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

Submission Date:30thMay, 2012

Submitted By:

Table of ContentsSummary of the case:..................................................................................................................................2

Operations in Georgetown Production Plant:..........................................................................................2

Different Elements of TPS:...................................................................................................................4

Issues Affecting the plant:.......................................................................................................................5

ANALYSIS.....................................................................................................................................................8

Recommendation......................................................................................................................................11

Risks and Contingencies............................................................................................................................14

Conclusion :...............................................................................................................................................15

Summary of the case:This case study discusses the Toyota production plant in Georgetown, Kentucky.

In July of 1988 Toyota Motor Manufacturing (TMM), USA began producing Toyota Camry sedans. Toyota implements the Toyota Production System (TPS) in their Georgetown plant, similar to all other production facilities. This system reduces cost by eliminating waste. Excess production consumes extra space and human resources to control the products. The two governing principles that Toyota modeled the TPS system after are Just-In-Time (JIT) production and Jidoka(A Japanese word meaning automation).

JIT emphasizes the process of producing only what is needed when it is needed. Jidoka focuses on making any production problems instantly self-evident and production would cease when a problem arose. Toyota performs Jidoka by using andon cords(A board that hangs over the aisle between production lines and alerts supervisors to any problem) to highlight with buzzers and lights the step with the non-compliance. Toyota uses these processes to outperform its competitors and deliver a high quality product.

Operations in Georgetown Production Plant:

The various Operations in the Georgetown production plant are:

Assembly:Operations were performed along 353 stations on a conveyor line, over five miles in length and consisting of several connected line segments: the trim lines, chassis lines, and final assembly lines. Every station on the assembly line embodied Jidoka and kaizen( Kaizen meaning changing something for the better)tools. A standardized work chart was posted adjacent to each work station on the line, showing the cycle time of that station, the sequence of work tasks, and the timing to perform them within one cycle.

Production Control: PC’s task thus involved coordination with TMC, the sales company, and local suppliers. PC relied on the extensive forecasting and planningthat TMC performed for worldwide markets. The planning process reflected JIT principles in two major ways. First, the practice of heijunka(Heijunka is Toyota’s

terminology describing the idea of distributing volume and different specifications evenly over the span of production such as a day, a week, and a month. Under this practice, the plant’s output should correspond to the diverse mix of model variations that the dealers sell every hour) called for evening out (balancing) the total order in the daily production sequence. , TMM’s assembly line exhibited a variety of shapes and colors, with every car displaying a printout (manifest) that informed team members of the vehicle’s full specifications. The heijunka practice achieved two purposes. Spreading out the demand for parts as evenly as possible relieved suppliers of a surge of workload and facilitated their JIT production. Heijunka also synchronized the assembly line with the ultimate sales of the cars.

Quality Control: TMM’s quality control (QC) department pursued a mandatory routine of setting toughquality standards, inspecting every vehicle against those, and following through on the customer’s experience with shipped vehicles. QC served two other functions as well. The first was providing instant feedback to direct operations including final assembly. When eight cars filled up this limited clinic space, the assembly line was shut down under a “Code 1” status. This procedure worked as an equivalent of andon pulls for the managers. QC’s second unique function was proactive: preventing problems from occurring in the firstplace.

Purchasing: Purchasing department concentrate on managing cost. They prefer low cost supplier and encourages supplier to share their cost data with them and then they discuss with the supplier how they can improve their manufacturing process.

The Georgetown production plant uses Kentucky Framed Seat (KFS) to supply the seat sets for the entire production taking place at the plant. KFS follows a JIT system of production. When the body shells are finished with the paint line the information about the car is sent to KFS. This information enables KFS to ship out the corresponding seat sets in the correct amount of time to synchronize when the car arrives at final assembly and the seat sets are needed to be installed.

Different Elements of TPS:

Andon : A Japanese word for lantern, describes the appearance of the board. This board hangs over the aisle between production lines and alerts supervisors to any problem. In assembly, the board normally indicates the line name in green at the top. When a team member pulls a cord on the line, the board lights up a number corresponding to the troubled station in yellow, which then changes to red when the line actually comes to a halt. Theboard also shows whether the line stop is temporary or not, and whether the line is starved (body short), blocked (body full), or stopped by internal problems. This device quickly informs a supervisor of only what he or she needs to know to take immediate actions and thereby allows a small number of supervisors to control a large area; it also prompts supervisors to develop countermeasures for recurring problems in the longer term.

Heijunka is Toyota’s terminology describing the idea of distributing volume and different specifications evenly over the span of production such as a day, a week, and a month. Under this practice, the plant’s output should correspond to the diverse mix of model variations that the dealers sell every hour.

Jidoka:The three kanji characters comprising the Japanese word jidoka are “ji” or self; “do” or movement, motion; and “ka” or -ize; thus, a general meaning of jidoka is automation. At Toyota, however, the second character has been modified by adding the element for person (which doesn’t affect its pronunciation). “Do” now takes on the meaning of work (motion plus person). Jidoka at Toyota thus means investing machines with humanlike intelligence. In TPS, jidoka has both mechanical and human applications. Equipment contains fail-safe features like lights or buzzers that indicate defects; and people stop production when they detect any abnormalities. Overall, by adding the “human element” to the generic meaning of jidoka, Toyota emphasizes the difference between working and moving. This distinction is crucial because merely automated operations can produce both good and defective products “efficiently.” In practice, jidoka at Toyota thereby prevents defective items from being passed on to the next station, reduces waste, and most important, enables operations to build quality into the production process itself.

Kaizen : Kaizen literally means “changing something for the better.” The object of change usually includes the standardized work, equipment, and other procedures

for carrying out daily production. The purpose is to eliminate waste in seven categories: (1) overproduction, (2) waiting imposed by an inefficient work sequence, (3) handling inessential to a smooth work flow, (4) processing that does not add value, (5) inventory in excess of immediate needs, (6) motion that does not contribute to work, and (7) correction necessitated by defects. Kaizen requires that a process be first standardized and documented so that ideas for improvement can be evaluated objectively.

Kanban: Kanban means “signboard” in Japanese. The one used for a part supplied by an outside supplier indicates the name of the supplier, the receiving area at Toyota, the use-point inside the Toyota plant, the part number, the part name, and the quantity for one container. A bar code is used to issue an invoice based on actual part usage

Issues Affecting the plant:1)The Seat problem:

Doug Friesen is the manager of assembly, for Toyota’s Georgetown, plant, and he is responsible for the entire production floor. Currently Toyota is having a problem with their rear seat installation and Doug in the man on the line to fix the seat problem. Doug first course of action is to identify the root cause, and then create a mitigation plan. Toyota’s seat problem was costing them approx. 45 cars per shift and several hours a week of overtime. It is clear to Doug that the problem lays between TMM and their seat supplier Kentucky Framed Seat (KFS).

The problem began to propagate itself in early 1992 when the Toyota was preparing to introduce the new model Camry. The new Camry had 5 seat styles instead of the three styles used by the old model, and to complicate the issue Toyota began production of the Camry wagon (worldwide) in April of 1992 . This created an increase in seat combination from 3 in early 1992 to 18 in April.

All the new combinations caused a major interruption in the TMM, and KFS production process. Now KFS was responsible for 18 seat combination and the following problems resulted at the TMM facility:

• The rear seat andon pulls have soared by 450% and 150% for the 1st and 2nd shifts respectively, during April(As per the Exhibit10).• Defects are mostly the responsibility of KFS, and KFS owns on average 85% of the defects found in seats on a single day (As per Exhibit 8).

With KFS owning 85% of the defects on the TMM production floor Doug knows that it is now time to make changes and identify exactly why they are having so much trouble with the rear seats.

In Doug’s attempt to adequately address the problem he interviewed his assembly teams and found very few new problems. His assembly staff could not think of anything new that could cause the problem with the seats. This leaves Doug with a couple options internally, first he could reassign the seat assembly teams and bring on more experienced crew to solve the problem, he could improve the off-line operations in the cases where manages decided to continue correcting seats off-line, and lastly he could address the issue of overworking KFS.

As Doug Friesen, I would concentrate my efforts on the root case of the problem and not the outcome of the problem. The solution to the rear seat problem should be addressed in a dual effort attack. First, KFS should be contacted to identify exactly why the rear seats are having problems. With this TMM and KFS should work closely together to complete a process evaluation to narrow down the possible sources of the defects. Subsequently, I would concentrate on TMM in-house problem. As we can see from exhibit10 the andon pulls (along the seat installation stations) in April increased gradually throughout the month. This clearly indicates a problem with the installation of the rear seat. TMM must look into the following three internal issues to resolve this problem.

• Increased number of defective items from supplier (KFS), defects build on defects• Gradual decline in part quality, such as screws, fixtures, tools etc.• New Team members in the rear seat installation group still learning

The issue with KFS can be solved by working closely with their management team to education and train their employees. The issue of part quality can be easily controlled by addressing the issue with the production control foreman and the purchasing agents responsible for those parts.

The last issue is with TMM’s new team members. Data shows that the increase in andon pulls occurred when the new crew was assigned to the rear seat assembly section. This is more than likely the major cause of the in house based defects. TMM could combat this problem by partner each new employee with a more experience mentor and have the senior employee train the junior employee as an apprentice until they are ready to work on their own.

2) Deviation from the TPS procedure:

As far as deviation from the Toyota Production System, the manner in which the seat problem was handled is far from Jidoka. Jidoka calls for building quality into the production process and strongly condemns any deviation from value-additions. The seat defects were not being corrected immediately upon their detection, and therefore the process was being violated. By allowing the defective seats to go into the system as defects Toyota broke its own rules.

In this case the cars with defective seats were allowed to slip through the system for the following reasons:1. The final assembly people already knew of the problem2. It was possible to finish building the car without seat assemblies3. It was felt that stopping the line was too expensive given how long to take to obtain the replacement seat.

The breach of the Jidoka system ended up costing Toyota a significant amount of time and money to identify and correct the problem

ANALYSIS

A failure investigation should be in place which would best serve Toyota in the long-term and would also help all employees study the problem rather than just use a short-term solution. This failure investigation could be similar to the Five Why approach (exhibit 2). The failure investigation would reinforce the Toyota emphasis of “good thinking, good products “by sticking to the facts and getting down to the root cause of the problem. The failure investigation would begin with an engineering investigation into the problem. This would consist of generating possible reasons for the failure. In the case of the seat failure some possible reasons that would require deeper investigation would be:

1) Whether KFS have an inventory problem when a special request is submitted.

2) Whether the hook material change can affect the installation process.

TMM’s workers occasionally install a seat-bolt at the wrong angle, but this

problem is easily fixed within 30 seconds. This only accounted for approximately

11% of all seat problems between April 14 and April 30, 1992 according to the

Group Leader’s Seat Defect Data in exhibit 8, so KFS is responsible for the

remaining problems. The two most significant problems are material flaws and

missing parts, which account for almost 60% of all defects. It is clear that the

problem should first be analyzed on the supplier side.

TMM should also be using a better Engineering Change process. They should be

tracking Engineering Change request (ECR)with better traceability. Shirly Sargent,

the group leader of Final 2, mentioned that she had filed an ECR several months

prior to May but she had not heard back any information regarding a solution.

She should have heard an answer faster and the ECR should have been tracked by

TMM. Tracking ECRwould give TMM a better idea of an acceptable turnaround

time and ensure that it was always followed as a minimum. It turns out that

itwould cost KFS $50,000 to complete the ECR and this was an investment they

were not willing to make. When Friesen looked into the hook problem he learned

that Tsutsumi(Plant in Japan) had identical drawings and that the number of

breakages had decreased from 7 occurrences to 1 over the course of a few

months. Friesen should communicate with the lead at this plant and find out

why this happened. It is possible that after the assembly line workers learned how

to work with the material that the failures would decrease. Friesen needed to

find out if this problem would go away with experience or would it be necessary

to change the design.

KFS only delivers replacement seats twice a day and these seats are sometimes

not the correct seats that match any of the cars waiting for rework. TMM needs

to find out if the seats are not correct because KFS cannot interpret the fax

correctly or if they are sending the wrong seats because their computer system

cannot account for extra inventory in the shipment. Both problems would deliver

an incorrect seat to TMM therefore creating a delay in production. Due to which

the run ratio was down from 95% to a damaging 85% in April. The calculations

below demonstrate that the decrease in per-shift production is close to 47 cars.

Most of this can be blamed on the seat problem. Producing the missing cars via

overtime capacity will cost TMM in excess of $16,000approx. per shift. This

translates to around $8.4 Million per year considering two shifts and a 5-day

workweek.

Stations 353 Employees 769 Wage/Hour $17.00 Overtime $25.50 Cycle Time 1.05 Cars/MinShift Length 525 Minutes'Productive' Minutes 450 Run Ratio

100% 473 95% 449 85% 402

'Lost' Cars Per Shift (95% to 85%)

47

Cost per Hour of Production Overtime

$19,610

Time Required to Produce Add'l Cars

50 Minutes

Cost to Produce Additional Cars

$16,215

TMM and KFS should have an electronic order system instead of a fax system. An electronic ordering system would make certain that no information on the seat reordering form is misinterpreted. TMM should file the order electronically using a designated computer system and KFS could notify TMM electronically when they received the order and shipped the seat back. If TMM received a correct seat that matched the order they could close out the replacement seat purchase order and could therefore track the complete delivery time on all replacement seats from KFS. This information could be used as a bargaining chip when prices were being negotiated. To solve the shipment problem KFS could ship more frequently than twice daily. A good amount of shipments would be to ship twice per shift. This would help TMM with their goal of completing the retrofitted seat assemblies within two shifts. TMM could also help with the replacement seat inventory by keeping a certain amount of seats in stock. By keeping a certain amount of seats in inventory TMM

would be able to fix all seat problems within the ideal two shift time limit.TMM would have to look into the cost of carrying the inventory and see if it would be better to change the inventory holding principle or to implement changes between themselves and KFS.TMM has the two shift maximum goal of a turnaround time to fix the seat problem. It was found that some cars had been sitting in the overflow parking area for four days. The cars should have the date of submission in large font so it has better visibility to the workers. TMM should also make sure that the cars in the overflow parking area are following a First in First out (FIFO) inventory flow. This is the best way to ensure that the cars are not idle in the overflow parking area for an excessive amount of time. If a car is sitting for more than two shifts the supervisor of the overflow parking area, Jim Cremeens, should raise a red-flag and bring this car to the top of the priority list.

Recommendation

The short-term recommendation

1) Create a routine to deal with defective seats off-line (outside of the TPS system). This will allow time for a thorough root case investigation of the defective seat problem with minimal impact to the production line.

2) Designate an employee to manage seat correction and replacement and implement a one-shift requirement. In the same manner, have an employee check the seats at the arrival dock so those problems can be identified early.

3) Cars with defective seats should continue to be kept in the clinic area awaiting replacement seats. This will ensure that the production line is not interrupted and that all other aspects of production care not affected.

4) Deliveries from KFS should be increased in frequency to two deliveries per shift in order to maintain production levels and delivery. This will also ensure that cars do not line up in the clinic area.

5) The overflow parking area to visualize the fluctuation in defects. Positively reinforce time limits on replacement seats and time limits on how long a vehicle can stay in the overflow parking area. If the limit is exceeded, a problem-solving meeting should be initiated.

6) Awareness of the potential for seat damage caused by the hook should be communicated immediately to all line workers and KFS in order to help reduce defects as much as possible.

7)Finally, actions should be introduced to revise current procedures in response to problems. QC personnel should be placed with KFS to analyze why so many defective seats are getting to TMM.

Long term Recommendation

1) The electronic ordering system could be implemented within a year to ensure that seat orders from KFS are accurate and traceable.

2) Below are the few other IT enabled solution to rectify the seat and shipment problem.

A)Seat problem can be solved using RFID:

The automotive industry uses Sequenced Part Delivery (SPD) to create a ‘factory without borders’. This advanced JIT parts delivery technique was developed to enable outsourcing of some operations within the auto assembly process. When done correctly, Toyota can back a trailer into the assembly area with the correct finished components ready to build into a particular car as it moves down the line.

When a seat build order is started down the line at Intier, the job number is transmitted by the RFID system to an RFID transponder, or “tag”, which has been embedded in the seat assembly pallet. Once embedded, these durable tags will remain as a permanent element of the re-usable pallets. The job number is then read from the tag at each manufacturing workstation to initiate the correct processing as the seat travels from station to station on the production line. The seat assembly remains with its pallet throughout the build process. After a seat is

finished, the pallet is removed to be reused to carry another seat through the assembly line, and the tag is re-written with a new job number. The pallets with their tags can be used over and over again. Tags chosen for this application require no batteries; instead they receive electrical power from the energy of the RF field when passing an RFID system antenna. These “passive” RFID tags contain digital memory that can typically store from 1000 to 2000 bytes of data. Integrated RFID controller/antennas are installed into the conveyor system at each work station to automatically read the job identification data from the tag embedded in the bottom of the seat pallets. Any incorrect (skipped steps, out-of-sequence steps) are flagged and corrective action taken.

B)Implementation of Barcode:

Barcode labels can also be chosen to identify the seats as they move down the line. After all, the barcode is a unique identifier associated with the job and the individual barcode labels cost less than RFID tags. The reasons are simple but key to the success of this application: reliability – cost – function. First, EMS’s readers and tags provide much higher reliability of data in manufacturing environments than can be achieved by barcode techniques. The EMS readers and tags achieve as many as a million read cycles with only a few failures. This means that Intier Seating has a bullet-proof method of identifying each seat pallet. This level of reliability is not possible for barcode reader systems in the manufacturing environment.

3)The TPS system should be implemented at KFS and throughout Toyota’s supplier network. KFS’s proximity and significance in the manufacturing process are also a good reason why KFS and TMM will benefit from a TPS integration. KFS employees should be trained to identify problems in the line so that solutions can be found. Extensive education is needed for this to work. KFS inspectors should pursue training in the Five Why’s.

4)TMM should recommend a reduction in the variety of seats with TMC. In addition, seat parts from Japan should be sent and compared scientifically with the parts that KFS produces and buys. The variety of seats that Toyota is requiring should be minimized to avoid additional problems and to ease the scope of problems when they occur.

Risks and Contingencies1)TMC might not feel that the variety of seats could be reduced. Even if TMC

keeps increasing the variety, we believe it could be manageable in the long-term.

In this case, TMM must focus on teaching KFS the principles of TPS and help KFS

to deal with the increased capacity demands. Another option might be to get a

second seat supplier or assemble the seats in-house like they do in Japan.

2)KFS might not be able to react to the increased demand in which TMM’s

alternatives are similar to the ones mentioned above: TMM can pursue a second

suppler or additional plant capacity. This risk could be relatively high in the short-

run but additional capacity can be purchased which makes this risk small in the

long run.

3)KFS could refuse to adopt TMM and TPS procedures. This is highly unlikely since

TMM and KFS are so dependent on each other. We assume that Toyota is KFS’s

largest customer. KFS is Toyota’s only local seat supplier so they have a mutual

dependence. The same contingencies as above would also be recommended to

mitigate these risks.

Conclusion :

TMM managers have significantly deviated from the TPS principles in order to accomplish short term goals. This creates a dislocation in the system, erodes the benefits from TPS, hides the source of problems and introduces higher costs, time lags, and errors. To tackle the problem Doug Friesen should go back to the TPS supported by jidoka and heijunka principle. To do that he has to enforce these principle and provide intensive coaching. Once the TPS is fully restored, Mr. Friesen should launch a several of initiatives at different point of the line since it appears that instead of a single problem, the seat issue has different sources that have been aggregated and identified at the overflow stage.