Toyota Case Study

Background Toyota Motor Corporation is a famous global automaker headquartered in Japan, which commonly known as Toyota (Liker, 2004). As a leader in the global car market, Toyota Motor is famous of manufacturing quality cars with low price. Toyota’s world-leading quality and the management system are remarkable. In 2003, the annual profit of Toyota was larger than the combined earnings of GM, Chrysler, and Ford. Also, Toyota’s market share increased 24% over 2002, so a number of analysts estimated that Toyota’s market share would pass GM in few years and become the largest automaker in the world (Liker, 2004).

Toyota’s success

Many reasons lead to the success of Toyota Motor. Some researchers stated the “Toyota Way” based on the Toyota Production System (TPS) and concluded 14 principles of the “Toyota Way” which are divided into four categories of Philosophy, Process, People/Partners, and Problem Solving (Liker, 2004). These four categories started from long-term thinking to short-term management. The 14 principles are based on some techniques and human motivations.

The quality improvement methods are from lean production, such as just-in-time, kaizen, one-piece flow, jidoka, and heijunka. The superiorities of human motivation in Toyota can be classified to one the four principles – Philosophy, which contains leadership, teams, culture, and supplier relationships (Liker, 2004). Toyota Recall

At the end of 2009 and start of 2010, Toyota faced a big issue which is that 6.5 million cars have been recalled in the U.S. because of the problems of gas pedals (“Toyota's quality lapse”, 2010). Many analysts started to research why the quality issues happened to the world-leading quality car maker. As a large vehicle manufacturer in the world, Toyota had to change the strategies and some management methods to obtain more profit and market shares. Those changes may lead to some big issues and the most affected portion is quality.

From a local car maker to a global vehicle manufacturer, Toyota is getting harder to control the quality of every car. For example, Toyota usually bought parts from a small group of Japanese suppliers who have been longtime partners with Toyota. However, as the globalization and sales increasing, Toyota started to buy the parts from companies around the world (“Toyota's quality lapse”, 2010). According to Total Management Quality (TQM), this paper mainly states supplier relationship and employee involvement to discuss the quality management problems of Toyota and give some appropriate recommendations.

Problems Employee Involvement Employee relation is considered as an important critical factor of total quality management implementation. Implementing employee involvement and quality circles can do a great job when applying total quality management. This includes employee participation in quality decisions, responsibility of employees for quality, employee recognition for superior quality performance, effectiveness of supervision in handling quality issues and on-going quality awareness of all employees. (Saraph, Benson & Schroeder, 1989)

However, Toyota Company did not do well in this part so far. In the TQM approach used by Toyota, the assembly line teams are responsibility for the steps related to their own work. It is no doubt that, in order to apply TQM approach, workers are cross-trained and when there is a problem occurring in their work areas, they can stop the assembly line processes in some cases. Although they are responsibility for continuous improvement processes, they must achieve management approval before they can make changes in their work. (Edward, 1994; p68-76)

Managerial behavior and leadership are playing important roles in both TQM and employee relations, but Toyota seems a little bit weak in these areas. Whenever emergencies take places, the Toyota team may waste too much time passing the information through stratums. The top level in this company cannot make decision quickly enough to handle problems. Decision making and executing may be delayed due to the poor communication between leaders and workforce. During the passing procedure, the condition of occurring problems may be misunderstood, errors may occur meanwhile. Such situations may even lead to deadly result which could be avoided if concerned. Supplier Relationship

Supplier relationship is an important critical factor in the total quality system of auto industry like Toyota. The vehicle recalls exposed the defects between the company and its suppliers in the matching system. In traditional Japanese industrial circles, the corporate relationship between the producer and its suppliers is established based on the Japanese credit system which is called the keiretsu system. (Banerji, Sambharya, 1996:89) Generally speaking, the members in the system are almost Japanese companies. Besides business relationships between each other, these companies usually talk about marketing targets and the prospects of the industry together some time during a year.

However, the Toyota’s new cost-saving strategy CCC21 (Construction of Cost Competitiveness in the 21st Century) which aims to achieve large-scale cost reductions for about 170 components that account for 90% of the total component purchasing costs has put the cooperative partners of Toyota under great pressure. In other word, if these suppliers want to continue their cooperative relationship with Toyota, they have no choice but accept the new order quotations given by Toyota. Otherwise, they won’t get cooperation contracts from Toyota. For Toyota, in order to get cheap auto-spare parts, the company sought for oversea supplies extensively.

This action has actually damaged the traditional keiretsu system. To be more specific, it led to two defects. Firstly, it is hard to assure the overall quality of Toyota’s products and manage the supply chain if the company pursuit for a lower costs blindly. Secondly, Toyota outsourced its manufacture of auto-spare parts to overseas suppliers, which increased the difficulties of quality control. Compressing costs excessively brings great negative impacts on its product quality.

Recommendations Employee Involvement “Employee involvement groups have been found to positively impact employee commitment to quality”. (Ahire, Golhar & Waller, 1996) Toyota organization, however, do not satisfied the workforce currently. In order to create an active working group, Toyota Company should move power to individuals that are lower in the organization.

According to Edward’s saying, improvements can be best down by natural work team when team members are given authority, information and knowledge to improve processes and are responsibility for the major portion of the production or service process. (Edward, 1994; p68-76) Recommendation from this theory can be conclude that Toyota Company should strengthen the relationship between each level within the whole organization and try to achieve equilibrium in team members’ authorities.

Company culture need to be created and accepted by everyone in the company. If team members have totally different ideas when making decisions, the efficiency and effectiveness in decision making would be decreased. The total quality will then be affected. The firm has to concern that TQM and employee involvements are close related to each other.

Recent researches have proved that the development of encouragement and tracking systems can push employee involvement. Toyota Company can make use of cross-functional quality improvement teams and quality circles plus a framework of evaluation and reward systems to improve quality. Effect will be significant. (Ahire, Golhar & Waller, 1996) One possible solution is to offer profit-sharing and dividends. Such rewards can satisfy employees and motivated them a lot. Supplier Relationship

The recommendations given to Toyota in the aspect of supplier involve two aspects. On the one hand, Toyota can expand its manufacturing depth and range to some degree. According to Smith and Greenwood, Toyota adopted a very close co-operative partnerships relationship with its suppliers for the reason that the company can only manufacture a bit of self-made spare parts. The company is just responsible for its products’ overall quality and design and almost all of the spare parts that needed to produce the car come from the suppliers. A high degree of component commonality was promoted in the process of production.

Using the same spare parts that from one supplier to product different types of cars to lead to a scale effect. However, if there is only one mistake in the production process or the spare parts the supplier offered, the negative effect will be circulative. Toyota needs to strength its ability in the manufacture of auto-spare parts like Volkswagen and Audi has already done nowadays. For these two companies, they have a deeper manufacturing range than Toyota; some spare parts of their cars come from the company themselves. As a result, the company has a better control of the quality of their products for the reason that they reduce the reliability to the suppliers.

Though, this method can’t bring benefits to reduce the costs. However, quality should be the most important factor that a company should take into fully consideration than the cost. On the other hand, to specifically talk about the method to manage the suppliers, it can be classified as three aspects: verify, standardized and evaluate. Firstly, verifying the suppliers lists to ensure the quality of the suppliers. Secondly, standardize the producing process of the suppliers to reduce the possibility of making mistakes. Thirdly, evaluating the products the suppliers offered. For Toyota, the company needs to strengthen the responsibility of its quality control department. Conclusion

Toyota has shown its brilliant power in Quality Management over the years though there still remain some problems. Supplier relationship and employee involvement are two typical ones while many other factors need to be concerned about as well, like quality control and leadership management. “Low-cost, high-profit” is known as Toyota’s special features for a long time. However, as the quality management system’s innovation keeps going, it is obviously that Toyota ought to have some changes in its TQM approach in order to keep pace with the updated science.

Reference * Ahire, S. L., Golhar, D. Y. and Waller, M. A. (1996), Development and Validation of TQM Implementation Constructs. Decision Sciences, 27: 23–56. Doi: 10.1111/j.1540-5915.1996.tb00842. * Banerji, K, & Sambharya. R. B(1996). Vertical Keiretsu and International Market Entry: The Case of the Japanese Automobile Ancillary Industry. Journal of Palgrave Macmillan. Retrieved from http://www.jstor.org/stable/10.2307/155373 * Edward E. Lawler III (Feb., 1994), Total Quality Management and Employee Involvement: Are They Compatible? The Academy of Management Executive (1993-2005), Vol. 8, No. 1, pp. 68-76, Academy of Management.Liker, J. K. (2004).

The Toyota way: 14 management principles from the world's greatest manufacturer. New York: McGraw-Hill. * Saraph, J. V., Benson, P. G. and Schroeder, R. G. (1989), An Instrument for Measuring the Critical Factors of Quality Management. Decision Sciences, 20: 810–829. Doi: 10.1111/j.1540-5915.1989.tb01421. * Smith, K.L., & Greenwood, M. R.,(1998). Developing Co-operative Buyer–Supplier Relationships: A Case Study of Toyota. Journal of Management Studies. Retrieved from http://onlinelibrary.wiley.com/doi/10.1111/1467-6486.00096/full * Toyota's quality lapse. (2010). Industrial Engineer, 42(3), 14-15. Retrieved from http://search.proquest.com/docview/507104123?accountid=13803