Group Assignment (10%): Planning Production for Toyota North America

Lexus RX 350, Successor in 2007 to the RX 330

Photo courtesy of Toyota Motor Company

Assignment Tasks

The overall purpose of this assignment is to use teamwork to assess the value of the Toyota Production System to Toyota Motor Corporation ( ( https://global.toyota/en/ )

The assessment time period begins with Toyota’s decision to produce the Lexus RX 330 in Canada in 2000 and continues to the present day with the LEXUS RX 350 and 350L.

First study the  Content  topic,  Important Information on the Toyota Production System. See also the  Content references on  Grid Analysis  and  Decision Trees.

Then address the following four exercises:

Exercise 1: Making a Critical Assessment of the Toyota Production System (TPS) Today

a. Demonstrate your group’s basic understanding of the TPS by 1) defining  any eight of the TPS terms found at http://www.toyotageorgetown.com/terms.asp, and 2) applying them to one or more of your group members’ own companies.

For example , the TPS term Pokayoke  can be defined as an approach to create mistake proofing through use of devices that detect or prevent production errors. At a software development firm, pokayoke might be applied through a modular development process that includes extensive software module testing before proceeding to module integration and then total system testing.

b. Describe the TPS today. What are its purposes? Does it contribute significantly to Toyota’s profitability? Has it been copied by other motor vehicle manufacturers?  Why or why not?

Exercise 2: Use of a Grid Analysis (Weighted Scoring Model) to Help Make the North American Plant Location Decision for the RX 330

This exercise illustrates how when deciding among two or more competing plant location options, various decision factors (which can typically be characterized as exogenous – in a company’s external environment – or endogenous – internal to the company) can be qualitatively identified, and how these factors can then be weighted to obtain an overall score for each competing location option.

a. List the factors your group considers key to the Toyota Motor Manufacturing Canada  (TMMC): The Lexus RX 330 Line ( http://polaris.umuc.edu/~jstewart/Amba604/TMMCCase_Final.pdf ) North American plant location decision, identifying these factors as either exogenous (external)  or endogenous (internal), weighting them using your team’s best judgment (stating any relevant assumptions or constraints), and assigning two scores to each factor: one for production of the Lexus RX 330 at TMMC, and one for production at a Toyota factory in the USA.

b. Using the scores from your team’s weighted scoring model and working with regard to Toyota’s management approaches of Ringo Sho and Nemawashi, make and support your recommendation for the RX 330 North American plant location – at TMMC or a factory in the USA.

Exercise 3: Determine the Initial RX 330 Production Capacity for Toyota Motor Manufacturing of Canada (TMMC) 

This exercise illustrates how using a decision tree, determination of the best production capacity option can be supported from among several possible capacity options based on the provided probable market demand and expected costs/payoffs of events that influence the options.

It is spring 2000, and TMMC has indeed just been chosen to produce the new Lexus RX 330 line, with the first cars deliverable in 2003. Toyota must now determine the amount of annual production capacity it should build at TMMC.

· Toyota’s goal is to maximize the profit from the RX 330 line over the five years from 2003-2007. These vehicles will sell for an average of $37,000 and incur a mean unit production cost of $28,000 (here, $ = the Canadian dollar).

· 10,000 units of annual production capacity can be built for $50M (M=million) with additional blocks of 5,000 units of annual capacity each costing $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain, even if the capacity is unused.

· Assume that the number of units actually sold each year will be the lesser of the demand and the production capacity.

· Toyota Marketing has provided three vehicle initial estimated demand scenarios with associated probabilities as follows:

 Initial

a. To maximize profit earned during this period, which production capacity should TMMC in 2000 decide to build – 10,000, 15,000, 20,000, 25,000, or 30,000 cars?  Please justify your choice. 

The group may use the following decision tree, developed by Toyota operations analysts in Toyota City, Japan:

b. What are the weaknesses or limitations in this analysis? How might they be eliminated or at least reduced?

c. It is now 2020. Please do online research to learn how well the current Canadian-built RX 350 & 350L ( https://www.tmmc.ca/en/plants/south-plant-cambridge ) have done in the North American market.  Is their quality today rated as high as if they were made in Japan?

Exercise 4: Assessment of Toyota’s Current Regional Production Strategy 

North America

Source: www.worldatlas.com/<wbr><wbr>webimage/countrys/na.htm ,

a. After doing necessary online research, document and evaluate the distribution of Toyota production facilities in North America.   Here be sure to include Canada and Mexico, as well as the USA. You can start by updating the 2017 production data found here https://pressroom.toyota.com/toyota-production-north-america-nearly-two-million-in-2017/

b. Has Toyota been wise with this distribution of North American production? Would you improve it – if so, how? Please explain your answer, remembering that there are three major motor vehicle country markets within North America – Canada, Mexico, and the USA.

END

A Difference between Toyota Production System and Six Sigma

Both the Toyota Production System (TPS) and Six Sigma (6Σ or 6S) are considered to be important approaches to providing industrial product quality in a timely manner.

However, a cardinal difference between the two is that  6σ is administered by a coterie of “belted” experts  in an organization, while  Toyota expects every employee to be imbued with the spirit of the TPS  – hence, for one example, the presence in the TPS of jidoka, which has several meanings but includes the ability of any employee to stop the production line when a quality problem is seen or suspected.

Ontario Is Proud of its Toyota Plants

See the Ontario provincial government’s ad here at http://polaris.umuc.edu/~jstewart/Amba604/Week%205%20Lexus%20in%20Ontario%20ad.pdf .

See the planning details in Canada here: http://www.just-auto.com/analysis/toyota-canada-prepares-for-lexus-manufacturing_id87073.aspx This pride in local production is typical. US States also compete for automobile and other factories, which bring jobs and inbound technology transfer, plus tax revenues.

Recent examples include the Mercedes-Benz factory now in Alabama, the BMW factory in South Carolina, and the Toyota factories in Texas, Indiana, Kentucky, and Mississippi.

Since 2012, there has been a second Toyota factory in Ontario, and in 2016 Toyota built a factory in Guanajuato, Mexico.

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