The Toyota Production System

Manuel Díaz
Market Development Manager

November 2007
Content
• What is Toyota Production System (TPS)?
• Background of TPS
• Understanding waste
• Two pillars of TPS
• Just-in-time concept
• Jido-ka
• Kaizen Philosophy
• Example of using TPS and Kaizen principles
Toyota’s guiding principles

Toyota Production System is a framework of concepts and methods for

enhancing corporate vitality.

It enables companies to achieve continual gains in productivity while

satisfying customers expectations for quality and prompt delivery.

Jidoka Just In Time Kanban

Kaizen
Takt
Heijunka
Time
Flexible
Pull System Manpower Standardized
Line Work
Early history of TPS
Sakichi Toyoda

• 1902 Sakichi Toyoda (founder of Toyota Group) invents a

loom that would stop automatically if any threads snapped
- separation of operator and machine

• 1930s Kiichiro Toyoda (head of new automotive

Kiichiro Toyoda
operation) travels to the USA to study Ford’s system -
groundwork for Just-In-Time concept

• 1940s Taiichi Ohno experiments at the Koromo plant to

Taiichi Ohno
produce only needed items in a timely, standardized
manner

• 1956 Taiichi Ohno visits the USA and discovers the

“supermarket” and sets up production based on a “pull
system”
Basis of TPS is respect for humanity
• Delivering high quality, cost-effective products and services to customers
• Actively supporting our local communities
• Being concerned about the impact our business has on the environment
• Recognizing our colleagues as our most precious resource
What can TPS do for you?
• Reduce waste and cut costs
• Reduce lead-time
• Improve quality
• Reduce inventory
• Create a “visual” workplace (easier to manage and identify waste)
• Standardize work operations
• Increase customer satisfaction
• Increase employee satisfaction
• Improve profitability
How to be more profitable

Traditional Formula TPS Formula

Price = Cost + Profit Profit = Sales Price - Cost

Selling
Price Profit
Selling Selling
Price Profit Price Profit Profit
Cost Cost Price is Cost
decided by
the market Cost

(eg. monopoly) We need to reduce the cost

How to reduce cost (and lead time)
• Eliminating waste (cost and time  muda)
• Waste is bad … but the biggest problem is to be unaware of it or to lack
the knowledge of what waste is
• Nothing can be done about it if you are unaware

Cost

Capacity = Operation + Waste

Understanding waste

7 kinds of waste (muda):

1) Overproduction
2) Waiting
3) Transportation / conveyance
4) Over processing / over quality
5) Inventory / stock
6) Motion (people’s movement)
7) Correction / rework
The two pillars of TPS

J I T JIDO-KA
Just-in-time (“Automation”)
Just-in-time

The just-in-time concept is a way to reduce cost while at the same time
meeting the customer’s delivery needs

• Produce only the necessary items, at the necessary time, in the necessary
quantity

• No unnecessary items are stored

• No unnecessary operations are carried out

The preceding processes exist for producing only what is ‘pulled’

Basic principles of just-in-time

The necessary items at the necessary time in the necessary quantities

Takt time

Continuous flow processing

Pull system
Takt time

• The ideal amount of time required to produce a single part or product

• The takt time determines the speed or the interval of the flow of people,
materials, and information at each process

• It is a factor that must be established based on the amount that is needed

per day to prevent wasteful overproduction or job delays

• The takt time is a standard that defines the number of minutes within each
process
Total daily operating time
Takt time =
Total daily production requirements
Takt time
Takt time for a Automotive Service Advisor for reception process
• Daily working hours: 8 hours (480 minutes)
• Daily number of customer visits: 48 customers
• Takt time = 480 ÷ 48 = 10 minutes per customer

20
18
16
14
12
10
8
6
4
2
0
8 9 10 11 13 14 15 16

• Takt time (from 8 to 9am) = 60 / 18 = 3.33 minutes per customer

Cycle time

The actual amount of time required for a worker to complete one cycle of
their entire job process.

For our previous example:

Cycle time for a Service Advisor to complete the reception process is 15

minutes per customer
Manpower calculation

Use the takt time and cycle time to calculate the required manpower
• Formula for calculating the manpower required for a process:

Cycle Time (Actual)

Required manpower =
Takt Time (Theoretical)
• For our example:
Cycle Time (actual processing time) = 15 minutes
Takt Time = 3.33 minutes
15 ÷ 3.33 = 4.55 = 5 resources

Note: If Cycle Time is reduced to 14 min (through Kaizen)

then 4 service advisors can manage this volume.
Basic principles of just-in-time

The necessary items at the necessary time in the necessary quantities

Takt time

Continuous flow processing

Pull system
 Continuous flow processing
Establishing a smooth flow by:

• Eliminating stagnation of work between processes

• Carrying out one-piece-at-a-time production

Traditional production system (lot production)

Start Finish

Continuous flow processing system

Start Finish
Traditional (lot) production
Traditional
Lead Time Analysis

A 100’ Transfer 100 items

to Process B
Process

100’ Transfer 100 items

B
to Process C

100’
C

First Part  201’

Lead Times:
Complete Order  300’
Continuous flow production
Traditional
Continuous
Lead Time Analysis

A 100’
100’
Process

Transfer 1 item 100’

B
100’
Transfer 1 item 100’
C
100’
Lead Times:
Reduction results
1st item lead time  98%
First Part  3’
Full order lead time  66%
Complete Order  102’
Pull system
• Subsequent process pulls the necessary items in the necessary quantities
at the necessary time from the preceding process
• Completed products should be kept in the process in which they were
produced
 Kanban system
Pull system  Levelled production
(heijunka)
Fluctuating workload Levelled workload

• Waste during slack times • Minimizes resources

required to handle
• Difficult to absorb peak workload
time demands • Increased efficiency

Max

Max

Units/Workload
Units/Workload

Min

Min

Period/Time Period/Time
The two pillars of TPS

J I T JIDO-KA
Just-in-time (“Automation”)
Jido-ka

The ability to stop a production line when a problem occurs so that no defective
products will be released to the subsequent process

Effectiveness of Jido-ka

• Do not produce defective products

 Built in quality at the production process

• Easy to know when a problem occurs

 Quick action can be taken

• No need for workers to watch the process or machine

 Saves on resources
Jido-ka – built in quality

Traditional method:
Rework

A B C Detailed
Complete
Inspection

• 100% final inspection

• No quality feedback to operation responsible

• Extra rework operation required
Jido-ka – built in quality
TPS method:

Quality feedback

A B C Minor Complete
inspection

Built in quality checks at each process

• Problems / defects do not pass
• Inspections / repairs at each process
• Quality feedback is immediate
• Problems are visible at the source
Jido-ka

 Control  control irregular operations (irregularity control)

 What is irregular?
 Products / operations that flow out of the standard

 Setting the standard is the first step to find out Irregularity!

 We have a standard, but it is impossible to check every operation …

 Impossible to check all staff operations all day, every day
 Set visual controls that make irregularity visible!
Standardized work
• Clarifies the current situation:
- Organizes and defines worker movement
- Outlines efficient, safe work methods
• Defines the method for:
- Building in quality
- Lowering cost
- Maintaining safety
• Provides work site management a basis to:
- Make judgments (Is it going the way it is supposed to?)
- Identify waste
- Suggest improvements
- Take actions
Flexible manpower line

A system and way of thinking that enables any

number of workers to produce the required quantity,
without a drop in productivity

In contrast, a fixed manpower line is one that always

requires a fixed number of workers and no upward or
downward adjustment can be made
Flexible manpower line
Fixed manpower line Max capacity: 50 units / day

• If required units increase to 55  overtime work

• If required units decrease to 40  Slow Down = low productivity
Flexible manpower line

• Increase staff to shorten the Cycle Time and then increase line speed

• Reduce staff to spread the Cycle Time and then reduce speed
Fixed manpower line
Fixed manpower line

Process A Process B Process C Process D Total

Manpower
Required 1.5 1.5 1.5 1.5 6.0
Staff Required 2 2 2 2 8.0

Barriers / walls
1. Fixed organization / rigid job responsibility
2. Limitation of skills

3. Poor / fixed layout

Flexible manpower line
Flexible manpower line

Process A Process B Process C Process D Total

Manpower
Required 1.5 1.5 1.5 1.5 6.0
Staff Required 3 3 6.0

Requirements for flexible manpower line

1. Flexible organization / non-rigid job responsibility
2. Multi-skill development

3. Functional layout
Kaizen Philosophy
What is Kaizen?

• Japanese word “Kaizen” that means continuous improvement

• The idea is to keep making one improvement after another. Gradually, a lot
of small improvements add up to huge gains in productivity (elimination of
waste) and quality. As a direct result customer satisfaction will increase.

• Continually improve the process by discovering / eliminating waste

• Philosophy that there is always more to improve

• Proactive vs reactive approach to improving processes and preventing

problems

• Empower team members to take part in managing and improving their own
jobs
Relationship between management and
staff
Top Management

Policy
I TY
T I V
AC
EN
I Z
KA

Engagement
Time
Staff
Kaizen implementation steps

• Understand the current condition

- Actual situation  Genchi Genbutsu

- Data collection

- 5Ws - What, Where, When, Who, and, Why

Note:
• Genchi (site or place): Is where key value-added activities take place

 Input from the people who actually do the work is vital

• Genbutsu (something physical or tangible): Go look and see first hand what is
actually happening at the work site

 Confirm with your own eyes

Kaizen implementation steps

Determine and implement countermeasures

What will please the company, the customers and the staff?

- Company  More sales, more profits, etc.

- Customers  Quality, price, time (delivery time, lead-time)

- Staff  Job security, job satisfaction, income, etc.

• Decide priority / order of kaizen points to achieve high effectiveness in a

short / realistic time frame (cost, time and impact comparison)

• Set kaizen targets

• Have a strong will / motivation to achieve the targets!

Kaizen implementation steps

Check effectiveness of the countermeasures

• Follow the established rules / standards
- Once irregularity is admitted, irregularity becomes the standard
• Improve rules / standard to establish higher standards
• Control the irregularity
- Visualise / control points
- Find out root causes and take action to eliminate the root causes
• Watch the status, not the results
- Do not wait for results (i.e. reports)
- Take action in advance
• Show kaizen improvements with numerical values
- How many, how much or what percentage of improvement
Kaizen implementation steps

Standardized problem-solving procedure:

1. Select a project

2. Understand the current status and setting objectives

3. Analyze the data to identify root causes

4. Establish countermeasures

5. Implement countermeasures

6. Confirm the effects of the countermeasures

7. Establish or revise the standards to prevent recurrence

8. Review the entire process

Key points on kaizen

• Kaizen is a continuous process of improvement

• Improves efficiency through the elimination of waste

• Kaizen should involve all personnel and eventually should be a bottom up

approach

• The kaizen plan should be clear and specific

• Periodically measure the results within the kaizen plan

Example of TPS / Kaizen
Implementation
Objectives of challenge

• Improve CSI score by at least 5%

• Improve Labour Utilization up to 80%

• Improve Inventory Control and reduce inventory to 2 stock months

First steps

80% preparation and 20% implementation

• Grasp the current situation via surveys (parts then workshop)

• No changes / investments until surveys and analysis are completed

• Dealer principal and management were introduced to TPS / kaizen and

were very motivated!

• Kaizen team created  Parts Manager

Owner General Manager Service Manager

After Sales Director

Survey results – facility layout

• Inefficient layout of facility (reception, parts, service and B&P)

• Long walking distances for parts and dispatch

• Bottlenecks created in entrance to service workshop

Survey results – inventory

• Poor inventory control

Built inventory control tool 

• Over 5 stock months of stock

• Over $2,000,000 in stock

• 3236 obsolete parts references

in stock based (MAD < 0.15)
Survey results – storage layout

Studied and measured the parts

1st Floor
0.8m 0.62m
5.7m

storage warehouse: 0.5m 0.7m

0.5m
0.6m 1.5m
Customer Parts Counter

6.0m
1.8m

• Poor use of storage techniques

0.9m
4.0m
1.8m
1.0m
1.0m 1.8m 1.8m 1.8m
0.5m
1.5m 0.62m
1.0m 1.6m
2.1m 0.33m

• Lack of cleanliness / organization 1.8m

1.8m
1.8m
2.3m
1.2m
0.62m

1.7m
0.33m 0.33m 0.33m 1.5m

1.8m

0.8m 2.1m
1.8m 1.8m
1.8m Office

• Inefficient layout of parts

1.0m
1.8m
1.85m
1.0m
1.5m
1.8m
2.3m
1.0m
1.0m 1.8m

• Long walking distances

1.8m
1.0m 1.5m

1.0m 1.0m 1.5m

1.8m 0.9m

1.0m 1.8m windscreens

1.2m 0.5m
Lockers for 1.0m 1.2m
emloyees 1.5m
3.0m 0.9m 1.5m
1.0m
windscreens
1.8m
0.62m
0.5m 0.7m 1.1m
10 m 0.9m
1.5m
1.8m 0.9m
0.62m 1.2m
windscreens
2.4m
1.6m 1.4m 1.5m

5.5m 1.8m 0.62m

1.5m
1.3m
1.8m 1.0m

0.5m 0.62m

1.0m 1.0m 1.0m 1.0m 1.8m 1.8m

computer desk
0.5m
Survey results – general KPIs
KPIs are a fundamental prerequisites to understand the current situation

• KPIs need to be captured as accurately as possible

Customer satisfaction index Serviced units

4.60 5000

4.55
4500
4.50

4.45 4000

4.40
3500
4.35

4.30 3000

4.25
2500
4.20

4.15 2000
Jan Feb Mar Apr May Jun Jul Aug Jan Feb Mar Apr May Jun Jul Aug
Survey results – job category analysis
Job Component Ratio
100%

90% 17.8%
Maintenance component ratio
80% 4.0%
8.7% S. Light Heavy
70% 14% 14%

60%
Medium
50% 24%
Light
40%
69.6% 48%
30%

20% Average service units

4,225 monthly
10%

0%

Maintenance Repair W arranty Internal

Survey results – process leadtime

Reception Washing Dispatch Production Invoicing Delivery

Lead-
time
MUDA (stagnation between the processes)
2:47

Lead-
time
1:37

Eliminate all MUDA from the service operation

Survey results – service job time (avg.)

128 minutes total

8 min
(waiting
for parts)
Survey results – technician’s movement
Tools box

table

t
a
b
l
e

Oil
drainer

Parts desk
Survey results – technician’s movement
100%
9.49%
90% Non-
6.29%
productive
80% 31.92%
16.14%

70%
0.20%
Waiting
6.72%
Parts preparation
60%
Walking
Management job
50%
27.80% Cleaning/W ashing
Assemble/Disassemble
40%
Adjustment
Inspection
30%

20% 24.72%
Productive
68.08%
10%
8.64%
0%
Survey results - stagnation N/A
6%
In
operation
28%

Stagnation Reasons

13 14
Stagnation
66%

N = 73
12/07/05

1
12 Waiting for service
2 Waiting for new car delivery
Waiting for parts
Waiting for delivery
4 Waiting for technician
N = 62 Waiting for cleaning
12/07/05 Unknown
10 B&P
Survey results - appointments
Customer traffic at reception
Reception Delivery
18.0

16.0

14.0

12.0
Appointment rate: 97.53%
10.0

8.0

6.0

4.0

2.0

0.0

Labour Utilization: 42.58%

Extracted from MSI

Survey results – appointment analysis
Appointment System Analysis

18%

Spare time for

appointments

Technician's actual
working time

11% No-show rate

53%

Time allocated for appointments

"MUDA"

18%
Kaizen activity - examples
Kaizen actions
 Survey results – facility layout
Before

Two warehouse created:

a) Service workshop

b) B&P workshop

After

• Second entry ramp

created

• Walking distances
cut significantly
Kaizen actions – service workshop flow

New workshop layout

• Second entry gate installed

• Unit repair area created with

two lifts

• B&P preparation and spray

booths disassembled and
installed in new B&P shop
Kaizen actions – inventory control

• Inventory control tool

• Trained parts staff

• Scrapping / staging deadstock

• Optimum inventory level

• Stocking policy

• Reduce safety stock

• Phase in, phase out

Kaizen actions – new storage layout
1st Floor
Key 2nd Floor
0.5m
Each grid square is 50cm 5.5m
Racks are 2.1m Height, 1m Width,

1V-13
1V-11 1V-12 1V-13

1V-07 1V-08 1V-09 1V-10 1V-11 1V-12 1V-13

1Y-11 1Y-12 1Y-13

1T-14
50cm Deep

1Z-04 1Z-05 1Z-06

1V-10 1V-11 1V-12

1T-12 1T-13
4.1m
.8m

1V-06 1V-07 1V-08 1V-09 1V-10

1Y-08 1Y-09 1Y-10

1T-09 1T-10 1T-11

8.1m
.8m
1.0m .95m
Spare parts movement P-to-P

1V-08 1V-09
class A
FAST MOVING .6m
3.0m

1Y-06 1Y-07

1T-08
1V-06 1V-07
1V-06 1V-07

1T-07
Pre-pull rack for non 16m 1.0m 2.2m 1.0m 1.0m

1T-06
standard-size parts 0.4m
0.5m
2.5m

1V-03 1V-04 1V-05

1X-01 1X-02 1X-03 1X-04 1X-05
1Y-01 1Y-02 1Y-03 1Y-04 1Y-05

1T-05
1W-
6m 2.2m

05
.8m

1T-04
1W-
Prepull

04
1Z-03

1T-02 1T-03
1W-
6.4m

03
Class A Gold Zone

1V-02
1Z-01 1Z-02

1W-
FAST MOVING

02
.8m

1V-01

1T-01
1W-
5.2m
01
.8m
0.8m 0.8m
Electrical
0.5m 0.5m 2.3m
parts
1.0m 1.0m
2.5m
.8m
2m 1.5m .8m .8m .8m .8m 1.0m
`
.5m
Workshop Parts Counter Spare parts movement class
B&C&E
Kaizen actions – fast moving parts
Before
After
Kaizen actions – pre-pulling
Before

After
Kaizen actions – service reception
Before After
Results
Results
• CSI improved to 4.62 (originally 4.29, target was 4.5)

4.70

4.60
Target
4.50 Launch of TSM Project

4.40

4.30

4.20

4.10
Apr May Jun Jul Aug Sep Okt Nov Dec Jan Feb Mar
Results
• Labour utilization increased to 92% (originally 42%, target was 80%)

100%
90%
Target
80%
70%

Launch of TSM Project

60%
50%
40%
30%
20%
10%
0%
Apr May Jun Jul Aug Sep Okt Nov Dec Jan Feb Mar
Results
• Stock months reduced to 1.6 (originally 5, target was 2)

Launch of Project
5

4 - 600,000 $
3
Target
2

0
Mar Apr May Jun Jul Aug Sep Okt Nov Dec Jan Feb Mar
Conclusions
Summary on TPS / kaizen

1. Respect for humanity (human factor)

2. Differentiation by reducing cost and lead time

3. Eliminate the 7 kinds of muda (cost / time)

4. 3 key factors to realize JIT operations

5. Jido-ka  irregularity control should be visible

6. Standardize work

7. Flexible manpower

8. Kaizen implementation
Conclusion

The Toyota Production System is a complex system developed by Toyota

which pursues optimum streamlining through the elimination of muda and
which aims at building in quality while recognizing the principle of cost
reduction.

“Once you discover the bountiful results of Kaizen improvements you

continue forever in the spirit of Kaizen”

Taiichi Ohno
Thank you