Logistics Operation at Toyota in North America
Phone Interview on September 25, 2008, with Mike Botkin, General Manager of Logistics,Toyota
The purpose of the interview was to discuss the logistics operation at Toyota in North America.
Mike Botkin is general manager of the North American Logistics division. The two departments that comprise this division are Logistics and Parts Distribution. Logistics, is responsible for route planning, operations of over-theroad logistics (inbound), cross-dock management, and initial planning for new projects or model change. Outbound logistics of finished vehicles are the responsibility of Toyota Motor Sales. Parts Distribution manages the supply of service parts from the plant to the service center. It supports service parts production and shipping preparation. This group is also responsible for quality, technical support, and overseas logistics and customs.
Describing the logistics, Mike mentioned that the preferred method of routing is from supplier to cross-dock to plant. The milk run is used when demand is not satisfied from cross-dock and is not the norm. In case of milk runs, Toyota generates the routes and passes them on to a third-party logistics company. That arrangement was not always in place. In Japan, the supplier is responsible for delivering to the plant. When Toyota came to the United States, two logistics partners were charged with doing the routing. They were provided with such information as the delivery frequency and time windows. Over the 20 years that Toyota has been operating in the United States, they have developed the expertise to do the routing themselves. Routes from the supplier directly to the plant are planned at the plant. Routes integrated with other North American plants are determined by the logistics organization.
If weather delays or supplier issues occur, ordering is still based on the old timeline but a new transportation plan is manually generated. For example, if an 8-hour route is delayed to 10 hours, a one-way move may be used to recover the timeline. Such planning is done on a case-by-case basis. Some automation is utilized for communication and control of trucks. Lead time for each part and supplier is synchronized with the route and assembly requirement.
Mike described heijunka at the plant as focused on smoothing of lineside workload requirements (e.g., wire harness adjustments take more time on a vehicle with a sunroof assembly than on one that does not have that need). As a result, other considerations such as the lot size and delivery sequence determine the loading and smoothness of the logistics, handling, and transportation.
Service parts demand comes from dealers and repair shops, but demand for service parts is erratic, as it is based on need. The parts depot, in the early days of Toyota, had some buffers because of fewer models and parts. The only issue was seasonality, but that could be planned for. As the number of models increased, the parts count increased. The company is working through the process to smooth the flow.
Lead time is higher for international shipments, as they are shipped in sea containers. Transportation costs are also large. The planners first try to determine the number of containers per day required at a facility and build the containers for one production day. So when a container is unloaded at an assembly plant, it may contain all parts for 150 vehicles that are planned to be made during part of a day. If there are options, there may be inventory at the plant to handle variations at the plant.
Variation is also created because of product mix. Consider the difference between a Camry and a Sequoia—the Camry is 10 cubic meters while the Sequoia is closer to 20. The smaller vehicle has a better chance for trailer efficiency. The packaging and lot sizes are thus impacted by the product. The other issue in North America is that the vehicle is produced at the assembly plant. However, the supplier base is spread out in North America—perhaps over 300 miles from the plant, unlike in Japan where the distance from plant to supplier is less than 50 miles. Each plant manages logistics, but there is an attempt to standardize processes; thus, logistics at plants is decentralized. The expectation is that the planning will be centralized in a few years, while deployment remains decentralized.
For example, in concept, it is expected that a delivery of a pallet is one for one with a returnable container. However, with variance in orders and in scheduling the completion of vehicles, such synchronization is a challenge.
Toyota uses a core carrier program to pick up loads directly from supplier locations. The transportation partner is expected to be safe, confirm parts counts at the order level, inform about short shipments, and deliver on time. Toyota measures instances where the shipment error should have been caught, as well as in and out time. In some cases, company observers ride along to confirm drive times. The trucking company manages the route—the expectation is that it can confirm progress of the driver with a global positioning system or may contract the monitoring to another company.