The Toyota Way - Part 2

The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer

Toyota developed the after World War II. While Ford and GM used mass production and economies of scale, Toyota faced very different business conditions. Toyota’s market was very small but it had to produce a variety of vehicles on the same assembly line to satisfy customers. The solution: making the operations flexible. This resulted in the birth of TPS.TPS borrowed some of its ideas from the United States.

The core idea of the Just in Time system came from the concept of the “pull-system”, which was inspired by the American supermarkets. In the pull system, individual items are replenished as each item begins to run low on the shelf.

Applied to Toyota, it means that the first step in the process is not completed until the second step uses the materials or supplies from Step 1. At Toyota, every step of the manufacturing process uses Kanban to signal to the previous step when its part needs to be replenished.

The company was also inspired by W. Edwards Deming. Aside from broadly defining customers to include internal and external clients, he also encouraged Toyota to adopt a systematic approach to problem solving, which became a cornerstone for continuous improvement (Kaizen). The point of the TPS is to minimize time spent on non-value adding activities by positioning the materials and tools as close as possible to the point of assembly.

The major types of non-value adding waste in business or production process are:

1. Overproduction.
2. Waiting or time on hand.
3. Unnecessary transport or conveyance.
4. Over processing or incorrect processing.
5. Excess inventory.
6. Unnecessary movement.
7. Defects.
8. Unused employee creativity.

The Fourteen Principles of the Toyota Way

Principle 1: Base your management decision on a long-term philosophy, even at the expense of short-term financial goals

The Toyota message is consistent: Do the right thing for the company, its employees, the customer and the society as a whole. This long-term philosophy is the guiding post of the company in its continuous quest to offer the best in quality and service to its customers, employees and stockholders.

Long-term goal should supersede short-term decision making or goals: Develop, work, grow and align the company towards a common goal that is bigger than making money.Your philosophical mission is and should be the foundation of all our other principles.

Toyota is aligned around satisfying the customer. It believes that a satisfied customer comes back and gives more business through referrals. It generates value for the customer, the society and the economy.

One of the keys to success of Toyota is that it lives by the philosophy of self reliance and a “let’s do it ourselves” attitude. This can be best illustrated when it ventured into the luxury car industry. It did not buy a company that already made luxury cars.

Rather, it created its own luxury division - the Lexus - from scratch in order to learn and understand the essence of a luxury car.

Principle 2: Create continuous process flow to bring problems to the surface

The mass production system used by many manufacturers assures overproduction in large batches which in turn guarantees inventory being idle and taking up a lot of plant space. Toyota’s lean production system has redesigned the work process to move both materials and information faster.To optimize the flow of materials so that it would move quickly, Toyota reduced batch sizes and came up with work cells that were grouped by product rather than by process. The continuous process flow links the process and the people together so that if a problem surfaced, it can be solved right away.

1. Builds in quality.
2. Creates real flexibility.
3. Creates higher productivity.
4. Frees up floor space.
5. Improves safety.
6. Improves moral.
7. Reduces cost of inventory.

The next post in the series will cover the remainder of the fourteen points and how to apply the Toyota Way in your organization.