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Module Name: Industrial System & management Assignment Title: Operation Management, Toyota Production System

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Industrial System & Managements, MNM101

KINGSTON UNIVERSITY LONDON

December 19, 2011 Authored by: Omar S. Hamdan, K1067538

Declaration of Plagiarism
I, Omar S. Hamdan, K1067538, certify that I fully understood the faculty of science engineering and computing definition on Cheating and Plagiarism and that all material in this assignment is my own work, other peoples work which been used in this assignment has been properly acknowledged and referenced

Table of contents: 1.0 Introduction 2.0 O*perations Management 3.0 Toyota Production System (TPSc ) 4.0 Just in Time Inventory Management 5.0 Lean Manufacturing 6.0 Supply Chain Management 7.0 Conclusion References 2 2 3 6 8 10 12 14

1.0 Introduction The success of Toyota Motor Company is due to the unique reduction systems that focus on continuous improvement and just in time management. Toyota has created a decentralised structure that encourages employee participation and team working. Toyota incorporated concepts just as supply chain management and inventory management to create high quality automobiles and gain a competitive edge in the highly competitive global automobile market. Toyotas success and its lean manufacturing philosophy have been widely studied. The Toyota manufacturing system is centred on achieving a high level of productivity. The company has a unique approach to problem solving and it continuously trains its employees. The Toyota Production Systems is based on the lean manufacturing philosophy that seeks to minimize wastages and centres on cost reduction. The Toyota manufacturing philosophy emphasises on quality management through a process of continuous improvement. This report looks at how Toyota created its manufacturing system and the role of operation management techniques to enhance efficiency. This report examines the production processes and philosophy and Toyota to assess how the company has achieved a competitive advantage globally. The lean manufacturing philosophy pioneered by Toyota has become a benchmark for all manufacturing companies around the world. The lean manufacturing philosophy includes concepts such as customer relations, product design, supplier networks and operations. The lean manufacturing practices have made Toyota achieve low cost production and allowed them to manufacture high quality cars at lowered costs. This report looks at how operations management techniques such as supply chain management and inventory management have led to efficiency and profitability at the Toyota Motor Company.

2.0 Operations Management The study of operations management looks at the production of quality goods and service. The aim of this discipline is to create efficient and effective business operations. Operation management seeks to ensure the efficient management of resources along with

the distribution of goods and services. Operation management seeks to enhance manufacturing performance and this study has proposed various techniques and a theoretical framework to achieve this goals. These techniques include quality management (TQM), just in time (JIT) or Leaning manufacturing. Other concepts in the field of operations management include six sigma and supply chain management. All these techniques require a flat organizational structure coupled with functional integration in the organization (Gupta & Boyd, 2008). The competitive pressure for improved product quality has led to numerous operations paradigms emerging/ the most significant ones include Just in Time, Total Quality Management (TQM) AND Supply chain management (SCM). JIT seeks to eliminate waste and recue setup times, it also controls the material flows and focuses on effective resource utilisation. The TQM philosophy looks at developing a corporate culture that is customer focused empowers employees and seeks continuous improvement. The supply chain management integrates buyers and suppliers decision-making to improve the flow of materials in the supply chain. The JIT, TQM and SCM approaches improve the effectiveness and efficiency of the operations function (Kannan & Tan, 2005).

3.0 Toyota Production System (TPS) The TPS lead to the lean production movement that emphasises on eliminating waste from value streams. This production system is highly standardised. The production systems have buffers that are controlled through various pull signals. The lean production is very efficient and greatly improves quality that has given Toyota an edge in the global automobile markets. TPS should be viewed as a philosophy that is described by a set of general principles of organising and managing an enterprise (Lander & Liker, 2007). Toyotas success as an automaker in the world is based on its expertise in creating a unique production system. This TPS is based on the principles of continuous improvement also known as Kaizen. The Toyota company has a highly decentralised workforce which is highly trained and takes part in the decision making process. The TPS consists of most successful Japanese production and work practices. This approach was developed by Sakichi

Toyoda the founder of Toyota who pioneered the TPS. It was Taciichi Ohno that created the Just in Time (JIT) production systems. The JIT approach made Toyota more efficient and these techniques also incorporated total quality control, statistical process control and quality circles. Toyota introduced a new system of employee relation with one trade union and created flexible work to respond to the demand based production (Winfield & Kerrin, 1994). The Toyota manufacturing system is characterised by a continuous flow of production that allows the company to be flexible enough to adapt to the demand conditions. The JIT ensures that only the required materials for the production are acquired at the right time. This minimises the excess inventories which leads to cost reductions. Also the JIT emphasis on quality control and the production system is made adaptable to the daily and monthly fluctuations in demand and quantities. The quality assurance processes in the JIT ensures that each process supplies good units to the next process in the production. The JIT systems also include human resources in the cost and production systems .Toyota has also streamlined its production processes through implementing Total Quality Management (TQM) process to lower costs and enhance quality (Amasaka, 2002). The TPS is a highly specialised and flexible system that is aligned with the market. In thus system the Kanban systems play a vital role as the system provides instructions as part move along the production line. This system works with production line to deliver the required material for production. The Kanban synchronises the production quantities at each production stage. The Kanban Systems provide the precise information of the required materials for the production process, this makes the production at Toyota more efficient (Balakrishnan, 2003). The Kanban systems uses IT systems for planning and control including enterprise resource planning (ERP). The modern computer aided production management systems includes applications such as MPS, MRP and CRP, inventory control, shop floor and vendor measurement systems (Riezebos et al, 2009). Toyota production systems use less material and fewer employees that bring down the costs making the company more efficient. The operations management systems at the company efficiently allocate resources and employees for each project. This makes the company more flexible and responsive to the needs of the market. The continuous flow
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production at the company allows it to customise its cars to meet the changing customer needs. Also the management introduced quality assurance teams to ensure that each unit of production meet the set quality standards. This defect prevention technique is referred to as Jidoka which in actual terms means to control defects. The Japanese culture heavily influences the work culture at Toyota; the flexible workforce concept Shonjinka enables the management to hire employees based on the fluctuating demand. This makes the company more flexible and minimising costs (Balakrishnan, 2003). The TPS is linked externally and to the entire production system, the main TPS practices are focused on detecting, assessing and eliminating sources of the entire production system. The sequential relationship amongst the external and internal links includes three types of interaction; the first is upstream integration which is between the external suppliers and internal suppliers within the firm. The internal integration is between the firm actors that own successive process stages as either internal suppliers and internal customers. The downward integration is between the internal suppliers that own the last process stage and firms external customers (Jayaram et al, 2010).

Figure 1 Structural links internal and external to the organization Source Jayaram et al (2010)

The problem solving framework at Toyota constantly evaluates the performance of the TPS by detecting any variance on the production process. The variance assessment includes part of product, people or personnel, procedure or method and equipment or machine. The system variation can result from product variation, poor quality or inputs, flawed design or misaligned processes (Jayaram et al, 2010).

Figure 2 Toyotas problem solving framework. Source Jayaram et al (2010) The employees can also lead to variations in the systems and performance owing to lack of proper training or motivation. Toyota has implemented a decentralised problem solving approach that empowers the works to make decisions. The principle of Kaizen is made possible with standardisation in the company. Toyota has standardised technical skills to ensure a flexible staff in the company (Jayaram et al, 2010).

4.0 Just in Time Inventory Management The Japanese automakers have been very successful in improving their productivity and efficiency by focusing on continuous improvement. JIT has evolved from continuous improvement paradigm. The JIT creates a flexible environment in which the whole organisation is responsible for eliminating waste. The JIT manufacturer seeks to acquire materials that are needed to satisfy the actual demand. The JIT philosophy creates a customer focused production process. The JIT processes eliminate inventories through

interdependent relationships in the operations.to create a customer oriented strategy the marketing activities are also integrated in the system. The JIT links the supplier to shop floor by pulling the required materials form the suppliers. At Toyota the JIT controls delivery and necessary quantities for the operations. The Kanban Systems create the pull for getting the parts in the operations, the customer demands creates the initial pull of the system (White & Pearson, 2001). Toyota Motor Company pioneered the just in time (JIT) production system during the mid-1970s the JIT production system is also known as the zero inventory production system. JIT manufacturing is a production philosophy that is based on three fundamental principles that include elimination of waste, continuous quality improvement, and a participative work culture. Companies that implement the JIT methods minimize the need for raw materials, work in process and inventory of finished goods. This method reduces the setup times and all deliveries are coordinated from suppliers to meet the production needs. The main aim of the JIT methods is to eliminate waste; waste is anything does not add value to the production process (Biggart & Gargeya, 2002). The JIT systems become more efficient and used the Kanban as an information exchange tool for different production lines. Through using the JIT the wastages in the production process are minimised and the defect prevention system enhance the quality of the products. The culture at Toyota ensures that the entire production team focus on preventing any defects and reducing wastages from the production process. In 1959 Toyota dramatically increased its productivity and produced 100,000 cars for the first time. To improve quality and automobile exports Toyota implemented Total quality controls in the company (Dahlgaard & Dahlgaard-Park, 2006). The JIT and respect for human systems are central doctrines of the TPS. To implement JIT various practices such as Kanban, short setup times, multi skilled workers are required JIT production is a means to achieve total elimination of waste and implement lean production. The respect for human systems looks at the physical movements of the

employees that should add value to the product. The employees at Toyota are empowered and are responsible for quality issues and monitoring the assembly line. JIT is a critical aspect of TPS; JIT allows for low inventories and ensure better quality and faster response to
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engineering changes. JIT is an overall organisational phenomenon. The Kanban systems implement the control in JIT systems. The Kanban systems provide customers with the right product at the right time. The Kanban is a flexible system that allows Toyota to implement JIT manufacturing. To successful they implement Kanban systems it is important to improve the production systems and eliminate wastages for efficient work. The Kanban systems ensure that there is no late or early production. The TPS is a decentralised production system that allows for a control systems to flow smoothly through the lean manufacturing production facility. The Kanban systems is characterised by a pull principle that ensures that parts are sourced when needed and there are no wastages. The Kanban system ensues that there is no waste of overproduction and the inventory costs are reduced. The implementation of Kanban entails the support of other TPS practices. The success of Kanban systems is dependent on an integrated infrastructure of supporting practices (Thun et al, 2010).

5.0 Lean Manufacturing The lean production techniques have also be termed as the post Fordism system of work that is more efficient, humane and democratic. A central tenet of lean production is the concept of kaizen that is continuous improvement in the production process. The lean production philosophy seeks to combine efficiency with quality of work life. The concept of Kaizen seeks to remove all activities that do not add value, referred to as waste or muda in Japanese. This looked at excessive setup time, excessive size inventory and work in progress. The Kaizen process also eliminates errors in the production process and locates the source of the problems. This entails worker participation that can monitor and detect any variations in processes or products. The workers also contribute to the organisation and improvement of production. The productivity improvements are achieved through incremental innovation. The participatory nature of lean production is different from the Taylorist and Fordist production approaches (Hampson, 1999). Kaizen emphasises on quality assurance, this entails team work and collective responsibility for quality improvement in the company. The Toyota management systems included the concept of zero defects which comprised of quality circles to emphasis on all quality related
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issues. The concept of Kaizen ensures that all employees are quality conscious and focuses on quick problem solving. The team leaders in the organisation encourage their members to constantly focus on quality improvements in the production process. All employees have are trained to develop the knowledge and skills needed for quality production (Elsey & Fujiwara, 2000). The TPS is an action oriented approach that favours a problem solving approach, the employees work as project teams. Toyota introduced a flat structure in the organisation that allowed for open communications in the organisation and facilitated experiments and learning. The Kaizen empowers the employees and seeks new methods of work. The company emphasises on high product quality and customer services to gain a competitive edge in the automobile market. The Kaizen work culture is egalitarian and allows for the involvement of employees and management in the production process. Such a management style made Toyota highly productive and the consensual decision making made the company very productive and allowed it to ensure a high level of quality (Fang & Kleiner, 2003). The concept of lean manufacturing originates in the Toyota Motor Corporations; resulted from scarcity of resources and intense domestic competition in automobile market in Japan. The lean philosophy incorporated the JIT production system and the Kanban method of pull production. Toyota also introduced the concept of respect for employees and team working (Hines et al, 2004). Lean manufacturing involves inventory and quality control, industrial relations, labour management and supply chain management. Studies show that lean manufacturing reduces human effort by 50% along with the manufacturing space, tool inventory and improved financial performance. This manufacturing system also includes lean logistics that is the ability to administer systems to control the movement of materials, work in process and finished inventories at the lowest cost. To ensure long term competitiveness a manufacturing firm has to develop capabilities of JIT production and delivery. The suppliers have to be able to respond to the increasing needs of the customers. The lean production system requires rapid flows of information along the value chain. Toyota uses the Kanban system to achieve this along with computerised information that can be exchanged with the suppliers to reduce lead times (Wu, 2003).

Taciichi Ohno the head of Toyota crated the Toyota Production System (TPS) that influenced the production philosophy all over the world. The TPS is a holistic production system that has standardised procedures in the company. This system enhances the companys productivity and labour flexibility allowing the company to efficiently produce various types of vehicles. This production philosophy emphasises on quality management as the lean production system is based on assembly design, work organisation and low cost automation based on an incremental improvement approach. The automation in this production system is in line complies with the continuous improvement paradigm that constantly identities and eliminates any problems in the production process. Toyota has deployed the Semi Automation Jidoka that maintains a balance between the machines and humans. This is more economical and makes the production process, more flexible. The lean approach for automation includes low cost equipment and tools that are reused for new models (Muffatto 1999).

6.0 Supply Chain Management The supply chain management (SCM) is a key strategic factor for enhancing organisational effectiveness and achieving organisational goals. With the globalisation of the markets and increase in outsourcing companies use supply chain and logistics techniques to manage their operations. The contemporary market place is characterised by increased competition and prevalence of technology. These changes have led to profound changes for organisations and firms must be able to respond to changing customer needs while becoming lean at the same time. With this increased globalisation and customer orientation organisations are more logistics sensitive. Supply chain is a system that is made up of material suppliers production facilities, distribution services and customers that are linked together through flow of materials and feedback flow of information (Gunasekara et al, 2001).

Toyotas success globally can be attributed to the company philosophy of continuously reducing costs through waste elimination. Toyota developed the Pull Systems

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and created the Just in Time techniques that made the Toyota Production System more functional and efficient. Toyota pioneered the value added concept through the lean supply chain. This allowed the company to detect waste in the value chain which is eliminated (Wee & Wu, 2009). The TPS since its inception created a group of first tier suppliers who were part of the company. During the 1970s the company developed a second tier of suppliers through kyoryoku Kai which is a supplier association. During the 1980s and 1990s Toyota spread its chain of overseas part suppliers and distribution system (Jones et al, 1997). The TPS is vertically integrated the main car parts are purchased from the first tier supplier who acquire them from smaller suppliers from the second tier of suppliers. The company creates subcontracting agreements with one supplier for a long term period to ensure quality, reliability and meeting the delivery standards. Such arrangements allowed Toyota to exert influence the suppliers and reduce costs (Winfield, 1994). Toyota has created a distinct competitive advantage on its supplier networks allowing the company to add value to its products. The competitive advantage stems from the raw material supply derived from 40% of the components from the first tier component manufacturers and 42% from the lower tier component suppliers. Toyota effectively integrated its suppliers based on its hoshin kanri policy (Hines & Rich 1998).

Toyotas supply chain management approach focuses mainly on resources that were of critical importance. Toyota created a Keiretsu structure comprising of the dependent suppliers that worked in close proximity to the Toyota factories. The company outsourced aspects that were not critical to the ability of maximising the shareholder value. Toyota was able to create such a supply chain because the supplier was relatively dependent on them in highly contested markets. Toyota created an assembly based systems that was demand pull and JIT based, it had dominant power relationships with the suppliers. This allowed the company to be innovative and create a customised supply chain. Toyota also implements effective controls over quality, cost and innovation. This allowed the company to maximise the customer value. The lean production system at the company focused on the highest level of quality to the customers. Toyotas lean approach has both strategic and operational
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practice; the company operates a contested supply chain and market place. For Toyota to be profitable it has to achieve sustained business success by operating on low margins and satisfying customer needs. The supply chain at Toyota can be described as entrepreneurial (Cox 1999).

7.0 Conclusion The competition in the automobile industry and the resource scarcity lead to Toyota creating a lean manufacturing system that was flexible and highly efficient. This manufacturing system leads to cost reductions and makes a company more flexible. The Just in tome approach in the Toyota production systems allows the company to be more efficient and responsive to the marketing demand. Toyotas production system is demand responsive and customer centric which a major source of competitive advantage is for the company. The production process at Toyota also emphasises on quality and employee empowerment. The low inventory and continuous production system has allowed Toyota to produce high quality vehicles with minimum defects and lowered costs. The Kanban system at the company is used to provide complete information for the required raw materials. This system also monitors the quality of all products. To implement lean manufacturing a company must create an empowered workforce that has the right competencies to ensure high quality production. The basic aim of the TPS is to shorten the time taken to convert customer orders into vehicle deliveries. To achieve the sequences from order to delivery in a single continuous flow along with shortening the sequence to make the production process more smooth. This has created a high level of productivity, better quality and a reduction in wastages. This makes the Toyota automobiles more cost effective. . The TPS is a standard management approach in supply chain that effectively provides the customers with products in a timelier manner. The lean manufacturing philosophy seeks to eliminate waste, eliminate defects and reduce lead times. Toyota has created a culture of efficiency and problem solving. This has allowed the company to innovate its product and maintain high quality through continuous improvement.

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The production system that Toyota has created uses less materials human effort, manufacturing space and tools than the mass production systems. This production system has decreased the use of inventory and created a system of zero defects and led to the production of high quality automobiles. The production at the company maintains a continuous flow of products allowing the company to adapt to the market needs and demand patterns. The Toyota production philosophy has evolved from the experiences at Toyota factories which is why it can be implemented at any location in the world. The production system has made Toyota highly efficient and profitable. The JIT systems ensure achieving fault free parts and each production process should have the right part in the right quantity at the right time. The scheduling of materials is an important principle of just in time. The aim of the Toyota production systems is to provide the customers with highest quality products at the lowest possible cost. The production concepts incorporate quality at each production stage. The Just in Time approach seeks to get the right information about the market demand and the production is adapted to the demand. The JIT systems leads to efficient inventory systems and only the required quantities are procured in the production systems. The Kanban systems enable the working of the JIT system by providing the information about the raw materials and keep a check on quality. To ensure that the JIT system works, Toyota has implemented systems to motivate employees and empower them. The Toyota production system is very efficient that has made Toyota a competitive and profitable company.

Since the 1950s Toyota created the concept of continuous material flow, process standardization and a pull system that is market responsive. It took the company decades to refine the concepts such as JIT and make the production system more functional. The TPS is characterised by cross organisational planning and long term objectives. This production system relies on technology and the integration of all manufacturing activities. The focus on meeting customer needs made the TPS highly successful the creation of the JIT philosophy allowed the company to eliminate wastages and inventory to make the company more profitable. Toyotas supplier network and supply chain is another source of the companys competitive advantage. The company has created a close network of suppliers which are all integrated with the Toyota Company.
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