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The Toyota Way

(The Company that invented Lean Production)

14 Management Principles from the World’s

Greatest Manufacturer

By: Jeffrey K. Liker

(Paperback,330p,ISBN 0-07-058747-7,Rs. 250)

(Tata McGraw-Hill)
Why to read this book ?
• You’ll learn how Toyota creates an ideal environment for
implementing Lean techniques & tools by :
-Fostering an atmosphere of continuous improvement
and learning
-Satisfying customers (and eliminating waste at the same
-Getting quality right the first time
-Grooming leaders from within rather than recruiting
them from the outside
-Teaching all employees to become problem solver
-Growing together with suppliers and partners for mutual
About Toyota
• Market capitalization over $ 105 billion;
2,40,000 employees
• 3rd Largest auto manufacturer in the world;
behind GM & Ford
• Global Vehicle sale of over 6 million per
year in 170 countries
• Big Brands like Corolla, Camry, Lexus
• Annual Profit margin: 8.3 times higher
than industry average
• Development of Toyota Production
System “TPS” (5-9)
• Fundamentals of TPS (10-15)
• The Toyota Principles (16-19)
• What can be learnt from Toyota (20-28)
• How to adopt TPS (29-32)
Development of Toyota
Production System (TPS)
• Toyota customer requirement was in small lots &
different verities unlike Ford & GM using ‘mass
production’ concepts
• These requirement is to be met with same
assembly line
• Toyota was having cash crunch and there was
no stable supply chain
• Toyota studied that ‘mass production’ concepts
cannot be feasible in Japan. Ford & GM were
facing many issues due to same.
Lean Manufacturing or TPS
To be a lean manufacturer requires a way of thinking
that focuses on making the product flow through
value-adding processes without interruption (one piece
flow), a ‘Pull’ system that cascades back from
customer demand by replenishing only what the next
operation takes away at short intervals, and a culture
in which everyone is striving continuously to improve
Five Step process
• Defining Customer Value
• Defining the value stream
• Making it ‘Flow’
• ‘Pulling’ from the customer back
• Striving for excellence
‘Pull’ System
• Same as ‘Supermarket’ where replenishment
depends on consumption
• It means at shop floor, step 1 in a process
should not make parts until the next process
(step 2) uses up its original supply
• Small safety stock is kept to raise alarm
• This is same as we get signal from fuel tank of
our vehicle for re-fuelling
• This can be termed as ‘JIT’ or ‘Single Piece’ flow
Toyota Production System
Best Quality - Lowest Cost - Shortest Lead Time -
Best Safety - High Morale (QCDSM)
through shortening the production flow by eliminating waste

Just - in - Time People & Teamwork Just - in - Time

Right Part, Right (In-station quality)
Selection Joint decision
Amount, RightTime Common making Make Problem
goals Cross-trained Visible
Take time planning
Continous flow Automatic stops
Pull system Andon
Quick changeover Continuous Improvement Person-machine
Integrated logistics seperation
Error proofing
Waste Reduction In-station quality
Go & See Eyes for w aste
Solve root cause
of problems
5 Why's solving
(5 Why's)

Leveled Production
Stable and Standardized Processes
Visual Management
Toyota Way Philosophy
The "4 P" model and where most
companies are

Continual organizational learning through Kaizen

Go see for yourself to thoroughly understand the
Where most Solving situation (Genchi Genbutsu)
"lean" (Continuous Make decisions slowly by consensus, thoroughly
Improvement and considering all options; implement rapidly (Nemawashi).
companies Learning)
Grow leaders who live the philosophy
Respect and

People and Partners



(Respect, Challenge, Respect, develop, and challenge your people and teams.
and Grow Them) Respect, challenge, and help your suppliers

Create process "flow" to surface problems

Use pull systems to avoid overproduction
Process Level out the workload (Heijunka)
(Eliminate Stop when there is a quality problem ((jidoka)
Standardize taks for continuous improvement
Use visual control so no problems are hidden.
Use only reliable, thoroughly tested technology

Philosophy Base management decisions on a long-term philosophy,

(Long-Term Thinking)
even at the expense of short-term financial goals.
Fundamentals of TPS
The basics of TPS refers to elimination of 3 M
(ie Muda, Muri & Mura)

• Muda-Non-value-added. The most

familiar M includes the eight wastes.
These are wasteful activities that lengthen
lead times, cause extra movement to get
parts or tools, create excess inventory, or
result in any type of waiting.
(Anything which is not adding any value or customer
do not want to pay for that)
• Overproduction. Producing items for which there are no
orders, which generates such wastes as overstaffing and
storage and transportation costs because of excess

• Waiting (time on hand). Workers merely serving to watch an

automated machine or having to stand around waiting for the
next processing step, tool, supply, part, etc., or just plain
having no work because of stock outs, lot processing delays,
equipment downtime, and capacity bottlenecks.

• Unnecessary transport or conveyance. Carrying work in

process (WIP) long distances, creating inefficient transport, or
moving materials, parts, or finished goods into or out of
storage or between processes
• Over processing or incorrect processing. Taking unneeded
steps to process the parts. Inefficiently processing due to poor
tool and product design, causing unnecessary motion and
producing defects. Waste is generated when providing higher-
quality products than is necessary

• Excess inventory. Excess raw material, WIP, or finished

goods causing longer lead times, obsolescence, damaged
goods, transportation and storage costs, and delay. Also,
extra inventory hides problems such as production imbalances,
late deliveries from suppliers, defects, equipment downtime,
and long setup times

• Unnecessary movement. Any wasted motion employees

have to perform during the course of their work, such as
looking for, reaching for, or stacking parts, tools, etc. Also,
walking is waste.
• Defects. Production of defective parts or correction.
Repair or rework, scrap, replacement production, and
inspection mean wasteful handling, time, and effort.

• Unused employee creativity. Losing time, ideas,

skills, improvements, and learning opportunities by not
engaging or listening to your employees.
Fundamentals of TPS….

• Mura-Unevenness.
Unevenness results from an irregular
production schedule or fluctuating
production volumes due to internal
problems, like downtime or missing parts
or defects.
Fundamentals of TPS….
• Muri-Overburdening people or
equipment. This is in some respect on
the opposite end of the spectrum from
muda. Muri if pushing a machine or
person beyond natural limits.
Overburdening people results in safety
and quality problems. Overburdening
equipment causes breakdowns and
Toyota Principles
• Section I : Long-Term Philosophy
• Principle 1. Base your management decisions
on a long-term philosophy, even at the
expense of short-term financial goals.
• Section II: The Right Process Will Produce
the Right Results
• Principle 2. Create continuous process flow to
bring problems to the surface.
• Principle 3. Use “pull” systems to avoid
• Principle 4. Level out the workload (Work like
the tortoise, not the hare.)
Toyota Principles…
• Principle 5. Build a culture of stopping to fix
problems, to get quality right the first time.
• Principle 6. Standardized tasks are the
foundation for continuous improvement and
employee empowerment.
• Principle 7. Use visual control so no problems
are hidden.
• Principle 8. Use only reliable, thoroughly
tested technology that serves your people
and processes.
Toyota Principles…
• Section III: Add Value to the Organization by
Developing Your People and Partners
• Principle 9. Grow leaders who thoroughly
understand the work, live the philosophy, and
teach it to others.
• Principle 10. Develop exceptional people and teams
who follow your company’s philosophy
• Principle 11. Respect your extended network of
partners and suppliers by challenging them and
helping them improve.
Toyota Principles…
• Section IV: Continuously Solving Root
Problems Drives organizational Learning
• Principle 12. Go and see for yourself to
thoroughly understand the situation (genchi
• Principle 13. Make decisions slowly by
consensus, thoroughly considering all
options; implement decisions rapidly
• Principle 14. Become a learning organization
though relentless reflection (hansei) and
continuous improvement (kaizen).
What can be learnt
from Toyota?
1. Simplicity
At Toyota they keep things simple and use
very few complex statistical tools. The
quality specialists and team members
have just four key tools:
• Go and see.
• Analyze the situation.
• Use one-piece flow and andon to surface
• Ask “Why” five times.
2. Clean It Up, Make It Visual
When Americans were making pilgrimages to Japanese plants
in the 1970s and ‘80s, the first reaction was invariably “The
factories were so clean you could eat off of the floor. In Japan
there are “5S programs” that comprise a series of activities for
eliminating wastes that contribute to errors, defects, and injuries in
the workplace. Here are the five S’s (seiri, seiton, seiso,
seiketsu, and shitsuke, translated into English):
• Sort – Sort through items and keep only what is needed while
disposing of what is not.
• Straighten (orderliness) – “A place for everything and everything in
its place.”
• Shine (cleanliness) – The cleaning process often acts as a form of
inspection that exposes abnormal and pre-failure conditions that
could hurt quality or cause machine failure.
• Standardize (create rules) - Develop systems and procedures to
maintain and monitor the first three S’s.
• Sustain (self-discipline) – Maintaining a stabilized workplace is an
ongoing process of continuous improvement.
3. Decision Making
Thorough consideration in decision making
includes five major elements:
• Finding out what is really going on, including go
and see.
• Understanding underlying causes that explain
surface appearances – asking “Why?” five times.
• Broadly considering alternative solutions and
developing a detailed rationale for the preferred
• Building consensus within the team, including
company employees and outside partners.
• Using very efficient communication vehicles to
share the decision and tracking
“5-Why” Investigation questions
Corresponding Level of
Level of Problem
There is a puddle of oil on the shop floor Clean up the oil

Because the machine is leaking oil Fix the machine

Because the gasket has deteriorated Replace the gasket

Because we bought gaskets made of

Change gasket specifications
inferior material
Because we got a good deal (price) on
Change purchasing policies
those gaskets
Because the purchasing agent gets Change the evaluation policy for
evaluated on short-term cost saving. purchasing agents
4. Achieving No-Compromise
1 Great high-speed handling / stability YET A pleasant ride

2 Fast and smooth ride YET Low fuel consumption

3 Super quiet YET Light weight

4 Elegant styling YET Great aerodynamics

5 Warm YET Functional interior

6 Great stability at high speed YET Great CD value (low friction)

Development of Lexus
5. Coercive vs. Enabling -
Employee Empowerment
Coercive Systems and Procedures Enabling Systems and Procedures
(Taylorism) (Toyota Way)

Focus on best practice methods:

Systems focus on performance standards so as information on performance standards is not
to highlight poor performance. much use without information on best
practices for achieving them.

Systems should allow customization to

Standardize the systems to minimize
different levels of skill/experience and should
gameplaying and monitoring costs.
guide flexible improvisation.

Systems should help people control their

Systems should be designed so as to keep
own work: help them form mental models of
employees out of the control loop.
the system by “glass box” design.

Systems are instructions to be followed, not Systems are best practice templates to be
challenged. improved.
6. Deeply Understanding and
Reporting What You See
• Always keep the final target in mind
Carefully plan for your final target
Have a clear purpose for meetings.
• Clearly assign tasks to yourself and to others
• Think and speak based on verified, proven information and data
Go and confirm the facts for yourself
You are responsible for the information you are reporting to other.
• Take full advantage of the wisdom and experiences of others to
• Send, gather or discuss information
• Share your information with others in a timely manner
Always consider who will benefit from receiving the information.
• Always report, inform and consult in a timely manner.
• Analyze and understand shortcomings in your capabilities in a
measurable way
Clarify the skills and knowledge that you need to further develop yourself.
• Relentlessly strive to conduct kaizen activities
• Think “outside the box,” or beyond common sense and standard
• Always be mindful of protecting your safety and health.
7. Themes of Leadership at
Focused on a long-term purpose for Toyota as a
value-added contributor to society.
Never deviated from the precepts of the Toyota Way
DNA and lived and modeled themselves around this
for all to see.
Worked their way up doing the detailed work and
continued to go to the Gemba-the actual place where
the real added-value work is done.
See problems as opportunities to train and coach
their people.

A common phrase heard around Toyota is “Before

we build cars, we build people.”.
How to adopt TPS
• A Commitment from the Top to Build a Total
• Culture from the Ground Up
• What do we know about a change of the
• Start from the top
• Involve from the bottom up.
• Use middle managers as change
• It takes time to develop people who really
understand and live the philosophy.
13 Tips for Transitioning to a
Lean Enterprise
• Start with action in the technical system; follow
quickly with cultural change.
• Learn by doing first and training second.
• Start with value stream pilots to demonstrate lean as
a system and provide a “go see” model.
• Use value stream mapping to develop future state
visions and help “lean to see”.
• Use kaizen workshops to teach and make rapid
• Organize around value streams.
13 Tips…
• Make it mandatory.
• A crisis may prompt a lean movement, but may not
be necessary to turn a company around.
• Be opportunistic in indentifying opportunities for big
financial impacts.
• Realign metrics with a value stream perspective.
• Build on your company’s roots to develop your own
• Hire or develop lean leaders and develop a
succession system.
• Use experts for teaching and getting quick results.
Six Sigma, Lean Tools, and Lean
Sigma: Just a Bunch of Tools?
Myth Reality
What TPS Is Not What TPS Is
- A tangible recipe for success - A consistent way of thinking
- A management project or program - A total management philosophy
- A set of tools for implementation - Focus on total customer satisfaction
- A System for production floor only. - An environment of teamwork and improvement
- Implementable in a short-or mid-term period - A never-ending search for a better way
- Quality built in process
- Organized, disciplined Workplace.
- Evolutionary