Wednesday, September 9, 2015

Toyota Production System - Origin and Development - Taiichi Ohno

Toyota Production System - 2015 Reading by KVSS Narayana Rao

1. Paper by Sugimori in 1977 in IJPR

Mutagenization of Toyota Production System: The Story of Hyundai Motor Company
Byoung-Hoon Lee†, Hyung-Je Jo‡
† Department of Sociology, Chung-Ang University, 221 Heuksuk-dong, Dongjak-gu, Seoul, 156-751, South Korea.
‡ Department of Sociology, Ulsan University

The Contradictions That Drive Toyota’s Success
Hirotaka Takeuchi, Emi Osono, and Norihiko Shimizu
Hirotaka Takeuchi ( is a professor at Harvard Business School. They are the authors of The Knowledge-Creating Company (Oxford, 1995).
Emi Osono ( is an associate professor;
and Norihiko Shimizu ( is a visiting professor at Hitotsubashi University’s Graduate School of International Corporate Strategy in Tokyo. 
This article is adapted from their book Extreme Toyota: Radical Contradictions That Drive Success at the World’s Best Manufacturer, John Wiley & Sons.


Summary of What Taiichi Ohno Shared in His Book

I. Starting From Need

"Catch Up With America" Toyoda Kiichiro (1894-1952)

15 August 1945 . Japan lost the war. Toyoda Kiichiro, President of theToyota Motor Company said, "Catch up with America in three years. Otherwise, the automobile industry of Japan will not survive"


The basis of the Toyota production system is the absolute elimination of waste. The two pillars needed to support the system are:

Just in time
Autonomation - Intelligent machine that does not produce defect and also stops on it own. Also intelligent operator that do not produce defective parts and investigate and remove the root cause whenever a defective part is produced.

Just in time system eliminates one of the seven wastes specified by Ohno. In an assembly flow process, the right parts needed reach the appropriate place at the time they are needed, inventories can be reduced drastically even up to zero. But to reach the JIT ideal, many existing conventional management methods have to be changed.

Using a Common-Sense Idea

The common sense idea is making only those components demanded or used by the downstream process.

Ohno said, I am fond of thinking about a problem over and over.  The normal planning and production process is for the component producer to produce as per plan and keep it inventory for the assembly department to draw when needed. But Ohno changed this method. Assembly department will go and take what they want and component department has to replenish that component only. So component department has no independent plan. Only assembly department has the plan. Every link in the production flow process or chain is connected with this method and synchronized. With this practice, the management work force is reduced drastically. This information system is given the name kanban.

Give the Machine Intelligence

At Toyota,  machines automated along with an automatic stopping device in case of a problem
 are utilized. In this way, human intelligence is given to machines. The machine stops in case of a problem and the management will come to know of it. Expanding the rule, even operators are asked to stop the flow, if there is a problem. Rapid counter measures are taken to prevent recurrence of a problem.

The Power of Individual Skill and Teamwork

A champion team must have good teamwork and people with individual skill. Likewise autonomation is individual machine skill and JIT is teamwork.

Cost Reduction is the Goal

Frequently we use the word "efficiency" when talking about production, management, and business. "Efficiency" means cost reduction. At Toyota, profit can be obtained only by reducing costs.  We cannot set prices based on our costs.  Consumer sets the price and if the manufacturer sets a higher price due to his high manufacturing cost, the consumer will simply turn away. Cost reduction has to be the goal of manufacturers. The management has to develop human resources ability to its fullest capacity to best enhance creativity, and fruitfulness, to utilize facilities and machines well, and to eliminate all waste.

The Illusion of Japanese Industry

Japanese industry believed in mass production. Till 1973 oil crisis, Japanese manufacturers had the illusion that this system fits their needs

Establishing a Production Flow

Establishing production flow in machine shop was difficult. But in 1947, Ohno arranged machines in a flow order and tried having one worker operate three or four machines (different machines). Even though working time did not go up, operators did not like the new system. Also Ohno wrote, that many adjustments that an operator has to make to machine created difficulties for the operators.  Hence, Ohno said he became patient to implement the system even though he was convinced that the direction was right.

Production Leveling

We got the idea that we should spread production evenly throughout the workday.  We wanted to get away from having to produce everything around the end of the month.

In the Beginning There was Need.

The key to progress in production improvement, I feel, is letting the plant people feel the need.
Opportunities to take care of the needs are always there. Once a need if felt, we just have to drive ourselves to find the practical opportunities that satisfy the needs.

A Revolution in Consciousness Is Indispensable

A person in business may feel uneasy about survival in this competitive society without keeping some inventories of raw materials, work-in-progress, and products. But Ohno says a revolution in consciousness is needed to realize that overproduction and the consequent inventory is a waste that has to be eliminated rather than accumulated.

2. Evolution of the Toyota Production System

Repeating Why Five Times

By asking why five times and answering it each time, we can get to the real cause of the problem, which is often behind behind more visible symptoms.

May be we can interpret it as  prevention - appraisal - failure model. We see failure. We need to know ways to prevent the event very early in the event sequence.

Complete Analysis of Wastes

Improving efficiency makes sense only when it is tied to cost reduction. The efficiency of each operator has to be improved, each production line has to be improved and efficiency of the entire plant has to be improved due to them.

       Waste of overproduction
       Waste of time on hand (waiting)
       Waste in transportation
       Waste in processing itself
       Waste of stock on hand (inventory)
       Waste of Movement
       Waste of making defective products

Ohno made the statement that eliminating these seven wastes completely can improve the operating efficiency by a large margin. To eliminate these wastes, we must make only the quantity needed, thereby releasing extra manpower. Management has to identify excess manpower and utilize it effectively in other activities. Eliminating wasteful and meaningless jobs and creating useful jobs enhances the value of work for workers.

My Plant-First Principle

A proper work procedure cannot be written from a desk. It must be tried and revised many times in the production plant. Production managers have to be in the plant which is a major source of information.

Writing the Standard Work Sheet Yourself

Standard work sheet is basis for all improvements in Toyota production system. Improving machining processes, improving tools, improving transportation processes, and optimizing the inventory, rearranging machines, all such things are implemented through standard work sheets only. The job of the field supervisor, section chief or group foreman is to train workers in standard work. The trainer must actually take the hand of the worker and teach them. Workers of a team also help their team members.

Teamwork is Everything

Team work is essential in manufacturing also like many of the sports. Assigning responsibility to individuals is not sufficient. Teamwork is essential.

The Skill of Passing the Baton
The work area is like track relay. There is a wide area in which baton can be passed.
       Mutual Assistance Campaign

An Idea from the U.S. Supermarket

The communication system of Toyota is Kanban and Ohno got the idea for it from watching the transactions in Supermarkets of USA. At supermarkets buyers buy what they need.  Supermarkets have to facilitate it.

The idea of supermarket was implemented in Toyota and to avoid a situation wherein large quantity of a component is demanded suddenly, production leveling was also introduced.

What is Kanban?

         Kanban is a method for communicating production and use related messages among the plant personnel. Its most frequently used form is a piece of paper contained in a rectangular vinyl envelope. It contains 1. pickup information 2. transfer information and production information.  The kanban method is used for information flow vertically and laterally within Toyota itself and between Toyota and its supply partners.

Kanban is autonomic nerve of the production line.

(The word Kanban literally means visible record).

Incorrect Use of Kanban Causes Problems

Incorrect use of Kanban system causes problems. Close supervision of the kanban rules is required to derive best results from it.

1. An assembly process (more generally later process) can pick up items only in the quantity specified in the kanban from the earlier process. So the quantity the assembly process can pick up at a time is specified in the kanban system.
2. Earlier processes produce items in the quantity specified in the kanban which is provided by the later process after withdrawing the item from stocks of earlier process.
3. No items are withdrawn or transported or produced without a kanban indicating it.
4. All items have to move with an attached kanban.
5. Defective items cannot be sent ahead from any processing station. The assembly line can be stopped if there are no defect-free components or assembly in process. But a defective item cannot move forward.
6. Reducing the batch quantities indicated in the Kanban would make the system more sensitive and makes the system more synchronized.

The Talent and Courage to Rethink What We Call Common Sense

Productivity improvement ideas may come but implementing them requires understanding by top management. The ideas when they defy the present conventional thinking or common sense, requires much more understanding the by the top management and the greater the commitment of top management, the more successful will be the implementation.

Ohno wrote that he came up with many revolutionary ideas and implemented them. They were sometimes regarded as high handed. But Toyota's top management watched the situation quietly and allowed Ohno to implement them.

In 1963 only JIT was extended to outside suppliers. Till that only internal production was handled on JIT basis.

Establishing the Flow is the Basic Condition

Toyota helped its suppliers or cooperating firms to set up flow systems first. Then Kanban system was introduced.

Kanban is the communication tool for implementing or realizing JIT. This tool works well when all the supporting processes are flow processes. So flow process is a basic condition for realizing JIT through Kanban communication system.  The other important conditions are levelled production (eliminating surprise withdrawals of components) and working using standard work methods

Use Your Authority to Encourage Them,

Ohno said his ideas were not understood and hence not used initially by many. But he applied them in his department and when he was given more departments to manage, or was shifted to other departments, he implemented them there also, till Kanban became a company wide practice.

Mountains Should be Low and Valleys Should be Shallow

There must be efforts to level the production during the year. The mountains should be low and valleys should be shallow as much as possible and sales department has to strive for more uniform sales.

Challenge to Production Leveling

TPS works for production leveling during the year, the month and even a day. If 250 sedans, 125 hardtops, and 125 wagons are made daily, in assembly there are done in the sequence One sedan, one hard top, one sedan and then wagon etc. That gives a lot size of one. But lot size of one was not achieved overnight in various shops. In a die-press, in 1940 changing the die took to two or three hours. With such a die changing time, one cannot make small lots. So a decision was taken to make efforts to decrease the die changing times. During 1950s, the die change time went down to one hour. Then it was further reduced to 15 minutes. By late 1960s, the die changing time was drastically reduced to 3 minutes.

The challenge to production leveling and small lots was high set up times. The need for quick die changes was generated or identified and steps were taken to understand the issue and develop a solution.  This problem was not attempted earlier. To do this, initial solutions were developed and the workers were trained. But subsequently, the enthusiasm spread and everybody chipped in with suggestions and method improved beyond the initial description. The system became the product of the effort of large number of people.

Product Leveling and Market Diversification

Ohno emphasized that production leveling (small batch quantity) is much more advantageous than the planned mass production system (larger batch quantity) in responding to the diverse demands especially of the automobile market.

Product leveling or small batches is more advantageous to respond to the market diversification. But still, leveling becomes more difficult as diversification develops. Toyota copes up with this problem well enough and keeps market diversification and production leveling in harmony.  In this endeavor, it is important to avoid the use of dedicated facilities and equipment and also equipment that has very general utility. It is important to put in effort and develop specialized, and yet versatile production processes through use of machines and jigs that can handle minimal quantities (Lot sizes of one). It is difficult but we must utilize all available knowledge to avoid undermining the benefits of mass production.

Kanban Accelerates Improvements

Carrying Carts as Kanban

The Elastic Nature of Kanban

3. Further Development

An Autonomic Nervous System in the Business Organization

Ohno says that human body has autonomic nerves that work as instant reflux to certain external stimuli and motor nerves that work under the command of the brain.

Similar to that in TPS, worker make some decisions without the involvement of production control or engineering departments. Production control and engineering departments are the brain of the organization.

In TPS workers stop the plant when problem occurs, decide the sequence to follow in making parts and also decide when overtime is necessary. They need not involve brain in reacting to some small changes in plans.

Provide Necessary Information When Needed

Computers should not be bought and used indiscriminately. It should not lead to higher costs. Processing customer orders and information on market needs and wants by computers can be very effective. But  kanban communication system is more effective in production communication.

The Toyota Style Information System

Toyota does production planning like other companies.  It has an annual plan, say for instance making 2 million cars in the year.  Next, there is a monthly plan, announced a month ahead. Based on the monthly plan daily production schedule is established and this is based on production leveling. Each production line is informed of the daily production quantity. But the daily sequence schedule (sequence of models and color) is sent to only one place - the final assembly line.

The production order for a specific car is issued to the process 1 of the assembly line. This production order will have all the information needed for its production and the workers in the following assembly  processes can tell which parts to use by at the car this  production order attached to car. Workers in the subprocesses can know what to do as soon as they see the car in assembly at the first stage. If needed they are sent the information directly.  Toyota makes sure the right information reaches the operators at the right time by letting the products being produced carry the information needed to assemble them.

Fine Adjustment

To cope with a constantly fluctuating market, the production line must be able to respond to schedule changes.  One day, the line may make four Car A's and six Car B's. But on another day, the ratio might turn out be the reverse - six car A's and four car B's. Such reversed ratios are followed the production line as per the information carried by the Kanban

Coping with Changes

Fine adjustment also means that mistakes are corrected immediately.

What Is True Economy?

True economy is tied directly to the survival of business. In Toyota production system, economy or efficiency is thought in terms of manpower reduction and cost reduction for making one car. Manpower reduction is a means for cost reduction, which the most critical condition for the growth of the business and its survival. The criterion for all decision making in Toyota is cost reduction.

Many improvement ideas are to be generated and each idea has to be thorougly investigated. The cost of improvement should not be more than the cost reduction. Unless, the judgment is made carefully, cost increasing improvements may be undertaken.

At Toyota, we still use many old machines, by maintaining them properly and daily, improving work methods and making layout changes. A layout must make worker activities easy and should not impede production flow.

Re-Examining the Wrongs of Waste

TPS is a method to thoroughly eliminate waste and enhance productivity. Waste refers to all activities of production that increase cost but not add any value (No increase in price takes place due to them). For example, excess people, inventory, and equipment.

The primary waste of excess people, inventory and equipment give rise to secondary wastes.  Complete understanding of waste is essential to implement TPS successfully.

Generate  Excess Capacity

If excess capacity is there, we can use it for various purposes. At Toyota, through continuous improvement, we create excess capacity first and then use it profitably.

The Significance of Understanding

Ohno emphasize the importance of thoroughly understanding production and improvement of production methods and organization and the process of manpower reduction and cost reduction.

Understanding needs an approach to examine an objective positively and comprehend its nature. Careful inspection of a production area reveals waste and scope for improvement.  Only a very close observation reveals waste and work. There are work movements which are not processing, and there are processing activities which are a waste. Manpower reduction means raising the ratio value added processing activities to 100 percent of the working time.

Utilizing the Full Work System

All sources of waste have to be detected and crushed. Waste of overproduction is eliminated in TPS by strictly adhering to standard inventory. If the standard inventory is specified as 5, on a day when it becomes 3 only 2 are produced. On a day when it becomes 4 only one is produced. We call it a full work system, when all standard inventories are replenished in a day. We do not want any overproduction in a day.

Tact Time

(Do Not Make a False Show)

Tact is the length of time, in minutes and seconds, allowed by the customer demand to make one piece of the product. Tact is obtained by dividing the operable time per day (of the machine) by the required number of pieces per day.  Operable rate in TPS refers to the time machine is available for production in a day. The ideal operable rate is 100 per cent. To achieve this, maintenance has to be regular to prevent breakdowns and setup times are to be reduced. Operating rate refers to the production per day.

At Toyota, improvements increase the production quantity per day from a group of workers. But, if excess production is not required as per demand, the number of workers are reduced from the team and only required production is made. Unnecessarily producing excess is no efficiency.

Required Numbers Are All-Important

For each production line, numbers or quantity required by the market is important. In Toyota, we do not produce extra above the required quantity in any line. The excess manpower is transferred to other lines where needed. The required number is adhered to in a disciplined way.

The Tortoise and the Hare

At Toyota we produce according to the needs of the market at slow or fast rate everyday. It is the way of tortoise. We do not run very fast some days and then take rest on other days like a hare.

Take Good Care of Old Equipment

Ohno says, the expertise of a worker increases overtime. But in case of machine, the depreciation of the machines is the popular idea. If machines are poorly maintained and driven close to death, enormous costs are incurred in replacement.  Ohno says, with adequate maintenance, machines will have a longer life.

Look Straight at the Reality

When estimating future business, Ohno recommends that one must be realistic and be ready for instant declines in business.

0.1 Worker is Still One Worker

The savings that come from automation should result in saving a full worker. Then only automation will give cost reduction. Ohno says at the design stage of the production system itself, fewer workers are to be employed. One should not employ more workers initially and then remove them when not needed.

Ohno, in this point also stresses that, they form teams of workers and do not allow only one worker to work in isolation.

Management by Ninjutsu

Management by Ninjutsu means acquiring management skills by training.

In an Art Form, Action is Required
An engineer is an artist. Art requires action not speaking.

Profit Making Industrial Engineering at Toyota

Advocating Profit-Making Industrial Engineering

Surviving the Slow-Growth Economy

4. Genealogy of the Toyota Production System

This chapter gives many passages from the thoughts and sayings of Toyota Sakichi and Toyoda Kiichiro.

Toyoda Kiichiro once told Toyoda Eiji that the best way to work in an automobile assembly plant would to have all parts for assembly at side of the line just in time for their use. The words "just-in-time" attracted many managers of Toyota and Ohno was also attracted by those words.

Taiichi Ohno had experience of cost reduction at Toyota Spinning and Weaving also. The company was implementing cost reduction measures  to catch up and surpass  Lancashire and Yorkshire companies. Toyoda Sakichi had world class view. Toyoda Kiichiro also had world class view. In the two pillars of TPS, autonomation came from Toyoda Sakichi and JIT came from Toyoda Kiichiro.

Toyoda Sakichi said that he observed a grand mother hand weaving for a full day and developed interest in developing a machine for it. Ohno likes that idea of observing on the shop floor to understand things. He wrote "Stand on the shop floor all day and watch - you will eventually discover what has to be done."

Toyoda Kiichiro visisted America and he must have thought about how surpass America's highly developed automobile production system and utter the idea of JIT.

Toyoda Sakichi talked of inventions made by Japanese efforts, knowledge and intellect.He made 100 inventions with patents.

A Global World Around Us

Two Extraordinary Characters

Learning from the Unyielding Spirit

I believe just-in-time was Toyoda Kiichiro's dying wish  - Ohno

Toyotaism with a Scientific and Rational Nature

Provide Good Equipment Even If the Factory Is Simple

Pursuity of a Japanese-Style Production Technique

Making Products That Have Value

Toyoda Kiichiro recognized that the market always demands reasonably priced products.  He wrote "We know our cars will not sell unless they are cheaper than foreign models. "We might manage to sell 50 to 100 cars per month by appealing to patriotism. But selling 200 or 500 cars per month would be difficult. In the end, prices must be competitive."

Can we actually produce economical cars domestically? Cars with proper materials and proper quality?

A Chess Player's View

In Search of Something Japanese

Witnessing a Dialectic Evolution

Toyoda Kiichiro  " we shall learn production techniques from the American method of mass production. But we will not copy it as is. We shall use our own research and creativity to develop a production method that suits our own country's situation."

I believe this was the origin of Toyoda Kiichiro's idea of just-in-time.

5. The True Intention of the Ford System

The Ford System and the Toyota System

Ohno acknowledges - Henry Ford without dispute created the automobile production system. Toyota system uses the flow system developed by Ford. But the difference is that at Ford they were concerned about warehousing the parts and moving the chassis past the warehouse. Toyota eliminated the warehouse.

Small Lot Sizes and Quick Setup

The American automobile business has continuously shown that planned mass production has the greatest effect on cost reduction. The Toyota system takes the reverse course. The slogan is "small lot sizes and quick setups." Toyota system works on the premise of totally eliminating the overproduction generated by inventory and costs related to workers, land, and facilitates needed for managing inventory.

Toyota system works on the premise of totally eliminating the overproduction generated by inventory and costs related to workers, land, and facilities needed for managing inventory.

Rapid changeovers are an absolute requirement for the Toyota Production System. Teaching workers to reduce lot sizes and setup times took repeated on-the-job training.

The Foresight of Henry Ford

Ford said what we do have to bother about is the waste of human labor.  Material in our factory represented labor. When we are wasting material we are wasting labor of some body. We will use material more carefully if we think of it as labour.  Our studies and investigations up to date have resulted in the saving of 80,000,000 pounds of steel a year and this amounts to about 3 million dollars a year.

Standard are Something to Set Up Yourself

Prevention Is Better than Healing

Toyota's strength does not come from its healing processes - it comes from preventive maintenance.

Is There a Ford after Ford?

Ohno said "I think the TPS can be applied in America where the market for many types in large quantities is there."

Toyota has learned a lot from the Ford system.

Inverse Conception and Business Spirit

Is cotton the best material we can use here?  (in seats) As an answer to this question Ford came up with flax and methods to handle it mechanically. Ohno said, "I was intrigued by Ford's question. Is cotton the best material we can use here?"  As Ford pointed out, people follow tradition. This might be acceptable in private life, but in industry, outdated customs must be eliminated. This process of aking why represents Ford's business spirit.  Ohno said reading Ford shows many such brilliant inverse conceptions.

Getting Away from Quantity and Speed

Is efficiency in production systems wrecking all the finer things in life?

Efficiency is merely doing the work in the best way you know rather than in the worst way. It is the taking of a trunk up a hill on a truck rather than on one's back. It is training of the worker and the giving to him of power so that he may earn more and have more and live more comfortably.

6. Surviving the Low-Growth Period

The System Raised in the High-Growth Period

Raising Productivity during Low Growth

Learning from the Flexibility of Ancient People

Important Terms Used to Describe Toyota Production System




Baton Passing Zone

Do NOt Mkae Isolated Islands

Five Why's



Labor Saving to Worker Saving to Reducing Number of Workers

Moving vs. Working

Multi-Process Operation System

Operating Rate and Operable Rate

Production Leveling

Profit-Making Industrial Engineering

Real Cause

Required Numbers Equal Production Quantity

Small Lot Sizes and Quick Setups

Standard Work Procedures

Stopping the Line

Tact Time

Toyota Production System

Visual Control (Management by Sight)

Waste Recognition and Elimination

Work Flow and Work Forced to Flow

Work Improvement vs. Equipment Improvement
Work productivity improvement is productivity improvement using the existing equipment. Only tools, jigs and fixtures are introduced as required in work productivity improvement.
If equipment improvement comes first, manufacturing processes will never be improved.

Shigeo Shingo -  Study of Toyota Production System from Industrial Engineering Point of View." - Summary

Shigeo Shingo, the famous industrial engineer from Japan, taught training programmes in Toyota Motors and also gave consultancy services. Based on Taiichi Ohno's book on Toyota Production System, Shingo gave further details of the system in the a book titiled "Study of Toyota Production System from Industrial Engineering Point of View."

You can read the summary of the books in these two parts.

Updated 9 Sep, 5 Sep 2015, 30 Nov 2013

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