Operations Management of Toyota Company - Research Paper Example

 Operations Management Introduction Toyota Motor Corporation is the world’s largest automobile company in terms of production and sales. The company has worldwide presence with manufacturing plants in many countries. This allows Toyota to cater to different markets individually. The company started its operation in 1937 and since then it has expanded its operations in Europe, Asia, North America and Australia. The company offer different brands for different types of customer. Some brands offer luxury other offers sturdiness. The presence of company in different countries also creates many problems. The operations of Toyota are susceptible to political and economic fluctuations. Because of the dispersed manufacturing the company faces different problems in different countries. The problem of competitors and safety issues rise regularly. The recent safety issues with Toyota cars caused significant financial issues to the company. There are issues regarding location of retail showrooms and supply chain management issues. The company follows Just in Time inventory system (JIT) in which management of supplies is extremely important. Also with different safety rules, manufacturing regulations, tax legislations and environment concerns in different countries Toyota faces many operational challenges and this paper will discuss these challenges with great detail. The strategies to address these issues will also be discussed in the paper. These possible solutions might help Toyota Motor Company solve its operational problems. Key Operational Challenges faced by Toyota The automobile industry all over the world is facing problems due to economic recession and environmental concerns. Toyota faces multifaceted problems due to its presence all over the world. Design issues, pricing and product development issues are the main operational challenges Toyota is facing today. Supplier Issues regarding the Product Development System The product development system of Toyota is considered to be one of the best in the industry. The unique thing about this system is that the developmental work is divided into subsystems instead of teams working together on the whole product (Kennedy, M. 2005). Usually there are teams that work on new products as a whole but in Toyota teams work on subsystems like hardware, software and suppliers. Then all these subsystems are combined to form a new product. In this way the development process is speeded. The problem in this system arises with regards to the suppliers. Product development cannot be completed if suppliers are not equipped to supply different parts that are needed to develop the new product. For this reason supplier development is also necessary. This is an operational challenge for Toyota as it is very difficult for development teams and suppliers to be on the same page. Suppliers are to be trained and they should be equipped with proper technology in order to ensure that they are able to meet the demands of the newly developed product. This is a serious challenge for Toyota. Because of supplier issues inventories of Toyota are increasing and storage cost is also hiking even though Toyota is famous for its Just in Time inventory system (JIT). Toyota will have to rely on suppliers because it is not feasible to develop everything on their own but supply chain management issues are also a major challenge even for a big company like Toyota. Complexity Problems in Toyota The complex products of Toyota are a problem. The manufacturing units are dispersed all over the world and because of this sophisticated technology have to be made available everywhere. Alongside making complex products for its diverse clientele Toyota also has to manage its worldwide sale. The complexity problem becomes an operational issue when a car is developed and the technology used in the car is not available in some of the manufacturing countries. Now in order to make similar cars in those countries the technology is required to be imported and that costs a lot of money. Moreover training is required for workers in order to make them familiar with the production procedure. This is a serious challenge for Toyota because it costs greatly to import the new technology in manufacturing countries. The complexity problem is not limited to development of new products. Existing supply lines are also affected by the use of sophisticated technology. Problems arises that suppliers cannot handle and this causes the supply of parts to delay. This is another dimension of the complexity problem. The problems that faced Toyota regarding its vehicle parts last year is a consequence of the complexity problem (Shook, J. 2010). Problem arises when the production system becomes sophisticated and it is not easy to solve because of the globalized presence of Toyota. This complexity problem is an operational challenge. Design, International Demand and Regulations Another problem for Toyota is that it has to keep in mind the international regulations in mind when designing cars. Now these regulations are stern in countries like United States and United Kingdom but in Pakistan or Philippines little attention is given to car safety. With different regulations in different countries the company faces problem in designing new vehicles. Safety regulations are to be kept in mind and minor adjustments are made in order to abide by the rules of the local country. Safety is not the only issue that is to be kept in mind. Design of the vehicle is to be same all over the world in order to ensure standardization of products. This is another issue because different countries have different demands. In some regions demand is based on quality and in other it is sensitive to price. It is not easy to innovate keeping in mind all the demand of the customers of different regions. Operating in such diverse settings is a problem for Toyota. This is why it is considered an operational challenge. Product Differentiation Toyota has to compete with local and international players in the automobile sector. All these players regularly come up with new models and design. Some local automobile companies have an upper hand in the domestic market as they are more familiar with the demand and structure of their target market. This pressures Toyota to differentiate in their product line in order to cater to demands of various markets. Demand in one market may also be very different. It is important for Toyota to cater to more than one class of people in the same market. That too requires different product. The problem is that Toyota has worldwide sales so it has to focus on many kinds of customers unlike BMW or Mercedes who focus on luxury products. This is big challenge for Toyota. Toyota has to focus on quality in some brands and in other brands the focus is on low cost. This increases the work load of the company and chances of mismanagement arise. Also to compete with names like Ford and GM is an operational challenge. Political Risk in some Countries Toyota also has manufacturing units in third world countries. In these countries there is less uniformity in policies so there is always a threat of unfriendly policies and nationalization. This causes problem for Toyota because it invests heavily in its plants. Any unfriendly policy can hurt the company badly. The economic conditions of the country and inflation are also important factors in the countries where Toyota manufactures. If prices increase rapidly or economic conditions deteriorate then sales of Toyota can affect badly. In third world countries usually demand is mostly price centric and any increase in prices can hurt the automobile industry. The size of these target markets is so big that sometimes Toyota has to tailor made products for these markets. The role of governments is also important in third world countries. Although there is some advantage regarding taxes and environmental regulations, there are some disadvantages as well. Governments can bring in rules that can hurt Toyota badly. In 2009 Venezuelan government asked car makers to make cars that are fit for local use and also threatened nationalization (Cawthorne & Chinea, 2009). So it is clear that there are serious operational challenges related to third world governments. Economic and political instability can cause serious problem for Toyota and profits can be affected. Environment Issues A serious problem automobile industry is the environmental concerns that are rising all over the world. Automobiles are a major cause of pollution and environmental laws are getting stern and strict every day. In such an environment Toyota is facing major challenges regarding new environmental friendly cars. The newer technology needs innovation and a major shift from recent product trends of Toyota. Toyota has made inroads in this regard and has introduced its hybrid car called Prius. But still there is a lot of criticism on Toyota regarding its opposition for legislations for fuel boost in vehicles (Naughton, 2007). Toyota tries its level best to be environmentally cautious but environmental groups are always ready to attack the company. The challenge for Toyota is to counter these groups and develop a product that is environmental friendly and at the same time that product can be sold all over the world. Adding such products to its product line will require new marketing campaigns and new strategies all together. Strategies to Address these Challenges Now we will discuss certain strategies that might help Toyota in countering the operational challenges it is facing today. These strategies will deal with the problems of the product development system. Also how Toyota can differentiate its product and how political risk can be reduced. The main problem with product development system is that the suppliers of Toyota are not up to the same level as the product development teams are. This problem can be resolved by training suppliers and giving them incentives to upgrade their technology. In this way suppliers can improve their technology. Toyota should start giving awards or bonuses to suppliers that supply less defective parts for a given period. This will encourage suppliers to higher their standards. At the same time training should be given to the suppliers. Suppliers should be included in the product development procedure, and then they will be able to match with the technology of the Toyota. But this should also be understood that training is not the only solution. Toyota cannot train all its suppliers as it will be costly and inappropriate. So it is important that incentives should be given to the technology and they should be involved in the product innovation. The complexity issues in Toyota are very difficult to solve. It is very difficult not to innovate in such a competitive world and if Toyota innovates it is likely to face complexity issues. In order to reduce these issues the company can extend its experts in to all the major fields and even in the supply chain. This will allow the workers to better understand the complex technology and less hiccups will be occur. These experts should give regular training to the workers so that operations are run smoothly. The Toyota system is very well managed but still problems occur. The problem lies with the production facility according to the experts (Fujimoto, T. 2010). It is not able to handle the high demand and for this reason experts should be employed in this area. Workers can be increased and new facilities can be established. This is highly appropriate simply because in the coming years demand will increase more and in order to avoid more issues steps are to be taken today. It is also very important to use some experts that have specific skills in identifying bottlenecks. These experts can reduce the hiccups that disrupt the whole chain of productions. They can ensure that everything is running smoothly. This can really help solve problems of Toyota. In relation to abiding international regulations Toyota has to see to it that it does not have to face embarrassment like it did last year. Another recall of cars of that magnitude will further increase the problems of Toyota. It is very important that at the design and the testing time proper measures are taken to ensure safety regulations. Testing is extensive at Toyota but it has to be more extensive since problems are arising. The problem of product differentiation can be solved by introducing a new strategy. Product development should be made keeping in mind the local demand. In this way Toyota can expand in big ways. Cars made for local demands will cater better to local demand and local manufacturing units will make these cars. This will help Toyota increase its product differentiation. The political risk can be reduced by improving relations with the local governments. It is pivotal that right people are taken on board and lobbies are made to ensure the profits of the company. Also thorough research should be done with regards to the countries in which Toyota is now thinking to set up plants. Issues that happened in Venezuela cannot be tolerated in other countries so efforts should be done in this regard. Environmental concerns will increase in near future. It is important that Toyota starts to reduce its pollution. All the production and manufacturing process should be made environmental friendly. This can please the environment activist and can also increase the popularity of the company. Also it is important to separate the brand of Toyota in the eyes of the customer to ensure that brand image is enhanced (Duncan, E. 2010). This can be done by handling all the environmental friendly issues. An important step can be to use an environmental audit to increase the reputation of the company. This is an operational challenge because environmental groups can disrupt the operations of the company. All these issues must be sorted out in order to reduce the challenges of the company. Toyota is a big name but recently it is being passing through a lot of problems. The automobile sector is getting competitive and alongside with it brakes problem has somewhat shaken the grip of Toyota over its international market. Now it is important to solve such problems in the manufacturing and product development system. The complexity problem is also a major issue that needs attention. The most important point is that these issues should be considered real issues. Identifying these problems is important. Many experts are talking about these issues but the problem is that attention is not given to these experts. Toyota first needs to understand that these are real problems and they are to be solved. Only then the company will be able to solve these challenges and improve upon its performance. Conclusion Toyota is facing many operational challenges right now. The product development system is not working and political risk is also hurting the company in some countries. Product differentiation is also important but complexity issues are also hurting the company. All these problems have operational solutions. Toyota should start to think differently and should change its strategy. It should innovate locally and should produce products that cater to local demands. In this way it can increase it sales. Also complexity issues can be resolved by hiring experts. All these strategies can help the company in solving these problems. References Cawthorne & Chinea. (2009). Venezuela's Chavez threatens to oust. Retrieved from http://in.reuters.com/article/2009/12/25/idINIndia- Reuters 44982020091225?pageNumber=2 Duncan, E. (2010). Toyota Canada tries to separate from US problems. Business Review. Retrieved from http://www.businessreviewcanada.ca/business-features/operations/toyota-canada-tries-separate-us-problems Fujimoto, T. (2010). Under the Hood of Toyota's Recall: 'A Tremendous Expansion of Complexity'. Knowledge Wharton. Retrieved from http://www.knowledgeatwharton.com.cn/index.cfm?fa=viewArticle&articleID=2204&languageid=1 Kennedy, M. (2005). Implementing Toyota’s Product Development System. Appliance Magazine. Retrieved from http://www.appliancemagazine.com/editorial.php?article=680&zone=1&first=1 Naughton, K. (2007). Toyota’s Green Problem. Newsweek Magazine. Retrieved from http://www.newsweek.com/2007/11/10/toyota-s-green-problem.html Shook, J. (2010). Toyota Troubles: Fighting the demons of Complexity. Lean Enterprise Institute. Retrieved from http://www.lean.org/common/display/?o=1395 Read More