Planning Production for Toyota North America
Address the following four exercises:
Exercise 1: Making a Critical Assessment of the Toyota Production System (TPS) Today
a. Demonstrate your team's basic understanding of the TPS by 1) defining in your team's own
words any eight of the terms found athttp://www.toyotageorgetown.com/terms.asp, and
2) applying them to one or more of your team's own companies or other organizations.
For example, Pokayoke can be defined as an approach to create mistake proofing through use of
devices that detect or prevent production errors. At a software development firm, pokayoke might be
applied through use of a modular development process that includes extensive software module
testing before proceeding to module integration and total system testing.
b. Describe the TPS as a total entity. What are its purposes? Its advantages? Its limitations? How is it
now evolving? Is it getting better – or not? Has it been successfully copied by other motor vehicle
manufacturers? Why or why not?
Exercise 2: Use of a Grid Analysis (Weighted Scoring Model) to Help Make the North American Plant
Location Decision for the RX 330
This exercise illustrates how when deciding among two or more competing plant location options,
various decision factors (which can typically be characterized as exogenous - in a company’s external
environment - or endogenous - internal to the company) can be qualitatively identified, and how
these factors can then be weighted to obtain an overall score for each competing location option.
a. List the factors your team considers key to the Toyota Motor Manufacturing Canada (TMMC): The
Lexus RX 330 Line North American plant location decision, identifying these factors as either
exogenous or endogenous, weighting them using your team's best judgment (stating any relevant
assumptions or constraints), and assigning two scores to each factor: one for production of the Lexus
RX 330 at TMMC, and one for production at a Toyota factory in the USA.
b. Using the scores from your team's weighted scoring model and working with regard to Ringo Sho
and Nemawashi, make and support your recommendation for the RX 330 North American plant
location - TMMC or a factory in the USA.
Exercise 3: Determining Production Capacity Needed at Toyota Motor Manufacturing of Canada
Decision trees are another important if challenging world-class operations management method
which operations managers should understand and with which other managers should be familiar.
This exercise illustrates how using a decision tree, determination of an "optimal" production capacity
option can be made from among several possible capacity options based on the provided probable
market demand and expected costs/payoffs of events that influence the options.
It is spring 2000, and TMMC has indeed just been chosen to produce the new Lexus RX 330 line, with
the first units deliverable in 2003. Toyota must now determine the amount of annual production
capacity it should build at TMMC.
Toyota's goal is to maximize the profit from the RX 330 line over the five years from 2003-2007. These
vehicles will sell for an average of $37,000 and incur a mean unit production cost of $28,000 (here, $ =
the Canadian dollar).
10,000 units of annual production capacity can be built for $50M (M=million) with additional blocks of
5,000 units of annual capacity each costing $15M. Each block of 5,000 units of capacity will also cost
$5M per year to maintain, even if the capacity is unused.
Assume that the number of units actually sold each year will be the lesser of the demand and the
Marketing has provided three vehicle estimated demand scenarios with associated probabilities as
Demand 2003 2004 2005 2006 2007 Probability
Low 10,000 10,500 11,000 11,500 12,000 0.25
Moderate 15,000 16,000 17,000 18,000 19,000 0.50
High 20,000 24,000 26,000 28,000 30,000 0.25
a. To maximize profit earned during this period, which production capacity should TMMC in 2000
decide to build - 10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice.
You may use the following decision tree developed by Toyota operations analysts in Toyota City,
Japan - or your group may choose to vary it in some way based, perhaps, on its presumed better local
b. What are the weaknesses or limitations in this analysis? How might they be corrected or at least
c. It is now late 2016. How well has the RX-330/350 actually done in the North American market? Is
its quality rated as high as if it were made in Japan?
Do some online research; it's part of improving your attainment of Information Literacy, one of
the UMUC MBA Competencies. Here see the Content/Week 10 references on Grid
Analysis and Decision Trees
Exercise 4: Assessment of Toyota’s Current Regional Production Strategy
a. After doing necessary research online or otherwise, document and evaluate the current distribution
of Toyota production in North America. Here be sure to include Mexico.
b. Why does the team believe Toyota has chosen to produce its cars in the current manner? Has
Toyota been wise, or not?
In effect, this exercise provides the team an opportunity to think ahead to the politico-socio-economic-
technological considerations that will be quite important in DMBA 630.