To begin, it would be appropriate to provide a short overview of the Toyota Motor Corporation. Toyota was established in 1937 in Japan, and is the United States and the world's biggest car manufacturer, with production plants and facilities in a number of nations around the world (Wikipedia). 1957 is the year the first Toyota vehicles were exported to the United States by the Toyota Motor Sales, U.S.A., Inc. (History). Toyota also owns and operates Lexus and Scion brands and has a majority shareholding stake in Daihatsu and Hino Motors, and minority shareholdings in Fuji Heavy Industries, Isuzu Motors, Yamaha Motors, and Mitsubishi Aircraft Corporation (History).
For every company, Including Toyota, organizational control is one of the important functions of management. Organizational control, as defined by the text book, is "the systematic process through which managers regulate organizational activities to make them consistent with the expectations established in the plans and to help them achieve predetermined standards of performance" (405). The performance of organizations must be monitored by managers because it is very important to both achieve goals and understand what is needed to achieve goals. For organizational goals, it is necessary to develop a control plan to maintain quality, and failing to adequately do so could result in lost business, dissatisfied customer base, bankruptcy, or poor employee efficiency. In order to develop a system of control, an organization must follow four steps: setting standards of performance, measuring actual performance, comparing actual performance with standards, and responding to deviations.
In terms of controlling systems as well as conducting overall business, Toyota possesses their own principles in regards to management and production which they call "The Toyota Way. Principles of "The Toyota Way include "Challenge", "Kaizen" (improvement), "Genchi Genbutsu" (go and see),
"Respect," and "Teamwork" (Toyota Document). According to external observers, the Toyota Way has four components (Liker). First is long-term thinking as a basis for management decisions. Second is a process for problem-solving. Third is adding value to the organization by developing its people. Finally, Fourth is recognizing that continuously solving root problems drives organizational learning. Toyota also has it's own productivity system which is called Toyota Production System (TPS). TPS has got principles: Continuous Improvement, Respect for People, Long-term philosophy, The right process will produce the right results, Add value to the organization by developing your people and partners, and Continuously solving root problems drives organizational learning.
With their systems, Toyota has been able greatly reduce time and cost using the TPS, as well as improving quality. This enabled the company to become one of the largest companies in the world. In 2007, it managed to become the largest car manufacturer. According to the Wikipedia article "It has been proposed. that the TPS is the most prominent example of the 'correlation', or middle, stage in a science, with material requirements planning and other data gathering systems representing the 'classification' or first stage. A science in this stage can see correlations between events and can propose some procedures that allow some predictions of the future. Due to the success of the production philosophy's predictions many of these methods have been copied by other manufacturing companies, although mostly unsuccessfully." And as quoted from the from Liker in The Toyota Way, "Since the 1980s, Toyota and Lexus vehicles have been recognized for their quality and are consistently ranked higher than other car makers in owner satisfaction surveys, due in large part to the business philosophy that underlies its system of production."
Toyota has several design factors affecting its control system quality, including the amount of variety its control system offers and its ability to predict future problems. When it comes to the amount of variety in Toyota's control system it lacks variety. Toyota has a standardized control ("Toyota Production System," 2009). Toyota believes "Standardized tasks and processes are the foundation for continuous improvement and employee empowerment. Standardization breeds efficiency at all levels of the operations" ("Toyota Production System," 2009). When it comes to Toyota's ability to predict problems within their control system they are very effective. Toyota manages its operations by walking around the place of operations making it easier to understand operations and catch problems ("Toyota Production System," 2009). Toyota strives to "Build a culture of stopping to fix problems, to get quality right the first time. Empower everyone to stop production of non-compliant material (NCM) parts" ("Toyota Production System," 2009). Toyota uses a visual control system which basically gives its employees the power to stop production if they spot any defects ("Toyota Production System," 2009). Toyota also uses autonomous machines which are equipped with automatic stopping device that help to prevent mass production of defects (R. Balakrishnan, n.d.).
Toyota's control system is an effective control system. Toyota's control system is directly related to its organizational goals. One of Toyota's organizational goals is to reduce waste. The way Toyota accomplishes this goal is through reduce setup times, small-lot production, employee involvement and empowerment, quality at the source, equipment maintenance, pulls production, and supplier involvement ("Toyota Production System," 2009).
Another goal for Toyota is to strive for diversity. Toyota has a statement on their website that states "We are committed to making sure employees at all levels of our organization represent the many faces of America today" ("Diversity," 2008-2010).
Just as with any company, Toyota must take care in selecting its control systems. First, it must consider the costs associated with its control practices. Toyota uses a several control practices. In pre-production, the use of CAD software and designing in an effort to prevent errors is used by Toyota to control the output of production (TMMK). Then, during production, Toyota employs a system where every worker is expected to maintain constant quality checks on the vehicle, and, by pulling what is known as an "andon cord," is able to cease production for the entire line if necessary (TMMK). In post production, the vehicles undergo a series of tests including water test, a sample-based full inspection, and as seen in recent cases, manufacturer recall (TMMK). In respect to selecting these processes, Toyota must examine the costs associated with both acquiring the information used in the control process, as well as any costs which might exist from deviations of what is expected in the product. Costs associated with acquiring the information would include such things as the cost of Toyota's post-production testing, where as the cost associated with deviations, would include the cost for Toyota in losses from shutting down the assembly line and cost of recalling the cars, which, as of February 17th 2010 in the current situation, is the cost of determining the problem and solution, shutting down a number of their plants to handle the recall of 8.5 million cars, and any bad press and government fines as a result (Kageyama).
The company must also consider the reliability of the system being controlled, as well as its importance. Cars are complex machines with many parts to break or fail. This is why so many forms of testing and control systems are used by automobile manufacturers. Toyota, who was previously very well known for their methods of production and control as frequently stated in the case study handout provided called "Toyota: Looking Far into the Future," has proved how unreliable this system can be with their recent recall debacle. Furthermore, Toyota must look at all the various processes being controlled to determine which are the most important and what deserves the most resources spent on controlling it. The textbook claims that one "Should not automatically assume that importance can always be measured by cost or value" (416). This would seem especially clear in Toyota's example, in which issues of relatively cheap parts, namely the gas pedal and driver side floor mats, have been major players in the bulk of the recalls as well as the auto accidents and deaths (Yah Kageyama oo).
Another idea that must be considered by companies for their control systems is the focal points, which consists of three options: feedforward control, concurrent control, and feedback control. Feedforward control is methods of control used even before the manufacturing process begins usually associated with inputs. In the case of Toyota, this would include they pre-production design controls as well a unique supplier relationship, as mentioned in the handout "Toyota: Looking Far into the Future," which allows for careful planning of the necessary supplies as well as relieving pressure from the suppliers giving them time and other means to focus on the quality of their supplied parts. The second focal point would be concurrent control, which is control systems employed during the actual manufacturing or transformation process. For Toyota, this control system is performed by every worker on the production line, with each being expecting to constantly inspect all the production of all vehicles and if necessary stop production to correct the issue before the construction of the vehicles is completed. The final focal point is feedback control, which consists of controlling the systems following production. Not only does Toyota conduct a number of tests on selected vehicles following the completed production, but as seen recently, can recall vehicles following productions if too many deviations from what Toyota finds acceptable is discovered. Although a company must select the focus of its focal points it does not have to focus on only one, as in the case with Toyota which maintains control systems during all three focal points. A company must do this to ensure that products following production are up to the company's expectations, and to predict any issues which may be going to occur within the future, and in the case of Toyota and their recalls, Toyota clearly had some major shortcomings in regards to their control systems.
Toyota's organizational control is a relatively flat organic system often called a clan control. Toyota believes that sharing information and problems with the entire company from top to bottom will result in a more balanced organization. This balance will result in a company from top to bottom that is informed and aware of all aspects of the business that will result in quicker responses to problems that can arise. Toyota is a company based around team work that results in more efficient, quality work from all individuals. Each group or team is controlled by one manager who usually has five to eight workers that they oversee. Each team leader or manager is given the task of auditing, performance checks, training, and ensuring safety amongst the group while still maintaining quality. Fujio Cho was the first president of Toyota Motor Manufacturing, Kentucky Inc. and was one the main people to implement the Japanese strategy and the American way of business as one. Cho didn't want to change how Americans worked as individualist but rather teach and add the Japanese team-work style of work. Cho combined America's power of innovation and the Japanese way of strength and discipline. The executives at Toyota want to shape great relationships with the employees that work for them and the suppliers they do business with. The individual competitive nature combined with the team-work nature of the Japanese which caused some to call it The Toyota Way (Liker and Hoseus, 2008, p. 231-249).
Just-in-time is a production strategy that Toyota uses in their Toyota Production System to diminish wasted extra products or supplies and also it reduces the chance for too large a work force. This type of production system allows for the suppliers to maintain consistent supply shipments for the manufacturer. Toyota will not change orders on the fly they in turn forecast their shipments in advance to ensure everyone is on the same page. Toyota Production System is a production management system that controls all aspects of the organizations production line. The goal of this production system is a continuous production flow while reducing the cost overall. The kanban system is an information management system that controls and works cohesively with the just-in-time production system. The kanban is an actual tag or card that has the number of units needed and type of unit needed. This card is then sent on to various process within the production line to ensure standardization of jobs, smoother production, autonamation, and less time setting up machine layout. Quality control is a main aspect of the just-in-time production system which needs autonamation in order to ensure that quality products are used. Autonamation is a mechanism that is used to detect defective work or materials within the production line (Balakrishnan, p.1).
Toyota uses a balance sheet and their income statement to assess their performance in finances. Toyota's total current assets are over one hundred million dollars which can be converted into cash and include accounts receivable, inventory, and cash. Total assets for Toyota come out to a total of almost three hundred million dollars. The balance sheet also includes the liabilities of the company which are the firm's debts. Currents liabilities are unpaid salaries and accounts payable that come to a total of one hundred and seven million dollars. Long-term liabilities include bonds, loans, and mortgages which total out to be seventy million dollars. The equity of the company is the difference of Toyota's assets and liabilities which is over one hundred million dollars (Yahoo Finance, 2010). Toyota uses their income statement like every other business in the world does to examine their profit or loss from the products they sell. The income statement includes the liquidity ratios which is the organizations ability to pay for short-term debt. Toyota has a current ratio and quick ratio below two percent; these ratios are included in the liquidity rates. Profitability ratios, debt ratios, and activity ratios are also included in the income statements. Return on total assets is a ratio to show how affective the company is utilizing its assets. Toyota has a return on assets of almost four percent. In the debt ratio category of the financial ratios the lower the number the better which means that Toyota nearly being under one percent means that they are doing a fine job with their finances(Toyota Motor Corp., 2009).
To make quality products in an efficient manner Toyota needs committed and reliable employees with the right moral and ethical values. One way of ensuring this is by giving drug test. Employee performance monitoring is mainly done formally through various management performance reviews. These are done throughout the year to determine if a selected group of workers and its manager is performing with efficiency while maintaining quality. The managers are trained to assess the performance of the workers in their group as well as being evaluated from another manger who is higher up on the chain of command.
