Toyota’s “lean production” system is the blueprint for almost every other type of manufacturing, as its painstaking attention to detail, aggressive pursuit of perfection and self-assured marketing techniques has made Toyota the world’s largest car firm.
Over the past two decades Toyota have set the standard in manufacturing and not just in the automotive industry. The Japanese giant’s “lean production” system is also the blueprint for almost every other type of manufacturing, as its painstaking attention to detail, aggressive pursuit of perfection and self-assured marketing techniques has made Toyota the world’s largest car firm.
You won’t find a single car-maker who hasn’t copied Toyota’s manufacturing and supply chain management, so it comes as no surprise that when the company was hit by a devastating series of safety recalls in February, its competitors refrained from basking in its failings and instead returned to their shop floors fully aware that the same could happen to them.
Toyota successfully manufactured its own downfall via a number of practices that were far removed from the well established processes that made them the market leader. In a relentless pursuit of growth, Toyota dropped the ball as it began to push the lean production model beyond its limits and engineering quality ultimately suffered as a result.
As Toyota boss Akio Toyoda himself put it in his testimony to a US congressional panel, “Toyota has, for the past few years, been expanding its business rapidly. Quite frankly, I fear the pace at which we have grown may have been too quick.”
Weak working relationships
In 2002, Toyota set itself the goal of increasing its global market share from 11 percent to 15 percent, a goal that was driven purely by “ego”, according to James Womack, one of the authors of The Machine that Changed the World.
The automotive manufacturing industry is made up of a complex web of original equipment manufacturers or OEMs (car-makers such as Toyota), then first-, second- and third-tier suppliers. As you move away from the OEMs at the centre down to the second- and third-tiers, working relationships become less and less established and the OEM’s working philosophy becomes almost meaningless.
Toyota revolutionised the industry by streamlining its supply chain and reducing the number of tiered component manufacturers thus generating closer working relationships and improving on quality. But as Toyota grew the company started to forget what they already knew – the “three nevers”.
According to Paul Ingrassia, an automotive expert who has studied Toyota extensively, the Japanese car-maker neglected their philosophy to “never build … a new product in a new factory with a new workforce.” These “three nevers” offer a useful insight into how organizations must combine “knowing” with their “growing” if they are to succeed in a global marketplace.
Priorities became “confused”
Toyota appeared to become obsessed with growing even more than protecting its market position as world leader. Mr. Toyoda himself admits that because of this his company’s priorities became “confused”.
“Toyota’s priority has traditionally been the following: First, Safety; Second, Quality; and Third, Volume…These became confused, and we were not able to stop, think, and make improvements as much as we were able to before, and our basic stance to listen to customers’ voices to make better products has weakened somewhat.”
Basically, the company and its people could not keep up with the pace at which the company was trying to grow.
The technological failures at Toyota were born from a failure in culture. Rapid expansion, strained engineering resources and a centralized corporate structure put stress on Toyota’s established and widely emulated corporate discipline.
To respond more effectively to future safety and quality problems, Toyota must learn to trust non-Japanese leaders, delegate more authority to them and decentralize decision-making, this is according to people who have actually worked with and for the Japanese automaker.
Combining the familiar with the new
All recall decisions were made from Toyota’s Customer Quality Engineering Division in Japan, meaning no cars could be pulled off the roads in America, or anywhere else for that matter, without first getting the OK from Toyota HQ thousands of miles away. From there it is impossible for the company to truly understand the extent of safety and quality problems.
If Toyota is to be the example and the warning, then other car-makers must learn the true value of trust and experience in supply chain management and the passing on of “tacit” knowledge. This can be done by simply placing a number of experienced company employees with a worthy knowledge of company culture into new working environments.
Visibility of the supply chain is key to protect manufacturers from disasters such as the one Toyota is currently experiencing. A recent study by IBM (Q4 2009) revealed that the lack of visibility was greater within the automotive sector compared to other industries.
As described by Bill Fischer, a Professor of Technology Management at IMD, the key is always keeping some of the familiar while embarking on something new. Perhaps this the most valuable lesson to be learned from Toyota’s recall crisis.