Dean Whitter
Org & Mang’t
Fall 2008
Case Study Two
Toyota
Toyota has always made its company motto “better cars for more people.” This means they would produce cars in such a way that they can meet diverse customer preferences and they stressed flawless quality & lack of waste. The case goes on the say “It further meant delivering cars at an affordable price with perfect timing. This ambitious goal had seemed nearly elusive after the Second World War, since most people in Japan could not afford a car even at cost. In addition, the country’s labor productivity was only one-eighth of that of the United States. In essence, Toyota was challenged to cut cost dramatically, but without the scale economies that American firms enjoyed. It needed an entirely new source of economies to satisfy customers with variety, quality, and timeliness, all at a reasonable price.” The Toyota Production System (TPS) was developed to help enforce this motto and standard.
TPS emphasized cost reduction by “thoroughly eliminating waste, which, in production environments tended to snowball unnoticeably. Waste of overproduction, for example, not only tied up working capital in inventory, but it necessitated warehouse storage space, forklift trucks to move goods about, material handlers to operate trucks, computers to keep track of inventory locations, a staff to maintain the computerized system, and so on. Furthermore, overproduction often concealed the location of the true bottleneck and thereby invited investment in the wrong equipment, resulting in excess capacity. “
Identifying waste, according to the case, was no easy feat. To help with this problem Toyota adopted two guiding principles to facilitate this critical process. The first was the principle of JIT or Just-In-Time. JIT was to “produce only what was needed, only how much was needed, and only when it was needed. Any deviation from true production needs was condemned as waste.” The second principle was...