Overview of Toyota
History
In 1926 Toyoda Automatic Loom works was founded by Sakichi Toyoda. Later in 1930, he sold
the rights of the Loom and gave the proceeds to his son Kiichiro Toyoda to start an automobile
business. Kiichiro started working on Automobile division under the Loom works. When
automaker legislation passed in Japan, Kiichiro split the automobile division from Loom and went
public (1937) with new name called “Toyota Motor Co.”. During WWII, Toyota manufactured
military vehicles, but due to the war they had to suffer financial problems. However, after the war
they invested heavily into R&D and introduced four-wheel drive Land Cruiser (1951).
Toyota entered into USA market in 1957 with Toyopet Crown a four-wheel sedan, but it failed
badly. They introduced Corona in 1965 and Corolla in 1968, which turned out to be the best-selling
cars of all time. Toyota grew rapidly into USA market through fuel-efficient cars. By 1970’s
Toyota was world’s fourth largest car maker. Toyota had witnessed success in the growth of their
company by keeping production cost as low as possible.
Implementation of Lean Manufacturing and TPS
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 around the world.
Toyota developed TPS system through various observations from US automakers and principles
of jioka and one-piece flow. After many years of practice and innovation, they introduced total
lean extended enterprise, which extended even to their supplier. They also integrated the Pull
system concept, which was inspired by American Supermarkets. Lean manufacturing requires
continuous improvements in the system; therefore, Toyota used Kaizen workshops. Kaizen is the
Japanese term for continuous improvements and is the process of making incremental
improvements, no matter how small, and achieving the lean goal of eliminating all waste that adds
cost without adding to value (Liker,2004).
One of the main pillar of lean manufacturing is eliminating the waste or non-value adding activity.
Toyota closely followed their processes and analyzed it from Customer’s perspective. Through
customer perspective, it is easier to differentiate the value-added steps from the non-value-added
steps. Toyota determined seven significant non-value-added waste in manufacturing process
(Appendix – 1.1). They found overproduction as fundamental waste because it leads to other
wastes. Manufacturing more than customer demand can lead to build-up of inventory, which is
just waiting to be processed further. Thus, eliminating non-value-added activities from process
made TPS better and more efficient.
Challenges
In 1980’s Toyota formed Joint venture with General Motors to enter into USA market. Toyota
followed TPS system in Japan, but it was very difficult to implement those strategies in US because
of unionized workers. Workers of the plant went on strike for no reasons and complete ignorance
of TPS system made very difficult for Toyota. Then, Toyota decided to teach TPS to GM, so that
they both can benefit. They guided workers of the plant and decided to take management from the
GM under the joint venture. The result was astonishing, it exceeded all GM’s plant in productivity,
quality, space and inventory turnover.
Appendix
1.1
Activities Definition
1. Overproduction Producing items for which there are no orders, which
generates such wastes as overstaffing and storage and
transportation costs because of excess inventory.
2. Waiting (time on hand) Workers merely serving to watch an automated machine or
having to stand around waiting for the next processing step,
tool, supply, part, etc., or just plain having no work because
of stock outs, lot processing delays, equipment downtime, and
capacity bottlenecks.
3. Unnecessary transport Carrying work in process (WIP) long distances, creating
inefficient transport, or moving materials, parts, or finished
goods into or out of storage or between processes.
4. Over processing or Taking unneeded steps to process the parts. Inefficiently
incorrect processing processing due to poor tool and product design, causing
unnecessary motion and producing defects. Waste is
generated when providing higher-quality products than is
necessary.
5. Excess Inventory Excess raw material, WIP, or finished goods causing longer
lead times, obsolescence, damaged goods, transportation and
storage costs, and delay. Also, extra inventory hides problems
such as production imbalances, late deliveries from suppliers,
defects, equipment downtime, and long setup times.
6. Unnecessary movement Any wasted motion employees must perform during their
work, such as looking for, reaching for, or stacking parts,
tools, etc. Also, walking is waste.
7. Defects Production of defective parts or correction. Repair or rework,
scrap, replacement production, and inspection mean wasteful
handling, time, and effort.
