The open Secret of Toyota's Change
Why German carmakers fail to implement the Toyota Production System
©2006
Masterarbeit
53 Seiten
Zusammenfassung
Inhaltsangabe:Abstract:
This Master thesis explores the organisational change, as performed by Toyota after World War II which, within decades, made this company the most successful automobile producer in the world and a model of corporate governance.
Since the Toyota Production System (TPS) was born and continuously developed, it gave such a boost of productivity to the Japanese automobile industry that soon it was copied all over the world. The details of this system, which is to a huge amount based on practical experience and which requires a huge amount of preparatory work, are sufficiently known within the industry. Nevertheless, other Japanese companies and, in particular, international companies fail to catch up with Toyota. The question is, why?
Quite a number of car manufacturers already produce according to lean principles, as the TPS instruments are sometimes called, quite successfully, as it seems, and nevertheless they lag behind the performance of Toyota. A highly saturated North American and European automobile market requires thorough change, since companies, due to an increasing global competition, need to undergo some kind of change to survive in the market. Experts assume further consolidation among Original Equipment Manufacturers (OEM) until 2010.
Although everything seems to be known about TPS, there is obviously a remainder, because otherwise there would be more Toyotas than just one.
There must be something in TPS that has not been identified or has been left out so far by the majority of OEMs all over the world. (Judging from the current competition in the automotive industry, it is more likely that this something has been unintentionally ignored). This is the case although the whole system, without any restrictions, is made accessible to competitors and anyone interested in TPS. Obviously, the knowledge of this mostly missing aspect or link in TPS is restricted, because in the current situation in the automotive industry no company can afford giving away any chances.
This master thesis aims at identifying and preparing the above mentioned, apparently hidden or unintentionally ignored, aspects of the Toyota Production System (TPS) which make Toyota more successful than other car makers.
Problem definition:
Although everything seems to be known about TPS, there is obviously a remainder, because otherwise there would be more Toyotas than just one. There must be something in TPS that has not been identified or has […]
This Master thesis explores the organisational change, as performed by Toyota after World War II which, within decades, made this company the most successful automobile producer in the world and a model of corporate governance.
Since the Toyota Production System (TPS) was born and continuously developed, it gave such a boost of productivity to the Japanese automobile industry that soon it was copied all over the world. The details of this system, which is to a huge amount based on practical experience and which requires a huge amount of preparatory work, are sufficiently known within the industry. Nevertheless, other Japanese companies and, in particular, international companies fail to catch up with Toyota. The question is, why?
Quite a number of car manufacturers already produce according to lean principles, as the TPS instruments are sometimes called, quite successfully, as it seems, and nevertheless they lag behind the performance of Toyota. A highly saturated North American and European automobile market requires thorough change, since companies, due to an increasing global competition, need to undergo some kind of change to survive in the market. Experts assume further consolidation among Original Equipment Manufacturers (OEM) until 2010.
Although everything seems to be known about TPS, there is obviously a remainder, because otherwise there would be more Toyotas than just one.
There must be something in TPS that has not been identified or has been left out so far by the majority of OEMs all over the world. (Judging from the current competition in the automotive industry, it is more likely that this something has been unintentionally ignored). This is the case although the whole system, without any restrictions, is made accessible to competitors and anyone interested in TPS. Obviously, the knowledge of this mostly missing aspect or link in TPS is restricted, because in the current situation in the automotive industry no company can afford giving away any chances.
This master thesis aims at identifying and preparing the above mentioned, apparently hidden or unintentionally ignored, aspects of the Toyota Production System (TPS) which make Toyota more successful than other car makers.
Problem definition:
Although everything seems to be known about TPS, there is obviously a remainder, because otherwise there would be more Toyotas than just one. There must be something in TPS that has not been identified or has […]
Leseprobe
Inhaltsverzeichnis
Doris Kermer
The open Secret of Toyota's Change
Why German carmakers fail to implement the Toyota Production System
ISBN: 978-3-8366-0516-8
Druck Diplomica® Verlag GmbH, Hamburg, 2008
Zugl. FOM - Fachhochschule für Oekonomie und Management Essen, Essen,
Deutschland, MA-Thesis / Master, 2006
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The open Secret of Toyota's Change
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Table of Contents
1
Introduction... 6
1.1
Background ... 6
1.2
Problem definition... 7
1.3
Objective ... 7
1.4
Methodology... 7
1.5
Determination leads to longlasting success ... 22
1.6
Preliminary results... 28
1.7
Directed backing information... 28
1.8
Utility analysis ... 37
2
Results and Conclusion... 40
3
Outlook ... 42
The open Secret of Toyota's Change
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List of abbreviations
e. g. -
exempli gratia
etc. -
et cetera
FAW -
Forschungsstelle Automobilwirtschaft
i. e. -
id est
IQS -
Initial Quality Survey
ISI -
IWK Survival Index
JIS -
Just in sequence
JIT -
Just in time
TPS -
Toyota Production System
TVAL -
Toyota Verification of Assembly-Line
VDS -
Vehicle Dependability Study
The open Secret of Toyota's Change
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List of figures and tables
(This list is not complete; sources that hint at companies that have been examined in
this work have been removed)
Figure 1: Comparison of results before and after the introduction of TPS ... 21
Figure 2: Dealer Satisfaction Index (DSI) 2003 - 2005, FAW Bamberg 2005 ... 23
Figure 3: 2005 vehicle dependability study - J. D. Power & Associates, 2005... 24
Figure 4: Imageprofile 2006 ranking list of automotive companies ... 25
Figure 5: Imageprofile 2006, ranking of criteria since 1990 ... 26
Figure 6: Production Systems... 27
Table 1: Utility Analysis ... 38
Table 2: Performance Objectives and Scale... 39
The open Secret of Toyota's Change
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Acknowledgements
Special thanks to all experts who readily filled in the questionnaire and answered my
questions, my tutor at the FOM Dr. Cetin Nazikkol, Peter Siemens for his MS excel
support (during his own master thesis), my friends who checked the questionnaire
and made recommendations, all people who gave me valuable references and all
who helped me otherwise.
The open Secret of Toyota's Change
Page 6 of 50
1 Introduction
1.1 Background
This Master thesis explores the organisational change, as performed by Toyota after
World War II which, within decades, made this company the most successful
automobile producer in the world and a model of corporate governance.
Forced by historic circumstances, Toyota, which started as a company producing
automated looms, underwent a dramatic and sweeping revolution, which finally made
it number two of the most successful car manufacturers in the world regarding sales
volume.
Following World War II, Japan could not afford mass production as was commonly in
place elsewhere. A tiny domestic market that demanded for a wide range of vehicles,
new labour laws introduced by the Americans that strenghthened the workers'
negotiation position, a post-war economy that was starved for capital and foreign
exchange (and thus offered no way of acquiring expensive machinery for mass
production), and pressure from huge foreign motor vehicle producers who wanted to
defend their markets against Japanese exports made a new way to satisfy the
Japanese domestic market inevitable.
Productivity indices of that time claimed that one American worker was as productive
as nine Japanese workers. At Toyota, one was amazed about this relation and it was
understood that a lot of energy was wasted by Japanese workers. Soon the Toyota
Production System (TPS) was born and continuously developed. It gave such a
boost of productivity to the Japanese automobile industry that soon it was copied all
over the world. The details of this system, which is to a huge amount based on
practical experience and which requires a huge amount of preparatory work, are
sufficiently known within the industry. Nevertheless, other Japanese companies and,
in particular, international companies fail to catch up with Toyota. The question is,
why?
Studies have shown that the German industry as a whole does not only produce
costly because of high wages. Additionally, potential for improvement is far from
being exhausted. If it were used, costs for processes could be lowered substantially.
But obviously this is only one side of the story. Quite a number of car manufacturers
already produce according to lean principles, as the TPS instruments are sometimes
The open Secret of Toyota's Change
Page 7 of 50
called, quite successfully, as it seems, and nevertheless they lag behind the
performance of Toyota.
A highly saturated North American and European automobile market requires
thorough change, since companies, due to an increasing global competition, need to
undergo some kind of change to survive in the market. Experts assume further
consolidation among Original Equipment Manufacturers (OEM) until 2010.
1.2 Problem definition
Although everything seems to be known about TPS, there is obviously a remainder,
because otherwise there would be more "Toyotas" than just one.
There must be something in TPS that has not been identified or has been left out so
far by the majority of OEMs all over the world. (Judging from the current competition
in the automotive industry, it is more likely that this `something' has been
unintentionally ignored). This is the case although the whole system, without any
restrictions, is made accessible to competitors and anyone interested in TPS.
Obviously, the knowledge of this mostly missing aspect or link in TPS is restricted,
because in the current situation in the automotive industry no company can afford
giving away any chances.
1.3 Objective
This master thesis aims at identifying and preparing the above mentioned, apparently
hidden or unintentionally ignored, aspects of the Toyota Production System (TPS)
which make Toyota more successful than other car makers.
The main objective consists of the collection of data and information from literature
that hint at Toyota's `open secret'; subordinate targets will be the backing of the
gained information by a suitable analysis.
1.4 Methodology
A deductive approach has been selected. Due to the enormous amount of
information it was not possible to evaluate all sources that are available on the
subject.
This work provides hypotheses on why Toyota has such a lead over its competition.
Four hypotheses were selected after an initial literature research aiming to identify
well known German automobile manufacturers who produce according to lean
principles (that are derived from the TPS).
The open Secret of Toyota's Change
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The TPS is superior to other production systems ...
1. ...because it aims for 100 % value added for the customer.
2...because it is characterised by uncompromising and longlasting determination.
3. ...because it guarantees full transparency and is comprehensible.
4. ...because it involves all stakeholders and shareholders of the company
regardless of hierarchy.
These hypotheses were derived by the author following an initial literature research
on the topic including books and internet resources. These sources will be verified as
far as possible.
At the same time a questionnaire was developed to illuminate production and overall
processes within the respective companies. This questionnaire was sent to as much
employees of the companies in focus as possible to support literature findings and to
catch a glimpse of internal organisation and overall orientation of the four German
car manufacturers.
Characteristic of the TPS is the huge amount of preparatory work. To successfully
install the TPS it is inevitable to become aware of various aspects in advance, e.g.
the true value added for the customer. Only by this a company can put up itself
adequately to be able to fully satisfy its customers' needs. An example taken from
Womack and Jones illustrates this. Four companies, all members of the combine of
Pratt and Whitney, a leading producer of turbine engines
1
, participate in a value
chain. Each of them operates rather isolated, preoccupied with its own concerns. No
one of the four parties has ever analysed the
whole
value chain to optimise the
cooperation between the four companies for actions in one company have an
influence on processes in the downstream one.
2
Thus each company will merely
optimise its own processes, but never the whole value chain. Furthermore, redundant
processes are likely, as is the case in this example. Womack and Jones talk of
1
For further information see the company's homepage on http://www.pratt-whitney.com/
2
Womack and Jones, 2005, p. 25
The open Secret of Toyota's Change
Page 9 of 50
"desintegrated creation of value", which creates a huge amount of
muda
(unnecessary effort).
Studies have shown that the German industry as a whole does not only produce
costly because of high labour cost. Additionally, potential for improvement is just
given away. If it were used, costs for processes could be lowered drastically.
3
Other
sources, too, come to similar conclusions: pressure on carmakers in a global market
increases and hence creates the need for rationalisation, e. g. by lean development,
as it is called in this source.
4
The Management Engineers study sees further potential for optimisation in a
redesign of production processes or build-up of new plants with modern structures.
This could save as much costs as the improvement of existing structures. Overall
30% to 50% of production costs in German automobile plants could be saved in such
a way, according to the study. The result also applies to companies with a high
degree of automation and creation of high value added with the help of innovations.
Lowering of wages is also needed, though, to achieve the calculated level of savings.
Potential for further savings is seen especially in the administration where one third
of the company's work is done, but which is a department which does not contribute
to value added. Furthermore nested structures as well as redundant work create high
costs.
Womack and Jones
5
describe the difficulties of implementing TPS. Most managers
they have met tried to implement single instruments without an understanding of the
whole concept. They drowned in work due to a missing overview. According to the
authors "shows of strength" are necessary to turn a mass production system into a
lean one
6
. Yet, Ford recognized the tendency of people to stick to a method while it is
3
Results of a study conducted by ,,Management Engineers", a strategy consultancy headquartered in
Düsseldorf, according to this source belonging to the top 15 of management consultancies in
Germany. (The study was published in the paper "Handelsblatt"), on:
http://www.wiwo.de/pswiwo/fn/ww2/sfn/buildww/elemid/10/searchno/0/id/1301/SH/8a2301067106a9ee
1ec20179469208/depot/0/index.html
(copied 11/2005)
4
Automobil Industrie 05/2005, on
http://www.ai-forum.com/images/Lean_Development.pdf
(copied
11/2005)
5
Womack and Jones, 2005, p. 8
6
Womack and Jones, 2005, p. 10
The open Secret of Toyota's Change
Page 10 of 50
long overdue to change it.
7
Womack and Jones recommend rather to compete
against perfection than against rival firms.
8
This, of course, requires uncompromising
determination.
A survey of Management Engineers
9
comes to the conclusion that in Germany,
companies give away huge potential for optimisation with regard to processes and
costs: in most factories, around 20% of costs could be saved just by process
optimisation, that is mainly a more efficient assignment of the workforce. A reason for
problems in implementing the TPS mentioned in a number of sources is the
existence of mass production structures that in a way `block' innovation.
Steffen Lehndorff
10
who deals with problems of supply chains due to inadequate
change towards lean production examines the consequences for supplier companies
if the philosophy of JIT is not fully understood. Production processes have been
adapted to the pull principle but on the other hand very often the cost-intensive
machinery is to be used as long as possible and preferably without interruptions.
Further inconsistencies and relocations of problems lead to a constant disorientation
within the system, and it becomes evident that mostly the supply chain is not
optimised at all. Lehndorff attributes this problem to the fact that only a limited
understanding of "JIT" exists which reduces JIT to precise supply of companies
without recourse to larger inventory, in other words: a logic of supply. Lehndorff
explains the true meaning of JIT: it is used as a lever because without inventory all
processes have to run optimally so that there is no need for parts from an inventory.
The aspect of transparency is important within the company itself but also outside,
e.g. when an analysis of the value chain outside the company is required. Closely
related to full transparency are information hiding aspects. Womack and Jones give a
7
Henry Ford cited in Weber, 2004: ,,Geschäftsleute versagen in ihrem Geschäft, weil ihnen die alten
Methoden so gut gefallen, dass sie sich nicht dazu aufraffen können, sie zu ändern."
8
Womack and Jones, 2005, p. 70
9
"
Management Engineers" is a consulting company with headquarter in Düsseldorf, and, according to
the source, belongs to the top 15 of management consultancies in Germany:
http://www.wiwo.de/pswiwo/fn/ww2/sfn/buildww/elemid/10/searchno/0/id/1301/SH/8a2301067106a9ee
1ec20179469208/depot/0/index.html
(copied 05/11/05)
10
Steffen Lehndorff: ,,Menschen als Problemlöser - oder nur Puffer?", in: Institut Arbeit und Technik
(IAT): Jahrbuch 1995. Gelsenkirchen, p. 114-125; "Wissenschaftszentrum NRW, Institut für Arbeit und
Technik" online on
http://www.iatge.de/aktuell/veroeff/am/lehndorff95a.html
(copied 19/12/05)
The open Secret of Toyota's Change
Page 11 of 50
vivid example on how
muda
could survive over decades because in a value chain
every company worked on its own, for reasons of distrust:
Keines der vier Unternehmen (...) hatte jemals seine Aktivitäten den anderen drei Parteien
vollständig transparent gemacht. Zum Teil war dies eine Frage des Vertrauens jedes
Unternehmen hatte Angst, dass die vor- und nachgelagerten Firmen jede geeignete
Information für härtere Verhandlungen benutzen würden.
11
Transparency, which is essential for the TPS to work, is only possible if hierarchical
thinking and rivalry among companies are given up for the benefit of true
partnerships from a company to its suppliers and partner companies who, together,
create the value added.
In this context, Lehndorff speaks of "department egoism" which impedes effective
and crossfunctional work along the value chain
12
:
Es existiert eine althergebrachte Unternehmenskultur die durch Mißtrauen,
Schubladendenken und Abteilungsegoismen gekennzeichnet ist. Aus Fehlern wird nicht
gelernt - Fehler werden geahndet und müssen daher tunlichst vertuscht werden.
Gesichtswahrung gilt als oberste Prämisse.
The Toyota way of coping with mistakes is completely contrary: every mistake is
appreciated as an opportunity to improve the actual state. The person who makes a
mistake will not be punished but will be supported. On the other hand, the Toyota
corporation expects everyone to do his very best to prevent mistakes and, at the
same time, to help eliminate a mistake immediately if one has occurred.
Toyota aims at reducing complexity and helping everyone to understand what he or
she has to do. Toyota lets its employees partake in the whole production process by
providing an undisguised 360-degree glance at the company. The idea behind that is:
everyone can easily understand the individual requirements, everyone can see his or
her own work within the context of the whole company. Thus, everyone gains an
increased awareness of the intertwinement of one's own work and the work of one's
11
Womack and Jones, 2005, p. 25
12
Dorit Jäger: "Die strategische Bedeutung der Meister für das lernende Unternehmen"; in: Institut
Arbeit und Technik: Jahrbuch 1996/97. Gelsenkirchen, S. 150-165, on
http://www.iatge.de/aktuell/veroeff/ps/jaeger97a.html
The open Secret of Toyota's Change
Page 12 of 50
neighbours. By this, employees get the chance to see their company as one big
"machine" and their place in the whole process. In all likelihood, this, in combination
with other TPS concepts, contributes to a feeling of togetherness.
The TPS certainly contains strong aspects of employee participation, too. Konosuke
Matsushita, founder of the electronic consumer goods company Matsushita, is often
cited with the insight that Western companies and even managers' heads are
designed according to the Ford principles. Only those companies will survive that can
take full advantage of the combined intelligence of their whole workforce, which
makes serious qualification and care for the staff necessary. In this, Matsushita and
other companies are ahead of Western companies.
13
The andon trigger line serves as a suitable example to illustrate a noticeable
difference between Japan and the West: in most Western companies (and especially
in Germany - due to its strong hierarchical orientation
14
) it is not allowed to exceed
one's competence. Usually, this competence is very restricted: this leads to people
working as specialists in a well-defined domain without being allowed to interfere with
other areas or to do something without permission of their superior. TPS works
differently: every employee is seen as thinking individual who is
expected
to act for
the company's good - in his or her team, however. If a defective component or part
arrives at the production line it is the duty of every worker to pull the andon trigger
line immediately because JIT does not allow any components to arrive in minor
quality. No excess capacity of parts exists to replace a defective one. The company
trusts in the competence of production line workers to identify the required level of
quality and to act accordingly. One relies on the awareness of workers that any
mistake might lead to a stop of the whole production process. A number of sources,
some of which will be discussed below, argue that this possibly represents a strong
pressure on the lean production worker.
13
See "Futurverlag" on http://www.futur.futurverlag.de/zitate.htm (copied 27/11/05); reference to
Matsushita taken from Hajo Weber, 1994. The source "Futurverlag" seems critical but it was the only
one available to display most of the matsushita text, and identical passages of the text can be found in
the discussion paper of Hajo Weber, however.
14
Cp. "Communicaid - global communication", on
http://www.communicaid.com/germany-business-
culture.asp
or "Executive Planet", two of the very few sources with explicit notes on the subject, on
http://www.executiveplanet.com/business-culture-in/132163004477.html
(both copied 12/01/06)
Details
- Seiten
- Erscheinungsform
- Originalausgabe
- Jahr
- 2006
- ISBN (eBook)
- 9783836605168
- DOI
- 10.3239/9783836605168
- Dateigröße
- 617 KB
- Sprache
- Englisch
- Institution / Hochschule
- FOM Essen, Hochschule für Oekonomie & Management gemeinnützige GmbH, Hochschulleitung Essen früher Fachhochschule – Institut für Ökonomie und Management, Studiengang Master of Business Administration
- Erscheinungsdatum
- 2007 (August)
- Note
- 1,3
- Schlagworte
- toyota produktionssystem deutsche automobilbranche german carmaking industry
