Toyota’s Supply Chain Management

Week 1-2: Toyota, having its regional headquarters is a large company whose effective supply chain can be difference between efficiency and inefficiency. The information flow between the suppliers and the company include requests for quotation, schedules and purchase orders. Offers, dispatch details and confirmation of purchase orders should also be included. The material flows include the transport of cars and parts ordered to the customers and the importation of parts and cars from Japan. The financial flow is also important and includes money paid by customers, money refunded to unsatisfied customers, money paid out to suppliers and expenses incurred. Logistic activities include deliveries to customers, receipt of returned products, transportation of parts, importing cars, receipt of supplies and shipping of vehicles and parts.

Week 3: Toyota is involved in a lot of buys including purchase of shift lever knobs, rear seat assembly locks, touch screens, tires and exhaust parts. One of the main suppliers for Toyota is Bridgestone which provides the car maker with tires for most of its vehicles. In its strategic sourcing process, the profiling of the tire categories come first and each type of car is identified for the size of tyres and type. The cost of the raw materials used in making the tires is then estimated before developing a strategy that minimizes costs and risks. Toyota then requests for a proposal for the required tires from Bridgestone and tries to negotiate the supplies’ pricing. If there are any discounts and offers, they are tackled in this stage. Toyota then implements the contract in collaboration with Bridgestone to ensure the right supplies are made. The last step involves tracking the results to identify areas of improvement and/or change.

Week 4: Toyota ships the vehicles to the main port in the customer’s country but the chipping cost is catered for by the customer. Toyota is conscious of the many customer service dimensions and works to achieve customer satisfaction through: improving reliability, responsiveness, assurance and even empathy. For instance, it provides an efficient feedback mechanism where customers can share their views on the product and service rendered. Part of its customer service protocol is to ensure that the product is collected by the owner in time. In this regard, Toyota informs the buyer in advance about the duration it will take to ship the car and confirms when it has reached the destination. For in-country sales, the owners can either collect the products themselves or arrangements made for the transportation to their desired destinations. Toyota further establishes a smooth flow from the point of sale quotation to order approval and timely invoicing for payment. The service charter provided is followed to the letter therefore improving order fulfillment. In case there are no stocks at the time of order, the customer has the option of being sourced the product from another location or to wait until the orders are available. In most cases, Toyota ships the required product from its other headquarters.

Week 6:  The business has spare parts inventory for tracking the parts within the premise. It also maintains an inventory for work in process to cater for products that have not been assembled fully. This category is suitable for incomplete vehicles that may be awaiting supply of parts to be full. The business also has a finished products inventory that takes care of all the vehicles that have been assembled completely. These vehicles include those that have been ordered and are awaiting collection. In addition, Toyota maintains a transportation inventory that covers all the vehicles that are in transit to their destinations. Some of the operational costs incurred by Toyota in handling its inventory include purchasing costs from the supply of different vehicle parts. Shipping and transportation costs are also incurred both in purchasing and selling of the vehicles. There is also an added cost for assembling the different parts into a complete vehicle. There is also an administrative cost for efficient management of the company. The company also incurs warehousing and handling costs from the storage of the vehicles. Insurance and deterioration costs are also provided for to cater for losses and damages of the vehicles while at the warehouse.

Week 7: In making transportation planning decisions, certain considerations have to be made to ensure the timely arrival of the imports. One of the key considerations is the cost of transportation and the various ways available (Coyle & Coyle, 2009). The decision on the mode of transportation of side mirrors is dependent on the urgency of the same and the cost and effectiveness of the different modes available. Another consideration is the safety of the transportation mode and the route that the products are transported through. It would be imprudent to let goods pass via a pirates-prone ocean just because it is cheaper. The urgency of the goods should also determine the mode used. Before ordering the importation, there should be enough room in the warehouse to store all the ordered imports. In most cases, Toyota uses ship transportation for its large cargo because of the volume of parts involved. In other cases, however, air transport is used especially when the goods are needed urgently. In distribution of the vehicles, Toyota may use road transport to deliver the final products within the country. Intermodal transportation is widely used within the organization. When goods and material are imported by sea, they have to be transported to the warehouse either by road or rail transport. The performance of Toyota’s transportation can only be measured by the timely delivery of the products to the customers and by minimizing the cost of this delivery. The degree of customer satisfaction is therefore directly proportional to the efficiency of the company’s transportation.

Week 9-10: Toyota is to a large extent dependent on the efficient distribution of the products that it sells. If distribution is not efficiently and timely achieved, then the company would not be in business. Strategic distribution decisions have been made over time and keep changing with time and depending on the prevailing circumstances. Although Toyota does not often use cross docking in delivering its products, sometimes the company has to source the desired brand from another of its store and in such cases considers cross-docking to minimize the handling costs. The warehouses that Toyota has are purely for storage and assembly of the vehicles. It has several warehouses in UAE and the neighboring countries such as Qatar. I’d advise Toyota to have at least one ware house in every major region so as to minimize the costs of transportation and the time taken to deliver the products. This will decentralize the company’s operations and minimize the out of stock costs. Some of the materials handling techniques include lifting, dropping and automated lifting equipment. Packaging is mostly used when vehicles are being loaded into lorries or trains.

Week 12: Toyota Company has many supply chain relationships including transactional and strategic relationships. For example, Toyota has a relationship with the main banks in UAE to facilitate faster processing of cheques and disbursement of funds. In addition it has strategic relationships with transportation companies therefore enabling efficient transportation of products. Outsourcing is however not common in Toyota. This is because the company produces most of its major parts. Nevertheless, some parts such as exhausts are outsourced for manufacture by other companies. That notwithstanding, the assembly is done within the plant. Outsourcing ensures efficiency and helps the company to minimize costs. It is however not the best idea since the quality may be compromised.

Week 13: After all is said and done, the efficiency of supply chain management is based on its performance. Toyota measures this performance using inventory metrics, financial metrics, speed metrics as well as service metrics. The feedback from customers is also an important metric for the company. An assembling company such as Toyota would be better suited to measure its performance based on the distribution metrics. This means the efficiency with which products are distributed to their customers. Other measures include transportation metrics and customer service to track customer satisfaction and feedback.

Week 13-14: Toyota is conscious of the fact that its success depends on its ability to improve and adapt to changing market needs. The firm banks on its supply chain management to ensure the efficient flow of information, products and money from and to the customers. The firm is implementing a number of strategies to bolster its supply chain management with a view of improving efficiency. In this regard, the company is positioning itself as a solution provider and has entered into contracts with many companies and parastatals for the supply of vehicles. Moreover, technology based strategies including going green and making energy efficient engines thus preventing climate change. These among many other strategies are pointers to Toyota’s growth and dominance.



Coyle, J. J. & Coyle, J. J. (2009). Supply chain management: A logistics perspective. Mason, OH: South-Western Cengage Learning.

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