Transcript ERP Implementation

1990
2003
2004
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Chapter 9
The Lean,
The Just-in, and
The Toyota Way
2007
2011
2011
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What happened to Toyota recently?
Robert E. Cole, Professor, UC Berkeley
MIT Sloan Management Review, 52(4), 2011
Toyota was no ordinary company. It was in a class by
itself, long known, ever revered, for its sterling quality.
But in October 2009 consumers were surprised by the
first of a series of highly publicized recalls of Toyota
vehicles in the United States.
Exaggerated by media and politicized by politicians,
Toyota’s quality image among consumers suffered
significantly with the recalls.
Floor mats, sticky gas pedals, software glitches that
affected braking, electronic control, driver errors, or to help
“Government Motors”?
So what really happened and why?
Why has Toyota been struggling with quality issues?
Robert E. Cole, Professor, UC Berkeley
MIT Sloan Management Review, 52(4), 2011
Management’s recent focus on growth
weakened the emphasis on quality.
The increasing technical complexity of
the company’s products.
Underestimated the great influence of
media reports.
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Strategic Focus on Growth
In 1995, top management called for rapidly increasing
its global market share from 7.3% (1995) to 10% over
the next decade. Toyota achieved 9.7% in 1998, and
then set a new target of 15% by 2010, surpassing GM
as the global leader.
Its overseas manufacturing facilities increased from 37
to 53, and global sales rose an average of 9% per
year between 2002 and 2008.
Hired significant number of new employees,
contracting with new non-Japanese suppliers and
hiring large number of of contract engineers.
The expansion gave management little opportunity for
adjusting its systems and practices to accommodate
such strong growth.
Key decisions affecting product development, supplier
management and production became biased in favor
of meeting sales, cost cutting and profit targets.
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Product Complexity
A typical car today has more than 60 electronic
control units and more than 10 million lines of
computer code — a 400% increase over what was a
decade ago.
Toyota’s North America sales increased from 1.7 to
2.9 million units (71%) between 2000 and 2007, and
product offerings grew from 18 to 30 models.
Lead time between exterior design approval and
start of sales was compressed to less than 20
months.
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Did Washington Punish Toyota to Help U.S. Automakers?
Ray Lahood, the Secretary of Transportation made his illadvised offhand remark (2/3/10) that Toyota owners
should stop driving their cars and take them into
dealerships. Despite his almost immediate clarification,
damage (or help for “Government Motors”) was done.
Succumbing to political pressure, NHTSA commissioned
NASA to study the problem. After 11 months, NASA found
absolutely no evidence that Toyota's electronic throttle
control systems were at fault for unintended
acceleration(1/11).
NHTSA knew all along that the only problems were floor
mats and sticky pedals, but they had to go ahead with the
NASA study to convince members of Congress who
believed electronics were the cause of sudden
acceleration despite a total lack of evidence to support
that belief.
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Did Washington Punish Toyota to Help U.S. Automakers?
Moreover, NHTSA confirmed only two deadly crashes,
the Saylor crash and one more, as a result of pedal
entrapment and none for the sticky gas pedal problem.
According to NASA, reported cases of unintended
acceleration are exceedingly rare events. The probability
of these events is about 1/100,000 vehicles a year or 1 in
1.4 billion miles driven.
There has been only one documented accident caused
by the floor mats — the one involving the loaner Lexus,
where the dealer had used the wrong floor mat and failed
to attach it properly with the provided restraining clips.
There have been no documented cases of accidents
caused by the very small number of sticky pedals. Most
accidents have been attributed to driver error.
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Media Reports
"I was itching for the world to have a crisis,”
Roone Arledge, the legendary chief of ABC News (1977).
CBS Evening News (Jan. 2010) anchor Katie Couric
opened her broadcast with the story of Jim Sikes, a
California real estate agent who claimed to have lost
control of his Toyota Prius, shooting up to 94 miles an
hour. Jim's contentions were later discovered to be
fraudulent—he was facing serious financial difficulties
and had told his story to obtain a large settlement.
The Los Angeles Times, criticized NHTSA for not
pursuing alleged electronic causes of the problem.
Lawyers for plaintiffs charging faults in Toyota
electronic controls fueled the speculation.
Media reports ignored the low probability of
unintended acceleration. Negative events drive the
news, not careful analyses of their likelihood.
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Implications for Supplier Management
70% of the value added in Toyota’s vehicles comes from
parts and subassemblies produced by its suppliers.
In response to the growth, Toyota had to delegate more
design work to outside contract engineers and take on
new suppliers because the internal engineering
resources and existing supplier base couldn’t keep up
with the demands. It came to use outside engineers for
as much as 30% of its development work globally.
In the wake of rapid growth, Toyota increasingly failed to
properly evaluate and approve components designed
and produced by outside, especially overseas, suppliers.
Suppliers attributed their growing problems to less
experienced staff in Toyota’s purchasing group who had
not internalized the “Toyota Way.”
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Toyota’s Actions
Slow down the product development.
Establish a new team of 1,000 quality engineers.
Expand its rapid quality response teams around the
globe.
Reduce its percentage of outside engineers to 10%.
Although driver error appears to have been the
primary cause of the acceleration problems, user
error can be reduced by better design. Toyota
decided to reconfigure the shape of the acceleration
pedal in response to the floor mat problem.
In contrast to centralized management, delegate
more power to overseas (e.g., U.S.) executives to
make decisions affecting recalls.
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Lessons Learned
Robert E. Cole, Professor, UC Berkeley
MIT Sloan Management Review, 52(4), 2011
Identify risks early and eliminate them while they are
still minor problems (risk management)
Despite the growing availability of real data, consumers
form perceptions of product quality on what is often
limited information and personal experiences (“My
brother loves his XYZ”).
Consumers may hold on to their beliefs even in the
face of objective information on the contrary.
Negative quality perception can linger long after the
objective quality problems have been corrected.
Toyota’s problems were not caused by a faulty
production system but by poor management decisions.
There is no such thing as corporate DNA, and that
superior production systems, important as they are,
cannot be taken for granted.
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Concluding Remarks
Robert E. Cole, Professor, UC Berkeley
MIT Sloan Management Review, 52(4), 2011
While Toyota's quality has recently declined, it still
score in the top ranks of quality performers.
Toyota pioneered numerous quality improvement
methodologies in the 1960s, providing the operational
basis for Japanese total quality control (TQC). TQC, in
turn, provided the basic building blocks for the Six Sigma
approach, actively embraced by leading U.S. companies
such as GE and Boeing.
It would be difficult to overstate Toyota’s role in shaping
the modern approach to quality improvement.
The Toyota production system still represents state of the
art in manufacturing and continue to provide an important
model to companies in a wide range of industries.
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Further Readings
"Toyota, The Media Owe You an Apology,“ by Ed
Wallace, BusinessWeek, Feb. 10, 2011.
“What Really Happened to Toyota?” by Robert E. Cole,
MIT Sloan Management Review, 52(4), 2011
“Toyota's Recall Crisis: What Have We Learned?” by
Jeffrey Liker, Harvard Business Review, Feb. 11, 2011.
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JIT: Some buzzwords
“Pursuing the last grain of rice in the corner of the
lunchbox”
“Continuous commitment to the pursuit of excellence
in all phases of manufacturing system design and
operation”
“Produce the required items, at the required quality
and in the required quantities, at the precise time they
are required”
Relentless Pursuit of Perfection
Passionate Pursuit of Perfection
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Japan: Limited Resources
Japan
California
U.S.
Land
Population
(000 Sq. Miles)
(Millions)
145
156
3,539
128
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300
Culture to Survive
Any scrape is not acceptable
Large inventory is evil.
Save more, waste none!
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The Recent
Toyota 2007
2007 marks the 70th anniversary of Toyota’s funding, 50
years since it started exporting cars to the U.S.
Overtakes GM as the world’s largest automaker.
Has been top ranked in terms of reliability, initial quality, and
long-term durability for the past 15 years.
Lexus goes from 0 to 25% market share in 10 years; the #1
luxury brand in the U.S.
In 2006, Toyota made a profit of $13.7 billion, whereas GM
lost $1.97 billion and Ford lost $12.61 billion.
Most profitable automaker on earth.
Market capitalization (May 2007) of $186 billion is more than
1.5 times GM’s ($16 B), Ford’s ($15.7), and DaimlerCrysler’s
($81.7 B) combined.
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The Humble Past
Toyota in the past
≈ Poor quality and cheap products
(1950s~1970s)
US market share:
Toyota: 2%(1970), 3%(1980), 8%(1990), 9%(2000),
13%(2006), 16%(2009)
GM: 40%(1970), 26%(2006), 19%(2009)
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The Future
What’s the secret?
Toyota is proud of the fact that its management
principles are different from those taught in
Business schools.
Other companies find it very difficult, if not
impossible, to emulate Toyota, because its
management tools matter less than its mind-set.
“Toyota is as much a state of mind as it is a car
company.” (--USA Today--)
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The Future
Why competitors have not yet been able
to imitate or learn from Toyota?
“We are not so concerned that our knowledge will
spillover to competitors. Some of it will. But by the
time it does, we will be somewhere else.” –Toyota
executive-“We are a moving target.”
“Toyota’s advantage is sustainable because Toyota
and its suppliers have a ‘dynamic learning capability’
and learn at a faster rate than competitors.”
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The Toyota Traditions
Father of Kiichiro Toyoda, the
founder of Toyota Motor.
“Five Main Principles of Toyoda”
1.
2.
3.
4.
5.
(1935)
Always be faithful to your duties, thereby contributing to
the Company and to the overall good.
Always be studious and creative, striving to stay ahead
of the times.
Always be practical and avoid frivolousness.
Always strive to build a homelike atmosphere at work
that is warm and friendly.
Always have respect for God, and remember to be
grateful at all times.
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The Toyota Production System (TPS)
Pioneer of the Toyota Production
System (TPS) in the 1950s
Taiichi Ohno visited Ford’s Rough plant in Detroit several times,
but soon concluded that mass production as running at Ford
could never work in Japan, as there was too much muda (waste)
everywhere.
Muda: any activity that does not
add value.
Example: Muda of manpower,
overproduction, inventories and
excess processing, defects,
waiting, transport, idle time, etc.
Japan and Toyota were too poor to
have these kinds of waste.
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The Toyota Production System (TPS)
Pioneer of the Toyota Production
System (TPS) in the 1950s
Inspired by the modern supermarket system in the USA, Ohno
invented the so-called just-in-time or kanban system to reduce muda
(waste). e.g., parts would be produced as they are needed and arrive
just in time when they are needed. The concept was later extended
through the entire supply chain.
The concept of muda (waste) became one of the most important
concepts in quality improvement activities originated by Taiichi
Ohno’s famous production philosophy from Toyota in the early 1950s.
The philosophy was widely called Toyota production system (TPS) in
Japan, and later labeled as lean production and lean thinking.
Muda (waste) is anything (that increase cost, time, etc.) without
adding value for customers.
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The Lean Production
Published in 1990, The Machine that Changed the World is the
result of a 5-year, $5-million study of the auto industry in the world
by Womack et al. at MIT.
The term “lean” was coined because the best plants in Japan
used less of everything: half the human efforts in the factory, half
the manufacturing space, half the investment in tools, half the
engineering hours to develop a new product in half the time, far
less than half the needed inventory, etc.
These impressive results are due to the quality evolution in Japan
from 1950 to 1980, during which most Western companies did not
bother very much on quality issues.
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The Lean Production
The 5 principles of Lean Production
1. Specify what creates value from the customer’s perspective
2. Identify the value stream for each product
3. Make the value flow without interruptions
4. Make only what is pulled by the customer
5. Strive for perfection by continually removing wastes
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Total Quality Management
The new management philosophy “TQM” was born in the late
1980s because West woke up and began to study “what
happened in Japan.”
TQM is a company culture characterized by the participation of
everyone to enhance customer satisfaction through continuous
improvement. T=?, Q=?, M=?
The roots of TQM can be traced back to the Japanese quality
evolution, where Toyota was one of the pioneering companies.
Toyota practiced the philosophy and principles of TQC as early as
late 1950s. The Japanese version of TQC became the main
reference when the term TQM was born in late 1980s.
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Total Quality Management
It is interesting to note that TQM was not mentioned at all in
The Machine that Changed the World (published in 1990) as
TQM was not a well-known management philosophy at that
time.
Quality control (QC) is regarded as a narrow engineering
discipline focusing on defects in production. In 1988, quality
control has developed into a holistic management philosophy
called TQM, which deals with not only production but also all
other processes in the company in all types of industries
including services.
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The 6 Sigma
Motorola pioneered the concept of a six sigma program in late 1980s.
Since then, many other companies have developed their own 6-sigma
programs, including GE, TI, Eastman Kodak.
Motorola’s “six steps to 6 sigma”
1.
2.
3.
4.
5.
6.
Identify physical and functional requirements of the customers
Determine the critical characteristics of product
Determine for each characteristic, whether controlled by part,
process or both
Determine maximum range of each characteristics
Determine process variation for each characteristics
If process capability (Cp) is less than 2, then redesign
materials, product, process as required
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The 6 Sigma
In 1996, Jack Welch, then Chairman and CEO of GE, declared
the 6 sigma process to be GE’s strategy for improving quality and
competitiveness.
GE’s 4 simple but rigorous steps to 6 sigma:
1.
2.
3.
4.
Measuring every process and transaction
Analyzing each of them
Painstakingly improving them
Rigorously controlling them for consistency
once they have been improved.
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The 6-Sigma
6-sigma improvement process usually follow the so-called DMAIC
process.
Define: Identification of the process or product that needs improvement.
Measure: Identify those characteristics of the product or process that are critical
to the customer’s requirements for quality performance and which
contribute to customer satisfaction.
Analyze: Evaluate the current operation of the process to determine the potential
sources of variation for critical performance parameters.
Improve: Select those products or process characteristics which must be
improved to achieve the goal. Implement improvements.
Control: Ensure that the new process conditions are documented and monitored
via statistical process control methods (SPC). Depending on the
outcome it may become necessary to revisit one or more of the
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preceding phases.
The 6 Sigma
The DMAIC process may be regarded as a short version of
PDCA cycle, also referred to as either the Shewhart Cycle
or the Deming Wheel, which became an important quality
improvement standard.
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The Lean and 6-Sigma
The 5 principles and the aim of lean production as well as the
principles and tools behind the 6-sigma process are embedded in
principles, concepts and tools of the holistic management philosophy
called TQM, or Japan’s quality evolution.
Both lean and 6 sigma recommend simple and clear roadmaps to
follow for companies that have decided to embark on a quality journey
to TQM or world class quality.
On the surface, 6-sigma and DMAIC appears to be easier to
understand and hence to implement compared to the five lean
production principles. 6-sigma and DMAIC does not explicitly require
the “pull” and flow principles from lean production. This may make it
easier to apply to non-manufacturing operations.
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The Toyota Way: 4 P Model
Jeffery K. Liker, 2004
1P: Philosophy: Long-term Philosophy
2P: Process: The right process will produce
the right results
3P: People and Partners: Add value to the
organization by developing your
people and partners
4P: Problem Solving: Continuously solving
root problems drives organizational
learning
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The Toyota Way: 14 Management Principles
from the World’s Greatest Manufacturer
Jeffery K. Liker, 2004
1.
2.
3.
4.
5.
6.
7.
Base your management decisions on a long-term
philosophy, even at the expense of short-term financial
goals.
Create continuous process flow to bring problems to the
surface.
Use “pull” systems to avoid overproduction.
Level out the workload.
Build a culture of stopping to fix problems, to get quality
right the first time.
Standardized tasks are the foundation for continuous
improvement and employee empowerment.
Use visual control so no problems are hidden.
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The Toyota Way: 14 Management Principles
from the World’s Greatest Manufacturer
Jeffery K. Liker, 2004
8.
9.
10.
11.
12.
13.
14.
Use only 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.
Make decisions slowly by consensus, thoroughly
considering all options ; implement decisions rapidly.
Becomes a learning organization through relentless
reflection and continuous improvement.
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The Toyota Way: 4P & 14 Principles
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The Toyota Way—Two Pillars (2001)
Toyota’s internal document
I. Continuous Improvement
Challenge:
We form a long-term vision, meeting challenges with
courage and creativity to realize our dreams.
Kaizen: (改善; Change for the better; improvement)
We improve our business operations continuously, always
driving for innovation and evolution.
Genchi Genbutsu: (現地現物; Go and see for yourself)
We got to the source to find the facts to make correct
decisions, build consensus, and achieve our goals.
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The Toyota Way—Two Pillars (2001)
Toyota’s internal document
II. Respect for People
Respect:
We respect others, make every effort to understand
each other, take responsibility, and do our best to build
mutual trust.
Teamwork:
We stimulate personal and professional growth, share
the opportunities of development, and maximize
individual and team performance.
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The Toyota Way—Two Pillars (2001)
Katsuaki Watanabe, President (05-09)
Toyota Motor Corporation.
I. Continuous Improvement
II. Respect for People
“Respect is necessary to work with people. By
“people” we mean employees, supply chain
partners, and customers. “Customer first” is one
the company’s core tenets. We don’t mean just
the end customer; on the assembly line the
person at the next workstation is also your
customer. That leads to teamwork.”
-- Katsuaki Watanabe, HBR, 2007 --
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The Toyota Way—Two Pillars (2001)
Katsuaki Watanabe, President (05-09)
Toyota Motor Corporation.
II. Respect for People
“If you adopt this principle, you’ll also keep analyzing
what you do in order to see if you are doing things
perfectly, so you’re not troubling your customer. That
nurtures your ability to identify problems, and if you
closely observe things, it will lead to kaizen: continuous
improvement.”
-- Katsuaki Watanabe, HBR, 2007 -“The root of the Toyota Way is to be dissatisfied
with the status quo; you have to ask constantly,
“Why are we doing this?”
-- Katsuaki Watanabe, HBR, 2007 -39
The Toyota Way—Two Pillars (2001)
Katsuaki Watanabe, President (05-09)
Toyota Motor Corporation.
“There is no end to the process of learning
about the Toyota Way. I don’t think I have a
complete understanding even today, and I have
worked for the company for 43 years.”
-- Katsuaki Watanabe, HBR, 2007 --
“It takes time to develop Toyota people, who are trained on
the job rather than in a classroom. Toyota develops T-type
people. The vertical stroke of the T stands for the fact that
employees must intensify or deepen what they do, and the
horizontal stroke indicates that they must learn other jobs.”
-- Katsuaki Watanabe, HBR, 2007 -40
The Toyota Way—Two Pillars (2001)
II. Respect for People
“Year after year, Toyota has been able to get more out of its
people than its competitors have been able to get out of
theirs,” according to Gary Hamel [1] .
“It took Detroit more than 20 years to ferret out the radical
management principle at the heart of Toyota's capacity
for relentless improvement ....Only after American
carmakers had exhausted every other explanation for
Toyota's success — an undervalued yen, a docile
workforce, Japanese culture, superior automation—were
they finally able to admit that Toyota's real advantage
was its ability to harness the intellect of ‘ordinary’
employees."
[1] "Management Innovation," by Gary Hamel, Harvard Business Review, February, 2006,
p. 74.
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The Toyota Way—Two Pillars (2001)
II. Respect for People
Lean is a management system that creates engaged,
thinking people at every level of the organization and
most particularly at the front line. If you implement all
of the lean principles save one -respect for peopleyou will reap only a shadow of the potential
advantages that lean can bring.
If you implement only one principle -respect for peopleyou will position the people in your organization to
discover and implement the remaining lean principles.
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