Exploring Toyota's Production System and New Product Development

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Understanding Operations, Logistics,
and Supply Chain Management

Table of Contents
Introduction............................................................................................................................. 2
Body......................................................................................................................................... 3
Conclusion................................................................................................................................8
Reference List...........................................................................................................................9
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Introduction
In today’s world of global competition, the operations and supply chain management have
become critical for the survival and growth of every organisation. The operation
management involves coordinating with different organisational functions to achieve the
organisational goals with utmost efficiency. It is intrinsic to an organisation and has different
roles as per the requirements such as tactical, strategic, and operational (Panneerselvam,
2012). The responsibilities of operations management include sales forecasting, productivity
enhancement, ensuring quality standards, etc. Supply chain management is a later
development and came about when organisations started considering supply chain as a
separate entity. It is usually a part of the operations management of the organisations but
both are complimentary but dissimilar (Panneerselvam, 2012). The supply chain
management is focused outwards instead of within the organisation and looks after
controlling the cost and efficiency improvement. The scope of supply chain management
starts from raw material procurement and ends at finished product delivery. Supply chain
management includes product-planning, raw material sourcing, sourcing relevant parts or
components, transportation, warehousing, and delivery of finished products to the sales
point. Supply chain management is all about negotiating better prices and solving efficiency
issues. Logistics is a part of supply chain management and it focuses on meeting the
demands of the customers by managing the storage and flow of services and products.
Operations management and supply chain management focus on internal and external
aspects of making the process of production and delivery of services and products efficient
in order to make achieving the organisational goal cost-effective and profitable
(Panneerselvam, 2012).
For the purpose of this assignment, we will be considering the case of Toyota Motors
Corporation. It is an automobile manufacturer based at the Toyota City in Japan. Toyota is a
multinational company considered to be the sixth in the world in terms of annual revenue. It
was established in 1937 and it has a presence in almost every country of the world including
the UK. Toyota’s automobile operation is conducted under the five brands that are Toyota,
Lexus, Hino, Daihatsu, and Ranz. To manage its vast scale of operations effectively Toyota
has a capable operations and supply chain management division. The operations
management of Toyota is its Toyota production system and supply chain management is a
part of TPS. The Toyota Production system is considered to be one of the finest in the world
and is the source of Just in Time, lean manufacturing, Kaizen, etc. We will be considering
two aspects of the operations and supply chain management of Toyota. These aspects are
Quality management and the new product development process (Toyota, 2018).
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Body
The product development process in any organisation is a critical component for their
growth, survival and a source of their competitive edge. Product development focuses on
creating new wealth by creating tangible from intangible and converting the market
requirement into reality. Product development is important for an organisation even though
it requires substantial resources since it instils new value in the company product for which
a customer pays money and without new products a company will not be able to survive in
the fiercely competitive global market (Barczak and Kahn, 2012).
In the new product development process, the raw materials are intangible, the information
and knowledge of developers/engineers is the basic raw material of this process. The Toyota
Product Development System or TPDS focuses on the creation of groups of engineers that
are thoroughly devoted to the experimentation aspect of the product development and
their object of experimentation are the new design ideas. The knowledge-based approach
to developing new products has served Toyota well. The Functional managers that are
basically engineers emulate the role of a teacher and they are led by the chief engineer. All
the product development teams at Toyota are led by a chief engineer and the teams are
composed of highly experienced and competent engineers. The organisational structure of
Toyota is based on excellence and the engineering excellence is valued and rewarded so
usually the chief manager is almost always the most competent and competency-based
leadership is promoted (Ward and Sobek II, 2014).
The product development process progresses on the basis of target dates based key
integrating events such as tooling release or styling approval, established by the chief
engineer. The engineers figure out their own schedules to complete the tasks within the
given time frame. At Toyota, for each component, several alternative solutions are created
by the engineers which are evaluated one by one on the basis of performance trade-offs.
The unsuitable or non-performing solutions are replaced by new ones that are usually a
result of new component combinations. This facilitates a low-risk approach through which
the final configuration evolves from multiple solutions sets. The knowledge about solution
sets and their performance are stored in a system that’s easily accessible to all the
engineers this reduces wastage of replication and promotes component reuse. Other
automobile makers like General Motors, create a master solution and then design a
component variation to match it. This results in higher expenses and wastage in terms of
time and resources due to the requirement of changes at the final stages of product
development (Ward and Sobek II, 2014).
The entire development process uses detailed checklists, design standards, and quality
matrices for every component level and subsystem. The project progress is depicted
through colour-coded graphics that are placed in the team rooms. Earlier, the product
development for different brands was done separately. This approach is being changed by
the introduction of a new framework that will allow Toyota to have a common global
architecture. This change will allow reduction of costs and launch times while making the
vehicle designs more stylish and easy to handle. The new vehicle architecture will be shared
by multiple models across the globe and it will be developed by the coordination of design
and planning divisions (Ward and Sobek II, 2014). Under the new system, the numbers of
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executives involved in product development were reduced and the chief engineer was given
greater autonomy and authority. Another change is the involvement of cross-functional
teams in the concept creation with the chief engineer allowing a fast track method of plan
formulation. The cross-functional team involves experts from design, planning, evaluation
and manufacturing. Another aspect of the involvement of production and manufacturing
engineers at the early product development stage is the increased speed of product
development. Their involvement fine-tuned the product development process since any
manufacturing or production related potential issues came to notice at an earlier stage
allowing the completion of final design that much faster (Ward and Sobek II, 2014).
Source: Engineering Structure and Product development
The success of Toyotas new product development and its turnaround time of 12 months
that’s half the industry standard is due to the people that work in the company. The Toyotas
approach of developing engineers through mentoring and allowing them to focus on a single
division allows the creation and development of experts and specialists. The specialists drive
the product development for Toyota leading to high levels of effectiveness (Ward and Sobek
II, 2014).
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In today’s world of global competition, the quality of product and services play an important
role in the continuous growth of the company and its market positioning. This makes quality
management an important part of the organisation's operations and supply chain
management. The quality management can be defined as the process of ensuring quality
across all the process of the company along with the product and service quality. In the
automobile sector, quality becomes a cornerstone of the product saleability and success.
Different automobile makers have different quality management approaches in place. We
will be considering the case of a Japanese automobile manufacturer, Toyota Motors
Corporation (Stark, 2015). Quality can be defined as a parameter that assesses the
superiority or the inferiority of a product, service, or a process. It can be measured in terms
of reliability, usage, durability, etc. In the competitive business environment quality is the
differentiator of a product or service from its competition. Total Quality Management (TQM)
can be referred to as an on-going effort by the organisation as a whole towards quality
maintenance and improvement to ensure customer satisfaction and loyalty in the long term.
The TQM process has four stages and it’s referred to as the PDCA cycle. The first stage is
‘Planning’ and it involves the determination of quality targets and goals while determining
ways to standardize the work process. The second stage is ‘Doing’ and it involves the
implementation of the findings from the first stage. The third stage is ‘Checking’ and it
involves measuring the effectiveness of changes by comparing the resulting data with the
before data. The last stage is ‘Acting’ and it involves documenting the results and preparing
to restart the PDCA cycle (Stark, 2015).
Toyota is a well-known name not only for its quality product offerings but for the quality and
production management practices employed by them. The quality management practices
created and developed by the Toyota became a standard across the business world and
many well-known quality management practices are either evolved from the quality
management of Toyota or are a part of Toyotas quality management. The quality
management at Toyota is an Organisation wide activity that involves all the employees of
the company with a total focus on customer satisfaction (ToyotaUK, 2019). At Toyota, in
addition to their normal job responsibilities employees are expected to participate in quality
control. This is known as Companywide quality control. The quality management at Toyota
operates on the principle that quality is established at every stage and it is improved
continuously. The employees at Toyota ensure only quality work moves to the next stage
and standardised work along with visual control is employed. Intelligent automation
“pokayoke” stops the work if there’s a defect or an error. Any quality concern that arises is
sorted out on the spot instead of being passed on. In case of a quality issue, the root cause
is identified and necessary countermeasures are incorporated to prevent its recurrence
(ToyotaUK, 2019).
Further scrutiny of finished goods is done to ensure quality standards. The focus on training
is paramount to educate and train the employees in their work and standardised work
methodology. The continuous training and development provide Toyota with highly trained,
skilled, motivated, and flexible employees that are loyal and committed to the company's
goals and objectives. Quality management at Toyota is a part of its Toyota Production
System (TPS) that are created from the company’s actual experiences and requirements and
is being perfected continuously. TPS is based on the concepts of ‘Jidoka’ and ‘Just in Time’.
Jidoka involves the use of automation to detect defects and errors by stopping the
equipment and intimating the employee responsible for the equipment. Just in Time
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involves a process in which every stage creates only the quantity required for the next stage.
‘Kanban’ system is at the core of Just in Time process and it provides the method of
providing an automatic way of replenishing the required components and parts while
maintaining minimal stocks (ToyotaUK, 2019).
Source: Toyota Production System
Another aspect of quality management is the sourcing of parts and components. Towards
this end, the company strives towards early association, joint development, and long-term
relationship with suppliers. This allows the suppliers to develop continuously while
providing the quality products required by Toyota. ‘Kaizen’ which means continuous
improvement is the core of Toyotas quality management activities and processes. The
Company remains focused on seeking new and better ways of doing things that are cost-
effective, efficient, and enhance quality. In terms of quality control, Toyotas system is
incomparable with the systems being used by other automobile manufacturers. This due to
the fact that many organisations use production and quality management systems based on
lean management, Just-in-Time, and agile management, these concepts originated from the
Toyota Production System. For example, the quality and production management system
used by the BMW group is based on the lean management and Just-in-Time system. The
Toyotas in house system is quite effective and is still being continuously improved so
comparing it with other companies system becomes impractical (ToyotaUK, 2019).
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The change in the global business environment has made the companies realise the need
for thinking beyond their products, services, and profits (Elkington, 2013). This shift in
thinking and the businesses inherent need to survive lead to Triple Bottom Line. The
concept of Triple Bottom Line broadens the organisations focus to include environmental
and social considerations along with the financial consideration. Triple Bottom Line assesses
the organisational sustainability on the basis of its economic, social, and environmental
values (Elkington, 2013). The social value assesses the organisation's social responsibility
while environmental value assesses its environmental impact. Toyota Motors Corporation
emulates the Triple Bottom Line Approach. With its core belief of customer first, the
company strives to fulfil its social responsibilities to the local and global community while
extending efforts to minimise its environmental footprint by working for the betterment of
the environment (Savitz, 2013). These beliefs and values are clearly depicted in their annual
sustainability reports. In the economic front, Toyota Motors generated net revenue of £201
billion in the year 2018, an increase from its 2017 net revenue of £188.9 billion. In 2018, the
Toyota group spent £117 million on social contribution activities (Toyota, 2019).
Source: Toyota Vision and Philosophy
Various activities that are being planned and operated by Toyota on the environmental and
social front involve a focus on eliminating the CO2 emission completely by 2050. Towards
this end, Toyota is continuously focusing on the development and marketing of electric
vehicles (Toyota, 2019). Another focus area is the reduction of traffic causalities through
technological advancement and education (Savitz, 2013). Toyota traffic sense is an
innovation by Toyota to reduce traffic causalities and the Toyota vehicles with this
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technology have crossed the 8 million mark. Toyota has established a Toyota mobility fund
that undertakes projects like the promotion of multiple transport modes in Vietnam. Toyota
focuses on pursuing sustainable financial success by striving to act responsibly both socially
and environmentally (Savitz, 2013).
The last decade saw Toyota facing the global recession, having multiple quality issues, and
losses associated with recalling vehicles having quality issues. Though the company seems
to have recovered and in 2018 posted excellent revenues collections it will take time to
recover from the damage to its pristine reputation of exceptional quality. The rapid pace of
growth and the company’s focus on growth led to this quality crisis (Mannon, 2014). Toyota
needs to make a course correction and refocus on quality that's the trademark of the
company. The company has exception production management and quality management
systems in place it only needs to make them a point of focus, assess the quality of its
existing engineers, and provide training wherever necessary. These measures will allow the
company to regain its reputation for exceptional quality (Mannon, 2014).
Conclusion
The essay explores the operations and supply chain quality management of Toyota. The new
product development process of Toyota Motors is a competitive edge for the company since
it allows it to cut down the product development time in half as compared to the industry
average. The production and quality management process of the company, the Toyota
Production System is a production and quality management benchmark of the automotive
industry and it’s again a competitive advantage for the company. Lastly, the triple bottom
line approach of the company and its contribution to environmental and social enhances is
social acceptability in the host countries, which are many due to the company’s gigantic
scale of operations. The company has all the tools at its disposal that has made it one of the
largest in the automobile industry and will help it to grow further (Mannon, 2014).
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Reference List
Barczak, G. and Kahn, K.B., 2012. Identifying new product development best practice.
Business horizons, 55(3), pp.293-305.
Elkington, J., 2013. Enter the triple bottom line. In The triple bottom line (pp. 23-38).
Routledge.
Mannon, M., 2014. Lean healthcare and quality management: The experience of ThedaCare.
Quality Management Journal, 21(1), pp.7-10.
Panneerselvam, R., 2012. Production and operations management. PHI Learning Pvt. Ltd..
Savitz, A., 2013. The triple bottom line: how today's best-run companies are achieving
economic, social and environmental success-and how you can too. John Wiley & Sons.
Stark, J., 2015. Product lifecycle management. In Product lifecycle management (Volume 1)
(pp. 1-29). Springer, Cham.
Toyota. 2019. Toyota Motor Corporation Official Global Website. [Online]. [3 April 2019].
Available from: https://global.toyota/en/sustainability/csr/index.html
Toyota. 2018. Globaltoyota. [Online]. [3 April 2019]. Available from:
https://global.toyota/en/company/vision-and-philosophy/production-system/
ToyotaUK. 2019. Toyotaukcom. [Online]. [3 April 2019]. Available from:
https://www.toyotauk.com/files/Our-approach-to-quality.pdf
Ward, A.C. and Sobek II, D.K., 2014. Lean product and process development. Lean Enterprise
Institute.
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