Toyota Contemporary Business and Management Assignment Analyze TQM

Issue

Toyota massive recalls and quality issues have become the serious concern for the company total quality management principle “Toyota Way”.

Toyota company overview

Toyota came into existence from year 1867 with headquartered in Japan. Toyota moved its some operation in 1957 to North America sub division. The company’s main primary business is in automobile production. Toyota has brand name and the company became the market leader in the auto sales. The Toyota has geographical presence around the world in North America, Europe, Asia, Africa, Latin America and Middle East. The Toyota sales and production graph is shown below for geographically location of Europe. This graph shows the market position of Toyota from year 2005 to year 2009. As it is shown in the graph Toyota has major portion of market share in auto industry and the Toyota is loosing the edge of leader as the graph shows the sales in 2009 is going downward. This sales trend is not a good sign for the Toyota future and shows the some problems facing by Auto market leader. (Toyota, 2010c)

Europe market Sales history

Ultra Luxury

Bentley, Ferrari, Lamborghini

The auto industry overview can be summarized in the strategic groups of market makers in the auto industry are shown in the graph below.

Luxury

Acura, BMW, Lexus, Mercedes, Porsche

Cost/ Price

Mass Market

Chrysler, Ford, GM, Honda, Hyundai, Nissan, Toyota, Volkswagens

Prestige

Toyota has a long history of success and it is usually termed as the most profitable automaker and provides best auto performance in the industry. In 2007, Toyota sold 9.4 million vehicles globally only about 3,000 fewer than General motors (GM)

Toyota quality issues

But with series of success and market reputation, in recent years, Toyota has facing serious issues with quality, defects in cars and massive recall of different models around the world. All these issues have put a serious concern for the reliability on Toyota model. The sales have dropped and Company is facing series of law suits and challenges with more recalls. Toyota consumers are not very happy with quality issues in Toyota product. (Kageyama, 2010)

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Literature Review

TQM concept is utilized around the world by organization to achieve the competitive advantage and to get improved financial results. (Edge man, 2006) TQM concerned about the total quality management of the organization from supplier to customer. Edward Deming provides 14points on how to implement TQM in the organization. In literature it is also used Japanese term Kaizen for the continuous improvement to achieve goals and improvement in business process. (Heizer & Render, 2008, p.198-200)

The points are listed as below:

Create consistency of purpose

Focus to bring change

Build quality into product and service

Build strong ties based on performance

Continuous involvement in quality improvement activates

Start training

Emphasize leadership control and management

Drive out fear

Break down barrier between various departments to promote open communication.

Respect workers

Provide support, help and understanding

Remove barriers

Promote education and program of improvement

Put everybody in workforce in the transformation track

To analyze the problems with Toyota, let’s contrast the Toyota TQM program named Toyota way with these 14 principles to determine the reasons for the quality issues. Toyota way is guiding principles prepared by the president of Toyota Group Fuji Cho (2003). The principle states that these principles are tools for people and the principles are more centric for people suggestion that actually bring the improvement and quality in production and service.( Fuji Cho, 2003)

14 principles of Toyota Way

Comparison with Deming Theory

Make decision based on long term strategy even in case of short term loss

This is according to Deming principle of quality improvement.

Right process will produce the right result

Use pull production to produce only what is needed basically lean production strategy

Level out work and eliminate waste

Toyota laid the foundation of building first time right quality so that it does not need any future fix

This is according to Deming principle of quality improvement

Standardized task for continuous improvement and employee empowerment

In accordance with Six Sigma and Deming Principle of TQM

Use visual control so that no problems left unseen

Use reliable and tested technology to serve people and process

Develop leadership quality in employees and add value to organization

This is according to Deming principle of quality improvement

People should follow your company philosophy

Respect and help networks of partners and suppliers to improve

This is according to Deming principle of quality improvement

Solving the problems from root

Make decision slowly but implement it fast

Learning organization with continuous improvement

This is according to Deming principle of quality improvement and Six Sigma implementation steps

The various components of TQM to make the effective TQM program are listed below:

First component of continuous improvement is already taken care by Toyota Company. Toyota principle also focuses on eliminating the waste and utilizing lean production system. Toyota philosophy is to produce in amount which is needed. Just in time will eventually helps to cut the costs of quality, improves quality and lastly, better quality ends up with less inventory and better control over system.

The next component of TQM is Six Sigma and it is focused on strategy to bring customer satisfaction. It describes the process, design, product in high capabilities and in more statistical sense. Sigma and its symbol means standard deviation and this particular component is used to minimize the production defect.

Six Sigma Process: Source Dilioa.2009

Six Sigma has five step implementation process abbreviated as DMAIC. It means define, measure, analyze, improves and control the quality process. The diagram shown below illustrates the process of Six Sigma

Six Sigma Management Kit

Toyota has utilized this component of employee empowerment. Toyota has a strategy to involve the employees in every step of transformation. The main focus is given on the process improvement and providing more responsibilities to employees and authority so that they perform better.

Next component of Benchmarking defines the standardization of process, service, cost and practices. The benchmarking development process involved determine what needs to benchmark, form a team and identify benchmarking partners, collecting information and analyze if the process is correctly define in terms of benchmarking and lastly, match the process to the level of benchmarking (Heizer & Render, 2008, p.201). Toyota did implement the standardization of process but, the internal benchmarking should be more consistent and inclined to remove any barrier in case of different geographical sub division like Toyota has around the world.

Taguchi concept believes in the fact that quality issues arise because of poor design of product or process. The concept also aimed to improve the quality by utilizing quality robustness, quality loss function and target oriented quality. Robustness means consistency in the production process to meet the consumer demand. Quality loss function is a mathematical relationship illustrated by equation

L = D2C

Where L = Loss to society

D2 = Square of distance from targeted value or quality

C = Cost of deviation at the specification limit

In other words, this function identifies all cost related with poor quality and show how the cost increase as the product quality align with customer needs. The diagram shown below illustrates the distribution of specification of products produced. Target oriented quality is mechanism to bring the product to target quality through continuous improvement in process. (Heizer & Render, 2008, p.203)

The Taguchi Loss Function

The last component of TQM is to have proper knowledge and training of using TQM tools. There are seven TQM tools defined as Check sheets, Scatter Diagram, Cause and effect diagrams, Pareto Charts, flow charts, Histograms and Statistical process control (SPC). (Heizer & Render, 2008,p.204)

Conclusion

Toyota lacks several Deming principles and six sigma implementation steps in its program Toyota way. There is no education and training program for the employees. Also, there is no communication strategy within the various sub division of the organization. There is no program to remove the barrier and to provide openness in the work environment. The company principle lacks behind in providing any vigorous education program to bring change in form of quality improvement. Toyota way principle has also not catered fully all the aspects of six sigma component in their guiding principle.

Recommendation

Based on the analysis of TQM and Six Sigma concept Toyota needs to bring some major strategic changes in there processes to handle the quality defects and recall issues. Toyota needs to revise its Toyota Way program to focus more on the quality management. Although, its process and product whose standardization effect the performance.

But, after this analysis it can be recommended that it is people who run those processes and they also need to give special attention for the standardization service to bring quality in product. Toyota has already undertaken the need for quality process, but it should also bring knowledge propagation, education and training for employees to bring consistency and quality in their work. The controls and performance measurement program should be made more vigorous to meet the customer expectation and gain the competitive edge as before Toyota has.

The knowledge and training of TQM tools and other education program to increase the quality performance of Toyota product should be provided to employees on regular basis. The other issues related to quality improvement can be resolved by increasing the frequency of communication and company strategic philosophy in different geographical regions around the world.

The company has already taken crucial steps to handle this problem by executing these three major steps. First, Toyota has unleashed the program “Toyota way” which consists of its core-value and respect for people principles. Toyota has also announced to provide massive training program around the world in various production facilities. In the last effort Toyota has emphasized on the facilitation of knowledge transfer and learning across its all sub division. (Toyota, 2010a)

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To sum up, Toyota is on the right track to fix the quality problems and company needs to have better control and supervision of this improvement process. Toyota restricting effort is in accordance to the Total quality management principle and it would benefit Toyota to regain the confidence of customer and improve quality standards in its production. Toyota has renowned name in auto industry and this research report supports the Toyota actions to correct the quality issues.