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The Toyota story has been intensively researched and Decoding the DNA of painstakingly documented, yet what really happens inside the Toyota Production the company remains a mystery. Here’s new insight into the unspoken rules that System give Toyota its competitive edge. by Steven Spear and H. Kent Bowen

Included with this full-text Harvard Business Review article:

1 Article Summary The Idea in Brief—the core idea The Idea in Practice—putting the idea to work

2 Decoding the DNA of the Toyota Production System

12 Further Reading A list of related materials, with annotations to guide further exploration of the article’s ideas and applications

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Decoding the DNA of the Toyota Production System

The Idea in Brief The Idea in Practice Toyota’s renowned production system (TPS) TPS’s four rules: clude that their demand on the next ma- has long demonstrated the competitive ad- chine doesn’t match their expectations. All work is highly specified in its content, vantage of continuous process improve- They revisit the organization of their pro- sequence, timing, and outcome. ment. And companies in a wide range of duction line to determine why the machine Employees follow a well-defined sequence of industries—aerospace, metals processing, was not available, and redesign the flow steps for a particular job. This specificity en- consumer products—have tried to imitate path. ables people to see and address deviations TPS. Yet most fail. immediately—encouraging continual learn- Any improvement to processes, worker/ Why? Managers adopt TPS’s obvious prac- ing and improvement. machine connections, or flow path must tices, without applying the four unwritten be made through the scientific method, Example: rules that make TPS successful. Like strands under a teacher’s guidance, and at the Installing the right-front seat in a Camry re- of DNA, these rules govern how people lowest possible organizational level. quires seven tasks performed in a specific carry out their jobs, how they interact with Frontline workers make improvements to sequence over 55 seconds. If a worker finds each other, how products and services flow, their own jobs. Supervisors provide direction himself doing task 6 before task 4 or falling and how people identify and address pro- and assistance as teachers. behind schedule, he and his supervisor cess problems. correct the problem promptly. Then they Example: The rules rigidly specify how every activity— determine whether to change the task At one Toyota factory, workers seeking to from the shop floor to the executive suite, specifications or retrain the worker to pre- reduce a machine’s changeover time from from installing seat bolts to reconfiguring a vent a recurrence. 15 to 5 minutes were able to reduce the manufacturing plant—should be per- time only to 7.5 minutes. A manager asked Each worker knows who provides what to formed. Deviations from the specifications why they hadn’t achieved their original 5- him, and when. become instantly visible, prompting people minute goal. His question helped them see Workers needing parts submit cards specify- to respond immediately with real-time ex- that their original goal had been a random ing part number, quantity, and required desti- periments to eradicate problems in their guess, not based on a formal hypothesis nation. Suppliers must respond to materials own work. Result? A disciplined yet flexible about how fast it could be done and why. requests within specified periods of time. and creative community of scientists Thus they couldn’t test the hypothesis to Workers encountering a problem ask for help who continually push Toyota closer to its determine what caused the less-than- immediately. Designated assistants must re- zero-defects, just-in-time, no-waste ideal. ideal results. spond at once and resolve the problem within Mastering TPS’s four rules takes time. But by the worker’s cycle time (e.g., the 55 seconds it dedicating yourself to the process, you takes to install a front seat). stand a better chance of replicating Toyota’s Failure to fulfill these specifications signals a DNA—and its performance. search for potential causes—such as ambiguous requests from colleagues or an overwhelmed assistant. Once the cause is identified, it’s re- solved rather than kept hidden. Every product and service flows along a simple, specified path. Goods and services don’t flow to the next available person or machine—but to a specific person or machine.

Example: If workers at an auto parts supplier find themselves waiting to send a product to the next designated machine they con- OPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. OPYRIGHT © 2006 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. C

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The Toyota story has been intensively researched and painstakingly documented, yet what really happens inside the company remains a mystery. Here’s new insight into the unspoken rules that give Toyota its competitive edge.

Decoding the DNA of the Toyota Production System

by Steven Spear and H. Kent Bowen

The Toyota Production System has long been not the case. Other Japanese companies, such hailed as the source of Toyota’s outstanding as Nissan and Honda, have fallen short of performance as a manufacturer. The system’s Toyota’s standards, and Toyota has success- distinctive practices—its kanban cards and fully introduced its production system all quality circles, for instance—have been widely around the world, including in North America, introduced elsewhere. Indeed, following their where the company is this year building over a own internal efforts to benchmark the world’s million cars, mini-vans, and light trucks. best manufacturing companies, GM, Ford, So why has it been so difficult to decode the and Chrysler have independently created Toyota Production System? The answer, we be- major initiatives to develop Toyota-like pro- lieve, is that observers confuse the tools and duction systems. Companies that have tried to practices they see on their plant visits with the adopt the system can be found in fields as di- system itself. That makes it impossible for verse as aerospace, consumer products, metals them to resolve an apparent paradox of the processing, and industrial products. system—namely, that activities, connections, What’s curious is that few manufacturers and production flows in a Toyota factory are have managed to imitate Toyota successfully— rigidly scripted, yet at the same time Toyota’s even though the company has been extraordi- operations are enormously flexible and adapt- narily open about its practices. Hundreds of able. Activities and processes are constantly thousands of executives from thousands of being challenged and pushed to a higher level businesses have toured Toyota’s plants in Japan of performance, enabling the company to con- and the United States. Frustrated by their in- tinually innovate and improve. ability to replicate Toyota’s performance, many To understand Toyota’s success, you have to visitors assume that the secret of Toyota’s suc- unravel the paradox—you have to see that the cess must lie in its cultural roots. But that’s just rigid specification is the very thing that makes OPYRIGHT © 1999 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. OPYRIGHT © 1999 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. C

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the flexibility and creativity possible. That’s make explicit what is implicit. We describe what we came to realize after an extensive, four principles—three rules of design, which four-year study of the Toyota Production Sys- show how Toyota sets up all its operations as tem in which we examined the inner workings experiments, and one rule of improvement, of more than 40 plants in the United States, which describes how Toyota teaches the scien- Europe, and Japan, some operating according tific method to workers at every level of the to the system, some not. We studied both pro- organization. It is these rules—and not the cess and discrete manufacturers whose prod- specific practices and tools that people observe ucts ranged from prefabricated housing, auto during their plant visits—that in our opinion parts and final auto assembly, cell phones, and form the essence of Toyota’s system. That is computer printers to injection-molded plastics why we think of the rules as the DNA of the and aluminum extrusions. We studied not only Toyota Production System. Let’s take a closer routine production work but also service func- look at those rules (for a summary, see the tions like equipment maintenance, workers’ sidebar “The Four Rules”). training and supervision, logistics and materi- als handling, and process design and redesign. Rule 1: How People Work We found that, for outsiders, the key is to un- Toyota’s managers recognize that the devil is derstand that the Toyota Production System in the details; that’s why they ensure that all creates a community of scientists. Whenever work is highly specified as to content, se- Toyota defines a specification, it is establishing quence, timing, and outcome. When a car’s sets of hypotheses that can then be tested. In seat is installed, for instance, the bolts are al- other words, it is following the scientific ways tightened in the same order, the time it method. To make any changes, Toyota uses a takes to turn each bolt is specified, and so is rigorous problem-solving process that requires the torque to which the bolt should be tight- a detailed assessment of the current state of af- ened. Such exactness is applied not only to the fairs and a plan for improvement that is, in ef- repetitive motions of production workers but fect, an experimental test of the proposed also to the activities of all people regardless of changes. With anything less than such scien- their functional specialty or hierarchical role. tific rigor, change at Toyota would amount to The requirement that every activity be speci- little more than random trial and error—a fied is the first unstated rule of the system. Put blindfolded walk through life. this baldly, the rule seems simple, something The fact that the scientific method is so in- you’d expect everyone to understand and be grained at Toyota explains why the high degree able to follow easily. But in reality, most man- of specification and structure at the company agers outside Toyota and its partners don’t take does not promote the command and control this approach to work design and execution— environment one might expect. Indeed, in even when they think they do. watching people doing their jobs and in help- Let’s look at how operators at a typical U.S. ing to design production processes, we learned auto plant install the front passenger seat into that the system actually stimulates workers a car. They are supposed to take four bolts and managers to engage in the kind of experi- from a cardboard box, carry them and a torque mentation that is widely recognized as the cor- wrench to the car, tighten the four bolts, and nerstone of a learning organization. That is enter a code into a computer to indicate that what distinguishes Toyota from all the other the work has been done without problems. companies we studied. Then they wait for the next car to arrive. New The Toyota Production System and the sci- operators are usually trained by experienced Steven Spear is an assistant professor entific method that underpins it were not im- workers, who teach by demonstrating what to of business administration at Harvard posed on Toyota—they were not even chosen do. A seasoned colleague might be available to Business School in Boston. H. Kent consciously. The system grew naturally out of help a new operator with any difficulties, such Bowen is the Bruce Rauner Professor the workings of the company over five de- as failing to tighten a bolt enough or forgetting of Business Administration, also at Har- cades. As a result, it has never been written to enter the computer code. vard Business School. Professor Bowen down, and Toyota’s workers often are not able This sounds straightforward, so what’s is the coauthor of “Regaining the Lead to articulate it. That’s why it’s so hard for out- wrong with it? The problem is that those speci- in Manufacturing” (HBR September– siders to grasp. In this article, we attempt to lay fications actually allow—and even assume— October 1994). out how Toyota’s system works. We try to considerable variation in the way employees

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do their work. Without anyone realizing it, move to correct the problem right away and there is plenty of scope for a new operator to then determine how to change the specifica- put the seat into the vehicle differently than tions or retrain the worker to prevent a recur- an experienced employee would. Some opera- rence. (See the sidebar “How Toyota’s Workers tors might put the front bolts in after the rear Learn the Rules” for a short description of the bolts; some might do it the other way around. process by which workers learn how to design Some operators might put each bolt in and work in this way.) then tighten them all; others might tighten as Even complex and infrequent activities, they go along. All this variation translates into such as training an inexperienced workforce poorer quality, lower productivity, and higher at a new plant, launching a new model, chang- costs. More important, it hinders learning and ing over a production line, or shifting equip- improvement in the organization because the ment from one part of a plant to another, are variations hide the link between how the work designed according to this rule. At one of is done and the results. Toyota’s suppliers in Japan, for example, equip- At Toyota’s plants, because operators (new ment from one area of the plant was moved to and old, junior and supervisory) follow a well- create a new production line in response to defined sequence of steps for a particular job, changes in demand for certain products. Mov- it is instantly clear when they deviate from ing the machinery was broken into 14 separate the specifications. Consider how workers at activities. Each activity was then further sub- Toyota’s Georgetown, Kentucky, plant install divided and designed as a series of tasks. A spe- the right-front seat into a Camry. The work is cific person was assigned to do each task in a designed as a sequence of seven tasks, all of specified sequence. As each of the machines which are expected to be completed in 55 sec- was moved, the way the tasks were actually onds as the car moves at a fixed speed through done was compared with what was expected a worker’s zone. If the production worker finds according to the original design, and discrepan- himself doing task 6 (installing the rear seat- cies were immediately signaled. bolts) before task 4 (installing the front seat- In calling for people to do their work as a bolts), then the job is actually being done highly specified sequence of steps, rule 1 differently than it was designed to be done, in- forces them to test hypotheses through ac- dicating that something must be wrong. Simi- tion. Performing the activity tests the two larly, if after 40 seconds the worker is still on hypotheses implicit in its design: first, that task 4, which should have been completed the person doing the activity is capable of per- after 31 seconds, then something, too, is amiss. forming it correctly and, second, that perform- To make problem detection even simpler, the ing the activity actually creates the expected length of the floor for each work area is outcome. Remember the seat installer? If he marked in tenths. So if the worker is passing can’t insert the seat in the specified way the sixth of the ten floor marks (that is, if he is within the specified amount of time, then he 33 seconds into the cycle) and is still on task 4, is clearly refuting at least one of these two hy- then he and his team leader know that he has potheses, thereby indicating that the activity fallen behind. Since the deviation is immedi- needs to be redesigned or the worker needs to ately apparent, worker and supervisor can be trained.

The Four Rules The tacit knowledge that underlies the Toyota Production System can Rule 3: The pathway for every product and service must be simple be captured in four basic rules. These rules guide the design, opera- and direct. tion, and improvement of every activity, connection, and pathway for Rule 4: Any improvement must be made in accordance with the sci- every product and service. The rules are as follows: entific method, under the guidance of a teacher, at the lowest possible Rule 1: All work shall be highly specified as to content, sequence, level in the organization. timing, and outcome. All the rules require that activities, connections, and flow paths Rule 2: Every customer-supplier connection must be direct, and have built-in tests to signal problems automatically. It is the continual there must be an unambiguous yes-or-no way to send requests and re- response to problems that makes this seemingly rigid system so flexi- ceive responses. ble and adaptable to changing circumstances.

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Rule 2: How People Connect as the passing of the baton in the best Olympic Where the first rule explains how people per- relay teams because they are just as carefully form their individual work activities, the sec- thought out and executed. For example, the ond rule explains how they connect with one number of parts in a container and the num- another. We express this rule as follows: every ber of containers in circulation for any given connection must be standardized and direct, part are determined by the physical realities of unambiguously specifying the people involved, the production system—the distances, the the form and quantity of the goods and services changeover times, and so on. Likewise, the num- to be provided, the way requests are made by ber of workers per team is determined by the each customer, and the expected time in which types of problems expected to occur, the level the requests will be met. The rule creates a of assistance the team members need, and the supplier-customer relationship between each skills and capabilities of the team’s leader. person and the individual who is responsible Other companies devote substantial re- for providing that person with each specific sources to coordinating people, but their good or service. As a result, there are no gray connections generally aren’t so direct and un- zones in deciding who provides what to whom ambiguous. In most plants, requests for mate- and when. When a worker makes a request for rials or assistance often take a convoluted parts, there is no confusion about the supplier, route from the line worker to the supplier via the number of units required, or the timing of an intermediary. Any supervisor can answer the delivery. Similarly, when a person needs any call for help because a specific person has assistance, there is no confusion over who will not been assigned. The disadvantage of that provide it, how the help will be triggered, and approach, as Toyota recognizes, is that when what services will be delivered. something is everyone’s problem it becomes The real question that concerns us here is no one’s problem. whether people interact differently at Toyota The requirement that people respond to than they do at other companies. Let’s return supply requests within a specific time frame to our seat installer. When he needs a new con- further reduces the possibility of variance. tainer of plastic bolt covers, he gives a request That is especially true in service requests. A to a materials handler, who is the designated worker encountering a problem is expected to bolt-cover supplier. Commonly, such a request ask for assistance at once. The designated assis- is made with a kanban, a laminated card that tant is then expected to respond immediately specifies the part’s identification number, the and resolve the problem within the worker’s quantity of parts in the container, and the loca- cycle time. If the worker is installing a front tions of the part supplier and of the worker seat every 55 seconds, say, then a request for (the customer) who will install it. At Toyota, help must be answered and dealt with in less kanban cards and other devices like andon cords than the 55 seconds. If the problem cannot be set up direct links between the suppliers and resolved in less than 55 seconds, that failure the customers. The connections are as smooth immediately challenges the hypotheses in this

How Toyota’s Workers Learn the Rules If the rules of the Toyota Production System aren’t explicit, how are This continuing process gives the person increasingly deeper in- they transmitted? Toyota’s managers don’t tell workers and supervi- sights into his or her own specific work. From many experiences of this sors specifically how to do their work. Rather, they use a teaching and sort, the person gradually learns to generalize how to design all activi- learning approach that allows their workers to discover the rules as a ties according to the principles embodied in rule 1. consequence of solving problems. For example, the supervisor teach- All the rules are taught in a similar Socratic fashion of iterative ques- ing a person the principles of the first rule will come to the work site tioning and problem solving. Although this method is particularly effec- and, while the person is doing his or her job, ask a series of questions: tive for teaching, it leads to knowledge that is implicit. Consequently, • How do you do this work? the Toyota Production System has so far been transferred successfully • How do you know you are doing this work correctly? only when managers have been able and willing to engage in a similar • How do you know that the outcome is free of defects? process of questioning to facilitate learning by doing. • What do you do if you have a problem? harvard business review • september–october 1999 page 5

Decoding the DNA of the Toyota Production System

customer-supplier connection for assistance. Rule 3: How the Production Line Is Perhaps the request signal is ambiguous. Per- Constructed haps the designated assistant has too many All production lines at Toyota have to be set other requests for help and is busy or is not a up so that every product and service flows capable problem solver. Constantly testing the along a simple, specified path. That path hypotheses in this way keeps the system flexi- should not change unless the production line ble, making it possible to adjust the system is expressly redesigned. In principle, then, continually and constructively. there are no forks or loops to convolute the The striking thing about the requirement to flow in any of Toyota’s supply chains. That’s ask for help at once is that it is often counterin- the third rule. tuitive to managers who are accustomed to To get a concrete idea of what that means, encouraging workers to try to resolve prob- let’s return to our seat installer. If he needs lems on their own before calling for help. But more plastic bolt covers, he orders them then problems remain hidden and are neither from the specific material handler responsi- shared nor resolved companywide. The situa- ble for providing him with bolt covers. That tion is made worse if workers begin to solve designated supplier makes requests to his own problems themselves and then arbitrarily de- designated supplier at the off-line store in cide when the problem is big enough to war- the factory who, in turn, makes requests di- rant a call for help. Problems mount up and rectly to his designated supplier at the bolt only get solved much later, by which time valu- cover factory’s shipping dock. In this way, able information about the real causes of the the production line links each person who problem may have been lost. contributes to the production and delivery

The Experiments of the Toyota Production System When organizations are managed according to the four rules, individuals are repeatedly conducting experiments, testing in operation the hy- potheses built into the designs of individual work activities, customer-supplier connections, pathways, and improvement efforts. The hypothe- ses, the way they are tested, and the response if they are refuted are summarized below.

Rule Hypotheses Signs of a problem Responses

1 The person or machine can do the The activity is not done as Determine the true skill level of the person activity as specified. specified. or the true capability of the machine and train or modify as appropriate. If the activity is done as specified, the The outcome is defective. Modify the design activity. good or service will be defect free.

2 Customers’ requests will be for goods Responses don’t keep pace Determine the true mix and volume of and services in a specific mix and with requests. demand and the true capability of the volume. supplier; retrain, modify activities, or reassign customer-supplier pairs as appropriate. The supplier can respond to The supplier is idle, waiting customers’ requests. for requests.

3 Every supplier that is connected A person or machine is Determine why the supplier was unnecessary, to the flow path is required. not actually needed. and redesign the flow path. Any supplier not connected to A nonspecified supplier Learn why the nonspecified supplier was the flow path is not needed. provides an intermediate actually required, and redesign the flow path. good or service.

4 A specific change in an activity, The actual result is different Learn how the activity was actually performed connection, or flow path will improve from the expected result. or the connection or flow path was actually cost, quality, lead time, batch size, or operated. Determine the true effects of the safety by a specific amount. change. Redesign the change. pyright © 1999 Harvard Business School Publishing Corporation. All rights reserved. Corporation. pyright © 1999 Harvard Business School Publishing Co

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Decoding the DNA of the Toyota Production System

of the product, from the Toyota factory, connected is not necessary. If workers at the through the molding company, to even the auto parts supplier found themselves wanting plastic pellet manufacturer. to divert production to another machine or The point is that when production lines welding station, or if they began turning for are designed in accordance with rule 3, help to someone other than their designated goods and services do not flow to the next helpers, they’d conclude that their actual de- available person or machine but to a specific mand or capacity didn’t match their expecta- person or machine. If for some reason that tions. And there would also be no ambiguity person or machine is not available, Toyota about which press or welder was involved. will see it as a problem that might require Again, the workers would revisit the design of the line to be redesigned. their production line. Thus rule 3, like rules 1 The stipulation that every product follow a and 2, enables Toyota to conduct experiments simple, prespecified path doesn’t mean that and remain flexible and responsive. each path is dedicated to only one particular product, however. Quite the contrary: each Rule 4: How to Improve production line at a Toyota plant typically ac- Identifying problems is just the first step. For commodates many more types of products people to consistently make effective changes, than its counterparts do at other companies. they must know how to change and who is re- The third rule doesn’t apply only to products— sponsible for making the changes. Toyota ex- it applies to services, like help requests, as well. plicitly teaches people how to improve, not If our seat installer, for example, needs help, expecting them to learn strictly from personal that too comes from a single, specified sup- experience. That’s where the rule for improve- plier. And if that supplier can’t provide the ment comes in. Specifically, rule 4 stipulates necessary assistance, she, in turn, has a desig- that any improvement to production activities, nated helper. In some of Toyota’s plants, this to connections between workers or machines, pathway for assistance is three, four, or five or to pathways must be made in accordance links long, connecting the shop floor worker to with the scientific method, under the guid- the plant manager. ance of a teacher, and at the lowest possible The third rule runs contrary to conventional organizational level. Let’s look first at how wisdom about production lines and pooling Toyota’s people learn the scientific method. resources—even contrary to how most people How People Learn to Improve. In 1986, Aisin think the Toyota Production System works. Ac- Seiki, a Toyota Group company that made cording to received wisdom, as a product or complex products such as power trains for the service is passed down the line, it should go to auto industry, created a line to manufacture the next machine or person available to pro- mattresses to absorb excess capacity in one of cess it further. Similarly, most people assume its plants. Since 1986, its range has grown from that help should come from the first available 200 to 850 types of mattresses, its volume has person rather than from a specific person. At grown from 160 mattresses per day to 550, and one auto parts supplier we studied, for exam- its productivity has doubled. Here’s an exam- ple, most of the parts could be stamped on ple of how they did it. more than one press machine and welded at On one of our visits to this plant, we stud- more than one welding station. Before the ied a team of mattress assembly workers who company adopted the Toyota system, its prac- were being taught to improve their problem- tice was to pass each part on to the first avail- solving skills by redesigning their own work. able press machine and to the first available Initially, the workers had been responsible for welder. When the plant switched over, under doing only their own standardized work; they Toyota’s guidance, each type of part followed had not been responsible for solving prob- only one production path through the plant. lems. Then the workers were assigned a leader By requiring that every pathway be specified, who trained them to frame problems better the rule ensures that an experiment will occur and to formulate and test hypotheses—in each time the path is used. Here the hypothe- other words, he taught them how to use the ses embedded in a pathway designed according scientific method to design their team’s to rule 3 are that every supplier connected to work in accordance with the first three rules. the pathway is necessary, and any supplier not The results were impressive. One of the team’s harvard business review • september–october 1999 page 7

Decoding the DNA of the Toyota Production System

accomplishments, for instance, was to rede- ing to reduce that by two-thirds—to achieve a sign the way edging tape was attached to the five-minute changeover—so that we could re- matresses, thereby reducing the defect rate by duce batch sizes by two-thirds. Because of 90%. (See the exhibit “On-Demand Production the modifications we made, we achieved a at the Aisin Mattress Factory.”) changeover time of seven and a half minutes— To make changes, people are expected to a reduction of one-half.” present the explicit logic of the hypotheses. After their presentation, Ohba asked why Let’s look at what that can involve. Hajime the group members had not achieved the five- Ohba, general manager of the Toyota Supplier minute goal they had originally established. Support Center, was visiting a factory in which They were a bit taken aback. After all, they had one of TSSC’s consultants was leading a train- reduced the changeover time by 50%, yet ing and improvement activity (for a descrip- Ohba’s question suggested he had seen oppor- tion of the role of the Toyota Production System tunities for even greater improvement that promotion centers, see the sidebar “Toyota’s they had missed. They offered explanations Commitment to Learning”). The consultant having to do with machine complexity, techni- was helping factory employees and their super- cal difficulty, and equipment upgrade costs. visor reduce the manufacturing lead time of a Ohba responded to these replies with yet more particular line, and Ohba was there to evaluate questions, each one meant to push the con- the group’s progress. sultant and the factory people to articulate Group members began their presentation by and challenge their most basic assumptions describing the steps by which their product about what could and could not be changed— was created—delineating all the problems assumptions that both guided and constrained they identified when they had first studied the the way they had solved their problems. Were process for changing over a machine from they sure four bolts were necessary? Might the making one part to making another, and ex- changeover be accomplished with two? Were plaining the specific changes they had made they certain that all the steps they included in in response to each of those problems. They the changeover were needed? Might some be concluded by saying, “When we started, the combined or eliminated? In asking why they changeover required 15 minutes. We were hop- had not achieved the five-minute goal, Ohba was not suggesting that the team had failed. Rather, he was trying to get them to realize that they had not fully explored all their im- On-Demand Production at the Aisin provement opportunities because they had not Mattress Factory questioned their assumptions deeply enough. There was a second reason for Ohba’s persis- Aisin Seiki produces 850 varieties of To be able to do so, Aisin has made thou- tence. He was trying to show the group mem- mattresses, distinguished by size, firm- sands of changes in individual work bers that their improvement activity had not ness, covering fabric, quilting pattern, activities, in the connections linking been carried out as a bona fide experiment. They and edge trim. Customers can order any customers and suppliers of intermediate had established a goal of five minutes based on one of these in a retail store and have it goods and services, and to the overall the premise that faster changeovers and smaller delivered to their homes in three days, production lines. This table captures batches are better than slower changeovers yet Aisin maintains an inventory at the how dramatic the results of those and larger batches. But here they were confus- plant equal to just 1.5 days of demand. changes have been. ing goals with predictions based on hypothe- ses. The goal was not a prediction of what they believed they would achieve through the spe- 1986 1988 1992 1996 1997 cific improvement steps they planned to take. Styles 200 325 670 750 850 As a result, they had not designed the improve- ment effort as an experiment with an explicit, Units per day 160 230 360 530 550 clearly articulated, verifiable hypothesis of the Units per person 811132026 form, “If we make the following specific changes, Productivity index 100 138 175 197 208 we expect to achieve this specific outcome.” Although they had reduced the changeover Finished-goods inventory (days) 30 2.5 1.8 1.5 1.5 time considerably, they had not tested the hy- pyright © 1999 Harvard Business School

Number of assembly lines 22332 All rights reserved. ublishing Corporation. potheses implicit in their effort. For Ohba, it P Co harvard business review • september–october 1999 page 8

Decoding the DNA of the Toyota Production System

was critical that the workers and their supervi- work flowed from the feeder lines to the final sor realize that how they made changes was as assembly lines. In this way, Toyota ensures that important as what changes they made. problem solving and learning take place at all Who Does the Improvement. Frontline work- levels of the company. Of course, as we have al- ers make the improvements to their own ready seen, Toyota will bring in external ex- jobs, and their supervisors provide direction perts as necessary to ensure the quality of the and assistance as teachers. If something is learning process. wrong with the way a worker connects with a In the long term, the organizational struc- particular supplier within the immediate as- tures of companies that follow the Toyota Pro- sembly area, the two of them make improve- duction System will shift to adapt to the na- ments, with the assistance of their common ture and frequency of the problems they supervisor. The Aisin team we described ear- encounter. Since the organizational changes lier, for example, consisted of the assembly line are usually being made at a very low level, workers and the supervisor, who was also their however, they can be hard for outsiders to de- instructor. When changes are made on a larger tect. That’s because it is the nature of the prob- scale, Toyota ensures that improvement teams lems that determines who should solve them are created consisting of the people who are di- and how the organization is designed. One rectly affected and the person responsible for consequence is that different organizational supervising the pathways involved. structures coexist quite happily even in the Thus the process remains the same even at same plant. the highest levels. At Aisin’s mattress factory, Consider Toyota’s engine-machining plant we found that the plant manager took respon- in Kamigo, Japan. The plant has two ma- sibility for leading the change from three pro- chine divisions, each of which has three in- duction lines back to two (the number had dependent production shops. When we vis- risen to three to cope with an increase in prod- ited in summer 1998, the production people uct types). He was involved not just because it in the first machine division answered to was a big change but also because he had opera- shop heads, and the process engineers an- tional responsibility for overseeing the way swered directly to the head of the division.

Toyota’s Commitment to Learning All the organizations we studied that are managed according to the nal architects of the Toyota Production System—to develop and dif- Toyota Production System share an overarching belief that people are fuse the system throughout Toyota and its suppliers. Many of Toyota’s the most significant corporate asset and that investments in their top officers—including Toyota Motor’s new president, Fujio Cho— knowledge and skills are necessary to build competitiveness. That’s have honed their skills within OMCD. During their OMCD tenure, why at these organizations all managers are expected to be able to do which can extend for a period of years, Toyota’s employees are re- the jobs of everyone they supervise and also to teach their workers lieved of all line responsibilities and instead are charged with leading how to solve problems according to the scientific method. The leader- improvement and training activities in the plants of Toyota and its ship model applies as much to the first-level “team leader” supervi- suppliers. By supporting all of Toyota’s plant and logistical operations sors as it does to those at the top of the organization. In that way, in this way, OMCD serves as a training center, building its consult- everybody at Toyota shares in the development of human resources. ants’ expertise by giving them opportunities to solve many difficult In effect, there is a cascading pathway for teaching, which starts with problems and teach others to do the same. the plant manager, that delivers training to each employee. In 1992, Toyota founded the Toyota Supplier Support Center (TSSC) To reinforce the learning and improvement process, each plant and in the United States to provide North American companies with train- major business unit in the Toyota Group employs a number of Toyota ing in the Toyota Production System. Modeled on OMCD, TSSC has Production System consultants whose primary responsibility is to given workshops to more than 140 companies and direct assistance to help senior managers move their organizations toward the ideal. 80. Although most of these companies are auto suppliers, few are ex- These “learner-leader-teachers” do so by identifying ever more subtle clusively Toyota suppliers; participants come from other industries and difficult problems and by teaching people how to solve problems and from universities, government organizations, and industry associa- scientifically. tions. Indeed, much of the research for this paper was derived from Many of these individuals have received intensive training at Toyota’s the experience of one of the authors, who was a member of a TSSC Operations Management Consulting Division. OMCD was established team for five months, promoting the Toyota Production System at a in Japan as an outgrowth of efforts by Taiichi Ohno—one of the origi- plant that supplies Toyota and two other auto assembly plants. harvard business review • september–october 1999 page 9

Decoding the DNA of the Toyota Production System

However, in the second machine division, ple will clearly state the expectations they will the engineers were distributed among the be testing when they implement the changes three shops and, like the production work- they have planned. But beyond this, we found ers, answered to the various shop heads. Nei- that people in companies following the Toyota ther organizational structure is inherently Production System share a common goal. superior. Rather, the people we interviewed They have a common sense of what the ideal explained, problems in the first division hap- production system would be, and that shared pened to create a situation that required the vision motivates them to make improvements engineers to learn from one another and to beyond what would be necessary merely to pool engineering resources. By contrast, the meet the current needs of their customers. problems that arose in the second division This notion of the ideal is very pervasive, and required the production and engineering we believe it is essential to understanding the people to cooperate at the level of the indi- Toyota Production System. vidual shops. Thus the organizational differ- When they speak of the ideal, workers at ences reflect the fact that the two divisions Toyota do not mean something philosophically encountered different problems. abstract. They have a concrete definition in mind, one that is remarkably consistent Toyota’s Notion of the Ideal throughout the company. Very specifically, for By inculcating the scientific method at all lev- Toyota’s workers, the output of an ideal per- els of the workforce, Toyota ensures that peo- son, group of people, or machine:

Countermeasures in the Toyota Production System Toyota does not consider any of the tools or practices—such as kanbans or andon cords, which so many outsiders have observed and copied—as fundamental to the Toyota Production System. Toyota uses them merely as temporary responses to specific problems that will serve until a bet- ter approach is found or conditions change. They’re referred to as “countermeasures,” rather than “solutions,” because that would imply a per- manent resolution to a problem. Over the years, the company has developed a robust set of tools and practices that it uses as countermeasures, but many have changed or even been eliminated as improvements are made. So whether a company does or does not use any particular tool or practice is no indication that it is truly applying Toyota’s rules of design and improvement. In particular, contrary to the impression that the concept of zero inventory is at the heart of the Toyota system, we’ve ob- served many cases in which Toyota actually built up its inventory of materials as a countermeasure. The ideal system would in fact have no need for inventory. But, in practice, certain circumstances may require it: •Unpredictable downtime or yields. Sometimes a person or a machine is unable to respond on demand when a request is made because of an unexpected mechanical breakdown. For this reason, safety stock is held to protect the customer against random occurrences. The per- son responsible for ensuring the reliability of a machine or process owns that inventory and strives to reduce the frequency and length of downtimes so that the amount of the safety stock can be reduced. •Time-consuming setups. Difficulties in switching a machine from processing one kind of product to another can prevent a supplier from responding immediately. Therefore, suppliers will produce the product in batch sizes greater than one and hold the excess as inventory so it can respond immediately to the customer. Of course, suppliers will continually try to reduce the changeover time to keep batch sizes and stores of inventory as small as possible. Here, the owners of both the problem and the countermeasure are the machine operator and the team leader, who are responsible for reducing changeover times and batch sizes. •Volatility in the mix and volume of customer demand. In some cases, variations in customers’ needs are so large and unpredictable that it is impossible for a plant to adjust its production to them quickly enough. In those instances, buffer stock is kept at or near the shipping point as a countermeasure. The buffer stock also serves as a signal to production and sales managers that the person who works most di- rectly with the customer must help that customer eliminate the underlying causes of any preventable swings in demand. In many cases, the same type of product is held in different types of inventory. Toyota does not pool its various kinds of inventory, even though doing so would reduce its inventory needs in the short term. That might sound paradoxical for a management system so popularly known to abhor waste. But the paradox can be resolved when we recognize that Toyota’s managers and workers are trying to match each coun- termeasure to each problem. There’s no link between the reason for keeping safety stock—process unreliability—and the reason for keeping buffer stock—fluctuations in customer demand. To pool the two would make it hard to distinguish between the separate activities and customer-supplier connections in- volved. The inventory would have many owners, and the reasons for its use would become ambiguous. Pooling the inventory thus muddles both the ownership and cause of the problems, making it difficult to introduce improvements. harvard business review • september–october 1999 page 10

Decoding the DNA of the Toyota Production System

• is defect free (that it, it has the features and activity—falls short of this ideal, that short- performance the customer expects); coming is a source of creative tension for fur- •can be delivered one request at a time (a ther improvement efforts. batch size of one); •can be supplied on demand in the version The Organizational Impact of the requested; Rules •can be delivered immediately; If the rules make companies using the Toyota •can be produced without wasting any ma- Production System a community of scientists terials, labor, energy, or other resources (such performing continual experiments, then why as costs associated with inventory); and aren’t these organizations in a state of chaos? •can be produced in a work environment Why can one person make a change without that is safe physically, emotionally, and profes- adversely affecting the work of other people sionally for every employee. on the production line? How can Toyota con- We consistently found people at plants stantly introduce changes to its operations that used the Toyota Production System while keeping them running at full tilt? In making changes that pushed operations to- other words, how does Toyota improve and re- ward this ideal. At one company that pro- main stable at the same time? duced electromechanical products, for exam- Once again, the answer is in the rules. By ple, we found that workers had come up making people capable of and responsible with a number of ingenious error-detecting for doing and improving their own work, gauges that generated a simple, unambigu- by standardizing connections between in- ous yes-or-no signal to indicate whether dividual customers and suppliers, and by their output was free of defects—as speci- pushing the resolution of connection and fied in the ideal. At yet another plant, which flow problems to the lowest possible level, manufactures injection-molded parts, we the rules create an organization with a found that workers had reduced the time it nested modular structure, rather like tradi- took to change a large molding die from an tional Russian dolls that come one inside the already speedy five minutes to three min- other. The great benefit of nested, modular or- utes. This allowed the company to reduce ganizations is that people can implement the batch sizes of each part it produced by design changes in one part without unduly 40%, bringing it closer to the ideal batch size affecting other parts. That’s why manag- of one. As Toyota moves toward the ideal, it ers at Toyota can delegate so much respon- may temporarily hold one of its dimensions sibility without creating chaos. Other com- to be more important than another. Some- panies that follow the rules will also find it times this can result in practices that go possible to change without experiencing against the popular view of Toyota’s opera- undue disruption. tions. We have seen cases where Toyota Of course, the structures of other companies keeps higher levels of inventory or produces have features in common with those that in batch sizes larger than observers generally follow the Toyota Production System, but expect of a just-in-time operation, as we de- in our research we found no company that scribe in the sidebar “Countermeasures in had them all that did not follow the system. It the Toyota Production System.” may turn out in the end that you can build Toyota’s ideal state shares many features of the structure only by investing the time the popular notion of mass customization— Toyota has. But we believe that if a company the ability to create virtually infinite varia- dedicates itself to mastering the rules, it tions of a product as efficiently as possible has a better chance of replicating Toyota’s and at the lowest possible cost. In the final DNA—and with that, its performance. analysis, Toyota’s ideal plant would indeed be one where a Toyota customer could drive up Reprint 99509 to a shipping dock, ask for a customized prod- To order, see the next page uct or service, and get it at once at the lowest or call 800-988-0886 or 617-783-7500 possible price and with no defects. To the ex- or go to www.hbrreprints.org tent that a Toyota plant—or a Toyota worker’s

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Decoding the DNA of the Toyota Production System

Further Reading ARTICLES Learning to Lead at Toyota the company to achieve integration across by Steven J. Spear projects and time. Harvard Business Review The Lean Service Machine May 2004 by Cynthia Karen Swank Product no. R0405E Harvard Business Review This article builds on “Decoding the DNA of October 2003 the Toyota Production System” by explaining Product no. R0310J how Toyota inculcates managers with the four Toyota’s continuous improvement approach unwritten rules for continual improvement. can benefit service businesses as well as man- Spear describes the training of a star recruit— ufacturing companies. Swank describes how a talented young American destined for a Jefferson Pilot Financial (JPF), a life insurance high-level position at one of Toyota’s U.S. and annuities firm, set out to establish itself as plants. The story offers four lessons for any its customers’ preferred partner by reducing company wishing to train its managers to policy-application turnaround time, simplify- apply Toyota’s system: 1) Have trainees ob- ing the submission process, and reducing er- serve process failures as they occur. 2) Encour- rors. JPF appointed a team to reengineer its age them to structure proposed changes as New Business unit’s operations—beginning simple experiments. 3) Remind them to ex- with the creation of a fully functioning micro- periment as often as possible. 4) Teach manag- cosm of JPF’s entire process. This “model cell” ers to coach, not fix problems—to direct em- enabled managers to experiment and smooth ployees without telling them where to find out kinks while working toward an optimal opportunities for improvements. design. The team also placed linked processes Another Look at How Toyota Integrates near each other, balanced employees’ work- Product Development loads, posted performance results, and mea- by Durward K. Sobek II, Jeffrey K. Liker, and sured performance from customers’ perspec- Allen C. Ward tive. The experiment proved so successful that Harvard Business Review JPF rolled out similar systems across many July 1998 operations. Product no. 98409 The authors explain how Toyota applies its continual improvement rules to the vehicle development process. The company com- bines social rules (such as mentoring supervi- sion and integrative leadership from product To Order heads) with standardization (of skills, work processes, and designs). Together, these For Harvard Business Review reprints and mechanisms give Toyota a tightly linked subscriptions, call 800-988-0886 or product development system that relies on 617-783-7500. Go to www.hbrreprints.org training and standardization to achieve cross- functional coordination while still building For customized and quantity orders of functional expertise. Each project has the flex- Harvard Business Review article reprints, ibility it needs while also benefiting from les- call 617-783-7626, or e-mai sons other projects have taught—enabling [email protected]

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