SCH4801
ASSIGNMENT 02
Unique code:796010
Due Date 30 June 2025
, SECTION A: QUESTION 1
1.1 Inventory-related decisions
Toyota SA is considering sourcing 60% of components globally and 40% locally. This
sourcing strategy impacts inventory decisions, particularly concerning trade-offs
between efficiency and responsiveness. The following three inventory categories are
relevant:
a) Raw Materials Inventory
Toyota must store essential materials such as metal parts and plastic components.
Sourcing globally may result in longer lead times, requiring higher raw material
inventory levels to avoid disruptions, sacrificing efficiency for responsiveness.
Trade-off: Holding more raw materials increases costs (storage, insurance), but
reduces production delays during supply chain disruptions.
b) Work-in-Progress (WIP) Inventory
Toyota follows Just-in-Time (JIT), keeping minimal WIP to improve efficiency. However,
reliance on overseas suppliers may require increased buffer WIP during high-risk
periods like port congestion or strikes.
Trade-off: Increasing WIP decreases responsiveness to disruptions but may slow
throughput and raise overhead costs.
c) Finished Goods Inventory
Due to past disruptions like floods, Toyota might consider holding more finished stock to
meet sudden market demand or recover from production halts.
Trade-off: Higher finished inventory ensures customer satisfaction but ties up capital
and risks product obsolescence.
1.2 Production strategies
ASSIGNMENT 02
Unique code:796010
Due Date 30 June 2025
, SECTION A: QUESTION 1
1.1 Inventory-related decisions
Toyota SA is considering sourcing 60% of components globally and 40% locally. This
sourcing strategy impacts inventory decisions, particularly concerning trade-offs
between efficiency and responsiveness. The following three inventory categories are
relevant:
a) Raw Materials Inventory
Toyota must store essential materials such as metal parts and plastic components.
Sourcing globally may result in longer lead times, requiring higher raw material
inventory levels to avoid disruptions, sacrificing efficiency for responsiveness.
Trade-off: Holding more raw materials increases costs (storage, insurance), but
reduces production delays during supply chain disruptions.
b) Work-in-Progress (WIP) Inventory
Toyota follows Just-in-Time (JIT), keeping minimal WIP to improve efficiency. However,
reliance on overseas suppliers may require increased buffer WIP during high-risk
periods like port congestion or strikes.
Trade-off: Increasing WIP decreases responsiveness to disruptions but may slow
throughput and raise overhead costs.
c) Finished Goods Inventory
Due to past disruptions like floods, Toyota might consider holding more finished stock to
meet sudden market demand or recover from production halts.
Trade-off: Higher finished inventory ensures customer satisfaction but ties up capital
and risks product obsolescence.
1.2 Production strategies
