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What Really Happened to Toyota?

Given the spate of recalls and quality problems, managers wonder whether Toyota’s difficulties throw its legendary manufacturing model into question.

  • Quality & Service
  • Supply Chains & Logistics

toyota case study summary

Toyota’s quality problems in the United States were signaled with a recall in late 2009 for problems with floor mats, but they didn’t end there.  Since then, more than 20 million cars have been recalled.

Image courtesy of Flickr user kenjonbro.

Consumers were surprised in October 2009 by the first of a series of highly publicized recalls of Toyota vehicles in the United States. Citing a potential problem in which poorly placed or incorrect floor mats under the driver’s seat could lead to uncontrolled acceleration in a range of models, Toyota announced that it was recalling 3.8 million U.S. vehicles. The recall was triggered by the report of a fiery crash in California, where the accelerator of a Lexus sedan got stuck, resulting in the driver’s death.

Additional reports of unintended acceleration from sticky gas pedals prompted the National Highway Traffic Safety Administration to pressure Toyota to recall additional vehicles and models.

To car buyers and students of manufacturing excellence, Toyota was no ordinary company. It was in a class by itself, long known, even revered, for its sterling quality. For manufacturing executives who have strived for decades to emulate Toyota, the mere suggestion that it had quality issues was a serious matter, to say the least. All over the world, executives paused to wonder if they had been chasing after the wrong manufacturing model.

Despite Toyota’s long record of building reliable, low-defect vehicles, public perceptions about quality are often greatly influenced by reports in the media and their overall timing. The public view can be at odds with the objective measures. In the case of Toyota, there were definitely indications that the quality level of its products had fallen off in recent years. What’s more, the changes had occurred during a period of time when many of Toyota’s competitors, including Ford, Chevrolet and Hyundai, were producing better and better cars. The key question was the source of Toyota’s problems: To what extent did they originate with the product designs and assembly, and to what extent could they be pegged to the company’s manufacturing systems?

About the Research

I began collecting data for this paper systematically in early 2010 and continued the research until May 2011. However, my long history as a researcher of automotive quality provided the underpinnings for this initiative. The initial efforts consisted of monitoring the media, both print and online, to see both what they reported and how they reported it. I also gained access to publicly available data from internal Toyota documents related to vehicle safety and defects submitted in response to congressional subpoenas, and I consulted with officials at the U.S. National Highway Traffic Safety Administration. Depositions from Toyota executives were made available to me. I showed early drafts of the paper to a variety of individuals, including former Toyota employees, retirees and quality experts in Japan, the United States and elsewhere. I interviewed and discussed particular issues with Japanese academics with deep knowledge of the auto industry. I also had access to a report commissioned by Toyota from the Japanese Union of Scientists and Engineers, titled “Findings by Independent Experts about Quality Assurance at Toyota.” Databases from Automotive News , NHTSA, the Project on Excellence in Journalism and information from Toyota annual reports also proved useful.

The Leading Question

Why has Toyota been struggling with quality issues?

  • Management’s recent focus on growth weakened the emphasis on quality.
  • The quality of competitive products has improved.
  • Public perceptions about quality can be greatly influenced by media reports.

The degree to which Toyota’s quality problems should be seen as serious depends to some extent on whether we view them in absolute terms or relative to its competitors and on the size of the gap between consumer perceptions and objectively identified problems. Even before the March 2011 earthquake and tsunami hit Japan, the company had incurred huge financial and reputational costs stemming from the recalls and subsequent publicity. Since then, the effects of the earthquake and tsunami on both Toyota and many of its supplier companies have been significant, resulting in cutbacks in production and delays in the delivery of new vehicles. With reduced product availability, some prospective Toyota customers are likely to choose another brand, and the long-term risk is that some of these buyers will find that the other brands meet their quality expectations just fine.

Defining the Problem

It would be difficult to overstate Toyota’s role in shaping the modern approach to quality improvement. Beginning in the early 1960s, Toyota, together with its supplier companies, pioneered numerous quality improvement methodologies, providing the operational basis for Japanese total quality control. TQC, in turn, provided the basic building blocks for the Six Sigma methodology, which has been actively embraced by leading U.S. companies such as GE and Boeing. In the 1960s, Toyota management began to understand the critical links between quality, customer satisfaction and profit. The importance of these connections became deeply rooted in Toyota’s management philosophy and an integral part of the company’s employee training and growth. Quality emerged as a central element in Toyota’s global strategy and became embedded in the renowned Toyota production system. In this context, referring to Toyota’s recent quality problems as a “fall from grace” is not an exaggeration.

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Toyota’s quality problems in the United States were signaled with the initial recall in late 2009 for problems with floor mats, but they didn’t end there. Over the next four months, the company recalled 3.4 million more vehicles in three separate recalls over and above the initial 3.8 million, for a total of more than 7 million. There were several issues: potentially sticky gas pedals, pedal entrapment and software glitches that affected braking on some models.

Back in 2006, well before Toyota’s difficulties became public, the company’s management commissioned a survey of U.S. consumers that included the following question: How much influence does having a recall on your current vehicle have on subsequently purchasing that same automotive brand again? At the time, 11% of U.S. car owners said a recall was influential, and 20% said it was highly influential. 1 But in Toyota’s case, at least, the actual reaction was harsher than the hypothetical: A Gallup national survey in late February 2010 found that 31% of Americans believed Toyota vehicles were unsafe; the percentage among Toyota owners was only 14%, but for non-Toyota owners the figure shot to 36%. 2 Even if the media exaggerated the seriousness of problems and politicians politicized them, customer perception is the final arbiter.

Moreover, the number of safety-related recalls kept growing. Between February and August 2010, there were 13 separate Toyota recalls. They affected old and new models and were based on a wide range of issues (including steering control and fuel leakage). Just as things seemed to be settling down last winter, the company announced two further recalls in January and February 2011. In May 2011, Automotive News reported that more than 20 million Toyota vehicles had been recalled since autumn 2009. 3

The Consumer Perspective

There is no question that Toyota’s quality image among consumers suffered with the recalls. Not only is the decline visible in survey data, it has also been greatly amplified by the media. David Champion, senior director of Consumer Reports ’ Auto Test Center, has said that Toyota vehicles’ quality measurably decreased in recent years. In 2007, the magazine observed that the fit and finish of some Toyota models, as well as overall vehicle quality, had declined. In 2008, Consumer Reports decided no longer to give automatic “recommended” ratings to all Toyota models based on their previous evaluations. 4 J.D. Power and Associates, another influential evaluator of autos, also noted a recent decline in the quality of Toyota’s products. 5 Its Initial Quality Study surveys car owners and lessees 90 days after purchase, asking some 160 detailed questions. In 2009, before the recalls, Toyota was tied with Mercedes Benz for sixth place overall and was the top company among mass-market producers. The 2010 results, released in June 2010, told a different story. Toyota fell to 21st out of 33 brands, while the Lexus brand fell from first place to fourth place, behind Porsche, Acura and Mercedes-Benz. 6

At first glance, the change between 2009 and 2010 appears to be stunning. However, J.D. Power’s data show that between 2000 and 2009, the quality of Toyota’s products actually improved . Part of the issue is in the way quality gets measured: J.D. Power looks at the number of defects per 100 vehicles. In 2009, Toyota had 101 problems per 100 vehicles; in 2010, the number of defects increased to 117. Although that may seem like a significant change in quality, for the individual car owner it is actually quite small (an increase from 1.01 problems per vehicle to 1.17), and it hardly suggests a collapse in quality. This method of reporting can make the differences among brands appear more substantial than they are.

At the same time, the auto quality ratings across brands have become compressed over the last three decades. That means that the relative changes in brand rankings from year to year, which are widely featured in the media, do not necessarily reflect important absolute changes in performance. J.D. Power reports in detail on brand performance in different categories of mechanical and design quality. From 2009 to 2010, the most notable decline involving Toyota’s models was in power train design, which declined from “about average” to “below average.” 7 These findings are consistent with other observations that Toyota’s quality problems are largely engineering rather than manufacturing problems.

Another factor worth noting involves the role of changing owner perceptions. People who bought a Toyota in 2009 likely did so in the belief that they were buying a high-quality car. They were reacting to what market researchers call a positive halo effect. All things being equal, buyers in this situation pay less attention to small problems (or don’t even notice them) when filling out surveys. If there were any initial irritants, owners in this environment frequently become used to them. But in 2010, in the midst of a barrage of negative news about Toyota’s problems, customers became far less forgiving about Toyota’s product flaws. Whereas consumers tended to overestimate Toyota’s objective quality with low reports of defects in 2009, in 2010 they tended to underestimate the quality with high reports of defects. Toyota’s objective quality problems, while significant, became greatly exaggerated by the media. While the objective data about the company’s quality performance suggest it has deteriorated, there is no evidence showing that it collapsed. The dynamics of specific measurements, combined with negative media coverage and the improved quality of competitors, have contributed to a further tarnishing of Toyota’s quality reputation and weakened consumer trust. 8 For years, Toyota’s core brand theme in the United States and Europe was advertised as quality, durability and reliability, with an added emphasis on value. 9 Increasingly, those themes were less effective in differentiating its products. That raises the question about how Toyota will market its vehicles going forward.

Damage to the Brand

A possible parallel to the challenges Toyota faces can be found with Ford, which experienced significant negative fallout from rollover incidents involving the Explorer/Firestone tire failures in 2000 and 2001 and the company’s alleged subsequent cover-up. Like Toyota, Ford received enormous media attention. 10 Ford was able to fix the problem relatively quickly by changing tire suppliers and redesigning the model. But the damage to its market position was costly and long-lasting. In the highly profitable light truck market between 2000 and 2005, Ford went from being the market leader, selling about 100,000 units more than rival GM, to being about 500,000 units behind.

Negative quality perceptions can linger long after the objective quality problems have been corrected. While many auto analysts predicted early in 2010 that Toyota would rebound from its troubles quickly, Ford’s experience suggests that this view may be overly optimistic. Indeed, managers need to understand the relation between perceived and objective quality. Despite the growing volume and availability of real data, consumers form perceptions of auto quality on what is often limited information and personal experiences (“My brother loves his Camry”). They may hold on to their beliefs even in the face of objective information to the contrary.

Part of the reason brand reputations don’t recover quickly can be traced to the media and to ongoing interest by government regulators. During January and February 2010, when Congress conducted hearings on the Toyota recalls, the recall story was among the top 10 news stories in all but one week. In a U.S. media fixated on celebrities and brands, stories about endangered icons are, by nature, eminently newsworthy. In this case involving unintended acceleration, with the safety of millions of drivers and passengers at stake, there was the added concern for public safety. 11

Beneath the Problems

A basic principle of risk management is to identify risks early and eliminate them while they are still minor problems. Toyota executives had a number of warnings about its deteriorating quality. In early 2009, for example, before the massive recalls, Toyota disbanded a high-level task force that had been set up in 2005 to deal with quality issues. A Toyota manager explained the decision by saying that management had come to believe that quality control was part of the company’s DNA and therefore they didn’t need a special committee to enforce it.

We have already discussed early signs of Toyota’s quality problems as reported in Consumer Reports . In January 2008, Chris Tinto, Toyota’s U.S. vice president in charge of technical and regulatory affairs, further warned his fellow executives that “some of the quality issues we are experiencing are showing up in defect investigations (rear gas struts, ball joints, etc…).” 12 These and other early warnings were ignored. In a pattern not uncommon in large organizations, politically powerful executives shrugged off early warnings of lower-ranking executives. 13

There appear to be two root causes for Toyota’s quality problems. The first is an outgrowth of management’s ambitions for rapid growth. The second is the result of the increasing complexity of the company’s products.

Growth Toyota’s drive for growth moved into high gear in 1995 with the appointment of Hiroshi Okuda as the company’s new president. Okuda, known for his aggressive efforts to remake Toyota, was the architect of an ambitious global growth strategy, known as the “2005 vision.” It called for rapidly increasing Toyota’s global market share from 7.3% in 1995 to 10% over the next decade. The company achieved a global market share of 9.7% in 1998 and then set a new target of 15% by 2010. Toyota was well on its way to achieving that goal (its global market share reached 13% in 2008) when the global financial meltdown and Toyota product recalls threw the effort into disarray.

Akio Toyoda, Toyota’s current president (and grandson of the company’s founder), puts the turning point at 2003; from then on, sales grew faster than the company could manage. He acknowledges that the strategic focus on growth warped the “order of Toyota’s traditional priorities.” 14 In other words, growth had taken priority over the company’s traditional focus on quality.

Toyota’s aggressive growth targets were out of character for what historically had been a conservative company. Under family leadership, Toyota had pursued growth cautiously; for example, it was the last of the major Japanese auto companies to begin manufacturing vehicles in the United States. Given its huge cost and quality advantages, it is likely that Toyota could have gained U.S. market share much more rapidly than it did. However, to avoid protectionist sentiment, management had been careful not to exploit the company’s ability to reduce prices to build market share, preferring to rely instead on its reputation for reliability and durability.

Okuda convinced corporate leaders to pursue rapid sales growth and profits while downplaying the risks associated with this strategy. The 15% market share target meant surpassing GM as the global volume leader and expanding production to new locations. It also meant hiring significant numbers of new employees, contracting with new non-Japanese suppliers and hiring large numbers of contract engineers. Between 2002 and 2008, Toyota’s overseas manufacturing facilities increased from 37 to 53, and global sales rose an average of 9% per year. 15 That expansion gave management little opportunity for adjusting its systems and practices to accommodate such strong growth. Organizational incentives, especially informal ones, became skewed toward growth. Without specific policies that preserved the traditional quality focus, key decisions affecting product development, supplier management and production became biased in favor of meeting sales, delivery, cost-cutting and profit targets. Many of the changes were subtle (for example, tilting promotion criteria more in favor of success at meeting growth targets), and they may not have been what Okuda and members of Toyota’s executive team intended. But cumulatively, they had negative impacts on quality. Top corporate leaders tend to underestimate how their mandates get transformed as they travel down the hierarchy.

Product complexity The other root cause of Toyota’s quality problem can be linked to the growing technical complexity of today’s vehicles. 16 For a variety of reasons — stricter government regulations on safety, emissions and fuel consumption, and rising customer demand for vehicles with “green” and luxury features — cars are becoming increasingly sophisticated both in terms of how they are designed and how they are manufactured. A typical auto sold in the United States or Europe has more than 60 electronic control units and more than 10 million lines of computer code — a fourfold increase over what was common a decade ago. 17 In effect, cars have become computers on wheels.

To be sure, other auto companies, not just Toyota, have had to come to grips with the issues of product complexity. The competitive pressures to produce vehicles that are safe, clean, fuel-efficient and comfortable are industrywide. But for Toyota the challenges were even more intense, complicated by the already considerable challenges associated with global growth, including rapid expansion of manufacturing capacity and the proliferation of hybrids and other technologically advanced new models. Between 2000 and 2007, Toyota’s North American sales increased from 1.7 million units to 2.9 million units, and the company’s offerings grew from 18 to 30 models. Lead time between exterior design approval and start of sales was compressed to less than 20 months. Accelerated design cycles strained the company’s development and production systems and pushed human resources to the limit, creating the conditions for quality failures. Although Toyota’s Lexus and Prius models accounted for less than 25% of its sales in 2010, they were among the most technologically complex products and were involved in more than half of the number of recalls.

The combination of rapid growth and increased product complexity has had major implications for Toyota’s supplier management system and its overall performance. Around 70% of the value added in Toyota’s vehicles comes from parts and subassemblies produced by its suppliers. So the consequences of the growth and complexity were felt across the company’s supply chain. First, Toyota personnel were stretched increasingly thin as the company’s growth accelerated. In response to the growth, Toyota had to delegate more design work to outside contract engineers and take on new suppliers because the internal engineering resources and existing supplier base couldn’t keep up with the demands.

A high-level Toyota executive publicly acknowledged in 2010 that, facing internal manpower shortages, the company had no choice but to use a large number of new contract engineers to boost engineering capacity. In his view, that contributed to the increases in quality glitches. 18 The company came to use outside engineers for as much as 30% of its development work globally. 19 That meant hiring contract engineers overseas; it also gave rise to a new policy of hiring temporary engineers in Japan, which challenged the company’s established ways of doing business. Toyota engineers had been accustomed to communicating among themselves and with Japanese suppliers with whom they had established long-term relationships that often relied on tacit knowledge built up over the years. The influx of new, mostly non-Japanese-speaking engineers and overseas suppliers during a short period of time led to problems of coordination and miscommunication. Less experienced Toyota engineers were increasingly assigned to global technical centers to work with and monitor new overseas suppliers, who were also inexperienced in Toyota practices and standards. The result was a convergence of inexperience, with the key parties insufficiently trained in Toyota’s standard practices.

Takahiro Fujimoto, a leading Japanese researcher on Toyota, reports that in the wake of rapid growth, Toyota increasingly failed to properly evaluate and approve components designed by outside overseas suppliers. 20 As a result, Toyota’s relationships with suppliers became less collaborative, thereby weakening the company’s distinctive “relational contracting” system characterized by long-term close OEM relationships with suppliers. Ironically, it was the collaborative practices that had originally distinguished Toyota from its Western competitors. 21 We can see this play out in the results of the annual U.S. auto-parts supplier surveys since 2007. Toyota traditionally has ranked best in its relationships compared with other automakers. Its ranking, however, while still high, has fallen steadily from 2007 through 2010. Suppliers attributed their growing problems with Toyota to less experienced staff in Toyota’s purchasing group who had not internalized the “Toyota Way.” 22

As much as growth and product complexity were at the root of Toyota’s recent quality problems, any thorough analysis would also need to acknowledge the role of the company’s centralized management structure. Toyota’s information and decision making has been highly centralized. The result: Top management in Japan has been less sensitive to the expectations of regulators, culture and politics in overseas markets, and consequently, they have been slower to respond to local problems. For example, in October 2004, Toyota recalled pickup trucks and SUVs in Japan for steering defects, but it didn’t extend those recalls to the United States until September 2005. As one executive commented, “[Toyota headquarters] is the kind of brain of the company. We don’t have any independent knowledge outside of them.” 23

It is too early to know how quickly Toyota can overcome its quality problems. However, it is clear that senior executives have worked hard to understand the magnitude of the problems and are acting to eliminate them. This determination is demonstrated by several major initiatives in North America and elsewhere to improve product quality. For example, Toyota is reportedly seeking to reduce its percentage of outside engineers to 10%. 24 In addition, Tokyo headquarters has delegated more power to the company’s North American executives to make decisions affecting recalls and strengthening the independence of quality management activities in each region. Furthermore, Toyota has reorganized and, in effect, deliberately slowed down the product development process by establishing a new team of about 1,000 quality engineers and by greatly expanding its rapid quality response teams around the globe. Although driver error appears to have been the primary cause of the acceleration problems, user error can be reduced by good design. In today’s environment, that is a corporate imperative. To that end, Toyota has reconfigured the shape of the accelerator pedal in response to its floor mat problems.

Still, there is a lingering question raised by Toyota’s recent quality problems: What do the product recalls say about the effectiveness of the company’s legendary production system? Why should other companies try to emulate Toyota if it is struggling with so many serious design and production issues itself? The reality is that Toyota’s problems were not caused by a faulty production system but by poor management decisions. In particular, the company’s executives failed to respond aggressively to early signs of quality problems. Toyota’s stumbles are a powerful reminder that there is no such thing as corporate DNA, and that superior production systems, important as they are, cannot be taken for granted. As new senior management teams move into positions of power, they need to recognize that there are no guarantees that the systems and values that have provided the underpinnings for the organization’s success can be sustained without renewed commitment. Ensuring continuity requires clear incentives for the promotion of best practices, adhered-to processes, especially strong problem-solving processes, flexibility, effective socialization of new employees and a supportive organizational culture. In any organization, there will be internal and external factors that threaten to weaken the foundation, be they opportunities for growth, temptations to skimp on training or pressures to lower costs. Therefore, corporate leaders need to be vigilant in maintaining practices and values that support high-quality production systems, even as they learn to adapt to emerging challenges. Despite its vulnerabilities, the Toyota production system still represents state of the art in manufacturing and continues to provide an important model to companies in a wide range of industries.

About the Author

Robert E. Cole is a professor emeritus at the University of California Berkeley Haas School of Business and a visiting researcher at the Institute of Technology, Enterprise and Competitiveness at Doshisha University, in Kyoto, Japan.

1. J. Press, “A New Era for Toyota and TMA in North America,” (internal Toyota presentation, Sept 20, 2006), http://commerce.senate.gov .

2. Gallup, “Americans, Toyota Owners Still Confident in Toyota Vehicles,” March 2, 2010, www.gallup.com .

3. N. Roland, “Toyota Doesn’t Go Far Enough on Safety Management Changes, Panel Says,” Automotive News, May 23, 2011.

4. D. Sedgwick, “Toyota Likely to Win Back Consumer Reports ‘Recommended Rating,’” Feb. 26, 2010, http://autos.aol.com .

5. J.D. Power and Associates, “J.D. Power and Associates 2010 U.S. Initial Quality Study” (Westlake Village, California: J.D. Power and Associates, 2010).

6. C. Jensen, “Toyota’s Image Falls in J.D. Power Survey,” New York Times, June 18, 2010, sec. B, p. 5.

7. J.D. Power redesigned the IQS survey in 2006, doubling the number of items ranked, going beyond defects that can, presumably, be repaired to include design problems. With quality differentials sharply diminishing, the survey was in danger of becoming irrelevant, but with a doubling of items to be scored, brand differentials were increased. Many of these new items have little or nothing to do with the fundamental safety, quality, value and performance (in that order) that consumers, on average, say is most important when buying a vehicle.

8. Ordinarily, just equaling longtime quality leaders is not enough to dislodge them from their leadership position. In Toyota’s case, however, these developments combined with the publicity given its successive recalls.

9. M. Rechtin, “Fay in the Fray of Toyota Image Turnaround,” Automotive News, Sept. 13, 2010, 20.

10. Parker Waichman Alonso LLP, “Chronology of Events in Ford/Firestone Controversy,” May 21, 2001, www.yourlawyer.com .

11. Adding to Toyota’s woes, its recalls are getting far more publicity than those of other automakers. In late October 2010, Toyota issued a voluntary recall on 1.5 million cars globally to replace a brake master cylinder seal. A few days later, Nissan recalled 2 million cars for ignition problems. Both recalls were reported on msnbc.com. The Toyota article was 966 words and described the company as “lurching from recall to recall”; the Nissan article was only 285 words long and suggested that there was nothing unusual about Nissan’s recall. P.A. Eisenstein, “Dark Clouds Gather Over Toyota After New Safety Setback,” Oct. 21, 2010, http://msnbc.com ; and “Nissan Recalls 2 Million Cars Worldwide,” Oct. 27, 2010, http://msnbc.com .

12. A. Frean, “Fears Over Potential Toyota Problems Surfaced in 2006, U.S. Senate Told,” Times Online, March 3, 2010, http://business.timesonline.co.uk .

13. J.S. Busby, “Failure to Mobilize in Reliability-Seeking Organizations: Two Cases from the UK Railroad,” Journal of Management Studies 43, no. 6 (2006): 1375-1393.

14. N. Shirouzu, “Toyoda Concedes Profit Focus Led to Flaws,” Wall Street Journal Asia, March 1.

15. Toyota Industries Corporation, “A New Direction for a New Millennium: Annual Report 2001” (Kariya, Aichi, Japan: Toyota Industries Corporation, 2001); and Toyota Motor Corporation, “Driving to Innovate New Value: Annual Report 2008” (Aichi, Japan: Toyota Motor Corporation, 2008).

16. J.B. White, “What’s Safer: A Chevy or Mercedes?” Wall Street Journal, Sept. 22, 2010, sec. D, p. 1.

17. D. Barkholz, “Fixing Cars’ Brains Saves Ford Millions,” Automotive News, May 11, 2010, 12B.

18. N. Shirouzu, “Inside Toyota, Executives Trade Blame Over Debacle,” Wall Street Journal, April 13, 2010.

19. M. Ramsey and N. Shirouzu, “Toyota Is Changing How It Develops Cars,” Wall Street Journal, July 6, 2010, sec. B, p. 6.

20. T. Fujimoto, “Toyota Overwhelmed by Demon of Complexity,” Asahi Shimbun, March 3, 2010, http://www.asahi.com .

21. R. Dore, “Taking Japan Seriously” (Stanford, California: Stanford University Press, 1987), 173-192.

22. R. Sherefkin, “Detroit 3 Score Higher with Suppliers,” Automotive News, May 24, 2010, 16B; and R. Sherefkin, “Toyota Loses Luster with Suppliers,” Automotive News, May 25, 2009.

23. N. Roland, “Toyota’s U.S. Execs: Japan Didn’t Share Info,” Automotive News, Aug. 9, 2010, 3.

24. Ramsey and Shirouzu, “Toyota Is Changing.”

Acknowledgments

More like this, comments (8), what happened in toyota – lean six sigma consultant directory, darren relty, trent harding, martin dressler, siswanto gatot, charles h. green.

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Few companies have as solid a reputation for supplier relationship management as Toyota does. The world’s biggest auto maker has developed longterm, collaborative and close partnerships with its key Japanese suppliers over a period of several decades. In its European operations, like those of North America, supplier relationship management (SRM) is also a major focus area, albeit one with a shorter history.

We asked Jean-Christophe Deville, general manager, purchasing, at Toyota Motor Europe about its approach.

How do you define srm at toyota and how do srm specific activities with strategic suppliers differ from the way you manage supplier relations in general, what impact, if any, has the economic downturn and toyota’s recent quality issues had on your srm activities, what challenges do you face internally from an srm perspective, what other roles does purchasing, and the supplier relationship managers within the function, play in srm, innovation is a key driver of srm at toyota. how do you manage the process of capturing, assessing and either progressing or rejecting supplier ideas and proposals, to date, the financial benefits you’ve achieved from srm activity are relatively small (0-2% of annual spend with each supplier), but you expect these to grow significantly in future. how will you achieve that, toyota generally shares savings with suppliers, typically on a 50:50 basis. why do you consider this important, what do you see as the most important ingredients for success in srm and what should you avoid doing, reports and publications, case studies, newsletter sign-up, stay connected on linkedin, lang: en_us, enjoy customer of choice benefits.

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Leveraging Data to Increase Car Sales

Jim norton toyota case study.

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Michael Rentschler General Manager Jim Norton Toyota

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Toyota Motor Manufacturing Case Study

What would be done to address quality (“seat” problem)-doug friesen, existing options, recommendations, and reasons, divergence of the present routines from the principles of tps, real problem(s) facing doug friesen, works cited.

The “seat” problem in Toyota Motor Manufacturing (TMM) Company requires immediate resolution. As evident from the case provided, the condition is worsening and might hinder the productivity of TMM. The company upholds the aspects quality and competitiveness. Thus, it can hardly install defective Camry seats in its new vehicle models due to quality issues (Mishina 1).

As the CEO of the company, Doug Friesen could have done a lot in order to address the quality issues regarding the seat problem. This is a significant provision when considered critically in the Toyota’s context. The processes set to ensure quality provisions within the company should be augmented to ensure that every department addresses quality issues with precision.

The first recommendable action is to order the supplier of Camry seats (Kentucky Framed Seats) to observe quality in its production systems. This will ensure that the seats they supply meet the quality standards set Toyota Corporation. Doug Friesen could have instructed KFS to produce Camry seats with substantial fitting provisions that minimize damages during their installation.

This will allow employees in the seat installation section to uphold quality and minimize the alleged seat damages. Evidently, how some of the seats are made contribute to the damages witnessed during their installation processes. This is quite discouraging and might force the company to change supplier of its required seats.

Additionally, the CEO would have instructed the concerned departments to observe vigilance while handling seats. This will help in upholding the stipulated quality with regard to seat installation. Additionally, Doug Friesen could have proposed the production of other viable seat designs for the concerned vehicles. This would have helped in alleviating the problems noticed with the defective Camry seats (Erjavec 55).

Ability to incorporate the entire production stakeholders and the department of quality assurance could have also helped in curbing the noticed seat problem. It is from this context that the whole problems facing the company could be alleviated. Additionally, it is important to consider the fact that having proficient workforce and seat designers who could make the required none-defective seats could have helped considerably.

As the CEO, Doug Friesen should act cautiously with precision. It is evident that the seat designs and their nature do not allow for effective installation. Liaising with the supplier of Camry seats (Kentucky Framed Seat-KFS) through relevant departments within the organization could equally help in the situation (Mishina 7). In such instances, KFS would obviously adjust its quality systems and change seat design to the better.

This would have solved the alleged seat problem once and for all. Nonetheless, employees were mandated to install the seats cautiously and report all the problems detected during the installation processes. This would have helped in redesigning the seats to suit the new vehicle models produced by Toyota. Contextually, this is an important provision due to its relevancy.

There are various options that can help in solving the seat problem presented in the provided case. Firstly, Toyota can change the seat supplier. The company can outsource another firm, which will provide the recommended seats with no defects and at a cheaper cost. This is an imperative provision in the entire production context. It can help in solving the seat problem with promptness.

Additionally, the company will be able to reduce costs and increase profits. However, changing the seat supplier can also interfere with the production processes and efficiency that the company has been embracing. It will take the new supplier a considerable duration to design the new seats, test their viability, and launch their mass production.

Contextually, it is considerable to change the supplier despite the probable challenges mentioned before. It is crucial to consider various aspects of this provision before enacting other inconsiderable measures. This will allow Toyota Motors to explore other new talents in the realms of seat designers, efficacy, and modernity.

Another considerable option in this context is changing the seat design such that the parts that create problems during installation are corrected precisely. It is illogical to damage the seats during installation due to their poor structures (Mishina 3). Despite the needs to grant customers some comfort within the vehicles, the aspects of production should also be considered for viability.

Evidently, it is quite costly to continue attaining faulty seats while the condition can be corrected with utmost precision. Considerably, changing the seat design is a viable option helpful in reducing wastage of resources. This is a significant option when scrutinized critically. Restructuring the concerned seat design will be helpful in augmenting the efficiency of production, reliability, and other relevant business provisions.

Another viable option in this context is the augmentation of quality assurance requirements. It is the mandate of the company to cope with the situation in a positive manner as it sources for viable options helpful in this context. The seat problem should not continue to distract the efficiency of employees since there are efforts on the ground to correct it.

As indicated before, caution during the alleged installation can help considerably in the matter. Additionally, the quality department will ensure that the seats made for installation abide by the quality demands of the company and enhance the efficiency of the workflow. Seats, which are easy to install, will not distract the production and assembly processes.

Concurrently, the company will achieve its quality demands stipulated in this context. It is crucial for TMM to consider this provision in the entire production context in order to remain relevant and competitive in the motor vehicle industry. Managing to execute the demanded duties will equally contribute to the alleged quality provisions and production efficiencies.

The Toyota Production Systems (TPS) has two principles governing its operations in order to attain value, efficacy, suitability, and adjustability to the constantly shifting market demands. Conversely, current practices used to manage faulty seats diverge considerable from the stipulated TPS principles.

The first principle of TPS is JIT (Just-In-Time) where the company intends to produce only what is needed, at the right time, place, and quantity (Mishina 2). This is meant to eradicate wastage of resources and other impracticable production concepts. Evidently, some aspects of the routines used to handle defective seats are incongruent with the JIT principles of quality, efficiency, and appropriateness.

Firstly, rejection of defective seats translates to wastage of resources and valuable production time. Seats should be inspected at the supplier’s site before introducing them into the Toyota’s production systems within the company. By using defective seats, it means that Toyota will be producing what is not needed in the market. Hence, the company will not meet the intended market demands.

Consequently, this will interfere with the viability and appropriateness of the company. Precisely, this provision hardly conforms to the JIT’s quality provisions embraced by TPS. It is important to observe the production duration used by the company in order to understand evident loopholes that characterizes the matter.

The second considerable principle embraced by TPS is the ability to put production systems focused on detecting problems. TPS achieves this by stopping production processes upon detection of any problem within the production systems. This is helpful in curbing problems promptly before they spread within the entire production systems.

Since the routine production systems do not stop their operations even after detecting defective seats, they hardly conform to the provisions of viable corrective measures as demanded by TPS. It is proper to consider such provisions in the business context. It helps in saving time, reducing costs, and improving efficiency.

Considerably, it is the mandate of every organization to uphold the aspects of quality and effective production processes. Since Toyota returns defective seats to KFS for replacements, it is evident that there are considerable delays in the entire production processes. Inability to correct the defective seats in time equally defies the principle of TPS in observing promptness and quality provisions.

Toyota considers the quality of Camry seats used in the new Wagon models produced by the company (Erjavec 55). Since the occurrence of defective seats is a stumbling block to the entire production processes, it is important to agree that there is a massive deviation from TPS’s quality and timely provisions.

From the provided case study, it is evident that Doug Friesen is faced by numerous problems. This ranges from managerial prospects to workforce concerns. One major problem that is facing Doug Friesen is the seat problem (Mishina 1). The emergence of defective seats witnessed within the production system is a major problem. It retards the organization’s efficiency and the productivity of the concerned organization.

This necessitates a massive eradication of this problem forever. The way through which Toyota Corporation would solve this problem explicitly is a massive concern to Doug Friesen. He must mediate its viability in various contexts. Additionally, since he is the CEO of the organization, he must react swiftly, cautiously, and meaningfully in order to correct the situation within the required duration and with precision.

This is a considerable option for Doug Friesen, which he must observe carefully. Evidently, he started to investigate the matter by himself in order to have a viable applicability of the matter. Contextually, it is important to eradicate uncertainties, reservations, and apprehensions within the company and beyond.

Another noticeable problem that faces Doug Friesen is how to enhance productivity of the company and deal with the issues of extended work durations. Employees complain of continuous work minus rest. Since there are higher demands for new model vehicles, the company has to increase its productivity in order to grasp the increasing customer demands and other probable provisions.

Proper management and convincing employees to work extensively is of a massive concern to Doug Friesen. Precisely, the need to resolve the “seat” problem, enhance the sale of new vehicle models, advance the company, embrace new vehicle models, and manage employees properly are noticeable problems facing Doug Friesen.

Erjavec, Jack. Automotive Technology: A Systems Approach . Sydney: Thomson/Delmar Learning, 2005. Print.

Mishina, Kazuhiro. Toyota Motor Manufacturing, U.S.A., Inc . Massachusetts, MA: Harvard Business School, 1995. Print.

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Toyota’s Recall Crisis: What Have We Learned?

  • Jeffrey Liker

In August, 2009, the improper installation of an all-weather floor mat from an SUV into a loaner Lexus sedan by a dealer led to the vehicle’s accelerator getting stuck, causing a tragic, fatal accident and launching the most challenging crisis in Toyota’s history. This iconic company, synonymous with safety and quality, was vilified by the […]

In August, 2009, the improper installation of an all-weather floor mat from an SUV into a loaner Lexus sedan by a dealer led to the vehicle’s accelerator getting stuck, causing a tragic, fatal accident and launching the most challenging crisis in Toyota’s history . This iconic company , synonymous with safety and quality, was vilified by the American press , the government, and expert witnesses to plaintiff lawyers. Details usually unworthy of public attention, such as internal memos disagreeing over public relations strategy, became smoking guns that convinced the press and the public that Toyota vehicles had electronic problems causing runaway vehicles — and that the company was hiding this from the public.

toyota case study summary

  • Jeffrey K. Liker is a professor of industrial and operations engineering at the University of Michigan and is author, with Timothy N. Ogden, of Toyota Under Fire .

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Toyota Motor Manufacturing, U.S.A., Inc. – Case Solution

Doug Friesen, the manager of assembly for the Toyota Motor Manufacturing plant in Georgetown, Kentucky was facing a huge problem regarding its car seats. Several of their cars came up with either having defective seats or without any seat at all. It resulted in employees being engaged to work overtime to resolve the problem but the cause of the problem cannot be identified. Without identifying the cause, the company cannot come up with an appropriate solution.

​Kazuhiro Mishina Harvard Business Review ( 693019-PDF-ENG ) September 08, 1992

Case questions answered:

Case study questions answered in the first and second solutions:

  • As Doug Friesen, what would you do to address the seat problem at the Toyota Motor Manufacturing, U.S.A. plant? Where would you focus your attention and solution efforts?
  • What options exist? What would you recommend for the short-term and long-term? Why?
  • Where, if at all, does the current routine for handling defective seats deviate from the principles of the Toyota Production System?
  • What is the real problem facing Doug Friesen?

Case study questions answered in the third solution:

  • What are the key principles that TPS incorporates? Which ones did they fail to follow?
  • What is the cost of a chord pull resulting in a line stoppage of 1 minute? 30 minutes? 60 minutes? What is the value of a chord pull?
  • How should Doug Friesen address the seat problem of Toyota Motor Manufacturing Inc.? As Doug Friesen, where would you focus your attention and solution efforts?

Not the questions you were looking for? Submit your own questions & get answers .

Toyota Motor Manufacturing, U.S.A., Inc. Case Answers

You will receive access to three case study solutions! The second and third solutions are not yet visible in the preview.

Q1. As Doug Friesen, what would you do to address the seat problem at Toyota Motor Manufacturing, U.S.A. plant? Where would you focus your attention and solution efforts?

The deteriorating quality of seats continued to be an issue at Toyota Motor Manufacturing, U.S.A., Inc. (T.M.M.) owing to the Just-In-Time policy followed at their end. The problems ranged from the delivery of defective seats to failure in seat replacement for the defective ones.

Changes and proposed solutions are as follows:

  • The introduction of numerous variants led to issues in seat quality management as the operations at the end of KFS were initially streamlined and in line with T.M.M.’s goals. Postponement of customization of colors can lead to a reduction in the variants during the production stage and can be customized after the seats pass the quality check.
  • Quality Control needs to be performed either at the outbound stage of KFS (as per T.M.M. standards) or at the inbound stage of Toyota Motor Manufacturing, U.S.A.

Toyota Motor Manufacturing, U.S.A., Inc.

Instead of keeping the faulty seats on the assembly line, it is better to move to the Code 1 Clinic Area immediately so that the problems in the seat can be identified and rectified. It also helps in the company’s adherence to the Jidoka concept. Adoption of Just-In-Time in the Code 1 Clinic Area for seat reworks as well to reduce the delay in the rework process.

Proper seat assembly needs to be cross-checked at the Inbound stage itself by T.M.M. for special deliveries.

Q2. What options exist? What would you recommend? Why?

The alternatives are as follows:

  • Review of available variants to identify if all of them are necessary or not. Reduction in slow-moving variants can streamline the process.
  •   Toyota Motor Manufacturing, U.S.A. should take up the Quality Control process of KFS in association with KFS’s quality department by providing expertise and developing solutions to match the requisite standards.
  •   Search for a new supplier who could deliver quality products on Just-In-Time. o Multi-Vendor Policy
  • Trend analysis (Exhibit 10) shows an increasing number of Andon Pulls as the month progresses for Rear Seats. The underlying issues have to be identified and rectified.
  • Safety Inventory needed to be maintained for Seats so that the delay from the supplier wouldn’t affect the T.M.M.’s production cycle.

Recommendation : Out of the alternatives mentioned above, we would suggest Toyota Motor Manufacturing, U.S.A…

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Operations Management

Toyota Supplier Relations: Fixing the Suprima Chassis

Charles Fine

Donald Rosenfield

Jamie Bonini

Apr 24, 2017

In late 2004, Walt Bernstein, the director of production control for Toyota Motor Manufacturing’s Macon, Georgia operation, was notably frustrated with the plant manager for ChassisCo, a Toyota supplier. There were quality and conformance issues with the rear suspension cradle that ChassisCo was manufacturing for Toyota’s new Suprima crossover. ChassisCo had made a number of operational improvements since production started 14 months earlier, but problems continued to surface. Bernstein, an expert in Toyota’s production principles, needed to figure out what to do.

Learning Objectives

To encourage students to think about how best to structure a supplier relationship that will be able to continually address new challenges and change.

Appropriate for the Following Course(s) 

operations management; operations strategy

Toyota Supplier Relations: Fixing the Suprima Chassis   

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Sunday Wisdom #47: Total Quality Management (TQM) Revolutionizing Efficiency: A Toyota Case Study

The Toyota Case Study Summary by Joy Moitra (Sunday Wisdom #47)

Toyota Case Study Summary by Joy Moitra (Sunday Wisdom #47)

Table of Contents

Total Quality Management (TQM) Revolutionizing Efficiency: A Case Study on Toyota Motors

Toyota Motors, a pioneer in the automotive industry, has long been known for its excellence in quality management.  Let’s look into the implementation of Total Quality Management (TQM) at Toyota, examining key data points and critically evaluating its impact on the company’s operations.

In the late 20th century, Toyota faced challenges related to quality issues, prompting the adoption of TQM principles. The company aims to promote a culture of continuous improvement, employee involvement, and customer satisfaction through a comprehensive TQM approach.

Implementation of TQM: A Toyota Case Study

1. Quality Circles: Toyota introduced quality circles, small groups of employees to address and solve quality-related problems collaboratively. This encouraged a sense of ownership and responsibility among employees.

2. Kaizen Philosophy: The Kaizen philosophy of continuous improvement became a cornerstone of Toyota’s TQM. Employees were empowered to identify and suggest improvements in processes, resulting in incremental enhancements.

3. Just-In-Time (JIT) Production: TQM was integrated into Toyota’s renowned JIT production system, reducing waste, minimizing inventory, and enhancing overall efficiency.

Data Points of the Toyota Case Study

1. Defect Reduction: Over the years, Toyota experienced a significant reduction in defects. Statistical data shows a steady decline in the number of recalls and warranty claims, highlighting the effectiveness of TQM in improving product quality.

2. Cost Savings: TQM practices, such as Kaizen and JIT, led to substantial cost savings. Data indicates a decrease in production costs, waste reduction, and improved resource utilization.

3. Customer Satisfaction: Customer satisfaction surveys consistently rank Toyota high for product quality and reliability. Repeated business and positive word-of-mouth referrals became indicators of the success of TQM in meeting customer expectations.

Toyota Case Study:  Critical Evaluation

1. Long-Term Sustainability: Toyota’s commitment to TQM has demonstrated long-term sustainability. The company’s ability to adapt and evolve its quality management processes has contributed to its long-term success.

2. Employee Engagement: TQM’s emphasis on employee involvement has led to a motivated and skilled workforce. However, challenges may arise in maintaining this engagement over time, requiring continuous efforts in training and development.

3. Global Expansion: Toyota’s TQM practices have been successfully replicated in its global operations, showcasing adaptability. However, cultural differences may pose challenges, necessitating a customised approach in diverse markets.

Toyota ’s implementation of TQM has been a journey of change, evident in improved product quality, cost savings, and increased customer satisfaction. TQM is not a one-size-fits-all solution but requires continuous refinement and adaptation to ensure sustained success in an ever-evolving business landscape.

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    Toyota Case Study Summary By: Kristopher Lam Robert Blundell Mary Tadros Jessica Jia BUSI514 - Operations Management June 21, 2019 Instructor: Dr. Sean Jasso. 1 Auto Industry Overview Toyota today Competitor Toyota's Production System 2 3 4 Agenda 1 2 3 1 2.

  13. Case Study Toyota Supplier Relations Fixing the Suprima Chassis

    case study april 24, 2017 toyota supplier relations: fixing the suprima chassis charles fine, donald rosenfield and jamie bonini to say that walt bernstein, Skip to document. ... Robust summary of materials. Management Operations None. 801. Introduction to probability model s.ross math cs. Management Operations None. 15.

  14. Jim Norton Toyota Case Study

    Summary. Believing in the value of predictive analytics back in 2015, Jim Norton Toyota hired one of the leading providers of data mining technology for the automobile industry. In time, the dealership realized that it's not just a set of numbers - it's HOW the data is leveraged - is what transforms high-level prospects into highly ...

  15. Toyota Motor Manufacturing

    Mishina, Kazuhiro. Toyota Motor Manufacturing, U.S.A., Inc. Massachusetts, MA: Harvard Business School, 1995. Print. This case study, "Toyota Motor Manufacturing" is published exclusively on IvyPanda's free essay examples database. You can use it for research and reference purposes to write your own paper.

  16. Toyota's Recall Crisis: What Have We Learned?

    In August, 2009, the improper installation of an all-weather floor mat from an SUV into a loaner Lexus sedan by a dealer led to the vehicle's accelerator getting stuck, causing a tragic, fatal ...

  17. Toyota Motor Manufacturing, U.S.A., Inc.

    Unlock Case Solution Now! Get instant access to this case solution with a simple, one-time payment ($24.90). You'll be redirected to the full case solution. You will receive an access link to the solution via email. Doug Friesen, manager of assembly for one of Toyota Motor Manufacturing plant, was facing a huge problem.

  18. Case Study Analysis on Toyota Corporation

    Case Study Analysis of Toyota Company Course Code: MGT Course Title: Strategic Management Section- 05 Group- 05 Fall 2021 Prepared For Dr. Rumana Afroze Assistant Professor Department of Business Administration East West University Prepared By Name ID. Tanvir Ahmed 2017-1-10- MD. Ibrahim Khalid 2017-2-10-

  19. Toyota Supplier Relations: Fixing the Suprima Chassis

    THIS CASE HAS A TEACHING NOTE. In late 2004, Walt Bernstein, the director of production control for Toyota Motor Manufacturing's Macon, Georgia operation, was notably frustrated with the plant manager for ChassisCo, a Toyota supplier. There were quality and conformance issues with the rear suspension cradle that ChassisCo was manufacturing ...

  20. (DOC) Toyota Case Study

    Toyota Case Study Executive Summary This research traces the internationalization of global manufacturing companies using known theories with focus on how one successful company has used finance, marketing and human resource management in helping it to internationalize its operations and product sales.

  21. 24 Toyota Case Study

    Harvard Business School 9-693-Rev. September 5, 1995. Professor Kazuhiro Mishina prepared this case with the assistance of Kazunori Takeda, MBA '93, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

  22. Toyota Case Study Summary

    Toyota Case Study Summary. 1749 Words4 Pages. Chapter 1. 1. Toyota Motor Corporation. 1.1 Corporate Overview. Toyota Motor Corporation is one of the bigger automobile industries in the world, located in Toyota, Aichi, Japan. This corporation was founded in 1937 by the Toyoda family. Toyota has a subsidiary that has known as Toyota Australia.

  23. Toyota Case Study Summary: Know it All

    Implementation of TQM: A Toyota Case Study. 1. Quality Circles: Toyota introduced quality circles, small groups of employees to address and solve quality-related problems collaboratively. This encouraged a sense of ownership and responsibility among employees.