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The Toyota Production System (TPS) and Lean Production

The Toyota Production System is Toyota’s unique approach to manufacturing. It is the basis for much of the “lean production” movement that has dominated manufacturing trends (along with Six Sigma) for the last 10 years or so. Despite the huge influence of the lean movement, I hope to show in this article that most attempts to implement lean have been fairly superficial. The reason is that most companies have focused too heavily on tools such as 5S and just-in-time, without understanding lean as an entire system that must permeate an organization’s culture. In most companies where lean is implemented, senior management is not involved in the day-to-day operations and continuous improvement that are part of lean. Toyota’s approach is very different.

What exactly is a lean enterprise? You could say it’s the end result of applying the Toyota Production System to all areas of your business. In their excellent article, Lean Thinking, James Womack and Daniel Jones define lean manufacturing as a five-step process: defining customer value, defining the value stream, making it “flow,” “pulling” from the customer back, and striving for excellence. To be a lean manufacturer requires a way of thinking that focuses on making the product flow through value-adding processes without interruption (one-piece flow), a “pull” system that cascades back from customer demand by replenishing only what the next operation takes away at short intervals, and a culture in which everyone is striving continuously to improve.

Taiichi Ohno, founder of TPS, said it even more succinctly:

All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing that time line by removing the non-value-added wastes. (Ohno, 1988)

As we will see in more detail in How Toyota Became the World’s Best Manufacturer: The Story of the Toyoda Family and the Toyota Production System, Toyota developed the Toyota Production System after World War II at a time when it faced very different business conditions than Ford and GM. While Ford and GM used mass production, economies of scale, and big equipment to produce as many parts as possible, as cheaply as possible, Toyota’s market in post-war Japan was small. Toyota also had to make a variety of vehicles on the same assembly line to satisfy its customers. Thus, the key to their operations was flexibility. This helped Toyota make a critical discovery: when you make lead times short and focus on keeping production lines flexible, you actually get higher quality, better customer responsiveness, better productivity, and better utilization of equipment and space. While Ford’s traditional mass production looks good when you measure the cost per piece on an individual machine, what customers want is a much greater variety of choices than traditional manufacturing can offer cost-effectively. Toyota’s focus in the 1940s and ’50s on eliminating wasted time and material from every step of the production process—from raw material to finished goods—was designed to address the same conditions most companies face today: the need for fast, flexible processes that give customers what they want, when they want it, at the highest quality and affordable cost.

A focus on “flow” has continued to be a foundation for Toyota’s success globally in the 21st century. Companies like Dell have also become famous for using short lead times, high inventory turns, and getting paid fast to rapidly develop a fast growing company. But even Dell is just beginning on the road to becoming the sophisticated “lean enterprise” that Toyota has developed through decades of learning and hard work.

Unfortunately, most companies are still using the mass production techniques that worked so well for Henry Ford in the 1920s, when flexibility and customer choice were not important. The mass production focus on efficiency of individual processes goes back to Frederick Taylor and his “scientific management” at the beginning of the 20th century. Like the creators of the Toyota Production System, Taylor tried to eliminate waste from production processes. He observed workers and tried to eliminate every second of inefficient motion. Mass production thinkers have long understood that machine downtime is another obvious non-value-added waste—a machine shut down for repair is not making parts that could make money. But consider the following counter-intuitive truths about non-value-added waste within the philosophy of TPS.

  • Often the best thing you can do is to idle a machine and stop producing parts. You do this to avoid over production, the fundamental waste in TPS.
  • Often it is best to build up an inventory of finished goods in order to level out the production schedule, rather than produce according to the actual fluctuating demand of customer orders. Leveling out the schedule (heijunka) is a foundation for flow and pull systems and for minimizing inventory in the supply chain. (Leveling production means smoothing out the volume and mix of items produced so there is little variation in production from day to day.)
  • Often it is best to selectively add and substitute overhead for direct labor. When waste is stripped away from your value-adding workers, you need to provide high-quality support for them as you would support a surgeon performing a critical operation.
  • It may not be a top priority to keep your workers busy making parts as fast as possible. You should produce parts at the rate of customer demand. Working faster just for the sake of getting the most out of your workers is another form of over production and actually leads to employing more labor overall.
  • It is best to selectively use information technology and often better to use manual processes even when automation is available and would seem to justify its cost in reducing your headcount. People are the most flexible resource you have. If you have not efficiently worked out the manual process, it will not be clear where you need automation to support the process.

In other words, Toyota’s solutions to particular problems often seem to add waste rather than eliminate it. The reason for these seemingly paradoxical solutions is that Ohno had learned from his experiences walking the shop floor a very particular meaning of non-valued-added waste: it had little to do with running labor and equipment as hard as possible, and everything to do with the manner in which raw material is transformed into a saleable commodity. For Ohno, the purpose of his journey through the shop floor was to identify activities that added value to raw material, and get rid of everything else. He learned to map the value stream of the raw material moving to a finished product that the customer was willing to pay for. This was a radically different approach from the mass production thinking of merely identifying, enumerating, and eliminating the wasted time and effort in the existing production processes.

As you make Ohno’s journey for yourself, and look at your own organization’s processes, you will see materials, invoicing, service calls, and prototype parts in R&D (you fill in the blank for your business process) being transformed into something the customer wants. But on closer inspection, they are often being diverted into a pile, someplace where they sit and wait for long periods of time, until they can be moved to the next process or transformation. Certainly, people do not like to be diverted from their journeys and to wait on long lines. Ohno viewed material as having the same degree of impatience. Why? If any large batches of material are produced and then sit and wait to be processed, if service calls are backed up, if R&D is receiving prototype parts they don’t have time to test, then this sitting and waiting to move to the next operation becomes waste. This results in both your internal and external customers becoming impatient. This is why TPS starts with the customer, by asking, “What value are we adding from the customer’s perspective?” Because the only thing that adds value in any type of process— be it in manufacturing, marketing, or a development process—is the physical or information transformation of that product, service, or activity into something the customer wants.