ormally known as ‘Toyoda’ in the 1920s, before becoming an independent company in 1937, Toyota Motor Corporation is a Japanese multinational automative manufacturer with its headquarters located in Toyota, Aichi, Japan. The company was established by Kiichi Toyada with their first ever creation being the Toyota AA. Today, Toyata Motor Corporation have gone on to produce over 200 million vehicles making them the largest automative manufacturer and the fifth largest company in the world in terms of revenue as of October 2016 (wikipedia, 2016).
The company has Operations in over 170 countries around the world and sales in over 190 countries. The company also maintains 53 overseas manufacturing companies in 28 countries and regions with 364,445 employees worldwide engaged in the continuous process of raising the standard and performance of its product to an international level (Toyota, 2017). The company has come a long way since its reestablishment in 1937 and has made itself a Leader in its domain with brand like Lexus, Hino, Ranz and Isuzu under its name.
Operations management is an area of management which is focused on overseeing the designing or redesigning of business operations in the production of goods or services (Chase et al, 2001). The Operations management at Toyota is focused on implementing, driving and supporting the organisations overall strategy to ensure that resources are efficiently utilised into the transformation process. Some of the key features of the organisation’s operations have involved Lean Manufacturing techniques, as well as the Just in Time supply chain management processes, which the organisation was very instrumental in developing (Liker, 2004).
Slack defined Supply chain management as The management of the interconnection of organisations that relate to each other through upstream and downstream linkages, between the process that produce value to the ultimate consumer in the form of products and services. Toyota’s Supply Chain includes approximately 100,000 employees, working with over 70,000 suppliers to manage a logistics network that transports over a distance of more than 1.5 billion km each year (Toyota, 2016). Toyota uses lean manufacturing for supply chain management. In this strategic decision area of operations management, the company uses automation systems for real-time adjustments in supply chain activity. In this way, Toyota minimises the bullwhip effect in its supply chain (Panmore Institute, 2017).
According to Stewart (1998), logistics is the management of the flow of goods, information and other resources, including energy and people between the point of origin and consumption. While in 2005, Staccini defined logistics as the integration of information, transportation, inventory, warehousing, material-handling and packaging of goods in an organisation. According to Taleghani (2010), there are two types of logistics namely; the inbound and outbound logistics.
Spear (2004) in his HBR article “Learning to Lead at Toyota,” emphasises that the Toyota Production System is a system of nested experiments that enables them to constantly improve the operations, and Toyota has a structure where those principles are practised at all levels.TPS targeted at removing any kind of waste and inconsistency in the production system. TPS consists of two pillars that are Just-in-Time (JIT) and Jidoka (Ohno, 1988). The concept of Toyota Production System.The lean production system of Toyota is concentrated on putting the proper equipments to the proper locations to attain excellent flow of operations, and also reducing waste and gaining the capability to cope up with the latest developments (Womack, 2007).
INTERNAL AND EXTERNAL PROCESSES
The internal and external process at Toyota is broad and comprises a lot of processes that when connected together, shape a production network from the customer back to the different tiers of suppliers. These processes entail the generation of parts by the suppliers, transportation of these parts to the assembly plant of the OEM, assembling the parts into a finished vehicle, distribution of finished vehicles to dealers, lastly conveyance to a customers.
Inbound (or inward) logistics are the activities carried out in-between a supplier and the company (Greasley A, 2009). Toyota uses ‘network logistics model’ for an efficient inbound logistics that enables it to receive materials from its suppliers on daily basis and reduce its logistics costs (Iyer, Seshadri and Vasher, 2009). The company’s inward logistics involves 2 different operations. The first operation involves moving parts from the local suppliers to Toyota’s local plants while the second involves the global inbound logistics of the company which has to do with transporting parts from Japan to their European and North American plants.
Local Inbound logistics: TMC have been successful in establishing an effective lean supply chain which means that their parts have to be supplied in an efficient and timely manner from the suppliers. To do this, TMC forged a partnership with a few 3rd party logistics providers (3PLs) to deliver logistics services.The organisation sorts out a large number of its suppliers into groups in view of their geographic area. Parts are taken from those suppliers by trucks on a “milk route” (i.e., a circuit in which a truck gets numerous parts from different providers en route), after which they are delivered to a regional cross dock. At the cross-dock (an organising office that is used to ship parts), the parts are offloaded and arranged ready for pickup and delivery to one of the Toyota plants. After the trucks touch base at the plant, the trailer is separated and stopped in a numbered space in a staging lot. In line with TPS, the parts are synchronised with the production rate and are not offloaded until the production progress triggers the need for the trailer to be offloaded.
Global Inbound Logistics: Toyota’s efforts to minimise risks and reduce costs in its supply chain is apparent in their global operations. Overseas parts arriving from Japan are shipped via vessel to a port and then transported by railcar to the assembly plant. One of the distinctive aspects of parts flow from the Japanese suppliers is the utilisation of the vanning centre.The vanning centre is a consolidation point in Japan where parts are received from the Japanese suppliers and packed for shipment to an overseas manufacturing plant (Toyota,2015). At the vanning centre, parts are packed into plastic trays which are arranged into groups of modules ready for shipment by a container ship or overseas port. It takes about 4 weeks for the containers to arrive at the overseas plant. The parts are kept in inventory at the plant until needed. Just like the method for the local parts, the parts are synchronised with the production rate
INTERNAL LOGISTICS (THE TOYOTA PRODUCTION SYSTEM)
The foundation of Toyota’s processes is based on the Toyota Production System. It is a production system which is steeped in the philosophy of “the complete elimination of all waste” imbuing all aspects of production in pursuit of the most efficient methods (Toyota, 2017). The TPS has spiralled through a lot of changes and has continued to evolve over the years, however, the philosophy of it remains the same – to improve efficiency and eliminate waste through out the operations. It is based on two concepts, Jikoda and Just-In- Time (Appendix 3).
Just-In-Time which is also known as lean management is an operations process used by companies which requires them to order or receive inventory for production or customer sales only when it is needed. Toyota started using this in 1970s, it requires the production line to be loaded with all the correct parts, in the correct succession from the time production starts. As parts are used, new stock is conveyed at the right time and in the right amount so there is no intrusion or set back in the production process.
Jidoka means simply means automation. In the Toyota Production System, operators and machines are able to put a halt to the production flow when they notice anything untoward. This eliminates any cost which might otherwise be incurred if defective vehicles are produced. Utilising Jidoka standards all through the production flow is an indispensable component of the Toyota Production System, compelling flaws to be instantly tended to without any human input and consequently decreasing the amount of work added to defective parts.
The third principle of TPS is the Pull System (Kanban System). The Kanban system is integral to the just-in-time process, giving a programmed, constant method to replenish parts at the line side and keep stock low at all times. (Appendix 1). Its purpose is to eliminate waste by avoiding overproduction.
Outbound logistics, on the other hand, is defined as the movement of materials, storing, transporting, and distribution of a firm’s goods to its customers (Shukla et al., 2008). The activities associated with the outbound logistics of manufacturing firms includes order selection, order transportation, customer delivery, customer order, order transmission and order processing (Gayen, 2010). The beginning of outbound logistics for TMC is when vehicles are completed and dispatched from he overseas or local plant to their warehouses. This includes storage, movement of the final product and related information flows from the end of a production line to the end user (Huang, J., 2016). Unlike inbound load logistics, the local and global outbound logistics for Toyota are very similar. The process is explained as follows:
Vehicle Distribution flow: This shows how vehicles are transported from the assembly plants through to the distribution network. After the assembling of the vehicles is complete, they are transported to the marshalling yard in order to make sure vehicles are delivered to their rightful destinations efficiently. Here, Vehicles that need to be equipped with accessories are taking to accessory staging which usually takes 1-3 days. While the rest are marshalling yard flow directly to the truck or rail staging area. From the marshalling yard, the vehicles are transferred to the staging area for shipment. At this point, there are two options for shipment of transporting the vehicles to the dealers, either by rail shipment or using a direct truck-away depending on the distance of the dealers from the OEM plants.