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Robert E. Cole Professor Emeritus Haas School of Business University of California, Berkeley Visiting Researcher, ITEC Doshisha University
EOQ June 2011 1

How Many Quality Problems Do They Have?
• Operationally: 3 problems (as of 2/08/10) • From a “customer first” perspective, they had 7 million problems • From a future customer perspective, the universe of potential car purchasers

EOQ June 2011

2

The Unfolding Big Picture
• Subsequent to the recalls associated with floor mats and sticky pedals causing unintended acceleration, Toyota had 14 safety related recalls through Sept. 2010. • These highly publicized recalls may well have solidified in the U.S. public’s mind that Toyota has serious quality problems.

EOQ June
8

Early Warnings
• Basic Principle of Risk Management: Identify risks early and eliminate them while they still are minor • Early internal warnings • No large scale counter measures.

EOQ June 2011

9

Root Causes of Toyota’s Quality Problems (1) Hyper Growth
• In 1995, Hiroshi Okuda, Toyota President, set in motion a new global growth strategy. It included a set of challenging interim goals to move Toyota’s global market share to 10%. This goal morphed into a new target of 15% by 2010. • They were moving toward that goal, reaching 13% in 2008, before the global financial meltdown recalls derailed their efforts.

EOQ June 2011

10

Root Causes of Toyota’s Quality Problems (2) Growing Technical Complexity
Vehicles in developed countries becoming more complex • Governments of developed countries imposing stricter regulations governing safety, emissions &fuel consumption • Customer expectations rising as seen in demand for green cars, advanced features and performance in luxury cars • High end features in luxury cars spreading faster into lower cost vehicles • Automakers advancing technological capabilities.

EOQ June 2011

11

Impact of Hyper Growth & Growing Technical Complexity on Supplier Management
– Toyota personnel were increasingly stretched thin – Toyota had to delegate more design work to outside contract engineers and new overseas suppliers – Toyota found it increasingly difficult to have