Transportation improvement plan development and implementation

Toyota Transportation

Toyota Beginning and Emergence

The Market for the Company

The Major Partners and Suppliers

Toyota Supply Chain

Dedicated Transport Service

The Green Supply Chain

Transportation Planning

Freight Flow of Toyota

Speed

Reliability

The Transport Improvement Plan

Dedicated Transport Service

Route Mapping

Environmental Concerns

Integration of services

Packaging

Division of Duties at the Plant Level for Better Accountability

Mapping logistics flows

The Future of the Transport Improvement Plan

Production by region

Sales by region

Toyota is the biggest single producer and the second biggest producer of cars in the world, after General Motors.

The Toyota Motor Corporation was founded in 1937 by Kiichiro Toyoda. It is headquartered in Toyota city in Japan with regional offices and factories all around the globe. The company primarily manufactures automobiles but also has business interests in robotics, financial services and biotechnology. It employs a huge number of people and is among the top two car manufacturers in the world (http://www.toyota-global.com, 2012).

In April 1935 Toyoda created the first prototype of an engine named, type A. Soon after, the A1 automobile was created. On April 1936 mass production of the A1 and a truck G1, based on A1 began. Thereby, Toyota Motor Corporation Ltd., was established on August 28, 1937 by Kiichiro Toyoda. The letter "d" in the name Toyoda was replaced by the letter "t" for softer sounding, and easier pronunciation.

Toyota's cumulative worldwide motor vehicle production with the production of G1 truck in 1935 to 2011 is approximately 195.7 million vehicles (http://www.toyota-industries.com, 2015). Based on the principles of contributing to society through automobile manufacturing and manufacturing products where demand exists, Toyota has conducted production in 27 countries and regions.

In this study we would examine and prepare a transport improvement plan for the company.

Toyota Beginning and Emergence

After the end of the Second World War, by October 1947, TMC managed to do its first post-war export. It supplied BM trucks to Okinawa, and SA cars to Egypt. To celebrate its one millionth exported car, the Nipondenso Co. Ltd., was established on December 16, 1947, and by 1979 they exported their tenth millionth car. "Toyotism" or the system production created by Toyota is said to be the best and most efficient among the world of automobile production. This is because of the strict quality control, close relations with local communities, selection and training of labor force, clear and liberal relationship between workers, mid and high managerial levels, and minimized hierarchy in the company (Chambers, 2008). This mixture created the perfect base for the evolution of Toyota as a company and its products.Toyota's strict policy of using the most advanced and modern technology in the production of their cars, made the company, as the undisputed leader in the field of technological advance. Toyota's management philosophy has evolved from the company's origins and has been reflected in the terms "Learn Manufacturing" and Just in Time Production. Toyota goes under two headings- Respect for People and Continuous Improvement (Liker, 2004).

Japan's automakers could not count on government protection in the form of high duties or other barriers as they had before the war because American and European auto manufacturers were overwhelming the Japanese market with their economic and technical superiority. Kiichiro Toyoda in the postwar situation compared Japan to England. He had said that the British motorcar industry also faced many difficulties, but its fate would be largely determined by how strongly American automakers felt they should concentrate on small cars. Since American manufacturers were concentrating their efforts on medium-sized and larger cars (Magee, 2007), Toyota's engineersin 1947 completed their first prototype of a small car.

Since, Japanese economy was suffering a severe depression, the Toyota dealers were unable to sell cars in sufficient quantities and thereby they had to pay Toyota in long-term promissory notes as inventories kept accumulating. Toyota was compelled to reduce both production and overhead as it kept falling further into debt, almost to the verge of bankruptcy. Production dropped from 992 vehicles in March 1949 to 304 in May. Voluntary resignation was asked to Toyota employees. President Kiichiro Toyoda himself resigned as well.

Toyota executives visited United States in 1950 to seek new ideas for Toyota's anticipated growth. They brought in the idea of investing only on the most modern production facilities as the keys to advance in productivity and quality. The company soon began to benefit from the increased efficiency. In 1951 (Rubenstein, n.d.), Toyota introduced the first four-wheel-drive Land Cruiser. In 1953, the demand for taxis rapidly increased the production of passenger cars rose from 50 units per month to 250 units per month.

The 'Kanban' system (DALLERY & LIBEROPOULOS, 2000) was adopted in 1954 where 'consumers' took parts from stock shelves, and the 'storekeepers' replenished stock to the degree that it was depleted. This became the basis of Toyota's production system. In 1950, Toyota had to make additional investments in manufacturing facilities and equipment, as well take new research and development effort due to the crowdedness of the Japanese market from American and European automobile industries.

Toyota through its rapid motorization brought about a remarkable increase in national income in Japan. Toyota, foreseeing the coming age of large-scale international trade and capital liberalization in Japan, focused on developing sophisticated cars and lowering its production cost though promising to achieve the highest level of quality in production. The expansion of Japan's gross national product improved the growth of auto sales to the Japanese public. Toyota Corolla became Japan's most popular family car in the late 60s (Chambers, 2008).

In 1970, Japan adapted strict laws to set limits on automobile engine emissions. Notwithstanding these laws, Toyota developed a new generation of cleaner and more fuel-efficient engines. Toyota settled on the catalytic converter after going through catalytic systems, rarefied combustion, rotary engines, gas turbine, and battery powered cars; to be the most flexible, promising and successful in producing automobiles that conformed to the world's toughest emissions-control standards.

The Market for the Company

Toyota became second to General Motors in 1980 in terms of total number of cars produced. Although, Toyota made efforts to improve international cooperation between automakers, it still became a target of criticism in the world. Toyota tried to elevate the principal of free competition in the minds of the American people as Shoichiro Toyoda believed the future success of Toyota was dependent on the way it handled public relations with the United States, a nation who was extremely bitter on losing trade battles from the Japan industry. At the same time, Toyoda carefully committed his company to greater international cooperation in both technological and managerial areas (Toyoda, 1987). In 1984, Toyota entered into a joint manufacturing venture with American giant General Motors called New United Motor Manufacturing, Inc. (NUMMI).Thisallowed Toyota to begin production in the United States cautiously at a time of increasing protectionism, as well as learn about American labor practices.

By the beginning of 1990, Toyota sold more than one million cars and trucks in the United States itself besides commanding an overwhelming 43% of the Japanese car market. Soon, Toyota tried solidifying its global operations, especially in Southeast Asia and Latin America as the burgeoning demand for cars promised much growth. In the mid-1990s Toyota outsold market veterans BMW, Mercedes-Benz and Jaguar with its Lexus LS400 luxury sedan.With the highest operating margin of any carmaker in the world, Toyota was a formidable competitor (Wimmer & Muni, 2012).

Despite favorable moments, Toyota's management strived for improvements. A cost-cutting program was enacted in 1995 that reduced expense account budgets by 50%, limited travel expenditures, and eliminated white-collar overtime. Toyota also moved to less expensive overseas markets, like Great Britain, Pakistan, Thailand, Turkey, the United States, and Japan. Hiroshi Okuda unveiled Toyota's New Global Business Plan, in June 1995 which placed renewed focus on innovation and international expansion (Automotivelogisticsmagazine.com, 2015). Toyota targeted on raising production to six million vehicles a year; increasing Toyota's international market share to 10% and increase its share of domestic market to 40%. These were achieved through the construction of new manufacturing plants in foreign markets, along with an increased emphasis on the "localization" of parts production. Localization was important as it reduced time and expense involved with shipping components across great distances. This enabled Toyota to increase overall automobile production and devote greater resources to research and development.

In 1998, Toyota exported 20,000 vehicle units to Australia and New Zealand. In the same year, it opened a new operation in Brazil, and in 1999 it constructed a transmission production plant in the Walbrzych special Economic Zone in Poland which exported parts to Toyota's manufacturing centers in France, Turkey, and United Kingdom (http://www.toyota-global.com, 2012). In November, 1998 toyota opened its first vehicle production plant in China named as Sichuan Toyota Motor Co., Ltd., a joint venture with the Sichuan Station Wagon Factory and Toyota Tsusho Corp (Liker, 2004).

In 2000, Toyota introduced stricter environmental regulations in its U.S. manufacturing plants and also took initiatives to eliminate all landfill waste by 2003. Okuda revolutionized Toyota by introducing Prius, Toyota's first hybrid car. It combined a highly efficient gas engine with a self-regenerating electric motor that reduced carbon dioxide emissions into half. The future of eco-car looked promising on the domestic market as demand surpassed supply. Increased fuel prices and mounting concerns over global warming lead Prius hit the American and European markets in late 2000 (Magee, 2007). Toyota exceeded five million vehicles for the first time ever in worldwide production in 2000.

At present the company operates in al the continents and has production facilities in almost all the regions it operates in (Toyota-global.com, 2015). The total global production of the company in 20120 was 8736.5 units, up from 6078.3 units in 2003. The global sale figures of the company in 2012 were 8717.3 units, up from 6070.4 units from 2003. Refer to Appendix for detailed region wise figures of the company.

The Major Partners and Suppliers

1. Microsoft delivers cloud computing-enabling car digital information.

1. GW improves car safety.

1. Ford develops hybrid trucks.

1. Tesla makes electric cars (Liker & Meier, 2006).

Toyota has the best working relationship to its suppliers, that pays off handsomely in terms of quality, reliability and cost -- and also results in getting new technologies ahead of the competition. It has also topped its suppliers-Honda, General Motors, Ford and Chrysler.

Toyota policies manage suppliers for the long run:

1. Spends 3-5 years evaluating new supplier before awarding initial contract.

1. Agrees to prices that allow suppliers to make profit.

1. Toyota is willing to give 100% of its business part to a company that can meet Toyota's expectations for quality and delivery (Hung, n.d.).

Toyota Supply Chain

The supply chain policy of Toyota is very simple. It believes in minimizing of the costs of the supply chain while maintaining a reasonable level of service and customer satisfaction, quality and delivery time.

The objectives of the supply chain policy of the company are to product the right product at the right price that is affordable for the target market. The company has a distribution chain of stores of its own and also operates through a retail system (Antony, Caine & Escamilla, 2003). The company has designed its supply chain in such a way that the right quantity of products, cars and trucks, reach the stores at the appropriate time in the right quantity. The company also has a policy to target the right customer at the right time and thus aim to maximize profits (Liu & Brookfield, 2006).

Given below is a pictorial description of the supply chain of Toyota

(Source: hcsdesignit.com)

The company has a policy of segregation of its supply chain and the suppliers. For the company, the supply chain and the suppliers are very important. The suppliers not only supply raw materials for the production of automobiles but also technology for various systems of the automobiles. The company segregates its suppliers into several tiers that is based on the functions of the suppliers (Iyer, Seshadri & Vasher, 2009).

The suppliers who work with the company in the development of a product are placed in the first tier. Such suppliers can be those that help the company in research and development or companies that develop computer software for the vehicles and intelligent systems for the state of the art luxury cars produced by the company (Priem & Swink, 2012). The second tier of suppliers comprise of those who are engaged in supplying of individual parts for the automobiles. Such companies can be those who supply the electrical system or the sound system or the navigation system or engine parts.

The policy of encouragement of communication between the various suppliers of the first tier is followed by the company. The company encourages cross supplier communication so that the quality and the range of products that the suppliers provide to the company increases. The supplier policy of Toyota also include the cross sharing of personnel. Toyota often sends personnel and part of its workforce to the suppliers in order to compensate for greater workload as and when demanded by the company. this not only ensures quality work but also ensures timely delivery form the suppliers which ultimately ensures timely delivery of the vehicle to the customer (http://www.toyota-industries.com, 2015). To encourage corporate managing of the suppliers companies, Toyota often transfers its senior managers and production experts to the suppliers for top positions in the supplier companies in order to streamline the company operations according to standards of Toyota thus ensuring quality of products as well as timely delivery of the products.

The policy of pricing for the supply chain followed by the company is "market price minus" system and no the "supplier cost plus" system. This means that the price for suppliers is calculated on the basis of the market price of a vehicle rather than adding to the cost incurred by paying to the suppliers for the final pricing of the company products. This value analysis of the cost to suppliers helps the company to check prices, keeping the final product value competitive and yet ensure quality product delivery which ultimately helps the company in maximization of its profits. The smoothening of the production line by the sharing of personnel and expertise with the suppliers ensures that the suppliers maintain a constant volume of business throughout the year and creates value for the supplier to get associated with the company (Iyer, Seshadri & Vasher, 2009). This also encourages the suppliers to enter and maintain their focus on the long-term relationships with the company, and vice versa. Such long standing relationships between the company is based on cooperation and teamwork.

In its supply chain the company views the suppliers as partners I the business process with respect to it procurement policy. At Toyota, the suppliers are viewed as integral part of the company as the proper functioning of the supplier company ensures better quality products and timely delivery of the Toyota products in the market. As a general rule, the company tries to ensure that the production unit of a supplier company is located within a radius of 56 miles from the production plant of Toyota. This policy is applicable for all the production units if the company placed all round the world. As a mode of encouragement and providing a sense of security to the suppliers to set up their production unit so close to the Toyota plant, the company tries to guarantee work for the suppliers throughout the year. This ensures that growth of both the Toyota Corporation and its suppliers are mutual and gradual. The suppliers grow along with the growth of Toyota Corporation. This policy is in sharp contrast to the price and bidding policy seen in some other large business companies (lean Supply Chain: Learning form the Toyota Production System, 2015). At Toyota, the company does not encourage bidding but generally selects suppliers based on the criteria of quality, delivery time, financial capability and closeness. As an apart of the gradual improvement policy of the suppliers, Toyota provides training to the suppliers and their staff to improve quality and management according to the requirements. The well renowned policy of Kaizen learning that the company applies for itself is also followed for the suppliers as well. The Kaizen learning concept entails joint improvement activities that are based on the sharing of information that helps in the creation of compatible capabilities. The system also sets up a control system that has an interlocking structure and that is based on mutual understanding and trust (Liker, 2004).

The management of the supply chain the suppliers of Toyota is based on the principle that recognizes suppliers as extensions of the company. The company does not much into the selection of its suppliers and does so through a process of caring and developing them as own associates. The aim is to establish long-term relationships that can serve to accomplish the company goals. The tier structure profiling of the suppliers helps in creating various levels of responsibilities among the suppliers and the supply chain. With the aim of maximization of profits and being competitive in the market with respect to pricing of products, the company follows strict cost targets and delivery timings. This, the company calls the joint integrated system that the company follows in its production also.

Dedicated Transport Service

To gain leverage in the market Toyota ensures that they deliver their products in time. Time of delivery is very important to the company and the company expects the suppliers and the supply chain to follow strict deadlines of delivery. For this reason the company has a dedicated transportation service that exclusively delivers company products as well as serves to get the parts from the suppliers (Liu & Brookfield, 2006). To make use of the dedicated transport service, the company keeps the packaging in mixed box size and has a small pallet size so that transportation is made easy and fast. The dedicated transport system has a dedicated daily route with periodic route diversions to encourage faster delivery. There are also several conjunction points in the routes where the products change hands making use of the dedicated transport service. The company ensures that the change time at the conjunction points is kept to a minimum so as to maintain strict deadlines of delivery. The route plans are designed to incorporate fluctuations in order and the capacity of the routes are flexible to adjust to the fluctuations in order (Magee, 2007).

The Green Supply Chain

Toyota follows what it calls a green supply chain. The company has a concept of bringing the cycle of nature and the cycle of industry together to create a harmony between nature and industry. For this reason the company has adopted the green supply chain. The company aims to install a technically advanced production environment that is environment friendly. The plants are surrounded by green belts where the company regularly plants trees and greenery. The company expends a lot of time and money in research and development for the production of environment friendly vehicles that conform to the strictest of environment norms. This, the company claims, is their way of serving and giving back to the society. The aim is to provide customer and environment friendly vehicles (Thegreensupplychain.com, 2015). As a part of the green supply chain, the company recycles its wastes at the production units that mostly include purification of waste water that is often used in development of fisheries and for agriculture.

The use a balance of human skills and of robots for production at the plants is also a step by the company towards establishing a green supply chain. The company sees the process of improvement of the environment along with the improvement and growth of the company as an important responsibility and sustainable development of environment and industry. To attain sustainable green supply chain, the company involves all the stakeholders and the components of the supply chain to engage in environment friendly activities from the design to disposal of products.

As already discussed, the company procures a large number of parts required for its production and is sourced from various parts of the world. The company believes that the supply chain is has a very vital role to play in the aim of establishing a sustainable and eco friendly company. The company keeps a keen watch on the carbon and environment footprint of the manufacturing and transportation of parts and raw materials. To achieve the objective of creating a green supply chain and to have environment sustainability, the company has drawn up a Green Purchasing Guidelines (http://www.toyota-global.com, 2015). This program, a global program of the company, aims to enhance supplier's environment activities. The program is based on global environment guidelines and is applicable for every installation and supply chain of the company wherever placed on the globe. To cater to the dynamic nature of environment friendly norms, the company revisits and reviews the policy to judge its effectiveness every five years. Shown below is a pictorial description of the Green Purchase guidelines of the company.

(Source: http://www.toyota-global.com, )

As recognition of its efforts of establishing a green supply chain, the Toyota has received several awards. The Toyota Material Handling U.S.A. Inc. was awarded with the Inbound Logistics' list of 2012 Green Supply Chain Partners. The award is based on the efforts and the solutions that a company undertakes for establishing a sustainable green logistics service that is eco friendly. The basis of the choice of the award was for the environmentally friendly solutions provided and used by the company, the green manufacturing process and the continued dedication to establishing a sustainable green supply chain. This was in fact the fourth time in as many years Toyota was named for this award. As a part of the company efforts to go green, the company has been releasing annual sustainability reports for many years. In almost all the reports, the company stresses on its aim to be the "environmental leader" in all the markets they operate in and includes all the services that the company provides.

In this effort the company claims to have improved green sustainability in the supply chain through measures such as improving utilization of assets, sharing of vehicle for transportation with other companies and modal shifts (Mann, 2012).

Transportation Planning

The evaluation, assessment, design and citing of transport facilities is termed as planning of transportation. With respect to business, transportation planning refers to the way a company manages its transport logistics for its supply chain both for inbound and outbound goods.

A rational planning model has been historically followed for transportation planning or transport planning. The model entails the defining of goals and objectives, identification of the problems in transportation, generation of alternatives means to eliminate the problems, evaluation of the alternatives and developing final plans for the optimum utilization of the transport resources available (lean Supply Chain: Learning form the Toyota Production System, 2015). In the reference of business and industry, a transport plan would include the setting of objectives that primarily relate to deadlines, costs and profit margins. In the modern business world greater and greater emphasis is also being attached to the environment friendliness of transport plans for both business and non-business purposes.

Some of the other types of models for planning of transportation or transport plan and improvement are the rational actor model, the transit oriented development model, the satisficing model, incremental planning model, organizational process model and the political bargaining model.

The transport planning in modern times is expected to use a multi-disciplinary approach that includes the vital aspect of environment and environmentalism. Promoting sustainability is now the prime role of the transport planner which has shifted away from the traditional concept of technical analysis. Apart from the environment factor, the economical factor too comes into play when business decides on the development of a plan for transportation of goods (Priem & Swink, 2012).

For business purposes, the most important model is the rational planning is employed and this paper too would use that planning method to design a transport improvement plan for Toyota.

Freight Flow of Toyota

The freight flow and transport improvement plan for Toyota would depend primarily on two production and delivery concepts that the company uses. Heijunka, the term that the company uses for the efforts of smoothing of the production flow is an important consideration for the planning of transport and logistics. The plan is also guided by the concept of just-in-time assembly essentially requires the strict following of scheduled deliveries. The company's policy of very quick replenishment of the inventory that follows the low inventory pull system also entails the frequent delivery of materials in small lots (Toyota in the World 2013., 2014). Hence the company's transport improvement plan needs to have a large, flexible trucking network (Toyota, 2015). The plan and the design of the transport and logistics flow plan for Toyota would be constructed keeping in mind and using as base values the above mentioned three prime concepts.

Speed

The prime concern for the planning of the network is speed of delivery. The three mentioned concepts all require the timely delivery of raw materials and finished products. The off the shelf spare part system in use in Toyota stores also requires that the company replenishes its inventory, especially at the stores on a regular basis. The time gap between the order placement and its delivery is minimal. There for the planning is primarily concerned with speed of delivery (Toyota.com, 2014). This however does not mean that the trucks in the transport logistics would ply at great speeds. The concept is essentially to have trucks ready for transport at short notice.

Reliability

The smoothing of the production flow and the just-in-time concepts make it mandatory that the spare parts and the raw materials reach the production facility within the expected time. Hence the transport plan for Toyota would essentially be made to ensure that the materials reach the production units in time. This is a reliability factor that the transport plan would need to have.

The Transport Improvement Plan

The primary planning of a transport plan for Toyota would begin with the formation of a Logistics Control team. Since speed and reliability are of prime importance to the plan, it is essential that the company has a monitoring system in place. The Logistics Control team would be centrally placed and in constant touch with the transport system of the company. The team would entrusted with the job of responsibility of receiving all queries and orders for logistics movement. All the requirements need to be handled by the team exclusively (Mann, 2012). The responsibility of the team would include keeping track of the vehicle availability, placing goods movement orders for trucks, monitoring the movement of each and every truck=, to ensure goods movement within the deadlines and to co-ordinate the entire logistics operation with the regional units and the suppliers.

Dedicated Transport Service

Toyota has its operations all around the globe. It is truly a global company and hence its operations within a region are also vast. The concept of very quick replenishment of the inventory that follows the low inventory pull system also entails that there needs to be very frequent movement of logistics and often in small packets (Liker & Meier, 2006). This means that the trucking system would have to handle frequent movement and deliver essentially small packages to the various units and stores. The rapid frequency of need for movements makes it necessary for the company to have access to a large number of vehicles. This means that the company should keep ready some trucks at all times at various locations. This can be done by either purchasing a large number of trucks or entering into agreements with large transport companies that own large number of trucks region wise. The company also needs to ensure sudden and frequent availability. For this reason, the agreements need to be exclusive and the truck system needs to be dedicated. Hence the company would need a dedicated trucking network that would be available at all times and at any place. The result of such a plan would often mean having a large and flexible trucking network. The trucks should essentially function in loops so that maximum area and units and stores are covered (Inboundlogistics.com, 2008).

Route Mapping

A very important aspect of the transport improvement plan for Toyota is to have a proper route plan. The Logistics Control team would have the primary duty of preparing route maps for various installations and stores. The plan should include the maximum coverage in the minimum time period. This means that the team has to prepare the routes in such a way that time is saved and the transportation is economic and safe. This would necessitate the preparation of various routes to reach a certain place and evaluating the economic, reliability and time factors for each route. The team has to then decide upon the best route for the transportation of goods, raw materials and spares. This planning stage also requires extensive deliberations and meetings with the transportation department and the transporters. Valuable knowledge can be gained from the transporters as well with respect to saving time and maximizing fuel efficiency, safety and reliability of delivery. This type of a plan would be a central plan. Such route maps and plans would help the Logistics Control team to identify the shortest and the most economical route from one place to another. Moreover, such route identification can also be used to fix proper and realistic deadlines for delivery of the raw materials, parts and finished products (Hung, n.d.).

Environmental Concerns

Toyota has a well developed policy for green supply chain. This is more relevant for the logistics supply department. The transport improvement plan also needs to factor in the environmental issues while making the plan. The plan should be so designed that both the outsourced or in-house trucks are of the highest quality and they maintain a carbon emission limit that is within the international and company norms. Vehicles should either be bought keeping in mind the carbon emission thresholds or such transport agencies need to be selected who strictly follow the company carbon emission norms. This factor is very important in the transport improvement plan as this is also a value that the company cherishes. The plan also requires the setting up of a pollution control department in the company that would also look into the environment friendliness and the level of carbon emission by the logistic trucks.