Business Book Review

Saturday, March 24, 2007

The Toyota Way - by Jeffrey K. Liker - About the Author

About the Author

Jeffrey K. Liker, PhD, a principal of Optiprise, a lean enterprise/supply chain management consulting firm, is professor of Industrial and Operations Engineering at the University of Michigan, where he is also cofounder and director of the Japan Technology Management Program Lean Product Development Certificate programs. Dr. Liker, who was the editor of Becoming Lean: Experiences of U.S. Manufacturers (which won the 1998 Shingo Prize for excellence in manufacturing research), has written on Toyota for The Harvard Business Review, Sloan Management Review, and other leading publications.

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The Toyota Way - by Jeffrey K. Liker - CONTENTS


Chapter 1: The Toyota Way—Using Operational Excellence as a Strategic Weapon
Chapter 2: How Toyota Became the World’s Best Manufacturer— the Story of the Toyoda Family and the Toyota Production System
Chapter 3: The Heart of the Toyota Production System— Eliminating Waste
Chapter 4: The 14 Principles of the Toyota Way—an Executive Summary of the Culture Behind TPS
Chapter 5: The Toyota Way in Action—the “No Compromises” Development of Lexus
Chapter 6: The Toyota Way in Action—New Century, New Fuel, New Design Process—Prius

Section 1: Long-Term Philosophy
Chapter 7: Principle 1—Base Your Management Decisions on a Long-Term Philosophy, Even at the Expense of Short-Term Financial Goals
Section 2: The Right Process Will Produce the Right Results
Chapter 8: Principle 2—Create Continuous Process Flow to Bring Problems to the Surface
Chapter 9: Principle 3—Use “Pull” Systems to Avoid Overproduction
Chapter 10: Principle 4—Level Out the Workload (Heijunka)
Chapter 11: Principle 5—Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time
Chapter 12: Principle 6—Standardized Tasks Are the Foundation for Continuous Improvement and Employee Empowerment
Chapter 13: Principle 7—Use Visual Control So No Problems Are Hidden
Chapter 14: Principle 8—Use Only Reliable, Thoroughly Tested Technology That Serves Your People and Processes
Section 3: The Right Process Will Produce the Right Results
Chapter15: Principle 9—Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others
Chapter 16: Principle 10—Develop Exceptional People and Teams Who Follow Your Company’s Philosophy
Chapter 17: Principle 11—Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve
Section 4: Continuously Solving Root Problems Drives Organizational Learning
Chapter 18: Principle 12—Go and See for Yourself to Thoroughly Understand the Situation (Genchi Genbutsu)
Chapter 19: Principle 13—Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Decisions Rapidly
Chapter 20: Principle 14—Become a Learning Organization Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

Chapter 21: Using the Toyota Way to Transform Technical and Service Organizations
Chapter 22: Build Your Own Lean Learning Enterprise, Borrowing from the Toyota Way

The Toyota Way - by Jeffrey K. Liker - Reading Suggestions

Reading Suggestions

Reading Time: 28-30 Hours, 352 Pages in Book

Liker notes that if you follow only a select few of the Toyota principles, the “result will be short-term jumps on performance measures that are not sustainable.” And, Fujio Cho, president of Toyota Motor Company, says that what is unique about Toyota’s remarkable success is putting all the elements of the Toyota Way together as a system and practicing this system daily and consistently, not in parts. Thus, as far as we’re concerned, if implementation doesn’t work in bits and pieces, fits and starts, there’s no point in reading this book in bits and pieces, fits and starts. Even if your company has already “dabbled” in TPS (especially, if you’ve merely dabbled), your greatest value lies in practicing a little genchi genbutsu from the beginning and discovering and understanding as much as possible about the purpose of The Toyota Way, the centrality of people in that purpose, and appropriately applying that understanding to your particular situation.

Liker is a longtime fan of the Toyota Way and brings the incisive energy of a perennial admirer to his vigorous, articulate, and accessible discussion. The book is an easy read, and each chapter is mercifully short and to the point, but you should not expect to just zip through. Our estimated reading time of 28 to 30 hours might be an overestimate, but we want to impress upon you the importance of taking your time. We suspect that you will want to take notes, take time to reflect, and perhaps even reread much of the material. In any event, you should perhaps plan ahead, schedule a block of time each day, and prepare to read no more than two or three chapters each sitting.

The Toyota Way - by Jeffrey K. Liker - Remarks


Everyone in the auto industry is familiar with Toyota’s dramatic business success and, of course, consumers are demonstrably aware of the company’s world-renowned quality. In fact, Toyota has done so well that, as Liker points out, many consider the company to be “boring.” For, after all, steadily growing sales, consistent profitability, huge cash reserves, operational efficiency (combined with constant innovation—not an easy complement to pull off), and top quality, year after year, are not the stuff of breaking news. But, despite this reputation as the best manufacturer in the world, and despite the huge influence of the lean movement, most attempts to emulate and implement lean production have been fairly superficial, with less than stellar results over the long term. “Dabbling at one level—the ‘Process’ level,” U.S. companies have embraced lean tools, but do not understand what makes them work together in a system.

This integration is precisely what The Toyota Way examines, explaining how to create a Toyota-style culture of quality, lean, and learning that takes quantum leaps beyond any superficial focus on tools and techniques. Suffice it to say, there are hundreds of books out there explaining, analyzing, and advocating lean—providing details and insight into the tools and methods of TPS. The two most noted among this treasure trove are, of course, the contributions of The Machine That Changed the World (Womack, Jones, Roos, 1991) and Lean Thinking (Womack and Jones, 1996), and both stand as excellent resources on the subject. The first introduced the world to the tools and techniques of lean manufacturing by extracting its principles from their initial Japanese application and examining them in detail. And, the second explained how “to make value flow smoothly at the pull of the customer in pursuit of perfection.”

The Toyota Way is, however (according to Liker), the first business book in English to provide a blueprint of Toyota’s management philosophy for general business readers, dispelling the misconceptions that TPS is merely a collection of tools that lead to more efficient operations. Of course, there is no way of ascertaining the validity of this claim, without an extensive and time consuming exploration of the literature, but that truly doesn’t matter. The Toyota Way is an approach of such breadth, depth, and significance to the world of business that it has yet to be fully understood; thus, the subject has not yet been fully exhausted. Liker’s keen sense of the subtleties of TPS intrepidly challenges conventional understanding and transforms it with eloquent simplicity. He takes the reader deeply and comprehensively into the “heart and intelligence” of Toyota’s “way,” giving businesses in diverse industries some very practical and effective ideas that they can use to develop their own unique approach to TPS.

The Toyota Way - by Jeffrey K. Liker - PART III: APPLYING TPS AND THE TOYOTA WAY

“A prerequisite for change is for top management to have an understanding and commitment to leveraging the Toyota Way to become a ‘lean learning organization.’ ”
As manufacturing companies worldwide apply TPS on the shop floor and experience extraordinary improvements, many ask how the process can be applied to their technical and service operations. Although Liker acknowledges the difficulty of understanding the workflow in technical and service organizations in the same way it is possible to map the transformation of a physical product, it can indeed be made more manageable via the following five-step procedure: (1) Identify who the customer is for the each process as well as the added value the customer wants. (2) Separate the repetitive processes from those that are one-of-a-kind and apply TPS to the repetitive processes. (3) Map the flow to determine value added and non-value added. (4) Think creatively about applying the broad principles of the Toyota Way to these processes, using a future-state value stream map. (5) Start implementation and learn by implementing, using a PDCA cycle. Then, expand implementation to the less repetitive processes.
The author notes, however, that it is the broader philosophy—the way Toyota leads people and partners, solves problems, and learns—that is the most difficult for organizations to adapt, develop, and sustain. The toughest and most basic challenge is “how to create an aligned organization of individuals who each have the DNA of the organization and are continually learning together to add value to the customer.” Thus, the essential thing to take from Toyota’s example is the importance of developing a system, sticking with it, and improving it. The Toyota Way model was built from the ground up, intentionally, starting with a philosophy that starts with the CEO. The top executive and the executive team must be committed to a long-term vision of adding value to customers and society in general, and they must be committed to developing and involving employees and partners. Moreover, there must be continuity in top leadership philosophy. This does not mean that the same people should run a company forever, only that they must develop successors with the company’s DNA (as opposed to installing a new cast of characters with each crisis and/or frequent buyout).
In the meantime, Liker offers the some general tactical tips for transitioning into this kind of lean enterprise: Start with changes in the technical system; follow quickly with cultural change. Learn by doing first and training second. Start with value stream pilots as a means of demonstrating lean as a system and providing a “go see” model. Use value stream mapping to develop future state visions and to help “learn to see.” Use kaizen workshops to teach and make rapid changes. Organize around value streams. Make the shift to lean mandatory. Be opportunistic in identifying opportunities for making big financial impacts. Realign metrics with a value stream perspective. Build on your company’s own roots to develop its own “Toyota Way.” Hire or develop lean leaders and create a succession system. And, use experts for teaching and getting quick results.

* * *
End notes by chapter, a chapter-by-chapter bibliography, recommendations for further reading,
and a subject index are provided.


“TPS is not a toolkit. It is not just a set of lean tools. … It is a sophisticated system of production in which all of the parts contribute to the whole. … When looked at more broadly, TPS is about applying the principles of the Toyota Way.”
“If production levels—the output—varies from day to day, there is no sense in trying to apply those other systems, because you simply cannot establish standardized work under such circumstances.”
“First work out the manual process, and then automate it. Try to build into the system as much flexibility as you possibly can. … And always supplement the system information with ‘genchi genbutsu,’ or ‘go look, go see.’ ”
Liker contends that if a company does not understand the culture behind TPS, even though it has all the tools and techniques of TPS in place, the real work of implementing lean has just begun. Essentially, TPS is about applying the principles of the Toyota Way so that workers are contributing to the improvement of the system and of themselves. The Toyota Way encourages, supports, and demands employee involvement, for it is people who bring the system to life by working, communicating, resolving issues, and growing together. Thus, it is a culture even more than a set of efficiency and improvement techniques.
Based on the author’s 20 years of studying Toyota, he offers 14 principles that constitute the Toyota Way and form the basis of the culture behind TPS. For ease of understanding, he divides these principles into the four categories—Philosophy, Process, People/Partners, and Problem Solving—that correlate to the four high-level principles (genchi genbutsu, kaizen, respect, and teamwork) explained in Toyota’s own internal Toyota Way training document.
Long-Term Philosophy
Principle 1: Base management decisions on a long-term philosophy, even at the expense of short-term financial goals.
The Right Process Will Produce the Right Results
Principle 2: Create continuous process flow to bring problems to the surface.
Principle 3: Use “pull” systems to avoid overproduction.
Principle 4: Level out the workload (heijunka)—work like the tortoise, not the hare.
Principle 5: Build a culture of stopping to fix problems, to get quality right the first time.
Principle 6: Standardized 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.
Add Value to the Organization by Developing Your People and Partners
Principle 9: Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
Principle 10: Develop exceptional people and teams who follow the company’s philosophy.
Principle 11: Respect your extended network of partners and suppliers by challenging them and helping them improve.
Continuously Solving Root Problems Drives Organizational Learning
Principle 12: Go and see for yourself to thoroughly understand the situation (genchi genbutsu).
Principle 13: Make decisions slowly by consensus, thoroughly considering all options: implement decisions rapidly (nemawashi).
Principle 14: Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen).
Throughout the company, every person has a philosophical sense of purpose that supersedes any short-term decision making, and all work, grow, and align the entire organization toward a common purpose that is bigger than making money. Generating value for the customer, society, and the economy is the starting point, and every function is evaluated in terms of its ability to achieve this objective. Each person understands his or her place in the history of the company and works to bring the organization to the next level. Thus, individuals strive to be responsible, to act with self-reliance, to trust in their own abilities, and to maintain and improve the skills that enable them to produce added value.
Toyota strives to cut back to zero the amount of time that any work project is sitting idle. When a customer places an order, this triggers the process of obtaining the raw materials needed for that specific order. These materials then flow immediately to supplier plants that immediately fill the order with components that flow immediately to a plant and are assembled. The completed order then flows immediately to the customer (the entire process is designed to take a few hours or days, rather than a few weeks). Creating this kind of one-piece flow, whether of materials or of information, and using small lots and closely situated processes, exposes any inefficiencies or defects that demand immediate attention, motivating everyone concerned to fix the problem. It is an approach that builds in quality, creates real flexibility, results in higher productivity, frees up floor space, improves safety, improves morale, and reduces cost of inventory.
Toyota provides its downline customers with what they want, when they want it, and in the amount they want. This practice of letting consumption initiate material replenishment is the basic principle of JIT, which minimizes work in process and warehousing of inventory by stocking small amounts of each product and frequently restocking, based on what the customer actually takes away. Thus, Toyota is responsive to day-by-day shifts in customer demand and does not rely on computer schedules and systems to track wasteful inventory.
Pulling a system to avoid overproduction goes hand in hand with heijunka. Eliminating waste is just one-third of the equation for making lean successful. It is also necessary to eliminate any overburden to people and equipment (muri) that comes as a result of uneven production schedules (mura). Thus, as an alternative to the stop/start approach of working on batches that is typical at most companies, Toyota levels out both volume and product mix of all manufacturing and service processes. Instead of building products according to the actual flow of customer orders, which can swing up and down wildly, it takes the total volume of orders in a period and levels them out so the same amount and mix are made each day in a predictable sequence, spreading out different product types and leveling volume. This provides Toyota the flexibility to make what customers want when they want it, reduces the risk of unsold goods, balances use of labor and machines, and smoothes demand on upstream processes and the plant’s suppliers.
Nonetheless, warns Liker, there are some basic requirements to meet before any of these benefits can be garnered. Not only must the first three principles, be in place, principles five, six, seven, and eight must also be adhered to. Because Toyota believes that quality should be built in, devices are built into machines to detect abnormalities and automatically stop an operation. Moreover, in the case of humans, the company gives them the power to push buttons, or pull cords—called andon cords—which can bring an entire assembly line to a halt. Every team member has the responsibility to stop the line every time something is out of standard. Thus, quality is the responsibility of every individual, and every individual is empowered to make it happen.
Because building in quality is a principle, not a technology, quality control is simple and involves team members, rather than a lot of complex statistical tools. It entails: going and seeing, analyzing the situation, using one-piece flow and andon to surface problems, and asking “Why?” five times when a problem is uncovered, in order to get a root-cause analysis and to discover the proper countermeasures.
At Toyota, standardized work is not intended to be a coercive management tool imposed on a hapless workforce; quite the contrary. Rather than enforcing rigid standards that make jobs routine and degrading, standardized work is the basis for empowering workers and innovation. As a foundation for flow and pull, the organization uses stable, repeatable methods everywhere to maintain the predictability, regular timing, and regular output of its processes. In this way (by standardizing today’s best practices), it can capture the accumulated learning about a process up to a point in time. This allows creative and individual expression to emerge from those actually doing the work so that they can improve upon the standard and hand this learning off to the next person.
In Japan there are “5S programs” for eliminating wastes that contribute to errors, defects, and injuries in the workplace (i.e., for cleaning it up, making it visual). These five S’s are: (1) sort—separate items and dispose of what is not needed); (2) straighten—make a place for everything and put everything in its place; (3) shine—as a form of inspection, clean up, so as to expose abnormal conditions that could hurt quality or cause machine failure; (4) standardize—develop systems and procedures to maintain and monitor sort, straighten, and shine; and (5) sustain—impose self-discipline to maintain a stabilized workplace as an ongoing process of continuous improvement. Nonetheless, the Toyota Way is not about using 5S to maintain a clean and shiny environment, but to support a smooth flow and to help make problems visible.
At Toyota, visual control refers to the design of JIT information of all kinds, integrated into the process of value-added work, to ensure fast and proper execution of operations and processes. Its well-developed visual control system (which includes such lean production tools as kanban and andon) increases productivity, reduces defects and mistakes, helps meet deadlines, facilitates communication, improves safety, lowers costs, and generally gives workers more control over their environment. And, because the Toyota Way recognizes that visual management complements the visual, tactile, and auditory orientations of humans, it seeks a balance and takes a conservative approach to using information technology to maintain its values. It does not avoid information technology, but creatively uses the best available means to create true visual control.
Although Toyota does not lead the industry in acquiring technology, Liker notes that it is a global benchmark on how to use value-added technology that supports the appropriate processes and people. At Toyota, new technology is introduced only after it has been thoroughly evaluated and tested, with a broad cross-section of people, to ensure it adds value to the process and does not conflict with the principles of valuing people over systems, using consensus decision making, and eliminating waste. If it meets these criteria, it is used to support continuous flow in the production process and help employees perform better, according to Toyota Way standards.
Throughout Toyota’s history (with the Toyoda family, behind the scenes, carefully selecting and grooming), key leaders have been found within the company, at the right time, to shape the next step in the company’s evolution. Unlike typical U.S. companies that at every crisis, go “shopping” for new CEOs and presidents to take them in new directions, Toyota develops its leaders to live and thoroughly understand its genchi genbutsu culture day by day. Leaders must demonstrate this ability and understand how work gets done at the shop-floor level. Leaders must teach their subordinates the Toyota Way, which means they must understand and live the philosophy. And, they must support the culture continuously so that it can create the environment for a learning organization and lay the foundation for genuine long-term success.
Toyota encourages its employees to work diligently, to do their jobs perfectly, and to strive for daily improvement by building a system that conforms to the principle of developing exceptional people and teams who follow the company’s philosophy. This is not a matter of adopting simple solutions or applying motivational theories as an afterthought. Rather, it is about making the training of exceptional people, and the building of individual work groups, the backbone of the company’s management approach—one that integrates the social system with the technical system. Toyota’s “respect-for-humanity” social framework and its culture of continuous improvement fully support the system in which one-piece flow drives positive problem-solving behaviors and motivates people to improve.
Toyota also follows a principle of finding solid partners and growing together with them so both can benefit in the long term. New suppliers must prove their sincerity and commitment to Toyota’s high performance standards for quality, cost, and delivery. If they demonstrate this, they get larger orders, are taught the Toyota Way, and adopted into the Toyota family. Once inside, they are not kicked out except for the most egregious behavior. As Ohno has stated, “Achievement of business performance by the parent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.” It is unthinkable for the company to switch suppliers simply to save a few percentage points in cost. Nonetheless, Toyota is not an easy mark. Just as it challenges its employees to improve, it challenges its suppliers to develop by setting a series of aggressive targets and challenges.
Liker has found that genchi genbutsu is the factor that most distinguishes the Toyota Way from other management approaches. Tables and numbers may measure results, but they do not reveal the details of the actual process being followed every day. Thus, whether they are in manufacturing, product development, sales, distribution, or public affairs, people trained in the Toyota Way take nothing for granted, nor do they rely on reports, but go and see for themselves. Moreover, observing is not enough, employees and managers must also “deeply” understand the processes of flow and be able to provide critical evaluations and analyses.
According to Alex Warren, former senior vice president of Toyota’s manufacturing plant in Kentucky, Toyota will spend nine to ten months planning a yearlong project. Then it will implement in a small way with a pilot project and be fully implemented by the end of the year, with virtually no remaining problems. This is in direct contrast to most American companies that tend to spend about three months planning, before implementation, and then spend the rest of the year correcting all the problems they encounter.
For Toyota, how a decision is arrived at is just as important as the quality of the decision. Underlying the entire process of planning, problem solving, and decision making lies careful attention to every detail including: (1) finding out what is really going on (genchi genbutsu is an important part of this); (2) understanding underlying causes (asking “Why?” five times); (3) broadly considering alternative solutions and developing a detailed rationale for preferred solutions; (4) building consensus within the team, including employees and outside partners; and (5) employing very efficient communication vehicles to complete the first four items, preferably using one side of one sheet of paper. This five-step approach helps to uncover facts that could lead to many problems down the road, it gets support from all parties before implementation begins, and a great deal of learning is achieved up front before anything is planned or implemented.
Liker believes that this last point, learning, is Toyota’s greatest accomplishment. The company is a true learning organization, for it views continuous improvement as a relentless companywide process in which superiors motivate and train subordinates, predecessors do the same for successors, and team members at all levels share knowledge. As he has emphasized, the Toyota Way is far more than tools and techniques—it is designed to push everyone to think and grow through a process in which mistakes are used as opportunities for learning. This involves: perceiving the problem, clarifying it, determining the root cause of the problem, providing effective countermeasures, evaluating the results, and standardizing the approach. Then, the new knowledge is transferred to the right people so as to make it part of the company’s repertoire of behavior.



“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).

The Toyota Way - 14 Management Principles from the World’s Greatest Manufacturer - by Jeffrey K. Liker - Introduction


When Gary Convis, managing officer and president of Toyota Motor Manufacturing in Kentucky, joined Toyota after working in the U.S. auto industry for 18 years, he witnessed how one of the worst workforces in General Motors was transformed into one of the best in any U.S. manufacturing facility. This transformation, which occurred at NUMMI (the Toyota/GM joint venture plant in Fremont, California), was a direct result of the “Toyota Way,” the fundamental method by which Toyota does business. This approach, when coupled with the Toyota Production System—the basis for much of the worldwide “lean production” movement—makes up Toyota’s “DNA.”

The Toyota Way describes the 14 principles that form the foundation of this uniquely successful management style. Using profiles of a diverse group of organizations, from a variety of industries, it demonstrates how this model of success can be applied in any organization, to improve the quality, efficiency, and speed of any business process, including sales, product development, marketing, logistics, and management. This blueprint of Toyota’s management philosophy offers managers in blue-collar, white-collar, manufacturing, or service environments specific tools and methods for becoming the best in their industries on cost, quality, and service.