Operational Management of Toyota - Research Paper Example

Operational management-Toyota Introduction: Toyota Motor Corporation is one of the world’s largest automobile manufacturer offered well known car models like Camary, Corolla, Corona and Lexus. Though a late entrant compared to General Motors and Ford, Toyota had become one of the strongest players in the automobile industry. In an industry generally considered to be mature in terms of technology, Toyota had continued to set benchmarks for providing value to customers more effectively than competitors. Toyota had also redefined the rules of the game in various areas like product development, manufacturing process, vendor management, customer satisfaction and human resource management. The formal establishment of Toyota motor company ltd. took place in 1937 and since then it moves on to become one of the leaders in the global automobile industry. By 31st march 2008, Toyota group approximately sold 8.9 million vehicles in 170 countries under the Toyota, Lexus, Daihatsu and Hino brands. As the automobile industry is facing the great recession, Toyota aims to achieve sustainable growth by building a more flexible and stronger operational process and corporate structure to counter the challenges of the hyper competitive market world over (Annual Report, Toyota, 2008). Customers’ requirement and customer relation management: As we know that Toyota is present in almost 170 countries, so the customers from all over the world have different requirements. Automobile industry is one of the industries which need maximum investment in new product development. So careful analysis of customers internal (dealers) or external (direct customers) is very much required. Today in the developed nations, Luxury vehicles with maximum features and utility are needed but in the emerging market, cost and size of the vehicles (car) is very much the criteria for purchases. Fuel efficiency, hybrid fuel use and production qualities as well as different emission standards are required in different parts of the world. To identify the customer’s requirements, Toyota goes beyond the general customer surveys and remains in continuous touch with the customers. Apart from routine surveys from customers Toyota sends its representatives into the field to converse with the customers or potential customers to understand the problems or requirements as well as to have firsthand experience of their life styles so that products could be modified accordingly. Apart from meeting its customers directly, Toyota has established a network of dealers worldwide and giving them place in board of management. To have the presence almost every corner of the world need smooth, seamless communication network between the company and its internal and external customers. One such network which is providing Toyota’s customers service and quality is Mitel network in UK. These networks basically provide the solution of customer’s problems and ensure that the available resources could be effectively deployed to solve the customer’s problem within time. Toyota (GB) PLC is one of the distributor and importer of Toyota in UK and responsible for sales marketing and customer satisfaction. Now Mitel network with 6115 interactive contact customers providing customer services within time and solution to their smallest problems. These structures are basically providing seamless operation of business. It provides customers both internally and externally the high level of services and solution to all the problems, no matter how challenging the problem is. Apart from these networks, requirements of new models by the customer’s keeps automaker all the time remain innovative. But developing new model in automobile industry is highly capital intensive and time consuming. But Toyota is considered as a pioneer in team product development, a philosophy which emphasized development of new products, with minimum resources. Toyota realized the need to balance two conflicting objectives to fulfil customers demand i.e. Encouraging creativity and cutting costs. It wanted to minimize duplication of existing technologies and at the same time encourages the development of new technologies that would facilitate the introduction of new products. Toyota created these development centres, each focussed on one type of platform design-rear wheel drive, front wheel drive and utility vehicles/vans. Later, it set up another centre that focussed on developing components and subsystems that could be shared by different vehicles in the three centres. The objective was to focus on product families with shared components rather than on stand-alone products, to dedicate engineering resources to the platform groups and to streamline the flow of designs all the way into production so that new vehicles could be taken from concept to launch in about two years. Each center had 1500 to 1900 people and typically worked on five new vehicle projects simultaneously. Healthy competition existed among the three centres. Senior executives and center heads encouraged engineers in one center to learn from other centers. Toyota has also created center to develop components and systems for all the vehicle projects. The company reorganized the grouping which worked on advance technologies. Center closely supported vehicle development by providing specific projects with components and subsystems. To fulfil the customer’s requirements, Toyota has based on restructuring of number of functional engineering divisions. Each center had only 6 engineering divisions when compared to 16 different functional divisions of old structure. The new organization improved product development in various ways. It excluded some areas of component development in order to allow projects to focus on integration of product development activities, as opposed to the development of parts. One part of the organization could focus on new technologies. The close co-ordination between the product development centers and the component development center also brought a strong result orientation into Toyota’s R&D activities. Under this new system, Toyota’s product development process improved significantly. Toyota doubled its engineering output with and additional budget allocation of only 20% in a period of about 4 years. Toyota used set based concurrent engineering to increase the effectiveness of its product development activities. Toyota also expected its suppliers to come with multiple design ideas. The ideas were evaluated on the basis of material cost and performance, quality, tool and mold investment, total weight, cost etc. Toyota used various organizational mechanisms and processes to optimize its product development activities. Toyota also used a mentoring process to upgrade the capability of young engineers. Toyota rotated most of its engineers within only one function to promote specialization and standardization. Toyota prefers to develop and rely on the skills of its personnels and it shapes its product-development process around this central idea: People not systems design cars, to adopting various technologies and innovative management practices; Toyota has achieved customer satisfaction to the maximum despite hyper competition, market turmoil and ever changing needs of the customers. Operational processes design and systems management: Toyota operational processes had been streamlined over several decades. Toyota production system had been well researched but difficult to replicate. On the other hand Toyota replicated successfully, several parts of the system at various overseas plants. Toyota production system (TPS) objective was to eliminate waste, reduce costs and respond quickly to the changing customer needs. One of the key features of this system was reduced setup time. Toyota believed that all jobs had to be clearly specified in terms of content, sequence, timing and outcome. Exact specifications were laid down not only in the case of repetitive assembly line jobs but also for infrequent or one time activities. Toyota specified clearly how the assistance would be triggered, who would provide it, when and how. The rigid description of specifications allowed shop floor supervisors to detect quickly any kind of discrepancy. Failure to solve the problem indicated a poor articulation of the request, preoccupation of the person whose assistance was behind sought or inability of the assistance to solve the problem depending on the problem necessary action was taken. Each Toyota plant employed a number of Toyota Production System consultants whose primary responsibility was to help senior managers more towards their ideal system. In the ever changing world, companies need to change continuously. Any system cannot be assumed as static. Toyota has adopted many operational processes and systems which are continuously changing and adopting according to the needs of the market. TPS had evolved and grown in sophistication over a period of time. It had become the source of many innovative techniques like Just in Time (JIT), Kanban Andon, Jidoka and Kaizan, which were used all over the world. Kanban facilitated continuous flow of information regarding production quantity, time method, sequence, transfer quantity, transfer time, destination, storage point, transfer equipment, containers etc. between succeeding stages of the production process within Toyota and also between Toyota and its suppliers. Kanban had been facilitated by Hegunka, which ensured smooth production flow by emphasizing the even distribution of work among the shop floor workers. Jidoka meant automation with a human touch i.e. investing machines with human like intelligence. Kaizan, another unique feature of the TPS, meant continuous improvements. Kaizan emphasized looking for better, safer, easier and more efficient ways of working which could improve efficiency and reduce waste no matter how small the tasks were. To facilitate Kaizan, Toyota’s management used various measures such as employee suggestion schemes. In some cases, the company focussed on single area for a short period of time to bring about improvements. This was referred to as focussed Kaizan or Jishuken. Apart from using such versatile techniques and tools, Toyota needs continuous improvements in its products due to changing needs of customers and vehicle users has changed. In view of the requirement Toyota has to design its operational processes and systems to adopt and assimilate changes smoothly. Toyota has to plan for long-term quality from the very first phase of product development. For this, Toyota has to understand the usage of vehicle and the age of vehicle. Now to improve quality and long-term durability, Toyota has to formulate a plan for its production lines. Continuous monitoring and analysis of product precision trend is the basic requirement for quality improvement and long-term durability. Again, Toyota’s operational processed and systems need a coherent supply chain in which development, production and purchasing division work simultaneously. Though continuous improvement process is the feature of Toyota operational processes and systems but in recent times need for low cost compact cars and rising of raw material put us a challenge to provide quality with lower prices. Toyota has launched construction of cost competitiveness for the 21st century (CCC 21) to minimize the cost of its vehicles. To maintain the lowest cost, Toyota worked closely with its suppliers (vendors) from the very first phase of product development to ensure that each and every component has to be produced with quality and lowest possible prices. In addition to it, value innovation (VI) activities have been added to CCC21 activities. This facilitated Toyota to evolve on operational system which is trying to integrate components and systems with similar functions and placement of systems, such as engine and safety systems. Toyota has reduced number of components and amount of material used but without compromising the quality of the products by continuously reviewing production/operational processes and systems. These are some milestones achieved by Toyota in the last 10 years, launch of Prius hybrid vehicle (1997), cumulative total production reaches 100 million vehicles (1999), establishment of the Toyota institute, a personal training facility (2002), Joint Venture Company established with PSA Peugeot Citroen begins, launch of Lexus in Japan (2005), Global cumulative sales of Toyota hybrid vehicles top one million (2007). In modern day, environmental laws and awareness put vehicle manufacturers at the tight spot. Toyota vision for sustainable plant and processes keeps it ahead of others. Toyota is working with hybrid vehicles since 1997, when it launched Prius. To improve the quality of the product CO2 (carbon di oxide) emission has to be reduced substantially. Europe has the strict environmental norms which have to be complied by all the manufactures of vehicle including Toyota. So to improve the quality of the products, Toyota planned to cut down the CO2 emission. Toyota began to shorten its assembly line and drastically reduced energy use. In one of the plants in Takaoka, it achieved CO2 reductions of approximately 15% by shortening the length of the painting equipment and eliminating the need of the primer drying oven. The time plan for Co2 emission reduction has been planned as: Region worldwide CO2 Emissions 2007 results 2010 Target New 2010 Target (120 Toyota group companies) Volume for sales unit 32% reduction from 2001 20% reduction from 2001 35% reduction from 2001 Toyota is a company moving towards sustainable development. In the process, it is the company which started to think about environment much early and developed its hybrid car Prius. In the 21st century, world is experiencing the impact of global warming and most of the tinkers blame automobile companies for the same. So the burden of reducing the impact of global warming is directly on automobile manufacturers. Toyota believes that the following three major issues must be overcome in order to achieve sustainable mobility (Sustainability Report, Toyota-2008) 1. Reducing CO2 emissions 2. Supporting alter native sources 3. Improving air quality Implementation and control: To meet out and counter these issues Toyota has adopted several projects. Toyota has been developing fuel efficient engines through improving the existing engines and developing new engines, reducing vehicle weight, improving transmission line efficiency etc. Toyota is pioneer in developing hybrid vehicles. Developing hybrid vehicle is the core area of moving towards sustainability. Apart from fuel efficiency improvements, better emission standards, hybrid technologies i.e. using alter native fuel like bio ethanol or photovoltaic cells, use of electricity charging are some of the technologies where all automakers have to move in the future. Since the launch of its hybrid car Prius, Toyota has sold 1.5 million by May 2008. It becomes popular world over due to its ability to reduce CO2 emission and gasoline consumption. Toyota is aiming to sell 1 million hybrid cars by as early in the year 2010 and planning to integrate hybrid technologies in all its vehicle by the year 2020. Therefore Toyota is working harder to reduce the cost of hybrid cars, its size and weight so that it could be applied to all the cars and can improve the quality. To develop alternative energy driven cars, rechargeable batteries for long duration with lesser weight and capacity is the basic challenge Toyota is facing. Toyota has started testing of these batteries in US, Japan and Europe plants to introduce lithium-ion batteries driven vehicles by 2010. The basic efforts Toyota is making to develop high performance batteries with lesser size and weight and high power and rechargeable capacity. Toyota has established the battery research division in July 2008. This new division is very much on the way to develop high efficiency batteries (lithium—ion batteries) and conducting research for future generation batteries. The basic challenge Toyota is facing is to develop high efficiency batteries with lower cost and high standard quality. Toyota has not been able to produce a battery which has the output to 100HP over 36 continuous hours with weight 225 kg and size 280 litres. Though Toyota has rolled out its hybrid car way back in 1997 but still not reached to the level of mass production and acceptance by the customers all over the world. One reason for this non acceptance especially is emerging economy of the world like India, China or Brazil is only due to its cost and efficiency. The requirement of these countries and their customer is a compact car with fuel efficiency and have low cost. On this front this project of developing hybrid cars has not accelerated yet. These battery driven or hybrid cars are good for short distance running or urban movement but long distance driving on alternative fuels still a dream for car owners. Toyota has launched E10 compatible cars (10% Ethanol + 90% gasoline) since 2006. Toyota has also launched flexible fuel vehicles (FFV) in Brazil where high concentration vehicles are easily available. Toyota is currently researching cellulosic ethanol which could be stably supplied and hoped to begin production as soon as possible. The main bottleneck Toyota has been facing is the cost and timing as well as the mass production ability of these innovative technologies. Hybrid system performance and fuel efficiency is also a point of concern for Toyota which needs to be solved as soon as possible. To reduce CO2 emission, Toyota started with developing new gasoline and diesel engines with lower fuel consumption and electronic control. Toyota has introduced new gasoline engines of 1.3 liter and 2.5 liter of which 1.3 lilters engine uses Toyota stop and start system. This innovative system contributes to improving fuel efficiency and reducing CO2 emission. Promoting clean diesel engine with a wide line-up from 1.4 liter to 4.5 liter giving Toyota an edge over others in reducing the emission level of specific particulate matter (PM) and nitrogen oxide in exhaust gases. Despite sales of hybrid vehicles, Toyota is trying to achieve the goal of selling one million vehicles in year 2010. It requires drastic improvements in hybrid system performance and fuel efficiency. Toyota is working on to develop high performance motors, inverters and batteries and other devices while working on to reduce cost, size and weight of batteries. Toyota is aiming to reduce cost, size and weight of batteries by one fourth as soon as possible (Sustainability report, 2008). Monitoring and Evaluation: Based on the vision of “Zeronize and Maximize” Toyota aims to minimize negative impact and maximize the positive impact such as convenience, comfort, enjoyment and excitement. So Toyota has evolved a system which satisfies the customers as well as proper utilization of resources. Toyota is also modifying its design, planning and implementation processes. Toyota production system is based on technical competence of its people. As a manufacturer, Toyota emphasized on quality of its products and its main priority is to improve the quality of its vehicles according to customer’s perspective. It has launched “Customer first” campaign since 2005. From the customer point of view early detection and solution to the problems of customers is the basic requirement to move on. Toyota “Built-in-quality” takes this even further. It assures that quality built in process so that it can be passed on to next level. In case of any problem occurred during a particular process, the causes could be known immediately and plans, facilities and management processes will be reviewed. So improvement processes could be implemented not only in manufacturing processes but other processes also such as sales and service & management. Toyota has been improving its engines to improve fuel efficiency of the vehicles. Toyota ways of problem solving is one of the unique ways in the industry. Toyota is maximizing its performance through its trained manpower. Every employee is used to follow the system regularly and this collective effort plays tremendous improvement in processes and operational improvements. Problems have been categorized according to their difficulties and occurrences and resources have been deployed accordingly. Larger issues could be addressed by management directed and management controlled activities such as management Kaizen Training, other problems are generally solved by supervisors or team members or by individuals. Individual or group efforts to solve the problems enhance the performance of the organization to many folds. A continuous improvement is the key to quality and utilization of resources and is part of every employee daily activities. Toyota performance monitoring and practising depends on the six organizational mechanisms. Three of them are primarily social processes i.e. mutual adjustment, close supervision and interactive leadership from product head and standard skills, work processes and design standards are from standardization. This mechanism provides Toyota a tightly linked product development system and cross-functional co-ordination. This mechanism provides Toyota a tightly linked product development system and cross-functional co-ordination. This mechanism allows balance and integration of projects over time. But Toyota seems to rely highly on formalized rules and standards. Such rigid policies and follow of system and rules can have some drawbacks. To avoid these drawbacks, Toyota is likely to provide some flexibility. Toyota has developed 14 guiding principles to monitor and evaluate performance of the organization at every level. These principles are: Base your management decisions on a long term philosophy even at the expense of short-term financial goals Create continuous process flow to bring problems to the surface Use pull systems to avoid overproduction Level out the work load(Heijunka-work like the tortoise not the hare) Build a culture of stopping to fix problems, to get quality right the first time Standardized tasks are the foundation for continuous improvement and employee empowerment Use visual control so no problems are hidden Use only reliable, thoroughly tested technology that serves your people and processes Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others Develop exceptional people and team who follow company’s philosophy Respect extended network of partners and suppliers by challenging them and helping to improve Go and see thoroughly understand the situation (genehi genbutsu) Make decisions slowly by consensus, thoroughly considering all options, implementing decisions rapidly Become a learning organization through relentless reflection (Hansei) and continuous improvement (Kaizen). (Accessed from the website www.toyota.com ) Toyota has built stronger relationship with all its stakeholders, including shareholders, customers, business partners, local communities and employees. To achieve long-term sustainable growth, Toyota provides quality products according to needs of the customers. Toyota has a unique corporate culture that places emphasis on problem solving based on the actual situation on the site. Toyota’s approach is to build quality through manufacturing processes, enhancing the quality of everyday operations. Toyota’s management team and employees conduct operations and make decision founded on the common system of checks and balances. To monitor the management, Toyota has adopted an audit for system. Monitoring and evaluation of production/processes and synchronization with other activities enhanced the performance of the organization. Toyota improved its timing and took average less than 10 minutes to change dies, which it did three times per day, and produced in lots of only one day’s supply for most items. Toyota’s inventory management practices represented a sharp break from conventional wisdom. Toyota’s assembly lines are one of the most efficient one and 3-5 models can be assembled on the single assembly lines. Toyota has used several concepts to improve customer services, resource utilization, improving designs, planning and effective implementation processes. Toyota could generate various scheduling options as production lines were flexible. Each line had the capacity to produce different types of product each day as per daily and monthly schedule. Summary: Till now we had discussed Toyota as an organization, who set the benchmark in automobile industry. It has created operational excellence and developed various concepts like Just in Time (JIT), Kaizen,Jidoka Kanban etc. These operational excellence and Toyota production system is the existing system which provides Toyota an advantage over others. Most of the automakers tried to replicate the TPS but failed. Toyota has not been dependent upon occasional improvement but the system has inbuilt continuous improvement processes. Toyota “Customer First” practice and networking with dealers and suppliers improved the efficiency of the whole system considerably. The current operational processes and systems and plan to implement new projects with utmost detail and efficiency making Toyota as one of the successful automakers in the world. The system of Toyota is so flexible and continuously changing that any change could not be planned but it takes shape continuously and automatically as and when needed. Recently, Toyota is working on hybrid cars using alternative fuel options like battery driven, ethanol driven, photovoltaic cells driven or driven on gasoline and any other alternative fuels. This project is still at the starting stage due to non-viable options. Cost, size, weight, efficiency and power of battery are some of the constraints. Organization has the culture of constant and continuous monitoring and evaluation. So continuous improvement in customer services, resource utilization, minimum waste, recycling of waste, sustainable development to technologies and cost-benefit of each process has to be analyzed before implementation of any operational processes and system. Recommendation and conclusion: Finally we come to the conclusion that Toyota’s team processes had made it truly outstanding business model that competitors found it extremely difficult to replicate. According to well known Management scholars, Consumano and Nobeoka (1998), for several decades, Toyota has been a leader in adopting new organisational structures and processes in both manufacturing and product development. For firms in different industries, it has served as a benchmark for performance in these areas. Steven Spear and H. Kent Bowen (1999) explained why western companies, despite several visit to Toyota plants had found it difficult to replicate Toyota’s business model. “Observers confuse the tools and practices they see on their plant visits with the systems itself” Activities, connections and production flows in a Toyota factory are rigidly scripted yet at the same time Toyota’s operations are enormously flexible and adaptable. Activities and processes are constantly being challenged and pushed to a higher level of performance enabling the company to continuously innovate and to improve – the rigid specification is the very thing that makes flexibility and creativity possible. Though no system is ideal but Toyota’s system of production is almost nearing to perfection. It has been stated that for Toyota the output of an ideal person, group of people or machine is defect free ( i.e. it has the features and performance the customer expects) can be delivered one request at a time (a batch size of one) can be supplied on demand in the version requested can be delivered immediately can be produced without wasting any materials,labor,energy or other resourced ( such as costs associated with inventory ) can be produced in work environment that is safe physically, emotionally and professionally for every employee (Spear and Bowen, 1999) Now keeping in mind this ideal situation Toyota is working hard and improving its processes and systems continuously to achieve the ultimate in automobile industry. References: 1. All the information about Toyota has been accessed from Toyota annual report (2008), website www.toyota.co.jn on 7th may 2009. 2. All the information about Toyota has been accessed from Toyota sustainability report (2008) website www.toyota.co.jn on 7th may 2009. 3. Cusumano, Michael A. And Nobeoka, Kentaro (1998), “Thinking beyond lean: How multi project management is transforming product development at Toyota and other companies”, Simon and Schuster. 4. Spear, Steven and Bowen H. Kent (1999), “Decoding the DNA of the Toyota production system”, Harvard Business Review, September-October, pp. 96-105. Read More