The Toyota Way

THE TOYOTA WAY
JEFFREY K. LIKER
By Himani Sabharwal (gori waali)
Who is in love with Aishwarya’s big wet butts

From the Factory to a Book!
 20 years of study
 Japan Technology Management Program, University of Michigan- Director
 Learning trade imbalance

PART 1: THE WORLD CLASS POWER OF
THE TOYOTA WAY
THE TOYOTA WAY USING OPERATIONAL EXCELLENCE AS A
STRATEGIC WEAPON
HOW TOYOTA BECAME THE WORLD’S BEST
MANUFACTURER
THE HEART OF TPS: ELIMINATING WASTE
THE 14 PRINCIPLES OF TOYOTA WAY
THE TOYOTA WAY IN ACTION: DEVELOPMENT OF LEXUS

PART 1: The World Class Power of the
Toyota Way
THE TOYOTA WAY USING OPERATIONAL EXCELLENCE AS A
STRATEGIC WEAPON
HOW TOYOTA BECAME THE WORLD’S BEST
MANUFACTURER
THE HEART OF TPS: ELIMINATING WASTE
THE 14 PRINCIPLES OF TOYOTA WAY
THE TOYOTA WAY IN ACTION: DEVELOPMENT OF LEXUS

The Toyota Way: Using Operational
Excellence As A Strategic Weapon
 Where did the world attention come from?
 What inspired this world attention?
Not eye-popping designs or performance
 What was the extent of Toyota’s success?
Faster Designing
Reliability
Competitive Costs
Wages
Miraculously Fixing Problems
Annual Profit,’03 : $8.13bn
Market Cap ‘3 : $105bn
2002: Lexus outsold BMW, Cadillac, Merc
Lean Production
Fastest Product Development Process: 12 months

 What is the secret of Toyota’s success?
 What makes up Toyota’s DNA?
The Toyota Way
Toyota Production System
 What is a lean enterprise?
Five Step Process
Make lead times short
Keep production lines flexible
Shift Focus from Mass Production : Flexibility and Customer Choice
Eliminate Waste : Machine Downtime, Inefficient Motion
Operational Excellence
Tools and Quality Improvement methods
Deeper Business Philosophy
Leadership, Teams, Culture, Relationships
Learning Organization
Define Customer
Value
Define Value
Stream
Make it Flow
Pull from
Customer Back
Strive for
Excellence

 What about Toyota’s elimination of waste?
Idle a machine, stop producing parts
Build up inventory to level out production schedule
Selectively add and substitute overhead for direct labor
Produce parts at the rate of customer demand
Selectively use IT
 What exactly is non value added waste?
Add value to raw material, get rid of everything else
Map the value stream of raw material
 But companies that often think they are lean, aren’t. Why?
Management commitment and cultural transformation
Far more than just a set of lean tools
Muda and example – Shingo Prize
46% reduction in lead time
83% reduction in work-in-process inventory
91% reduction in finished goods inventory
50% reduction in overtime
83% improvement in productivity
addition

HOW TOYOTA BECAME WORLD’S BEST
MANUFACTURER? ( TOYODA FAMILY AND TPS’
STORY)
 How have generations of consistent leadership transformed Toyota?
1800s, Sakichi Toyoda
Carpentry, designing and building wooden spinning machines
Power driven wooden looms
Toyoda Automatic Loom Works
Special Mechanism to stop a loom when a thread broke- jidoka
Kiichiro Toyoda
World War II
Rampant Inflation, Horrendous Cash Flow
1948- Debt= 8*capital
Pay cuts and cost cutting
Resignation
Research lab in a car hotel for Eiji

 What has shaped the Toyota Production System?
Visit to Ford and GM
Henry Ford’s Book : “ Today and Tomorrow”
 But there ought to be differences between Ford’s mass production system and the
production system of Toyota?
 What were the learnings from Ford?
Large volumes, larger inventories
High equipment costs
Disorganized work places, uneven flow, traditional accounting measures
Ford
Huge quantities of limited number of models
Tons of cash
A large U.S. and international market.
Complete supply system
Toyota
Low volumes of Different models from the same
assembly line
No cash
Operated in a small country.
No such supply system.

Basically an OPPORTUNITY TO CATCH UP
 Did that mean competing head-on with Ford?
Improve Toyota’s manufacturing within Japan’s protected market
Creating the manufacturing system that changed the world.
 How? What? When?
“hands-on” journey’s through Toyota’s factories
Principles of jidoka and one-piece flow
drawing from the U.S. concept of pull system
Teaching to key suppliers and then the world.

THE HEART OF THE TOYOTA PRODUCTION
SYSTEM: ELIMINATING WASTE
 What are non-value-adding wastes in business processes?
Overproduction
Waiting
Unnecessary conveyance
Over processing or incorrect processing
Excess Inventory
Unnecessary Movement
Defects
Unused Employee Creativity
Therefore avoiding: suboptimal behaviors
 How is traditional process improvement different from lean improvement ?

 How does TPS work?
The TPS House diagram
Traditional Process Improvement
Focuses on identifying local efficiencies
Provide a significant percent improvement
for individual process
Less number of value added steps are used to
advantage.
Complete supply system
Lean Improvement
Cells facilitate one piece flow of a product or
service.
The rate is determined by the needs of the
customer hence significant value is added.
More number of non value added steps are
squeezed out.
No such supply system.

THE “NO COMPROMISES” DEVELOPMENT
OF LEXUS
 Innovative vs Conservative
 Lexus: A New Car, A New Division by the Michael Jordan of Chief Engineers
Buying Toyota vs a Merc or a BMW ( Yukiyasu Togo)
Why not luxury vehicles?
New sales channel and name
Ichiro Suzuki
 How did Lexus come into being?
Thorough evaluation of goals of the vehicle.
Considering Competition
Focus Group Interviews, Marriott Hotel, Long Island, U.S.
Classification of reasons (Purchase, Rejection, Image)
Simplification of Results
Qualitative Summarizing ( emotion vs scientific precision)
Summary grids

 What did the surveys convey?
Focus on status and prestige
Stereotype of Japanese cars
Striking an emotional nerve
Functional performance and elegant experience
Functional Performance and Human warmth??????
 What was done to integrate the two?
Quantitative targets
Compare with main competition
Going to root causes instead of resorting to a surface solution
 What were the guiding goals?
Cut noise, vibration, and harshness at the source
Maintaining the “yet” concepts, balancing without compromising on
traditional auto design trade-offs
 What exactly are no-compromise objectives?
Great high speed handling/stability yet a pleasant ride
Fast and smooth ride yet low fuel consumption
Super quiet yet light weight
Elegant styling yet great aerodynamics
warm yet functional interior
 The FQ Committee (Production engineering, R&D, manufacturing plant)

PART 2: THE BUSINESS PRINCIPLES OF
THE TOYOTA WAY
SECTION 1: LONG TERM PHILOSOPHY
PROBLEM SOLVING (Continuous
improvement and learning)
PEOPLE AND PARTNERS (
Respect challenge and grow
them)
PROCESS ( Eliminate waste)
PHILOSOPHY ( Long Term
thinking)

PRINCIPLE 1:
BASE YOUR MANAGEMENT DECISIONS ON A
LONG TERM PHILOSOPHY, EVEN AT THE
EXPENSE OF SHORT TERM FINANCIAL GOALS
 Capitalism as the dominant socio-economic system
 A mission greater than earning a paycheck!
The one theme that stands out- Why does Toyota exist as a business?
What about cutting costs?
Total Budget Control System
Cost consciousness
Is it an underlying principle?
Generate value, not making money
 Jim Press’s Secret
“Nixon Shock”- 1971 (import surcharge)
Fast forward to lexus

 The NUMMI Story: Building Trust with Employees
1980s- GM JV
Light truck factory, Fremont, California
“Speed up!”
Productivity, quality, space and inventory turns
Helping Society and Community
 Don’t Let Business Decisions Undermine Trust and Mutual Respect
TABC: Truck bed plant, Long Beach
Chicken tax: 30% import surcharge, US
2001: Mexico
 Use Self-reliance And Responsibility To Decide Your Own Fate
Lexus
Toyoda family
 Mission Statement
Contribute to economic growth
Contribute to well being and stability of members
Contribute to the overall growth of Toyota

 Guiding Principles
Honor the language and spirit of every nation
Respect the culture and customs of every nation
Dedicate to provision of clean and safe products
Create advanced technologies
Foster a creative teamwork culture
Pursue growth in harmony
Work with business partners
 Create A Constancy Of Purpose And Place In History
The Gutting of Chrysler’s culture

SECTION 2: THE RIGHT PROCESS WILL
PRODUCE THE RIGHT RESULTS
them)
thinking)

PRINCIPLE 2: CREATE A CONTINUOUS PROCESS
FLOW TO BRING PROBLEMS TO THE SURFACE
 Most Business processes are 90% Waste and 10% value-added work
Beginning a journey to lean
Shortened elapsed time
Implementation of lean tools
Deal or sink
Batch and Queue
 How do you distinguish between value added work and waste?
Engineers and products
Engineering analysis groups
 The Alternative? Flow.
Time and Patience
Continuous Cost benefit analysis
 Traditional Mass Production Thinking
Organise equipment and processes: Economies of Scale
Apparent Flexibility in Scheduling

 WIP Inventory
Overproduction>Idle inventory>Plant Space>Hiding Problems
Value streams crossing departments>Delay
Eg. 21 minutes (plus transport time) vs 3 minutes
 Ideal Batch Size
Lean thinking- One
Blow up departments and “process islands”
 Why faster means better in a flow?
Batch vs continuous flow
 Takt Time: The Heart Beat of One-Piece Flow
Competitive rowing and coxswain
But extra power and speed, slows the boat down
How fast? Capacity? Number of People?
Takt- rhythm
Rate of customer demand
 Benefits of One-Piece Flow
Quality, Flexibility, Productivity, Floor space, Safety, Morale, Inventory costs

 Why creating flow is difficult?
Life gets tougher for a while
Sink or swim together
But then why not inventory and an easy life?
One piece flow and continuous improvement
Two mistakes: Fake flow and go backwards when problems occur
37 days vs 431 minutes (Will-Burt Co.)
Cost and flow
Thinking Production System
 Case Example: Job Summaries in a Navy Ship Repair Facility
Work instructions folder
Kaizen Workshop
Cross functional work cell
Open office environment

PRINCIPLE 3: USE PULL SYSTEMS TO
AVOID OVERPRODUCTION
 Online milk delivery orders! Anyone?
Inventory Push System
vs Pull System
 Managing vs Eliminating Inventory
But, Natural breaks in flow
Past purchase patterns and expected future demand
 The Principle- Customer Pull and Replenishment
Independent department schedules
Small stores of parts between operations
 Toyota’s Kanban system- Pull where you must
Orders from car dealerships>Leveled schedule by production control>Schedule
sent to the body shop>Stamped steel panels welded to the body>Kanban to
stamping press
 Push Scheduling Has Its Place (Parts from Japan to U.S.)

PRINCIPLE 4: LEVEL OUT THE WORKLOAD
(Heijunka)
 Why not a strict build-to-order model?
Piles of inventory
hidden problems
poorer quality
Lead times are likely to grow
Better, level out schedule
 Elimination of 3 M’s
Muda(Waste), Mura(Unevenness), Muri(Overburden)
 How to level production and schedules?
Leveling of production by volume and product mix
Keep batch sizes small
Instead of building out parts irregularly and working overtime
Mix model production
 Role of inventory?

 Build to Order, Yet Heijunka
Quality vs build to order
Change to order( Solara)
 What about service operations?
Fit customer demand into a leveled schedule
Establish standard times for delivering different types of service
(The medical field)
Toyota product development matrix
meeting development milestones with 100% accuracy
Cadence to workload requirements over the life of the development project
Conceptual>design>launch
 Putting Levelling and Flow Together
Combine build-to-stock and build-to-order

PRINCIPLE 5: BUILD A CULTURE OF
STOPPING TO FIX PROBLEMS, TO GET
RIGHT THE FIRST TIME
 Russ Scaffede and the American Powertrain (Georgetown, Kentucky)
Don’t shutdown the assembly plant
Hiding problems
 Stopping the process to build in quality(Jidoka)
Sakichi Toyoda
Relates to employee empowerment (andon cards)
Autonomation
Building things right the first time
Andon system
Buffers
Tanguay, Canada
 Using Countermeasures and error-proofing to fix problems
Poka-yoke devices

 Keep quality control simple and involve team members
Go and see
Analyze the situation
Use one piece flow and andon to surface problems
Ask ‘Why?’ five times
 Building in Quality in a Services Environment
Kentou (study drawing) phase

PRINCIPLE 6:STANDARDISED TASKS ARE THE
FOUNDATION FOR CONTINUOUS IMPROVEMENT
AND EMPLOYEE EMPOWERMENT
 Slow working for Setting low expectations
Grievances and conflict
Slaves to numbers, not philosophy
 Toyota’s standardization philosophy
Takt time, sequence of processes, Inventory needs
Stabilize to apply kaizen
Facilitate quality
 Coercive vs Enabling Bureaucracies
Taylor’s scientific management
Following neither approach- Bureaucracy or Organic

Coercive
Bureaucracy
Rigid Rule
enforcement
Extensive Written
Rules
Hierarchy Controls
Enabling Bureaucracy
Empowered
Employees
Rules and Procedures
as enabling tools
Hierarchy supports
organizational
learning
Autocratic
Top down control
Minimum Written
rules and procedures
Hierarchy control
Organic
Empowered
employees
Minimum rules and
procedures
little hierarchy
TechnicalStructure
HighBureaucracyLowBureaucracy
Social Structure
Coercive Enabling
Focus on best practice
methods
Customization and
flexible improvisation
Control over own work

 Standardising Work for A new product launch
Develop a pilot team
Use standards and improve
 Standardization as an Enabler
SMART
Improvement by those working

PRINCIPLE 7: USE VISUAL CONTROL SO
NO PROBLEMS ARE HIDDEN
 The accepted dysfunction of the day
Fire fighting crisis
Donnelly Mirrors’ Ford Taurus
coworker’s visual organization
 Clean it up, Make it visual
The 5 S’s:
Sort
Straighten
Shine
Standardise
Sustain
 Improving value added flow
Visual controls
Traffic signals
A3 Reports
 Keeping it Visual through technology and human systems
Obeya

PRINCIPLE 8:USE ONLY RELIABLE,
THOROUGHLY TESTED TECHNOLOGY THAT
SERVES YOUR PEOPLE AND PROCESSES
 The best way to find employment?
Lagging behind in acquiring new technology.
Value added simple technology
 Adoption of new technology must support your people, process and values.
First hand inspection
New opportunities
Pilot area
Analyse wrt to philosophy
 People do the work, computers move the information
Support only
How does IT support Toyota way?
Kitano and Dean
Rotary rack system at Toyota’s Chicago Parts Distribution Center

 IT in Toyota’s product development process
1980s- own CAD system
shift to CATIA
 The Role of Technology- Adopting it Properly
Testing- Existing and Forthcoming
Welding the automotive body together - Of robots and Programmable fixturing
Blue sky system

SECTION 3: ADD VALUE TO THE ORGANISATION
BY DEVELOPING YOUR PEOPLE AND PARTNERS
them)
thinking)

PRINCIPLE 9: GROW LEADERS WHO
THOROUGHLY UNDERSTAND THE WORK, LIVE
THE PHILOSOPHY, AND EACH IT TO OTHERS
 Looking at the companies
Turnarounds by new faces
No sudden change of direction= eliminating muri
 First American president of Toyota motor manufacturing
Toyota coordinator
Gary Convis, 1999, Kentucky
genchi genbutsu
 Putting Customers First
Shotaro Kamiya- Sales manager, 1935
 The Chief Engineer
Responsibility without authority
Ear of executives, Control, lead, critical link
 Common Themes of leadership at Toyota
Before we build cars, we build people

GROUP
FACILITATOR
“You’re
empowered”
BUILDER OF
LEARNING
ORGANISATIONS
“Here is our
purpose and
direction”
BUREAUCRATIC
MANAGER
“Follow the
rules”
TASK MASTER
“Here is what to
do and how”
BottomUp
(Development)
TopDown
(Directives)
Toyota Leaders
General
Management
Expertise
In Depth
understanding of
Work

PRINCIPLE 10: DEVELOP EXCEPTIONAL PEOPLE
AND TEAMS WHO FOLLOW YOUR COMPANY’S
PHILOSOPHY
 Form vs function of Teams
Hourly team leader and group leader.
Work teams: system and culture
 Developing excellent individual work while promoting effective team work
Launching a Toyota facility in North America
Empowering too quickly could be immature
One shot at getting the culture right
Selection of Candidates
 Situational leadership, Ken Blanchard(The One Minute Manager)
4 stages of team development
Orientation>Dissatisfaction>Integration>Production
 Work Groups are the focal point for solving problems
The cliché of bottom up management and empowerment

 Using Motivation Theories
Maslow’s Need
Hierarchy
• Satisfy lower
level needs and
move employees
higher up
towards
actualization.
• Culture of
continuous
improvement
while having job
security, good
pay, safe working
conditions
Herzberg’s Job
Enrichment
• Eliminate
dissatisfiers and
design work to
create positive
satisfiers
• 5S, ergonomic
programs, visual
management, HR
Policies (hygiene
factors)
Continuous
improvement,
job rotation,
built-in feedback
support
(motivators)
Taylor’s
Scientific
Management
• Scientifically
select, design
standardized
jobs, train and
reform with
money
Performance
relative to
standards.
• All principles
followed at group
level based on
employee
involvement.
Behavior
Modification
• Reinforce
behavior on the
spot when the
behavior
naturally occurs
• Continuous flow
and andon
creates short
lead times for
rapid feedback
Goal Setting
• Set SMART goals
and measure
progress
• Set goals and
meet them
through hoshin
kanri ( policy
deployment)
Continuous
measurement
relative to
targets.

PRINCIPLE 11: RESPECT YOUR EXTENDED
NETWORK OF PARTNERS AND SUPPLIERS BY
CHALLENGING THEM AND HELPING THEM
IMPROVE
 Best and Toughest Customer for auto industry suppliers
excellence standards
The typical approach to supplier relationships
Aisin’s p-valve
 Find solid partners and grow together to mutual benefit in the long run
A typical Conference
 Nirvana
Toyota and ford- Breaking the bulk
 Partnering with Suppliers while maintaining internal capability

Learning Enterprise
Enabling Systems
Clear Expectations
Stable, Reliable Processes
Fair and Honorable Business
Relations
Next level of
Improvement
Stability

SECTION 4: CONTINUOSLY SOLVING ROOT
PROBLEMS DRIVES ORGANISATIONAL
LEARNING
them)
thinking)

PRINCIPLE 12: GO AND SEE FOR YOURSELF TO
THOROUGHLY UNDERSTAND THE SITUATION
(GENCHI GENBUTSU)
 Deeply understanding and reporting what you say
“going to gemba”
Ohno Circle
 Think and speak based on personally verified data
2004 Sienna
drift, side win stability, flipup tray, cup and bottle holders
 Leaders are not excused
Hourensou- for executives, they aren’t spared either

PRINCIPLE 13: MAKE DECISIONS SLOWLY BY
CONSENSUS, THOROUGHLY CONSIDERING ALL
OPTIONS; IMPLEMENT RAPIDLY (NEMAWASHI)
 Thorough Consideration in Decision Making
Major reeducation process
Five major elements of decision making
 Broadly consider alternative solutions with set-based approach
 Getting on the same page through Nemawashi
Threatened water supply and consensus
Avoiding the ‘chimney’ problem
 Communicate on One Piece of Paper
Using the Deming PDCA cycle
Genchi genbutsu
Ask “why” five
times
Broadly consider
alternative
solutions with a
set-based
approach
Building team
consensus (
employees and
outside)
Efficient
communication

Decide and
announce
Seek
individual
input, then
decide and
announce
Seek group
Input, then
decide and
announce
Group
Consensus,
Management
Approval
Group
Consensus
with Full
Authority
Preferred
Fallback
LevelofInvolvement-----------------------
Time---------------------------------------------

PRINCIPLE 14: BECOME A LEARNING
ORGANIZATION THROUGH RELENTLESS
REFLECTION (HANSEI) AND CONTINUOUS
IMPROVEMENT (KAIZEN)
 Identify root causes and develop counter measures
Don’t pass the buck
 Getting to the Root by asking why five times
No SixSigma
 Practical Problem solving in 7 steps
Before 5 whys
Pareto diagram
Identify POC

 Hansei: Responsibility, Self reflection and organizational learning
Hansei Kai
Obligatory negative or obligatory opportunity?
 Process vs. Result Orientation: The role of metrics
Global Performance Measures
Organisational Performance Measures
Stretch Improvement Metrics
 Hoshin Kanri- Directing and motivating organizational learning
Policy deployment by cascading objectives

 Creating a Learning Oganisation
Long term Journey
Project
DoDoDoActActAct
Check
Check
Check
Plan
Plan
Plan

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