Toyota Turns the Clock Back a Decade to Improve Quality

 

What do you get when you mix 1,000 engineers, four weeks of additional product development lead time and reduced reliance on outsourced engineering by 67%? In most product development departments this would get a decision maker quickly fired. Not so for Executive VP Takeshi Uchiyamada, a chief engineer at Toyota tasked with turning the tide on quality issues. Toyota is taking some expensive countermeasures to the root causes that their quality assurance process from the product design and testing standpoint seems to have been cut a bit too close to the bone over the past decade through cost reductions and development time reduction efforts.
According to the Wall Street Journal article Toyota Assigns 1,000 Engineers to Quality Drive :

Toyota Motor Corp. has assigned 1,000 engineers to help analyze quality problems and is extending time devoted to testing new models by an average of four weeks in an effort to head off glitches before vehicles enter production

Toyota has so far spent about $4 billion to correct the problem of unintended acceleration in its vehicles, but this has been mostly containment and not root cause correction. The changes suggested in this article are aimed more at root causes, and will cost approximately $400 million if we take the cost of 1,000 engineers to be $150 million per year and estimate the cost of 4 weeks of lead time and the reduction in outsourcing to be another $250 million. Could this be a demonstration of the 10X rule of the cost of quality?
Toyota reportedly saved more than $11 billion in the early 2000s thanks to its CCC21 efforts, and some have linked these cost reductions in the design process as well as supply chain costs as contributors to today’s quality problems. Cost reduction should result from following and improving safe, high quality processes that deliver to customer’s expectations. When cost reduction programs put quality before the other KPIs there is a danger that the overall costs increase in the long-run.

Mr. Uchimayada said he would like to reduce the amount of outside engineers working on research and development, but the process will take time. The company must wait for contracts to expire before it can bring the work inside the company. A company executive said the target is 10% outside engineering contractors, down from 30% now.

Not too long ago Japanese society considered lifetime employment a virtue and employees and companies considered it a given. As Japan’s economic bubble burst and as consultants advised them to modernize their employment policies in line with global best practices, this lifetime employment has gradually eroded to be replaced by an sea of what we might term lifetime temporary workers across a range of industries and professions.

When it comes to the impact of decisions by corporations on society, many of the unintended consequences do not become visible for years, even a decade. In BP’s case we see the distressing short-term impact of an eroded culture of safety, and can only guess at the long-term impact for BP and for the Gulf of Mexico. In Toyota’s case one of these may be the loss of company-specific values and knowledge relative to quality culture around the design and testing process among the 30% contract engineers. In Toyota’s case they may need to turn back the clock by a decade to return to the quality methods and processes that yielded famous results.

Corporations are what are known as “legal persons”. What we need are less legal persons whose purpose is to maximize shareholder return in the short term and more ethical persons whose purpose is to maximize social well-being in the long term.

6 Comments

  1. John Santomer

    July 10, 2010 - 8:17 am

    Dear Jon,
    I’ve often wondered…Why does it need to reach a decade, and a disastrously shameful accident for a company as big as TMC to realize that it has eroded much from its culture of quality and people handling before deciding to its clock? Do you think a decade will be enough to recover what it has lost? Obviously this problem did not set in in just a few years…But is this digging in to the root cause or just another containment scheme? BP did not take more than 10 years to destroy a lot of natural resources because of its incompetence and lack of foresight.

  2. rajen

    July 12, 2010 - 4:26 am

    “Life Time Temporary Workers”- sorry to share, might not prove to be an effective solution! Culture can grow effectively thru involvement, participation & ownership. These need to be facilitated. LTTPW-could prove to be a hanging sword on the Heads of Value Makers. Toyota may consider this view! Thanks !

  3. Jon Miller

    July 12, 2010 - 4:55 am

    Hi John
    I think the answer to your question is captured in the old adage, “The higher they rise, the harder they fall.” If Toyota was mediocre, as many automobile manufacturers are, the gap between their best and their worst may not be as stark. It may take a few years for blindness induced by pride to set in, but if the core values are strong and the people remember these shared values they can recover. I think this is true of Toyota. I hope it is also true for BP.

  4. John Santomer

    July 21, 2010 - 8:53 am

    Hey Jon,
    Unfortunately for BP, a lot of things in this world cannot be replaced or recreated overtime. We still have much things to learn and yet we act as if we know everything. The destruction they’ve contributed by the oil spill will take years to recover if it ever will. For Toyota, I’ve never doubted that they will recover-their commitment to quality, hard work, and honor is insurmountable…I just felt that they have a very slow reaction response from the design to the production stage. Isn’t this one of the Toyota principles that TMC was known for? Where has the “andon switch” gone to? Was it caused by cutting cost and stiff competition from other brands? Yet I see every year the competitor is churning the market with innovative designs and more gizmos in their new models. Toyota has conservatively maintained and has not strayed away from its practical designs…

  5. Drew Peregrim

    July 21, 2010 - 11:35 am

    John:
    When a company finds success, they continue repeating what made them successful. As time changes, small accidents occure (warnings) which are usually dismissed as oddities, statistically small. Depending how large the momentum of succes is, it may be nearly impossible to change the company’s direction or see a need to. I have seen this happen to several small and large companies that I worked for. Fast rise, and even long term success leading to a disaster because the top management has lived a successful path and is desperatly fearful of changing until big damage is done.

  6. John Santmer

    July 23, 2010 - 11:47 pm

    To Drew,
    I understand where your point is rooted on but “Even the most oiled machine, breaks down from wear and tear”. What is really unbelievable is for an accident to occur marring TMC’s name because a lot of the warning signs were “dismissed” or were overlooked. This was not brought about by a dismissal of one point – but even that could have started the “domino effect” of all the points dismissed. Whatever the reasons were – this is not a light subject to just pass off – the loss of a Customer’s life can’t be corrected as easily as a design fault. Fear in changing a successful path is another “golden opportunity” that should be taken as a “kaizen improvement” and not avoided like the “plague” because it’s “straying from the proven success formula”. Likewise, disasters should not be taken as the “Andon switch” for something that is life threatening. The best design should consider life preservation above all others.