Principle change of process that Toyota needs

Toyota

Although there are a number of processes that quite clearly need alteration within Toyota as elucidated within the case study “Toyota: The accelerator crisis,” the foremost one which inherently affect the others is the company’s chief aim: globalization. Although globalization in and of itself is not a deleterious end to aim for, the pursuit of overtaking competition (largely in the form of General Motors) and focusing on “top-line growth and profits to…become the world’s leading automaker” (Greto, 2010, p. 10) is a faulty company missive that reaps results including safety violations, class-action lawsuits, governmental penalties and fees, as well as millions of recalls.

Thus, the principle change of process that Toyota needs to enact is exchanging its goal from one of global domination into that of building quality automobiles whose reputation for quality and consistency will eventually earn its top spot in the global marketplace. To achieve this result, however, requires making fundamental transformations at several different levels in Toyota’s operations, management and production processes. There are several issues with the production process that must be addressed in order to sufficiently and positively affect the other two aforementioned processes. The first is the propensity for Toyota manufacturers to routinely identify and implement measures to cut costs which ultimately result in an inferior product. This tendency of the automaker is alluded to in the following quotation in which non-family member and former president Fujio Cho “took lean manufacturing to extreme levels,” resulting in “pressure…to cut costs at every stage…” with “an explicit goal…to cut the number of components in a car by 50%” (Greto, 2010, p. 5 )

This manufacturing process is a key one to reform for the simple fact that it appears highly integral to Toyota’s goal of achieving global dominance, since reducing the production of a cost results in the finances and material to create more costs and to continue a blitzkrieg, rush-production schedule. The breadth of altering this process is considerable. By spending more time, money and materials constructing quality vehicles, Toyota will inherently spend less time issuing recalls and settling lawsuits for manufacturing faulty vehicles. Similarly, there will be less emphasis on the management and corporate structure of this company if it simply produces quality vehicles that perform the way Toyota touts them as performing. Virtually all parties involved will benefit from reforming this process, which includes customers who will be able to live longer and not have their safety threatened by simply driving a car, as well as upper level management and those who have had to finance Toyota’s previous mishaps identified in this case study. This reform should be the top priority for Toyota. What is interesting about most of the process reforms that will be delineated in this document, is that they are angled towards alignment with principles in Toyota’s initial phase of selling vehicles, known as the Toyota Production System (Greto, 2010, p. 4). Therefore, Toyota will benefit from spending more time, material and money producing vehicles by re-establishing its previously stellar reputation, and garnering sales accordantly. The costs to the company if this one simple aspect of its vehicle production is not fixed is nothing short of disastrous, as any executives with the organization that was involved in the rampant recalls and class-action lawsuits against the company for its oil and accelerator fiascos can certainly indicate.

Another process that Toyota needs to issue substantial improvement to is that of its overall company structure. The company was founded (and is principally based in) Japan, although it has locations, dealerships and sales offices throughout the vast majority of the world. However, in the United States, most of Toyota’s dealerships and service center operate as independent silos. The structure of the company is set up so that “Toyota did not have a U.S. headquarters; its units operated as fiefdoms that reportedly independently to Japan” (Greto et al., 2010, p. 6). The company was centralized in Japan yet disseminated a dangerous amount of autonomy and agency to its independently functioning American centers. Even worse, all major decisions came from Japan, which still did not consider the context of its independent American operations cohesively. Instead, such subsidiaries were “managed separately in many cases from Japan” (Greto et al., 2010, p.7). Such decentralized authority inevitably leads to a lack of continuity that was well demonstrated in the latency of Toyota’s response to various recall issues demonstrated in this case study.

The importance of implementing an American headquarters that could oversee U.S. based operations and report directly to Japan with issues of significant magnitude is immeasurable for Toyota, primarily because it can largely put a stop to the trend to ‘cut corners’ and forsake regulation and TPS protocol in favor of a ‘quick buck’. Such centralized authority in the U.S. could recognize and even anticipate future issues before they come to stain the company’s reputation. The breadth of improving this aspect of Toyota’s structural process directly affects all of its American subsidiaries, and actually serves to empower the Japanese power structure even more by providing it with a comprehensive overview of U.S. developments. The principle parties involved in this improvement are Toyota employees, although there certainly is an overall ability to boost product quality that will eventually aid customers. The prioritization of this concern is secondary only to that of diverting Toyota’s global domination aspirations in favor of achieving quality TPS goals, for the simple fact that restructuring the company to include a U.S. headquarters will act as a safety net to ensure that the former objective is sufficiently met. As such, the overall improvement benefits to Toyota due to such restructuring will empower the Japanese controlling element of this company more. Were Toyota not to restructure its company in accordance with this structural improvement, it will demonstrate that it has not learned from its previous mistakes and will almost certainly incur similar errors that have definitive fiscal repercussions.

Additionally, it is essential that Toyota change its management processes to involve upper level management in a more prominent role to prevent future mishaps and to ensure that TPS principles and those of the Toyota Way are readily practiced (Liker, 2004, p. 41). Despite the fact that most of the major decisions made for this organization came from Japan, Akio’s involvement (and even awareness of) the difficulties his company faced in terms of recalls was minimal — until, of course, it was too late. More than other management and leaders within the company, Toyoda is fully cognizant of the tradition that his brand built and succeeded upon, just as he is cognizant of the fact that his company had strayed from that tradition. Procuring the involvement of Toyoda and other upper level management officials in safety and production issues could have possibly spared Toyota a number of settlements and class action lawsuits — especially if Toyoda was forthright about the company’s error, sincerely apologized and attempted to address the concerns of his customers. A look at the inverse of this perspective illustrates the financial obligations of the company (primarily in the form of costly recalls and lawsuits) incurred by Toyoda keeping silent until things were out of hand. Therefore, greater involvement in upper level management is of considerable importance to Toyota and affects the entire company — its centralized authority in Japan, its American subsidies, and its generous customer base. All of the aforementioned parties are involved in and impacted by this simple process improvement (priority) that can ensure that individual Toyota organizations are functioning in accordance to the principles of the primary company.

An implicit aspect of striving to directly involve upper-level management in the operations of Toyota is the reversal of the systematic overhaul of values that occurred when non-family members began to manage and preside over operations. In many ways, the mores that made Toyota famous and successful had to do with the leadership of founder Kiichiro Toyoda, who was instrumental in establishing the Toyota Way and TPS. Although the appointing of Kiichiro’s son was a definite measure to help restore the values associated with this company when it was managed by family members, Toyota needs to continue to reassert the principles that allowed it to make a positive impact on the automotive industry and its customer base. Implementing the mores of Kiichiro would have a result on the improvement of recall issues, for the simple fact that as part of his TPS system “when a problem occurs, the equipment stops immediately, preventing defective products from being produced” (Greto et al., 2010 p. 4). A reassertion of the values of family-owned business would primarily affect the upper echelons of this organization, who could systematically restructure operations, manufacturing and production to adhere to the traditional values Toyota was known for. The ramifications of not only utilizing family members but also reinforcing the values that were initially disseminated from Kiichiro would eventually affect automobile producers and sellers, as well as customers. Toyota faces the danger of re-living its recall nightmare if the customs of family managers are not restored. This process improvement is implied in the manufacturing and the upper-level management changes, and should be prioritized as such.

Another manufacturing process that Toyota needs to address and which is implicit in the previously mentioned manufacturing process is its increasing propensity to utilize parts suppliers outside of its keiretsu, which loosely translates into headless combination (No author, 2009). Keiretsu is a Japanese term for the tiered hierarchy of additional companies (including suppliers) that traditional Japanese countries work with (Greto et al., 2010, p. 9). Due to Toyota’s pressing concerns for globalization and its forsaking of localization concerns, Toyota’s American development largely functioned independently of traditional keiretsu suppliers. The noxious effects of this occurrence is not only witnessed in the plethora of recalls Toyota endured in the first decade of the 21st century, but they also resulted in the fact that the organization struggled to find enough senior engineers responsible for monitoring these suppliers. Nevertheless, Toyota leaned even more heavily on its single-source supply-chain approach, often using single suppliers for entire ranges of its cars across multiple markets (Greto et al., 2010, p. 9).

Conventionally, Toyota’s keiretsu requires a three-level tier of suppliers, which was largely forsaken during the American market in the 2000’s for a single supplier. Clearly, the organization needs to resume its keiru structuring of parts suppliers and equipment manufacturers, since its alternative method engendered swift production and poor vehicle quality. The importance to the company is that doing so may require greater up front capital, but will ultimately produce superior automobiles. This improvement will primarily affect manufacturers, suppliers and Toyota customers, and should affect the organization’s operation from a bottom up approach.

Toyota Summary

Toyota is one of the most well-known foreign companies operating within the United States. Its principle product is the manufacture, sale and service of a variety of automobiles. As of 2010 it had dealerships and nearly 9,000 employees — in addition to more than 10 regional offices — in every state in the country (Greto et al., 2010, p 9). In spite of its substantial U.S. presence, the Japanese-based company has dealerships and offices all throughout the world. The company was founded by Kiichiro Toyoda during the Great Depression, and initially began supplying vehicles to government entities (including both Japan and the U.S.) before specializing in sales and service in the private sector.

Toyota’s automobiles have different subsidiaries to accommodate varying customer bases. For instance, its Lexus line produces luxury vehicles designed for higher-end clientele, while its Scion subsidiary manufacturers more affordable automobiles generally designed for a younger customer base.

For the past several years, Toyota has routinely vied with General Motors, Chrysler and Ford for the bestselling automobile manufacturer in the world. Its principle foreign competition is Nissan and Honda, both of which are also based in Japan. In 2008 it achieved its goal of being the top selling automotive company in the world, with its sales fueled in no small part by its U.S. customer base.

Toyota developed its reputation as a staple of the automotive industry by focusing on creating quality, safe vehicles. It began manufacturing and selling vehicles in the U.S. In the early 1980’s as part of a joint venture with General Motors.

References

Greto, M., Schotter, a., Teagarden, M. (2010). “Toyota: The accelerator crisis.” Thunderbird School of Global Management.

Liker, J. (2004). The 14 Principles of the Toyota Way: An Executive Summary of the Culture Behind TPS. New York: McGraw-Hill.

No author. (2009). “Keiretsu.” The Economist. Retrieved from http://www.economist.com/node/14299720

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