Managing International Supply Chain Assignment

Managing International Supply Chain
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EXECUTIVE SUMMARY
This work is centred on the adoption of green strategy in the overall operations of Toyota
Motor Corporation. It highlights how these strategies are practically adopted by Toyota, how
it affects cost, quality and services, the challenges Toyota are facing while adopting these
strategies, the long term benefits associated with these strategies and recommendation given.

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INTRODUCTION
Reducing carbon emission is one of the most discussed and highlighted issues presently
across the globe, because of its effect on our environment and entire ecosystem. The
accumulation of carbon dioxide in the environment is recognised as a major contributor to the
global warming problem. Many governments across the globe including the leaders of the
developed countries like United States, Germany, Japan, whose economies are driven by
massive industrialisation, and leaders of emerging economies like China, India, Brazil whose
economies are also driven by massive industrialisation have now shown great commitment to
the issue of reducing carbon emission.
In his report DuPont 2009, highlighted that the answer to solving the potential disaster of
global warming is to control the amount of carbon dioxide that is being emitted from
automobiles, fossil fuel, power plants and industries.
Toyota Corporation
Toyota is the world’s leading automotive manufacturer; it was established in 1937 in Japan.
With 53 manufacturing companies in 27 countries and regions outside Japan, it registered 152
billion Euros net revenue in financial year 2006 (UNEP 2008).
Guided by a clear vision of a sustainable future, Toyota has developed a wide range of
vehicles powered by excellent new petrol and diesel engines. The company is also an
acknowledged leader in environmental technologies, such as hybrid (petrol/electric), clean
diesel and fuel-cell drive systems. Toyota is committed to sustainable development and seeks
to address the challenges of global warming and urban pollution by developing a number of
innovative environmental technologies and vehicles.

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Figure 1: pathway to eco car
Toyota marketed the world first mass-produced hybrid car, the Prius which combines the
power of a petrol engine with the clean, efficient energy of an electric motor, of which over
1, 295,300 of the hybrid vehicles has been sold by the end of 2007(UNEP 2008).
Toyota’s guiding principles are –
a. To contribute to the development of a prosperous society through the manufacturing
of automobiles, and
b. To contribute to global sustainable development its focused activities centres on
environmental preservation through corporate activities, technology Innovation, and

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people which all will lead to a prospering low carbon society by creation of a dream
vehicle.
Figure 2: Source: (http://www.toyota.com.au/toyota/events/environment/vision)
Toyotas guiding principles serves as the fundamental management policy for its operations
worldwide. These principles reflect Toyota’s commitment to providing clean, safe and
innovative products, while respecting the environment and culture of local community in
which it operates. Using fiscal year 2001 as baseline, by 2011 Toyota is targeting 27percent
reduction in energy per vehicle produced according to (environmental leader, 2009).
Toyota has set up action plan that involves green technology compliance in all its operations
and businesses worldwide, to show how committed it is to the safety of earth’s environment.
This action plan acts as the focal point for the entire organisation.

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1. Practically Adopted Programs by Toyota
Toyota has adopted practical programmes centred on supporting green environment in all its
operations, in form of environmental initiatives towards sustainability. The areas were it has
been adopted are;
a. Research and development
The input by R&D of any organisation will determine whether it will be sustainable in the
market. Toyota has focused its R&D green initiatives since the past decade on areas such as;
Increase in fuel efficiency of Toyota’s vehicles; Toyota has developed the strategy of
producing different vehicles with different power trains capable of using very less oil and
also using alternative energy sources based on energy market situation from region to region
in order to achieve CO2 emissions reduction and cleaner atmosphere with the right, vehicle in
the right place at the right time. Clear example is promoting the increased use of hybrid
vehicles which are electric motor with option of plug in, by combining hybrid and plug in
technology. Toyota’s goal is to have hybrid models for all its vehicles by 2020. (Toyota
Corporation, 2008)
Developing improved fuel economy, making smaller, lighter weigh vehicles and improving
power train efficiency in its engine systems.
Increase the speed at which new technologies can be reached for mass production, shorten
lead time
Response to energy diversification through alternatives to oil like bio energy, alternative fuels
in other to reduce carbon emissions through the use of bio fuels such as bio ethanol and

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biodiesel. Also in its R&D it is conducting research on the conversion of wood chips and
other biomas to ethanol. (Toyota Corporation, 2008)
Accelerate the development of small electric vehicle for mass production. R&D is
accelerating the development of small electric community vehicles and also focusing on
battery technology development of next generation batteries with greater energy densities
than that offered by current lithium- ion systems. (Green Car Congress, 2009)
Developed a traffic system to curb and decongest heavy road traffic in the cities, the system
is called.
Toyota R&D

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b. Manufacturing
Toyota’s has been implementing the action plan it developed to reduce Carbon emission in its
production plants and facilities according to (Toyota Corporation 2008 and Toyota North
America, 2009). These action plans are;
They have integrated the use of low carbon emitting production technologies like water borne
plant system in its plants to lessen the emissions of volatile organic compounds, and the use
of energy saving equipments and machineries in its manufacturing facilities.
Introduction of daily kaizen (improvement) activity that reduces energy consumption like
reducing the time between equipment start up and start of production start times, and
reducing the number of agitators used in coating process.
Manufacturing plants partnering with local utility companies to implement sustainable
energy management programme through commitment to reduction in electricity usage.
Utilization of renewable energy like solar in its plants. Example where this was done was the
Installation of solar source of power for the Toyota centres in North America, and Toyota’s
Ban Pho plant in Thailand.
Environmental planning for new plants and creating production sites that are in harmony with
their natural surroundings
Local community involvement and ecological preservation through three planting at
production plant called “green for tomorrow”.

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Toyota environmental action plan from the year ending March 2007 to year ending
March 2011
2010 CO2 Emission Reduction Targets, Results and New Targets
Region Emissions 2010 Target 2007 Result New 2010
Target
Worldwide Volume per
sales unit
20% reduction
from 2001
32% Reduction 35% reduction
from 2001
Japan- Toyota Volume per
sales unit
35% reduction
from 1990
55% reduction 60% reduction
from 1990
Manufacturing
Corpration
Volume 20% reduction
from 1990
25% reduction 30% reduction
from 1990
Figure 3: Source; (http://www.toyota.co.jp/en/vision/message/conference/080611_president.pdf)
c. social contribution
Social contribution initiatives for realizing a sustainable society includes funding of
environmental centres in leading universities, projects to counter deforestation, Toyota
foundation activities fostering programs for local communities, Environmental activities
grant program. Environmentally friendly urban planning to enable improving traffic flow and
reducing carbon emissions by putting transport infrastructure in place and applying traffic
intelligent managing system developed by Toyota engineers. Publication of sustainability
reports for each country and region.

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Figure 4: Source;
(http://www.emilygertz.com/mt/mtsearch.cgi?blog_id=4&tag=global%20warming&limit=20
Figure 5 Source; (http://www.autospectator.com/cars/topics/environment?page=2)

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d. suppliers
Toyota’s green supplier guidelines emphasize that its suppliers must comply with applicable
laws, regulations and social norms, to undertake activities that support Toyota’s
environmental goals, improve their environmental action plan and process (UNEP 2008).
Procurement- Toyota practice green procurement for both vehicle parts and raw
supplementary materials through entryway management of chemical substance by asking its
suppliers to report the contents of substances of environmental concern in materials and not
include prohibited- use substances (Toyota UK, 2009)
Toyota expanding its chemical substance control list to include approximately 3400 control
substances of which 460 substances are prohibited from use.
Toyota has been able to reduce the number of office supplies items used in the offices to
approximately 1300 green compliant categories from a previous 2000 items.
e. logistics
Restructuring routes and increasing load density, to reduce the mileage travelled by trucks
transporting Toyota products like cars, parts and accessories. Collaborating with freight
industry and shipping partner to increase energy efficiency while significantly reducing green
house gases and air pollution. Logistics division tracking and monitoring green house gas
emissions.
Utilisation of high efficiency cargo carriers and railroads, increased loading rates, increased
fuel efficiency through environmental considerate driving and sharing vehicle transportation
with other companies and modal shift. (UNEP 2008)
There are large waste streams from the logistics especially in the area of packaging and
cafeteria waste. Ensuring that environmental impacts are managed properly by reducing
amount if waste generated, increase recycling rate and reduce waste sent to landfills.

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f. recycling
Recycling and reduce the use of resources by integrating manufacturing practices that
advance recycling and reuse. The materials for making vehicles from the steel used for
vehicle body to the fibres used in floor mats and seat cushions are produced with the design
for environment by thinking of the entire life cycle of the vehicle from manufacturing and
distribution to use and dispose. (Toyota North America, 2009)
When designing a vehicle the materials used are renewable resources from ecological
plastics, bio- based plastics and also materials that use less resource.
Figure 6: Source; (http://www.home-sewing.com/Environment-EN)

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g. Overall Operations
Reduction of energy consumption in its building to optimize building performance, these
building include parts centres, warehouses, offices by installing fluorescent lighting in
warehouse, sensors to reduce interior corridor lighting, building automation system to
minimise the energy used in the warehouse and office, photovoltaic rooftop solar panel.
(Toyota North America, 2009)
Educating third party users on carbon emission from purchased electricity, natural gas use,
business travel, employee activities, and logistics activities by working to find ways to reduce
emission by these third party users.

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Practical Adoption of Strategies in terms of Cost, Service and Quality
Cost;
The practical adoption of these strategies had a significant effect on cost. Toyota by reducing
the environmental impact of their energy use also reduced the cost of operation in its
manufacturing facilities. An example of this reduction in cost was shown in Toyota’s US
plants, where energy improvement have reduced carbon emissions by almost 150,000 metric
tons since 2002 financial year saving over $18 million annually.
Also Green procurement has enabled Toyota to decrease costs by increasing the purchasing
volume per category and minimising the frequency of single purchase through the retaining
of same features or performance while reducing the number of product categories.
Assessing the energy consumption of office equipment during use has reduced cost. Also
Toyota’s service centres have due to reduction in energy use have had savings of up to
20percent in electricity and gas consumption as well as reducing the carbon footprint of each
site around 30 tonnes of carbon a year.
Toyota’s reduction of office supplies to products that are green compliant helped it keep
down office supply cost.
Service;
Toyota has been involved in ensuring significant reduction on energy use in its services and
parts centres, warehouse and dealership centres. Also Toyota’s dealers, servicemen and
keepers are trained and provided with resources to help them manage services related waste
streams and comply with environmental and safety regulatory requirements. They also are
trained on how to educate and inform customers on ways to be green conscious while using
their vehicles.

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Quality;
Toyota has achieved a reputation for the production of very high quality vehicles in all
countries around the world. This has been achieved due to quality control and quality
assurance, which is unique to Toyota and has been developed over the years by applying
kaizen or continuous improvement that enables to increase quality, efficiency and reduce
costs. Toyota considers quality control as a key part of the activities to produce products or
services economically and to be of a standard which exceeds customer needs. Toyota’s
approach is peculiar because everybody from research and development to manufacturing,
retailing and servicing contribute to the quality control process. This quality reputation has
been maintained, but in recent times the quality has been questioned due to recall in America
of Toyota cars including its green car prius as a result of neglect on safety and reliability.

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2. Various Challenges Involved
There are various challenges encountered by Toyota Corporation while implementing the
programmes of carbon emission reduction in its entire operations. These challenges are
encountered across Toyota’s value chain.
Figure 7: Source; (http://www.1000ventures.com/business_guide/im_value_chain_main.html)

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Supply Chain Model
a. Water
One of the greatest challenges facing Toyota while adopting strategies centred on green
environment is the issue of water conservation in their operations, fresh water is their most
precious resources and reducing consumption has been challenging. Toyota is taking steps to
conserve water across its operations worldwide. Although there has been a drop in their water
usage but the consumption rate is still on the high side.

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Figure 9: Source; http://www.cleanmpg.com/forums/showthread.php?t=18285
b. Reducing substances of concern
There are substances of concerns which are heavy metals like mercury, cadmium, lead,
hexavalent chrome and volatile organic compounds in the automobile cabin that may have
both environmental and health effects but cannot be removed completely from operations ii
cannot avoided in vehicle production.

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c. Electricity
Despite the attraction of electricity as a power source for transportation a number of issues
and challenges remain like the energy density of batteries, infrastructure issues such as
recharging facilities. The presently used battery in Toyota’s hybrid car lithium-ion battery has
the tendency to overheat, to build a plug in hybrid car that would only run on battery power
for 40 miles a battery powerful enough to achieve that task the size will fill the trunk of the
car.
d. Customers Acceptance
With infrastructures for plug in to be recharged not yet readily available, management of
Toyota are concerned that customers might not accept a plug-in hybrid electric car to be
recharged every day, rather customers may want to continue using the normal conventional
fuel already available.

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3. Long term advantages
There are many long-term advantages for Toyota by adopting green technology.
a. Boost of the image of the company to the public.
The image of Toyota as a highly innovating, environmental friendly company has been
already been established because of the great effort they have put in place across all their
operations to be green compliant. This good image will continue to attract ethical consumers
who are concerned about products that pollute the environment, and also consumers who
value great innovation and quality. Already a poll taken puts Toyota as the
b. Attract good employees
It will enable the company to attract employees who care about the environment, and want to
impact the world through green compliance. Since Toyota is building towards a sustainable
future, attracting these types of employees will aid and boost their operations positively.
c. Lower Carbon Emission
Adopting green compliance in their operations will reduce carbon emissions, thereby saving
the environment from disasters associated with pollution. The Earth will be better for it in the
long run.
d. Saving Cost
Adopting green compliance will also reduce cost of production, procurement cost, logistic
costs, thereby adding profit to the balance sheet of the company. This will be favourable to
the shareholders who will have better profits, employees who will receive better pay and
customers who will be able to purchase cheaper. Therefore every person is affected
positively.

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Recommendation
Having gone through all the ways Toyota Motor Corporation are practically adopting green
strategies in their operations, it can be said that the level of attention they have paid to this
issue is very great. But still there are some areas that need improvement.
a. The issue concerning safety and reliability
Toyota already has good quality reputation, but where they have not done well is in the area
of safety and reliability. The issue of safety and reliability was highlighted more during the
case of recalling of a lot of Toyota vehicle models including the green compliant Prius. This
safety issue might do a lot of damage to the reputation they have built over the years.
Therefore the management should ensure that safety and reliability of their vehicles must go
hand in hand with green compliant strategy and models.
b. Synergy among the subsidiaries
Having looked at different information from different subsidiaries of Toyota, it can be noted
that the Japanese headquarters, North American subsidiary and Asian subsidiaries like
Thailand was more green compliant than the Subsidiary in Europe. Therefore the
management should ensure that Toyota as a group have one common focus towards green
compliance in its entire operations.

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Conclusion
This work has been able to show the need for adoption of environmental friendly strategies in
the operations of any organisation, by learning from the ways Toyota Motor Corporation has
been able to implement the right green strategies. It is also important that all organisations
that have not been serious about the issue raised in this write up become, because for the
earth to become safer, all hands must be on deck to reduce and totally remove all forms of
pollution that contributes to global warming.

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References
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Warming Creating Green Energy and Sustainable Employment, Virginia, DuPont Group Inc.
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Environmental leader, 2009, Toyota Targets 27% Reduction in Energy Consumed per Vehicle
Produced, Available from http://www.environmentalleader.com/2009/12/08/toyota-targets-
27-reduction-in-energy-consumed-per-vehicle-produced/ [Accessed 12th September 2010]
Toyota Motor Corporation, 2008, Toyota’s Environmental Initiatives, Available from
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2010]
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its-reputation/ [Accessed 15th September, 2010]
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