Toyota: cost-slashing drive proves to be a car crash

To ‘toyota’, as in to ‘toyota a company’, is, I would suggest, a new verb which means “to destroy a company’s hard-earned reputation for quality by the pursuit of profit, through relentless cost-cutting”.

Toyota introduced its CCC21 program (Construction of Cost Competitiveness for the 21st Century) five years ago. It was designed to go much further than merely squeezing its own network of traditional suppliers (known as keiretsu). The bottom line, it was felt would benefit from a process called kawaita zokin wo shiboru which means ‘wringing drops from a dry towel’. It also meant going to non-keiretsu suppliers.

This whole process has been deemed a huge success. Until now!

The relentless pursuit of lowest costs (which is also known as ‘China pricing’) is having a very bad effect on quality in all areas of manufacturing, from plastic toys to automobiles. We should learn from this and move away from cheap sourcing of manufacture to start to pursue quality – ultimately that is what ensures long-term survival.

Toyota has had to admit that its own factory workers produced a two-page memo which was seen by senior management. One of its authors who had worked in one of Toyota’s factories for 45 years has condemned the fact that cost-cutting and speed had become the dominant ethos at the expense of experience and thoroughness. In the course of its rapid growth it had forgotten what it was that made its brand so strong.

It is time then that the accountants were put in their place. Maybe they should be sacked and replaced by historians. Why? Because cost-cutting, and its effects on a company – particularly through the quality of its products – have to be measured over a long period of years. Toyota was once the benchmark of quality. Then it became the benchmark for cost-cutting. At the moment Toyota is the benchmark for how easy it is to destroy the reputation and brand of a business – where all the hard work of previous regimes is thrown away by failing to balance cost and risk in engineering processes.

In the UK we have until now led the world in how to squander past success – now we have been beaten even in that, by Toyota!

Published on Mar 12, 2010 by Neil Thomas