9.2. Cultivating Organizational Capability and People Required for Growth

As manufacturing efficiency increases, employees become redundant. A 10-person production line producing X number of parts per hour at 70 percent efficiency could make the same number of parts in the same amount of time with fewer employees if efficiency increased to 80 percent. In an efficiency-driven manufacturing environment, redundancies from efficiency gains typically result in workforce reductions. Yet, from 1980 to 2006, as Toyota's average number of labor hours per car shrank from 39 to 22, its production capacity increased almost three fold to 9,017,000 units and headcount increased six fold to 286,000.[] Although manufacturing efficiency increased, workforce growth outpaced increases in production capacity. This seems to contradict the conventional view that higher efficiency leads to a smaller workforce.

One of the reasons for faster growth in the workforce relative to production capacity is obvious. Toyota expanded outside Japan and entered new market segments overseas during this period, increasing operational complexity and duplication in sales, marketing, administrative, and information technology (IT) functions. In the 11-year period between 1997 and 2007, Toyota opened 31 new plants around the world. The growth of small-scale overseas facilities countered the benefits of concentrated production in Toyota City, causing productivity to decline. In 1997, Toyota was making 33.1 vehicles per ...

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