Toyota Motor Corporation: History and Brief Overview - Essay Example

Toyota Motor Corporation: History and Brief Overview Toyota Motor Corporation, founded by Kichiro Toyoda in 1937, is the world’s biggest automobile manufacturer. The company is headquartered at the Toyota city, Japan. It manufactures a range of vehicles in various categories like Cars, SUVs, Trucks, and Vans. The product line includes famous brand names like Corolla, Avalon, Camry, Yaris, Tundra, Land Cruiser, and Sequoia. Together with its other business interests, the company is generally referred to as the Toyota Group. The post-World War II manufacture of trucks started in December, 1945. Car manufacturing began in 1947 with introduction of Toyopet model. “By 1955, Toyota was making 8,400 cars; and by 1965, 600,000 cars per year.” (Toyland.com, Toyota Corporate History). The Land Cruiser made entry in the US market in 1957. Within a decade, Toyota established itself as major company in the US. Till 80s, Toyota products were known for their simplicity, economy, and utility. In 1984, Toyota entered into a joint venture with GM called New United Motor Manufacturing (NUMMI) in the US. According to Toyota.com, Toyota’s produces 1,334,160 units, annually, in the US. It employs 36,632 employees in US and there are 1486 dealerships of the company in the country. The first independent. Toyota plant was established in the US, by Fujio Cho, in 1988. Today, Toyota has manufacturing and assembly facilities in 22 countries. Hiroshi Okuda is the current chairman of Toyota and Katsuaki Watanbe, is the president. The famed Toyota Production System was launched in 1950s by legendary Taïchi Ohno and Shigeo Shingo. 1.1 Lexus and Prius By, 1985, there emerged a movement in Toyota to compete in the luxury segment of Mercedes, and BMW. In 1987, the final Toyota design was approved by Lexus. The first LS 400 luxury sedan rolled out in 1989. It proved the total self-reliance prowess of Toyota. Toyota had accomplished another wonder and without external aid. Lexus is a landmark achievement in innovation and self-reliance. Prius is the hybrid; petrol and electric car, another of Toyota’s home-grown excellence is slated to be launched soon. 2.0 SCM Toyota Way Supply chain management of Toyota begins from the customer pull mechanism. Customer remains the epicentre of production, sourcing and supply of a Toyota product. Toyota’s tryst can be traced to 1951, but its actualization occurred in the 70s and 80s when world first acknowledged the supremacy of the Japanese cars in general, and Toyota in particular. The supply chain management of Toyota is deeply embedded in a metaphorical work culture the Toyota Way. Toyota is the summation of company Philosophy to add value to associates, partners, people, and problem solving. (Liker, 2004) The essence of Toyota Way is “Toyota is able to manufacture vehicles in about the same order customers buy them.” (Andel quoted by Martin, S. Cash to Cash). Thus Toyota manufacturer demand driven small batches, at lower inventory levels thus ensuring reduction of floor space utilization at dealerships from 40 to 20% (Feare, 2000 quoted by Martin, S, 2008, Cash to Cash). 2.1 Elements of Toyota Production System Specifically, it is built into the 11-fold principles of the philosophy of Toyota Production Systems (TPS). The shift from supply centric or industry outwards to “customer centric” or “customer backwards” perspective (Martin, 2005) occurred during introduction of TPS. Ayers and Ayers (2004) explain the gamut of TPS as consisting of Kanban, Smoothing, Standardized operations, Set- up reduction, Cells, Small-group improvements, and visual control systems. Cells according to Ayers and Ayers make for the human resource interface in the production process, their training needs and multi-tasking. (Ayers and Ayers, 2006). 2.2 Jidoka, Heijunka and Takt Supply chain of Toyota achieves efficiency maximization through waste elimination. Cho (quoted at Liker, 2004) explains waste as “anything other than the minimum amount of equipment, space and workers time, which are absolutely essential to add value to the product. The supply chain management of Toyota is a set of robust structures and slick procedures embodying TPS philosophy. Liker (2004) describes the House model developed Toyota to represent the company’s with roof representing best quality, lowest cost and shortest lead time. Just-in-time inventory and, jidoka are two pillars that resting on foundation of standardized and reliable processes and heijunka, a dynamic schedule that levels spikes of volumes and variety. Easy and hard objects are interspersed to smoothen the spikes. The timing is controlled through the German idea of ‘takt.’ Just-in-time and Value Addition Just-in –time is simply the provision of Right Part, Right amount and Right Time. “The house is strong only if the roof, pillars and foundation are strong. (Liker, 2004, 32). Ayers and Ayers (2006) however, replace the jidoka pillar by autonomous defect control. It checks the flow of defective pieces in supply chain. The structural elements reinforce one another (Liker, 2004) and keeps Toyota ticking. Here the customer takes the wheel asking for a tailored logistics response (Fuller, O'Connor, and Rawlinson 1993 cited by Martin 2005). The customer’s demand driven supply chain drives efficiency customer backwards to its suppliers ensuring shorter time, “when Toyota needs an item and when the supplier makes it. (Martin, S., 2003, Cash to Cash.). The lean supply chain eliminates waste, and maximizes efficiency and production is organized along work-in-process inventory (Liker, 2004). The goal of the supply chain is to create “one piece flow”. One piece flow eliminates all muda. The constant flow of value added work is achieved by cutting down on down on overproduction, over processing, excess inventory, defects and unused employee creativity. The flexible and dynamic flow can always be improved. Viewed in years it becomes constancy of purpose (Liker, 2004), achieved by rallying employees around common goals (Liker, 2004) that that goes on an on year after. The idea of this long-term work philosophy it to get repeat business ensuring prosperity to its external and internal stake-holders. Value added work is that component of work in traditional manufacturing shapes the final product. In lean environment all work is value-added. The target thus again is muda; removal of wastage in terms of time, capital or material. Since production is regularly marked by defect-check, speed in the work flow helps to improve the quality. In addition it creates real flexibility, higher productivity, frees up floor space, improves safety, land lifts morale (Liker, 2004). This ensures stable and long-term growth prospects for it business partners. The low inventory levels are pregnant with problems. Stacks of inventory hide inefficiencies. Sometimes needless goods get stored up. “The more inventory a company has…the less likely they will have what they need.” (Ohno quoted at Liker, 2004, 104). These problems offer the chance to sail or sink. Toyota prefers the latter. This, in fact, is its lean message depicted by (Liker, 2004) in ‘sea of inventory’. At lower levels the rocks symbolizing communication, absenteeism, vendor delivery, long transport and machinery failure are jutting towards the surface. One wrong move and sea of opportunity is lost by the sinking ship. As a result Toyota engineers new vehicles in one year against two years taken by its rivals. 2.3 The Paradigm of Push and Pull The stimulus arrives from the customer. It comes as ‘pull’ effect and contrasts with the ‘push’ of traditional manufacturing system. ‘Push’ creates a glut of the finished product, using more floor space of the retailer and blocks capital of the manufacturer. “Very early on Toyota stating thinking in terms of pulling inventory based on immediate customer demand, rather than using a push system that anticipates customer demand.”( Liker, 2004 105). Production is 100% on demand resulting in zero inventories. (Liker, 2004). However, zero-inventory is a hypothetical and ideal situation. Toyota tries to remain as close to it as possible. In fact it was the supermarket shelf that inspired the father of TPS to replicate the system in car manufacturing. The customer takes off a product from the shelf thus asking for replenishment. The replenishment comes from schedule based inventory. This in fact, is not ‘zero inventory’ but ‘necessary inventory’ system at Toyota. All what the system requires in the TPS is ‘necessary inventory.’ Ohno’s idea of “stores” of parts between operations comes in handy. Taking into account Toyota’s present spread worldwide, long time ago, “Ohno needed a way to that the assembly had used the parts and needed more. He used simple signals—cards, empty bins, empty carts, called kanban. ( Liker, 2004, 105).” “ Kanban uses a carton and an empty bin to seek a refill. It can also be a colour card with details of the requirement and they move in the factory in an orderly fashion. (Liker, 2004, 105).” “It is remarkable, simple, effective and highly visual.” (Liker, 2004, 105). An ideal situation of pure one-piece-flow works on a zero-inventory system. But the practical and complex system of flows is supported by kanban. The process starts at the assembly factory. “Empty containers are sent by truck back to the supplier which are use to refill the kanban.” (Liker, 2004, 105) Kanban is further augmented by the use of visual controls and smoothening of spikes in TPS. “The visual aspect means being able to look at the process, a piece of equipment, inventory, or informant or at a worker performing a job and immediately see the standard being used to perform the task and if there is a deviation from the standard by making a band.” (Liker, 2004, 105). 2.4 Partnering Relations Toyota employs a conservative approach towards its suppliers, testing their ability, and retaining them. “Once inside, you are not kicked out except for the most egregious behaviour.”( Liker, 2004, 105). This long term relationship and integrated TPS at the supplier’s workplace helps Toyota get the lowest price for supplies. (Vollman, Berry, Whybark and Roberts, 2004). Vollman (2004) et. al state: “Toyota gets better price because it is easy to do business with. In essence this means inter-firm integration with Toyota works. “Achievement of business performance by parent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.” (Ohno quoted by Liker, 2004, 203). For the assembly plants spread across US and Canada Toyota uses the cross-dock facility. It uses the cross-dock as an extension of the assembly line making for a continuous and smooth flow of parts onto vehicles and finally to customers. (Liker, 2004). “It is part of the flow.” Pull and kanban sometimes complement each, substitute, and support each other. “Flow where you can, pull where you must.” (Rother and Shook, 1999, quoted by Liker, 2004,108). The quick reaction up and down the supply chain management is Toyota’s indigenously grown work ethic. The supply chain environment is depicted 4 P pyramid by Liker (2) (2005). The base of the pyramid is secured by belief in long term philosophy at Toyota. On it is imposed, process that eliminates muda, respect, growth and challenge for partners form the third tier of the muda and continuous problem solving. One of the outstanding features of Toyota’s SCM is logistics performance. The logistics principles are summed by Liker (2004). Packaging, dedicated transport service, consistent routes, order fluctuation alliance, strategically placed cross docks. It is, in fact, the adoption of kanban out of the factory premises. 3.0 Apprehended Fault Lines As we study TPS application over Supply Chain Management we notice certain areas where Toyoto can falter. The foremost apprehension is that disruption in work in the ‘flow system’ as it operates at very low inventory level. Substitute in case of appearance of a fault may be hard to obtain. Not every Toyota supplier or dealer can ingrain the ideals of TPS. There always remains the danger of systemic failure. To succeed the concept has to work all the time, but even a single failure can trigger a sever backlash on the entire supply chain management. In the era of globalization, Toyota is conservative on the use of Information Technology. The competition employs IT to operate their worldwide operation. Toyota relies too much on its own systems and procedures. Undermining of IT in the systems approach is a real-time threat. Toyota is the best and the largest automobile manufacturer. It has to ensure that its systems, procedures attain novel ideas with changing times. In the era of globalization no one system can be taken for granted. In fact, some of the quality systems of Toyota have been inspired by the philosophies and ideas of Edward Deming, the quality guru of the twentieth century. Continuous improvement needs imbibing knowledge from the whole world resource. 4.0 Conclusion Toyota Production System is the best of human endeavour in integration man, machine, money and materials. The lean concept of Toyota is the best of human production approach ever. It has made Toyota to emerge as the largest and most reliable automobile manufacturer in the world. The world view of Toyota has made it extremely adaptable to foreign climates. Toyota is an epitome of self-reliance. It believes creating its own systems making others follow its concepts. Toyota has not only to remain in constant mode of improvement but innovation. In the era of globalization synthesis of the best concepts developed anywhere in the world is taking place. Toyota can’t remain aloof for long. It has to integrate emerging technologies and ideas with home-grown ones.. Retaining the number one position in the world is as much a challenge as achieving it. References: Liker, Jeffrey, K. (1)(2004) The Toyota Way, Third Reprint, The MacGraw Hill Company, New York (NY), US. Rother, Michael and John Shook, (1999) Learning to See: Value Stream Mapping to Add Value and Eliminate Muda. Martin, Shana (2003), Lessons Learnt, Supply Chain Management Digest http://scm.ncsu.edu, “The NC State University Website, Accessed April 8th, 2008. http://scm.ncsu.edu/public/lessons/less031202.html Andel, T. (1999) Accentuate Heijunka, Eliminate Junk. Material Handling Engineering. Vol. 54. Issue 8, Aug 99. Liker Jeffrey (2) (2005) The Toyota Way and Supply Chain Management, Presentation for OESA Lean to Survive Program, http://www.oesa.org/, “The Original Equipment Suppiers Association. Accessed April 8th, 2008, http://www.oesa.org/pdf/presentations/021505_Toyota_Way%20_Supply_Chain.pdf Toyota history: corporate and automotive (Anon, n.d) http://www.toyoland.com/ “The Toyland Website” Accessed April 8th 2008, http://www.toyoland.com/history.html The Toyota Motor Corporation Website, http://www.toyoto.com Accessed April 8th 2008. Ayers, James B, Ayers, Jim (2006) Handbook of Supply Chain Management, Second Edition, The CRC Press, Vollman, Thomas E., Berry, William Lee., Whybark, David Clay., Jacobs, Robert F., Roberts, 2004, Manufacturing Planning and Control Systems for Supply Chain Management, The McGraw Hill Company. New York (NY) US. Martin, Christopher (2005), Designing and Managing Multiple Pipelines, Journal of Business Logistics, http://www.allbusiness.com, All Business Website, Accessed April 8th, 2008, http://www.allbusiness.com/marketing-advertising/strategic-marketing/1060150-1.html Read More