Production System of Toyota Motor Company - Research Paper Example

Toyota Production System Toyota Motor Company – The people who transformed it into a leader of global automobile industry The Toyota Motor Company that made humble beginnings in the middle of the last century and has beaten the erstwhile dominant auto manufacturers of the western world owes its success to the famous Toyota Production System which was evolved through sustained efforts of Sakichi Toyoda, who founded the Toyoda Group in 1902; Kiichiro Toyoda, son of Sakichi Toyoda, who headed the automobile manufacturing operation between 1936 and 1950; Eiji Toyoda, Managing Director between 1950 and 1981 and Chairman between 1981 and 1994; and Taiichi Ohno, father of Kanban System. Sakichi Toyoda founded the Toyoda Automatic Loom Works that manufactured automatic looms. In 1937, Sakichi sold his automatic loom patents to a company in England to finance an automobile manufacturing operation with his son Kiichiro managing the new venture. Just to matters in proper perspective it would be worthwhile to mention that at that time Ford was the largest manufacturer of automobiles in Japan with General Motors as the second largest manufacturer, together producing over 90% of the vehicles manufactured in Japan. Kiichiro Toyoda travelled to the Ford Motor Company in Detroit for a year of studying the American automotive industry and returned to Japan to introduce certain innovative features in the production system of Toyota Motor Company that prescribed smaller production batches, drastic alteration of assembly sequence of production, the logistics of material procurement simultaneous to production consumption, and a supplier network capable of supplying component material as required. Taken together the entire system was referred to as JIT (Just in Time) within the company. Eiji Toyoda, a nephew of Sakichi Toyoda, was named Managing Director of the Toyoda Automotive Works when the Japanese government forced Kiichiro Toyoda into reorganizing the Toyoda Group. Eiji travelled to Ford Motor Company and was so impressed by the ‘suggestion system’ that was prevalent there that he introduced a modified version of the concept in his company and termed it as kaizen. It is accepted to be one of the major building blocks of the concept of continuous improvement that happens to be one of the most important mainstays of Toyota Production System. Taiichi Ohno, is considered to be the father of kanban system. As he managed the machining operations under severe conditions of material shortages during Second World War, he envisaged a supply chain that imitated the inventory system of a supermarket where there is a continuous supply of merchandise on the store shelves. Two other gentlemen who contributed immensely to the development of Toyota Production System were Shigeo Shingo, a quality consultant hired by Toyota, who assisted in the implementation of quality initiatives; and Edward Deming who brought Statistical Process Control to Japan. [Bec98] The entire project has been devoted to analyse and understand the contributions of these persons and how they revolutionised the concept of factory production. Objective The objective of undertaking an in-depth study of the famed Toyota Production System was to uncover the mystery that surrounds a production system that in spite of not following any of the accepted and well-respected theories of production management that every western manufacturer without fail strictly adheres to; produced results that astounded all industry observers across the world. It is not that Toyota is secretive about its production processes but none could actually replicate the success that Toyota achieved even after repeated and prolonged visits to its manufacturing units. So, as a student of management one quite naturally becomes inquisitive about the Toyota mystique and attempts to unravel the real reasons for the stupendous success of Toyota Motor Company. Methodology As it is not quite possible either in terms of economics or logistics to undertake a personal visit to any of the manufacturing units of Toyota Motor Company, the next best alternative is to undertake an extensive research of all that has been written on this famed production system. In the current project an attempt has been made to critically analyse the existing procedures practiced in Toyota shop floor and investigate where these differ from the more popular norms followed by other auto manufacturers with a special attempt being made to contrast the production practices of Toyota with that of another giant in the automobile sector – Ford Motor Company. The purpose of such a comparison is to bring in sharper focus the uniqueness of Toyota Production System. How it all began nearly sixty years ago Ford Motor Company was the leader in automobile industry during the 50s and 60s of the previous century and Eiji Toyoda, cousin of Kiichiro Toyoda, the then president of Toyota Motor Company, was sent to the US in early 1950s, to observe minutely the famous mass production system of Ford Motor Company that managed to produce phenomenally large volumes that allowed the company to enjoy economies of large scale. An example of the exceptional productive capacity of Ford Company can be understood from the fact that while Toyota could produce 2,685 automobiles in thirteen years since its inception, Ford Motor Company was producing 7,000 units daily in its Rouge plant in Detroit.[Wom07] The secret to such an astounding level of output was the revolutionary concept of assembly line production pioneered by Henry Ford. He had discovered that if a worker performed only a single task, his expertise in that task increased and this specialisation ensured a higher level of productivity of that particular worker. Thus he broke down the entire job of manufacturing an automobile into several identifiable jobs and entrusted each job to a particular group of workers. Initially these workers used to move from one semi finished car to the other doing only that part of the job they have been entrusted with. The cars remained stationery while workers moved from one point to the other. Ford observed that level of output increased substantially with the introduction of this form of stationery assembly line. The output level, however, really got a quantum boost when the cars were placed on a mobile assembly line where the workers remained stationery while the semi finished cars came near the workers. The production time required for manufacturing a complete car reduced by a massive 88% this, quite obviously, increased the output volumes many time over. An added advantage of a moving assembly line was a reduced level of inventory of parts waiting to be assembled that reduced levels of working capital quite markedly and this financial advantage only added to the financial stability of an already stable organisation.[Pra] Eiji Toyoda was no doubt impressed by the efficiency of the system but felt such a system was full of muda, the Japanese equivalent of non-value added activities that resulted in expenditure without any corresponding benefit.[Rot03] Moreover, Toyota could only aspire to sell in Japanese markets. Thus, the economies of large scale production that Ford could enjoy were not there for Toyota to take advantage of. So, Eiji Toyoda thought of enjoying economies of large scale by producing much lesser volumes of quite a large number of products on the same production line. This was how the famous Toyota Production System came into existence.[Placeholder59] Taiichi Ohno, production manager at Toyota, also discovered that the cost per part manufactured reduced substantially when such manufacturing is done in small batches instead of large lots. There was another benefit of manufacturing in small batches. As the workers dealt with relatively less volumes, it was easier for them to identify manufacturing defects almost immediately and restrict any further expense of material and labour on a defective product. All these measures ensured maximum utilisation of capital employed. [Placeholder54] Toyota Production System – How it bettered Ford’s Assembly Lines Ford’s assembly line had a foreman who ensured workers were working according to predetermined schedules and procedures and there were housekeepers who periodically came and cleaned the work area to remove any unnecessary oil and chemicals that may or may not cause slippage, fire or any other possible hazard. There was a separate group of workers entrusted with the responsibility of repair and maintenance of both machines and tools and they visited the work area according to a preset frequency to ensure that there was no stoppage in production due to sudden breakdowns. There were several quality inspectors who examined at random finished units to verify that output conformed to standards. There was a rework area right at the end of the production line where workers rectified defective outputs and there were a gang of workers who acted as a backup to cover up unanticipated absenteeism. Ohno did away with the foreman and clubbed workers into teams where team leaders played the role of the foremen. Each team also had the responsibility of keeping the work area clean thereby removing the requirement of the group of workers who perform only housekeeping jobs under Ford Company’s system of assembly line production. Ohno also entrusted this team with undertaking minor repairs of machines and tools and undertaking quality checks of outputs produced. Thus, at one stroke he removed four categories of workers and envisaged a scenario where only those that are directly adding value should be present on the shop floor. This removed a substantial amount of production overhead.[Placeholder54] But the most innovative introduction of Ohno was setting aside some time for each group of workers when they would collectively discuss and suggest ways and means of further improving the current levels of production efficiency. This became known as ‘Quality Circles’ and this process of continuously thinking about ways to further improve the current procedures at workplace is known as kaizen in Japanese and it became one of the mainstays of Toyota’s production process and philosophy.[Ima86] Ohno insisted defects should be rectified right at the very moment they are identified else a late rectification would be much more costly and cumbersome. To ensure that a defective piece of output does not proceed further up the production line, he envisaged introduction of some form of automatic self regulation or jidoka similar to the power loom designed by Sakichi Toyoda that automatically stopped the moment one thread broke. Ohno also introduced another equally novel concept called andon system where every worker had the right to stop the assembly the moment any one of them spotted a defect. It was in direct contrast with American methods of assembly line production where only a senior supervisor had the right to stall the assembly line. The moment the assembly line is stopped by a worker in a Toyota factory all related workers gather around to solve the problem and the assembly line is restarted only after the problem has been fully resolved. Ohno also introduced ‘five whys’ method of solving a problem that went to root of a problem to ensure that it never occurred again. Initially andon system caused numerous stoppages of work but as workers got used to it the quality of output increased dramatically while cost of rework and rectification fell equally drastically. Ohno devised a novel method of reducing inventory levels on the shop floor by introducing Just-in-time (JIT) inventory system which is described as “Producing only what is needed, in necessary quantity and at necessary time.”[Toy09] This was undoubtedly a very ambitious target and the most important tool to achieve such a target was the famous kanban system which Toyota often refers to as the ‘supermarket concept’. Supermarket authorities always ensure that shelves are full with items in proper quantities and varieties to satisfy demands of customers as and when they visit the supermarket. Ohno equated subsequent processes as customers and preceding processes as supermarket that is ready to supply components in exact quantities and at the exact point of time when they are needed. A similar situation takes place in Toyota manufacturing units where all subsequent processes send signals to the preceding processes indicating the exact quantity that needs to be manufactured and the accurate time when it needs to be supplied by those preceding processes. These signals are conveyed through cards called kanban which in Japanese means signboard. This form of ordering production in reverse is not only carried out between different production departments of the company but also between its vendors thereby bringing inter-process inventory to a minimum. However, such a fine-tuned production process can run with clockwork precision only when each process unambiguously defines the exact permissible duration during which a particular job has got to be fully finished by that particular process. This is done by measuring Takt (a German word meaning meter) time which is measured using the formula: Total Daily Operating Time ------------------------------------- = Production time for one unit of output Total Production Requirement If there is a demand for 50 vehicles per day and if the available production time is 8X60 = 480 minutes, the Takt time available at each production station is 9.6 minutes. A job must not stay for more than 9.6 minutes at each production node to ensure that requisite numbers of vehicles are produced to satisfy the existing demand. Some other techniques used by Toyota One such process is known as Value Stream Mapping. It is a visual method of following the material flow in a factory – right from the entry of raw materials in the factory premises to the despatch of finished goods outside the factory gates while noting the quantum of value added at each step. It generally consists of four main steps with numerous sub-steps thrown in between that depend on the level of complexity of the production process. The four main steps are: “Preparation”, “Current State”, “Future State” and “Planning and Implementation”. Management thus can focus more on activities that add value and devise logical steps to ensure that higher productivity levels are attained. The desired status is described in the “Future State” template and constant reference to it highly motivates the workforce to reach the target.[Loc08] The other equally innovative introduction is the concept of 5S that provide a methodology to ensure that the workplace is cleaner, orderly and more organised. Though an orderly and clean workplace does not directly improve efficiency as say reduction of waste but a favourable environment most surely creates an ambience where the workforce feel more motivated to put in their best. The 5S are derived from the initials of five Japanese words: Seiri (Sorting out what is necessary and what is not), Seiton (Orderliness where there is a place for everything and everything is in its place), Seiso (Cleanliness), Seiketsu (Ensure everything conforms to standards set) and Shitsuke (Constant application of the previous four Ss to ensure that levels attained are sustained). The other innovation of Toyota is Quality Function Deployment (QFD) that tries to incorporate the customers’ requirements while designing the products. With the implementation of QFD, a company would no longer have to be bothered about a consumer demand since it has produced what exactly the consumers want. This method also guarantees a massive savings in cost as all the problems are solved at the drawing stage only.[ReV98] Conclusion A survey of Toyota’s path breaking innovations in production systems would remain incomplete if a mention is not made about Total Productive Maintenance (TPM) approach to production processes. Toyota elevated the job of maintenance from a necessary nuisance that only added to downtimes to an essential activity that is as much a part of production as is the act of churning out finished jobs from machine bays. It also incorporated the maintenance downtime within the normal time required for production and thus reduced machine breakdowns and consequent production losses to near zero levels.[Wir03] All the innovations described above have propelled Toyota to the forefront of international automobile industry. References Bec98: , (Becker 1998), Wom07: , (Womack, Jones and Roos 2007), Pra: , (McKay and Wiers August 2004), Rot03: , (Rother and Shook 2003), Placeholder59: , (McCoby 1997), Placeholder54: , (Tolliday 1998), Placeholder54: , (Tolliday 1998), Ima86: , (Imai 1986), Toy09: , (Toyota Production System 1995), Loc08: , (Locher 2008), ReV98: , (ReVelle, Moran and Cox 1998), Wir03: , (Wireman 2003), Read More