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Toyota Production System

By Seiki "Stan" Hirota

Originally published November 4, 2018 on LinkedIn


Last month I had the opportunity to visit the Toyota factory in Georgetown, Kentucky, which is the world’s largest automobile manufacturing plant for Toyota. It was the first time for me both to visit Georgetown, and to visit a factory of Toyota, and I was blown away from what I saw. The factory is 8.1 million square feet, which is large enough to make 140 American football fields. This factory is staffed with 8,000 employees and has the production capacity of 550,000 vehicles per year and 600,000 engines annually.

The first Camry was produced at this factory back in 1988, which is still displayed in the visitor lobby as the symbol of teamwork. The first president of Toyota Motor Manufacturing, Kaneyoshi Kusunoki, left a comment that “This car is a symbol of our most important company principle, team work. For this reason, I have declared that our first car shall be preserved forever in Kentucky for our team members. It is to remind us not only of what we have accomplished today, but more importantly, what we can achieve in the future through team work.” Since the beginning of this factory, 11 million vehicles including Camrys, Camry Hybrids, Avalons, Avalon Hybrids, and Lexus ES350s have been shipped out from this factory along with other engines and parts.

Toyota is the grandfather of Lean Production and brought the idea of Kaizen (continuous improvement) and Lean in the form of what they call “Toyota Production System”. Toyota originated as a manufacturer of loom for cotton spinning, founded by Sakichi Toyoda. When Sakichi’s son, Kiichiro, had an opportunity to study abroad in America, he was so fascinated with the automobiles that served great service to the society, and became passionate about manufacturing automobiles.

The core philosophy of Toyota was developed in order for Kiichiro to overcome the business environment which was not favorable for him to start up an automobile business back in Japan. The Japanese market for vehicles back in 1930’s was very small with only 20,000 vehicles, which was dominated by foreign manufacturers. In addition, the technical aspects in manufacturing vehicles were highly sophisticated when compared to looms, and was capital intensive. In order for Toyota to be successful, Kiichiro had to develop a system where he could satisfy customer needs while producing in small quantities with limited capital expenditure.

In 1950’s when the economic crisis hit the market, the vehicles stopped selling and forced Toyota into a severe cash flow problem. In order to avoid bankruptcy, Kiichiro had to lay off 2,500 employees, which was an extremely painful experience. Ever since, Toyota is determined to adhere to a “no debt” principle, in order to assure the company to never lay off employees again, and started working hard on optimizing production workflow and elimination of waste, which we call “Muda” in Japanese.

Toyota’s chief production engineer, Taiichi Ono, responsible for this initiative realized that employing Detroit’s production methods would not work for Toyota, so he underwent for more than a decade of trial and error with new ways of working and improving process. He started his trial and error by taking an opposite approach, how the process can be optimized based on the customer needs and demands and the actual pace of sales. He started giving employees responsibility of suggesting ways to work better together and continuously improve the process.

He soon realized that the traditional mass-production process of never stopping the line meant errors and defects to pile up, and it was better to stop the line to resolve the problem on the spot. The system eventually included a new way to organize suppliers into functional tiers, and simple ways to coordinate the flow of parts feeding the assembly operations, arriving just in time. As it evolved, the system became especially well-suited to meeting the changing demands of consumers for reliable and high-quality products.

Toyota worked out most of the details of the Toyota Production System by the early 1960s, while American automakers were just focused on complaints and trade disputes, accusing Japan of protectionist trade policies, including high tariffs on foreign imports, and domestic taxes that discriminated against large cars like the ones made in America. As a result, the Japanese Ministry of Trade and Industry imposed export controls on cars, trucks, and motorcycles, which made it more difficult for Detroit to realize that Toyota had a unique system to drive lower cost and to drive efficiency in production.

Toyota had more variability in their approaches, which required far less labor hours by employees at all levels in the production chain to make a vehicle, with the highest level of quality, the lowest levels of work-in-process inventories, and the greatest flexibility to meet changing market demands. I believe that Toyota has taught us the right attitudes and behaviors for success in business. Putting in passion and effort to continuously aggregate marginal improvements in business for a long period of time. The philosophy that developed out of this history is the underlining belief system of Toyota today, which can be summarized as follows:

  1. Customer first (never pass on defects to the next process)

  2. People are the most valuable resource (empower and respect people to problem solve)

  3. Kaizen (aggregate continuous marginal improvements)

  4. Floor or front line focus (problem solve in the trenches)

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