The focus of this report is to analyze the supply chains strategy of Toyota Company. The paper will look at some of the supply chains challenges and strategies of the company in the motor manufacturing industry. The report finds out ways the company uses supply chains to maintain competitive advantage in the industry (Kim, Cavusgil, & Calantone, 2006). The report discusses supply chains practices, discusses the use of innovative technologies and the advantages of gaining competition over the years of its supply chains practices.
The Toyota Company is a car manufacturing company based in Toyota, Aichi, Japan. The multinational corporation has a record of more than 338,875 employees all around the world. By February 2016, the car manufacturing company was ranked 13th largest company in terms of revenue. It was also the largest automobile manufacturer in 2012 with regard to production. This is more than Volkswagen group and the General motors. By the month of July the company, being the first world automobile manufacturer recorded more than 10 million production of vehicles each year. Also according to IOCA, by the year 2013, Toyota car manufacturing company was rated as the largest company in Japan through market capitalization by revenue (Liker, The Toyota Way and Supply Chain Management, 2005). When it comes to innovative technologies, Toyota car manufacture is the world’s market leader about the sale of highbred vehicle. The company is also lauded for encouraging mass-market production of highbred vehicles across the world.
The company boasts of having one of the most effective product flow in the motor vehicles supply chains system. through the Toyota Production system, the company has been able to control logistics all over the world. It puts more emphasis on Heijunka, which is the smoothing of the product flow. The company also uses the Just in time Principle with regard to assembly of products; this is important as it has been able to strictly follow up on the completion of products and scheduled deliveries (Porter, 2005). In this line as this happens the company maintains inventory pull system for replenishment and high frequency demand.
Recommendation – with regard to product flow it is recommended that the company ensures the company gets in line with the market trends. As much as the company is doing well, releasing new products may not be a good ideas since other equal competitors will be doing so.
Information flow will look at how orders are taken and updated to ensure proper delivery. Since the company has different workstations all around the world. Here business information is corporate and managed across the board. Good coordination of information among the parties ensured that there is good flow of supply chains. Information sharing among the divisions is also important when I comes to the intensity of interaction and provision of valuable information regarding partners in the business strategies (Teller, Kotzab, Grant, & Holweg, 2016). Through the right flow of information, employees and other people in the supply chains also maintain, obtain and deliver the right communication when it comes to decision making. This is a main factor as it enables the strengthening of elements of the overall collaboration thus reducing a lot of congestion due to information flow.
Recommendation – It is recommended that the company gets in line with the new trends in technology. Having to decentralize their service is also a good way forward as this will make the supply chains more effective.
In Toyota, the cash flow is determined by the MTS (make to stock) system. This is where products are made in reference to the demand forecasts. Because the accuracy of the forecast will prevent opportunity loss and inventory excess, it is important for the company to forecast in a very accurate way. As the economy of a country increases the income of the consumer will also go high, this means there will be a demand for Toyota products. The demand of this product will keep on changing with regard to the boom cycle of the country’s economy. Even when the demand of the products increase, the inventory will eventually turn in to cash depending on the demand recovery (Govindan, Seuring, Zhu, & Azevedo, 2016). This means that production and inventory will also determine the cash flow in the company. This means that there must be a demand forecast, production systems and lead times of material procurement (Kim, Cavusgil, & Calantone, 2006).
For the Toyota Company, returns supply chains management is based on the strategic goals and policies implementation on every part of their operations. There is also a cross functional integration among different function. This means that as the company continues to be more integrated, the continue to know ways to better deal with the internal and external factors of their operations in the return processes. The supply chains orientation here is also important and is linked to every returns management.
Many firms in the industry including business executives admire the success of Toyota Company with regard to growth in the market. The company has actually become an envy of many organisations working in the automobile industry due to its supply chains management flows. The main flow of the Toyota company is credited to two main values; the Toyota Just in time way and the Toyota Production system (TPS). Through the Toyota way, the company has been able to create a culture that supports respect for individuals, fostering cooperation and promoting innovation. The Toyota production system is the main engine where lean manufacturing, quality systems, kanbans, just in time and the increasing improvement practices are developed (Chappell, 2001). Putting all these efforts together, they become the key flows to the success of Toyota supply chains management (Govindan, Seuring, Zhu, & Azevedo, 2016).
It is however important to note that the Toyota way and the Toyota production system are only the pillars of its supply chains foundation. The other secret of supply chains flow is in the way the company runs its supply chains on a daily basis. As much as the Toyota way and the Toyota production system is part of it supply chains development, the supply chains flow also looks at how the company applies these principle to enable it work with dealers, suppliers and manufacturers (Krajewski, Ritzman, & N.Malhotra, 2006). Based on these supply chains principles, the company has been able to coordinate the supply chains planning across the board.
Here Toyota has seen proper execution of each supply chains functions. The excellence of Toyota supply chains is they main issue that enables the company to build up in efficiency of its operations. as much as Toyota production systems is the main theme of how it runs its manufacturing, the flow of Toyota manufacturing is much more great. It will span from the suppliers to the whole company including the distribution channel, supplies and suppliers, dealers and most importantly its customers (Marley, Ward, & Hill, 2014). In addition, the planning, coordination and control processes of the company’s supply chains is very extensive and a daunting task. Its operations takes on three dimensions of supply chains management that include production, geographical coverage and time management (Liker, The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer, 2004). This shows that Toyota company supply chains flow is designed in a manner that can be able to cover these three areas. For example when looking at the United States and Japanese markets, the Toyota Lexus and Toyota Camry and the different areas of time of production will be different in relation to the supply chains processes. It can thus be agreed that the Toyota supply chains flow ensures velocity, variety, variability and visibility control. In every part of the supply chains process, inventory, production, employee management and market penetration is realized (Mellat-Parast & Spillan, 2014).
It is however recommended that the supply chains process in Toyota should evolve with regard to customer demand; the way that they will schedule products in the market should be depending on the way economic performance for target countries progress. This can also be done through understand the customer continuum model below:
Through the above model, the company is able to understand its supply chains process and customer behavior. Through customer behavior, manufacturing and production strategies will also be controlled. This will also be realized in the company inventory management systems.
During the make process of supply chains, the parts of each vehicles are produced then shipped to the assembly plants. The make process is also referred to as the inbound logistics. At the Toyota manufacturing company, the make process consists of two ways. First is the overseas parts which come from Japan and are shipped using a vessel then continue the movement using a railcar (Krajewski, Ritzman, & N.Malhotra, 2006).
During the make process, there are also local parts which are produced in host countries, these parts are usually shipped by truck by use of dedicated logistics partners. The company takes complete responsibility for transportation and pickup of parts from the supplier area to the plants. The company here is good at organizing supplies in to clusters on the grounds of geographic proximity (Cai, Goh, Souza, & Li, 2013). The routes of different trucks are also designed in a way that these parts can be picked up from different suppliers and will be able to be delivered to the regional cross-dock. For the company to improve on efficiency, these trucks will also be used in picking up parts from each supplier destined in various Toyota plants across the supply chains (Liker, 2005).
After the trucks have arrived at the cross-dock, parts are offloaded and set up in each assembly plant. They will be loaded on trucks, which take parts directly to each making plant. The trucks are also unloaded with reference to the production processes. After these plants are offloaded, the truck will be reloaded with returnable containers. The containers flow in reverse by use of a cross dock and taken to the supplier so that they can be reused in the next shipment (Kim, Cavusgil, & Calantone, 2006). During the making process, suppliers will produce vehicles in the final assembly plants from those provide.
The body shop consists of various robots used in welding body parts together. The vehicle is then moved to the final assembly (Teller, Kotzab, Grant, & Holweg, 2016). Here use most of the supplier provided parts to finish the vehicle. Each part of assembly is assigned a location and address bar code in reference to the supplier. Fuel is then added and the vehicle is driven off the assembly line. Here his vehicle will go through quality tests for final inspection. It will then be released for shipment to the dealer and finally to the customer.
Recommendation – during the make process, it is recommended that the company decentralizes its administrative activities. Also having a manufacturing plant for their raw materials would ensure cost saving in transportation among other activities.
Supply chains forecasting is usually the work of the sales division. They are required to roll a three months plan after the first production month, which is referred to as a firm order in the first month and the next two months as a forecast. Supply chains forecasting requires that the sales division is committed to the total volume of units for the production month and months of volume where the supply chains focust is determined, also the content of the order month will also be changed. The supply chains forecasting will begin with production and sales divisions by agreeing on a planned volume of vehicle units, which will be produced on a month basis (Teller, Kotzab, Grant, & Holweg, 2016).
The sales division will be determined by request based on recent stock and sales levels. they will also consider marketing and seasonality changes. After agreeing to the total planned volumes for next three months, the sales division allocates total volume by model for each region with reference to performance. The mix plan is used together with sales trend by coming up with quantity of building for each month model.
Recommendation – In the supply chains forecasting, it is recommended that an analysis of the market is done before budgeting for a stretch of period in the market. It is also important to find value allocations and variable when forecasting. This will enable the company to save costs.
Conclusion
In conclusion, the logistic and supply chains management of the Toyota Company is among the best practices of running a motor manufacturing company. It is will also be important for the company to have separate lines on which the vehicles will be assembled. At the end, the vehicle is born in the body shop through framing and body formation. The parts of the body will be stamped in the stamping shops suing presses. With the ever growing competition, having customized supply chains processes will be important as this will ensure services are provided in regard to the countries preferences. Through proper management and coordination of inventory, employees, suppliers and customers, the company continues to be the leader in motor manufacturing industry. By use of the core just in time and Toyota production System, the company is bound to maintain its market share and penetrate new ones.
References
Cai, S., Goh, M., Souza, M. d., & Li, G. (2013). Knowledge sharing in collaborative supply chains: twin effects of trust and power. International Journal of Production Research, 51(7), 2060-2076.
Chappell, L. (2001). To heck with tech; In a world awash in fancy computer logistics, Toyota says kanban colored cards are managing the supply chain just fine. Automotive News, 75(36), 5942.
Govindan, K., Seuring, S., Zhu, Q., & Azevedo, S. (2016). Accelerating the transition towards sustainability dynamics into supply chain relationship management and governance structures. Journal of Cleaner Production, 112, 1813-1823.
Kim, D., Cavusgil, S., & Calantone, R. (2006). Information system innovations and supply chain management: Channel relationships and firm performance. Journal of the Academy of Marketing Science, 34(1), 40-54.
Krajewski, L., Ritzman, M., & N.Malhotra. (2006). Operations Management: Processes and Value Chains (8th ed.). Prentice Hall.
Liker, J. (2004). The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. NY: The McGraw-Hill Companies.
Liker, J. (2005). The Toyota Way and Supply Chain Management. The University of Michigan: Presentation for OESA Lean to Survive Program.
Marley, A., Ward, T., & Hill, J. (2014). Mitigating supply chain disruptions – a normal accident perspective. Supply Chain Management: An International Journal, 19(2), 142-152.
Mellat-Parast, M., & Spillan, E. (2014). Logistics and supply chain process integration as a source of competitive advantage: An empirical analysis. The International Journal of Logistics Management, 25(2), 289-314.
Porter, M. E. (2005). Competitive Advantage. New York: The Free Press.
Teller, C., Kotzab, H., Grant, D., & Holweg, C. (2016). The importance of key supplier relationship management in supply chains. International Journal of Retail & Distribution Management, 44(2), 109-123.
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