SCH4801
Assignment 2 2025
Unique #:796010
Due Date: 30 June 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, SECTION A: QUESTION 1 CASE STUDY
1.1 Inventory-related decisions
a) Work-in-progress (WIP) Inventory
This category refers to partially completed goods that are still in the production
process. For Toyota South Africa, disruptions such as strikes or supplier delays (e.g.,
from Auto Parts South Africa) can stall the movement of components, leading to
unfinished vehicles on the assembly line. Keeping a moderate level of WIP inventory
allows production to continue even when certain components are delayed.
Trade-off: While higher WIP levels improve responsiveness to supply interruptions,
they increase holding costs and may reduce operational efficiency if excess semi-
finished products pile up without completion.
b) Safety or Buffer Inventory
Safety stock protects against unforeseen disruptions such as component shortages
or environmental disasters (e.g., the 2022 floods in KwaZulu-Natal). For Toyota,
keeping extra brake pedals or fuel tanks in stock could have prevented the total
production shutdown during the ASA strike.
Trade-off: Maintaining safety inventory reduces risk and improves continuity, but it
ties up capital and goes against the Toyota Production System’s lean principles,
which aim to eliminate waste and reduce excess stock.
c) In-transit Inventory
In-transit inventory includes goods currently being transported from suppliers (both
local and international) to Toyota’s plant. With a potential shift to 60% global
sourcing, Toyota’s exposure to longer lead times and shipping delays increases. For
instance, delays at the Durban port during the 2022 floods highlight the vulnerability
of in-transit inventory.
Varsity Cube 2025 +27 81 278 3372
Assignment 2 2025
Unique #:796010
Due Date: 30 June 2025
Detailed solutions, explanations, workings
and references.
+27 81 278 3372
, SECTION A: QUESTION 1 CASE STUDY
1.1 Inventory-related decisions
a) Work-in-progress (WIP) Inventory
This category refers to partially completed goods that are still in the production
process. For Toyota South Africa, disruptions such as strikes or supplier delays (e.g.,
from Auto Parts South Africa) can stall the movement of components, leading to
unfinished vehicles on the assembly line. Keeping a moderate level of WIP inventory
allows production to continue even when certain components are delayed.
Trade-off: While higher WIP levels improve responsiveness to supply interruptions,
they increase holding costs and may reduce operational efficiency if excess semi-
finished products pile up without completion.
b) Safety or Buffer Inventory
Safety stock protects against unforeseen disruptions such as component shortages
or environmental disasters (e.g., the 2022 floods in KwaZulu-Natal). For Toyota,
keeping extra brake pedals or fuel tanks in stock could have prevented the total
production shutdown during the ASA strike.
Trade-off: Maintaining safety inventory reduces risk and improves continuity, but it
ties up capital and goes against the Toyota Production System’s lean principles,
which aim to eliminate waste and reduce excess stock.
c) In-transit Inventory
In-transit inventory includes goods currently being transported from suppliers (both
local and international) to Toyota’s plant. With a potential shift to 60% global
sourcing, Toyota’s exposure to longer lead times and shipping delays increases. For
instance, delays at the Durban port during the 2022 floods highlight the vulnerability
of in-transit inventory.
Varsity Cube 2025 +27 81 278 3372
