In a business organization, the organization is composed of systems that concentrate on overall efficiency. A systems approach is essential whenever something is being designed, redesigned, implemented, improved, or otherwise changed. It is important to take into account the impact on all parts of the system. Consider owning and operating an automobile. It has many parts and systems that can malfunction; some of these are critical. The automobile would not function or would be dangerous to operate without them.
The Toyota Company seemed to have missed the importance of the impact on all parts a system as they came under scrutiny with the largest recall of vehicles in the United States in 2009-2010. These recalls were triggered by a car collision in August 2009 that took the lives of four people. This assignment will look at what barriers caused the systems to fail within the Toyota Company that subsequently changed the attitudes of their consumers and their trust towards Toyota.
Toyota Motor Corporation
The Toyota Motor Corporation was established in 1933 as a division of Toyoda Automatic Loom Works under the direction of Kiichiro Toyoda. In 1934, the company produced its first Type A engine at the encouragement of the Japanese government, and two years later the company produced its first passenger car, the Toyota AA and in 1937 was established as an independent company.
In 1957 Toyota established its first sales, marketing, and distribution subsidiary in the U.S., called Toyota Motor Sales Inc. In 1982, Toyota Motor Corporation formed a joint venture with General Motors, called New United Motor Manufacturing, Inc. and began production in the U.S. in 1988 establishing new brands for this market. In 2009, Toyota employed more than 8,900 people and supervised 14 regional offices throughout the 50 states.
Toyota produced 5.2 million cars in 58 production sites in 2000, and by 2009 they had the capacity to produce 10 million cars and had added 17 production sites. Toyota had added the capacity of a Chrysler-sized company. (Greto et al., 2010). In January 2010, Toyota suspended sales of eight recalled vehicle models to fix accelerator pedals with mechanical problems that could cause them to become stuck. In December 2012, Toyota announced an agreement worth more than $1,000 million to settle a lawsuit involving unintended acceleration in some of its vehicles (Slobe, 2010)
According to Greto et al.(2010) the Toyota company incorporated a philosophy known as the Toyota Way. This set of principles was to bring about approaches that called for continuous improvement, which encouraged teamwork, respect, and value for people. The Toyota Way was to encourage employees to strive for perfection. Another key process to mention is the Toyota Production System (TPS).
It was designed to remove all unnecessary waste from the production and manufacturing process. More than just waste avoidance, it aimed to eliminate any excess interruption, misalignment, unnecessary work, or redundancies in the production process that add no value to customers. Specifically, TPS addressed seven kinds of waste: overproduction, operator motion, waiting, conveyance, self-processing, inventory, and correction (rework and scrap). Through TPS, Toyota had been able to significantly reduce lead-time and production costs (p 4).
Importance to Toyota
These processes both posed of great importance to the Toyota Company because when you value and respect your employees and external constituents it brings about a level of trust and cohesiveness in the work place and your company gains loyalty from the customers.
When everyone is operating as a team, any challenges that exist are met with courage and this creates a level of motivation within the company to bring about improvement. In regards to the having a production system that will bring to the forefront at the onset any issues, it eliminates wasted time, production costs, and manpower. It builds a foundation to where employees are reliable where they embrace the philosophy of quality at the start. It also creates a learning environment where leaders who carefully understand the philosophy, will teach it to others. This grows the company and builds it up for success.
Scope: Breadth of its reach
The scope of its reach can be throughout the global market. Not only within the automobile industry but because Toyota diversified into several nonautomotive businesses, it can also affect industries in aerospace, higher education, robotics, finance, and agricultural biotechnology (Greto et al., 2010).
Parties involved: customers as well as internal and external suppliers.
When there is a breakdown in these processes, it impacts the employees and all external stakeholders. For example, when a breakdown occurred in the lines of communication between the Japan and U.S. offices, in responding to the issues with the faulty accelerators, not only was customers affected, stockholders were affected. When the reputation of a company is tarnished, it affects the stockholders and they stand to lose money they invested in the company. Supply vendors are also affected when these processes breakdown because they lose business as well. Competitors can also be positively affected by this. They gain the customers who choose to no longer do business with Toyota.
Priority: the timeliness or urgency.
Timeliness is important to any business as this attributes to the quality of service a company provides customers, to employee concerns, matters concerning supply vendors and stock holders to name a few. Toyota did not readily address the concerns of their customers initially until it became more in the public eye. This takes away from the value of the company and it certainly affected customer loyalty and satisfaction to say the least. The company stock value went down and it suffered millions of dollars in lost. Timeliness is certainly a priority for any business.
Overall impact or benefits of improvement to Toyota
The overall impact for Toyota led to someone dying while driving a faulty vehicle therefore all the millions of dollars they were fined still does not make up for the loss of a person’s life. This goes down in Toyota’s history book as it cost them their reputation. The benefit is that can take place is to push management to take a look at their overall company operations and break down the areas that need improvements; identify additional defects and restructure their operational systems. If changes are to occur, Toyota has the opportunity to make changes, manufacture more innovative vehicles, and create initiatives that involves the communities they do business with as a way to build trust and their reputation.
Cost to Toyota if the process is not improved
The cost to Toyota if these processes are not improved could mean failure with a loss of market. The business can go bankrupt; offices close down, excessive inventory, stock price decreases, and employee layoffs that add to the unemployment rate.
Greto, M., Schotter, A., & Teagarden, M. (2010). Toyota: The accelerator crisis.[Case No. A09-10-0011]. Glendale, AZ: Thunderbird School of Global Management.
Kelly, A. M., (2012, March 5). Has toyota’s image recovered from the brand’s recall crisis? Retrieved from http://www.forbes.com/sites/annemariekelly/2012/03/05/has-toyotas-image-recovered-from-the-brands-recall-crisis/
Russell, R. S. & Taylor, B. W. (2011). Operations Management: Creating ValueAlong the Supply Chain (7th ed.). Hoboken, NJ: John Wiley & Sons, Inc.
Soble, J. (2010, February 26). Financial times. Toyota timeline: a company history. Retrieved from http://www.ft.com/cms/s/0/1f8f077c-2301-11df-a25f-00144feab49a.html#axzz2UM6ZCw2x
Stevenson, W. J. (2007). Operations management and decision making. (9th ed.). Retrieved from http://highered.mcgraw-hill.com/sites/0073041912/student_view0/ebook/chapter1/chbody1/operations_management_and_decision_making.html