Operations at Indus Motor Company

2010

Operations Management Report Toyota Production System – Indus Motor Company Toyota Production System is based on the concept of Lean Manufacturing; Manufacturin g; through this concept Toyota has been able to win the share of hearts of their customer by providing them with excellent cars that add value to their life.

Submitted To: Mr. Shahid Zaki Submitted By: Faizan Shahzad MBA 1 – City Campus Registration I.D. #: 10010 [24/01/2010]

Toyota Production System (TPS)

Table of Conten Contents ts Executive Summary................................................................................5 Company Introduction............................................................................................6

Indus Motor Company Vision & Mission.................................................. Mission................................................................6 ..............6 Company’s History.................................................................................6

History of Lean Manufacturing.................. Manufacturing............................................. ...................................................... ...............................7 ....7 Key Benefits of Lean Manufacturing.................. Manufacturing............................................. ...................................................8 ........................8 Toyota Production System (TPS).............................................................9 Key Principals of Toyota Production System (TPS)..................................10 Toyota Production System System (TPS) at a Glance..................................... .....12 About the Visit.....................................................................................13 Key Takeaways & Learning...................................................................17 References...........................................................................................18

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Acknowledgement I highly acknowledge the efforts of our teacher Mr. Shahid Zaki who made us realize the importance of operations management in current business scenario. He led us quite well and taught us the necessary tools to be an efficient operations manager. Moreover, Moreover, I would like to thank Indus Motor Company who demonstrated us their production systems and also allowed us to visit their plant in order for us to have firsthand knowledge of the techniques applied at their plant.

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Disclaimer Respected Sir, I want to bring into your knowledge that the report is made solely by me and in my own words. The only thing which is taken from the company’s website is its introduction and Mission Statement. Besides that all the work is done by me, which is totally based on my understanding of the visit, Toyota presentation and through the class lectures.

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Executive Summary Indu Indus s Moto Motorr Comp Company any is one one of the the leadi leading ng car car manu manufa fact ctur urin ing g firm firms s of Paki Pakist stan an.. The The orga organi niza zati tion on prom promis ised ed and and prov provid ided ed qual qualit ity, y, cred credib ibil ilit ity, y, performance and safety in their models. The crown jewel of their product line is named as “TOYOTA COROLLA”, which has a mighty appeal among the masses of Pakistan. Since long time Toyota Corolla has penetrated as a life lifest styl yle e in the the socie society ty of Paki Pakist stan an and and thro throug ugh h thei theirr spec specia iall offe offerr the the company has been able to win share of hearts of their customers. Only through keen management and commitment to customer satisfaction, the company has been able to rule the hearts for almost three quarters of a century. Such dedication to value creativity and value delivery can only be done by achieving high levels of operations management. Our semester visit at Toyota made us learn and realize that operations management is one of the most integral parts of any organization, whether they offer good or a service. During the past two decades the company has achieved enormous heig height hts s thro throug ugh h effi effici cien entt mark market et rese resear arch ch,, proc proces ess s desi design gn,, inve invent ntor ory y management, supply chain management and aggregate planning.

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Company Introduction Indus Motor Company (IMC) is a joint venture among the House of Habib (HOH), T Toy oyot ota a Moto Motorr Corp Corpor orat atio ion n (TMC (TMC)) and and Toyo Toyota ta Tsus Tsusho ho Corp Corpor orat atio ion n (TTC (TTC)) for for assem assembli bling, ng, progre progress ssive ive manuf manufact acturi uring ng and marke marketin ting g of Toyota Toyota vehicl vehicles es in Pakistan since July 01, 1990. Since then the company and its partners never looked back and provided their customer base with latest and the most appealing cars. According to me, the two main reasons for their success are; commitment to quality, service and design of goods which is certainly achieved by coherent operations management management channel and secondly through effective marketing and research so that the company offers the right kind of product at the right time. In present world where the competition is getting tougher and tougher, I believe the key behind success is “to be at the right place at right time and with the most appropriate offer.”

Indus Motor Company Vision and Mission "IMC’s "IMC’s Vision Vision is to be the most respected respected and successf successful ul enterpris enterprise, e, delightin delighting g customers with a wide range of products and solutions in the automobile industry with the best people and the best technology". • • • • • •

The most respected. The most successful. Delighting customers. Wide range of products. The best people. The best technology.

Mission of Toyota is to provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world. The mission statement is one of the most important aspects of any organization. It should coincide with the company’s long term goals and vision. Appropriate mission statement should reflect the company’s commitment as a service to society. It can be based on the company’s strategy, such as product differentiation, low cost, or response.

Company’s History The roots of Toyota Manufacturing Company (TMC) dates back to the start of 18th Centur Century. y. Sakich Sakichii Toyoda Toyoda,, the think thinker er and invent inventor or grew grew up in a local local farmi farming ng community and started his career in carpentry by making manual hand powered looms. Through shear excellence and research he figured out a way to automate Page | 6

Toyota Production System (TPS) the hand loom through a steam powered engine. This innovation led the foundation for future future autom automati ation on and he launch launched ed “Toyot “Toyota a Autom Automate ated d Loom Loom Works. Works.” ” Mr. Toyoda also focused on a very renowned concept of Poka-Yoke/Mistake Proof and helped the future of manufacturing manufacturing by creating fool proof designs. Late in 1930’s his son Kiichiro Toyoda laid the basis of Toyota Motor Company. This enabled them to research and generate a drive for innovation and development in order to create more more desi design gn spec specif ific ic and and cust custom omer er focu focuse sed d car car manu manufa fact ctur urin ing. g. Late Later, r, afte afterr becoming the chairman, Mr. Kiichiro Toyoda played a key role in the success of Toyota as a blue chip company of the automobile industry by successfully making a production process named Toyota Production System (TPS). In the start of 1990’s TMC, TTC and HOH did a joint venture and named it as Indus Motor Company (IMC). IMC’s through its efficient distribution network played a key role in the profitability profitability of Toyota. The company inherits inherits knowledge and and innovation based drive through Toyota. Heavy investments were made in the section of capital expenditure that enabled the setup of state of the art technology plant. IMC offers six varian variants ts in the form form of Toyota Toyota Coroll Corolla a (seda (sedan), n), Toyot Toyota a Hilux Hilux (Singl (Single/D e/Dou ouble ble Cabin), 4x4, and other basic and luxury based variants such as XLI, GLI, and 2.OD etc. etc. The The comp compan any y has has also also won won vari variou ous s acco accola lade des s main mainly ly in perf perfor orma manc nce, e, environment and corporate social responsibility. responsibility.

History of Lean Manufacturing Car manufacturing at Toyota is based on the concept of Lean Manufacturing which dates ates back ack to 1850 1850 befor efore e the the Americ erica an Civi ivil War War, the concep nceptt of lean ean manuf manufac actur turing ing was genera generated ted by El Whitn Whitney; ey; he practi practiced ced the concep conceptt of lean lean manufacturing manufacturing in interchangeable interchangeable parts as the inventor of “cotton gin.” After After the Americ American an Civil Civil War, War, two famous famous names names of opera operatio tions ns manag manageme ement, nt, Fredrick Taylor and Frank Gilbreth laid the foundation of standardized work, time studies, work management, process charts and motion studies. Gilbreth developed pre-determined time standards for basic motions known as therbligs. Therbligs include activities such as select, grasp, position, assemble, reach, hold, etc. and these activities are stated in terms of Time Measurement Unit (1 TMU = .0006 Min). Predet Predeterm ermine ined d time time studi studies es have have few advant advantage ages s over over conven conventio tional nal time time and motion study. First, they may be established in laboratory environment, where the process will not upset running production. Second, the standard can be set before the task is actually done. Third, less biasness as time standards for various motions are predetermined and these are acceptable by all, be it management or labor unions. Two decades after the advent of 19th century, Henry Ford proposed the concept of assembly lines, flow line and manufacturing strategy, which were followed by the class work of Edward Deming who mainly contributed in the field of quality control by developin developing g Statistic Statistical al Process Process Controls Controls (SPC) (SPC) and total total Quality Quality Managemen Managementt (TQM). Sir Deming, also introduced the importance of customer in any business cycle, he also created a Deming cycle consisting of four quadrants Plan, Do, Check, Act (PDCA). Through his studies Mr. Deming also proposed that merely 20% of the Page | 7

Toyota Production System (TPS) defects are caused by humans and the major 80% of the defects can be triggered through inadequate process design and faulty machines.

Key Benefits of Lean Production Considerable waste reduction by 80%, Production cost reduction by 50%, Cycle times of manufacturing reduced by 50%, Increasing production by reducing labor through multi-tasking, Inventory reduction by 60% through pull concept and JIT, High quality and profits, Flexible system designs, Strategic focus, Improved supply chain, and Reduced lead times, shipping and billing hassles. Then, in 1950’s Toyota breakthrough with Toyota Production System who relied on the conce concept pt of stockl stockless ess manu manufac factur turing ing,, Just Just in Time Time (JIT), (JIT), Kaize Kaizen n and Kanba Kanban n models.

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Toyota Production System (TPS) Toyota Production System is a repetitive modular process design which uses the formula of assembly design and modules to manufacture different variants of their models. So, in order to manufacture manufacture and create value, there must be a standardized standardized set of rules to follow. The four basic components under which TPS was designed include: • • • •

Safety Quality Cost Productivity

As stated earlier, TPS’s main target is to produce more with less, which means removing all those steps that don’t add any value to the final product. Moreover, focus on Kanban/Just in Time (JIT), continuous improvement, less inventory, pull concept, concept, multi-ta multi-tasking sking,, employee employee empowerm empowerment ent and doing doing things things right the first first time. The main goals of TPS are to manufacture highest quality automobiles, with the lowest possible cost and shortest possible lead time. TPS is based on working out a process as a team that promotes a culture of earning and giving respect. During the visit we saw various sign boards focusing on the importance of team work. The one board which we saw on entrance says: “Together We Achieve More”

The ten basic components of Lean Manufacturing Manufacturing through which TPS is designed are as follows: 1. Optim Optimize ize throug throughpu hputt 2. Mini Minimi mize ze inve invent ntor ory y 3. Eliminat Eliminate e waste waste (MUDA/MU (MUDA/MURI/M RI/MURA) URA) 4. Flexible Flexible proce process ss design design (Multi-t (Multi-taski asking) ng) 5. Pull Pull con conce cept pt (JI (JIT) T) 6. Quality Quality (JIDOKA/ (JIDOKA/KAIZ KAIZEN/A EN/ANDONS NDONS)) 7. Doing Doing it right right the first first time (KANBAN (KANBAN)) 8. Partner Partner with collabora collaborators tors/sup /supplier pliers s 9. Employ Employee ee empowe empowerm rment ent 10.Foster the culture of continuous improvement Page | 9


Key Principles System

of

Toyota

Production

Eliminate Waste Wastes are all those processes that take up production time while adding no value to the final product. TPS focuses on eliminating such situations or processes that are regarded as a loop hole in the production system and does no good to the firm’s operations. TPS classifies such items into three broad categories. 1. MUDA 2. MURI 3. MURA MUDA can be originated through various bottle necks and loop holes in the system which which mainly mainly includes, includes, over productio production, n, transpor transportatio tation, n, non-opt non-optimum imum inventor inventory, y, waiting, motion, or re-work/scrap. Any unaddressed MUDA will nurture many other MUDAs/MURIs/MURAs. These are inefficiencies inefficie ncies in any process design and contribute in increasing costs of manufacturing. According to a key takeaway from our course, inventory undergoes operations for only 5% of the time and the rest 95% of the time inventory is either sitting idle or its in transit or motion.

Minimize Inventory (Small Lot Production) Due Due to the compa company’ ny’s s focus focus on reduc reducing ing all the waste waste eleme elements nts,, the system system minimizes inventory and lowers the cost. The main idea is to produce in small lots that reduce wastage. Because large lots often bring with them element of risk by associating higher capital input, holding costs, extended lead times and increased chance of error. In contrast, small lots minimize inventory, lower costs, improve controls, less stocking, and assist in achieving economies of scale.

Flexible Process Design (Multi-tasking) Small lot-size, efficient workforce, coherent process and assembly designs aids in flexible setups. These include quick change over of internal and external designs Page | 10

Toyota Production System (TPS) with respect to demand forecast and customer requirements. The concept is an integral part of Lean Manufacturing and fosters the culture of training workforce that supports multi-tasking.

Pull Concept Since the company aligns its production targets on the basis of Pull concept from the customers, this enables them to produce under the umbrella of JIT. JIT means to produce what is required, when it is required and how much required. JIT is an efficient tool of minimizing overall process costs, but it requires good relations with all the collaborators and vendors. JIT benefits by minimizing in work in progress inventory, worker motivation, lower costs and less warehousing.

HEIJUNKA (Leveled Production) TPS focuses on leveled production which means they decide one to two months prior what to make, and how much to make? This enables them to continue with the smooth smooth flow of producti production on with a leveled leveled workforc workforce, e, capacity capacity and machines machines.. In contrast chase strategy focuses on the quantity of units produce on the basis of demand forecast which surely increases cost of holding, cost of hiring/laying off workers etc. The key benefit of leveled production is efficient aggregate planning, worker motivation and employee empowerment. HEIJUNKA mean balanced and sequenced production, since they make around six variants so exact quantity and quality is of prime importance. HEIJUNKA aids in flexib flexible le and balan balanced ced produc productio tion n line line which which reduc reduces es the vulner vulnerabi abilit lity y of over over burdened employees which eventually sets the tone for employee empowerment and improves morale and motivation.

Kanban Kanban means “Sign Board” in Japanese. It is a card that shows standard quantity of produ producti ction on.. It is derive derived d from from two-bi two-bin n invent inventory ory system system and and maint maintain ains s the the discipline of pull production. It authorizes production production and movement of goods.

Quality (TQM) Quality is very important for any firm to be successful. At IMC it includes visual controls, like checkpoints. Every worker in an assembly assumes the next worker as customer. This creates the culture of inspection at source. TPS is aided through Poka Yokes which means fool proof system or part design, poka-yokes help in Page | 11

Toyota Production System (TPS) reducing the vulnerability of producing defects. JIDOKA means that the worker has the authority to stop the production line where ever the fault occurs, in the same way the automatic machines can also stop when the process undergoes any fault, this is done by the high-tech sensors installed on the machine. ANDONS are light signals which show and highlights when there is a problem that needs to be fixed. KAIZEN is a system of continuous improvement; under capacity scheduling which leaves adequate time for planning and maintenance.

Continuous Improvement At IMC, they focus on continuous improvement through efficient system design that is promoted by the help of Kaizen, Kanban, Poka-yokes, Total Quality Management, Statistical Process Controls and Employee Empowerment. Such techniques help a firm seek continuous improvement on all crucial stages of an assembly/production line. System improvement is also aided by continuous flow of work, since each worker is enable of doing multi-tasking and forwards his part of work as if the next worker is a customer, this idea assists them to check quality at the source which is truly the concept behind Total Quality Management (TQM).

Supplier Networks Toyota treats its suppliers as collaborators; they assist TPS by delivering materials as and when when requir required. ed. Suppl Supplier iers s are traine trained d to reduce reduce setup setup and lead times, times, inve invent ntor orie ies, s, defe defect cts, s, mach machin ine e brea breakd kdow owns ns.. This This aids aids in long long term term supp suppli lier er manufacturer relationship that synchronize production runs, lower costs, emphasis on quality and through their collaboration provide innovation and adequate supply chain network.

TAKT Time TAK TAKT T is a Germ German an word word whic which h mean mean “met “meter er”. ”. It is the the speed speed with with whic which h the the production is sold in the market. The less the TAKT time the more efficient the system is. TAKT time is calculated by the following expression TAKT TIME = Total Daily Operating Time/Total Time/Total Daily Production Requirement

At Toyota the TAKT time is approx 4.26 minutes, which means each car takes about less less than than 5 minute minutes s to produc produce e in an assemb assembly ly line line modul module. e. Howeve Howeverr when when a changeover occurs the first car takes approximately 20-24 hours.

TPS at a Glance All the techniques mentioned above perfectly compliment the Toyota Production Syst System em,, whic which h reli relies es on two two basi basic c comp compon onen ents ts:: 1) Peop People le Aspe Aspect ct 2) Proc Proces ess s Improvement. TPS can be elaborated much more coherently by looking at the Pillars of TPS. Page | 12


About the Visit Indus Motor Company is located in Port Qasim, which is in the outskirts of Karachi. The The locati location on is of prime prime importa importance nce for Toyota, Toyota, becaus because e a plant plant near near the port definitely improves the supply chain channel. IMC has a state of the art plant for manufacturing which is strictly secured and maintained. Being an ISO certified firm they they main mainly ly focu focus s on the the qual qualit ity y of envi enviro ronm nmen ent, t, safe safety ty and and prec precau auti tion onar ary y measures for their employees and visitors. Proper instructions instructions were given to us with respect to safety and confidentiality of the visit. We were then divided into two groups; each group was escorted by an experience management representative. The trip was basically focused on four key areas: 1. Precautio Precautionary nary Measures Measures and the the Proces Process s 2. Floor Floor Managem Management ent Developm Development ent System System 3. KANBAN KANBAN and and Materia Materiall Managem Management ent System System 4. Toyota Toyota Produ Producti ction on System System (TPS (TPS)) Just as we entered the production plant (assembly line), we were given instruction that that we shou should ld walk walk on the the gree green n belt belted ed mark mark on the the floo floorr whic which h was was the the designated corridor to walk on. This definitely signals that how much they care about MUDA’s because delays in material movement certainly increases lead time and process costs. I also witnessed that there were numerous sign boards that showed their culture of cont contin inuo uous us impr improv ovem emen entt and and empl employ oyee ee empo empowe werm rmen ent. t. Ther There e were were boar boards ds (KANBAN) which emphasized on the concept of QUALITY COMES FIRST, they are key bulle bullett points points that the employ employee ee should should always always look look upon upon so that that he is always always focused on his task and do things right the first time. The concept of PDCA, which Page | 13

Toyota Production System (TPS) was proposed by Edward Deming, was also shown all across the assembly line. Toyota basically sums up its values by focusing on the following key points: •

Challenge

•

Kaizen

•

Genchi Genbutsu

•

Respect

•

Team Work

We were also shown different parts of the plant which represented their quality policy, environmental policy and different safety and precautionary precautionary measures. TPS TPS emph emphas asiz ized ed on the the conc concep eptt of JOB JOB SHOP SHOP in an asse assemb mbly ly line line.. No Now, w, I will will elabor elaborate ate the proces process s flow flow which which was being being conduc conducted ted at TPS to manuf manufac actur ture e premium quality automobiles for their customers.

Trim Line Trim line basically includes press shops and weld shops. Both focused on creating different body parts.

Press Shop Here the metal sheets were being pressed and molded to form different shapes for different body parts of the car.

Weld Shop In weld shop parts were joined through welding, and they were molded together to form a car structure. It was basically divided into two parts: 1. Workers Workers were were taking taking parts parts like vehicle vehicle doors doors for for welding welding 2. Weld differe different nt parts parts to form the car car structure structure,, which includ includes: es: a. Floor b. Lugga Luggage ge Compar Compartm tment ent c. Roof d. Engi Engine ne Compa Compart rtme ment nt Page | 14


Chassis Line In this area of the production line, different welded parts were perfectly joined with body pillars and the body base. As the whole manufacturing is done on the chassis of the car, so it makes this process of prime importance, because an unaddressed fault in chassis will definitely hinders other processes. So quality check is done here to make sure everything is in correct form.

Paint Shop Afterwards the whole body was being painted. We weren’t allowed to visit the paint shop due to its sensitive nature. Proper protective clothes were required to enter the paint shop. A typical paint process followed the following steps: Base

Primer

Color

Liquor

Dryer

Plastic Assembly This includes the assembly and plastic parts of a car like bumpers, mud guards, mud shields, steering, dash-boards, interiors, and tires.

Engine Assembly In the engine assembly shop we were shown that how the engines were checked for optimal performance. We were told the engine parts are usually imported and then asse assemb mble led d here here at IMC. IMC. Ther There e were were diff differ eren entt vari varian ants ts of engi engine ne whic which h were were classified like Coure Engine, Toyota 1300cc and 1800cc petrol engines, and 2000cc diesel engines for 2.OD. Engine Assembly line was further divided into two rooms: Room 1 – Engine assemebly for different variants Room 2 – Quality Check for engines, for e.g. leakages, bubbling, abrasiveness Dynamo Room – This includes: •

Thorough checking of engines

•

Fuel consumption consumption

•

Oil consumption

•

Engine timing and power checks.

Engine Transmission Fitting Page | 15

Toyota Production System (TPS) Then the final painted body was equipped with the engine and transmission, the workers here were very efficient and were able to identify defects at the source, this is the main concept behind JIDOKA.

Final Assembly Shop This includes the final assembly of all the parts to complete a car; it comprises of the assembling of main parts of the body from the section of engine transmission fitting area with various accessories accessories like wiring, air-conditioner air-conditioner etc. a. Wiring b. Car Car Air Air Cond Condit itio ione nerr c. Piping d. Panels e. Glasses f. Shocks g. Elec Electr tron onic ics s h. Roof Roof Pads, Pads, Bumber Bumber Pads Pads

Quality Checking Line (Customer Satisfaction Line) Here quality assurance is done, because cars are classified as consumer durables that are very costly to purchase. Since cars brings about with them luxury and speed so good quality measures are of prime importance because the life of the customers and users are at stake. Key areas include: •

Every step is checked according to the standards

•

Inspection of engine assembly is done

•

Engine, bolts with standard torque

•

Tires are fixed

•

Fuels & fluids

•

Air conditioner gas is filled

•

Carpet

•

Wind shield

•

Vin plate

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Vehicle Performance Line (Quality Audit)

•

Wheel alignment

•

Brakes check

•

Speed check 120 km/h (drum testing)

•

Shower testing

•

Wave testing (noise checking)

•

CNG fitting

SQA (Shipping Quality Audit) Final Supreme Audit This is done by Toyota certified quality inspector; checker is highly qualified and trained and has its excellence in checking the car performance. Suppose if 50 cars are produced in a shift then the inspector has the authority to select any 4 cars on a random basis and audit them according to the specified international standards. Any defect diagnosed at this stage seriously causes a dilemma because it is the final stage of checking. But since TPS is integrated with quality checking at source the vulnerability of defects at final stage are very rare.

Key Takeaways and Learning At Indus Motor Company, practical applications of the concepts studied at Operation Manag Manageme ement nt cours course e made made us realiz realize e the impor importan tance ce of Just Just in Time, Time, Kaizen Kaizen,, Kanban, Jidoka, Employee Empowerment and various other techniques conducted at TPS. The visit has certainly improved our practical knowledge. TPS is an ideal mix of human involvement and automated system design that help them attain supreme quality products that add value to their customers. customers.

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References •

http://www.hci.com.au/ http://www .hci.com.au/hcisite2/toolkit/ hcisite2/toolkit/images/pdc images/pdca02.gif a02.gif

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http://www.strategosin http://www .strategosinc.com/lean_m c.com/lean_manufacturing_ anufacturing_history.htm history.htm

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http://www.toyota-indus.com/

•

•

•

http://www.leanproductionforum.co.u http://www.leanproductio nforum.co.uk/dissertatio k/dissertation/definition_fi n/definition_files/image002 les/image002.. gif Operation Management (8th Edition) by Jay Heizer and Barry Render Toyota Production System presentation presentation

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Operations at Indus Motor Company

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