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14 Management Lessons from The Toyota Way

bookguide on 21/06/10 city: New-York tags: Business greatbooks book summary  Comment: 0 Save: 0

Toyota Moturs made a dominating position in the Global automotive industry by fine-tuning some remarkable management and production methods, which have been explained lucidly in the remarkable book, 'The Toyota Way'. A quick summary:

[From the Great Books Series. Also see The Success Manual  - Encyclopedia of Advice, which contains summaries of 100+ Most useful books.]

The 14 Principles
1. THE TOYOTA WAY:

Philosophy (Long-Term Thinking) Process (Eliminate Waste) People & Partners (Respect, Challenge & Grow Them)) Problem Solving (Continuous Improvement & Learning) Challenge Kaizen Respect & Teamwork Genchi Genbutsu Leveled Production (Heijunka) Stable & Standardized Process Visual Management Toyota Way Philosophy TPS Best Quality – Lowest Cost – Shortest lead Time – Best Safety – High Morale
* Just-in-Time
* Right Part, Right Amount,
* Right Time
* Takt Time Planning
* Continuous Flow
* Pull System
* Quick Changeover
* Integrated Logistics
* Jidoka
* (In-station Quality)
* Make Problems Visible
* Automatic Stops
* Andon
* Person-Machine separation
* Error-proofing
* In-station Quality Control
* Solve Root Cause of Problems
* (5 Why’s)
Continuous Improvement
* People & Teamwork
* Selection
* Common Goals
* Ringi Decision-making
* Cross-Trained
* Waste Reduction
* Genchi Genbutsu
* 5 Why’s
* Eyes for Waste
* Problem Solving

2. Sneaks ……. The Toyota Way can be briefly summarized through two pillars that support it : “ Continuous Improvement ” and “ Respect for People ”.
* Management’s critical role would be to motivate and engage large numbers of people to work together toward
* a common goal .
o “ Defining and explaining what the goal is, sharing a path to achieving it, motivating the people to take the
o journey with you, and assisting them by removing obstacles --- those are management’s reason for being.”
They “ designed-in quality ” and “ built-in quality ” at every step of the process, and they did it with remarkably few labor hours. There was a sense of partnership between Toyota and its suppliers … the top tier suppliers were all integrally part of the product development process. “ The key to Toyota Way and what makes Toyota stand out is not any of the individual elements … But what is important is having all the elements together as a system . It must be practiced everyday in a very consistent manner --- not in spurts” … … … Fujio Cho, President of Toyota Motor Company. Its success is derived from balancing the role of people in an organizational culture that expects and values their continuous improvements, with a technical system focused on high-value-added “flow ”. Long-term Philosophy The Right Process will produce the Right Results Add Value to the Organization by Developing your People and Partners Continuously Solving Root Problems Drives Organizational Learning

“ 4P” model of the Toyota Way ……. Philosophy (Long-Term Thinking) Process (Eliminate Waste) People & Partners (Respect, Challenge & Grow Them)) Problem Solving (Continuous Improvement & Learning) Challenge Kaizen Respect & Teamwork Genchi Genbutsu Toyota’s Terms
* Continual organizational Learning through Kaizen
* Go see for yourself to thoroughly Understand the Situation (Genchi Genbutsu )
* Make decisions slowly by Consensus, thoroughly considering all options;
* Implement Rapidly
* Grow Leaders who live the Philosophy
* Respect, develop, and challenge your People and Teams
* Respect, challenge and help your Suppliers
* Create process “flow” to surface problems
* Use pull systems to avoid over production
* Level out the workload (Heijunka)
* Stop when there is a quality problem (Jidoka)
* Standardize tasks for continuous improvement
* Use Visual Control so no problems are hidden
* Use only reliable, thoroughly tested technology.
* Base management decisions on a Long-term
* philosophy, even at the expense of short-term
* financial goals

The Toyota Production System ……. Leveled Production (Heijunka) Stable & Standardized Process Visual Management Toyota Way Philosophy
* Just-in-Time
* Right Part, Right Amount,
* Right Time
* Takt Time Planning
* Continuous Flow
* Pull System
* Quick Changeover
* Integrated Logistics
* Jidoka
* (In-station Quality)
* Make Problems Visible
* Automatic Stops
* Andon
* Person-Machine separation
* Error-proofing
* In-station Quality Control
* Solve Root Cause of Problems
* (5 Why’s)
Continuous Improvement Best Quality – Lowest Cost – Shortest lead Time – Best Safety – High Morale
* People & Teamwork
* Selection
* Common Goals
* Ringi Decision-making
* Cross-Trained
* Waste Reduction
* Genchi Genbutsu
* 5 Why’s
* Eyes for Waste
* Problem Solving

Principle 1 … Base Your Management Decisions on a Long-Term Philosophy, Even at the Expense of Shot-Term Financial Goals
* Toyota’s Starting Point in Business – “To Generate Value for the Customer, Society and the Economy”.
o A Mission Greater than Earning a Paycheck: “Do the Right Thing for the Company, its Employees,
* the Customer, and Society a Whole”.
* Do the Right Thing for the Customer.
* Building Trust with Employees.
* Do not Let Business Decisions Undermine Trust and Mutual Respect.
* Use Self-Reliance to Decide Your Own Fate.
* Toyota’s Mission Statement & Guiding Principle: TMMNA
o As an American Company, contribute to the economic growth of the community and the
o United States.
o 2. As an Independent Company, contribute to the stability and well being of team members.
o 3. As a Toyota Group Company, contribute to the overall growth of Toyota by adding value to
o our customers.
* Honor the language and spirit of the law of every nation and undertake open and fair corporate
* activities to be a good corporate citizen of the world.
* Respect the culture and customs of every nation and contribute to economic and social development
* through corporate activities in the communities.
* Dedicate ourselves to providing clean and safe products to enhance the quality of life everywhere
* through all our activities.
* Create and develop advanced technologies and provide outstanding products and services that fulfill
* the needs of customers worldwide.
* Foster a corporate culture that enhances individual creativity and teamwork value, while honoring
* mutual trust and respect between labor and management.
* Pursue growth in harmony with the global community through innovative management.
* Work with business partners in research and creation to achieve stable, long-term growth and mutual
* Benefits , while keeping ourselves open to new partnerships.

Principle 2 … Create Continuous Process Flow to Bring Problems to the Surface
* Most Business Processes are 90% Waste and 10% Value-Added Work .
o Create continuous Flow wherever applicable in Core Manufacturing & Service Processes.
* 8 Non-Value-Adding Wastes;
o Overproduction
o Waiting
o Unnecessary Transport
o Over processing
o Excess in Inventory
o Unnecessary Movement
o Defects
o Unused Employee Creativity
* Other Sources of Wastes:
o Muri - No Value-Added beyond Capability, Overburden
o Mura - Unevenness
* “ Flow ” means that “when your customer places an order, this triggers the process of obtaining raw materials needed just
o for that customer’s order. The raw material then flow immediately to supplier plants, where workers immediately fill the
o order with components, which flow immediately to a plant, where workers assemble the order, and then the completed
o order flows immediately to the customer.”
* The Heart of One-Piece Flow – Takt Time (Rhythm in German) – The rate of Customer Demand - Setting the pace of
* production and alert workers whenever they are getting ahead or behind.
BENEFITS OF ONE-PIECE FLOW
1. Builds-In Quality
2. Creates Real Flexibility
3. Creates Higher Productivity
. 4. Frees up Floor Space
5. Improves Safety
6. Improves Morale
7. Reduces Cost of Inventory

Principle 3 … Use “Pull” Systems to Avoid Overproduction
* The Principle – Customer Pull & Replenishment:
o The Toyota Way is not about Managing Inventory, it is about Eliminating It.
o Toyota Production System (TPS) is not a Zero-Inventory System. It relies on “Stores” of Materials
o that are replenished using “Pull” Systems.
o “ Kanban” – means a signal of some kind. Kanban System is used for managing and ensuring the
o flow and Production of materials in a just-in-time production system.
o Kanban System – Remarkable, Simple, Effective and Highly Visual.
* Toyota’s Kanban System: When pure flow system is not possible – process too far apart, cycle times vary
* a great deal.
* Kanban is an organized system of Inventory Buffers.
* “ The challenge is to develop a learning organization that will find ways to reduce the number of Kanban
* and thereby reduce and finally eliminate the inventory buffer”.

Principle 4 … Level Out the Workload (Heijunka)
* In the application of TPS, the first thing that must be done would be to even out or level the production. This is primarily the responsibility of Production Control or Production Management. Toyota found out that it can create the leanest operation and ultimately give customers better service and better quality by leveling out the production schedule and not always build to order.
* Comparison between unleveled and leveled schedules of production:
Unleveled Schedule Disadvantages Leveled Schedule Advantages
* Customers usually do not buy products predictably.
* There is risk of unsold goods.
* The use of resources is unbalanced.
* Placing an uneven demand on upstream processes.
* Flexibility to make what the customers want, when they
* want it.
* Reduced risk of unsold goods.
* Balanced use of labor and machines.
* Smoothed demand on upstream processes and plant
* suppliers.

BATCH PROCESSING Economies of Scale foe Each Individual Piece of Equipment MIXED-MODEL PROCESSING Leveling Customer Demand to a Predictable Sequence KEY FEATURE Large Batches of Product before Changeover MIXED-MODEL PROCESSING Elimination of Set-up Time for Changeover
* A small inventory of finished goods is often necessary to protect a supplier’s level production schedule from being jerked around b sudden spikes in demand.
* To achieve the lean benefits of continuous flow, leveling the workload is important. Eliminating Muda (Wastes) is only 1/3 rd of achieving flow. Eliminating Muri (Overburden) and Mura (Unevenness) are equally important.
* Heijunka (Leveling Workload) focuses on Muri and Mura – by leveling product volume and mix i.e. leveling the demand on people, equipment, and suppliers. Standardized work is far easier, cheaper, and faster to manage.

Principle 5 … Build a Culture of Stopping to Fix Problems, to Get Quality Right the First Time (Jidoka)
* Quality should be built-in … require a method for detecting defects when they occur and automatically stop production so an employee can fix the problem before the defect continues downstream.:
* In-station quality (preventing problems from being passed down the line) is much more effective and less costly than inspecting and repairing quality problems after the fact.
* When equipment shuts down, flags or lights, usually with accompanying alarm, are used to signal that help is needed to solve quality problem. This signaling system is called Andon .
* The Andon – is a “ fixed position line stop system ”:
o When the Andon Button is pushed or Andon Cord is pulled, light will light up but the line will continue moving.
o The Team Leader has until the vehicle moves to the next work station zone to respond! before the Andon turn Red and the line segment automatically stops.
o Team Leaders must be trained in carefully trained in standardized procedures on how to respond to Andon calls.
* The closer to one-piece flow, the quicker quality problems will surface to be addressed:
o Using countermeasures and Error-proofing (Poka-Yoke) to fix problems.
o Keep Quality Control simple and involve Team Members:
+ Four (4) Key Tools:
# Go and See
# Analyze the situation
# Use one-piece flow and andon to surface problems
# Ask “Why” 5 Times
* Building-in Quality is a Principle , not a Technology issue:
o The Andon System should be effective only when the operators followed standardized work, the Kanban System was reliably pulling materials to the work-station, workplace discipline was followed, and the Team Leader was responding to problems.

Principle 6 … Standardized Tasks are the Foundation for Continuous Improvement and Employee Empowerment
* Standardized Work consists of three elements:
o Takt Time – Time required to complete one job at the pace of customer demand.
o The sequence of doing things of sequence of processes.
o How much inventory or stock on hand the individual worker needs to have in order to accomplish the standard work.
* The Principle: Standardization is the basis for Continuous Improvement and Quality:
o It is impossible to improve any process until it is standardized (Re: Imai – Kaizen).
o The Standard Work Chart is posted outwards at the Shop floor – For Team Leaders & Group Leaders to audit the work.
o Enable those doing the work to design and build in quality by writing the standardized task procedures themselves.
* Enabling Systems are simply the Best Practice Methods, designed and improved upon with the participation of the workforce. The standards actually help people control their own work. The worker is the most valuable asset … an analyst and problem solver.
o Focus best practice methods: information on performance standards is not much use without information on best practices on achieving them.
o System should allow customization to different level of skill/experience and should guide flexible improvisation.
o Systems should help people control their own work: help them form mental models of the system.
o Systems are best practice templates to be improved.
* Standardizing Work for a New Product Launch:
o Develop a “Pilot Team” in the early planning stages: workers representing all major areas of the factory are brought together full-time to an office area where as a team they help plan launch the vehicle. They work hand-in-hand with engineering and develop the initial standardized work used when the product is first launched. Then it is turned over to the production team to improve.

Principle 6 … Standardized Tasks are the Foundation for Continuous Improvement and Employee Empowerment 5. Coercive vs. Enabling Design of systems and Standards: Coercive Systems and Procedures Enabling Systems and Procedures
* System focus on performance standards so as to highlight poor performance.
* Standardize the systems to minimize game-playing and monitoring costs.
* Systems should be designed so as to keep employees out of the control loop.
* Systems are instructions to be followed, not challenged.
* Focus on best practice methods: information on performance standards is not mush use without information on best practices for achieving them.
* Systems should allow customization to different levels of skill/experience and should guide flexible improvisation.
* Systems should help people control their own work: help them form mental models of the systems by ‘glass-box” design.
* Systems are best practice templates to be improved.
Coercive vs. Enabling Bureaucracies:
* Coercive Bureaucracy
* Rigid rule enforcement
* Extensive written rules
* & procedures
* Hierarchy Controls
* Autocratic
* Top down control
* Minimum written rules
* and procedures
* Hierarchy controls
* Enabling Bureaucracy
* Empowered employees
* Rules and procedures
* as enabling tools
* Hierarchy supports
* organizational learning
* Organic
* Empowered employees
* Minimum rules and
* procedures
* Little hierarchy
SOCIAL STRUCTURE TECHNICAL STRUCTURE Low Bureaucracy High Bureaucracy Coercive Enabling

Principle 7 … Use Visual Control So No Problems are Hidden

* The Principle - Clean It Up, Make Visual:
o 5 S Programs that comprise a series of activities for eliminating wastes that contribute to errors, defects, and injuries in the workplace.
o The 5 S’s are – Seiri (Sort) , Seiton (Straighten) , Seiso (Shine), Seiketsu (Standardize) and Shitsuke (Sustain ) :
+ Seiri – Arrange - Sort through items and keep only what is needed while disposing what is not.
+ Seiton – Orderliness – a place for everything and everything in its place.
+ Seiso – Cleanliness – the cleaning process acts as a form of inspection that exposes abnormal and pre-failure conditions that could hurt quality or cause machine failure.
+ Seiketsu – Create rules – Develop systems and procedures to maintain and monitor the first 3 S’s (Seiri, Seiton & Seiso).
+ Shitsuke – Self discipline – Maintaining a stabilized workplace is an ongoing process of continuous improvement.
* Visual Control systems are about Improving Value Added Flow: Visual Control means -
o Any communication device used in the work environment that tells at a glance how work should be done and whether it is deviating from standard.
o Refers to the design of just-in-time information of all types to ensure fast and proper execution of operations and processes.
o Integrated into the process of the value-added work, being able to look at the process, piece of equipment, inventory, or information or at worker performing a job and immediately see the standard being used to perform the task and if there is a deviation from the standard.
o Visual management charts must allow for communication and sharing.
* Keeping It Visual Through Technology and Human Systems:
o The best visual indicators are right at the work site, where they can jump out at you and clearly indicate by sound, sight, and feel the standard and any deviation from the standard.
o A well developed visual control system increases productivity, reduces defects and mistakes, helps meet deadlines, facilitates communication, improves safety, lowers costs, and generally gives the workers more control over their environment.

Principle 8 … Use Only Reliable, Thoroughly Tested Technology that Serves Your People and Processes
* The Principle – Adoption of New Technology must Support your People, Process and Values:
o New technology is introduced only after it is proven through direct experimentation with the involvement of a broad cross-section of people:
+ Analyze the impact it may have on existing processes.
+ Analyze to see if it conflicts with Toyota’s philosophies and operating principles – (1) Valuing People over Technology (2) Using consensus Decision Making (3) Operational focus on Waste Elimination.
+ The Technology must be highly visual and intuitive.
* People Do the Work, Computers Move the Information:
o IT- Tool to support the People and Processes.
o Inventory is generally a symptom of poorly controlled processes.
o Ultimately, manufacturing is about making things!
* IT in Toyota’s Product Development Process:
o A collaborative vehicle development using digital engineering.
o Taking a finely tuned development process, based on exceptionally well trained engineers and excellent technical leadership, and surgically inserted information technologies to enhance it.
o Testing and Visualization done up front in the design process, thereby avoiding this downstream rework.
o Maintaining the collaborative design process and the strong value placed on visualization of the actual situation f the design process.
* The Role of Technology – Adapting it Appropriately:
o Example:
+ Flexible Body Shops – Major Innovation that allowed multiple car bodies to b made in the same shop.
+ Using “Blue Sky System” or “Global Body Line” – The Car Body held in place by robots that can be programmed for each car body. The bodies rides on “ski lift”. The system has a programmable fixturing device that holds the parts together from the inside out & takes about ½ the space.
+ 50% fewer processes to weld the body, 70% less investment to change over the line for a new vehicle, 75% less time to go from launch to meeting quality targets.
* The acid test for new technology – lean, simple, and speedy.

Principle 9 … Grow leaders who Thoroughly Understand the Work, Live the Philosophy, and Teach it to Others
* The Principle – Growing Your Leaders Rather than Purchasing Them:
o Leaders must live and thoroughly understand the Toyota Culture day by day.
o The Critical element of the culture is Genchi Genbutsu (deeply observing the actual situation in detail).
o Leaders must demonstrate this ability and understand how work gets one at a shop floor level.
* Toyota uses the “constancy of purpose” throughout the organization, which lays the groundwork for consistent and positive leadership as well as an environment for learning.
o We build cars not Intellectuals!
o Quality First, Safety First. Extra Effort. Extra Caring.
* Toyota Leader's View of the Toyota Production System:
PEOPLE Long-Term Asset  Learned Skills Machinery Depreciates  Loses Value People Appreciate  Continue to Grow
* TECHNICAL
* Stability
* JIT
* Jidoka
* Kaizen
* Heijunka
* MANAGEMENT
* True North
* Tools to focus
* management attention
* Go and See
* Problem-solving
* Presentation skills
* Project Management
* Supportive Culture
* PHILOSOPHICAL
* Customer First
* People are most important Asset
* Kaizen
* Go and See  Focus on Floor
o Give feedback to team members and earn respect
* Efficiency Thinking
o True (vs. Apparent) Condition
o Total (vs. Individual) team involvement

Principle 9 … Grow leaders who Thoroughly Understand the Work, Live the Philosophy, and Teach it to Others
* The Chief Engineer: Critical Link to Innovation, Leadership and Customer Satisfaction:
o Example Toyota’s Product Development Matrix Organization:
o Vehicle Centers 1,2 & 3 each focus on a family of products.
o The functional group within each center, are technical specialty groups with their own GM.
o The GM controls the engineers by assigning them projects, generating their performance evaluations etc..
o The CE (Chief Engineer) controls the vehicle program and is responsible for the results.
o The CE has to depend on all the functional groups to supply the people and get the work done.
* CE – “Heavyweight Project Manager”:
o Even though perceived as having “Responsibility without Authority”, the CE is :
o Blessed by Top Executives
o Controlling the Vehicle Program
o Leading the Program
o Having Proved that he is an exceptional engineer
o Being the critical link between engineering and customer satisfaction
Center 1 Center 2 Center 3 Power train Engineering Division Program Planning Division Cost Management Division Body Engineering Division Chassis Engineering Division Vehicle Evaluation and Engineering Division Component and System Development Center Head Chief Engineer Functional General Manager TOYOTA’S PRODUCT DEVELOPMENT MATRIX ORGANIZATION
* The Common Themes of Leadership at Toyota:
o Primary Leadership Role is as Builders of a Learning Organization:
o Common Traits:
+ Focused on Long-term Purpose as a Value-Added Contributor to Society.
+ Never deviated from the Precepts of the Toyota Way DNA and lived and modeled their themselves around this for all to see.
+ Worked their way up doing the Detailed Work and continued to Go and See the Gemba.
+ Saw Problems as Opportunities to train and coach their people.
* The Leaders’ real challenge is having the long-term vision of knowing what to do , the knowledge of how to do it , and the ability to develop people so they can understand and do their job excellently.
Group Facilitator “ You are Empowered” Bureaucratic Manager “ Follow the Rules” Builder of Learning Organizations “ Here is Our Purpose and Direction, I will Guide and Coach” Task Master “ Here is what to do and how – Do It!” TOYOTA LEADERS Top-Down (Directives) Bottom-up (Development) General Management Expertise In-Depth Understanding Of Work

Principle 10 … Develop Exceptional People and Teams who Follow Your Company’s Philosophy
* The Principle – Developing Excellent Individual Work While Promoting Effective Team Work:
o Excellent balance between Individual Wok and Group Work, and between Individual Excellence and Team Effectiveness.
o The capabilities and characteristics of individual matter.
o Until Individuals understand the Toyota Way and TPS, they not in position to be empowered.
* Building culture by using a three(3)-stage process to select the best associates:
o Stage One – One year to do the hiring.
o Stage Two – Randomly select a subset to attend a job fair (opportunities for informal meetings and assessments).
o Third Stage – Random sample of those who passed the job-fair for Interviews.
o Finally – after background check, drug test, and physical exam, finalists offered a job.
+ N.B. Randomness was to ensure fairness and diversity.
* Ramping up gradually and systematically, four(4)-phase implementation process ~ 1 months period:
o Phase One – Facility operated at very low volume level to get job duties and responsibilities right.
o Phase Two – Best suppliers to ship low volume parts to the operation.
o Phase Three – Smaller suppliers were added that were not as sophisticated in their manufacturing and logistics systems.
o Phase Four – Finally high-volume suppliers brought on-lime.
* Developing Teams at Toyota – Groups have to develop over time::
o Stage 1 – Orientation – Group needs strong direction from the leader and must understand the basic mission, rules of engagement, and tools the members will use.
o Stage 2 – Dissatisfaction – Continue to need strong direction (structure) from the leader but also need a lot of social support to get through the tough social dynamics.
o Stage 3 – Integration – Group starts to develop clearer picture of the roles of various team members and begins to exert control over team processes. (Learn about roles, goals, norms, and team structure)
o Stage 4 – Production – The group puts it all together and is functioning a a high-performing team with little task-support or social support from the leader.

Principle 10 … Develop Exceptional People and Teams who Follow Your Company’s Philosophy 5. The TOYOTA ORGANIZATION (Assembly Operation), Roles and Responsibilities:

* Perform Work to Current Standard (SOP)
* Maintain 5S in their Work Area
* Perform Routine Minor Maintenance
* Look for Continuous Improvement
* Opportunities
* Support Problem Solving Small Group
* Activities
TEAM MEMBER (Associate) TEAM LEADER (Associate Leader/Line keeper) GROUP LEADER (Supervisor)
* Process Start-up and Control
* Meet Production Goals
* Respond to Andon call by Team Member
* Confirm Quality – Routine Checks
* Cover Absenteeism
* Training and Cross Training
* Work Orders for Quick Maintenance
* Insure Standardized Work is Followed
* Facilitate Small Group Activities
* On-Going Continuous Improvement Projects
* Insure Parts/Materials are Supplied to Process
* Manpower Vacation / Scheduling
* Monthly Production Planning
* Administrative: Policy, Attendance, Corrective
* Actions
* Hoshin Planning (Policy Deployment)
* Team Morale
* Confirm Routine Quality and Team Leader
* Checks
* Shift-to-shift Coordination
* Process Trials (Change in process)
* Team Member Development & Cross Training
* Report/Track Daily Production Results
* Cost Reduction Activities
* Process Improvement Projects
* Coordinate Major Maintenance
* Coordinate Support form Outside Groups
* Coordinate Work with Upstream &
* Downstream Processes
* Group Safety Performance
* Help Cover Team Leader Absence
* Coordinate Activities around Major Model
* Changes
Team Size Team Member 5 ~ 8 Team Leader 3 ~ 4 Group Leader 5 ~ 8 Assistant Manager 4 - 10 Manager PTMSB Working Group Associate Associate Leader/ Line Keeper Supervisor Executive Head Of Department

Principle 11 … Respect Your Extended Network of Partners and Suppliers by Challenging Them and Helping Them Improve
* The Principle: Find Solid Partners and Grow Together to Mutual Benefit in the Long-Term:
o Serious investment in building a network of highly capable suppliers integrated into Toyota’s extended lean enterprise i.e. grow the business together and mutually benefit in the long-term.
o Supplier development includes a series of aggressive targets and challenges to meet those stretch targets, e.g. innovation, engineering, manufacturing and overall reliability. Break down barriers among functions so everyone is working toward a common goal.
* Toyota’s Approach in Logistic Partnership:
o Cross-Docking (“Break-Bulk” Facilities): An extension of the assembly line – part of the value system that gets parts just-in-time from suppliers onto vehicles and finally to customers – i.e. one-flow system.
+ Flow-through facility, associates involved in continuous improvement, visual indicators and mistake proofing utilized to build quality & reliability, truck drivers have defined roles in picking & delivering within tight time windows including making quality checks.
o Partner – Transfreight – Cross-docking needs for Toyota:
+ Achieved JIT deliveries despite great distances in North America.
+ Costs of Transportation went down considerably.
+ Saves money on returnable containers.
+ Transfreight continually improving & reducing costs.
* Partnering with Suppliers While Maintaining Internal Capability:
o Toyota outsource 70% of the components of the vehicle, but still want to maintain internal competency even in components it outsources i.e. Concept of Self Reliance.
o Toyota will learn with suppliers, but will never transfer all the core knowledge and responsibility in any key ara to suppliers.
o Once Toyota had that internal expertise, they could selectively outsource.
+ E.g. IGBT (Insulated Gate Bipolar Transistor) for Toyota Prius Hybrid Engine.
+ E.g. Joint Venture with Matsushita - Panasonic EV Energy, develop Battery Technology.
+ E.g. Set up its own Electronics Plant instead of relying on Denso (used to be part of Toyota).
* Working with Suppliers for Mutual Learning of TPS:
o Toyota works with highly capable suppliers that are following TPS or an equivalent system:
+ Toyota needs its suppliers to be as capable as its own plants at building and delivering high quality components JIT.
+ Toyota cannot cuts costs unless suppliers cut costs.
o Methodology - “Learning by Doing” , Real Projects on the shop floor, Jishuken – Voluntary Study Groups.
* Saving “Sick” Suppliers Through TPS:
o Toyota nurses them out of their ‘sickness’ in a very holistic way.
o Developing a system of evaluating and classifying suppliers e.g.: (1) Supplier will close down (2) Supplier will shut-down Toyota Assembly Plant …………………………. (5) Exemplary TPS Supplier.
o Toyota develop a supplier improvement committee (SIC = SICK).
* Developing an Extended Learning Enterprise Means Enabling Others:
o Until relationship has stabilized to the point where the business relationship is fair, processes are stable, and expectations are clear, it is impossible to get to the higher levels of enabling systems and truly learning together as an enterprise.
Learning Enterprise Enabling System Clear Expectations Stable, Reliable Processes Fair & Honorable Business Relations Progressing Need of Satisfaction Regressing Need of Satisfaction Next Level Of Improvement Stability SUPPLY CHAIN NEED OF HIERARCHY

Principle 12 … Go and See for Yourself to Thoroughly Understand the Situation (Genchi Genbutsu)
* Genchi Genbutsu – Distinguishes the Toyota Way from other management approaches:
o You cannot be sure you really understand any parts of the business problem unless you go and see for yourself firsthand.
o Tables and Numbers may measure results, but they do not reveal the details of the actual process being followed everyday.
* The Principle: Deeply Understanding and Reporting What You See:
o Genchi – means the actual location; Genbutsu – means the actual material or products.
o Genchi Genbutsu – means ‘going to the place to see the actual situation for understanding’.
o Requires skill to analyze and understand the current situation.
o Collecting Data and Analysis will tell you if your Common Sense is Right!
* 10 Management Principles (Yamashita):
o Always keep the final target in mind.
+ Carefully plan for your final target.
+ Have a clear purpose for meetings .
o Clearly assign tasks to yourselves and others.
o Think and speak based on verified, proven information and data.
+ Go and confirm the facts for yourself.
+ You are responsible for the information you are reporting to others.
o Take full advantage of the wisdom and experiences of others to send, gather or discus information.
o Share your information with others in a timely manner
+ Always consider who will benefit from receiving the information .
o Always report, inform and consult (Hou/Reng/Sou) in a timely manner.
o Analyze and understand shortcomings in your capabilities in a measurable way.
+ Clarify the skills and knowledge that you need to further develop yourself .
o Relentlessly strive to conduct kaizen activities.
o Think “outside the box” or beyond common sense and standard rules.
o Always be mindful of protecting your safety and health. - Genchi Genbutsu
* Ohno Circle – Watch and Think For Yourself –
o The power of deep observation, ‘ what you are seeing, to question, to analyze , and to evaluate’ .
o “ Data is of course important in manufacturing, but I place the greatest emphasis on facts” … Taiichi Ohno
o Think and speak based on Personally Verified Data.
* Leaders are Not Excused from Genchi Genbutsu:
o “ How can you expect to do your job without getting your hands dirty!” … Kiichiro Toyoda
* Hourensu – Rapid Genbutsu for Executives:
o Hou (Hou Koku - to report), Ren (Ren Raku -to give updates periodically) and Sou (Sou Dan - to consult/advise).
o To have subordinates to learn how to communicate efficiently give reports on key events that happens during the day.

Principle 13 … Make Decisions Slowly by Consensus, Thoroughly Considering All Options; Implement Rapidly
* Toyota stands out as the preeminent analyst of strategy and tactics. Nothing is assumed. Everything is verified. The goal is getting it right”.
* The Principle: Thorough Consideration in Decision Making:
o How you arrive at the decision is just as important as the quality of the decision.
o Toyota’s Secret to flawless implementation of new initiatives is careful, upfront planning. Underlying the entire process of planning, problem solving, and decision making is careful attention to every detail.
o Thorough consideration in decision making includes 5 major elements:
+ Finding out what is really going on, including Genchi Genbutsu .
+ Understanding underlying causes that explain surface appearances – asking “Why” 5 Times.
+ Broadly considering alternative solutions and developing a detailed rationale for the preferred solution.
+ Building consensus within the team, including Toyota employees and outside partners.
+ Using very efficient communication vehicles to d one through four, preferably one side of one sheet of paper.
* Broadly Consider Alternative Solutions with a Set-Based Approach:
o “ Set-based Concurrent Engineering” – Toyota Engineers and Managers were trained to thin in sets of alternative solutions.
* Getting on the Same Page through Nemawashi :
o Process of “Nemawashi” – Make decisions slowly by consensus, thoroughly considering all options; implements rapidly.
o Example: Broad circulation of ideas works in the early stages of product development. Each design is meticulously analyzed and countermeasures are developed through study drawings. The completed study-drawing phase put together in a binder called the K4 (Kozokeikaku – the study drawings that collectively address the structure and integration of the vehicle).
o Uncovers the facts that if not considered could lead to a great deal of pain and backtracking further down the road.
o Gets all the parties on board and supporting the decision so any resistance is worked-out before implementing anything.
o Achieves a great deal of learning up front even before anything is even planned or implemented.
* Pre-requisites to an efficient meeting
* Clear objectives prior to the meeting.
* The right people at the meeting.
* Prepared participants.
* Effective use of visual aids.
* Separate information sharing from problem solving.
* The meeting starts and ends on time.
Decide & Announce Seek Individual Input, then Decide and Announce Seek Group Input, then Decide and Announce Group Consensus, Management Approval Group Consensus, With Full Authority Preferred Fallback Fallback Time Level of Involvement
* Decision making is highly situational
* Philosophy is to seek maximum involvement for each situation.
* CURRENT SITUATION
2. PROPOSAL 3. ANALYSIS 4. PLAN 5. IMPLEMENTATION 6. CONTROLS 7. TIMELINE Grasp The Situation TITLE Background (Existing Value, Expectation, Policy, Goal or Plan) Current Situation (Analysis of Need and Contributing Conditions) Recommendations (cost/Benefits) Implementation (Details of the Plan) Follow-up (Expected Results – When, How they will be checked) PLAN-DO-CHECK-ACT in the proposal process PLAN DO CHECK & ACT

Principle 14 … Become A Learning Organization through Relentless Reflection (Hansei) and Continuous Improvement (Kaizen)

* A Learning Organization as a place where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together .
* The Principle: Identify Root Causes and Develop Countermeasures:
o Process-oriented and invests long term in systems of people, technology, and processes that work together to achieve high customer value.
o Systems are work processes & appropriate procedures to accomplish a task with the minimum amount of time & effort.
o The Right Process will Produce the Right Results – continuous improvement (Kaizen) can only occur only after a process is stable and standardized.
o To be a learning organization, it is necessary to have stability of personnel, slow promotion, and very careful succession systems to protect the organizational knowledge base.
o The Core of Kaizen – is an attitude of self-reflection and even self-criticism, a burning desire to improve.
o The greatest sign of strength is when an individual can openly address things that did not go right, take responsibility, and propose countermeasures to prevent these things from happening again.
* Getting to the Root Cause by Asking Five (5) Times:
o Most Problems do not call for complex statistical analysis, but instead require painstaking, detailed problem solving.
o Toyota does not have a Six Sigma Program.
o True problem solving requires “ identifying ” root-cause rather than source, the root-cause hidden behind the source.
o To keep asking until the root cause(s) are determined.
* Hansei : Responsibility, Self Reflection, and Organizational Learning:
o Hansei is a mindset, an attitude.
o Hansei and Kaizen go hand in hand.
o Hansei is the incubator for change – overcoming areas of weaknesses, with sincerity.
o Obligatory opportunity to improve NOT “Obligatory Negative”.
* Initial Problem Perception
* (large, Vague, Complicated Problem)
2. Clarify the Problem The “Real” Problem 3. Locate Area/Point of Cause POC Grasp the Situation Cause Investigation Why? Why? Why? Why? Why? Basic Cause and Effect Investigation 4. Five (5) Why? Investigation Of Root Cause Root Cause 5. Countermeasure 6. Evaluate 7. Standardize
* 4. Process vs. Results Orientation – The Role of Metrics::
o There are at least three (3) types of measures at Toyota:
+ Global Performance Measures – How is the Company Doing?
# Uses Financial, Quality and Safety Measures .
+ Operational Performance Measures – How is the Plant or Department Doing?
# Painstakingly track progress on key metrics and compare with aggressive targets.
# The metrics tend be specific to a process .
+ Stretch Improvement Metrics – How he Business Unit or Work Group Doing?
# Sets stretch goals for the Corporation and translated to business units etc.
# Tracking at the work group and project level.
# The measures are very particular to what the teams are trying to accomplish .
* 5. Hoshin Kanri – Policy Deployment - Directing and Motivating Organizational Learning:
o The Key to Organizational Learning is to Align Objectives of all Employees toward Common Goals.
o Simply setting Specific, Measurable, Challenging Goals and then measuring progress is highly motivating.



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