Toyota Motoring Manufacturing

1) How does the andon procedure work and what are its fundamental aspects? How much does it cost to stop the line? What are the benefits of stopping the line? The andon procedure is adopted by Toyota Motor Manufacturing to ensure quality of their products. It involves the pulling of the andon cord whenever production at a work station is unable to be completed within the cycle time, or whenever any problem is faced. Pulling the andon cord will alert the team leader to the station.

If the problem can be corrected immediately, assembly is resumed by pulling the andon cord again. However, if the team leader is unable to solve the problem, the line is stopped. With this process, Toyota is able to manufacture quality products and prevent defective products from being transferred on to the next station. This is in line with Toyota’s principle of jidoka where problems are instantly detected and production is stopped whenever a problem is detected. However, stopping the line will reduce the flow time of the car assembly and flow rate of the production. As more time is required to produce the cars, worker overtime costs will be incurred. According to the case, line stoppages caused a shortfall of 45 cars per shift.

These cars could have been sold in the market instead. Thus, line stoppages caused lost revenue (opportunity cost) for these 45 cars. In analyzing the costs for stopping the line, we assume that hourly wage per team leader is set at a 6.5% premium. We assume 769 team members are spread equally between the two shifts. We assume that each worker causes an average of 1 line stop per shift. The number of shortfalls in a shift is based on that in April 1992 i.e. 45 cars. The breakdown of costs incurred to stop the line is as follows: Hourly Wage per Team MemberHourly Wage per Team Leader (6.5% premium)Overwage rate per Team MemberOvertime Wage Rate per Team Leader 1718.10525.527.1575

Number of Shortfalls per Shift45 Number of Shifts2 Total Team Members769 No. of Team Members per Shift (769/2)384 Number of Team Leaders per Shift102 Number of Stops per Worker per Shift1 Number of Stops per Shift384 Overtime per Car (57s/3600)hrs0.0158333 Total Overtime Cost per Shift ($)8950.4713 Overtime Cost per Stop ($)23.308519 Lost Revenue per Stop (0.17 x 18,500 x 45)/384368.55469 Tota Cost Incurred per Stop ($)391.86

Benefits of stopping the line is to reduce wastage as defects are detected early and problems can be solved earlier before the defect is passed on to the next station.

2) What are the underlying causes of the problems facing Doug Friesen? The main problem faced is a decrease in run ratio, which measured the numbers of cars actually assembled in proportion to the number of cars that could have been assembled with no line stoppages, from 95% to 85%. This drop also led to a shortfall of 45 cars per shift, which had to be made up with overtime. The underlying causes are as follow:

•The combination of seats, which resulted from by the variety of Toyota Camry, has increased the probability of defects or human error. •Problems are not solved at the point where the defect is detected and the defective cars remained in the assembly line until they are moved to the Code 1 clinic area for further inspection and quality control. Solving problems at the end of the assembly line could be more difficult or require more time than at the spot where the problem was first detected.

This is because the car at the end of the assembly line has already been completely assembled thus, making amendments to specific components could be more challenging. •There is a long waiting time for the delivery of replacement seats from KFS to TMM. This led to an increase in inventory in the overflow parking area where the cars waited for KFS’ special delivery.

3) How, if at all, does the current routine for handling defective seats deviate from the principles of the Toyota Production System (TPS)? The current routine deviates from the TPS principles of Jidoka and Just-in-Time (JIT) production. JIT Principle

TPSCurrent Routine (deviation) Produces only what was needed, how much was needed, and only when it was needed. Any deviation from true production needs was condemned as waste. Defective cars remain in inventory and some have to wait for replacement seats to be delivered. Cars are not produced at maximum capacity. Thus, consumer demand is not met on time. Jidoka Principle

TPSCurrent Routine (deviation) Make any production problems instantly self-evident and stop producing whenever the problem was detected. Insisted on building in quality in the production process and condemned any deviation from value-addition as waste.Does not follow the jidoka principle - instead of stopping production and waiting for the new seat to arrive then fixing the seat before production restarts, Toyota continues with production and only fixes the seats after production ends

4) As Doug Friesen, what would you do to address the seat problem? Where would you focus your attention and solution efforts? What options exist? What would you recommend? Why? There are several solutions to address the seat problem in the manufacturing process. These solutions are non-exclusive and could be implemented together.

Solution 1: Decrease the error caused by variability in car seat styles. This can be done by investing in training staff so that they will be proficient in handling the variety of seat styles for respective cars and reduce the defect rate caused by human error. Another way is to assemble the cars in batches based on its respective seat styles as this method of production decreases the chance of human error as well since production will be more uniform. However, batching violates Toyota’s ‘Heijunka’ principle. Solution 2:

Toyota could also consider the option of repairing the damaged seat immediately rather than allowing it to through the entire process first and congregating at the end of the line; in other words, to put the practice of jidoka into play. All staff involved in the production line will then have to be more critical in ensuring the best quality of the seats, and stop the production line once a defect is realized. However, repair staff would need to be well equipped to handle the situation. Furthermore, this solution requires the production line to stop, thus incurring costs.

Solution 3: Switch to another seat supplier or source for additional suppliers to ease the current load on KFS since the current supplier delivers poor quality of seats which causes the problem in the manufacturing process. However, having more than 1 supplier may result in differences across the finished goods as it is difficult for two suppliers to provide identical seats. Solution 4:

Stock safety inventory to use it as a buffer for the defective seats so as to decrease the wait time required to deliver replacement seats. However, having excess seat inventory will incur inventory cost. It is also against the JIT principal which hallmarks Toyota. Solution 5:

Seats can be redesign such as changing plastic hooks back to metal to reduce the probability of one of the problems for defective seats, which is a broken hook. The focus of the solution should be aimed at improving the internal process problem which is decreasing the human error caused by variability of car seat style and also improving external process problem which is the quality of the car seats supplier. As show in Exhibit 8, the main cause of defective seats comes from the poor quality of seats delivered by the supplier.

Therefore it is vital that we would firstly have to improve the delivered seats and Toyota can do so by bringing up this issue to the management at KFS. Toyota must demand for better quality products and if the problem continues due to poor quality of seats, Toyota should then source for additional suppliers to cover up for the lack of quality sets supplied by KFS. Once the external problem has been handled, Toyota must look at ways to improve the capabilities of its production line staff. By training them to handle the various seat styles for respective cars, it increases the skill level of the workers and hence decreases the probability of making an error.

However, Toyota will incur training cost but these costs will reflect savings in the long run if its staff would make less errors hence improving the run ratio of the production line.