Operations Management

Toyota Production System (TPS)

Definition: The production system developed by Toyota Motor
Corporation to provide best quality, lowest cost, and shortest
lead time through the elimination of waste.
TPS is comprised of two pillars, Just-in-Time and Jidoka
(autonomation) , and is often illustrated with the "house"
shown on the next slide.
TPS is maintained and improved through iterations of
standardized work and kaizen (continuous improvement),
following PlanDo-Check-Act (PDCA Cycle from Dr. Deming),
or the scientific method.

Toyota Production System (TPS):
Related Terms

Ohno System
MAN (Material as Needed) - Harley
Davidson
MIPS (Minimum Inventory Production
Systems) - Westinghouse
Stockless production - Hewlett Packard
Zero inventory production system
Lean Manufacturing/Production - MIT



How to make money?
Profit equation: Sales Cost = Profit

Traditional pricing strategy: Cost + Profit = Selling price

Example:

When the cost goes up, the product selling price is raised to reflect
the higher costs and maintain the desired level of profit.
Some even argues that the profit added should be large enough to
cover potential losses if the product does not sell well.

Toyota accepts neither this formula nor these arguments!


1oyoLa's phllosophy
Selling price Cost = Profit
Customers decide the selling price.
Profit is what remains after subtracting the cost from it.
The main way to increase profit is to reduce cost.
Consequently, cost reduction through waste elimination
should have the highest priority.
1oyoLa's paradox: educlng cosL (wasLe), wlll reduce lead Llme
while increasing quality and customer satisfaction.
How? We will discuss it soon.




House of Toyota
What Does Just-in-Time Do?
Attacks waste
Anything not adding value to the product
lrom Lhe cusLomer's perspecLlve
Exposes problems and bottlenecks caused by
variability
Deviation from optimum
Achieves streamlined production
By reducing inventory
Introductory Quotation
Waste (muda" ln !apanese) ls
'anyLhlng oLher Lhan Lhe minimum
amount of equipment, materials,
parLs, space, and worker's Llme,
which are absolutely essential to add
value Lo Lhe producL.'
Shoichiro Toyoda
Founder, Toyota
1995 Corel Corp.
Variability Occurs Because
Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the proper
quantity
Engineering drawings or specifications are
inaccurate
Production personnel try to produce before
drawings or specifications are complete
Customer demands are unknown
Continuous Flow
Producing and moving one item at a time (or a small
and consistent batch of items) through a series of
processing steps as continuously as possible, with
each step making just what is requested by the next
step.

It is also called the one-piece flow, single-piece flow,
and make one, move one.

Continuous Flow Production
Flow with JIT
Traditional Flow
Customers
Suppliers
Customers
Suppliers
Production Process
(stream of water)
Inventory (stagnant
ponds)
Material
(water in
stream)
Push versus Pull
Push system: material is pushed into
downstream workstations regardless of
whether resources are available

Pull system: material is pulled to a workstation
just as it is needed

Traditional U.S. Manufacturing Firm:
ush (old sLyle" M / MaLerlal


Requirements Planning System)
The production of items at times required by a
given schedule planned in advance

Material
Information (Production Schedule)
Work
Station 1
WS 2
WS 3
Pull (JIT) System
The production of items only as demanded for
use or to replace those taken for use.


Material
Information (via Kanban/Card)
Work
Station 1
WS 2
WS 3
Basic Fixed-Order Quantity Model and
Reorder Point Behavior
R = Reorder point
Q = Economic order quantity
L = Lead time
L
L
Q Q Q
R
Time
Number
of units
on hand
1. You receive an order quantity Q.
2. Your start using
them up over time.
3. When you reach down to
a level of inventory of R,
you place your next Q
sized order.
4. The cycle then repeats.
Inventory
Traditional: inventory exists in case problems
arise
JIT objective: Eliminate inventory
JIT requires
Small lot sizes
Low setup time
Containers for fixed number of parts
JIT inventory: Minimum inventory to keep
system running
Heijunka = Leveling (Smoothing) Production
Schedule using Mixed Model Sequencing
Reduce ripple effect of small variations in schedules
(e.g., final assembly)
Production quantities evenly distributed over time
(e.g., 7/day)
Build same mix of products every day
Results in many small lots
1 month = 20 working days
Item Monthly Quantity Daily Quantity
A 40 2

B 60 3
A
A A B B B C
JIT Small Lots
Large-Lot Approach
Time
Time
A A B B B C
A A A B B B B B B C C
JIT produces same amount
in same time if setup times
are lowered
Small versus Large Lots
Small lots also increase flexibility to meet
customer demands
40 10 4
40 10 4
10 10 1



Heijunka = Leveling (Smoothing) Production Schedule using Mixed
Model Sequencing = Uniform Plant Loading
Product Demand Requirements
Monthly Daily
800 20 40
800 20 40
200 20 10



A
B
C
Largest integer that divides into all daily requirements evenly is 10
Product Daily Requirements Divided by 10
A
B
C
Mixed-model sequence
A-B-A-B-A-B-A-B-C Repeat 10 times per day
Transparency 17.7
Determining Production Sequence
Cycle Times
Working time per day = 480 minutes
Daily requirements: A = 40 units; B = 40 units; C = 10 units
The system cycle time = 480/(40+40+10) = 5.33 min/unit
Product Requirements Cycle Time
480 40 12
480 40 12
480 10 48



A 40
B 40
C 10
Transparency 17.8
Scrap
Work in process inventory level
(hides problems)
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste
Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
WIP
Lowering Inventory
Reduces Waste
Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
WIP
Lowering Inventory
Reduces Waste
Customer
orders 10
Lot size = 5
Lot 1 Lot 2
Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
Reducing Lot Sizes Increases the
Number of Lots
Whlch lncreases
Inventory Costs
Lot Size
Cost
Setup Cost
Optimal
Lot Size
Smaller
Lot Size
Unless Setup Costs are Reduced
Lot Size
Cost
Setup Cost
Original optimal
lot size
New optimal lot size
Quick setup = Quick changeover
Reducing setup cost reducing setup time
Setup reduction time is a prerequisite to lot size
reduction
SMED (Single Minute Exchange of Dies) method
The method has been developed by Toyota and
then expanded by Dr. Shigeo Shingo (a consultant to
Toyota), and has proven its effectiveness in many
companies by reducing changeover times (non-
value added times) from hours to a less than 10
minutes
Setup Components
Internal Setup: consists of setup activities that must
be performed while the machine is stopped.
External Setup: consists of setup activities that can be
carried out while the machine is still operating.
It is desirable to:
1. Convert as much internal setup to external setup
2. Improve the setup procedure


Setup Reduction Techniques
Quality At The Source
Doing it right at the first time.
Jidoka allows workers to stop production line
Andon lights signal quality problems
Under capacity scheduling allows for
planning, problem solving & maintenance
Visual control makes problems visible
Poka-yoke prevents defects
Jidoka Techniques
Poka-yoke (mistake or error proofing)

A form of device for building-in quality at each production
process.

This device may take many shapes and designs.

Typical types of Pokayoke are sensors, proximity switches,
stencils, light guards and alignment pins. Simple circuitry is
usually used to operate these electrical error proof devices as
they should be of low cost and simple design.

Goal: Finding defects before they occur = Zero Defects

Statistical Quality Control (SQC): Finding defects after they occur

Visual management including using Andon Lamp

5Whys: Finding the root cause of a
problem.
5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma.
Example:

Why is our client, Hinson Corp., unhappy? Because we did not deliver our services when we
said we would.


Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job
took much longer than we thought it would.

Why did it take so much longer? Because we underestimated the complexity of the job.


Why did we underestimate the complexity of the job? Because we made a quick estimate of
the time needed to complete it, and did not list the individual stages needed to complete the
project.

Why didn't we do this? Because we were running behind on other projects. We clearly need
to review our time estimation and specification procedures.

Plan-Do-Check-Act
(PDCA/Shewart /Deming Cycle)
Plan: Go to the real place/factory flow (gemba), obverse the
real thing/product (gembutsu), get the real fact (genjitsu).
Focus on reducing response time, lead times, exposing wastes
in your process
Do: Conduct Kaizen. Create models of excellence so others
can aspire to. Flow everything: product, information material
replenishment, services.
Check for direction by aligning activities with long-term
business direction
Act: Take actions to sustain and accelerate improvement
activities

Source: www.leanbreakthru.com


Similarity between 3 Gs and MBWA
The 3 G's (Gemba, Gembutsu, and Genjitsu, which translate
lnLo acLual place", acLual Lhlng", and acLual slLuaLlon").
In the early days of Hewlett-Packard (H-P), Dave Packard and
Bill Hewlett devised an active management style that they
called Management By Walking Around (MBWA). Senior H-P
managers were seldom at their desks. They spent most of
their days visiting employees, customers, and suppliers. This
direct contact with key people provided them with a solid
grounding from which viable strategies could be crafted.
5S: Workplace organization/Housekeeping
5s: Important part of Kaizen/Lean Manufacturing
The S's stand for:

Seiri - keep only what is absolutely necessary, get rid of things that
you don't need, i.e. simplify or sort.
Seiton - create a location for everything, i.e. organize
or straighten.
Seiso - clean everything and keep it clean, i.e. cleanliness or
sweep.
Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e.
standardize.
Shitsuke - assure that everyone continues to follow the rules of 5S,
i.e. stick to it or self discipline.

5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple

5S + 1S (Safety) = 6S (Hytrol, etc)
5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part
of Hewlett Packard)


5S
5S is simple to begin and gives good benefits.

Each individual in an organization is asked to get
rid of overburdening items.

Red tag attack: A red tag attack is the strategy of
a group of people going through the plant and
putting red tags on everything that has not been
used within the last 30 days. The items that
people feel are necessary to "hold on to" must be
justified to their superior, or the item is taken out
of the plant!


5S in a Factory






Factory tour: Toyota vs.
others.
5S in Office
Before 5 S



After 5 S


Standard Work
When manpower, equipment, and materials are used in the most efficient
combination, this is called Standard Work.
There are three elements to Standard Work:
1) Takt Time
2) Work Sequence
3) Standard Work-in-Process

Once a Standard Work is set, performance is measured and continuously
improved.
Standard Work Sheet
Scope of From Raw mat er i al Date Reviewed:
Operations To Heat Tr eat ment Janary 7, 2000
Quality Safety Standard Work Standard WIP TAKT Cycle Crew
Check Precaution in Process Quantity Time Time Size


FG
2 23.4 min 12.1 min 10
RM
The Importance of Standardized Work:

Without it, all improvement efforts using Kaizen to eliminate
waste (muda) are not sustainable. You will go back to the
original position before Kaizen.
Manufacturing Cell
Worker Routes Lengthened as Volume
Decreases
Cell 5
Worker
2
Cell 2
Worker
1
Cell 1
Worker
3
Cell 3 Cell 4
Figure 11.4
Workload balancing

Aims at maximizing operator utilization based
on the given takt time.
Is the key to adjust JIT lines to demand
fluctuations
Requires flexible operators
Production Line Balancing
Improving Lead Time:

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Current Situation
Percent of Lead Time
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Approach # 1: Reducing Value Added (VA) Time by 50%
VA
Approach # 2: Reducing Non Value Added (VA) Time by 50%
NVA (Non Value Added)
NVA
NVA
VA
VA
Value Stream Mapping
SM

What?
Why?
Who?
When?
Where?
How?
A visual tool for identifying all activities of the planning,
and manufacturing process to identify waste.


Provides a tool to visualize what is otherwise usually
invisible.

The leaders of each product family need to have a
primary role in developing the maps for their own area.

Develop a current-state map before improvements are
made so that the efforts and benefits can be quantified.

On the shop floor, not from your office. You need the real
information, not opinion or old data.

Next page
Value Stream Map Symbols
Spot weld
ABC
plating
C/T = 30 sec
C/O = 10 min
3 shifts
2% scrap rate
Process
Finished
goods
Vendor Data box
3,000 units
= 1 day
Inventory
Push Supermarket:
the location of a
predetermined
standard inventory
Physical pull
Mon
and
Wed
Shipment
C/T = Cycle Time
C/O = Change over or setup time
Current Value Stream Map
Future Value Stream Map
Attributes of Lean Producers - they
use JIT to eliminate inventory
build systems to help employees product a perfect part
every time
reduce space requirements
develop close relationships with suppliers
educate suppliers
eliminate all but value-added activities
develop the workforce
make jobs more challenging
reduce the number of job classes and build worker
flexibility
apply Total Productive Maintenance (TPM)
The Five Steps of Lean Production/Toyota
Production System Implementation

Step 1: Specify Value
Define value from the perspective of the final customer. Express value in terms of a specific
product, which meets the customer's needs at a specific price and at a specific time.
Step 2: Value Stream Mapping.
Identify the value stream, the set of all specific actions required to bring a specific product
through the three critical management tasks of any business: the problem-solving task, the
information management task, and the physical transformation task. Create a map of the
Current State and the Future State of the value stream. Identify and categorize waste in the
Current State, and eliminate it!
Step 3: Create Continuous Flow
Make the remaining steps in the value stream flow. Eliminate functional barriers and develop
a product-focused organization that dramatically improves lead-time.
Step 4: Create Pull Production
Let the customer pull products as needed.
Step 5: Perfection
There is no end to the process of reducing effort, time, space, cost, and mistakes. Return to
the first step and begin the next lean transformation, offering a product which is ever more
nearly what the customer wants.

Comparison of
MRP (Material Requirements Planning),
JIT, and TOC (Theory of Constraints)
Loading of operations


Batch sizes


Importance of data
accuracy
Speed of scheduled
development
Flexibility
Cost
Goals

Planning focus
Production basis
Checked by capacity
requirements
Planning afterward
One week or more


Critical

Slow

Lowest
Highest
Meet demand
Have doable plan
Master schedule
Plan
Controlled by kanban
system

Small as possible


Unnecessary

Very fast

Highest
Lowest
Meet demand
Eliminate waste
Final assembly schedule
Need
Controlled by
bottleneck operation

Variable to exploit
constraint
Critical for bottleneck
and feeder operations

Fast

Moderate
Moderate
Meet demand
Maximize profits
Bottleneck
Need and plan
MRP JIT TOC