Page 75 - Toyota Under Fire

TOYOT A UNDER FIRE

at just over 70 percent capacity. The profitability of a factory de-
pends on many factors besides the workers and the cost of the
machines. Of course there are maintenance costs, but there are
also the costs of defects, inventory, and managing complexity.
Complexity in an auto plant is based on several factors, includ-
ing how many different types of vehicles are produced on each
line, how many variations there are in those vehicles (such as dif-
ferent engines, transmissions, and trim levels), and how often
new vehicles or variations are introduced. The largest factor of
all, though, is how frequently the speed of the line is changed.
When complexity is handled poorly, it causes lots of errors and
defects and drives down profitability. But a plant that can handle
a great deal of complexity without errors is the most profitable
of all—it can dynamically adjust what it is producing to match
demand, both upward and downward (even in a strong economy,
overproduction leads to price cuts, which harm profitability).
Toyota’s plants in Japan are legendary for their ability to
manage complexity while maintaining quality. Each plant pro-
duces a myriad of vehicles in a variety of versions (including dif-
ferent versions for different countries), with frequent changes in
line speed. While Toyota’s plants in North America were con-
sistently ranked near the top of American factories, they really
weren’t close to matching the capabilities of the Japanese plants in
terms of managing complexity and achieving high quality rates.
For instance, in 2008, TMMI was building at most two different
models on one line and operating at 150 defects (these are items
that are caught and corrected as the car moves along the assembly
line or at final inspection before the vehicle leaves the plant) per
100 vehicles, while the best Toyota plants in Japan were building
four to six different models and operating at about 20 defects per
100 vehicles.

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