Quality Control Problem - Toyota Motors - Case Study Example

Quality Control Problem Quality Control Problem Introduction In 2009 and Toyota Motors was faced with technological challenges that resulted in mass recalls of vehicles from the market around the world and the stopping of production of eight models. Modern vehicles establish a connection between the driver-operated pedals and the engine via electrical signals unlike earlier models that used mechanical or cable linkages. However, a design fault resulted in the sticking of pedals and vehicles accelerating themselves. This had unprecedented impacts on the business and market. From the perspective of quality control, this paper will prepare an analysis and report that is aimed at improving safety and operations in Toyota vehicles. Summary of Current Problem Toyota is one of the leading and reputable vehicle manufacturers in the world. As the company continued to embrace advances in technology, they adopted the drive-by-wire concept of accelerating and braking rather than mechanical throttles. However, there were unforeseen problems that resulted in unintended accelerating suspected to be caused by floor mats, pedal sensors and sticking accelerator pedals. Consequently, accidents, some fatal, were reported as a result of the fault. Following safety and quality concerns, the company recalled millions of vehicles from the market to be rectified by appointed dealers. Business and Market Impact of the Problem In February 2010, the manufacturer halted production in some plants and significantly affecting markets in Texas, Kentucky, Indiana, Ontario and Cambridge. This had inevitable negative impacts on the business as the company was still recovering from the financial crisis through which it had suffered decreased sales. The balance between demand and capacity affected costs and revenues. Working capital was also affected as it was at the company’s expense that the recalls and rectifications were done. The problem was further compounded by the yen’s low exchange rate to the US dollar. In the British plant, 750 jobs were lost while up to $2 million in revenue was being lost across the US per month by each Toyota dealership. As a company, Toyota Motors lost $2 billion in global sales and in a period of four days its shares dropped by 15% in value. By extension, the owners of Toyota vehicles, even those who owned vehicles that were not recalled were affected economically by the recall. This is because the reputation of Toyota was compromised and affected resale value of second hand cars negatively. This led the company to set up a global community that coordinated defect analysis and was also responsible for announcing future recalls. Taking advantage of the crisis at Toyota, competitors, and in particular General Motors, Hyundai, Chrysler and Ford, offered cash rebates of up to $1,000 targeting owners of Toyota just one day after the suspension of sales was announced. Business Case to Implement Quality/Process Improvement For the past two decades, the entire automotive industry has earnestly been embracing features in vehicles that work electronically rather than using mechanical cylinders, pinions and pumps. This concept, commonly refered to as drive-by-wire, comes with the promise of safer, more fuel efficient, lighter and easier to build vehicles. However, the progress of this concept has been impeded by fears from consumers concerning compromised safety and quality measures caused by software malfunctions. Typically, the problem at Toyota may be a technical one, but it must be addressed from a quality and process improvement perspective, which is a managerial concern. The underlying strategy that Toyota Motors must emphasise on is re-establishing trust from its consumers. The Toyota Production System (TPS) may not and should not be discredited entirely, since any technological innovation can be rectified and improved (Ede 2011, p. 1). However, simply improving the system but failing to build the trust of consumers will not rebuild the image and reputation of a company (Vollmann, Berry & Jacobs 2004, p. 210). That translates into the management acknowledging that it is time to listen to loyal consumers and critics equally, analyse their views and make moves to improve on what is not being done right. As a global player, Toyota Motors has previously enjoyed a well placed corporate image, and what the recalls should ignite is the need to reflect on its past successes and how they were achieved. This will involve drastic changes in not only management strategies but also manufacturing and quality control processes. It is evident that Toyota Motors compromised its organisational culture, which largely entails ethics, in a bid to find a permanent spot in the rapidly globalising market. The solution to the problems can be designed by first detailing the problems and acknowledging their existence. First, the central management of Toyota can be faulted. All recall decisions were unilaterally arrived at in Japan. Ironically, Toyota Motors uses the concept of Lean manufacturing, which characteristically deploys responsibility to the lowest level of the organisational hierarchy as much as possible. However, although that was implemented at the level of production, the management level did not adopt it. The decision to devolve more responsibilities to local branches came a bit too late. Second, for the past decade, Toyota Motors’ production rose too rapidly, growing from five million units per year to eight million. Organisational capacity within the company was unable to keep up with the rate and complexity of globalisation (Ede 2011, p. 1). Third, Toyota Motors deals with an excessively complex supply chain through which the production of various components is outsourced to external suppliers. In turn, the outsourced suppliers also deal with second tier suppliers, which further complicate the supply chain. Fourth, Toyota Motors is known to standardise components and use them in more than one of their models. Essentially, when a problem is reported in one model, it will lead to massive recalls that involve many models that used the standardised component. Continuous process improvement and accountability at all levels will form the basis of quality improvement at Toyota Motors. These two aspects must be engrained into the corporate culture of the company. The company’s management must establish if the entire staff accept the present situation and are actively involved in identifying inefficiencies and problems as well as designing solutions. Ideally, improvement should be a company-wide mindset and way of life rather than just a mere method (Slack, Brandon-Jones & Johnston 2013, p. 63). The first step that management should take to rebuild the trust of consumers is one that will, apart from improving internal processes, collect and publish complete and credible records of every reported problems and repair of all models. The idea of publishing such reports openly is informed by the knowledge that the consumers will know that efforts are being made to remedy the situation. Further, for credibility purposes, the company should find out from consumers that report issues whether they can accept to be contacted by any willing member of the public to confirm that the issue was handled successfully and efficiently. For companies, that is an initiative that should first start internally as a means of detecting emerging problems (Hayes, Pisano, Upton & Wheelwright 2005, p. 92). More importantly, the management at Toyota Motors should learn and accept that just because the company can produce eight million units per year does not mean that they should. This point is especially important because there will be an inherent tendency to produce volumes (quantity) rather that quality and safety. What Toyota Motors needs to do is redesign their processes in ways that will deliver planned and controlled processes and operations while developing and improving their production capabilities. Planned and controlled processes must be implemented even if that will mean reducing the units produced per given period. This is in view that fewer units and less revenue will work more successfully towards regaining consumers’ trust than producing at maximum capacity and profits with reduced quality. In fact, maximum production and profits is more costly economically and in terms of reputation as it will result in more recalls. All these initiatives should be overseen by management teams that maintain high ethical standards (Slack, Brandon-Jones & Johnston 2013, p. 64). After the 2010 recalls, Toyota Motors CEO admitted that the company has expanded its business rapidly to meet demands of globalisation (Psomas, Fotopoulos & Kafetzopoulos 2011, p. 440). He further admitted that the pace of growth was so high that it confused the company’s long standing priorities which were, in that order, safety, quality and volume. Consequently, the company’s ability to listen to consumers and make suggested improvements weakened. Growth became the management’s priority, which they focused on more than developing staff and processes to accommodate the changes and keep up with the pace. From the timeline of the recalls as posted by numerous media houses, it is evident that complaints were being received from consumers. Since it took a while to rectify the problem and the recalls continued, it implies that the company must improve its systems that monitor consumer feedback. Hence, their processes should be market-led, meaning that all strategies need to be developed in a manner that is responsive to the market environment and mood in which the company operates. The company’s operation strategies must be connected to its marketing strategies through which they consider the way in which its vehicles fair in the market in terms of sales and consumer satisfaction (Mills, Bourne & Richards 2002, p. 69). The improvement design should entail changes in both structure and infrastructure. Structural changes will be concerned with physical operational attributes while infrastructural changes will be concerned with the staff as well as operational systems, mainly software (Hayes, Pisano, Upton & Wheelwright 2005, p. 93). In terms of structural decisions, the management should focus on the company’s facilities, process technology, capacity, and supply networks. The changes in facilities will include location, operational resources, focus and size. It must be decided where production facilities will be located, how large they will be and what market is targeted by each facility. Essentially, the aspect of a globalised market will have to be abandoned as it will be more effective to target a particular segment of the market from each facility’s location. Second, the management must improve on the technology of its operations and processes. These improvements will include the level of automation and how equipment is configured (Hayes, Pisano, Upton & Wheelwright 2005, p. 93). TPS may be a tried and tested method, but to ensure that consumers are confident in it, the company must show that they are improving its functionality and efficiency. Then, the operational capacity alongside the responsiveness to consumers’ demands must be determined by the management and generally be concerned with the manner in which facilities are used. A specific example would be enhancing shift patterns by restructuring levels of staffing and working hours. In that sense, the company will be able to serve specific markets sufficiently from specific locations. Hence, the degree to which they outsource operations must be reconsidered, which means that the network of supply chains must change. Structurally, the company will need to make changes in key capital investments. One the changes are made, they will lay the foundation of long term operational directions for the company. Key changes in terms of structure will involve the systems that plan and control operations as well as practices and policies concerned with the management of quality. The way employees are recruited, selected, trained and developed as well as managed will necessarily be geared towards a new organisational culture that is more concerned with safety and quality (Mills, Bourne & Richards 2002, p. 78). The central management of Toyota must devolve authority to branches and, if strictly required, recall decisions be made at branch level rather than from the corporate headquarters in Japan. That will essentially translate into enhancing the concept of Lean manufacturing that allows the deployment of organisational authority down the leadership hierarchy as much as possible. This will ensure that even if the company needs to produce in large volumes to meets demands from consumers, safety and quality matters will be decided at the level of production. The complex supply chain through which the production of components is outsourced must be abolished. That is the only way to ensure accountability and responsibility when components fail. This change must be implemented alongside the ending of standardising components. Specific models must run on specific components, albeit during the duration of rebuilding trust, in order to avoid mass recalls. Approaches/Tools that would be Applied to Design the Process/Quality Improvement The Six Sigma tool will be the most appropriate to improve processes and quality at Toyota Motors. Through this approach, the executive leadership made up of the CEO and top management will bear the responsibility of empowering other responsibilities with the liberty and resources to explore new ideas (Mills, Bourne & Richards 2002, p. 51). This must reflect process changes at the corporate, business and function levels. Initiatives that aim at the continuous improvement of processes will include tools such as data collection, reports, analytics, metrics, statistics, and overall equipment effectiveness. The underlying concept is that for Toyota Motors to conclusively analyse a problem, they will require plenty of hard data regarding that particular problem. Although the company presently has a network of disseminating the data to all their branches, they will require the services of a permanent data historian apart from the general purpose storage database. After relevant data has been gathered, it is imperative that it is distributed to the relevant departments as well for the relevant action to be taken. The main consideration is that data is conveyed to persons who need it and can produce applicable results from it. From that requirement, it is worth noting that the data must be looped back to the database and data historian to ensure it is available to departments that need it at the right time and in the right way. This approach, implemented within the Lean manufacturing concept, eliminates wastes from poorly organised processes and provides a platform for real-time communication within the company and also with consumers in a manner that will draw attention to issues as they occur (Mills, Bourne & Richards 2002, p. 46). That way, manufacturing processes that limit the overall quality of products will be identified and improved by strengthening weaker links. Project Plan and Approach for High Quality Project Implementation For successful implementation of a high quality project, the Six Sigma approach will identify key roles that include Executive Leadership, Champions, Master Black Belts, Black Belts and Green Belts. The executive leadership will communicate the change and improvement strategy as well as what the company’s vision in undertaking such measures is. Drawn from the upper management by the executive leadership, champions will be responsible for implementing the project across the entire organisational network in an integrated fashion. They will also assume the role of mentors to the Black Belts that they will also identify (Psomas, Fotopoulos & Kafetzopoulos 2011, p. 440). The Master Black Belts will be the internal guides on Sigma Six to the Black and Green Belts, who will apply the methodology of Sigma Six, and fully devote their time to the project. Unlike Champions and Master Black Belts, whose focus is on identifying Sigma Six functions, the Black Belts will be more concerned with the execution of the project and special tasks and leadership. Then, operating under the Black Belts’ guidance, the Green Belts will be made up of employees who will be implementing the Sigma Six and at the same time carrying on with their other primary job responsibilities (Mills, Bourne & Richards 2002, p. 59). Key Challenges likely to be encountered During Transition and How to Overcome Them A significant challenge lies in the fact that operational aspects concerned with infrastructure can be changed more easily and quickly than when changing operational structures. Then, there is the traditional resistance to change. Inevitably, the company will need to downsize staff, reorganise and restructure operations. The management itself will need to be prepared for such change and then prepare the employees for the same. The project manager will have to plan, prioritise and organise the changes systematically in a way that will minimise disruptions. It is imperative that the company’s vision for the future be communicated clearly and why such changes must be part of that vision. In that sense, the management must get the executive leaders to support, endorse and promote the implementation plans. Then, employees must also be allowed time to adapt the new policies (Psomas, Fotopoulos & Kafetzopoulos 2011, p. 449). Explanation of Measuring the Success of the Process/Quality Improvements The success of the project will be measured through both financial and non financial performances, which are the key metrics designed to track and motivate the progress and process towards the company’s critical objective. The performance of processes targets various objectives and they include cost, flexibility, quality, dependability and speed (Psomas, Fotopoulos & Kafetzopoulos 2011, p. 441). Using these variables, it is possible for Toyota Motors to measure the success of the improvement project upon completion. Cost will reflect the company’s ability to carry out production with as little expenses as possible. If processes are flexible, the company can determine how successful the project was. Flexibility will be seen in how easy it is to change three aspects which are production volumes, production time and the mix of products produced. The quality variable will basically be reflected in the company’s capacity to produce vehicles as per the set standards and minimised chances of errors (Mills, Bourne & Richards 2002, p. 51). Success will also be measured through dependability which will be reflected in the ability of the company to produce and deliver products according to the commitments given to consumers. These metrics will fundamentally be aligned with the strategies set in the objectives of the project and aligned with company’s top management. Further, they will effectively expose and quantify waste by providing information on the overall effectiveness of equipment (Psomas, Fotopoulos & Kafetzopoulos 2011, p. 439). Equally important is that these metrics will easily be influences by the staff on the plant floor. References Ede, J 2011, Toyota returns to its roots: listen, stop, think, improve, viewed 28 November 2014, http://www.business-improvement.eu/lean/Toyota_recall_and_Toyota_Production_System.php Hayes, R, Pisano, G, Upton, D & Wheelwright, S 2005, Operations, strategy and technology: pursuing the competitive edge, Wiley, New York. Mills, J, Bourne, M, & Richards, H 2002, Competing through competences, Cambridge University Press, Cambridge. Psomas, E, Fotopoulos, C & Kafetzopoulos, D 2011, ‘Core process management practices, quality tools and quality improvement in ISO 9001 certified manufacturing companies’, Business Process Management Journal, vol. 17, no. 3, pp. 437-460. Slack, N, Brandon-Jones, A & Johnston, R 2013, Operations management, Pearson, Harlow. Vollmann, T, Berry, W & Jacobs, F 2004, Manufacturing planning and control systems for supply chain management: the definitive guide for professionals, McGraw, New York. Read More