Toyota’s problem revealed

1. Abstract

A system can be defined as a collection of interrelated parts that taken together form a whole system such that the collection has some purpose and a change in any parts leads to or result from change in some other part(s). Information system is organized system which comprises input unit, process unit and output unit with a feedback mechanism that receives raw data and converts into a sensible information. Management information system is a system that provides information for the management activities carried out within the organization. This system consists of hardware and software that accept data and store, process, and retrieve information. This information is selected and presented in a form suitable for managerial decision making and for the planning and monitoring of the organization’s activities. Essential to the idea of a management information system is the ability to retrieve data and use it for the production of targeted information for different purposes. Much data will be stored as the result of transaction processing operations. It is important that this data is seen as a central resource for the entire management information system and not tied to the application that produced it. In order to achieve the objective of common availability, the data needs to be managed as a central resource. The software that creates this database and handles access to it is called a Database Management System. This ensures the data is controlled, consistent and available to provide information. The database serves as a permanent store for the results of transaction processing, as a temporary store during processing and as a store for the records of the transaction processing and the database is handled by the database management system software. This protects the database from direct contact with the application programs and maintains data consistency.

2. Toyota’s Problem Revealed

Toyota is all about the customer. Technology does not drive business processes at Toyota but the various systems employed in it like Toyota production system(TPS),Corporate Customer Information System, Just-In-Time System, Customer Relationship Mangement,Enterprise Resource Planning are, few systems to name ,which drive the business processes on Toyota.Psabilla (2006). Major problems faced by Toyota can be broadly classified into Organizational/Technical and Management Problem.

2.1 Organizational/technical problems at Toyota:

2.1.1 Problems with Corporate Customer Information System (CCIS)

CCIS is a central repository of up-to-the-minute customer information linked to all transaction systems. CIS is designed around customers, providing information about the products and services they use and their relationships with other customers and the organization. CCIS can reduce the costs associated with redundant systems by functioning as a single, central point of entry for creation, inquiry and retrieval. Because it readily accepts information from a variety of systems, CCIS easily accommodates virtually any financial institution’s system environment.
In order to build and sustain a competitive edge, service organization need to strive to maintain a superior quality of services in an effort to gain customer loyality, hence improving customer retention rates.(Kadampully,1998)

Many organizations find they are surrounded by data that come in variety of forms: records, instructions, design, blueprints, maps, image, sounds, metadata, detailed data, and summarized data, to name just a few. Yet much of it does not truly satisfy their information need. This information may be stored in places ranging from file cabinets to databases and from library shelves to the Internet. Today’s organizations have achieved quantity of data and information, but not necessarily quality of either, meaning that the data or information lacks one or more vital characteristics necessary for it to be fit for use. Problems with the quality of data and information are further compounded by the struggle many organizations are experiencing as they try to improve their systems for knowledge management and organizational memory. This is the main area where Toyota had crucial problem. Toyota’s database had several million records that had to be checked. Some database had wrong addresses, wrong vehicles, and wrong motors.

2.1.2 Information- and – Data quality challenges

Toyota relied on its Corporate Customer Information System to provide the information about its customers and other service problems. Data from system identified Lexus owners with troublesome tyres, and Toyota began mailing the owners cheques for $400 or more to replace troublesome tyres. But some of these cheques went to the people who did not even own a Lexus and one was mailed to a Toyota’s auditor for a vehicle he no longer owned. These mistakes pointed to a massive data quality problem because the Corporate Customer Information System used customer data stored in 15 databases in different parts of the company. So the company had to bear a huge financial loss.

2.1.3 Root causes of poor data quality in the Corporate Customer Information System

  • Multiple data sources: Multiple sources of the same information can contain different values for information, including values that were accurate at a prior point in time.
  • Subjective judgment in data production: data collected using subjective judgments and technique can lead to biased information being recorder.
  • Bypassing input rules and too strict input rules: bypassing database edit checking without careful examination may produce missing or error nous information when individuals either arbitrarily change a value to pass the edit check or skip entering the field. Input rules that are too strict may further encourage data entry clerks to seek ways to bypass onerous edit checks.
  • Volume of data: Large volume of stored information may make it difficult to access information from multiple system
  • Distributed heterogeneous systems: distributed heterogeneous systems can lead to inconsistent definitions, formats, and values as well as excessive time spent to select and aggregate information from multiple systems

Researcher and practioners are continuing to discover and explain the roots causes of poor quality data so that the systems that collect, process, and disseminate data can be improved. One of the best examples of this type of research is an article by strong, lee, and Wang (1997) that identifies ten key problems that often lead to data-quality problems

2.1.4 Cost of poor data and information quality are difficult to quantify

  • The costs associated with poor data and information quality are often difficult to quantify because they involve both tangible and intangible components. Without accurate cost estimates, organizations may not realize the impact that poor data and information quality is having on their bottom line and, therefore, improvement is not a priority. Knight(1992)
  • Redman (2003) estimates that without an active quality program in place, the cost of poor data and information quality for a typical organization is about 20% of the revenue. Although the fear of bad publicity keeps many companies silent about this issues,Knight(1992).thats why,Toyata also suffered a huge financial loss due to decline in its sales revenue.
  • The presence of poor quality data and information can lead to higher costs in several ways. First there is the cost of remedying the mistake caused by the poor quality data or information along with the cost of correcting the data or information problem itself. rectifying the harm caused by poor data and information quality may involve dealing with cleanup effort, loss of lives, valuable equipments or production time, rework, lawsuit or penalties, and costumer appeasements such as offering rebates or issuing apology letters.
  • Redman (1996,1-16) also cities other quality-related expenses such as different department within the same organization maintaining their own stores of redundant information because no one trusts the information in the other’s data base: managers forming poorer, less-confident decisions that take longer to make; and organizational difficulties in adopting new technologies such as data warehouse or business- re- engineering projects.
  • Beside causing additional expenses, the presence of poor quality data may cause revenue reduction due to dissatisfied customers and partners opting to do business with someone else.Dealing with the effects of poor quality data and information can frustrate employees, lower job satisfaction, and raise levels of organizational mistrust. In a tight labor market, organizations may find that poor quality data and information inhibit their ability to attract and retain skilled employees. All these findings are echoed by Hansen and Wang (1991), who found that data and information quality impact corperate profits by interfering with an organization’s ability to deliver customer service, management support, and productivity gains.

2.2 Management Problem at Toyota

“In Toyota, Technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to Transaction Processing System(TPS).Over the years, Toyota refined a number of other concepts and production methods that support the two central TPS pillars.They are Just-in-time and Genchi Genbustsu(meaning- Go and see for yourself) . And behind each of those pillars are information systems, supporting and enabling the processes”-Evans,P(2002).

Data and information quality represent an important and maturing area in the field of management information system. This pursuit is fraught with the challenges as organizations discover the difficulties surrounding the definition, measurement, analysis and improvement of quality for data and information. For the help in dealing these challenges, organizations can turn to a growing body of research on data and information quality. (Coleridge,S.T 2003).

The major management challenges face by the Toyota is as follows:

  • Financial Loss: The Company had a huge financial loss due to error on the customer information system. Company had to pay huge value for the customer service resulting into tangible loss for it. This introduced a financial risk to the company.
  • Ineffective customer service and support: The Company offered monetary compensation to Lexus owners with troublesome tyres but unfortunately, it reached to such group of people who never owned such vehicles. On other side of the coin, the incentive never reached to deserving candidates. This action gave wrong message to the public. Customers were totally dissatisfied with the customer service and support system of the company resulting a problem in the customer retention program of the company.
  • Ineffective decision support system: the poor quality data led to inaccurate information to transaction processing system. This resulted poor reports which are tools for decision making in the Management Information System. This entire problem resulted its effect on the company on its strategic planning area i.e. Executive Information System.
  • Human Resource Problem: Huge number of employee had to recruited throughout various branches distributed in different geographical locations. Laying off these unnecessary workforce was a big problem to the company as they had to handle the distributed information system.

3. Management Initiative to solve the problem

3.1 Installation of Centralized Database: Toyota’s management called for a single centralized customer database to solve the problem regarding the data quality. The advantages of a centralized database approach can be summarized in that it leads to a system where data management and control are more effective and the ability to share data is increased. Advantages of database can be summarized as follows:

  • Data redundancy is reduced: In the application – led, file based approach; data such as employee name may be unnecessarily duplicated in various files. This is a waste of storage and can be reduced, if not entirely eliminated, in a database system.
  • Data consistency can be maintained: A corollary of the elimination of redundancy is that update inconsistency is reduced. Some inconsistency may result unless care is taken in database design, because some duplication of data is not eliminated.
  • Independence of data and programs is possible: In the file based approach, the application programs are closely interdependent with the file structure. For example, the payroll programs will need to ‘know’ how the employee file is organized in order to access to records. It makes a great deal of difference whether the file is organized sequentially by employee# or organized with an employee# index. At the level of the record, the order of the fields and the length of each will probably need to be ‘known’ by the program. It is not possible to change the file organization or change the record structure without changing the program or program that access it. The program is dependent on the data.
  • In a database system, many programs will share the same data. It is not desirable to require each program to be changed when there is a change in the physical form of storage of data.( changes in physical storage can be made for reasons of technical efficiency.) The database management system maintains the same view of the data to the accessing program no matter how the data may be reorganized physically on the disk.
  • A logical view is presented to the user or user programs: following from the last point, it is clear that the view of the data presented to the users or user programs must be independent to the physical storage details – it must be logical. Many database management systems allow different logical views of the same data to be presented to different users or programs. This is important as it frees programmers from a need to pay attention to the physical details of storage and allows them to concentrate on the applications to be coded. In the example covered earlier in this chapter, it is much easier for programmers to develop the cost allocation program if it is not necessary to consider the physical details of data retrieval. Program can concentrate on how to do a task, not on how to obtain the data to do
  • Applications development is enhanced because data sharing is possible: The ability to use the database management system to retrieve data across the database in any required form once it has been stored opens up the range of applications for which the existing data can be used.
  • Standards can be enforced: The factor that all access to data occurs via the database management system allows the individual responsible for this , the database administrator (DBA), to ensure that applications standards are followed in the representation of data.
  • Security is more easily implemented: The DBA will control access to the database. The DBA can ensure that authorization code for users are set restricting their access to only parts of the database and for only for the functions (read,write,copy)that are legitimate to their data purposes. Databases allow more effective control over access than the dispersal of responsibility associated with file- based systems. However, a breach of security may lead to a greater risk, as more data is accessible than with a traditional file- based system.

(Curtis,G.,Cobham,D.(2002)

3.2 Application of Informatica’s Power Mart:

Informatica is data integration software. Thousands of companies rely on the informatica’s platform to lower the IT costs and gain greater business value from all their information assets both on-premise in traditional IT computing system and in the internet cloud. Two main elements of this software are :

Data mining

It is a collection of tools and techniques. It is one of the several technologies required to support a customer-centric enterprise. In broader sense, data mining is an attitude that business actions should be based on learning that informed decisions are better than uninformed decisions, and that measuring resulting is beneficial to the business. Data mining is also a process and methodology for applying the tool and techniques for effective relationship with its customers. (Berry, Michael J. A.Linoff, Gordon S. 2004)

Data mining helped Toyota to identify the hidden trends in the database. Various software modules present in the data mining were used to realize the dependency of data and its relationship with other entities in the database repository. This helped Toyota to make decision in the real-time.

Data Warehousing

Data warehousing is a logical repository of an organization’s electronically stored data. It fulfills the organization’s need for reliable, consodiated,unique and reporting and analysis of it’s data at different levels within the organization. The practical reality of Toyota is that their data infrastructure was made up by a collection of heterogeneous systems like customer relationship management, Enterprise Resource planning, transaction processing system, decision support system etc, throughout all the branches distributed in different geographical locations. so same information of different entities were repeated all over in the database. Data warehousing tools and module helped to keep these information in more scientific way in the form of data marts. Some of the benefits that a data warehouse provided are as follows:

  • A data warehouse provided a common data model for all data created whatever the data’s source may be. So it was easier to report and analyze information
  • Before storing data into the data warehouse, inconsistent data were identified and resolved which made it easy to report and analyze the trend of data.
  • The information in the warehouse can be stored safely for long periods of time.
  • Data warehouses provide retrieval of data without slowing down operational systems because they were separated from operational system.
  • Data warehouses added the value of operational business applications especially CRM.
  • Data warehouses helped decision support system applications to produce trend reports, exception reports, and reports that show actual performance versus goals.

4. Conclusion:

By implementing a new information system, Toyota was able to maintain data quality within the database. As we know “Too much of Information kill information”, the main challenge in every business is not creating and storing the information but the challenge lie on the capability of company to manage it and use it as par need. Efficient management of the database helped Toyota to increased it’s annual vehicle sales revenue from 750000 to 1.7 million. This is a huge financial benefit to the company from market share viewpoint. Toyota also gained the intangible benefits of ‘first-mover’ advantage which made them a leader in using a new process or system that were difficult for competitors to follow yielding strategic competitive advantage. This helped them to stay in the business despite of the huge system failure. Other intangible benefits like staff morale, customer satisfaction,reputation,customer-management, value chain management, organizational learning were also observed by the management.