Toyota Company Production and Operations Management

Company description

Toyota Motor Company is a Japanese corporation engaged mainly in automobile and financial business. The corporation operations are based on three segments (TMC, 2010). The auto sector takes on the devising, fabrication and production of automobiles products namely trucks, minicabs, commuter vans, and allied accessories. The funding industry subdivision takes part in offering fiscal services mainly concerned with the vending of Toyota artifacts like letting of sedan and tools. The final division takes on the designing, assembly and vending of board, information as well as contact services.

Toyota is the largest automobile manufacturer with some of the biggest manufacturing facilities in the world. The company had a workforce of over 305,600 employees working in either of the three business segments as at the fiscal 2010 (TMC, 2010). Its global presence is remarkable with major operations spread in almost all countries including the developing countries. The biggest markets for Toyota include U.S. followed by Far East countries. However, the recent trends indicate that the company is gaining substantial share in the emerging markets of India, Brazil and Africa. Most growth strategies are target to these growing markets.

Despite the stiff competition in the global arena characterized by key players such as Ford Motor Corp., Honda, Nissan and General Motors, Toyota has managed to acquire the largest market share which incessantly expands. By the end of the fiscal 2009, the company had a market share of 21% hence becoming the largest distributor of vehicles in the developing countries. This tremendous performance has made Toyota the leader in terms of revenue and profitability. Besides, the company had revenue totaling to over 19 trillion yen as at the FY 2010 (TMC, 2010). With most of its sales concentrated in North America and Japan, Toyota sales revenue were 4.87 trillion yen while making a profit of 190.47 billion yen. It has a stock market capital of $225.39 billion and a P/E ration of 14.83 (TMC, 2010).

Production and operations management

Operational management is also referred to as production process, production management or operations within an organization (Chary, 2009). It simply means the actual production and delivery of products. It involves product design along with the associated product process, planning and implementing production as well as acquiring and organizing resources. With this broad scope, the production and operation functions have a fundamental role to play in the company’s ability to attain the set goals and objectives.

Hence, operations managers are required to be conversant and familiar with the concepts and issues that surround this functional area. Any firm’s operation management system should be focused on fulfilling the requirements of its customers for dependable and fast services at reasonable prices besides helping its suppliers to improve the services they provide. As Slack et al. (2009) observed, the basic performance objectives which pertain to all operations include quality, speed, flexibility, dependability and cost. Toyota Company has been much successful in meeting these objectives through its production and operation function.

Over several decades Toyota operations were streamlined thus resulting in the popularly known Toyota Production System or TPS. Although the system had been extensively researched on and written about many companies such as Nissan experienced difficulties in replicating TPS. The TPS was conceived when the company realized that producing massive quantities from a limited product line and ensuring large lots of components to achieve maximum economies of scale led to flaws. Its major objectives were to reduce cost, eliminate waste and respond to the changing needs of the customers. The initial feature of this system was set-up time reduction.

Quality might be considered as doing things right through provision of error free product which satisfies the target customers. Toyota vehicles are among the leading brands in customer satisfaction. Being voted as the car of the year by many market surveys, research conducted over several years indicates that the company has an appealing record globally. Due to good quality Toyota success has kept growing and in 2009 the company was the best worldwide. Moreover, Toyota has been keen on producing quality vehicles with many technologies that improve the performance of the vehicles.

Speed objective means doing things fast in order to reduce the time spent between ordering and availing the product to the customer. The TPS techniques operations focused on reducing complexity through the use of small and simple machines which are flexible and robust. Rearranging flow and layout to promote simplicity enhances the speed of production.

Another objective is dependability which implies timely working to ensure that customers get their products within the promised time. Toyota has included just-in-time production system comprised of skilled employees who worked as teams while the kanban control allows them to deliver goods and services as promised. Improving quality and efficiency is a concern for managers and technical experts as well as other employees. These operational techniques give customers a dependability advantage.

Among the responses that many organizations make to the rapidly changing environment is by changing their products in addition to changing their ways of doing business. This is often dubbed as flexibility. Chary (2009) argues that organizations must learn to like change and develop responsive and flexible organizations to deal with the changing business environment. Within Toyota plants flexibility refers to the ability to adopt their manufacturing resources so as to develop new models. The company is able to attain high degree of flexibility whilst manufacturing rather small bunches of products with no or little loss of quality or productivity. Throughout the years Toyota has offered a range of options which consumers use comfortably.

The most significant operations objective especially in market environments where firms compete with price is cost. Globally, low price is an attractive objective to consumers and can be attained by producing products at low costs. For Toyota to do things cheaply they aim at leveraging the cost of both commodities. In the future the company plans to shift their production to different countries where labor is cheap. Internally, cost performance is aided by best performance in other operative objectives like manufacturing quality products at sound prices.

Team working in TPS

According to market surveys and researches, Toyota was among the few manufactures in the whole automobile industry that consistently profited during the oil crisis in 1974. This made popular manufacturers to envy and visit Toyota to discover the reason of the company’s success in a declining market. Their discovery was the unique team working of the Japanese who utilized scientific management rules (Huczynski & Buchanan, 2007).

Japanese team working is very dissimilar to that which became prominence in American and European companies in the 1960s and 1970s. The Japanese team working usually referred to as toyotaism, refers to a certain form of work organization that emphasizes on lean production. This is a technique which combines just-in-time production, problem solving teams, work standardization, powerful first-line supervision and continued incremental process improvement.

Just-in-time (JIT) production system attempts to instantaneously meet demand with no waste and perfect quality. It is different from conventional operation practices in that it emphasizes fast throughout and waste elimination which add to low inventories. Control and planning of many JIT approaches are concerned directly with pull scheduling, leveled scheduling, kanban control, synchronization of flow and mixed-model scheduling (Slack eta al., 2009).

Toyota is one of the biggest players in transforming Japan into a kingpin in automotive production. Other companies which have adopted the company’s production system have increased efficiency and productivity. The 2009 industry census of manufacturers indicates that many superlative firms have adopted just-in-time production along with the various techniques Toyota has been developing over years. The industry’s analysis of best plant winners shows that majority of them use lean manufacturing techniques extensively.

Adjusting to major crisis

In case of a major crisis Toyota adjusts by shutting down its production or operations in the areas that are affected most or on particular products that underperform in such a situation. For example, during the 2008 financial crisis the company shut its production of large vehicles for some time and switched the factory that produced SUVs into that which produced Priuses.

This adjustment was also evident during the Japanese earthquakes when Toyota suspended its operation in the plants within the affected region. The company also responds by eliminating some of its workforce especially the temporary workers in the affected facilities. This may include extending leaves of absence or making them work on part time basis. Toyota also minimizes remuneration for plant managers and condense bonus for every salaried workforce.

Since the crisis adjustment in Toyota affect employees and customers directly the company ensures that the stakeholders are aware of the changes. When a crisis comes Toyota establishes a committee that takes the opinions of employees and customers in the affected areas in order to determine the most appropriate adjustment. The committee is responsible for devising methods to explain the reasons for the adjustment and the benefit it has for the stakeholders at large. Before tuning customers are linked to other production plants through the company representatives. The employees are given options to extend their leaves or get assistance to secure another job. Through this strategy Toyota has maintained good relationship with customers and employees affected by the adjustments.


Chary, S. N. (2009). Production and operations management. Mumbai, India: Tata McGraw-Hill Education.

Huczynski, A. & Buchanan, D. (2007). Organizational Behavior: An introductory text. New York, NY: Prentice Hall.

Slack, N., Chambers, S. & Johnston, R. (2009). Operations and process management: principles and practice for strategic management. New York, NY: Prentice Hall.

Toyota Motor Corporation (2010). Annual report 2010. Web.