SCH4801
ASSIGNMENT 2 2025
UNIQUE NO. 796010
DUE DATE: 30 JUNE 2025
, ALTERNATIVELY;
SECTION A: QUESTION 1
1.1 Inventory-Related Decisions Toyota South Africa's future plan to source 40% of
components locally and 60% globally requires careful inventory management to
maintain responsiveness and cost efficiency. The three key inventory categories
relevant to Toyota are:
1. Raw Materials Inventory: This includes steel, plastics, electronics, and other inputs
used in manufacturing. Sourcing globally increases lead times and the risk of delay due
to port congestion or geopolitical tensions. The trade-off here is between low holding
costs and risk of stockouts.
2. Work-in-Progress (WIP) Inventory: Given Toyota’s use of the Toyota Production
System (TPS), maintaining minimal WIP is essential to avoid waste. The trade-off is
between just-in-time efficiency and the need for safety buffers during disruptions,
such as strikes or floods.
3. Finished Goods Inventory: Finished vehicles ready for delivery to customers.
Holding more finished goods increases responsiveness to customer demand but raises
storage and insurance costs. The trade-off is between high customer service levels
and increased holding costs.
1.2 Production Strategies Although Toyota relies on TPS, incorporating additional
production strategies can enhance flexibility and competitiveness:
1. Make-to-Stock (MTS): Producing vehicles based on forecast demand could help
during peak periods or known high-demand times (e.g., holiday sales). However, this
could lead to overproduction and waste, contrary to TPS principles.
2. Make-to-Order (MTO): Producing vehicles based on specific customer orders aligns
closely with TPS and limits unnecessary inventory. It ensures product customisation
but can result in longer lead times.
ASSIGNMENT 2 2025
UNIQUE NO. 796010
DUE DATE: 30 JUNE 2025
, ALTERNATIVELY;
SECTION A: QUESTION 1
1.1 Inventory-Related Decisions Toyota South Africa's future plan to source 40% of
components locally and 60% globally requires careful inventory management to
maintain responsiveness and cost efficiency. The three key inventory categories
relevant to Toyota are:
1. Raw Materials Inventory: This includes steel, plastics, electronics, and other inputs
used in manufacturing. Sourcing globally increases lead times and the risk of delay due
to port congestion or geopolitical tensions. The trade-off here is between low holding
costs and risk of stockouts.
2. Work-in-Progress (WIP) Inventory: Given Toyota’s use of the Toyota Production
System (TPS), maintaining minimal WIP is essential to avoid waste. The trade-off is
between just-in-time efficiency and the need for safety buffers during disruptions,
such as strikes or floods.
3. Finished Goods Inventory: Finished vehicles ready for delivery to customers.
Holding more finished goods increases responsiveness to customer demand but raises
storage and insurance costs. The trade-off is between high customer service levels
and increased holding costs.
1.2 Production Strategies Although Toyota relies on TPS, incorporating additional
production strategies can enhance flexibility and competitiveness:
1. Make-to-Stock (MTS): Producing vehicles based on forecast demand could help
during peak periods or known high-demand times (e.g., holiday sales). However, this
could lead to overproduction and waste, contrary to TPS principles.
2. Make-to-Order (MTO): Producing vehicles based on specific customer orders aligns
closely with TPS and limits unnecessary inventory. It ensures product customisation
but can result in longer lead times.
