Supply Chain Management - Final Project

Lean Wastages of Toyota Company

Submitted By: BBA-6C
Hamza Ali (01-111182-029)
Muwadit Ahmed (01-111182-193)
Inzamam ul Haq (01-111182-154)
Muhammad Qasim Iqbal (01-111182-139)
Muhammad Imran (01-111182-189)

Submitted To: Sir Zulfiqar

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Toyota Motor Corporation is the largest automobile manufacturer in the whole world with the
capacity of producing 10 million vehicles per year. They have roughly 360,000 employees
worldwide. They are also the global market leader in sales of hybrid electric vehicles along with
hydrogen fuel-cell vehicles. The competitive advantages they possess are in their handling of
lean wastages.

Entrepreneurs and managers should not think of lean as a trend or fad. It is a solid initiative for
boosting your whole company. Toyota adopts lean as simply one integral part of its business
philosophy. The Toyota Production System (TPS) which was developed by Toyota Motor
Corporation in the 1970s is Toyota’s unique production approach and it has become the
worldwide application of the production system in many companies.
 LEAN WASTAGES

Overproduction:

In simple words, overproduction refers to producing an item before it is actually needed or more
than it is needed. This means producing excessive units, these units may or may not have been
demanded by the consumers. This can become extremely costly for a company because it
prohibits the smooth flow of materials and actually hinders production levels and quality.
Overproduction can create significant lead times, resulting in significant storage costs.

Overproduction is the root cause of why Toyota has to bear a lot of other types of lean wastages.
Because of overproduction, Toyota has to keep extra or unnecessary inventory which can result
in additional warehouses and other charges. Overproduction can also lead to other costs like
excessive capital tied up, wasted materials, and storage costs. As the unnecessary raw material is
consumed, the environment is also getting affected by it. Extra emissions of waste disposal,
toxins from coolants, and other car parts are contaminating the environment.

Unnecessary Inventory:

Having an excess inventory can create problems and it can increase lead times, it can consume
productive floor space, delay problem identification in the company, and hinder communication.
Holding Costs would also increase which could reduce profits.

As mentioned earlier, Toyota’s over-manufacturing can lead to more lean wastages and one of
these lean wastages is having unnecessary inventory. It is pretty simple here. Over-production
requires more and more inventory. As the production is more than it is needed, it leads to excess
inventory. This excess inventory proves a great burden on the company's financial statement as it
has to bear extra storage and other types of expenses.

Waiting:

Whenever goods are not moving or being processed, the waste of waiting occurs. Much of a
product’s lead time is tied up in waiting for the next operation; this is usually because the
material flow is poor, production runs are too long and distances between work centers are too
great. Wastes from waiting were quite common initially in the assembly lines of Toyota.
Most recently, a widening global shortage of semiconductors for auto parts had forced Toyota to
halt or slow down vehicle production as they were recovering from pandemic-related factory
shutdowns. If not dealt with accordingly, this could have cost Toyota a whopping loss of $110
Billion.

Furthermore, the Coronavirus Pandemic is a major factor causing waste of waiting. Factories
including those of Toyota have had to adhere to the Standard Operating Procedures which
restricts the full amount of workforce to be present in the factory. Shortage of workers dealt a
significant blow to Toyota and other automobile giants. Unnecessary delays were caused in the
assembly line.

Transportation:

Transportation is the backbone of a manufacturing company. If transportation is not done

effectively and efficiently, the value of production increases by a big amount. Transport refers to
moving materials from one position to a different one. whether it is transportation of final
product to the end consumer or transportation of raw material or part to the factory. The transport
itself adds no value to the merchandise, so minimizing these costs is important. This implies
having one plant closer to a difference within the production chain or minimizing the prices of
transportation using more efficient methods. Unnecessary transport ends up in added cost. like
out-of-route stops, excessive backhaul, and locating fast-moving inventory to the rear of the
warehouse causing unnecessary material handling distances to be incurred.

Service parts for nine large Toyota dealers within the Denver area were shipped from Kansas
City—600 miles away. Within the days of weekly stock order replenishment, five dealers got
their parts on Wednesday and 4 on Thursday (two shipments per week). Usually, one semi-trailer
for every day was sufficient, but occasionally (such as after a month-end sales push) an
additional truck (dispatched partially empty, of course) had to be called to ensure the overflow.

Defects:

Much has been written about the value of defects, the reason being that the value is not always
what we perceive to be. The price of rejection and rework is commonly compared to an iceberg;
only a little fraction of truth cost is visible above the water level.
In addition to the apparent costs of the first scrap, we've variety of other costs that are not always
obvious or accounted for but are often well above these original costs. There are costs related to
problem-solving, materials, rework, material relocation, setup, transportation, paperwork,
extended lead times, delivery errors, and potentially lost customers taking their customers
elsewhere.

The effect becomes detrimental to productivity since resources need to be used again. billing
errors, inventory discrepancies and adjustments, and damaged/defective/wrong/mislabeled
products are few samples of defects. Toyota’s significant errors had been caused in assembling
of service parts, packaging operations, and mislabeled cartons.

Motion:

Motion in lean wastages refers to the unnecessary movement of individuals, like walking,
reaching, and stretching. Examples include extra travel or reaching because of poor storage
arrangement or poor ergonomic design of packaging work areas. Storage arrangements in
warehouses can have a surprisingly large impact on labor productivity and the use of space /
equipment.

The waste motion within the process results in a variety of problems, either immediately obvious
or hidden beneath the surface, waiting to bite you within the future. The primary and most
blatant could be a decrease in work efficiency. If workers spend time lifting, retrieving and
searching rather than actually assembling them, work efficiency is going to be very low.

Toyota’s U.S. service parts warehouse network and internal control system were originally
founded within the 1960s through the mid-1980s by managers hired from U.S. automakers and
run in an exceedingly traditional fashion. Rapid sales growth puts an excellent strain on
warehouse facilities and folks, potentially adding greatly to costs. Most of the regional depots
were running out of space, and labor productivity was almost like the industry average.
 CATEGORIZING LEAN WASTAGES:

Category 1

It includes over production and unnecessary inventory. Because they both are interrelated as over
production is producing excessive units, which may or may not have been demanded by the
consumers. This can become extremely costly for a company because it prohibits the smooth
flow of materials and actually hinders production levels and quality. , Toyota’s over
manufacturing can lead to more lean wastages and one of these lean wastages is having
unnecessary inventory. It is pretty simple here. Over-production requires more and more
inventory. As the production is more than it is needed, it leads to excess inventory. This excess
inventory proves a great burden on the company's financial statement as it has to bear extra
storage and other types of expenses.

Category 2

It includes Waiting, transportation and Motion. Whenever goods are not moving or being
processed, the waste of waiting occurs. Much of a product’s lead time is tied up in waiting for
the next operation; this is usually because the material flow is poor, production runs are too long
and distances between work centers are too great. Wastes from waiting were quite common
initially in the assembly lines of Toyota. Whereas transport refers to moving materials from one
position to a different one. Whether it is transportation of final product to the end consumer or
transportation of raw material or part to the factory. And motion in lean wastages refers to the
unnecessary movement of individuals, like walking, reaching, and stretching. Examples include
extra travel or reaching because of poor storage arrangement or poor ergonomic design of
packaging work areas. Storage arrangement in warehouses can have a surprisingly significant
impact on labor productivity and space/equipment utilization. The waste motion within the
process results in a variety of problems, either immediately obvious or hidden beneath the
surface, waiting to bite you within the future. The primary and most blatant could be a decrease
in work efficiency.

Category 3
This category includes lean wastages of defects. Much has been written about the value of
defects, the reason being that the value is not always what we perceive to be. The price of
rejection and rework is commonly compared to an iceberg; only a little fraction of truth cost is
visible above the water level. In addition to the apparent costs of the first scrap, we've variety of
other costs that are not always obvious or accounted for but are often well above these original
costs. There are costs related to problem-solving, materials, rework, material relocation, setup,
transportation, paperwork, extended lead times, delivery errors, and potentially lost customers
taking their customers elsewhere.

PRIORTIZING LEAN WASTAGES

Let us prioritize the lean wastages in Toyota Company:

Category 1:

Over production and Unnecessary Inventory

Overproduction and unnecessary inventory are the root cause of why Toyota has to bear a lot of
other types of lean wastages. Because of overproduction, Toyota has to keep extra or
unnecessary inventory which can result in additional warehouses and other charges.
Overproduction can also lead to other costs like excessive capital tied up, wasted materials, and
storage costs. As the unnecessary raw material is consumed, the environment is also getting
affected by it. Extra emissions of waste disposal, toxins from coolants, and other car parts are
contaminating the environment.

Category 2:

Waiting, transportation and Motion

After defects, Toyota Company is affected by Waiting, transportation and Motion lean wastages.
Because recently the Coronavirus Pandemic is a major factor causing waste of waiting. Factories
including those of Toyota have had to adhere to the Standard Operating Procedures which
restricts the full amount of workforce to be present in the factory. Shortage of workers dealt a
significant blow to Toyota and other automobile giants. Unnecessary delays were caused in the
assembly line. The transport itself adds no value to the merchandise, so minimizing these costs is
important. This implies having one plant closer to a difference within the production chain or
minimizing the prices of transportation using more efficient methods. Unnecessary transport
ends up in added cost. Like out-of-route stops, excessive backhaul, and locating fast-moving
inventory to the rear of the warehouse causing unnecessary material handling distances to be
incurred. Service parts for nine large Toyota dealers within the Denver area were shipped from
Kansas City—600 miles away. Within the days of weekly stock order replenishment, five dealers
got their parts on Wednesday and 4 on Thursday (two shipments per week). Also, Toyota’s U.S.
service parts warehouse network and internal control system were originally founded within the
1960s through the mid-1980s by managers hired from U.S. automakers and run in an
exceedingly traditional fashion. Rapid sales growth put an excellent strain on warehouse
facilities and folks, potentially adding greatly to costs. Most of the regional depots were running
out of space, and labor productivity was almost like the industry average.

Category 3:
Defects
After over production and unnecessary inventory, defects are the lean waste which effects the
company. The effect becomes detrimental to productivity since resources need to be used again.
Billing errors, inventory discrepancies and adjustments, damaged/defective/wrong/mislabeled
products are few samples of defects. Toyota’s significant errors had been caused in assembling
of service parts, packaging operations, and mislabeled cartons.

SOLUTION TO THE LEAN WASTAGES

Over Production:

One of the best and proven ways to reduce overproduction is to make things quickly as the
customer wants. Though it is not possible for an auto manufacturing company like Toyota to
make things on the order because car manufacturing requires a lot of processes. Still, the
company can adopt the system of JIT to reduce this lean wastage. The company is already,
somehow, using the Just-In-Time inventory system.
Toyota Production System launched a system in order to counter this wastage problem. Toyota’s
production revolves around the “Just in Time” inventory system! How this system works is
pretty much simple. When a vehicle order is received, production instructions would be issued to
the beginning of the vehicle production line as soon as possible. The assembly line would be
equipped with the right number of resources needed. This means they would only manufacture
cars when they actually receive orders. This model ensures less wastage of resources, no
overproduction at all!

Unnecessary Inventory:

To counter this issue, Toyota launched the ‘Kanban’ technique. Kanban was originally
developed at Toyota in the1950’s as a way to manage material flow on the assembly line. Over
the last three decades, the Kanban process—a highly efficient and effective factory production
system—has become a widely used tool in the manufacturing environment and global
competition. Kanban stands for Kan- card, Ban- signal.

The essence of the Kanban concept is that a supplier, the warehouse, or the manufacturer should
deliver components only when they are needed so that there is no excess inventory. Within this
system, workstations located along production lines only produce or deliver desired components
when they receive a card and an empty container, which indicates that more parts are needed in
production. Toyota does not hold any sort of unnecessary inventory.

Waiting:

However, to counter this Toyota had conducted an extensive risk identification and prioritization
exercise to seek out all of the risks by the impact they could possibly have. Backup
manufacturing, alternative logistics providers, or even relocating production sites across different
countries (Those with less severity in terms of COVID-19) had been considered.

Transportation:

To eliminate the transportation waste, we believe that a group of techniques should be used. The
general layout of the transportation should be changed and use an efficient system that helps the
company to come to a decision when the carrier should be leaving and how much load it should
carry. This technique will help in reducing the price of transportation and additional dispatch of
logistic vehicles will not be required.

To counter the difficulty that Toyota was facing, it launched a “systems thinking” approach to
JIT logistics dramatically reduced demand fluctuation, allowing Toyota to vow its carrier 40% of
a truckload from Kansas City to Denver on a daily basis. The JIT approach is that Toyota
receives only the parts required for the assembly of cars and reduces the inventory of vehicle
parts.

Defects:

Defects are something that we wish to prevent from occurring when it involves lean
manufacturing. The prevention of those defects can be achieved by different ways, few of them
are automation and also the following of standardized procedures. implementation of standard
operating procedures is one in all the simplest and price effective steps to stop defects.

To counter the problem that Toyota was facing, Toyota had launched a really inexpensive and
effective countermeasure. If, as an example, a packer had 10 cartons of an element number to
pack, he/she was given 12 labels. The primary label was stuck on a form with a row of circles
below the label for every digit within the part number. The packer would write the part number
from the parts to be packed within the circles and compare it with the part number on the label.
After packing the ten cartons, the packer repeated the method with the 12th label and therefore
the last part. By using this method, the issue of labeling errors dropped dramatically.

Motion:

Motion needs to be minimized as much as possible in order to reduce the overburden and
increase the efficiency. To stop motion waste at the workplace, we would like to implement the
5S challenges. the use of SMED single minute exchange of die can even help reduce motion
wastages,

In order to tackle the lean waste of motion, during a 13-year period when sales grew 126% and
stocked part numbers grew 72%, only 14% was added to warehouse space, greatly reducing
capital investment. This denser storage and intelligent location of parts, combined with efficient
small instruction execution, enabled Toyota to attain a 50% labor productivity advantage over
competitors.

RCA DIAGRAM

Machinery Material Methods

-Poor machine repairs - lack of resources - lack of process design

- Idle equipment - inventory defects - lack of process control

Lean Wastes

- human error - poor working conditions

- lack of process map - lack of training - poor layout

Measurement Manpower Environment