My MBA presentation

1. TOYOTA
SUPPLY CHAIN MANAGEMENT

2. 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

3. SCM
Minimizing supply chain costs
while keeping
a reasonable service level
customer satisfaction
quality
on time delivery, etc.

4. Objective
 Right product
 Right price
 Right store
 Right quantity
 Right customer
 Right time
Higher profit
The right
Product
Higher
Profits
The right
Time
The right
Customer
The right
Quantity
The right
Store
The right
Price
=
+
+ +
+ +

5. TOYOTA SUPPLY CHAIN
OVERSEA
S
NETWORK
(EXIM)
PARTS/
SERVICE
CENTERS
COMPONENTS
SUPPLIER
GROUP
RAW
MATERIAL
SUPPLIERS
WAREHOU
SE
DISTRIBUT
OR
ASSEMBL
Y PLANT
DEALE
R
CUSTOME
R

6. INTEGRATED SCM
RAW
MATERIAL
SUPPLIER
S
1ST & 2ND
TIRE
SUPPLIER
S
MANUFACTURI
NG PLANTS
WAREHOUS
E
DEALER
END
CUSTOME
R
INTERNATIONAL
COLLABORATIO
N

7. SMOOTHER MATERIAL FLOW

8. 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

9. 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

10. 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

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

12. 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)

13. 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

14. 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

15. Manufacturing
 Toyota Production System
 Best quality
 Lowest cost
 Shortest lead time
 Best safety
 High morale
 Through shortening the production flow by
eliminating the waste

16. 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

17. 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.

18. 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.

19. 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.

20. 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.

21. TOYOTA GROUP
WORLDWIDE