toyota production system (j

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TOYOTA PRODUCTION S YSTEM

(J.I.T)

A CASE STUDY

HYPERCOMPETITION:

PRODUCT AND SERVICE DIFFERENTIATION

THROUGH KNOWLEDGE OF PROCESS



INTRODUCTION

The early 1980s saw the automotive industry In

the USA to be in a state of Hypercompetition

with the 4 major car companies losing pricing

power and having to create new models inextremely short duration to maintain

differentiation«.Toyota moved into this highly

competitive market and was able to gain Pricing

Power in a relatively short duration

HOW DID TOYOTA DO THIS«



SIGNS OF HYPERCOMPETITION

By the early 1980s the automotive industry in the

United States was concentrated in four major firms

y GM

y Ford

y Chrysler

y AMC

Increasing competition from European and Japanese

firms

Germany·s Volkswagen opened an assembly

operation in the United States in the late 1970s



Japan·s Nissan Motor Corporation established

a plant in the early 1980s

Honda Motor Company followed with a car

manufacturing operation adjacent to its

motorcycle plant

Japan·s Toyota Motor Corporation formed a

joint venture with GM called New United Motor

Manufacturing Incorporated, which built smallcars for both Toyota and GM.



JUST IN TIME

The father/originator: Taiichi Ohno

The beginnings:

y At that time one American car worker produced

approximately nine times as much as a Japanese carworker.

y The American industry and found that American

manufacturers made great use of economic order

quantities before switching to a new item. They also

made use of economic order quantities in terms of ordering and stocking the many parts needed to

assemble a car.



HOW TOYOTA DID IT?

The new system of production was based on theelimination of waste by:

y Just-in-time - items only move through theproduction system as and when they are needed

y Autonomation - automating the production systemso as to include inspection - human attention onlybeing needed when a defect is automatically detected

Number of sources of waste to be eliminated:

y Overproduction

y

Time spent waitingy Transportation/movement

y Processing time

y Inventory

y Defects



Cost Reduction:

y Toyota instituted production levelling - eliminating

unevenness in the flow of items.

y If a component which required assembly had an

associated requirement of 100 during a 25 day

working month then four were assembled per day,

one every two hours in an eight hour working day.

y Levelling was also applied to the flow of finished

goods out of the factory and to the flow of raw

materials into the factory.



Factory layout:y Previously all machines of the same type, e.g.

presses, were together in the same area

y The items had to be transported back and forth as

they needed processing on different machines.

y The workers were skilled at operating just one type of

machine.

y To eliminate this transportation different machines

were clustered together so items could move smoothly

from one machine to another as they were processed.

y Now, the workers had to become skilled on more than

one machine.



Relay Race:

y To help the workforce to adapt, the analogy of

teamwork in a relay race was introduced

y The newly rearranged factory floor workers were

asked to work as members of a team-

passing theprocessed items between themselves with the goal of

reaching the finishing line appropriately

y If one worker flagged (e.g. had an off day) then the

other workers could help him, like in setting up amachine for him so that the team output was

unaffected.



Kanban:

y To control production (the flow of items) in the new

environment Toyota introduced the kanban (essentiallyinformation as to what has to be done)

y Within Toyota the most common form of kanban was a

rectangular piece of paper within a transparent vinyl

envelope.

y The information listed on the paper basically tells aworker what to do - which items to collect or which

items to produce

Reducing the setup time:

y Machines and processes were re-engineered so as to

reduce the setup time required before processing of a

new item can start.



THE CHALLENGES & THE RESULTS

Major challenges:

y Multi-skilling the workforce to operate multiple

machines

y Redesigning every part of the vehicle to eliminate or

widen tolerance

y Testing and training suppliers of parts to assure

quality and delivery in time on demand



Success at Toyota:

y Sale of in-process inventory generated surplus cash

y

Response time fell to about a day

y Product quality increased improving customer

satisfaction

y Vehicles built to order eliminating the risk of vehiclesremaining unsold

y Improving the company's return on equity

toyota production system (j

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