1.

As Doug Friesen, what would you do to address the seat

problem? Where would you focus your attention and solution efforts?
What options exist that you would recommend? Why?

The problem that Doug and the leadership team faces is specifically in the area
of the rear seat assembly. This area has
been a problem for much of the last six
months. Figure 1 illustrates the top 5
sources of problems for each of the past
seven months. While the defects per
vehicle are down from the October 1991
peak, the trend line is disturbing with the
largest month-to-month change occurring
from March to April.
From October through January, there
seemed to be a large number of missing
Figure 1 - TMS USA HBS - Exhibit 7
or broken parts appearing among the
top five problems. This was likely related to poor design or process steps,
which seemed to have been addressed based on the data in the accompanying
chart. Aprils problems seemed to focus more on missing elements (possible
misalignment in the JIT process), manufacturing quality (wrinkles), and
apparent manufacturing process errors (gap in rear seat).
Additional data suggests that the number of defects increased on or about the
14th of April. The timing could suggest that
the introduction of the new European
models, which increased the possible
combinations from a low of 12 in early 1992
to 20 at the beginning of the month, to 30
options. There were plans to increase this
again by 18 as exports were planned for
Japan and the Middle East.
It should be noted that while the trend
increased for both shifts, there is a much
larger defect rate for the 1st shift.
Figure 2 - TMS USA HBC
Exhibit 10

Toyota
also
captured the defects by type in a Pareto
chart. The shaded elements note the TMS
view that the defects were the
responsibility of KFS. Material Flaws and
Missing parts (likely incorrect colors or seat
configuration) lead the list of defects.

It is our recommendation to work actively to address the problematic trend with

the seats on two fronts: (1) quality control with KFS and (2) the discovery of the
reason for the differences between the first and second shift.
The recommended actions related to KFS would focus on incoming inspection.
It is unclear if the material flaws are directly
Figure 3 - TMS USA HBC - Exhibit 8
related to the manufacturing process at KFS,
the transport, or the transfer process into the TMS line. This can be easily
examined using Jidoka. Addition focus needs to be placed on ensuring that the
number of seat options is not contributing to the number of missing parts and
that the JIT information exchange is correct. Again, a Jidoka process would
uncover quickly the issue and likely result in recommendations to alleviate this
problem. If this was an area of continued concern, the focus of a Kaizen team
on this problem would be justified. A short-term solution might include placing
additional Vendor Managed Inventory golden seats on-site at the TMS facility
to replace defective parts to ensure that there are fewer parts taken off line.
There must also be a close examination of the two TMS areas. The first take
would be to explore the reason for the difference in defect rates between the
shifts. If there is a training problem, this should be addressed immediately.
Additional emphasis needs to be focused on the reason for the delays in
obtaining replacements parts from KFS once the source of the problem is
identified in the Clinic or Overflow area.

2.

What do you think about stopping the line? What is the cost of a
chord pull resulting in a stoppage of 1 minute? 30 minutes? 60
minutes? Do you think the line should be stopped when the station
identifies a defective seat?
It is our belief that the line should not be stopped to fix a defective seat.
The method of noting the defect and creating a triage to handle the problem
does work; however, the company needs to discern the root cause of the
exceptionally high volume of defects and implement appropriate remedial
measures.
An underlying message from The Goal states that the cost of a line stoppage
due to defect costs more than the replacement parts and overtime.
Because the Georgetown plant has capacity for only 200,000 cars and
market demand is for 240,000 cars, every foregone unit of production costs
Toyota the margin they would have made on that car. According to the case,
a Camry sells for $18,500 with Toyota making a 17% margin. Thus, every
foregone unit of production costs Toyota $3,145. If we assume that they will
not operate overtimes, have the demand for the units, the cost for the line
stoppages are:

Cars Per Shift

428

Minutes Per Shift

Cars per Minute

485
0.88

Pricing
Sale Price $ 18,500
Margin
OP

OP Impact Per
Stoppage (minutes)
Cars Lost Shift For Lost Car
1
1 $
3,145.00

17%
$ 3,145

30
60

26 $
53 $

81,770.00
166,685.00

If we are to assume that the demand still exists and overtime is available to
make up for lost Cars related to stoppages, then the costs for the stops
need to consider the overtime to make up for the lost cycles.
Stoppage
(minutes)

Number of Workers Per Shift

Overtime Cost Per Worker $
Cost Per Minute of Overtime $
Time required to Build One Car (minutes)

385
25.50
163.63
0.88

Additional Cost
Impact for Labor
Per Car
Cars Lost
1
1 $
163.63
30

26 $

4,908.75

60

53 $

9,817.50

1 We will assume Anyone in Management is Salaried

2 We will assume the Average Shift Size is 769/2
3 We will assume that Overtime cost are ($17 * 1.5)

0
385
$ 25.50

4 We will assume there is no additional Variable Materal cost

The costs associated with the line stopages are likely further understated
because there is a minimum overtime requirement for the employees .

52
5
(7
5)

Shift time (in minutes)

Minus lunch & breaks

Total time per worker
Workers per shift
Total man-hour mins / shift

450
769
346,050

Total cars per shift

Cars per man-hour minute
Times workers affected
Car production lost / minute of
stoppage
Margin per car
Profit lost per minute of stoppage

427.5
0.001235
769
$
$

0.95
3,145
2,987.75

Plus 1 min of overtime for 769

workers
Overtime hours
Overtime rate
Total overtime for 1 min. of lost
production

Total cost for 1 minute delay

Total cost for 30 minute delay
Total cost for 60 minute delay

$ 3,314.58
$ 99,437.25
$ 198,874.50

769
12.82
25.50
326.83

3. Where, if at all, does the current process of handling defective

seats deviate from the principles of Just-In-Time and the Toyota
Production System?
The Toyota Production System principle is based on the assumption that true
need will deviate from production planning and that problems will crop up.
The Just in Time inventory management system was designed to ensure a
Pull rather than Push management principle, which reduces inventory costs
and ensures the most efficient manufacturing environment. The system
functions well when communication is effective and suppliers have
completely adopted the principles and practices.
It is not evident that the TMS team deviated from the principle of Just in
Time, but rather it had other problems - either supplier issues, process
issues, or the JIT information flow was incorrect. It would be our conclusion
that there were problems with the TPS process that may not be directly
linked to the JIT, but rather failures to implement other elements of the TPS
to quickly determine the root cause and fix it.
The Toyota Production system relied on two practices to address problems
and drive additional quality and productivity, Jidoka and Kaizen.
Jidoka was a system for immediately identifying and addressing problems in
production. According to the case, in order for Jidoka to work properly, the
normal state of operations had to be well characterized and understood
and the processes had to be standardized. In the case of attempting to
remedy the seat problem, there was not a normal state of operations, the
problem was not understood, and there was no way to address the issue in a
standardized manner. Therefore, the principle of Jidoka was not applied
effectively.
Finally, kaizen was the idea of constantly seeking change for the better and
this was certainly not the case in Toyotas ad hoc approach to trying to
rectify the seat problems.
It is our conclusion that the core principles of TPS were not upheld and the
tools of TPS were not utilized with regard to the seat defect problems.

4. What is the real problem facing Doug Friesen?

The real problem facing Doug is that he has no idea where his problem lies.
Clearly, he is losing money each shift by missing his production goal,
incurring more costs related t fixing the problem, and in some ways has not
used Toyota Production System tool, the 5 Ws. He needs to drill down on the
problem, determine the root cause, and fix it correctly to ensure he meets
his plants commitment to its customers.
As a part of Question 1, we examined three possible issues, two with KFS
and one with TMS deltas between shift one and two. If we were to apply the
5Ws to the case,
Situation: We are seeing far more defects than
acceptable impacting our top revenue and bottom line
profit.
Initial Proposal Add QC checks to incoming
inspection, determine if issues exist in JIT system,
determine deltas in 1st to 2nd shift defects.
Why are we seeing so many in Material Flaws defects in the
line?
Why is the JIT system providing us bad matches or missing
products?
Why is this problem amplified by the introduction of more
model combinations?
Why is there a difference in defects between shift 1 and shift
2?
Why are we not effectively clearing inventory from the Clinic?

It has been stated that Doug also may be experiencing the problem of
looking at this issue through the prism of a traditional US manufacturer
rather than way the Toyota Motor Company would, fix the problem not the
source.
He is trying to work within the confines of the TPS, but is not taken
advantage of the tools of Jidoka and Kaizen to fully address the problem