Toyota's (Open)TPS

Really long and comprehensive article in Baseline on Toyota -- What's Driving Toyota? Nice piece, actually. I don't know where to begin since so many bits in the article interest me. How about starting with some basic business assumptions and how the Toyota Production System is defined. To quote the article:

The engine behind its success, say insiders and outsiders alike, is the Toyota Production System (TPS), a set of principles, philosophies and business processes to enable the leanest manufacturing.

And behind TPS is information technology -- supporting and enabling the business processes that help Toyota eliminate waste, operate with virtually no inventory and continually improve production.

Technology does not drive business processes at Toyota. The Toyota Production System does. However, technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to TPS.

"What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy," says Philip Evans, a senior vice president at the Boston Consulting Group who has studied Toyota. "They have a very clear understanding of the role technology plays in supporting the business."

This strikes me, too, because I'm so used to focusing on the technology that the business case sometimes gets lose or the technology ends up driving the business case or obfuscating the business case. The sequence, however, seems quite clear at Toyota. But reading only this far, I thought for sure that this TPS thing must certainly be based on Toyota proprietary IP, right? It appears not. Later in the article you'll find this:

Unlike the formulas to blend Coca-Cola or the latest blockbuster drug, there is no veil of secrecy behind the Toyota Production System. In fact, Toyota openly invites general visitors and competitors alike into its plants to observe its operations and manufacturing techniques.

In 1992, it opened the Toyota Supplier Support Center in Erlanger, Ky., about an hour's drive north of the Georgetown plant, to teach other companies the principles and concepts behind TPS and to help implement TPS in their own operations. To date, it has worked with more than 100 companies as varied as office furniture maker Herman Miller, seat manufacturer Trim Masters and several hospitals. The supplier center now operates as an independent consulting firm.

It even created a joint venture with GM in 1982, taking a plant that was to be closed in Fremont, Calif., and reengineering it into a lean manufacturing facility based on TPS. That plant, renamed New United Motor Manufacturing Inc. (NUMMI), quickly surpassed all of GM's plants in North America in productivity, quality and inventory turns. NUMMI became a living laboratory for hundreds of GM executives and now manufactures Corollas, Tacoma pickup trucks and the Pontiac Vibe.

Toyota is open with the strategy behind TPS because it wants to raise its North American suppliers up to its own level of efficiency and quality, Liker says. At the same time, it can afford to be open with its competitors because Toyota is constantly raising the bar. By the time they copy its current processes, Toyota will have moved on.

So, the business model comes first at Toyota, and technology supports the business model -- not the other way around. Then both are packaged and implemented via the TPS, which is open and enables others to benefit while Toyota profits and drives its thinking deeper into the market. And Toyota is not worried about opening up its production processes because the company is confident it can out innovate competitors and, actually, the company would like suppliers to come up to its standards. Talk about confidence. My goodness. I think I'm going to cite this example the next time someone is worried about opening their code. This has an open community dynamic to it of sharing as well as competing.

The article goes on to explain the core elements of the TPS: Just-in-Time, Jidoka, Kaizen, Andons, Poka Yokes, and Genchi Genbutsu. To me, that last one in the list is the most interesting. According to the article,

The literal translation of this term is, "Go and see for yourself." Rather than hear about a problem, Toyota requires its workers, team leaders and executives to go and see a problem directly and to work collectively on a solution.

Interesting. So, there seems to be a community dynamic occurring internally as well as externally. There are several other examples of this in the article. If Toyota were a software company, I bet they'd participate in open source, don't you think?

Back to the article ...

Together, the elements of TPS form the basis for a system of business process management that allows Toyota to continuously look for ways to optimize its operations and put thought into action. Sounds simple, but it requires a basic cultural change in an organization, and that, according to Gary Convis, can be the most difficult challenge. Convis, chairman of Toyota Motor Manufacturing Kentucky, oversees the company's manufacturing plant in Georgetown, Ky.

By the way, after his promotion, this guy Convis moved his office from the administrative building to the factory floor. The chairman. On the factory floor.

So, why can't the American car companies tap into a system like this? It obviously works pretty well since Toyota just picked off Ford and is on its way to taking down GM. Why are those guys doing so poorly while Toyota (and Honda as well) are doing so well? Especially, when at least Toyota opens its processes? I think I'm just now beginning to understand what the answer is and why Toyota isn't afraid of opening those processes. Ok, the answer is obviously massively complex -- especially when you consider American union, health care, pension issues, and missing market shifts - but perhaps a few of these elements are involved as well: (1) openness can help build markets, (2) those who open some of their stuff end up leading within those markets, (3) and the culture of pervasive quality is almost impossible to copy because it leads to unique value every time it's implemented. And by "culture" I don't necessarily mean Japanese vs American. Yes, I think the Japanese notion of quality and service is somewhat higher than what most Americans can even imagine, but it doesn't have to be that way and it wasn't always this way in the past.

Now, the article is not all rosy for Toyota. In fact, the company has actually had some tough times lately with re-calls and quality issues. But most analysts feel that things are turning around, they have confidence in the company, and they still put Toyota quality way above that of their competitors. Nevertheless, "[a]t a news conference in July, Toyota president Katsuaki Watanabe bowed deeply and apologized for the recall troubles. 'I take this seriously and see it as a crisis,' Watanabe said at the conference. 'I want to apologize deeply for the troubles we have caused.'"

Bowed deeply and apologized. So, perhaps I should add a touch of humility to my little list of elements to consider.

Comments:

Excellent article and analysis here (and thanks for linking to the original). Yes, even with all the principles, techniques, and methods of the TPS right out there in the open for suppliers and competitors alike, Toyota manages to remain head and shoulders above the rest (most of the time). They're obviously doing something right!

Posted by RisingSunofNihon on September 12, 2006 at 02:11 PM JST #

Thanks! I think this is a fascinating issue here. Toyota is not afraid to open their TPS because they are confident about how they innovate and how they implement the TPS.

Posted by Jim Grisanzio on September 13, 2006 at 02:46 AM JST #

I visited the NUMMI facility while in Calif., thanks to my friend Steven at Sun. The most striking part of the whole place is the techniques like Kaizen that they use for improving quality. One example shown was an automated unit which had downtimes due to the fact that all the tiny fragments from the polishing etc. needed to be cleaned off at periodic intervals. Now an employee offered a suggestion that the exposed parts of the unit be covered in silver foil, yes the off the shelf one. This lead to a reduction in the downtime of the equipment and of course increased productivity. Heck even visitors are encouraged to give feedback and suggestions on any process that they have noticed while going through the plant. Now thats what I call a truly flat org.

Posted by allen mathias on September 13, 2006 at 05:23 AM JST #

alan, that is amazing. I'm going to have to go to a plant here in Japan to check this out.

Posted by Jim Grisanzio on September 13, 2006 at 10:05 AM JST #

This is to inform you of the publication of a new book about the subject. This one can be found at:

http://www.amazon.com/truth-about-Toyota-TPS/dp/2917260025/ref=sr_1_6?ie=UTF8&s=books&qid=1256573135&sr=8-6

It deals with the latest developments at Toyota and how TPS could not manage to save Toyota from financial losses.

Posted by E. Kobayashi on October 26, 2009 at 06:31 PM JST #

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