Toyota Company: Supply Chain Management

Explain fully the impact on the Supply Chain of transferring all the manufacturing to factories in India, Bangladesh and Philippines. From a Supply Chain perspective what risks do you think are involved and how would you recommend these are overcome?

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Impact of transferring manufacturing activities

The transfer of manufacturing by Toyota significantly affects the supply chain. According to Bhattacharya, Mukhopadhyay, and Giri, (2014), adoption of supply chain improves product delivery time, enhances product quality, and promote customer satisfaction. Therefore, companies outsource production services to other firms to enhance their competitive advantage in a market segment. The impacts of transferring manufacturing operations to factories near the UEA by Toyota on the supply chain are enhanced integration, reduced operation cost, enhanced quality of service, and reduced risk of inventory.

Enhanced integration

Integration involves alignment and coordination of operations within the supply chain with the use of shared management information systems. Toyota has adopted the lean strategy in production process through the just-in-time strategy. In this view, the transfer of manufacturing factories to the proximity of a large market segment of the UAE promotes customer-focused production. The customer-centric approach promotes the external integration due to the narrow line of stocking materials by the supply chain and consistent market demand.

Reduced operation cost

The supply chain’s daily operating cost involves warehousing, working capital, and transport costs. The adoption of lean production strategy reduces inventory, as manufacturing of automobiles is limited to the market demand and customer order. In this case, the on-demand production essentially reduces the pressure of large working capital requirement for bulk production and large inventory cost. The proximity of the supply chain tiers to the target market reduces the additional expense of transport cost. Therefore, supply chain tiers adopted improved operation processes, which significantly reduced their operation expenses and enhanced their productivity.

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Enhanced quality of service

The objective of collaboration in the supply chain is to enhance customer satisfaction and competitive advantage. The transfer of manufacturing to factories in India, Bangladesh, and Philippines by Toyota is fundamental in understanding the dynamic needs of the target market in UAE. In this view, the transfer enhances research, design, and development of the automobiles in line with customer preference. Moreover, the proximity of the target market facilitates speedy delivery of automobiles and enhances customer satisfaction. Thus, the process of transfer of manufacturing significantly improves the effectiveness of the supply chain and enhances the quality of service delivery.

Reduced risk of inventory

Manufacturing of automobiles requires a large inventory to keep track of market demand. Transfer of manufacturing enables the supply chain tiers to keep sufficient inventory for the smooth flow of on-demand processes and manufacturing due to the enhanced relationship of target market and supply chain tiers. The enhanced relationship enables the supply chain to monitor trends of the market. As a result, the approach reduces the associated risk of keeping large inventory, which includes waste, damage, and loss due to handling and effects of natural hazards for the supply chain firms only handle automobiles in line with market demand.

Risks and recommendations to overcome

The possible risks involved include risks associated with supply chain procedures. Sardar and Lee (2015) hold that automobile manufacturing requires large assembly of vehicle units from different suppliers (p 703 par 3). Hence, the delivery process of the vehicle parts and the finished automobile through the supply chain faces disruption due to transport requirements and trade policies. Thus, the associated risks include unanticipated costs, integration difficulties, and compromised quality.

Unanticipated cost

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The transfer of manufacturing production puts burden on the factories. The technology in India, Philippines, and Bangladesh is inadequately advanced, and thus, the companies involved must invest more funds to adopt the advanced technology to support updated manufacturing processes. Additionally, the unanticipated risk includes the cost incurred due to unpredictable customer needs in the target market and efficient communication networks. The approach to overcoming this cost risk involves financing of the factories by Toyota to acquire advanced manufacturing technology in line with the standards of desired quality automobiles.

Integration risks

Integration involves technical and complex processes. The transition process in the supply chain management requires sufficient finances and time from all the relevant firms. The integration process requires investment in efficient and robust communication networks to enhance efficiency of the just-in-time strategy. Additionally, unrealistic distribution timelines can lead to delayed inventory resulting in impaired customer satisfaction, which is a setback in the integration process. The steps to overcome this risk include investment in adequate infrastructure and advanced communication technology to enhance communication and speedy delivery.

Compromised quality

The mother countries of the factories outsourced in the supply chain have low technological advancement compared to Japan. In this view, the companies have inadequate experience and technology in manufacturing quality Toyota automobiles. The low technological advancement and on-demand manufacturing puts high production pressure on these manufacturing firms with the desire to deliver. This pressure forces the supply chain to adopt speedy delivery within a short time, which could lead to compromised manufacturing processes, resulting in the production of low quality automobiles.

Provide the detailed steps required to introduce the new product range successfully through the Supply Chain. Explain how and why you would ensure “collaboration” is present in the process.

Steps to introduce a new product range

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The introduction of a new product range requires preparation of logistics operations in the supply chain. Dung (2015) argues that the steps of ensuring collaboration amongst supply chain firms include an agreement between firms to share information, responsibilities, and investment resources to achieve organisations joint objectives. Thus, the steps of ensuring collaboration in the process include establishing long-term collaborative objectives, investing in infrastructure and people, and establishing a joint performance management system.

Establish long-term collaborative objectives

Long-term objectives are essential in ensuring collaboration amongst supply chain firms and construction of lasting perspectives and expectations. Moreover, long-term collaboration objectives ensure long-term planning by the firms, and consequently, promote companies to break from the short-term view of collaboration. The establishment of long-term perspective ensures improved understanding amongst firms of the supply chain and knowledge of individual capabilities that promote smooth and efficient manufacturing processes.

Invest in infrastructure and people

Infrastructure is an essential factor to consider in ensuring successful collaboration. In the case of Toyota, outsourcing of the production process, different locations of the firms require, and established infrastructure enhance convenience in communication within the supply chain. Therefore, to ensure successful collaboration, Toyota must lead in collective investment in infrastructure in the supply chain network. The infrastructure includes improved information technology, transportation, and facilities of the delivery process. Additionally, Toyota must invest in staff training to enable transfer of knowledge and skills essential in the production and overcome challenges of diverse cultures.

Establish a robust performance management system

An effective system of performance management ensures that there is a successful tracking of processes and products. Establishment of a robust performance management system among the supply chain network builds common targets and allows joint monitoring of processes. The robust performance management system comprises strategies aimed at reducing costs, reviewing performance, and boosting communication. This approach ensures the identification and the development of a framework for effective strategic planning of goals and expectations for the collaboration.

Why ensure collaboration is present in the process

Collaboration is a key component in the supply chain that ensures the success of the manufacturing processes. According to Mattos and Laurindo (2015), collaboration ensures successful functioning of supply chain due to the established integration of supply chain processes. In essence, collaboration enables firms to obtain opportunities to assess resources, information, and knowledge. Thus, improved communication between firms significantly enhances sharing of information and dissemination of knowledge essential to achieving benefits including cost sharing and improvement of flexibility in the manufacturing process. The establishment of opportunities to assess resources amongst firms of the supply chain promotes sustained long-term planning, productivity, development, and risk management. Thus, collaboration ensures that there is an effective periodic assessment of processes and target market.

Explain in your report the characteristics of both “push” and “pull” and how the two processes are best managed.

Push and pulls processes

Push process

The push process is a style of market approach that involves ensuring consistent availability of the product in the market through forecast production to guarantee adequate stock and supply. In this case, product manufacturers push their products to customers through future projection of possible demand and manufacturing to meet the projected market demand. The common sales tactics in this approach comprise selling products to customers through display in showrooms and retailers.

The manufacturing companies pay retailers to drive sales by setting up of point-of-sale display units in their premises to increase product visibility and demand. This approach is essential in establishing a market for new products. Showroom and display units provide customers with the first experience with the product and are indispensable in influencing customer decision to purchase the product thus creating market demand. Therefore, under this model, companies engage the predictability approach in their supply chains to establish knowledge of the possible future demand for a product, which enhances production and provides time for product stocking to avoid market shortages.

Pull process

This logistic chain process entails establishing customer loyalty and manufacture of market responsive products through the adoption of lean production approach. According to Sabet, Yazdani, and Leeuw (2017), the application of just-in-time strategy is essential for inventory management, which minimises stock on hand and enhances focus on on-demand deliveries. The goal in this process includes pulling customers to create market demand for company products. Thus, companies manufacture products and distribute in line with customer demand, resulting in reduced costs of inventory. The tactic used to create customer loyalty and market demand includes product promotion through mass media advertisements and word-of-mouth referrals. This approach targets long-term customer relationship and continuous market demand. However, the risk involved includes the shortage of inventory to meet an upright rise in product demand, which cause customer dissatisfaction and negatively influence company’s competitive advantage

Managing push and pull processes

Managing push and pull processes requires effective communication and planning. Integration of advanced information technology is essential for effective communication across the supply chain. Marinagi, Trivellas, and Reklitis (2014) explain that information sharing improves coordination and significantly enhances the performance of supply chain. Thus, coordination ensures the adoption of best management practices such as adequate maintenance of inventory for both finished products for push strategy and materials for pull processes. This approach requires effective management of supply chain through process coordination stimulated by information sharing.

In push processes, supply chain management requires consistent coordination to ensure sufficient inventory to cater for the fluctuation in market demand, reduce losses, and avoid transport cost for product returns. Moreover, push processes requires the adoption of advanced research and development to ensure proper projection of future market demand. Management of pull process involves the integration of advanced management information system to support coordination and efficient information sharing in the supply chain to ensure on-demand manufacturing. Effective management information system is essential in coordination and projection of possible market demand essential in maintenance of adequate inventory of raw materials for just-in-time manufacturing.

Inventory Data is critical in any Supply Chain. Explain how and from where you would recover / source such information and what practical use it would be for future planning.

Sourcing of inventory data and its practical use

The process of acquiring inventory data involves sourcing from the supply chain. Jimoh, Olakunle, and McNay (2015) state that effective information sharing enables supply chain partners to keep data of the prevailing market conditions, which guides supply chain firms to project on the level of inventory required to meet market demand. Thus, the adoption of advanced information technology enhances storage and management of data in inventory management systems such as Vendor managed inventory and collaborative joint-inventory systems.

Vendor managed inventory

This inventory management system, managed by suppliers, provides data on the inventory level of particular manufacturing material of each product. The inventory system contains policies regarding the maintenance of the appropriate level of inventory. Data from this system is essential as it involves coordinated information sharing on product demand and supplier access to the inventory level of the supply chain. Therefore, suppliers combine data from other firms in the supply chain to ensure proper forecast of market behaviors and demand.

Collaborative joint-inventory system

This inventory system includes collection of data from different business processes across the supply chain. Firms in the supply chain jointly manage inventory system providing data on forecasting, planning, and replenishing with the goal to enhance sufficiency in manufacturing. Data in joint inventory management significantly helps firms in the supply chain to manage costs and effectively meet customer demands.

Practical use for future planning

Sourcing of inventory data is essential in establishing the independence of operation, maintaining consistent production, and enhancing flexibility through the forecast, coordination, and planning. Turkay, Saracoglu, and Arslan (2016) assert that management of inventory is essential in controlling and guiding production processes that help in optimising profit. Therefore, firms in the supply chain use inventory data in planning and coordinating their operations to sustain their business activities

Independence of operation

The data enables appropriate forecasting of market characteristic that aid in decision making and planning future business activities. The data guide supply chain firms in managing business operations by enhancing maintenance of materials and products at a sufficient level to support consistency of daily business operations. In this view, inventory data enables firms to set strategies of sufficient stocking, which reduce reliance on their suppliers and support their business operations. Additionally, the data helps in controlling expenses and projecting expected profits that aid in the setting of strategies to establish a competitive advantage and sustain growth.

Consistent production

Inventory data is critical in managing storage space, which significantly reduces losses through inappropriate handling and extra handling costs. Coordination amongst the supply chain firms promotes sharing of inventory data that guides in placing orders, and thus, enhances consistent production. Therefore, the inventory data is essential in the placement and the delivery of orders that promotes consistent production to avoid product shortages in the market and enhance customer satisfaction.

Enhancing flexibility

Availability of inventory data promotes the supply chain’s agility by guiding stocking and storage of the appropriate amount of materials and products. In this case, logistics companies have the capacity to change their production and quantity to meet market demands. Moreover, the availability of inventory data enhances forecast of future market demand and promote organisations’ ability to plan and change inventory to suit future needs. The data guide firms to keep track of products and maintain them in line with market demand, and thus, reducing idle capital in the form of inventory while enhancing their financial capacity to support a new direction of production.

Detail the Logistics processes for moving goods from the manufacturing source to the inventory warehouse in Jebel Ali. Show that you have compared the various modes of transport and make a recommendation that will consider Cost, Speed, and Flexibility. Consider multimodal transport, security, safety of the transportation, all processes and the potential complications and provide justify recommendation for the decision making purposes.

Moving goods factory to warehouse

Logistic processes

Logistics processes involved in the movement of automobiles from factories to warehouse include all activities essential in ensuring smooth and convenient dispatch, transport, and storage of automobiles. Kherbach and Mocan (2016) hold that logistic processes involve all activities undertaken in the supply chain that facilitate the movement of goods from manufacturing firms to end users. Thus, logistics processes comprise inbound and outbound activities of the supply chain, which are internal, shipping, transport, and receiving processes.

Internal processes are all the processes that take place within the facility. These processes comprise procedures of documentation and dispatch in the factory, storage, and display in the warehouse. Shipping processes refer to shipment consolidation, contract, tendering, and compliance functions associated with getting shipments out. Transportation processes entail the processes and activities performed by the supply chain in connection with the transportation process. Receiving processes include verification, acknowledgment, and storing activities associated with the reception of shipments at the warehouse.

Cost, speed, and flexibility of modes of transport

The modes of transport facilitate convenient movement of goods from the production site to end user. Harris, Wang, and Wang (2014) argue that convenient modes of transport ensure effective movement of goods in the supply chain and significantly influence the conditions of business activities. The modes of transport include trucks, railroads, air, and water transport. Truck transport is moderately flexible compared to other modes of transport and is essential in transporting goods from ports to the warehouse.

The cost involved in truck transportation is relatively higher than that of rail and water. These costs include truck maintenance cost, fuel, and high expenses incurred in transporting large and bulky goods. Moreover, transportation by truck is also relatively slower compared to air and rail transport in the industrialised countries. Railroad transport carries products over land and is significantly important in the transportation of large cargo over long distances. Containerisation has significantly enhanced rail flexibility and reduced associated cost. Thus, rail is slightly less flexible than road transport but cheaper and more efficient.

Water transport is the cheapest because allows transport of large cargo. However, water transport is the slowest and the least flexible due to limited accessibility to inland locations. Although air transport is the fastest mode of transport, it is the most expensive in transporting cargo. Moreover, air transport is the most flexible compared to other modes of transport due to its ability to deliver goods over water and land. Additionally, air transport is the most convenient mode of transport for international trades.

The best mode of transport to adopt considering cost, speed, and flexibility in the delivery of automobiles from the factory units in India, Bangladesh, and the Philippines to the warehouse in UAE is air transport. Despite the high cost of air transport, the recommendation is due to flexibility attribute to deliver goods over water and land, and the convenience of speedy and timely delivery. Hence, air transport is convenient to meet the on-demand production strategy adopted by Toyota and effectively enhances customer satisfaction.

Multimodal transport, security, safety of the transportation

In international businesses, the multimodal transport involved includes air-truck transport, air-rail transport, sea-truck transport, and sea-rail transport. The multimodal transport modes involving air transport is safer and more secure than the modes involving sea because it has affordable insurance rates and inexpensive warehousing, which enhances product safety and security than multimodal transport involving sea transport. On the other hand, air-rail transport has higher security and safety level of goods compared to air-truck transport. Truck transport is highly prone to accidents and attacks by crime victims than the rail transport due to tight security measures in railway lines.

Thus, the recommended multimodal transport for Toyota with the consideration of security and product safety is air-rail transport because Toyota has adopted lean production that utilises just-in-time processing. In this view, the company must adopt the most secure and safe transportation in shipping its automobiles to shield from any loss and deliver goods, according to customer needs.

Overall, the company must adopt air–rail multimodal transport process that involves air transport for shipping automobiles and railroad transport to deliver cargo from airport to 3PL location. In this view, the fast, safe, and secure air transport mode is essential in an automobile is shipping from the manufacturing factories in India, Bangladesh, and the Philippines to Dubai to meet the on-demand market supply. On the other hand, railroad provides a cheaper means of transport to supplement the air transport cost. Additionally, rail transport is slightly slower than truck transport but carries large cargo thus making it essential in transporting automobiles from the airport to 3PL warehouse.

Reference list

Bhattacharya, S, Mukhopadhyay, D & Giri, S 2014, ‘Supply chain management in Indian Automotive industry: Complexities, challenges and way ahead’, International Journal of Managing Value and Supply Chains, vol. 5, no. 2, pp. 49-60. doi 10.5121/ijmvsc.2014.5206

Dung, L 2015, ‘Factors affecting the collaboration in supply chain of mechanical enterprises in Vietnam’, International Journal of Managing Value and Supply Chains, vol. 6, no. 4, pp. 17-28 doi:10.5121/ijmvsc.2015.6402

Harris, I, Wang, Y & Wang, H 2014, ‘ICT in multimodal transport and technology trends: Unleashing potential for the future’, International Journal of Production Economics, vol. 159, no. 1, pp. 88-103. doi:10.1016/j.ijpe.2014.09.005

Jimoh, M, Olakunle, A & McNay, B 2015, ‘Improving business performance through effective inventory management’, International Journal of Management Sciences and Business Research, vol. 4, no. 11, pp. 52-69

Kherbach, O & Mocan, M 2016, ‘The importance of logistics and supply chain management in enhancement of Romania SMEs’, Social and Behavioral Sciences, vol. 221, no. 1, pp. 405-413. doi:10.1016/j.sbspro.2016.05.130

Marinagi, C, Trivellas, T & Reklitis, P 2014, ‘Information quality and supply chain performance: The mediating role of information sharing’, Social and Behavioral Sciences, vol. 175, no.1, pp. 473-479. doi:10.1016/j.sbspro.2015.01.1225

Mattos, C, & Laurindo, F 2015, ‘Collaborative platforms for supply chain Integration: Trajectory, assimilation of platforms and results’, Journal of Technological Management and Innovation, vol. 10, no.2, pp. 79-89.

Sabet, E, Yazdani, N, & Leeuw, S 2017, ‘Supply chain integration strategies in fast evolving industries’, The International Journal of Logistics Management, vol. 28, no. 1, pp. 29-46. doi: 10.1108/IJLM-01-2015-0013

Sardar, S, & Lee, Y 2015, ‘Modeling the impact of border crossing bottlenecks on supply chain disruption risk’, International Journal of Engineering and Technology, vol. 7, no. 2, pp. 692-706.

Turkay, M, Saracoglu, O & Arslan, M 2016, ‘Sustainability in supply chain management: aggregate planning from sustainability perspective’, PLoS ONE, vol. 11, no.1, pp. 1-18. doi: 10.1371/journal.pone.0147502

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