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15 January, 2016 - 09:50

In mid-1999, Toyota Motor Corp. shook up the automotive industry when it announced it would be able to produce a custom-order auto in just five days. The announcement came in an industry known for taking closer to 60 days for custom orders. Even DaimlerChrysler Corp, who was perceived to have the industry lead, was averaging over twice the announced Toyota turnaround, with Daimler- Chrysler taking closer to 12 days. Most automotive manufacturers have been working with a goal of achieving 10 days in the future—double the time promised in the Toyota announcement. Toyota plans to achieve the newly announced custom-order promise with its “next generation just-in-time logistics system.”

This system is driven by a 15-day advanced plan “virtual production line,” which forms the initial manufacturing plan. The plan generates provisional orders for parts from its suppliers that can be revised until 5 days before actual production. A complex parts delivery system provides for parts pick-ups from suppliers and delivery to the plant an average of 24 times a day. This strategy reduces parts storage requirements by 37 percent at the plant level and reduces in-house automobile inventories by 28 percent, helping to cut inventory carrying costs significantly. In this chapter, we explore the issues surrounding production scheduling and inventory management in greater detail and look at the role of information technology in improving the efficiency and effectiveness of integrated production processes, such as those planned at Toyota.