Toyota in 2009:
The Origin and Evolution of the World’s Leading Automobile Manufacturer by: Charles Hill
The Toyota Case study by Professor Hill includes several very interesting items for consideration. Among the most notable is the difference between Toyota’s manufacturing processes and those in use by the majority of the automotive industry, including the large automobile manufacturers in the United States.
There are several important items that are integral to Toyota’s manufacturing system, just-in-time inventory, long-term partnership agreements with major suppliers, team-based production, and a focus on identifying issues/defects at as early a point in the process as possible. Each of these components provides an advantage to Toyota over its rivals. When these elements are combined the advantage becomes strategic.
At a conventional assembly facility the inventory on-hand is equal to several days production needs. Having this much inventory requires a large capital investment in both the inventory and in warehouse capacity to hold the inventory. The investment of that capital in inventory also prevents rapid changes in vehicle features without also having the different components on-hand – yet more inventory.
An issue with holding such a large inventory is the introduction of defects. With a small inventory defects are identified very quickly and can be corrected. Identifying defects quickly ensures that minimal capital is wasted through defective components. Having large amounts of inventory complicates the identification of the source of a defect and at what point the defect was first introduced along with the task of isolating assemblies that may have used the defective part. This can cause a very large amount of waste or worse, allow defective products (automobiles) to leave the factory.
By developing a team –based approach Toyota eliminated the need for several levels of intermediate management that did not actually provide
Bibliography: 1: The Machines that Changed the World J.P. Womack, D.T. Jones, and D. Roos New York, Macmillan, 1990 Fig 4.2, p.83 2: Toyota in 2009: The Origin and Evolution of the World’s Leading Automobile Manufacturer by: Professor Charles Hill, Foster School of Business, University of Washington, May 2009 p15-16 3: Oliver Wyman’s Harbour Report, Oliver Wyman, June 2008