Digital Assignment-III MBA T-III, 2019-20

Course Name: Logistics and Supply Chain Management Slot: G2+TG2

Course Code/ Class Nbr: BMT6180/ 0040 Max. Marks: 10
Course Faculty: Dr.Stephan Thangaiah.I.S Date of submission: 21.04.21

Toyota: A Global Auto Manufacturer

[Facility Decisions]
Toyota Motor Corporation is a Japanese multinational automotive manufacturer
headquartered in Toyota, Aichi, Japan. The company was founded by Kiichiro Toyoda in
1937, as a spinoff from his father's company Toyota Industries to create automobiles.
Three years earlier, in 1934, while still a department of Toyota Industries, it created its
first product, the Type A engine, and its first passenger car in 1936, the Toyota AA.
Toyota Motor Corporation produces vehicles under five brands, including the Toyota
brand, Hino, Lexus, Ranz, and Daihatsu.

In 2017, Toyota's corporate structure consisted of 364,445 employees worldwide. As of

December 2019, Toyota was the tenth-largest company in the world by revenue. Toyota
is the largest automobile manufacturer in Japan, and the second-largest in the world
behind Volkswagen, based on 2018 unit sales. Toyota was the world's first automobile
manufacturer to produce more than 10 million vehicles per year, which it has done since
2012, when it also reported the production of its 200-millionth vehicle.

Toyota is the global market leader in sales of hybrid electric vehicles, and one of the
largest companies to encourage the mass-market adoption of hybrid vehicles across the
globe. Toyota is also a market leader in hydrogen fuel-cell vehicles. Cumulative global
sales of Toyota and Lexus hybrid passenger car models achieved the 10 million milestone
in January 2017. Its Prius family is the world's top-selling hybrid nameplate with over 6
million units sold worldwide as of January 2017.

One of the world’s great manufacturing success stories is the Toyota Production System
(TPS) — the philosophy which organizes manufacturing and logistics at Toyota,
including its interaction with suppliers and customers. TPS is known more generically as
“lean manufacturing.” The primary goal of TPS is to eliminate waste, called “muda.” The
“seven wastes” is a tool to further categorize “muda.” To eliminate waste, it is important
to understand exactly what waste is and where it exists. While products significantly
differ between factories, the typical wastes found in manufacturing environments are
quite similar. For each waste, there is a strategy to reduce or eliminate its effect on a
company, thereby improving overall performance and quality.
Toyota Motor Corporation has experienced significant growth in global sales over the
past two decades. A key issue facing Toyota is the design of its global production and
distribution network. Part of Toyota’s global strategy is to open factories in every market
it serves. Toyota must decide what the production capability of each of the factories will
be, as this has a significant impact on the desired distribution system. At one extreme,
each plant can be equipped only for local production. At the other extreme, each plant is
capable of supplying every market. Prior to 1996, Toyota used specialized local factories
for each market. After the Asian financial crisis in 1996-1997, Toyota redesigned its
plants so that it could also export to markets that remain strong when the local market
weakens. Toyota calls this strategy “global complementation.”

Whether to be global or local is also an issue for Toyota’s parts plants and product
design. Should parts plants be built for local production or should there be few parts
plants globally that supply multiple assembly plants? Toyota has worked hard to increase
commonality in parts used around the globe. While this helped the company lower costs
and improve parts availability, common parts caused significant difficulty when one of
the parts had to be recalled. In 2009, Toyota had to recall about 12 million cars using
common parts across North America, Europe and Asia causing significant damage to the
brand as well as the finances.

Any global manufacturer like Toyota must address the following questions regarding the
configuration and capability of the supply chain:

a) Where should the plants be located and what degree of flexibility should be built
into each? What capacity should each plant have?
b) Should plants be able to produce for all markets or only specific contingency
markets? How should markets be allocated to plants and how frequently should
this allocation be revised?