Toyota is a highly successful conglomerate that requires no introduction. Toyota products are well-known all over the world because of affordability and performance. The company made its U.S. market debut in the late 1950s and since then it manages to take a major slice of the American automotive market. Its major source of revenue is the manufacture and sales of cars, trucks, SUVs, vans, and hybrids. The secret to its success is just-in-time inventory and lean management systems an example of a sociotechnical system. These were created because the company considered the social side of manufacturing.
The said company was able to determine quickly that main competitors like Ford, General Motors, and Chrysler cannot match their socio-technical systems that enabled the Japanese automaker to significantly reduce costs. When Toyota was just beginning to make a name in the United States, its management team was able to develop strategies that have come to be known as a just-in-time system and lean management system. As a result, the company was able to reduce waste such as 1) overproduction; 2) waiting; 3) unnecessary transport; 4) over-processing; 5) excess inventory; 6) unnecessary movement; 7) defects; and 8) unused employee creativity (Liker, 2004 p.89). Toyota was able to achieve a competitive advantage, selling cars at a higher margin because it was able to reduce operational costs.
A lean management system and the just-in-time system can be considered a sociotechnical system because it enhances the work efficiency of the employees. At the same time, it can boost employee morale. The workers are inspired because of the trickle-down effect of the success of Toyota. The increase in revenue means job security for many of them and at the same time, it increases employment benefits (Hino, 2006, p.10). But the most important thing is that the improvement in efficiency and the reduction of errors in the workplace also means that workers were able to accomplish much and work less as compared to their counterparts in other companies.
The significant difference in having sociotechnical systems can no longer be denied. The competitors took notice. Consider for instance that in the fiscal year 2002 alone, Ford Motor Company suffered a $5 billion loss while in the same fiscal year Toyota had a net profit of $5 billion (Lawfer, 2004, p. 24). There may be other factors at play but no one can deny that the sociotechnical systems within the organization played an important role in the firms success. Toyota must seek to continually improve its sociotechnical system keeping in mind that the system was not only designed to reach a high level of efficiency but also to reduce burnout. If the company can achieve this goal then there is no stopping the Toyota juggernaut.
The sociotechnical systems established at Toyota gave the company the needed competitive advantage over its main rivals. It is not easy to understand how a Japanese firm can be planted within the United States and beat companies like Ford and Chrysler. Corporate leaders at Toyota were able to develop the correct mix of a socio-technical system that eliminated waste. This enabled the workers to accomplish more in a shorter period. However, the company must not be complacent and must continue to find ways how to improve its sociotechnical system. It must be refined to create a balance between efficiency and prevention of burnout among its workers. Toyota is the best proof that if the organization considers the social side of their operation, then, they can expect amazing results.
References
Hino, S. (2006). Inside the Mind of Toyota: Management Principles for Enduring Growth. New York: Productivity Press.
Lawfer, M. (2004). Why Customers Come Back: How to Create Lasting Customer Loyalty. New Jersey: Career Press.
Liker, J. (2004). The Toyota Way: 14 Management Principles from the Worlds Greatest Manufacturer. New York: McGrawHill.
Toyota is a highly successful conglomerate that requires no introduction. Toyota products are well-known all over the world because of affordability and performance. The company made its U.S. market debut in the late 1950s and since then it manages to take a major slice of the American automotive market. Its major source of revenue is the manufacture and sales of cars, trucks, SUVs, vans, and hybrids. The secret to its success is just-in-time inventory and lean management systems an example of a sociotechnical system. These were created because the company considered the social side of manufacturing.
The said company was able to determine quickly that main competitors like Ford, General Motors, and Chrysler cannot match their socio-technical systems that enabled the Japanese automaker to significantly reduce costs. When Toyota was just beginning to make a name in the United States, its management team was able to develop strategies that have come to be known as a just-in-time system and lean management system. As a result, the company was able to reduce waste such as 1) overproduction; 2) waiting; 3) unnecessary transport; 4) over-processing; 5) excess inventory; 6) unnecessary movement; 7) defects; and 8) unused employee creativity (Liker, 2004 p.89). Toyota was able to achieve a competitive advantage, selling cars at a higher margin because it was able to reduce operational costs.
A lean management system and the just-in-time system can be considered a sociotechnical system because it enhances the work efficiency of the employees. At the same time, it can boost employee morale. The workers are inspired because of the trickle-down effect of the success of Toyota. The increase in revenue means job security for many of them and at the same time, it increases employment benefits (Hino, 2006, p.10). But the most important thing is that the improvement in efficiency and the reduction of errors in the workplace also means that workers were able to accomplish much and work less as compared to their counterparts in other companies.
The significant difference in having sociotechnical systems can no longer be denied. The competitors took notice. Consider for instance that in the fiscal year 2002 alone, Ford Motor Company suffered a $5 billion loss while in the same fiscal year Toyota had a net profit of $5 billion (Lawfer, 2004, p. 24). There may be other factors at play but no one can deny that the sociotechnical systems within the organization played an important role in the firms success. Toyota must seek to continually improve its sociotechnical system keeping in mind that the system was not only designed to reach a high level of efficiency but also to reduce burnout. If the company can achieve this goal then there is no stopping the Toyota juggernaut.
The sociotechnical systems established at Toyota gave the company the needed competitive advantage over its main rivals. It is not easy to understand how a Japanese firm can be planted within the United States and beat companies like Ford and Chrysler. Corporate leaders at Toyota were able to develop the correct mix of a socio-technical system that eliminated waste. This enabled the workers to accomplish more in a shorter period. However, the company must not be complacent and must continue to find ways how to improve its sociotechnical system. It must be refined to create a balance between efficiency and prevention of burnout among its workers. Toyota is the best proof that if the organization considers the social side of their operation, then, they can expect amazing results.
References
Hino, S. (2006). Inside the Mind of Toyota: Management Principles for Enduring Growth. New York: Productivity Press.
Lawfer, M. (2004). Why Customers Come Back: How to Create Lasting Customer Loyalty. New Jersey: Career Press.
Liker, J. (2004). The Toyota Way: 14 Management Principles from the Worlds Greatest Manufacturer. New York: McGrawHill.
Toyota Motor Corporation is one of the worlds largest motor vehicle manufacturing corporation. Headquartered in Aichi, Japan, the companys Toyota automobile models are quite popular in nearly all regions of the world due to their comparatively cheap prices and fuel efficiency.
As an international corporation headquartered in Japan, the corporation off shores much of its production activities, and procures cheap labor from various countries outside Japan. Off shoring enables companies to reduce operation costs and thus maximize on profit (Meredith & Shaffer, 2007, p.136). The Toyota Motor Company has several divisions in the US involved in production, assembly, and sale of Toyota automobiles.
In late 2009 and the early months of 2010, Toyota Motor Company began a worldwide recall of its vehicles, many of which were found to have faulty accelerator pedals. The pedals malfunctioned upon increased application of pressure, leading to accidents which had, by the time of the recall, killed nearly one hundred persons.
In the US, the death figure was about 60. Toyota Motor Corporation ignored early complaints of problems with the floor mats, accelerator, and brake pedals in some of its models.
The subsequent reluctance to alert its clients of the stated defects in its vehicles publicly, and denial of the existence of the same defects make Toyota Motor Corporation culpable, and the ensuing product liability lawsuits against the corporation are well justified.
Background to the Product Liability Lawsuit
Complaints against the faulty accelerator pedals had been made as early as the year 2006. Further complaints from Toyota vehicle owners focused on the floor mats, which seemed to attach to the accelerator pedals, and when this occurred when a driver was in high speed, the driver easily lost control of the vehicle.
Additionally, during high speeds, when a driver applied the breaks the vehicle increased its speed, leading to loss of control and accidents, therefore, even the break pads themselves were faulty in these vehicles.
Toyota Motor Company as a corporate entity had always been a model company insofar as quality production, employee satisfaction, and customer service were concerned. According to Liker, Toyotas corporate management style was one of the best in the world, and had always been used as the best example in running successful and sustainable corporations (2010, p.30).
However, in 2001, Toyota Motor Corporations resolution of increasing its global market share by nearly 20% thereby making it the worlds largest automaker in terms of units produced and sold began to erode the corporations quality commitments.
Toyota Motor Corporation had always had a post for a vice president in charge of worldwide quality production. However, due to the drive to increase sales, this office got engaged in sales increase as opposed to its core business, leading to the decline in quality that led to the production of the vehicle models with the defective floor mats, accelerator and brake pedals.
The Product Liability Lawsuit
The Product Liability Lawsuit against Toyota for the above stated product deficiencies and negligence on the part of the manufacturer were filed in California and New York, US, in March 2010.
Mark Saylor, a Highway Patrol officer, was off duty and had been travelling with a Toyota Lexus automobile since his own vehicle was undergoing service. While cruising at high speed, the accelerator pedal attached to the floor mat and his subsequent inability to stop the car led to a collision that resulted in his death (The Gilbert Law Group, 2010, Para. 2).
According to his wife and other relatives who filed the liability lawsuit against Toyota, a previous user of the same vehicle had complained of the exact hitch with the accelerator pedal that led to Saylors death. Despite this complaint, the Lexus dealership (managed by Toyota Motor Corporation) still went on and rented out the car to Saylor.
Another victim of the malfunctioning pedals was Nancy Murtha, who while driving her Lexus in the company of her five year old child tried to apply the breaks only for the vehicle to accelerate further, and she subsequently crashed into a wall (The Gilbert Law Group, 2010, Para. 8).
Her child died while she suffered multiple injuries that required several surgeries, which left her bankrupt and emotionally traumatized. Saylors wife and their relatives filed a product liability lawsuit against Toyota in California on 18 March 2010, while Nancy Murtha filed her lawsuit in New York on 24 March 2010.
The Reaction of Toyota Motor Corporation
By the time the two lawsuits were filed in the US, Toyota had recalled about 9 million units worldwide due to suspected defects in the accelerator and brake pedals. Therein lays the fault with Toyota Motor Corporation: despite undertaking such a significant recall of its vehicles, there were no press releases to warn owners of particularly susceptible vehicles such as the Lexus, that their vehicles were veritable death traps.
Therefore, owners and users of Toyota models such as Lexus for instance Mark Saylor and Nancy Murtha could have benefitted immensely from public warnings of the possible defects in their vehicles accelerator pedals.
The matter of faulty accelerator did not come to the attention of Toyota Motor Corporation in the period immediately preceding the recall, but much earlier. According to Taylor, as early as 2007, reports of defective floor mats and the malfunctioning accelerator pedals had begun to surface on a substantial scale in the US (2010, p.110).
However, part of the reason why the recall of these vehicles was delayed has to do with Toyotas tradition of dealing with its overseas plants and clients, and the corporations historically slow reaction to allegations of deficiencies in its automobile models. Toyota typically has a number of Chief Engineers, or Shusas, whose exclusive task is to oversee the quality of manufactured automobile models.
However, due to Toyotas focus on expansion and an increased global presence, these Shusas overrode many decisions made by Toyota managers in overseas divisions, such as the US.
Therefore, any reports of mechanical defects in theses vehicles would receive scant attention from the Shusas, who seemed more interested and focused on the corporations growth. Additionally, these Shusas would routinely ignore recommendations from Toyotas overseas managers, especially if such recommendations did not align with the corporations expansionist intentions.
Furthermore, Toyota Motor Corporation has historically been averse to acknowledging defects in its automobile units. Long admired for its quality productions, Toyota basked in the glory of the quality of its units for so long that, any claims of defects in its units would immediately be dismissed or denied altogether.
For instance, between 1998 and 2003, the corporation refused to acknowledge the fact that some of its six cylinder engines in the US were performing under par due to a build up of engine oil caused by defects in the cylinders.
Even though independent investigations confirmed this fact, Toyota Motor Corporation fervently denied these claims, only to agree later to repair and compensate owners of vehicles with the defective engine cylinders (Taylor, 2010, p.111). Lewis States that the fear of negative publicity for a corporation such as Toyota sometimes outweighs the desire to perform public good, even when lives are involved (2010, p.32).
Unethical Conduct of Toyota Motor Corporation
As stated in the foregoing paragraphs, there was indeed an actual manufacturing problem in the Toyota automobile models, especially the Lexus, which necessitated a worldwide recall. The recall began November 2009, and as more investigations revealed further hitches in wide ranging Toyota models, the scope of the automobiles units recalled widened. The last recall occurred in May 2010.
Instructively, the onus was Toyota Motor Corporation to issue public warnings and press releases communicating to the American public the possible anomalies in the accelerator pedals of some of its automobile models. Such an undertaking never occurred, and due to the lack of such notices, Mark Saylor and Nancy Murthas child, and many other victims lost their lives.
According to Bensinger and Vartabedian, federal regulators had, as early as 2007, asked Toyota Motor Corporation to consider making the necessary changes to the software of its automobile models to prevent sudden acceleration in its vehicles, a complaint against Toyota models that had become too common to ignore for the regulatory body concerned (2010, Para. 1).
The company should have conducted a worldwide systems analysis of its models; to identify faults and make the necessary changes, as is the purpose of a systems analysis (Meredith & Shaffer, 2007, p. 156). The corporation did no such software upgrade.
Conclusion
The conduct of Toyota Motor Corporation in handling its vehicle recalls between November 2009, and the early months of 2010 were unethical, especially in light of the needless lives lost due to the lack of public communication of the possible defects in its vehicles.
As discussed in this paper, The Toyota management, both in and out of the US, had been aware of complaints regarding the faulty accelerator pedals, and the defective floor mats. However, the corporation was slow to act, meanwhile, millions of lives were put at risk, and some, like that of Mark Saylor and Nancy Murthas child discussed here, were lost.
As much as the corporation had earned its reputation as a manufacturer of quality vehicles over the years it has been in operation, this seeming lack of empathy and its desire to protect its public image at the expense of the lives of its clients has stained its reputation. The onus is now on the corporation to compensate the wronged victims and their families, and attempt a restoration of its reputation, if at all that is possible.
Toyota Motor Corporation is one of the worlds largest motor vehicle manufacturing corporation. Headquartered in Aichi, Japan, the companys Toyota automobile models are quite popular in nearly all regions of the world due to their comparatively cheap prices and fuel efficiency.
As an international corporation headquartered in Japan, the corporation off shores much of its production activities, and procures cheap labor from various countries outside Japan. Off shoring enables companies to reduce operation costs and thus maximize on profit (Meredith & Shaffer, 2007, p.136). The Toyota Motor Company has several divisions in the US involved in production, assembly, and sale of Toyota automobiles.
In late 2009 and the early months of 2010, Toyota Motor Company began a worldwide recall of its vehicles, many of which were found to have faulty accelerator pedals. The pedals malfunctioned upon increased application of pressure, leading to accidents which had, by the time of the recall, killed nearly one hundred persons.
In the US, the death figure was about 60. Toyota Motor Corporation ignored early complaints of problems with the floor mats, accelerator, and brake pedals in some of its models.
The subsequent reluctance to alert its clients of the stated defects in its vehicles publicly, and denial of the existence of the same defects make Toyota Motor Corporation culpable, and the ensuing product liability lawsuits against the corporation are well justified.
Background to the Product Liability Lawsuit
Complaints against the faulty accelerator pedals had been made as early as the year 2006. Further complaints from Toyota vehicle owners focused on the floor mats, which seemed to attach to the accelerator pedals, and when this occurred when a driver was in high speed, the driver easily lost control of the vehicle.
Additionally, during high speeds, when a driver applied the breaks the vehicle increased its speed, leading to loss of control and accidents, therefore, even the break pads themselves were faulty in these vehicles.
Toyota Motor Company as a corporate entity had always been a model company insofar as quality production, employee satisfaction, and customer service were concerned. According to Liker, Toyotas corporate management style was one of the best in the world, and had always been used as the best example in running successful and sustainable corporations (2010, p.30).
However, in 2001, Toyota Motor Corporations resolution of increasing its global market share by nearly 20% thereby making it the worlds largest automaker in terms of units produced and sold began to erode the corporations quality commitments.
Toyota Motor Corporation had always had a post for a vice president in charge of worldwide quality production. However, due to the drive to increase sales, this office got engaged in sales increase as opposed to its core business, leading to the decline in quality that led to the production of the vehicle models with the defective floor mats, accelerator and brake pedals.
The Product Liability Lawsuit
The Product Liability Lawsuit against Toyota for the above stated product deficiencies and negligence on the part of the manufacturer were filed in California and New York, US, in March 2010.
Mark Saylor, a Highway Patrol officer, was off duty and had been travelling with a Toyota Lexus automobile since his own vehicle was undergoing service. While cruising at high speed, the accelerator pedal attached to the floor mat and his subsequent inability to stop the car led to a collision that resulted in his death (The Gilbert Law Group, 2010, Para. 2).
According to his wife and other relatives who filed the liability lawsuit against Toyota, a previous user of the same vehicle had complained of the exact hitch with the accelerator pedal that led to Saylors death. Despite this complaint, the Lexus dealership (managed by Toyota Motor Corporation) still went on and rented out the car to Saylor.
Another victim of the malfunctioning pedals was Nancy Murtha, who while driving her Lexus in the company of her five year old child tried to apply the breaks only for the vehicle to accelerate further, and she subsequently crashed into a wall (The Gilbert Law Group, 2010, Para. 8).
Her child died while she suffered multiple injuries that required several surgeries, which left her bankrupt and emotionally traumatized. Saylors wife and their relatives filed a product liability lawsuit against Toyota in California on 18 March 2010, while Nancy Murtha filed her lawsuit in New York on 24 March 2010.
The Reaction of Toyota Motor Corporation
By the time the two lawsuits were filed in the US, Toyota had recalled about 9 million units worldwide due to suspected defects in the accelerator and brake pedals. Therein lays the fault with Toyota Motor Corporation: despite undertaking such a significant recall of its vehicles, there were no press releases to warn owners of particularly susceptible vehicles such as the Lexus, that their vehicles were veritable death traps.
Therefore, owners and users of Toyota models such as Lexus for instance Mark Saylor and Nancy Murtha could have benefitted immensely from public warnings of the possible defects in their vehicles accelerator pedals.
The matter of faulty accelerator did not come to the attention of Toyota Motor Corporation in the period immediately preceding the recall, but much earlier. According to Taylor, as early as 2007, reports of defective floor mats and the malfunctioning accelerator pedals had begun to surface on a substantial scale in the US (2010, p.110).
However, part of the reason why the recall of these vehicles was delayed has to do with Toyotas tradition of dealing with its overseas plants and clients, and the corporations historically slow reaction to allegations of deficiencies in its automobile models. Toyota typically has a number of Chief Engineers, or Shusas, whose exclusive task is to oversee the quality of manufactured automobile models.
However, due to Toyotas focus on expansion and an increased global presence, these Shusas overrode many decisions made by Toyota managers in overseas divisions, such as the US.
Therefore, any reports of mechanical defects in theses vehicles would receive scant attention from the Shusas, who seemed more interested and focused on the corporations growth. Additionally, these Shusas would routinely ignore recommendations from Toyotas overseas managers, especially if such recommendations did not align with the corporations expansionist intentions.
Furthermore, Toyota Motor Corporation has historically been averse to acknowledging defects in its automobile units. Long admired for its quality productions, Toyota basked in the glory of the quality of its units for so long that, any claims of defects in its units would immediately be dismissed or denied altogether.
For instance, between 1998 and 2003, the corporation refused to acknowledge the fact that some of its six cylinder engines in the US were performing under par due to a build up of engine oil caused by defects in the cylinders.
Even though independent investigations confirmed this fact, Toyota Motor Corporation fervently denied these claims, only to agree later to repair and compensate owners of vehicles with the defective engine cylinders (Taylor, 2010, p.111). Lewis States that the fear of negative publicity for a corporation such as Toyota sometimes outweighs the desire to perform public good, even when lives are involved (2010, p.32).
Unethical Conduct of Toyota Motor Corporation
As stated in the foregoing paragraphs, there was indeed an actual manufacturing problem in the Toyota automobile models, especially the Lexus, which necessitated a worldwide recall. The recall began November 2009, and as more investigations revealed further hitches in wide ranging Toyota models, the scope of the automobiles units recalled widened. The last recall occurred in May 2010.
Instructively, the onus was Toyota Motor Corporation to issue public warnings and press releases communicating to the American public the possible anomalies in the accelerator pedals of some of its automobile models. Such an undertaking never occurred, and due to the lack of such notices, Mark Saylor and Nancy Murthas child, and many other victims lost their lives.
According to Bensinger and Vartabedian, federal regulators had, as early as 2007, asked Toyota Motor Corporation to consider making the necessary changes to the software of its automobile models to prevent sudden acceleration in its vehicles, a complaint against Toyota models that had become too common to ignore for the regulatory body concerned (2010, Para. 1).
The company should have conducted a worldwide systems analysis of its models; to identify faults and make the necessary changes, as is the purpose of a systems analysis (Meredith & Shaffer, 2007, p. 156). The corporation did no such software upgrade.
Conclusion
The conduct of Toyota Motor Corporation in handling its vehicle recalls between November 2009, and the early months of 2010 were unethical, especially in light of the needless lives lost due to the lack of public communication of the possible defects in its vehicles.
As discussed in this paper, The Toyota management, both in and out of the US, had been aware of complaints regarding the faulty accelerator pedals, and the defective floor mats. However, the corporation was slow to act, meanwhile, millions of lives were put at risk, and some, like that of Mark Saylor and Nancy Murthas child discussed here, were lost.
As much as the corporation had earned its reputation as a manufacturer of quality vehicles over the years it has been in operation, this seeming lack of empathy and its desire to protect its public image at the expense of the lives of its clients has stained its reputation. The onus is now on the corporation to compensate the wronged victims and their families, and attempt a restoration of its reputation, if at all that is possible.
Advertisements of Toyota Yaris car communicates its benefits enabling the audience to understand and consider buying it. The selling benefit attempts to persuade the customer by emphasizing the positive side of the product. It makes the audience realize that a reputable multinational company that offers nothing less than quality products to the market manufactured the car. The advertisement process aims to educate the audience and ensure that all the necessary information is provided.
The key selling benefit makes it possible for Toyota Company to charge higher prices and earn greater returns on investment. It facilitates the differentiation of the car by creating a positive story that motivates the audience to prefer the product to those of the competing companies. The strategy enables the company to justify higher prices for this car than other similar cars in the market resulting in better profits. Since the brand has a good reputation and is recognized around the globe, many consumers could be willing to pay higher prices for their preferred cars. Moreover, selling benefits creates room for the company to emphasize the intangible benefits.
The selling strategy facilitates the expansion of the target market and makes it easier for the audience to develop complicated purchasing decisions. It becomes possible for consumers to make informed decisions since the details of benefits are provided. This implies that selling benefits would promote consumer knowledge and understanding to influencing the purchasing decision. The method also enables the company to benefit from powerful psychological motivators based on the consumers purchasing behavior. Focusing on the benefits of the car enables its marketers to satisfy the desires and needs of the consumer. It also supports product differentiation to satisfy customers through meeting their diverse needs. Toyota has achieved the objective by presenting the car model with a hatchback and another one with a sedan shape to meet the requirements of all customers.
Advertisement Targeting the Audience Appropriately Verbally and Non-Verbally
Non-verbal advertisement played a great role in the establishment of a good impact on consumers and included eye contact, gestures, facial expressions, and body postures. The facial expression created a beneficial impact by supporting contradicting or complementing statements. The use of body language facilitated the creation of a long-lasting impression and reinforced the verbally communicated message. The audience was targeted appropriately verbally by ensuring effective persuasion and provision of beneficial information. Toyota Company applied various persuasion tricks to influence customers decisions and create a fruitful relationship. Communicating with customers offers clarity making sure that they access all the necessary information. Both verbal and non-verbal advertisements promoted the satisfaction of customers following a better flow of information and response to feedback.
The Positive/Negative Aspects of the Advertisement
The positive aspect of the advertisement is that it explains the benefits of the car to customers, and its ability to solve their problems. Defining the benefits in a quantifiable manner is likely to attract more customers than offering the basic description. The selling approach highlights all the benefits of the car including public perception and attitude towards it. Moreover, the approach facilitates the identification of unique needs in the market and presents the product as an effective solution. It also helps maintain a low cost of production while maintaining the high profitability of the company products.
The negative aspect of the selling approach is that it does not inform consumers about possible problems with the car. It only concentrates on the positive side while ignoring issues that buyers are likely to experience while driving the car. Moreover, the approach takes the advantage of intangible services such as the reputation of the company and public perception to charge higher prices than the value of the product. For instance, Toyota uses its strong brand and reputation to maintain exaggerated prices regardless of the quality of the product they are selling. This implies that large organizations may not realize the need of offering quality products since their recognition and reputation will support the market. The approach frustrates new entrants in the market since they do not have loyal customers who would come for their products based on the history. Important features such as the quality, interior space, durability, fuel efficiency, acceleration rate, and stability on the road that should determine the price become irrelevant.
Improvements/Changes for the Advertisement
The advertisement should incorporate specific features of the product that are relevant to consumers. Apart from focusing on increasing profitability, the approach should consider the customers value for money by ensuring that their needs are satisfied. Customers are always interested in the buying of products meeting their needs and solving their problems. This means that it is important for the approach to avoid misleading consumers to buy recognized brands even when they are not meeting their minimum requirements. Improvements should be focused on ensuring that customers receive the necessary information regarding specific features of the product. This would play a role in the satisfaction of customers while facilitating the development of a long-lasting relationship. Moreover, it should provide information regarding the available models in the market, engine size, body size, capacity, as well as, the number of seats.
The definition of globalization stems from capitalism. It is the domination of the world markets by multinational organisations with massive capital bases through the imposition of free trade policies leading to existence in massive frontiers simultaneously. The practice has been ongoing for quite some time but has however picked momentum in the last half decade.
Multiple Free Trade Agreements (FTAs) have been signed between nations in a bid to opening up new markets for the maximization of profits for capitalists. The labour markets have not been left untouched, far from it, they are the drivers of globalizations as cheap labour usually amounts to less costs and in turn more revenue, a capitalists dream. Like in all other factors affecting the world economy, there have been beneficiaries of this practice as well as losers (Gereffi 2005).
Naturally, the beneficiaries are the few privileged members of the society whereas the losers have largely involved the marginalized poor, lowly paid workers ad the environment. Present trends, like melting of the ice caps due to global warming, tend to suggest that unless this practice is regulated, then our very existence is at risk. The regulation of globalization has been regarded as the most challenging task of the political leadership of our time.
The Toyota Engineering and Manufacturing, North America (TEMA), company provides a very good platform for the analysis of the operations of globalization. The company is a subsidiary of the Toyota Motor Company (TMC) of Japan and is based in Texas in the United States.
The case of Toyota is perfect since it is a blueprint of a multinational company which has 13 plants in North America alone. This helps in dispelling the notion that globalization only happens in developing countries. Toyota has already surpassed general motors in the production of automobiles in the US making it a very good example of a global company at work.
The company is accused of being the biggest force in undermining its workers and also the community it exists in. for starters, the 2,000 acre piece of land that the plant sits on was formerly ranch land. Additionally, the company has collaborated with the state in the preference of capital over labour.
This has an effect on the way workers are treated, how the community is handled and how the environment is utilized. The location of the plant and all others is along the NAFTA corridor that allows access to the markets in the south as far as Mexico and also on all other directions (Vogel 2006). No study can be conclusive without the examination of the significance the location plays.
Theoretical framework
Globalization as discussed is a product of communism and is driven by the need for rapid expansion into new markets and also in existing ones. Therefore, there are several characteristics of globalization that can be derived from this description. The first is that globalization is relentless in the search for cheap labour.
Hence, companies are opening up subsidiaries in areas where production is cheapest and then exporting these products into the markets that have opened up as a result of the free trade agreements. As a result, there are opportunities of employment that open up in those countries where multinational set up their production plants. The downside to this characteristic of globalization is that sometimes in a bid for utilizing cheap labour, children are coerced into working in these plants like in Asia.
When multinationals set up production plants in foreign countries, they are in effect investing in the resources of those countries which lead to foreign direct investment (FDI). This is because most factors of production readily available in those countries are utilized and only those that are not available are imported into the country. Globalization is therefore a source of development for different regions in the world.
The other characteristic of globalization is that it leads to increased sales in foreign countries that may amount to new markets that open up. Companies make more revenue from the marketing of products in countries that they have set up in by selling those products in those markets before they are exported into others.
Manufacturing in foreign countries means that there are a lot of raw materials that may be needed that translate to the importation of most factors of production not present in the countries of manufacture (Humphrey and Memedovic 2003).
As discussed above, many companies are usually attracted by the prospect of having cheap labour which accounts for a very small fraction of the total cost as it would have had where labour is more expensive. The exchange of factors of production has led to the improvement of communication as coordination is very important.
The negative impacts of globalization are usually concerned with the attitude of the multinationals towards their workers, some who are children, and the environment. Many multinationals corporations that set up in developing countries usually do not have employee structures and pay very little attention to them.
In addition, very little investment is made in the conservation of the environment with no established waste management systems. This has led to pollution on a very large scale. Another negative impact of globalization is that most multinationals do not develop the area in which they operate.
Discussion
The theoretical framework above presents a preview of what is expected in the subsequent discussion. Since the focus was on the Toyota Company, the discussion will look at the impact of globalization on the corporation itself, the labour market, the community of operation and the environment.
The Corporation
The company boasts a strategy that it refers to as lean manufacturing (Berger & MIT IPC 2005). This entails the manufacture of the maximum number of sellable parts or services at the lowest operational cost (Vogel 2010). This strategy has worked very well for the company as it is hinged on teamwork, flexibility and evaluations and re-evaluations. The system is aimed at maximizing throughput instead of input which is a system through which the company generates revenues form the sale of automobiles.
There is a lot of corporate rhetoric that is anti-lean manufacturing. The company has had partnerships with state governments that extends to it subsidies and tax abatements. There is also the factor that allows the company to maximize cheap labour both offshore and onshore to extensively produce low cost motor vehicles capable of competing with other companies in the country (Gereffi 2006).
On close inspection of the companys operations, it is clear that no manufacturing process adopted saves on operational costs as the tax abatements and cheap labour do. This serves to uphold the principles and strategies that have been adopted by Toyota.
By the endorsement of the system, the company has made mega profits during its cause of operations and has remained relatively unaffected by the global economic dynamics. The successes of the company must however be measured against its impacts on its workforce, the community and the environment.
Labour
It is undoubted that the success of globalization has largely been at the expense of the working population. The strategy of utilizing cheap labour is affecting the labour market on two major fronts. The first effect is that globalization creates a sense of competition between the workers which drives the cost of labour further down (Herrigel 2004). Secondly, the effect has been that workers in regional labour markets have been stratified thus. The chart below shows the cost of labour in the Americas where Toyota operates.
The North American Free Trade Agreement (NAFTA) is the reason why manufacturing companies in the US are moving their operations southerly in order to maximize the cheap labour in Mexico. The simple strategy is to pit workers against each other which works very well for the company but has had disastrous consequences for the labourers.
Among the consequences is the obsoleteness of UAW (United Auto Workers) which was one of the strongest welfare unions in the US, the deteriorating welfare of all auto workers, the continuous decline in the payable wages and other benefits and the decline in employment opportunities in both the Midwest and Canada (Sturgeon & Richard 2000).
The table shows how the wages are distributed in the various divisions of the Americas. Clearly, there is a distinction between the different wages with those in the Midwestern US assembly receiving the highest wages at $26 per hour. In sharp contrast, those in the Mexican parts receive and abysmal $1.75 per hour while performing relatively same tasks as their counterparts. Another disparity that is noticeable is that part workers receive about half what the others in the assembly do.
What is even more appalling is that assembly workers in Mexican parts receive only 16% as much as part workers in Midwestern US. The absence of part workers in southern US is largely because the company relies on Mexicans to produce he bulk of their parts and just crosses them over the border where they are utilized. This proximity was largely the reason why manufacturing plants were in the southern parts of the US.
Another strategy that has worked very well for the company has been the payment of surwages, a practice that involves the payment of wages that are higher than the minimum wages but much lower that those that are arrived at through collective bargaining. This makes it hard for members of these labour blocks to unionize and hence the company keeps control of the labour block. The figure below supports this fact.
It is clear that the company pays a little higher that the minimum age in San Antonio which is $11.55 and hour. The company adds an extra $3.70 dollars but that does not even begin to cover the amount that is demanded by the unions. The company has reiterated that this strategy is very important for its continued growth in North America.
The Community
It is almost absolute that the fate of the economy of a part like San Antonio is closely tied with that of its workers. In the discussions above, it is clear that the beneficiaries of globalization are usually a few people at the expense of the larger society. The economy of the area can thus be said not to be gaining as a result of having the company located here. As an example, we are going to examine public education in the area.
As a starting point, the deal between the government and the company where it receives subsidies and tax abatements mean that there is lost revenue for the region. The funds that were diverted into this cause could have been utilized in the development of public utilities or invested into the education system.
Even before the company was officially began and asked for applications from prospective workers, there was already an influx of people into the area seeking to be employed which put a pressure on the existing systems. This led to a financial crisis barely a year after the plant had been opened.
In 2007, Toyotas tax was estimated at $700 million. The Southwest Independent School District (SWISD) went before the Bexar County Appraisal District (BAD) to challenge this valuation as it felt that revenue was being lost. As a retaliatory approach, the companys lawyer also went before BAD arguing that the $700 valuation was too high for the $1.2 billion rated plant and that the figure should be reduced to $300 million.
The company went as far as to threaten BAD which led to it revising their tax downwards to $627 million. During the same period, the company installed a sewerage system in Texas which led it to receiving a further $52 million tax break which brought the total tax to $575 million. This scenario shows the power that multinationals has which is capable of holding local authorities at ransom and twisting them to do according to their will.
In that year, SWISD received taxes totalling to $2.86 million from Toyota but the figure included $2 million which was part of an initial deal, meaning that in subsequent years, the educational system in San Antonio will receive only meagre amounts from the company. This scenario is played out in all other social infrastructure.
The Environment
Toyota has been named as being environmentally responsible in Texas. However, on close inspection, they have relocated all their dirty manufacturing procedures outside the US to countries that have fewer restrictions to environmental pollution. For example, auto batteries are manufactured in Mexico and steel products are manufactured in the Far East countries where the governments are lax in enforcing environmental laws. Toyota thus gets tax breaks for not polluting the US but doing it elsewhere.
Conclusion
The discussion above has drawn comparisons on how globalization affects the economy of the world through the utilization of cheap labour and the destruction of the environment. The deliberate effort by Toyota to underpay its workers and in turn rob them of their rightful dues is a pattern does not go unnoticed by the government but is in fact assisted by it to succeed.
The payment of surwages further aims to subvert the need for unionization which is a well calculated move but is however against the rules of labour. The consequence of this cheap labour and by extension globalization is a poorer society which cannot adequately fend for itself leading to poverty.
The policies that are adopted by the Toyota Company have been emulated by other multinationals leading to the same results. This means that the workers are continually being exploited for the profit of a few individuals while their governments continue to do nothing.
It is not that multinationals should not make profits; on the contrary, they should make their profits in the edicts of ethics. Paying their workers the appropriate dues does not only help that single individual but also ensures that the economy of the particular country also benefits.
While there are positives that can be associated with globalization, the bottom line is that it is a trend that threatens the everyday survival of most populations. These positives are clearly outnumbered and their effects are nowhere as catastrophic as the negatives. It is therefore my recommendation that world governments revise the operations of multinationals in order to protest their societies and the environment.
References
Berger, S., & MIT IPC. 2005. How We Compete. Doubleday, New York.
Gereffi, G. 2005. The global economy: organization, governance and development, in Smelser, N. and Swedberg, R. (Eds): Handbook of Economic Sociology.
Gereffi, G. 2006. The New Off shoring of Jobs and Global Development. International Institute for Labor Studies, Geneva.
Herrigel, G. 2004. Emerging strategies and forms of governance in high-wage component manufacturing regions. Industry and Innovation Vol. 11, Nos. 1/2, pp.45-79.
Humphrey, J., & Memedovic O. 2003. The global automotive industry value chain: what prospects for upgrading by developing countries? Sectoral studies series, United Nations Industrial Development Organization, Vienna.
Sturgeon, T. & Richard, F. 2000. Globalization and Jobs in the Automotive Industry. Final Report to the Alfred P. Sloan Foundation, International Motor Vehicle Program, Center for Technology, Policy, and Industrial Development, Massachusetts Institute of Technology. Cambridge, MA.
The Toyota production system is one of the most efficient production systems in the world. The efficiency of Toyota production system makes it one of the most studied production system in the world. Thousands of managers have attempted to replicate the production system in their own companies. One of the major characteristics of Toyota production system is that it empowers employees to be in control of their activities. Toyota ensures that improvements start at the lowest possible level within the company.
Toyota strives to ensure that it has an ideal production system. According to the company, an ideal system should have defect free products. Toyota ensures that its employees have skills that would enable them produce defect free products within a short time. Toyota retrains or replaces workers who fail to meet this condition.
In addition, Toyota strives to reduce the batch size of its production cycle. Smaller batches reduce wastage and increase the efficiency of the production . Toyotas just-in-time production strategy helps the company minimize wastage of labor, energy and other resources (Spear & Bowen, 1999). Reducing the amount of inventory reduces the cost of managing the inventory. This increases the efficiency of the company (Ohno, 2002).
Continuous development of Toyotas production system makes it difficult for companies to emulate the production system. Toyota uses the scientific method in formulating developments in its production systems. Developments in the production system begin with the formulation of a hypothesis. The hypothesis determines the objective of the improvements in the production system (Spear & Bowen, 1999).
Employees design an experiment on how to undertake the improvements. This enables them to simulate the improvements. Simulations usually take place in reality. Whenever possible, Toyota undertakes the simulations in the workplace. When it is impossible to test the ideas in the real world, the company recreates the work area to test the idea. Simulation enables operators and supervisors detect areas that need further improvements (Liker, 2011).
Toyotas production system arranges all production processes in a single, smooth flow. Just-in-time production enables the company produce the right quantity of a product at the right time. This reduces wastage in the production system. Just-in-time production system ensures that Toyota has lean operations. In addition, employees of the company implement various improvements in their works. Proper implementation of changes in the production process is one of the key objectives of a lean production system (Ohno, 2002).
Ensuring that employees initiate various changes eases the implementation process. One of the key features of a lean production system is that it establishes a time frame for each process within the production cycle. Toyota links its pace of production with the demand (Ohno, 2002). This reduces the amount of inventory, and the time it takes for the customer to receive motor vehicles after placing an order.
Lean production systems have continuous flow processes. Toyota strives to reduce the batch sizes to create a continuous flow production process. The company ensures that it produces one vehicle at a time to create continuity in its production process (Ohno, 2002). This reduces the time lag of the production process.
In addition, continuous flow process makes optimum use of the available labor. This ultimately reduces the cost of production. Toyotas production system enables the company to produce high quality vehicles in a cost effective manner. However, the efficiency of the production system is highly depedent on the ability of the employees to undertake their activities efficiently.
References
Liker, J. (2011). The Toyota way: Management principles and fieldbook. New York: McGraw-Hill Professional.
Ohno, T. (2002). The Toyota production system. London: Productivity Press.
Spear, S. & Bowen, H.K. (1999). Decoding the DNA of Toyota production system. Harvard Business Review, 77(5), 97-106.
The recall of Toyota vehicles in 2009 and 2010 attracted the attention of governmental agencies and journalists who criticized the company for its failure to ensure the safety of their cars (Bunkley, 2010, p. 4).
Many consumers are now aware of the car accidents that were primarily caused by the deficiencies of Toyota Camry and Toyota Corolla (Bunkley, 2010, p. 4). The negative publicity is probably the main reason why the financial performance of this organization declined significantly and its market share decrease relative to the major competitors. Currently, this corporation attempts to regain the trust of customers.
This paper is aimed at discussing current strategies that Toyota implements in order to overcome public relations difficulties. On the whole, the problems encountered by this company demonstrate that modern businesses should always remember about their corporate social responsibility; their profitability and reputation. Nevertheless, Toyota will manage to cope with this problem, if they adhere to their policy of quality improvement.
First of all, the annual report of Toyota emphasizes the importance of safety for this corporation. In particular, it is argued that the ultimate goal of this corporation is the zero casualties of their vehicles (Toyota Motor Corporation, 2011, p. 14).
In particular, this company will carry out investigations of various accidents in which their vehicles were involved (Toyota Motor Corporation, 2011, p. 14). Furthermore, they intend to carry out numerous simulations in order to detect possible limitations of their cars (Toyota Motor Corporation, 2011, p. 15).
The results of these tests can help this corporations create safer vehicles. This is the core strategy that they want to adopt. In this way they intend to eliminate the slightest deficiencies of their cars. Additionally, this company intends to introduce cars that pose a lesser threat to pedestrians and decrease the risk of injuries. Again, they want to achieve this objective through a series of tests and simulations.
Provided that the strategies advocated by Toyota succeed, this organization can indeed restore its reputation and gain the trust of their clients. This policy is consistent with the culture of Toyota because this corporation continuously stresses quality improvement of their products. However, it may take this company many years in order to achieve the goals. The problem is that the recall of vehicles has been wide discussed in various media, and these reports produced a long-lasting impression on many customers.
This problem is particularly important nowadays when the news about a specific event is spread via social networks very quickly. This is why Toyota will have to spend much time in order to change the opinions of clients and public organizations. Under these circumstances, even well-developed policies cannot bring immediate success.
Furthermore, this corporation implements other strategies in order to reestablish its positions in the market. First of all, this company has changed its sales program in order to attract new buyers. In particular, they offer such an option as no-interest financing to their customers (Bunkley, 2010, p. 4). Moreover, the buyers of Toyota vehicles in the United States are allowed to repay their loans within five years (Bunkley, 2010, p. 4). Additionally, the company enables clients to take three years of free maintenance (Bunkley, 2010, p. 4).
These policies are supposed to make the products of Toyota more appealing. Currently, these strategies do not yield the expected results and Toyotas market share has decreased, especially in comparison with their major rival Ford Motor Company. There are several reasons why the activities of Toyota have not been quite successful. First of all, at this point, many customers are still too concerned about the safety deficiencies of Toyota vehicles.
It should be admitted that these concerns may be significantly exaggerated, but they strongly affect their purchasing decisions. This is one of the main arguments that can be made. Similar difficulties were once experienced by Ford when this company was strongly criticized for the release of Ford Pinto (Weiss, 2008). The impact of that scandal also produced a profound effect on the financial performance of Ford. This problem can be even more challenging at the time, when news is spread at a much faster rate.
This aspect should be considered by the senior management. Still, one can argue that Toyota can further implement this policy because they should offer certain incentives to their clients. However, they should not expect that they can quickly regain the loyalty of clients. This is the main issue that they need to take into account when developing new strategies or business initiatives.
Certainly, one has to admit that the recall of Toyotas vehicles has adversely impacted the financial performance of this corporation. Moreover, their reputation was significantly compromised. Nevertheless, the effects of these events can be overcome if they can successfully implement their quality assurance programs. In the long term, this organization can regain their positions in the market. The policies that they currently pursue are consistent with the culture of this company and its production process.
Reference List
Bunkley, N. (2010, March 2). After Recalls, Toyota Offers Incentives to Win Back.
Today, the Toyota Company has the best supply chain management framework many companies in the world use as a model and benchmark to implement their supply chain management practices. The best practices are based on Toyotas supply chain managements lean thinking techniques.
The rationale is efficiency and lean thinking to achieve effectiveness and customer satisfaction. The purpose of this paper is to discover how Toyotas supply chain management approach is implemented, the significance, and negative impact of the supply chain management practices.
Toyotas Supply chain management, Isnt It Obvious
It is obvious that the study raises questions on the meaning of supply chain management and how Toyota implements its supply chain management practices to position the company in the market and be globally competitive. In answer to the questions, supply chain management, in the context of lean thinking, embodies techniques and strategies to improve the operational efficiency and effectiveness in the production, supply, and delivery of products and services to the customers (Ohno, 1988, p.3).
Toyota operates on a global scale based on the concept of lean thinking in the steady stream of activities that contribute to the companys supply chain management processes to optimize the production and delivery of vehicles to the global market (Huntzinger, 2002, p.23).
In answer to how Toyota does the supply chain management, it is critical to note here that Toyotas company executives have all the secrets about the lean thinking techniques the company employs in its supply chain management. The key words lean thinking underlies the efficiency that defines Toyotas supply chain management framework.
Flow system
Flow is a concept underlying Toyota operational efficiency and success. Here, the company ensures that any point in the production and supply chain framework that hinders any process is removed from the entire system (Drogosz, 2002, p.4).
The underlying model is to ensure that the production of different models of vehicles, the supply of materials required for the production of vehicles and the components needed proceed uninterrupted. In this case, a one-piece-at-a-time production process is facilitated creating a lean manufacturing and supply chain environment (Liker, 2004, p.4).
The way Toyota implements its supply chain management strategies is by facilitating the behavior and principles which facilitate production focused on long term results and not on short term gains (Drogosz, 2002, p.5). From the perspective of Toyotas supply management framework, the flow concept forms the basis for the companys success and enables the company to eliminate losses from the large inventory of unused equipment, products, and labor (Huntzinger, 2002, p.21).
In addition, the companys cost per piece production system works by assigning specialized tasks to qualified employees and provides a separation of duties and responsibilities within the company framework, which contributes to the success of the company.
In this case, the products are made in quantities that are in demand. The benefits include short lead times and the making of specific products to address specific needs of the customer. To be lean, Toyota uses a tool that requires each employees commitment in eliminating wastes that leads to errors, injuries, and defects.
In addition, the necessary training, knowledge, and motivation are provided to workers by improving the workplace environment (Drogosz, 2002, p.4). The key elements in this approach are management commitment, appropriate training and development, and inculcation of organizational culture that supports the top management commitment and involvement to continuous improvements. In each case, problems could are brought to the surface and solutions to address the problems formulated on time.
Pulling from the customer
On the other hand, the concept of pulling from the back of the customer is a crucial component in Toyotas supply chain management strategy. All the lean activities are integrated into the system where products are supplied according to the current need and use. Typically, the products are delivered in the right quantities and at the right time to the right destination. The logistics is crucial because it reduces the lead time and costs (Drogosz, 2002, p.4).
A question on the strategy the company uses to implement the pull from the back approach occurs. The answer is obvious. The underlying principle is the just-in-time (JIT). The principle provides the basis for material replenishment, minimal effort and warehousing inventory, based on what is taken by the customer to make small replenishments and ensuring responsibility in the day-to-day changes in the demand for products.
The solution is to integrate computerized information systems for inventory processing purposes (Huntzinger, 2002, p.22). The pull concept is crucial in the entire supply chain management process because the entire workforce uses stable and repeatable methods to ensure regular output, predictability, and timing which form the foundation of the pull and flow concept (Drogosz, 2002, p.5).
The question arises then, how is the lean concept realized in the supply chain of the company in the context of the pull and flow approaches? The answer is that the lean concept becomes a success by ensuring that wastes are eliminated in each phase of the supply chain cycle.
The company ensures that employees and the entire supply chain system is not overburdened (Huntzinger, 2002, p.17). All production and supply chain schedules are evenly distributed to minimize unnecessary burden on the system so that the work is evenly leveled.
Talk time
Talk time is one of the concepts that are the foundation of Toyotas lean concept in the supply chain management exemplified in the way the management talk about the need to eliminate waste. The management ensures non-value adding activities are avoided to eliminate wastes to reduce lead time, excess inventory, and other delays.
It enables the company to avoid overburdening people and machinery which leads to quality and safety problems. The people are encouraged to talk with qualified and trained group leaders on the problems and challenges encountered and possible solutions to the problems.
Significance of supply chain management
One can learn the significance of supply chain management from the above discussion and the way Toyota undertakes the supply chain management process embedded in the lean thinking strategy. Supply chain is critical in the total management of each of the phases involved in the supply chain to eliminate wastes and ensure effectiveness and efficiency (Huntzinger, 2002, p.12).
In addition, supply chain is important because the management is able to identify and align effective inventory management, inbound transportation, material handling, warehousing, and transportation service procurement based on Toyotas supply management lean thinking strategy (Huntzinger, 2002, p.5).
Toyota, through an effective supply chain strategy embedded in the companys lean thinking concept has made the company grow in its revenue base (Bolles, 2003, p.3).
In addition, the company has experienced effective asset utilization, effective cost management and controls, and enhance customer product and service delivery. As discussed above, Toyotas growth is strongly correlated to its supply chain management because perfect orders are given for the right market, with after sales services easily within reach of the customer (Huntzinger, 2002, p.7).
In addition, reduced inventory as stated above leads to working capital reductions where delays in the delivery of products and services are minimal or lacking completely. Investigations show that Toyotas supply chain management strategy leads to fixed capital efficiency by optimizing the supply network leading to a global tax minimization and cost minimization. However, the negative side of supply chain management exists (Huntzinger, 2002, p.5).
Negative impact
Studies show the negative impacts include the risks resulting from the macro economic trends which have the possibility of magnifying the problems that arise because of the complex nature of the supply chain methods (Bolles, 2003, p.3). In addition, other problems include margin erosion and changes in consumer behavior and sudden changes in demand, which makes the supply chain management worse, and the lack of new technologies to absorb the sudden changes (Bolles, 2003, p.3).
Conclusion
In conclusion, Toyotas supply chain management is embodied in the lean manufacturing concept developed by the company for efficiency and effective delivery of products to the market. The significance of Toyotas supply chain management is valuable and acts as a tool for efficiency and effectiveness in product and service delivery. The key pillar of the effectiveness of Toyotas supply chain management is the lean thinking concept which has many benefits despite the negative impact of the supply chain management.
References
Bolles, R. N. (2003). What Color Is Your Parachute? A Practical Manual for Job Hunters and Career-Changers. Revised edition. Berkeley, CA: Ten Speed Press.
Drogosz, J. D. (2002). Applying Lean above the Factory Floor. Journal of Ship Production, 18 (3), 159-166.
Huntzinger, J. (2002). The Roots of Lean: Training Within Industry: The Origin of Kaizen. Target, 18 (1), 1-20.
Liker, J. K. (2004). The Toyota Way: 14 Management Principles from the Worlds Greatest Manufacturer. New York: McGraw-Hill
Ohno, T. (1988). Toyota Production System: Beyond Large-Scale Production. Portland, OR: Productivity Press.
Johnny Chang has a typical supply chain management problem in his hands. The only silver lining in his dilemma is that he has a steady stream of orders coming in. But apart from that he has no clear grasp of the other aspects of the supply chain management component of his business.
This was brought about by sudden and unexpected success of his company when it began to manufacture and sell Realcos Breadmaster. The orders kept pouring in for the past two years. Apparently Johnny was busy focusing on marketing and perhaps the technology within them that he did not have time to look into the manufacturing and supply issue of the business.
Two years later the company seemed to be operating on the basis of the demand made during the boom years it was the time when was a novelty item and the market was not yet saturated with them.
However, in the present time when Johnny Chang studied the inventory levels for this particular item, he was correct to be alarmed when he discovered that there are 7,000 units left in their warehouses. In his opinion this number is too high and the company has to find a much reliable method when it comes to manufacturing only the required units and create an oversupply of the said equipment (Proud, 2007, p.49).
Facts of the Case
The current production cycle is based on the idea that orders are estimated to be around 20,000 units of Breadmaster per week. This is the reason why the manufacturing facility has been churning roughly 40,000 Breadmaster every other week. This is equivalent to 80,000 units per month.
But upon closer examination of the orders that were already listed for the upcoming month Johnny discovered that for the first week the order was 23,500 units. For the second week, the order was 23,000 units. For the third week the order was 21,500 units.
For the fourth week the order was 15,050 units. For the fifth week the order was 13,600 units. For the sixth week the order was 11,500 units. For the seventh week the order was 5,400 units. For the eight week the order was 1800 units.
There are two implications here. First of all, if the estimated order was 20,000 units per week and by deciding to manufacture 40,000 units every other week, the eight week cycle is projected to yield 160,000 units of Breadmasters.
Assuming that on the first week of the eight-week cycle the company was able to produce 40,000 units and still have 7,000 units inventory then at the end of that particular cycle the company has 167,000 units ready for delivery. But the actual demand is less than that. It is clear that there is an oversupply of Breadmasters.
However, there is another problem, on the fourth week the orders began to decline in a significant manner. Thus, using the current production cycle, the company cannot created a significant oversupply in the next five weeks of the production cycle.
Master Scheduling
There are two ways to look at the changes in the demand for Breadmasters. It can be a mere fluctuation and that in the next few months it goes back to the previous levels. In this case the company has no need to modify the master schedule and Johnny can rest easy because it is business as usual.
However, this can be a new trend altogether. It can also be a sign that the company has already saturated the market. Regardless of what happens in the next few months it is important to use master scheduling tools to determine how the company can correctly respond to current supply and demand trends.
The following table would help Realco eliminate guesswork and determine once and for all how to manage their supply chain. In this manner, the company can eliminate waste because it is obvious that if there is excess production, Realco pays for the cost of storage and obsolescence if the same items are not delivered on time.
Past Due
1
2
3
4
5
6
7
8
Item Forecast
20,000
20,000
20,000
20,000
20,000
20,000
20,000
20,000
Total Demand
23,500
23,000
21,500
15,050
13,600
11,500
5,400
1800
Projected Available Balance
7,000
23,500
500
19,000
3,950
30,350
18,850
53,450
51,650
Available-to-Promise
47,000
23,500
40,500
19,000
43,950
30,350
58,850
53,450
Master Schedule
40,000
40,000
40,000
40,000
As predicted the projected available balance is way beyond what the management expected when it comes to surplus. There is an excess of 51,650 units at the end of the eight-week production cycle and that is not a good thing. This is not the proper way to manage the company.
This means added cost when there is no need to spend for additional Breadmasters. In addition, the company spends more money in terms of storages costs. And if the Breadmasters will not be sold in the next few months then the company is also expected to spend an extra amount to cover obsolescence or potential damage to the equipment.
The critical factor here is the tremendous number of units made every two weeks. It was made clear that 40,000 units should not be the base number of units that has to be produced in one production cycle. Based on the actual demand even changing the master schedule to 20,000 units per week would still result in the significant oversupply of Breadmasters in eight weeks.
However, the high demand for Breadmasters in the first three weeks justifies the change to 20,000 units per week. However, management must reduce the number of units that must be manufactured after the fourth week. After the fourth week the number of units must be reduced to 15,000 units per week and then the reduction continues until it matches the actual demand.
Supply Chain Management Techniques at Realco
The strategy to make a promise to deliver a particular number of goods at a particular time frame is a good way to increase customer satisfaction, improve brand image, and most probably enhance customer loyalty. This is good on one condition alone and that is, Realco would be able to deliver on the promises made.
However, an error in estimating actual demand and forecasted demand can create in shortages. The inability to deliver as promised can easily hurt the companys image. This can even lead to the cancellation of orders.
In the case of Realco the company cannot afford to make this mistake. Based on data given it is best to assume that the company has already saturated the market. It is not the time to damage the business relationship established in the past and endanger the orders placed in the present.
With regards to the question concerning which one is worse: to refuse an order or to make a promise and not deliver, both are pitfalls that must not be avoided. However, if forced to make a choice it would be best to make a promise and not deliver on time.
This is assuming of course that the delay is a matter of days or a few weeks. In this regard the company can offer a discount and other freebies that can repair the damaged reputation of the organization and can lessen the frustration of the customer. But both scenarios are bad for business. A business leader must do his best not to make a pledge to deliver an item and then turned around and fail to do so.
This is disastrous for a company if it keeps failing to deliver. On the other hand an oversupply of Breadmasters can force the company to bankruptcy because it is being made to produce a product in excess numbers and yet the demand is no longer the same as previous levels. This not the prudent thing to do and thus, aside from master scheduling Johnny Chang must hire experts to anticipate future demand for Breadmasters.
Toyota
Toyota is a globally known brand. It is a company with production facilities scattered all over the globe. It has announced its presence to the global market when it debut in the United States in 1957. After that time there was no turning back for Toyota as its core leaders vowed to become the best automotive company in the world.
A few decades later they were able to deliver their promise. From a fledgling manufacturing organization in Japan it has grown to be a dominant force, producing cars, trucks, SUVs, vans and hybrids. At its highest level of success, Toyota has invested billions of dollars into the U.S. economy and there seems to be no sign of stopping although a slowdown has been noticeable as of late.
In difficult times, such as those that is being experienced by Toyota Motors only those who are ready to adapt to a changing world can expect to compete and win. The challenges and opportunities brought about by globalization is easy to understand and made obvious in news headlines and changes that can be seen happening all around us.
In the business world, especially in the automotive sector, the use of technology to lower production costs has increased the level of competition. This is exacerbated by the needs to lower energy consumption and the sophisticated tastes of consumers.
The giant auto-manufacturing companies in the United States and Europe knew this very well when they discovered that ability of a Japanese upstart company to take away the global dominance that they had been enjoying since cars became an indispensable commodity in the 20th century.
However, the rapid ascension of Toyota to the top has been threatened as of late. The company that revolutionized production systems and has grown itself to take down the global leader in auto sales has realized the difficulty of sustaining tremendous growth.
Recommendations
It has become apparent that Toyotas success is in the use of lean-management principles as well as just-in-time management strategies (Bell, 2006, p.38). This has been enhanced by their knowledge of Manufacturing Resource Planning or MRP2 and Enterprise Resource Planning or ERP.
The goal of these different systems is to increase efficiency while at the same time reducing waste. There must be an economy of effort as well as the economical use of resources to produce a high-quality product that can be delivered on time.
These are tough standards to follow but Toyota was able to deliver on it promises beginning in the 1980s up to the early part of the 21st century. But a survey of recent headlines gives the idea that the company is struggling to regain its dominance that it experienced two decades ago.
The use of computer-based technologies and even proven management strategies has been the hallmark of Toyota and this has resulted in their unprecedented success according to automotive industry standards. A fledgling Asian company became so successful it was able to influence the whole world when it comes to its revolutionary manufacturing techniques.
A closer look at Toyotas production strategies would reveal that the company is well-aware of Enterprise Resource Planning and in their case it can be argued that it is simply an improvement of MRP2 (Rowbotham, Galloway, & Azhashemi, 2007, p.89).
This can be interpreted to mean that ERP takes the integration of different system even further, whereas MRP2 deals with the integration of system related to manufacturing and human resources, ERP aims to provide &one integrated information system for the whole organization using one set of common data (Rowbotham, Galloway, & Azhashemi, 2007, p.83).
Therefore, in the case of Toyota the following components were included into their ERP: a) customer relationship management; b) human resources; c) operations; d) supply chain management; and e) finance and accounting. However, in order for ERP to work it is imperative that the company has to initiate a company-wide system of training and education in order to prepare their management team to apply the principles of ERP.
The use of ERP techniques would enable Toyota to prepare for sudden increase in demand and yet provide the same level of flexibility when the demand for a particular product slides down. This means a more prudent approach when it comes to the constraints in the production cycle.
This gives the management team the ability to understand the requirements of a particular demand cycle and also prepare them for the unavailability of personnel and materials during the course of the production of a particular product.
If these principles are not taken to heart then Toyota becomes the organization that it has worked hard not to become. The organization can experience a negative transformation and instead of others companies copying their strategies, Toyota would end up copying their style (Shinkle & Smith, 2004, p.81).
It has been proven disastrous in the past and thus this organization has to find ways to rekindle the passion to demonstrate lean management principles, just-in-time management and the much vaunted Toyota way of doing things. It is commonly known as the Toyota Production System or TPS.
The linchpin and the one that keeps the system running is the midlevel Japanese manager commonly known as the coordinator. This was the time when computers are not as sophisticated as they are today. This is also the time when there was no over reliance on automated assembly lines.
Today robots do most of the work. Although Toyota made use of technology, without a doubt it was the masters of TPS that made everything work perfectly. The difficulty of replicating this atmosphere and the creation of a special team to emulate what has been done 20 years ago is the skill-level of the coordinator. A coordinator has 20 or more years of experience.
This is a tremendous challenge because in todays marketplace it is difficult to have a loyal worker who stays with the company for more than 15 years, much more 20 or more years of dedicated service is rare.
Obviously the first step in the process is to develop an efficient human resource department that can take care of good workers. The HRM must make it their goal to retain the best worker and do what has to be done to make them a part of the Toyota team for many years to come.
The second strategy that can be implemented is to put together a system that can speed up the learning process. Using technology and other management principles it is possible to transfer knowledge and experience that can be had in twenty years of work and yet perform the same process in five years. The company cannot afford to wait another twenty years to mentor and develop top quality leaders or coordinators.
The next thing that Toyota has to do is to study the communication techniques used by coordinators. It has been said that these coordinators are the by-products of a particular culture and that this culture created a certain language that enable them to communicate beyond words.
This is the reason why machines and top executives was not the secret of Toyota but midlevel managers who are called coordinators. This means that these leaders were able to coordinate complicated tasks and inspire people to work closely and efficiently. These are the things that the company has to focus on.
References
Bell, S. (2006). Lean Enterprise Systems. New Jersey: John Wiley & Sons, Inc.
Proud, John. (2007). Master Scheduling: A Practical Guide to Competitive Manufacturing. New Jersey: John Wiley & Sons, Inc.
