The Toyota Way to Continuous Improvement

Jeffrey K. Liker
Professor, Industrial and Operations Engineering The University of Michigan

Lappeenranta University of Technology Finland June 3, 2011

Lean Value Streams

a total systems approach to shorten the time between the customer order and the delivery of the product or service by
eliminating sources of waste.

Business as Usual
CUSTOMER ORDER

Waste

PRODUCT OR SERVICE TO CUSTOMER

Time
Lean Management
CUSTOMER ORDER

PRODUCT OR SERVICE TO CUSTOMER

Waste

Time (Shorter)

The 4 Ps of The Toyota Way

The 4 Ps of The Toyota Way

Why you Exist

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

Toyota mission:
Contribute to the economic growth of the country in which it is located (external stakeholders) Contribute to the stability and well being of team members (internal stakeholders)

Contribute to the overall growth of Toyota

Fallacy # 1
Lean = Eliminate People

We are already too lean We have downsized and are getting anorexic

Example of Respect for People in Recession

TUNDRA, 2008-2009
Built in Princeton, Indiana (mother) and San Antonio, Texas (new child)

40% Reduction in Sales vs Plan--Gas Prices + Recession

3 month shut down of production 2008 followed by 1/2 rate production

No layoffs of long-term team members (training, kaizen) Temporary workers let go Rebalanced production in North America (Tundra to TX, Highlander to Indiana)

Why is a Long-Term Philosophy the Foundation?

PROCESS: Allows time to develop a lean system without expecting ROI from each piece! PEOPLE: Allows for careful selection and development of people--Toyotas most critical resource! PROBLEM SOLVING: Promotes root cause problem solving and organizational learning!

The 4 Ps of The Toyota Way

Eliminating Waste

What is Lean Thinking ?

Do these steps apply to every organization?

Overproduction

Transport/Transfer

Waiting

Inventory Motion

Seven Wastes
Overprocessing Defects

Continuous Flow Means Steady Velocity

Traditional: Work in Batches meandering stream with many stagnant pools and waterfalls Lean Processes: like pipeline with fast-flowing water

Toyota Example of Process Improvement: Food Bank in the U.S.

Situation: Charitable Organization servesThanksgiving dinner. Logistics are daunting: Canned and dry goods, fresh vegetables, bottled and packaged beverages, and turkeys (all donated). Sorting into family-sized portions for 1000 families lined up becomes a race against time. Challenges: "It was a group of big-hearted volunteers trying to provide one thousand food baskets during a very small window of time. The operation just needed a standardized process and a flow. Toyota TPS expert Execution: Starting with the delivery bays, volunteers laid out a receiving area where boxes of food being delivered from schools and churches are broken down and sorted by type, peas with peas, bread with bread, drinks with drinks, etc. Then, a production line is set up with goods moving from the staging area to a sorting area to bagging site. There is a continuous flow of products moving from the delivery trucks, in sequence, to the clients. Bags are systematically filled with the right amounts of food, in the right place, just in time for the next person in line. Result: Instead of volunteers filling food baskets, while following inefficient guidelines, an orderly assembly line was established, with a finished bag going into the hands of a client every 15 seconds. In three hours on the Tuesday before Thanksgiving, more than 1,000 families were served.

Toyota Example of Process Improvement: Hospital in the U.S.

Situation: Hospital system had a poor process in the pharmacy system for preparation and delivery of I.V. bags. On average, 141 incorrect bags were returned to the pharmacy daily, costing $391,000 dollars a year. Challenges: Each day, pharmacy prepared 750 IV bags and delivered to the "med rooms" on each floor. Doctors orders for I.V. bags were filled and delivered (or batched) in the morning. This system concentrated a heavy morning work load on the pharmacy and forced the nurses on the floor to sort through an entire day's worth of I.V. when all they needed was the morning doses. If patients were discharged during the day or if the meds were changed after delivery, the originally delivered I.V. would often have to be trashed and replaced. Execution: The nurses and the pharmacy became an improvement team. A series of "kaizens led to the pharmacy supplying the I.V. only when needed, in the amount needed. To make the deliveries even more visible and orderly, they constructed a simple "peg board" with each peg corresponding to a patient's room number. When the bags were delivered, they were hung on the correct peg. The I.V.'s needing refrigeration were placed in the fridge and a yellow card on the corresponding peg indicated that the meds were properly stored in the refrigerator.

Results: Number of returns reduced by more than half, all for the cost of a simple peg board.

Question

Did either of these organizations solve their problem permanently through lean?

The 4 Ps of The Toyota Way

Exceptional People

Its about People

People are your most valuable appreciating assets, not a disposable cost

Its the people who bring the system to life: working, communicating, resolving issues, and growing together. The Toyota Way goes well beyond this; it encourages, supports, and in fact DEMANDS employee involvement.

Strong People and Processes Go Hand In Hand, but People Development takes time and patience

Strength of People LOW HIGH

Fire Fighting Struggling

LOW

Excelling
Quick Hit Results
HIGH

Strength of Processes

Build a culture of continuous improvement

A culture of quality people working together with shared (Toyota) values to continuously improve
The Toyota DNA =
Product Value Stream

People Value Stream

Make people think

By going to the workplace Observing operations with them Showing typical problems

Outlining typical solutions

We were asked to stand in a circle for 1 week and come up with 240 improvements and implement most of them.

Toyota Japan TPS Training

21

The 4 Ps of The Toyota Way

PDCA Problem Solving is the Core of Lean Thinking

Get It Done Mentality Destroys the PDCA cycle

Toyota Way Principle Twelve Gemba Management

Observe the production floor without preconceptions and with a blank mind. Repeat why five times to every matter.

Taiichi Ohno

Problem Solving Continuum

Avoid the number one Trap! Jumping from problem to solution without clear understanding and analysis
PROBLEM

SOLUTION

27

5 Why Investigation for Toyota E-mail example

What is the problem? Why? Why? Employees are frustrated and complaining about the new e-mail system Employees do not understand how to use the functions of the system The employees didnt receive adequate training on the new system, a manual they can use, and didnt give input on their needs for the new system functions The I.S. Manager had a poor planning process: didnt ask employees about their needs on system functions; didnt plan for training up front; didnt notify employees using multiple communication channels; didnt review the manual with employees (pilot group) The Manager didnt get direction and support from his boss, or receive planning process training The company as a whole does not have effective internal processes in place, nor is disciplined in using good process Senior management hasnt worked to create a work culture that encourages and reinforces effective internal processes..

Why?

Why? Why?

Why?

Source: Toyota Technical Center, Ann Arbor, Michigan

Lean Systems = Processes that Surface Problems so People can Continually Improve and Learn through PDCA
Collect All Problems

Hoshin Kanri

Sort & Prioritize By Business Need

System Surfaces Problems

Process A Solve 1x1 Using PDCA

Improve Processes

Process B

From Toyota Way to Continuous Improvement

Typical Improvement Opportunities Available

Improvement

Toyota Leverages Opportunities at all Levels

The Iceberg Model of TPS

Kanban. Charts Slogans 5S Teams Andon Cells

Culture Change: Involve People in Continuous Improvement To Eliminate Waste through the Toyota Way

The Toyota way

A Long-term focus on Quality, Cost, Delivery, Safety, and Morale (Safety first) Contributing to society and the community A spirit of challenge Everyday kaizen Guided by long-term strategic thinking Turn strategies and goals into real targets with real action at the gemba Learning by doing A learning organization