Question 1

1.1. The five reasons for the increasing importance of the purchasing and supply function in relation to
Toyota.

1.Global Competition has resulted in organisations having to compete with world class suppliers, which
provide world class products and services as well as best customer service.

Top competitors in in this case includes BMW and Wolkswagen motors.

2. Information Technology- the latest developments has empowered purchasing and supply chain by
making information regarding supply sourcing, market trends immediately attainable.
Toyota uses Demand Planner from i2, SAS Business Intelligence, Windows Internet server system
and a list of other IT softwares (Stimula, 2006).

3. Inventory costs – the increasing particular in the interest and transportation costs, focus
organisations to find a settlement between the danger of having inventory levels that are too high
or too low.
Toyota uses JIT to help minimize it’s inventory of vehicle parts, Jitendra Parshar (2016).

4. Importance of sustainability
Ensuring that purchased goods and services that are being incorporated into the business are
environmentally friendly as well as the physical and economical impact that the business has in the
community in which it operates.
Green technology has been the focus for innovation at Toyota, Since 1997 when they launched the
Prius, the first mass produced hybrid car, reducing C02 emission by 100 million tons (Toyota, 2020).
5. Supply Risk is the possibility that an inbound supply problem will disrupt a business. These problems
may be matters with suppliers, shipments, and markets that disturb production.
For example, the disruptive event that occurred in 2011 in the automotive and electronics supply
chain resulted in huge losses of major automakers and electronic manufacturers.

Question 2

2.1. The principal used by Toyota is Just In Time.

It is a product oriented management philosophy perfected by Japanese industrialists to
eliminate all forms of waste whether waste of time, labor or resources. This is activated with a
relatively simple information system (kanban) which ensures that products of the correct
specifications are made available in the correct qualities at the right time during manufacturing
as well as to the customer market(Wisner et al, 2016:8).
For example when a car comes out of the paint shop, the system sends seat supplier an
electronic message detailing the exact configuration of the seats required. The supplier then has
four hours to ship those seats to the plant in the exact sequence, Stimula (2006)

2.2. Reasons why the principal is successful

 1. Lower inventory levels
2. Cost savings
3. Quality improvement
4. Shot and reliable lead times
5. Smaller buffer stock

2.3. The concept of Quality

According to Boateng (2016:454) quality is the characteristics of a product or service that shows
its conformance as the designated parameters and its degree of perceived customer acceptance
or satisfaction.
Quality characteristics includes reliability, consistency and the ability to continue performance in
stress or volume situations but are critical only in relation to the value placed on them by a user.

Sourcing the right Quality

Quality products help to maintain customer satisfaction and loyalty and reduces the risk and
cost of replacing faulty goods often. Sampson Quain ( 2019).
Quality products could be an absolute advantage for Toyota in the industry-leading to more
customers.

2.4. The role and economic importance of holding inventory for car manufacturers

INTRODUCTION

Toyota Motors Corporation is a Japanese- based company largely engaged in the automotive industry
and business segments (Toyota, 2010). The automotive sector is active in designing, manufacturing, and
sale of car products including passages cars, vans, and trucks as well as relevant parts and accessories.

The major objectives in terms of holding inventory are to assure that customers’ demand is met without
compromising the cash flow or causing interruptions in production. When customers cannot purchase
what they need and when they need it, always cease to be customers (Melanie, 2015).

BODY

The role and economic importance of holding inventory (J.A Badenhorst- Weiss, J.O Ciller, W Dlamini, IM
Ambe, 2017).

1. Continuity in production and marketing

The production of foods and services should not be distributed especially because of a shortage
of materials or services. Continuity in production ensures the availability of products or services
and being reliable to the customer base.
The practical option includes entering into fixed maintenance contractors for essential
equipment and holding stock of critical spares.
2. Cost-savings and hedging against price uncertainty
Natural hedging is to survive an anticipated exposure to a particular currency by obtaining a
debt denominated in that currency.
 Since Toyota is based in Japan. Toyota does not have to bother about the exchange rate
fluctuations, as Yen is weaker than Zar and it will be paying the loan from proceeds produced
from local operations.

3. Protection against supply uncertainty.

Inventory protects the business against uncertainties such as supply shocks.

4. Purchasing costs
Since ordering costs are generally fixed, larger, less frequent deliveries must be dealt off against
the high cost of holding inventory and decrease the cost of transportation.
These costs include warehouse expenses, insurance, physical handling, tariffs, and deterioration,
and pilferage.

Word count:510

Question 3

3.1. The concept of outsourcing.

According to (Boateng 2016: 405) outsourcing is the strategy of paying for goods and services
from external suppliers, that were once or could be performed in-house. It can entail the
transfer of an entire company’s function to the suppliers.
This practice usually is undertaken by companies as a cost cutting measure . As such, it can
affect a wide range of jobs, varying from customer support to manufacturing and to the back
office (Alexander Twin, 2020).

3.2. The essay

INTRODUCTION
Large organisations chose to outsource mainly because of the obvious benefits such as saving
time and money, receiving skilled expertise, increasing efficiency, reducing turnover times and
other more. And this then gives the organisation to focus on it’s core activities.
Businesses have the ability to select which type of supplier do they want to use in any of those
outsourced activities

BODY

I. Types of suppliers
Local suppliers are business that offers goods and services for procument within the
minimum proximity.
The advantage is the improved speed to market. As a local supplier is strategically
positioned- both geographically and operationally leading to shorter lead times.
The down side might be the possible resistance to change due to convention routine or
methods of doing business.
 Regional/ National supplier
The advantage is competitive pricing “By ordering form one source, you business is able
to make advantage of volume discounts” (Verified, Inc, 2001).
One disadvantage is possible resistance to change due conventional routines.
International suppliers refers to purchases that are made to businesses that operate
physically outside the home country.
One advantage has to be the availability of world-class technology that exists in specific
market markets.
The drawback is the increasing rules and regulations.

II. Which supplier does Toyota

Local suppliers
“The intent of the exhibition today was to support further localization”
The benefits are strong relationship with suppliers, greater control and improved public
relations meaning that the community will view the business in a positive way since
there are jobs tied to the process. And cost saving in terms of administration, regulation
and legal considerations such as currency exchange rates, tax implications and ect
(Katelyn Fogle, 2018).

III. Other supplies

International suppliers and national suppliers.
National suppliers difficulties would be the increase in fuel pricing meaning the transmit
of products would be compromised. And the limited resources that and lack of supplier
development “It will become more difficult to localise if suppliers do not develop
capabilities required soon".
For international supplier due to the sudden expansion, the supply chain is often
disturbed for many reasons, such as currency fluctuations, supply shocks and quality
risk and ect.

CONCLUSION
“In 2016 double the number of parts were localised”. This shows that local suppliers are able to
deliver products as per required by Toyota.
The company did a big misstep by being highly dependent on the suppliers which are
international. It would be better to have few suppliers nearer where they had control over
easier.

Word count: 1150

BIBILOGRAHY
J.A Badenhorst- Weiss, J.O Ciller, W Dlamini, IM Ambe, 2017, 2nd Ed, Purchasing and supply
chain management, Pretoria, Van Schaik Publishers

Stimula, 2006, Lean manufacturing, Toyota Information Technology, 20 September 2006.

[Online]
Available at:
https://www.shmula.com/information-technology-at-toyota/205/#fnref-205-1

Alexandra Twim, 2020, Investopedia, Outsourcing, 28 February 2020.[Online ] Available at:

https://www.investopedia.com/terms/o/outsourcing.asp

Melanie, 2015, Unleashed, 19 October 2015. [Online] Available at:

Katelyn Fogle, 2018, Weidert group, How suppliers can leverage the benefits of local sourcing for
manufactures, 12 February 2018. [Online] Available at:
https://www.weidert.com/blog/leveragine-local-sourcing

Toyota Motor Corporation

https://www.toyota-europe.com/