Short and Long Term Effects of Continuous Change at Toyota
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Fast Company described the approach to continuous change at Toyota. One example involves improvement in the paint shop at Toyota's Georgetown, KY plant. In this case, workers changed the painting system to use paint cartridges for different colors, replacing the previous hose based system. This change reduced waste and manufacturing time. After the change, 30% less paint is used per car, process time per car dropped from ten hours to eight hours, and the factory dismantled one of the three heated booths used in the paint process. How do these improvements show up in Toyota's financial statements in both the long-term and short-term?
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Solution Summary
This solution describes how continuous change at Toyota equates in terms of long and short term profitabilities.
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In the short term, the costs of goods sold would be impacted first. The 30% reduction in paint cost and decreased process time would reduce variable costs per manufactured unit thus reducing cost of goods sold by some overall percent. The gross profit per vehicle would, ...
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