ISCOM 383 Week 2 Team Assignment Toyota Value Chain Model Paper
ISCOM 383 Week 2 Team Assignment Toyota Value Chain Model Paper
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Week 2 Team Assignment ISCOM383 Global Value Chain Management - Week 2 Team Assignment - Toyota Value Chain Model Paper Identify a nonUS based global organization. Prepare a 1,0501,750word paper describing the components of its value chain. Select a nonNorth American country in which this organization operates. Describe how this organization utilizes its value chain within that country. Answer the following questions: Which value chain model is being used? Why is the value chain model being used? How does this model differ from other supply chain models? (Be sure to obtain faculty approval for these selections prior to Week Two. The selected organization and selected country will be used for the rest of the Learning Team assignments). A minimum of two citations, from different references, in a proper APA format required to receive credit for this assignment. Toyota Value Chain Model ISCOM/383 5/5 PointsToyota Value Chain Model Value Chain Management is the process by which a company creates and develops trade and strategy partners and increases the effectiveness of the company (Sheridan, 1999). Within a value chain, a product is designed and ideas are formulated before start of production. Once this is completed, a supply chain is established and communication is outlined. The entire process requires managers familiar with the industry requirements, not the least of which is the actions by competitors. Toyota was one of the first companies to employ the value chain. In doing so, Toyota has set the standard for other companies worldwide. The purpose of this paper is to examine the components of the value chain and outline how it applies to Toyota in Japan. Generic Value Chain Models Many corporations implement value chain management programs based on concepts outlined in Michael Porter’s popular Value Chain model or those found in Michael Treacy and Fred Wiersema’s Value Disciplines. Porter’s Value Chain focuses on primary activities including logistics, operations, and service. Processes that support primary activities are company infrastructure, human resources management, technology development, and procurement (Institute for Management, n.d.). Treacy and Wiersema suggest that companies benefit from focusing on any of their three value disciplines - operational excellence, product leadership, or customer intimacy (Keynote Resource, 2004). Some corporate decision-makers use these concepts along with organizational strategies to customize the organization’s value chain. Other companies, such as Toyota, develop value chain disciplines based on organizational culture rather than concepts from the generic value chain models. Toyota Production System Eliminating Waste “Waste can manifest as excess inventory in some cases, extraneous processing steps in other cases, and defective products in yet other cases” (Toyota, 2011, para 2). The Toyota Production System (TPS) espouses the philosophy of eliminating all waste. This philosophy began in the late 1800s with Sakichi Toyoda’s development of production efficiencies in his automatic loom business. Today Toyota uses the Just-in-Time principle that was developed by the founder of Toyota Motor Company, Kiichiro Toyoda. Using the Just-in-Time principle, Toyota maintains adequate inventory levels of parts for current production projects instead of warehousing excess parts that could become obsolete with newer innovations in the company’s automotive technology. Managing inventory level means less capital is tied up with less inventory loss on obsolete parts. In addition to managing inventory levels, TPS follows stringent rules that govern production, encourage improvements, and guide relationships with employees, customers, and suppliers (Spear & Bowen, 1999). Such efforts decrease waste and increases production efficiency. TPS and Toyota’s Success “What’s curious is that few manufacturers have managed to imitate Toyota successfully – even though the company has been extraordinarily open about its practices” (Spear & Bowen, 1999, p. 97). Although other manufacturers, including Ford and General Motors, have tried to develop value chain models similar to Toyota’s production system, none have been as successful as Toyota. Research suggests that Toyota’s success comes from the shared vision of corporate leaders and employees of creating the ideal production system based on ideals passed down through decades of family and corporate culture (Spear & Bowen, 1999). Successful Implementation As a vertically integrated company, Toyota prides itself in management of its supply and value chain and successful implementation of best practices. However, one can argue that Toyota was clearly following in the footsteps of Ford Motor Company, by using the production line technology and making it more efficient (Ahrens, 2006). Aforementioned Toyota’s Production System (TPS) focuses on waste elimination, low costs, high flexibility, optimization of all activities, and consumer satisfaction. Important to note about TPS is that it is supported by JIT (just-in- time) and Jidoka (automation with human touch). JIT provides for zero-inventory and just-in-time delivery of vehicle parts. Jidoka enables multi-management of machines and production of less defective parts. Furthermore, Toyota implements TPS in conjunction with the total quality control (TQS). These aspects of value chain management result in effective and productive workforce, and thereby achieve one of Toyota’s crucial goals. The effective workforce is further able to create value across the chain and establish the process that many other companies try to copy (Ahrens, 2006). In aim of creating further consumer value Toyota’s management places high priority on human capital management, fair procurement practices, technology, and internal structure. For example, Toyota is assisting its employees in both personal and professional development by providing educational and career opportunities, fostering relationship with families, and nurtures a business culture focused on technical skills. Additionally, Toyota’s procurement practices advocate fair competition, mutual benefit, and good corporate citizenship (Toyota, 2005). Based on the aforementioned examples, it is proven that Toyota’s implementation of its value chain is not only an internal strategic activity, but also company’s philosophy. Value Chain Model Decision Toyota’s value chain focus on new information technology supports an ever- evolving product line. This new technology creates consumer excitement to remain loyal to the Toyota brand. According to Toyota’s annual report in 2001, “Toyota has long sought to build close, enduring relationships with its customers. This objective lies at the heart of expanding our value chain for by offering an extra suite of services that are intrinsically linked to the automobile; we can support people's lives in a whole host of ways. Such wide-ranging assistance strengthens the bond between Toyota and its customers, and encourages them to stay with us throughout their days” (Toyota, 2001, para 2). The Toyota Company of Japan has estimated the company’s worth at “¥30 trillion, but not many people know that sales of new cars account for only a quarter of this figure” (Toyota, 2001, para 3). The value chain brings together not only the sale of new vehicles but also adds in used car sales, automobile accessories, rental vehicles, maintenance of the vehicles, insurance, and financing of the Toyota cars. Toyota has experienced global success by focusing not on the manufacturing end of the business, but the customer’s wants, needs, and satisfaction. To track the demand of the customer, Toyota remains focused on the information technology and financial aspects of the business. Five initiatives that drive the IT and financial side of the Toyota Company are creating automotive e- commerce websites, “Intelligent Transport Systems (ITS) aimed at commercializing the next generation of highway travel, information terminals designed to add value to automobiles through increasingly sophisticated car navigation systems, the TS3 card that paves the way for our entry into the business of processing and settling consumer purchases and finally, networks that support the above four initiatives” (Toyota Annual Report, 2001, para 5). Differences with Primary Competitor Toyota’s chief competitor is without question the Ford Motor Company. One cannot handily itemize the wildly varying value chain strategies of Toyota versus Ford. The truth is Ford and other parallel peers seek to emulate Toyota’s value chain philosophy. Ford has witnessed firsthand the loss of market share to the company’s head-spinning progress. Toyota is in essence the industry leader and sets the tone for its closest competitors (Wee & Wu, 2009). Toyota has achieved lean supply chain perfection via robust value stream mapping (VSM). VSM is a logistics discipline that assists with the highlighting of value-added activities along the value chain and the discarding of those deemed wasteful. Preoccupation with this one tool has helped Toyota secure the lowest cost production on the smallest volumes, the highest complexity, and most abbreviated lead times in the industry. In a lean logistics context, VSM eliminates redundant, wasteful, or impeding practices. Surplus inventory, defects, untapped employee ingenuity, excess down-time, over-processing, and overproduction are examples of items that VSM combats. Toyota singles out overproduction as its chief nemesis (Wee & Wu, 2009). In contrast to Toyota, Ford, although employing similar VSM techniques, has not prioritized aggressively the avoidance of overproduction. Ford has chosen to fixate on built-in quality exclusive of other VSM findings. In addition, Ford’s focus on shorter-term strategy has resulted in piece-meal value chain improvements with bright spots here and there but not firm-wide or worldwide. Relative to Toyota, Ford’s traditional short-sighted value chain management approach translates into overproduction and extra costs in the form of related warehousing and storage (Wee & Wu, 2009). Conclusion Toyota is a world-class leader of cross-functional value chain management with synergistic policy deployment throughout their organization. Cultural influences have also led to the success of Toyota’s Production System with JIT (just-in-time) and Jidoka (automation with human touch) processes. This strategy raises Toyota’s performance ahead of their competition. With a primary goal on reducing overproduction and waste, Toyota took industry best practices, adapted them with improvements, to the Japanese corporate business model, and successful decreased waste. An effective production workforce environment, with a high priority on human capital management, fair procurement practices, technology, and internal structure remains strong today. Competitors try to use the same model but have not achieved the same success. Ford’s “just-in-time” approach is spotty in its focus on overproduction and trends more toward quality control process improvements. Cultural differences are also viewed as a primary contributor to Toyota’s success. Japanese business culture emphasizes relationships with loyalty, group harmony, and team spirit, as key components of a person’s character (Grove & Hallowell, 1994). Using the 14 principles of the Toyota Way as a workplace modality, Toyota has developed a successful cross- functional value chain management system that remains an industry standard to emulate today (Kotelnikov, n.d.). References: Grove, C., & Hallowell, W. (1994). Deciding Whom to Hire, Promote, and Trust. Grovewell, LLC. Retrieved on March 13, 2011 from http://www.grovewell.com/pub-cultural-influence.html Institute for Management. (n.d.). Porter's Value Chain. Retrieved from http://www.ifm.eng.cam.ac.uk/dstools/paradigm/valuch.html Kotelnikov, V. (n.d.) Cross Functional Management, CFM. Retrieved on March 13, 2011 from http://www.1000ventures.com/business_guide/mgmt_cross-functional.html Keynote Resource. (2004). The Discipline of Market Leaders: Choose Your Customers Narrow Your Focus. Retrieved from http://www.keynoteresource.com/article2Mtreacy.html Spear, S., & Bowen, H. K. (1999, September-October). Decoding the DNA of the Toyota Production System. Harvard Business Review, 99509 (Reprint), 95- 106. Toyota. (2011). The origin of the Toyota Production System. Retrieved from http://www.toyota- global.com/company/vision_philosophy/toyota_production_system/origin_o f_the_toyota_production_system.html Toyota (2005). Environmental and Social Report – 2005. Retrieved March 12, 2011 from http://www.toyota- global.com/sustainability/sustainability_report/pdf_file_download/05/pdf/re port2005.pdf Wee, H.M., & Wu, S. (2009, January). Lean supply chain and its effect on product cost and quality: A case study on Ford Motor Company. Supply Chain Management: An International Journal, 14(5), 335 - 341.
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