In the early 2000’s Toyota was becoming a powerhouse in the car manufacturing industry. They were growing so fast that many competitors adopted Toyota’s Production System also known as TPS. Toyota’s revenues grew tremendously in a short time frame and the way they were reducing production cost made them number one in the industry by the end of 2009. They were so focused on making money that they lost focus on quality and safety issues. The Accelerator Crisis had to deal with the recall of defective cars that wasn’t safe to drive. This crisis brought a bad image on Toyota and fees that they didn’t want to pay. Apply the principles and techniques of operations management to the identification of candidate processes.
The purpose of operations management is to use a company’s capital and human knowledge to convert raw materials into a finish product. In the case study the crisis was caused by poor planning by the Operations Department, defective vehicles leaving the Manufacturing Department, and buying cheap insufficient goods by the Distribution and Logistics Department. The change of management was a big mistake.
They changed from a customer first focus to a profit first focus. In the mid 90’s Toyota had a strong history in making reliable and high quality cars all over the world. By the beginning of the early 2000’s management started to shift in the wrong direction. The philosophy that many competitors were trying to copy went out the window. They lost focus on their philosophy and strayed away from their business model. They were trying to increase profits by minimizing operating cost by cutting corners. I believe it was a great ideal to incorporate the Toyota Production System but it was used in the wrong way. TPS was designed to eliminate all unnecessary waste from the production and manufacturing process.
The objective was to make vehicles ordered by customers in the quickest and most effective way while reducing manufacturing errors and waste. The gain of market share and profits was credited by this new system but by cutting cost by using cheap supplies caused many safety issues to the customers. Toyota was growing so fast that they were using an outside sources to supply parts to their cars. There were so many defected engines, problems with the floor mats and sticking pedals that Toyota had no answer for. All these departments had an impact on the Toyota’s Crisis. Analyze process opportunities for innovation or improvement.
I believe issues with Toyota started with poor organization skills and ineffective communication to management, employees and external stakeholders. Excellent organization skills and communication keeps the business growing and flowing effectively. By applying Deming’s approach (1987) “Transformation of Today’s Management; the first step is to communicate effectively and to organize the companies structure is to Institute leadership. A successful leader needs to focus on the company’s vision and communicate successful to management, employees, and stakeholders. The new CEO has to be active by emailing stakeholders regularly and walking around the company learning not only managers but the employees that feel left out at times. The CEO has develop a strong foundation; To have a strong foundation he or she needs a management team that believes in his vision and knows that he or she is accountable for their responsibilities and the employees supervised by them.
Toyota also needs to create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business and to provide jobs. This improvement will be directed to the Manufacturing Department. Toyota was trying to produce massive numbers of automobiles but failed to check the quality of these cars. They were aimed for quantity instead of quality. The demand for cars was at an all-time high and Toyota didn’t know how to handle it. They were in a rush to get cars off the assembly line that they failed to check the quality of the car. Toyota needs to provide better cars for their customers. A profit is important but a loyal customer can last a lifetime. Even though the crisis took place I know people that still only buy Toyota cars. Toyota needs to create a customer relationship plan to win some of their customers back.
The Distribution and Logistics Department needs to stop awarding business on the basis of price. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust. If you can cut cost in a business successfully I am all for it but in Toyota’s case it was an epic fail. Toyota wasn’t looking at the long term effects of their decision and they ended up paying big fines. They were buying the cheapest parts for any supplier they could find. They had complaints about defected engines, malfunctioning pedals, and misconfigured floor mats. Toyota needs to find one supplier that specializes in one item and build a long term relationship with that company. When Toyota was buying from many suppliers I believe they had a hard time matching what item to which supplier. Focus on one supplier and that can minimize problems in this department. Analyze the impact of the processes on the organization.
Toyota has to change their organizational structure to promote success. The first step to this is to create an achievable mission plan. For the mission plan to be successful effective information sharing and communication needs to start at the top then work its way to the bottom. Toyota also needs to recreate their Customer Relationship Management Team to rebuild their relationship with customers. CRM will help retain and gain new customers. This would of help tremendously before the crisis if customers could have issues addressed before it became known around the world. During the crisis Toyota had a bad reputation so their image and brand took a hit. Toyota will need to find a way to rebuild their image and to make their brand strong again. The crisis also showed how the company was operating ineffectively. The TPS was a good ideal but their strategy running it was awful. Instead addressing the problems they ignored it and the ending results lead to fines and a bad reputation for the company. The crisis showed how Toyota lost sight of their vision, a decline of customers took place, their image and brand had a bad reputation, and errors in the way they ran operations was made aware. Analyze the potential impact and benefits of improvement to the organization
“Time heals all wounds”; it will take time for Toyota to be a strong powerhouse again. Toyota can fix all their problems in every department but communication is essential. Toyota needs to regain their philosophy on customer first and stand behind their vision. A strong leader can keep employee morale high and detect problems in the company before it gets out of control. Toyota needs to beware that profits will come but a customer relationship can last forever. Finally letting one supplier focus on the one item they specialized is most important. I feel if this happened in the first place then their wouldn’t of been a recall on defected items. All the improvements suggested in this paper are achievable but it will be a process. Conclusion
Toyota lost its main focus. They drove all their efforts to increase efficiency to the highest level possible but they lost the main reason why they should be efficient which is the customer itself. They narrowed their view in only this objective and put aside their customers. Toyota should manage growth more carefully. Growth is positive but unmanaged growth can lead to loss of product quality control and severe consequences with customers. Management, employees, and stakeholders should be taught about the core values of the company. This will ensure that they adhere to these core values. Also their image could be damaged if they don’t meet their customer’s needs. Blogs and social is where customers can express their dissatisfaction and can travel around the world in a matter of seconds. The most important lesson is that the pursuit of profitability must not be followed in an irresponsible manner since it cannot be sustainable in the long-term. In this regard, the best advice is to remain true to the company’s principles and business model.