Toyota Motors Operations Management - Case Study Example

Operations Management Plan Name Professor Institution Course Date Operations Management Plan Executive summary Over the decades, Toyota Motors created a good reputation for producing quality and reliable vehicles (Camuffo &Wilhelm 2016, p.1). Japanese carmaker products have an embodiment for value and effectiveness for consumer. This has led to its manufacturing strategies being analyzed by its rivals across the globe. However, Andrews et al. (2011, p.1074) claimed that in the recent past, the company has been faced with massive recall, production and sales suspension casting a bad image on the company’s repution for quality and operations management. Therefore, this report will discuss and critically analyze current and recommended operational issues for Toyota’s operations plan. To put the discussion into context, the report will analyze the transformation within the organization, including resources and environmental factors. The report will also discuss Toyota’s supply chain management and processes and how it has resulted in current operation issues. To improve the Toyota’s operations management, the report provides various recommendations on facility layout, Inventory management and other related strategies. Table of Contents Executive summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Overview of Operations management 5 3.0 Transformation within the organization, including resources and environmental factors 6 4.0 Environmental factors 9 5.0 Supply chain management and processes 10 6. Recommendations 11 7.0 Inventory management and associated recommendations 12 8.0 Conclusion 13 9.0 References 13 1.0 Introduction Japanese production management had been considered to have a major effect in the discipline of the operations management from 1980s (Schonberger 2007, p.403). The concept from this form of production management influenced companies even beyond Japan. Toyota Motors is one the companies which rode on the wave to build a good reputation world over. Monden (2012, p. 44) opined that over decades, Toyota Motors has been considered as the most effectively managed and successful motor vehicle manufacturer across the globe. Liker and Hoseus (2008, p.78x) postulated that the success has been attributed to its operations management approach particularly Toyota Production System. However, the company’s recent endeavor to increase its productivity and be top selling carmaker global could have resulted to unfavorable changes in its operations management and supply chain management. As a result, the company has suffered some operational issues including massive recall and bad reputation. In this report, the paper will discuss and critically analyze current and recommended operational issues for Toyota’s operations plan. 2.0 Overview of Operations management Operations management also called product management is defined as the practice which designs and controls production to ensure the different resources applied in the production are efficiently transformed into the value added product or services (Kumar & Suresh 2008, p. 1). It simply means operations management entails changing of the inputs into the quality product or service. However, the few resources should be efficiently used to meet the customer needs and to also enable the company to make profits. Kumar and Suresh (2008, p.2) posited that even though it borrowed ideas from ancient management and economic theorists such as Frederick Taylor and Adam Smith, Japan is one of the countries which perfected the use of operations management in its industries. Toyota engineers took advantage of operations management in Japan to improve its production of motor vehicles. Schonberger (2007, p.406) pointed out that Toyota developed a philosophy called Just-In-Time to help it produce only what is needed. The overall goals of this operations management concept were to decrease the flow time in product, increase response to the customers and suppliers, reduce wastage in production and increase efficiency. Kumar and Suresh (2008, p.103) asserted that JIT was used to identify seven wastes in production including waste of the overproduction, waste of waiting, waste of the transportation, waste of the processing and waste of the motion and waste of manufacturing defective products. Monden (2012, p. 57) contended that Toyota Motors continued with innovation and came up with an operational management philosophy called the Toyota Production System, which reduces overburden and inconsistency, and eliminates wastes. This operations management was also designed to organize production and the logistic among the suppliers, the company and customers. The company improved Toyota Production System and is now referred to as lean production or manufacturing (Monden 2012, p.63). The current philosophy is more of elimination of waste and concentrates on the provision of customer value. Total customer value is achieved by improving quality, elimination of wastes, reduction of the time of production and reduction of the total costs. The practices have steered Toyota Motors to greater heights over the years. In fact, in 2012, Toyota Motors was the largest car maker in terms of production with 200 million vehicles. However, the company has faced numerous cars over the years (Toyota Motor Corporation 2016). In year 2009, the company recalled 3.9 million vehicles in the US market (Toyota Motor Corporation 2016). The recall was triggered by the defection detected in its Lexus sedan. In particular, Cole (2011, p.31) claimed that that defective floor mats which were under the seat of the driver resulted to the uncontrolled acceleration. The situation was detected when accelerator of Lexus Sedan stuck causing accident in California (Cole 2011, p. 29). With several other recalls in the recent years, customers began to question Toyota’s commitment to quality. On the other hand, the operations management experts question Toyota’s lean management and effectiveness in elimination of waste of defective products. Greimel (2010, p. 4) argued that due to operational issues of accidents and car recalls, even Toyota managers wondered whether they were chasing the wrong production model or philosophy. 3.0 Transformation within the organization, including resources and environmental factors Toyota Motors has undergone both positive and negative transformation in the last two decades. Positive transformation has been marked by significant success since its inception. Toyota Motor has been considered as the apex of innovation, industrial pioneer and manufacturing quality of Japan (Feng 2010, p. 10). The company’s vehicle had been known for efficiency, reliability and economy. The company’s use of JIT, Toyota production system lean manufacturing philosophies of incessant improvement had been the envy of the businesses world over (The Economist 2010, p.14). Toyota Motor’s operational management philosophy has changed from its inception and has manifested in its way of operation. Operation management through it philosophies has led to its transformation. Such transformation has been carried out of the basis of effective management of resource and environmental factor. Research on operations management considers resource to be an essential need of every company even before operation itself. One of the most effective resources which have been attributed to transformation of Toyota has been human resource. Liker & Hoseus (2008, p.41) stated that Toyota Production System considered people has the greatest resource in realizing production efficiency and product quality. Toyota Production System was founded on the concept that people who are involved within the production system have high chances of identifying expense of the material, time and effort which generate high value for the consumers (Liker & Hoseus (2008, p.41). The company also created a principle under the Toyota Production System philosophy called “The Toyota Way”. According to Liker (2004, p. 67) the principle holds several concepts including continuous improvement and respect for the people. Under this concept, Toyota management has been able to recognize the role of human resource. Management believes that by respecting your employees, they become motivated and works towards the success of the company (Najdawi, Chung & Salaheldin 2008, p.311). Also, the Toyota way holds high regards for teamwork. The concept of teamwork has enabled the company to become innovative. Team setting is very healthy for the company because every team member have the unique ideas which they bring together to make a high quality product. Similarly, teamwork has enabled Toyota Motors to complete several projects ahead of the set timeframe. In addition, “The Toyota Way” supported the idea of adding value to Toyota by developing and nurturing the employees (Liker & Hoseus, 2008, p.104). The management believes in nurturing people, they will follow the company’s philosophy, hence maintaining the needed quality. According to Liker (2004, p. 269), in Toyota Motors there are three types of people who have contributed to its growth, including decision makers, lean zealots and ordinary people. He continued to claim that lean zealots are people who lead cost cutting policy to projected standards (Liker 2004, p. 269. Research holds that for an organization to attain lean production in its practices, it ought to have staff who understand that lean budgets are significant components which ought to be sought. Over the years, the Toyota has also employed decision makers to contribute to its goal setting (Najdawi, Chung & Salaheldin 2008, p.311). Decision making executive understand have little knowledge concerning production processes, but are interested in the results. These managers are significant in making sure that set goals are fulfilled by the firm. Research by Liker (2004, p. 270) asserted that Toyota also has a category of human resource referred to ordinary people. Ordinary people are the operational managers. These individuals understand the entire production process to the stage of product sale. They also provide technical knowhow to the people working in the production room. Another resource which has played a crucial role in the positive transformation of Toyota Motors is technology. Technology has created a platform for efficient manufacturing of vehicles. According to Pardi (2007, p.5), Toyota has been using technology to manufacture economical engine in terms of fuel consumption. Toyota has their unique technology which enables them to produce economical engine and meet their strategic objective. Toyota highly used technology in manufacturing of its hybrid electric cars (Pardi 2007, p.6). The company has two types of technology in making such cars and is called Lexus Hybrid Drive and Hybrid Synergy Drive. Hybrid Synergy Drive is the technology used in making cars such as Yaris, Prius, Highlander Hybrid, Auris, Estima, Camry Hybrid and Alphard among others (Toyota Motor Corporation 2016). While Lexus Hybrid Drive was a technology used in production of Lexus vehicles. HSD technology develops the full hybrid car the enable the vehicle to operate on just electric motor rather than other brands which is regarded as mild hybrids. Today, Toyota is ranked as the market leader in hybrid electric cars sales in the world. The total sales of Lexus hybrid car models exceeded the 9 million targets in April of 2016 (Toyota Motor Corporation 2016). Another technology, highly applied by Toyota in its operation is the Quality Function Development. Monden (2012, p. 97) pointed out that this technology is a customer oriented technique of the management strategy since it emphasizes on everything which concern them. The Quality Function Development assists in analyzing the client’s needs so as to concentrate every attention to them while carrying out production. Even the Toyota production system is a technological resource. Monden (2012, p. 98) claimed that this system has been used by Toyota to assist the company in minimizing wastage when manufacturing. 4.0 Environmental factors Toyota Motors strategies on environmental matters have contributed tremendously to its positive growth. Toyota Motor Corporation (2016) reported that the company has an environmental initiative which aims at cutting carbon emission to 65percent by 2020. For instance, Toyota Motor Company has since adopted production of fuel efficient and environmentally-friendly by use of technology. Toyota is the leading company in environmentally-friendly automobile technology, most outstandingly RAV4 EV which it used to make between 1997 and 2003, and Toyota Prius which was introduced in 1997 (Japan Corporate News Network 2005). In 2012, the company launched the second generation of RAV4 EV and generation of Prius. To improve its image and sustain its achievement and operations, in 2005, Toyota Company adopted a program dubbed Fourth Environmental Action Plan which revolves around four themes entailing the environmental research and development, design, manufacture and marketing (Japan Corporate News Network 2005). The five-year program was directed towards creating a rejuvenated recycling-oriented society. 5.0 Supply chain management and processes Supply chain management is described as putting together suppliers, producers, distributors and vendors so that products can be produced and disseminated with the right quality and quantities, at the right moment, to the right place with the objective of reducing system costs as well as satisfying the customers expectations (Sweeney et al., 2015, p.58). On the other hand, supply chain processes integrate purchasing, manufacturing operations, transportation and distribution. From its inception, Toyota’s supply chain has been considered to be the critical part which has led to the company’s value creation and quality of its product. According to Liker (2005), Toyota’s supply-chain management is described as an element of the firm’s operations strategy and approach that is founded on the Toyota Production System. This system was adopted as a way of achieving lean manufacturing. Toyota’s supply chain brings suppliers, logistic officer, operations managers, transporters, and customers together. The company has created a good business relation with suppliers to ensure smooth delivery of raw material and elimination of waste. Liker (2005, p.16) classified Toyota-supplier relationship chain to include trust and mutual understanding, control systems, information sharing, compatible capabilities, Kaizen and interlocking structures. The suppliers of Toyota have been organized into the functional tiers. The suppliers in the first tier work with the development team to understand the materials they require (Kumar & Schmitz 2011, p.237). The second tiers are made of individual suppliers. The company has an effective communication system with suppliers making sure the inventory is of quality and at the right time when needed. Capacity planning is another important strategy used in the supply chain management. The company’s capacity planning is one of the way it tries to get rid inventory. Liker (2005) argued that to attain this objective, Toyota Corporation depends on the pull system. Management experts claim that general goal here is to continuously improve the production. However, the numerous car recalls is an indication that the company supply system is no longer efficient and might need a review of its philosophy or some processes (Kumar & Schmitz 2011, p.238). 6. Recommendations The research shows that due to increase competition and work, and the pressure to increase more profits, the company has neglected use of Andon in its plants (Andrews et al. 2011, p.1062). As a result, the company has been forced to recall its cars already in the market due to defect in floor mat and gas pedals. Camuffo & Wilhelm (2016, p.4) pointed out that Andon had resulted in positive impacts on the performance owing to the fact that it decreased quality problems. Therefore, this paper recommends that Toyota needs to effectively use Andon to enable them find defects during their production. Facility layout has played out a big role to the company high performance over the last 3 decades (Kimmo 2014, p.55). Plant layout determines the arrangement of raw materials, machines, people, products, and handling of products. Kimmo 2014, p.56) claimed that with Toyota growing in terms of production, there has been a need to modify the plant layout to increase capacity and also to reduce incidences of defects. 7.0 Inventory management and associated recommendations The company has integrated a scheduling system which controls its supply chain. In particularly, Pardi (2007, p.5) claimed that Kanban has been implemented at Toyota to control the inventory and ensure that the needed once are within the warehouse and no shortage too. In this way, it eliminates waste of overproduction, waste of waiting and waste of the transportation. Kanban system requires that every part is distributed with a particular card. The New stock is just needed when such part is used up and the card is detached indicating time re-stocking (Liker 2005, p.16). Kanban has worked well in Toyota as it has been used to control parts of inventory needed for specific vehicles. Toyota has also been using its employees to manage inventory. Toyota employs personnel such as procurement officers, supply chain manager, and in-Store Logistics manager to control and manage supply chain risks. Monden (2012, p. 76) stated that these staffs are responsible for monitoring stock levels, quality of inventory, production levels and supplier relationship. However, with the expansion and scatter of several subsidiaries it has become difficult for the company to control its inventory (Camuffo &Wilhelm, 2016, p.6). Therefore, the report recommends reviewing of the company supply chain to bring all subsidiaries to work under one large supply chain. Also, North America Manufacturing manager declaring that most of the America employees do not understand “Toyota Way”, the report recommends for training to understand how to manage inventory and minimize waste (Camuffo &Wilhelm, 2016, p 7). 8.0 Conclusion In the current volatile business platform in which consumer demand is greatly unpredictable and providing quality products is a big challenge, companies must have effective supply chain management to sufficiently satisfy consumer demand. Toyota is of the company which faces challenges of number of vehicle recalls which is a sign of poor operations management, inefficient supply chain and inventory management. Therefore, this report concludes that Toyota Motor Corporation must have a way of sensing the new demand for quality, review their supply chain practices to respond to such challenges. This can be done through effective implementation of Andon, connecting supply chains of its subsidiaries together and training staff “Toyota Way”. 9.0 References Andrews, AP, Simon, J, Tian F & Zhao, J 2011,The Toyota crisis: an economic, operational and strategic analysis of the massive recall, Manag Res Rev vol.34, no.10, pp.1064–1077. Camuffo, A &Wilhelm, M 2016, Complementarities and organizational (Mis) fit: a retrospective analysis of the Toyota recall crisis, Journal of Organization Design, vol.5, no.4, pp.1-13. Cole, R 2011, What really happened to Toyota? MIT Sloan Manag Rev vol.52, no.4, pp. 29–35. Feng, Y 2010, Toyota Crisis: Management Ignorance? – A Swedish Case of Consumers Perceptions, Halmstad University, pp.1-30. Greimel, H 2010, Toyota tries to find its way; Saying many ‘just don’t understand’ rules, Automot News vol.84, no.6406, pp.4-10. Japan Corporate News Network (JCNN) 2005, Toyota Outlines Fourth Toyota Environmental action Plan, Viewed 29 September 5 2016, from http://www.japancorp.net/Article.Asp?Art_ID=10041 Kimmo, K 2014, Creating a new factory layout and calculating its efficiency, Tampere University of Technology, pp. 1-63. Kumar, S & Schmitz, S 2011, Managing recalls in a consumer product supply chain–root cause analysis and measures to mitigate risks, Int J Prod Res vol.49, no.1, pp.235–253. Kumar, S.A & Suresh, N 2008, Production and Operations Management (With Skill Development, Caselets and Case) 2nd e.d, New Age International (P) Limited Publishers. Liker, J 2004, The Toyota Way: 14 management principles from the world’s greatest manufacturer, McGraw-Hill, New York. Liker, JK, 2005, The Toyota Way and Supply Chain Management, Presentation for OESA Lean to Survive Program, The University of Michigan. Liker J & Hoseus, M 2008, Toyota culture: The heart and soul of the Toyota Way, McGraw Hill, New York. Monden, Y 2012, Toyota Production System: An integrated approach to just-in-time, 4th ed., CRC Press, Boca Raton, FL. Najdawi, M.K, Chung, Q.B & Salaheldin, S.I 2008, Expert systems for strategic planning in operations management: a framework for executive decisions, International Journal of Management and Decision Making, vol.9, no.3, pp.310-327. Pardi, T 2007, Redefining the Toyota Production System: the European side of the story, New Technology, Work Employ vol.22, no.1, pp.2–20. Schonberger, R.J 2007, Japanese production management: An evolution—With mixed success, Journal of Operations Management, vol.25, pp.403–419. 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