The issues were linked to different things; Sticky gas pedals, more floor mat problems, software glitches, and electrical problems. But one fact remained, the percentage of unintentional accelerations by Toyota brand cars increased yearly. By December 31 SST 2009, “Toyota accounted for 33 percent of all unintended acceleration complaints filed with NATHAN. ” (Bailey & Kim, 2010). By 2012, Toyota lost almost 3 billion dollars in Government and lawsuit fees and suffered a sales decrease from 2009-2011. The company’s image and standard of quality was tainted. On August 8th, 2009, Chris Lasted frantically dialed 91 1 “We’re in a Lexus… D we’re going north on 125 and our accelerator is stuck… We’re in trouble… There’s no brakes… We’re approaching the intersection… Hold on… Hold on and pray… Pray. ” (Freak and Lea, 2010). These were the last words heard before the family of four were sent to an early grave. This was also the beginning of what would become Toyota Motor Corporation’s biggest recall to date. Toyota was and is known for it’s quality above other automobile manufacturers. The main ingredient in Toast’s Production System (T AS) is Total Productive Maintenance (TAMP). The goal of TAMP is to eliminate product defects and other problems before they occur.
With this type of structure, how did a company known for its’ excellence in quality, suffer one of the worse recall crises in recent history? There’s some facts and many theories. Let’s first kick at some Of the processes in place at the time Of Toast’s acceleration crisis. 1 Quality Control and Risk Management: Quality has always been one of the pillars to Toast’s foundation. One of the basic principles of risk management is to identify risks and eliminate them before they occur. Risk management also involves the elimination of risks in their early stages. It’s safe to say this is pretty high up on the importance list for Toyota. Alive all of the processes ultimately affect the consumer. However directly, this process affects employees as well as management. Keeping up your quality, increases profitability and productivity. Not keeping up with quality can cause the company billions; As Toyota found out. Solving a quality control issue should be handled as swiftly and thoroughly as possible because if you could stop a crisis before it happened, why wouldn’t you? 2. ) Standardization (Standardized Work Sheets): Toyota utilizes standardized worksheets to convey information (to factory workers and other employees) about the processes and steps to completing a ask.
Under the T AS, the worksheets make it possible for employees to be self-sufficient in three days. The purpose is to maximize efficiency while minimizing waste by focusing on task time, the step-by-step work sequence, and the amount of parts that should be used at that time. This process directly affects the employees as well as the company as a whole. When each employee knows what each task entails, the process runs a lot smoother. The cost of employees having no knowledge of their tasks can be very detrimental to profits as the cost to fix an error can cancel out profit.
A chain is only as strong as its weakest link. The worksheets are created through data collection and observation so the time it takes to change this process, if needed, will depend on what the task is and what type of data is being collected. 3. ) Management and Ownership (Communication): According to the owner of Expressway Toyota in Boston, when the crisis first began and several weeks later, communication between dealerships and executives was scarce. ‘ ‘The communication from Toyota to its dealerships was nonexistent in the sense that we were learning things as we read about them in the press. (Brooks, 2010). To fully understand how this disconnect an occur, you have to look at the organizational structure of Toyota. Such as most family owned big corporations, Toyota has a hierarchy of power. Toast’s board of directors is composed of 29 Japanese men, all of whom are Toyota insiders. As a result of its centralized power structure, authority is not generally delegated within the company; all U. S. Executives are assigned a Japanese boss to mentor them, and no Toyota executive in the United States is authorized to issue a recall. ” (Toyota Struggles With Organizational Structure, n. D. ).
This makes communication one-sided as information flows p and decisions are made with no information coming back down. Often times people are reluctant to send the bad news up for fear of the consequences or the lack of response. As you can see, non-communication affects the people on the bottom of the hierarchy directly and then ultimately the higher level management. Toyota saw first hand that not responding to the people who had the most contact with consumers (The dealers) quickly can cost you billions in the long run. This may be a cultural issue so changing this process may take longer than it should.
After a plan is drawn up, it should be implemented immediately. This is a part of quality control and risk management. II. Process Improvement Cause and Effect As shown in Appendix B, there are four main causes for Toast’s poor top to bottom communication and slow response. The first is the flawed company structure. Because Toyota is ran by an all male group of Japanese men, there is a cultural disconnect with the parts of their business outside of Japan. This also creates a bottom to top fear complex, where car dealers fear the consequences Of sending up bad news or a bad report.
Furthermore, there is only one central hub where decisions are made (which is in Japan) and this an easily slow down response times to problems. The second cause is Toast’s poor risk management strategy or lack thereof. With no risk management team or effective plan in place, the car dealers have no clear plan of action regarding multiple issues or multiple car defects. The third cause focuses on the company’s misconstrued core values. Toast’s values were ordered as Safety, Quality, and Volume. But when the want to be the best in the industry became the need to be the best, volume became the most important value.
Quality and, subsequently, safety fell behind. The last cause was the company’s manufacturing system. When Toyota set out to beat GM in the automobile industry, they had one goal in mind: having the most cars on the road. They managed to accomplish this but it was at the expense of quality. The new suppliers they started working with had cheaper cost. This allowed them to save money and increase volume but the quality of the parts was also cheaper. The New Process of Communication This particular process (Appendix C) starts with a series of malfunctions and/or customer accidents.
The dealerships receive multiple complaints so they send the complaints to their respective area or division correspondents o determine if a localized recall is necessary. At that time, customers are also sent to the dealership service center to be checked and serviced. The service centers are in constant communication with the manufacturers to determine the cause(s) of the multiple malfunctions. If the problems are unresolved, the service center data and complaints are sent to upper management and manufacturers in Japan to determine a decision on a mass recall. Reduction stops here and if the problem is resolved quickly or it is determined that the issues are local, production resumes and area correspondents notify dealerships of the decision. If a mass recall is needed, correspondents notify dealerships before the recall is announced. This is also the time when company stakeholders are notified. To a stakeholder?and most likely consumer?this is a very important step that should not be left out of the new communication efforts. A marketing campaign is then launched to reaffirm Toast’s mark of quality.
Production resumes after problem is identified and nullified. Going through this flowchart, the clear difference between the old and new process is the level and amount of communication. Standardizing the communication leaves no doubt who each business segment or apartment responds to. In the old process, information went straight to upper management. Often with little to no responses. How do you know what to tell your customers if you (as the dealer) are barely scratching the surface of Toast’s insider information. That’s where the area correspondents come in.
These correspondents are the “shortstops” of Toyota. They’re the bridge of information that was missing in the old process. These correspondents can also make localized recall decisions which can soften the blow of a mass recall. This will speed up response and reaction time tremendously. Implications and Desired Outcome It’s not uncommon for a company in a big industry to kick its competitor when they’re down. That is exactly what happened in Toast’s case. Ford and Handy were the first to offer incentives for Toyota owners. GM even offered $1 000 and 0% financing for a Toyota trade in.
If Toyota decides to take the accelerator crisis and other recalls lightly, how costly could that be? According to Chandler and Quality Digest, “Initial cost estimates for the accelerator fix show a cost of 520 per vehicle taking about 30?45 minutes to repair, based on a mechanic’s hourly wage of $45-50 in the United States. This is estimated to slough translate into a half billion dollars for Toyota. ” (Chandler, 2010). This is all short-term effects, however. In the long-term, the company has to worry about changing the customers’ new perspective and overall image of the Brand.
They essentially have to re-brand themselves into what they once were known for just a few short years ago. The overall outcome of the new Risk Management Process I m proposing is to break down the fear barrier between ownership and dealership, effectively opening up the communication channel. The Risk Management Task Force that was disbanded in 2009 will be recreated and re-purposed to serve both wineries and dealership. That means there will be correspondents, in every major country that the Toyota brand is sold , specifically dedicated to Risk Assessment and management.
Externally, Toyota has already implemented a plan to gain back customers and fix the brand image. “Toyota is trying to make a strong comeback… With incentives such as a $1 ,OHO discount in addition to the existing loyalty cash incentive Of $1 ,OHO for returning Toyota owners. The company also plans to offer free oil changes, free regular maintenance services. ” (Chandler, 2010). In addition, a more thorough valuation of our suppliers will be conducted and if quality standards are not met, we will cut ties. Quality and safety will return to the front of our core values.
Initially this will slow production, However, through lawsuits, recalls, and our production freeze, we lost nearly $3 billion. We can’t afford to lose more money on another quality issue. Our fiscal year will be back ended as we look to gain and retain customers first. This will cost us billions but will save us more in the future. The new Risk Management Process won’t fix all of the damage that the old process did, but it will prevent further damage to the rand and give Toyota another baseline to build upon. II.
Problem Statement Before and throughout Toast’s recall crisis, the company showed that it lacked a level of communication needed to uphold its mark of quality. Toyota has traditionally been known for its core values and focuses of safety, quality, and volume. In that order. Once the want to be the best in the industry became a need for Toyota ownership, these values lost their order. Toast’s President, Mr.. Toyota proclaimed, “We pursued growth over the speed at which we were able to develop our people and our organization… ” (Greet, Scooter, and Degraded, 2010).
As a result of the expedient growth, the company’s flaws were brought to the light. This is only one of the causes of Toast’s poor communication. Looking at the cause and effect diagram, you see that there were three more major causes: The company structure, Risk management, and the manufacturing system in place. When comparing the cause and effect diagram with New Process Flowchart, what stands out is the company’s need for a better communication system. This alone creates a better risk management strategy than the one that was in place at the time of the crisis. The new process adds a middle man.
An area correspondent for ultimate areas or divisions in the country. This was something the old process lacked and response time suffered severely. Standardizing communication speeds up reaction time. The new process has a very broad scope. It essentially effects everyone from the head of the company to the foot soldiers in the dealerships to manufacturers putting the cars together. The idea behind the process is to take any second guessing out of the communication process. Second guessing is a delay. Standardization takes the hard thinking out of the equation and offers solutions quicker.
IV. Measurement Strategy and Data Collection/Evaluation Tools Data Collection There are many different strategies to measure a change or impact in a company’s process. It’s important to not focus on just quantitative or qualitative measurement objectives. Quantitative measurements is the visible, often numerical or statistical data. It allows for generalizations from sample results to be applied to an entire population. Any type of Impact data will be categorized as quantitative. Impact data or quantitative data for that matter is useful in that you can easily measure change in an outcome.
It can also help assess the effectiveness of that change. Questionnaires and surveys offer a quick way to get information from a group of people for a relatively cheap price. Many sun,’eye websites also offer data analysis tools to help assess a subject. Interviews and focus groups offer a depth of information right from the source. The goal of the new process is to improve the communication between every level of Toast’s structure. In doing this, we look to establish a more effective risk management strategy and ultimately regain the perception of quality and safety the company had before the recall crisis.
To measure change, preliminary surveys were given to customers who were affected by he recall crisis (See Appendix D). The survey aims to get a feel of how customers felt during and after the recall crisis. After the new process was fully implemented, a follow up survey was issued. Internally, a combination of observation, surveys, impact data, and interviews were used to collect data. A preliminary survey was issued to dealership owners affected by the recall crisis. We wanted to know how informed they felt on recall issues? How comfortable did they feel with the level of communication between them and upper management?
After the implementation process was over, the surveys were reissued to compare and contrast. For quantitative measurement, employee retention was tracked as well as the number of suggestions or complaints from dealerships or other employees. Finally, anonymous scorecards were issued to the dealership owners, before after implementation, to score the upper management and area correspondents on communication. Data Analysis The ultimate goal of the new process was to improve the overall perception of Toyota by improving the company’s communication process. American car buyers believe that Toyota is the highest-quality car brand ? followed by Ford, Honda and Chevrolet – as the four “continue to dominate in consumers’ minds,” according to an annual study by the Consumer Reports National Research Center. ” (Amnesiac, 2014). As you can see in Appendix E, Toyota is #1 in overall brand perception. More specifically, the company solely owns the #1 spot in 2014 for overall Quality. Toyota made it to #3 in 2014 for overall safety; A step up from 201 g’s ranking.
According to Consumer Reports, “Toast’s high score seems to reflect the brand’s overcoming the damage due to the publicity in 2009 to 2010 regarding sudden acceleration concerns with some of its models. ” (Consumer Reports, 2014). The new process is the main season the brand overcame the damage. On top Of the consumer report results, the number of complaints from dealerships is down from 2,389 after 2012 to 929 after 2014. After the implementation process, 546 quality issues reached the upper management level with a solution already in place.
The old process didn’t have area correspondents to determine if an issue was locally based or widespread. This directly supports the process flowchart. The addition of the area correspondents correlates to the success of the new process. The additional “communication checkpoints” in the process have improved the company’s risk management. The problem statement stated, “When comparing the cause and effect diagram with New Process Flowchart, what stands out is the company’s need for a better communication system. This alone creates a better risk management strategy than the one that was in place at the time of the crisis”.