Toyota Production System and Success Secrets
No one can deny the importance of the company's production systems (Toyota Production Systems, TPS) in the success of the automotive giant Toyota. Toyota Production System and What are the Factors Driving Toyota's Growth?
The distinctive and unique production system enables the Japanese automotive giant to produce the world's best cars at the lowest cost in the shortest time and to rapidly develop new products.
By adopting this production system, both Toyota's competitors such as Chrysler, Daimler, Ford, Honda, and hospital and postal organizations offer a more efficient and more effective production and service process.
Lean manufacturing experts see this production system as one of the biggest factors in Toyota's success.
Investigating factors in Toyota's success, Harvard Business School researchers Hirotaka Takeuchi, Emi Osono, Norihiko Shimizu visited Toyota's 11 different factories for 6 months, attended many meetings of the company, and examined the company's reports and documents in detail. In addition, 220 Toyota employees and managers were interviewed.
The result of the research conducted by these three researchers is that Toyota's production system is very useful, but it is not the only factor in the company's success.
In this article, we will examine Toyota's success story based on the research in question.
What is Toyota Production System?
Toyota production system (TPS, Toyota Production Systems) is basically a system that allows the company to make improvements in vehicle production. In addition, soft innovation and corporate culture are constantly being improved.
One of the key elements of Toyota's success is the creation of various paradoxes in the organizational structure of the company. As employees constantly have to approach difficulties and problems from a new perspective, new ideas are always circulating within the company, which allows Toyota to develop regularly. In other words, the vision of development, in both technical and psychological terms, carries the company forward. Toyota's contrast philosophy both improves the production system and moves the company ahead of its competitors.
At Toyota, there is no thought that efficiency is the only requirement for success. Don't get me wrong, when it comes to efficiency, nobody can pour water into Toyota. Toyota sees its employees as people who relay their experiences to the company rather than a pair of hands. For this reason, great importance is attached to the personnel and investment is made at Toyota. The opinions of all personnel working in the company are given importance.
At the same time, scientific studies show that employees who live together with opposite or different ideas realize different aspects of an issue and develop more effective solutions. For this reason, it is important for Toyota to coexist opposing thoughts and find creative solutions by taking into account the opposite situations. Being at peace with contrasts allows Toyota to outperform its competitors and make both small and large-scale improvements.
Culture of Contrast
Many outsiders cannot make sense of Toyota's success as the company does not provide concrete indications of what a successful company should look like. Moreover, Toyota's stocks are not very profitable. Between 1995-2006, the company's stock brought an average of 20% profit. For example, in 2006, Nissan gained 22.9%, Hyundai-Kia 17.4% and DaimlerChrsyler 47.5% to its shareholders.
Almost all of Toyota's top executives are Japanese. But we see a more international staff in the management of the big corporations in the west. Toyota has its roots in a town called Mikawa. It gives great responsibilities to the company managers and there is a sound business ethic in the company. The headquarters of the company is not in Tokyo, as for example Honda did. Senior managers are paid less than other firms. A senior executive at Ford earns 10 times more than his counterpart at Toyota, for example. Rising at Toyota is also slow. The average age of the company's general managers is 61, which is equivalent to the retirement age in non-Japanese companies.
Another strange thing about Toyota is that the founding Toyoda family only has a 2% stake in the company. Although the Toyoda family has a say in important decisions, it is not clear why they have so much power with a 2% share. Although the general managers of the company usually come from the family, the general manager from outside the family has also served 3 times in the history of the company.
In short, Toyota has different dynamics than any global company.
Toyota Forges Slow But Takes Big Steps
For example, the company started production in the USA slowly. Production started in California in 1984, in partnership with General Motors. It opened its completely own factory in Kentucky in 1989. However, the release of the Prius in 1997 was a big deal. The company was able to produce the hybrid engine much earlier than its competitors.
Toyota grows steadily
In the early 1950's the company was almost bankrupt. But over the next 40 years, Toyota grew steadily and increased its market share. Despite this enviable growth, senior executives of the company said, "Never settle down." and "There is still a long way to go." they determined the direction of the company with their messages. "Don't be afraid to innovate when things are good," said Hiroski Okuda, one of the former general managers. and "No change is bad." His words summarize this understanding.
Production is Efficient, but Some Waste Matters
A large number of people attend the meetings held at Toyota, but most of these people do not speak at the meeting. The number of office workers of the company is much higher than its competitors. Managers visit Toyota dealers extremely often. There are many coordinators who speak more than one language and these people work towards eliminating the language barrier between the headquarters and international operation units.
Frugality and Generosity Together
Toyota can only be compared to Walmart in calculating penny. During lunch, the lights in the offices are turned off. Due to the high cost of offices, the entire department works in a large room. In other words, thrift within the company is at the highest level.
However, unbelievable money is spent on production tools, factory setups and human resources. Since 1990, the company has transferred $ 22 billion to production and support centers in the USA and Europe. An annual budget of 170 million dollars was prepared for Formula 1 races between 2003-2008.
Communication Processes Are Both Simple and Complex
It is an unwritten rule that employees at Toyota should speak to each other in as simple a language as possible. Presentations, reports and analyzes are expected to fit into a single A4. At the same time, it is important that everyone in the company knows everything. It is important that the employees know their departments and their respective counterparts well, the master-apprentice-mentor relationship is taken into account according to the experience period, and the necessary opportunities are provided for the employees to socialize. In other words, simplicity is used in individual communication and a complex communication network is used as an organization.
Hierarchy Exists But Nobody Is Untouchable
Putting a contrary opinion, pointing out problems, blindly saying yes to a wrong decision are things that are allowed for employees at Toyota. An engine technician who criticizes top management does not fear being fired. If there is a justified criticism, no one is afraid that something will happen to him. All debates take place in a friendly and constructive manner.
So many contrasts coexist in Toyota. But analyzing Toyota is a bit like peeling an onion. As you peel off the layers, it becomes harder to reach the center. There are basically 6 factors for the company to have a contrast culture.
Three of these factors encourage change and development. It is inevitable that these factors make the company more comprehensive, complicate decision-making mechanisms, and threaten the control of the company over communication processes.
The other 3 factors are aimed at protecting the integrity of the company. These factors ensure the stability of the company and enable the employees to adopt the company values.
3 different methods are applied in Toyota production system to grow and integrate.
Factors Driving Toyota's Growth:
Practices applied in every company become standard over time and create a certain efficiency. Over time, these methods prevent adopting new developments. Toyota, on the other hand, adopts a continuous development philosophy to acquire new customers, expand into new regions, and compete with competitors.
1- Goals That Look Impossible
Almost impossible goals are set at Toyota, breaking routines that cause inefficiency within the company. In 1937, Toyota founder Kiichiro Toyoda wanted to produce pure Japanese cars without using foreign technology. At that time, this goal was considered impossible. Even Mitsubishi, the strong brand of that period, could not attempt such a thing, but Toyota succeeded.
Toyota often sets high and difficult goals so that its employees become aware of their values and capabilities. The company's global strategy is to meet the needs of all customers and to provide excellent service in every market. This philosophy is also against managerial thought. But Toyota is doing its best to bring this philosophy to life.
Strategist Michael Porter, for example, states that the essence of a strategy is to decide what not to do. However, Toyota has a plan for every segment because the company believes the car is something that makes people happy.
This is similar to the thinking of Henry Ford: "To produce affordable cars for American families and to ensure that these people spend time happily on earth, the work of God ..."
Toyota's goal of being in every segment arouses the feeling that they are working for a sacred purpose. The document Toyota Value, which summarizes Toyota's values and culture, contains the following words:
“We are working to increase the happiness of all our customers and to build a better future for society and the planet. This is our mission. We are Toyota. "
Many of Toyota's goals have been deliberately left unclear. This allows employees to realize their own energy in different ways. It allows people with different expertise to cooperate.
For example, Watanebe, CEO of the company, states that their main purpose is to produce cars that are the least polluting, resistant to accidents, make people happy and travel from end to end with a tank of gasoline. Zenji Yasda, a former employee of Toyota, states that a clearer statement of this goal will result in employees not being able to fully employ their potential. In other words, the unclear and ambiguous setting of the goals leads to new discoveries and new innovations. The deliberate uncertainty principle, which allows the testing of previously untested methods, is one of the important elements in Toyota's production system.
Toyota does not modify its vehicles for local needs. Instead, it produces its products and operations according to the requirements of each country. This strategy makes Toyota very successful outside of Japan. Even if it increases operational complexity thanks to this strategy, it positively affects the creativity of the employees. Because it is necessary to develop new ideas, new technologies and new marketing tactics in every new market.
In 2006, Toyota sold 94 models in Japan, while Nissan remained 35 and Honda 30. Thanks to its localization approach, Toyota can better respond to local needs. For example, Yaris, which was put on the market in 1999, was produced according to the large interior space, fuel economy and safety needs of European customers.
The understanding of localization also encourages the company to push its limits. For example, when the Innovative International Multipurpose Vehicle (IMV) platform was established in 1998, there were various difficulties. Toyota engineers had to localize this draft vehicle for 140 different markets. This platform was developed for use in vans, minivans and jeeps, thus reducing design and production costs. Because a single model could be used in three different classes. Vehicles with the IMV platform were produced entirely outside of Japan, which led to the decentralization of elements such as production technology, production planning technology. Since 2004, Toyota has been producing IMV-based vehicles in Thailand, Argentina, Indonesia and South Africa. In India, Philippines and Malaysia, production is made for the needs of the local market.
IMV-based tools also eliminated the "Made in Japan" concept. Many executives thought this would hurt the company. Because the expression Made in Japan was seen as a quality assurance in itself. However, Akio Toyoda made the necessary effort to replace the Made in Japan statement with Made by Toyota, and comforted all stakeholders of the company.
Toyota's determination to experiment is one of the biggest factors in achieving goals that seem impossible. Employees at Toyota learn from successes and failures by constantly testing their hypotheses. Encouraging its employees to experiment, the company gets out of the comfort zone and discovers new things.
Toyota is a company that attaches great importance to thinking deeply, taking small steps and never giving up to achieve the impossible. First he breaks down big targets into small pieces, then he experiments on these pieces and learns countless lessons from these experiments.
For example, let's look at Toyota's development process for the Prius. In 1993, the company decided to develop a vehicle that is easy to use and burns low. The R&D team developed a vehicle that could save 50% fuel, but senior management rejected this prototype and requested 100% improvement. This demand was impossible to achieve even using the most economical engine of the time.
The R&D team could not find any alternative other than the hybrid engine that was being worked on by another team at that time. The hybrid engine was not yet ready for that time. In a few tries, the vehicle could only advance a few hundred meters. In subsequent attempts, the engine overheated. Despite these challenges, Toyota never stopped development and introduced the hybrid concept car at the 1995 Tokyo Motor Show. Toyota management knew back then that alternative technologies would be possible in the future, and the Prius's temporary nature did not deter them. They believed this project was worth the investment because they learned a lot during the process.
Toyota applies its experiments in a strict routine. Known as the Plan-Do-Check-Act (PDCA, plan, do, check, act), this method is an integral part of the continuous improvement philosophy.
In the Toyota Business Practices process, employees are expected to improve an existing situation. First, the problem is detected. Then the problem breaks down into pieces. The target is determined and the underlying cause of the event is analyzed. Precautions are taken and result-process is observed and successful processes are standardized.
Similarly, employees are asked to write down the most important information to solve a problem on A3 size paper. So it is very important for Toyota to reduce the whole process to an A3 paper.
What sets Toyota's culture apart from others is to encourage employees to be frank about the problems they face and the mistakes they make. Thanks to its open and transparent communication principle, Toyota has a corporate culture that can tolerate mistakes.
Factors That Ensure Integration of Toyota
As Toyota grows, both its employees and customers need to think differently. In addition, as the quality of internal communication decreases, it becomes difficult to coordinate activities in different markets and product groups.
So how is the company struggling with the side effects of continuous improvement and growth?
1- Founding Values
Over the years, the values of Toyota have been developed by different people. Sakichi Toyoda enabled Toyota to operate in weaving. Kiichiro Toyoda enabled the company to enter the automotive industry. Taiichi Ohno developed Toyota production systems (TPS). Shataro Kamiya developed the company's sales network.
The logic of continuous improvement, respect for people, importance to teamwork, humility, and the priority of the customer have been the founding values of Toyota.
Toyota employees overcome these values and provide a training appropriate to these values. The importance of these values cannot be denied in keeping Toyota, a complex organism, straying.
Tomorrow will be better than today: Optimism is key to Toyota's success. Employees see difficulties as a source of motivation. They believe Toyota will get better every day. The attitude of never being satisfied with the current situation also allows employees to constantly try new things.
Responsibility everyone: Teamwork has been given great importance in the company since the day it was founded. When a problem occurs, all members of the team are responsible for it and have the responsibility and authority to find a solution to the problem. This philosophy, which started in the factory, is valid in all areas of the company.
Genchi genbutsu: Fujio Cho, honorary president of Toyota, used the phrase "Genchi genbutsu" in a recent speech. This phrase "Did you see yourself?" We can translate like. This sentence reflects Toyota's philosophy, which means that if you haven't seen something yourself, your knowledge of that thing is essentially doubt.
In other words, it is essential to see and examine everything personally at Toyota. For this reason, Toyota's top executives take frequent trips to factories and pay attention to personally observe production and other processes.
First the customer, then the seller, the last manufacturer: Toyota knows well that success lies in satisfying customers and sellers, and establishing a long-term relationship with them. Toyota employees are also aware that their salaries are paid by customers, not by the company.
2- Faith in Employees
Many companies either offer their employees promotions or ask them to leave their jobs. Toyota aims to improve performance instead of firing low-performing employees. The company attaches importance to long-term employment. Even during the 1997 Asian financial crisis, no employee was laid off at the Thai factory. Because Hiroshi Okuda, the general manager at that time, gave the order "Lower all costs but do not lay anybody out". In August 1998, the international credit rating agency Moody lowered Toyota's credit rating from AAA to AA1, and noted that the company provided a lifetime employment guarantee. Even if this situation increases the interest payments of Toyota by an additional 220 million annually, the management stated that it will not compromise its philosophy just for the credit rating.
Toyota is a company that attaches great importance to training while working. During the initial training, employees are subject to broad guidelines rather than strict rules. The company, which trains its employees well in problem solving, also believes in the mentoring system. In other words, experienced managers and employees tell young people about Toyota values and mentor them in their business life.
While evaluating managers at Toyota, performance and learning elements are kept ahead of the results. The company looks at how managers achieve their goals, how they overcome problems, how they motivate and develop the employees under them. Factors such as gaining the trust of his colleagues, determination and determination are things that take great care for the promotion of an executive candidate and manager.
In summary, everyone who is a part of the Toyota family is considered to be the leading actor. When an employee is promoted, senior managers send a message to this person: “Congratulations on the promotion. Many people, like you, were also eligible for promotions, but you were chosen by a very small margin. Keep this fact in mind while doing your job. " We are talking about a message like. In other words, the promoted person knows that he has been chosen by a very small margin and is motivated to perform better in his new role.
3- Open Communication
Toyota has 50 factories outside of Japan. We are talking about a brand that sells vehicles to 170 countries and employs more than 300,000 people. Despite its size, Toyota still operates like a small city firm. "Everyone should know everything." Let us point out that his motto is valid even today.
At Toyota, the flow of information flows freely from top to bottom. Customers, vendors and business partners also get their share from this flow. Personal relationships are extremely important, as in Asian societies. Employees are expected to have the habit of listening consciously and carefully to what they are told. The network of relationships developed is similar to the nervous system. As with the central nervous system in humans, information is transmitted to the whole organization in Toyota.
Even in any Toyota factory, managers go down to the factory site and provide information. Takahiro Fujioka, general manager of the Takaoka factory, goes down to the production facility every day and has lunch with the workers. Senior executives responsible for sales visit the dealers and get information about customer preferences.
Toyota takes great care in communication processes in order to avoid communication weaknesses in large companies. We can say that Toyota's unique communication system has 5 different features.
Sharing knowledge: The word "Yokoten" is heard frequently in Toyota corridors. Yokoten means like opening towards the edge. Communication at Toyota spreads in all directions. The company advocates that all employees in a department must work in the same room, with no divisions in between, in order to ensure sound communication. Yokoten thought emphasizes that knowledge and knowledge should be shared with everyone.
Giving contrary thoughts a voice: Toyota communication system is effective because it is open to criticism. Employees do not worry about it, even if they have opposite thoughts with their superiors. Everyone at Toyota is free to act as they think they are right. Confronting the boss is considered normal.
For example, Yukitoshi Funo, who is responsible for Toyota's US sales, says: “I spoke with many senior executives before I was sent to the USA in 1997. They told me to increase the number of dealers. These people were really top executives. I went to the USA and saw the current situation personally. I saw that increasing the number of dealers in the USA will intensify the competition and this will not be beneficial for Toyota. Therefore, I did not follow the "increase the number of dealers" order that the senior managers told me. "
Meeting face to face: Even if it is free to disobey the center's instructions in local operations, not listening to each other is a crime within Toyota. Toyota system works properly as information reaches everyone. Therefore, listening to each other and keeping the communication channels open is an important issue. Former US sales manager Tony Fujita says: “Other brands are also interviewing their dealers. Toyota, on the other hand, holds meetings more often than them, while more important issues are discussed. "
Embodimenting knowledge: Another element of Toyota's central nervous system is to make information concrete. While Fujio Cho was CEO of the company, Toyota wrote down the values of the founders. The words and recommendations of senior executives were also collected in the book Toyota Way 2001.
Creating a support mechanism: In 2002, the Toyota Institute was established in Tokyo and the Global Knowledge Center in California. These institutions strengthened Toyota's communication network and helped spread the company's values and practices. In addition, employees were encouraged to join informal communities among themselves. There are more than 20 groups in the company, and in a sense, it is important that employees are better aware of what is happening in the company and socialize.
If Toyota is so successful, you might think that every company that imitates the Toyota Production System will achieve the same success, but there is one point you miss:
Creating culture takes time and resources. First, a company must accept the contrasts. Many companies fail because they are still following practices that were successful in the past. Old methods cause institutional clumsiness. Companies can overcome this clumsiness by expanding into new markets and tackling new challenges.
In addition, a company has to develop certain routines in order to resolve the contradictions. For example, Toyota implements the PDCA (plan, do, check, act) model, the 8-stage development and integration model, the A3 reporting system.
The power of contrasts cannot be harnessed if a company does not seriously and systematically teach its employees how to deal with contradictions.
A company should give its employees the freedom to share their opposing opinions. Senior managers should be open to criticism, and if they want to hear new ideas, they should be willing to voice contrary thoughts.
In summary, any company can take Toyota as an example, and that's a good thing. At the center of Toyota's philosophy of contrast are people, not machines. As such, there is always room for change and development. In this sense, we can say that the Toyota model is a brand that rises on human creativity.