The Toyota Group and the Aisin Fire

Summary of: The Toyota Group and the Aisin Fire

Author(s) / Editor(s)

A flexible and coordinated response by the Toyota Group's supplier network enabled the manufacturer to rapidly restore production after a disastrous fire; the self-organized cooperation was enabled by deliberately designed practices that created dense social networks of trust and reciprocity that extended beyond Toyota's boundaries and into the companies of its network of suppliers.

Disciplines

Publication Reference

Published in/by
Harvard Business Review, Vol 40, No. 1, pp 49-59, Reprint 4014
Date
Fall 1998

Findings

  • Carefully cultivated networks of trust in business networks such as networks of suppliers to a manufacturer, can lead to rapid and flexible responsiveness of the whole network in the case of disaster that threatens their common interests.
  • The kind of social capital (networks of trust, norms of reciprocity, dense social networks of horizontal associations) noted by Putnam's study of civic institutions in Italy seem to play an important parallel role in Toyota's famously resilient and effective supply and production system – extending beyond the walls of the Toyota group to include ties with and among external suppliers.

Toyota Group's production system and the management practices that brought it about are legendary. When the factory that supplied a crucial component burned down in 1997, the supplier network's self-organized problem-solving made it possible to begin production of the component within two days. The coordinated and rapid response did not happen in a vacuum. Toyota did not treat suppliers as a market, pitting them against one another, and demanding price improvements when suppliers improved their own productivity; instead, Toyota brought suppliers together in informal associations, at Toyota's expense, and helped them improve productivity while allowing them to keep profits as a result of improvements – even encouraging suppliers to share their improvements with others in the network. The horizontal associations, scale-free social networks, ties of trust and reciprocity that were cultivated by these and other practices (such as encouraging ad-hoc problem-solving at all levels of the company, and bringing together employees from different parts of the company into temporary juries to solve problems) created communication channels and both catalyzed and lubricated information sharing and coordinated actions.