Global Business A Case of Toyota

Global Business: A Case of Toyota Name: Course: Tutor: Date: There are various theories that are used by different motor manufacturing industries globally. Toyota Company is the leader in the industry and mainly base its production activities on lean principles that work in a way to minimize cost and reduce errors in the manufacturing process (Kumar & Schmitz, 2011). The company’s core strength is the management of the supply chain inventory that is achieved by the use of “Just-in-Time” theory that ensures that less time is spent in delivering products to points of demand. The Toyota Company uses the JIT theory in its working and hence resulting to tremendous growth over the years from a small company to the current position as a market leader. Despite the growth, there are various challenges that are experienced in the global motor industry in the supply chain that the paper is trying to explain (Monden, 2013). The challenges explained include; limited warehouse space that influences the inventory capacity, delivery period, defect rates and quality assurance standards, dynamism with technological change and the production costs with reference to profit. A critical evaluation of the benefits and demerits accompanied by the adoption of the lean manufacturing, the merits far outweigh the demerits on a single condition that involves the blending of environmental factors in the philosophy (Amasaka, 2009). It will give the company a competitive advantage over other companies that deals with motor vehicle manufacturing and assembly (Kumar & Schmitz, 2011). Just-in-time is a business model that is used by the Toyota Company to meet its demand without creating any surplus as a way of cutting down wastage hence achieving optimal production capacity (Liker & Morgan, 2006). The model involves a series of steps which are strictly adhered to by the companies using the model for sustaining its production capacity and any slight failure in either step may lead to stopping of the process to identify any possible defects that may arise at an early stage. This model ensures that defects if incurred are at their lowest, and can be controlled early before they bring destruction to machines or wastage of raw materials. This way the model assures the users of efficient production capacity (Thun et al., 2006). Toyota is the leader in the motor industry in implementing the concept of “Just-in-time” in a way that meets the supply chain management of demand and supply. The motor industry has a lot of competitors in the manufacturing industry, and it is only by uniqueness that the company will be able to secure its place in the global market. The concept of just-in-time works in a way that it takes the shortest time to meet the customer inventory requirement (Monden, 2013). The amount of inventory manufactured coincides with the demand in the market and meets the customer’s specification and quality. The application of the strategy is important in minimizing wastage by optimally utilizing the available resources (Harms et al., 2013). The concept was arrived at through a process of lean manufacturing that was essentially meant for reducing the amount of wasted resources during the manufacturing process. Toyota is majorly identified in the motor industry because it puts most of its activities in this idea (Towill, 2006). JIT ensures that the supply chain runs smoothly in the movement of the inventory from point of production to the final destination. Toyota Company is the modernizer of the JIT theory in Japan that is otherwise referred to as the “Lean Manufacturing.” The JIT process is controlled closely by a series of processes that is referred to as Kanban. The process if implemented properly enables the manufacturing company to attain quality, efficiency and good returns at the end (James et al., 2007). JIT tries to reduce wastage that normally results from over-production, and excessive inventory kept in a warehouse or in some cases too much time during the waiting. The principle works in a way that it provided the right quantity, at the right time and delivered to the right destination (Liker & Morgan, 2006). The Toyota main reason for adopting the process was to eliminate the seven types of wastage experienced in the supply chain management. The model can be used in a wide variety of industries not only in motor manufacturing as it is an efficient system; it is in some instances referred to as “Just-in-case” model. The theory of lean manufacturing originated from the Toyota production system by the Japanese with an objective to eradicate waste that is produced while manufacturing quality merchandises at minimal costs. It was one way of managing the large inventories that were experienced by the motor industries (James et al., 2007). The concept was started in early 70’s, and 80’s by the Toyota company and after a wide study of the philosophy, it has since been adopted by many other companies. The philosophy is best described to help manage inventory in a restricted market. There are four basic principles used in the lean manufacturing and include; identifying customers who need Toyota’s services and the respective value specification (Thun et al., 2006). The organization should be in a position to know the type of products or services that the customers require and from there they will be able to specify the value addition program needed. The value should specify the product use as a way of satisfying the customer’s need, tastes and preferences and price specification. Secondly, the organization maps the value stream for the period of the production process through a systematic manner during their production. The way the customers get their deliveries are also done to manage end-to-end processes (Amasaka, 2009). Thirdly, it ensures that there is a smooth flow in the supply chain by a way of minimizing waste. Waste is what the company considers as that which customers will not be in a position of willing to buy. The final phase in the process is to fathom the customer demand and how to respond to various request levels. The Toyota Company works in a way that it produces unique products to attract the customers because of their quality which is a fact that helps them to respond to ‘customer pull’ more efficiently and in an optimal way. The Toyota Company uses the competitive theory in its productivity and marketing of its products (Kumar & Schmitz, 2011). Lean manufacturing concept is derived from the Toyota Production System (TPS) with the intention to add value while at the same time scrapping off all other processes that do not add value to the process. The main intention is to incur minimal cost during production as a way to increase the profit margin and work in the most optimal way in the production economics (Harms et al., 2013). This concept was used by Toyota during its growth from being a small company to its current position as a market leader. The idea of lean production tries to solve two major problems, for example, the quality problems and the wastage problems while at the same time providing users with a competitive advantage over non-users (Towill, 2006). It is driven by the concept of increasing value to their esteemed customers while at the same time minimizing the amount of resources used. The challenges facing the global motor manufacturer include large inventories, long production times, high defect rates, production obsolescence, meeting of tight deadlines, and high production costs. Inventory management is essential for any company, and the amount of stock required is determined by the previous records (Monden, 2013). The previous demand levels help in forecasting of future demand levels and thus determining the amount of stock to be maintained (Tagaduan, 2009). The major challenge is to determine the correct re-order interval. Correct Kanban level can be determined accurately by forecasting of future shifts in demand. Improper forecast would render the company to face problems that may arise in either insufficient or excess hence leading to customer service problems. It can, therefore, be concluded that determining the re-order level is a big challenge in the motor industry and should be done accurately. Factors that help in the determination of the re-order interval is prior information on customer needs, detect in future customer change and an idea on how best to satisfy the respective customer needs (James et al, 2007). Another major challenge faced by the motor industries globally was the fact that they had limited warehouse space. Available space if not utilized efficiently would render the company into chaos. Limited space led to companies reducing their production capacities as there was not enough space to store their inventory. It led to reduced profits hence Toyota’s concept of JIT acts as a solution to the problem of limited space (Liker & Morgan, 2006). Toyota applies the JIT concept as one of its pillars as it allows the companies to utilize the available warehouse space efficiently. This way, the company can reduce overhead costs and increase its productive capacity hence increasing the returns since the storage costs are in control (Amasaka, 2009). The warehouse influences the production capacity in all motor industries, and the size is normally proportionate to the quantity that the company will manufacture. Holding a sizable inventory that can meet the demand in the market without creating a shortage or a wastage at least cost is healthy to any growing industry. Motor industries face the challenge of manufacturing motor vehicles in time and to meet the clients’ specification and finally to beat the deadline by shipping the products to reach the customer in time. Customers’ satisfaction is upheld by the efficiency of the process by minimizing the amount of time taken between the demand time and the time that the order is supplied and its quality. In order to meet quality specification and be unique in the market, a company like Toyota places a proper quality assurance procedure that redesigns the way the cars are manufactured part by part and a close monitoring is made to ensure that their quality standards are met. It stands out to be a challenge to many companies and should be dealt with promptly (Kumar & Schmitz, 2011). Toyota Company invented the use of robots in manufacturing of cars so as to save time and help in reducing the waiting time between the time the order is placed and the time of supply. The product line should always be monitored to ensure that there is no problem that arises and cater for any change in the future in case there is a change in demand (Thun et al., 2006). Any slightest observation of a problem would render the company into problems and therefore should be identified early and be corrected. The stopping of product line with the purpose of inspecting the process for any problem is one way of determining quality assurance by the company and therefore poses a major challenge for many companies (Vachon & Klassen, 2007). Most companies that are not used to the procedure find it tiresome and hence fail to follow it strictly thereby leading to the production of low-quality products. The product line should act as the center of quality assurance to all motor industries in maintaining a proper supply chain management by any industry. All levels of the supply chain should be monitored properly to ensure that the supply and demand are met by all companies properly. The process ensures that everyone is on toes to meet the deadlines set in place, hence supply chain circulate as required making the company to efficiently meet the set goals and objective, hence meeting the targeted profits more efficiently. It is evident that the challenge in the supply chain is to meet the demand levels in time while at the same time meeting the customers’ specification considering that quality is attained. The manufacturing processes put in place should be efficient and cost effective to ensure that wastage is reduced or zero in order to attain the companies set objective of maintaining a proper supply chain management (Towill, 2006). Predicting of demand is difficult and in most cases, demand changes with time. This difficulty may arise in wrong forecasting of the future demand as JIT is mainly based on saving cost for manufacturing companies that are healthy for any business but in return fails to tell the change in demand accurately. Market demand is always subject to fluctuation and if not done accurately will rise into problems in the company as there will be excessive supply or a shortage (Amasaka, 2009). The environment is subject to change and hence the change should be noted early in the correct forecast to be done (Liker & Morgan, 2006). Strict inventory management by use of JIT may not be suitable as the customers taste and preferences change with time and eventually determine the fluctuating demand levels. JIT can, therefore, be said to be applicable in an environment where the demand levels are easy to be predicted. The JIT system at times results into slow dispatch of inventory to the final consumer. Worse off is a situation whereby the system may fail to supply the customer with the required orders within the set time. This kind of scenario may lead to customer dissatisfaction and regarding the fact that there are many competitors in the market; the customer loyalty will be lost as he/she will move to a different company that will provide the services within the speculated time interval. This will, therefore, reduce the companies’ loyalty to esteemed customers and hence the JIT system of inventory management should have a backup at all times as it may fail to work as expected (Monden, 2013). In such instances, the old theory of mass production comes in hand. As much as the theory has been widely researched on and concluded to be a suitable one for the motor industries in the process of inventory management, it is a difficult idea to apply. The core values of the theory is to make sure that companies stay lean by way of minimizing wastage or even meeting zero wastage and to stay dynamic with the change in technology. The theory may be difficult to be applied in a case whereby there is a sudden jump in product demand as the market conditions are always subject to change. It will render the theory useless as other theories will be more suitable in such cases (James et al., 2007). Theories that are flexible and able to easily change the product line to meet the customer’s satisfaction will be required in such cases. The major weakness of the process is its dependence on time, and any slightest mistake will lead to the collapse of the system. Due to a change in the current environmental needs, there is a need for a theory that has a strong resilience so as to withstand the environmental changes (Harms et al., 2013). JIT system is clean and has a no resilience that will make it adjust well in case of a problem in the market. The JIT system works on a strict product line that is mainly focused towards cost reduction. Manufacturing is the main stage that is considered by the system as delicate since the system does not have room for the future prediction in environmental changes, especially nature as is the mother of everything. The environment should be considered as the base for everything that pertains production as it is the source of raw materials that is the determinant factor in manufacturing. JIT, therefore, needs to consider ecosystem as a core determinant in its processes. It can, therefore, be concluded that JIT can only be perfect in an environment whereby there are no exogenous factors as it is not blended with the environmental factors that are subject to change. Reduced wastage ensures that the final product is added value and hence more suitable for the customer (James et al., 2007). The problem with the JIT concept is that it over relies on the efficiency experienced by the suppliers. In the case of any problem along the supply chain the theory does not work to meet the customers’ expectations hence leaving the customers dissatisfied. The adoption process of the JIT process should be systematic and performed in agreement with the employees. The process requires human input for it be successful since, without its acceptance by the employees, it will be useless because it will be rejected and fail to work as expected. Therefore, for its adoption to be successful, the employee’s opinion is very critical for the manufacturing process. JIT has a very high cost of implementation in an organization where the process is new. The process is made expensive because of the training costs of the employees to adjust to the new process and the purchase of machinery required for efficient operational processes. The external environmental factors will not allow the company to work efficiently as it will go at a loss first (Vachon & Klassen, 2007). The existing companies will be working at the economies of scale and hence will be making more profits than it (Amasaka, 2009). The JIT process is ideally dependent on suppliers, and any slightest mistakes alter the whole process (Kumar & Schmitz, 2011). JIT discourages an excess inventory that at times is inevitable as it may be caused by employee strikes, delays in the transportation systems or other problems. The prevailing environment is not ideal hence hindrance factors to the normal running of the process will not be an exemption. Lean manufacturing is a concept that requires human motivation for it to be successful as human input is an essential element in its implementation. The process is healthy as it minimizes wastage by its principle of carrying out only the processes that add value to the customer and yet difficult process to implement. There are various processes that are followed in the implementation and if followed well will help the company to continue growing at a tremendous rate. Toyota Company to be specific, is one of the companies that has always insisted on the philosophy of lean manufacturing and has never gone as it is the market leader in the industry of automobile. Despite the fact that there are many challenges facing the concept, it is a good process if implemented well. The major challenge that makes the process a bit cumbrous is the threat of its surrounding environment: both the internal and the external environment (Harms et al., 2013). The just in time concept can only work well in an ideal environment where there are no external factors and, therefore, for it to work perfectly in the current market that we face globally, it has to be blended with the environmental factors. The concept of just-in-time helps smoothen the operations of the supply chain and can only work efficiently if there are no factors that will hinder the smooth operation. The concept has no room for excessive production as it is working towards the elimination of any wastage and if possible reduce it zero. It can, therefore, be concluded that lean manufacturing is the best strategy for any company only if the concept will be blended to incorporate the environmental factors. The challenges experienced in the supply chain will be overcome by this idea, hence will be more suitable than the other theories available in the motor industries like mass production. This idea will make Toyota have a competitive advantage over the other companies. 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