Introduction
Today, the Toyota Company has the best supply chain management framework many companies in the world use as a model and benchmark to implement their supply chain management practices. The best practices are based on Toyota’s supply chain management‘s lean thinking techniques.
The rationale is efficiency and lean thinking to achieve effectiveness and customer satisfaction. The purpose of this paper is to discover how Toyota’s supply chain management approach is implemented, the significance, and negative impact of the supply chain management practices.
Toyota’s Supply chain management, Isn’t It Obvious
It is obvious that the study raises questions on the meaning of supply chain management and how Toyota implements its supply chain management practices to position the company in the market and be globally competitive. In answer to the questions, supply chain management, in the context of lean thinking, embodies techniques and strategies to improve the operational efficiency and effectiveness in the production, supply, and delivery of products and services to the customers (Ohno, 1988, p.3).
Toyota operates on a global scale based on the concept of lean thinking in the steady stream of activities that contribute to the company’s supply chain management processes to optimize the production and delivery of vehicles to the global market (Huntzinger, 2002, p.23).
In answer to “how” Toyota does the supply chain management, it is critical to note here that Toyota’s company executives have all the secrets about the lean thinking techniques the company employs in its supply chain management. The key words “lean thinking” underlies the efficiency that defines Toyota’s supply chain management framework.
Flow system
Flow is a concept underlying Toyota operational efficiency and success. Here, the company ensures that any point in the production and supply chain framework that hinders any process is removed from the entire system (Drogosz, 2002, p.4).
The underlying model is to ensure that the production of different models of vehicles, the supply of materials required for the production of vehicles and the components needed proceed uninterrupted. In this case, a one-piece-at-a-time production process is facilitated creating a lean manufacturing and supply chain environment (Liker, 2004, p.4).
The way Toyota implements its supply chain management strategies is by facilitating the behavior and principles which facilitate production focused on long term results and not on short term gains (Drogosz, 2002, p.5). From the perspective of Toyota’s supply management framework, the flow concept forms the basis for the company’s success and enables the company to eliminate losses from the large inventory of unused equipment, products, and labor (Huntzinger, 2002, p.21).
In addition, the company’s cost per piece production system works by assigning specialized tasks to qualified employees and provides a separation of duties and responsibilities within the company framework, which contributes to the success of the company.
In this case, the products are made in quantities that are in demand. The benefits include short lead times and the making of specific products to address specific needs of the customer. To be lean, Toyota uses a tool that requires each employee’s commitment in eliminating wastes that leads to errors, injuries, and defects.
In addition, the necessary training, knowledge, and motivation are provided to workers by improving the workplace environment (Drogosz, 2002, p.4). The key elements in this approach are management commitment, appropriate training and development, and inculcation of organizational culture that supports the top management commitment and involvement to continuous improvements. In each case, problems could are brought to the surface and solutions to address the problems formulated on time.
Pulling from the customer
On the other hand, the concept of pulling from the back of the customer is a crucial component in Toyota’s supply chain management strategy. All the lean activities are integrated into the system where products are supplied according to the current need and use. Typically, the products are delivered in the right quantities and at the right time to the right destination. The logistics is crucial because it reduces the lead time and costs (Drogosz, 2002, p.4).
A question on the strategy the company uses to implement the pull from the back approach occurs. The answer is obvious. The underlying principle is the just-in-time (JIT). The principle provides the basis for material replenishment, minimal effort and warehousing inventory, based on what is taken by the customer to make small replenishments and ensuring responsibility in the day-to-day changes in the demand for products.
The solution is to integrate computerized information systems for inventory processing purposes (Huntzinger, 2002, p.22). The pull concept is crucial in the entire supply chain management process because the entire workforce uses stable and repeatable methods to ensure regular output, predictability, and timing which form the foundation of the pull and flow concept (Drogosz, 2002, p.5).
The question arises then, how is the lean concept realized in the supply chain of the company in the context of the pull and flow approaches? The answer is that the lean concept becomes a success by ensuring that wastes are eliminated in each phase of the supply chain cycle.
The company ensures that employees and the entire supply chain system is not overburdened (Huntzinger, 2002, p.17). All production and supply chain schedules are evenly distributed to minimize unnecessary burden on the system so that the work is evenly leveled.
Talk time
Talk time is one of the concepts that are the foundation of Toyota’s lean concept in the supply chain management exemplified in the way the management talk about the need to eliminate waste. The management ensures non-value adding activities are avoided to eliminate wastes to reduce lead time, excess inventory, and other delays.
It enables the company to avoid overburdening people and machinery which leads to quality and safety problems. The people are encouraged to talk with qualified and trained group leaders on the problems and challenges encountered and possible solutions to the problems.
Significance of supply chain management
One can learn the significance of supply chain management from the above discussion and the way Toyota undertakes the supply chain management process embedded in the lean thinking strategy. Supply chain is critical in the total management of each of the phases involved in the supply chain to eliminate wastes and ensure effectiveness and efficiency (Huntzinger, 2002, p.12).
In addition, supply chain is important because the management is able to identify and align effective inventory management, inbound transportation, material handling, warehousing, and transportation service procurement based on Toyota’s supply management lean thinking strategy (Huntzinger, 2002, p.5).
Toyota, through an effective supply chain strategy embedded in the company’s lean thinking concept has made the company grow in its revenue base (Bolles, 2003, p.3).
In addition, the company has experienced effective asset utilization, effective cost management and controls, and enhance customer product and service delivery. As discussed above, Toyota’s growth is strongly correlated to its supply chain management because perfect orders are given for the right market, with after sales services easily within reach of the customer (Huntzinger, 2002, p.7).
In addition, reduced inventory as stated above leads to working capital reductions where delays in the delivery of products and services are minimal or lacking completely. Investigations show that Toyota’s supply chain management strategy leads to fixed capital efficiency by optimizing the supply network leading to a global tax minimization and cost minimization. However, the negative side of supply chain management exists (Huntzinger, 2002, p.5).
Negative impact
Studies show the negative impacts include the risks resulting from the macro economic trends which have the possibility of magnifying the problems that arise because of the complex nature of the supply chain methods (Bolles, 2003, p.3). In addition, other problems include margin erosion and changes in consumer behavior and sudden changes in demand, which makes the supply chain management worse, and the lack of new technologies to absorb the sudden changes (Bolles, 2003, p.3).
Conclusion
In conclusion, Toyota’s supply chain management is embodied in the lean manufacturing concept developed by the company for efficiency and effective delivery of products to the market. The significance of Toyota’s supply chain management is valuable and acts as a tool for efficiency and effectiveness in product and service delivery. The key pillar of the effectiveness of Toyota’s supply chain management is the lean thinking concept which has many benefits despite the negative impact of the supply chain management.
References
Bolles, R. N. (2003). What Color Is Your Parachute? A Practical Manual for Job – Hunters and Career-Changers. Revised edition. Berkeley, CA: Ten Speed Press.
Drogosz, J. D. (2002). Applying Lean above the Factory Floor. Journal of Ship Production, 18 (3), 159-166.
Huntzinger, J. (2002). The Roots of Lean: Training Within Industry: The Origin of Kaizen. Target, 18 (1), 1-20.
Liker, J. K. (2004). The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. New York: McGraw-Hill
Ohno, T. (1988). Toyota Production System: Beyond Large-Scale Production. Portland, OR: Productivity Press.