To grasp the current state of Toyota’s suppliers, let’s start by understanding the carmaker’s supply chain.
Since a single car is said to contain some 30,000 parts, naturally not all of them can be made in-house. Instead, the production process involves many different parts manufacturers.
Take, for instance, a single headlight. At Toyota, headlights are produced by Tier1 suppliers, with lenses manufactured by Tier2, which involves surface finishing by Tier3, using coatings made by Tier4… and so on. Components such as rubber covers and brackets must also be procured from Tier2 suppliers.
As the chart below shows, the supply chain’s tiers expand as we move outward from Toyota, the final assembler of vehicles. In Tier1 alone, Toyota buys parts from some 400 domestic companies; across the entire supply chain, the total reaches around 60,000, with annual orders worth approximately 7 trillion yen.
However, as we’ve already seen, Toyota can directly discuss transactions only with Tier1 firms. Negotiating directly with Tier2 suppliers may constitute an abuse of Toyota’s dominant position.