What Is Driving Toyota

In the heart of Kentucky, amid rolling bluegrass hills and miles of neat white plank fences, sits the machine that threatens the three pillars of Detroit.

Under the roof of Toyota Motor’s largest manufacturing facility in North America, the headlights flash and the horn blasts on a new Camry, Avalon or Solara rolling off the assembly line every 55 seconds. Its journey began just 20 hours earlier, when sheets were cut from a 24-ton coil of steel and stamped by giant machines into body parts. Robots weld the stamped parts into the naked frame of car bodies, which are then hung on an overhead conveyor system to begin a Disney-like ride through 7.5 million square feet of factory floor (the equivalent of 156 football fields).

Employees—some 7,000 at this plant alone—have exactly 55 seconds to install engine components, brakes, dashboards, windows, doors or some other piece of the car puzzle before it is transported to the next stage of the assembly line on the overhead conveyor. Driverless carts ferry parts just-in-time to assembly stations so inventory doesn’t pile up, and everywhere, overhead signs, plasma screens and musical jingles alert team leaders to production status or problems on the assembly line.

Every organization strives to make its business processes more effective, more efficient and more capable of adapting to an ever-changing environment. In fact, business process management (BPM) was the top business priority expressed by companies in research firm Gartner’s ranking of business and technology priorities for 2006. There are a number of definitions for BPM, and a whole category of software products to help companies improve their business processes, but the overriding premise is simple: BPM is about continuously identifying opportunities for improvement in a company’s business activities and acting upon those opportunities.

Most companies will claim this goal, yet very few can hope to come close to achieving the same degree of success with BPM as Toyota. Its entire culture—its basic DNA—is built around continuously searching for better ways to improve its manufacturing and business processes, and ultimately achieve customer satisfaction.

Information technology often plays the role of bringing those processes to life, be it using new software to shorten the cycle from accepting a customer order to having that Camry or Corolla roll off the production line, or monitoring equipment on the factory floor to prevent breakdowns and defects. And the payoff is impossible to ignore.

In 2003, Toyota overtook Ford Motor to become the world’s second-largest automaker, with sales of 6.8 million vehicles, compared to Ford’s 6.7 million. In 2006, Toyota forecasts that as many as 9 million vehicles will roll off its production lines, putting it a few bumpers away from General Motors, which is expected to produce about 9.2 million vehicles in 2006. In July, Toyota reported its best first-half sales in its 49 years in the U.S., selling 678,691 units.

In the wake of recalls and other quality issues, the company last month said that it was looking at possibly delaying some models. Still, what Toyota has accomplished over the years has been widely admired by manufacturing and information-technology experts.

In factories around the globe, from Toyota City, Japan, to this one in Georgetown, Ky., Toyota consistently produces higher-quality cars, with fewer worker-hours, lower inventory and fewer defects, than any other competitor. The engine behind its success, say insiders and outsiders alike, is the Toyota Production System (TPS), a set of principles, philosophies and business processes to enable the leanest manufacturing.

And behind TPS is information technology—supporting and enabling the business processes that help Toyota eliminate waste, operate with virtually no inventory and continually improve production.

Technology does not drive business processes at Toyota. The Toyota Production System does. However, technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to TPS.

“What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy,” says Philip Evans, a senior vice president at the Boston Consulting Group who has studied Toyota. “They have a very clear understanding of the role technology plays in supporting the business.”

By 2007, Toyota could unseat GM as the world’s largest automaker, a title GM has held for almost a century. It long ago unseated Detroit’s Big Three as the world’s most profitable car maker.

“Many companies have tried to duplicate what Toyota has done with TPS… and most fail,” notes Jeffrey Liker, a professor of industrial engineering at the University of Michigan and author of several books on lean manufacturing, including The Toyota Way. Liker has consulted with a number of companies implementing lean manufacturing techniques based on the Toyota model, and by his reckoning, “less than 1%” deserve an A or B+.

“It’s hard work,” Liker says. “You have to be willing to commit to practicing the concepts behind TPS every day.”