Logistics And Supply In The Automotive Industry: Insights From Lexus And Toyota

Logistics and Supply

Discuss about the Automotive Industry for Logistics and Supply.

Lexus has taken a more centralized approach to handle the inbound logistics network so that they can influence the carmaker’s purchasing decisions. The company tries to focus on the smooth production flow. The management has implemented Just-in-Time approach in all the manufacturing plants in order to make strict scheduling of all the deliveries. The company has also implemented low inventory pull system to boost up demand for high frequency small lot deliveries.

It has been found that the supply chain of the company Lexus varies by region. The American logistics design of Lexus follows this pattern. It has dedicated, flexible and direct trucking system. As You et al. (2012) mentioned, “In many markets, such as the U.S., the dealership network is a distinct organization from corporate headquarters, with separately owned and operated Lexus showrooms. By contrast, in Japan all 143 dealerships in the country are owned and operated by Lexus. Several markets have a designated, third party regional distributor; for example, in the United Arab Emirates, sales operations are managed by Al-Futtaim Motors LLC, and in Costa Rica, Lexus vehicles are sold via regional distributor Purdy Motors S.A. Other officially sanctioned regional distributors have sold Lexus models prior to the launch of, or in absence of, a dedicated dealership network.” A chart has been given below to describe assembly sites of Lexus.

According to the former Executive President of Toyota Taiichi Ono, “The Toyota Production System (TPS) is a management concept based on the Just-in-Time system and jidoka which can be loosely translated as automation with a human wisdom.” Carlsson (2012) stated that, the development of TPS began during 1982. According to the founder Kiichiro Toyoda “the best way to gather automotive parts is just in time.” On the other hand, jidoka was developed form the pratices and enthusiasm of Sakichi Toyoda for automatic loom development. These two processes are combined by Taiichi Ono to develop TPS. At the end of 80s the TPS was adopted by various culture along with globalization of Toyota. Cichocki et al. (2012) stated, “During this period of time various innovations being introduced to address long local parts procurement times.”  It continues to address new issues in the form of “Toyota way.”

Presently the company has introduced some new features in the TPS. Their aim is to provide customers the best quality cars at lowest possible price. They also try to provide employees high level of job satisfaction. The main objective is to increase profitability with the help of cost reduction approach. Monden (2012) mentioned, “Kaizen is the heart of the Toyota Production System.” Kaizen means “Continuous Improvement.” It helps the company to ensure eliminate waste, maximum quality and enhance efficiency. Monden (2012) also stated, “The day-to-day improvements that Members and their Team Leaders make to their working practices and equipment are known as kaizen.” In addition, just-in-time manufacturing process is applied by the natural laws of demand and supply. Lexus needs to take lesson from Toyota and apply Kaizen (continuous improvement) and Just-in-time to improve its production system. 

Toyota Production System

Lexus needs to implement the universally accepted approach of production Just-in-Time. As Shimokawa et al. (2012) mentioned that this manufacturing process allows the entire production system to operate according to the natural law of supply and demand. It has been found that demand of consumers can stimulate vehicle production. In addition, production of car can stimulate the production and delivery of other parts. Lexus needs to understand that the ultimate arbiter in JIT approach is the customers. The implementation of JIT approach can help Lexus production system to be pulled by the customer’s demand rather than pushed by the capabilities or needs of production itself. It will help to improve the production efficiency of Lexus. Dai et al. (2012) mentioned that, “Just-in-time manufacturing can dissolve inventories at parts suppliers just as readily and effectively as it does at Toyota's assembly plants.” It will also help to improve Product quality of any organization.

The company needs to apply “Jidoka” in its operating procedure. In Japanse “Jidoka” means automation. It means Lexus should develop cars with little human touch. The company should apply the principle originated by Henry Ford. They have to break down all complex tasks into simple steps and then all these steps need to be distributed among employees. The employees have to provide the opportunity to make improvements and implement them into the operation procedure.  Lexus also can adopt Toyota Production System as it can help to improve relation between employees and management. Monden (2012) stated that, TPS can help to bring management and employee together in order to improve working condition quality and productivity.

Lexus can implement manufacturing simulation software such as SIMUL8 to develop powerful simulation within 2 days or less. It runs 10 times faster than other simulation software. It can help to take appropriate decisions in day-to-day what-if scenarios for continuous improvement. It can help to improve throughput/jobs per hour, system cycle time, operator utilization and staffing requirements. It can reduce Current Delays, Storage Needs and Travel Times for a company. It is compatible with other software packages that can help to develop the simulation. They are such as AutoCAD, Visio, Minitab, ERP Systems, xml and VBA. It can be connected with any data set such as Excel, Access, Oracle, Sybase. 

There is another manufacturing simulation software named as SIMIO is used by various industries that includes metal and plastics, automobile, consumer packaged goods. As Davis et al. (2012) stated that implementation of SIMIO can improve process by implementing lean manufacturing and six sigma. This simulation software can help to combine production facility that reduced production cost. Nee et al. (2012) mentioned, “This Simulation provides an inexpensive, risk-free way to test changes ranging from a "simple" revision to an existing production line to emulation of a new control system or redesign of an entire supply chain.”  Implementation of SIMIO can help Lexus to determine the absence of important data. It can help to explore alternative solution for the company. Bhasin (2012) stated that “Development of a simulation helps participants better understand the system. Modern 3D animation and other tools promote communication and understanding across a wide audience.” 

Mass Customization

According to Vinodh & Joy (2012), “Lean manufacturing is defined as a systematic approach to identifying and eliminating waste through continuous improvement, flowing the product at the pull of the customer in pursuit of perfection.” It is a performance-based process that can be utilized in automobile company like Lotus to improve competitive advantage. Bhasin (2012) mentioned that there are five major principles of lean manufacturing that can guide the action of management toward success. They are mentioned below in a table:

Four major thrusts that Lexus can get by lean management system are like enhanced leadership style, development of team based cultures, enhanced communication channel and effort for continuous improvement (Vinodh & Joy, 2012). However, lean manufacturing system has some issues related with it as well. Bhasin (2012) argued that, “Many of the companies that report initial gains from lean implementation often find that improvements remain localized, and the companies are unable to have continuous improvements going on. One of the reasons, we believe, is that many companies or individual managers who adopted lean approach have incomplete understanding and, as a result, could not be able to gain all the benefits as Toyota enjoys.” 

Reference List

Bhasin, S. (2012). An appropriate change strategy for lean success.Management Decision, 50(3), 439-458.

Carlsson, B. (Ed.). (2012). Technological systems and economic performance: the case of factory automation (Vol. 5). Springer Science & Business Media.

Cichocki, A., Ansari, H. A., Rusinkiewicz, M., & Woelk, D. (2012). Workflow and process automation: concepts and technology (Vol. 432). Springer Science & Business Media.

Dai, Q., Zhong, R., Huang, G. Q., Qu, T., Zhang, T., & Luo, T. Y. (2012). Radio frequency identification-enabled real-time manufacturing execution system: a case study in an automotive part manufacturer. International Journal of Computer Integrated Manufacturing, 25(1), 51-65.

Davis, J., Edgar, T., Porter, J., Bernaden, J., & Sarli, M. (2012). Smart manufacturing, manufacturing intelligence and demand-dynamic performance. Computers & Chemical Engineering, 47, 145-156.

Monden, Y. (2012). Toyota production system: an integrated approach to just-in-time. CRC Press.

Nee, A. Y. C., Ong, S. K., Chryssolouris, G., & Mourtzis, D. (2012). Augmented reality applications in design and manufacturing. CIRP Annals-Manufacturing Technology, 61(2), 657-679.

Shimokawa, K., Jürgens, U., & Fujimoto, T. (Eds.). (2012). Transforming automobile assembly: experience in automation and work organization. Springer Science & Business Media.

Vinodh, S., & Joy, D. (2012). Structural equation modelling of lean manufacturing practices. International Journal of Production Research, 50(6), 1598-1607.

You, Y., Liu, D., Yu, W., Chen, F., & Pan, F. (2012). Technology and its trends of active distribution network. Dianli Xitong Zidonghua(Automation of Electric Power Systems), 36(18), 10-16.