Ben Wanichek – Making Supply Chain Decisions
Toyota Motor Corp. has expanded their manufacturing as they moved into the United States. They are sharing a factory with Mazda Motor Corp. in Alabama. This begs the question, what brought them to this supply chain decision? Toyota, a Japanese motor company, has built cars for over 80 years, and they are just moving factories into the country with their most customers. I will focus on how this supply chain decision affects the customer’s preference matrix.
For the consumer, decisions are made based on order qualifiers and order winners. Order qualifiers are all the variables the customer considers while buying a good or service, but the order winner is the highest weighted variable of the order qualifiers. In the car market, customers look for order qualifiers that range from color of the car to the country the car was manufactured in. There has been a recent trend in which the product’s country of origin is a focal point in the buying process of US customers. “In a speech Wednesday in Alabama, Toyota President Akio Toyoda said Alabama laid the groundwork to create ‘another made-in-America success story,’” and the President said, “the two auto makers’ new Alabama factory are a sign that ‘companies are coming back to the U.S. in a very big way.’” Japan and other foreign countries have been tagged with developing employee unions and new government regulations. Car manufacturers move their production overseas for the lower costs and, in turn, cheaper prices for customers and higher margins. But Americans are more willing to pay for a car built in their home country than ever before, and this is a man reason Toyota, among other car manufacturers, are moving into the United States.
Does this make the country of the car’s origin the order winner? Does it beat out qualifiers like safety, gas mileage, etc.? I would argue no, but customers are sacrificing a higher price to buy an American made car. “The big three, General Motors Co., Ford Motors Co., and Fiat Chrysler Automobiles NV, are being outsold by non-U.S. rivals, as their share of American sales dwindled to 44% in 2017.” This is a product of foreign car manufacturers like Toyota moving a portion of their manufacturing to the United States and taking advantage of an order qualifier for customers. Traditionally American made car companies have used their domestic manufacturing in marketing for decades. It’s hard to determine what weight the customers in the car market put on domestic manufacturing, but the advertising and recent statistics show that there is a structural difference between foreign and American cars in the minds of customers.
In short, Toyota and other foreign car manufacturers have moved some manufacturing to the US for financial and strategic reasons. There are many factors for each individual car buying customer. It’s difficult to determine where domestic manufacturing ranks among the order qualifiers in the car market. The current decrease in sales for the Big Three American made car companies as foreign car manufacturers have moved factories to the United States shows that although it may not be an order winner, domestic manufacturing is a determining factor for consumers across the United States while buying a car. These are questions I asked myself while reading about the trends in motor company supply chains: how much weight do customers put on domestic manufacturing? What order qualifiers/order winners do you think of when buying a car, and how does that compare with others in America?
In the first place, Toyota is a Japanese company that sells cars in 49 countries. Their biggest sells are in Asia, Africa, Oceania and South and Central America, while other brands, like Ford, has is biggest sales in the USA. So, in order to value the weight of the order qualifiers it is important to realise that most of Toyota´s customers are not from the USA.
It might be true that customers give more value to where the car is built (local or out the sea), but, american customers or any customer? Toyota´s main sales are in those 4 continents, so the first thing to do is gather information about what those customers, in those coutries, value the most. A citizen from Asia might do not care about the fact that the car is made in the US as much as citizen from Europe or the US. In Asia, South and Central America and Africa citizens do not have as much money as people from the USA, so probably their order winner is the price, and they do not put as much value to the country where the car is build. But, this is only an assumption made by the main customers of Toyota.
https://www.20minutos.es/noticia/3106821/0/mapa-marcas-coches-mas-vendidas-cada-pais/
I think this is a very interesting point that Carmen brought up. Toyota is a foreign company, so even if they have a plant in Alabama, they are still at their core a foreign country. Additionally, there isn’t that great of a price difference between Toyota and Ford for example, so I don’t think that customers are really going to base their entire order winners on where the company is from. That being said, I think it is interesting that Toyota is focusing so much on their customer relationships and even more so that they are trying to connect with their customers through a new plant. Given The Big Three’s sales, it seems that customers don’t really care that much about American made cars anymore. I would be interested in seeing the changes in sales for Toyota with the new addition of their Alabama plant.
It is important to look at where America is politically especially based on our current President. We live in a nation where people believe that the United States of America is past its glory days and needs to go back. When Ford announced that they would not be moving there plant to Mexico they not only saved jobs but the created a better brand personality. The hope here for Ford is to capitalize on popularity instead of price. This movement showed how powerful the tagline “made in America” can be. I think that Toyota has noticed this and decided to try and capitalize on it as well. Toyota need to do this because of there loss of edge in the market. Toyota used to sell the most fuel efficient cars but recently all car companies have made a point to focus on fuel efficiency causing Toyota to lose their competitive edge. Since the “made in America” effect was so good why not try it. Toyota coming to this plant will also have a greater effect on American people than Ford. This is because Ford was not creating jobs in America only saving them by not moving to Mexico. Toyota on the other hand is creating jobs because it is a new factory.
Ben, your comments about Toyota’s plan to build a plant in Huntsville, Alabama are interesting. In essence, I believe there are many reasons why Toyota ultimately made their decision. First off, according to the New York Times, Toyota is planning on producing the Carolla model at this new plant. It must be noted that Toyota already produces this model at a plant in Blue Springs, Mississippi, 140 miles away. This offers the potential for Toyota to streamline suppliers in producing one of their best selling models. Furthermore, the new plant is conveniently located only 14 miles from an existing Toyota engine plant, furthering their capability to add efficiency to the production process.
Another comment brought up by Carmen was the “Made in America” stamp, and how much people actually care about it. Interestingly, Toyota has long been producing their line of pickup trucks in a plant in Texas, and makes this very clear in their marketing of the vehicles. People in the market for a pickup truck might have stronger opinions in regard to where their goods are produced. Other manufacturers try and capitalize on this preference, coining terms such as “An American Revolution”, with Chevy for instance. In the case of the Carolla, it seems as if utilitarianism was the driving factor in the decision, as they are able to streamline the supplying and manufacturing process, with potential aims of decreasing costs for the consumer.