Understanding Sustainable Competitive Advantage Toyota
Toyota’s global competitive advantage is based on a corporate philosophy known as the Toyota Production System. The system depends in part on a human resources management policy that stimulates employee creativity and loyalty but also on a highly efficient network of suppliers and components manufacturers. Employee Empowerment: Selected Average Annual Results More than 700,000 improvement suggestions were submitted by Toyota's employees. That is an average of over 10 improvement suggestions per employee per year. Over 99% of suggestions were implemented.
7 Principles of Toyota Production System 1. Reduced Setup Times: All setup practices are wasteful because they add no value and they tie up labor and equipment. By organizing procedures, using carts, and training workers to do their own setups, Toyota managed to slash setup times from months to hours and sometimes even minutes. 2. Small-Lot Production: Producing things in large batches results in huge setup costs, high capital cost of high-speed dedicated machinery, larger inventories, extended lead times, and larger defect costs. Because Toyota has found the way to make setups short and inexpensive, it became possible for them to economically produce a variety of things in small quantities. 3. Employee Involvement and Empowerment: Toyota organized their workers by forming teams and gave them the responsibility and training to do many specialized tasks. Teams are also given responsibility for housekeeping and minor equipment repair. Each team has a leader who also works as one of them on the line. 4. Quality at the Source: To eliminate product defects, they must be discovered and corrected as soon as possible. Since workers are at the best position to discover a defect and to immediately fix it, they are assigned this responsibility. If a defect cannot be readily fixed, any worker can halt the entire line by pulling a cord (called Jidoka). 5. Equipment Maintenance: Toyota operators are assigned primary responsibility for basic maintenance since they are in the best position to defect signs of malfunctions. Maintenance specialists diagnose and fix only complex problems, improve the performance of equipment, and train workers in maintenance. 6. Pull Production: To reduce inventory holding costs and lead times, Toyota developed the pull production method wherein the quantity of work performed at each stage of the process is dictated solely by demand for materials from the immediate next stage. The Kamban scheme coordinates the flow of small containers of materials between stages. This is where the term Just-in-Time (JIT) originated. 7. Supplier Involvement: Toyota treats its suppliers as partners, as integral elements of Toyota Production System (TPS). Suppliers are trained in ways to reduce setup times, inventories, defects, machine breakdowns etc., and take responsibility to deliver their best possible parts.
Corporate Culture The fundamental reason for Toyota's success in the global marketplace lies in its corporate philosophy – the set of rules and attitudes that govern the use of its resources. Toyota has successfully penetrated global markets and established a world-wide presence by virtue of its productivity. The company's approach to both product development and distribution is very consumer-friendly and marketdriven. Toyota's philosophy of empowering its workers is the centre-piece of a human resources management system that fosters creativity, continuous improvement, and innovation by encouraging employee participation; and that likewise engenders high levels of employee loyalty. Knowing that a workplace with high morale and job satisfaction is more likely to produce reliable, highquality products at affordable prices, Toyota has institutionalized many successful workforce practices. Toyota has done so not only in its own plants but also in supplier plants that were experiencing problems.1 Although many car manufacturers have earned a reputation for building highquality cars, they have been unable to overcome Toyota's advantages in human resource management, supplier networks and distribution systems in the highly competitive car market. Much of Toyota's success in the world markets is attributed directly to the synergistic performance of its policies in human resources management and supply-chain networks. The Focus of Toyota Production System Real TPS is not just about “flow” or “pull production” or “cellular manufacturing” or "load leveling". TPS in Toyota is primarily concerned with making a profit, and satisfying the customer with the highest possible quality at the lowest cost in the shortest lead-time, while developing the talents and skills of its workforce through rigorous improvement routines and problem solving disciplines. This stated aim is mixed in with the twin production principles of Just in Time (make and deliver the right part, in the right amount, at the right time), and Jidoka (build in quality at the process), as well as the notion of continuous improvement by standardization and elimination of waste in all operations to improve quality, cost, productivity, lead-time, safety, morale and other metrics as needed.