March 2006

The Toyota Way
John Shook

I’m going to talk about Toyota, but…

That doesn’t mean I think Toyota is “perfect”.

The point is not “Toyota”. (I’m not trying to sell you a Toyota.)

It’s not about Toyota; it’s not about cars.

JOHN SHOOK

Thought Question

• Why is Toyota so successful?

JOHN SHOOK

Why Study Toyota?

Compare Market Cap; Cash; Profit..

JOHN SHOOK

Why Study Toyota?
Automaker Toyota Honda DaimlerChrysler Nissan BMW Volkswagen Hyundai Audi Ford Motor General Motors Suzuki Mitsubishi Kia Porsche Mazda Isuzu Market capitalization $166.4 $55.4 $52.3 $46.7 $28.1 $21.5 $20.4 $15.2 $15.2 $12.7 $10.5 $9.9 $8.3 $6.6 $6.2 $4.8 Total revenue $179.4 $83.7 $194.1 $83.4 $60.1 $122.8 $51.3 $34.3 $175.5 $193.0 $22.8 $18.9 $17.1 $8.0 $25.1 $13.8 Profit/loss $10.7 $4.5 $3.1 $4.7 $2.9 $1.2 $1.6 $1.1 $2.0 -$3.9 $0.6 -$3.4 $0.6 $1.0 $0.5 $0.5

Revenue, net income are in US billions from the four quarters Q4 ’04 through Q3 ’05. Source: Capital IQ

JOHN SHOOK

JOHN SHOOK . • Product is essentially the “same”. • Customers are essentially the same.Thought Question again Why is Toyota so much more successful than GM? • Technology is almost exactly the same.

” -2001 JOHN SHOOK . Our practices based on this core principle have become a source of competitive advantage.The Toyota Way according to former President Cho “Toyota contributes to society through the manufacturing of high-quality products and services. These managerial values and methods are the Toyota Way.

Toyota Way is always… • Simple & Practical • Consistently solving real business problems – at each level of the company – in each activity of the company – in real time – at the root cause JOHN SHOOK .

The Toyota Story • Toyota picked up where Ford left off with “flow production”. JOHN SHOOK . lower volume environment. • His solution was high-variety production system with high velocity to shorten time from order to cash – TPS. • Taiichi Ohno followed Ford’s early thinking to its logical conclusion in a high-variety.

S. auto industry in three years…!” JOHN SHOOK .The Toyota Story Toyoda Family to Taiichi Ohno: “Catch up with the U.

auto industry in three years…!” • • • • Market much smaller than the US. banks refused additional loans Poor labor-management relations JOHN SHOOK .S.“Catch up with the U. yet diverse Productivity 1/10 that of the US No money.

5S Robust Products and Processes Supplier Involvement JOHN SHOOK .Shortest Lead Time Through Shortening the Production Flow By Eliminating Waste Just in Time “The right part at the right time in the right amount” •Continuous Flow •Pull System •Takt Time Jidoka “Built-in Quality” •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency HEIJUNKA Production Lines That Stop for Abnormalities Standardized Work and Kaizen Mutual Trust. TPM.The Toyota Production System Best Quality .Lowest Cost . Employee Development Stability.

The NUMMI Example: Lean Success with a UAW Workforce Agreement between Toyota and GM: Toyota manages the plant and implements the Toyota Production System GM’s “worst” plant: Quality Workforce Former GM workers offered jobs: Including the old “troublemakers” JOHN SHOOK .

The NUMMI Example: Lean Success with a UAW Workforce Extensive training program: Over 600 employees sent to Japan for training Over 400 trainers sent from Japan to NUMMI About 30 managers or "coordinators" from Japan TPS established: Physicals Product. Management/people systems JOHN SHOOK . etc. plant layout.

The NUMMI Example: Lean Success with a UAW Workforce Results In about one year… Quality Equal to Takaoka Japan Productivity Close to Takaoka Japan JOHN SHOOK .

Quantity The Toyota Production System or “Flow” Control Best Quality .Lowest Cost . TPM.Shortest Lead Time Quality Through Shortening the Production Flow By Eliminating Waste Control Quality. Quantity. Employee Development Stability. then Cost Just in Time “The right part at the right time in the right amount” •Continuous Flow •Pull System •Takt Time Jidoka “Built-in Quality” •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency HEIJUNKA Production Lines That Stop for Abnormalities Standardized Work and Kaizen Mutual Trust. 5S Robust Products and Processes Supplier Involvement JOHN SHOOK .

Cost Cutting Vs. Systematic Total Cost Reduction Conventional Thinking Cost + Profit = Price Lean Thinking Profit = Price – Cost JOHN SHOOK .

Individual Efficiency vs. System Efficiency JOHN SHOOK .

WASTE Value Waste Creating Work Action “Non-Value Creating Work” Processing Correction P Inventory C Over production I W Waiting TYPES OF MUDA O M Motion M Material Movement JOHN SHOOK .

Muda – Waste Too much overtime! Stress! Variability.System Design to Control the 3 M’s • Muri – Overburden or unreasonableness to a person or a machine Mura – Instability.All projects scheduled in 1Q with none in 2Q! . Inconsistency Not enough resources! • • The Seven Types of Waste .Extensive IT everywhere yet not enough copy machines! JOHN SHOOK .End of month deadlines with much overtime followed by periods of not enough work! . Unevenness.

Shortest Lead Time Through Shortening the Production Flow By Eliminating Waste Control Just in Time “The right part at the right time in the right amount” •Continuous Flow •Pull System •Takt Time Jidoka “Built-in Quality” •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency HEIJUNKA Production Lines That Stop for Abnormalities Standardized Work and Kaizen Mutual Trust.Lowest Cost . TPM.The Toyota Production System Quality Best Quality . Employee Development Stability. 5S Robust Products and Processes Supplier Involvement JOHN SHOOK .

Quality At The Source High Cost Low In-Process Next Process Final Inspection Location of Defect Detection Ability to find root cause Customer JOHN SHOOK .

Core Toyota View: • “You can understand everything about a company that is important by observing from a good spot on the plant floor.” JOHN SHOOK .

Lean Problem Solving .five whys GEMBA ENGINEER’S ROOM OW L F W OR K TA A D TOOLS DEFECT!! JOHN SHOOK .at the gemba .

Lowest Cost . Employee Development Stability.Shortest Lead Time Through Shortening the Production Flow By Eliminating Waste Flow Pillar Just in Time “The right part at the right time in the right amount” •Continuous Flow •Pull System •Takt Time Jidoka “Built-in Quality” •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency HEIJUNKA Production Lines That Stop for Abnormalities Standardized Work and Kaizen Mutual Trust. TPM. 5S Robust Products and Processes Supplier Involvement JOHN SHOOK .“Quantity The Toyota Production System Control” or Best Quality .

I call the basic principle of this the “just in time” approach.” -Kiichiro Toyoda. The guiding rule is to not ship any goods too early or too late. 1938 JOHN SHOOK .The Toyota Story “I plan to cut down on the slack time within processes and in the shipping of parts and material as much as possible.

based on sales. Takt Time = Operating Time per Shift Production Requirement per Shift 450 minutes 460 pieces = 59 sec 59 sec. JOHN SHOOK .Takt Time -Sets Pace of Production to Match Pace of Sales Time to produce a single component or entire product. 59 sec. 59 sec.

for first part JOHN SHOOK . for total order 3 min.Continuous Flow Processing Batch Processing Process A Process B Process C 10 minutes 10 minutes 10 minutes Lead Time: 30+ minutes for total order 21+ minutes for first piece Continuous Flow Processing Process A Process B Process C 12 min.

¾Preceding processes replenish what is taken away. Withdrawal Kanban Following Process Production Kanban Preceding Process New Product Supermarket Needed Product JOHN SHOOK .Pull System Assumptions: • Production schedules will always change • Production will never go according to schedule Rules: ¾Following processes go to preceding processes and withdraw what they need when they take it.

100 B. 200C 400C 200C. 200A DANGER: Kanban Tsunami Every Part Every Day Monday: 140 A. 160 C Monday 20 A 20B 10 C 10 C 20 A 20 C 20 A 20 B 10 C 10 C 20 A 20 C Every Part Every X (EPEX) 20 A 20 B 10 C 10 C 20 A 20 C 20 B 20 C 10 A 10 A 20 B 20 C How do you want to run your operations? JOHN SHOOK . 300B 200B.Level the volume and mix of work Every Part Every Week Monday Tuesday Wednesday Thursday Friday 400A 100A.

Employee Development Stability. 5S Robust Products and Processes Supplier Involvement JOHN SHOOK .Shortest Lead Time Through Shortening the Production Flow By Eliminating Waste Just in Time “The right part at the right time in the right amount” •Continuous Flow •Pull System •Takt Time Jidoka “Built-in Quality” •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency Foundation of operational stability and improvement HEIJUNKA Production Lines That Stop for Abnormalities Standardized Work and Kaizen Mutual Trust.Lowest Cost .The Toyota Production System Best Quality . TPM.

Standardized Work Chart Standardized Work Chart From: Pick up bar To: Set RP in press Analysis Number 5-15-95 1/3 AX Leader: Coach: 3 2 1 8 7 5 + 4 6 ROBOTIC WELDER 1/10 [Quality check Every 10 pieces] + SPOT WELDER PUNCH PRESS Takt Time Std. In-Proc Inventory Cycle Time In-Process Inventory Quality Checkpoint Safety Precaution 56 3 54 + JOHN SHOOK .

2. JOHN SHOOK . Standardized Work without Kaizen. you will encounter one of two types of very serious problems: 1. Kaizen without Standardized Work.Standardized Work as Structured Learning for the Operator What is Standardized Work? What is Kaizen? They are two sides of the same coin – if you try to have one without the other.

like companies. improvement stops Operations – like economies. Standardized Work without Kaizen • • • Employee motivation killed.Standardized Work as Structured Learning for the Operator 1. unidentified and unsolved Employees don’t take initiative. human creativity wasted Problems repeat. like species – either progress or decline JOHN SHOOK . like cultures.

PDCA not followed. • • • Kaizen without Standardized Work Chaotic change. no root cause analysis Progress impossible to identify. Improvement stops Kaizen – like the Scientific Method – requires a baseline of comparison JOHN SHOOK . saw-tooth effect Problems repeat.Standardized Work as Structured Learning for the Operator 2.

SW and Operator Balance Traditional Approach: Balance all the existing operators TT TT BEFORE AFTER .

SW and Operator Balance Lean Approach: Balance each c/t to TT Strive to eliminate one job TT TT BEFORE AFTER .

People Systems for the Lean Enterprise Empowerment Programs Involvement QC Circles Suggestion Programs Programs Human Resources Management Work Systems Rewards and Recognition Employee Development Employees as Citizens Standardized Work/Kaizen JIT/JIDOKA Respect for People Responsibility pushed down Examples JOHN SHOOK .

Toyota’s Cheryl Jones… “Continuous improvement comes from making mistakes and learning from them." JOHN SHOOK .

JOHN SHOOK .From “LEAN” to “LEARN” • Arguably what Toyota accomplished in its early days that has enabled it to continue to thrive is simply that it learned to learn.

Thinking Production System “If some problem occurs in one-piece-flow manufacturing then the whole production line stops. But when production stops everyone is forced to solve the problem immediately. In this sense it is a very bad system of manufacturing.” -Teruyuki Minoura. and through thinking team members grow and become better team members and people. former President. Toyota Motor Manufacturing. So team members have to think. North America JOHN SHOOK .

The Thinking Production System Getting people Through Shortening the Production Flow By Eliminating Waste to think and Just in Time Jidoka take initiative “The right part “Built-in Quality” at the right time is the key! in the right amount” Best Quality .Lowest Cost .Shortest Lead Time •Continuous Flow •Pull System •Takt Time •Automatic Machine Stop •Fixed Position Line Stop •Error Proofing •Visual Control •Labor-Machine Efficiency Leveled Production Production Lines That Stop for Abnormalities Operational Stability and Kaizen Standardized Work Preventative Maintenance. 4S Robust Products and Processes Supplier Involvement JOHN SHOOK .

Kaizen. PDCA.Teach the Scientific Method from “scientific management” to “management by science” Each leader’s job is to develop his/her people: • • • What is the real problem? What is the root cause? Use the “Five Why” process.all are essentially the scientific method. “Countermeasures” and “solutions”. JOHN SHOOK . Continuous Improvement. -.

P-D-C-A Cycle GRASP the SITUATION ADJUST ACTION PLAN CHECK REFLECT DO HYPOTHESIS TRY JOHN SHOOK .

Extensive Support and Coaching at the Front Lines of the Organization Superintendent Group Leaders Team & Team Leader JOHN SHOOK .

The Toyota Way Best Quality .Highest Morale Continuous Improvement Respect for People PDCA Learning Cycles JOHN SHOOK .Shortest Lead Time Best Safety .Lowest Cost .

engaged • To be successful – Operator-out or the Line-back principle • You can build your operating system from the operator out.Respect for People Focus on the operator – Enable the operator • To work safely • To know his/her customer • To be involved. so that nothing is left but value-creating steps. giving it to support people (isolate the waste). Don’t waste the operator’s time and effort! JOHN SHOOK . Continually remove wasteful steps from his work.

Back to the Thought Question Why is Toyota so much more successful than GM? • Technology is almost exactly the same. • Product is essentially the “same”. JOHN SHOOK . • Customers are essentially the same.

NUMMI as a Macro Learning Example: The Business Agreement: Toyota manages the plant and implements the Toyota Production System The Business Case for GM Small profitable car TPS Idle capacity – plant and people The Business Case for Toyota: ?? Results: GM Toyota ?? ?? JOHN SHOOK .

• “Use the “Why?” technique daily.” Show Respect. Mgmt. • “Respect your people.” JOHN SHOOK .” Ask Why. • “Sr.President Cho of Toyota: Three Keys to Leadership the Toyota Way Go See. must spend time on the plant floor.