Cusumano, Michael. 1989. Japanese Automobile Industry. Boston: Harvard University Press.

Chapter Five: Toyota Production System

Toyota took 120 labor hours to make a car compared to 175-200 in the US. They accomplished this through a more efficient materials handling system.

The previous system was a push system generated by computer, but it suffered from failing to identify and remove defects quickly from the line and from high parts buffers. In 1948 Toyota moved to a "pull" system. Thus final assembly controlled the ordering of parts and materials. Workers checked for mistakes as they took only the parts they needed from the prior process step. This system requires very small lots. Through the kanban system they learned how to make a variety of automobiles in mass volume at low cost.

The Japanese system changes were partly a reflection of their need to produce variety in low volumes in small production spaces in Japan in the 50's given US production equipment designed for mass production. Eventually Toyota achieve the smallest lots, lowest inventories, shortest setup and leadtimes, and the highest profits.

Ono Taiichi created the kanban system. He found the US system of high lot production created massive inventories and reduced quality due to worker boredom and laxness in the long production runs. Furthermore, it didn't accomodate customer demands for product diversity.

Ono used time and motion studies to understand each production step to eliminate unnecessary motion. He had operators (in the machine shop) work more than one machine. He opted for more universal machine tools instead of specialized ones. he used limit switches to balance the operation flow and eliminate inventory.

He also reversed the process information flow via the JIT system,which required low setup and maintenance times and workers willing to do a variety of jobs. It required suppliers to move from 1-2 month lots and single deliveries to daily deliveries. The system was:

1. Workers go back and take only what they needed.

2. Workers only produced what the next station required.

3. Reduced conveyors and had workers carry parts to next station in small lots.

4. Limited conveyance lots to 5 vehicles.

Toyota also worked with sales to set a two-month production schedule and reviewed plans one month and 10 days in advance, and used computers to draw up resource schedules. Eventually they had the ability to change schedules at the last moment, and set a mixed final assembly process.

Toyota also reduced lot sizes by effectively increasing inventory costs in the EOQ formula. They made massive reductions in setup times on machines, from hours to minutes. They would do so by:

1. Distinguishing which set up steps required shutting down the machine and minimize or adapt them.

2. Standardize parts to minimize adjustments

3. Use easy removal fasteners on jigs and fixtures and dies.

4. Train workers

The kanban system, besides reducing WIP inventory, make defects more obvious by immediately affecting the next process station. The kanban system could be changed 10-30% to handle demand variations, but really required good production planning.

Rejection of MRP

In the US larger lot production required more elaborate computerized materials handling scheduling programs (MRP), and many companies believe in "real-time" control (which isn't possible actually). Ono believed that one of the most important benefits of the Toyota system was that it didn't rely on computers and was easier to modify than the MRP system. Toyota found that computer control tended to push defectives into the next station, increasing inventories and complicating quality control.

Eventually their suppliers also adopted the kanban system. Japanese companies would run with only 1-2 hours of parts on hand compared to 3-4 days in the US. WIP inventories averaged $74 vs $584 in the US in 1980 and allowed Japanese companies to have smaller factories as well. But inventory turnover rates varied widely in Japan, and many figures were exaggerated.

But the Toyota system had a negative impact on labor. Toyota records suggest the stressed system led to more accidents and suicides. There was a sense of despair and loneliness on the lines. Toyota partly succeeded because they could control the union and threatened to fire dissident workers.

Nissan Production System

Unlike Toyota, Nissan didn't employ a pull kanban system. They also preferred moving to automation instead of speeding up the line, and produced in larger production lots. The Nissan union was stronger in more urban Tokyo, and so they preferred to increase automation instead of overtime.

Nissan imported many production techniques from the US. But unlike the US systems, they had more worker task flexibility and fewer restrictions on job classifications. They also worked to improve synchronicity between suppliers and plants and deliver more frequently. Eventually they introduced a more limited kanban system in the 1970's, but still relied more on computer scheduling.