Toyota Motor Corporation (Toyota) Toyota is a Japanese company founded by Chichi Toyota. It first began selling cars in the US in 1957, and quickly became successful by its mission of high quality and low prices. The company’s objective was never to be number one in sales. Toyota was focused in their offer of best quality in the market. Toast’s vehicles were also very well known by their high resale price. Automobile Industry in 2008 Toyota played in a very competitive environment.
There are 4 top companies, with a share of market from 8% to 12% each. The market was estimated to value 1,9 trillion liars which is a very high value if were taken into account the impact of the global financial crisis. The US market was especially competitive, because of the high percentage discounts and the low interest taxes on car loans. This made lower cost production crucial in order to maintain a low price policy.
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Toast’s operations management Toyota has been adopting some unusual practices with the intent of reducing costs, while keeping a high level of quality: The Toyota way: Consists in long term planning, learning from problems and mistakes, developing teamwork relations among colleagues and a culture of mutinous improvement. In 2001 the Toyota Way was improved by adding 14 management principles that lead all the company towards a their goal. Meanwhile the Toyota Production System (TIPS) was developed and integrated in the Toyota Way.
TIPS is based in two quality concepts: 1) Kodak, which consists on providing machines and workers of practices to quickly detect production problems and immediately stop production until the error is fixed; and 2) Just-in-time Tot), which is a practice that makes production more lean and cost efficient by decreasing the invested capital at its minimum needed. Low stocks, no unnecessary waste). Later, Toyota developed the AS Approach: The AS it’s a guide made by 5 Japanese words to complement TIPS and it stands for: Series, simplification; Sexton: organization; Skies: cleanliness; Geekiest: standardization and Skittish: stick to the rules. Monumental key in the production saturation Toyota was undergoing. This is a measure to cut costs at every stage of production. Every process and car component was studied thoroughly in order to find the most cost efficient way to build a car. The goal was to reduce by 50% the components in a car. This procedure enabled Toyota to save 2. 2 billion dollars a year. At last they’ve implemented a stronger version of the CHECK , called Value Innovation. This culminated in the best production process possible.
With costs trimmed at the most, Toyota was saving more than ever, and growing in an incredibly fast speed. Toast’s development Toyota started as a small company and rapidly gain a favorable positioning in the market. Its aggressive growing strategy began in 1995 with the change of the CEO. By 1999, Hiroshige Gouda, the new CEO, had reached a cumulative production of 100 million domestic vehicles. Vehicle Recalls A recall happens when a vehicle has a defect from production line. Usually the company assumes total responsibility, fixes the problem and covers the cost.
A vehicle recall obviously represents an enormous cost for the company and strongly influences the company’s quality image. Some of the defects can be also very dangerous for the costumer’s safety. Toast’s massive vehicle recall happened on 26th of September 2007, when it recalled 55,000 cars to replace the floor mate after complaints that the accelerator would often get stuck. From 2006 to 2011 Toyota recalled nearly 10 million vehicles to the factory. This had a huge impact on the consumer’s perceived quality. What lead Toyota to such a drastic loss in quality?
In my opinion the factors which most contributed to this events were: 1) The lost of quality culture; and 2) The disorganized growth. The issue that is in the origin of this problem is the loss of quality culture. While Toyota expanded there was no effort in passing the heritage of quality to the others production plants. The quality decreased, affecting products and costumers safety. Centralized power in Japan made even hard to process a complaint in a firm in the US. Toyota had 8900 employees in the US working in 14 regional offices and 1500 dealerships across all 50 US.
With the lead headquarters very far away, each office had their own “CEO”. Each CEO handle complaints differently, there were no best practice for quality complaints. This also meant that the large-scale complaint aggregate was not taken into account. Next Steps 1. Production Processes need to be revised 2. Company structure needs to be reorganized 3. A quality culture needs to be implemented in every production site Only this way Toyota could slowly gain a quality image next to his costumers, and gain market power again.