Managing International Supply Chain

EXECUTIVE SUMMARY

This work is centred on the adoption of green strategy in the overall operations of Toyota

Motor Corporation. It highlights how these strategies are practically adopted by Toyota, how

it affects cost, quality and services, the challenges Toyota are facing while adopting these

strategies, the long term benefits associated with these strategies and recommendation given.

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INTRODUCTION

Reducing carbon emission is one of the most discussed and highlighted issues presently

across the globe, because of its effect on our environment and entire ecosystem. The

accumulation of carbon dioxide in the environment is recognised as a major contributor to the

global warming problem. Many governments across the globe including the leaders of the

developed countries like United States, Germany, Japan, whose economies are driven by

massive industrialisation, and leaders of emerging economies like China, India, Brazil whose

economies are also driven by massive industrialisation have now shown great commitment to

the issue of reducing carbon emission.

In his report DuPont 2009, highlighted that the answer to solving the potential disaster of

global warming is to control the amount of carbon dioxide that is being emitted from

automobiles, fossil fuel, power plants and industries.

Toyota Corporation

Toyota is the world’s leading automotive manufacturer; it was established in 1937 in Japan.

With 53 manufacturing companies in 27 countries and regions outside Japan, it registered 152

billion Euros net revenue in financial year 2006 (UNEP 2008).

Guided by a clear vision of a sustainable future, Toyota has developed a wide range of

vehicles powered by excellent new petrol and diesel engines. The company is also an

acknowledged leader in environmental technologies, such as hybrid (petrol/electric), clean

diesel and fuel-cell drive systems. Toyota is committed to sustainable development and seeks

to address the challenges of global warming and urban pollution by developing a number of

innovative environmental technologies and vehicles.

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Figure 1: pathway to eco car

Toyota marketed the world first mass-produced hybrid car, the Prius which combines the

power of a petrol engine with the clean, efficient energy of an electric motor, of which over

1, 295,300 of the hybrid vehicles has been sold by the end of 2007(UNEP 2008).

Toyota’s guiding principles are –

a. To contribute to the development of a prosperous society through the manufacturing

of automobiles, and

b. To contribute to global sustainable development its focused activities centres on

environmental preservation through corporate activities, technology Innovation, and

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people which all will lead to a prospering low carbon society by creation of a dream

vehicle.

Figure 2: Source: (http://www.toyota.com.au/toyota/events/environment/vision)

Toyotas guiding principles serves as the fundamental management policy for its operations

worldwide. These principles reflect Toyota’s commitment to providing clean, safe and

innovative products, while respecting the environment and culture of local community in

which it operates. Using fiscal year 2001 as baseline, by 2011 Toyota is targeting 27percent

reduction in energy per vehicle produced according to (environmental leader, 2009).

Toyota has set up action plan that involves green technology compliance in all its operations

and businesses worldwide, to show how committed it is to the safety of earth’s environment.

This action plan acts as the focal point for the entire organisation.

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1. Practically Adopted Programs by Toyota

Toyota has adopted practical programmes centred on supporting green environment in all its

operations, in form of environmental initiatives towards sustainability. The areas were it has

been adopted are;

a. Research and development

The input by R&D of any organisation will determine whether it will be sustainable in the

market. Toyota has focused its R&D green initiatives since the past decade on areas such as;

Increase in fuel efficiency of Toyota’s vehicles; Toyota has developed the strategy of

producing different vehicles with different power trains capable of using very less oil and

also using alternative energy sources based on energy market situation from region to region

in order to achieve CO2 emissions reduction and cleaner atmosphere with the right, vehicle in

the right place at the right time. Clear example is promoting the increased use of hybrid

vehicles which are electric motor with option of plug in, by combining hybrid and plug in

technology. Toyota’s goal is to have hybrid models for all its vehicles by 2020. (Toyota

Corporation, 2008)

Developing improved fuel economy, making smaller, lighter weigh vehicles and improving

power train efficiency in its engine systems.

Increase the speed at which new technologies can be reached for mass production, shorten

lead time

Response to energy diversification through alternatives to oil like bio energy, alternative fuels

in other to reduce carbon emissions through the use of bio fuels such as bio ethanol and

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biodiesel. Also in its R&D it is conducting research on the conversion of wood chips and

other biomas to ethanol. (Toyota Corporation, 2008)

Accelerate the development of small electric vehicle for mass production. R&D is

accelerating the development of small electric community vehicles and also focusing on

battery technology development of next generation batteries with greater energy densities

than that offered by current lithium- ion systems. (Green Car Congress, 2009)

Developed a traffic system to curb and decongest heavy road traffic in the cities, the system is called.

Toyota R&D

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b. Manufacturing

Toyota’s has been implementing the action plan it developed to reduce Carbon emission in its

production plants and facilities according to (Toyota Corporation 2008 and Toyota North

America, 2009). These action plans are;

They have integrated the use of low carbon emitting production technologies like water borne

plant system in its plants to lessen the emissions of volatile organic compounds, and the use

of energy saving equipments and machineries in its manufacturing facilities.

Introduction of daily kaizen (improvement) activity that reduces energy consumption like

reducing the time between equipment start up and start of production start times, and

reducing the number of agitators used in coating process.

Manufacturing plants partnering with local utility companies to implement sustainable

energy management programme through commitment to reduction in electricity usage.

Utilization of renewable energy like solar in its plants. Example where this was done was the

Installation of solar source of power for the Toyota centres in North America, and Toyota’s

Ban Pho plant in Thailand.

Environmental planning for new plants and creating production sites that are in harmony with

their natural surroundings

Local community involvement and ecological preservation through three planting at

production plant called “green for tomorrow”.

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Toyota environmental action plan from the year ending March 2007 to year ending March 2011

2010 CO2 Emission Reduction Targets, Results and New Targets

Region Emissions 2010 Target 2007 Result New 2010 Target

Worldwide Volume per sales unit

20% reduction from 2001

32% Reduction 35% reduction from 2001

Japan- Toyota Volume per sales unit

35% reduction from 1990

55% reduction 60% reduction

from 1990

Manufacturing Corpration

Volume 20% reduction from 1990

25% reduction 30% reduction from 1990

Figure 3: Source; (http://www.toyota.co.jp/en/vision/message/conference/080611_president.pdf)

c. social contribution

Social contribution initiatives for realizing a sustainable society includes funding of

environmental centres in leading universities, projects to counter deforestation, Toyota

foundation activities fostering programs for local communities, Environmental activities

grant program. Environmentally friendly urban planning to enable improving traffic flow and

reducing carbon emissions by putting transport infrastructure in place and applying traffic

intelligent managing system developed by Toyota engineers. Publication of sustainability

reports for each country and region.

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Figure 4: Source; (http://www.emilygertz.com/mt/mtsearch.cgi?blog_id=4&tag=global%20warming&limit=20

Figure 5 Source; (http://www.autospectator.com/cars/topics/environment?page=2)

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d. suppliers

Toyota’s green supplier guidelines emphasize that its suppliers must comply with applicable

laws, regulations and social norms, to undertake activities that support Toyota’s

environmental goals, improve their environmental action plan and process (UNEP 2008).

Procurement- Toyota practice green procurement for both vehicle parts and raw

supplementary materials through entryway management of chemical substance by asking its

suppliers to report the contents of substances of environmental concern in materials and not

include prohibited- use substances (Toyota UK, 2009)

Toyota expanding its chemical substance control list to include approximately 3400 control

substances of which 460 substances are prohibited from use.

Toyota has been able to reduce the number of office supplies items used in the offices to

approximately 1300 green compliant categories from a previous 2000 items.

e. logistics

Restructuring routes and increasing load density, to reduce the mileage travelled by trucks

transporting Toyota products like cars, parts and accessories. Collaborating with freight

industry and shipping partner to increase energy efficiency while significantly reducing green

house gases and air pollution. Logistics division tracking and monitoring green house gas

emissions.

Utilisation of high efficiency cargo carriers and railroads, increased loading rates, increased

fuel efficiency through environmental considerate driving and sharing vehicle transportation

with other companies and modal shift. (UNEP 2008)

There are large waste streams from the logistics especially in the area of packaging and

cafeteria waste. Ensuring that environmental impacts are managed properly by reducing

amount if waste generated, increase recycling rate and reduce waste sent to landfills.

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f. recycling

Recycling and reduce the use of resources by integrating manufacturing practices that

advance recycling and reuse. The materials for making vehicles from the steel used for

vehicle body to the fibres used in floor mats and seat cushions are produced with the design

for environment by thinking of the entire life cycle of the vehicle from manufacturing and

distribution to use and dispose. (Toyota North America, 2009)

When designing a vehicle the materials used are renewable resources from ecological

plastics, bio- based plastics and also materials that use less resource.

Figure 6: Source; (http://www.home-sewing.com/Environment-EN)

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g. Overall Operations

Reduction of energy consumption in its building to optimize building performance, these

building include parts centres, warehouses, offices by installing fluorescent lighting in

warehouse, sensors to reduce interior corridor lighting, building automation system to

minimise the energy used in the warehouse and office, photovoltaic rooftop solar panel.

(Toyota North America, 2009)

Educating third party users on carbon emission from purchased electricity, natural gas use,

business travel, employee activities, and logistics activities by working to find ways to reduce

emission by these third party users.

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Practical Adoption of Strategies in terms of Cost, Service and Quality

Cost;

The practical adoption of these strategies had a significant effect on cost. Toyota by reducing

the environmental impact of their energy use also reduced the cost of operation in its

manufacturing facilities. An example of this reduction in cost was shown in Toyota’s US

plants, where energy improvement have reduced carbon emissions by almost 150,000 metric

tons since 2002 financial year saving over $18 million annually.

Also Green procurement has enabled Toyota to decrease costs by increasing the purchasing

volume per category and minimising the frequency of single purchase through the retaining

of same features or performance while reducing the number of product categories.

Assessing the energy consumption of office equipment during use has reduced cost. Also

Toyota’s service centres have due to reduction in energy use have had savings of up to

20percent in electricity and gas consumption as well as reducing the carbon footprint of each

site around 30 tonnes of carbon a year.

Toyota’s reduction of office supplies to products that are green compliant helped it keep

down office supply cost.

Service;

Toyota has been involved in ensuring significant reduction on energy use in its services and

parts centres, warehouse and dealership centres. Also Toyota’s dealers, servicemen and

keepers are trained and provided with resources to help them manage services related waste

streams and comply with environmental and safety regulatory requirements. They also are

trained on how to educate and inform customers on ways to be green conscious while using

their vehicles.

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Quality;

Toyota has achieved a reputation for the production of very high quality vehicles in all

countries around the world. This has been achieved due to quality control and quality

assurance, which is unique to Toyota and has been developed over the years by applying

kaizen or continuous improvement that enables to increase quality, efficiency and reduce

costs. Toyota considers quality control as a key part of the activities to produce products or

services economically and to be of a standard which exceeds customer needs. Toyota’s

approach is peculiar because everybody from research and development to manufacturing,

retailing and servicing contribute to the quality control process. This quality reputation has

been maintained, but in recent times the quality has been questioned due to recall in America

of Toyota cars including its green car prius as a result of neglect on safety and reliability.

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2. Various Challenges Involved

There are various challenges encountered by Toyota Corporation while implementing the

programmes of carbon emission reduction in its entire operations. These challenges are

encountered across Toyota’s value chain.

Figure 7: Source; (http://www.1000ventures.com/business_guide/im_value_chain_main.html)

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Supply Chain Model

a. Water

One of the greatest challenges facing Toyota while adopting strategies centred on green

environment is the issue of water conservation in their operations, fresh water is their most

precious resources and reducing consumption has been challenging. Toyota is taking steps to

conserve water across its operations worldwide. Although there has been a drop in their water

usage but the consumption rate is still on the high side.

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Figure 9: Source; http://www.cleanmpg.com/forums/showthread.php?t=18285

b. Reducing substances of concern

There are substances of concerns which are heavy metals like mercury, cadmium, lead,

hexavalent chrome and volatile organic compounds in the automobile cabin that may have

both environmental and health effects but cannot be removed completely from operations ii

cannot avoided in vehicle production.

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c. Electricity

Despite the attraction of electricity as a power source for transportation a number of issues

and challenges remain like the energy density of batteries, infrastructure issues such as

recharging facilities. The presently used battery in Toyota’s hybrid car lithium-ion battery has

the tendency to overheat, to build a plug in hybrid car that would only run on battery power

for 40 miles a battery powerful enough to achieve that task the size will fill the trunk of the

car.

d. Customers Acceptance

With infrastructures for plug in to be recharged not yet readily available, management of

Toyota are concerned that customers might not accept a plug-in hybrid electric car to be

recharged every day, rather customers may want to continue using the normal conventional

fuel already available.

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3. Long term advantages

There are many long-term advantages for Toyota by adopting green technology.

a. Boost of the image of the company to the public.

The image of Toyota as a highly innovating, environmental friendly company has been

already been established because of the great effort they have put in place across all their

operations to be green compliant. This good image will continue to attract ethical consumers

who are concerned about products that pollute the environment, and also consumers who

value great innovation and quality. Already a poll taken puts Toyota as the

b. Attract good employees

It will enable the company to attract employees who care about the environment, and want to

impact the world through green compliance. Since Toyota is building towards a sustainable

future, attracting these types of employees will aid and boost their operations positively.

c. Lower Carbon Emission

Adopting green compliance in their operations will reduce carbon emissions, thereby saving

the environment from disasters associated with pollution. The Earth will be better for it in the

long run.

d. Saving Cost

Adopting green compliance will also reduce cost of production, procurement cost, logistic

costs, thereby adding profit to the balance sheet of the company. This will be favourable to

the shareholders who will have better profits, employees who will receive better pay and

customers who will be able to purchase cheaper. Therefore every person is affected

positively.

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Recommendation

Having gone through all the ways Toyota Motor Corporation are practically adopting green

strategies in their operations, it can be said that the level of attention they have paid to this

issue is very great. But still there are some areas that need improvement.

a. The issue concerning safety and reliability

Toyota already has good quality reputation, but where they have not done well is in the area

of safety and reliability. The issue of safety and reliability was highlighted more during the

case of recalling of a lot of Toyota vehicle models including the green compliant Prius. This

safety issue might do a lot of damage to the reputation they have built over the years.

Therefore the management should ensure that safety and reliability of their vehicles must go

hand in hand with green compliant strategy and models.

b. Synergy among the subsidiaries

Having looked at different information from different subsidiaries of Toyota, it can be noted

that the Japanese headquarters, North American subsidiary and Asian subsidiaries like

Thailand was more green compliant than the Subsidiary in Europe. Therefore the

management should ensure that Toyota as a group have one common focus towards green

compliance in its entire operations.

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Conclusion

This work has been able to show the need for adoption of environmental friendly strategies in

the operations of any organisation, by learning from the ways Toyota Motor Corporation has

been able to implement the right green strategies. It is also important that all organisations

that have not been serious about the issue raised in this write up become, because for the

earth to become safer, all hands must be on deck to reduce and totally remove all forms of

pollution that contributes to global warming.

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References

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Environmental leader, 2009, Toyota Targets 27% Reduction in Energy Consumed per Vehicle Produced, Available from http://www.environmentalleader.com/2009/12/08/toyota-targets-27-reduction-in-energy-consumed-per-vehicle-produced/ [Accessed 12th September 2010]

Toyota Motor Corporation, 2008, Toyota’s Environmental Initiatives, Available from http://www.toyota.co.jp/en/vision/message/conference/080611_president.pdf [Accessed 11th September 2010]

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Seireeni, R., 2010, Toyota’s Green Goodwill will Save its Reputation, Available from http://chelseagreen.com/blogs/richardseireeni/2010/02/08/toyotas-green-goodwill-will-save-its-reputation/ [Accessed 15th September, 2010]

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