The operation plays key role in firms because it affects operation managers understand their customers and translate their customers’ needs into performance objectives. “In turn, the performance objectives (and especially the relative importance of each one) influence the overall operations strategy of the business”. (Slack et al., 2010,) The reason is that managers can based on performance objectives to do decision because it is reflection of corporation strengths and weaknesses. This essay will describe the Toyota Motor Corporation performance around five-performance objective: quality, speed, dependability, flexibility and cost. Then following discussion of how Toyota uses techniques in operation management to achieve the five objectives. Based on analysis, some suggestions for this firm will shows in the conclusion.
FIVE PERFORMANCE OBJECTIVES IN TOYOTA
As most successful car manufacturer in the world, Toyota is a few automobile companies that able to be stockless production system by its unique operational management systems, the most famous Toyota Production System (TPS) and Just-In-Time (JIT). Further, in terms of five performance objectives, which Toyota did quite well in the overall circumstances, especially in the cost, speed and flexibility areas. Toyota cooperation was chosen to analysis because its significant performances and great operations management. Organizations can respond to the performance objectives, but the real challenge is to offer better quality, speed, dependability and flexibility at lower costs than the competition. (Slack et al., 2007) Also, the aim and objective of Toyota is making low-cost, high-efficiency, high-quality production to maximize customer satisfaction and keeping strong competitiveness. (Toyota, 2011)
Quality can be defined as “specification” of a product or service, also meaning high specification and must satisfy your customers by providing error-free goods and services, which are “fit for their purpose”. (Pycraft, 2000) The external affect of good quality within in operations is that the customers without (or less) complain leading to customers more likely to consume again because the customer feel has received real value for money. This brings in more revenue for the company. For internal influence, conformance quality is high that generally means that cost is saved, dependability increases and speed of response increases. If an operation is continually correcting mistakes, it finds it difficult to respond quickly to customers’ requests. (Slack et al., 2010)
Speed indicates the time between the beginning of an operation process and its end. (Greasley, 2010) “More specific, that means the elapsed time between a customer asking for a product or service and getting it with a satisfactory condition”. (Slack et al., 2010) Externally affect of speed is important because it helps to respond quickly to customers and resulting customers return with more business. The internal side have much to do with cost reduction. Usually, faster throughput of information (or customers) will mean reduced costs via reduces the need to manage transformed resources as they pass through the operation and helps to overcome internal problems by maintaining dependability.
In terms of dependability, is usually means “being on time”, in other words, keeping delivery promised to the customer that receive their products or services on time. (Slack et al., 2010) Also, dependability is other half of total delivery performance along with delivery speed and always linked in some way. In externally influence, dependability as good thing for customers also enhances the company product or service in the market, or at least avoids customer complaints. Internally dependability has affect on cost via saving time, saving money directly and giving an organisation the stability that allows it to improve its efficiencies. Moreover, it prevents late delivery slowing down throughput speed.
Flexibility always means being able to change the operation in some way, “vary or adapt the operation’s activity to cope with unexpected circumstance or to meet customer requirements gives a flexibility advantage to customers.” (Slack et al., 2010) Flexibility has several specific types: Product or service flexibility; Mix flexibility; Volume flexibility and Delivery flexibility. For external affect, the different types of flexibility allow an operation to fit its products and services to its customers in some way, such as produce wide range and frequent new products or services. On other hand, Volume and delivery flexibility adjust its output levels and its delivery procedures in order to cope with unexpected changes. The internal influence is speeds up response, saves time (money) and helps maintain dependability.
“Produce goods and services at a cost, which enables them to be priced appropriately for the market while still allowing for a return to the organization”. (Slack et al., 2010) not surprisingly, low cost is a universally attractive objective because lower cost means higher revenue and more competitiveness. “If managed properly, high quality, high speed, high dependability and high flexibility can not only bring their own external rewards, they can also save the operation cost.”(Greasley, 2010)
FIGURE 1: INTEGRATION IN FIVE PERFORMANCE OBJECTIVES
Reference: Slack el at, 2010. Chapter 2: _The strategic role and objectives of operations_, Operations management.
From figure 1 and unique ‘Toyota Production System’, which shows the company five-performance objectives irrelative significantly with each other. As Toyota’s mainstay, quality is the most emphasize element of this company. According to the relevant survey institutions that indicates Toyota’s vehicles consistently rank near the top in third-party customer-satisfaction. (Toyota, 2012) Excellent quality of Toyota not only prevents errors slowing down throughput speed, also avoid wasted time and effort, therefore saving cost. For instance, if there occurs many non-value-added activities that mean the company need use time, money and human resource to solve it and increase cost. Also, if quality is not qualified in the produce process then rework will drag on production speed.
According to survey data from relevant agencies, the three giants in US, General Motors, Ford, Chrysler, parts procurement costs higher than Toyota 8%. Alternatively, Just-in-Time (JIT) stockless production system is extremely increasing Toyota productivity, which means the speed of production is fast. High speed helps Toyota maintaining dependability via zero (less) inventories because the company can respond to the market quickly. Toyota is a dependable company resulting by TPS (Toyota production system) with multi skilled worker that work as a team, and with control has allowed them to deliver products as promised.
On the other hand, be more dependability can increase speed without late delivery and saving cost. In addition, For Toyota plant, flexibility means the ability to produce new products and offer wide range volume. During these years, Toyota has provided a wide range of options cars, such as SUV (Prado, RAV4), hybrid fuel (Prius,Yaris Hybrid) , commercial vehicle, sports car(GT86) and bus et al, also to meet environment and economic changes, Toyota was the earliest car maker to introduce hybrid fuel cars, with the commencement of Prius model. The high flexibility leading to Toyota brings frequent new products to the market to gain more competitiveness. Moreover, the speed from JIT system makes Toyota more flexibility in volume.
TECHNICS IN TOYOTA
Currently, the main competition between enterprises is from supply chain. The world famous TPS strategic management is also created by Toyota. It is called a variety of small amount of production of the unique market demand in Japan. From mass production of the highly formative changed to be a variety of small amount of production, to completely eliminate waste, improve production efficiency and cost competitive. For example, to increase production, one person can do kinds of multi-skilled jobs (Kawada Makoto, 1993)
Figure 2: TPS Structure
JIT & JIDOHKA
According to Figure 2 indicates that TPS is comprised of two pillars, JIT and Jidoka (automation). Bicheno (1991) states that ‘JIT aims to meet demand instantaneously, with perfect quality and no waste. Three key issues identified by Harrison (1992) as the core of JIT philosophy are: eliminate waste, involve everyone and continuous improvement (Kaizen). JIT approach, through rational design for make the product easy to produce and easy assembly. Essentially, ‘just in time’ manufacturing consists of allowing the entire production process to be regulated by the natural laws of supply and demand. Customer demand stimulates production of a vehicle.
In turn the production of the vehicle stimulates production and delivery of the necessary parts and so on. The result is that the right parts and materials are manufactured and provided in the exact amount needed. Under ‘just in time’ the ultimate arbiter is always the customer. This is because activity in the system only occurs in response to customer orders. In order to support its JIT system, Toyota needs to ensure that the supplier in accordance with the cost, quality and timeliness, with on time delivery and production, stringent quality control system to help Toyota to reduce inventory, also minimize scrap production, and reduce non-value-added operations to increase quality, save cost and respond market immediately by decrease lead time. It also played an important role to ensure working capital is fully available that make the company be more flexibility to explore new production. (Kawada Makoto, 2004)
Moreover, JIT emphasis on total preventative management (TPM), developed by total quality management (TQM). Toyota insists to regular maintenance activities, periodic inspection to equipment to avoid breakdowns and preventative repairs. Attention to the detection and control of each process, ensure found quality problems in a timely manner, immediately stop produce until resolved. On other hand, TPM encourage all employees involved and use their knowledge to improve performance. (Greasley, 2010) In Japanese ‘jidoka’ simply means automation. At Toyota it means ‘automation with a human touch’. The most visible manifestation of ‘automation with a human touch’ is using andon cord situated in the line to intervene any abnormalities occur.
‘One system for implementing a pull system called a kanban production system’. (Greasley, 2009) Kanban is the core in the JIT and it does not work without Kanban manage method. A kanban is simply a message. For example, in the assembly shop this message takes the form of a card attached to every component that is removed and returned when the component is used. The return of the kanban to its source stimulates the automatic re-ordering of the component in question. This system permits greater control over production as well as inventory via efficiency maximum. In Toyota process of produce, kanban is intended to convey information: “what is needed when it is needed, and in the amount needed!”(Lowson, 2002) The accurate number of parts allocation to avoid waste in the production process, thereby improving the manufacturing speed.
KAIZEN / CONTINUOUS IMPROVEMENT
Kaizen is the heart of the Toyota Production System. The day-to-day improvements that Members and their Team Leaders make to their working practices and equipment are known as kaizen. This is simply common sense – since it is clear that inherent inefficiencies or problems in any procedure will always be most apparent to those closest to the process. The sense of continuous improvement also can influence Toyota performance, such as quality directly. (Iyer, 2009)
Overall, TPS use JIT to eliminate inventory and develop close relationships with suppliers, eliminate all but value-added activities, reduce the number of job classes and build worker flexibility, apply Total Productive Maintenance (TPM) to increase productivity and ensure quality, thereby obtain faster produce speed and improve productions; avoid waste time and resource to reduce cost; Regards to integration of these five performance objectives, faster speed and low cost resulting to Toyota becoming more dependability and have enough capital to be flexibility. When a company can respond the customer required immediately that means it could be depend. Refers to the flexibility, when Toyota have large amount capital then the firm could use on the production innovation to explore more cars types to offer the market and develop cars capability to increase quality of productions. (Greasley, 2010)
In conclude, Toyota has good performances on speed and quality, thereby promoting the dependability to the customer, also this firm did great on the flexibility because Toyota keep introducing new types of car. The interrelationship between these performances takes a significant benefit for save cost, for instance, faster speed means efficiency to save time and labor source to avoid waste. Although Toyota is extremely successful carmaker, but the recall events in 2009 caused great impacts for it. The reason is the company eagers to rapid expand to the market, the quality of management and personnel training has not been followed up, and then resulting series of parts defects. Moreover, in terms of excessive cost cutting, cause quality of components cannot guarantee.
There have four suggestions for Toyota to developing performance: Firstly, Toyota in order to reduce expenditure in research and development via using general parts and components, but the manager have not realize technical innovation is the most important mean to reduce the cost of doing business, promote new products, the company should focus on technology innovation to be more efficiency and flexibility. Secondly, Toyota enterprises should pay more attention on After-sales service, the cost of these services is much lower than the recall and increase the sense of dependability to Toyota, such as Toyota car examination and driving lessons for free.
Thirdly, Toyota need to strengthen the staff training to avoid the quality defects occurs in the process of produce line. Thus, not only can ensure the cars quality and save cost without deal with the consequence from employees non-value-added activities. Finally, the company should increase more quality testing sections to examine new productions repeatedly. In general, the speed of produce car is quick resulting the production line easily ignore the nature of Toyota quality. Increase the quality inspection to insure Toyota manufacture superior products, which enhance the company production quality and dependability. As we known, quality is everything, if the company to seek a long term development then should be offer good products, not just focus on how to save cost thereby supply defective to the customer.
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