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Toyota’s Operations Management, 10 Decisions, Productivity

Toyota operations management, 10 strategic decisions, areas and productivity, car manufacturing business strategy analysis case study

Toyota Motor Corporation’s operations management (OM) covers the 10 decisions for effective and efficient operations. With the global scale of its automobile business and facilities around the world, the company uses a wide set of strategies for the 10 decisions of operations management, while integrating local and regional automotive market conditions. Toyota is an example of successful operations management on a global scale. These 10 decisions indicate the different areas of the business that require strategic approaches. Toyota also succeeds in emphasizing productivity in all the 10 decisions of operations management.

Toyota’s approaches for the 10 strategic decisions of operations management show the importance of coordinated efforts for ensuring streamlined operations and high productivity in international business. Successful operations management leads to high productivity, which supports competitive advantages over other automakers, such as Ford , General Motors , Tesla , and Hyundai. Nonetheless, these competitors continuously enhance their operations and create challenges to Toyota’s competitive advantages.

Toyota’s Operations Management, 10 Strategic Decision Areas

1. Design of Goods and Services . Toyota addresses this strategic decision area of operations management through technological advancement and quality. The company uses its R&D investments to ensure advanced features in its products. Toyota’s mission statement and vision statement provide a basis for the types and characteristics of these products. Moreover, the automaker accounts for the needs and qualities of dealership personnel in designing after-sales services. Despite its limited influence on dealership employment, Toyota’s policies and guidelines ensure the alignment between dealerships and this area of the company’s operations management.

2. Quality Management . To maximize quality, the company uses its Toyota Production System (TPS). Quality is one of the key factors in TPS. Also, the firm addresses this strategic decision area of operations management through continuous improvement, which is covered in The Toyota Way, a set of management principles. These principles and TPS lead to high-quality processes and outputs, which enable innovation capabilities and other strengths shown in the SWOT analysis of Toyota . In this regard, quality is a critical success factor in the automotive company’s operations.

3. Process and Capacity Design . For this strategic decision area of operations management, Toyota uses lean manufacturing, which is also embodied in TPS. The company emphasizes waste minimization to maximize process efficiency and capacity utilization. Lean manufacturing helps minimize costs and supports business growth, which are objectives of Toyota’s generic strategy for competitive advantage and intensive strategies for growth . Thus, the car manufacturer supports business efficiency and cost-effectiveness in its process and capacity design. Cost-effective processes support the competitive selling prices that the company uses for most of its automobiles.

4. Location Strategy . Toyota uses global, regional, and local location strategies. For example, the company has dealerships and localized manufacturing plants in the United States, China, Thailand, and other countries. The firm also has regional facilities and offices.  Toyota’s marketing mix (4Ps) influences the preferred locations for dealerships. The automaker addresses this strategic decision area of operations management through a mixed set of strategies.

5. Layout Design and Strategy . Layout design in Toyota’s manufacturing plants highlights the application of lean manufacturing principles. In this strategic decision area of operations management, the company aims for maximum efficiency of workflow. On the other hand, dealership layout design satisfies the company’s standards but also includes decisions from dealership personnel.

6. Job Design and Human Resources . The company applies The Toyota Way and TPS for this strategic decision area of operations management. The firm emphasizes respect for all people in The Toyota Way, and this is integrated in HR programs and policies. These programs and policies align with Toyota’s organizational culture . Also, the company has training programs based on TPS to ensure lean manufacturing practice. Moreover, Toyota’s organizational structure affects this area of operations management. For example, the types and characteristics of jobs are specific to the organizational division, which can have human resource requirements different from those of other divisions.

7. Supply Chain Management . Toyota applies lean manufacturing for supply chain management. In this strategic decision area of operations management, the company uses automation systems for real-time adjustments in supply chain activity. In this way, the automotive business minimizes the bullwhip effect in its supply chain. It is worth noting that this area of operations management is subject to the bargaining power of suppliers. Even though the Five Forces analysis of Toyota indicates that suppliers have limited power, this power can still affect the automotive company’s productivity and operational effectiveness.

8. Inventory Management . In addressing this strategic decision area of operations management, Toyota minimizes inventory levels through just-in-time inventory management. The aim is to minimize inventory size and its corresponding cost. This inventory management approach is covered in the guidelines of TPS.

9. Scheduling . Toyota follows lean manufacturing principles in its scheduling. The company’s goal for this strategic decision area of operations management is to minimize operating costs. Cost-minimization is maintained through HR and resource scheduling that changes according to market conditions.

10. Maintenance . Toyota operates a network of strategically located facilities to support its global business. The company also has a global HR network that supports flexibility and business resilience. In this strategic decision area of operations management, the company uses the global extent of its automotive business reach to ensure optimal and stable productivity.

Productivity at Toyota

Toyota’s operations management uses productivity measures or criteria based on business process, personnel, area of business, and other variables. Some of these productivity measures are as follows:

  • Number of product units per time (manufacturing plant productivity)
  • Revenues per dealership (dealership productivity)
  • Number of batch cycles per time (supply chain productivity)
  • Jin, T. (2023). Bridging reliability and operations management for superior system availability: Challenges and opportunities. Frontiers of Engineering Management , 1-15.
  • Toyota Motor Corporation – Form 20-F .
  • Toyota Motor Corporation – R&D Centers .
  • Toyota Production System .
  • U.S. Department of Commerce – International Trade Administration – Automotive Industry .
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What Really Makes Toyota’s Production System Resilient

  • Willy C. Shih

toyota operations case study

“Just-in-time” only works as part of a comprehensive suite of strategies.

Toyota has fared better than many of its competitors in riding out the supply chain disruptions of recent years. But focusing on how Toyota had stockpiled semiconductors and the problems of other manufacturers, some observers jumped to the conclusion that the era of the vaunted Toyota Production System was over. Not the case, say Toyota executives. TPS is alive and well and is a key reason Toyota has outperformed rivals.

The supply chain disruptions triggered by the Covid-19 pandemic caused major headaches for manufacturers around the world. Nowhere was this felt more acutely than in the auto industry, which faced severe shortages of semiconductor chips and other components. This led many people to argue that just-in-time and lean production methods were dead and being superseded by “just-in-case” stocking of more inventory.

  • Willy C. Shih is a Baker Foundation Professor of Management Practice at Harvard Business School.

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  • The Toyota Way: Using Operational Excellence as a Strategic Weapon

We place the highest value on actual implementation and taking action. There are many things one doesn’t understand and therefore, we ask them why don’t you just go ahead and take action; try to do something? You realize how little you know and you face your own failures and you simply can correct those failures and redo it again and at the second trial you realize another mistake or another thing you didn’t like so you can redo it once again. So by constant improvement, or, should I say, the improvement based upon action, one can rise to the higher level of practice and knowledge.

—Fujio Cho, President, Toyota Motor Corporation, 2002

Toyota first caught the world’s attention in the 1980s, when it became clear that there was something special about Japanese quality and efficiency. Japanese cars were lasting longer than American cars and required much less repair. And by the 1990s it became apparent that there was something even more special about Toyota compared to other automakers in Japan (Womack, Jones, and Roos, 1991). It was not eye-popping car designs or performance—though the ride was smooth and the designs often very refined. It was the way Toyota engineered and manufactured the autos that led to unbelievable consistency in the process and product. Toyota designed autos faster, with more reliability, yet at a competitive cost, even when paying the relatively high wages of Japanese workers. Equally impressive was that every time Toyota showed an apparent weakness and seemed vulnerable to the competition, Toyota miraculously fixed the problem and came back even stronger. Today Toyota is the third-largest auto manufacturer in the world, behind General Motors and Ford, with global vehicle sales of over six million per year in 170 countries. However, Toyota is far more profitable than any other auto manufacturer. Auto industry analysts estimate that Toyota will pass Ford in global vehicles sold in 2005, and if current trends continue, it will eventually pass GM to become the largest automaker in the world.

Every automotive industry insider and many consumers are familiar with Toyota’s dramatic business success and world-leading quality:

  • Toyota’s annual profit at the end of its fiscal year in March 2003, was $8.13 billion—larger than the combined earnings of GM, Chrysler, and Ford, and the biggest annual profit for any auto maker in at least a decade. Its net profit margin is 8.3 times higher than the industry average.
  • While stock prices of the Big 3 were falling in 2003, Toyota’s shares had increased 24% over 2002. Toyota’s market capitalization (the total value of the company’s stock) was $105 billion as of 2003—higher than the combined market capitalization of Ford, General Motors, and Chrysler. This is an amazing statistic. Its return on assets is 8 times higher than the industry average. The company has made a profit every year over the last 25 years and has $20-$30 billion in its cash war chest on a consistent basis.
  • Toyota has for decades been the number one automaker in Japan and a distant fourth behind the “Big 3” automakers in North America. But in August of 2003, for the first time, Toyota sold more vehicles in North America than one of the “Big 3” automakers (Chrysler). It seems that Toyota could eventually become a permanent member of the “Big 3” U.S. automakers. (Of 1.8 million Toyota/Lexus vehicles sold in North America in 2002, 1.2 million were made in North America. Toyota is rapidly building new production capacity in the U.S., at a time when U.S. manufacturers are looking for opportunities to close plants, reduce capacity and move production abroad.)
  • In 2003 the Toyota nameplate was on track to sell more vehicles in the U.S. than either of the two brandnames that have led U.S. sales for the past 100 years—Ford and Chevrolet. Camry was the top-selling U.S. passenger car in 2003 and five of the years prior. Corolla was the top selling small car in the world.
  • Toyota not long ago was known for making small, basic transportation vehicles, yet in ten years leaped out to become the leader in luxury vehicles. Lexus was introduced in 1989 and in 2002 outsold BMW, Cadillac, and Mercedes-Benz in the U.S. for the third year in a row.
  • Toyota invented “lean production” (also known as “the Toyota Production System” or “TPS”), which has triggered a global transformation in virtually every industry to Toyota’s manufacturing and supply chain philosophy and methods over the last decade. The Toyota Production System is the foundation of dozens of books on “lean” including two bestsellers: The Machine That Changed the World: The Story of Lean Production (Womack, Jones, Roos, 1991) and Lean Thinking (Womack, Jones, 1996). Toyota employees are sought out by companies in almost every industry throughout the world for their expertise.
  • Toyota has the fastest product development process in the world. New cars and trucks take 12 months or less to design, while competitors typically require two to three years.
  • Toyota is benchmarked as the best in class by all of its peers and competitors throughout the world for high quality, high productivity, manufacturing speed, and flexibility. Toyota automobiles have consistently been at the top of quality rankings by J.D. Powers and Associates, Consumer Reports, and others for many years.

Much of Toyota’s success comes from its astounding quality reputation. Consumers know that they can count on their Toyota vehicle to work right the first time and keep on working, while most U.S. and European automotive companies produce vehicles that may work when new but almost certainly will spend time in the shop in a year or so. In 2003 Toyota recalled 79% fewer vehicles in the U.S. than Ford and 92% fewer than Chrysler. According to a 2003 study in Consumer Reports, one of the most widely read magazines for auto-buying customers, 15 of the top 38 most reliable models from any manufacturer over the last seven years were made by Toyota/Lexus. No other manufacturer comes close. GM, Mercedes, and BMW have no cars on this list. Not a single Toyota is on the dreaded “vehicles to avoid” list, while a handful of Fords, almost 50 percent of the GMs, and more than 50 percent of the Chryslers are to be avoided, according to Consumer Reports.

Here are some other statistics from Consumer Reports’ 2003 annual auto issue:

  • In the small car category (Toyota Corolla, Ford Focus/Escort, GM Cavalier, and Chrysler Neon), Toyota won each of the last three years for overall reliability, as well as the prior three years, and predicted reliability for the 2003 model year.
  • For family sedans, the Toyota Camry beat out the Ford Taurus, the GM Malibu, and Dodge Intrepid, winning in the last three years, the three prior years, and predicted reliability for the 2003 model year.
  • More than half of all Toyota used cars are singled out as “recommended for purchase,” compared with less than 10 percent of the Fords, 5 percent of the GMs, and none of the Chryslers.
  • Toyota/Lexus has also dominated the J.D. Powers “initial quality” and long-term durability rankings for years. Toyota’s Lexus was again the #1 most reliable car, according to the J.D. Powers 2003 quality survey, followed by Porsche, BMW, and Honda.

What is the secret of Toyota’s success? The incredible consistency of Toyota’s performance is a direct result of operational excellence. Toyota has turned operational excellence into a strategic weapon. This operational excellence is based in part on tools and quality improvement methods made famous by Toyota in the manufacturing world, such as just-in-time, kaizen, one-piece flow, jidoka, and heijunka. These techniques helped spawn the “lean manufacturing” revolution. But tools and techniques are no secret weapon for transforming a business. Toyota’s continued success at implementing these tools stems from a deeper business philosophy based on its understanding of people and human motivation. Its success is ultimately based on its ability to cultivate leadership, teams, and culture, to devise strategy, to build supplier relationships, and to maintain a learning organization.

This articles describes 14 principles which, based on my 20 years of studying the company, constitute the “Toyota Way.” These 14 principles are also the foundation of the Toyota Production System (TPS) practiced at Toyota manufacturing plants around the world. For ease of understanding, I have divided the principles into four categories, all starting with “P”—Philosophy, Process, People/Partners, and Problem Solving .

Toyota was unveiling its own internal “Toyota Way” document for training purposes. This document greatly influenced my thinking about the 14 principles and consequently I have incorporated the four high-level principles from that document (Genchi Genbutsu, Kaizen, Respect and Teamwork, and Challenge) and correlated them to my four principle categories of Philosophy, Process, People/Partners, and Problem Solving .

The Toyota Way and the Toyota Production System (Toyota’s manufacturing method) are the double helix of Toyota’s DNA; they define its management style and what is unique about the company. In this articles I hope to explain and show how the Toyota model of success can be applied in any organization, to improve any business process, from sales to product development, marketing, logistics, and management. To assist you in this journey, I offer numerous examples of what Toyota does to maintain such a high level of achievement as well as explore companies from a variety of industries and service operations that have effectively applied Toyota’s principles.

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Toyota’s Lean Management Program Explained (with Real Life Examples)

by Frank Stuart , on Nov 1, 2023 3:45:00 AM

Toyota’s Lean Management Program Explained

If you’ve ever searched for information online about the Toyota Production System, you've probably seen a variety of house-shaped graphics. But even though we all know what a house is, understanding what the TPS house graphic means can be a challenge — especially when some of the words are Japanese.

In this article, I’ll explain the house graphic and Toyota’s lean management principles. Because I worked for Toyota and have spent many years as a Toyota lean practitioner, I’ll share insights you won’t find anywhere else including:

  • How the Toyota management system boosts employee retention
  • Three common misinterpretations of Toyota’s lean methodology
  • Several real-world examples and a customer case study

The Toyota Production System is What Makes Toyota #1

Toyota has made the best-selling forklift in North America since 2002. That’s a long time to be number one. How do they do it? By following the Toyota Production System (TPS). 

What is Toyota Lean Management vs. The Toyota Production System? Toyota Lean Management (TLM) is a system that takes the principles of the Toyota Production System and applies them to other industries such as construction, supply chain, healthcare and of course manufacturing. I’ve yet to find a business that doesn’t benefit from the Toyota production management system.

Toyota Principles Improve Retention and Your Bottom Line

Improving efficiency and customer satisfaction are the best-known reasons for following Toyota’s lean management practices. Most people don't know it can also improve employee retention.

Hiring and retaining qualified workers was the number one challenge reported in MHI’s 2023 Top Supply Chain Challenges survey . The responses come from more than 2000 manufacturing and supply chain industry leaders from a wide range of industries. 

This isn’t the first year hiring and retention created major heartburn for supply chain operations, and it likely won’t be the last. If finding and keeping good people is something your organization struggles with, TLM can help with that too .

Toyota Lean Management House

Here’s my version of the TPS house.

Why is it a House?

Most people use a house-shaped graphic to explain TPS because the function of a house is to preserve what’s inside . All the parts of the house interact with each other to protect what’s the business and its people — from the groundwork to the pillars to the roof.

The Groundwork

Respect for People, Long-Term Thinking and Continually Improve

Respect for People, Long-Term Thinking and Continually Improve are fundamental management philosophies that drive all policy and decision-making under the Toyota way.

Respect for People is not about being nice (although that is important). This principle is about creating a home-like atmosphere where everyone is encouraged and supported to reach their full potential. 

EXAMPLE: A supervisor has monthly one-on-one meetings with each associate to:

  • Review personal performance
  • Discuss issues with work processes
  • Uncover opportunities for improvement

This mentor-mentee program develops people from within. Associates move into higher and higher positions so eventually, the people leading the company not only know the product but understand the work.

Respect for people also includes being mindful of how decisions in one department affect another. Uncoordinated decisions can negatively impact the customer.

EXAMPLE: If sales and marketing decide to have a big sale the weekend before Thanksgiving, the extra orders could overwhelm an already understaffed shipping department — creating delays for the customer and/or increased overtime expenses.

Last but not least, respect for people means providing stable employment. This leads us to the next fundamental principle… 

Long-Term Thinking — During COVID and the supply chain challenges that followed, many companies made the hard decision to lay off workers. I was in the training department at Raymond during this time.

Instead of letting workers go, we chose to strengthen the company by training associates and improving processes. We developed online training programs on various topics for hundreds of associates in various roles. These actions and this type of thinking goes back to the 1950s when Toyota decided to focus on building a strong, stable company for the long term. The economy will cycle up and down, but because our people are our most important asset, we must take care of them and protect them, even during economic downturns.

Short-term decisions, like letting experienced and tenured employees go, can improve the bottom line in the short term, but long term it hurts the business. All too often, corporate culture lives and dies on a quarterly report. This is short-sighted. When times are good, you have to squirrel money away in your war chest to protect the company and its people when times are bad .

Continually Improve – It is said in business, as in life, we are either growing or dying. A structured focus on continual improvement ( kaizen ) and challenging the status quo ensures a company stays competitive and growing.

EXAMPLE: We challenged the team who reconditioned our forklifts this year. At the beginning of the year, our lead time was 12 weeks. By mapping the process, improving flow and using a kaizen philosophy, we are now at 6 weeks. We are not satisfied with this improvement and have further challenged the team to cut the lead time in half again by the end of this year.  

TLM cleaning station

The Foundation

Organize, Standardize, Optimize

The next level of the TPS house is all about creating an efficient work environment. It starts with a clean, orderly workspace where the next tool (or whatever the worker needs) is right there and not hidden in a pile of clutter.

If we don’t give people an organized workspace and standards to follow, we’re not helping them be successful. Even worse, we’re wasting their time. It goes back to respect for people.

EXAMPLE: The litmus test I used in the factory was to have a workstation set up with all the necessary tools. If I could take a tool away from the workstation and the operator couldn’t tell me within five seconds what was missing, that meant we had more work to do to. 

To be clear, it isn’t about telling people: you must do it this way or to make changes for the sake of making changes. The goal is to:

  • Find the best way of doing things for the people who are doing the work
  • Develop standards and best practices
  • If a better way is found, everyone starts using that new way instead

That last bullet point is the principle of kaizen showing up again. Toyota Lean Management is an ongoing process where small, incremental changes result in measurable improvements to quality or reduced cost, cycle or delivery times.

FYI, we haven’t gotten to the actual Toyota Production System yet. The groundwork and the foundation are the basis for TPS. The system doesn’t work without establishing the groundwork and creating a solid foundation. 

Creating optimized workspaces and processes are deceptively simple assignments. It’s really easy to make work hard and it’s hard to make work easy. When you’re stuck in chaos it can be hard to see the way out. 

The foundation of TPS helps make work easy. Once an orderly, efficient system has been established, we work on the two pillars.

TPS Pillars: The Toyota Production System

Just in Time & Continuous Flow

The first pillar is all about having what you need, when you need it. Waste, in the form of wasted time or excess inventory, should be avoided. 

Back in 2021, Bloomberg and other news organizations excitedly reported how Toyota had abandoned its “just in time” philosophy because it started stockpiling computer chips. This is just one example of how Toyota principles are misunderstood by the Western world.

Misunderstanding #1 Here’s what most news outlets got wrong: After the earthquake and tsunami in 2011, Toyota reevaluated the lead time required for semiconductors and other parts. Their assessment revealed they were unprepared for a major shock to the supply chain, such a natural disaster. 

To ensure a continuous flow of chips to their factories, Toyota required suppliers to carry a 2-6 month supply of semiconductors. When COVID hit, the news reported Toyota was “stockpiling” chips when, in fact, the company was simply following a plan it had created ten years earlier. 

auto plant assembly line

Our business training in the Western world is all about the balance sheet. Reducing inventory becomes a goal unto itself and that’s when things start to go badly. “Just in time” doesn’t mean “last minute.” It means keeping enough supply to ensure a continuous flow.

For Toyota, "just in time" meant a supply that could weather supply chain ups and downs. In 2021, when the chip shortage forced other automakers to stop their production lines, Toyota kept churning out vehicles and raised its earnings forecast by 54% . 

Visual Management & Zero Defects

EXAMPLE: Zero defects is pretty self-explanatory, but here’s an example of zero defects through visual management. The first thing Mr. Toyoda built was an automated loom for the textile industry. Occasionally, a thread would break and the operator wouldn’t see it. When this happened, the final product had to be thrown away. 

To fix the problem, Mr. Toyoda put a washer in the thread. If the thread broke, the washer fell off into the machine and it stopped. The operator could fix the problem without any waste (defective product). This also allowed one operator to oversee multiple machines.

Misunderstanding #2 Some people say Toyota Lean Management is basically the same as Six Sigma. I disagree. There are major differences between the two systems , but here’s a big one related to TPS Pillar Two: Six Sigma says you can have 3.4 defects per million operations. An “operation” is defined as a single action, such as attaching a wire or screwing a bolt. Building a jumbo jet requires millions of operations. Knowing 3.4 defects are permitted per million operations, would you rather fly on an airplane built by a company that follows Six Sigma principles or Toyota?

Another comparison you may have heard is one about a GM versus a Toyota factory. At GM, workers can get in trouble for stopping the line. At Toyota, it’s the opposite. If workers aren’t periodically stopping the line, managers get concerned. It goes back to the fundamental principles we talked about in the very beginning: respect for people and a culture of continuous improvement.

Toyota Lean Management Case Study

I worked with a hard cider manufacturer in upstate NY. The company was approaching its busy season and trying to build up its inventory to supply its distributor. Their “we gotta get this done” mentality caused them to overrun their facility.

A Foundational Problem The company thought they were following the “just in time” lean methodology. What they had was a mess. 

  • Product and supplies were all over the place
  • Equipment was haphazardly maintained
  • They didn't have good standards on how to clean the kegs

A bottleneck in their system meant a new batch would get stuck behind the previous batch and unfinished inventory would pile up. Disorganization and stress led to unnecessary handling, damage and waste (wasted time and wasted product). 

After speaking to everyone who helped produce the cider, we created a list of best practices. Next, we helped the company organize, standardize and optimize the workspaces and procedures throughout their facility. With groundwork laid and a firm foundation in place, we were ready to move on to Pillars One and Two.

cider conveyor belt

Guess what? The company had more than enough capacity. They didn’t need to build up inventory for their distributor. All they had to do was tame their operational chaos.

  • Standardized practices saved time and improved product quality
  • Clear processes and optimized workspaces helped everyone work more efficiently
  • The company reclaimed space previously used to store inventory

Cider Batches Now Flow Continuously Once the bottleneck was subdued and equipment was kept in good working order, the cider company could run continuously with minimal downtime between batches. By staggering five batches to start over six weeks the company could meet customer demands.

The Core of the House: Its People

Grow People: Skills, Competence, Leaders

I added this circle in the center of the house (you won’t find it in other TPS house graphics) because I was fortunate to learn about Toyota’s lean management system directly from Toyota executives. 

The addition was inspired by a story I heard that really stuck in my mind. Mr. Onishi, Toyota’s president, visited a plant in Canada. He asked one of the plant managers to explain TPS. The manager described the house and the elements of zero defects, continuous improvement, etc. Mr. Onishi politely said, “It’s actually a people development process. We want to improve people’s skills and competence and grow them into leaders. Our goal is to promote people from within because they know the products, the customers and understand the work.”

The TPS Circle

Everything starts and ends with respect. 

Teamwork is about supporting the person who does the thing the customer is paying for. 

EXAMPLE: At SST, that means the technician working on a customer’s forklift.

Go and See — when a problem arises, the best way to find a solution is to observe the problem. 

EXAMPLE #1: At the forklift factory, units occasionally came off the line with the wrong counterweight. We observed the employee do everything right until one time he read the build sheet but chose the wrong counterweight. He was always on the go which created an opportunity for this mistake. By adding a simple step, stopping to highlight the weight info, the problem disappeared.

warehouse with boxes

EXAMPLE #2: A warehouse thought they needed to buy more pallet rack and even had a rack consultant on-site while I was there. Turns out the company had plenty of rack space. They just needed to throw out three years of inventory they couldn't sell. The executive team almost wasted thousands of dollars on rack they didn’t need rather than take a hit on their balance sheet.

Challenge does not mean I had a challenging day because two associates didn’t show up for work. It means aiming for the stars and making it to the moon.

To generate significant improvements, you need an aggressive challenge and a team that’s committed to reaching a common goal. It changes your approach. To keep the space analogy going, consider all the technological innovations we enjoy that came from putting a man on the moon .

Misunderstanding #3 Toyota’s Production System strives for 100% customer satisfaction by eliminating wasteful activities. Many business leaders incorrectly believe running lean means using cheaper materials or reducing staff. By now you know this isn't the Toyota way. Building a strong house requires leaders who respect their people and think long-term. 

Companies that refuse to think beyond the bottom line will always struggle to stay competitive. Their short-term savings on cheap materials create long-term losses as customers become dissatisfied. They will also waste money hiring and training people who leave when they aren’t treated with respect. 

Sometimes I have to have a conversation with new clients about helping team members overcome challenges. When something goes wrong, some companies look for someone to blame (reprimand or fire) but that’s not the Toyota way.

Toyota’s approach focuses on fixing broken systems, not pointing fingers. We encourage leaders to challenge their team members to improve processes, but if the team member fails and gets fired after one try, how is that person’s replacement going to feel about taking on the same challenge?

The Roof of the TPS House

The roof protects the house and the people inside. A safe workplace that produces quality products at the lowest cost with the shortest delivery time in a good environment generates high morale and protects the business. By protecting the business, you protect the people inside and help them to grow into successful leaders. 

Request a Free Toyota Lean Management Consultation

If you’d like to reduce costs and turnover while increasing customer satisfaction, why not schedule a free consultation ? Toyota Lean Management has a low cost of implementation and is designed to help you get more out of your existing resources. 

During the initial consultation, we’ll talk about where your company is now versus where you’d like to be. The next steps depend on the individual client, but typically we’ll Go and See your space and look for:

  • Inventory build-ups
  • Excessive transportation
  • Cluttered workspaces
  • Unnecessary motion
  • Producing more than what’s needed for the near-term
  • Piles of defects

To learn more, contact us online or by phone (800) 226-2345.

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Generative AI in operations: Capturing the value

In this episode of McKinsey Talks Operations , host Christian Johnson sits down with senior partner Nicolai Müller and partner Marie El Hoyek from McKinsey’s Operations Practice. Together, they discuss the game-changing potential of generative AI. From automating complex processes to unprecedented opportunities across industries, discover insights on productivity boosts, system considerations, and the vital capabilities organizations need for successful integration.

Their conversation has been edited for clarity.

Christian Johnson: Your company’s future demands agile, flexible, and resilient operations. I’m your host, Christian Johnson, and you’re listening to McKinsey Talks Operations , a podcast where the world’s C-suite leaders and McKinsey experts cut through the noise and uncover how to create a new operational reality. As we’re recording this episode in late 2023, it’s clear that generative AI, or gen AI, has become the topic in conversations about digital, analytics, and operations. This new deep learning technology is already making ripples with applications across the value chain.

For today’s episode, I’m delighted to be joined by Marie El Hoyek, a partner based in London, and Nicolai Müller, a senior partner based in Cologne. Together, we’ll be exploring what generative AI in operations is, how it’s different from digital twins and other AI technologies, its potential, and its risks. We’ll also look at what it takes to get started with these tools. Nicolai, great to have you here today. Welcome.

Nicolai Müller: Thank you. It’s a pleasure to be here, Christian.

Christian Johnson: Marie, so pleased you’re able to share your thoughts with us today. Thanks for joining.

Marie El Hoyek: Pleasure being here, Christian.

Christian Johnson: Great. So, Nicolai, can you tell us a bit about why you believe generative AI is worthy of discussion for operations leaders, especially now?

Nicolai Müller: In the past decades, there was this mantra of being faster, being more efficient, and pushing productivity. Tools we all know, such as lean, offshoring, reviewing make-or-buy decisions, and also through technology—but we see nowadays that this productivity improvement gets more complex.

In this scenario, we now have a new technology coming in: generative AI. It promises to automate processes that, in the past, were hard to automate—areas that are more in management collaboration, which currently humans are operating, and also in complex data that you have to manage. So, in this context, there’s the question: how much will generative AI help in the search for productivity?

The McKinsey Global Institute has looked into this, and we discovered that, particularly in the areas of collaboration and management, around 50 percent of typical activities can now be automated by generative AI. Also, when it comes to handling complex data and synthesizing the essence of that, we believe there’s a huge jump in automation. This may lead to value creation across industries and functions—from pharmaceuticals to automotive, to machinery and functions from engineering, procurement, and supply chain to customer operations—that can unleash tremendous value. We talk about $3.5 [trillion] to $4 trillion, which is approximately the GDP of the UK.

Christian Johnson: Nicolai, what are some of the more specific opportunities that your clients are focusing on, and that you’re focusing on right now?

Nicolai Müller: Where I see our clients acting fast is in product development. And if you look deeper into product development, especially in software coding, we see up to a 50 percent productivity increase by having a machine produce code from the simple instruction, “Please give me the code for a program doing XY,” and by using tools like ChatGPT and others, a solution is generated. This is one application area where we see generative AI becoming a copilot for humans, aiding in tasks ranging from program management to procurement, and assisting supply chain managers in performing their roles more effectively.

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Christian Johnson: Thanks, Nicolai. That has given us a great idea of the why and some of the opportunities. Now, let’s go into a little bit more detail about what generative AI is. Marie, what can you describe here for us?

Marie El Hoyek: Generative AI is a fascinating field, and just like the name suggests, it exists at the intersection of artificial intelligence and natural language processing. Essentially, it involves a machine that can analyze something, and this something can now be unstructured, like language or pictures. Similar to a person, generative AI is all about teaching machines to understand and generate text or content.

Now, to add a bit more flavor, let’s discuss the different generations of large language models—LLMs. These models are the driving force behind what we refer to as generative AI. One of the first ones we commonly heard about is GPT-3, which stands for generative pretrained transformer 3. When it was introduced, it had 175 billion parameters. Think of parameters as the amount of information it had learned, allowing it to generate text ranging from writing letters to answering questions, primarily text-based. Soon after, GPT-4 was released, and we saw a leap from 175 billion to 170 trillion parameters. Consider how much more it had learned, making it more fluent and accurate, and now it could also be used for images and video.

This is the transformative possibility with generative AI. You can now generate new content in many different types of spaces. Now, that being said, generative AI comes with its own set of risks and challenges. If you imagine that it’s based on logic or probabilities, very similar to the human brain, the answers come from what you’ve learned and your sources. Because of this fact, any generative AI can give you a convincingly wrong answer—and this is what we call hallucination .

Christian Johnson: I love that term. But what do you do about it? How do you mitigate?

Marie El Hoyek: If you had a person answering you based on wrong information, you would tell them, “I want your answer from this specific book.” Similarly, you can prompt generative AI better by telling it, “I want you to answer me from this data set or to tell me where you’re guessing.”

Another risk is model bias. Imagine that the model or the person has learned from the internet as its source, which is not the most respectful or kindest place. So, whenever you use a model, you need to be able to counter these biases and instruct it not to use inappropriate or flawed sources, or things you don’t trust. Another risk that is top of mind is IP [intellectual property] risk. Now, if you imagine generative AI generating code for you, who owns the code? Is it the gen AI that generated it or the requester who wanted it? These details are something we will need to iron out soon.

Christian Johnson: What I’m appreciating here is the discussion of the very limits of the data sources. That’s really critical, right?

Marie El Hoyek: It’s critical. Additionally, the fact that you need to guide your own data means you have to take care of your data and ensure its safety. Otherwise, that is also an added risk. That being said, all of these risks can be mitigated. However, we need to be aware of them, plan for them, or approach them in a way that limits them so we can control them. By the way, we’re witnessing regulations and offerings that are starting to adapt to these risks, and I expect we’re going to see quite a few changes in the near future.

Christian Johnson: Just the evolution here—the rapid expansion from 100 billion with a “B” to 170 trillion with a “T” is really dramatic. I think one thing we would now like to turn to is how this is being used and where we are seeing use cases come to life in businesses today. What are some really good examples of that?

Nicolai Müller: I think it’s a question that clients have to ask themselves: what impact do I want to achieve? In the end, we have to solve one big question and challenge: how to increase productivity, which involves efficiency and effectiveness.

When we look into use cases, we try to explore different angles. One is the question of automation. Things that currently take hours can be done in seconds. But it’s also about augmentation, where a human may only be able to work with a certain set of data. Imagine being able to access all the data in the world that exist. This was one of the big revolutions; the internet gave us access to all data. Now, with machines, we can use and synthesize that data. So we talk about augmentation. And then we see innovation.

Innovation is the capacity to come up with completely new solutions. Not just making an existing product cheaper or achieving faster product development, but now generating completely new ideas for features and services. So what have we seen? Automation. I talked about how I’m fascinated by what we can now do in software coding and the whole field of engineering. You also heard, for example, the CEO of Nvidia saying, “Hey, the era of software is over. I think we told all our kids to learn software; now you figure out software can be done by a machine.” It’s a huge evolution that we see, but not only in software.

Parts and hardware development. Synthesizing a huge amount of requirements that your customer gives to you, asking generative AI to understand what the requirements are and how the requirements differ from the last product. How do the requirements vary between products? Are they similar or different? It will help to come to a better synthesis, better understanding of the requirement, and develop faster and better products.

In augmentation in pharma and research, I think we’ll see a humongous increase in effectiveness, output, and research. We have cases in pharma where you can imagine understanding each little molecule, what kind of effect it has, and how it reacts with other molecules. It’s something that is instrumental. So we see vaccines or other pharma products being developed faster than traditionally was expected by using generative AI. This augmentation leads to a better kind of solution.

As for innovation, you may have also seen one famous German OEM in the US that has integrated ChatGPT into its products. So you can interact and speak with your car. This is innovation. But, Marie, you have also worked with me in this space. What have you seen?

Marie El Hoyek: My background is in industrials, very much deep in operations. Personally, I love all the copilot applications, especially in procurement. The idea that you can ask a friend who knows all your contracts and can answer any question by heart and in plain English is just mind-blowing to me. So, instead of analyzing old contracts, price history, and external trends, I can simply ask the questions. I’m sure there are many more cool applications in terms of content generation, et cetera, but this one, in particular, blew my mind.

Nicolai Müller: And Marie, what I observed are these humongous opportunities out there and the numerous use cases. I mean, we have been in workshops where we were sitting with our clients, and easily after an hour or two, we didn’t end up with just five or six potential use cases across a whole different function, but rather 150 or more. I see here a huge opportunity, but the challenge that we’re facing is, where do you start? What I call “happy generative AI,” where a copilot can help you in your daily job, may become a commodity that everybody can do. Where is the truly transformative generative AI? Is it leading to a differentiating factor for your business? Is it really adding value and creating value for your customers?

I think this is the challenge we face. It’s like what we say in Germany, you don’t see the woods because of the amount of trees in front of you. So where do you start and where do you end?

Christian Johnson: Can’t see the forest for the trees. That’s exactly it. When I hear all of this excitement, I also think of the classic chart that we’ve seen for technologies in general, where you have this initial sharp upward curve as everybody gets very excited about it. Then it sounds like where you’re moving is, we need to anticipate when organizations either find, as you’ve put it, that it’s commoditized or that it’s hard. And that gets us down then to value. How do companies think about long-term value and not just a set of very exciting use cases that may not build forward very much?

Nicolai Müller: This is a challenging question. If you look into the Google search index, which gives you a bit of a feeling of where we are on the curve, you’ll find out that it’s now googled more than any traditional operational questions you have. You have seen all the digital manufacturing terms out there. We have cloud computing and the Internet of Things that we’ve now seen over the years, and it’s a constant discussion.

Generative AI in operations has just started to pick up, I would say, in the first quarter of this year. And it has, in terms of the amount of searches people are doing, overtaken everything you can imagine. This may give you an indication that there is a huge hype out there. But has this hype and all the dreams come true yet? Indeed, people are now starting to recognize that things are easy, like the low-hanging fruits, but actually, the real core is still challenging to implement and also to make your company adaptive to changes. So we are still on the verge of answering one important question when it comes to generative AI: is it now just another tool kit in your operations, like lean or digital or any other artificial intelligence—that is, predictive maintenance—and enables levers you can pull? Or is it a disruption on its own? Is it changing the way you operate? I think these are two scenarios I can imagine.

I tend to believe that in the next two to three years, we’ll see these two questions answered. And it may differ completely by player or by industry what the outcome is. Let’s talk about disruption. Imagine that coding is now easy. Often, you have, for example, an automotive OEM defining requirements, and then you have a supplier more or less programming the code. If now that code can be programmed by machine, do you need a supplier anymore? It can be disruptive and threatening to say that the raison d’être, or the reason for the supplier to exist, is actually gone. So this is an extreme of a disruption.

For example, for a very research-heavy company, suddenly, if you tap into completely new sources of data, you come to a completely new set of products. And finding the language model that suits you by adopting generative AI in ways that are differentiating may help you to move faster and with better products. I think this is the most pressing question that clients have to answer.

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Christian Johnson: I think one of the things we’re struggling with and organizations seem to always struggle with when it comes to a new technology or a new methodology is how do you scale? We talked years ago about pilot purgatory—this idea that you try a bunch of ideas, but then they’re never really cohering in a way that creates lasting value. So how can organizations think about this in a way that they can minimize or even avoid that kind of stagnation with this idea?

Marie El Hoyek: This is a good question, Christian. Generative AI might be relatively new, but we have years of experience in scaling digital transformations. To your point, one of the biggest challenges is the pilot trap. Building a pilot or innovating with the technology is great, but transforming an organization is a whole different playing field.

Nicolai talked about the business-led mindset to prioritize applications that are useful with real business ROI. Beyond that, getting a real impact out of any digital change, and for generative AI in particular, will always be both a human and systems question. The way I’d summarize it is, without people, the best technology has no impact. We need to take our people on a real change journey to build the capabilities to use this technology, develop this technology, but also just to know what you can ask of this technology. And by the way, in terms of developing it, there are new skills that are needed here.

Christian Johnson: So what sort of capabilities do organizations really need now?

Marie El Hoyek: I’m thinking about prompt engineering, for example, which is the ability to ask a question really, really well. Now, number two is in terms of systems. There are fundamental questions that businesses should consider early to ensure that whatever they decide leads to capable, consistent, and safe technology usage. You don’t want to end up with ten different decisions on the technology because pilots are going left and right.

So you’re going to be wondering, do we build our own language models? Do we work with partners? Do we get off-the-shelf solutions? Where do we put our data? How do we process it? These questions are better learned early, and you need to make a conscious decision about them, to ensure that later on, as you use generative AI more and more, your solution is safe, scalable, and consistent. So, yes, for me, it’s both the people element and the systems element that will enable us to go through to the finish line.

Christian Johnson: Excellent. Thank you very much. We’re now nearing the end of our discussion. But before you go, I’d like to ask one final question, which is, what should our audience be doing now to bring generative AI to their organizations? There’s so much noise out there. We’ve got a strong idea of that with the Google searches. So how do you start to cut through and make a solid start?

Nicolai Müller: I would recommend two things. First is to start with a pilot, and I would even use the term “play” with generative AI. The cost of doing nothing is just too high because everybody has this at the top of their agenda. I think it’s the one topic that every management board has looked into, that every CEO has explored across all regions and industries. So it’s important that you start and see what generative AI can do.

In parallel, you need to really think about your strategy. When I talk about strategy, it includes a couple of elements. It’s a question of how will this impact my business? Where will it lead to improvements? Where will it not lead to improvement? Should I go fast ? Should I not go fast? Do I have solutions out there? Do I need partners? Can I rely on existing LLMs out there, or should I build my own? I think this is the whole question of truly understanding what generative AI in three to five years means for us.

Then there’s a layer in the strategy, which is about getting the data technology right. It’s understanding how you want to put governance and organization in place, which can build solutions. And there’s the question, where do the competencies in my company actually come from? Can I build them? Do I need to acquire them? So you need to be thoughtful about the whole question of competencies needed.

And then there’s the question of actually making the change. We often hear that this is the most important thing. You need to make people work with generative AI. You need to capture the early wins, but also things that are more challenging.

Christian Johnson: Excellent. And Marie, anything you’d like to add?

Marie El Hoyek: Yes, Christian. Nicolai, last time we spoke, you talked about this fresh breath of innovation in our companies, and I love to repeat this. You can see it in our discussion even. This gives us the ability to dream again, to come up with new things, and to hope for more impact. And I think, to some extent, we just need to learn, and start doing it, and start capturing it.

Christian Johnson: That’s a lovely ending, Marie. Thank you both, Nicolai and Marie, for sharing your expertise and experiences of generative AI with us today. It’s a topic that we don’t see going away anytime soon. So, your advice on diving in, but with both eyes open to risk mitigation and value creation, is a great note to end on.

Marie El Hoyek is a partner in McKinsey’s London office, and Nicolai Müller is a senior partner in the Cologne office. Christian Johnson is an executive editor and is based in McKinsey’s Washington, DC, office.

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Case Study of Toyota: Significance of Operation Management in Manufacturing Sector

Executive Summary

In the next section of the study, problem exploration and analysis will be elaborated. Problems and challenges faced by Toyota in account of Covid-19 pandemic in 2020-2021 will be explained. There are many automobile manufacturing companies including Toyota that are unable to sustain consistency in their business due to heavy restriction by the government with respect to working places. For this reason, Toyota has decided to improve its operation management. This will significantly help the organization to deal and overcome this problematic condition and, at the same time seek opportunity to increase the customer demand. Relationship among operation management, change management with the organizational success will also be demonstrated to overcome the problem. The section has also delivered a few theoretical framework and models by considering the problems faced by Toyota, in its manufacturing facility. The themes mentioned in here are based on the importance and effectiveness of the process of operational management in the better management of the automobile sector productivity. Along with that, the second theme is also associated with the utilisation of Robot Assisted sensing as a potential approach in the course of the development of organisational productivity and management. The discussion of the based on a vivid and descriptive analysis of the collected themes and thereby helps in providing a detailed understanding of the topic of operational management.

Introduction

Problem definition

According to the published report of Statista.com (2021), it is noted that in the financial year of 2021 total sales of the automobile industry have increased by 71 million units. This fact is clearly indicating the people prefer to use personal vehicles in order to prevent the spread of Covid-19 infection. It is also noted that sales of Toyota have also increased by 39% across the world but the authority is failing to meet the demand of consumers (Theguardian.com, 2021).

Sudden hike of demand in the automobile industry is creating challenges in the operation management process of different organizations. Toyota is one of the organizations that is struggling to fulfil demands of consumers because of the lack of productivity (Raval et al.  2020). Health crisis created by Covid-19 pandemic and norms of social distancing are the main reasons behind the sudden demand hike. According to the published report of Theguardian.com (2021), it is noted that Toyota is not being able to meet the demands of consumers because of the absence of a significant operation management system. Considering this situation, this report is aiming to find the importance of operation management behind the success of the manufacturing sector.

Demands of automobile products are increasing across the world in present days. According to the study of Raval et al.  (2020), it is noted that due to the reason of Covid-19 pandemic and health concerns people are choosing personal transportation. High demand for Persian transport is automatically creating a high demand in the automobile manufacturing sector. Sudden hike of demands is influencing manufacturers to restructure the operational management system. As this study is aiming to find out associated challenges of operation management in the manufacturing sector, that is enlarging the scope of the research. Clear outlines of challenges in relation to the operation management process will help managers of the manufacturing sector to prepare a follow up. Along with that, determinations of prospective ways to resolve challenges of operation management can help the manufacturing industry to mitigate challenges and to meet success.

Aim of this report is to find out the significance of operation management in the success of the manufacturing sector.

  • To determine the importance of operational management in the manufacturing sector
  • To develop understanding about the concept of operation management and associated challenges
  • To determine prospective way to resolve operational challenges in the international company
  • To recommend effective operation management strategies for the manufacturing company

Q 1-  What is the importance of operational management in managing the business of Toyota?

Q 2-  What are the critical challenges incorporated to the business of Toyota?

Q 3-  What are effective measures and methods needed to be considered for resolving the operational challenges of Toyota?

Q 4-  What are the effective operation management strategies that can support the future growth for the company in international business?

H0-  Operation management processes improve the overall success rate of business.

H1-  Operation management processes do not improve the overall success rate of business

Problem exploration and analysis

Problem in the business context

Demand for automobile products is growing significantly over the time. Automobile industries had encountered difficulties to fulfil this growing demand that affected their business performance. As per the latest reports it is expected that the worldwide sales of automobiles will grow over 71 million units in 2021 (Statista.com, 2021). Therefore, to match the huge demand increase it is essential for the automobile industries to adopt suitable practices that will enhance their productivity. It might also be the biggest opportunity for the top automobile manufacturers like Toyota, Ford and Volkswagen to earn significant profit by boosting their revenue to a great extent. As per the views of Laato  et al.  (2020), the recent pandemic of Covid-19 also had an impact on the consumer purchase behaviour. Due to the social distancing norms and guidelines people more prefer to use their own vehicle that also resulted in a certain demand hike of the automobile products. However, on the other hand, automobile manufacturing organisations are unable to maintain consistency in their business process due to the restrictions by the Government for workplaces for pandemics. Therefore, in this situation consideration of operation management becomes essential for audible industries to overcome the problematic situation and capitalize the opportunity of high demand of automobile offerings. Toyota is one of those organisations that encounter issues related to inability to fulfil the demand of the customers due to the lack of productivity. Therefore, this study will illustrate the significance of operation management in the business context of Toyota that can help the firm to gain back its business position by meeting their consumer demands efficiently.

toyota operations case study

Figure 1: Global car sales statistics

(Source: Statista.com, 2021)

Concept of operation management

Operation management can be defined as the administration of all the business processes and practices for the establishment of the highest possible level of operational efficiency in the organisation. Therefore, in simple words it can be said that operation management can be termed as the optimisation of business attributes for delivering best possible performance in business. This concept can be useful for Toyota to streamline their operational activities and business processes which might be helpful for the productivity enhancement of the company. As stated by Shad  et al. (2019), operation management can be useful for organisations to establish proper balance between all the organisational attributes which is crucial for improving the ratio of converting labour and products into goods that is related to the achievement of better profitability. Therefore, consideration of the operation management concept can enable Toyota to make possible improvements in their internal attributes that will deliver a noticeable boost in organisational productivity and can resolve the business problem of Toyota permanently.

Importance of operation management in business success

Operation management process ensures utilisation of business resources in a planned and organised manner that can deliver better return to the business in terms of both efficiency and profitability. Therefore, for organisations like Toyota, operation management can be very helpful to deal with productivity crisis. As mentioned by Cousins  et al. (2019), operation management improves the supply chain management process of business. Therefore, it might be helpful for the automobile industries like Toyota to make their procurement process more responsive which is crucial to eliminate the issues related to productivity crisis. Moreover, resolution of the supply chain issues might be also helpful to control the overall cost of the final products that might be helpful to offer products at lower price. It is associated with the chances of establishing cost leadership that can attract more customers. According to Gemünden etal. (2018), operation management greatly helps organisations by delivering better control in their operational activities. It ensures minimal defects of productivity errors. It is also associated with the enhancement of organisational productivity at Toyota. Moreover, operation management principle is able to manage and optimise inventory better which is essential for performance betterment of business by facilitating the logistic operations. Hence, it can also be a crucial aspect for the business of Toyota to overcome from the issue of productivity crisis.

Factors associated with operation management

Operation management in business is a vast area as it covers optimisation or regulation of the entire business to make it more responsive and goal oriented. As stated by Ferràs-Hernández  et al.  (2017), availability of technology is one of the factors associated with operation management in automobile industries. Modern and effective technologies such as AI-based equipment, automated machines can complete production related tasks with better efficiency and accuracy. Therefore, it might resolve the productivity issue of Toyota with ease. Moreover, the skills of employees are another crucial factor associated with operation management. Better skills of employees ensure minimal operational error and greater operational output. So, it is also highly interlinked with operation management. As stated by Basheer  et al.  (2019), operation management of business heavily relies on operational planning. Better operation planning helps in organising the business resources, scheduling activities & operations which are essential for cost control. Hence, operational planning must be considered as a key factor of operation management. Change readiness of an organisation is a key factor in operation management. Application of operation management principle leads to change in certain business aspects therefore, it is crucial for the organisation to become ready for the change. In the case of the automobile industry, Toyota application of operation management principle might require change in workforce distribution, change in schedule etc. therefore, organisations must be ready to adopt those changes easily.

Interrelationship between operation management and organisational success

Operation management greatly helps organisations to establish proper balance between all the organizational aspects which is one of the key success criteria of business. As mentioned by Lim  et al. (2017), operation management helps organisations to control their operating cost. Therefore, organisations are able to earn more profitability through operation management which finally leads to organisational access. Operation management process ensures better utilisation of resources, technologies with proper planning that ensures better output conversion. It might be helpful for automobile organisations to fulfil the growing need of consumers that can deliver business success. Automobile manufacturing organisations can be benefited through the planning improvement and implicational viability enhancement for operation management. It also helps organisations to achieve a better level of productive efficiency which is directly associated with business success. As outlined by Sklyar etal. (2019), operation management helps to organise the tasks or activities in a structured way. It can deliver better operational results with optimal accuracy. Thus, it also leads to organisational success.

Relationship between operation management and change management

Change management is one of the essential aspects in business that make possible improvements in the operational process for the improvement of business stability and flexibility. As opined by Raval etal. (2020), operation management principles in business basically integrate certain activities and eliminate unnecessary operations for the performance betterment. Thus, basically a change has been initiated at the workplace which links operation management with change management at an organisational context. In the automobile industries in most of the cases operation management has been considered in terms of making improvement in the manufacturing operations. Therefore, possible changes have been considered related to the technological improvements, scheduling of operations, elimination of operations wastes etc. all of these processes are associated with changes therefore, it is quite obvious that operation management is highly interlinked with organisational change management in the case of the automobile manufacturing industries. Hence, it can be said that the higher authorities of Toyota must concentrate on the change management to eliminate their productivity issue, to which the company is unable to fulfil the growing demand of the market.

Operation management and key performance indicator

Key performance indicators are basically the indicators that represent the progress or improvements in certain areas. It basically helps the supervisors or operational managers to monitor certain activities which is essential for the all-round betterment of the aspect. The main aim of operation management is to make best possible improvements by which the firm can deliver best possible output. Key performance indicators basically shed light on those areas that facilitate operation management in business. Key performance indicators also demonstrate the current progress on certain aspects that helps the business authorities to prioritise their business activities. It helps in operation scheduling which is one of the essential aspects of successive operation management. It has been found that, operation management relies on distribution of tasks as per the resources and workforce. Key performance indicators enable the operation manager to distribute task resources as per the requirements. Thus, operation management and key performance indicators are also linked with each other. It is found that key performance indicators are also able to deliver detailed insight about the current condition of business and how the executives can understand any improvements. It is suitable for the application of effective operation management practices.

Theories and models associated with operation management

Six Sigma is a methodology-based theory that consists of different ideas of quality control within the operations management of an organisation. This theoretical framework was developed by an organisation named Motorola Inc. in 1986. The method considers using a data-driven approach and review to limit defects and mistakes within a corporate business process. The Six Sigma approach does emphasize the cycle-time improvement whereas at the same time, it decreases the manufacturing defects to a certain level of no more than 3.4 occurrences in million units (Bhaskar, 2020). While most business associates consider undertaking this framework in manufacturing facilities, it can also be applicable to each type of business within any market industry. As per the problem analysis in the current study, it is identified that Toyota, being a famous global car manufacturing company, is struggling with its production facility as it is failing to meet the market demands, especially during the Covid-19 pandemic period.

toyota operations case study

Figure 2: DMAIC method in Six Sigma methodology

(Source: Influenced by Bhaskar, 2020)

In this concern, the Six Sigma approach can be useful for the organisation as the successful implementation of the framework depends on a key component such as buy-in as well as support from business executives. In this framework, the most prominent method of improving operations management is the DMAIC method. This method depends on a few procedures such as defining problems in an operation along with goals, measuring various aspects of current operations management, analysing data to find the root defects within a process, improving the operational process and controlling how the process is delivered in the future (Pugna et al . 2016). Eventually, the Six Sigma framework has become an industrial standard containing legal certifications offered to operations managers and other business practitioners. With this theoretical framework, Toyota can improve their operations management by identifying the issues they are facing and the ways to improve the production process.

Just-In-Time (JIT)

The Just-In-Time framework or concept refers to a manufacturing workflow methodology that is aimed at diminishing flow times as well as costs in the production systems and distribution system of an operations management. The concept was popularized by the organisation itself, which is chosen for the problem exploration and analysis in the study, Toyota. The company chose this framework because they wanted to meet customer demands in the market with minimum production delays. The primary goal of the JIT approach is for zero inventories across the operations management and its logistics and supply chain management (Xu and Chen, 2016). This completely utilizes the capabilities of an organisation and it also maximizes the ROI. As per this framework, successful implementation and operation depends on creating business initiatives, encouraging increased staff encouragement and developing mobilized strategies and policies.

toyota operations case study

Figure 3: Just-In-Time manufacturing model

(Source: Influenced by Khaireddin et al . 2015)

As per the consultancy report, the identified issue in the chosen case-study company is lack of improvement in the production facility and failure to meet the rising demand of customers in this pandemic period. Therefore, the JIT framework can be crucial for the operations management as it helps establish a long-term supplier-consumer relationship and it also creates a stabilized work schedule. It means that by successfully implementing this framework, Toyota’s operations management can ensure more control and improvement in the manufacturing process. For instance, Toyota does not usually purchase raw materials for products until orders are received from the market.

4Vs of operation management

Business operations management can be described as the main focus of a corporate firm where the majority of direct labour system takes place. Within a manufacturing business, operations are basically task-oriented where management does follow some basic steps until the manufacturing and distribution are accomplished. All kinds of operational procedures have a common aspect as they all consider their inputs such as raw materials, knowledge and skills, equipment and time. On this note, the operations management can be classified into four ways such as Volume, Variety, Variation and Visibility. All together, this is called the model of 4Vs of Operations Management.

  • Volume within the operations management is key to how the business is organised. Essential to the operation is an ideal repeatability of the tasks along with the work systemization.
  • The variety dimension of the operations management is usually based on service organisations within the global market. Whilst service operations offer a similar service, flexibility and variety, the difference of service quality may depend on the size of an operations management.
  • The dimension of variation refers to how much the demand level changes over time due to various external factors (Chircu et al . 2016). Different market factors may sometimes make it hard for the operations management to predict variation. For instance, the current production issues and market demand failure in Toyota are occurring due to the current Covid-19 pandemic period.
  • The visibility dimension refers to the value chain of an operations management. Consumers need to experience an organisation’s products or services. Service industries have a higher level of visibility, as compared to manufacturing industries like the automobile industry.

Scientific management theory

It is a management-based theoretical framework advocated by Federick Taylor. It uses the scientific methods for analysing the most effective and prominent manufacturing procedure, in order to enhance productivity. The scientific management theory has argued that it is the duty of workforce managers to develop an ideal production system to achieve economic efficiency. The author of this theoretical understanding devised a few key principles for the scientific management within an operation.

toyota operations case study

Figure 4: Scientific management and modern management

(Source: Influenced by Uddin and Hossain, 2015)

  • Selecting methods on the basis of science is essential, rather than allowing individuals in the workforce the freedom to utilise their own ‘rule of thumb’ method for accomplishing a task.
  • Assigning jobs among workers is beneficial when it is done by understanding their aptitudes. It always helps an operations manager to assess the skills, knowledge and competency of each worker (Uddin and Hossain, 2015). This ensures efficient work distribution within an organisation.
  • Efficiently monitoring the performance of workers is another key principle of scientific management in which workers’ efforts and engagement is closely monitored by operations management. It increases the productivity level of an organisation.
  • Ideally dividing the workload between workers and operations managers is another scientific management principle in which workers are trained and then asked to imply what they have been taught.

Different approaches to operation management

Operational management serves the functions of sustaining the procedure of transforming the inputs in terms of materials, energy and labor into outputs in the form of final products and services. In order to do so, various approaches are developed and incorporated into the operation management. As per the views of Bag  et al.  (2020), it is crucial to make sure that the strategic objective of the firm is maintained by making tactical decisions in terms of utilization of the resources to make sure that the competitive advantages is maintained effectively within the current market. The approaches to operation management consist of contingency approach, system approach, operational approach, decision theory approach, socio-technical system approach and empirical approach. All these approaches are crucial and imply that operation management cannot be successful without an appropriate strategic plan, coordination of various activities and proper direction and reasonable control over the decision-making processes. As a result, managers of the operation management are equipped with a right skill set in managerial competence along with effectiveness of the human resource management, leadership and problem solving.

Operational approach is crucial of all approaches that is borrowed from the work of Bridgman as it attempts to bring together all the knowledge and understanding of the management that is associated with the functionality of the operation management. On the other hand, the operational approach gathers all the management principles, concepts and techniques within the management practices as said by Bastas and Liyanage (2018). As a result, the operational approach is seen as the most effective and modern approach to operation management.

Suitable practices to mitigate operational issue in Toyota

The outbreak of the novel corona virus has brought a severe and negative impact on every aspect of society that also includes the automotive industry. The suppliers of Toyota in January and February have been scrambling to keep the automobiles in an organized line, but unfortunately March has allowed the Toyota to take concerted action by aligning with the governmental advisories in order to keep its operational management safe and secure. The employees of Toyota were furloughed on account of economic conditions that the company was facing (Billedeau and Wilson 2018). In order to maintain the protocols and maintain social distancing, the whole workforce was not allowed at work at a time. This was the biggest operational issue in Toyota. On the other hand, it has been observed that due to the crisis, no customer was willing to purchase an automobile, as it was a time when people were laid off from their jobs, people did it had enough to even buy necessary things. In such scenarios people only focus on efficiently spending money. For this reason, Toyota has introduced a “customer connect” program to mitigate the operational issue and alleviate inconveniences for the Toyota owners. Toyota has announced the extension of free emergency support to the customers that do not have coverage till 15 days post the lockdown. Moreover, a series of measures was also announced in 2020 for dealer partners (Autocarindia.com 2020). This has targeted to ensure the liquidity to manage the business by securing the dealers for approximately 38-75 days by offering cash flow support.

Methodology and justification

Research methodology refers to the specific process and techniques of selecting processing and analyzing data. Clear outline of research methodology guides new research to complete the research 0bjectives in order to obtain results. In this regard to gain great understanding about the operating management process of Toyota research philosophy, research approach, design of research is presented. Further discussion is based on data collection methods and the process of data analysis. Sampling methods and ethical consideration of this research is highlighted along with the research limitation.

Research Philosophy

Research philosophy refers to the development of assumptions. According to the statement of Novikov and Novikov, (2019), it can be said that research philosophy determines the research activity. Research philosophy is a particular belief that has been discussed in developing this consultancy report. Positivism, post-positivism, interpretivism and realism are major four types of research philosophy that can be used in developing consultancy reports regarding the performance management of Toyota and Kampen, (2019) commented that interpretive research philosophy is based on the principle which plays an important role in observing the social world. On the other hand, realism research philosophy guides to describe specific phenomena that happened recently. In this regard to analyze the operation management process of Toyota and to understand the role of operation management in the success of manufacturing industry  interpretivism  and  positivism  research philosophy have been selected. Positivist approaches help to develop hypotheses in order to test the research objectives through empirical experimentation.

Research approach

Inductive and deductive are two main research approaches which are being followed by researchers. According to the comment of Žukauskas  et al.  (2018), it can be said that inductive research approaches help to develop a theory and deductive research approaches guide to test an existing theory. In order to test the research hypothesis regarding the operation management system  deductive  research approaches have been selected. This consultancy report about the operation management process of Toyota is relying on deductive research approaches because it is providing the opportunity to test the research hypothesis. Inductive research approaches are not selected because this is a complex method where research findings can be invalidated. Along with that it is needed to mention that deductive research approaches enlarge the scope of success because it tests existing theories.

Research design

In order to develop the consultancy report regarding the operation management system in manufacturing industry exploratory, explanatory or descriptive research design can be followed. As per the views of research design focus on the aims and objectives of research to obtain results. Exploratory design generally determines cause and phenomena by highlighting the cause of the phenomena. On the other hand, descriptive design of research generally focuses on describing phenomena rather than highlighting the factor associated with the phenomena (Doyle  et al.  2020). Considering the particular characteristics of above mentioned research design,  descriptive  research design has been selected. Descriptive research design is helping to identify and explain important factors that are related to the operation management system of the manufacturing industry. Along with that, descriptive research design holds the capability to determine the importance of the operation management system in organizational success because it is describing all important phenomena considering literary evidence.

Data collection method

In order to find out challenges of the operation management system of the manufacturing industry and to recommend effective operation management strategies  secondary  data have been collected. From the literary evidence secondary qualitative and quantitative data is obtained to develop the understanding about the concept of operation management system of the manufacturing sector. Along with that, it is needed to mention that both qualitative and quantitative data is providing all required information related to the sales and demand of products manufactured by Toyota. Secondary data collection method have been selected because it guides researchers to complete research and to develop consultancy reports within the time (Ong and Puteh, 2017). Moreover, it can be said that the secondary data collection method takes less time to complete reports regarding research topics. On the other hand, research by collecting primary data takes more time because the data synthesis process is time consuming. In relation to reducing the time of preparing report secondary data have been collected.

Data analysis

There are three main types of data analysis which include quantitative analysis, qualitative analysis and mixed data analysis.  Secondary qualitative  analysis process is being followed to complete the consultancy report. On the basis of qualitative data,  thematic  analysis is conducted to test research hypotheses. Thematic analysis is conducted because it helps to meet the research objective by synthesizing secondary qualitative data. According to the study of Ong and Puteh (2017), it can be said that quantitative analysis is a complex method as compared to qualitative thematic analysis. On a similar note, it can be commented that quantitative primary analysis can create volatility in meeting research objectives because success of qualitative analysis depends on authenticity of research questions (Sattar  et al.  2017). Considering this fact,  secondary thematic  analysis has been selected to develop this consultancy report regarding the operation management process of Toyota and manufacturing sector.

Sampling size and method

This consultancy report is based on the secondary data obtained from journal articles to determine operational challenges in the manufacturing industry. Along with that, it can be highlighted that  4 research articles and 4 themes  have been selected to conduct thematic analysis regarding the operation management process of the manufacturing industry.

Ethical consideration

Data protection Act 1998  is followed to protect the data confidentiality and to complete the research in an ethical way (Legislation.gov.uk, 2020).  GDPR principles  are also abided by at the time of conducting research. No personal data of human beings involved in the research. As this research is completed on the basis of secondary data there are less amounts of risk related to the data breach.

Research limitation

Research is based on secondary data collected from peer reviewed articles or published newspaper reports. Secondary data collection methods may limit the viability of research because it lacks practical and direct observation.

Findings and analysis

Thematic analysis

Importance of operational management within the automobile manufacturing sector

The concept of operational management is based on the effective deals and decision making which is further identified to be directly associated with that of the production procedure. The concept of operational management is considered to be closely aligned with that of the specific production of the goods and services. Operational management is known to be utilised in various manufacturing sectors. Hence, based on the requirement, the automobile manufacturing sector can be considered to be the most suitable for the sustainable incorporation of the operational management. Various automobile manufacturing organisations have been manufacturing products and services as per the demands and requirements of their target customers. The cost of the automobiles also tends to alter and differ based on the customer requirements as well. In the current situation of technological advancement and escalation of demand and productivity, the automobile makers are providing their sustainable emphasis towards the operational management process. As mentioned by Jung  et al.  (2018), the organisations are also known to introduce the concept of modular platforms based on which the better management and operation of the organisations are taken into consideration.

The importance of including operational management within the automobile sector is further known to be based in the different aspects and factors including the ethical behaviour within the workplace, the environmental factors, social factors as well as the people factors like the employee involvement training acquired by the employee’s supplier customer relationship, team performances and so on. The potential importance of the automobile industry based on operational management is quite a few. A sustainable involvement of operational management helps to ensure profitability within the automobile sector. It is further known to be a sustainable reason based on which the customer retention is maintained. As per the findings of Lampón  et al.  (2017), the automobile industry is often known to be involved with customer complaints and warranty claims. The concept of operations management also helps to accurately sort them and mitigate the complaints as effectively as possible. Furthermore, incorporation of an effective operational management is also known to lower the wastage of the resources and raw materials within the firm thereby causing a steep decline in the company’s financial expenditure. It is also capable of providing the organisation with a greater percentage of market share as well as sustainably increase and escalate the employee and customer engagement.

Therefore, it can be stated that a sustainable and satisfactory utilisation of the operational management process can provide the companies with a detailed understanding regarding the organisation’s internal environment as well as the existing market condition. The concept of operational flexibility is also known to witness a steep escalation as a result of direct implementation of this concept. As mentioned earlier, operational management also helps to better align with the cost reduction as well as ensure a much better scope and sales economy.

Approach for improving  scale  of production in automobile industry by Robot Assisted Sensing

The comprehensive structure of the automobile sectors tends to change and alter based on the requirements of the customers. The production of the vehicles and automobiles are also considered to be an essential aspect based on which the position of the automobile industry tends to escalate and diminish over the course of time. The current advancement of technological aspects has led to the inclusion of various technological features within different manufacturing sectors and it has also led to the sustainable growth of the industry as well. Based on a similar factor, a newer technological aspect known as the Robot Assisted Sensing (RAS) has been widely used in the automobile manufacturing industry. As per the identification of Smys and Ranganathan (2019), robots are known to be used to a wide extent in the automobile manufacturing industry. This particular system is further known to add various flexibilities and safety within the different stages of the production process. Along with the escalation in the production capacity, the inclusion of Robotics within the manufacturing process also helps in keeping the employees safe from any types of dangerous accidents. It also helps to improve the peer production quality, relieve the bottlenecks within the organisation as well as accentuates the organisational capacity.

The incorporation of robotics is known to provide an immense competitive advantage to the organisations based on the automobile sectors. The automobile sectors are considered to be entirely based on the preparation of the cars and their parts. The implementation of robotics can provide a sustainable aid in the process by helping in welding, painting, assembly, removal of the materials, sealing process, coating of the cars, parts transfer and so on. The inclusion of robotics is also known to sustainably reduce the variability of the parts. As stated by Kangru  et al.  (2018), there are different types of robots that are used for different functions as well. More specifically, the pick and place robots are predominantly used within the automobile industry for the purpose of assembly, packaging, bin packaging and in the inspection process as well. The predominant utilisation of the robots and robotics within the automobile manufacturing industry is based on the fact that they can be used for transferring and relocating the materials and car parts that are heavy and thereby difficult to handle and move. Furthermore, it can be depicted that the robots can also be customised by the organisations to perform the activities as per their requirements.

Hence, a comprehensive analysis and understanding regarding the incorporation of Robotics within the automobile manufacturing firms provides with a general idea that it can actually enhance and escalate the peer production rate and scale of a firm. It can also be mentioned that the enhancement of efficiency within the process of manufacturing and production of the vehicles are also an essential aspect in terms of the Robotics implementation. Although, the implementation of robotics can be costly, the improvement in the technological aspects and innovative features can be turned into a more affordable and user-friendly experience.

The concept of operations management and its associated challenges in the global manufacturing sector

The concept of operations management refers to the administration of various business practices that creates the higher level of efficiency within a business operation. It is highly concerned with converting labour and raw materials into finished products and services. In global manufacturing industries, the operations management concept has become more viable as it helps organisations maximize their profit margin. Associate teams of operations management make attempts to balance costs with organisational revenue for achieving the highest possible net operating profit. The concept of operations management does involve utilising resources from labour, materials, machines and equipment and innovative technologies (Atasu  et al . 2020). Managers within an operations management team acquire, create and deliver products and services to their clients based on market needs and organisational capabilities. Operations managers handle several strategic issues such as determining the size of production plants and the project methods as well as executing the structure of software applications and information technology networks. With various operational methods and processes, operations managers ensure minimal waste occurs within the use of raw materials and equipment and manufacturing goods and services. Apart from the manufacturing, operations management is also concerned with the logistics and supply chain management within an organisation. To ensure better supply management, operations management professionals understand local, regional and global market trends, consumer demand and available sources for manufacturing and distribution. Operations management does approach the acquisition of manufacturing materials and labours from the market and eventually, manufacturing operations like the automobile sector releases finished products such as commercial and personal-use vehicles.

In the operations management, a few general challenges can be recognised that mainly affect the manufacturing operations. One of the major challenges in operations management is in balancing tactical and strategic concerns. It is based on the movement of the practices away from different tactical concerns, towards strategic, societal, financial and global concerns. For instance, when manufacturing industries have to deal with mega-projects, dozens of business operations, varieties of stakeholders like regulators, multiple agencies, public and other profit-making operations are involved (Meredith and Pilkington, 2018). Therefore, challenges can be seen in the communication and coordination between those stakeholders and organizations. As the operations management consists of the engagement of several organisational departments, consistency in communication has become a major challenge which reduces efficiency in areas like demand planning and forecasting, developing and implementing production plans, and monitoring the manufacturing activities. Apart from that, globalization has become a massive external challenge for the operations management where trade barriers, social and cultural barriers and inaccurate understanding of technological advancement in different areas can pose adverse effects in manufacturing and distributional operations, within an automobile operation. In several cases, it is recognised that operations managers find themselves struggling with high-extent market competition not only from the county of origin, but from countries all around the world.

Operations management strategies to prosper in production facility within automobile manufacturing operations

Operations management within an organisation refers to an area of management that is concerned with designing and controlling the manufacturing and redesigning processes in the production of products and services. In simple words, operations develop products, manage quality and generate effective services (Walker  et al . 2015). Thus, operational departments in business management consist of production or manufacturing, supply and logistics support, marketing and finance, sales and service. Operations are considered as the current chain of business activities, which eventually leads to efficient delivery of operational objectives and missions. The global manufacturing sector is under a critical juncture where multinational manufacturers are facing tough competition in their markets. In order to deal with the competitive challenges, manufacturers are continuously working on developing manufacturing capabilities as well as quality standards by introducing latest software and technologies and applying new innovative business tools. The automobile industry falls under the global manufacturing sector which is holding a massive market share, even if the current Covid-19 pandemic has disrupted the overall production. In the contemporary market, demands for vehicles with innovative features and technologies are being acknowledged and demanded by most of the customers. Manufacturers like Toyota are facing issues in developing their production facilities and units during this pandemic period, to achieve the market demand all over the world.

To prosper at automobile production level, “Total Productive Maintenance (TPM)” is a methodological framework which can help a manufacturing operations management enhance productivity and quality and reduce manufacturing costs (Gupta and Vardhan, 2016). The TPM method is being executed within manufacturing industries as a team activity by which an operation can reduce equipment maintenance, enhance production quality and develop profit margins. With this method, operations management increases production efficiency by involving all workers from top management to operatives for carrying out the maintenance tasks. An operations management can reduce the production costs through the TPM initiatives. Product costs usually include material costs, manufacturing costs and profits where manufacturing costs incorporate machinery or processing costs and costs regarding production losses. With the TPM methods, production losses within an automobile operation can be controlled and decreased to a large extent and it can help the management reduce the overall costs of production. To generate an action plan for reducing production loss, the Loss-cost Matrix” can be prepared as it delivers a clear understanding of the cost effects associated with several major losses. A production loss register can be maintained by the production team and manager of an automobile operation in order to record the overall losses gained during the production cycle of each vehicle (Gupta and Vardhan, 2016). For instance, if a production unit is having the loss type of measurement adjustment, an action plan must be made to rectify the machine failure, and resolve quality issues. On the other hand, when there is a loss-type of high set-up time, the action plan should be developed for reducing set-up facilities and activities. Therefore, it can be stated that the automobile manufacturing sector with production issues can initiate the TPM method by which the concerned operations management can look after the technical activities in vehicle production and quality adjustment.

Operation management is one of the essential criteria for the automobile industries like Toyota to enhance their productivity level to the desired level which will help the firm to meet the growing demand. Moreover, operation management is quite effective for the organisation to control their operating cost to a great extent that is essential in order to achieve better profitability which will help business to grow further (Dubey  et al.  2020). The concept of operation management might be greatly helpful for Toyota to improve their operational planning which enables the organisation to maintain their consistency in the manufacturing process during the restrictions of pandemic. Operation management makes organisations more stable and flexible in the changing business environment which is useful for business to maintain its competitiveness. As commented by Ivančić et al. (2019), the operation management process ensures proper resource handling. It also contributes towards the betterment of operational efficiency which is a key success criterion for business. Organisations need to be concerned about numerous factors for successive operation management. According to Dalenogare et al.  (2018), technological integration is one of those factors in which operation management is heavily dependent on. For instance, automation in manufacturing facilities, utilisation of AI-based machineries not only improve working efficiency but also improve operational accuracy & safety which are primary goals of operation management. Moreover, management information systems help to streamline the business process through accurate operational planning by analysing all the business aspects. It also widened the scope of successive operation management at automobile manufacturing organisations like Toyota to a great extent.

Automobile industry is more prone to the integration of modern services with maximum accuracy. Therefore, skills and experience of the staff plays a crucial role in the operation management of automobile industries. Therefore, it is highly essential for the management of authorities to emphasize more on the training & development programs, workshops etc. to enhance the practical knowledge of the employees and keep them up to date. It can facilitate the operation management at Toyota to a great extent. Operation management enables the organisations to extract best possible output from their operational process. It is essential for organisations to serve their consumers efficiently which can also enhance the revenue generation. As outlined by Kurilova-Palisaitiene et al.  (2018), operation management can help the automobile manufacturing industries to identify and make possible improvements in the key activities that can enhance the productive efficiency to a great extent. Hence, it might be useful for Toyota to deal with their issue of surplus production in the pandemic situation when the demand of automobile products continuously rises. The concept operation management is very good and effective for organisations. However, organisations need to be completely prepared for the change for successive execution of the operation management. As mentioned by Agrifoglio  et al. (2017), operation management changes the operational process, used technology, activity schedules etc. Therefore, organisation must be capable to handle those changes otherwise the productivity of the firm will be disrupted for a longer time. In addition to that, for effective execution of operation management plans organisations also need to adopt suitable theoretical principles such as Six sigma, Just-In-Time, 4Vs of operation management, Scientific management theories etc. it will help to execute the operational management process by applying properly guided strategies which can enhance the productive efficiency of the organisations easily.

Operational management process plans, executes, supervises and controls all the production or manufacturing related activities in the manufacturing sector. Therefore, it can be said that incorporation of suitable changes can be only possible through the operation management process. As per the knowledge of Wamba-Taguimdje  et al.  (2020), the operation management process ensures better conversion of business resources and labour into assets that will make business more responsive in meeting the market requirements or demands. Thus, it might be very helpful for the organisation.

Managing large projects becomes easier for the operation management process. It basically enables the organisations to establish balance between all the business attributes that is crucial in order to achieve the desired success level in projects. As stated by Hong  et al.  (2018), the automobile manufacturing industry can be also benefited through operation management for its capability of supply chain management. It basically, helps organisations to stem line their supply chain related activities and optimise inventory operations also which is essential for the consistency in the manufacturing process. Hence, it might be also useful for Toyota to overcome their productivity crisis related business problems. Operation management greatly helps to control operating costs which might be useful for the procurement process in business. Thus, it might be useful for Toyota to offer low-cost products or services which can further increase their demand for the offerings. It might be a great opportunity of success for the firm if it is able to capitalise the opportunity of high demand through effective operation management.

From the entire discussion it can be said that operation management is basically a key emulator for the business which steps up the business performance by making possible changes in business. It makes business contemporary, table and flexible as per the competitive business environment and market conditions. Therefore, it can be said that multinational organisations like Toyota need to concentrate on operation management to a great level as it will help those organisations to retain their business position successfully. Moreover, operation management can deliver better control to the business attributes which might be useful for the achievement of corporate goals smoothly. Operation management process also ensures proper distribution of products through regulating the logistic operations. It also ensures better availability of products in the market. It also helps to reduce the load of inventory that is crucial for the automobile industries like Toyota. Moreover, operation management process greatly facilitates the R&D of products which can enhance the product design. It might be also useful for the automobile manufacturers to serve their customers as per the market trends. It will also helpful to offer most innovative offerings to the customers which is essential to attract more customers easily towards the brand.

This research study has addressed the significance of operation management in the manufacturing sector. To support this statement, a case study of Toyota Company has been considered. It has been observed that in 2021, the sales volume increased by 71 million units. The reason was that the majority of people prefer personal vehicles to prevent the spread of Covid infection. Health crisis due to Covid pandemic was the key reason for high customer demand. Therefore, Toyota struggled to accomplish the customer demand even though there was a lack of productivity. Considering this crisis situation, the study has demonstrated the significance of operation management in Toyota for bringing success in the manufacturing sector. The key aim is to understand the operational management and identify challenges and issues. Based on the challenges identified, the researcher will be determining a prospective method to mitigate those challenges. In the next section of the study, the problem in the business context of Toyota has been identified. Here it has been observed that Toyota is unable to sustain consistency in their business process because of restrictions imposed by the government especially on the workplace such as manufacturing units and production units. As a result, the role of operation management within the business is explained in the study as the vast area that covers up optimization or regulations of the whole business to make the business more goal oriented and more responsive. In the next section of methodology as illustrated relevant methods and approaches that are suitable to derive reliable data and optimum results. Secondary data collection was used to derive data from the available sources. Based on the collected data, themes were framed.

Objective linking

Objective 1:  This objective is linked to a literature review section where the concept of operation management and its importance in the business sector is explained.

Objective 2:  This objective is linked with factors associated with operation management that is elaborated in the literature review section. Elaboration has allowed the researcher to meet the objectives.

Objective 3:  This objective is linked to a literature review section where different approaches to mitigate the challenges of operation management are identified.

Objective 4:  This objective is linked with theories and models related to operation management.

Research limitations

While conducting this research study, the researcher had faced a lot of limitations of time restriction. In order to derive reliable and relevant data related to operation management, the researcher consumed a lot of time, due to this reason, other activities were delayed. Moreover, collected data was analysed and arranged. In spite of framing, it properly, plagiarism occurred; researchers again reframed the context and then considered it as final data.

Recommendation

There are many issues and challenges identified in the operation management in Toyota. Considering these, it is highly recommended to team up with the customers and try to comprehend their taste and preference. Later organize product families accordingly. Moreover, it is also recommended to aim for non-stop advancement to deliver superior quality. Engage the frontline employees to make strategic decisions and ensure the organizational goal is accomplished. Acknowledging the core customers, their best practices and their competitive edges is relevant and recommended to make proper business decisions and alter as per the customer demand.

Future scope

This study was prepared with utmost care and perfection. Concept of operation management and its issues and challenges in Toyota are elaborated in detail. Hence, this study can be used as a secondary source in future events. Moreover, a comparative study can also be conducted for any other automobile manufacturing organization.

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Implementation of Total Quality Management (TQM): Toyota Case Study

Introduction, implementation of tqm in toyota, tqm practices in toyota, benefits of tqm in toyota, examples of tqm in toyota, toyota quality management, toyota tqm implementation challenges.

The Toyota Corporation case study report is based on the implementation of total quality management (TQM) meant to improve the overall performance and operations of this automobile company. TQM involves the application of quality management standards to all elements of the business.

It requires that quality management standards be applied in all branches and at all levels of the organization. The characteristic of Toyota Corporation going through the total quality process is unambiguous and clear.

Toyota has limited interdepartmental barriers, excellent customer and supplier relations, spares time to be spent on training, and the recognition that quality is realized through offering excellent products as well as the quality of the entire firm, including personnel, finance, sales, and other functions.

The top management at Toyota Corporation has the responsibility for quality rather than the employees, and it is their role to provide commitment, support, and leadership to the human and technical processes (Kanji & Asher, 1996).

Whereas the TQM initiative is to succeed, the management has to foster the participation of Toyota Corporation workers in quality improvement and create a quality culture by altering attitudes and perceptions towards quality.

This research report assesses the implementation of TQM and how Toyota manages quality in all organization management systems while focusing on manufacturing quality. The report evaluates the organization management elements required when implementing TQM, identifies, and investigates the challenges facing Quality Managers or Executives in implementing Quality Management Systems.

In order to implement TQM, Toyota corporations focused on the following phases:

  • The company extended the management responsibility past the instantaneous services and products
  • Toyota examined how consumers applied the products generated, and this enabled the company to develop and improve its commodities
  • Toyota focused on the insubstantial impacts on the procedures as well as how such effects could be minimized through optimization
  • Toyota focused on the kaizen (incessant process development) in order to ensure that all procedures are measurable, repeatable, and visible.

The commitment from business executives is one of the key TQM implementation principles that make an organization successful. In fact, the organizational commitment present in the senior organizational staff ranges from top to lower administration. These occur through self-driven motives, motivation, and employee empowerment. Total Quality Management becomes achievable at Toyota by setting up the mission and vision statements, objectives, and organizational goals.

In addition, the TQM is achievable via the course of active participation in organizational follow-up actions. These actions denote the entire activities needed and involved during the implementation of the set-out ideologies of the organization. From Toyota Corporation’s report, TQM has been successful through the commitment of executive management and the organizational workforce (Toyota Motor Corporation, 2012).

Through inventory and half the bottlenecks at half cost and time, the adopters of TMS (Toyota Management System) are authorized to manufacture twice above the normal production. To manage the quality in all organizational management systems, the Toyota Production System incorporates different modernisms like strategy or Hoshin Kanri use, overall value supervision, and just-in-time assembly.

The amalgamation of these innovations enables Toyota to have a strong competitive advantage despite the fact that Toyota never originated from all of them. The 1914 Henry Ford invention relied on the just-in-time production model. The Ford system of production, from a grand perspective, warrants massive production, thus quality (Toyota Motor Corporation, 2012).

Kanji and Asher (1996) claim that to manage the minute set of production necessitated by the splintered and small post-war marketplaces, the JIT system focuses on the motion and elimination of waste materials. This reduces crave for work-in-process inventory by wrapping up the long production lines. Toyota Corp wraps the production lines into slashed change-over times, a multi-trained workforce that runs manifold machines, and new-fangled cells into a U shape.

When supplementing the just-in-cells, the system of kanban is employed by the Toyota Corporation to connect the cells that are unable to integrate physically. Equally, the system helps Toyota integrate with other external companies, consumers, and suppliers.

The TQM and the creativity of Toyota proprietors both support the quality at the source. The rectification and discovery of the production problems require the executives to be committed. At the forefront of Toyota operations, the managers integrate a number of forms of operational quality checks to ensure quality management at all levels.

The uninterrupted tests help the Toyota workforce engaging in the assembly course to scrutinize the value of apparatus, implements, and resources utilized in fabrication. The checks help in the scrutiny of the previously performed tasks by other workers. However, the corporation’s own test enables the workers to revise their personal advances in the assembly course.

The Toyota process owners set up the mistake-proofing (Poka-yoke) procedures and devices to capture the awareness of management and involuntarily correct and surface the augmenting problems. This is essential for the critical production circumstances and steps that prove impractical and tricky for Toyota employees to inspect.

Nevertheless, the policy deployment system decentralizes the process of decision-making at Toyota. This context of implementing Total Quality Management originates from Hoshin Kanri’s management by objective (MBO).

This aspect becomes more advantageous to Toyota when dealing with quality management. The system initially puts into practice the coordinated approach and provides a clear structure for the suppliers, producers, and consumers through inter-organizational cost administration. Moreover, Toyota executives can solve the concurrent delivery, cost, and quality bottlenecks, thus replacing and increasing the relatively slow accounting management mechanisms.

Customer focus that leads to the desired customer satisfaction at Toyota Company is one of the major success factors in TQM implementation. For every business to grow, it should have understanding, reliable, and trustworthy customers. The principle of customer satisfaction and focus has been the most presently well-thought-out aspect of Toyota’s manufacturing quality.

The TQM may characteristically involve total business focus towards meeting and exceeding customers’ expectations and requirements by considering their personal interests. The mission of improving and achieving customer satisfaction ought to stream from customer focus.

Thus, when focusing on manufacturing quality, this aspect enhances TQM implementation. The first priorities at Toyota are community satisfaction, employees, owners, consumers, and mission. The diverse consumer-related features from liberty. The concern to care is eminent in Toyota Corporation during manufacturing.

Toyota has three basic perspectives of TQM that are customer-oriented. These are based on its manufacturing process traced back to the 1950s. The strategies towards achieving quality manufacturing, planning, and having a culture towards quality accomplishment are paramount for TQM implementation to remain successful. To enhance and maintain quality through strategic planning schemes, all managers and employers must remain effectively driven.

This involves training workers on principles concerning quality culture and achievement. Scheduling and planning are analytical applications at Toyota Company that purposes in assessing customer demand, material availability, and plant capacity during manufacturing.

The Toyota Corporation has considerable approaches that rank it among the successful and renowned implementers of TQM. From the inherent and designed structure of Toyota, it becomes feasible to comprehend why quality manufacturing is gradually becoming effective. The inspection department is responsible for taking corrective measures, salvaging, and sorting the desired manufactured product or service quality.

The Toyota Corporation also has a quality control system that is involved in determining quality policies, reviewing statistics, and establishing quality manuals or presentation data. Furthermore, quality assurance is one of the integral principles in quality implementation that is practically present at Toyota. The quality assurance and quality inspectors throughout the Toyota Company structure also manage research and development concerning the quality of manufactured products and services.

The quality assurer and quality inspectors all through the Toyota Company structure also manage research and development concerning quality of manufactured products and services

The Toyota production and operations management system is similarly dubbed as the managerial system. In fact, in this corporation, operational management is also referred to as the production process, production management, or operations (Chary, 2009). These simply incorporate the actual production and delivery of products.

The managerial system involves product design and the associated product process, planning and implementing production, as well as acquiring and organizing resources. With this broad scope, the production and operation managers have a fundamental role to play in the company’s ability to reach the TQM implementation goals and objectives.

The Toyota Corporation operations managers are required to be conversant and familiar with the TQM implementation concepts and issues that surround this functional area. Toyota’s operation management system is focused on fulfilling the requirements of the customers.

The corporation realizes this by offering loyal and express commodities at logical fees and assisting dealers in progressing commodities proffered. As Slack et al. (2009) observed, the basic performance objectives, which pertain to all the Toyota’s operations, include quality, speed, flexibility, dependability, and cost. Toyota Company has been successful in meeting these objectives through its production and operation functions.

Over several decades, Toyota’s operational processes and management systems were streamlined, resulting in the popularly known Toyota Production System. Although the system had been extensively researched, many companies, such as Nissan, experienced difficulties in replicating TPS.

The TPS was conceived when the company realized that producing massive quantities from limited product lines and ensuring large components to achieve maximum economies of scale led to flaws. Its major objectives were to reduce cost, eliminate waste, and respond to the changing needs of the customers. The initial feature of this system was set-up time reduction, and this forms the basis of TQM implementation.

At Toyota Corporation, quality is considered as acting responsibly through the provision of blunder-gratis products that please the target clientele. Toyota vehicles are among the leading brands in customer satisfaction. Due to good quality, its success has kept growing, and in 2012, the company was the best worldwide. Moreover, Toyota has been keen on producing quality vehicles via the utilization of various technologies that improve the performance of the vehicles.

While implementing TQM, Toyota perceives speed as a key element. In this case, speed objective means doing things fast in order to reduce the time spent between ordering and availing the product to the customer.

The TPS method during processing concentrates on reducing intricacy via the use of minute and uncomplicated machinery that is elastic and full-bodied. The company’s human resources and managers are fond of reorganizing streams and designs to promote minimalism. This enhances the speed of production.

Another objective during TQM implementation is dependability. This means timely working to ensure that customers get their products within the promised time. Toyota has included a just-in-time production system comprised of multi-skilled employees who work in teams. The kanban control allows the workers to deliver goods and services as promised. Advancing value and effectiveness appears to be the distress for administrators, mechanical specialists, and other Toyota human resources.

During TQM implementation, Toyota responds to the demands by changing its products and the way of doing business. Chary (2009) argues that while implementing TQM, organizations must learn to like change and develop responsive and flexible organizations to deal with the changing business environment.

Within Toyota plants, this incorporates the ability to adopt the manufacturing resources to develop new models. The company is able to attain an elevated degree of suppleness, manufacturing fairly tiny bunches of products devoid of losses in excellence or output.

The organizational hierarchy and job descriptions also determine the successful implementation of the TQM. Toyota is amongst the few companies whose organizational structure and task allocation have proved viable in TQM implementation. The company has three levels of management. See the diagram below.

Management hierarchy

Management hierarchy

Despite the hierarchy and task specification, employees are able to make independent decisions and take corrective measures when necessary to ensure quality during production. Team working is highly encouraged at Toyota Corporation, and this plays a significant role during TQM implementation. All stakeholders are incorporated in quality control initiatives to ensure client demands are satisfied.

However, all employees are required to carry out their assigned tasks, and the management closely supervises the ways of interactions between workers. The management ensures that the manufacturing lines are well-built and all employees are motivated to learn how to improve the production processes.

Toyota is among the few manufacturers in the complete automobile industry that consistently profited during the oil crisis in 1974. The discovery was the unique team working of the Japanese that utilized scientific management rules (Huczynski & Buchanan, 2007).

The joint effort in Japan, usually dubbed Toyotaism, is a kind of job association emphasizing ‘lean-assembly.’ The technique merges just-in-time production, dilemma-answering groups, job equivalence, authoritative foremost-streak administration, and continued procedure perfection.

Just-in-time (JIT) assembly scheme attempts to accomplish all clients’ needs instantly, devoid of misuse but with ideal excellence. JIT appears to be dissimilar from the conventional functional performances in that it emphasizes speedy production and ravage purging that adds to stumpy supply.

Control and planning of many JIT approaches are concerned directly with pull scheduling, leveled scheduling, kanban control, synchronization of flow, and mixed-model scheduling (Slack et al., 2009).

Toyota appears to be amongst the principal participants in changing Japan to a kingpin in car production. Companies, which have adopted the company’s production system, have increased efficiency and productivity. The 2009 industrial survey of manufacturers indicates that many world-class firms have adopted continuous-flow or just-in-time production and many techniques Toyota has been developing many years ago.

In addition, the manufacturing examination of top plant victors illustrates that the mainstream them utilize lean production techniques widely. Thus, team-working TPS assists Toyota Corporation in the implementation of TQM.

Executives and Quality Managers face some challenges while implementing Quality Management Systems in organizations. In fact, with a lack of the implementation resources such as monetary and human resources in any organization, the implementation of TQM cannot be successful. Towards the implementation of programs and projects in organizations, financial and human resources have become the pillar stones.

The approach of TQM impels marketplace competence from all kinds of organizational proceeds to ensure profitability and productivity. To meet the desired results in TQM implementation, an organization ought to consider the availability of human and financial resources that are very important for the provision of an appropriate milieu for accomplishing organizational objectives.

In the case of Toyota, which originated and perfected the philosophy of TQM, the Executives, and Quality Managers met some intertwined problems during TQM implementation. The flaw in the new product development is increasingly becoming complicated for the managers to break and accelerate, thus creating reliability problems. Besides, secretive culture and dysfunctional organizational structure cause barriers in communication between the top management, thus, in turn, augmenting public outrage.

The top executives may fail to provide and scale up adequate training to the suppliers and new workforces. As a result, cracks are created in the rigorous TPS system. In addition, a lack of leadership at the top management might cause challenges in the implementation of TQM. Therefore, in designing the organizational structures and systems that impact quality, the senior executives and managers must be responsible, as elaborated in Figure 2 below.

Therefore, in designing the organizational structures and systems that impact quality, the senior executives and managers must be responsible

Total Quality Management is a concept applied in the automobile industry, including the Toyota Corporation. It focuses on continuous improvement across all branches and levels of an organization. Being part of Toyota, the concept defines the way in which the organization can create value for its customers and other stakeholders. Through TQM, Toyota Corporation has been able to create value, which eventually leads to operation efficiencies.

These efficiencies have particularly been achieved by continuous correction of deficiencies identified in the process. A particular interest is the central role that information flow and management have played in enabling TQM initiatives to be implemented, especially through continuous learning and team working culture.

The Toyota way (kaizen), which aims at integrating the workforce suggestions while eliminating overproduction and manufacturing wastes, helps the company to respect all the stakeholders and give clients first priority. The objectives are realized through TPS.

Chary, D. 2009, Production and operations management , Tata McGraw-Hill Education Press, Mumbai.

Huczynski, A. & Buchanan, D. 2007, Organizational behavior; an introductory text, Prentice Hall, New York, NY.

Kanji, G. K. & Asher, M. 1996, 100 methods for total quality management , SAGE Thousands Oak, CA.

Slack, N. et al. 2009, Operations and process management: principles and practice for strategic management, Prentice Hall, New York, NY.

Toyota Motor Corporation 2012, Annual report 2012. Web.

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  23. Total Quality Management (TQM): Toyota Case Study

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