OPM658

Quality Management

Case Study : TOYOTA

1. Introduction

Introduction Taiichi Ohno, who died in 1990, is perhaps less well

remembered than his work. He was the creator of the demand driven, ‘just-in-time’
Toyota Production System which has morphed into ‘Lean Manufacturing’. Born in
China in 1912 and a graduate of Nagoya Technical High School, he worked initially
with Toyoda Spinning before joining the vehicle business in 1943 where he
completed his career, eventually working primarily to develop Toyota thinking in
suppliers to the business. His most widely read work is Toyota Production System:
Beyond Large Scale Production, originally published in Japanese in 1978, and in
English by Productivity Press in 1988. In a foreword to that text, Muramatsu Rintaro
describes Ohno as ‘a determined man’ who ‘always challenged existing concepts’
and ‘able to conceive of and apply improvements that are both accurate and swift’.

‘All we are doing is looking at the time line …. from order … to cash …and
reducing that time by removing the ::: wastes’ Taiichi Ohno, 1988

Arguing that, ‘The world has already changed from a time when industry
could sell everything it produced to an affluent society where material needs are
routinely met’, Ohno, inspired by Toyoda Sakichi and Toyoda Kiichiro, saw the
objective of the Toyota system as being the consistent and thorough elimination of
waste, combining that objective with ‘respect for humanity’. Ohno (1988) states that
‘The Toyota Production System will reveal its strength as a management system
adapted to today’s era’. His belief seems to have been that by reengineering
production processes to enable ‘small quantities in many varieties’ (contrasting with
the Western high volume, long run, single product approach), Toyota could
compete more effectively in challenging markets.

Toyota is well known as one of the leaders in using Kaizen. In 1999 at one US
plant, 7,000 Toyota employees submitted over 75,000 suggestions, of which 99 per
cent were implemented. These continual small improvements add up to major
benefits. They result in improved productivity, improved quality, better safety, faster
delivery, lower costs and greater customer satisfaction. On top of these benefits to
the company, employees working in Kaizen based companies generally find work
to be easier and more enjoyable, thus resulting in higher employee morale and job
satisfaction and lower turnover. Kaizen reduces waste in areas such as inventory,
waiting times, transportation, worker motion, employee skills, overproduction,
excess quality and in processes. It improves space utilization, product quality, use
of capital, communications, production capacity and employee retention. It
provides immediate results. Kaizen focuses on creative investments that continually
solve large numbers of small problems.

2. Lean Six Sigma

Lean Six Sigma is a methodology that relies on collaborative team effort to

improve performance by systematically removing waste and combining lean
manufacturing/lean enterprise and Six Sigma to eliminate eight kinds of waste
(muda)—time, inventory, motion, waiting, over production, over processing, defects,
and skills. Lean Six Sigma combines lean manufacturing (originally developed by
Toyota) and Six Sigma (originally developed by Motorola). It is a management
approach to improve business performance that has blended the two individual
specialisms of lean and Six Sigma. Both management strategies are widely used
globally and have experienced proven success in various industries and services.

3. Seven Principles of Lean Manufacturing: Toyota Production System (TPS)

The famous seven principles of lean manufacturing as practiced by Toyota are as
follows:

1. Reduced setup times: Toyota was able to slash setup times by organizing
procedures, using carts and training workers to do their own setups. This was done
because setup practices are generally wasteful and tie up labour and equipment.

2. Small-lot production: Producing things in large batches result in huge setup costs,
high capital cost of high-speed dedicated machinery, larger inventories, extended
lead times and larger defect costs. It became possible for Toyota to economically
produce a variety of things in small quantities since it had found the way to make
setups short and inexpensive.

3. Employee involvement and empowerment: Toyota organized its workers by

forming teams and gave them the responsibility and training to do many specialized
tasks. Teams are also given responsibility for housekeeping and minor equipment
repair. Each team has a leader who also works as one of them on the line.

4. Quality at the source: Toyota focused on eliminating product defects by

discovering and correcting them as soon as possible. A worker can stop the entire
line by pulling a cord called Jidoka if the defect cannot be fixed.

5. Equipment maintenance: Toyota operators are assigned primary responsibility

for basic maintenance since they are in the best position to detect signs of
malfunctions. Maintenance specialists diagnose and fix only complex problems,
improve the performance of equipment and train workers in maintenance.

6. Pull production: In order to reduce inventory holding costs and lead times, Toyota
developed the pull production method wherein the quantity of work performed at
each stage of the process is dictated solely by the demand for materials from the
immediate next stage. The Kanban scheme coordinates the flow of small containers
of materials between stages. This is where the term just-in-time (JIT) originated.

7. Supplier involvement: Toyota treats its suppliers as partners and integral elements
of the Toyota Production System (TPS). Suppliers are trained in methods to reduce
setup times, inventories, defects, machine breakdowns, etc. and take responsibility
to deliver best possible parts.

Source: Adapted from Taiichi Ohno, Toyota Production System: Beyond Large Scale Production (Portland,
Oregon: Productivity Press, 1988).

Questions :

1.What factors have contributed to the increased awareness of quality in modern

business?

2.How each major function of TPS contributes to total quality and achievement of
competitive advantage?

3.How can business support activities help to sustain quality in organization?

4.Explain the roles of employee involvement in contributing quality products?

5. Is there any relationship between TPS and Lean ? Discuss.