As a car manufacturer, how do you compete with an industry giant, such as Toyota? Well, incorporating Just In Time [JIT] into your production strategy might help you do that. In fact, it’s a must-include in your new manufacturing approach.
Introducing TAIZO MOTORS!
For the purposes of this article, I have created a fictitious car company called TAIZO MOTORS. California-based TAIZO produces a range of six car models, and is typical of many companies seeking to compete with Toyota.
TAIZO must first stop leaking market share before striving to challenge Toyota’s market dominance of the US automotive industry, their overall goal being: “To find and implement the best business practise, to achieve a greater market share.”
About TAIZO’s new approach
TAIZO’s senior management team feels strongly that imitating Toyota’s car manufacturing lean-production approach (incorporating JIT, total quality management and continuous improvement) is their best strategy, and so pitch a proposed plan of action, Operation Transform, to the company’s Kagoshima-based Chairman, Mr Oshiro, which he approves. However, Mr Oshiro is adamant that to gain a real competitive edge, TAIZO must also come up with a unique selling point.
Also, and crucially, Mr Oshiro impresses upon senior personnel the importance of TAIZO adopting a new mindset when it comes to logistics. To ‘move with the times’ as they work towards being seen as a serious global player in the automotive industry, rather than perceiving TAIZO as one entity in a supply chain, TAIZO should, from now on, see themselves as part of the wider picture. Adopting an integrated approach, creating closer ties and sharing information between all supply chain links is to be encouraged. Also, there must be definite ‘fit’ between the new proposed logistical set up of TAIZO, and the wider strategic direction of the company itself.
A TAIZO junior executive, with a particular interest in green business practices, suggests the following USP: “As well as offering excellent vehicles and rock solid customer service, when setting the MSRP TAIZO will not pass on a destination charge* to consumers.”
*The destination charge is the cost of transporting new vehicles to dealers. Much of this cost is usually passed on to consumers.
To bear this cost in full themselves, and for several other reasons, TAIZO decides to exploit geographical advantage, by relocating its production facilities to America’s Midwest. Note: Once there, the junior executive also suggests, the company can also possibly make savings through being awarded government rebates, for installing environmentally-friendly lighting systems and other energy-conserving equipment in the new production plant’s internal and external areas. These savings could also help TAIZO to solely bear their goods transportation costs themselves.
OPERATION TRANSFORM – STATEMENT OF GOALS
1) TAIZO’s SHORT-TERM GOAL: To continue production and fulfilment of orders and commitments during TAIZO’s initiative-structured research phase into how to improve on their current position, and also during the transitioning of their current operational MRP push system to one similar to Toyota’s JIT pull system, once at their new location.
After closing down its in-house components production unit, TAIZO will relocate its production plant from Sacramento on the west coast to Detroit on the United States/Canadian border, from where it can more easily and cost-effectively ship its cars to New York, Chicago and Toronto along road, rail and water routes.
The new plant will be purposely designed and constructed to best facilitate car components flow. The layout will see workers grouped into areas to do particular tasks on the cars as they come through the plant. Until now, TAIZO workers have relied upon conventional automated systems, but in Detroit will be aided by new machines, not taken over by them. This should improve production and markedly reduce equipment maintenance problems, saving TAIZO time and money.
TAIZO decides that it would minimise lead times and make better economic sense to subcontract components supply out to Michigan-based suppliers in the State’s thriving manufacturing sector; TAIZO’s purchasing policy being: “Sourcing components of the right quality, not just the cheapest ones.”
Relocating to Detroit will also put TAIZO in closer proximity to dealerships. This will minimise their own lead times and delivery times.
2) TAIZO’s MEDIUM-TERM GOAL: Post-transitioning, TAIZO will set a new production target, increasing production capacity from 100,000 to 150,000 cars per year.
3) TAIZO’s LONG-TERM GOAL: To compete with Toyota for the position of market leader, to become the industry’s No.1!
To be continued…
(Look out for next month’s blog post, where I tell you all about TAIZO’s four OPERATION TRANSFORM key initiatives!)