Case study on

Presented by:
Paras Chamoli (50092528)
Archit Dhasmana (500089474)
Dhruv Gupta (500092537)
Nancy Agarwal (500097374)
 Background
In the early 1980s, Japanese auto
makers contemplated building cars
in North America
In July 1988, Toyota Motor For the first time, in March 1992,
Manufacturing, U.S.A. (TMM) TMM started producing wagon
began volume production on a versions of the new Camry
1,300 acre site in Georgetown, exclusively within Toyota’s
near Lexington.  worldwide plant network.

early 1980s July 1988 Mar. 1992

1985 1992

in 1985 when Toyota Motor In 1992, TMM was expected to

Corporation (TMC) unveiled its supply 240,000 of the all-new
plan to open an $800 million Camrys, whose sales were up by
greenfield plant in Kentucky.  more than 20% since the model
change in fall 1991. 
 TMM GEORGETOWN PLANT

1987 CAMRY SEDAN 1992 CAMRY SEDAN 1992 CAMRY WAGON

History of Toyota Production System
Founded by : Sakichi Toyoda who grew up in predominantly farming community in late 1800s

Sakichi Toyoda 
About TPS: 
• TPS is an integrated socio-technical system developed by Toyota to efficiently organize
manufacturing and logistics, including the interaction with suppliers and customers, to
minimize cost and waste.
• The philosophy is to work intelligently and eliminate waste so that only minimal inventory is
needed
• The purpose is to identify and reduce three primary obstacles or deviations from optimal
allocation of resources within the system:
The two main principles:
JIT (removing, as much as possible, the inventory used to buffer operations against problem that may arise in
production)
Jidoka (never letting a defect pass to the next station; and freeing people from machines)
Base:
Heijunka  (Leveling out production schedule for both volume and variety) 
Kaizen (Change for better = continuous improvement)
Standardized Work (When manpower, equipment, and materials are used in the most efficient combination
• JIT aims for ideal one-piece flow to make one unit at the rate of customer demand or
takt (German for meter)
• Using smaller buffer means quality defects become immediately visible.
• This will reinforce Jidoka which can halt the production (Andon)
• The production line restarts once workers resolve the problem. 
• Less inventory and the Andon forces urgency among the workers
• To implement TPS principles, Toyota employed a variety
of tools:
• JIT: Keep information flow as close to the physical flow of
parts as possible. Parts thus pulled from downstream based
on actual usage, rather than pushed from upstream based
on planned schedule remote from shop floor. Hence,
creating a flowing production process prerequisite for TPS.
• JIDOKA: Aimed to aid immediate problem detection and
facilitate visual control. Prerequisite of TPS was
standardizing the process and documenting the standard
plainly.
• Toyota’s corporate slogan: “Good thinking, Good
Products” . Toyota instilled “good thinking” in all its
employees through senior management coaching and
internal training programs.
• A typical discussion of a problem would start with “let’s
go and see it” and then coverage on the “Five Whys”
exercise.
Problems:
• Toyotaincreased the seat variety from 12 to more than 30 in
march 1992.
• Defective seats are being produced by TMM.
• For majority of seat defects detected KFS is responsible.
• Run ratio of TMM fell from 95% to 85% by the end of April.
• This caused a shortage of 45 cars per shift.
Sources of deviation:

• They are not using TPS methods for detecting defective seats.
• ANDON sord is being pulled by the employees to signal the defective seats, but they let the production line run with defective seats
in the cars until the clinic.
• The routine goes against the principle of JIDOKA because they don’t fix the issue as it occurs.
• Toyota had TMC’s kaizen experts helping KFS in its startup phase, by installing visual controls, slash work-in-process inventory,
reduce assembly labor content,
• However they are not pursuing the kaizen methodology in their off-line routine that is currently being used to deal with the
defective seats
• TMM spreads out demand for parts as evenly as possible thereby following heijunka policy
• In 1992, this model is difficult to scale across the seat models seats case and makes their work actually harder.
CORE PROBLEM:
• The quality control of the seats is actually outside of
Toyota and at the supplier's side.
• Doug has no direct impact on the production quality
of the seats.
• He has to find a way to ensure the quality of the seats
before they actually leave the KFS factory.
• The philosophy of KFS does not match the one of
Toyota.
• They do not fully follow the jidoka concept.
• TMM allows defective cars to continue on the line
• TMM has to apply TPS properly and be an example
for KFS
• He did not address the issue in a timely manner
• Postponing action is counterintuitive to TPS
• Overtime capacity which costs money
• TMM enforces the Matrjoschka doll model, so
Doug is actually quite separated and does not
have the power to change things outside of his
area
• Hecan be let go quite easily if he does not
manage to fix the seat issues.
• The main problem he is facing it that TMM
does not enforce the TPS concepts properly as
well, so how can they expect their student, KFS,
to do so?
 TACKLING THE PROBLEM:
• What would you do to address the seat problem? Where would you focus your attention and solution efforts?
• “Five Whys” analysis can be done to find the root of the problem:

WHY this is happening? WHY KFS is allowing defective WHY is TMM being so slow to handle
• It is because of Product proliferation. products to reach TMM? cars with seat problems?
• Reduce variability that might be caused by • KFS has poor quality control • KFS is consistently sending the wrong
changes in inputs for new seats or in system which can be seats to TMM.
process parameters addressed by sending a QC
• Implementing a control chart that team to train employees at
distinguishes the source of variability. KFS.

WHY are they sending the wrong seats? WHY is TPS failing?
• Due to manual communication methods. • They are not fixing seats in the production line.
• TMM in sending hand written orders that might not be understood by • Extensive re-education is needed to internalize the
KFS employees. TPS system as a philosophy instead of merely using
• Implement an ERP, enterprise resource planning solution, to manage it as a tool.
communication • Focus on communication & QC.
• Designate a QC team that checks the seats immediately when they
arrive to TMM.
• Reinforce the time limits a vehicle can stay in the overflow parking
area.
Solutions:

Possible options

Retain KFS as its supplier, while

increasing inter-organizational Change or widen the pool of
communication and innovating suppliers that TMM uses to Insource the production seats.
sections of seat production and outsource its seat production.
installation process.
Solution 1:
• A KFS team can be placed at TMM
to help repair the defective seats
on the assembly line.
• ERP systems like SAP, ORACLE etc.
can be implemented in both
factories.
• Streamlining the variety of seats
may not satisfy Toyota’s global
market, especially in EUROPEAN
countries.
Solution 2:
•A multi-vendor policy can be
adopted, that would reduce the
power given to KFS. Vendo
• Marginal cost will be reduced and r2
quality might increase with Vendo Vendo
increased competition. r1 r3
• For logistical convenience the
supplier should be located near TMM
to TMM.
Solution 3:
• TMM can manufacture its
own seats using TPS. It will
be a time consuming and
capital intensive approach,
and a lengthy cost benefit
analysis would have to be
done justify its adoption.
 Recommendation
• TMM should use Solution 1 and retain
KFS as its supplier, while increasing
inter-organizational communication
and innovating sections of seat
production and installation process.
• Their long-term strategy should
however be solution 2 i.e. to modify
their approach to outsourcing by
increasing the number of vendors.
• They have to start following the
concepts within the firm and then
carry it outside to the supplier, which is
always Toyota's strategy for success.