Managing Operations and the Supply Chain in Toyota Industries Corporation - Case Study Example

Managing Operations and the Supply Chain Contents of the Organization 3 a) Products and services 3 b) s 3 c) Order qualifiers 3 d) Order winners 4 2. Operational processes 4 3. Literature Review 7 4. Gaps that exist between customer expectations and operational delivery 11 a)Plan of action to correct the gap between the expectation and perception 12 b)Conclusion and Recommendation 13 References 15 1. Description of the Organization a) Products and services Toyota Industries Corporation deals mainly with the production of automobiles including, ICE powered cars, trucks, hybrid and electric cars. Apart from these the group also includes businesses like textile machinery, electronics, engines and logistic and financial solutions. Toyota is one of the leading automobile giants. The company was formed in 1937 in Japan and today, the group is more known for the automobile business which manufactures automobiles and automobile parts in more than 28 countries across the globe. More than 70 models of automobiles are manufactured and sold under the Toyota brand name. The company manufactures vans, trucks, special utility vehicles, multi utility vehicles and sedans. b) Customers The main customers of Toyota automobiles belong to a wide segment of customers. The company manufactures different models to target different customer groups. The customers are mainly those who look for fuel efficiency, quality, safety and reliability. The Toyota cars are placed as safe cars and people who are focused on the quality and safety factors are the main buyers of Toyota cars. c) Order qualifiers The order qualifiers for Toyota include the price and the variety of the automobiles. The company extensively focuses on reliability and variety while providing the cars at a competitive price in the automobile market. d) Order winners The order winners of Toyota are continuous innovation and superior quality. The external and internal features of the automobiles are designed by adopting high innovative technologies. The company makes huge investments in the research and development creating high innovation level for the design and quality of the cars. 2. Operational processes The three operational processes implemented in the quality management process of Toyota to provide better value to the customers are Lean manufacturing, Kaizen and Just in Time processes. The Total Production System of Toyota is diagrammatically represented below. Lean Production system: The Toyota production system is highly driven by the lean production process within the manufacturing activities. The lean manufacturing process focuses on the elimination of any waste products from the value creating activities. The lean production system is a highly standardized and efficient system and is particularly useful for improving the quality of the manufactured products as well as the manufacturing process in Toyota. The lean management in the Toyota production system aims at eliminating wastage (muda), overburden (muri) and inconsistency (mura) from the production process (Lemak and Reed, 1999, pp.67-68). The transforming activities include the reduction of wastage in the form of overproduction, processing, motion, inventory, defects, wait time etc. The output products and services are products that have improved quality and are manufactured faster indicating a decreased lead time. Also, the operational costs are much lowered by the lean manufacturing process as the process runs smoothly and does not collapse in the event of overburden. The lean production system ensures that the company produces the right thing for the customer in the right time and right quantity (Doyle, 2005, pp.23-41). The process also helps in minimizing the inventories, establish quality in the operational processes, prevent errors, reduce the lead time and produce a high quality product that is critic al in improving the customer satisfaction level while balancing the operating costs. The lean management ensures that the wastage is removed optimally and subsequently the process flow is also improved. Lean manufacturing is thus mainly focused on creating outputs or services of higher value through the use of lesser input resources and wide transformational activities within the process flow (Hermann and Huber, 2000, pp.95-112). The result is the creation of high value products by the prevention of process wastage which leads to an increase in the overall value creation for the customers. Kaizen: The Toyota production system has implemented the concept of Kaizen in total quality management which aims as continuous innovation in the manufacturing processes. All staff in the line management is instructed to stop their production activities whenever any abnormality is noticed. This is to facilitate the improvement of finding a solution for the abnormal condition which would ultimately lead to kaizen i.e. continuous improvement within the operational activities. The PDCA cycle is implemented as a basic part of Kaizen which includes a process framework of Plan, Do, Check and Act. The kaizen activity cycle is used to standardize the activities and operations, assess and evaluate the in-process inventories and the cycle times, innovate and meet the evolving requirements of the customers, increase the productivity levels, standardize the improved operational activities and provide suitable measurements for the requirements in the production processes. Apart from PDCA, Toyota also incorporates concepts like 5Whys and the fishbone diagram to find the root causes and effects of the particular manufacturing activities. The decentralized workforce of Toyota ensures that the process of Kaizen is thoroughly incorporated in the manufacturing process. The workforce is trained to be able to participate actively in the decision making process within the manufacturing and other operational domains of the business. The thinking people system (TPS) and the 5S principle are implemented as critical components of kaizen. The thinking people system is implemented in Toyota by ensuring that inputs are taken from the employees, irrespective of the position of the employees in the organization. The workforce is encouraged to take decisions regarding the operation processes instead of mechanically going through the operating activities. This ensures an improvement in the quality of the process and plays a significant role in the successful incorporation of the concept of kaizen. The different units of Toyota within the production departments welcome the proposals and suggestions of the employees (Gale, 2001, p.57). The 5S includes Siri which means shifting, Seiko which means sweeping and cleaning, Seekers which indicates spanning, Seiton which denotes sorting and Shitsuke which denotes sustainability. The 5S is actively used to nurture equality and efficiency within the workplace of Toyota. Just in Time: The JIT concept has been actively used by Toyota to improve the processes of total quality management (TQM), quality circles (QC) and statistical process control. Toyota has focused on demand based production by ensuring healthy relations between the management and the workers unions and by creating flexible work levels within the manufacturing process. The continuous running of the operations ensures that Toyota can adequately respond to the changing demand conditions by maintaining a production process driven by the demand levels in the market (Edvardsson and Gustafsson, 1999, p.56). The JIT process helps to minimize the maintenance of excess inventories and ensures greater quality control in the operational processes of Toyota. This is because the JIT process allows for the sourcing of sufficient materials for the forecasted production which reduces the cost of sourcing as well as the cost of manufacturing. The JIT system spans over the manufacturing processes as well as other departments like the human resources. Toyota has streamlined the operational activities within the production processes by ensuring necessary quantities for production to reduce the costs and improve the qualities. 3. Literature Review There are many research works done by academicians and scholars on the discussion of quality management being an appropriate reflection of the expectation of the customers of a business. Through years, researchers have supported the concept that the quality management processes incorporated within an organization are driven by the demands and expectations of the consumers. According to the study presented by Setijono and Dahlgaard (2007), customer values are the main elements for the derivation of the key performance indicators (KPIs) of a business (Setijono and Dahlgaard, 2007, pp.44-61). There exists an intricate relation between the quality management and the creation of customer value for a business. Anderson and Narus (2006) have suggested that customer value is an important deriver of the quality evolution process. Thus the quality concept can be effectively derived from the expectations of the customers (Anderson and Narus, 2006, pp.53-65). The ultimate goal of quality management is to ensure profitability and efficiency of the business which is majorly dependant on the need satisfaction of the customers. According to the work of Miller, Pawloski and Standridge (2010) most businesses aim to design their quality management process to meet the demands and requirements of the customers (Miller, Pawloski and Standridge, 2010, pp.11-32). Thus, the works of the researchers clearly establishes that the ultimate objective of the quality management processes in a business is to increase the value creation and customer satisfaction level for the business. As proposed by Lian and Van Landeghem (2007), customer value is the underlying concept that drives the values for the other entities within the business like the stakeholders and the shareholders (Lian and Van Landeghem, 2007, pp.3037-3058). Thus, the quality management processes of a business start with focusing on the expectations of the customers which ensure that subsequently the other necessary values are also created. The thoughts of Bathie and Sarkar (2002) are useful in establishing the fact that there exists major gaps between the implementation of quality management from the strategic level perspective and the focus on the creation of value for ensuring customer delight (Bathie and Sarkar, 2002, p.241-244). Researchers like Lindgren and Wynstra (2005) argue that there exists a major theoretical gap between the incorporation of quality management concepts like lean management and six sigma and the reflection of customer expectations and value within the company (Lindgren and Wynstra, 2005, pp.732-748). The demands and requirements of customers follow a fluctuating pattern and thus becomes a very complex concept but the quality management processes are designed so as to make the company equipped enough to adapt to the changing patterns of consumer demand levels. Quality management involves the implementation of concepts like Total Quality management, Kaizen, six Sigma, Lean production and Just in Time all of which have essentially been derived from the new customer expectations from a business at a particular time. In contrast to these studies, the work of Johnson and Weinstein (2004) suggests that there are many scepticisms in relation to the different quality management concepts that indicate that the quality management processes are not conceptualized by a thorough understanding of consumer behaviour and the competitive structure of the market (Johnson and Weinstein, 2004, pp.59-61). But these scepticisms could not be strongly established as it has been understood that the concept of quality management is a philosophy that has been designed on the basic principles of focusing on the customers in order to attain standard quality based objectives. Johnson, W.C., Weinstein, A. (2004) has proposed in their studies that quality management focuses on the creation of value and therefore, the understanding and representation of the expectations of customers is critical for driving the quality management techniques (Johnson and Weinstein, 2004, pp.97-99). Only when the expectations are understood, then the company is able to deliver greater value and satisfaction for the customers through introducing and implementing effective techniques within their quality management processes. The gap between quality management and customer value creation can be removed by ensuring that the quality management processes mirror the expectations of the customers from the business. The relation between customer value and quality management is shown below (Bounds, Yorks, Adams and Ranney, 1999, p.178). According to the work proposed by Berghman, Matthyssens and Vandenbempt (2006), meeting or exceeding the expectations of the customers is critical to ensure a higher level of customer satisfaction (Berghman, Matthyssens and Vandenbempt, 2006, pp.961-973). The proper reflection of the expectations of the consumers in the quality management processes of the business is mandatory for the creation of products and services that add to the delight of the customers. The requirements and demands of the customers are based on different criteria which influence the total quality management concepts in a business. For example, a highly demand driven business in which more fluctuation in the demand pattern of the customers is noticed, calls for the implementation of just in time mechanisms which ensure that the production levels in the quality management process are decided by the demands of the consumers. As indicated by Shah and Ward (2002) in his work, customer value encompasses the factors of customer perception and customer requirements (Shah and Ward, 2002, p.129). For the implementation of proper quality management concepts it is important to understand the expectations of the customers i.e. the buyers as well as the expectations of the consumers i.e. the end-users of the products or services. The customer expectations can be context dependant and involve two different levels of abstraction. At the lower level of abstraction, factors like the characteristics of the products and services become critical for meeting or surpassing the needs of the customers. At a higher level of abstraction, more emphasis is given on the factors like the personal values and experiences of the customers. But the consideration of both the levels of abstractions required for the creation of a proper quality management process. The selection of the different total quality management and other operational processes is highly dependent on the customer expectations and the degree to which the business expects to meet or exceed the level of customer expectations and requirements. Customer expectations are considered to be the ideas of the customer regarding the actual experience that he is going to derive from the product or service. The quality management processes are incorporated by an in-depth analysis of the customer expectations from the products or services. The analysis includes the thorough understanding of the different dynamics of the customer expectations. According to the analysis of the total quality management processes of Toyota by Shingo and Dillion (2004), the company mirrors the expectations of the customers in its quality management processes (Singo and Dillion 2004, p.117). The company implements a pull technique rather than a push technique in its quality management. The production is driven by the needs and demands of the customers rather than pushing the stocks in the market. Quality is incorporated as a factor which ensures meeting or exceeding the expectations of the customers. Toyota incorporates the lean management system and extensively focuses on building people before they build cars. According to the work of Dubois and Gadde (2002), Toyota has continuously tried to implement the lean manufacturing technology as well as many other quality management concepts to respond to the changing customer demands and has concentrated on the pull technique within the operational processes to maintain a production process that is driven by the demands of the customers (Dubois and Gadde, 2002, pp.553-560) 4. Gaps that exist between customer expectations and operational delivery The operational processes of Toyota have been highly derived from the customer expectations from the products and services of the company. The company implements a Toyota way in which the implementation of processes like lean manufacturing is supported by the robust product development system which ensured that the operational process ensures that the customer expectations are met with. The company implements the Hansei approach which represents reflection and ensures that the gaps between the consumer expectations and the company deliverables are minimized (Liker, 2004, pp.441-442). There have existed gaps between the expectation of the customers and the operational processes of Toyota which resulted in the operational design issues like the floor mat issue and accelerator pedal problem in 2009 and the anti-lock breaking system issue in early 2010. The company immediately recalled the models in which the problems were identified. The causes of these issues rooted from a gap in the operational design of the automobiles and the increasing customer expectations related to safety and reliability. As the customer base of the company became wider, Toyota at some point could not respond to the increased level of customer expectations. The customers expected safe and reliable automobiles from Toyota, which the company could not implement in its operational designs and activities. a) Plan of action to correct the gap between the expectation and perception The correction of gaps between the expectations of the customers and the operational delivery of Toyota can be done by successfully implementing the quality management processes within the organizational processes. The company can close the gaps by effective monitoring techniques and ensuring the early recognition and solution of the problems. The gathering of information related to the changing customer demands is critical for closing the gap. Also, improving the decision making processes and strengthening the capabilities of the workforce would ensure that the expectations of the customers are fulfilled. Strengthening the disclosure of information through the reviews and assessments by the external auditors and quality checkers would be critical to ensure that the expectations of the customers related to safety of the automobiles. Investing more in the research and development departments would ensure that the customer expectations are properly evaluated and understood so as to design the operational processes effectively (Hair, Anderson, Tatham and Black, 1998, p.241). Improving the effectiveness of the quality management processes in the manufacturing activities of the company is critical in increasing the customer satisfaction level by exceeding the expectations of the customers. All these strategies would be helpful in correcting the gap between the expectations of the customers and the products and services developed by the company. b) Conclusion and Recommendation The order qualifiers of Toyota are safety and reliability factors. Thus, the customers expect the delivery of automobiles which promote safe driving options. Therefore, solving any arising quality problems immediately is critical to maintain the reliability of the brand in the minds of the customers. The company should ensure the sourcing of parts from reliable suppliers. The company should also focus on sourcing good quality parts so that the automobiles produced provide a safe driving mode for the customers. Toyota should also try to understand and monitor the changing customer demands and streamline their production processes according to the needs of the customers. The company should understand that quality is the most important factor in driving the success of an automobile company. In case any compromise is made with the quality, it would leave a negative impression on the minds of the customers, which would be very difficult to remove. Therefore, focusing on quality control and quality monitoring processes is of high significance for the automobile company. The company should focus on implementing effective manufacturing processes and adhere to the global manufacturing processes to produce cars that are safe and reliable. Also, a proper quality check and assessment by external audit controllers should be done so that incidents like the accelerator pedal problem and floor mat skidding problem of 2009 and the anti-brake lock system issue of 2010 do not occur. References Anderson, J. C. & Narus, J. A. 2006. Business Marketing: Understand What Customers Value. Harvard Business Review. Vol. 76(6), pp. 53-65. Bathie, D. & Sarkar, J. 2002. Total Quality Marketing (TQM) – a symbiosis. Managerial Auditing Journal. Vol. 17(5), pp. 241-244. Berghman, L., Matthyssens, P. & Vandenbempt, K. 2006. Building Competences for New Customer Value Creation: an exploratory study. Industrial Marketing Management. Vol. 35(8), pp. 961-973. 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