TOYOTA SUPPLY, DEMAND AND PRODUCTION

Toyota supply, demand and production

Outline

Introduction

Effects of demand, supply and production

Supply chain management and firm's performance

Corporate and supply chain strategy

ConclusionToyota supply, demand and production

Introduction

Toyota is a Japanese multinational company, founded in 1933 by Kiichiro Toyoda. In the 1980 Toyota first caught the attention of the world, when it was noticed there was something special about Japanese quality and efficiency. Toyota is the leader in the automotive industry featuring a box of eight-speed automatic transmission guide, real time traffic routing with dynamic reallocation and a four-zone climate control with infrared technology in some of their models.

Effects of supply, demand and production

According to Porter model, the two generic competitive strategies are cost advantage and differentiation. Cost advantage is achieved through reducing costs, and differentiation increases profitability by providing increased levels of customization and service (Burgess, 2006). Increased levels of service can be provided through efficient order capture, product availability, on-time delivery, information transparency, and improved responsiveness.

Supply chain management creates differentiation “through the customer value that is created by superior service” Furthermore, there is a positive relationship between increased levels of service and increases in sales volume and customer retention. This indicates that supply chain improvements must have the twin aims of reducing costs without negatively impacting customer service or improving service without a disproportionate increase in costs. Initiatives that reduce the organisation's cost base will also contribute to delivering a positive impact in terms of profitability. Such initiatives include:

Reducing the cost of goods sold through a reduction in the total cost of sourcing of materials

Reducing the cost to serve customers through identifying customer attribute costs and improved customer contribution management

Reducing inventory holding costs through improved inventory management (Stapleton et al., 2002); and

Identifying and eliminating non-value added supply chain activities and their associated costs.

It is essential that managers understand the business implications associated with fixed (property, plant and equipment) and current assets (inventory) related to the supply chain activities they manage. These activities underpin the transformation and transition of a product or service from its inception to final consumption and disposal. An organisation can improve its asset utilisation either by generating additional sales revenue with the current level of assets or by maintaining existing sales and reducing the total assets employed by disposing of assets which are no longer core to the business. It has been suggested that this is one of the key reasons for the growth in third-party logistics where fixed assets appear “off-book”.

Reducing current assets, such as inventory, improves asset utilisation and profitability. Furthermore, a reduction in inventory decreases the operating costs associated with holding inventory. Moreover, this reduction will have a favourable impact on the cash-to-cash cycle as less inventory is held and a significant objective for supply chain managers is to identify solutions that reduce the cash-to-cash cycle time, leading to an increase in liquidity (Christopher, 1998). Thus, supply chain management directly impacts organizational profitability, liquidity and productivity and the effects can be measured and reported via the financial statements and ...