Toyota Motors: Operations Management

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Toyota Motors: Operations Management

Table of Contents
Executive Summary ...................................................................................................................................... 3 Introduction ................................................................................................................................................... 3 Different process categories in Toyota/ Operations as competitive weapons ............................................... 4 Customer relationship process .................................................................................................................. 4 New service/ product development process .............................................................................................. 5 Order fulfillment process .......................................................................................................................... 5 Supplier relationship process .................................................................................................................... 5 Quality and Performance: Total quality management in Toyota .................................................................. 7 Cost of poor process performance and quality.......................................................................................... 8 Capacity Planning: Theory of constraints .................................................................................................... 9 Capacity Bottlenecks ................................................................................................................................ 9 Theory of constraints .............................................................................................................................. 11 Supply chain design and Integration: SCOR model ................................................................................... 12 SCOR model ........................................................................................................................................... 12 Inventory Management: EOQ and P and Q inventory control systems ...................................................... 14 Evaluate the impact the concepts/frameworks discussed in (b) may/may not have on the competitive priorities of your chosen organization .................................................................................................... 15 Conclusion .................................................................................................................................................. 16 Recommendation ........................................................................................................................................ 16 References ................................................................................................................................................... 17

Toyota Motors: Operations Management

Executive Summary The basic purpose of this report is to know about production process of Toyota motors. The different processes give the continuous improvement and relationship with internal and external customers. Supplier relationship process gives the organization inventory management system. Toyota motors manage its material requirement through adopting different inventory maintenance techniques. Suppliers also help in maintaining the inventory requirement to organization. The organization can save it inventory cost by continuous maintaining the long term relationship process with supplier. Supply chain designs helps in managing the reach of product to end customers. The organization tries to manage the supply chain design. Toyotas management tries to remove the issues regarding supply chain design to gain the competitive advantage. The supply chain operation reference model helps to remove the supply chain problems.

Introduction The Toyota Motors Corporation is established in 1937 and it is one of the leading organizations in the automotive industry. The major brands of Toyota include Toyota, Lexus and scion. Toyota has leading position in Total Product Quality management. The continuous improvement is quality of organization in every aspect is very important to compete in the market. This report gives the brief information about the total quality management, difference process, inventory management and supply chain design. Toyota motors were facing the bottleneck issues in batteries to produce Prius hybrid model in the market. The profit of Toyota is also suffered because of batteries due to low productions of cars. That batteries manufacturing company has resolve this problem and the profit of Toyota motors has been increased. Toyota is used dealership for distribution of cars. The customers are purchased cars through authorized dealers of Toyota motors. Toyota motors managed the supply chain design to remove the dispute between different distribution channels.

Toyota Motors: Operations Management

Part: A

Different process categories in Toyota/ Operations as competitive weapons Toyota Motors has same operation process as the other businesses. The process of conversion of from inputs to output by systematically designed, directed and control and converted into products and services for internal and external customers is referred to operational process or Toyota Motors(Krajewski, Ritzman and Malh, 2010). The production system of Toyota motors is designed and organized systematically. It directed and control by the top management of Toyota motors. There are different processes in Toyota motors are customer relationship process, new services or product, order fulfillment process, supplier relationship.

Customer relationship process The process of attracting the prospect and become the customers. it includes the identifying the customer needs and want and then developing the final product according to needs and wants of Toyota customers. It is necessary to satisfy not only external customer but internal customer of Toyota motors. Internalcustomer is the employees of organization. It is necessary for top management to satisfy the employees of the organization.There is complete customer relationship process to retain and continue relationship with customers.

Toyota Motors: Operations Management

The customer relationship management is combination of different things that includes technology, people, and process. These things seek the customer or Toyota motors.It requires cross functional and customer focused business(Chen and Popovich, 2003). New service/ product development process New product development process is starts from the inputs from form employees and customers of Toyota motors. The employees design and produce the cars for their customers. the new product or service development process starts from convincing and getting fruitful ideas from internal and external customers. Order fulfillment process Order fulfillment process in Toyota motors includes the activities that are necessary to produce and fulfillment of external customer needs and delivered them products or services. Supplier relationship process All activities that are necessary to maintain the long term relationship with supplier in Toyota motors are referred to supplier relationship process. Supplier provides the raw material, services and necessary information to organization. Supplier relationship process helps to management in providing of material timely. The delivery of final product is only possible with help of suppliers

Toyota Motors: Operations Management

A process of Toyota Motors is given in above figure. The inputs include workers, managers, equipment, facilities, material, land and energy. These are the basics for the final products for Toyota. The management starts working by using these inputs. This input comes into the process stage. The external and internal customers are impacted on process or operations. The customer need and wants impact on the production process of cars.The production department tries to fulfill the individual needs about the products. The final product is received after processing of inputs.

Toyota Motors: Operations Management

Quality and Performance: Total quality management in Toyota Quality is the main issue in global world. Every organization is seeking for better quality in their services and products. Quality means free from defects. Total quality management means continues improvement in whole organization. This continuous improvement can be in term of increase the satisfaction of customers. Total quality management includes intense focus on the customer, concern for continual improvement, process focused, and improvement quality of every thing, accurate measurement and empowerment of employees. Toyota motors focused not only external customer but also internal customers. The external customer includes those individual or organization who buys the goods and service. The internal customer includes shipping and account payable personnel that coordinate and communicate work activities to assist the customers. The basic aim of total quality management is continuous improvement in quality of every aspect in the Toyota motors. Quality is not for specific period of time, it is continuous improvement in every aspect of organization. Total quality is process focused, it also focus on the work pressure of employees. Toyota management is making arrangements to improve the quality at work. The quality of goods and services in Toyota will also improve by maintaining the work load in organization. Total quality management does not means the improvement in the quality of service or product only, it means improving the quality of every thing. Total quality management gives the facility to Toyota management accurate measurement. Statistical tools are used to measure and analyze the critical variable at the time of operations. Toyota in continuous improvements includes the employees of organization. Employees are empowered to take decision for the betterment of quality (Robbins and Coulter, 2010).

Toyota Motors: Operations Management

TQM Wheel Source: Operations management textbook(s) by Lee J. Krajewski, Larry P. Ritzman, Manoj K. Malhotra

Cost of poor process performance and quality Toyota some fails to deliver the quality product to it customer as compared to its competitors. The evidence showed that Toyota has losing its quality and standards. Toyota had no voluntary layoffs in the recession time with respect to its customers. They have extra staff during recession which slows down the quality and safety of the organization. In some plants of Toyota have forty percent of extra employees as not needed for production and they are paid full time. They create the problems for production and for management issues. There is lack of staff management in Toyota. It creates the extra expense for the organization. It also creates the quality issues and customer dissatisfied with the current scenario (businessweek.com, 2010).The failure to provide the quality product cause in increasing the cost of Toyota. It is also source or wastage of financial resource, manpower, and time wastage for Toyota motors.

Toyota Motors: Operations Management

There is positive impact of total quality management on business performance. The profit of Toyota is also increased with the improvement of quality of products. Customer shows loyalty after the satisfaction with organization (Breja, Banwet and Iyer, 2011).

Capacity Planning: Theory of constraints

Toyota motors continuously making planning about the enhancement of its capacity. Capacity of Toyota production means the maximum output can gain from its process. The management is trying to improve its capacity of plant. The enhancement of capacity will decrease the cost of production and prices of cars in the market will decline. The maximum output is only possible that organization can put it resource at extreme point (Krajewski, Ritzman and Malh, 2010). Toyota motors also facing the different type of constraint that slows the production capacity. These are hurdles that create the problems in the production. They are also restricts the production process of cars. Physical constraints, market constraints and managerial constraint are the type of constraints in Toyota motors. Capacity Bottlenecks Capacity bottlenecks in Toyota motors is special type of constrain and bottleneck is capacity constraint resource. It limits the organization resource, limits the production volume, fluctuation in demand and limits the production mix of Toyota motors.

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Limited supplies of battery packs are slowing down production of the Toyota Prius. Source: http://www.autoweek.com/article/20090805/carnews/908059996 Toyota motors are facing the battery bottleneck, it create the problem in the high production at the time heavy demand. This problem is also carries next year according to Toyota management. The new Prius model has very popular in the customer, but it bothering some customers of Toyota motors and its factory is working at full capacity. The management announce at quarterly report that batteries are not produced as the increasing demands by the customers. The batteries production needs to increase to meet the market demand by the Toyota motors. The annual capacity of Toyota motors is five hundred thousand of Prius car model but batteries for the gasoline hybrid car cannot make as compare to its car production by Panasonic Energy Co. So the production of Prius hybrid car is slow as compare to its demand. The dealers have heavy demand such car. There is large number of order are in pipeline of dealers. Honda is competitor of Toyota motors take the advantage of slow production capacity and they are selling its large quantity to customers. Toyota decides that they will not increase the capacity of Prius cars as the batteries are not product at high level quantity. Panasonic EV Energy plans to increase its battery production capacity up to one million by this year (autoweek.com, 2009)

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Theory of constraints Toyota management is continuously taking corrective action to improve its quality of product by removing the constraints from production side. The management is continuously scanning internal environment to remove the constraints in the different process of the Toyota motors. The profit will maximize after removing the constraints. Management takes operation measure terms of inventory, output, operational expense and utilization. Toyota motors can improvement in process through identification of system bottleneck, exploit the bottleneck, removing the constraints, elevate the bottleneck.

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Supply chain design and Integration: SCOR model A Toyota motor is using supply chain design to decrease the cost. The basic purpose of using the supply chain model is to decrease the cost and increasing in profit of Toyota motors. Management of Toyota can take necessary measure to manage the supply chain design. It coordinates the work activities between the different departments. For achieving the competitive advantage the input match with the output of Toyota motors. There are different alternatives are offered by the organization. It is essential for the organization for achievement of competitive advantage. Supply chain design contains the member of every organization. They support the different customer in delivering the services in case of services sectors. Supply chain design controls the inventory through managing of flow of material in the Toyota. It identifies the position of suppliers in supply chain like tier. It also helps in facilitate the customer and suppliers of organization.

For determination of efficiency and effectiveness supply chain design is critical factor. Toyota motors involve the decision in supply chain design about the total number of supplier, closeness of suppliers. It also includes the selection of suppliers and its evaluation process. Capacities of supplier in production matter and contractual terms are also include in supply chain design. The organization has also management the disagreement between the different channels member is also included supply chain design. The supplier selection is basic concern for an organization for Toyota manufacturing unit. The relationship with the supplier helps in managing the inventory turnover like Just in time. It is only possible if the suppliers have long terms relationship with Toyota. The capacity and locations of supplier is also impact on the management of supply design of Toyota motors (Sezen, 2008). SCOR model The supply chain council developed the supply chain operation reference model. It helps to Toyota managerial staff to solve the problem of supply chain management. It contains the different concepts of cross functional framework benchmarking. It includes Management process description

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Standard process relationships framework Best performance production practice of management Alignment between the features and functions

The supply control operation reference model have four distinct process are source, make, deliver, and plan. This process is divided into tasks, elements and activities. Chain of source is the basic supply of each process. This model provides helps to Toyota motors to perform thorough analysis of all supply chain (Huan, Sheoran and Wang, 2004).

The long term relationship helps in managing the inventory system in organization. Toyota management manages the pressure of small inventories and large inventories. They manage the inventory of raw material, work in process and finished goods. Toyota is managing the just in time and jidoka inventory system through the supply chain. The house of Toyota provide the just in time approach and Jidoka approach. It includes the manual or automatic line stop

Source: Operations management textbook(s) by Lee J. Krajewski, Larry P. Ritzman, Manoj K. Malhotra

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Inventory Management: EOQ and P and Q inventory control systems

Inventory management is the main issues for organizations. The manufacturing of Toyota motors is also managing the inventory. All types of inventory are important for an organization. These inventories are very important for an organization. The management of inventory manages the customer confidence. There are three types of inventories, it includes the raw material, work in process and finished goods. The basic purpose of inventory management is to provide the product to end customer with in less period of time. These inventories helps in the managing the customer demand. The orders are priorities according to production requirement. Toyota is producing five hundred thousand cars. Raw material includes the materials that are in raw form. The procurement department of Toyota is procuring the raw material from different vendors. Raw material is that material that required the further processing on it to become into final shape. The work in process material is those materials that are in the process of manufacturing the final product. Toyota production system has different process material in it factory. This material is in between input and output. This material is under process and it can be in different shapes. The finished product is the product that comes after process. This is final product that is ready to sell in market. After finalizing the finished product it is ready to sell in the market The economic order quantity is that level of quantity that minimizes the holding cost and ordering cost of Toyota motors. Toyota management can manage inventory by using this approach. It will helps in saving the organization resource (Hax and Candea, 1984). The P inventory system is that system that organization place single order for material and wait for second order until the product. It is the technique that saves the income of the organization. Toyota safe the material as safety stock that the meet the organizational requirement at the time shortage of raw material in market. Therefore, EOQ is the most critical inventory management technique which is using by today many organizations.

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Part: B

Evaluate the impact the concepts/frameworks discussed in (b) may/may not have on the competitive priorities of your chosen organization Toyota motors can gain the competitive edge if it follows the all process. This process includes the new product development process, customer relationship process. These processes provide the competitive edge to the organization. Total quality management provides the continuous improvement in the organization. The improvement in customer relationship is only possible the maintaining of relationship with internal and external customer is very important for the success of organization. It is necessary to maintain the relationship with internal external customer for maintaining the relationship with external customer. The internal customer helps in the managing the organization of resources that will helps in managing the customer demands at time. Customer relationship process includes the maintaining the long term relationship with customers. This process start form the thinking about the customer point of view rather that organizational point of view. The employees can understand easily the issues regarding the cars (Hoang, Igel and Laosirihongt, 2006). Toyota motors manage the Capacity planning to gain the competitive advantage in the automotive industry. Identification of capacity bottleneck issues helps in removing the low production capacity of the Toyota motors. The full utilization of resource give the more profit to Toyota and decrease the cost of production. The management of Toyota motors uses its full capacity production that increases its production. The full capacity decreases the cost of production and increase in operational profit of organization. In the way by managing their capacity organization can easily get long term success in the market. Toyota motors can get competitive advantage if they put its effort to compensate its weak points and gain the opportunities. Management take necessary action to overcome the threat and take action that these threat converts into opportunities. Today there is globalization, every company want to get competitive advantage in the market in order to get long term sustainable market leadership. It is a valid strategy for companies to remove their weaknesses and get opportunities in the market so that they can get enduring success.

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Conclusion Toyota motors are one of the leading organizations in the world. Toyota motors have managed its production process by managing the inventory, supply chain design, customer relationship process, supplier relationship process. The management is also managing the supply chain in the market. The cost of production can be saved by maintaining the inventories by using the economic order quantity, P and Q system. This model gives the organization to find out the exact quantity to make order for fulfilling the customer demands. Toyota motors can only use just in time technique when they have long relationship with suppliers. The long term relationship is only possible if the management timely fulfillment the requirements of suppliers.

Recommendation This report discusses the different issues regarding the quality, production, supply chain design. Toyota motors go for total quality improvements. Management continues review its quality programs to for maintaining the quality in the organization. The demand of staff is maintained according to business period in industry. Toyota management takes necessary action to maintain and save the additional cost of retaining of raw material. Toyota motor is using dealership system for sales of its products. Dealers do not take care about the needs and wants of the customers. So its management uses the combination of distribution channels which not only save the carrying cost but also provide the goods and service according to their desire.

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References autoweek.com (2009) Toyota Prius: Battery bottleneck limits Prius Output, 8 May, [Online], Available: http://www.autoweek.com/article/20090805/carnews/908059996 [22 Novemeber 2011]. Breja, S., , Banwet, D., and Iyer, , (2011) 'Quality strategy for transformation: a case study', The TQM Journal, vol. 23, no. 1, pp. 5 - 20. businessweek.com (2010) Toyota's Lost Its Quality Edge, 28 January, [Online], Available: http://www.businessweek.com/bwdaily/dnflash/content/jan2010/db20100128_907800.htm [22 Novemeber 2011]. Chen, , and Popovich, (2003) 'Understanding customer relationship management (CRM)', Business Process Management Journal, vol. 9, no. 5, pp. 672 - 688. Hax, A. and Candea, (1984) Production and Operations Management, 2nd edition, Prentice-Hall. Hoang, , , Igel, and Laosirihongt, (2006) 'The impact of total quality management on innovation', International Journal of Quality & Reliability Management, vol. 23, no. 9, pp. 1092 - 1117. Huan, , , Sheoran, , and Wang, G. (2004) 'A review and analysis of supply chain operations reference (SCOR) model', Supply Chain Management: An International Journal, vol. 9, no. 1, pp. 23 - 29. Krajewski, , , Ritzman, , and Malh, , (2010) Operations Management: Processes And Value Chains, 8th edition, Prentice Hall. Robbins, S.P. and Coulter, M. (2010) Management, 7th edition, Prentice Hall. Sezen, (2008) 'Relative effects of design, integration and information sharing on supply chain performance', Supply Chain Management: An International Journal, vol. 13, no. 3, pp. 233 240. triplepundit.com (2011) Toyota Production System Will Boost CSR Efficiency, 7 July, [Online], Available: http://www.triplepundit.com/2011/07/toyota-production-system-csr/ [22 November 2011]. Wallin, , Rungtusanatham, M., and R, (2006) 'What is the right inventory management approach for a purchased item', International Journal of Operations & Production Management, vol. 26, no. 1, pp. 50 - 68.

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