Operations management assignment on: Organizational supply chain at Toyota Motors Corporation

INTRODUCTION

A critical appraisal of an organizational supply chain at Toyota Motors CorporationToyota Motors Corporation is a Japanese multinational company whose headquarters are in Toyota, Aichi. It is said to be the eleventh largest company when it comes to the revenue. In the year 2011, Toyota was known as the third largest manufacturer of automobiles after General Motors and Volkswagen. Recently in the year 2012, the company revealed that it has successfully launched its 200 millionth vehicle which is considered to be a great achievement in the automobile industry.

Toyota Industries is famous for developing and manufacturing automobiles and the products related to automobiles. They manufacture vehicles, air conditioner compressors for cars, electronic devices for cars, engines and other products.

Toyota is famous for the approach it follows in order to solve problems and to improve continuously. They scientifically assess the problem and then solve it. They learn from their experiences and they make sure that the knowledge is passed on to others. Toyota is a global company that deals with a lot of products and different markets. The company works in different markets across the globe. These markets have different characteristics and thus these call for different supply chain relationship. In fact there are different supply chain processes in the company depending upon the product. (Ananth Iyer et al 2009).In order to understand how all the supply chains exist in one company, one must know how to apply the v4L framework which is used by the company. The evaluation of performance in Toyota is done by giving equal weightage to both the processes that are used to calculate performance and the results that are achieved. The v4L framework helps the company to create a balance of the main supply chain parameters which are:

• Variety
• Velocity
• Variability
• Visibility

THE v4L FRAMEWORK

The v4L framework is all about balancing the key supply chain parameters. For a manager to understand how this is done within the company, the first thing to analyze is to check and know how the company is able to balance its supply chain. It is generally found that variety has a upper hand keeping in had the marketing advantages. Very less attention is given to velocity, variability and visibility. Variety refers to the variety of the produced that are presented to the customers, velocity refers to the speed at which the product flows, variability refers to the inconsistency of the results against what has been forecasted, and the visibility of the different processes to facilitate learning.

The choice of Variety over other key supply chain parameters can have severe consequences on the supply chain which becomes difficult to solve. The supply chain performance is superior at Toyota because they ensure a careful choice of the v4L parameters.The v4L principles are:

Toyota follows the following v4L principles in order to ensure the v4L balance

• Variety: it is very important to choose this parameter carefully by keeping in mind the market demands and the operational efficiency. The awareness of the effect of the variety of the products on the market demand, manufacturing and supply chain helps in considering all the supply chain entities when any decision regarding the variety of the products is been taken. It is necessary to receive a feedback so that it is sure that the variety that has been chosen is the best response to the present market situations. Toyota’s processes enable the loop of Plan, Do, Check and Act (PDCA).
• Velocity: is also one of the key parameters and it displays in almost all the processes throughout the supply chain. The focus is on maintaining a firm flow which in turn helps in synchronizing the capacity planning across the supply chain.
• Variability: the minimization of the variability actually depends upon the way each individual process is carried out. If the variability is low then it enables the quality improvement processes to be done without any hindrances and thus not only the cost reduces but the quality also improves. The low variability also helps all the supply chain flows to operate with reduced level of inventories. The supply chain performance is stabilized by the interaction of the three parameters which are variety, velocity and variability.
• Visibility: the visibility of all the processes should be ensured by using the correct metrics before changing the plan, a consensus should be reached. The performance metrics at Toyota have half weightage for the results and have for the process compliance. This means that the main aim is to recognize not just the small successes but also to ensure that the right processes have been followed. This key parameter helps in visibility of the bottlenecks, and also encourages continuous learning and feedback.

The v4L principles highlight the balance of all the supply chain processes. The choice of these key parameters reflects the competitiveness of Toyota in the market.

                                               (Source: Word Press 2010)

COMPREHENSIVE OVERVIEW OF THE SUPPLY CHAIN

The Toyota Production System (TPS) is the point of reference that is used all over the world as the base for the concept of Lean thinking. The TPS at Toyota also includes the supply chain and in order to ensure supply chain efficiency it is important that some crucial choices are made. The global automotive supply chain is quite confusing and it consist many processes which when are connected together form a supply chain between the customers and the suppliers. The processes include producing the parts at the suppliers, transporting these parts to the original equipment manufacturer, assembling these parts in a vehicle, distributing these vehicles to the dealers, and finally delivering to the customer. (Ananth Iyer et al 2009)

Apart from the above mentioned physical processes there are processes like pre production, and day to day operational support process. In order to understand these processes, it is important to know the product, the customers and the distribution models.Product

There are certain terminologies that are used for different products. The vehicles are described by their specifications. These can be the make, the model, the body style, the engine, the accessories, the exterior and the interior color. Each vehicle is made of peculiar specifications which are termed as “build combination”. The numbers of build combinations are generally limited because if the entire probable build combinations for a particular model are made then the supply chain will become very complex and also costly. Toyota in order to reduce the number of build combinations includes many standard equipment options on the basis of the model and the grade that is selected. Toyota has been able to achieve success in balancing the build combinations which are made and sold. (N. Suthikarnnarunai 2008)

Customer

There are various categories of the customers for different automotive customers. They can be retails customers, the suppliers or the employees, rental companies, commercial fleet, government entities. The type of the customer and the characteristics of the order are used to establish a flexible supply chain.

Distribution Models           

The distribution model is the method that is used to distribute the vehicles from the assembly plant to the dealers. The distribution model at Toyota is different from the other regions around the world. This means that the distribution model differs from region to region. The distribution models will be different for Japan and Europe.

The Physical flow

The physical flow of the supply chain is illustrated in the diagram.

The suppliers produce the parts and then these parts are transported with the help of the inbound logistics to the assemble plant. When the parts reach the assemble plant, they visit the body shop, the paint shop, they then move to the assembly and then finally to the inspection area. After the vehicle is produced it is then transported to the dealers with the help of the outbound logistics. This entire process seems quite simple but in actual this process is very complex because the vehicle is a very huge commodity. It is made up of hundreds and thousands of different parts which are produced by hundreds of suppliers.

Suppliers

The suppliers are those who provide different parts and products that are used to make to make the final product. These parts are received by the inbound logistics from different suppliers. These suppliers are the Tier 1 suppliers. Tier 1 suppliers are the first level suppliers. They make the parts and then directly ship them to the assembly plants. The suppliers have their suppliers who have their suppliers, thus the supply chain has various levels which are called tier 1, tier 2, tier3 etc. thus it can be imagined how complex is the inbound supply chain. To top it all there are suppliers who are in different parts of the world and the time at which the parts are delivered varies greatly. The local suppliers do not take much time but the overseas suppliers require a lot of transportation time. (N. Suthikarnnarunai 2008)

Inbound Logistics

Logistics is an extremely important part of the supply chain. As per the supply chain of Toyota Inbound logistics helps in the transportation of the parts from the tier 1 suppliers to the assemble plant. The Inbound logistics covers two operations. The first operation transports the parts to the local plant and the other is a different global inbound logistics that transports parts from Japan to North America and European plants. The parts are to be delivered efficiently and timely only then can Toyota be successful in operating the lean supply chain. Thus Toyota has a partnership with a certain number of third party logistics providers (3PL’s).

The inbound logistics operations of Toyota can be described as a network of logistics. At Toyota the suppliers are organized into clusters on the basis of the geographic location. The truck follows the “milk route” and picks the parts from the suppliers. The milk route is the path from where the truck picks up different parts from different suppliers one after the other. These parts are then delivered to a regional cross dock. Here the parts are taken and are prepared to be delivered to one of the plants of Toyota. When these trucks reach the plant, these are parked and not unloaded till the time a trigger is given to do so. (Ineak 2009)

The Network Logistics Model helps Toyota to have a very effective and a very efficient inbound logistics operation. The suppliers, crossdocks and the Toyota plants are the entities of the network. These entities are connected by the trucks that delivers the parts to the plant or the empty trucks that go back to the suppliers to collect the parts. The strategy that Toyota follows is to have small lots so that the delivery is frequent. The supply chain works effectively when each supplier transports the parts and components every day to each plant. The network logistics helps Toyota to pick up parts from many suppliers on a daily basis minimizing the transportation cost at the same time. (Toyota Industries 2012)

Production

The parts that are provided by different suppliers are accumulated at the assembly plant and then these are produced. The assembly plant has different lines where the vehicles are assembled. The plant is divided into sections which are called shops. These are the body shop, the paint shop, the assemble area and the final inspection.

It is said that a vehicle is born in the body shop as here the vehicle gets its frame and body. In the body shop many robots work and weld the parts of the body and then eventually put them all together. After the body parts are assembled, the vehicle then is taken to the paint shop where the vehicle is painted. After the exterior of the body is painted, it is then moved to the assembly plant. Here many of the supplier parts are put together and are installed finally. After all of this is done, fuel is added to the vehicle and then it is not left alone as there other processes that need to be done. The vehicle needs to pass a few quality check processes along with getting inspected at the inspection section. After the final inspection is done the vehicle is sent for shipment to the final dealer.

Outbound logistics

Outbound Logistics better known as product distribution is also one component of the supply chain. The main function of the outbound logistics is to transport the final products to the dealers from the OEM plants. Toyota uses a separate distribution flow in the country North America when compared to Europe. The company has 3PL for the outbound logistics also but the relationship between the 3PL for outbound logistics is different from the relationship that the company shares with 3PL for the inbound logistics. The 3PL for the inbound logistics are much dedicated. Toyota however considers the 3PL for outbound logistics as its partners but the 3PL are not able to be dedicated to them because it is very difficult for one 3PL to have a control of the end to end transportation activities starting from the plant to the dealers. (Toyota Industries 2012) Thus Toyota has to rely on the railroads and trucks in order to deliver their vehicles from the OEM to the final retailers. (Ineak 2009)At Toyota the vehicles are parked outside the OEM plant in big yards and these yards are referred to as “Marshalling yards”.

Dealers

The dealers are the most important people when it comes to the supply chain as these are the people who act as the face of the company, Toyota for the end customers. They are the people who take the responsibility of selling the final product to the end customers. Not only are they responsible for selling the product but they are also responsible for ensuring customer satisfaction. It is very important that the quality of the product should be high and the perception of the company should be positive but it should not be negative under any circumstances. An important factor in the lean supply chain management is the maximum level of the stock with the dealer. (Toyota Industries 2012)

The Toyota Production System (TPS) is the point of reference that is used all over the world as the base for the concept of Lean thinking. The TPS at Toyota also includes the supply chain and in order to ensure supply chain efficiency it is important that some crucial choices are made. The global automotive supply chain is quite confusing and it consist many processes which when are connected together form a supply chain between the customers and the suppliers.

The supply chain of almost all the car manufacturers is almost same but there are certain things that differentiate the supply chain of Toyota with the other car manufacturers. This can be explained by visualizing the supply chain at Toyota just like a huge Swiss clock. When a clock exposes all the mechanisms that are working within it, it can be noticed that there are movements of different sizes which are all working at different levels but these all work together to achieve on email objective which is to display the correct date and time. This motion is repeated numerously. In the same way, the vehicles in the Toyota plant go to the assembly lines at the same speed. In some other area something else is done for example seats are installed in the vehicles which have been collected from the suppliers. On the other hand the trucks that deliver the parts collected from the suppliers are unloaded in the marshalling yards. This is done on the basis of the sequence of the vehicles and also the progress of the vehicles. The other processes also occur in repeated intervals so that it can support the need for the parts. Therefore, the supply chain of Toyota is just equal to a Swiss clock which is integrated and synchronized in order to have a successful lean supply chain. Moreover the company is able to produce sufficient variety at an effective velocity so that they are able to satisfy and meet the demands of their customers. (Ananth Iyer et al 2009)

ROLE OF THE LOGISTICS MANAGER

A reasoned appraisal of the extent to which supply chain management is a key aspect of the role of the logistics manager.

The Logistics as discussed before is an important part of the supply chain management. The management of the supply chain is referred to as the supply chain management. The supply chain contains of various steps like the sourcing, extraction, storing of the raw materials, scheduling, planning of the production, logistics, finished goods, and customer service etc. logistics is often one of the main functions for any company. Logistics includes the storing and moving raw material in the company. It is the logistics that take the responsibility of delivering the raw material from the different suppliers to the end customers.

The logistics manager thus plays an important role in the supply chain management. The effective working of the supply chain is possible only if the delivery of the parts is done timely. The main role of the logistics manager is to ensure that he is able to coordinate all the processes so that the customer, suppliers and retailers or the manufacturers of the company are satisfied. The coordination helps in assuring the loyalty in the near future and also ensures the effective working of the supply chain.

The role of the logistics manager is not just coordinating but much more. He has to procure the raw materials, oversee the shipments of the final product from the supplier to the end customers. The role of the logistics manager can be discussed:

• Inventory: the logistics manager should be aware of the inventory before he ships it. He must the quantity he has in hand before shipping it. They keep a record of the current stock and also foresee the needs of the company in the near future. If the manager thinks that the stock for a particular product is low then it is his responsibility to order more for that product.
• Allocating Resources: a logistics manager is also responsible for allocating the resources efficiently. The allocation of the resources should be in such a way such that it completes the future as well as the present objectives. This requires the manager to be aware of the central goals of the organization.
• Scheduling deliveries: it is an important duty of the logistics manager to ensure that all the suppliers are ready to deliver the parts at the time and date that has been fixed. His responsibility is to ensure that all the parties that involved in the supply chain are prepared at the time which is scheduled and are not asking for a change in the time.
• Negotiating with the Carriers: most of the companies rely on the independent carriers for the transportation. The logistics manager is responsible to coordinate with these carriers and also negotiating for the best possible rate at which the goods can be shipped.
• Supervision of Staff: there is an administrative staff which is under the Logistics manager and he/she has to supervise it. All this include training them, monitoring and evaluating their performance, ensuring that they are clear about the goals and objectives that have been set, and last ensuring that they are abiding all the rules and regulations.
• Maintenance and Repairs: only ensuring delivery and transportation of the goods is not the sole responsibility of the logistics manager. He is also to ensure that the goods are in perfect condition. This is done by ensuring that the source through which the goods will be shipped or transported will not damage the product.
• Forecasting Obstacles: planning is also an important responsibility of the logistics manager and thus he should plan as per the information available to him. He should prepare for different situations and should be prepare plans if there is a change in the situations. (E how 2012)
• Cost Cutting and Efficiency: logistics manager should also ensure that whatever they do and whatever decision they take they should be able to save money of the organization and increase the effectiveness and the efficiency of the company. This can be done by using cheaper carriers or negotiating with the independent carriers for the best price.
• Develop Backup Plans: an effective logistics manager is the one who is hoping for the best to happen but at the same time he also prepares himself for the worst. He may anticipate delays or any goof ups and thus he should be prepared for a back up so that he can fix the situation at the time of urgency.
• Coordinate Paperwork: paperwork is also important in doing any transaction. The logistics manager is to prepare all the relevant paperwork. This can be explained with the help of an example; if a certain consignment of goods has to be transported through customs then all the required papers should be prepared beforehand and should be submitted to the respective authorities. (E how 2012)
• Track goods: the logistics manager should ensure that the goods that have transported and the goods that have been shipped are as per the schedule. If any mistake or error is reported the he must change the logistics plans accordingly.
• Finding Inefficiencies: the Logistics manager is to find the loopholes in the supply chain and will have to work on improving these inefficiencies. The supply plan should then be reconfigured so that these inefficiencies are eliminated.
• Prepare Budgets: The logistics manager should also be able to prepare the budget so that they can estimate the cost of the goods that are moving. The manager is to edit the logistics plan after the budget is prepared only if any changes have been incorporated.

The above mentioned are the basic roles and responsibilities of a logistics manager. Even the logistics manager at Toyota is to follow the same roles and responsibilities. The fact cannot be ignored that the management of the logistics is a very critical responsibility and only a very responsible can exhibit outstanding performance in it. The Toyota industries take Logistics as a process which is ongoing which will continue till the time it passes the checkout counter. At Toyota the logistics manager aims to have original business models which will help in improvements and will also enable certain reforms in the logistics.It has been discussed above that logistics is an essential component of the supply chain. Logistics includes two roles which are inbound logistics and outbound logistics. Inbound logistics helps in the transportation of the parts from the tier 1 suppliers to the assemble plant. The Inbound logistics covers two operations. Outbound Logistics better known as product distribution is also one component of the supply chain. The main function of the outbound logistics is to transport the final products to the dealers from the OEM plants. Both these parts have been discussed in the report above. The success of the lean supply chain at Toyota is possible only when there is timely delivery of the parts that are given by the suppliers and this is done by the logistics. The role of the Logistics manager is to ensure that the parts and the components are delivered timely.

The logistics manager plans, directs and analyses the system of the logistics and they are also responsible for keeping a very close watch on the operations that occur on a daily basis. The logistics manager is the one who supervises the work of the schedulers and the logisticians. He is also required to collaborate with other departments like the accounting department, customer sales, shipping and the other processes. (Logistics Courses 2012)

With time every company has to ensure that their supply chain works effectively and also ensure that their logistics manager is performing his duties well so that there are no hindrances in the effective management of the supply chain.

The logistics manager at Toyota also has to have a clear base of the v4L framework. The v4L framework is all about balancing the key supply chain parameters. For a manager to understand how this is done within the company, the first thing to analyze is to check and know how the company is able to balance its supply chain. The evaluation of performance in Toyota is done by giving equal weightage to both the processes that are used to calculate performance and the results that are achieved. The v4L framework helps the company to create a balance of the main supply chain parameters which are:

• Variety
• Velocity
• Variability
• Visibility

 The designing and managing the supply chain is very complex and it is getting difficult as the companies are expanding their business. They take goods from one country, produce them in another country and sells them in a different country altogether. Thus it is very important for the logistics manager of every company to understand the supply chain and effectively perform his roles and duties. (Anand Nair 2011)

The logistics manager should also be able to prepare the budget so that they can estimate the cost of the goods that are moving. The manager is to edit the logistics plan after the budget is prepared only if any changes have been incorporated. Thus it is very important for the effective implementation of the supply chain to have an efficient logistics manager as logistics is an important component of the supply chain.

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