Lean Management And Recall Of Several Toyota Models Finance Essay
What is Lean
Lean is a production practice that takes consideration of the expenditure of resources other than creation of the value for the end user (customer) to be wasteful, having a targeted elimination. What is ‘value’? With regard to customer’s perspective who consumes a product or service, value is defined as any process or activity that a customer will pay for willingly. Therefore, lean is focused on preserving value with less work. Lean manufacturing, generically, is a process management philosophy mostly derived from the Toyota Production System (TPS) and identified as Lean in the 1990s  2. It is known for its pure focus on reduction of the Toyota seven wastes helping to improve the value to the customer. We should keep in mind that as like any other process or system lean has also varying perspectives on how it is achieved at its best level. The Toyota for its steady growth has focused attention on how it achieved at its best consequently making Toyota from a small company to the world's largest automaker  .
What is a Product Recall? It is a request to return a batch or an entire production to the maker usually due to the lack of safety issues. This is way to limit the liability for corporate negligence and to improve the safety measure and/or to avoid the damage and losses to the customers and/or public. This process of recalling is heavily cost to a company because of replacing the recalled product or paying for damages but definitely less costly than consequential damages to the goodwill of the brand and the reduced trust in the company
Recently Toyota made different separate recalls of automobiles in the last months of 2009 and start of 2010. The two massive recalls were regarding the floor mat and accelerator pedal.
The first recall was made on November 2, 2009. It was about to correct a incursion of an out of place or incorrect front floor mat into the foot pedal of driver side.
The second recall was made on January 21, 2010. It was due to a defect causing unintentional acceleration  and it was identified as a mechanical sticking of the accelerator pedal. This recall was in connection with the first recall.
Purpose of the Report
The major purpose of this report is to establish a connection between the circumstances of Toyota recall and the lean system. Identifying the fact that why these recalls were made. Either these recalls were made because of the problems in lean or due to some other circumstances and under what conditions lean would work well.
Toyota Production System
The Toyota Production System (TPS), developed by Toyota, is an integrated socio technical system comprised of its management philosophy and practices. This system organizes manufacturing and logistics for the automobile manufacturer, including the interaction with the customers and suppliers.
The underlying 14 principles of TPS, or in other words the Toyota Way, outlined by Toyota are as follow  ;
Management decisions are to be based on a long-term philosophy and even they could be at the expense of short-term financial goals.
Problems can be brought to the surface by creating a continuous process flow.
Pull system to be used to avoid the overproduction.
Heijunka technique to be used i.e. Level out the workload.
Problems can be fixed and right quality at first time can be achieved by building a culture of stopping.
The foundation for continuous improvement and employee empowerment to be based on standardization of tasks and processes.
Visual controls are helpful to make sure that no problems are hidden.
Reliable and thoroughly tested technology should be used.
Leaders are to be grown to understand the work thoroughly, live the philosophy and transfer the knowledge to others.
People and teams are to be developed exceptionally who follow the company philosophy.
Respect the extended network of suppliers and by challenging them and helping them to improve.
Genchi Genbutsu - Go and see by yourself to understand the situation thoroughly.
Decisions making should be slowly and by consensus after thoroughly considering all options and implementing decisions rapidly (nemawashi)
Become the learning organization by relentless reflection (hansei) and/or continuous improvement (kaizen).
Toyota Production system is a major forerunner of the generic Lean manufacturing.
Lean and Toyota’s Approach
There are two different approaches for Lean. The first school of thought says that lean is a set of tools and it assist to identify the waste and then eliminating this steadily. This approach focuses on improving quality and reducing production time and cost by eliminating waste.
Some of the tools used in this system are;
Value Stream Mapping
The waste was originally categorized as under  ;
The second approach to Lean Manufacturing was promoted by Toyota. In this approach the focus is on improving the flow of work to make it as smooth as possible and hence steadily eliminating the unevenness through the system. The most common techniques used to improve flow include the following;
The advantage of second approach on first one is that it takes a system wide perspective and by implementing the smooth flow, the quality problems are exposed and waste reduces naturally. Whereas the waste focus approach, sometimes, assumes this perspective wrongly.
Toyota more systematic and abridged but most comprehensive approach towards lean is that main methodology to be used in Lean should not be the tools rather than it should be the reduction of three types of waste;
Muda - non-value-adding work
Muri – overburden
Mura – unevenness
This methodology would expose the problems systematically and the tools would be used where the ideal cannot be achieved. From this viewpoint, the tools are workarounds adapted in different situations, which explain any incoherence of the above mentioned principles.
The basic goal of both Lean and TPS is to reduce cost by the eliminating waste and these are somehow connected with each other based on competing principles and having same goal. These common principles include;
Long-term relationship with suppliers
Difference from TPS
Despite of the fact that lean is basically derived from Toyota Production System and the both systems are somehow connected with each others and have similar principles but still like other systems there are some difference between them. How lean is being differentiated from Toyota Production System? In depth we can say that TPS principles 1, 4, 8, 9, 11 and 13 are not reflected and/or different, significantly, in the Lean.
Although Lean is evolved from TPS and their principles are similar, but they are organized in different manners hence, the both can not always be identical and we can say that TPS is more than just a set of Lean tools. Lean and TPS are quite sophisticated techniques and the holistic approach is a key to the success of their implementation. We can also say that TPS is somewhat broader than Lean. So, now It is defined that both TPS and Lean as similar business philosophies; but however, TPS has more emphasis on the principles of the Toyota Way, while Lean is a continuous improvement methodology  .
In broader sense, we can categories these all these difference in three categories;
Management technique rather than change agents
Characteristics of Lean
Following are the characteristics of lean system along with a brief description of some  ;
Pull method of workflow
Quality at the source
Small lot sizes
Uniform workstation loads
Standardized components & work methods
Close supplier ties
Pull method of workflow
Pull method of workflow is a method in which customer demand activates production of the service or goods.
Quality at the source
It is an organizational effort to improve the quality of the products by having their employees acting as their own quality inspectors and by never passing defective units to the next stage.
There are two different approaches dealing with quality at the source.
First approach to implement quality at the source is to use poka-yoke. These are the mistake-proofing methods aimed at designing fail safe systems to minimize the human errors.
Second approach is a practice, called jidoka, and andon, that gives machines and their operators the ability to detect any the mistakes and/or the abnormal conditions occurred.
Small lot sizes
The goal of having a setup time, the time required for a group of activities needed to change or readjusting a process between successive lots, of less than 10 minutes.
Uniform workstation loads
Lean system works best if the load on individual workstations is relatively uniform. In manufacturing, this can be achieved by assembling the same type and number of units every day and this will create a uniform daily demand at all workstations.
Standardized components & work methods
The technique of standardized components is much more convenient for different products of the same brand to be used in all of them efficiently and cost effectively. The uniform work methods are also a useful tool of efficiency and low cost production.
Close supplier ties
This will helpful in reduced inventory costs, uniform quality and brand standard of products and trust worthy in time shipments of units.
The flexible workforce would help in reducing the labour overheads and the availability of employees whenever required like in busy production times.
Employees and equipments can be organized to provide uniform work flows through the process and the wasted employee time can be eliminated or minimized. Another tactic, one-worker multiple machines (OWMM) approach, can be used to reduce or eliminate setups.
Automation plays a huge role in lean and this is a key factor to lower the cost of operations.
Sort: Separate the needed items from unneeded items and preferably discard the unneeded ones.
Straighten: Arrange the needed items with the philosophy of having a place for everything and everything should be in its place and organize the work area so it will be easy to find what is required.
Shine: Clean and wash the work area after use.
Standardize: Establish the schedules and methods to perform the cleaning and sorting. Formalize the cleanliness to maintain the perpetual cleanliness and a state of readiness.
Sustain: Create discipline to perform the above four practices, so everyone understands, obeys, and practices these rules at work place. Implement mechanisms to sustain these gains by involving staff and recognizing them.
Advantages of Lean
There are several advantages of lean and could be summarized as under  10;
Reduction of manufacturing time. Thus, helping companies retain, maintain and increase their earnings, spreading wide their margins and generating savings.
Saving of working space. It is estimated that by adopting lean techniques and strategies it will help to reduce the physical floor space requirements by as much as 5% to 30%.
Boost and increase manufacturing productivity by as much as 75% to 125%.
The elimination and/or reduction of wastes.
The most benefited advantage of lean is customer satisfaction. When customer satisfaction is achieved, sales will rise automatically.
Another advantage is streamlined, rationalized or lean structuring of the organization.
The cultures are standardized, thus, unfavorable practices and behaviors of both the employees and the management are reduced.
Fewer inter departmental moves, shorter travel distances, and simpler routes and route structures
Large number of smaller lot size rather than small number of larger lot size and shorter queues
Adopt make to order policy rather than make to stock resulting in more inventory turnover
Reduced throughput times and equipment utilization
A cellular layout allows simpler scheduling approaches such as kanban
This focuses responsibility and motivates the team to avoid similar defects in the future.
With teams and work cells quality is more likely to be self-enforced and the team spirit motivates quality improvements
Cellular layout helps in fast and positive communication, enhanced team work, positive and intrinsic motivation, broad skills range and easy and localized supervision
With respect to customers, it helps in quicker response, easy customization, quick and reliable deliveries and consistent high quality.
Problems of Lean
Although there are a lot of advantages of lean as discussed above but despite of these advantages there could be some potential problems of lean as well. Sometimes a person and/or system can be a victim of his/its own success. Therefore, some of the advantages of lean could be potentially disadvantages. It is not necessary that all of the advantages would be potential disadvantages but they might and/or might not be.
Some potential problems of lean could be these one;
Reduction of manufacturing time may cause to overlook some important safety and security issues.
The possible side effect of streamlining could result in fewer options available.
Standardization might give rise to quality issues and the products would not be up to standard.
Use of Common parts across different products to save the cost.
Cellular layout might cause to limited knowledge and might restrict the sharing of knowledge.
The complex and new technologies, to win the race, sometimes make harder to diagnose the problems and risk involved at early stages.
Flexible work force could better to achieve short term financial goals but it would not grow leaders or teachers.
Circumstances of Toyota Recall
Recall is a request to return a batch or an entire production to the maker usually due to the lack of safety issues. This is way to limit the liability for corporate negligence and to improve the safety measure and/or to avoid the damage and losses to the customers and/or public. This process of recalling is heavily cost to a company because of replacing the recalled product or paying for damages but definitely less costly than consequential damages to the goodwill of the brand and the reduced trust in the company
Recently Toyota made different separate recalls of automobiles in the last months of 2009 and start of 2010.
The summary of recall data is given during this current recall scenario is as under;
Date of Recall
November 02, 2009
Floor mat 
November 26, 2009
Floor mat including brake override 
January 21, 2010
Accelerator pedals  14
January 27, 2010
January 29, 2010
Accelerator pedals 
February 08, 2010
February 12, 2010
Front drive shafts 
April 16, 2010
Spare tire carrier cable 
April 19, 2010
Stability control system  21
April 28, 2010
Stability control system 
May 21, 2010
Steering system software 
Toyota recalled almost more than 10.5 million (10,547,009) vehicles from November 02, 2009 to May 21, 2010 because of different problems in the vehicles. Out of these 10,546,809 vehicles, almost 9.4 millions vehicles were recalled because of the most dangerous safety issues of Floor Mat and Accelerator Pedal.
Is Lean Responsible
Toyota can trace its problems since 1996  . This biggest ever recall brings up many issues that what happened with the safest vehicle manufacturer. So, there are many questions that need to be addressed. what went wrong? What happened? What are the inside stories? Why did these defects remain for so long? Did the company loose control on core Lean values and principles? Did Toyota was very conscious about Lean and become too much focused? Were the company employees very confident about Lean or they interpreted the core values wrongly? Some school of thought thinks lean as culprit others think it is just greed to earn more money and to ignore the safety precautions.
From the detailed study of lean, its characteristics, advantages and problems Lean can be described in the simplest possible words as a method by which companies can reduce the overall cost by minimizing and/or eliminating unnecessary steps in a process and by controlling inventories.
The Wall Street Journal says that eliminating overlapping parts could have a major contribution towards the recent recall.
The Lean created by Toyota has spread to almost all over the world and is being taught to the concerned personnel that how to implement this to achieve the reduced cost and eliminated waste. The financial benefits from lean could be huge. Last year Sony implemented a procurement plan in the line of lean system and saved a huge sum of $5.5 billion. Hence, the companies might think appropriate to sacrifice some safety issues for this kind of incentives by implementing lean because companies make profits and that is the bottom line of any business.
Lean is a philosophy and contributed for so long and can not be dropped off easily at any time because it made Toyota a legend not only for automobile industry but for other industries as well. Toyota is being investigated to assess that if the management knew these problems beforehand and overlooked or there were some other problems.
The labour union of Toyota aired fears on safety and they accused the company of sacrificing the safety features by curtailing the vehicle safety tests and hiring of thousands of irregular and short term workers  .
They also said that the company put aside the vital processes to safe auto making to save cost and to compete with the market challenges.
In 2004 Toyota had more than 12,000 short term irregular workers. These were almost 40% of the total production force. These numbers dropped down with the passage of time and because of financial crisis but still they have 2,200 workers.
Cutting cost or eliminating waste is the core principle of Lean. Infact Lean is based on elimination of waste but there should be tradeoff between the cost reduction and quality issues as first and foremost characteristics of Lean is quality at source. Furthermore, Lean emphasis on flexible labour and also emphasis on quality at source by having their employees acting as own quality inspectors. However, in this situation the short-term irregular workers can not be well trained enough to act as quality inspector. In other sense, one principle of lean is contradicting the other.
After reviewing the literature thoroughly and analyzing the literature and the possible causes suggested by others we believe that Lean is responsible to certain extent for this recall and rest was management and/or employees overriding and misinterpreting the Lean core principles. Hence, we conclude as follows;
Lean is contradicting its own principle of quality at source by having flexible labour. We believe that the short term irregular workers can not act as own quality inspectors because of insufficient training, lack of motivation, lack of responsibility and lack of ownership.
Lean should include TPS principle 9 to grow leaders. This would make Lean a more powerful system than now.
The elimination of waste is the key point on which Lean is based but this should not be misinterpreted with the reduction of cost.
It’s not Lean but management who is responsible for having and/or maintaining a trade off between the cost reduction and safety measures.
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