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

Case Study

Operations Management
eMEP10/ePGP03
IIM, Kozhikode
Date: 14-Mar-2011

Information in the case:

In 1985, Toyota Motor Corporation (TMC) unveiled its plan to open an $800 million Greenfield
plant in Kentucky.

In July 1988, Toyota Motor Manufacturing, U.S.A. (TMM) began volume production with annual
plant capacity of 200,000 Toyota Camry sedans replacing 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.
Toyota Production System (TPS)

Toyota had always striven for better cars for more people.

TPS aimed at cost reduction by thoroughly eliminating waste by providing two guiding principles,
identifying what was waste in reality.

First principle: Just-In-Time (JIT) production - Produce only what was needed, only how much was
needed , and only when it was needed. Any deviation from true production needs was
condemned as waste.
Second principle: Principle of jidoka: make any production problems instantly self-evident and
stop producing
whenever problems were detected. In other words, jidoka insisted on building in quality in the
production process and condemned any deviation from value-addition as waste.
To implement the TPS principles, Toyota employed a variety of tools. For JIT production, these
tools were used to keep information flow as close to the physical flow of parts as possible. Parts
were thus pulled from downstream based on actual usage.

Information in the case (Cont.):

To implement the TPS principles, Toyota employed a variety of tools. For JIT production, these
tools were used to keep information flow as close to the physical flow of parts as possible. Parts
were thus pulled from downstream based on actual usage.
The purposes of jidoka tools were to aid immediate problem detection and facilitate visual
control. A typical discussion of a problem would start with lets go see it and then converge on
the Five Whys exercise. This exercise consisted of asking a chain of why questions until the
root cause was identified and countermeasures determined.

Methodical thinking extended beyond solving problems and enabled people to seek kaizen:
change for the better. Kaizen was indispensable in pursuing TPS goals continuously and
indefinitely.

Assembly operations were performed along 353 stations on a conveyor line, over five miles in
length and consisting of several connected line segments: the trim lines, chassis lines, and final
assembly lines.

Every station on the assembly line embodied jidoka and kaizen tools. A standardized work chart
was posted adjacent to each work station on the line, showing the cycle time of that station, the
sequence of work tasks, and the timing to perform them within one cycle.

If the team member was behind at this yellow line or found any other problem, he or she pulled
the andon cord: a rope running along the assembly line over the work area. An andon pull turned
on a flashing light, triggered loud music, and lit up the work stations address number on the
andon board stopping production. This is to avoid waste by stopping production faulty cars.
The planning process reflected JIT principles in two major ways. Heijunka also synchronized the
assembly line with the ultimate sales of the cars. The second JIT principle was reflected in the use
of kanban cards. A kanban card included a part code number, its batch size, its delivery
address, and other related information. The PC department monitored the circulation of

Information in the case (Cont.):

Practice of heijunka: called for evening out (balancing) the total order in the daily production
sequence. The heijunka practice achieved two purposes. Spreading out the demand for parts as
evenly as possible relieved suppliers of a surge of workload and facilitated their JIT production.
Quality Control:
Setting tough quality standards, inspecting every vehicle against those, and following through on
the customers experience with shipped vehicles. Also, provide instant feedback to direct
operations including final assembly.
On the last stretch of the final assembly line, QC checked assembly quality before cars went off
to elaborate shipping inspection, and it returned problematic cars immediately to an off-line
assembly group.
The Seat Problem:
A Camry seat consisted of several pieces: the front left and right assemblies, the rear seat bench
and backrests, and the rear side bolsters.

To QC, on the one hand, it was a safety item because it had to meet rigorous standards for the
cars crash performance.

TMMs sole seat supplier was Kentucky Framed Seat (KFS). just-in-time. KFS manifest specified
the style and color of the seat, and triggered seat production much like a kanban of lot size one.

That TMM and KFS were located near each other was coincidental, though the proximity
benefited both parties in operating the sequential pull system.

The old model Camry seat had three styles and four colors; the 1992 Camry offered only three
seat colors but had five styles. The problem intensified when TMM launched the Camry wagons
and became the sole source of these cars for the first time for Toyota worldwide.

Information in the case (Cont.):

The wagon models destined for North America added eight seat variations immediately, but
producing for the world market added considerably to that number. Wagons destined for Europe
added another 10 variations, and on the horizon was export to Japan and the Middle East, adding
still another 18 seat variations.

The run ratio was down to a meager 85%. It had been around 95% a month before. This 10-point
drop meant a shortfall of 45 cars per shift, which had to be made up with overtime.

The cars with seat problems accumulating off-line reflected TMMs choice for handling occasional
glitches.

In over flow parking area it is found that there were 18 vehicles with various seat problems.
Some of the cars were there since four days, a major surprise because cars were supposed to
leave this area with retrofit seat assemblies within the same or the following shift.

KFS responded with a special delivery of replacements twice a day for faulty seats. However, KFS
sometimes sent the wrong seat assemblies that did not match any of the cars waiting for rework.

For Rear side bolster installation, a hook protruding from the back of that part was to be snapped
into the eye of the body, but the hook sometimes broke off. An engineering change request
had filed several months ago but kept pending as it costs $50,000 to KFS.

Questions to be Answered
Q1: What does it mean to implement JIT and jidoka principles in this situation?

More broadly, whether seat defects are handled correctly on the line?
The off-line assembly routine for handling defective seats deviates from two
guiding principles of TMM JIT and Jikoda.

First, high level of defective car inventory does not apply to Just-In-Time (JIT)
Principle as there were 18 vehicles lying in over-flow parking area waiting for
attention. It is considered a deviation of the true production, which is waste
given Toyota Production system principles.

Second, the current application is against Jikoda principle, which insists on

building quality in the production process and on stopping production
wherever a problem is detected. Also, two strong attitudes created within
organization - stick to the facts and get down to the root cause of the problem
using five whys are ignored. Contrary to these principles, the TMM plant
currently tries to handle defective seats with off-line operations.

Also, the decreased plant run ratios reduced the production and forced over
time to recover the production loss. This may not be continued for long run.

Q2: Is the current routine for handling seat defect cars really a legitimate
exception to TPS, or could it be a dangerous deviation from TPS?

TMM is deviating from the standard assembly line principles of Jikoda in an

attempt to avoid expenses incurred from the stopping of the production line
for seat quality defects. This deviation has contributed to the inability to
identify the root cause of the problem, which has led to decreased run ratios
on the line and an excess of defective automobiles in the overflow lot for
multiple days. This may not be dangerous deviation from TPS, if numbers of
seat defects are reduced. TMM can work with TFS to improve their quality
process to reduce the number of defective seats supplied even though TFS has
100% verification of the seats before delivery.

Also, TMM can think of another supplier for the seat assembly as TFS may not
be capable of handling so many variations of seat assembly for Camry new
model and Camry Wagon models for different regional markets across the
world.

If this problem is not fixed quickly, an increased amount of waste will continue
to be incurred and the customer value will be threatened which can also be
interpreted as dangerous deviation to TPS.
***End**