| by Jerry Feingold
Ask most people what the Toyota Production System is and they will most likely answer, “It’s the way Toyota makes cars.” If they are a bit more knowledgeable, they may say, “It’s the way Toyota makes good cars.” If they are quality geeks, they will launch into a lengthy explanation of just-in-time, jidoka, pull vs. push systems, and, just before you nod off, they’ll get to “lean.”
All them of them are right. The Toyota Production System is all of that. But what are the roots of the Toyota Production System, and how has the Toyota Production System affected the United States? Can or will our culture adopt a manufacturing system that is as steeped in culture as it is in technique?
There are three key players in the history of Toyota Production System. The first is Sakichi Toyoda, who in the early 1900s owned the Toyoda Automatic Loom Works (from which came the Toyota Motor Co.). One of Toyoda’s many contributions was a loom that would automatically stop if any of the threads snapped. The idea of automatically stopping a machine whenever something went wrong became known as jidoka, sometime translated as “intelligent automation” or “automation with a human touch.” Jidoka is one of the key elements of the Toyota Production System.
The second key player in the development of the Toyota Production System was Sakichi’s son Kiichiro, head of the Toyota Group’s automobile manufacturing operation. After visiting Ford’s automotive plants in the United States in the 1930s, Kiichiro was impressed with Ford’s conveyor system, but not with Ford’s processing of large batches that required more warehouse space and money than Toyota had. Kiichiro set out to develop a system more adapted to small production volumes. His solution was to provide each process in the assembly line only with the quantities of parts it needed and only when they were needed. This became what Kiichiro called “just in time” production. It is the second key element of the Toyota Production System.
Just-in-time and jidoka form the basis of the Toyota Production System.
The third, and perhaps most crucial player, was Taiichi Ohno, who in the late 1940s was in charge of a machining center at Toyota. He is credited with having the biggest effect on structuring what would become the Toyota Production System.
Ohno had visited the United States after World War II, when Japan was suffering from severe food shortages. He was amazed to see how plentiful the supply of food was in the supermarkets. He was most impressed with the design of the supermarket system. As soon as the customer removed a can from the sloping shelf, another one took its place. Customers chose the products they wanted in the quantity they wanted, and the shelves were replenish accordingly. In this kind of “pull” system, the production line (shelf in this case) is replenished based on the needs of the following lines (customers in this case). This contrasted with the traditional “push” type of production where the output of a line drove, or pushed, product at subsequent lines. This became Ohno’s vision--to keep inventories at a minimum and replace the inventory as quickly as possible. The essence of his theory was to make only what’s required, when required, in the quantity required. The kanban system, where information is communicated between processes on instruction cards, is the best-known example of a pull system.
If the Toyodas and Ohno were the architects of the Toyota Production System, Shigeo Shingo gave it its tools. Shingo wasn’t a Toyota employee but an industrial engineer who worked closely with them. He was the architect of many of the tools of the Toyota Production System, the most important being the single minute exchange of dies, or SMED, that allowed the setup time on a major press to be reduced from 18 hours to less than nine minutes.
Ohno collaborated with Shigeo Shingo to develop the many tools and techniques required to improve Toyota’s manufacturing process so that it equaled the productivity of Ford’s.
The Toyota Production System took decades to evolve and refine. In the 1980s Toyota had thousands of suppliers. The challenge for Toyota was to develop a system to rapidly infuse the Toyota Production System into its suppliers’ processes. The company came up with the kaizen system of continual improvement in which senseis from Toyota would visit the supplier plant and, in three to five days, conduct a kaizen event (also called a kaizen blitz), transforming one section of the facility. After a few such visits by the senseis the supplier plants understood the kaizen methodology and had trained staff that could conduct their own kaizen events.
This kaizen methodology turned out to be an extremely effective method of culturally transforming an enterprise and of competing with the United States via lower overall costs, shorter delivery lead times, higher margins, and much better quality.
The term “lean” is now a well-known buzzword. The term comes to us from Japan and was first described to Americans in a book titled The Machine That Changed the World (James P. Womack, Daniel T. Jones, and Daniel Roos; Simon & Schuster Adult Publishing Group; 1990). This book compared U.S., European, and Japanese car manufacturing. The authors described Japanese management practices that enabled its stunning success in the automotive and consumer electronics businesses. What they described was the Toyota Production System, which they called “lean.”
The authors said that when lean companies are compared to ordinary ones, the following differences emerge:
• Lean companies take half the human effort.
• Lean companies have half the defects in the finished product (or service).
• Lean companies require one-third the engineering effort.
• Lean companies use half the floor space for the same output.
• Lean companies have 90-percent less inventory.
At the time that this book came out, U.S. factories were anything but lean. Once again the United States found itself at war with Japan. This time Japan wasn’t dropping bombs, however; it was dropping VCRs, automobiles, cameras, televisions, and stereos. Attempts to emulate the Japanese methods at that time failed.
U.S. companies would visit factories in Japan and see a high level of cleanliness, hourly employees involved with “quality circles” (committees formed to improve productivity and quality), and very low inventory levels. They would return to their factories, clean them up, throw some hourly workers together to form quality circles, and arbitrarily reduce the level of inventory on hand. Then they would sit back, assuming that they had become lean, and witness, to their horror, massive stock shortages and no results whatsoever from their quality circles. They understood that the cleanliness, quality circles, and low inventory levels were the results of the Toyota Production System, but they had no idea how these results were achieved.
There were a number of what could be called “structural differences” between U.S. and Japanese societies that prevented the United States from simply copying every aspect of the superior Japanese manufacturing systems.
Americans pride themselves on being rugged individualists as compared to the Japanese, in which a boss was to be a good paternalist and the employee a good worker. In the United States, individuality is stressed, at times almost to the extreme. Conformity is stressed in the U.S. military, and conformity to various rules and demands in business, but outside of that, almost anything goes. In Japan, however, there is the tradition that “the nail that sticks up is hammered down.” In other words, the group becomes more important than the individual, and wild nonconformity is strongly frowned upon. Individualism can be seen as a form of selfishness. To go along with the group is considered to be a form of inner strength. To be defiant against the boss is viewed symbolically as being defiant against the nation.
In Japanese business, decisions are made by consensus rather than coming from the top-down as in U.S. businesses.
The second big difference between the United States and Japan was Japan’s use of cartels, called zaibatsus . These were family-controlled vertical monopolies or holding companies with their own wholly owned banks that provided financial and industrial subsidies, and which dominated specific sectors of a market. The cooperative nature of these groups powered Japan’s tremendous postwar economic growth because, in the pooling of resources, the investments made by these groups in developing industries like automobiles and consumer electronics were large enough to make these industries competitive worldwide.
The third difference was in the attitudes of the U.S. vs. the Japanese worker after World War II. This attitude, combined with the Japanese manufacturing leaders’ relentless attack on waste that encouraged workers to remove waste from the system as if they were “wringing water from a stone,” made for formidable industrial competitors.
U.S. factories in the 1980s were run with manufacturing resources planning (MRP). This was a system requiring very powerful computers and almost always based production on very long runs and massive levels of inventory between processes. The Japanese, on the other hand, had developed an elegantly simple manual system called kanban that required no computers and relied on very low lot sizes with little or no inventory between processes.
Japan’s quality circles, in which hourly workers made decisions to improve quality and productivity, were the result of several things. First, the system was based on what they called policy deployment. At the start of the year, senior executives developed goals for the company. These goals were translated so that every department and, ultimately, every individual understood what they had to do to help achieve the company goals. For these goals to be useful, the workers were given extensive training so that they had the tools to use. One of the strongest tools they had was statistical process control. The typical Japanese factory that the Americans visited back then was peppered with small break rooms where Japanese employees met over tea to develop their action plans. These plans and metrics showing progress were prominently displayed.
In the early 90s a notion developed that, to compete, U.S. companies needed to become what was called “world class.” A set of metrics was developed to define world-class levels. Some of these metrics were:
• Finished product first-pass yield: 99 percent
• Scrap and rework costs as a percentage of sales: less than 1 percent
• Warranty costs as a percentage of sales: less than 0.5 percent
• Five-year manufacturing cycle time reduction: greater than 20 percent
• Customer lead time: less than five days
• On-time delivery rate: greater than 98 percent
• Annual raw materials inventory turns: 12 turns
• Annual work-in-progress inventory turns: 16.5 turns
• Annual finished goods inventory turns: 12.6 turns
U.S. companies that compared their own performance to these metrics received a strong wake-up call. It became obvious that the methods being employed by the typical U.S. factory would never allow it to achieve world-class status. In the late 1980s it took General Motors Corp. 50-percent longer to make a similar automobile to a Japanese-made Toyota… and GM made no profit on that automobile.
There are several factors that prevented U.S. companies from simply copying every aspect of the Toyota Production System to become lean and achieve world-class metrics.
First, many U.S. factories were designed to manufacture in high volumes with low mix, and with large work-in-process inventories and large spaces between processes. Machinery was therefore inflexible to allow for mix or volume changes.
Also, Japanese financial systems are not hampered by the U.S. requirement to show improved profits every quarter and a return on investment analysis for every investment made in the factory.
Leadership consistency is another key issue. American CEOs and COOs typically stay with a company for three to five years. Contrast that to Eiji Toyoda, who was Toyota’s CEO from 1950 to 1994.
The Japanese system relies on an employee-centered process requiring that the hourly workforce be extensively trained and engaged in the efforts to continually improve and to pursue a fanatical attack on waste. The workforce was involved in a focus on specific problems, and people were made to challenge conventional wisdom to identify root causes and solve problems. By contrast, U.S. employees were often asked to “leave their brains at the door” when they entered the shop.
The typical relationship U.S. companies had with their suppliers was one in which suppliers were played off one another. In Japan, suppliers were often part of the zaibatsu and had very strong strategic alliances with one another. They supported each other in reducing costs and improving deliveries. Americans were amazed when they visited Japanese factories in the 1980s and saw suppliers making multiple deliveries each day.
The U.S. companies involved with automobile manufacturing had two difficult problems with employees. First were lifetime employment union contracts. Second was the policy that all employees involved with assembling an automobile received the same wage. This is unlike a Japanese-run auto plant in which the lower-skill jobs receive less pay.
Early efforts to compete with Japan were not successful. General Motors, for example, decided that the answer was to automate its factories and have robots build its cars. This did not work because Toyota was using employees who constantly improved their processes. The robots couldn’t do that. General Motors ultimately abandoned their robotics approach, and community colleges throughout the United States found themselves bestowed with robots as gifts from General Motors.
Other failed attempts to compete with the Japanese involved trying to implement the just-in-time methodology simply by pushing inventories back to suppliers and demanding that the suppliers start making deliveries “just in time.” This failed mostly because the suppliers couldn’t respond to changes in demand.
Another type of failed attempt was to bring all the Japanese manufacturing tools into the factory and deploy them simultaneously. U-shaped cells, kanban, Takt-time-based balancing, 5S, poka-yoke, suggestion systems, quality function deployment, and the like were thrust onto companies. Sometimes Japanese consultants were engaged. Sometimes companies would invest in the training of their own in-house senseis. Many companies failed at becoming lean because instead of focusing on the results of their efforts on the bottom line, they became focused on counting how many lean activities they had going.
The problem with this approach was that, although these were all proven Japanese techniques that had good results in the U.S. factories, the results were often isolated victories over waste with no benefit to the total enterprise--no benefit to the bottom line.
Clearly U.S. companies could not become lean simply by copying the Japanese. Cartels were illegal; we couldn’t blow up our old-fashioned factories designed for batch processing and start new factories from scratch. U.S. CEOs weren’t about to release an annual policy- deployment statement outlining goals for the year. Many U.S. companies that became lean did so by adapting Japanese techniques and retaining the U.S. culture. Those companies relied upon an implementing technique called the lean promotions office (LPO).
Unlike the Japanese company where the CEO may be intimate with lean implementation methodology and where the CEO will be with the company for decades, U.S. companies needed to develop a unique strategy. Typically the strategy relies on kaizen events to infuse Japanese techniques into the enterprise, and the establishment of a formal LPO. Simply stated, the LPO is a steering committee that lays out the game plan for lean implementation, coordinates the events, and makes sure that resources are available.
The typical LPO:
• Forms and trains continuous improvement teams involved with such activities as kaizen events
• Schedules all kaizen events and coordinates the logistics and resources that the events will require; after each kaizen event, the LPO leads post mortems to glean lessons learned and to make sure that the to-do lists are being addressed
• Develops, calculates, and communicates metrics across organizational barriers
• Shares results with customers and suppliers
• Gives recognition to successful teams, celebrates their successes, and offers the opportunity for them to ask for any additional resources to help them improve even more
• Maintains momentum and ensures that all improvement activities are focused on achieving the desired “future state”
Over time, many U.S. companies using such tactics as the LPO were able to adapt Japanese techniques and become truly lean. General Motors, for example, which in 1998 took 50-percent longer than Toyota to make a similar car, can now make a car in 33 hours as compared to 29 for Toyota. General Motors, like many U.S. companies today, is getting lean.
Many U.S. companies that attempted to become lean and failed did so because they viewed lean as something that applied only to the factory. The companies who are now lean and have achieved world-class metrics recognized that unless lean is applied to every function, starting with their suppliers and ending with delivery to their customer, they will not have a lean enterprise. A lean enterprise means a complete business system consisting of a product development process, a supplier management process, a fulfillment process from order through production to delivery, and a customer relations process through the useful lives of the products or services being provided.
U.S. companies that are now lean got that way by taking a total systems approach. They took the time to analyze their operations’ unique combination of products, equipment, materials, processes, and links with suppliers and customers. They developed a clear understanding of where their operations stood compared with the lean vision of a continuous stream of value-adding steps stretching from the first supplier to the end-user. They had to train and then engage the entire workforce to understand that vision and work together to achieve it.
Jerry Feingold is a highly sought-after management consultant in the field of lean process improvement. He conducts work in the United States and Europe with a wide variety of companies, including consumer, commercial, and medical product producers; food processors; financial service organizations; and government contractors. The book Getting Lean (WCM Associates, 2004) is the result of Feingold’s many years of experience helping companies become more competitive. It contains specific, proven, and valuable tools and secrets that will assist an enterprise to reach new levels of productivity and to improve continuously. Visit his web site at www.continuousimprovements.com .
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