Operations Management Analysis of Toyota Motor Company

Operations Management

 

EXECUTIVE SUMMARY

This report helps to analyse the functions and operations management. The management of operations is an essential key factor that helps. The report analysis the operations management, process management, impact of lean management, capacity management through various models and frameworks. The chosen business organisation is Toyota motor company with its existing process of operations and supply chain. For the effective understanding of the operations management of the company, there are various modes and methods has been discussed to fund the shortcomings and gaps, followed by the recommendations and suggestions to overcome the issues.

INTRODUCTION

For the effective and efficient conduction of the activities of the business, it is very essential to maintain the operations of the business in such a strategical way that further leads to the profits and the higher sales and at the same time making the business process highly efficient and ensuring the satisfaction of the customers. The management of the business activities is very pivotal with a viewpoint to meet the target and the objective of the organisation. Along with operations management, there is also an essential or key factor that is important to be managed such as process, lean, capital management and more.

Toyota motor company is a global Japanese automotive manufacturer. The company was founded in the year 1937 by the founder kiichiro Toyoda. The company headquarters in Toyota city of japan. Toyota is mainly known for its commercial and heavy vehicles and offers highly reliable engines. The Toyota production system (TPS) is renowned worldwide with lean or just-in-time systems (Toyota, 2020).

OPERATION MANAGEMENT OF TOYOTA

Operations management is the process that is majorly and essentially undertaken by the business managers and administrators for the specific purpose for building the efficiency between the levels of the organisation. Operations management is a resource management function that produces and provides products and services. The functioning of the operations is part of the company that is responsible for this practice. Management of the operations becomes important in order to achieve efficiency in the business process enjoy the generated profits to the business organisation. Thus, every organisation has its own unique operations function for the certain type of product or service so does the automotive company Toyota has (Simão and Lisboa 2017).

In the automotive manufacturing company Toyota, the operations functions and precise maintenance is very essential in making of effective services and profits. In the company, operations management plays a pivotal role in identifying the most suitable location for the company, manufacturing facilities size, and the structure of the supply chain that further helps to function effectively and efficiently. There are different more ways with the help of which the operations management helps to achieve its profit, target, and priorities (Aoki et al. 2017). The following are some ways and through which operations management helps the company in its efficient functioning.

FUNCTIONS IN OPERATION MANAGEMENT

Prediction of organisational sales

Most essentially the operational process helps the company to determine and predict future sales with efficient decision making. The operations management of the organisation also helps in determining the future trends, wants and the needs of the customer and the market to satisfactorily serve in an efficient way. Along with the prediction of future sales, it also helps the company to determine the appropriate level of capital investment.

Tactical decision making

Other than a prediction of sales, the operations management of Toyota also helps in the precise planning and making of tactical and strategic decision that benefit the company in a lucrative way. Strategically and the tactical decision is pivotal for the company to meet its key operational strategies and plans as well as further designing the schedules, quality assurance processes and more (Lee et al. 2018).

Long term operations support

One of the most pivotal functions of operation management is that it helps the company to achieve its goals and priorities and long-term operational goals. By supporting the achievement of marketing and financial goals, the operations management plays its role in achieving the overall strategy of the company.

Functional and operational decisions

The operations management of Toyota also helps the company in making strategically decision in its functional and production department. These decisions help the automotive company to effectively and efficiently achieve its priorities including different types of technologies to employ, determination of workforce activities and more.

There is a further number of business operational activities that the company does in order to attain the specific goal and objective. The production and sales department of the company have synchronised with its production activities with the interface offered in purchasing, sales, and production to the customers. The domestic sales department of the company carry out the inventory as a finished vehicle to monitor the selling in the market and creates a strong bond between clients (Sprock et al. 2019).

KEY ISSUES WITHIN TOYOTA MOTOR COMPANY

Marketing strategies

The challenging issue with the company is that its marketing strategies are less effective and efficient to capture the market and attract customers. The marketing team of the company has to deal with many challenges to convince the potential and existing customers to purchase the vehicle.

Product recall

Another issue with the company is a product recall. Due to intense competition in the market, there are rivals who offer the substitutes of the existing products of the company with the same features and even the latest technologies. The company has to recall its product Toyota corolla due to major issues such as quality of product such as interior, build, faults with airbags and more.

Pricing strategy

For many years the company has pursued a cost leadership strategy. Particularly, Toyota has remained concentrated on the reducing cost and the associate elements from the operation. Eventually, it leads to low build quality with the purchasing of less strength steel, low-quality airbag, accelerators and more.

Designs and craftsmanship

The major operational issue with the company is that its designs and craftsmanship the products. This factor is somehow responsible for the less interest of customers in its vehicle. The designs of the cars are outdated, asymmetrical and less attractive choice of material and colours for vehicles (Mazur and Momeni 2018).

PROCESS MANAGEMENT IN TOYOTA

Process management business activity the business conducts in order to make the business operations smooth in function and achieve the desired objective. Process management refers to the process through which the essential processes are aligned in such a manner that helps businesses to achieve its strategic goals, implementation of process designing, the establishment of the process management system and more.

Process analysis

The evaluation and the analysis of the process can be done efficiently with the help of process chart. The following is the process chart for the automotive company Toyota.

Figure: Process Chart of Toyota

The customer plays an important role in the process management of Toyota. With the help of above process chart, it can be seen as the customers go through the production process just before the last step. The customers are important in the idea generation process and in making the demand for vehicles in Toyota. In a nutshell, the customers are important for the beginning and the end of the process.

In the production process, the company can increase its design language and build quality and should build vehicles in a precise and efficient way (Soliman, 2020).

CUSTOMER SERVICE STRATEGIES

Customer service is the most valuable function in the business operation to effectively generate profits. The following are the customer service strategies for the company.

Agent training

The strategy is to make sure to fulfil the expectation of the customers. This strategy can be fulfilled by training the customer manager and agents with providing dignity, problems identification, opportunity creations, and apology.

Improving call centre KPIs

By improving and advancing the call centre KPIs the customers can be effectively handled and maintained. KPIs such as resolution in the first call, less average time, and minimum abandonment rate and more.

Optimization of quality assurance

Quality assurance or QA practices helps to ensure the high service quality, efficiency in process and reduction of wasteful spending. For quality assurance tools can be used such as call monitoring and recording, agent reporting, call barging and more.

Omnichannel support

By offering the Omnichannel support, the customer service of the company can be enhanced. Omnichannel support includes providing services through phone, live chat, online support portal, email, social media and more (Narayana and Durga 2017).

INVENTORY MANAGEMENT

Along with the customer experience, the management of inventory is also very important for ensuring the smooth running of operation and process management. Basically, inventory management is the approach that helps in storing, sourcing, selling of raw material and finished goods and more. The following is the inventory management process:

Figure: Inventory Management Process

Source: Purchase Control, 2020

Step.1 firstly, well delivered to the area of the warehouse. This includes raw material, finished good and more.

Step.2 then, goods are reviewed and sorted then stored in the special stock areas and on the shelves.

Step.3 in the third stage the inventory levels are monitor and reviewed gradually with physical counts and data. This makes sure the accurate inventory available.

Step.4 orders placed by the customers are maintained in the inventory management. The customer places an order to sales departed that further transferred to the inventory management.

Step.5 the approval of order is verified with the original sales slip, purchase order, requisition and more.

Step.6 as per the order received, the specific number of products are received from the warehouses and the balance maintained by the inventory manager.

Step.7 the maintained records are uploaded and shared with the key stakeholders of the company.

Step.8 further with the review of records, the inventory levels are demonstrated and further restock the inventory to match the demand (Singh and Verma 2018).

SCHEDULING OPERATIONS

Scheduling means to establish the timing and the usage of resources in such a manner that helps the business organisation to achieve its objective in an efficient way. Within the operations functions for manufacturing and services scheduling refers to the use of facilities and equipment, scheduling of human activities and the material receipts. The following are the types of operations scheduling:

Forward operations scheduling: Forward scheduling may include the selection of the planned release date of the order and the scheduling of subsequent activities afterwards. Forward analysis techniques are especially useful in the case of production models, where production order is met in the shortest possible time.

Backward operations scheduling: The backward scheduling method commences with the scheduled date of receipt or due date or the date normally given by the customer. With this, the earliest possible receipt of goods’ time can be demonstrated with customers’ site.

FUNCTIONS OF OPERATIONS SCHEDULING

• It helps in allocating the resources within the production process.

• Maximum use of plant with minimum use of the cost and resources.

• Determines the sequence or the series of the tasks and jobs (Kousi et al. 2019).

PURCHASING AND SUPPLIER MANAGEMENT

Purchasing and supplier management is the process through which the business organisation makes the understanding of the business operations and the most pivotal elements to conduct business. Purchasing is the procedure of components, acquiring material, services and more. Whereas supplier management is the process that makes sure the maximum value to be received for the money incurred to the suppliers.

SUPPLIER MANAGEMENT PROCESS

• Identifying the business goals: the first step in the supplier management process is to identify the goal and the objective with the suppliers and the management.

• Selection criteria for suppliers: selection criteria such as pricing, industrial recognition, quality of past work, legal consideration and more.

• Selection and evaluation: As per the quoted prices of the supplier evaluate and select the most suitable and convenient supplier for the organisation.

• Negotiation and contraction: after the selection of the supplier, it is essential to negotiate with them to make a more profitable deal.

• Performance evaluation: after selection of the suppliers the next step is to evaluate the performance and match the industry standards.

FACTORS DRIVING SUPPLIER MANAGEMENT

• Managing supplier data that enables organisations to standardise key supplier data to provide practical insights to enhance supplier management.

• Leveraging supplier relationships in conditions of company or external distress to ensure market output does not fluctuate.

• Increasing the operational scale that helps to fulfil the increasing need for local and global suppliers.

With the help of the above factors and elements, effective process management can be planned in an efficient way in the organisation to serve the customers worldwide in a highly efficient and lucrative way. Further, these factors also help in the coherent achievement of the business objective and smooth functioning of the operations process (Fujimoto et al. 2019).

LEAN MANAGEMENT IN TOYOTA

Lean management is the type of management that helps the business organisation to achieve its objective and specific goal along with improving the efficiency and the performance of the organisation. In simpler words, lean management is the method or technique of organising and managing the work with the objective of improving the performance of the organisation, specifically profitability and the quality for the production process. Toyota production system (TPS) is based on a lean or just-in-time production system. The production control system was set up on the basis of several years of consistent improvement, with the idea of achieving the vehicles requested by customers the fastest and most efficient way to deliver the vehicles as quickly as possible (Coetzee et al. 2016).

The Toyota Production System (TPS) was created on the basis of two notions: ‘Jidoka' as when an issue arises, the equipment stops immediately, attempting to prevent the production of faulty products; and the 'Just-in-Time' notion, in which each production process produces that is needed for another gradual process. With the help of such a lean production system, the company has reduced its defective products and make an increase in the performance of the company. The lean management can be done with the help of certain tools such as 5S methods, kaizen method, visual method, six sigma methods and more (Chiarini et al. 2018). The following is the six-sigma method or tool for Toyota.

5S TOOL

The process of 5S was coming into consideration and popular through Toyota. Basically, the 5S tool for the lean management model includes five principles. The principles of 5S can be implemented in any business context, production/factory, or even to the personal life to help in organizing the home and more. The following are the five elements of the model.

Sort

The very first stage is to sort. This involves looking through the products and determining what is needed and what is not to reduce the forgetfulness and reducing clustering leads to safer, more stable spaces. Unwanted items always need more space and costs.

Systematise

Systematise is the next process in the lean management process. This simply involves designing a structure for a specified area. Ensure there is a position for it all, and everything stays in its place Labelling of spaces with items and quantity of parts enables to systematize the stock and also helps at a subsequent level.

Shine

The systematization of a workplace provides a space for all the stage of optimizing shines. Although shine does mean cleaning and tidying and it also calls for troubleshooting. This helps to effectively notice the instability in the lack of organisation and order of items.

Standardise

This phase is to establish safe, productive, and reliable practices to effectively complete a process or task which can be duplicated in order to maximize the efficiency of a process or task. Standardization ensures protection and allows the procedure to be quickly shared between team members.

Sustain

Sustaining is a crucial component and is probably the most complicated aspect of the process. The method must be compliant with the guidelines set in the 5S. Sustaining also means a relentless push toward change along the same lines.

The 5S model and the principles help the company to effectively overcome its shortcomings and improve the performance in an essential and effective manner. With the help of the principles, the overproduction can be reduced and quality can be assured to further improvement of the systems and the production efficiencies (Polancich and Pilon 2019).

BENEFITS WITH LEAN MANAGEMENT SYSTEM IN TOYOTA

There are many benefits and advantages that the automotive company Toyota gets with the implementation of the lean management system. The lean management system has really improved the efficiency and effectiveness of the performance of the company. The following are the benefits of the system to Toyota:

Improves quality: The Toyota Production System (TPS) helps to increase the performance of the operation, which eventually helps to improve the consistency of its goods by using different methods such as 5S, Kaizen, Poka-Yoke and more.

Improvement of safety aspects: TPS is the help to reduce the uncertainty and risks for customers and employees. TPS is a safety-conscious tool that performs to reduce the dangers both at the workspace and on the road. 5S helps workers recognise and avoid risks

Improves customer satisfaction: with the lean management and the zero-defect strategy of the company and the constant commitment to minimize costs enables it to offer quality at a price that can be afforded to the consumer that ultimately satisfies.

Reduces wastes: TPS eliminates waste improves productivity and reduces costs. Toyota's high-quality and cost-effective goods are closely related to Toyota's ability to minimize waste during the manufacturing process (Siasos et al. 2017).

From the above discussion, it is clear that the Lean management of the automotive company Toyota has creates a competitive advantage to itself with the lean production system and just-in-time process.

CAPACITY MANAGEMENT IN TOYOTA

The capacity management is the pivotal function that the business organisations are needed to function in the operations for the effective and efficient running of the processes. Capacity management is the practice of ensuring that a company maximises its various activities and output at certain times, under all circumstances. The ability of a company measures how much a company can perform, develop, or sell within a given period of time. Capacity management retains great importance in the automotive sector and in the Toyota motor company (Sabet et al. 2020).

CAPACITY PLANNING

To get the effective, efficient and the desired results with the management of capacity, it is very essential for the Toyota to plan for the capacity of the vehicles to be produced in order to generated sales and precise operations within the production process. Capacity planning can be done with the help of two aspects such as supplier capacity review and internal plant capacity review.

Internal capacity planning

The assembly plant regularly conducts a review over the operations of the production capacity and the process for the purpose to evaluate the ability and the capability of the company to produce the vehicle to serve the customers worldwide. Internal capacity planning can be done with the following aspects:

Production rate and workforce performance: Toyota employees the temporary workers and labours to assist in the process of normal production. The production rate of Toyota is quite high with over 10.74 million vehicles sold across the world.

Facility and equipment: Every process need to be analysed in order to determine the weakest point in the production process. The facility and equipment include the machines such as chassis builder, installation of sunroof, paint job, and more.

Supplier capacity

The suppliers are the initiator of the production process in any business organisation. Toyota’s supplier capacity needs to be evaluated because since this is a shared responsibility, purchase and production control must collaborate with each supplier to determine any restrictions that may limit the supply of a component. The supplier capacity can be evaluated through various modes. Toyota has an efficient supplier base for the conduction of its production process. The company gets supplied through different supplier form the world (Uzsoy et al. 2018).

CAPACITY PLANNING STRATEGIES

With the help of demand patterns and capacity evaluation, it is very pivotal for the business organisation to strategically plan for the capacity management to attain the desired objective effectively and beneficially with higher profits and customer satisfaction with on-time delivery. The following are the capacity strategies for Toyota:

Lead strategy: It is a strategy in which the organisation predicts an increase in demand and hence raises its production capacity in advance. The production management of the company uses this tool to attract the customers towards the product and capture the larger share in the market.

Lag strategy: This approach is very different than the previous one, as the company reacts to the call of high demand by boosting its output capacity after the company has started working at full strength. Under this strategy, it does not increase the production on the basis on a prediction but it needs facts and figures to act on.

Match strategy: This is known to be a moderate approach since it requires the combination of both the Lead and Lag strategies. It does not expect and predict very high demand and start building accordingly, nor does the production sit idle until the high demand increases at a higher pace (Cortiglioni et al. 2020).

BENEFITS OF CAPACITY MANAGEMENT

The following main benefits of capacity management to handle the production and operations process effectively and efficiently.

• Capacity planning helps to reduce cost by helping in identifying the least expensive way to meet upcoming needs for resources.

• Helps in the process of inventory management.

• Capacity management shows the scope and the future demand to plan production accordingly.

Figure: Toyota sales

Source: Statista, 2020

With the help of the above analysis and figure, it is clear the capacity management is an important function in operations management. The figure shows the increased sales of Toyota over the years by following efficient capacity management. This shows the organisations must follow demand forecast and should always attempt to match the capacity with the demand to efficiently get the desired results (Uzsoy et al. 2018).

CONCLUSION

From all the above discussion it can be concluded that the management of operations is the pivotal aspect of business functions to ensure the achievement of desired objectives and the fulfilling the wants and needs of the customers followed by satisfaction. The report suggests that the operations and the supply chain help the production to be done on time with the effective attainment of the objective followed by the customer experience and brings efficiency in the process. Operations management includes various processes and frameworks that help the business organisation to achieve its objectives such as lean, process, capacity management, 5S model, supplier's management process, process chart, and various strategies. With the help of such factors and elements, Toyota makes itself the most leading company in the world serving millions of customers worldwide.

RECOMMENDATION

From the above analysis and the strategies, the followings are recommendations to the company to effectively achieve objective and that maintain the position in the market.

Competitive advantage: Toyota is required to increase its competitive advantage on the basis of its creative capabilities. The business should also further change its culture and structure in order to improve its versatility in decision-making and solving the major issue.

Training: the company should train the staff on a permanent basis to assure the quality and the effective production process to achieve the desired objective and the increase the customer base.

Hybrid cars: although the company is manufacturing a very reliable and efficient hybrid cars, it should further increase the production that will boost the present situation of Toyota.

Increasing potentiality: as per the demographic preferences and to serve efficiently and profitability in the Asian market, the company should introduce more fuel-efficient vehicle to capture a larger market.

Designs: at least for the Asian market or specifically for India, the company should revise its design philosophy and serve the product as per the choices of the customer like build, own sub-4-meter SUVs and more.

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