1. Introduction

The whole Assignment of the course 'Manufacturing Strategy' consists of two individual parts, contributing 50 % to the end mark.
The task in this first assignment is to identify the manufacturing strategy of a company by plotting the manufacturing system changes (structure and infrastructure) that have occurred over recent years. It's up to me, which scope of time I regard.

After identifying the changes, I'll try to formulate the objectives and the Manufacturing Strategy of my selected company.
 

I chose Toyota for my assignment, because I think that this company has partly developed the modern ways to mass-car-production. With it's approaches (Just-in-time and Kanban), Toyota has influences the whole industry branch.

After a short introduction, I will have a closer look at the changes in production during the late 1940s to the 1970s. I have tried to plot developments very short. Some things I evaluated as worth explaining, are enclosed in the Appendices you can have a look, with them I want to make sure that there are no misunderstandings. The main text contains the manufacturing objectives of Toyota. I'll summarise them again in the conclusion. Finally I'll try to form a Manufacturing Strategy.

I'll also try to construct the diagram mentioned in the lectures, which plots the structural and infrastructural changes of Toyota over the scope of time regarded.

I've used only one textbook, which describes in detail many aspects of the Japanese automobile industry so I do not dedicate this book a whole page for a list of references. I'll mention it after the conclusion.

The history of Japanese automobile industry is a history of success. They managed a growth in production from a level of 32,000 cars in 1950 to over 10,000,000 per year during the 1980s:
Their special management approaches and the techniques behind this tremendously growth had been adapted by many other carmakers in the world. Equipped with these techniques and assisted by two oil crises in the 1970s which brought about soaring petrol prices and a shift in demand towards smaller cars, the Japanese automobile industry replaced by 1980 the USA as the largest automobile production nation in the world.
This assignment puts a scope on Toyota's methodologies which gave the company the push to be a leader in the worldwide automobile industry.
 

Toyota's production system was strongly affected by one person: Ono Taiichi. He can to Toyota as an engineer without college degree but he had the ability to analyse processes in production accurately and eliminate the unnecessary parts done by the worker. Ono came to Toyota in 1943 with no experience in vehicle production. That was a kind of advantage, because he had no prejudices in favour of American methodologies.

When he studied the production systems from Ford, he recognised two major flaws (the big lot sizes and the inability to adapt customer's wishes).
Ono developed Ford's strategy one step further. He discovered the small lot production in American company's body-stamping shop and extended this idea throughout Toyota's entire production system.
The advantage of a small lot size is a more flexible production, which enabled Toyota to extend their product sortiment between the 1950s to 1960s and, first of all to reduce costs by eliminating unnecessary inventories in production
In 1950 Toyota set up it's first 5-year plan to double production capacity to 3000 units per month without increasing personnel. In the first year of the plan Toyota repaired or modified old machines. In the next years, management focused on increasing car production capacity by purchasing body stamping machines (to produce more bodies in house), automatic spot welding machines and new conveyors for final assembly lines.
Ono's department became a 'model-shop'. Immediately Ono and his staff analysed processes of work to eliminate waste and idle time in single operations.

One of Ono's rationalisations resulted from this researches was to redistribute workers motions and cycle time and, finally, remove one or more of them or make the persons on a line take over more operations of the neighbours.

The Korean war orders placed a huge demand on Toyota's factory. More than it was able to handle. That forced Toyota to test Ono's ideas on productivity and costs at rising levels of output. But the war orders didn't call for mass-production. During the first two years Toyota has to produce a relative large variety of vehicles (trucks) in small lots and with a shortage of workers.

The second rationalisation and a key reason for the rise in Toyota's productivity in the 1950s was to clearly separate the terms 'operating time of a machine' and 'working time of its operator'. Ono asked in 1950 each worker to operate two machines instead of one. This had been made possible by placing the machines into an 'L' formation. Toyota extended this technique by asking employees to operate three machines and four machines in a horseshoe configuration to cope with the increasing. In addition they introduced four changes on the machines to make work much more simple:

· remove handles from machine tools and replace them with pneumatic or hydraulic chucks to free the hands of the workers add limit switches to turn machines off automatically when they completed one operation.

· centralise and automate lubricationÞ each worker do not have to lubricate the machine on his own create a section to grind tools and to deliver tools to workers when they have finished one operationÞ workers don't have to leave their stations.

All these changes made it possible for one worker to deal with 17 machines by 1953. The average in the machine shops was 5-10 machines per worker.

A further, more infrastructural aspect of the first five year plan was (in 1949) that Toyota for the first time offered lectures for manufacturing staff of the inspection department in quality control, later joined by members from the supervision department in 1950. These lectures were sponsored by different Japanese organisations like JUSE (Japanese Union of Scientists and Engineers). Toyota held in 1951 in house QC lectures and established an independent QC committee in 1953. In fact, the history of quality control began quite earlier by study customer complaints.

In 1953 there were some serious struggles with the workers unions of Nissan and Toyota (1953). Toyota fired 2,000 employees what gives productivity a further boost.

After 1940 Toyota manufactured lot sizes as big as possible. As a result of this stockpiles occurred whenever downstream stations were not able to receive components . Therefore Toyota tried between 1950-55 to reverse the process information flow (Just in time). That means that one station only produces as many parts as the next station can handle immediately. The aims of JIT were to identify waste in manufacturing, transport, buffer stocks, worker motions and finished product inventories. JIT had two consequences. On the one hand it made mass production in large lots inconvenient, with building work in time storage, on the other hand it made long lead or set-up times to an obstacle in the production flow. The new technique aimed at an continuous product flow. To apply JIT efficiently short set-up times had to made possible.
For example: prior 1955, Toyota needed 3 hours to change stamping dies. Toyota cut this to 15 minutes in 1962 by simply standardising all dies and mechanising a part of the set-up process. 1971 Toyotas set-up time was 3 minutes.

At the end of the 1950s Toyota changed its assembly sequence to satisfy monthly sales orders as close as possible to insure that workers only produced what was necessary for the next process so that the company did not store finished vehicles.

The daily production schedule was arranged in the same ratio than the monthly schedule. Mixing the assembly provided some examples.
It insures against stockpiles resulting when a dealer cancelled large orders for one car.
Toyota was after a certain time so flexible that it was able to change production mix daily.
Mixed production also save floorspace and cut work-in-process inventory.
For big orders about parts the factories used continuously Toyota still applies the advantages of mass-production in large lots.
The aim was-in contrast to other carmakers- to be able to change production very quickly to only produce in lot sizes of one day's supply.

Towards the end of the five year plan (1954-55) the 'pull-system' runs properly
At the end of the first 5- year plan Toyota's monthly production capacity stood at 5,000 units, compared to 1750 units when the five year plan began.

In this chapter I have to jump between periods of time to plot structural and infrastructural changes more blocked.
Toyota and other carmakers completed an impressive modernisation of their existing facilities in 1950s an, in addition, started in the 1960s with a tremendous expansion of plants .
In March 1956 Toyota spent over $ 17,000,000 (a quarter of this sum to imports of modern machinery) and exceeded the goal of the first 5-year-plan of doubling production capacity.
This investment was only the first step of a huge structural expansion boost mainly in the 1960s and 1970s.
Toyota completed 3 new plants near Toyota city between 1964-68 and five more in the 1970s and, after testing in two plants, spread gradually automation and modern computer equipment.

It was clear that the Japanese market had room for an increasing demand over several years. This fact made managers to drive their factories and workers roughly under or even above the potential output levels. Toyota's constantly drives over 100% capacity by setting up extra shifts, line speeds above standard and overtime. Toyotas capacity utilisation went from 115% to 150% during the 1960s and stayed over 100% in the 1970s. In general Japanese workers worked more hours than Americans do (roughly 10 % more, incl. Overtime). Therefore managers were in the situation to employ less workers.

This was one reason besides a low vertical integration (which I'll explain next) for a rise in productivity.

Looking back to the late 1950s Toyota get rid of one of the most fundamental manufacturing strategies developed by Ford: a high vertical integration, that made companies more efficient by reducing dependence on other firms. Toyota followed this principle after studying American car industry in 1930, too. They had no other chance doing that, because the only few Japanese companies made machine parts. In the 1950s they increased their dependence on firms over which they had no financial control. They became aware that buying parts for production is no disadvantage. Even it was possible to buy parts of a better quality.

The aims of this measure were to save the money which is necessary for a high vertical integration to by out firms or expand in-house capacity in addition the firms. Japanese firms were highly profitable and productive during the 1950s and 1960s, but executives hesitated to invest larger (as they already spent) sums, because they couldn't be sure of the growth of the domestic market, despite the mentioned high market-potential.
Low levels of in-house integration helped Japanese carmaker to increase productivity in that way that they were able to specialise in some processes like assembly for example and the manufacturing of sub-assemblies .

Subcontracting lowered fixed costs (like labour wages and inventory requirements) and required less operating capital. In addition they were able to cut production by only reducing outside procurement.

The first use of kanban at Toyota was made by Ono in 1953 and after this 1959 in a larger scale. At first, he introduced it in his machine shop. The system of kanban is the approach to let the bits of processing information flow backwards. Stations in the kanban system produced only as many components as there were (production ordering) kanbans from the following station(user) which needs the pieces. The user gets this pieces back, when the first station have made enough parts to meet the production ordering kanban.
The expression kanban is relying to the pieces of paper/metal where the information of the kanban is printed.
Toyota gradually expanded the kanban system, that in the 1970s professionals all over the world used the expression 'kanban' for the whole collection of Toyota's manufacturing techniques.
The changes the kanban system demanded from their users were tremendous even for Toyota. The system did not work properly if there were defects in the processes or in components that were delivered. To minimise this failures, Toyota put enormous emphasis on training workers (12 hours over a 2 week period). Naturally, the management had to be trained, too (1965-69). After this methods a few mistakes still remained, but they didn't disturb the system critically.
The aims of introducing the kanban system were:

· Control inventories of work in process and finishing goods by preventing over

production.

· reduce the production of defectives by eliminating buffer inventories

· make problems in the production system highly conspicuous because immediately

feedback to the previous station was possible.
 

The kanban system was able to handle variations of 20-30% in monthly demand only by changing the frequency of kanban exchanges bur suddenly appeared changes or bigger ones created problems because the number of kanban had to be expanded and the number of personnel, too. In the 1970s the kanban system works properly.

Looking back to 1960 and another (infrastructual) change, Toyota launched a 5-year quality control program in 1961 to win the Deming competition.

Before Toyota's management broadly ignored QC as a separate function. As Nissan won this competition, the publicity the company received makes Toyota to start such a program.

The last thing I want to mention are Toyota's experiences with computer controlled production. Toyota was one of the first companies who introduced in the mid 1960s the production schedule programs MRP. They believed in 'real-time' production and the fast return of information direct from the shop floor. To be effective, these programs needed very detailed information about lead times and intermediate costs. It was very difficult to win those data and constantly renew them (for the company and the suppliers).

The other drawback was that cost and timing estimates required that companies behave in the future exactly as data indicated they were behaving nowadays.

The kanban system required detailed information, too, but it was much more easier and cheaper to install. In addition, managers were able to adjust these values.

Around the 1970s Toyota made the decision to use computers only for overall production scheduling or to prepare data for kanban.
 

 2.3 Goals of manufacturing at Toyota

A company who wants to be successful should be orientated on the needs and wants of its customers. The Manufacturing (and its objects)- seen as a part of the whole company- should be orientated on the needs and wants of the customers, too.

There's only a very small amount of objects that can be influenced by the manufacturing engineers. We have mentioned them in the lecture.

In addition, four stages of a manufacturing strategy (depending on the character of a strategy) have been mentioned. Because of all what I've pointed out above, I would say that the manufacturing strategy of Toyota is externally supportive because Toyota has placed an enormous emphasis on looking for appropriate manufacturing processes abroad and to adapt them in the company. Long range programs (5-year plans) had been developed in order to acquire a vital know-how in advance for their objectives.

The objectives Toyota followed, can be divided into two aspects:

At first, goals for general business and second, goals for the competitive edge criteria we spoke about in the lectures.

During the first five year plan (1950-55) the aim was to modernise machines after the war period and to double the production capacity to 3,000 units, because of the anticipated rising demand.
With regards to competitive edges, the quality of the parts manufactured has been expected to increase. Moreover the design- and volume flexibility has to be improved by producing in smaller lots, reducing the in-process-stocks to maintain the product flow. These aims were met with the introduction of the just in time system.
One flaw of the American production, Ono recognised was the inflexibility against customer wants. The small lot sizes and the Just in time with all its advantages mentioned in the text, made Toyota's production more flexible.

In the second period of time after the first 5-year plan, Toyota built a new generation of plants to cope with the rising demand. Besides the big rate of outsourcing production, Toyota aim was only to manufacture a few parts considered as important. Hence, Toyota were able to concentrate only in the production of these parts and to get practise in it.
Another aim was to increase output to use the economies of scale and finally to lower costs. The low vertical integration gave a boost in nominal productivity and together with the high utilisation of capacity reduced costs, too.

There were no goals mentioned Toyota wanted to meet, but didn't manage it.

The main goals over the period of time were: cost reduction, fulfil customer demands, no stocks, increase output, synchronise the procession of work, incrementally improve the quality of the cars (not change models every one or two years).

The next two diahrams are providing a  rough graphical view of the changes in Toyota's manufacturing objectives/strategy.
 
 

As mentioned in the lecture, a company needs a crisis to start thinking about changes. Toyota's situation in the Korean war time period, where production was prescribes was not so good.

With the right, competent people who analysed foreign techniques and adapt and implement them in the company they were able to cope with this situation and became a world-market leader. They constantly improved manufacturing and gave this sector in the company an equal position between the Sales and the Finance. While reading the textbook, everything seemed to be so fluent in Toyotas production development. I read another article, where the president of Toyota Ono Taiichi had been criticised for made people to operate more and more machines. They cited a shocking suicide statistic about this development. In the book Ono portrayed as a hero.

The development Toyota has gone through shows how a company can influence its sector. Furthermore how a manufacturing strategy can grow over the time. Like the quality of its cars, Toyota has improved the strategy gradually, therefore the aims nearly stayed the same.