Toyota Case

Sakichi Toyoda was born in 1867 and in the 1900’s he founded the Toyoda group, a company focused on the production of looms for the textile business. In 1933, under the influence of his son Kiichiro Toyoda, who was more interested in automobiles, Sakichi opened a new division focused on car manufacturing.It was in 1937 that there was a separation between the two businesses and consequently Toyota Motor Company was born. In order to get a deeper understanding over the industry, Kiichiro studied the production system of Ford, the leading car manufacturing company at that time, and later adopted and improved it.

Ten years later, in 1947, Toyota started to produce large-scale passenger cars, competing with Ford and General Motors but suffered from Japan’s economy that was going through a rough patch after the Second World War. In the beginning of the 1950’s Eiji Toyoda became president and developed a different process, the Just-in-time system and in the mid 1950’s the Kanban.

The company entered the American market in 1958, but only had its first success there in 1968 with the model Corolla and in the 1990’s expanded to other places throughout the world. Throughout the last few years, Toyota, General Motors (GM) and Volkswagen (VW) have been the three main players competing in the automobile industry. In 2011, GM was the leader with 9.03 million dollars of sales, followed by VW with 8.16 million dollars in sales and finally Toyota with 7.9 million dollars. However, these results can be partly explained by not only the 2009-2010 recalls but also the Japanese tsunami and the Thailand floods that affected the supply of car parts.

These results don’t mean that Toyota cannot make a comeback, opposed to that, data from the 1st quarter of 2012 shows that Toyota is the leader in sales, with a total of 2.49 million dollars in sales, followed by GM with 2.28 million dollars and finally VW with 2.16 million dollars1. Lots of concepts used in quality management are invented in the Toyota Production System (TPS). The TPS organizes logistics and manufacturing for the automobile industry, with a lot of attention for interaction with the suppliers and customers. The goal is to design out overburden (Muri) and inconsistencies (Mura) 1  and to eliminate waste (Muda), by employing a “unique production system that cuts costs through continuous improvement, yielding sharp reductions in product development and manufacturing lead times”. manufacturing, where the goal is to minimize waste. One of the most important concepts is Just-In-Time (JIT). It basically means that only what is ordered, will be produced. The production and inventory system are well organised in order to meet the customer demand exactly, in time, quantity and quality.

The success of the Toyota Production System is owed to this principle. It eliminates waste at a high level and makes sure that the inventory costs are minimal. Another interesting concept is ‘KanBan’, literally translated as signal card. It’s an instrument that helps companies achieving the Just-In-Time production. Originally Toyota’s Kanbans were cards, but a Kanban can be a box. Any given work station should onlyproduce a part when the following station sends requisition for it. The objective was to restrict manufacturing inefficiencies. Jidoka is another well-known concept in the TPS.

It’s automation with a human touch, focused rather on supervisory functions than production functions. If an abnormal situation occurs, the machine will stop and the worker will stop the production line. This is perfectly aligned with the JIT-philosophy, namely by trying to prevent producing defect products and thus eliminate waste. An important concept related to Jidoka is the so-called ‘Andon’. It’s a signal board that indicates when a problem occurs so that other workers can go to this particular place and help solving the problem. Another concept is the 5S-principle.

To summarize this principle, there are 5 key words, that all begin with the letter ‘S’. There is Sort (eliminate unnecessary stuff), Stabilize (make sure everything has a fixed place), Shine (clean the workplace), Standardize (work practices should be consistent) and Sustain (maintain the 5Sprinciples). Kaizen is also very important within an organization: It stands for continuous improvement. An organization should always try to improve, to search for innovations and evolution.

TPS can be described as lean  Some other well-known concepts are for example Poka-Yoka (avoiding inadvertent errors), Genba (the workplace), Genchi Genbutsu (go and see for yourself at the Genba), hejunka (efficient way for variation in the production process) and so on… Despite the fact that Toyota invented lots of quality concepts, the company had many recalls due to quality issues. The Majority of recalls was caused by problems with floor mat, accelerator pedal and anti-lock brake software. other issues concerned power steering hose, carrying capacity labels, front drive shaft etc.

The first recall was in 2006 in the US due to fuel and steering system malfunction. Toyota withdrew 400,000 Sports Utility Vehicles in the US, then in October 2007 470,000 cars in Japan and in December 2007 15,600 Tundra pick-up trucks again in the US. But that was only the beginning of Toyota’s problems with quality. Its quality level fell down drastically. In November 2009 Toyota recalled 4.2 million cars from the US market.

On January 21st, 2010 the company withdrew another 2.3 million vehicles – this time because of faulty accelerator pedals (2.1 of those where already involved in previous issue). One week later, on January 27th another 1.1 million cars were recalled due to the same reason. In February 2010 problems occurred with brakes and front drive shafts. In April 2010 recalls were done due to possible corrosion of spare tire carrier cable, problems with stability control system – 21,000 MY 2010 Toyota Land Cruiser Prado, 13,000 Lexus GX 460 SUV's and MY 2003 Toyota Sequoia were recalled to reprogram the stability control system. In May 2012 problems occurred regarding the steering system software.

In February 2011 Toyota recalled another 2.17 million cars due to gas pedals issues. Despite all these recalls Toyota continues to be one of the three main players in the industry and the first numbers of 2012 show that the company is ahead of the other two. Regaining customers trust is crucial for Toyota, and the positive numbers of 2012 show that Toyota has been successful in restoring its customers trust in the company. Given the highly competitive industry in which Toyota operates, it is of utmost importance that they stay ahead and act quickly, otherwise they will lose market share to the competitors.