Katie Yakes

Manufacturing Management
Toyota Way

Jeffrey Liker’s “The Toyota Way” explains the philosophy, behaviors, and principles used by
Toyota Motor Corporation to accomplish their worldwide success in producing high quality cars and a
business organization. Toyota’s commitment to continuous improvement in their manufacturing process
reflects its complete embracing of its philosophy, behaviors and principles is what Liker refers to as “the
Toyota Way.” Toyota’s lean production approach, called the Toyota Production System (TPS), has
achieved a reputation as setting a world class standard that other companies seek to achieve in their own
operations. Liker uses Toyota’s TPS to explain in greater detail Toyota’s approach to lean production,
along with the 14 principles that Toyota uses as the foundation for its performance and commitment to
continuous improvement to achieve high levels of quality and excellence. The book is organized into four
sections which follow the structure of the Toyota Way’s four key “P” categories: long- term philosophy,
the right process will produce the right results, add value to the organization by developing your people,
and continuously solving root problems drives organizational learning. Listed below is a summary of
each of the 14 principles which drive Toyotas success.

Section 1 of the Toyota Way consists of only one principle, “Base your management decisions on
long-term philosophy, even at the expense of short-term financial goals.” Toyota’s commitment to its
employees, as well as to bringing value to its customers and society as a whole, is the driving force and
foundation for all other principles that Toyota follows. Toyota’s first focus is on long-term goals and
actions that can bring the company’s products and performance to the next level of excellence. This
means making decisions that are based on the longer term implications of the actions, not on what
generates short term profitability. Toyota’s belief is to “work, grow and align the whole organization to
work toward a goal that is bigger than making money” (37). That goal is to reinvest in the future to create
a stronger and more efficient and dynamic business for the benefit of its employees, customers,
shareholders, and society.

Liker provides examples of Toyota incurring short-term financial losses resulting from actions
that demonstrate a longer-term commitment to customer satisfaction and building trust among its
employees. For example, the effect of certain import tax surcharge reversals resulted at one point in the
same Toyota car being priced differently at 3 different dealerships. Toyota decided to pay the extra taxes
on the cars in order to equalize the pricing to customers and dealers even though doing this had an
adverse impact on Toyota’s short-term profits. An important part of the first principle is Toyota’s belief in

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the importance of self-reliance and taking responsibility for one’s own fate. Toyota supports the business
philosophy of “let’s do it ourselves,” which means choosing a path of personal action rather than relying
on other business partners to do things. One example of living up to this principle is the way Toyota
approached its decision to expand its product line to include a luxury car. Instead of choosing an option
of simply buying a luxury car manufacturer, such as BMW, Toyota chose to create its own original luxury
division, Lexus. It did this in order to learn first hand what is entailed in designing, producing, and
marketing a luxury car. Toyota’s philosophy about business self-reliance is summed up best in the quote,
“We strive to decide our own fate. We act with self-reliance, trusting in our own abilities. We accept
responsibility for our conduct and for maintain and improving the skills that enable us to produce and add
value” (37).

Toyota supports its workers to also be self-reliant and responsible by continually challenging
them to look for ways to improve themselves and the business processes and to participate as individuals
and team members working together to help the company produce better products and thereby grow
successfully. Toyota’s employee training programs are focused on instilling the philosophy that business
success is the result of building long lasting customer satisfaction with Toyota and its products and that
this is only achieved through hard work, continuous improvement of skills, and a commitment to adding
value to customers, employees and society.

Section II, the second “P” of the Toyota Way is, “The right process will produce the right results.”
This section involves principles 2 through 8 which focus on how to use standardization and “flow” to
eliminate wastes and non-value added activities throughout the manufacturing and business processes.
“Flow” is at the heart of making a manufacturing process lean. Optimizing “flow” means that shortening
the elapsed time from raw materials to finished goods (or services) will lead to the best quality, lower
cost, and shortest delivery time (88). The ultimate goal in the Toyota Way is to strive for continuous and
problem/error-free movement of material and information so that there is no idle time between when
required raw materials are sourced and converted into finished goods, and then packaged and shipped in
response to customer purchase orders. A work environment focused on optimizing flow encourages
employees to promptly identify inefficiencies as problems surface and motivates employees to develop
solutions sooner rather than later because inadequate fixes will result in the process slowing or shutting
down in the future. Some examples of non-value wastes that Toyota (and any manufacturer) encounters
and strives to eliminate are overproduction, production line waiting, over-processing, excess inventory,
unnecessary movement or transport, quality defects, and unused employee creativity (89). Understanding
the concept of flow is very important to the success of lean improvement initiatives because many
businesses do not realize that the amount of employee time spend on value-added processes is often

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disproportionately small compared to the amount of time focused on wasteful, non-value activities.
Misdirected focus is why businesses fail to achieve long term project improvement goals.

Principle 2 is “create a continuous process flow to bring problems to the surface.” Toyota
focuses on “one-piece flow,” which has the goal of zero product inventory. That is, every piece produced
is available just-in-time to be sold and therefore there is 100% demand for all products produced. Proven
benefits that result from striving for one-piece flow include higher productivity, built-in quality, improved
safety, improved employee morale, and reduced inventory costs. One lean production technique used to
add value through continuous flow is reducing batch sizes. The goal is that only the amount of product
that is needed is being produced. This is different from the concept of traditional mass production which
Toyota opposes as being less efficient. Physically arranging the layout of equipment to follow the flow of
materials is important to optimize flow. Positioning the layout of equipment in a continuous “U” or “L”
allows material and information to move faster through the sequential processes, facilitates linking
processes and people together, allows process problems to be more readily identified, and fosters better
communication among workers.

Principle 3 is to “use ‘pull’ systems to avoid overproduction. Toyota believes that a pull system is
much more effective than a push system because a pull system generates less inventory carrying costs and
only produces or “pulls’ an item based on customer demand. This concept is also referred to just-in-time-
manufacturing because it focuses on giving the customer what they want, when they want it, and in the
amount they want, without carrying lots of inventory. This system allows Toyota to focus on eliminating
inventory rather than gaining it. As stated in principle 2, Toyota believes that the best form of pull is the
one-piece flow, because it reflects 100% demand and zero inventory. As a compromise, however,
between a one-piece flow and pull system, Toyota created “small store parts (106)” to help minimize
product work-in-process between operations. Toyota uses clear and simple signals, called “kanban” in the
form of empty bins or cans to indicate when parts need to be replenished. This provides an easy way for
Toyota to adjust its restocking needs based on the daily production needs and demand fluctuations. This
type of pull-replenishment system is known as a “Kanban system.” Toyota uses the Kanban, as an
inventory buffer because it is easy to use, and highly effective in forcing improvement in the production
system. Toyota does not view it as an optimal system however, because any amount of inventory is
technically process “waste,” and the objective of one-piece flow is the elimination of waste.

The fourth principle is “level out the workload (heijunka).” Heijuka means “leveling of the
production by both the volume and product mix” (116). Toyota emphasizes that leveling cannot be solely
achieved in a lean system by just eliminating waste alone (muda), it also includes eliminating any

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overburden that equipment or a person might face during the process that results in unevenness in the
production schedule (38). There are four main benefits of leveling production scheduling: (i) flexibility to
make what the customer wants when they want it, (ii) reduced risk of unsold goods, (iii) balanced use of
labor and machinery, and (iv) smooth demand on upstream processes and the plant suppliers (118-119).
The Toyota system does not focus on build-to-order systems as many companies use, but uses a “change-
to -order system” which focuses on the importance of a leveled production schedule. If waste is not
leveled, the production process will take on a stop/start approach which overworks employees and
equipment because of continuous waste building up. A change-to-order process can be described by the
phrase, “work like the tortious not like the hare” (37). That is, a stop/and start approach is comparable to
the hare who at times speeds through the race (process) at record speed and at other times is waiting idle
until something spurs him back into action and he then runs at high speed to make-up his lost time.
Toyota is like the tortoise who uses a slower continuous process, leveling its workload through the
change-to-order system and in the end proves to be the more efficient and successful winner.
The fifth principle is “build a culture of stopping to fix problems, to get quality right the
first time.” Toyota believes that quality drives the value proposition for its customers. The technique of
“Judoka” is the foundation for building quality into the process. According to Liker, this principle
involves equipment automation and requires building equipment that has features which provide a type of
“intelligence” to detect defects when they occur and stop production “automatically” to that an employee
can immediately fix the problem before the defect becomes a major issues or compromises the product or
process as it progresses through further manufacturing steps. For example, every Toyota factory employee
has the ability to stop the production line at any time they see something that is out of standard. “That’s
how we put responsibility for quality in the hands of our team members (129). Additionally, there should
be a simultaneous automated signal, flag, an alarm, or music that alerts people on the production line that
an issue that has been detected which needs to be addressed. This device or signal is called an “Andon.”
The system should also have a built-in mechanism to quickly solve problems and initiate
countermeasures, such as “poka-yoke” devices at every station, which are error proofing devices that
make it hard for an operator to make a mistake. For example, Toyota uses four key tools or steps when
quality issues arise: they go and see the situation, analyze the situation, use one-piece flow and andons to
surface problems, and ask “why” 5 times. Toyota prides itself on the power of simplicity in addressing
issues and solutions.

The sixth principle is to embrace “standardized tasks and processes for continuous improvement
and employee empowerment.” It is important to understand that standardized work is built into quality. A
defect is discovered by looking for deviations from the standard. It is important to use stable, repeatable

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methods throughout the process in order to maintain predictability and regular timing in output. Toyota
believes that a company cannot consistently achieve product quality without standard and consistent
procedures. Toyota insists that everyone must be involved in the standardization of work and achievement
of quality. For example, when launching a new vehicle, Toyota creates pilot teams in which every team
member has the opportunity, and the responsibility, to contribute their creative and individual skills to
developing and reaching agreement on the final standardization of the product. In this way, no one group
controls the whole process and individuals learn new skills and feel they are part of the process. A goal is
to identify best practices drawn from a diverse ideas, knowledge, and experiences. Allowing individual
participation on the pilot teams to rotate supports ongoing employee opportunities to share ideas that can
lead to improvements to the standards and achievement of even greater quality.

The seventh principle is “use visual controls so no problems are hidden.” Toyota uses the
Japanese “5s” program which comprises series of activities aimed at eliminating the wastes that
contribute to errors, defects, and injuries in the workplace. The 5s’ are: sort, straighten, shine, standardize,
and sustain as a way to improve the work environment. Visual controls “are communications used in their
work place to tell us at a glance how work should be done and whether it is deviating from the standard”
(152). Simple visual indicators provide immediate feedback so employees know if they are performing
the job right and how well they are doing. An important part of this principle is that visual controls are
important to use to eliminate waste, improve flow and support the pull process. As previously mentioned,
Toyota uses the kanban card as a visual control so that managers can quickly determine if product
replenishment and inventory is being managed correctly. For example, if there is a filled bin sitting
without a kanban card, this is a sign of overproduction.

Principle 8 is “use only reliable, thoroughly tested technology that serves your people and
processes.” Toyota does not haphazardly implement new technology. Toyota strongly believes that a
proven process takes precedence over new technology; however, Toyota wants its employees to work
with new technologies when considering ways to improve process flow. Toyota believes in first
experimenting with a new technology, then having employees test it in a controlled manner before
implementing it directly into the production process. Toyota emphasizes the importance of giving
employees a significant role in piloting new technology and seeking their feedback on how the
technology can add value to process flow. If employees conclude after pilot testing that the technology
interferes with any of Toyota’s core philosophies, disrupts stability, reduces reliability or predictability, or
interferes with flow, Toyota will either reject or delay implementation regardless of the initial financial
investment in the technology or its state-of-art feature. Toyota supports employees reconsidering ideas
and technologies that has been deferred or rejected if conditions later change and the idea or technology

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has a new potential for usefulness. This correlates back to the trust and support that Toyota develops and
places in its employees as part of its core believes in Principle 1. Essentially technology must meet the
criteria of supporting people, process flow, and Toyota’s principles.

The Section III category of “add value to the organization by developing your people” consists of
principles 9 through 11 which have an overall objective of focusing on how to create added value in an
organization through its employees.

The first of these principles, principle 9, emphasizes the growth of leaders who are able to
comprehensively understand the work that is being done, are fully committed to the Toyota philosophies,
and able to teach the Toyota way to others by being effective role models. Toyota emphasizes the
importance of developing leaders internally rather than recruiting them from outside organizations. This is
a critical component of Toyota’s corporate culture and referred to as “Genchi Genbutsu,” which means
“deeply observing the actual situation in detail (176).” That is, being a true leader is not just about having
good communication skills and other business accomplishments, it is about demonstrating through
actions a complete commitment to reflecting the Toyota Way philosophies and empowering others to
embrace a commitment to Toyota’s philosophies and values. Toyota develops and selects as its leaders
people who are role models and “live and breathe” the Toyota principles. Toyota identifies a number of
traits that its leaders have in common: focus on longer-term purpose; being a value added contributor to
society; never deviating from the Toyota principles and being a clear role model to its principles;
successfully working up through various detail-focused roles and having positioned themselves in the
“gemba” where the real work was done; and being able to observe and find opportunity’s to continuously
teach, train, and mentor other employees in a way that fosters their own growth in the Toyota Way.

The tenth principle emphasizes how a company can develop exceptional people and teams that
allow the workers to proactively embrace the company’s philosophy in a way that individuals and the
company achieve exceptional results. Toyota emphasizes the importance of hiring employees who can
succeed as individual worker as well as excel as a team player. Toyota believes is finding the right person,
not just any individual, to do the job. Toyota’s process for selecting employees is time consuming, but
Toyota feels this is necessary because it wants individuals who have the ability to be cross-trained in a
wide variety of technical skills to use themselves as well to empower other employees when working on
teams. Toyotas strongly believes “if you make teamwork the foundation of the company, individuals will
give their hearts and souls to make the company successful” (186). Toyota also emphasizes cross-
functional teams as the best way to continuously improve quality and productivity and solve difficult
problems that affect the flow. Toyota uses a number of different motivational theories to motivate

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employees, such as Maslow’s Need Hierarchy and the Herzberg’s Job Enrichment Theory , Taylor’s
Scientific Management, Behavior Modification, Goal Setting theories (195) .Toyota emphasis on
identifying challenges and pushing its employees to continuously develop themselves and improve
processes results in a culture of thinking creatively (“outside-the-box). Toyota believes that team work is
not something that comes naturally, but rather takes time to learn and follow.

The eleventh principle emphasizes respecting suppliers and partners as an extension of the
business, and finding ways to challenge them to grow and improve as well. Toyota believes that part of
this respect means treating suppliers like employees from the perspective of empowering and helping
suppliers learn and understand the Toyota Production System. Toyota believes in allowing their potential
new suppliers to prove their loyalty and commitment to Toyota by meeting Toyotas high performance
standards for quality, cost, and delivery. In return, Toyota will show its commitment to the supplier by
awarding the supplier significant amounts of business, more fully teaching them the Toyota Way, and
treating them as an extension of the Toyota family by remaining a loyal customer of the supplier (202).
Toyota’s philosophy which emphasizes challenging people to continually improve themselves and finding
ways to empower them, also applies to Toyota’s suppliers. Respect to Toyota means “having high
expectations for their suppliers and then treating them fairly” (202). In the TPS system Toyota works
with employees on projects and improvement opportunities to help them achieve Toyota’s challenging
goals. Toyota believes in the importance of collaborative learning because if the suppliers cannot find
viable ways to achieve Toyota’s goals, then Toyota cannot improve either. For example if Toyota cannot
cut its cost of sourcing raw material or component parts, unless its suppliers can cut their own costs that
go into building the material and components. Simply demanding cost reductions from suppliers is not
part of TPS. Toyota invokes learning through “learning by doing” processes (217). Toyota’s commitment
to ensuring that suppliers who are part of its business family are continuing growing and improving
themselves has earned them the respect of those suppliers, and has resulted in many other suppliers eager
to become part of this Toyota experience.

The overall philosophy in principles 12 through 14 in Section IV of the Toyota Way is that
“continuously solving root problems drives organizational learning.” The twelfth principle is embodied
by the term “Genchi Genbutsu,” which means that whether a problem surfaces in manufacturing, product
development, or anywhere or with anything else, you cannot fully understand the problem or situation
unless you actually go and see it for yourself. Toyota believes that the term “Genchi Genbutsu”
distinguishes the Toyota Way from any other management approach. For Toyota, “Genchi Genbutsu”
means sending experienced people to the place to see the actual situation for understanding (224). Toyota
prides itself on obtaining a thorough understanding on all aspects of the situation, and relying on firsthand

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knowledge. Toyota strong belief to this term, is further supported by their requirements that t employees
have a very detailed understanding of the flow process in order to be able to critically evaluate, analyze
and observe the problem, identify the root cause of the problem, effectively and accurately communicate
the root cause of the problem, and with others propose an optimal solution. Toyota relies mainly on
factual information from a knowledgeable person first hand observing and verifying the data themselves,
rather than relying on theorizing on the basis what others have told you, or others believe (40). This
expectation applies not only to the process employees, but to high level managers and executives because
they are expected to have a deep understanding of issues in order to effectively run the company and
support the problem solving and decision making process. For executives this concept is called
“hourensou,” which means keeping in touch with what is going on (233), and is similar to “Genchi
Genbutsu” if practiced correctly by executives. Liker provided the following example: in the middle of a
conversation Liker was having with a Toyota vice president of manufacturing, the executive excused
himself to leave for meeting addressing a particular team member’s concern. Liker asked why the
executive felt that he had to attend. The vice president acknowledged that the group leader could have
handled the situation, but then added, “I want to investigate it for myself. And I want them to see that this
is important to me” (232). Particularly for high ranking Toyota executives, it is important that they serve
as role models and through their actions continuously demonstrate living the Toyota Way and staying
involved at all levels so they can best maintain first hand understanding “of what’s happening.”

The Thirteenth principle emphasizes the concept of making decisions slowly by consensus,
thoroughly considering all options, and then rapidly implementing the chosen decision. This is called
“nemawashi” (241). Toyota strongly believes that the way someone arrives at the decisions is just as
important as the quality of the decision (236). This involves taking the time and effort “to do it right the
first time” and reflects a commitment to carefully identify and consider alternative solutions. The belief
is that this is the only way to best assure that the right decision is chosen and that time is not wasted
choosing getting to the optimal solution. Toyota discourages employees from taking shortcuts, and
encourages employees to consider “sets of alternative solutions” before deciding which solution or option
to pick. Toyota often describes this process using the example of a junior person building consensus by
first developing a proposal and then presenting it to multiple managers to gather their opinions, refining
the plan, and finally building a consensus or agreement on one specific option. By the final stages of the
process, all aspects have been agreed to and the approvals and final meeting are just a formality. Once the
decision is made, the decision can be implemented rapidly. This is why Toyota emphasizes the importance
of choosing the right solution because once it is chosen, a person will move continuously and quickly
down the chosen path toward implantation. Toyota also involves other parties in this decision process,

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such as suppliers or an administrator, if they are going to be affected somehow by the ultimate decision.
Toyota acknowledges that this process of building a consensus can be time consuming, however, it
believes that Toyota saves time in the long-run because it identifies all points of view that might
otherwise have been overlooked, and most importantly, the decisions that are made are “right the first
time.”

The last and fourteenth principle is focused on the idea of becoming and remaining a learning
organization through relentless reflection (hansei) and continuous improvement (kaizen). After a stable
and standardized process has been established that allows for the identification of waste and
inefficiencies, a continuous improvement process (kaizen) provides the way to effectively learn form the
situation (kaizen). For Toyota becoming a learning organization “means having the capacity to build on
your past and move forward incrementally, rather than starting over” (252). Only when a stable process
has been achieved, can continuous improvement tools be effectively applied to help find the cause of
wastes and inefficiencies, and then apply the proper countermeasures (40). Toyota continually strives to
achieve stable and standard processes that result in literally no, or minimal, inventory, because inventory
is an example of waste, and waste needs to be eliminated. Toyota’s one-piece flow process is designed to
make any wasted time or resources readily visible. Employees are expected to use kaizen principles to
continuously improve the flow process and eliminate waste and efficiencies. When inventory waste
occurs (either oveproduction or shortages), visual tools such as the kanban cards referred to in Principle 7
(which were likely inspired by prior kaizen initiatives) help alert employees to the expectation that they
find ways or tools to effectively eliminate and improve the process.
The other important term of that is part of Toyota’s learning process is “hansei,” which means
reflection. Toyota strongly believes that kaizen is impossible without having hansei. Toyota uses “hansei”
at periodic stages during and after project completion to focus on not only what is going well or went
well, but on identifying project weaknesses and shortcomings. Toyota views hansei not simply as a
philosophical belief, but as an indispensable tool for process improvement. The expectation is that by
reflecting on weaknesses and shortcomings while those features are fresh in the teams’ mind, the team
will be best able to develop and find corrective countermeasures that can be used in the next series of
projects to avoid the same mistakes or shortcomings. The Toyota Way principles of respect for employees
and employee empowerment are an important part of both hansei and kaizen. For example “TTC holds
formal and schedule hansei events at key milestones in a vehicle program as well as after it launches the
vehicle and program ends”(259). This demonstrates Toyota’s commitment to continuously look for ways
to improve itself in all aspect of its business. Dedication to continuous improvement is at the heart of the
Toyota principles.

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 In the 300 pages of The Toyota Way, Liker does a good job of summarizing the philosophies,
behaviors and principles that serve as the foundation for how Toyota conducts its business, interacts with
its employees and suppliers, and sets goal for itself to be a successful organization. He does this in an
organized fashion which allows the reader to see the distinctions that apply to the various principles.
Understanding the principles individually, and how they interact as a whole, is a useful approach for a
better understanding of what not only Liker, but the world community, recognizes as The Toyota Way.

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