Manufacturing
Company
FINAL CASE STUDY
Franziska Morrow
MGMT 365-ON1 |
I. Background Facts
In 1985 Toyota Motor Company (TMC) decided to begin making cars in North America, and
The plant had an annual capacity of 200,000 Toyota Camry sedans, therefore it would replace
In 1992, Toyota was expected to supply 240,000 of the new Camry models.
o The new Camry model was competitive with the midsize family models on the market;
The Toyota Production System (TPS) was an essential part of TMCs competitive advantage in
TPS aimed at cost reduction by thoroughly eliminating waste, this included overproduction.
TPS utilized the Just-In-Time production principle; where you only produce what is needed, and
only when it was needed. They believed that any production over what was truly needed was
considered waste.
The second principle that was utilized in TPS was jidoka a problem-solving method. This process
was aimed to make any production problems instantly self-evident and to stop production
o Employees on the production line would pull an andon cord that would halt
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supervisors would come directly to the problem and they would not start production
TPS emphasized continued innovation and improvement and valued input from line workers.
Every station on the assembly line embodied jidoka and kaizen tools.
The production control department mission was to coordinate between the production
department and the sales companies, so that they manufactured and then delivered he right
The quality control department was responsible for setting tough quality standards, then
inspecting the vehicles against those standards, and then shipping the vehicles.
o They were also involved in the problem-solving process when dealing with quality
The Camry seat was made up of several pieces: the front left and right assemblies, the rear seat
KFS and TMM synchronized their production process to embody the Just In Time Principle, so
that they produced the exact seat, in the exact color and size for every car that was being
TMM and KFS were located near each other geographically, because of this TMM taught KPS the
In 1991 the Toyota Camry had a model change, that offered far more options and variations
II. Problems
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TMCs main priority was to implement the TPS in Georgetown. They first sent employees to train
in Tsutsumi with TPS experts. Then Tsutsumi people came to Georgetown by the hundreds to
train and coach the TMM employees. They focused on a hands-off training method where they
did not do any of the work for the trainee, they talked them through the process and required
them to always do the work themselves. This process was very time consuming and in order to
be effective there needed to be constant supervision. Although many trainers from Tsutsumi
came to train the Georgetown factory, they were not there nearly long enough to truly immerse
the employees in the TPS method. In order to teach someone TPS you needed to get to know
that individual very well and it was most effective over a long period of time. This is a limitation
On average, a team member pulled the andon cord about a dozen times a shift, and typically
at least one of the andon cord pulls resulted in a complete line stoppage. This is a key element
of TPS. In the beginning it can result in a lot of time lost, and valuable production time lost.
In the production control department, they rely heavily on extensive forecasting and planning to
serve their worldwide market. Their system is within a 20% accuracy of what is needed, but this
The Camry seat features posed several challenges for many areas of assembly:
o In its final assembly its soft material was prone to damage and by far the bulkiest of all
the parts.
o For Quality Control is was crucial for meeting quality controls for safety and car crash
performance.
o The seat was an aesthetic item, that had to appeal to the customer, with the desired
o The seat was the most expensive of the purchased parts, costing $740.
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The relationship KFS entered with TMM was unique, because it was the first time a car company
did not manufacture the seat themselves. TMM wanted to institute the TPS system at KFS and
that required a lot of time and money. The startup of this relationship was not seamless, and
TMM management admitted that now KFS is an extension of TMM and they are both students.
Because these are two completely different companies it is difficult to correctly allocate the
necessary personnel, time and finances into getting KFS to run as smoothly as TMM.
During the fall of 1991 Toyota instituted a model change for the Camry. KFS was required to
continue producing the exact same product until the very last day. Then KFS only had ten days
to change over the process and 10 weeks to build up to working at full capacity for the new
model. This was a small time frame to expect of a new company to TPS. Although TMM was a
great resource and partner for KFS they did not completely control their production and
management, so the change over to the newer model caused a lot of production problems for
KFS.
After instituting a tight schedule for changing the model, Toyota increased the seat variations,
offering them in more sizes and colors. This coupled with them servicing to a worldwide market
(not only North America) caused many production problems with KFS.
3 Months after the change, the run ratio was down to 85%, and it had been at 95% earlier in the
month. The run ratio measures the number of cars actually assembled in proportion to the
number of cars that could have been assembled with no line stoppages. This 10% decrease
This loss in production will cost TMM $16,000 per shift and $8.4 million per year.
On May 1, 1992 they found 18 vehicles offline with seat problems. And some dating back to
April 27, which was surprising because policy dictated that vehicles be refit to another seat
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When management came to the scene and was trying to solve the problem, he began asking
employees what they thought of the situation and they looked increasingly puzzled when
Friesen (manager) kept asking about seat problems. This shows that someone along the line
was not pulling the andon cord to stop production and alert the factory that there was a
problem with quality control or production problem. This is a clear deviation from TPS.
A group leader in Final 2 said she had submitted a request for an engineering change several
months ago regarding the seat. The manager was unaware. She claimed that there was a
problem since last fall, and in April it is finally being brought to a managers attention.
They that the problem resulted from a hook, and they learned three facts from QC:
o Modifying the relevant tool for the hook would cost KFS about $50,000
o In Tsutsumi, they had used the identical engineering drawings for the part but had not
o The hook breakage frequency had gone down from several occurrences per shift to only
When management was trying to solve this problem, they did not go through the 5 Whys
Toyota had two major strategic operational issues, and they are both interconnected. The first is the
Camry seat problem, they are losing valuable time and cost of production by having cars having to be
taken out of the assembly line and needing additional work. They were underproducing around 4 cars a
shift as a result of this problem. This issue goes against all ideals and principles of TPS. The fact that a
manager was unaware of the problem contributes to the magnitude of the problem. The Georgetown
personnel were trained to be able to deal with problems that arise on the spot and for the most part
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independently. If they were unable to find the root cause then they involved higher management. In this
case that did not happen and the problem continued for over a month.
The question is whether or not TMM can follow the TPS method and come to a solution to this seat
problem, or if the overall procedure goes against the TPS as a whole. When TMM did not stop
production and attempted to solve the problem in real time (they simply put it in another area for
Their second strategic operational issue is their relationship with KFS. KFS is their sole supplier of
seats and they rely heavily on KFS to work interconnectedly with TMM to provide seamless service and
production. Although TMM taught KFS the TPS method, for TPS to be effective it must be ingrained in
their culture, employees cannot simply be taught the methods they have to believe in them for the TPS
method to work. The additional variations and sizes were a problem that KFS was not ready for, they did
not know how to standardize the process and make the changes work in their plant. For Toyota adding
these additional seat variations went against the ideals of standardizing the process. A priority for TMC
is to produce cars, quickly, affordably and ones that consumers want. Possibly adding that many
IV. Alternative/Solutions
TMM should maintain a stronger relationship with TMC and KFS so that they can properly
coordinate. It was stated that Tsutsumi had not reported problems with the new seat installations. A
reasonable and cost effective option would be to communicate with Tsutsumi and see what they are
doing differently. Maintaining a closer relationship among all parties will facilitate the execution of the
TPS system, ideally you would want all three companies to flow as if they were one.
The Georgetown factory would benefit greatly by creating a specific quality control team that can
analyze the situation and get to the root of the problem. Creating a team whose sole purpose is to
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identify the cause of the problem and come up with possible solutions would create accountability and
management could be presented with the right data to make an informed decision.
When assembly line workers experience a problem they should immediately pull the andon cord so
that supervisors are alerted. They could also create a separate area to put cars with defective seats so
that additional information (other cars out of assembly line for various reasons not involving the seat
defect) is not clouding the problem at hand. For example, if there are ten cars taken out of assembly and
six of them are because of seat defects it is easier to see the problem when you are solely dealing with
that problem, not others as well. If a separate area was created this could give the quality control
Toyota could also consider reducing the amount of seat variations in the short term so that
production is not hindered for too long. The Toyota Production System production system ideals are to
standardize the process and to continue to innovate and improve. When they introduced the Camry seat
variations with little planning time (only 10 weeks) for KFS that went against the standardization of TPS.
Although the ideals of TPS are rooted in TMM, KFSs TPS culture is not as strong as TMM. Therefore,
they were unable to fix the problem when it first started. If the Georgetown facility maintained a closer
relationship with KFS they could have seen this problem earlier. It would be beneficial is Toyota places
V. Recommendations
I recommend that TMM, TMC, and KFS maintain a closer relationship. TMM should be
communicating any ongoing problems (that they were unable to solve themselves) to TMC so that they
can get their feedback and advise. Toyota Motor based out of Japan are TPS experts and they would
know how to properly guide their Georgetown counterparts correctly. In their communications they
could also request a reduction in the amount of seat variations and explain their reasonings. TMM
should maintain a stronger relationship with KFS by taking an investment in the company, they should
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have a quality control department (at the very least assign a team to monitor QC in KFS) within KFS so
TMM should immediately create a QC team that is dedicated to identifying the problem and then
coming up with various solutions. They will be there when assembly line workers pull the andon cord
and they will also look at the cars taken off the assembly line. By creating a team, they are creating
guidelines and assigning tasks. This team then can study this and then present the facts and solutions to
They also much reinforce the TPS system in their Georgetown factory because the proper
procedures were not followed when the assembly line experienced the seat problems. They were
supposed to immediately stop production and solve the problem. If they had done this, it would have
costed them some time in the beginning of the process but it would have resolved in a faster time
frame. Because now Toyota is losing time and money every day because of this problem (the loss of 45
cars having to be made up in overtime). Maybe this means more training and instruction, but it is
important that the TPS system is truly engrained in their culture, the employees have to believe in the