Secondly, when you are talking about IT systems for visualisation, stability is key. The last thing you want to do is put in a new system to give you total visibility but because it is unproven technology it gives you less visibility than you would have without an IT system. It is about how you choose and what the purpose of IT is. Too many times people see IT systems as a solution to the problem. Rather, IT systems is the tool to reinforce the process. Ludwig: What are digital tools and systems that Toyota is looking at now for its logistics?
Van der Merwe: We are looking at two big areas at the moment. The first is service parts and how do we put the right system in place. Starting everything from inbound planning to yard management, to stock management. We need to look at that whole system for the future. Likewise, the whole backbone system that manages finished vehicles.
On a continuous basis we should be looking at these opportunities. There is no one area that I would highlight. It is about taking a step forward and listening to our customers and interacting with them to see what we need. Van der Merwe: At Toyota we believe that ecommerce for vehicle sales is going to increase in the future. I have no idea. But we do see it increasing.
But at Toyota we believe absolutely that our retailers are a key part of our future. When you are buying a product that for most people is half their annual income, it is not just a product you want to buy online, arrive at your house tomorrow morning with no experience and no explanation.
Also, the vehicle of the future is becoming more complicated. Vehicles will be either reserved online or bought online a lot more. Whatever you need to do the customer needs that knowledge and experience. A finished vehicle truck driver is not the person to do it. He transports every make of car so how can he really know a Toyota? Ludwig: Has Covid permanently changed the way you operate in logistics? What lessons have been learned? Van der Merwe: Covid has permanently changed the way we do things.
Never has Toyota Motor Europe had such a turbulent year. We have had to design tools to allow us to stop doing things. Normally our focus is on designing tools to start doing things.
That has had an impact. Working from home has totally changed how we manage logistics. On the other side, Covid fatigue has proven that people want to get back to the office.
Decision making in Toyota has totally changed. We have always spoken about one team but Covid has created one team. Otherwise, we would not have survived. We have had cross-functional decision-making advance to such a level that none of us could have comprehended [previously]. We need to find a way to keep that. I think for me I came into logistics as a novice and have had to learn very quickly how to manage crises and empower members to manage them too, as there were so many I could not manage them all.
In many cases the first time I heard about a crisis is when my team told me they had resolved it. So, the changed management style is something I personally need to find a way to keep. Ludwig: By what is the most important thing you hope to have achieved? Van der Merwe: Toyota is now self-sustainable so if ever another Covid comes we will not be taken by surprise like we were this time.
Toyota has been forced to suspend production next month at two plants in Japan because of a shortage of semiconductors. There are positive, albeit early signs, that vehicle production is recovering in North America. This year saw a loss in light vehicle production of 2. While will be constrained, carmakers are reporting that plants will be running without shutdown over the coming months, even if they are under capacity for the time being.
In its latest results Renault estimates that its vehicle production shortfall thanks to parts shortages for will reach around , units, above the , it previously forecasted for the year. However, the company is making efforts to meet its projected operating margin. Toyota is having to make further reductions to planned global production in November because of the shortage in the supply of semiconductors and other Covid restrictions.
Automotive Logistics is the leading resource for automotive logistics and supply chain professionals globally. Site powered by Webvision Cloud. Skip to main content Skip to navigation. No comments. Leon van der Merwe, vice-president of supply chain at Toyota Motor Europe.
This interview has been abridged and edited for clarity. Toyota has already sold 10, units of the Mirai hydrogen-powered car. Related articles. News Toyota forced to suspend production in Japan in June TZ Toyota has been forced to suspend production next month at two plants in Japan because of a shortage of semiconductors.
News Outbound sector faces capacity crisis as production rebounds, says Nissan TZ There are positive, albeit early signs, that vehicle production is recovering in North America. Load more articles. The Huntsville plant will be Toyota's 11th in North America, producing , units annually, and is expected to be fully operational by the end of In January , Toyota announced that production of the Tacoma -- a historically popular mid-sized pickup for Toyota -- will be moving to Mexico from the plant in Texas.
This announcement was directly after President Trump signed the United States-Mexico-Canada Agreement, which increases the percentage of automakers selling automobiles within the United States to acquire parts to assemble the vehicles from Toyota's decision to move Tacoma production to Mexico is a profitability decision in the long-term, as Toyota projects domestic production to fall 5.
As the operating margin is flat year over year at 8. In its recent corporate governance report, Toyota stated that "as the automotive industry enters into a phase of revolutionary evolution at an unprecedented pace, Toyota has decided to focus efforts toward fostering innovation to open the way to the future.
The purpose of this investment was to increase the artificial intelligence AI integration within vehicles, in addition to creating new vehicles with a better focus on AI. An example of the innovation-driven from these two investments is the newly announced concept car , "Concept-i.
Toyota's focus on all-electric cars is large, with plans to receive half of all sales from electric vehicles by This is a seemingly large hurdle for an auto manufacturer with not one all-electric vehicle currently on the market. Toyota stated during the Geneva auto show that battery production is a hindrance for Toyota currently, with a current production capacity of 28, electric cars annually, however, Toyota announced a partnership with Panasonic in to produce batteries for electric vehicles -- paving the road to an all-electric lineup for Toyota.
Shares of Toyota are trading at a forward price-to-earnings ratio of 8. Continued innovation and heavy investments in all-electric vehicles paired with an increased focus on costs set Toyota apart from the competition, however, competitors ahead of the all-electric market such as Tesla put pressure on Toyota and the competition to step on the accelerator and innovate to meet customer demands.
Investors looking for substantial revenue growth need to look elsewhere; however, owning Toyota is a good bet on the "revolutionary evolution" -- as Toyota stated during -- of the automobile transition to fully electric and possibly autonomous driving in the future. Continuing to innovate and focus sales on successful regions such as North America will keep Toyota relevant for the next five years, making this auto manufacturer a compelling company to own over the long term.
We created teams specializing in different areas and instructed them to analyze the root causes of problems in each area. If we had thought about product designs more clearly or had the time to conduct more experiments, we could have avoided those problems.
To prevent more problems, I suggested that we extend the deadlines for several projects by six months, even if that meant delays in new launches, and that we postpone or eliminate other projects.
We have to improve quality even if I have to slow our pace of growth. After examining every project in our pipeline, product by product, market by market, we have created a new product-development plan. Some projects have taken a different direction, and I have halted others—just as workers stop the line. How does Toyota address that risk in strategic terms? As the company continues to expand outside Japan, we will increasingly face market risk, which will vary from country to country.
To create a company that can resist fluctuations all over the world all the time is difficult. However, we use the concept of leveling fluctuations heijunka , which is part of the Toyota Production System, to reduce risk.
For example, the conditions in some Asian markets, such as Taiwan and Indonesia, are still tough. There will always be such vicissitudes in different markets, so leveling out those peaks and troughs is important.
Our basic philosophy is to produce vehicles where customers are. When there are short-term demand fluctuations in one market, we use our operations in Japan to support them. But will your long-term strategy, which you have described as having a full line of products and competing in all regions, maintain stability? GM competes with a full line in all markets, but the strategy has proved to be more of a liability than an opportunity.
We will create a full line of appropriate products for every region in the world by offering global models and also developing regional models. In Japan we must continue to maintain our market share by launching new products that create new market segments and by revamping our sales channels.
In North America we recently entered the full-size pickup truck segment with the redesigned Tundra, and we must engage more closely with Generation Y customers through brands such as the Scion.
In Europe we will expand and strengthen the lineup by marketing diesel engine and hybrid vehicles. As I said earlier, we believe in building vehicles where we sell them, so we will increase our production capacity overseas.
The company strategy puts equal emphasis on taking in opportunities and avoiding or absorbing risks; it utilizes global car models and also regional models. However, that can sometimes create inflexibility in terms of capacity utilization, because local demand will fluctuate. To increase efficiency, we have developed a global link production system.
Owing to the innovative technologies in our plants in Japan, we are able to transfer the production of different models between them quickly. So we have linked some plants in Japan to our overseas plants. When there is a spike in demand in, say, Europe, our plant in England will maintain stable production while the link plant in Japan manufactures the extra units needed. This system helps us in several ways: It enables us to respond swiftly to changes in demand; it enables high capacity utilization at all plants; and it saves capital expenditure, because we use existing resources in Japan to balance demand in other markets.
Are they merely sources of raw materials, or are they also markets? Brazil, Russia, India, and China are entirely new markets for us. They are going to be important markets for Toyota eventually. As those economies grow, we need to figure out what kinds of manufacturing facilities we should set up and what sorts of products we need to sell. We will introduce global and regional models and augment our production bases in those countries. Those countries are growth markets, and they will continue to grow.
As our former executive vice president Mr. We would do better to wait than to jump into the market; we should let the market come to us. Does the fear that Toyota may have to compromise on quality prevent you from entering the emerging markets more aggressively? Those markets demand low-priced vehicles, which embody cost-quality trade-offs that Toyota may not want to make.
Is quality proving to be the enemy of growth? Brazil is different from China, which is different from India, and so on. In Brazil the Corolla sells well; in Russia the Lexus sells extremely well.
Anyway, it would be wrong to say that these markets want lower-quality products. But yes, one factor they have in common is that many of their consumers want low-cost automobiles.
The moment I became president, I created a team to work on a project related to that. But I told our engineers, let us not focus on developing low-cost automobiles; let us develop technologies and processes that will allow Toyota to manufacture all our vehicles at lower costs.
If we do that, we can produce cars for BRIC and we can use the same processes to reduce the cost of automobiles for other countries, too. By conceptualizing the problem in that fashion, we will also meet our quality standards rather than worrying about whether we have to compromise on them in emerging markets. We have started developing those technologies already. Our rivals may be trying to create low-cost vehicles for emerging markets, but Toyota will go beyond that and develop the optimal vehicles for all worlds.
Toyota is clearly trying to grow as it has always grown, at a steady pace. But the forces of the global market are pulling you, and you are being pushed to move faster and faster to keep up. Are those forces so strong that they might pull Toyota apart? The Toyota Way has been and will continue to be the standard for everyone who works for Toyota all over the world. The Toyota Way has two main pillars: continuous improvement and respect for people. Respect is necessary to work with people.
That leads to teamwork. That nurtures your ability to identify problems, and if you closely observe things, it will lead to kaizen: continuous improvement. The question is how long it takes to train people to develop the Toyota mind-set. Challenge We form a long-term vision, meeting challenges with courage and creativity to realize our dreams.
Respect We respect others, make every effort to understand each other, take responsibility, and do our best to build mutual trust. Teamwork We stimulate personal and professional growth, share the opportunities of development, and maximize individual and team performance. Just yesterday I spent a whole day with 30 of our young executives. They had been broken up into teams to tackle different problems, and they made presentations based on what they had learned about using the Toyota Way to tackle them.
I listened and commented. The managers felt happy and said that they had learned a lot. When I asked, many of them said they were now able to understand the Toyota Way fully. I asked them to explore that. How will Toyota balance demand for its products with the longer-term need for human resources? Making cars is a capital-intensive business, but manufacturing at Toyota is a human capital-intensive business.
Your executive vice presidents all say that Toyota is facing a serious shortage of trained people. Will you be able to catch up and keep up with the demand for people?
As our executive vice president Mr. It takes time to develop Toyota people, who are trained on the job rather than in a classroom. Only when employees start working at Toyota do they learn from their superiors what values and skills they need in order to do their jobs.
Most of our plants outside Japan were set up in the past ten years, so even senior employees overseas have relatively little experience with the Toyota Way. Toyota develops T-type people. Creating T-type personnel is a time-consuming process. The moment we start operations, employee turnover begins. So we are learning how to retain people. We used to transmit the Toyota Way through the mother plant system, whereby a Japanese plant served as the parent of each new overseas plant we set up.
That Japanese plant was responsible for training people in the overseas plant and instilling the Toyota Way in them. Because of the rate at which we are growing overseas, we have done away with that system.
We now send people from Japan, coordinators, to instill our philosophy and concepts in our overseas companies.
When a new company is established, the coordinator will serve as a teacher, or sensei , for its employees. After some years a second-generation coordinator will serve as a coach rather than a mentor.
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