CASE STUDY ON DENSO CORPORATION AND GLOBAL SUPPLIER RELATIONS 1.

How has DENSO's relationship with Toyota affected its international strategy? Prior to 1949, DENSO Company was a part of Toyota, but then it became a separate company remaining 25% of its issued stocks with Toyota. Thus DENSO is part of Toyota's keiretsu. DENSO is the major supplier to Toyota and when Toyota set up its plant overseas, DENSO initially expanded overseas to supply Toyotas overseas plant. Thus, now it became supplier to other auto companies overseas as well starting with Toyota. Toyota paved the way for DENSO by being the first in many new markets, such as North America, and by supplying needed capital to DENSO. DENSO has attained market power and pricing autonomy by distributing better quality products at relatively lower price. So this economy scale of DENSO has freed DENSO from grapes of Toyota and became free distributor to so many auto companies including worlds third largest auto company, DaimlerChrysler.

2. What types of quality programs has DENSO adopted, and how do you think they will affect DENSO's future as a global supplier? Supplying the right quality of products and services will have a significant effect on whether the company can get future market advantage or not. The quality will affect the delivery speed and reliability. In order to have a better quality, Denso is encouraged to ensure that they take the responsibility themselves to provide a right-first-time level of quality. DENSO has to meet tough quality standards. So, it adopted TQM (Total Quality Management) to meet Toyotas rigid quality standards. And also to make their product of a better quality, DENSO strives for zero defects. DENSO also complies with both ISO 9001 and QS9000 certification so that it can qualify for supplying parts to auto makers in Europe and North America. Besides adopting TQM to meet Toyotas rigid quality standards, its product quality have meet with many other auto maker companies. So, it will become supplier to many other companies in foreign market which will decrease its dependency to Toyota Company. And, since ISO 9001 and QS9000 are quality standards certification, by compiling with these two certifications, DENSO can supply its products to Europe and North America where most of worlds developed countries are located. Thus, it will be supplying the auto parts to many automaker companies worldwide, by which it can definitely

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CASE STUDY ON DENSO CORPORATION AND GLOBAL SUPPLIER RELATIONS increase its sales and build product/brand image in the world market. So later in the future it will be the worlds leading auto parts suppliers

3. Why does it make a difference whether DENSO uses kanban or MRP? In KANBAN techniques no separate, higher-level planning is used to control the material flow through production. Instead, the work center further down the line (demand source) requests material from the preceding work center (supply source) only when it is required. Thus Kanban is fully based on Just-inTime basis and if no Kanban signal is received, then no production. But in case of MRP (Material Requirement Planning), it uses demand forecast by some of its customers and thus DENSO can produce auto parts well in advance where it is ready to supply as and when asked. So, whether DENSO s using Kanban or MRP makes lot of differences. When rest of the industry is moving away from the Kanban, Toyota Company is still based on Kanban. Following kanban limits it supply to Toyota only and could not supply to other automakers as it manufactures auto parts in JIT basis. Thus DENSO is not truly the independent company they actually are as it should follow Toyota for its production and supplies. There is no demand forecast in Kanban system and no proper inventory is kept. Thus, the burden of keeping inventory is shifted to is customers. So, by following MRP system, DENSO can calculate demands for parts form production schedule of companies that uses parts. They can produce parts for its own use as well as several different auto companies. DENSO can supply auto parts to any other companies beyond Toyota if it is using MRP system and thus their production and supply becomes unlimited and free which makes DENSO an independent company.

4. What challenges will DENSO face as it diversifies its customers and its product lines?

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CASE STUDY ON DENSO CORPORATION AND GLOBAL SUPPLIER RELATIONS The major challenges faced by DENSO is that though other auto companies are moving away from Kanban, Toyota Company, the major revenue generator with 56% of DENSO still remains with Kanban system. Toyota uses forecast to help DENSO plan its production, but final production cycle is based on Kanban. Honda and Mutsubishi requests products based on a forecast of demand and place their orders three days in advance. There is lot of fluctuation in demand than Toyota where Toyota schedules a relatively flat production. DENSO is producing auto parts in line with Toyota, it may become bit of a challenge to distinguish themselves as an independent company and it would be difficult to satisfy all those customers effectively. To go with new customers and new product line, a company should go for cost effective and unique products. DENSO will need better inventory control and communication systems to integrate all their production. Coordination and control may prove troublesome too if they get involved in making too many different products. If DENSO keeps on diversifying its customers and product line, it would be difficult for them to meet all the quality parts which are desired by their different customers. Different customers has got their own taste and preferences, so they cant go in line with all customers with different products but can only produce standardized products which some of customers may not like it.
5. What do you notice in the layout of the Takatana plant that demonstrates DENSOs

commitment to its employees? DENSO has created a Green Belt around the plant where their workers can look at green trees and not to the factories. This shows that DENSO fully cares its employees health and mental well-being. It want their employees to be strong and healthy enough to do their tasks. DENSO also engages with lifetime employment and they did not want to lay off their employees. So, it finds new product line to shift its workers. And when DENSO assigns its worker with new task, it retrains them for the job. Each plant has got on-site education facility which fully shows DENSOs commitment to their workers. To not let their workers get heavy task, they are usually kept in one division until they retire as working in most experience job will be much easier for them. Workers are hired for life and they pay salaries which are based on mixture of age, expertise and performance. There is only small wage gap among workers. Employee performance is evaluated every six months with a bonus paid every six months. So thus DENSO treats its employees equally.

References

Submitted By: Singye Samdrup. GC(2)/0900231 B.com. 5th Act. B

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CASE STUDY ON DENSO CORPORATION AND GLOBAL SUPPLIER RELATIONS 1. http://www.linkedin.com/answers/business-operations/supply-chainmanagement/OPS_SCH/317158-30077660 2. http://www.globaldenso.com/en/ 3. http://www.globaldenso.com/en/newsreleases/101109-01.html

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