Executive summary

Objective of this report is to use Toyota as the case company and to critically examine three
relevant operation management decision areas such as quality, supply chain management and
maintenance-reliability. Also it will further compare and contrast Toyota with BMW using the 4
V configuration (Volume, Variety, Variation and Visibility). Finally report will highlight the ways
to improve operational performance within Toyota.

This will be achieved using tools learned from operations and project management such as ten
decision areas of operations strategy, 4V configurations and associated challenges and five
performance objectives. However all arguments and predictions will be supported with
recommended journal articles. Discussion will highlight how Toyota achieved its current global
leadership in operations under key areas specified earlier. Overall evaluation revealed that until
2009 they were progressed as quality leader and then with critical quality failure due to
“sticking accelerator pedals”, Toyota have encountered massive cost of failure impacting the
growth and brand reputation negatively. Therefore Toyota may need to slow down their
growth rate and really focus on quality to regain their global operations leadership.

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Contents

Executive summary.....................................................................................................................................1
1. Introduction.........................................................................................................................................3
2. Analysis - Operations management decision areas.............................................................................4
3. Analysis – Comparison on 4V configuration........................................................................................9
4. Analysis operational performance.....................................................................................................11
5. Conclusion.........................................................................................................................................12
List of references.......................................................................................................................................14

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1. Introduction
Global operations management become a key aspect in operations management, where
manufacturing organisation who operates in many countries need to know how to produce and
deliver goods and services considering respective global constraints and opportunities. As per
Hayes and Wheelwright (1985, cited in Slack et al., 2015) organization in global operations need
to uplift their operations strategy minimum to a supporting role than a just implementer. It
reflects in the third stage as illustrated in the figure 01, where it called “internally supportive”
stage, hence the best in the industry. However in order to excel, they must have set of order
winners that are developed from operations strategic areas ( Hill and Hill, 2018; Slack et al.,
2015).

Figure 01: Four stage strategic role model

Source: Hayes and Wheelwright (1985, cited in Slack et al., 2015)

Interesting phase or rather zenith of the operations excellence in global operations

management could be seen as externally supportive phase, when an organization uses
operations as driving strategy of the company hence redefines the industry norms and
expectations. Accordingly Apple, Dell, Microsoft, Amazon, DHL, Toyota, BAT, Unilever, GSK and
many other global companies were able to redefine the industry expectations in multifarious

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ways. Out of those companies, this report will use Toyota as the case company and attempts to;
1) Critically examine three relevant Operation Management decision areas; 2) Compare and
contrast Toyota with BMW using the 4 V configuration and 3) Examine the ways to improve
operational performance within Toyota.

2. Analysis - Operations management decision areas

Many researchers argue different areas of operation strategy and as per Hill and Hill (2018) it
was focused in delivery systems and infrastructure. Conversely Slack et al. (2015) highlighted
product and process design, supply network, capacity design, quality management, supply
chain management, capacity management, improvement, project management and risk
management under the key four areas of design, direct, deliver and develop. However as per
the assignment guideline, this report will focus quality management, supply chain management
and maintenance as key strategic areas under the ten areas specified by Heizer, Render and
Munson (2017).

As Hopp and Spearman (2011) explained, when USA manufacturing companies work on
streamlining the material requirement planning through push planning framework, Toyota
exploited the pull planning framework in order to reduce cycle time. Toyota identified quality at
affordable price as their order winner at the beginning and found longer the cycle time will
increase the cost of production (Hill and Hill, 2018). As per the Little’s law, cycle time can’t see
but the work in progress. So if they could reduce working progress, cycle time will reduce (Hopp
& Spearman, 2011; Slack et al., 2015). Principally they have identified that total throughput
time is impacted by variability, utilization and cycle time. However Jasti and Kodali,(2015) argue
that introduction of Toyota production system was the strategy they adopted considering the
total quality management, total productive maintenance and lean supply chain with just in time
principles aiming the reduction of cycle time, so they could deliver on demand.

Quality management of Toyota therefore considered as one of the key strategic areas of them.

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Their focus was to establish error proofing methods so production line will not proceed till the
quality problem is solved. Andon, visual control, Poka-Yoke, 5S, why-why analysis, statistical
process control and related charts, Pareto diagram were some of the TQM tools they have used
(Teeravaraprug, Kitiwanwong and SaeTong, 2011) in operations. It was further stated that
whenever there is a quality problem, they go to the place where it produced, so called GEMBA
walk. “Go and see, ask why and respect people” was the leadership attitude of Toyota (Yang &
Yang, 2012) to ensure that total quality is responsibility of all employees. This is however in line
with the European foundation of quality framework illustrated in Slack et al. (2015). Figure 2
shows the importance of leadership in quality management.

Figure 02: EFQM framework

Source: Slack et al., (2015)

The approach of effective management of quality will help organisation to improve its speed,
flexibility, dependability and finally reduce overall cost as per the sand-cone theory of quality
(Slack et al., 2015). Hopp and Spearman (2011) proved that, Toyota to achieve their lean supply
chain objectives, they had to involve extensively to reduce their defect rate. Defect is one of the
seven wastes they pronounced all times. Quality principles of JIT and Lean adopted by Toyota
was highlighted as process control, easy to see quality, insistence on compliance, line stop if

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quality fails, correcting one’s own errors, first off and last of inspection and continual
improvement (Schonberger, 1982; cited in Hopp and Spearman, 2011). However there are
many incidents that Toyota also failed to achieve its desired quality (Quelch, 2011). That will be
discussed in the later part of the analysis. Nevertheless author then evaluates the supply chain
management (SCM) as another key strategic area in operations management of Toyota. Heizer,
Render and Munson (2017) defined SCM as an effective coordination of all activities in the
supply chain starting with the raw material to satisfied customer who receive the product or
service offering. Since Toyota into automobile and it is in line with the mass process with
automation and produce relatively low varieties with high volumes, it was able to use lean
supply chain management principles. Jasti & Kodali (2015) stated that lean SCM (LSCM) also
will have main focus as same as typical lean principles such as to identify waste in the process
including materials, information and funds. However Slack et al. (2015) stated that organization
they operates with the market where relatively low in demand, high volume and low variety
could use LSCM. One of the key challenges in supply chain is to manage bullwhip effect, where
it is caused by when members of SCM overreacted to the rapid changes in demand (Heizer,
Render and Munson,2017).

Klug (2011) argues that lean principles of Toyota supply chain with its synchronized material
flow created harmonized material flow, hence parts move in a coordinated fashion. However
Slack et al (2015) argue that in order to reduce bullwhip effect, organization must have
integrated information system, all channels to be linked and operational efficiency to be high so
no buffer is needed. It is evident that when western focuses to set the supply chain more visible
in order to manage bullwhip, Toyota uses pull, JIT and Lean approaches to manage it. In
addition to that Toyota supply chain is highly connected with complex supply network
worldwide, therefore as per Heizer, Render and Munson (2017) this company uses highly
vertically integrated supply chain and figure 03 shows the complexity of supply network of
Toyota.

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Figure 03: Supply network of Toyota
Source: Kito at al. (2014)

However synchronized flow of materials become a key to have lean supply chain in Toyota, they
were compel to focus on continuous maintenance of their machinery because they do not keep
inventory. Reduction of overall inventory of supply chain in Toyota enforced to run the
machines with zero breakdown. In order to achieve zero breakdown they had to invent new
rules of machine maintenance (Hopp and Spearman, 2011). That is known as total productive
maintenance (TPM). Maintenance and reliability is another strategic operations area author
intends to evaluate under Toyota’s context. Heizer, Render and Munson (2017) stated that it is
strategically important because it is aimed to sustain the capability of system that deliver goods
and services to customers uninterruptedly. System breakdown is wasteful, costly and resulted
in poor service level. Hopp and Spearman (2011) explained mathematical overview of TPM
using mean time between failure (MTBF) and mean time to repair (MTTR) so Toyota was able to
zero unexpected stoppages due to its rigorous approach of TPM, hence availability of their
machine and assembly lines are more than 99%. As per Slack et al (2015) availability is a
fraction of MTBF and the sum of MTBF and MTTR (A= MTBF/(MTBF+MTTR)). When machine
availability increases it will increase the reliability of the system. Teeravaraprug, Kitiwanwong,
and SaeTong (2011) explained that Toyota has established TPM way back in 1971 started in one
of their partner companies called “Nippon Denso Company” and primarily aimed at maximizing

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overall equipment effectiveness throughout their entire life through the employee participation
as well as motivation. Japanese Institute of Plant Maintenance developed well-known eight
pillars of TPM that is implemented in Toyota. These pillars are stated in Figure 4.

Figure 04: Eight pillars of TPM

Source: Dawood and Sahib (2017)

Light of evidence suggests that however, Toyota become an externally supportive global
operation company by redefining the industry norms in quality, inventory, cycle time and
reliability. TQM, JIT and TPM were predominantly used by Toyota in order achieve their
operational excellence in quality, supply chain and maintenance strategic areas respectively.
Similarities of all three strategies are illustrated in figure 05.

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Figure 05: Integration of quality, supply chain and maintenance strategies
Source: Teeravaraprug, Kitiwanwong, and SaeTong (2011)

3. Analysis – Comparison on 4V configuration

One of the key principles of the operation and process management is that “The way in which
processes need to be managed influenced by volume, variety, variation and visibility” (Slack et
al., 2015). Hill and Hill (2018) called variety as “range of products” and increase of range will
have impact on complexity of the process. Therefore there is a tradeoff between two setoff 4V
of volume-variety so called high volume-low variety (HVLV) and low volume –high variety
(LVHV). By analyzing the volume figures illustrated in figure 05, Toyota belongs to HVLV and one
of the competitor chosen in this report, BMW should belongs to LVHV.

As per Toyota-global.com, (2020), Toyota manufactures significant number of vehicles such as

approximately 8,736, 500 units based on 2012 production. Based on the principle, such high
output need to be manufactured using mass process compared to batching and jobbing. It is
not continuous process because cars are discreet units (Hill and Hill, 2018; Hope and Spearman,
2011). Evaluating Toyota moving assembly line it is evident that they have used significant level
or automation processes in their operations hence, as per Slack et al., (2015) operators’ duties
are narrowly focused, defined and manage through standard operating procedures. They could
use highly standardized approach. However their lean principles supported to have near zero

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changeover time in the assembly line so they could produce mix models so some level of
varieties could be managed without time losses. This highlights Toyotas’ capability of certain
level of flexibility, compared to “any color-but black” concept of Henry Ford (Hopp and
Spearman, 2011). Compared to Toyota, BMW has relatively low volume, conversely produced
over two million cars in 2018/19 (annualreport.bmwgroup.com; 2019). This could be stated as
moderated volumes. When comes to variety and related flexibility BMW shows capability on
customization using material, process and product technologies in line with digitalization.
Therefore BMW has relatively high varieties than Toyota (bmw.com). Volume comparison is
illustrated in figure 06.

Figure 06: Global car market share

Source: Statistica.com

Having HVLV configuration, Toyota will have relatively predictable level of demand fluctuations
as per the principles of 4V configuration (Slack et l, 2015). Hence the variation in demand is
relatively low. This was the reason that Toyota could apply lean principles. However even they
boast about pull capability, it was evident that Toyota also carryout push planning system in
engine manufacturing as well as defining the TAKT time with annual forecast (Hopp and
Spearman, 2011). In BMW, since they are in customized car manufacturing, that particular

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segment will have high variation demand however their standard product will have same
variation in demand just like Toyota. There is no evidence to prove this scenario however as per
the 4V configuration principle, both will have some processed in the push planning hence
variation in demand could be managed through push-pull interface in supply chain (Slack et
al.,2015).

Considering the visibility dimension, Toyota has relatively low visibility to customer due to its
careful scheduling of mix models. However they encourage students and professional
associations to visit and see their assembly line but not the designing, planning and control
units. BMW’s new approach of customization process however has encouraged customer to a
greater visibility than Toyota. As Slack et al. (2015) admitted, there is no single manufacturer in
this world who has given 100% visibility to its customers. It is a faction of their processes that
they could open customer to experience. In that context BMW has relatively high visibility than
Toyota.

4. Analysis operational performance

Started with quality as the dominating performance objective with the affordable price range,
Toyota was able to attract massive portion of market share in global operations. Conversely in
2003, Toyota‘s rapid growth strategy might have compromised the quality. According to Quelch
(2011), Toyota ’ s this exponential growth put some tensions on product design, engineering as
well as manufacturing that resulted in succession of quality defects and recalls in many recalls
in 2003. It was recorded that 3.9 million vehicles in the USA in year 2009 were recalled
“because of uncontrollable acceleration ascribed to floor mat problems leading to sticking
accelerator pedals” a fatal incidents. This serious nature the defect of Toyota cars grabbed
massive national attention in early 2010. That has resulted of recalling additional 2.3 million
vehicles due to “sticking accelerator pedals”.

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Having established its status as global leader in operations excellence in automotive industry,
nonetheless Toyota production system fell to a “deep crisis when it came under increased
stress from the rapid growth and globalization of the company” (Ciravegna, 2012). The rate of
individual as well as organizational capability development over time was not consistent with
the new set of problems posed by latest scale of the organization and with its global operations
structure. However its cycle time, line efficiency, cost leadership and human capability still
better than competitors (Camuffo and Weber 2012). They further stated that In supply chain
performance, Toyota is the most “vertically integrated manufacturer” in the global operations
compared to others and still Toyota maintains machining and assembly lines internally however
rest of all automotive manufacturers have outsourced them permanently. On the other hand
recent studies of Henke et al. (2008) show that Toyota was able to manages its strong supply
relationships more efficiently and effectively than other competitors. This was due to the ability
to reduce operational costs, quality improvements and involvement the suppliers in concurrent
engineering in design stage. Light of evidence suggests that when compared to generic
performance objectives explained by Slack et al. (2015), Toyota to regain its brand value, they
have to introduce new methods of quality management in relation to the global operations and
rapid growth while sustaining in dependability, speed, flexibility and cost.

5. Conclusion

Key purpose of this report was to critically evaluate Toyota’s global operations management
capabilities under the scope of key operations strategic areas, 4V and its comparative focus
against BMW and improvements opportunities in performance. It was observed that Toyota
gained the externally supportive status and redefined the industry norms with its unique
production system called Toyota production system that encompasses JIT, Lean, TPM and TQM
approaches. Toyota’s main objectives of implementing JIT, TQM, and TPM, highlighted
similarities such as reduction of cost and improvement of quality. However through JIT and
Lean they have achieved lean supply chain performance, while TQM aimed to improve quality
and finally TPM focused to gain reliability of the machines and processes through best ever
preventive maintenance system. Toyota on the other hand operates in high volume, low

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variety, low variation in demand and low visibility compared to BMW. However both have their
own competitiveness and are in the efficient frontier based on the market they have chosen.
Latter part of the study raveled that, rapid and exponential growth of the Toyota might have
compromised its key order winner, Quality and it had negative impact on expected revenue
growth as well as cost efficiency due to massive recalls. In order to remain in the “global
leadership” status, Toyota need to reset “Quality” as number one priority.

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