Operations Management: Processes and Value Chains of Toyota - Case Study Example

Operations Management: Processes and Value Chains of Toyota Contents Contents 2 Introduction 3 Discussion 4 Operations Management 4 Toyota Productionsystem 5 Just in Time Inventory Management 9 Supply Chain management 10 Lean Manufacturing 10 Value Chain analysis 11 Primary Activities 13 Support Activities 13 Conclusion 14 References 16 Introduction Toyota group of companies was founded by Sakichi Toyoda; he started the company as a textile machine company in 1933 as Toyoda Automatic Loom Works. In the mid 1930s Kiichiro Toyoda, son of Sakichi founded the Toyota automobile business and also came up with the concept of Just-In-Time. He made it sure that the company will have no inventory and also maintain a good relation with suppliers. In the post World War 2 Taiichi Ohno, as the chief of Toyota production developed the whole Toyota Production System (TPS). The success of the company is majorly due to the system that they follow for continuous improvement and also for just in time system. The organizations structure of the company is a decentralized one which creates a lot of motivation for the employees and also increases their participation and they work as a team towards the growth of the company. IT gains high competitive edge over its competitors in the global market because of the high quality maintenance along with a good supply chain management and also inventory management. It has been successfully able to reduce the wastages by implementing lean manufacturing; it has highly concentrated over achieving the highest level of productivity by having continuous improvement in their process and also other operational process. Toyota has a wide training program for training its employees and to enhance their skills and also improve the work place. The Toyota Production System is highly focused on lean manufacturing which helps them to reduce the wastes and also reduce the cost of production, and also emphasizes a lot over the quality thorough continuous improvement. Through this report the overall operational process and also the value chain that the company creates to get the maximum efficiency is been studied. The process through which the company has achieved the global competitive edge in the global automobile market is been widely seen in this report which includes the production operational process, supply chain management, inventory management. Discussion The Toyota Production system and also the value chain created by the company in the global market over its customers is widely been seen through all the below topics. Operations Management The operations management includes the overall production process of producing quality products and providing the quality service. This helps in creating an efficient and effective operation process in the whole business operation. This ensures that the company manages the resource in the best way and has the optimum usage of the available resources. The company implements various techniques to make its process the best, the techniques that Toyota has implemented over the years are Total Quality management, Lean manufacturing, Just in Time, Kaizen and many others. Toyota also follows a flat organizational structure with functional integration which helps the management to implement the changes and also make the decisions in the best process for continuous growth of the company (Shingo, 1989, Pp. 89-92). The competitive market in the whole world has made the company to come up with better methods so that they can provide the best quality products to the customers worldwide. Just-in-Time helps the company to have an effective utilization of the available resources; it helps in reducing the set up time and also controls the flow of materials in and out of the company. This concept does helps in keeping the inventory stock very low as a result of which the inventory cost or the cost for maintaining the stock is be3en reduced to a great extent (Monden, 2011, Pp. 78-83). Total Quality management helps to improve the overall company in every aspect including its culture, working process, quality of products, and also helps in getting continuous improvement (Ōno, 1988, Pp. 102-105). The effective management of the supply chain network helps the company to have a good relation with the suppliers and also helps them in getting the materials at the right time and in the best of quality and also plays an important role in the decision making process of the management towards the production planning. Operations management includes all the major departments and their functions like the production, marketing, information management, logistics and purchase, finance and organizational structure and culture. Toyota keeps in mind to have a flat structure and also implements the best of techniques to get the best process in its operations so that it achieves the best quality products and is able to give the highest customer satisfaction to the customers across the whole worlds by providing them with innovative and stylish automobiles with high level of performance and quality at the best price. Toyota Production system Every company’s production system focuses to get the major four aspects quality, speed, flexibility and cost. These aspects help the company to produce the best quality product by the optimum utilisation of the available resources. Toyota has its own Toyota production system which helps the company to get the best quality products and also reduce the overall cost in the production process (Marksberry, 2012, Pp. 98-105). Figure 1: Manufacturing system (Source: Long, 2011) This system implements the lean manufacturing system in the company which helps them to reduce the wastes and also reduce the cost. This has helped to introduce the pull system in the company. This system is based on the principle called Kaizen which means continues improvement in the whole process. Along with the decentralised system in the company helps the management to make the decisions very effectively. Toyota production system has come up with new techniques to achieve kaizen at a constant rate which has helped the company to have a good quality control, quality circles and also good statistical process. It helped them to implement the Just-In-Time concept which made the process more efficient and technically equipped (Chiarini, 2012, Pp. 223-225). It helps the company to have flexibility in its process as they use cellular manufacturing layouts and also use various concepts like visual display, 5S, poke-Yoke etc. It has a continuous flow of materials thus the company’s production process is highly flexible and also helps the company easily adapt to the changes based on the changes in the demand in the global market. The Just-In-Time helps the company to acquire the right material at the right time from the right place and also reduce the stock maintenance in the company which is considered to a big waste. The JIT helps the company to maintain the quality as well the first process needs to provide quality products for the next process so that there is a continuous flow in the production process (Liker and Meier, 2005, pp. 67-73). In the Toyota production system Kanban plays an important role as the system provides instructions in every process in its production line. Kanban helps the company’s every process to take the right material needed for the particular process in each stage so that the whole process is very efficient and becomes effective without producing any defects. This system helps the company to utilises IT system which helps them to improve their production planning and control like ERP (Enterprise resource Planning) and also the Master production scheduling, inventory control and vendor management system is been done using software’s in the computers to reduce the time of operations (Ruffa, 2008, Pp. 34-37). This production system in Toyota helps them to use other techniques also like Jidoka-Poke Yoke which means mistake proofing, this helps the company to reduce the defects and achieve six-sigma and also work towards achieving zero defects. Apart from this it also has the concept of Shonjinka, which is related to the flexible workforce and enables the company to have a flexible work force and process which can change with the changes in the demand of the market. The overall production system includes the integration of the external and also the internal process. This overall process is been shown in the below diagram (Hobbs, 2003, Pp. 23-27). The integration of the external and internal process helps them to have a continuous flow in the production process and produce products without any defects and of high quality. The Upstream integration includes the external suppliers and the relation been maintained with them so that they can supply the material in time and in good quality. These materials comes into the main system and the various stages in the production process take place where every initial stage is an internal suppliers for the next stage and the next stage is an internal customer for the previous stage, for example from the diagram it can been seen that stage 1 in the process is an internal supplier for the stage 2 and the output of stage 1 is the raw material for stage 2, here stage 2 is an internal customer for stage 1. Thus huge amount of importance is been given over the fact that the output of each stage is of the highest quality in order and also with no defect. The downstream integration connects the company with the customer which helps the company also to know the exact demand of the market and also the requirement of the customers. The framework of solving problems in the process evaluates the overall performance on every aspect of product, people, procedure and equipments detecting each and every variance that might arise. This helps the company to have a continuous improvement and also find out the problems very easily and also solve them. Just in Time Inventory Management The Just-In Time system in the Toyota production system helps a lot to the company in reducing the wastes and also cost of production. It is a part of Kanban system which brings in the continuous improvement. The JIT enhances in reducing the wastes and also improve the quality of the products as every step in the process has to supply its material in the best quality to the next step in a continuous flow. This Just-In-time helps the company to have zero stock in their inventory which does reduces the cost of maintaining stock and also the place. It helps in proper utilisation of the resources available so that there is no wastage at all (Wireman, 2004, Pp. 45-47). Just-In-Time inventory system also makes the company to have a flexible production system because of which it is able to change with the changing market demand and also launch automobiles as per the requirement of the customers along with a lot of innovations and technically strong with high quality. Toyota maintains this Just-In-Time system by having great control over its supply chain network and also over its suppliers which enables them, to get the materials on the right time when needed without keeping huge stock in their warehouse or in the inventory. Supply Chain management Supply Chain network includes the movement of the materials from the suppliers to the company, the internal movement of the materials and also the movement of the materials to the customers from whom the company gets information regarding the market in the form of feedback which flows in the backward direction. Toyota has achieved success globally by reducing its wastes, it has looked to develop the Pull system and also implemented lean supply chain which allowed the company to know the waste in the value chain and also eliminate them. The company has its supplier association and have contractual agreements with the suppliers for long term relations with them who can ensure in supplying good quality products, reliable suppliers and also suppliers who can meet the standards set by the company. The company looked to take suppliers which were near to the factories and also had good level of control over the suppliers by providing them training and improvement process so that they can also improve their quality and process. Toyota has a good control over its suppliers because the suppliers are highly dependent over Toyota and they look to keep the good relation with the company by providing quality products meeting the standards without any defects and also at a low cost along with supplying them in a way that Toyota’s JIT system is been maintained (Schmitz, 2005, Pp. 98-105). Lean Manufacturing The central force towards lean manufacturing is Kaizen which is having a continuous improvement in the overall process including production process, people and also equipments. The lean manufacturing combines the efficiency along with the work life quality in the company. It helps the company to utilise the available resources in the best way and also remove the wastes mainly the MUDA’s in the production process (Bass, 2010, pp. 87-92). This has looked to reduce the excess inventory stock, reduce the set up time and also the extra work in progress. Lean manufacturing helps the reduction of wastes as a result of which the overall cost incurred in the production is been reduced to a great extent. The kaizen process helps to remove the defects in the production process and achieve six-sigma and also zero defects. It helps the company to improve the productivity of the company enhancing the working ability of each employee of the company and increase the man-machine utilisation percentage reducing the waiting time. Lean manufacturing includes quality and inventory control, labour management, industrial relations and also the supply chain management. This manufacturing process reduces handling of the products along with the tool inventory to about 50% and helps in increasing the layout space and financial cost for the company. It also helps the company to have a good control over the material movement, finished goods and also the work in progress materials. This type of manufacturing system has allowed Toyota to have a semi automatic production process through which the human and machines are been utilised in the best way, this is more economical process and more flexible. This approach has enabled the company to get low cost equipments and tools and also reuse the available materials. Lean manufacturing does helps the company to get the best product quality at minimum price of production. Value Chain analysis This concept was been developed by Michael porter in 1980. The chain consists of a series of activities which create a lot of value to the company. The value chain analyses mainly two activities primary activities and secondary activities which includes all the operational process of the company. The diagram, for the value chain analysis of the organization is been given below. Figure 2: Organization value chain (Source: Madnick, 2008) Extended Value Chain structure Primary Activities Inbound Logistics: Toyota uses Just-In-Time for material handling and uses various equipments like forklifts, automated guided vehicles for the internal movement of the materials in the company’s factory. Operations: Toyota motors uses the best process and the most effective and efficient process in its production process to have quality maintained in high level. Outbound Logistics: Toyota uses trucks and other transport ways for the movement of the raw materials from the suppliers and also from the factory to the various showrooms which are present in the various parts of the world in different countries. They assemble their products easily and very efficiently. Marketing and Sales: Toyota looks to communicate its message about a particular product to the customers using various promotional processes based on the demand and the requirement of the target customers. Service: Toyota has always given value to their customers by providing the best of service to the customers in the form of good quality final check, complaints handling, after-sales-service and also training (Hino, 2006, pp. 89-93). Support Activities Procurement: Toyota looks to outsource most of its process and uses e-purchasing using various IT and web-based technology to achieve the overall procurement goal and objectives. The major aim is to get the materials at the cheapest rate and of the highest possible quality. Technology Development: Toyota looks to have a continuous improvement in even usage of technology for various processes like production planning, master production scheduling, Management information system, statistical calculations, internet marketing, customer relationship management and also for many other processes. Human Resource Management (HRM): every employee of the organization plays a very important role in the overall process of the company. Toyota has a flat sand decentralised structure which helps the company to have a good work environment and also makes every employee to come up with new ideas and also work as a team for the growth of the company. Toyota looks to train their employees very well to enhance their skills and also increase their productivity. It looks to motivate the employees by giving compensation and rewards based on the performance of the particular employee. Firm Infrastructure: This includes the infrastructure and the facilities that the company has for its operations. Toyota has got its assembly plants at various countries and they have the latest of equipments and machines in best of conditions which help them in getting the best output. It uses Management Information System (MIS) for its internal communication, production planning control and also uses visual displays at every stage in the production process to make the process clear to the employees (Arlbjørn, 2010, Pp. 32-36). Conclusion With the growing automobile competition in the global market, Toyota has maintained its position as one of the leaders through its effective and efficient production process and also good value chain. The company looks to puts lots of importance towards maintain good quality for its products and implement the latest technologies for the improvement of the process. Toyota over the year has come up with new and better techniques in its operational process like lean manufacturing, kanban, just-in time etc. which has enhanced the company to have a strong production process. Apart from this the decentralised structure of the company helps its employees to feel good and get involved in having a continuous improvement in the whole process. The company has always looked to give maximum value to its customer by launching the best quality products and also by providing the best quality service to the customers over the years at a good price. References Arlbjørn, J. 2010. 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London: Productivity Press Wireman, T. 2004. Total Productive Maintenance. New York. Industrial Press Inc. Read More