TOYOTA

SUPPLY CHAIN MANAGEMENT

INTRODUCTION

Toyota Motor Corporation Founded 1937 Founder Kiichiro Toyoda Headquarters Toyota City, Japan; Industry Automotive, Robotics

Financial services and Biotechnology

Products Economy/mainstream/luxury vehicles

Revenue USD $203.26 billion (2009) Employees 316,121

SCM

Minimizing supply chain costs while keeping

a reasonable service levelcustomer satisfaction

qualityon time delivery, etc.

Objective

Right product Right price Right store Right quantity Right customer Right time

Higher profitThe rightProduct

HigherProfits

The rightTime

The rightCustomer

The rightQuantity

The rightStore

The rightPrice =++ ++ +

TOYOTA SUPPLY CHAIN

OVERSEAS

NETWORK (EXIM)

PARTS/ SERVICE CENTERS

COMPONENTS SUPPLIER

GROUPRAW

MATERIAL SUPPLIERS

WAREHOUSE

DISTRIBUTOR

ASSEMBLY PLANT

DEALER

CUSTOMER

INTEGRATED SCM

RAW MATERIA

L SUPPLIER

S

1ST & 2ND TIRE

SUPPLIERS

MANUFACTURING PLANTS

WAREHOUSE

DEALER

END CUSTOME

R

INTERNATIONAL

COLLABORATION

SMOOTHER MATERIAL FLOW

SUPPLIERS

Organized suppliers into functional tiers First-tier suppliers: worked together in a

product-development team Second-tier: made individual parts

Encouraged cooperation and communication among first-tier suppliers

Cross- sharing of personnel through Toyota sending personnel to suppliers to

compensate for greater workload Toyota transferring senior managers to

suppliers for top positions

SUPPLIERS

“market price minus” system, not “supplier cost plus” system Value analysis reduces costs

Production smoothing enables suppliers to maintain a constant volume of business

Focus is on long-term relationships that underscores cooperation, teamwork

Procurement

Suppliers are the partners Suppliers are the integral elements of

Toyota Located within 56 miles radius Security to the suppliers for guaranteed

order gradual mutual improvement, rather than

price through bidding as a way to choose a supplier

Trained suppliers as per requirement

Suppliers partnership hierarchy Kaizen and learning Joint improvement activities Information sharing Compatible capabilities Control system Interlocking structure Mutual understanding and trust

Managing suppliers

Suppliers are extensions of Toyota Care and develop as own associates Long term partnership Tier structure : levels of responsibility Strict cost target and timing Integrated system (JIT)

Purchasing challenges

Normal expectation : 3 to 4 % price reduction per year after model year launch

Meet best price with Toyota quality Trim master goal : 30% price reduction

for new vehicle launch

Key to logistics performance Packaging : mixed box size, small pallet

size Dedicated transportation service Consistent daily route, period route

revision Good timing at all connection points Order fluctuation allowance built into

route capacity plans

Manufacturing

Toyota Production System Best quality Lowest cost Shortest lead time Best safety High morale

Through shortening the production flow by eliminating the waste

Manufacturing

Continuous improvement JIT People and teamwork Jidoka – quality (make problem visible) Waste reduction Leveled production Stable and standardize process Visual management Kanban – flow of correct information

DISTRIBUTION

In Japan, Toyota’s sales and marketing work is divided into four distribution channels Toyota (mostly high-end, large cars), Toyopet (medium size), Toyota Corolla(compact), and Netz Toyota (compact).

Overall, Toyota offers about 60 car models, with each channel offering only 15-25 models.

The Toyota dealers as a whole have approximately 5,000 outlets and 120,000 employees.

DISTRIBUTION

This way, each dealer can develop deep knowledge of all models he has for sale, and can make an effort to sell all car models assigned to him, rather than only the few most profitable ones.

DISTRIBUTION

Toyota applies the “Toyota Way” to manage dealers, based on three basic principles: Dealers are free to make independent

decisions, and Toyota can only help them to invest in the right things to improve. Such a strategy motivates dealers to be more proactive.

Both the dealers and Toyota must prosper jointly.

Competition is a means to improve.

DISTRIBUTION

Toyota works with one distributor in each country

Toyota markets cars in about 170 countries through its overseas network consisting of more than 160 importers/distributors and numerous dealers.

Overall, China is the highest-growth market.

TOYOTA GROUP WORLDWIDE