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Toyota takes lead in parts

2004-02-11 10:24

The construction of a new, R10m bulk store at Toyota's National Distribution Centre in Sandton is the latest step in an ongoing programme that has seen dramatic changes to the company's service parts operation over the past few years.

Toyota took the first steps in 1996 towards introducing a vastly different parts distribution system that would impact to significantly contain service parts distribution costs and improve customer service levels.

Fundamental to this change was the realignment of systems and procedures at Toyota SA and its countrywide network of dealers, aided by a major reorganisation of its parts distribution centre at the company's Sandton headquarters.

This "high rise" facility, added to the existing building in 1989, increased on-site warehousing capacity to 52 000 m³.

The facility has been adapted over the years to incorporate a modern infrastructure that allows not only for efficient parts storage, but also substantially increased the level of efficiency in parts picking and despatch.

Prior to 1998 Toyota's parts distribution had followed the conventional South African motor industry model; in fact one that was at the time still common in most world markets.

This system involved the majority of dealer parts supply being delivered in the form of a periodical, mostly weekly, stock order with supplementary daily emergency orders filled within a day or two at a higher price to the dealer.

"Under this system a 10-day lead time was required to fill monthly orders and dealers typically carried a 10 to 12 week parts inventory to provide a parts availability rate of 85% at dealer level," says Piet van Wyk de Vries, Toyota SA's Vice President, After Sales Marketing.

That increased to 95% in two to three days, with the availability of the emergency parts order system.


"A further source of inefficiency was the fact that all the links in the supply chain acted independently of each other.

"Parts suppliers, Toyota SA, and the dealers each applied their own stocking and order practices in a system that provided adequate parts support for Toyota owners, but was clearly lacking in efficiency.

"During 1996 a commitment was made to introduce a Lean Parts Distribution (LPD) system in South Africa that would include all Toyota dealers. irrespective of size. This system would be based on the proven principles of the world-renowned TPS (Toyota Production System) and the JIT (Just In Time) philosophies.

"In order to implement LPD we needed agreement from the dealer network as it was a radical change from the previous system. At the same time we had to pass on a benefit to customers as well.

"Understandably there was some resistance from dealers. We were promising an increase in operating efficiencies, but this still had to proven in practice."

"Under the new lean parts distribution system dealers are able to order all their parts requirements several times each day. These orders are processed and ready for delivery within two hours," says Piet van Wyk de Vries.

"No longer do dealers have to carry the huge inventories that they had in the past. A major dealer's stock level is now below four weeks.

"Today the average Toyota dealer's parts stock is around four weeks. Based on 2003 economics at retail price level this has resulted in a reduction of R360m in capital employed within the dealer network.

"Toyota has developed guidelines for dealers' stock levels and this is maintained on a 'sell-one-buy-one' principle.

"The implementation of this much improved flow through the whole parts supply chain has also enabled Toyota SA to lower its central parts inventory by a full month. Parts availability has improved, going from 92% to 97% due to the 'within 24 hours' countrywide delivery service.

"The accelerated and improved flow of parts through the supply chain has also resulted in higher efficiencies and, importantly for the dealers, cost reductions in the parts operational area.

"This has enabled Toyota to become more price competitive in the parts and service areas of their business, to the benefit of the customer.

"The rapid evolution of LPD has placed new demands on us," says Piet van Wyk de Vries.

"Inefficiencies and time delays in the handling of larger components, such as chassis and truck cabs that were stored off-site meant we had to move the storage of these parts to the NPDC in Sandton.

This resulted in the construction of our new bulk storage facility that provides an additional 32 000m³ of storage volume ? an increase of 66%.

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