Analysis Of Toyota Production System: Key Performance Objectives

About Strategic operation management and key objectives

Discuss about the Analysis of Toyota Production System.

Founded in 1937 by Kiichiro Toyoda, Toyota remains one of the leading Japanese Multinational automotive manufacturer companies in automobile sector located in Toyota, Aichi, Japan. Today, the company produces automobiles under five brands that include Toyota, Ranz, Lexus, Hino, and Daihatsu. Not only that, the company also holds 5.9% stake in Isuzu, and 16.66% stake in Subaru Corporation. In addition, it also has a joint-venture with two companies in China that includes Sichuan FAW Toyota Motor and GAC Toyota (Iyer, Seshadri, & Vasher, 2009, pp, 57). In India, it has one joint-venture in India, Toyota Kirloskar and one joint venture in the Czech Republic, TPCA. As per experts, TMC is considered as an integral part of Toyota Group widely-known as one of the largest conglomerates throughout the globe. Currently, the company is considered as one of the largest automobile manufacturers and markets its automobiles on every continent.  The strategic operation management remains one of the integral parts of the company with its Toyota way philosophy (Chase, Jacobs, Aquilano, 2007, pp.42).

Described as an area of management that is mainly concerned with designing as well as control of the process of production and redesign of the business operations in the production process of the products and services of an organization, the main focus of operation management is to ensure that the business operation of any organization such as Toyota remains efficient in terms of the optimization of the resources and meeting the requirements of the customers as far as possible (Krajewski, Ritzman, & Malhorta, 2013, pp, 54). Not only that, the main objective of the operation management is concerned with an efficient management of the entire production system as a process that converts the required inputs such as energy, labor and raw materials into desired outputs includes products and services for the benefit of the customers (Poluha, 2016, pp.64). The operation management covers almost every sector of the economy such as health care sector, banking systems, and includes suppliers, the use of technology and the customers and is involved in producing products, managing customer services, and quality of both (Cachon, & Terwiesch, 2009, pp. 53). One of the major functions in any organization such as Toyota, it can be considered as par with other departments such as human resources, finance, marketing and supply chain managements. For efficiency purposes, the operation function requires the management related to both day-to-day production of products and services as well as strategic management (Cachon, & Terwiesch, 2009, pp. 53).

In this case, the strategic management can be described as the formulation as well as the implementation of major goals as well as the initiatives that have been taken by the top management of the owners based on its assessment of internal and external environments and the consideration of the resources (Cachon, & Terwiesch, 2009). This management offers an overall direction to organizations and includes its objectives, the development of policies and plans that are specifically designed for the achievement of these objectives and then, allocate the requirement of the resources for implementation of the plans. The main focus of strategic management is to assist an organization and increase its performance through efficiency, flexibility, and improvement in the effectiveness of various processes (Cachon, & Terwiesch, 2009). The main focus of strategic operation management is to satisfy the requirement of its customers for dependable and fast services at reasonable prices and assist its own suppliers in order to improve the service they offer to the company. This is achieved mainly by fulfilling its five key and basic performances and is applied in all types of operation (Cachon, & Terwiesch, 2009).

About 5 key performance objectives

It is a fact that for achieving its strategic operation management strategies, a company first needs to define its corporate strategy and then, define its operational performance objectives (Ferrari, and Goethals, 2010). After that, the company needs to define various measures to determine if these operational objectives are being met. The next step is to configure its operating environment for accomplishing one key performance objective or all five key performance objectives and they are quality, costs, speed, flexibility, and dependability (Ferrari, and Goethals, 2010).

The first key performance objective in the strategic operation management is known as the quality performance objective (Montgomery, 2012, pp.65). As per the experts, quality in strategic operation management is considered more than compliance to a particular specification and includes how well a product performs its intended function and includes reliability, durability, and innovativeness of its products. In addition, it also refers to easy access to service of the product as well as to the degree to which a product meets their requirement (Montgomery, 2012, pp.65).

The next key performance objective in this type of management includes speed performance objectives and it refers to the rate with which an organization can generate products and services (Ferrari, and Goethals, 2010). Not only that, it also includes the rate at which an organization can deliver its products and services to the customers and how often this rate is maintained. The speed also refers to various concepts such manufacturing time of one unit of product or services as well as the time-period required by an organization to research and development a new product or service (Ferrari, and Goethals, 2010).

The third key performance objective of strategic operation management is known as dependability performance objective and refers to the quality of company operation. It includes various issues such as production and delivery of the products and services on time and according to the specified prices (Fujimoto, and Miller, 2007). The objective of dependability of an organization is also measured through the ability of a product to function as expected and designed. Not only that, it also refers to its capacity of performing in a consistent manner over a reasonable time-period (Fujimoto, and Miller, 2007).

The fourth key performance objective of strategic operation management is known as flexibility Performance Objectives. Some of the key issues in this performance objective are related to flexible operation process as required, for example, if an organization produces various types of products for the benefits of the customers, the manufacturing facilities should be configured the product lines to deal with the requirement of various products in the market. Not only that, the operations process should retain an ability to adapt to new requirement quickly. As per this performance objective, the company should be able to manufacture products with different product modifications at various quality levels as per requirement in the market. With this performance criterion, the systems should also be able to adjust to changing production volumes or new delivery schedules (Ferrari, and Goethals, 2010).  

The last and final key performance objective of strategic operation management also known as the most important objective that is known as cost performance objective. This performance objective refers to variation in one unit cost due to continued fluctuation in the volume of the product and services produced and manufactured by a manufacturer and it also include the variety of the products that have been manufactured by the manufacturer. As per experts, the cost is inversely proportionate to the units of the products as well the variety of the products that have been manufactured. For example, the cost of one unit decreases with the increase in the volume of the units and decrease in variety and vice versa (Ferrari, and Goethals, 2010). Further, the cost of one unit varies and affects running prices, product prices and profits. One of the best examples that illustrate the importance of the key performance objectives in the strategic objective management of any organization is how it affects Toyota, a leading Japanese Multinational automotive manufacturer companies in the automobile sector (Ferrari, and Goethals, 2010).

Located in Toyota, Aichi, Japan, Toyota is famous as a leading Japanese Multinational automotive manufacturer companies in the automobile sector. Famous for its premier quality program, The Toyota Way, the main focus of the company remains a continuous improvement in every aspect of the company that also includes its operation department (Lee, & Jo, 2007). As part of “The Toyota Way”, the five key performance objectives remain the core strategy of its production strategy (Lander, & Liker, 2007). The first key operations performance objective related to TMC is as follows –

Quality operation key performance objective – The definition of quality according to Toyota is to do the things right by providing the best and error-free products and services that result in satisfaction of the customers in the market. According to various case studies, Toyota brand and its products continue to get top ranking in various third-party customer-satisfaction surveys (Thun, Drüke, & Grübner, 2010). The company cars have also been voted as the car of the year by various market surveys and research studies for many years. Not only that since the adaption of “The Toyota Way” the products of the company are very popular throughout the world due to their innovative features, quality and reduced amount of emission when compared with any other car. In addition, the company continues to develop new technologies through its research and development (Thun, Drüke, & Grübner, 2010).

Speed operation key performance objective – According to Toyota, the speed operation key performance is related to minimization of the time between the orders of the customer its availability in the market for his or her benefit. It can be also defined as doing things at the fast rate (Radnor, & Barnes, 2007). As the main focus of the company is to streamline various production process, it uses various techniques such as focused operations for reducing the complexity of the process such as the use of a small and simple machine that are also flexible and robust (Taylor, & Taylor,, 2008). In addition, the management also simplifies the layout to achieve a good flow and enhance simplicity that further increases the speed of the production process. In this way, the company achieves two or three times higher production output per worker when compared with similar European or US automobile plants (Taylor, & Taylor,, 2008).

Dependability key performance objective – When considered from Toyota point of view, the dependability key performance can be defined as fulfilling orders of the customers within the deadline of the promises that have been given. JIT or Just-in-time’ remains an integral part of the company production system with some core concepts such as 'kanban control' and presence of multi-skilled workers who are committed to quality control and work as a team (Amasaka, 2007). Improvement in quality and efficiency remains the core working values not only of the technical experts and managers but also of every employee in the organization. By implementation of these values, TMC fulfils the dependability key performance objective (Wilhelm, & Kohlbacher, 2010).

Flexibility key performance objective – Like any other company, Toyota offers a wide-range of product lines for fulfilling the requirement of different market segmentation groups. It is a fact that the quality and dependability is not enough if the taste or requirements of the customer change suddenly or at a slow rate (Wilhelm, & Kohlbacher, 2010). For fulfilling the changing customer taste, as part of its Toyota way philosophy, the company retains the flexibility to change its production process in a very short-term time-period. Not only that as the organization continues to launch innovative features at the regular intervals, it retains the capability to modify its products at various quality levels and is quite capable of adjusting its production system to changing production volumes or new delivery schedules (Wilhelm, & Kohlbacher, 2010).

Cost key performance objective – The last and most important key performance objective in any company, the main focus is to cut the cost of operation and increase the margin of the profit.  The main focus of Toyota philosophy, “The Toyota Way”, is to streamline the production process, increase quality control and reduce the cost of one unit of the product that is being manufactured (Rutledge, Xu, & Simpson, 2010). This core concept and process are solely devoted to cut the cost of the product even when the organization is producing a variety of products for the benefit of the customers and the company has achieved a significant success in its endeavor (Rutledge, Xu, & Simpson, 2010).

Conclusion

The main focus of the operation management is to achieve the efficient control of production as well as redesigning of the business operations in the production process. The operation management is concerned with daily processes as well as the strategic area of the topic. One of the best examples of the operation management can be related to “The Toyota Way”, mainly concerned with efficient and quality production performance process. For achieving this purpose, there are five key performance objectives such as cost, flexibility, speed, dependability and quality that remain the main causes of meeting the requirements of the customers and that, in turn, ensure the success of any organization such as Toyota in the market.

References

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