Many manufacturers find themselves trying to solve the Toyota Production System conundrum: More and more, adopters of the lean manufacturing practices of TPS find they aren't guaranteed a competitive edge. TPS merely brings their manufacturing prowess on par with other adopters. What these companies are still missing is as important to their enterprise as a powertrain is to an automobile: the Toyota Product Development System.

The experts say that lean product development as Toyota practices it can surpass even the potential performance and cost-reduction advantages of TPS. In addition, there is only so much waste that TPS can squeeze out of the production process before engineering of the products and processes becomes a critical constraint, says Jeffrey K. Liker, professor of industrial and operations engineering, University of Michigan at Ann Arbor and the co-author (with James M. Morgan) of The Toyota Product Development System (2006, Productivity Press).

Among automakers, lean manufacturing practices are becoming less of a competitive differentiator, says Ron Harbour, president, Harbour Consulting, Troy, Mich. The growing proliferation of lean manufacturing practices is evident in a recent Harbour Consulting study, which observes that the labor productivity gap continues to narrow among all North American carmakers. The difference between the most and least productive in terms of total labor hours (assembly, stamping and powertrain) was 7.33 hours per vehicle in 2005, down from 9.08 in 2004 and less than half the 16.56 hours per vehicle gap in 1996.

While the six major auto manufacturers are closer than ever on labor productivity, there remain larger gaps on several other manufacturing attributes, including capacity utilization. Toyota, Nissan and DaimlerChrysler are producing at between 94% and 106% of their North American capacity. Honda and General Motors operate at 91% and 90% respectively, while Ford's assembly plants run at 79% of their potential output.

Jeffrey K. Liker

Capacity utilization is a big cost element and is being impacted by each manufacturer's flexibility, a factor often influenced by product development considerations. When assembly plants can produce multiple models, even from multiple platforms, a company is much more likely to fully use its human capital and equipment.

While Toyota still maintains its impressive performance in applying lean practices, less of that edge now comes from TPS and more comes from adopting lean product development practices. In turn, those best practices provide synergy to TPS.

For example, the Harbour study notes that in-plant quality improvement has been the biggest driver of productivity improvement and is better for all automakers. In addition, the report documents that U.S. automakers are learning the lessons of lean manufacturing. General Motors is cited as having five of the 10 best assembly plants in North America, improving 3%, despite declining volume. The report names Ford Atlanta as the best single assembly plant at 15.37 hours of assembly time per vehicle, followed by General Motors' Oshawa, Ont. #2 line that produces the Pontiac Grand Prix, Buick Lacrosse and Buick Allure mid-size sedans.

To put Ford's 15.3 hours into perspective, compare that assembly time per vehicle with a 1980s statistic -- 40 hours per vehicle at a GM plant in Framingham, Mass. (Ironically, Ford will close the Atlanta plant as part of its "Way Forward" restructuring and GM will idle the Oshawa #2 operation in 2008.)

Lean is now the mantra of U.S. automakers -- and the rest of North American manufacturing. But while lean has progressively revised and improved the best practices of the production floor, the concept of manufacturing has evolved, too -- from mass production to mass customization.

See Also

The Toyota Branding System?

The 13 Principles Of Lean Product Development

Product Development: The Next Competitive Frontier

While TPS still delivers significant value despite the transition toward mass customization, the range and scope of product variation intensifies the development game. Not only is the development function challenged by increased product variations, but suddenly the need for lean practices between design and manufacturing multiply. For example, with an expanding product model mix, the need for product design/production collaboration increases.

In a Merrill Lynch analysis that Liker and Morgan cite, new model introductions over the past five years have grown at a tremendous pace. Between 2003 and 2005 more than 60 new vehicles were being introduced each year in the U.S.