Toyota's Supply Chain

1.0 Executive Summary

The report details the findings on Toyota Motor Corporation's 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 world's 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 Toyota's 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 company's 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

Toyota's 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 Toyota's 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