Date: 3/5/2014

INDIAN INSTITUTE OF MANAGEMENT ROHTAK Operations Management

Toyota Motor Manufacturing, USA Inc

Submitted By: Section C Group-9 TEAM OMG! G Ramya PGP04111 Harsh Khambra pgp04 112 Roshan Kumar PGP04133 Roshan Mandrawalia PGP 04134 Suraj Dongare pgp04 146

Submitted To: Dr Arabinda Tripathy

Toyota Motor Manufacturing, USA Inc

Introduction
Japanese auto makers wanted to start manufacturing in North America in the early 1980s. The huge trade imbalance caused a political pressure and the raising value of Yen led to the huge investments possible. But the problem was whether the cars produced outside Japan would match to the quality of those manufactured in Japan. Toyota Motor Corporation (TMC) set to transfer its knowledge to TMM. For this they have used TPS which reduced cost by eliminating waste. TPS had two guiding principles: Just-in-time and Jidoka. Just-in-time meant produce only when it is needed. Any deviation was termed as waste. Jidoka means make the production problems self evident and stop producing whenever problems were detected. This brought in the quality in the manufacturing procedure. For JIT production, information has to be as close as possible to the physical flow of parts. For the Jidoka process standardization of the processes and documentation was necessary. For the TPS to be possible human infrastructure was needed. Thus a well informed pool of engineers and workers was always available. They followed stick to the facts and get to the cause of the problem methodology. TMC was able to properly transfer the necessary knowledge to TMM. But in the recent times TMM is facing increasing problems with its seat supply. TMMs single seat supplier, Kentucky Framed Seat (KFS), is responsible for the majority of the problems with material flaws and missing parts as the major encountered defects. These problems have been increasing with an increase in varieties of and demand for the seats. This is because each variant of car needed a different type of seat. The number of car varients has been increasing. Toyota currently addresses these problems offline; however, this is a deviation from the policies and procedures under the TPS. Now, as TMM ramps up for the production of the Camry Wagon, it must address the seat issue before seriously impacting production performance. Analysis of the problem: The principle of Toyota is to correct the defects on the production line and not off line. But he vehicles with seat problems are tackled off line after the assembly is complete. This happens because: 1. Stocks cannot be maintained as TPS is based on JIT principle. So the seats that come should match the order in which the cars come on the production line. 2. The supplier KFS also works on JIT 3. KFS also cant replace the defective seats immediately This means that stopping the line to check the seats for replacement is not an option. Though KFS send the new order the seats are not installed in timely order. Sometimes four days old cars are still in the parking lot.

Stations Employees Wage/Hour Overtime Cycle Time Shift Length 'Productive' Minutes Run Ratio 100% 95% 85%

353 769 $ 17.00 $ 25.50 1.05 Cars/Min 525 Minutes 450

473 Try to get the value 449 402 'Lost' Cars Per Shift (95% to 85%) 47 Cost per Hour of Production Overtime $ 19,610 Time Required to Produce Additional Cars 50 Minutes Cost to produce additional cars 16,215 Most of the seat problems, however, are material flaws or missing parts, which cannot be corrected online because no replacement is immediately available. One possible option would be to have a larger amount of safety stock, but this is not an efficient solution to the problem because it contradicts the JIT concept. it would require excessive stock maintenance near the seat station for correct seat-to-car matching. Another solution could be to have a smaller number of seat varieties. This step would increase the chances a good seat is in the pipeline. But there is another problem. When the workers try seat-bolt at the wrong angle, but this problem is easily fixed within 30 seconds. But as per the casse this is oly 11% of total faults. The most important problem is that of the material flaws. This accounts for almost 60%. So the problem is from the supplier side. But KFS has been good till date. This means it is not incompetent. From the case information, it is evident that the problem began in March 1992 when Toyota began increasing the seat varieties from twelve to about thirty-three. The problems will further intensify in May when more varieties are introduced with plans to reach more than fifty. If we consider the option of using 50,000usd investment, it may sound good. This is because if we consider that there would be 2 shifts per day, then there would be around 500 replacemnet per year. This will lead to huge costs. But the same type of hooks are used in Japan and they did not show any problem. TMM could also change the seat supplier or get an additional supplier. Toyota generally prefers to resolve issues with its suppliers rather than just replacing them. Additionally, it would be challenging to find a supplier that is geographically closer than KFS.

Recommendations:

1. Worker should be designated to check the seat quality and the order in which they arrive.

2. 3. 4.

5. 6.

7.

Having an employee check the seats at the arrival dock so those problems can be identified early. The supplier should be notified of defective seats as soon as they are discovered. Employees on the assembly line and in quality control should immediately inform KFS. QC personnel should be placed with KFS to analyze why so many defective seats are getting to TMM. an effective IT solution should be implemented to improve information flow and prevent problems and mitigate costs. IT should also be used to reorder seats that are defective or incorrect. In the long run, a closer collaboration with the Japanese designers and the American seat manufacturer should be encouraged. The TPS system should be implemented at KFS and throughout Toyotas supplier network. KFSs proximity and significance in the manufacturing process are also a good reason why KFS and TMM will benefit from a TPS integration. TMM should recommend a reduction in the variety of seats with TMC. The variety of seats that Toyota is requiring should be minimized to avoid additional problems and to ease the scope of problems when they occur.

Risks
1. TMC might not feel that the variety of seats could be reduced. 2. KFS might not be able to react to the increased demand. Then TMM can look for another supplier. 3. KFS could refuse to adopt TMM and TPS procedures. But then both the companies are dependent on each other. KFS is Toyotas only local seat supplier so they have a mutual dependence.