Operations Management

Toyota Production System (TPS),

Just-in-Time (JIT),
and Lean Manufacturing
Handout
Why Toyota?
 Toyota is now the world's largest
carmaker
• Toyota sold 2.348 million vehicles in the
first three months of 2007.

• General Motors (GM) is estimated to have

sold 2.26 million cars and small trucks
during the same period.
Why Toyota?
Why Toyota?
 Why not Toyota?
• GM lost $10.6 billion in 2005.
• GM's pension obligations under funded by about $31
billion
• GM will eliminate 30,000 jobs and close 12 North
American factories by 2008
• Ford earned $2 billion worldwide, but lost $1.6 billion in
its North American operations.
• Ford is shutting 10 plants and laying off 25,000 hourly
workers.
• Daimler paid $36 billion for Chrysler in 1998.
• Chrysler reported a $1.5 billion loss for the third quarter of
2006 and a $2 billion loss for the first quarter of 2007.
• DaimlerChysler finally sold 80.1% of Chrysler to Cerberus
Capital for $7.4 billion in May of 2007.
Why Toyota?
History of Manufacturing Management
 History
• Sakichi Toyoda, the founder of the Toyota group of
companies, started Toyota as a textile machine
company.
• 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,
U.S.
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
 Toyota Production System (TPS):
Related Terms
• Ohno System
• MAN (Material as Needed) - Harley
Davidson
• MIPS (Minimum Inventory Production
Systems) - Westinghouse
• Stockless production - Hewlett Packard
• Zero inventory production system
• Lean Manufacturing/Production - MIT
 How to make money?
Profit equation: Sales – Cost = Profit

Traditional pricing strategy: Cost + Profit = Selling price

Example:

When the cost goes up, the product selling price is raised to
reflect the higher costs and maintain the desired level of
profit.
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
 What Does Just-in-Time Do?
• Attacks waste
– Anything not adding value to the product
• From the customer’s perspective

• Exposes problems and bottlenecks caused by

variability
– Deviation from optimum
• Achieves streamlined production
– By reducing inventory
 Introductory Quotation
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.

 Variability Occurs Because
• Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the proper
quantity
• Engineering drawings or specifications are
inaccurate
• 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
Traditional Flow Production Process
(stream of water)

Suppliers
Customers
Inventory (stagnant
Flow with JIT ponds) Material
(water in
stream)
Suppliers

Customers
 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

Work WS 2 WS 3
Station 1
Material
Information (Production Schedule)
 Pull (JIT) System

The production of items only as demanded for

use or to replace those taken for use.

Work WS 2 WS 3
Station 1
Material
Information (via Kanban/Card)
 Kanban
• Japanese word for card
– Pronounced ‘kahn-bahn’ (not ‘can-ban’)
• Authorizes production from downstream
operations
– ‘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
rate
 Triangular Kanban

Part # Part Description Location

Date Triggered Lot Size

Trigger (Reorder) Point

Tool #

Machine #
Kanban
Figure S12.5
 Basic Fixed-Order Quantity Model and
Reorder Point Behavior
1. You receive an order quantity Q. 4. The cycle then repeats.

Number
of units
on hand Q Q Q

R
L L
2. Your start using
them up over time. 3. When you reach down to
Time a level of inventory of R,
R = Reorder point
Q = Economic order quantity you place your next Q
L = Lead time sized order.
 Kanban
The function of Kanban ≈

The function of Inventory Reorder Point

(ROP)
 Kanban System
• Single card • Dual card
– Move only containers – Move only container
with C (Conveyance)- with C- kanban
kanban) – Produce only when
– e.g.: Kawasaki authorized by P
(Production)- kanban
– e.g.: Toyota

Transparency 17.5
 Inventory
• Traditional: inventory exists in case problems
arise
• 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
Heijunka = Leveling (Smoothing) Production
Schedule using Mixed Model Sequencing
• 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
 Small versus Large Lots
JIT produces same amount
in same time if setup times
JIT Small Lots are lowered

A A B B B C A A B B B C

Time
Small lots also increase flexibility to meet
customer demands
Large-Lot Approach

A A A A B B B B B B C C

Time
Photo S12.4
 Heijunka = Leveling (Smoothing) Production Schedule using
Mixed Model Sequencing = Uniform Plant Loading
Determining Production Sequence
Monthly Daily
Product Demand Requirements
A 800  20  40
B 800  20  40
C 200  20  10
Largest integer that divides into all daily requirements evenly is 10
Product Daily Requirements Divided by 10
A 4010 4
B 4010 4
C 1010 1
Mixed-model sequence
A-B-A-B-A-B-A-B-C Repeat 10 times per day
Transparency 17.7
 Cycle Times
Working time per day = 480 minutes
Daily requirements: A = 40 units; B = 40 units; C = 10 units
The system cycle time = 480/(40+40+10) = 5.33 min/unit

Product Requirements Cycle Time

A 40 480 4012
B 40 480 4012
C 10 48010 48

Transparency 17.8
 Lowering Inventory
Reduces Waste

Work in process inventory level

(hides problems)

Unreliable Vendors Capacity Imbalances

Scrap
 Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.

WIP
Unreliable Vendors Capacity Imbalances
Scrap
 Lowering Inventory
Reduces Waste
Reducing inventory reveals
problems so they can be solved.

Unreliable Vendors WIP Capacity Imbalances

Scrap
Reducing Lot Sizes Increases the
Number of Lots
Customer Lot size = 5
orders 10 Lot 1 Lot 2

Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
 …Which Increases
Inventory Costs
Cost

Setup Cost

Smaller Optimal Lot Size

Lot Size Lot Size
 Unless Setup Costs are Reduced
Cost

Setup Cost
New optimal lotOriginal
size optimal
Lot Size
lot size
Quick setup = Quick changeover
• Reducing setup cost ≈ reducing setup time
• Setup reduction time is a prerequisite to lot size
reduction
• SMED (Single Minute Exchange of Dies)
method
• 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
operating.
It is desirable to:
1. Convert as much internal setup to external setup
2. Improve the setup procedure
Systematic Setup Reduction
Setup Reduction
 Setup Reduction:
Standardizing die holder heights reduces the need to
exchange fastening bolts
Setup Reduction Techniques
 Quality At The Source
• Doing it right at the first time.
• Jidoka allows workers to stop production
line
• 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
 Jidoka
• 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
further.

• 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

process.

– 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

occur

• Visual management including using Andon Lamp

 Exhibit 7.10

Poka-Yoke Example
 Visual Management
Andon Lamp
• Red - line stoppage
• Yellow - call for help
• Green - normal
operation
 Kaizen
• Change for better = continuous
improvement
• 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
• 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
out.
• 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!
 5Whys: Finding the root cause of a
problem.
• 5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma.
Example:

• Why is our client, Hinson Corp., unhappy? Because we did not deliver our services
when we said we would.

• Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job
took much longer than we thought it would.

• Why did it take so much longer? Because we underestimated the complexity of the job.

• Why did we underestimate the complexity of the job? Because we made a quick
estimate of the time needed to complete it, and did not list the individual stages needed
to complete the project.

• Why didn't we do this? Because we were running behind on other projects. We clearly
need to review our time estimation and specification procedures.
 Plan-Do-Check-Act
(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
activities
Source: www.leanbreakthru.com
Similarity between 3 Gs and MBWA
• The 3 G's (Gemba, Gembutsu, and Genjitsu, which
translate into “actual place”, “actual thing”, and “actual
situation”).
• In the early days of Hewlett-Packard (H-P), Dave Packard
and Bill Hewlett devised an active management style that
they called Management By Walking Around (MBWA).
Senior H-P managers were seldom at their desks. They
spent most of their days visiting employees, customers,
and suppliers. This direct contact with key people provided
them with a solid grounding from which viable strategies
could be crafted.
 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
sweep.
– Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e.
standardize.
– 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
• 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.

others.
 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

improved.
 Standard Work Sheet
Scope of From Raw mat er i al Date Reviewed:
Operations To Heat Tr eat ment Janary 7, 2000

FG

RM

Quality Safety Standard Work Standard WIP TAKT Cycle Crew

Check Precaution in Process Quantity Time Time Size

10 12.1 min 23.4 min 2

 The Importance of Standardized Work:

Without it, all improvement efforts using Kaizen to eliminate

waste (muda) are not sustainable. You will go back to the
original position before Kaizen.
Manufacturing Cell
 Worker Routes Lengthened as Volume
Decreases
Cell 1 Cell 2

Worker Worker
1 2

Worker
3

Cell 3 Cell 4 Cell 5

Figure 11.4
 Workload balancing

• Aims at maximizing operator utilization

based on the given takt time.
• Is the key to adjust JIT lines to demand
fluctuations
• Requires flexible operators
Production Line Balancing
 Improving Lead Time:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Current Situation
Percent of Lead Time
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100

VA NVA (Non Value Added)

Approach # 1: Reducing Value Added (VA) Time by 50%

VA NVA

Approach # 2: Reducing Non Value Added (VA) Time by 50%

VA NVA
 Value Stream Mapping SM

• A visual tool for identifying all activities of the planning,

What? and manufacturing process to identify waste.

• Provides a tool to visualize what is otherwise usually

Why? invisible.

• The leaders of each product family need to have a

Who? primary role in developing the maps for their own area.

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

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

How? • Next page

 Value Stream Map Symbols
3,000 units
Spot weld
C/T = 30 sec

ABC C/O = 10 min

plating 3 shifts Finished

2% scrap rate = 1 day goods
Process Vendor Data box Inventory

C/T = Cycle Time

Mon
C/O = Change over or setup time and
Wed

Push Supermarket: Physical pull Shipment

the location of a
predetermined
standard inventory
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
time.
• 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)
MRP JIT TOC
Loading of operations Checked by capacity Controlled by kanban Controlled by
requirements system bottleneck operation
Planning afterward
Batch sizes One week or more Small as possible Variable to exploit
constraint
Critical for bottleneck
Importance of data Critical Unnecessary and feeder operations
accuracy
Speed of scheduled Slow Very fast Fast
development
Flexibility Lowest Highest Moderate
Cost Highest Lowest Moderate
Goals Meet demand Meet demand Meet demand
Have doable plan Eliminate waste Maximize profits
Planning focus Master schedule Final assembly schedule Bottleneck
Production basis Plan Need Need and plan