EPGP 07 Qtr 2

OPERATIONS MANAGEMENT

TOYOTA Motors Mfg Case Analysis & Report

SUBMITTED BY
EPGP-07-001
Krishna
EPGP-07-022
EPGP-07-024
EPGP-07-086
EPGP-07-088
EPGP-07-096
IIMK : EPGP-07 : E-city, Bangalore

:
Aarthi Balamurali
Avinash Sahu
Bimal Kumar
Sushil Soni
Thejaswaroop Salem
Vipin Suresh T

TOYOTA Motors Mfg Case Analysis

Background
1. Toyota Motor Corporation (TMC), Japan opened its greenfield plant at
Kentucky ,US in 1988 called Toyota Motors Mfg U.S.A, Inc. (TMM) with
a capacity of 2,00,000 Toyota Camry per year to replace its imports
from japan.
2. The capacity was expected to be increased to 2,40,000 by 1992 with
new version of Camry and the Wagon version .
3. TMC trained the employees towards Toyota Production System (TPS)
about the concept of built-in quality (through immediate detection of
defects)-JIDOKA , waste elimination - and continuous improvementsKAIZEN.
4. TMC closely worked with their suppliers also for cost reduction and
quality improvements.
5. The seats for Camry were supplied by the sole supplier called Kentucky
Framed Seat (KFS) which operated based on JIT supply ensuring supply
of the right model of seat at the assembly point.
6. Initially there were 3 styles and 4 colours of seats , which after model
changeover became 5 styles and 3 colours. And orders for North
America, Europe, Japan and Middle East added another 36 variants of
IIMK : EPGP-07 : E-city, Bangalore
TOYOTA Motors Mfg Case Analysis
seats by 1992.

Background
7. The run ratio started coming down from 95% to 85% (almost 45 cars
loss per shift) due to line stoppages related to seat problems.
8. The clinic area and overflow parking area started getting filled with
cars waiting for seat rectification / replacement and instances of cars
waiting for days together also started popping up.
9. This seat related problem was affecting the running of TMM both in
terms of economy as well as delivery as the to make up the daily
losses, it required overtime of the operators/workers at a higher wage
rate and waiting for seat replacement affected flow of the products to
dealerships and to customers.
10.Mr Doug Friesen , the Assembly Manager is analysing the problem and
trying to find the root cause of the issue and also trying to find out why
the TPS practices were unable to prevent the losses.

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Did TMM deviate from the TPS principles?

TMM did deviate from some of the critical focus points of TPS and
the details are :
a)Deviations from JIDOKA - As per JIDOKA, production should be
stopped when problems surfaced but , in the case of defective seat
problem production was not stopped and car was allowed to passed
through assembly line with defective seats in it or without seat. Car was
taken to Code 1 clinic area to detect the problem and then to overflow
parking area for seat replacement. This is a deviation and this has caused
accumulation of defective products at the end of assembly line.
Deviations from JIT principle JIT principle recommends to produce
what is needed when it was needed. So it aimed at reduction of waste
and inventory. But in this case, for handling of defective seats, cars were
moved to overflow parking area where seat replacement was done so it
resulted in increase in inventory as well as waste. Secondly seats with no
defects were not produced as replacement at a time when they were
needed, which resulted in hold up of vehicles for 2-3 days.

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Were the seat defects handled correctly?

It can be observed that the seat defects were NOT handled correctly.
1.Majority of the problems related to seat were manufacturing defects like
missing parts, broken parts, loose back board, material defects, wrinkles,
scratches, gap etc which were not highlighted to KFS or TMM.
2.Though data was available, no evidence was available for action taken
on any defects.
3.Workforce who are directly involved in assembly of seat on the car are
not aware of the issues due to which vehicles are held up at the clinic.
4.Seat re-order form is found to be given not enough importance. If it was
used properly, the data collected from the same would give a very clear
picture about the trend in defects.
5.Another observation that can be deduced from the defect trend is that
major chunk of defect are related to Rear seat and First Shift. A more
specific analysis should have been done taking these two into account.
IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

What should Friesen do to resolve the problem?

Doug Friesen should first try to establish what the problem is and where
it is coming from. Is it a procedural problem on the line, is it an
engineering problem in relation to the seats design or is it a defect
problem originating from the supplier.
Once he has gathered the initial facts he should consult his
counterparts at the Tsutsumi plant and, see if they could help him
trouble shoot the issue.
Once facts are gathered, he should take a two pronged approach, first
he should go to all his team leaders and share with them his findings to
see if what they are experiencing on the line backs up my information,
Secondly he should institute the 5 whys and try to determine a root
cause to the issue

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Did the TPS practices fail to prevent the defects?

It is not the TPS practices which has failed, but the inadequate
adherence or failure to practice TPS which has resulted in failure to
prevent defects .
If TPS was followed with an understanding of the underlying philosophy
and concept, it could have definitely prevented increase in defects by
timely identification, alerting and preventing defects.
Moreover, it can be seen that design and purchase team involvement is
inadequate during new variant development and support during
production at the supplier end. In case of hook modification, the cost of
$50,000 investment at KFS could have avoided problems during end
assembly at TMM.

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Economics of Line stoppages

No of employees
conswdered)
Regular wage
Over time wage

: 769 (group/team leaders not

: $ 17 / Hr
: $25.5 / Hr

Total production per shift (450 min)

: 450 x 60 / 57 = 473
Loss of cars per shift
: 95% - 85% = 10%
: 47 Nos
Overtime reqd to make up this loss
: 47 x 57 sec =2679 sec
: 0.744 Hrs
Cost of over time

: $ 14590 / shift

(2 shift/ day & 22 days per month)

: $ 6,41,936 per month

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Economics of Line stoppages

The cost of quality involves two entities.
1.Cost of additional work to be done to make up for the loss and rectify
the problem (Loss due to line overflowing and chocking, loss due to delay
in delivery , rework cost).
2.Cost of line stoppage to correct the problem.
One has to analyze and calculate in detail the time lost and the
corresponding loss in vehicle to understand which factor will contribute
more towards total loss to the company.
If the Line is stopped once for a very small issue, which can be
rectified offline at a later point, it will be a loss to the company in terms of
vehicles produced. But, if the line is stopped for correcting a critical and
recurring problem, which is difficult to rectify offline, it will justify the loss
of vehicle for the time period. But it will be ensured that the problem will
not re-occure.

IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

Conclusion and Recommendations

The current problems due to defective seat had grown and intensified as a
result of the deviations from TPS practices.
This can be solved by systematically analyzing the problem through whywhy.
For preventing recurrence of such problems, the company has to ensure
complete adherence to the TPS practices and guidelines.
The company should stick to the proven TPS practices.
Kaizen must be reinforced to the plant employees.
A close relationship is to be fostered between KFS, TMM and TMC. A
closer collaboration with the Japanese designers and the American seat
manufacturer should be encouraged to help the team overcome any
geographical or cultural barriers.
The TPS system should be implemented at KFS and throughout Toyotas
supplier network.
IIMK : EPGP-07 : E-city, Bangalore

TOYOTA Motors Mfg Case Analysis

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