Toyota ERP Case Study: Introduction
The Company chosen for analysis is a manufacturing plant located in Kentucky, Georgetown known as Toyota Motor Manufacturing Kentucky. The organization is appropriate for analysis owing to its use of Enterprise Resource Planning (ERP) as a mechanism for continuous improvement.
Prior to the use of this information System (IS), the organization struggled with disjointed information flow, slow decision making, inventory wastage and low productivity. It was imperative to employ an information system that would allow the plant to meet its underlying strategies as well as enhance the value in production.
Research Objectives
The key research objective is to determine how an organization can use Enterprise Resource Planning, as an information system in order to enhance productivity. The report will realize this key objective through the analysis of a car manufacturer.
Other minor objectives include: determining the necessary factors needed to make ERP work, to identify problems that can be solved using the ERP system, and how businesses tie their strategies with the adoption of technology.
Company overview and background
The Toyota, Kentucky manufacturing plant, is a subsidiary of the parent firm based in Tokyo. For purposes of this analysis, focus will go to the processes and operations in this plant. The production section has three key divisions, which include body assembly, paint and final assembly. Each of the divisions is further split into the smaller units, usually identified as shops.
The first is the press shop, which presses inner, and outer parts of the body together. The second is the body shop where the panels from the press shop are pieced together to create body shells. The later two shops belong to the body assembly divisions. Thereafter, the commodity enters a paint shop where it goes through a series of booths or dips designed to protect it from corrosion and abrasion. It also painted to make it strong.
This section also entails installation of sound pads that reduce noise as the car travels. The final assembly area consists of a series of trim and chassis equipments. In the trim section, machines or people fit interior parts of the body into the incomplete vehicle.
Thereafter, the car enters into the chassis section where machines fit it with external components. The completed body then enters the quality control section. Members of each of these shops think of each other as teams, so they do their best in their sections in order to prevent problems in other parts.
Other than manufacturing, the company also has a procurement and supply chain function that handles all the logistical issues in the organization. Since the firm implemented a flat structure, the assembly group is responsible for this aspect. It has a quality control department that inspects vehicles when completed.
The plant has an accounting function which top management handles. Plant managers also handle human resource issues such as hiring, promotion and training of employees. The plant outsources the marketing and distribution of its products to another subsidiary of Toyota so as to ensure efficiency in the production of cars.
The IT department is rather amorphous because it is responsible for numerous activities in the plant. First, it ensures that the robots carrying out a lot of work in the plant are in order. It also handles all the data that relate to the company; this may range from financial to material-based information. Additionally, the firm empowers members of the IT team to make crucial decisions at work.
They may halt an assembly line if they identify a flaw. The department manages Toyota’s information through information systems, data infrastructure and computer hardware. They handle almost all types of information. Employees in the group are answerable to a departmental manager.
Role of Toyota Information Systems in Business Model & Strategy
Toyota Kentucky has a high degree of automation, and this necessitates information networking and flow. For instance, the company needs to plan how it can acquire material for production through order processing. Information Systems facilitate performance of this function seamlessly and accurately.
During the production process, the organization needs to carry out planning, automation, quality management, operation monitoring, and many others. Information Systems assist the organization to facilitate the interaction of all these components before car production. Seamless interlinking of all these production processes necessitates the existence of a data record.
For instance, a new car has a unique number that its components have. This will serve as the identifier during the registration process. All the stages involved, such as painting and trimming, will work towards development of a car. Additionally, some parts of the automobile need to be scanned in order to ascertain that they are in working order. Aspects such as torque, density weight must all be assessed and recorded.
Information Systems facilitate this fast transition in production processes by coordinating information sources at all stages. They also assist individuals in identifying where current and future bottlenecks will arise, thus facilitating their resolution. Data analysis through the information system can enhance production processes significantly.
The company has a range of information systems that it uses to manage its operations. It has a customer relationship management IS supplied by Oracle, and clients use it to enhance customer interactions. Furthermore, the firm has several systems for the management of the production process, such as the plant scheduling system as well as the plant monitoring system (assembly line control system).
The latter aspects are crucial for the implementation of the just – in –time model that people associate with Toyota. Additionally, the company utilizes information systems to correct waste and ascertain that customers do not have to wait long for the completion of their car. Lean production is yet another principle that made Toyota famous and ERPs are effective in achieving this objective.
Toyota Information System
Type of IS
The IS system is an Enterprise Resource Planning system. It facilitates information flow between the various functions in a firm. Some of the functions can include manufacturing, finance and inventory management (Vilpola, 2008). Usually any ERP system needs to have four key traits.
It should operate on real time in order to eliminate the need for frequent updates. It should also have a database that can support all the applications within an organization. One should get a consistent look of the ERP regardless of the nature of model used. Additionally, the IT team within a certain organization should not have to do data integration in order to install the system.
Systems integrators normally configure ERP systems within an organization. They have adequate knowledge about the necessary vendor solutions needed by the implementing firm and the equipments they require in order to do so. When an organization possesses an Enterprise Resource Planning IS, then it can connect real time data and transactions through various channels.
Sometimes the latter functions can be done through direct integration of plant floor equipments. Alternatively, it may occur through database integration or enterprise transaction modules. Sometimes a company may choose to use custom integrated solutions where it alters the server or workstations when necessary.
ERP systems have the potential to alter how a company does business only if the processes covered in the system match those in an organization. Each process should also be highly effective, and ERP users should understand the automated systems.
Components
The ERP system at Toyota consisted of a financial management component. This financial module is responsible for the management of fixed assets. It also handles the billing and accounts paid or received within the plant. Additionally, general ledger requirements and budgetary functions are also in the package. Tax reporting, budgeting and management of cash flow are part of this system, as well (Abilla, 2006).
Business intelligence is a critical part of Toyota’s operations in the Kentucky plant. This is part of the ERP package in the organization, and it allows users to analyze or share data across the enterprise in a centralized manner. The firm achieves this function through the use of automated analytical and reporting tools. It also has dashboards or control panels, in which top management monitors business performance.
Supply chain management is also a vital part of the system and involves procurement of materials for the vehicle, fulfillment of orders, planning and scheduling of the materials. This module possesses some sub modules that include procurement management, inventory management and product scheduling.
Human resource management is a vital component of the ERP system in the Kentucky Toyota Plant. The plant ensures that all employee-related issues run smoothly through the management of all human resource issues in hiring and retaining workers. The ERP solution handles payroll; it does time tracking, benefits, and even performance management.
Manufacturing operations are also part of the organization’s ERP system. This is the heart of the firm’s endeavor. It does product configuration through the ERP component. Additionally, it carries out material requirements planning, production scheduling as well as forecasting.
Perhaps one of the key components of the ERP system that makes the package work successfully for the organization is the fact that it is ingrates easily. Integration allows information flow in the entire plant, and this facilitates business intelligence.
Technologies used: hardware and software
No ERP system can be successful without investment in hardware technologies; therefore, the organization needed to invest in two types of computers: servers and workstations. Currently, the company uses high throughput disk drives in its servers. The network card used in the servers has gigabit speed, and the ram is twice as much as the recommended amount by the ERP vendor.
This ensures that performance is satisfactory on all levels. Additionally, the company invested in reasonable workstations. Many organizations that have failed in ERP implementation have ignored this aspect. Toyota Kentucky chose to invest in its workstations through the use of a high-memory RAM. It also has video controllers on its computers and uses the latest version of Microsoft.
Aside from workstations and servers, the company also has a power backup system for the ERP system. Power failures have been occurring in the USA, of late. In order to protect the integrity of the material in the ERP system, the organization often ensures that it connects the workstations, switches, servers, external drives and the laptops used in the ERP to strong UPS systems.
In addition to hardware systems, the company has a software solution known as SAP. The latter is an acronym for Systems, Applications and Products. Toyota selected this software vendor because it has plenty of experience in the field. Additionally, high integration exists in the software thus allowing the manufacturing plant to incorporate as many of its business functions as it wants (O’Brien, 2011).
The company also selected SAP because it would save on costs that emanate from integrating different modules into the ERP. Choosing SAP enabled the firm to take advantage of business support services offered by the vendor.
Targeted end users
The end users of the ERP systems in Toyota range from ordinary workers, mid level and top level management. Top level managers carry out the business intelligent aspect as well as the analytics process of the manufacturing plant. They use information from the ERP system to forecast as well as determine other strategic components that must be endorsed to make the firm successful.
For instance, they will carry out production planning through the use of business analytics inherent in the ERP system. They are also responsible for the creation of new processes when the firm implements the Information System. Mid level managers, on the other hand, are responsible for the implementation of these new processes (Yusuf et. al., 2004).
This ERP system also targets line employees and other ordinary staff who have no senior title. They are the ones who use their work stations to input data. They also rely on the ERP system for feedback concerning certain aspects of work. These individuals make the ERP a success by incorporating it into their daily activities. In the event of an ERP upgrade, all line workers will need to participate in their configuration of the system.
How the Information System relates to the company strategy
Toyota is famous for its emphasis on lean production. Enterprise Resource Planning has been at the heart of meeting this company’s strategy. Currently, the organization has firm control over its processes and practices. This enables the firm to add value to customers as well as to eliminate waste continually.
Toyota often examined the activities that add value to the company and reduces the non value adding activities through its ERP system. The firm realizes that lean production is not a one-day event; it is a continual process that the organization must work on throughout production.
Lean production centers on five key principles: pursuit of perfection, customer pull, value steam mapping, uninterrupted flow and value definition. Toyota has been able to achieve all these principles thanks to the ERP system. It has reduced down time as well as delays, scrap, reworking and inefficient inventory handling through business intelligence.
What would happen if the technologies were not available
If the technologies were not available, it is likely that the business would have disjointed information systems that are not just inconsistent and inaccurate, but are also difficult to access. This implies that the organization would be making decisions lengthily and would not analyze performance effectively.
For instance, the company would need to determine the nature of a car component delivery as well as the quality metrics that apply to the car using an incredibly complicated process. Additionally, the technologies are modern, so they are compatible with most modern technologies in production and computing. Without them, the organization would have to encounter numerous hurdles in data recording.
Additionally, the ERP Information System has ensured that various sections in the Toyota plant work together. If the company had not implemented the system, then chances are that the organization would still have isolated functions.
The absence of these technologies would have left Toyota susceptibility to manual manipulation as the older systems were susceptible to this. Furthermore, manufacturing systems between different plants would not be able to communicate. Prior to ERP, it was hard for the company to determine whether its seat manufacturers or equipment manufactures had adequate stock for a certain make of product.
Consequently, ERP allowed communication between different manufacturing systems thus enhancing productivity in the plant. Monitoring the company’s finances would have been extremely hard without the ERP technologies. In the past, the organization controlled its financial transactions using an old accounting legacy system.
However, this created difficulties in interfacing with other databases thus preventing the company from controlling its financial transactions adequately. It was difficult to predict and thus minimize how much money the company spent on certain partners or suppliers.
How the IS benefited the business
Toyota Kentucky has benefitted enormously from the use of ERP. The most outstanding benefit is the company has gained real time capabilities (Itech, 2012). It has enabled workers to see what is taking place inside their organization in real time. The automaker often deals with large and high volume processes. Consequently, it is invaluable to have a system that allows them to assess situations easily.
Because of this advantage, now Toyota does not suffer from time wastage that stems from file transfers. Workflow has improved and so has efficiency within the firm. It also does not face difficulties in inventory shortages since all the company requires is to use its ERP system. This benefit comes from the tracking, planning and forecasting capabilities.
The seamlessness that emanates from the use of this IS system has enabled the manufacturing plant to increase the volume of cars coming from the company. It has also assisted the company in fulfillment of orders as mandated by its partners. Furthermore, the facility reduced production costs and thus passed on the savings to car consumers. The organization hardly faces challenges in billing because of better visibility.
People, organization and technology factors involved
In order to achieve maximum benefit from the ERP system, the company ensured that the ERP software configuration matched the business processes. It also trained all the line, mid and senior level managers to accept change and alter the way they do business. Employees were also taught how to use the ERP equipment.
For the ERP system to work, Toyota needed to commit to timely equipment deliveries, as well as data clean up. The company also needed to manage its relationships effectively especially with regard to computer – based environments.
Training is an imperative part of ERP success in the company. Workers attended workshops and other classes in order to acquire the skills needed to operate the IS effectively. With the right commitment from top level management, the organization is well on its way to achieving its objectives.
Extent to which the IS helped the company to compete in the industry
Successful automakers in the industry always endeavor to produce quality products at a consistent level. Toyota’s internal processes have improved tremendously through the use of ERP. Now the company’s internal processes have led to increased output. The firm competes with other players who may not effectively deliver quality at a level that is as consistent as theirs.
The long term prospects for business success have increased owing to the use of ERP. Top level management can make critical decisions concerning various aspects of business. The ERP system has allowed the company to adopt a long term, strategic approach, and this gives it an edge over its competitors.
In addition to the above, ERP has helped Toyota to become more alert. It has become immensely responsive to its external and internal factors. As a result, the firm can deal with changes more effectively than its competitors.
Toyota ERP System Case Study: Conclusion
The key research objective was to determine how an organization can use Enterprise Resource Planning, as an information system, in order to enhance productivity. Through the Toyota case study, it was evident that information synchronization, business intelligence and elimination of redundancy enable companies to achieve high productivity.
Other minor objectives included determining the necessary factors needed to make ERP work; Toyota illustrated that one needs investment in a dependable software program like SAP, servers, as well as workstation hardware.
Problems that can be solved with ERP include inventory challenges, procurement glitches, forecasting as well as assembly line issues. Toyota realized its strategy of lean production through ERP, as well. This made the plant competitive and immensely successful.
References
Abilla, P. (2006). Information Technology at Toyota. Web.
Itech (2012). Toyota decides to replace business-critical systems with open source business applications. Web.
O’Brien, J. (2011). Management Information Systems (MIS). New York: McGraw-Hill, Irwin.
Vilpola, H. (2008). A method for improving ERP implementation success by the principles and process of user-centered design. Enterprise Information Systems, 2 (1), 47–76.
Yusuf, Y., Gunasekaran, A. and Abthorpe, M. (2004). Enterprise Information Systems Project Implementation: A Case Study of ERP in Rolls-Royce. International Journal of Production Economics, 87(3), 250-290.