The success of Toyota Motor Company is due to the unique reduction systems that focus on continuous improvement and just in time management. Toyota has created a decentralised structure that encourages employee participation and team working. Toyota incorporated concepts just as supply chain management and inventory management to create high quality automobiles and gain a competitive edge in the highly competitive global automobile market. Toyota’s success and its lean manufacturing philosophy have been widely studied. The Toyota manufacturing system is centred on achieving a high level of productivity.
The company has a unique approach to problem solving and it continuously trains its employees.
The Toyota Production Systems is based on the lean manufacturing philosophy that seeks to minimize wastages and centres on cost reduction. The Toyota manufacturing philosophy emphasises on quality management through a process of continuous improvement. This report looks at how Toyota created its manufacturing system and the role of operation management techniques to enhance efficiency. This report examines the production processes and philosophy and Toyota to assess how the company has achieved a competitive advantage globally.
The lean manufacturing philosophy pioneered by Toyota has become a benchmark for all manufacturing companies around the world. The lean manufacturing philosophy includes concepts such as customer relations, product design, supplier networks and operations. The lean manufacturing practices have made Toyota achieve low cost production and allowed them to manufacture high quality cars at lowered costs. This report looks at how operations management techniques such as supply chain management and inventory management have led to efficiency and profitability at the Toyota Motor Company.
The study of operations management looks at the production of quality goods and service. The aim of this discipline is to create efficient and effective business operations. Operation management seeks to ensure the efficient management of resources along with the distribution of goods and services. Operation management seeks to enhance manufacturing performance and this study has proposed various techniques and a heoretical framework to achieve this goals. These techniques include quality management (TQM), just in time (JIT) or Leaning manufacturing. Other concepts in the field of operations management include six sigma and supply chain management.
The competitive pressure for improved product quality has led to numerous operations paradigms emerging/ the most significant ones include Just in Time, Total Quality Management (TQM) AND Supply chain management (SCM). JIT seeks to eliminate waste and recue setup times, it also controls the material flows and focuses on effective resource utilisation. The TQM philosophy looks at developing a corporate culture that is customer focused empowers employees and seeks continuous improvement. The supply chain management integrates buyers and suppliers decision-making to improve the flow of materials in the supply chain. The JIT, TQM and SCM approaches improve the effectiveness and efficiency of the operations function (Kannan & Tan, 2005).
Toyota Production System (TPS)
The TPS lead to the lean production movement that emphasises on eliminating waste from value streams. This production system is highly standardised. The production systems have buffers that are controlled through various pull signals. The lean production is very efficient and greatly improves quality that has given Toyota an edge in the global automobile markets.
Toyota’s success as an automaker in the world is based on its expertise in creating a unique production system. This TPS is based on the principles of continuous improvement also known as Kaizen. The Toyota company has a highly decentralised workforce which is highly trained and takes part in the decision making process. The TPS consists of most successful Japanese production and work practices. This approach was developed by SakichiToyoda the founder of Toyota who pioneered the TPS. It was Taciichi Ohno that created the Just in Time (JIT) production systems. The JIT approach made Toyota more efficient and these techniques also incorporated total quality control, statistical process control and quality circles.
The Toyota manufacturing system is characterised by a continuous flow of production that allows the company to be flexible enough to adapt to the demand conditions. The JIT ensures that only the required materials for the production are acquired at the right time.The JIT systems also include human resources in the cost and production systems .Toyota has also streamlined its production processes through implementing Total Quality Management (TQM) process to lower costs and enhance quality (Amasaka, 2002).
The TPS is linked externally and to the entire production system, the main TPS practices are focused on detecting, assessing and eliminating sources of the entire production system. The sequential relationship amongst the external and internal links includes three types of interaction; the first is upstream integration which is between the external suppliers and internal suppliers within the firm. The internal integration is between the firm actors that own successive process stages as either internal suppliers and internal customers. The downward integration is between the internal suppliers that own the last process stage and firm’s external customers (Jayaram et al, 2012).
Figure 1 Structural links internal and external to the organization Source Jayaram et al (2012)
The problem solving framework at Toyota constantly evaluates the performance of the TPS by detecting any variance on the production process. The variance assessment includes part of product, people or personnel, procedure or method and equipment or machine. The system variation can result from product variation, poor quality or inputs, flawed design or misaligned processes (Jayaram et al, 2010).
Figure 2 Toyota’s problem solving framework. Source Jayaram et al (2012)
The employees can also lead to variations in the systems and performance owing to lack of proper training or motivation. Toyota has implemented a decentralised problem solving approach that empowers the works to make decisions. The principle of Kaizen is made possible with standardisation in the company. Toyota has standardised technical skills to ensure a flexible
staff in the company (Jayaram et al, 2010).
Just in Time Inventory Management
The Japanese automakers have been very successful in improving their productivity and efficiency by focusing on continuous improvement. JIT has evolved from continuous improvement paradigm. The JIT creates a flexible environment in which the whole organisation is responsible for eliminating waste.
Toyota Motor Company pioneered the just in time (JIT) production system during the mid-1970s the JIT production system is also known as the zero inventory production system. JIT manufacturing is a production philosophy that is based on three fundamental principles that include elimination of waste, continuous quality improvement, and a participative work culture.
The JIT systems become more efficient and used the Kanban as an information exchange tool for different production lines. Through using the JIT the wastages in the production process are minimised and the defect prevention system enhance the quality of the products. To improve quality and automobile exports Toyota implemented Total quality controls in the company (Dahlgaard & Dahlgaard-Park, 2006)
The lean production techniques have also be termed as the post Fordism system of work that is more efficient, humane and democratic. A central tenet of lean production is the concept of kaizen that is continuous improvement in the production process.
The concept of lean manufacturing originates in the Toyota Motor Corporations; resulted from scarcity of resources and intense domestic competition in automobile market in Japan. The lean philosophy incorporated the JIT production system and the Kanban method of pull production. Toyota also introduced the concept of respect for employees and team working (Hines et al, 2004).
Lean manufacturing involves inventory and quality control, industrial relations, labour management and supply chain management. Studies show that lean manufacturing reduces human effort by 50% along with the manufacturing space, tool inventory and improved financial performance. This manufacturing system also includes lean logistics that is the ability to administer systems to control the movement of materials, work in process and finished inventories at the lowest cost. To ensure long term competitiveness a manufacturing firm has to develop capabilities of JIT production and delivery. The suppliers have to be able to respond to the increasing needs of the customers. The lean production system requires rapid flows of information along the value chain. Toyota uses the Kanban system to achieve this along with computerised information that can be exchanged with the suppliers to reduce lead times (Wu, 2003)
Supply Chain Management
The supply chain management (SCM) is a key strategic factor for enhancing organisational effectiveness and achieving organisational goals. With the globalisation of the markets and increase in outsourcing companies use supply chain and logistics techniques to manage their operations. Toyota’s supply chain management approach focuses mainly on resources that were of critical importance. Toyota created a Keiretsu structure comprising of the dependent suppliers that worked in close proximity to the Toyota factories. The company outsourced aspects that were not critical to the ability of maximising the shareholder value. Toyota was able to create such a supply chain because the supplier was relatively dependent on them in highly contested markets. Toyota created an assembly based systems that was demand pull and JIT based, it had dominant power relationships with the suppliers. This allowed the company to be innovative and create a customised supply chain. Toyota also implements effective controls over quality, cost and innovation.The supply chain at Toyota can be described as entrepreneurial (Cox 1999).
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