Lean Production: Toyota Production Systems & Accounting Decision Making (Research Paper Sample)

Lean Production: Toyota Production System
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Abstract
Traditional manufacturing process uses the target sales or production in production while lean manufacturing uses actual sales in production. This results to lean production being more efficient in reducing wastes. This paper focuses on lean production system of Toyota known as Toyota Production System (TPS). The company benefits a lot from its lean production from maximizing quality to minimizing quality such that its lean production is being applied by other companies. This paper focuses on lean production system by Japanese giant vehicle manufacturer, Toyota.
Traditional manufacturing principle is where a certain number of products are produced while holding a reserve that would be leveraged in case of unexpected shortage or demand. The method still works well for some firms, but it is being replaced by lean production which aims at reducing wastage (Nicholas & Nicholas, 2011). Lean production achieves this by saving money through aligning production inflow with the changes in demand concentrating on efficiency rather than reserves. Business strategy results to changes in accounting approaches in case a company starts using lean production (Ruffa, 2008). Costing is important process for reporting expenses where a certain cost is assigned to a particular production step or activity.
Matching principle is used where cost of a certain production process is matched to the value it has created. In this case, cost is categorized by department or stages where one cost is assigned to all resources (Ruffa, 2008). On the other hand, lean manufacturing use techniques such as work cells with the aim of adapting new product needs and shifting production as need. Each of the work cells requires its own resources, machines and labor. The broad costing technique does not work and accountants have to find an accurate way of costs representation. One approach to accounting in lean production is value streams where cost is based on value added rather than on categories such as labor or raw materials (Nicholas & Nicholas, 2011). The result of this is a more accurate allocation of costs which allows businesses to find new ways of saving money. In most lean manufacturing, it is connected with lean accounting. Lean accounting involves representing costs in a more simplified manner which is easy to understand figures and facts.
Most companies have been pushing towards lean production over the last ten years. Lean production focuses on production on the basis of demand compared to traditional methods which focuses on a certain level of production. In lean production, inventories account balances are usually small compared to the traditional manufacturing (Ruffa, 2008). This is because lean production produces products whenever customers start ordering and finished products do not necessarily have to wait for a long time before they are shipped. In the same way, raw materials are ordered when the company embarks on production which makes the balances to be low. In addition, lean manufacturers order their raw materials from a variety of suppliers in case one does not respond quickly to the request then another supplier is made to make the supply.
Toyota is the third largest company in the world and the largest car company. The company had been producing about five million units annually in late 1990s each year. However, its profits decline during the economic downturn of early 1990s which made it to cut its costs by moving its production to overseas. Kiichiro Toyoda visited United States where he visited a variety of vehicle manufacturing companies (Nicholas & Nicholas, 2011). He established his automobile division in his father’s factory and the first vehicle prototype was produced in 1935. Japan did not have natural resources that are found in other countries which made Toyoda to develop fuel efficient cars. The first research center was established in 1939 where work on battery powered vehicles began. Then in 1940, Toyota Science Research Centre was established and the Toyoda Works. During the Second World War, the company was faced by the problem of procuring materials which made it to reuse old parts and minimize on some parts (Ohno & Bodek, 2008). In order to recover from the war, Toyota concentrated on small cars in order to compete with American Automobile manufactures which focused on medium and large cars.
Lean production involves elimination of waste within the process of manufacturing. Lean production accounts for waste that is created as a result of overburden and waste that is created through unevenness in workloads. Lean production is aimed at adding values while reducing everything else. Value is anything that the customer will be willing to pay for. Toyota Production System (TPS) is a socio-technical system comprised of management philosophies and practices (Chiarini, 2013). TPS is involved in organizing of logistics and manufacturing of automobiles and it includes the interaction with suppliers and customers.TPS has made Toyota reduce its original seven wastes thereby improving the overall customer value although there are variations on how this is best achieved (Chiarini, 2013). Lean production has made Toyota to move from a small company to the world’s largest car company.
Lean production by Toyota may have started in 1934 when the company moved from textiles to produce its first prototype. The idea of lean production may have come from the textile factory with looms that automatically stopped whenever a thread broke (Liker, 2004). Kiichiro Toyoda directed the engine casting works and he must have realized the many problems encountered in manufacturing. In order to stop repairing of poor quality, he decided to study each processes in an intense manner. However, his processes encountered more problems when he won Japanese truck contracts in 1936 which made him to develop Kaizen improvement teams.
After the Second World War, demand fell and the mass production was low which means that Toyota would not apply the economy of scale (Nicholas & Nicholas, 2011). Taiichi Ohno realized that scheduling of work did not have to be driven by targeted sales and production but rather by actual sales. Due to financial situations during this period, the company has to reduce overproduction and then applied the concept of pull in production scheduling came to play. Through Taiichi Ohno, these themes were integrated into the company production which led to Toyota Production System (TPS).
The aim of lean production is elimination of waste ad Toyota identified three types of wastes. These wastes are Muda, Mura and Muri, but for most implementations the wastes reduces the first type alone (Liker, 2004). Identification and clarification of waste is important in establishing the difference between waste, value adding activity and non-value adding activity. To measure these wastes one would be required to demonstrate effects of changes are achieved and the move towards the goals. Just-in-time (JIT) is achieved by the flow based approach where variations that results from work scheduling are removed (Chiarini, 2013). Through efforts to achieve JIT, a lot of problems are brought into light which were previously hidden y the buffer stocks.
Muri is all unnecessary work that the management offers works or machines due to poor organization. Such work includes dangerous tasks, moving items around and carrying heavy things. This is pushing a machine or a worker beyond the natural limit (Liker, 2004). TPS approaches this problem by designing what can be avoided or preparing and planning of processes. In mura, elimination of fluctuation during operations and scheduling is done where quality and volume are focused on. Muda is then realized after the processes are in place and the management deals with it reactively.
TPS was developed from Jidoka and Just-in-Time concepts. Jidako can be said to be automation with a human touch where whenever a problem occurs, the equipments are stopped thereby preventing production of defect...