Supply Chain Management Research Project

Toyota Motor Philippines Corporation

In Partial Fulfillment
of the Requirements for the course
SUPPMAN K31

Submitted by:
Bernabe, Marianne D.
Gabriel, Jose Angelo R.
Gonzales, Jasper
Mangune, Paul Andrei R.
Oba, Ryu R.

Submitted to:
Mr. Willy L. Cuason

Submitted on:
December 8, 2016

Table of Contents
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 I. Organization Background

Starting in 1988, Toyota Motor Philippines Corporation (TMP) has become the
leading and the biggest automotive company in the country. They offer around 18
models and operate 43 sales distribution and service network outlets. Mostly, TMP has
been known to be the number one in passenger car sales, in commercial vehicle sales,
and in total sales. Specifically, the bestsellers are the Vios and the Innova which are
manufactured in Toyota Santa Rosa, Laguna.

The Toyota Santa Rosa is an 82-hectare Industrial Complex that was declared a
Special Economic Zone and contains the companys manufacturing plant, head office,
and housing of investors. These investors take part in the manufacturing and and
exporting of automotive products to Southeast Asian Countries and other parts of the
world.

Being one of the first corporations to establish their production facility in Santa
Rosa City, they helped transform the city from an agriculture- based economy to one
that is more focused on manufacturing and commercialization. This brought about more
resources for TMP since new housing projects were developed alongside commercial
establishments.

TMP is promoting sustainable and localized approaches in managing their

operations. They would get components from local suppliers and ensures that their
operations are in compliance with government regulatory standards in environment,
labor, and practice.

Its Supply Chain Management Section oversees all matters relating to the
companys supply chain practices and needs. The group interviewed Artemio Garces,
head of TPS Promotion, to better understand the details of all the aspects pertaining to
Toyotas Supply Chain elements.

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 Figure 1- Supply Chain Management Section- Organizational Chart

VISION

To be the No. 1 AUTOMOTIVE COMPANY where GREAT PEOPLE work as a TEAM to

provide the BEST products and service to our CUSTOMERS

MISSION

To dominate our markets through dynamic selling and timely delivery of attractive
products, with excellent customer service and continuous product improvement.

To produce vehicles and components of outstanding quality, using advance technology,

continuously improving methods and environment-friendly processes while maintaining
safe working conditions.

To sustain Company profitability, stability, productivity and growth by engaging in

effective financial and resource management for the collective gain of the Toyota Family
and the society we serve.

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To sustain Team Member's morale and productivity by developing their full potential and
total well-being, and by establishing mutual trust, mutual responsibility, and harmony
through open communication.

They have work values such as Competence, Discipline, 5S (Seiri or Sort, Seiten
or Straighten, Seiso or Shine, Seiketsu or Standardize, and Shitsuke or Sustain),
Genchi or Going to the actual place and see it for yourself, Kaizen or Continuous
Improvement, Productivity, Professionalism, Quality, Safety, and Health.

Relational Values are Commitment, God-centeredness, Integrity, Loyalty,

Malasakit, Respect for Others, Teamwork, Transparency, Trust, and Unity.

The Toyota Production System involves Cost Efficiency, Job Rotation, Just-In-
Time, and Standardized Work.

For this research, the group has interviewed representatives from the retail/sales
department of Toyota Cubao and from the purchasing department of Toyota Santa
Rosa, Laguna.

II. The Organizations Supply Chain

The pool of customers that Toyota is targeting is everyone who is capable of

owning a vehicle. This includes the upper, middle and working class. The social status
of individuals can easily be distinguished by the model/s of car they select.

They have observed that demand is quite stronger during the holidays (Holy
Week, Christmas, etc) and weak during lean months. Also, when new models are
released, demand for these models tend to rise.

They do forecasts on a yearly basis and based yearly data. TMP does two main
types of forecasts for the suppliers to align their activities with them. Long-term and
short-term forecasts for suppliers are beneficial even though Toyota follows a JIT
system. For development, a capacity study is given reference for the supplier but during
production time this shifts to OAP and RAP. OAP stands for original annual plan while
RAP stands for revised annual plan.

Forecasting is used to determine the number of units to be purchased from the

supplier so Toyota will not overspend or supersede the numbers on the inventory. They
determine the forecasting numbers through the number of reservations, inquiries for
both showroom and offsite displays. The information given by their frontline distributors
are also evaluated.

Customers are segmented into different types. Toyota will assess the needs of
each customer so that they can properly provide for each of their needs. As such, they
analyze and filter the need of customer to arrange what product or service they can
direct to them. Customers will say what they need; they say their budget, their preferred

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type of vehicle, etc. Their social classes however, does not purely determine their
preference. There are rich individuals who opt for low-mid end vehicles like the Vios,
whereas there are middle class customers who are willing to pay more for a high end
vehicle like the Camry and the FJ Cruiser.

All in all, around 30% of the suppliers are already domestically sourced and the
rest are imported. Overall there are 91 suppliers involved in the whole TMP supply chain
and examples of parts that can be purchased locally are seats, tires and plastic parts. If
there is a total of 1,000 parts, 300 to 400 parts are already local made. Unfortunately,
engines are still imported because the quality cant still be achieved by local suppliers or
there are really no suppliers of machines in the Philippines.

Indonesia, Thailand and Japan are the importers of parts which means that most
importers come from the ASEAN community. The suppliers have long been partnering
with Toyota and there are new local suppliers who are already capable of supplying
other parts, particularly for new models.

Toyota Motor Philippines purchase components for the manufacturing of their

automobile products such as the Vios and Innova. Components both come from
domestic and international suppliers from ASEAN countries (Thailand, Indonesia, and
Japan) while the engine part is imported directly from Japan.

Ordering is done 3 months in advance by the dealers. Since Toyota follows a JIT
system, stocks are very minimal. Local parts are being held for only two hours while
import stocks are being held for only one month. These are for two separate
warehouses, one for local and one for imported parts. Ordering process is using
Kanban, a signaling system under JIT. Orders are firm for a month which means
suppliers receive daily Kanban for specific orders. For example, an order for this day
could have 100 pieces while this month TMP might need 3,000 pieces so supplier would
receive a Kanban for these orders daily. A system called Toyota Partners Online can be
accessed by the suppliers where they work side-by-side their suppliers for easier
communication and collaboration. If there are firm orders for a month, TMP also makes
sure they have a three month forecast.

III. Key supplier partnerships.

Selection of suppliers is based on their production, capabilities and development.

Development is a technical aspect and example is how a supplier develops its molds.
Production tackles more on the availability of the machines and production lines
involved. Cost-Merit is an important aspect TMP holds against a supplier because is a
supplier is capable and yet they do not have cost-merit, they will still not be awarded to
be part of the supply chain. From these requirements, a list of potential suppliers is
listed and they are ranked by a criteria system Toyota created to dwindle the number of
suppliers.

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 Performance Monitoring of Suppliers are done by Toyota. They have their own
criteria as well as procedures that they want their suppliers to follow. The group will
highlight 2 major procedures in the following section.

1. They require suppliers to spend time in their own

plant to ensure correct compliance of ordered components.

There is a separate group monitoring the performance of the supplier and this is
called the quality department. But monthly, the purchasing engineers receives the
performance of suppliers in terms of quality and delivery. After assessing the
performance of suppliers and finding that they are not delivering well, management of
that supplier would be contacted and TMP would find out the reason behind the poor
performance.

2. 3-Month Interval Assessments

This type of assessment is in the form regular product quality check of their
suppliers. Their 3 month interval for assessing the materials is a way for Toyota to check
that each component that will go into their car are in the quality that they are looking for.
The assessments would typically include a thorough check of whether or not each batch
has accrued an error using the total rejected parts per million parts or the PPM.

Toyota would have local suppliers for their seat arrangements, tiers, metal and
plastic parts. They source these

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 IV. Supply Chain Diagram

V. Detailed Description of the Supply Chain Diagram

A. Transportation

From the beginning, quotation for conditions already indicates how the supplier
would deliver the parts to TMP branches. The suppliers would have to specify if the
parts would be transported to TMP Bicutan or TMP Sta. Rosa and once they awarded,
the truck design will be under development and also the layout of the truck internally.
Logistics and the development of parts would be finalized once quotations are done.
Naturally, the number of trucks that would be delivering would also be specified under
these quotations. As long as the supplier is able to deliver, TMP has no problem with
accepting the supplier in their supply chain.

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 B. Inventory and Purchasing

Inventory and Purchasing for Toyota follows a very fundamental flow. First, they
forecast the materials they need that are sourced from the sales they have received
from their distributors. Once they have made the necessary forecasts, they need to
know the delivery schedule of the suppliers for easier management of the components
needed for the finished product. Once that is done, they are set to tally all the required
components that they need from each specific supplier. Finally, they would receive the
products in 2 separate warehouses for imported and locally sourced components.

Once they have made the necessary purchases of their components, they need
to sort them into warehouses. Components will be sourced according to whether or not
they were made locally or somewhere else. Locally stored products will be placed in
inventory for not more than 2 hours making the warehouse considerably smaller than
the warehouse for exported products.

Forecast-> Delivery Schedule-> Receive from suppliers

C. Warehousing and Storage

Under Toyotas Production System, warehouse and storage is separate for local
and internationally sourced parts. They are brought to different warehouses and are
cared for differently with each other. As discussed earlier, locally sourced parts only
include tires, seat arrangements as well as metal and plastic parts. Engines are still
sourced from international suppliers such as companies from Japan, Indonesia,
Malaysia, and most other ASEAN countries.

Storage of these materials will be housed in different warehouses. However,

each local part should always be moving as much as possible and would not need
much warehouse. This is in line with Toyotas mindset and production philosophy. If they
have to store, they would only store buffer supply that should only last for 2 hours
before needing to be dispatched as soon as possible. Meanwhile, parts sourced
internationally, particularly car engines can be stored in the warehouse for a maximum
of 1 month.

D. Order Processing

Order processing starts from dealers to the marketing department. Vehicle

logistics are next in line because this is where the order of the car itself is processed.
The main problem that TMP has right now with the order processing is the traffic
congestion in Metro Manila. This causes delay, especially for their JIT system. Adding to
the congestion in the Metro is a construction being started right in front of TMP Sta.
Rosas plant but management has the least complains since a flyover right in front of
the plant would be beneficial for future deliveries.

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 Their basic ordering process would be in this format:

Dealers -> Marketing -> Logistics

Dealers would be the ones that would take in the orders of their customers.
Marketing would coordinate all of the orders and forward them to logistics which would
be the ones responsible for assembling the product. This is a basic description of how
an order would be processed and what departments are responsible for what tasks.

They have a straight flow production line wherein they would receive the
shipments of components from one end and those components will go down the
production line to be converted to the finished product. This promotes better efficiency
at the cost of building space.

E. Forecasting

Forecasts for Toyota would typically involve sales forecasts and production
forecast. They are divided into midterm and longterm supply and demand relationships
that should be in accordance with the Original Annual Plan (OAP) or the Revised Annual
Plan (RAP)

F. Customer Service

Customer service is mainly handled by the marketing department because this is where
customer feedback goes straight to. Although monthly, there are reports received by the
purchasing department about sales for the month against sales last year which is their
own version of customer feedback. This is the main collaboration process that
purchasing has with marketing.

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G. Supply Chain Partners

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 VI. The Organizations Service Processes

Aside from selling brand new vehicles, TMP also sells aftermarket car
accessories to further give clients minor customization options to their units. They also
offer a program for clients a no cost maintenance and roadside assistance.

Purchase of brand new units from the TMP Laguna plant are dealt by their
marketing professionals as they assist and consult their clients on vehicle type and unit
specifications. They also offer clients aftermarket accessories for their new vehicles.
Their Customer Service Department allow clients to request schedules for maintenance
of their unit. Service Advisors would also offer and suggest other services that may not
include on the regular periodic maintenance. Such as rust proofing coating, wheel and
brake fluid replacement, window tinting etc..

Their Service crew are usually monitored on how soon they can accomplish the
repair order. A strict criteria is followed as monitoring mechanism for consistent
technician efficiency. As for their marketing department, they are usually given a strict
time frame of scheduled release as it usually takes 2 days to properly prepare the
documents and unit at the same time.

Service clients are filtered by clients with appointments and walk-in clients.
Clients with appointments choose for themselves a schedule that they prefer on a
specific time. They also have a department that monitors clients in a database to remind
clients of their appointments. The company usually to encourage the clients to have a
schedule to avoid waiting on line and have their units the soonest. Walk in clients are
would need to take a queue number until a service advisor is available to assist them.
Although they may have wait a little longer since clients with appointments are
prioritized first.

The TMP Laguna plant currently has an actual capacity of 28,000 vehicles per
year. Plans are already underway for an investment of P405.8 billion to increase its
current capacity to 33,000 unit per year.

TMP manages their service capacity by focusing on their lean production. The
downside of this however, is that any delay of supply in their components can shutdown
the entire production floor. Dealers manage the demand by using the forecast as a
basis for ordering additional units from the TMP Laguna plant.

VII. The Organizations Production Processes

TMP manufactures motor vehicles for the Philippine market. They manufacture
vehicles types such as sedans, SUVs, vans, pickups, hybrids, and high performance
cars. Most of the car models are manufactured domestically at the TMP Laguna plant.
Car models such as the Vios, Innova, Hilux and Hiace. The sedans, SUVs, hybrids, and

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high performance vehicles are imported from other toyota manufacturing plants around
ASEAN.

When TMP receives new vehicle blueprints from Japan, manufacturing methods
are now planned 1 year before the release of the new vehicle. Suppliers are assessed if
they have the current capability for producing the components of the new car design.
TMP constantly communicates with its suppliers to deliver the new car to the market not
only on time but also not compromising the quality of the vehicle.

Finished units are stored in a parking bay directly outside the production facility.
Every unit undergoes product testing for each components such as headlamp and
luminaire testing, battery testing, buzz squeak and rattle, fuel and oils, emission testing,
etc. Truck with car carrier trailers are loaded with vehicles that have passed the test and
are now ready to be transported to dealerships nationwide.

VIII. Performance Monitoring

For suppliers, their performance is monitored by the availability of products and

capacity of logistics. TMP has already a number of suppliers and they are all carefully
chosen. This is done by Toyota representatives who actually go to the supplier's site
and evaluate accordingly through evaluation sheets.

Quality is monitored through the 3 parts per million formula or more commonly
known as 3PPM. This formula is shown below:

For example, if the target is 3PPM and this month a supplier produced 10PPM a
letter would be sent to the management of the specific supplier asking for them to
evaluate and investigate why there was a very big amount of rejection and if
countermeasures or improvement measures are already being done as of the moment.

With customer service, TMP has created a department to solely address to that.
This department would conduct surveys through calls and personal messages. Also,
they would ask for suggestions so that it could help the company improve their
operations and service.

IX. Information Systems

The purchasing department is not fully aware of the systems being used since
material planning is the main focus for the inventory. What they are aware of is that they
have the basics or control for other logistics through systems like visualization, clear
location of parts, and minimum and maximum inventory.

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 Right now, SAP, which stands for systems, applications and products, is being
studied. The systems they use are being upgraded to catch up and run with the same
level as the industry.

X. Recommendations

As one of the worlds leading car manufacturer, Toyota has already a

sophisticated method of managing their supply chain. They have the resources needed
to integrate suppliers and customers into a single system in which Toyota could benefit
the most. However, the group believes that there are factors that can still be improved
upon.

During the groups interview, the representatives mentioned that incentives

offered to suppliers as part of their good performance is making them a priority supplier
and a recognition during the years Suppliers Night. The group felt that Toyota could still
do more for their suppliers by providing necessary training in the production of the part
they supply to Toyota. In this manner, it would be more effective and resourceful for the
company to be linked with these partners.

Supplier Partnerships

Their Toyota Production System (TPS) is an integration of their internal

management and supply chain capabilities and extending it to their suppliers. Not all of
their local suppliers, however, are linked to the TPS. As of now, they only have 23
suppliers out of their 45 local suppliers that makes use of Toyota approved standards
within the TPS.

Naturally, Toyota would want all of their suppliers to be following a single directive
as well as a centralized system wherein they would be able to manage all of these
suppliers and the components they produce for Toyotas products. That is why, it is the
strong belief of the group that they should implement the TPS to all remaining direct and
indirect suppliers. The group recognizes the challenge behind this, but it would prove
highly worthwhile in the long run.

Integrating all the suppliers within the TPS will directly benefit them. Toyota will
become their partner in production and would help and evaluate the needs of their
operations. Moreover, this would provide a more consistent quality control management
of the components these suppliers will be delivering to Toyota. Quality and delivery
performance are measured so that the system will become more lean and be more
efficient.

Performance Monitoring

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 A checklist for the indicators that would be required per each supplier is a
necessary tool to ensure quality consistency. Their comprehensive checklist of for
evaluating suppliers, (see Appendix C), is a tried and tested

Information System

In making the remaining suppliers adopt the TPS, a comprehensive IS should be

set in place to regularly conduct delivery and performance checks. The IS would be
done to ensure that documentation and ease of access is granted to all users and
parties involved. A SAP program is currently being looked into by the Supply Chain
Department and would be a good way to start in making this integrated within their daily
operations.

APPENDIX A

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Photo of Group with Interviewee

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APPENDIX B
Toyota Values

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 APPENDIX C
Evaluation Sheets

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 APPENDIX D
Canteen for TMP employees

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