TOYOTA Process improvements

Toyota: Case study

What exactly needs to be improved?

The Toyota Corporation built its reputation upon safety and quality. Based upon its perceived superiority to its competitors, particularly its American competitors, the Japanese carmaker had established itself as 'benchmark' of excellence in the international marketplace. All of this began to change in the late 1990s and early 2000s. Toyota's safety was questioned after a series of highly-publicized recalls. In particular, the revelation that its accelerators could get 'stuck' and cause vehicles to go dangerously fast was profoundly damaging to Toyota's reputation.

Toyota's fall from grace was so disturbing because Toyota's managerial philosophy had been so influential. Pillars of the Toyota Way included the need for long-term planning; lean manufacturing; keeping inventories low; and cultivating strong relationships with suppliers. Toyota had long been considered the paradigm of what to do 'right,' but its response to the recalls seemed the epitome of what a company could do 'wrong.'

Background

During the 1990s, the normally robust health of the Toyota Corporation was failing, given the many internal difficulties Japan was facing at the time. Toyota embarked upon an aggressive policy of international expansion as a result. It also created a Value Innovation program which required the company to work closely with suppliers, reducing component parts of the vehicles to their simplest denominators. Toyota always had close relationships with suppliers, enabling it to keep inventories low. Suppliers were involved in design, in contrast to American firms which had transient relationships with suppliers and simply looked for the lowest-cost products.

However, there were concerns that Toyota was "growing more quickly than the company's...

Concerns began to arise about the quality of many Toyota vehicles, first exemplified in the evidence of engine sludge in many of its vehicles. Then, after settling lawsuits regarding this issue, Toyota was forced to recall 3.8 million vehicles for 'sticky' accelerator pedals that could cause vehicles to reach dangerously high speeds without driver intervention.
For some, equally as troubling as the actual safety issues posed by the problems in the vehicles was Toyota's responses to these issues. Regarding the oil 'sludging,' Toyota first blamed customers, saying that it was due to infrequent oil changes/not having the oil changed at the dealership -- despite the fact that many of the vehicles were still under warranty. Eventually, Toyota agreed to pay for the engine reconstruction needed to make the vehicles useable again. Then, Toyota blamed customers for positioning floor mats improperly and causing the accelerators to 'stick,' but gradually it became clear that problems with the vehicle design itself was to blame. Rather than trying to learn from what customers were telling them, Toyota deployed an off-putting 'circle the wagons' approach regarding its apparent failures, until it finally issued a public apology and a promise to do better.

Implications: Tangible and intangible

Although it was expensive to repair the vehicles in question, this was only the tip of the iceberg of the potential costs. Toyota was threatened by government fines and lawsuits. "Toyota's market capitalization had fallen 21%, and its inventory position skyrocketed since the problems became public in late January 2010" (Greto, Schotter & Teagarden 2010: 7). The recalls did not seem to be freakish, isolated incidents, but evidence of deep, systemic problems at the company.…