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E S SE N TIA L B U SIN ES S K NO WLE D GE F O R H IGH A CH IEV ER S

TheToyotaProduction

Systemby Taiichi Ohno

Starting From Need 2

The Two Principles of TPS 2

What Is The True Economy? 4

Evolution of TPS 6

In This Summary

The Toyota Production System is a comprehensivehandbook of instructions and guidelines that should bestudied by every Manager and head of a manufacturing

organization.

The ideas you will gain are so simple to comprehend, yet soeffective and powerful in achieving success in production.

Mr. Taiichi Ohno, presently vice president of the ToyotaMotor Company, developed the Toyota Production System(TPS) almost 30 years ago. TPS has become a major topic ofconversation all over the world. It has been studied andintroduced into workplaces regardless of industrial type, scaleand even national boundaries.

This summary will show you how to manufacture moreefficiently, reduce costs, produce greater quality, and also takean important look at how, we as people work in a factory.

And, most importantly, you’ll discover the most importantprinciple of TPS, the reduction of waste. Whether it is waste inthe form of over-production, hoarding unnecessary inventoryor the performance of unnecessary tasks by workers. You willfind that your company’s primary aim becomes the eliminationof processes that don’t add value to your plant, departmentoperation or company.

Above all else TPS is a simple and incredibly effective systemfor how to run your business effectively and with thissummary, you’ll discover how.

Beyond Large-Scale

Production

Starting From Need

Following World War II, no one could have imagined thatthe production of cars would increase to such high levels.For decades, American companies followed the path ofmass-production of fewer types of cars. This was theirmethod of cutting production costs.

However, Japan had a different problem. It wanted toproduce many types of cars in small quantities. During the15-year period after 1959, Japan followed the Americanstyle of mass production. However, such an imitation poseda danger to the Japanese car production industry becausethe goals were totally different.

August 15, 1945: Japan lost the war. Toyota Kiichiro – thenpresident of the Toyota Motor Company – made a boldstatement, “Catch up with America in three years. Otherwise,the automobile industry of Japan will not survive”. PresidentKiichiro’s message was clear but the difficulty lay in raisingproduction levels to such heights and in such a short periodof time.

Taiichi Ohno thought if waste in any form could beeliminated then productivity should rise by a largepercentage. This idea marked the start of the presentToyota Production System (TPS).

After the oil crisis in 1973, Japan’s economy collapsed to astate of zero growth. A recession followed which affected governments,businesses and societies all over the world. However, in theyears 1975, 1976 and 1977 greater earnings were sustained atthe Toyota Motor Company. What was Toyota doingdifferently?

In Taiichi Ohno’s words:

“…all we are doing is looking at the time line from themoment the customer gives us an order to the point whenwe collect the cash. We are reducing that time line byremoving the non-value-added wastes”.

The Two Principles of TPS

The Toyota Production System is based on the absoluteelimination of waste. The two principles that support thissystem are:

• Just-In-Time (JIT) manufacturing and;• Autonomation – or automation with a human touch.

JIT means that, in a flow process, the right parts needed inassembly reach the assembly line at the exact time neededand only in the quantities needed. ConventionalManagement Methods become hard to practice in such aproduction system.

Using a Common-Sense Idea

Faced with the problem of how to supply the number ofparts needed for production just-in-time, Taichi Ohnorealized that the conventional way of manufacturing, tosupply materials from an earlier process to a later process,was not the most efficient strategy. But what if he reversedthe process?

For example, suppose a car is assembled in 12 stages. Stage 1of the assembly process becomes the earlier process andstage 12 – the final assembly stage – becomes the laterprocess.

Taichi Ohno reversed the direction of this conventionalway of transferring materials. This meant that the laterprocess in production went to an earlier process to pick uponly the right part in the quantity needed at the exact timeneeded.

So it was common sense that the earlier process had tomake only the number of parts withdrawn by the laterprocess. After experimentation the final decision was totake the final assembly line as the starting point. Then themethod of transferring materials was reversed. In thisreverse way the manufacturing process went back from thefinished product to the earliest materials-formingdepartment.

This reserve production flow system withdrew only thenumber of parts needed when they were needed, ‘just-in-time’. As a result, every link in the Just-In-Time chain isconnected and synchronized.

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About the Authors

Taiichi Ohno was born in Dairen (Port Arthur),Manchuria, China, in February 1912. After graduating fromthe Department of Mechanical Engineering in NagoyaTechnical High School in 1932, he joined Toyoda Spinningand Weaving.

In 1943, he was transferred to the Toyota Motor Company,where he was named Machine Shop Manager in 1949. Hebecame Toyota’s director in 1954, Managing Director in1964, Senior Managing Director in 1970 and Executive VicePresident in 1975.

Autonomation

The second system that supports the principles of TPS iscalled Autonomation. It’s also called Automation with aHuman Touch.

Autonomation performs a dual role. It eliminatesoverproduction – an important waste in manufacturing –and prevents the production of defective products.

The idea of autonomation originated with the invention ofan auto-activated weaving machine by Toyoda Sakichi,founder of Toyota Motor Company. Toyoda Sakichiinvented a device that could distinguish between normaland abnormal conditions. This eliminated the process ofproducing defective products.

From Toyoda Sakichi the management at the Toyota plantlearned that applying human intelligence to machines wasthe only way to make machines work for people. Manymachines don’t have a built-in automatic checking systemagainst defective parts or any mishaps. Let’s say there’s amishap like a piece of scrap falling into the machine thatthen damages the machine in some way. When thishappens, tens and soon hundreds of defective parts areproduced and pile up.

But a little human touch can quickly prevent this wastefrom happening. That is why Toyota emphasizesautonomation – machines that prevent these problems‘autonomously’.

At Toyota, a machine automated with a human touch isattached to an automatic stopping device. Most machines inall Toyota plants are equipped with these safety devices andfool proof systems to prevent defective products. This ishow human intelligence or human touch is given tomachines.

A Brief History of Toyota

Toyoda Sakichi went to America for the first time in 1910when the automobile industry was just beginning. There hewitnessed the boom of the car industry and saw how thepopularity of automobiles was rising and how manycompanies were involved in their production.

On his return he urged Toyoda Kiichiro to venture into theworld of cars and carry out experiments and trials todevelop the car industry in Japan. He financed theseexperiments with money he gained from an invention hecreated.

Toyoda Kiichiro must have clearly envisioned Just-In-Timeas the first step in the evolution of a Japanese productionsystem. He established ‘Toyotaism’ and placed thefollowing conditions on the automobile business:

• Provide cars for the general public,• Make reasonably priced cars,• Recognize the importance of sales in manufacturing,• Establish the basic material industry.

Toyoda Kiichiro insisted on the highest quality equipmentand worked to use them effectively. His mission was todevelop a Japanese production technique.

Toyoda Sakichi and Toyoda Kiichiro had an internationalbusiness perspective and excelled at perceiving the world asa whole. Both spent their lives mainly in the productionfields, looking at things realistically, calmly and objectively.

The path from Toyoda Sakichi to Toyoda Kiichiro andthen to the present Toyota Motor Company is the path ofa developing and maturing modern Japanese industry.

Toyoda Sakichi’s mission in life and business was tocultivate and train the natural intellect of the Japanesepeople, sell original Japanese products produced by thisintellect and increase the national wealth of Japan. Raisingthe national consciousness of the Japanese people becamehis goal.

He believed Japanese business and Japan would continue tolag behind the European-American world unless thecreativity and original technology of the Japanese peoplewas discovered.

The Goal

After World War II Toyota’s goal became catching up withAmerica in three years. Because the goal was clear, activityat Toyota became focused and vigorous. President Toyoda’swords, “Catch up with America” generated a spirit ofeagerness and action.

Toward the end of 1955, Japan entered a period of largegrowth. High performance machines were introduced intothe automobile industry. Whatever was made was sold.Japan almost doubled its national income figures andbusinesses raced to automate.

However, the machines had a serious shortcoming. Theywere unable to make judgments and stop by themselves.Therefore, supervision by an operator was necessary.

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Consequently, the number of workers didn’t decrease withautomation.

“In the Toyota Production System, work sequencing andstandardization are done before improvement ofequipments. In this way, most problem areas can beeliminated or improved.”

Japan’s economy expanded in the first two quarters of 1965and the desire for large, high-performance machines inproduction plants intensified. At the time, Taiichi Ohnoseriously felt it would be dangerous to continue purchasinghigh-performance equipment.

He believed that many people harbor such misconceptions.Many think that they can achieve cost reduction byreducing workers and increasing high-performancemachines. However, results show that costs are not reducedat all.

“It is a shame that in today’s business and industrialsociety, the relationship between work and worker andmachine and worker have become so adversarial. For ourdevelopment to continue, we must become moregenerous, more resourceful, and more creative.”

Changing the System of Fixed Workers

In the fall of 1973, the oil crisis brought a new twist toJapan’s economy and Toyota was forced to reduceproduction for 1974. However, compared to othercompanies, Toyota handled the crisis incredibly well.Because of this, companies started to pay more attention toTPS and its possibilities.

With the reduced production that followed the oil crisis,Toyota had problems with the autonomated machines towhich a fixed number of operators were assigned. With theproduction reduced by 50 percent, two workers were stillneeded to complete the cycle. One at the input and one atthe output for the large machines.

So, the next step for TPS was to remove the system of afixed number of workers to a certain work station.

“The person who establishes the work standards should besomeone who works in production. Otherwise, thestandards would not lead to progress.”

What Is The True Economy?

In the Toyota Production System, economy meansreduction of manpower and costs. This is the most criticalcondition for a business’s survival and growth. Costreduction is the basis of all decisions at Toyota.

To achieve manpower reduction many methods could beused, such as buying automated machines, or changing thework combination or even considering buying robots.

In order for an improvement to be implemented correctly,a thorough study is required. If the idea is pushed forwardrashly without deep thought, it might cost too much toimplement and thus, not result in any cost reduction at all.Rashly purchased advanced high-performance machinesmight result in over-production and waste.

Toyota’s main plant – its oldest facility- has accomplished asmooth production flow by rearranging the conventionalmachines after a thorough study of the work sequence.Toyota has studied the capacity of the conventionalmachines and has put them into good use before wastingfinances on the purchase of overly expensive unnecessarymachinery.

Multi-Tasking

In American as well as Japanese machine shops, a latheoperator is always a lathe operator and a welder is always awelder to the end. In the TPS, an operator has a broadspectrum of skills. He can operate a lathe, handle a drillingmachine, and also run a milling machine. He can evenperform welding.

This type of multi-skilling or multi-tasking allows theworkers to participate in building up a total system in theproduction plant. In this way, the individual can find valuein working.

“It is a shame that in today’s business and industrialsociety, the relationship between work and worker andmachine and worker have become so adversarial. For ourdevelopment to continue, we must become moregenerous, more resourceful, and more creative.”

Multi-tasking has many advantages. Its main advantage is toreduce the idle time spent by workers just watching themachines. A multi-skilled worker can fill up the shift timeby attending to other machines or even help other workerswho are lagging behind in their production schedule. Thismethod reduces production costs and eliminates waste inthe form of idle time.



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Production Leveling

The special demands of the Korean War in 1950, created afrantic atmosphere in the production plant. There was ashortage of everything from crude materials to parts. Thefear resulting from this shortage forced manufacturingplants to increase workers and machines to produce andstore items. A one-month inventory was kept in eachprocess. This meant needing a large warehouse to store theexcess goods.

Moreover, manufacturers started to think ahead and worryabout what will happen in case the situation changed andproduction increased.

To avoid this potential problem, Toyota looked at ways tolevel all production.

The System of U.S. Supermarkets

Following World War II, American products flowed intoJapan. The first U.S. - style supermarket appeared in themid-1950s. Consequently, this type of store became the ragein Japan. By late 1940, the U.S. supermarket method wasbeing applied to work in the Toyota machine shop.

A supermarket is where a customer can get what is needed,at the time needed and in the amount needed. Exactly asthe just-in-time system. From the supermarket method,Toyota got the idea of viewing the earlier process ofproduction as a kind of store.

The later process in production goes to the earlier processto acquire the required parts at the right time in the neededquantities. The earlier process immediately produces thequantity taken.

However, this posed a problem. What happens when thelater process in production picks up large quantities at onceand throws the earlier process into confusion? After trialand error, Toyota came up with the idea of productionleveling.

To make it work, they used pieces of paper listing the partnumber of an item and other information related tomachining work. This was called “Kanban”. Subsequently,this was called the “Kanban System”.

What is Kanban?

One piece of paper provides at a glance the followinginformation:

• Production quantity. • Time. • Method.• Sequence or transfer quantity.• Transfer time • Destination. • Storage point. • Transfer equipment.• Container and so on.

The operating method of the Toyota production system isKanban. Its most frequently used form is a piece of papercontained in a rectangular vinyl envelope.

Kanban provides the following information and advantages:

• Pick-up or transport information. Thus the laterprocess in manufacturing picks up the number ofitems indicated by the Kanban at the earlier process ofmanufacturing. • Production information, so that earlier processes inmanufacturing produce items in the quantity andsequence indicated by the kanban. • It prevents overproduction and excessive transport.No items are made or transported without a kanban.• It prevents the defective products by identifying theprocess making the defect. Thus, defective productsare not sent on to the subsequent process. The resultis 100% defect-free goods. • It reveals the existing problems and maintainsinventory control.

So, in essence, TPS is the production method and theKanban System is the way it is managed.

6 Rules of Kanban

1. The later process goes to the earlier process to pick upproducts. Top management must change its way of



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thinking and make a commitment to reverse theconventional flow of production, transfer and delivery.Kanban is a tool for realizing just-in-time. In order to makethis system work, the production processes must bemanaged to flow as much as possible. Another importantcondition is the leveling of production and always workingin accordance with standard work methods.

2. Have the earlier process of production produce onlythe amount withdrawn by the later process of production.

3. Prohibit picking up or producing goods without aKanban.

4. Attach Kanban to the goods.

5. Products must be 100% defect free (that is, do not sendanything defective to the subsequent process).

6. Reduce the number of Kanban.

A Kanban always moves with the needed goods and sobecomes a work order for each process. In this way, aKanban can prevent overproduction.

Evolution of TPS

There are two types of work.1. Non-value-added work (Moving is not necessarilyworking)This type of work can create excess waste. For example,some workers, instead of waiting, work ahead. This willresult in the accumulation of inventory at the end of aproduction line. In the Toyota Production System, thisphenomenon is called the waste of overproduction, becauseit helps hide other wastes.

2. Value-added workTo add value means actually advancing the process towardscompleting the job.

‘Waste’ refers to all elements of production that onlyincrease cost without adding value. Such as, excess people,inventory and equipment.

Redistribution of work should be taken into considerationin order to eliminate waste, such as non-value addedmovements.

“Total improvement of efficiency is achieved only whenthere is zero production of waste and value-added workreaches its 100 percent capacity.”

The vicious cycle of waste generation is hidden everywherein production. To avoid this, production managers andsupervisors must fully understand what waste is and itscause.

Waste is identified as follows:• Waste of overproduction such as producing morethan, faster than or sooner than is required.• Waste of time on hand (waiting). This could be idletime that could be used productively.• Waste in transportation such as unnecessarytransport of parts or materials.• Inappropriate processing such as operations that addno value from the customer’s perspective.• Waste of stock on hand (inventory)• Waste of movement-any movement by people orequipment that does not add value.• Waste of making defective products.

Waste has been eliminated through the followingprocedures:

• Examining available resources.• Rearranging machines.• Improving machining processes.• Installing autonomous systems.• Improving tools.• Analyzing transportation methods. • Optimizing the amount of materials at hand formachining.



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Ask Why

According to Mr Ohno, the best way to get to the root of aproblem is to ask the question why at least five times. Byasking why five times and answering it each time, we canget to the real cause of the problem, which is often hiddenbehind more obvious symptoms.

Overproduction as Waste

According to Taiichi Ohno the most terrible waste inbusiness is overproduction. Modern industry seems stuck in this way of thinking. Aperson in business may feel uneasy about survival withoutkeeping inventories of raw material, work-in-process andproducts. But this so called security is an illusion.

To change this debilitating mindset requires a revolution inconsciousness and a change of attitude and viewpoint bybusiness people. Understanding and implementing the TPSsystem brings about this change.

High production efficiency has also been maintained bypreventing the recurrence of defective products, operationalmistakes, and accidents and by incorporating workers’ideas.

Standard Work Procedure

Trying and revising procedures many times in theproduction plant itself can only establish proper workprocedures. Furthermore, it must be a procedure thatanybody can understand on sight.

The three elements of a standard work procedure are asfollows:(1) Cycle time: is the time allotted to make one piece or unit.

(2) Work sequence: Work sequence refers to the sequence ofoperations, or the order of operations in which a workerprocesses items. Included in these processes are things suchas transporting them, mounting them on machines,removing them from machines, and so on.

(3) Standard inventory: Refers to the minimum inventory ofproducts needed for the operations to proceed.

Standard Work Sheet

In each Toyota Motor Company plant, standard worksheets are posted prominently at each workstation. Whenone looks up, the andon (the line stop indication board)comes into view, showing the location and nature oftrouble situations at a glance.

The standard work sheet is based thoroughly on principles.It plays an important role in Toyota’s visual controlsystem.

Teamwork

In Japan, the individual craftsman is highly valued.However, in modern industry, harmony among people in agroup, as in teamwork, is in greater demand than the art ofthe individual. Just because areas of responsibility have beenassigned, things do not necessarily run smoothly.Teamwork is an essential aspect of manufacturing.

The idea is not how many parts were drilled or machinedby one worker, but how many products the line as a wholecompleted. In a manufacturing environment, if an operatorin a later process is delayed, others should help set up his orher machine.

In Toyota, this is called the “Mutual Assistance Campaign”.It provides the power to generate more powerfulteamwork.

There is a continued need for training and practice. It’s easyto understand theory with the mind; the problem is toremember it with the body. The goal is to know it and doit instinctively.

An Autonomic Nervous System in the BusinessOrganization

In the production plant, an autonomic nerve means makingjudgments autonomously at the lowest possible level. Forexample, when to stop production, what sequence to followin making parts, or when is overtime necessary to producethe required amount.

In Toyota, the idea of an autonomic nervous system grewwith the broad and in-depth implementation of the just-in-time system in the production field, as well as with theincreased adherence to the rules through the use of Kanban.

Use of Information Technology

With regards to the usage of computers and abundance ofinformation, Taiichi Ohno believes that information shouldbe provided only when needed. The excess informationgenerated by computers is not needed for production.Reviewing information too quickly results in the earlydelivery of raw materials and thus causing waste.

Instead, Mr. Ohno talks about establishing an industrialmind which extracts knowledge from the manufacturingpeople and develops the production plan for the entireplant. Information is required only when needed. Thus,information sent to production should arrive exactly at theright time.

The Toyota information system bases its operation on anannual plan, followed by a monthly production schedule.The daily production schedule is based on these plans andincludes production leveling.

During the last half of the previous month, each productionline is informed of the daily production quantity for eachproduct type. This daily sequence schedule is sent to thefinal assembly line.

This is a special characteristic of Toyota’s information



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system. In other companies, scheduling information is sentto every production process.

The Toyota information system works as follows. Whenthe production line workers use parts at the side of the linefor assembly, they remove the Kanban to indicate thatcertain parts were used and need to be reproduced orreordered. The preceding process makes as many parts aswere used, eliminating the need for a special productionschedule.

Thus, the Kanban acts as a production order for the earlierprocesses.

The Ford and Toyota System

The Ford policies and work procedures are different thanToyota’s. At the beginning Toyota started mass productionjust like Ford but its needs were different. Toyota neededto produce less quantity and more variety and massproduction did not meet its needs.

The major difference between the two systems is thatToyota has totally eliminated the warehousing system andthe accumulation of inventory. The Ford system promoteslarge lot sizes, handles vast quantities, and produces lots ofinventory.

“The Toyota production system is not just a productionsystem. I am confident it will reveal its strength as amanagement system adapted to today’s era of globalmarkets and high-level computerized informationsystems.”

The Ford system makes a quantity of the same item at onetime. The Toyota system synchronizes production of eachunit. General Motors, Ford and the European automobilemakers have not attempted the production leveling Toyotahas been working to achieve.

European and American manufacturers still take a longtime for setup. Lot sizes are still large. And they continueto pursue mass production under a planned productionsystem.

Workers’ Training

Quick die changes are necessary to enable averageproduction and reduce lot sizes. In the 1940s, in Toyota’s

production department, setups in large processes took twoto three hours to complete. Teaching workers to reduce lotsizes and setup times took repeated on-the-job training. In the 1950s, when production leveling was being pushed atToyota, setup time was reduced to under an hour,sometimes dropping to 15 minutes. This is an example oftraining workers to meet needs by changing what isconsidered to be common sense.

Getting Away From Quantity and Speed

In the Toyota Production System, efficiency is not assessedaccording to quantity and speed. The system has alwayssuppressed overproduction, and has only produced inresponse to the needs of the marketplace.

During a high-growth period, market needs are great andlosses caused by overproduction do not appear on thesurface. However, during slow growth, excess inventoryshows up.

This kind of waste is definitely the result of pursuingquantity and speed.

“As the Toyota production system evolved, I frequentlyapplied reverse common sense or inverse thinking. I urgeall managers, intermediate supervisors, foremen, andworkers in production to be more flexible in theirthinking as they go about their work.”

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toyota production systemconsequently, the number of workers didn’t decrease with automation. “in...

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