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ASSIGNMENT
JULY 2014 SEMESTER
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PROGRAMME
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CENTER OF LEARNING
[0]
PARTICULAR PAGE
Introduction 2
Definition of Operation Management 3
Operation Management of Toyota 3
Just In Time (JIT) Inventory Management for Toyota 7
Lean Manufacturing for Toyota 9
upp!y "#ain Management ("M) for Toyota $$
%ecommendations for Toyota&s Operation Management $2
"onc!usion $'
%eferences $(
Introd!t"on
Operations management is t#e maintenance of t#e production of goods or services t#at a
company is deve!oping for sa!e) T#e management team is c#arged *it# t#e tas+ of ensuring a
profita,!e and safe production system- and a!so ensuring t#at resources are a!!ocated and used
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in an efficient manner- minimi.ing *aste in !a,our and materia! resources) In order to meet
t#ese goa!s- t#e management team t#us #as to attempt to find t#e ,est operations strategy
avai!a,!e for t#eir particu!ar situation and product) T#e ,iggest c#a!!enge for any organi.ation
and its operations is to try to ma/imi.e productions ,y cutting do*n on *aste- 0inding t#e
rig#t ,a!ance ,et*een getting t#e production up to t#e re1uired standard ,y using t#e
resources avai!a,!e to t#e optima! !eve!)
T#ere are many strategies t#at can ,e used ,y an operations manager depending on t#e needs
of production- and in t#e first section *e *i!! e/amine some e/isting operation management
strategies- and in t#e second section *e *i!! e/amine t#e effectiveness of t#ese strategies- and
#o* *e!! t#ey fit in *it# t#e goa!s of t#e target organi.ation- Toyota)
T#e success of Toyota Motor "ompany is due to t#e uni1ue reduction systems t#at focus on
continuous improvement and 2ust in time management) Toyota #as created a decentra!ised
structure t#at encourages emp!oyee participation and team *or+ing) Toyota incorporated
concepts 2ust as supp!y c#ain management and inventory management to create #ig# 1ua!ity
automo,i!es and gain a competitive edge in t#e #ig#!y competitive g!o,a! automo,i!e mar+et)
Toyota&s success and its !ean manufacturing p#i!osop#y #ave ,een *ide!y studied) T#e
Toyota manufacturing system is centred on ac#ieving a #ig# !eve! of productivity) T#e
company #as a uni1ue approac# to pro,!em so!ving and it continuous!y trains its emp!oyees)
T#e Toyota 3roduction ystems is ,ased on t#e !ean manufacturing p#i!osop#y t#at see+s to
minimi.e *astages and centres on cost reduction) T#e Toyota manufacturing p#i!osop#y
emp#asises on 1ua!ity management t#roug# a process of continuous improvement) T#is
report !oo+s at #o* Toyota created its manufacturing system and t#e ro!e of operation
management tec#ni1ues to en#ance efficiency) T#is report e/amines t#e production processes
and p#i!osop#y and Toyota to assess #o* t#e company #as ac#ieved a competitive advantage
g!o,a!!y)
T#e !ean manufacturing p#i!osop#y pioneered ,y Toyota #as ,ecome a ,enc#mar+ for a!!
manufacturing companies around t#e *or!d) T#e !ean manufacturing p#i!osop#y inc!udes
concepts suc# as customer re!ations- product design- supp!ier net*or+s and operations) T#e
!ean manufacturing practices #ave made Toyota ac#ieve !o* cost production and a!!o*ed
t#em to manufacture #ig# 1ua!ity cars at !o*ered costs)
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D#$"n"t"on o$ O%#r&t"on' M&n&(#)#nt
T#e study of operations management !oo+s at t#e production of 1ua!ity goods and service)
T#e aim of t#is discip!ine is to create efficient and effective ,usiness operations) Operation
management see+s to ensure t#e efficient management of resources a!ong *it# t#e
distri,ution of goods and services) Operation management see+s to en#ance manufacturing
performance and t#is study #as proposed various tec#ni1ues and a t#eoretica! frame*or+ to
ac#ieve t#is goa!s) T#ese tec#ni1ues inc!ude 1ua!ity management (T4M)- 2ust in time (JIT) or
Leaning manufacturing) Ot#er concepts in t#e fie!d of operations management inc!ude si/
sigma and supp!y c#ain management) 5!! t#ese tec#ni1ues re1uire a f!at organi.ationa!
structure coup!ed *it# functiona! integration in t#e organi.ation (6upta 7 8oyd- 299:))
T#e competitive pressure for improved product 1ua!ity #as !ed to numerous operations
paradigms emerging and t#e most significant ones inc!ude Just in Time- Tota! 4ua!ity
Management (T4M) and upp!y c#ain management ("M)) JIT see+s to e!iminate *aste and
recue setup times- it a!so contro!s t#e materia! f!o*s and focuses on effective resource
uti!isation) T#e T4M p#i!osop#y !oo+s at deve!oping a corporate cu!ture t#at is customer
focused empo*ers emp!oyees and see+s continuous improvement) T#e supp!y c#ain
management integrates ,uyers and supp!iers decision;ma+ing to improve t#e f!o* of
materia!s in t#e supp!y c#ain) T#e JIT- T4M and "M approac#es improve t#e effectiveness
and efficiency of t#e operations function (<annan 7 Tan- 299=))
O%#r&t"on M&n&(#)#nt o$ To*ot&
Tota! 3roduction ystem (T3) of Toyota T#e practica! e/pression of Toyota>s peop!e and
customer;oriented p#i!osop#y is +no*n as t#e Toyota 3roduction ystem (T3)) T#is is not a
rigid company;imposed procedure ,ut a set of princip!es t#at #ave ,een proven in day;to;day
practice over many years) Many of t#ese ideas #ave ,een adopted and imitated a!! over t#e
*or!d)
T#e T3 !ead to t#e !ean production movement t#at emp#asises on e!iminating *aste from
va!ue streams) T#is production system is #ig#!y standardised) T#e production systems #ave
,uffers t#at are contro!!ed t#roug# various pu!! signa!s) T#e !ean production is very efficient
and great!y improves 1ua!ity t#at #as given Toyota an edge in t#e g!o,a! automo,i!e mar+ets)
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T3 s#ou!d ,e vie*ed as a p#i!osop#y t#at is descri,ed ,y a set of genera! princip!es of
organising and managing an enterprise (Lander 7 Li+er- 2997))
Toyota&s success as an automa+er in t#e *or!d is ,ased on its e/pertise in creating a uni1ue
production system) T#is T3 is ,ased on t#e princip!es of continuous improvement a!so
+no*n as <ai.en) T#e Toyota company #as a #ig#!y decentra!ised *or+force *#ic# is #ig#!y
trained and ta+es part in t#e decision ma+ing process) T#e T3 consists of most successfu!
Japanese production and *or+ practices) T#is approac# *as deve!oped ,y a+ic#i
Toyoda t#e founder of Toyota *#o pioneered t#e T3) It *as Taciic#i O#no t#at created t#e
Just in Time (JIT) production systems) T#e JIT approac# made Toyota more efficient and
t#ese tec#ni1ues a!so incorporated tota! 1ua!ity contro!- statistica! process contro! and 1ua!ity
circ!es) Toyota introduced a ne* system of emp!oyee re!ation *it# one trade union and
created f!e/i,!e *or+ to respond to t#e demand ,ased production (?infie!d 7 <errin- $99'))
T#e Toyota manufacturing system is c#aracterised ,y a continuous f!o* of production t#at
a!!o*s t#e company to ,e f!e/i,!e enoug# to adapt to t#e demand conditions) T#e JIT ensures
t#at on!y t#e re1uired materia!s for t#e production are ac1uired at t#e rig#t time) T#is
minimises t#e e/cess inventories *#ic# !eads to cost reductions) 5!so t#e JIT emp#asis on
1ua!ity contro! and t#e production system is made adapta,!e to t#e dai!y and mont#!y
f!uctuations in demand and 1uantities) T#e 1ua!ity assurance processes in t#e JIT ensures t#at
eac# process supp!ies good units to t#e ne/t process in t#e production) T#e JIT systems a!so
inc!ude #uman resources in t#e cost and production systems )Toyota #as a!so stream!ined its
production processes t#roug# imp!ementing Tota! 4ua!ity Management (T4M) process to
!o*er costs and en#ance 1ua!ity (5masa+a- 2992))
T#e T3 is a #ig#!y specia!ised and f!e/i,!e system t#at is a!igned *it# t#e mar+et) In t#us
system t#e <an,an systems p!ay a vita! ro!e as t#e system provides instructions as part move
a!ong t#e production !ine) T#is system *or+s *it# production !ine to de!iver t#e re1uired
materia! for production) T#e <an,an sync#ronises t#e production 1uantities at eac#
production stage) T#e <an,an ystems provide t#e precise information of t#e re1uired
materia!s for t#e production process- t#is ma+es t#e production at Toyota more efficient
(8a!a+ris#nan- 2993)) T#e <an,an systems uses IT systems for p!anning and contro!
inc!uding enterprise resource p!anning (@%3)) T#e modern computer aided production
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management systems inc!udes app!ications suc# as M3- M%3 and "%3- inventory contro!-
s#op f!oor and vendor measurement systems (%ie.e,os et a!- 2999))
Toyota production systems use !ess materia! and fe*er emp!oyees t#at ,ring do*n t#e costs
ma+ing t#e company more efficient) T#e operations management systems at t#e company
efficient!y a!!ocate resources and emp!oyees for eac# pro2ect) T#is ma+es t#e company more
f!e/i,!e and responsive to t#e needs of t#e mar+et) T#e continuous f!o* production at t#e
company a!!o*s it to customise its cars to meet t#e c#anging customer needs)
5!so t#e management introduced 1ua!ity assurance teams to ensure t#at eac# unit of
production meet t#e set 1ua!ity standards) T#is defect prevention tec#ni1ue is referred to as
AJido+aB *#ic# in actua! terms means to contro! defects) T#e Japanese cu!ture #eavi!y
inf!uences t#e *or+ cu!ture at ToyotaC t#e f!e/i,!e *or+force concept A#on2in+aB ena,!es t#e
management to #ire emp!oyees ,ased on t#e f!uctuating demand) T#is ma+es t#e company
more f!e/i,!e and minimising costs (8a!a+ris#nan- 2993))
T#e T3 is !in+ed e/terna!!y and to t#e entire production system- t#e main T3 practices are
focused on detecting- assessing and e!iminating sources of t#e entire production system) T#e
se1uentia! re!ations#ip amongst t#e e/terna! and interna! !in+s inc!udes t#ree types of
interaction *#ic# are t#e first is upstream integration *#ic# is ,et*een t#e e/terna! supp!iers
and interna! supp!iers *it#in t#e firm) T#e interna! integration is ,et*een t#e firm actors t#at
o*n successive process stages as eit#er interna! supp!iers and interna! customers) T#e
do*n*ard integration is ,et*een t#e interna! supp!iers t#at o*n t#e !ast process stage and
firm&s e/terna! customers (Jayaram et a!- 29$9))
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T#e pro,!em so!ving frame*or+ at Toyota constant!y eva!uates t#e performance of t#e T3
,y detecting any variance on t#e production process) T#e variance assessment inc!udes part
of product- peop!e or personne!- procedure or met#od and e1uipment or mac#ine) T#e system
variation can resu!t from product variation- poor 1ua!ity or inputs- f!a*ed design or
misa!igned processes (Jayaram et a!- 29$9))
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T#e emp!oyees can a!so !ead to variations in t#e systems and performance o*ing to !ac+ of
proper training or motivation) Toyota #as imp!emented a decentra!ised pro,!em so!ving
approac# t#at empo*ers t#e *or+s to ma+e decisions) T#e princip!e of <ai.en is made
possi,!e *it# standardisation in t#e company) Toyota #as standardised tec#nica! s+i!!s to
ensure a f!e/i,!e staff in t#e company (Jayaram et a!- 29$9))
T3 #as t#ree desired outcomesD
To provide t#e customer *it# t#e #ig#est 1ua!ity ve#ic!es- at !o*est possi,!e cost- in a
time!y manner *it# t#e s#ortest possi,!e !ead times)
To provide mem,ers *it# *or+ satisfaction- 2o, security and fair treatment)
It gives t#e company f!e/i,i!ity to respond to t#e mar+et- ac#ieve profit t#roug# cost
reduction activities and !ong;term prosperity)
T3 strives for t#e a,so!ute e!imination of *aste- over,urden and unevenness in a!! areas to
a!!o* mem,ers to *or+ smoot#!y and efficient!y) T#e foundations of T3 are ,ui!t on
standardisation to ensure a safe met#od of operation and a consistent approac# to 1ua!ity)
Toyota mem,ers see+ to continua!!y improve t#eir standard processes and procedures in order
to ensure ma/imum 1ua!ity- improve efficiency and e!iminate *aste) T#is is +no*n as +ai.en
and is app!ied to every sp#ere of t#e company>s activities)
J't In T")# +JIT, In-#ntor* M&n&(#)#nt $or To*ot&
T#e Japanese automa+ers #ave ,een very successfu! in improving t#eir productivity and
efficiency ,y focusing on continuous improvement) JIT #as evo!ved from continuous
improvement paradigm) T#e JIT creates a f!e/i,!e environment in *#ic# t#e *#o!e
organisation is responsi,!e for e!iminating *aste) T#e JIT manufacturer see+s to ac1uire
materia!s t#at are needed to satisfy t#e actua! demand) T#e JIT p#i!osop#y creates a customer
focused production process) T#e JIT processes e!iminate inventories t#roug# interdependent
re!ations#ips in t#e operations)to create a customer oriented strategy t#e mar+eting activities
are a!so integrated in t#e system) T#e JIT !in+s t#e supp!ier to s#op f!oor ,y pu!!ing t#e
re1uired materia!s form t#e supp!iers) 5t Toyota t#e JIT contro!s de!ivery and necessary
1uantities for t#e operations) T#e <an,an ystems create t#e pu!! for getting t#e parts in t#e
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operations- t#e customer demands creates t#e initia! pu!! of t#e system (?#ite 7 3earson-
299$))
Toyota Motor "ompany pioneered t#e 2ust in time (JIT) production system during t#e mid;
$979s t#e JIT production system is a!so +no*n as t#e .ero inventory production system) JIT
manufacturing is a production p#i!osop#y t#at is ,ased on t#ree fundamenta! princip!es t#at
inc!ude e!imination of *aste- continuous 1ua!ity improvement- and a participative *or+
cu!ture) "ompanies t#at imp!ement t#e JIT met#ods minimi.e t#e need for ra* materia!s-
*or+ in process and inventory of finis#ed goods) T#is met#od reduces t#e setup times and a!!
de!iveries are coordinated from supp!iers to meet t#e production needs) T#e main aim of t#e
JIT met#ods is to e!iminate *aste *#ic# is t#e *aste is anyt#ing does not add va!ue to t#e
production process (8iggart 7 6argeya- 2992))
T#e JIT systems ,ecome more efficient and used t#e <an,an as an information e/c#ange too!
for different production !ines) T#roug# using t#e JIT t#e *astages in t#e production process
are minimised and t#e defect prevention system en#ance t#e 1ua!ity of t#e products) T#e
cu!ture at Toyota ensures t#at t#e entire production team focus on preventing any defects and
reducing *astages from t#e production process) In $9=9 Toyota dramatica!!y increased its
productivity and produced $99-999 cars for t#e first time) To improve 1ua!ity and automo,i!e
e/ports Toyota imp!emented Tota! 1ua!ity contro!s in t#e company (Da#!gaard 7 Da#!gaard;
3ar+- 299())
T#e JIT and respect for #uman systems are centra! doctrines of t#e T3) To imp!ement JIT
various practices suc# as <an,an- s#ort setup times- mu!ti s+i!!ed *or+ers are re1uired JIT
production is a means to ac#ieve tota! e!imination of *aste and imp!ement !ean production)
T#e respect for #uman systems !oo+s at t#e p#ysica! movements of t#e emp!oyees t#at s#ou!d
add va!ue to t#e product) T#e emp!oyees at Toyota are empo*ered and are responsi,!e for
1ua!ity issues and monitoring t#e assem,!y !ine) JIT is a critica! aspect of T3C JIT a!!o*s for
!o* inventories and ensure ,etter 1ua!ity and faster response to engineering c#anges) JIT is an
overa!! organisationa! p#enomenon)
T#e <an,an systems imp!ement t#e contro! in JIT systems) T#e <an,an systems provide
customers *it# t#e rig#t product at t#e rig#t time) T#e <an,an is a f!e/i,!e system t#at a!!o*s
Toyota to imp!ement JIT manufacturing) To successfu! t#ey imp!ement <an,an systems it is
important to improve t#e production systems and e!iminate *astages for efficient *or+) T#e
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<an,an systems ensure t#at t#ere is no !ate or ear!y production) T#e T3 is a decentra!ised
production system t#at a!!o*s for a contro! systems to f!o* smoot#!y t#roug# t#e !ean
manufacturing production faci!ity) T#e <an,an systems is c#aracterised ,y a pu!! princip!e
t#at ensures t#at parts are sourced *#en needed and t#ere are no *astages) T#e <an,an
system ensues t#at t#ere is no *aste of overproduction and t#e inventory costs are reduced)
T#e imp!ementation of <an,an entai!s t#e support of ot#er T3 practices) T#e success of
<an,an systems is dependent on an integrated infrastructure of supporting practices (T#un et
a!- 29$9))
L#&n M&n$&!tr"n( $or To*ot&
T#e !ean production tec#ni1ues #ave a!so ,e termed as t#e post 0ordism system of *or+ t#at
is more efficient- #umane and democratic) 5 centra! tenet of !ean production is t#e concept of
+ai.en t#at is continuous improvement in t#e production process) T#e !ean production
p#i!osop#y see+s to com,ine efficiency *it# 1ua!ity of *or+ !ife) T#e concept of <ai.en
see+s to remove a!! activities t#at do not add va!ue- referred to as *aste or muda in Japanese)
T#is !oo+ed at e/cessive setup time- e/cessive si.e inventory and *or+ in progress) T#e
<ai.en process a!so e!iminates errors in t#e production process and !ocates t#e source of t#e
pro,!ems) T#is entai!s *or+er participation t#at can monitor and detect any variations in
processes or products) T#e *or+ers a!so contri,ute to t#e organisation and improvement of
production) T#e productivity improvements are ac#ieved t#roug# incrementa! innovation)
T#e participatory nature of !ean production is different from t#e Tay!orist and 0ordist
production approac#es (Eampson- $999))
<ai.en emp#asises on 1ua!ity assurance- t#is entai!s team *or+ and co!!ective responsi,i!ity
for 1ua!ity improvement in t#e company) T#e Toyota management systems inc!uded t#e
concept of .ero defects *#ic# comprised of 1ua!ity circ!es to emp#asis on a!! 1ua!ity re!ated
issues) T#e concept of <ai.en ensures t#at a!! emp!oyees are 1ua!ity conscious and focuses on
1uic+ pro,!em so!ving) T#e team !eaders in t#e organisation encourage t#eir mem,ers to
constant!y focus on 1ua!ity improvements in t#e production process) 5!! emp!oyees #ave are
trained to deve!op t#e +no*!edge and s+i!!s needed for 1ua!ity production (@!sey 7 0u2i*ara-
2999))
T#e T3 is an action oriented approac# t#at favours a pro,!em so!ving approac#- t#e
emp!oyees *or+ as pro2ect teams) Toyota introduced a f!at structure in t#e organisation t#at
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a!!o*ed for open communications in t#e organisation and faci!itated e/periments and
!earning) T#e <ai.en empo*ers t#e emp!oyees and see+s ne* met#ods of *or+) T#e
company emp#asises on #ig# product 1ua!ity and customer services to gain a competitive
edge in t#e automo,i!e mar+et) T#e <ai.en *or+ cu!ture is ega!itarian and a!!o*s for t#e
invo!vement of emp!oyees and management in t#e production process) uc# a management
sty!e made Toyota #ig#!y productive and t#e consensua! decision ma+ing made t#e company
very productive and a!!o*ed it to ensure a #ig# !eve! of 1ua!ity (0ang 7 <!einer- 2993))
T#e concept of !ean manufacturing originates in t#e Toyota Motor "orporationsC resu!ted
from scarcity of resources and intense domestic competition in automo,i!e mar+et in Japan)
T#e !ean p#i!osop#y incorporated t#e JIT production system and t#e <an,an met#od of pu!!
production) Toyota a!so introduced t#e concept of respect for emp!oyees and team *or+ing
(Eines et a!- 299'))
Lean manufacturing invo!ves inventory and 1ua!ity contro!- industria! re!ations- !a,our
management and supp!y c#ain management) tudies s#o* t#at !ean manufacturing reduces
#uman effort ,y =9F a!ong *it# t#e manufacturing space- too! inventory and improved
financia! performance) T#is manufacturing system a!so inc!udes !ean !ogistics t#at is t#e
a,i!ity to administer systems to contro! t#e movement of materia!s- *or+ in process and
finis#ed inventories at t#e !o*est cost) To ensure !ong term competitiveness a manufacturing
firm #as to deve!op capa,i!ities of JIT production and de!ivery) T#e supp!iers #ave to ,e a,!e
to respond to t#e increasing needs of t#e customers) T#e !ean production system re1uires
rapid f!o*s of information a!ong t#e va!ue c#ain) Toyota uses t#e <an,an system to ac#ieve
t#is a!ong *it# computerised information t#at can ,e e/c#anged *it# t#e supp!iers to reduce
!ead times (?u- 2993))
Taciic#i O#no t#e #ead of Toyota crated t#e Toyota 3roduction ystem (T3) t#at inf!uenced
t#e production p#i!osop#y a!! over t#e *or!d) T#e T3 is a #o!istic production system t#at #as
standardised procedures in t#e company) T#is system en#ances t#e company&s productivity
and !a,our f!e/i,i!ity a!!o*ing t#e company to efficient!y produce various types of ve#ic!es)
T#is production p#i!osop#y emp#asises on 1ua!ity management as t#e !ean production system
is ,ased on assem,!y design- *or+ organisation and !o* cost automation ,ased on an
incrementa! improvement approac#) T#e automation in t#is production system is in !ine
comp!ies *it# t#e continuous improvement paradigm t#at constant!y identities and e!iminates
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any pro,!ems in t#e production process) Toyota #as dep!oyed t#e Aemi 5utomationB Jido+a
t#at maintains a ,a!ance ,et*een t#e mac#ines and #umans) T#is is more economica! and
ma+es t#e production process- more f!e/i,!e) T#e !ean approac# for automation inc!udes !o*
cost e1uipment and too!s t#at are reused for ne* mode!s (Muffatto $999))
S%%.* C/&"n M&n&(#)#nt +SCM, $or To*ot&
T#e supp!y c#ain management ("M) is a +ey strategic factor for en#ancing organisationa!
effectiveness and ac#ieving organisationa! goa!s) ?it# t#e g!o,a!isation of t#e mar+ets and
increase in outsourcing companies use supp!y c#ain and !ogistics tec#ni1ues to manage t#eir
operations) T#e contemporary mar+et p!ace is c#aracterised ,y increased competition and
preva!ence of tec#no!ogy) T#ese c#anges #ave !ed to profound c#anges for organisations and
firms must ,e a,!e to respond to c#anging customer needs *#i!e ,ecoming !ean at t#e same
time) ?it# t#is increased g!o,a!isation and customer orientation organisations are more
!ogistics sensitive) upp!y c#ain is a system t#at is made up of materia! supp!ier&s production
faci!ities- distri,ution services and customers t#at are !in+ed toget#er t#roug# f!o* of
materia!s and feed,ac+ f!o* of information (6unase+ara et a!- 299$))
Toyota&s success g!o,a!!y can ,e attri,uted to t#e company p#i!osop#y of continuous!y
reducing costs t#roug# *aste e!imination) Toyota deve!oped t#e 3u!! ystems and created t#e
Just in Time tec#ni1ues t#at made t#e Toyota 3roduction ystem more functiona! and
efficient) Toyota pioneered t#e va!ue added concept t#roug# t#e !ean supp!y c#ain) T#is
a!!o*ed t#e company to detect *aste in t#e va!ue c#ain *#ic# is e!iminated (?ee 7 ?u-
2999))
T#e T3 since its inception created a group of first tier supp!iers *#o *ere part of t#e
company) During t#e $979s t#e company deve!oped a second tier of supp!iers t#roug#
+yoryo+u <ai *#ic# is a supp!ier association) During t#e $9:9s and $999s Toyota spread its
c#ain of overseas part supp!iers and distri,ution system (Jones et a!- $997))
T#e T3 is vertica!!y integrated t#e main car parts are purc#ased from t#e first tier supp!ier
*#o ac1uire t#em from sma!!er supp!iers from t#e second tier of supp!iers) T#e company
creates su,contracting agreements *it# one supp!ier for a !ong term period to ensure 1ua!ity-
re!ia,i!ity and meeting t#e de!ivery standards) uc# arrangements a!!o*ed Toyota to e/ert
inf!uence t#e supp!iers and reduce costs (?infie!d- $99'))
[11]
Toyota #as created a distinct competitive advantage on its supp!ier net*or+s a!!o*ing t#e
company to add va!ue to its products) T#e competitive advantage stems from t#e ra* materia!
supp!y derived from '9F of t#e components from t#e first tier component manufacturers and
'2F from t#e !o*er tier component supp!iers) Toyota effective!y integrated its supp!iers
,ased on its #os#in +anri po!icy (Eines 7 %ic# $99:))
Toyota&s supp!y c#ain management approac# focuses main!y on resources t#at *ere of
critica! importance) Toyota created a <eiretsu structure comprising of t#e dependent supp!iers
t#at *or+ed in c!ose pro/imity to t#e Toyota factories) T#e company outsourced aspects t#at
*ere not critica! to t#e a,i!ity of ma/imising t#e s#are#o!der va!ue) Toyota *as a,!e to create
suc# a supp!y c#ain ,ecause t#e supp!ier *as re!ative!y dependent on t#em in #ig#!y
contested mar+ets) Toyota created an assem,!y ,ased systems t#at *as demand pu!! and JIT
,ased- it #ad dominant po*er re!ations#ips *it# t#e supp!iers) T#is a!!o*ed t#e company to
,e innovative and create a customised supp!y c#ain) Toyota a!so imp!ements effective
contro!s over 1ua!ity- cost and innovation) T#is a!!o*ed t#e company to ma/imise t#e
customer va!ue) T#e !ean production system at t#e company focused on t#e #ig#est !eve! of
1ua!ity to t#e customers) Toyota&s !ean approac# #as ,ot# strategic and operationa! practiceC
t#e company operates a contested supp!y c#ain and mar+et p!ace) 0or Toyota to ,e profita,!e
it #as to ac#ieve sustained ,usiness success ,y operating on !o* margins and satisfying
customer needs) T#e supp!y c#ain at Toyota can ,e descri,ed as entrepreneuria! ("o/- $999))
R#!o))#nd&t"on' $or To*ot&' O%#r&t"on M&n&(#)#nt
T#ere are a num,er of recommendations t#at can ,e made to Toyota to improve t#eir
operations management strategies and tec#ni1ues) Toyota a!ready uses t#e !ean
manufacturing met#od of operations management in t#eir production of ve#ic!es and as
mentioned a,ove- it can ,e said t#at t#e met#od is t#e Toyota met#od ; it *as pioneered and
deve!oped ,y t#is company and t#e company evident!y sti!! emp!oy t#e met#od of continua!
improvement and efficiency in t#eir operations dea!ings and *aste management) Eo*ever- it
*i!! ,e recommended #ere t#at to ac#ieve t#e ,est possi,!e operations management strategy-
t#e !ean manufacturing tec#ni1ue must ,e emp!oyed in con2unction *it# ot#er tec#ni1ues so
as to esta,!is# t#e ,est possi,!e operationa! efficiency and *aste management)
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T#e first recommendation is to do *it# t#e si/ sigma tec#ni1ue) T#is tec#ni1ue is often
criticised ,ut it can offer a suita,!e improvement to t#e operations management tec#ni1ues of
Toyota) It #as ,een remar+ed t#at t#e si/ sigma tec#ni1ue is ,ased on ar,itrary standards of
success ; t#is is ,ecause t#e standard of success is a!*ays set at a standard deviation of ( on
t#e norma! distri,ution of a production curve and it is difficu!t to see #o* suc# an ar,itrary
num,er can offer anyt#ing of importance to *ide!y different products and services t#at
re1uire greater or !esser amounts of 1ua!ity contro!)
Eo*ever- t#oug# t#is criticism may ma+e sense for somet#ing *#ic# re1uires a very #ig#
degree of 1ua!ity contro! in *#ic# a standard deviation of ( is #ig#!y irresponsi,!e- suc# as
mi!itary e1uipment- t#ere is no need to app!y t#is criticism to t#e motor ve#ic!e industry
*#ere t#e si/ sigma system *i!! *or+ perfect!y *e!! and increase t#e 1ua!ity of Toyota>s
product measura,!y) T#e si/ sigma system can ,e used a!ongside t#e !ean manufacturing
tec#ni1ue so t#at 1ua!ity contro! and *aste management can ,e suita,!y and efficient!y
contro!!ed *it# t#e same process and management team) T#is *i!! not on!y save on *aste and
improve 1ua!ity ,ut *i!! ensure t#at t#e operations management team itse!f is running t#ings
smoot#!y from one optima! vantage point)
T#e ne/t recommendation is in regards *it# <ai.en) T#is tec#ni1ue is very genera! and can
,e app!ied a!ong *it# any ot#er tec#ni1ues t#at a company may a!ready ,e using suc# as t#e
!ean manufacturing a!ready ,eing used ,y t#e company under scrutiny- Toyota) T#e reason
for recommending <ai.en a!ong *it# t#e current !ean manufacturing and t#e ot#er
recommended tec#ni1ue of si/ sigma is ,ecause <ai.en is seen as a great motivationa! too!)
<ai.en- as *e!! as see+ing to continua!!y improve efficiency 2ust !i+e t#e !ean manufacturing
tec#ni1ue a!so emp!oys a continua! appraisa! system t#at a!! of t#e *or+force is encouraged
to participate in and not on!y t#e operations management team)
T#is is an incredi,!y successfu! motivationa! too! as it is 1uite o,vious t#at a *or+force t#at
fee! t#eir voices are ,eing #eard and t#ey #ave a tangi,!e sta+e in t#e fina! product *i!! *or+
#arder and far more efficient!y to t#e ,etterment of t#e overa!! operations performance of t#e
company) Toyota and any company in fact- *ou!d ,e *e!! advised to emp!oy suc# a met#od
of operations management t#at not on!y improves efficiency vast!y ,ut a!so raises t#e esteem
of t#e production team as *e!!)
[13]
Con!.'"on
T#e competition in t#e automo,i!e industry and t#e resource scarcity !ead to Toyota creating
a !ean manufacturing system t#at *as f!e/i,!e and #ig#!y efficient) T#is manufacturing
system !eads to cost reductions and ma+es a company more f!e/i,!e) T#e Just in tome
approac# in t#e Toyota production systems a!!o*s t#e company to ,e more efficient and
responsive to t#e mar+eting demand) Toyota&s production system is demand responsive and
customer centric *#ic# a ma2or source of competitive advantage is for t#e company) T#e
production process at Toyota a!so emp#asises on 1ua!ity and emp!oyee empo*erment) T#e
!o* inventory and continuous production system #as a!!o*ed Toyota to produce #ig# 1ua!ity
ve#ic!es *it# minimum defects and !o*ered costs) T#e <an,an system at t#e company is
used to provide comp!ete information for t#e re1uired ra* materia!s) T#is system a!so
monitors t#e 1ua!ity of a!! products) To imp!ement !ean manufacturing a company must create
an empo*ered *or+force t#at #as t#e rig#t competencies to ensure #ig# 1ua!ity production)
T#e ,asic aim of t#e T3 is to s#orten t#e time ta+en to convert customer orders into ve#ic!e
de!iveries) To ac#ieve t#e se1uences from order to de!ivery in a sing!e continuous f!o* a!ong
*it# s#ortening t#e se1uence to ma+e t#e production process more smoot#) T#is #as created a
#ig# !eve! of productivity- ,etter 1ua!ity and a reduction in *astages) T#is ma+es t#e Toyota
automo,i!es more cost effective) ) T#e T3 is a standard management approac# in supp!y
c#ain t#at effective!y provides t#e customers *it# products in a time!ier manner) T#e !ean
manufacturing p#i!osop#y see+s to e!iminate *aste- e!iminate defects and reduce !ead times)
Toyota #as created a cu!ture of efficiency and pro,!em so!ving) T#is #as a!!o*ed t#e
company to ma+e its product to ,e more innovative and maintain #ig# 1ua!ity t#roug#
continuous improvement)
T#e production system t#at Toyota #as created uses !ess materia!s #uman effort-
manufacturing space and too!s t#an t#e mass production systems) T#is production system #as
decreased t#e use of inventory and created a system of .ero defects and !ed to t#e production
of #ig# 1ua!ity automo,i!es) T#e production at t#e company maintains a continuous f!o* of
products a!!o*ing t#e company to adapt to t#e mar+et needs and demand patterns) T#e
Toyota production p#i!osop#y #as evo!ved from t#e e/periences at Toyota factories *#ic# is
[14]
*#y it can ,e imp!emented at any !ocation in t#e *or!d) T#e production system #as made
Toyota #ig#!y efficient and profita,!e)
T#e JIT systems ensure ac#ieving fau!t free parts and eac# production process s#ou!d #ave
t#e rig#t part in t#e rig#t 1uantity at t#e rig#t time) T#e sc#edu!ing of materia!s is an
important princip!e of 2ust in time) T#e aim of t#e Toyota production systems is to provide t#e
customers *it# #ig#est 1ua!ity products at t#e !o*est possi,!e cost) T#e production concepts
incorporate 1ua!ity at eac# production stage) T#e Just in Time approac# see+s to get t#e rig#t
information a,out t#e mar+et demand and t#e production is adapted to t#e demand) T#e JIT
systems !eads to efficient inventory systems and on!y t#e re1uired 1uantities are procured in
t#e production systems) T#e <an,an systems ena,!e t#e *or+ing of t#e JIT system ,y
providing t#e information a,out t#e ra* materia!s and +eep a c#ec+ on 1ua!ity) To ensure t#at
t#e JIT system *or+s- Toyota #as imp!emented systems to motivate emp!oyees and empo*er
t#em) T#e Toyota production system is very efficient t#at #as made Toyota a competitive and
profita,!e company)
It *ou!d ,e fair to say t#at Toyota a!ready emp!oys a very efficient and t#oroug# operations
management strategy and t#at to t#eir credit t#ey deve!oped it t#emse!ves) Eo*ever- !ean
manufacturing- in its very ideo!ogy as+s for infinite continua! never ending improvement- and
t#e a!!iance of t#e !ean manufacturing tec#ni1ue *it# t#e si/ sigma tec#ni1ue and t#e +ai.en
met#od represents t#at continua! striving for improvement) T#ese additiona! operation
management tec#ni1ues *i!! add great!y to t#e performance of t#e company ,y giving t#e
company a tangi,!e 1ua!ity contro! system- a #ig#!y motivated *or+force and a decade o!d
and #ig#!y refined *aste management system) T#e ama!gamation of t#ese tec#ni1ues *i!!
offer Toyota t#e ,est *ay for*ard in t#e g!o,a! ve#ic!e industry as one of t#e ma2or p!ayers in
t#e fie!d and *i!! a!!o* Toyota to ,e at t#e forefront of 1ua!ity innovation in t#e operations
fie!d *#ic# t#e recommendations made in t#is assignment *i!! ac#ieve tangi,!e and testa,!e
success in t#e performance of t#e production of goods and services ,y t#e company- Toyota)
R#$#r#n!#'
5masa+a < (2992) AGe* JITBD 5 ne* management tec#no!ogy princip!e at Toyota
Internationa! Journa! of 3roduction @conomics- Ho!ume :9- Issue 2- 3ages $3=;$'')
[15]
8a!a+ris#nan % (2993) T#e Toyota 3roduction ystem 5 "ase tudy of "reativity and
Innovation in 5utomotive @ngineering ystem- 3agesD $;=)
8iggart T 8 7 6argeya H) 8)- (2992)) Impact of JIT on inventory to sa!es ratios- Industria!
Management 7 Data ystems- Ho!ume $92 Issue '- pp)$97 I 292)
"o/ 5 ($999)) 3o*er- va!ue and supp!y c#ain management- upp!y "#ain ManagementD 5n
Internationa! Journa!- Ho!ume ' Issue '- pp)$(7 I $7=)
Da#!gaard J J 7 Da#!gaard 3ar+ M (299()) Lean production- si/ sigma 1ua!ity- T4M and
company cu!ture- T#e T4M Maga.ine- Ho!ume $: Issue 3- pp)2(3 I 2:$)
6unase+ara 5- 3ate! "6- Tirtirog!u 6 @- (299$)) 3erformance measures and metrics in a
supp!y c#ain environment- Internationa! Journa! of Operations 7 3roduction Management-
Ho!umeD 2$ IssueD $J2- pp)7$ I :7)
6upta M " 7 8oyd L E (299:)) T#eory of constraintsD a t#eory for operations management-
Internationa! Journa! of Operations 7 3roduction Management- Ho!umeD 2:- Gum,erD $9- ppD
99$ $9$2)
Eampson I)- ($999)) Lean 3roduction and t#e Toyota 3roduction ystems or- t#e "ase of t#e
0orgotten 3roduction "oncepts- @conomic and Industria! Democracy- Ho!ume 29- pp) 3(9;
39$)
[16]