1.0 Executive Summary
The report details the findings on Toyota Motor Corporations supply chain management in
great description. Areas that will be covered in the report include the supply chain
processes of Toyota, supply chain strategies that it adopts and the practical use of drivers
that determine the performance of the entire supply chain in terms of responsiveness and
efficiency.
The supply chain processes and strategies of Toyota are the fundamentals in its daily
operations. By adhering Just-In-Time (JIT) manufacturing and Toyota Production System
(TPS), Toyota emerges to be one of the worlds largest automaker.
In addition, the above-mentioned drivers refer to transportation, facilities, information
technology and inventory. The report examines the use of the respective drivers that push
Toyota to achieve the desired strategic fit.
Moreover, our team has described the e-business/e-strategy that Toyota undertakes and the
plans of expansions. Examples of how Toyota overcomes issues in its business or enhance
its competitive edge with the implementation of a particular supply chain solution will be
illustrated as well.
Last but not least, all the cited sources and references will be printed and compiled
accordingly at the end of the report.
2.0 Introduction
The scope of this report will be covering on Toyotas operations and strategies in North
America.
Toyota Motor Corporation (TMC) or Toyota is the Japanese multinational organization and
the world largest automobile manufacturers, selling 7.5 million models annually on all five
continents. At present, it employs 70,000 people. Like many enterprises that have made
their mark in history, Toyota has been shaped by a unique set of values and principles that
have their roots in the companys formative years in Japan.
In a recent study conducted by AMR Research, 25 companies were ranked accordingly to
the superior supply chain capabilities and performance that they exhibit. Toyota was
ranked fifth in the AMR Research Supply Chain 2007 list. This is due to the
implementation of the Lean supply chain management practices into the Toyota Production
System. In addition, Toyota also shares the success of the practices with other
organizations.
3.0 Supply Chain processes of Toyota
Toyotas supply chain is classified as a pull process as it is executed in response to a
customer order. In order to deliver the ordered vehicles as quickly as possible, the vehicle
is efficiently built within the shortest possible period. The simplified diagram below shows
the flows of information and materials among the stages in Toyotas supply chain.
Toyota Supply chain processes
Product order information is communicated to the production line.
(Dealers → Manufacturer)
When a vehicle order is received from the customers to the respective dealers, the order
information is quickly incorporated into the production line through information systems.
The production plan will be created, including the latest orders into the production line.
Based on the confirmed production plan, the production sequence is then determined to
allow the production of various vehicle series at a uniform pace throughout the day. As a
result, the usage quantity of various parts is also leveled.
• Timely Production (Manufacturer → Assembler)
Vehicles with different specifications are produced efficiently one at a time, in a timely
manner while ensuring high quality. Various measures have been implemented to
accurately produce individual vehicle. At this stage, the body of the vehicle is being
processed and painted before sending to the assembler.
Replacement of parts used (Manufacturer)
Parts which are used up in the process need to be replenished without delay. The operator
checks against the order sheet (kanban) to retrieve the replacement parts at the part plant.
Production of parts retrieved (Manufacturer)
Parts retrieved are efficiently produced and replenished according to production instruction
sheet.
• Procurement of supplies (Manufacturer → Supplier)
Supplies that are used up for production have to be procured without any delay.
4.0 Toyota Supply Chain Strategies
Toyota manages its supply chain using its company Toyota Production System (TPS). The
TPS is a set of philosophies which organizes manufacturing and logistics at Toyota,
including the interaction with suppliers and customers. With the implementation of the
TPS, Toyota was able to greatly reduce lead-time and cost while improving quality at the
same time. This enabled it to become one of the ten largest companies in the world.
The TPS is largely similar to “lean” manufacturing, to assist the company in the
identification and steady elimination of waste. It is aimed at defining value, creating flow,
and eliminating waste in various aspects including customer relations, product design,
supplier networks and factory management.
The goal of the TPS is to incorporate less low-value human effort, less inventory, less time
to develop products, and less space to become highly responsive to customer demands
while producing top quality, error-proofed products in the most efficient and economical
manner possible.
In order to eliminate waste, Toyota uses various strategies. The strategies are as followed:
4.1 Just-in-Time
Just-in-Time is an inventory strategy implemented to improve the return on investment of
Toyota by reducing in-process inventory and its associated costs. The process is driven by
a series of signals that tell production processes when to make the next part. The signals
can be just simple visual signals, such as the presence or absence of a part on a shelf. New
stock is also ordered when stock drops to the re-order level.
Results of Just-in-Time
The Just-in-Time system delivers clear results.
Quality is confirmed at every step, through first-in, first-out flow. This is to ensure that if
parts or material defects are found in one process, the Just-in-Time systems force the
problem to be quickly identified and corrected.
Cost and space needed is reduced by eliminating the need for warehousing, as well as the
