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Importance of operations management for an organization

In the broader context, operations management can be defined as, “the process of planning, organizing, leading and controlling the production or services right from the manufacturing to the supply chain management issues.” It is clear from the definition that, like all the other necessary functions of an organization including research and development, finance, marketing, human resource management, operations management is also crucial for the success of a company and is particularly related to the generation of product or services. This branch of management involves all the necessary components of management; planning, organizing, leading and controlling. In this particular document we will cover all these aspects of the operations management.

Importance of operations management for an organization will follow this section of introduction of operations management. In the upcoming sections the focus will shift to the quality management systems in particular. The whole document will elaborate different concepts of quality control systems with reference to Toyota Motor Corporation. The link of strategic objectives of the company will be followed with the performance operations objectives and the resources, systems and tools to support business process. The quality audit and review systems and the quality culture at Toyota will be discussed. Towards the end of the document existing and potential problems affecting the systems at Toyota will be identified. Recommendations for improvements in the working with the analysis of impact of all the given recommendations will end the effort of analysis of Toyota quality control systems.

Operations management plays a vital role in the success of any organization. It is the area of management which is concerned with creation of all the products and services of a company. The field is important as well as challenging and vital for all types of organizations ranging from manufacturing to retailing to services.

The concepts of efficiency and effectiveness of any organization revolve around the operations management. Managing operations is all about making the processes work right! Running the processes involves great degree of integration of organizational resources to the capabilities of workforce and supply chain management issues of the resulting output to get the product in the right place in the right way keeping in view the cost and time considerations. Operations managers are responsible to get the product manufactured or the service offered in the most appropriate way; serving the interests of both the organization and the customer.

Operations management supplements all the other activities of an organization. Research and development activity is focused on the developing a product that is the need of the customers and has enough market potential. The finance department is concerned with the cost considerations and can make projected statements or forecasts about the productions in terms of fixed cost, variable cost and overhead costs. Human resource department has got the task to hire people who have the appropriate knowledge, skills and abilities to meet the organizational objectives. It is the operations department which has to integrate all these functions. Making the product according to the proposed specifications, in the provided budget by utilizing the best of capacity of land, labor and machinery to produce a product which can make it easier for the marketing people to target the desired market segment is the task of operations’ people.

No single innovation promises an ever lasting competitive advantage for an organization. The secret to success lies in creating such a robust competitive advantage which has its roots in the processes; the processes for use of new technology, the process for using resources, the process for utilizing the current resources to generate new ones and above all the process for creating value. These all can be achieved only if the operations are managed in a way which makes a difference and creates the concept of differentiation right at the shop floor. This is what Toyota Motor Corporation is known for!

The history of Toyota is lined by continuous improvement in quality. Right from the founder of the company, Kiichiro, there has been a great emphasis on operations management and quality control systems. The story starts from the time when Kiichiro, during his visit to U.S.A., noticed that the budding automotive industry had huge growth potential and started the Toyota in 1920. The company has been known for a long time for its focus on quality management systems. The various systems associated with Toyota production system include 14 Priniciples, Kanban System, Kaizan, Just-in Time (JIT) and Jidoka; all of which make the Toyota Production System (TPS). TPS is considered as an excellent example of what is known as Lean Manufacturing System. Rest of this document will analyze all the production systems of the company with particular reference to the way quality management systems work in the organization.

Toyota Motor Corporation has announced following strategic objectives in its annual report of year 2009:

Achieving Market Leadership by Delivering Value to Customers

Bringing Toyota Quality to Every Subsidiary

Optimizing Cost by Kaizen

Respecting our People

Becoming a Good Corporate Citizen.

Now here we analyze these objectives one by one using one of the tools for strategic analysis, the SWOT (strength, weakness, opportunity and threat) analysis.

Toyota Motors has an established strength in the market in terms of its good will and is known for the durable products. Optimizing Cost by Kaizen is based on the strength of the company to utilize its expertise and learning curve experiences to minimize the cost while keeping the quality same. The company has knocked out many of its competitors out of the market on the basis of its competencies. The determination of Toyota Motors to strictly abide by the rules of lean manufacturing system is one of the strengths of the company which has enabled it to stay ahead of other automakers like Ford. The objective to optimize cost using its quality control systems is a manifestation of the pride of company in its system.

Coming to the analysis of strategic objectives of the company in terms of its weakness; the weaknesses need to be identified first. These include constantly changing patterns of demand of automobiles due to uncertain economic conditions particularly in countries where the company has its manufacturing units and the huge fixed costs which make it difficult to move plant from one location to another or even to liquidate the plant. The strategic objectives lack this dimension as none of them seems to give a notion that company is planning to handle such situations if they arise in near future. It may be because of the fact that world economy is back to its way but still the strategic objectives need to address this issue.

The building of objectives like Achieving Market Leadership by Delivering Value to Customers seems to be appropriate as it covers the strength as Toyota cars are known for their durability and are known for their long life as compared to the luxurious looks on one hand and realizes the opportunity to provide more value to the customers in terms of luxury and affordability as well.

Respecting our People and Becoming a Good Corporate Citizen are the objectives which represent the opportunity which Toyota has to grasp in future in order to stay competitive in the marketplace. The importance of role of human resource in today’s market cannot be denied. In all types of organizations, it is the recruiting and retaining top talent which makes the best utilization of other available resources possible. In multinational organizations, like Toyota, the workforce diversity is one such issue which can serve as a source of improvement as well as decline in the productivity of the company. A diverse workforce can contribute to well being of the organization by participating in the processes by giving diverse and creative ideas to bring out innovation. On the other hand, potential conflicts among various workers can work the other way round as well. The concept of corporate social responsibility is becoming more and more important for organizations which are striving to create and maintain positive and long lasting public relation efforts. The se two objectives are established keeping in view the contemporary organizational issues.

Considering Bringing Toyota Quality to Every Subsidiary, threat element is addressed to some extent whole developing the strategic objectives of the company. For a global business like Toyota, maintaining quality across all subsidiaries has always been a challenge. The possible threat for the automobile company which may arise is addressed in this strategic objective. However, some other potential threats, like competitive rivalry and product recalls are not addressed in any of the objectives.

After analyzing the strategic objectives of Toyota Motor Corporation, this section will address the performance objectives of the company and will elaborate how these objectives are instrumental in achieving various strategic objectives. The discussion will be focused on

Quality

Cost

Speed

Flexibility and

Dependability

Before going into the details of what are the objectives of Toyota Motors in the above mentioned areas, let us briefly discuss what the performance operation objectives are? These are the specific areas in which the performance and productivity of an organization is measured. Performance objectives are set according to the organizational goals and strategic objectives. The key to success in designing appropriate performance objectives is to keep in mind the rule of setting SMART objectives. Whatever the organizational goals might be, they cannot be met unless they are set according to the capability of the organization and its both hard and soft assets. Cost, quality and dependability are the three major elements in the production system of Toyota Motor Corporation.

Quality means that the product or service of the company must be flawless; there must be the best suitable procedure used for the manufacturing or in the creation of service. As far as Toyota Motor Corporation is concerned, the performance objectives in terms of quality can be best described by considering the records the company holds in terms of the quality of its cars. Toyota’s vehicles consistently rank near the top in third-party customer-satisfaction surveys. Being voted by many market research and surveys as the car of the year for several years it shows that, Toyota has a successful record worldwide. Because of the good quality Toyota’s success kept going, where in the year 1995, Toyota was the best car in the Middle East. Also, Toyota Motor Corporation has produced good quality cars that are quite and do not emit unpleasant fumes; as more than 40 emission-control systems and dozens of technologies that have improved passenger-car safety (Ahmed, A., 2003, Coursework). Therefore it is evident that Toyota pays deep attention to the quality of its products in terms of noise produced by the car and the fumes emission. At this pint it is noteworthy that although the presence of various other quality control systems assure the other features of the cars to meet the standards, enough emphasis should be paid on the quality and working of various parts of the cars which are imported from other countries or are manufactured in subsidiaries of the company in other parts of the world other than home country.

Speed means the time needed to supply the desired product or provide the desired service. In case of manufacturing organizations like Toyota, the speed performance objective means the time consumed in manufacturing one unit of product since its order was placed. The speed of delivery at Toyota can be illustrated by considering the following statement from the company regarding the timely production of cars:

“Efficiently producing vehicles with different specifications one at a time, in a timely manner while ensuring high quality: Vehicle production begins when the production instruction for an individual vehicle is issued to the first process step in the body plant. Various innovative measures have been implemented to efficiently and accurately produce individual vehicles with different specifications.” This shows the degree of importance which the company pays to the in time delivery of the product to its dealers and customers. There are three major elements in the production system of Toyota which make it possible to deliver the product in time; these include working facility, operators and supply of parts. These will be discussed in the next section with reference to how they play their part in supplementing the overall business process of the company.

The next performance objective is ‘dependability.’ This measures the degree to which performance of a company is dependant on the performance of its various stakeholders, rather external stakeholders in general and suppliers in particular. In case of Toyota, the dependence of the whole production system on the ‘just-in-time’ system of inventory management is an evidence of how the performance of company depends upon the input from suppliers. For Toyota, dependability means “To efficiently produce a large number of products such as automobiles, which are comprised of some 30,000 parts, it is necessary to create a detailed production plan that includes parts procurement.”

Next comes the turn of ‘flexibility,’ the measure of response a company makes to its dynamic and continuously changing environment. The performance objective of Toyota in terms of flexibility can be best elaborated by considering the three of seven guiding principles at Toyota Motor Corporation. These are:

 Foster a corporate culture that enhances individual creativity and teamwork value, while honoring mutual trust and respect between labor and management.

 Pursue growth in harmony with the global community through innovative management.

 Work with business partners in research and creation to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships

At the end of the section comes the cost objective. If we review the strategic objectives of the company the operational objectives become visible. The aim is to reduce cost by focusing on the core competencies of the manufacturer but not compromising on the quality and thus ensuring maximum value for the money of customers.

All these performance objectives seem to compliment the strategic objectives of Toyota. The quality, cost and speed dimensions address the strategic objectives of “Achieving Market Leadership by Delivering Value to Customers” and “Optimizing Cost by Kaizen.” The dependability and flexibility factors address the Bringing Toyota Quality to Every Subsidiary, Respecting our People and Becoming a Good Corporate Citizen objectives by being responsive to the industry environment and valuing diversity.

Of the resources, systems and tools used in the Toyota production system to support its business process, the human resources of the company and the operations management systems used are the key success factors for the company. Consider the following statement: “The Toyota Production System, with its emphasis on Continuous Improvement, the value of employee commitment and superior quality, would eventually be recognized as a true benchmark in the eyes of the global automotive industry.” This statement elaborates the fact that company places high importance to its people and systems while describing its success. The tools used by the company to support its business process is the set of principles which served as guideline to employees at Toyoda and now serve as blue prints of the current principles of employees’ organizational behavior at Toyota.

The just-in-time (JIT) inventory system and Jidoka are the two basic systems at Toyota Motor Corporation. At this stage when one is familiar enough with JIT, it is appropriate to define what is Jidoka? According to the description of Toyota, “Jidoka means that a machine safely stops when the normal processing is completed. It also means that, should a quality or equipment problem arise, the machine detects the problem on its own and stop, preventing defective products from being produced. As a result, only products satisfying the quality standards will be passed on to the next processes on the production line.”

Elements of Toyota Production System

Coming to the resources side, the human resources are the best example of resources which are serving the aim to support the business process. The tools employed by the organization to support its business process include the technology with the principles which lie at the bottom of shaping the way employees behave when they are a part of what is called ‘ the Toyota Production System.’

A quality audit system can be defined as, “an independent and systematic examination to establish whether quality activities and related results comply with planned arrangements. A quality audit is a form of internal audit, useful in the maintenance of quality control. A quality audit needs to look at effective implementation of quality arrangements and whether they are suitable for the achievement of objectives. It is an integral part of working toward a quality standard or a quality award.” In other words, “Periodic, independent, and documented examination and verification of activities, records, processes, and other elements of a quality system to determine their conformity with the requirements of a quality standard such as ISO 9000 is known as quality audit system. Any failure in their proper implementation may be published publicly and may lead to a revocation of quality certification. It is also called conformity assessment or quality system audit.”

The current quality management at Toyota uses the outside agencies services to check the quality of its products. The systems involve the use of ‘Kaizan.’ Kaizan is the quality control method which is associated with the continuous maintenance of quality at the workplace. Kaizan systems involve following stages:

 standardize an operation

 measure the standardized operation (find cycle time and amount of in-process inventory)

 gauge measurements against requirements

 innovate to meet requirements and increase productivity

 standardize the new, improved operations

 continue cycle ad infinitum. [known as the Shewhart cycle, Deming cycle, or PDCA]

The quality audit system that needs to be implemented at Toyota Motor Corporation is Product Development Audit System. The reason for this choice is the constant recall of the products which company has to face since a long time. These recalls are the manifestation of the fact that there are flaws at the product development stage which need to be addressed through proper internal quality audits at the very initial stages to avoid huge damages as in the case of Pirus. The process for implementation of audit process at the product development stage involves three stages:

Product development process:

In this phase, the audit should be conducted for development items, schedule of development, scale of development, estimated costs and quality planning measures.

Development project audit phase

At this stage of implementing the quality audit plan, the objective is to critically review the scheduling conditions, records of person-hours outcome, quality condition at each development level and management if the risks which emerge during the process. Any deviations from pre-set standards are monitored.

Development project risk

The audit at this stage aims to ensure the quality of the final product and development process in the development division. After this stage, the quality assurance unit needs to conduct the qualification test as a part of production testing process.

By adopting a quality audit system at the product development stage, Toyota can reduce the huge losses incurred after the introduction of the product in the market.

The quality culture at any organization plays an important role in the quality of products or services it produces. It can be defined as, “Company where all employees are keenly aware of the important of quality and continuous improvement.” The quality culture at Toyota is embedded in the production system and is exhibited in each and every function of the automobile manufacturer. The 14 principles of Toyota way determine the quality culture at Toyota. These principles can be divided into four sections which dictate the overall process management. These are:

I. Having a long-term philosophy that drives a long-term approach to building a learning organization

II. The right process will produce the right results

III. Add value to the organization by developing its people and partners

IV. Continuously solving root problems to drive organizational learning.

There are some areas in the Toyota production systems which need to be addressed. These include:

Lack of experienced middle managers

Low Quality supplies.

There is a huge potential for the development of improved quality control systems at Toyota. If the learning and development of the human resource is stresses even more, the productivity of the company can increase significantly. The second area where the opportunity for improvement in manufacturing is present is the development of more strictly controlled quality control systems in order to minimize the damages from recall of products.

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