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Background

Efficiency is a strong competition tool in businesses; it reduces the cost of production and leads to a more satisfy customers. On the other hand, satisfied customers are an increased business to an organization. When pondering of a system that can point out areas of inefficiency, Motorola, company in 1981 innovated a system called Six-Sigma. Six-sigma is a management tool that approaches management from a scientific angle.

It analyses an entire organizations processes and by creating relationships and data analysis, the area with a deficit is recognized. Six-sigma is implemented in business to improve the efficiency and increase the productivity of the entire organization; when the system is implemented, it focuses on all areas in an organization to have a totality of good results in the organization.

Though when implemented is a project that undertakes a number of procedures, it is a continuous process that requires constant improvements and upgrading (Tennant, 2001)

The motor vehicle industry is a competitive sector that is not only affected by the player in the industry but also by other external forces in the market. It is one of the industries affected largely by external environment like international trade, global environments and economies and the relationship among countries.

Toyota is the world greatest motor vehicle producer and seller; the success of the company has been attributed to an effective processes management. According to the company’s corporate website, its success can be attributed to internal process efficiency and improved products.

The process adopted by the company to improve its processes and produces in TQM (Total Quality Management) system. However, the company can improve its operation further and improve its products quality if it adopts a Six-sigma strategy in its operations (Hino, 2006). This paper is a case study of how Toyota Motor Corporation can implement a Six-sigma policy in its processes.

Brief History of Toyota Motor Corporation

Toyota is a multinational company found in Japan and it is the leading automobile carmakers and seller in the world; other than automobile business, the company offers financial services. It was incorporated in 1937; its founder is Kiichiro Toyoda. Currently, the company’s chairperson of board of directors is Fujio Cho and the Chief Executive Officer is Akio Toyoda, it has its global headquarters at Toyota, Aichi, Japan.

According to 2009, financial report, the company had employed 71116 directly and other people who indirectly benefit from the company were 259792 in the same year, distributed in 540 consolidated subsidiaries and 226 affiliates. The main market for the company is in North America followed by the home market: its competitors include Mitsubishi, Honda, General Motors and Ford.

According to fortune global survey 500 of 2008, it was the fifth largest company in the world and the second largest automobile company. The company is structured in a no extra ordinary way and has departments like any other multinationals in the world; however, the achievement of the company has made it different in performance something that proves that something extra happens.

In 2008, it was able to surpass General motor company as the world largest automobile seller in the world. What has made the company go this far?

The answer is in the quality of its management and the interaction that brand as well the loyalty that it derives from its customers (see the appendixes for the company’s sales by region). To maintain the leadership role, the company needs to adopt a six-sigma mechanism of controlling different sectors (Toyota Motor Company corporate website, 2011).

The operating strategy of Toyota

The company has a framework that works alongside. Operates under five principals, they are Kaizen (continuo’s improvement), team work, Challenges, Respect and Genchi Genbutsu (go and see).

Toyota is divided into small teams with team leaders and given certain task that they are supposed to perform and improve accordingly. Innovation is seen as a necessity in the firm both the Japan head quarters and the rest of the subsidiaries.

The effectiveness has been seen when the employees has innovated different products that supposed to abide to the general principals of the company. The combinations have lived to the task of continuously improving its processes to a point that it was able to surpass general motors. This is in line with the company’s principal of Kaizen.

In the components statements it has an express statement that is adhered to that is “adding value to the organization by developing its people” as people are being developed and empowered, they are enthusiastic and come up with the innovations. The company employs people various level of competitiveness.

On the other hand, they have their own training school called Toyota Technological Institute at Chicago that among other duties is used as the breeding ground of the employees. It has a policy that enables graduates of different diversities relevant to the particular task to join the company and grow in the company.

They also recruit from all over the world. This efficiency is what has made the company such a success, especially in the areas of innovation. In the institution, it offers scholarships to people with potential especially in the motor and designing of motor vehicle this are deliberate measures that are aimed at continuously improving it processes.

The technology adopted by the company can be seen from two angles. One in the marketing strategies and two in the continuous improvement of its processes when the company was set up in 1937, it is obvious that the technological advancement has been attained in the entire world. There is a research department that has the aim of undertaking the policy of Genchi Genbutsu (go and see).

The company’s first car was a high fuel consuming passenger car called A1 and G1. The vehicles were manually modeled. Today the numerous models in the market are because of computer-aided modeling. All along, we are hearing of Toyota X new model. This shows how they are continually improved their products to remain competitive in the world (Toyota Motor Company corporate website, 2011).

Major challenges facing the company that can be improved using Six-sigma system

The world is recovering from global financial crisis which started in 2007, the company was affected by the crisis and recorded a loss of US$4.2 billion; although the crisis were beyond what the company could control, then if the company had an effective six-sigma policy, then it would have reduced the loss suffered.

The next area that the company is facing inefficiency is in faulty automobiles finding their way into the market; between the last quarter of 2009 and first quarter of 2010, the company recalled some faulty cars from different markets to the tune of 8million cars and trucks.

Due to the recall the United States Congress committees on Oversight and Investigations, seek for explanation on the recall of the country from James Lentz the US Sales Chief; it ended by the company being fined US$16.375 million for the faulty products. In the year ended 31 March 2010, the company recorded that it had suffered a total loss of US$1.93 billion (¥180 billion).

This loss could have been avoided if the company had an effective Six-sigma policy (Toyota Motor Company corporate website, 2011).

Of late, the automobile industry has been affected by changes in environmental policies that are focusing and targeting the industry to ensure that its processes as well as products are environmentally friendly. The company has to company with international standards of pollution emissions; to keep the trend, the company need to increase efficiency in its operations.

To remain competitive in the industry, companies in the industry need to improve their internal processes and products.

When developing internal process and products improvements, focus is given to all sectors of the company. The industry can have its sectors being divided into administrative and the core line of business, both the sectors should be focused in to have a total improvement of processes and projects (Pyzdek and Paul, 2009).

Implementation of Six-Sigma in Toyota

Generally, there are six stages of six-sigma that Toyota should implement for the start of the project; then the processes are improved with time and as new policies and dimensions are implemented. The word DMAIC (the acronym for Define, Measure, Analyze, Improve and Control), is used to define the processes that are involved in an effective six sigma operation.

Define

The automobile industry is facing numerous challenges; Toyota having assumed the leadership in the industry does not guarantee that it will retain the position for the rest of its life. The managers should define the current position and so as it can understands business conflicts and business problems the company is undergoing through or the company is likely to undergo through in the future.

Understanding a problem encountered in an organization is the first step in developing a solution and develop methodology or combination of methodologies, to solve the business problem at hand. When defining a problem, the managers should use the symptoms or indicators of inefficiency to get to the root course: Six sigma projects should target the root causes and not the symptoms (Snee and Hoerl, 2002).

To diagnose a problem, two questions that should be used as the start point, they are:

  1. What exactly is the current problem facing the organization for example the quality of its vehicles or the environmentally friendly vehicles?
  2. Which areas are affected by the problem and how has this problem affected the operation of the entire organization; is the problem leading to losses?

With the full understanding of the problem, then the company adopts a project plan or a team charter; there are different methods of adopting the project plan or a team charter, they include CTQ, (Customer to Quality) among others, the best method will be defined by the problem at hard.

The plan adopted should be used to improve all sectors in the organization for examples, marketing, sales and finance (Pande, Neuman and Cavanagh, 2001).

Measure

At this stage, the Toyota management should find and gather as much information as possibly available to develop different solutions and alternatives (O’Connor, 1989). Generally there are three processes involved in the measure stage, they are:

Value Stream Mapping: this involves having a clear analysis of the problem and the project at hand: at the stage the company should aim at analysis the difference between what is expected (the firms goals and objectives) and what the company is really giving.

It seeks to establish the missing points, waste areas, areas of inefficiencies, and constraints to achievement of the corporate goals. Toyota should have an understanding of the quality of its processes and the products so as it can realize the differences between them.

Data Gathering: With the gaps and areas, that needs improvement at hand, and then the management should seek to develop alternatives of solutions so it can choose the best out of the list available. To gather information, the management should adopt five Ws strategy (when, what, who, where and why). Information should be vetted for relevance and applicability in certain areas (Münsterberg, 1973).

Data measurement validation: with the data at hand, then the management should adopt data management, interpolation and analysis methodologies: some of the tools used are Gauge R&R), control charts, time plots or Pareto charts. The main concern of this stage that the company should have is to understand “where it is” and where it “should be”, then the difference between the two is the area of focus in the six sigma policy.

Analyze

At this stage, the management has reliable information about the problem or areas of potential problem the information should be analyzed to get the root cause of the problems. Cause and Effect Analysis, FMAE (Failure modes and effects), Correlation and regression studies and DOE (design of experiments).

This stage marked the project more focused on particular key areas. The areas of concerns have been recognized and the alternatives that the company has known; the best alternative will be the one that will yield expected results in the least time using minimum resources (Keller, 2001).

Implement

Now the management/implementation team understands the problem at hand, has a well-defined picture of what is going on in an organization, understand departments with inefficiencies and the financial implications of the gaps (Wheelen and Hunger, 1998). The next step is to devise a number of possible solutions to be implemented. Here staffs should be fully included.

Alternatives are derived and the best alternative among the many is considered. After the alternative has been chosen, then there is support from all corners, these will involve management offering direct support to departments in attaining their new set goals.

Many are the times that need for frequent meeting at departmental level or the entire company is important to discuss any issue that night has cropped up during the implementation.

Periods are important in this stage to ensure that the new goals set attainability is possible. There are times that a short time evaluation for example weekly recording can be made to measure progress of the project. At this level, there is use of Force field diagram, Stakeholder Definition, and FAME to explain progress (Taylor, 2008).

Control

After implementation of the policy: Toyota Management at different regional offices should develop a control and monitoring team. When controlling there is an already set path, through which processes should follow. They should start from somewhere heading to another area.

When under control, there is need to have a well-defined personnel’s who have been recognized to have a certain efficiency level in an area, they should be empowered to conduct their duties. If there was a department that was scrapped, then any effects as a result should be understood and addressed effectively.

When controlling and monitoring, managers should establish areas that need improvement should be pointed out, and appropriate actions taken accordingly (Adams, Gupta and Charles, 2003).

The implications of a Six-sigma strategy in Toyota

After the implementation of the strategy, the company will recognize areas of deficiency and inefficiency, and device appropriate measures to improve their operations. When using the Six-sigma strategy, then routes of efficiency will be developed which lay-down steps that must be followed.

The steps are regarded as the path of efficiency; when the company is following these routes, it will benefit from low operating costs and improved products quality.

Six-sigma policy consists of competitive moves and business approaches aimed at producing successful performance; it is management’s “game plan” for running the business, strengthening a firm’s competitive position, satisfying the customers, the stakeholders, share holders and the staffs. It seeks to develop the way into which all those that are a party to the business get satisfied.

It aims at going a step further and satisfying the customers beyond their expectations. When the system is fully operation in Toyota, the company is likely to face the world automobile market more rejuvenated and have products that are more competitive.

References

Adams, W., Gupta, P. and Charles, E. ,2003. Six Sigma Deployment. Burlington, MA: Butterworth-Heinemann.

Hino, S.,2006. Inside the mind of Toyota: management principles for enduring growth. Tokyo: Productivity Press.

Keller, A. ,2001. Six Sigma Deployment: A Guide for Implementing Six Sigma in Your Organization. Tucson, AZ: Quality Publishing.

Münsterberg, H.,1973. Psychology and Industrial Efficiency. New York: Arno Press.

O’Connor, P.,1989. Total Quality Management (Book). Quality & Reliability Engineering International. April 1989; 5(2),p.183.

Pande, S., Neuman, P. and Cavanagh, R. ,2001. The Six Sigma Way: How GE, Motorola, and Other Top Companies are Honing Their Performance. New York, NY: McGraw-Hill Professional.

Pyzdek, T. and Paul A. ,2009. The Six Sigma Handbook, Third Edition. New York, NY: McGraw-Hill.

Snee, D. and Hoerl, W.,2002. Leading Six Sigma: A Step-by-Step Guide Based on Experience with GE and Other Six Sigma Companies. Upper Saddle River, NJ: FT Press.

Taylor, G.,2008. Lean Six Sigma Service Excellence: A Guide to Green Belt Certification and Bottom Line Improvement. New York, NY: J. Ross Publishing.

Tennant, G.,2001. SIX SIGMA: SPC and TQM in Manufacturing and Services. Aldershot, UK: Gower Publishing, Ltd.

Toyota Motor Company corporate website. (2010). Toyota. Available at https://www.toyota.com/ [acccessed 20th March 2010]

Wheelen, L. and Hunger, J.,1998. Strategic Management and Business Policy: Entering 21st Century Global Society. Massachusetts: Addison Wesley.

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