Discuss about the Transportation Distribution Management In Toyota Motor Corporation.
Toyota Motor Corporation is an automotive manufacturer headquartered in Aichi Prefecture, Japan. It was founded in 1933 by Kiichiro Toyoda, and started production of automobiles as Toyoda Automatic Loom Works. Toyota is headed by President and CEO Akio Toyoda and chairman of board Takeshi Uchiyamada. Its major shareholders are Japan Trustee Services Bank, Toyota Industries Corporation, Master Trust Bank and Nippon Life Insurance Company. It's primary business activities comprises of vehicle production and manufacturing of vehicles parts. It is also involved in nonautomotive business such as financial services for vehicle leasing and purchasing, web-based informatics on vehicles, and biotechnology. It is the first automobile manufacturer to succeed in producing 10 million vehicles in a single year. As of 2016, Toyota is the global leader in automotive manufacturing ahead of General Motors, Volkswagen, and Hyundai. Its revenue in 2015 amounted to $239 billion. In terms of market capitalisation, Toyota is the largest company in its home country Japan. US and Japan remain the biggest markets for Toyota's vehicles. In terms of sales, Toyota is the market leader in selling hybrid electric vehicles. Its company strategy has been to focus on lean framework in manufacturing and JIT inventory (Corporation, 2016).
The following report intends at evaluation of transportation and distribution capability of Toyota Motor Corporation, the properties of automotive products manufactured by Toyota and key areas of transportation of Toyota's products are also examined. Selection is done upon latest incoterms to provide relevance, and E, F, C & D groups of incoterms are used for recommendations. Several parameters such as geo-coverage, transit reliability, transportation costs and technical capabilities are used for carrier selection in order to present appropriate justification of modes selected. Moreover, transportation performance is evaluated in light of several predetermined relationship management to provide interpretations from different perspectives.
As mentioned by Chan & Zhang (2011 p.2325) transportation capability of manufacturing concerns are positively correlated with the market expansions of new products of the concerns. Moreover, Palensky & Dietrich (2011, p.387) states that relevance of demand forecasting and inventory management relies upon the distributing capability of the organisation. Toyota Corporation transports and distributes over 96 million automobile parts and accessories every year. It has refurbished it 35-year-old distribution and delivery network using computer modeling and the distribution database software focuses first on its Lexus section and then at the others. Rexhausen, Pibernik & Kaiser (2012) states that for distribution and logistical requirement of the manufacturer providing both accessories and heavy products carrier operations requires being divided into multiple segments. For distribution purposes, four channels were drawn up being Toyota for high end and large automobiles, Toyopet for medium-sized automobiles and Netz Toyota for compact cars, automotive accessories. Toyopet and Toyota divisions have a capacity of transporting around 56 million automotive parts and large vehicles from factory floors to dealer outlets, whereas Netz Toyota ships are capable of distributing approx 65 million vehicle parts and compacts and accessories. As stated by,An, Lee & Shin (2011) product characteristics influences the transportation and distribution mediums since the size of the product is a prerequisite towards the formulation of distribution networks. Toyota manufactures hybrid-electric hatchbacks, pickup trucks, compact cars, sedans, sports utility vehicles (SUV), minivans, compact crossover SUVs, land cruisers. It also produces small automotive parts, leather seats, tire and other accessories for other automobile businesses.
Incoterms Selection Consideration
Toyota has operations around all six continents. Toyota Corporation follows a delivery at terminal (DAT) policy for its emerging markets such as the South American and Asian markets. Therefore, Toyota takes up the responsibility of logistics and the risks involved in freight in emerging market as it realizes the importance of building brand reliability. Moreover, del Castillo Tello et al. (2015) states that transportation logistics services in urban markets comprise undertaking responsibility regarding the delay in lag time along with responsibility regard to delivery. Therefore, for its developed automobile markets such as the North American and European markets it follows a policy of delivery at the terminal (DAT) as it anticipates that through mitigation of transportation risks it could continue expanding its market share in European and North American markets through streamlined service delivery. As per Jiangping & Shuai (2012), markets and economies that have low customs duties require outbound logistical operations to be conducted in a manner complementing the exporter of such products as the exporter comparatively has a disadvantage regarding outward transportation of goods. Moreover, Rexhausen, Pibernik & Kaiser (2012) states that storing, stuffing, translating operations assessment reveals that product damages are primarily occurring in the initial exporting stages thereby a reputed business should take responsibility towards its outbound distribution. Toyota requires to follow delivered at place (DAP) services in low income countries like South Africa, Cuba, Mexico, India since Lambert, Riopel & Abdul-Kader (2011, p.570) states that dealers and consumers in these economies cannot bear the burden of high logistic costs leading to a shrinkage in market share of the company in these locations. Further, for its African markets, Toyota requires to focus on minimising risks of its dealers as the market itself is developing with low-income consumers. For its Scandinavian locations, Toyota requires to continue with their delivery at place (DAP) service policy as dealer and end users in these economies can afford to have both cost and responsibilities relating to the automobiles. While highly developed markets such as UK and France as well as Canada requires Toyota to follow a delivery at the terminal (DAT) as even though these markets have strong economies but because of accessibility issues from the manufacturing locations and competitive markets with a large number of indigenous automobile manufacturers present.
Moreover, as per Jin et al. (2010) marine transportation of automotive products requires risk mitigation as regards to unfavourable climate changes in sea routes, therefore for Toyota’s Oceania markets comprising of Australia, New Zealand along with Papua New Guinea Toyota needs to follow a Delivery at Terminal (DAT) policy here since the highest proportion of risk is already undertaken by Toyota once it docks its products through the freight corridor.
Carrier Selection Criteria
Toyota Motors, in this study, knows the future capacity for the contracts taken up. Therefore, the deciding factor for the selection of the carrier for the Toyota Motor Corporation depends on the contract issue capacity and service that is to be provided.
According to Kye, Lee & Lee (2013,p.711), the mode of the carrier selected has to be judged on the total geographical area, the distance between the manufacturer company and the delivery point, that is to be covered in the contract entered. For example, If the delivery spot is inland or within the country, the best option is to choose road carriages in such cases.
The main issue arising is the cost of the carrier that is incurred by choosing a particular mode. The company at times chooses some expensive carriage mode which results in more cost.
Toyota Corporation may be able to reduce its logistics expenses through choosing cheaper carriage selection in terms of cross-boundary transportation. Selection of waterways transportation over freight transfer through airways is a better option. Moreover, costs of developing and maintaining routes are low. Accessories can be transported using air freights as they comprise of smaller diameters and the air freights can conveniently be distributed as their overhead costs. However, in the case of large automotive parts, using sea transportation through large freight carriers are recommended even though sea transportation is perceived to deliver goods at a slower rate compared to other forms of transport.
In the words of Martens, Golub & Robinson (2012, p.785), the actual total length of the transit time and the reliability on that time is an important consideration. The duration of time required for the transition helps to decide the mode of carriage.
The issue with this is that the carrier options that are chosen by Toyota Corporation to save the cost such as marine transportation takes longer transit time and the carriage that have less transit time such as transferring automotive parts through airways or by freight trucks incurs a high cost. Therefore, in the case of African and Latin American markets railways should be the chosen mode of transportation for Toyota as the road infrastructure is poor leading to high freight charges. However, for Toyota's Oceania and Asian markets because of accessibility issues marine transportation using sea freight carriers are the best way for distribution and delivery of automotive logistics.
3.3 Reliability of on-time pickup and delivery:
For the goodwill of the company, it has to deliver the goods on scheduled time to the customers and for this; it has to choose a mode that he is reliable of on-time pickup and delivery (Martens, Golub & Robinson 2012, p.65).
Toyota Corporation needs to streamline its delivery process through a mix of rail and road delivery. For short distances road transportation through freight trucks is economical while for delivery spanning long distances transport through the land the railways are the optimum transportation medium. A beforehand estimation of the transit time through several means are to be undertaken by Toyota would be a better way to depend on and chose the mode of carriage.
While choosing the carriage system the technical capabilities of the vehicle to deliver the type of the goods is to be considered.
The choosing of lightweight vehicles for heavy goods or a heavy vehicle for lighter goods, results in the damage of the goods or higher cost (Zhang et al. 2011, p.1633)
The type of the goods to be delivered has to be first taken under a category and then the carriage must be chosen.
The company needs to check if the carrier company provides for a safe and secure packaging of the goods or not. As a reason, this may result in fatal damage to the goods causing loss to the company.
The issues that have been seen lately is the poor packaging of the product resulting in product damage. However, in the recent decade, such issues have become less.
Before selecting the carrier is it recommended checking the previous goods damaging experience of the company.
The freight charges differ for different carrier companies, however, it is the company's duty to check the company's financial stability and compare the charges and then choose (Zacharewicz, Deschamps & Francois, 2011, p.601). Issues with higher freight charges are that some companies are not financially stable and may use unfair means to release the charges. The company must check and choose a company and rely on it for all its carrier services.
Carrier management of Toyota Corporation through selecting marine transportation for geographical location separated by large water bodies while for inland transportation railways is the recommended mode of logistics service systems into practice. The selection of such modes of transport by Toyota Corporation is towards minimising delivery time through the use of railways and minimizing logistics costs through utilising the sea routes.
Management of the effective carrier relationship management is a must for maintaining the balance of the contracts and the carrier service taken into account. The different types of the carrier relationship management are:
- Arm’s length carrier relationship management.
- Type I partnership carrier relationship management.
- Type II partnership carrier relationship management.
- Type III partnership carrier relationship management.
- Joint ventures carrier relationship management.
- Vertical integrations carrier relationship management.
The Toyota company follows the Arm’s length carrier relationship management system for maintaining the relationship. This kind of relationship could be taken by only those companies which have their own independent view in any kind of party transaction. Toyota being an independent company uses this relationship system (Stathopoulos, Valeri & Marcucci, 2012, p.36). The control division of Toyota takes a more serious approach for the management of its inland logistic networks so that the delivering of the products could be done accurately and timely. In the words of Steve Brown, the vice-president of logistics control, Toyota, Toyota demands and tries to follow the same process of logistics wherever it may be in the world. Toyota has a small inventory, involved in this section and thus prefer to do small lot delivery, basically following a large and flexible trucking network for timely delivery (Rushton, Croucher & Baker, 2014, p.641).
Figure 1: The Inbound Trucking Network of the Toyota Motor Corporation.
(Source: Toyota's Total Supply Chain Vision - Automotive Logistics, 2013)
The company wants a smooth flow of deliveries of the product and so believes in the trucking network during inland deliveries, goods carrier trains and waterways for the foreign delivery. The inbound carrier service is highly synchronized. The vehicles, the routes the codes all are planned and secure. Different Toyota Motor Corporation is present all over the world and no matter how much it tries following the same carrier relationship is however not possible. Many a branch prefers to use the Arm's length carrier relationship management whereas others may prefer the other types of relationships. This choosing depends on the geographical factors, the country's economic background and also on the availability of the resources (Farahani, Rezapour & Kardar, 2011, p.1674)
By analysing the above study, the company, Toyota could be recommended to bring in the other carrier relationship management that eliminates unnecessary costs as relates to logistical operations. The following a new system may give some better results or may improve the carrier relationship more. To maintain this carrier relationship the company must follow on its commitment and the data that it provides to its carriers. The data regarding the goods is very important for the carriers during the bid process; hence the company must provide the carrier with all the necessary details required. Instead of hiring different carriers for different deliveries, the company must keep an opportunity to bring the carrier service as its partner carrier into the company. This will increase the chance of any fraud any losses and also the costing will become reduced. Holding of the annual meetings of its carriers to review the performances and the problems faced by the carriers and resolve them.
Analysis of logistical operations and distributions policies of Toyota concludes that the company, being an independent entity, follows the Arm's length carrier relationship management. The Toyota company follows this management for the all the branches worldwide. The ways of improving the Toyota Company with its carrier servicers has been discussed and also the ways of communicating has been discussed. The carrier of the goods requires a lot much information regarding the goods from the company for the accurate delivery of the goods. This information is to be given to the goods carrier companies by Toyota. Toyota employs several logistical service patterns in several locations and even though the automobile manufacturer has succeeded in providing high end and environmentally friendly products to its end users, it requires several changes to be made in terms of international carrier policies. The responsibility parameters require being changed in terms of economic variables and accessibility factor. Also, the distribution facilities is robust in certain markets like the US, India, and Canada, while it's marketed in the middle east and Central Africa, are underdeveloped compared to industry benchmarks. While Toyota has been able to sustain robust deliverance in top markets, it has failed inadequate carrier selection in markets requiring compact cars and low-end vehicles.
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