BUSINESS CASE

University of Wollongong

IACT422

Case Studies in I.T.

Name Student Email

Joseph Baez 2387256 jsb16@uow.edu.au
Nurhazman Abdul Aziz 2666182 naa925@uow.edu.au
Tee Young Chew 2524272 tyc95@uow.edu.au
Hoh Whay Loh 2400431 hwl97@uow.edu.au
Cong Xue 2809217 cx850@uow.edu.au

Course Coordinator: Dr. Aditya K. Ghose

Tutorial: Wed 9:30am to 11:30am
Document: Group Case Study
Date Submitted: 19th August 2005
Executive Summary
The purpose of this case study is to analyse Toyota Motor Corporation of Australia’s
(TMCA) supply chain. It also focuses on how Information Technology (IT) is currently
being utilized to support its operations.

The history of Toyota since its introduction into Australia is covered in detail, followed
by a thorough description of the organisation’s current business and its context. Within
the case detail description the supply network is also analysed. These details include the
description of the upstream and downstream entities, and how procurement and selling
arrangements are done within the organisation. Material and financial flows, logistics and
shipping arrangements are also reviewed. Additionally details on the current
involvements of the organisation with any e-Marketplace are being highlighted.

Within each of the subcategories of the supply chain being discussed, each of them has
been provided with information of how IT is being utilised to support and improve legacy
supply chain operations. The strengths of the supply chain are being highlighted, while
discussing its weaknesses derived from the previous information.

In summation there is no perfect solution for any supply chain, as all legacy systems have
their own weaknesses. With the implementation of IT though, a large scale company can
come close to reaping the benefits of a solution that aims at excellence, but not
perfection.
Table of Contents

Introduction........................................................................................................................ 1
History of Toyota Australia.............................................................................................. 1
TMCA Timeline ................................................................................................................. 2
Toyota Australia’s Current Business............................................................................. 3
Business Context ............................................................................................................. 5
The basis of Toyota Australia’s supply network .......................................................... 7
Supplier Association .................................................................................................... 7
History of Supplier Association .................................................................................. 7
Effect of “knowledge sharing network” on supply chain coordination.................. 8
Intra-Plant Vs Inter-Firm.............................................................................................. 9
Upstream and downstream entities......................................................................... 11
Bundled Outsourcing ............................................................................................. 11
Logistic Challenge.................................................................................................. 12
Import of Vehicle Components............................................................................. 15
Upstream entities ................................................................................................... 16
Downstream entities .............................................................................................. 17
Internal entities ........................................................................................................... 17
IT solution for Toyota’s overall supply chain operation. ....................................... 18
IT Solution for Toyota Australia’s overall supply chain operation....................... 20
Downstream Sales Arrangements........................................................................... 22
Sales and Marketing Arrangements.................................................................... 24
Financial Management Arrangements................................................................ 24
Procurement Arrangements ..................................................................................... 26
‘Kanban’ – Card System ....................................................................................... 26
Toyota’s Material & Financial Flow.......................................................................... 27
B2B e-Marketplaces where Toyota Australia participates ................................... 32
Logistic & Shipping Arrangement ............................................................................ 35
Backbone of IT Solutions .......................................................................................... 38
Maximizing Information Exchange ...................................................................... 38
Network Structure................................................................................................... 39
The network is the company................................................................................. 41
Strength & Weakness.................................................................................................... 42
Strengths ..................................................................................................................... 43
Weaknesses................................................................................................................ 46
Conclusion....................................................................................................................... 47
Bibliography ................................................................................................................ 48
Introduction
Significant opportunities are being presented to the Australian automotive industry. Since
Toyota’s introduction, it has continued to make remarkable impacts on the Australian
marketplace. In spite of the size and complexity of the organisation, every minute detail
is transparent across the entire supply chain process. In being able to see these details,
errors become apparent which cause losses in productivity and efficiency, from the early
manufacturing stages right through to end customer satisfaction.

Given these losses, it is critical to fully analyze the supply chain to cite any inherent
weaknesses. What also needs to be determined is whether the implementation of
Information Technology has significantly contributed to the known strengths of the
legacy supply chain, and eliminated its inherent weaknesses.

History of Toyota Australia

Toyota Australia's origins go back to 1958 when Theiss Brothers began importing the
first Land Cruiser models for work on the Snowy Mountains Hydro-electric scheme.
Assembly of Toyota cars began in the Melbourne factory of Australian Motor Industries
(later AMI-Toyota) in 1963 and within a decade the Corolla and Corona (replaced by
Camry in 1987) were well established in the market1.

The commercial vehicle business became Theiss Toyota in 1971 and achieved
commercial leadership in 1979. Meantime AMI Toyota began investing in an engine and
stamping plant to consolidate its position as a high local content vehicle manufacturer.

In 1988 Toyota's local operations were unified to form Toyota Motor Corporation
Australia and work began on restructuring and strengthening the group as a major step

1 Toyota Motor Corporation Australia, (2005), ‘History’, Online, Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D922%2526sectionId%253D880 [Accessed
15 August 2005].

Page 1
towards achieving international competitiveness and building vital export business.
Within two years preceding 1995, Toyota Australia merged its vehicle production at its
new Altona plant in Victoria. The Altona plant began production in July 1994 and was
commissioned officially in March 1995 . 1

Toyota Australia currently builds two models – the Camry and Avalon series. It has
manufactured over 100,000 vehicles and over 80,000 engines at the Altona plant in 2003.
In this same year Toyota spent an estimated $1.6 billion on Australian companies
supplying locally made components for its Australian made vehicles. TMCA has become
a significant contributor to the Australian economy through direct and indirect
employment, capital investment and export revenue. Exports of Altona-manufactured
Camry vehicles have risen steadily and will approach 50,000 this year, making Toyota
Australia the nation's largest export manufacturer2.

TMCA Timeline
Below is a timeline for TMCA from 1958-2004:
Time Events Time Events
1958 First 13 Land Cruisers imported for 1992 One millionth locally-built Toyota
use on Snowy Mountains Scheme produced

1959 First Toyota Land Cruiser sold in 1994 Corolla is first car built at the new Altona
Australia Assembly Plant. Camry is the last car built
at Port Melbourne
1963 Toyota Tiara assembly starts 1995 Camry enters production at Altona
1964 Corona assembly begins 1996 First Camry export shipments to the
Middle East
1967 Crown assembly starts 1998 Altona plant receives ISO 14001
certification (Environmental Management)

2 Toyota Motor Corporation Australia, (2005), ‘Manufacturing’, Online, Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D878%2526sectionId%253D214,00.html
[Accessed 15 August 2005].

Page 2
Time Events Time Events
1968 Corolla assembly begins at Port 1999 Victorian Parts Distribution Centre opened
Melbourne at Altona

1978 First engines built at Altona 2000 Avalon production commences at Altona.
Toyota Australia appointed as national
Daihatsu distributor. New National Sales
and Marketing headquarters opened in
Sydney
1981 Altona begins volume production of 2001 The hybrid petrol/electric Prius launched
body panels in Australia. 100,000th Camry exported to
Saudi Arabia
1987 Camry replaces Corona at Port 2003 Toyota Australia's 300,000th vehicle
Melbourne Assembly Plant exported. Toyota overall Australian market
leader with industry record sales of
186,370 vehicles
1990 Lexus LS 400 launched in Australia 2004 Two millionth locally built Toyota
produced.
New corporate headquarters in Port
Melbourne opened
1991 Toyota becomes Australian overall
market leader

Source: www.toyota.com.au

Toyota Australia’s Current Business

Toyota Australia is the second largest vehicle manufacturer in Australia and one of
Australia’s largest manufacturing organizations. The main corporate and engineering
headquarters are based in Melbourne are assisted by wide-ranging sales and marketing
operations in Sydney. It has parts and automotive dealerships on mainland locations
nationwide, utilizing over 4500 people and many more employed in its supplier and retail
networks. As well as its locally manufactured models, it imports a wide range of sedans;

Page 3
hatch-backs; four wheel drives and business make vehicles. In fact, it has been
manufacturing automobiles in Australia for more than four decades3.

Toyota has exported over 60,000 cars to over 20 different commercial locations
worldwide, supplying left and right-hand drive Camry vehicles to South East Asia, the
Middle East, South Africa and Australasian markets. This strong overseas sales drive will
supply over AUD$1.4 billion dollars in revenue for Toyota Australia in 2003. To
compliment this, Toyota Australia also distributes and sells the Lexus range of vehicles,
as well as the Daihatsu and Hino series3.

In addition to its Melbourne operations, Toyota Australia maintains a comprehensive

sales and marketing operation in Sydney as well sales and distribution operations. Toyota
continues to make a major investment in the production plant at Altona and its operation
at Port Melbourne. These investments included a new automated press line, e-business
implementation, supplier tooling and equipment, and a new corporate business centre in
Melbourne4.

Toyota is a people oriented organization that sees the development of its staff as a
foundation stone for future business prosperity. In the Toyota Production System, the
manufacturing staffs are frequently encouraged to undergo continuous process on the job
training. As part of a global company, learning opportunities are often available and
encouraged. Furthermore, Toyota also has joint ventures with a number of education and
training institutes in Australia. In short, Toyota is working towards excellence in
organisation learning3.

3 Egan j., (2000), ‘Submission to Productivity Commission Inquiry into Post 2005 Assistance arrangements
for the automotive manufacturing sector’, (Online), [http://www.pc.gov.au/inquiry/auto/subs/sub039.pdf,
Last Accessed 15 August 2005].
4 Toyota Motor Corporation Australia, (2005), ‘Toyota Australia’, (Online), [Available:
www.toyota.com.au, Last Accessed: 15 August 2005].

Page 4
With the support of Australian government policy, Toyota Australia exports a total of
50,000 automobile, representing 55% of total Australian vehicle exports for the year.
This has made Toyota Australia’s largest vehicle exporter, shipping to 33 countries
worldwide and ensuring high quality standards in their products3.

In terms of supply chain, Toyota has long been recognized as one of the most efficient
manufacturers in the world. It has been proactive in working partnerships with its
suppliers to improve capabilities and increase local component sourcing. In addition,
Toyota and its first tier suppliers also have benefits on the introduction of lean
manufacturing into their operation. With a dedicated supplier development team in place
since 1989, Toyota has successfully implemented lean manufacturing, benchmarking
their Toyota Production System process5.

Toyota Australia plays an important role in the Australian automotive industry, as well as
the manufacturing industry. In terms of supplier capability development initiatives and a
major contributor to building skills, Toyota is a leader in the industry. In addition, it is the
second largest volume automobile producer and exporter.

Business Context
The business context of Toyota Australia is actually link to the operating environment
that consists of a number of factors. They are as follows3:
• The global industry operating environment;
• Automotive investment trends;
• Policy environment;
• International market access;

5 Toyota Motor Corporation, Manufacturing, “Toyota Production System”, (Online), [Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D905%2526thirdId%253D1005%2526secti
onId%253D214,00.html, Last Accessed:15 August 2005].

Page 5
 • Australian industry operating environment; and
• Government policy environment.

Over the past five years, the global automotive industry has undergone a significant
restructuring in their business context. A number of automobile companies have merged
into six major production groups to benefit in terms of resource availability. The
component supply industry has also seen consolidation by the automobile makers of their
component making subsidiaries . 1

In terms of the automotive investment trends, the dominant companies in the industry are
usually the Japanese, German and United States companies. Investment decisions are
usually based of increasing integrated global strategies, as these companies coordinate
brands, product portfolio and supply chains with investments in production, engineering,
R&D and design that are distributed across every continent. Moreover, a recent
development can be seen in the investment of the industry into the China market. This is
due to potentials in its infrastructure, and also to allow important access to international
market opportunities. To provide sufficient volume to vehicle and component
manufacturers and to exploit scale and scope economies though, an export market is
required. Government policy too has had changes over the past five years upon the
Australian automotive operating environment, having a significant impact in the industry . 1

In summary, Toyota Australia has to consider these contexts that affect the growth of the
operation here in Australia. It is not just a part as a matter in the current business process
or the mass production, but also the business context that summaries the profitable and
growth of the company, as well as the industry. As an aside point, Toyota too has taken
the initiative to develop many innovative systems from the current Toyota Production
System to compete against other companies. With the rapid increase of globalization and
rapid technology, Toyota Australia has to be up to date with its competitors, from the raw
materials suppliers, right across to the sales of its end products.

Page 6
The basis of Toyota Australia’s supply network

Supplier Association
The key to Toyota’s success would appear to be their highly effective supplier integration
process that over the past 50 years has enabled the excellence of their internal hoshin
kanri strategic management, cross functional process based management and Toyota
Production System to be shared directly with their direct suppliers. In addition, over time,
as the supplier integration system has been taught to their suppliers the excellence in
performance was then outsourced to second and over time lower tier firms6. The primary
method to do this has been the kyoryoku kai or Supplier Association.7

History of Supplier Association

A Supplier Association may be defined as a mutually benefiting group of a company’s
most important suppliers brought together on a regular basis in order to achieve strategic
and operational alignment through the development of awareness, education and
implementation programmes designed to achieve both radical and incremental
improvements. The first Supplier Associations had their roots in the late 1930s Japan and
have from that time on been generically called kyoryoku kai (or Cooperative Association)
in Japan after the original grouping of around 20 of Toyota’s suppliers who formed such
a group in 1939 . 7

During 1970s, the original Toyota group was widened to include tooling and capital
equipment suppliers with a fully developed multi-tier cascading Supplier Association in
place by the late 1980s involving nearly all of the key suppliers to Toyota in their 1st, 2nd
and 3rd tiers of supply. The most recent development in the 1990s has been the creation

6 Dimancescu D., P. Hines & N. Rich (1997) The Lean Enterprise: Designing & Managing Strategic
Processes for Customer Winning Performance, AMACOM, New York
7 Hines, P., Rich, N. Outsourcing Competitive Advantage. (Online)
[http://www.cf.ac.uk/carbs/lom/lerc/centre/publications/downloads/outcompad.pdf#search='Outsourcing%2
0Competitive%20advantage', Last Accessed: 16 August 2005].

Page 7
of overseas Supplier Associations based around Toyota’s overseas facilities such as the
Suppliers Associations developed by the American and English plants and Australia
(Altona) . 7

Effect of “knowledge sharing network” on supply chain

coordination
Toyota has a system to increase its suppliers’ involvement, share valuable knowledge,
and prevent free riders in its supply chain8. It was found that in the Toyota system, the
suppliers were developing a “dynamic learning capability” that improved their
competitive capabilities. This type of network – a network where manufacturers and
suppliers are highly involved in the interactions and learning – is referred to as
“knowledge sharing network.”9 The effects of knowledge sharing network on the
coordination of supply chain and product customization forms the basis of Toyota
Production System (TPS). Toyota believes it has much to gain from developing strong
ties amongst its suppliers and creating and sharing new knowledge to increase the
efficiency of the entire TPS. The aim is to have members identify themselves as part of
an interdependent economic network.10

8 Dyer, J. H and K. Nobeoka (2000), “Creating andManaging a High-performance Knowledge Sharing

Network: The Toyota Case,” Strategic ManagementJournal, Vol. 21, 2000, pp. 345-367.
9 Kim, K., Im, I. The Effect of Electronic Supply Chain Design (e_SCD) on Coordination and Knowledge
Sharing: An Empirical Investigation. Proceeding of the 35th Hawaii International Conference on Systems
Sciences, 2002.
10 Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press, Inc.,
Pg. 10-20

Page 8
 Lean Production Plan (Value-Carrying Information Cycle)

Intra-Plant Vs Inter-Firm
Lean production, which was originally introduced by Toyota Motor Corporation
(Womack, Jones, & Roos, 1990), derives its strengths from two sub-systems: intra-plant
(mainly shop-floor) organization and inter-firm relations with key CPA (Components,
Parts, and Accessories) suppliers. Automobiles are highly CPA-intensive assembly-based
products. Many of these CPAs are specific to particular car models, which are highly
differentiated in color and engineering design. Yet, because of a single firm's limited
scale of operations, Toyota cannot afford to completely monopolize their suppliers,
Toyota use the CPA procurement practice called "design-in" or "black-box" supplier
engineering, where they closely collaborate on new model development with their
suppliers from the outset.11 Thus, they in effect purchase their suppliers' soft engineering
capabilities, rather than simply their hard final components.

11 Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press, Inc.,
Pg. 129-172

Page 9
 Parts Sourcing Systems
Source: Fujimoto: The Evolution of a manufacturing System at Toyota12

Once key CPAs are collaboratively designed and engineered, they are delivered just-in-
time for final assembly. The contracts are long-term, and assembler-supplier transactions
are guided by trust and pursued to the mutual benefit of both parties.

Toyota has its own primary suppliers of key components. But those CPAs which are
more standardized (i.e. lower asset specificity) will be catering simultaneously to all the
local assemblers to gain scale and scope economies. Even if some CPAs are assembler-
specific in design and engineering, flexible production (e.g. multi-purpose robots and
adaptable manufacturing techniques, such as fabricating a variety of differentiated CPAs
on a given assembly line) can still accommodate considerable diversity in upstream
supplier products.

12 ibid

Page 10
Upstream and downstream entities
As previous stated, Toyota’s success appear to be their highly effective supplier
integration process. Although Toyota Motor has created Overseas Supplier Association in
Australia, to enable the development of multi-tier Supplier Association, this move by
Toyota however do not allow the supply network of Toyota Australia to work identical
as the supply chain in Japan, which thus changes the whole supply coordination. After a
series of research, few critical factors were identified. They are as follows:

Bundled Outsourcing
One of the important characteristics of Toyota Japan suppliers system in terms of the
inter-firm tasking portioning is that the outsourcing ratio is high not only in
manufacturing but also in product development. A firm can assign the product
development and production jobs of a given component to one company (e.g. a
technologically capable supplier) or to two or more separate companies.13 One good
example will be the use of black-box system to produce the whole engine before sending
it to the final assembly line. However in the case of Toyota Australia, production of
engines are manufactured in-house, which includes many of the engine parts including
cylinder blocks, pistons, cylinder head covers, exhaust manifold and bearing caps in their
Alton’s Manufacturing plant.. Additionally, bumper bars, door trims, fuel tanks and trim
fabrication are also manufactured by Australia, however by their Port Melbourne plant
which is brought to Alton for assembly of the vehicles. Above the former, parts such as
cylinder block castings, is sourced from external suppliers14.

13 Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press, Inc.,
Pg. 10-20
14 Toyota Motor Corporation, Manufacturing ( Online)
[http://www.toyota.com.au/corporate/articles/0,2862,subId%253D878%2526sectionId%253D214,00.html,
Last Accessed:15 August 2005].

Page 11
From above mentioned, it can be seen that there is a difference in terms assembly process
and the level of hierarchy in supplier. Without bundled Outsourcing, it has first changed
the internal process of the supply chain and most importantly, the number of first tier
suppliers decreases and many of the suppliers ascended to the higher tiers and the
hierarchy of the parts markers.

Logistic Challenge
In Japan, Toyota’s plants and those of many suppliers have been clustered near ‘Toyota
City’. Even suppliers located greater distances from a Toyota plant have been situated
along a narrow delivery corridor. Thus, in Japan, suppliers made frequent, small batch
deliveries, with orders shipped from individual suppliers typically arriving as often as
once an hour. For large or frequently used parts, trucks hauled supplies directly between
the supplier and the customer. For smaller or less frequently used parts, ‘milk-run’15
trucks followed looped routes, made quick, frequent stops, and picked up small batches
of parts at several suppliers before delivering orders to the Toyota plant.
One advantage of localization is closer relationships facilitate collaborative problem
solving. When a problem is discovered, a problem-solving team comprised of buyer and
supplier personnel comes together to identify the root cause, brainstorm a resolution, and
take action. Joint problem solving also can mitigate the impact of an unexpected disaster.
For example, when one of Toyota’s suppliers in Japan suffered a catastrophic fire that
burned a key facility to the ground, a joint problem solving team was quickly mobilized
to get a critical valve back in production. The factory had been the only source of the
valve and Toyota Japan only kept four hours worth of inventory on hand. As a result of
this joint problem solving, Toyota's auto assembly plants were back on line within a
week.

15 A routine trip involving stops at many places. The ‘milk-run’ approach increased the frequency and
reduced the batch-size with which individual suppliers delivered without compromising truckload
economics.

Page 12
 Time taken for Assemble back on line
Source: SMR, WSJ

In Australia, in contrast, Toyota has only one manufacturing plant. Building the network
of 97 suppliers, were geographically dispersed (i.e., some close to Altona plants but some
not). Therefore, direct, point-to-point, daily order-shipments from each supplier the plant
were not feasible, nor were milk-run routings in many instances.

“Kanban”= Card (Japanese)16

16
Reimer K. (2003), Advance Supply Chain Coordination (Lecture Presentation), University of
Melbourne, (Online), (http://www.dis.unimelb.edu.au/staff/kai/slides/week8.ppt), Last Accessed: 19
August 2005.

Page 13
The mechanisms for ordering supplies were therefore different, however, because of the
longer travel distances between Toyota’s plants and those of its suppliers. Longer supply
lines required faster order processing, and this was done electronically. Essentially,
electronic kanban cards were identical in function to the physical kanban cards used by
Toyota in Japan. For example, a batch of electronic cards (a) was the sole means of
requesting new parts, (b) was sent for every order shipment, (c) went to a specific
supplier plant, and (d) established the mix and volume criteria for assessing if an order
was correct.

Page 14
PARTS TOYOTA
SUPPLIER (TMCA)
Material Requirements Forcast
Orders
Planning ANSI X12 830 Planning Forecasts

Kanbans
Kanban
Delivery Docket
Sorting Production
Line
Despatching Goods

Kanbans

Delivery Docket Receiving

Accounts Remittance Advice Accounts

Receivable EDIFACT REMADV Payable

EFT EFT

BANKING
SYSTEM

Electronic Kanban Cards System 16

Import of Vehicle Components

Toyota Japan is one of the world‘s leading automakers, offering a full range of models,
from mini-vehicles to large trucks. Global sales of its Toyota and Lexus brands,
combined with those of Daihatsu and Hino. Besides its own 12 plants and 11
manufacturing subsidiaries and affiliates in Japan, Toyota Japan has a massive group of
suppliers, supplying Japan components for its domestic made vehicles. However in the
case of Toyota Australia, only 79 per cent of components are local content, with the
balance relying on imports. This has been highlighted as one of the critical factors in
terms of supply chain due to the fact the it affects the supply chain coordination as well
as the upstream entities.

Page 15
Upstream entities
At current, Toyota Australia has an extensive local supplier base from its 98 component
suppliers and 300 general suppliers. In general, suppliers may be broadly classified into
three categories:

• Parts suppliers (Key component/ low assets specificity component)

• Raw materials suppliers
• Suppliers of equipment and tools

These companies were predominantly manufacturers of tires and rubber parts, glass,
paint, batteries, electronic parts, bearings and brake systems. By contrast, suppliers which
have remained members of a single association tended to be locally based single-
establishment companies in mechanical engineering. Additionally, components such as
bumper bars, door trims, fuel tanks and trim fabrication manufactured at their Port
Melbourne plant are also considered part of the upstream entities as they are brought to
Alton plant for assembly of the vehicles.

Toyota was particularly successful in outsourcing a major part of its competitive

advantage to its network of direct and indirect suppliers. This performance is partially
explained by the supplier associations as previously mentioned. In Toyota Australia,
production relies heavily on sub-contracting. The firm deals directly with their 98
components suppliers and 300 general suppliers who themselves deal in turn with their
lower tier suppliers. Over time these associations have developed to involve almost all
Toyota suppliers in the first, second and third tiers of supply. While encouraging such
associations, Toyota is not necessarily involved in their day to day functioning. Instead,
leadership is delegated to important direct suppliers.

The kyoryoku kai promotes integration activities among members such as top
management group meetings, quality awards and audits, and tries to achieve thereby a
better coordination through information exchanges. Such flows of information were not
present at that scale in other forms of supplier-buyer relationships and should be viewed

Page 16
as the key factor explaining Toyota achievement. As argued by Baiman and Rajan
(2002), the amount of information exchanged among subcontractors is what really
distinguishes supplier networks from more traditional arm's length relationships.

Downstream entities
In general, Toyota Australia has the following downstream entities:

• Warehouse facilities in all major states

• Distributors in all major states
• Dealer network of over 285 outlets across Australia

Additionally, downstream entities comprises parts distribution centre in Sydney and

Melbourne and a storage distribution complex situated at Woolooware.

Internal entities
Toyota builds two models - Camry and Avalon - in Australia. The fully integrated Altona
manufacturing plant incorporates state-of-the-art weld, paint and assembly shops to
produce cars that have been independently recognised as Australia's best quality locally
built vehicles. To build a car, the internal entities of the supply chain which includes all
of the in-house processes used in transforming the inputs from the suppliers are as
follows:

• Production of Engines (Once completed, the engines head straight for the final
assembly)
• Pressing of steel panels and parts
• Welding of car shells
• Painting of car shells
• Final Assembly

Page 17
 Parts/Service Customers
Centers
Dealers

Overseas Distributors
Network
Import / export

Altona Assembly Plants

Components Warehouse Assembly

Supplier Group
Paint Engine
•Key Components
Production
•Low Assets Specificity
Wielding
Components
•Equipments & Tools
Pressing
•Port Melbourne Plant
Manufactured Components

Raw Material
Suppliers

Legend: Up Stream Internal Downstream

Supply Chain of Toyota Australia

IT solution for Toyota’s overall supply chain operation.

Toyota Australia’s parent’s company, Toyota Motor Corporation (TMC), is Japan’s
largest vehicles manufacturer and one of the largest automotive companies in the world.
As of December 2004, outside Japan, Toyota has a total of 51 overseas manufacturing
companies in 26 countries / locations. Toyota markets cars worldwide through its
overseas network consisting of more than 160 importers / distributors and numerous
dealers. At current, to support their operation worldwide in terms of building tighter
collaboration links among manufacturers of Toyota Group, OEMs manufacturers,

Page 18
suppliers, distributors worldwide, Toyota is current supported by the SAP automotive
suit17 Enterprise Resource Planning (ERP) system.

With the current SAP automotive suit, outstanding strategic, operational, financial and
marketing position gains have been achieved by Toyota that have embedded the lean
philosophy, principle, practices, tools and methods of the Toyota Production System
(TPS) into their integrated IT systems. Gains ranging from factors of three or more in
sales per employee, profitability, free cash flow and a superior market position, among
other performance indicators, have been acknowledged in Toyota with revenues from
tens of millions to billions of dollars.18 This system hence acts as one of the main means
of information flow between Toyota Australia and its counterparts worldwide.

17 SAP, “Toyota Motorsport Accelerates Formula One Operations with SAP” (Online)
[http://www.sap.com/solutions/businesssuite/plm/newsevents/index.epx?pageview=print&pressid=2462,
Last Accessed: 15 August 2005].
18 Terence, T., Thomas, E., Building the Lean Extended Enterprise Through Adaptive Supply Chain
Networks, The Center for Excellence in Operation, Inc., Special Research Report.
(Online)[http://www.sap.com/industries/hightech/pdf/BWP_AR_Building_the_Lean_Extended_Enterprise.
pdf#search='CEO%20special%20research%20report', Last Accessed: 15 August 2005].

Page 19
 Toyota Group Worldwide
Source: Toyota Website

IT Solution for Toyota Australia’s overall supply chain operation

At current, while Toyota Australia has the main SAP Automotive suit ERP system, this
however could not allow them to be connected to their numerous partners in the value
chain via an assortment of systems, including some proprietary technologies.
Understanding that modern production methods, which depends on many independent
suppliers, and just-in-time delivery requires them to manage an increasingly complex
value chain, Toyota Australia commenced a major revamp of its operation, known as the
ebusiness Transformation Program in 200419. This program, designed to integrate the

19 BEA Systems, Inc, Press Release: Toyota Australia Selects BEA WebLogic Integration 8.1 as
Foundation for eBusiness Transformation Program. (Online)

Page 20
systems and processes that connects Toyota Australia and its trading partners, with the
goal of achieving real-time information access, enhanced tow-way visibility and
improved performance through all of its processes and those of its partners.20 To drive
out costs and enable a smooth transfer of data along the entire value chain within
Australia, BEA Weblogic Integration 8.1 was selected due to BEA’s aggressive support
for open standards. Another advantage of implementing BEA Weblogic Integration 8.1
was that it has the ability to implement existing business logic, such as that within the
SAP automotive suit.

The current BEA software has the following function21:

• Electronic proof of delivery
• Online accounts payable status for suppliers
• Fleet management integration
• The Toyota Vehicle Order Processing System (TVOPS)
• Advance Shipping Notice for vehicle deliveries
• Vehicles inventory synchronization

With a mover towards open-standards, the value of data collected is increase because it
can be shared between projects.

[http://www.bea.com/framework.jsp?CNT=pr01121.htm&FP=/content/news_events/press_releases/2003&
WT.si_n=PR1, Last Accessed: 15 August 2005].
20 BEA Systems, Inc. Whitepaper: Toyota Australia eBusiness Transformation Program.
(Online)[http://www.bea.com/content/news_events/white_papers/BEA_ToyotaAustralia_cs.pdf, Last
Accessed 15 August 2005].
21 BEA Systems, Inc. Case Study:Toyota Australia Drives Out Cost and Increase Visiblilty with BEA
Solution for Dealers. (Online)
[http://www.bea.com/content/news_events/white_papers/IDC_ToyotaAustralia_cs.pdf, Last Accessed: 15
August 2005].

Page 21
 International
collaboration

Raw Material
Suppliers
End Customer

SAP/BEA Dealers
1st Tier/ 2nd Tier
Suppliers

Manufacturing Warehouse/
Plants Parts Centers

Supply Chain Collaboration with IT Solutions

Downstream Sales Arrangements

Toyota Motor Corporation of Australia’s (TMCA) downstream sales arrangements, in
particular the agreements in place with existing dealerships are done via strict selling
arrangements. No customers, corporate or otherwise, can purchase a new car, or fleet of
cars, directly from TMCA but must purchase from an authorised Toyota dealership; this
purchasing arrangement is also the same for the sale of Toyota Genuine parts.

Another downstream procurement arrangement is the method by which unavailable stock

can be obtained from other vendors. This is done via a method called ‘transfers’. For
example, when a customer wishes to buy a fleet of cars and the required number of stock
cannot be obtained in time by that dealership, they will check the amount of stock that
other dealerships have of the required product and initiate a transfer of the amount of
vehicles necessary to maintain the sale.

Page 22
Internal arrangements can be made for Toyota customers to access disintermediary
resources by allowing them to see where their requested product is located in the internal
manufacturing process. Using a login and password assigned to them by dealership staff,
they can access their confidential product information to see what country, and even the
shipment details of the product being delivered.

These sales and related financial transactions are maintained via a customised BEA
application. This enables any Australian dealership’s financial managers and accountants
to keep track of all purchases and transfers made within the TMCA internal supply chain.

Customised BEA Application

(Courtesy Toyota Financial Services Australia)

Page 23
Sales and Marketing Arrangements
Marketing arrangements such as paid agreements between the purchasing of advertising
space on radio, television and other related media is also monitored via the customised
BEA application. Orders for ongoing promotional material required for maintaining
regular and ongoing flow of customers such as signs and massive advertising banners are
tracked transparently via this application.

Sales and Marketing Functions on BEA Application

(Courtesy Toyota Financial Services Australia)

Financial Management Arrangements

Regular marketing instructions for showroom staff can be broadcasted via this same BEA
system. This covers such information as the arrangement of showroom promotional
material, changes to pricing structures that change with each promotion, as well as

Page 24
information about product recalls and what needs to be told to customers in the event of
such unforseen circumstances.

Financial arrangements between customers and dealerships can also be monitored with
BEA, such as ongoing repayment information that is unique to each client. Credit
checking and other financial assessment tools are also available from this system.
Customised payment options between clients with special needs such as corporations
who purchase fleet vehicles can be modified to suit their needs.

Financial management functions from BEA Application

(Courtesy Toyota Financial Services Australia)

To compliment the ongoing requirements of dealership sales staff, customers have access
to summarised confidential information that is relevant to their purchase. Customers have
access to a web front-end to the BEA’s data via an individual assigned login and
password. These assigned customer details allows a mutual exchange of relevant

Page 25
information for customers for the duration of their purchase as well as extended web
based information services for their duration of the ownership of their Toyota vehicle.

Procurement Arrangements
Procurement for specific upstream components not manufactured in Australia that are to
be added to a car on an Australian assembly line can only be purchased by TMCA via its
parent company Toyota Motor Corporation (TMC). Exporting and importing
arrangements of Toyota genuine parts are government regulated which is considered to
be a barrier to trade22.

‘Kanban’ – Card System

The mechanisms for ordering supplies in Australia are different differ to those of
Japanese plants mainly because of the longer travel distances between Toyota’s plants
and those of its suppliers. Longer supply lines required faster order processing, and this
was done electronically. Essentially, electronic kanban cards were identical in function to
the physical kanban cards used by Toyota in Japan. For example, a batch of electronic
cards (a) was the sole means of requesting new parts, (b) was sent for every order
shipment, (c) went to a specific supplier plant, and (d) established the mix and volume
criteria for assessing if an order was correct.

22 Submission to Productivity Commission Inquiry, May 2002

Page 26
PARTS TOYOTA
SUPPLIER (TMCA)
Material Requirements Forcast
Orders
Planning ANSI X12 830 Planning Forecasts

Kanbans

Delivery Docket Kanban

Sorting Production
Line
Goods
Despatching
Kanbans

Delivery Docket Receiving

Accounts Remittance Advice Accounts

Receivable EDIFACT REMADV Payable

EFT EFT

BANKING
SYSTEM

Electronic Kanban Card System

Toyota’s Material & Financial Flow

In a related research paper (as paraphrased from the “Managing Material Flow and Cash
Flow in the Value Chain”, Racheal Zhang), the production decisions (e.g., the
production’s schedule and quantity, ordering’s schedule and quantity) and financial
decisions (e.g., the payments) are interrelated in a value chain.23 Here, production is
defined as the core value-added activity of the firm and needs purchased raw materials,
equipment and labour which depend on money, while the finance is responsible for
generating capital and investing the firm's assets efficiently and effectively in the
company.9 Therefore, the production and financial decisions are required to be decided
simultaneously, including the internal material flows as well as material flows through
the supply chain. In the case of Toyota, they have approach both materials and financial

23 Zhang, R (1998), Managing Material Flow and Cash Flow in the Value Chain, (A Research Project By
Value Chain Program University of Michigan), Online, Available:
http://www.engin.umich.edu/VCAP/index.html [Accessed August 17, 2005]

Page 27
flow in a new revolutionised way, making Toyota one of the best production factory in
the industry.

The success of Toyota’s material and financial flow lays in their Just-in-Time (JIT)
system, which is distinctive in applying the concept of the "right part at the right place at
the right time" throughout its manufacturing system and supply chain.24 In another
words, JIT is actually consider a means of controlling material flows through linear
process, as these concept is a result of using the kanban.25 However, from the
understanding of the Kanban’s details, a product is being in place and will follow through
a specified production pathway. In addition, material will be automatically ordered and
travel directly from the suppliers to the customers, without first going through a
centralised store. In short, this explains the core operation of the Toyota Production
System, in collaboration with the Lean Systems Thinking.

24 Liker, J (1998), Manufacturing and Suppy Chain logistic Strategies for Mass Customization, (A
Research Project By Value Chain Program University of Michigan), Online, Available:
http://www.engin.umich.edu/VCAP/index.html [Accessed August 17, 2005]
25 Blakemore J, (2002) Maximising profit with Short Production Runs … Lean Systems Thinking, Online,
Available: http://www.blakemore.com.au/ [Accessed August 17, 2005]

Page 28
 This diagram above illustrates a Lean system works, resulting in smoother material
flows.26

Basically, the objective of the Lean System, adopted by Toyota is to introduce a pull
system with a short lead-time, comprising two main components. They are valued added
and non-valued added time, where value added is run time on a machine and latter is the
storage time, setup time, idle time, breakdown, inspection time etc. Thus, Australian
companies is able to win by being more skilful, flexible in tapping the full creativity as
they apply the rules of Lean to all the processes and system. On the beneficial side, IT
companies, such as SAP and Oracle is able to present an opportunity to help in rectify
this solution further. Moreover, to optimize supply, first establishment agreements with
raw material suppliers have to be set. Software such as Vendor Managed Inventory or
B2B connections will have in this process to minimize inventory and risk, taking in the
consideration for continuous flow matching supply with real demand . 26

26 Strategos-International, Toyota Production System & Lean Manufacturing, Online, Available:

http://www.strategosinc.com/toyota_production.htm, [Accessed August 17, 2005]

Page 29
In an article report, Toyota Australia has been progressing its eBusiness. This is an effort
to move the company’s main business processes into an extensible online environment.27
For instance, the Melbourne’s manufacturing plant have been using BEA WebLogic
Workshop Technology to build Java and Web services-based applications, that will allow
manufacturing partners (suppliers) to interoperate with Toyota’s. With the aid of the BEA
technologies, Toyota’s system will allow information to flow smoothly between the
integration of it operating system, increasing the functionality of the existing ones. One
of the benefits, is the fleet management integration (the Toyota Vehicle Order Processing
System) notifying for vehicle deliveries and a dealer interface that allow dealers to
receive automatic updates from Toyota‘s SAP system regarding of vehicle production
and delivery.28 Thus, this demonstrates that BEA systems which explained earlier.

Basically, with the implementation system of BEA Weblogic and the SAP’s architecture,
Toyota is able to shift the transition from a mass-production material-handling system to
a lean system. This is more reliable in supplies purchased parts to continuous-flow cells,
small-batch processing, and traditional assembly lines with the plant. The benefits of a
lean material-handling system include : 28

• Fewer material handlers

• Fewer equipment (forklift, heavy machines)
• Higher plant inventory turns
• Higher production output
• Less time spent by operators retrieving parts
• Less overtime
• Less expedited delivery costs.
• Less inventory

27 Brace D (2005), Driven to action, Managing Information Strategies, Online, Available:

http://www.misweb.com/magarticle.asp?doc_id=23045&rgid=2&listed_months=0, [Accessed August 17,
2005]
28 BEA Case Study, (2003) Toyota’s Australia eBusiness Transformation Program, Online, Available:
http://www.bea.com/content/news_events/white_papers/BEA_ToyotaAustralia_cs.pdf, [Accessed August
17, 2005]

Page 30
Furthermore, in the developing of the plan for every part to be manufacturing the product,
the basic database will fosters accurate and controlled inventory reduction and
continuously improving of a plant’s material-handling system. The system to will be able
to operate a market that eliminates the waste of hoarding, searching for parts, and storing
inventory throughout a facility. In addition, it is able to design delivery route changing
the plant into an organised community, where operators get the parts they need, when
needed and in the quantity needed.

While the financial flow of the system will consist the methods of payments and other
financial aspect between the suppliers or customers and Toyota, In this case, Toyota
Australia has adopted CommSecure to acts as an intermediary in the direct debit process,
in using of CommSecure method of handling personal and small business lease and loan
payments. This move has motivated a desire to give customer to drive to the Toyota
website to view informational and marketing messages, and cost savings. Moreover, the
system handles the traditional form of direct debit, as well as flexible customer initiated.
The data integrity is also transferred between two companies via a Secure Socket Layers
(SSL) connection with 128-bit encryption. This is another channel of Toyota handles
regular payments from her customers, reducing the number of late payment and is
relatively affordable29.

Another approach that Toyota Motor Sales has moved a milestone, when they started to
be upgraded their Web portal with the assistance of Microsoft Consulting Services. One
of the highlights, it enables dealers to work more closely with other corporate subsidiaries
such as Toyota Financial Services. For instant, when a customer wants to finance a
vehicle, dealerships can submit a loan application based on already captured customer
data through Dealer Daily to Toyota's financing system (which utilizes an Oracle
database running on UNIX). Furthermore, this will enables Toyota to respond with an

29 Wither S, How to integrate hosted applications, Technology Business Magazine, Online, Available:
http://www.zdnet.com.au/insight/business/soa/How_to_integrate_hosted_applications/0,39023749,3916091
7,00.htm [Accessed August 17, 2005]

Page 31
offer in as little as 15 seconds and increasing the chances that Toyota will win the
customer's financing business as well. This system is actually used in the United Stated.
And, in Australia it is towards CommSecure’s products30.

B2B e-Marketplaces where Toyota Australia participates

According to Toyota Australia’s report to the Productivity Commission Inquiry in 2002,
Toyota participates with up to 98 key component suppliers and 300 general suppliers . 1

The Business to Business (B2B) e-marketplace has emerged as a means of connecting

buyers and suppliers31. Suppliers are able to look for opportunities to grow their business
and expand their customers’ base on a platform, which is able to provide the abilities to
improve the purchasing processes and the supply demand. Basically, an B2B e-
Marketplace is comprised of three main functions, as defined by Turban32:

• Matching buyers and sellers

• Facilitating the exchange of information goods, services and payments associated
with market transactions
• Providing an institutional infrastructure, such as legal and regulatory framework,
that enables the efficient functioning of the markets

30 Microsoft Customer Evidence, (2004), Toyota Motor Sales, Web Portal Saves Toyota and Dealers
Millions Per Year and Accelerates Delivery of New Business Value, Online, Available:
http://www.microsoft.com/resources/casestudies/CaseStudy.asp?CaseStudyID=14987, [Accessed August
17, 2005]
31 Dubbles. J, Eggebraaten, Nowicki, Jeff, Prentice J. (2001) Connect for iSeries with WebSphere
Commerce Suite, Available: IBM Redbooks, [Accessed August 15, 2005]
32 Turban. E, (2004), Electronic Commerce - A Managerial Perspective, Pearson Education, New Jersey,
USA.

Page 32
With the three main functions above, B2B e-Marketplaces operates similar to a physical
markets, where it in included further an electronic transactions that fetch about a new
distribution of goods and services. In addition, the intermediaries in e-Marketplace has
lead towards two types of services obtain. Firstly, they provide relevant information
about demand, supply, prices, aiding match sellers and buyers, following the second
service to offer value-added services such as consulting and assistance in finding a
business partner. Moreover, these services can be fully automated, providing low
commission services, benefiting both parties.

Supplier Manufacturer Warehouse

Supplier
Sub Service Retailer
Supplier
Buyer

A. Traditional Process

Technology Other Services Logistic Delivery

Supplier Buyer

Consultant Buyer
Electronic
Hub
Logistics Bank Payment

Sub Supplier Support Manufacturers

B. Hub-Based Chain

Changes in the Supply Chain (Turban. E, 2004)

Page 33
In the case for TMCA, a new e-Marketplace, called iStarXchange, was constructed for
the automotive replacement parts industry in 2000 to reach. Toyota has predicted that its
new e-business initiative with i2 Technologies Inc. will revolutionized further the
automotive market reaching all their distributors and suppliers with a vast scope and
setting up as a leader in the B2B e-Market area. Hence, in reality, due to the process for
dealers, installers and independent auto parts shops and service centre are an expensive,
time consuming and often a frustration for both aftermarket business and vehicle’s
33
owners, who has to wait for the right part to arrive. In addition, this marketplace had
grew out from the existing relationship with i2 to streamline Toyota’s own auto parts
supply chain, unlike Ford Motor Co or General Motors Corp., which are building
marketplace for their suppliers only.

In fact, Toyota has created a market for the entire market industry. This would allow
subscripted members able to view a single catalogue with information on parts, checking
the prices and availability and conduct transaction online, tapping into the tools for
forecasting supply and demand and delivery cycle of a supply chain.34 Thus, by
optimising the inventory through improved forecasting and enhancing the planning,
deployment and replenishment of the inventory.35

Through the venture, with i2, they have choose to used the TradeMatrix system,
providing the software, implementation and support, as well as host and manage the
36
venture. Further, i2 will streamline the system to automate the site’s inventory

33 Keena, T, (2000), Toyota get set to start the eBusiness parts revolution, WARD’s Dealer Business.
Online. Available: http://wdb.wardsauto.com/. , [Accessed August 15, 2005]
34 Wallace B, Bacheldor B, Markertplaces Bring Order and Efficency To Supply Chains, INFORMATION
WEEK ONLINE,. Online, Available: http://www.informationweek.com, [Accessed August 15, 2005]
35 Enos L., i2 Links Deals with Giant Automakers, TechNewsWorlds, Online, Available:
http://www.technewsworld.com, [Accessed August 15, 2005]
36 Farmer M A, (2000) Toyota revs up strategy with online market place, CNET NEWs,, Online,
Available: www.news.com.com, [Accessed August 15, 2005]

Page 34
management, warehousing and shipping system, enabling equipment manufacturer and
suppliers to conduct. A results, exploiting the under-utilised resources, grow on business,
diversify the business and combat the cyclical demand of the mainstream activities, as
explained by Tidd.37

Logistic & Shipping Arrangement

One of the greatest benefits from the implementation in the Kanban system is the logistic
and shipping arrangement. The external business environment in Australia is a totally
different stage from Japan. A number of factors have contributed to this statement is due
to the range of external forces and other related issues. However, the industrial relation’s
structure and geographic concerns are the most concern in this matter. As for the
industrial relation, the use of the simple Kanban process is still increase the efficiency
and accuracy of the internal logistic process.38 And, in terms of geographical limitations,
this system will reduce logistic barriers and cost through a modified integrated Kanban
system, just for Australia. This is because, due to, Toyota Australia has suppliers
scattered all over the nation, unlike in Japan. The suppliers are located within the radius
of the city. In enhancing the existing system, Toyota Australia has decided to integrate
the system with BEA software, which includes39:
• electronic proof delivery
• online accounts payable states for supplies
• fleet management integration
• the Toyota Vehicle Order Processing System (TVOPS)
• advance shipping notices for vehicle deliveries
• vehicle inventory synchronisation.

37 Tidd J. (2001). Intergrating Technological, Market & Organizational Change, MANAGING

INNOVATION, John Wiley & Sons Inc
38 Olsson J, (2003), Kanban-an Integrated JIT System, Supply Chain Plane, Online, Available:
http://www.supplychainplanet.com/e_article000213392.cfm, Access: 18 August 2005
39 BEA System, Inc (2004), Toyota Australia drive out cost and increases visibility with BEA Solution for
dealers, Online, Access: 18 August 2005

Page 35
The value data of this system will be increase and can be shared with related projects.
Furthermore, it is build toward open standards.

Practically, Toyota’s logistic and shipping arrangement is already well planned and
integrated in Kanban system. That is begun at the right point, when a customer purchased
a car from a dealer. In addition, that application is practice a long time ago by Toyota.
And the latest development, Toyota has decided to integrate that system into the BEA
software, as mention before. This BEA software will sit on top the current SAP software.
This is the only workable solution for Australia’s stage in the logistic and shipping
arrangement.

Value Chain
Source: Porter, Strategy and the Internet

Page 36
Toyota has decided to take this project with BEA, due to the prominent application of the
technology in the value chain. Basically, the technology will be built as a web based
interface that able to be access across the network in Toyota Australia. At the same time,
Toyota Japan too will able to monitor and overview the operation of her subsidiaries
companies. In short, the value chain will allow performing a number of discrete but
interconnected value creating activities, such as operating sales forces, fabricating a
component, or delivering products.40 And, these activities have a connection with the
activities suppliers, channels and customers. In addition, at the fifth stage of the
application, it will involve relatively simple optimization of sourcing production, logistic
and servicing transaction. In other words, in the value chain of the system consists of 5
early stages. Three of them are related to supply chain management, which is inbound
logistic, operations and outbound logistic. The illustration above illustrated the whole
picture of the value chain that Toyota has adopted.

In general, Toyota Australia has enhance their logistic and shipping arrangement
according to the geographical limitations and the industrial relations. With the partnership
from BEA, Toyota has solved a new solution of supply chain, for this logistic and
shipping arrangement using the value chain process.

40 Porter E M,(2001), Strategy and the Internet, IACT 401’s e-reading materials, Online, Available: webct
401 Accessed: August 20, 2005

Page 37
Backbone of IT Solutions

Maximizing Information Exchange

The automotive industry is geared towards Just-in-time (JIT) manufacturing. JIT in short
deals intimately with all areas of supply chain to reduce inefficiencies in transportation,
processing, inventory and other business processes. In order to facilitate JIT, the
automotive industry developed a fast and reliable communication network for all the key
stakeholders involved, manufacturers, suppliers, importers and dealers, to share
information. This industry driven initiative is called the Australian Automotive Network
eXchange (AANX). The four major car manufacturers in Australia are involved in the
project41.

AANX provides IP based Extranets for the automotive industry in Australia. AANX
Operates as a virtual point network (VPN), an internet-based infrastructure that allows
users to send date to each other in a reliable and secure manner. It is a platform for
conducting domestic and international business-to-business (B2B) e-commerce activities.
The main components of the project consist of42:

• A network that is based on available Internet technology

• Operated by agreed and standardized service levels.
• Demonstrating proactive management of trading partner connections
• Practice the best standard of security and privacy for transactions and
interoperability between service providers.

41
Hafiz Mohd, (2002), “Testing new waters Down Under”, Online, Available:
http://www.thefabricator.com/Articles/Fabricating_Exclusive.cfm?ID=198 [Accessed: 16 August 2005].
42Dcita.gov.au, (2004), “Case Study: The Australian Automotive Network eXchange”, Online, Available:
http://www.dcita.gov.au/ie/publications/2002/july/itol_case_study_australian_automotive_network_exchan
ge [Accessed: 16 August 2005].

Page 38
By connecting to AANX, the benefits reach beyond tangible gains such as cost savings.
Some of the benefits include43:

• Pervasive supply chain communications

• Rapid application deployment across the supply chain
• Lower cost of EDI
• Faster Business Cycles
• Simpler integration into trading partners' and customers' online e-business
systems and strategies

Network Structure
AANX is a multi-provider, virtual private network where service providers compete for
customers and at the same time conform to standard service quality requirements such as
security. Every trading partners share a similar physical infrastructure of the AANX.
Within the framework, all electronic conversations traverse a secure and private
connection between two trading partners . 42

43 AANX, (2002), “Benefits of AANX”, Online, Available: http://www.motor.net.au/AANX/a7a8b02e-

10c7-409a-b6ef-161bf40d02a6/ [Accessed: 16 August 2005].

Page 39
 Software
Gateway
Router Dialup
trading
Trading
Partner
Partner
Permanent
Connection IBM Laptop
Firewall Hardware
Compatible Computer
Gateway
Modem

Modem

Equant Connect

Exchange
Point

Permanent
Connection
AANXO
Monitor
CASP Trading
Keytrust Partner
Router Hardware
Community
Firewall
Gateway
Directory &
Authentication

AANX Framework
Source:
http://www.dcita.gov.au/ie/publications/2002/july/itol_case_study_australian_autom
otive_network_exchange

As shown in the diagram, Equant and Connect Internet Solutons provide communication
services for the network. Keytrust is the certificate authority and vendor for providing
IPSec security services.

Page 40
Keytrust provides the AANX network with four major security functions : 42

1. Secured Data Transmission - IPSec protocol is used to provide secure

communication over publick and private data networks. It is implemented through
encryptions for premenant and dialup connections.
2. PKI Digital Certificates - The use of Public Key Infrastructure (PKI) certificated
within the AANX network enables all particiapants to achieve a high level of
confidence when making transactions on the network;
3. KeyTrust Professional Managed Services - Defines and verify network service
levels and certification criteria;
4. AANX Community Directory - Central policy repository used by security
gateways when sessions between trading partners are established.

The network is the company

Australia's car manufacturers have started to implement major improvements to their
production management systems in order to deliver real-time communications across the
entire supply chain.

With the introduction of AANX, key stakeholders are able to link the company's critical
business systems that will in turn increase efficiencies and cost savings across all
business divisions. Moreover, managers will have real-time visibility into different
aspects of the organization. CommercePlus is the central trading solution for AANX. It
can significantly streamline the supply chain by allowing companies to collaborate and
trade via the Internet44. With this software, documents sent directly from the

44 AAPT, (2002), “40 per cent reduction in data processing costs available for supply chain”, Online,
Available: http://203.14.180.116/news/content.asp?n=57 [Accessed: 16 August 2005].

Page 41
manufacturer's back-end systems are converted to a form readable by the recipient
through an XML (extensible markup language) translation engine45.

Toyota Australia has been working on its eBusiness Transformation Program. It will
move the company's main business processes into extensible online environments that
links up the company's A$10 billion value chain. The company has been using BEA
WebLogic Workshop technology to build Java and Web services-based applications that
enables manufacturing partner's system to interoperate with Toyota's. There are many
projects already online which provide functions such as the Toyota Vehicle Ordering
Procurement System, electronic proof of delivery, online accounts payable status for
suppliers, fleet management integration and automatic update systems that alert dealers
about delivery status and production information46.

Strength & Weakness

Toyota's business is restricted by the factors that affect its supply chain. This includes
available skill base, sophistication and depth of automotive supplier base, industrial
relations system, business environment and the quality of education & research
institutions. Furthermore, its potential is greatly affected by the local demand. The
domestic market is rather limited and is continuously searching for potential export
markets.

45 Jenny Sinclair, (2002), “Gearing up for a new era”, Online, Available:

http//www.smh.com.au/articles/2002/08/03/1028157861627.html&ei=6-0EQ8qrNcyWYNaXkJMK
[Accessed: 16 August 2005].
46 David Braue, (2005), “Driven to action”, Online, Available:
http://www.misweb.com/magarticle.asp?doc_id=23045&rgid=2&listed_months=0 [Accessed: 16 August
2005].

Page 42
Its strengths and weaknesses have resulted in various areas that form its competitive
advantage. They are : 1

• The production of medium and upper medium size cars

• Innovation - based automotive components
• Design and engineering automotive services
• Export to overseas markets
• High flexibility in producing low volumes of high quality vehicles

Strengths
In order to improve production efficiency, Toyota Australia has applied lean
manufacturing principles into its Toyota Production System. Since 1990, the application
of TPS and adoption of Just-In-Time delivery by all Toyota Australia Suppliers has
achieved 97% reduction in stock holding at its Altona plant. With the introduction of
Toyota Production System, suppliers have seen great improvements in efficiency. There
has been significant inventory, floor space, and lead time reductions achieved by various
Toyota suppliers due to its usage . 1

Toyota holds a major strength in terms of its partnership relationship with its suppliers. A
number of initiatives have been introduced to build trust between Toyota and suppliers.
These include exchange of information, regular briefings on changing technologies,
availability of support services and other opportunities. There have been a range of
supplier development programs offered by the Toyota Supplier Development Department
such as :1

Supplier support initiative Specific program Benefits received

Direct supplier Direct application of TPS Overall business operating
assistance principles – interactive benefit – cost, quality and
support program delivery

TPS training Formal theoretical & practical Education and motivation

seminars education process

Page 43
Supplier support initiative Specific program Benefits received
Supply chain Value chain analysis and Focus on all cost areas, from
management management raw material to final customer

Supplier structure/ Resources and management Program sustainability &

education structure establishment internal education process

In North America, Toyota has an online website (www.toyotasupplier.com) that is

dedicated to educating suppliers in that area. Potential suppliers can get information on
the company’s purchasing policies, newsworthy articles, and bio information through the
home page. The website also provides information on what products the company needs,
purchasing principles and development efforts, supplier standard and how to become a
Toyota supplier47. This in turn attracts potential suppliers to join with Toyota’s supply
chain network.

Toyota has been using AANX to communicate securely with other subscribers on the
network. It enables closer collaboration between industry players and facilitates
electronic business interchange such as B2B e-commerce and EDI. AANX helps connect
new supplier and customers wherever they are48. It also facilitates private E-marketplace
activities which enables companies to take their existing processes and trading networks
online to gain the connectivity and speed of the Internet, within a secure environment49.

47 Toyota Motor Manufacturing, (2003), “Toyota Supplier”, Online, Available:

http://www.toyotasupplier.com [Accessed: 16 August 2005].
48 AANX, (2004), “AANX Brochure”, Online, Available: http://www.motor.net.au/AANX/ab8500a9-
4526-4256-93c2-ce457e91413b/AANX_brochure.pdf [Accessed: 16 August 2005].
49 Dcita.gov.au, (2004), “Contemporary Developments in B2B E-Commerce”, Online, Available:
http://www.dcita.gov.au/ie/publications/2001/10/b2b_e-commerce/developments [Accessed: 16 August
2005].

Page 44
Toyota Australia is a subsidiary of a top global car manufacturer. Global linkages enable
the car manufacturers to:

• Access know how and technology

• Access to global platforms
• Access to overseas markets

These global links will in turn develop the Australian's manufacturing base . Similarly,
1

Knowledge Management (KM) activities such as organization, creation, sharing and flow
of information50 can be facilitated through AANX.

Australian car manufacturers and component suppliers have strong skills in low volume
production. This is due to the physical and intellectual infrastructure that has been built
up over time to support the automotive industry. Furthermore, there is a diversified
component supplier industry already available . 1

The Australian automotive industry possesses design, engineer and manufacture

capabilities of new vehicles. Furthermore, the workforce is able to operate effectively at
high levels of technicality and flexibility .
1

The industry is one of the leading sources of business spending on R&D. Local
component suppliers have established their reputation in producing innovate products that
are globally acceptable .1

50 Wikipedia, (2005), “Knowledge management”, Online, Available:

http://en.wikipedia.org/wiki/Knowledge_management [Accessed: 16 August 2005].

Page 45
Weaknesses
Toyota had to cope with the reality of a small domestic market. In Australia, the size of
market places limits the ability of the business to take advantage of economy of scale
production. As a result, number of assembly plants and models produced has been
reduced to achieve greater economies of scale .
1

Sometimes there are no local productions of certain components. These parts must be
produced in order to reach full operating efficiencies. However, it is too much for the
Australian market. Therefore, these components are imported from North America, Japan
and Western Europe. In order to increase localization of parts, Australian suppliers need
to develop technology alliances to reach global competitiveness. Currently, some
suppliers do not possess the management ability to develop these relationships and
possibly not even investing in developing them . Evidently, there is a need for a local E-
1

marketplace catered to the needs of Toyota Australia. This will support the major
objective of the company to become free of currency exchange exposure by means of
localization. The company will then try to source from Australia first before searching for
components outside of Australia.

The domestic market is rather small, which means car manufacturers and component
suppliers have had to look for export opportunities. Although sold export markets have
been established in Middle East, North America and New Zealand, there are trade
barriers in regional markets in Asia .
1

Toyota Australia focuses their market on medium and upper medium size cars. This may
be a major disadvantage for the company if they endeavor to venture into more foreign
markets . To better understand the market demand, both domestic and foreign, they
1

should introduce DSS (Decision Support System). A DSS is an interactive computer-

based system or subsystem intended to help decision makers use communications

Page 46
technologies, data, documents, knowledge and/or models to identify and solve problems,
complete decision process tasks, and make decisions51.

While most suppliers can gain access to AANX network through dial-up or permanent
connections, some parties are still without basic Internet access. In order to achieve better
localization of vehicle components, this gap between Toyota and these suppliers should
be remedied.

Conclusion
With the advent of the technology and the development of Information Technology,
computer mediated processes have undoubtedly change the traditional supply chain
management through the Toyota Australia to conduct their supply chain operations in the
automotive industry. The analysis of the supply chain has improved drastically over the
period of time, within the implementation of IT. Nevertheless, the utilization of the IT on
supply chain operation still result weaknesses, in spite of the benefits. It appears that
while the technology is willing or has the intrinsic capability of effecting this utopian
transformation, the reengineer supply chain process simply still need improvement to its
current configuration.

51 DSSResource.com, (2005), “Decision Support Basics”, Online, Available: http://dssresources.com/

[Accessed: 16 August 2005].

Page 47
Bibliography
AANX, (2002), “Benefits of AANX”, Online, Available: http://www.motor.net.au/AANX/a7a8b02e-
10c7-409a-b6ef-161bf40d02a6/ [Accessed: 16 August 2005].

AAPT, (2002), “40 per cent reduction in data processing costs available for supply chain”, Online,
Available: http://203.14.180.116/news/content.asp?n=57 [Accessed: 16 August 2005].

AANX, (2004), “AANX Brochure”, Online, Available: http://www.motor.net.au/AANX/ab8500a9-

4526-4256-93c2-ce457e91413b/AANX_brochure.pdf [Accessed: 16 August 2005].

BEA Case Study, (2003) Toyota’s Australia eBusiness Transformation Program, Online, Available:
http://www.bea.com/content/news_events/white_papers/BEA_ToyotaAustralia_cs.pdf, [Accessed
August 17, 2005]

BEA Systems, Inc. Case Study: Toyota Australia Drives Out Cost and Increase Visibility with BEA
Solution for Dealers. (Online)
[http://www.bea.com/content/news_events/white_papers/IDC_ToyotaAustralia_cs.pdf, Last Accessed:
15 August 2005].

BEA Systems, Inc, Press Release: Toyota Australia Selects BEA WebLogic Integration 8.1 as
Foundation for eBusiness Transformation Program. (Online)
[http://www.bea.com/framework.jsp?CNT=pr01121.htm&FP=/content/news_events/press_releases/20
03&WT.si_n=PR1, Last Accessed: 15 August 2005].

BEA System, Inc (2004), Toyota Australia drive out cost and increases visibility with BEA Solution
for dealers, Online, Access: 18 August 2005

BEA Systems, Inc. Whitepaper: Toyota Australia eBusiness Transformation Program.

(Online)[http://www.bea.com/content/news_events/white_papers/BEA_ToyotaAustralia_cs.pdf, Last
Accessed 15 August 2005].

Blakemore J, (2002) Maximising profit with Short Production Runs … Lean Systems Thinking,
Online, Available: http://www.blakemore.com.au/ [Accessed August 17, 2005]
Brace D (2005), Driven to action, Managing Information Strategies, Online, Available:
http://www.misweb.com/magarticle.asp?doc_id=23045&rgid=2&listed_months=0, [Accessed August
17, 2005]

Dimancescu D., P. Hines & N. Rich (1997) The Lean Enterprise: Designing & Managing Strategic
Processes for Customer Winning Performance, AMACOM, New York

Dyer, J. H and K. Nobeoka (2000), “Creating andManaging a High-performance Knowledge Sharing

Network: The Toyota Case,” Strategic ManagementJournal, Vol. 21, 2000, pp. 345-367.

Dubbles. J, Eggebraaten, Nowicki, Jeff, Prentice J. (2001) Connect for iSeries with WebSphere
Commerce Suite, Available: IBM Redbooks, [Accessed August 15, 2005]

Dcita.gov.au, (2004), “Case Study: The Australian Automotive Network eXchange”, Online,
Available:
http://www.dcita.gov.au/ie/publications/2002/july/itol_case_study_australian_automotive_network_ex
change [Accessed: 16 August 2005].

David Braue, (2005), “Driven to action”, Online, Available:

http://www.misweb.com/magarticle.asp?doc_id=23045&rgid=2&listed_months=0 [Accessed: 16
August 2005].

Dcita.gov.au, (2004), “Contemporary Developments in B2B E-Commerce”, Online, Available:

http://www.dcita.gov.au/ie/publications/2001/10/b2b_e-commerce/developments [Accessed: 16
August 2005].

DSSResource.com, (2005), “Decision Support Basics”, Online, Available: http://dssresources.com/

[Accessed: 16 August 2005].

Egan j., (2000), ‘Submission to Productivity Commission Inquiry into Post 2005 Assistance
arrangements for the automotive manufacturing sector’, (Online),
[http://www.pc.gov.au/inquiry/auto/subs/sub039.pdf, Last Accessed 15 August 2005].
Enos L., i2 Links Deals with Giant Automakers, TechNewsWorlds, Online, Available:
http://www.technewsworld.com, [Accessed August 15, 2005]

Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press,
Inc., Pg. 10-20
Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press,
Inc., Pg. 129-172

Fujimoto, T.(1999) The Evolution of a Manufacturing System at Toyota, Oxford University Press,
Inc., Pg. 10-20

Farmer M A, (2000) Toyota revs up strategy with online market place, CNET NEWs,, Online,
Available: www.news.com.com, [Accessed August 15, 2005]

Hines, P., Rich, N. Outsourcing Competitive Advantage. (Online)

[http://www.cf.ac.uk/carbs/lom/lerc/centre/publications/downloads/outcompad.pdf#search='Outsourcin
g%20Competitive%20advantage', Last Accessed: 16 August 2005].

Hafiz Mohd, (2002), “Testing new waters Down Under”, Online, Available:
http://www.thefabricator.com/Articles/Fabricating_Exclusive.cfm?ID=198 [Accessed: 16 August
2005].

Jenny Sinclair, (2002), “Gearing up for a new era”, Online, Available:

http//www.smh.com.au/articles/2002/08/03/1028157861627.html&ei=6-0EQ8qrNcyWYNaXkJMK
[Accessed: 16 August 2005].

Kim, K., Im, I. The Effect of Electronic Supply Chain Design (e_SCD) on Coordination and
Knowledge Sharing: An Empirical Investigation. Proceeding of the 35th Hawaii International
Conference on Systems Sciences, 2002.

Keena, T, (2000), Toyota get set to start the eBusiness parts revolution, WARD’s Dealer Business.
Online. Available: http://wdb.wardsauto.com/. , [Accessed August 15, 2005]

Liker, J (1998), Manufacturing and Suppy Chain logistic Strategies for Mass Customization, (A
Research Project By Value Chain Program University of Michigan), Online, Available:
http://www.engin.umich.edu/VCAP/index.html [Accessed August 17, 2005]

Microsoft Customer Evidence, (2004), Toyota Motor Sales, Web Portal Saves Toyota and Dealers
Millions Per Year and Accelerates Delivery of New Business Value, Online, Available:
http://www.microsoft.com/resources/casestudies/CaseStudy.asp?CaseStudyID=14987, [Accessed
August 17, 2005]
Olsson J, (2003), Kanban-an Integrated JIT System, Supply Chain Plane, Online, Available:
http://www.supplychainplanet.com/e_article000213392.cfm, Access: 18 August 2005
Porter E M,(2001), Strategy and the Internet, IACT 401’s e-reading materials, Online, Available:
webct 401 Accessed: August 20, 2005]

Strategos-International, Toyota Production System & Lean Manufacturing, Online, Available:

http://www.strategosinc.com/toyota_production.htm, [Accessed August 17, 2005]

SAP, “Toyota Motorsport Accelerates Formula One Operations with SAP” (Online)
[http://www.sap.com/solutions/businesssuite/plm/newsevents/index.epx?pageview=print&pressid=246
2, Last Accessed: 15 August 2005].

Submission to Productivity Commission Inquiry, May 2002

Toyota Motor Corporation Australia, (2005), ‘History’, Online, Available:
http://www.toyota.com.au/corporate/articles/0,2862,subId%253D922%2526sectionId%253D880
[Accessed 15 August 2005].

Tidd J. (2001). Intergrating Technological, Market & Organizational Change, MANAGING

INNOVATION, John Wiley & Sons Inc
Toyota Motor Corporation, Manufacturing ( Online)
[http://www.toyota.com.au/corporate/articles/0,2862,subId%253D878%2526sectionId%253D214,00.h
tml, Last Accessed:15 August 2005].

Toyota Motor Corporation Australia, (2005), ‘Manufacturing’, Online, Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D878%2526sectionId%253D214,00.ht
ml [Accessed 15 August 2005].

Toyota Motor Corporation Australia, (2005), ‘Toyota Australia’, (Online), [Available:

www.toyota.com.au, Last Accessed: 15 August 2005].

Toyota Motor Corporation, Manufacturing, “Toyota Production System”, (Online), [Available:

http://www.toyota.com.au/corporate/articles/0,2862,subId%253D905%2526thirdId%253D1005%2526
sectionId%253D214,00.html, Last Accessed:15 August 2005].

Terence, T., Thomas, E., Building the Lean Extended Enterprise Through Adaptive Supply Chain
Networks, The Center for Excellence in Operation, Inc., Special Research Report.
(Online)[http://www.sap.com/industries/hightech/pdf/BWP_AR_Building_the_Lean_Extended_Enterp
rise.pdf#search='CEO%20special%20research%20report', Last Accessed: 15 August 2005].

Turban. E, (2004), Electronic Commerce - A Managerial Perspective, Pearson Education, New Jersey,
USA.

Toyota Motor Manufacturing, (2003), “Toyota Supplier”, Online, Available:

http://www.toyotasupplier.com [Accessed: 16 August 2005].

Wikipedia, (2005), “Knowledge management”, Online, Available:

http://en.wikipedia.org/wiki/Knowledge_management [Accessed: 16 August 2005].

Wallace B, Bacheldor B, Markertplaces Bring Order and Efficency To Supply Chains,

INFORMATION WEEK ONLINE,. Online, Available: http://www.informationweek.com, [Accessed
August 15, 2005]

Wither S, How to integrate hosted applications, Technology Business Magazine, Online, Available:
http://www.zdnet.com.au/insight/business/soa/How_to_integrate_hosted_applications/0,39023749,391
60917,00.htm [Accessed August 17, 2005]

Zhang, R (1998), Managing Material Flow and Cash Flow in the Value Chain, (A Research Project By
Value Chain Program University of Michigan), Online, Available:
http://www.engin.umich.edu/VCAP/index.html [Accessed August 17, 2005]