Sustainable Supply Chain Management

Developing Cost Competitiveness in All Stages

Toermoedi Soedjiargiono
Director of Technical, Internal Audit,
Technical Government Affairs
PT. TOYOTA MOTOR MANUFACTURING INDONESIA

Do not duplicate or distribute without written permission.

 2
Toyota Indonesia Overview
As automotive leader with market share >50% of Indonesia market, Toyota Group*) business operation involves many
stakeholders from component industries, sales forwarding, government, associations, alliances, etc
*)Toyota Group: including Toyota, Daihatsu, Hino

Component Industries Vehicle OEM Sales Forwarding External Partners

Local & Overseas Government &

TMMIN TAM & Dealers
Associations
Tier-1

Tier-2 & 3 MoI MoF MoTr MoMP MoT

BKPM MoESDM MoRT MoEd

More than
400 Companies
7 Vehicle Models Toyota Alliances
More than 2 Engine Type
Component business
70% 130 Companies And others

Toyota Indonesia Toyota Indonesia • SMEs devl at Central Java

Value Social • Lean Mfg Lab at Univ
• Vocational Training &
Chain Contribution
Suppliers Local Production >300,000 Certification

>530 Companies Employees >330 dealership outlet

Do not duplicate or distribute without written permission.
 3
Toyota Indonesia Employment
TOYOTA Indonesia is working to nurture the automobile industry and peripheral industries in Indonesia and contributes to
securing employment of about 300,000 people.

Automotive Related Industry Number of Related Companies and Employees

Final product Number of Companies Number of Employees

Assembly
make Vehicle 1 (TMMIN) About 7,227

Automotive Tier 1 Component

Assembly About 200 About 110,000
supplier (Transmission etc.)
Industry

Tier 2/3 Small

supplier About 400 About 130,000
Component

Sales Sales 1 (TAM) About 1,281

Forwarding
Industry Dealer・Forwarding・Others About 700 About 40,000

Total Over 1,200 Over 300,000

Do not duplicate or distribute without written permission.
 4
Dynamic World of Automotive Business
Automotive Business operates in dynamic environment from changing preferences of customer, economic fluctuation,
competitor and regulation movement.

Changing preferences of customer Economic condition fluctuation

-
-
Driver profiles
Decision criteria (private  shared vehicle)
% - Economic growth
- Inflation
- Vehicle loyalty - Foreign exchange rate
- Lifestyle - Monetary policy
- Alternative powertrains (ICE  electrify)
£
- Vehicle technology (self-driven  autonomous)

Competitor movement Regulation movement

- Technology change (IR 4.0) Variety & Choice Customization (local & global)
- Variety & choice, customization - Safety regulation
- Cost leadership Technology - Emissions regulation
Change

Cost Leadership Diversification

Do not duplicate or distribute without written permission.

 5
Challenges of Automotive Industry
To win the competition with other ASEAN countries, we need to enhance our competitiveness from these 4 sectors:
localization, sales enhancement, infrastructure, HR development

Automotive Industry Challenges from Production and Sales Side


A Parts, Material localization and Supply Chain Development for competitiveness
Parts & Material  Indonesia’s component supplier industry is still small compared with other countries (number of
supplier should be expanded)
Local Development  For enhance the competitiveness of upstream, Material development like resin, steel and
Aluminum is necessary

Automotive Sales  Local Produce Vehicle which fulfill customers demand,

B
Industry Competitiveness both domestic and export market
Enhancement Enhancement  How we can create market expansion & customer acceptance
(Domestic & Export Expansion)
For Surviving
the Competition 
C Develop good industrial zone to increase Logistic Competitiveness
Infrastructure  (ex:) Government regulation, build smart integrated city/industrial zone which has integration
with international port

 To develop talented HR to meet future industry needs

D
HR Development
 (ex:) industry facility to develop human capital

Do not duplicate or distribute without written permission.

 6
Challenges of Automotive Industry
A Supply Chain Development

To support government’s target/objective to achieve positive trade balance,

we should enhance product competitiveness (regional sourcing) by developing supporting industry
Toward Indonesia Automotive Industry Development

Industrial Goal In Indonesia Issues for Supplier Development

Strong Leadership & High Ownership

Improvement of
Competitiveness
Export/Trade T2/T3 Human Capital Development
balance • Safety & Health Supplier
improvement • High Quality Development Downstream Industry Direct Involvement
• High Technology (include Small Medium Enterprise)
• Competitiveness
Government Regulation & Support

The automotive industry can not be built instantly, we should have mid long-term activities with
the government’s support.

Do not duplicate or distribute without written permission.

 7
Challenges of Automotive Industry
B Export Business Expansion
Toyota Indonesia are exporting to more than 80 countries, consist of CBU, CKD (Parts/Components), and Engine.
Challenge: How we can increase our competitiveness to compete in the Global market ?
Toyota Brand Export Volume
: Non FTA
Southeast Asia (AFTA)
250,000
South Asia Philippines 
: FTA
Pakistan Malaysia 200,000

India (AIFTA) Thailand

150,000
Kazakhstan Vietnam 
East Asia
Middle East Japan (JIEPA)
100,000

Saudi Arabia  Taiwan

UAE Latin America 50,000
Actual
China (ACFTA) Mexico
Egypt Planning
Korea (AKFTA) 0
Venezuela 2016 2017 2018 2019 2020 2021
Peru
Africa
Argentina Destination Countries
South Africa
Brazil
Nigeria Oceania Chile > 80 Countries
Ghana TOYOTA Tahiti Panama CBU : > 60 Countries
Morocco GROUP Fiji Guatemala
CKD : > 16 Countries
Threat barrier to entry: tariff & non tariff Engine : > 14 Countries
Non tariff barrier (): regulation, distribution network, customer loyalty, competition, technology, etc
- Vietnam: strict regulation for import cars - Philippines: protection of the local automotive industry
- Saudi Arabia: VAT increase 5%  15%
Do not duplicate or distribute without written permission.
 8
Challenges of Automotive Industry
B Future Technology: Toyota Electrification Development
 Introduction of Electrified Vehicle (xEV) could bring positive effect to Indonesia by potentially giving additional component industry
and contribute to lower CO2 emission.
 To implement the acceleration of sales of xEV, Toyota will introduce with a mix of HEV, PHEV and BEV entering the market.

Challenges:
1. Limited charging station infrastructure
2. Long charging time compare to gasoline
3. Price acceptance (expensive)
4. Waste management

Current Toyota xEV Models

Do not duplicate or distribute without written permission.

 9
Challenges of Automotive Industry
B Future Technology: Toyota Activities Toward Electrification Technology

In line with Government Policy to Promote the development of xEV Industry & market, Toyota Indonesia support
Government to conduct research collaborate with Universities since 2018 as a socialization and education about xEV
technology to society.
xEV Research with Universities (2018 – 2019)
A User Convenience Study
B Technical Characteristic Study tam
C Overall Environment, Industry, Social Impact Study & Total Cost of Ownership
D Policy & Regulation Study

Continue Support Government to

Conduct xEV Research with
Universities to promote xEV
Industry in Indonesia
Do not duplicate or distribute without written permission.
 10
Challenges of Automotive Industry
C Building Business Friendly Government & Improving Infrastructure
In order to developing good manufacturing industry, we need “smart integrated city” concept which has integrated between industrial
area – international port - infrastructure – government facility – supporting facility
Supply Chain
Government Facility Surrounding
Area  Upstream Industry Dev’t
 License & permit  Downstream Industry Dev’t
(One Stop Service) Industrial/
 Custom & Immigration Manufacturing
clearance Area
 Incentive (Taxation)

International Port and

Hospital Gov’t
Airport
Facilities
Infrastructure Supporting Facility
School Police  Housing
 Power Plant Utility  Banking
Station
(Electricity, Oil & Gas) Praying Facility  School / Education
 Water treatment plant  Hospital, Medical Services
 Telecommunication  Fire / Police Station
 Waste management  Praying Facility
Power Plant
 Access Road  Sport Facility
 Warehouse  Shopping Center

Do not duplicate or distribute without written permission.

 11
Challenges of Automotive Industry
C Improving Infrastructures
<Aiming to reduce wealth disparity through increase the equitable development to all provinces> Government boosts tourism and
explore natural resources across Indonesia not only Java or Bali through rapid infrastructure development
National Strategic Project : Toll road, seaport, airport construction already started

Trans Kalimantan 7619 km Trans Sulawesi 2000 km

Kuala Tanjung  connecting 5 provinces Sebatik
connecting North to South Sulawesi
(international)  Finish in end of 2018  Finish expected in 2019
Bitung
(hub international) Ternate

Kijing Port KEK Maloy

Sorong
Teluk Palu

Radin Inten II
Trans Sumatera 2818 km Tjilik Syamsudin
Jakarta
 connecting Lampung to Aceh Patimban Noor
Surabaya Makassar
DI Yogyakarta
(Intl) Kertajati Trans Papua 4325 km
Expected 24 seaport can connect to become SEA  connecting Sorong to Merauke
Kupang
TOLL (10 new port is in progress)  Finish expected in 2019
Existing Toll Road
New/extended Port
Port
International Sea Toll New/extended Source : Bappenas &
Port Airport https://kkpip.go.id
Do not duplicate or distribute without written permission.
 12
Challenges of Automotive Industry
D Human Resource Development
Transform Human Capital Development Program with competency that matched with IR 4.0
which required new digital knowledge & skills (Make People Before Make Product)
Current New

Basic Skill Internet of Things Knowledge

• Soft Skill • Information Technology knowledge
Safety, 5R, Standardization, Idea & QCC
• Understand IT security & data protection
• Hard Skill:
Welding, Assembly, Maintenance,
Machining, Painting, Logistic Dasar, dll.

Knowledge Work with Big Data

• Theoretical • Able to process & analyse data
Welding, Assembly, Maintenance, • Visual data output & making decision
Machining, Painting, Logistic Dasar dll.

Attitude Technical: Connectivity & Artificial

• Working Mindset
Intelligence
Teamwork, Discipline, Obedience, Respect
• Technical know-how about Connectivity
• Healthy Lifestyle & Artificial Intelligence implementation
Healthy eating, healthy habits, physical
and mental fitness
Do not duplicate or distribute without written permission.
 13
Cost Competitiveness as Key Factor
To sustain automotive business in dynamic world,
cost competitiveness is one key factor to be managed in all stages.

Set cost competitiveness target: Variable & Fixed Cost

Plan

Monitor
Report countermeasure + Do improvement activities
Action through Do
additional plan and follow up (report, workshop, yokoten)
PDCA meeting

Check

Visualize abnormality, check plan vs actual

Product Planning Product Development Production Preparation Mass Production

Do not duplicate or distribute without written permission.

 14
Cost Competitiveness Concept
Market Acceptance Profit Management (Toyota): Manage cost competitiveness in all stages:
(Uncontrollable) Sales Price – Target Profit = Target Cost Product Development → Mass Production
Cost Management
Sales Price
(Controllable)
② Operating Profit (OP)
= Price – Total Cost
= MP – Fixed Cost Total Cost
Fixed Cost
Fixed Cost = not directly impacted by volume fluctuation
① Marginal Profit (MP) [Indirect labor, general expense, maintenance,
= Price – Variable cost depreciation, etc]

Variable Variable cost

Cost = directly impacted by volume fluctuation
[component cost, raw material, operating
supplies, consumable tools, royalty]

Do not duplicate or distribute without written permission.

 15
Vehicle Development & Production Stages
External Factors:

Customer preference Economic condition Competitor Regulation

Cost Management: • Design & specification review • Assess spec cost vs should be cost • Manage inhouse and
• Material selection • Benchmark with affiliates outhouse cost
Cost Target • Supplier bidding competition • Final cost assessment including competitiveness
• Sourcing optimization change in Forex, inflation, material
• Cost assessment rate, etc
Check vs Cost Target Check vs Cost Target Check vs Cost Target
Timeline: N – z months N – y months N – x months N

Product Planning Product Development Production Preparation Mass Production

Invention Design Engineering Manufacturing Launch

• Performance target • Design & color • Research technologies • Mass Production • Quality feedback
• Competitor movement • Platform selection (Engine, Electronic, etc) • Tooling design • Part warranty
• Customer Pain Point • Engineering reviews • Homologation • Quality check • Problem solving
Do not duplicate or distribute without written permission. • Logistic
 16
Product Planning
Product Planning Product Development Production Preparation Mass Production

 Aim  To win the competition by making best product that meet Indonesia customers needs
Market Research Product Planning Development Proposal

• Customer needs, pain point. • Package & styling design concept

• Competitor movement • Performance target
• Regulation • Positioning & market segmentation
• Environment • Cost & Mass target

Product  Market (Customer driven)

by Goyokiki
(grasping customer pain point & voice)

Balance

Value Engineering (VE) Study & Proposal

Product planning activity is balanced with value engineering study to get optimum spec with competitive cost
Do not duplicate or distribute without written permission.
 17
Product Development
Product Planning Product Development Production Preparation Mass Production

Aim  To develop part & performance with high quality & competitive cost
Part development Performance evaluation Production Prep.

• Simultaneous Engineering • Local vehicle evaluation

(Designer x manufacturing x supplier) • Part durability & Collision test

Cost is managed by collaboration among designer x manufacturing x supplier to maximize design target w/ competitive cost.

Plan External factors could change design and specification of the vehicle.
PDCA of cost management:
Customer Economy • Design & specification review • Sourcing optimization
Action Do • Material selection • Cost assessment
Competitor Regulation
• Supplier bidding competition

Check Check vs Cost Target at each development stage

Do not duplicate or distribute without written permission.
 18
Production Preparation (Toyota & Supply Chain)
Product Planning Product Development Production Preparation Mass Production

Development Shipping Quality

Completion Judgment

Tooling
Vehicle Eval.
Equipment Making MFG Trial Mass Prod’n

Milestone Start Production Preparation Trial Cost Pricing

Purpose Confirm cost status correspond to Formal Update changing based on Actual Final Price for Mass
Production Drawing Complete Vehicle Evaluation Production Transaction
Key (1) Tooling benchmarking (1) Line up variation reduction (1) Price negotiation
Activities (2) Supplier Process optimation (Shop (2) Logistic optimization (2) Finalize price
Floor Management, etc.) (3) Investment smart spending positioning
(4) Final cost assessment incl. change Check vs Cost Target
in Forex, inflation, material rate, etc

Continu
Toyota
Respect ous
Value The Toyota Way for People Improve Production Bad News First!!
ment System
Do not duplicate or distribute without written permission.
 19
Mass Production
Product Planning Product Development Production Preparation Mass Production

Continuously maintain Competitiveness through benchmark among affiliates

Outhouse Competitiveness Inhouse Competitiveness
Supply Chain Management

Safety Quality Productivity Delivery Cost

• Variable cost:
• Safe & healthy • Increase OK ratio • Toyota Production • Just-In-Time (JIT):
Gentan-i*) & loss cost
workplace • Total Quality System provide goods at the
mgmt, best source,
(procedure, tools, etc) Management • Eliminate muda, right amount and
process & rate review
• Safety first & training mura, muri right time (only when
• Fixed cost:
• Zero accident • Production efficiency needed)
Smart spending

Human Resource
Recruitment, People development, Talent satisfaction, Industrial Relation
*)Gentan-i mgmt (real minimum resource to carry out a process)

Plan
Customer Economy
Changing in external factors will trigger new product planning
Action Do and development.
Competitor Regulation

Check
Do not duplicate or distribute without written permission.
 20

THANK YOU
www.toyotaindonesiamanufacturing.co.id

Toyota Motor Manufacturing Indonesia

@tmmin_id

Toyota Motor Manufacturing Indonesia

Do not duplicate or distribute without written permission.