OPERATIONS MANAGEMENT

CATALINA CARVAJAL | CEYDA ATES | MARTIN MASSIAH | SARA REBORDÃO | YANNIC RENATUS

The CaseDESCRIBE THE MAIN POINTS OF THE CASE.

Toyota During the 1980s, they were widely known for their capability of offering high quality products at low cost.

Toyota Motor Corporation (TMC) expanded production to Kentucky USA

Toyota’s vision of “more cars for more people” resulted in the development of the Toyota Production System (TPS)

TPS enabled the company to offer fair pricing while maintaining high customer satisfaction through eliminating waste from their operations.

Taiichi Ohno, Father of the Toyota Production System

Some Features of TPSAssess production needs and minimize wasteJIT

Integrating quality controlJidoka

Continuous improvements Kaizen

Manual line shutdown featureAndon

Balancing component demandHeijunka

Component production triggerKaban

Problem Toyota increased the seat varieties from 12 to more than 30 in March 1992.

Toyota Motors Manufacturing is facing issues with defective seats.

KFS was responsible for the majority of the detected seat-defects

By the end of April, the run ratio of TMM fell from 95% to only 85%.

This decrease caused a shortage of 45 cars per shift.

Toyota Motors Manufacturing, Kentucky

Doug’s DilemmaAS DOUG FRIESEN, WHAT WOULD YOU DO TO ADDRESS THE SEAT PROBLEM? WHERE WOULD YOU FOCUS YOUR ATTENTION AND SOLUTION EFFORTS?

Addressing the Problem He can implement the “five whys” find the root of the problem

Why this is happening- Product proliferation Reduce variability that might be caused by changes in inputs for the new seats or in process parameters.

Implementing a control chart that distinguishes the source of variability.

Addressing the Problem Why KFS is allowing defective products to reach TMM?

◦ They have a poor quality control system that can be addressed by sending a QC team to train employees at KFS.

Why is TMM being so slow to handle cars with seat problems?◦ KFS is consistently sending the wrong seats to TMM

Why are they sending the wrong seats? ◦ Due to manual communication methods, TMM in sending hand written orders that

might not be understood by KFS employees

Addressing the Problem Implement an ERP, enterprise resource planning solution, to manage communication

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.

Addressing the Problem Why is TPS failing?

◦ They are not fixing the seats in the production line

Extensive re-education is needed to internalize the TPS system as a philosophy instead of using it only as just a tool.

Focus on communication and quality control

SolutionsWHAT OPTIONS EXIST? WHAT WOULD YOU RECOMMEND? WHY?

Possible Options1. Retain KFS as its supplier, while increasing

inter-organizational communication and innovating sections of the seat production and installation process.

2. Change or widen the pool of suppliers that TMM uses to outsource its seat production.

3. Insource the production of the seats.

Solution 1 Placement of a permanent KFS team at TMM to repair the defective seats on the assembly line

Implementation of an ERP in both factories Streamlining the variety of seats may not satisfy Toyota’s global market, especially in Europe.

Solution 2 Adopting a multi-vendor policy would reduce the power given to KFS.

Increased competition may lead to a reduction in the marginal costs and an increase in quality.

The geographic distance is important since there is a preference for the supplier to be located near to TMM.

Solution 3 TMM can manufacture its own seats using its world renowned TPS

It is a time consuming and capital intensive approach, and a lengthy cost benefits analysis would have to be done to justify its adoption.

Recommendation We recommend that TMM uses Solution 1 and retain KFS as its supplier, while increasing inter-organizational communication and innovating sections of the seat production and installation process.

Their long-term strategy, however, should be Solution 2 to modify their approach to outsourcing by widening the pool of suppliers.

TPS DeviationWHERE, IF AT ALL, DOES THE CURRENT ROUTINE FOR HANDLING DEFECTIVE SEATS DEVIATE FROM THE PRINCIPLES OF THE TOYOTA PRODUCTION SYSTEM?

Sources of Deviation The current routine for handling defective seats deviates from two main keystones of the TPS, jidoka and kaizen.

Although employees in fact pull the andon cord to signal the defective seat, they let the production line run with the defective seats in the cars until the clinic,

Instead of fixing the issue as it occurs, the routine goes against the principle of jidoka.

Sources of Deviation 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

Sources of Deviation TMM complies with the heijunka policy (spreading out the demand for parts as evenly as possible) as it relieves them from a surge of workload and facilitates their JIT production.

However, in 1992, this model is difficult to scale across the seat models seats case and makes their work actually harder.

Core ProblemWHAT IS THE REAL PROBLEM FACING DOUG FRIESEN?

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.

Core Problem They do not follow fully 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

Core Problem 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

He can be let go quite easily if he does not manage to fix the seat issues.

Core Problem

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?

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.

Any Questions