Toyota Production System 14 Management Principles

THE

TOYOTA WAY14 MANAGEMENT PRINCIPLES

FROM THE WORLD’S

GREATEST MANUFACTURERBy Wg Cdr DK Sharma

THE TOYOTA WAY 02/49

Toyota Production System

(TPS)

Also called The Toyota Way


Toyota Production System

14 Principles

ΩPhilosophy (01 principle)ΩProcess (07 principles)ΩPeople / Partners (03 principles)ΩProblem Solving (03 principles)


Lean Engineering / Manufacturing / Thinking / Enterprise /System is a: -

A Five Step ProcessDefining customer value (internal / external)Defining the Value Stream (Process)Making it Flow (Process)“Pulling” from the Customer back (Inventory)Striving for Excellence (Long term)


Objectives of TPSEliminating wasted time and resources

Building quality into workplace systems

Finding low cost but reliable alternatives to

expensive new technology

Perfecting business processes

Building learning cultures for continuous

improvements


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


Long-Term PhilosophyPrinciple 1 - Management Decisions on a Long–Term Philosophy, even at the expense of Short-Terms Financial Goals.

We wanted to break new ground in ride quality. To get

that, our tire compounds were fairly soft. So even

though the customer experienced a good ride and the

tires were well within our specs, they did not last as

long initially as many customers wished. 5-7% of the

customers actually complained about tire life. For

Toyota that is a big deal, as Toyota is used to dealing in

complaint level far < 1%.


Long-Term PhilosophyBase Management Decisions on a Long–Term Philosophy, even at the expense of Short-Terms Financial Goals.

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.


Problem Solving (Continuous Improvement and Learning)

People & Partners (Respect, Challenge and Grow Them)

















Process – Eliminate WastePrinciple 2. Create Continuous Process Flow to Bring Problems to the Surface

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

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

Flow also forces the implementation of other lean tools such as preventive maintenance, built-in quality (jidoka), continuous improvement (kaizan) and even production (heijunka)



Toyota Identified 7 Major Non-Value Adding Waste

1. Overproduction – Producing items for which there are no orders

2. Waiting (time on hand) – Worker waiting for a preceding process to be over, tool, part, lot processing, capacity bottlenecks

3. Unnecessary transport or conveyance – Carrying work-in-progress (WIP) long distance



4. Over / incorrect processing - Inefficient process due to poor tooling or production design

5. Excess / unavailable Inventory – Extra inventory hides problems such as production imbalances, late deliveries, defects, downtime and long set up time

6. Unnecessary Movement – Wasted motion like looking for, reaching for, stacking part, tools etc, even walking is a waste during production

7. Defects – Production of defective parts and its correction, Repair or rework, replacement production and inspection


PROCESS FLOW ‘Batch & Queue’ Computer Base Dept (1 min each)

Computer Monitor Dept (1 min each)

Computer Test Dept (1 min each)

Complete processing of first batch of 10 takes 30 minutes

Transportation from Base to Monitor Dept is in batch of 10

First good computer ready in 21 minutes

There are at least 21 sub-assemblies in process at a time

Batch Processing Example


PROCESS FLOW – ‘One Piece’Computer Base Dept

Computer Monitor Dept

Computer Test Dept

First part is ready in 3 minutes

10 complete assembly ready in 12 minutes

Only two sub-assembly in process at a time

Continuous Flow Example

Product requires three processes that takes one minute each (One Piece Flow Production Cell)

Lean Thinking – Batch size - ONE

Process – Eliminate Waste

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.

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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.

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Process – Eliminate Waste Principle 4. Level out the Workload (heijunka)

(Work like the tortoise not the hare)

Elimination

Muda Waste due to

Non-value adds

Muri Overburd

ening people or equipme

nt (safety

and quality

problem, breakdow

ns and defects)

Mura Unevenn

ess of production (down time, NA

parts, defects)

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Principle 5. Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time

GM followed the golden rule of automotive engine production: do not shut down the assy plant! At GM, managers were judged by their ability to deliver the numbers, Get the job done no matter what – and that meant getting the assy plant to keep it running.

How Toyota Reacted – If you are not shutting down the assy plant, it means that you have no problem. All mfg plants have problems. So you must be hiding your problems. It is better to shut down the plant and work on quality and continue to solve your problems.

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Principle 5. Keep Quality Controls Simple and Involve Team Members

Things like ISO-9000, an industrial quality standard that

calls for all kinds of detailed SOPs, for whatever good they

have done, have made companies believe that if they put

together detailed rule books the rules will be followed. Quality

planning dept are armed with reams of data analyzed using

most sophisticated statistical analysis methods. Six Sigma has

brought us roving bands of black belts who attack major

quality problems with a vengeance, armed with an arsenal of

sophisticated technical methods. But at Toyota........................

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Principle 5. Keep Quality Controls Simple and Involve Team Members

..........they keep things simple and use very few complex statistical tools, the quality team have just four key rules (power of simplicity): -

Go and See Analyze the situation Use one piece flow and andon (cord to stop production)

to surface problems Ask “Why?” Five times to get to the root of problem

Quality for customer drives your value proposition, because adding value to customer is what keeps you in business and allow you to make money.

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Principle 6. Standardized Tasks are the Foundation for Continuous Improvement and Employee Empowerment (Kaizan)

It is impossible to improve any process until it is standardized.

Standardization, stabilize the process before continuous improvements can be made.

Until you have the fundamental skill needed to swing the club consistently, 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.

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Process – Eliminate WastePrinciple 6

Coercive Vs Enabling Systems and Standards

Coercive Bureaucrac

y+Rigid rule

enforcement +Extensive written rules

and procedures

+ Hierarchy controls

Enabling Bureaucrac

y + Empowered

Employees +Rules and

procedures as enabling tools+ Hierarchy supports

+ Org learningAutocratic + Top down

control +Minimum

written rules and

procedures + Hierarchy

controls

Organic +Empowered employees +Minimum rules and

procedures +Little

hierarchy

Hig

h

Bu

reau

crac

y

Lo

w

Bu

reau

crac

y

Coercive Enabling

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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

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Clean It Up and Make It Visual – 5 S

Sort Clear out

rarely used items by red

tagging (seiri)

Straighten (Orderline

ss) A place for everything

and everything in

its place (seiton)

Shine Clean it (seiso)

Standardize

Create rules to sustain

the first 3 S (seiketsu)

Sustain Use regular

management audits to

stay disciplined (shitsuke)

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Use Only Reliable, Thoroughly Tested Technology That Serves Your People, Processes

and Values

“Society has reached the point where one can push a button and be immediately deluged with technical and managerial information. This is all very convenient, of course, but if one is not careful there is a danger of losing the ability to think. We must remember that in the end it is the individual human being who must solve the problems”

Eiji Toyoda

Any information technology must meet the acid test of supporting people and processes and prove it adds value before it is implemented broadly.

First work out the manual system and then automate it

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Problem Solving

(Continuous Improvement and Learning)People &

Partners (Respect, Challenge and Grow

Them)
















PEOPLE & PARTNERSPrinciple 9

Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others

The Automotive News recognized newsmakers in the auto industry. Direct quotes from the issue about these newsmakers: -

Bill Ford (Ford): Talks up revitalization, brings backs old guys, stars in TV commercial. Ford stock remains mired in the $10 range

Robert Lutz (GM): Former Marine pilot inspires GM’s troops and simplifies product development, giving designers a bigger voice

Dieter Zetzsche (Chrysler): Turns the company around a year early with 3 Qtrs in the black

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Fujio Cho (Toyota): Toyota President presides over rise in operating profit to industry record. Take lead on hybrids. Grabs 10 point of US market. Joins with Peugeot for plants in Eastern Europe.

Changing the culture each time a new leader comes into office necessarily means jerking the company about superficially, without developing any real depth or loyalty from the employees. The problem with the radical shifts in the culture is that organization will never learn – it loses its ability to build on achievements, mistakes, or enduring principles.

Deming, the Quality Guru terms it “Constancy of Purpose”.

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Long term assets Learned skillsMachinery depreciates Loses value

People appreciates continue to grow

PHILOSOPHY

Customer FirstPeople are most important asset

Kaizan – continuous improvementGo and See – Give feedback

Efficiency thinkingTrue (vs. Apparent) condition

Total (vs. Individual) team involvement

PEOPLE

TE

CH

N I C

AL

MA

NA

GE

ME

NT

+Stability+JIT+Jidoka+Kaizan+Heijunka

+Growth+Attention+Go & See+Problem solving+Presentation skills+Project Mgt+Supportive culture

Toyota Leader’s view of the TPS

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TOYOTA LEADERSHIP MODEL

Group Facilitator

“You are empowered”

Builder of Learning Organization

“Here is our purpose and direction – I will

guide and coach”

Bureaucratic Manager “Follow the

rules”

Task Manager “Here is what to do and how – do

it”

Bo

tto

m-U

p

(Dev

elo

pm

ent

)

Top

Do

wn

(Dir

ecti

on

al)

General Management Expertise

In-depth Understanding of Work

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Develop Exceptional People and teams Who Follow Your Company’s Philosophy

Internal Motivation Theories

Concept 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.

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External Motivation Theories

Concept Toyota Approach

Taylor’s Scientific Management

Scientifically select, design, standardize jobs, train, and reward with money performance relative to standards

All scientific management principles followed but at the group level other than individual learned based on employee involvement

Behaviour Modification

Reinforce behaviour on the spot when the behaviour naturally occurs

Continuous flow and andon creates short lead times for 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

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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.

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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.

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Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve

Enabling Systems

Clear Expectations

Stable, Reliable Processes

Fair and Honourable Business Relations

Supply Chain Need Hierarchy

Progr

essin

g Nee

d Sat

isfac

tion

Regressing Need Satisfaction

Next Level of Improvement

Stability

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Problem Solving

(Continuous Improvement and Learning)People &

Partners (Respect, Challenge and Grow

Them)
















PROBLEM SOLVINGPrinciple 12

GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu)

“Observe the production floor without preconceptions and with a blank mind. Repeat “why” five times to every matter.”

Taiichi Ohno (as quoted in the Toyota Way document)

It is more than going and seeing. “What happened? What did you see? What are the issues? What are the problems?” At the root of all of that, we try to make decisions based on factual information, not based on theory, statistics and number contribute to the facts, but it is more than that. Some time we get accused of spending too much time doing all the analysis. Some will say, “Common sense will tell you. I know what the problem is.” But collecting data and analysis will tell you if your common sense is right.

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Mr. Ohno at times made his supervisor / managers to draw a circle on the floor of a plant and they were told, “Stand in that and watch the process and think for yourself”, and then he did not even give you any kind of hint of what to watch for. This is the real essence of TPS.

The Power of Deep Observation To Question, Analyze and Evaluate

We often depend upon computers to analyze and evaluate data

Like Six Sigma quality improvement initiatives – we collect data and run it through statistical analysis – correlations, regressions, variance etc, some of the results we get are statistically significant. But do we really understand the context of what is going on or the nature of the problem?

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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

You can not expect to do your job without getting your hands dirty

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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

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Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Rapidly

Decide and Announce

Seek individual input, then Decide and Announce

Seek group input, then decide and announce

Group consensus, Management Approval

Group consensus with full authority

Preferred

Fallback

FallbackIf consensus not achieved

Lev

el o

f In

volv

emen

t

Time

Decision making is highly situationalPhilosophy is to seek maximum

involvement for each situation

Get all the parties on board, iron out all the resistance, generate consensus, then implementing

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A Learning Org Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

We view errors as opportunities for learning. Rather than blaming individuals, the organisation takes corrective actions and distributes knowledge about each experience broadly. Learning is a continuous company-wide process as superiors motivates and train subordinates; as predecessors do the same for successors; and as a team subordinates at all levels share knowledge with one another.

The Toyota Way Document 2001

Toyota has judiciously used stability and standardization to transfer individual and team innovations into organisational-wide learning. Standardisation punctured by innovation, gets translated into new standards (Kaizen) .

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Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

5 Whys is a method to pursue the deeper, systematic causes of a problem to find correspondingly deeper countermeasures

Level of Problem Countermeasure

There is a puddle of oil on the shop floor

Clean up the oil

Because the machine is leaking oil Fix the machine

Because the gasket has deteriorated Replace the gasket

Because we bought gasket made of inferior material

Change gasket specifications

Because we got a good price on those gaskets

Change purchasing policies

Because the purchase agent gets evaluated on short term cost savings

Change the evaluation policy for purchasing agent

Why

Why

Why

Why

Why

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Point of

Cause

2. Clarify

the Proble

m

1. Initial Problem Solving (Large, vague,

complicated)

3. Locate Area / Point of Cause

Direct Cause

Cause

Cause

Cause

Cause

5. Countermeasure

6. Evaluate

7. Standardize

Root Cause

Why

Why

Why

Why

Why

Grasp the Situation

Cause Investigation

Basic Cause and Effect Investigation

4. Five Whys?Investigation of Root Cause

Toyota’s Practical Problem Solving Process

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Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

Create

Flow (Act) Surfa

ce Probl

em (Plan)Coun

ter Measures (Do)

Evaluate

Results

(Check)

Eliminate Waste

Deming Circle of Quality (PDCA)

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THE TOYOTA WAY

One man did his part, and the other his, and neither even had to check to make sure both parts were getting done. Like the dance of atoms Alvin had imagined in his mind. He never realized it before, but people could be like those atoms, too. Most of the time people were all disorganized nobody knowing who anybody else was, nobody holding still long enough to trust or be trusted, just like Alvin imagined atoms might have been before God taught them who they were and gave them work to do.

It was a miracle seeing how smooth they knew each other’s next move before the move was even begun. Alvin almost laughed out loud in the joy of seeing such a thing. Knowing it was possible, dreaming of what it might mean – thousands of people knowing each other that well, moving to fit each other just right, working together. Who could stand in the way of such people?

Orson Scott CardPrentice Alvin: The Tales of Alvin Maker

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THE TOYOTA WAY

The Lessons and Secrets of Toyota way

It creates bonds among individual and patterns such that they “move to fit together just right, working together” towards a common goal.

Creating a WHOLE much greater and stronger than the SUM of the individuals

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THE TOYOTA WAY

Bibliography &Recommended Readings

The Toyota Way – Jeffery K. Liker

The Machine that Changed the World – Womack, Jones & Ross

Lean Thinking – Womack & Jones

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THE TOYOTA WAY

Thank You

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Toyota Production System 14 Management Principles

Business

terms financial

base management

involve team

process eliminate

quality controls

principle

create process

long term