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TOYOTA PRODUCTION S YSTEM
(J.I.T)
A CASE STUDY
HYPERCOMPETITION:
PRODUCT AND SERVICE DIFFERENTIATION
THROUGH KNOWLEDGE OF PROCESS
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INTRODUCTION
The early 1980s saw the automotive industry In
the USA to be in a state of Hypercompetition
with the 4 major car companies losing pricing
power and having to create new models inextremely short duration to maintain
differentiation«.Toyota moved into this highly
competitive market and was able to gain Pricing
Power in a relatively short duration
HOW DID TOYOTA DO THIS«
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SIGNS OF HYPERCOMPETITION
By the early 1980s the automotive industry in the
United States was concentrated in four major firms
y GM
y Ford
y Chrysler
y AMC
Increasing competition from European and Japanese
firms
Germany·s Volkswagen opened an assembly
operation in the United States in the late 1970s
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Japan·s Nissan Motor Corporation established
a plant in the early 1980s
Honda Motor Company followed with a car
manufacturing operation adjacent to its
motorcycle plant
Japan·s Toyota Motor Corporation formed a
joint venture with GM called New United Motor
Manufacturing Incorporated, which built smallcars for both Toyota and GM.
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JUST IN TIME
The father/originator: Taiichi Ohno
The beginnings:
y At that time one American car worker produced
approximately nine times as much as a Japanese carworker.
y The American industry and found that American
manufacturers made great use of economic order
quantities before switching to a new item. They also
made use of economic order quantities in terms of ordering and stocking the many parts needed to
assemble a car.
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HOW TOYOTA DID IT?
The new system of production was based on theelimination of waste by:
y Just-in-time - items only move through theproduction system as and when they are needed
y Autonomation - automating the production systemso as to include inspection - human attention onlybeing needed when a defect is automatically detected
Number of sources of waste to be eliminated:
y Overproduction
y
Time spent waitingy Transportation/movement
y Processing time
y Inventory
y Defects
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Cost Reduction:
y Toyota instituted production levelling - eliminating
unevenness in the flow of items.
y If a component which required assembly had an
associated requirement of 100 during a 25 day
working month then four were assembled per day,
one every two hours in an eight hour working day.
y Levelling was also applied to the flow of finished
goods out of the factory and to the flow of raw
materials into the factory.
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Factory layout:y Previously all machines of the same type, e.g.
presses, were together in the same area
y The items had to be transported back and forth as
they needed processing on different machines.
y The workers were skilled at operating just one type of
machine.
y To eliminate this transportation different machines
were clustered together so items could move smoothly
from one machine to another as they were processed.
y Now, the workers had to become skilled on more than
one machine.
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Relay Race:
y To help the workforce to adapt, the analogy of
teamwork in a relay race was introduced
y The newly rearranged factory floor workers were
asked to work as members of a team-
passing theprocessed items between themselves with the goal of
reaching the finishing line appropriately
y If one worker flagged (e.g. had an off day) then the
other workers could help him, like in setting up amachine for him so that the team output was
unaffected.
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Kanban:
y To control production (the flow of items) in the new
environment Toyota introduced the kanban (essentiallyinformation as to what has to be done)
y Within Toyota the most common form of kanban was a
rectangular piece of paper within a transparent vinyl
envelope.
y The information listed on the paper basically tells aworker what to do - which items to collect or which
items to produce
Reducing the setup time:
y Machines and processes were re-engineered so as to
reduce the setup time required before processing of a
new item can start.
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THE CHALLENGES & THE RESULTS
Major challenges:
y Multi-skilling the workforce to operate multiple
machines
y Redesigning every part of the vehicle to eliminate or
widen tolerance
y Testing and training suppliers of parts to assure
quality and delivery in time on demand
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Success at Toyota:
y Sale of in-process inventory generated surplus cash
y
Response time fell to about a day
y Product quality increased improving customer
satisfaction
y Vehicles built to order eliminating the risk of vehiclesremaining unsold
y Improving the company's return on equity