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System dynamics and control (Syst301)

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Supply Chain Management Midterm Project

Prof. Dr. Özlem Akçay Kasapoğlu

Osman FİDAN

1002160047

The company, founded in 1937, spends approximately $35 billion per year on supplier parts and materials, goods, and services in the North American market in FY2019. 5

The company typically gets much of its component parts from suppliers at the local level, preferring a long-term contract to assure a steady supply of everything from upholstery to tires to windshields.

While supply contracts are never set in stone, maintaining strong ties with its top suppliers is a priority for the Japan-based multinational auto manufacturer. To maintain its relations with suppliers, Toyota hands out awards yearly to suppliers that exceed performance targets.

In 2020, Toyota announced changes to its supplier map and sourcing for North America

Toyota and Its Suppliers

Toyota has a wide range of suppliers that also include the likes of Tesla Motors, which previously signed a $ million agreement to supply the power train for RAV4 EVs (electric vehicles); Bridgestone Americas to supply tires for the Toyota FJ Cruiser model; and Cypress Semiconductor to provide the touchscreen for the Toyota Avalon.

In Toyota’s Detroit plant, the Camry model alone has suppliers such as Magnuson Products, IPT Performance Transmission, Goodridge Fluid Transfer Systems, MagnaFlow, Autometer, Impact Racing, Goodyear, Nitrous Supply, and Optima Batteries. The finishing touches before the Camrys are delivered to dealers are provided by Fast Ed's Interiors and the Polishing Shop.

In some instances, Toyota has created downstream industries that were formerly integral parts of the company. The likes of Nippon Denso Co., which manufactures air conditioners, and Aisin Seiki Co., which produces components and systems for automobiles, started out as part of Toyota but later became independent corporate entities. Nippon and Aisin continue to be principal suppliers for Toyota but also manufacture products for other car manufacturers.

The Bottom Line

Since most modern cars have built-in infotainment systems, Microchip Technology serves as a supplier not only for Toyota but for other manufacturers as well, including General Motors. With its efficient supply chain in place, Toyota expects to remain one of the world’s most profitable car manufacturers in the foreseeable future.

Toyota recognizes its top North American suppliers

DENSO, Johnson Controls Inc. and MAHLE earned top recognition from Toyota Motor Engineering & Manufacturing North America Inc. (TEMA) at its annual supplier business meeting (ABM). The awards recognize suppliers who exceeded the company’s expectations in several areas.

“As Toyota redoubles its efforts to improve quality, our suppliers’ commitment to flexibility and continuous improvement is crucial to Toyota now more than ever,” said Tetsuo Agata, TEMA president. “Our supplier partners are working with us to assure the best possible product for our customers.”

Now in its 14th year, ABM allows TEMA to discuss business objectives with direct suppliers in preparation for the upcoming fiscal year. Held at the Northern Kentucky Convention Center in Covington, Ky., ABM brings together approximately 800 attendees from across North America. In the U. alone, there are about 63,000 supplier jobs

across 38 states dedicated to Toyota. Moreover, Toyota collectively spent nearly $25 billion on parts, goods and services last year in North America.

TEMA 2009 Supplier Award Recipients

QUALITY AWARDS Awarded to suppliers who demonstrate quality in production, performance, delivery, warranty and service

Supplier Location Commodity Award

Aisin Light Metals, LLC. London, Ky. Bumper reinforcements Excellent

American Fine Sinter, Co. Ltd. Tiffin, Ohio Valve seats Excellent

DENSO International America, Inc. Southfield, Mich. Multiple commodities Superior

DTR Tennessee, Inc. Midway , Tenn. Anti-Vibration Rubber Excellent

Franklin Precision Industry, Inc. (Systex Products Arkansas Corp.) Osceola , Ark. Engine Plastics Excellent

Intat Precision, Inc. Rushville , Ind. Iron Castings Excellent

International Crankshaft Inc Georgetown , Ky. Forged Crankshafts Excellent

Jernberg Division of HHI Forging Chicago , Ill. Wheel hubs Excellent

MAHLE Engine Components USA, Inc.

Farmington Mills, Mich. Multiple commodities Superior

Mitchell Plastics Kitchener, Ontario Canada

Stampings, brackets, oil pans, fuel tank straps & hinges Excellent

OTICS USA Inc. Morristown, Tenn. Camshaft bearing caps, fuel pipe, value rockers Excellent

U. Engine Valve Westminster, S. Intake/exhaust valves Excellent

VALUE IMPROVEMENT AWARDS

Awarded to suppliers who demonstrate value and cost competitiveness

Supplier N. Corporate Location Commodity Award

DENSO International America, Inc. Southfield, Mich. Multiple commodities Excellent

TRW Automotive Electronics Livonia, Mich. Air bag sensors, wireless door locks, tire pressure monitoring Excellent

SUPPLIER DIVERSITY AWARDS

Awarded to suppliers who implement supplier diversity activities and targets

TEAM AWARD

Total Exceptional Achievement for Manufacturing Award for suppliers that excel in overall performance

Supplier N. Corporate Location Commodity Award

DENSO International America, Inc. Southfield, Mich. Multiple commodities Total Performance

Supply chain drivers on example of Toyota Company

Introduction.

In order to understand how Toyota Company have improved its supply chain performance in terms of responsiveness and efficiency, we should examine four supply chain drivers: inventory, transportation, facilities and information. Above-mentioned drivers not only determine the supply chain's performance in terms of responsiveness and efficiency, they also determine whether strategic fit is achieved across the supply chain.

Consider this framework for Toyota Company as the objective of my analysis. Toyota's competitive strategy is to be reliable manufacturer of different models of quality cars. This strategy dictates that ideal supply chain for Toyota will concentrate in responsiveness but also should be efficient. Its supply chain consists of decentralized, but interlinked units that engage in local experimentation and actively pursue learning and resource transfer across units. Toyota effectively uses four supply chain drivers to show best performance. Later while analyzing each driver you will be able to see it.

Inventory.

One of the key goals of Toyota is to reduce inventory at the line side of the plant and throughout the supply chain. It does it with the help of crossdocking (which support all of Toyota's plants) in order to increase delivery frequency and reduce inventory.

Toyota reduces in-process inventory through Just in Time set of techniques. The process is driven by a series of signals, or Kanban that tell production processes to make the next part. Kanban are usually simple visual signals such as the presence or absence of a part on a shelf. JIT causes dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.

For example involves picking up from one supplier and delivering to the cross dock, such as delivering kits to a plant. Toyota may divide four pallets into 12 to 14 smaller orders in order to minimize inventory at the plant, which can absorb some fluctuation in demand. This means more frequent pick-ups of small lot levels done hour by hour. Toyota's management initiatives involve increasing delivery frequency, reducing inventory, and accommodating the five-day car (from order to delivery). It is also being more proactive in order to absorb changes or uncertainty on a daily basis. At the same time, reducing costs.

The above listed companies are the major suppliers of inventory for Toyota Company.

Toyota group and suppliers organizations: Toyota Industries Corporation (Manufacture and sales of spinning and weaving machines, industrial vehicles and automobiles), Aichi Steel Corporation (Manufacture and sales of specialty steel and forged steel products), Toyoda Machine Works, Ltd.

and service of large-size spare parts), Oguchi Parts Center (Warehousing and service of small and medium spare parts), Kamigo Logistics Center (Warehousing and service of interior and exterior spare parts), Tobishima Logistics Center (Warehousing and service of parts for overseas production and spare parts).

Each Toyota facility working towards ISO 14001 certification, or already certified, continues to set measurable environmental targets to be achieved. (ISO 14001 is a process of continual improvement that does not stop at initial certification. The facilities' targets typically involve setting time goals for prevention of pollution).

The reasons on the choices of facilities` location made by Toyota were mainly the well-established infrastructure along with the quality of auto-parts manufacturers established in the region, the geographic situation, the proximity to other Toyota facilities, and the easy access to most markets for the every new car to be produced at the plant.

For manufacturing facilities company had implemented Toyota Production System (TPS)-the framework and the interaction of these facilities with the suppliers and customers. The main goal of the TPS is to eliminate waste. There are 4 kinds of waste found in the TPS:

·Excessive Production Resources (excessive facilities and workforce).

·Overproduction.

·Excessive Inventory.

·Unnecessary capital investments.

Toyota was able to greatly reduce cost and inventory using the TPS, enabling it to become one of the three largest companies in the world. Due to this stellar success of the production philosophy many of these methods have been copied by other manufacturing companies.

Commonly used terminology in TPS:

·Just in time (JIT).

·Kanban (Sign, Index Card).

·Muda (Waste).

·Heijunka (Production Smoothing).

·Andon (Signboard).

·Pokayoke (Fool proofing).

·Jidoka (Automation).

·Kaizen (Continuous Improvement).

Considering Japanese manufacturing facilities Toyota is more efficient than responsive, by using its famous TPS. But you can see that for other facilities company is more responsive and moreover it

chain. Toyota is also the first company to pursue an online replacement-parts aftermarket exchange. Nowadays Toyota has wide-ranging web initiatives. They stretch from providing automobiles with wireless access to live traffic and safety reports to connecting Toyota dealers in a virtually paperless communications network.

Toyota is working closely with i2 Company to launch what the automaker is calling the Monarch

Project, which is aimed at improving operations in Toyota's $1 billion parts-replenishment business. A major part of the initiative will be Dealer Daily, a web-based portal that will connect Toyota's 1,300 dealers with its factories around the clock, improving parts ordering, sales and vehicle repair operations. For example, dealers will be able to download sales and other company information directly from the Web using a virtual private network and leased lines. This will prevent Toyota from having to send two pounds of paper-based updates to dealers each week, slashing about $3 million in annual printing and distribution costs.

In the long term, Toyota wants to have complete visibility in its supply chain. Suppliers will be able to look at Toyota's parts inventories and automatically replenish them, instead of waiting for Toyota to make a request (pull information system, data is quickly transmitted through all stages to accurately react on demand).

The new i2 system will also allow dealers to instantly locate the exact car model a customer has ordered - whether it's in a warehouse, on a truck or in a factory - and deliver it as soon as possible. Though it's not quite the build-to-order model Dell Computer uses to sell its PCs, Toyota's approach should greatly reduce the cycle time for customers to get their cars

Toyota relies on visual controls in place of using TMS or WMS for decision support. It uses a Kanban card, which is a visual cue for the need to replenish small lot sizes. But it is developing in-house systems that support enhancing Kanban to Web-based E-Kanban.

Automaker has tide connections between all stages of supply chain with the help of own intranet (EDI, which helps to exchange information with suppliers, staff very effectively); web-sites, which are localized for every specific market (for example toyota for North America, toyota.co for Japan, etc) and allow to customers to be not physically presented at facility, but to reach information, or even choose car model he/she likes; and ERP systems (SAP and i2 software) which allow interaction between all stages and make information visible to everyone who has enough rights to use it. This determines the role of information in company`s supply chain. At that stage Toyota is much more responsive to customer than efficient.

Obstacles to achieving strategic fit.

There are several obstacles, which can make difficult to create ideal balance between efficiency and responsiveness for Toyota Company:

Increasing Variety of Products : customers may demand custom-made product (in our case- cars): sport/casual car, different colors, various options (ABC, conditioner, audio/video, signaling), diesel/benzene (or even hybrid: hydrogen-benzene car). All these can increase uncertainty, hence cost for company and low down of responsiveness.

Decreasing Product Life Cycles: environmental restrictions for octane number of benzene, right-side cars can involve prohibiting usage of cars, which possess these features, and hence decrease opportunity window for automaker.

Globalization : difficulties with coordination of business units, competition from GM, Ford, and Honda.

Difficulty Executing New Strategies : current strategy is perfect, but then after influence of different factors company will face with the need of change, it should not only understand, but know how to

costs for a company and increase the efficiency and requires a strategic approach to be implemented towards it.

Toyota Motor Corporation is currently one of the model companies worldwide in many aspects of conducting a successful business practice, including supply chain management. They principles of Just in time, Kanban, lean manufacturing, Kaizen and others provides competitive edge for Toyota and provide efficiency in many business functions along with supply chain management. Other companies willing to increase their productive efficiency need to look at these principles above, and if the need arises, implement them into their own business practices. It needs to be done, of course, taking into account the current culture within organization and the level of knowledge and qualification of employees. Therefore, some of the principles practiced by Toyota can be adopted by other companies with some adjustments.

Toyota’s SWOT Analysis & Recommendations

Toyota Motor Corporation addresses the internal and external strategic factors in the business, as identified in this SWOT analysis. The SWOT framework pinpoints the most significant opportunities, threats, and organizational weaknesses that Toyota must address using its strengths. As a global leader in the automotive industry, Toyota effectively addresses such factors. This SWOT analysis provides insights about the possible influences on the company’s business. Toyota’s high performance serves as an indicator of its ability to address the issues enumerated in this SWOT analysis.

Toyota’s SWOT analysis shows that the company remains strong in the global automobile market, although issues related to competition, organizational structure, and corporate culture must be addressed.

Toyota’s Strengths (Internal Strategic Factors)

Toyota’s strengths indicate that the firm is capable of keeping its position as one of the top auto manufacturers in the world. This element of the SWOT analysis model identifies the internal strategic factors that serve as capabilities of the firm. Toyota’s main strengths are as follows:

Strong brand image
Global supply chain
Rapid innovation capabilities

Toyota has one of the strongest brands in the global automotive industry. The company’s global supply chain is also a strength that enables resilience and market-based risk minimization. Furthermore, Toyota has an organizational culture that facilitates rapid innovation, which is crucial for long-term competitive advantage. This part of the SWOT analysis shows that Toyota’s strengths support its position as one of the biggest automobile manufacturers in the world.

Toyota’s Weaknesses (Internal Strategic Factors)

Toyota’s weaknesses point to possible inefficiencies in the organization. This element of the SWOT analysis model determines the internal strategic factors that serve as obstacles to business growth. Toyota’s main weaknesses are as follows:

Hierarchical organizational structure
Secrecy in organizational culture
Effects of product recalls in recent years

Toyota’s global hierarchical organizational structure prevents maximum flexibility of regional operations. Also, the company’s culture of secrecy is a weakness that reduces response times in addressing emerging problems. In addition, Toyota implemented massive product recalls starting in 2009. These recalls weaken the firm because the recall processes consume business capacity that could be used for product distribution instead. This part of the SWOT analysis shows that Toyota could improve its performance through adjustments to reduce the weaknesses based on its organizational structure and culture.

Opportunities for Toyota (External Strategic Factors)

Toyota’s opportunities are mainly based on technological and economic trends. This element of the SWOT analysis model identifies the external strategic factors that the firm could use to improve its business. Toyota’s most significant opportunities are as follows:

Growing markets in developing countries
Rising demand for fuel-efficient automobiles
Growing interest in advanced electronics in vehicles
Weak Japanese Yen vs. U. Dollar

Developing markets present the opportunity for Toyota to increase revenues by further penetrating these markets. Also, the current trends of increasing demand and interest for higher fuel efficiency and advanced electronics present the opportunity for Toyota to focus its innovation on these directions. In addition, the weaker Japanese Yen versus the U. Dollar means higher competitiveness of products and components exported from Japan to the U. This part of the SWOT analysis shows that Toyota must emphasize market penetration and innovation to exploit its opportunities.

Threats Facing Toyota (External Strategic Factors)

The threats to Toyota’s business are based mainly on the competitive landscape. This element of the SWOT analysis model determines the external strategic factors that could reduce the firm’s performance. In Toyota’s case, the main threats are as follows:

Growing market presence of low-cost competitors
Rapid innovation of competitors

Toyota faces the threat of competition with low-cost automobiles from Korean, Chinese and Indian manufacturers, which have been increasing their presence in foreign markets. Toyota also experiences the threat of rapid innovation of competitors like GM, Honda, and Ford. This

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