Toyota Motor Manufacturing: An In-Depth Insight of Operations

Topics: Toyota, Toyota Camry, Toyota Production System Pages: 31 (7492 words) Published: September 18, 2015
Harvard Business School

9-693-019
Rev. September 5, 1995

Toyota Motor Manufacturing, U.S.A., Inc.
On the Friday before the running of the 118th Kentucky Derby, Doug Friesen, manager of assembly for Toyota’s Georgetown, Kentucky, Plant, was approaching the final assembly lines, where shiny Camrys took shape. He heard a cheer go up. Team members on the lines were waving their hand tools towards a signboard that read “no overtime for the shift.” Smiling broadly, Friesen agreed: everyone in the plant surely deserved a relaxed Derby weekend. The plant had been hectic lately, as it was both supplying brisk sales of the all-new Camry sedan and ramping up station wagon versions for the European as well as North American markets. Overtime also had been necessary early in the week to make up lost production because the line utilization rate was below the projected target. In addition to these immediate problems, a growing number of cars were sitting off the line with defective seats or with no seats at all. The seat problem had been the subject of an urgent meeting called by Mike DaPrile, general manager of the assembly plant, that morning, May 1, 1992. At the meeting, Friesen learned of the situation firsthand from key people in both the plant and the seat supplier. He then spent the afternoon on the shop floor to learn more about the problem while the issues discussed were fresh in his mind. By the end of the day, it became clear to Friesen that the seat problem needed solving once and for all; the trouble was that trying to do so could hurt line utilization. This was not the first tough question Toyota’s famous production system had encountered, nor would it be the last. But this seat problem was especially delicate and undoubtedly would demand Friesen’s attention in the following week.

Background
In the early 1980s, Japanese auto makers contemplated building cars in North America. Japan’s huge trade imbalance had caused political pressure to mount, while the economic feasibility of such investment had improved with a rapidly rising yen. At that time, however, it was unclear whether cars produced outside Japan could live up to their hard-earned reputation of high quality at low cost. This issue was far from settled in 1985 when Toyota Motor Corporation (TMC) unveiled its plan to open an $800 million greenfield plant in Kentucky. (See Exhibit 1.) Thus, the company’s endeavor to transplant its unique production system to Bluegrass Country effectively became a live experiment for the world to watch.

Professor Kazuhiro Mishina prepared this case with the assistance of Kazunori Takeda, MBA ’93, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1992 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

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Toyota Motor Manufacturing, U.S.A., Inc.

In July 1988, Toyota Motor Manufacturing, U.S.A. (TMM) began volume production on a 1,300 acre site in Georgetown, near Lexington. The plant had an annual capacity of 200,000 Toyota Camry sedans, which would replace the bulk of Japanese imports of the same model. In 1992, TMM was expected to supply 240,000 of the all-new Camrys, whose sales were up by more than 20% since the model change in fall 1991. The new Camry joined the ranks of midsize family sedans, which constituted one-third of the total American car market and returned an average 17% pretax profit margin1 on a sticker price averaging $18,500. For the first time, in March 1992, TMM started producing wagon versions of...
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