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Date Submitted: 09/17/2012 10:07 AM

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Operational Excellence at TOYOTA:

Operational Excellence has many definitions. According to one such definition, operational excellence is “when each employee can see the flow of value to the customer and fix that flow when it breaks down” (Kevin Duggan, 2007). This definition explains that when employees are able to relate operational performance to business process and are capable enough to fix any issues without supervisor intervention, operational excellence is achieved.

Operational excellence was initially relevant to manufacturing sector, however, it is now applied across industries. Several models have been designed to achieve operational excellence. Some of these models are Business Process Reengineering, Total Quality Management, Six Sigma and Lean Manufacturing. Companies which apply these models in their operations achieve better results than before.

The question then is, if all such information is publically available then shouldn’t all companies achieve operational excellence? This would mean that all companies should be market leaders. This question can be answered taking American automobile sector into consideration. Toyota was late entrant in a market of existing majors such as Ford, general Motors and Chrysler (Chrysler was shed due to a failed merger with Daimler from Germany).

Toyota used its Toyota Production system to achieve operational excellence and started its successful journey in American automobile sector. Soon after a lot of research was done on models to achieve operational excellence, other companies implemented their own models. Systems like the Ford Production System, the Chrysler Operating System, and the GM Global Manufacturing System came into picture. Ideally, all the companies should have gained from the implementation. But that did not happen and Toyota’s profits were soaring while the others had to suffer losses.

By March 2007, Toyota had a net income of $13 billion while the competitors GM incurred a loss of over $12...