Toyota Companys Recalls Problem - Case Study Example

Toyota Company’s Recalls Problem 362221 - RESEARCH REPORT 3/18/2010 Student Reasons of Recall Toyota Company is facing multiple recall problems of its cars from all continents of the world. This recall problem has negatively impacted on the image of the company in the world. There has been considerable economic process for the company too (Toyota USA Newsroom, 2009). This recall problems has been recent phenomena and if put a cross the test of analytical examination, it comes to the conclusion the real routes of the problems existed in the supply chain management of the company. The problem started with outsourcing different manufacturing parts of different brands of Toyota Car Company. This report identifies the real reasons of the recall and an analyzing the problems of supply chain and out sourcing issues behind Toyota recall problems. As identified above the supply chain and out sourcing of Toyota Company are the basic reasons of Toyota recall. Most recently by the end of the year 2009 and at the start of the year 2010 Toyota has recalled its products in close collaboration with the national highway traffic safety administration of the USA. The problems were with the unintended acceleration and floor mats that ran on the foot pedals. Most recently the anti-lock brakes have also caused the problem. Up to now the Toyota Company has recalled approximately 9.5 million vehicles due to different problems. The highly upgraded cars like Lexus and Pontiac are also amongst the affected models. Outsourcing and Supply Chains of Toyota Production Lines While analyzing the outsourcing of business by the Toyota Company of Japan, there is strong evidence that provides an analytical proof that the plants in North America have produced the defected cars that had to be recalled. The problem with the defective floor mats and their improper fitting in the cars under foot pedals is the older one. It dates back to 2003, according to the documents available with the Toyota Company (Joe Barkai, 2008). According to the market intelligence reports the problem with the acceleration gears was even older than reported in the press with the start of the outsourcing of company’s business (Toyota USA Newsroom, 2010). AMR Research has indicated that the data on car accidents due to the manufacturing problems were not maintained at the Toyota Company of Japan (Michael Burkett, 2009). The similar cars were produced and supplied by the chain manufacturer across the world for their own benefits. Therefore, the decision of the Toyota Company at halting the production of certain brands has also immediately halted the supply chains down the line around the world. The supply chains of the Toyota Company work like an ecosystem. All the parts of this system must work harmoniously and correctly. The supply chains often die or suffer economically. For instance the manufacturers and suppliers of the bonded fiber mats for the Toyota Company in North America have also suffered heavily due to the Toyota recalls recently. As a result many suppliers in the pipeline have also been cut down and the results have been disastrous for them. Specific issue of floor mats in Toyota Corolla, Vitz, Camry and Xli and Gli Models More specifically the floor mats problem was caused due to the bulk supply of the floor mats from North American manufacturers and suppliers of the floor mats. Actually for this specific item in the saloon of the Toyota cars the supply chain was neither properly neither investigated nor researched by the company’s experts. The floor mat suppliers were mixed for all sorts of cars and some of them stated supplying Toyota Company with the mats who had little or no experience with the business. They were not either physically contacted by the company. The expansion of business distorted the healthy competition and resultantly Toyota Company began buying the defective mats from the suppliers.  The mats slipped on the foot pedals of the cars and resulted into many reported and unreported accidents all over the world. This specific item and its supply chain structure caused heavy damages to the Toyota Company in the shape of money, reputation and goodwill loss in the market ("Toyota recalls 'up to 1.8 million cars'". BBC. 2010-01-29). Supply chain of floor mats Actions Taken by the Company The Toyota Company has, therefore, taken several actions to deal with the recall problems of its cars. An investigation is being made to see the real causes of the defects in the cars. The software’s for the designs are being upgraded. All the parts received by the company for the final car manufacturing are being put to the stringent tests of quality and efficiency (Toyota demo counters claim of electronic acceleration glitch, June, 2009). New simulation programs for the test driving are being launched under the new and innovative research and development labs. Temporality the production of certain strains of cars has been halted and the apologies from the press and media are being issued. The legal cases are being tackled through the lawyers of the company and wherever possible the monetary compensations are being paid to the affected clients. The image of the company is being rebuilt and every effort is being made in order to learn the lesson from the bad supply chains and bad outsourcing decisions. Comments and Recommendations about the actions taken by the Company The actions taken by the Toyota Company to rebuild its market image are quite good but not enough. The problems have to be investigated historically and the supply chains have to be very discretely selected and chosen at the most strict standards of quality and efficiency. Each and every part manufacturer and its vendor, supplier has to be proved by the company’s management that it is worth it. The outsourcing of production, manufacturing, assembly and marketing of the cars has to be closely revisited and only those parts of the world should be selected where quality of cars is not compromised for the labor and raw material costs (Recall U.S. Interests In Auto Industry, December, 2007). Only the honest and efficient supply chains have to be kept on board. This is a long term planning and the Toyota Company should never be in a hurry to put its cars back in the market unless all above issues are amicably resolved. Primary Pressures on the Companies to Outsourcing their Businesses Primary pressure on the companies to outsourcing their businesses are the cheaper labor available in the countries like china, Malaysia , Vietnam ,Thailand and Mexico. The completion for the cost of production of the marketed products and the cheaper raw material in some third world countries are other reasons for the pressures for outsourcing. The legal and easier regulatory frame works along with tax holidays and financial incentives for the Foreign Direct Investments (FDI). The globalization of the business and more demands for the cheaper products are other reasons for outsourcing pressures. How the Accountability Can be Made Better However, the accountability can be made better if the ISO regimes are required to put the human lives and their safety at the centre of the quality, efficiency and business ethics at the centre. Every multinational should be subject to the strict international legal, moral and ethical framework in order to ensure that the quality and respect of human life is not compromised on the pretext of expansion of businesses around the world for the sheer profits. The recall problem of the Toyota Company of Japan has many essential aspects of outsourcing and the supply chain problem (Toyota USA Newsroom, 2001). The company must learn the lessons from such problems and the replicable example should be set by it for other multinational businesses around the world. References 1- Toyota USA Newsroom, 2009, Amended Recall: Potential Floor Mat Interference with Accelerator Pedal. 2- Takahashi, Yoshio. "Toyota: 400,000 Vehicles Subject To Recall Worldwide", January 2006. Wall Street Journal. http://online.wsj.com/article/BT-CO-20100209-702754.html?mod=WSJ_World_MIDDLEHeadlinesAsia.  3- Toyota USA Newsroom, 2010, Toyota Files Voluntary Safety Recall on Select Toyota Division Vehicles for Sticking Accelerator Pedal. 4- Toyota USA Newsroom, 2001, Toyota Press Release . 5- "Toyota recalls 'up to 1.8 million cars'". BBC. 2010-01-29.  6- Toyota demo counters claim of electronic acceleration glitch, June, 2009. 7- Dragging Toyota through the Media Muck, 2008. 8- Recall U.S. Interests In Auto Industry, December, 2007. 9- Michael Burkett, 2009, IDC report, USA automobiles magazine New York. 10- Joe Barkai, 2008, IDC report, USA automobiles magazine New York. Read More