THE

TOYOTA WAY
14 MANAGEMENT PRINCIPLES

FROM THE WORLD’S
GREATEST MANUFACTURER
By Wg Cdr DK Sharma

THE TOYOTA WAY

02/49

Toyota Production System (TPS) Also called The Toyota Way

THE TOYOTA WAY

03/49

Toyota Production System 14 Principles
ΩPhilosophy (01 principle) ΩProcess (07 principles) ΩPeople / Partners (03 principles) ΩProblem Solving (03 principles)

THE TOYOTA WAY

04/49

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)

THE TOYOTA WAY 05/49 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 .

+Respect. 06/49 Problem Solving (Continuous Improvement and Learning) +Go & see yourself. +Use only reliable technology. develop and challenge people. +Decision slowly by consensus and implement rapidly.THE TOYOTA WAY +Continual org learning. (Jidoka) + Level out the workload. teams and suppliers. (heijunka) +Standardize tasks for continuous improvement. +Create process flow to surface problems +Use pull system to avoid over production +Stop when there is a quality problem. Challenge and Grow Them) Process (Eliminate Waste) Philosophy (Long Term Thinking) “4 P” MODEL OF THE TOYOTA WAY . even at the expense of short term financial gains. +Base management decisions on a long term philosophy. People & Partners (Respect. +Grow leaders who live the philosophy. +Use visual control so no problems are hidden.

We wanted to break new ground in ride quality. they did not last as long initially as many customers wished. even at the expense of Short-Terms Financial Goals. 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%. our tire compounds were fairly soft. So even though the customer experienced a good ride and the tires were well within our specs.Management Decisions on a Long–Term Philosophy.THE TOYOTA WAY Long-Term Philosophy 07/49 Principle 1 . . To get that.

The way you treat your customer when you do not owe them anything. So Toyota sent the owner of every Lexus who had the specified batch of tires. Many of these customers had already sold their Lexus. like how you treat somebody who can not fight back – that is the ultimate test of character and long term philosophy of values. a coupon they could redeem for $500 and apologised for inconveniency.THE TOYOTA WAY Long-Term Philosophy 08/49 Base Management Decisions on a Long–Term Philosophy. even at the expense of Short-Terms Financial Goals. .

+Grow leaders who live the philosophy.THE TOYOTA WAY +Continual org learning. (heijunka) +Standardize tasks for continuous improvement. +Use only reliable technology. Challenge and Grow Them) Process (Eliminate Waste) Philosophy (Long Term Thinking) “4 P” MODEL OF THE TOYOTA WAY . +Decision slowly by consensus and implement rapidly. even at the expense of short term financial gains. +Create process flow to surface problems +Use pull system to avoid over production +Stop when there is a quality problem. +Respect. teams and suppliers. 09/49 Problem Solving (Continuous Improvement and Learning) +Go & see yourself. +Use visual control so no problems are hidden. (Jidoka) + Level out the workload. People & Partners (Respect. develop and challenge people. +Base management decisions on a long term philosophy.

THE TOYOTA WAY Process – Eliminate Waste 10/49 Principle 2. assemble the order. transport to dealer and deliver to customer Flow also forces the implementation of other lean tools such as preventive maintenance. flow to production plant. this triggers the process of obtaining raw material from suppliers. lowest cost and shortest delivery time Flow means when a customer places an order. 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. built-in quality (jidoka). continuous improvement (kaizan) and even production (heijunka) .

Unnecessary transport or conveyance – Carrying workin-progress (WIP) long distance .THE TOYOTA WAY Process – Eliminate Waste 11/49 Principle 2. lot processing. Waiting (time on hand) – Worker waiting for a preceding process to be over. Create Continuous Process Flow to Bring Problems to the Surface Toyota Identified 7 Major Non-Value Adding Waste 1. tool. Overproduction – Producing items for which there are no orders 2. capacity bottlenecks 3. part.

reaching for. late deliveries. even walking is a waste during production 7. replacement production and inspection . downtime and long set up time 6. Create Continuous Process Flow to Bring Problems to the Surface 4. Repair or rework. Defects – Production of defective parts and its correction. tools etc. stacking part. Excess / unavailable Inventory – Extra inventory hides problems such as production imbalances. Over / incorrect processing .THE TOYOTA WAY Process – Eliminate Waste 12/49 Principle 2.Inefficient process due to poor tooling or production design 5. defects. Unnecessary Movement – Wasted motion like looking for.

THE TOYOTA WAY Computer Base Dept (1 min each) Computer Monitor Dept (1 min each) 13/49 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 .

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 .THE TOYOTA WAY Computer Base Dept Computer Monitor Dept 14/49 PROCESS FLOW – ‘One Piece’ Product requires three processes that takes one minute each (One Piece Flow Production Cell) Lean Thinking – Batch size .

. . .. Material replenishment initiated by consumption is the basic principle of just-in-time (JIT). Be responsive to the day-by-day shifts in customer demand rather than relying on computer schedules and systems to track wasteful inventory.the less likely they will have what they need. 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. when they want it. and in the amount they want. Use Overproduction “Pull” Systems to 15/49 Avoid “The more inventory a company has.” Taiichi Ohno Provide your down line customers in the production process with what they want. It triggers at a customer’s orders of Toyota...Process – Eliminate Waste Principle 3.

Process – Eliminate Waste 16/49 Principle 4. The TPS can be realised only when all move at the speed of tortoise. 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. 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. .

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. breakdowns and defects) . NA parts.Process – Eliminate Waste 17/49 Principle 4. defects) Muri Overburdening people or equipment (safety and quality problem.

How Toyota Reacted – If you are not shutting down the assy plant. . managers were judged by their ability to deliver the numbers.Process – Eliminate Waste 18/49 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. 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. All mfg plants have problems. Get the job done no matter what – and that meant getting the assy plant to keep it running. it means that you have no problem.

Quality planning dept are armed with reams of data analyzed using most sophisticated statistical analysis methods........ for whatever good they have done.... Keep Quality Controls Simple and Involve Team Members Things like ISO-9000....Process – Eliminate Waste 19/49 Principle 5..... Six Sigma has brought us roving bands of black belts who attack major quality problems with a vengeance.. an industrial quality standard that calls for all kinds of detailed SOPs.. .. have made companies believe that if they put together detailed rule books the rules will be followed... armed with an arsenal of sophisticated technical methods. But at Toyota..

... Keep Quality Controls Simple and Involve Team Members . because adding value to customer is what keeps you in business and allow you to make money.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...Process – Eliminate Waste 20/49 Principle 5.... ..

Standardization is to find that balance between providing employees with RIGID procedures to follow and providing the freedom to INNOVATE and be creative. Standardized Tasks are the Foundation for Continuous Improvement and Employee Empowerment (Kaizan) It is impossible to improve any process until it is standardized. Standardization. there is no hope of improving your golf game. Until you have the fundamental skill needed to swing the club consistently. stabilize the process before continuous improvements can be made.Process – Eliminate Waste 21/49 Principle 6. .

Process – Eliminate Waste 22/49 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 .

a piece of equipment.Process – Eliminate Waste 23/49 Principle 7 Use Visual Controls so No Problems Are Hidden Traffic signals tend to be well-designed visual controls. 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. Good traffic signs don’t require you to study them: their meaning is immediately clear The visual aspect means being able to look at the process. touch and audio oriented . inventory.

Process – Eliminate Waste 24/49 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) .

Thoroughly Tested Technology That Serves Your People. 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 . of course. This is all very convenient.Process – Eliminate Waste 25/49 Use Only Reliable. Processes and Values “Society has reached the point where one can push a button and be immediately deluged with technical and managerial information.

even at the expense of short term financial gains. +Use only reliable technology. teams and suppliers. +Grow leaders who live the philosophy.THE TOYOTA WAY +Continual org learning. (heijunka) +Standardize tasks for continuous improvement. +Create process flow to surface problems +Use pull system to avoid over production +Stop when there is a quality problem. +Respect. +Decision slowly by consensus and implement rapidly. develop and challenge people. 26/49 Problem Solving (Continuous Improvement and Learning) +Go & see yourself. (Jidoka) + Level out the workload. People & Partners (Respect. +Use visual control so no problems are hidden. +Base management decisions on a long term philosophy. Challenge and Grow Them) Process (Eliminate Waste) Philosophy (Long Term Thinking) “4 P” MODEL OF THE TOYOTA WAY .

PEOPLE & PARTNERS 27/49 Principle 9 Grow Leaders Who Thoroughly Understand the Work. giving designers a bigger voice Dieter Zetzsche (Chrysler): Turns the company around a year early with 3 Qtrs in the black . stars in TV commercial. Ford stock remains mired in the $10 range Robert Lutz (GM): Former Marine pilot inspires GM’s troops and simplifies product development. Live the Philosophy. and Teach It to Others The Automotive News recognized newsmakers in the auto industry. brings backs old guys. Direct quotes from the issue about these newsmakers: Bill Ford (Ford): Talks up revitalization.

Deming. Grabs 10 point of US market. . and Teach It to Others Fujio Cho (Toyota): Toyota President presides over rise in operating profit to industry record. Joins with Peugeot for plants in Eastern Europe. The problem with the radical shifts in the culture is that organization will never learn – it loses its ability to build on achievements. Live the Philosophy. mistakes.PEOPLE & PARTNERS 28/49 Principle 9 Grow Leaders Who Thoroughly Understand the Work. or enduring principles. the Quality Guru terms it “Constancy of Purpose”. Take lead on hybrids. without developing any real depth or loyalty from the employees. Changing the culture each time a new leader comes into office necessarily means jerking the company about superficially.

Apparent) condition Total (vs. Live the Philosophy. Individual) team involvement Toyota Leader’s view of the TPS .PEOPLE & PARTNERS Principle 9 29/49 Grow Leaders Who Thoroughly Understand the Work. 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.

PEOPLE & PARTNERS Principle 9 30/49 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 .

HR policies address hygiene factors. 5 S. safe working conditions satisfy lower level needs. visual management.PEOPLE & PARTNERS Principle 10 Concept 31/49 Develop Exceptional People and teams Who Follow Your Company’s Philosophy Internal Motivation Theories Toyota Approach Maslow’s Need Satisfy lower level of Hierarchy needs and move employees up the hierarchy towards self actualization Herzberg’s Job Eliminate “dissatisfies” Enrichment (hygiene factors) and Theory design work to create positive satisfiers (motivators) Job security. Job rotation. good pay. Continuous improvement. Culture of continuous improvement supports growth towards self actualization. ergonomics programs. . and built-in feedback supports motivators.

standardize jobs. Leaders constantly on the floor and providing reinforcement Set specific. achievable challenging goals and measure progress Set goals that meet these criteria through policy deployment. 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. Scientific design. Continuous measurement of targets Goal Setting . measurable goals.PEOPLE & PARTNERS Principle 10 External Motivation Theories Concept Toyota Approach 32/49 Taylor’s Scientifically select. Management train.

and also their toughest.PEOPLE & PARTNERS 33/49 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 …. Have respect for your partners and suppliers and treat them as an extension of your business. . It shows that you value them. Set challenging targets and assist your partners in achieving them. Challenge your outside business partners to grow and develop.

. It still wants to maintain internal competency Even when Toyota chooses to outsource a key component. having extensive standards. Toyota wants to have at least two suppliers for every component Toyota is very bureaucratic in their dealings with suppliers.PEOPLE & PARTNERS Principle 11 34/49 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. auditing procedures. it does not want to lose internal capability As a general rule. rules etc. But suppliers consider Toyota as their partner and Toyota is viewed as enabling customer who participate and solve their problems too. Toyota outsource about 70% of the components.

PEOPLE & PARTNERS Principle 11 35/49 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 .

+Respect. teams and suppliers. +Create process flow to surface problems +Use pull system to avoid over production +Stop when there is a quality problem. +Decision slowly by consensus and implement rapidly. +Base management decisions on a long term philosophy. +Use visual control so no problems are hidden. Challenge and Grow Them) Process (Eliminate Waste) Philosophy (Long Term Thinking) “4 P” MODEL OF THE TOYOTA WAY . 36/49 Problem Solving (Continuous Improvement and Learning) +Go & see yourself. +Grow leaders who live the philosophy. +Use only reliable technology. even at the expense of short term financial gains. (Jidoka) + Level out the workload.THE TOYOTA WAY +Continual org learning. develop and challenge people. (heijunka) +Standardize tasks for continuous improvement. People & Partners (Respect.

Some time we get accused of spending too much time doing all the analysis. . not based on theory. we try to make decisions based on factual information. “Common sense will tell you. statistics and number contribute to the facts. Repeat “why” five times to every matter.” But collecting data and analysis will tell you if your common sense is right. I know what the problem is. Some will say. but it is more than that.” 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.PROBLEM SOLVING 37/49 Principle 12 GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu) “Observe the production floor without preconceptions and with a blank mind.

some of the results we get are statistically significant. “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. variance etc.PROBLEM SOLVING GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu) 38/49 Principle 12 Mr. This is the real essence of TPS. Ohno at times made his supervisor / managers to draw a circle on the floor of a plant and they were told. regressions. But do we really understand the context of what is going on or the nature of the problem? . 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. The Power of Deep Observation To Question.

the Chief Engineer of D&D drove extensively in US. but place greatest emphasis on facts – go and see Think and speak based on personally verified data See America. 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 39/49 Principle 12 GO and SEE to Thoroughly Understand the Situation (Genchi Genbutsu) Data is of course important in manufacturing. then design for America – to design Sienna minivan in 2004.

PROBLEM SOLVING Principle 13 40/49 Make Decisions Slowly by Consensus. building consensus. Implement Rapidly If there is a project supposed to be fully implemented in a year. Every thing is verified . 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. implement it in a small pilot production – and fully implement at the end of year. Thoroughly Considering All Options. with virtually no remaining problems Nothing is assumed. A typical company anywhere would spend about three months on planning and begin to implement.

then implementing . Implement Rapidly Preferred Decision making is highly situational Philosophy is to seek maximum involvement for each situation Seek group input. Management Approval Decide and Announce Seek individual input. iron out all the resistance.PROBLEM SOLVING Principle 13 41/49 Make Decisions Slowly by Consensus. Thoroughly Considering All Options. generate consensus. then Decide and Announce Fallback Fallback If consensus not achieved Time Get all the parties on board. then decide and announce Group consensus with full authority Level of Involvement Group consensus.

Rather than blaming individuals. .PROBLEM SOLVING Principle 14 42/49 A Learning Org Through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen) We view errors as opportunities for learning. and as a team subordinates at all levels share knowledge with one another. Learning is a continuous company-wide process as superiors motivates and train subordinates. as predecessors do the same for successors. gets translated into new standards (Kaizen) . the organisation takes corrective actions and distributes knowledge about each experience broadly. 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.

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 .PROBLEM SOLVING Principle 14 43/49 Relentless Reflection (Hansei) and Continuous Improvement (Kaizen) 5 Whys is a method to pursue the deeper.

Countermeasure 6. Evaluate 7. complicated) 44/49 2. Locate Area / Point of Cause Point of Cause Why Why Direct Cause Cause Cause Cause Cause Basic Cause and Effect Investigation 4.1. Standardize Toyota’s Practical Problem Solving Process . Initial Problem Solving (Large. Five Whys? Investigation of Root Cause Cause Investigation Why Why Why Root Cause 5. vague. Clarify the Problem Grasp the Situation 3.

PROBLEM SOLVING Principle 14 45/49 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) .

and the other his. Like the dance of atoms Alvin had imagined in his mind. dreaming of what it might mean – thousands of people knowing each other that well. Who could stand in the way of such people? Orson Scott Card Prentice Alvin: The Tales of Alvin Maker . too. Most of the time people were all disorganized nobody knowing who anybody else was. working together. Knowing it was possible. and neither even had to check to make sure both parts were getting done. 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. He never realized it before. Alvin almost laughed out loud in the joy of seeing such a thing. moving to fit each other just right. It was a miracle seeing how smooth they knew each other’s next move before the move was even begun.THE TOYOTA WAY 46/49 One man did his part. but people could be like those atoms.

THE TOYOTA WAY The Lessons and Secrets of Toyota way 47/49 It creates bonds among individual and patterns such that they “move to fit together just right. Creating a WHOLE much greater stronger than the SUM of the individuals and . working together” towards a common goal.

Liker The Machine that Changed the World – Womack. Jones & Ross Lean Thinking – Womack & Jones .THE TOYOTA WAY 48/49 Bibliography & Recommended Readings The Toyota Way – Jeffery K.

THE TOYOTA WAY 49/49 Thank You .

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