Toyota Motor Corporation: Operations Management

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Background to the Case

The case will focus on Toyota Motor Corporation, the world’s second largest automobile manufacturer. Klichiro Toyoda founded the company in 1937 as an offshoot from Toyota Industries (French and Korngold, 2019). The company achieved rapid growth in its early years of operation as it focused on producing inexpensive cars with great efficiency. Through acquisition, the company has become one of the dominant brands in the automotive industry. It is currently the market leader in production and sales of hybrid electric cars and hydrogen fuel-cell vehicles in the world (Sheehan, 2017). The company has been successful both in the developed and developing world because of its wide variety of cars meeting a wide range of customers’ needs.

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The case will focus on the production of Lexus hybrid cars, one of the products of Toyota Motor Corporations that is rapidly gaining massive popularity around the world. As technology moves towards green energy, many companies are keen on producing hybrid and electric cars, which are less dangerous to the environment. However, Lin (2018) warns that the technology behind hybrid cars is still evolving, which means that production of them may be costly. It is also possible that these initial hybrid cars may have problems with reliability. Toyota will need to streamline the development of this product to enhance efficiency and reduce cost of production. Just-in-Time (JIT) theory may be a useful concept for the firm.

Definition of Operations

It is important to have a proper definition of operation at Toyota’s Lexus production plant. The company offers a wide range of cars, but the study will focus on the production of hybrid cars. The production of Lexus cars is a complex multidisciplinary process that starts with the sourcing of all relevant materials. The team will develop appropriate design for a specific car model. Currently, Lexus produces hybrid cars under the models of RX, NX, LS, LC, GS, ES, and UX. Each of them has a unique design (Nguyen, Melewar and Schultz, 2017). The company spends many resources to come up with designs that meet market demands. Besides the beauty of each car, other important factors that should be considered at the design stage: functionality of the vehicle, comfort of the driver and passengers, safety, and security features.

Once the design is made and materials are available, the next phase is the actual manufacturing process. The team has to make different components of the car. The chassis and the body come first based on the design. The two are then brought together before another team can start the painting process. This team will be responsible for the interior assembly of the car, which is often done by robots. The seats, dashboard, mirror, navigation and entertainment system, and various other interior components will have to be fixed. The company has to source for some components of the car such as the battery and tyres. These components have to be sourced at the right time and made available for assembling at the factory.

The next phase of the operation is quality assurance. The Lexus brand prides itself as a luxury car that offers comfort, efficiency, and security to its users. As such, the company has set up a quality assurance unit that is primarily responsible for checking all the manufactured cars to ensure that they meet the company’s standards. Any defects have to be corrected before the car can be released to the market. If they pass the quality assurance test, they will be rolled out of the production unit, ready for the market. The company has specialty shops all over the world where customers can purchase these products. It has an effective logistics system that facilitates the movement of products from the production point to the market.

Planning and Controlling Strategies for the Operations

Toyota Motor Corporation should have a proper planning and controlling strategies for its production of Lexus hybrid cars. This particular brand is unique from other cars produced in mass because it focuses on reduced carbon emission and a low cost of operation.Through proper planning and controlling activities, the company can achieve an edge over its rivals in the market. According to Yang, Ishtiaq, and Anwar (2018), successful corporations understand the significance of having proper planning and controlling activities, especially in the current competitive market. It is important to know when to make production materials obtainable, conduct processing and manufacturing activities, and make the product available in the market. It is important to discuss each of these planning and controlling strategies for the operations of the company.

Planning Policies

The management of this company should develop a clear planning policy for its production of the Lexus hybrid cars. According to Marchewka (2015), when a company is introducing a new item in the market, it should emphasize the importance of involving all the stakeholders relevant in defining the product design. Lexus hybrid cars have been in the market since 2006, and the company has been keen on promoting the evolution of design. It created a planning policy that involved getting feedback from customers currently using the hybrid cars on issues such as fuel efficiency, comfort, beauty of the car, and any other area that they would desire a change. Using that information, the design and production unit has been able to come up with higher-level models. For instance, the Lexus Rx450h is superior in design and functionality to Lexus Rx400h because of the improvements made. The policy of listening to customers’ concerns has helped the company to maintain its dominance in the hybrid car market.

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Approaches to Controlling and Scheduling

The management of the company has defined specific approaches to controlling and scheduling its operations. Its quality control unit focuses on maintaining perfection of products before they are released to the market. It starts with the inspection of raw materials once they are delivered to the premises of the company. Each of the stages of production is closely supervised to ensure that any mistakes in the products are detected and eliminated within the right time. The company also has an elaborate logistics unit that facilitates movement of the finished cars to its dealers all over the world. Scheduling is essential in achieving the desired level of success. The entire process of sourcing for materials, production of the car, and delivery to the market follows a strict schedule based on specific parameters (Dionne, 2019). The company is keen on ensuring that there is precision in terms of making these products available to its customers at the right time.

Methods for Capacity, Inventory and Production

The demand for Lexus hybrid cars has been soaring in the global market because of the efficiency and comfort that it offers. As such, there is a need for the company to enhance its production capacity. Inventory management and production capacity are becoming major issues for the company as it struggles to keep up with the global demand (Modi, 2017). One of the methods that the company has employed to improve its production capacity is to introduce new production plants outside the country. In 2003, the management of Toyota decided to start the production of Lexus 330 in Ontario, Canada (Lin, 2018). This facility has become one of the main manufacturing plants for some of the current hybrid cars for the company. It primarily focuses on the production of high-end Lexus cars. The strategy also improved the efficiency in inventory management, besides increasing the production capacity. Europe and North America are some of the most attractive markets for the company.

Introducing a new production plant in Canada meant that it was easier for the company to deliver its products to the North and South American markets than it was before when the manufacturing was centralized in Japan. It has significantly reduced the cost of operation for the company and the time in which it delivers its products to the market. The decentralization of the production process was also meant to promote creativity and innovation within the company. The plant in North America could easily tap into the emerging technologies in that region as it focused on improving efficiency in production and quality of cars made available (Whitman and Mattord, 2016). The unique approach has enabled the company to create unique car designs that have gained massive popularity in North America and European markets. The decision has also helped the company to strengthen its image in the region as a local firm. One of the main criticisms that Toyota has faced in North America is that it does not create employment for the locals. Having a major plant in that region meant that it will be able to overcome such criticism and be viewed as a local company.

Lean and Agile Considerations

In the current competitive car market, success of a firm depends on its ability to respond quickly to forces in the market and maintain a lean workforce. At the Lexus production plants, Toyota has embraced the use of robots and other machines to undertake various tasks that were previously done by people. The introduction of these robots has helped the firm to maintain a lean and highly effective workforce. These computerized machines are more precise, less prone to making mistakes, and can work for long periods without break. According to Jiang and Gong (2019), one of the main challenges that large corporations currently face in their operations is how to deal with a highly demanding workforce. Unionization of workers is becoming a major concern for large producers of cars. As firms struggle to increase their profit margins, it is getting increasingly challenging to meet the demand for higher salaries. Automation of production processes has been a major help for these company as it reduces the size of its workforce. It can now afford to pay its current employees high salaries because they make a significantly small portion of the workforce.

In the course module, one of the theoretical concepts discussed was agile operation. Greasley (2008) explains that “the aim of agile operations is to be able to respond quickly to changing market demand in order to retain current markets and gain a new market share” (p. 16). Toyota Motor Corporation has embraced agile operations in its production of cars. The introduction of hybrid cars was a direct response to the market demand for a clean vehicle. According to Zhou and Lianqian (2020), cars are some of the leading emitters of greenhouse gases. In some of the major cities of China and India, the emission of these gases is so bad that young children and the elderly are often advised to stay indoors because of the potential risks to their health. The company was able to understand the changing tastes and preferences both in the local and international market. Its agile operations made it easy for the company to respond to these changes.

The production of the hybrid car took into consideration many factors. First, the management realized that there was no proper infrastructure that could support fully electric cars in the global market. Many people in China avoided purchasing fully electric vehicles because it was taking longer for them to recharge their batteries. The same case was witnessed in other major markets in Europe and North America. Despite these challenges, the desire to have cars using clean energy was growing. In order to find a middle ground, the company introduced the hybrid car (Slack and Brandon-Jones, 2018). This car does not need to spend hours at a charging station to get the energy it needs. Instead, it starts with the use of gas. As the car moves and during major breaks, its battery is charged. Once it is fully charged, the engine switches to the electric mode, which means that it will not burn the gas any more. It was a unique approach to solving the problem that electric car manufacturers faced in the market.

Process Analysis

It is important to conduct analysis of redesign of processes facilitating the above discussed operations at Toyota’s Lexus production plant. As Chakrabarti and Sen (2019) explain, processes within a production plant can only be successful if there is a proper integration of systems and people. Sociotechnical system theory is a complex organizational work design, which focuses on the interaction between technology and people in the workplace (Greasley, 2008). The advancements made in the field of technology mean that some tasks that were previously done by human beings can easily be undertaken by machines. However, that does not mean a firm can replace its entire workforce with robots. At Lexus production plants, Toyota understands the significance of the interaction of people and technology. Although most of the physically demanding tasks are conducted by robots, precision can only be achieved if there is a proper inspection of the outcomes. The activities of the robots must also be coordinated properly to achieve the desired outcome. The robots need to be programmed, operated, and in some cases assisted by people to enable them function properly. As such, these processes require effective integration and interaction of machines and people within the workplace.

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Presentation of Processes Facilitating Operations

The production of a Lexus hybrid car is a multidisciplinary process that has to be conducted to precision to achieve the desired outcome. It starts with having a design and preparation of estimates needed per unit product (Hill and Hill, 2017). The team will then develop a schedule of activities that have to be conducted to ensure that the intended goal is realized within the right time. Figure 1 below shows the processes involved in the production of a car once the design has been developed. It starts with sourcing for raw materials. The materials have to be delivered to the production plant at station 1. The team will then move to the next station where different parts of the car are manufactured based on the design that had been developed. A quality assurance team will inspect each of the parts to ensure that they meet specific criteria. The parts will then move to the next station where they are assembled into a complete car. A further inspection will be conducted to ensure that the assembly is conducted successfully. The next stage involves testing the car to guarantee that the specifications are fully met. A finished item is released at the end of the process ready to be delivered to the market. The figure shows that at every stage of the production process, employees have to use machines to facilitate the production of the parts.

Production layout 
Figure 1. Production layout 

Classification of Materials and Data Flow within These Processes

Toyota produces a wide variety of hybrid cars that target different market segments. For instance, Lexus GS series target high-end customers. Therefore, its parts must meet the expectation of buyers. The classification of materials involves articulate identification and quality inspection of the car parts. Each of the Lexus series has unique materials meant to satisfy specific segments of the market. The assortment of these parts helps in maintaining standards of each of the models (Rehacek and Bazsova, 2018). The process is supported by effective flow of data. All the departments and production units discussed above have to maintain a close coordination of activities to achieve success. Station 1 must understand the demand and capacity of station 2 to avoid over or underproduction. Each of the stations has to meet specific expectations based on the capacity of the previous and next unit. Similarly, the production department has to communicate with the procurement department and the finance unit to ensure that the needed materials are made available at the processing plant. The marketing department should regularly inform the production department about the demand within a given region so that the right amount of cars will be made available to customers. Effective data flow in these processes helps in enhancing smooth operations.

Risks/Issues Currently Associated With These Processes

The management of this company should be aware of the various risks associated with the above processes. As Power and Ferratt (2019) note, knowing the potential risks makes it easy for the team to prepare adequately and to prevent unnecessary losses that a firm may incur. One of the major issues that are associated with the process is breakdown of information. Cases may arise where the production unit fails to provide accurate information to the relevant departments about the materials needed. In such cases, the entire production process may be halted as the team tries to figure out how to search for the missing items.

Cases of miscommunication can also result into a situation where excess products are made available in the market. According to Saunders and Lewis (2017), when excess inventory is produced, a firm will incur a high cost of storage. Toyota Motor Corporation should also be keen on fighting possible cyber-attacks. Most of the production processes are automated and conducted using robots, which rely on computer programs to conduct specific tasks repeatedly and to precision. A company can be sabotaged if a criminal-minded individual manages to plant a virus that can alter the normal program for the robots. The company can incur massive losses if such cases occur. The robots may even be a threat to people who work alongside them if their software is compromised. The team must ensure that such risks are properly managed.

Recommendations on Redesign of Operations and Processes

Toyota has developed a unique way of producing its Lexus hybrid cars. It is currently the leading manufacturer and distributor of a wide range of electric cars. However, the management must understand that as technology continues to evolve, it is necessary to embrace new approaches of operation that will help in lowering the cost while at the same time increasing value on the products (Parker, 2018). As has been the tradition of the company, it may also be necessary to produce new models of its current hybrid cars to meet the changing expectations of customers. Based on the analysis and discussion above, it may be advisable that the company redesigns its operations and processes to achieve improved productivity. Value stream mapping can help in rediscovering new processes and approaches that can deliver the desired goals as new demands continue to emerge. Figure 2 below shows the recommended steps that should be taken when redesigning operations and processes at the company.

Value stream mapping: redesigning operations and processes 
Figure 2. Value stream mapping: redesigning operations and processes 

The first step is to draw a current state value stream map. It involves outlining the current operation processes used in the production of cars at the company. It is essential to be as accurate and detailed as possible when defining the up-to-date designs in operation. The second step is to identify existing mistakes in the current process. It requires active involvement of all stakeholders irrespective of their position within the firm. They should discuss what they believe limits the capacity of the company to register impressive performance using the current system (De and Houman, 2019). They should also compare the current operational processes with that of best practices within the industry. The process is fundamental in motivating change because stakeholders will understand what they need to change within the system.

The third stage is to develop solutions based on the assessment conducted in the previous stage. The goal is to address all the identified weaknesses to enhance the production process. The stage may require a complete redesigning of the operations and processes at the company. The new system must reflect the future state value stream that is sustainable based on various forces in the market. Jovanović et al. (2016) emphasize the need to ensure that all stakeholders are convinced and satisfied with the new design to ensure that they support it. The fifth stage is the implementation of the new value stream map. All the relevant stakeholders may need to be trained on how to undertake their duties under the new system. The final step is to measure the outcome of the process. The team will need to assess if the desired outcome has been realized.

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Reference List

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Jovanović, F. et al. (2016) ‘Risk management impact assessment on the success of strategic investment projects: benchmarking among different sector companies’, Acta Polytechnica Hungarica, 13(5), pp. 221-236.

Lin, H. (2018) Adoptive management innovation. New York, NY: Springer.

Marchewka, J. (2015) Information technology project management: providing measurable organizational value. Hoboken: John Wiley & Sons.

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