Toyota Supply Chain Essay

2838 words - 11 pages

The business environment is increasingly becoming competitive and challenging. In the recent past, manufacturers have found themselves facing the threat of dwindling profit margins due to unfortunate global events such as the 2007 global financial crisis and the on going Europe economic crisis. The need to improve operation efficiency so as to ensure current and future investment yield the highest rate of return has therefore become extremely important. Manufacturers are now actively engaged in, managing their costs, Research and Development, adopting best procurement strategies, among other Actions. While such actions might eventually lead to positive results, additional business value can be achieved through proper management of the supply chain (Waymer, Ivanaj & Mussa 2009; Krivda 2004).
To support this assertion Krivda (2004) cites the findings of AMR Research Inc. According to this research, companies that have adopted proper supply chain operation and management enjoy greater performance as determined by various financial measures. Specifically, excellence in supply chain can result in relatively accurate demand forecast therefore making such companies realize higher profit margin by approximate 5%, a 15% percent lower inventory, a stronger “perfect order rating” rating of up to 17%, and a comparative shorter cash-to-cash cycle time of about 35% (Krivda 2004).
Generally, a superior supply Chain is an important and unique source of competitive advantage. Its importance is especially illuminated in Multinational companies such as Toyota. Putting this into consideration, the question that now begs for an answer is whether Toyota’s supply chain is effectively serving the organization. Without a doubt, Toyota has been considered over the years as a having a superior supply chain. However recent events, specifically the 2010 recall of some of its major models, indicated that there are some issues affecting its supply chain. It is therefore important to analyze and evaluate this organization’s supply chain and thus provide recommendation for the way forward (Krivda 2004; Aqua Management Consulting Group 2009).
Toyota Supply Chain Management
For years Toyota has been considered to be having a lean supply chain. In fact in 1990 after the successful completion of Massachusetts Institute of Technology study that painted a deemed picture of the effectiveness of mass production in enabling manufacturers achieve competitive advantage, lean production system, which what the study advocated for, was also referred to as Toyota production system(Sezen & Erdoragan 2009; Teresko 2001). Companies that have rushed to replicate Toyota’s lean production system have quickly realized that lean thinking cannot be sufficiently effective if it is only incorporate in the production stage. It has to be extended to be incorporated in the whole supply chain network, as it has been the case in Toyota. By doing so not only will the product meet...

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