Toyotas Total Supply Chain Vision - Case Study Example

Toyota’s Total Supply Chain Vision Name Institution Course Date Table of Contents Table of Contents 2 1.0 Executive Summary 3 2.0 Introduction 4 2.1 Toyota’s Logistics Management Activities 4 2.2 Efforts for Controlling Supply Chain Risks and Costs 5 2.3 Centralized and Decentralized Logistics Activities 6 2.4 Logistics Flows and Trucking Routes 8 2.5 Management of Import and Export Activities 9 2.6 Packing Loops and Rack Standards 10 2.7 Recommendations for Performance Improvements 11 3.0 Conclusion 12 4.0 References 13 1.0 Executive Summary Toyota Motor Corporation manufactures motor vehicles and also provides financial services via its Toyota Financial Services department. It has a management philosophy that has developed substantially since its commencement and has been described with regard to “Lean Manufacturing” as well as “Just in Time Production” which were very fundamental to their development. This report will look at their logistics activities which involves both inbound and outbound. In addition, this report will demonstrate the efforts Toyota has put to control supply chain risks and costs. The company has put in expansion strategies with an air of caution and focuses on addressing the demands of their customers and at the same time minimizing the risks that accompany supply chains. Furthermore, the report will describe the centralized and decentralized logistics activities of Toyota. The report will also discuss the management of import and export activities where Toyota imports parts from overseas and into the North America as well as their packing loops and rack standards. 2.0 Introduction Toyota Motor Corporation has its headquarters in the Toyota City of Aichi and also Tokyo. It manufactures motor vehicles and also provides financial services via its Toyota Financial Services department (Ludwig, 2013). Toyota management philosophy has developed since its origin and has been described with regard to “Lean Manufacturing” as well as “Just in Time Production” which were very fundamental to their development. Furthermore, Toyota has managerial values as well as business approaches commonly known as the Toyota Way (Ludwig, 2013). This report will discuss the logistics management activities in Toyota Motor Corporation and the efforts the company is employing to control supply chain risks and costs. Furthermore, it will highlight the Toyota’s centralized and decentralized logistics as well as their logistics flows and trucking routes. 2.1 Toyota’s Logistics Management Activities The “Toyota Way” integrates Toyota Production System (TPS) whose main objective is to design out overload as well as inconsistency (Ludwig, 2013). It is also designed to face out waste and they utilize fundamental principles such as just in time and lean manufacturing. Toyota constitutes a partnership with a restricted number of 3Pls. it consists of an inbound logistics process that is known as logistics network which consists of suppliers, cross-docks as well as Toyota’s plants (Ludwig, 2013). They have a Milk Route that has a plan done once a month with which they ensure that both the location and the number of the entities are well known and recorded. In these Milk Routes, they also consider road routes as well as distances between every probable destinations. In addition, Toyota also has an outbound logistics which is also described as product distribution since the work of outbound logistics is to disseminate their final products from the OEM plants and delivered to the various retailers (Ludwig, 2013). The outbound logistics involves marshaling vehicles at the yard, performing a final quality assurance and delivering the vehicles to dealers either by railroad and trucks or even directly by trucks (Ludwig, 2013). 2.2 Efforts for Controlling Supply Chain Risks and Costs Toyota’s effort to take ahold of the supply chains as well as other costs can be identified across its international processes although their opportunities to catch economies of scale and hence come up with more informed decisions and probably important in North America (Ludwig, 2013). It is considered the hugest market that averaged about 2.2 million vehicles the previous year and is estimated to surpass the 2.4 million mark this year. The production supplied to North America falls second after Japan at about 1.77 million units the previous year (Ludwig, 2013). Furthermore, Toyota has vehicles as well as component production in almost a dozen states including Canada and Mexico. The company is highly investing all over the supply chain incorporating a rise in yearly capacity by almost 180,000 vehicles, 120,000 transmissions and 316,000 engines in the year 2015 all over the US and Canada (Ludwig, 2013). Following the upheaval of prior years, the strategy of expansion taken up by Toyota has an air of caution and focuses on addressing the demands of their customers and at the same time minimizing the risks that accompany supply chains. As the company incorporates newer models to its collection, the company has been evaluating supplier positions and therefore, Ludwig (2013) mentions that assessing total logistics as well as the effects of lead-time is very important. TEMA is desperately working to evaluate logistics performances and costs (Ludwig, 2013). These considerations fall in place successfully at Georgetown plant where eminent localization as well as a properly planned logistics flow that permits flexibility within the supply chain (Larson and Halldorsson, 2004). For instance, the plant permits variations to vehicles a few days prior to its production with day-to-day changes probable to the colour of the paint. Therefore, with the increased growth as well as the upcoming plans of building Lexus, Toyota is looking at limiting costs and ensuring both efficiency and flexibility in their supply chains once they are out of those projects (Ludwig, 2013). 2.3 Centralized and Decentralized Logistics Activities The complexity of Toyota’s management organization has deemed to be one of the challenges facing the view of Toyota’s supply chain (Lee and Whang, 2001). Toyota Motor Engineering and Manufacturing North America (TEMA) has core sections in Erlanger that takes care of purchasing, production control as well as logistics control together with Steve Brown’s team taking care of the inbound logistics, new model logistics and packaging designs to name a few (Ludwig, 2013). The fundamental purpose has always been to monitor and handle providers and identify packaging requirements as well as working with Purchasing so as to procure the services. Although, most of their logistics power has always settled with the plants with which each of them is separately integrated entity at Toyota (Larson and Halldorsson, 2004). Most of the operational logistics work are divided amongst individual plant’s Manufacturing and Production Control sections (Ludwig, 2013). The inner transfer of parts as well as containers fall into Manufacturing together with plant dock processes as well as the handling of empty containers. Production Control operations includes ordering of parts, planning production as well as the management of separation centres (Ludwig, 2013). These operations sort inbound materials by dock lines and consequently arrange empty containers for return legs. This assembly replicates Toyota Production System in its level of consolidation between manufacturing and supply at individual plants (Ludwig, 2013). Then again, Erlanger headquarters is not affiliated with any manufacturing site nonetheless it ought to work in order to build their connection between the tight run processes of individual plants. Currently, Production Control section in each plant also takes care of full truck loads as well as milkrun supplies (Ludwig, 2013). The LLPs govern the routing on the basis of the volumes, lead times as well as fine-tuning frequency to correspond the plant. TEMA has both IT as well as logistics engineering capabilities which was formulated so as to centralize its planning as well as brining it in-house beginning with plant in Princeton (Ludwig, 2013). Within the next few years, Toyota plan to centralize all their plants. 2.4 Logistics Flows and Trucking Routes Toyota owns three engine plants which deals with building cylinders, engines together with transmissions and powertrain parts (Ludwig, 2013). Within North America, Toyota spent up to26 billion dollars per annum for parts as well as 1.5 billion dollars in services from 660 suppliers all over 30 states including Canada and Mexico. Almost 75 per cent of Toyota’s incoming resources originates from North America with a wide concentration of suppliers from Midwest states as well as those in the southeast (Ludwig, 2013). Though it also has supplies in Mexico, the company has not been observed to migrate its market to the south. A few years ago, there was a push for the idea although their new model launched has been using their chief supply bases (Esper, Fugate and Davis, 2007). Toyota Company hauls materials via a dynamic trucking network all over the continent, which TEMA’s core routing team adapts more than 8 times a year (Ludwig, 2013). This has a recorder a very high frequency more than most of the existing automotive industries. The company is working at meeting the variations that occurs within the vehicle market every month (Ludwig, 2013). Therefore, if the company fails to adapt to the fluctuations, they may lose their efficiency or even risk blowing out their own trailers especially when the volumes increase. Toyota’ inbound connections are highly planned and synchronized and at the same time designed for minimal number of contacts for their resources (Ludwig, 2013). Toyota describes their most efficient flow as a direct route that involves the movement of a supplier in one full truck that ensures that it has made multiple stoppages before proceeding to a plant (Coyle et al., 2008). A number of their plants possess more than one lines as well as docks for example, Georgetown. In such instances, the company utilizes ‘separation centres’ that are located next to the plant in order to effectively control the flow between truckload and the assembly line (Ludwig, 2013). Therefore, for such routes, these carriers gather resourced by the method of milkrun before transporting full loads in arranged time periods to the separation centres, which arrange freight in accordance to their course code and eventually move trucks to their factory door (Mentzer, Stank and Esper, 2008). The third method of trucking involves regional cross-docks. For either long distances or even smaller suppliers that have no capability to access their gate directly, trucks gather the resources from the suppliers and transport them to the cross-docks. Toyota refers to these movements as ‘sub-routes’. Cross-docks have similar functionality as separation plants although their freight are arranged according to different routes (Mentzer, Stank and Esper, 2008). 2.5 Management of Import and Export Activities Toyota imports various parts from abroad and into North America especially through Japan (Spekman, Spear and Kamauff, 2002). It often receives almost 160 containers daily which amounts to about 80,000 TEUs per annum. Nearly every parts obtained from Asia are repackaged and merged in Japan thereafter imported into North America (Ludwig, 2013). TEMA doesn’t handle the importation of containers although Toyota Motor Corporation located in Japan purchases the sea freight and every plant contracts carriers to haul it from various ports (Ludwig, 2013). On the other hand, exported materials are controlled by TEMA and are continuously growing into nations such as Russia, Europe, Brazil, Central America and Australia (Ludwig, 2013). Recently, Toyota exports nearly 1,500 containers per annum from North America which equates to about 3,000 TEUs. Furthermore, majority of their exports which are inclusive of those for FTA projects, are merged at cross-docks located in both San Antonio and Chicago (Ludwig, 2013). These cross-docks receive freight and thus loads them straight into the sea containers. 2.6 Packing Loops and Rack Standards TEMA has a number of packaging projects for retumable containers and also for designing standards. Packaging is involved in various sections of the supply chain which involves functioning in concert with the plants (Ludwig, 2013). Packaging is an adjacent collaboration that exists between the internal side and the external side. The function of containerization may be performed by a Production Control at the plant although the individual handling the box belongs to an internal logistics team. Toyota’s container loop is a very big operation which takes about 98 per cent of the packaging which is retumable in North America (Ludwig, 2013). Trailers that are involved in delivering the various components are refilled with empty containers to be taken back to the cross-docks. In addition, Toyota doesn’t involve any outside provider in managing any of their packing loops. Furthermore, Logistics Control in Toyota have always been responsible in packaging design and also to set similar standards for designs for instance, metal racking used throughout plants (Lee and Whang, 2001). TEMA packaging engineers normally begin their operations four years before so as to model different launches and collaborate with plants on supply and handling (Ludwig, 2013). Over the years, TEMA has operated on common packaging from complicated equipment such as metal raking. For example, the first huge project was designing a rack that can be used to move engines built at Toyota’s plant in Alabama. The second one was a rack for automatic transmission. Therefore, TEMA is looking on ways they can utilize more retumable packaging for international movements (Ludwig, 2013). Packaging used for Japanese imports are of international standards and also 95 per cent retumable. 2.7 Recommendations for Performance Improvements As Toyota plans for future growth, it might come across various constraints especially for their logistics department. It is very important that Toyota incorporates training programs or both in-house and also for logistics providers (Christopher, 2011). They ought to ensure that their supply chains management as well as their external counterparts are properly trained in supply chain thinking. They should utilize their resources at TEMA in order to collaborate with those at the plant as well as those their partners (Willersdorf, 2007). Toyota ought to integrate their concept of total logistics with their decision-making processes. They should effectively do this by not only focusing on their container pack density but also the handling costs, internal conveyance and return management to name a few (Green, Whitten and Inman, 2008). 3.0 Conclusion To sum up, Toyota Motor Corporation manage their logistics activities through their Toyota Production Systems whose objective is to design out overburden and inconsistency. Also, Toyota efforts to take ahold of the supply chains as well as other costs through recognition of its international operations although their chances to catch economies of scale. In addition, Toyota hauls materials via a dynamic trucking network all over the continent which TEMS’s core routing team adapts more than 8 times a year. The company also imports a number of parts from abroad and into North America particularly through Japan. Also their export materials are controlled by TEMA and are continuously growing into various nations such as Russia, Europe and Brazil to name a few. Lastly, their packing loops and rack standards are controlled by their internal logistics team through their function of containerization as well as their package designing. 4.0 References Christopher, M 2011, Logistics & Supply Chain Management, 4th edition, Prentice Hall, Edinburgh Gate, Harlow UK. Coyle J., Gibson B., Novack, R & Bardi, J 2008, Supply Chain Management: A Logistic Perspective, South Western CENGAGE Learning, Mason, OH, USA. Esper, TL, Fugate, BS & Davis-Sramek, B 2007, ‘Logistics learning capability: sustaining the competitive advantage gained through logistics leverage’, Journal of Business Logistics, Vol. 28, No. 2, pp. 57-81. Green Jr., K.W., Whitten, D. & Inman, R.A. 2008, ‘The impact of logistics performance on organizational performance in a supply chain context’, Supply Chain Management: An International Journal, Vol.13, No.4, pp.317-327. Larson, P & Halldorsson, A 2004, ‘Logistics vs. supply chain management: an international survey’, International Journal of Logistics: Research & Applications, Vol. 7, No.1, pp.17-31. Lee, H. L., & Whang, S 2001, March/April, Demand chain excellence. Supply Chain Management Review, 41−46. Ludwig, C 2013, Toyota’s Supply Chain Vision. Penske Logistics, retrieved from http://automotivelogistics.media/interview/total-supply-chain-vision Mentzer, J., Stank, T., & Esper, T., 2008, ‘Supply chain management and its relationship to logistics, marketing, production and operations management’, Journal of Business Logistics, Vol. 29, Issue 1, pp. 31-46. Spekman, R., Spear, J., & Kamauff, J 2002, Supply chain competency: Learning as a key component. Supply Chain Management, 7(1), pp. 41−55. Willersdorf, RG 2007, ‘Adding value through logistics management’, Logistics Information Management, Vol.3, Issue 4, pp. 6-8. Read More