Shri Vile Parle Kelavani Mandal’s

NARSEE MONJEE COLLEGE OF COMMERCE

AND ECONOMICS
(Autonomous)

Department of Commerce
SY BCOM ECONOMICS- Semester III
2023-2024
Course: Operations Management

TOPIC: SUPPLY CHAIN MANAGEMENT

Group no. 2

[Link]. SAP I’d Name in Full Div & Roll no. Signature

1 45214220034 Shreenidhi Agrawal A005

2 45214220013 Suhani Shah A023
3 45214220045 Akhand Pratap Singh A025

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 SUPPLY CHAIN MANAGEMENT: TOYOTA

Abstract:

This research paper will examine Toyota's well-known lean supply chain management principles,
paying particular attention to their historical evolution, core ideas, and effects on the company's
operational effectiveness. This study looks at how Toyota has successfully implemented lean
concepts in order to glean important knowledge and lessons that may be used by other businesses
and organizations. This paper explores how Toyota's supply chain management practices have
contributed to its persistent competitive advantage through a thorough literature research and
case study analysis.

Keywords:
Lean supply chain management, Historical development, Key principles, Operational
efficiency, Competitive advantage, Sustained, Organizational practices.

Introduction:

Toyota is a leader in supply chain management and a model for excellence and innovation. The
Japanese automaker has proven over many years that it is extraordinary to continually produce
high-quality goods while retaining operational effectiveness and profitability. Toyota's
innovative approach to supply chain management, which is characterized by the lean principles it
has painstakingly developed over the years, lies at the heart of this ongoing success. This study
paper launches a thorough investigation into Toyota's lean supply chain management practices,
following their growth over time and analyzing their fundamental ideas. We hope to shed light
on how these concepts have contributed to Toyota's persistent competitive advantage as well as
their potential relevance across diverse industries and organizations through a thorough case
study investigation.

Toyota has distinguished itself as a benchmark for industry best practices despite the fact that the
idea of lean supply chain management is not particularly novel. We contend that Toyota's supply

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chain management tactics have proven effective outside of the automotive industry and can serve
as a beneficial example for other businesses throughout the world looking to boost their
operational effectiveness and competitiveness. This research aims to identify the underlying
elements that have contributed to the success and adulation of Toyota's supply chain
management by exploring the fundamental principles of their strategy and looking at practical
instances.

We will journey through the historical evolution of Toyota's supply chain practices, uncover the
fundamental ideas that drive its success, and ultimately derive lessons that can spur innovation
and transformation in the larger field of supply chain management as we navigate through the
pages of this study. Our goal is not just to highlight the accomplishments of one carmaker, but
also to offer a road map for other businesses to use as they work to improve productivity, satisfy
customers, and experience long-term success.

In this era of globalization, rapidly evolving customer demands, and environmental challenges,
the importance of a lean and efficient supply chain cannot be overstated. Toyota's journey serves
as a compelling case study for businesses aspiring to navigate these complexities while
upholding the highest standards of quality, sustainability, and cost-effectiveness. As we embark
on this academic expedition into the heart of Toyota's supply chain management philosophy, we
invite readers to join us in discovering the principles that continue to drive Toyota's remarkable
success story.

Literature Review:

For many years, the idea of lean supply chain management has been the focus of academic study
and real-world application. The discussion surrounding effective supply chain practices has been
significantly shaped by Toyota, which is frequently credited as the creator of lean ideas. In this
section, we offer a succinct review of the relevant literature that covers the evolution of lean
supply chain management historically as well as its essential elements.

1. The Lean Principles Historical Evolution.

It is essential to trace the development of lean concepts over time in order to comprehend
Toyota's lean supply chain management. The Toyota Production System (TPS) has been
thoroughly studied by academics like Womack and Jones (1996) and serves as the basis for the
modern lean principles. Taiichi Ohno, a Toyota employee, is credited with creating TPS, which
places a strong emphasis on waste reduction, just-in-time production, and continuous
improvement. The writings of Liker (2004) go into much historical information regarding the
development of TPS and its transformation into lean thinking, demonstrating how these ideas
have influenced Toyota's operational tactics throughout time.

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2. Lean Supply Chain Management Fundamentals.
Toyota's supply chain success is based on a number of important factors. 'Standardized work' and
'kaizen' (continuous improvement) are crucial components of Toyota's manufacturing system,
according to researchers like Spear and Bowen (1999). As a cornerstone of lean supply chains,
Ohno (1988) emphasized the idea of "pull" manufacturing, where production is motivated by
customer demand rather than forecast. The importance of "mistake-proofing" and "single-minute
exchange of dies" (SMED) in achieving operational excellence has also been highlighted by
Shingo's (1985) seminal work.

3. Applicability and Adaptation Across Industries.

While Toyota's success in the automotive sector is undeniable, scholars like Christopher (2005)
have explored the applicability of lean supply chain principles beyond manufacturing. The
service industry, healthcare, and even government agencies have adopted and adapted these
principles to enhance efficiency and customer satisfaction. By analyzing case studies and
empirical research, we gain insights into how diverse organizations have leveraged Toyota's lean
principles to optimize their supply chain operations.

4. Problems and Recommendations.

It is important to recognize that putting into practice lean supply chain management has its
difficulties. The challenges and potential dangers of adopting lean methodologies, such as
resistance to change and the requirement for a cultural shift inside organizations, have been
studied by researchers like Christopher and Peck (2004). The overemphasis on efficiency at the
expense of worker welfare and sustainability has also been criticized by some (Begun and Kaissi,
2005). Examining these criticisms offers a fair view of how lean ideas are applied.

In conclusion, there is a wealth of information about Toyota's lean supply chain management. It
covers the development of lean thinking over time, the guiding ideas behind Toyota's success,
how it may be applied to different industries, as well as the difficulties and objections to its
application. This background information is essential for our upcoming case study research of
Toyota's supply chain procedures.

Research Methodology:

We used secondary data that was made accessible to us through a variety of company reports,
research papers, and other internet films. We have done data analysis, examined how Toyota
manage its supply chain before and after, and shown how this has enhanced the company's
overall effectiveness in terms of operational efficiency, issues mitigated, and applicability in
many industries and sectors.

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Objectives of the study:

1. To Examine the Historical Evolution of Supply Chain Principles at Toyota.

2. To Analyze the Key Principles of Toyota's Lean Supply Chain Management.
3. To assess how lean supply chain principles have affected Toyota's operational effectiveness.
4. To examine whether Toyota's Lean Supply Chain Management is applicable outside of the
automotive industry.
5. To determine the problems and criticisms of lean supply chain management.
6. To Extract Lessons and Insights for Other Organizations.
7. To Contribute to the Current Lean Supply Chain Management Discussion.
8. To Provide Advice for Businesses Seeking to Implement Lean Supply Chain Practices.

Hypothesis:

1. Operational Efficiency Hypothesis: The adoption of Toyota's lean supply chain concepts has
shown to significantly improve operational effectiveness, particularly through waste reduction
and cost reductions in the context of supply chain management.

2. Application to Various Industries Hypothesis: Lean supply chain ideas, as demonstrated by

Toyota, are scalable and relevant outside the automotive industry and may be successfully
adopted in a variety of sectors, leading to enhanced supply chains. Performance

3-Mitigation of Challenges Hypothesis: Through carefully thought-out change management

strategies and employee engagement activities, difficulties related to the implementation of lean
supply chain practices, such as resistance to change and cultural shifts, can be successfully
managed.

Limitations:

- Pull systems make lean manufacturing more challenging since they demand extensive
coordination and communication across numerous processes and stakeholders. A strong and
trustworthy supply chain and manufacturing system must be in place in order to manage changes
and disruptions. A change in culture and conduct is also necessary, and this requires commitment
from senior management as well as the workforce.

-Any supply chain hiccups, such as sluggish supplier deliveries or unanticipated occurrences like
natural disasters, can obstruct the seamless flow of supplies required for just-in-time production.

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It frequently takes a culture change inside the organization to implement a pull mechanism. To
comprehend and use the ideas of JIT and continuous improvement (Kaizen), employees require
support and training.

Data Analysis:

How did Toyota run their business before implementing supply chain management?
-Toyota used batch production, just as many other manufacturers of the time. To take advantage
of economies of scale, mass production of the products was necessary. But it typically led to
excessive inventory levels, lengthy lead times, and increased storage costs.

-High Goods Levels: Batch production resulted in massive Goods stocks. This excess inventory
increased the danger of obsolescence or damage, took up storage space, and locked up cash.

-Inflexible Production: Traditional production methods were less flexible, making it challenging
to adapt to changing customer demands. This inflexibility often led to overproduction or
underproduction issues

It's important to keep in mind that Toyota didn't change overnight. The development of the
Toyota Production System (TPS) and the acceptance of concepts like Just-in-Time (JIT),
Kanban, and Kaizen were key turning moments in its long history. These changes fundamentally
changed Toyota's supply chain management and manufacturing strategies.

Toyota's Supply Chain Management Transformation:

1. JIT Production: Toyota invented the Just-in-Time (JIT) production method, emphasizing the
need of creating only what was required, when required, in the appropriate quantity. As a result,
efficiency increased and surplus inventory was minimized.
Due to the use of this method, materials and components are now delivered to the production line
only in time to be used, as opposed to being pre-stocked. Costs are decreased and inventory
waste is reduced as a result. Utilizing techniques like root cause analysis and the 5S method
(sort, set in order, shine, standardize, and sustain), Toyota also encourages staff members to
detect and get rid of waste.

2. Kaizen and Continuous Improvement: Toyota encouraged staff members at all levels to find
and get rid of waste and inefficiencies by fostering a culture of continuous improvement
(Kaizen). Kanban: To better coordinate operations and cut down on waste, Toyota uses a visual
signaling system called kanban. Kanban cards or bins act as indications for when components or
supplies are needed on the production line and when work is complete.

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Toyota created cooperative, long-term partnerships with its suppliers, working closely to
increase supply chain efficiency overall and improve quality and lead times.

3. Quality at the Source: To ensure that flaws were found and swiftly corrected, quality control
was integrated into every stage of the production process. The organization has implemented a
number of steps to ensure that the parts and materials it receives are of the highest quality.
Quality control inspection processes are applied at every stage of the production process. This
ensures that the company can produce vehicles of the highest standard.

4. Toyota's management style is known as lean management. Toyota makes it a point to keep a
close relationship with its suppliers. The merchants may select any design they desire. For
component demands, Toyota's suppliers also rely on other vendors. The buyer and supplier
relationship has been controlled by entire chain.

COMPARATIVE ANALYSIS of the pre and post supply chain management workings in
TOYOTA.

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QUANTITATIVE ANALYSIS

1. Implementation of the kanban system and just in time system by Toyota has yielded
significant results:

a) it helps the provided the company with competitive advantage

b) it helps meet company its environmental goals

c) improves the efficiency of the production system and as well as the product.

d) reduced the cost for both the company and customer

Fig. 1: Significant results yielded by Toyota.

Fig. 2: Significant results yielded by Toyota.

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2. The effect of implementation of both the policy can be seen in the profit and revenue of the
company BEFORE THE IMPLEMENTATION of the policy the revenue of the company is
just 100000 $ million BUT AFTER THE IMPLEMENTATION of the policy the Toyota
revenue consistently rises thus ensuring proper management and success of policies
implemented to improve the supply chain.

The graph below represents the revenue of the company before and after the implementation of
the supply chain policies:

Fig. 3: Revenue of the company before and after the implementation of the supply chain policies.

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Strategies used by Toyota:

PULL SYSTEM USED BY TOYOTA -( strategy for Toyota for 2023)

Toyota's approach to supply chain management is a customer-centric strategy that prioritizes

efficiency, adaptability, and waste minimization. It has been central to Toyota's success in
achieving operational excellence, and many companies around the world have adopted it as a
supply chain management best practice.

Toyota uses the Pull System to control inventory levels, reduce production costs, and ensure
customers receive their orders on time.
The basic concept behind the Pull System is the idea of "pulling" products off the production line
only when there is a real demand for them. The Pull System does not produce products in
advance, but instead waits for the customer to place an order and then "pulls" the components
and materials needed to build that product. This helps reduce high inventory, as only what is
needed is produced

Customers benefit from this because they do not have to wait for orders to be filled.

Because it decreases the time it takes for customers to receive their orders, the Pull System is
also advantageous to them. Because customer orders are handled as soon as they are received,
the Pull System does away with the requirement for lengthy lead periods.

Interpretation:

Toyota has been able to improve sales as a result of the pull system it implemented. It has also
been able to decrease waste, inconvenience, and

-Products are developed in response to genuine consumer demand, which lowers or gets rid of
excess inventory. cheaper inventory levels result in cheaper costs associated with storage,
including rent for warehouse space, handling, and hauling. Capital that might otherwise be
constrained for other purchases or operational needs can be released when there is excess
inventory.

Overproduction, which can be expensive in terms of labor, raw materials, and other resources, is
avoided by pull systems.

-Faster, higher-quality product and service delivery; improved workflow transparency and
predictability; and facilitation of feedback loops and problem-solving.

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Conclusion:

This research has improved our understanding of the Toyota Production System and, more
crucially, its fundamental components, the "just-in-time" and "Kanban" systems. It also
demonstrates that the various shut-down choices were influenced by either the Just-in-Time or
Jidoka systems. But in the end, the timing of the decisions made about the shutdown of
manufacturing lines was correct.

Moreover, as per the initial hypothesis and objective set out for this report, it clearly makes sense
that there are some limitations for Just-in-Time system only due to disruptions in supply of small
but crucial parts from its suppliers required for the production during severe disaster situations.
Otherwise, Toyota Production System has not encountered many such incidents which directly
pose a threat to the existence of Just-in-Time System in Toyota and other manufacturing firms in
Japan.

Toyota only places orders for production parts when it receives fresh client orders. As long as
Toyota maintains a consistent production pace, with high-quality workmanship, and no machine
malfunctions at the plant that could halt production, JIT manufacturing will be successful.
Additionally, it needs to be able to swiftly construct the machinery that puts its vehicles together
as well as dependable suppliers that can always provide parts on time.

The majority of the time, Toyota has endured severe losses as a result of these supplier shortages.
But nobody should be held accountable for it because the majority of shortage incidents were
brought on by natural disasters or unanticipated circumstances.

Toyota’s Just-in-Time system, Jidoka and Kanban system are very well known across the globe
because Toyota showed huge success in most of its production department. Since the 1950's,
Toyota has been using the Toyota Production System and it has made it better and better over the
time. It will be wrong to say usage of such old system shall be abolished and replaced with
something else, just because it only proves its insufficiency during unforeseen disasters

Suggestions:

Collaboration with suppliers:

A smooth supply chain is crucial to JIT. Natural disasters, labor disputes, or supplier problems
are just a few examples of interruptions that can cause production to stop and materials to
become scarce. enhancing connections with important vendors to guarantee a seamless and
dependable supply of materials. In addition to reducing lead times and improving the quality of

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incoming materials, collaborative partnerships can also help businesses prepare for unforeseen
circumstances and make adjustments based on varying demand and lead times.

Technology Integration:

Using technology to monitor production processes in real-time, such as Manufacturing Execution

Systems (MES) and Internet of Things (IoT) sensors. This information can be used to spot
obstructions and areas for development.

- While JIT reduces carrying costs, it leaves little room for error. A slight miscalculation in
inventory needs can lead to stockouts, production delays, or increased costs for expedited
shipments therefore Continuously train and empower employees to identify and address
inefficiencies, quality issues, and process improvements. A culture of continuous improvement
(Kaizen) is essential

- JIT places a strong emphasis on quality, and any lapses in quality control can lead to defects
and production disruptions. Maintaining consistent quality is essential.

-In larger organizations or those with distributed teams, communication challenges can arise in
managing and coordinating to ensure overcome communication challenge Toyota can Establish
Clear Communication Policies and Guidelines along with it,Toyota can Provide Communication
Training and should promote transparency and openness in communication.

References:

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