Logistics management involves the practice of organizing the procurement, mobility, and handling of products, and parts. Morgan and Liker (2020), assert that a good logistics management system has to entail the completed inventory and the associated information transfer to optimize present and future revenue through cost-effective operations. Toyota has capitalized on effective supply chain management to ensure effective operations in its multiple (more than a thousand) subsidiaries globally. This presentation focuses on all dimensions of Toyota Motor Corporation’s supply chain management system.
Toyoda Kiichiro started Toyota, in 1933. The AA sedan, the company’s first passenger car, was introduced in 1936 (Sweeney et al., 2018). The division was renamed Toyota Motor Company, Ltd. a year later. In the mid-20th century, the company grew quickly and began exporting considerable quantities of cars to other markets. Toyota now has production lines and dealers in several different nations producing an average of 10 million vehicles yearly. Its subsidiaries make rubber and steel in addition to automobile items.
The ingredients used to manufacture various car models by Toyota are typical of the steel, iron, and aluminum materials used by vehicle manufacturers. However, the company has been innovating by considering high-strength materials to improve the quality of their cars (Morgan & Liker, 2020).
This includes electromagnetic materials for hybrid cars. The materials are categorized by the part involved such as the body, the powertrain, the engines, and the electronic parts. Steel is one of the commonly used materials, whereby the company applies cast and high-resistant steel, which is mainly non-thermal.
Competition is crucial for business as it aids in quality assurance and fair prices. Toyota is a renowned vehicle manufacturer facing stiff competition from other automotive manufacturers. Competition in the vehicle manufacturing sector has been significantly increasing, with each company innovating to increase competitiveness. Toyota’s main rivals include Ford, General Motors, Volkswagen, Hyundai, and Nissan (Morgan & Liker, 2020). Comparatively, Toyota has the best pricing and customer service strategies, giving it a competitive advantage. It falls below Ford and Volkswagen in company culture.
Supply Chain Strategy
A supply chain strategy is vital for every company’s the production and marketing management. The Toyota Motor Corporation has demonstrated the power of effective supply chain strategies in logistics and overall company performance. The Toyota Production System (TPS) includes all the processes that define product development, supplier relations, information sharing, and decision-making. According to Sweeney et al. (2018), such a supply chain facilitates risk identification and mitigation. Toyota’s supply chain strategy includes lean manufacturing and JIT strategies through capacity planning for operational excellence.
Toyota’s Supply Chain
An infographic of Toyota’s supply chain strategy shows the various processes followed by the company in acquiring materials, manufacturing, and delivering the products to customers. Since the company manufactures all types of vehicles from prepared materials and pre-fabricated parts, it has to deal with contact suppliers for all necessary products for producing desired cars. Most of the company’s suppliers are located outside the country, some in India and Denmark (Morgan & Liker, 2020). After sourcing the raw materials, the company manufactures vehicles and then distributes them for sale in its subsidiaries. The entire process is indicated in the infographic above, whereby border crossing shows the products are obtained from outside countries. This supply chain process requires continuous information sharing and financial accountability. The Lean and JIT manufacturing processes are crucial for ensuring no wastage of resources from sourcing to manufacturing.
Toyota has actively pushed for creativity and development in its information management systems by embracing new data processing technology and responding to external changes. Its information system can be divided into four segments depending on the role played. The warehouse management system is responsible for stock monitoring and control. The decision support system is probably the most extensive as it facilitates decision-making in all areas of the organization. It includes mobile technology, big data, and the internet of things (Morgan & Liker, 2020). The Toyota production and transaction systems entail just-in-time production and frequent conveyance for cost savings.
Cost-saving is also achieved through labor-management techniques. These four types of information systems work together to ensure efficient manufacturing and marketing processes.
Global supply chains are today’s integrated network of suppliers, producers, wholesalers, and merchants that span industries and geographical boundaries. A well-informed investment decision accompanied by good cost management can go a long way. Higher transport costs for final products and services are usually the result of poor supply chain design, inefficient routing, and inefficient resource deployment. Choosing the ideal supplier for Toyota’s supply chain deliverables is also a strategic decision that has a significant impact on total supply chain costs (Morgan & Liker, 2020). The logical move is for providers that can give the best product at the lowest possible cost and in the shortest amount of time. While inventory serves as a buffer for businesses against market volatility, it can also translate into significant expenses.
It’s far more typical to notice discounts on one channel than targeted price rises on another when it pertains to differential channel-based costing. Omnichannel retailers should have a single channel-based pricing strategy. In a nutshell, omnichannel retailing is a comprehensive strategy aimed at providing customers with a smooth experience (Morgan & Liker, 2020). Toyota determines prices using the market-oriented/differentiated pricing structure, which is based on current conditions and competitive prices. According to Morgan and Liker (2020), the great majority of Toyota products, including trucks, follow this pricing model. The company also employs a value-based pricing/ unified system, which determines prices depending on the product’s real and perceived value, for high-end items such as the Lexus vehicles.
Toyota employs personal selling through salespeople who directly market products to the target market at dealerships. Advertising is also used by corporations across a variety of media, including television, newspapers, and websites. Furthermore, the company uses public relations to market its products, such as the Toyota Together Green program, which supports sustainable projects (Morgan & Liker, 2020). Toyota’s brand image is enhanced through these public relations tactics. For corporate clients, the organization also uses direct selling on occasion.
For sustained operations and increased profitability, Toyota will have to make significant changes to its supply chain and logistics operations. Recently, the company expressed its intention to decentralize its operations and diversify its products for more revenue sources. Morgan and Liker (2020) note that the company plans to establish a testing facility for high-quality products. Since data plays a crucial role in production management, the company may move towards artificial intelligence and big data for risk identification and mitigation.
Although Toyota has been the number one vehicle manufacturer and seller, it should adjust its supply chain for sustained operations. Human operations are associated with delays, product damages, and loss. Therefore, it should apply technological solutions for automation. In addition, data mining and artificial intelligence could aid in data gathering and analysis, thereby facilitating strategic decision-making. Since it is ranked third regarding customer service, it can improve in this area. Lastly, the company should mitigate supply chain risks by adopting product monitoring strategies throughout the supply chain.
Morgan, J. M., & Liker, J. K. (2020). The Toyota product development system: integrating people, process, and technology. Productivity press.
Sweeney, E., Grant, D.B. & Mangan, D.J. (2018). Strategic adoption of logistics and supply chain management. International Journal of Operations & Production Management. (38)3, pp. 852-873. Web.