Toyota’s plan

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Toyota’s plan- The advantages of the supply chain used in the Japanese auto industry before the earthquake and tsunami were, high quality products, streamlined manufacturing and supply processes. Inventory is low and money can be directed to other channels, deliveries were just in time which improved efficiency.Toyota’s plan

The disadvantages were disruption of the entire country’s auto industry, shutdown of entire plants in sections of Japan, suspended production in other plants due to shortages of part supply, operations were run on part time basis due to shortages, extra training and improvements which cost money had to be carried out in other plants, shortages in cars for sale so loss is made, empty showrooms, dwindling sales, big profit declines, slow output towards recovery and some cars even went out of stock. The disadvantages are more than the advantages.

  1. Toyota’s plan for a ‘fool proof’ supply chain is not consistent with the Lean Production philosophy. This is because lean production focuses on eliminating waste, reducing inventory, maintaining supply partnerships, meeting customer requirements and pull production from customer demand. The ‘foolproof’ plan goes against all these principles by standardizing auto parts, which means that customer specifications may not be met in some auto parts. This plan will also involve parts made in several locations which translate to some supply partnerships not being maintained as before. Some suppliers were asked to hold higher inventories which are different from the norm of lean which requires a minimized inventory. Finally the supply chain of Lean would be disrupted by Toyota’s plan which required independence of suppliers.
  2. The Japanese auto industry as a whole needs to incorporate Six sigma to their lean production. Six sigma ensures that the output of a process is improved by identifying and removing the causes of defects and minimizing variables in manufacturing. The different auto industries also need to identify areas in other countries that are not as exposed to earthquakes and tsunamis to ensure they do not loose so much profit in the future. It would also not hurt to have a little higher inventory, for emergencies such as these.
  3. Toyota’s plan may have a negative impact on the way it handles relationship management in its supply chain. This is because some of these relationships have been lifelong and based on trust that has been tried and tested for such a long time and this ‘plan’ may mean that some of that business is stolen from one supplier and given to another. This may mean well for the company but it may not be welcome news for the other end. The company will therefore need to actively explain to its suppliers why it needs to take this action for a while.