Introduction

Logistic management plays an important role in automobile manufacturing industry.

Toyota is one of the successful companies and created a profitable margin by controlling cost
through logistic management over the years. Logistic is defined as a business planning
framework for the management of material, service information and capital flows. It includes the
increasingly complex information, communication and control systems required in today’s
business environment. – (Logistix Partners Oy, Helsinki, FI, 1996) Logistic consist of seven Rs
which are right cost, right place, right time, right quantity, right condition, right product and right
customer. There are eight activities to be discussed of it importance.

Production Planning

Production planning is one of the crucial activities in logistic. It affects the budget of
procurement directly which then the cost. Toyota had adopted the principles of Henry Ford
which is “doing it right at the first time” and came out with Toyota Production System (TPS)
which is a better system. After decades of applying TPS, in 2007, Toyota had become the best
auto seller in U.S. Any wastes while production will cause a significant lost to the company. For
example, overproduction which is producing more than immediate needs, defects which result
particular product to be reproduce, exceed of inventory which is exceeded requirement in raw
material or finished goods to meet customer needs and over processing which is using extra
energy or activity to produce the product. Over production is delivering the product before they
are needed and caused large volume fluctuation that distorted true demand. With the computer
technology nowadays, stock check can be done by weekly basis and stock replenishment
orders are to be received throughout the day compare to olden days where stock check were
done on monthly basis and with man power. This has showed the application of latest
technology in assisting control or plan production accurately in order to control cost efficiently.

Storage and Warehouse

Warehouse is the place where raw material and finished goods are to be stored in.
Warehouse size has to suit the size of a company to prevent underused of the asset. Goods are
store in warehouse before they are moved to next place. Features of warehouse are to hold
stocks which acts as buffer against fluctuating demand, hold stocks so that more economic
production runs can take place and enable materials to be held in case shortage of supply. With
the movement more than 8million parts and accessories every month in U.S. for Toyota
company, it has resulted two distribution centers to be built in California and another in
Kentucky to fulfill the requirement in that region. About thirty years ago, Toyota had eight
months supply of inventory in U.S. regional parts distribution center. But for recent, due to the
more frequent movement of inventory, the level has gone down to just one month supply. It has
reduced the storing spaces and enables to work more efficiently in shorter period. In other word,
warehouse with application of latest technology is able to reduce the investment of warehouses
but able to perform more efficiently with less expenses. Besides, warehouse is to store
inventory such as finished goods and raw material to enable them to perform optimally although
after a long period of storing. Warehouse has the function of keeping inventory in a safe and
optimum mode to eliminate unnecessary wastes that can be prevent.

Procurement

Procurement or purchasing is an important activity as it will affect the wastage or

expenses of a company thoroughly and also affect the production directly. Procurement is the
inbound activity in a supply chain where inbound is the activity of purchasing raw material. For
example, Toyota has a wide range of raw material such as engine compartment, car air-
conditioning, electronic parts and etc to complete the assembly of finished goods. Procurement
also included the purchase of warehouse handling equipments, necessary parts and material.
Equipments are such as forklift trucks. Suppliers are from all over the world to obtain the quality
of item at a low price and in a timely manner. And also Toyota has been cooperated with
suppliers to promote environmental preservation to meet other demand of society. Procurement
is normally from local supplier in order to provide an efficient performance and also contribute to
the local community.

Packaging

Packaging is the activity where raw material or finished goods are to be protected while
damages can occur during transportation or handling and storing in warehouse. Other than that,
packaging can differentiate the goods by labeling and also reduce the error of presenting the
incorrect goods to customer. The mispresentation will lead to a poor customer service. Different
inventory has different material to protect or wrap. Shrink-wrap is the most common material to
be used in packaging. For Toyota, during transportation of diesel engines, ORBIS that is Toyota
preferred outsourced packaging supplier, has produced a uniquely profiled reusable plastic
‘engine cell’ to house the engines securely within the metal rack. This has successfully created
a container that was robust and durable as well as economical to use in long haul journeys to
assembly plants as far as Turkey from Japan. This packaging is providing the unbeatable
protection for critical high value components where loss and damage can have unacceptable
time and cost consequences for Toyota’s business. Packaging is important in the fact that
securing the originality and perceived functions of products when present to customers. The
way of packaging will also determine the quantity of goods to be transported in a time. Proper
packaging will not only reduce the rate of spoilage but also allows a larger quantity of goods to
be transported in one time.
Materials Handling

Material handling will affect company business in the way of efficiency and spoilage rate.
Moving goods in warehouse is a very time-consuming progress and it determines the levels of
customer service. Time is very important to all. If any serious delays or waiting, it might cause
the company to lost a significant market share. There are material handling equipments can be
use. The most common equipment is forklift truck, which commonly found in warehouses or
docks. Forklift truck has a range of sizes for different purposes. It can save time by loading or
unloading in a bulk and also convenient to use. Then, pallet is also one kind of material handling
equipment and is use to enhance the activity of handling material. Pallet provides an organized
form of goods for more efficient handling, as it is able to hold a large quantity of goods in a time.
This can help to reduce dependent on manpower then save cost indirectly for long-term period.
The efficient handling will enable the company to focus on monitoring the fleet operations.
Furthermore, improper handling of material will then cause damages to the goods. A well
management of material handling can help company to save cost in term of manpower and also
minimize error or reduce spoilage rate when presenting to customers.

Transportation

Transportation plays an important roles in logistic as it is the only activities that

transporting goods from one place to another. It has to be a proactive management to assure
every movement has worth what it cost and most important is to get the goods reach on the
right time and the right place. Transportation modes consist of air, land and sea mode. Normally
various modes will use together to complete a transportation. For example, Toyota has many
distribution centers (DC) around the world but for most DC in underdevelopment country like
South Africa, they will need to import parts like engine from Japan or U.S. or Europe. In this
case, Toyota has to transport the engines with container by using truck and sea carrier to
achieve the goal within the cost allowed. This will allow Toyota to reach their customer in the
acceptable time. But for some cases, there are shipper using the air mode to transport. This is
the most uneconomical way to transport due to the high cost compare to others modes but it
gives the best capability and security as it can reach customer within 24 hours around the world.
Then, cost of transportation has the major part of the cost calculating. It shows the importance
of negotiating the cost of transportation with carriers to obtain the lowest rate but best quality of
services. However, timely manner is the most important issue among transportation. In cases of
Toyota delivering parts and units to St. Petersburg, Russia, Toyota has been using sea mode
previously but in recent, they are gradually curtail sea mode to start using the Russian
Transsiberian Railway (Transsib). Although sea mode is the cheapest way but due to the 60
days of duration, they preferred to use Transsib to transport where it is three times quicker – in
20 days. Transportation activity requires consideration not only cost but also other factors like
carriers’ capability, accessibility, reliability and security provided.
Customer Service

In logistics, customer service applied in the place where customers are to be. Customer
service is the key link between logistic and marketing. It requires a more dynamic, proactive
approach that recognized the value-added role of logistic supply chains in creating and
sustaining competitive advantage and providing win-win outcomes. There are few elements
such as time, dependability, communications and convenience to determine standards of
customer service provided. Customers are the purchaser of companies and these companies
need to maintain the relationship to obtain sales after sales. Value added on services or product
may create a partnership with the customers where customers found the service or product
provided is suitable for them. This has resulted locking-up customers in the form of relationship.
Customer service can be considered as the feedback of a company performance where with
customer service, company can prevent stock-out, reduce order cycle, and upgrade distribution
system in flexibility to meet unexpected needs and response time and quality of service after
sales. Stock-out will possible outcome delaying customer, reprocess order, loss of sales and
lost of customers. This will significantly affects the business of a company. Toyota has a well-
managed customer service where they provide 24hours of calling center to assist the customers
who have problems with their vehicle during a journey. Besides, they also promised to deliver
parts and accessories within a week to the smaller distribution centers around the world. It has
brought in more business to Toyota with maintaining the excellent relationship with customers.

Order Fulfillment

Order fulfillment refers to processing order of customers efficiently to deliver the goods
to customers in right time, right price, right quantity, right condition, right product and also right
customer. Back order will occur in the case where orders are not completed in the first time.
This will cause to reprocess order including rearrangement of transportation to the same
customer. It will add on the cost. Any delay between the activities will probably cause the
customer order information to be delayed too. Stock-out will also cause order cannot be fulfilled
and back orders. It will then have the chain reaction where might loss of sales and also loss of
customer. To fulfill customers’ orders, it will need a smooth linkage between logistics activities.
For example, Toyota has realized because the separation of production, warehousing and
transportation activities each of these functions are often unaware of the schedule for the
subsequent process. Then, by coordinating production and shipping operations, Toyota can
avoid the shipment delaying and then fulfill customers’ order efficiently.

Conclusion
 In conclusion, every activity plays an important role in logistics management. Each
activity is link to each other to create an optimum performance and well-managed will have cost
controlled efficiently. Logistics management is always achieving the seven R’s to bring the
biggest profit to company. Logistics has the function not only controlling cost but also managing
the production line and maintaining relationship with customers to take care of the business.
Basically logistics have to work proactively to ensure the operation of company running
smoothly. Therefore, logistics management is all about activities of managing from inbound to
outbound in supply chain. With the successful facts from Toyota Company, making larger profit
than other manufacturer by focusing in logistics management, this has proven logistics
management is playing a big part in a company where it can efficiently brought in profit to
company.