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The toyota way Book Review
1. The Toyota Way
-Jeffery K. Liker
By:Harish Gawai 12218
Megha Gilda 12220
Roshani Mehta 12248
Sanket Aggarwal 12249
Abhishek Kale 12271
2. Why Study Toyota Way?
Total
annual profit on March 2003 was $8.23 billionlarger than combined earnings of GM, Chrysler and Ford.
Profit margin is 8.3 times higher than industry average.
Toyota shares rose 24% from their 2002 values. Market
capitalization was $105 billion as of 2003 – higher than
total of Big 3.
In 2002, Lexus outsold BMW, Cadillac and Mercedes
Benz in the US for the third year in a row.
In 2003, sold more vehicles than Ford and Chevrolet.
The company has made profit every year over the last 25
years and has approximately $20-$30 billion in cash on a
consistent basis.
3. 3
More laurels
In
2003, Toyota recalled 79% fewer vehicles in US
than Ford and 92% fewer than Chrysler.
According to Consumer Reports, 15 out of the 38
most reliable models from any manufacturer over
the last seven year came from Toyota/Lexus.
According to J.D. Powers ranking for initial
quality and long-term durability, Lexus was #1
most reliable car in 2003 followed by Porsche,
BMW and Honda.
Not a single Toyota car is on the dreaded “vehicles
to avoid” list published by Consumer Reports.
About 50% of the GMs and more than 50% of the
Chryslers are to be avoided.
4. 4
How did it happen?
Incredible consistency
comes from operational
excellence.
The operational excellence is based on the quality
improvement tools and methods developed by
Toyota (under the TPS): such as JIT, kaizen, onepiece-flow, jidoka, and heijunka!
These technique triggered a “lean revolution” in
the manufacturing sector.
Of course, Toyota system is much deeper and in
fact is at a philosophical level!
Toyota Way – 14 principles which constitute this
philosophy.
5. 5
What is “Toyota” lean?
End result of applying the TPS to all areas of
business. A five-step process:
Defining customer value
Defining value stream
Making it “flow”
“Pulling” from the customer and back
Striving for excellence.
Taiichi Ohno (founder of TPS) “All we are doing is
looking at the time line from the moment the
customer gives us an order to the point when we
collect the cash. And we are reducing that time line
by removing the non-value-added waste.”
6. THE TOYOTA WAY
Problem Solving
(Continuous Improvement and
Learning)
People & Partners
(Respect, Challenge and Grow
Them)
Process
(Eliminate
Waste)
Philosophy
(Long Term
Thinking)
+Continual org learning.
+Go & see yourself.
+Decision slowly by consensus and
implement rapidly.
+Grow leaders who live the philosophy.
+Respect, develop and challenge people, teams
and suppliers.
+Create process flow to surface problems
+Use pull system to avoid over production
+Stop when there is a quality problem. (Jidoka)
+ Level out the workload. (heijunka)
+Standardize tasks for continuous improvement.
+Use visual control so no problems are hidden.
+Use only reliable technology.
+Base management decisions on a long term
philosophy, even at the expense of short term
financial gains.
“4 P” MODEL OF THE TOYOTA WAY
7. 7
Story from the beginning
Starts
with Sakichi Toyoda who grew up in predominantly
farming community in late 1800s. Weaving was a major
industry promoted by the Japanese government.
By 1894, Sakichi began to make manual looms that were
cheaper but of better quality (more features and less
failures).
Started working on his own to develop power-driven loom.
This approach of learning and doing yourself became
integral part of TPS (genchi genbutsu).
Among his inventions was a special mechanism to
automatically stop a loom whenever a thread broke –
building in quality as you produce the material (jidoka or
poka-yoke).
8. 8
Toyota story
The
“mistake-proof” loom became Toyoda’s most popular
model and in 1929, his son Kichiro, negotiated the sale of
patent rights to Platt Brothers of England for £100,000.
In 1930, these funds were used to start building the Toyota
Motor Corp.
Kichiro’s contribution to the Toyota philosophy – JIT.
What is JIT? – marriage between the Ford’s idea of
assembly line and US supermarket system of replacing
products on the shelves just in time as customer purchased
them.
Not much later WWII started.
9. 9
Toyota story
Post-WWII,
rampant inflation meant getting paid by
customers was very difficult. Cash-flow problems lead to
pay cuts.
When situation worsened, 1600 workers were asked to
“retire voluntarily.”
The resultant work stoppages and public demonstrations
by workers led to resignation of Kichiro.
Eiji Toyoda took over as president.
Eiji’s main contribution – leadership towards development
of the TPS.
Eiji hired Taiichi Ohno as the plant manager and asked
him to improve Toyota’s manufacturing process so that it
equals the productivity of Ford.
10. 10
Toyota story
Taiichi
Ohno benchmarked the competition by
visiting Ford and studied Henry Ford’s “book.”
Impressed with Ford’s philosophy of eliminating
waste. Ford itself didn’t seem to practice it.
Took idea of reducing inventory by implementing
“pull” system from the US supermarkets.
“Pull” system was implemented by Kanban cards.
Ohno also took ideas from Deming when he was
lecturing in Japan about quality and productivity.
11. 11
Toyota story
Deming
told the Japanese industry about meeting
and exceeding customer satisfaction. Also
broadened the definition of customer to include
both internal as well as external customers.
“The next process is the customer” became the
most significant expression for JIT, because in a
pull system it means the proceeding process must
always do what the subsequent process says.
Otherwise JIT won’t work.
Deming’s PDCA cycle led to Kaizen.
12. THE TOYOTA WAY
Lean
Engineering / Manufacturing / Thinking /
Enterprise /System is a: -
A Five Step Process :
Defining
customer value (internal / external)
Defining the Value Stream (Process)
Making it Flow (Process)
“Pulling” from the Customer back (Inventory)
Striving for Excellence (Long term)
13. Objectives of TPS:
Eliminating
wasted time and resources
Building
quality into workplace systems
Finding
low cost but reliable alternatives to
expensive new technology
Perfecting
Building
business processes
learning
improvements
cultures
for
continuous
14. 14 Toyota-Way Principles
Section I – Long-term philosophy
Principle
1: Base your management decisions on a
long-term philosophy, even at the expense of
short-term financial goals.
Section II – The Right processes will
produce the right results
Principle
2: Create continuous process flow to
bring problem to the surface.
Principle 3: Use “pull” system to avoid
overproduction.
Principle 4: Level out the workload (heijunka).
(work like a tortoise not the hare.)
Principle 5: Build the culture of stopping to fix
problems to get quality right the first time.
15.
Principle 6: Standardize tasks are the foundation for
continuous improvement and employee empowerment.
Principle 7: Use visual control so no problems are
hidden.
Principle 8: Use only reliable, thoroughly tested
technology that serves your people and processes.
III – Add value to the
organization by developing your people
and partners
Section
Principle 9: Grow leaders who thoroughly understand
the work, live the philosophy, and teach it to others.
16. Principle
10: Develop exceptional people and
teams who follow your company’s philosophy.
Principle 11: Respect your extended network of
partners and suppliers by challenging them and
helping them improve.
Section IV – Continuously solving root
problem drives organizational learning
Principle
12: Go and see for yourself to thoroughly
understand the situation (genchi genbutsu).
17. Principle
13: Make decisions slowly by consensus,
thoroughly considering all options, implement
decisions rapidly.
Principle 14: Become a learning organization
through relentless reflection (hensei) and
continuous improvement (kaizen).
So
we see that the JIT, Lean, 5S etc. are just tools
that enable quality and productivity. TPS is much
more than that!
18. Long-Term Philosophy
Principle 1 - Management Decisions on a
Long–Term Philosophy, even at the expense of
Short-Terms Financial Goals:
Work
and grow rather than making money.
Generate value for customer, society and economy.
Be responsible.
Base Management Decisions on a Long–Term
Philosophy, even at the expense of Short-Terms
Financial Goals.
19.
Customers had complaint regarding tyre-life. So Toyota sent
the owner of every Lexus who had the specified batch of
tires, a coupon they could redeem for $500 and apologised
for inconveniency. Many of these customers had already sold
their Lexus.
The way you treat your customer when you do not owe
them anything, like how you treat somebody who can not
fight back – that is the ultimate test of character and long
term philosophy of values.
20. Process – Eliminate Waste
Principle 2. Create Continuous Process Flow
to Bring Problems to the Surface
o Strive to cut waiting time to zero.
o Flow is the heart of the Lean message that shortening the elapsed
time from raw material to finished goods / service will lead to the
best quality, lowest cost and shortest delivery time
o Flow means when a customer places an order, this triggers the
process of obtaining raw material from suppliers, flow to
production plant, assemble the order, transport to dealer and
deliver to customer
o Flow also forces the implementation of other lean tools such as
preventive maintenance, built-in quality (jidoka), continuous
improvement (kaizan) and even production (heijunka)
21. PROCESS FLOW „Batch & Queue‟
Computer Base Dept (1 min each)
Computer Monitor Dept (1 min each)
Computer Test Dept (1 min each)
o Complete processing of first batch of 10 takes 30 minutes
o Transportation from Base to Monitor Dept is in batch of 10
o First good computer ready in 21 minutes
o There are at least 21 sub-assemblies in process at a time
Batch Processing Example
22. PROCESS FLOW – „One Piece‟
Computer Base Dept
Computer Monitor Dept
Product requires three processes
that takes one minute each
(One Piece Flow Production Cell)
Lean Thinking – Batch size - ONE
Computer Test Dept
o First part is ready in 3 minutes
o 10 complete assembly ready in 12 minutes
o Only two sub-assembly in process at a time
Continuous Flow Example
23. Principle 3. Use “Pull” Systems to Avoid
Overproduction
“The more inventory a company has, the less likely they will
have what they need” -Taiichi Ohno
Provide your down line customers in the production process
with what they want, when they want it, and in the amount
they want. Material replenishment initiated by consumption
is the basic principle of just-in-time (JIT). It triggers at a
customer’s orders of Toyota.
Minimize your work in process (WIP) and warehousing of
inventory by stocking small amounts of each product and
frequently restocking based on what the customer actually
takes away.
Be responsive to the day-by-day shifts in customer demand
rather than relying on computer schedules and systems to
track wasteful inventory.
24. Principle 4. Level out the Workload (heijunka)
(Work like the tortoise not the hare)
Eliminating waste is just one-third of the equation for
making lean successful. Eliminating overburden to
people and equipment and eliminating unevenness in
the production schedule are just as important
The slower and consistent tortoise causes less waste
and is much more desirable than the speedy hare that
races ahead and then stops occasionally to doze. The
TPS can be realised only when all move at the speed of
tortoise.
25. Process – Eliminate Waste
Muda
Waste due to Nonvalue adds
Muri
Mura
Unevenness of
production
(down time, NA
parts, defects)
Overburdening
people or
equipment
(safety and
quality problem,
breakdowns and
defects)
26. Principle 5. Build a Culture of Stopping to Fix
Problems(Jidoka), to Get Quality Right the
First Time
Traditional production view: “Do not shut down the
assembly line!” The managers are judged by their
ability to deliver the numbers.
TPS view: “If you are not shutting down the assembly
plant, it means that you have no problems. All
manufacturing plants have problems. So you must be
hiding problems. Please take out inventory so that
problems surface. Then you will have to shut down the
assembly line and fix the problems.”
If we continually follow this view, we can make even
better-quality products more efficiently.
27. 27
Jidoka
Hence we need a method to detect defects when they occur
and automatically stop production so an employee can fix the
problem before the defect continues downstream.
Jidoka is also referred to as autonomation – equipment
endowed with human intelligence to stop itself when it has a
problem.
In-station quality is much more effective and less costly than
inspecting and repairing quality problem after the fact.
Lean manufacturing dramatically increases the importance of
building things right the first time.
With very low levels of inventory, there is little buffer to fall
back on in case there is quality problem.
28. 28
Andon system
When the equipment shuts down because of a quality
problem, flags or light, usually with accompanying music,
signal that help is needed to solve the problem.
This signaling system is called the andon system.
At Toyota, the andon is called a “fixed-position line stop
system.”
When a workstation in the assembly line signals a problem,
the production line is not stopped immediately.
The manufacturing team has until the product moves to the
next workstation to respond and address the problem, before
the andon turns red and stops the assembly line.
30. 30
Andon system
If
the problem is small enough that can be solved
in the lead-time between two workstation, 100%
quality is achieved without stopping the line.
If the problem is complex, the team leader can
conclude that the line should stop.
In TPS, the workstation detects the defects by
using countermeasures and error-proofing (pokayoke).
Applications of andon system to service
organizations like call-center are obvious!
31. Principle 6 – Standardized Tasks are the
foundation for continuous Improvement and
Employee Empowerment
It is impossible to improve any process until it is standardized
Standardization, stabilize the process before continuous
improvements can be made.
eg. If you want to learn Golf , you have to first learn the
fundamental skill needed to swing the club consistently, without
that there is no hope of improving your golf game.
Standardization is to find that balance between providing
employees with RIGID procedures to follow and providing the
freedom to INNOVATE and be creative.
32. Coercive Vs Enabling Systems and Standards
High Bureaucracy
Low Bureaucracy
Technical Structure
Social Structure
Coercive Bureaucracy
+Rigid rule enforcement
+Extensive written rules
and procedures
+ Hierarchy controls
Autocratic
+ Top down control
+Minimum written rules
and procedures
+ Hierarchy controls
Enabling Bureaucracy
+ Empowered Employees
+Rules and procedures as
enabling tools
+ Hierarchy supports
+ Org learning
Organic
+Empowered employees
+Minimum rules and
procedures
+Little hierarchy
33. Principle 7 :Use Visual Controls so No
Problems Are Hidden
Traffic signals tend to be well-designed visual controls. Good
traffic signs don’t require you to study them: their meaning is
immediately clear.
The visual aspect means being able to look at the process, a
piece of equipment, inventory, or information or at worker
performing a job and immediately see the standards being
used to perform the task and if there is a deviation from
standards
Visual management complements humans because we are
visual, touch and audio oriented
34. Clean It Up and Make It Visual – 5 S
Sort
Clear out rarely used
items by red tagging
(seiri)
Sustain
Use regular
management audits
to stay disciplined
(shitsuke)
Standardize
Create rules to sustain
the first 3 S (seiketsu)
Straighten
(Orderliness)
A place for everything
and everything in its
place (seiton)
Shine
Clean it (seiso)
35. Principle 8 - Use Only Reliable, Thoroughly Tested
Technology That Serves Your People, Processes and
Values
At Toyota, new technology is introduced only after it is proven out
through direct experimentation with the involvement of a broad crosssection of people.
It means the technology has been thoroughly evaluated and tested to
ensure it provides added value.
If it determines that the new technology can add value to the process,
the technology is then carefully analyzed to see if it conflicts with
Toyota’s philosophies and operating principles.
36.
Toyota has had experience with pushing technology that is the latest
and greatest, only to later regret it.
One example was an experiment in Toyota’s Chicago parts
Distribution center, where the company installed a highly automated
rotary-rack system.
At the time the warehouse was built, Toyota s dealers placed weekly
stock orders for parts. But soon after the warehouse was completed,
the company implemented daily ordering and daily deliveries to
reduce lead time and lower inventories in the dealerships.
In 2002, Toyota’s parts distribution centered completed a two year
systems initiative known as the Monarch project to improve its
demand forecasting and inventory planning.
The focus of the Monarch system is to work behind the scenes
supporting a visual system on the floor so people can go and see the
actual situation.
37. People and Partners
Principle 9 - Grow Leaders Who Thoroughly
Understand the Work, Live the Philosophy, and Teach It
to Others
Toyota does not go shopping for successful CEOs and
Presidents because their leaders must live and thoroughly
understand the Toyota culture day by day.
Toyota expects its leaders to teach their subordinates the
Toyota Way, which means they must understand and live
the philosophy.
The characteristics of Toyota leadership, particularly the
drive to meet seemingly impossible targets and the
requirement to understand the work by getting your hands
dirty, evolved from the leadership of two company founders
(Sakichi Toyoda, who built Toyota Automatic Loom into one
of the premier loom manufacturers in the world, and his son
Kiichiro Toyoda, who founded Toyota Motor Company)
39.
i.
ii.
iii.
iv.
If we look at all of the great leaders in Toyota’s history we see
they share several common traits:
Focused on a long-term purpose for Toyota as a value-added
contributor to society.
Never deviated from the precepts of the Toyota Way DNA
and lived and modelled themselves around this for all to see.
Worked their way up doing the detailed work and continued
to go to the gemba the actual place where the real addedvalue work is done.
Saw problems as opportunities to train and coach their
people.
A common phrase heard around Toyota is Before we build cars,
we build people. The leader’s goal at Toyota is to develop
people, so they are strong contributors who can think and
follow the Toyota Way at all levels in the organization.
40. Principle 10 - Develop Exceptional People and
teams Who Follow Your Company‟s
Philosophy
Team
Size
Team
member
5-8
Team
Leader
3-4
Group
leader
5-8
Asst.
manager
4-10
Manager
Smallest group
4 TLs
18 TMs
Largest group
5 TLs
23 TMs
Fig. : Typical Toyota organization – assembly operation
41. Principle 10 - Develop Exceptional People and teams
Who Follow Your Company‟s Philosophy
Classic motivation theories and the Toyota way
Internal
Concept
Motivation
Theories
Toyota Approach
Maslow‟s
Need
Hierarchy
Satisfy lower level of
needs and move
employees up the
hierarchy towards self
actualization
Job security, good pay, safe
working conditions satisfy
lower level needs. Culture of
continuous improvement
supports growth towards
self actualization.
Herzberg‟s
Job
Enrichment
Theory
Eliminate “dissatisfies”
(hygiene factors) and
design work to create
positive satisfiers
(motivators)
5 S, ergonomics programs,
visual management, HR
policies address hygiene
factors. Continuous
improvement. Job rotation,
and built-in feedback
supports motivators.
42. External
Motivation
Theories
Concept
Taylor‟s
Scientifically select,
Scientific
design, standardize jobs,
Management train, and reward with
money performance
relative to standards
Toyota Approach
All scientific management
principles followed but at the
group level other than
individual learned based on
employee involvement
Behaviour
Modification
Reinforce behaviour on
Continuous flow and andon
the spot when the
creates short lead times for
behaviour naturally occurs rapid feedback. Leaders
constantly on the floor and
providing reinforcement
Goal Setting
Set specific, measurable
goals, achievable
challenging goals and
measure progress
Set goals that meet these
criteria through policy
deployment. Continuous
measurement of targets
43. Principle 11
Respect Your Extended Network of Partners
and Suppliers by Challenging Them and
Helping Them Improve
Auto industry suppliers consistently report that TOYOTA is
their best customer and also their toughest.
Have respect for your partners and suppliers and treat them
as an extension of your business.
Challenge your outside business partners to grow and
develop.
It shows that you value them.
Set challenging targets and assist your partners in achieving
them.
44. Respect Your Extended Network of Partners and
Suppliers by Challenging Them and Helping Them
Improve
Toyota is very carefully when deciding what to outsource
and what to do in house. Toyota outsource about 70% of the
components. It still wants to maintain internal competency.
Even when Toyota chooses to outsource a key component, it
does not want to lose internal capability.
As a general rule, Toyota wants to have at least two suppliers
for every component.
Toyota is very bureaucratic in their dealings with suppliers,
having extensive standards, auditing procedures, rules etc.
But suppliers consider Toyota as their partner and Toyota is
viewed as enabling customer who participate and solve their
problems too.
46. Principle 12
GO and SEE to Thoroughly Understand
the Situation (Genchi Genbutsu)
Solve problems and improve processes by going to the
source and personally observing and verifying data rather
than theorizing on the basis of what other people or the
computer screen tell you.
Think and speak based on personally verified data.
Even high-level managers and executives should go and see
things for themselves, so they will have more than a
superficial understanding of the situation.
47. GO and SEE to Thoroughly Understand
the Situation (Genchi Genbutsu)
Data is of course important in manufacturing, but place greatest
emphasis on facts – go and see
Think and speak based on personally verified data
See America, then design for America – to design Sienna minivan in
2004, the Chief Engineer of D&D drove extensively in US, Canada and
Mexico to get a feel of what people wants in a minivan
48. Principle 13
Make Decisions Slowly by Consensus, Thoroughly
Considering All Options; Implement Rapidly
If there is a project supposed to be fully implemented in a
year. A typical company anywhere would spend about three
months on planning and begin to implement. But they
encounter all sorts of problems after implementation and
would spend rest of the year in correcting them
Toyota will spend 10 months planning, building consensus,
implement it in a small pilot production – and fully
implement at the end of year, with virtually no remaining
problems
Nothing is assumed. Every thing is verified
49. Make Decisions Slowly by Consensus, Thoroughly
Considering All Options; Implement Rapidly
Level of Involvement
Decision making is highly situational
Philosophy is to seek maximum
involvement for each situation
Decide and
Announce
Time
Seek individual
input, then
Decide and
Announce
Seek group
input, then
decide and
announce
Preferred
Group
consensus,
Management
Approval
Group
consensus
with full
authority
Fallback
If consensus
not achieved
Fallback
Get all the parties on board, iron out all the
resistance, generate consensus, then
implementing
