Long praised for its reliability, quality, and innovative supply chain, Toyota Motor Corporation today is facing perhaps the greatest crisis in its history. A defect that causes gas pedals in many of its most popular models to stick has prompted massive recalls, halted sales of these products, and required expensive repairs to models on the road. What went wrong?

Toyota may be confronting the downside of lean manufacturing. Its widely touted production method aims for complete efficiency by making products arrive just-in-time, eliminating waste, and cutting costs. Toyota perfected lean manufacturing and became a model for factories around the world. By centralizing the procurement of parts, this supply chain approach includes fewer suppliers and tries to use the same parts for more than one product. These efforts allow for bulk discounts and standardized manufacturing processes.

But it appears the short-term cost benefits may trade off against the risk of quality issues. When companies use the same parts in many different products, the need for well-designed parts that have gone through rigorous quality control testing becomes even more important. Toyota’s quality control slipped, and as a result, the company has to recall multiple models, all of which use the same defective gas pedal.

Although Toyota’s problems are notable and widespread, they are not the first example of a massive recall. Ford has recalled 16 million cars and trucks since 1999 and 4.5 million just in October 2009. The October recall involved vehicles with a defective cruise-control mechanism that became a fire hazard.

The promises of lean manufacturing still appear to outweigh the risks for many companies though. Sony recently reduced its number of suppliers by half, after it consolidated its procurement policies to save 500 billion yen. Panasonic also uses lean manufacturing—and experienced one of the largest product recalls ever when in 2007 it realized its ovens, clothes dryers, and refrigerators were at risk of overheating and catching on fire. With lean manufacturing comes greater responsibility for ensuring the highest levels of quality control.

Discussion Questions:

1. What are the advantages of lean manufacturing? 
2. What are the disadvantages of lean manufacturing?

Daisuke Wakabayashi, “How Lean Manufacturing Can Backfire,” The Wall Street Journal, January 30, 2010.