Supply_Chain_Toyota

1.What are Toyota's Core Competencies' According to Fawcett, Ellram, and Ogden (2007), core competency is something that the company does so well that it provides the company a competitive advantage. Core competency give the company hard-to-imitate advantage. One of the Toyota's core competencies is their production system which is known as Toyota Production System (TPS). This is consists of Lean Manufacturing and Just-In-Time (JIT) Production. Lean Manufacturing is the production practice in which it is focusing on the elimination of waste and continuous improvement over long-term. Lean Manufacturing has been proven to be successful in improving productivity and reducing cycle times. On the other hand, Just-In-Time production is the production practice in which it is focusing on synchronising the material flow so that when one item move out from a work station, another item is ready to move in. It allows Toyota to keep their inventory to the minimal levels and this can help the company to reduce the cost significantly. Toyota Production System has enable Toyota to gain competitive advantage over their competitors. Liker and Hoseus (2008) argued that many companies have studied Toyota Production System for decades and try to imitate their production system but not many companies has been proven to be successful in imitating their production system. It requires long-term commitment, determination and discipline to make all the process work. Furthermore, another Toyota's core competency is their brand management. Toyota has been successful in their marketing strategy in which their brand has been recognised in all over the world. Toyota has outsourced 70% of its vehicle content. It means Toyota did not manufacture many of their auto parts. They just focus on assembling those parts to build cars. In fact, those suppliers also provide their auto parts to the other companies, not only to Toyota. Therefore, it is obvious that Toyota is actually selling their “brand” name on their cars. 2. How should they exploit these competencies in the future' Nowadays, customers are expecting highest possible quality products with lowest possible costs. This gives pressure to the company to continuously improve and innovate. Failure to innovate will lead to the lost of market shares to their competitors. Innovation manufacturing has been introduced by Toyota through its Toyota Production System (TPS). This is helpful for the improvement of the company system-wide process by linking the focal company, suppliers and customers in order to improve the quality and at the same time reducing costs. However, in order to survive in the future competition, Toyota should be able to exploit its core competencies. Network orientation which is part of the Lean Manufacturing principles can be exploited in the future through Early Supplier Involvement (ESI). For the company like Toyota in which they rely on few suppliers, getting the suppliers involved early is critical. Recent Toyota recall case occurred because of the poor communication between the Toyota and its suppliers. The gas pedal provided by CTS Corporation has been proven to be the primary factor leading to the recall issue. This is because CTS Corporation are only given a specification regarding the design of pedal by Toyota without getting CTS Corporation to be involved early in the development process. In the future, Toyota need to get their supplier to be involved early to avoid the mistakes. Moreover, Toyota recall issue has tarnished Toyota image as the high quality auto-maker. In this case, brand management as one of the Toyota's core competencies must be exploited so that Toyota's image can be repositioned in the customer's mind. Toyota can use marketing strategy such as repositioning strategy to reposition itself as a innovative and user-friendly auto-maker rather than high quality auto-maker. 3. Describe the competitive environment of Toyota and determine how well Toyota is positioned (vis-a-vis the competitors) to take advantage of changes in the industry. Toyota need to face fierce competition in the automotive industry. Competition is increasing with new entrants are trying to enter the automotive industry. This new entrants can be automotive company from Europe, China and South Korea. Direct competitors of Toyota are Honda, General Motors, and Fords. Besides that, Hyundai has become serious threat for Toyota as well. According to Amherst (2008), Hyundai's vehicles cost less than Toyota while it has more power compared to Toyota's vehicles. In the luxury market segment, Toyota's Lexus lost to BMW in terms of sales (Business Week 2009). Technology innovation has become major force in the industry. This requires those automotive companies including Toyota to catch up with their competitors or otherwise, they will lose their market shares. Recently, the raising price of fuel and pollution have become major concern. Therefore, the latest trend in the automotive industry is producing hybrid cars which are environmentally friendly, uses more electronic power and less fuel. Toyota has successfully take advantages of this changing environment through positioning itself as an innovator by introducing its first hybrid car, Toyota Prius in 1997 (Hybrid Cars 2010). So far, the others competitors such as General Motors, Daimler-Chrysler, and Ford are in the process of introducing new hybrid cars (Hybrid Cars Guide 2010). 4. Analyse Toyota's global supply chain. How well does the configuration of this supply chain support the production process and the optimisation of materials' Toyota's global supply chain strategy is to localize its supply base in which the company are developing local suppliers to minimize the supply chain costs. Instead of seeking for low-cost production sites, Toyota want to produce its vehicle in the places where their customers and part suppliers are. Toyota has located its assembly plants in 28 countries. Toyota's assembly plant in Japan are used to manufacture multiple model and more flexible than other plants because other plants especially North American plants are used to manufacture single model. Around 26 out of 52 of its assembly plants are located in North America (Toyota Land 2010). There are several reasons for Toyota to locate many of its assembly plants in North America. One of the reasons is because it has abundant, hard-working as well as high quality work force. Besides that, it has modern infrastructure and close proximity to Toyota's largest market which is North America. The total sales for North American region in 2009 is around ¥ 8,7 trillions (WikiInvest 2010). By locating its plants in North America, Toyota also have access to its suppliers. Many of the Toyota's suppliers are located in North America including CTS, Delphi and Bosch. Around $20 billions per annum has been spent by Toyota for its North American parts suppliers (Spend Matters 2010). Moreover, Toyota is relying on sole suppliers for certain components. Toyota's gas pedal is one of the components that is outsourced to sole supplier which is CTS Corporation. CTS Corporation is located in North America. Therefore, through its assembly plants in North America, it made possible for Toyota to support its Just-In-Time production process and optimisation of its materials. 5. What are the pros and cons of Toyota's supply chain strategy'Specify what economics and strategic factor should be analysed to answer this question' There are advantages and disadvantages of Toyota's supply chain strategy. Toyota Production System (TPS) which is including Lean Manufacturing and Just-In-Time production allow Toyota to reduce cost, improve quality as well as productivity. However, there are some disadvantages from the system. Inventory is kept on minimum level. Therefore, when there is a problem occurred in its supplier side such as quality issues, Toyota need to shut down its assembly lines. Besides that, Toyota has gained economies of scale by relying on single suppliers to produce entire range across multiple markets. Toyota's lean manufacturing makes Toyota depends heavily on sole suppliers. In the Toyota recall case, quality error in its auto parts has cost the company around $2 billions. Furthermore, Toyota's strategy in localizing its supply base has lead to the shorter supply chain which enables Toyota to keep its supply chain costs down. Economic and strategic factors such as transportation costs, energy costs and labour costs are more likely to be unpredictable in the longer supply chain. Nielsen (2009) argued that unpredictability always implies risks. Fluctuation of exchange rates also can have a huge impact on the company. Therefore, Toyota is trying to purchase its auto parts locally as many as possible to reduce the risks. However, this makes Toyota become dependent on its suppliers outside Japan since its largest market is in North America and majority of its suppliers are located in North America. References Amherst 2008, Toyota Motor Company, viewed 23 April 2010, http://www.amherst.edu/~ilstrata/Toyota.htm. Business Week 2009, Can Anything Stop Toyota', viewed 24 April 2010, http://www.businessweek.com. Fawcett, Ellram and Ogden, 2007, Supply Chain Management: From Vision to Implementation, Pearson Prentice Hall Hybrid Cars 2010, History of Hybrid Vehicles, viewed 24 April 2010, http://www.hybridcars.com/history/history-of-hybrid-vehicles.html Hybrid Cars Guide 2010, Impact of Hybrid Cars on The Automotive Industry, viewed 22 April 2010, http://www.hybrid-cars-guide.com/impact-of-hybrid-cars-on-the-automotive-industry.html Lean Manufacturing Japan 2008, Toyota Production System, viewed 25 April 2010, http://www.lean-manufacturing-japan.com/interviews/toyota-production-system-part2.html Liker, J & Hoseus, M 2008, Toyota Culture: The Heart and Soul of the Toyota Way, Mc-Graw Hills Nielsen 2009, Toyota and Volkswagen Supply Chain Management, viewed 24 April 2010, http://www.docshare.com/doc/184644/Toyota-and-Volkswagen-supply-chain-management Spend Matters 2010, The Importance of Supply Base Localization for Toyota, viewed 25 April 2010, http://www.spendmatters.com/index.cfm/2010/02/15/The-Importance-of-Supply-Base-Localization-for-Toyota Toyota Land 2010, Toyota Assembly and Parts Plants, viewed 26 April 2010, http://www.toyoland.com/toyota/plants.html WikiInvest 2010, Automakers, viewed 23 April 2010, http://www.wikinvest.com/industry/Auto_Makers