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TPS
The Toyota Production System
One of the historic breakthroughs in the automotive industry occurred because a Japanese visitor to the United States walked into an American supermarket while on a business trip. The man’s name was Taiichi Ohno, and the visit to the supermarket was not even part of his itinerary. Ohno was a machine shop manager at Toyota Motor Corporation, and he had been sent to the United States in 1956 to tour American automobile plants.
This was slightly more than ten years after World War II, and Japan was still struggling to emerge from the depths of postwar poverty. Throughout this era, Japanese managers and engineers were regularly sent to the United States to learn whatever they could from American manufacturers.
Toyota’s History of Implementing Innovations
The then CEO of Toyota Motor Company, Kiichiro Toyoda, was especially eager to learn from the American automotive industry. Henry Ford had pioneered the modern assembly line several decades earlier, and Kiichiro had traveled to America to tour Ford’s factories before the war. He returned to Japan with an understanding of conveyor-fed lines, a key element of Ford’s mass production system. He was intent on implementing the new technology in his own automobile factories.
However, Toyoda encountered some significant obstacles. Factories in Japan had less floor space than their American counterparts, so he couldn’t simply copy Ford’s layouts. Another problem was the supply of raw materials. Although the entire world suffered through the Great Depression of the 1930s, Japan was far worse off than the United States.
Kiichiro therefore adapted Ford’s methods of supplying the manufacturing lines. Rather than stockpiling huge quantities of raw materials, Toyoda provided each manufacturing process with small amounts, often staying just ahead of the production schedule.
The practice of providing small, frequently replenished quantities to a factory process would later evolve into the practice known as "just-in-time manufacturing," or JIT. Since the 1980s, JIT has been implemented in factories throughout the world. JIT was considered cutting-edge when it was “discovered” in the West, but Toyota Motor Company and other Japanese companies had been practicing JIT for decades.
Linking the Manufacturing Process to Customer Demand
However, JIT wasn’t quite ready for primetime. A fundamental insight was still missing. This brings us back to 1956, and Mr. Ohno’s visit to the American supermarket.
The America of the mid-1950s was full of things that were still novelties in most of the world. Postwar prosperity had brought new consumer appliances, business models, etc. But why was Mr. Ohno so fascinated with the American supermarket? Even in 1956, the supermarket wasn’t exactly space-age technology.
Unless you were used to the Japanese alternatives of the era: in the Japan of the mid-1950s, there simply were no mass-market, self-service retail establishments. The consumer economy was served by small, mom-and-pop retailers who waited on customers one at a time. If a shopper wanted fish, she went to a sakana-ya / 魚屋 , or “fishmonger’s shop”. Then she went to a niku-ya / 肉屋 ("butcher shop") to buy meat. The next stop, perhaps, would be a yaoya / 八百屋 or "greengrocer," where vegetables for the evening meal could be purchased. Japanese consumers didn’t yet have any place to go to buy all these items on a single receipt.
Ohno was impressed by the efficient way in which the shelves in the American supermarket were replenished. Stockers circulated throughout the store, replacing items as they were removed by consumers. Inventory levels in the supermarket aisles were carefully controlled within a predetermined range. The shelves were neither empty nor overflowing with excess goods. Using this system, the supermarket was able to control the inventory levels of thousands of items. When he returned to Japan, Ohno would apply the supermarket system to Toyota’s production lines.
In traditional manufacturing systems, one of the most difficult problems is calibrating the exact number of goods that each process should produce. Suppose, for example, that aluminum castings are created at a Process A. The Process A workers then pass the castings on to Process B, where a different team of workers paints them. If the Process A workers make too few parts, then the Process B workers will be idle while they wait for more castings from Process A. Then when the castings finally arrive, they will have to work like gangbusters to make up for lost time.
On the other hand, if the Process A workers overproduce, then semi-finished goods (known as work-in-process, or WIP) will accumulate between Process A and Process B. When work-in-process accumulates in this manner, an inordinate amount of the company’s cash flows are tied up in inventory. This situation is extremely detrimental to the company’s finances.
To solve this dilemma, Ohno implemented a "pull" system. Rather than blindly producing intermediate goods and forcing them on the next process in quantities that might be too large or too small, each process in the plant was to become a "supermarket" for the next process. In the context of the above example, this meant that the workers at Process A would only produce castings at the rate at which the workers in Process B could paint them. This might mean a reallocation of production resources. In order to synchronize the two processes, it might be necessary to add workers to Process A, or subtract them from Process B, or vice versa.
The above is an extremely simplified description of the Toyota Production System (TPS), a manufacturing philosophy that has been adopted by companies in Japan and throughout the world. There is of course a lot more to the system, but the most groundbreaking aspect of TPS began with a casual trip to the supermarket. You never know when and where inspiration will strike.