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Operations Management Of Toyota

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Question:

Identify which of these activities contribute more strongly to the creation of customer value. Further, you should discuss which aspects of the company’s operations may raise ethical or environmental concerns?
 
 

Answer:

1. Introduction

The success of Toyota Motor Company is significantly reliant upon the unique operations management system which emphasizes on the Just in Time inventory management and continuous improvement (Greasley, 2008). It has been found that a decentralized structure has been developed by Toyota which has been encouraging employee participation and team work. Toyota Motor Company has integrated several operational techniques such as JIT inventory management, efficient supply chain management for producing high quality cars for gaining significant competitive advantages in the intensely competitive global automobile market. Various research studies have been conducted for studying the lean manufacturing philosophy and organizational success (Gaither and Frazier, 2002). The manufacturing unit of the organization has been focusing on high productivity. Toyota has adopted a unique approach for solving critical issues as well as training its employees.

The lean manufacturing philosophy of Toyota has been focusing on cost reduction through waste minimization (Heizer and Render, 2001). The company is managing quality through continuous improvement and this particular aspect will be discussed in this paper. The major objective of this paper is to provide an insight to the operation management techniques adopted by Toyota for enhancing efficiency.

2. Important role of Operations Management in Toyota

Operations management in Toyota helps in scrutinizing the quality of products. The major aim of the operation management department in Toyota is to ensure efficient business operations. Operation management is also responsible for managing resources as well as distribution of products in an efficient manner. The operation management of Toyota helps in enhancing the manufacturing performance through utilization of various techniques such as leaning manufacturing, just in time and total quality management. Additionally inclusion of six sigma and supply chain management is considered to be notable activities of operation management. In the international market, the company has been continuously encountering high level of pressure for producing improved quality product (Lee and Jo, 2007). Adoption of just in time concept helps in elimination of waste along with reduction of setup costs and storage cost. It helps in controlling the flow of materials along with effective resource utilization. Different operational management techniques have been improving the efficiency and effectiveness of the operational functions.

 

3. Toyota Production System

This section will focus on discussion of the production system in Toyota. The practical expression of people of Toyota and its customer oriented philosophy is referred to the Toyota production system. It has been observed that this system is neither rigid nor imposed by the organization (Adler, 2002). It can be referred to the set f principles which have been found to be effective in the daily operational activities if the firm. The production system of Toyota has been studies and adopted by several business organizations (Lander and Liker, 2007). The major objectives of Toyota production system is presented below:

  • Offer best quality vehicles to the customer at the lowest possible cost.

  • Provide job satisfaction as well as job security to the members and ensure fair treatment to all members (Toyota Australia, 2015).

  • Toyota Production System aims to offer high level flexibility so that the company can easily respond to the market change as well as achieve profit by undertaking cost reduction activities which will ensure long term prosperity (Jayaram, Das and Nicolae, 2010).

Toyota Production System has been focusing on achievement of absolute elimination of waste along with unevenness and overburden for permitting the members to work efficiently as well as smoothly (Kumar and Suresh, 2009). The foundation of the Toyota Production System has been developed on the standardization that focuses on ensuring a safe technique for operation and consistent in terms of quality (Fang and Kleiner, 2003). The employees of Toyota focus on continuous improvement of the standard procedure for ensuring enhanced efficiency, superior quality and minimization of waste (Li, 2013).

Problem Solving Framework of Toyota (Jayaram, Das and Nicolae, 2010)

3.1. Lean Manufacturing

Lean manufacturing system is found to be very efficient and significantly contributes in the improvement of quality. Thus, the lean manufacturing system helps in achieving competitive advantages in the international automobile market. Lean manufacturing system can be also referred to the post Fodism system of work which is more efficient as well as democratic. One of the major principal of lean production is continuous improvement in the manufacturing procedure. The lean production philosophy significantly emphasizes on the combination of efficiency with the quality of work life. it has been found that the production system in Toyota focuses on elimination of the activities that do not have any contribution in enhancing value of the product (de Bucourt et al., 2011).

The concept of lean manufacturing was introduced in Toyota due to the scarcity of resources. Additionally, adoption of the lean manufacturing technique in the production activities of Toyota can be seen as the response to the high level of rivalry in the automobile market. It has been found that the lean philosophy has integrated the just in time production system along with the Kanban method of pull production (Osagie, 2009). Additionally, it has significantly emphasized on the idea of respecting the employees as well as team work. Lean manufacturing is associated with the quality and inventory control, labor management, industrial relations and supply chain management (Chun Wu, 2003). Research studies have demonstrated that lean manufacturing helps in reduction of human effort by 50% along with improvement in financial performance. Lean manufacturing system in Toyota has integrated the concept in logistics which has significant potential for controlling the transportation of materials, work in progress as well as finished goods at the optimized cost. In order to ensure long term competitiveness Toyota has focused on adoption of the JIT approach. The lean production system has a requirement for rapid flow of the relevant information along the value chain (Society of Manufacturing Engineers, 2001).

 

3.2. Kaizen

Kaizen is considered to be the major characteristics of the Toyota Production System. In Toyota, mass production takes place (Toyota-global.com, 2015). It is evident that the Toyota focuses on undertaking all the tasks by machine or human being by defining those precisely. Additionally, it focuses n standardization of the activities that helps in ensuring superior quality through elimination of waste and improved efficiency (SAKAI and AMASAKA, 2006). The employees of Toyota associated with these procedures are responsible for following the standardized guidelines. Additionally, the responsibility of the members includes focusing on continuous improvement.  It has been observed that the issues or inefficiencies in a process will be most apparent to the process. The team leaders and the team members focus on improving their work practices o day to day basis. This procedure is known as Kaizen (Murray, 2012). Moreover, this term has another implication which emphasizes on the continual improvement in each sphere of the organizational activities starting from the basic production procedure to the customer service along with the wider community.

3.3. Jidoka

Jidoka is an important concept in the operations management of Toyota. In Japanese, ‘Jidoka’ means automation. Toyota has interpreted ‘Jidoka’ as automation with a human touch.  According to this principle, the procedure will stop if it senses any problem within the process. Thus, any technical issues in the production process of Toyota can be easily detected and the process can be stopped and therefore resolved (Stevenson, 2005). The concept of automation with human touch in the manufacturing process of Toyota can be clearly recognized in the Altona Plant. It has been found that the presence of andon cord allows the team members to scrutinize as well as bring the manufacturing to stop if any kind of abnormality takes place. The manufacturing process in Toyota has followed the principle of Henry Ford which emphasized on splitting down work into some simple phases as well as delegating those tasks among the employees. in Toyota, the employees are the in charge of their own jobs. The teams are responsible for running worksites in Toyota (Berk and Toy, 2009). The teams help in identification of the opportunities that significantly contribute in making relevant amendments. Additionally, teams do play a major role in taking various initiatives for implementation of the proposed improvement by seeking co-operation from the management.

 

3.4. Just in Time inventory Management

The Japanese automobile company Toyota has ensured success and high growth in the international market through improvement of the efficiency as well as productivity.  The idea of integrating Just in Time approach has been evolved from the aim of continuous improvement. Presently, various organizations has accepted the advantages of Just in Time Approach in operations management and integrated it into the business operation. Application of the Just in Time approach was pioneered by Toyota motor company and the term was also coined by the engineers of the company (Amasaka, 2014). 

The principle concept of Just in Time revolves around the idea that the manufacturing process must be regulated by the natural laws of demand and supply. The production of a vehicle gets stimulated by the demand of the customer. Consequently, the production process of that particular vehicle is responsible for stimulating the process of manufacturing as well as delivery of the necessary parts. In this manner, the company has been able to obtain the right material such as the parts in right quantity and at right time that will be required for manufacturing the vehicle. It has been observed that Toyota has been successful in achieving improved productivity along with efficiency through focusing on continuous improvement. The concept of Just in Time had evolved from the objective of continuous improvement.

In Toyota, Just in Time approach has created a flexible atmosphere where all the activities focus on elimination of waste.  The major aim of the company is acquired the required amount of material so that it can satisfy the actual demand. The production process of Toyota focuses on the customer. The Just in Time procedure focuses on elimination of inventories through interdependent associations in the operations for creating a strategy for the marketing activities which is customer focused. It has been observed that the Just in Time approach in Toyota helps in linking the suppliers to the shop floor through acquiring the required material from the suppliers.  In Toyota, Just in Time approach is responsible for controlling the delivery procedure and managing the necessary quantity for the operation.  It has been observed that the Kanban system contributes in creation of the pull for acquiring the required parts in operations and the demand of the customers is responsible for creating the initial pull of the system (Slack, Chambers and Johnston, 2010).

Toyota has pioneered the Just in Time production system which is known as the zero inventoy production process. Just in Time is a manufacturing approach which is developed on the basis of three pillars. The elementary principles of Just in Time philosophy in Toyota are continuous improvement of quality, elimination of waste and a cooperative work atmosphere in the company (AMASAKA, 2009). Implementation of the Just in Time approach helped the company in minimizing the need of raw materials, work in progress along with finished goods. This method helps in reducing the time for set up and the deliveries can be coordinated from the suppliers in order to satisfy the need of production activities. It has been observed that one of the major objectives of the Just in Time method is to eliminate waste. In the production process waste refers to anything which does not add value to the procedure and cutting down the step will not affect the mechanism (Yazdani, 1995).

Just in Time is the most efficient approach for managing the production operations and Kanban has been used by Toyota as an information exchange tool for different production line (AMASAKA and SAKAI, 2010). In Toyota, JIT has helped in minimizing waste of the production procedure and the defect prevention mechanism helps in enhancing the quality of the products. The organizational culture has ensured that the manufacturing team of the company has significantly focused on prevention of any defects and reduced wastes from the production process which leaded to improved productivity (Amasaka, 2002).

JIT is one of the most significant aspects of the total production system of Toyota. For successful implementation of Just in Time approach, Toyota has adopted different practices such as Kanban, recruited multi skilled labors, reduced the time of set up etc.  On the other hand, the respect for human system has focused on the physical movement of the employees which will contribute in adding value to the product. Toyota has empowered its employees for handling the quality issues as well as they are responsible for supervising the assembly lines (Saruta, 2006). Just in Time approach in Toyota has helped in maintaining low inventory and ensured enhanced quality though responding promptly to the technological changes. In Toyota JIT can be considered as an overall organizational phenomenon (Amasaka, 2009).

 

3.5. Six Sigma

 Lean manufacturing is an important approach implemented in the production procedure of Toyota. In order to manage the operational activities of Toyota, some other strategies have been found to be very effective (Towill, 2010). Six sigma approach of operations management has been applied in case of Toyota in order to eliminate errors along with minimizing the variability in the manufacturing procedure (Azis and Osada, 2010). Implementation of the six sigma process has contributed in ensuring minimization of the defects and enhancing the quality of products. Six Sigma is method which uses a metrics based on standard deviation (Tannock, Balogun and Hawisa, 2007). The major objective of the Six Sigma is to develop a world class organizational culture for supporting the manufacturing process where the variation will be minimized (Chiarini, 2013).

3.6. Supply Chain Management

Supply chain management is considered to be one of the crucial factors for ensuring operational excellence in the business organization. Effective supply chain management contributes in enhancing the organizational efficiency followed by achievement of organizational objectives. Presently, the market can be characterized through prevalence of modern technologies and competition (Towill, 2006). It has been observed that the changes in the external business environment have led to significant changes in the organization so that the business firm can efficiently respond to the changing needs of the customers. With increased level of globalization along with customer orientation, business firms are becoming more informed decision Toyota maker with lot of alternatives. Supply chain of Toyota includes the material suppliers, distribution service and the customers. It means that the supply chain system indicates the flow of the materials along with the feedback flow of the information (Towill, 2007).

The success of Toyota can be attributed to various manufacturing philosophy of the company. It has been focused on the cost reduction through elimination of waste. Just in Time approach, lean manufacturing system has been the major aspects of Toyota Production System which has made it more efficient. The concept of value addition has been included in the lean manufacturing chain. It has allowed the company to identify waste in the value chain which can b eliminated for enhancing the quality.

The supply chain management of Toyota has majorly focused on the resources having critical significant. It has been observed that Toyota has developed Keiretsu structure which was comprised of the dependent suppliers which have been working with Toyota in a close proximity. Toyota has outsourced some parts which were found to be non critical for optimizing the value of the shareholder. Toyota has been able to develop such supply chain as the suppliers were relatively dependent on those in the intensely competitive market. The company has developed an assembly based system which is based on the JIT approach and demand pull, which has a significant association with the suppliers (Yang and Yang, 2012). It has been observed that implementation of these approaches and philosophies have helped in innovation and development of a customized supply chain (Lander and Liker, 2007). Effective cost and quality control along with innovation has helped Toyota in achievement of operational excellence. Additionally, customer value was maximized through the operational activities of the company (Toyota Australia, 2015).

4. Conclusion 

Highly competitive global automobile industry as well as scarcity of resource has leaded to development of an innovative and effective manufacturing system which is very flexible and responds to the changing need of the customers. The operations management system of Toyota has helped in reducing cost and improved the overall production system. From the above sections, it can be implied that the Toyota production system is customer focused for achieving competitive advantage. It has been found that extensive emphasis has been given on the employee empowerment and quality control. The major aim of the Toyota Production System is minimize defect and reduce cost of production. Toyota has already achieved higher productivity through implementation of different operational management approaches.

Adoption of the lean manufacturing system has focused on elimination of waste, minimization of defects and declined the lead time. Toyota has been able to develop an organizational culture of efficiency and employees are empowered to solve problems during the manufacturing process. It has been observed that adoption of this approach assisted Toyota in innovation of its product along with maintenance of high quality through the objective of continuous improvement.

Implementation of Just in Time approach has helped in maintain low inventory and declined the cost. Adoption of JIT has emphasized on scheduling material. The principal aim of the production system in Toyota is to offer superior quality product to the customers at the lowest possible cost.  At each production stage, the concept of production has incorporated quality. JIt approach helps the organization in obtaining the right information regarding demand and the production is designed accordingly. The successful supply chain management of Toyota has also contributed in achieving operational excellence.

 

5. References

Adler, (2002). Flexibility versus efficiency? A case study of model changeovers in the Toyota production system. International Abstracts in Operations Research.

Amasaka, K. (2002). “New JIT”: A new management technology principle at Toyota. International Journal of Production Economics, 80(2), pp.135-144.

Amasaka, K. (2009). An intellectual development production hyper-cycle model – new JIT fundamentals and applications in Toyota. IJCENT, 1(1), p.103.

Amasaka, K. (2014). New JIT, New Management Technology Principle: Surpassing JIT. Procedia Technology, 16, pp.1135-1145.

AMASAKA, K. (2009). THE FOUNDATION FOR ADVANCING THE TOYOTA PRODUCTION SYSTEM UTILIZING NEW JIT. Journal of Advanced Manufacturing Systems, 08(01), pp.5-26.

AMASAKA, K. and SAKAI, H. (2010). EVOLUTION OF TPS FUNDAMENTALS UTILIZING NEW JIT STRATEGY: PROPOSAL AND VALIDITY OF ADVANCED TPS AT TOYOTA.Journal of Advanced Manufacturing Systems, 09(02), pp.85-99.

Azis, Y. and Osada, H. (2010). Innovation in management system by Six Sigma: an empirical study of world‐class companies. Lean Six Sigma Journal, 1(3), pp.172-190.

Berk, E. and Toy, A. (2009). Quality control chart design under Jidoka. Naval Research Logistics, 56(5), pp.465-477.

Chiarini, A. (2013). Relationships between total quality management and Six Sigma inside European manufacturing companies: a dedicated survey. IJPQM, 11(2), p.179.

Chun Wu, Y. (2003). Lean manufacturing: a perspective of lean suppliers. Int Jrnl of Op & Prod Mnagemnt, 23(11), pp.1349-1376.

de Bucourt, M., Busse, R., Güttler, F., Wintzer, C., Collettini, F., Kloeters, C., Hamm, B. and Teichgräber, U. (2011). Lean manufacturing and Toyota Production System terminology applied to the procurement of vascular stents in interventional radiology. Insights Imaging, 2(4), pp.415-423.

Fang, S. and Kleiner, B. (2003). Excellence at Toyota motor manufacturing in the United States.Management Research News, 26(2/3/4), pp.116-122.

Gaither, N. and Frazier, G. (2002). Operations management. Australia: South-Western/Thomson Learning.

Greasley, A. (2008). Operations management. Los Angeles: SAGE Publications.

Heizer, J. and Render, B. (2001). Operations management. Upper Saddle River, N.J.: Prentice Hall.

Jayaram, J., Das, A. and Nicolae, M. (2010). Looking beyond the obvious: Unraveling the Toyota production system. International Journal of Production Economics, 128(1), pp.280-291.

Kumar, S. and Suresh, N. (2009). Operations management. New Delhi: New Age International.

Lander, E. and Liker, J. (2007). The Toyota Production System and art: making highly customized and creative products the Toyota way. International Journal of Production Research, 45(16), pp.3681-3698.

Lee, B. and Jo, H. (2007). The mutation of the Toyota Production System: adapting the TPS at Hyundai Motor Company. International Journal of Production Research, 45(16), pp.3665-3679.

Li, J. (2013). Continuous improvement at Toyota manufacturing plant: applications of production systems engineering methods. International Journal of Production Research, 51(23-24), pp.7235-7249.

Murray, L. (2012). Kaizen usage to drive continuous improvement. CFW Plexus, (AACCI 2012 Annual Meeting).

Osagie, S. (2009). Lean everywhere [lean manufacturing]. Engineering & Technology, 4(4), pp.66-67.

SAKAI, H. and AMASAKA, K. (2006). TPS-LAS MODEL USING PROCESS LAYOUT CAE SYSTEM AT TOYOTA: ADVANCED TPS , KEY TO GLOBAL PRODUCTION STRATEGY NEW JIT. Journal of Advanced Manufacturing Systems, 05(02), pp.127-140.

Saruta, M. (2006). Toyota Production Systems: The ‘Toyota Way’ and Labour–Management Relations. Asian Bus Manage, 5(4), pp.487-506.

Slack, N., Chambers, S. and Johnston, R. (2010). Operations management. Harlow, England: Financial Times Prentice Hall.

Society of Manufacturing Engineers, (2001). Manufacturing insights: an introduction to lean manufacturing. Journal of Manufacturing Systems, 20(1), p.70.

Stevenson, W. (2005). Operations management. Boston: McGraw-Hill.

Tannock, J., Balogun, O. and Hawisa, H. (2007). A variation management system supporting six sigma. Journal of Manufacturing Technology Management, 18(5), pp.561-575.

Towill, D. (2006). Handshakes around the world [Toyota production system]. Manufacturing Engineer, 85(1), pp.20-25.

Towill, D. (2007). Exploiting the DNA of the Toyota Production System. International Journal of Production Research, 45(16), pp.3619-3637.

Towill, D. (2010). Industrial engineering the Toyota Production System. Journal of Management History, 16(3), pp.327-345.

Towill, D. (2010). Industrial engineering the Toyota Production System. Journal of Management History, 16(3), pp.327-345.

Toyota Australia, (2015). Toyota Production System. [online] Available at: https://www.toyota.com.au/toyota/company/operations/toyota-production-system [Accessed 7 Mar. 2015].

Toyota-global.com, (2015). Toyota Global Site | Production System. [online] Available at: https://www.toyota-global.com/company/vision_philosophy/toyota_production_system/ [Accessed 7 Mar. 2015].

Yang, C. and Yang, K. (2012). An Integrated Model of the Toyota Production System with Total Quality Management and People Factors. Hum. Factors Man., 23(5), pp.450-461.

Yazdani, B. (1995). Toyota production system: An integrated approach to Just-In-Time. Computer Integrated Manufacturing Systems, 8(3), pp.230-231.

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