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Toyota’s manufacturing and supply-chain operations use a groundbreaking approach that champions lean operations and abhors waste of any kind, whether it be materials, human resources, or innovative thinking. The Toyota Production System is studied and emulated across the globe.
Toyota Production System
The company’s production operates on two tenets that drive lean production:
- Jidoka, which translates roughly to “automation with a human touch”
- Just-in-Time production (JIT)
The concept of Jidoka relies on machinery that stops if any defect is present so that material and time aren’t wasted producing defective parts. The root causes of defects are then discovered and eliminated.
JIT manufacturing means that the company only makes what is needed, when it’s needed, and in the quantity that is needed. The practice aims to eliminate waste and enhance productivity, and it reduces response times from suppliers and to customers.
Vertical Integration
Toyota centralized its U.S. operations at new headquarters in Plano, Texas, and invested in facilities in Michigan and Kentucky in 2017. They call the initiative OneToyota. While the company certainly sought out the leaner operations costs associated with a move like this, the less concrete goal behind the shift was improved collaboration.
Recently, Toyota announced it would combine inbound manufacturing parts and after-market/service parts divisions into a single division referred to as Parts Distribution and Accessory Development (PDAD). Since the two departments have similar goals, it makes sense that this move could improve operational efficiencies and boost savings with suppliers.
Agility and Risk Assessment
Toyota had difficulty sourcing parts after a 9.0 magnitude earthquake struck Japan in March 2011 and damaged the manufacturer’s supplier network in the country. Toyota’s carefully tuned JIT strategy had led to a very precise supplier network, and alternative suppliers couldn’t solve the supply issue, leading to a nearly 30% drop in production.
The company took on board learnings from this event, which is a common theme in Toyota’s operations.
The large-scale risk identification operation that ensued aimed to not only seek out potential risks to the supply chain but also to understand the effects of major crises on the supply chain so Toyota could formulate a plan to mitigate risks. As a result, Toyota built an improved supplier network that was more agile and less prone to the massive disruption they saw in 2011.
Toyota’s Future
It’s highly likely that the concept of kaizen, or continuous improvement, will continue to play a role in Toyota’s business philosophy. This means that the company will implement small changes consistently to move the needle rather than implementing sweeping, top-down changes.
Shifting Vehicle Production
The company recently announced a plan to shift around vehicle production in North American plants to keep production of models that share a supply base in the same location. Since the company historically aimed to produce a diverse mix of vehicles at each manufacturing facility to protect against volatile market demand, this will require some changes throughout the supply chain as well as the manufacturing facilities themselves.
Toyota’s Test City
The race to perfect the coolest tech hasn’t slowed down in the automotive industry, and Toyota is making moves to ensure they come out on top. The company will soon break ground on a 175-acre prototype city that will allow engineers to develop and test new technologies like autonomous and electric vehicles, smart home devices, and artificial intelligence applications.
The “city of the future” will be located at the base of Mount Fuji in Japan and construction is set to begin in 2021. It won’t be a ghost-town as some might imagine; the city will have thousands of residents who play a role in the research and development set to occur there. Toyota’s president Akio Toyoda referred to the city as a “living laboratory.”
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