Weakness of Toyota

Abstract (Summary) This paper reviews some of the advantages and potential disadvantages of lean production in the Japanese automotive industry. This briefing is prepared by an independent writer who adds their own impartial comments. According to the experts, 2006 saw Toyota become the world’s largest automobile manufacturer in the world, knocking General Motors (GM) off the top spot. It is a big leap from the situation in 1950, when Toyota produced 11,706 units per annum compared to GE’s 8,000 units per day. The cause of this switch in position? Smooth operation.

Heavy operating losses have forced GM to downsize, whereas Toyota has its highly efficient manufacturing system to thank for its ongoing rise. The paper suggests that adopting practices of lean production in the automotive industry reaps considerable financial and environmental rewards, but poses difficulties in making an impact on buyers in the prestige market. The paper weighs up the virtues of lean production in terms of the environment and costs against the potential negative impact of lean production on brand image. It thus provokes thought on how the best of both goals might be achieved.

Full Text (1360 words) Copyright Emerald Group Publishing Limited 2007 According to the experts, 2006 saw Toyota become the world’s largest automobile manufacturer in the world, knocking General Motors (GM) off the top spot. It is a big leap from the situation in 1950, when Toyota produced 11,706 units per annum compared to GE’s 8,000 units per day. The cause of this switch in position? Smooth operation. Heavy operating losses have forced GM to downsize, whereas Toyota has its highly efficient manufacturing system to thank for its ongoing rise.

How to keep lean Toyota, like other Japanese car makers, has learned the benefits of developing a policy of lean production. The idea is that manufacturing processes are continually tweaked to ensure efficient and cost-effective production with the very minimum of waste. To achieve this much effort goes into error prevention, so that designs do not have to be reworked further down the line, and into making sure the different processes involved in production work well together. Materials flow continually through the system as required and thus customer demand is met but there is little need to hold a large inventory of stock.

It is not something that is easily mastered. As well as having designs and machinery that are reliable and consistent, communication and management are vital components of the successful system. Contact with suppliers is very frequent, and ideally manufacture should be organized so that parts flow regularly and in similar volumes into the plant. Suppliers should know what to expect and when: an open relationship improves business practice and cuts wasted time in waiting for parts. Similarly, the production plant should keep close contact with managers of the retail stores.

If salesmen know levels of stock and its specifications then they can subtly manipulate the potential purchasers into opting for models that fit current production levels. These lines of communication, then, cannot be overlooked in planning lean production. Subaru in Indiana is another car manufacturer that has managed to go completely waste-free. It began with on-site recycling initiatives from staff – collecting newspapers, soda cans, corrugated packaging and so on – and, through more and more suggestions as to how recycling could be improved, the whole plant now produces no waste at all.

Some alterations had to be made as to the parts used on the plant and time and effort has gone into working out how all previous waste products could be recycled or reused, but the end result is as cost-effective as it is environmentally friendly and inspirational. Top executives at the firm set objectives to obtain and keep hold of the ISO 14001 certification, part of a voluntary set of standards intended to encourage organizations to address the environmental impacts of their activities systematically.

The hope is that an internationally recognized system of environmental protection will eventually be set up and adhered to, so that green practice will not inhibit international trading. Keeping hold of their certificate means that Subaru now returns some parts and packaging back to suppliers to be re-used, melts and processes soaked rags into plastic beads for electric wire harness covers, and burns other waste for energy. The plant now saves money by cutting waste, and always ensures that lean initiatives do not in any way hamper production. The customer response

In theory lean production should win favor in the eyes of an ever more environmentally aware customer base. Indeed, we do tend to voice approval if we are made aware of the benefits. From a practical point of view lean production often means we get hold of our car sooner and it has few problems. From an ethical one, it appeals to us to know that the companies we support are acting in an environmentally responsible way. Or does it? Oliver and Holweg believe that lean production can actually damage sales in some sectors of the market, especially the prestige end.

Whereas the reliability and the fulfilment of basic functional needs might win over those on low to mid level budgets, those with more cash to spend tend to be impressed by different things. Japanese cars constantly score highly in consumer reports, and win “Best Buy” labels in the Supermini and Medium categories, but as Top Gear presenter Quentin Wilson has noted, that is just not sexy enough at the top end: “People are only interested in three things: how fast it goes, how much it costs, and whether you can pull in it. “

The German manufacturers BMW and Mercedes still have the power at the top end, despite having no particularly noted reputation for lean production. Perhaps that is because the most efficient production plants strip out over-engineering. Why produce a car that can exceed 150 mph safely, when in the majority of countries the speed limit is way below that? Why design features and fittings which will far outlive the time any customer has the car? To the lean producer, these things mean waste in terms of both money and time. To the likes of BMW, they mean a highly sought after brand.

The individual character of prestige cars comes from that additional stretching of performance capability, that extra flourish in design, those additional optional extras that lean production necessarily compromises. So despite that fact that Japanese producers show significantly lower failure rates then their European counterparts, buyers are still more attracted to the glamor of Audi’s “Vorsprung durch Technik” and BMW’s “ultimate driving machine. ” The probable conclusion from looking at buying trends shows that brand still matters over environmental considerations and predicted reliability.

Despite their power in the low budget market, Japanese manufacturers miss the benefits in terms of sales and profit margins that come with attracting the strata of society with the most money to spend. Functional waste may be the enemy to the engineer and manufacturer, but their waste may well be the customer’s value. It is up to firms who have achieved the enviable mix of lean production and manufacturing excellence to package that achievement in a way that adds value and appeal to their relatively bland brands.

Only then will the market start to shift. Comment This is a review of “A clean, green set of wheels” by William Inman, “Bland or brand? ” by Nick Oliver and Matthias Holweg, and “Smooth is smart” by Denis R Towill. “A clean, green set of wheels” explains how the Subaru Indiana Automotive plant has gradually become entirely waste-free. The firm has been committed to obtaining and keeping an ISO 14001 certification since 2004, and now everything on the plant either becomes part of an automobile, is reused, recycled or burned to generate power.

The article thus demonstrates the feasibility of opting to go completely green in manufacturing. “Bland or brand? ” takes Toyota as the benchmark in achieving lean production and manufacturing excellence in the automotive industry. It explains that the Japanese car maker boasts a consistently strong reliability performance and has successfully optimised its systems to eliminate many different forms of waste. What interests Oliver and Holweg, though, is the relationship between reducing costs and reducing brand appeal in the eyes of the consumer.

They argue that firms such as BMW may not have achieved the same lean production as Toyota, but they manage to maintain a high level of desirability in the eyes of luxury car buyers. If Japanese manufacturers are to compete, they must consider the brand benefits of over-engineering in some areas, despite the accompanying drop in production efficiency. As Toyota becomes the largest car manufacturer, Towill’s paper explores how the celebrated Toyota Production System has achieved the enviable position of making-to-stock coupled with a minimum reasonable inventory.

He explains that Toyota manages a smooth production system by managing consistent volumes and low volatility, something that is assisted by constant communication with suppliers and salesmen. Sequential learning and the continuous updating of controls maintain the efficiency of the lean production system. [Reference] 1. Inman, W. (2006), “A clean, green set of wheels”, Industrial Engineer, Vol. 38 No. 4, pp. 26-9. 2. Oliver, N. and Holweg, M. (2006), “Bland or brand? “, Manufacturing Engineer, Vol. 85 No. 3, pp. 18-23. 3. Towill, D. (2006), “Smooth is smart”, Manufacturing Engineer, Vol. 85 No. 2, pp. 18-23.