Toyota: Application of Modern Techniques in Operations Management - Term Paper Example

?Toyota: Application of modern techniques in operations management Introduction With the turn of the 21st century, market competition got intensifiedand consequently many leading business firms went out of business. In order to address this challenge, business executives today are seeking innovative ways to improve organisational performance and thereby competitiveness. As Ketchen et al (2008) point out, for the last few decades, most of the firms have been paying particular attention to maximising their speed or minimising costs with intent to improve the efficiency of the supply chains. Today, organisations have identified the significance of developing potential supply chains in enhancing operational performance; and as a result, firms consider best value supply chains as the central aspect of their operational strategy rather than a way to increase sales (ibid). Best value supply chains are designed to deliver superior services to customers in terms of the five performance objectives-quality, speed, dependability, flexibility, and cost. This paper will discuss Toyota Motor Corporation’s performance in the light of these five performance objectives and assess how the application of modern techniques in operations management can support the organisation’s five performance objectives. A brief overview of the TMC Toyota Motor Corporation (TMC), simply termed as Toyota, is a Japan based multinational automaker. The organisation was founded on 28th August 1937 by Kiichiro Toyoda. In 2011, Toyota was the world’s third largest automobile manufacture in terms of production and the company employed 300,734 people globally as of 2010. Toyota Motor Corporation is the part of the Toyota Group and has a presence in almost all parts of the globe. Performance objectives of TMC According to Slack et al, quality, speed, dependability, flexibility, and cost represent a basic set of five performance objectives that can be applied to all operations (Kossmann 2006, p.45). In the following session, Toyota’s performance is discussed in the light of these five performance objectives Quality Quality is the most important performance objective because it is believed to be the major factor influencing the performance of organisations. “Quality is defined as the totality of features and characteristics of a product, process or service that bear on its ability to satisfy stated or implied needs” (Bart 2006, p.179). It seems that TMC performs outstandingly in terms of product/service quality. From different third-party customer surveys, Toyota’s vehicles are consistently ranked on the top. In addition, Toyota’s different car models have been selected as “the car of the year” many times by third party market researches and surveys. The company has developed a series of advanced quality features to limit the emission of unpleasant and harmful fumes and to enhance passenger safety. Toyota has improved quality control and quality assurance systems that have been developed over many years (‘Toyota’s approach to quality). The company considers customer satisfaction as the core of its operations and it fosters the involvement of all employees, from ground level to top level, in quality control activities (ibid). Speed Speed or speed of response is another performance objective and is a criterion for evaluating the operational efficiency of an organisation in terms of doing things fast. In other words, speed can be defined as the time period between the order and delivery of products/services (‘process design’). Every firm tries to minimise this time period, and instead increase speed with intent to provide customers with competitive advantages. TMC has developed simple, flexible, and robust technologies to reduce complexity in its operations so as to fasten overall supply chain activities. It is interesting to note that the Toyota maintains a high output per worker as compared to other leading multinational automakers; and at the beginning of the 21st century, Toyota Burnaston (UK plant) had achieved an output of 86 cars per employee (PR Newswire). In a comparison by Lieberman and Dhawan (2005), it is identified that General Motor’s output per worker was nearly 62% of Toyota’s during the 1965-1997 period. Hence, Toyota performs better in terms of speed. Dependability The concept dependability simply refers to ‘being on time’. More precisely, dependability means that doing things timely and appropriately for delivering goods and services to customers at the right time and in the right manner. Dependability has external as well as internal perspectives. Externally, dependability is necessary for an organisation to meet customer satisfaction and thereby retain potential customers. Internally, it has a direct effect on the firm’s cost of operations. In order to meet this performance objective, TMC has developed a ‘just-in-time’ production system (Shingo 1989). This system really assists the organisation to achieve customer satisfaction by effectively linking its production activities to the prevailing market demand (ibid). Toyota’s management indicates that this production system is greatly beneficial for the organisation to maintain an uninterrupted and optimised workflow (ibid pp.97-99). The company relies on the ‘kanban control system’ that benefits the firm to properly manage the logistical chain from a production perspective (Kouri et al 2008). It is obvious that the company has an edge over its competitors in terms of dependability advantage. Flexibility In order to effectively respond to today’s dynamic business environment, an organisation needs to change its products and services and the way it operates whenever required. This performance objective is termed as flexibility. While going through the history of TMC, it seems that the organisation effectively utilises its resources in order to be flexible. Market analysts indicate that TMC maintains high level of flexibility and therefore the firm can produce relatively small groups of diverse models without compromising productivity or quality. It seems that the Toyota’s management gives particular importance to flexibility as it believes that flexibility is a key element influencing competitiveness. In order to improve its flexibility, the organisation has developed an improved flexible assembly system called Global Body Line (Visnic 2002). Cost Evidently, cost reduction is the ultimate performance objective of every organisation regardless of the firm’s nature and size, because cost reduction determines the profitability of the firm. Historically, low price is paramount in influencing customer behaviour which in turn can be offered through reducing costs of production. In order to reduce costs, TMC has planned to shift their production plants to overseas countries where raw materials and labour are available at lower rates. Experts opine that cost-effective operations assist the company to manufacture and deliver high quality vehicles at reasonable prices. Modern techniques in operations management Computer-aided Design and Manufacturing (CAD/CAM) is one of the recent advancements in operations management. Under this technique, all product designing/manufacturing operations would be performed with the help of computers. This technique is helpful for organisations to make their designing/manufacturing operations more efficient. As DesignNews Staff (1998) reports in contrast to the approach of the Big Three who settled on one primary CAD supplier, TMC has developed its own ‘TOGO (meaning integrated) CAD/CAM System’. Although the company had developed some in-house systems before the introduction of this method, they did not assist the company to shorten the overall development period significantly (ibid). Toyota engineers state that the development of TOGO CAD/CAM system has benefited the company to enhance its performance objectives including speed and dependability (ibid). Mass customisation is a major advancement in the field of operations management. In contrast to the past production practices where firms including Toyota focussed on mass production to take advantages of economies of scale, today companies strive to promote creative product designs and flexible production processes with intent to cater individual customer needs. Reports indicate that Toyota greatly emphasises the customised production of goods in order to effectively respond to quick changes in customer tastes and specifications. Evidently, this mass customisation technique greatly benefits the company to enhance its operational flexibility to a great extent. Finally, green manufacturing is another modern development in operations management. In order to address people’s growing concerns over environmental sustainability, today companies such as Toyota specifically promote the design of products and processes that are sustainable in terms of ecology (Shuhab-u-Tariq 2010-11). As part of green manufacturing, Toyota has designed hybrid electric vehicles that produce little greenhouse gas emissions. These eco-friendly vehicles greatly meet customer interests and hence the company can cut down its operating expenses including that of promotion. Therefore, the concept of green manufacturing is beneficial for Toyota to trim down its prices. Conclusion From the above discussion, it is clear that TMC performs competitively in the light of five performance objectives including quality, speed, dependability, flexibility, and cost. The company maintains comprehensive quality check systems to produce high quality vehicles. Similarly, the organisation operates just-in-time production system and kanban control system to deliver its products on time. Toyota has a high output per employee and the firm is flexible enough to respond to the dynamic market environment quickly and effectively. Well developed technologies and efficient managerial control aid the firm to reduce its production costs and thereby deliver its offerings at fair prices. Finally, the application of modern techniques like CAD/CAM and mass customisation in operations management support Toyota’s five performance objectives. References Bart, J. C. (2006) Polymer Additive Analytics. Industrial Practice and Case Studies. Italy: Firenze University Press. DesignNews Staff. ( 1998) ‘Toyota develops its own CAD’. [online] available at [accessed 20 Feb 2013]. Ketchen, et al. (2008) “Best value supply chains: A key competitive weapon for the 21st century”. Business Horizons, 51 (3), pp. 235–243. Kossmann, M. (2006) Delivering Excellent Service Quality in Aviation: A Practical Guide for Internal And External Service Providers. England: Ashgate Publishing, Ltd. Kouri, I. A. Et al. (2008) “The principles and planning process of an electronic Kanban system”. In Novel Algorithms and Techniques In Telecommunications, Automation and Industrial Electronics. (Ed. T. M. Sobh 2008). US: Springer. Lieberman, M. B & Dhawan, R. (2005) ‘Assessing the Resource Base of Japanese and U.S. Auto Producers: A Stochastic Frontier Production Function Approach’. [online] available at [accessed 20 Feb 2013]. Process design. Chapter 5. [online] available at [accessed 20 Feb 2013]. PR Newswire. “Nissan's Sunderland car plant sets new European productivity standards”. [online] available at [accessed 20 Feb 2013]. Shingo, S. (1989) Study of the Toyota Production System: From an Industrial Engineering Viewpoint. US: Productivity Press. Shuhab-u-Tariq. (2010-11) “Recent trends in modern operations management”. Aston Business School. [online] available at [accessed 20 Feb 2013]. Toyota’s approach to quality. Toyota Manufacturing UK Ltd. [online document] available at [accessed 20 FFeb 2013]. Visnic, B. (2002) ‘Toyota Adopts New Flexible Assembly System’. 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