Essay: Toyota-2 the Chief Process Improvement

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Toyota-2

The chief process improvement that Toyota needs to undertake involves restructuring its company objectives. Traditionally, Toyota was a company that built a solid reputation for safety and reliability while attempting to provide quality vehicles. There are numerous principles of the Toyota Way that denote this company objective, including principles I and II which are focused upon long-term philosophy and a continual process improvement to elucidate problems before they affect customers (Liker, 2004, p. 37). During the past decade, however, this company objective became supplanted by the notion of prioritizing competition with other automobile manufacturers as the company's chief objective. Whereas once before Toyota's goal was to consistently manufacture quality automobiles, during the end of the last millennium the company's objective transitioned into vying for the top automotive sales spot around the world. The new prioritization of sales, which superseded that of quality construction, directly contributed to a number of mishaps that resulted in costly penalties and a loss of reputation that is difficult to repair.

Toyota can rectify this situation by resuming its initial company objective of ensuring customer satisfaction with the manufacturing of reliable, safe vehicles. Doing so, however, requires the company to revise key components of its production process which contributed to many of its troubles within the past 10 years. Specifically, Toyota must replace its hyper-lean manufacturing methodology with a more traditional one in which proper materials and time implementing them is placed upon its vehicles. Doing so requires not only abandoning its cut costs approach, but also utilizing tried and true original equipment manufacturers (OEMs) that the company has a relationship with as part of the conception of keiretsu (No author, 2009).

Background

Toyota's transition from a product and customer satisfaction-oriented company to one governed by achieving sales quotas began in the 1990's, when longtime leader and founder Tatsuro Toyoda had a stroke (Ohnsman et al., 2010). For the first time, the company's leadership was replaced by non-family members whose primary objective was expediting the company's globalization process to achieve a majority share in the automotive industry. In the midst of the "Toyota 2005 Vision," in which former CEO Hiroshi Okuda made great strides to globalize Toyota's production process by building manufacturing locations throughout the world (Greto, 2010, p. 4), the company's priority became the speed at which vehicles were created. To aid in producing more cars faster, Toyota began systematically reducing the amount of money and materials spent on vehicle manufacturing, which not only reduced costs by substituting different OEMs for less expensive ones, but also was targeted towards Toyota's "Global Vision 2010." This updated version of "Toyota 2005 Vision" revolved around achieving a 15% market share of automobiles sold by 2010 (Greto, 2010, p. 5). Clearly, Toyota's company objectives had shifted to those of sales vs. those of quality.

When explicating the background information related to Toyota's excessively lean manufacturing process, it becomes necessary to denote specific initiatives and the years they were implemented to truly gauge the cost, impact, and implications of this change in company direction. Inspired by 1996's "Toyota Vision 2005," Construction for Cost Competitiveness for the 21st century (CCC21) was implemented in 1999 and eventually resulted in the formation of 2002's "Global Vision 2010." The aims of CCC21 were formidable, and included an "explicit goal…to cut the number of components in a car by 50%" and "to cut procurement costs by 40% and the installation time of many components by 75%" (Greto, 2010, p. 5). Moreover, CCC21 was responsible for saving "more than U.S.$10 billion" by 2005, during which time then-president Katsuabe Watanabe implemented a program known as Value Innovation, which "promised greater savings by making the entire development process cheaper and faster, further trimming parts, production costs and time to market" (Greto, 2010, p. 5). The ramifications of these numbers and reduction measures in Toyota's manufacturing process are staggering. If by 2005 CCC21 had achieved its end of reducing the parts in a vehicle by 50%, then the implications for Value Innovation were downright disturbing. Was Toyota actually attempting -- and succeeding -- in producing vehicles with, say, 25% of the parts originally used in 1999?

Implications

Unfortunately, the answer to this rhetorical question, albeit somewhat difficult to prove, appears affirmative. One can make a quite convincing case that the number of quality issues Toyota endured while striving to reduce materials, increase production speed and quantity, and achieve status as the top selling automobile manufacturer had a direct impact on the myriad quality issues it encountered beginning in 1999 -- when it initiated CCC21. If the suggested process improvement of Toyota's restructuring company objectives by attempting to produce quality vehicles -- as opposed to attempting to sell the most vehicles quickly -- is not undertaken via abandoning its ultra-lean manufacturing model and implementing one more emblematic of the Toyota Way, the company can expect a host of negative ramifications.

The most significant of these presaged its litigation woes which began in earnest during 1999 when engine malfunction related to impeded oil passages caused a number of customers to have to replace their engines. Toyota literally received thousands of warranty requests and lawsuits related to approximately 3.3 million vehicles plagued by this issue, resulting in expensive engine overhauls and financial settlements (Greto, 2010, p. 5-6) that do not appear unrelated to its goal of attempting to build cars using fewer materials, faster than ever before. This theory is bolstered by the fact that Toyota's recalls nearly doubled from 2003-2004 (shortly after its "Global Vision 2010" was developed), totaling almost 2 million across the globe -- for issues not related to its oil crisis (Greto, 2010, p. 6). The increase of quality issues and expensive financial repercussions for Toyota only escalated during a two-year period in 2009 (Belsie, 2011) as its most damaging recall issue -- in which vehicles experienced a sudden, inexplicable surge in acceleration -- received global prominence. In addition to having at least two vehicles owners and their passengers die due to this malfunction, the company "pulled millions of its vehicles off the road," and "got hit with $32 million in fines for failing to promptly notify the" National Highway Traffic Safety Administration (NHTSA) "of the defects" (Yang, 2011). From a financial perspective, there is clearly a link between vehicle quality issues and Toyota's attempts to build more cars utilizing less fiscal, temporal, and material resources. It is not unreasonable to posit the fact that failure to ameliorate this approach to manufacturing will lead to similar lawsuits, fines, and recalled vehicles.

The results of the aforementioned quality issues are also intangible, and include the damaging of Toyota's once stellar reputation. The tarnishing of the company's reputation is indicated by the fact that soon after the accelerator issue gained notoriety, "Toyota's market capitalization had fallen 21%, and its inventory position skyrocketed since the problems became public in late January 2010" (Greto, 2010, p. 7). Other sources indicate that the accelerator crisis was responsible for rendering Toyota "the butt of endless jokes on late night television" (Yang, 2011). Thus, failure to rectify company objectives by terminating its hyper-lean manufacturing will likely continue in further sullying of the company's reputation, which would scare customers away.

Yet if Toyota was to adjust its corporate priorities and focus on reasserting the principles of the Toyota Way in manufacturing vehicles with the goal of providing quality and safety first, the inverse of Toyota's reputation woes will occur. It is not too late for the company to again gain acclaim for building reliable vehicles; rededication to the principles of the Toyota Way will ensure this positive outcome. Most of all, a revitalized positive reputation based on the provisioning of safe vehicles is actually the ideal way to achieve a majority of the market share of automobile sales. If Toyota cannot become the top automobile manufacturer by sticking to its own methodology, then that pursuit is not a goal worthy of this once reputable organization.

This point should not be undervalued. Toyota must realize that focusing on manufacturing quality vehicles may not lead to the apex of automotive sales. Therefore, it may very well concede that top position to General Motors or some other popular manufacturer. Yet the benefits of conceding this position include, eventually, a loyal customer base, steady profits in uncertain economic times, and financial freedom from costly penalties and lawsuits, of which the company has been far too well acquainted with in recent times. Lastly, it is worth mentioning that spending more to provide higher quality vehicles could actually result in Toyota's becoming the top automotive manufacturer.

Desired Outcome

The primary outcome that is projected to occur if Toyota dissipates its ambition for globalization and for leading in automotive sales by adhering to the principles of the Toyota Way and prioritizing safety and quality over expansion is that Toyota will regain the stellar reputation and financial standing it possessed for the duration of the company's standing. The point is that Toyota will actually not be different in its processes and company objectives… [END OF PREVIEW]

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