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Planning and Assessing Production for Toyota North America
Member 1
Member 2
Member 3
Member 4
August 11, 2014
University of Maryland University College
AMBA 640 Section 9040 Professor J. Stewart/S. Malone
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Executive Summary
The foundation behind Toyota’s remarkable distribution and production system is
through its standardization, which ensures the safest method of its distribution and production
operations and guarantees its unswerving method to excellence. Toyota strives to provide its
customers with the best automobiles on the road, while at the same time, providing their
automobiles to its customers at a reasonable price. The main purpose of TPS is to make quality
vehicles free of defects in a rapid and efficient way in order to quickly deliver to the consumer.
The TPS system seeks to eliminate all wasteful events in the vehicle production process and
embraces all aspects of efficiency (TPS, 2013). TPS takes great pride in its quality, costs
management, expedited delivery, environmental sustainability and safety. TPS is extremely
efficient, but it has its limitations in the form of high production costs, complexity of use, and
supply issues. That said, TPS have evolved through the years by trial and error to continuously
improve efficiency (TMC, 2014). TPS expanded globally to a number of overseas plants and
manufacturing facilities which resulted in the company doubling in size from the years 1995 to
2009 (TMM, 2014). Toyota has made a huge investment by constructing the first Lexus
assembly line in Kentucky, which is planned to operate in 2015. Not only the car production in
U.S. will increase, but it also will reduce the logistics transportation costs and protect the car
prices from the effect of foreign exchange of Japanese yen against the U.S. dollar. Toyota is
postured at all times to rapidly react to what’s going on in the global market, because of this --
Toyota exports its vehicles built in the U. S. to over twenty countries. Through this effort, Toyota
is able to adapt and increase its production and distribution volumes.
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Introduction
In 2014, Toyota Motor Corporation reportedly gained 5% jump in quarterly profit
exceeding the targeted sales goals in North America (Kageyama, 2014). Behind Toyota’s success
story, in 2009, Toyota involved in an “unintended acceleration” scandal that could endanger the
driver’s life. As a result of the scandal, Toyota suffered in auto sales and production drops, but
was able to handle it smoothly by recalling over 8 million vehicles and fixed it with no additional
costs. Toyota’s full commitment to its customers perhaps was the key why this company was
placed in the top-rank position in Consumer Reports’ 2014 Car-Perception survey.
Evaluating this Toyota case study is a great activity to develop business knowledge about
operations management. This paper discusses four main topics: production system, plant location
analysis, plant capacity analysis, and Toyota’s current regional production strategy.
Toyota Production System Terms
Andon
Andon can be defined as a manufacturing process that provides a visual display of a
current job status and serves as a control mechanism. This visual display will alert management
in the event of an abnormalities or errors in the job progress. In a call center environment, andon
may be applied through a dashboard indication system to notify management that incoming calls
are waiting in queue to be answered. Based on an established threshold, andon can alert
management that additional agents are needed to meet the current call volume and satisfy the
targeted objectives for wait times and completed calls.
Genchi Genbutsu
Genchi Genbutsu can be defined as a practical approach to a problem; solving by
identifying and addressing an issue directly. When a problem arises the source specifically
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identifies and physically visits to examine and correct the problem. In a financial services
industry (banks, credit unions, etc.), which are comprised of several branch locations genchi
genbutsu, can be utilized by management to address specific branch locations that are
experiencing problems to include: customer service issues, loan delinquency and low deposit or
loan growth. An unproductive branch may require significant changes to correct the problems.
By visiting the branch and observing the issues contributing to the problems, management can
develop effective ways to address these problems.
Heijunka
Heijunka can be defined as a technique used to ensure that all elements of production are
efficiently coordinated to achieve the desired results. It involves planning the adequate resources
and time required to meet production specifications. In a sales environment such as auto or
product sales, heijunka can be utilized to prioritize sales leads to guarantee that the most viable
leads are worked first followed by the less viable. Managing time and effort on sales leads based
on their level of opportunity demonstrates a coordinated effort to maximize resources and time
on promising leads and minimize on those that are not. Organizing sales leads in this manner
ensures that they are processed efficiently in order to achieve results.
Hoshin
Hoshi can be defined as a system of developing corporate goals and strategies to
implement for achieving these goals by upper-management. Progress on goals and strategy
implementation it tracked and reviewed on quarterly, semi-annual or annual basis. At the U.S.
Postal Service Federal Credit Union, hoshin can be compared to a strategic management tool
called a corporate balanced scorecard utilized to establish corporate goals for the organization.
The executive management team hosts an annual strategic conference to identify the
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organization’s strategic focus and develop the corporate balanced scorecard. From the corporate
balanced scorecard each organizational department is assigned expectations, which contribute to
the corporate goals. Each department is responsible for developing strategies to achieve these
goals. For example, the corporate balanced scorecard may target 10% loan growth; the
department expectation will target a specific dollar amount to generate in loans in order to meet
this goal. Accordingly, specific expectations are assigned to each departmental employee and
their performance levels are evaluated quarterly. Management reviews progress on the corporate
goals quarterly to decide if modifications are warranted.
Jishunken
Jishunken can be defined as a process improvement approach led by management. This
approach involves managers continuously looking for ways to improve processes, thereby
inspiring kaizen activities. Kaizen is a system in which all employees implement process
improvements that eliminate waste to minimize costs on a continual basis. In the jishunken
method, management is the driving force behind all kaizen activities. At the U.S. Postal Service
Federal Credit Union recently completed under the direction of management, a loan process
improvement session in support of our strategic focus to become more lending based
organization. Management selected team members from various levels of lending to include loan
processors, loan officers and branch managers within the organization to participate in a week
long process improvement project. The team’s goal was to identify problems in the current
lending practices and suggest ways to improve in this area. This process is comparable to
jishunken as it was management driven and created kaizen activities in the organization. The
changes and improvements implemented as a direct result of this process will continue to
improve lending practices at the organization.
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Nemawashi
Nemawashi can be defined as a process used to prepare for a new project or
implementing change. It involves gathering information and support for various areas within the
organization in order to prepare for the new endeavor. This process may also involve meetings to
discuss how the new endeavor or change will impact specific areas of the organization and
developing strategies for successful implementation. In the restaurant business industry with a
relatively small staff, nemawashi might be utilized for small staff meetings to discuss new menu
items and/or scheduling changes before implementing these items in order to gain useful
feedback from staff. These preliminary meetings could result in valuable information to assure a
new menu item is presented to the customer effectively and conflicts with schedule changes are
addressed. Meeting to discuss these items in advance prepare for a positive integration and
consider the impact they have on all parties involved.
Pokayoke
Pokayoke can be defined as a preventative measure employed to protect against defects
identified during the production process. Mistakes are avoided by stopping the production of
defective parts by an extremely proficient electronic device. At a toy development company,
pokayoke might be applied to implement safety measures that prevent un-intentional harm to
children. These measures may include various safety mechanisms such as labels, size
requirements and battery protection parts. A test segment should be produced to evaluate
accuracy prior to fully implementing these measures.
Yokoten
Yokoten can be defined as process of disseminating information throughout the entire
organization and its affiliates. The process involves a concentrated effort of sharing information
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within all areas of the organization including corporate partners. A sales company might utilize
yokoten to share successful sales techniques and strategies to other departments within the
organization to help increase sales for the entire organization versus one specified area. Specific
techniques may develop an explicit sales culture applicable throughout the organization. For
example, Enterprise car rental company strives to meet the needs of their consumers in the rental,
leasing and sales departments through providing service, quality and value. All departments
strive to establish long-term relationships with customers subsequent to providing the initially
requested service.
Toyota Production System: Total Entity Analysis
Purpose
The main purpose of TPS is to make quality vehicles free of defects in a rapid and
efficient way in order to quickly deliver to the consumer. The TPS system seeks to eliminate all
wasteful events in the vehicle production process and embraces all aspects of efficiency (TPS,
2013). TPS is frequently identified as a lean manufacturing system because it targets waste
elimination and producing only the quantity demanded. The TPS system guarantees that a
vehicle will be produced in the shortest time period possible and starting the production process
as soon as a vehicle order is received. The TPS systems ensure the production assembly line is
adequately stocked with the required parts needed to complete a vehicle order for any vehicle
type (TPS, 2013).
Advantages
The TPS offers several advantages to include: quality, costs management, expedited
delivery, environmental sustainability and safety. TPS involves continuous process improvement
that guarantees production of the high quality vehicles. The good return on investment permits
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costs to be minimized. Vehicles are delivered on time and always meet the quality standard. The
TPS system recognizes the environmental concerns of the consumer and embraces recycling in
the production process. Safety is addressed in TPS with pokayoke as employ measures to avoid
defects in production to ensure vehicle safety (TPS, 2014). Additionally, all production team
members are encouraged to continuously strive for process improvements and eliminated waste
in the production process (TPS, 2014).
Limitations
The TPS is extremely efficient, but has its limitations in the form of high production
costs, complexity of use and supply issues. The safety and kaizen practices involved in the TPS
production imposes significantly increase in operational costs (Mehri, 2006). The production
process is halted when the andon displays an abnormality or a safety issue presents that poses
danger to a production employee. These events result in a loss of time and resources. The safety
issue must be resolved before production can be restored. Quality-control supervisors must
inspect the vehicle when an andon indicates the presence of an error or abnormality (Mehri,
2006). The TPS system is extremely complex with several features, which can take a significant
amount of time to implement and prepare for use (TPS, 2014). The Just-in-Time method of
making vehicles based solely on demand request means that a small amount of inventory is
generally kept on hand (TMM, 2013). This lean manufacturing system requires a reliable
supplier that can meet TPS expectations and provide supplies needed without interruptions or
delays.
Is Toyota Production System evolving?
The TPS have evolved through the years by trial and error to continuously improve
efficiency (TMC, 2014). TPS expanded globally to a number of overseas plants and
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manufacturing facilities which resulted in the company doubling in size from the years 1995 to
2009 (TMM, 2014). Taylor and Taylor (2008) noted that the automotive industry as the most
globalized sector in the world. TPS recognizes the importance of establishing a position in the
global market.
Have other motor vehicle manufacturers copied TPS?
The Toyota way of production has continuously spread throughout the world as other
manufacturers embrace TPS. Lee and Jo (2007) noted that TPS had a significant influence on the
global reshaping of the automotive industry. Hyundai Motor Company is an example of how
TPS can be implemented by a Korean manufacturing firm (Lee and Jo, 2007). Hyundai Motor
System (HMS) used TPS as a benchmark to evaluate its manufacturing performance levels (Lee
and Jo, 2007). In contrast to TPS, HMS involved reducing the amount of workers in the
production process by implementing more automated techniques (Lee and Jo, 2007). While HMS
initially developed its production model based on TPS the system required specific modifications
to adjust and meet the needs of Hyundai’s distinct situation.
Location Selection Introduction
There are multiple exogenous or endogenous factors that have been considered during the
Nemawashi process for determining the location for the RX 330 North American plant. These
factors will be incorporated during the development of the Ringo Sho presentation to Toyota
leadership. The decision for Toyota leadership is between the Toyota Motor Manufacturing
Canada (TMMC) and the Toyota factory in the USA.
Work Force
Work force is a significant factor for consideration during Nemawashi. During this
process Toyota must gather the relevant information for discussion and the eventual Ringo Sho
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presentation to leadership. Work force factors include skill levels, labor costs and whether the
workforce is unionized (Gigerick, 2014). The U.S. Department of Labor published International
Comparisons of Hourly Compensation Costs in Manufacturing, which indicated costs are slightly
lower in the U.S. compared to Canada. Most of the southern states in the USA are "Right to
work" states and employees cannot be forced to join trade unions (McDermott, M.C., Luethge,
D., & Byosiere, P., 2011). In 2009 the Toyota plant in California, which was unionized, was shut
down for “economic” reasons (Bunkley, 2009). Therefore it is reasonable to expect that Toyota
plans located in the USA would continue to be non-unionized. However, here is a big push at
TMMC to organize the plant workers by Unifor (Rogers, 2014). This unionizing of employees
could increase the costs associated with the work force at TMMC. Unionization of employees is
a factor that Toyota does not have much influence over. When wages and productivity are
considered, U.S. factories appear to be more cost effective than Canadian factories.
Incentives for Expansion
In 2012 Toyota committed to investing $100 million dollars to expand the TMMC plant.
The decision for this expansion was based in part on Canadian incentives provided to the
company (Area Development Site and Facilities Planning, 2012). However, the amount of the
incentives was not disclosed. The number of reported incentives provided by local governments
in Canada pales in comparison to the incentives provided by communities in southern states in
U.S. In 2013, Ohnsoman reported $146.5 million incentives in Kentucky for expansion of one of
the current plants (2013).
Real Estate
Real estate factors for determining whether to build a new plant are more complex than
the costs of land for which to build. Gigerick (2014) outlined additional determination that must
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be considered, beyond the availability of sufficient land and costs to acquire the land. During the
land selection process leadership must consider the existing utility infrastructure and the cost
associated with developing utilities and zoning requirements (Gigerick, 2014). Additional
exogenous factor that Toyota leadership will consider related to real estate is supply chain
availability. While suppliers might be spread across North America, the location of the new plan
must be reasonably accessible via interstate highways and rail services (Gigerick, 2014). When
Toyota leadership follows the Ringo Sho process for determining the plant location, the
presentation must include all of these real estate factors and the proposed plans to address the
concerns.
Factory Performance
Factory performance is an important endogenous factor for consideration when
determining whether to expand the Ontario factory or select another location in the U.S. The
Ontario plant has won multiple JD Power & Associates quality awards and vehicle awards for
the RX350. According to the U.S. Department of Labor Bureau of Labor Statistics’ International
Comparisons of Manufacturing Productivity and Unit Labor Costs Trends, in 2011 U.S. output
each hour is slightly higher than in Canada. With the plant quality in the current plant at TMMC,
it would be reasonable to expect similar quality with an expansion.
Regulatory Environment
Rao and Sharma (2006) compared the regulatory environments related to product markets
on multiple factors including barriers related to trade and investment, economic and
administrative regulations, and state control. The report concluded that overall the United
Kingdom was the least restrictive of the seven countries evaluated, with a factor of 0.5, and the
United States came in second place, with a factor of 1.0. Canada had the same score as Japan
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(1.5) and was directly behind Germany (1.4). The regulatory environment can add time and
increase the resource burden for companies to remain compliant. Canada had one of the lowest
scores related to barriers related to entrepreneurship, however, this is of little help to larger
companies planning to expand (Rao & Sharma, 2006).
Gantt Chart
Work Force
Incentives Real Estate
Factory Performance
Regulations Total
Weight 3 5 3 5 3 TMMC 15 10 20 25 15 85
US Location 20 25 20 20 20 105
Using this weighted grid analysis it would appear that expanding a current factory in the
United States is a better business decision for Toyota.
Recommending Production Capacity Needed at Toyota Motor Manufacturing of Canada
According to www.japantimes.co.jp, Toyota has been able to keep its position as the
world’s top-selling automaker for the first half of the year and reportedly the sales rose sharply in
North America and Europe with a 5 percent jump in quarterly profit. Encouraged to improve
Toyota’s productivity and quality, Simon Nagata, the president of Toyota Motor Engineering and
Manufacturing North America, decided to maximize the existing plant capacity in order to
increase the overall outputs. Furthermore, Simon explained that the plant is now prepared to
pioneer the production of U.S.-assembled Lexus, in which, will be adding more than 50,000
automobiles to the current plant capacity, which is 600,000 (Toyota-U.S. newsroom, 2014).
Toyota Motor Manufacturing of Canada (TMMC)’s new president has prepared a
challenging plan to reach the sales goal 25 percent higher than the previous years by selling
200,000 vehicles. Such an aggressive target can only be met if TMMC-Canada increases its plant
capacity to 30,000 units per day for the maximum level. As a starting point, TMMC-Canada
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special team is planning to acquire a technique that enables them to identify, classify, and
determine the best option possible from several available choices.
TMMC-Canada: Recommendation for Annual Capacity Production
Facing a complex and multi-stage decision, TMMC-Canada planned to implement the
decision tree technique as guidance in choosing the best option from different possible
alternatives and chance events. According to www.palisade.com, decision trees are formed as
diagrams and consist of chance events that linked sequentially. Further, it explained that decision
tree is an important decision-making technique, and for managers, it relatively easy to
understand with little clarification. The advantage of using decision tree technique is users can
allocate definite values through series of events and it works by reducing the uncertainty of
multi-stage decisions. The problems are clearly laid out and allow users to analyze each
consequence from every decision.
TMMC-Canada has 5 alternatives to be used as the plant capacity: 10,000 units, 15,000
units, 20,000 units, 25,000 units, and 30,000 units. Each alternative has an outcome (state-of-
nature) with probability as follows: low (0.25), moderate (0.5), and high (0.25). Each outcome is
followed by appropriate payoffs.
Refer to the example of decision tree provided, we recommend TMMC expand capacity
to 25,000 units because it offers the highest value or average return with the amount of
$554,000,000. From the following table, it appears that a 25,000-unit capacity plant will results
the highest value.
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Next we will be evaluating a decision node with the cost of each option along every
decision line. The method is to start from the left to the right, and to subtract the cost of outcome
values in order to get the series of value that represent the benefit of every decision.
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From the decision tree above, we can clearly see that to build the 25,000-unit capacity
plant with the value of $554,000,000 is the most valuable option.
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What are analysis weaknesses or limitations and how are they addressed?
Although decision tree technique is relatively easy to use and understand, it also has
some limitations in the implementation to the real life problems. According to
businessmanagementcourse.org, using decision tree technique can be less appropriate for
estimation tasks where users have to make prediction about the value of each alternative. Further,
this technique has a high probability of errors when doing complex problems with many
classifications.
In order to reduce the limitation of decision tree technique during the implementation of
solving the real life problems by reducing the uncertainty of multi stage decisions, users have to
identify the problem clearly and specifically lay out each alternative. Furthermore, providing
certain amount of number in quantitative and its probabilities will help decision maker to make
decisions based on the existing information available on the diagram tree.
How has the RX-330/350 done in the North American market?
Surprising news from came in 2009 and took a major hit on Toyota's luxury division
reputation for their ability to produce the “unbeatable” bulletproof quality products. Toyota had
to conduct safety recalls to several numbers of units including the 2004-2007 Lexus RX 330 and
350 due to the case of unintended acceleration after receiving reports from the car owners
(Kreindler, 2011).
The fact, in 2011 Lexus was in the third position in sales record after BMW and
Mercedes with 138,689 units sold during the period (Team, 2014). Toyota is likely trying to
improve their products consistently after the big downturn that may already be hurting the RX
model when their sales fell by 5.5% in 2010 (Peterson, 2010).
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This unintended acceleration scandal raised questions about the quality differences
between North American and Japanese made Toyota products. Perhaps the answer is yes, there
are probability some quality differences since Toyota has released a North American-made
Lexus RX model that has had an accelerator-pedal from a different supplier (Autoguide, 2011).
The good news is that the Canadian-made RX 350 model has received no major complaints since
the cars were first produced in 2003.
However, the “Toyota Way” philosophy became the stimulator for Toyota’s plants all
over the world to create products with the same standard of quality. There are no references to
Toyota being made is USA or Japan, instead there is a universal label of made by Toyota
(Toyota-global.com, 2014). Further, one method implemented by Toyota to achieve the same
standard quality assurance is by establishing centers for educating its human resources such as
the Global Production Center (GPC) and the Toyota Institute.
Toyota has made a huge investment by constructing the first Lexus assembly line in
Kentucky, U.S. which is planned to operate in 2015. Not only the car production in U.S. will
increase, but it also will reduce the logistics transportation costs and protect the car prices from
the effect of foreign exchange of Japanese yen against the U.S. dollar.
Assessment of Toyota’s Current Regional Production Strategy: North America
The current Toyota distribution in North America
The foundation behind Toyota’s remarkable distribution and production system is
through its standardization, which ensures the safest method of its distribution and production
operations and guarantees its unswerving method to excellence. Toyota strives to provide its
customers with the best automobiles on the road, while at the same time, providing their
automobiles to its customers at a reasonable price; the goal is no “sticker shock”. That said,
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Toyota takes great pleasure assembling their efficient and quality vehicles from start to finish in
record time; reducing its overall lead time during production. To take it further, Toyota prides
itself with taking care of their employees, which is evident through its good treatment and
making sure each employee is a valuable member of the team. Toyota is postured at all times to
rapidly react to what is happening in the global market. By being flexible, Toyota is able to
maximize its profits by reducing and/or eliminating useless activities and processes. Business
Week wrote an interesting article on Toyota’s Production System, in which it applauded the
automaker on how it’s utilizing their plants in the United States as the largest source to export
vehicles to counter the effects of the rising yen. In 2013, Toyota shifted its auto production from
its Japan’s plant to North America to offset the yen’s 8.3 percent rise. Toyota is postured at all
times to rapidly react to what’s going on in the global market, because of this -- Toyota exports
its vehicles built in the United States to over twenty countries. Through this effort, Toyota is able
to adapt and increase its production and distribution volumes; totaling 16,700 units (Ohnsman,
2012). In Bloomberg’s article, Yoshimi Inaba Toyota’s Chief Operations Officer (COO) stated,
“From North America, Toyota already exports Camry and Avalon sedans, Tundra and Tacoma
pickups, Sienna minivans and Sequoia sport-utility vehicles to markets including Venezuela,
South Korea and countries in the Middle East. And given the scale of Toyota’s global
distribution network, the company should eventually be able to export more vehicles from North
American plants than even U.S. based automakers” (2012) .
Case in point, the assembly plant in Texas is Toyota’s central hub of its intricate
distribution and production supply chain; this plant extends out for hundreds of miles and has
connections to assembly plants as far as the Far East, to include connections to Mexico and most
of the states located in the southern regions in North America. The Texas assembly plant has
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technological connections to Japan and states located in the mid-west, which are required to
access product engineering and distribution/production control. The Texas assembly plant is the
central hub of Toyota’s far-reaching vehicle exporting and transportation system.
It should come to no surprise that the Texas assembly plant offers Toyota the shortest
distance to “low-cost south Texas labor market for assembly workers while insuring just-in-time
delivery of cut-rate parts manufactured in the Far East and Mexico and subassemblies from other
southern U.S. plants and providing convenient access to the U.S. auto market” (Vogel, 2008). As
for distribution in Mexico, Toyota’s COO envisioned more cost-saving by attaining parts and/or
producing automobiles from its plant in Mexico. According to Inaba, “using Mexico as an
important base for either parts or production is no doubt, we are always looking at Mexico and
we have a small experience in Baja, but that is not the end of the story” (2012). The plant in
Mexico is located in Baja California. This plant produces over 70,000 Tacoma pick-up trucks on
a year basis. In an article written by Case & Sciaudone, they stated “Mexico’s close proximity to
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the United States has its advantages, mainly due to the labor costs for automakers, which are
approx. 20 % of the United States levels” (2014).
Why does the team believe Toyota has chosen to produce its cars in the current manner?
As it stands, Mexico is plagued with flawed loose laws and regulations, and most
importantly, Mexico has a meager economic standing in the world compared to Northern
America. Toyota produces vehicles in this manner, mainly due to cost reduction and its emphasis
to identify waste, which is often challenging, follow-up by the use by proven techniques to
eradicate it. In the team’s opinion, Toyota has smartly embodied the right combinations of
attitude, theme and technique into its all-exclusive socio technical system for development.
Instead of importing vehicles abroad, it is more cost effective to import part and material, and
assemble Toyota automobiles in the United States. Toyota is able to maximize its profits by
reducing and/or eliminating useless activities and processes. Toyota’s Production System was
applauded by Business Week on how it’s utilizing their plants in the United States as the largest
source to export vehicles to counter the effects of the rising yen. In 2013, Toyota shifted its auto
production from its Japan’s plant to North America to offset the yen’s 8.3 percent rise. In the
end, Toyota is clearly postured at all times to rapidly react to what’s going on in the global
market, because of this -- Toyota exports its vehicles built in the United States to over twenty
countries. Through this effort, Toyota is able to adapt and increase its production volumes;
totaling 16,700 units (Ohnsman, 2012).
Conclusion
The foundation behind the TPS remarkable distribution and production system is through
standardization and minimizing waste. Toyota strives to provide its customers with the best
automobiles on the road, while at the same time providing these automobiles at a reasonable
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price. Toyota’s production system is a great case study for analyzing plant location, plant
capacity, and production strategy.
In order to understand TPS it is critical to define the terms used within the system. Andon
is a manufacturing process that provides a visual display of the current job status and serves as a
control mechanism. Genchi Genbutsu is a practical approach to problem–solving, by identifying
and addressing an issue directly. Heijunka is a technique used to ensure that all elements of
production are efficiently coordinated to achieve desired results. Hoshi is a system of developing
corporate goals and strategies to implement for achieving these goals by upper-management.
Jishunken is a process improvement approach led by management. Nemawashi is a process used
to prepare for a new project or implementing change. Pokayoke is a preventative measure
employed to protect against defects identified during the production process. Yokoten is a
process of disseminating information throughout the entire organization and its affiliates. Each of
these terms is integrated within the entire TPS and helps ensure standardization.
TPS offers several advantages including quality, costs management, expedited delivery,
environmental sustainability, and safety. TPS involves continuous process improvement that
guarantees production of the high quality vehicles and all production team members are
encouraged to continuously strive for process improvements. However TPS is not without
limitations, which include high production costs, complexity of use, and supply issues. TPS has
evolved through the years to continuously improve efficiency and expanded globally to a number
of overseas plants and manufacturing facilities. This production system has had a significant
influence on the automotive industry, including Hyundai Motor Company.
There are multiple exogenous or endogenous factors that have been considered during the
Nemawashi process for determining the location for the RX 330 North American plant. These
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factors will be incorporated during the development of the Ringo Sho presentation to Toyota
leadership. The decision for Toyota leadership is between the Toyota Motor Manufacturing
Canada (TMMC) and the Toyota factory in the USA. Work force is a significant factor for
consideration during Nemawashi. When wages and productivity are considered, US factories
appear to be more cost effective than Canadian factories. Another factor considered during
Nemawashi were the incentives provided to Toyota for expansion of manufacturing facilities and
the incentives provided by US states and local communities are much more desirable than those
provided within Canada. Factory performance is an important endogenous factor for
consideration and considering the experience and quality associated with TMMC, it appears that
Canada is a strong performer. Finally, the exogenous regulatory environments within the United
States appear to provide less of a regulatory burden for companies. Using a grid analysis it would
appear that expanding a current factory in the United States is a better business decision for
Toyota.
Facing a complex and multi-stage decision, TMMC-Canada implemented the decision
tree technique to help decided the best option for plant capacity. Based on the decision tree the
recommendation is for TMMC to build a 25,000-unit capacity plant. This option offers the
highest value or average return with the amount of $554,000,000.
The future plan, Toyota has made a huge investment by constructing the first Lexus
assembly line in Kentucky, U.S., which is scheduled to operate in 2015. Not only will car
production in U.S. increase, but it also will reduce the logistic transportation costs and protect the
car prices from the effect of foreign exchange of Japanese yen against the U.S. dollar.
Toyota is positioned to react to what is happening in the global market. By being flexible,
Toyota is able to maximize its profits by reducing and eliminating useless activities and
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processes. TPS has been recognized in the United States as the largest source to export vehicles
to counter the effects of the rising yen and Toyota exports its vehicles built in the United States
to over twenty countries.
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References
Area Development Site and Facilities Planning Online. (2012). Toyota Canada invests $100
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