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
