“Production strategies adopted by Toyota (Sunderland) to minimise

wastage of material.”

Prepared by Kashan Pirzada

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Introduction

Ever since the company was founded in 1937, The TOYOTA MOTOR CORPORATION and

their subsidiaries (“TOYOTA”), have continuously strived to contribute to the sustainable

development of society and the earth through the manufacturing and provision of high-quality

and innovative products and services. Through these continuous efforts, they have established a

corporate philosophy that has been passed down from generation to generation throughout the

company and which has come to be known as the “Guiding Principles at Toyota” (originally

issued in 1992, revised in 1997; the “Guiding Principles”. they have also put TOYOTA’s values

and methods in written form, in the “Toyota Way” (issued in 2001). Such values and methods

must be shared globally among us to realize the “Guiding Principles” and they are seeking to

pass these on to future generations. Through these efforts and by Passing down corporate

philosophy and values and methods, they are steadfastly striving to realize the “creation of a

prosperous society by making things”. TOYOTA has long-demonstrated its dedication to

contributing to sustainable development. As their business operations have become increasingly

global, they need to reconfirm their corporate philosophy and have issued an explanatory paper

in January 2005 entitled “Contribution towards Sustainable Development”. This paper interprets

the Guiding Principles from the stand point of how TOYOTA can work toward sustainable

development in its interactions with its stakeholders. They believe that by implementing the

Guiding Principles in operation, TOYOTA will successfully fulfill its expected contribution

towards sustainable development. Therefore, as stated in the Guiding Principles and explanatory

paper, we must comply with local, national and international laws and regulations, including the

spirit thereof, and act with humility, honesty and integrity. Compared to when the “Code of

Conduct for Toyota Employees” was first issued in 1998, TOYOTA’s presence in society has

greatly increased and also new laws and regulations have been established, such as for the

protection of personal data. With this background in mind, we have revised the existing code of

conduct and created the “Toyota Code of Conduct” in order to communicate the fundamental

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approach necessary to inspire continued confidence in TOYOTA, to respect and comply with the

laws, and to maintain our honesty and integrity. I would particularly like to ask each one of you,

as a person working for TOYOTA, to be aware that you are an essential contributor to the

success of TOYOTA. In this era of global competition, borderless trade, and diversification,

TOYOTA wishes to conduct business in an open and fair way. TOYOTA aims to become the

most valued, respected and trusted company in the world by its customers and society.

Accomplishing this goal requires that each one of us is aware of TOYOTA’s respected

reputation and standing in the community, the gratitude their owe to customers and society, and

the necessary respect of laws and regulations. Therefore, they must each act in a “steadfast, sure-

footed, and thorough” way, and in accordance with common sense and good judgment. I expect

and ask you to carefully read this “Toyota Code of Conduct” and to implement the spirit within

March, 2006.

After the Second World War, the distribution of World economic power was totally rearranged.

Before the war, Europe and the USA ruled the world market. The management of Western

companies was based on the "Scientific Management" by Frederick Winslow Taylor (1856-

1915) and on "Modern Sociology" by Max Weber (1864-1920). This intellectual basis

characterizes the begin of industrialization, led to mass production and to tremendous

productivity increases. Yet after the war, new players appeared on the playground, whose work

was based on a philosophy, on methods and rules unknown before. Whilst Western managers

turned to short-term thinking to satisfy shareholders and to endless restructuring, the new actors

concentrated on continual improvement in the quality of products, uniformity of processes and

qualification of employees. Toyota is one of these new players, which despite the fierce

competition due to excess production capacity in the automobile industry of around 25 %

outperforms Western competition in every aspect, in technological innovation, in customer

satisfaction, in continuous growth and in profit. In 2004 Toyota passed Ford to become he

second largest automobile producer. Before long, Toyota will overtake General Motors

becoming the biggest car company in the world probably having no less than 15% of the world

market. Toyota will prevail. Most others will have the choice between shrinking or sinking. This

paper tries to shed light on the root causes of the Toyota Phenomenon, which for some reason or

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another Western companies find so hard to understand and much less on how to apply, despite

their struggle for its survival.

FOUNDER OF TOYOTA

COMPANY’S MISSION STATEMENT:

“To be the most respected and successful enterprise, delighting customers with a wide

range of products and solutions in the automobile industry with the best people and the

best technology.”

In a nutshell the company’s objective is to have:

“Action Commitment Teamwork for becoming #1 in the world”

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Guiding Principles at Toyota

1. Honor the language and spirit of the law of every nation and undertake open and fair

corporate activities to be a good corporate citizen of the world.

2. Respect the culture and customs of every nation and contribute to economic and social

development through corporate activities in the communities.

3. Dedicate ourselves to providing clean and safe products and to enhancing the quality of

life everywhere through all our activities.

4. Create and develop advanced technologies and provide outstanding products and services

that fulfill the needs of customers worldwide.

5. Foster a corporate culture that enhances individual creativity and teamwork value, while

6. Honoring mutual trust and respect between labor and management.

7. Pursue growth in harmony with the global community through innovative management.

8. Work with business partners in research and creation to achieve stable, long-term growth

and mutual benefits, while keeping ourselves open to new partnerships.

9. The Toyota Way includes a set of tools that are designed to support people continuously

improving and continuously developing. For example, one-piece flow is a very

demanding process that quickly surfaces problems that demand fast solutions, or else

production will stop. This suits Toyota’s employee development goals perfectly because

it gives people the sense of urgency needed to confront business problems. The view of

management at Toyota is that they build people, not just cars.

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Toyota Production System (TPS)

First, of course, it taught the modern car industry how to make cars properly. Few had heard of

the Toyota Production System (TPS) until three academics in the car industry study programme

run by Massachusetts Institute of Technology (MIT) wrote a book in 1991 called “The Machine

that Changed the World”. It described the principles and practices behind the “just-in-time”

manufacturing system developed at Toyota by Taiichi Ohno. He in turn had drawn inspiration

from W. Edwards Deming, an influential statistician and quality-control expert who had played a

big part in developing the rapid-manufacturing processes used by America during the Second

World War. At the core of TPS is elimination of waste and absolute concentration on consistent

high quality by a process of continuous improvement (kaizen). The catchy just-in time aspect of

bringing parts together just as they are needed on the line is only the clearest manifestation of the

relentless drive to eliminate mud waste) from the manufacturing process. The world's motor

industry, and many other branches of manufacturing, rushed to embrace and adopt the principles

of TPS. Toyota's success starts with its brilliant production engineering, which puts quality

control in the hands of the line workers who have the power to stop the line or summon help the

moment something goes wrong. Walk into a Toyota factory in Japan or America, Derby in

Britain or Valentines in France and you will see the same visual displays telling you everything

that is going on. You will also hear the same jingles at the various work stations telling you a

model is being changed, an operation have been completed or a brief halt called. Everything is

minutely synchronized; the work goes at the same steady cadence of one car a minute rolling off

the final assembly line. Each operation along the way takes that time. No one ushers and there

are cute slings and swiveling loaders to take the heavy lifting out of the work. But there is much

more to the soul of the Toyota machine than a dour, relentless pursuit of perfection in its car

factories. Another triumph is the slick product-development process that can roll out new models

in barely two years. As rival Carlos Ghosn, chief executive of Nissan, notes in his book “Shift”

(about how he turned around the weakest of Japan's big three), as soon as Toyota bosses spot a

gap in the market or a smart new product from a rival, they swiftly move in with their own

version.

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The result is a bewildering array of over 60 models in Japan and loads of different versions in big

overseas markets such as Europe and America. Of course, under the skin, these share many

common parts. Toyota has long been the champion of putting old wine in new bottles: over two-

thirds of a new vehicle will contain the unseen parts of a previous model. But TPS alone would

not justify the extraordinary success of the company in the world market.

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World Class Manufacturing

Many firms have tried to install the Toyota Production system TPS. They set up the Kanban

system, which is a tool for managing the flow and production of materials in a Toyota-style

“pull” production system. They plug in the andon, which is a visual control device in a

production area that alerts workers to defects, equipment abnormalities or other problems using

signals such as lights, audible alarms, etc. Finally, with all these devices the workplace looks like

a Toyota plant. Yet over time the workplace reverts to operating like it did before. And this is

exactly what many Western organizations have experienced. With the set up of TPS, the real

work of implementing TPS has just begun. In the Toyota Way, it’s the people who bring the

system to life by working, communicating, resolving issues and growing together. The Toyota

Way encourages, supports and in fact demands employee involvement. The Toyota Way is much

more than a set of improvement and efficiency techniques. It’s a culture depending on worker

attitude to reduce inventory, identify hidden problems and to fix them with a sense of urgency,

purpose and team work. The Toyota Production System can be copied, the Toyota Way cannot.

It has to be built, maintained and refined over decades. The roots of the Toyota Way go back to

1926, when Sakichi Toyoda (1867 – 1930), a brilliant engineer, later referred to as Japan’s “King

of Inventors”, founded Toyoda Automatic Loom Works. His work ethics was significantly

influenced by the book of Samuel Smiles, “Self- Help”, first published in England in 1859. The

book grew out of the devotion, to help young man in difficult economic circumstances by

improving themselves. The book chronicles inventors whose natural drive and inquisitiveness led

to great inventions that changed the course of humanity. When looking for instance at the

success and impact of James Watt, Smiles concluded, that both were not the result of natural

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endowment but rather trough hard work, perseverance and discipline. These few words

summarize the spirit, which Sakichi Toyoda handed over to his son Kiichiro Toyoda (1894-

1952), the founder of Toyota Motor Company, his son Shoichiro Toyoda, Honorary Chairman

and director of Toyota Motor Corp., and on to his nephew Eiji Toyoda (*1913), President of

Toyota from 1967 to 1994. Spend some time with Toyota people and after a time you realize

there is something different about them. The rest of the car industry raves about engines,

gearboxes, acceleration, fuel economy, handling, ride quality and sexy design. Toyota's people

talk about “The Toyota Way” and about customers. In truth, when it is written down the Toyota

creed reads much like any corporate mission statement. But it seems to have been absorbed by

Japanese, European and American employees alike. Mr. Cho thinks that something of the unique

Toyota culture comes from the fact that the company grew up in one place, Toyota City, 30

minutes drive from Nagoya in central Japan, where the company has four assembly plants

surrounded by the factories of suppliers. In this provincial, originally rural setting, Toyota

workers in the early days would often have small plots of land that they tended after their shift.

Mr. Cho, who made his career in the company by being a pupil of Mr. Ohno and becoming a

master of production control, thinks that the fact that Toyota managers and their suppliers see

each other every day makes for a sort of hothouse culture— rather like Silicon Valley in its early

days. Jim Press is boss of Toyota's sales in North America. He left Ford in frustration 35 years

ago, because he did not think it handled customer relations properly and he suspected that the

upstart Japanese company making its way in the American market might do better. He was right.

Toyota shares a production plant in California with GM. Identical cars come off the line, some

badged as GM, the rest atlas: after five years, according to one study by Boston Consulting

Group, the trade- in value of the Toyota was much higher than that of the American model,

thanks to the greater confidence people had in the Toyota dealer and service network. Mr. Press

talks with a quiet, almost religious, fervor about Toyota, without mentioning cars as such. “The

Toyota culture is inside all of us. Toyota is a customer's company,” he says. “Mrs. Jones is our

customer; she is my boss. Everything is done to make Mrs. Jones's life better. We all work for

Mrs. Jones.” But not even the combination of its world leading manufacturing, rapid product

development and obsess ional devotion to customer satisfaction is enough to explain Toyota's

enduring success. There is one more ingredient that adds zest to all these. Tetsuo Agata doubles

as general manager of Toyota's Honsha plant in Toyota City and as the company's overall

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manufacturing guru. The magic of Toyota's winning culture was summed up for him by an

American friend who observed that Toyota people always put themselves “outside the comfort

zone”: whenever they hit one target, they set another, more demanding one. That relentless

pursuit of excellence certainly explains much of what has been happening to the company in

recent years, at home and abroad.

Methods Used In Controlling Waste

The purpose of TPS is to minimize time spent on non-value adding activities by positioning the

materials and tools as close as possible to the point of assembly. The major types of non-value

adding waste in business or production process are overproduction, waiting or time on hand,

unnecessary transport or conveyance, over processing or incorrect processing, excess inventory,

unnecessary movement, defects and unused employee creativity. The driving force behind the

Japanese system of production is eliminating waste, thereby maximizing process efficiency and

the returns on resources. A wide number of principles and practices can be employed to achieve

this goal. As Shingo once noted, people instinctively know to eliminate waste once it is

identified as such, so the task of reducing waste often centers first around identifying

unnecessary uses of human, capital, or physical resources. After waste is targeted, new processes

or practices can be devised to deal with it.

Just-In-Time (Jit)

Just-in-time (JIT) production or so-called lean manufacturing. The pioneers of these methods

were Taiichi Ohno, a former Toyota executive, and Shigeo Shingo, an eminent engineer and

consultant. In his 1989 book The Study of the Toyota Production System from an Industrial

Engineering Perspective, Shingo identified these basic features of TPS:

1. It achieves cost reductions by eliminating waste, be it staff time, materials, or other

resources.

2. It reduces the likelihood of overproduction by maintaining low inventories ("nonstock")

and keeps labor costs low by using minimal manpower.

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3. It reduces production cycle time drastically with innovations like the Single-Minute

Exchange of Die (SMED) system, which cuts downtime and enables small-lot

production.

4. It emphasizes that product orders should guide production decisions and processes, a

practice known as order-based production.

Process Improvement

An important aspect of eliminating waste is designing efficiency into production processes and

methods. For example, in the Toyota system heavy emphasis was placed on lowering the time

and complexity required to change a die in a manufacturing process. A time-consuming die-

changing process is wasteful in two ways. First, while it is happening production is often at a

standstill, increasing cycle times and all the costs associated with longer cycle times. (However,

it is important to note that idle time for individual machines in a system is not always viewed as

wasteful under the TPS philosophy.) Second, workers' time and effort are spent on activities that

aren't directly related to production (i.e., no value is being added by changing a die). As a result

of such concerns, the push at Toyota was to reduce significantly the time it took to change dies.

VALUE ADDED

TPS and similar Japanese manufacturing techniques distinguish between activities that add value

to a product and those that are logistical but add no value. The primary—even the sole—value-

added activity in manufacturing is the production process itself, where materials are being

transformed into progressively functional work pieces. Most other activities, such as transporting

materials, inspecting finished work, and most of all, idle time and delays, add no value and must

be minimized. When processes are examined for potential improvements and cost cutting,

reducing non-value-added activities is often the highest priority. Conversely, processes that add

the most value, even if they are expensive, will usually not be compromised to achieve lower

costs at the expense of quality.

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Quality by Design

Another feature thought to be defining in Japanese manufacturing is a marked attention to quality

throughout the production process. Specifically, under the influence of such luminaries as W.

Edwards Deming and Joseph M. Juran, Japanese manufacturers have sought to achieve quality

by designing it into the production process rather than simply trying to catch all the errors at the

end. As noted, poka-yokes can serve this function either by halting/correcting a faulty process or

by alerting a worker to a problem as it occurs. While plenty of traditional, defect-monitoring

sorts of quality controls are still used, philosophies such as TPS hold that the results of quality

inspections should be used to inform—and improve—the manufacturing process, not just to

describe it. This means the feedback from a quality inspection is expected to be immediate and,

often, to result in some change in the process so that the likelihood of similar problems in the

future is reduced.

Order-Based Production.

A natural and necessary extension of the non-stock goal is that manufacturers need specific

customer information to drive their production decisions. Obtaining this information necessitates

effective market research/forecasting and communication with customers. As much as possible,

production under the Japanese system is guided by actual orders, rather than anticipated demand

based on less reliable information such as past sales. The order-based system is said to provide

production "pull" from the actual market, as opposed to "push" that stems only from the

manufacturer's conjecture.

Transportation.

The Toyota Production System also recognizes waste in the excess movement of items or

materials. In general, the more transportation required, the less efficient the process, since

moving goods back and forth is normally not a value-adding procedure. Transport waste is

usually addressed by changing the layout of a factory, its geographic location relative to its

customers, and so forth. While sometimes transportation problems can be mitigated through

automation, the ideal under the Japanese system is to minimize it altogether. Cell and flexible

manufacturing layouts are one approach to controlling transport waste.

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Market-Driven Pricing

In contrast to the traditional practice of setting prices by marking up some percentage over the

cost of manufacturing, the Japanese system attempts to identify the market-determined price for

a good and then engineer the manufacturing process to produce at this price profitably. Under

this principle, increases in costs are not passed on to the consumer in the form of higher prices.

As a corollary, the only way for a firm to increase profitability is by lowering costs; lower costs

may also allow the company to be profitable yet deliver products at the low end of the pricing

spectrum, a practice central to the rise of the Japanese auto manufacturers in the U.S. market.

Worker Flexibility

Maximizing returns on human capital is another goal of Japanese manufacturing practices.

Driven by the theory that human time is more valuable than machine time, the Japanese system

attempts to optimize labor efficiency by deploying workers in different ways as order-based

production requirements fluctuate. The main two dimensions of this flexibility are skills and

scheduling.

Lean Principles

Precisely define value by specific product.

Identify the value stream for each product.

Make the value flow without interruptions.

Let the customer pull value from the producer.

Pursue perfection

Principles Adopted By Toyota To Achieve Their Goals

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Toyota’s business practices differ from those of Western automobile manufacturers in

a number of aspects:

Operations are strictly governed by a sustainable business policy, which is passed on

from one generation to the other and not by short-term decision making or by the

attitudes of changing management teams and variable customer tastes.

Growth comes from the inside out and not through mergers and acquisitions, in other

words, growth through continual improvement of products and services and not through

continued restructuring.

Production is controlled by customer demand (“pull” system) not by production capacity

(“push” system).

Qualified employees are attracted with the possibility to participate in the company’s

striving to meet and exceed customer expectations with products of unparalleled quality

and not with compensation schemes. Toyota employees work for a winner. Who wants to

work for an employer, whose products have to be forced onto the customers with

discounts and incentives? Who wants to work for a looser?

No unions are admitted which force both management and employees to defend their

own interests and by so doing distract from the shared responsibility to satisfy customers.

For more than 50 years, Toyota experienced an extraordinary history of continuous

growth without major layoffs

Base your management decisions on a long-term philosophy, even at the expense of

Short-term financial goals.

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Create continuous process flow to bring problems to the surface.

Build a culture of stopping to fix problems, to get the quality right the first time.

Standardised tasks are the foundation for continuous improvement and employee

Empowerment.

Use visual control so no problems are hidden.

Use only a reliable, thoroughly tested technology that serves your people and

Processes.

Grow leaders who thoroughly understand the work, live the philosophy, and teach it to

others.

Develop exceptional people and teams who follow your company’s philosophy.

Respect your extended network of partners and suppliers by challenging them and

helping them improve.

Go and see for yourself to thoroughly understand the situation (genchi genbutsu).

Make decisions slowly by consensus, thoroughly considering all options; implement

decisions rapidly.

Become a learning organisation through relentless reflection (hansei) and continuous

Improvement (kaizen)

Conclusion

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As one of the leading automobile manufacturers in the world, Toyota ranks within the top three

worldwide. Due to their unique business model, they are now having a market share of 14% in

the first four months of this year. That is an astonishing 2.3% jump from the previous year.

According to Autodata.com, the Toyota City based automaker ranks fourth in United States

sales.

We have determined that their business model is an Integrated Low Cost? Differentiated

Strategy. It involves finding the lowest operational cost along with a unique niche or strategy that

separates them from the competition. Toyota’s new statement? Moving Forward? Reflects their

plans and expectations for the future. This includes the known and the unknown factors that a

business must face. In 2000, Toyota launched a new cost effective strategy called CCC21

(Construction of Cost Competitiveness for the 21st century), for Low Cost operational expenses.

With this aspect Toyota plans to advance such initiatives globally, based on its policy of

purchasing the world’s best parts at the lowest cost with the shortest lead times.

References

www.toyota.co.uk

http://www.enotes.com/biz-encyclopedia/japanese-manufacturing-

techniques#eliminating-waste

http://www.strategosinc.com/just_in_time.htm

http://en.wikipedia.org/wiki/The_Toyota_Way

http://www.springerlink.com/content/f432382q8x486312/

http://www2.toyota.co.jp/en/vision/production_system/index.html

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http://www.1000ventures.com/business_guide/cs_efficiency_toyota_ps.html

http://www.vorne.com/learning-center/tps.htm

http://www.swmas.co.uk/info/index.php/Toyota-Production-System?

http://www.toyoland.com/history.html

http://www.toyota-europe.com/experience/the_company/index.aspx

http://homepages.ius.edu/GCENTER/Toyota%20Project.htm

http://www2.toyota.co.jp/en/vision/index.html

http://wapedia.mobi/en/The_Toyota_Way

http://www.toyota.co.jp/en/csr/principle/policy.html

http://www.toyota.co.jp/en/environment/communication/glossary/

glossary_02.html

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