2010

Operations
Management
Report
Toyota Production System – Indus
Motor Company
Toyota Production System is based on the concept of Lean
Manufacturing; 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 Contents
Executive Summary................................................................................5
Company Introduction............................................................................................6
Indus Motor Company Vision & Mission................................................................6
Company’s History.................................................................................6
History of Lean Manufacturing............................................................................7
Key Benefits of Lean Manufacturing.....................................................................8
Toyota Production System (TPS).............................................................9
Key Principals of Toyota Production System (TPS)..................................10
Toyota Production 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, 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
Indus Motor Company is one of the leading car manufacturing firms of
Pakistan. The organization promised and provided quality, credibility,
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
lifestyle in the society of Pakistan and through their special offer 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
heights through efficient market research, process design, inventory
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),
Toyota Motor Corporation (TMC) and Toyota Tsusho Corporation (TTC) for
assembling, progressive manufacturing and marketing of Toyota vehicles 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 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 Vision is to be the most respected and successful enterprise, delighting
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 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 18 th
Century. Sakichi Toyoda, the thinker and inventor grew up in a local farming
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
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the hand loom through a steam powered engine. This innovation led the foundation
for future automation and he launched “Toyota Automated Loom Works.” Mr.
Toyoda also focused on a very renowned concept of Poka-Yoke/Mistake Proof and
helped the future of 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 design specific and customer focused car manufacturing. Later, after
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 of Toyota. The company inherits knowledge 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 variants in the form of Toyota Corolla (sedan), Toyota Hilux (Single/Double
Cabin), 4x4, and other basic and luxury based variants such as XLI, GLI, and 2.OD
etc. The company has also won various accolades mainly in performance,
environment and corporate social responsibility.

History of Lean Manufacturing

Car manufacturing at Toyota is based on the concept of Lean Manufacturing which
dates back to 1850 before the American Civil War, the concept of lean
manufacturing was generated by El Whitney; he practiced the concept of lean
manufacturing in interchangeable parts as the inventor of “cotton gin.”

After the American Civil War, two famous names of operations management,
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).
Predetermined time studies have few advantages over conventional 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 developing Statistical Process Controls (SPC) and total Quality Management
(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

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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 concept of stockless manufacturing, Just in Time (JIT), Kaizen and Kanban
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 and create value, there must be a 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, multi-tasking, employee empowerment and doing things right the 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 through which TPS is designed are
as follows:

1. Optimize throughput
2. Minimize inventory
3. Eliminate waste (MUDA/MURI/MURA)
4. Flexible process design (Multi-tasking)
5. Pull concept (JIT)
6. Quality (JIDOKA/KAIZEN/ANDONS)
7. Doing it right the first time (KANBAN)
8. Partner with collaborators/suppliers
9. Employee empowerment
10.Foster the culture of continuous improvement
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Key Principles of Toyota Production

System
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 mainly includes, over production, transportation, non-optimum inventory,
waiting, motion, or re-work/scrap. Any unaddressed MUDA will nurture many other
MUDAs/MURIs/MURAs. These are inefficiencies 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 to the company’s focus on reducing all the waste elements, the 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

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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 flow of production with a leveled workforce, capacity and 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
flexible and balanced production line which reduces the vulnerability of 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 production. It is derived from two-bin inventory system and maintains the
discipline of pull production. It authorizes 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
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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 required. Suppliers are trained to reduce setup and lead times,
inventories, defects, machine breakdowns. This aids in long term supplier
manufacturer relationship that synchronize production runs, lower costs, emphasis
on quality and through their collaboration provide innovation and adequate supply
chain network.

TAKT Time
TAKT is a German word which mean “meter”. It is the speed with which 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 Daily Production

Requirement

At Toyota the TAKT time is approx 4.26 minutes, which means each car takes about
less than 5 minutes to produce in an assembly line module. However 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
System, which relies on two basic components: 1) People Aspect 2) Process
Improvement. TPS can be elaborated much more coherently by looking at the Pillars
of TPS.
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About the Visit

Indus Motor Company is located in Port Qasim, which is in the outskirts of Karachi.
The location is of prime importance for Toyota, because a plant 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 mainly focus on the quality of environment, safety and precautionary
measures for their employees and visitors. Proper 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. Precautionary Measures and the Process

2. Floor Management Development System

3. KANBAN and Material Management System

4. Toyota Production System (TPS)

Just as we entered the production plant (assembly line), we were given instruction
that we should walk on the green belted mark on the floor which was 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
continuous improvement and employee empowerment. There were boards
(KANBAN) which emphasized on the concept of QUALITY COMES FIRST, they are key
bullet points that the employee should always look upon so that he is always
focused on his task and do things right the first time. The concept of PDCA, which

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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 measures.

TPS emphasized on the concept of JOB SHOP in an assembly line. Now, I will
elaborate the process flow which was being conducted at TPS to manufacture
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 were taking parts like vehicle doors for welding

2. Weld different parts to form the car structure, which includes:

a. Floor

b. Luggage Compartment

c. Roof

d. Engine Compartment

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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
assembled here at IMC. There were different variants of engine which 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

• Oil consumption

• Engine timing and power checks.

Engine Transmission Fitting

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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 like wiring, air-conditioner etc.

a. Wiring

b. Car Air Conditioner

c. Piping

d. Panels

e. Glasses

f. Shocks

g. Electronics

h. Roof Pads, Bumber 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
Management course made us realize the importance of Just in Time, 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.

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References

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

• http://www.strategosinc.com/lean_manufacturing_history.htm

• http://www.toyota-indus.com/

• http://www.leanproductionforum.co.uk/dissertation/definition_files/image002.
gif

• Operation Management (8th Edition) by Jay Heizer and Barry Render

• Toyota Production System presentation

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