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Toyota's JIT Revolution 
Toyota's JIT Revolution 
“Toyota’s focus on JIT is a continual problem-solving process (not an inventory reduction plan) 
illustrates why the automaker is a JIT leader not only in its industry but all of industry.” 
A Legendary Production System 
In the mid-1990s, more than 50 executives and engineers from major automobile companies 
worldwide visited Toyota Motor Company's (Toyota) manufacturing complex at Georgetown, 
US, to study the Toyota Production System (TPS). The visit also included an intensive question 
and answer session, which lasted for 5 hours each for two days a month. Even though the visitors 
were from competing automakers, including Ford and Chrysler. Toyota did not deny them access 
to the plant. 
The TPS aimed to produce world-class quality automobiles at competitive prices. It was built on 
two main principles, Just-in-Time (JIT) production and Jidoka. 
JIT was used not only in manufacturing but also in product development, supplier relations and 
distribution. Analysts remarked that despite imitating Toyota's JIT for many years, no other 
automaker in the world had been able to make their production systems and processes as 
efficient as Toyota had done. Analysts felt that though other leading automakers like Mercedes- 
Benz, Honda and DaimlerChrysler excelled in advanced engineering techniques, engine 
technology and styling, they did not match Toyota in efficiency, productivity and quality. 
Executives of rival companies also appreciated Toyota's manufacturing and product development 
systems. Officials at GM commented, "Toyota is the benchmark in manufacturing and product 
development." A top executive at Ford said, "Toyota is far ahead in developing markets that the 
real race is for the second place." Some executives at BMW also considered To yota the best car 
company in the world. 
The early adoption of JIT principles by Toyota seemed to have helped the company achieve 
significant success. It helped the company respond quickly to changing customer needs and offer 
high quality products at low costs, thus increasing customer satisfaction. 
Toyota’s History 
Toyota's history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the 
handloom machinery business from his family traditional business of carpentry. He founded 
Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi 
invented a loom that stopped automatically when any of the threads snapped. This concept of 
designing equipment to stop so that defects could be fixed immediately formed the basis of the 
Toyota Production System (TPS) that went on to become a major factor in the company's 
success. 
In 1933, Sakichi established an automobile department within TALW and the first passenger car 
prototype was developed in 1935. Sakichi's son Kiichiro Toyoda (Kiichiro) convinced him to 
enter the automobile business. After this the production of Model AA began and Toyota Motor 
Corporation was established in 1937. Kiichiro visited the Ford Motor Company in Detroit to 
study the US automotive industry. He saw that an average US worker's production was nine 
Akshay Jain (2013004) Page 1 
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Toyota's JIT Revolution 
times that of a Japanese worker. He realized that the productivity of the Japanese automobile 
industry had to be increased if it were to compete globally. 
Back in Japan, he customized the Ford production system to s uit Japanese market. He also 
devised a system wherein each process in the assembly line of production would produce only 
the number of parts needed at the next step on the production line, which made logistics 
management easier as material was procured according to consumption. This system was 
referred to as Just-in-Time (JIT) within the Toyota Group. 
The JIT production was defined as 'producing only necessary units in a necessary quantity at a 
necessary time resulting in decreased excess inventories and excess workforce, thereby 
increasing productivity.' Kiichiro realized that by relying solely on the central planning 
approach, it would be very difficult to implement JIT in all the processes for an automobile. 
Hence, TPS followed the production flow conversely. People working in one process went to the 
preceding one to withdraw the necessary units in the necessary quantities at the necessary time. 
This resulted in the preceding process producing only quantities of units to replace those that had 
been withdrawn. 
Toyota flourished during the Second World War by selling trucks and buses to the army and the 
company launched its first small car (SA Model) in 1947. After the war, the company faced a 
series of financial problems. A financial support package from a consortium of banks (after the 
intervention of the Bank of Japan) helped Toyota tide over its problems. The package consisted 
of a series of steps that included downsizing and restructuring the company into separate 
manufacturing and sales divisions. As per the revival package, The Toyota Motor Sales 
Company Ltd. was formed in 1950. In the same year, Kiichiro resigned. 
By 1952, Toyota made a turnaround and in 1953, the company appointed distributors in El 
Salvador and Saudi Arabia and started exports. Meanwhile, Taiichi Ohno (Ohno) took charge of 
the company. In 1957, Toyota entered the US market through its subsidiary, Toyota Motor Sales, 
USA. In 1959, the company began its first overseas production in Brazil and over the next few 
years, developed a vast network of overseas plants. Besides manufacturing, Toyota started a 
global network of design and Research and Development facilities covering the three major car 
markets of Japan, North America and Europe. 
By the early 1970s, Toyota's sales exceeded that of Chrysler and Volkswagen and its production 
was behind that of only General Motors (GM) and Ford. Toyota continued its efforts to make its 
production system more efficient and also developed flexible manufacturing systems. It also 
began to tap the markets in the Middle East and by 1974 the Toyota Corolla, (launched in 1965) 
became the largest selling car in the world. In 1984, Toyota entered into a joint venture with GM 
and established the New United Motor Manufacturing Inc. (NUMMI). 
By the early 1990s, as Toyota expanded its overseas operations, the excessive capital spending 
affected its profit margins. Tatsuro Toyoda (Tatsuro), who took over as the company President in 
1992, began to control costs by eliminating all unnecessary expenditure. In 1995, after Tatsuro 
resigned due to health reasons, Hiroshi Okuda (Okuda) became Toyota president. In 1996, 
Toyota consolidated its production in North American production units into the Cincinnati based 
Toyota Motor Manufacturing (North America). 
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Toyota's JIT Revolution 
In 1999, Okuda replaced Chairman Shoichiro Toyoda and Fujio Cho (Cho) became the 
president. In the same year, Toyota listed its shares on both the New York and London stock 
exchanges. By the end of 2001, the company's net income had reached $5,447 million and net 
revenue reached $106,030 million (Refer Exhibit I for the company's financial performance over 
the years). 
According to analysts, Toyota's success in both the local and global markets was mainly because 
of its state-of-the-art and well-planned operational strategies. The company had continuously 
focused on gaining a competitive advantage through implementation of innovative and path-breaking 
ideas on its production floors. TPS worked on the basic idea of maintaining a 
continuous flow of products in factories in order to flexibly adapt to demand changes. The most 
important feature of TPS was the way it linked all production activities to real dealer demand 
through implementation of Kanban, JIT and other quality measures that enabled Toyota to 
manufacture in low quantities. 
A Brief History of (Just-In-) Time 
Lean Manufacturing is not especially new. It derives from the Toyota Production System or Just 
in Time Production, Henry Ford and other predecessors. 
The lineage of Lean manufacturing and Just in Time (JIT) Productio n goes back to Eli Whitney 
and the concept of interchangeable parts. 
`Just-in-time' is a management philosophy and not a technique. 
It originally referred to the production of goods to meet customer demand exactly, in time, 
quality and quantity, whether the `customer' is the final purchaser of the product or another 
process further along the production line. 
JIT - Background and History 
JIT is a Japanese management philosophy which has been applied in practice since the early 
1970s in many Japanese manufacturing organizations. It was first developed and perfected 
within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer 
demands with minimum delays. Taiichi Ohno is frequently referred to as the father of JIT. 
Toyota was able to meet the increasing challenges for survival through an approach that focused 
on people, plants and systems. Toyota realized that JIT would only be successful if every 
individual within the organization was involved and committed to it, if the plant and processes 
were arranged for maximum output and efficiency, and if quality and production programs were 
scheduled to meet demands exactly. 
JIT manufacturing has the capacity, when properly adapted to the organization, to strengthen the 
organization’s competitiveness in the marketplace substantially by reducing wastes and 
improving product quality and efficiency of production. 
There are strong cultural aspects associated with the emergence of JIT in Japan. The Japanese 
work ethic involves the following concepts. 
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Toyota's JIT Revolution 
 Workers are highly motivated to seek constant improvement upon that which already 
exists. Although high standards are currently being met, there exist even higher standards 
to achieve. 
 Companies focus on group effort which involves the combining of talents and sharing 
knowledge, problem-solving skills, ideas and the achievement of a common goal. 
 Work itself takes precedence over leisure. It is not unusual for a Japanese employee to 
work 14-hour days. 
 Employees tend to remain with one company throughout the course of their career span. 
This allows the opportunity for them to hone their skills and abilities at a constant rate 
while offering numerous benefits to the company. 
These benefits manifest themselves in employee loyalty, low turnover costs and fulfilment of 
company goals. 
In the early 1930s, the technology used by American automobile companies was superior to that 
used by Japanese companies. Kiichiro therefore decided to learn new automobile production 
techniques from American manufacturers. He soon realized that to catch up with the Americans, 
he had to master basic production techniques. He then reorganized the production system in 
Toyota in a unique way. This reorganization eventually led to the development of JIT concept. 
In the early 1970s, Taiichi Ohno (Ohno) implemented JIT in Toyota's manufacturing plants. The 
JIT system was aimed at avoiding waste, reducing inventories and increasing production 
efficiency in order to maintain Toyota's competitive edge. Ohno also believed that customers 
should receive high quality products in the shortest time. Initially, JIT was used as a method for 
reducing inventories in Toyota's shipyards, but later it evolved into a management p hilosophy 
including a set of techniques. 
Developed by the Japanese, the JIT production system was one of the most significant 
production management approaches of the post-WWII era. The system comprised a set of 
activities aimed at increasing production volume through the optimum use of inventories of raw 
materials, work- in-process, and finished goods. In a JIT production system, a workstation gets a 
part just in time, completes its work and the part is moved through the system quickly. 
JIT was based on the principle of producing only what is needed and nothing more than needed. 
The Japanese believed that anything produced over the quantity required was a waste. Cho 
defined waste as, "Anything other than the minimum amount of equipment, materials, parts and 
workers (working time) which are absolutely essential to production." JIT did not allow any 
surplus as it believed that "effort and material expended for something not needed now cannot be 
utilized now." (Refer Table I for requirements and assumptions of JIT). 
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Toyota's JIT Revolution 
The Experiments of the Toyota Production System 
Rule Implied 
Hypothesis 
Problem 
Signals 
Responses 
1 How People 
Work 
>Specifications 
document all work 
processes and include 
content, sequence, 
timing and outcome. 
>The person or 
machine can 
perform the work as 
specified 
>If the work is 
done as specified, 
the product is 
defect-free. 
>The work 
procedure 
varies from 
specification 
>Defective 
Products 
>Improve training 
>Improve Process 
Capability 
>Modify the work 
specification 
2 How Work 
Connects 
>Connections with 
clear YES/NO signals 
directly link every 
customer and 
supplier. 
>Customer requests 
have a known, 
specific volume and 
mix. 
>The supplier can 
respond to requests. 
>Responses do 
not keep pace 
with requests. 
>Supplier is 
idle waiting for 
requests. 
>Determine true 
mix and demand. 
>Determine true 
supplier capability. 
>Retrain/improve/ 
modify. 
3 The Physical 
Arrangement 
>Every product and 
service travels a 
single, simple and 
direct flow path. 
>Every supplier in 
the flow path is 
required and 
suppliers not on the 
flow path are not 
required 
>A person or 
machine is not 
needed. 
>Unspecified 
supplier 
performs work. 
>Determine why 
supplier was 
unnecessary; redes 
ign flow. 
>Determine reason 
for unspecified 
supplier; redesign 
flow. 
4 How To 
Improve 
>Workers at the 
lowest feasible level, 
guided by a teacher 
(Sensei), improve 
their own work 
processes. 
>A specific change 
causes a specific, 
predictable 
improvement in 
productivity, 
quality or other 
parameter. 
>Actual result 
varies from 
expected 
result. 
>Determine why 
the actual result 
differed from the 
prediction. 
>Redesign the 
change. 
5 Problem 
Alarms 
>Integrated failure 
tests automatically 
signal deviations for 
every activity, 
connection & flow 
path. 
>Automatic alarms 
prevent defects or 
sub- standard 
performance. 
>Defects are 
passed through 
to the next 
operation. 
>Sub-Standard 
Performance. 
>Analyze and 
institute new or 
improved alarms. 
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Toyota's JIT Revolution 
Table I 
Just-In-Time Production System 
What it is 
 Management philosophy 
 'Pull' System through the plant 
What it does 
 Attacks waste (time, inventory, 
 scrap) 
 Exposes problems and bottlenecks 
 Achieves streamlined production 
What it requires 
 Employee participation 
 Industrial engineering/basics 
 Continuing improvement 
 Total quality control 
 Small lot sizes 
What it assumes 
 Stable environment 
JIT could be applied to any manufacturing environment including job shop, batch production or 
repetitive production. The ideal lot size as per JIT was one. A worker had to complete one task 
and pass it on to the next workstation for further processing. If workstations were geographically 
far away, efforts were made to reduce the transit time. 
The advantages of JIT included price flexibility, reduction in product variation, quick 
response to customers' demands, high quality products at low cost for consumers, and 
above all, customer satisfaction. The system also offered the advantages of low inventory 
investment, shortened lead times, and early detection of quality problems. 
The Kanban 
Kanban was an essential component of Toyota's JIT concept. The Japanese referred to Kanban 
as a simple parts-movement system that depended on cards and boxes/containers to take parts 
from one workstation to another on a production line. Ohno had developed the idea in 1956 from 
the super markets in the US, which had devised an effective system for replenishment of store 
shelves based on the quantities picked by the customers. 
Initially, Ohno used pieces of paper contained in rectangular vinyl envelopes to convey 
information (called Kanban). In a period spanning three decades, Kanban developed into a 
sophisticated information system that ensured production in required quantities at the right time 
in all manufacturing processes within the factory. 
The essence of the Kanban concept was that a supplier delivered components to the production 
line only when required, thus eliminating storage in the production area. Suppliers delivered 
desired components when they received a card and an empty container, indicating that more 
parts were needed for production. In case of line interruption, each supplier produced only 
enough components to fill the container and then stopped. Since Kanban was a chain process in 
which orders flowed from one process to another, the production or delivery of compo nents was 
'pulled' to the production line (Refer Box “Pull and Push Systems”). In the traditional forecast 
oriented method, parts were 'pushed' to the line (Refer Exhibit I for a comparison of the Kanban 
philosophy with the western philosophy). 
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Pull and Push Systems 
In a pull system, the production of a certain product starts only when a demand or request is 
made by the buyer. The consumer of the product 'pulls' from the last link of the production chain. 
This last link pulls its preceding link and so on. In western companies, the push system was 
considered to be more cost-effective. Push systems were schedule-based projections of what 
demand was expected to be. Based on historical information (updated on a weekly or monthly 
basis), a computer program processed the information giving a detailed sub-schedule for buying 
materials and producing goods. This schedule pushed the production in order to comply with the 
expected demand. The disadvantage of the push system was that predictions did not always 
coincide with facts. This resulted in either excess or inadequate inventories. 
Exhibit I 
Toyota’s Kanban Philosophy vs Western Philosophy 
Factors Toyota's Kanban Western Philosophy 
Inventory A liability. Every effort must be 
extended to do away with it. 
An asset. It protects against forecast 
errors, machine problems, late vendor 
deliveries. More inventory is "safer". 
Lot sizes Immediate needs only. A minimum 
replenishment quantity is desired for 
both manufactured and purchased 
parts. 
Formulas. We're always revising the 
optimum lot size with some formula 
based on the trade-off between the 
cost of inventories and the cost of set 
up. 
Set ups Make them insignificant. This 
requires either extremely rapid 
changeover to minimize the impact 
on production, or the availability of 
extra machines already set up. Fast 
changeover permits small lot sizes to 
be practical, and allows a wide 
variety of parts to be made 
frequently. 
Low priority. Maximum output is the 
usual goal. Rarely does similar 
thought and effort go into achieving 
quick changeover. 
Queues Eliminate them. When problems 
occur, identify the causes and 
correct them. The correction process 
is aided when queues are small. 
If the queues are small, it surfaces 
the need to identify and fix the 
cause. 
Necessary investment. Queues permit 
succeeding operations to continue in 
the event of a problem with the 
feeding operation. Also, by providing 
a selection of jobs, the factory 
management has greater opportunity 
to match up varying operator skills 
and machine capabilities, combine set 
ups and thus contribute to the 
efficiency of the operation. 
Vendors Co-workers. They're part of the 
team. Multiple deliveries for all 
active items are expected daily. The 
Adversaries. Multiple sources are the 
rule, and it's typical to play them off 
against each other. 
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Toyota's JIT Revolution 
vendor takes care of the needs of the 
customer, and the customer treats 
the vendor as an extension of his 
factory. 
Quality Zero defects. If quality is not 100%, 
production is in jeopardy. 
Tolerate some scrap. We usually 
track what the actual scrap has been 
and develop formulas for predicting it 
Equipment 
maintenance 
Constant and effective. Machine 
breakdowns must be minimal. 
As required. But not critical because 
we have queues available. 
Lead times Keep them short. This simplifies the 
job of marketing, purchasing, and 
manufacturing as it reduces the need 
for expediting. 
The longer the better. Most foremen 
and purchasing agents want more 
lead time, not less. 
Workers Management by consensus. Changes 
are not made until consensus is 
reached, whether or not a bit of arm 
twisting is involved. The vital 
ingredient of "ownership" is 
achieved. 
Management by edict. New systems 
are installed in spite of the workers, 
not thanks to the workers. Then we 
concentrate on measurements to 
determine whether or not they're 
doing it. 
At Toyota, two types of Kanban cards were used: one, to move parts from one place to another, 
known as the Conveyance Kanban card, and the other, to authorize the production of parts, 
known as the Production Kanban card. (Refer Figure I). A standard size container was used to 
store parts and each card was treated like a coupon. (Refer Box Illustration). 
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Illustration 
Suppose a container of item X is required in work center A. As a first step, a production Kanban 
card is issued to work center A. The work center withdraws a container of raw materials from its 
inventory. The container of raw materials also included a conveyance Kanban card. Work center 
A removes the conveyance Kanban card from the container and sends it to the proceeding work 
center where it serves as an authorization to pick up a container of raw materials. 
Three types of information were exchanged using Kanban. Pick up information guided the 
earlier stages regarding parts to be produced for the succeeding stages. Transfer information 
indicated when the parts had to be produced for the succeeding stages. Production information 
was transmitted from the earlier stages to the later stages to inform the workers about the product 
mix and other operational matters. 
To make the Kanban system effective and reap maximum benefits (Refer Table II) from it, Ohno 
framed six rules: 
 Later process went to the earlier process to pick up products. 
 The earlier process produced only the amount withdrawn by the later process. 
 Should not pick or produce goods without a Kanban. 
 A Kanban should be attached to the goods. 
 100% defect free parts were required. 
 Reduce the number of Kanban. 
Table II 
Advantages of Kanban 
1. A simple and understandable process 
2. Provides quick and precise information 
3. Low costs associated with the transfer of 
information 
4. Provides quick response to changes 
5. Limit of over-capacity in process 
6. Avoids overproduction 
7. Minimizes waste 
8. Control can be maintained 
9. Delegates' responsibility to workers 
The Kanban cards were re-circulated and the number of cards controlled work- in-progress (WIP) 
in the system. In this way, the activities of final assembly were linked to previous operations by a 
chain system of card ordering that 'pulled' production through the factory. 
Another important component of JIT was Heijunka (production smoothing). JIT's principle of 
building only the required number of items helped keep the production costs low. Heijunka 
helped in the accomplishment of this principle by creating a consistent production volume. 
Heijunka averaged the highest and lowest variations of the orders. The variations were then 
removed from the production schedule. This ensured that the right quantity of parts was 
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Toyota's JIT Revolution 
produced with minimum workforce. Heijunka took care not only of the total volume of items but 
also the type of items produced and the other options. 
Problems with JIT 
Although many automobile companies around the world adopted JIT, the system was far from 
perfect and difficult to implement. It was based on the key assumption that sources and channels 
of supply were constantly reliable and dependable. Analysts felt that it did not take into account 
the possibility of labor strikes at automotive plants. Moreover, JIT involved high set up costs 
and Special training and reorganization of policies and procedures in the company were 
necessary to implement JIT. The supplier relations of the company also needed to be improved to 
ensure timely delivery. In the absence of good supplier relations, JIT increased the risk of 
inventory shortage. Organizational culture also seemed to play a crucial role in the 
implementation of JIT. Many companies outside Japan reported difficulties in the 
implementation of the concept. 
Another problem seemed to be the difficulty of removing the 'human element' from the systems 
that generate requirements. 
An analyst commented, "Computer algorithms, they say, go only so far. Good people, with 
lengthy experience at reading the ups and downs of the industry are still a must." Most 
companies felt that people should be actively involved in the system. 
Moreover, there could be many barriers to the successful implementation of JIT. For JIT to be 
successful, companies had to ensure that they did not make frequent changes in production 
planning and that their forecasting procedures were reliable and did not result in under or over 
forecasting of demand. Other barriers could be equipment failure and employee absenteeism. 
Analysts felt that Toyota's JIT was a complicated process and that its success inside a plant 
depended mainly on highly experienced, highly motivated managers. Outside the plant, JIT's 
success depended on a network of capable suppliers that operated in sync with Toyota's 
production processes. In fact, according to some analysts, Toyota was not able to replicate the 
JIT production system in an efficient way in any of its operations outside Japan. John Paul 
MacDuffie said, "Toyota hasn't developed a single facility that is as efficient as the ones it has in 
Japan." 
Future of JIT 
Although Toyota's JIT had some drawbacks, it offered several advantages over other 
manufacturing processes. Because of the early adoption of JIT, Toyota benefited more from the 
system than other automobile companies (Refer Exhibits II & III). 
By 2000, JIT was adopted by many Japanese companies, as well as some US car companies. 
Analysts felt that JIT was not only a process that could be applied to manufacturing, but also a 
philosophy that governed the attitude of a successful business. According to one analyst, "Using 
JIT, Taiichi Ohno had revolutionized production. The market clearly reflects the success of JIT. 
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The concept has made Japanese products affordable and reliable in quality. Quality is no longer a 
privilege - it is a standard accompanied by low cost." 
Exhibits II 
Plant Productivity 
*For products low in demand, one batch = 7 days use. 
Exhibits III 
Comparison of Different Auto Manufacturers 
Future directions for research 
Just- in-Time concept has changed the way manufacturing organizations do things. Some of the 
JIT concepts are completely opposite to traditional ways of thinking. It is human nature to resist 
change, and the implementation of JIT system is typical of this. People resist these new ideas and 
call them risky. But it is important to realize that JIT will not work if it has to be forced against 
everybody’s will. Voluntary participation and training is necessary. 
Being a philosophy, JIT does not restrict itself to high technology manufacturing environments 
which make extensive use modern technologies like flexible manufacturing systems (FMS) or 
computer integrated manufacturing (CIM). JIT philosophy is valid in any manufacturing 
environments, regardless of the level of automation in the technology hardware. Similarly, the 
philosophy is not limited to any specific type of industry nor does the size of the organization 
matter. Organizations of different sizes, in a variety of industries, have successfully implemented 
JIT philosophy. Indeed, some applications have shown that JIT is eminently suited to non-manufacturing 
situations as well as, such as in service and administrative work situations. It may 
not be possible to shift from traditional manufacturing system to JIT system at once. To start 
with companies may try to implement JIT elements that are easy to implement. 
Akshay Jain (2013004) Page 11 
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Developing countries like India to expand the base of JIT applications in India. As service sector 
as growing very fast in developing countries like India but poorly managed. JIT can be very 
useful in improving the performance of service sector. This becomes another area for future 
research. 
Companies currently using JIT 
 Harley Davidson 
 Toyota Motor Company 
 General Motors 
 Ford Motor Company 
 Manufacturing Magic 
 Hawthorne Management Consulting 
 Strategy Manufacturing Inc. 
Conclusion 
Hence, we can see that to have a Total JIT manufacturing system, a company-wide commitment, 
proper materials, quality, people and equipment must always be made available when needed. In 
addition; the policies and procedures developed for an internal JIT structure should also be 
extended into the company’s supplier and customer base to establish the identification of 
duplication of effort and performance feedback review to continuously reduced wastage and 
improve quality. By integrating the production process; the supplier, manufacturers and 
customers become an extension of the manufacturing production process instead of 
independently isolated processes where in fact in clear sense these three sets of manufacturing 
stages are inter-related and dependent on one another. Once functioning as individual stages and 
operating accordingly in isolated perspective; the suppliers, manufacturers and customers can no 
longer choose to operate in ignorance. The rules of productivity standards have changed to shape 
the economy and the markets today; every company must be receptive to changes and be 
dynamically responsive to demand. In general, it can be said that there is no such thing as a KEY 
in achieving a JIT success; only a LADDER; where a series of continuous steps of dedicat ion in 
doing the job right every time is all it takes. 
Akshay Jain (2013004) Page 12 
Abhishek Jain (2013002)

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Toyota jit revolution

  • 1. Toyota's JIT Revolution Toyota's JIT Revolution “Toyota’s focus on JIT is a continual problem-solving process (not an inventory reduction plan) illustrates why the automaker is a JIT leader not only in its industry but all of industry.” A Legendary Production System In the mid-1990s, more than 50 executives and engineers from major automobile companies worldwide visited Toyota Motor Company's (Toyota) manufacturing complex at Georgetown, US, to study the Toyota Production System (TPS). The visit also included an intensive question and answer session, which lasted for 5 hours each for two days a month. Even though the visitors were from competing automakers, including Ford and Chrysler. Toyota did not deny them access to the plant. The TPS aimed to produce world-class quality automobiles at competitive prices. It was built on two main principles, Just-in-Time (JIT) production and Jidoka. JIT was used not only in manufacturing but also in product development, supplier relations and distribution. Analysts remarked that despite imitating Toyota's JIT for many years, no other automaker in the world had been able to make their production systems and processes as efficient as Toyota had done. Analysts felt that though other leading automakers like Mercedes- Benz, Honda and DaimlerChrysler excelled in advanced engineering techniques, engine technology and styling, they did not match Toyota in efficiency, productivity and quality. Executives of rival companies also appreciated Toyota's manufacturing and product development systems. Officials at GM commented, "Toyota is the benchmark in manufacturing and product development." A top executive at Ford said, "Toyota is far ahead in developing markets that the real race is for the second place." Some executives at BMW also considered To yota the best car company in the world. The early adoption of JIT principles by Toyota seemed to have helped the company achieve significant success. It helped the company respond quickly to changing customer needs and offer high quality products at low costs, thus increasing customer satisfaction. Toyota’s History Toyota's history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the handloom machinery business from his family traditional business of carpentry. He founded Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi invented a loom that stopped automatically when any of the threads snapped. This concept of designing equipment to stop so that defects could be fixed immediately formed the basis of the Toyota Production System (TPS) that went on to become a major factor in the company's success. In 1933, Sakichi established an automobile department within TALW and the first passenger car prototype was developed in 1935. Sakichi's son Kiichiro Toyoda (Kiichiro) convinced him to enter the automobile business. After this the production of Model AA began and Toyota Motor Corporation was established in 1937. Kiichiro visited the Ford Motor Company in Detroit to study the US automotive industry. He saw that an average US worker's production was nine Akshay Jain (2013004) Page 1 Abhishek Jain (2013002)
  • 2. Toyota's JIT Revolution times that of a Japanese worker. He realized that the productivity of the Japanese automobile industry had to be increased if it were to compete globally. Back in Japan, he customized the Ford production system to s uit Japanese market. He also devised a system wherein each process in the assembly line of production would produce only the number of parts needed at the next step on the production line, which made logistics management easier as material was procured according to consumption. This system was referred to as Just-in-Time (JIT) within the Toyota Group. The JIT production was defined as 'producing only necessary units in a necessary quantity at a necessary time resulting in decreased excess inventories and excess workforce, thereby increasing productivity.' Kiichiro realized that by relying solely on the central planning approach, it would be very difficult to implement JIT in all the processes for an automobile. Hence, TPS followed the production flow conversely. People working in one process went to the preceding one to withdraw the necessary units in the necessary quantities at the necessary time. This resulted in the preceding process producing only quantities of units to replace those that had been withdrawn. Toyota flourished during the Second World War by selling trucks and buses to the army and the company launched its first small car (SA Model) in 1947. After the war, the company faced a series of financial problems. A financial support package from a consortium of banks (after the intervention of the Bank of Japan) helped Toyota tide over its problems. The package consisted of a series of steps that included downsizing and restructuring the company into separate manufacturing and sales divisions. As per the revival package, The Toyota Motor Sales Company Ltd. was formed in 1950. In the same year, Kiichiro resigned. By 1952, Toyota made a turnaround and in 1953, the company appointed distributors in El Salvador and Saudi Arabia and started exports. Meanwhile, Taiichi Ohno (Ohno) took charge of the company. In 1957, Toyota entered the US market through its subsidiary, Toyota Motor Sales, USA. In 1959, the company began its first overseas production in Brazil and over the next few years, developed a vast network of overseas plants. Besides manufacturing, Toyota started a global network of design and Research and Development facilities covering the three major car markets of Japan, North America and Europe. By the early 1970s, Toyota's sales exceeded that of Chrysler and Volkswagen and its production was behind that of only General Motors (GM) and Ford. Toyota continued its efforts to make its production system more efficient and also developed flexible manufacturing systems. It also began to tap the markets in the Middle East and by 1974 the Toyota Corolla, (launched in 1965) became the largest selling car in the world. In 1984, Toyota entered into a joint venture with GM and established the New United Motor Manufacturing Inc. (NUMMI). By the early 1990s, as Toyota expanded its overseas operations, the excessive capital spending affected its profit margins. Tatsuro Toyoda (Tatsuro), who took over as the company President in 1992, began to control costs by eliminating all unnecessary expenditure. In 1995, after Tatsuro resigned due to health reasons, Hiroshi Okuda (Okuda) became Toyota president. In 1996, Toyota consolidated its production in North American production units into the Cincinnati based Toyota Motor Manufacturing (North America). Akshay Jain (2013004) Page 2 Abhishek Jain (2013002)
  • 3. Toyota's JIT Revolution In 1999, Okuda replaced Chairman Shoichiro Toyoda and Fujio Cho (Cho) became the president. In the same year, Toyota listed its shares on both the New York and London stock exchanges. By the end of 2001, the company's net income had reached $5,447 million and net revenue reached $106,030 million (Refer Exhibit I for the company's financial performance over the years). According to analysts, Toyota's success in both the local and global markets was mainly because of its state-of-the-art and well-planned operational strategies. The company had continuously focused on gaining a competitive advantage through implementation of innovative and path-breaking ideas on its production floors. TPS worked on the basic idea of maintaining a continuous flow of products in factories in order to flexibly adapt to demand changes. The most important feature of TPS was the way it linked all production activities to real dealer demand through implementation of Kanban, JIT and other quality measures that enabled Toyota to manufacture in low quantities. A Brief History of (Just-In-) Time Lean Manufacturing is not especially new. It derives from the Toyota Production System or Just in Time Production, Henry Ford and other predecessors. The lineage of Lean manufacturing and Just in Time (JIT) Productio n goes back to Eli Whitney and the concept of interchangeable parts. `Just-in-time' is a management philosophy and not a technique. It originally referred to the production of goods to meet customer demand exactly, in time, quality and quantity, whether the `customer' is the final purchaser of the product or another process further along the production line. JIT - Background and History JIT is a Japanese management philosophy which has been applied in practice since the early 1970s in many Japanese manufacturing organizations. It was first developed and perfected within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer demands with minimum delays. Taiichi Ohno is frequently referred to as the father of JIT. Toyota was able to meet the increasing challenges for survival through an approach that focused on people, plants and systems. Toyota realized that JIT would only be successful if every individual within the organization was involved and committed to it, if the plant and processes were arranged for maximum output and efficiency, and if quality and production programs were scheduled to meet demands exactly. JIT manufacturing has the capacity, when properly adapted to the organization, to strengthen the organization’s competitiveness in the marketplace substantially by reducing wastes and improving product quality and efficiency of production. There are strong cultural aspects associated with the emergence of JIT in Japan. The Japanese work ethic involves the following concepts. Akshay Jain (2013004) Page 3 Abhishek Jain (2013002)
  • 4. Toyota's JIT Revolution  Workers are highly motivated to seek constant improvement upon that which already exists. Although high standards are currently being met, there exist even higher standards to achieve.  Companies focus on group effort which involves the combining of talents and sharing knowledge, problem-solving skills, ideas and the achievement of a common goal.  Work itself takes precedence over leisure. It is not unusual for a Japanese employee to work 14-hour days.  Employees tend to remain with one company throughout the course of their career span. This allows the opportunity for them to hone their skills and abilities at a constant rate while offering numerous benefits to the company. These benefits manifest themselves in employee loyalty, low turnover costs and fulfilment of company goals. In the early 1930s, the technology used by American automobile companies was superior to that used by Japanese companies. Kiichiro therefore decided to learn new automobile production techniques from American manufacturers. He soon realized that to catch up with the Americans, he had to master basic production techniques. He then reorganized the production system in Toyota in a unique way. This reorganization eventually led to the development of JIT concept. In the early 1970s, Taiichi Ohno (Ohno) implemented JIT in Toyota's manufacturing plants. The JIT system was aimed at avoiding waste, reducing inventories and increasing production efficiency in order to maintain Toyota's competitive edge. Ohno also believed that customers should receive high quality products in the shortest time. Initially, JIT was used as a method for reducing inventories in Toyota's shipyards, but later it evolved into a management p hilosophy including a set of techniques. Developed by the Japanese, the JIT production system was one of the most significant production management approaches of the post-WWII era. The system comprised a set of activities aimed at increasing production volume through the optimum use of inventories of raw materials, work- in-process, and finished goods. In a JIT production system, a workstation gets a part just in time, completes its work and the part is moved through the system quickly. JIT was based on the principle of producing only what is needed and nothing more than needed. The Japanese believed that anything produced over the quantity required was a waste. Cho defined waste as, "Anything other than the minimum amount of equipment, materials, parts and workers (working time) which are absolutely essential to production." JIT did not allow any surplus as it believed that "effort and material expended for something not needed now cannot be utilized now." (Refer Table I for requirements and assumptions of JIT). Akshay Jain (2013004) Page 4 Abhishek Jain (2013002)
  • 5. Toyota's JIT Revolution The Experiments of the Toyota Production System Rule Implied Hypothesis Problem Signals Responses 1 How People Work >Specifications document all work processes and include content, sequence, timing and outcome. >The person or machine can perform the work as specified >If the work is done as specified, the product is defect-free. >The work procedure varies from specification >Defective Products >Improve training >Improve Process Capability >Modify the work specification 2 How Work Connects >Connections with clear YES/NO signals directly link every customer and supplier. >Customer requests have a known, specific volume and mix. >The supplier can respond to requests. >Responses do not keep pace with requests. >Supplier is idle waiting for requests. >Determine true mix and demand. >Determine true supplier capability. >Retrain/improve/ modify. 3 The Physical Arrangement >Every product and service travels a single, simple and direct flow path. >Every supplier in the flow path is required and suppliers not on the flow path are not required >A person or machine is not needed. >Unspecified supplier performs work. >Determine why supplier was unnecessary; redes ign flow. >Determine reason for unspecified supplier; redesign flow. 4 How To Improve >Workers at the lowest feasible level, guided by a teacher (Sensei), improve their own work processes. >A specific change causes a specific, predictable improvement in productivity, quality or other parameter. >Actual result varies from expected result. >Determine why the actual result differed from the prediction. >Redesign the change. 5 Problem Alarms >Integrated failure tests automatically signal deviations for every activity, connection & flow path. >Automatic alarms prevent defects or sub- standard performance. >Defects are passed through to the next operation. >Sub-Standard Performance. >Analyze and institute new or improved alarms. Akshay Jain (2013004) Page 5 Abhishek Jain (2013002)
  • 6. Toyota's JIT Revolution Table I Just-In-Time Production System What it is  Management philosophy  'Pull' System through the plant What it does  Attacks waste (time, inventory,  scrap)  Exposes problems and bottlenecks  Achieves streamlined production What it requires  Employee participation  Industrial engineering/basics  Continuing improvement  Total quality control  Small lot sizes What it assumes  Stable environment JIT could be applied to any manufacturing environment including job shop, batch production or repetitive production. The ideal lot size as per JIT was one. A worker had to complete one task and pass it on to the next workstation for further processing. If workstations were geographically far away, efforts were made to reduce the transit time. The advantages of JIT included price flexibility, reduction in product variation, quick response to customers' demands, high quality products at low cost for consumers, and above all, customer satisfaction. The system also offered the advantages of low inventory investment, shortened lead times, and early detection of quality problems. The Kanban Kanban was an essential component of Toyota's JIT concept. The Japanese referred to Kanban as a simple parts-movement system that depended on cards and boxes/containers to take parts from one workstation to another on a production line. Ohno had developed the idea in 1956 from the super markets in the US, which had devised an effective system for replenishment of store shelves based on the quantities picked by the customers. Initially, Ohno used pieces of paper contained in rectangular vinyl envelopes to convey information (called Kanban). In a period spanning three decades, Kanban developed into a sophisticated information system that ensured production in required quantities at the right time in all manufacturing processes within the factory. The essence of the Kanban concept was that a supplier delivered components to the production line only when required, thus eliminating storage in the production area. Suppliers delivered desired components when they received a card and an empty container, indicating that more parts were needed for production. In case of line interruption, each supplier produced only enough components to fill the container and then stopped. Since Kanban was a chain process in which orders flowed from one process to another, the production or delivery of compo nents was 'pulled' to the production line (Refer Box “Pull and Push Systems”). In the traditional forecast oriented method, parts were 'pushed' to the line (Refer Exhibit I for a comparison of the Kanban philosophy with the western philosophy). Akshay Jain (2013004) Page 6 Abhishek Jain (2013002)
  • 7. Toyota's JIT Revolution Pull and Push Systems In a pull system, the production of a certain product starts only when a demand or request is made by the buyer. The consumer of the product 'pulls' from the last link of the production chain. This last link pulls its preceding link and so on. In western companies, the push system was considered to be more cost-effective. Push systems were schedule-based projections of what demand was expected to be. Based on historical information (updated on a weekly or monthly basis), a computer program processed the information giving a detailed sub-schedule for buying materials and producing goods. This schedule pushed the production in order to comply with the expected demand. The disadvantage of the push system was that predictions did not always coincide with facts. This resulted in either excess or inadequate inventories. Exhibit I Toyota’s Kanban Philosophy vs Western Philosophy Factors Toyota's Kanban Western Philosophy Inventory A liability. Every effort must be extended to do away with it. An asset. It protects against forecast errors, machine problems, late vendor deliveries. More inventory is "safer". Lot sizes Immediate needs only. A minimum replenishment quantity is desired for both manufactured and purchased parts. Formulas. We're always revising the optimum lot size with some formula based on the trade-off between the cost of inventories and the cost of set up. Set ups Make them insignificant. This requires either extremely rapid changeover to minimize the impact on production, or the availability of extra machines already set up. Fast changeover permits small lot sizes to be practical, and allows a wide variety of parts to be made frequently. Low priority. Maximum output is the usual goal. Rarely does similar thought and effort go into achieving quick changeover. Queues Eliminate them. When problems occur, identify the causes and correct them. The correction process is aided when queues are small. If the queues are small, it surfaces the need to identify and fix the cause. Necessary investment. Queues permit succeeding operations to continue in the event of a problem with the feeding operation. Also, by providing a selection of jobs, the factory management has greater opportunity to match up varying operator skills and machine capabilities, combine set ups and thus contribute to the efficiency of the operation. Vendors Co-workers. They're part of the team. Multiple deliveries for all active items are expected daily. The Adversaries. Multiple sources are the rule, and it's typical to play them off against each other. Akshay Jain (2013004) Page 7 Abhishek Jain (2013002)
  • 8. Toyota's JIT Revolution vendor takes care of the needs of the customer, and the customer treats the vendor as an extension of his factory. Quality Zero defects. If quality is not 100%, production is in jeopardy. Tolerate some scrap. We usually track what the actual scrap has been and develop formulas for predicting it Equipment maintenance Constant and effective. Machine breakdowns must be minimal. As required. But not critical because we have queues available. Lead times Keep them short. This simplifies the job of marketing, purchasing, and manufacturing as it reduces the need for expediting. The longer the better. Most foremen and purchasing agents want more lead time, not less. Workers Management by consensus. Changes are not made until consensus is reached, whether or not a bit of arm twisting is involved. The vital ingredient of "ownership" is achieved. Management by edict. New systems are installed in spite of the workers, not thanks to the workers. Then we concentrate on measurements to determine whether or not they're doing it. At Toyota, two types of Kanban cards were used: one, to move parts from one place to another, known as the Conveyance Kanban card, and the other, to authorize the production of parts, known as the Production Kanban card. (Refer Figure I). A standard size container was used to store parts and each card was treated like a coupon. (Refer Box Illustration). Akshay Jain (2013004) Page 8 Abhishek Jain (2013002)
  • 9. Toyota's JIT Revolution Illustration Suppose a container of item X is required in work center A. As a first step, a production Kanban card is issued to work center A. The work center withdraws a container of raw materials from its inventory. The container of raw materials also included a conveyance Kanban card. Work center A removes the conveyance Kanban card from the container and sends it to the proceeding work center where it serves as an authorization to pick up a container of raw materials. Three types of information were exchanged using Kanban. Pick up information guided the earlier stages regarding parts to be produced for the succeeding stages. Transfer information indicated when the parts had to be produced for the succeeding stages. Production information was transmitted from the earlier stages to the later stages to inform the workers about the product mix and other operational matters. To make the Kanban system effective and reap maximum benefits (Refer Table II) from it, Ohno framed six rules:  Later process went to the earlier process to pick up products.  The earlier process produced only the amount withdrawn by the later process.  Should not pick or produce goods without a Kanban.  A Kanban should be attached to the goods.  100% defect free parts were required.  Reduce the number of Kanban. Table II Advantages of Kanban 1. A simple and understandable process 2. Provides quick and precise information 3. Low costs associated with the transfer of information 4. Provides quick response to changes 5. Limit of over-capacity in process 6. Avoids overproduction 7. Minimizes waste 8. Control can be maintained 9. Delegates' responsibility to workers The Kanban cards were re-circulated and the number of cards controlled work- in-progress (WIP) in the system. In this way, the activities of final assembly were linked to previous operations by a chain system of card ordering that 'pulled' production through the factory. Another important component of JIT was Heijunka (production smoothing). JIT's principle of building only the required number of items helped keep the production costs low. Heijunka helped in the accomplishment of this principle by creating a consistent production volume. Heijunka averaged the highest and lowest variations of the orders. The variations were then removed from the production schedule. This ensured that the right quantity of parts was Akshay Jain (2013004) Page 9 Abhishek Jain (2013002)
  • 10. Toyota's JIT Revolution produced with minimum workforce. Heijunka took care not only of the total volume of items but also the type of items produced and the other options. Problems with JIT Although many automobile companies around the world adopted JIT, the system was far from perfect and difficult to implement. It was based on the key assumption that sources and channels of supply were constantly reliable and dependable. Analysts felt that it did not take into account the possibility of labor strikes at automotive plants. Moreover, JIT involved high set up costs and Special training and reorganization of policies and procedures in the company were necessary to implement JIT. The supplier relations of the company also needed to be improved to ensure timely delivery. In the absence of good supplier relations, JIT increased the risk of inventory shortage. Organizational culture also seemed to play a crucial role in the implementation of JIT. Many companies outside Japan reported difficulties in the implementation of the concept. Another problem seemed to be the difficulty of removing the 'human element' from the systems that generate requirements. An analyst commented, "Computer algorithms, they say, go only so far. Good people, with lengthy experience at reading the ups and downs of the industry are still a must." Most companies felt that people should be actively involved in the system. Moreover, there could be many barriers to the successful implementation of JIT. For JIT to be successful, companies had to ensure that they did not make frequent changes in production planning and that their forecasting procedures were reliable and did not result in under or over forecasting of demand. Other barriers could be equipment failure and employee absenteeism. Analysts felt that Toyota's JIT was a complicated process and that its success inside a plant depended mainly on highly experienced, highly motivated managers. Outside the plant, JIT's success depended on a network of capable suppliers that operated in sync with Toyota's production processes. In fact, according to some analysts, Toyota was not able to replicate the JIT production system in an efficient way in any of its operations outside Japan. John Paul MacDuffie said, "Toyota hasn't developed a single facility that is as efficient as the ones it has in Japan." Future of JIT Although Toyota's JIT had some drawbacks, it offered several advantages over other manufacturing processes. Because of the early adoption of JIT, Toyota benefited more from the system than other automobile companies (Refer Exhibits II & III). By 2000, JIT was adopted by many Japanese companies, as well as some US car companies. Analysts felt that JIT was not only a process that could be applied to manufacturing, but also a philosophy that governed the attitude of a successful business. According to one analyst, "Using JIT, Taiichi Ohno had revolutionized production. The market clearly reflects the success of JIT. Akshay Jain (2013004) Page 10 Abhishek Jain (2013002)
  • 11. Toyota's JIT Revolution The concept has made Japanese products affordable and reliable in quality. Quality is no longer a privilege - it is a standard accompanied by low cost." Exhibits II Plant Productivity *For products low in demand, one batch = 7 days use. Exhibits III Comparison of Different Auto Manufacturers Future directions for research Just- in-Time concept has changed the way manufacturing organizations do things. Some of the JIT concepts are completely opposite to traditional ways of thinking. It is human nature to resist change, and the implementation of JIT system is typical of this. People resist these new ideas and call them risky. But it is important to realize that JIT will not work if it has to be forced against everybody’s will. Voluntary participation and training is necessary. Being a philosophy, JIT does not restrict itself to high technology manufacturing environments which make extensive use modern technologies like flexible manufacturing systems (FMS) or computer integrated manufacturing (CIM). JIT philosophy is valid in any manufacturing environments, regardless of the level of automation in the technology hardware. Similarly, the philosophy is not limited to any specific type of industry nor does the size of the organization matter. Organizations of different sizes, in a variety of industries, have successfully implemented JIT philosophy. Indeed, some applications have shown that JIT is eminently suited to non-manufacturing situations as well as, such as in service and administrative work situations. It may not be possible to shift from traditional manufacturing system to JIT system at once. To start with companies may try to implement JIT elements that are easy to implement. Akshay Jain (2013004) Page 11 Abhishek Jain (2013002)
  • 12. Toyota's JIT Revolution Developing countries like India to expand the base of JIT applications in India. As service sector as growing very fast in developing countries like India but poorly managed. JIT can be very useful in improving the performance of service sector. This becomes another area for future research. Companies currently using JIT  Harley Davidson  Toyota Motor Company  General Motors  Ford Motor Company  Manufacturing Magic  Hawthorne Management Consulting  Strategy Manufacturing Inc. Conclusion Hence, we can see that to have a Total JIT manufacturing system, a company-wide commitment, proper materials, quality, people and equipment must always be made available when needed. In addition; the policies and procedures developed for an internal JIT structure should also be extended into the company’s supplier and customer base to establish the identification of duplication of effort and performance feedback review to continuously reduced wastage and improve quality. By integrating the production process; the supplier, manufacturers and customers become an extension of the manufacturing production process instead of independently isolated processes where in fact in clear sense these three sets of manufacturing stages are inter-related and dependent on one another. Once functioning as individual stages and operating accordingly in isolated perspective; the suppliers, manufacturers and customers can no longer choose to operate in ignorance. The rules of productivity standards have changed to shape the economy and the markets today; every company must be receptive to changes and be dynamically responsive to demand. In general, it can be said that there is no such thing as a KEY in achieving a JIT success; only a LADDER; where a series of continuous steps of dedicat ion in doing the job right every time is all it takes. Akshay Jain (2013004) Page 12 Abhishek Jain (2013002)