Professional Documents
Culture Documents
ID: 1058RDRD1009
Table of Contents
Introduction/Executive Summary....................................................................................................2
Birth of Lean Production System....................................................................................................2
Impact on Manufacturing................................................................................................................2
Impact on Supply Chain Management............................................................................................3
Lean Production System and Competitiveness................................................................................3
Pitfalls of Lean Production System.................................................................................................4
Expansion of Toyota........................................................................................................................4
Consequences of Rapid Growth......................................................................................................4
Recommendations for Toyota and Other Companies......................................................................5
Conclusion.......................................................................................................................................5
References........................................................................................................................................6
Bibliography....................................................................................................................................7
1
Balaji chandrasekaran
ID: 1058RDRD1009
Introduction/Executive Summary
The automobile industry went through many changes in the way it handled the manufacturing
process and the corporate management. The automobile industry went through various
production systems such as craft production system, mass production system and lean production
system. Each system had a huge impact on the growth of the automobile industry. However, the
lean production system revolutionized the concept of production and supply chain management.
It helped the automobile industry to achieve high standards of manufacturing and management.
In this writing, I attempt to find out the underlying concepts of the lean production system, its
impact on manufacturing and supply chain management; and how it affected the competitiveness
and rapid growth of Toyota.
Taichi Ohno (1988) of Toyota found that the large batch and queue assembly production
followed by the leading automobile companies such as Ford, Chrysler, and General Motors
created huge material waste and was not efficient. To remedy that Toyota introduced flexible
mixed production which reduced waste and the just in time system which maintained a lean
inventory. Later onwards, quality aspect of production was also added into the lean production
system to ensure that the cars manufactured in Toyota were of highest quality. In the words of
Taichi Ohno, one of the founders of the Lean Production System, the ultimate aim of lean
production system is to reduce the timeline taken from time of the customer order and the
delivery of the car. This is achieved through waste reduction, error free production, and quality
assurance.
Impact on Manufacturing
To understand how the lean manufacturing system influenced the manufacturing process across
all companies, it is important to analyze the manufacturing systems that preceded the lean
production system. During the beginning of the 1990s automobile companies used the craft
production system in which one car at a time was manufactured. There was no scientific
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Balaji chandrasekaran
ID: 1058RDRD1009
management of the manufacturing process and the production was not in relation with the
demand. The mass production system followed the craft production system. The mass production
system introduced by Ford aimed to manufacture cars in mass numbers by using the division of
labor. This system used a large inventory and created lots of material waste. The quality of the
cars was very low. Lean production system developed by Toyota, which followed the mass
production system of Ford, aims at improving the manufacturing process to achieve the optimum
productivity with highest quality. The lean production system gave much emphasis on the quality
assurance of the cars being manufactured. The pull system of the lean production allowed the
employees to stop the operation when they spot a quality issue in the manufacturing. This helped
Toyota to prevent the faults before it reaches the customers.
When Toyota’s rivals Ford and General Motors were following a bureaucratic management set
up, Toyota’s lean production advocated a management philosophy where the employee’s
opinions were taken into account. This allowed Toyota to continuously improve the
manufacturing process. The Total Quality Management system, which is an integral part of lean
production system, ensured that all the components and products manufactured in Toyota meet
the highest quality standards.
The supply chain management of Toyota is hugely directed by their lean production system. The
supply chain principles of Toyota were developed by Eiji Toyoda. The lean production system
advocates to have only the products or supplies that are urgently required for the manufacturing.
This way, the need to have a huge inventory is eliminated. Most of the companies incur huge
cost in having huge inventories.
According to Jeffrey P. Wincel (2004), the lean production helps a company to reduce its cost of
production by having a lean supply chain. This means by having a small inventory, companies
can reduce the cost of stocking and maintenance. This reduction in cost can be passed on to the
customers, which will in turn increase the market share for the company.
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Balaji chandrasekaran
ID: 1058RDRD1009
system in the company. Lean production system gave Toyota a method to use minimum inputs
and produce maximum outputs. This means waste reduction, error proofing of production, and
high quality assurance. These practices enabled Toyota to take advantage of the oil embargo of
1977 and produce fuel efficient small cars. This provided Toyota an easy access to the US and
the European market.
Expansion of Toyota
It is very obvious that the growth and success of Toyota can be attributed to the development and
implementation of the lean production system in Toyota. The lean production system helped
Toyota to overcome its disadvantages in the production of the automobiles. When the global
automobile market was dominated by automobile giants such as Ford and General Motors,
Toyota was struggling to survive in the market. The growth of Toyota in the initial years of its
entry into the global market was directed by the core principles of the lean production system –
adding value to the customer. By focusing on waste reduction, lean inventory, just in time
supply chain, and total quality management, Toyota steadily captured the global automobile
market. Its growth was such that the rival companies, such as Ford, also started to implement the
lean production system (Jeffrey K. Liker, 2004).
From their small capacity of manufacturing only hundreds of cares in 1937, Toyota became the
largest automobile manufacturer in the world with a capacity of manufacturing 7.5 million cars
per year. In 2008, Toyota achieved a milestone by surpassing the General Motors in terms of
sales and production. Currently, Toyota has its business presence in more than 140 countries.
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Balaji chandrasekaran
ID: 1058RDRD1009
the current CEO accepts that the quick expansion of Toyota made them to neglect the core
principles of the lean production system. In the process, Toyota allowed several unfamiliar
suppliers, such as CTS Corp. who supplied faulty components. For the sake of mindless
expansion, Toyota over stretched the lean production system to a point till the whole system
broke down causing massive recalls of faulty cars. Now, Toyota is facing Congressional
inquiries into its mismanagement of the production procedure and for resulting accidents in the
US.
Conclusion
The lean production system in its true sense is designed to achieve high customer satisfaction
through high quality products and services. However, when the lean production system is over
stretched to achieve the narrow goals of the companies, the system produces opposite results as
evident from the case of Toyota.
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Balaji chandrasekaran
ID: 1058RDRD1009
References
Art Smalley (2004), Creating level pull: a lean production-system improvement guide for
production control, operations, and engineering professionals, 1st Edition, Lean Enterprise
Institute, Inc.
Xiaohua Yang (1995), Globalization of the automobile industry, 1st Edition, Library of
Congress Cataloging-in-Publication Data
David Mann (2005), Creating a lean culture: tools to sustain lean conversions, 1st
Edition, Productivity Press
David John Lu, Nihon Nōritsu Kyōkai (1989), Kanban just-in-time at Toyota:
management begins at the workplace, 2nd Edition,Productivity Press
Stephen A. Ruffa (2008), Going lean: how the best companies apply lean manufacturing
principles to shatter Uncertainty, drive innovation, and maximize profits, 1st Edition,
Library of Congress Cataloging-in-Publication Data
Joel D. Wisner, Keah-Choon Tan, G. Keong Leong (2009), Principles of Supply Chain
Management, 2nd Edition, South-Western Cengage Learning.
John R. Black (2008), Lean production: implementing a world-class system, 1st Edition,
Industrial Press, inc.
James William Martin (2007), Lean six sigma for supply chain management: the 10-step
solution process, 1st Editoin, McGrow-Hill
Womack, James P. and Jones, Daniel T. (2003), Lean Thinking: Banish Waste and Create
Wealth in Your Corporation, Revised and Updated, HarperBusiness
James P. Womack, Daniel T. Jones, Daniel Roos (1990), The machine that changed the
world, 1st Edition, McGraw-Hill
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Balaji chandrasekaran
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Balaji chandrasekaran
ID: 1058RDRD1009
Bibliography
Cusumano, Michael A., “The Limits of ‘Lean,’” Sloan Management Review, Summer
1994.
Mentzer, J.T. et al. (2001): Defining Supply Chain Management, in: Journal of Business
Logistics, Vol. 22, No. 2, 2001
Spear, Steven, and Bowen, H. Kent (1999), "Decoding the DNA of the Toyota
Production System," Harvard Business Review
Ford, Henry; with Crowther, Samuel (1922), My Life and Work, Garden City, New
York, USA, 1st Edition, Garden City Publishing Company, Inc