Toyota Global Sourcing Perspective & Journey in India

ACMA ANNUAL SESSION AND CONFERENCE September 2, 2003 Toyota Global Sourcing Perspective & Journey in India Mr. Atsushi Toyoshima Managing Director Toyota Kirloskar Motor Private Limited

Content • Introduction • 2.Toyota Global Sourcing Policy • Toyota Journey in India • 4. Sourcing from India – Toyota initiative

Content • Introduction • 2.Toyota Global Sourcing Policy • 3. Toyota Journey in India

3rd Largest Auto Mfr in the World Overview of Toyota TOYOTA MOTOR CORPORATION: • Establishment August 28, 1937 • Employees 247,000 (TMC Japan:65,000) • Sales volume (2002) 6.16 million Vehicles in 160 countries • Net Revenues (2002) US $ 107,443 million • Overseas Operations 46 Manufacturing Units in 26 countries • Plus12 Plants & 11 mfg subsidiaries in Japan TOYOTA KIRLOSKAR MOTOR: • Establishment October 6, 1997 • Investment Rs. 9 billion • Employees 2,300 (Two shifts) • Sales volume (02-03) 30,000 (Qualis, Corolla & Camry) • Vendors 82 Tier I Suppliers • Group Co’s Investment Rs. 3 billion (11 New Units)

YEAR ON YEAR SALES FIGURES 44400 45000 40000 29836 35000 25361 25006 30000 25000 TOTAL SALES 20000 15000 3519 10000 5000 0 APR - MAR' 00 APR- MAR ' 01 APR- MAR ' 02 APR- MAR ' 03 APR- MAR ' 04 (PROJECTED) FINANCIAL YEAR Growth of Toyota In India • Start of Volume Prodn : Dec 1999 • Current Capacity : 50,000 units / annum • Sales Plan (03-04) : 44,400 (all models) • Current Models : Qualis, Corolla, Camry (CBU)

Basic Purchasing Philosophy Supplier for Toyota is Equal partner Sharing target for mutual Prosperity through Mutual trust

Basic Purchasing Policy Toyota`s approach to purchasing • Open & Fair • Mutual Trust & Mutual benefit • Contribution to local economy through localization Global Optimum Purchasing Programme

Optimum Global Purchasing programme 1. Global Cost comparison 2. Add New Supplier, New Technology 3. Enhance current suppliers global competitiveness Application in India……..

Expansion Domestic Exports Enhance (Transition) Quickly Enhance Competitiveness Benchmark, Overall improve Startup Setup Smooth start Localization drive TKM Component Supplier base Expansion Export Projects Corolla launch Localization efforts < No.of Suppliers >

Export Projects Corolla launch Localization efforts < No.of Suppliers > TKM Parts Supplier base Expansion Startup Setup Smooth start Localization drive

Export Projects Corolla launch Localization efforts < No.of Suppliers > TKM Parts Supplier base Expansion Expansion Domestic Exports Enhance (Transition) Quickly Enhance Competitiveness Benchmark, Overall improve Startup Setup Smooth start Localization drive

Supplier Base Study Technology, capability mapping SE Activity Supplier participation from Concept stage Startup & Enhance phase Application of Global Policy in India • Supplier Parts Tracking Team Formation(SPTT) • Close interaction during development • Target Value System • For Continuous improvement

Target Value System For Continuous improvement P e r f o r m a n c e Suppliers to achieve targets gradually by continuous improvement <Need based support from TKM> Target 3 Based on Performance, TKM to fix Challenging but Achievable New Targets Target 2 Target 1 Year 1 Year 2 Year 3

Delivery – Timely Supply <TKM Support> - Unique Milk run system ensures effectiveness, -TPS implementation in Supply chain Concerns Points: Transport Strike, infrastructure 3 Pillars of Target Value System • Cost- Best Cost + Continuous improvement • activity ongoing through out Supply chain • Concern points: Productivity, Tax Barriers, Raw Material- not cost based • Quality- Incoming quality (PPM) • Big Gap…..needed special focused activity Quality Case….

Incoming Parts Quality.. 3.7 1.1 6.8 Big Gap 1.8 1 0.5 0.8 Index (Thailand) T Australia Indonesia India Thailand Taiwan India 2001 2003 2002 Toyota Experience

TKM Parts Supplier base Expansion Expansion Domestic Exports Transition Quickly Enhance Competitiveness Benchmark, Overall improve Startup Setup Smooth start Localization drive Export Projects Corolla launch Localization efforts < No.of Suppliers >

Expansion & Exports Govt policies Aligning Global Trend Export Initiatives Suppliers Participation Efforts towards Target achieve

Increasing environmental awareness Intense Competition among economies Emergence of economic blocks & WTO Business Environment Global

Regional Trade Blocks

Increasing environmental awareness Emergence of economic blocks Competition among emerging economies Business Environment Global Local • Aligning towards rest of the world – WTO • Encouraging Government Policies • - Duty Reductions -Tax reforms • - Increased spending on infrastructure • Barriers coming down • - Tariff - Non Tariff

New Transmission Project- EOU • TOYOTA KIRLOSKAR AUTO PARTS: • Establishment April 2002 • Investment Rs. 4.8 billion • Product Automobile Transmission • Volume 168,000 units / annum • SVP June 2004 • Nature of operation 100% EOU • Exports Destination Asia, Africa & South America • Aluminum Die-casting and machining • in Kirloskar Toyoda Textile Machinery Ltd – another new EOU

Unique Model to Global Models • Direct Global comparison • Direct Opportunities Toyota as a Global company Can be Platform to jump for Global Business It is up to Suppliers to Challenge….. Additional to Transmission EOU Part Exports.. By 2005 10% of Suppliers to Export Parts

<Internal> Benchmark Globally: Cost,Quality, Delivery, Quick catch up Technology is Key Eco & Safety Govt Initiatives Infrastructure, Tax Reduction <External> WTO and Intl Trade Trade Blocks, WTO commitments, Harmonization of standards, etc For Export competitivenessIssues to be addressed…..

CONCLUSION: • Toyota Global Sourcing is purely based on merits • of Quality, Cost and Delivery • Toyota believes in equal partnership concept • with Suppliers • Regional trade blocks & WTO will have an impact • on global sourcing policy

Thank You

Toyota Global Sourcing Perspective & Journey in India