International business research the toyota’s way of production

TRƯỜNG ĐẠI HỌC KINH TẾ QUỐC DÂN -*** - INTERNATIONAL BUSINESS: RESEARCH THE TOYOTA’S WAY OF PRODUCTION MEMBERS: VŨ NGỌC HUYỀN LÊ MINH NGỌC HOÀNG THẢO NHI NGUYỄN NHƯ QUỲNH HÀ QUỲNH TRANG I OVERVIEW OF TOYOTA .3 History of formation and development Vision and philosophy 3 Operational, production and business situation II TOYOTA PRODUCTION SYSTEM (TPS) Overview of TPS 1.1 Overview 1.2 TPS goals .7 Five main pillars of TPS and practical application 2.1 Standardization 2.2 Just in time 2.3 Jidoka: .10 2.4 Kaizen: .11 2.5 Heijunka Production Leveling 12 Compare Toyota Production System (TPS) and Lean Manufacturing 13 III LESSONS LEARNED FROM VIETNAM WHEN APPLYING THE TPS SYSTEM 16 Difficulties 16 Advantages .16 Lessons 17 3.1 For State management agencies 17 3.2 For business in Vietnam 17 I OVERVIEW OF TOYOTA History of formation and development Toyota Motor Corporation (Toyota) is the No automobile manufacturing corporation in Japan, a symbol of quality and leading vision in the automobile industry In 1937, Kiichiro Toyoda, son of the founder of Toyota Industries, founded Toyota Motor Corporation The company initially specialized in manufacturing and maintaining machinery for the textile industry After Mr Kiichiro shifted the company's activities to the field of automobile manufacturing In 1970, Toyota Corolla's success in the US market marked an important turning point when the company became one of the world's leading automobile manufacturers Toyota has always continued to innovate and invest in fuel-saving and environmentally friendly technologies over time Vision and philosophy ● Toyota Vietnam vision: With the desire to see "Customer Smiles" by exceeding customer expectations, we set quality goals at a new level, in which quality in work becomes the foundation for Toyota's product quality, sales and service activities Besides, we will always strive to contribute to the Vietnamese auto industry, respect the environment as well as the community and become the most trustworthy company in Vietnam We will power our ability to achieve these challenging goals through our talented and passionate team members, always thinking of a better way to things ● Toyota's business philosophy in Vietnam is one of the outstanding points That is: + Production and business based on quality, achieving success + Environmental protection, sustainable development with society + Contribute to society, support and share with the community Toyota's core values and management philosophy have created an outstanding working style, helping the company build a high-performance and reliable production system 3 Operational, production and business situation From business results, Toyota is the leading car company in the entire market with sales reaching 92,625 units in 2022 (including Lexus cars), an increase of 34% compared to 2021 Cumulative sales reached 846,592 cars By the end of 2022, Toyota has shipped 36,602 vehicles, an increase of 20% compared to 2021, bringing cumulative production output to 660,702 vehicles Regarding service, Toyota has welcomed more than 1.6 million customers, an increase of 45% over the same period last year, bringing the total number of vehicles using genuine Toyota services to more than 16.2 million In 2022, Toyota expanded its dealer network with the opening of new dealers, bringing the total number of Toyota dealers to 85 located in 46 provinces and cities across the country Toyota's export of components and spare parts is guaranteed with a revenue of 68.6 million USD Toyota is considered the "flagship" in automobile production and assembly in Vietnam with quality car models that are popular with customers such as Vios, Fortuner and Innova Besides manufacturing and assembling, Toyota Vietnam is also an enterprise that focuses on promoting the use of domestic spare parts and components In the first half of 2022, Toyota launched new and improved products, starting with the Corolla Altis model, adding a Hybrid version, becoming the third Hybrid car line following the success of the Corolla Cross Hybrid and Camry Hybrid In December 2022, Toyota released the B-MPV Veloz Cross and Avanza Premio duo after less than a year of being sold as CBU imports The assembly of these two car models contributes to improving supply, better meeting market demand and contributing to increasing the localization rate This event marked the number of domestically assembled car models of Toyota Vietnam increasing from to cars, nearly 300 components on the Veloz Cross and Avanza Premio models were localized, contributing to the cause of automobile localization of the country Business results of Toyota Vietnam in the first months of 2023: In terms of sales, Toyota Vietnam leads the passenger car market with sales reaching 27,420 vehicles in the first months of 2023 (including Lexus), bringing total cumulative sales to 884,496 vehicles In terms of production, Toyota has shipped 11,309 vehicles, bringing cumulative production output to 672,011 vehicles In terms of service, Toyota has welcomed more than 865 thousand customers, an increase of 12.5% over the same period in 2022, bringing the total The cumulative number of vehicles using genuine Toyota services is more than 17 million Toyota's export of components and spare parts reached nearly 37 million USD in revenue, with accumulated revenue reaching nearly 827 million USD In May 2023, Toyota Vietnam officially introduced Vios 2023 with a safety upgrade system with top features of the Toyota Safety Sense safety package Next, the all-new Toyota Wigo was launched in June with comprehensive changes Exterior and interior details have been completely transformed with segment-leading safety features At the same time, Toyota has updated Euro emissions standards for vehicle models corresponding to the company's product change roadmap according to the Government's direction Through each year, Toyota's products are constantly improved and receive the love and acceptance of customers In particular, the Corolla Cross, Vios and Veloz Cross models are regularly in the top 10 best-selling car models on the market with sales of 6,341 cars, 5,425 cars and 4,512 cars, respectively II TOYOTA PRODUCTION SYSTEM (TPS) Overview of TPS 1.1 Overview Toyota's production system is a system that produces products in the right quantity at the necessary time or we can say "Just-In-Time", arising from the need to respond to surrounding circumstances company “Toyota Production System” (Toyota Production System) is the first production model proposed by two senior leaders of Toyota Group, Eiji Toyoda and Taiichi Ohno, after World War II The most famous element of TPS is certainly the Just-in-Time pillar of the manufacturing system The company was quite poor and could not afford to waste money on excess equipment or materials during production Everything is expected to be purchased on time and not too early or too late In 1957, two automobile tycoons, Ford and Chevy, were dominating the market But only 50 years after Toyota appeared, Toyota became the largest car manufacturer in the world Toyota first caught the world's attention in the 1980s when consumers began to learn that Toyota cars were more durable and required fewer repairs than cars from the United States Today, Toyota is the most profitable car manufacturer, consistently producing highquality cars using few labor hours and little inventory Toyota continually raises the bar in manufacturing, and develops product and process excellence What makes this famous car company successful? It is a comprehensive, effective, practical and potential production system that the company has applied 1.2 TPS goals The goal of the Toyota Production System is to provide products at world-class quality levels to meet customer expectations, serving as a model of corporate responsibility in the Document continues below Discover more from: International Finance Đại học Kinh tế Quốc dân 55 documents Go to course Testbank international finance chapter practice 22 International Finance 100% (4) Review Essay Questions 11 International Finance 100% (3) Testbank international finance chapter practice 24 International Finance 100% (2) final exam of International finance 578 International Finance 75% (4) International-financial-management-6nbsped9780078034657-0078034655 compress International Finance None Chapter TCQT2 22 International Finance None industry, surrounding communities and reducing the timeline from when an order is received until it is delivered to the actual customer The Toyota Production System has historically had four fundamental goals consistent with these values and goals: ● Provide world-class quality and service to customers ● Develop the potential of each employee, based on mutual respect, trust and cooperation ● Reduce costs through eliminating waste and maximize profits ● Develop flexible production standards based on market needs Five main pillars of TPS and practical application 2.1 Standardization The first pillar is the standardization of production processes and instructions Standardization is production processes and instructions that are specified and communicated in great detail This creates consistency in job performance and helps avoid inconsistencies and incorrect assumptions about how a job should be performed The goal of standardization is to unify production activities, except when production processes are adjusted due to new needs arising A high level of process standardization also makes it easier for companies to expand production, avoiding disruptions that can result from a lack of standardized processes Standardization will maximize efficiency and minimize waste by controlling the following three factors: ● Takt time: time needed for a job to be completed ● Work sequence: Order of each step of work ● Inventory handling standards: Establish work sequences for each process to achieve the ideal time and quantity of goods in the standard process 2.2 Just in time 2.2.1 Definition: ● Just-In-Time (JIT) is a production system in which the flow of raw materials, goods, and products is meticulously planned during the production and distribution process, so that the next step in the process can be executed immediately after the current process is completed As a result, no items are left in a waiting state, and there is no need for labor or equipment to wait for inputs to operate Each stage of the production process produces exactly the quantity required by the next stage Processes that not add value are eliminated ● This is an inventory management strategy with the main goal of aligning the flow of raw materials with the production schedule and customer orders JIT is implemented to ensure production with the criteria of "right product, right quantity, right place, right time," aiming for "zero inventory, zero waiting time, zero additional costs." 2.2.2 Advantages: ● First and foremost, implementing JIT can help businesses reduce production lead times by minimizing waiting time between stages in the process Additionally, when JIT is applied, businesses must maintain everything in the right quantity and just-in-time, thereby minimizing the number of returned goods This, in turn, keeps inventory levels to a minimum, reducing various costs such as storage costs, bookkeeping costs, etc ● Another advantage of implementing JIT is increased customer satisfaction By producing quickly and efficiently, JIT can help companies respond more rapidly to customer demands, increasing customer satisfaction and loyalty This, in turn, can retain existing customers and potentially attract new ones 2.2.3 Disadvantages: ● The first apparent disadvantage of JIT production is that businesses can become dependent on suppliers Since JIT's goal is to minimize inventory, there are no safety stock levels, so when orders come in, JIT-based businesses must purchase materials from external suppliers Therefore, if subcontractors not provide the necessary components in a timely manner, the entire production process can be disrupted, and the entire supply chain may experience disruptions with even minor changes from the manufacturer ● Furthermore, businesses applying JIT may face shortages if they not have accurate and regularly updated sales forecasts In addition, transportation costs may increase due to reduced batch sizes and increased delivery frequency Instead of delivering large quantities once a month and requiring a lot of inventory, JIT operates with weekly orders of smaller quantities to keep inventory costs low 2.2.4 Practical Application of JIT at Toyota: ● With the implementation of Just-In-Time, the entire management process from production to vehicle distribution at Toyota does not involve inventory holding or surplus raw materials Vehicles are produced based on customer orders and delivered on time to the right location To avoid overproduction, the automaker uses a "pull system," which means supplying goods based on customer demand rather than a predetermined system or schedule In other words, it's a demand-driven system ● In Toyota's production line, to fulfill an order, they must adhere to the following rules: - Upon receiving a new order, production instructions must be issued to the production line as early as possible - Necessary parts must be held in reserve to assemble any type of vehicle in the production line - The parts used in the assembly process must be in the same quantities as the previous process - The production process must be synchronized with consumption, meaning the preceding process must reserve parts and produce only the quantity required for the subsequent process ● JIT has enabled Toyota to create a highly integrated, efficient, and scientific production process Toyota's satellite companies must adhere to the process and schedule controlled by the parent company's information system through clear instructions regarding schedules and quantities Toyota always strives to keep inventory levels to a minimum, enough to replace the quantity of goods shipped 2.3 Jidoka: 2.3.1 Definition: ● Jidoka (Automation with Human Intelligence) is a production principle that combines human intelligence and the role of automation in machinery to detect errors early in the manufacturing process, minimizing losses due to machine malfunctions or defective products Therefore, each process and production line can autonomously control issues, identify abnormalities in machinery and products, and continuously operate, only stopping in the case of equipment failure, quality defects, or human intervention in the production line ● There are four fundamental elements of the Jidoka principle in lean manufacturing: - Detecting Abnormalities: In the production process, everything operates continuously from one production unit to another without stopping This can lead to problems in creating a high-quality product when the process encounters errors and cannot correct them promptly Jidoka performs automated production processes with the ability to detect abnormalities during production - Stopping Production: When an abnormality is detected in the production process, the entire production line stops to rectify the issue Identifying defects occurs at this point, enabling prompt problem resolution during production to improve product quality Halting production when errors occur is crucial and necessary in production line processes - - Taking Action: In Jidoka, when errors are detected and production stops, an alert is immediately issued to address the problem These detections aim to prevent the creation of severely defective batches that could affect the final product and its reputation Issues are resolved quickly following the error detection and stoppage sequence Investigating Root Causes and Implementing Countermeasures: Jidoka helps production lines identify the root causes of issues and handle them comprehensively Finding the root cause is essential to prevent future errors and efficiently address quality concerns, resulting in higher-quality products 2.3.2 Significance of Jidoka: ● Preventing Errors and Incidents in Production: Applying Jidoka to the production process helps detect errors rapidly Issues that occur in the process can be quickly addressed through Jidoka, enabling operators and managers to identify and rectify errors during production, resulting in the best possible product quality ● Cost Savings: When a process experiences batch errors, it can lead to significant losses for a business Utilizing Jidoka helps businesses save costs by addressing error issues within the production line efficiently 2.4 Kaizen: 2.4.1 Definition: ● Kaizen is a Japanese term composed of the word " 改 " (kai), meaning change, and the word " 善 " (zen), meaning good, which translates to "change for the better" or "continuous improvement." It is a philosophy aimed at ensuring maximum quality, eliminating waste, and improving efficiency, both in terms of equipment and work processes Kaizen is about improvement, continuous improvement, and involves everyone, including managers and workers ● Standardizing improvements in work helps maximize productivity everywhere Standardizing work relates to consistently following processes, allowing employees to identify issues promptly 2.4.2 Benefits of the Kaizen Principle: ● Accumulating small improvements to achieve significant results over the long term ● Reducing waste and increasing productivity in production and business operations, such as reducing inventory, substandard items, search and waiting times, and transportation times, as well as enhancing employee skills ● Improving and synchronizing company operational systems in both the short and long term to reduce costs and save production time ● Enhancing productivity and employee morale when employees are aware of specific departmental issues ● Creating opportunities for each individual to propose improvements, be heard, and have their ideas recognized ● Contributing to building a culture of self-discipline and conscientiousness within the company ● Promoting teamwork and internal unity 2.4.3 Real-World Application of the Kaizen Principle at Toyota: ● Applying Kaizen to reduce waste within the company: Toyota applies Kaizen to its production processes, such as using plastic bins to sort parts according to each vehicle model and their specific characteristics This allows each worker in the factory to perform their tasks more easily and efficiently Additionally, Toyota applies the concept of 3M (Mura – Muri – Muda) This means that the existence of Mura (imbalance) leads to Muri (overburden), resulting in Muda (waste) Emphasizing the identification of waste and repeatedly asking "why" until the root cause of the problem is found is also essential ● Applying Kaizen to create new and useful improvements: Using existing parts on the production line and adding engines, Toyota has innovated transportation vehicles within the factory, saving employees time and effort in handling goods Furthermore, Toyota has saved nearly $3,000 in procurement costs for transportation vehicles The application of Kaizen has brought significant improvements by providing the right materials depending on consumption volume, minimizing tasks in the process, and organizing inventory ● Applying Kaizen to shape Toyota's corporate culture: The effective implementation of the Kaizen method by all members of the company has gradually shaped Toyota's corporate culture The editor-in-chief of AutoWeek magazine stated, "Savings isn't just a culture unique to Toyota It's a culture that the Japanese have brought to the United States, or at least into their manufacturing plants." At Toyota, Kaizen has helped establish the company's culture, which includes interactions between leadership and employees, costsaving measures, protecting the company's brand, putting in maximum effort in the workplace, and fostering a culture of mutual learning 2.5 Heijunka Production Leveling 2.5.1 Definition: ● Heijunka, also known as Line Balancing or Production Leveling, is a method of arranging production flows and product varieties consistently over time to minimize fluctuations in workload at each production stage in response to changing customer demand ● Heijunka facilitates Just-In-Time (JIT) production and is a lean manufacturing method first used by the Toyota Production System (TPS) to enhance production efficiency To apply line balancing, production controllers need to accurately know the capacity and speed of each stage ● Production Leveling by Quantity: For companies with unstable order volumes, it is necessary to adjust work processes to meet demand Applying Heijunka helps balance production by averaging the number of orders received ● Production Leveling by Product Type: Similar to quantity-based leveling, this method requires businesses to create a plan to allocate production based on average demand for different product types each day 2.5.2 Benefits of Heijunka Production Leveling: ● Establishing production planning methods to flexibly meet the diverse and frequently changing needs of various customers more efficiently ● Avoiding waste, such as producing ahead of schedule, reducing finished goods inventory, and lowering capital costs ● Ensuring stable resource allocation (human and machine resources) without overloading or causing stress ● Avoiding production of products driven by fluctuations in the type and quantity of actual customer orders ● Reducing production lead time (improved delivery capabilities) 2.5.3 Practical Application of Heijunka Production Leveling at Toyota: ● Toyota Motor Corporation has implemented Heijunka in their production process to address the issue of unsustainable batching and the challenge of continuously meeting irregular orders without difficulty due to uneven production capacity ● This tool enables smooth and efficient manufacturing operations Unlike mass production, Heijunka focuses on designing processes that can quickly switch from one product to another This benefits Toyota because manufacturing processes can better respond to market demands ● In mass production, excess inventory of certain products may accumulate while customers have strong demands for specific products When Heijunka is used as part of the JIT system, a process can produce a small quantity of one product and then easily switch to producing another product to fulfill single orders from customers Compare Toyota Production System (TPS) and Lean Manufacturing - Similarity: TPS (Toyota Production System) and Lean Manufacturing are two production management methods used to optimize production processes and minimize waste Both methods focus on improving product quality and increasing productivity by eliminating unnecessary operations in the production process Customer focus: Both TPS and lean manufacturing focus on the customer TPS and Lean take customer requirements as the center to adjust production activities Minimize waste: Both TPS and lean manufacturing emphasize minimizing waste in the manufacturing process Basically, TPS and Lean define waste the same way, and they use the same tools to reduce that waste (Kaizen, Jidoka, 5S…) Increase productivity: Both TPS and lean manufacturing aim to increase productivity by eliminating unnecessary activities in the production process - Difference: Many people say that Lean is simply a more general form of the Toyota Production System (TPS) However, there are some fundamental differences between how Toyota uses TPS and how other organizations apply Lean That difference will be presented in this section TPS Lean Origin TPS is a production system developed by Toyota Motor Company in Japan It was developed in the 1940s and continued to be improved and developed throughout the following decades Lean manufacturing is a product management method derived from TPS It has been widely developed and applied by companies outside the automotive industry and has become an important part of quality and performance management Applicable scope TPS focuses on production management and optimization of the automotive manufacturing process It includes aspects such as quality control, warehouse management, human resource management and performance improvement Lean Manufacturing is not only applied in the automotive industry but can also be applied in many industries such as manufacturing, services, healthcare, oil and gas, and many others It focuses on optimizing work processes, eliminating waste and improving overall organizational performance Waste classification types - Waste due to overproduction - Wasting time by waiting or delaying - Waste of transportation - Waste during operations types - Waste due to overproduction - Wasting time by waiting or delaying - Waste of transportation - Waste during operations - Waste due to inventory (finished or semi-finished products) - Waste due to redundant operations - Waste due to defective products - Waste due to inventory (finished or semi-finished products) - Waste due to redundant operations - Waste due to defective products - Waste of human resources (improper use of employee skills or unused human potential) Cultural influence TPS emphasizes the Toyota way, which embraces Toyota's core values, culture and long-term thinking TPS focuses on a strong work culture, promoting accuracy, quality and individual contribution within the organization Lean was developed based on inspiration from TPS but is not closely tied to a specific philosophy or organizational culture Philosophy - Customers come first - People are the most important resource They are the only resource that can solve the problem - Kaizen (Continuous improvement to True North) - Genchi Genbutsu (Scene, artifact): direct observation of actual conditions in an area to understand and solve problems faster and effectively - Value: Value is created by the manufacturer from the customer's perspective - Value chain: Value chain is a process that includes the actions necessary to bring a product/service to customers - Flow: ensures the remaining activities in the value chain flow smoothly without interruption, delay or blockage - Pull: plan and produce exactly what customers need, when they want it, to reduce inventory and accelerate return on investment - Perfection: there is no stopping in the process of eliminating waste, cutting labor, saving time, costs and minimizing errors when providing a product/service that is increasingly close to demand customer's accuracy Purpose TPS highlights problems so we can solve them, so we can more with less By identifying and solving problems, TPS aims to optimize processes, reduce waste and achieve more with fewer resources TPS recognizes Lean is about eliminating waste but takes a broader approach The focus of Lean is to streamline processes, improve flow, and eliminate non-value-added activities that problems and inefficiencies are opportunities for improvement and emphasizes continuous learning and problem solving Approach TPS is a comprehensive systematic approach to meeting customer needs It is a comprehensive manufacturing system consisting of principles, practices and philosophies aimed at achieving customer satisfaction, continuous improvement and waste reduction TPS provides a structured framework that integrates different concepts and tools to create a lean and efficient manufacturing system Lean is generally a tools approach Lean includes a series of principles, practices, and tools derived from TPS and other sources It provides a set of methods and techniques that organizations can selectively implement and adapt to improve their performance III LESSONS LEARNED FROM VIETNAM WHEN APPLYING THE TPS SYSTEM Difficulties There are many other car manufacturers in the world that have been entering the market, this is a big challenge for Toyota as it has to both improve product quality and price to compete with existing car manufacturers, while also improving product quality and price must find ways to compete with potential competitors In addition, the exchange rate change between USD and JPY also leads to a decrease in the company's profits and an increase in raw material costs, making production difficult After a prolonged economic crisis, governments are expected to announce policies to tighten spending, leading to a decrease in sales and revenue of car manufacturers In addition, demographic changes and changes in the way families use cars also reduce the demand for car models significantly Advantages In a situation where world gasoline prices are escalating, car customers tend to consume fuelsaving products or use clean energy sources Toyota is pursuing the project of manufacturing vehicles powered by gas and hydrogen by applying world-class achievements and advanced techniques and the results of R&D activities While customers are looking for alternative sources of oil, this is a lucrative project for the company Currently in many countries where the demand for cars is great but the supply is still limited Toyota can expand its market to these countries Manufacturing more vehicles that meet the requirements of geographical conditions and expanding target customers to modern markets are also opportunities to help Toyota increase its market share Lessons 3.1 For State management agencies - Create favorable conditions for businesses: State management agencies need to create a supportive and encouraging environment for businesses to apply TPS This may include developing policy and regulatory support for businesses involved in TPS improvement and implementation - Accompany and advise businesses: State management agencies can play the role of accompanying and advising businesses in the process of applying TPS This may include providing resources, training and guidance to businesses on how to effectively implement TPS - Create an effective evaluation and measurement mechanism State management agencies can establish effective evaluation and measurement mechanisms to ensure that enterprises implement TPS effectively Regulators need to ensure that this assessment is carried out in a fair and transparent manner - Create a communication and collaboration network State management agencies need to create a network of communication and cooperation between different businesses and regulatory agencies Management agencies can organize seminars, discussions and support communication between businesses to share knowledge and experience in applying TPS In summary, state management agencies need to create favorable conditions, accompany, create evaluation mechanisms and support communication between businesses to support the process of applying TPS 3.2 For business in Vietnam - For State management agencies: Businesses need to create an environment where employees are encouraged to come up with innovative ideas and not be afraid of responsibility This will create commitment and initiative in improving production processes - Pay attention and invest in employee training: To be successful with TPS, businesses need to invest in training employees on the principles and methods of this system Training employees helps them understand the importance of flexibility, process optimization and quality management - Monitor and evaluate performance Businesses need to establish measurement and reporting systems to track progress and measure the effectiveness of improvement measures This helps businesses identify problems that need to be fixed and adjust processes to achieve maximum performance - Actively apply and continuously improve Businesses need to actively apply TPS and continuously improve production processes to create growth and improve performance for the business - Long-term orientation and patience Success does not come in the short term, but requires commitment and patience from all stakeholders The parties need to maintain orientation and not give up halfway, no matter what difficulties or challenges they face In short, applying the TPS system is a long process and requires commitment from the entire enterprise If implemented properly, TPS can bring great benefits to Vietnamese businesses