Toyota Inventory Management Decision - Term Paper Example

Inventory management decision at Toyota Table of Contents Introduction 3 Toyota 3 Inventory Management decision 4 Analysis 4 Concepts 4 Process modelling 5 Validity of system 8 Recommendations 9 Conclusion 10 Works cited 11 Name of the student Name of the professor Course Number: Date of submission: Introduction Toyota Toyota Motor Corporation is a Japanese automobile manufacturing company. Toyota is one of the most successful companies of the world in terms of revenue, management efficiency and product quality. The company is also referred to as one of the pioneers in the automobile industry. Toyota is known for having the most efficient operations management systems in the world. The company’s management philosophy and strategies evolve from the concepts of just- in-time production and lean manufacturing. These concepts play an important role in developing the company’s managerial values and methods of operation (Holweg 420). The values and functioning methods of Toyota are known as the “Toyota Way”. Employees of the organization are encouraged to respect each other and strive for continuous improvements. Toyota was selected for conducting the current analysis as the company operates in the U.A.E. Toyota UAE has been successful at implementing a strong customer base in the U.A.E. The company has been successfully holding its core corporate values in the Middle-East while catering to the specific needs of the consumers. Toyota U.A.E plays an important role in the automobile industry of the nation, contributing significantly in terms of revenues and productions. The values and mission of the company is described as follows: 1) All management decisions must be based on long term thinking. 2) Employees and managers are required to have a problem solving attitude. 3) All members of the organization must strive towards continuous improvement and adding value to the system and its people. 4) Organizational learning is driven by innovation and continuous efforts towards solving root issues (Heikkila 747). Inventory Management decision Inventory management is one of the most critical decisions which mangers are required to take. The success of an organization depends upon a proper inventory management process. Inventory management involves establishing proper control over the flow of stock of goods into and out of the business. The process involves taking critical decisions regarding the level of stock to be brought to the factory floor, the level of stock required to be dispatched, the time interval for placing orders for raw materials and the duration of storage. Factors such as the duration of storage of inventory and the quantity of materials orders affect the cost of production. Hence firms are required to take inventory related decisions through careful planning and long term analysis. Warehousing, cost, delivery time and turnover time are the most important aspects which mangers consider before taking decisions relating to management of inventory (Stevenson and Hojati 96). Analysis Concepts The primary concepts followed by Toyota in its inventory management system are discussed as follows: Toyota essentially follows the just-in-time inventory management concept. Based upon the just-in-time inventory concept, raw materials are brought to the factory floor only after order for the same have been received from the dealers and customers. The just-in-time inventory concept ensures that there are no wastages of valuable raw materials and all units manufactured. Since goods are produced on the basis of the orders received, it can be ensured that all items manufactured are sold. Hence finished products held as stock are a minimum (Monden 46). Toyota’s inventory management system is also characterized with the feature of “Jidoka”. Jidoka prevents the passing on of defective products from one process to the other. Any defect in the products are identified immediately during the production stage and rectified immediately. When defects are identified only at the last stage of production, it becomes difficult for the management to rectify the same. It is comparatively easier to rectify errors as and when they occur. Jidoka also prevents the reoccurrence of errors (Kannan and Tan 153). Toyota also follows the Kaizen approach in its inventory management system. Kaizen technique focuses upon continuous improvement in the operational system. At Toyota, employees and managers believe that no system is such that they cannot be improved further. Continuous innovation and improvements is an effective way for reducing costs and achieving competitive advantages. Toyota is famous for its lean manufacturing techniques. The technique facilitates employing only those resources, raw materials and technologies in the operation system that increases the value of the final products and services. Hence wasteful resources are avoided from the production system which ultimate facilitates cost saving (Bhasin and Burcher 56). Process modelling The inventory management process of Toyota can be described through the following process model. Figure: Inventory and productions management at Toyota (Source-“Lean terms & definitions”) The inventory system of the company is mainly the integration of the just-in-time inventory and the Jidoka concept. The just-in-time inventory facilitates ensures continuous flow of products. Since the company manufactures products only on the basis of the orders received, raw materials are brought in only as per the requirement. This ensures maximum efficiency and reduces wastage. Takt Time system matches the production time with demand and ensuring that goods are delivered on time. The pull system brings in materials which are required for production. Integration of the pull, Takt Time and the continuous flow of goods form the just-in-time inventory policy of the company. Another important component of the lean manufacturing system of Toyota is Jidoka which in implemented jointly with the just-in-time policy. Jidoka involves prevention of errors through continuous detection. Advanced machines and software technologies are implemented in the production house of the company which detects abnormalities on a regular basis. Jidoka also emphasizes upon the separation of human labour from machine work. Inventory processing is therefore done without mixing manual and automated technologies. The heijunka system ensures organizing the tasks which are required to be done by individual workers and establishing accurate schedules for the completion of different tasks. The work performed by individual units is carefully monitored to ensure that they are as the standard requirements. The inventory management system also promotes Kaizen whereby workers are encouraged to remain innovative and add value to the organization. The inventory management model of Toyota is designed in a manner such that it helps in manufacturing high quality products in the shortest lead time incurring minimum costs (Arnheiter and Maleyeff 5). The process of operations at Toyota can therefore be summarised with the help of the following flow chart. Validity of system Toyota’s inventory management concepts are implemented in the organization in a manner such that they adequately support the ultimate aim of the organization which is delivering quality products. The just-in-time and the Jidoka systems support the objectives of Kaizen which ultimately results in the lowering of costs. Hence it can be understood that Toyota adopts strategies in its inventory management process which directs towards similar goals. Through the Kaizen and Jidoka techniques Toyota is also able to fulfil the requirements of total quality management which focuses upon reduction of errors and their repetition. Overall the system matches with the mission of the organization and also facilitates meeting the needs of the stakeholders of the firm. The lean system of inventory management allows the organization to continuously improve existing products and processes. In order to remain competitive it is essential for firms to concentrate upon finding better ways of manufacturing that enhance competitive advantages for the firm. Since Toyota relies upon just-in-time production system, it requires maintaining adequate stock of buffer materials as well as buffer time to meet production contingencies without missing the deadlines of delivery (Shah and Ward 785). Recommendations Toyota may consider integrating the six sigma policies with the lean manufacturing objectives. Toyota does not focus upon meeting the six sigma requirements explicitly, however the efficient production systems facilitates the firm in achieving the six sigma requirements to a large extend. Experts are of the opinion that if the company employs six sigma as an integral part of the inventory management systems, then it is possible to reduce errors and increase quality of production further. The six sigma criterions are often criticized by many as it is generally seen that achieving such high standards of accuracy is difficult in most organizations involving complex manufacturing and production techniques. Hence manufacturing organization organizations such as Toyota can incorporate few of the standards of six sigma if not all for achieving high quality in their products (Schonberger 403). Another important recommendation is in respect of Kaizen. Toyota is seen to implement Kaizen for improving process and product. Kaizen is not used much by the organization to enhance employee morale. The company should also come up with innovative techniques for enhancing the productivity of workers and to motivate them towards performing better. Inventory management is associated with other functional practices of operational management such as supply chain management, job and product design. Hence if Kaizen concept is applied to other functions as well, better results can be achieved. Another important aspect which Toyota is required to consider is the maintenance of buffer stock. Since Toyota follows the just-in-time concept, orders for raw materials are placed as per the units of products which are required to be manufactured. During production if there are any complications or errors, extra stock of materials is required to be utilized. Toyota usually maintains a very low level of buffer stock so as to prevent wastages. Although it facilitates reduction in cots, a low buffer stock increases operational risks (White and Prybutok 113). Conclusion Inventory management is an integral part of the manufacturing process of an organization and requires careful planning. The inventory management system adopted by Toyota helps the company to maximize efficiency and deliver products within the lead time. Toyota’s manufacturing system relies upon the efficient technique of demand forecasting and preparing production facilities accordingly. The company is always prepared to deal with even large orders without missing the delivery time limit. Advanced technologies, high values and well integrated systems of quality measurement facilitate the organization to develop products which are of high standard. Unlike other automobile firms, Toyota dedicates much time and effort towards developing automobiles at minimum costs. Costs minimization efforts are therefore taken from every perspective. Much importance is given towards the timely replenishment of stocks so that there are no shortages. Works cited Arnheiter, Edward and John Maleyeff. "The integration of lean management and Six Sigma." The TQM magazine (2005): 5-18. Print. Bhasin, Sanjay and Peter Burcher. "Lean viewed as a philosophy." Journal of Manufacturing Technology Management (2006): 56-72. Print. Heikkila, Jussi. "From supply to demand chain management: efficiency and customer satisfaction." Journal of Operations Management (2002): 747-767. Print. Holweg, Matthias. "The genealogy of lean production." Journal of operations management (2007): 420-437. Print. Kannan, Vijay and Keah Choon Tan. "Just in time, total quality management, and supply chain management: understanding their linkages and impact on business performance." Omega (2005): 153-162. Print. “Lean terms & definitions”. The Northwest Lean Networks. The Northwest Lean Networks, 13 April 2013. Web. 9 September 2014. Monden, Yasuhiro. “Toyota production system: an integrated approach to just-in-time”. Florida: CRC Press, 2011. Print. Schonberger, Richard. "Japanese production management: An evolution—With mixed success." Journal of Operations Management (2007): 403-419. Print. Shah, Rachna and Peter Ward. "Defining and developing measures of lean production." Journal of operations management (2007): 785-805. Print. Stevenson, William and Mehran Hojati. “Operations management”. Boston: McGraw-Hill/Irwin, 2007. Print. White, Richard and Victor Prybutok. "The relationship between JIT practices and type of production system." Omega (2001): 113-124. Print. Read More