DEMAND MANAGEMENT

INDIVIDUAL ASSIGNMENT

TOYOTA

AYUSH ARORA
MJ18GL059

1
TABLE OF CONTENTS
1. Introduction.................................................................................................3
2. Industry overview and analysis.....................................................................3
3. Industry Life Cycle.........................................................................................4
4. Business Model.............................................................................................4
5. Toyota’s Supply Chain...................................................................................6
6. Manufacturing and Retail Strategy................................................................8
7. Logistics and Warehousing Strategy..............................................................9
8. Inventory Models used by Toyota................................................................11
9. Demand Forecasting Strategy.......................................................................13
10. Future Challenges.......................................................................................14
11. Bibliography...............................................................................................16

2
INTRODUCTION-

Toyota was established by Kiichiro Toyoda in 1933. In 1934 division of Toyota ventures
fabricated first product called as the Type A motor and its first traveller auto AA in
1936. Toyota purchased and acquired many organizations and operates Lexus, Scion,
Daihatsu and Hino Motors and have shareholdings in Fuji overwhelming industry,
Isuzu, Yamaha, and Mitsubishi Aircraft Corporation. They have a total of 522
subsidiaries.

Toyota is headquartered in Toyota City, Aichi and in Tokyo. Rather than vehicle Toyota
additionally gives budgetary administrations through its division Toyota Financial
Services and furthermore assembles robots for various enterprises. Toyota Motor
Corporation handles its money related administrations and Toyota Industries all
together shape the majority of the Toyota Group and one of the biggest aggregates
on the planet.

Toyota is very popular and well reputed organization since they have a reputation of
making high quality and reliable vehicles. The Hybrid concept by Toyota is quite
successful and has also helped in increasing sales.

In 2008 Toyota surpassed General Motors and Toyota became the world’s biggest
carmaker. Toyota is also the world’s market leader in Hybrid segment and one of the
biggest companies to mass produce Hybrid vehicles all around the world.
(https://en.wikipedia.org/wiki/Toyota)

INDUSTRY OVERVIEW AND ANALYSIS

Toyota Motor Corporation contends in the automotive business. The previous five
years were quite turbulent for automobile manufacturers. Soaring fuel costs and
developing ecological concerns have moved customers' inclinations from fuel-
chugging pickup trucks to littler, more eco-friendly vehicles. A few automakers
grasped the change by extending their small car portfolios and broadening into the
generation of hybrid electric engine vehicles. Fuel prices fell during 2008 period due
to United States financial crises which caused bad effect everywhere. This had a
domino effect across developing and emerging economies. Industry income fell
around 15.4% out of 2009. In the previous five years, development in the BRIC nations
bolstered the production. Rising salary in these nations prompted an expansion in the
demand for automobiles

Many western automakers moved production offices to BRIC nations to take

advantage of these business sectors and advantage from minimal effort creation.
Throughout the following five years, the developing economies will proceed with their

3
development, and interest for engine vehicles in the Western world will recuperate.
Industry income is gauge to grow an annualized 2.5% to add up to an expected $2.6
trillion over the five years to 2018.

INDUSTRY LIFE CYCLE

Toyota has reached the mature stage of its product life cycle. Toyota, over the course
of time has researched about various key areas-

 Reducing exhaust emissions

 Reducing the usage of harmful and dangerous substance.
 Enhancing fuel economy.
 Reducing external noise.
 Enhancing the overall design for recycling and usage of recyclable materials.

Components and spare parts procurement is considered as an important aspect of

Toyota’s life cycle. Toyota is one of the main organization which shows commitment
towards its suppliers so that quality standards are maintained. Toyota also has a very
strict system for monitoring performance. For old and damaged vehicles, Toyota
follows “Polluter Pays Principle”. This ensures several measures to discard end of life
vehicles.

BUSINESS MODEL OF TOYOTA

Toyota follows 4Vs model for operations which includes Volume, Variety, Variation and
Visibility.

VOLUME OF PROCESSES- Output for Toyota is high and hence there is a greater
degree of repeatability in the entire process. Toyota has managed to achieve
economies of scale and standardization.

VARIETY OF PROCESSES- Toyota offers high range of variability to its customers. The
portfolio has a wide range of products to meet the requirements of wider range of
customers.

VARIATION OF PROCESSES- Toyota uses JIT (JUST IN TIME) technique and the
variation is demand is low for Toyota. This helps in stability and predictable processes.

VISIBILITY OF PROCESSES- Toyota has a low process visibility and this helps them to
achieve high staff utilization and low unit cost of production.

The five performance objectives for Toyota includes- Speed, Flexibility, Quality,
Dependability and Cost. (http://cmuscm.blogspot.com/2014/02/understanding-
toyotas-production-system_2.html)

4
 Figure-1: TOYOTA’S BUSINESS MODEL

ORDER WINNERS AND ORDER QUALIFIERS-

Important competitive factors can be determined with the help of order winners and
order qualifiers. Cost, flexibility and quality are the order winners for Toyota. Power
steering and air conditioning are now considered as order qualifiers. The objectives for
Toyota changes according to the product market and product model.

THE 4P MODEL

The lean principles are applied using 4P model-

 Process
 Philosophy
 Problem Solving
 People and Partners

As shown in Figure 1, it can be concluded that strength of Toyota lies in not just tools
and processes but in the philosophy of the approach towards lean.
(http://www.academia.edu/13175662/Marketing_Strategy_of_Toyota_Motor_Corporat
ion_TMC_)

5
TOYOTA’S SUPPLY CHAIN (FOCUSING ON UNITED STATES)

Making the supply chain more efficient is the biggest concern regarding operations.
Managing the supply chain more efficiently helps in reducing the overall cost, reducing
the inventory levels and decreasing lead times.

Toyota has an efficient way of managing its supply chain. Toyota uses TPS (Toyota
Production Systems) strategy. This unique strategy ensures efficiency is maintained
across the entire supply chain.

Product flow of Toyota-

Figure 2- Structure of Toyota’s Supply chain

Toyota’s United States division is taking a centralized approach to manage the

inbound logistics network. The Toyota Production System (TPS) requests comparable
procedures for coordination’s wherever they may happen in the world at any location.
The accentuation on heijunka – the smoothing of the generation stream – and JIT (Just
in time) get together require entirely booked conveyances; in the meantime, the low
stock force framework for recharging requests high recurrence, little part conveyances.

JIT framework – a framework that composes the assets data streams and choice
decides that empower a firm to understand the advantages of JIT standards. The
components of JIT framework are as a rule expert dynamic in uncovering issues, pull
creation situated in Kanban, Total Quality Management, disposal of waste, diminishing
stock, including suppliers in arranging process, nonstop change, enhancing hardware
and concentrating on co-activity. (https://www.thebalancesmb.com/just-in-time-jit-
inventory-management-393301)

As per Kanban each part goes with a card. New stock might be required when that
part has been utilized, the card is expelled, utilizing signs to re-stock this part. Kanban
is all around coordinated in Toyota's creation framework, because in Toyota there are
predetermined number of parts with stable interest for them. Likewise, item blend is
low, and trades are inconsistent.

Capacity planning in any organization is a piece of a store network administration for

that organization. Toyota's approach to planning is that it endeavours to reduce levels
of inventory. In accomplishing this target Toyota depends intensely on its pull
framework. For the most part, the fundamental target is constant change with
continuous improvement.

6
Another operational perfection spearheaded in Toyota and later received by different
organizations worldwide is a "Lean Concept". Lean approach helps to reduce wastes,
prevalent customer care, and Lean depends on pull framework where the end of waste
seen as an essential target. Without a moment to spare stock administration enables
an organization to pick up an aggressive edge by not needing a lot of stock in their
distribution centres, however just to arrange parts when they are really required. As
indicated by JIT theory new material will be delivered just when old supply of that
material has wrapped up. (https://asia.nikkei.com/Business/Toyota-takes-just-in-time-
production-to-another-level)

Figure 3- Supply Chain Strategy

Understanding TPS (Toyota’s Production System)-

“Customer First, Respect for people, Continuous Improvement”

7
 Figure 4- TPS

MANUFACTURING STRATEGY OF TOYOTA-

Principles which are followed by Toyota are-

 Reducing Setup Time- All setup times are inefficient claiming they include no
value and they tie up equipment and labour. By sorting out strategies, utilizing
trucks, and preparing laborers to do their very own setups, Toyota figured out
how to slice setup times from months to hours and now even minutes.
 Production in small-lots- Creating things in vast bunches results in tremendous
setup costs, high capital expense of fast devoted apparatus, bigger inventories,
broadened lead times, and bigger imperfection costs. Since Toyota has
discovered the best approach to make setups short and modest, it wound up
workable for them to financially deliver an assortment of things in little
amounts.
 Employee empowerment and involvement- Toyota sorted out their laborers by
framing groups and gave them the obligation and preparing to do many
specific errands. Groups are additionally given obligation regarding
housekeeping and minor gear repair. Each group has a pioneer who additionally
functions as one of them.
 Maintenance of equipment’s- Toyota administrators are allocated essential duty
regarding fundamental support since they are in the best position to abandon
indications of glitches. Specialists analyse and settle just complex issues,
enhance the performance of equipment’s, and give trainings to workers.
 Maintaining Quality at the source level- To dispense with item abandons, they
should be found and redressed as quickly as time permits. Since specialists are
at the best position to find an imperfection and to instantly settle it, they are

8
 allocated this obligation. On the off chance that an imperfection can't be
promptly settled, any labourer can end the whole line by pulling a string (called
Jidoka).
 Pull system of production- To decrease stock holding expenses and lead times,
Toyota built up the pull strategy wherein the amount of work performed at each
phase of the procedure is directed exclusively by interest for materials from the
prompt next stage. The Kanban theory arranges the stream of small containers
of materials between stages. This introduced Just-in-Time(JIT) system.
 Involving suppliers- Treating suppliers as partners helps Toyota in many ways.
They make suppliers as integral part of the organization. Proper trainings are
given to suppliers to reduce setup times, lead times, defects in inventories. They
also invest in supplier’s infrastructure so that quality is maintained.

TOYOTA’S LOGISTICS AND WAREHOUSING STRATEGY-

Toyota Industries Corporation ("TICO") perceives the changing elements in the North
American material taking care of market identified with internet business, work cost
and profitability necessities, which have made a perpetual interest for new types of
coordination’s arrangements, past forklifts.

To line up with market changes and client needs, TICO has made another business
division to oversee North American exercises in the region of coordination’s
arrangements named "Toyota Advanced Logistics Solutions" (TALS). TALS will be
working independently from the forklift business, except for coordination in vital
territories. TICO is likewise satisfied to report the procurement of Bastian Solutions,
LLC, a main frameworks integrator with territorial US activities and nearness in
deliberately noteworthy global markets. Bastian Solutions will be the primary
gathering organization in the TALS agent structure, until the point that further plans
for key development are reported.

As far as streamlining, a cutting-edge WMS (Warehouse Management System) can

bolster distribution centre chiefs by giving them a large number of data. For instance,
items can be arranged into 'A', 'B' or 'C' after their process duration with the end goal
to put the most required things in lower levels close to the dispatch zone, along these
lines limiting the taking care of exertion. An incorporated forklift direction framework
explores the administrator through the distribution centre to satisfy guidelines as
productively as could be expected under the circumstances. This framework can
likewise spare vitality and help to expand truck uptime before support is required. Also,
a WMS can offer an extensive variety of picking systems, for example, single-order

9
picking and different request picking in blend with single-step picking or two-step
picking. WMS helps in avoiding wastes by using a forklift guidance system. Lean
warehousing also helps in increasing efficiency and reducing wastes by MUDA
philosophy. Using KANBAN in a WMS system helps to trigger order when it reaches
the minimum level, thus maintaining optimization and efficiency.
(http://manufacturing-strategy.blogspot.com/2009/09/7-principles-of-toyota-
production.html)

CREATING A LEAN WAREHOUSE-

Making a lean warehouse) isn't something one can achieve in short term. It takes
vision, arranging, procedure, instruments and strategies. In respect to individuals, one
must form colleagues into issue solvers and afterward give an administration
foundation to help their endeavours. Distinguishing and taking care of issues may
appear to be fundamental; anyway, experience does recommend it can demonstrate
subtle in application. The outcomes accomplished through lean endeavours can be
quantum in nature. Enhanced client fill rates, diminished stock levels, diminished stock
conveying costs, enhanced stock precision, expanded resource and colleague usage
are on the whole advantages of lean warehousing. (https://leancor.com/creating-the-
lean-warehouse/)

At the point when Toyota Motor Manufacturing created and shared its lean assembling
procedure (known as the Toyota Production System), many acknowledged it had
suggestion as a general business framework and not only an assembling framework.
The standards of lean are presently being connected generally, including inside the
distribution centre. A portion of these standards incorporate colleague preparing and
advancement, institutionalization, perceivability, quality at the source, persistent
change, squander disposal, visual administration, and critical thinking exhaustive the
Plan, Do, Check, Act Cycle (PDCA).

Beginning with colleague preparing and improvement, it is individuals who can

distinguish issues and make supportable arrangements. One of the lean devices that
can be given to warehousing individuals is esteem stream mapping. This enables to
outline current procedures on the floor and distinguish waste and see where wastes
can be removed from the esteem stream. The esteem stream is essentially
characterized as the stream of exercises that increase the value of the client. The
objective is that we should just do those things that include esteem. Every single other
action is viewed as waste and ought to be dispensed with. The idea of standardization
is additionally a key lean guideline for the stockroom. Making standardization of
procedures is to make errands are effectively repeatable with arranged zero waste. The
production of standard work enables the group to comprehend forms from the
perspective of information sources, methods, timing and yields. Many distribution

10
centre activities are a progression of manual procedures. The awful perspective to this
is individuals will do a similar procedure in various ways. While this may prompt a
similar outcome, it is difficult to enhance the procedure without a standard. Therefore,
the lean scholar puts stock in standard work as it delivers the benchmark from which
the organization will move forward.
(https://corporatenews.pressroom.toyota.com/releases/toyota+is+leading+the+way
+in+automotive+retail+certifications.htm)

INVENTORY MODELS USED BY TOYOTA-

Toyota Motor Corp's quarterly raw materials expanded from Dec. 2017 ($0 Mil) to Mar.
2018 ($5,197 Mil) however then declined from Mar. 2018 ($5,197 Mil) to Jun. 2018 ($0
Mil).

Toyota Motor Corp's yearly raw materials expanded from Mar. 2016 ($4,184 Mil) to
Mar. 2017 ($4,662 Mil) and expanded from Mar. 2017 ($4,662 Mil) to Mar. 2018 ($5,197
Mil).

Suppliers are provided with a General Purchasing Agreement which spreads out
standards of activity. These standards are a directing device for providers to
successfully oversee and organize their business. The assertion diagrams the
accompanying standards:

•Customer Satisfaction is the primary objective.

• Adopting Toyota Production System (TPS) and Just-In-Time (JIT).

• Develop long standing business relationship based on mutual trust.

• Comply with environmental and safety standards.

• Contribute to the sustainable development of society.

• Promote faithful and sound business activities.

NEW SUPPLIER AGREEMENT SYSTEM-

FIG-5

11
Green purchasing guidelines-

FIG-6

Risk assessment and support for risk elimination-

 Internal audit at suppliers.

 Report preparation and sharing with supplier management.
 C/M implementation and confirmation.
 Counter measure confirmation for risk reduction.
 Sustain and Standardize.

FIGURE 7- TREND LINE FOR TOYOTA INVENTORY (GENERAL)-

The four trend lines show, for Toyota, growing production days of purchased materials,

12
Toyota's visibility over its parts and dissemination focuses attempts to the immense
advantage of dealers, yet the carmaker's test is at last to attempt and recognize
genuine interest from stock renewal demands

Toyota's North American Parts Operations (NAPO)has constructed stock visibility over
its part focuses and conveyance focuses, because of an incorporated stockroom
administration framework, or, in other words not exclusively to most of its distribution
centres and administration, yet additionally to all Toyota merchants.

The inverse, be that as it may, isn't the situation. NAPO's directors have exceptionally
constrained visibility of the stock that dealers stock on their racks and as a rule they
are left speculating a merchant's structure and stocking aims. Nonetheless, head of
NAPO Neil Swartz and his group are investigating methods for refining information on
merchant requesting propensities and aims, while likewise rolling out striking
improvements to Toyota's arrival strategy with the expectation of expanding parts
accessibility over all merchants.

Toyota does not have a retail inventory management system (RIM) to track its
inventory across distribution and sales channels.

DEMAND FORECASTING STRATEGY-

Toyota recently upgraded its demand forecasting software. Earlier forecasts were
based on fixed inputs, but it didn’t allowed changes to coding. The new software helps
in more customization, so Toyota can manage its forecasts with more specific factors
about its locations and markets. With the installation of the new software, there has
been a reduction in forecasting errors and it has also helped in eliminating the need
to verify and review forecasts at the location level and part number.

Determining customer or stock orders

Toyota still lacks the precise data about the levels of inventory at the dealer level. They
cannot track how many dealer orders are tied to actual customer. As a step towards
better understanding between dealer and customer behaviour, NAPO is in the process
of revamping its order policy. For parts ordered for stock, Toyota is considering a
minimum holding period of around nine months. The thinking is again to keep a better
mix of stock parts at the dealer to avoid missing sales opportunities. After nine months,
it could be that the part is approaching the end of its demand curve and would be
better stored centrally for other customers that may need it. The dealer, meanwhile, is
not penalised for returning the parts to NAPO. (http://www-
935.ibm.com/services/nz/igs/pdf/g510-3781-toyota.pdf)

13
FUTURE CHALLENGES FOR TOYOTA-

What does the future look like?

This is the question that has plagued humanity since the start of time. The future is a
vague, opaque and mysterious thing - one that can be only fully known when it truly
exists.

One thing is for sure - the future is full of vast challenges. Whether it's early
Neanderthals discovering fire and learning to use tools, to the industrial revolution and
now the digital age, the future poses all manner of challenges for anyone facing it.
What does the future hold? How do we tackle it? How do we get ahead of it?
These are the very same questions the Toyota brand is asking, not just of itself, but
also of the world around us.

Toyota Motor Corporation is one of the biggest and most prominent car brands in the
world, delivering countless cars to drivers all around the world since its formation in
1937. However, Toyota first began producing weaving looms. The decision to begin
manufacturing passenger cars and become a car brand was a big step into the
unknown for the brand.

Bravery, determination and relentless dedication - these are values that has allowed
the brand to grow into the automotive juggernaut it is today. This spirit of pursuing
dreams and overcoming challenges form the foundation of the brand's new global
initiative - Start Your Impossible.

According to Mr. Hao Quoc Tien, Executive Vice President, Toyota Motor Asia Pacific,
"Start Your Impossible isn't just a campaign, it's a global initiative to change our
company from a car company to a mobility company. This is a change of philosophy
and way of doing business. As a company, we are taking on the challenge of creating
an inclusive, sustainable and mobile society, one where everyone has an equal
opportunity to achieve their dreams." (https://scm.ncsu.edu/scm-articles/article/cash-
to-cash-toyota-inventory-management-and-heijunka)

Challenge the future

Sustainability will of course form a key part of this. As the manufacturer of the first
mass-produced hybrid vehicle in the world (the Toyota Prius), sustainable technology
has always figured in the brand's product development and philosophy

Mobility is changing, too. The way people use and think about cars is changing, with a
detectable shift from an ownership model to a service model.

So, what does the future hold? For Toyota, it is promise. The promise of a more
inclusive society with equal opportunity for all. The promise of sustainable and

14
environmentally responsible vehicles. The promise of mobility solutions to meet the
demands of all commuters. The promise to overcome the challenges that will inevitably
stand in the way.

Toyota’s Environmental Challenge 2050 consists of 6 different challenges, that cover

every aspect of the business, new products and technologies and as an enabler for
communities as well as individuals to learn about the natural world.

15
Bibliography
http://cmuscm.blogspot.com/2014/02/understanding-toyotas-production-system_2.html. (n.d.).
http://cmuscm.blogspot.com/2014/02/understanding-toyotas-production-system_2.html.

http://manufacturing-strategy.blogspot.com/2009/09/7-principles-of-toyota-production.html. (n.d.).
http://manufacturing-strategy.blogspot.com/2009/09/7-principles-of-toyota-
production.html.

http://www.academia.edu/13175662/Marketing_Strategy_of_Toyota_Motor_Corporation_TMC_.
(n.d.).
http://www.academia.edu/13175662/Marketing_Strategy_of_Toyota_Motor_Corporation_
TMC_.

http://www-935.ibm.com/services/nz/igs/pdf/g510-3781-toyota.pdf. (n.d.).

https://asia.nikkei.com/Business/Toyota-takes-just-in-time-production-to-another-level, •. (n.d.). •
https://asia.nikkei.com/Business/Toyota-takes-just-in-time-production-to-another-level.

https://corporatenews.pressroom.toyota.com/releases/toyota+is+leading+the+way+in+automotive
+retail+certifications.htm. (n.d.).
https://corporatenews.pressroom.toyota.com/releases/toyota+is+leading+the+way+in+aut
omotive+retail+certifications.htm.

https://en.wikipedia.org/wiki/Toyota. (n.d.). TOYOTA. WIKI.

https://leancor.com/creating-the-lean-warehouse/. (n.d.). https://leancor.com/creating-the-lean-

warehouse/.

https://scm.ncsu.edu/scm-articles/article/cash-to-cash-toyota-inventory-management-and-
heijunka. (n.d.).

https://www.thebalancesmb.com/just-in-time-jit-inventory-management-393301, •. (n.d.). •
https://www.thebalancesmb.com/just-in-time-jit-inventory-management-393301.

16
17