The Fall of Toyota

Ok, so many may not know this, but I love car manufacturing! And for a few years now, Toyota has been at the top of my list of amazing companies I want to work for. Unfortunately, the recalls, infighting and bad press has made me question exactly what Toyota stands for in this modern day and age. So here is my little commentary on an issue very close to my heart...

Sure, they may have once been the most reliable cars on the market, but the seemingly never-ending recalls on numerous Toyota models since late 2009 have challenged that. Despite desperate attempts to reinstate their reputation for quality, consumers and investors alike have been put off by yet another recall of 1.7 million cars.

Having a (modest) background and interest in Lean manufacturing: the techniques pioneered by Toyota decades ago, this really raises a lot of questions! Firstly, Lean is the term used to describe a series of philosophies that Toyota's founding fathers instilled in their business, making it the number one automotive manufacturer in the world, racing past the giants of Ford and General Motors. Based on the principles of minimizing waste and creating flow, costs were cut as quality was continuously improved.

Quality. This was the cornerstone of Toyota's success! Toyota has long since held the reputation of building cars to last a lifetime, cars that you could hand down to your kids, cars that were designed and built so well, they they never broke.  Their standards were incredibly high as everything about their design process and manufacturing line was tuned to spotting mistakes as they occurred...and fixing them at the source. Whilst in the conventional Western automotive manufacturing house, if a defect was discovered, the defective component would be removed from the line for rework. In Toyota, 'andon' cords were installed above each and every employee's workstation. Each and every employee has the authority, and is even encouraged to stop the entire production line if a problem is found that cannot be solved in a few seconds. In this way, no part is passed on that does not meet the stringent quality standards. Furthermore, as problems are solved as they occur, continuous improvement is possible! 

So lets see what the critics say. Just type in 'Toyota quality crisis' into Google, and you'll find tons of experts giving their ten cents. I found this article incredibly ironic! They are practically preaching the fundamentals of Lean back to Toyota! And what about the infighting between top Toyota executives, with the current president alluding to the non-Toyoda family ex-president for the compromise on quality? I'd be a bit weary of this skape-goating attempt. Looking deeper, an idea arises: since the adoption and whole-hearted application of Lean was the tool that grew Toyota into the giant it is, could this same tool now be the reason for its undoing?

Deming, (one of the brilliant minds behind Lean), says in his book "Out of Crisis":

…the following chain reaction became engraved in Japan as a way of life. This chain reaction was on the blackboard of every meeting with top management in Japan from July 1950 onward. The production worker in Japan, as anywhere else in the world, always knew about this chain reaction; also that defects and faults that get into the hands of the customer lose the market and cost him his job. Once management in Japan adopted the chain reaction, everyone there from 1950 onward had one common aim, namely, quality.(p.3)

Sounds great, doesn't it? Well, then what went wrong?

Well, I wonder how many blackboards (I mean power-point projections) this chain reaction appears on today. Chances are, it hasn't appeared on any Japanese walls for some years now. Some believe that the problem is systemic, but you cant deny that Japanese culture and more specifically, organizational culture have changed dramatically since the 1980's. Although the practices of Lean still exist within the business, their leaders lack the depth of understanding that is necessary to implement them effectively. 

The shift in mindset from 'The company with the highest quality in the word' to 'the largest auto-manufacturer in the world', the preoccupation with 'family' and 'non-family' leadership and most importantly, the reorganizing of the above chain reaction with 'improve quality' not being the first link in the chain has cost Toyota dearly. 

For more info and insights, read this: Dialogue regarding Toyota's Quality Crisis