Toyota’s safety recalls – Are they indicators of problems associated with quality management, outsourcing or simply indicators of setting inconsistent competitive priorities in operations strategy?
In Chapter 12 of the textbook we provide detailed description of Toyota’s production system and their various innovative operations management practices. Over the last three decades Toyota has received many awards for their excellent quality and performance. The marketplace has rewarded them with higher sales and market-share, ultimately making them the world’s largest producer of automobiles.
So what went wrong in January 2010? Are the safety recalls due to faulty gas pedals an example of an isolated, one-time problem or are they symptoms of bigger long-term problems with Toyota and also the automobile industry?
Exhibit 1 shows some of the major recalls associated with the automobile industry during the past few years (source: The Wall Street Journal). The problems range from faulty seat belts, air bags, cruise control switches, ignition modules, sudden acceleration and sticky gas pedals. It is also interesting to note that many of the same problems are associated with multiple brands produced by different companies.
The above trends make us wonder about the root causes of quality problems. Clearly the final responsibility for producing and delivery high-quality products resides with Toyota. So perhaps because of their exponential and sudden growth Toyota has relaxed their quality standards and is not paying the requisite attention to quality of incoming parts and raw-materials? Or perhaps it has changed its competitive priorities from quality to something else which has lead to these problems?
One could also argue that the root cause of these quality problems lie with the extreme and expanding practice of outsourcing common in the automobile industry. For example, were the gas pedals associated with safety recalls produced by Toyota or were they manufactured by a supplier company? Who was responsible for designing these components? Some recent reports published in various newspapers suggest that the safety recalls illustrate the problems associated with the entire production system – such as supplier involvement in product development (e.g. concurrent engineering), outsourcing, extreme modularity in design, lean production concepts, and also pressure to reduce costs of commodity components.
Questions
Q1. How has operations strategy and competitive priorities evolved in the automobile industry during the last 100 years (Hint – about a hundred years ago, one could buy any care from Ford as long as it was black!)? (Chapter 1)
Q2. What are the positive and negative tradeoffs associated with outsourcing production functions to supplier organizations? (Chapters 12 and 14)
Q3. What quality systems and procedures and systems should Toyota have followed to ensure that faulty automobiles are not delivered to the customers? (Chapters 2 and 11).
Exhibit 1
Advances in Medicine: The Checklist
OM Blog 6: January 5, 2010
By Ken Boyer, Fisher College of Business, Ohio State University and Rohit Verma, Cornell University
Authors: Operations and Supply Chain Management for the 21st Century, 2009, Southwestern Cengage Publishing
Magnetic Resonance Imaging (MRI), Image-guided Radiofrequency Ablation (RFA), Computed Tomography Angiography (CT) and Checklists. In this list of the “latest and greatest” in medical treatments, which one would seem not to belong? Checklists? Really? In 2009 with all the DNA mapping, computer assisted and imaging technologies that have contributed to improved medicine (and often substantially increased costs), simple checklists are being proffered as a critical tool for improving medical care and outcomes.
In a new book released in mid-December (The Checklist Manifesto: How to Get Things Right, Metropolitan Books, 2009), Dr. Atul Gawande, explores the nature of complexity in our lives and in medicine in particular. Gawande, bestselling author of Better and Complications, MacArthur Fellow, general and endocrine surgeon at Boston’s Brigham and Women’s Hospital and an associate professor at the Harvard Medical School offers his observations, experiences and research on the use of checklists. His central argument: medicine has advanced to a point where there is tremendous know how an ability to effectively treat many medical conditions, yet there are over 150,000 deaths from surgery every year – at least half of which are attributable to preventable error. Why so many errors? Because medicine is complicated and with many complex pressures it is common for doctors, nurses or other medical professionals to either forget a step or perform a critical step out of order. A powerful illustration of this can be drawn from Gawande’s writing:
Central Line Infections:
In 2001, Dr. Peter Pronovost, a critical care specialist at Johns Hopkins Hospital decided to tackle the challenge of reducing (preventing) infections when patients received a central line. He wrote the following steps on a piece of paper:
- Wash hands with soap
- Clean patient’s skin with Chlorhexidene Antiseptic
- Place sterile drapes over the entire patient
- Wear a mask, hat, sterile gown and gloves
- Put a sterile dressing over the insertion site once the line is in.
As Gawande writes, “These steps are no brainers: they have been known and taught for years”. And yet, when Pronovost recruited nurses in the ICU to observe doctors for one month, he found that in more than one third of the patients, AT LEAST ONE STEP WAS SKIPPED!
Dr. Patchen “Patch” Dellinger reads off of a checklist for surgery at the University of Washington Medical Center
The next step involved Pronovost and his team persuading administrators at Johns Hopkins to authorize nurses to stop nurses if they saw doctors skipping a step. Nurses were also encouraged to ask doctors each day whether any lines should be removed – thus not leaving them in any longer than necessary. Now, Gawande being a surgeon has better authority regarding medical practices than any non-medical professional has, but essentially he writes that nurses have always had ways of nudging physicians and reminding them to perform critical steps. Yet, this approach was revolutionary – encouraging nurses to intervene and “checklist” the doctors. The results were amazing – the ten day infection rate dropped from 11 percent to zero. Pronovost and colleagues calculated that in just one hospital, the new checklist had prevented forty-three infections and eight (8) deaths and saved $2 million in costs.
I will not reveal more of Gawande’s writing here – I highly encourage you to buy or borrow a copy of the book and read it yourself. The point is – technology does not have to be complicated to be effective. Operations management professionals in a variety of service and manufacturing industries have been employing checklists for years. Other basic, yet effective tools covered in most textbooks include:
- Pareto Analysis
- Bar charts
- Histograms
- Scatter Diagrams
- Run charts
- The Five S: sort, straighten, shine, standardize, sustain
- Poka-yoke
While people often fall for the fancy and impressive technologies and medical treatments, often getting the simple stuff right can be more important. So, think of ways that you use checklists in your daily life – both for personal use and for business use. Maybe you should have one for your doctor the next time you see him or her?
Discussion Questions:
Sources:
Dr. Atul Gawande, The Checklist Manifesto: How to Get Things Right, Metropolitan Books, 2009)
Pronovost, P.J., et al., 2003, “Improving Communication in the ICU Using Daily Goals” Journal of Critical Care, V. 18, pp. 71-75.
“UW Medical Center Using Surgical Checklist to Improve Safety”, Carol M. Ostrom, Seattle Times, June 26, 2008
Have you gotten your Flu shot yet?
OM Blog 4: November 2, 2009
By Ken Boyer, Fisher College of Business and Rohit Verma, Cornell University
Authors: Operations and Supply Chain Management for the 21st Century, 2009, Southwestern Cengage Publishing
Amidst the public debate these days about whether or not individuals should get shots for either the regular, seasonal flu or for H1N1, there is another challenge. That is, if you do want to get a shot, where and how can you get one? This is not a trivial question as there have been numerous delays and canceled clinics around the U.S. in the past two weeks.
What does this have to do with operations and supply chain management? Several things.
First, manufacturing and distribution of vaccine dosages is a substantial supply chain challenge. The U.S. Centers for Disease Control and Prevention (CDC) had hoped to have 40 million doses of the H1N1 vaccine ready by the end of October, but there were numerous manufacturing delays. As of October 30, Dr. Thomas R. Friedan of the CDC stated that there were 26.6 million doses available, up from only 10 million a week prior to that.
Manufacturing flu vaccine is a challenge – each dose must be grown in a chicken egg and carefully handled and harvested to avoid any contamination. The yield of antigen is unpredictable, making it difficult to forecast how much to produce. In addition, production must start several months before doses can be administered. Another challenge is that the revenue is relatively small for a complicated product. In short, vaccine production is a complicated process, that must be started months ahead of need and the revenue and yield is very unpredictable.
Once the vaccine is produced, then there is the distribution challenge. The CDC must ship the vaccine to numerous hospitals, clinics, doctor’s offices and pharmacies. In the current situation, many if not most of these organizations want more doses than are available. Thus, doses must be allocated and some potential patients will be left without. Once vaccine is actually delivered to a clinic, it must be administered as efficiently as possible. In short, the distribution of vaccine is one giant application of the newsvendor problem (see pages 222-223 of textbook). In the current case, there seem to be more stockouts than excesses.
Discussion questions:
- How does vaccine distribution relate to key operations and supply chain management questions including: quality management (Chapter 2), new product development (Chapter 3), forecasting (Chapter 5) and project management (Chapter 8)?
- Could more vaccine be made available if the government or patients simply paid more money for it? What are the pluses and minuses of producing extra at an increased cost?
- How should the government and producers balance safety – i.e. carefully assessing the vaccine so that few unintended consequences occur – versus speed of getting the vaccine to patients?
Sources:
- The following article from CNN has some interesting data on flu vaccine production: http://www.cnn.com/2009/HEALTH/10/30/h1n1.vaccine.available/index.html
- The CBS TV show 60 Minutes has a good video on flu vaccine production: http://www.youtube.com/watch?v=ABYrGSCn4M0
