Operations: Module 5, Supply Chain Management
However, as a local retailer, manufacturer, or service provider, I don't
always control the supply chain tiers beyond my direct suppliers and
customers.
It is when this global supply chain faces disruptions that our view of
what supply chain management really is gets challenged.
makes Toyota unique in its approach to suppliers
o Itself minimizing inventory supply
o Often the best thing you can do is to idle a machine and stop producing
parts. You do this to avoid over production, the fundamental waste in TPS.
Often it is best to build up an inventory of finished goods in order to level
out the production schedule, rather than produce according to the actual
fluctuating demand of customer orders. Leveling out the schedule
(heijunka) is a foundation for flow and pull systems and for minimizing
inventory in the supply chain. (Leveling production means smoothing out
the volume and mix of items produced so there is little variation in
production from day to day.)
o By the 1960s, TPS was a powerful philosophy that all types of businesses
and processes could learn to use, but this would take a while. Toyota did
take the first steps to spread lean by diligently teaching the principles of
TPS to their key suppliers. This moved its isolated lean manufacturing
plants toward a total lean extended enterprise when everyone in the
supply chain is practicing the same TPS principles.
o In lean thinking, the ideal batch size is always the same one. That is
because Ohno was not trying to optimize the utilization of people and
equipment in each department. When the Toyota factory was first
organized, it was operating this way like Ford s factories. But this didn t
work, because Toyota could not compete with Ford s volume and
economies of scale. So Ohno decided to optimize the flow of material so it
would move more quickly through the factory. This meant reducing batch
size. And the fastest way to achieve this was to blow up departments and
process islands and create work cells that were grouped by product,
rather than by process
o , TPS experts will often recommend keeping at least a small inventory of
finished goods.
o This is one reason why companies that have successfully applied TPS
often schedule their production with a combination of building to order and
maintaining a pre-determined level of finished goods inventory.
o Author: To get more productivity out of the work process, you have to
change the way the work is done by eliminating waste.
o Author: The power of the supply chain is far more than information
technology. It is the power of ingenuity and relationships.
o Author: The Principle: Find Solid Partners and Grow Together to Mutual
Benefit in the Long Term
o What you are not likely to hear about is the enormous complexity of
coordinating detailed, daily activities to deliver value to the customer.
o You are not likely to hear about relationships across firms about how to
work together toward common goals. Yet, this is the heart of what has
made Toyota s partnership with suppliers a global benchmark
o When Toyota started building automobiles, it did not have capital or
equipment for building the myriad of components that go into a car. One of
Eiji Toyoda s first assignments as a new engineer was to identify high-
quality parts suppliers that Toyota could partner with. At that time they did
not have the volume to give a lot of business to suppliers. In fact, some
days they did not build a single vehicle because they did not have enough
quality parts. So Toyoda understood the need to find solid partners. All that
Toyota could offer was the opportunity for all partners to grow the business
together and mutually benefit in the long term. So, like the associates who
work inside Toyota, suppliers became part of the extended family who
grew and learned the Toyota Production System.
o Even when Toyota became a global powerhouse, it maintained the early
principle of partnership. It views new suppliers cautiously and gives only
very small orders. They must prove their sincerity and commitment to
Toyota s high performance standards for quality, cost, and delivery. If they
demonstrate this for early orders, they will get increasingly larger orders.
Toyota will teach them the Toyota Way and adopt them into the family.
o Toyota s view is that, just as it challenges its own people to improve, it
needs to challenge its suppliers. Supplier development includes a series
of aggressive targets and challenges to meet those stretch targets.
Suppliers want to work for Toyota because they know they will get better
and develop respect among their peers and other customers. But no
supplier I know that has Toyota as a customer believes it is easy to
please. From Toyota s perspective, having high expectations for their
suppliers and then treating them fairly and teaching them is the definition
of respect. Treating them softly or beating them up without teaching them
would be very disrespectful. And simply switching supplier sources
because another supplier is a few percentage points cheaper (a common
practice in the auto industry) would be unthinkable. As Taiichi Ohno said:
Achievement of business performance by the parent company through
bullying suppliers is totally alien to the spirit of the Toyota Production
System.
What is the key to successful supply chain management?
o Ship = safe navigation of ship, invisible part of shipping most
aren’t aware of
o During pandemic taking 2-3 weeks but before pandemic it was 2-
3 days
o Many stakeholders (no one owns entire system, there has to be
consensus and consensus among the stakeholders is difficult)
o Not enough truck drivers