Operations Management-II

Toyota Motor Manufacturing USA, Inc

Group Assignment

Submitted by
Group 3
Section B

Ambarish 2020PGP293
Rohit 2020PGP283
Anish 2017IPM019
Stephen 2019PGP542
Problem
Toyota Motors Manufacturing (TMM) in facing problem-related to seat supply. Kentucky
framed seat (KFS), one-seat supplier for TMM, is responsible for the vast majority of material
defects and shortage of components as the principal defects encountered. With the increase in the
variety and demand of seats, these issues continue to occur. Toyota is currently addressing these
issues offline, but this is a variation from the Toyota Development System policies and
procedures ​(TPS). ​Now that TMM ramps up for the Camry car's production, it must tackle the
seat problem before it has a serious effect on its production performance.

Analysis
Usually, Toyota corrects its defects on the production line. The vehicles with seat problem were
rectified after the assembly was corrected. The seat problem was caused by 3 factors. Firstly,
Stock parts were not used as seats were required to match with respective cars. Secondly, the
supplier process operated under Just in Time (JIT). Finally, it was not easy for KFS to supply
replacements for defective seats. Even though KFS delivered replacements twice a day on an
average, it sometimes sent incorrect seat assemblies which led to delay. There were also many
instances where the seats were not installed properly. There were several four-day vehicles in the
overflow parking area.

The run ratio decreased from 95% to 85% on 27th April. The calculations depicted below to
demonstrate that per-shift production has decreased by approximately 50 cars. The main reason
behind this was the seat problem. Producing the missing cars via overtime capacity will cost
TMM in excess of $16,000 per shift. This translates to around $8.4 Million per year considering
two shifts and a 5-day workweek.

Most of the seat problems, however, are material flaws or missing parts, which cannot be
corrected online because no replacement is immediately available. One possible option would be
to have a larger amount of safety stock, but this is not an efficient solution to the problem
because it contradicts the JIT concept. Furthermore, it would require excessive stock
maintenance near the seat station for correct seat-to-car matching. Another solution to this issue
would be to have a smaller number of seat varieties. This step would increase the chances a
good seat is in the pipeline. Of course, these two options do not address the real problem, they
only provide possibilities for increasing the ratio of vehicles fixed on line.

TMM’s workers occasionally install a seat-bolt at the wrong angle, but this problem is easily
fixed within 30 seconds. This only accounted for approximately 11% of all seat problems
between April 14 and April 30, 1992, according to the Group Leader’s Seat Defect Data, so KFS
is responsible for the remaining problems. The two most significant problems are material flaws
and missing parts, which account for almost 60% of all defects. It is clear that the problem
should first be analyzed on the supplier side.
KFS has been a very reliable supplier to date, so it can be assumed that the problems we are
facing are not due to incompetence. From the case information, it is evident that the problem
began in March 1992 when Toyota began increasing the seat varieties from twelve to about
thirty-three. The problems will further intensify in May when more varieties are introduced with
plans to reach more than fifty. We are predicting that this trend will exacerbate the problems
TMM is experiencing, especially since KFS is their only seat supplier and has exhibited
vulnerability to style proliferation.

It seems that the ten-day changeover and the ten weeks to ramp up production that TMM allowed
KFS was sufficient for KFS to efficiently adapt. It appears KFS employees are not sufficiently
trained in JIT to allow them to accommodate the level of modifications introduced with the
wagon. This will result in even more defects in the near term.

The $50,000 investment will resolve TMM’s problem with the Plastic hook and may justify the
expense. Currently, the hook breaks about once per shift. Assuming two shifts per day and a
five-day workweek, there will be approximately 500 breaks per year. Further assuming an
internal rate of return of 15%, each replacement would have to exceed $15 to justify avoiding the
$50,000. Statistics represent that this occurrence has significantly declined, most likely due to
learning curve benefits. Furthermore, no problems have been reported in Japan where they have
used the same design. Therefore, we do not recommend investing the $50,000 at this time.

TMM could also change the seat supplier or get an additional supplier. Toyota generally prefers
to resolve issues with its suppliers rather than just replacing them. Additionally, it would be
challenging to find a supplier that is geographically closer than KFS.

RECOMMENDATION & IMPLEMENTATION

● Assign an employee to manage seat correction, replacement and implementation of the
one-shift requirement. In the same manner, have an employee check the seats at the
arrival dock so those problems can be identified early

● It is also better to monitor the trends, an area for vehicles with seat problems should be
available in the overflow parking area to monitor the fluctuation in defects. It is
necessary to reinforce time limits on replacement seats and time limits on how long a
vehicle can stay in the overflow parking area. If the time limit is exceeded, a
problem-solving meeting should be started.

● The supplier should be made aware of defective seats as soon as they are discovered.
Also, the Employees on the assembly line and in quality control should immediately
 inform KFS. These short-term measures are to address the current situation and should
become obsolete when the underlying problems are resolved

● A safety inventory is necessary for storing the seats so that delay from supplier won’t
affect the TMM’s production cycle.

Risks and contingencies

● If the variety of seats could be reduced and if TMC keeps increasing the variety, we
believe it could be manageable in the long-term. If that's the case TMM must focus on
teaching KFS the principles of TPS and help KFS to deal with the increased capacity
demands. Another option might be to get a second seat supplier or assemble the seats
in-house like they do in Japan.

● KFS might not be able to react to the increased demand in which TMM’s he alternatives
are similar, TMM can also pursue a second supplier or increase its additional plant
capacity. Even though risk could be relatively high in the short-run but in the long run,
the additional capacity can be purchased to minimize the risk.

● KFS can reject the adoption of TMM and TPS procedures. Which is highly unlikely
since TMM and KFS are dependent on each other. We assume that Toyota is KFS’s
largest customer. KFS is Toyota’s only local seat supplier so they have a mutual
dependence.
● Actions should also be introduced to revise current procedures in response to the
problems. QC personnel should be placed with KFS to analyze the number of defective
seats going to TMM.
● In addition, an effective IT solution should be implemented to improve the flow of
information and prevent problems and mitigate costs. IT can also be used to reorder seats
that are defective or incorrect. It can also shut down the line if a seat needs to be replaced
is generally not recommended but the employees should be reeducated to follow the TPS
philosophy and maintain high quality and volume.