The Toyota way
There are some interesting articles about Toyota in this month’s press – unfortunately if you want to read them in full, you are going to have to buy the magazines or pay to download the article from the Internet. Toyota is an interesting company because it focuses on getting the best out of its staff and its suppliers.
I’ve summarised some of the main points from both articles below.
The first article is in the Harvard Business Review. It looks at how staff are trained in the Toyota Production System (TPS) to make improvements in the production process. It follows the training of the manager (holding two Master’s degrees in engineering) hired for a top position in one of Toyota’s US plants. Very few other companies have successfully emulated the Toyota Production System (TPS) – one reason is the way that Toyota trains all employees to approach process improvement.
The article picks out some of the key differences between TPS and the way most American and European enterprises tackle productivity improvement.
- There is no substitute for direct observation.
Many western employees try to solve problems (for example, why a machine is unreliable) by thinking about the problem and devising hypothoses that can can checked. Toyoto gets their employees to recognise the importance of direct observation – before he took up his new position, the US manager spent 3 months observing the production lines in both the USA and Japan. His role was to spot problems on the line and implement fixes. His “productivity” rose in that time from 25 changes in the first 6 weeks to 50 changes in 2 1/2 shifts (a change every 22 minutes). All changes had to win the buy-in of the shift. - Proposed changes should always be structured as experiments.
Toyota expects workers (at all levels – down to production line workers) to structure their problem solving so that the assumptions made are defined and measured. Before a change is made, the worker should estimate the saving which the change will bring; after the change is made, the improvement will be measured and any difference between the estimate and the actual figure must be investigated too – you expected to save 4 seconds on a production step, but the actual is 6 seconds – why? The discrepancy may lead to further investigation of the change any a deeper understanding of the improvement, which in turn leads to modifications and further changes - Workers – and managers – should experiment as frequently as possible.
Toyota focuses on many quick, simple experiments, rather than lengthly, complex ones. If the learning cycle is kept short, then the employee can learn from her mistakes, which are not so big as to cause huge problems. Best to make lots of little steps mostly in the right direction, rather than a few large steps possibly in the wrong direction. - Managers should coach, not fix.
The only reason our manager can achieve an improvement every 22 minutes is because he involved the production line team in the improvement process – each worker was looking for ways to improve the process, and the manager’s role became one of involving the term in identifying the problems and not doing all the work himself
The second article is in Wirtschaftswoche 2004-05-06, translated from the spring 2004 issue of the MIT Sloan Management Review. It looks at how Toyota deals with suppliers.
Unlike many automobile manufactures who squeeze their suppliers for the last cent on price, Toyota believes that our suppliers are essential for our success – we must help them to be the best. Toyota sets up supplier interest groups with the explicit goal of enabling suppliers to learn from Toyota’s – and each other’s – experience. In the USA, the number of member companies has grown from 13 in 2000 to 97 today.
As part of Toyota’s support for the supplier groups, Toyota has founded an Operations Management Consulting Division (OMCD), which consists of 6 managers and about 50 consultants whose job is to transfer production know-how to the suppliers. This involves loaning consultants to the suppliers for several months at a time at Toyota’s cost. Additionally, the suppliers meet and exchange information and experience with each other and with Toyota several times a year. The benefits for the suppliers are considerable – the American members of the TSSC (Toyota Supplier Support Center – the American supplier group) have been able to increase their productivity by 123%, achieve 25% lower inventories and 50% fewer defects.
The interesting thing, however, is that some of the suppliers produce similar products for other cusomers such as Ford and GM in the same factory, yet the quality of these products and the manufacturing costs have not moved in line with the products produced for Toyota. These suppliers have cut defects on Toyota components by 84% between 1990 and 1996, the same suppliers have only achieved a 46% reduction for their other US customers. They have reduced inventory by 35% for Toyota components but by only 6% for their other customers. Why is that?
Their other customers are not able or willing to cooperate with their suppliers to improve quality and cut costs. For example, in one case Toyota and the supplier decided to use smaller containers, weighing only 20 Kg when full, for storing and shipping the product – the other customers insisted on using standard-sized units weighing 90 – 140 Kg when filled. The smaller containers could be moved more easily (no need to use a fork-lift truck to move them within the factory and thus no need to employ a driver) and the larger containers could not be cleaned as easily, resulting in more contamination of the product.
Overall, the Toyota information sharing with their suppliers costs Toyota between $50 – $100 million worldwide per year. A small amount of money well invested for a concern with $100 billion revenue per year.