Toyota

THE
TOYOTA WAY
14 MANAGEMENT PRINCIPLES
FROM THE WORLDS

GREATEST MANUFACTURER
By Wg Cdr DK Sharma
THE TOYOTA WAY
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Toyota Production System (TPS) Also called The Toyota Way
THE TOYOTA WAY
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Toyota Production System 14 Principles

Philosophy (01 principle) Process (07 principles) People / Partners (03 principles) Problem Solving (03 principles)
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Lean Engineering / Manufacturing / Thinking / Enterprise /System is a: A Five Step Process Defining customer value (internal / external) Defining the Value Stream (Process) Making it Flow (Process) Pulling from the Customer back (Inventory) Striving for Excellence (Long term)
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Objectives of TPS
Eliminating wasted time and resources Building quality into workplace systems Finding low cost but reliable alternatives to expensive new technology Perfecting business processes Building learning cultures for continuous improvements
THE TOYOTA WAY

+Continual org learning.
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Problem Solving
(Continuous Improvement and Learning)
+Go & see yourself. +Decision slowly by consensus and implement rapidly. +Grow leaders who live the philosophy. +Respect, develop and challenge people, teams and suppliers. +Create process flow to surface problems +Use pull system to avoid over production +Stop when there is a quality problem. (Jidoka) + Level out the workload. (heijunka) +Standardize tasks for continuous improvement. +Use visual control so no problems are hidden. +Use only reliable technology. +Base management decisions on a long term philosophy, even at the expense of short term financial gains.
People & Partners

(Respect, Challenge and Grow Them)
Process
(Eliminate Waste)
Philosophy
(Long Term Thinking)
4 P MODEL OF THE TOYOTA WAY
THE TOYOTA WAY

Long-Term Philosophy
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Principle 1 - Management Decisions on a LongTerm Philosophy, even at the expense of Short-Terms Financial Goals.
We wanted to break new ground in ride quality. To get that, our tire compounds were fairly soft. So even though the customer experienced a good ride and the tires were well within our specs, they did not last as long initially as many customers wished. 5-7% of the customers actually complained about tire life. For Toyota that is a big deal, as Toyota is used to dealing in complaint level far < 1%.
THE TOYOTA WAY

Long-Term Philosophy
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Base Management Decisions on a LongTerm Philosophy, even at the expense of Short-Terms Financial Goals.
So Toyota sent the owner of every Lexus who had the specified batch of tires, a coupon they could redeem for $500 and apologised for inconveniency. Many of these customers had already sold their Lexus.
The way you treat your customer when you do not owe them anything, like how you treat somebody who can not fight back that is the ultimate test of character and long term
philosophy of values.
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Problem Solving
People & Partners

Process
(Eliminate Waste)
Philosophy
THE TOYOTA WAY

Process Eliminate Waste
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Principle 2. Create Continuous Process Flow to Bring Problems to the Surface
Flow is the heart of the Lean message that shortening the elapsed time from raw material to finished goods / service will lead to the best quality, lowest cost and shortest delivery time Flow means when a customer places an order, this triggers the process of obtaining raw material from suppliers, flow to production plant, assemble the order, transport to dealer and deliver to customer Flow also forces the implementation of other lean tools such as preventive maintenance, built-in quality (jidoka), continuous improvement (kaizan) and even production (heijunka)
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Toyota Identified 7 Major Non-Value Adding Waste 1. Overproduction Producing items for which there are no orders 2. Waiting (time on hand) Worker waiting for a preceding process to be over, tool, part, lot processing, capacity bottlenecks 3. Unnecessary transport or conveyance Carrying workin-progress (WIP) long distance
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4. Over / incorrect processing - Inefficient process due to poor tooling or production design
5. Excess / unavailable Inventory Extra inventory hides problems such as production imbalances, late deliveries, defects, downtime and long set up time
6. Unnecessary Movement Wasted motion like looking for, reaching for, stacking part, tools etc, even walking is a waste during production 7. Defects Production of defective parts and its correction, Repair or rework, replacement production and inspection
THE TOYOTA WAY

Computer Base Dept (1 min each) Computer Monitor Dept (1 min each)
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PROCESS FLOW Batch & Queue
Computer Test Dept (1 min each)
Complete processing of first batch of 10 takes 30 minutes Transportation from Base to Monitor Dept is in batch of 10 First good computer ready in 21 minutes There are at least 21 sub-assemblies in process at a time
Batch Processing Example
THE TOYOTA WAY

Computer Base Dept Computer Monitor Dept
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PROCESS FLOW One Piece

Product requires three processes that takes one minute each (One Piece Flow Production Cell) Lean Thinking Batch size - ONE Computer Test Dept
First part is ready in 3 minutes 10 complete assembly ready in 12 minutes Only two sub-assembly in process at a time
Continuous Flow Example

Principle 3. Use Overproduction Pull Systems to
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Avoid
The more inventory a company has, .....the less likely they will have what they need. Taiichi Ohno
Provide your down line customers in the production process with what they want, when they want it, and in the amount they want. Material replenishment initiated by consumption is the basic principle of just-in-time (JIT). It triggers at a customers orders of Toyota. Minimize your work in process (WIP) and warehousing of inventory by stocking small amounts of each product and frequently restocking based on what the customer actually takes away. Be responsive to the day-by-day shifts in customer demand rather than relying on computer schedules and systems to track wasteful inventory.
Process Eliminate Waste 16/49

Principle 4. Level out the Workload (heijunka) (Work like the tortoise not the hare)
Eliminating waste is just one-third of the equation for making lean successful. Eliminating overburden to people and equipment and eliminating unevenness in the production schedule are just as important The slower and consistent tortoise causes less waste and is much more desirable than the speedy hare that races ahead and then stops occasionally to doze. The TPS can be realised only when all move at the speed of tortoise.
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Principle 4. Level out the Workload (heijunka) (Work like the tortoise not the hare)
Muda Elimination Waste due to Non-value adds

Mura
Unevenness of production (down
time, NA parts, defects)
Muri
Overburdening people or equipment

(safety and quality problem, breakdowns and defects)

Principle 5. Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time
GM followed the golden rule of automotive engine production: do not shut down the assy plant! At GM, managers were judged by their ability to deliver the numbers, Get the job done no matter what and that meant getting the assy plant to keep it running. How Toyota Reacted If you are not shutting down the assy plant, it means that you have no problem. All mfg plants have problems. So you must be hiding your problems. It is better to shut down the plant and work on quality and continue to solve your problems.

Principle 5. Keep Quality Controls Simple and Involve Team Members
Things like ISO-9000, an industrial quality standard that calls for all kinds of detailed SOPs, for whatever good they have done, have made companies believe that if they put together detailed rule books the rules will be followed. Quality planning dept are armed with reams of data analyzed using
most sophisticated statistical analysis methods. Six Sigma has

brought us roving bands of black belts who attack major quality problems with a vengeance, armed with an arsenal of
sophisticated technical methods. But at Toyota........................

Principle 5. Keep Quality Controls Simple and Involve Team Members
..........they keep things simple and use very few complex statistical tools, the quality team have just four key rules (power of simplicity): Go and See Analyze the situation Use one piece flow and andon (cord to stop production) to surface problems Ask Why? Five times to get to the root of problem
Quality for customer drives your value proposition, because adding value to customer is what keeps you in business and allow you to make money.

Principle 6. Standardized Tasks are the Foundation for Continuous Improvement and Employee Empowerment (Kaizan)
It is impossible to improve any process until it is standardized. Standardization, stabilize the process before continuous improvements can be made. Until you have the fundamental skill needed to swing the club consistently, there is no hope of improving your golf game. Standardization is to find that balance between providing employees with RIGID procedures to follow and providing the freedom to INNOVATE and be creative.

Principle 6
Coercive Vs Enabling Systems and Standards
Coercive Bureaucracy
High Bureaucracy +Rigid rule enforcement +Extensive written rules and procedures + Hierarchy controls
Enabling Bureaucracy
+ Empowered Employees +Rules and procedures as enabling tools + Hierarchy supports + Org learning
Low Bureaucracy
Autocratic
+ Top down control +Minimum written rules and procedures + Hierarchy controls
Organic
+Empowered employees +Minimum rules and procedures +Little hierarchy
Coercive
Enabling

Principle 7 Use Visual Controls so No Problems Are Hidden
Traffic signals tend to be well-designed visual controls. Good traffic signs dont require you to study them: their meaning is immediately clear The visual aspect means being able to look at the process, a piece of equipment, inventory, or information or at worker performing a job and immediately see the standards being used to perform the task and if there is a deviation from standards
Visual management complements humans because we are visual, touch and audio oriented

Principle 7 Clean It Up and Make It Visual 5 S
Sort
Clear out rarely used items by red tagging (seiri)
Sustain
Use regular management audits to stay disciplined (shitsuke)
Straighten (Orderliness)
A place for everything and everything in its place (seiton)
Standardize
Create rules to sustain the first 3 S (seiketsu)
Shine
Clean it (seiso)

Use Only Reliable, Thoroughly Tested Technology That Serves Your People, Processes and Values
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 Any information technology must meet the acid test of supporting people and processes and prove it adds value before it is implemented broadly. First work out the manual system and then automate it
Principle 8
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Problem Solving
People & Partners

Process
(Eliminate Waste)
Philosophy
PEOPLE & PARTNERS
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Principle 9 Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others
The Automotive News recognized newsmakers in the auto industry. Direct quotes from the issue about these newsmakers: Bill Ford (Ford): Talks up revitalization, brings backs old guys, stars in TV commercial. Ford stock remains mired in the $10 range
Robert Lutz (GM): Former Marine pilot inspires GMs troops and simplifies product development, giving designers a bigger voice
Dieter Zetzsche (Chrysler): Turns the company around a year early with 3 Qtrs in the black
PEOPLE & PARTNERS
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Principle 9 Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others
Fujio Cho (Toyota): Toyota President presides over rise in operating profit to industry record. Take lead on hybrids. Grabs 10 point of US market. Joins with Peugeot for plants in Eastern Europe. Changing the culture each time a new leader comes into office necessarily means jerking the company about superficially, without developing any real depth or loyalty from the employees. The problem with the radical shifts in the culture is that organization will never learn it loses its ability to build on achievements, mistakes, or enduring principles. Deming, the Quality Guru terms it Constancy of Purpose.
PEOPLE & PARTNERS

Principle 9
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Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others +Growth
+Stability +JIT +Jidoka +Kaizan +Heijunka +Attention +Go & See +Problem solving +Presentation skills +Project Mgt +Supportive culture
PEOPLE
Long term assets Machinery depreciates People appreciates Learned skills Loses value continue to grow
PHILOSOPHY
Customer First People are most important asset Kaizan continuous improvement Go and See Give feedback Efficiency thinking True (vs. Apparent) condition Total (vs. Individual) team involvement
Toyota Leaders view of the TPS
PEOPLE & PARTNERS

Principle 9
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TOYOTA LEADERSHIP MODEL

Bottom-Up (Development)
Group Facilitator You are empowered Builder of Learning Organization Here is our purpose and direction I will guide and coach
Top Down (Directional)
Bureaucratic Manager
Task Manager
Here is what to do and how do it
Follow the rules
General Management Expertise
In-depth Understanding of Work
PEOPLE & PARTNERS

Principle 10
Concept
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Develop Exceptional People and teams Who Follow Your Companys Philosophy
Internal Motivation Theories Toyota Approach
Maslows Need Satisfy lower level of Hierarchy needs and move employees up the hierarchy towards self actualization Herzbergs Job Eliminate dissatisfies Enrichment (hygiene factors) and Theory design work to create positive satisfiers (motivators)
Job security, good pay, safe working conditions satisfy lower level needs. Culture of continuous improvement supports growth towards self actualization. 5 S, ergonomics programs, visual management, HR policies address hygiene factors. Continuous improvement. Job rotation, and built-in feedback supports motivators.
PEOPLE & PARTNERS

Principle 10
External Motivation Theories Concept Toyota Approach
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Taylors Scientifically select, Scientific design, standardize jobs, Management train, and reward with money performance relative to standards Behaviour Modification
All scientific management principles followed but at the group level other than individual learned based on employee involvement
Reinforce behaviour on Continuous flow and andon the spot when the creates short lead times for behaviour naturally occurs rapid feedback. Leaders constantly on the floor and providing reinforcement Set specific, measurable goals, achievable challenging goals and measure progress Set goals that meet these criteria through policy deployment. Continuous measurement of targets
Goal Setting
PEOPLE & PARTNERS
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Principle 11 Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve
Auto industry suppliers consistently report that TOYOTA is their best customer .and also their toughest. Have respect for your partners and suppliers and treat them as an extension of your business. Challenge your outside business partners to grow and develop. It shows that you value them. Set challenging targets and assist your partners in achieving them.
PEOPLE & PARTNERS

Principle 11
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Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve Toyota is very carefully when deciding what to outsource and what to do in house. Toyota outsource about 70% of the components. It still wants to maintain internal competency Even when Toyota chooses to outsource a key component, it does not want to lose internal capability As a general rule, Toyota wants to have at least two suppliers for every component Toyota is very bureaucratic in their dealings with suppliers, having extensive standards, auditing procedures, rules etc. But suppliers consider Toyota as their partner and Toyota is viewed as enabling customer who participate and solve their problems too.
PEOPLE & PARTNERS

Principle 11
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Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve
Reliable Partnership
Next Level of Improvement
Enabling Systems
Clear Expectations
Stability
Stable, Reliable Processes Fair and Honourable Business Relations
Supply Chain Need Hierarchy
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Problem Solving
People & Partners

Process
(Eliminate Waste)
Philosophy
PROBLEM SOLVING
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Principle 12 GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu)

Observe the production floor without preconceptions and with a blank mind. Repeat why five times to every matter. Taiichi Ohno (as quoted in the Toyota Way document)
It is more than going and seeing. What happened? What did you see? What are the issues? What are the problems? At the root of all of that, we try to make decisions based on factual information, not based on theory, statistics and number contribute to the facts, but it is more than that. Some time we get accused of spending too much time doing all the analysis. Some will say, Common sense will tell you. I know what the problem is. But collecting data and analysis will tell you if your common sense is right.
PROBLEM SOLVING
GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu)
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Principle 12
Mr. Ohno at times made his supervisor / managers to draw a circle on the floor of a plant and they were told, Stand in that and watch the process and think for yourself, and then he did not even give you any kind of hint of what to watch for. This is the real essence of TPS.
The Power of Deep Observation To Question, Analyze and Evaluate

We often depend upon computers to analyze and evaluate data
Like Six Sigma quality improvement initiatives we collect data and run it through statistical analysis correlations, regressions, variance etc, some of the results we get are statistically significant. But do we really understand the context of what is going on or the nature of the problem?
PROBLEM SOLVING
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Principle 12 GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu)

Data is of course important in manufacturing, but place greatest emphasis on facts go and see Think and speak based on personally verified data See America, then design for America to design Sienna minivan in 2004, the Chief Engineer of D&D drove extensively in US, Canada and Mexico to get a feel of what people wants in a minivan You can not expect to do your job without getting your hands dirty
PROBLEM SOLVING
Principle 13
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Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Rapidly If there is a project supposed to be fully implemented in a year. A typical company anywhere would spend about three months on planning and begin to implement. But they encounter all sorts of problems after implementation and would spend rest of the year in correcting them Toyota will spend 10 months planning, building consensus, implement it in a small pilot production and fully implement at the end of year, with virtually no remaining problems
Nothing is assumed. Every thing is verified
PROBLEM SOLVING
Principle 13
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Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Rapidly Preferred
Decision making is highly situational Philosophy is to seek maximum involvement for each situation
Seek group input, then decide and announce Group consensus with full authority
Level of Involvement
Group consensus, Management Approval
Decide and Announce
Seek individual input, then Decide and Announce
Fallback
Fallback If consensus not achieved
Time
Get all the parties on board, iron out all the resistance, generate consensus, then implementing
PROBLEM SOLVING
Principle 14
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A Learning Org Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)
We view errors as opportunities for learning. Rather than blaming individuals, the organisation takes corrective actions and distributes knowledge about each experience broadly. Learning is a continuous company-wide process as superiors motivates and train subordinates; as predecessors do the same for successors; and as a team subordinates at all levels share knowledge with one another. The Toyota Way Document 2001
Toyota has judiciously used stability and standardization to transfer individual and team innovations into organisational-wide learning. Standardisation punctured by innovation, gets translated into new standards (Kaizen) .
PROBLEM SOLVING
Principle 14
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Relentless Reflection (Hansei) and Continuous Improvement (Kaizen) 5 Whys is a method to pursue the deeper, systematic causes of a problem to find correspondingly deeper countermeasures Level of Problem There is a puddle of oil on the shop floor Because the machine is leaking oil Because the gasket has deteriorated Because we bought gasket made of inferior material Because we got a good price on those gaskets Because the purchase agent gets evaluated on short term cost savings Countermeasure Clean up the oil Fix the machine Replace the gasket Change gasket specifications Change purchasing policies Change the evaluation policy for purchasing agent
1. Initial Problem Solving (Large, vague, complicated)
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2. Clarify the Problem

Grasp the Situation
3. Locate Area / Point of Cause

Point of Cause
Why Why
Direct Cause Cause Cause Cause Cause
Basic Cause and Effect Investigation 4. Five Whys? Investigation of Root Cause
Cause Investigation
Why Why Why
Root Cause
5. Countermeasure 6. Evaluate 7. Standardize
Toyotas Practical Problem Solving Process
PROBLEM SOLVING
Principle 14
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Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)
Create Flow (Act)

Evaluate Results (Check)
Eliminate Waste
Surface Problem (Plan)
Counter Measures (Do)

Deming Circle of Quality (PDCA)
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One man did his part, and the other his, and neither even had to check to make sure both parts were getting done. Like the dance of atoms Alvin had imagined in his mind. He never realized it before, but people could be like those atoms, too. Most of the time people were all disorganized nobody knowing who anybody else was, nobody holding still long enough to trust or be trusted, just like Alvin imagined atoms might have been before God taught them who they were and gave them work to do. It was a miracle seeing how smooth they knew each others next move before the move was even begun. Alvin almost laughed out loud in the joy of seeing such a thing. Knowing it was possible, dreaming of what it might mean thousands of people knowing each other that well, moving to fit each other just right, working together. Who could stand in the way of such people? Orson Scott Card Prentice Alvin: The Tales of Alvin Maker
THE TOYOTA WAY

The Lessons and Secrets of Toyota way
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It creates bonds among individual and patterns such that they move to fit together just right, working together towards a common goal. Creating a WHOLE much greater stronger than the SUM of the individuals and
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Bibliography & Recommended Readings

The Toyota Way Jeffery K. Liker The Machine that Changed the World Womack, Jones & Ross Lean Thinking Womack & Jones
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Thank You

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THE

FROM THE WORLDS

THE TOYOTA WAY

Toyota Production System (TPS) Also called The Toyota Way

THE TOYOTA WAY

Toyota Production System 14 Principles

THE TOYOTA WAY

THE TOYOTA WAY

THE TOYOTA WAY

People & Partners

4 P MODEL OF THE TOYOTA WAY

THE TOYOTA WAY

THE TOYOTA WAY

THE TOYOTA WAY

People & Partners

4 P MODEL OF THE TOYOTA WAY

THE TOYOTA WAY

Principle 2. Create Continuous Process Flow to Bring Problems to the Surface

THE TOYOTA WAY

Principle 2. Create Continuous Process Flow to Bring Problems to the Surface

THE TOYOTA WAY

Principle 2. Create Continuous Process Flow to Bring Problems to the Surface

THE TOYOTA WAY

PROCESS FLOW Batch & Queue

Computer Test Dept (1 min each)

Batch Processing Example

THE TOYOTA WAY

PROCESS FLOW One Piece

Continuous Flow Example

Process Eliminate Waste

Process Eliminate Waste 16/49

Process Eliminate Waste

Muda Elimination Waste due to Non-value adds

Overburdening people or equipment

Process Eliminate Waste 18/49

Process Eliminate Waste 19/49

most sophisticated statistical analysis methods. Six Sigma has

sophisticated technical methods. But at Toyota........................

Process Eliminate Waste 20/49

Process Eliminate Waste 21/49

Process Eliminate Waste 22/49

Process Eliminate Waste 23/49

Process Eliminate Waste 24/49

Process Eliminate Waste 25/49

THE TOYOTA WAY

People & Partners

4 P MODEL OF THE TOYOTA WAY

PEOPLE & PARTNERS

PEOPLE & PARTNERS

PEOPLE & PARTNERS

Toyota Leaders view of the TPS

PEOPLE & PARTNERS

TOYOTA LEADERSHIP MODEL

Top Down (Directional)

Follow the rules

General Management Expertise

In-depth Understanding of Work

PEOPLE & PARTNERS

PEOPLE & PARTNERS

PEOPLE & PARTNERS

PEOPLE & PARTNERS

PEOPLE & PARTNERS

Stable, Reliable Processes Fair and Honourable Business Relations