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The manufacturing system of Toyota

The Toyota Production System (TPS) is an integrated socio-technical system,developed by Toyota, that comprises its management philosophy and practices. The TPSorganizes manufacturing and logistics for the automobile manufacturer, including

interaction with suppliers and customers. The system is a major precursor of the moregeneric "Lean manufacturing." Taiichi Ohno,Shigeo Shingo and Eiji Toyoda developedthe system between 1948 and 1975.[1]

Originally called "Just In Time Production," it builds on the approach created by thefounder of Toyota, Sakichi Toyoda, his son Kiichiro Toyoda, and the engineerTaiichiOhno. The founders of Toyota drew heavily on the work ofW. Edwards Deming and thewritings ofHenry Ford. When these men came to the United States to observe theassembly line and mass production that had made Ford rich, they were unimpressed.While shopping in a supermarket they observed the simple idea of an automatic drinkresupplier; when the customer wants a drink, he takes one, and another replaces it. The

principles underlying the TPS are embodied in The Toyota Way.

The main objectives of the TPS are to design out overburden (muri) and inconsistency(mura), and to eliminate waste (muda). The most significant effects on process valuedelivery are achieved by designing a process capable of delivering the required resultssmoothly; by designing out "mura" (inconsistency). It is also crucial to ensure that theprocess is as flexible as necessary without stress or "muri" (overburden) since thisgenerates "muda" (waste). Finally the tactical improvements of waste reduction or theelimination of muda are very valuable. There are seven kinds of muda that are addressedin the TPS:

1. over-production2. motion (of operator or machine)3. waiting (of operator or machine)4. conveyance5. processing itself6. inventory (raw material)7. correction (rework and scrap)

The elimination of waste has come to dominate the thinking of many when they look atthe effects of the TPS because it is the most familiar of the three to implement. In theTPS many initiatives are triggered by inconsistency or overburden reduction which

drives out waste without specific focus on its reduction.

Toyota was able to greatly reduce leadtime and cost using the TPS, while improvingquality. This enabled it to become one of the ten largest companies in the world. It iscurrently as profitable as all the other car companies combined and became the largestcar manufacturer in 2007. It has been proposed[10] that the TPS is the most prominentexample of the 'correlation', or middle, stage in a science, with material requirementsplanning and other data gathering systems representing the 'classification' or first stage. A
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science in this stage can see correlations between events and can propose someprocedures that allow some predictions of the future. Due to the success of the productionphilosophy's predictions many of these methods have been copied by othermanufacturing companies, although mostly unsuccessfully.

Also, many companies in different sectors of work (other than manufacturing) haveattempted to adapt some or all of the principles of the Toyota Production System to theircompany.

Lean manufacturing orlean production, often simply, "Lean," is a production practicethat considers the expenditure of resources for any goal other than the creation of valuefor the end customer to be wasteful, and thus a target for elimination. Working from theperspective of the customer who consumes a product or service, "value" is defined as anyaction or process that a customer would be willing to pay for. Basically, lean is centeredonpreserving value with less work. Lean manufacturing is a management philosophyderived mostly from the Toyota Production System (TPS) (hence the term Toyotism is

also prevalent) and identified as "Lean" only in the 1990s.[1][2]

It is renowned for its focuson reduction of the original Toyotaseven wastes to improve overall customer value, butthere are varying perspectives on how this is best achieved. The steady growth ofToyota,from a small company to the world's largest automaker,[3] has focused attention on how ithas achieved this.

Also known as the flexible mass production, the TPS has two pillar concepts: Just-in-time (JIT) or "flow", and "autonomation" (smart automation).[6] Adherents of the Toyotaapproach would say that the smooth flowing delivery of value achieves all the otherimprovements as side-effects. If production flows perfectly then there is no inventory; ifcustomer valued features are the only ones produced, then product design is simplified

and effort is only expended on features the customer values. The other of the two TPSpillars is the very human aspect of autonomation, whereby automation is achieved with ahuman touch.[7] The "human touch" here meaning to automate so that themachines/systems are designed to aid humans in focusing on what the humans do best.This aims, for example, to give the machines enough intelligence to recognize when theyare working abnormally and flag this for human attention. Thus, in this case, humanswould not have to monitor normal production and only have to focus on abnormal, orfault, conditions.

Lean implementation is therefore focused on getting the right things to the right place atthe right time in the right quantity to achieve perfect work flow, while minimizing waste

and being flexible and able to change. These concepts of flexibility and change areprincipally required to allow production leveling, using tools like SMED, but have theiranalogues in other processes such as research and development (R&D). The flexibilityand ability to change are within bounds and not open-ended, and therefore often notexpensive capability requirements. More importantly, all of these concepts have to beunderstood, appreciated, and embraced by the actual employees who build the productsand therefore own the processes that deliver the value. The cultural and managerialaspects of Lean are possibly more important than the actual tools or methodologies of
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production itself. There are many examples of Lean tool implementation withoutsustained benefit, and these are often blamed on weak understanding of Lean throughoutthe whole organization.

Lean aims to make the work simple enough to understand, do and manage. To achieve

these three goals at once there is a belief held by some that Toyota's mentoring process,(loosely called Senpai andKohai), which is Japanese for senior and junior, is one of thebest ways to foster Lean Thinking up and down the organizational structure. This is theprocess undertaken by Toyota as it helps its suppliers improve their own production. Theclosest equivalent to Toyota's mentoring process is the concept of "Lean Sensei," whichencourages companies, organizations, and teams to seek outside, third-party experts, whocan provide unbiased advice and coaching, (see Womack et al., Lean Thinking, 1998).

There have been recent attempts to link Lean to Service Management, perhaps one of themost recent and spectacular of which was London Heathrow Airport's Terminal 5. Thisparticular case provides a graphic example of how care should be taken in translating

successful practices from one context (production) to another (services), expecting thesame results. In this case the public perception is more of a spectacular failure, than aspectacular success, resulting in potentially an unfair tainting of the lean manufacturingphilosophies

A typical example of the interplay of these wastes is the corporate behaviour of "makingthe numbers" as the end of a reporting period approaches. Demand is raised to 'makeplan,' increasing (mura), when the "numbers" are low, which causes production to try tosqueeze extra capacity from the process, which causes routines and standards to bemodified or stretched. This stretch and improvisation leads to muri-style waste, whichleads to downtime, mistakes and back flows, and waiting, thus the muda of waiting,

correction and movement.

Eliminating wastes:

The original seven muda are:

Transport (moving products that is not actually required to perform theprocessing)

Inventory (all components, work in processand finished product not beingprocessed)

Motion (people or equipment moving or walking more than is required to perform

the processing) Waiting (waiting for the next production step) Overproduction (production ahead of demand) Over Processing (resulting from poor tool or product design creating activity) Defects (the effort involved in inspecting for and fixing defects
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JIT OF TOYOTA

Just in Time, or JIT is a set of techniques to improve the return on investment of abusinessby reducing in-process inventory, and its associated costs. The process is drivenby a series of signals, or Kanban that tell production processes to make the next part.

Kanban are usually simple visual signals such as the presence or absence of a part on ashelf.

JIT causes dramatic improvements in a manufacturing organization's return oninvestment, quality, and efficiency.

History

The technique was first adopted and publicized by Toyota Motor Corporation of Japan aspart of its Toyota Production System (TPS).

Japanese corporations cannot afford large amounts of land to warehouse finishedproducts and parts. Before the 1950s this was thought to be a disadvantage because itreduced the economic lot size. An economic lot size is the number of identical productsthat should be produced, given the cost of changing the production process over toanother product. The undesirable result would be a poor return on investment for afactory.

The chief engineer at Toyota in the 1950s examined accounting assumptions, andrealized that another method was possible. The factory could be made more flexible,reducing the overhead costs of retooling, and therefore reducing the economic lot size tothe available warehouse space.

Over a period of several years, Toyota engineers redesigned car models for commonalityof tooling for such production processes as paint-spraying and welding. Toyota was oneof the first to apply flexible robotic systems for these tasks. Some of the changes were assimple as standardizing the hole sizes used to hang parts on hooks. The number and typesof fasteners were reduced in order to standardize assembly steps and tools. In some casesidentical subassemblies could be used in several models.

Toyota engineers then determined that the remaining critical retooling operation was thetime to change the stamping dies used for body parts. Traditionally, these were adjustedby hand, with crowbars and wrenches. It sometimes took as long as several days to install

a large (multiton) die set and achieve acceptable quality. Further, these were usuallyinstalled one at a time by a team of experts, so that the line would be down for severalweeks.

Toyota implemented a program called "The Single Minute Exchange of Die," SMED.With very simple fixtures, measurements were substituted for adjustments. Almostimmediately, die change times fell to about a half hour. At the same time, quality of thestampings became controlled by a written recipe, reducing the skill reuqired for the
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change. Analysis showed that the remaining time was used to search for hand tools, andmove dies. Procedural changes (moving the new die in place with the line in operation)and dedicated tool-racks reduced die change times to as little as 40 seconds. Dies werechanged in a ripple through the factory, as a new product began flowing.

After SMED, economic lot sizes fell to as little as one vehicle in some Toyota plants.

Carrying the process into parts-storage made it possible to store as little as one part ineach assembly station. When a part disappeared, that was used as a sign to produce ororder a new part.

Effects

Some surprising things occurred. A huge amount of cash appeared, apparently fromnowhere, as in-process inventory was built out and sold. This by itself generatedtremendous enthusiasm in upper management.

Another surprising effect was that the response time of the factory fell to about a day.This improved customer satisfaction by providing vehicles musually within a day or twoof the minimum economic shipping delay.

Also, many vehicles began to be built to order, completely eliminating any risk that theywould not be sold. This dramatically improved the company's return on equity byeliminating a major source of risk.

Since assemblers no longer had a choice of which part to use, every part had to fitperfectly. The result was a severe quality assurance crisis, and a dramatic improvement in

product quality. Eventually Toyota redesigned every part of its vehicles to eliminate orwiden tolerances, while simultaneously implementing careful statistical controls. (SeeTotal Quality Management). Toyota had to test and train suppliers of parts in order toassure quality and delivery. In some cases, they eliminated multiple suppliers.

When a process problem or bad parts surfaced on the production line, the entireproduction line had to be slowed, or even stopped. No inventory meant that a line couldnot operate from in-process inventory while a production problem was fixed. Manypeople in Toyota confidently predicted that the initiative would be abandoned for thisreason. In the first week, line stops occurred almost hourly. However, by the end of amonth, the rate had fallen to a few line stops each day. In six months, line stops had so

little economic effect that Toyota had an overhead pull-line, similar to a bus bell-pull,that permitted any worker on the production line to order a line stop for a process orquality problem. Even with this, line stops fell to a few per week.

The result was a factory that became the envy of the industrialized world, and which hassince been widely emulated.


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Company offering quality discounts:

ACER

Quality discount can be described as an incentive or discount offered by a seller to thebuyer for purchasing or also ordering the product greater than the usual quantity andquality, which has to be delivered at one time.

Since its founding in 1976, Acer has constantly pursued the goal of breaking the barriersbetween people and technology. Focused on marketing its brand-name IT productsaround the globe, Acer ranks as the world's No. 3 vendor for total PCs and No. 2 fornotebooks, with the fastest growth among the top-five players. A profitable andsustainable Channel Business Model is instrumental to Acer?s continued growth, whilethe successful mergers of Gateway and Packard Bell complete the company?s global

footprint by strengthening its presence in the U.S., and enhancing its strong position inEurope. Acer Inc. employs 5,000 people worldwide. 2007 revenues reached US$14.07billion.

Over 30 years of making history in the fast-paced IT industry shows that Acer haswalked in the right direction. Its far-reaching strategy of focusing on R&D and marketingdevelopment laid the foundations and created a company ready to embrace the challengesof the future.


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An impact of a company having ERP in accordance with JIT inventory:

In the early 1980's a new concept, known as zero inventories" was introduced to the

American manufacturing industry. The "zero inventories" concept called for thetransportation of materials from the outside vendors directly to the work-in-process area,where the required value added(*) through the manufacturing operations occurred,followed by the shipping of the finished products out of the door, all at a reasonable rateof time. This "zero inventories" concept would save companies the costs of inspection,stocking, material handling, inventory tracking, carrying the inventory, and the risks ofdamage and obsolescence. The concept now formally termed just-in-time (JIT) inventoryhas evolved into a corporate philosophy that seeks to do the process right the first timeand to eliminate any non-value added activities.(1) The time a part is delayed, moved, orinspected is referred to as non-value added time. It is waste time because no value iscreated for the customer when the product is not being processed. Under the JIT concept

activities such as moving parts, waiting for parts, machine setup, and inspection arereferred to as non-valued added activities. Inefficiencies in production cause non-valueadded activities.

There are three basic stages of what JIT is and how JIT works. These stages are termed:(1) Kanban, (2) Production planning, and (3) Global management philosophy.Organizations claim that they are using JIT when they are at any of these stages. Inreality, these are not three separate stages but rather a migration path from using JITsimply as a shop-floor-control tool (Kanban) to the installation of a factory wide globalmanagement philosophy.

In stage one which is the simplest form, JIT is a shop floor-control tool that allows thescheduling ofinventory movementthrough the shop floor with the use of a Kanban, amaterials movement tracking device. The Kanban can take the form of a card, a box, or amarked off area on the floor. These Kanbans are used as an authorization to movematerials or to produce new product. This initial stage of JIT should generate impressivereductions in work-in-process inventory because of the direct uninterrupted movement ofmaterials between work stations.

The second stage of JIT, production planning, focuses on the basic principle of receivingproduction parts as needed, rather than building up inventories of these components.Using the JIT production planning approach, managers reduce inventory to a minimum

level, keeping on hand only the amount needed in production until the next order arrives.This approach eliminates the double handling of products which occurs when storage isrelocated to the work area or shipping area. The JIT production stage is driven by havingcontinuous delivery of items. The use of production planning eliminates the need formaterial requirements planning (MRP) as a production planning tool. In contrast to theJIT system, a MRT system is a "push-through" system driven by forecasted demand. Itexamines the finished goods requirements before determining the demand for rawmaterials, components, and subassemblies. The purpose of MRP is to maintain the lowest
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possible level of inventory while making certain materials and parts are available. Inproduction planning, detailed bill-of-materials for the manufacturing process whichauthorize the movement of materials or parts from storage to work areas, are no longerneeded. The lead time in JIT is dramatically different. In a large production typeenvironment, lead time may be reduced from months to hours. With such a short time

horizon, it is easy to determine what parts will be needed each day. Another importantpart of the planning environment in JIT involves the long-term contractual relationshipswhich are established with vendors. These relationships will eliminate the need forpurchase requisitions and purchase orders. A last critical part of the production planningprocess in JIT is that quality evaluations are performed differently. Quality is part of themanufacturing process. Every employee is a quality inspector. Inspection is done beforethe work is started and after it is finished. This process is referred to as in-line qualitycontrol or total quality control.

TECHNIQUES of JIT

More than 6 years of research devoted to the JIT system have led to tentativelydistinguish among its elements two main categories: JIT's industrial engineeringtechniques and Japanese management-related features of JIT.

It is a question of JIT techniques that can be seen as belonging or related to the field ofindustrial engineering. They can be divided into two groups. There are pure industrialengineering methods and there are industrial engineering elements that are closelyassociated with the worker's actions.

JIT's pure engineering elements

In this category, one has to find techniques that are universally valid like laws of physicsor mathematics. They have no close relationship with the social, cultural, economic ormanagerial environment in which they appear or are discovered for the first time. Thoseelements can therefore be applied anywhere and yield the same results. The following areelements of the JIT production system identified as belonging to that group:

* Quick set-up (QSU);

* Automation (ASD) (poka yoke or automatic stopping device, full-work system);

* Breaking of physical barriers (BPB) between processes, sections or departments: Shopfloor reduction (SFR);

* Flow-of-products-oriented layout of processes and machines (FPL);

* U-formed processing line (UPL);

* Mass production of mixed models (MMP) - on the same line;


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* Total preventive maintenance (TPM);

* Kanban (KBN).

Those engineering elements constitute the "technical side" of JIT or "technical JIT".

Applying them anywhere would unavoidably contribute to the reduction of cost,production lead time, defective parts (work), overproduction of work-in-processinventories and workforce.

Worker's operations/activities as JIT elements

The worker's operations can and do constitute some JIT elements. In other words, youhave JIT techniques that are part of the worker's activities and that interact with thehuman being. Their application and realization or success depend also on the humanfactor. If they are accepted by the work force, then they can work, otherwise they cannot.In that group may be included the following JIT techniques or methods:

* Multi-machine manning working system (MMM);

* Standard operations (SO);

* Quality control circles (QCC);

* Suggestions system (SS); and

* Continuous improvement (CI).

Japanese management-related elements of JIT

The Issues : JIT INVENTORY

JIT is often viewed in direct conflict with Material Requirements Planning (MRP) sinceJIT uses pull scheduling and MRP uses a push methodology. JIT is best suited forrepetitive production environments. Some consulting firms in the past haverecommended replacing MRP and information systems with JIT, and "pulling the plugfrom the computer." This is nonsense and an overdose of a manufacturing philosophy.

Just like anything else, Just-in-time is no panacea, nor should it be embraced as areligion. It is an operational strategy that, if implemented properly, will provide a newdimension to competing: quickly introducing new customerized high quality productsand delivering them with unprecedented lead times, swift decisions, and manufacturingproducts with high velocity


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Main IMPACT of JIT include:

Reduced setup time. Cutting setup time allows the company to reduce or eliminate

inventory for "changeover" time. The tool used here is SMED(single-minuteexchange of dies). The flow of goods from warehouse to shelves improves. Small or individual piece

lot sizes reduce lot delay inventories, which simplifies inventory flow and itsmanagement.

Employees with multiple skills are used more efficiently. Having employeestrained to work on different parts of the process allows companies to moveworkers where they are needed.

Production scheduling and work hour consistency synchronized with demand. Ifthere is no demand for a product at the time, it is not made. This saves thecompany money, either by not having to pay workers overtime or by having them

focus on other work or participate in training. Increased emphasis on supplier relationships. A company without inventory does

not want a supply system problem that creates a part shortage. This makessupplier relationships extremely important.

Supplies come in at regular intervals throughout the production day. Supply issynchronized with production demand and the optimal amount of inventory is onhand at any time. When parts move directly from the truck to the point ofassembly, the need for storage facilities is reduced.
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