Success Through A Highly

Integrated Supply Chain:

Toyota North America
Dr. Karl Manrodt
Professor, Georgia Southern University
Mr. Matt Greene
Assistant Manager Purchasing, TEMA
Mr. Steve Hagan
Assistant Manager PCL, TEMA
Mr. Kevin Thornberry
Assistant Manager, PCL, TEMA
Here Are Your Speakers!
Dr. Karl Manrodt
Current Roles at Georgia Southern University:
Associate Professor, Department of Management, Marketing and
Logistics
Co-Director, Southern Center for Logistics & Intermodal Transportation
Published:
Customer Responsive Management: The Flexible Advantage, 1992
Keeping Score: Measuring the Business Value of Logistics in the Supply
Chain, 1999
Degrees Include:
B.A. in Philosophy and Psychology, Wartburg College
M.S. in Logistics, Wright State University
Ph.D., University of Tennessee
2
Here Are Your Speakers!
Mr. Matt Greene
Assistant Manager of PCL, TEMA
Responsibilities:
Manage procurement of North American
Returnable Packaging & Logistics Services
Develop & manage strategies for commercial,
process & operational kaizen for packaging &
logistics
Education:
Harvard University, BA Mechanical Engineering -
1994
3
Here Are Your Speakers!
Mr. Steve Hagan
Assistant Manager of PCL, TEMA
Responsibilities:
Overall mgmt of Midwest Logistics Network Ops
Lead process kaizen and problem solving
Cost Management
Established new Mexico Plants supply chain (04)
Education:
The Ohio State University, BSBA - 1999
4
Here Are Your Speakers!
5
Mr. Kevin Thornberry
Assistant Manager, TEMA Logistics Planning
Supply Chain Design
Responsibilities include:
Lead supply chain kaizen with focus on reducing costs,
lead time and removing unnecessary complexities
Lead development of logistics support systems
North American Logistics Workshop Lead
Education:
Xavier University, MBA - 1999
Eastern Kentucky University, BBA Finance - 1994
This Session Will
Define supply chain integration and why it is an
enabler to Toyotas success
Discuss the information and material flows within
the Toyota supply chain
Share how integration and collaboration can lead to
cost reduction and service improvements
Reveal how managing through Key Performance
Indicators (KPIs) is effective and efficient
6
This Session Will Not
Define or discuss basic lean terms, principles,
or philosophies
Be entirely presentation based
7
8
Corporate Organization cont.
Toyota Motor Corporation
(TMC)
Toyota Motor Engineering &
Manufacturing North America
(TEMA)
TMMK BODINE TMMI TMMWV TMMAL
TABC
HOLDING
TSSC
TABC
TMMCA
CCP
TMMC CAPTIN
TMC
100%
TMC
100%
TMMBC
TMMTX
GM
50%
TMC
50%
TMMNK
Corporate Organization
Toyota Motor Sales
(TMS)
Toyota Motor North America
(TMA)
NUMMI
North American Capacity
Capacity: Nearly 2 Million in 2008
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
1990 1994 1998 2001 2003 2005 2006 2008
SIA
Texas
Mexi co
Canada
Indi ana
NUMMI
Kentucky
M
i
l
l
i
o
n

V
e
h
i
c
l
e
s
9
Toyotas Supply Chain Overview
~$600M Parts Logistics Budget N. America.
~750+ Suppliers in US, Canada and Mx.
~2000+ Route Runs, ~ 835,000 miles per day
11 Toyota Plant Customers in Network
5 Core Trucking Logistics Partners
2 Core Consolidation (Cross Dock) Logistics Partners
TEMA = Centralized Design for plants
10
Toyotas North American Operations
11
12
Logistics Volume

(km3)
0
20
40
60
80
100
120
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10
Europe
North America
Toyotas Logistics Network
MCD
GCD
LCD
UCD
SCD
Increasing Volume Increasing Volume
(Supplier Localization + More Plants + production) (Supplier Localization + More Plants + production)
OCD
RCD
CCD
Plant/ Warehouse
Supplier
LTL
Problems:
High in-house inventories
Much double handling
Stores required
Low Frequency delivery &
uneven flow
High mileage routes
Complex plant unload
required
Supplier
Supplier
Supplier
Milk
Run
Traditional Manufacturing Logistics
13
TPS Logistics
Continuous Flow - No warehousetime:
Strong Logistics Partners + Relationships Required
I n House
Parts
C
U
S
T
O
M
E
R
B
A
C
Dock
EXTERNAL PARTS
LOGISTICS
INTERNAL LOGISTICS
FI NI SHED
VEHI CLE
LOGISTICS
CUSTOMER
DELI VERY
Key: One Production System Flow
Logistics
T

r

a

n

s

f

e

r
T

r

a

n

s

f

e

r
Production
Logistics Not Connected To Production
Not TPS Logistics
15
TPS ENVIRONMENT
Supply chain team members can quickly & easily see problems as
they occur..
Problem!
TPS Logistics
. . . And make countermeasures immediately.
Lower the water to see the rocks.
The Need to Integrate
Integration is:
Combining and coordinating separate parts or elements into a
unified whole
Value:
Mileage reduction
Small lot & high frequency delivery
Minimize internal stores inventories
Quicker reaction to abnormal
Even, spaced out pickups at parts suppliers (smooth production)
Create environment for dedicated dock delivery (simple)
No multi-stop plant unloads
17
LTL
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Supplier
Cross Dock
Manufacturing
Facility
Cross Dock
Integrated Manufacturing Logistics
18
Manufacturing
Facility
Collaboration for a World Class Supply Chain
Collaboration is: To work together in a joint intellectual effort
Ryder
Schneider
Transfreight
VASCOR
Local Companies
Toyota Tusho America (TTA)
Transfreight
Ryder
Transfreight
Cross
Docking
Cross
Docking
Transportation
Transportation
Route
Design
Route
Design
Toyota Plant
Toyota Plant
TEMA HQ
Logistics
Program
TEMA HQ
Logistics
Program
19
How Is The Relationship Built?
Complete understanding of both Toyotas business needs &
LPs capabilities
Commitment by both parties to achieve excellence
Shared values
Continued learning
Shared ownership of processes - development & execution
Joint problem solving and kaizen to improve overall condition
Effective & open communication
Reward & recognition
20
Different from Other Auto OEMs
Toyota invests in a handful of providers only
LP grows with Toyota
Others mostly for short term result (e.g. lowest cost)
Others may not invest in LP learning
Culture
Train the trainer
Global Production Center
Toyota allows LP to own & manage processes
Others use directive not collaborative communication
No joint problem solving or shared working groups
21
Building the Relationship: Communication
Annual Pricing Review (APR)
Annual Purchasing Policy (APP)
Benchmarking
Commercial Working Group
Daily Problem Reporting
Go & See Initiatives
Incident Reporting
Logistics Kaizen Workshop
Value Analysis (VA) Program
22
Working
Towards
Self- Reliance!
Working
Towards
Self- Reliance!
Annual Pricing Review (APR)
Reestablish pricing for each existing business unit
LPs are given cost reduction targets
LPs provide unit cost detail with explanation of all variances above
target levels
Excessive price changes and wide variances between LPs can lead to
DOB (division of business) changes
Toyota supports LPs when challenges to meet cost reduction
targets are present
Review of LP business model
Foster dialogue amongst LPs to generate cost savings ideas
LPs are provided unit pricing information to benchmark
23
24
Annual Pricing Review (APR) Model
$0.500
$0.250
$0.050
$0.100
$0.100
$0.475
$0.238
$0.048
$0.095
$0.100
0%
20%
40%
60%
80%
100%
C
o
s
t

A
l
l
o
c
a
t
i
o
n
FY05 FY06 Time
Cost Reduction - Pricing Model Margin
Overhead
Utilities
Equipment
Labor
$1.00 $.955
Focus on cost reduction by looking at each
cost element, not margin
CASE STUDY
LOGISTICS KAIZEN
WORKSHOP
JOINT COLLABORATIVE EFFORT
AT WORK
25
Logistics Kaizen Workshop
TEMA, NAMC, LP joint kaizen activity focusing on logistics
opportunities
1. Supply chain development routing efficiency, flexibility
2. Packaging design, reuse, standardization
3. Operations productivity, quality of service
Purpose: Provide a forum for problem areas (themes) to be
addressed
Cost Reduction
New Model Management
Team member development
Create team environment, share workload & knowledge and
create ownership amongst all participants
26
Example #1 Trailer Efficiency
Cost = Mile X M3 X Rate
M3= trailer efficiency X skid efficiency X box efficiency
M3= trailer efficiency X skid efficiency X box efficiency
27
Skid
Empty
Optimize Order Frequency Optimize Order Frequency
Optimize Palletization Optimize Palletization
1. Trailer
2. Skid
Optimize Routing Optimize Routing
Improve Stackability Improve Stackability
Maximize QPC Maximize QPC
Minimize Box Size Minimize Box Size
Optimize Part Orientation Optimize Part Orientation
3. Box
Example #2 - Common Rack
Focus: Reduce Packaging Investment Cost
Method: Study/Design Common rack with one team
Team: TMMAL,TMMTX,TMMI, NUMMI, TMMBC, TEMA
Results: Reduce Investment Cost by $1.2M; increase
flexibility with common design; increase opportunity for re-use
Key Points:
1) Focused Team
Activity to reduce
cost
2) Developed OP
for future
common pkg
Development
Old:
4 Unique Racks
New:
1 Common Rack
TMMI
RACK
NUMMI
RACK
TMMBC
RACK
TMMTX
RACK
28
GCD TMMK M/R Process Kaizen
Before Significant wait time
29
SET
LANE
SET
LANE
AFTER ALL FREIGHT HAS BEEN CLEARED:
TM 3:
Move Freight to Set
Lane
TM 1:
Load Truck #1
TM 3:
Load Truck #2
TM 1:
Move Freight from the M/L
Lay Down Area
Time=0 to
40 (min)
Time =41
to 55 (min)
Temporary Lay
Down
TM 2:
1) Pull Tickets & Slot in
Ticket Box.
2) Clear Freight against
TMMK Checksheet
N1
1
N1
2
N1
3
N1
4
N1
5
N1
6
N1
7
N1
8
TMMK N1 Main Lane
Time =55
to 75 (min)
WAIT for Next Cycle
Example #3 Operations Efficiency
Cost = Mile X M3 X Rate
t/m #3
eliminated
SET
LANE
SET
LANE
AFTER ALL FREIGHT HAS BEEN CLEARED:
TM 2:
1) Clear freight using
TMMK check sheet
TM 1:
Load Truck #1
TM 2:
Load Truck #2
TM 1 & 2:
Move Freight from the
M/L to Set Lane
Time=0
to 40
(min)
Time =60
to 75
(min)
TM 1:
1) Pull Tickets & Slot in
Ticket Box
N1
1
N1
2
N1
3
N1
4
N1
5
N1
6
N1
7
N1
8
TMMK N1 Main Lane
GCD TMMK M/R Process Kaizen -After Level work load
Time =41
to 60
(min)
Benefit:
4 docks x 2 shifts =8 t/m
$399K/yr savings
Cont. Operations Efficiency
30
Logistics Workshop Results FY06
$48.6M REDUCTION YTD
KAIZEN AREA
ANNUAL
PLAN
TARGET
CURRENT
STATUS
PLANNING
Route Kaizen / Mileage Red.
PACKAGING
Reuse / Sourcing / Pkg Oper.
$20.0M
$21.9M
$24.7M $32.1M
31
OPERATIONS
Crossdock Kaizen
$2.0M $3.4M
TOTAL
$45.5M
$48.6M
YTD
TARGET
$15M
$23.5M
EVAL
$2.5M
$41.0M
Managing Through KPIs
What is a KPI: A key performance indicator
(KPI) is a quantifiable measurement that reflects
the critical success factors of an organization.
32
P
C
A
D
KPI
Managing Through KPIs cont.
Why Are They used:
Why Are They used:
To define and measure progress toward organizational goals.
KPIs provide a clear picture of current condition.
Sample KPIs:
Project Management Project Management
1. 1. Cost Planning ($/veh) Cost Planning ($/veh)
2. 2. % PKG Re % PKG Re- -use use
3. 3. M3/veh M3/veh
Logistics Operations Logistics Operations
1. 1. On On- -time arrival time arrival
2. 2. M3/tm M3/tm
3. 3. Qty of mis Qty of mis- -shipments shipments
Logistics Planning Logistics Planning
1. 1. M3/trailer M3/trailer
2. 2. Miles/veh Miles/veh
3. 3. Miles/stop Miles/stop
33
Keypoint:
Keypoint:

KPI support our pursuit to the

KPI support our pursuit to the
ultimate
ultimate
goal
goal
TOYOTA NORTH AMERICA
34