What might be some of the challenge and problems with Toyota’s approach?

From our analysis we could find the below challenges and problems in Toyota’s approach

A network of suppliers along with Toyota as the central node connecting all the suppliers can get very
complicated. Even though the suppliers in US have less dependency on Toyota, the complex network
will most probably result in reduction of the degree to which the suppliers can take independent
decisions. Complex interdependency can only lead to lesser freedom in decision-making.

Toyota’s approach had a fundamental flaw in that they had a tough time replicating the supplier-to-
supplier knowledge-sharing model in the US. This model already deployed successfully in Japan. In 1994,
when Toyota established its Plant Development Activity (PDA) core groups, they tried to replicate
jishuken concept in the US. Some of the groups had trouble because of markedly different skills and
knowledge of TPS methods among suppliers.

A very serious problem with the Toyota approach was the fear of knowledge spillover to the
competitors. Toyota was not concerned about knowledge spillover to their competitors even when they
knew that it would happen to some extent. This would eventually result in nullifying the good that
comes from network learning.

If the network can create a strong identity and effective coordinating rules, then it may be superior to a
firm as an organizational form at creating and recombining knowledge owing to the greater diversity of
knowledge that resides within a network.

Strong network interconnections with numerous redundant ties resulted in a stronger structure with
lesser structural abnormalities. This resulted in suppliers being less reliant on Toyota to facilitate
knowledge sharing activities. As said by one of Toyota’s executives, “We realize we simply don’t have the
resources or information to help all our suppliers as much as we’d like to.” Due to this approach, Toyota’s
role as an arbitrager of knowledge diminished, resulting in lesser enforcement of rules by Toyota and
lesser control over the network. Toyota was unable to maintain its leadership role (power and
relevance) in the network.

This approach by Toyota led the suppliers to believe in the idea of reciprocal obligations for sharing
knowledge. However, the problem was that the suppliers had no option but follow reciprocity. A
supplier not sharing information considered as a serious breach of faith and then no additional business
provided to the specific supplier.

Network maturity was a bigger challenge to the Toyota approach in the US. The suppliers in the United
States were less dependent on Toyota than their Japanese counterparts (affiliated suppliers sell roughly
60 percent of their output to Toyota. This made it difficult for the US suppliers to identify with the
Toyota network and participate in knowledge sharing activities.

In conclusion, we can say that the idea behind Toyota’s approach to create an interconnected network
of suppliers with Toyota forming the central node was efficient but ridden with flaws. Knowledge
spillovers could cost them a lot financially and losing the autonomy over the network could mean the
end of Toyota’s leadership in the network.