Procurement for Toyota

The supply chain used by Toyota is one that places a lot of emphasis on reducing the cost of production. As part of its procurement processes, the company works with its suppliers not just in a functional capacity but also includes them in some of its operations. To begin with, the company ensures that the suppliers are in close proximity to its base of operation to speed up delivery of raw materials and collection of finished products ready for distribution. The company also guarantees its suppliers some form of security by giving them order guarantees which encourage the suppliers to produce high quality goods at relatively low cost. Since the company believes in growing with its suppliers, it is able to build lasting relationships that make it more convenient to purchase raw materials and supply its products.

            Although efficient, there is a need to improve the procurement supply chain at Toyota because its focus on reducing costs takes away from other important factors such as customer satisfaction[1]. The approach did not factor in the importance of other factors such as customer opinion and preference and this can have serious negative effects on sales even when the best quality products are offered by a company[2]. Even if the company managed to present the best quality products to the most appropriate stores, customer satisfaction and preference is something the supply chain should have taken into account as it greatly determines demand for the products.

            In order to achieve a global supply chain strategy trade off, the company can implement the use of the in-house procurement approach combined with the multiple sourcing approaches. The in-house approach is one where a company relies on its employees to fulfill specific tasks aimed at assisting the company meet its objectives[3]. It also gives access to external providers who get to use the facilities within an organization to not only help meet company objectives; but also save on cost of production. The in house approach is appropriate as creates more streamlined projects, improves communication and makes processes more standard.

Combining the in-house approach and multiple sourcing will ensure that the company not only saves on cost but also gets the best quality of products and services as it has a variety to choose from. If one supplier stops offering a service or product, the company is flexible as it has the option of choosing from other suppliers[4]. This further increases competition between suppliers as they seek favor from Toyota which translates to better prices, delivery times and quality of products.

Once established, the company can rely on the transaction cost internationalization approach to enter into new markets. The company may decide to have subsidiaries in the new markets it wants to venture into so as to better control operations[5]. The transaction cost method will give the company more control not just of the market but also over its subsidiaries. In the case of new market ventures, the company can rely on the popularity and experience of its subsidiaries and its suppliers to gain more customers and build better customer relationships and in so doing, improve the procurement approaches implemented by Toyota when making products available to its customers. The in-house approach will ensure that members of staff are selected from within the organization to take care of procurement[6]. The mixed sourcing will result to the production of better quality products which will go a long way in boosting customer satisfaction.

 

 

 

References

Ayears C, (2018) “Outsourcing vs insourcing: Getting procurement right for your business” Bis   Henderson Recruitment,  retrievced from, https://www.bis-hendersonrecruitment.com/outsourcing-vs-insourcing-getting-procurement-right-for-your-    business/

Dudovskiy J, (2012) “Supply chain management in Toyota Motor Corporation” retrieved from,             https://research-methodology.net/supply-chain-management-toyota-motor-corporation/

Marquis A, (2019) “The difference between outsourcing and insourcing” retrieved from,             https://smallbusiness.chron.com/difference-between-outsourcing-insourcing-32400.html

Toyota, (2019) “Toyota company profile” retrieved from,    https://www.supplychain247.com/company/toyota

Whitelock J, (2002) “Theories of internalization and their impact on market entry” International Marketing Review, retrieved from,           https://www.emeraldinsight.com/doi/abs/10.1108/02651330210435654?journalCode=imr

 

 

 

 

 

 

 

 

 

[1] Ayears C, (2018) “Outsourcing vs insourcing: Getting procurement right for your business” Bis Henderson Recruitment

[2] Marquis A, (2019) “The difference between outsourcing and insourcing”

[3] Whitelock J, (2002) “Theories of internalization and their impact on market entry” International Marketing Review

[4] ibid

[5] Toyota, (2019) “Toyota company profile”

[6] Dudovskiy J, (2012) “Supply chain management in Toyota Motor Corporation”