ASSI

Introduction
Toyota Motor Corporation is engaged in manufacture of passenger cars and their assembly,
minivans, recreational and sport vehicles worldwide. Toyota has a network of more than 45
manufacturing companies and 12 plants affiliated in Japan. Toyota is working on its strategic
global vision program of 2010. This program describes the long-term Toyota’s policies like
recycling of goods and pro-environmental stance. Toyota has its global vision to respect the
different people and communities and providing the new marketing opportunities in Asian markets
and aims to get more than 35% of vehicle by the tapping the emerging markets. In automobile
industry the need of the local customization and global strategy required the regional production.
After 1990 Toyota has become first organized car manufacturer. The main targeted markets of
Toyota industry are the Europe, North America and Asia with capability to customize the regional
markets. Toyota has reacted very quickly and bypassed the regional and trade barriers; based
upon the local suppliers to impact the cost efficiencies.

 Toyota Value Chain Analysis

Value chain analysis is an analytical framework that assists in identifying business activities that
can create value and competitive advantage to the business.

Figure 1 Value chain analysis

Primary Activities
 Inbound logistics
Inbound logistics for Toyota comprises two separate operations. The first is the operation “that
transports parts from local suppliers to the local plants; the second is a separate operation, global
inbound logistics, to transport parts from Japan to the North American and European plant”.
Localization of production is one of the core strategies pursued by Toyota and accordingly, 75.4%
and 76.3% of non-domestic sales were produced outside of Japan for the calendar years of 2012
and 2013 respectively. Thanks to localization of production, Toyota is able to achieve better match
of local currency revenues with local currency expenses. Moreover, Toyota has developed and
perfected Just-In-Time (JIT) system of manufacturing that eliminates the need for inventory and
inventory management, thus saving considerable costs. To summarize, inbound logistics is a
primary activity that creates an immense value for Toyota due to the localization of production and
efficiency application of JIT supply chain system.
  Operations
In 2013 Toyota automotive operations were reorganized into the following four units:
1.The Lexus International. The business unit is assigned the role of the global head office for
Lexus brand development, sales, marketing and advertising.

2.Toyota No.1. This unit is in charge of North America, Europe, and Japan.

3.Toyota No.2 unit caters for emerging markets of China, Asia & the Middle East, East Asia &
Oceania; Africa, Latin America & the Caribbean

4.Unit Cellar. This unit deals with unit-related technological development, manufacturing
technology development and production
Toyota promotes a spirit of monozukuri i.e. conscientious manufacturing throughout its operations
and lean manufacturing represents one of the core sources of Toyota competitive advantage. As it
is illustrated in Figure 2 below, a typical Toyota assembly plant comprises.

Figure 2 Typical Toyota assembly plant flow

 Outbound logistics
Toyota has approximately 170 distributors and 8,900 dealers outside of Japan. The company uses
“common carriers, railroads and truck “car haulers,” to transport its vehicles from the assembly
plants to the dealers”. Toyota uses different distribution strategies in US, Europe and Japan.

Distribution practices used in US can be further divided into three categories:

1.Distribution of vehicles produced in North America. Once out of the plant, vehicles are
transported into the marshalling yard, where they are prepared for the shipment. This is followed
by shipment of vehicles into dealership offices via train and truck.

2.Distribution of vehicles produced overseas. Large vessels are used to transport vehicles
produced in Japan to ports in North America and to be further transported to dealerships. The
delivery times varies between three to five weeks and vehicles are delivered to ports located
close to dealers. Therefore, the most popular ports used are the ones located in cities such as
Portland, Oregon; Long Beach, California; Houston, Texas; Jacksonville, Florida; and Newark,
New Jersey.

3.Scion model of distribution. This model relates to the distribution of vehicles produced in
Japan in the US, however there are some differences between the Scion model and the previous
model discussed above. In Scion model vehicles arrive from Japan with only basic equipment
installed to be further customized in the US according to required specifications by dealers.
European distribution pattern of Toyota vehicles is different from US distribution due to the
location of dealers in urban areas and hence, the absence of room for vehicle stock. After the
production vehicles are taken to the marshalling yard to prepare them for the shipment. Then,
vehicles are taken by truck to a consolidation place known as ‘hub’. Generally, each European
country has one ‘hub’. At the same time, there are several hubs in large counties and a number of
smaller countries do share one hub. The hub performs the role of warehouse and additional
accessories may be installed at the hub as requested by dealers according to customer order.

Distribution of vehicles in Japan is like vehicle distribution in Europe in a way that dealership
offices have a small storage capacity. In Japan, each Toyota dealership office has a consolidation
centre, which is assigned the role of storage, until a vehicle has been sold by the dealership office.

 Marketing and sales

The practices at Toyota emphasize innovativeness and efficiency of the brand, as well as,
integration of brand with the best practices of Japanese ways of doing things. Toyota marketing
strategy utilizes a combination of print and media advertising, sales promotion, events and
experiences, public relations and direct marketing techniques with a focus on television
advertising.

 Services.
Toyota operates according to the principle of ‘The Customer Always Comes First’ as declared in
“The Toyoda Precepts” in 1935. This principle is reflected in all business processes and
procedures of the company. Figure 3 below illustrates a schematic diagram of dealing and
obtaining the customer feedback in the case of Toyota Japan.

 Strategic Planning Process of Toyota

Strategic planning is the process of developing and maintaining a strategic fit between the
organizations’ goals and capabilities and its changing marketing opportunities. Same goes to
Toyota organizations that have their own objectives for business. Toyota objectives are “to create
vehicles and a mobility society in which people can live with a sense of safety, peace of mind, and
comfort”. These objectives are concern about the quality of product and the society regarding their
business.

Toyota is the third-largest auto manufacturer in the world, behind General Motors and Ford, with
global vehicle sales of over six million per year in 170 countries. However, Toyota is far more
profitable than any other auto manufacturer. Auto industry analysts estimate that Toyota will pass
Ford in global vehicles sold in 2005, and if current trends continue, it will eventually pass GM to
become the largest automaker in the world.
What is the secret of Toyota success?
The incredible consistency of Toyota s performance is a direct result of operational excellence.
Toyota has turned operational excellence into a strategic weapon. Toyota s continued success at
implementing these tools stems from a deeper business philosophy based on its understanding of
people and human motivation. Its success is ultimately based on its ability to cultivate leadership,
teams, and culture, to devise strategy, to build supplier relationships, and to maintain a learning
organization (Liker, 2004).
According to the book wrote by Jeffrey K. Liker, Ph.D., is Professor of Industrial and Operations
Engineering at the University of Michigan we can comprehend what have made Toyota success.
They have incredibly applied planning process to their operation step by step. From setting goal,
develop commitment, develop effective action plan, track progress toward goal achievement,
maintain flexibility.

1. Setting goal
Toyota has identified specific company is to achieve simultaneously high quality, low cost, short
lead times, and flexibility.
2. Develop commitment
Then, the leaders try to motivate their employees because goals don’t encourage them to worker
harder or smarter. Thus, they were armed with their shop-floor knowledge, dedicated engineers,
managers, and workers who would give their all to help the company succeed.
3. Develop effective action plan
They move to next step of planning is to develop effective action plans to their objectives. Toyota
lists the specific steps (how), people (who), resources (what) and time period (when) for
accomplishing a goal.
4. Track progress toward goal achievement
After completing second step, they use the method of tracking progress toward goal achievement
to get more motivating and rewarding and then gather and provide performance feedback to make
adjustment in efforts, direction and strategy that will lead to dramatic increase in performance.
5. Maintain flexibility
Finally, is maintaining flexibility, which is the key to their operations. They learned from
experiences and failures and improve them to satisfy their customers and get the best
productions.
They accept challenges with a creative spirit and the courage to realize their own dreams without
losing drive or energy. They approach their work vigorously, with optimism and a sincere belief in
the value of our contribution. Furthermore, they strive to decide their own fate. They act with self-
reliance, trusting in their own abilities. They accept responsibility for their conduct and for
maintaining and improving the skills that enable them to produce added value. Toyota understands
that in a typical business system, meeting and exceeding the customer’s requirements is the task
of everyone within an organization. And they comprehended the definition of customer to include
both internal and external customers. Each person or step in a production line or business
process was to be treated as a customer and to be supplied with exactly what was needed, at the
exact time needed.
Understanding Toyota’s success and quality improvement systems does not automatically mean
you can transform a company with a different culture and circumstances. Toyota can provide
inspiration, demonstrate the importance of stability in leadership and values that go beyond short-
term profit, and suggest how the right combination of philosophy, process, people, and problem
solving can create a learning enterprise. I believe all manufacturing and service companies that
want to be successful in the long term must become learning enterprises. Toyota is one of the best
models in the world. Though every company must find its own way and learn for itself,
understanding the Toyota Way can be one giant step on that journey. (Liker & Meier, 2007)

 Decision Areas
STRENGH WEAKNESS
 Strong human resource  Dependence on suppliers
 Innovated organizational culture  Not grabbing market
 Strong brand image  Negative publicity
 Strong diversified portfolio  Poor brand recognition
 Advanced technology
 Global supply chain
 High production capabilities
OPPORTUNITY THREATS
 Growth of developing nations  Number of competitors
 Green vehicle technology  High priced raw material
 Going concern for pollution  Lower profit

1. Design of Goods and Services. Toyota addresses this strategic decision area of operations
management through technological advancement and quality. The company uses its R&D
investments to ensure advanced features in its products. Toyota also integrates dealership
personnel needs in designing aftersales services.

2. Quality Management. To maximize quality, the company uses its Toyota Production System
(TPS). Quality is one of the key factors in TPS. Also, the firm addresses this strategic decision
area of operations management through continuous improvement, which is covered in The Toyota
Way, a set of management principles.
3. Process and Capacity Design. For this strategic decision area of operations management,
Toyota uses lean manufacturing, which is also embodied in TPS. The company emphasizes waste
minimization to maximize process efficiency and capacity utilization. Thus, Toyota supports
business efficiency and cost-effectiveness in its process and capacity design.

4. Location Strategy. Toyota uses global, regional and local location strategies. For example, the
company has localized manufacturing plants in the United States, China and Thailand, as well as
official dealerships in all markets except Mongolia and some countries in the Middle East and
Africa. Thus, Toyota addresses this strategic decision area of operations management through a
mixed set of strategies.

5. Layout Design and Strategy. Layout design in Toyota’s manufacturing plants highlights the
application of lean manufacturing principles. In this strategic decision area of operations
management, the company aims for maximum efficiency of workflow. On the other hand, Toyota
dealership layout design satisfies the company’s standards but also includes decisions from the
dealers.

6. Job Design and Human Resources. The company applies The Toyota Way and TPS for this
strategic decision area of operations management. The firm emphasizes respect for all people in
The Toyota Way, and this is integrated in HR programs and policies. Also, Toyota has training
programs based on TPS to ensure lean manufacturing practice.

7. Supply Chain Management. Toyota uses lean manufacturing for supply chain management. In
this strategic decision area of operations management, the company uses automation systems for
real-time adjustments in supply chain activity. In this way, Toyota minimizes the bullwhip effect in
its supply chain.

8. Inventory Management. In addressing this strategic decision area of operations management,

Toyota minimizes inventory levels through just-in-time inventory management. The aim is to
minimize inventory size and its corresponding cost. This inventory management approach is
covered in the Toyota Production System.

9. Scheduling. Toyota follows lean manufacturing principles in its scheduling. The company’s goal
for this strategic decision area of operations management is to minimize operating costs. Cost-
minimization is maintained through HR and resource scheduling that changes according to market
conditions.

10. Maintenance. For decades, Toyota developed a network of strategically located facilities to
support its global business. The company also has a global HR network that supports flexibility
and business resilience. Thus, in this strategic decision area of operations management, Toyota
uses its global business reach to ensure optimal and stable productivity

THANK YOU