Toyota’s Operations Strategy

  Operations Strategy     5

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Lean Manufacturing

Toyota’s lean manufacturing has enabled the company to focus on consistent design and responsive approach to production operation. The company’s workforce is self-directed and motivated by output based measures and customer oriented criteria. The concepts of just in time (JIT), Kanban and respect for employees together with expedited problem solving approach (automated error correcting) has enabled the company to pursue lean innovations.  Lean manufacturing has enabled Toyota to successfully develop its production systems to include new types of designs. The principles enables Toyota to manage its value stream, identify customer value, implement a “pull” approach that ropes the flow of scarce materials in operations and the overall development of production capability. The success of this ingenious strategy has enabled the company to rise up to global success in the auto industry.  While the company still maintains its impressive performance in the application of lean practices, less of its competitive edge can be traced to TPS, more comes from applying lean product development strategies. As a result, lean best practices provide synergy to Toyota Production System.

Supply Chain Management

Toyota’s Supply chain management is a perfect combination of Porter’s value chain strategy, Kierestsu strategy, and Eliyahu Goldratt’s theory of constraints.  Supply chain involves all activities associated with the transformation of raw materials into finished products and flow of products to the consumers as well as the flow of information. Toyota modernized its supply chain management by using information management systems in the 1980’s; suppliers, dealers, body makers, and customers were all linked to the Toyota Network System (TNS). The overall goal of supply chains is to keep all the major components connected. For instance
connecting warehouses and the vendors ensures that inventory management process keeps running effectively at all times (Lancioni, 2000). Currently, Toyota’s supply chain has gone a bit awry, inevitably raising a number of questions, particularly in the recent (2009/2010) failures and recalls.

Global Competiveness

In the United States, Toyota’s market leadership was molded on a competitive advantage that ran across the company’s entire supply chain. Toyota Company’s operation in the US has continued to establish a competitive advantage due to its dedicated focus on quality and innovativeness. In addition, knowledge is effectively shared across the supply chain to enhance creativity and innovation. The seamless sharing of information is however a disadvantage, the risk of spillover to competitors is high.  However, Toyota is not so concerned that its creative
knowledge may spill over to competitors; they admit that some of the information will actually leak but by the time it does so, they will be several miles ahead. The company has remained committed
to the integration of people, processes, resources and technology so as to add value to their customers and the society in general (Krause, Handfield, & Tyler, 2007). Toyota successfully and uniquely leverages suppliers and technologies in its lean product development strategy. The company even sometimes helps suppliers with the development of product strategy (Teresko, 2007).

Toyota’s top performance over the years has been based on the mastering of the Toyota way (Liker, 2004). However, of late the company has faced challenges where it had to recall some of its cars for safety reasons.  Toyota’s problems originate from its overstretched supply chain, as a result of the breakneck expansion of the company since 2002.  The company grew to become dependent on suppliers outside Japan, clutching on the basics of collaboration, also minimizing the complex task of integrating its manufacturers who are located around the world. The carmaker utilizing the approach of sole sourcing, Toyota gained incomparable economies of scale, where sole suppliers were used for all of its car models.

Toyota is a multinational success story that affects and is affected by the process of globalization. Globalization has led to localization of production and a higher level of cooperation between production units of the carmaker that are situated in different parts of the world. The benefits are evident; the company has successfully reduced financial barriers, hence affecting the conventional management of the company, particularly with regards to human resource management. The company’s human resource management practices are rather ineffective, as the traditional principle of the teams work has turned out to be counterproductive in new countries as compared to Japan. On the other hand, the expansion of the global market as stimulated by the process of globalization affects the company’s ethical issues, thereby increasing risk of cultural conflicts within the organization. However, Toyota has responded well to this by developing of universal ethical principles and corporate culture to govern the supranational units. In the face of all these challenges, the position of Toyota is still very strong, essentially due to the company’s wide implementation of technological innovations, and its mass customization as opposed to mass production, especially when it comes to hybrid cars (Sanna, 2005). This strategy has enhanced the vanguard position of the company in the global market. With this trend, Toyota demonstrates a strong trend to globalization of its production process that appropriately matching the changes in its style of management style which puts the company in number one spot in the auto industry.



Krause, D.R., Handfield, R.B., Tyler, B.B. (2007). The relationships between supplier development, commitment, social capital accumulation and performance improvement. Journal of Operations Management 25 (2), 528–545

Lancioni, R. (2000), “New developments in supply chain management for the
millennium”, Industrial Marketing Management, Vol. 29 No.1, pp. 1-9

Liker, J. K. (2004). The Toyota Way: 14 Management Principles from The World’s Greatest Manufacturer

Sanna, L. (2005). “Driving the Solution: the Plug-in Hybrid Vehicle”. EPRI Journal, p.8-17.

Teresko, J. (2007). “Toyota's Real Secret: Hint, It's Not TPS.” Retrieved April 20, 2011 from