VIETNAM NATIONAL UNIVERSITY HO CHI MINH CITY

UNIVERSITY OF ECONOMICS AND LAW

FACULTY OF INTERNATIONAL ECONOMIC RELATIONS


SUPPLY CHAIN MANAGEMENT

GROUP 4 CHAP 1 ASSIGNMENT

Major : International Business

Lecturer : PhD. Phan Hoang Phuong Uyen

STT Họ và Tên MSSV

1 Nguyễn Lê Nhật Vy K234080928
2 Phạm Thiều Mỹ Ý K234080930
3 Nguyễn Ngọc Khánh Lam K234080899
4 Nguyễn Thuỷ Linh K234080900

Ho Chi Minh City, December 2024

Toyota: A Global Auto Manufacturer

Toyota Motor Corporation is Japan’s top auto manufacturer and has experienced significant
growth in global sales over the past two decades. A key issue facing Toyota is the design of its
global production and distribution network. Part of Toyota’s global strategy is to open factories
in every market it serves. Toyota must decide what the production capabilities of the factories
will be, as this has a significant impact on the desired distribution system. At one extreme, each
plant can be equipped only for local production. At the other extreme, each plant is capable of
supplying every market. Before 1996, Toyota used specialized local factories for each market.
After the Asian financial crisis in 1996–97, Toyota redesigned its plants so it could also export to
markets that remain strong when the local market weakens. Toyota calls this strategy “global
complementation.”

Whether to be global or local is also an issue for Toyota’s parts plants and product design.
Should parts plants be built for local production or should there be a few parts plants globally
that supply multiple assembly plants? Toyota has worked hard to increase commonality in parts
used around the globe. Although this has helped the company lower costs and improve parts
availability, common parts caused significant difficulty when one of the parts had to be recalled.
In 2009, Toyota had to recall about 12 million cars using common parts across North America,
Europe, and Asia, causing significant damage to the brand as well as to the finances.

Any global manufacturer like Toyota must address the following questions regarding the
configuration and capability of the supply chain:

1. Where should the plants be located, and what degree of flexibility should be built into
each? What capacity should each plant have?
2. Should plants be able to produce for all markets or only for specific contingency
markets?
3. How should markets be allocated to plants and how frequently should this allocation be
revised?
4. How should the investment in flexibility be valued?
 1. Where should the plants be located, and what degree of flexibility
should be built into each? What capacity should each plant have?

• Plant Location:
- Proximity to Key Markets: Plants should be located near major markets (such as North
America, Europe, and Asia) to reduce shipping costs and delivery times.
- Economic Stability: Choosing countries with stable economic and political environments to
minimize risks.
- Logistics and Infrastructure: Availability of good transportation infrastructure to facilitate the
movement of goods.

• Flexibility:
- Product Line Flexibility: Plants should have the capability to produce multiple models to adapt
to market changes and demand fluctuations.
- Volume Flexibility: Ability to scale production up or down based on demand.
- Supplier Network: Proximity to a robust network of suppliers to ensure a steady supply of parts
and materials.

• Capacity:
- Demand Forecasting: Each plant's capacity should be based on forecasted demand for its
respective market.
- Buffer Capacity: Allowing a buffer in capacity to handle unexpected surges in demand or
supply chain disruptions.
- Scalable Design: Plants should be designed with scalability in mind, allowing for future
expansion as demand grows.
2. Should plants be able to produce for all markets or only for specific
contingency markets?

Plants ought to possess the capability to produce for all markets as opposed to being limited to
specific contingency markets. This methodology is congruent with Toyota's "global
complementation" strategy, which amplifies flexibility by enabling plants to modify production
in accordance with the varying demands of distinct regions, particularly in scenarios where local
markets undergo downturns. The capacity to produce for all markets confers numerous
advantages, including enhanced adaptability, cost efficiency, and diminished disruptions within
the supply chain. For example, when demand in a particular market wanes, plants are able to
relocate production to alternative regions, thereby optimizing resource utilization and mitigating
operational risks. Furthermore, a global production system effectively minimizes disruptions that
may arise during product recalls, as the use of common components and standardized processes
allows for expedited recovery. Nonetheless, this strategy necessitates meticulous management to
alleviate risks associated with shared components or extensive global recalls, as exemplified by
the incident involving Toyota in 2009. Ultimately, the equilibrium between global flexibility and
product reliability is crucial for sustaining operational efficiency and preserving brand
reputation.

3. How should markets be allocated to plants and how frequently should this allocation be
revised?

• Market Allocation to Plants:

- Strategic Fit: Aligning market allocations with the company's overall strategy is essential. For
instance, Toyota's "global complementation" strategy involves designing plants to serve both
local and international markets, enhancing flexibility in response to demand fluctuations.
- Capacity and Capability Considerations: Allocating markets should consider each plant's
production capacity and technological capabilities. Plants with specialized equipment or
expertise may be better suited to produce specific products for certain markets.

- Risk Management: Diversifying market allocations can mitigate risks associated with regional
disruptions. By ensuring that multiple plants can serve key markets, companies can maintain
supply continuity during unforeseen events.

• Frequency of Allocation Revisions:

- Regular Assessments:Periodic reviews, such as annual evaluations, allow companies to adjust

allocations based on changes in demand, market conditions, and production capabilities.

- Event-Driven Revisions: Significant events, like economic shifts or natural disasters, may
necessitate immediate reassessment of market allocations to maintain supply chain resilience.

- Technological Advancements: The adoption of real-time data analytics enables continuous

monitoring of market dynamics, facilitating more responsive and frequent adjustments to
allocations.

By strategically allocating markets to plants and regularly revising these allocations, companies
like Toyota can enhance their supply chain flexibility and responsiveness, effectively meeting
global demand variations.

4. How should the investment in flexibility be valued?

- The value of investments in flexibility should be determined by the extent to which they enable
Toyota to reduce risks and respond quickly to market changes.
- When demand changes or unforeseen circumstances, such as economic crises, arise, Toyota can
effectively move resources between markets because to its flexibility in manufacturing and
delivery. For instance, Toyota's "global complementation" policy following the Asian financial
crisis demonstrated the value of having plants that could serve several markets, guaranteeing
stability even during downturns in certain areas.
- Flexibility minimizes the risk of disruptions in the supply chain
=> In short, flexibility adds value by enhancing resilience, maintaining operational efficiency,
and protecting Toyota's brand and market position in the long run.

Amazon: Online Sales

Amazon sells books, music, and many other items over the Internet and is one of the pioneers of
online consumer sales. Amazon, based in Seattle, started by filling all orders using books
purchased from a distributor in response to customer orders. As it grew, the company added
warehouses, allowing it to react more quickly to customer orders. In 2013, Amazon had about 40
warehouses in the United States and another 40 in the rest of the world. It uses the U.S. Postal
Service and other package carriers, such as UPS and FedEx, to send products to customers.
Outbound shipping-related costs at Amazon in 2012 were over $5 billion.

Following the introduction of the Kindle, Amazon has worked hard to increase sales of digital
books. The company has also added a significant amount of audio and video content for sale in
digital form.

Amazon has continued to expand the set of products that it sells online. Besides books and
music, Amazon has added many product categories such as toys, apparel, electronics, jewelry,
and shoes. In 2009, one of its largest acquisitions was Zappos, a leader in online shoe sales. This
acquisition added a great deal of product variety: According to the Amazon annual report, this
required creating 121,000 product descriptions and uploading more than 2.2 million images to
the website. In 2010, another interesting acquisition by Amazon was diapers.com. Unlike
Zappos, this acquisition added little variety but considerable shipping volumes.
Several questions arise concerning how Amazon is structured and the product categories it
continues to add:

1. Why is Amazon building more warehouses as it grows? How many warehouses should it
have, and where should they be located?
2. Should Amazon stock every product it sells?
3. What advantage can bricks-and-mortar players derive from setting up an online channel?
How should they use the two channels to gain maximum advantage?
4. What advantages and disadvantages does the online channel enjoy in the sale of shoes
and diapers relative to a retail store?
5. For what products does the online channel offer the greater advantage relative to retail
stores? What characterizes these products?

1. Why is Amazon building more warehouses as it grows? How many warehouses

should it have, and where should they be located?
As it expands, the organization has incorporated additional warehouses, thereby facilitating more
prompt reaction to consumer demand. It is evident that an increase in the quantity of warehouses
correlates with a reduction in response time, whereas a decrease in warehouses results in an
escalation of response time. Thus, augmenting the number of warehouses and strategically
positioning them in proximity to the customer base will enhance response efficacy. Amazon
operates approximately 50 warehouses, with 20 located in the United States and 30 distributed
globally. Amazon ought to establish additional warehouses in regions worldwide where their
presence is limited or where demand is significantly higher, taking into account conditions in
other nations.

2. Should Amazon stock every product it sells?

Amazon does not necessitate the inventory of every item it retails. Specific products ought to be
housed in warehouses to promptly fulfill customer demand and minimize delivery durations,
particularly for items that are popular or in high demand. Conversely, for products that are less
sought after or infrequently requested, Amazon can utilize a "third-party fulfillment" or "drop
shipping" strategy, in which items are dispatched directly from suppliers to consumers.

This methodology assists Amazon in reducing expenses related to storage and inventory
oversight while simultaneously broadening its product assortment without necessitating
substantial investment in infrastructure. Nonetheless, it is imperative for Amazon to ensure
transparency and maintain quality standards from third-party suppliers in order to preserve its
reputation and enhance customer experience. An adaptable integration of warehousing and direct
sales from suppliers will maximize operational efficiency and address the varied requirements of
the market.

3. What advantage can bricks-and-mortar players derive from setting up an online

channel? How should they use the two channels to gain maximum advantage?

Advantages of Bricks-and-Mortar Players Setting Up an Online Channel:

• Improved Inventory Management through Aggregation:

The online channel allows the retailer to centralize and aggregate inventory for low-demand
products, reducing overall inventory levels while still meeting customer needs.

• Broader Product Offering:

Retail stores are limited by shelf space. An online channel allows them to offer a much larger
variety of products, particularly for niche or low-demand items.

• Enhanced Customer Experience:

By combining physical stores and online channels, retailers can provide customers with the
option to browse and purchase in-store while using the online channel for items not available on-
site.

• Reduced Transportation Costs for High-Demand Products:

Bestsellers and frequently purchased items can be stocked in retail stores, lowering
transportation costs compared to shipping individual items to customers.
 • Increased Impulse Purchases:

Retail stores encourage impulse purchases, while the online channel complements this by
allowing customers to order items they couldn't find in the store.

Using Both Channels to Gain Maximum Advantage:

• Retail Stores for High-Demand Products:

Retail outlets should stock multiple copies of bestsellers or frequently purchased products (e.g.,
popular books or high-demand items) to ensure immediate availability for walk-in customers.

• Online Channel for Low-Demand Products:

Use the online channel to aggregate demand for low-demand products. Customers can browse
these items in-store using kiosks or terminals and place orders for home delivery or store pickup.

• Integration Between Channels:

Ensure seamless integration between online and offline channels by allowing customers to order
online and pick up in-store, or browse products in-store and order online.

• Reduce Inventory Costs:

By using the online channel for low-demand items, the retailer can avoid the cost of holding
large inventories at individual stores.

• Customer Engagement and Loyalty:

Offer personalized recommendations and promotions through the online channel, while
maintaining the in-store experience for customers who prefer physical shopping.
 4. What advantages and disadvantages does the online channel enjoy in the sale of
shoes and diapers relative to a retail store?

In comparison to a physical business, the online channel offers certain benefits and diapers.
Customers who might not have access to specific brands or sizes locally can benefit from a
greater selection, ease of comparison, and convenience when purchasing shoes online.
Conversely, diapers profit from online sales since they are convenient, allow for service
subscriptions, and offer comprehensive product information and reviews to help customers
make selections. The inability to physically inspect the quality of the diaper or put on shoes
before buying, however, is a drawback for both products that may impact customer happiness
and returns.

5. For what products does the online channel offer the greater advantage relative to
retail stores? What characterizes these products?
• Large Product Variety with Low Demand per Product:
Products like books, music, and specialty items benefit from the online channel. For example,
Amazon can store and sell a wide variety of products that would be difficult to stock in a
physical retail store due to space constraints.
• Products with High Information Content:
Items such as electronics, appliances, and digital goods are better suited for the online channel
because detailed specifications, reviews, and multimedia content can be provided online, helping
customers make informed decisions.
• Digital or Easily Shipped Products:
Products like e-books, digital music, or lightweight items are ideal for the online channel as they
can be delivered quickly and inexpensively.
• Low Need for Immediate Consumption:
Items that customers do not require immediately, such as home goods or specialty clothing,
perform well online because customers are willing to wait a few days for delivery.
• Broad Customer Base but Limited Local Demand:
Products with a niche appeal or specialized market can benefit from the online channel, as it
aggregates demand globally, making it viable to stock such items.
Examples:
Netflix (Movies): Netflix offers a large selection of movies compared to a traditional
video rental store, as maintaining such a collection in a physical location would require
significant space and cost.
Shoes: Online channels like Zappos allow customers to browse a wider variety of shoes
than what would be available in a retail store.

Key Advantages:
The online channel reduces the need for physical inventory space, lowers operating costs,
and allows companies to serve a broader customer base efficiently.
It enables businesses to leverage economies of scale and provide detailed product
information that would be impractical in a retail setting.