Toyota Motor Corporation Lean Production System - Term Paper Example

Toyota Production System 0 Introduction In the recent past, the automobile industry has been characterised by the adoption of the lean productionsystem of operations by western manufacturers of automobiles. Driven by the need to maximise their profits through cost reduction, leading automobile companies overhauled their mass production system and adopted the lean production system. According to Black (2008), the lean production system refers to socio-technical production system whose primary objective is to limit waste by continuously reducing or minimizing supplier, customer, and internal variability. Economists assert that the lean production system was an adoption of the Toyota production system, which propelled Toyota Motor Corporation to the top of the automobile industry. This essay is aimed at the analysing the lean production system through a comprehensive definition of lean production system and outlining the history and concept of the Toyota production system (TPS). The essay will also provide an evaluation of the system’s impact on western automobile companies. 1.1 History of Toyota Production System Emerging from a developing market, Toyota Motor operations were presented with social, economic and cultural market dynamics, which had not characterized the western automobile industry according to Black (2008). Based on writings by Monden (2012), an engineer of Toyota Eiji Toyoda critically studied the efficiency and effectiveness of Ford’s Rouge plant when he was on a study trip of the American largest automobile manufacturing facility. Toyoda’s findings indicated that Ford’s mass production system had the potential to surpass its current production capacity. He was marveled by Ford’s mass production system effectiveness and attributed it to inherent attributes of the system. However, Toyoda also noted that the system had its limitations, which could derail the production progress. Consequently, based on his understanding of the Japanese industry, Toyoda concluded that the mass production process was not suited for the Japanese market. According to Dennis (2002), Japan was slowly recovering from the effects of the Second World War loss; hence, the Japanese market was relatively small and unstable. In addition, the workforce in Japan was limited and the industry had strained resources, hence costly labour. Toyoda was compelled to formulate a production system which could minimize wastage of resources and workforce while ensuring a continual production process with a limited window for error. Based on the principle of resources and wastage reduction, Toyoda and his coworker Onho Taiichi formulated the famous Toyota Production System (TPS). 1.1.1 Factors which hindered the adoption of the mass production system in Japan Japan had a small domestic automobile market in comparison to the American and Western market, hence mass production strategy was never suited for the market. The Second World War resulted to massive fatalities and casualties among members of Japanese public leading to significant reduction of the country’s workforce hence the labour requirement for the mass production process could not be met. Adoption of labour laws that were introduced by the Americans after their occupation of the state led to empowerment of workers unions which agitated for workers rights. This led to upsurge of the labour cost in the country. The government and the automobile industry lacked financial power that could enable purchasing of the western production technology and equipments that could facilitate the mass production system. In order to match competitive advantage of the established foreign companies within and outside Japan, Toyota had to operate an efficient production system that was more enhanced than the industry’s dominant mass production system. Toyota had a political incentive to match economical status of the United States within a period of three years hence the need to outdo their production system 1.1.2 Toyota Production System According to Dennis (2002), the TPS was founded on two primary pillars, “Just in Time” production technique and the Jikoda philosophy. The philosophy of Jikoda had its origin from the founder of Toyota Motor Corporation, Sakichi Toyoda who developed the self-powered loom that could automatically halt when an error was detected during production process. Based on Cheng and Jarvis (1996) writings, Jikoda could be translated as “An automation with human touch”. Through the application of Jikoda philosophy in the organisation’s operation, each step of the production process was checked for errors thus ensuring that defects and abnormalities in the production process were timely identified and corrected. The other fundamental pillar was the concept of “Just in Time” production technique that could be defined as the continual flow of production of minimum number of different units within the smallest possible quantities at the latest time thus eliminating inventory need. Toyoda observed that the utilisation of parts was subject to production rates. By focusing on the supply of the goods needed for a given process, the organisation was able to reduce time, resource and labour wastage leading to increased productivity. The incorporation of the Kankan system allowed for the assignment of the product codes whose purpose was to store specific information that aided in the identification of products or components. Cheng et al (1996) wrote that Kankan enabled communication between various production phases by prompting access of a product’s information from the previous production segment. Furthermore, TPS also constituted the following concepts Leveled Production: This refers to production of varying brands of products using the same production line. This enabled product differentiation using the same production line to cater for the diverse consumers’ demands. Pull System: This was the foundation of the concept “Just in Time”. The pull system determined production volume and rate based on the pull generated by customers who were confirming their orders. Consequently, initiated production only produced the amount demanded at a given period. 1.2 Definition of Lean Production In his writings, Chiarini (2012) defined the lean production system as manufacturing process that primarily focuses on the enhancement of the performance of an organization, leading to an increased competitive advantage over other rivals in the industry. The production system enhances performances through identification and elimination of activities that are wasteful and do not add value to the given production process. Elimination of waste leads to increased product quality, lowering of the costs incurred and achievement of the shortest lead-time. The concept of “Just in time” is majorly aimed at ensuring continuous flow of production subject to the market demands. Lean production is strategically aimed at lowering the costs associated with mass production through appropriate use of work force. Lean production system involves sorting of an organisation’s employees into specific teams and each employee of the team is expected to be capable of performing all tasks assigned to his/her team. Each team accesses their workload that is delivered at their workstation in “Just in Time.” Any discovery of fault or abnormality necessitates halting of the production process by every worker. The success of the lean production system is based on five principles that act as guidelines for the actions of the management. Value Specification: Provides the means for comparison and decision making against what customers’ are willing to pay. Mapping: Refers to the process of analysing the production activities and identifying non-value adding phases and consequently formulating remedial steps to eliminate the processes. Flow: Analysis of the production process to eliminate factors that could hinder continuous production. Pull: The practice of determining the production rate and volume by assessing customer’ usage of products. Perfection: Elimination of errors and abnormalities in the production process by advocating for precision and accuracy through consistant improvement efforts. 2.0 Lean Production System Impacts on Global Auto Industry 2.1 Wide Spread Adoption of the Lean Principles Positive implications of the TPS on Toyota Motor Corporation performance on the global market led to development of interest on the lean production system. Early 1990s marked the widespread transformation of production system by key automobile companies from United States and Europe. According to Blanpain and Brulin (2008), majority of western automobile companies experienced a decrease in their performances in 1990s. On the contrary, Japanese automobile companies were enjoying positive market response both locally and on the global market. Led by Toyota, these companies were expanding their market shares while at the same time differentiating their products. Based on studies by Huntzinger (2006), critical analysis of the market situation by economist indicated that Toyota’s success could be solely attributed to its TPS strategy. In response, key western and American companies reevaluated their mass production system against Japan’s lean production system and the findings faulted the western traditional mass production system. Because of the ineffectiveness of mass production system, Kawamura (2009) reported that by early 1990s the United States had a trade deficit with Japan. Three quarters of the deficit between the two countries comprised of automobile trade. Late 1990s characterised the shift in production strategy from the populist Fordist mass production to the strategic production systems that demonstrated remarkable features of the lean production. Lehto (2010) wrote that among the Western companies, Chrysler was the first to adopt production reforms that inclined towards Toyota’s lean production system. Chrysler reduced its number of supplier from 3000 to just 150 over a period of five years. Enticed by Chrysler’s recovery after adoption of the lean production system, other companies also implemented their strategic reforms that intricately replicated the lean production system of Toyota. These companies were increasingly focusing on creation of economies of scale, centralization of their operations and enhancing their production efficiency. Referring to Wincel (2004), unlike Toyota’s model of production, production models adopted by Western companies were geared at surpassing their previous production scale; these models could hence be termed as a hybrid of the TPS. 2.2 Supply Chain Restructuring The adoption of the Toyota’s production system model by the western companies has further led to unprecedented restructuring of the market’s supply chain. The emerging relationship between manufacturers and suppliers in the automobile industry has been likened to the Japanese concept of keiretsu. According to Morgan and Liker (2006), keiretsu refers to a corporate relationship between business entities where parties involved enter agreement to take small stakes in each other’s operations. Adoption of this system of supply chain has resulted to a paradigm shift from the traditional relationship between suppliers and manufacturers. Unlike conventional market where the manufacturer designs products without involving the suppliers and further employs the technique of bidding when choosing respective suppliers, the lean production framework intensified suppliers’ role in the production process. Referring to writings by Smith (2000), with the implementation of the lean product system, suppliers became pertinent contributors in product development and improvement processes. According to Abele (2008), the restructuring of the supply chain was characterised by a matrix of undertakings and role sharing which were nontraditional to conventional market conditions. Manufacturers’ view of the suppliers as a means to an end was abolished with their incorporation in the product design and development processes. Suppliers were in return to take responsibility of manufacturer’s operation thus sharing profit and loss with manufacturers. Furthermore, suppliers were also offered stakes in the management and ownership of the enterprise. However, compared to the Japan’s keiretsu, manufacturers still had majority control of the production process in the majority of Western Corporation who had integrated suppliers in their operations. Chrysler was arguably the first western automobile corporation to undertake keiretsu model of operation. Studies by Takeda and Konradt (2006) indicated that Chrysler adopted the new supplier relationship after conducting an extensive study of Honda’s product development team. The study indicated that Honda’s product development team comprised of supplier engineers whose primary duty was design and manufacture product components. Subsequently, Chrysler formulated and implemented a cross-functional development team. Babson (1995) noted that the primary role of the team was mend relationship between Chrysler and its supplier through promotion of continuity, cooperation and corporate trust between the two parties. Chrysler’s strategy immediately led to shortening of product development process, minimal production cost and reduction of procurement costs. Due to heightened productivity, Chrysler was able to increases its revenues that further facilitated expansion of its market share. 2.3 Global Platform Strategy By introducing the concept of platform sharing across its dynamic models, Toyota pioneered the campaign towards global platform sharing among automotive industries. This concept was adopted by the variant of TPS production model, the lean production system. According to Waldchen (2013), global platform strategy refers to a production strategy aimed at manufacturing a globally common car base for the automotive industry. Sharing of platforms in automotive production aims at facilitating increase of production volume and creation of economies of scale in the industry. Automobile manufacturers normally produce variety of brands that are built on the same platform. This is evidenced by Skoda Fabian and Volkswagen polo, which are built on the same platform. According to Zylstra (2013), Evaluserve estimated that ten major original equipment manufacturers (General Motors, Toyota, ford, Nissan, Volkswagen, Honda, fiat , Daimler, Peugeot and Renault) will reduce their platforms by almost a third of their total platforms in 2010 which was 175. There already exist global platforms such as B platform of Renault-Nissan, MQB platform of Volkswagen group and Toyota’s MC platform. Prevalence of lean production system in the automotive industry is like to accelerate the rate of global platform strategy development through facilitation of collabouration between key players in the industry. Furthermore, partnership of various suppliers with manufacturers of motor vehicles creates an environment conducive for research and development for global platform sharing technology. Through pooling of resources, these companies will significantly strengthen their product development capabilities favored by lean production system factors. However, Ríos-Mercado and Ríos-Solís (2012), observed the advancement of the global platform strategy is dependent on the effectiveness of the supply chain, product development capabilities of parties involved and suppliers’ capability to delivery globally components demanded globally. In the long, the adoption of global platform strategy will signify global Toyotism since the entire approach of lean production system could be attributed to Toyota’s TPS strategic approach. Conclusion Toyota Motor Corporation pioneered the concept of lean production system, which was adopted by majority of the western manufacturers of automobiles. Under the guidance of Toyoda, Toyota was able to formulate a domestic production system that incorporated cultural and philosophical aspect that identified with the traditions of Japan. Consequently, through effective elimination of wastage in the production process, Toyota was able to harness revenue from the emerging global market and emerge as the leading automobile manufacturer. The concept of globalization enabled western manufacturers to develop divergent production systems that incorporated key pillars of lean of TPS, Just in Time and Jikoda. Global adoption of lean production system had positive ramification on major manufacturers of automobile in the West and American. Globalization of the production system led to further spreading of the lean production system to other industries. The lean production system also resulted in restructuring of the supply chain where supplier in the automobile industry became part of product development and design. Finally, global adoption of lean production model has revamped campaign for development of global platforms in the automobile industry. Various key players in the industry currently aim their efforts at research and development projects focused on global platforms. Consequently, successful development of these platforms will lead to a universal Toyotism. References Abele, E. (2008). Global Production a Handbook for Strategy and Implementation. Berlin, Springer. Babson, S. (1995). Lean Work: Empowerment and Exploitation in The Global Auto Industry. Detroit, Wayne State Univ. Press Blanpain, R., & Brulin, G. (2008). Globalization and Employment Relations in the Auto Assembly Industry: A Study of Seven Countries. Austin, Wolters Kluwer Law & Business. Black, J. R. (2008). Lean Production: Implementing a World-Class System. New York, Industrial Press. Clarke, C. (2005). Automotive Production Systems and Standardisation From Ford to the Case of Mercedes-Benz. Heidelberg Physica-Verlag. Cheng, T., Podolsky, S., & Jarvis, P. (1996). Just-In-Time Manufacturing: An Introduction. London, Angleterre, Chapman And Hall. Chiarini, A. (2012). Lean Organisation: From the Tools of the Toyota Production System to Lean Office. Milano, Springer. Dennis, P. (2002). Lean Production Simplified: A Plain Language Guide to the Worlds Most Powerful Production System. New York, Productivity Press. Huntzinger, J. (2006). Lean Cost Management: Accounting for Lean By Establishing Flow. Ft. Lauderdale, Fl, J. Ross Pub. Kawamura, T. (2009). Hybrid Factories in The United States the Japanese-Style Management And Production System Under the Global Economy. New York, Oxford University Press. Liker, J. K., & Meier, D. (2006). The Toyota Way Fieldbook a Practical Guide For Implementing Toyotas 4ps. New York, Mcgraw-Hill. Lehto, S. (2010). Chryslers Turbine Car the Rise And Fall of Detroits Coolest Creation. Chicago, Ill, Chicago Review Press. Morgan, J. M., & Liker, J. K. (2006). The Toyota Product Development System: Integrating People, Process, and Technology. New York, Productivity Press. Monden, Y. (2012). Toyota Production System: An Integrated Approach to Just-In-Time. Boca Raton, Fl, Crc Press Taylor & Francis. Ríos-Mercado, R. Z., & Ríos-Solís, Y. A. (2012). Just-In-Time Systems. New York, Springer. Smith, T. (2000). Technology And Capital In The Age Of Lean Production: A Marxian Critique of the "New Economy". Albany, State Univ. Of New York Press. Takeda, H., & Konradt, G. (2006). The Synchronized Production System: Going Beyond Just-In-Time Through Kaizen. London, Kogan Page. Waldchen, D. (2013). Towards a New Order in the Global Automotive Industry: How Asian Companies Catch Up To Their. [S.L.], Anchor Academic Publishin. Wincel, J. P. (2004). Lean Supply Chain Management A Handbook For Strategic Procurement. New York, Ny, Productivity Press. Zylstra, K. D. (2013). Lean Distribution Applying Lean Manufacturing to Distribution, Logistics, And Supply Chain. Hoboken, N.J., Wiley. Read More