DMBA 620 9041 Effective Financial and Operational Decision Making (2172)

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Table of Contents Course Content Week 10: April 3 – 9 Group Project Assignment
Group Project Assignment
Instructions
Instructions
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TeamAssignment (10%): Planning Production for Toyota North America
Lexus RX 350, Successor in 2007 to the RX 330

Assignment Taskings
Address the following four exercises:
Exercise 1: Making a Critical Assessment of the Toyota Production System (TPS) Today
a. Demonstrate your team’s basic understanding of the TPS by 1) defining in your team’s own words any eight of the
terms found athttp://www.toyotageorgetown.com/terms.asp,and 2) applyingthem to one or more of your team’s
own companies or other organizations.
For example, Pokayoke can be defined as an approach to create mistake proofing through use of devices that detect or prevent production errors. At a software development firm, pokayoke might be applied through use of a modular
development process that includes extensive software module testing before proceeding to module integration and total system testing.
b. Describe the TPS as a total entity. What are its purposes? Its advantages? Its limitations? How is it now evolving? Is it getting better – or not? Has it been successfully copied by other motor vehicle manufacturers? Why
or why not?

DMBA 620 9041 Effective Financial and Operational Decision Making (2172)

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Exercise 2: Use of a Grid Analysis (Weighted Scoring Model) to Help Make the North American Plant Location
Decision for the RX 330
This exercise illustrates how when deciding among two or more competing plant location options, various decision
factors (which can typically be characterized as exogenous – in a company’s external environment – or endogenous
– internal to the company) can be qualitatively identified, and how these factors can then be weighted to obtain an
overall score for each competing location option.
a. List the factorsyour team considers key to the Toyota Motor Manufacturing Canada (TMMC): The Lexus RX 330
LineNorth American plant location decision, identifying these factors as either exogenous or
endogenous, weighting themusing your team’s best judgment (stating any relevant assumptions or constraints),
and assigning two scoresto each factor: one for production of the Lexus RX 330 at TMMC, and one for production
at a Toyota factory in the USA.
b. Using the scores from your team’s weighted scoring model and working with regard to Ringo Sho and Nemawashi, make and support your recommendation for the RX 330 North American plant location – TMMC or a factory in the USA.
Exercise 3: Determining Production Capacity Needed at Toyota Motor Manufacturing of Canada (TMMC)
Decision trees are another important if challenging world-class operations management method which operations

DMBA 620 9041 Effective Financial and Operational Decision Making (2172)

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managers should understand and with which other managers should be familiar.
This exercise illustrates how using a decision tree, determination of an “optimal” production capacity option can be
made from among several possible capacity options based on the provided probable market demand and expected
costs/payoffs of events that influence the options.
It is spring 2000, and TMMC has indeed just been chosen to produce the new Lexus RX 330 line, with the first units
deliverable in 2003. Toyota must now determine the amount of annual production capacity it should build at
TMMC.
Toyota’s goal is to maximize the profit from the RX 330 line over the five years from 2003-2007. These vehicles will
sell for an average of $37,000 and incur a mean unit production cost of $28,000 (here, $ = the Canadian dollar).
10,000 units of annual production capacity can be built for $50M (M=million) with additional blocks of 5,000 units
of annual capacity each costing $15M. Each block of 5,000 units of capacity will also cost $5M per year to maintain,
even if the capacity is unused.
Assume that the number of units actually sold each year will be the lesser of the demand and the production
capacity.
Marketing has provided three vehicle estimated demand scenarios with associated probabilities as follows:
Demand 2003 2004 2005 2006 2007 Probability
Low 10,00010,50011,00011,50012,0000.25
Moderate15,00016,00017,00018,00019,0000.50
High 20,00024,00026,00028,00030,0000.25
a. To maximize profit earned during this period, which production capacity should TMMC in 2000 decide to build -10,000, 15,000, 20,000, 25,000, or 30,000 cars? Justify your choice.
You may use the following decision tree developed by Toyota operations analysts in Toyota City, Japan – or your group
may choose to vary it in some way based, perhaps, on its presumed better local market knowledge.
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b. What are the weaknesses or limitations in this analysis? How might they be corrected or at least reduced?
c. It is now late 2016. How well has the RX-330/350 actually done in the North American market? Is its quality
rated as high as if it were made in Japan?
Do some online research; it’s part of improving your attainment ofInformation Literacy,one of the UMUC MBA
Competencies. Here see the Content/Week 10 references on Grid Analysis and Decision Trees
Exercise 4: Assessment of Toyota’s Current Regional Production Strategy
North America
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Source:www.worldatlas.com/<wbr><wbr>webimage/countrys/na.htm,
a. After doing necessary research online or otherwise, document and evaluatethe current distribution of Toyota
production in North America. Here be sure to include Mexico.
b. Why does the team believe Toyota has chosen to produce its cars in the current manner? Has Toyota been wise,
or not?
In effect, this exercise provides the team an opportunity to think ahead to the politico-socio-economic-technological
considerations that will be quite important in DMBA 630.
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