Presented by: Cynthia Bucher, Daniel Webb, Diego Belez, Samuel Jones

Supply Chain Management

OPRE 3320.001

December 3, 2013

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Company & Division

The Toyota Motor Corporation is an expansive organization consisting of sixteen companies

(mostly automotive manufacturing) that make up Japan’s Toyota Group, six non-automotive

businesses, 52 overseas manufacturing facilities, 167 overseas distributors, research and

development centers, design centers, holding companies and Toyota Museums as well as

numerous other organizations around the globe (Toyota Motor Corporation). This paper focuses

on Toyota’s supply chain as it relates to the North America Manufacturing Division primarily

that of United States and Toyota Motor Manufacturing Texas, Inc. (TMMTX) located in San

Antonio, Texas.

Executive Summary

Toyota Motor Company produced the A1, its first automobile prototype in 1935. Twenty-two

years later Toyota established Toyota Motor Sales, U.S.A. Inc., as part of its global expansion

efforts. In 2003, the Toyota Motor Manufacturing Texas, Inc. (TMMTX) began manufacturing

automobiles, with the goal of becoming “the most successful and respected care company in

America” (Toyota Motors U.S.A.).

Toyota’s global reach expands over six continents and consist of eight manufacturing divisional

regions. The North America region includes Canada and the United States and is home to eleven

manufacturing facilities including Toyota Motor Manufacturing Texas, Inc., located in San

Antonio, Texas.

In addition to the eleven manufacturing facilities, of which six produce automobiles, the North

America regions also houses several Research and Development Centers and Design Centers.

All six automobile manufacturing facilities act as major customers for the Research and

Development Centers, Design Centers and remaining manufacturing facilities.

Through the practices of Genchi Genbutsu and Lean processes Toyota has been able to identify

customer demand and lower transportation cost. When a truck order is received at TMMTX,

Toyota utilizes Just-in-Time (JIT) manufacturing to help eliminate waste and improve efficiency

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and Jidoka to improve quality at the source. Through these practices Toyota has gained

unparalleled reliability and trust its consumers.

As a leader in innovation, Toyota is constantly responding to external environments and

incorporating the latest technologies. These practices have help promote Toyota’s growth and

innovative advantage.

Manufacturing in the Toyota organization utilizes the demand-driven strategy known as Total

Production System (TPS) and Just-in-Time (JIT) inventory processes. The TPS focuses on

providing customers with the products of the highest quality at the lowest cost, employee

satisfaction and security, and organizational flexibility, profitability and prosperity.

Originally Toyota Logistics Services (TLS) managed the logistics operations, administration, and

planning of Toyota and its subsidiaries and was responsible for the import and distribution of all

American sales.

Today Toyota Motor Engineering and Manufacturing North America headquarters (TEMA) is

responsible for overseeing the organizations logistics engineering and routing. In its quest of

continuous improvement, TEMA conducts route analysis and total network studies several times

a year. This allows for quick response times during production changes.

Toyota’s specific routing schedule requirements makes truck transportation the ideal method

shipping and delivery in the United States. TMMX originally used rail transportation, but was

forced to switch to truck transportation after an increase in production. A trend that affects

Toyota’s lead time.

Through the practices of Jidoka and Just-In-Time (JIT), Toyota has been able to uniquely set

themselves apart from all other organization.

In the United States as well as globally, Toyota is faced with competitors in all vehicle segments.

Yahoo Finance list Ford Motor Corporations and General Motors Corporations as Toyota’s top

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competitors. Despite the competition, Toyota has managed to secure a competitive advantage

through its TMMTX manufacturing of the Tacoma.

Future growth relies on managers and decision makers who are properly trained in total supply

chain management. Such training can help decision makers understand the overall impact that

logistic decisions can have on the organization’s supply chain.

Toyota’s practices have vastly improved the manufacturing and logistic practices of its supply

chain as well as that of many other companies around the globe; however, Toyota is constantly

seek environmental friendly methods of improvement. After touring TMMTX one such

improvement would be the installation of LED lighting and skylights.

Background/Vision/Mission

Toyota’s history begins with the 1867 birth of Sakichi Toyoda. As a young boy, Sakichi

watched his mother and other women being over worked in the textile industry and thought there

should be a more efficient way. This thought process led to Sakichi inventing the first wooden

Toyoda handloom in 1890 and the first “non-stop shuttle change type Toyoda automatic loom

(Type G)” in 1924 (Toyota Motor Corporation). Saskichi’s original business vision was based

on five main principles: “(1) always be faithful to your duties, thereby contributing to the

company and to the overall good, (2) always be studious and creative, striving to stay ahead of

the times, (3) always be practical and avoid frivolousness, (4) always strive to build a homelike

atmosphere at work that is warm and friendly, and (5) always have respect for spiritual matters,

and remember to be grateful at all times” (Toyota Motor Corporation). Today these guiding

principle make up “Toyota’s Corporate Social Responsibility Policy: Contribution towards

Sustainable Development” (Toyota Motor Corporation). By the late 1920s Sakichi had sold his

patent to a British company and offered a million yen to his son Kiichiro, if he would research the

automotive industry. Kiichiro accepted his father’s offer and establish an Automobile

Department in 1933. In 1935 Kiichiro established the Hinode Motors, which produced the

company first prototype automobile the A1. In 1936 the Toyota logo known today was

established. In the years that followed Toyota expanded across Japan and then entered the global

market. In 1957 Toyota established Toyota Motor Sales, U.S.A., Inc., followed by Toyota do

Brasil S.A. in 1958. Today Toyota operate 13 manufacturing facilities in its North American

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Manufacturing Division including Toyota Motor Manufacturing Texas, Inc. (TMMTX) which

was established in 2003 and operates under the following mission and vision statement (Toyota

Motor Company).

• Mission Statement: "To attract and attain customers with high-valued products and

services and the most satisfying ownership experience in America."

• Vision Statement: "To be the most successful and respected car company in America."

(Toyota Motors U.S.A.)

Company Structure (Division, Global Reach, etc.)

Toyota Motor Company’s Manufacturing Divisions currently consist of 68 manufacturing

facilities spread across eight regions; Japan (16), North America (11), Latin America (4), Europe

(8), Africa (3), Asia (24 - excluding Japan), Oceania (1), and the Middle East (1) (Toyota Motor

Corporation). Globally these regions cover 27 different countries on six continents with 59

percent of manufacturing facilities located in the Asia and Japan regions (Toyota Motor

Corporation).

(Toyota Motor Corporation)

North  America  16%  

La1n  America  6%  

Europe  12%  

[CATEGORY  NAME]  5%  

Asia  (excluding  Japan)  35%  

[CATEGORY  NAME]  1%  

Middle  East  1%  

Japan  24%  

   TOYOTA  MANUFACTURING  DIVISIONS  

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Nine of the eleven manufacturing facilities in Toyota’s North America Manufacturing Division

are located in the United States. Five of these manufacturing facilities produce automobiles such

as the; Sienna, Sequoia, Camry, Tacoma, and Tundra. Subaru of Indiana Automotive, Inc. (SIA)

is a contracted manufacturer, which manufactures the Toyota Camry (Toyota Motor

Corporation). The remaining manufacturing facilities produce component parts such as; engines,

transmissions, aluminum castings, and stamped parts.

(Toyota Motors U.S.A.)

The Toyota Motor Corporation began practicing the concept of Genchi Genbutsu (Go to the

Source) in the late 1950s in order to ensure success and continues to apply the concept to all

parts of the company. Each of the eight manufacturing divisions currently operate under an

organizational structure similar to the one illustrated in following figure.

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Figure 1.1

(Alif)

Major Customers =>End Customers

Toyota’s North America Manufacturing Division is composed of both major customers, end

customers and dual major/end customers. Six of the eleven manufacturing facilities that make

up the North American Manufacturing Division are suppliers for six of the North America

manufacturing facilities that produce automobiles. These supply manufacturers produce:

aluminum wheels, catalytic converters, steering columns, stamped parts, engines, aluminum

castings, and transmissions needed by their major customers the automobile manufacturing

facilities. In some instances the automobile manufacturing facility itself can act as its own

supplier, for example Toyota Motor Manufacturing, Kentucky, Inc. (TMMK) produces the 4-

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cylinder and V6 engines it uses in the manufacturing of Avalon and Camry automobiles. In the

United State there are eight Research and Development (R&D) Centers responsible for product

planning, general research, and engineering, and two Design Centers responsible for interior and

exterior color design. All eleven manufacturing facilities in North America could be dual

major/end customers of both the R&D Centers and the Design Centers. Ultimately the end

customer of all the products manufactured by Toyota Motor Company are the purchasing

consumer; however, dealerships can be considered the end customer until purchasing

transactions take place. This representation of customers is repeated throughout all eight of

Toyota’s Manufacturing Divisions. (Toyota Motor Corporation) (Toyota Motor Company)

Supply Chain Diagram

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Ordering Process & Procurement

Toyota has a unique approach in procurement and manufacturing. Due to strenuous import laws and

regulations, the company has opted to build some of their vehicles in the United States. To better

understand this, the chart below details where each vehicle is made in the United States.

Sienna

Indiana Sequoia

Highlander

Camry

Camry Hybrid

Kentucky Avalon

Venza

Lexus ES (2015)

Mississippi Corolla

Texas Tacoma

Tundra

By basing the manufacturing plants near their customer base, Toyota is able to better identify

customer demand and lower transportation costs. Although Toyota is a broad company that spans

multiple continents and time zones, the focus of truck manufacturing is on the manufacturing plant

in Texas. The Toyota Motor Manufacturing, Texas, Inc. (TMMTX) facility is located just south of

the city of San Antonio, Texas.

When an order is received by TMMTX, the plant utilizes a unique form of Just-In-Time

manufacturing (Toyota Production System). Just-In-Time manufacturing is a process all about

“Producing quality products efficiently through the complete elimination of waste,

inconsistencies, and unreasonable requirements on the production line.” (Toyota Production

System).

Toyota best explains it this way: “In order to deliver a vehicle ordered by a customer as quickly

as possible, the vehicle is efficiently built within the shortest possible period of time by adhering

to the following:

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1. When a vehicle order is received, a production instruction must be issued to the beginning of

the vehicle production line as soon as possible.

2. The assembly line must be stocked with required number of all needed parts so that any type

of ordered vehicle can be assembled.

3. The assembly line must replace the parts used by retrieving the same number of parts from

the parts-producing process (the preceding process).

4. The preceding process must be stocked with small numbers of all types of parts and produce

only the numbers of parts that were retrieved by an operator from the next process.”(Toyota

Production System).

Throughout the Just-In-Time manufacturing process, Toyota is constantly looking for ways to

improve through a process known as Jidoka. Jidoka, simply put is “Quality must be built in

during the manufacturing process!”(Toyota Production System). On the Toyota manufacturing

line, Jidoka means that every worker needs to inspect every part for quality and mechanical

malfunctions. If a problem is discovered, a worker can pull a cable that sounds a chime

indicating a problem. For the Toyota Production System, this means:

1. Jidoka means that a machine safely stops when the normal processing is completed. It

also means that, should a quality / equipment problem arise, the machine detects the

problem on its own and stops, preventing defective products from being produced. As a

result, only products satisfying quality standards will be passed on to the following

processes on the production line.

2. Since a machine automatically stops when processing is completed or when a problem

arises and is communicated via the "andon" (problem display board), operators can

confidently continue performing work at another machine, as well as easily identify the

problem's cause to prevent its recurrence. This means that each operator can be in

charge of many machines, resulting in higher productivity, while continuous

improvements lead to greater processing capacity. (Toyota Production System)

Through the enactment of these policies Toyota has unparalleled reliability and trust of the

consumers who purchase Toyota products. To enable these fantastic customer service levels, the

parts must first be delivered to the factory. Through the procurement division’s direction, all of the

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parts are coordinated to be the correct type and scheduled for delivery when necessary. The

established procurement policy from Toyota is as follows (Procurement Policy):

• Fair Competition Based on and Open Door Policy

o All suppliers are more than welcome to offer their products without fear of

discrimination

o Suppliers are chosen based upon the quality, price and volume of

product(s) being offered

o Additional consideration is given to technological development

opportunities, company stability and environmental awareness

• Amicable Relationship of Mutual Benefit Based on Mutual Trust

o Promote a friendly relationship with suppliers based upon mutual trust

o The more two parties trust each other, the greater chance of success both

now and in the future

• Environmentally-Friendly Products Based on “Green Procurement”

o Toyota seeks to make products that are more environmentally friendly

o One of the best options is to procure products from companies that

maintain a low environmental impact

• Localization of Business Based on Good Corporate Citizenship

o Toyota is a Japan-based company that has built its production overseas

o When possible, it will hire local suppliers to not only assist the

community, but also reduce their carbon footprint

• Obeying the Law

o It is the policy of Toyota to follow both the letter and the spirit of all laws

where applicable

o Additionally, Toyota will not divulge any partner’s confidential

information

When purchasing items for Toyota trucks, the procurement department focuses on different criteria

for different portions of the truck (Purchasing Items):

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To ensure that the products are up to the correct specifications, Toyota will periodically send out

inspectors to its suppliers to ensure that all of the guidelines set forth are being followed. In 2010,

one of the parts began to malfunction. The accelerator pedal would get stuck in the ‘ON’ position

and would cause the car to continue forward, even when the brakes were applied. Following the

recall, Toyota began an audit of all of its suppliers to ensure that all of the quality standards were

being enforced. According to a Bloomberg Article, “Toyota Safety Audit Finds ‘Misunderstanding’

With Suppliers”, Toyota auditors found that several suppliers were not testing the products as

rigorously as expected. Some suppliers were only testing their products once a year, not four times

per year as expected. These issues have been fixed and a computer-based system will be

implemented by 2011 to allow suppliers to communicate with a database and register any updates or

process changes. This will be more cost-efficient and allow faster reviews than the paper-based

system. (Kitamura)

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Toyota also releases an annual purchasing policy that details the annual performance expectations

for the manufacturer and for the products themselves. In addition to the expectations, Toyota

operates a supplier support system that seeks to help suppliers who may not be able to meet the

annual expectations. If necessary, Toyota will dispatch a specialized team to come in and help get

everything back on track. Additionally, the team can also help prepare the manufacturer to focus on

Toyota’s future needs (Toyota Suppliers).

Information Systems

Toyota has steadily promoted the growth and innovation of their information systems by

incorporating new technologies, responding to the external environment, and implementing rapid

globalization of the entire company system. During the tail of the 1980s to the early part of the

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1990s, the company applied in-house developed CAD/CAM systems in the engineering systems

of business applications toward more broad activities and even extended the systems to supplier

operations. In the latter half of the 1990s to early 2000s, administrative systems saw

advancements that made them more adaptable on a global scale, including innovations to

engineering data to make this information more integrative and globally useable. The late 2000s

began standardizing all business application systems to make more efficient use of information

(Toyota Information Systems).

Manufacturing & Inventory – strategy / what types / where

After WWII, Japan was in a financial crisis and looked to US automotive manufacturers for

inspiration. However, they observed the risks found in America’s “just-in-case” method of

holding large inventories and knew something different would be required. Since Japan’s

consumer dynamics were ever changing, they needed a system that could be easily adjusted.

Vice President of Toyota Taiichi Ohno was determined to find a way to work with suppliers to

lower costs and improve quality. (O’Reilly). The demand-driven strategy began to take shape

and evolved into what is now known as Total Production System or TPS. The TPS has three

desired outcomes: “1) To provide the customer with the highest quality vehicles, at the lowest

possible cost, in a timely manner with the shortest possible lead times, 2) To provide members

with work satisfaction, job security and fair treatment, and 3) It gives the company flexibility to

respond to the market, achieve profit through cost reduction and activities and long-term

prosperity (“Toyota Production System”).

The first main pillar of the Toyota Production System is Just-in-Time, coined by a Toyota

engineer (“Toyota Production System”). This means that rather than stocking inventory, they

only make “what is needed, when it is needed, and in the amount needed.” The same can be said

in regards to procurement. The San Antonio plant houses more than 20 on-site suppliers, cutting

out transportation time and improving communication. By operating this way, they are able to

minimize waste, reduce risk of error, and produce trucks faster. (“Just in Time”)

Inventory comes as either preassembled components or as on-site created components. For

instance, the engines for both the Tacoma and the Tundra are made at other locations and

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shipped in for immediate placement on the line. Other parts like the dashes for the trucks are

assembled in the very same factory that the trucks are, at a speed that matches production.

(Woods)

The Toyota Production system uses a Kanban” scheduling system to measure and control

productivity. Kanban boards hung throughout the factory display information between processes

to help smooth the production flow. Cards are also used and communicate production speeds and

stocking requirements. The control boards and cards are also online in the form of “e-kanban”

which are used in enterprise resource software to keep all parties updated in real-time. Use of

this system allows Toyota to minimize paperwork and maximize efficiency. (“Just in Time”)

In San Antonio, Toyota produces the Tundra and Tacoma trucks in a factory that is 2.2 million

square feet (Toyota Motor Manufacturing). A plant tour guide stated that it is the company’s

smallest factory, yet it makes the largest vehicles (Woods). It takes about 20 hours for each

vehicle to be produced, and a truck is completed every 64 seconds (“Best of Tours”). Using two

shifts, about 200,000 trucks are produced each year and they actually celebrated the production

of their one-millionth truck on September 18, 2013. The milestone truck was a bronze-mica

colored 1794 edition Tundra. It is named for the year the ranch where Toyota’s factory is located

was founded. (“A Million and Counting”).

The manufacturing process begins in the stamping room of the factory. There are three large

presses that use 384 dies and 40 tons of pressure to create 130 sheet metal parts. The steel is

American-made and all scrap from the process is sent back to an on-site supplier to be recycled

and reused. The weld shop then creates a shell out of the stamped pieces and builds 430 bodies

during each shift. Team members and 400 robots work together to complete the more than 2700

welds per truck. The paint shop is next in line and it takes about 9.5 hours to paint a body shell.

Robots do most of the work but team members touch up difficult areas. The team members who

work in the paint shop take showers and go through a large air dryer to rid themselves of any lint,

dust, or particles that could compromise the paint quality. A water-born primer is used, thereby

reducing VOC air emissions. (“Best of Tours”).

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While the body is coming together, the plastics shop creates instrument panels, bumpers, and

other items out of plastic pellets using injection molds. Toyota uses 3.2 million pounds of pellets

over a 1 year period. (“Best of Tours”) An on-site supplier assembles the dashes, which are then

sequenced into the line with the key already in the ignition. (Woods).

The seats for the trucks are built by an on-site supplier and put on a conveyer belt that leads to an

elevator near the line and a team member guides them into place using a an ergonomic lift assist.

Windshields are sequenced into the line the same way, with clips already installed for placement.

The framing department installs the remaining parts, including the engine, transmission, fuel

tank, suspension and spare tire. The final line bolts the truck frame and body and adds finishing

touches such as the emblems (“Best of Tours”). Trucks coming off of the line are driven over

rumble strips to check for noises or other obvious problems before leaving the plant.

While production is in progress, the Assembly Convenience Team move parts around the factory

to ensure they are at the right place, at the right time, in the right amount. They often transport

pre-assembled kits created by on-site suppliers as part of the Set Parts System (SPS). Team

members keep a continuous watch on their own quality, and additional quality specialists inspect

the work done as well. There is a special room for quality control where employees check steel

quality, tool calibrations, and production equipment to ensure accuracy and efficiency. An

additional maintenance team works around the factory to repair machinery and program robots

(“Best of Tours”).

The second main pillar of the Toyota Production system is “Jidoka” which means “automation

with a human touch.” Jidoka focuses on preventing defects and gives people the capability to

stop production lines if there is an equipment malfunction or quality variance. Toyota believes

in “building quality in during the production process” and utilizes Andon cables to help them

achieve this (“TPS Terminology”). Andon is Japanese for “little lamp” or “little sign.”(“Lean

Manufacturing Andon”) Andon boards were first made with green, yellow, and red lights to

show normal operation, assistance needed, or line down. They are now more sophisticated, with

additional audible cues. All of Toyota’s plants play a melody when the cord is pulled; primarily

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folk tunes like “Greensleeves,” “Popeye the Sailor Man,” and “Farmer in the Dell.” (“Toyota

Quality Control”)

Andon cables are placed on both sides of the assembly line within reach of every worker, and are

used to bring attention to their station. Workers may pull the cord for a variety of reasons. If

they sense that the quality of a previous department is substandard, or if they aren’t able to finish

their task in the time allotted, they pull the cord to alert their manager. They may also do so if

they are low on stock or are going on their lunch break. Team members are encouraged to speak

up in the name of quality. Managers often thank the employee and jump in to help with the

issue, and then thank them again afterwards. In a world where pointing out flaws is frowned

upon, Toyota runs the other way. (“Lean Manufacturing Andon”). Often, there is a small buffer

in the production line to allow time for these events. In San Antonio, about 25 truck chassis

were in the buffer when the plant was toured. Andons may also be used to signal task events

such as tool changing, job progress steps, and part arrivals.

Kaizen stands for “good change” is at the heart of the Toyota Production System (“Toyota

Production System”). It refers to the day-to-day improvements that are made by reducing waste,

or “Muda,” related to material, time, and people. Management empowers team members to

identify this waste and recommend improvements in the system as they are working within it.

The result is generally a safer and more efficient environment. This process also fosters a sense

of pride in team members as they feel appreciated and integral to the process. The San Antonio

factory has a specific area set aside for workers to experiment with their ideas. Kaizen also

refers to the continual striving of the company to improve in every activity in order to benefit the

customer and improve profits for Toyota.

Logistics Facilities Network

In 1976, Toyota established Toyota Logistics Services (TLS) as a subsidiary of Toyota Motor

Sales; TLS managed the logistics operation, planning, and administration for Toyota, Lexus, and

Scion vehicles (Toyota Logistics Services Fact Sheet). TLS is responsible for 11 Vehicle

Distribution Centers across the U.S. and two in Canada, which processed a combined total of

2,265,000 vehicles in 2008. TLS also oversees the import and distribution of products sold

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within the US and underneath their umbrella of responsibility, they have maintained partnerships

with eight North American Class I railroads, 12 trucking companies, 10 ocean carriers, and

management of approximately 4,200 routes (Toyota Logistics Services Fact Sheet). Toyota’s

network of logistics facilities still consist primarily of their Logistics Control team which is

based at the Toyota Motor Engineering and Manufacturing North America headquarters (TEMA)

which is located in Erlanger, Kentucky.

In recent years, TEMA has taken over logistics engineering and routing to keep a close eye over

the network of moving parts; individual plants were responsible for their own logistics in the past

but moving forward, TEMA aims to expand their executive oversight and play a role in

administrative logistical control for the entire operation In an effort to strive toward continual

improvement, the team also completes route analysis and total network studies 10 times per year

so they can respond to production changes and test consolidation points (Christopher Ludwig).

This type of analysis is important not only for increasing efficiency, but being able to see total

network movement gives Toyota a view of the big picture so they can create better forecasts,

adjust shipping routes in a shorter time period, and provide a more detailed insight into their

logistical directive of continual growth and innovation. As new car models are introduced and

major changes are implemented, there can be a change in supplier for individual or bulk parts.

These changes are not just managed to keep control of current needs, but they are forecasted to

estimate how much of an impact the change could have; forecasts that were made as recent as

this year have projected as far as 2016 (Christopher Ludwig). Previously, truckload and milk-

run deliveries were managed solely by the individual plants’ Production Control department and

outsourced to lead logistics providers where these LLP’s would provide routing based off of lead

times and adjust the frequency of delivery for each plant (Christopher Ludwig). More recently,

however, Toyota is shifting away from this method of control and the Toyota Production System

(TPS) is moving toward a more centralized management by TEMA. According to general

manager of Logistics Control, Doug Adams, all plants will be more centrally planned within the

next few years (Christopher Ludwig). The more centralized control of their plant activities

brings obvious benefits such as quicker responses to market changes and a wider network view

of all productions, whereas before each plant could only see its own information and make

decisions based on the needs of the individual plant. Additional benefits also include tightly

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scheduled deliveries and frequent, small lot deliveries to complement the JIT assembly utilized

by Toyota and low inventory pull system for replenishment of parts.

Transportation

Toyota imports almost 160 full containers per day to be used at individual plants; most parts are

imported from Japan and almost every part originating from all of Asia is repacked and

consolidated at vanning centers in Japan. Once imported, these containers must be transported to

individual plants from the docks they arrived at. However the imported containers are not

managed by TEMA. Toyota Motor Corporation in Japan purchases the sea freight and once

containers arrive in America, each individual plant is in charge of contracting a carrier to move

their containers to their factory docks. Once in the US, very little of the transportation is done by

rail which is mostly due to the fact that Toyota has such specific routing schedule requirements

that can only be accommodated by truck. The plant in San Antonio previously moved product

by rail to the Midwest, however when production was increased, the rail could not keep up with

production. The General Manager of Logistics, Doug Adams, made a comment on the need to

move toward more trucking versus rail shipments, “we learned a lot about lead times during that

period and how flexible our supply systems were and weren’t. Rail just couldn’t keep up.”

(Christopher Ludwig).

Uniqueness

Toyota has a plethora of unique technologies and policies at its disposal. One of the greatest

advantages it has over competitors would be Jidoka (Toyota Production System). Jidoka is the

process of constantly checking for quality and for stopping the line to fix problems as they occur.

By choosing to employ this strategy, Toyota has become renowned for its quality in

manufacturing. Additionally, they utilize the just-in-time logistics system (Toyota Production

System). By coordinating with the suppliers to deliver at specific time, the inventory is virtually

reduced to 0. With no inventory needed to store, Toyota is able to streamline the production

system. Additionally, if problems are found through Jidoka then suppliers can be contacted and

the problems can be fixed.

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Competition

As of November 29, 2013, Yahoo Finance listed the Ford Corporation, General Motors

Corporation, and Honda Motors Corporation as Toyota’s top 3 competitors in the United States.

Yahoo’s direct competitor comparison also illustrated that Toyota’s net income in 2012 exceeded

all 3 competitors by an average of 13.14 billion (Yahoo Finace). In the United States Toyota’s

product line includes; mini-vans, sport utility vehicles, compact vehicles, mid-size vehicles,

luxury vehicles, and both full-size and mid-size trucks (Toyota Motor Company). Toyota’s

product line offers a source of competition for all of the products manufactured by the United

States’ “Big Three” automobile manufactures. One market segment that Toyota has been able to

capture in the United States is that of the mid-size truck. Toyota was able to accomplish this

after the United States’ “Big Three” failed to recognize consumer need for a fuel economy mid-

size truck and instead focused on the popular full-size model (Buss). The following graph from

Edmunds Auto Observer illustrates the competitive advantage that the Toyota Tacoma has over

all mid-size trucks offered in the United States.

(Buss)

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Current/Future Challenges

In planning for future growth, Toyota must put emphasis on ensuring that managers and decision

makers are trained properly in total supply chain management by integrating a total logistics

concept to “quantify the logistics implications of any decision, as those logistics can in turn have

big impacts on other operations.” (Christopher Ludwig). For example, they will not look at just

the packing density of a package, but the handling cost, moving it internally, and manage its

return, etc.

Recommendations for Potential Improvement

Toyota is one of the great innovators of all time. It has greatly improved the manufacturing and

logistics policies of several companies around the globe. Although they are leading in so many

areas, Toyota is always looking to improve their business. After touring the manufacturing plant

in San Antonio, we observed some improvements that could be made. When we arrived, outside

was sunny and bright. When we headed inside, the lights inside seemed very dim and you could

not see the sun while working. The first improvement would be LED lights on the factory floor.

This would help to alleviate the dim factory into a brighter, more cheerful place to work.

Additionally, skylights should be installed to allow the sunlight to enter in. By installing

skylights, just like the ones you see at many big-box stores, workers are able to see the sunlight

and feel empowered. When installed, the lights could be dimmed on sunny days to conserve

electricity. These small improvements would help Toyota to continue to be environmentally

friendly.

Summary

Toyota Motor Corporation is an innovative organization with their eyes focused on growth and

the future. They have built a global supply chain with operations in many countries that have

enabled them to become a respected leader in the car manufacturing industry. Driven by

concepts like “Just-In-Time” implemented in production and “Kanban” to focus on overall

efficiency, Toyota has accelerated the company’s direction in the area of continual improvement;

by constantly looking for more efficient methods of operation and utilizing a global viewpoint

into their supply chain, they are able to maintain an ability to respond faster to market changes

and gain perspective into the greater picture of what the company needs while at the same time,

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understand how changing even the smallest decisions will impact other segments of the supply

chain. This total supply chain vision is a critical aspect that will secure their position as a global

leader and provide a market-wide “bar” that other manufacturers can aspire toward.

23

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