LSCM Assignment

Supply chain Management & Logistics at Toyota

Submitted by
Burhanuddin H Dahodwala (15) Chetan Gandhi (16) Madhumitha Uday Kumar (30) S Vignesh (43) Saranyan R (46) P.R.Venkatnarayanan (58)

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Table of Contents

1. Industry Analysis . Page 3 2. Toyota Supply Chain Management Overview ..Page 13 3. Logistics Management at Toyota Page 18 4. Case Study: Logistics Management at Toyota U.S.A ...Page 21 5. References .Page 24

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INDUSTRY ANALYSIS The automobile industry, one of the core sectors, has undergone metamorphosis with the advent of new business and manufacturing practices in the light of liberalization and globalization. The sector seems to be optimistic of posting strong sales in the couple of years in the view of a reasonable surge in demand. The Indian automobile market is gearing towards international standards to meet the needs of the global automobile giants and become a global hub.

A detailed analysis of Automobile industry has been covered in respect of past growth and performance. Under this project to better understand the Industry we have used Fundamental and Technical tools to make it more authentic and meaningful. An E.I.C approach has been followed under Fundamental Analysis which covered effect of Recession, the impact of inflation, FDIs, Export, GDP etc. on Automobile Industry. The Industry Analysis has been done with the help of five forces model, BCG Matrix, SWOT analysis, industry life cycle and the industry specific index. For Company Analysis as a part of Fundamental tool we have undergone with the comparative analysis of TATA Motors as our leading company with Maruti Suzuki Indias largest Car manufacturer. The fundamental aspect consists financial and Non-Financial analysis of both the company. In the Technical aspect we have considered Share price analysis, moving average, moving average crossover, Bollinger bands and M.A.C.D. of both the company by keeping TATA Motors as our leading company.

At the end conclusion and recommendations have been specified so as to make the research work more meaningful and purposeful.

ANALYSIS OFAUTOMOBILE INDUSTRY

Over a period of more than two decades the Indian Automobile industry has been driving its own growth through phases. With comparatively higher rate of economic growth rate index against that of great global powers, India has become a hub of domestic and exports business. The automobile sector has been contributing its share to the shining economic performance of India in the recent years. To understand this industry for the purpose of investment we need to analyze it by following two approaches:

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1). Fundamental Analysis (E.I.C Approach) a) Economy b) Industry c) Company

2).Technical Analysis

I) FUNDAMENTAL ANALYSIS

a). ECONOMY

Economic analysis is the analysis of forces operating the overall economy a country. Economic analysis is a process whereby strengths and weaknesses of an economy are analyzed. Economic analysis is important in order to understand exact condition of an economy.

GDP and Automobile Industry In absolute terms, India is 16th in the world in terms of nominal factory output. The service sector I is growing rapidly in the past few years. This is the pie- chart showing contributions of different sectors in Indian economy. The per capita Income is near about Rs38,000 reflecting improvement in the living standards of an average Indian.

Today, automobile sector in India is one of the key sectors of the economy in terms of the employment. Directly and indirectly it employs more than 10 million people and if we add the number of people employed in the auto-component and auto ancillary industry then the number goes even higher.

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Following is the graph showing a trend of Indian GDP trend over the past few years.

Source:India Central Statistical Organization

The market value of Automobile Industry is more than US$8 bl. and Contribution in Indian GDP is near about 5% and will be double by 2016. The automotive industry in India grew at a computed annual growth rate (CAGR) of 11.5 percent over the past five years, but growth rate in last FY2008-09 was only 0.7% with passenger car sales shows 1.31% growth while Commercial Vehicles segment slumped 21.7%.

Recession All the major auto companies enjoyed the high growth ride till the mid 2008. But at the end of the year, industry had to face the hard truth and witnessed the fall in sales compared to last year. In December 2008, overall production fell by 22 % over the same month last year. The present global recession has hit the Indian auto industry, India is strong and growing industry but the impact of recession is evident now on industry as sales & growth of automobile companies have declined. Passenger Vehicles segment registered negative growth.

One of its supporting facts for effect of earlier recession on the industry is that the sales in December 2008 for passenger vehicles fell by 13.86% over December 2007 Two Wheelers registered minor growth of 1.85 % during April December 2008. However, Two Wheelers sales recorded 15.43 percent fall in December 2008 over the same month last year. Although the sector was hit by economic slowdown, overall production (passenger vehicles, commercial vehicles, two wheelers
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and three wheelers) increased from 10.85 million vehicles in 2007-08 to 11.17 million vehicles in 2008-09. Passenger vehicles increased marginally from 1.77 million to 1.83 million while twowheelers increased from 8.02 million to 8.41 million. Total number of vehicles sold including passenger vehicles, commercial vehicles, two-wheelers and three-wheelers in 2008-09 was 9.72 million as compared to 9.65 million in 2007-08.

Inflation Despite of negative inflation (-.21% on 22-Aug-09) we saw an increasing trend of sales in auto sector. A moderate amount of inflation is important for the proper growth of an economy like India because it attracts more private investment. The fall in wholesale prices from a year earlier is mainly due to a statistical base effect and doesnt suggest contraction in demand, the Reserve Bank of India said few week back, while revising its inflation forecast for the FY through March to around 5% from 4%. In last FY despite of skyrocketing oil prices (crude oil price has already up to $130 compared to $20 per barrel five years back), Indian automobile Industry was not as much affected and experts think that Indian automobile industry will continue to grow this year despite all obstacles- oil price hike, higher interest rates. However, the effect of inflation has affected every sector which is related to car manufacturing and production. The increase in the price of fuel and the steel due to inflation has led to a slower growth rate of the car industry in India. The effect of inflation has taken the rise in the price rate of the cars by 3-4% which in turn suffices the need to meet the rise in price of the raw materials to build a car. The car market and the car industry witnessed a fall of 8-9%.

FDIs In India FDI up to 100 percent, has been permitted under automatic route to this sector, which has led to a turnover of USD 12 billion in the Indian auto industry and USD 3 billion in the auto parts industry. India enjoys a cost advantage with respect to casting and forging as manufacturing costs in India are 25 to 30 per cent lower than their western counterparts the Investment Commission has set a target of attracting foreign investment worth US$ 5 billion for the next seven years to increase India's share in the global auto components market from the existing 0.9 per cent to 2.5 per cent by 2015. FDI inflows in Automobile Industry 2008-09 was Rs.5,212 Cr an increase of 47.25% compare to 2007-08, while in April-May 2009 it was around Rs.497 Cr.

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Export Society of Indian Automobile Manufacturers (SIAM), automobile sales (including passenger vehicles, commercial vehicles, two-wheelers and three-wheelers) in the overseas markets increased to 1.53 million units in 2008-09 from 1.23 vehicles increased from 218,401 in 2007-08 to 335,739 units in 2008-09. million units in 2007-08. Export of passenger

There is a continuous increase in the export of automobiles since the financial year 2002-03, except for the decline in the export of commercial vehicles in the financial year 2008-09, which may be attributed to the global economic recession.

Despite recession, the Indian automobile market continues to perform better than most of the other industries in the economy in coming future, more and more MNCs coming in India to setup their ventures which clearly shows the scope of expansion.

Current Scenario of Automobile Industry in Economy With the latest available data Indian Automobile Industry is expected to grow at 9%-10% in near future, Two wheeler segment sales grew up by 12.8% with the modest 2.6% growth rate, under this segment the market leader Hero Honda registered growth of 12% in its domestic sales
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where as Bajaj Auto disappointed as sales plunging by 23%, on the other hand car sales has been grew up by a healthy 22.7% in last February and Commercial Vehicles reported slower sales. It is assumed that in coming festive season to meet demand, carmakers going to produce

70000units/month more over the average 1.3lac/month with help of 5000 new hands.

Indian Automobile Industry at Global level: India ranks 1st India is the 4th India ranks 11th India ranks 5th in the global two-wheeler market biggest commercial vehicle market in the world in the international passenger car market pertaining to the number of bus and truck sold in the world

India is the second largest tractor manufacturer in the world.

Volkswagen, Toyota, Nissan & Ford plan new cars to cash in on fastest-growing compact car section of car market in India. Source: Economic Times

Sales of different Auto Companies speed up even before festive season Maruti by 29%, TATA by 11%,Skoda Auto 33%, Hero Honda 33%, Mahindra 42%, Yamaha 63% etc. Source: Economic Times (3/09/09) It is expected that the Automobile Industry in India would be the 7th largest automobile market within the year 2016.

Projected Growth rate in Automobile Industry

Passenger vehicle sales in the country will grow at a CAGR of 12 per cent to touch 3.75 million units by 2014. The domestic two-wheeler sales will grow at a CAGR of 8.8% by 2014 at 11.3 million units. To emerge as the destination of choice in the world for design and manufacture of automobiles and autocomponents with output reaching a level of US$ 145 billion accounting for more than 10% of the GDP and providing additional employment to 25 million people by 2016.

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b) INDUSTRYANALYSIS (AUTOMOBILE)

The current trends of the global automobile industry reveal that in the developed countries the automobile industries are stagnating as a result of drooping markets, whereas the automobile industry in the developing nations, have been consistently registering higher growth rates every passing year for their domestic flourishing domestic automobile markets.

Being one of the fastest growing sectors in the world its dynamic growth phases are explained by the nature of competition, Product Life Cycle and consumer demand. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing countries.

In 2009, estimated rate of growth of India Auto industry is going to be 9% .The Indian automobile sector is far from being saturated, leaving ample opportunity for volume growth.

Segmentation of Automobile Industry The automobile industry comprises of Heavy vehicles (trucks, buses, tempos, tractors); passenger cars; Two-wheelers; Commercial Vehicles; and Three-wheelers. Following is the segmentation that how much each sector comprises of whole Indian Automobile Industry.

Industrial Analysis of any industry can be done based on the following headings: 1. Five Forces Model 2. BCG Matrix 3. Industrial Life Cycle 4. SWOT Analysis 5. Industry Specific Index

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1.) Five Forces Model

Michael Porter identifies five forces that influence an industry. These forces are

Degree of Rivalry Despite the high concentration ratio seen in the automotive sector, rivalry in the Indian auto sector is intense due to the entry of foreign companies in the market. The industry rivalry is extremely high with any being product being matched in a few months by the competitors. This instinct of the industry is primarily driven by technical capabilities acquired over years of gestation under the technical collaboration with international players.

Threat of Substitutes The threat of substitutes to the automotive industry is fairly mild. Numerous other forms of transportation are available, but none offer the utility, convenience, independence and value offered by automobiles. The switching cost associated with using a different mode of

transportation, may be high in terms of personal time, convenience and utility.

Barriers to entry The barriers to enter automotive industry are substantial. For a new company, the startup capital required to establish manufacturing capacity to achieve minimum efficient scale is prohibitive. Although the barriers to new companies are substantial, establishing companies are entering the new markets through strategic partnerships or through buying out or merging with other companies. However, a domestic company, with local knowledge and expertise, has the potential to compete its home market against the global firms who are not well established there.

Suppliers power In the relationship between the industry and its suppliers, the power axis is tipped in industrys favour. The industry is comprised of powerful buyers who are generally able to dictate their terms to the suppliers.

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Buyers Power In the relationship between the automotive industry and its ultimate consumers, the power axis is tipped in the consumers favor. This is due to the fairly standardized nature and the low switching costs associated with selecting from among competing brands.

2.) Industrial Life Cycle

The industrial life cycle is a term used for classifying industry vitality over time. Industry life cycle classification generally groups industries into one of four stages: pioneer, growth, maturity and decline.

In the pioneer phase, the product has not been widely accepted or adopted. Business strategies are developing, and there is high risk of failure. However, successful companies can grow at extraordinary rates. The Indian automobile sector has passed this stage quite successfully.

In the growth phase, the product market has been established and there is at least some historical guide to ground demand estimates. The industry is growing rapidly, often at an accelerating rate of sales and earnings growth. Indian Automotive Industry is booming with a growth rate of around 15 % annually. The cumulative growth of the Passenger Vehicles segment during April 2007 March 2008 was 12.17 percent. Passenger Cars grew by 11.79 percent, Utility Vehicles by 10.57 percent and Multi Purpose Vehicles by 21.39 percent in this period. The Commercial Vehicles segment grew marginally at 4.07 percent. While Medium & Heavy Commercial Vehicles declined by 1.66 percent, Light Commercial Vehicles recorded a growth of 12.29 percent. Three Wheelers sales fell by 9.71 percent with sales of Goods Carriers declining drastically by 20.49 percent and Passenger Carriers declined by 2.13 percent during April- March 2008 compared to the last year. Two Wheelers registered a negative growth rate of 7.92 % during this period, with motorcycles and electric two wheelers segments declining by 11.90 percent and 44.93% respect. However, Scooters and Mopeds segment grew by 11.64% and 16.63% respect. The growth rate of the automobile industry in India is greater than the GDP growth rate of the economy, so the automobile

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sector can be very well be said to be in the growth phase. As the product matures, growth slows as penetration reaches practical limits. Companies began to focus on market share rather than growth. Industry demand tends to follow the overall economy, but the scope of growth of the automobile sector is very much possible in India due to the increasing income of the middle class and their income as well as standard of living.

3.) SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. SWOT analysis of the Indian automobile sector gives the following points:

Strengths Large domestic market Sustainable labor cost advantage Competitive auto component vendor base Government incentives for manufacturing plants Strong engineering skills in design

Weaknesses Low labor productivity High interest costs and high overheads make the production uncompetitive Various forms of taxes push up the cost of production Low investment in Research and Development Infrastructure bottleneck

Opportunities Commercial vehicles: SC ban on overloading Heavy thrust on mining and construction activity
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Increase in the income level Cut in excise duties Rising rural demand

Threats Rising input costs Rising interest rates Cut throat competition

TOYOTA - SUPPLY CHAIN OVERVIEW

The supply chain has both physical components as well as operational and planning processes.

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Physical Flows Parts are produced by suppliers and transported by inbound logistics to the assembly plant. At the assembly plant, the vehicle begins in the body shop, moves to the paint shop, then to assembly, and finally to inspection. Once the vehicle is produced, it is transported to the dealerships via outbound logistics.

Suppliers Suppliers provide thousands of parts and components that go into the vehicle. These parts and components are received via the inbound logistics network from hundreds of tier 1 suppliers. Tier 1 consists of the first-level suppliers that make parts and ship directly to the assembly plants. Because suppliers also have suppliers, and those suppliers have suppliers, the supply chain contains several
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levels that are referred to as tier 1, tier 2, tier 3, and so on. So you can imagine how complex the inbound supply chain is for an automobile assembly plant. In addition, because suppliers are located in various geographic areas, the time for parts to arrive from each supplier to the assembly plant can vary greatly. Local suppliers may be only one or two days away from the assembly plant, whereas suppliers located overseas may require several weeks of transportation time.

Fig. Network Logistics Inbound Logistics Toyotas success in operating a lean supply chain requires that the parts be transported from the suppliers in an efficient and timely matter; therefore, Toyota establishes a partnership with a limited number of third-party logistics providers (3PLs) to deliver logistics services. Toyotas inbound logistics operation can best be described as a logistics network. The company organizes many of its suppliers into clusters based on geographic location. Parts are picked up from those suppliers by

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suppliers along the way), and then they are delivered to a regional crossdock. (Suppliers that are located close to the plants, however, ship parts direct.) Toyota takes complete responsibility for pickup and transportation of parts from the suppliers to the plants, because Toyotass just-in time parts inventory practice requires extreme reliability of inbound logistics. Toyota organizes the suppliers into clusters based on geographic proximity. The truck routes are designed for parts to be picked up from multiple suppliers and delivered to a regional cross-dock. To improve efficiency, the same truck will pick up parts not only from multiple suppliers but also from each supplier destined for different Toyota plants. Once trucks arrive at the cross-dock, the parts are unloaded and staged for each assembly plant. They are then loaded onto trucks that take parts directly to each plant. Trucks are unloaded at the plant based on the progress of production. If the plant is operating on schedule, the trucks will wait only a few hours in the plant yard. After the parts are unloaded, the truck is reloaded with the corresponding empty returnable containers. These returnable containers flow in reverse through the cross-dock and back to the supplier to be reused for a future shipment. The first step in network design is to analyze the location of the suppliers and identify clusters of them that are located in close proximity to one another. Next, a determination is made as to which cross-dock is located nearest to the suppliers. The idea behind this design is that one truck picks up parts from mul the nearest cross-dock. The parts are unloaded and the corresponding empty containers are picked up and returned to the suppliers on the next run. The parts are then staged for pickup by trucks that are scheduled to deliver full truckloads of parts directly to each plant. Production Vehicles are produced at the final assembly plant from the parts provided by hundreds of suppliers. A typical assembly plant will have one or more separate lines on which vehicles are assembled. The plant is subdivided into shops. The vehicle is born in the body shop where the frame and body are formed. The body parts are stamped in the stamping shop by presses. The body shop is where numerous robots are used to weld the body parts together. Once the body is assembled, then the vehicle moves to the paint shop and its exterior is painted. After the vehicle is painted, it moves down
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the line into final assembly. At that point most of the supplier-provided parts are installed to make a finished vehicle. Once the vehicle completes the final inspection, it is released from the factory for shipment to the dealer. Outbound Logistics Vehicles that are produced at an assembly plant must be transported to each dealer. This process is

that is used to stage the vehicles prior to shipment. At Toyota, these yards are referred to as marshaling yards. Team members install accessories, perform final quality assurance, and stage vehicles for shipment. Once the vehicle is ready for shipment, it is driven to either the railcar staging area or the truck staging area. Dealers Dealers play a key role in the supply chain because they are the face of Toyota to the customer. They are responsible for selling the vehicles produced by the manufacturer to the retail customers. In addition to selling vehicles, dealers have an extremely important influence on customer satisfaction. One of the key responsibilities of the salesperson is to guide customer demand. Toyotas sales model is designed so that a high percentage of vehicles is sold from a relatively low level of dealer stock. Parts Ordering There are many parts ordering processes for the different categories of parts. The four broad part categories are local parts, long lead time parts, in-house parts, and sequenced parts: 1. Local parts are parts supplied by suppliers located within the same global region as the assembly plants. For example, parts supplied by North American suppliers to assembly plants located in North America would be considered local. 2. Parts supplied by Japanese suppliers to North American and European assembly plants would be considered long lead time parts. 3. In-house parts such as body panels, plastic bumpers, and engines, are produced at the same site as the assembly plant.
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4. Sequenced parts are produced at suppliers located near to the assembly plant. Those parts are shipped to the assembly plant in the exact sequence of the vehicles being produced. Atypical sequenced part for assembly is seats. Parts and Supplier Master A common process is to maintain a parts and supplier master database. The parts master contains information such as part name, supplier, lot size, and vendor share. Vendor share is used to allocate shares when a part is sourced to multiple suppliers. Forecasting Each week, a 13-week rolling forecast is sent to all suppliers to provide them with guidance for future orders. The forecast gives suppliers an estimate of future orders so that they in turn can send forecasts to their suppliers. In some cases, long lead time component parts or raw materials may need to be ordered as a result of the forecast. After all of the necessary part quantities are determined for each vehicle for the three-month rolling production, they are summarized by part number, by supplier, and by production week. Then the quantities are divided by the lot size to determine the number of lots to order for each part number for each supplier Logistics Management at Toyota Milk-run Logistics Over the last 20 years, Toyota has also transformed its after market parts distribution system using the principle of milk run system. Dealers pre-diagnose and pre order parts they need each day, instead of carrying months of stock, and get two three deliveries a day on milk runs from local distribution centers. Toyota uses milk runs from suppliers to support its JIT manufacturing system in both Japan and the United States. In Japan, Toyota has many assembly plants located close together and thus uses milk runs from a single supplier to many plants. In the United States, however, Toyota uses milk runs from many suppliers to each assembly plant.

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Detailed Overview Toyota Motor Corporation is putting up three logistics concepts which cope with the efficient TPS system. The first concept is a flexible logistics that can cope with demand fluctuation. As mentioned above, a mixed mass production system based on TPS has been established, and it is necessary to pursue JIT transportation to maintain this. It is also necessary to have a safe logistics system (against transportation damages, wrong item delivery, and stockouts) that put importance not just on speed but also on transportation quality. The second concept is a logistics with a competitive edge as a result of minimum lead times (LT) and lower costs. Ultimately, it includes reducing logistics cost by advancing localization of parts suppliers and re-assessing Milk Run areas. After performing re-assessment of such issues on production and procurement, shortening of lead times and reduction of distribution costs are pursued. The third concept is a logistics with minimum environmental impacts. The response to the environmental problem is a major issue not only in Japan but also on a global level. In the logistics field, the ultimate objective is to reduce the amount of CO2 exhausts generated from the activities of transportation and to decrease the amount of packaging and wrapping materials used.

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As a method to actualize these concepts, consolidated fully-loaded distribution, through small-lot frequent pickup from each supplier and shortening of lead time, can be adopted after production leveling has been performed. It is designed to collect goods from two or more suppliers at the same time which increases the amount of cargo sufficient enough for fully-loaded distribution.

Small-lot fully-loaded frequent distribution can be classified into three types. The Milk Run collection of goods is done when procuring them from suppliers in the outskirts of the overseas plant. In Japan, it is common that the suppliers perform JIT delivery by themselves as the amount of delivery from each supplier is greater and delivery distance is not so long. In foreign countries, however, trucks do not become fully-loaded. Furthermore in many cases, transactions (ownership transfer) are made at the suppliers plant, so Toyota Motor Corporation tailors the collector trucks and performs routing to collect goods from the suppliers.

The Milk Run logistics is generally a generic name of a logistics procurement method using routing to consolidate goods by the buyer. Explaining it in detail, it is a method of goods collection in which the user (i.e. car assembly manufacturer) dispatches one truck at a specified time period to visit various suppliers (i.e. parts supplier) following a predefined route to collect parts or products, and deliver them to the factory. In general, the reasons why the Milk Run logistics has been widely employed are: 1) clarification of distribution cost included in the prices of parts previously in the traditional business practices 2) reduction in transportation cost due to consolidated transportation offsetting even the use of small lot transport 3) improvement of the assembly manufacturers production line and greater accuracy of JIT goods delivery due to synchronization

The Milk Run logistics can provide the consolidated collection of goods necessary to improve the logistics procurement system. When there are two or more plants and the parts used in these plants are provided by a single supplier, consolidation at the supplier facility is performed. The parts are consolidated at the place of departure in such a way that they are fully loaded to the truck,
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transported, and unloaded to various destinations. This method is used in the delivery of goods from suppliers in remote areas not only those located in the outskirts but also from foreign countries.

Consolidation using a transfer facility is a method of goods delivery in which parts are transported fully-loaded from suppliers in remote areas to the transfer facility, sorted according to the destination plant, and then transported. Transshipment can be performed without maintaining stocks. There are international cross-dock centers in the different regions of the United States, Europe, and Asia.

These three types of consolidation system can increase the loading rates of trucks, then reducing their number on urban roads. Therefore they have the same effect as the cooperative delivery system involving many shippers or consignees with a public consolidation center, which is one of the most common city logistics policies. It means that if there is a big shipper like a car manufacturing company, the urban traffic condition could be improved to some extent by their own consolidation efforts.

Case: Toyotas logistics management in U.S At the heart of everything that happens within Toyota's four walls is the Toyota Production System (TPS). Based on the concept of kaizen, or continuous improvement, TPS depends heavily on a wellSupply Chain Management and Logistics at Toyota Page 21

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oiled supply chain management and logistics system. Logistics is a key foundation of Toyotas production system, because if we don't move material efficiently and in small lots we might lose many of the benefits Toyotas production system principles stand for. Toyota practices one critical production system principle via what the company calls abnormal management. "When you are running lean, there's not a lot of room for mistakes, because if something goes wrong, it doesn't take much to shut our plant down," the companys logistics manager says in an interview. VASCOR Ltd., one of Toyota's major LPs (logistics partners), fully understands and embraces these principles. VASCOR (Value-Added Service Corporation), with headquarters in Georgetown, Ky., is a joint business venture between APL Logistics and Fujitrans Corporation, the two controlling partners. VASCOR route drivers are extremely critical to the successful operation of the TPS, which incorporates kanban, a highly efficient ordering system. The theory behind TPS is one-piece movement at a time. Toyota focuses on small order lots. There are 24 order possibilities in one day of two eight-hour shifts. How the company use those 24 order slots depends on the supplier, the volume, the distance and the efficiencies. The 24-order network gives Toyota the flexibility to shift frequencies in response to volume changes. Frequencies are based on any number divisible by 24. The optimum shipment model is 24 times a day. This means 12 times a shift, 40 minutes worth of material in one order flows into a plant. Toyota always builds in some buffer or safety stock, so if one shipment is missed for any reason, the line won't shut down. But if two shipments are missed, it could mean stopping the line. Heijunka Heijunka, or level flow, is another major part of TPS. Heijunka is a principle driving the entire supply chainfrom supplier to crossdock through the production chain to the production floor. There are equal intervals of time between shipmentsotherwise you have a surge of material. This principle also helps suppliers so they can level their outputs and shipments to Toyota.

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VASCOR picks up from within a network of 500 suppliers in North America and delivers to any one of eight crossdocks that Toyota's LPs operate for the company. The crossdocks are located where Toyota needs them, based on volume and that no product sits at a crossdock for more than 12 hours, with most shipped out in less than six hours. Crossdocks accumulate shipments from a region. Those shipments then get split according to plant requirements and are shipped directly from the crossdock to the plant. Milk runs help optimize transportation and production. The company can operate efficiently by increasing the frequency of runs to multiple suppliers, which reduces the lot size of each move, allowing it to fill trucks. They have to sacrifice some mileage, but the benefits are steady and level flows of material and higher order frequencies.

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REFERENCES 1. Milk Run Logistics by Japanese Automobile Manufacturers management at Toyota 2. Driving Efficiencies in Automotive Logistics , a comprehensive article from www.inboundlogistics.com 3. Milk Run logistics: Literature Review and Directions a research paper by Gagan Saini and Guginder Singh, published in July 2011 4. Toyota Supply Chain Management , book by Ananth Iyer, Sridhar Seshadri and Roy Vasher 5. Internal college databases (Ebsco, etc. ) Press articles on websites displaying news on supply chain management and global logistics like supplychaindigital.com, scdigest.com, supplychaintoday.com, etc. - Research Paper on logistics

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