Management Failures:
Toyota Prius Manufacturing & Marketing
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Toyota has made hybrid cars in Japan since 1997 and shipped them worldwide for about five years. Some have been extremely popular. The best example is the 2004 Prius. Toyota upped production about 33% from the 2003 model, redesigned the model to make it roomier and more driver-friendly in many part of the cockpit design.

Production immediately sold out after the late-2003 introduction, and probably won't catch up with demand until late 2005. There are many lessons to be learned here, mostly by Toyota, but there seem to be no means of placing those lessons in one location for everyone to see. This is one of those places.

I'm making this up, but correct me if you can prove I'm wrong: From Day One, Toyota decided that the best, most efficient way to sell cars was to create options packages, color schemes, estimate demand based on consumer polls or from order rates, and run their production lines accordingly.

Here's the stupidity.

Toyota's production ran, in early 2004, 4-5 months behind demand. People eager to own a Prius put down deposits and sat on their hands for months, waiting for delivery. They told the dealers which colors and options they wanted. Dealers could not get any information [or at least, did not share any information] with customers as to when the car they had ordered would be manufactured, shipped, or delivered to the dealership.

The insight... the solution... the Vision... is this:

Toyota was building Prius's to manufacturing schedule. Why? History, tradition, too hard to change to anything else? You tell me.

Toyota had, in its hands already, their entire production plan for the next four to six months: build the cars that the customers wanted; the ones they'd ordered; the ones they'd put money down on.

But they didn't recognize it.

Had Toyota looked at their order sheets, they could have put them into one big, high-tech Excel® spreadsheet, shipped it electronically in seconds to the manufacturing planning people in Japan, and immediately begun building exactly the cars their customers wanted!

But they didn't do it.

Instead, they continued to build to plan, not to order. Customers who, for whatever emotion or real reasons, wanted or needed their cars sooner than the vague-to-nonexistent predictions from their dealers, had several choices:

All Toyota had to do was to change how they looked at their market: stop using the tried and true [and annoying] "we will build them and they will sell" strategy, which inherently sub-optimizes customer satisfaction. Begin translating orders into production plans, and start telling customers when the car they'd ordered would be delivered to their dealer, and then actually delivering it there!

But they didn't. It's really sad. Toyota will probably be faced with the same excess of demand over supply as they roll out hybrid versions of the Highlander SUV and the Camry and other models in the future. Lexus will, I forecast, suffer the same fate, as will their customers. All for want of changing some ways of thinking.

An easy route to improved customer satisfaction, and the road not taken. Ironic, eh?

First rev: 01.31.2005