1.

As Doug Friesen, what would you do to address the seat problem? Where would you focus your attention and solution efforts? What options exist that you would recommend? Why?

The problem that Doug and the leadership team faces is specifically in the area of the rear seat assembly. This area has been a problem for much of the last six months. Figure 1 illustrates the top 5 sources of problems for each of the past seven months. While the defects per vehicle are down from the October 1 1 pea!" the trend line is disturbing with the largest month#to#month change occurring from $arch to %pril. From October through &anuary" there seemed to be a large number of missing Figure 1 - TMS USA HBS - Exhibit 7 or bro!en parts appearing among the top five problems. This was li!ely related to poor design or process steps" which seemed to have been addressed based on the data in the accompanying chart. %pril's problems seemed to focus more on missing elements (possible misalignment in the &)T process*" manufacturing +uality (wrin!les*" and apparent manufacturing process errors (gap in rear seat*. %dditional data suggests that the number of defects increased on or about the 1,th of %pril. The timing could suggest that the introduction of the new -uropean models" which increased the possible combinations from a low of 1. in early 1 . to ./ at the beginning of the month" to 0/ options. There were plans to increase this again by 11 as exports were planned for &apan and the $iddle -ast. )t should be noted that while the trend increased for both shifts" there is a much larger defect rate for the 1st shift. Toyota also captured the defects by type in a 2areto chart. The shaded elements note the T$3 view that the defects were the responsibility of 4F3. $aterial Flaws and $issing parts (li!ely incorrect colors or seat configuration* lead the list of defects.
Figure 2 - TMS USA HBC Exhibit 10

)t is our recommendation to wor! actively to address the problematic trend with the seats on two fronts5 (1* +uality control with 4F3 and (.* the discovery of the reason for the differences between the first and second shift. The recommended actions related to 4F3 would focus on incoming inspection. )t is unclear if the material flaws are directly Figure 3 - TMS USA HBC - Exhibit 8 related to the manufacturing process at 4F3" the transport" or the transfer process into the T$3 line. This can be easily examined using &ido!a. %ddition focus needs to be placed on ensuring that the number of seat options is not contributing to the number of missing parts and that the &)T information exchange is correct. %gain" a &ido!a process would uncover +uic!ly the issue and li!ely result in recommendations to alleviate this problem. )f this was an area of continued concern" the focus of a 4ai6en team on this problem would be 7ustified. % short#term solution might include placing additional 8endor $anaged )nventory 9golden: seats on#site at the T$3 facility to replace defective parts to ensure that there are fewer parts ta!en off line. There must also be a close examination of the two T$3 areas. The first ta!e would be to explore the reason for the difference in defect rates between the shifts. )f there is a training problem" this should be addressed immediately. %dditional emphasis needs to be focused on the reason for the delays in obtaining replacements parts from 4F3 once the source of the problem is identified in the ;linic or Overflow area.

2.

What do you think about stopping the line? What is the cost of a chord pull resulting in a stoppage of minute? !" minutes? #" minutes? Do you think the line should be stopped when the station identifies a defecti$e seat? )t is our belief that the line should not be stopped to fix a defective seat. The method of noting the defect and creating a triage to handle the problem does wor!< however" the company needs to discern the root cause of the exceptionally high volume of defects and implement appropriate remedial measures. %n underlying message from The Goal states that the cost of a line stoppage due to defect costs more than the replacement parts and overtime. =ecause the >eorgetown plant has capacity for only .//"/// cars and mar!et demand is for .,/"/// cars" every foregone unit of production costs Toyota the margin they would have made on that car. %ccording to the case" a ;amry sells for ?11"5// with Toyota ma!ing a 1@A margin. Thus" every foregone unit of production costs Toyota ?0"1,5. )f we assume that they will not operate overtimes" have the demand for the units" the cost for the line stoppages are5
OP Impact Per Stoppage (minutes) Cars Lost Shift For Lost Car 1 1 " #,14 $!! #! (! 2( " # " 81,&&!$!! 1((,(8 $!!

Cars Per Shift %inutes Per Shift Cars per %inute

428 48 !$88

Pricing Sale Price " 18, !! %argin OP 1&' " #,14

)f we are to assume that the demand still exists and overtime is available to ma!e up for 9lost ;ars: related to stoppages" then the costs for the stops need to consider the overtime to ma!e up for the lost cycles.
Stoppage (minutes) )**itional Cost Impact for La+or Per Car Cars Lost 1 1 " 1(#$(# #! (! 2( " # " 4,,!8$& ,,81&$ !

Bumber of Wor!ers 2er 3hift Overtime ;ost 2er Wor!er ? ;ost 2er $inute of Overtime ?
-ime re.uire* to /uil* One Car (minutes)

015 .5.5/ 1C0.C0 /.11

1 1e 2ill assume )n4one in %anagement is Salarie* 2 1e 2ill assume the )5erage Shift Si6e is &(,72 # 1e 2ill assume that O5ertime cost are ("1& 8 1$ ) 4 1e 2ill assume there is no a**itional 3aria+le %ateral cost

! #8 " 2 $ ! " 0

The costs associated with the line stopages are li!ely further understated because there is a minimum overtime re+uirement for the employees.

3hift time (in minutes*

$inus lunch D brea!s

Total time per wor!er Wor!ers per shift Total man#hour mins E shift Total cars per shift ;ars per man#hour minute Times wor!ers affected ;ar production lost E minute of stoppage $argin per car 2rofit lost per minute of stoppage 2lus 1 min of overtime for @C wor!ers Overtime hours Overtime rate Total overtime for 1 min. of lost production Total cost for 1 minute delay Total cost for 0/ minute delay Total cost for C/ minute delay

5. 5 (@ 5*
,5/ @C 0,C"/5/ ,.@.5 /.//1.05 @C ? ? /. 5 0"1,5 ." 1@.@5

? ?

@C 1..1. .5.5/ 0.C.10

? 0"01,.51 ? ",0@..5 ? 1 1"1@,.5/

!. Where, if at all, does the current process of handling defecti$e seats de$iate from the principles of %ust&'n&(ime and the (oyota )roduction *ystem? The Toyota 2roduction 3ystem principle is based on the assumption that true need will deviate from production planning and that problems will crop up. The &ust in Time inventory management system was designed to ensure a 2ull rather than 2ush management principle" which reduces inventory costs and ensures the most efficient manufacturing environment. The system functions well when communication is effective and suppliers have completely adopted the principles and practices. )t is not evident that the T$3 team deviated from the principle of &ust in Time" but rather it had other problems # either supplier issues" process issues" or the &)T information flow was incorrect. )t would be our conclusion that there were problems with the T23 process that may not be directly lin!ed to the &)T" but rather failures to implement other elements of the T23 to +uic!ly determine the root cause and fix it. The Toyota 2roduction system relied on two practices to address problems and drive additional +uality and productivity" &ido!a and 4ai6en. &ido!a was a system for immediately identifying and addressing problems in production. %ccording to the case" in order for &ido!a to wor! properly" 9the normal state of operations had to be well characteri6ed and understood: and the processes had to be standardi6ed. )n the case of attempting to remedy the seat problem" there was not a normal state of operations" the problem was not understood" and there was no way to address the issue in a standardi6ed manner. Therefore" the principle of &ido!a was not applied effectively. Finally" !ai6en was the idea of constantly see!ing change for the better and this was certainly not the case in Toyota's ad hoc approach to trying to rectify the seat problems. )t is our conclusion that the core principles of T23 were not upheld and the tools of T23 were not utili6ed with regard to the seat defect problems.

+. What is the real problem facing Doug Friesen? The real problem facing Doug is that he has no idea where his problem lies. ;learly" he is losing money each shift by missing his production goal" incurring more costs related t fixing the problem" and in some ways has not used Toyota 2roduction 3ystem tool" the 5 Ws. Fe needs to drill down on the problem" determine the root cause" and fix it correctly to ensure he meets his plants commitment to its customers. %s a part of Guestion 1" we examined three possible issues" two with 4F3 and one with T$3 deltas between shift one and two. )f we were to apply the 5Ws to the case" *ituation, We are seeing far more defects than acceptable impacting our top re$enue and bottom line profit. 'nitial )roposal - Add ./ checks to incoming inspection, determine if issues exist in %'( system, determine delta0s in st to 2nd shift defects. Why are we seeing so many in $aterial Flaws defects in the lineH Why is the &)T system providing us bad matches or missing productsH Why is this problem amplified by the introduction of more model combinationsH Why is there a difference in defects between shift 1 and shift .H Why are we not effectively clearing inventory from the ;linicH

)t has been stated that Doug also may be experiencing the problem of loo!ing at this issue through the prism of a traditional I3 manufacturer rather than way the Toyota $otor ;ompany would" fix the problem not the source. Fe is trying to wor! within the confines of the T23" but is not ta!en advantage of the tools of &ido!a and 4ai6en to fully address the problem