Application of Operations Management Principles
Operations management is an inherently important skill in solving problems that are bound to arise at any work place. As an operations manager, one must have the critical skill of being able to identify current and potential problems, after which he/she must be able to come up with sound solutions, and timely implementation of the decisions (Khanna, 2007). Sound problem solving and decision making can help avert an impending calamity at a work place. On the other hand, poor decision making- or the complete absence of a decision- has the potential of causing the failure of an organization and its operations. Not only will it be it be necessary to decide on problem solving technique and procedure, but also give recommendations on alternative solutions. Using a standard problem-solving model is crucial in ensuring that the decisions made are sound, practical and logical. This research paper is an analysis of the practical application of relevant operations management methods to solve an actual problem I experienced at my work place.
Toyota Motor Corporation is a Japanese automobile manufacturer. It is currently the world’s largest carmaker by production volume (Ōno, 2011). Toyota’s operations have been admired worldwide as perfect models due to their efficiency without compromising on quality. However, U.S. automakers have consistently failed to replicate Toyota’s lean manufacturing philosophy primarily due to their focusing more on the technicality of the system rather than on the implementing of the unique cultural and leadership skills necessary for its effective implementation. In addition to having an efficient model for the running of its numerous assembly plans (for example, just-in-time “JIT” shipment of supplies), its operations manager strives to instill the necessary work philosophy, including the desire for innovation and concern for quality and safety (Ciravegna, 2012). JIT is an integrated group of actions designed primarily to achieve maximum production while using minimum inventories of raw materials, work in progress, and the completed product (Shingō, 2003).
However, Toyota’s flawless international reputation was severely dented in 2004 when the company’s officials were hit by criminal inquires that they knew some of their cars had mechanical defects dating back to as early as 1996. During this period, I was working at Toyota’s North America’s manufacturing headquarters located in Kentucky. Data from the National Highway Traffic Safety Administration (NHTSA) indicated that the agency had received over 1,500 complaints annually since 2000 specifically regarding the unintended acceleration of cars and that Toyotas accounted for about 4% of the complaints. This share rapidly rose to 17% in 2008 and 33% in 2009. 43 of these cases led to fatal accidents that resulted in 52 deaths. In order to address this problem, the company decided to recall all defective vehicles. By the year 2010, the company had recalled a massive 9.1 million cars, including its popular Prius, Corolla and Camry models (Wisner, Tan, & Leong, 2011).
Despite the fact that problem identification is one of the most difficult stages in the 5 step decision making process, it is also the most crucial one that will directly affect the success of the implementation strategies. All subsequent steps will be pegged on how problem identification was handled. A problem can be described as a situation or condition of people or the whole organization whose implications are considered negative by the members of the organization. The accurate identification of the problem at Toyota involved the following parameters; what was happening, what was involved, and what were the stakes. The problem involved in this case study was how to correct the mechanical defects (caused by floor mats entrapping gas pedals) of already sold cars and how to prevent future flaws occurring in their automobiles.
After generation of problems, they were evaluated for feasibility. This involved determining the appropriateness of a solution, whether it was adequate or not, its efficiency and effectiveness, and the side effects or ramifications that would be caused by taking a particular cause of action. Various criteria were employed for an extensive evaluation. Some of the constraints identified by the company during evaluation included;
Technical limitations due to inadequate equipment and technology to handle defect correction and new assemblies concurrently.
Economic constraints due to the unplanned increased operational costs incurred due to a planned recall of defective car brands.
Political restrictions (Toyota being an international corporation had its cars being operated in virtually every country, each with different legal restrictions and ordinances).
Time factor (this constraint impacted greatly during the evaluation due to the limited prescribed time frame during which they had to be implemented.
Human resource (the company lacked adequate manpower to implement some of the alternatives; as part of its lean manufacturing and JIT philosophy, Toyota had employed just enough employees for efficient production and no surplus for emergency situations).
This step involves analyzing alternative solutions that had been identified in the first step. Toyota’s quality department came up with two alternatives; a Short-Term Fix and a Long-Term Fix. The Short-Term fix involved advising drivers on precautionary measures such as removing the driver-side floor mat until a more comprehensive fix could be established and sensitizing customers on how to bring their cars to a safe stop in case they experience a sticking accelerator pedal. The Long-Term Fix included recalling all defective cars to repair the defective gas pedals and reassessing its production and testing methods to eliminate future problems (Ciravegna, 2012). There are various techniques that were applied by Toyota’s management in generating relevant alternatives;
Discussion groups; Toyota’s human resource department was tasked with grouping the company’s large pool of employees into groups. These groups consisted mostly of employees that worked in its North American assembly plants and various branch managers and most importantly, individuals from its quality department. To ensure the relevance of the alternatives they generated the groups were given the following general guidelines; they had to focus on the problem, avoid making rushed judgments, and finally, they had to be comprehensive.
Brainstorming; when the scandal involving the quality of Toyota’s car makes erupted, the company’s operation managers summoned all employees for an emergency meeting. In these brainstorming sessions, employees were encouraged to freely “think out loud” and suggest as many relevant ideas as they could within the limited time frame of the meeting. These ideas were then recorded for later evaluation.
Surveys; this was the most extensive of the three techniques used to generate alternatives. Toyota’s management decided that its customers were the best placed individuals to provide feedback on the quality, or lack of it, of their cars. The surveys generally involved presenting the respondents with the problem after which they would suggest a series of alternative solutions that would best suit their needs.
Evaluation of Alternatives
This involved choosing the most appropriate course of action (with more advantages and the least disadvantages) explored in evaluation for implementation. When selecting the best alternative, various factors influenced the final decision. These considerations included safety, environmental, political and ethical factors. After carefully evaluated the various factors involved, Toyota decided that the best alternative would be the Long-Time Fix; it would recall all its defective car brands and remodel its production system and quality assessment.
Implementation of the selected solutions was subdivided into five categories;
Formulating an action plan; this clearly outlined who has do to do what, which resources he/she will be allocated, time frame for the implementation, and most importantly, his/her goal.
Determining objectives; these were quantifiable targets that Toyota utilized when monitoring progress and identifying priorities. Objectives were formulated based on an in-depth analysis of the current situation (including Toyota’s position as a market leader) and contingencies.
Computing the needed resources; these included not only monetary resources but also people, information, and data. The financial impact on Toyota from the global recall drive was projected to total over $5 billion during the one year period due to its aggressive incentive campaigns, litigation costs and marketing efforts (Ciravegna, 2012). The critical factors addressed when identifying necessary resources including the type of resources, how to acquire them, and time required for the acquisition.
Creating a plan; this had to be communicated to all parties involved in implementation strategy. Qualified personnel were posted to all of Toyota’s dealership globally to repair recalled cars.
Implementing the formulated plan; this utilized an action plan to correctly place the decisions made. To ensure the effectiveness of an action plan, the company ensured it addressed the following requirements; it presented the best result of all the feasible solutions, sufficiently addressed any consequent side effects, appropriately identified who will perform a particular course of action, include a timetable outlining all the activities, described the resources that were to be utilized in the implementation.
This involved analyzing the progress and evaluating the results. This was an ongoing process that enabled perfecting a course of action while it was in progress. It addressed the following inherent questions; has the situation improved or worsened? Are more resources needed? Is there need for an alternative approach? Toyota analyzed data from complaints received by National Highway Traffic Safety Administration (NHTSA) on defective vehicle mechanics since the implementation of its Long-Term Fix that indicated a sudden drop in malfunctions. It also conducted consumer attitudes, the company conducted an extensive survey of Toyota drivers; despite showing that consideration for the brand was reduced to nearly half, from 29% before the recalls to 18% after, it also indicated that majority of car buyers believed the car maker would learn from the future and continue to manufacture good products (Ciravegna, 2012).
Toyota should conduct a rigid reevaluation of its production system. This is the most effective way of preventing future disasters. Although it’s JIT and lean production systems have been lauded as revolutionary, these models carry with them inherent disadvantages as clearly illustrated in this paper. To repair its damaged reputation, the company should also increase their marketing. They can apply incentives such as offering post-recall customers minimal interest on purchases, competitive lease rates and free maintenance across its affected car brands to convince customers once more that Toyota is the best car brand in the market.
As clearly illustrated, even the most reputed brands are not immune to disasters. Consequently, when a major crisis strikes, judicious operation management principles and problem solving techniques are essential to enable salvaging of the brand’s image. An inappropriately addressed problem can lead to several negative repercussions; negative press, dissatisfied customers and shareholders, law suits from individuals and public interest groups, government investigations, low employee morale, , and a drop in stock market prices and earnings.
Each consequence begets another. The longer the story is covered by the media, the bigger it will dent a company’s or organizations image. While the company is not assured of going scot-free when it addresses a problem well, the damage is relatively short-time, a sharp contrast to extensive damage that might be caused by a poorly managed problem.
(Toyota Can’t Catch A Brake On Twitter, 2010)
Figure 2: A pie chart illustrating the public’s perspective on the Toyota brand after the recalls, compiled from various comments made in the social networking site Twitter (Toyota Can’t Catch A Brake On Twitter, 2010). The majority of respondents felt that the scandal would have negative implications on Toyota’s image. After the recall, Toyota’s PR department carefully monitored its online image, putting up a variety of online advertisements that featured happy Toyota owners.
Complaints Per 100,000 Vehicles Sold
Figure 3: A table illustrating the complaints of unintended accelerations in selected car brands in the United States (Kirchhoff, 2010). This data was compiled for cars sold from 2005 through September 2009. Despite Toyota having the highest number of sales, it also reported the most frequent defects in its cars, hence necessitating the application of relevant management methods to address the problem.
Figure 1: A graph illustrating the sales of Toyota Prius in Japan, North America and Europe (Richard, 2010). There is a rapid drop in sales from 2007, since the Prius was one of the models heavily affected by the recalls. In early 2007, Toyota had recalled 437,000 Prius and other hybrid models worldwide caused by braking problems due to faulty software. They designed, tested and began repairing the defect at about the same time, although it was definitely late coming as shown above. This clearly indicated that Toyota’s brand image had been severely affected especially in the North American markets, although the recalls appear not to have affected the Japanese market that has recorded a tremendous rise in overall sales. Toyota should therefore concentrate its marketing efforts on the North American markets to reverse the negative trend.
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