Operation management, toyota production system


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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. Toyota’s 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.

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Operation management, toyota production system

  1. 1. Faculty of Science, Engineering and ComputingASSESSMENT SUBMISSION FORMSurname / Family Name (PRINT)HamdanFirst Name / Given NameOmarStudent Number:K1067538Course: (SFBMS etc)Renewable Energy EngineeringLevel( 7)Module Name:Industrial System & managementModule Code:MNM101Assignment Setter/MarkerAssignment Title:Operation Management, ToyotaProduction SystemModule Leader:A. LungNames of other group members(if applicable, e.g. partners in practical classes etc.)None1. I declare that the attached work is all my own , and that where I have quoted from, used or referred to the opinions, work or writingsof others, these have been fully and clearly acknowledged. I will provide electronic copies of my work if required for Turnitin analysesor reference.2. I am aware of the consequences of late submission.3. I have read the document ‘Student Collection Notice and Permission Form’ and by signing below I agree to the terms and conditionsregarding the use of service as contained within the document.Student Signature: ……………………… Date & Time Submitted:………………………
  2. 2. STAFF USEOverall Mark: % or grade point: ........ Grade ………..FEEDBACK COMMENTS: (Some staff may also provide structured feedback on an additional feedback form)MODERATOR’S COMMENTS (where applicable)
  3. 3. Industrial System & Managements, MNM101KINGSTON UNIVERSITY LONDONDecember 19, 2011Authored by: Omar S. Hamdan, K1067538
  4. 4. 1Declaration of Plagiarism“I, Omar S. Hamdan, K1067538, certify that I fully understood the faculty of scienceengineering and computing definition on Cheating and Plagiarism and that all material inthis assignment is my own work, other people’s work which been used in this assignmenthas been properly acknowledged and referenced”Table of contents:1.0 Introduction 22.0 O*perations Management 23.0 Toyota Production System (TPSc) 34.0 Just in Time Inventory Management 65.0 Lean Manufacturing 86.0 Supply Chain Management 107.0 Conclusion 12References 14
  5. 5. 21.0 IntroductionThe success of Toyota Motor Company is due to the unique reduction systems thatfocus on continuous improvement and just in time management. Toyota has created adecentralised structure that encourages employee participation and team working. Toyotaincorporated concepts just as supply chain management and inventory management tocreate high quality automobiles and gain a competitive edge in the highly competitive globalautomobile market. Toyota’s success and its lean manufacturing philosophy have beenwidely studied. The Toyota manufacturing system is centred on achieving a high level ofproductivity. The company has a unique approach to problem solving and it continuouslytrains its employees.The Toyota Production Systems is based on the lean manufacturing philosophy thatseeks to minimize wastages and centres on cost reduction. The Toyota manufacturingphilosophy emphasises on quality management through a process of continuousimprovement. This report looks at how Toyota created its manufacturing system and therole of operation management techniques to enhance efficiency. This report examines theproduction processes and philosophy and Toyota to assess how the company has achieved acompetitive advantage globally. The lean manufacturing philosophy pioneered by Toyotahas become a benchmark for all manufacturing companies around the world. The leanmanufacturing philosophy includes concepts such as customer relations, product design,supplier networks and operations. The lean manufacturing practices have made Toyotaachieve low cost production and allowed them to manufacture high quality cars at loweredcosts. This report looks at how operations management techniques such as supply chainmanagement and inventory management have led to efficiency and profitability at theToyota Motor Company.2.0 Operations ManagementThe study of operations management looks at the production of quality goods andservice. 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
  6. 6. 3the distribution of goods and services. Operation management seeks to enhancemanufacturing performance and this study has proposed various techniques and atheoretical framework to achieve this goals. These techniques include quality management(TQM), just in time (JIT) or Leaning manufacturing. Other concepts in the field of operationsmanagement include six sigma and supply chain management. All these techniques requirea flat organizational structure coupled with functional integration in the organization (Gupta& Boyd, 2008).The competitive pressure for improved product quality has led to numerousoperations paradigms emerging/ the most significant ones include Just in Time, Total QualityManagement (TQM) AND Supply chain management (SCM). JIT seeks to eliminate waste andrecue setup times, it also controls the material flows and focuses on effective resourceutilisation. The TQM philosophy looks at developing a corporate culture that is customerfocused empowers employees and seeks continuous improvement. The supply chainmanagement integrates buyers and suppliers decision-making to improve the flow ofmaterials in the supply chain. The JIT, TQM and SCM approaches improve the effectivenessand 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 eliminatingwaste from value streams. This production system is highly standardised. The productionsystems have buffers that are controlled through various pull signals. The lean production isvery efficient and greatly improves quality that has given Toyota an edge in the globalautomobile markets. TPS should be viewed as a philosophy that is described by a set ofgeneral principles of organising and managing an enterprise (Lander & Liker, 2007).Toyota’s success as an automaker in the world is based on its expertise in creating aunique production system. This TPS is based on the principles of continuous improvementalso known as Kaizen. The Toyota company has a highly decentralised workforce which ishighly trained and takes part in the decision making process. The TPS consists of mostsuccessful Japanese production and work practices. This approach was developed by Sakichi
  7. 7. 4Toyoda the founder of Toyota who pioneered the TPS. It was Taciichi Ohno that created theJust in Time (JIT) production systems. The JIT approach made Toyota more efficient andthese techniques also incorporated total quality control, statistical process control andquality circles. Toyota introduced a new system of employee relation with one trade unionand created flexible work to respond to the demand based production (Winfield & Kerrin,1994).The Toyota manufacturing system is characterised by a continuous flow ofproduction that allows the company to be flexible enough to adapt to the demandconditions. The JIT ensures that only the required materials for the production are acquiredat the right time. This minimises the excess inventories which leads to cost reductions. Alsothe JIT emphasis on quality control and the production system is made adaptable to thedaily and monthly fluctuations in demand and quantities. The quality assurance processes inthe 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 .Toyotahas also streamlined its production processes through implementing Total QualityManagement (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. Inthus system the Kanban systems play a vital role as the system provides instructions as partmove along the production line. This system works with production line to deliver therequired material for production. The Kanban synchronises the production quantities ateach production stage. The Kanban Systems provide the precise information of the requiredmaterials for the production process, this makes the production at Toyota more efficient(Balakrishnan, 2003). The Kanban systems uses IT systems for planning and control includingenterprise resource planning (ERP). The modern computer aided production managementsystems includes applications such as MPS, MRP and CRP, inventory control, shop floor andvendor measurement systems (Riezebos et al, 2009).Toyota production systems use less material and fewer employees that bring downthe costs making the company more efficient. The operations management systems at thecompany efficiently allocate resources and employees for each project. This makes thecompany more flexible and responsive to the needs of the market. The continuous flow
  8. 8. 5production at the company allows it to customise its cars to meet the changing customerneeds. Also the management introduced quality assurance teams to ensure that each unitof production meet the set quality standards. This defect prevention technique is referredto as “Jidoka” which in actual terms means to control defects. The Japanese culture heavilyinfluences the work culture at Toyota; the flexible workforce concept “Shonjinka” enablesthe management to hire employees based on the fluctuating demand. This makes thecompany more flexible and minimising costs (Balakrishnan, 2003).The TPS is linked externally and to the entire production system, the main TPSpractices are focused on detecting, assessing and eliminating sources of the entireproduction system. The sequential relationship amongst the external and internal linksincludes three types of interaction; the first is upstream integration which is between theexternal suppliers and internal suppliers within the firm. The internal integration is betweenthe firm actors that own successive process stages as either internal suppliers and internalcustomers. The downward integration is between the internal suppliers that own the lastprocess stage and firm’s 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 ofthe TPS by detecting any variance on the production process. The variance assessmentincludes part of product, people or personnel, procedure or method and equipment ormachine. The system variation can result from product variation, poor quality or inputs,flawed design or misaligned processes (Jayaram et al, 2010).
  9. 9. 6Figure 2 Toyota’s problem solving framework. Source Jayaram et al (2010)The employees can also lead to variations in the systems and performance owing tolack of proper training or motivation. Toyota has implemented a decentralised problemsolving approach that empowers the works to make decisions. The principle of Kaizen ismade possible with standardisation in the company. Toyota has standardised technical skillsto ensure a flexible staff in the company (Jayaram et al, 2010).4.0 Just in Time Inventory ManagementThe Japanese automakers have been very successful in improving their productivityand efficiency by focusing on continuous improvement. JIT has evolved from continuousimprovement paradigm. The JIT creates a flexible environment in which the wholeorganisation is responsible for eliminating waste. The JIT manufacturer seeks to acquirematerials that are needed to satisfy the actual demand. The JIT philosophy creates acustomer focused production process. The JIT processes eliminate inventories through
  10. 10. 7interdependent relationships in the operations.to create a customer oriented strategy themarketing activities are also integrated in the system. The JIT links the supplier to shop floorby pulling the required materials form the suppliers. At Toyota the JIT controls delivery andnecessary quantities for the operations. The Kanban Systems create the pull for getting theparts 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 themid-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 principlesthat include elimination of waste, continuous quality improvement, and a participative workculture. 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 andall deliveries are coordinated from suppliers to meet the production needs. The main aim ofthe JIT methods is to eliminate waste; waste is anything does not add value to theproduction process (Biggart & Gargeya, 2002).The JIT systems become more efficient and used the Kanban as an informationexchange tool for different production lines. Through using the JIT the wastages in theproduction process are minimised and the defect prevention system enhance the quality ofthe products. The culture at Toyota ensures that the entire production team focus onpreventing any defects and reducing wastages from the production process. In 1959 Toyotadramatically increased its productivity and produced 100,000 cars for the first time. Toimprove quality and automobile exports Toyota implemented Total quality controls in thecompany (Dahlgaard & Dahlgaard-Park, 2006).The JIT and respect for human systems are central doctrines of the TPS. Toimplement JIT various practices such as Kanban, short setup times, multi skilled workers arerequired JIT production is a means to achieve total elimination of waste and implement leanproduction. The respect for human systems looks at the physical movements of theemployees that should add value to the product. The employees at Toyota are empoweredand are responsible for quality issues and monitoring the assembly line. JIT is a criticalaspect of TPS; JIT allows for low inventories and ensure better quality and faster response to
  11. 11. 8engineering changes. JIT is an overall organisational phenomenon. The Kanban systemsimplement the control in JIT systems. The Kanban systems provide customers with the rightproduct at the right time. The Kanban is a flexible system that allows Toyota to implementJIT manufacturing. To successful they implement Kanban systems it is important to improvethe production systems and eliminate wastages for efficient work. The Kanban systemsensure that there is no late or early production. The TPS is a decentralised productionsystem that allows for a control systems to flow smoothly through the lean manufacturingproduction facility. The Kanban systems is characterised by a pull principle that ensures thatparts are sourced when needed and there are no wastages. The Kanban system ensues thatthere is no waste of overproduction and the inventory costs are reduced. Theimplementation of Kanban entails the support of other TPS practices. The success of Kanbansystems is dependent on an integrated infrastructure of supporting practices (Thun et al,2010).5.0 Lean ManufacturingThe lean production techniques have also be termed as the post Fordism system ofwork that is more efficient, humane and democratic. A central tenet of lean production isthe concept of kaizen that is continuous improvement in the production process. The leanproduction philosophy seeks to combine efficiency with quality of work life. The concept ofKaizen seeks to remove all activities that do not add value, referred to as waste or muda inJapanese. This looked at excessive setup time, excessive size inventory and work inprogress. The Kaizen process also eliminates errors in the production process and locatesthe source of the problems. This entails worker participation that can monitor and detectany variations in processes or products. The workers also contribute to the organisation andimprovement of production. The productivity improvements are achieved throughincremental innovation. The participatory nature of lean production is different from theTaylorist and Fordist production approaches (Hampson, 1999).Kaizen emphasises on quality assurance, this entails team work and collective responsibilityfor quality improvement in the company. The Toyota management systems included theconcept of zero defects which comprised of quality circles to emphasis on all quality related
  12. 12. 9issues. The concept of Kaizen ensures that all employees are quality conscious and focuseson quick problem solving. The team leaders in the organisation encourage their members toconstantly focus on quality improvements in the production process. All employees have aretrained 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, theemployees work as project teams. Toyota introduced a flat structure in the organisation thatallowed for open communications in the organisation and facilitated experiments andlearning. The Kaizen empowers the employees and seeks new methods of work. Thecompany emphasises on high product quality and customer services to gain a competitiveedge in the automobile market. The Kaizen work culture is egalitarian and allows for theinvolvement of employees and management in the production process. Such a managementstyle made Toyota highly productive and the consensual decision making made thecompany 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 marketin Japan. The lean philosophy incorporated the JIT production system and the Kanbanmethod of pull production. Toyota also introduced the concept of respect for employeesand 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 manufacturingreduces human effort by 50% along with the manufacturing space, tool inventory andimproved financial performance. This manufacturing system also includes lean logistics thatis the ability to administer systems to control the movement of materials, work in processand finished inventories at the lowest cost. To ensure long term competitiveness amanufacturing firm has to develop capabilities of JIT production and delivery. The suppliershave to be able to respond to the increasing needs of the customers. The lean productionsystem requires rapid flows of information along the value chain. Toyota uses the Kanbansystem to achieve this along with computerised information that can be exchanged with thesuppliers to reduce lead times (Wu, 2003).
  13. 13. 10Taciichi Ohno the head of Toyota crated the Toyota Production System (TPS) thatinfluenced the production philosophy all over the world. The TPS is a holistic productionsystem that has standardised procedures in the company. This system enhances thecompany’s productivity and labour flexibility allowing the company to efficiently producevarious types of vehicles. This production philosophy emphasises on quality management asthe lean production system is based on assembly design, work organisation and low costautomation based on an incremental improvement approach. The automation in thisproduction system is in line complies with the continuous improvement paradigm thatconstantly identities and eliminates any problems in the production process. Toyota hasdeployed the “Semi Automation” Jidoka that maintains a balance between the machinesand humans. This is more economical and makes the production process, more flexible. Thelean approach for automation includes low cost equipment and tools that are reused fornew models (Muffatto 1999).6.0 Supply Chain ManagementThe supply chain management (SCM) is a key strategic factor for enhancingorganisational effectiveness and achieving organisational goals. With the globalisation of themarkets and increase in outsourcing companies use supply chain and logistics techniques tomanage their operations. The contemporary market place is characterised by increasedcompetition and prevalence of technology. These changes have led to profound changes fororganisations and firms must be able to respond to changing customer needs whilebecoming lean at the same time. With this increased globalisation and customer orientationorganisations are more logistics sensitive. Supply chain is a system that is made up ofmaterial supplier’s production facilities, distribution services and customers that are linkedtogether through flow of materials and feedback flow of information (Gunasekara et al,2001).Toyota’s success globally can be attributed to the company philosophy ofcontinuously reducing costs through waste elimination. Toyota developed the Pull Systems
  14. 14. 11and created the Just in Time techniques that made the Toyota Production System morefunctional and efficient. Toyota pioneered the value added concept through the lean supplychain. 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 ofthe company. During the 1970s the company developed a second tier of suppliers throughkyoryoku Kai which is a supplier association. During the 1980s and 1990s Toyota spread itschain of overseas part suppliers and distribution system (Jones et al, 1997). The TPS isvertically integrated the main car parts are purchased from the first tier supplier whoacquire them from smaller suppliers from the second tier of suppliers. The company createssubcontracting agreements with one supplier for a long term period to ensure quality,reliability and meeting the delivery standards. Such arrangements allowed Toyota to exertinfluence the suppliers and reduce costs (Winfield, 1994). Toyota has created a distinctcompetitive advantage on its supplier networks allowing the company to add value to itsproducts. 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 lowertier component suppliers. Toyota effectively integrated its suppliers based on its hoshinkanri policy (Hines & Rich 1998).Toyota’s supply chain management approach focuses mainly on resources that wereof critical importance. Toyota created a Keiretsu structure comprising of the dependentsuppliers that worked in close proximity to the Toyota factories. The company outsourcedaspects that were not critical to the ability of maximising the shareholder value. Toyota wasable to create such a supply chain because the supplier was relatively dependent on them inhighly contested markets. Toyota created an assembly based systems that was demand pulland JIT based, it had dominant power relationships with the suppliers. This allowed thecompany to be innovative and create a customised supply chain. Toyota also implementseffective controls over quality, cost and innovation. This allowed the company to maximisethe customer value. The lean production system at the company focused on the highestlevel of quality to the customers. Toyota’s lean approach has both strategic and operational
  15. 15. 12practice; the company operates a contested supply chain and market place. For Toyota tobe profitable it has to achieve sustained business success by operating on low margins andsatisfying customer needs. The supply chain at Toyota can be described as entrepreneurial(Cox 1999).7.0 ConclusionThe competition in the automobile industry and the resource scarcity lead to Toyotacreating a lean manufacturing system that was flexible and highly efficient. Thismanufacturing system leads to cost reductions and makes a company more flexible. The Justin tome approach in the Toyota production systems allows the company to be moreefficient and responsive to the marketing demand. Toyota’s production system is demandresponsive and customer centric which a major source of competitive advantage is for thecompany. The production process at Toyota also emphasises on quality and employeeempowerment. The low inventory and continuous production system has allowed Toyota toproduce high quality vehicles with minimum defects and lowered costs. The Kanban systemat the company is used to provide complete information for the required raw materials. Thissystem also monitors the quality of all products. To implement lean manufacturing acompany must create an empowered workforce that has the right competencies to ensurehigh quality production.The basic aim of the TPS is to shorten the time taken to convert customer orders intovehicle deliveries. To achieve the sequences from order to delivery in a single continuousflow along with shortening the sequence to make the production process more smooth. Thishas created a high level of productivity, better quality and a reduction in wastages. Thismakes the Toyota automobiles more cost effective. . The TPS is a standard managementapproach in supply chain that effectively provides the customers with products in a timeliermanner. The lean manufacturing philosophy seeks to eliminate waste, eliminate defects andreduce lead times. Toyota has created a culture of efficiency and problem solving. This hasallowed the company to innovate its product and maintain high quality through continuousimprovement.
  16. 16. 13The production system that Toyota has created uses less materials human effort,manufacturing space and tools than the mass production systems. This production systemhas decreased the use of inventory and created a system of zero defects and led to theproduction of high quality automobiles. The production at the company maintains acontinuous flow of products allowing the company to adapt to the market needs anddemand patterns. The Toyota production philosophy has evolved from the experiences atToyota factories which is why it can be implemented at any location in the world. Theproduction system has made Toyota highly efficient and profitable.The JIT systems ensure achieving fault free parts and each production process shouldhave the right part in the right quantity at the right time. The scheduling of materials is animportant principle of just in time. The aim of the Toyota production systems is to providethe customers with highest quality products at the lowest possible cost. The productionconcepts incorporate quality at each production stage. The Just in Time approach seeks toget the right information about the market demand and the production is adapted to thedemand. The JIT systems leads to efficient inventory systems and only the requiredquantities are procured in the production systems. The Kanban systems enable the workingof the JIT system by providing the information about the raw materials and keep a check onquality. To ensure that the JIT system works, Toyota has implemented systems to motivateemployees and empower them. The Toyota production system is very efficient that hasmade Toyota a competitive and profitable company.Since the 1950s Toyota created the concept of continuous material flow, processstandardization and a pull system that is market responsive. It took the company decades torefine the concepts such as JIT and make the production system more functional. The TPS ischaracterised by cross organisational planning and long term objectives. This productionsystem relies on technology and the integration of all manufacturing activities. The focus onmeeting customer needs made the TPS highly successful the creation of the JIT philosophyallowed the company to eliminate wastages and inventory to make the company moreprofitable. Toyota’s supplier network and supply chain is another source of the company’scompetitive advantage. The company has created a close network of suppliers which are allintegrated with the Toyota Company.
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