Lean Services For Toyota Company Management Essay

Introduction

What is an operation management? Operations management is the area concerned with the efficiency and effectiveness of the operation in support and development of the firm’s strategic goals. Other areas for operations management include the design and operations of systems to provide goods and services.

To put it briefly, operations management is the planning, scheduling, and control of the activities that transform inputs (raw materials and labour) into outputs (finished goods and services). A set of recognized and well-developed concepts, tools, and techniques belong within the framework considered operations management.

While the term operations management conjures up views of manufacturing environments, many of these concepts have been applied in service settings, with some of them actually developed specifically for service organizations.

For example, good operations management can produce services which satisfy the customer and are produced efficiently. So the customers are getting value for money from their services.

Critically we evaluate the use of lean production and/or lean services for Toyota Company

The company philosophy (Toyota’s management) has evolved from the company’s origins and has been reflected in the terms “Lean Production” and Just In Time Production, which it was instrumental in developing. Toyota’s managerial values and business methods are known collectively as the Toyota Way.

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Lean production is a variation on the theme of efficiency based on optimizing flow; it is a present-day instance of the recurring theme in human history toward increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than uncritically accepting pre-existing ideas.

Lean production is often seen as a more refined as managers or management they are learning from their mistakes and make changes.

Basically, Toyota motor company has use this tool (lean production) seeks to look for waste and inefficiencies and eliminate them. Anything that does not add value, functionality, or quality that can be stripped out is removed from the production process. Continuous improvement by the shortest, fastest route possible is the ultimate goal.

It can provide a higher quality product for less cost than their competitor.

Lean production make everybody to work best, everyone in the supply chain needs to be more informed because the end result usually involves several manufacturers. If there is a communication breakdown, things will be less efficient.

If a process in the manufacturing is being unnecessarily duplicated in supply chain members, it can be eliminated if it does not contribute to the value, function, or quality. A smooth work flow is the only way to get the best results at the lowest cost. This is all the more reason for cooperation within a supply chain. Transportation, machine set-up, inventory, quality consistency and inspection, material handling, these all affect the work flow and are closely evaluated to achieve lean production.

Aside from cost savings, another benefit to lean production is that better use can often be made of smaller spaces. With solutions such as work cells, minimal movement of parts and assemblies creates better efficiency with less manufacturing space. Other suit include reduced defects, less handling, better on-time delivery, and less inventory or storage requirements.

Lean production can get higher quality products to market quicker, control their costs, reduce waste, partner with other supply chain members to achieve the most efficient work flow, and offer better value to the consumer while still making profit.

The essence of lean therefore is to create flow throughout the production system. The difference between ‘push’, ‘pull’ and ‘flow’ is described below:

Push systems – push work through the processes resulting in inventory build-up at each operation.

Pull systems – pull work from the previous operation and hence are likely to result in less inventory build-up.

Flow systems – a process that is seamless, the ultimate being continuous ‘one-piece flow’ where production flows one operation to another without inventory build-up.

Above you can see how Toyota Motor Company using Lean production makes the company to improve their quality: To stay competitive in today’s marketplace, Toyota Company understand its customers’ wants and needs and design processes to meet their expectations and requirements. Eliminate waste and reduced time in production and producing in a lower cost.

2. Toyota Motor Company how they managed waste in value chain

The value chain, a concept developed by Michael. E. Porter, is a useful tool for analysing the value adding activities of a company. Value chain is important for all companies, Value chain configuration increases competitive leverage by helping a company access resources and capabilities.

Identifying waste is when the company is asking the question ” What does the customer want from this process?” This defines value through the customer’s eyes, a process is observed and the value-added steps are separated from the non-value-added ones.

Toyota firmly believes overproduction is a fundamental waste. Producing more than what the customer wants necessarily leads to a build-up of inventory somewhere downstream. The material is just sitting around, waiting to be processed in the next operation. Big buffers lead to other suboptimal behaviour, like reducing the motivation to continuously improve operations.

By the time a defective piece works its way to the later operation where an operator tries to assemble that piece, there may be weeks of bad parts in process and sitting in buffers.

Lean production or JIT means removing, as much as possible, the inventory used to buffer operations against problems that may arise in production. Using smaller buffers means that problems like quality defects become immediately visible. This reinforces Toyota, which halts the production process. Workers must resolve the problems immediately to resume production. The requirement for working with little inventory and stopping production when there is a problem, introduces a sense of urgency among workers.

In mass production, when a machine goes down, there is no sense of urgency. The maintenance department fixes the problem while inventory keeps the operations running. By contrast, in lean production, when an operator shuts down equipment to fix a problem, other operations will soon stop producing, creating a crisis. So people have to scramble to fix problems together to get the equipment up and running. Moreover, they would try to get the root of the problem so that it does not recur again.

3. Justification how your recommendation will ensure increased competitiveness, long term sustainability and corporate social responsibility in Toyota Company resources:-

Slack et al (2001:70) identifies five performance objectives encompassing quality, speed, dependability, flexibility and cost that form a framework for competitiveness in both manufacturing and service industries. By improving the flow of work through lean manufacturing principles, Toyota has to know how improved performance can be achieved by adopting lean strategies that address each of the five performance objectives.

As we see how waste can destroy the operation and if the management don’t take notice they will be in bad situation.

The basis of lean is the elimination of waste in terms of excessive transport, inspection and delay. Five competitive indicators have been highlighted, notably quality, speed, dependability, flexibility and cost.

Quality, by using lean production will make improvement in the business by using Total Quality Management, Poka-yoke. Kaizen.

Speed, Reduced set up times resulting in reduced lead times. Single Minute Exchange of Die (SMED)

Dependability with the tool like Just-in-time (JIT), having the right parts, at the right place at the time needed.

Flexible: Toyota it will be very good to have ability to keep a steady flow without high peaks and valleys. It will be very good if their workers trained to be multi-skilled and machinery designed to be flexible.

Cost: a good flow in reduction in inventories and reduced costs throughout the supply chain.

By adopting lean principles and techniques, such as Total Quality Management, one-piece flow, improved process layout, integrative design, and the elimination of stock, organizations should be able to improve their competitive position. . Lean production results in higher productivity and profitability

Process and product standardization is the third attribute of a lean supply chain. It’s important to develop standardization across both processes and products for the reasons elaborated below.

Process standardization enables continuous flow that is, the uninterrupted movement of a product or service through the company’s system and to the customer. Major inhibitors of flow include work in queue, batch processing, and transportation issues. These roadblocks slow the time from product or service initiation to delivery.

Continuous flow needs to be accomplished with a “value stream” perspective, which means viewing processes in terms of how they add value to the customer. This perspective demands a shift from vertical to horizontal thinking. Horizontal thinking requires that managers look across the traditional vertical functions to integrate activities in a value stream that flows from suppliers, through the organization, and on to customers. This effort is facilitated by having processes that are standardized across the supply chain to reduce complexity.

Toyota should creating flow throughout the value stream with minimal interruptions leads to shorter lead times, reduced inventories, “while at the same time cutting defects and eliminating lots of costly steps and human effort”. From the customers perspective this leads to significant improvements in quality, cost, delivery and responsiveness.

Successful cultural change requires a clear roadmap. During times of change or uncertainty, employees want to know where things are headed. What does the future look like? What will I have to do differently in order to succeed? Done properly, a lean supply chain initiative can provide a “roadmap” that provides employees with that long-term perspective. It can clearly communicate the objectives and benefits of going lean. The roadmap then can map how the company will move from the “as is” condition to the desired state. And as with any major change management initiative, the lean roadmap must have the unconditional support of top management.

The final attribute of the lean supply chain is cross-enterprise collaboration. Through collaborative practices and processes, supply chain partners must work to maximize the value stream to the customer. To do this right, of course, it’s necessary to first understand how the customer defines value. Added services, regardless of how the supply chain partners view them, are of true value only if the customers understand and desire them.

Cross-enterprise teams are a major enabler of supply chain collaboration. In a lean supply chain, these teams are not functionally oriented or internally focused. Rather, they are oriented toward the whole supply chain and work toward solutions that benefit all of the members. The most effective teams comprise members from all of the end-to-end supply chain partner companies. The team members should represent all of the principal supply chain functions of plan, source, make, and deliver as well as the enabling functions of finance and technology.

4. Using Porter’s value chain as a template, create a framework that will assist a newly employed first-line manager in your organisation with the following:

To identify the types wastes in both primary and support processes

The Porter’s Value Chain (“Competitive Advantage”, 1985) provides a valuable tool for identifying ways to create more customer value. Every firm is a collection of activities performed to design, produce, market, deliver and support its product.

The Value Chain identifies nine strategically relevant activities that create value and cost in a business.

The Porter’s Value Chain Diagram

Primary Activities: Five Generic Categories

Inbound Logistics – are activities associated with receiving, storing and disseminating inputs to the product, such as material handling, inventory controlling, vehicle scheduling and returns to suppliers.

Operations – are activities associated with transforming inputs into the final product form, such as machining, packaging, assembly, equipment maintenance, testing, printing and facility operations.

Outbound Logistics – are activities associated with collecting, storing and distributing the product to buyers, such as finished goods warehousing, order processing and scheduling.

Marketing and Sales – Activities associated with providing a means by which buyers can purchase the product, such as advertisement, promotion, sales force, channel selection, channel relations and pricing.

Service – Activities associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply and product adjustment.

A primary objective of any manufacturing system is to sustain its purpose. An aspect of a Toyota’s purpose was being to grow sales and increase profit margins. But neither goal can be achieved without realizing and constantly improving the entire enterprise and manufacturing system design. A manufacturing system design may be thought of as an enabler to eliminate waste. To reduce true cost in a manufacturing enterprise requires the elimination of true waste. To eliminate waste, a system must be designed to expose waste. Many companies have attempted to target areas within their companies for waste reduction only to find waste re-emerging in another part of the business.

SUPPORT ACTIVITIES

These are activities handled for the entire organization by certain specialized departments, hence these are Staff functions.

Infrastructure covers the costs of general management, planning, finance, accounting, legal, and Government affairs that are borne by all the primary and support activities.

Procurement involves the sourcing of various inputs for each primary activity.

Similarly, Human Resources Management and Technology Development are specialized activities covering all areas of the firm’s business.

Support Activities: Four Generic Categories

Procurement – This is the function of purchased inputs used in the firm’s value chain, not the purchased inputs themselves. Purchased inputs include raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment and buildings. Improved purchasing practices can strongly affect the cost and quality of purchased inputs, and other activities associated with receiving and using the inputs and interacting with suppliers.

Technology Development – this refers to how every value activity embodies technology, be it know-how, procedures or the technology embodied in the process equipment. Porter terms this category of activities as “technology development” instead of “research and development” (R&D) because R&D has too narrow a connotation to most managers. Technology development does not solely apply to technologies directly linked to the end product. It also takes many other forms, from basic research and product design to media research, process equipment design and servicing procedures.

Human Resource Management – A firm performs myriads of activities related to recruiting, hiring, training, developing and compensating all types of personnel. Human resource management supports both primary and support activities (e.g., the hiring of engineers) and the entire value chain (e.g., labor negotiations). This management affects competitive advantage in any firm, through its role in determining the skills and motivation of employees and the cost of hiring and training.

Firm Infrastructure – This refers to activities including general management, planning, finance, accounting, legal affairs, government affairs and quality management. Unlike other support activities, infrastructure usually supports the entire chain and not individual activities. In diversified firms, infrastructure activities are typically split between the business unit and corporate levels (e.g., financing is often done at the corporate level while quality management is done at the business unit level). However, many infrastructure activities occur at both the business unit and corporate levels.

Toyota’s 7-wastes strategy these are

Inventory

Unnecessary transportation

over-productions

Motion

Defects

Over processing

Waiting

Linkages within the Value Chain and waste

Although value activities are the building blocks of competitive advantage, the value chain is not a collection of independent activities, but a system of interdependent activities. Value activities are related through linkages within the value chain. Linkages are relationships between the performance of one value activity and that of another.

Linkages can lead to competitive advantage in two ways: optimization and coordination. Examples of optimization include a more costly product design, more stringent materials specifications and greater in process inspection, which may reduce service costs. A firm must optimize such linkages in order to achieve a competitive advantage.

Linkages may also reflect the need to coordinate activities. The ability to coordinate linkages often reduces cost or enhances differentiation. Better coordination, for example, can reduce inventory throughout the firm. Linkages imply that a firm’s cost or differentiation is not merely the result of efforts to reduce costs or improve performance in each value activity individually. Much of the achievement is the result of linkages.

The ‘danger signals’ of each waste

Inventory- Inventory, be it in the form of raw materials, work-in-progress (WIP), or finished goods, represents a capital outlay that has not yet produced an income either by the producer or for the consumer. Any of these three items not being actively processed to add value is waste.

Unnecessary transportation- Each time a product is moved it stands the risk of being damaged, lost, delayed, etc. as well as being a cost for no added value. Transportation does not make any transformation to the product that the consumer is supposed to pay for.

over-productions- Overproduction happens each time you engage more resources than needed to deliver to your customer

Motion – This has significance to damage, wear and safety. It also includes the fixed assets and expenses incurred in the production.

Defects – Whenever defects occur, extra costs are incurred reworking the part, rescheduling production,

Over processing – This also includes using tools that are more precise, complex, or expensive than absolutely required.

Waiting – Whenever goods are not in transport or being processed, they are waiting. In traditional processes, a large part of an individual product’s life is spent waiting to be worked on.

How to respond to the ‘danger signals

According to Deming, management goals cannot be achieved by unstable systems. Waste can only be reduced when a manufacturing system has been designed to be stable. The attributes of a stable manufacturing system are:

Producing the right mix

Producing the right quantity

Shipping perfect-quality products on-time to the customer

The manufacturing system design must enable people to achieve the above objectives:

In spite of variation (internal and external) to the system

While rapidly recognizing and correcting problem conditions in a standardized way

Within a safe, clean, bright, ergonomically sound working environment for workers who are doing standardized work.

These attributes for a successful manufacturing system are discussed in a variety of writings. Cochran asserts that achieving these requirements defines a stable manufacturing system. Only when the manufacturing system is stable can waste be permanently reduced. When true waste is reduced, true cost is reduced.

Recommendations

Basically, Toyota motor company has use the tool lean production seeks to look for waste and inefficiencies and eliminate them. Anything that does not add value, functionality, or quality that can be stripped out is removed from the production process. Continuous improvement by the shortest, fastest route possible is the ultimate goal.

Lean production is a variation on the theme of efficiency based on optimizing flow; it is a present-day instance of the recurring theme in human history toward increasing efficiency, decreasing waste, and using empirical methods to decide what matters, rather than uncritically accepting pre-existing ideas.

The good operation management for Toyota will concern all activities involved in making a quality product or providing a good service. These are transformation process they convert a set of resources (INPUT) into services and goods (OUTPUT).

Toyota they have got a good supply chain these is from external suppliers to the external customers. That why they manage to control the waste in their organisation and have a good decision and making a good profit in their business by having good technology machineries and making their customer happy.