Toyota - Success and Downfall

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There were several advantages of Toyota’s manufacturing system when compared with conventional manufacturing system. Ohno Taiichi was the person responsible in helping Toyota shift from the established method of manufacturing automobiles set by Ford. The basic philosophy was to produce everything in mass quantity to gain maximum economies of scale. The logic was to spread the fixed cost over the production line and benefit from lower cost. Another characteristic of this philosophy was to make each worker perform a single task only. This premise was supported by the fact that if one worker performs the same task over and over again then eventually he or she would get faster in doing so. Ohno Taiichi was able to identify several flaws in this philosophy. Firstly, mass production of same item meant that what was not used had to be stored in warehouses. This resulted in high storage cost. At the same time it tied up inventory in unproductive uses. Secondly, if anything goes wrong in initial machine setting, that would mean massive production of defective parts. Thirdly, if each worker is assigned to do only one task then that resulted in quality mismanagement. Fourthly, this philosophy created the problem of employing specialist at extreme ends of division of labor. There were many tasks that could have been performed by one person. Lastly, mass production system created hindrances in making customizable products. Ohno, came up with a new approach for Toyota’s manufacturing system. This approach had several advantages. First of all, the emphasis was to create everything in small batches. This was done by reducing the time needed to set up the machine for stamping out body parts. Engineers were involved in experiments that helped to speed up the time it took to change the dies in stamping equipment. The company moved away from traditional approach of making each person do one task. Instead they made people work in teams. This not only encouraged innovation but at the same time helped in solving a problem faster and with efficiency. Another advantage of this approach was to decentralize responsibility for coordinating the manufacturing process to lower level employees. This helped in getting rid of extensive centralized management to coordinate parts between various stages of production . Hence, in a nutshell, the Toyota’s manufacturing system made small production runs economical, minimized work in progress by increasing inventory turnover, speeded up the process of identifying defects items before too many defective parts were made. In contrast to U.S., Toyota decided to contract out most components it needed while minimizing in house capacity for essential subassemblies and bodies. The reason for shifting from traditional American way of supplier relations had a lot to do with finding ways to expand at lower costs. The consequence of such action was the fact that it helped Toyota avoid large capital expenditures needed to expand capacity for manufacturing a wide variety of components. At the same time, contracting out its certain operations helped company further lower costs by taking advantage of lower wages in smaller firms. Instead of focusing on competitive bidding followed by U.S. to get a lower price, Toyota decided focusing on having long term relationships with major suppliers. This helped them achieve quality and at the same time lower inventory holding cost. Moreover, Toyota focused on bringing suppliers in to design making process because Ohno strongly believed that this would encourage idea sharing to improve manufacturing experience. Toyota also provided its suppliers management expertise, engineering expertise, and at times capital to finance new investments. Toyota also gave incentives to its suppliers in order to encourage them to continuously improve their processes. One of the things that Toyota did was to put together a plan of profit sharing with its suppliers. This was to encourage cost...
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