Supply Chain Relationships.

3.1 Supply chain relationships.

The automotive industry, Toyota’s supply chain is extensive and include elements of production based on several forecasting techniques. The amount of money invested is large and fixed within the supply chain. The key trend within automotive industry is the increase of the variant numbers on individual figure and standardization of factors in the supply chain. The objective of Toyota’s SCM was to place the "Right product" at the right store with the right quantities to the right customer at the appropriate time and an appropriate price considering the costs.

The recommended type of relationship with the SC members recommended for Toyota is to have a long-term relationship, the firm also seeks a single-sourcing strategy for their strategic components with results to a strategic alliance with their supplier.

Toyota should organize its suppliers into functional tiers. The first-tier suppliers worked together in a product development team and the second-tier suppliers made individual parts. The first-tier suppliers were high level of co-operation and information exchange between the Toyota and the supplier. This largely reduces the lead time in new product development as it avoids or/and reduces the re-inventing defaults with their products. Toyota should have an overall technological development throughout their suppliers as well.

The reason why the strategic alliance is recommended for several reasons; firstly, it means to establish a long-term and flexible relationship with the supplier this would lead to many opportunities for both Toyota and their supplier. Secondly the relationship between the two parties would be strong and the trust would lead to great opportunities for both parties, there would be more accomplished by having this type of relationship. Thirdly having the concept of the reduction of production cost is so well practice within the supply chain that the dealer pricing is also done on "Market Price Minus" concept rather than "Supplier Cost Plus" this is basically a value analysis to the end user. By this particular move they try to provide the necessary value to the end product at minimal manufacturing cost.

The company Toyota should utilize their elements of an effective negotiation strategy in order to build strong supply chain relationship. These elements are; firstly, verbal clarity and language skills with their supplier, this would establish a relationship with their supplier based on facts rather than fiction. When information is delivered clearly to the supplier the objective is being accomplished effectively and efficiently. For example, if Toyota wants to order essential parts for manufacturing their products to meet the demands of their customers. Secondly patience, when negotiating with a second party Toyota should be patient throughout the process. The processes could be fast or slow it could contain a complex or simple content. The company should understand the second party’s way of thinking in order to negotiate with them, and if both parties face a problem when negotiating there should be patience with the processes.

Toyota should plan effective negotiations by; firstly, adopting a win-win mentality. when the organization has an open mind and a win-win mentality prepares them for opportunities and threats within the market. Secondly Toyota should also view the negotiation as part of a larger of longer-term relationship, this would make the organization to devote the time and the human capital to work towards their objectives, this would result to it being executed effectively and efficiently. Lastly approaching the negotiation processes with an effective planning strategy should be that Toyota should approach the supplier negotiation with an approach of high trust and a positive attitude.

The tactics that would support Toyota’s win-win negotiations are; firstly, argue based on facts Toyota should always be certain that they’ve made decisions based actual evidence and facts and not just guessing which one to take. Secondly be wary of deadlines, Toyota should always make sure that internal functions and supplier are aware of deadlines so that their work is efficient and effectively. And lastly security, Toyota should always make sure that they are safe when dealing with potential suppliers and internal functions if not Toyota would lose power within the market.

3.2 Sharing information across the supply chain.

Toyota has actively increasingly grown and innovated in its information systems by incorporating new information processing technologies while responding to various changes in the external environment, including rapid globalization of development, manufacturing, and sales operations; advancements in car electronics technologies; compliance with global environmental standards; and changes in the Japanese and global economy.

Source: Toyota Motor Corporation, 2012

The benefits of this system of the company Toyota would be; that the company reduces their costs, improves customer service levels and reduces lead times. This would ensure the end products value would be delivered effectively and efficiently.

Its greatest effect within the automotive industry has been in the manufacturing process. E-commerce allows companies to adjust their ways in sectors such as Supply Chain Management by; adopting a supply chain integration mode would result to the automotive industry is able to manage information efficiently and create a steady flow to distributors, suppliers, internal divisions and customers.

Most of the automotive manufacturers are using ERP and CRM (Customer Relationship Management) systems in addition to managing their supply chain management process. ERP (Enterprise Resource Planning) is defined as the broad set of activities that helps a business manages the important parts of its business. The results attained from ERP can help managers evaluate the company’s performance and see if it achieves their corporate objectives. CRM is a figure built to help organizations achieve customers easily and receive their feedback. Since this model combines customer’s information to the overall organization, the supply chain management is improved efficiently.

Example of ERP: