How does continuous improvement take place in a supply chain? In our view, continuous improvement is learning and implementing the lessons learned; thus, much of what has been written about continuous improvement can be subsumed into the broader context of organizational learning. As we shall demonstrate, many of the methods used by Toyota in its effort to make continuous improvement happen are grounded strongly in theory.
The Toyota Way document states: “Learning is a continuous, company-wide process as superiors motivate and train subordinates; predecessors do the same for successors; and the team members at all levels share knowledge with one another. Every team member should be motivated to learn for his or her own development.”
The Theory of Learning
Huber writes about four learning-related constructs: knowledge acquisition, information distribution, information interpretation, and organizational memory. The reader can clearly identify how Toyota institutionalizes learning along each of these constructs from the following:
Spear describes the gradual induction of a manager into the Toyota Way of experimentation and continuous improvement. The manager is gradually led into learning the workings of the system through direct observation (knowledge acquisition). Spear also recounts that the trainer concluded the training by having the manager present his findings to the plant manager, the shop manager, and group leaders. “Two-thirds of the audience actively took notes,” noted Spear (information distribution). Thus, sometimes direct observation is substituted with structured formal presentations. Then the trainer taught the manager how to structure experiments with a carefully reasoned hypothesis; for example, if this change were made, it would change cycle time by six seconds. The objective of this exercise was as much to improve the system as to learn the workings of the system. Is the cause-effect relationship clear? Are there important variables we have forgotten to take into account? The next lesson was to make small incremental changes. Once again, the purpose of this cautious but exploratory approach is to minimize the risk of overlooking some aspect and learning about the system before moving to the next step (information interpretation). Finally, during the entire training the student was guided but never given direct answers. Toyota deploys coaches over a long period of time who are not only the repository of the lessons learned but also the chief conduits for passing them on to the next generation of managers (organizational memory).
In addition, theory emphasizes the role of communication and the implications of the learning rate as described below.
The Role of Communication
For a giant organization such as Toyota, communication is critical in order to learn. The structure of Toyota is very complex. Its informal information system mirrors that complexity. Takeuchi, Osono, and Shimizu write that information flows freely up and down and across the hierarchy. Employees are urged to “listen intently in an open environment.” Senior salespeople share information with dealers and learn from dealers by talking to them. Toyota’s word for lateral communication is yokoten . Yokoten means “open out sideways.” Toyota has a global strategy to ensure yokoten. They have a matrix organization structure to ensure that processes are standardized by the functional area. The management for each affiliate is responsible for day-to-day operations, but the functional management is responsible for yokoten of processes. Figure 11-1 illustrates the structure. This is the “Guiding Hand” concept used by Toyota to spread the best supply chain practices not only to the parts of the supply chain internal to Toyota but also to dealers, suppliers, and contractors. The spread of practices is coordinated topdown. Herbert Simon20 writes that “an important component of organizational learning is internal learning—that is, transmission of information from one organizational member to another. Individual learning is very much a social, not a solitary, phenomenon.” Takeuchi, Osono, and Shimizu21 list ways that communications are reinforced and employees and supply chain partners are kept informed. They include giving freedom to people to voice contrary opinions, having frequent face-to-face interactions, and making tacit knowledge explicit.