114109174 just in time toyota vs nissan

7/24/2019 114109174 Just in Time Toyota vs Nissan

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Abstract

Toyota Motor Corporation and Nissan Motor Corporation were established in 1937 and 1933

respectively. They have been facing the same global challenges as well as the same politico-

economic changes domestically and globally. They have similar bsiness resorces sch as wor!

force" capital" prodcts" technology" and information. #ow" then" can there be sch ma$or

differences in their overall bsiness performance% This case highlights the activities"

performance level" operation mode of Toyota and Nissan" their &'T implementation stats. This

research also shows the similarities and differences in performance level of these two firms with

a view to show effectiveness as well as competitive advantage. 't also addresses recent sccesses

and challenges Toyota and Nissan may face in the ftre.

KEYWORDS

Toyota" Nissan" (eadership" )overnance" *trategy" &st-'n-Time method" Toyota +rodction

*ystem" ,les-in-se" process improvement

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TABLE OF CONTENT

1. 'NT,/0CT'/N3

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>. 2N2'T* /, 'M+(2M2NT'N) &'T M2T#/05..:1

7. C/M+2T'T'62 4064NT4)2 / T//T4 4N0 N'**4N5:O by 198=. ;hen &apanFs economy boomed in 1987" Nissan dobled its prodction

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capacity and strengthened its sales networ!. 4s a reslt of rapid eEpansion" NissanFs debt rose to

P19.< billion by 1998. ;hen the &apanese economy went into recession in the early 199s"

Nissan fond itself in a debt trap. NissanFs prodctivity and financial problems trned for the

worst in the 199s" and in 1993 it recorded its first loss since going pblic in 19=1. The efforts

of restrctring of the 199s did not improve NissanFs financial performance and by 1998 it had

incrred losses for seven years of the prior eight years. ltimately" to avoid ban!rptcy" Nissan

was forced to enter into alliance with rench ,enalt in March 1999.

-.1 /+T &%$#e%entat&on &n N&ssan

;ith a $st-in-time approach" specific vehicles and their components are prodced $st-in-time to

meet the demand for them. *b-assemblies move into the final assembly plant $st as final

assemblers are ready to wor! on them" components arrive $st in time to be installed" and so on.

'n this way" the amont of cash tied p in stoc!s and in wor!-in progress is !ept to a minimm"

as is the amont of space devoted to costly warehosing rather than to revene-generating

prodction. NissanFs $st-in-time process depends not on hman frailty bt on machine precision.

2very vehicle is monitored atomatically throghot each stage of prodction. 4 transponder

attached to the chassis leg contains all of a vehicleFs prodction data e.g. its reAired color"

specification and trim. This triggers sensors at varios points along the prodction line ths

pdating the records.

;hen" for eEample" the transponder sends a message to the prodction system at a spplying

company to prodce a seat in a particlar color and trim" this triggers the relevant response and

a seat to the reAired specification is prodced. rther along the prodction line the specifically

prodced seat arrives to meet the vehicle to which it belongs - $st in time.

-.2 ro!0ct&on %etho!s an! Act&t"&tes o( N&ssan:

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The Times 1 series of case stdies cover a wide range of real bsiness sitations" one of which

is a stdy of the prodction methods in se at NissanKs *nderland car plant. The plant is one of

the most modern car plants in 2rope and has consistently been in the very top of the

prodctivity leage tables. The case stdy helps yo to have some nderstanding of the factors

that contribte to this sccess.

-. Wor(orce an! ro!0ct&"&t' o( N&ssan:

NM is one of the most prodctive car plants in 2rope" prodcing more Kcars per manK than

any other factory. There are


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is a reflection of the state of the motor indstry and manfactring in general in the . The

proliferation of low cost contries ?eastern 2rope" China and 'ndia@ is feling a migration of

manfactring from the . 'n response to this" manfactrers are having to ct costs in

order to srvive in an increasingly competitive world mar!et. The pay negotiations were

sspended for :9Q1 de to the instability in the world mar!ets" effectively meaning there has

been no pay award agreed.

=. Comparison between Toyota and

Nissan5

.1 er(or%ance Le"e# o( To'ota an! N&ssan:

Toyota had a healthy growth in its mar!et share" revene" and profit from early 197s" bt

Nissan did not fair well in the 198s. NissanFs performance trned for the worst in the 199s"

and it incrred seven years of annal losses in eight years of operation from 199: to 1999?igre 1@. 'ts atomobile prodction declined significantly in the 199sL its domestic mar!et

share declined from 18.>O in 1989 to 13.3O in 1999L and its global mar!et share declined from

>.>O in 1991 to a low of


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.2 )an0(act0r&n, Techno#o,' an! O$erat&ona# E((&c&enc'

Toyota and Nissan mastered the 4merican trc! manfactring techniAes dring the 193s and

19s. y then" they had srpassed 4merican atoma!ers in terms of the prodctivityL and the

Aality" performance" and price of their small cars were competitive with 2ropean atoma!ers.

Their sccess in manfactring technology too! decades and it involved a niAe combination oftechnology transfer and process innovation. #owever" the approaches of Toyota and Nissan in

technology transfer were very different.

To'ota:

Toyota mostly relied on indirect technology transfer that consisted of selective coping of designs

and manfactring techniAes from different foreign atoma!ers" whereas Nissan relied mostly

on direct technology transfer throgh formal tie-ps with foreign atoma!ers li!e ritish"

4merican" and )erman atoma!ers or part manfactrers. or Nissan" tie-ps had an advantage

of speedy introdction of new models comparable to imports" bt this approach loc!ed Nissan

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into designs that were not the most advanced and sppliers that most often were not cost

efficient. ToyotaFs advantage with indirect technology transfer was three fold5

irst" Toyota engineers were able to dplicate proven technologies selectively from

different manfactrers and to incorporate advanced featres mch faster than Nissan in

their atomobile designs.

*econd" indirect technology transfer provided Toyota a valable eEperience in

engineering design that became highly valable for development of new prodcts or

improvement of eEisting designs.

Third" ToyotaFs reliance on in-hose engineering prevented them from adopting

manfactring techniAes and" more importantly" eAipments that were better sited for

larger manfactrers that emphasiBed economics of scale in manfactring as was the

case for 4merican and 2ropean atoma!ers.

Moreover" /hno devised a revoltionary approach to assembly of parts and lean manfactring

throgh the reversal of the information flow from a forward psh to a bac!ward pll. The

classical forward psh system of assembly line reslted in a tremendos amont of wor!-in-

progress inventory or idle parts sitting at different stages of prodction line. The bac!ward pll

as!ed wor!ers to go bac! to the previos stations to ta!e only materials or parts they needed" anda rle was established that no station shold prodce more parts than the neEt station cold

handle immediately. y reversing the system" /hno cold identify waste in manfactring"

transport" bffer stoc!s" eAipment operation" wor!er motions" defective prodction" inspection"

and finished prodct inventories. 4s a reslt" the bac!ward pll system forced process

improvement. y 197" the bac!ward pll ?anban@ and &st-in-time inventory system had

become the most important techniAes that increased prodctivity and at the same time redced

the prodction cost at Toyota.

N&ssan:

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Nissan managers were aware of the /hnoFs techniAes from early 19=s" bt some ma$or factors

inhibited them to copy ToyotaFs manfactring techniAes.

irst" the types of machinery that Nissan had were highly specialiBed and not sitable for

reconfigration to be sed for mltiple prposes as was the case for ToyotaFs machinery.

*econd" the nion at Nissan opposed cycle time redction and wor!erFs overtime.

inally" geography affected how Nissan and Toyota reacted to the prodction

management since ToyotaFs rral wor!ers had lower consciosness of labor and

management distinction" i.e. higher power distance" verss NissanFs rban labor force

that demanded greater role in rnning the company.

*o" NissanFs answer to /hnoFs techniAes was wide spread se of high speed single fnction

machine tools with the goal of higher prodctivity throgh atomation. 0ring the 197s" as

manfactring volmes and prodct compleEity rose" Nissan improved its compter based

prodction system and lin!ed factories to main sppliers throgh on-line terminals and added

highly atomated robots. Nissan managers eEpected to bring the same reslts as /hnoFs

techniAes" bt by mid 198s the Toyota wor!ers prodced more cars" added more vale" and

yielded more profit per employee than Nissanites.

. ro!0ct&"&t' o( To'ota an! N&ssan:

*everal important factors helped Toyota to set the standard for prodctivity and profitability.

Most of ToyotaFs assembly plants and its parts sppliers were both located in the rral areas of

&apan. This became critical in sbseAent years for the effectiveness of &st-in-time

manfactring de to the proEimity and ease of part transportation in the spply chain. This was

not the case for Nissan who had plants in the rban areas of &apan mostly close to large

metropolitan areas. The nions of Toyota and Nissan also played an important role in thedifferences between prodctivity and the manfactring cost strctre of the two companies.

The nion at Nissan" nli!e ToyotaFs" opposed methods to compress cycle time" raise assembly

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line speeds" or se overtime when the demand was high. igre 3 shows the prodctivity per

employee at Toyota and Nissan from 19= to 1983.

>. enefits for 'mplementing &'T Method5

To'ota:

To'ota3s 4#oba# Co%$et&t&"e A!"anta,e:

ToyotaFs global competitive advantage is based on a corporate philosophy !nown as the Toyota

+rodction *ystem. The system depends in part on a hman resorces management policy that

stimlates employee creativityand loyalty bt also on a highly efficient networ! of sppliers

and components manfactrers.

De(eat&n, the R&"a#r':

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/ne reason why Toyota is overta!ing )M ?)eneral Motors@ in the mar!et is its highly

efficient prodction system. Toyota grops its wor!ers on the assembly line in teams" and

gives them individal responsibility to correct mista!es before the cars reach the end of the

line.

'n the graph yo can see how KThe ig ThreeK ta!e more time to bild a car than a &apanese

company li!e Nissan" Toyota and #onda. Toyota prodces more environmentally friendly and

reliable cars. Now Toyota is set to overta!e )M as the worldFs largest carma!er" ending 7

years of dominance.

Re!0c&n, the ro!0ct&on t&%e:

&'T ,edces set p times in warehose - the company in this case can focs on other

processes that might need improvement. 'mproved flows of goods inQthroghQot warehose -

employees will be able to process goods faster. 4s a reslt" the prodction level increases.

N&ssan:

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#ow long does it ta!e to bild a car%


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Cost Re!0ct&on:

(i!e Toyota" Nissan ses KaiBenK and a K&st-in-TimeK prodction system. Nissan" however"

have ta!en K&st-in-TimeK a stage frther. 4 separate company ma!es parts on the same site as

the car plant in order that components may be delivered $st in time for assembly. This saves

transport and storage costs as well as theft and is an innovative system for a car plant.

)ore #abor e((&c&enc' an! #ess $ro!0ct&on t&%e:

ThatFs a crde indication of what is involved. Management is particlarly !een to monitor total

machine-hors and total labor-hors that each vehicle reAires.

/ther facilities of Toyota and Nissan for implementing &'T method in their prodction process

are5

2mployees who possess mlti-s!ills are tiliBed more efficiently - the company can se

wor!ers in sitations when they are needed" when there is a shortage of wor!ers and a

high demand for a particlar prodctL

etter consistency of schedling and consistency of employee wor! hors - if there is

no demand for a prodct at the time" wor!ers donFt have to be wor!ing. This can

save the company money by not having to pay wor!ers for a $ob not completed or cold

have them focs on other $obs arond the warehose that wold not necessarily be done

on a normal dayL

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'ncreased emphasis on spplier relationships - having a trsting spplier relationship is

important for the company becase it is possible to rely on goods being there when

they are neededL

*pplies contine arond the cloc! !eeping wor!ers prodctive and bsinesses focsed

on trnover - employees will wor! hard to meet the company goals.

7. Competitive advantage of Toyota and

Nissan5

a. ;ar of attrition between Nissan and Toyota before Toyota even entered the 4merican mar!et

reslted in a great cost advantage for Toyota over 4merican car companies

b. ,ivalry for mar!et share in &apan was fierce" with both Toyota and Nissan loo!ing for ways to

ct their costs and ma!e better cars at the same time.

c. Toyota and Nissan saw increased mar!et share in &apan as another way of speeding p the

learning crve5 whoever prodced more cars wold learn faster how to prodce better" cheaper

cars.

.

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8. /bstacles in &'T 'mplementation5

To'ota

Toyota company is eEperiencing cltral barriers to &'T as they globaliBe operationsL e.g."

globaliBation does not atomatically eEport the trst reAisite to &'T into foreign sppliers

?Csmano" 199


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managers encontered in persading adoption of their traditional familial references" ie" where

direct laborers are referred to as JchildrenJ of the company.

N&ssan

Nissan began to eEperience difficlties with &'T deliveries in congested" rban areas as early as

the 197Ks when they adopted the Toyota style" difficlties not then eEperienced by sppliers

en$oying the proEimities of Toyoda City. 'n recent years" increasing congestion effected by

rising rates of &'T deliveries forced the &apanese government to lanch a media campaign

encoraging companies to actally redce the freAency of their material deliveries ?Csmano"

199


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and all wor!flow processes. *ynergy is the only thing that can improve bsiness reslts. 4nd in

the bottom line" the &'T concept is $st one lin! in the whole chain" bt very important.

10. References:

'nformation 2merges on TransportationFs ifth Modes.D +rchasing?17 &ly 1997@.

&'T5 4 +rocess with Many acesL &'T.D +rchasing ?< *ept. 1997@

&ohnson" ).*. &'T Ma!es ig Three 6lnerable to *tri!es.D &ornalof Commerce ?18*ept. 1997@.

(ambert" 0.M." and &.,. *toc!. *trategic (ogistics Management" 3rd ed. New or!5Mc)raw-#ill" 1993.

/nline" 'nternet5 ;;; address5 http5QQfedwE.comQsQabotQfacts.htmlQ ?1 Mar. 1998@.

/nline" 'nternet5 ;;; address5 http5QQmiras.comQhtmlQprodcts.htmlQ ?1> eb. 1998@.

/nline" 'nternet5 ;;; address5 http5QQroberts.comQtechnology.htmQ ?: Mar. 1998@.

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/nline" 'nternet5 ;;; address5 http5QQps.comQabotQglance.htmlQ ?1 Mar. 1998@.

+orter" 4.M. The +roblem with &'TL &'T 'nventory *ystems.D+rchasing ?18 *ept."1997@.

114109174 just in time toyota vs nissan

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