The once magic spell of Henry Ford’s T-modal and assembly lines is a long forgotten memory. In today’s highly dynamic market place the consumer cannot be satisfied with a black color ford. Today the global automotive industry is facing its toughest challenge of delighting the customer in an economical manner.
The Toyota motor company of Japan has taken this challenge seriously and has proved its ability to compete with the once emperors of the industry such as Ford, Volvo, Chevrolet et al. Buy careful adoption of cutting edge technologies such as Total quality management, Toyota has turned itself into a game changer in the industry.
This assignment focuses on how Toyota achieved its objectives using TQM. It unfolds in three stages starting with TQM and its scope. Secondly competitive environment analysis with SWOT and PESTLE analyses and finally it arrives at conclusion based on a thorough evaluation of the organization.
Toyota Motor Company (TMC) is the crown of Japanese auto industry. Started as a small car manufacturer on August 28, 1937 it gifted many quality innovations to the world throughout its history. In the early 1980s Toyota won its first quality control award in Japan.
The company launched its luxury brand Lexus in 1989 which became a massive success. It also manufactures Scion an economical automobile brand that targets young adults. Toyota also conquered the hybrid car market with the launch of its iconic car Prius in 17.
Today with a work force of 71,116 and an annual sale of US$228+ billion, Toyota is as profitable as all the other car companies combined. In 2007 it became the world’s largest auto manufacturer beating General Motors.
(Info – http://www.toyota-global.com/)
Total Quality management
Total quality management can be defined as
“A management psychology that seeks to integrate all organizational functions such as marketing, finance, design, engineering, production, customers satisfaction et al. to focus on meeting customer needs and organizational objectives.”
[Abstract Besterfield D, Michna Besterfield C, Besterfield Glen and Besterfield-Sacre Mary Total Quality Management (3rd Edition) (2002)]
The team of the organization that the TQM is implementing tries to take part in improving processes, products, services as well as the culture which they work. This approach is inspired by quality leaders such as Philip B Crosby, W. Edwards Deming, Kaonru Ishikawa and Joshep M. Juran.
According to Deming TQM involves 14 principles.
1. Create constancy of purpose
2. Adopt a new philosophy of cooperation
3. Cease dependence on mass inspection to achieve quality
4. End the practice of awarding business
5. Improve constantly, and forever
6. Institute training
7. Adopt and institute leadership for the management of people,
8. Drive out fear and build trust
9. Break down barriers between departments.
10. Eliminate slogans, exhortations, and targets asking for zero defects or new levels of productivity
11. Eliminate numerical goals, numerical quotas and management by objectives
12. Remove barriers that rob people of joy in their work
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation.
Today The concept of quality is significant more than ever before. The history of quality goes as far as 1920s to the times of gurus such as F.W. Taylor who is the “father of scientific management”.
It erupted in 1950s in Japan in a time where the Japanese were searching ways to boost their economy that was ruined by World War 2. By 70s high quality Japanese goods had flooded the US and European markets. It took 20 years for the west to catch up the Japanese quality system.
By today the growing global competition the quality has become a decisive factor and is inspired by changing customer needs. Today the customer is the person who defines the quality of a product. Quality management is important because achieving a higher quality is ever changing.
Also failing to meet the quality standards continuously would result in losing customers.
An organization can take many initiatives to assure quality of its products.
Standardization is one such initiative that assures quality. Standardization can be carried out by round interchangeability, variety reduction; improved communication of technical criteria, commonly agreed safety and performance parameters. Standardization applies to raw materials, testing, sampling methods as well as processes
Institutional learning is another way of ensuring quality. Here the training process for workers are recorded and will be used in the learning process. The learning forms such as lessons as well as good practices are the primary sources of the knowledge working process. The institutional learning process can be further enhanced through training workshops, evaluation material as well as electronic training media.
Also by way of knowledge management an organization can assure the quality of its products. Under knowledge management the capacity to retain knowledge, educational capacity, design and training methods, the training programs as well as qualified trainers are the majors concerns under knowledge management.
The fruits of knowledge management can only be picked when:
The learnt knowledge puts in to practice.
The knowledge is material in innovation.
Turning tacit knowledge in to explicit knowledge
Gathering and preserving knowledge from every possible source such as information, experience etc.
SWOT analysis is a method used to analyze the internal and external environment of an organization. Following is a comprehensive SWOT analysis of Toyota Motor Company.
- Toyota operates factories in US and China that led to increase in company profits since 2005.
- The organization through careful segmentation, Targeting and positioning offers the right product mix to the market.
- Toyota is highly efficient in its manufacturing which uses total quality management.
- Toyota has a strong brand name which is a house hold brand name all around the world.
- Toyota is excessively focused on US and Japanese markets. Thus suffers from fluctuating economic and political conditions of these countries.
- Toyota has few layers in its hierarchy and as a result there are few opportunities for promotions.
- Heavy emphasize on techniques such as kaizen has led to higher level of stress among workers.
- Toyota and Lexus has pioneered the environmentally friendly technologies. The world needs vehicles inspired by such technologies more than ever.
- The company is targeting the urban youth market which has a huge potential.
- The European Union is emerging as a world of opportunities for auto manufacturers. Toyota already has a large market share in countries such as Denmark, Finland, Ireland et al.
- Global recession has drastically affected the performance of the global auto industry.
- Rising gas prices due to the OPEC decision of price hike is a severe damage.
- In 200, 2010 the product recall of Toyota was estimated to be million units. This can have adverse effects the organizations reputation.
- Toyota faces strong competition from rivals. New entrants from China, South Korea and India are growing rapidly.
The PESTLE stands for
P – Political
E – Economical
S – Social
T – Technological
L – Legal
E – Environmental
Since it is a global organization Toyota needs to observe the global political situation. For the past few years Toyota has been enjoying from some of the governments key decisions. The government’s decision to limit vehicle imports to Japan and the US government’s introduction of quota system in vehicle importing eases the pressure of heavy competition from the outsiders.
The Japanese government has provided stimulus packages and tax reliefs to deal with the recent economic down turn.
The global recession has hit the global auto industry severely. With inevitable losses companies tend to cut jobs. The same is applicable to Toyota.
Due to sky rocketing cost of living people might be prioritizing the fulfillment of their needs at primitive levels. In such a background the industry might get a serious blow. Also during the past 5 consecutive years the global auto mobile sales in major markets have sharply dropped.
Social factors are vital in deciding the demand for a certain good. Throughout the past decade Japan is experiencing a growing adult population. It is estimated that by 2030 the 65 year old population will be 25.6% of the total population of Japan. Some critical changes in the age structure of the country can be observed. Also the country’s negative population growth rates provide serious implications for the business organizations. Because the shrinking population implies that the business organizations will have to face a shortage in skilled labor in the near future.
[Source Matsumoto Yoshiko Faces of Aging: The Lived Experiences of the Elderly in Japan ]
With the introduction of cutting edge production technologies adoption of such technologies in the auto industry can be widely seen. Use of robotics for production in Japan has become a major trend.
In this information age people have more ways to know about products which makes the present consumer a highly aware one compared to some decades back.
The development in World Wide Web led to many organizations going online. The organization will have to adapt to the new ground realities of online marketing to stay ahead of the curve.
Today although the free trade is been heavily promoted some key player in the global economy are following protectionism. Countries such as India, Brazil et al are imposing legal restrictions on foreign auto manufacturers in order to promote indigenous manufacturing.
With its recall of some of the car models in 2010 Toyota had to face several court cases over accidents occurred due to defect Toyota cars. It was reported that Toyota has paid $ 1.2 million in settlement of a case that was filed against the company.
The global warming and climate change has become a burning problem in today’s world. The changes in this regard have a major influence on the global auto mobile industry.
The global warming has insisted the global auto manufacturing firms to come up with less emission solutions. Governments all around the world are raising the standards and tightening the environmental laws on this matter.
In addition to the global warming problem the dwindling oil reserves in Middle Eastern countries which are expected to come to an end as soon as 2040s has urged the auto manufacturers to seek more sustainable and energy efficient solutions for the future.
The green marketing has become a major weapon for any organization competing in todays auto industry. Today the green products as well as green production methods has become a threshold in many cases. Thus any organization lagging behind its counterparts in green marketing is in the path to destruction.
Although the total quality management is widely adopted in today’s highly dynamic business environment Toyota motor company has its own version of quality management called the Toyota production system or TPS. The TPS includes just in time production which means manufacturing products in required amounts avoiding excess inventories Kanban and Jidoko or automation.
According to the field research done and published by Harvard’s Steven J. Spear it leads to the conclusion that Toyota has achieved a dynamic capability by following the ‘Rules-in-Use’ for
Organizational design, improvement, and adaptation.
[Source Spear J Steven Just-in-Time in practice at Toyota: Rules-in-Use for building self-diagnostic, adaptive work-systems Harvard Business Review Oct 2002]
The paper identifies that in TPS managed organizations every operation is performed by carrying out hypothesis testing experiments that makes accelerated generation and accumulation of individual and organizational learning about coordinating delegating, and performing work done collaboratively. This also includes work which is done repeatedly few times.
The findings adds literature by explaining the most tools that got lot of attention in the operations research process were trustworthy and were giving uninterrupted service without any malfunctioning.
Just in time
The idea behind just in time is manufacturing the required amounts in required numbers at the required time. For instance the assembly line of a car arrives all the sub assembly lines should reach the main assembly line in right quantities. This will eliminate the need for inventories thus removing the requirement for warehouses and storage facilities. As a result the inventory cost will be drastically reduced giving a higher capital turn out to the company.
The JIT manufactures quality products in an efficient manner by completely eliminating waste, inconsistencies and unwanted use of production lines. According to the JIT the Toyota by adhering to the following guidelines can manufacture a car which was ordered by a customer in a soonest possible manner.
No sooner an order is received for a vehicle the instructions as well as specifications of the vehicle reach the start of the production line.
The assembly line is stored with sufficient parts and components to enable the plant to assemble any kind of vehicle model without any delays.
The assembly line must replace the parts used by retrieving the same number of parts from the parts-producing process.
The preceding process should store a small number of all types of parts to manufacture only the numbers of parts that were retrieved by an operator from the next process.
Although it proves to be a success of following JIT method it is a complicated exercise at Toyota as its business involves hundreds of spare parts and components.
Although many believe that kanban is TPS, the kanban method exist to manage the just in time method. Simply it is an information system which controls the quantities in every process.
In kanban the required amount of units and types are written in a card called kanban. It is send to the people in preceding process to the subsequent process which connects many processes in a Toyota plant. This method is supported by followings.
Smoothing of process
Reduction of machine set up time
Standardization of jobs
Kanban uses two cards. One a withdrawal card and the other a production order card.
(Source – http://www.toyota-global.com/)
According to the above figure there are two operational flows as production instruction kanban and the operational flow of parts retrieval kanban.
In the production instruction kanban it involves 3 distinctive steps. Firstly a production instruction kanban A is removed when an operator retrieves parts. Then the numbers of parts that are indicated in the kanban card are only manufactured. Thirdly the kanban is attached to the newly manufacture parts ready for the next process.
Then the next process starts on the operational flow of parts retrieval kanban. The parts are transferred to this process from the preceding process. Then as the first step the parts retrieval kanban is removed when an operator uses parts. Secondly the operator carries the kanban to retrieve replacement parts. As the third step the operator removes the production instruction kanban and replaces it with a parts retrieval kanban. Finally the parts that are displaying the parts retrieval kanban are transported to the next process.
To gain maximum of just in time 100% good units must reach the prior process. And this process should continue without any interruptions. This means quality control must co-exist with JIT to get the best out of kanban.
The idea behind autonomation is built in a mechanism means to avoid mass production of defective items in product lines. It involves autonomous inspections for abnormalities in the process. At Toyota all machines are autonomous where every machine is attached with automatic stopping device. This avoids mass production of defective items and also alarms machine break downs if there are any.
The above theory also applies to the manual works at Toyota where an employee pushes the stop button if something abnormal happens in the production line. This would eventually cease the operations of his whole lines.
In order to detect discrepancies in the process a device called andon, an electric light board is hung very high in the factory that it is visible to everyone this is called Toyota’s visual control system.
The Toyota production system is a practical and effective as it popped out from the real life experience of the organization. This system is enriched with practical effects, actual practices and implications over the analysis.
This system has a vital role in developing the quality of operations of the companies all around the world. Even to this date hundreds of western companies are using the Toyota quality management methods which are a clear indication of Toyotas success.
Since Toyotas founding we have adhered to the core principal of contributing to society through the practice of manufacturing high quality products and services. Our business practices and activities based on this core principal created values, beliefs and business methods that over the years have become a source of competitive advantage. these are the managerial values and business methods that are known collectively as the Toyota way. – Fujio Cho, president Toyota
[Source Liker Jeffery, The Toyota Way, McGraw-hill, 2003]
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