In 1933 company was founded by Kiichiro Toyoda. In 1934 department of Toyota industries manufactured first product the product called Type A engine and its first passenger car AA in 1936. Toyota bought some other companies also and own and operates Lexus, Scion, Daihatsu and Hino Motors and shareholdings in Fuji heavy industry, Isuzu, Yamaha, and Mitsubishi Aircraft Corporation. All these and some other in total includes around 522 subsidiaries.
Toyota is headquartered in Toyota City, Aichi and in Tokyo. Instead of automobile Toyota also provides financial services through its division Toyota Financial Services and also builds robots for different industries. Toyota Motor Corporation its financial services and Toyota Industries all together form the bulk of the Toyota Group and one of the largest conglomerates in the world.
Toyota is worldwide famous and well known company because of their high quality manufactured cars, Toyota is doing very well and growing very fast globally they have their operations, manufacturing facilities and valuable loyal customers all over the world. The new technology Hybird in Toyota cars gave a new pride to Toyota and the sales of Toyota going up day by day. In last few years Toyota became number one in automotive industry and became a number one in mostly selling their cars worldwide. Below chart shows the figures of manufactured cars in 2008 and the chart is showing other companies production also.
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In 2008 Toyota overtook GM and automotive industry announced Toyota the world biggest carmaker. But after that complains started arising and more customers stated blaming about the quality controls because of their rapid expansion. Due to the rapid expansion they recalled more than eight million cars in year 2009 the brake and accelerator defects and bearing, defending their selves against 98 lawsuits due to the deaths, injuries and damages happened to customer who were using their cars.
http://news.bbc.co.uk/1/hi/8626668.stm
Toyota products were in high demand worldwide and they had a time when they felt they might not be able to meet the demand of customers but they were selling as normal routine and increase the production with huge volumes and increase the manufacturing speed. Contacted and started working with more suppliers for different parts which they are use to buy from different suppliers. Toyota Executives and Mr. Akio Toyoda had a strong feeling that working with new and more suppliers might give a bad impact for their quality and they might not be able to control well. They had very busy and high demand for their cars instead of finding good solution to cope this situation they didn’t go for more alternatives like booking, reservation for cars instead of doing this they gave focus on rapid expansion.
Rapid expansion met the demand of customers but on the other hand gradually they started receiving complains from their customers. In one period they were aware of the problem but they didn’t recover it and took it easy which later returned back as a big problem for Toyota and did huge quantity recalls which cost a lot.
Rapid expansion helped but put them in big problem also they lost the quality control and the spare parts purchased from different suppliers were the big problem also. They have basically three types of suppliers:
Tier One Suppliers
Tier Two Suppliers
Tier Three Suppliers
The car makers manufacturing system is known as Original Equipment Manufacturers, or OEM. After OEM system then they reply on Tier One Suppliers, Tier Two Suppliers and finally Tier Three Suppliers. Tier one supplier such as Bosch, Denso, Continental, Delphi, Valeo and Tenneco. These companies deliver big integrated system directly to the OEM. Tier two suppliers provides individual products to Tier one or directly to OEM. Tier three supplier make single products and deliver to Tier two suppliers. Due to the high demand of products the supplier did big mistakes and put Toyota in big problems. The unintended acceleration was problem happened because of the Tier Two Supplier. In Tier one supplier category they have few suppliers and they never faced any problem while working with them. But on Tier Two and Tier Three they have thousands of suppliers around the world which is quite hard for Toyota to control closely to all of them.
OEM working smoothly closely with Tier One Suppliers but facing many problems with their thousands of Tier Two Suppliers and Tier Three Suppliers. These problems are increasing and they are losing market grip and the customers trust because of these kinds of inefficiencies and less quality control standards.
Toyota Lean Production System
Lean Production/Manufacturing
Lean production is a model followed very well by Toyota which helped a lot to improve their working conditions and helped them to save time and money. The main concept behind this word lean is more outputs against less input in less time. The main sources of this less input are money, work force, working space, inventory and time. These wastes needs to be eliminated, in other words lean production means to minimize the waste and make easy, simple steps and speed up the working results.
Toyota Production system called as lean manufacturing also because they introduced and worked on this concept of saving extra wastages. The system eliminates the overproduction, waste, useless transportation, inventory, motion, defective goods, over processing, waiting and implementation of the concepts like continuous flow and customer pull. The major areas which are very considerable and main causes are:
Quality
Delivery
Safety
Costs
Morale
Diagram showing components of Lean Production System
Advantages of Lean Production
Lean manufacturing helped Toyota to achieve many targets with the help of this system they achieved many benefits which helped them to save money, time and work force and many other factors also that indirectly strengthen the company and help their market share grow worldwide significantly.
Within few years the lean production helped them to reduce wastages by around 80% which is very high for this type of big company, production costs were reduced by 50 percent and manufacturing cycle time decreased by around 50 percent also. Inventory reduction reduced significantly which helped them to save space for storing and work force decreased by 50 percent also.
These reductions encourage them to increase facilities for employees and customers, improved the working environment. Friendly, comfortable working environment encourage employees and it helped to have higher quality and higher profits. They achieved many benefits through great system flexibility, more focus and good flow of shipping and billing frequencies.
Below mentioned chart illustrates very clearly the different between the traditional manufacturing system and lean manufacturing system. Production system of 20th century was recognized as a mass production system of Toyota and lean production system is taken as 21st century production system.
Toyota Production System (TPS)
TPS based on 7 basic principles which really helped them to have good approach to meet the demand and in a good satisfied manner. The principles they followed tried their best to reduce setup time and to have better quality focused on small lot productions. Encourage and involved employees gave them job security and rights to involve and give full participation and their thoughts for improvements, quality increment and maintained the equipments with great new changes. Involvement of suppliers of all three types and the pull production is a part of those 7 basic TPS principles.
http://www.1000ventures.com/business_guide/lean_production_main.html
Toyota Supply Chain Management
Supply Chain Management
Any company manufacture products and at the same time buy products from different suppliers and then these products sold to their customers, this procedure called supply chain. Supply chains are simple and difficult too depends on the company size and the products produced by them. There are some elements involved in supply chain which are customer, purchasing, planning, transportation, production and inventory. Those people who manage all these procedures involved in this case known as supply chain management.
To make it sure that supply chain operating are efficient and producing high level of customer satisfaction and trust at low costs, companies adopted supply chain management technology and processes. The three basic activities involved which company follows which are:
Operational
Tactical
Strategic
To make it quicker companies bought and use special technology software which helps to have quicker information between customers and suppliers. ERP, SAP and Oracle are mostly used to give and take latest updates.
http://logistics.about.com/od/supplychainintroduction/a/into_scm.htm
http://www.mhprofessional.com/product.php?isbn=0071615490
All major automotive companies use supply chain management and lean production system. The rapid expansion gave big impact on its supply chain, when the requirement to expand the supply chain it meant they need to work with many unfamiliar and new suppliers who was not aware and don’t had deep understanding of the culture of Toyota.
In 2008 Toyota used parts which were not completely controlled and the chain didn’t focus that much because of the rapid expansion and high demand.
http://www.economist.com/business-finance/displaystory.cfm?story_id=15576506
The company did a big mistake too highly depending on the supplier which are outside Japan, it would be better to have few suppliers and near and in approachable market where they can control easily. Toyota needs to have closer monitoring on supply base especially for tier two and tier three supplier. Due to the rapid expansion the supply chain also disturbed because of many reasons, it’s hard to work with new supplier suddenly and who are not aware well to our company structure and culture.
http://forums.industryweek.com/showthread.php?t=14131
Success
Lean production system, supply chain management and the concept of product life cycle which is well followed by Toyota helped Toyota to reach the highest level in automotive industry.
Other inspirations within organization also make a big contribution like an internal blog, rewards, hold creativity and ideology sessions, give positive feedback and respond to suggestions, celebrate on success, encourage risks & celebrate failures too, use of mind maps, mix up work teams, understand consumer behaviour and innovation links to Jobs.
http://news.bbc.co.uk/1/hi/business/4015831.stm
http://videos.cnet.co.uk/39042972.htm
Recommendations
Toyota OEM is working closely to their Tier One Supplier and having good results, few suppliers come under Tier one category they have long term relations and never faced any problem regarding quality or other related issues. But Toyota has faced many issues and still facing and having problems with their Tier two suppliers and tier three suppliers. During rapid expansion they increased the quantity of suppliers and they were not aware completely about Toyota cultures and Toyota even could not check and focused that well on their supplies.
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They did a big mistake to reply on new and thousands of suppliers in Tier one and Tier two categories and other big mistake was they replied on those suppliers which are outside Japan. I would say it would be great if they take extra time for deliveries give more attention on lean and supply chain. Try to decrease the number of tier two and tier three suppliers try to list them and have few which are according to the Toyota standards. Give more focus on quality controls and the team must make sure there will be no space for recall after handover the vehicles to the customers.
Chapter 3: Conclusion
In short Toyota is doing well in the market and going at the highest level of their successes. Enjoying being number one in the automotive industry, ranks number one in highest units selling cars worldwide. Regularly struggles and keeps trying bringing innovation to their products helped them to be number one innovative company in the world.
Toyota Prius Hybrid innovation gave more value to Toyota Corporation, after introducing Prius I and II finally they introduced new Prius III with many more facilities and functions for drivers to enjoy the journey and daily life on road while travelling to jobs, offices etc. Overall if you see they are doing well but from 2008 after rapid expansion and when they took over GM after that they started facing issues and complain. They are trying their best to cope and tackle this hard time, recalling all vehicles which parts are needed to exchange and working to get quality promised parts form their tier two and tier three suppliers.
List of Sources
Internet:
Manchester Business School [Online] (Cited 24 November 2009) Available from Yo Goy [Online] (Cited 27 November 2009) Available from Automative Industry [Online] (Cited 22 November 2009) Available from London Government Uk [Online] (Cited 2 December 2009) Available from Working Knowledge [Online] (Cited 2 December 2009) Available from MSN Autos [Online] (Cited 30 November 2009) Available from All Hybrid Cars [Online] (Cited 27 November 2009) Available from CNET [Online] (Cited 27 November 2009) Available from Toyota [Online] (Cited 29 November 2009) Available from http://blogs.hbr.org/cs/2010/03/dont_believe_everything_you_re.html?cm_mmc=npv-_-DAILY_ALERT-_-AWEBER-_-DATE
E & Ghaziri, H.M (2003) Knowledge Mangement (5th Edition). Prentice Hall Harvard Business Review on Innovation. Harvard Business School Press
Joe Tidd and John Bessant, (2009) Managing Innovation: Integrating Technological,(4th Edition) “Market and Organizational Change” by Paperback April 2009.
Semsar, E. (2009),”Strategic & Innovation Marketing” 21 January 2009, London
Chris Freeman & Luc Soete (2005), “The Economics of Industrial Innovation” Chapter 8, page 197 to 204.
Literature:
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