Operations Management (Toyota Motor Corporation Case Study)

Operations management is the practice of making inputs into outputs as efficiently as possible. Operations management includes all the related activities of the business process. For example, Product design; Supply chain management; Job planning; Quality control; Inventory management. Etc.

In operations management there are many strategies that need to be taken to make the operations management effective. But the strategies cannot be put arbitrarily. These two items are widely used in management. In past it has been thought that operations strategy is under operation strategy. But now operations strategy has developed and got out from the boundary of operations management. The major steps that needed to be taken care of to implement strategies are, selecting and prioritizing the primary tasks, finding out the competencies of the firm, put the business organization into a better position (by eliminating waste, improving quality etc) and finally put the strategy into the action. (Russel & Taylor, 2009) (Brown, et al., 2010) Toyota Motor Corporations the largest auto manufacturer in the world. The company is founded in August 1937 in Japan. The company is current traded in top 3 largest stock exchanges in the world, New York Stock Exchange, London Stock Exchange and Tokyo Stock Exchange. This company has its motor almost every country in the world. It is their unique and competitive management and operation system which put them in an edge in the global market. In the scale of production Toyota Motor is the world leader. In fiscal year 2011 Toyota Motor manufactured 7,858,091 units of output. (Anon., 2012) (Liker & Meier, 2005)

Operations Strategy:
Toyota Motor has its own operations strategy. The management of the company has adopted new operations strategies that have given the company a competitive advantage over its competitors. That time Toyota Motor has developed Toyota Production System. There were some very basic features which had given the company some advantages over its competitors like Ford and GM Motor. Some of the basic advantages are, Better quality product; Higher productivity; Better customer response; Production waste minimization, etc. (Liker, 2004)

According to Liker Toyota have 14 principles. These principles can be divided into four major parts. They are, 1. Philosophy aimed for distant time horizon; 2. Choosing the best option to produce the best output; 3. Considering manpower is a very vital force to the organization which will add value to the company; 4. Taking the organization forward on continual learning process.

Operations Competitive Dimensions:

Choosing the best strategies for operations can give a company a competitive edge over its competitors. But implementing a good strategy is not so easy. There are some steps to help this thing. For example, First task of this process is to set the companys objective. Different companies has different objective, so strategies should be set according to that; Communication is a very important factor to let everyone know about the strategy. This communication includes both internal and external marketing.

After that company has to assess its competitors and also the market. The manager of the company has to find out dimensions which can give the company a competitive advantage over its competitor. Then after choosing these things the manager to implement the best way for the production process. And the manager also has to support the team with all the amenities to run the operation process. (Greasley, 2008)

From the very beginning Toyota Motor has many strategies which have given this company a competitive advantage over its competitors. Toyota has always considered their customers needs. The basic thing the management has significantly improved over its competitors is reducing waste. There are seven main steps which helped the management to reduce the waste. These waste reduction policies of the management has given the company eco-friendly working process. So as a result the company is becoming eco-efficient. For example, this efficiency of the company has gone up 23% in the fiscal year 2011 with respect to fiscal year 2004. Some of the things Toyota Motor follow to reduce waste are Preventing over production; Reducing excess inventory; Defined working movements. So the employees do not have move unnecessarily; Identifying defects and curing them.

Toyota Motor always try took at the root cause for creating the waste. And always aim to reduce these with the efficient manner. (Liker, 2004) (Anon., 2011)

Capacity:
In the broad sense of operations management capacity planning is a very important thing. It should not be misunderstood by the thought that capacity planning only deals with production capacity. But capacity planning deals with a variety of things. The whole capacity planning comprises of

many things. This capacity planning determines the firms ability to meet current demand as well as future demand. Two major things in this capacity planning is, 1. Figuring out the capacity needed to meet the demand. This stage is very important for the profitability of the company and also for the future growth. 2. And then comes for the stage where there will be an evaluation for the capacity plans. (Porter, 2011) For a global player like Toyota Motor, capacity planning is very important. The capacity planning and management is very well organized in the operating areas. It is very much helpful for the employees. For example, the founder of Toyota Motor, Mr. Toyoda had five main principles. And one of those was creating homely atmosphere at workplace. Toyota is contributing with its product in the global market more than any other auto manufacturer. This proves that the management has the capacity to meet the global demand. Toyota has 50 manufacturing companies and 173 distributors around the world. (Anon., n.d.) (Anon., 2011)

Location:
Location decision is a very important factor for the management. From the very beginning of the operation process till the end of it location decision is a very important thing. Choosing appropriate location is vital for both manufacturing division and also selling division. For strategic management choosing the location is vital part. in this era when the world becomes integrated and it makes location decision more important. but when implementing the location the management should consider many things. for example, Regional factors; Taking the overall community into their considerations; Other site related factors. Etc. (Stevenson, 2005)

Toyota Motor has also taken a competitive advantage in the market from choosing their location. The management of the company had chosen the

most convenient location for their operation. This reflects in many cases. Toyota has many operations in North America and Canada. There is relatively high production cost. But at the same time it diminishes transportation cost. And then again the management is moving from these high cost production area to nearby cheap cost production area. So we can see Toyota Motor has a lot of operations in South America where the production cost is cheaper. And when it comes to the selling part the management chooses to stay close to the customers. A wide range of distributorship around the globe gives them an advantageous position.

Process:
Process design is very important to make the whole operations management efficient. Perfection in the process proves how well the management is ready to take a leap ahead. This process can be various types. Process design varies from company to company. For example, Quality process; Dependability process; Durability process; Speed process; etc.

There are some general approaches to manage process, this is called, process types. Some of the process types are, Project processes; Batching processes; Jobbing processes; Mass processes; etc. (Slack, et al., 2007) (Slack & Betts, 2006)

Toyota Motor Corporation has its own system of processing. The management of the company has a special focus on eliminating waste. The company is well reputed for its wide range of good cars. And the company also has a good reputation to provide quick spare parts to the customers. On the other hand as the management chooses to eliminate excess inventory some times in some regions the company faces shortage of some of its product.

Total Quality Management:

Total Quality Management is a widely used term in management. Though this concept is introduced around 1950 but it has become one of the most important factors in operations. There are different views on TQM. Some people say, it means to eradicate all the defects in the very beginning and provide a flawless good or service from the very beginning and some other people say, TQM is a continual process. It is said that in order to achieve Total Quality Management, the management should focus on eight major elements, 1. 2. 3. 4. 5. 6. 7. 8. Ethics; Integrity; Trust; Training; Teamwork; Leadership; Recognition; Communication. (Ahire, 2000) (Padhi, 2012)

Data source: www.edrawsoft.com/TQM-Diagrams.php

Toyota Motor has accepted Total Quality Management system. The management of the company has been trying hard to improve quality of their products and services. Toyota Motor is one of the very few companies in the world which puts a lot of effort behind ensuring the quality. The management of Toyota Motor practices continual development process. The management also practices kaizen and andon cords. These practices have been praised in all over the world. But in recent times the company is facing some difficulties in various departments. Some of the causes are because of the recession. The management has announced its first losses in more than 50 years. Recently there have been some issues relating with Toyota vehicles quality. A great number of their vehicles have been called from various countries of the world because of the quality issues. So it would be better for the company if it looks a bit deeper into the quality matter of their vehicles. (Liker & Ogden, 2011)

Flexibility:
In the modern dynamic business atmosphere flexibility in the operations management is a very important factor. Flexibility comes to use in almost every stage in the operation process. For the customers perspective flexibility becomes useful in four ways, 1. Flexibility in the product or service of the company; 2. Flexibility to give a variety of products and services; 3. Flexibility of the operations to provide with the necessary amount of output to the consumers; 4. Flexibility to provide the good or service at the desired time. (Slack, et al., 2007) To determine the proper flexibility of the management, several researches and surveys can be done. The level of flexibility depends upon the customers. So researches can be done with the consumers. For example, a questionnaire can be set and may be given to the customers. Customers can express their demands from that paper. They may fulfill by giving marks depending upon their likings and disliking. (Jayaram, et al., 2011)

Toyota Motor has always followed flexibility principle to run its operations. This flexibility is one of the main reasons why this company has become a world leader in automobile manufacturing. Some of the examples of Toyota Motors flexibility in operations are given below, 1. Toyota Motor can manage its supplies according to the economy; 2. There is a wide range of vehicles offered by the company which satisfies all the customers; 3. When there is a problem with the product the management has the ability to recall their products successfully; 4. Toyota Motor is the pioneer company to provide eco friendly hybrid vehicles, etc.

Business process outsourcing:

Toyota Motor the worlds biggest car company has started outsourcing as it helps to minimize the costs of the parts not affecting the quality of their product. Toyota Motor yields to outsource from rest of the country as the prices of the auto parts are increasing day by day in Japan. They outsource over 60 - 70% of their vehicle content from the U.S. AS they produce limited number of parts in the house hold they can give emphasis on the quality of the engine and also the other strategies. (Barnes, 2009)

Why they involve in outsourcing:

Toyota Motor did not want to invest much in the manpower rather they wanted to achieve the strategies of mass production. Their vision was to be a successful automaker by fulfilling larger customer expectation. They also wanted to deliver high quality product by offering a low price which is possible by outsourcing. Some advantages that they can achieve by outsourcing: Outsourcing helps to meet their goal of mass production. It enhances new skills and better management.

 It reduces the cost of the production. Outsourcing ensures the quality of the product. It helps them to survive in global competition. Moreover they have to face some problems due to outsourcing. It may need high cost to implement. They may cause delivery problem. (Mahadevan, 2010)

Conclusion:
Since the very beginning of Toyota history, the company has always adopted new and unique management system in their operations process. The management of this company has become pioneer in many management systems. A large number of studies and researches have been done to understand the management and production system of Toyota. Because of their excellent approaches with the overall operations management The Toyota Way and Toyota Production System has become a very important factor in the study of management. Other things that has given the chance to their employees to strive for excellence is, all the employees should have respect for people irrespective of race, religion, gender and learning on a continual basis. The strategic management team has also focused a lot to bring the efficiency with the human-machine relationship. This particular focus has helped a lot to increase the companys overall productivity. There can be some places where Toyota Motor can improve their output. Though the company focuses a lot to the safety features of the cars but Toyota has experienced more safety related problem than most of its competitors. And because of this problem the company loses some market shares around the globe. And Toyota vehicles are mostly considered as cheap, non-durable vehicles. So the management can take initiatives to enter into the high class expensive vehicle market to full throttle. So along with the competition with middle class car manufactures like Nissan, Honda, Subaru and then Toyota will enter the high class markets and compete with Mercedes, BMW, Audi, Porche. But in the end time Toyotas management steps are successful to add the value to the company.

Reference:

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