Toyota Motors Manufacturing Usa Inc

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Figure 2: Style and color transitions

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Management problem

The run ratio has decreased from 95% to 85% which translates to the loss of production amounting to 45 cars per shift. This was critical as this would mean direct loss of sales and increase in cost as overtime was required to complete the production. Considering that the cost of rectification was USD 16,000 per shift, then it can impact the profitability by approx. USD 8.32 million per annum (16,000*2(shifts)*5(days a week)*52( weeks)).

The problem was identified in the car seats where the seat sets were not matching with the particular car where it needed to be installed. In addition, there were also defects in the seat sets which arrived directly from Kentucky Framed Seats (KFS).

In case of faulty parts the replacements are ordered. Lately these replacements are not arriving on time which hampers JIT production and rectification needs to be done off the production line. This is not in line with TPS strategy.

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Addressing the problem

Doug Friesen set the course to rectify on the right foot by visiting the production lines and the areas where rectifications were being made. Interviews were conducted of the workers operating on the production line which revealed certain insights; the problem lied with the faulty seats received and delays in the replacement.

The problems with seats is directly linked with KFS therefore it will require working closely with the supplier. Since, KFS is the only supplier in North America which can cater the needs of TMM therefore, this issue needs to be handled delicately and supplier needs to be on board to come to a conclusion. Working closely with suppliers is vital as we have seen in McDonald’s case as well.

It is also important to work closely with the production team as they are the ones who are directly involved in the process, any change in the process will directly have an impact on them. They need to take ownership of the decisions and implement effectively.

In anyway, it needs to be ensured that the core strength of TMC which is cost and quality is never compromised and every decision should be based considering this fact; the operations strategy should be in line with the corporate strategy.

It also needs to be analyzed that the problem started with the introduction of 36 new variants, making all together 42 variants in the seats. Prior to this there were almost no problems encountered in the production line. Maybe, the variation in car seats can be discussed with the design or sales team to reduce the number of variants and focus on few. This is similar to the concept of ‘Focus factory’ where efforts are focused towards producing few products which are best suited for company’s financial health. This was learned in the case of American Connector.

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Available options

Situation faced by Friesen require solutions which will bring the production line back to its operated usual capacity and also serve as a permanent solution to the problem. The options which Friesen has are as follows:

- While interviewing the staff, it was also noted that the blame is bluntly put on KFS whereas no procedure was carried out to answer the ‘five whys’. This practice needs to be carried out to reach to the root cause of the problem and rectify it. This is also part of the quality management concept ‘Kaizen’ which is practiced under TPS.

- TPS team from TMM should extend their expertise to KFS to help them to design their supply chain to cater the needs of TMM. The practice of training suppliers has been a practice at TMM with the aim of helping the suppliers to reduce their manufacturing cost and therefore supply cheaper goods. The synchronization of KFS production and supply of goods and TMM will being about synergy in the process and may eliminate the errors.

- Appoint Quality Control check at the arrival of goods, this will ensure that only goods of the required quality and specifications enter the premises of TMM. By placing Quality Control at the arrival of goods, is an efficient way of handling defective raw material as cost of handling defective raw material is eliminated and replacement can be received earlier. This practice was also done by McDonalds as learned in its case.

- In short-term, a buffer stock may be maintained of the seats so that the production of the car is done on time. Although, this will be a violation of JIT, however as the circumstances demand, ensuring smooth flow is of importance too. Currently, there is a car which was parked from 17th April and was waiting for replacement of seats from KFS. As seat problem is resolved, this buffer stock may be eliminated all-together.

- The issue can be discussed with the design, sales and marketing team. It may be argued that the existing number of variations is disrupting the production process and TMM is losing USD 8.3 million approx. per annum due to this. Cost and benefit should be done to determine if reducing the number of variable will reduce any losses and not affect ales at disproportional manner. This might be considered as short-term solution giving enough time to Friesen to find a way to produce existing number of variants in an efficient manner.

- Change the material used in the seats which plugs in the eye of the body from metal to plastic. One of the workers mentioned that the tip of the component was brittle and often tend to break while fixing it in socket. If it is plastic then it lasts longer.

The problem should be addressed immediately, therefore while concluding the solution it is vital to consider both short-term and long-term options.

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Figure 3: Short-term and Long-term options

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Current routine for handling defects – violation of principles of TPS

The production line should operate as per TPS concept which involves JIT and Jidoka. By removing the cars from the production line and waiting for the supplies violates JIT which is one of the principles of TPS.

Furthermore, as the workers are not resolving the problems on the production line or in real-time, but pending it by moving out of the production line, this is in contrast of Jikoda,