Two questions:
1) How does Japan's leading automaker keep getting better?
2) What keeps competitors from emulating that performance?
One answer: The Toyota Production System (TPS). While Toyota carefully describes its fabled system as an operating philosophy for guiding the management of an entire enterprise, would-be followers typically think of TPS as a departmental solution that affects only the plant floor, suggests Stanford University professor Jim Matheson (also chairman, SmartOrg Inc., Menlo Park, Calif.). "Instead of also using TPS to optimize the strategic direction and management of an enterprise, many of the would-be emulators seem to have little strategy beyond the plant floor."
This, some would say, is why Toyota's North American auto division continues to gain market share, rake in profits, build new plants, have harmonious supplier relations and retain an enthusiastic workforce with relatively lower labor costs while General Motors Corp. and Ford Motor Co. continue on a downward financial spiral despite their use of TPS-derived practices at many plants.
The question is a critical one for U.S. manufacturing. The auto industry is the latest stalwart U.S. manufacturing sector in the past two decades to begin a tumultuous rebirth. Some industries that have undergone similar trials have come out stronger here, such as steel. Others, such as textiles, have not and have moved mostly overseas. Toyota's success in North America should be keeping U.S. manufacturing executives up at night. Not only has the company weathered a tenacious economic slog, but it appears to be the fastest runner in the race.
This year Toyota's newest facility begins operations at San Antonio, Texas. Assembly plant No. 7 has been announced for Ontario, and rumor has it that more are coming, observes David Cole, chairman, Center for Automotive Research, Ann Arbor, Mich. Cole speculates that Arkansas and Michigan may be possible sites for the future.
Meanwhile, expansions are underway at Toyota's Alabama and West Virginia engine plants, and hybrid vehicles are being added to the production mix at Georgetown, Ky., the company's first U.S. plant. Vehicle production in 2004 totaled 1,443,889 with suppliers receiving about $25 billion.
Watershed Event, Lopsided Response
Analysts unanimously describe Toyota's arrival in North America with TPS as a watershed in manufacturing -- one that will supercede the advances spawned by Henry Ford's evolution of mass production. (Interestingly, both mass production and TPS originated with companies where descendants of the founders maintain control.)
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