Operations Management

Toyota Production System (TPS),
Just-in-Time (JIT),
and Lean Manufacturing

History of Manufacturing Management
• Sakichi Toyoda, the founder of the Toyota group of
companies, started Toyota as a textile machine

• Kiichiro Toyoda, son of Sakichi and founder of the
Toyota automobile business, developed the concept
of Just-in-Time in the 1930s. He decreed that Toyota
operations would contain no excess inventory and
that Toyota would strive to work in partnership with
suppliers to level production.

• Taiichi Ohno, Toyota's chief of production in the post-
WWII period. He was THE main developer of Toyota
Production System (TPS).

• Dr. Shigeo Shingo: A consultant to Toyota.

PS: Shingo Prize is the highest manufacturing
excellence award in the U.S. The prize is given both
to companies and individuals who contribute to the
development of manufacturing excellence.
History (cont.)
• Toyota Production System (TPS) drew wide attention from the
industrial community because Toyota was a profitable car company in
Japan during and after the oil embargo in 1970s.

• Outside Japan, dissemination began in earnest with the creation of the
Toyota-General Motors joint venture-NUMMI (New United Motor
Manufacturing Inc.) in California in 1984.

• Widespread recognition of TPS as the model production system grew
rapidly with the publication in 1990 of The Machine That Changed the
World: The Story of Lean Production, the result of five years of
research led by the Massachusetts Institute of Technology.

• The MIT researchers found that TPS was so much more effective and
efficient than traditional, mass production that it represented a
completely new paradigm and coined the term lean production to
indicate this radically different approach to production.

• The term was coined by John Krafcik, a research assistant at MIT with
the International Motor Vehicle Program in the late 1980s. He then
worked for General Motors and now is a Vice President of Hyundai,

Toyota Production System (TPS)
• Definition: The production system developed by Toyota
Motor Corporation to provide best quality, lowest cost, and
shortest lead time through the elimination of waste.
• TPS is comprised of two pillars, Just-in-Time and Jidoka
(autonomation) , and is often illustrated with the "house"
shown on the next slide.
• TPS is maintained and improved through iterations of
standardized work and kaizen (continuous improvement),
following Plan–Do-Check-Act (PDCA Cycle from Dr.
Deming), or the scientific method.

House of Toyota
How to make money?
Profit equation: Sales – Cost = Profit

Traditional pricing strategy: Cost + Profit = Selling price


When the cost goes up, the product selling price is raised to
reflect the higher costs and maintain the desired level of
Some even argues that the profit added should be large
enough to cover potential losses if the product does not
sell well.

Toyota accepts neither this formula nor these arguments!

Toyota‘s philosophy
• Selling price – Cost = Profit
• Customers decide the selling price.
• Profit is what remains after subtracting the cost from it.
• The main way to increase profit is to reduce cost.
• Consequently, cost reduction through waste elimination
should have the highest priority.
• Toyota‘s paradox: Reducing cost (waste), will reduce lead
time while increasing quality and customer satisfaction.
• How? We will discuss it soon.

House of Toyota
• Attacks waste
– Anything not adding value to the product
• From the customer‘s perspective
• Exposes problems and bottlenecks caused by
– Deviation from optimum
• Achieves streamlined production
– By reducing inventory
What Does Just-in-Time Do?
Waste (―muda‖ in Japanese) is
‗anything other than the minimum
amount of equipment, materials,
parts, space, and worker‘s time,
which are absolutely essential to add
value to the product.‘
— Shoichiro Toyoda
Founder, Toyota
© 1995 Corel Corp.
Introductory Quotation
Variability Occurs Because
• Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the proper
• Engineering drawings or specifications are
• Production personnel try to produce before
drawings or specifications are complete
• Customer demands are unknown
Continuous Flow
• Producing and moving one item at a time (or a
small and consistent batch of items) through a
series of processing steps as continuously as
possible, with each step making just what is
requested by the next step.

It is also called the one-piece flow, single-piece
flow, and make one, move one.

Continuous Flow Production
Flow with JIT
Traditional Flow
Production Process
(stream of water)
Inventory (stagnant
(water in
Push versus Pull
• Push system: material is pushed into
downstream workstations regardless of
whether resources are available

• Pull system: material is pulled to a
workstation just as it is needed

Traditional U.S. Manufacturing Firm:
Push (―old style‖ MRP / Material
Requirements Planning System)
• The production of items at times required
by a given schedule planned in advance

Information (Production Schedule)
Station 1
WS 2
WS 3
Pull (JIT) System
The production of items only as demanded for
use or to replace those taken for use.

Information (via Kanban/Card)
Station 1
WS 2
WS 3
• Japanese word for card
– Pronounced ‗kahn-bahn‘ (not ‗can-ban‘)
• Authorizes production from downstream
– ‗Pulls‘ material through plant
• May be a card, flag, verbal signal etc.
• Used often with fixed-size containers
– Add or remove containers to change production
Triangular Kanban
Part #
Trigger (Reorder) Point
Part Description Location
Date Triggered Lot Size
Tool #
Machine #
Figure S12.5
The function of Kanban ≈

The function of Inventory Reorder Point
Kanban System
• Single card
– Move only containers
with C (Conveyance)-
– e.g.: Kawasaki
• Dual card
– Move only container
with C- kanban
– Produce only when
authorized by P
(Production)- kanban
– e.g.: Toyota
Transparency 17.5
• Traditional: inventory exists in case problems
• JIT objective: Eliminate inventory
• JIT requires
– Small lot sizes
– Low setup time
– Containers for fixed number of parts
• JIT inventory: Minimum inventory to keep
system running
• Reduce ripple effect of small variations in
schedules (e.g., final assembly)
• Production quantities evenly distributed over
time (e.g., 7/day)
• Build same mix of products every day
– Results in many small lots
– 1 month = 20 working days
– Item Monthly Quantity Daily Quantity
A 40 2
B 60 3
Heijunka = Leveling (Smoothing) Production
Schedule using Mixed Model Sequencing
JIT Small Lots
Large-Lot Approach
Small versus Large Lots
Small lots also increase flexibility to meet
customer demands
Work in process inventory level
(hides problems)
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste
orders 10
Lot size = 5
Lot 1 Lot 2
Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
Reducing Lot Sizes Increases the
Number of Lots
…Which Increases
Inventory Costs
Lot Size
Setup Cost
Lot Size
Lot Size
Unless Setup Costs are Reduced
Lot Size
Setup Cost
Original optimal
lot size
New optimal lot size
Quick setup = Quick changeover
• Reducing setup cost ≈ reducing setup time
• Setup reduction time is a prerequisite to lot size
• SMED (Single Minute Exchange of Dies)
• The method has been developed by Toyota and
then expanded by Dr. Shigeo Shingo (a
consultant to Toyota), and has proven its
effectiveness in many companies by reducing
changeover times (non-value added times) from
hours to a less than 10 minutes
Setup Components
• Internal Setup: consists of setup activities that must
be performed while the machine is stopped.
• External Setup: consists of setup activities that can
be carried out while the machine is still
It is desirable to:
1. Convert as much internal setup to external setup
2. Improve the setup procedure

Setup Reduction
Quality At The Source
• Doing it right at the first time.
• Jidoka allows workers to stop production
• Andon lights signal quality problems
• Under capacity scheduling allows for
planning, problem solving & maintenance
• Visual control makes problems visible
• Poka-yoke prevents defects
House of Toyota

• Toyota Production System (TPS) is supported by two pillars: Just-in-
Time and Jidoka

• Jidoka = Autonomation = Automation with ―human‖ intelligence.

• Sakichi Toyoda, founder of the Toyota group of companies, invented
the concept of Jidoka in the early 20th Century by incorporating a
device on his automatic looms that would stop the loom from operating
whenever a thread broke. Dr. Shigeo Shingo then developed his idea

• This enabled great improvements in quality and freed people up to do
more value creating work than simply monitoring machines for quality
(separating people‘s work and machine‘s work).

• Eventually, this simple concept found its way into every machine,
every production line, and every Toyota operation.

Jidoka Techniques
• Poka-yoke (mistake or error proofing)

– A form of device for building-in quality at each production

– This device may take many shapes and designs.

– Typical types of Pokayoke are sensors, proximity switches,
stencils, light guards and alignment pins. Simple circuitry is
usually used to operate these electrical error proof devices
as they should be of low cost and simple design.

– Goal: Finding defects before they occur = Zero Defects

– Statistical Quality Control (SQC): Finding defects after they

• Visual management including using Andon Lamp

Visual Management
Andon Lamp
• Red - line stoppage
• Yellow - call for help
• Green - normal

• Change for better = continuous
• Kaizen workshop or Kaizen event:
A group of Kaizen activity, commonly lasting
five days, in which a team identifies and
implements a significant improvement in a
process, e.g., creating a manufacturing cell.

• GEMBA" is a Japanese word meaning "real place", where
the real action takes place. In business, GEMBA is where
the value-adding activities to satisfy the client are carried
• Manufacturing companies have three main activities in
relation to creating money: developing (designing),
producing and selling products. In a broad sense, GEMBA
means the sites of these three major activities.
• In a narrower context, however, GEMBA means the place
where the products are made.
• The term is often used to stress the that real improvement
can only take place when there is a shop-floor focus on
direct observation of current conditions where work is
done, e.g., not only in the engineering office.
Five Golden Rules of Gemba
• Masaaki Imai promoted Kaizen to people outside Japan through his two highly
acclaimed books:

1. Kaizen: The Key To Japan's Competitive Success.
2. Gemba Kaizen: A Commonsense, Low-Cost Approach to Management

• He preaches the Five Golden Rules of Gemba, the first of which is 'When a
problem (abnormality) arises, go to gemba first'. So what's gemba? It's the
shop floor, or equivalent. Once there, you apply

Golden Rule Two: check with gembutsu (relevant objects).

Three: take temporary counter-measures on the spot.

Four: find the root cause.

Five: standardize to prevent recurrence.

Standardization is the managing part of getting good gemba. You also need
good housekeeping (Imai is very keen on cleaning machines) and muda, the
elimination of waste. But all hinges on getting away from your desk. Obey the
master Imai. GO TO GEMBA!

(PDCA/Shewart /Deming Cycle)
• Plan: Go to the real place/factory flow (gemba), obverse
the real thing/product (gembutsu), get the real fact
(genjitsu). Focus on reducing response time, lead times,
exposing wastes in your process
• Do: Conduct Kaizen. Create models of excellence so
others can aspire to. Flow everything: product, information
material replenishment, services.
• Check for direction by aligning activities with long-term
business direction
• Act: Take actions to sustain and accelerate improvement

Source: www.leanbreakthru.com

5S: Workplace organization/Housekeeping
• 5s: Important part of Kaizen/Lean Manufacturing
• The S's stand for:

– Seiri - keep only what is absolutely necessary, get rid of things that
you don't need, i.e. simplify or sort.
– Seiton - create a location for everything, i.e. organize
or straighten.
– Seiso - clean everything and keep it clean, i.e. cleanliness or
– Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e.
– Shitsuke - assure that everyone continues to follow the rules of 5S,
i.e. stick to it or self discipline.

• 5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple

• 5S + 1S (Safety) = 6S (Hytrol, etc)
• 5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part
of Hewlett Packard)

• 5S is simple to begin and gives good benefits.

• Each individual in an organization is asked to get
rid of overburdening items.

• Red tag attack: A red tag attack is the strategy of
a group of people going through the plant and
putting red tags on everything that has not been
used within the last 30 days. The items that
people feel are necessary to "hold on to" must be
justified to their superior, or the item is taken out
of the plant!

5S in a Factory

Factory tour: Toyota vs.
5S in Office
• Before 5 S

• After 5 S

Standard Work
When manpower, equipment, and materials are used in the most efficient
combination, this is called Standard Work.
There are three elements to Standard Work:
1) Takt Time
2) Work Sequence
3) Standard Work-in-Process

Once a Standard Work is set, performance is measured and continuously
Value Stream Mapping

• A visual tool for identifying all activities of the planning,
and manufacturing process to identify waste.

• Provides a tool to visualize what is otherwise usually

• The leaders of each product family need to have a
primary role in developing the maps for their own area.

• Develop a current-state map before improvements are
made so that the efforts and benefits can be quantified.

• On the shop floor, not from your office. You need the real
information, not opinion or old data.

• Next page
Value Stream Map Symbols
Spot weld
C/T = 30 sec
C/O = 10 min
3 shifts
2% scrap rate
Vendor Data box
3,000 units
= 1 day
Push Supermarket:
the location of a
standard inventory
Physical pull
C/T = Cycle Time
C/O = Change over or setup time
Current Value Stream Map
Future Value Stream Map
Attributes of Lean Producers - they
• use JIT to eliminate inventory
• build systems to help employees product a
perfect part every time
• reduce space requirements
• develop close relationships with suppliers
• educate suppliers
• eliminate all but value-added activities
• develop the workforce
• make jobs more challenging
• reduce the number of job classes and build
worker flexibility
• apply Total Productive Maintenance (TPM)
The Five Steps of Lean
Production/Toyota Production
System Implementation

• Step 1: Specify Value
Define value from the perspective of the final customer. Express value in terms of a
specific product, which meets the customer's needs at a specific price and at a specific
• Step 2: Value Stream Mapping.
Identify the value stream, the set of all specific actions required to bring a specific
product through the three critical management tasks of any business: the problem-
solving task, the information management task, and the physical transformation task.
Create a map of the Current State and the Future State of the value stream. Identify and
categorize waste in the Current State, and eliminate it!
• Step 3: Create Continuous Flow
Make the remaining steps in the value stream flow. Eliminate functional barriers and
develop a product-focused organization that dramatically improves lead-time.
• Step 4: Create Pull Production
Let the customer pull products as needed.
• Step 5: Perfection
There is no end to the process of reducing effort, time, space, cost, and mistakes. Return
to the first step and begin the next lean transformation, offering a product which is ever
more nearly what the customer wants.

Comparison of
MRP (Material Requirements Planning),
JIT, and TOC (Theory of Constraints)
Loading of operations

Batch sizes

Importance of data

Planning focus
Production basis
Checked by capacity
Planning afterward
One week or more


Meet demand
Have doable plan
Master schedule
Controlled by kanban

Small as possible


Meet demand
Eliminate waste
Final assembly schedule
Controlled by
bottleneck operation

Variable to exploit
Critical for bottleneck
and feeder operations

Meet demand
Maximize profits
Need and plan