Toyota Alters Face Of Production

It is one of the greatest ironies in manufacturing history that the stellar success of Japan's Toyota Motor Corp. derived from the production concepts of American entrepreneur Henry Ford. In his book Today and Tomorrow (1988, Productivity Press reprint edition), Ford describes the elements of lean manufacturing, including continuous flow, just-in-time, standardized work, quality, and reduction of waste. These concepts formed the foundation of the Toyota Production System (TPS), which has fueled Toyota's ascent to the top tier of global manufacturing companies, and more importantly has influenced manufacturers worldwide. Countless production operations have adopted Toyota's lessons in quality, productivity, management, and employee relations. Notes longtime Toyota observer James P. Womack, founder and president of the Lean Enterprise Institute, Brookline, Mass., "The entire Toyota production system didn't fully mature until 1975. From that point it has marched from victory to victory, and it still does all across the world." Womack, author of Lean Thinking (1996, Simon & Schuster) and coauthor of The Machine That Changed the World (1990, Macmillan Publishing Co. Inc.), adds, "Toyota is . . . at least in my way of looking at it, the preeminent manufacturing organization." Toyota's global growth has been astronomical. The company was a small, little-known domestic manufacturer in 1947 when it produced just 100,000 vehicles. Today it is the world's third-largest automaker, with worldwide production of 5.81 million vehicles in 2000. It operates 56 plants in 25 countries, and has a workforce of more than 210,000. And Toyota's vehicles consistently rank near the top in third-party customer-satisfaction surveys. Based in Toyota City, Japan, the automaker also can take credit for developing more than 40 emissions-control systems and dozens of technologies that have improved passenger-car safety. In 1997 Toyota introduced the world's first mass-produced gasoline-electric hybrid sedan, the Prius, that produces up to 90% less harmful emissions than the average car; in June of this year the company introduced the Estima, the first hybrid minivan. The Toyota brand has been notably successful in the U.S., where last year the company sold a record 1.6 million vehicles. The Toyota Camry, with sales totaling 420,000, was the U.S.' best-selling car for the fourth consecutive year, while the Lexus, at 200,000 units sold, earned the title of best-selling luxury brand in the U.S. for the first time in the marque's 11-year history. Despite the automaker's success in selling to the U.S. market, Toyota's executives for many years were skeptical that its manufacturing system could be adopted in U.S. production facilities. Gary L. Convis, who recently became president of Toyota's second-largest plant, located in Georgetown, Ky., says that's why Toyota agreed to form a joint venture in 1984 with General Motors Corp. to operate the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, Calif., that produces the Toyota Corolla car and Tacoma truck, as well as the Chevrolet Prizm. Convis, who was part of the NUMMI start-up management team, says the success of that plant convinced Toyota that TPS could be transplanted to the U.S. "I did know the only way [TPS] could operate in the U.S. was if everyone pulled in the same direction," says Convis, who is the first American executive to head a Toyota manufacturing plant. "The heart of TPS is finding a way to get the people involved." Part of that effort involves allowing workers to solve problems. At the Georgetown plant, just north of Lexington, it is common for production lines to stop hundreds of times during each shift. TPS allows employees, who work in teams, to stop the line when they see a defect or problem and resolve it. "It does affect production and it may create more overtime, but we feel it's a legitimate tradeoff because it ensures that we are building quality into the cars," Convis says. Just two years after the successful launch of the NUMMI venture, the Georgetown plant was established in 1986, and so was a plant in Cambridge, Ont., Canada. Ten years later Toyota opened a manufacturing site in Indiana and founded its North American manufacturing headquarters in Erlanger, Ky., about 60 miles north of Georgetown. Toyota has opened three other plants in the U.S. that make auto parts and industrial equipment, and in June it broke ground for a manufacturing facility in Huntsville, Ala. A Higher Standard Although there is little doubt that Toyota's production system has been a key to its success, TPS also has had a significant impact on the world of manufacturing by lifting quality and productivity standards to new levels. The 2000 IndustryWeek Census of Manufacturers shows that world-class plants have widely adopted just-in-time/continuous-flow production, quick-changeover techniques, kanban systems, lot-size reductions, and preventive maintenance, all methods that Toyota began developing more than 60 years ago. Moreover, analysis of IndustryWeek's Best Plants winners from 1991 to 2000 shows that the vast majority use lean-manufacturing practices extensively. Success in attacking waste in manufacturing comes only with the "passionate and relentless execution of all facets" of the Toyota Production System, declared Joseph C. Day, chairman and CEO of Plymouth, Mich.-based Freudenberg-NOK, in a speech at the annual Shingo Prize Conference in Dearborn, Mich., in June. A large auto-parts manufacturer, Freudenberg-NOK credits TPS with reducing its defect rate by more than 2,000 parts per million to less than 50, cutting quality costs by 60%, slashing work-in-process inventory by 80%, and improving labor productivity by 25% annually. Toyota, of course, is a role model for TPS. "What is unique about Toyota is how pervasive lean manufacturing is across every process at all their plants, as well as all their first-tier suppliers," observes Jeffrey K. Liker, director of the Japan Technology Management Program and the Lean Program Office at the University of Michigan, Ann Arbor. "In other companies with several plants you'll find that they have a plant with good preventive maintenance, a plant with good work teams, a plant with good mistake-proofing. But at Toyota all of these elements of lean are used together in its system." TPS traces its origins to 1926 when Sakichi Toyoda invented a loom that would stop automatically if any of the threads snapped. The concept of designing equipment to stop so that a defect can be fixed immediately is a crucial element of TPS. As a total system TPS began to take shape in the 1930s when the Toyoda family launched an automobile manufacturing firm that was headed by Sakichi's son, Kiichiro. After traveling to the U.S. to study Henry Ford's mass-production system, Kiichiro Toyoda created a system to meet the needs of the smaller Japanese market. Each process produced only the number of parts needed at the next step on the production line, and at the right time. This laid the foundation for just-in-time production, a term coined by Kiichiro Toyoda. Supermarket Approach Today's Toyota Production System is largely credited to Taiichi Ohno, a Toyota executive vice president who traveled to the U.S. in 1956 to visit automobile plants. Interestingly, his most important discovery during his journey was the American supermarket. Ohno was impressed with how shoppers selected what and how much they wanted. The supermarket gave Ohno the idea to set up a pull system, in which each production line became a supermarket for the succeeding line. Each line would replace only the items that the next line selected. Ohno also created the kanban ("signboard" in Japanese) system for replenishment of components or subassemblies. The thirst among manufacturers to learn about TPS has spawned an industry of consultants, books, case studies, and articles, as well as seminars and conferences on the subject. But much of the information about TPS comes from Toyota itself. In 1992 the Toyota Supplier Support Center (TSSC) opened in Erlanger, Ky., in response to increasing interest in TPS. Over the last nine years, 89 manufacturing companies from a variety of industries have studied the TPS program in Erlanger. Many have seen double- and triple-digit productivity growth, as well as dramatic inventory reductions. Although there is a perception that TPS is inflexible, TSSC's objective is to help North American manufacturers create their own version of the system. "Each [company] has a different circumstance," says Hajime Ohba, TSSC's vice president and general manager. "They cannot follow exactly the Toyota way. The techniques can be flexible." The initial process of learning TPS takes seven months to a year. Toyota requires that top executives be directly involved in order to gain an understanding of how the system works. "Some improvements do not come from the plant floor," Ohba observes. "Sometimes the financial system is wrong, sometimes the [human-resources] system is wrong. So being involved allows top management to take responsibility to correct problems." TPS takes a proactive approach to solving problems. In a speech to Canadian manufacturers, Toshiaki Taguchi, president and CEO of Toyota Motor North America Inc., described an encounter between Taiichi Ohno and a production team. During a kaizen (continuous-improvement) event, team members devised a way to collect kanban cards without getting down from their tow-motor vehicles, thus eliminating wasted motion and time. To their surprise Ohno became angry when he heard the presentation. "He told them that if they were to implement this [improvement], the tow-motor drivers would be on the vehicle all the time," Taguchi said. "They would be twisting the accelerator grip for a couple of hours straight, which is not good for the driver's wrist. Also, Mr. Ohno pointed out that getting off the vehicle and walking a few steps and getting back on provides exercise of different muscles that were not used by driving the tow motor. That would be beneficial for the kanban collector's well being." Taguchi added: "Mr. Ohno was looking at the bigger picture. He placed the ergonomic well-being of the team member before the short-term goal of efficiency. This happened almost 30 years ago, many years before the concept of ergonomics became a household word."