(Image provided by Mytho88 via Wikipedia)
Just a year or two ago, Toyota was a model case study in business management.
Recognised as a leader for quality, safety and reliability, and modeled by rivals for its ‘lean production’ system, the Japanese giant was arguably the most respected car maker in the world.
Nowadays, the company still features in case studies – but for all the wrong reasons.
In this series, I would like to look at what exactly went wrong. In the next post, I will talk about what lay behind the company’s poor response to the crisis.
Where did it all go wrong?
Problems associated with unintended acceleration are well documented, as is Toyota’s sluggish and poor response.
But to attribute the current crisis to any one singular cause is over-simplistic. More likely, a combination of contributing factors was at play:
• Expanding too fast.
Back in 2002, the company set a goal to expand its global market share from 11% to 15% (refer article).
Sensible and manageable though that may sound, commentators such as James Womack, one of the authors of “The Machine that Changed the World”, a prominent book about Toyota’s innovations in manufacturing, believe that this almost certainly contributed to current problems.
For one thing, management focus became consumed with the relentless push for growth, causing traditional considerations such as safety and customer satisfaction to take a back seat.
In addition, a by-product of this was a massive expansion within Toyota’s supply chain, with the company being forced to place increasing reliance on newer suppliers outside of Japan. Reports suggest that unlike traditional Japanese suppliers, who share an intimate working relationship with the automaker, many of these new suppliers were not familiar with Toyota’s methods, nor was expansion of the supply chain itself matched by sufficient effort to integrate new suppliers into the production process or to ensure that quality control was not compromised in the process.
• Complexity.
Coupled with growth came increasing complexity, both of the cars themselves and of Toyotas rapidly expanding production system.
As the Taiwan News puts it:
“In an average Toyota, there are about 24,000 inputs and outputs, with as many as 70 computer chips processing information and sending it on to other chips to operate the engine control units. It is a very complex system.”
Added to this are the company’s sprawling global operations – it now has more than 50 plants outside Japan and more models on the road than any other carmaker (same article). To manage all of this effectively would require an almost superhuman effort. The associated complexity almost certainly contributed toward current problems.
• Focus on the parts, but forgetting the whole
Another contributing factor, believes Kenichi Ohmae from The Christian Science Monitor, relates to the company’s excessive focus on minute detail and a loss of the bigger picture in terms of the overall workings of the engine as a whole.
A large aspect of the world renowned Toyota Production System (TPS) revolves around the Japanese concept of Kaizen, which focuses on continuous improvement in the manufacturing process. These improvements, in turn, tend to be smaller and incremental, and to stem from a bottom-up type of focus upon individual aspects of the production process.
Whilst there is nothing inherently wrong with this concept as such, problems arise where it is taken to extremes and management loses focus on the bigger picture of the vehicle as a system and how all of the parts work together as a whole.
• Cultural issues.
Cultural issues no doubt played a part as well, as did management style.
As I understand it, Japanese culture is characterised by strict hierarchies and an emphasis on maintaining group harmony at all costs. Questioning a senior is virtually taboo, as is causing a senior to ‘lose face.’ In this environment, lower level workers are expected to tow the line and problems at an operational level are rarely reported to senior management.
Combine this with a management style which was said to be highly centralised and largely disengaged from operations on the factory floor, and one could understand the scope for serious problems to go undetected.
Conclusion
It is likely that Toyota’s current problems stem not from a singular cause but from a combination of contributory factors.
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