Toyota Managing Tundra Inventory Supply VERY Closely
Jason Lancaster | Jun 17, 2009 | Comments 18
Late last week, Toyota announced that they were going to increase Tundra production. Many auto industry pundits announced that this move was nothing more than Toyota stepping back up to a “normal” level of production. At first blush, I agreed with that assessment.
Today, after reading a news story from the Dallas Morning News, I’m not so sure. It seems like Tundra demand is starting to climb…
Meanwhile, at Toyota of Richardson, Steve Grogean grapples with a limited supply of Tundra pickups and Sequoia SUVs. He thinks Toyota simply overreacted when sales began dropping by amounts the company had never seen before. Toyota recently announced that it’s restoring some of its truck production.
“If business picks up as it usually does in the summer, things could get pretty tight in the next 45 to 60 days,” said Grogean, vice president and general manager of the dealership.
There’s an interesting story from 2003 about Toyota’s process for managing ‘days supply’ of inventory. Specifically, it relates the days supply of the 2003 and 2004 model year Tundras to production and sales. The long and short of it: Toyota is very sensitive to ‘days supply.’
“Low days supply” is often considered anything less than 60 days of vehicle supply. The advantages in a low days supply are numerous, including:
- Dealership financial benefits. Quick vehicle turnover reduces dealership carrying costs and leads to more dealer profits.
- Lower sales incentives. Low days supply mean there’s less pressure to provide big incentives to consumers to sell vehicles.
- Value perception. When a dealership salesperson shows a customer a parking lot full of vehicles, it’s very difficult to convince the customer that the vehicle is valuable and desired. When a salesperson says “here’s the three Tundras we have in stock, but we’re getting some more next week,” consumers tend to get excited. That often means more sales.
I think there’s a major sales advantage for Toyota in having a low supply of Tundras on dealer lots. First of all, you have to acknowledge that there’s not much difference between all these half-ton trucks in terms of price, quality, value, etc. Second, you have to understand that Toyota spends a lot of time talking about quality and resale value.
If a consumer goes to the Ford dealership and sees a lot full of trucks, they might conclude that Ford sells a lot of trucks (and they do). If a consumer goes to the Toyota dealership and sees that they can’t keep Tundras in stock, the consumer might conclude that Toyota quality is excellent. They are also very likely to believe that the Tundra has great resale value (it does) because it’s so popular.
To me, low inventory seems like a distinct sales advantage.
Of course, the danger with a low supply is that you risk running out of product. Toyota wants to sell as many Tundras as they can, and they really can’t risk missing sales because they don’t have enough vehicles. The million dollar question:
“How do you sell as many Tundras as possible while also keeping inventory levels low?”
It seems as if Toyota has a solution to this problem. A recent story about Toyota practicing TAKT changes at the San Antonio Tundra plant [Sidebar: TAKT changes refer to changes in the speed of the production line.], shows that Toyota is attempting to tie Tundra production speed to inventory supply as closely as possible. Toyota has changed line speed half a dozen times this year – that’s phenomenal when you compare it to the rest of the industry. It’s also exceptionally odd – what would be the benefit to practice line speed changes so frequently?
My answer: Toyota can manage Tundra inventory very closely if they can get the San Antonio truck plant used to changing line speed all the time.
Here’s the bottom line:
- Low Tundra inventory levels are good for business.
- Toyota needs to sell as many Tundras as possible to be profitable.
- The only way to accomplish low inventory without running out is to control vehicle production VERY carefully. That’s what Toyota is doing with the Tundra.
It’s called efficiency folks – it’s the Toyota way. It’s also very good evidence that Toyota Tundra demand is rising. Here’s to hoping Toyota’s plan works.
Filed Under: Tundra News
Great news…. Good story Jason…..
As long as they don’t get greedy like these fuel companies. Everything they LIED to us about in economics with supply and demand….
Mickey – Thanks for your support as always.
TXTee – That’s definitely one aspect of this system. If Toyota dealers only get just enough Tundras, they’re going to be a lot more proud of them.
I think Chevy was hit hardest. Those are the lots I have seen close shop more than any other brand. More and more Tundras, even Tacos, are rolling around out there. I’m not seeing new competitor trucks so it probably is true Toyota is taking over. And I actually feel a pang in my chest when I see a Titan….
It is too early to tell if Toyota is having the right inventory on the dealer’s lots, especially for the 2010 model tundras. As far as I can tell, so far, the inventory levels in my area are extremely low and too low to create levels of any type of sales at all. The sales staff at a major Toyota dealer in a big city close by said they have only 3 tundras total on their lots and only 1 of the 3 are 2010’s and he checked their inventory coming in on tundras and they are limited models, standard 8′ box, leather, etc. and not double or crew cabs and he cannot figure out why they are getting or ordering this type of non-selling tundra compared to double and crew cabs. He told me over 2 months ago in 3-4 weeks they expect 2010 tundra double cabs to come in and now 2 months gone, none to be found and said will be another month or so only getting in a couple. I wish the dealers had 4-5 double cabs in different colors on their lots now and not in 2 months from now, but the rebates on 2010’s even hardly out are already 1750 in our area vs. 3K on 2009’s and 4K on 2008’s which are slim pickins. The salesman expects in 1-2 months from now the rebates on 2010 tundras to go over 2K, but I bet not unless they get a lot more on their lot and able to sell them. I’m itching to drive a 4.6L 4.10 gear ratio and see if it really does have enough oomph and get 2 more mpg than the 5.7L monster V8. I love driving the excessively powerful 5.7L, but only getting 17 mpg overall which is not really that bad, but would prefer closer to 20 mpg for daily driving. It’s amazing to see in our exclusive chevy area where I live to NOT have 30-40 chevy silverado’s on their lots and now only having 3-5 to pick from. I don’t think chevy’s are selling too well with all the bankruptcy proceedings along with dealers being cut left and right by GM (now Government Motors). Lets hope Ford stays out of bankruptcy or Tundra’s will have no competition anymore and will cost more because of the lack of competition.
mk – Interesting comments about the tight supply of 2010 Tundras. I hope that Toyota figures out how to balance demand against production, but clearly there’s an issue in your area. Thanks for commenting.
I support mk’s comments. Here in Puerto Rico u can’t find any new Tundra. I went to a few dealerships and the sales staff told me that i have to wait 3 months for a new one. Also he told me those tundras will be a crew max limited, and here in the island are very expensive. I hope to buy one soon, but no chance to even test drive one. By the way, great site.
MrPote – I think Puerto Rico might be a bit of a special case – I can’t imagine that most people opt for such a big vehicle there. I’ve never been to Puerto Rico, but big pickups like the F150 or Silverado weren’t nearly as common in Central America as they are in the mainland USA (not to mention Tundra sightings). Are gas prices significantly higher in Puerto Rico like the are in the rest of the Caribbean?
Jason – Here u can see a lot of big trucks such as F-150’s, Rams, last gen tundras and a few new ones. They love big trucks because u can use it for anything u want.About the gas prices, here the liter is between .65 cents to .73 cents (maybe from $2 – $4 a gal. i’m not sure). In the dealer they told me that one of the reasons that they don’t have Tundras is the production of the truck. Well i hope that i can drive one this week and buy one if it is possible pre-owned or new one… Thanx!
MrPote – Good to know. Puerto Rico sounds a lot like the rest of the USA.
Just drove today a 2010 tundra 4wd SR5 equipped double cab msrp around 33400 with the new 4.6L V8 with 4.10 axle ratio which is included in the tow pkg. vs. the 3.90. Overall, I liked it alot from 0-30 mph and really could not tell too much diff. from the 5.7L EXCEPT from about 30-60 mph. The mid-range punch of the 4.6L was not there where the 5.7L pulls continously strong and somewhat noticeably quicker. Also, at 60 mph, the rpm was 1500 vs. with the 5.7L at around 1600 rpms. The same held true at 65 and 70 mph where the rpms were about 100-150 rpm’s lower with the 4.6 vs. the 5.7L which should help in gas mileage of 2-3 more mpg on the hwy. or interstate. The price diff. is about 1300 bucks cheaper for the 4.6L and should serve anyone’s need for speed and pulling power as long as towing under 5,000 lbs. (in my opinion only). I read an article stating the 0-60 mph speed with the 4.6L was only about 1/2 second slower than the mighty 5.7L which is close enough for me. It hauls harder and quicker than what I thought it would compared to a similar sized and hp/torque rating of the 5.3L V8 chevy with 3.73 axle ratio. The dash layout, etc. is now graphite colored vs. silver color which is sharper and nicer looking and if ordering the black interior, new for 2010 tundras the glove box, carpet on floor, and door armrests are now black to match unlike previous year tundras having non-matched light colored gray. (much more blended in and sharper looking) Now, I just have to work a trade-in price for my 2007 5.7L double cab TRD pkg. tundra and pull the trigger (and about 5-6K – hopefully no more) and try to find one that is available. Still tough to find, but according to 2 dealers, my options and color choices should be appearing later in July and for sure in August.
MK – Good notes – thank you.
I’ve been in the market for a Tundra for several weeks now. What I’ve encountered at numerous Toyota dealers is a range from almost cocky, to uninspired or frustrated sales people. Basically, there is no product to LOOK AT or TEST DRIVE and therefore my interest in the Tundra is diminishing. I’ve been pressured at every dealer to order a truck, but why on earth would I order a truck without test driving that exact model or seeing the actual colors in person? Sorry, looking at the internet and the available colors does nothing for me, I want to see this stuff first hand! If at that time I do not like the available models than perhaps I’ll entertain placing an order.
Off the GMC, Ford and Dodge dealers I go… Toyota isn’t all that…
Jimmydean – Your experience sums up the risks of Toyota’s Tundra supply strategy. For what it’s worth, I completely understand your feelings. It’s interesting to note that back in the 80’s and early 90’s, Toyotas were so popular (and in such short supply) that many customers had to blindly order them without test-driving. I don’t think that’s a reasonable strategy long-term, but it’s hard to argue with success. Did Toyota enjoy annual sales gains in the 80s and 90s because they managed their inventory so carefully that they created a sort of “feeding frenzy” mentality? Were they just lucky? It’s hard to imagine Toyota selling as many Tundras as they can build if dealers don’t have any available for test drives…
4o that’s the key stop/slow the production. Yhea then they will get upset and buy a domestic. Toyota solution to helping GM. Hire mexicans and they work harder and produce a better product for less than those lazy americans. Ever heard of a Monday car, well every day is Monday at Toyota.
Oh buy the way just buy a used on I see plenty of them on vehicle lots. Japan’s quality at its finest, so bad the CEO was ashamed! I really want a truck the CEO is ashamed of.
Hank funny thing I see alot of domestics on the used lots also. Let’s add another one what domestic dealerships had to close too because of no backing from it’s manufacturer’s. I guess the CEO’s are really embarass and yes the tali is between their legs.
Hank – Trolling will get your comments deleted, sir.