Problem Statement
Toyota Motor Manufacturing USA, Inc is dealing with an increasing problem regarding seat supply, and one of the main reasons for this issue is due to seat defects. This has led to a decreased run ratio on the line, as well as resulting in the rising number of vehicles sitting off line with defective seats or no seats at all thus requiring overtime to make up for the loss of production. In addition, it should be mentioned about the way Toyota Motor Manufacturing handles the defective seats as they migrate towards the TPS (Toyota Production System) standards.
Situation Analysis
The major issue regarding seat supply limits the company by not allowing them to supply vehicles on time to the sales companies. The run ratio dropped ten points from around 95% to 85% due to the seat defects. This 10% difference is equivalent to approximately 45 vehicles per shift, which results in a potential loss of almost $74,000,000 per year. This deficiency requires high overtime for the personnel to cope with in response to the demand in the market. It scores a 50% premium for overtime, resulting in an additional cost of over $7 million per annum. The increasing number of vehicles sitting off line with defective seats or with no seats at all results in a loss of production due to the wait time and the rework.
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Toyota Motor Manufacturing, U.S.A. (TMM) is deviating from the standard assembly line principle of jidoka in an attempt to avoid expenses incurred from stopping the production line for seat quality defects. This deviation has contributed to the inability to identify the root cause of the problem, which has led to decreased run ratios on the line and an excess of defective automobiles in the overflow lot for multiple days. If this problem isn’t fixed quickly, an increased amount of waste will continue to be incurred and customer value will be threatened.
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