Toyota Motor Manufacturing, Indiana (TMMI) officially announced last week, April 25, 2007, their plans to eliminate its “variable workforce” by the end the year, citing low demand for the Toyota Sequoia. The news release added “About 350 temp workers will be affected by the decision” which is a more pleasant way of saying that 350 workers will lose their jobs. The TMMI is located in Princetown, Indiana.
This news flash did not make the major headlines like the recent quarter sales announcements that Toyota passes up GM as the Number one (in sales) worldwide automotive manufacturer. I guess the hype of the Toyota race to unseat ex-goliath GM and the potential effect on the future of GM is more news-worthy. In my opinion, this little news headline tells a bigger story about Toyota.
Although I feel saddened for the 350 families affected by the pain of losing of a job, I also feel hopeful. For one, the announcement stated a timeline “by the end of the year” for the elimination. That is a seven month horizon to ease the burden. From my manufacturing experience, temp workers are typically given little notice that their services were no longer needed. This meant same day or next day notice with the “Thanks for your work, here is your last check and don’t come back tomorrow” speech.
Also noted in the news release, Toyota is working with PMI, the company that provides TMMI with variable work force team members, to find them other assignments. This includes transferring workers to the Subaru of Indiana Automotive plant in Lafayette, Indiana where Toyota has recently begun building the Camry. So far, 17 workers have accepted the move.
All are steps to ease the burden of a job loss, while following the “respect for people” principle of lean which extends to even the I-get-no-respect temp workers. I don’t know all the details on how Toyota is actively working to ease the job loss pain yet I get the impression it would be more than most companies.
Other lean lessons point to the workforce strategies of Toyota in a variable demand market. Despite all the news of Toyota’s popularity and sales growth, some Toyota models decline in sales as with the Toyota Sequoia in this case. How does Toyota balance their workforce in a cyclical industry?
One strategy is the variable (temporary) workforce. The role of the variable workforce is a huge strategic difference from typical Western Manufacturers. This is not to say using temporary employees is uncommon in America, just that we use a lower percentage of temporary employees by comparison. This was a surprising fact I learned on my trip to Japan where temporary employees made up 40-50% of the workforce at companies I toured. With the exception of highly seasonal industries, I’ll bet that most American manufacturing companies that have temporary employees have a much lower percentage.
Does this high proportion of temporary employees strategy work? It appears so, but not without creating other issues. Healthcare coverage, employee benefits, pay structure, training, re-staffing to name just a few. A closer investigation into the pros and cons beyond replacing the term “layoff” with “release” would help determine if this is a better approach. Given the added flexibility, a larger variable workforce is more likely a growing strategy for the future beyond even typical cyclical industries.