Business Book Review

Saturday, March 24, 2007



“All manufacturing and service companies that want to be successful in the long term must become learning enterprises. Toyota is one of the best models in the world.”
“Everyone should tackle some great project at least once in their life. … should make an effort to complete something that will benefit society.”
--Sachichi Toyoda
“Out of the rubble of WWII … ‘with a creative spirit and courage’ [Ohno] solved problem after problem and evolved a new production system. … This same process has been played out time and again throughout the history of Toyota.”

Liker believes that Toyota’s consistent success is a direct result of its turning operational excellence into a strategic weapon, using such tools and quality improvement methods as just-in-time (JIT), one-piece flow, jidoka, and heijunka (that make up the Toyota Production System [TPS]). But its continued success at implementing these tools comes from its philosophy (the Toyota Way), which is based on an understanding of people and what motivates them. Thus, the company’s achievement ultimately emerges from its ability to cultivate leadership, teamwork, and culture; to devise strategy; to build supplier relationships; and to maintain a learning organization. In this manner, the Toyota Way and the TPS form the “double helix” of the company’s “DNA,” for they define its management style and what is unique about the company.
TPS, Toyota’s distinctive approach to manufacturing, is the basis of the “lean production” revolution it helped spawn. According to Womack and Jones (Lean Thinking), “lean manufacturing [is] a five-step process: defining customer value, defining the value stream, making it ‘flow,’ ‘pulling’ from the customer back, and striving for excellence.” A lean enterprise is, then, the end result of applying TPS to all these aspects of a business.
After World War II, Ford and General Motors used economies of scale and big equipment to produce as many parts as possible, as cheaply as possible. However, because Toyota’s market was small, forcing it to make a variety of vehicles on the same assembly line, flexibility was key to its operations. This need to be flexible led to the critical discovery that when lead times are short, and production lines are kept flexible, higher quality, better customer response, better productivity, and better utilization of equipment and space ensue. This drive (in the 1940s and 1950s) to eliminate wasted time and material from every step of the production process, from raw material to finished goods, addresses the same need companies face today—“the need for fast flexible processes that give customers what they want, when they want it, at the highest quality and affordable cost.”
Toyota has discovered that non-value-added waste has little to do with running labor and equipment as hard as possible and everything to do with the manner in which raw material is transformed into a saleable commodity. This is why TPS begins with the customer, “because the only thing that adds value in any type of process—be it manufacturing, marketing, or … development … is the physical or information transformation of that product, service, or activity into something the customer wants.”
The roots of these TPS and Toyota Way principles can be traced back to the history and personalities of the company’s founders, who left their indelible marks on Toyota’s culture, through generations of consistent leadership.
In the 1890s, Sakichi Toyoda used trial-and-error tinkering and getting his hands dirty (genchi genbutsu—an approach that would become part of the foundation of the Toyota Way), to invent a sophisticated and highly successful automated wooden loom, which contained a special mechanism for automatically stopping the loom whenever a thread broke. It was a capability that evolved into the broader system, jidoka (automation with a human touch), one of the two pillars of TPS. Essentially, jidoka means “mistake proofing,” or building in quality as material is produced. It also refers to designing operations and equipment so that workers are not tied to machines and are free to perform value-added work.
In 1929, Sakichi sent son Kiichiro to England to sell the patent rights for the popular “mistake-proof” loom. With the 100,000 English pounds received from the sale, he gave Kiichiro the task of building the Toyota Motor Corporation. The objective was not to increase the family fortune, but to move the company into a future technology (automobiles) and to give his son his opportunity to contribute to the world.
Despite his formal engineering education, Kiichiro, like Sakichi, learned by doing and added his own innovations to his father’s philosophy and management approach. He was especially influenced by the U.S. supermarket system of replacing products on the shelves as customers purchased them. Thus, while Sakichi contributed the jidoka pillar to TPS, Kiichiro contributed JIT. Still, it was his actions as a leader that left the greatest imprint on Toyota. For after World War II, when rampant inflation threatened the company, Kiichiro resigned as president—despite the fact that the crisis was beyond anyone’s control. Not only did this personal sacrifice help quell worker dissatisfaction, it also laid the foundation for Toyota’s philosophy (one still extant in the company today) of thinking beyond individual concerns to the long-term good of the company and taking responsibility for any problems.
One of the family leaders who shaped the company after Kiichiro was cousin Eiji Toyoda, who eventually became Toyota’s president and, then, chairman, helping to build the company into a global powerhouse. Like Sakichi and Kiichiro before him, he learned to get his hands dirty, learned the spirit of innovation, understood the value of contributing to society, and had the vision of creating a special company with a long-term future. He also played a key role in selecting and empowering Toyota’s subsequent leaders who shaped sales, manufacturing, product development and, most importantly, TPS.
In 1950, Eiji gave plant manager, Taiichi Ohno, the assignment of improving Toyota’s manufacturing process so that it equaled Ford’s productivity. Nonetheless, this did not mean competing head-on with Ford, it meant improving Toyota’s manufacturing within the protected confines of the Japanese market. So Ohno began by benchmarking the competition and studying Henry Ford’s book, Today and Tomorrow, which preached the importance of creating continuous material flow throughout the manufacturing process, standardizing processes, and eliminating waste. What Ohno saw, however, was that the company did not always practice what it preached, for it used “wasteful batch production methods that built up huge banks of work-in-process inventory throughout the value chain, [pushing] product onto the next stage of production.” Toyota did not have the luxury of creating this kind of waste, but it could use Ford’s idea of continuous material flow to develop an efficient system of one-piece flow, flexible enough to change, according to customer demand.
Ohno turned to Toyota’s shop floor for a “hands-on” application of the principles of jidoka and one-piece flow, which he combined with the concept of the “pull system,” inspired by American supermarkets. On the shop floor, this means that the first step in a process does not replenish parts until the second step uses up its supply from step one, down to a small amount of “safety stock.” In this manner, every step of every process has the equivalent of a built in “gas gauge” (kanban), signaling the previous step when parts need to be replenished. This creates backwards pull to the beginning of the manufacturing cycle. Thus, JIT is dependent upon kanban.
Toyota also assimilated the teachings of American quality pioneer, W. Edwards Deming, who taught that, in a business system, meeting and exceeding both external and internal customer requirements is the task of everyone in the organization. Thus, he originated the “the next process is the customer” principle, which in a pull system, translates into “the preceding process must always do what the subsequent process says” (atokotei wa o-kyakusama); otherwise, JIT does not work.
Deming also advocated the systematic Plan-Do-Check-Act (PDCA) Cycle approach to problem solving that is a cornerstone of continuous improvement (kaizen). This is the process of making incremental improvements, no matter how small, and achieving the lean goal of eliminating all waste that adds cost without adding value. It is a total philosophy that strives for perfection and sustains TPS on a daily basis, in that it pushes the decision making and/or proposal making down to the workers and requires open discussion and a group consensus before any decision can be implemented.
This new manufacturing system, which Ohno and his team created, did not just pertain to one company in one market and culture, but was a new paradigm in manufacturing or service delivery. It was a new way of seeing, understanding, and interpreting what is happening in a production process and, as a result, propelling a company beyond the mass production system. Still, the power of TPS and lean manufacturing remained mostly unknown outside of Toyota and its affiliated suppliers until the business world was overtaken by the quality movement and learned that when companies focus on quality rather than solely on cost, costs are reduced even more. Moreover, through the work of Womack, Jones, and Roos (The Machine That Changed the World), manufacturing worldwide discovered “lean production”—what the authors identified as Toyota’s way of “shortening lead time by eliminating waste in each step of a process [so as to get the] best quality and lowest cost, while improving safety and morale.”
As Liker notes, the first question in TPS is always “What does the internal and external customer want from this process?” Thus, many of the tools of TPS and principles of the Toyota Way derive from the focused behavior of eliminating non-value-added waste, or muda, in business or manufacturing processes. The traditional approach to process improvement focuses on identifying local efficiencies, such as improving uptime, making a cycle faster, or using automated equipment to replace the human being. And, though there might be a significant improvement for an individual process, there is little impact on the overall value stream. Without a lean improvement initiative, most companies are unable to see the huge opportunities for reducing waste by getting rid of, or reducing, non-value-added steps.
Toyota identifies seven major types of non-value-adding muda, to which Liker adds an eighth (all can be applied to any process in manufacturing, information or service):
1. overproduction, which generates excess inventory, which, in turn, leads to overstaffing and increased storage and transportation costs;
2. waiting for the next step, tool, part, etc;
3. unnecessary transport or conveyance of work in progress (WIP);
4. overprocessing or incorrect processing due to poor tool and product design;
5. excess inventory in the form of excess raw material, WIP, or finished goods, causing longer lead times, obsolescence, damaged goods, transportation and storage costs, and delay (excess inventory also hides production imbalances, late supplier deliveries, defects, equipment downtime, and long setup times);
6. unnecessary movement, such as walking and/or looking for, reaching for, or stacking parts or tools;
7. defects that result in repair, rework, scrap, replacement production, and inspection; and
8. unused employee creativity (i.e., losing time, ideas, skills, improvements, and learning opportunities by not engaging or listening to employees).


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