Tier I suppliers, diversity drivers and lots of good ideas

“Safety, quality, cost and supplier diversity … those are our priorities,” explained Jim Holloway, Toyota’s assistant general manager for purchasing, as he opened up a session especially designed for Tier I suppliers during the company’s Opportunity Exchange.

“We want those to be priorities for our suppliers, too,” he added, admitting that amid a recessionary economy, many companies seek to trim costs wherever they can.

Regardless of the economy, however, “There is a business case for supplier diversity,” he continued. “It’s good for business for Toyota and our suppliers. It opens doors that might otherwise remain closed, and it encourages a healthy exchange of ideas.”

While many, if not most, of the toptier vendors in the audience have developed supplier diversity initiatives, some have not. Regardless, Holloway reinforced the reasons for such a program and listed several critical components of supplier diversity.

Getting it right

“First of all, it [supplier diversity] must be an integral part of everyday business,” Holloway said. “It needs the support from all divisions, not just purchasing.

“Strategy development and target setting are equally critical,” Holloway continued. “Last year, Toyota announced a diverse spend target of 10 percent,” he explained. “We developed a strategy and training for doing that with the help of the National Minority Supplier Development Council and its regional councils.”

Part of the company’s action plan for achieving the 10 percent goal includes investing in the development of certain MBEs, growing existing MBEs and identifying processes and parts that can be outsourced. They then find MBEs that can provide those processes and parts.

“We are only as strong as the weakest link in our supply chain,” Holloway added. “Our growth depends on our suppliers’ growth and success. It’s an interdependent system.”

It’s a familiar system that Reginald Layton of Johnson Controls Inc. is comfortable with, but he also understands its challenges. As the director of diversity business development at JCI he has jumped many hurdles as the company hit the $1 billion mark for diversity spend in 2002. Milwaukee-based JCI is a prime supplier for Toyota.

Silver linings

“We didn’t just spend money,” Layton explained. “We made money by engaging diverse suppliers and requiring our first-tier suppliers to work with MBEs. Last year, our second-tier spend was $225 million.” JCI provides automotive interiors and batteries, as well as building products and services that optimize energy use, comfort and security. Founded in 1885, JCI has 140,000 employees in more than 1,300 locations serving customers in 125 countries.

It’s not just the company’s size and geographic spread that summon Layton’s most innovative thinking. “It’s the complex marketplace,” he said. “We’re dealing with a global economy, constantly changing technology and different cultures. These are all factors that make supplier diversity more challenging.”

But that doesn’t stop Layton or JCI’s management team from trying. By the end of 2007, JCI had reached $1.5 billion in diversity spend. There’s a good reason for that, he said.

“The planning for supply chain diversity doesn’t start when we meet a diverse supplier,” he explained. “It started when we trained our buyers and when we started attending events like this so that we could meet MBEs and when we started identifying MBEs that can fulfill our needs. It doesn’t come together overnight.”

Debra Martin, director of minority business development at Continental North America (CNA), said she often co-opts ideas from JCI and Toyota. CNA supplies brake components and subsystems for Toyota in Europe and North America.

“Lifting” good ideas

“I steal from them all the time,” Martin admitted. “You have to find good ideas wherever you can. Supplier diversity is not easy. How do you get people to welcome this initiative? How do you get everyone on board?”

Like JCI, CNA’s facilities spread around 36 countries, but its headquarters are in Hanover, Germany, a city where supplier diversity has yet to gain immediacy. Still, CNA’s top management “understands supplier diversity,” Martin said. “They get it, but many below that level don’t.”

“So we communicate a lot,” she continued. “We send newsletters to our people explaining the benefits of supplier diversity. We dispel a lot of myths.” Then there is Martin’s “elevator speech.” “When someone in the hall or on the elevator asks me, ‘What’s going on?’ I don’t talk about the weather or my health. I take that 30-second opportunity to tell them about supplier diversity and how it’s helping the company.”

She explained some of the other things she does internally to promote diversity in CNA’s supply chain. “First, we’re honest about opportunities and risks,” Martin explained. “We want to be up front with our buyers and our MBEs about our needs.”

“We also attend events like this because this keeps us connected to good ideas and people who have a lot of experience in supplier diversity and, of course, these venues are great ways to hook up with MBEs.” “I couldn’t agree more,” Jeff Fliegel, chimed in. Fliegel is the director of sales for Lebanon, Ohio-based Amtex, a supplier of flooring and acoustical components for Toyota. Amtex is a joint venture between U.S.-based Lear Corp. and Japanese company Hayashi Telempu.

Looking Within

Fliegel, who sits on the OE planning committee, said Amtex’s own employees turn out to be some of the company’s best minority suppliers. For instance, AES, a firm owned by a former Amtex tooling engineer who left the company in the mid- 1990s to start a tooling firm, is now one of Amtex’s primary tooling suppliers and a significant Tier II supplier to Toyota.

Similarly, Vistech Manufacturing Solutions, a firm also owned by former Amtex employees, became a Tier I supplier to Toyota by supplying the automaker with the floor carpet assembly for the Avalon.

Fliegel said that these and other MBEs have helped Amtex’s diversity spend rocket from 1 percent when the company launched its initiative in 1996, to 24.8 percent last year.

“We’ve found that supplier diversity benefits us in many ways,” he said. “Among other things, it brings us localized and regional support and lowers our overhead costs. We had $126 million in sales last year. You don’t have to be a billiondollar company to do supplier diversity