Toyota was faced with an operational challenge in the early 1990's and here is our take on how it could have been handled

1. OPERATIONS MANAGEMENT
CATALINA CARVAJAL | CEYDA ATES | MARTIN MASSIAH | SARA REBORDÃO | YANNIC RENATUS

2. The Case
DESCRIBE THE MAIN POINTS OF THE CASE.

3. Toyota
During the 1980s, they were widely known for
their capability of offering high quality products at
low cost.
Toyota Motor Corporation (TMC) expanded
production to Kentucky USA
Toyota’s vision of “more cars for more people”
resulted in the development of the Toyota
Production System (TPS)
TPS enabled the company to offer fair pricing
while maintaining high customer satisfaction
through eliminating waste from their operations.Taiichi Ohno, Father of the Toyota Production System

4. Some Features of TPS
Assess production needs and minimize wasteJIT
Integrating quality controlJidoka
Continuous improvementsKaizen
Manual line shutdown featureAndon
Balancing component demandHeijunka
Component production triggerKaban

5. Problem
Toyota increased the seat varieties from 12 to more than
30 in March 1992.
Toyota Motors Manufacturing is facing issues with
defective seats.
KFS was responsible for the majority of the detected
seat-defects
By the end of April, the run ratio of TMM fell from 95%
to only 85%.
This decrease caused a shortage of 45 cars per shift.
Toyota Motors Manufacturing, Kentucky

6. Doug’s Dilemma
AS DOUG FRIESEN, WHAT WOULD YOU DO TO ADDRESS THE SEAT
PROBLEM? WHERE WOULD YOU FOCUS YOUR ATTENTION AND
SOLUTION EFFORTS?

7. Addressing the Problem
He can implement the “five whys” find the
root of the problem
Why this is happening-
Product proliferation
Reduce variability that might be caused by
changes in inputs for the new seats or in
process parameters.
Implementing a control chart that
distinguishes the source of variability.

8. Addressing the Problem
Why KFS is allowing defective products to reach TMM?
◦ They have a poor quality control system that can be addressed by sending a
QC team to train employees at KFS.
Why is TMM being so slow to handle cars with seat problems?
◦ KFS is consistently sending the wrong seats to TMM
Why are they sending the wrong seats?
◦ Due to manual communication methods, TMM in sending hand written orders
that might not be understood by KFS employees

9. Addressing the Problem
Implement an ERP, enterprise resource
planning solution, to manage
communication
Designate a QC team that checks the
seats immediately when they arrive to
TMM.
Reinforce the time limits a vehicle can
stay in the overflow parking area.

10. Addressing the Problem
Why is TPS failing?
◦ They are not fixing the seats in the
production line
Extensive re-education is needed to
internalize the TPS system as a
philosophy instead of using it only as just
a tool.
Focus on communication and quality
control

11. Solutions
WHAT OPTIONS EXIST? WHAT WOULD YOU RECOMMEND? WHY?

12. Possible Options
1. Retain KFS as its supplier, while increasing
inter-organizational communication and
innovating sections of the seat production
and installation process.
2. Change or widen the pool of suppliers that
TMM uses to outsource its seat
production.
3. Insource the production of the seats.

13. Solution 1
Placement of a permanent KFS team at TMM
to repair the defective seats on the assembly
line
Implementation of an ERP in both factories
Streamlining the variety of seats may not
satisfy Toyota’s global market, especially in
Europe.

14. Solution 2
Adopting a multi-vendor policy would
reduce the power given to KFS.
Increased competition may lead to a
reduction in the marginal costs and an
increase in quality.
The geographic distance is important since
there is a preference for the supplier to be
located near to TMM.

15. Solution 3
TMM can manufacture its own
seats using its world renowned
TPS
It is a time consuming and
capital intensive approach, and
a lengthy cost benefits analysis
would have to be done to
justify its adoption.

16. Recommendation
We recommend that TMM uses Solution 1
and retain KFS as its supplier, while
increasing inter-organizational
communication and innovating sections of
the seat production and installation
process.
Their long-term strategy, however, should
be Solution 2 to modify their approach to
outsourcing by widening the pool of
suppliers.

17. TPS Deviation
WHERE, IF AT ALL, DOES THE CURRENT ROUTINE FOR HANDLING
DEFECTIVE SEATS DEVIATE FROM THE PRINCIPLES OF THE TOYOTA
PRODUCTION SYSTEM?

18. Sources of Deviation
The current routine for handling defective seats
deviates from two main keystones of the TPS,
jidoka and kaizen.
Although employees in fact pull the andon cord to
signal the defective seat, they let the production
line run with the defective seats in the cars until
the clinic,
Instead of fixing the issue as it occurs, the routine
goes against the principle of jidoka.

19. Sources of Deviation
Toyota had TMC’s kaizen experts helping
KFS in its startup phase, by installing
visual controls, slash work-in-process
inventory, reduce assembly labor
content,
However they are not pursuing the
kaizen methodology in their off-line
routine that is currently being used to
deal with the defective seats

20. Sources of Deviation
TMM complies with the heijunka policy
(spreading out the demand for parts as
evenly as possible) as it relieves them
from a surge of workload and facilitates
their JIT production.
However, in 1992, this model is difficult
to scale across the seat models seats
case and makes their work actually
harder.

21. Core Problem
WHAT IS THE REAL PROBLEM FACING DOUG FRIESEN?

22. Core Problem
The quality control of the seats is actually
outside of Toyota and at the supplier's side.
Doug has no direct impact on the production
quality of the seats.
He has to find a way to ensure the quality of the
seats before they actually leave the KFS factory.
The philosophy of KFS does not match the one
of Toyota.

23. Core Problem
They do not follow fully the jidoka concept.
TMM allows defective cars to continue on the
line
TMM has to apply TPS properly and be an
example for KFS
He did not address the issue in a timely
manner
Postponing action is counterintuitive to TPS

24. Core Problem
Overtime capacity which costs money
TMM enforces the Matrjoschka doll
model, so Doug is actually quite
separated and does not have the
power to change things outside of his
area
He can be let go quite easily if he does
not manage to fix the seat issues.

25. Core Problem
The main problem he is facing it that TMM
does not enforce the TPS concepts
properly as well, so how can they expect
their student, KFS, to do so?
They have to start following the concepts
within the firm and then carry it outside
to the supplier, which is always Toyota's
strategy for success.

26. Any Questions