The Operations Management - Report Example

Management: Operation Management Report- Toyota   Grade Toyota, a Japan based company, is a world famous pioneer brand in automobile industry. The following report builds up on how Toyota operates and what tools are used by Toyota to establish and promote their product and services. This paper will provide insight into how the culture of Toyota, the structures and designs have impacted individuals, groups and structures within the organisation and ultimately towards improving organisation’s effectiveness. The report also has made an effort to establish and analyse quality control issues faced by company through analysing the case of Toyota recall in 2010. The paper will also provide suggestions regarding what quality control tools will help Toyota to sustain their image within the auto industry. Contents 1. 1 2.1 Company History 7 2.2 Objectives of the company 7 3.1Toyota structure and strategy 9 4.3 Inventory Management and Merchandising 14 15 References 16 1. Identification and Justification Toyota has the credit of achieving the second highest rank within the top ten automobile companies. For every organisation, the role of operations Management is conversion of the organisational resources into finished good to provide the desired utilities to the customer while keeping in view the goals of the organisation such as efficiency, effectiveness and adaptability (Liker, 2004). The reason for choosing is that it is the world’s largest automobile industry which has a formal structure of business operation and service provision. As the following image depicts, Toyota has achieved second highest rank in the world’s top automobile providers. Also, it has the largest growing empire that amounts up to 100,000 units at a global level. Toyota has earned revenue of 200 billion dollars in the year 2010. The production system established by Toyota Motor Corporation is delivering best quality, lowest price, and shortest lead time by implementing the waste management system. Therefore, Toyota is considered to be the best choice for this particular research study. 2. Introduction 2.1 Company History Sakichi Toyoda is the founder of the Toyota group of companies who had initially established Toyota as a textile company. Kiichiro Toyoda, who is son of Sakichi and founder of the Toyota automobile business, established the Just-in-Time concept in the 1930s. He decided that the operation management of Toyota will contain no extra inventory and following this decision, Toyota started to work with their suppliers for having partnership in meeting levels of production. 2.2 Objectives of the company “Toyota” is mainly concerned with efficiency in its production levels so that to seek the best performance amongst other auto selling companies and to maintain its long term position. As far as the element of quality is concerned, Toyota products are provided according to the needs of the customers (Bamford, 2005). The objective of the company is "making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible." 2.3 Toyota Business Environment One of the most important aspects for Toyota is to consider a philosophy that acts as a guide for the efforts demonstrated by the organisation. Toyota gives priority to the interests of the organisation; it has prioritised customer value and also considers the society while achieving its goals and objectives (Kakuro, 2004). The market sales of Toyota have been around 2.348 million vehicles in the year 2007 which is increasing at the rate of 7% per year, in comparison with its biggest competitor, General Motors (GM), whose sales were around 2.26 million cars and trucks during the same time period. Toyota’s competitor GM has faced a loss of $10.6 billion in the year 2005. GM planned to right size 30,000 jobs and decided to shut down 12 factories in North America by the year 2008. On the other hand, Ford Motors in North America faced losses of $1.6 billion in its operations. Ford is also observing closings of 10 plants and downsizing 25,000 workers on an hourly basis. Daimler has given $36 billion in the year 1998 for Chrysler. Chrysler has faced losses of $1.5 billion in the year 2006 and $2 billion in the year 2007. 3. Organisation Structure and Strategy 3.1 Toyota structure and strategy In Toyota, jobs and common tasks are coordinated through departmentalization. Toyota has organized their plant and has made different departments for the functions of manufacturing, accounting, engineering, human resources, and supply chain. They have functional specialization that seeks them to achieve maximum profit by combining employees with outstanding abilities and skills into one common project (Takayasu, 2004). Toyota also practices process departmentalization for product development and improvement activities (Daft, 2009). The sale price of Toyota products are based upon the purchasing power of the customer. Toyota implements cost reduction techniques by implementing waste elimination system that has the highest priority in Toyota operations (Harris & Raviv, 2002). 3.2 Production System and Job Design The production system of Toyota Motor Corporation is providing outstanding quality, least cost and minimum lead time by implementing waste reduction. TPS consists of two pillars named as Just-in-Time and Jidoka (automation). The maintenance and improvement procedures are implemented through iterations of quality work with standard operating procedures and continuous improvement techniques. An example of this is by implementing Plan–Do-Check-Act Cycle presented by Dr. Deming, Scientific methods are also implied in manufacturing operations at Toyota. The following image depicts the production system at Toyota (Amasaka, 2002). Jobs are designed in a way to minimise resources of manpower, the machinery used, and also the material that are needed for production (Black, 2007). A simple formula used to dedicate time for each piece of production is as follows: The formula to calculate time is = Net Available time to work/ Customer Demand. 3.3 Toyota Recall 2010 Case Analysis Toyota recalled around 2.3 million vehicles because of gas pedal issue in its cars. In February 2010, Toyota’s U.S. sales dropped by approximately 9% compared to the previous year, while sales of other manufacturers experienced a double-digit growth. It is certainly unusual that a company that is considered to be amongst the world’s best industry falls at such a speedy rate. The problem may occur rarely, but Toyota is concerned with their quality. Toyota is known to be the best quality product provider; keeping in view the image of notifying millions of customers about the cars recalled, without keeping in view the cost incurred by the company. Toyota pays double to maintain its quality standard in the automobile industry (Liker, 2010). At the height of a recalling crisis a year ago, Mr LaHood warned Toyota owners not to drive their cars. Steve St Angelo, who was named as chief quality officer for North America, said in a statement that the study should "further reinforce confidence in the safety of Toyota and Lexus vehicles" (Toyota, 2011). This statement was stated so that customers could be reassured. Toyota holds a reputation of steadiness and, therefore, they immediately started to work on replacing their pedals. Toyota understands the importance of social responsibility and is highly concerned regarding the quality management of their production and operations. 4. Quality Control in Toyota 4.1 Potential Problem Toyota was concerned to increase their market share but faced the issue of quality in products which resulted in the shape of product recall. The quality control, low inventory levels, and being a profitable firm are few of the important factors of utmost concern for Toyota. It aims to achieve 5% margin rate from its present margin rate which is 2.9%. To meet these targets, Toyota needs to focus on improving overall product quality, improving styles to attract-new generation buyers, and word towards introducing ‘more exciting’ models. Also in the emerging markets, they intend to increase sales rate from 40% to 50%. Except this, Toyota also plans to decentralize decision making in future and work towards providing more autonomy to regional offices. The other problem faced by Toyota was the considerable increase in complexity of automobiles over the last 10–15 years. A modern automobile is a very complex product involving systems that are a combination of mechanical and electronic components and requires complex software to operate them. The production system of Toyota emphasizes lean processes that can ensure these components and modules are installed correctly and efficiently on each vehicle but it cannot ensure it from the error that occurs in the software. Also problems with electromagnetic radiation interference, or temperature/vibration induced failures might occur in rare circumstances and lead to problems that may not be detected during the initial stages. This is a very complex engineering design problem requiring special skills to resolve such issues. To be competitive in the industry, it is compulsory to implement quality control methods (Clave & Tarii, 2003). Statistical Process Control (SPC) charts are used for process monitoring and variability reduction for Toyota motors. Around 500 product samples are selected on a random mode from a batch or a lot of cars (Rayan, 2011). The Chart above shows decline in the quality of product after the experimentation process of the sample products. Recall of 2010 is the result of this quality decline which can be seen clearly from the graph. Toyota needs to realise that their processes of quality management requires changes, so that quality products can be produced. 4.2 Quality Tools The quality control and quality assurance of Toyota are achieved by implementing many new systems. Every department from R & D to production, retailing and supply chain needs to take part in the control process. Toyota needs to standardise work together through visual control so that this will clearly show the current working status of the operations. This will also allow early detection of problems in production and will allow tackling of unfavourable conditions that occur at work. New techniques of intelligent automation like “pokayoke” devices can be used at work place so that it automatically stops the whole production line if any error is detected. Every member of the workforce should understand that it is their responsibility to produce quality work. It is compulsory for them to produce a quality product at every next stage of the manufacturing process. Andon Cord needs to implement in the Toyota factories. If any employee feels any problem in the production line then he/she can immediately pull the Andon cord to stop the production line (Tari, 2004). Toyota needs to use the following seven quality measurement tools i.e. flow charts, Cause-and-Effect diagrams, Check sheets, Pareto diagrams, Histograms, Scatter plots, and Control charts to follow up with high quality performance. Toyota needs to consider rigorous scrutiny of product and process features and functions for each vehicle. In case of problems, counter measures should be adopted not only in machinery and equipment but also in process flow (Furman, 2007).Careful recruitment and continuous formal trainings should be conducted to obtain multi-skilled, motivated, flexible, competent and determined employees so that the goals and objectives of the organisation can be achieved in a successful manner. The operations management team need to design strategic plans to control the entire quality process and also work towards obtaining a benchmark in the industry. 4.3 Inventory Management and Merchandising The quality vehicles of Toyota depend upon a reliable source of suppliers for the various parts and material supply. Toyota’s philosophy of good working relationship entirely depends on joint ventures and immediate selection of their suppliers (Dyer, 2002). More than 100,000 units are working together to provide high quality product. Toyota is planning to start their operations at a number of new places. They plan to grow their dealership network by 1,500 outlets to 7,500 points of sale globally by the end of the year. 5. Conclusion Toyota is the world’s largest automobile industry. The main objective of Toyota Motors is to attain maximum market share around the globe. They need to focus on quality control mechanisms as well in order to deal with the issues of product recall to improve and maintain their market image in a positive manner. Kaizen or continuous improvement techniques should be implemented in the production and process systems so as to produce high quality products. This way the organisation will become highly efficient and effective and will also observe reduction in waste. The implementation of quality control programs will allow Toyota to become successful and also maintain a satisfied customer base. References Amasaka, K., 2002. New JIT: A new management technology principle at Toyota. International Journal of Production Economics, 12(1), p. 65-195. Bamford, D.R., 2005. The use of quality management tools and techniques: a study of application in everyday situations. International Journal of Quality, 1(5), p. 65-92. Black, J.T., 2007. Design rules for implementing the Toyota production system. International Journal of Production Research, 5(12), p. 165-396. Clave, E. & Tari, J.J., 2003. Critical factors and results of quality management: an empirical study. Total Quality Management journal, 12(4), p. 65-298. Daft, R.L., 2009. Organisation Theory and Design. Mason, OH: SouthWestern Cengage Learning.  Dyer, J., 2002. Creating and managing a high performance knowledge sharing network: The Toyota case. dspace.mit.edu, 5(c), p. 325-665. Furman, C., 2007. Applying the Toyota production system: using a patient safety alert system to reduce error. Journal on Quality and Patient Safety, p. 65-225. Harris, M. & Raviv, A., 2002. Organisational design. Management Science 48 (7), 852–865. Kakuro, A., 2004. Development of science TQM, A new principle of quality management: effectiveness of strategic stratified task team at Toyota. International Journal of Production Research, p. 125-295. Liker, J.K., 2004. The Toyota way: 14 management principles from the world’s greatest manufacturers. CWL Publishing Enterprises, p. 199-265. Liker, J.K., 2010. The way back for Toyota. Industrial Engineer journal, 5(1), p. 125-225. Ryan, T.P., 2011. Statistical methods for quality improvement. Wiley Publishers, 12(5), p. 65-296. Tari, J.J., 2004. Quality tools and techniques: are they necessary for quality management. International journal of production economics, 2(c), P. 265-445. Takayasu, T., 2004. The global strategies of Japanese vehicle assemblers and the implications for the Thai automobile industry. Global Production Networking, p.165-296. 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