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SECTION A: QUESTION 1 QUESTIONS
1.1. Inventory-related decisions:
Procurement managers at Toyota might, in future, only source 40% from local suppliers and
60% from global suppliers, which might impact their inventory decisions. To balance efficiency
and responsiveness, evaluate any three key inventory categories relevant to Toyota with possible
trade-offs for each.
Toyota South Africa’s choice to source 60% of its components globally and only 40% locally
introduces complex inventory-related considerations that require balancing cost efficiency with
operational responsiveness. Inventory plays a central role in managing supply chain risks and
ensuring that production continues smoothly despite disruptions. While Toyota follows lean
principles under the Toyota Production System, the realities of a disrupted and volatile supply
environment call for practical adjustments to how inventory is managed. Three key inventory
categories—raw materials and components, in-transit inventory, and safety or buffer
inventory—highlight important trade-offs the company must navigate (SCH4801, 2025).
Raw Materials and Components Inventory
Raw materials and components are the building blocks of Toyota’s production processes. With the
increased reliance on overseas suppliers, a large portion of these parts will face longer lead times and
higher exposure to global risks such as geopolitical tensions or logistical bottlenecks. While
international sourcing may provide cost benefits or access to specialised components not available
locally, it also weakens responsiveness, especially when supply chain disruptions occur. Local
sourcing, though possibly more expensive or inconsistent at times—as seen with the ASA
strike—offers shorter lead times and more control. Toyota will have to evaluate each component's
criticality and origin to decide which items can be globally sourced without risking downtime and
which ones require faster, more flexible local sourcing (Hugo & Badenhorst-Weiss, 2022).
In-Transit Inventory
In-transit inventory refers to goods moving between global suppliers and Toyota’s facilities. With
60% of the supply now arriving from international sources, Toyota will hold more stock in this
category, particularly through maritime shipping. While bulk shipping reduces unit costs, it increases
pipeline inventory levels and ties up working capital for longer periods. Faster transport options like
air freight can improve responsiveness but come at significantly higher costs. If Toyota faces
customs delays or port congestion—as has happened before in Durban—these in-transit stocks
become a liability. The company must weigh the cost-saving benefits of slower, consolidated
shipping against the operational flexibility gained through quicker, more expensive logistics options
(Hugo & Badenhorst-Weiss, 2022).
Safety or Buffer Inventory
Safety inventory serves as a cushion against supply disruptions or demand spikes. Given Toyota’s
recent experiences with natural disasters and labour strikes, maintaining an adequate level of safety
stock has become a practical necessity. However, holding excess stock contradicts the company’s
lean philosophy and increases costs through storage, obsolescence, and tied-up capital. The challenge
is to find the right balance—too little buffer stock leaves the business vulnerable to halted production,
while too much wastes resources. Global sourcing increases variability in supply reliability, which
may justify higher safety stock levels for certain imported components. Toyota will need to make
data-driven decisions based on historical disruptions, supplier performance, and component
SECTION A: QUESTION 1 QUESTIONS
1.1. Inventory-related decisions:
Procurement managers at Toyota might, in future, only source 40% from local suppliers and
60% from global suppliers, which might impact their inventory decisions. To balance efficiency
and responsiveness, evaluate any three key inventory categories relevant to Toyota with possible
trade-offs for each.
Toyota South Africa’s choice to source 60% of its components globally and only 40% locally
introduces complex inventory-related considerations that require balancing cost efficiency with
operational responsiveness. Inventory plays a central role in managing supply chain risks and
ensuring that production continues smoothly despite disruptions. While Toyota follows lean
principles under the Toyota Production System, the realities of a disrupted and volatile supply
environment call for practical adjustments to how inventory is managed. Three key inventory
categories—raw materials and components, in-transit inventory, and safety or buffer
inventory—highlight important trade-offs the company must navigate (SCH4801, 2025).
Raw Materials and Components Inventory
Raw materials and components are the building blocks of Toyota’s production processes. With the
increased reliance on overseas suppliers, a large portion of these parts will face longer lead times and
higher exposure to global risks such as geopolitical tensions or logistical bottlenecks. While
international sourcing may provide cost benefits or access to specialised components not available
locally, it also weakens responsiveness, especially when supply chain disruptions occur. Local
sourcing, though possibly more expensive or inconsistent at times—as seen with the ASA
strike—offers shorter lead times and more control. Toyota will have to evaluate each component's
criticality and origin to decide which items can be globally sourced without risking downtime and
which ones require faster, more flexible local sourcing (Hugo & Badenhorst-Weiss, 2022).
In-Transit Inventory
In-transit inventory refers to goods moving between global suppliers and Toyota’s facilities. With
60% of the supply now arriving from international sources, Toyota will hold more stock in this
category, particularly through maritime shipping. While bulk shipping reduces unit costs, it increases
pipeline inventory levels and ties up working capital for longer periods. Faster transport options like
air freight can improve responsiveness but come at significantly higher costs. If Toyota faces
customs delays or port congestion—as has happened before in Durban—these in-transit stocks
become a liability. The company must weigh the cost-saving benefits of slower, consolidated
shipping against the operational flexibility gained through quicker, more expensive logistics options
(Hugo & Badenhorst-Weiss, 2022).
Safety or Buffer Inventory
Safety inventory serves as a cushion against supply disruptions or demand spikes. Given Toyota’s
recent experiences with natural disasters and labour strikes, maintaining an adequate level of safety
stock has become a practical necessity. However, holding excess stock contradicts the company’s
lean philosophy and increases costs through storage, obsolescence, and tied-up capital. The challenge
is to find the right balance—too little buffer stock leaves the business vulnerable to halted production,
while too much wastes resources. Global sourcing increases variability in supply reliability, which
may justify higher safety stock levels for certain imported components. Toyota will need to make
data-driven decisions based on historical disruptions, supplier performance, and component
