World’s Largest Vehicle Manufactures

Toyota Motor Corporation is Japanese globally automaker headquartered in, Japan. Toyota Motor Corporation has about 325,905 employees working worldwide and was third-largest automobile manufacture in 2011 by production behind General Motors and Volkswagen Group. Toyota Motor Corporation is in top eleventh largest company in the world by revenue. The world’s largest vehicle manufactures, Toyota Car Company was having issues with recall. This issue is going around all over the world as well as in USA, Europe and China. This issue makes the consumer loss their confidence and as well as corporate image dropped. Toyota Motor Corporation their recall was nearly one million vehicles around the world, on top to replace damaged parts that could cause drivers to lose control of the steering wheel. There were total of 10 models affected, including the popular Prius. Prius recall more than 200,000. Due to defective gas pedals Toyota lost a lot of customers. But, to be in market and not to lose customer they are still in game.

Toyota Motor Corporation blamed that the floor mats was the problem, then it came to the gas pedal was the actual cause. But, when car owners they don’t know personally what was causing the gas pedal to accelerate and stick, without releasing. Not only Toyota had recall problems, but cars like Honda and Nissan recall over 3 million vehicles globally due to air bag problems. Not only these two cars had recall problems with their airbag, Toyota recall 1.3 million cars due to this airbag problem. Toyota FJ Cruiser recall affects seat belt retractors on 209,000 vehicles. Still, the numbers are getting bigger and bigger.

To chase the maximum profit and cost minimization, suppliers pay more attention on how to reduce cost. By using raw materials quality Toyota Motor Corporation was over confidence with their suppliers, that they changed their design without taking permission. Toyota Motor Corporation their biggest suppliers changed the pedal design that leading to the pedal problem.

Toyota Motor Corporation lack of an effective quality control cause them recall happening. They did not do enough test of their design before they produced. Their biggest mistake was they did not use quality check after the production they did not even do better quality check. This is a big embarrassment for the world’s largest automobile manufacture, that lack of negligence and having over confidence could cause them big problem in future.

Now the big question is that, let’s see that tomorrow morning you sit in your car to drive to work or anywhere and you are driving, down the road and suddenly you notice that your car breaks are not working fine. What would be your reaction? Are you still going to keep buying the same car brand you were buying before? What do you think that Toyota Motor Corporation should do to keep their name back in world’s largest automobile manufacture?

Sources:

  1. http://www.caranddriver.com/news/toyota-recall-scandal-media-circus-and-stupid-drivers-editorial
  2. http://money.cnn.com/2013/06/05/news/toyota-recall/index.html
  3. http://en.wikipedia.org/wiki/Toyota
  4. http://www.nydailynews.com/news/money/toyota-recalls-2-17-million-cars-jammed-accelerator-pedals-article-1.135025
  5. http://crownheights.info/general/25720/toyota-recalls-sienna-minivans/
  6. http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporation/index.html

 

Product or Patient? How Lean Manufacturing is Saving Lives

When someone suffers a stroke they must receive anti-clotting medication in several hours to prevent them from dying. At Southwest Medical Center in Oklahoma City, just a few years ago it would take on average 71 minutes for ER patients to receive the drug. Now, their average is 53 minutes, a decrease in 25%. In order to make this change the hospital learned from Toyota’s lean manufacturing.

A team of nurses and doctors looked at the process flow of a patient and identified several key points that wasted time. Just like Toyota’s lean manufacturing, their goal was to get rid of any waste. For example, they leave the patient on an ambulance gurney through the entire process instead of transferring the patient to a bed, which was the traditional process.

Improving this process may not save more lives but it does enhance the treatment of the patients. Treating a stroke patient about 20 minutes earlier “can save an average of 38 million neurons, depending on the type of stroke. That could mean the difference between walking out of the hospital to live a normal life or living the rest of one’s life in a nursing home with constant care.”

Source: http://asq.org/qualitynews/qnt/execute/displaySetup?newsID=16039

My Old Kentucky Home: Lexus Production Moves to US

This past week Toyota announced that it will begin producing its Lexus luxury car in the United States for the first time. The company will invest over $500 million to move production of the Lexus ES 350 luxury sedan to its existing plant in Georgetown, Kentucky. Until now the plant in Kentucky, Toyota’s oldest and largest in the United States, produced the flagship Toyota Camry, as well as the Avalon and Venza. The Lexus ES 350 shares underpinnings with the Camry and Avalon, making the transition somewhat easier. This aspect is just one of several strategic implications of the move of Lexus production to the United States.

While it’s parent is fully Japanese, Lexus is an American child, for many years the luxury car was available only in the United States. This focus on the American market led Lexus to the top of luxury car sales every year from 2000 to 2010. In recent years, however, Toyota has watched BMW and Mercedes Benz pass it in luxury car sales and showing little evidence of slowing down. In my opinion this factor played a role in Toyota finally deciding to move the production of Lexus to the United States. As the president of Toyota, Akio Toyoda, said, the company plans to “give regions greater autonomy to make the products their customers want.” By moving the production of the ES 350 to the United States, I believe Toyota will be able to more closely monitor how Lexus is doing compared to BMW and Mercedes Benz. The company can also make production changes more effectively and efficiently at its plant in Kentucky. This high involvement with its target consumers should aid Lexus as it tries to regain its spot as the top luxury car in the United States. The move of production also helps protect Toyota from the Japanese economy and possible disastrous production issues.

From an operations management viewpoint, I think that Toyota is much better off by moving the production of the Lexus to the United States. The ES 300 is essentially an American car, it is not nearly as popular in Japan as it is in the US, therefore it made little sense to have it produced half a world away from where it was being sold. There are no economic benefits since there is an exchange rate penalty for Japanese automakers. Additionally, the 2011 earthquake and tsunami in Japan had devastating effects on production. This disaster revealed just how vulnerable Toyota and other Japanese automakers are, and in my opinion, played a key role in Toyota moving the production of Lexus to the United States. By having all of it’s operations and production in one place, Toyota can become more efficient and continue being a leading automaker.

Do you think it was a good decision by Toyota to move the production of Lexus to the United States?

Will this lead other foreign carmakers to move to America and what affect will that have on the production of American cars?

 

Sources

http://www.nbcnews.com/business/toyota-investing-over-500m-launch-us-lexus-production-1B9519106

http://www.nytimes.com/2013/04/20/business/toyota-will-make-lexus-es-350-in-kentucky.html?_r=0

http://www.bloomberg.com/news/2013-04-19/toyota-to-make-lexus-in-kentucky-amid-localization-push.html

 

2015 = First US Lexus Production Plant

Many people know that Lexus is the luxury brand that Toyota owns. The company is planning on opening a new production plant in 2015. The plant will be located in United States. Although, Toyota does have plants make Toyota brand cars, this will be the first US plant that Lexus will open. It will also be the very first time the Lexus ES will be produced outside of Japan. This is very interesting because most companies would look to go to countries with cheap labor and flexible labor laws. In the US, there are a lot of regulations that protect workers. What would cause Toyota to bring Lexus in the US?

Just as we learned in class, there are a couple reasons why companies would globalize. Some of the reasons are to reduce costs, improve their supply chain, and provide better goods and services.

It is reported that “[Lexus] will receive as much as $146.5 million in tax credits, significantly bringing down the overall cost of the investment. Bloomberg reported earlier this week that Toyota would have to invest $531.2 million and add 570 full-time jobs in order to yield the full value of the package”. The tax credit is definitely one of the main reasons why Lexus would want to come relocate in America. This move will help reduce costs such as shipping the cars from overseas by improving their supply chain. Also it will help provide a better service for Lexus owners because the plant is not located domestically.

Not only does Lexus benefit from this new plant but so does the people of Kentucky. In order to be efficient and complete their goal of producing 50,000 per year, they will need to hire a lot more workers. This will create a lot of new jobs for the people of Kentucky. Everyone seems to be pleased with the move and there have been no ethical problems with it. Even the state governor said, “This is a great day for Toyota and for the commonwealth of Kentucky”.

Toyota is also looking to retain its title as the “world’s biggest carmaker” because Volkswagen is closing the margin between them. If the opening of the North American Production Plant, this will give them the edge they need. Hopefully with the success of the new US plant, this will cause more companies to relocate here.

 

Do you think this was a will be a smart move for Lexus to produce their cars for the first time outside of Japan? What would some of the concerns be for the carmaker?

Do you think the US government is giving these large tax credits to help stimulate the economy by creating new jobs?

Will other carmakers follow?

 

Sources:

http://www.forbes.com/sites/michelinemaynard/2013/04/19/the-sweetheart-deal-toyota-got-to-build-an-american-lexus/

http://blog.caranddriver.com/lexus-to-refresh-ls-for-2013-with-spindle-grille-previews-it-2013-es-and-2014-is-in-video/

97 Month Loan? No Problem.

After taking several finance courses at DePaul, I have gotten to know what a good deal would be and how to fall into the trap of a salesman.  A woman in Northbrook Illinois recently took out a car loan for 97 months. The reason she said she did this was because she has a child on the way and would like to pay for childcare and keep her payments affordable. As the years have passed and the costs of cars are rising, people need to take out loans that are longer in length in order to be able to afford them. This should interest all students and new car owner because it should make you stop and think, am I really saving money by taking out longer loans? The answer will always be no but not everyone will be able to afford the luxury of paying off a car quickly.

 

Banks and dealers are really taking a risk by letting consumers take out these long loans. By the time the car is paid back it will be worth so much less to the consumer. Also if the consumer does not pay the loan for example after five years of having the car, the dealership will not receive nearly as much as they should if they have to repossess the car. The women in the article took out the loan for 97 months and the difference in payment per month was only $5. That was fascinating to me because that is less then what an average person spends on lunch.
In our class textbook it talks about strategic approaches to competitive advantages.  Toyota has definitely stood out by making this 97 month loan and will now either force its competitors to lengthen their financing time or lose the business. This long term loan is going to appeal to a vast majority of our population and will therefore bring more business to the car dealerships. Being the first ones out there with this long term loan is going to push that Toyota ahead because the other dealerships will still have to contemplate if this would be the right move for them or if they will in fact be losing out.

 

Another issue that can arise from taking out a loan for such a long period is that people will keep their cars longer. The turnaround time for a new car is now extended and while the dealerships will be getting in business now they may have to wait longer for returning customers. Think about how often people in your life buy new cars? Will there be a large spike in people purchasing cars? Will this be an affordable option for newly graduated college students or lower income families? We will see.

Reference:

http://autos.yahoo.com/news/introducing-the-97-month-car-loan-202203365.html

To Green or NOT to Green that is the Question

A corporation’s decisions regarding sustainability impact both their brand and their bottom line.  There are direct and indirect strategic reasons for a corporation to “go green.”

 The global ecosystem has been threatened which makes reducing waste and increasing energy efficiency more and more important.  Corporations can conserve by cutting down on packaging, using energy-efficient lighting, recycling, purchasing energy-efficient office equipment, and adapting to alternative heating and cooling solutions.  Many companies are warming up to the idea of working in LEED Certified buildings.  “LEED is an internationally recognized green building program.  It provides building owners and operators with a framework for identifying and implementing practical and measurable green building design, construction, operations, and maintenance solutions” (https://new.usgbc.org/leed).  A 2011 study released by MIT found that sustainability is now a permanent part of 70% of the corporate agenda (www.earthshare.org). 

 Interbrand released their 2012 annual Best Global Green Brands report, and automotive and technology companies dominated the list.  Toyota, Johnson & Johnson, and Honda were the top three players.  This report “… examines the gap that exists between corporate environmental practices and consumer perception of those practices…” (www.interbrand.com).  Reports like this not only strengthen a brand, but also encourage and challenge corporations to further develop new energy-efficient practices.

 As more and more companies realize the financial benefits of “going green,” they also recognize the positive way that this strategy impact their customers, employees, and overall image.  A positive environmental message attracts superior associates, creating a healthier, safer, more team-oriented work environment.  92% of young professionals would be more inclined to work for environmentally-friendly companies (www.earthshare.org).  Many employers offer team members the option to work remotely which saves in vehicle maintenance, gas, and parking costs and may also relieve external family pressure and stress.  These factors, not only, cut overhead expenses, but also increase employee efficiency and overall morale. 

 A modern family tends to be more environmentally conscious than those from past generations.  Recycling and reducing waste have become commonplace practices.  A focus on sustainability attracts and engages customers and is a brand-strengthening asset.  35% of consumers are willing to spend more for green products as long as the product is comparable or better than the competitor’s product (www.earthshare.org).  “Going green” also tends to attract investors and can create a positive media buzz.  It is important, however, that a corporation does not misuse this asset.  “… A brand’s efforts in this area could serve as an under-utilized asset, or conversely, suffer due to accusations of ‘greenwashing’” (www.interbrand.com).

 It is clear that businesses no longer believe that “going green” is a fad.  Consumers demand green alternatives and illustrate this through their spending patterns.  The focus should always remain on the bottom line, but attention to sustainability has proven to be a way to positively impact these figures.

 

 Sources

http://www.earthshare.org/greening-business.html

http://www.interbrand.com/en/best-global-brands/Best-Global-Green-Brands/2012-Report.aspx

https://new.usgbc.org/leed

Quality Pioneer in Trouble !!!

 

When we discuss quality management philosophies, Toyota and Total Quality Management is always discussed. The name Toyota was synonymous with quality because they pioneered and mastered the philosophy of TQM. In management 301, TQM was introduced as the “Toyota Way”. So why is toyota in trouble? What happened?? what went wrong?

The Toyota quality lapse officially started in sep 2009 with Toyota recalling 3.8million US vehicles due to floor mat problems causing the accelerator to get stuck. Next official recalling was announced in 2010 for the same problem but this time without the presence of floor mats and included 4 models, Rav4, Corolla, Camry and highlander. Further more, the same year, jan 2010, Toyota temporarily suspended sales and production of the models involved in the pedal issue. Next on February 9 2010, Toyota recalls 437,000 prius and other hybrid vehicles worldwide to fix break issues. Same year, on 12th February recalls about 8000 tacoma pickup trucks to fix propeller shift problems that cause the vehicle to lose control.

Experts say that the company expanded rapidly over the past decade to capitalize on the strong demand but failed to train staff to meet the company’s high quality standards. Part of the reason for the quality lapse is directed towards the growing demand and shifting of production outside japan.  Koji Ando, An analyst at Advanced Research Japan says, “Toyota knows it can never go back to the things used to be. It is still going to cut costs; it is still going to localize manufacturing. Furthermore, Toyota is known as a follower of Demings philosophy which states improving quality lead to reduced costs due to less rework, fewer mistakes, fewer delays and better use of machine-time and material which in turn improves productivity. Which will furthermore lead to larger market share and more business. Again the same question, what happened?

If Deming’s was asked, he would say,” 94% of all the problems in the workplace are problems not with the workers, and not their performance but with the SYSTEM.”

What could be the reason behind the massive quality lapse in toyota production system? are the labors to be blamed or the management?

http://pressroom.toyota.com/releases/toyota+voluntary+safety+recalls+certain+camry+venza+tacoma+march12.htm

http://articles.cnn.com/2010-02-10/us/timeline.toyota_1_toyota-recalls-high-profile?_s=PM:US