Concentrated Knowledge™ for the Busy Executive • www.summary.com Vol. 26, No. 12 (2 parts) Part 2, December 2004 • Order # 26-30 FILE: MANUFACTURING ® Fourteen Management Principles From the World’s Greatest Manufacturer THE TOYOTA WAY THE SUMMARY IN BRIEF Toyota is the world’s most profitable automaker. Its “secret weapon” is By Jeffrey K. Liker, Ph.D. lean production — the revolutionary approach to business processes that it invented in the 1950s and has spent decades perfecting. Today, businesses CONTENTS around the world are trying to emulate Toyota’s remarkable success by working to implement the company’s radical system for speeding up busi- Using Operational Excellence ness and service processes, reducing waste, and improving quality. It is a As a Strategic Weapon Page 2 system that is derived from balancing the role of people in an organization- al culture that expects and values their continuous improvements, with a How Toyota Became technical system that is focused on high-value-added “flow.” The World’s Best Manufacturer To help other companies learn to continually improve on what they do, Pages 2, 3 Professor of Industrial and Operations Engineering at the University of Eliminating Waste Michigan Dr. Jeffrey K. Liker describes the results of his year-long research Page 3 into Toyota and its managers, executives, suppliers and training centers. Long-Term Philosophy While detailing the company’s culture, processes and people, Liker provides Page 4 readers with a management model that can be used to transform business across industries, and the key principles that drive the techniques and tools The Right Process Will Produce the Right Results of the Toyota Production System and the management of Toyota in general. Pages 4, 5, 6 These principles embody the long-term philosophy, processes, results, peo- ple, partners and problem solving that drive the organizational learning at Add Value By Developing Toyota, and can make the Toyota Way work for any organization. Your People and Partners Pages 6, 7 Continuously Solving Problems What You’ll Learn In This Summary Drives Learning ✓ How to foster an atmosphere of continuous improvement and learning. Pages 7, 8 ✓ How to satisfy customers and eliminate waste at the same time. Using the Toyota Way to ✓ How to get quality right the first time. Transform Technical and ✓ How to groom leaders from within rather than recruit them from the out- Service Organizations side. Page 8 ✓ How to teach employees to become problem solvers. Build Your Own Lean ✓ How to grow together with suppliers and partners for mutual benefit. Learning Enterprise Page 8 Published by Soundview Executive Book Summaries, P.O. Box 1053, Concordville, Pennsylvania 19331 USA © 2004 Soundview Executive Book Summaries • All rights reserved. Reproduction in whole or part is prohibited. THE TOYOTA WAY by Jeffrey K. Liker, Ph.D. — THE COMPLETE SUMMARY PART ONE: THE WORLD-CLASS POWER OF THE TOYOTA WAY Using Operational Excellence processes without interruption (one-piece flow), a “pull” system that cascades back from customer demand by As a Strategic Weapon replenishing only what the next operation takes away at Toyota first caught the world’s attention in the 1980s, short intervals, and a culture in which everyone is striving when it became clear that there was something special continuously to improve. ■ about Japanese quality and efficiency. Japanese cars were lasting longer than American cars and required much less repair. By the 1990s, it was apparent that How Toyota Became there was something even more special about Toyota The World’s Best Manufacturer compared to other automakers in Japan. It was the way The most visible product of Toyota’s quest for excel- Toyota engineered and manufactured the autos that led lence is its manufacturing philosophy, called the Toyota to unbelievable consistency in the process and product. Production System (TPS). TPS is the next major evolu- Toyota designed autos faster, with more reliability, yet tion in efficient business processes after the mass produc- at a competitive cost, even when paying the relatively tion system invented by Henry Ford. high wages of Japanese workers. Equally impressive Although Toyota now has more than 240,000 employ- was that every time Toyota showed an apparent weak- ees around the world, in many ways it is still a large ness and seemed vulnerable to the competition, Toyota “family business” with considerable influence still exer- fixed the problem and came back even stronger. cised by the founding Toyoda family. To understand TPS Today, Toyota is the third-largest auto manufacturer in and the Toyota Way, and how the company became the the world, behind General Motors and Ford, with global world’s best manufacturer, it is helpful to understand the vehicle sales of over 6 million per year in 170 countries. history and personalities of the founding family members Auto industry analysts estimate that Toyota will pass who left an indelible mark on the Toyota culture. Ford in global vehicles sold in 2005, and if current Sakichi Toyoda was a tinkerer and inventor who grew up trends continue, it will eventually pass GM to become in the late 1800s and invented a sophisticated automatic the largest automaker in the world. (continued on page 3) Quality Reputation Much of Toyota’s success comes from its astounding The author: Jeffrey K. Liker, Ph.D., is professor of industrial and operations engineering at the University of quality reputation. In 2003, Toyota recalled 79 percent Michigan, and co-founder and director of the Japan fewer vehicles in the United States than Ford and 92 per- Technology Management Program and Lean cent fewer than Chrysler. According to a 2003 study in Manufacturing and Product Development Certificate Consumer Reports, 15 of the top 38 most reliable models Program at the university. He is the winner of four Shingo from any manufacturer over the last seven years were Prizes for Excellence, and a principal of Optiprise, a lean made by Toyota/Lexus. enterprise/supply chain management consulting firm. Copyright © 2004 by McGraw-Hill. Summarized by The Toyota Production System is Toyota’s unique permission of the publisher, McGraw-Hill, Two Penn approach to manufacturing. It is the basis for much of the Plaza, New York, NY 10121-2298. 330 pages. $24.95. “lean production” movement that has dominated manufac- ISBN 0-07-139231-9. turing trends for the last 10 years. Lean manufacturing is a Summary Copyright © 2004 by Soundview Executive five-part process that includes defining customer value, Book Summaries. www.summary.com, 800-521-1227, defining the value stream, making it “flow,” “pulling” 610-558-9495. from the customer back, and striving for excellence. To be a lean manufacturer requires a way of thinking that focus- For Additional Information on the author, es on making the product flow through value-adding go to: http://my.summary.com Published by Soundview Executive Book Summaries (ISSN 0747-2196), P.O. Box 1053, Concordville, PA 19331 Soundview USA, a division of Concentrated Knowledge Corporation. Published monthly. Subscriptions: $195 per year in U.S., Executive Book Summaries® Canada and Mexico, and $275 to all other countries. Periodicals postage paid at Concordville, PA and additional offices. Postmaster: Send address changes to Soundview, P.O. Box 1053, Concordville, PA 19331. Copyright © 2004 by DEBRA A. DEPRINZIO – Art and Design Soundview Executive Book Summaries. Available formats: Summaries are available in print, audio and electronic formats. To subscribe, call us at CHRIS LAUER – Senior Editor 1-800-521-1227 (1-610-558-9495 outside U.S. and Canada), or order on the Internet at www.summary.com. CHRISTOPHER G. MURRAY – Editor in Chief Multiple-subscription discounts and Corporate Site Licenses are also available. GEORGE Y. C LEMENT – Publisher 2 Soundview Executive Book Summaries® The Toyota Way — SUMMARY How Toyota Became The Toyota Production System The World’s Best Manufacturer Best Quality - Lowest Cost - Shortest Lead Time - (continued from page 2) Best Safety - High Morale power loom. In 1929, Sakichi sent his son, Kiichiro, to through shortening the production flow by eliminating waste England to sell the patent rights to his “mistake-proof” Just-in-Time People & Teamwork Jidoka loom. With that money (100,000 English pounds), he start- Right part, right • Selection • Ringi decision (In-station quality) amount, right time ed the Toyota Motor Corp., and tasked Kiichiro with build- • Common making Make Problems Visible ing the car business. After studying mechanical engineering • Take time goals • Cross-trained • Automatic stops planning • Andon and engine technology at the Tokyo Imperial University, he • Continuous flow • Person-machine built the company on his father’s management approach, • Pull system Continuous Improvement separation but added his own innovations. As his father had driven his • Quick changeover • Error proofing success with jidoka — automation with a human touch, or • Integrated Waste Reduction • In-station quality logistics control “mistake proofing” — Kiichiro contributed the second pil- • Genchi • Eyes for Waste • Solve root cause lar of the TPS: Just-in-Time, a system based on the U.S. Genbutsu • Problem • 5 Why’s Solving of problems supermarket system of replacing products on shelves just in (5 Why’s) time as customers purchased them. Leveled Production (heijunka) TPS evolved to meet the particular challenges Toyota Stable and Standardized Processes faced as it grew as a company. It evolved as Taiichi Ohno, Visual Management Toyota’s plant manager who was assigned to improve Toyota Way Philosophy Toyota’s manufacturing process in 1950, and his contempo- raries put these principles to work in the shop through years considered this to be the fundamental waste because it of trial and error. Out of the rubble of WWII, they accepted causes most of the other wastes. the challenge of matching Ford’s productivity “with a cre- 2.