OM Project Report

on

LEAN PRODUCTION AT TOYOTA

Submitted to: Prof. Divya jain
BY

GROUP H-04
ALOK AGRAWAL MANJINDER DHANOVA H17 H39

ASIA PACIFIC INSTITUTE OF MANAGEMENT STUDIES
PLOT NO. F-2, BLOCK NO B-1, MOHAN CO-OPERATIVE ESTATE, MATHURA ROAD, NEW DELHI 110044 FOR THE ACADEMIC SESSION 2007-2009

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ACKNOWLEDGEMENT
The feeling of acknowledging something and expressing it in words are two different things altogether. It is our weakness, but we honestly admit that when we truly wish to express our warm gratitude and ineptness towards somebody concerned, we are always at a loss of words. We gratefully take this opportunity to express our gratitude and ineptness to our most able guide Prof. Divya Jain, AIMS New Delhi for her active interest, timely encouragement, valuable suggestions and unceasing assistance and creative criticism at every stage of this project. We would like to thank our institute AIMS, New Delhi for providing us with this opportunity to undertake this project.

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Certificate
This is to certify that the Project Report titled “Lean Production at TOYOTA” has been submitted in partial fulfillment of the PGPM course, 3 term of PGPM Program at ASIA PACIFIC
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INSTITUTE OF MANAGEMENT STUDIES

by the members of Group H-04 ALOK AGRAWAL MANJINDER DHANOVA H-17 H-39

Prof. Divya Jain (Faculty: OPERATIONS MANAGEMENT)

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Table of Contents
Titles
Lean production Characteristics of lean production Basic Elements of lean manufacturing Benefits of lean production Origins and philosophies behind the Toyota Production System 7 Principles of Toyota Production System 13 The Focus of Toyota Production System Lean manufacturing at Toyota Conclusion Bibliography 14 15 17 18 11

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5 6 8 10

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LEAN PRODUCTION
Lean is about doing more with less: less time, inventory, space, labor, and money. "Lean manufacturing" is shorthand for a commitment to eliminating waste, simplifying procedures and speeding up production. The term was coined by James Womack and Daniel Jones to describe the Toyota Production System, widely recognized as the most efficient manufacturing system in the world. . Lean production is an assembly-line manufacturing methodology developed originally for Toyota and the manufacturers’ of automobiles. It is also known as the Toyota Production System (TPS). The goal of lean production is described as "to get the right things to the right place at the right time, the first time, while minimizing waste and being open to change". Taiichi Ohno, who is credited with developing the principles of lean production, discovered that in addition to eliminating waste or Muda (anything other than which adds value to the product or service), his methodology led to improved product flow and better quality. TPS evolved slowly over a span of 15 years. Initially known as JIT (Just In Time), it emphasized minimizing inventory and smoothing the flow of material so that it arrived just as it was needed or “just-in-time”. As the concept widened in scope, the term lean production became more prevalent. Now the terms are often used interchangeably. Just as mass production is recognized as the production system of the 20th century, Lean production is viewed as the production system of the 21st century.

Five areas drive lean manufacturing/production: 1. 2. 3. 4. 5. Cost Quality Delivery Safety Morale

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Characteristics of lean production
• • • • • Integrated single piece continuous workflow Close integration of the whole value chain from raw material to finished product through partnership oriented relations with suppliers and distributors. Just-in-time processing: a part moves to a production operation, is processed immediately, and moves immediately to the next operation Short order-to-ship cycles times; small batch production capability that is synchronized to shipping schedules Production is based on orders rather than forecasts; production planning is driven by customer demand or "pull" and not to suit machine loading or inflexible work flows on the shop floor. Minimal inventories at each stage of the production process Quick changeovers of machines and equipment allow different products to be produced with one-piece flow in small batches Layout is based on product flow Total quality control by active involvement by workers in trouble shooting and problem solving to improve quality and eliminate wastes. Defect prevention rather than inspection and rework, by building quality in the process and implementing real time quality feedback procedures. Team based work organizations with multi skilled operators empowered to make decisions and improve operations with few indirect staff.

• • • • • •

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During the 1980s, the set of practices summarized in the ten rules of lean production were adopted by many manufacturing plants in the U.S. and Europe. The management style was tried out with varying degrees of success by service organizations, logistics organizations and supply chains. Since the demise of many dot.coms, there has been a renewed interest in the principles of lean production, particularly since the philosophy encourages the reduction of inventory. Dell Computers and Boeing Aircraft have embraced the philosophy of lean production with great success. The ten rules of lean production can be summarized: 1. Eliminate waste 2. Minimize inventory 3. Maximize flow 4. Pull production from customer demand 5. Meet customer requirements 6. Do it right the first time 7. Empower workers 8. Design for rapid changeover 9. Partner with suppliers 10. Create a culture of continuous improvement

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Basic Elements of Lean Manufacturing

1. 2. 3. 4. 5. 6. 7. 8. 9.

Flexible resources Cellular layouts Pull production system Kanban production control Small lot production Quick setups Uniform production levels Quality at the source Total productive maintenance 10. Supplier networks

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1) Flexible resources- It is recognized as the key element of lean production and includes multi-functional
workers who perform more than one job and general purpose machines that perform several basic functions.

2) Cellular Layouts- There are Manufacturing Cells, comprised of dissimilar machines brought together
to manufacture a family of parts. In this the Cycle time (time required for the worker to complete one pass through the operations assigned) is adjusted to meet Takt time (paces production to customer demand) by changing worker paths.

3) Pull system - Material is pulled through the system when needed. It forces cooperation, and prevent over
and underproduction. While push systems rely on a predetermined schedule, pull systems rely on customer requests.

4) Kanbans –

It is a Card which indicates standard quantity of production. It is derived from two-bin inventory system and maintains the discipline of pull production. It authorizes production and movement of goods.

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Sample Kanban

5) Small Lots -

Require less space and capital investment and moves processes closer together and more dependent on each other. It Make quality problems easier to detect.

6) Quick Setups – This includes Internal setup (setup activities that can be performed only when a process
is stopped) and External Setup (setup activities that can be performed in advance).

7) Uniform Production Level – This is maintained by smoothing the production requirements on the final assembly line, or smoothing the demand across the planning horizon. This helps in reducing variability,
with more accurate forecasts. Mixed-model assembly steadies component production.

8) Quality at the source - It

includes visual control, that makes problems visible; Poka–yokes, that prevents defects from occurring; Jidoka, that gives authority to stop the production line if required, when any defect occurs; Andons, which are call lights that signal quality problems; Kaizen, which is a system for continuous improvement; and Under-capacity scheduling, that leaves time for planning, problem solving, and maintenance

9) Total Productive Maintenance (TPM) - combines preventive maintenance, which is a system
of periodic inspection and maintenance to keep machines operating, with total quality concepts.

10)Supplier networks –

This deals with long-term supplier contracts, synchronized production, supplier certification, mixed loads and frequent deliveries, precise delivery schedules, standardized and sequenced delivery, and being in close proximity to the customer.

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Benefits of Lean Production
Establishment and mastering of a lean production system would allow us to achieve the following benefits:
• • • • • • • • • • •

Waste reduction by 80% Production cost reduction by 50% Manufacturing cycle times decreased by 50% Labor reduction by 50% while maintaining or increasing throughput Inventory reduction by 80% while increasing customer service levels Capacity in current facilities increase by 50% Higher quality Higher profits Higher system flexibility in reacting to changes in requirements improved More strategic focus Improved cash flow through increasing shipping and billing frequencies

However, by continually focusing on waste reduction, there are truly no end to the benefits that can be achieved.

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Origins and philosophies behind the Toyota Production System
The Toyota Production System (TPS) is the philosophy which organizes manufacturing and logistics at Toyota, including the interaction with suppliers and customers. Toyota has long been recognized as a leader in the automotive manufacturing and production industry. This system, more than any other part of the company, is responsible for having made Toyota the company it is today. Toyota received their inspiration for the production system in the United States, but not from its automotive production process. This occurred when a delegation from Toyota visited the United States to study its commercial enterprises. They first visited several Ford Motor Company automotive plants in Michigan, but despite Ford being the industry leader at that time, found the methods in use to be unappealing. They were mainly appalled by the large amounts of inventory on site and by how the amount of work being performed in various departments within the factory was uneven on most days. However, on their visit to an American supermarket, the delegation was inspired by how the supermarket only reordered and restocked goods once they’d been bought by customers. They observed the simple idea of an automatic drink resupplier; when the customer wants a drink, he takes one, and another replaces it. Toyota applied the lesson from that supermarket, by reducing the amount of inventory they would hold only to a level that its employees would need for a small period of time, and then subsequently reorder. This is highly representative of a Just-in-Time (JIT) inventory system. The main goals of the TPS are to design out overburden (muri), inconsistency (mura) and eliminate waste (muda). There are 7 kinds of muda targeted in the TPS-

:
1. 2. 3. 4. 5. 6. over-production motion (of operator or machine) waiting (of operator or machine) conveyance processing itself inventory (raw material) 7. correction (rework and scrap)

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Toyota was able to greatly reduce lead time and cost using the TPS, while improving quality at the same time. This enabled it to become one of the ten largest companies in the world. It is currently as profitable as all the other car companies combined and became the largest car manufacturer in 2007. It has been proposed that the TPS is the most prominent example of the 'correlation', or middle, stage in a science, with material requirements planning and other data gathering systems representing the 'classification' or first stage. A science in this stage can see correlations between events and can propose some procedures that allow some predictions of the future. Due to this stellar success of the production philosophy's predictions many of these methods have been copied by other manufacturing companies, although mostly unsuccessfully.

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7 Principles of Toyota Production System (TPS)
1. Reduced Setup Times:
All setup practices are wasteful because they add no value and they tie up labor and equipment. By organizing procedures, using carts, and training workers to do their own setups, Toyota managed to slash setup times from months to hours and sometimes even minutes.

2. Small-Lot Production:
Producing things in large batches results in huge setup costs, high capital cost of high-speed dedicated machinery, larger inventories, extended lead times, and larger defect costs. Because Toyota has found the way to make setups short and inexpensive, it became possible for them to economically produce a variety of things in small quantities.

3. Employee Involvement and Empowerment:
Toyota organized their 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:
To eliminate product defects, they must be discovered and corrected as soon as possible. Since workers are at the best position to discover a defect and to immediately fix it, they are assigned this responsibility. If a defect cannot be readily fixed, any worker can halt the entire line by pulling a cord (called Jidoka).

5. Equipment Maintenance:
Toyota operators are assigned primary responsibility for basic maintenance since they are in the best position to defect signs of malfunctions. Maintenance specialists diagnose and fix only complex problems, improve the performance of equipment, and train workers in maintenance.

6. Pull Production:
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 demand for materials from the immediate next stage. The Kamban 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, as integral elements of Toyota Production System (TPS). Suppliers are trained in ways to reduce setup times, inventories, defects, machine breakdowns etc., and take responsibility to deliver their best possible parts.

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The Focus of Toyota Production System
Real TPS is not just about “flow” or “pull production” or “cellular manufacturing” or "load leveling". TPS in Toyota is primarily concerned with making a profit, and satisfying the customer with the highest possible quality at the lowest cost in the shortest lead-time, while developing the talents and skills of its workforce through rigorous improvement routines and problem solving disciplines. This stated aim is mixed in with the twin production principles of Just in Time (make and deliver the right part, in the right amount, at the right time), and Jidoka (build in quality at the process), as well as the notion of continuous improvement by standardization and elimination of waste in all operations to improve quality, cost, productivity, lead-time, safety, morale and other metrics as needed.

Instead of devoting resources to planning, which would be required for future manufacturing, Toyota focused on reducing system response time so that the production system was capable of immediately changing and adapting to market demands. In effect, their automobiles became made-to-order. The principles of lean production enabled the company to deliver on demand, minimize inventory, maximize the use of multi-skilled employees, flatten the management structure, and focus resources where they were needed. Toyota pioneered the "just-in-time" manufacturing system, in which suppliers send parts daily or several times a day - and are notified electronically when the assembly line is running out.

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LEAN MANUFACTURING AT TOYOTA
Toyota's steady growth from a small player to the most valuable and the biggest car company in the world has focused attention upon how it has achieved this, making "Lean" a hot topic in management science in the first decade of the 21st century. This production control system has been established based on many years of continuous improvements, with the objective of making the vehicles ordered by customers in the quickest and most efficient way, in order to deliver the vehicles as quickly as possible Toyota’s approach to automobile production, with its inherent quality controls, revolutionized the industry. Its “just-in-time” supply-chain concept has become a model for manufacturers around the world, and not just for automakers. The Toyota Production System (TPS) calls for the end product to be “pulled” through the system. This means the right parts reach the assembly line at the right place, just as they are needed, and with no excess. This approach represents a radical departure from conventional manufacturing systems, which require large inventories in order to “push” as much product as possible through production lines, regardless of actual demand. The idea of TPS, the contrary, is to produce only the products required in the precise quantities desired at a given point in time. There is a second approach to Lean Manufacturing, which is promoted by Toyota, in which the focus is upon improving the 'flow' or smoothness of work (thereby steadily eliminating mura, unevenness) through the system and not upon 'waste reduction' per se. Techniques to improve flow include production leveling, "pull" production (by means of kanban) and the Heijunka box While low inventory levels are a key outcome of the Toyota Production System, an important element of the philosophy behind its system is to work intelligently and eliminate waste so that inventory is no longer needed Toyota, through its "lean" production system, has been able to produce cars much more cheaply, and to a higher quality, than its US rivals. In 1998, it took Ford and GM 50% more hours to make a car than Toyota - and the difference was so great that GM did not make a profit on any of its cars. In 2006, Toyota could build an average car with just 29 hours' labor, while it took GM workers 33 hours. The list of organizations that have tried to ape the Toyota 'lean production' method includes rivals GM and Ford, aerospace giants Boeing and even the NHS. Lean manufacturing allows Toyota to develop products quickly, reduce the time it takes to produce an end result and have zero to low levels of waste. Toyota can develop a new model of car in just 18 months, and in 2006 it took just 29 hours to build a Toyota from scratch. General Motors took 33 hours at best. A decade ago GM and Ford were taking 50 per cent longer to build their vehicles than Toyota, and the final product was famous for its unreliability, while Toyota are famous for the opposite.

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Toyota's business has taken off because it's delivering faster and better quality, which is a result of its lean manufacturing practices. Although a mass manufacturer, Toyota has ditched the traditional way of mass manufacturing and instead produces cars as the customer wants, and they can have what they want when they need it.

Focus on flexibility
By basing production on demand rather than simply on capacity, Toyota manages to keep inventories, both of parts and of finished goods, to a strict minimum. But this is only one of the more obvious advantages of Toyota’s unconventional approach. By focusing on smaller production lots and producing only what customers require, and when they require it, Toyota has developed a flexibility and responsiveness that continues to set the standard for the industry. With its attention to continuous improvement (Kaizen), Toyota has attained die-changeover and machine-set times that are a fraction of its competitors'. Thus its capacity for reacting quickly to new market trends makes TPS an ideal system in today’s rapidly changing global business environment. Just as important is ensuring quality control, and the delivery of reliable and dependable products to customers. If a problem arises at any stage of production, Toyota’s automatic error detection system, called “Jidoka”, flags the defect and enables line employees to take the necessary steps to resolve it on the spot – even if that means bringing production to a halt. By calling attention to the equipment when an error first occurs, the Toyota system makes it easier to identify the source of the problem and prevents defects from progressing to subsequent stages of production. Only a system as agile and quality-oriented as TPS could make such measures economically possible. This approach not only helps eliminate waste, which makes TPS more respectful of the environment, it also means that customers can rest assured that Toyota products will conform to the highest standards of quality, reliability and durability.

Applying TPS principles, the Toyota staff carefully examined how production waste was created, and invented appropriate solutions to reduce, reuse or recycle all the ‘waste’ materials generated. This resulted in a 73% reduction of waste going to landfill between 2001 and 2005Between 2001 and 2005-

 Total energy usage per car was reduced by 37% across all their European manufacturing
plants.  Water usage was reduced in Europe by 34%.  Packaging waste has been reduced through the full use of returnable or recyclable packaging.  Volatile organic compound emissions per square meter of painted surface were reduced by 21%.

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CONCLUSION
Lean production has truly changed the face of manufacturing and transformed the global economy. It is both a philosophy, and a collection of management methods and techniques. The main advantage of the system is derived from the integration of the techniques into focused, smooth-running management systems. Lean production is most effective in repetitive environments, but elements of lean can be applied to almost any operation, including service operations like, retailing, banking, health care etc., as every system contains waste, i.e. something that does not provide value to your customer. Whether you are producing a product, processing a material, or providing a service, there are elements which are considered 'waste'. The techniques for analyzing systems, identifying and reducing waste and focusing on the customer are applicable in any system, and in any industry, and hence proper adoption of lean's advantages can prove to be a strategy for increased market share and market domination by combining lower costs and higher quality to create more value for the customer.

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Bibliography
The following sources have been referred to while making the project: Websites referred: http://en.wikipedia.org/wiki/Toyota_Production_System http://www.1000ventures.com/business_guide/cs_efficiency_toyota_ps.html http://www.1000advices.com/guru/processes_lean_5elements_bywj.html http://www.toyota.com/ http://www.toyotageorgetown.com/terms.asp Books referred: Operations Management by Russell & Taylor

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