The Operational Theory Of Toyotas Production Systems - Research Paper Example

The Operational Theory Of Toyota’s Production Systems Introduction Operations and productions management is at the heart of any manufacturing organization as it spells the cost efficiency and optimization in prices for the company. Generally, firms are not aware of what actually are the activities that come under the ambit of Operations management, reengineering operational processes remaining a distant reality (Barnes 2008). However, there are some organizations that have redefined the operations processes and also have innovated them through their concepts and exemplary business practices. Toyota Automobiles is one of them that has set an example in front of this world on how to manage the operations successfully without compromising with quality and providing with what exactly the customer wants, and still remaining a cash cow. Company and market overview The Toyota Group was established in 1937 in Japan. It operates in automobile manufacturing and has its operations spread across 26 countries. Toyota’s operating capacity is around 400 cars per day and each car is made up of approximately eight to ten thousand parts. Without a flexible and robust at place, such huge operational capability cannot be achieved. Toyota faces fierce competition from Ford and other major global players in auto manufacturing. The market for Toyota is getting intensified day by day as prices are rising, substitutes are getting available to consumers and new fashion trends are emerging which compel Toyota for better product features and servicing facilities. Issue in question While applying operations to its business practices, Toyota has undergone through in-depth research and analysis of not only processes but also determining the roles of process owners and actual workers. With this case and analysis, one can develop better understanding of how tangible and intangible aspects of business are combined together to produce synergies in operations. Toyota has defined its entire operations as Toyota Production Systems or Thinking Productions Systems (TPS), which encompass many novel and unique concepts. Toyota operates in business through combined efforts of suppliers, management and process owners with new techniques that aim to simplify the operational activities and improve upon the efficiency and quality of manufacturing. In order to achieve this, Toyota has realized and recognized the need of collaborative relationships with vendors and suppliers. Threats for Toyota Strategies emanate from threats and problems. Toyota also faces stiff competition and market forces pose challenges in front of Toyota to make things harder for it. Major threats ahead Toyota are: Auto industry is suffering from an oversupply of vehicles and products which give rise to judging customer perceptions more closely and offering products that match the exact specifications. This has raised the need for more concerted marketing efforts by Toyota. Fluctuations in emerging markets can lead to profit margin reduction for Toyota. Not delivering to specifications and some technical hassles resulted in recalling of its vehicles by Toyota which was not an acceptable thing for the brand image of Toyota. It has to recover its prestige in the market which could be threatened by its competitors. Economically also, Toyota faces stiff competition from new entrants into the auto industry and lowering of economies in sourcing supplies of raw materials from areas like Pacific, Europe and US. Slow down of these economic factors are seen as potential threats. Operational overview of the chosen company Toyota has undergone through many experiments and innovations in devising a well structured and planned framework for its operational activities. Its operations are rigid in the sense that each and every activity comes along with a scripture, and flexible also as they change as per current needs. The operational processes and systems at Toyota adhere to the following four rules as mentioned below: Governing the way of performing adopted by the workers Monitoring the way of interaction adopted by workers Monitoring the way of construction of production lines Monitoring the way people are learning to improve An overview of Toyota’s manufacturing process is as under: Building of engine by making use of latest technologies and improving the performance of the product in emission and consumption of fuel. Parts and panels having light weight yet quality and strength. Welding procedure involving 530 parts and around 250 separate processes. Car painting after welding work is done Assembling the vehicle after which it is taken for a test drive. The above processes were a summarized view of how product is started with manufacturing and assembled and finally delivered to the end user. The methods of work specified at Toyota workplace are defined as: RULE PREMISE VISIBLE SIGNS RESPONSE 1 Ensuring defect minimization by conducting the activity in the pre-specified way Non-conformance to specifications Defective outcome. Determining capacity level of machine and person. Modifying the activity. 2 Order request placed in proper mix of volume and size Request and response mismatch Idle supplier Supplier assessment Reconsidering customer-supplier relationship 3 Eliminating suppliers on the basis of need and requirement Person or machine not needed Supplier is not specified Revamping the flow path Eliminate non-required suppliers. 4 Improving upon cost, size and quality Expected and actual results differ Redesigning activity on the basis of change determination. Suppliers and Shortcomings The supplier base of Toyota was not flawless since the inception. The earlier suppliers of Toyota were unable to match with the capacity and quality philosophy of Toyota due to which it had to face serious repercussion in the form of defective parts and even recalling of products. Toyota had mended its relations and sorted out issues with first tier suppliers but the real problem was generated by second and third tier suppliers which were directly not attached to Toyota. Taking these facts and defects into consideration, Toyota prepared a hierarchy of its supplier base with increased level of responsibility and its suppliers were treated as its associates and not just buying spots. Long term partnership with suppliers favored integrating of systems and implementation of new concepts across the supply chain. Many loopholes have been found intermittently with starting systems of Toyota and also some problems with quality management at Toyota. Even after applying so many concepts and out of the box thinking in rejuvenating the operational activities, the workers still face issues in understanding their roles and significance of applied practices. This unveils shortcoming on the part of Toyota’s management in imparting proper training to its workforce and making the efforts organizational wide success. Supply chain management Theoretical perspective Nigel Slack has proposed five essential components that work in tandem for an organization in making its processes an effective and efficient one (Lewis & Slack 2003): Making the right thing- the advantage of QUALITY Making things faster- the advantage of SPEED Making things on time- the advantage of DEPENDABILITY Changing as per needs- the advantage of FLEXIBILITY Cheap manufacturing- the advantage of COST However, in getting a responsive and efficient supply chain at work, there are four drivers namely facilities, information, transportation and inventory that spell success for any firm (Lowson 2002). Toyota’s endeavor in turning theory into reality Toyota was the first to conceive the idea of streamlining its operations and imparting visibility across its supply chain by making use of shared information and cost-effective solutions. Toyota works on the “pull” strategy where orders are built on specifications and boasts of internal capabilities and strong networks with partners and suppliers. Toyota’s supply chain management efficiency is based on the premise that time should be reduced between the production of vehicle and its delivery schedule. This time lag between source and destination has to be minimized to gain cost reduction and reliability. Dissecting the TPS TPS concept in Toyota is not a stand alone function, rather incorporates a number of features that work collectively for the firm (Bowen & Spear 1999): Lean manufacturing Lean manufacturing is associated with minimizing inventory level and wastage by streamlining the flow and adding value to the product at each successive level (Olsen & Zetter 2006). For this, first and foremost is the identification of value proposition which Toyota has done in the following ways: Value specification Identification of the processes where value can be added Making value added process free of any hassles and interruption Pulling of value by customers Pursual of perfection Kaizen Kaizen is a Japanese term which connotes continuous learning and improvements which accumulate to offer long term and sustained benefits. Kaizen has been implemented by Toyota on the basis of a five S framework: Sorting out of parts to gain space “Seiri” Systematic arrangement of parts and components to allow for prompt and quick searching “Seiton” Cleaning and maintaining goods with disposal of damaged ones “Seiso” Standardization of processes to ensure quality and productivity “Seiketsu” Encouraging the process owners to do the right thing the first time itself “Shitsuke” JIT The focus of Just-in-Time is to provide excellent customer service with quality and timeliness. JIT philosophy calls for manufacturing the order when it is actually placed by the customer, leaving no scope for inventory cost or storing the product unnecessarily. It also avoids a mismatch between supply and demand. To put it into reality, vendors are also asked to be agile in sourcing the materials as and when needed and workers are also authorized to hold on the processes in case of defects. Outsourcing Outsourcing is a prudent step taken by Toyota with an objective to use the synergies of capable partners and service providers in leveraging its own capabilities. Around 70 percent of Toyota’s vehicle content is outsourced to expert and functional partners which help Toyota focus on its core competencies and having control over its processes. The elements of timeliness, quality and responsiveness are ensured through outsourcing as fixed costs are converted to variable costs through lean manufacturing and maintaining a strategic trust base with its suppliers and vendors. Kanban Kanban is the cornerstone for JIT which is implemented through a system of Japanese cards and involves: Reducing the inventory levels Keeping production lots and sizes smaller and easy to handle Standardization of quality and control Reducing complexity in processes Wastage minimization Recommendations For Toyota, lowering the costs and adhering to quality standards has been its prime motto. However, standards have to be constantly reviewed and corrected if they have to be result-oriented. Apart from well planned framework and modeling processes according to the said structure, Toyota needs to undertake the following steps in a defined sequence to rationalize its processes and operations: Gauzing exact customer’s value perception Trading in vicinity areas Outsourcing to similar lean manufacturing enabled companies Not getting baffled by quantity discounts Customer involvement in decision making process Risk management Measure and monitoring the right thing at right time This will not only anchor the concept applied by Toyota but also help in building upon its image as a responsible manufacturer. Following the systems and processes in a sequential manner will make sure that all quality standards are met in a timely way and competitors are not allowed to imitate the processes easily. Conclusion Analyzing the operational theory in the light of Toyota’s production systems provided valuable insights into how concepts are developed into practice and managed to reap maximum benefits out of them. Toyota has its own well established and thought of principles which provide the pathway for the management and workers to traverse. References Barnes, D 2008. Operations management: an International perspective. London: Thomson Learning Bowen, H & Spear, S 1999. “Decoding the DNA of the Toyota Production System”. Retrieved April 15, 2010 from http://hbswk.hbs.edu/item/0869.html Lewis, M & Slack, N 2003. Operations Management: critical perspectives on business and management. USA: Routledge Lowson, R 2002. Strategic Operations Management: the new competitive advantage. New York: Routledge Olsen, E & Zetter, M 2006. “Lean manufacturing and outsourcing”. Retrieved January 13, 2010 from http://www.ventureoutsource.com/news_articles/Olsen_LeanManufacturing_Aug_06.html Read More