Executive SummaryThe purpose of this report is to identify on how Toyota Motor Corporation (TMC) has approached the planning and implementation of its logistics activities. Toyota has established Toyota Production System (TPS) to organize its manufacturing and logistics activities as well as suppliers and customer’s interaction. One of the TPS concepts is Just-intime (JIT) which is well known worldwide and provide significant competitive advantages to Toyota. As a result, Toyota has become to be the world’s largest automobile manufacturers by sales and production. To achieve JIT goals, Toyota has used “kanban system” to control its production which can reduce lead time and response to any changing requirements. Another system that Toyota has implemented and it is important on expediting JIT delivery in lean system which is cross docking. In order to accomplish this, Toyota has integrated kanban and milk run logistics into the operational design of cross docking facility. Milk run is one of the most common used in the automobile industry nowadays. It combines inbound and outbound logistics in a single vehicle on a JIT basis. Although JIT and cross docking are beneficial and support Toyota production system but there’re some limitations that has found in this report. Toyota has to traded-off the additional cost against inventory and transportation cost savings form this implementation. For future trend, Toyota has continuously improved its system such as implementing e-kanban and material requirement planning which capable to support its JIT concept. implementing. In the competitive business world today. . and controlling the efficient. material handling. 1998). effective flow and storage of goods. 2009) and production (The Truth about Cars. Moreover.Introduction “Logistic Management is the process of planning. and related information from point of origin to point of consumption for the purpose of conforming to customer requirements” (Council of Logistics Management. the effective logistic management helps reduce cost of inventory carrying. logistics has been increasing their importance to the business achievements to create time and place value in the products to maximize consumers’ satisfaction. services. transportation and other distribution activities. 2011). This report will investigate on how Toyota Motor Corporation (TMC) has planned and implemented of their logistic activities to become to be the world’s largest automobile manufacturer by sales (Marr. Yamaha Motors and Mitsubishi Aircraft Corporation. Japan. (Datamonitor. Toyota gained a highest market share in automotive industries with 9. Toyota has passed GM as a world’s largest automaker in Y 2008 with selling of 8. Toyota has developed the Toyota Production System (TPS) to organize its manufacturing and logistics activities. Figure 1: Business Results (Consolidated basis (U.S.40%. The current business is not only automotive but also in robotics and financial services. The company philosophy has reflected in the terms of Lean Manufacturing and Just-in-Time Production which are known as “Toyota Way”.972 million. There’re totally 522 subsidiaries worldwide under Toyota Group and about 320. In Y 2009.590 employees.Company Background Toyota Motor Corporation is a multinational automaker company. GAAP)) Source: Toyota .0%. Isuzu Motors. as well as suppliers and customer’s interaction. recognized as a world’s automobile industry leader in manufacture and production with the large economic of scales in production of 51 manufacturing plants in 26 countries worldwide (Toyota. 2009b). followed by General Motors Corporation 6. Kichiro Toyoda since Y1937 and has its head quarter in Aichi Prefecture. Hino Motors. Fuji Heavy industries. 2011).60% and Daimler AG 6. Toyota owns and operates Lexus and Scion brands as well as holding shares in Daihatsu. was found by Mr. 2. the goal is to reduce the average delivery time since the dealer order until receive vehicles from 70 days to 14 days (Fahey. The Company has spent many years to revamp its ordering. 3. Once received a vehicle order. cost is reduced and quality of the product is improved which will give the sustainable competitive advantage to the company. To be able to assembled any types of vehicle ordered. This goal accomplishment would not only satisfy customers need but also reduce dealer inventory costs and the need for Toyota to spend on rebates for slowselling vehicles (Fahey. an Inventory Strategy “The more inventories a company has. Toyota could produce a vehicle within shortest time and deliver to the customer as fast as possible by adhering to the following: 1.Just-in-Time. producing and distribution to make it easier for dealers and customers to make changes before production (Fahey. With JIT production system. a production instruction must be given to the vehicle production line since the beginning as fast as possible. the require number of all types of needed parts have to be stocked at the assembly line. 2001). the less likely they will have what they need” (Liker 2004. 2004). JIT is most likely been used in Automobile industries. p104). Parts are provided only when they are needed in production. Toyota is a pioneer using of just-in-time production. The parts must be replaced by retrieving the same number of parts from the preceding process. Inventory has seen as waste associated with keeping stocks. 2004). At that time. It is a continuous improvement philosophy in increasing value-added and eliminating waste. The results once it achieved. . “Just-in-Time” (JIT) production is one of the concepts of Toyota Production System (TPS). “It means producing the necessary items in necessary quantities at the necessary time” (Kotelnikov. 2004). means card. The pull system starts from the customers and then it works all the way backwards to the original resources. Figure 2: Kanban System at Toyota Source: Toyota The figure 2 shows the sample of the process of Kanban System at Toyota supplying carburetors. when to produce and how much to produce. . machining when its products stock level lower than demand needed from the subsequent assembling process. It is a pull inventory system which means that parts are pulled when it needed and sent to the needed location. 1986). Only small numbers of all types of parts will be stocked in the preceding process and produce only the numbers of parts that were retrieved by an operator from the next process. Toyota uses “kanban system” to control its production to determine what to produce. The machining process will start processing immediately once receives an order card to replenish the inventory.4. It is an information system that controls the production of the necessary products in the quantity that is required at the right time in every process of a manufacturing company (Henderson. In order to meet JIT goals. The washing process will give an order cards to a preceding process. Kanban is a Japanese word. Cost Reduction: JIT enables to reduce cost of ordering and inventory because it allows to purchase and receive parts just before needed in the assembly line. JIT itself doesn’t cost a lot of investments in assets or systems. increasing its efficiency in managing shop floor production can improve quality of the product. as pre-war some critical machines typically had 3 or 4 operators assigned per machine to increase efficiency of production. Moreover. there’re limitations of this system that is not suitable for manufacturing with high demand fluctuation. The examples to reduce lead time in production are moving work stations closer together. . products are produced more than demand and leads to excess inventory. increase production efficiency and quick customer response by shorten lead time. 2005). It’s simply use the simple technique like Kanban to use card as a signal of parts movement and utilize machine and people at the optimum. Moreover. JIT helps to eliminate this waste and Toyota can save storage costs as car no longer sit idle in warehouses waiting for customers (Atkinson.The benefits of Kanban are to reduce lead time and having fast response to any changes of production schedule by changing the final assembly process and then the work will automatically produce in their way back up the production line. 2. Moreover. The efficiency increased when productivity increase and cost reduce. the entire production line will be shutting down. reducing the number of jobs that waiting in process. if the Kanban is breakdown. However. short production run and having multi types of products. 3. Last. Increasing of production efficiency: Ohno (1984) found that it was easy to triple or quadruple productivity by assigning one person per machine. 1. Quick customer response by shorten lead time: JIT helps to reduce lead time both in production and delivery. Benefits of Just-in-Time (JIT) production system The main benefits that Toyota received from implementing Just-in-Time production are cost reduction. when overproduction occurs. . this may effect to logistic costs especially transportation cost because of high frequency of parts delivery and costly bulk transportation charges. Toyota decided to stop and close down all the assembly lines. This cause Toyota lost about $15 billions in sales before supply break parts could be restored.and improving cooperation between processes. Parts of automobiles come from many different suppliers which will result in high level of supply network coordination. Toyota has good relationship with suppliers and encourages them to locate close to the factory. International Herald Tribune (1997) reported about one of Toyota’s supplier plants got fired and couldn’t deliver all break parts. Limitation of Just-in-Time (JIT) production There’re some limitations in JIT system as following. Toyota supplier’s goal is Open-Door Policy. With the concept of zero inventories. small batch production is preferred. giving them training. 2. 1. To reduce lead time in delivery. However. no stocks or minimal reserve. In JIT. encourage innovations and partnering for growth with their suppliers. a small disruption from suppliers is possible to cease the production with a very short notice. In lean system. Milk run is a logistic procurement method that uses in scheduled pick up of parts from multiple suppliers designed to support a given production level (Baudin. After that. repack and delivery of large number of Kanbans while parts order-cycle time can be reduced. To be able to deliver parts frequently with the required amount and specific time from suppliers. Cross docking is a warehouse management concept. parts are unloaded and prepared for each assembly plant. the suppliers must located near the assembly base such as Toyota in Japan and the scale of each supplier’s production has to be large enough.000 orders representing shipments from 100 suppliers to 34 production sites. a 7.Just-in-Time Cross dock In a past decade. truck is reloaded with the empty returnable containers and return to supplier to be reused for the next shipments. Milk-run has been implemented to utilize Toyota logistic concepts by consolidated fully-loaded distribution through small-lot and pickup frequently from each supplier. At cross dock. reorganized based on customer demands. aim to reduce costs and improve customer satisfaction. The truck is scheduled at specific time to pick up several parts from suppliers along the way and return to cross dock. To be able to achieve this. 2008). in which products are delivered to a warehouse by inbound trucks and been sorted out immediately. . The ferret (2011) website stated that in one week of operation. routed and loaded into outbound trucks for delivery to customers without holding the products as inventory at the warehouse (Yu and Egbelu. A JIT cross dock is able to sort.525. a cross dock is focus on expediting JIT delivery to the production sites.15 square-meter-cross dock could process over 8. Toyota has integrated kanban and milk run logistic into the operational design of cross docking facility. Toyota has designed and implemented cross dock to support their lean principle. JIT cross dock is also supports JIT production by using “milk run” to pick up and deliver parts just-in-time and in a consolidated manner. 2004). The number of trucks used for the milk-run logistics expanded to 565 trucks in May 2007 while the number of drivers expanded to 1. which is result in reducing transportation cost.081. Hayash & Hashimoto 2010 ). The route number and time for unloading/loading must be labeled on dock doors to verify that what truck is being serviced and to assure that the service are correct within the specific time limits. There’re 4 steps to track the operations of JIT cross docking that can help to indicate problems immediately. and succeeded by TTK Logistics (Thailand) in 2003 and became full-scale with the beginning of multi-purpose vehicles production (Nemoto.Figure 3: Cross dock operation for Milk run system Source: Toyota Kirloskar Motors (TKM) Implementation of milk run system into cross dock makes transportation consolidation more efficiency and help to increase inbound-material visibility and control. There’re about 150 delivery routes established in 3 plants at TMT with six-wheel trucks (4. 1.3 tons loading capacity) are usually utilized. The example of milk-run logistic for Toyota Motor Thailand (TMT) was started by Toyota Tsusho Thailand in 2001. . TMT has received benefits from milk-run logistic in term of loading rate has been improved and number of trucks and travel distance have been reduced. Work standardization is the key factor of JIT cross-dock operational stability. supplier’s name and destination in order to be tracked internally. . All containers come to cross dock will receive the ticket which will be indicated all contents. 2. Toyota has set the work standardization such as exact format. For preventive maintenance. To ensure a JIT cross-dock operational stability. A cross-dock floor is marked by Kanban square. Using a minimum number of containers. preventive maintenance and supplier involvement. vehicles. the trucks are almost fully utilized with full truckload in both direction. Toyota can save money from returnable containers because the vehicle parts that go to assembly plants are balance to the empty containers that return everyday. 4. not same as before the trucks only partially full.2. With JIT cross docking. involvement from suppliers to join pick-up route planning and sharing related information can also decrease operational variability. process and procedures. The employees at the dock use a box with indicated slots for each shipment. 3. Moreover. Toyota transportation cost has reduced. material and equipments need preventive measures to decrease process breakdowns. This is to ensure that the shipments are placed in the right lane and the right time. This will help to verify that each shipment has been loaded on truck correctly. parts are shipped more frequency and lower quantity by consolidating smaller part supplies into consolidated loads. Benefits of JIT Cross Docking 1. it needs to utilize TPS principles which are work standardization. and then published to all employees so everyone knows what to do and how to do it in the same way in each process and can identify the errors or variability in the operation immediately. and in overhead signs must show the destination and time for delivery as well as the height of truck. Last. departure time. 2010). said that as Toyota redoubles its efforts to improve quality. 1.toyota. Limitation of JIT Cross Docking Although there’re many benefits from JIT cross dock implementation but there’re still some limitations as follow. Tetsuo Agata. One example. 3. Transfreight. Toyota is able to deliver more frequency and in some cases even double delivery cycles because of reducing in product cycle time and improve customer satisfaction. Cross-docking is lower holding inventory cost since there’s no required inventory in stocks. forecast and share information among the chain. Cross docking need a lot of start-up investment and it is difficult to manage. Inc. Cross docking is suitable for company with large distribution system because with the full truckload from suppliers to factory need sufficient volume to reduce transportation cost. our suppliers’ commitment to flexibility and continuous improvement is crucial to Toyota now more than ever (pressroom. 4. Cross docking needs good cooperation with supply chain partners to plan. a joint venture company between TNT Logistics and Mitsui Trading Company is one of the Toyota companies which is successful to implement cross docking and achieved JIT delivery goal in North America.3. 2. president of Toyota Motor Engineering & Manufacturing North America. . Toyota has been aware and developed new technologies to support the production system such as implementation of e-Kanban instead of card-Kanban. . traceable and compliance. Moreover. 2007). To improve JIT cross-docking activities. The visibility can be seen in term of real-time shipment status to its suppliers and 3PL providers.Future Trends With high competition in manufacturing industry and significant of Just-in-time production. all information passes through electronic data information system and material number doesn’t need to write into SAP. E-kanban is more efficiency in term of fast response. data availability. Toyota has continue complemented current enterprise resource planning (ERP) applications such as Material Requirement Planning (MRP) with integrated capabilities to make it more visible. traceability in term of historical records of shipment activities and compliance to the procedures to make sure the accuracy of shipment and timeliness. monitoring and performance measurement (Wan and Chen. The electronic kanban (ekanban) system can minimize human mistakes and facilitate tacking. the history data can be analyzed in e-kanban. It uses to schedule production. it needs a high level of supplier’s coordination. produce according to customers’ actual demand. Moreover. However. and only suitable for the company with large distribution size. In the future. when and how much to produce by using pull concepts. Toyota has implemented JIT cross docking as a strategy. Toyota is able to pick-up parts more frequency with small-lot size delivery and having better truck utilization. JIT cross docking uses milk run logistic concept to pick-up and deliver parts just-intime. Toyota has continuous improved its system by using new technologies to support its operation such as material requirement planning to make more competitive advantages to the Company. . By this means. In term of reducing transportation cost. avoid risk of remaining vehicles unsold and improve customer satisfaction. determine what need to be produced. It has brought many benefits to the company such as reducing cost. The major benefits from cross docking implementation are reducing transportation cost and inventory handling cost. This concept is very well known and mostly used in automotive industries nowadays. increasing speed of production with high product quality. there’re limitations such as high setting cost.Conclusion The success of implementing of Just-in-time as an inventory strategy has made Toyota become to be a world’s leader automotive manufacturer. One of the tools that support JIT production is kanban system.