G2 Written Final Exam for the course. PDF

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Final written exam/assignment for the course. Worth 25% of the final exam. ...

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Toyota Makes Major Improvements to Its Quality Control System Group 19

Course number: MGMT 3340 The section number (CRN): 21861 Members name: XXXXXX Date of submission: 12/01/2018

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Table of Contents Background Information

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What happened? Why Toyota had to call back so many cars with defects in the early 2010’s

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“Pokayoke” and “ccc21”

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Net Revenue

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Cars sold and Global market

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Vehicle Sales by Region

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Summarize the entire paper and list what you have learned from this research.

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Reference Page

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Background Information Toyota was founded 1937 in Japan by Kiichiro Toyoda. Toyota has its headquarter in the city Toyota, located on the east coast of Japan. Kiichiro Toyoda was the President for the company until 1950. Today’s president Akio Toyoda has been the face of the company since 2013. Toyota has also over 600 subsidiaries and under divisions. The most famous one is probably Lexus which is the Luxury version of Toyota. It is impossible to only mention one factor to Toyota’s phenomenal success and how Toyota become the number one car manufacturer in the world. When Toyota first started to export vehicles to the United States in the late 1950s. They only sold around 300 vehicles during the first year in the United States, included their flagship model Toyopet Crown  (Magee, 2007). It is hard to image that Toyota only sold around 300 cars, not even a vehicle a day, compared to over 200,000 sold vehicles only in October 2018. Today, more than fifty years later, Toyota has replaced Ford as America’s second largest carmaker. It sells one in six vehicles in the world’s largest car market, and by next year it will have capacity to produce more than two million vehicles in North America (Blanco, 2018). Something that helped Toyota early on was their improvement of the Just-In-Time inventory (JIT). Just-in-time means making “only what is needed, when it is needed, and in the amount needed”. For  example, to efficiently produce a large number of automobiles, which can consist of around 30,000 parts, it is necessary to create a detailed production plan that includes parts procurement. Supplying "what is needed, when it is needed, and in the amount needed" according to this production plan can eliminate waste, inconsistencies, and unreasonable requirements, resulting in improved productivity

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(Toyota-Global, 2018). Another invention that Toyota uses to get a competitive advantage is the Kanban System . Toyota uses this system in their daily “Toyota Production System” (TPS). This is an unique system that plays an integral role for Toyota. The Kanban system has also been called the “supermarket method” because it is somewhat similar to converter bands that supermarkets use. At Toyota, when a process refers to a preceding process to retrieve parts, it uses a kanban to communicate which parts have been used. Toyota employs more than 350,000 worldwide during 2018,. A number that have been growing for every year the past decade. Table 1.1 shows the growth in employees world wide for Toyota during the past six years.

Table 1.1

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What are the major factors for Toyota’s success? Unlike many of their competitors, Toyota produces vesicles that their customers really want. They have a design for everyone; all the way down from their Toyota Yaris which is their cheapest model, all the way up to the Lexus (the luxury vehicle division of Toyota). This gives the customers plenty of options regardless of their economical situation. Toyota is a car brand for everyone! Toyota is also a great corporate citizen when it comes to helping the environment and our planet. Toyota has set up an environmental goal that they want to reach before 2050. This target is called Challenge 2050. This challenge consist of six smaller tasks. The goal for task one is to eliminate almost all CO2 emissions from Toyota vehicles by 2050. The second task is to  eliminate all the CO2 emissions from the manufacturing of parts and material used to produce  Toyota vehicles. Goal for task number three is to eliminate all CO2 emissions from Toyota  Facilities, logistics and processes. The goal for task number four will be to insure that all Toyota facilities and processes conserve and protect water resources by 2050. Goal number five is to ensure that all Toyota Facilities and processes support a recycling-based society. The sixth and final goal is to ensure that all Toyota facilities and processes operate in harmony with nature. Toyota also contributes with important benefits to many local communities where people live, work and play. Each Toyota manufacturer is located within a area that has an unique and important natural balance of plants, animals and ecosystems. That is why Challenge 6 supports Toyota’s efforts to minimize the disruption of natural habitats as they plan, construct and manage our facilities across North America (Toyota-Global, 2018). Toyota has also been the leading manufacturer when it comes to hybrid cars for the past two decades. 1997 was the year when the first Toyota hybrid car, prius was sold. This would be

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the starting point for Toyota’s growth and success within the hybrid division. Since then, many thing have happened and Toyota went from a company with a slow start to becoming the world leader in the car industry per revenue. The first year in business Toyota sold around 300 vehicles, and the year after they had a fast growth to 17,600 cars sold. Year 2000 Toyota expanded their company with sales in Europe and North America where they sold 19,000 cars total whereas 5,700 cars was sold in North America and 700 cars in Europe. It is easy to analyze the great success that Toyota has had during the past decades.

Core values Toyota has major five core values that they follow within the company. These values are followed through the whole Toyota structure in every country they are operating in. The list down below describes the values in more detail: ● Always be faithful to your duties, thereby contributing to the Company and to the overall good. ● Always be studious and creative, striving to stay ahead of the times. ● Always be practical and avoid frivolousness. ● Always strive to build a homelike atmosphere at work that is warm and friendly. ● Always have respect for spiritual matters, and remember to be grateful at all times. The most important core values are probably “Always strive to build a homelike atmosphere at work that is warm and friendly” because it is important for all the employees that the workplace is a comfortable place to be around and the employees want a warm welcome when they arrive to perform their job. Another critical success factor is “Always be faithful to your duties, thereby contributing to the Company and to the overall good” because it is important for Toyota that

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their employees do not violate their duties or does not obey to the duties they have got assigned. If they follow their guidelines and have no problems, the employees will be able to produce more and contribute more to Toyota and the overall good.

Critical success factors Key Success Factors (KSF) are very important for a company to possess, because it is those that can decide whether a customer shop at a rivals brand. Toyota is one of biggest global manufacturer of vehicles, and some of the KSF’s are Production and Manufacturing Facilities , Research & Development, and Innovative Activities . Toyota has more KSF’s, but these are three of them there will be discussed below. Production and Manufacturing Facilities i s the first on the list of KSF’s. Toyota owns manufacturing plants in most parts of the globe, which assembles or produce vehicles in local markets. Toyota is really good at Just in Time (JIT) and also “Lean Manufacturing”, which have shown to be an import KSF for Toyota. Research & Development (R&D)  is the second on the list of KSF’s. Some of Toyota’s R&D values are Quality, durability, reliability, value for money and environmentally-safe . Toyota has dedicated themselves to be on top on research and spend a lot of time on innovation. Being one of the top leaders, Toyota has to stay on top of things, in order to maintain their worldwide reputation as leaders. Innovative Activities  is the third on the list. A little while ago, Toyota tried to gratify market demand in more than 142 markets globally. Toyota also started the “Innovative International Multi-purpose vehicle” plan (IMV) in order to get maximum potential from the worldwide manufacturing and supply. This is just one innovative activity that Toyota has been

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involved in, but they are in general on top of new ideas and innovation in general as mentioned under R&D.

Strategies Toyota is using two major strategies that are helping the company to improve on the global worldwide market. The Generic Strategy  and the Intensive Growth Strategies . The Generic Strategy helps to determine the company’s approach in the global automotive industry. For Toyota Motor Corporation it is a combination of the cost leadership strategy and differentiation strategy. It makes sure to minimize the cost of operation and selling prices, and for Toyota, the goal is to minimize production costs to attain cost leadership. The Intensive Growth Strategy focus on three categories; Market Penetration, Product Development and Market Development. Market Penetration  is the main strategy for Toyota in the intensive growth strategy, because it supports business growth by attracting customers in the current market. In order for Toyota to fulfill this strategy, Toyota must offer products for every market segment. Product Development i s the secondary strategy for Toyota in the intensive growth strategy. It is very similar to Market Penetration because this strategy also focus on attracting customers, but in this strategy, customers are getting attracted because of new products. Toyota is known for being very innovative, and when Toyota published the Toyota Prius, the intensive growth strategy attracted customers that were concerned about the environment. This strategy also support Toyota’s broad differentiation generic strategy by using innovative products that can attract customers because of the advanced features the vehicle has or uniqueness. Market Development  is the third possible strategy in intensive growth strategy for

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Toyota. Market development is just supporting Toyota’s business, because Toyota already has a global presence. In this strategy, Toyota grows by entering new markets and selling to new market segments, but since Toyota already are occupied on most markets in the world, this strategy is not a top priority for the company.

What happened? Why Toyota had to call back so many cars with defects in the early 2010’s It came as a tremendous shock when Toyota had to recall over six million vehicles in the United States and Japan during 2010. Especially since Toyota had recalled over 10 million vehicles during the first half of the 2000s. During the 2000s, managers also realized that they have failed the employees training, and they in fact needed to improve their work performance in order to reduce the amount of cars returned, because of mistakes or errors. The new defects mainly involved uncontrolled acceleration that lead to several deaths. This included the popular hybrid model Prius Hybrid. At first the problem were attributed to floor mats becoming stuck under accelerator pedals; however, within weeks it was discovered that the design of the accelerator pedals was also faulty. By March 2010, Toyota had repaired over 2 million cars that was defected or other errors, which is around 50,000 cars a day. Toyota wanted improvements on their cars, because of the many errors and cars they have taken back the past 10 years and therefore, they have announced a new company wide control system to improve quality and reliability. Toyota want to increase the numbers of technology centers in North America from one center to seven centers. Toyota also want to recruit hundreds of new engineers, that can help

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uncover potential problems with the quality of the vehicle, so there would be as less cars as possible in the future with defect errors. Surprisingly, even after calling 10 million cars back because of mistakes and errors, Toyota become the world’s largest carmaker in 2008, and Toyota overtook GM in 2008 as the global leader. The quality problems Toyota has had up until 2010, led to plunging car sales, but already in 2011, the sales had recovered. Customers believed that Toyota had learned from their mistakes and with Toyota’s new control system, it will help them reduce and prevent design quality problems in the future.

“Pokayoke” and “ccc21” Poka Yoke is credited to Shigeo Shingo who was an industrial engineer at Toyota in Japan during the 1960s. It has become one of the most powerful work standardization techniques and can be applied to any manufacturing or service industry. Its idea to prevent errors and defects from appearing as soon as they occur is universally applicable and has proven to boost efficiency. The value of using Poka Yokes is that they help people and processes work right the first time, which makes mistakes impossible to happen. These techniques can significantly improve quality and reliability of products and processes by eliminating defects. This approach to production fits perfectly the culture of continuous improvement, which is also part of the Lean management arsenal.

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It can also be used to fine tune improvements and process designs from six-sigma Define – Measure – Analyze – Improve – Control (DMAIC) projects. Applying simple Poka Yoke ideas and methods in product and process design can eliminate both human and mechanical errors. In July 2000, Toyota launched CCC21, a cost reduction initiative that utilized new concepts with the aim of building vehicles with world-leading competitiveness in the 21st century. CCC21 was a company-wide initiative involving collaboration between engineering, production engineering, manufacturing, procurement, and suppliers to revise Toyota's fundamentals. Firstly, quality and price targets for the vehicles delivered to customers were set, and the function and quality of components and cost level required to realize these targets were assessed. At the same time, the company increased efforts into cross-model initiatives, studying each component to determine what parts could be made common across multiple vehicle models.

Net Revenue Toyota is a company with a strong market position and brand recognition worldwide together with their market share for Toyota and Lexus brands. Looking at the net revenues for Toyota since 1987, you can point out that Toyota have increased their revenue with four times. In 1987, Toyota had 7.2 billion yen in net revenue. Ten years later in 1997 Toyota had 12.2 billion yen in net revenue. In 2007 they had 26.2 billion yen in net revenue before they faced a big setback for the upcoming years. Today, the net revenues of Toyota are looking better than ever and their net revenue for 2018 is 29.380 billion yen (1 US Dollar ≈   113.8 Yen) (Toyota Motor, 2018).

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Table 1.2

Cars sold and Global market Looking back at the car reports from last year, we can point out that Toyota is the world’s second-largest automotive manufacturer right behind Volkswagen group. Toyota was the world’s first automobile manufacturer to produce more than 10 million vehicles. Since 1977, the car sales has increased significantly for Toyota. Back in 1977 Toyota reported that they sold 1,445,529 vehicles in Japan and 900,808 vehicles overseas. Ten years later, it was reported that Toyota sold 1,683,494 vehicles in Japan and 2,139,361 vehicles overseas. The big start for Toyota came around 2000, where overseas production far exceeded CBU exports. Toyota launched several different region-specific models and they were soon hitting a new peak at over 6.8 million units in 2007. Since then, Toyota has come a long way and the last years the sales of Toyota cars have been slightly stable. Toyota’s biggest peak came in 2014 where they sold 9.1 million cars and they are predicted to sell sell around 8.9 million cars in 2018 (Toyota-Motor, 2018).

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Table 1.3

Vehicle Sales by Region Even though the slight loss of car sales between 2014 and 2018, Toyota is still making around ¥ 4,000 billion more in revenue 2018 compared to 2014. Toyota have their biggest market in Asia, where Japan stands for 25.2 % of the sales, the rest of Asia stands for 17.2 %, Europe stands for 10.8 %, North America stands for 31.3 % and other regions stands for the additional 15.5 % (Toyota Motor, 2018)

Table 1.4

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Market Share According to Fortune Global 500, a company that list companies by revenue, they show that Toyota are ranked 6th (Fortune Toyota is the biggest automobile industry in the world, and they have a yearly revenue with 265 billion US Dollar. Toyota’s market share in North America with 13.9 %, South America with 10.37 %, Europe with 4.75 %, Asia and Africa with 8.27 %. This means that Toyota have a world-wide market share with 9.35 %, compared to General Motors which is the second biggest with 8.6 % (World-wide Auto Sales Market Share).

Table 1.5

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Summarize the entire paper and list what you have learned from this research. Toyota is among one of the most Successful Companies in the entire World. Starting from one man in Toyoda, to expansion and horizontal integrations into one of the most profitable in the industry. Started in 1937, it wouldn’t be long until ground breaking improvements were made. The following year, 1938, Toyota pioneered the “Just in Time” Manufacturing which was inspired from trip to an American Supermarket. Methods and Initiatives would soon be adopted such as CCC21 and Poka Yoke, which helped boost efficiency while eliminating on waste and mistakes. Toyota is ranked 6th on the Global Fortune 500 at a staggering 265 Billion in Revenue. Their Revenue is not solely based in the Toyota Motors but as well as horizontal integrations with their subdivision brands such as Hino and Lexus, with a few others. Over the past 75 years, they have been associated with being dependable and highly reliable as a brand and company. They currently possess the majority in global market share with most of their sales are in North America, Asia, and Japan. Japan sales are so high in volume, that they are comparable and computed alone when compared to other markets such as North America and even Asia. It is the Patriotic brand in Japan with almost every vehicle being a Toyota. We learned that the original spelling of the company was with a ‘D” but was soon changed after Corporate Level Decisions. We also learned that Toyota is Dominating on a Global Scale compared to American Favorites like Chevrolet and Ford. Toyota continues to push the boundaries just as they have before when first starting out as a new company. They are one of the top Hybrid and Fuel efficient brands on the market. Their

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CCC21 initiative as well as their 2050 Environment Challenge, help lead in a green initiative as they take on their corporate social responsibilities. This challenge will push Toyota towards having no CO2 emissions from their vehicles or any form of their production and manufacturing process. Toyota is one of the most influential brands in the world, but to keep that position, they will have to continue to push boundaries and keep moving forward.

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Task Table for group 19

Name:

Task/Tasks

Rasmus Jonsson

Organization, Powerpoint, background and historical information. Table 1.1, Table 1.2, cov...