Effectiveness of Inventory Management at Toyota Production System

OPERATIONS
AND
INFORMATION
MANAGEMENT

1
ABSTRACT
Production system of Toyota is one of the biggest in the industry. It is capable of producing
cars at higher speed and with lesser amount of defects. This report will be going to analyse
the effectiveness of the inventory management at Toyota production system. This report
shows that how integration of Kanban system has helped them in gaining control over the
inventory management. Report will also suggest about three major key operations within
Toyota, This includes Just-In-Time approach, Kaizan and Jidoka. In this report it was
discussed that how Suspension in sourcing and Issues in managing distribution are creating
threat of failure. This report will also discuss different aspects of lean approach and how it is
effective in removing the threat of failure in the Toyota production system. In this regards, it
was found that waste management and quality improvement are the two things that can help
Toyota along with the use of different theories of quality improvement to reduce the chances
of failures.

2
Contents
INTRODUCTION......................................................................................................................1
Inventory management in production system of Toyota............................................................1
The key operations involved within Toyota’s production system presenting a logical
operational flow.........................................................................................................................4
Toyota’s delivery system may fail to align its operational performance measures...................6
Lean approach that can be used by Toyota to reduce the chances of failures...........................7
Key findings...............................................................................................................................8
CONCLUSION..........................................................................................................................9
REFERENCES...........................................................................................................................9

3
INTRODUCTION
Operations management is very essential part of the modern day business. For any company
production is one of the major operations that they need to manage. Companies are investing
a lot of money on their production system so as to optimise the way in which they produce
products so as to manage the supply chain demands. Companies need to take care of the
inventories they have so as to reduce the chances of failures in the operational process. It is
also crucial that companies evaluate their key operations in the production system and hence
their delivery system might fail to get aligned with operational performance initiatives (Ng, et
al. 2010). Approaches such as lean approach can be helpful for reducing the chances of
failure. Toyota Production system is understood to be one of the best systems that are capable
of producing vehicles at much faster speed with the quality that is desired in the market. This
report will analyse the way in which Toyota production system should move so as to achieve
operational efficiency. It also includes the way in which lean production will help the
company in aligning its production system with operational performance measures.
Inventory management in production system of Toyota
Toyota is known for its production design and is using best practices in the industry to
manage the inventories at the production system. Inventory is understood as the materials and
goods that an organisation holds for producing new products. For achieving maximum
efficiency, it is crucial that company manages their inventories appropriately (Jayaram, Das
and Nicolae, 2010). In Toyota production system, inventories include raw materials, partially
finished goods and totally finished goods. Product during its whole lifecycle till the time it
gets out of the production system is understood as an inventory.
In the production system, company is using technique named Kanban. It is a technique for
work and inventory release and is a major element of lean manufacturing concept and Just In
time. Kanban is able to manage inventory flows on the assembly line. It manages the flow of
materials between work-station and another down-stream. For controlling this flow they are
using tickets to manage the flow. The efficiency in the inventory management can be
understood by the fact that Toyota should deliver components only when needed for ensuring
that there is no excess inventory. Due to this desired components are delivered only when
card is received (Rutledge, Xu and Simpson, 2010). If line interruptions are created then
measures are being taken where work station will manufacture that much component that will
fill the container and take a pause. Kanban also bounds the quantity of inventory in the