A Firms Competence Development - Case Study Example

Topic: Assesment #2 Report Graded Name: ID no: Unit code and name: Lecturer name: Assignment No: Due Date: Executive summary This report was based on the case study “Supply-Chain Challenges in Post Quake Japan” which is found in Bozarth and Handfields Introduction to Operations and Supply Chain Management. The case is about the challenges that faced Toyota after the destructive earthquake and Tsunami attack that occurred in 2011. Toyota faced a lot of crisis in the supply chain as an aftermath. The case study asks the question on advantages and disadvantages that were in the Japanese auto industry prior to march 20011 earthquake and tsunami. The second question asks on the consistency of the Toyota ‘fool proof’ plan with the lean production philosophy. The third question asks on additional ways in which Toyota can improve their plan on fool proof supply chain. The effect the plan will have on the way Toyota handles their fool proof supply chain is also questioned about. The issues that the automotive industry faces are all addressed which includes, differentiation, globalization, product development and the company supply chain that was in place before 2011. The issue of restructuring the supply chain is looked into depth and its relationship to lean production philosophy. The report has addressed areas in which Toyota needs to improve on so that the new plan will be of more advantage. The supplier customer relationship is one of the key areas that have been recommended for improving in the plan. Another key area is relationship with the local suppliers which needs to be more improved. The fool proof supply chain plan is concluded to be a great step in Toyota global market if well implemented. Contents Executive summary 2 Contents 3 Introduction 4 Supply chain management prior to 2011 Tsunami 5 Issues faced in the automotive industry 6 Product differentiation 6 Globalization 7 Product development 8 Toyota global supply chain 8 ‘Fool Proof’ supply chain consistently with lean production philosophy 9 Recommendations on ‘fool proof’ supply chain. 10 Impacts on relationship management 11 Conclusion 12 References 13 Introduction The global trend in the automobile industry is unpredictable and requires consistent reviews. The supply chain structures that were drafted many years ago have lost relevance making it prudent to have new strategies in supply chain. Toyota has been in the front line to make a supply chain plan that will survive all the situations such as disasters. Toyota has proved to be a strong company as it has made through in the global recession, recall of faulty vehicles and the Tsunami. The company was able to recover faster compared to the problems it has faced in these disasters. After the Tsunami, it became vital to restructure the supply chain. This led to the formation of the ‘fool proof’ supply chain that could help the company during the tough times. This report will look into the proposed fool proof supply chain plan that will be used in the automotive industry. The report will start by looking at the global problems faced by the industry, the company’s global supply chain and the required changes (Bozarth and Handfield, 2013) Supply chain management prior to 2011 Tsunami The Japanese automotive industry had been using a well streamlined supply chain. For example, Toyota had contracted a supplier association which dealt with subcontractor suppliers to help in improving their products. This was during the early years of its operation. Toyota used efficient inventory management so that it could be able to be ahead of its Japanese competitors. The supply chain management used up to 2011 had its set of advantages. These advantages came up after the firms furthered their supply chain management in the 1990s. One of the advantages was increased market share. The Japanese auto industry was able to set up branches overseas using these supply chain management techniques. The customers and suppliers relationship was highly improved in the automotive industry using the supply chain methods. The Japanese automotive industry emphasized on lean production which catered for quality and high level of efficiency. The supply chain made it possible for the companies such as Toyota to buy from their suppliers directly. Despite the success that has been enjoyed through use of previous supply, several disadvantages were experienced. The supply chain failed in that it could not cover the problems associated with current automotive industry. These problems are as discussed below (Bozarth and Handfield, 2013). Issues faced in the automotive industry The current automotive industry has been facing numerous challenges due to transformation that has been taking place. Toyota has been in the industry for a long time and these issues have affected the company. Toyota has been able to move with the current technology and through this; a larger customer base has been achieved. I will review some of the global challenges that Toyota are facing. Product differentiation The automotive industry is flooded with a lot of choices for consumers. This leads to the problems when there exist similar vehicles with same performance characteristics. For the company to maintain its market share there is need for product differentiation. Toyota as a company has enjoyed high volume of sales due to product differentiation through out the world. In the recent period, other companies have entered the market and made differentiation more difficult. This is an issue that can also be attributed to globalization in the automotive industry. One of such case is the Toyota Prius. This vehicle brand has been in the American market occupying 12 percent of the Toyota market in this region. This dominance has of late faded due to introduction of competing brands by companies such as Ford. For example, Ford used differentiation techniques to manufacture Ford’s hybrid C-Max which has managed to outsell Prius in this region. This has been followed buy other brands such as GM’s Spark EV which is a low cost model. Another of Toyota brand that is facing pressure is Camry. This brand is facing competition from the new make of Honda Accord and Ford Fusion. To overcome this problem, Toyota needs to change its differentiation approach. This can be reframed by making sure that the companies make appropriate surveys that look at what the customer wants and how to provide it to them. The automobile market has been fragmented making it prudent that companies must bring the best to the market. Toyota needs to work hard to avoid misguided markets which can lead to high losses (Paul, 2013). Globalization The current trend in the technology has led to globalization. Toyota has been able to take advantage of this and expanded into many new markets. The developing countries have acted as one of the main attractions to the automobile industry. These countries have auctioned themselves to the companies for investment. The global market growth has forced Toyota to take practices that have threatened the company position in the market. Toyota’s push to expand the vehicle production in new markets is one of such practices. This practice was conducted with an aim of making small cars which were fuel efficient. In doing this, some of the safety issues were not adhered to making it a crisis. Due to the high demand, Toyota made it possible for outsourcing of the vehicle parts. These parts came into the production lines from different countries. One of the main issues associated with outsourcing the spare parts is defective products. When a faulty part enters in to the supply chain, the effects will be held globally. The global market is interconnected such that making a faulty product in the supply chain leads to a dangerous global problem. The regulatory practices in the global market network in some cases are not able to cater for big companies like Toyota. This has led to lack of authority that can guide and rectify any disastrous outcome that may be associated with automotive industry. The automotive industry requires more regulation in the global industry (Bozarth and Handfield, 2013). Product development To make a vehicle requires time and revenue. This is a risky process which requires current technology to be in place to cater for time loss. Toyota has been in the forefront using technology to make state of art vehicles. The problem comes in when the cost and time used to produce a component becomes uneconomical. The supply chain in the Toyota had made mistakes by using defective products which led to recall. The technology in place is supposed to be in such a manner that it can solve issues of defects (Doran, Thomas & Caldwell, 2005) Toyota global supply chain The current Toyota global supply chain is a highly integrated method that uses key suppliers to incorporate their global business. In this setup of supply chain, the suppliers are given a great role to play in supplying the company. The supply chain is initiated by the supplier who makes sure that there is constant supply generating trust. Toyota works together with their global suppliers in managing global supply chain as partners. The company has been able to open new branches in the all over the world making sure that the company maintains its position as the world bets manufacturer. The company has maintained strong buyer to supplier relationship which have acted to make it’s global supply chain more reliable. The supply chain has demands that new arrivals have to adapt to the Toyota way of doing things. This makes it possible to achieve uniformity in the operations. The global supply chain has a management model organised selection and placement, rewards and motivation to adopting the Japanese management practices (Yoshiaki, Hayashi & Hidaka, K2000). ‘Fool Proof’ supply chain consistently with lean production philosophy For the supply chain to be more effective, restructuring is an important step. The supply chain needs to be in such that it can be used to know the defective products while reducing cost and labor. Utilizing the just in time manufacturing systems (JIT), the new ‘fool proof’ supply chain looks at efficient supply channel in terms of design and expertise transfer of design. The concept of training in this plan is utilised through training offered to suppliers and major players in the supply chain. Expertise transfer of design is another concept that is in lean production strategy. Toyota using the new supply chain plan will be able to achieve expertise transfer of design in their plants world wide. This will work in reducing any delay of supply in case of a disaster. The Toyota company fool proof supply chain management is an example of a well restructured supply chain. The plan for fool proof supply chain management is consistent with lean production philosophy. The company has made the management team to adapt all over the world. This supply chain management is centered on making the company have a competitive advantage globally. The global supply chain as planned by Toyota target in having ease of transferring materials from one area to another and maintaining good relation with the buyers’ suppliers and distributors (Doran, Thomas & Caldwell, 2005). The fool proof supply chain utilises well planned supplier selection. The supplier is expected to continue improving the product with time. The supply chain has been restructured to accommodate changes in the market and the new technology. The production strategy in the supply chain is also expected to be of high standards to prevent defects. This is in line with lean production strategy which makes it possible to achieve high level of production while maintaining quality and efficiency. The new supply chain has the ability to allow the customer to contribute ideas. The products made using the new supply chain management have the capability to reach the market just in time. The suppliers’ managers are also expected to keep talking to Toyota’s manager in a daily basis (Christopher, Peck & Towill, 2006). Recommendations on ‘fool proof’ supply chain. The fool proof supply chain is a great idea in the automotive business. This is due to the numerous challenges that the industry has been facing calamities such as Tsunami devastated the supply chain which made the company lose millions. Though this plan can overcome a lot of challenges, the company need to reevaluate: The buyer and supplier relationship. Having this relationship enhanced in the chain will lead to a competitive supply chain management which will make it possible for a lasting solution. The value of commitment should be enhanced. The enhancement is a step that requires Toyota to be more accountable incase of disasters that may occur in their line of business. The ‘fool proof’ supply chain should embark more on supplier consolidation. The consolidation of the suppliers is a key issue in the supply chain management. Poor consolidation may lead to poor delivery from the suppliers. The new plan should also cater for culture difference between Toyota and their global suppliers. This will enable a more effective operation of the global supply chain where different nationalities are involved in the trade. The ‘fool proof’ plan has to be more elaborate on this issue. The new supply chain plan should also be clearer on how Toyota aims in changing their business behavior for them to maintain the relationship that is there with the suppliers (Svensson, 2004). Impacts on relationship management The proposed ‘fool proof’ supply chain will have a great effect on the relationship management in the firm. The plan support relationship in the supply chain to the highest level. Using the new plan, the company will be able to bond the existing friendship between the different organs in the supply chain. The company will also be able to take the ideas from the suppliers which will help in improvements of their products. This is an example of how the plan will be able to effect transfer of suppliers in the global market and ideas mobility. This relationship will even be more fuelled through training offered to the suppliers. Through the supply chain, the company can easily be able to have a good focus strategy on how to maximize the relationship between the assemblers and markers (Liu & Brookifeld, 2006). The plan has also made it possible for the customer to make good relationship with the supplier. The new plan is expected to increase the cooperation between the companies where Toyota is located. Countries in the East Asia such as China which is a world class manufacturer have partnered with Japan. The new plan will make it possible for these countries to partner more closely (Awuah, 2001) Conclusion In conclusion, companies must look for ways to remain competitive in times of disaster. The Japanese Tsunami was a classic example where the company can raise itself after the crisis. What happened to Toyota supply chain after the earthquake required the company to come up with plan that would make sure that such failures were dealt with in future. This ‘fool proof’ plan is a big step in dealing with the global market supply. The supply chain of any company forms the most vital part in competing in market. The company awareness of the problems that exists in its supply chain forms the first part of the reevaluation in its strategy. Toyota must exercise care in implementing the new plan in supply chain to avoid situations where the buyer supplier relationship is completely severed. This can only be achieved by making it possible for the level of commitment between the supplier and the buyer to thrive. The new plan also needs to look more into how they can make good relation with the local suppliers in the market. If well implemented, the fool proof supply chain plan will be the biggest step in stabilizing the Toyota global market. References Awuah, G 2001, “A firm’s competence development through its network of exchange relationships”, Journal of Business & Industrial Marketing, Vol.16, No.7, pp. 574-99. Bozarth and Handfield 2013, Introduction to Operations and Supply Chain Management, 3rd Edition, Pearson Education, Prentice hall, Upper Saddle River, NJ.  Christopher, M. Peck, H. & Towill, D. 2006, “A taxonomy for selecting global supply chain strategies”, The International Journal of Logistics Management,Vol.17 No.2, pp.277-87. Doran, D. Thomas,P. & Caldwell, N. 2005, “Examining buyer-supplier relationships within a service sector context”, Supply Chain Management: An International Journal, Vol.10 No.4, pp.272-77. Liu, R.J. & Brookifeld, J. 2006, “Japanese subcontracting in mainland China: a study of Toyota and Shanghai Koito”, supply chain management: An international Journal, Vol.11 No.2, pp.99-103. Paul A. Eisenstein, 2013, Toyota cuts price of Prius Hybrid plug-in to spur demand, NBC News Business, Viewed 17 October 2013,http://www.nbcnews.com/business/toyota-cuts-price-prius-hybrid-plug- spur-demand-8C11363479 Svensson, G.2004, “Vulnerability in business relationships: the gap between dependence and trust”, Journal of Business & industrial Marketing, Vol.19, No.7, pp.469-83. Yoshiaki, T. Hayashi, M. & Hidaka, K. 2000, International Transfer of Management Style, Chuuo University Press, Tokyo. Read More