US auto industry, bailout, Toyota and lean manufacturing
US auto industry is going thru very tough times, especially with the rejection of $14 billion bailout package. Ford, GM and Chrysler, US auto manufacturing giants are among tremendous pressure. But the hit on Toyota is comparatively smaller, probably due to their lean manufacturing practices.
As usual tough times bring the best out of anything. There were some interesting topics coming up in the bailout negotiations. Lawmakers want the assurance this will not take place again in future and they want big three to consider building vehicles with higher fuel economy and environmentally friendly. This is ultimately good news for consumers and entire world. I think we are little too late even today.
If these giants fail and stop production, ripple effect will be massive. Job losses are among the most important effects. But how will Toyota respond to this? They have cleaner cars, less manufacturing wastes and they produce cars with higher fuel economy. Ideally they should be able to increase their market share further and become more and more profitable. Isn’t that simple economics. But some have other ideas.
Remember Toyota is mainly an automobile assembler. That is their main business. Parts for their vehicles are manufactured by various vendors all over the globe. Some of these vendors are suppliers for the big three US auto manufacturers as well. So if the big three fail, these vendors will have less orders and they will have to either downsize or probably closedown their operations. Meaning, Toyota will loose their reliable vendors (or partners in lean environment). Toyota need these vendors to operate in their just in time model. Supply chain is the main strength when it comes to operate in a JIT model. Any new comer will have to be adapted in to the lean culture over the time. This might directly impact their production.
It is interesting to see how Toyota, the legendary manufacturer is going to respond to this scenario. Their philosophy of working with few, reliable vendors are under a threat now. Will they change their concepts or will they look at this as learning and prepare for the future. Toyota and their lean manufacturing system (Toyota Production System) love challenges. We have to wait and see.
2 comments:
Hi;
I received a comment on this post via email by Glen Miller. I found his thoughts to be interesting and thought of sharing them with you. Below is his comment.
A comment. Automobile component and parts suppliers will consolidate, become more lean and survive to thrive. Toyota philosophy is so superior and useful that they also will consolidate, become more lean and survive to thrive.
During this whole debate I was amazed but not surprised that neither management or labor recognized or reached out for a better business model. I would pass out if the head of GM said, we will have to consolidate, use Lean, reward cost savings that come from labor or anyone and pay people commensurate with profits and earnings.
There is an other story that is very similar. USAIR has been in bankruptcy twice in the last five years. They still have not changed their business model and continue to provide some of the least customer friendly service I have ever witnessed. There is a business model, in the industry, that works. Southwest does not call it’s model LEAN but it sure has the fundamentals of LEAN. Southwest supplies the customer with what they want, treats employees decent and uses their creativity for the continuous improvement of the company, they have go see management and they reduce variance by having one pretty good size airplane.
It is my belief that American leadership has changed for the worst. It certainly seems clear that many American CEO’s are motivated by something other that growing a profitable company. Labor also has a collaborating hand in the recent demise of the American based auto industry. When Uncle Sam offered $11 billion to help, labor basically said that they did not see a need for them to change.
Glen Miller http://www.performanceessentials.com
hi i am happy to read your book because it is very imporant for industrial engineers, an i want to thank you for that....
omaralmoustafa@hotmailo.com
industrial engineer
Turkey
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