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OntheFridaybeforetherunningofthe118thKentuckyDerby,DougFriesen,managerofassemblyforToyota’sGeorgetown,Kentucky,Plant,wasapproachingthefinalassemblylines,whereshinyCamrystookshape.Heheardacheergoup.Teammembersonthelineswerewavingtheirhandtoolstowardsasignboardthatread“noovertimefortheshift.”Smilingbroadly,Friesenagreed:
everyoneintheplantsurelydeservedarelaxedDerbyweekend.
Theplanthadbeenhecticlately,asitwasbothsupplyingbrisksalesoftheall-newCamrysedanandrampingupstationwagonversionsfortheEuropeanaswellasNorthAmericanmarkets.Overtimealsohadbeennecessaryearlyintheweektomakeuplostproductionbecausethelineutilizationratewasbelowtheprojectedtarget.Inadditiontotheseimmediateproblems,agrowingnumberofcarsweresittingoffthelinewithdefectiveseatsorwithnoseatsatall.
TheseatproblemhadbeenthesubjectofanurgentmeetingcalledbyMikeDaPrile,generalmanageroftheassemblyplant,thatmorning,May1,1992.Atthemeeting,Friesenlearnedofthesituationfirsthandfromkeypeopleinboththeplantandtheseatsupplier.Hethenspenttheafternoonontheshopfloortolearnmoreabouttheproblemwhiletheissuesdiscussedwerefreshinhismind.Bytheendoftheday,itbecamecleartoFriesenthattheseatproblemneededsolvingonceandforall;
thetroublewasthattryingtodosocouldhurtlineutilization.ThiswasnotthefirsttoughquestionToyota’sfamousproductionsystemhadencountered,norwoulditbethelast.ButthisseatproblemwasespeciallydelicateandundoubtedlywoulddemandFriesen’sattentioninthefollowingweek.
Background
Intheearly1980s,JapaneseautomakerscontemplatedbuildingcarsinNorthAmerica.Japan’shugetradeimbalancehadcausedpoliticalpressuretomount,whiletheeconomicfeasibilityofsuchinvestmenthadimprovedwitharapidlyrisingyen.Atthattime,however,itwasunclearwhethercarsproducedoutsideJapancouldliveuptotheirhard-earnedreputationofhighqualityatlowcost.Thisissuewasfarfromsettledin1985whenToyotaMotorCorporation(TMC)unveileditsplantoopenan$800milliongreenfieldplantinKentucky.(SeeExhibit1.)Thus,thecompany’sendeavortotransplantitsuniqueproductionsystemtoBluegrassCountryeffectivelybecamealiveexperimentfortheworldtowatch.
ProfessorKazuhiroMishinapreparedthiscasewiththeassistanceofKazunoriTakeda,MBA’93,asthebasisforclassdiscussionratherthantoillustrateeithereffectiveorineffectivehandlingofanadministrativesituation.
Copyright©
1992bythePresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685orwriteHarvardBusinessSchoolPublishing,Boston,MA02163.Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,usedinaspreadsheet,ortransmittedinanyformorbyanymeans—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.
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InJuly1988,ToyotaMotorManufacturing,U.S.A.(TMM)beganvolumeproductionona1,300acresiteinGeorgetown,nearLexington.Theplanthadanannualcapacityof200,000ToyotaCamrysedans,whichwouldreplacethebulkofJapaneseimportsofthesamemodel.In1992,TMMwasexpectedtosupply240,000oftheall-newCamrys,whosesaleswereupbymorethan20%sincethemodelchangeinfall1991.ThenewCamryjoinedtheranksofmidsizefamilysedans,whichconstitutedone-thirdofthetotalAmericancarmarketandreturnedanaverage17%pretaxprofitmargin1onastickerpriceaveraging$18,500.Forthefirsttime,inMarch1992,TMMstartedproducingwagonversionsofthenewCamryexclusivelywithinToyota’sworldwideplantnetwork.
ToyotaProductionSystem2
Sinceitsinception,Toyotahadalwaysstrivenfor“bettercarsformorepeople.”Thismeantproducingcarsmeetingdiversecustomerpreferenceswithflawlessquality.Itfurthermeantdeliveringcarsatanaffordablepricewithperfecttiming.ThisambitiousgoalhadseemednearlyelusiveaftertheSecondWorldWar,sincemostpeopleinJapancouldnotaffordacarevenatcost.Inaddition,thecountry’slaborproductivitywasonlyone-eighthofthatoftheUnitedStates.Inessence,Toyotawaschallengedtocutcostdramatically,butwithoutthescaleeconomiesthatAmericanfirmsenjoyed.Itneededanentirelynewsourceofeconomiestosatisfycustomerswithvariety,quality,andtimeliness,allatareasonableprice.TheToyotaProductionSystem(TPS)evolvedasToyota’sanswertothischallenge,andservedasacommonframeofreferenceamongallitsemployees.
TPSaimedatcostreductionbythoroughlyeliminatingwaste,which,inproductionenvironmentstendedtosnowballunnoticeably.Wasteofoverproduction,forexample,notonlytiedupworkingcapitalininventory,butitnecessitatedwarehousestoragespace,forklifttruckstomovegoodsabout,materialhandlerstooperatetrucks,computerstokeeptrackofinventorylocations,astafftomaintainthecomputerizedsystem,andsoon.Furthermore,overproductionoftenconcealedthelocationofthetruebottleneckandtherebyinvitedinvestmentinthewrongequipment,resultinginexcesscapacity.
Identifyingwhatwaswasteinreality,however,wasnosimplematter.Thus,TPSprovidedtwoguidingprinciplestofacilitatethiscriticalprocess.ThefirstwastheprincipleofJust-In-Time(JIT)production:
produceonlywhatwasneeded,onlyhowmuchwasneeded,andonlywhenitwasneeded.Anydeviationfromtrueproductionneedswascondemnedaswaste.Thesecondwastheprincipleofjidoka:
makeanyproductionproblemsinstantlyself-evidentandstopproducingwheneverproblemsweredetected.Inotherwords,jidokainsistedonbuildinginqualityintheproductionprocessandcondemnedanydeviationfromvalue-additionaswaste. TPSdefined“needs”and“value”fromtheviewpointofthenextstationdowntheline,thatis,theimmediatecustomer.
TheseTPSprinciplesreflectedtwoassumptionsaboutproductionenvironments.First,trueneedswoulddeviatefromaproductionplanunpredictably,nomatterhowmeticulouslythatplanwasprepared:
hencethevirtueofJITproduction.Second,problemswouldcropupconstantlyontheshopfloor,makingdeviationsfromplannedoperatingconditionsinevitable:
hencethevirtueofjidoka.TPS,ofcourse,encouragedcontinuallyimprovingtheplanningprocess,butitalsostronglyemphasizedalertingplantpeopletodeviationsfromanyplansabouthowproductionwastoproceed.
ToimplementtheTPSprinciples,Toyotaemployedavarietyoftools,manydescribedlaterinthiscase.ForJITproduction,thesetoolswereusedtokeepinformationflowasclosetothephysical
1BusinessWeek(May18,1992)p.50.
2TheglossaryattheendofthecasesupplementstheexplanationofJapaneseandToyotaproductionconcepts.
flowofpartsaspossible.Partswerethuspulledfromdownstreambasedonactualusage,ratherthanpushedfromupstreambasedonaplannedscheduleremotefromtheshopfloor.Thisarrangementrequiredupstreamstationstobecapableofchangingoveramongpartswithminimalsetuptime.Hence,creatingaflowingproductionprocesswasaprerequisiteforTPS.
Thepurposesofjidokatoolsweretoaidimmediateproblemdetectionandfacilitatevisualcontrol.Forthemtoworkproperly,thenormalstateofoperationshadtobewellcharacterizedandunderstood.Therefore,anotherprerequisiteofTPSwasstandardizingtheprocessanddocumentingthestandardplainly.
Finally,TPSdependedonhumaninfrastructure,symbolizedbyToyota’scorporateslogan:
“GoodThinking,GoodProducts.”PlantspracticingJITandjidokaprincipleswereextremelypronetoshutdowns,andwouldbeparalyzedwithoutpeoplecapableofsolvingexposedproblemspromptly,completely,andsystematically.Toyotathusinstilled“goodthinking”inallitsemployeesthroughseniormanagementcoachingandinternaltrainingprograms.Theseeffortscultivatedtwostrongattitudesthatpermeatedtheorganization:
sticktothefacts,andgetdowntotherootcauseoftheproblem.Atypicaldiscussionofaproblemwouldstartwith“let’sgoseeit”andthenconvergeonthe“FiveWhys”exercise.Thisexerciseconsistedofaskingachainof“why”questionsuntiltherootcausewasidentifiedandcountermeasuresdetermined(seeExhibit2).
Methodicalthinkingextendedbeyondsolvingproblemsafterthefact.Itenabledpeopletoseekkaizen:
changeforthebetter.AtToyota,assoonasanyoneestablishedastandardwayofdoingajob,thatpersonsetouttodemolishitproactively,toinstallanevenbetterway.KaizenwasindispensableinpursuingTPSgoalscontinuouslyandindefinitely.
TheGeorgetownRampUp
DevelopinghumaninfrastructurewasTMC’sforemostpriorityintransplantingTPStoGeorgetown,asevidencedbyseveraldecisionsmadeearlyon.First,TMCassignedtoTMMthe1987Camrythatwasalreadybeingmass-producedinitsTsutsumiplantinJapan.Second,itreplicatedtheTsutsumilineascloselyaspossibleatTMM.Andthird,itsetadeliberatelyslowrampupschedule.Asaresult,TMCcouldfindpeopleinTsutsumiwho,basedontheirownexperience,wereabletodemonstratetoTMMhowtosolvetheproblemsencounteredinthatplant.
WhileconstructionwasunderwayatGeorgetowninearly1986,TMMinitiatedahiringandtrainingprogram(runoutofatraileroffice).Itbeganwithtopmanagersandproceededtocoreoperations