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Automotive Industry & Toyota Scm

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A brief on Global Auto Industry Trend, Forecast And Synchronization of TPS & Toyota-SCM Principles into the Current Framework.

A brief on Global Auto Industry Trend, Forecast And Synchronization of TPS & Toyota-SCM Principles into the Current Framework.

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  • very impressive presentation, could you please email me the presentation at cookiecreme95@gmail.com
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  • Hullo Praveenvanghese,

    Insightful and meaningful, thank you for your generosity in posting this article. The TPS is simple to understand and why is it many companies cannot emulate TPS successfully. Decoding the DNA paper gives some answer but it is not good enough. I am now researching on this the fcators why companies can't execute TPS well. I am a VP in charge of Global manufcaturing and I would appreciate your kindness in sending the above to my email address; ab.goh@schaffner.com
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Automotive Industry & Toyota Scm Automotive Industry & Toyota Scm Presentation Transcript

  • Global Automotive Industry & TOYOTA - SCM
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Appendix
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Conclusion
  • Global Automotive Industry
  • Global Automotive Industry
  • Global Automotive Industry
  • Global Automotive Industry
  • Global Automotive Industry
    • Basic Background on the Auto Industry
      • What is the Product?
      • Who are the customers?
      • What are the distribution models?
    • Customer
      • Retail Customers
      • Employee/Suppliers
      • Fleet
            • Rental
            • Commercial
            • Government
    • Distribution Model
      • Local Production
      • Overseas Production
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Conclusion
  • The Beer Game Rules
    • General Rules
      • Team of Four People (Member1-Retailor, Member2-Distributor, Member3-Wholesaler, Member4-Factory)
      • Each Member can see only – His Incoming & Outgoing Order
      • Retailer is the only who observes customer demand
      • Each Player fills the customer demand from the immediate customer
      • Retailer fills the Customer orders, W fills the R’s orders, D fills the W’s order, and the F serves the distributor
      • Each Player Carries Inventory, represented by Big Blue Sq Box
      • Orders can be filled only from Inventory in Big Blue Sq Box
      • Factory Produces Beer.
      • Game is Played one week at a time
      • Each Player Receives Orders and tries to fill as much as he or she can
      • If orders are not filled, they are backlogged and have to be satisfied in the future
      • Each Player than places the orders for the next week,
      • Players possess only local information about their inventory: demand by the immediate customer and the orders placed to their immediate supplier
      • Goal of each Player is to minimize the cost of holding inventory (HIC – Rs10/unit/wk)
      • Team with the smallest sum of the Costs of the Four Players Wins
  • The Beer Game Rules
    • Specific Rules
      • Transit Lead time to receive order or of supplier is 2 weeks
      • Order Processing Lead Time is again 2 weeks
      • So, Total Lead Time is 4 weeks from order to receipt
      • Factory Receives or Production Lead time is 2 weeks
    ? R 8 W 8 D 8 F 8 4 4 4 4 4 4 T T T T T T ? ? ? ? ? orders orders orders Cases of Beer Information / Orders 4 4 Beer Production Demand ? ? Orders 4 ?
  • The Beer Game Rules
    • Goal of the Game
      • Team of four people will work to minimize the total cost of the distribution network
      • There will be no collusion (i.e. talking) among team members
      • Each Player task
        • Outgoing Order (on Red card, place upside down)
        • Incoming Order
        • Keep track of your each event on the form supplied
        • So Each Player Executes Five Steps every week in Synchronization
      • Game is Starting with a Steady State
        • Each Player begins with 8 units of inventory
        • 4 units arriving one week later
        • Another 4 units arriving two weeks later
        • Each Player has incoming order and outgoing order written out for the fist Week, and place facedown, are 4 units each
        • Incoming Orders for the Retailer (customer demand) are written out in advance and placed facedown.
  • The Beer Game Rules
    • Steps of the Game (explained for Retailer only). follow it
      • First Step
        • Retailer receives delivery of the units. The Retailer records the units just received and adds to his inventory. The another 4 week consignment is now near by 1 week.
      • Second Step
        • Retailer then reads the current week’s demand from the incoming orders. Fills the demand from the inventory
      • Third Step
        • Retailer moves the order that was placed facedown (as the outgoing order) to the Wholesaler (that is the incoming order for W)
      • Fourth Step
        • Retailer decides how much to order, writes down that number on red card and places it facedown in the outgoing order.
      • Fifth Step
        • Only the last step, ie. Placing an order requires a decision for each player. Rest of the Steps are meant to simulate movement of material and information in a supply chain:
          • Getting a shipment
          • Taking it into Inventory
          • Filling Demand during the week
          • Placing an order with the supplier.
      • Players are not allowed to speak to each other about their orders. They can see the supply chain and orders that are coming to them but they cannot see the orders placed by other players.
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Conclusion
  • TOYOTA
  • Vision & Philosophy
  • Vision & Philosophy
  • Guiding Principles
    • Honor the language and spirit of the law of every nation and undertake open and fair corporate activities to be a good corporate citizen of the world.
    • Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in the communities.
    • Dedicate ourselves to providing clean and safe products and to enhancing the quality of life everywhere through all our activities.
    • Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.
    • Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.
    • Pursue growth in harmony with the global community through innovative management.
    • Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits , while keeping ourselves open to new partnerships.
  • Five Main Principles of Toyoda
    • Always be faithful to your duties, thereby contributing to the Company and to the overall good.
    • Always be studious and creative, striving to stay ahead of the times.
    • Always be practical and avoid frivolousness.
    • Always strive to build a homelike atmosphere at work that is warm and friendly.
    • Always have respect for God, and remember to be grateful at all times.
  • Vision & Philosophy
  • CSR Policy: Contribution towards sustainable Development
    • Customers (Principles 1,3, & 4)
    • Employees (Principles 1 & 5)
    • Business Partners (Principles 1 & 7)
    • Shareholders (Principles 1 & 6)
    • Global Society / Local Communities
      • Environment (Principles 3)
      • Community (Principles1,2,3 & 4)
      • Social Contribution (Principles 2)
  • Vision & Philosophy
  • 3 Sustainable Concepts
  • Vision & Philosophy
  • TPS - T oyota P roduction S ystem -Quality must be built in during the manufacturing process!- If a defective part or equipment malfunction is discovered, the machine concerned automatically stops, and operators stop work and correct the problem. For the Just-in-Time system to function, all of the parts that are made and supplied must meet predetermined quality standards. This is achieved through jidoka. Making only "what is needed, when it is needed, and in the amount needed!" Producing quality products efficiently through the complete elimination of waste, inconsistencies, and unreasonable requirements on the production line. In order to deliver a vehicle ordered by a customer as quickly as possible, the vehicle is efficiently built within the shortest possible period by adhering to the following:
  • Jidoka Jidoka means that a machine safely stops when the normal processing is completed. It also means that, should a quality or equipment problem arise, the machine detects the problem on its own and stop, preventing defective products from being produced. As a result, only products satisfying the quality standards will be passed on to the next processes on the production line. Since a machine automatically stops when processing is completed or when a problem arises and is communicated via the "andon (problem display board)," operators can confidently continue performing work at another machine, as well as easily identify the problem cause and prevent its recurrence. This means that each operator can be in charge of many machines, resulting in higher productivity, while the continuous improvements lead to greater processing capacity.
  • Jidoka
  • J ust- I n- T ime
    • When a vehicle order is received, a production instruction must be issued to the beginning of the vehicle production line as soon as possible.
    • The assembly line must be stocked with small numbers of all types of parts so that any kind of vehicle ordered can be assembled.
    • The assembly line must replace the parts used by retrieving the same number of parts from the parts-producing process (the preceding process).
    • The preceding process must be stocked with small numbers of all types of parts and produce only the numbers of parts that were retrieved by an operator from the next process.
  • JIT – Kanban System
  • Four Rules of TPS
  • TPS
  • Toyota Production System
  • The Three TPS Pioneers Built-In-Quality Sakichi Toyoda Just-in-Time Kiichiro Toyoda Pull Systems Taiichi Ohno
  • Comments – Kiichiro Toyoda
    • “ I plan to cut down on the slack time within work processes and in the shipping of parts and materials as much as possible. As the basic principle in realizing this plan, I will uphold the just-in-time approach.
    • The guiding rule is not to have goods shipped too early or too late.”
    • Kiichiro Toyoda, founder of Toyota Motor Company, 1938
  • Comments – Taiichi Ohno
    • “ All we are doing is looking at the timeline from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time by removing the non-value added wastes”
    • Taiichi Ohno, 1988
  • Hard Times Led to TPS Don’t manufacture defective parts. Get rid of them on the spot.
    • JUST-IN-TIME PRODUCTION
    • What is needed,
    • When it is needed,
    • in the right amount, &
    • in the right quality
    Don’t buy any unnecessary materials and don’t deliver them. Don’t produce products without any order. Sell products as soon as production is completed Non-Debt Management
    • JIDOKA
    • Don’t pass the defective parts onto the following process
    Toyota Production System
  • Hard Times led to TPS
    • TPS started after World War II
    • It began to be noticed after 1973’s oil crisis
    • In 1974 Japan’s economy was in a state of zero growth
    • Toyota was able to somehow sustain strong earnings in 1975, 1976, and 1977
  • Product Order Information
  • Timely Production
  • Replacement of Parts Used
  • Production of Parts Retrieved
  • JIT http://www2.toyota.co.jp/en/vision/production_system/video.html
  • Vision & Philosophy
  • Globalizing & Localizing Manufacturing
    • Among these the most important is “quality assurance,” which requires that “no matter where Toyota vehicles are made, they have the same quality.” To put it another way, we don’t put a label on our vehicles which says “Made in such and such a country;” we put the same label on all vehicles which reads “Made by TOYOTA.”
    • This means that we need to spread Toyota’s manufacturing philosophy — the “Toyota Way” — to all of our overseas bases. And on top of this it is important that we minimize the necessary support that comes from Japan and let each of our overseas bases become self-reliant. For example, the Toyota plant that recently commenced production in Texas made maximum use of the know-how which has been cultivated over the past 20 years by the Toyota plant in Kentucky. This is just the latest example of how the localized “Toyota Way” is being passed on overseas.
    • Toyota believes that the way to achieve “quality assurance” and to “spread the Toyota Way” is by educating people: "Making things is about developing people.” So, in 2003, we established the Global Production Center (GPC) within the Motomachi Plant in Toyota City. Furthermore, in 2006, we established regional GPCs in the United States, the United Kingdom and Thailand to carry out corresponding activities in the North American, European, and Asia-Pacific regions respectively.
    • Part of the “Toyota Way” is “Respect for People.” “People” in this case, of course, means customers, but it also includes the people in the local communities and Toyota employees. Toyota values all of its stakeholders and strives to meet the expectation of people in every part of the world for it to be a good corporate citizen.— I hope that the details contained here will show you what Toyota is doing to meet this goal.
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Appendix
  • Introduction
    • Objective is understanding process details, as well as the logic associated with their success – enable adoption of these ideas in both manufacturing and service contexts.
    • Provide Insights into
      • How Toyota uses Learning (L) processes to implement practices and principles, both within Toyota's CF Organizations as well as with Toyota's partners (including suppliers and dealers) – in short, across the extended supply chains.
      • How integrated and synchronized processes enable careful balancing of variety, velocity, variability and visibility (4v's) across the supply chain = 4v's + L = v4L framework
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Appendix
  • Toyota Learning Principles and the v4L framework
    • Learning (L) Principles at Toyota
      • Establish Capability – Unless someone is capable of solving a problem that might arise within the system boundaries set for him or her, that person will be unable to contribute to the problem-solving process and will be unable to recognize the need for specialized help
      • Make Action Protocols – Actions have to be taken within a set of constraints and they must conform to certain standards. Doing so will help in the identification betn action and results. Aid in the codification of knowledge for future use.
      • Generate System-level awareness – As experience with solving problems is obtained, greater awareness of other areas that might be affected by actions or that might impact one's own performance needs to be created
      • Produce the ability to teach – As system-level awareness and experience accumulate, the capability to teach others about these methods needs to be in place
      • Create Awareness – Unless problems are seen, they will not be solved. Systems need to be in place to report ideas, problems, deviations and potential issues to a direct team leader with no delay
  • v4L Principles
    • Variety: Variety of products offered = Careful selection
    • Velocity: Velocity of Product Flow = Steady Flow
    • Variability: Variability of outcomes against forecast = minimize variability
    • Visibility: Visibility of processes to enable learning = increase visibility across the SC
    • KEY POINT – Balancing variety, velocity, variability & visibility across the supply chain and applying the learning principles for each 4v's
    • THINK –
        • How Your Company supply chain achieves this balance???
        • How Choosing or focusing only on Variety affects Velocity, Variability, Visibility and Total Cost down the supply chain???
        • Following the Four Rules of TPS
  • Contents
    • Global Automotive Industry
    • The Beer Game – The Traditional Method
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Appendix
  • Comprehensive Overview of Supply Chain
    • Physical Processes
    • Operational Processes
      • And finally
    • Planning Processes
  • Comprehensive Overview of Supply Chain
    • Physical Processes
      • Suppliers
      • Inbound Logistics
      • Production
      • Outbound Logistics
      • Dealers
    • Physical Processes
    • Operational Processes
      • And finally
    • Planning Processes
  • Comprehensive Overview of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales Ordering/forecasting
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
    • Physical Processes
    • Operational Processes
      • And finally
    • Planning Processes
  • Comprehensive Overview of Supply Chain
    • Relationship of Processes to Physical Flow
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Mix Planning
    • Vehicle or Product Specification – Standard Options, Color & Accessories
    • OBJECTIVE:
        • To reduce the variants of each vehicle manufactured or Product Specifications
        • To carefully manage dealer-level product demand for stable production at manufacturing plant
        • Enabling stable orders to suppliers (Tier 1 -> Tier2...) ‏
        • Stability permits nip some of the demand variability in the bud
        • Stability permits focus on improved quality, cost reduction, and higher value to customers enabling higher customer satisfaction and retention
    • Higher value is attributed to VARIETY reduction, VARIABILITY control, improved VISIBILITY across the chain and higher VELOCITY.
    • Responsibility: “ Sales & Marketing”
      • Supportive Divisions - “Product Planning, Design, Purchasing, Operations”
  • Mix Planning
    • PROCESS
      • It is conducted during MAJOR or MINOR Model Change Or Model Year, adjusted annually about 12months prior to New Model Introduction
        • Marketing strategies for each region to be synchronized with Product Offerings
        • Manufacturing to fill the supply chain pipeline with parts
        • Sales Regions to order vehicles to have in stock in time for new model launch
      • SIMPLE DECISION
        • Planned Offerings PO == 20% of Product Range = 80% of Demand in a particular Region
        • PO in a region IS A SUBSET (all available product types or all product types in the national market) ‏
        • KEY is it is easier to add variants after the vehicle is launched than it is remove them == Lean Side to complexity after analyzing sales history, trends & competitive offerings, which is called SNOP
  • Mix Planning
    • Steps in (or before) Mix Planning
      • Complexity Reduction: Through collaboration among Product Planning, Design, Sourcing, Sales & Marketing.
        • Product Planning, Design, Sourcing
          • 80% of Manufacturing Cost is fixed at the design stage
          • Standardization of parts across products
          • Consider making high-volume options as standard & low-volume as options
          • Minimize parts that vary by color & options
          • Source Optional Parts (difficult-to forecast parts) to Local Sourcing
          • Increase Accessories Parts
        • Marketing
          • Converting Product offerings into Economy, Deluxe & Luxury + Option bundles or packages
          • Limit Product Offerings for a market area – targeting local area demand
  • Mix Planning
    • Mix Planning by Sales Region
      • Sales Division works closely with each sales region to determine which subset of vehicle mix will be the high-volume sellers in each region
        • Guidelines
          • Limit SKUs (stock keeping units) : Determine which variants will be stocked by a sales region
          • Analyze Past Sales, competition offerings, and local regulations to predict demand for future sales
          • 80/20 Rule: 20% of SKUs accounts to 80% of sales
          • Target Marketing Plans or Campaigns to support mix planning by region
          • Manage unpredicted demand: It is better to lose a sale than to have an unhappy customer through “Guided Selling Sales Technique”
  • Mix Planning
    • Mix Planning Details – How the Mix Planning is performed by the Toyota Sales Company
      • Determine the volume of vehicles that is expected to be sold by region
      • Determine the Volume by Region based on % Market Share of each region
      • Break the Planned Volume into the volume of sales by Vehicle Model
      • Combining Step 2 & 3 to determine Distribution of Vehicle Model by Region
      • Decide on the number of Variants for each model. (80/20 Rule = 20% of variants represents 80% of the volume) ‏
      • Decide on which of these variants will be sold in each region – Determine the Mix of Variants by Region
      • Finally, decide Color for each Model & Variant
      • Summary, Quantities of Color of each variants that is expected to be shipped to each region of a Specific Vehicle or Car.
  • Mix Planning – Sample Exercise
  • Mix Planning – Sample Exercise
  • Mix Planning
    • Reflection Points
      • So How does Variety hurt a company?
      • Variety: Selected by Region (Local to Global) representing the popular mix demanded.
      • Velocity: Is maintained by Limiting Variety by choosing variants accounting to 80% of the demanded Offerings. Faster Response to Customer with decreased rate of Inventory Turns at dealer
      • Variability: Is reduced by synchronizing Sales and Operations Planning to focus on a FEW VARIANTS (~20%) by REGION. These choices are adjusted in response to observed sales.
      • Visibility: Of this Planning Process across Sales & Operations enables ACCURUATE DEMAND FORECASTING, LIMITING THE IMPACT OF UNPREDICTABILITY OF LOW VOLUME VARIANTS, & STABILISING THE OPERATIONS & SUPPLY CHAIN
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Sales And Operation Planning
    • OBJECTIVE:
      • To provide Monthly Production Order and Forecast
      • Responsibility: “Sales & Marketing” supported by Operations
    • PROCESS:
      • Sales Division determine their request by Analyzing Recent Sales, Stock levels, Marketing Promotions, Seasonality Changes etc.
      • Both Sales and Production collaborate to agree on the total planned vehicle volume for next three months
      • Sales Division allocates the total volume by model to each region based on sales performance.
      • Each Region uses the mix plan along with the recent sales trends to create the quantity of each BC for each month for each vehicle model
      • Mix or Target Plan is compared to Actual Mix of Sales & Stock to determine which BC needs to be ordered to maintain the target level of mix for stock
      • Each Regional office then, submits the Order & Forecast to Sales Divisional HQ's, being checked before it is forwarded to the Production Divisional HQ's to create a production schedule
  • Sales and Operation Planning Mix Planning SNOP Production Scheduling
  • Sales and Operation Planning
    • At Toyota,
    Regional offices Toyota Dealer Monthly Allocation Process Monthly Vehicle Order Production Plan Top Down Approach OEMs Dealer Monthly Vehicle Order/Sales Bottom Up Approach Sales Office
  • Sales and Operation Planning SNOP Annual Planning Monthly Order Internal Capacity Planning Supplier Capacity Planning Production Planning Process Global/Regional Allocation Final Sales Order Preparation
  • Sales and Operation Planning
    • Objective: To establish a Rolling 3year sales and Production forecast.
    • Repeated Semiannually to update forecast based on the latest market and economic conditions
    • Annual forecast is used throughout the company – Project Profits, Establish Capital and Operating Budgets, Evaluate Plant and Supplier Capacity Requirements, Conduct APRs with Suppliers, Influence marketing strategies.
    Annual Planning Monthly Ordering
    • Objective: To establish a Rolling 3 month Production plan Order & forecast.
    • Repeated Every Month beginning for the subsequent Month
    • A joint focus by Sales & manufacturing on the monthly order ensures that all perspectives are balanced and the logic for the decision is clarified.
  • Annual Planning Process
    • Responsibilities of Sales
      • Grasp the Market & Economic Conditions
      • Predict Competitive Product Plans & Strategies
      • Understand New Product Launches
      • Marketing Plans
    • To create a SALES FORECAST for each MODEL for each MONTH and YEAR
    • Responsibilities of Manufacturing
      • Determine the operating capacity for each MODEL
      • Evaluate various model mix scenarios
      • Identify peak and valleys in the Production Calender created by model changeover schedules
    PUSH-PULL Momentum
  • Annual Planning Process
    • Capacity Planning
    • Internal Plant Capacity Review
      • Purpose is to calculate the upper & lower limit of its operations rate for each product
      • Production Capacity planning is Annual or semiannual process
      • Using the Annual Plan Volumes as a forecast, variables are assessed that impact capacity (Operations Rate – Labor & Facility/Equipment) ‏
    • Supplier Capacity Review
      • To identify the potential weak link in the Supply Chain
      • Upper & lower range of production for each part and supplier
  • Monthly Order Process
    • 3-Month Rolling Process – Global Process Managed by TMC
      • N (current month), N+1 & N+2 subsequent two months
      • N month – Firm Order
      • N+1 & N+2 are forecast order subject to changes
    • Production Calendar?
    • Production Planning Process
      • Monthly Production Order
        • Operations Plan by Each Plant (AM, EU, Africa, Asia & Oceania) ‏
        • Balance the Worldwide Sales Request with Operations Plan to get the optimum sales and operations plan
        • Global & Regional Allocation- by Sales Companies to each plants region wise.
        • Final Sales Order Preparation
          • Stock Analysis, Mix Analysis, Baseline, Final Order & forecast
        • Sales Aggregation & Adjustment – Comparison of Sales Vs Operations Plan to arrive at Optimum Production Order
  • Sales and Operation Planning Stock Dealer Stock Pipeline Stock In-Transit Sk (or Plant Sk) ‏ Allocated Stock (To be Produced) ‏
  • Production Calendar
  • Mix Planning to SNOP Transformation - Exercise
  • Mix Planning to SNOP Transformation - Exercise
  • Reflection Points
    • Variety – of cars sold is managed by keeping the national aggregate mix stable across time. (packages & colors) ‏
    • Velocity – of sales in a region is adjusted to match feasible production rates (takt time) at plants.
    • Variability – of Production is managed by freezing sales commitments over specified periods. Variability of sales is managed by adjusting sales incentives to deliver planned sales.
    • Visibility – is ensured by tightly linking sales and operations plans, developing them collaboratively with buy-in, and deploying them across the system.
    • Key Learning Principles are used to ensure Learnability from Plan, Do, Check and Act
    How Does Toyota's S&OP Compare to Yours?
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Production Scheduling
    • OBJECTIVE:
      • To assign Production Date and Sequence to each vehicle from the Monthly Order & Forecast – Production Schedule – leveled across each day of each production month using the heijunka principle.
    • INPUTS or Awareness
      • Understanding of Assembly Plant Operations
      • Scheduling Inputs
        • Month (N) Order and Forecast Order (N+1, N+2) ‏
        • Production Calendar
        • Operations Plan
        • Constraints (limits) ‏
    • Responsibility: “ Production Control Division”
  • Understanding of Assembly Plant Operations
  • Production Scheduling
    • Scheduling Process:
      • Use the Sales Order and Forecast data to create individual records for each vehicle and assign a unique reference number (URN) ‏
      • heijunka process is used to schedule the vehicles by day, by line, by plant. (called as “Mixed Model Production”) ‏
        • To avoid supply chain congestion, work load imbalance, etc
        • To smooth capacity requirements and balance use of resources
        • Extends to Parts Supplier by leveling the order load. (day to day order variation is within +- 5%) ‏
      • Sales Orders such as Fleet, or Special Request Customer Orders are scheduled during the first week of the Month so the customer will receive vehicle ASAP.
      • Remaining Sales Orders are grouped by BC’s and spread thru out the month evenly
      • Sum of each option for each day is checked against the constraints
      • Reshuffle some orders to meet the constraints --- > Priority Weighting is assigned to each option to determine its Ranking based on Demand, Production and Supply Rate
      • Also the destination of Vehicle is considered as one of the heijunka factors for even flow to each region contd...
  • Production Scheduling
    • Scheduling Process:
      • Use the Sales Order and Forecast data to create individual records for each vehicle and assign a unique reference number (URN) ‏
      • heijunka process is used to schedule the vehicles by day, by line, by plant. (called as “Mixed Model Production”) ‏
        • To avoid supply chain congestion, work load imbalance, etc
        • To smooth capacity requirements and balance use of resources
        • Extends to Parts Supplier by leveling the order load. (day to day order variation is within +- 5%) ‏
      • Sales Orders such as Fleet, or Special Request Customer Orders are scheduled during the first week of the Month so the customer will receive vehicle asap.
      • Remaining Sales Orders are grouped by BC,s and spread thru out the month evenly
      • Sum of each option for each day is checked against the constraints
      • Reshuffle some orders to meet the constraints --- > Priority Weighting is assigned to each option to determine its Ranking based on Demand, Production and Supply Rate
      • Also the destination of Vehicle is considered as one of the heijunka factors for even flow to each region contd...
    Why is Heijunka Important? To Ensure that its own assembly plants are operating in an efficient & effective manner while at the same time extending stability throughout the supply chain Cost of Sales = Total Cost of Operating the Supply Chain, not just Toyota Internal Production costs. EXAMPLE-Supplier to Dealer Example of How Heijunka can positively impact all elements of Supply Chain (Suppliers, IL, Assy Opns, OL, Dealers) Used to create a smooth flow of parts from supplier to plant & smooth flow of vehicles from plant to dealers
  • Production Scheduling
    • Scheduling Process (contd…):
      • Goal of heijunka is to balance the rates or flow
      • After heijunka, each order is assigned the schedule production day (i.e. Schedule line-off day) ‏
      • This Day Wise Schedule is sent back to Sales with a scheduled build date for each vehicle. A copy is also sent to the parts ordering group at each assembly plant.
    • Production Sequencing:
      • Exact Sequence of each vehicle within each production day
      • Daily Production Plan is the Input and the output is a Production Sequence for each day
      • This Production Sequence is used by the plant to create the parts orders.
      • And also as input to the assembly line control systems to start the vehicles in the correct sequence
  • Production Scheduling
    • Scheduling Process (contd…):
      • Goal of heijunka is to balance the rates or flow
      • After heijunka, each order is assigned the schedule production day (i.e. Schedule line-off day) ‏
      • This Day Wise Schedule is sent back to Sales with a scheduled build date for each vehicle. A copy is also sent to the parts ordering group at each assembly plant.
    • Production Sequencing:
      • Exact Sequence of each vehicle within each production day
      • Daily Production Plan is the Input and the output is a Production Sequence for each day
      • This Production Sequence is used by the plant to create the parts orders.
      • And also as input to the assembly line control systems to start the vehicles in the correct sequence
    Why is Production Sequence Important? Becoz the assembly plant operations need to be well balanced to ensure that there are no bottlenecks within the production process or overburden on selected teams. Guarantee Smooth Operations thruout the assembly process. To estimate the Line-off Time of each vehicle to be used by Sales to calculate the ETA, to Dealers to Customers Also, to estimate to time of Part Ordering & Shipping from the Supplier so that Parts reach JIT at Workstation.
  • Production Scheduling
    • Sample Production Plan
      • We have 10 Vehicles to be Scheduled over a period of 5 day
      • Task is to Create a Production Schedule to achieve level quantity of each option
  • Sample Production Plan
  • Sample Production Plan
  • Sample Production Plan
  • Reflection Points
    • Variety – of Production is planned and distributed across periods (using heijunka) to balance tasks ‏
    • Velocity – of Production is maintained using a rate-based planning of flows balanced across the supply chain. By eliminating bottlenecks, Velocity is maintained.
    • Variability – of Production is curtailed with heijunka to smooth out workload and loadings. That variability reduction enables suppliers to plan their capacity reliably and thus lower costs.
    • Visibility – is ensured by eliminating inventories, simplifying planning, ensuring buy-in, and so on.
    • Key Learning Principles – Using Heijunka, Intensive Apprenticeship, Documentation with Visual Controls.
    How Does Toyota's Scheduling Process Compare to Yours? Heijunka Run Production Schedule Vs MPS, FAS & MRP Run Production Schedule.
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Parts Ordering
    • Parts Are Divided Into Four Categories
      • Local Procured Parts
      • Long Lead Time Parts
      • TOYOTA In house Parts
      • Sequenced Supplier Parts
    • Common Parts Ordering Process
      • Necessary Parts Quantity -  Production Schedule + BOM (PSMS)
      • Parts & Supplier Master Database
        • Part Master – Part Name, Supplier, Lot Size and Vendor Share
        • Supplier Database – Supplier Name, Location, Lead Time & Shipment Frequency
      • Forecast Weekly – 13Wk Rolling
  • Parts Ordering
    • Local Parts Ordering
      • Operational Performance Daily Data
        • (Last Vehicle lined off, current operation schedule, installation points, time offset from line off, prior-day usage of parts based on kanban)
      • Key information for each supplier
        • Parts numbers for each supplier
        • Lot Size for each part
        • Location of the Supplier’s Plant and the lead time
      • PROCESS:
        • Determine the adjusted Vehicle Production Schedule based on latest operating conditions (refer table )
        • Based on the Revised Schedule, Parts Ordering is carried out to avoid muda
        • Actual Order by Lot and Shipping time is determined after part quantity for each supplier is calculated.
        • “ Small Lots, Frequent Deliveries” Principle
        • Parts to be order / Lot Size == No. of Lots per day / Shipments per day == Lots per shipment
  • Parts Ordering
    • Long Lead Time Parts (MSP – Material Scheduled Parts or Imported Parts, either Japan or Thailand or Indonesia)
      • Rundown for MSP parts to adjust the Freeze Point Variation to the already ordered parts long time back due to long lead time
      • The adjustment is based on Daily Production Sequence due to Different Working Calendar at Different Countries (refer table)
      • Heijunka is followed for even MSP parts so that Overseas Supply Chain Management is stable
      • In case of Overcapacity of Suppliers Overseas, then the excess-in quantity is adjusted backwards but again the production sequence required
      • Rundown Schedule is created at the beginning of each month, however, the actual parts orders are created on a daily basis. (allowable change is +-10%)
      • Safety Stock = 1000/wk * 10% = 100/wk * 6 Weeks = 600 units of safety Stock
  • Parts Ordering
    • Inhouse Parts – Material Produced inside the Toyota Plant namely Stamping and Plastic Parts
      • Kanban is the process used for Inhouse and Local Suppliers Parts Order.
      • Kanban is TWO BIN or Card System,
      • One Card represents one Part and the ONE BIN Quantity
      • Each Moving Container contains a Card which specifies the Part, Quantity,
      • When the USER Department consumes all of the Parts, then it places its card on the KANBAN POST which is carried back to the SUPPLY Department periodically
      • So Each Supply Department produces only when the KANBAN is received, otherwise not, Maintaining Heijunka, Production Schedule and ZERO INVENTORY -  JIT
  • Parts Ordering
    • Sequence Supplier Parts – JUBIKI SYSTEM
      • Parts which are order ONLY AT THE ENTRY OF ASSEMBLY LINE
      • RF Barcode sends FAX to the Supplier mentioning the Production Sequence based on the Lead Time (in HOURS)
      • Suppliers Produces only the Parts which are sequenced for the LEAD TIME HOUR based on the Fax
      • The Parts from the Supplier is picked by TLI every 20 or 30 minutes based on Transportation Lead Time,
      • Which reaches the Workstation of the Assembly Line, when the Relevant Vehicle reaches its assembly Station
      • Examples of Parts – Seat Assembly, wheel Assembly etc
      • THIS IS THE PERFECT JUST-IN-TIME model or LEAN MANUFACTURING with ZERO waste or Inventory or Muda.
  • Plan Vs Adjustment Exercise
  • Rundown Exercise
  • Reflection Points
    • Variety – of parts is maintained by Linking Parts Delivery to Production ‏ Sequence
    • Velocity – of parts flow is directly linked to Production Sequence & takt time, linking Supply Velocity to Production Velocity
    • Variability – of Parts order is controlled by daily adjustment based on Heijunka Principle (+-5% for Local Parts, +-10% for MSP parts)
    • Visibility – is maintained by tightly linking deliveries and lots to Production Sequence, Which permits Dealer Order Changes to be accommodated by direct adjustments to part orders.
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Managing Suppliers
    • Imagine, You are a supplier to Toyota
      • What is your role in the Toyota Supply Chain?
      • What is your expected productivity improvements over time?
      • How would your experience as a part of Toyota’s supply chain differ from your experience supplying to other auto OEMs?
      • How would your processes have to operate to synchronize with Toyota’s system?
      • How would you have to adjust organizationally to collaborate with other suppliers to Toyota?
      • How can the v4L framework enable an understanding of Toyota’s supplier management system and its impact across the supply chain?
  • Managing Suppliers
    • Links To TOYOTA Processes
      • As discussed, Toyota strives to reduce Variability to ensure stable operations by systematic mix planning, careful sales and operation planning, and sensitivity to the impact of product changes throughout the supply chain.
      • As discussed, Toyota Limits the Variety of Choices to Customers and instead guarantees Superior Product Quality on the available choices
      • Thus, for Toyota’s Strategy to limit customer choice to be competitive, it must result in a significant improvement in Product Value to the customer.
      • So, Suppliers Play a Major Role in Toyota’s Supply Chain, the value creation must begin at the SUPPLIERS.
      • Since the SUPPLIERS are offered stable order commitments by Toyota, they are expected to use this opportunity to develop superior quality products and achieve productivity improvements.
      • Thus, the SUPPLIERS responsibility is to capitalize on the order stability and deliver quality & Cost improvements to a level that makes the supply chain competitive.
      • And the Toyota Suppliers must be FLEXIBLE to respond to daily order changes. For example, Sequence Suppliers wait until about 4hours prior to delivery to receive the final order.
  • Managing Suppliers
    • Choosing Suppliers
      • Toyota’s Goal is to minimize the number of suppliers and create long-term partnerships by nurturing existing suppliers to expand and grow with Toyota instead of growing the number of suppliers to induce competitive price bidding.
      • Being a Supplier of Toyota, brings along with it an opportunity to receive ideas generated across the supply chain through Innovations Sharing with other similar suppliers in the supply chain. (Simultaneous Learning)
      • Individual Suppliers receive a contract for a fraction of total market over the life of a model.
      • Suppliers are promised either all of the orders associated with a market segment (eg. Exports Vs Domestic) or a Fixed Fraction of a certain market (eg. A fraction of the domestic market volume) or all of the orders for a particular car model.
      • Goal of the Supplier is to maintain Delivery Performance, High Quality, Productivity Improvements and so on, over the life of the model.
      • Key Features of Choosing Suppliers are closely linked suppliers, long-term relationships, frequent collaboration, exchange of employees between companies over long periods, cross linked shareholders and so on.
  • Managing Suppliers
    • Toyota Supplier Selection
      • A Supplier must meet extreme tough conditions to qualify
      • Main Evaluation factors are
        • Assessment of Management Attitudes
        • Production Facilities (Control & Engineering)
        • Quality Levels
        • R&D capabilities
        • Manufacturing (Capacity, Operation Efficiency)
        • Excessive Amount of Information Sharing
        • Value Engineering Capability etc
      • Toyota chooses suppliers across multiple tiers so as to guarantee availability of innovative solutions across the supply chain (Tiered Supplier Organization)
  • Managing Suppliers
    • Pressure on Suppliers to Perform
      • Maintained by Staggered System of Model Changes, which in turn entails Staggered System of Negotiations
      • Usual Price Commitments by Toyota is for a One-Year Period, prices are reviewed every six months, but the contract award is kept in place over the model life
      • Absence of Desired Performance after winning the contract will jeopardize chances to win a contract for other vehicle models made by the same supplier
    • Depth of Supplier Relationships
      • Upto 6 levels of Relationship exists between Toyota & Supplier
        • Toyota Provides Drawings and detailed Manfg instructions (Sub-Con)
        • Toyota Provides Drawings but the supplier designs the manufacturing process (eg Stamping)
        • Toyota Provides rough drawings and entrusts the completion of the drawing and the entire manufacturing process to the supplier (eg Plastic parts for Dashboards)
        • Toyota Provides Specifications while the Supplier Generates the drawings, but Toyota has detailed knowledge about the manufacturing process (eg. Seat Assy)
        • Toyota Provides Specifications, the supplier generates the drawing but Toyota has limited knowledge about the manufacturing process (eg Brakes, Bearing, Tires)
        • Toyota Purchases the product out of a catalog, commodity off-the-shelf items.
      • Shukko refers to type of transplant who may well spend his or her entire career at the supplier facility managing the relationship on behalf of Toyota
  • Managing Suppliers
    • Assisting Suppliers
      • Key Feature of Toyota Supply Chain is the role in Supplier Capability Development
      • JISHUKEN is a closely knit gathering of middle-level production technologists from a stable group of companies who jointly develop better capabilities for applying the TPS through mutual criticism and concrete application
        • Each jishuken company chooses a specific theme but works within the broad policy direction set by Toyota’s OM Consulting Division
        • The Supplier typically hosts a study over two months; Toyota Senior Engineers visit the supplier three times every two months while Junior Engineers visit more frequently.
        • Members of the jishuken group meet every week
        • The study sessions consist of concrete performance targets such as productivity, cost reduction, inventory turns and the like
        • Most of the kaizen ideas generated are implemented during the two months
        • At the end of the year, jishuken groups gather in one location to present their achievements
  • Managing Suppliers
    • Assisting Suppliers
      • Two Types of Assistance are provided
        • Individual
          • Individual Assistance is to get some quick results
          • Focus is to deal with an immediate supplier problem such as share drop in profits or difficulty in keeping up with a model launch
          • Toyota Experts go to supplier, observe and suggest improvements
        • Group
          • The Jishuken Group develops supplier personnel and also assists Toyota.
          • Toyota retains the manufacturing know-how for components it does not produce in-house, due to frequent jishukens.
          • This approach enhances Toyota’s Capability to do target costing – a technique to manage and reduce costs over a product’s life cycle.
            • Toyota has created a KAIZEN PROMOTION Section within the purchasing department
            • The group works with suppliers to decrease pay and cut investments and long-term capability
            • Suppliers Productivity improvement results may not even be communicated to the purchasing group, instead, supplier is permitted to keep the gains from improvement due to Toyota’ s assistance.
  • Managing Suppliers
    • Assisting Suppliers
      • Examples
        • Supplier Association
        • Toyota Supplier Support Center (TSSC)
          • Suppliers are encourage to share their best practices among the supply chain
          • Ability to see a working solution increases the chance that suppliers can replicate that knowledge.
        • Toyota Consultants visited XYZ company every day for 4 months to provide ongoing support for the next five years
        • TSSC suppliers have seen productivity (output per worker) increase by 123%, and inventory reduced by 74%.
        • A supplier of metal Stampings, found only 4 value-added steps out of 30, but with TSSC and Company jointly reconfigured the production system and through process changes, eliminated 19 steps. Setups were reduced from 2hours to 12minutes
        • Suppliers also go to keep all their benefits
        • Ultimately, Toyota does reap benefits during the annual price reviews through a target pricing in which customer price is defined and used to work backward to a supplier cost target.
  • Managing Suppliers
    • Assisting Suppliers
      • CCC21 System – 30% Cost Reduction Target ($10Billion Savings in five year from 2000)
      • Supplier Guest Engineers & Quality Resident Engineers
      • Supplier Location Decision
        • Planning Rule: 50-mile-per-hour travel time
        • In Japan, 85% of Suppliers are located within 50 mile radius of a plant with one-hour drive
        • In NA & EU, 80% of the parts are delivered within 3-4days lead time
        • Supplier Location Closer to Toyota results in lower inventories for the supplier and assembly plant
        • So, Toyota Expectation from New Supplier is to consider building factories near Toyota Plants.
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Logistics
    • Logistics
      • Inbound Logistics
      • Outbound Logistics
    • Inbound Logistics
      • Local Inbound Logistics
      • Import Inbound Logistics
    • Objective
      • A lean Supply Chain operation that requires parts be transported from the suppliers in an efficient and timely manner, therefore, Toyota Establishes a partnership with limited number of 3PLs to deliver logistics services
  • Logistics
    • Local Inbound Logistics
      • Process
        • Organize suppliers into cluster based on geographical location
        • Parts are picked up from those clustered suppliers by trucks on a “Milk Route”
        • And delivered to the Cross Dock
        • At Cross Dock, parts are unloaded and staged for pickup and delivery (as per Heijunka Production Schedule & Sequence of each plant) to each Toyota Plants
        • After the trucks arrive at the Plant, the trailer is disconnected and parked in a numbered space in a staging lot.
        • The trailers are not unloaded until the production progress triggers the need for the trailer to be unloaded.
        • THIS WAY, all incoming parts and deliveries are synchronized to the production rate -  Just-In-Time
  • S1 S2 S3 C1 S3 S4 S5 C2 Cross Dock CD 1 Cross Dock CD 2 Plant P1 Plant P2 T1 T3 T4 T6 T5 Full Containers Empty Containers Parts Order & Schedule- Heijunka Pick-Up Schedule- Heijunka T2 Logistics Network
  • Logistics
    • Local Inbound Logistics
      • Route Planning
        • Is a Key Function that ensures efficient and effective operations
        • Done Once per month & is based on the next month Production Plan
        • Without Heijunka, Route Planning is not feasible – developing a daily logistics route schedule and repeating it for the whole month
        • INPUTS required by Planner
          • Locations of the Suppliers
          • Cross-docks
          • Manufacturing plants
          • No. of packages or containers of parts to be picked up from each supplier each day
          • Destination of Cross-dock and plant these materials are to be delivered
          • Container Stacking Arrangement inside the Truck to avoid “blowouts”
          • Road Routes, Distances betn all potential to/from destinations
          • Total miles, miles per hour, no. of trucks needed, no. of drivers needed, risks etc.
          • Toyota Assumes 50mph speed of trucks and provides a desired route and travel time for deliveries
          • Such Detailed Planning provides the plant with a good estimate of deliveries, and thus permits synchronization of parts flow with plant requirements.
  • Logistics
    • Local Inbound Logistics
      • Pipeline Management
        • “ Parts Pipeline” is defined as all parts that have been ordered from a supplier and have not been unloaded at the receiving plant
        • Pipeline Management is the Process of exact tracking of status of each parts order.
    Plant Supplier EDI Order & Kanban Bar code label Advanced Shipping Notice ASN no. T1 Scan Kanban CD T2 Scan Kanban
  • Logistics
    • Overseas Inbound Logistics
      • Vanning Center
      • Vanning Packaging Process
      • Normally there would be 3-5days inventory at the Parking Lot
      • Unloading Process is similar to Local Parts
      • “ Tapping” in case of emergency like Parts Shortage
        • Excessive Workload on the team members
        • Parts Overflow
        • Impact of Variability is managed by buffer inventory for overseas logistics and Visibility of the Pipeline
      • Long Lead Time Pipeline management
        • Since the Orders are placed 5-6weeks before actual requirement, the Freeze Point Variations count to parts shortage or excess, this variation is compared to the pipeline inventory day to day basis for Advance VISIBILITY, necessary decisions like air shipping is made and appropriate adjustments are made for the upcoming orders and
  • Outbound Logistics
    • Also known as Product Distribution
      • Although Toyota considers outbound logistics providers to be its partners, those partners are not dedicated to Toyota because no one 3PL provider can control all transportation activities from Plant to Dealer end-to-end.
      • Therefore, Toyota Relies on Common Carriers, railroads to transport its vehicles from plant to dealers
    Vehicle Distribution
  • Marshaling Yard Operations
    • Even though Final Steps, this Operation is extremely important; as it ensures the efficient and timely delivery of vehicles to the final destination.
    Weekly Forecast “ Bi” & “Tri” Level Coaches
  • Marshalling Yard Flow
    • Process for Loading
      • Stage for Rail or Road Shipment
      • Prestage Empty Rail or Road carriers
      • Assign Destination to Rail or Road Carriers
      • Load the vehicles
      • Release the Rail or Road Carrier for Shipment
    • Tracking Process
      • Road or Rail Carriers provide real-time report of progress of each rail or road car.
        • ETA = FQA (final quality assurance) + estimated delivery elapse time
    Key Point: a) Vehicle Design has a negative or positive impact on the supply chain operations and costs  “Bi” or “Tri” Selection b) Logistics Mangers are imperative to consider the impact on downstream operations when they are establishing or modifying processes
  • Logistics
    • Reflection Points
      • Variety: across vehicle affects vehicle height, which affects loading efficiency and same cascading effect to inbound logistics
      • Variability: is managed by combining pickups across suppliers to create milk routes and the use of cross-docks.
      • Velocity: Parts inflow, production rate at the assembly plant and rail departures are synchronized to ensure heijunka across the supply chain, enabling steady velocity flow.
      • Visibility across the pipeline of parts inflow plays a key role in maintaining a lean system, particularly for long lead time parts. Scanners, ASN and the like enable visibility across the supply chain. Continuous Monitoring of Outbound flows from the plant all the way to the dealers provides visibility for dealers.
  • Comprehensive View of Supply Chain
    • Operational Processes
      • Mix Planning
      • Sales And Operation Planning
      • Production Scheduling
      • Parts ordering/forecasting
      • Managing Suppliers
      • Logistics
      • Dealer allocation
  • Dealer and Demand Fulfillment
    • Process for Fulfilling Retail Customer Demand
      • Vehicle Allocation
      • Demand Fulfillment Options
      • Dealer Operations
    • Vehicle Allocation
      • First Step: Regional Allocation - National Sales Company allocates vehicle to their regional areas
      • Second Step: Dealer Allocation - The Regional Areas Allocate these vehicles to Dealers
    • Regional Allocation
      • Is Performed monthly, about 6 Weeks prior to the start of the Production Month
      • Purpose: Is to allocate the quantity of vehicles by model to each region ( = % of Total National Market Share) – Regional Vehicle Order (RVO), input to S&OP.
        • Sales Vs Previous Month & Model-to-date Objectives
        • Regional Weather Conditions
        • Regional Economic Conditions and Trends
        • Competitive Strategies that may effect Market Share in a region and necessitate more aggressive marketing strategies
      • Output: RVO -  SNOP  Monthly Schedule  Region
  • Dealer and Demand Fulfillment
    • Vehicle Allocation
      • Second Step: Dealer Allocation - The Regional Areas Allocate these vehicles to Dealers
        • Toyota Brand Allocation
        • Scion/CBU Brand Allocation
        • Lexus Brand Allocation
    • Toyota Brand Allocation
      • Allocation is performed twice each Month (with full vehicle specifications)
      • Turn-and-earn Methodology for FAIR TREATMENT of all Dealers, means, the share of vehicle allocation is based on share of each dealer of the regional market, as calculated based on actual sales performance
      • Once the dealers receive their allocation of vehicles, they have a few days to accept the vehicles. If few are not accepted, then those units are placed in a supplementary pool and offered to other dealers
      • In case of high surplus of some models due to slow sales, the region may offer dealers a financial incentive to take these slow selling vehicles.
      • After the dealers accept the vehicles, they appear in a pipeline inventory report. At this time, dealers can make changes to some of the factory specifications and also add accessories that will be installed at the marshaling yard and/or port.
      • So Dealers know (Before 1.5month) which vehicles are scheduled for Production and when they will be built, they use these information in combination with Current Stock to fulfill demand
  • Dealer and Demand Fulfillment
    • Vehicle Allocation
      • Second Step: Dealer Allocation - The Regional Areas Allocate these vehicles to Dealers
        • Toyota Brand Allocation
        • Scion/CBU Brand Allocation
        • Lexus Brand Allocation
    • Scion/CBU Brand Allocation
      • Is similar to the method of allocating the traditional Toyota Vehicles, with one MAJOR difference
      • Distribution Model: These Vehicles are held at a HUB until the dealer receives a customer contract, accessories are installed, and shipped to the dealer.
    • Lexus Brand Allocation
      • Is similar to the method of allocating the traditional Toyota Vehicles, with one MAJOR difference
      • This Vehicles are allocated to dealers based on a Quarterly Sales Plan. i.e. Based on the forecasted sales of each dealer as a share of each region’s total sales.
      • The allocation share is revised each Quarter to adjust for market changes.
  • Dealer and Demand Fulfillment
    • Process for Fulfilling Retail Customer Demand
      • Vehicle Allocation
      • Demand Fulfillment Options
      • Dealer Operations
    • Demand Fulfillment Options
      • There are four options for dealers to fulfill customer demand:
    • It is important to provide Order-to-Delivery Lead Time for accurate ETA to the dealers to keep the Customer Updated.
  • Dealer and Demand Fulfillment
    • Process for Fulfilling Retail Customer Demand
      • Vehicle Allocation
      • Demand Fulfillment Options
      • Dealer Operations
    • Demand Fulfillment Options
      • There are four options for dealers to fulfill customer demand:
    • It is important to provide Order-to-Delivery Lead Time for accurate ETA to the dealers to keep the Customer Updated.
    • Dealer Pipeline consists of vehicles that have been allocated or assigned to the dealer but have not arrived at the dealer
    • Cars Produced and In-Transit
    • Cars To be Produced, within Fz Pt
    • Cars to be Produced, outside Fz Pt
    • Procedure for Change Request outside Fz Point
      • Dealer Submits the Change Request Online to Regional Sales
        • One-one or one-many or many-one change type
      • Sales checks for the change to swap the requirement with other regional dealers who have the same reverse change request
      • If not possible, then submit the change request to Manufacturing Computer System
      • Manf checks for the change within Set Allowable fluctuation and notifies to deliver the same within 30-40days
      • Or Notify the Sales of Non-Acceptance and take needful action with dealer/Customer.
  • Dealer and Demand Fulfillment
    • Process for Fulfilling Retail Customer Demand
      • Vehicle Allocation
      • Demand Fulfillment Options
      • Dealer Operations
    • Dealer Operations : Dealer after receiving the vehicles from OEM, Have to
      • Hold them in Inventory
      • Negotiate the Sale with a customer
      • Assist in Financing
      • Take a used vehicle for trade (Exchange Trade)
      • Prepare the Vehicle for Delivery
      • Familiarize the Customer with the Vehicle Features & Operations during the Handover process
      • Provide After-Sales Warranty and Service Support (Toyota’s Service Chain Management)
        • Efficient Supply Network to provide reliable supply of Service Parts to Dealers.
        • Train & Help Dealers in providing excellent service
        • Directly Intereact with Customers (TKM has Customer Service Group, Call Center)
  • Dealer and Demand Fulfillment
    • Reflection Points
      • Variety: Dealers work to convince Customers that the limited Variety is compensated by higher Attributed Levels like Product Quality, Reliability, etc
      • Variability: of sales is minimized by mix planning, which restricts variety sold in each region
      • Velocity: of the dealer sales is matched to shipments to dealers to maintain a lean supply chain
      • Visibility: of the product flows is ensured by providing each dealer with a specific delivery date for a car. This date is updated as the product flows through the supply chain. It permits the final customer to have a good idea regarding the expected delivery date.
  • Contents
    • Global Automotive Industry
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
  • Planning Processes
    • Planning Processes
      • The final Processes to complete the picture of the Comprehensive Supply Chain are performed 1 to 3 years prior to actual production. These Processes are as follows:
        • Product Planning & Design
        • Plant Design for Capacity & Flexibility
        • Package Design for Logistics
        • Purchasing
        • Annual Sales and Operations Planning
  • Planning Processes
    • Product Planning & Design
      • Vehicle Design Starts about 3 Years prior to Production and is completed about 18 Months prior to Production
      • Collaboration among Product Planning, S&M, Purchasing and Manufacturing is the Key
      • Standardization of Parts  Maximum no. of Common Parts among various multiple vehicles
      • And Increase Standard Equipments associated with Option & Color.
    • Plant Design for Capacity & Flexibility
      • Designed for Multiple Vehicle Production on Multiple Assembly Lines
      • High Flexibility to shift production volume from one model to another
      • With Takt Time adjustment, Assembly Speed can be increased or decreased to cater to High or Low Demand with 1 -2 Months Lead Time.
    • Package Design for Logistics
      • Strong “Green Policy” for packaging materials, USE only RETURNABLE CONTAINERS
      • Don’t “Ship Air”, Stackable, Lot Size, Quality, etc.
    • Purchasing
      • Responsible for Parts and Component Sourcing, Work Closely with Engineering & Quality
      • Supplier Selection factors:
        • Supplier Capability and Capacity, Current Supplier Base, Price, Location, Localization Targets etc
        • High Variability Parts Supplier are selected close to the Assembly Plants
    • Annual Sales and Operations Planning
      • S&M and Manufacturing must Collaborate on the Annual Plan for all Vehicles Sold and Produced within a market
      • Manufacturing and Sales Goals Naturally Conflict, Manufacturing Objective is to operate at full Plant Capacity with Stable Volume and to minimize interruption during model changeover
        • Where as Sales Objective is to maintain flexibility in order to change production volume as market demand shifts and to avoid producing too many vehicles of old models when a new model is scheduled to be introduced.
      • ONE COMMON objective is to maximize Profits
  • Contents
    • Global Automotive Industry
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Conclusion
  • Beer Game – Toyota Method
    • Rules of the Game
      • Production is Planned once every 4 weeks and kept stable for the next 4 weeks.
      • At each 4 Wk Cycle, Retailer & Factory would collaborate to forecast demand
      • With Recent Trends, stock adjustments, and backlog condition, are all evaluated to determine next production level
      • Retailers are provided some level of safety stock (inventory) to fulfill expected demand. Any additional spike in demand is placed on back order to be filled at the next planning cycle.
      • The Cycle Starts at the factory and production is based on the latest 4Week forecast
      • Two Intermediaries (Distributor and Wholesaler) do not carry inventory but just pass shipments through from factory to retailer
      • The retailer attempts to fulfill demand and if any safety stock is used, the retailer sends a weekly adjustment order to recover the used up safety stock during the next production cycle.
      • Orders that cannot be filled from SS are scheduled for production at the next 4week planning cycle.
  • Contents
    • Global Automotive Industry
    • Company Profile – TMC
    • Introduction
    • Toyota Learning Principles & the v4L framework
    • Comprehensive Overview of Supply Chain
      • Physical Processes
      • Operational Processes
      • Planning Processes
    • The Beer Game – The Toyota Method
    • Appendix
  • Appendix
      • References
        • Synergistics, “ Impact of Global Financial Crisis on Global Automotive Industry”
        • Steven Spear and H. Kent Bowen, “ Decoding the DNA of Toyota Production System”
        • Ananth Iyer, Sridhar Seshadri and Roy Vasher, “ Toyota Supply Chain Management”
        • Harvard Business Review, “ Toyota: Demand Chain Management”
        • Harvard Business Review,” Toyota: Service Chain Management”
        • Praveen Varghese, “ Toyota India Hands-On Purchasing Experience >2years”
    THANK YOU