The Five Performance Objectives in Operation Management
Introduction
In operation management (OM), there are five basic performance objectives that organizations must adhere to so as to achieve efficiency and business prowess. Gaining a competitive advantage over other market players requires strategic management, which is a key role played by the Operations Management team (Ferdows & Meyer, 1990). This paper is purposely set to identify and analytically discuss the five basic performance objectives used by the Toyota Company. This company has been chosen due to its global success and rapid growth, to currently occupy the coveted market leader position (Schmitt, 2013). The paper presents a critical analysis of how the roles of the Operations Management influence the performance objectives, and how Toyota has so far used the techniques in OM to achieve them.
The Toyota Company has been chosen in this paper due to its stellar global performance, exhibited by its rapid growth in the Automobile industry. It is most likely that nowadays, in every 3-4 vehicles plying the roads, one of them is a Toyota brand (Schmitt, 2013). It is this degree of market infiltration that has been so far achieved by the company that has qualified it to be a subject matter in critical review of the key performance objectives.
The Toyota Company was founded in 1937 as a spinoff from the Toyota Industries, by Kiichiro Toyoda with a primary focus of creating automobiles. The company is one of the largest in the automobile industry, and is part of the TMC, which is one of the global conglomerates. From its first product of Toyota AA in 1936, the company has grown tremendously, and currently operates under five major brands, that is, Ranz, Hino, Lexus, Toyota brand, and Scion (Schmitt, 2013). In the year 2013, the company was listed as being the largest in Japan in terms of market capitalization. It is roughly estimated that it produces more than 10 million vehicles per year, constitutes of more than 333, 400 employees, and is the fourteenth largest company in the world in terms of revenue (Simon et al., 2010). The company strategy, as is discussed in the advanced sections of this paper, has evolved over time, to achieve the most efficient, customer friendly, and affordable products of all time.
The Five Performance Objectives and their Application in Toyota Company
The Toyota Company, having ascended to the helm of market leadership through strategic production and marketing, must have put in place various performance objectives, which guided its operations management system. Among the most common objectives used by many organizations include: quality, dependability, speed, flexibility, and cost. The institution and successful management of these performance objectives is a crucial tool to achieving desired business access, as manifested by the Toyota Company. For these objectives to be met, transformation process must apply, where relevant resources are input, they undergo a transformation process, deliver output in terms of products and services, and these are delivered to the customer (Jingfeng et al., 2009).
Quality, as the first facet of the performance objectives in operations management, is a key aspect that must be met by all organizations that wish to succeed (Piercy, 2012). It refers to providing error-free goods and services to customers and which are fit for the purpose intended for them. These products and services must, thus, be able to completely satisfy the customers by providing them with a quality advantage. Quality is important as it enhances the products and services’ acceptability in the market, so as to avoid customer complaints (Holl, Pardo, & Rama, 2010).
The Toyota Company has been able to excel in the quality of its products, which are trusted by many customers due to their fuel efficiency, customized features, and affordability. Its management philosophy, which has been manifested through Just In Time Production and Lean Manufacturing, has always played to its advantage, as the company has been able to produce high quality products at a cheaper cost. Actually, the collective business and managerial strategies employed by the company have been colloquially referred to as “the Toyota Way”. As a result of these composite quality improvement strategies, the company has operated under the banner of two key principles: Continuous Improvement and Respect for People, which is deeply embedded within its TPS system of Kaizen. This particular management system enables the company practice continuous improvement of its products based on customer complaints and suggestions. In terms of quality, therefore, the company has been able to provide automobiles whose assemblies are tailored according to customer specifications, are reliable, attractive, and blemish-free.
The second performance objective is Speed. This entails doing things fast, so that the time that is consumed between customer requisition of goods and services and final receipt is substantially lessened (Piercy, 2012). Basically, speed makes a company’s goods and services available to the customers at the right time, thus giving them a speed advantage. Externally, fulfilling the demands of a speedy service provision of product delivery enhances the comparative their value to the customer; but it also has far-reaching benefits to the internal operations of a company, including increasing dependability, and saving on cost (Skinner, 1969).
In the automobile industry, the speed factor comes vividly into play. For instance, most clients like ordering for custom-made vehicles, which they may want delivered within a specific period. If the company is able to deliver the vehicle on or before the stated deadline, with all the specifications met, then the customer would surely be satisfied. The Toyota Company has a fully automated system which focuses on time reduction as a key component of production. The management believes that for it to excel, then the time spent on inventories as well as the entire production process has to be significantly reduced. Apart from automation, the company has also heavily invested in franchises and devolved branches, so that the supply and deliver of semi- or fully finished products can be hastened. Through its extensive global supply chain, Toyota Company has been able to efficiently supply all the spare parts and finished automobiles to its worldwide customers without spending unnecessary time on the way.
Thirdly, Dependability is another key performance objective, which entails doing things on time and keeping promises made, thereby giving customers a dependability advantage (Piercy, 2012). It functions to improve the company’s image, thereby enhancing its products in the market. Over time, the Toyota Company has grown to be largely dependable, delivering goods on time through massive networking, and complete automation of its operations, also referred to as Jidoka. As such, issues of lateness are completely avoided, and the company has been able to save huge costs out of the Jidoka system, which is “automation with human touch”. This system ensures that in case something goes wrong within the production process, the whole setup stops, so as to avoid manufacturing of defective products. Thus, quality and cost as parts of performance objectives have been met in this manner.
Flexibility, as the fourth performance objective, refers to being able to alter the normal operations of a company through variation and adaptation, so that it can withstand every unplanned circumstance, to ensure that customers’ needs are met, and they are given a flexibility advantage (Cokins, 2009). The Toyota Company has been an embodiment of change adopters, owing to the rapid changes in the tastes and preferences in the automobile industry. This has been seen in its continuous introduction of new brands, creation of customized brands, and subsequent withdrawal of obsolete ones from the market. One outstanding aspect of the company was its ability to withstand the unprecedented global recession of 1973 oil crisis.
Lastly, cost is also an important aspect of the pyramid of performance objectives; in fact, being at the top according to the Sandcone model of improvement proposed by Ferdows and De Meyer (1990), it is the ultimate facet to be achieved after all the previous objectives are met. The primary focus of cost is do things cheaply so that customers are given a cost advantage. The Sandcone model can be applied in Toyota as a guide to the achievement of all the five performance objectives, without creating a clash among them. The pyramid ranks the objectives according to the order in which they ought to be met. The company has continuously exploited this segment of the performance objectives by applying the Lean Manufacturing principle. As opposed to other brands, Toyota has managed to target the low-level customers, which obviously, are the majority. Due to this, it has been able to manufacture high quality products from scanty raw materials and maximum waste reduction, to result in affordable vehicles that have infiltrated the market. The company has also realized that in the automobile industry, the initial cost of purchasing a vehicle plays just a small role in most customer purchase decisions (Nafziger & Jochim, 2013). Based on the above principle, it has designed vehicles that have very low fuel consumptions, cheap, and accessible spare parts, so that the maintenance costs are equally low. Therefore, most purchasers prefer Toyota brands over the others due to its low on-going maintenance and operational costs.
Toyota’s Use of OM Techniques to meet the Five Performance Objectives
As aforementioned, the Toyota Company has always capitalized on two main OM principles: Lean manufacturing and Just In Time (JIT). The two have been used either concurrently or interchangeably, to give the best desired outcomes. The former has enhanced production of quality, affordable products by the use of the lowest amount of raw materials (Jingfeng et al., 2009). The principal aim of the strategy, as has been applied by the company, is reduction of wastes and inventories, which Toyota’s TPS names muri, mura, and muda (Simon et al., 2010). Through the application of this principle, the company has been able to explicitly achieve all the five performance objectives, since the TPS is centrally focused on elimination of waste, or muda, in terms of over-production, slow operator or machine motion, unnecessary waiting, delays in conveyance, extended processing time, overuse of inventories, and recurrent cases of corrections/rework (Cheng, Choi, & Zhao, 2012). As noted by Brown, Squire, and Lewis (2010), the TPS is one of the most efficient management systems ever used, with its main focus on three things: highest quality, lean production, and shortest lead time. The three pillars of the TPS have been very effective in enhancing the achievement of the performance objectives in the Toyota Company. However, it is imperative to understand that it is impossible to satisfy all the five objectives through the use of singular OM techniques, since trade-offs are most likely to occur between them.
On a similar note, the company has always made use of the Just In Time technique as a way of meeting its performance objectives. The OM technique is applicable in cases where dependability, flexibility, and speed are the key parameters that are to be achieved (Matthews & Marzec, 2012). (Piercy, 2012; Simon et al., 2010). The JIT system has enabled Toyota to make a great milestone in the realization of the performance objectives, primarily through the use of minimal inventories. This has been achieved by means of having a continuous flow of manufacturing operations, less processing time, and efficient pull system. In extension, this system makes it possible for the company to provide their customers with their products in an appropriate time thereby promoting dependability; work with speed within the manufacturing and supply chain processes, thus giving its customers a speed advantage; and reduce wastes through the use of a continuous process and lean manufacturing, to enable it give its customers a cost advantage.
Conclusion and Recommendations
The five basic performance objectives in operations management include: quality, speed, dependability, flexibility, and cost. Through the application of various OM techniques such as lean and JIT, supply chain networks and logistics, capability planning and control, e-operations, TQM, and process technology among others, an organization such as the Toyota Company can be able to achieve its performance objectives. However, it is recommended that focusing on all the objectives at a time may not make economic sense, since possible trade-offs between them may arise. As discussed, in Toyota, Trade-offs between performance objectives did occur when in the attempt of saving costs through lean manufacturing; the company’s products have reduced in quality and efficiency, so that they are not considered by most customers as being prestigious. Toyota, being a key player in the automobile industry, needs to maintain high level of flexibility and dependability so as to maintain its huge customer base.
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