Importance of Operations and Supply Chain Management

Operation and supply chain management is very vital for the success of any business unit. Operation management refers to the process of transforming various inputs such as labor, capital and many others into the desired output in form of products which result to profit maximization by the business unit (Harvey, Heineke and Lewis, 2016). Supply chain management refers to an operation field of management that is mainly involved with how the raw materials and other products move from the suppliers to the final consumers (Christopher, 2016). Many companies have formulated effective strategies to enhance profit maximization through various activities such as reducing the cost of production, improving the quality of output for their products and engaging in sustainability practices such as green purchasing. Green purchasing in supply chain management is where the organizations in corporate sustainability practices in trade where they deal only with eco-friendly products (Heizer, Render and Munson, 2016).

Basically, supply chain management involves the management of activities such as monitoring, designing, controlling and planning the process for purchasing various goods and services which makes the organization to gain the competitive advantage over other existing businesses. The activities involved in the supply chain process include all the parts and processes such as logistics, sourcing of products, product development and information systems used to monitor the movement of the products in the entire process. This study is going to focus on the supply chain management system for Toyota which operates in various countries including the UK. The two areas that the study is going to focus on are: how the company manages the business relationships in its supply chains together with the logistic mix, channels, networks, transportation and the inventory management approach that the company uses.

Toyota manufacturing UK started its operations in December 1989 (Toyota, Hallonsten and Shchepetunina, 2012). The company established various manufacturing plants such as Burnaston in Derby shire whose sole function was for assembling. The process for assembling in Burnaston included welding, stamping that involved the pressing of panels from wheel’s rolls, plastic moldings that involved making bumpers and instrument dashboards/panels after which the parts were painted and assembled. Toyota has a firm in Deeside whose main function is to assemble various parts of the vehicle, joining them and do the aluminum casting (Haynes and Ward, 2012).The Company builds Avensis and corolla models in its Derby manufacturing plant.

Toyota came up with a supply chain that didn’t incur the company a lot of costs. The company had formulated a cost strategy that aimed to reduce the cost of production to the minimal possible values.   The company ensured that it does not compromise with the consumer satisfaction, quality and time for delivery. The logistic mix that was used by the company was organizing its suppliers into various functional tiers where the suppliers in the first tier worked as a team in the process of product development (Jedli?ski, 2015). The suppliers in the second tier made the various parts of the vehicle to facilitate the assembling process. The company manufactures the engines in Deeside and North wales. The suppliers in the first tier cooperated through effective exchange of information between them which reduced the lead time in the process of developing the new product avoiding the process of ‘Re-inventing the wheel’.

Toyota’s Supply Chain Management System

The company believes in having an overall development in technology throughout their suppliers. The company sends some personnel to the suppliers who compensate for the greater work load in the struggle to provide the company with various parts for the vehicles. This strengthens the company’s relationship with its suppliers and furthermore, it enables the suppliers to acknowledge the ‘lean production initiatives for the company’. The company strives for long lasting good relationship with its suppliers by pursuing a single- sourcing strategy for its strategic components. The level of collaboration between the company and the suppliers is usually vertical and horizontal because each supplier for the company shares the destiny with other suppliers who work with the company. The sourcing strategy used by the company is perceived to be hazardous to some extent because if the supplier is affected by some factors, the whole process of production in the company is affected. The relationship between the company and the suppliers is very flexible creating an economic-oriented relationship between the company and the suppliers.

The company does not only partner with its suppliers functionally but also in operational terms as well. The suppliers for the company are the integral component towards the success of the company. The suppliers are strategically located in the UK in an approximated radius of 56 miles. The company gives a security guarantee for various orders requested from the suppliers which enables them to supply the best raw materials to the company at the cheapest cost possible facilitating the achievement of economics of scale by the company. The company does have a belief for considering the lowest bidder for the supply of the raw materials because it has a strong belief in the gradual mutual improvement. The company believes in ‘vendor creation and development’ an initiated action for training its suppliers as per the requirement.

The company has a unique supplier partnership hierarchy that facilitates the process of building relationship through various approaches such as enhancing the mutual understanding and trust with its suppliers which enhances the deliverance of quality raw materials to the company which in turn leads to quality products as outputs (Ellinger, Saenz and Koufteros, 2015). The company shares crucial in formation with the suppliers in relation to the nature of the quality materials it requires for different types of vehicles. This reduces the time wasted in the wrong supplies due to lack of sufficient information from the supplier in relation to the nature of the supply required.  The company also ensures that it assigns the suppliers the task for the development and supplying various parts of the vehicle according to their capability so as to acquire the best parts from each supplier which leads to the quality product after the assembling process.

Supplier Partnership Hierarchy

The company has integrated the Just in Time approach (JIT) in its control system for efficiency. This approach creates a need for flexibility in production by the company which is a very crucial aspect for the success of the company in all its operations. The company usually strives to achieve this by creating different levels of responsibility in the tiers for various suppliers a long strictness in cost and delivery time which enhances the efficiency of operations by the company. Toyota is perceived to be the first company ever to in the automobile industry to create a clear need for flexibility in its entire business system. The ‘lean philosophy ‘adopted by the company does not only describe its system of manufacturing but also describes the philosophy used by the company in the collection of various tools used in the entire manufacturing process. The philosophy also describes the process used by the business to optimize time, productivity, assets and the human resources while improving the quality of the products and services to enhance the satisfaction of the final consumer.

The company has appreciated the strength of ‘lean thinking’ in the focus to increase flexibility in its various supply chain activities (Christopher, 2016). This promotes the timely delivery of the raw materials from various suppliers which enhances efficient assembling of all the necessary parts for the vehicles hence facilitating continuous supply of the goods in the market  The company practices inventory management through its common practice for production at minimum cost and using a ‘market minus approach’ in vendor pricing which enhances the achievement of a wide market for its vehicles in the market that any other company in the United Kingdom. This practice of inventory management enables the company to have an accurate value for its final products that have been achieved at minimum cost enhancing profit maximization which in turn results to the growth and development of the company.

The company engages in ‘product smoothening’ an aspect that enables the suppliers maintain constant volumes in their transactions with the company. Generally the intention of the company in all its logistics mix and inventory management practices is to create a long lasting relationship with the suppliers and enhance profit maximization by the company. The company is usually empathetic when the suppliers face some shortcomings which might affect the production process and does all it can to ensure the suppliers are comfortable. The company ensures that the suppliers receive immediate treatment if they raise the grievance on time an aspect that further strengthens the relationship between the company and the suppliers resulting to efficiency in production.

Just in Time (JIT) Approach

The company adopts lean production processes which facilitates its continuous development in its Toyota Production System approach. This system is effectively designed on the basis of ‘pull strategy’ and it is customer oriented. The company implements lean production facility with various features such as cellular lay outs which could not be set up within a small amount of time. The company has adopted ‘pull scheduling ‘, a strategy that creates an emphasis in the decrease of wastes in the entire process of production, which is commonly referred to as loss aversion. The company also applies the six sigma approach to quality in the production process. This facilitates the production of high quality vehicles by the end of the production process. Lean production processes enhances agility where various processes involved in production are completed fast which reduces the time general time used in production which makes the JIT approach effective within the company.

The Logistics strategy of the company is to ensure that there is an efficient transport network to enhance effective transportation of the raw materials by the suppliers for timely production. The company has hired private contractors who have really worked on various roads within the radius of the suppliers an aspect that has enhanced effective transportation. The supply chain of the company follows a unique procedure. It involves the key flow in products, information and money between the company, suppliers and the customers. The product flow in the company generally involves the flow from the initial development of the product i.e. from the raw material to being the final product been offered to the final consumer. The product flow is clearly illustrated by the flow chart shown below.

The flow of information within the company basically involves the flow of information from all the parties involved in the supply chain. This is very important in logistics management because it enhances clarity on the raw materials requirements by the company to the suppliers which reduces the time wasted in production as a result a result of delivering raw materials. The customers should also communicate effectively on the specific model of vehicle they want especially if they order and needs the shipping to their various destinations. This saves their time especially if they are car dealers. The information flow used in the company is by the means of value stream mapping which facilitates the process of tracking the flow of information and material in the entire manufacturing process as shown in the chart below.

Inventory Management

The above flow chart outlines the information flow across the company with the aim of enhancing quick response to various consumers concerns. This is very important because it reduces the lead time between the order reception and delivery to the final consumer.

 The money flow involves the flow of cash between the parties involved in the process of supply chain management. Money may flow from the company to the suppliers when the company makes the payment for the raw materials that have been supplied. Money may also flow from the car dealers to the company after making orders for various types of vehicles. The flow of money within the company may also involve the stakeholders who usually finance various activities within the company. The inflow of cash is a well-coordinated organized function within the company for effective supply chain management.

The automotive firm has a complex flow of its various activities in the supply chain due to the nature of its product. Various parts are first produced by the suppliers and later send to the assembly plants through in bound logistics. At the assembly plant,  various parts are assembled systematically through apportioning various departments various tasks till the vehicle is complete after which it is painted and assembled for inspection by the quality assurance team before being send to the dealer through outbound logistics.

Supply chain management involves a series of theories to illustrate various activities that the company does. The one of the theories is the network theory which describe the relationship that exist between different participants in the supply chain management. The theory states that the suppliers and the consumers are very crucial for the success of the company (Wu and Ma, 2013). This is because, without the suppliers for various raw materials, the company cannot produce and without the buyers, the end products from the company are meaningless and without the company, the supplier cannot generate the raw material and the consumer cannot get the desired product. This network has to exist for the success of the entire supply chain management.

Agency theory is another significant theory in supply chain management. The theory is built on the foundation of delegation of duties between various parties involved in the process of supply chain management (Whipple and Roh, 2010). The company delegates the responsibility for supply of raw materials to the suppliers who commit themselves to ensure timely delivery to initiate continuity in the process of production. The dealer might award the company a contract for the manufacture of specific models of the vehicles an aspect that enhances the commitment of the company in the production of the vehicles as per the dealers’ specifications.

Lean Thinking and Philosophy

There are various factors that have several impacts to the supply chain management of the organization. These factors are referred to as the triple constraints and they are economic factors, environmental factors and social factors. The state of the economy depicts purchasing ability of various target consumers for the products. When the economy is down, the company reduces the quantity produced over a certain period of time so as to be able to enjoy the maximum gain from the few purchases that can be made and vice versa. An increase in the need for environmental sustainability as a requirement for business organizations has initiated the use of eco-friendly raw materials in the manufacture of the vehicles. The vehicles have some filters in their exhaust pipes so as to filter some chemical components produced after combustion of fuel so as to reduce air pollution by carbon monoxide. The company produces various types of vehicle for different individuals in the society according to their social status. Individuals who are very rich go for expensive vehicles from the company and those who can’t afford expensive vehicles go for the one they can afford. This has resulted to the success of the company because all the individual needs have been catered for in the supply chain management.

I would like to recommend that the method of supply chain management that the company uses is very efficient in the achievement of the set goals and objectives by the company within the United Kingdom. The company needs to upgrade its supply chain management system through the effective application of enterprise resource planning system in order to compete internationally an aspect that shall result to a rapid growth and development of the company. The company needs to schedule regular training for its employees so as to reduce the losses incurred during production due to poor time management in the assembling of the raw materials.

The company has done great by appreciating diversity in its car models allowing various individuals in the society access the vehicles they can afford.

In conclusion the success of the company relies heavily on the nature of the workforce, its relationship with the suppliers for various raw materials and the customers. The company should work on various aspects in the supply chain management and logistics so as to achieve a sustainable competitive advantage over the competitors. The company may initiate green purchasing practices where it advises the suppliers to use raw materials that shall be eco-friendly to minimize environmental pollution an aspect that is very important in the achievement of sustainability in supply chain management.

References

Christopher, M. (2016). Logistics & supply chain management. 2nd ed. Harlow, England: Pearson, pp.67-87.

Ellinger, A., Saenz, M. and Koufteros, X. (2015). Literature Reviews in Supply Chain Management and Logistics. 2nd ed. Bradford: Emerald Group Publishing Limited, p.68.

Harvey, J., Heineke, J. and Lewis, M. (2016). Editorial for Journal of Operations Management special issue on “Professional Service Operations Management (PSOM)”. Journal of Operations Management, 42-43(1), pp.4-8.

Haynes, J. and Ward, P. (2012). Toyota land cruiser owners workshop manual. 4th ed. Yeovil, Eng.: Haynes Pub. Group, p.200.

Heizer, J., Render, B. and Munson, C. (2016). Operations Management. 2nd ed. Pearson Australia Pty Ltd, pp.56-90.

Jedli?ski, M. (2015). DYNAMIC LOGISTICS STRATEGIES IN THE COMPANY LOGISTICS POTENTIAL MANAGEMENT. Russian Journal of Logistics and Transport Management, 2(1), pp.3-10.

Rosa, M. and Soffer, P. (2013). Business process management workshops. 4th ed. Berlin: Springer, p.80.

Toyota, J., Hallonsten, P. and Shchepetunina, M. (2012). Sense of emptiness. 3rd ed. Newcastle upon Tyne, UK: Cambridge Scholars Publishing, pp.105-120.

Whipple, J. and Roh, J. (2010). Agency theory and quality fade in buyer?supplier relationships. The International Journal of Logistics Management, 21(3), pp.338-352.

Wu, Y. and Ma, H. (2013). Logistics Network Nodes Importance Analysis Based on the Complex Network Theory. Applied Mechanics and Materials, 336-338, pp.2410-2414.