Toyota: Creating the Lean MachineBy Mel Duvall Print
Behind Toyota's assembly line are sophisticated information systems supporting and enabling the business processes that help the automaker eliminate waste, limit inventory buildup and continually improve production.
Creating the Lean Machine
Unlike the formulas to blend Coca-Cola or the latest blockbuster drug, there is no veil of secrecy behind the Toyota Production System. In fact, Toyota openly invites general visitors and competitors alike into its plants to observe its operations and manufacturing techniques.
In 1992, it opened the Toyota Supplier Support Center in Erlanger, Ky., about an hour's drive north of the Georgetown plant, to teach other companies the principles and concepts behind TPS and to help implement TPS in their own operations. To date, it has worked with more than 100 companies as varied as office furniture maker Herman Miller, seat manufacturer Trim Masters and several hospitals. The supplier center now operates as an independent consulting firm.
It even created a joint venture with GM in 1982, taking a plant that was to be closed in Fremont, Calif., and reengineering it into a lean manufacturing facility based on TPS. That plant, renamed New United Motor Manufacturing Inc. (NUMMI), quickly surpassed all of GM's plants in North America in productivity, quality and inventory turns. NUMMI became a living laboratory for hundreds of GM executives and now manufactures Corollas, Tacoma pickup trucks and the Pontiac Vibe.
Toyota is open with the strategy behind TPS because it wants to raise its North American suppliers up to its own level of efficiency and quality, Liker says. At the same time, it can afford to be open with its competitors because Toyota is constantly raising the bar. By the time they copy its current processes, Toyota will have moved on.
The origins of TPS date to the turn of the last century, and a very different industry. Sakichi Toyoda, founder of the Toyota Group, invented a loom in 1902 that would automatically stop if any threads snapped. It paved the way for automated loom works, where a single operator could handle dozens of looms. Sakichi's invention reduced defects and raised yields since a loom would not continue producing imperfect fabric and use up thread needlessly. This process, of stopping production to prevent defects, became known as Jidoka.
In the 1930s, the Toyoda family became fascinated by Henry Ford's mass production system, and decided to set up an auto manufacturing operation of their own. The problem they faced is that while Ford's system was ideal for a market the size of North America, it could not be easily adapted to serve much smaller production volumes for a market the size of Japan. (A Ford factory line in the 1930s produced about 9,000 units per month, while Toyota was only producing about 900 units).
The solution was to create an assembly line where parts and supplies were purchased in only the quantities required to satisfy production requirements, and to match production as closely as possible with consumer demand. This limited the amount of cash that had to be committed to inventory, and also allowed Toyota to respond quickly to any defects or changes in demand. Production became dependent on a pull system, where inventory was "pulled" from suppliers only when required, instead of the more common "push" mass production system, where parts are produced in large quantities and stored in inventory until required. This pull method became what is now known as a just-in-time (JIT) supply chain system.
Together with the ability to stop production to prevent defects, Jidoka and just-in-time are the central pillars of TPS.
Over the years, Toyota refined a number of other concepts and production methods that support the two central TPS pillars. And behind each of those pillars are information systems, supporting and enabling the processes:
- Just-in-time: Toyota employs one of the most sophisticated supply chain systems in manufacturing, working closely with suppliers to ensure that parts arrive just when needed. For example, when a car comes out of the paint shop in Georgetown, the system sends seat supplier Johnson Controls an electronic message detailing the exact configuration of the seats required (leather upholstery, bucket seats, etc.); Johnson Controls has four hours to ship those seats to the plant in the exact sequence required. The instructions are provided by Toyota's proprietary Assembly Line Control System (ALCS) software.
- Jidoka: At every stage of the assembly line, Toyota employs devices allowing workers to stop production to correct defects. Such devices may be as simple as a rope strung above the assembly line, or a button that can be pushed. In other cases, it is sophisticated monitoring software such as Activplant's Performance Management System, which can alert operators to problems with equipment or robots in real time.
- Kaizen: This is a system for continuous improvement. Toyota constantly looks to improve its business processes by finding ways to take Muda (waste) out of the system. It can be as simple as moving a tool to an assembly station so a worker does not need to waste time walking to get the tool. Or it may involve technology, such as allowing dealerships to swap car inventories using the Dealer Daily, an Internet portal, so customers are not left waiting longer for the vehicle they want.
- Andons: Wherever possible, Toyota uses visual controls, or Andons, such as overhead displays, plasma screens and electronic dashboards to quickly convey the state of work. On the assembly line floor, for example, overhead Andons tell a supervisor with one glance whether the station is functioning smoothly (a green light), whether there is a problem being investigated (yellow light) or whether the assembly line has stopped (red light). Newer plasma screens, tied into assembly line equipment, provide even more information such as which machine malfunctioned, the operator and the exact conditions (speed, temperature) when it broke down.
- PokaYokes: Toyota uses a range of these low-cost, highly reliable devices throughout its operations to prevent defects. A PokaYoke may be something as simple as a tool holder with an electronic sensor, or it may be a light curtain, a beam of light that sends a signal to a computer when a hand or some other object interrupts its flow. The curtain can signal a warning if, for instance, a worker fails to pick up a cotter pin, bolt, nut or some other required part.
- Genchi Genbutsu:The literal translation of this term is, "Go and see for yourself." Rather than hear about a problem, Toyota requires its workers, team leaders and executives to go and see a problem directly and to work collectively on a solution. At least 50% of Toyota's information systems workers are stationed at plant sites to work directly with operations.
Together, the elements of TPS form the basis for a system of business process management that allows Toyota to continuously look for ways to optimize its operations and put thought into action. Sounds simple, but it requires a basic cultural change in an organization, and that, according to Gary Convis, can be the most difficult challenge. Convis, chairman of Toyota Motor Manufacturing Kentucky, oversees the company's manufacturing plant in Georgetown, Ky.
"Kaizen defines Toyota's basic approach to doing business," Convis says. "Challenge everything. The true value of continuous improvement is in creating an atmosphere of continuous learning and an environment that not only accepts, but actually embraces change."
Convis is a former Ford and General Motors executive who joined the NUMMI venture in California, and moved up through Toyota's manufacturing ranks. In 2001, Convis became the first North American to head a Toyota manufacturing plant when he was put in charge of the Georgetown facility. He responded to the promotion by moving his office from the administrative building adjacent to the Georgetown plant to the center of the factory floor. In June, he was promoted again to the role of chairman.
In a recent interview in Nikkei Business Online, Toyota Motor CIO Yoshikazu Amano noted the importance of information technology in Kaizen activities.
"At Toyota, the information systems department, and I as the CIO, have an absolute advantage when compared to other departments," he said. "The reason is that we manage all of the data from Toyota's global operations. I have that data at my fingertips.
"Looking at this data tells me a lot. For instance, in sales I can see that some sales companies are successful at selling new cars while others are good at selling used cars or service. I can also see the difference in profitability between these companies. In the area of logistics, I can see one department over here and another over there processing similar data, and that these departments may need to be reorganized and the transactions streamlined.
"Part of my job as CIO is to take these companywide issues and use this data to make improvement suggestions when I have an opportunity to meet with the managing executives." (View a translation of the interview provided by Gemba Research.)
Millie Marshall, vice president of information systems for Toyota Manufacturing North America, concurs. At Toyota, there is a clear understanding of technology's role and its place in the boardroom, she says, and that in turn helps the company in the area of BPM.
"In I.T., we know what the business changes are and the problems for every single area—whether it's accounting and finance on the administrative side, or whether it's something on the plant floor that requires some type of solution," she says. "Because I.T. can span and look at all of those areas, our top executives look to us to put forward recommendations and help them prioritize business projects."
Marshall, a Kentucky native, began working with Toyota in 1991, a few years after the automaker began transforming sleepy Scott County with its massive Georgetown plant. Marshall had been working in information systems for Square D, a company that manufactures electrical breakers and associated components. She was happy working for Square D, but couldn't help notice the "amazing" impact Toyota was having on her community. Marshall started at the Georgetown plant working on mainframe database administration, and for some time worked in human resources on its PeopleSoft ERP implementation, but the majority of her time has been spent managing systems for the factory floor.
Her first impressions of joining Toyota was that it was "overwhelming." The workload was extremely high, with new plants and expansions being brought on-stream every month, and it took time to get used to the Toyota culture. Management at Toyota was much more hands-on; they didn't hand you an assignment and go away, and it was expected that they would get their hands dirty as well. "I can remember sitting down with Japanese coordinators—these were high-ranking people—and we were going over actual data fields," she says. "They were sharing their knowledge and were very patient with me... but what I noticed is that they had intricate knowledge of how the system worked."
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