On a roll for over 50 years now, Toyota Motor Corp. is the logical first place to look for a glimpse into the future of lean manufacturing. There a new generation is gearing up to spread the tried-and-true gospel of the Toyota Production System (TPS), and push it beyond the factory floor.
"How you make money in this business is really staying focused on the fundamentals. TPS is a key part of how we do that and will continue to be the bedrock foundation of who we are and what we do," says Chris Couch, 34, who worked for Toyota of Japan for seven years after earning a Ph.D. in Operations Management from the Massachusetts Institute of Technology. In 2000 he began an overseas assignment at Toyota's North American manufacturing headquarters, where he created the Operations Strategy group, which is responsible for strategic planning and tactical improvement projects that span business units. In early 2004 he became body weld manager of Toyota Motor Manufacturing Kentucky in Georgetown, the company's largest vehicle plant. Wrestling with the challenge of how to apply Toyota's production principles to other areas of the business, Couch uses the term "TPS2" to emphasize the different mindset required.
As an example, to the three fundamental pillars of cost, quality and delivery (or time), he adds a fourth: profit.
The Variable is Cost
"A factory process isn't a profit center. It's a cost center. The variable you have is cost. When you talk about the business as a whole, that's not necessarily true. What you really want to do is increase your profits," says Couch. This adds another layer of complexity that doesn't arise on the shop floor. "Working on a large enterprise process, some area needs to take a hit for the team. You have to craft a mechanism to allow that."
The various TPS mechanisms and the underlying philosophy are what American manufacturers have been trying to decipher for the past 20 years. Going forward, a third generation of leaders -- learning the ropes within Toyota or from people who used to work for the Japanese carmaker -- will be carrying the torch. Still, many companies have only scratched the surface. In part, this has been a function of the learning process.
"People would go to Japan. They'd see one thing and bring that back. Lean is, and you can fill in the blank: quality circles, kanban, 5S, setup reduction," says Art Smalley, 39, who worked for Toyota in Japan for over six years.
Back in the United States, Smalley led lean efforts at automotive supplier Donnelly Corp., and managed the Production Systems Design Center for the management consulting firm McKinsey & Co. until last summer. Since then he has co-authored a workbook, "Creating Level Pull," and is leading workshops for the Lean Enterprise Institute. In Japan, Smalley would host tours for foreign executives, and compares it to the story of the four blind men and the elephant, each grasping a different piece of the whole. "It was always amazing what people wouldn't see."
Steve Spear, 39, an associate professor in the technology and operations management department at Harvard Business School, sequenced the TPS philosophy, the "Toyota DNA," down into what he describes as "a tight coupling of doing work and learning to do work better." He says work within Toyota's factories is performed in what amounts to a tightly controlled experiment that tests the assumptions embedded in the work's design. By testing the work as it's being done, problems are recognized when and where they occur, which prevents them from propagating.
What excites Spear today is the opportunity that different organizations have to move beyond the widely copied tools of the Toyota Production System.
"If you look at Toyota's history, the tools and artifacts were developed to deal with very particular problems that were affecting people in very particular circumstances," he says. Beyond those situations, "the situations from which the tools were first created and embedded, tested, developed and refined, the tools have less and less applicability."