Breakthrough quality of Toyota

Toru Kinoshita, chairman of Toyota Motor Vietnam (TMV)

Levelling up Vietnamese suppliers

Starting to apply TPS and 5S at a basic level in 2010, Hanoi Plastics Company has become a partner and supplied 2-3 components per year for TMV. However, in May 2017, Hanoi Plastics has made a big transformation with the decision to apply 5S systematically and thoroughly, because this is a condition required to become a long-term supplier for TMV.

In the position of the buyer, TMV did not stand by watching his partner struggle. Training courses on 5S and Toyota plant tours for the top executives and key personnel of Hanoi Plastics have been organised.

With the kaizen spirit of keeping moving forward, after more than a year, 100 per cent of the processes of Hanoi Plastics have successfully deployed 5S, with the participation of all members, from employees to top management. There are also two shops that apply the advanced stage: work standardisation and kaizen. Both activities are supported by TMV which have sent experts to guide and support the factory weekly.

The results were clear and immediate. The factory is now cleaner and more organised. Work productivity increased from 73.7 to 89.2 per cent. The rate of defects decreased from 1.6 to less than 0.5 per cent. Only in the first half of 2018, Hanoi Plastics has cut about VND2.8 billion ($121,750) of costs through mould improvement while productivity increased by 10 per cent.

In addition, the number of parts provided for TMV has increased to 29, much higher than in the previous stage. Besides, the number of customers co-operating with Hanoi Plastics and the orders for a customer also increased.

Many people are surprised at the fact that a big Japanese enterprise spends time and manpower on supporting a local supplier. Responding to queries on this, Bui Thanh Nam, general director of Hanoi Plastics, said that the 11^th of the 14 principles of the Toyota Way says, "Respect the network of partners and suppliers by challenging and improving them." That is how TMV approaches Hanoi Plastics.

"Thanks to the on-site training at the TMV factory and the enthusiastic guidance of Toyota experts, the skills and knowledge of all staff of Hanoi Plastics have been enhanced. We feel the teamwork spirit that we have developed earned by becoming a supplier of TMV," said Nam when talking about the decision of applying Toyota's 5S principles.

Hanoi Plastics is one of the first two Vietnamese companies involved in the project on enhancing the capability of Vietnamese suppliers in terms of 5S, safety, and quality management implemented by TMV in 2017 and continue to be expanded in the future. This is also a strategic priority that Kinoshita had in mind when he returned to take over the position of chairman of TMV at the beginning of 2017.

“Vietnamese suppliers still lack experience. We are sure that they do not know and understand well what level we are requesting, so we are trying to foster them to start from 5S. This totally changes their attitude. With such support, they start improving not only 5S, but also their efficiency,” TMV's chairman said. He also said that TMV will expand to other suppliers because developing Vietnamese suppliers in quantity and quality "is our priority and long-term task."

Quality for long-term development

TMV’s desire to develop local suppliers did not start with Kinoshita’s return in 2017. Since 1999-2002, when he first arrived in Vietnam as deputy director of marketing. In addition, he shouldered crucial tasks, including localisation fostering and HR development.

The Plant in Vinh Phuc was completed in August 1996. In the first year of production, TMV only lined-off 2 models, the Hiace and Corolla with production capacity at four units per day, or 100 units per month.

Attracted by the potentiality of a developing country with a young population,hard-working labourers, and impressed by customer’s perception of “Toyota” as a synonym for “car,” he devoted himself to the Vietnamese auto industry and society.

At the nascent stage of the Vietnamese auto industry, high-quality HR development played a very important role, which was one of his great concerns: finding, recruiting, and nurturing good manpower for the company.

“At the time, FDI companies were popping up left and right, a there was a serious shortage of qualified labourers in production. Even though he was not directly in charge of production, he shared his concerns and discussed our HR development strategy with me to great depths,” Lam Chi Quang, former vice chairman of TMV, remembered.

To develop production, despite the small market size and small production volume, driven by his desire to enhance localisation, Kinoshita was a strong advocate of further investment in Vietnam. “Kinoshita showed great enthusiasm to call investment from Japan to Vietnam and increase localisation in line with the Vietnamese government’s direction. I still remember, at the time, we often had the chance to go on business trips to TMC and accompanied Vietnamese companies to Japan to call for investment 7-8 times a year,” Quang said.

In March 2003, TMV opened a Stamping Shop, and became the first manufacturer to complete five processes, including stamping, painting, welding, assembly, and inspection. Kinoshita was in charge of the investment planning for this shop.

Thanks to TMV’s efforts to persuade Japanese suppliers to invest in Vietnam, Denso Group and other Japanese suppliers officially opened plants in Vietnam, which not only supported Toyota’s localisation initiative, but also became hubs for parts production.

When talking about Vietnam’s chances to enter and operate in global supply chains, Kinoshita is confident to talk about “quality” instead of “competitive labour” to attract investors.

He said, “Like 20 years ago, when we started operations, some suppliers also invested in Vietnam. It was purely because of competitive labour force, which could reduce overall costs. However, after 20 years or more, they realised it is not the cost issue, but also the quality. With the quality, their parts can compete. Compared to these global suppliers, the competitiveness of Vietnam is by far number 1. It’s quite surprising.”

This strongly motivates him to continue developing local suppliers both in quantity and quality when he returns to Vietnam as chairman.

Change to anticipate customer needs

During his first term in Vietnam from 1999 to 2003, car buyers were mainly government or state-owned companies. However, by his second term, the market had been totally transformed.

“Economic development gives you more money. The number of family members is reducing, and as a result, you can use more money. It is true, with more money, you can afford to spend on new things, like cars. I believe this phenomenon will have the most marked impact on the lower classes. Those who couldn’t buy a vehicle or those who could only afford motorbikes will start buying cars. The whole market will keep increasing and improving. Besides, car buyers are getting younger.”