In 1937, Toyota was founded by Kiichiro Toyoda, son of Sakichi Toyoda, who created the Toyoda Automatic Loom Company. Toyota is a division of Toyoda Automatic Loom Works allocated to the production of automobiles under direction of Kiichiro Toyoda. Toyota's headquarter is in Toyota City, Aichi and in Tokyo. In addition to manufacturing automobiles, Toyota provide financial services to through its Toyota financial services division and also builds robots. Toyota Motor Corporation and Toyota Industries form the bulk of the Toyota Group, one of the largest corporations in the world.
The Toyota Production System (TPS) is a production system that sharped in the attitude of the complete elimination of all waste and that instills all aspects of production with this philosophy in search of the most efficient production method. (Toyota Motor Corporation, 2010) Beside organises manufacturing and logistics for automobile manufacturer, TPS also use to communicate with suppliers and customers. It originally called ‘Just In Time Production', as it builds on the approach created by Sakichi Toyoda, Kiichiro Toyoda and Taiichi Ohno. (Wikipedia, 2010) When all done, TPS brings order of importance progresses in material handling, inventory, quality, scheduling, and customer satisfaction. The recompense to shareholders is important and well acknowledged. (Strategos)
These are 7 principles of Toyota Production System; reduce set up time, small-lot production, employee involvement and empowerment, quality at the source, equipment maintenance, pull production and supplier involvement. (1000 advice)
Employee Involvement and Empowerment enable people to make decisions about their work. By forming a team, Toyota assigns their worker the task and training to do many specific tasks, this can help the human resource department and accounting and finance department to save up the training cost, salaries and wages as human resource department do not need hire a lot of workers. Each team has a leader who works in the same line, and the teams are also given the responsibility for house keeping and minor equipment repair. This also can help the company to save some repair and maintenance cost. (TAKTX, 2007)
In order to reduce waste related with defects in a process, the function of quality at the source focuses on the skills and knowledge in employees' hands to prevent defects from moving through the value stream as workers are at the best position to eliminate product defects. Employees are taught the minimum quality standard at each step of the process and authorized to correct defects or remove the defective item before the value-added activity is conducted. If the defect cannot be fixed, any worker can close down the line but other operations still can carry on. (TAKTX, 2007)
As for the equipment maintenance principle, Toyota operators are assigned primary duty for basic preservation since they are in the best position to defect signals of failures. Maintenance specialists analyse and fix only difficult troubles, improve the operation of equipment, and train workers in preservation. This can help the accounting and finance department save up the repair and maintenance costs and the wastages as the employees have the basic knowledge on how to identify the defective items and fix it. (TAKTX, 2007)
By using Andon, it will give different lights to show out which product failed to meet the quality standard (Red light) and which are in good condition (Green light) by using the electronic dashboard, plasma screen and overhead display. This will eventually help the sales and marketing department to make more sales as the products are in good quality and this also build up customers' confidence towards the company's products. (Learnsigma)
Pull production also known as Just-In-Time (JIT) is a strategy that uses to reduce the central warehousing and storage costs and reduce wastages. (Toyota) By using Just-In-Time principle, Toyota can produce quality products efficiently through the complete removal of waste, variation, and illogical requirements on the production area. In order to distribute a vehicle requested by a customer as soon as possible, the vehicle is efficiently built within the shortest workable period. Toyota only starts to customise the car when they receive order from customers. The assembly line must stock with some parts so that any kind of vehicle ordered by the customer can be assembled. As there is no storage or warehousing is needed and no wastage on material, this will help accounting and finance department to cut down costs. (Nash, Poling, 2007)
Mostly people will think that Toyota Way is same as Toyota Production System (TPS), but it is not same. TPS is already included in the 14 principles of the Toyota Ways. TPS is the most efficient and well developed example of which principles of the Toyota Way can carry out. Toyota Way consists of the basic principles of Toyota culture, which consent to s the TPS to operate so successfully.
The main idea of the Toyota Way is to review the principles of the Toyota Way through the 4Ps model—Philosophy, Processes, People and Partners, and Problem Solving. (Liker, 2005) The Toyota's 14 cultures have divided into 4 sections. Section I is talking bout the Long-Term Philosophy; Section II is about The Right Process Will Produce the Right Results; Section III is tell us about Add Value to the Organization by Developing Your People; and Section IV is about the Continuously Solving Root Problems Drives Organizational Learning. (Scribd)
Toyota Way has stated that it is important to use “pull” system to prevent from produce good in the amount that are more than the customer required. (Liker, 2004) The pull production method has been developed as one of its principles in TPS to reduce stock holding costs and lead times by Toyota. (TMMK, 2010) One of the main concepts of TPS, Pull Production also known as "Just-in-Time", also being recognised as reduce stock holding costs and lead times. Toyota improved the pull production method in which the quantity of work performed at each stage of the process is determined exclusively by demand for materials from the immediate next stage.
Promotes creativity, nonstop upgrading, and improvement by encouraging employees' participation and that similarly creates high levels of employees' loyalty to the company is the attraction of a human resources management system by empowering its workers. (Kotelnikov, 2001) Most of the process improvement idea that produced by Toyota employees has been put into action. Teamwork is very important in Toyota's management as the leader of each team is those who are capable that also work in the same line with their teammates. (Liker, 2004) Toyota culture is to have a high opinion of its partners by challenging and helping them to improve. Toyota treats suppliers much like they treat their employees, challenging them to do better and helping them to achieve it. Toyota provides cross functional teams to help suppliers discover and fix problems so that they can become a stronger, better supplier. (Lean Deployment) Toyota treats them as its own extension of business. (Liker, 2004)
Build a culture of stopping to solve problems and to get quality right at the first time is similar to the Jidoka which is one of the basic perceptions of TPS. Any employee in the Toyota Production System has the authority to stop the process to signal a quality issue. (Lean Deployment) Toyota Way's principle also emphasis that visual control is used so that, there is no unknown problem. (Liker, 2004) If the employee does not know where the problem happen, he/she cannot do anything to fix it. Eventually, here comes in the Andon system, which is a display board that helps to monitor the production process. (TMMK, 2010)
The Toyota Production system is a combined and interdependent system involving many aspects. The Toyota Production System has been an extremely good success at Toyota, but much less useful in other locations. (Greene) The industrial engineering genius at the back of the TPS is the leader of Toyota Manufacturing and Shigeo Shingo, Mr. Taiichi Ohno. These sources explore some significant differences between TPS at Toyota, and recent less successful application to a different place. All elements of the Toyota Production System systems are therefore interdependent and focused on the goals of adding value and eliminating waste. All require focus, flexibility, trained and motivated staff, continuous learning and improvement. (Greene)
The system that the companies have tried to implement can be found in fields as diverse as aerospace, consumer products, metals processing, and industrial product. (Spear, Bowen, 1999) For TPS to work effectively, it needs to be implemented in its entirety, not bit by bit. Each element of TPS will only fully develop if grown in an environment that contains and encourages the philosophies and managerial practices needed to support it. (Liker & Hoseus, 2008) The managerial culture for TPS is caused in several factors, including developing and sustaining a sense of trust, a commitment to involve those affected by teamwork, equal and fair treatment for all, and fact-based decision making and long-term thinking. All of these aspects must be in place and in practice for TPS to truly grow and provide the high-quality, high-productivity results it is capable of producing. TPS uses the chance to develop its exceptional workers in terms of productivity and job satisfaction with the support of Toyota Way. Based on mutual trust between people, a working environment is built and this will instantly involves the process of work remarkably in the passing on jobs from suppliers to firms. The lean management requires more highly developed people and deeper trust than in a mass-production system (Liker & Hoseus, 2008).
A business process is a collection of related, planned activities that deliver a particular service or product for a particular customer or market. It is also a set of coordinated tasks and activities, carried out by both people and equipment that will escort to achieving a specific organizational objective. It means a great importance on how the work is done within and organization, in compare to a product's focus on what. Therefore a process is a specific ordering of work activities across time and place, with a beginning, an end, and clearly defined inputs and outputs like a structure for action. It often can be imagined with a flowchart as a categorization of activities.
It begins with the customer's requirement and ends with the customer's need satisfaction. Process oriented organizations break down the difficulties of having structure departments and try to stay away from functional silos. Afunctional siloexists when thebusiness processesof a functional unit within thesection of labourof an organization focus privately on their functional objectives. This becomes awkward when the tendency of focus creates barriers that do not serve a reasonablebusiness purposeand negatively crashes the unit's ability to serve their role in the broader mission of the organization. A business process can be collapsed into several sub-processes, which have their own characteristic s, but also play a role in achieving the goal of the super-process. The planning of processes and sub-processes down to activity level is typically includes in the analysis of business process. Business Processes are designed to make a product or service more desirable for the customer and should not include redundant activities Business Processes can be developed through a large number of methods and techniques. For example, the Business Process Modeling Notation is a Business Process Modeling technique that can be used for drawing business processes in a workflow.
There are 4 functional areas in a business. Manufacturing and production department's function is to assemble the product, checking the quality and produce bills of materials. Sales and marketing department's responsibility is to indentify the customers, create the customers awareness and sell good to customers. Finance and accounting department need to pay the creditors, create financial statement and manage the cash account. The last functional area is Human resources department. Their job is to hire employees and evaluate the performance and enrolling employees in benefits plans.
Enterprise Resource Planning (ERP) is an enterprise system that provides single information system for organization with wide coordination and integration of key business processes. The function of ERP is to collect data from various function areas and store the data in a single storage. It enables different system to share information and to work closely with each other. For ERP, when customer places an order, the sales and marketing department will send the order to the warehouse and the warehouse will pick the ordered product and schedule shipment and inform the factory to restock whatever used up. The accounting department will be notified to send customer invoice. The customer service representative will track the progress and inform the customer about their order status. EPR provide valuable information for improving the company management and decision making. The corporate headquarter can have access to up to the minutes data to check for the accurate sales, forecasts and to analyze overall product profitability or cost structure.
The common functional areas of operation in most companies would include Marketing and Sales; Manufacturing and Production; Accounting and Finance; and Human Resources. ERP software was designed to get rid of the difficulties to share data and processes that happen when companies design and apply information systems for a single function or activity. SAP ERP is a solution for Tata Iron and steel company Limited (TISCO). The steel major's rapid response to market change and shifting to customer point of reference from product combined with the performance of ERP will speak more than measurements of their success for the suitable action. The company is now able to obtain benefits in all aspect and make further progress in each and every operation of an enterprise. (ERPwire2009)
Supply Chain Management (SCM) system is an automate flow of information between firm and suppliers to optimize production and delivery. It is a close relation of activities involved in buying, making and moving the product. The objective of SCM is to get right amount of their products from their sources to targeted point with least amount of time and cost. If the company and suppliers do not have accurate information, excessive inventories, in accurate manufacturing plans and missed production schedules will happen in the company. SCM helps manufacturing and production department to decide when and what to produce, store and move. It helps the firm to communicate orders rapidly, track the order status and check inventory available and monitor inventory levels. Besides that, SCM also help them to reduce the inventory, transportation and warehousing cost. They help to track shipments; plan production based in actual customer demand, and rapidly communicates changes in product design.
Dell‘s strategy is to provide customized, low cost, and quality computers that are delivered on time. Dell successfully implemented this strategy through its efficient manufacturing operations, better supply chain management and direct sales model. Dell takes orders directly from its customers through on phone or online. Thus, Dell reduces total cost of PC for the customer as the no need to go through any agent. By directly dealing with the customer, Dell gets a clearer indication of market trends. This helps Dell to plan for future besides better managing its supply chain. It is easier for Dell to get the customers requirements regarding the software to be loaded if they deal with the customers directly. Dell will check all the ordered software before they dispatch it. It helps customers to save time and cost as they no need to hire PC support engineer to load the software. They can use the PCs the moment they arrive. (SCM Case Study)
Customer Relationship Management (CRM) is manages way that used to deal with existing and potential customers. It uses information systems to coordinate all customer interaction processes in sales, marketing and service. It tracks all customer interactions. It also helps to analyze data to optimize revenue, profitability, customer satisfaction and customer retention. CRM help the sales and marketing department spot underserved markets, reward your best customers, fine-tune advertising campaigns, and predict new opportunities. (Fitter, 2010) By using customer relationship management (CRM) tools, Termite Extermination Inc. was able to develop and implement a marketing plan that increased sales dramatically. (Ward) Car manufacturing business will be the best example of CRM if they sell directly to the end users. They have to maintain the database about what the customers prefer when they want to buy cars and keep the database up-to-date. The manufacturer will knows what the customer needs and wants and this will be easier for them to target each customer. To build up the relationship with the customer, they can remind the customers of service dates, product recall and maybe send seasonal cards to customers. (BPC) Toyota have make a comparison of a recent before and after marketing campaign and it showed a 70 percent reduction of non-target customers being mailed, an 80 percent reduction in campaign costs, a 50 percent reduction in campaign development time and a 60 percent increase in campaign ROI. In the next few years, Toyota will contribute between $5 million and $10 million (in U.S. dollars) of additional contribution each year to the sales company by using Lean CRM. (Hill, 2006)
Knowledge Management Systems (KMS) help to collect relevant knowledge and experience in firm to support business processes and management decisions. KMS helps to manage and distribute documents and other digital knowledge object. Capturing corporate knowledge involves more than software and technology, it requires a strong document management software and cultural transformation of how information is generated, processed, stored, distributed and turned into innovation. With KMS, the company can share of valuable organizational information throughout the organizational hierarchy. The manufacturing and production department can avoid re-inventing the wheel and reduce redundant work. The human resources department may reduce the training time for new employees. Retention of Intellectual Property after the employee leaves if such knowledge can be codified. With the support by KMS, the experts of BP can respond immediately to operational issues in real times from support centres thank to collaboration technologies and remote data access tools that bring the problem to them. (BP, 2010)
Toyota Production System is a very useful system and it helps Toyota to earn more revenue. TPS is interconnected and interdependent with the Toyota's Culture as without one of them, Toyota will not be so successful as today. From the above, can see that how TPS help company's functional area. By using it, company can operate smoothly and can generate lots of revenues.