Group Presentation

TOYOTA MOTOR CORPORATION

ACKNOWLEDGEMENT

I. INTRODUCTION.
In the context of globalization and the rapid advancement of technology, manufacturing
enterprises face increasing pressure to optimize processes, reduce costs, and enhance product
quality. Fierce competition requires companies not only to increase productivity but also to
ensure flexibility and responsiveness to market demands. To achieve these goals, two crucial
manufacturing management methodologies have emerged and become industry standards in
modern industrial production: Lean Manufacturing and Six Sigma.
Lean Manufacturing is a production management philosophy developed from the Toyota
Production System (TPS), focusing on waste elimination, optimizing value streams, and creating
an efficient production system. Lean helps businesses not only reduce costs but also improve
production speed and enhance product quality.
One of the core principles of Lean is eliminating the seven types of waste (Muda) in
manufacturing, which include excess inventory, overproduction, unnecessary transportation,
waiting time in processes, inefficient movement, excessive processing, and defective products.
Eliminating these factors helps businesses cut costs, improve production flow, and increase the
value delivered to customers.
In addition to Lean, Six Sigma is a quality management methodology developed by Motorola in
the 1980s to minimize defects and variability in production processes. Six Sigma focuses on
using data and statistical analysis to identify the root causes of problems and implement
improvement measures.
One of the most important tools in Six Sigma is the DMAIC process (Define - Measure -
Analyze - Improve - Control), which consists of five key steps: defining the problem, measuring
relevant data, analyzing root causes, implementing improvement solutions, and maintaining
control to sustain effectiveness. By leveraging a data-driven approach, Six Sigma helps
businesses reduce defect r
below 3.4 defects per million opportunities
(DPMO - Defects Per Million Opportunities), thereby enhancing production accuracy and
improving customer experience

II. TOYOTA COMPANY.

Company’s Name: Toyota Motor Corporation

Established: 1937
Director-General (President & CEO): Koji Sato (as of 2023)

Headquarters: 1 Toyota-Cho, Toyota City, Aichi Prefecture, Japan

In the context of rapid global economic development and increasingly fierce competition,
optimizing the supply chain has become a key factor in helping businesses improve productivity,
reduce costs, and maintain a competitive advantage. This is especially true in the automotive
manufacturing industry, where production processes are becoming more complex, and supply
chains extend across the globe. The application of advanced management methodologies such as
Lean Manufacturing and Six Sigma has enabled companies not only to optimize their processes
but also to minimize waste and enhance product quality.
Lean Manufacturing is a production philosophy
focused on eliminating waste within the value chain, ensuring that manufacturing activities are
centered on creating maximum value for customers. Meanwhile, Six Sigma is a quality
management approach aimed at reducing variations in production processes and ensuring that
products meet the highest quality standards. When Lean and Six Sigma are integrated into supply
chain management, companies can significantly enhance operational efficiency, leading to a
more agile, stable, and effective supply chain.
One of the pioneering and most successful companies in implementing Lean and Six Sigma in its
supply chain is Toyota. Through the Toyota Production System (TPS), the company has set the
gold standard in the automotive industry for process optimization and quality control. This
system has not only enabled Toyota to maintain its leadership position in the automotive sector
but has also become a benchmark model for many other businesses to learn from and adopt.

III. Toyota – A Pioneer in Implementing Lean and Six Sigma.

Toyota is known as a pioneer in applying Lean Manufacturing and Six Sigma to its production
processes and supply chain management. By integrating these two philosophies, Toyota has
developed a streamlined and highly efficient manufacturing system, enhancing productivity,
ensuring strict quality control, and optimizing costs. Lean Manufacturing helps Toyota eliminate
waste at every stage of production, while Six Sigma improves quality by minimizing defects and
controlling process variations. The successful implementation of these methodologies has not
only enabled Toyota to maintain its leadership in the automotive industry but has also established
modern manufacturing standards that many other companies strive to follow.
The Toyota Production System (TPS) serves as the core foundation of Toyota's Lean philosophy.
TPS is built on two fundamental principles:
• Just-in-Time (JIT): Producing the right product, in the right quantity, at the right time to
minimize inventory and reduce waste.

• Jidoka: Smart automation that allows machines to detect defects immediately, stopping
production when an issue arises to ensure high-quality standards.

Additionally, Toyota integrates the Kaizen philosophy (Continuous Improvement) to ensure that
every process is continuously optimized over time, fostering a culture of efficiency, innovation,
and quality excellence.
With Six Sigma, Toyota applies the DMAIC methodology (Define – Measure – Analyze –
Improve – Control) to maintain quality control and minimize variations in production. The
seamless integration of Lean and Six Sigma has enabled Toyota to operate a flexible, efficient,
and highly adaptable manufacturing system, capable of responding effectively to market
fluctuations and industry changes.

3.1. Lean Manufacturing at Toyota – Eliminating Waste and Optimizing Processes.

Lean Manufacturing was developed by Toyota through the Toyota Production System (TPS) with
the goal of optimizing production processes by eliminating non-value-added activities for
customers. Toyota recognized that waste (Muda) is a major issue in manufacturing that needs to
be eliminated to enhance efficiency and reduce costs. According to Lean principles, there are
seven types of waste that must be eliminated, including excess inventory, overproduction,
unnecessary transportation, waiting time, excessive motion, over-processing, and defective
products.
Excess inventory waste occurs when a large quantity of raw materials or finished products is
stored without immediate use, leading to high storage costs and risks of obsolescence. To address
this, Toyota implemented the Just-in-Time (JIT) system, producing only the required quantity
based on actual orders. This minimizes storage costs and optimizes cash flow within the
business. Additionally, overproduction waste is a critical issue, as producing more than necessary
leads to excess inventory, increased operating costs, and reduced production efficiency. Toyota
addresses this by applying Heijunka (Production Leveling), ensuring that production processes
run at a stable pace aligned with market demand.
Furthermore, transportation waste arises when raw materials or finished products have to move
excessively between production stages, causing delays and increased logistics costs. Toyota
tackles this problem by designing factories with a continuous flow layout, optimizing movement
distances and reducing unnecessary transportation. Additionally, waiting time waste significantly
affects production efficiency, as workers or machines must halt operations due to material
shortages or process bottlenecks. Toyota optimizes this by implementing Kanban – a production
control system that ensures materials are supplied at the right time and in the right quantity,
reducing downtime in production.
Moreover, Toyota focuses on eliminating excessive motion, which refers to unnecessary steps
that do not add value to the product. By applying Kaizen (Continuous Improvement), Toyota
constantly reviews production processes, gathers feedback from workers and engineers, and
refines each production step. The company also leverages automation technology to eliminate
redundant tasks and enhance production efficiency. Additionally, Toyota employs Poka-Yoke
(Error-Proofing Mechanisms) to prevent defects from occurring at the start of the process,
reducing repair costs and improving the overall quality of the final product.

3.2. Six Sigma at Toyota – Improving Workflow and Quality Control.

While Lean focuses on eliminating waste and optimizing processes, Six Sigma emphasizes
minimizing defects and ensuring strict quality control. Toyota applies Six Sigma through the
DMAIC methodology (Define – Measure – Analyze – Improve – Control), which helps identify
weaknesses in production processes, measure performance, analyze the root causes of defects,
implement improvements, and control results to maintain consistent quality.
Toyota uses Define to identify key issues affecting product quality, setting clear improvement
objectives. In the Measure phase, Toyota collects relevant production performance data and
closely monitors each step in the process. Then, the company applies Analyze to determine the
root causes of defects, which helps develop improvement solutions in the Improve phase. Finally,
Toyota implements Control to ensure that the improvements are effectively maintained, leading
to continuous quality enhancement.
Beyond DMAIC, Toyota also utilizes Design for Six Sigma (DFSS) to design products and
processes from the outset to ensure optimal quality. DFSS helps the company identify critical
factors in production, thereby minimizing defects right from the product design stage. By
implementing Six Sigma, Toyota has significantly reduced defect rates in manufacturing, leading
to improved performance and higher-quality vehicles.

IV. Risk Assessment of Lean and Six Sigma Implementation at Toyota.

Although Toyota is one of the pioneers and most successful companies in applying Lean
Manufacturing and Six Sigma in production, it still faces several potential risks when
implementing these methodologies. Lean optimization helps Toyota reduce waste, while Six
Sigma ensures strict quality control. However, both approaches have certain drawbacks. When a
production system becomes overly lean and excessively optimized, the company may become
vulnerable to external disruptions, especially in the increasingly complex global economy and
fragile supply chains.
Toyota has encountered significant risks in applying Lean and Six Sigma, particularly during
crises such as the COVID-19 pandemic, when global supply chains were severely disrupted.
Additionally, relying heavily on the Just-in-Time (JIT) system made it difficult for the company
to maintain production when facing component shortages. Furthermore, overly strict
implementation of Six Sigma may reduce flexibility in the production process, making it
challenging for the business to quickly adapt to sudden market changes.

4.1 Risks from Supply Chain and Just-in-Time (JIT) in Lean.

One of the biggest risks of Lean Manufacturing at Toyota comes from the implementation of the
Just-in-Time (JIT) system. JIT helps the company minimize inventory levels by supplying
materials only in the exact quantity and at the precise time they are needed. However, this also
means that Toyota must maintain an extremely efficient supply chain, leaving no room for errors
or disruptions. If any link in the supply chain encounters an issue, the entire production system
can be severely affected.
During the COVID-19 pandemic, Toyota's JIT system faced significant challenges. The shortage
of critical components, particularly semiconductors—an essential part of modern vehicles—
forced Toyota to cut production at multiple factories worldwide. Because the company did not
maintain a safe inventory buffer, it was unable to respond quickly to supply chain disruptions. As
a result, production was delayed, and vehicle delivery times were extended beyond expectations.

Not only during the COVID-19

pandemic, but even before that, Toyota had suffered severe disruptions due to natural disasters.
The 2011 earthquake and tsunami in Japan caused months-long supply chain interruptions, as
many of Toyota's key component suppliers were heavily damaged. Since the company did not
stockpile large amounts of materials and relied heavily on JIT, it struggled to restore production
efficiently.
This raised a major challenge for Toyota: how to balance the efficiency of JIT with resilience
against unexpected supply chain risks.

4.2 Risks to Production Flexibility when Applying Six Sigma at Toyota.

Six Sigma helps Toyota maintain strict product quality control and minimize variations in
production. However, over-reliance on Six Sigma can lead to certain flexibility issues in the
manufacturing process. Toyota follows rigid quality control procedures, from product design to
production, ensuring that even the smallest defects are eliminated. However, this sometimes
results in a lack of agility, making it harder for the company to quickly adapt to sudden market
changes.
For example, with the rapid growth of the electric vehicle (EV) market, automakers need to
innovate quickly to meet customer demands. However, Toyota’s strict Six Sigma quality control
process can make experimenting with new technologies more complex. Extensive testing,
evaluation, and process controls can slow down the development of new products, reducing
Toyota’s competitiveness against more agile companies like Tesla.
Below is a comparison table between Toyota’s Six Sigma system and Tesla’s flexible production
model, highlighting the limitations in flexibility when Six Sigma is applied excessively:

Feature Toyota’s Six Sigma System Tesla’s Flexible Production

Model
Product Development Slower due to strict More agile due to higher risk
Speed inspection requirements and tolerance and adoption of a
multiple approval stages. mass testing model.
Technological Innovation More limited due to strict More agile due to willingness
Capability quality control procedures, to experiment with new
difficult to adjust quickly. technologies and refine
during production.
Quality Control Process Very strict, focusing on Focus on rapid improvement,
eliminating all errors from the accepting a certain level of
beginning. failure to speed up
development.
New Product Deployment Longer due to multiple Shorter due to agile
Time inspection steps and strict manufacturing approach and
procedures. ability to continuously adjust.

Market Responsiveness Lower because changes in Higher because Tesla can adjust
design or manufacturing process and change vehicle designs
 must go through multiple during production.
approval steps.

Defect Correction Costs Higher because Toyota controls Lower in the short term because
errors from the beginning, Tesla accepts some small
requiring large investments in failures in exchange for faster
quality inspection. product launches.

Electric Vehicle Industry Difficult to adapt quickly to Leading in electric vehicles due
Applications electric vehicle technology due to rapid testing and continuous
to strict requirements on quality optimization.
and procedures.

4.3 Risks Related to Initial Costs and Investments.

Implementing Lean and Six Sigma requires a significant initial investment. Toyota has spent
billions of dollars to establish automation systems, train employees, and improve production
processes. Although these investments help reduce production costs in the long run, they can
create financial pressure on the company in the short term.
Moreover, Lean and Six Sigma do not always yield immediate results. Some improvements may
take years to achieve optimal efficiency, and during that time, Toyota must continue investing to
ensure the system’s success. This poses a major challenge for smaller companies that lack the
financial resources to implement Lean and Six Sigma comprehensively.
4.4 Risks from Employee Resistance when Implementing Lean and Six Sigma.
One of the biggest barriers to Lean and Six Sigma implementation is employee resistance. As
Toyota introduces automation systems and strict process controls, some employees may feel
concerned about job security or excessive
monitoring. This can lead to internal opposition, affecting overall morale and work efficiency.
To mitigate this risk, Toyota has invested heavily in employee training, ensuring that workers
understand the benefits of Lean and Six Sigma. Additionally, the company has developed support
programs to minimize negative impacts. However, cultural transformation does not happen
overnight, and Toyota continues to face challenges in maintaining workforce motivation and
engagement.

V. Proposed Solutions to Help Toyota Balance Lean, Six Sigma, and Supply
Chain Disruption Risks.
Although Lean and Six Sigma provide numerous benefits in optimizing production and
enhancing product quality, their implementation also comes with significant risks, especially
when supply chains are disrupted or when businesses need to quickly adapt to market changes.
To ensure long-term stability and sustainability, Toyota must implement strategic solutions to
balance Lean, Six Sigma, and resilience against supply chain disruptions.

5.1 Developing a Flexible Supply Chain Model Combining Just-in-Time (JIT) with
Safety Stock.
One of the main reasons Toyota struggles when supply chains are disrupted is its Just-in-Time
(JIT) system, which maintains minimal inventory levels. To mitigate risks while preserving the
advantages of JIT, Toyota needs to adjust its inventory management model by maintaining a
safety stock of critical components.
 Instead of relying solely on a “just
enough, just in time” supply approach, Toyota can implement a "Flexible JIT" model, where
high-risk components such as semiconductors, electronic sensors, and lithium-ion batteries are
stored in optimized quantities. This does not mean abandoning JIT, but rather modifying it to
better align with reality and prevent material shortages.
5.2 Diversifying Supply Sources and Reducing Dependence on a Single Geographic
Area.
One of the major weaknesses of Lean is that it makes Toyota overly dependent on a few key
suppliers, particularly those located in Asia. When disruptions such as the COVID-19 pandemic
or trade tensions occur, Toyota is highly vulnerable to supply shortages. To address this issue,
Toyota needs to implement a supply chain diversification strategy by collaborating with multiple
suppliers from different regions.
For example, instead of relying solely on semiconductor manufacturers in Japan and Taiwan,
Toyota could seek partnerships in the U.S., Europe, or even develop an internal supply chain to
ensure access to critical components. Additionally, Toyota could adopt a "Regionalized Supply
Chain" model, where factories in each region prioritize local suppliers, helping minimize risks in
the event of global disruptions.

5.3 Applying AI and Big Data Technologies to Forecast Supply Chain Risks.
Technology plays a crucial role in helping Toyota enhance its forecasting capabilities and
manage the supply chain more efficiently. With advancements in Artificial Intelligence (AI) and
Big Data, Toyota can utilize advanced analytical models to predict material demand, detect early
supply chain disruption risks, and proactively develop contingency plans.
By analyzing historical data from thousands of
suppliers worldwide, Toyota can identify irregular patterns in deliveries, detect warning signs of
delays or disruptions, and make rapid decisions before issues escalate.
Additionally, Toyota can implement a real-time supply chain monitoring system, utilizing
Internet of Things (IoT) sensors to track transportation status, material quality, and supplier
performance. This enables Toyota to maintain complete control over the supply chain, ensuring
greater flexibility and minimizing risks of disruptions.

5.4 Enhancing Production Automation and Improving Plant Resilience.

One way for Toyota to minimize the impact of supply chain disruptions is by enhancing its
production autonomy. To achieve this, Toyota must continue investing in automation and in-
house manufacturing of critical components.
Currently, Toyota has developed Smart Factories with high levels of automation, utilizing robots
and artificial intelligence to improve production efficiency and reduce dependence on manual
labor. However, the company needs to further expand its in-house manufacturing initiatives, such
as producing semiconductors, electric vehicle battery systems, and other essential components,
instead of relying entirely on external suppliers.
This approach not only allows Toyota to maintain better control over product quality but also
reduces the risk of supply chain disruptions caused by external suppliers' issues. Additionally,
Toyota should invest in flexible manufacturing plants capable of switching between different
product lines, ensuring quick adaptation to market changes and fluctuations in demand.
5.5 Training and Developing Personnel to Adapt to Lean and Six Sigma.
In addition to technology and supply chain management, Toyota must also prioritize its
workforce. Employee resistance to Lean and Six Sigma can hinder the effective implementation
of these methodologies. To address this issue, Toyota needs to heavily invest in training and
workforce development to ensure employees understand the benefits of Lean and Six Sigma
while equipping them with the necessary skills to work in a modern manufacturing environment.
Toyota can implement continuous training programs focused on Lean thinking, Six Sigma, and
automation technologies, helping employees enhance their capabilities and adapt to changes in
work processes. Moreover, fostering a corporate culture that encourages continuous
improvement will enable Toyota to sustain innovation and long-term optimization in
manufacturing.

VI. Case Study.

Case study: Toyota Motor Corporation’s Lean Manufacturing Solution: A Case Study on
Efficiency and Innovation
- Toyota Motor Corporation was founded in 1937 and has become a leader in the global
automobile industry, known for its advanced manufacturing system and dedication to quality.
Toyota’s Lean Manufacturing approach, built on a tradition of excellence and reliability, has set
the industry standard and made the company a leader in automotive technology and
manufacturing efficiency.

1. The Problem to Solve

A major obstacle that Toyota had to overcome in the early 2000s that jeopardized the company’s
manufacturing efficiency was overproduction. Despite its advanced manufacturing system and
focus on high quality, Toyota actually produced more than the market demanded, which
increased inventory costs and caused storage problems. This has created a new problem with the
Just-in-Time (JIT) model, whereby the company is subjected to changes in production schedules
when the core issue is whether there is an overall profit associated with such operations at
present.

2. Solution

Toyota has used a multifarious approach grounded on lean manufacturing in order to overcome
the overcapacity situation. These are the primary actions:

- Early in the 2000s, Toyota had a major problem with its manufacturing processes:
overproduction. Lean principles indicate that this is one of the seven main wastes (Muda), which
can have a negative impact on company finances and production efficiency. The overcapacity
situation Toyota finds has led to a number of issues, including:

+ Producing more than the market demand results in significant inventories, so raising storage costs and
lowering capital efficiency.

+ Production system bottlenecks: Excessive inventories compromise the Just-in- Time (JIT) cycle, thus
Toyota is always changing the production calendar. Less flexibility in reaction to changes in the market:
Toyota finds it difficult to rapidly modify output when consumer demand changes unexpectedly.

+ From a Push System model (Production based on forecasts) Toyota has moved to a Pull System
(Production based on actual customer demand).

- Toyota changed from a Push System model based on forecasts to a Pull System, in which
production is just done depending on actual customer demand (Customer Demand-Driven
Production).

+ This enhances supply chain agility, helps to lower warehouse costs and cut surplus inventory.

- Analyzing and changing the production pace (Takt Time) to guarantee that no process is
backlogged or overloaded depends mostly on the Industrial Engineers (IE) of Toyota.

- Heijunka, or production leveling, helps the production system become more stable by helping
to match actual demand with production pace, so lowering fluctuations.

- Using adjustment loops and basing process improvement on actual feedback, Toyota
constantly applies the Kaizen philosophy.

- Reducing Setup Time Reduction and optimizing Overall Equipment Effectiveness (OEE) helps
the business to keep flexibility and the capacity to react fast to consumer needs.

- Through the Suggestion System and Visual Management, Toyota develops a culture that
motivates staff members at all levels to engage in the process of improvement. This fosters a
working environment in which every staff member feels accountable for production performance
and quality as well as for other aspects.

3. Effects

- The improvement initiatives of Toyota have produced notable outcomes:

+ 50% less overcapacity will help the JIT system to return to ideal state.
+ By 30%, cut inventory costs and save millions of dollars annually; by 20%, boost employee proposals
for improvements, therefore fostering an ownership and responsibility culture inside the company

- In particular, Flexibility Enhancement in the production system let Toyota keep its leading
position in the automobile sector by being more adaptable.

-> Finally, the way Toyota addressed overcapacity in the early 2000s is a good example of Lean
Manufacturing's and constant improvement's potency. Toyota not only solved the issue but also
greatly raised operating efficiency by using a Pull System, streamlining manufacturing
scheduling, and developing an Employee Engagement Culture. This study confirms the
requirement of flexibility and imagination in maintaining a competitive posture in the global
market.

VII. Conclusion
The successful integration of Lean Manufacturing and Six Sigma has allowed Toyota to establish
itself as a global leader in automotive production efficiency and quality control. Through the
Toyota Production System (TPS), the company has eliminated waste, streamlined operations, and
enhanced its supply chain management to maintain cost efficiency, productivity, and innovation.
The Just-in-Time (JIT) system has significantly reduced excess inventory and improved
operational flow, while Six Sigma methodologies have ensured strict quality control and process
stability.
However, as demonstrated, the implementation of Lean and Six Sigma is not without risks.
Toyota's over-reliance on JIT makes it vulnerable to supply chain disruptions, as seen during
COVID-19 and previous natural disasters. Additionally, the rigid quality control of Six Sigma
can slow down innovation, especially in emerging industries such as electric vehicles (EVs).
Moreover, high initial investment costs, employee resistance, and the challenge of maintaining
flexibility are ongoing concerns for Toyota in balancing efficiency and resilience.
To ensure long-term success, Toyota must adopt a strategic approach that retains the benefits of
Lean and Six Sigma while mitigating associated risks. This includes developing a flexible JIT
system with safety stock, diversifying supply sources, leveraging AI and Big Data for risk
forecasting, enhancing automation, and investing in workforce training. By continuously
adapting and improving its methodologies, Toyota can maintain its competitive edge, enhance
supply chain resilience, and remain at the forefront of the global automotive industry in the face
of evolving market challenges.

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Name of Group Member Student ID Contribution

Bùi Thị Cẩm Ly DS180097 100%

Lê Nguyên Ngọc DS180100 100%

Nguyễn Bá Việt DE180323 100%

Phạm Thị Bích Nga DA180079 100%

Trần Mạnh Dũng DE180027 100%

Nguyễn Phương Nam DE170292 100%