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The purpose of this report is to identify on how Toyota Motor Corporation (TMC) has
approached the planning and implementation of its logistics activities. Toyota has
established Toyota Production System (TPS) to organize its manufacturing and logistics
activities as well as suppliers and customer’s interaction. One of the TPS concepts is Just-in-
time (JIT) which is well known worldwide and provide significant competitive advantages to
Toyota. As a result, Toyota has become to be the world’s largest automobile manufacturers
by sales and production. To achieve JIT goals, Toyota has used “kanban system” to control
its production which can reduce lead time and response to any changing requirements.
Another system that Toyota has implemented and it is important on expediting JIT delivery
in lean system which is cross docking. In order to accomplish this, Toyota has integrated
kanban and milk run logistics into the operational design of cross docking facility. Milk run
is one of the most common used in the automobile industry nowadays. It combines inbound
Although JIT and cross docking are beneficial and support Toyota production system but
there’re some limitations that has found in this report. Toyota has to traded-off the additional
cost against inventory and transportation cost savings form this implementation. For future
trend, Toyota has continuously improved its system such as implementing e-kanban and
efficient, effective flow and storage of goods, services, and related information from point of
(Council of Logistics Management, 1998). In the competitive business world today, logistics
has been increasing their importance to the business achievements to create time and place
value in the products to maximize consumers’ satisfaction. Moreover, the effective logistic
management helps reduce cost of inventory carrying, material handling, transportation and
other distribution activities. This report will investigate on how Toyota Motor Corporation
(TMC) has planned and implemented of their logistic activities to become to be the world’s
largest automobile manufacturer by sales (Marr, 2009) and production (The Truth about
Cars, 2011).
Company Background
Toyota Motor Corporation is a multinational automaker company, was found by Mr. Kichiro
Toyoda since Y1937 and has its head quarter in Aichi Prefecture, Japan. Toyota owns and
operates Lexus and Scion brands as well as holding shares in Daihatsu, Hino Motors, Fuji
Heavy industries, Isuzu Motors, Yamaha Motors and Mitsubishi Aircraft Corporation.
There’re totally 522 subsidiaries worldwide under Toyota Group and about 320,590
employees. The current business is not only automotive but also in robotics and financial
services.
Toyota has developed the Toyota Production System (TPS) to organize its manufacturing and
logistics activities, as well as suppliers and customer’s interaction. The company philosophy
has reflected in the terms of Lean Manufacturing and Just-in-Time Production which are
and production with the large economic of scales in production of 51 manufacturing plants in
Toyota has passed GM as a world’s largest automaker in Y 2008 with selling of 8,972
million. In Y 2009, Toyota gained a highest market share in automotive industries with
(Datamonitor, 2009b).
“The more inventories a company has, the less likely they will have what they need” (Liker
2004, p104). Toyota is a pioneer using of just-in-time production. The Company has spent
many years to revamp its ordering, producing and distribution to make it easier for dealers
and customers to make changes before production (Fahey, 2004). At that time, the goal is to
reduce the average delivery time since the dealer order until receive vehicles from 70 days
to 14 days (Fahey, 2004). This goal accomplishment would not only satisfy customers need
but also reduce dealer inventory costs and the need for Toyota to spend on rebates for slow-
“Just-in-Time” (JIT) production is one of the concepts of Toyota Production System (TPS).
“It means producing the necessary items in necessary quantities at the necessary time”
and eliminating waste. The results once it achieved, cost is reduced and quality of the
product is improved which will give the sustainable competitive advantage to the company.
JIT is most likely been used in Automobile industries. Inventory has seen as waste
associated with keeping stocks. Parts are provided only when they are needed in production.
With JIT production system, Toyota could produce a vehicle within shortest time and
1. Once received a vehicle order, a production instruction must be given to the vehicle
2. To be able to assembled any types of vehicle ordered, the require number of all types
3. The parts must be replaced by retrieving the same number of parts from the preceding
process.
4. Only small numbers of all types of parts will be stocked in the preceding process and
produce only the numbers of parts that were retrieved by an operator from the next
process.
In order to meet JIT goals, Toyota uses “kanban system” to control its production to
determine what to produce, when to produce and how much to produce. Kanban is a
Japanese word, means card. It is an information system that controls the production of the
necessary products in the quantity that is required at the right time in every process of a
manufacturing company (Henderson, 1986). It is a pull inventory system which means that
parts are pulled when it needed and sent to the needed location. The pull system starts from
the customers and then it works all the way backwards to the original resources.
The figure 2 shows the sample of the process of Kanban System at Toyota supplying
carburetors. The washing process will give an order cards to a preceding process, machining
when its products stock level lower than demand needed from the subsequent assembling
process. The machining process will start processing immediately once receives an order
production schedule by changing the final assembly process and then the work will
automatically produce in their way back up the production line. However, there’re limitations
of this system that is not suitable for manufacturing with high demand fluctuation, short
production run and having multi types of products. Moreover, if the Kanban is breakdown,
The main benefits that Toyota received from implementing Just-in-Time production are cost
reduction, increase production efficiency and quick customer response by shorten lead time.
1. Cost Reduction: JIT enables to reduce cost of ordering and inventory because it
allows to purchase and receive parts just before needed in the assembly line.
Moreover, when overproduction occurs, products are produced more than demand
and leads to excess inventory, JIT helps to eliminate this waste and Toyota can save
storage costs as car no longer sit idle in warehouses waiting for customers (Atkinson,
2005). Last, JIT itself doesn’t cost a lot of investments in assets or systems. It’s
simply use the simple technique like Kanban to use card as a signal of parts
2. Increasing of production efficiency: Ohno (1984) found that it was easy to triple or
quadruple productivity by assigning one person per machine, as pre-war some critical
of production. The efficiency increased when productivity increase and cost reduce.
Moreover, increasing its efficiency in managing shop floor production can improve
3. Quick customer response by shorten lead time: JIT helps to reduce lead time both in
production and delivery. The examples to reduce lead time in production are moving
work stations closer together, reducing the number of jobs that waiting in process,
and improving cooperation between processes. To reduce lead time in delivery,
Toyota has good relationship with suppliers and encourages them to locate close to
the factory. Toyota supplier’s goal is Open-Door Policy, giving them training,
1. In JIT, small batch production is preferred. Parts of automobiles come from many
different suppliers which will result in high level of supply network coordination.
However, this may effect to logistic costs especially transportation cost because of
2. With the concept of zero inventories, no stocks or minimal reserve, a small disruption
from suppliers is possible to cease the production with a very short notice.
International Herald Tribune (1997) reported about one of Toyota’s supplier plants
got fired and couldn’t deliver all break parts. Toyota decided to stop and close down
all the assembly lines. This cause Toyota lost about $15 billions in sales before
In a past decade, Toyota has designed and implemented cross dock to support their lean
principle, aim to reduce costs and improve customer satisfaction. Cross docking is a
trucks and been sorted out immediately, reorganized based on customer demands, routed and
loaded into outbound trucks for delivery to customers without holding the products as
inventory at the warehouse (Yu and Egbelu, 2008). In lean system, a cross dock is focus on
expediting JIT delivery to the production sites. To be able to achieve this, Toyota has
integrated kanban and milk run logistic into the operational design of cross docking facility.
A JIT cross dock is able to sort, repack and delivery of large number of Kanbans while parts
order-cycle time can be reduced. The ferret (2011) website stated that in one week of
operation, a 7,525.15 square-meter-cross dock could process over 8,000 orders representing
JIT cross dock is also supports JIT production by using “milk run” to pick up and deliver
parts just-in-time and in a consolidated manner. Milk run is a logistic procurement method
that uses in scheduled pick up of parts from multiple suppliers designed to support a given
production level (Baudin, 2004). Milk-run has been implemented to utilize Toyota logistic
from each supplier. The truck is scheduled at specific time to pick up several parts from
suppliers along the way and return to cross dock. At cross dock, parts are unloaded and
prepared for each assembly plant. After that, truck is reloaded with the empty returnable
containers and return to supplier to be reused for the next shipments. To be able to deliver
parts frequently with the required amount and specific time from suppliers, the suppliers
must located near the assembly base such as Toyota in Japan and the scale of each supplier’s
Implementation of milk run system into cross dock makes transportation consolidation more
The example of milk-run logistic for Toyota Motor Thailand (TMT) was started by Toyota
Tsusho Thailand in 2001, and succeeded by TTK Logistics (Thailand) in 2003 and became
full-scale with the beginning of multi-purpose vehicles production (Nemoto, Hayash &
Hashimoto 2010 ). The number of trucks used for the milk-run logistics expanded to 565
trucks in May 2007 while the number of drivers expanded to 1.081. There’re about 150
delivery routes established in 3 plants at TMT with six-wheel trucks (4.3 tons loading
capacity) are usually utilized. TMT has received benefits from milk-run logistic in term of
loading rate has been improved and number of trucks and travel distance have been reduced,
There’re 4 steps to track the operations of JIT cross docking that can help to indicate
problems immediately.
1. The route number and time for unloading/loading must be labeled on dock doors to
verify that what truck is being serviced and to assure that the service are correct
destination and time for delivery as well as the height of truck. This is to ensure that
the shipments are placed in the right lane and the right time.
3. All containers come to cross dock will receive the ticket which will be indicated all
internally.
4. The employees at the dock use a box with indicated slots for each shipment. This will
help to verify that each shipment has been loaded on truck correctly.
To ensure a JIT cross-dock operational stability, it needs to utilize TPS principles which are
standardization is the key factor of JIT cross-dock operational stability. Toyota has set the
work standardization such as exact format, process and procedures, and then published to all
employees so everyone knows what to do and how to do it in the same way in each process
and can identify the errors or variability in the operation immediately. For preventive
process breakdowns. Last, involvement from suppliers to join pick-up route planning and
1. Toyota transportation cost has reduced. With JIT cross docking, parts are shipped
more frequency and lower quantity by consolidating smaller part supplies into
consolidated loads. Moreover, the trucks are almost fully utilized with full truckload
in both direction, not same as before the trucks only partially full.
2. Using a minimum number of containers, Toyota can save money from returnable
containers because the vehicle parts that go to assembly plants are balance to the
cycles because of reducing in product cycle time and improve customer satisfaction.
stocks.
One example, Transfreight, a joint venture company between TNT Logistics and Mitsui
Trading Company is one of the Toyota companies which is successful to implement cross
Although there’re many benefits from JIT cross dock implementation but there’re still some
limitations as follow,
1. Cross docking is suitable for company with large distribution system because with the
transportation cost.
3. Cross docking needs good cooperation with supply chain partners to plan, forecast
and share information among the chain. Tetsuo Agata, president of Toyota Motor
Engineering & Manufacturing North America, Inc, said that as Toyota redoubles its
Toyota has been aware and developed new technologies to support the production system
kanban) system can minimize human mistakes and facilitate tacking, monitoring and
performance measurement (Wan and Chen, 2007). E-kanban is more efficiency in term of
fast response, data availability, all information passes through electronic data information
system and material number doesn’t need to write into SAP. Moreover, the history data can
be analyzed in e-kanban.
(MRP) with integrated capabilities to make it more visible, traceable and compliance. The
visibility can be seen in term of real-time shipment status to its suppliers and 3PL providers,
become to be a world’s leader automotive manufacturer. It has brought many benefits to the
company such as reducing cost, increasing speed of production with high product quality,
avoid risk of remaining vehicles unsold and improve customer satisfaction. This concept is
very well known and mostly used in automotive industries nowadays. One of the tools that
support JIT production is kanban system. It uses to schedule production, determine what
need to be produced, when and how much to produce by using pull concepts, produce
In term of reducing transportation cost, Toyota has implemented JIT cross docking as a
strategy. JIT cross docking uses milk run logistic concept to pick-up and deliver parts just-in-
time. By this means, Toyota is able to pick-up parts more frequency with small-lot size
delivery and having better truck utilization. The major benefits from cross docking
implementation are reducing transportation cost and inventory handling cost. However,
there’re limitations such as high setting cost, and only suitable for the company with large
In the future, Toyota has continuous improved its system by using new technologies to
support its operation such as material requirement planning to make more competitive