Toyota Operations Improvement Plan

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About Toyota
For more than 50 years, Toyota Motor Corporation has been one of the world’s leading manufacturers of motor vehicles in the United States. It was born a Japanese company in 1935 and came to America in 1957. Now headquartered in Toyota City, Japan, it employs more than 300 thousand employees globally (Toyota Motor Corporation Company Profile, 2012). In addition Toyota is a global marketing organization. It strategically operates primarily through Japan, Asia, Europe, and North America; but its vehicles are sold in more than 170 countries and regions across the globe (Toyota Motor Corporation Company Profile, 2012). The Toyota brand is traditionally defined by brand attributes such as global leadership, innovation, durability, reliability, and sustainability. It represents an industry leading product line of several models including the 1955 flop Toyopet, the 1965 comeback Corona, the Corolla, Toyota trucks, the luxury Lexus, the Avalon, Solara, Scion, and the world’s first hybrid the Prius. Toyota’s Rise to Number Two

As Toyota established itself in the US automotive industry, other players watched in admiration as Toyota plants around the world boasted consistent production of higher quality cars, fewer worker-hours, lower inventory, and fewer defects than any other competitor (Duvall, 2008). Many credited Toyota’s continued success and its ability to roll a new Camry, Avalon, or Solara off of the assembly line every 55 seconds to its application of its core competency, the Toyota Production System (TPS) (Duvall, 2008). Among the various characteristics of this system that made it a success were concepts such as just in time production, real time defect monitoring and correction, waste reduction, and other process knowledge that offered Toyota a sustainable competitive advantage. Toyota’s unrelenting approach in manufacturing was eventually recognized simply as “The Toyota Way”.

Losing its Way
As leadership within Toyota changed over the years, so did its priorities. In 1999, Fujio Cho imposed a cost cutting campaign designed to reduce cost by 50% (Greto et al., 2010). In 2002, Global Vision 2010 focused all efforts toward increasing global market share by 15% (Greto et al., 2010). In 2005, Katsuabi Watanabe launched his Value Innovation Strategy which targeted further cost reductions (Greto et al., 2010). Amidst all of these competing priorities, the Toyota Way became cloudy and was lost. As early as 2006, the National Highway Traffic Safety Administration began an investigation into customer claims that ultimately resulted in 8.8 million recalls worldwide (Greto et al., 2010). This seemingly endless period of recalls was one of the most devastating crises that Toyota had ever experienced.

Indications of Toyota’s faltering quality were visible as early as 1999. Referred to as the oil-sludge crisis, roughly 3.3 million vehicles were cited as having engine failure which was said to be caused by oil jelling to the point where it clogged internal oil passages (Greto et al., 2010). Despite the fact that the sheer quantity of vehicles impacted indicated a massive quality failure, Toyota refused to cover the repairs and denied warranty claims and in addition to sticking customers with an $8,000 repair bill, they blamed customers for not properly maintaining their vehicles (Greto et al., 2010). Eventually, in 2002 after receiving nearly 3,400 warranty claims and impact to at least 7.5 million customers, Toyota agreed to cover the cost of the repairs.

Over the next few years, Toyota customers began to report “surging”, “sticky accelerators”, or “faulty accelerator pedals”. Toyota’s reputation of quality depreciated rapidly as the death of an off duty highway patrol officer and his family due to a sticky accelerator made news headlines (Greto et al., 2010). Contrary to the fifth principle of the Toyota Way which requires stopping to fix a defect as soon as the defect is reported,...
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