Toyota's Kaizen Experience

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Case Details:

Case Code : OPER006
Case Length : 12 Pages
Period : 1990 - 2002
Organization : Toyota
Pub Date : 2003
Teaching Note : Available
Countries : Japan
Industry : Automobiles

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Human beings think our way is the best, but at Toyota, we are told we have to always change. We believe there is no perfect way, so we continue to search. The goal is to break the current condition through Kaizen."

- Shoichiro Toyoda, Chairman, Toyota Motor Corporation, in December 2000.

Toyota Reinvents the Need for Kaizen

In the early 1990s, the Japanese automobile major, Toyota Motor Corporation (Toyota) was facing acute labor shortage. The emergence of high wage jobs and a shortage of young workers due to the low birth rates in Japan in the previous two decades were the primary reasons for this. The number of women and aged people was increasing in the country's labor pool. These people avoided heavy manufacturing work.

Toyota's strong focus on improving productivity and production efficiency over the decades had created strained work atmosphere as the workers were reportedly over burdened. This led to an exodus of young workers from the company.

Operations Management Case Studies | Case Study in Management, Operations, Strategies, Marketing Management, Case Studies

In 1990, around 25% of newly hired young workers left the company in their first year itself. To deal with the labor shortage problem, Toyota employed many temporary workers in the assembly plants. The ratio of temporary workers in the workforce soon reached more than 10% - some work groups had around 75% temporary workers. As these temporary workers were not adequately trained, the annual working hours of the company increased, while productivity decreased (Refer Figure I).

Further, according to analysts, Toyota management's focus on increasing production efficiency by achieving higher production levels with less number of workers resulted in increased stress for the workers. This also played a major part in the worker exodus. Toyota's problems increased with by the global upsurge in car demand during 1987-1991 because of which the demand for labor shot up. As high wage jobs were easily available to the limited pool of young male workers, many Toyota workers began to leave the company. To handle the crisis, Toyota radically changed its production management and human resource management practices.

The company decided to change its working conditions to attract high school female graduates and workers over forty years. Toyota realized that it would have to rely on Kaizen for modifying its existing assembly lines to attract workers.

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