The evolution of TOYOTA Production System

HISTORY OF THE COMPANY

CHRONOLOGY

GLOBAL VISION

Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people.

MISIONOffer our customers the prestigious car brand Toyota. Based on quality delivery, after-sales tracking and quality service at reasonable prices, to meet customer needs with technological support and quality, while achieving a return for our shareholders

KEY QUESTION

How the revolutionary production system developed at Toyota during the quarter of a century after 1950 paved the way for the company’s current success?

FLIPPING AND SKIMMING

Toyota: The evolution of the

Toyota Production System

Number of Pages: 11

Autor: Charles W.L. Hill, the University of Washington

Case’s Content:

Introduction, The origins of Toyota, The evolution of the Toyota production system

Distribution and customer relations, Overseas Expansion, Transplants , Operations, Product Strategy, Toyota in 2001, 2

tables

BEGINNING OF THE CASE

ENDING OF THE CASE

Today Toyota is the worlds third largest automobile company with global production of 5.8 million vehicles and revenues of 108 billon

The best and original idea behind the founding of the Toyota motor company came from the fertile mind of toyota Takichi.

In 1993 it was able to get permission to set up and automobile department with in toyota automatic loom.

LAB

ELI

NG

GENERAL ENVIRONMENT• It is considered the most

widely rolled-out environment-friendly system in the automotive industry to date

INDUSTRY• The industry has been successful

from the day it was established.• There are several strong brands

around the world so there are High barriers of entry.

• Growing market and changing consumer’s preferences.

COMPETITION• GENERAL MOTORS• FORD• NISSAN• VOLKSWAGEN• AUSTIN• HONDA

ECONOMICAL• The innovation and lowest

costs made that Toyota has an sustainable financial situation.

LEGAL• some countries impose restriction

on foreign countries to enter their markets in order to try to sustain the export and adopt new precautions of the competition law.

TECHNOLOGY

Demand at Capacity

Operational Cycle Time

Total Product Cycle Time

Line Balancing

Kabans

PORTER ANALYSIS• Low. There are various types of suppliers in the vehicles industry,

including the cooling system, electrical system, braking system and fuel supply system distributed across the globe.

Bargaining power of suppliers

• Medium. This mean that there are a lot of consumers but there’s also a lot of substitutes or competitors so if the consumer doesn’t agreed with the automobile,

Bargaining power of buyers

• Low. The entrants cannot enter to the automotive industry easily, as automobiles are special products that require a large amount of money on the design, electronic functions, and safety issues

Threat of new entrants

• High. The top eight auto companies have occupy large part of global revenues, and these automobile manufacturers strengthened the globalization and consolidation across the worldwide range

Rivalry among competitors

• Medium. There are a lot of substitutes to the automobile industry, but the automobiles have especial advantages over the substitutes that´s why the threats of substitutes is medium

Threat of substitutes

S•Flexible Production

•Quality, durability and reliability

•Strong management philosophy

•Increased worker productivity

•Product strategy

W

• Idle time of workers while the dies are changing

•Long production creates Massive inventories and that had to be store.

•The lack of capital to build a manufacturer of automobiles in another country.

•The assemble line made that the workers had little incentive to minimize defects and if the initial machine settings were wrong, long production runs resulted in a production of a large number of defects.

•Capital expenditures in create components in- house for essential subassemblies and bodies.

O•Growing market•Changing customers preferences

•Lower wage scales in smaller firms

•Government support

•Innovative work practices

T

•Increasing maintenance and oil costs

•New labor laws •North American and Western Europe were establishing operations in Japan and Market saturation

•Japanese economy was starved of capital,that made it difficult to finance new investments.

•Unknown new markets

TOWSOPPORTUNITIES

1) Growing market2) Changing customers

preferences3) Lower wage scales in smaller

firms4) Government support5) Innovative work practices

THREATS1) Increasing maintenance and

oil costs2) New labor laws 3) Competitors and Market

saturation4) Japanese economy 5) Unknown new markets

STRENGHTSA) Flexible ProductionB) Quality, durability and

reliability C) Strong management

philosophy D) Increased worker productivityE) Product strategy

SO Strategies:5a. Apply the Kanban, a scheduling

system that helps to determined what to produce, when to produce it, and how much to produce, is a scheduling system for lean and just-in-time (JIT) production.

ST Strategies:5e. Learn about the needs of the

new markets and redesigned several of its models based on feedback of consumer surveys and road test.

WEAKNESSESA) High cost of specialist

workers.B) Massive inventories C) The lack of capital to expandD) The assemble line E) High cost of create

components.

WO Strategies:5d. Place a cord above every

workstation and instructed workers to stop the assembly line if a problem emerged that could not be fixed. So the workers learn to identify and resolve problems.

WT Strategies:3c. Joint venture with a competitor

that provided a chance to find out whether it could build cars.

SUMMARY

TOWS Apply the Kanban Redesigned models according to new

markets Identify and resolve problems before

ending of the assemble line Joint venture with competitors

IFE-MATRIXWEIGHT RATING SCORE

STRENGHTS

Flexible Production 0,12 4 0,48

Quality, durability and reliability 0,12 4 0,48

Management philosophy 0,05 4 0,20

Worker productivity 0,14 3 0,42

Product strategy 0,10 4 0,40

WEAKNESSES

High cost of specialist workers. 0,05 1 0,05

Massive inventories 0,05 2 0,10

Capital to expand 0,13 1 0,13

Assemble line 0,15 1 0,15

Cost of create components 0,09 2 0,18

TOTAL 100/100 2,59

EFE-MATRIXWEIGHT RATING SCORE

OPPORTUNITIESGrowing market 0,13 4 0,52Changing customers preferences 0,10 3 0,30

Wage scales in smaller firms 0,12 2 0,24

Government support0,08 2 0,16

Innovative work practices 0,09 4 0,36

THREATSIncreasing maintenance and oil costs

0,07 3 0,21

New labor laws 0,05 3 0,15Competitors and market saturation 0,12 4 0,48

Japanese economy 0,12 2 0,24Unknown new markets

0,12 3 0,36

TOTAL 100/100 3,02

SUMMARY

IFE – EFE The Internal – External Matrix shows that

Toyota is a strong company in the automobile industry and the analysis recommended that Toyota should keep growing and building to reach the Vision. The Toyota Company should take advantage of its efficient production system, innovation, brand internationally known and the growing market situation

SPACE-MATRIX  Internal Strategic Position External Strategic Position

Y

FINANCIAL (FS)+6 best, +1 worst(+6) Work Strategy(+4) Market Share(+3) Capital to expand(+5) Total Revenue(+3) Export SalesAvg. = 4.2

ENVIRONMENTAL (ES)-1 Best, -6 Worst(-2) Demand Variability(-4) Competitive pressure(-3) Competition Price(-3) Barriers to entry(-1) Growing demandAvg. = -2.6

X

COMPETITIVE (CA)-1 best, -6 worst(-3) Low Price(-2) Variety(-2) Control over supplier(-1) Productivity(-1) Product QualityAvg. = -1.8

INDUSTRY (IS)+6 best, +1 worst(+6) Growth potential(+6) Profit potential(+2) Ease of entry(+5) Productivity(+6) Resource UtilizationAvg. = 5

SPACE-MATRIX

SUMMARY

SPACE Toyota is has a strong competitive

position in the market with rapid growth. It needs to use its internal strengths to develop a market penetration and market development strategy. This can include product development, integration with other companies and acquisition of competitors.

ALTERNATIVESALTERNATIVE PROS CONSKanban system Determined what to

produce, when to produce it, and how much to produce

Disruptions with workersCost of capacitating

Joint venture with General Motors

Facilities to expand to America and build quality cars.Deal with American Union

Trust Issues

Redesigned models according to new markets

Successful enter to new marketsIncrease revenues

Additional invest in technologyHigh cost of market research

RECOMMENDATION Toyota has to keep the same innovation,

productivity and commitment level as they did at the beginning, the

Toyota model of production has been globally recognized because the strategies that had applied are correct and it success and utility taking advantage of all their recourses and with a low general cost.

The vision is too ambitious and the people who work in TOYOTA believe in it, that’s why they work so hard to reach it.