JBICLPEMworkshop Comparativeperformanceassessmentfrom Managementperspectives

Learningthewayofcapabilitybuilding fromthecaseofToyotaMotorThailand
Amano,Tomofumi AssociateProfessor GraduateSchoolofEconomics TheUniversityofTokyo
ThecasestudyaimstobeusedinJBICLPEMworkshop.Thecitationisnecessarytobeapprovedbythe author

Contents
Japanesemanufacturingactivitiesabroadanda briefhistoryofToyota ProfilesofToyotaMotorThailand(TMT) Buildingthecapabilitieswhilebeingsmall Overcomingtheeconomiccrisisandfurthergrowth Implications

 Japanesemanufacturingactivities abroadandabriefhistoryofToyota

Japanesefirms foreignactivities ManufacturingsectorsvsNonmanufacturingsectors

Source:METI

OverviewofJapanesefirms foreignbusinessactivities Insidethemanufacturingsectors

Source:METI

LongtermperformanceofJapaneseautomobilefirms

500 450 400 350 300 250 200 150 100 50 0 1965 1967 1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

DataSource:DevelopmentBankofJapan

1991

Theriseofproductivityattheearlystageofgrowth
1.Earlystruggleoflowproductivitiesandlow qualitieswithhostilelaborrelationshipand financialshortageinthe1950s 2.Toyotalaidofftheiremployeesand announcedJointlabordeclaration in1962to promisethelaborsecurities. 3.TPSwasdevelopedattheearlystageoftheir growthtoovercomesuchshortages
Establishment ofTPS

1959 Motomachi

1974 Shimoyama

SituationsbeforeTPS EijiToyodaandTaiichiOhno

1965 Kamigo 1979 Tahara 1966 Takaoka 1970 Tsutsumi

ThephilosophyofTPS(ToyotaProductionSystem)
Missions Upgradingof productivityand quality Therobustproduction systemtothedemand fluctuationanddiversity

Sustainthelongterm laborrelationshipand upgradingorganization capabilities

Components JustinTime:demand pullproduction Therespectofworking standardandapplication toqualitycontroland Kaizen(Jidoka) Normalizationofprocesses basedonthecycletime (DohkikaandHeijunka)

Skillevaluation,education andtrainingtobemulti skilledworkers

TheimportanceofNUMMIs caseinthe1980s(USA)

ThefirstexperienceofexecutingTPSoutsideJapan Toyotatriedtoseekjointventurepartnerandstarted partnershipwithin1981 Twoheads:GMJohnSmithandToyotaEiji Toyoda

ManagementisToyota,UtilizingtheGMsunusedfactoryin California,Corollawithbrand,400,000carsannually Thereweremanyopponentsinsideandoutsidethefirms, howevertheypersuadedtheimportanceofthejointventure

Fullandbestsupports fromToyotamotherfactory

TheNegotiationoflaborissuescomesfirst
NegotiationwithUAW(UnitedAutoWorkersUnion) Rejectingthetraditionaljobbasedwagesystem,takingthe uniformwagesystem toeveryfactoryworkersallowingthemulti jobworkers,becauseoftheintroductionofTPS. HiringUAWworkers

Fullsupportfrommotherfactory
In1984,Takaokaplantaccepted250UAWworkerstotrainthe conceptandskillsofTPS.Workerslearnedthebasicsandmanagers learnedhowtomakethesystem. Californiagovernmentsupportedthetrainingfee(3milliondollars). JapanesemanagersopenedpartieseverySundayduringtheirstays.

BuildingthetrustthroughpracticesatNUMMI In1985theysucceedinlaunchingthe1st car

ToyotasanothersuccessinTaiwan
T aiwan Au t o m o bil e M ar ke t 70 60 50 40 30 10 20 10 0 5 0 Honda Mazda) 15 (Domestic Production) Imports) 30 Toyota 25 20 Mitsubish Nissan Ford TW Au t o m o bile M ar ke t Sh ar e

10,000units)

20 00 20 01 20 02 20 03 20 04 20 05

19 94

19 94 20 00 20 01 20 02 20 03 20 04 20 05

 ProfilesofToyotaMotorThailand

ToyotaMotorThailand(TMT)
Establishment1962 Capital7520millionBaht ShareholdersTMC86.4% Local13.6%(SiamCement10%) Employees13,500 PlantsSamrong,Gateway,BanPho NumberofDealers119 ChairmanPramonS.PresidentSonodaM.

TMTplants
Samrongplant(1964) 220,000unit/year 430,000 4,500emps IMV13Tacttime1.1min. TAW(1988) 55,000unit/year 40,000 1,100emps IMV34Tacttime4.0min.

Gatewayplant(1996) 200,000unit/year 1,000,000 4,400 emps CamryCorollaViosWish Yaris

BanPhoplant(2006) 110,000unit/year 760,000 1,800emps IMV3

TMT organizationchartin2008

TMThistory
Phase

Phase

Importingcompletecars CKDassembly(196070s) Carassemblytolocalmarket(197090s) Dev.ofSoluna

SamrongFactory(1964) SamrongFactory(1975) TAW(1988)

IMVandglobal

GatewayFactory(1996) BanPhoFactory(2006) TMTHeadquarter(1989) ToyotaThailandFoundation(1992) ToyotaEducation&TrainingCtr(1996) APGPC(2005) ToyotaAutomotiveSchool(2004)

 Buildingthecapabilitieswhilebeingsmall

Creatingtrustwithlocaldealers
Buildingstrongdealershipsince1956.
Contacting60reliablelocalcommissionpartners Onestrongdealerinoneprefecture(territorysystem)
Onedealerhas510shops

Strongservicesystem(mechanics,purepartssupplynetwork) TMTsupportedtheeducationofsalespersonsandmechanics Directcommunicationwithdealers(stocks) FinancialbackupfromBangkokBank

Buildingtheproductioncapabilitiesstepbystep
(1)Motorizationstartedinthe1990sinThailand.Beforethen, the productionlinesaremainlyCKDbasisandlaborintensive. (2)ProductionlinesinSamrong plantweredesignedbyengineersfrom ToyotaMotorSalesCorp. (1)Demandofcommercialvehicleshasincreasedsincethe1990s.In 1996,TMTestablishedGatewayplantwhichmainlyproducing passengercars,basedonMotomachi Factorystechnologicalsupports. (2)InGatewayplant,thenationalcarprojectSOLUNA startedin1996, basedonJapaneseTercel model.

VolumebymodelinGatewayplant

SOLUNA the1st nationalcarinThailand

Jointlabordeclarationandrelationshipwithunions
Buildingthestablelaborrelationship
LearningfromJapaneselaborrelationshipandproposingJoint labordeclarationin1993(quality,massproduction,productivity) 70%ofemployeesareunderoneunionandtheunionplaysan importantroleinpromotingcommunicationbetweenthe companyandlabors. TMTcontinuededucatingemployeestounderstandtheToyota waybybothOJTandOffJT
Whenlaunchingnewmodels, Toyotacelebrateditwiththe laborunionleaders.(1993)

Localizationofmanagementandorganizationalcapability building TMTslocalizationpolicy(Thainization)

TMTeducatedandpromotedlocalmanagersin20years
President(1)

EVP/SVP(35)

VP(20)

GM/M(500)

JapanseThai

Advisorysystem(Kurokosystem)
Localmanagershouldstandonthelines.Japanesearestaffs.

Localizationofpromotioncommittee
Evaluationandpromotionofmanagersarealllocalized

TMT organizationchartin2008

LocalizedorganizationatTMT

TMTinthe1990s

Appraisalbasedoncompetencies andperformance

CurrentsalesorganizationinTMT

(Ref)Educationandtrainingtomultiskilledworkers

SkillformationinToyotasfactoriesinJapan
Professional Knowledge LevelS 25 year LevelA 10 year TeamleaderisfromlevelB LevelB 5 year LevelC 1 year Practiceandmaintenanceof 60%processes Practiceof20% process Basics Professional Knowledge Practical Skills Basic Skills

Practiceandmaintenanceof everyprocess Practiceandmaintenanceof 80%processes

Basicskills

 OvercomingtheEconomicCrisisand furthergrowth

Bahtcrisisin1997 Productionvolume decreasetoalmost30%. SOLUNAprojectisstuck

IMVprojecttoincreasetheexportof completepickuptrucksandtheirparts

Internalcapabilitybuildingofsalesand productionfordomesticmarketin Thailand

Maintaininglaborrelationshipandsocialtrust Maintainingemployeesthroughdeepcostcutting
TMTshowedstrongcommitmenttounitingwiththewhole workforce,dealersandsupplierstorideoutthecrisis Makingoperationsmoreleanandutilizingtheexcesslabor toimplementimprovementinitiativesandadditional educationofemployeesandsuppliers

RespectstotheKingofThailand
ThekingofThailandaskedTMTtostayinThailand.TMT presentedSOLUNAtohisMajesty.Themotivationof employeesrose.

HismajestyinSOLUNA

IMV(InnovativeInternationalMultipurposeVehicleProjects)
initiatedbyJapaneseheadquarter
DispersionofR&Dcentresto4areas 1) NagoyaTechnicalCentre 2)ToyotaMotorEngineering& Manufacturing,NorthAmerica 3)ToyotaMotorEurope,R&Dand Manufacturing 4)ToyotaMotorAsiaPacific Engineering andManufacturing(Thailand)

IMVprojectwasinitiatedbyJapaneseheadquarterastheirglobal strategiestoemergingcountriesin2002.

 IMVprojectinSamrong plantinThailand
IMVprojectroomstartedinSamrong plantin2002. Maximum200Japaneseengineersmovedtothe factoryandinitiatedtheproject MotherplantisHinosHamura plant.Theymoved theproductionlinestoSamrong plantand launchedtheirproductionforexportingtheirturcks 13taskforceteams.Obeyaroommethod,E kanban,qualitygatesandothernewmethodswere introducedwhenlaunchingthelines. Thefirsttruckwasintroducedin2004 Thetacttimeisshortenedfrom1.7secto1.0sec in2006.

 Gatewayplant
Establishedin1996,Factoryofpassengercars(Vitz,Corolla,Camry, WishandYaris),Sales(Domestic 110thousandandexport76 thousandcars),Increaseexport. Oneproductionlinetreats5differentmodelwithabout1minute cycletimeandthehighestqualitiesinAsia. TheleaderofproductionlinewithbestpracticesinAsiaPacific ThecontinuousKaizenandtheimprovementofworkers skills

IMVpartsuppliesfromThailandtotheothercountries

OEMpartsof13,200containersperyear areexportedto13countries

 HumanresourcedevelopmentatAPGPC
Overcomingthelimitationofmotherplantsystem
ThenumberofJapaneseengineeringstaffsarelimited GPCstartedinToyotaMotomachi plantinNagoyain2003 andsoonexpandedtoAsia,NorthAmericaandEU.
GlobalProductionCenter(GPC) withintheMotomachi Plant

APGPSstartedin2005nearSamrong plant
700workersaretrainedbasicskillsin2months Educatingtrainerstrainer Spreadingtheirbestpracticestoothercountries

Learningthebasicskillswithvisual methods

StrengtheningthetotalvaluecreationinThailand
AutoManufacturingand Sales ToyotaMotorThailand(1962)

Technical&Production Support ToyotaMotorAsiaPacific Engineering& Manufacturing(2006)

InternalPartsManufacturers ToyotaAutoBody(1978), SiamToyota Manufacturing(1987)

AutoManufacturingand Sales ToyotaAutoWorks(1988)

Dealers Toyota120Lexus3

TruckManufacturingand Sales HinoMotor Manufacturing(1964) Logistics ToyotaTransport(1993) AutoPartsSuppliers Denso,Aisin

LeaseandInsurance ToyotaLeasing1993),AICI

DealernetworkinThailand

Developmentofdealersupportsystem
StandardizationofOperationProcedure(SOP)
Timesofdealervisits,Contentsofcommunication,Whomtotalk, Howto trainthem,Salesachievement,partsupplies,financialsupports andhuman skillsupportsetc. Thesystemsarestandardizedandimprovedbystaffseverymonths.They arealsousedfortheeducationofstaffs.

PartsCentreatBanPho plant
JITsupplyofservicepartstodealers

Trainingcentreforservicemechanicsofdealers
TETC(ToyotaEducation&TrainingCentre)in1996 Afterservicehasbeenrecognizedasanimportantcashsourceeveninthe economicslowdownlikeBahtcrisis.

Localizationofserviceengineersandthecreationoftheirown managementsystem
Areal marketing,DemandSupplymatching,Nationaldemandforecast, CR(customer retention)system,CSsurveyetc.

Communicationthroughthedealerclub

ServicecapabilitiesatTMTdealers

FinancialServicesofToyotaLeasingThailand
Useofcarryingchargeinpurchasingacar:7080%in Thailand ToyotaLeasingThailand
Establishedin1993 Shareholders:BangkokBank10.0%,TABT0.83%,TMT0.26%. JapaneseBanks10%.

Caseofcarryingcharge

Highlevelofintegrationamongthedepartmentsof manufacturing,sales,R&D,andhumanresourcewithhighly localizedorganizations

 RegionaltechnicalandproductioncentreinThailand
TMAP(ToyotaMotorAsiaPacific,Thailand)in2006,supporting productionandpartsuppliesinAsiapacificregion TMAPThailandwillsupporttheregionwithTMAPSingapore andToyotaTechnicalCentreAsiaPacific(TTCAP)inThailand

TheImportanceofsocialcontributionactivitiesinThailand
ToyotaThailandFoundationwasestablishedin1992 Currently400millionbahtfund Supportingpublicactivitiesincludingeducation,lifesupport andhealthcare.

Notonlylocalization,butalsosocialization

CEOEijiToyotavisitedKingseveraltimes

Launchingofnewcarsin1970s

BirthdaypresenttoLoyalfamily

Establishmentofnurseschoolin1995

TheeffectsofautomotiveindustryonSMEsinThailand
Therearelargeclustersofmechanicsandpartsimportersaround Bangkok (Siancon)

ManycarusersrepairgasolineenginestoLNGusableengines

SourcesandPhotosarefromT.RachottandShintaku(2008)

 Implicationsfrombusinesshistory

Someimplicationsfromthecasestudy
Theimportanceofforeignfirmsoperationsandtheroleof theirtechnologytransfersandlocalizationpoliciesin nationallevelofeconomicdevelopment Marketattractiveness+exportmanufacturingadvantage Theimportanceofbottomup styleeducationandtraining (Trainingtothemiddleclass)withinandoutsidetheMNEs. Longtermandstablelaborrelationshipforthecommitment totheaccumulationoftechnologicalskills Goodandreliablerelationshipofforeignfirmswithlocal governmentandoverallsociety Creatingqualitativecapabilitiesnotlikeonlyvolume buildingisveryimportanttoJapanesefirms

(Ref)ToyotasnextchallengeinRussia(St.Petersburg)