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Toyota has had to face a major loss in revenue and sales when glitches had been found in the acceleration system of some of the famous car models of the company. It all started with a small accident in the Southern California on August 2009, when the acceleration system of the Lexus model gone out of control due to some minor manufacturing glitches in the model. The vehicle safety administration of USA; NHTSA (National Highway Traffic Administration) took this issue seriously and issued a brief inquiry against the safety issues of the Lexus model and other models of the Toyota company.
Many reasons were related to these minor issues in the car models manufactured by Toyota. The company finally decided a major recall of around 8 million vehicles to repair the safety issues, which cost the company a loss of millions of dollars. This paper deals with some of the key issues that were responsible for the failure of Toyota (Badawy, 2008).
Figure 1. Overview of Recalls by Toyota (Rajsekara, 2013)
The failure of Toyota can be considered as both systematic or management failure. The circumstances going in the international market were also somewhat responsible for the failure of Toyota. After the global economic recession in the year 2008; the entire world was facing the aftermath of the recession and market decline, and Toyota was not an exception. The managers of Toyota put extensive pressure on the employees and workers to manufacture the product rapidly. Toyota was willing to increase its sales by 15% and was willing to cross every limit for this growth. This urge of rapid growth had hurt the quality of the car models manufactured by the company to a great extent. In order to meet the benchmark of getting 15% increase in sales, Toyota company has even hired many professionals from foreign countries who were not much acquainted with the TPS (Toyota Production System) model of the Toyota company and that’s why some technical mistakes started to happen in the car models manufactured by such workers (Heller, 2011).
Toyota employs the TPS model for the manufacturing and supply of the car models of the company. Some of the strategies extensively used by the company are lean manufacturing and JIT (Just in Time) production. Toyota employed both lean and JIT strategies very effectively within the existing manufacturing and supply chain model. However, some issues started to emerge when some glitches were recognized in the existing TPS model that came mainly due to abnormalities in the lean and JIT strategies. These two strategies of the TPS model were not properly understood by the foreign employees and thus they were not able to employ it properly. Many companies who are using the JIT strategy in their manufacturing refers it as the best strategy to minimize wastes during the production. JIT suggests that large inventories are wasteful in terms of company resources and they must be reduced to minimum level. However, JIT is only effective when the condition of sales and market are stable.
JIT is also beneficial only when the delivery times of the finished products are known and end the production is capable of scheduling according to the changing market conditions. The market conditions after the recession in the year 2008 were not stable and the company management became overly aggressive to increase the sales by 15%, which put lots of pressure on the production and employees; that results in the overall failure of the TPS model, and therefore the company (Finch, 2010).
Figure 2. Toyota Share in the Market (Rajsekara, 2013)
Toyota company has had to face the issues of safety and driving glitches in its model due to overproduction of the models of the company, without emphasizing on the basic requirements of safety. The company management didn’t bother about the issues in advance and followed a rat race of reaching the 15% growth in sales blindly. In order to achieve this benchmark, the company had hired many inexperienced and nonprofessional employees who were not acquainted with the TPS model of lean manufacturing in a Toyota. As it has already been discussed in this paper that although lean manufacturing is a best way, but some issues may arise if aggressive production is imposed on this system. Meanwhile, the JIT production system also collapsed due to the failure of the lean manufacturing system. The NHTSA has introduced many new regulations for the safety of the passenger in the cars that require many technical considerations. Toyota didn’t follow these regulations and has had to face failure and then a major recall (Cole, 2011).
Figure 3. Toyota Recovery Graph
It is evident from the Toyota failure that the company has had to face a major crisis due to some glitches found in the safety control systems of the models made by the company. The first preference should be given to the proper crisis management. Following are some suggestions that can help this company for better crisis management and other related strategies: —
- The company has to implement some testing and prevention systems so as to reduce the issues within meantime.
- The CEO of the Toyota company can appoint a head of the safety response team who should be responsible to carry out and receive the reports of serious injuries to the people or property linked to the issues of manufacturing.
- The rapid response team employed by the company should take any issue to the CEO or high business leader.
The last few years after the major 2008 recession had been very bad for the Toyota company. However, the company has employed many new strategies to revert back to its earlier position in the market. It was evident that some strategies of the TPS model were responsible for the failure of the company. However, it was the TPS model itself that helped the company to recover from the crisis of recall. The TPS model strategy that – “The biggest problem is thinking that you are ok” has helped the company a lot to revert back to normal position within meantime. Meanwhile, the CEO of the Toyota company; Akio Toyodo also announced an apology on the 5th of February 2010, emphasizing that all faulty models will go back to manufacturing plants to follow the basic cultural beliefs of the company, i.e. “customer first” and “genchi genbutsu” (that means go to the source to find the problem) (Toyotawebsite, 2010).
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Badawy, A., 2008. How TOYOTA Became #1: Leadership Lessons from the World’s Greatest Car Company. Journal of Engineering and Technology Management, pp. 22-36.
Cole, R. E., 2011. What Really Happened to Toyota?. [Online]
Available at: http://sloanreview.mit.edu/article/what-really-happened-to-toyota/
[Accessed 1 March 2017].
Finch, J., 2010. Toyota Sudden Acceleration: A Case Study of the National Highway Traffic Safety Administration -. Loyola Consumer Law Review, pp. 1-26.
Heller, V. L. &. D. J. R., 2011. Toyota in crisis: denial and mismanagement. Journal of Business Strategy, pp. 11-32.
Rajsekara, J., 2013. Challenges to Toyota Caused by Recall Problems, Social Networks, and Digitisation. Asian Academy of Management Journal, pp. 1-17.
Toyotawebsite, 2010. Toyota: Company Principles. [Online]
Available at: www.Toyota.co.jp/en/index.html
[Accessed 1 March 2017].
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