Book of the Week: The Toyota Way

Take-Aways
The key concept in Toyota’s production method is kaizen, a continual drive to improve.

  • Toyota is the world’s most profitable automobile manufacturer.
  • The key to Toyota’s success is the Toyota Production System emphasizing lean production.
  • TPS is a cultural way, a path and a commitment, not a set of tools to apply to a problem.
  • Fourteen fundamental principles make up the Toyota Way, including: apply a long term philosophy and grow leaders who live it.
  • Other principles include: create continuous fl ow, avoid overproduction, level the workload, standardize tasks, use visual control and use only tested technology.
  • The principles also include: respect your network, observe problems at the source, decide slowly but implement rapidly, and practice relentless refl ection.
  • Waste comes from overproduction, delay, unneeded transport, over-processing, too much inventory, unproductive movement, defects and unused employee creativity.
  • Map a system for creating an efficient fl ow of materials and processes, and avoid waste.

Relevance
What You Will Learn

  • The fundamentals of Toyota’s approach to continual quality improvement
  • The 14 principles that comprise the Toyota Production System
  • What your company needs to know to apply these ideas

Recommendation
This book is like a Toyota vehicle: not necessarily fancy, but extraordinarily capable of getting you from point “A” to point “B.” Author Jeffrey K. Liker’s thorough insight into the continual improvement method known as “The Toyota Way” reflects his experience with the Toyota Production System (TPS) and his knowledge of its guiding philosophies and its technical applications. He explains why Toyota has become a global symbol of passionate commitment to continual improvement and efficiency. Toyota’s success as the world’s most profitable automaker is no accident and now, thanks to this book, it’s no mystery, either. Liker drills down to the underlying principles and behaviors that will set your company on the Toyota Way. The book reflects years of studying Toyota’s philosophy: it is well mapped out, straightforward and exceedingly although not daringly innovative. I highly recommend it to anyone striving to improve their organization’s operational efficiency.

Abstract
The Toyota Commitment
The secret behind Toyota’s world-class quality and excellence is contained in a single word: kaizen, which defines Toyota’s way of life and its approach to business. Kaizen is not just a set of tools; it is the commitment to strive for improvement continuously. The value of this goal is obvious, but few companies even come close. Continual improvement requires continuous learning in an environment that embraces change. Toyota’s second great principle is respect for its people. The combination of kaizen and respect for workers makes “The Toyota Way” a powerful strategic weapon. Today, Toyota is an international corporate giant, the world’s third-largest auto manufacturer, after General Motors and Ford. Each year, it sells more than six million vehicles. But its excellence doesn’t stop there. In fact, Toyota is much more successful than any other automobile manufacturer in terms of profit. Toyota earned a profit of $8.13 billion by the close of its fiscal year in March 2003. For perspective, this is more than the combined earnings of GM, Chrysler and Ford. Toyota is far more profitable than its competition. Industry analysts generally agree that sometime in 2005, Toyota will surpass Ford in global vehicles sold. Based on current trends, Toyota will eventually overtake General Motors as well. Toyota is not just trying harder; it is succeeding more.

The Toyota Production System (TPS)
The Toyota Production System (TPS) reflects the company’s unique perspective onmanufacturing. TPS is central to the “lean production” movement that has sparked manufacturing trends over the past decade. Most companies’ efforts to be more lean end up being superficial because they focus too much on the tools used, such as just-intime delivery and 5S (sort, stabilize, shine, standardize, sustain). TPS, however, is an entire system, not an add-on strategy or tool. It must become part of an organization’s culture. Usually, senior managers are not involved in the nitty-gritty of becoming leaner, the daily operations or continual improvement efforts. At Toyota, they’re involved. Taiichi Ohno, founder of TPS, described lean production this way, “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 wastes.”

TPS proves many counter-intuitive conclusions:

  • Stop the production line — Letting a machine go idle is often the best thing to do. This avoids overproduction, the fundamental form of waste uncovered by TPS.
  • Build up inventory — Amassing fi nished goods to level out the production timetable is often better than producing in response to fluctuating levels of consumer demand.
  • Support direct labor — As you strip away waste, support your value-adding workers.
  • Don’t try to max out the workforce — Insisting that everyone on the assembly line works faster often isn’t the answer. It leads to overproduction and will actually increase costs.
  • Know when it is better to use manpower — Using manual processes is often a better idea than using information technology, even when automation is available. While automation might reduce your headcount, people are a very fl exible resource.

The common forms of waste that Toyota continually seeks to eliminate are: overproduction, delay, unneeded transport, over-processing, excess inventory, unproductive movement, defects and unused employee creativity. When other companies try to adopt lean production methods, they run into problems because they see this process as a series of tools, not as a deep cultural adjustment that affects every aspect of the business. TPS is a pervasive cultural transformation. The Toyota Way is about giving workers the tools they need to strive for continual improvement. Under the Toyota Way, people become more important, not less important, to the success of the organization. To put it another way, TPS requires the company to become more dependent than ever on its workforce. When Toyota formed a joint venture with GM in the early 1980s to set up Toyota’s fi rst overseas plant, a light truck factory in Fremont, California, it did two unusual things. First, it agreed to teach GM the principles of the Toyota Production System because its leaders realized that GM, the world’s largest automobile manufacturer, was struggling with its manufacturing operations. By helping GM, Toyota’s leaders believed they were helping U.S. society in general and giving something back to the U.S. for its help in rebuilding Japanese industry in the wake of World War II. Secondly, they decided to work with the UAW local union, against GM’s advice. Indeed, they sent the skeptical shop committee, which thought TPS was a way to work people to death and to “suggest your way out of a job,” to Japan for three weeks to study TPS. The union leaders became converts. When the factory reopened in 1984, its productivity surpassed all other GM North America plants.

The Toyota Way
Following the 14 principles of the Toyota Way is critical if you seek to go beyond the surface and truly transform your organization. These principles are:

  1. Apply a long-term philosophy — Base decisions on your company’s long-term philosophy, even if your short-term goals suffer as a result. Pursuing a long-term strategy is always the wisest course, but that long-range goal must be about more than just making money. Your company’s primary mission, properly conceived, is to generate value for your customers and for society at large. As part of its long-term philosophy, Toyota avoids layoffs at all costs. It emphasizes self-reliance and taking responsibility for deciding your own fate. Honor, respect and dedication are important values. Toyota feels a long-term responsibility as a global citizen and feels accountable for the long-range atability of its business partners.
  2. Create continuous fl ow — Bring issues to the surface, where they can be addressed, by creating a continuous or “one-piece” fl ow. With a lean fl ow, one problem may shut down the entire assembly line. This appears very inefficient, but it means that problems get addressed and corrected very quickly because everyone focuses on solving them.
  3. Use ‘pull’ systems and avoid overproduction — A push system loads products onto the retailer, regardless of how quickly the retailer can sell them. A pull system provides products just as the retailer needs them. This avoids the biggest source of manufacturing waste: overproduction.
  4. Level the workload — The Japanese word for leveling the workload is called “heijunka.” You want the production level to be the same and to be constant. Output should not vary from day to day. Although you seek to avoid overproduction, you cannot build product efficiently just as it is ordered because the production swings would be too inefficient.
  5. Build the right culture — The correct culture stops everything to fix problems and strives to get quality right the first time. It refuses to compromise on quality.
  6. Standardize tasks — Make tasks similar and consistent wherever possible. People get better at things they do repeatedly. Standard work sheets help to avoid defects.
  7. Use visual control — Some plants are so jammed with inventory and parts that no one can see the actual work taking place. You should be able to see the processes underway in your plant. Maintain visual control, so that no processes are hidden. This is why a thorough clean up is a common early activity in TPS initiatives.
  8. Use only tested technology — Toyota rarely tries to use cutting-edge technology. Rather, it looks for well-proven technology. Adopt technology only if it supports your people, your processes or your values.
  9. Grow leaders who live the philosophy — Senior managers cannot let their egos stand in the way of the organization’s best interest. When organizational leaders earnestly live the TPS philosophy, rather than just giving it lip service, they incorporate team members’ ideas and they put customers first.
  10. Develop people and teams — To have excellent teams, you need excellent team members. Respect for people means respecting their minds, ideas and capabilities. teamwork is critical.
  11. Respect your extended network — Often a company is only as good as its partners and suppliers. To obtain better suppliers, challenge your current suppliers to improve, and help them. Toyota expects all of its supplier partners to rise to their high standards of excellence, and will help them to do so.
  12. Observe the source — Go and observe a situation yourself so that you can understand it. Toyota managers commonly watch a business process take place and then ask “why” over and over until they understand it. Go see for yourself.
  13. Decide slowly, implement rapidly — A sound organization takes its time making decisions and decides issues by consensus, after thoroughly considering all the options. Implement ideas rapidly once consensus is achieved.
  14. Practice relentless reflection — Relentless reflection, or “hansei,” leads to kaizen, or continuous improvement. Continuous reflection means becoming a learning organization. Be passionate about identifying the root causes of problems and developing solutions.

Applying the Toyota Way
When managers begin to see the advantages of the Toyota Way, they also start to consider its broader implications for their organizations. They may become lean zealots, who eat and breathe lean. They come to understand the lean philosophy and its power through actual experience, and view the enormous waste in technical and service operations as anathema. Naturally, they seek ways to apply the Toyota Production System, or “lean manufacturing” approach, to other areas. The first challenge in applying the Toyota Way to service and technical organizations is identifying fl ow. Toyota, for example, views employee development as a repeatable process that can be continually improved. The challenge is that in an environment where people are sitting in cubicles, it is difficult to define the work flow the way that you would chart a physical manufacturing process. The goal of TPS is one-piece fl ow. The key element is tightly linking processes so that problems cannot hide in inventory or in queues where they wait to be processed. Each department should get the information it needs, just when it needs it, from each supporting department. With linkage, there is immediately feedback. If the supporting department falls behind for some reason, that immediately disrupts the activities of the department being served. Therefore the issue receives immediate attention. Similarly, if the information being provided is faulty, it generates immediate feedback from one department to the next. Your technical or service organization can create flow by following these five steps:

  1. Determine who the customer is and what the customer needs.
  2. Separate repetitive processes (split those that continually recur from one-time processes that are unique) and learn how to apply TPS to those repetitive processes.
  3. Study and chart the fl ow to determine which activities are value added and which are not.
  4. Creatively apply the Toyota Way principles to these repetitive processes by using a future-state value stream map.
  5. Learn by planning, doing, checking on your results and adjusting your methods as needed. Once you have a working model, expand it to your less repetitive processes.

Value Stream Mapping
Value stream mapping stems from a tool that Toyota calls the “material and information flow diagram.” It helps manufacturing suppliers learn TPS. Value stream mapping shows suppliers their current situation, and allows them to map a path to a future vision. The chart indicates processes by connecting boxes with arrows. It uses tombstones to depict inventory lingering between processes. The chart captures critical elements in the manufacturing process, such as feedback loops, inspection points, project reviews and points of decision. Value stream mapping can be adapted to an organization’s service and technical aspects. However, service processes can be incredibly complex to map, involving up to several thousand decision points. An effort to map all service processes simultaneously would end up looking like a big bowl of pasta — a barely organized jumble. Instead, develop a more general, macro picture of the current system, and use that macro value stream map to assist you in identifying areas of waste.

About the Author
Jeffrey K. Liker, Ph.D., is cofounder and director of the Japan Technology Management Program at the University of Michigan, where he is also a professor of industrial and operations engineering. He has won four Shingo Prizes for excellence, and has written extensively on Toyota in various management journals. Dr. Liker is also a principal of Optiprise, a lean enterprise/supply chain management consulting firm.

The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturerby Jeffrey K. Liker
© 2003 McGraw-Hill
350 pages
The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer
by Jeffrey K. Liker
© 2003 McGraw-Hill
350 pages

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