SCH4801
ASSIGNMENT 2 2025
UNIQUE NO. 796010
DUE DATE: 30 JUNE 2025
, Supply Chain Management
SECTION A: QUESTION 1
Total: 31 Marks
1.1 Inventory-related decisions
(9 Marks)
Toyota South Africa must manage its inventory carefully as it adjusts its sourcing ratio to
40% local and 60% global suppliers. This shift affects the efficiency and responsiveness
of its supply chain. The three relevant inventory categories with trade-offs are:
a) Cycle Inventory
Cycle inventory refers to the regular stock kept to meet expected demand. It is
influenced by order quantity and frequency.
Relevance to Toyota: With global sourcing increasing, longer lead times from
overseas suppliers (e.g., Japan, North America) mean larger order quantities to
justify shipping costs. This increases cycle stock.
Trade-off: Higher holding costs vs. lower ordering costs. Global suppliers offer
cost benefits at the expense of higher inventory carrying costs.
b) Safety Inventory
Safety inventory (or buffer stock) protects against demand variability and supply
uncertainty.
Relevance to Toyota: Local disruptions such as the strike at ASA or floods in
Durban expose Toyota to supply shocks. With increased reliance on global
suppliers, uncertainty rises, making safety stock essential.
Trade-off: Higher inventory holding costs for insurance vs. risk of stock-outs and
production halts. Maintaining excess stock is costly, but essential to avoid
incidents like the loss of 6,000 vehicles in 2019.
ASSIGNMENT 2 2025
UNIQUE NO. 796010
DUE DATE: 30 JUNE 2025
, Supply Chain Management
SECTION A: QUESTION 1
Total: 31 Marks
1.1 Inventory-related decisions
(9 Marks)
Toyota South Africa must manage its inventory carefully as it adjusts its sourcing ratio to
40% local and 60% global suppliers. This shift affects the efficiency and responsiveness
of its supply chain. The three relevant inventory categories with trade-offs are:
a) Cycle Inventory
Cycle inventory refers to the regular stock kept to meet expected demand. It is
influenced by order quantity and frequency.
Relevance to Toyota: With global sourcing increasing, longer lead times from
overseas suppliers (e.g., Japan, North America) mean larger order quantities to
justify shipping costs. This increases cycle stock.
Trade-off: Higher holding costs vs. lower ordering costs. Global suppliers offer
cost benefits at the expense of higher inventory carrying costs.
b) Safety Inventory
Safety inventory (or buffer stock) protects against demand variability and supply
uncertainty.
Relevance to Toyota: Local disruptions such as the strike at ASA or floods in
Durban expose Toyota to supply shocks. With increased reliance on global
suppliers, uncertainty rises, making safety stock essential.
Trade-off: Higher inventory holding costs for insurance vs. risk of stock-outs and
production halts. Maintaining excess stock is costly, but essential to avoid
incidents like the loss of 6,000 vehicles in 2019.
