Toyota Supply Chain Management

Toyota's supply-chain management is based on the Toyota Production System (TPS). Shingo and Ohno invented it in the 1940s. As Toyota's performance attracted worldwide attention, other companies became interested in TPS, or "lean manufacturing."

Liker (2005) describes Toyota Supplier Partnering Hierarchy components as mutual understanding and trust, interlocking structures, control systems, compatible capabilities, information sharing, cooperative improvement activities, and Kaizen and learning.

"JIT system — a system that organizes resources, information flows, and decision rules to realize JIT principles" (Krajewski et al., p.349)

Proactively revealing problems, pull production based on Kanban, TQM, elimination of waste, decreasing inventory by including suppliers in planning, continuous improvement, improving machinery, and focusing on cooperation are just-in-time system aspects.

Each Kanban part has a card. When a part is utilized and the card is removed, signals will restock it. Toyota uses Kanban because there are few parts with predictable demand. Low product mix, few swaps.

Supply-chain management in any organization includes capacity planning. Toyota plans capacity through reducing inventories. Toyota uses pull method to achieve this goal. Continuous improvement is the goal.

Another Toyota-pioneered operational excellence is the "Lean Concept." Lean seeks to eliminate waste, provide excellent customer service, and is built on a pull system where waste removal is a main goal. Just-in-time inventory management gives a company a competitive edge by ordering parts only when they're needed. Just-in-time production only produces new material when old stock is gone.

Liker (2004, pp.28-29) posits an eighth form of Toyota's non-value-adding waste in business and production. Overproduction, waiting, excessive transit, over-processing, excess inventory, wasteful movement, faults, and squandered staff ingenuity.

In today's extremely competitive global environment, organizations must seek competitive edge to survive and grow. Any organization should examine its supply chain management to improve it. Supply chain management improvement can cut costs and boost efficiency, but requires a deliberate strategy.

Toyota Motor Corporation is a model company in several areas, including supply chain management. Just-in-time, Kanban, lean manufacturing, Kaizen, and others give Toyota a competitive edge and improve supply chain management. Other organizations looking to boost their productivity should examine these ideas and, if necessary, implement them. It must be done considering the organization's culture, knowledge, and qualifications. Other companies can embrace some of Toyota's concepts with certain changes.

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