Toyota's Supply Chain

Toyota is making only "what is needed, when it is needed, and in the amount needed. Toyota is using impute from workers and their culture encourages employees to learn from their mistakes and successes and failures of each other.

Businesses benefit from having a good relationship with their suppliers of raw materials and components. In manufacturing, companies are adopting “Just-in-time” manufacturing. This means that businesses only produce when they have an order, and they only get materials delivered when they are needed. Businesses require reliable and efficient suppliers to be able to order their stock last-minute.

It is important that Toyota improve their communication and process of evaluating their parts because if they don’t they risk losing customers and market shares. An improved process would also give them reassures that this issue does not arise again. According to Porter (1996) “Delivering greater value allows a company to charge a higher average unit price; greater efficiency result in lower average unit cost” (p.62). Toyota needs to focus more on quality than quantity. After quality is critiqued then they can continue to grow at a lower rate. If Toyota gives their North American companies power to make decisions than it would be a huge improvement to the companies and less risk of safety issues.

Toyota faced a challenge related to the poor visibility and low quality of a supplier for the Suprima model. The Japanese brand, being related to a top quality product and a Just in Time manufacturing scheme could not afford to have stock out problems nor not meeting consumers’ demand for quality.

The topic selected is (Strategic Procurement & Supply Chain Management). For this study, we have selected Toyota Motor Corporations as our company of choice. Toyota is without doubt the best in the world, with its many philosophies and principles on how to make the best out of the least; JIT, lean production and elimination of waste and the desire for continuous improvement are just a few ways how Toyota has become the best in the auto industry. Toyota as a name, a company, and as a brand has become synonymous with Quality.

In this project, we will be studying Canadian Tire Auto Services’ main supply chain strategies. Canadian Tire provides many automotive services for their clients with many locations across the countries. Our goal for this project will also be to look into Canadian Tire’s logistics operations, their process of supplier selection, and evaluation. We will also look to study their use of the latest IS/IT innovations. We will then conclude our project by realizing the importance of supply chain management integration, as well as, the challenges and practices within a global supply chain.

This helped the company to have a competitive advantage for the suppliers opportunity cost. Suppliers were paid incentives for improving the process. Continuous contact with the suppliers helped the company to have control for quality and also the computer aided layouts were dispersed. If the supplier used ideas to reduce cost then profit was being shared with them. This encouraged the suppliers to bring more innovation the process and thus Toyota had a competitive advantage over its suppliers if compared to its

Communication is the most important aspect of conducting business. Toyota must improve their means of communication and it must start at the beginning of the customer/supplier relationship. The Process Flow chart will identify the communication process between Toyota and supplier is further updated to show improved processes. Expectations should be established to ensure that suppliers are providing the quality products that represent the Toyota brand. Currently, Toyota has sacrificed quality and safety to meet the demands of the customers. Toyota must take into consideration the market they enter and the major players that exist to provide the support necessary. Toyota uses the Annual Purchasing Policy process to communicate their expectations to suppliers. “The purpose of supplier expectations is to highlight key priority activities and emphasize broader, more philosophical issues universal to all suppliers (ToyotaSupplier.com, 2012).” In addition, “individual expectations, on the other hand, are developed uniquely for each supplier and include specific targets in the key areas of quality, delivery, value improvement and minority sourcing (ToyotaSupplier.com,

Toyota and Honda succeeded in constructing effective supplier relationships because of the methods they used for it. In article they were the following:

Toyota orders the raw materials from all over the world and in the interest of maximizing their availability of raw materials; they maintain good relationships with their suppliers. Toyota uses Just-in-Time system to manage the supply of raw materials as well as optimizing the supply and production processes.

Lean manufacturing originated long before Toyota and Ford, however the thought that it originated with Toyota is flattering since they are the ones who perfected it. By creating the Toyota Production System (TPS), Toyota found a better way to produce large quantities of product efficiently with eliminating the waste factor and while cutting down cost. Taiichi Ohno a former Toyota vice president promoted the idea of JIT (Just-in-Time) which means “producing the necessary units in the necessary quantities at the necessary time.” (Monden) Which leads to Toyota’s ultimate goal in the TPS is to improve productivity for better return in investment. To have continuous flow in a production system Toyota sought out to achieve the concept of JIT and autonomation . Since the TPS is what creates the parts who monitors the JIT system? The kanban system which is an informational system that controls quantities being produce in each process. As the discussion carries on throughout this paper about Toyota and their use of the kanban system the topic

Toyota SCM based on Keiretsu structure that it is working with dependent suppliers that ensure high quality of raw materials. Toyota develops this SCM by creating assembly system which base on Pull demand and just in time operation strategy.

One factor that adds to the success of Toyota’s supply chain is their relationship with their suppliers and how they do business with those suppliers. Toyota does not simply give their supply contracts to the highest bidder; instead they work incredibly closely with their suppliers so that they can get the highest quality products possible. Toyota uses long-term, just-in-time contracts with all of their suppliers (Winfield & Hay, 1997). Toyota does not engage in any kind of mutual contracts, such as buy-back or revenue-sharing; however, they do take multiple steps to ensure a mutual benefit when they pair up with a supplier. Toyota invests in their suppliers to help them develop products (Liker & Choi, 2004). They also ensure that they share information with their suppliers in a structured fashion. They believe that targeted information leads to results and they ensure that specific communication is relayed to their suppliers at set times and in set ways (Liker & Choi, 2004). Perhaps the most unique aspect of Toyota’s relationships with their suppliers is that they embark on joint improvement ventures together. They set up study groups with suppliers to help both parties learn how to improve operations and send executives and engineers to the supply plants to help them improve processes (Liker & Choi, 2004). These kinds of benefits are described in the contracts Toyota keeps with their suppliers (Toyota Supplier, 2011). The close relationships that

Toyota is committed in developing its supplier base, which more closely reflects the diversity of its customers and the diversity of its team members who build Toyota vehicles. Having a diverse supplier base enables it to contribute to the economic well being of all its segments. Also, it recognize that partnering with suppliers who provide a diversity of ideas in addition to delivering manufacturing support, goods and services that creates a significant competitive advantage for Toyota.

Toyota Production System (TPS) focuses on the philosophy of eliminating all waste. It can be trace back to its origin – automatic loom which was firstly introduce by Sakichi Toyota. During the past few decays, TPS has evolved through generations by trial and error to improve the efficiency. This is mainly based on the concept of JIT.