Operations management is a section of management that focuses on running the designing of business processes in production of services and goods. The operations management sector is tasked with making sure that the resources of an organisation are efficiently exploited to create goods and services, and in a manner that excellently meets the needs of the consumer. Consequently, operations management includes the whole continuum from the creation of goods and services precisely through to when consumers acquire them, and the consumer processes management.
Consumer value is improved by quality improvements, cost reductions, minimized waiting times, and heightened flexibility in answering to shifting consumer demands. Eventually, developments in customer value creation are intended to escalate the value for the organisation by building a grander consumer base therefore making more revenue. They further argue that numerous simulations of competition are in economic literature, and can be effectively used to elucidate the choice of operations management exercises embraced by any organisation.
Chase &Jacobs (2006), note that over the past two decades, U.S companies have faced competitive pressures causing them to introduce numerous management practices for instance just in time, employee empowerment, full quality management, so that they can compete with the overseas counterparts. As such, Cousins, Lawson & Squire (2006), classify the decisions areas of operation management into four very broad classifications of process selection, product design, planning and control, and quality management. Operations management applies influence and control over how these decisions are completed. This essay will attempt to discuss the operations management of a case study. It will look into production and quality management exercises of the company as well as operations management decisions, and organizations’ strategy.
For the tenacities of this study, the case study is Toyota Motor Corporation which is a leading vehicle manufacturer globally. The choice of this case study was influenced by the fact that Toyota Motor Corporation deploys very cutting-edge operations management techniques in creation and distribution of goods. By illustration, as early as 1930s Toyota Motor Corporation effected the just in time mode of inventory control (http://www.toyota-global.com/company).
Nevertheless, there has been the problem of faulty cars recently, prompting numerous million recalls round the globe and Toyota is engaged in law suits with the U.S Government. The law suits are in regard to flaws in the assembly of its cars which caused accidents and deaths within USA. These matters caused heavy financial and publicity damage as well as losing the position as the lead vehicle manufacturer globally. This study will critically examine Toyotas’ operations management practices to define their role on the organisations’ catastrophes.
The aim of the introduction has been to deliberate issues of operations management so as to lay the study into perspective. The next section shall focus on scrutinizing the practices of operations management of the case study. A brief history of the case study will be necessary so as to comprehend the practices of the organisation.
Toyota Motor Corporation
Toyota Motor Company was founded in 1937 by a Japanese man Kiichiro Toyoda. However, its history would be traced back to 1933 when Kiichiro Toyoda set up an automobile department at the Toyoda Automatic Loom Works Limited. In 1934, the company made its premier product, and named it Type ‘A’ Engine and the principal Toyota AA which was the premier passenger car in the year 1936. The Just in Time mode of operation was launched in 1938 when the company began working from the Honsha plant (Roehl & Fujimoto, 2000).
Financial crises emerged in Toyota in the 1950s leading to the Toyota Motor Sales Company Limited to be managed differently from the Toyota Motor Company. The two companies merged in 1982 forming the Toyota Motor Corporation. This company propelled the Toyopet Crown, Crown Deluxe and Master in 1955, and in 1957 the Toyota Crown first prototypes were exported to USA which saw the opening of the USA sales branch. Corolla trademark was propelled in 1966 an year after Toyota had emerged the winner of Deming Application Price for Quality Control (http://www.toyota-global.com/company).
In order to initiate production in USA, Toyota Motor Corporation teamed up with General Motors Corporation in 1984 as a joint venture. Remarkably, 1997 saw the introduction of the Prius brand which was mass produced and emerged as a hybrid car with the global record of being a best seller. Toyota has more recent brands such as: Toyota Rav4, Land Cruiser, Prado, Avensis, and Carina among others.
The company headquarters are in Japan though it has a worldwide presence. It is placed as one of the leading vehicle manufacturers and has over 80,000 employees globally. In 2009, the company was named the largest motor vehicle manufacturer in the world, a fact that was later to change after flaws in recent cars. Toyota is even registered on the Japanese, New York and London Stock Exchanges (http://www.toyota-global.com/company).
Operations Management in Toyota
Toyota Motor Corporation is renowned as one among the leading companies in manufacture of automobiles (http://www.toyota-global.com/company). Roehl & Fujimoto, (2000), proposes that the rapid rise to success exuded by Toyota Motor Corporation can be associated with its operations and marketing strategies. Evidently, the management philosophy of the company has advanced since origin and this is illustrated by the operations of the organisation.
Among the significant features of the company’s operations include the Just in Time system of supply chain administration processes which the company keenly developed, as well as Lean manufacturing techniques, and embracing technology. Chase and Jacobs (2006) denotes that Toyota Production System was considered as quite efficient to a point of being endorsed for introduction to the Western motor vehicle manufacturing companies in the 1980s. The system was applied as a classic model to strengthen the changes needed in the automobile industry of USA.
Chase and Jacobs (2006) say that production system of Toyota is entirely immersed in the philosophy of total waste elimination in every aspect of production, and is committed to acquiring the most proficient methods to be applied by the organisation. Toyota productions system is a combination of Just in Time system and the Lean manufacturing system which equals to the complete process of manufacturing automobile. This process is the fruit of continuous effort and advancements over time so as to manufacture and deliver quality vehicles in the nippiest and most effective way.
In 2001, Toyota embraced its values and business techniques, often termed as the Toyota Way. These values and conduct guidelines are concise in five headlines of: Challenge, Respect, Go and See, Improvement and Teamwork (http://www.toyota-global.com/company).
Evidently, Toyota began laying strategies from the origin of the company. First, Toyota Motor Corporation branched out from Toyota automatic Loom works Limited a diversification that was well planned and has seen the rise of a conglomerate. Toyota expanded its scope of business to include making automobiles and equipment to handle materials. Toyota took advantage of lack of competition in Japan in the 1960s helping it gain a large market share and dominance.
Secondly, the merger between Toyota Corporation and General Motors brought about huge benefits to Toyota. The costs of exporting cars to USA were reduced as well as the hurdles associated with import restrictions imposed by the U.S congress. Toyota gained experience from American unionized labour, from the American suppliers, and the trade disputes that existed between Japan and America were diffused. This joint venture boosted the global presence of Toyota and the partnership is close to thirty years as of today. From the experience gained from General Motors, Toyota was able to open and successfully manufacture automobiles in other continents.
Another strategy is integration. Toyota saw the need to expand the scope of business after experiencing the effects of World War II. Suppliers of good quality parts were unavailable, shortage of material stirred products to be expensive and this greatly affected business. Toyota decided to manufacture body parts instead of relying on suppliers (Roehl & Fujimoto, 2000). It also meant that the company would design and modify these vehicle parts gradually and at their own will. Today, the integration has seen Toyota diversify into making steering wheels, fuel train products, air bags, machinery recycling components among others. Notably, integration has caused increase in sales volumes and revenue.
Toyota ventured into China and America markets with the right product for each market. America needed the bigger SUV cars, and Toyota gave made Qualis and Fortuner, which sold impressively. On the other hand, China prefers cars that are fuel-efficient therefore sedans, Corolla, Prius and Camry did exceedingly well here. Toyota recorded huge profits because of this segmentation.
Due to its diversification, Toyota remains one of the leading manufacturers of motor vehicles competing with Ford and General Motors. Such strong industry position is grounded on targeting the highest market, a diverse range of products, and unshaken commitment to quality and lean manufacturing.
3.Maximizing on profits
By way of Total Quality Management or TQM the company is able to maximise profits. Total Quality Management is an integrative combination of principles and behaviour assumed by Toyota’s management in a bid to keep improving the standard of goods and services. The company makes small and large cars designed for different purposes such that if a certain brand reduces saes, then there is another that is on peak.
4.Strong Brand Image
Toyota has Prius and Corolla as flagship models under which it continues to make sales. It is also known for being environmentally friendly as it produces ‘green’ cars, hybrid and effective cars (Stevenson, 2014). The company heightens its brand awareness, and trades more cars so as to escalate the existing brand image. Toyota also conducts surveys from clients and through that; they learnt that clients are concerned about fuel efficiency and emissions of carbon dioxide.
1.Recalls in large scale
Between the year 2009-2010 Toyota recalled 9 million cars, and in 2012 about 7.43 million vehicles due to safety issues and defects. These recalls hurt the firm both financially and the brand image too.
Weak presence in developing markets
Most Toyota products are sold in Japan, USA and Europe meaning that fluctuation in economy or political situations in these markets exposes Toyota to risks. The company should reach out to China and Africa. General Motors boasts of enormous market share in China and Toyota should look towards Africa. It should produce smaller and cheaper cars as there is so much potential in Africa.
1.New Customer Segments
The launch of Toyota Aygo targets the urban youth’s market that is now independent and wealthy. The vehicle is a classy, unique convertible and has inbuilt sub woofers. Being a recent venture, it is not highly profitable but that will definitely change in the near future (http://www.toyota-global.com/company).
2.Hybrid and Eco friendly Technology
Toyota and Lexus are known for producing cars that are environment friendly such as the Toyota Prius and Lexus RX 400h hybrid. Toyota should maximise on this opportunity since people want fuel efficient cars and environment friendly cars. This would lead to massive profits and increase the company market share.
By venturing into new markets and growing the market share and operations in China and India, Toyota is raising its global presence. The emerging economies indicate massive demand for vehicles. So as to endure and compete in the global spectrum, Toyota has to elevate its market share in emerging countries.
There are new companies storming into the market from South Korea, China and Eastern Europe and they pose terrific competitive rivalry in the industry (Roehl & Fujimoto, 2000). General Motors has reorganized and emerged stronger while Volkswagen is growing steadily. Toyota has presented innovative products like cheaper cars and customized cars such as the Aygo targeting the youth.
2.Shifts in exchange rates
Considering that the largest part of Toyota’s raw materials and revenue arise from foreign states, the profits earned overseas have to be sent to Japan and converted to Yen. This forces Toyota to wait till Yen depreciates resulting to delayed payments and amplified debts which is not respectable for the company. This threat is not easy to curtail though Toyota may set up centres in other nations so as appreciate their profits through that country’s exchange rate.
Operation Management Decisions
Decisions regarding the suppliers of raw materials or services are considered quite crucial in the management of Toyota. As outlined earlier, Toyota is diverse and has integrated into producing the raw materials it requires. However, need arises to outsource some services (Chase & Jacobs, 2006). The decision to outsource and pick suppliers is a huge determinant of the success of Toyota. Suppliers have to be reliable, driven, and understand Toyota specific needs. It is also recommended to integrate the suppliers into the company if the partnership has proved indispensible.
2.Design of goods and services
The success of the company is measured by how much profit is generated, customer satisfaction, and the tenacity of the brand image among others. Success cannot be achieved if the vehicles are not of quality. Toyota is associated with success because it made the decision to produce quality, affordable, durable and classic vehicles. Toyota continues to increase innovation and this could only mean that its success is guaranteed.
3.Planning and Scheduling
Since Toyota only produces cars on demand rather than for stocking purposes, it is evident that scheduling will therefore, necessitate a top-notch automation level and a demand pull system. This caters for programmed and efficient scheduling which means that when certain market has been met, then employees are tasked to meet another demand. This way, employees will not be placed on payroll during slowdowns rather their skills are deployed elsewhere (Chase & Jacobs, 2006).
4.Process and capacity design
Toyota has mastered the art of processing its vehicles over time and has managed to balance the need for labourers and machines as well. The company has invested in quality and handy equipment to speed up the process. Technology has made it possible to draw new vehicle designs with the help of engineers and field experts. The decision to deploy such initiatives is pegged on long-term goals.
Just In Time Processing, Material Requirements Planning and Inventory control
As stated earlier, the rapid rise of Toyota is attributed to the fact that Toyota utilised the Just in Time processing system as early as 1930s. The system only allows production to be carried out to encounter demand and there is subsequently zero inventories, and a tough prominence in quality (Stevenson, 2014). It eradicates wastage of resources by the price of holding together inputs and outputs.
The material needed for production is only bought when production is necessary, and production is done to satisfy an established market, instead of just for speculative purposes. Therefore both the production and distribution chains are leaner. Additionally, the resources that would be taut down in inventories of completed goods or raw supplies are utilised elsewhere by Toyota (Chase & Jacobs, 2006). This decision boosts Toyotas success as holding costs are reduced, workers with multiple skills are utilised more effectively, and respectable supplier relationships are preserved.
Quality is defined to meet the requirements of the customer. If the quality of vehicles fail to meet what the client expects then the sales will decrease. Toyota production system is responsible of generating vehicles that meet the international standard (Stevenson, 2014). Note that competition is stiff and if the production system fails, Toyota might face financial losses such as the loss felt during the mass recall of vehicles. The company has applied innovation to raise the level of quality and comfort.
The headquarters of Toyota are in Japan however; its presence is felt globally. This is as a result of branching out and strategically putting up base in viable location. The global expansion has stimulated success of this company. The facilities are put up in geographically expansive locations as well as centre points for serving the vehicle markets. Toyota has made sure that a customer can access its products by being somewhere proximal. Some places like Africa do not have a facility so customers’ needs are met by shipping cars from Japan (Roehl & Fujimoto, 2000).
The Toyota production system is bestowed with the responsibility of making durable, quality and reliable vehicles as well as maintenance. For instance, the massive recall of millions of cars in 2010 was done as the vehicles were flawed and defected. Although the recall amounted to massive financial losses and various law suits, it was a measure that prevented what would have been a catastrophe had the cars been used. The company goal is to make cars that suit needs of the client and that goal has to be achieved at all costs.
Employees are recruited in a fair process, selected and trained according to job requirements, and developed, rewarded and appraised through occasionally. Staffs are considered the organisations most vital asset and have to be treated as important by providing a reasonable work environment (Stevenson, 2014). Toyota is a reputable employer with over 80,000 employees as of today who are committed to customer service.
Toyotas’ facility in Japan is largest as it has to produce for the largest market. In other countries the facilities are on smaller ground but are systematically arranged and effectively utilised. They are large enough to accommodate machinery, structures and manpower required to do the job. Space utilization requires a planner so that there is no wastage.
Chase, R. B., Aquilano, N. J., & Jacobs, F. R. (2004). Operations management for competitive advantage (10th Ed.). Boston, Mass.: McGraw-Hill.
Company. (n.d.). Toyota Global Site. Retrieved July 24, 2014, from http://www.toyota-global.com/company
Cousins, P. D., Lawson, B., & Squire, B. (2006). Supply chain management theory and practice the emergence of an academic discipline? Bradford, England: Emerald Group Pub.
Cousins, P. D., Lawson, B., & Squire, B. (2006). Supply chain management theory and practice the emergence of an academic discipline? Bradford, England: Emerald Group Pub.
Roehl, T., & Fujimoto, T. (2000). The Evolution of a Manufacturing System at Toyota. The Academy of Management Review, 25(2), 439.
Stevenson, W. J. (2014). Operations management (Twelfth Ed.). Georgia: McGraw-Hill Education.
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