This case study that is being currently examined relates to the success story of Toyota Motors in handling people, and more contextually, use of technology with greater degree of effectiveness and success in the global competitive automobile market.
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The main aspects that need to be considered that Japan has emerged as a world power after being completed destroyed during the Second World War during the 1940’s. This speaks volumes about the determination, grit, tenacity and hard working nature of the Japanese people and their devotion for their chosen occupation or profession, however humble it may be. It is only the people management skills of Japanese workers at all levels and their ability to surmount obstacles and difficulties that have endeared itself to the world markets and produced excellent quality that has sometimes even surpassed European and American standards. While people skills are undoubtedly present, the more significant aspect is the discipline and fortitudes of Japanese culture and traditions.
The chosen company is Toyota Motor Corpn. and topic would be technological aspects underpinning Toyota’s business conduct and performance.
Growth of technology driven company
The world’s car users first noticed the qualities about Toyota’s durable lifespan and robust construction during the 1980s; today, it is seen that Toyota is the worlds most profitable and prolific car manufacturer, consistently producing high standard cars using fewer man hours and lesser on-hand inventories. Still, Toyota does not believe in resting on its laurels. Even today, Toyota continues to dictate standards for manufacturing, production development and process excellence in global auto industry.
(Book Summaries: Book Summaries Preview: The Toyota Way: The big idea: http://www.bizsum.com/2page/b_TheToyotaWay.php
At the initial stages, it is necessary to take up the key technology factors that are dependable for the incredible success story of Toyota Company. (KFS)
Effective accomplishment of Kaisen, or standardized production through continuous improvements.
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- Lean Management by removing excess costs and superfluous procedures and practices.
- Toyota production systems (TPS)
- Just-in-time procedures
Effective implementation of Kaisan
Kaisan does not merely indicate a function but is a combined buildup of several purposes and events that are purported to create maximum efficiencies in the systems by eliminating wastes, improving production methods and rendering all round efficiencies. The elements involved in Kaisan are with respect to continuous improvements of methods of doing tasks and procedures.
Normally a baseline of standardized procedure is adopted, and continuous improvements of this baseline is undertaken, thus creating better standardized procedures along the line; thus new improvements are made, and becomes an unending and continual process.
(Lean Enterprise Institute: Standardized Work: The foundation for Kaizen: Description.)
Of great significance is takt time, which is the standard time rate in which products are made, honouring consumer’s demands, the flow of work that needs to be maintained and the materials etc needed to complete production schedules in continuous process sequence. (Lean Enterprise Institute: Standardized Work: The foundation for Kaizen: Description.
There are yet other aspects of kaisen.The entire process is first considered as a combined whole. Next, brainstorming sessions are held whereby the various thought aspects connected with the improvement of the work is done. Next, a revaluation of the proposed schemes is made. It is generally felt that Kaisen may not yield instant results, or the type of improvements may be minor in nature, but it needs to be remembered that the collection of all small improvements may gain good betterment.
The main rotation of Kaisen therefore could be: An operation or work process is first assessed and its quantitative measurements are considered, next, the comparison of the measurements against the requirements is made, and the changes are adopted after consideration of all its aspects. Kaisan has been one of the hallmarks of the Toyota management systems and has been a unique aspect of Toyota’s mission for all round brilliance.
How Toyota follows Lean Management practices
It is basically designed in the classification and eradication of uneconomical and wasteful practices, and also involves continuous process improvements. The procedure is more important than the goal, since the process has to be perfected and programmed to attain objectives. The Lean management systems are designed to get the right things done at the right time and through applications of the right procedures for attaining it. The concepts of lean management and how they are to be practiced are ingrained in the minds and actions of the work force through continuous training and retraining, and by its continuous implementation on the shop floor. By seeking to reduce, or eliminate elaborate complexities in the production processes, the Lean management seeks to simplify the way processes are executed with least time and efforts. At the core of lean is the need to address to following aspects:
- Knowledge about the customers, clients, stakeholders and their interests
- Data about needed outputs and values from the perspective of customers
- Examining the current processes or value streams in factual and not desired terms
- Identifying, isolating and eliminating waste techniques through use of productive ones
- Making the system demand from the customer. (Fiona Clark, Lynne Phillips, Neil Price: Office of Government Commerce: Senior Management Workshop: Productive Time Team.
Through a categorization of waste procedures as muda (non –significant), muri (heavy burden) and mura (non standard) it is possible to attain optimum efficiencies in work. Muri is the preparation and planning of processes, mura is the implementation of standardization and muda is the process of focusing on significant aspects while also attending to lower significant processes.
These Japanese terms are being used by Toyota to attain cost savings by eliminating wastes, overburdens and unevenness. Heijunka helps attain leveling of balanced flow of work. It is necessary to remove mura in order to also clear up muri and muda.What Heijunka essentially does is to balance the requirement so the customer by following a fact of output and mix and create a daily leveling of wastes through these procedures.(Master Thesis :Quality Costs ? Using Quality Costing to promote quality improvement in a Chinese Company.)
The collective aspects of utilising good aspects of these methods would be within scope and functional usage of lean management. In short, lean management is meant to eliminate redundant practices and direct efforts and work schedules to best methods possible for optimum use of men, materials, machine hours, money and management available.(5 Ms)
Toyota production system TPS
This is a unique system in that it is one of the prime reasons for the growing market acceptance of products coming off the assembly lines of Toyota Company. TPS is extensively used along with Lean Management in Toyota work system. It is meant to reduce lead time for operations and effect cost reductions in major areas of function. It is seen as the modern leader in manufacturing and production of automotives. TPS is the entire system which includes aspects like Just-in time, Lean Management, kaisen, kanban etc. In Toyota terminology there are two kinds of Kanban, the first being production Kanban , which signals the need to make more items and the second the withdrawal kanban which hints that parts need to withdrawn from one work center to another.(Just- in- Time : JIT Production)
Under TPS, the procedure followed is that the later procedures signal the earlier ones to indicate that parts are needed as replacements, also called Kamban. Thus, the basic idea regarding Kamban is that the minimal time spend on unproductive activities need to be scaled down, by making necessary requisite materials needed for production available closest to the shop floor unit as possible, so as to avoid time, labour and efforts for procuring items from stores. (Inventory Management: 2007: Business –Mgmt Ezine articles: Inventory turnaround as MRP and ERP functions: Inventory Controls).
There are certain fundamental guidelines to TPS and they are as follows:
The use of the right process would produce the preferred results. It is often found that on the shop-floor, the work force may indulge in work which may not be very productive or prolific, in the long run, or may be doing work which does not serve any useful purpose. The work may not be a part of the total production chain process for raw materials to be transformed into finished product. Therefore it is necessary to first draw up preferred planning and scheduling of work processes at shop floor levels, in order to achieve the production targets and allocate work to work force accordingly.
Thereby, individuals work could also move smoothly, and group productions are also taken care of. It is necessary to establish production goals and achieve it through use of right processes and motivational conduct. It needs to be emphasized, at this stage, that personnel form the core for TPS, and managing people is as much an art, as is a scientific proposition. It is therefore necessary for sides, management and work force to indulge in conduct, that is both conducive and co-existent with management goals and stated objectives and to refrain from conduct that breeds ill will and discontent among the work force. The TPS helps serve just this end – in that scientific basis and judgment replace trial and error methods in production programming
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Value creation is done only through a process of training, developing and nurturing people and partners, since they are responsible for end products. By supplying the right inputs to work force, and using scientific and time-tested models, it is possible to get the best performance from labor force. However it is necessary to take the workforce into confidence and help solve pending issues. The TPS believes that the strong, contented and pro-active work force has been the vital asset for Toyota and shall continue to remain so in future.
The use of Just-in-Time
Just in time (JIT) method relates to inventory control systems. Through a process of tight controls over inventory, which are termed as costs, or outflows, major savings in inventory and warehousing costs are envisaged , which could increase the Return on Investments (ROI) substantially. Under this method, the stocks replenishments are carried out only after the present stocks are exhausted, through automatic processes, and thereby, the dangers of idle or surplus stocks are eliminated, if not considerably reduced. Auto manufacturing industries, by their inherent nature, are capital intensive and require heavy investments in raw materials, process goods and inventories.
What had happened to American automakers was that that they depended on heavy warehousing inventories which, in the long run proved risk laden and cost intensive; thereby, locking up a lot of funds in stock and inventories. The aspect was that most of the lock-in investments were not used and this created heavy losses, in the sense that, availability and usage of stock and inventory were done on unscientific lines and there were heavy losses due to wastages, spillages, process losses etc.
However, Toyota was able to avoid these risks to a very large extent, due to their excellent inventory control mechanism through the Just in time (JIT) methods. Under this method, the shop floor would have only the barest minimum requirements of inventory for production, and upon its exhaustion, they would be reordered from the vendors. The rapport between vendors and company is so good, that often, vendors build plants in Toyota’s factory site itself. Thus, it was ensured that no extra inventory carrying costs were entailed. Through this process, Toyota was able to affect generous savings which was reflected in their profit statements.
The advantages of JIT is that it creates a stronger and strategic business relationships with the vendors, the setting up time for the products are reduced and the transportation of goods form the Warehouses to the Shop floor are also reduced. Further, the different types of skills of the workmen could also be utilized in the sense, that they could be used for a variety of jobs at the shop floor. Moreover, the scheduling of the stocks could also be better managed by the shop floor supervisors.
Thus it is seen for above reasons Toyota was in a position to establish itself as Number 1 automaker in global markets today. A lot of efforts and labour have gone into this and yet, they were able to establish themselves within a span of just 50 years after Giant automakers GM, BMW etc, were sent to lower echelons of the global car dominant leadership positions, since they did not invest in the use of the right technology needed for sustenance in a fiercely competitive international car making environment and did not aim to build cars for a global buyers.
Yet, another factor that is important is the exploitation of Core Competencies and capabilities of the entire work force of Toyota. It has always believed that their best car is yet to roll off their assembly line, and everyone from the CEO, down to the shop floor trainee is contributing to try and build the best car in the world.
As has already been mentioned in previous discussions, the Toyota Company is able to establish their dominance in the world auto market due to their inherent characteristics of strict quality maintenance, team building and attention to the barest details of car making. The production assembly lines are so designed that it is possible to detect the faults at each level itself. Thus defects are reworked or scraped at the initial stage without interrupting the batch of production as such, since each operation is independent of another.
The Toyota supervisor at the floor would inspect the product as it moves along the assembly line and taken corrective measures wherever necessary, so what would be going to the final customer would be the 100% Tested and approved products, after thorough checking. Therefore, the need for any further testing and approval at the site of the customer would be an additional bonus since checking has been completed at each stage of production itself and the vehicles that are send to the outlets are fully customer and road worthy. Toyota believes in fulfilling demands rather than selling cars, and this has been their philosophy right from the inception till the present day.
This work ethos binds the employees together and motivates them to seek greater laurels.
Commitment to people
Next it is necessary to speak about the Toyota’s commitment to its employees, stakeholders, customers and vendors. The Toyota Company enjoys excellent strategic communication relationships with its customers and, this is enforced with each day, by constant interaction and interfacing. This ensures that all matters are discussed and sorted out between the customers and the manufacturers at the early stages it and therefore, customer goodwill and satisfaction is ensured, which is the bedrock of Toyota’s success story.
The next factor regarding Toyota is their marketing style which is different from others Manufacturers. While other manufacturers produce cars and moves it into the market, hoping for customers to come and purchase it, Toyota does just the opposite. It first studies the market preferences, which brands are popular, which customer segments should it cater to, what are the customers’ preferences in terms of colour , design and interior accessories.
It makes a complete market survey before launching its products regarding the needs and demands of the market and then only does it produce cars for entry into the market. It is natural that the cars Toyota makes are the cars which the customers seek and covet and therefore, marketing ceases to be a problem for Toyota, since their products are market tested and proven and “instead of scheduling production to operate by a sales forecast, they can now simply make what the customer tells them to make.” (Lean Enterprise Institute: Customer Pull: 2008).
It is also relevant to mention in this context that Toyota makes cars to create brands and consolidate them, whereas the other car manufactures impose their brands on the customers, through a process of aggressive selling and back-up advertisement and publicity, using celebrities and having heavy investments in advertisements, in order to obsess the customers’ psyches with only their brands and not other rival brands.
It is common knowledge that customers would only buy cars on its benefit value and how it serves useful purpose for the buyers, and the discerning buyers would not be influenced by high profile advertisements and/or publicity for the purchase of cars. Customers buy cars in order to fulfill their requirements, purposes and performance and not because the brand is a popular or attractive one.
Toyota serves to increase their brand value and also make cars for utility value of the customers. This accounts for the excellent response being given to their products which have technical superiority and added features when compared to the brands offered by the competitors. Therefore, it is seen that Toyota creates brand value for its products and serves the industry well by making cars which are preferred by the customers, whether in their own countries or in international market.
Formerly, Toyota used to produce their vehicles in Japan and used to distribute it to the global markets. However, this strategy has now changed. Nowadays, Toyota sets up production centres where its management anticipates and forecasts ready markets. Thus developing countries like India, China, and Middle East countries, have gained heavily from the production units of Toyota and these countries have access to international quality cars produced in their own countries, which may work out to be cheaper than if it were to be imported from Japan. This policy also offers employment opportunities for the denizens of the countries in which Toyota has production units and also improves their standard of living and living styles.
This also obviates the necessity for making heavy investments setting up production centres in their county of origin. The main advantages of setting up production centres in other countries would be that the local economy receives a fillip, greater job opportunities are generated and the masses would become more erudite and socially aware, especially in the rural and backward areas. Moreover, Toyota could also tie up with local manufacturers for cheaper accessories and spare parts, which could provide economies of large scale production and progression of secondary and tertiary markets for goods, services and utilities.
One of the main reasons for the phenomenal success of Toyota has been their emphasis on right production methods, adherence to quality and delivery schedules and the constant passion for innovation in their quest for excellence in car making.
Toyota is never satisfied with the present levels of all aspects of the car making process and is always on the lookout for better, cost and fuel efficient, environmentally friendly methods of car making and this is one of the primary reasons they have claimed leadership status in the global car making industry today.
However it is necessary to also work out the strengths, challenges and overall competencies of the Toyota Company. The strengths of the Toyota Co would be in terms of its strong base not only in its country of origin, viz. Japan, but also in the global car manufacturing markets. Strength would be its technical expertise in Car making for well over thirty years in the global markets. Its strengths also lie in organisational skills and putting theory of car making into practice.
The constant drive for excellence coupled with an inquiring mind for matters connected with car making is also a true strength of this company. However, the most strongest aspect of this company has been its Employees, from the President of the Toyota Company to the factory workman, who all share a commitment to make the best car in the world for their customers
Their challenges are that they have not been able to make much impact on the European car segment; dealing with their competitors in Europe like Daimler, Porches, Skoda, and etc.It would need to make forays into the European markets if it wished to consolidate in the global scene for a long time to come.
Another needed area of improvement of Toyota branding is that they need to have strong brands for catering to the international car buyers and also need to have some Premium Brands which could improve their profitability considerably and also establish market presence in relatively unknown markets and territories of the globe.
This Japanese car maker has proved through expertise, sound production and delivery systems that they are indeed very capable and competent and have established themselves as the No 1 brand in the world, outracing even General Motors and Chrysler Motors. They are poised to reach greater heights in car making through strategic alliances, especially in developing markets like India, China, Middle East Countries and other emerging economies of the world. However, they also need to introduce several new models and especially spacious cars for the European and American markets since there is very high demand for these cars in those premium markets.
The overall competence of Toyota has been distinctly established due to their market presence in several countries of the world, including the US and Middle East markets. It is believed that in the years to come they would further develop and expand these markets with a view to get a larger share then the present modest market share in the US markets.
The key competencies of Toyota has been in their production and distribution networks, their marketing strategies, segmentation and positioning of their products in high potential areas and also their ability to penetrate strong markets in the developed and developing countries of the world.
It may be concluded that today Toyota enjoys a very good stature and reputation as an ideal car maker in global markets. This has been possible due to the adherence to best industry practices, being ethical in business and using good business methods to achieve their corporate goals and objectives. In a regime where most automakers are deep in debt, incurring crippling losses and lowering production for their product lines, or choosing to close down, Toyota has shown the way by expanding exponentially and opening new production centres regularly and catering to the needs of the vast multitude of present and potential car users in the world.
This has been achieved due to their strong commitment to the value systems enshrined in their corporate philosophy of keeping their market commitments first and foremost and by producing cars that are in demand by the consumers. It has also been possibly because they practice good human relations with their employees and take care of managing their people well.
Book Summaries: Book Summaries Preview: The Toyota Way: The big idea, 2008. Web.
Fiona Clark, Lynne Phillips, Neil Price: Office of Government Commerce: Senior Management Workshop: Productive Time Team. 2008. Web.
.Master Thesis: Quality Costs? Using Quality Costing to promote quality improvement in a Chinese Company. 2008. Web.
Just- in- Time: JIT Production. 2008. Web.
Inventory Management: 2007: Business –Mgmt Ezine articles: Inventory turnaround as MRP and ERP functions: Inventory Controls. Web.
Lean Enterprise Institute: Customer Pull: 2008. Web.