Jeffrey K.Liker: The Toyota Way

The Toyota Way

The Toyota Way can be briefly summarized through two pillars that support it: “Continuous Improvement” and “Respect for People”. Continuous improvement is called kaizen and is based on continuous learning.

The Wonderful Wacky World of Lean

The Toyota Production System (TPS) is the framework for what is often call “lean” management and has been embraced in mining, retail, defense, healthcare, construction, government, finance, or any other sector.

TPS is a living system. The goal is to produce a continual flow of value to the customer, without interruptions known as wastes.

Since world is constantly changing, variability has to be addressed through continuous improvement by the people closest to the “gemba” which means where the work is performed.

Lean, along with variations such as six sigma, theory of constraints, lean startup, lean six sigma, and agile development, is a global movement.

Taiichi Ohno developed TPS framework on the core philosophies and methods of founders Sakichi Toyoda and his son Kiichiro Toyoda.

At the center of surfacing and solving problems are developed people. They are the brains doing the problem solving.

At the base of TPS is operational stability that includes: standardized work, capable equipment, leveled workloads and capable supplier partners. This base is enhanced with Just-in-time (the right information, at the right time, in the right amount), culture (flexible, capable, motivated members) and In-Station Quality or Jidoka (don’t pass on defects, make problem visible). Those two steps then create positive outcomes that control: quality, cost, delivery through shortening the production flow by eliminating the wast.

We have mechanistic lean and organic lean approach. First is faster and more efficient, second more robust.

The Toyota Way: Using Operational Excellence as a strategic Weapon

Toyota first broadly caught the world’s attention in the 1970s, when it became clear that there was something special about Japanese quality and efficiency.

The Toyota Way is based on 4P: philosophy (long-term system thinking), process (struggle to flow value to each customer), problem solving (think scientifically to improve toward a desired future) and people (respect, challenge and grow them).

The 14 principles coming out of this 4P are:

• Philosophy
  • Long-term system thinking
• Process
  • Continuous flow
  • Pull
  • Level
  • Standardized processes
  • Design-build in quality
  • Visual control
  • Technology to support people and processes
• People 
  • Grow leaders
  • Develop people and teams
  • Partner with value chain
• Problem solving
  • Observe deeply and learn iteratively (PDCA)
  • Align goals
  • Bold strategy, large leaps, and small steps

The Toyota Way and Toyota Production System are the double helix of Toyota’s DNA.

TPS is build on scientific way of thinking. The normal pattern is to identify a gap in our knowledge and explain why it is important (problem definition), advance notion about the way things might work (hypothesis), explain the study design (methods), present the findings (results), discuss the implications of the study, and suggest further research (discussion/reflection).

Appreciate that difference between what we predict will happen and what actually happens can be a useful source of learning and corrective adjustment.

Scientific thinking is not our default. It is based on slow thinking.

In many organizations, problem solving often amounts to putting Band-Aid on processes.

Toyota made a critical discovery, when you make lead times shorter and focus on keeping production lines flexible, you actually achieve higher quality, better customer responsiveness, better productivity, and better utilization of equipment and space.

People are the most flexible resources you have. Automation is a fixed investment. And people, not computers, can continually improve processes.

TPS starts with customers. What value are we adding from the customer’s perspective.

Muda or waste is Toyota’s term for anything that takes time but does not add value for your customer.

A Storied History: How Toyota Became the World’s Best Manufacturer

Toyota developed TPS in a time of low demand and high need for variety in Japan.

Sakichi Toyoda began making manual looms in 1894. He introduced “genchi genbutsu” or getting his hands dirty approach.

His son Kiichiro was great note taker, and he created a lot of detailed sketches. He incorporated three core principles of TPS: just-in-time, jidoka (from his father), and standardization of processes and labor harmony.

Next family leader was the nephew of Sakichi Eiji Toyoda. He played a crucial role in selecting and empowering the leaders who shaped sales, manufacturing, and product development. Most notably Taiichi Ohno. He created TPS after being tasked to match Ford’s productivity.

Ohno extended JIT concept into a direct communication mechanism called “kanban”. Kanban means a sign or a signal.

Toyota categorized seven major types of non-value adding waste in manufacturing processes:

• Overproduction.
• Waiting (time on hand).
• Unnecessary transport or conveyance.
• Overprocessing or incorrect processing.
• Excess inventory.
• Unnecessary movement.
• Defects.

An eight waste is unused employee creativity.

Philosophy

Base Your Management Decisions on Long-Term System Thinking, Even at the Expense of Short-Term Financial Goals

Toyota’s priorities are: first safety, second quality, third volume, and fourth profit-making.

Do the right thing for a company, its employees, the customer, and society as a whole.

Toyota was founded on the willingness to tackle tough problems and work at them until they were solved.

Kaizen is mandate to constantly improve performance for the better.

The value of genchi genbutsu isn’t necessarily the specific act of going and seeing but the philosophy of deeply understanding the current condition before making a decision or trying to change something that you think will be an improvement. Decisions are based on observed facts and put in the hands of those closest to the problem.

Toyota needs every employee to always be thinking about how to improve processes – continuous improvement.

What drives Toyota forward is people who believe there is always a better way and trust the company to do right by them.

Process

Connect People and Processes Through Continuous Process Flow to Bring Problems to the Surface

Flow value to each customer, ideally one by one, without stagnation. Waste gets in the way of flowing value. The ideal process, perfectly executed, is all value-added work with zero waste.

One-piece flow is not for the faint of heart.

The average output at the end of the line is the product of all the inefficiencies of all the processes involved.

The traditional way to schedule an operation that is organized into separate processes is to send individual schedules to each department.

When you try to attain a one-piece flow, you are also setting in motion numerous activities to identify and reduce waste. A few of the benefits of flow:

• Builds in quality.
• Creates real flexibility.
• Creates higher productivity.
• Free up floor space.
• Improve safety.
• Improves morale.
• Reduces cost of inventory.

Toyota’s vision for any process is a true one-piece flow that is waste-free. Creating flow means linking together processes that otherwise are disjointed.

Use “Pull” Systems to Avoid Overproduction

The more inventory a company has … the less likely they will have what they need. Taiichi Ohno

Pull system or JIT (just in time) system is receiving items only when you need them.

Giving customers what they want, when they want it, and in the amount they want.

Supermarkets are simply warehouses that operate in a particular way.

Toyota’s version of system thinking is to break processes down into smaller parts and distribute local control to local customers – which creates small feedback loops based on the most recent information. Kanban gives the scheduling power to each customer in the value chain and allows to flexibly place orders based on actual needs.

Pull system can also be used to regulate information flow.

The real purpose of kanban is to eliminate the kanban. Kanban is a simple visual system that sends a signal from a customer to a supplier.

Level Out the Workload, Like the Tortoise, Not the Hare (Heijunka)

A strict build-to-order model, creates piles of inventory, hidden problems, and possibly poorer quality.

“Muda” is used in Toyota when they talk about waste.

The three M’s that need elimination are:

• Muda – non-value added.
• Mura – unevenness.
• Muri – overburdening people or equipment.

In manufacturing, heijunka is the leveling of production by both volume and product mix.

There are at least four things wrong with an unleveled schedule:

• Customers usually do not buy products predictably.
• There is a risk of unsold goods,
• The use of resources is unbalanced.
• There is an uneven demand placed on upstream processes.

Hold more of the right inventory to have less overall inventory.

To achieve the lean benefit of continuous flow, you need principle 4. Level out the workload, like the tortoise, not the hare.

Principle 5: Work to Establish Standardized Processes as the Foundation for Continuous Improvement

Standardized tasks became a “science” when mass production replaced the craft form of production.

Frederick Taylor was the father of scientific management. He identified the fastest worker and used that as a model for the standardized work forced on others.

By standardized work, we are referring to the most efficient and effective combination of people, material, and equipment to perform the work that is presently possible.

It is impossible to improve any process until it is standardized. Standardized work is also a key facilitator of building in quality. Standardized work, and some degree of stability, is necessary before you can train someone new to do the job.

Bureaucracies can be efficient if the environment is very stable and if technology changes very little.

Paul Adler, an organizational theory expert, concluded that there are two types of organizations: bureaucratic and organic. But in reality, there are at least four – based on the level of bureaucracy and social structure.

The key difference between Taylorism and the Toyota Way is that the Toyota Way preaches that the worker is the most valuable resource, not just a pair of hands taking orders, but an analyst and problem solver.

The critical task for standardized work is to find that balance between providing employees with rigid procedures to follow and providing the freedom to innovate and to be creative in consistently meeting challenging targets for cost, quality, and delivery. The key to achieving this balance lies in the way people write standards, as well as how contribute to them. Standardized work must be specific enough to be a useful guide, yet general enough to allow for some flexibility.

Plan, do, check, act. PDCA.

Build a Culture of Stopping to Identify Out-of-Standard Conditions and Build in Quality

Jidoka, the second pillar of TPS, traces back to Sakichi Toyoda, and his long string of inventions that revolutionized the automatic loop. It is also referred to as “automation – equipment endowed with human intelligence to stop itself when it has a problem”.

Lean manufacturing dramatically increases the importance of building things right the first time.

Toyota learned long ago that solving problems at the source saves time and money downstream.

Whenever there is a quality problem, the standardized work chart is reviewed to see if something is missing that allowed the error to occur and if so, the chart is updated accordingly. Also the production line is laid out in sections, and at the end of each section is a place where quality is checked.

When things are going too smoothly, it probably means problems are being hidden.

Toyota prefers to first use people and processes to solve problems, then supplement and support its people with technology later.

Use Visual Control to Support People in Decision-Making and Problem Solving

Hear a piece of information, and three days later you’ll remember 10 % of it. Add a picture and you’ll remember 65 %.

In Japan, there are “5S programs” that comprise a series of activities for eliminating wastes that contribute to errors, defects, and injuries in the workplace. Here are the five Ss (seiri, seiton, seiso, seiketsu, and shitsuke). In English:

• Sort.
• Straighten (orderliness).
• Shine (cleanliness).
• Standardize (create rules).
• Sustain (self-discipline).

Principle 7 of the Toyota Way is to use visual controls to support people.

The facing fill rate is the percentage of time a part ordered is immediately available at the distribution center assigned to that dealer. The system fill rate is the percentage of time a part ordered is immediately available somewhere in a Toyota parts distribution center. Toyota has the highest fill rates in the industry. The facing was 95 % and the system was over 98 %.

Adopt and Adapt Technology That Supports Your People and Processes

Toyota pride itself on only building to actual demand, and when demand declines, the company wants the flexibility to reduce costs to remain profitable.

Toyota’s way of automation is automation with a human touch.

Inventory is generally a symptom of poorly controlled processes.

When you live in the logistic world, nothing moves without information. First work out the manual process, and then automate it.

Mitsuru Kawai had a standing order in the plant for 50 years to increase productivity by 2 % every month.

• Visualize the production.
• Develop explicit knowledge of the process.
• Standardize the knowledge.
• Develop intelligent automation through kaizen.

Industry 4.0 uses software to manage assets through the IoT: data collection devices, big data mining to identify patterns, predictive algorithms, and artificial intelligence that can learn. You can monitor machines, predict failures, and in some cases take corrective action by automatically adjusting the machines.

If company has a lot of monitors and dashboards (electronic wallpaper), and no actions out of all that data, it is still electronic wallpaper.

AI is useful when the factory has achieved some level of standardized work that is stable and being used effectively. The worst situation is when management and workers fight over performance standards and team members believe the AI system is a management attempt to control them and speed up the production.

One irony might come out of this. Historically, a major role of industrial engineers was to reduce the number of workers needed. Now, the technology might enable workers to the point where they can eliminate the industrial engineers.

If the things are poorly designed, poorly laid out, and poorly maintained, software will not solve the problem.

When computers begin to do the thinking, will people abdicate responsibility?

Two concepts – automation with people and Just-in-Time – are the pillars of the TPS. What both have in common is that people are at the center.

People

Grow Leaders Who Thoroughly Understand the Work, Live the Philosophy, and Teach It to Others

Fujio Cho was the Toyota president. He was a student of Taiichi Ohno.

It seems the typical US company regularly alternates between the extremes of stunning success and borderline bankruptcy.

The vision for a Toyota leader is well summarized in the Toyota Way 2001. Lead continuous improvement while treating people with respect.

The ideal CEO in the US. He is a rugged individuals, who is charismatic and articulates loudly a bold vision.

The moment a leader allows himself to become the primary reality people worry about, rather than reality being the primary reality, you have a recipe for mediocrity, or worse. This is one of the key reasons why less charismatic leaders often produce better long-term results than their more charismatic counterparts.

Mutual dependence, an obligation to help others, and the determination to reach a goal together are all basic assumptions of Japanese life.

The first step of genchi genbutsu is the power of observation. It is more than going and seeing. It is about answering: what happened, what did you see, what are the issues, what are the problems? It is also important that you speak based on verified, proven information and data. You also need to take advantage of the wisdom and experience of others to send, gather and discus information.

The priority in receiving benefits from automobile sales should be in the order of the customer, then the dealer, and lastly, the manufacturer.

At Toyota, over half the formal appraisal is based on a clearly stated set of universal competencies. The other half of the performance appraisal focuses on targets for key performance indicators, but even these look at how the targets were achieved.

Toyota core competencies:

• Accurate grasp of the situation.
• Open and innovative thinking.
• Develop and lead improvement activities.
• Make appropriate decisions.
• Constantly practice perseverance.
• Allocate and adjust resources based on priorities.
• Establish and improve the business framework and systems.
• Consistent and fair assignments and performance reviews.
• Thorough and fair staff development.
• Achieving personal mission, aligned with company values.

Develop Exceptional People and Teams Who Follow Your Company’s Philosophy

Servant leadership is often attributed to Robert Greenleaf.

Toyota adopted servant leadership early in its history.

In Toyota floor workers have more responsibility for problem solving than in classical automotive industry factory.

Team members perform manual jobs to standard and are responsible for surfacing problems and aiding in problem-solving. Team leaders take on a number of the responsibilities traditionally done by “white-collar” managers. Group leaders do many things that otherwise would be handled by specifically support functions in human resources, engineering, and quality.

The team size is 1-4, we have team members, team leaders, group leaders, assistant managers and managers.

Toyota’s view of the role of the leader is quite different. It is not to discipline and react to problems, but rather to plan, lead by example, and coach. And continuous improvement is critical.

Japan education system is focused on small teams. Small groups are called han.

Ken Blachard in his The One-Minute Manager describes four stages of team development:

• Orientation – forming.
• Dissatisfaction – storming.
• Integration – norming.
• Production – performing.

GM and others tried to copy Toyota’s system. But they are lacking the culture.

Extrinsic rewards can be powerful motivators when the work to be done is very clear and creative thinking is not required. When “outside of the box” thinking is needed, money can cause people to try to rush toward the goal, and they think less deeply.

Toyota leaders are firmly committed to respect for people and job security.

Toyota’s standard is 20 % of the temporary workforce. Allowing to be flexible in hard times.

Respect Your Value Chain Partners by Challenging Them and Helping Them Improve

Toyota treats its outside companies as partners. In the auto industry, 70% of cars comes from outside companies.

From 2012 to 2019, Toyota was number one in working relationships. A close second was Honda.

In general, Toyota likes to have two to three suppliers of a given part type in each region of the world. Competition is encouraged, through long-term partners tend to get a consistent share of the business over time.

Toyota never want to transfer core knowledge in any area to suppliers. But they want to learn with them.

Value chain needs hierarchy:

• Fair and Honorable Business Relations.
• Stable, Reliable Processes.
• Clear Expectations.
• Enabling Systems.
• Learning Enterprise.

Toyota Way Principle 11 is “Respect your value chain partners by challenging them and helping them improve.

Problem-Solving

Observe Deeply and Lean Iteratively (PDCA) to Meet Each Challenge

Peter Senge is talking about learning organization in his book The Fifth Discipline. Toyota is close to Senge’s learning organization.

Toyota’s five-why analysis is almost synonymous with how Toyota solves problems. But it is more about root cause than source. And observations are the most important part of it. What is actually happening is a very good question.

While we can process 11 million bits of information every second, our conscious minds can only handle 40 to 50 bits of information.

Fujio Cho introduced Toyota Business Practices (TPB) which on the surface was an eight-step problem-solving process:

• Clarify the problem.
• Break down the problem (to a set of subproblems).
• Set a target (for the prioritized subproblems).
• Analyze the root cause (for the prioritized subproblems).
• Develop countermeasures.
• See countermeasures through (by coordinated and speedy implementation).
• Monitor both results and processes.
• Standardized successful processes.

Kata has two meanings. One is the form or way of doing things. The second is the pattern of movements to be practiced to develop fundamental skills.

The improvement kata (IK) model of scientific thinking is another Toyota’s model. The IK pattern:

• Set the direction or challenge.
• Group the current conditions.
• Establish your next target condition.
• Experiment.

It is difficult to change behavior by telling people things. To get to habits we need to change behavior through deliberate practice, repeatedly. What matters is what we do, not what we think we should do.

In Japan, people learn the act of reflection, called “hansei” at a young age. Hansei is much more than reflection. Is about being honest about your own weaknesses.

There are a number of ways to learn:

• Grasping a concept.
• Storing information.
• Retrieving and applying information.
• Developing new habits or routines.

Yokoten is a term in Toyota that means gain widespread adoption.

Focus the Improvement Energy of Your People Through Aligned Goals at All Levels

Hoshin kanri means policy deployment. Einar Gudmundsson started to think about hoshin kanri in Toyota like climbing the mountain. Climbing the mountain never goes as planned, so the initial plan is just a starting point.

The detailed hoshin process across the Toyota involves planning, communicating horizontally and vertically, building consensus, and committing to targets.

For Toyota how you arrive at the decision is as important as the results.

The philosophy is to seek the maximum involvement appropriate for each situation when there is time available and the quality of the decision is important. And to seek the least involvement if there is urgency to the decision or it is a straightforward issue.

Consensus does not mean everybody agrees 100 percent, but it does mean that everybody’s input is considered. It’s expected that everyone involved will support the final decision 100 percent.

Four types of problem-solving:

• Troubleshooting.
• Gap from standard.
• Open-ended.
• Target condition.

Toyota’s deviation of a problem is a deviation from the standard.

A Toyota plant is set up as a series of shops – body panel stamping, welding, paint, plastic molding, and assembly. Each shop, or sometimes a combination of shops, is led by a general manager.

No battle plan survives first contact with the enemy.

Learn Your Way to the Future Through Bold Strategy, Some Large Leaps, and Many Small Steps

The message of Principle 14 is that turning strategy into execution is a struggle and you cannot simply copy the strategy of another company.

Tesla has a simple strategy. It has one highly-focused direction: CASE. Connected (through the internet), autonomous, shared (with other paying customers), and electronic-powered vehicles.

Michael Porter said that operational effectiveness is not a strategy.

Toyota disrupted the industry in the 1970s with the Corolla.

In 1993 they introduced Prius. A fuel-efficient, small-size car.

By 2025, Toyota expects to sell 55 percent if its vehicles as electrified, which includes a hybrid version of almost every vehicle, plug-in hybrids, EVs, and hydrogen fuel cells.

Ambidextrous – some parts of the organization focused on incremental improvements in the current product lineup and other parts focused on long-term technology development.

Conclusion

Grow Your Own Lean Learning Enterprise – Getting Ideas and Inspiration from the Toyota Way

The lesson and secret of the Toyota Way is that it creates bonds among individuals and partners such that they are moving to fit each other just right, working together toward a common goal.

Lean transformation pulls the organization out of its steady state. Then, like pulling on a rubber band, if we let go, it snaps back to its steady state.

Go Mile Wide for the Tools Deployment (Mechanistic). Go Mile Deep for Capability Development (Organic).