The Toyota Way (book by Liker)

The Toyota Way

Jeffrey K. Liker

The Toyota Way

 Toyota is well known for its system of manufacturing called the Toyota Production System (TPS). From just-in-time inventory and pull-based production planning to the “lean” philosophy of continuous improvement (kaizen), companies all over the world have adopted elements of TPS in hopes of improving their own manufacturing. The majority of these efforts fail to deliver a significant benefit. The book attempts to explain how TPS is much more than a set of tools and processes by explaining 14 management principles that surround the TPS tool set. The author was able to interview many of the Toyota executives who were part of the system’s development and who provided their personal insight into what was important in the development of TPS. With the increasing deployment of continuous improvement systems inside of companies, it is worth examining the TPS as a complete system. When people describe “systems thinking”, this is an example of that approach.

 

The Toyota Way might be thought of as the framework surrounding the TPS. It consists of four P’s: philosophy, process, people and partners, and problem solving. Graphically, this is represented as a pyramid with philosophy at the bottom and problem solving at the top. Many companies considering lean processes hope to cherry pick from the processes and problem-solving components while retaining their own philosophies and people practices – and this may limit their ability to benefit. Interestingly, the widespread interest from outside of Toyota and a desire to encode the entirety of the Toyota approach, in order to pass it to a new generation of leaders, lead Toyota to set down “the Toyota way” while this book was being written and for Toyota leaders to share its contents with the author. In other words, even Toyota had not articulated the complete system internally until the early 2000s, though they had been practicing it for decades already. The 14 management principles are associated with specific P’s. For example, the principle “Go see for yourself to thoroughly understand the situation” is associated with problem-solving and “Create process “flow” to surface problems” is associated with processes.

 

TPS is in some ways completely different from mass production. In many mass production systems, a manufacturing goal is to run equipment near capacity, but in TPS the goal is to run equipment exactly to meet customer demand. This may mean stopping production of a part or the whole of a process when customer demand stops. When you realize that the customer may be the next process in the production cycle, you realize that a desire to avoid overproduction (a major waste) trumps the “need” to use capital “efficiently”. Mass production is about pushing materials through production to create products that the customer may not need. Huge overproduction by American car companies led to the need for heavy discounting. Clearly, these companies wasted resources building cars that people did not value (at that time and price).

 

The book describes a number of historical aspects in the development of TPS, but perhaps one of the most interesting is that one of the principle inspirations for TPS was not manufacturing, but the 1950s American grocery store (not a modern warehouse grocery). That is because a grocery store was essentially a pull system. Stores stocked a small inventory of many goods. As consumers bought items, they were restocked on the shelf and ordered from the supplier. For the grocery, they had minimal inventory and a near just-in-time inventory management system. It is helpful to recognize that the contrast would be a system that delivers grocery items to the store without regard to consumer purchases. Inventory of some items would build up, tying up working capital, taking up space and potentially going to waste. Ordering triggered by customer action is a central part of the Toyota approach. Don’t push raw material into the process, but pull it through.

 

One of the other insights that drove development of TPS was visits to Ford assembly plants. The Toyota team noticed that parts were stacked everywhere, things were handled many times, and the actual amount of time that people were actually working on assembly was a fraction of the time spent working. They realized that there was “value-added” and “non-value-added” work underway. This led to identification of eight kinds of waste:

• Over production (materials that nobody needs)
• Waiting (watching a machine or waiting for the next step)
• Unnecessary transport or conveyance (moving pieces multiple times between steps)
• Overprocessing or incorrect processing (poor equipment design that requires more time or corrective reaction)
• Excess inventory (storage of parts of products that are not needed)
• Unnecessary movement (of employees, for example lifting or carrying)
• Defects (rework is wasted time and energy, discarding is wasted money)
• Unused employee creativity (not using the full potential contribution of employees is a waste of potential)

One of the big insights about excess inventory was that it often hid problems in production. For example, if there were excess bolts in inventory then the fact that 10% of the bolts were defective might go unnoticed. If there is just-in-time delivery of a bolt and it is defective – production stops and everybody must work on making the bolt supply quality reliable. Though this causes a short-term loss in production, over time production becomes more reliable and efficient. In practice, having no inventory is impractical but ideal. Discovering the right minimal process to manage inventory exemplifies the fact that Toyota is a practical company. While there is a set of ideals, leaders seek ways to approach the ideal without shifting waste from one operation to another or exchanging one kind of waste for another.

 

Waiting is one of the wasteful consequences of inventory build-up in some systems, primarily associated with batch processes. In an example about production of a nut, each of the operations involved in making a nut takes a few seconds, so the manufacturing process in theory takes 1-2 minutes from start to finish. But in the book’s example, the actual time from beginning to end was weeks-to-months because the partially finished nut sat between machines for days at a time. The percentage of actual value-added time was well under 2%. What turned out to be worse was that the equipment was mismatched for scale leading to idle machine time and periodic startup failures. Management had determined that it was better to outsource maintenance, so there was sometimes nobody available to quickly bring a machine back into operation. The large inventory of partially finished parts obscured this loss of efficiency.

 

The point was made earlier that TPS is an example of system thinking. While there are tools and processes that are critical to TPS, they do not really work well without the surrounding cultural elements and balances. For example, TPS depends on production workers observing and recognizing opportunities for improvement. It teaches problem solving to everyone so that they can contribute their analysis and creativity. For a society that is stereotyped as hierarchal, the system is not a top-down, micromanaging system because that would not let everyone be a problem solver. The system can be expressed as a set of principles that are used as guides – not directives.

 

Long-term Philosophy	Principle 1	Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.*
Right process will produce right results	Principle 2	Create continuous process flow to bring problems to the surface
	Principle 3	Use “pull” systems to avoid over production
	Principle 4	Level out the workload (heijunka). (Work like the tortoise, not the hare.)
	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
Add value 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
Continuously solving root problems drives organizational learning	Principle 12	Go and see for yourself to thoroughly understand the situation (genchi genbutsu)
	Principle 13	Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly
	Principle 14	Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen)

 

The book makes clear that these are the principles of Toyota and hey may not apply to other organizations in exactly the same way. A small custom manufacturer might need to develop a different set of principles and then apply them. But for people who wish to understand Toyota’s success – these are the principles they use.

 

Principle 1

Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

Toyota intends to make a profit, but profit is not what drives the company. Most employees see Toyota as a company that should be doing the right thing for the company, its employees, the customer, and society as a whole. Executives consistently describe the purpose of the company being to contribute back to society and that the long term survival of the company is required to continue that contribution. Management feels a long-term obligation to its employees. In one example, the company had to close down an operation in California that was making truck bodies in favor of another plant. However, the employees of the plant had worked very hard to implement the directives handed to them, so management set out to find other work for this plant to do in order to keep those employees as contributors. Toyota recognized that if they abandoned these employees when the operations had to move, they would undermine employee morale everywhere. Toyota eventually found another truck maker (in which Toyota had an interest) who needed a facility to move in. They then gave the plant responsibility for building a Toyota truck engine; the plant was actually bigger in the end – all to keep a group of motivated employees. In a similar way, Toyota OFFERED to teach GM the TPS in one of their plants. Asked why, Toyota leaders expressed gratitude for American help in rebuilding after World War II and wanted to repay the debt. In the process of running the NUMMI plant, Toyota learned about American workers and American car companies learned about the Toyota approach. GM had serious productivity problems with the plant, but Toyota made the NUMMI plant into one of the most productive plants in North America using exactly the same work force as GM had used. The book mentions a number of examples of Toyota finding ways to cut costs and yet not laying off people. This practice is one of the ways that the company built trust with employees and their communities.

 

Philosophically, Toyota demonstrates “constancy of purpose”. In another context, Toyota considers itself a tortoise – not a hare. Toyota wants to be consistent and reliable, not exciting and flashy. The author mentions the contrast to Chrysler which was up and down in terms of direction (up market/ down market, mass production/specialty, new models/cost cutting) and leadership. Just before the acquisition by Daimler, Toyota viewed Chrysler as a threat to Toyota. Daimler disrupted the Chrysler constancy of purpose and Chrysler end up back in bankruptcy. For Toyota, their entire history has taught them that it is better to be consistent and survive than take too big a risk and die. Toyota is a deeply conservative company and yet it is willing to take big chances because they ensure the long term interests of the company, its employees and society.

 

Principle 2

Create continuous process flow to bring problems to the surface

Traditional mass production groups work together based on similar machines or skills. This may allow very large pieces of equipment to be installed giving apparent economy of scale and may provide apparent flexibility. What Toyota has learned is that this approach often creates wasted time. Work is completed without regard to what will follow and “work-in-progress” piles up. The opposite of this sort of batch processing is what was termed “single piece flow”. In single piece flow, once work begins on an item there are minimal pauses in the complete processing and processing of the next item does not begin until the previous item is complete. Nothing is produced before it is needed and nothing needs to wait for further processing since that equipment is waiting.

 

In practice, the system is balanced so that parts flow through the system continuously according to the amount of pull created by the customer. The consequence of this approach was the abandonment of departments using different operations and the creation of cells where all of the required operations could be completed as quickly as possible in series. While this example describes a manufacturing case, it also applies to many administrative tasks. The example was given of a work order in a naval repair yard. All of the instructions were compiled from different departments in a folder that went to yard mechanics for execution. Before the improvement, there were 58 handoffs, and 62 days spent waiting for further action which resulted in a total lead time of 67 days. Of this 15 days was value-added. After conversion to a one piece flow, there were 10 hand-offs, documents waited a total of 3 days, and total lead time was 26 days. The office was remodeled to place the main participants in a circle around a table where the work folders were stored. This visual representation of progress kept everything in order and on track. The author comments that lean processes have been widely applied to manufacturing, but hardly to administrative processes.

 

Principle 3

Use “pull” systems to avoid over production

“The more inventory a company has,…the less likely they will have what they need” – Taiichi Ohno

Most companies guide manufacturing by setting a production goal and then measuring their operations people by whether they meet or exceed the goal. Plants have an incentive to produce more than customers demand. Equally, to insure that operations can proceed without interruption, people will order a surplus of inputs to guard against being input limited. There is excess inventory at either end of production (or many intermediate points) relative to the amount of customer demand. This is a form of waste – the most important in manufacturing. Toyota talks about an ideal where the trigger to ordering the required parts for a car is the customer’s order. In this ideal, the required part arrives just when it is required for assembly. This is called one-piece flow.

 

In practice, this may mean working with very small batches. It does not make sense to have a small screw arriving one at a time, but maybe having 100 arrive instead of 10,000 achieves the same effect. The TPS method of creating pull is called the kanban system and it does not require sophisticated IT systems. The book suggests the phrase “flow where you can, pull where you must” encapsulates the choices that manufacturing has when trying to decrease inventory. The original system was built with cards and bins. A bin might have 10,000 screws and near the bottom of the bin is a card. When the operator reaches the card, it is sent to receiving who sends up a new bin. When the new bin arrives, the old bin is sent back. Everyday examples of Kanban are found in retail store shelves where stock is visible to everybody (principle 7) so that when stock gets low, more is ordered. No order is placed until inventory is down. We do this at home as well. We usually decide to buy toothpaste when the tube is about 25% remaining (sellers try to tempt us to store the inventory instead of them, transferring the waste to us).

 

Toyota is practical. Not everything can be pulled. For example, car parts made in Japan but used in the US need to be scheduled. The approach here is to make the lead times as short as possible. If daily ordering is possible, it is chosen. In not daily, then weekly ordering keeps inventory small and the system responsive. No big inventory overhand develops with daily ordering. In fact, Toyota uses these processes for most of their administrative functions. Office supplies are ordered using a Kanban system; one of the benefits of training office workers turns out to be that what starts as ordering supplies becomes office workers looking for and eliminating waste in other processes.

 

Principle 4

Level out the workload (heijunka). (Work like the tortoise, not the hare.)

Toyota is extremely productive, but part of why they are productive is that they are steady. Early in the development of TPS, they realized that having a variable flow prevented them from standardizing processes. They adopted the metaphor of the tortoise and the hare to express that idea that being fast, but needing to rest, was ultimately slower than being slower and steadier. The idea of unevenness as a problem is embedded in the 3M’s: Muda (non-value added), Muri (overburdening) and Mura (unevenness). Overburdening people or equipment leads to breakdown and production variation (unevenness) or worse (safety or quality problems). When production is stopped, people and equipment are idle increasing waste.

 

Most organization start by trying to eliminate waste, which increases overburdening and then unevenness. They end up less productive than before. Instead, the better staring point is unevenness and this usually means slowing everything down – sometimes a lot. Once the process is slowed down and evened out, it becomes possible to increase the whole system bit by bit. The process of slowing down reveals wastes to be eliminated and the process of speeding up reveals different wastes to be eliminated. It is counter-intuitive that improvement starts with slowing down, and this is part of why companies struggle with adapting TPS to their own processes. They must accept the short-term losses to build long term productivity. According to the founder of the TPS, “The Toyota production System can be realized only when all he workers become tortoises.” A more current metaphor might be that production is a marathon and not a sprint. Sprinters never win marathons.

 

Of course, customer orders may not be even, so this seems to create a dilemma. The traditional response is to combine slightly bigger production runs with finished goods inventory to fulfil variable orders. The TPS approach is to even production out by making smaller batches that more closely match the evenness of demand. To do this efficiently, Toyota work teams developed systems that allow extremely fast change overs between products. For example, can panels are stamped out on presses. These once required hours to change, but now require minutes. This is on the order of the production rate, so there is now no loss in production between products (an example was given of a Mazda plant which changed presses in 52 seconds).

 

Examples of leveled processes are commonly found in services. Visits to the dentist are leveled such that all standard visits have the same duration. Different procedures require different time and involve different staff.

 

Placing evenness at the front of designing a lean process means that sometimes the most productive approach is to create inventory. This allows people and equipment to avoid being overburdened and it help suppliers to even out their processes too. This is an example of the system thinking found on TPS – the whole system may be less wasteful, if they create the right waste in the right place at the right time. Finding that circumstance requires a good view of the whole system and willingness to adapt the principles purposefully.

 

Principle 5

Build a culture of stopping to fix problems, to get quality right the first time.

“…you do not understand. If you are not shutting down the assembly plant, it means that you have no problems. All manufacturing plants have problems. So you must be hiding your problems. Please take out some inventory so the problems will surface. You will shut down the assembly plant, but you will also continue to solve your problems and make even better quality engines more efficiently.” – Fugio Cho (President, Toyota Motor Company)

 

This quote captures the idea that quality and efficiency are the result of improvement. When you run the plant too safely, waste and inefficiency persists. Toyota does two things to insure that problems can’t hide. First, they have automated systems that shut down production when a deviation is detected. The big technological leap that gave Toyota its start was the development of an automatic loom that detected when a thread broke and stopped the loom. This prevented bad fabric from being made and the sale of the European patent rights funded the launch of the car company. Second, Toyota gives any production worker the right (and expectation) that they will stop the production line when a fault is detected. This allows problems to be solved before they decrease product quality and enable preventive measures to be developed that increase future productivity. Applying a practical perspective, assembly is broken into sections with small buffers between sections. A segment may stop for about 10 minutes then will begin to shutdown increasing portions of the plant. This releases resources from idled segments to help solve the problem and get things running again. In the meantime, inventory is not piling up and overburden is being prevented.

 

Some companies develop sophisticated statistical methods and systems to detect problems. Toyota uses such methods but more important are four simple steps.

• Go and see
• Analyze the situation
• Use one-piece flow and andon to surface problems
• Ask “Why?” five times

Andon is the act of stopping production when a problem occurs. Some organization develop bureaucratic procedures to “protect” production, but Toyota learned that people can’t remember too many rules, but can apply a few principles fairly easily.

 

This comment should not be interpreted to mean that Toyota uses few detailed procedures. The author was invited to work on an assembly line for a day installing a cotter pin on an axel assembly.  The job involved putting in a cotter pin and spreading the pin arms. The formal description of the work involved 28 steps, was known to take 44.7 seconds and was allowed 57 seconds for completion. Each of the 28 steps was described on a single page with a photograph showing the right way to do the job. Automatic controls were in place to reinforce the process. When the operator reached for a cotter pin, he put his hand through a motion detector. If the detector was not triggered frequently enough an alarm light came on. A tool used the spread the pins was on a hook and if the tool was not returned to the hook in time, the alarm light came on. This is an example of the task standardization in Principle 6. In addition, each person subsequently checks to see that the cotter pin is properly installed; just within the work cell were eight more inspections with a final inspection in which a magic marker is used to highlight the presence of various operations on the axel assembly.

 

These procedures were written by operators, revised on the basis of faults that are discovered over time and supplemented with systems to help keep the system working smoothly. In the Toyota Way of doing things, what matters when improving quality is enabling the process and the people. You can spend a great deal of money on the latest and greatest andon and have no impact on quality. Instead, you need to constantly reinforce the principle that quality is everyone’s responsibility throughout the organization. Quality for the consumer drives your value proposition, so there is no compromising on quality…

 

 

Principle 6

Standardized tasks are the foundation for continuous improvement and employee empowerment

“Today’s standardization…is the necessary foundation on which tomorrow’s improvement will be based. If you think “standardization” as the best you know today, but which is to be improved tomorrow – you get somewhere. But if you think of standards as confining, then progress stops.”  - Henry Ford

 

TPS was not created from nothing but reflects Toyota’s own experience. Toyota leaders studied western companies extensively, especially in the years right after World War II. In fact, techniques developed in the US as part of the war production effort were taught to Japanese (and European) companies to help them rebuild their industrial base. Ironically, they were immediately abandoned with the end of the war effort in the US.

 

Standardization enables a process to be made more even and decreases waste. Examination of Toyota standard reveals that they are examples of “enabling standards”; they make it easier for people to do the right thing in the right way. They are not used to set objectives and punish people. While high level goals are set by management, the standardized work is usually developed by the operator. The contrast is “coercive standards” which are set by experts and imposed on operators. Work done by Paul Adler described the relationship between cultures and “standards philosophy”. One dimension is the coercive-enabling contrast. The other dimension is the high-low bureaucracy contrast. This is illustrated in the following chart.

 

 

Toyota’s TPS falls in the upper right quadrant where a high degree of bureaucracy is combined with an employee empowering philosophy that both sets standards and confers autonomy on people.

 

Principle 7

Use visual control so no problems are hidden

 

Toyota depends on visual controls. The kanban cards mentioned above are one type of visual control. The application of visual controls in plants is much more extensive than in inventory management. There are visual signals that come on when processes are a risk of falling behind or when production is stopped. These signals attract help to resolve problems are get work back on track. As mentioned elsewhere, parts are marked, tools have specific places, and floors are marked to reinforce what goes where. Some designers attempt to introduce subtle controls; Toyota tries to make them obvious. There are many ways that visual controls can be imagined and implemented by the people doing the work.

 

But most begin with a need to be able to see. The first improvement to visibility is simply through neatness. It is not uncommon to find parts scattered around a plant on pallets next to where they will be used. The presence of clutter can make it hard to find things. One auto part supplier lost a car in their plant when it got surrounded by inventory on pallets and was not found for months.

Toyota devised a process called 5S to strive for neatness. The 5 S’s are:

• Sort – get rid of what is not needed frequently
• Straighten – organize things so everything has a specific place
• Shine – keep it clean and repaired
• Standardize – keep the first 3 active
• Sustain – check to insure that things remain orderly

Most people use spring cleaning to take care of the first three, but 5S goes further to make sure that everything is in the same condition year round. The application might seem most appropriate to a manufacturing environment, but it works just as well in the home or office.

 

With clear lines of sight and an orderly environment, it is easier to see when things go wrong.

 

Visual controls are taken a step further by use as planning and communication tools. These are often white boards where schedules or other work is displayed so that people can see what is in front of them and unevenness in process becomes visible for correction.

 

 

Principle 8

Use only reliable, thoroughly tested technology that serves your people and processes

“Society has reached the point where one can push a button and be immediately deluged with technical and managerial information. This is all very convenient, of course, but if one is not careful there is a danger of losing the ability to think. We must remember that in the end it is the individual human being who must solve the problems.” – Eiji Toyoda

 

The quote comes from 1983, so the problem of information overload due to computers has been around for a while. In the context of technology, this provides a warning not to replace humans with technology without great care. Toyota uses advanced technology, but they are rarely cutting edge. They are very careful to test technology and prefer the tried and true. In this sense, Toyota is very conservative. At the same time, Toyota was one of the first and most prominent companies to use robots in production. The principle is to use technology to support people. For example, an early diagram of the IT infrastructure of a Toyota plant showed all the computers, terminals and storage devices. This was rejected by the plant manager with the comment, “At Toyota we do not make information systems. We make cars. Show me the process of making cars and how the information system supports that.” Subsequent IT diagrams emphasized the car assembly process.

 

 

Principle 9

Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.

People looking at Toyota tend to focus on the many tools and procedures used in the TPS, but the tools depend on a supply of leaders who understand the context for the tools and can teach the system to others. This leads to a big emphasis on internal leader development – which leads to establishment of a supportive culture. Things like just-in-time are just technical tools and they can be effective only with the right management and the right philosophy – the basic way of thinking. Helping employees learn is a major focus of leaders and many stories revolve around the lessons provided by senior leaders. The overall approach might be summarized in the following grid.

 

 

 

 

In Toyota, the least effective manager does not understand the work intimately and depends on their positional authority to direct people. Toyota leaders come up through the ranks because that is the only way to understand the work.

 

Principle 10

Develop exceptional people and teams who follow your company’s philosophy

 

Talk to anybody at Toyota about the Toyota Production System and you can hardly avoid getting a lecture on the importance of teamwork. All systems are there to support the team doing value-added work. But teams do not do value-added work. Individuals do. High performing teams depend on developing high performing people. The first step in developing the right people to fit onto Toyota teams is in selecting the right people. When Toyota opened its first US parts distribution center, they had over 13,000 applicants for 275 positions. A random subset of applicants was invited to a job fair where a variety of assessments were performed and the Toyota work environment was explained. Of the pool of people accepted after the fair, a random subset was invited to 3 hour long interviews. Skills were important, but fit was even more important. A small group of people was hired and the center began operations at a low level. These workers then became part of the interviewing process to seek more people who would fit in. Staffing built up in this way to its permanent level. Not all highly skilled or intelligent people would fit into this environment and teams depend on having the right people as members.

 

Once the right people are available, Toyota works to create high performing teams. The distribution facility described above adapted a four-step team development process (orientation, dissatisfaction, integration and production) to the TPS. This team development model was combined with a “situational leadership” approach to training people in the processes used in the facility. Early training is quite directive and as trainees experience difficulty, trainers increase focus on social support. As confidence rises, direction decreases and then social support decreases. This approach is directed at both individuals and teams, thus teams become somewhat self-directed. There are few meetings of the team but lots of working together to solve actual problems doing the actual work. This is consistent with Toyota belief that work teams are the foundation problem-solving group.

 

An important role for leaders is motivation. Toyota applies five different motivation theories: two intrinsic and three extrinsic focused. For example, the application of Maslow’s needs hierarchy involves high job security, good pay and safe working conditions. Interestingly, continuous improvement is part of this method in that the process allows people to be constantly developing their skills. A second intrinsic method is based on Herzberg’s theories of job enrichment with the focus on elimination of job dissatisfiers through 5S and ergonomics programs and job rotation. These are combined with extrinsic focused methods like scientific management (Taylor time and motion), behavior modification through rapid feedback and goal setting. These approaches may be directed at work teams rather than individuals which reinforces the team’s cohesion. Traditional application of Taylor’s approach is directed at standardizing individual’s work and Toyota is very interested in standardization of work. In Taylor’s time, the standardization came from managers, but in Toyota it comes mostly from the work teams. These approaches work together. Employees at the Georgetown Kentucky production plant made 80,000 suggestions in one year and 99% were implemented. It is easy to understand that employees were motivated by seeing their ideas be put into action because their ideas were aligned with the goals of the work teams, the production site and the company.

 

 

Principle 11

Respect your extended network of partners and suppliers by challenging them and helping them improve

For Toyota to succeed using these principles, they also need their suppliers to succeed and usually to do things in much the same way that Toyota does. Consequently, Toyota devotes time and money to helping their suppliers embrace flow, minimal inventory, just-in-time and other features of TPS. Some manufacturers treat their suppliers poorly, expecting them to improve without any certainty that they will retain the business. Toyota works to make suppliers true partners and get true partnership in return. Two examples of this partnership stuck out to me. In Japan, the factory of the supplier of a critical brake valve burned down. With no inventory to fall back onto, Toyota would have been shut down within about one week. Two hundred other Toyota suppliers got together, found the required machinery and produced the required part within 2 days and kept Toyota production open until the original supplier was back in production. A more interesting example is the relationship with Trim Masters in the US. Trim Masters makes the seats for a Toyota production plant in Kentucky. They are very dependent on their computer system and one time they had a three-hour computer failure. The linkage between the companies was so lean that the Toyota production line was shut down. Toyota quality experts arrived at Trim Masters right away and stayed on-site for two weeks helping improve the system so that it would survive another computer failure. The intervention was much deeper than fixing the computer; it was making the system more robust despite being lean.

 

Thinking about supplier relationships requires a framework that goes beyond price and delivery. Toyota developed a hierarchy based on Maslow’s hierarchy of needs. From bottom-to-top, there are the features of their hierarchy.

• Fair and honorable business relations
• Stable , reliable processes
• Clear expectations
• Enabling systems
• Learning enterprise.

As an organization progresses, it approaches the ability to be a learning organization. And as an organization climbs a level, the goal is to stabilize the organization on that level before progressing to the next. Toyota understands that these transformations take a lot of time. An example of this patience is a cross-docking facility that it help Transfreight set up. The process of developing this logistic function lasted 10 years because it is very complex and Toyota understood and worked as a partner to develop the capabilities in Transfreight step-by-step.

 

Principle 12

Go and see for yourself to thoroughly understand the situation (genchi genbutsu)

 

Data is of course important in manufacturing, but I place the greatest emphasis on facts.

                Taiichi Ohno

 

In my Toyota interviews, when I asked what distinguishes the Toyota Way from other management approaches, the most common first response was genchi genbutsu – whether I was in manufacturing, product development, sales, distribution, or public affairs. You cannot be sure you really understand any part of any business problem unless you go and see for yourself firsthand. This is not something to delegate to others. Taiichi Ohno once had a young engineer draw a circle on the floor of a plant and then stand there to watch operations. He stood there the entire day and, after the initial shallow impressions sunk in, was able to see how the whole plant interacted; he saw things in both general and detail. This personal experience of things is the norm in Toyota. Seeing creates facts, while data is just an indicator in this perspective.

 

Two problems with a supplier reflect this contrast. A Japanese supplier of wire harnesses was producing for a new Camry and there was a problem with the harness. A quality engineer called Toyota to explain what corrective actions were being taken and the company president flew from Japan to Kentucky to watch the installation of the harness personally. He went and saw the problem. A US producer of a part ran into a similar problem. Their vice president went to Kentucky to express his apologies and to assure Toyota that he would do everything possible to solve the problem. When asked what the problem was, he responded that he did not get into details like that. Toyota saw this as an inappropriate response to the question.

 

When Yuji Yokoya was appointed chief engineer for the redesign of the Sienna minivan in North America, he had plenty of experience in car design and had visited the US many times. He had not spent much time thinking about driving in America though. He decided that he needed this experience to lead the effort. He eventually drove in every US state, Canadian province and Mexican state – most of the time in a “current” model Sienna. He realized that Canadian roads have steeper crowns than American, crosswinds make cars less stable in America (and there are plenty of windy areas west of the Mississippi), that some driving areas are quite tight and need sharper turning vehicles, and that America is big that cup holders are much more important than in other places around the world.

 

Kiichiro Toyoda (the founder of Toyota Motor) was walking through a plant one day and encountered a worker with a grinding problem. Toyoda pushed up his sleeve, reached into the oil pan and pulled out two handfuls of sludge. He threw the sludge on the floor and said “How can you expect to do your job without getting your hands dirty”  (I’m guessing that the operator was clean which showed he had not been checking his equipment).

 

Shoichiro Toyoda was visiting a dealership in the US after the introduction of a new automatic transmission. These were generally very reliable, but one had been brought into the shop for a repair. Toyoda went out to the shop floor, in his suit, and talked to the repair technician. He then went over to the pan containing the transmission fluid, pushed up his sleeves, reach into the fluid and pulled out some metal shavings. He put these on a rag to dry them off, then put them in his pocket for analysis back in Japan.

 

These stories are well known within Toyota and offer both lessons in commitment to personal observation, and standards to compare people and organizations to. It emphasizes that part of the Toyota Way is paying attention to details because getting the details right is part of what drives useful learning and continuous improvement.

 

Principle 13

Make decisions slowly by consensus, thoroughly considering all options; implement decisions rapidly

For Toyota, how you arrive at a decision is just as important as the quality of the decision. Taking time and effort to do it right is mandatory. Attention to details, verification of data and assumptions, understanding options and understanding root causes are combined with a consensus-based decision making process. The main benefit of this approach is in implementation speed. While it seems to take much longer to get a decision, it is much faster to convert the decision into action because there is little need to revisit the decision. Most of the delays that occur in implementation are prevented in the Toyota process. By requiring consensus, any decision crosses many functional boundaries and suppresses silo formation. This is another example of system thinking. It may seem to create waste by waiting, but the subsequent avoidance of waste is much greater.

 

One aspect of the Toyota process is an emphasis on getting everything on a single piece of paper (usually an 11 x 17 (A3) sized page). While this seems like a contradiction when compared the emphasis on detail elsewhere, it may reflect the sense that when you really understand things, it is easier to summarize them. As the summary passes through many hands, it is revised to reflect the additional inputs. The form (an example is shown below) includes the 5 requirements for a Toyota proposal: a situational analysis, the plan recommendations, the detailed implementation and the follow up. The latter four are the Plan-Do-Check-Act (PDCA) cycle common to continuous improvement efforts.

 

 

 

Many meetings are based on the form. Participants are expected to come to the meeting familiar with the proposal described on the form, and because of the consultative process that has gone before the meeting, the meeting itself is quite efficient. Because of the consultative process, disagreements have already been settled and the meeting really is the formalization of the commitment to act with all of the essential parties having already agreed to the proposal. What makes thinking about this principle interesting is that Toyota considers this an important aspect of being a learning organization. The processes of seeking options and consensus allow people to learn and for that knowledge to be shared.

 

 

Principle 14

Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen)

 Peter Senge described a learning organization as “where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together.”  Learning organizations learn to learn better. At Toyota, standardization and innovation are intimately linked. While individuals find new ways to work, they rapidly standardize and socialize that learning.

 

Two Toyota practices demonstrate the approach to learning. One is continuous improvement, which emphasizes the importance of many small changes coming from all levels and functions in the organization. The second is the “5Why” approach to understanding the root causes of problems. One of the interesting aspects of the 5Why process is that it often leads to unexpected understanding of how problems result from indirect systemic issues. For example, a quality problem may be a consequence of a poorly manufactured part or a problem in training of assembly line workers. Discovering the root cause is a form of learning, and the more experience people have of finding root causes – the better they get at it. While Toyota is disciplined in using the various tools for problem solving, these are aids. Problem solving is 80% thinking with 20% application of tools. The author comments that most companies act as if tools do 80% of the work. People learn and the tools help them learn, but the process depends on people.

 

Thinking in this context also involves deep reflection. At Toyota this tends to be reflection about personal and organization weaknesses. This reflection can take the form of project reviews or post-mortems. One of the aspects of continuous improvement is the constant search for opportunities for improvement and this means acknowledging weakness, mistakes and failures. The goal is not to shame people, but to acknowledge the reality of imperfection.

 

The author became interested in why some companies were able to adopt TPS but others try and fail. The difference between Toyota and many other companies is that Toyota is process oriented….some companies had vital continuous improvement programs while others has superficial programs that died before they got going….the companies with vital programs had a process orientation, while the unsuccessful companies had results-oriented managers. The results-oriented managers immediately wanted to measure the bottom line results of the continuous improvement program. The process oriented managers were more patient, believing that an investment in people and the process would lead to the results they desired….Creating a learning organization is a long-term journey.

 

The author quotes Will Rogers, “We are a great people to get tired of anything awful quick. We jump from one extreme to another.” No company should copy the Toyota Way exactly, because every company is different. But companies that want to develop their own way using lean tools and philosophy must be prepared to develop continuity of purpose because the Toyota Way is a cultural manifestation of the philosophy and tools. What do we know about changing culture?

1. 1.       Start at the top – this may require executive leadership shakeup.
2. 2.       Involve from the bottom up.
3. 3.       Use middle managers as change agents.
4. 4.       It takes time to develop people who really understand and live the philosophy.
5. 5.       On a scale of difficulty, it is “extremely” difficult

At various points in the book, Toyota leaders describe 10-year change processes consisting of steady evolution. This demonstrates a consistent commitment to the desired outcome that withstands the ups and downs of the business. According to Edgar Schein, culture is the pattern of basic assumptions that a given group has invented, discovered, or developed in learning to cope with its problems of external adaptation and internal integration, and that have worked well enough to be considered valid, and, therefore, to be taught to new members as the correct way to perceive, think and feel in relation to those problems. It is easy to see in these 14 principles how cultural they are. Toyota has learned that teaching newcomers these cultural norms requires “learning by doing”. The process of learning mostly involves doing tasks in the proper way (80%) supported by traditional teaching and mentoring (20%).

 

TPS is much more than just an efficient way to manufacture. It is a way of thinking that touches all management activities. It is very customer focused. TPS is a never-ending search for a better way. Companies hoping for a rapid return should do something else; this is the approach for patient, determined organizations.

 

 

Comment and observation:

• The author of this book is obviously a zealot for TPS and Toyota. Consequently, the book is not a dispassionate examination of TPS. Potential problems with TPS or Toyota’s practices are not discussed at all.
• Among the philosophical elements in the Toyota way is a dedication to direct experience. The founder (Sakichi Toyoda) of the company was an inventor with minimal formal education. He depended on hands-on experience and this became embedded in the company. His son, Kiichiro, obtained a formal engineering degree, but retained the dedication to personal experience that he embedded in Toyota Automotive. He was quoted not long after World War II “I would have grave reservations about our ability to rebuild Japan’s industry if our engineers were the type who could sit down to take their meals without ever having to wash their hands.” I suspect that this had a profound impact on the role and status of production people too. They are the ones who see the most and their direct experience must be the foundation of the Toyota idea that higher levels of the company exist to support workers and the belief that production workers are well positioned to create a constant stream of ideas for improvement. In the West, the idea that there are “hands” and “brains”, but in different people developed. Within Toyota, people were expected to have and use both.
• The author points out that we use the pull method in our personal lives all the time. We buy gas for our car when the gage says that we are low, not on a weekly schedule. We buy most foods that way, keeping a small inventory at home for immediate use and buying more as we consume the stock.
• During development of the original Lexus, an engineer was given the task of radically improving the aerodynamics of the car. They were seeking both lower gas mileage and a quieter ride. The desired change was quite large, so the engineer decided to cut the clay model of the car himself. Usually, this was a task assigned to a modeler, based on instructions from the engineer. In this case, the modeler tried a number of things and ended up with an ugly model, BUT one which he understood well enough to create the final design. The resulting design was much quieter and more fuel efficient that any preceding car. This is an example of “go and see yourself in order to understand” but it is also an example of linking hand and mind. This is a regular theme in design, but it is still not adopted often enough in companies. Managers ask for reports or presentations instead of going to see for themselves. About 20 years ago, there was a lot of talk about “management by walking around” and I wonder if this was not another version of this principle. Computer and telecommunications make it seem inefficient to actually go and look, but maybe there a lot of effectiveness lost in this new efficiency.
• The book discusses the development of the Lexus and Prius cars to illustrate both how the Toyota Way was applied to these radical new developments and how the principles were selectively adapted or ignored. One of the interesting phrases that was used in the development of the Lexus was “and yet”. This phrase was used in the context of supposed tradeoffs. For example, it was “well known” that the way to make a car quieter was to increase its mass, but the way to make a car more fuel efficient was to make it lighter. This suggests a tradeoff between fuel efficiency and quietness. So in the design of the Lexus they stated the design goal as being 58 db at 100kph AND YET weight less than 1710kg. Part of the solution was described above, but part came from improving the manufacture of the engine. Toyota already made some of the most precise auto parts, and yet a higher quality was required. The chief engineer convinced the parts department to make a single piece of equipment to the desired new standard just to see if they could do it, with no obligation to scale it up to production. A team of top engine engineers hand built an entire engine and discovered that it was much quieter and much more fuel efficient. They became so excited at the results that they figured out how to scale it up. The result was a car that was sold to a great extent on how quiet the ride was.
• As mentioned in the main text, work flow re-design got a bad reputation during the “re-engineering” period in the middle 1990s where the primary outcome of re-engineering seemed to be headcount reduction. This is one of those points were the overall philosophy of Toyota becomes more apparent. Improvements in productivity do not lead to headcount reductions. People who are no longer needed are re-assigned to other work. This is vital because it is hard for people to design their livelihoods out of existence. Most companies aspire to grow, and yet they also aspire to be more efficient. It is vital that company leaders link these two situations, while emphasizing that the long-term need for an engaged workforce trumps the short term cost of having people in the organization without a formal job.
• The idea of value and non-valued added work resonates with most people around the idea of undesirable bureaucracy, but the book provides a nuance view of the nature of non-value-added work. For example, some non-valued added work is required and some is not. Safety training is required non-value-added work because it does not add to the product that the customer buys. However, it is required from both a regulatory and moral perspective. The book’s discussion of this distinction reminded me of a conversation that I was part of years ago about the work of our R&D department. And it is not hard to link this to certain project management concepts. For example, the scoping phase of the project is certainly value added – it is essentially setting the specification. The work the project does (experiments, analysis, recommendations) is value-added (since the output of R&D projects is always information and knowledge). Project monitoring is probably not value added (it does not add to the information), but it is required non-value-added as its primary purpose is to minimize waste and insure the specification of the project is met. What we realized, years ago, was that it made sense to do the value added work as well as possible, but to drive the required non-value added work to a minimum and always seek to minimize it further. This was usually a struggle because any organization has people in roles that center on the non-value added work and it is hard for anyone to realize they are not adding value. This points to a real management challenge where people are engaged by decreasing the effort and output down to the “just good enough” level of required non-value added work. It is my observation that many people lack a clear view of when they are adding value and when they are just keeping the machine running.
• The book indirectly speaks about system thinking in describing TPS. This usually takes the form of pointing out the failures of system thinking in traditional manufacture where process leveling is not the norm and inventory is. I observe that the same system thinking failures occur in problem-solving settings where there is a lack of context. People prefer to focus on the problem and not look at the system containing the problem. The more this occurs in the context of a disruption, the more urgently people want to focus narrowly on the immediate problem. It is rare that people observe that deviations and defects are caused by the system rather than by failures of a part of the system.
• Early in my career, I was involved in hiring people and struggled to understand how to prioritize what I observed in candidates. A colleague offered that his approach was two phase. Phase one was on paper and this was used to screen for “technical” qualification; did they have the right experiences and skills. The interview had a single purpose – to determine if the person would fit in our environment. He personalized it to put this in terms of how own comfort in working with the candidate. I’ve adopted a similar approach. There are lots of highly skilled people who would be terrible to work with and I do not endorse hiring such people. People skills matter and as I have gotten older I’ve come to appreciate them more and more. When I think about the phased interviewing process used by Toyota, I was struck by the importance of “fit” in selecting people. This create many dilemmas (diversity in thought, perspective and background may get lost) and thus increases the challenge of finding people that both fit and stand out.
• I found the stories of Toyota leaders standing and watching or putting their hands in the oil fascinating. I suppose that it shows that building a car is “real” to them – not a numerical exercise. I like the quote that distinguishes the fact from the data, because it is another way of being focused in reality. The business press and most business books do not involve stories of executives in suits putting their hands in used engine fluids because that is not what executives do or want to be seen doing – except at Toyota. Reading these stories makes me wonder about the struggles than many companies have in improving quality while reducing cost or increasing innovation while maintaining their products. Are leaders going and seeing for themselves? Are they visiting plants or customer’s plants to see problems for themselves? If they are not, are they prepared to set direction for their organizations? I wonder if the ever-increasing computerization of businesses and fascination with big data will make personal observation even less likely, and thus even more competitively powerful. While writing this, I am remembering the story about a laundry detergent packaging change at P&G. Customer surveys had shown that consumers were happy with the packaging, but the product manager decided to spend time with house wives doing laundry. He was with a woman on a day when she was opening a new package. She pulled out a screw driver and punched a hole through the box – right through the perforated section meant to be “easy opening”. When asked if this meant that opening the package was a problem she said no – she bought the screw driver just for this. If she did not use the screw driver, she might break her nail. I read this story originally and my immediate reaction was that the woman was my mom - who had a screw driver, and my wife -who had a screw driver. By going and seeing for himself, he understood the problem that the data said did not exist. Tide was put into new packing and sales exploded.
• The last few years have seen increasing discussion in America about simplification, streamlining decisions and becoming more agile. This book was written before this trend, but clearly offers a counter-narrative. Toyota might ask if a fast bad decision is good for the customer or company. Is a fast decision more easily (quickly) implemented than a well-discussed one? Although not really emphasized elsewhere in this summary, Toyota develops new car models much faster than anyone else. They can make fast pivots in their design process when needed. The system and culture of Toyota creates an expectation of consultation, so people expect and are prepared to be consulted. The consultation is not a distraction but normal and thus does not take more time. It may be that the reason that western companies find this consultation slowing is that people are surprised to be asked and are not prepared to contribute.
• It is hard to do 5Whys – really hard. In many organizations, people are so dedicated to problem-solving that they solve the first problem they see. This happens at many levels and in most functions. One of the problems with understanding root causes is that things that have good effects can also have bad effects. When you track a bad effect done through 5Whys to a desirable behavior or process, it is hard to change an established “good”. I wonder if this just means that it is easier to take a shallow, wrong view than to address the dilemmas found in the root causes. Alternately, does our struggle with root-cause analysis comes from our results orientation? We don’t really trust process, so we jump straight to getting a result. We are rewarded for getting results and almost never for following a process.

 *text in italics is directly quoted from the book