Operations management assignment report writing: Importance

of operations management

Executive Summary
The importance of operations management in any kind of business organisation is known to all.
The companies that did not follow planning in the operations management were not able to
succeed as much as the companies that planned their operations and processes. The report
takes the example of Toyota Motor Corporation and establishes the fact the in spite of the severe
competition that exists in the automobile industry and in spite of the many downfall of the
industry; the company has been able to make its mark on the globe. The company has made its
global presence felt and it could very well be attributed to the excellent operations planning at
both the assembly line and at the product and process level. The company uses the Just in Time
techniques to reduce wastage and also aims at maintaining the highest possible quality by
implementing Kaizen techniques. The Kanban which is also known as the signboard technique is
also used for maintain the lean production in the company.
Toyota has been able to perform well as they have the most efficient process technology
planning, capacity management planning, lean production techniques, continuous improvement
strategies and supplier development techniques. The company would need to make some
changes in the materials-processing, information-processing, customer-processing and also in
the process technology related to volume and variety. The future outlook for the company
appears o be bright but the company would have to make the changes in the technologies
accordingly. Toyota appears to be the best possible example to demonstrate the operations
management techniques as they have mastered the art of using the space, the capacity and also
providing the highest possible quality.
Table of Contents
Executive Summary. 1
Introduction. 3
2.0 Company Background. 3
2.1 Background Information. 3
2.2 Main products and Customers. 4

2.3Current Scenario. 4
3.0 Identification of current organisational operations practices. 5
3.1 Process Technology Strategy. 5
3.2 Capacity Management 6
3.3Organisation and Systems development 7
3.4 Lean Production. 7
3.5 Performance and Improvement Strategy. 8
3.6 Supplier Development strategy. 8
4.1 Process Technology Strategy. 9
4.2 Capacity management 10
4.3 Organisations and systems development 10
4.4 Lean Production. 11
4.5 Performance and Improvement Strategy. 12
4.6 Supplier Development Strategy. 13
5.0 Main Factors affecting change in Operations management 14
5.1 Material processing technology. 14
5.2 Information-Processing technology. 15
5.3 Customer-Processing technology. 15
5.4 Process-Technology related to Volume and variety. 16
Conclusion. 17
Works Cited. 18

Introduction

Operations management would generally mean, converting the varieties of input into usable
outputs by using the physical processes. The main aim of the operations management procedure
would be to productively utilise the available resources, create products that meet customer
requirements and efficiently handle the processes without any chaos. The responsibility of the
operations management is to ensure that the production in the company happens continuously
and without any kind of interruptions.
The main six aspects of the operations management that the assignment handles are process
and product design, capacity management, organisations and systems development, lean
production techniques, performance and improvement strategy and supplier development
strategy. All these six aspects are of utmost importance for all types of business organisations,
be it manufacturing industry or service or retail industry. There has to be a proper planning of
these six aspects to create a place in the market and sometimes also to gain competitive
advantage.
The operations management would need to change the strategies if there is a significant change
in the inputs that relate to material, labour, capital, information technology. The operations
management would also need to implement a change if there is a change in the volume or
variety demand of the product due to market factors. In such cases, the company may have to
make a change in the process technology, the capacity , the information technology or in the way
the processes are arranged.
This assignment aims to analyse the six main aspects of the operations management by putting
forth the example of Toyota Motor Corporation which happens to be one of the largest automobile
companies in the world. Toyota is known for the high quality products and for using the JIT and
the Kanban techniques of operations management effectively. They have been able to implement
these techniques in the assembly line and other places to progress.

2.0 Company Background

2.1 Background Information

The Toyota Motor Corporation has its headquarters in Toyota, Aichi Japan. The company was
found in the year 1937 by Sakichi Toyoda. It established a plant in Honsha which began
production in 1938. The company face financial crisis in the year 1950 and then the Toyota Motor
Sales Co ltd is established. They established another plant in Motomachi and in 1965 won the
award for quality control for the first time for which it is known. It became the worlds one of the
largest and Japans largest car producing companies. (Toyota, n.d.)
After the second World war, Toyota decide to come up with a small car which was a failure and
made them suffer huge losses. After this Toyota worked towards a more comprehensive drive

and introduce land cruiser to cater to the growing needs of the taxis in the economy. This vehicle
was a huge success and changed the face of the company. Toyota also believed in providing top
quality products and services which was evident in their production systems. They introduced
many quality control techniques like Kanban, Kaizen which held them apart from their
consumers.

2.2 Main products and Customers

Toyota seeks to build in cars to cater to the needs of the people in all parts of the world. They
provide travellers safety first priority and employ the quality check for safety measures at all
possible places. Toyota produces two types of cars which include conventional engine cars and
hybrid engine cars. They aim to provide car solutions to all categories of people who need small
cars also unlike some of their competitors who would cater to the needs for medium and large
vehicles. Toyota produced approximately 8,000,000 units in a year and provides employment to
around 340000 staff members. They are mainly involved in manufacturing of automobiles and
their parts, wheel chair that is all wheel drive and vehicle maintenance automatic lift. Apart from
the automobile sector, Toyota is also involved in housing sector, Financial services
sector, biotechnology sector

and

afforestation,

marine

industry

and

e-business

sector,

etc. (Toyota, n.d.)

2.3Current Scenario
Toyota Motor Corporations appear to have a very bright future and looks very promising. The
current sales of the company has been up topping 1,2 and 3 million marks in the years 2008,
2010 and 2011 respectively. Toyota has made its worldwide presence felt and has manufacturing
and assembly lines available at most of the developed countries in the world. They have
expanded wings into countries like Australia, US, India, UK, South Africa, Poland, etc. They are
one of the leading car manufacturers in the world and they keep the safety of passengers as their
top priority. (Toyota, n.d.) Even though in the financial year 2011, there was no significant
increase that was noticed in the net revenues of the company but there was an increase in the
operating income by 217.4% for the overall company and for Toyota, the net income increased by
94.9%. The positive thing to note was that the overseas vehicle sales increased by 6.3%.
(Annual Report , 2011)

3.0 Identification of current organisational operations practices

3.1 Process Technology Strategy

A process layout is a format where the similar equipments and functions are clubbed together
and the operations are performed according to the predefined sequence. A product layout is the
format where the operations that are involved in making of a product are arranged in a sequence
to avail optimum results. A group technology means keeping a group of non-similar machines in

the work centre to work on the products that have similar shapes and sizes. In a fixed position
layout, the product remains at a single place and the machines and processes that are required
to produce the product move to the product.
Standardised work systems are followed in Toyota so that the managers and the top
management are able to identify the loopholes and wastage immediately and make
arrangements for improvement. Depicted below is the plant layout of Toyota motor Corporation at
Miyata which handles the molding, the welded parts, the press body and assembly.
Source: (Toyota Motor Kyushu Inc., n.d.)
They are all set to reduce the waste in the product design process. The product design process
in Toyota Motor Corporations has been explained below.
Source: (Obara and Wilburn, n.d.)

3.2 Capacity Management

Toyota Motor Corporation was fighting with lack of space problem when they redesigned the and
they started using Just In Time manufacturing system. They used the U-manufacturing system
concept and made maximum utilisation of available space and capacity. They could not produce
large batch sizes but they used the small batch manufacturing system. This would allow Toyota to
overcome the problem of space but utilise the other available capacities to the maximum. (YuLee, 2002)
In Toyota Common process lines are used for production where common machines were used
for many product lines. But after they have started using the multi machine and multi process
handling. Here the worker and the machine both handled more than one operations together to
reduce the lead times.
Source (Dillon, 1989)

3.3Organisation and Systems development

Toyota used Just in time system as they wanted to eliminate waste completely and using and
producing just the amount that is necessary. The JIT concept was so deeply rooted in the
assembly line systems of Toyota that they knew exactly how many vehicles of different colours,
types and accessories would be assembled in a single day. (Obara and Wilburn, n.d.)
The Just In time concept helps the company to reduce the wastage of time and resources in
waiting, wastage of resources in transportation, wastage of processing, wastage of inventory
and movement, wastage of reprocess and defects and wastage that occur due to over

production. They use the one-piece continuous flow for production system. (Obara and Wilburn,
n.d.)

3.4 Lean Production

The application of lean concepts in the system would mean optimising the usage of time,
resources and available techniques. (Slack and Chambers, 2008) The various tools of Lean
production are standardised production system, Jidoka, Kanban, Kaizen, etc.
The concept of lean production concepts in Toyota Production System is implemented using
various tools. The production planning is done based on JIT and Heijunka, Quality is maintained
thorough Jidoka, pull execution using Kanban and continuous improvement using the techniques
of Kaizen. Jidoka ensures quality production and reduces the need for continuous supervision
thus saving time and resources. The word Kanban literally means sign board where the inventory
requirements are planned so accurately that there is no extra stock of inventory remains and
there is also no delay due to the non-availability of the inventory. (Heizer and Render, 2008)

3.5 Performance and Improvement Strategy

Kaizen is a Japanese word that means continuous improvement in the process design
implementation and production systems. It involves two components which include maintenance
and improvement. The purpose of Kaizen is to maintain the technological and operating
standards and utilise the capacity to the optimum level. But the most important aspect of the
Kaizen is not only to implement the tools but also to maintain its continuity. The management has
to be committed enough to train their employees to follow the principles of Kaizen which would be
always advantageous in long-run. The implementation of Kaizen principles would also involve
some costs and so the company must make sure that they make the optimum utilisation of the
Kaizen tools and techniques.
Toyota sets an example for maintaining the Kaizan Principles. They have the top level
management committed to pursue the quality goals, they have trained the team to understand
the importance of quality services, the staff that are hired are committed and skilled, the staff are
trained continuously and they have adopted the principles of Kaizen in the manufacturing
process and the production system.

3.6 Supplier Development strategy

Suppliers are very important stakeholders for any company. He model below describes how an
enterprise can create value by satisfying all the stakeholders.
Source: (Rainey, 2006)

At Toyota, the company is very successfully using the V4L framework which means variety,
velocity, variability and visibility to maintain the suppliers. In the Variety steps, before placing an
order with the supplier, the company has to ensure that the supplier provides the right kind of
product variety and the components provided by that particular supplier ensure quality
manufacturing. During the velocity step, the company has to ensure that the supplier has to make
the component availability match with the requirements of the assembly line. Variability concept
ensures that since the company is using the JIT concept for inventory and logistics, the suppliers
are able to manage the variation in orders. The visibility ensures that the supplier and the
manufacturers have a transparent relation and they have discussed their problems first and both
of them are well informed about each other. By using the V4L techniques, Toyota has been able
to create a very good relation with the supplier who have been constantly supplying them top
quality products. (Iyer, Seshadri and Vasher, n.d.)

4.1 Process Technology Strategy

Toyota has been implementing the following model. They have firstly concentrated on creating a
continuous flow of operations with the help of standardisation.
Source: (Hayes and Wheelwright, n.d.)
The manufacturing process that is used in Toyota is very high tech and they are using the best
possible technologies available. So, they have made and defined their processes properly. They
have integrated the manufacturing technology with the processes and the systems. They have
developed the general capabilities to handle the processes and the technologies. They have
developed the holistic Decision-making process to handle the operation and the designs at the
process and the product level. (Hayes and Wheelwright, n.d.) They have been utilising the
workforce and machine capabilities to enhance production. They use the pull technique for
logistics and work on the minimum lead time concept.

4.2 Capacity management

When ratio of operation which means the number of hours when the machines are put into work
are analysed in Toyota, it could be observed that the ratio comes to about 100%. This means that
Toyota has been utilising all the available capacity. They are well aware of the fact that excess
capacity is an economic loss to the company. So, they do not give any way to the losses.
Therefore, at the production hours some of the machines are seen idle, this is not because the
capacity has to remain idle, but may be because the machines ratio of operation has surpassed
the desired level. There is always a continuous flow of operation in the production system and
with short lead times and small batches. They operate on zero inventory level. (Japan
management association, n.d.) The U-Configuration of equipments help them to operate many
machines in a much smoother way.

4.3 Organisations and systems development

The JIT system that has been employed in Toyota Motor Corporations has been depicted by the
picture below.
Source: (Amasaka, n.d.)
The new JIT technology that has been employed at Toyota emphasise on improvement of quality
while reducing the storage. TMC is planning to increase the level of quality from product quality to
business quality and then finally to corporate management Quality. This new model shows that
sales, productions and engineering are placed in the front line of the Toyota Production System
and the manufacturing system is planned accordingly. The new JIT system emphasises on
quality control not only on the Toyota Production system but also in the Toyota marketing system
and Toyota Development system. They are trying to develop and implement a scientific TQM
techniques so that the production is not delayed at any point of time and also the quality of the
product and the services is also not compromised.

4.4 Lean Production

The production system at Toyota ensures that they use lean production concepts to maximise its
production.
The model above describes the lean production system that is followed at Toyota. For Toyota,
they have made all arrangements to bring out more from less. They have been employing
procedures to simplify the procedures, eliminate the wastage and speed up the production. The
five main areas of lean production that Toyota is concentrating on are cost, safety, delivery,
commitment and quality. By using the Just In time technique Toyota is saving on time and cost
and also ensuring timely deliveries. Because of this, the company also follows activity based
costing. (Kee, 2003) The JIT concept also reduces wastage. By 0using the people and the
teamwork, they are all set to work on the morale of the employees and make them all the more
committed towards organisation goals. By using Jidoka and Kaizen techniques, the company
wants to maximise the productivity while ensuring top quality at each and every step. So, it could
easily be said that when it comes to the lean production operations management technique,
Toyota leads the way and sets examples for many other companies.

4.5 Performance and Improvement Strategy

The principles of the Toyota Production System are to reduce set uptimes, make the production
in small batches, skilled employees and employee empowerment, quality maintenance and
check up points established at every possible place, high level of technology usage and
maintenance, pull production which means reduced lead times and less holding costs and finally
supplier involvement in the Kaizen techniques. In order to succeed in the present competitive

world, Toyota has to train and empower its employees to put in efforts and make small changes
to implement the quality control techniques. All the employees in the company are dedicated to
work towards maintaining and improve their work environment.
Source: (Liker and Franz, n.d.)
The 4ps model is the model that is used by Toyota to improve continuously. The four steps of the
model involves making strategies firstly, then eliminating all kinds of wastage. Then they have to
assign authorities and powers to the people and the partners who are strategic assets to the
company and finally following up on all the processes. (Liker and Franz, n.d.)

4.6 Supplier Development Strategy

Toyota has been taking many proactive steps like the CCC21 program which ensures reduction
of wastage and increase in the efficiency. The following are some of the steps that Toyota has
taken with the help of the suppliers to comply to the highest quality needs of the company. The
steps are

They have created quality awareness amongst the suppliers to ensure quality product
components with the help of innovative programs like Jishuken.

They have developed a supplier support centre to ensure that suppliers queries are given
due respect and the relationship with the supplier is cordial which would maximise the
impacts.

At Toyota, customer needs are aligned with the production system. So, the suppliers have
to support the flexible planning system to ensure the best possible services to the
customers.

The suppliers are made aware of the general systems of work and the work flow of the
company so that they can match their supplies accordingly.

Communication level is very high with the suppliers to ensure that there is no scope for
any misunderstandings.

Suppliers are supported during low times to make the relationship a stable one. (Iyer,
Seshadri and Vasher, 2009)

5.0 Main Factors affecting change in Operations management

Operations management mainly comprises of three process, that include input, processing and
output. Any significant change in the inputs would certainly result in a change in the processes

and also in the output, thus a total change in the operations management procedure. The inputs
to the operations are materials, labour, capital, physical machines and information technology,
etc. (Gupta and Boyd, 2008) Also, when the company is operating in an international arena, there
are sometimes when the company has to make changes in the operations to adjust to the
national culture. (Pagell, Katz and Sheu, 2005)

5.1 Material processing technology

There are various types of material processing that are Robotics, Automated Guided Vehicles
(AGV), Flexible Manufacturing systems (FMS), Computer Numerically controlled machines
(CNC), computer integrated manufacturing (CIM), etc. With the advent of technologies, the
companies are using more and more advanced technologies. This innovation feature is going to
continue in the coming years. Any change in the material processing technology would certainly
cause a change in the entire process and so, the companies are trying to choose their material
processing technology carefully.
For Toyota, they are using the all possible technologies as they have one of the most advanced
manufacturing systems for the cars in place. Also, they are using the JIT concept in their
materials procurement method. So, they would have to have updated technology and processes
so that they do not lose out on time. In the coming years, as the customers would be needing
more and more advanced features in the cars, there would be a serious need for Toyota to make
arrangement for the advanced accessories and the relevant technologies to handle them. For
example with the new norms for carbon emissions for the automobile industry, there would be a
need to change the materials processing technology as hybrid technologies would be required to
handle the new regulations. (Venkatakrishnan, 2005)

5.2 Information-Processing technology

The information technology is experiencing a dramatic shift in the recent times. All the companies
are trying to use high-tech solutions to aid the workings and also aid to the comforts of the
employees. For this purpose the companies are conducting workshops for training and support.
All the stakeholders that include customers, suppliers, employees, management and
Government, require updated information about the company. The employees do need to have
proper technologies to handle all types of information and generate the required results.
For Toyota, they have been using the most advanced technologies for telecommunications and
Information technology. Since, Toyota has a global presence and they have to support the
customers and employees that are present in global arena. (Bae and Salomon, 2010)The
demands for high tech and instant support is going to continue in the coming years and therefore
Toyota would need to support the demand by making appropriate updations in the technologies.
Due to a rise in the fuel prices and economic slowdown there was a downturn that was witnessed

in the industry. The customers are demanding Green cars and energy cars for which the
company has to make suitable arrangements. (Zacks Equity research, 2012)

5.3 Customer-Processing technology

In the present world of competition, there is a serious need to have customer processing
technology, as it is of utmost importance to retain the customers. So, there would be a need to
have an appropriate customer-processing technology. (Mol and Birkinshaw, 2010) Also, in the
internet world, the customers are demanding 24 hours support. So, there is need for the
companies to use the latest technologies. Any change in the Information-processing technology
would cause a major change in the work practices of the employees and the way the customers
interact with the company. So, companies would have to plan and choose the technologies
accordingly and then they need to train the employees to handle the technology and provide
super assistance to the customers worldwide to handle the updation.
For Toyota, they are one of the most customer-oriented companies in the world. So, they do have
a proper technology and process to handle the customer queries. In the coming decade this
feature would need further advancement as the customers are becoming more and more
demanding and are getting access to higher and higher technologies. The graph plotted below
denotes the new car registrations in EU countries. So, the may not be as large as in the previous
years, still the database of customers for the company is increasing and so the company would
need to have proper technology support to handle the customers. (ipmd.net, 2012)
Source: (ipmd.net, 2012)

5.4 Process-Technology related to Volume and variety

The process-technology that is used in the manufacturing and also in service industry has to be
chosen with utmost care. If there is a major fluctuation in the volume and variety of the products
and also in the services, then the changes have to be implemented accordingly. (Johnston, 1999)
There are also some products and services where the demand is seasonal. So, in those places,
arrangements are done accordingly. When, there is a major change in the demand, either the
capacities have to go idle or the capacity becomes short. So, the companies have to make
arrangement accordingly.
For Toyota, since they are using the JIT concept there would not be much change in the process
technology when the volume and variety changes as they are already operating at zero inventory.
The graph below shows that there would be a major change in the demand in a particular variety
of vehicles and people would be interested more in hybrid and electronic cars than in the
traditional fuel running vehicles. (KPMG, 2012)

Source: (KPMG, 2012)

Conclusion
Toyota has been able to manage all front of operations management very effectively. The
process technology that Toyota uses ensures a continuous flow of production. The process
design and the facility design layout have been planned and the arrangements have been made
to use multi machines for a single product very effectively. They have been using the
standardised ways of operations management.
For capacity management, they use the U-shape of machine arrangement as they want to make
the optimum usage of space. The machine usage ratio for every machine is generally 100% if not
more, which speaks highly of the maximum capacity utilisation.
For Lean production techniques, the company has been using the Jidoka and the Kanban
techniques. They are making production in small batches and operate at zero level of inventory
which means the products are manufactured as and when demands are placed.
For organisation system and production techniques, the company is using the JIT concept which
means that they are more concerned about maintaining the quality of the products and do not
want to go in after quantity.
The performance and improvement strategy of the company concentrates on the 4 important Ps
of the business. These Ps are philosophy, process, people and problem solving. Toyota has
made appropriate strategies and designed appropriate processes by involving the people and
empowering them to handle the problems.
Finally the suppliers of the company also form an important part and at Toyota the suppliers
development is done through supplier relationship management. The suppliers are chosen
carefully and they are made to feel a part of the company and make sure that they adhere to the
company quality and time norms.
So, it could be easily concluded that Toyota could be the best possible example to understand
the importance of the operations management procedures.