Chapter 1 - An Introduction to Managerial
Durward K. Sobek
and Art Smalley, All Rights Reserved
Exceprt of pages
Toyota Motor Corporation is arguably the
company of the modern era. More than a
dozen books have been written about the company, its management system
philosophy, and its approaches to various business and operational
problems. One of the latest books, The Toyota Way by Jeffrey Liker, became
an immediate best seller, indicating the instant draw the Toyota name has
among the business community.
A search on Business Source Premier turned up over 3,000 articles
over a ten year period with “Toyota”
in the title. And this does not include
the hundreds of volumes and countless articles on lean manufacturing or
aspects thereof (e.g., 5S, kanban, poka yoke) that are largely based on
and practices developed by Toyota.
Such attention is well deserved. As of the writing of this book, Toyota had
just surpassed Ford Motor Company in number of vehicles sold annually
United States, having already beat out Ford in global sales several
prior; and it is poised to topple General Motors to become the largest
manufacturer in the world. In 2005, Toyota produced
vehicle approximately every four seconds somewhere in the world, while
same time, setting the benchmark for product quality.
perennially wins national and international acclaim in all of the major
quality ratings. For instance, Toyota’s flagship
nameplate has earned the top spot in JD Power’s Initial Quality Survey
10 years running. On top of all this, Toyota is
fact, very profitable. Toyota set record profits 2003, 2004,
2005 earning over $10 billion annually even while their North American
competitors saw significant drops in earnings and losses.
But other companies have also been
successful. What makes Toyota intriguing
is that its success has
been sustained over an extremely long time period by most business
standards. From the ashes of World War
II, Toyota initially struggled to
solvency, but rose over the following decades to become Japan’s
leading manufacturer. As it grew, Toyota
began seeking markets outside of Japan,
and by the early 1980’s Toyota was well
established in the US
market, Toyota has grown each year for the
last 50 years,
and has not experienced a loss in net earnings since the early 1950’s. This is standout performance in an industry
characterized by cyclical ups and downs.
is also intriguing because its business and management philosophy is
its approach to manufacturing exceptional and counterintuitive, its
understanding of operational dynamics breathtakingly insightful. Toyota
is perhaps most well-known for its production system, first documented
detailed 80-page handbook published internally in Japanese in 1973. The first English publication on it appeared
1977 by Sugimori, et al., as a high level summary.
However, it wasn’t until the early 1990’s
that the uniqueness of Toyota’s
system became well-known with the publication of the book The
Machine that Changed the World.
In it, the MIT professors detail the strikingly robust,
efficient systems they observed in Japan, and dubbed it “lean
for their ability to design, produce, and deliver higher quality
volume with a fraction of the resources of their North American and
competitors. The manufacturing community
learned later that the model of lean manufacturing was the Toyota
open in sharing its system with others, even establishing the Toyota Supplier Support
to provide consulting assistance to US companies wanting to operate
efficiently, at no cost to the client.
More recently, we’ve come to understand that Toyota’s
extends into many other areas as well, including product development
logistics. Cottage industries are
sprouting in many arenas to provide assistance and training in lean
concepts, and putting them into practice.
Lean applications that were once targeted primarily at
plants are rapidly finding their way into other sectors of the economy,
including engineering, financial services, transportation and
healthcare, food and beverage services, and government (including
operations). Toyota’s impact is being felt well
PDCA: Heart of the Toyota Way
The lean model is dramatically altering
the face of
manufacturing in the developed world.
Inventories are dropping, lead times are shortening,
quality is holding
steady or increasing, and prices are falling.
We expect this trend will follow in other sectors, just as
it has in
manufacturing. Yet, with all that we
know, with all that has been published, with all the resources that are
available, no American companies to these authors’ knowledge have
level of efficiency and effectiveness.
In fact, Toyota is
building factories in
the U.S. even as
most of U.S.
manufacturing is trying to move operations overseas or outsource them
altogether. Why don’t we see more
companies emulating Toyota’s
While there may be many explanations,
perhaps the most
crucial one is that most (perhaps all?) of us do not understand, or if
understand do not appreciate, what is at the heart of the Toyota business,
manufacturing approach. We tend to see
the intricate set of tools as the system.
But while they are important to the system as currently
are at the surface, not the heart. In
fact, Taiichi Ohno, the father of the modern Toyota
production system, said that the tools are just countermeasures to
problems that Toyota
has faced, and that they will only be used until better countermeasures
found. In other words, the interconnected
web of tools and practices we know as lean manufacturing are the
outcomes of a
deeper set of processes. These deeper
processes, we argue, are at the heart of Toyota’s