Toyota’s Disrupted Global Supply Chain TEAM 2: HAOLI PAN PHOO NGON KYAW ZAIHUI LII ZIN MIN PAING KAUNG SAN ABO UT TOYOTA ▪ Toyota, a Japanese multinational automobile company ▪ Headquartered located in Toyota City, Aichi, Japan ▪ Toyota is one of the largest automobile manufacturers in the world and producing about 10 million vehicles per year CRITICAL FACTS ▪ Toyota utilizes Toyota Production System to eliminate waste and increase efficiency by spotting defects early and using a just-in-time made to order system ▪ Fukushima Tsunami in 2011 resulted in huge supply chain disruptions to Toyota's plants that only held several hours' worth of inventory and relied on frequent inventory refill ▪ To increase its supply chain resiliency, Toyota increased buffer for crucial suppliers, increased supply chain visibility through databases and sourced back-up regional suppliers ▪ Covid-19 triggered lockdowns triggered a global recession and impacted supply chain where Toyota sourced their components ▪ Shift of consumer demand in tech during Covid and supply chain disruption lead to a global semi-conductor shortage Fukushima Tsunami CRITICAL ISSUE Supply chain disruptions due to Covid-19 and an ongoing global semi-conductor shortage have led to declining production output and sales for Toyota TOYOTA PRO DUCTIO N SYSTEM(TPS) TPS purses a complete elimination of waste in material (or) decrease process inefficiencies Jidoka – Machine (or) Human Jidoka • Stop production if defects and conditions leading to defects are discovered JIT- Just in Time System - Limits excess inventory • Makes only the amount of vehicle orders when it is ordered • No excess component is kept onsite Heijunka production plan • Schedule product assembly to adapt to demand – Limits excess inventory • Allows Toyota to visualize production on a physical board to increase efficiency and inventory visibility Each column represent one day. Every day production were scheduled according to the number of cars ordered in different models and planned to be constructed that day WHAT DO YOU THINK ARE SOME DISADVANTAGE OF JUSTIN-TIME SYSTEM BY TOYOTA? On March 11, 2011, a magnitude 9.1 earthquake occurred off the northeast coast of Japan Trench and generated a tsunami that destroyed over 300 Toyota supplier's facilities Toyota's Just In Time production and inventory system meant that their plants only held several hours' worth of inventory. Toyota plants quickly ran out of components and production shutdown To improve supply chain resiliency, Toyota: • Sourced multiple suppliers for each component • Required major component suppliers (e.g. semiconductor) to hold 2-6 months safety buffer • Established regional supply chain - to avoid shutdown by sourcing suppliers from other regions COVID-19'S IMPACT O N TOYOTA Toyota slowed production in several assembly plant due to • Decline in customer demand from lockdown • Risk of infection for production employees during lockdown A total of 145 operation days were removed from Toyota's Global production in April 2020 According to exhibit 5 -10.5% Toyota's sales declined from 7,186,150 units globally in 2019 to 6,418,609 units in 2020. A decline of (10.5%) TOYOTA SUPPLY CH AIN RE SIL IE NCY Due to the supply chain improvements made after the 2011 Tsunami, Toyota was well prepared for Covid as they were able to replenish stock for months from the inventory buffer while other automakers were running out of components Therefore: • Toyota experienced less decline in sales compared to other automakers • The changes in global auto sales for Toyota was negative (10.5 %), which was 5.5 % less than the industry average of (16%) HAVE YOU HEARD ABOUT THE SEMICONDUCTOR SHORTAGE, WHY IS IT HAPPENING? G LO BAL MICRO CH IP SH O RTAGE • Auto industry's short -term contract with microchip suppliers o 1- 3 months (vs)1+ years • Work-from home phenomenon during Covid o Demand Increase for microchips in other tech industries • Delayed rise in demand for automakers in late 2020-2021 o Chip manufacturers locked in long-term contract with other tech industries • Delta variant of coronavirus and other natural disasters delayed production of microchips in various factories across the world Result => Exhausted global chip-making capacity & huge supply chain disruptions in the auto industry Tesla: o Invent/redesign their automobile to use controller instead of semi-conductor GM: o Eliminate features that require microchip o Shift to use microchip in popular models Ford: o Produce vehicle first, wait for chip and insert it later RECO MMENDED DECISIO NS 1. Prioritize sourcing for microchips Effectiveness • In order to cope with uncertain market situations • Ensuring the Delivery timelines • Reduce the supply chain's disruption RECO MMENDED DECISIO NS 2. Leverage research and development to cope with microchip shortage Effectiveness • Redesign Toyota automobile features that depend on microchips • Reduce Toyota's reliance on microchip suppliers. • Production line's efficiency RECO MMENDED DECISIO NS 3. Strengthen relationships with key component suppliers Effectiveness • Increase the information trenchancy of the supply chain • Ensure the consistent supply of resources • Maximize the use of resources EXECUTIO N 1. Prioritize sourcing for microchips • Identify the type of microchips needed ❑Size, type, and application • Source chips from other automotive component manufacturer ❑Online search engine ❑Trade shows • Negotiate an agreement & place order ❑Discussing price point, volume discounts, and delivery schedule EXECUTIO N 2. Leverage research and development to cope with microchip shortage • Cooperate with microchip supplier engineers to innovate microchip usage ❑Supplier--Denso • Develop controllers to replace some product features supported by microchips • Redesign Low sales model to eliminate features supported by microchip EXECUTIO N 3. Strengthen relationship with key component suppliers • Utilize common database with suppliers to increase visibility ❑Understand all product & standard • Provide feedback to suppliers on how they can improve ❑Needed materials, greater support and feedback • Sign a long term (3-5 years) contract ❑Proprietary supplier technology ❑Competitive advantage SCENARIO PLANNING 1. Unreliable supplier or supply chain partners • Evaluating the supplier to ensure they meet quality standards • Enforce better processes and procedures • Demand compensation or reimbursement • End the relationship/ find another supplier SCENARIO PLANNING 2. Late delivery of parts or components • Consider alternative delivery methods • Establish collaborative agreement Question？ Thank You!
