The Toyota Way
Discussing Japan, and especially Japanese Management, without taking note of this company is just next to impossible. “Touching the Perfection”, this company is already the second largest car manufacturer in the world and soon heading to replace GM from the No. 1 spot. Surprisingly, what started as a Power and Automatic Loom Works, the company is now known for its quality and engineering in Automobile Industry. Yes, it’s Toyota.
It was Sakichi Toyoda who invented the power loom in 1902 and the automatic loom in 1926. He was the one who established the Toyoda Group of companies. The automatic loom would stop automatically if any of the threads snapped. His invention opened the way for automated loom works where a single operator could handle dozens of looms. Sakichi's invention reduced defects and raised yields, since a loom would not continue producing imperfect fabric and using up thread once a problem occurred. The principle of designing equipment to stop automatically and call attention to problems immediately is crucial to the Toyota Production System.
Even today, the company is still in the Computerized Automatic Looms, electric sewing machines and textile business!
The story of Toyota Motor Corporation began in September 1933 when Toyoda Automatic Loom created a new division especially for the production of automobiles. Kiichiro Toyoda – son of Sakichi Toyoda was heading this division. Soon, the division produced its first Type A Engine in 1934, which was used in the first Model A1 passenger car in May 1935 and the G1 truck in August 1935. Production of the Model AA passenger car started in 1936.
By 1936, Kiichiro had convinced his father that Automobile Business is the next thing they should jump in. So Sakichi sold the Power loom patents to a British company – Platt for £100,000! The sum was then invested in building Toyota Motor Corporation. The company was named Toyota, instead of Toyoda, because it took 8 strokes to write “Toyota” in Japanese and 8 was considered a lucky number! Jai Numerology! J
Till then, Ford and GM together shared 90% of the market and situation was not so encouraging for any startup to enter the automobile market. Kiichiro made a year long trip to Ford Motor Company and studied their methods in depth. Coming back to Japan, he not only implemented them but got rid of some of the inadequacies in the process and tailored them to suit Japanese industry. Kiichiro had observed piles of parts lying around in the factories in US. In Japan, however, he introduced Just – in – Time concept to reduce the inventory.
But soon, Toyota was asked to stop automobile manufacturing and to convert the factories to produce Trucks and other stuff for the Imperial Army. The urgent need to manufacture trucks made Toyota change designs of the trucks e.g. there would be only one head lamp on the hood instead of 2.
Fortunately for Toyota, the war ended shortly before a scheduled allied bombing on the Toyota factories in Aichi.
Soon after the war ended, Toyota moved back to its business. Commercial passenger car production started in 1947 with the model SA. In 1950 a separate sales company Toyota Motor Sales Co. was established (which lasted until July 1982).
The ending of the world war didn’t quite help Toyota to rise back to its feet because Kiichiro was forced to resign from the company by the Japanese government in 1950. The steering came in the hands of Eiji Toyoda, a nephew of Sakichi Toyoda. He had joined the Toyoda Automatic Loom Works family business after graduating from the University of Tokyo in 1936.
The reorganization forced by the government separated the family businesses and resulted in the resignation of Kiichiro and his entire staff. In the first year as Managing Director, Eiji followed the foot steps of Kiichiro to US to study the American automotive industry. After touring the Ford Motor Company operations, Eiji returned to Japan with a desire to redesign the plants. An important process learned during the trip was the Ford Motor Company suggestion system. Eiji instituted the concept and it is considered to be one of the major building blocks of the Toyota Production System of continuous improvement (Kaizen).
There was one other man who played a pivotal role in Toyota’s success. Taiichi Ohno, considered to be the creator of the Toyota Production System and the Father of the Kanban System, joined the Toyoda Automatic Loom Works after graduating from Nagoya Technical High School in 1932. Early in his career, he expanded upon the JIT concepts developed by Kiichiro Toyoda to reduce waste, and started refining the methodologies to produce components and subassemblies in a timely manner to support the final assembly. Taiichi Ohno made a smooth post war transition from loom works production to car and truck parts production. The war resulted in the leveling of all Toyoda Group Works production facilities, but under the management of Eiji Toyoda, the plants were gradually rebuilt.
In 1957, Toyota entered the US Market with Toyopet Crown. In 1958, only 287 Toyopet Crowns were sold in the U.S. Toyota's first experience in the U.S. market was a sharp contrast to the impressive success it had already achieved in Japan. But after this shaky start, Toyota went on to establish itself slowly but surely in the US market.
The US market was the market of big cars – the Gas Guzzlers as they were called. Compared to these cars, the cars produced by Japanese manufacturers were small in size and fuel efficient. I remember reading somewhere that Japanese like to manufacture cars having rectangular shapes like box. Wagon R could be one such example. Compare this with the stylish, sporty cars sold in US and the early failure of Japanese cars can be reasoned. The oil crisis, however, helped Japanese cars – Toyota mainly, to establish themselves firmly in the Japanese market. Small size, high quality, superior engineering and performance and most importantly affordable price tag made the Japanese cars very popular in US. Even, Iacocca’s autobiography has references of Japanese carmakers and how they made Ford, GM run for their money.
In 1968, Toyota introduced Corolla which became and still is a runaway success. Similarly, Camry introduced in 1983 was another perfect product from Toyota.
Together Eiji and Taiichi went on to build Toyota – a world class automobile manufacturer. Giving dose of its own medicine to Ford, Toyota implemented Ford’s best practices but at the same time made sure that they are customized to Japanese Industry.
Eiji remained the managing director of Toyota from 1950 to 1981 and Chairman from 1981 to 1994. Taiichi rose to become the executive Vice President and is considered Father of the Kanban system.
Today, it manufactures vehicles under the brand names Toyota, Hino, Scion and Lexus, and owns a majority stake in Daihatsu, and 8.7% of Fuji Heavy Industries. In 2005, the company has manufactured 7.5 Million cars that is more than 1 car per minute! At the end of fiscal 2005, Toyota had production bases in 26 overseas countries and regions, a vehicle sales network spanning approximately 170 countries and regions, and more than 260,000 employees worldwide on a consolidated basis. As we all know, Toyota also participates in the F -1 racing.
Apart from being a great company, Toyota has given a lot of new concepts about Management and processes. JIT, Kanban, TQM, Six Sigma, SCM and all the other concepts that are now used by manufacturing companies all over the world are essentially gifts from Toyota!
Watch this space tomorrow to know more about these concepts and Japanese Management.
Regards,
Abhishek
P.S.:
There is a book named “Toyota Way” which I am yet to read. The article is written purely by googling about Toyota.
It was Sakichi Toyoda who invented the power loom in 1902 and the automatic loom in 1926. He was the one who established the Toyoda Group of companies. The automatic loom would stop automatically if any of the threads snapped. His invention opened the way for automated loom works where a single operator could handle dozens of looms. Sakichi's invention reduced defects and raised yields, since a loom would not continue producing imperfect fabric and using up thread once a problem occurred. The principle of designing equipment to stop automatically and call attention to problems immediately is crucial to the Toyota Production System.
Even today, the company is still in the Computerized Automatic Looms, electric sewing machines and textile business!
The story of Toyota Motor Corporation began in September 1933 when Toyoda Automatic Loom created a new division especially for the production of automobiles. Kiichiro Toyoda – son of Sakichi Toyoda was heading this division. Soon, the division produced its first Type A Engine in 1934, which was used in the first Model A1 passenger car in May 1935 and the G1 truck in August 1935. Production of the Model AA passenger car started in 1936.
By 1936, Kiichiro had convinced his father that Automobile Business is the next thing they should jump in. So Sakichi sold the Power loom patents to a British company – Platt for £100,000! The sum was then invested in building Toyota Motor Corporation. The company was named Toyota, instead of Toyoda, because it took 8 strokes to write “Toyota” in Japanese and 8 was considered a lucky number! Jai Numerology! J
Till then, Ford and GM together shared 90% of the market and situation was not so encouraging for any startup to enter the automobile market. Kiichiro made a year long trip to Ford Motor Company and studied their methods in depth. Coming back to Japan, he not only implemented them but got rid of some of the inadequacies in the process and tailored them to suit Japanese industry. Kiichiro had observed piles of parts lying around in the factories in US. In Japan, however, he introduced Just – in – Time concept to reduce the inventory.
But soon, Toyota was asked to stop automobile manufacturing and to convert the factories to produce Trucks and other stuff for the Imperial Army. The urgent need to manufacture trucks made Toyota change designs of the trucks e.g. there would be only one head lamp on the hood instead of 2.
Fortunately for Toyota, the war ended shortly before a scheduled allied bombing on the Toyota factories in Aichi.
Soon after the war ended, Toyota moved back to its business. Commercial passenger car production started in 1947 with the model SA. In 1950 a separate sales company Toyota Motor Sales Co. was established (which lasted until July 1982).
The ending of the world war didn’t quite help Toyota to rise back to its feet because Kiichiro was forced to resign from the company by the Japanese government in 1950. The steering came in the hands of Eiji Toyoda, a nephew of Sakichi Toyoda. He had joined the Toyoda Automatic Loom Works family business after graduating from the University of Tokyo in 1936.
The reorganization forced by the government separated the family businesses and resulted in the resignation of Kiichiro and his entire staff. In the first year as Managing Director, Eiji followed the foot steps of Kiichiro to US to study the American automotive industry. After touring the Ford Motor Company operations, Eiji returned to Japan with a desire to redesign the plants. An important process learned during the trip was the Ford Motor Company suggestion system. Eiji instituted the concept and it is considered to be one of the major building blocks of the Toyota Production System of continuous improvement (Kaizen).
There was one other man who played a pivotal role in Toyota’s success. Taiichi Ohno, considered to be the creator of the Toyota Production System and the Father of the Kanban System, joined the Toyoda Automatic Loom Works after graduating from Nagoya Technical High School in 1932. Early in his career, he expanded upon the JIT concepts developed by Kiichiro Toyoda to reduce waste, and started refining the methodologies to produce components and subassemblies in a timely manner to support the final assembly. Taiichi Ohno made a smooth post war transition from loom works production to car and truck parts production. The war resulted in the leveling of all Toyoda Group Works production facilities, but under the management of Eiji Toyoda, the plants were gradually rebuilt.
In 1957, Toyota entered the US Market with Toyopet Crown. In 1958, only 287 Toyopet Crowns were sold in the U.S. Toyota's first experience in the U.S. market was a sharp contrast to the impressive success it had already achieved in Japan. But after this shaky start, Toyota went on to establish itself slowly but surely in the US market.
The US market was the market of big cars – the Gas Guzzlers as they were called. Compared to these cars, the cars produced by Japanese manufacturers were small in size and fuel efficient. I remember reading somewhere that Japanese like to manufacture cars having rectangular shapes like box. Wagon R could be one such example. Compare this with the stylish, sporty cars sold in US and the early failure of Japanese cars can be reasoned. The oil crisis, however, helped Japanese cars – Toyota mainly, to establish themselves firmly in the Japanese market. Small size, high quality, superior engineering and performance and most importantly affordable price tag made the Japanese cars very popular in US. Even, Iacocca’s autobiography has references of Japanese carmakers and how they made Ford, GM run for their money.
In 1968, Toyota introduced Corolla which became and still is a runaway success. Similarly, Camry introduced in 1983 was another perfect product from Toyota.
Together Eiji and Taiichi went on to build Toyota – a world class automobile manufacturer. Giving dose of its own medicine to Ford, Toyota implemented Ford’s best practices but at the same time made sure that they are customized to Japanese Industry.
Eiji remained the managing director of Toyota from 1950 to 1981 and Chairman from 1981 to 1994. Taiichi rose to become the executive Vice President and is considered Father of the Kanban system.
Today, it manufactures vehicles under the brand names Toyota, Hino, Scion and Lexus, and owns a majority stake in Daihatsu, and 8.7% of Fuji Heavy Industries. In 2005, the company has manufactured 7.5 Million cars that is more than 1 car per minute! At the end of fiscal 2005, Toyota had production bases in 26 overseas countries and regions, a vehicle sales network spanning approximately 170 countries and regions, and more than 260,000 employees worldwide on a consolidated basis. As we all know, Toyota also participates in the F -1 racing.
Apart from being a great company, Toyota has given a lot of new concepts about Management and processes. JIT, Kanban, TQM, Six Sigma, SCM and all the other concepts that are now used by manufacturing companies all over the world are essentially gifts from Toyota!
Watch this space tomorrow to know more about these concepts and Japanese Management.
Regards,
Abhishek
P.S.:
There is a book named “Toyota Way” which I am yet to read. The article is written purely by googling about Toyota.
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