Wednesday, April 14, 2004

Professor looks inside 'The Toyota Way'

An enduring success story has lessons for U.S. firms

Victoria Barber-Emery
Enquirer contributor

Toyota made $8.13 billion last year - larger than the combined earnings of General Motors, Chrysler and Ford and the biggest annual profit of any automaker in at least a decade.

And while stock prices for the Big Three were falling last year, Toyota's shares increased 24 percent over 2002.

Toyota's success story is not new, but it is enduring. University of Michigan professor Jeffrey Liker says American companies can learn from Toyota's business practices to speed up their production, improve quality and cut costs.

Liker, who teaches industrial and operations engineering and is co-founder and director of the Japan Technology Management Program at Michigan, has written a book, The Toyota Way: 14 Management Principles from the World's Greatest Manufacturer.

 What: Jeffrey Liker, author of The Toyota Way
 When: Thursday, 8 to 10 a.m.
 What: NKU METS Center, Erlanger.
 Registration: 579-3111 or
 Cost: Members* ($49), nonmembers ($98). Price includes copy of the book.
* Members of Greater Cincinnati Chamber of Commerce, Northern Kentucky Chamber of Commerce or TechSolve
Liker will speak about the Toyota Way on Thursday at Northern Kentucky University's METS Center for Corporate Learning.

What is the "Toyota Way" and how does it differ from lean production or the Toyota Production System (TPS)?

What people are referring to when they say the TPS is a set of tools and techniques designed to create a better flow of products or services through their operations, speed up lead time, reduce labor and increase productivity. The TPS is really just a special case of the broader management philosophy of Toyota. The same principles that lead the TPS also lead how they run their sales operation, product development processes and research.

Every aspect of Toyota is based on the same underlying principles and that's what the Toyota Way book is about - the underlying principles.

One of the tools of the TPS is one-piece flow. How does that work to improve operations?

One-piece flow is having one piece at a time move through your operation without delay, without sitting in inventory. It's just-in-time management practice. For example, it's creating a cell. Instead of having a lathe in one part of the building, a stamping press in another part and an assembly operation in another part, you bring them together right next to each other.

The product moves from machine to machine instead of stopping, sitting in inventory, being moved and having a lot of waste in the process. It's the concept of waste in any operation that doesn't add value to the customer. That's very seductive and interesting to American managers, particularly now, when we've been through this recession. ... There is a huge amount of pressure to cut labor costs. There is also some pressure to reduce lead time because customers are expecting built-to-order and fast lead times. That's the output of the Toyota Production System.

You say U.S. companies are mainly focusing on the tools of lean production, not the underlying principles. How does a company use the tools to implement the Toyota Way philosophy?

For example, what makes a cell is not that you've moved pieces of equipment close together. It's the people in the cell who are continuously improving the process, following standardized work, improving the standardized work, following the kanban system (where every step in the process signals to the previous step when its parts need to be replenished), using the kanban system to reduce inventory.

The key to a cell is the people in the cell and their continuous improvement process. Toyota works very hard at creating an environment that fosters continuous improvement and the cell helps to foster continuous improvement. The system forces employees to solve problems. It forces problems to surface. At Toyota, either they solve the problem or they stop production. That's the part that is missing from most companies' understanding of the TPS. It's a system designed to support people who are continuously improving and not a system designed simply for short-term cost reduction and productivity improvement.

How can the service industry benefit from the Toyota Way?

What I say in the book is that you need to start someplace. You can't start with cultural change, so the best place to start is with technical change. Use the basic tools of the TPS to improve processes, to show results and to get people excited. From that, expand to other areas and other applications. At some point, people will want to learn about the thinking behind lean instead of just the tools.

Fidelity Investments has been using it for parts of their operation where they respond to customers and gather together information for customers. They are reporting fantastic results.

What is the most important principle of the Toyota Way?

I emphasize to do the right things for the long term even at the expense of short-term financial consideration.

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