The success of Toyota Motor Company is due to the unique reduction systems that focus on continuous improvement and just in time management. Toyota has created a decentralised structure that encourages employee participation and team working. Toyota incorporated concepts just as supply chain management and inventory management to create high quality automobiles and gain a competitive edge in the highly competitive global automobile market. Toyota’s success and its lean manufacturing philosophy have been widely studied. The Toyota manufacturing system is centred on achieving a high level of productivity. The company has a unique approach to problem solving and it continuously trains its employees.

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Industrial System & management
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Operation Management, Toyota
Production System
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3. Industrial System & Managements, MNM101
KINGSTON UNIVERSITY LONDON
December 19, 2011
Authored by: Omar S. Hamdan, K1067538

4. 1
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Table of contents:
1.0 Introduction 2
2.0 O*perations Management 2
3.0 Toyota Production System (TPSc) 3
4.0 Just in Time Inventory Management 6
5.0 Lean Manufacturing 8
6.0 Supply Chain Management 10
7.0 Conclusion 12
References 14

5. 2
1.0 Introduction
The success of Toyota Motor Company is due to the unique reduction systems that
focus on continuous improvement and just in time management. Toyota has created a
decentralised structure that encourages employee participation and team working. Toyota
incorporated concepts just as supply chain management and inventory management to
create high quality automobiles and gain a competitive edge in the highly competitive global
automobile market. Toyota’s success and its lean manufacturing philosophy have been
widely studied. The Toyota manufacturing system is centred on achieving a high level of
productivity. The company has a unique approach to problem solving and it continuously
trains its employees.
The Toyota Production Systems is based on the lean manufacturing philosophy that
seeks to minimize wastages and centres on cost reduction. The Toyota manufacturing
philosophy emphasises on quality management through a process of continuous
improvement. This report looks at how Toyota created its manufacturing system and the
role of operation management techniques to enhance efficiency. This report examines the
production processes and philosophy and Toyota to assess how the company has achieved a
competitive advantage globally. The lean manufacturing philosophy pioneered by Toyota
has become a benchmark for all manufacturing companies around the world. The lean
manufacturing philosophy includes concepts such as customer relations, product design,
supplier networks and operations. The lean manufacturing practices have made Toyota
achieve low cost production and allowed them to manufacture high quality cars at lowered
costs. This report looks at how operations management techniques such as supply chain
management and inventory management have led to efficiency and profitability at the
Toyota Motor Company.
2.0 Operations Management
The study of operations management looks at the production of quality goods and
service. The aim of this discipline is to create efficient and effective business operations.
Operation management seeks to ensure the efficient management of resources along with

6. 3
the distribution of goods and services. Operation management seeks to enhance
manufacturing performance and this study has proposed various techniques and a
theoretical framework to achieve this goals. These techniques include quality management
(TQM), just in time (JIT) or Leaning manufacturing. Other concepts in the field of operations
management include six sigma and supply chain management. All these techniques require
a flat organizational structure coupled with functional integration in the organization (Gupta
& Boyd, 2008).
The competitive pressure for improved product quality has led to numerous
operations paradigms emerging/ the most significant ones include Just in Time, Total Quality
Management (TQM) AND Supply chain management (SCM). JIT seeks to eliminate waste and
recue setup times, it also controls the material flows and focuses on effective resource
utilisation. The TQM philosophy looks at developing a corporate culture that is customer
focused empowers employees and seeks continuous improvement. The supply chain
management integrates buyers and suppliers decision-making to improve the flow of
materials in the supply chain. The JIT, TQM and SCM approaches improve the effectiveness
and efficiency of the operations function (Kannan & Tan, 2005).
3.0 Toyota Production System (TPS)
The TPS lead to the lean production movement that emphasises on eliminating
waste from value streams. This production system is highly standardised. The production
systems have buffers that are controlled through various pull signals. The lean production is
very efficient and greatly improves quality that has given Toyota an edge in the global
automobile markets. TPS should be viewed as a philosophy that is described by a set of
general principles of organising and managing an enterprise (Lander & Liker, 2007).
Toyota’s success as an automaker in the world is based on its expertise in creating a
unique production system. This TPS is based on the principles of continuous improvement
also known as Kaizen. The Toyota company has a highly decentralised workforce which is
highly trained and takes part in the decision making process. The TPS consists of most
successful Japanese production and work practices. This approach was developed by Sakichi

7. 4
Toyoda the founder of Toyota who pioneered the TPS. It was Taciichi Ohno that created the
Just in Time (JIT) production systems. The JIT approach made Toyota more efficient and
these techniques also incorporated total quality control, statistical process control and
quality circles. Toyota introduced a new system of employee relation with one trade union
and created flexible work to respond to the demand based production (Winfield & Kerrin,
1994).
The Toyota manufacturing system is characterised by a continuous flow of
production that allows the company to be flexible enough to adapt to the demand
conditions. The JIT ensures that only the required materials for the production are acquired
at the right time. This minimises the excess inventories which leads to cost reductions. Also
the JIT emphasis on quality control and the production system is made adaptable to the
daily and monthly fluctuations in demand and quantities. The quality assurance processes in
the JIT ensures that each process supplies good units to the next process in the production.
The JIT systems also include human resources in the cost and production systems .Toyota
has also streamlined its production processes through implementing Total Quality
Management (TQM) process to lower costs and enhance quality (Amasaka, 2002).
The TPS is a highly specialised and flexible system that is aligned with the market. In
thus system the Kanban systems play a vital role as the system provides instructions as part
move along the production line. This system works with production line to deliver the
required material for production. The Kanban synchronises the production quantities at
each production stage. The Kanban Systems provide the precise information of the required
materials for the production process, this makes the production at Toyota more efficient
(Balakrishnan, 2003). The Kanban systems uses IT systems for planning and control including
enterprise resource planning (ERP). The modern computer aided production management
systems includes applications such as MPS, MRP and CRP, inventory control, shop floor and
vendor measurement systems (Riezebos et al, 2009).
Toyota production systems use less material and fewer employees that bring down
the costs making the company more efficient. The operations management systems at the
company efficiently allocate resources and employees for each project. This makes the
company more flexible and responsive to the needs of the market. The continuous flow

8. 5
production at the company allows it to customise its cars to meet the changing customer
needs. Also the management introduced quality assurance teams to ensure that each unit
of production meet the set quality standards. This defect prevention technique is referred
to as “Jidoka” which in actual terms means to control defects. The Japanese culture heavily
influences the work culture at Toyota; the flexible workforce concept “Shonjinka” enables
the management to hire employees based on the fluctuating demand. This makes the
company more flexible and minimising costs (Balakrishnan, 2003).
The TPS is linked externally and to the entire production system, the main TPS
practices are focused on detecting, assessing and eliminating sources of the entire
production system. The sequential relationship amongst the external and internal links
includes three types of interaction; the first is upstream integration which is between the
external suppliers and internal suppliers within the firm. The internal integration is between
the firm actors that own successive process stages as either internal suppliers and internal
customers. The downward integration is between the internal suppliers that own the last
process stage and firm’s external customers (Jayaram et al, 2010).
Figure 1 Structural links internal and external to the organization Source Jayaram et al (2010)
The problem solving framework at Toyota constantly evaluates the performance of
the TPS by detecting any variance on the production process. The variance assessment
includes part of product, people or personnel, procedure or method and equipment or
machine. The system variation can result from product variation, poor quality or inputs,
flawed design or misaligned processes (Jayaram et al, 2010).

9. 6
Figure 2 Toyota’s problem solving framework. Source Jayaram et al (2010)
The employees can also lead to variations in the systems and performance owing to
lack of proper training or motivation. Toyota has implemented a decentralised problem
solving approach that empowers the works to make decisions. The principle of Kaizen is
made possible with standardisation in the company. Toyota has standardised technical skills
to ensure a flexible staff in the company (Jayaram et al, 2010).
4.0 Just in Time Inventory Management
The Japanese automakers have been very successful in improving their productivity
and efficiency by focusing on continuous improvement. JIT has evolved from continuous
improvement paradigm. The JIT creates a flexible environment in which the whole
organisation is responsible for eliminating waste. The JIT manufacturer seeks to acquire
materials that are needed to satisfy the actual demand. The JIT philosophy creates a
customer focused production process. The JIT processes eliminate inventories through

10. 7
interdependent relationships in the operations.to create a customer oriented strategy the
marketing activities are also integrated in the system. The JIT links the supplier to shop floor
by pulling the required materials form the suppliers. At Toyota the JIT controls delivery and
necessary quantities for the operations. The Kanban Systems create the pull for getting the
parts in the operations, the customer demands creates the initial pull of the system (White
& Pearson, 2001).
Toyota Motor Company pioneered the just in time (JIT) production system during the
mid-1970s the JIT production system is also known as the zero inventory production system.
JIT manufacturing is a production philosophy that is based on three fundamental principles
that include elimination of waste, continuous quality improvement, and a participative work
culture. Companies that implement the JIT methods minimize the need for raw materials,
work in process and inventory of finished goods. This method reduces the setup times and
all deliveries are coordinated from suppliers to meet the production needs. The main aim of
the JIT methods is to eliminate waste; waste is anything does not add value to the
production process (Biggart & Gargeya, 2002).
The JIT systems become more efficient and used the Kanban as an information
exchange tool for different production lines. Through using the JIT the wastages in the
production process are minimised and the defect prevention system enhance the quality of
the products. The culture at Toyota ensures that the entire production team focus on
preventing any defects and reducing wastages from the production process. In 1959 Toyota
dramatically increased its productivity and produced 100,000 cars for the first time. To
improve quality and automobile exports Toyota implemented Total quality controls in the
company (Dahlgaard & Dahlgaard-Park, 2006).
The JIT and respect for human systems are central doctrines of the TPS. To
implement JIT various practices such as Kanban, short setup times, multi skilled workers are
required JIT production is a means to achieve total elimination of waste and implement lean
production. The respect for human systems looks at the physical movements of the
employees that should add value to the product. The employees at Toyota are empowered
and are responsible for quality issues and monitoring the assembly line. JIT is a critical
aspect of TPS; JIT allows for low inventories and ensure better quality and faster response to

11. 8
engineering changes. JIT is an overall organisational phenomenon. The Kanban systems
implement the control in JIT systems. The Kanban systems provide customers with the right
product at the right time. The Kanban is a flexible system that allows Toyota to implement
JIT manufacturing. To successful they implement Kanban systems it is important to improve
the production systems and eliminate wastages for efficient work. The Kanban systems
ensure that there is no late or early production. The TPS is a decentralised production
system that allows for a control systems to flow smoothly through the lean manufacturing
production facility. The Kanban systems is characterised by a pull principle that ensures that
parts are sourced when needed and there are no wastages. The Kanban system ensues that
there is no waste of overproduction and the inventory costs are reduced. The
implementation of Kanban entails the support of other TPS practices. The success of Kanban
systems is dependent on an integrated infrastructure of supporting practices (Thun et al,
2010).
5.0 Lean Manufacturing
The lean production techniques have also be termed as the post Fordism system of
work that is more efficient, humane and democratic. A central tenet of lean production is
the concept of kaizen that is continuous improvement in the production process. The lean
production philosophy seeks to combine efficiency with quality of work life. The concept of
Kaizen seeks to remove all activities that do not add value, referred to as waste or muda in
Japanese. This looked at excessive setup time, excessive size inventory and work in
progress. The Kaizen process also eliminates errors in the production process and locates
the source of the problems. This entails worker participation that can monitor and detect
any variations in processes or products. The workers also contribute to the organisation and
improvement of production. The productivity improvements are achieved through
incremental innovation. The participatory nature of lean production is different from the
Taylorist and Fordist production approaches (Hampson, 1999).
Kaizen emphasises on quality assurance, this entails team work and collective responsibility
for quality improvement in the company. The Toyota management systems included the
concept of zero defects which comprised of quality circles to emphasis on all quality related

12. 9
issues. The concept of Kaizen ensures that all employees are quality conscious and focuses
on quick problem solving. The team leaders in the organisation encourage their members to
constantly focus on quality improvements in the production process. All employees have are
trained to develop the knowledge and skills needed for quality production (Elsey & Fujiwara,
2000). The TPS is an action oriented approach that favours a problem solving approach, the
employees work as project teams. Toyota introduced a flat structure in the organisation that
allowed for open communications in the organisation and facilitated experiments and
learning. The Kaizen empowers the employees and seeks new methods of work. The
company emphasises on high product quality and customer services to gain a competitive
edge in the automobile market. The Kaizen work culture is egalitarian and allows for the
involvement of employees and management in the production process. Such a management
style made Toyota highly productive and the consensual decision making made the
company very productive and allowed it to ensure a high level of quality (Fang & Kleiner,
2003).
The concept of lean manufacturing originates in the Toyota Motor Corporations;
resulted from scarcity of resources and intense domestic competition in automobile market
in Japan. The lean philosophy incorporated the JIT production system and the Kanban
method of pull production. Toyota also introduced the concept of respect for employees
and team working (Hines et al, 2004).
Lean manufacturing involves inventory and quality control, industrial relations,
labour management and supply chain management. Studies show that lean manufacturing
reduces human effort by 50% along with the manufacturing space, tool inventory and
improved financial performance. This manufacturing system also includes lean logistics that
is the ability to administer systems to control the movement of materials, work in process
and finished inventories at the lowest cost. To ensure long term competitiveness a
manufacturing firm has to develop capabilities of JIT production and delivery. The suppliers
have to be able to respond to the increasing needs of the customers. The lean production
system requires rapid flows of information along the value chain. Toyota uses the Kanban
system to achieve this along with computerised information that can be exchanged with the
suppliers to reduce lead times (Wu, 2003).

13. 10
Taciichi Ohno the head of Toyota crated the Toyota Production System (TPS) that
influenced the production philosophy all over the world. The TPS is a holistic production
system that has standardised procedures in the company. This system enhances the
company’s productivity and labour flexibility allowing the company to efficiently produce
various types of vehicles. This production philosophy emphasises on quality management as
the lean production system is based on assembly design, work organisation and low cost
automation based on an incremental improvement approach. The automation in this
production system is in line complies with the continuous improvement paradigm that
constantly identities and eliminates any problems in the production process. Toyota has
deployed the “Semi Automation” Jidoka that maintains a balance between the machines
and humans. This is more economical and makes the production process, more flexible. The
lean approach for automation includes low cost equipment and tools that are reused for
new models (Muffatto 1999).
6.0 Supply Chain Management
The supply chain management (SCM) is a key strategic factor for enhancing
organisational effectiveness and achieving organisational goals. With the globalisation of the
markets and increase in outsourcing companies use supply chain and logistics techniques to
manage their operations. The contemporary market place is characterised by increased
competition and prevalence of technology. These changes have led to profound changes for
organisations and firms must be able to respond to changing customer needs while
becoming lean at the same time. With this increased globalisation and customer orientation
organisations are more logistics sensitive. Supply chain is a system that is made up of
material supplier’s production facilities, distribution services and customers that are linked
together through flow of materials and feedback flow of information (Gunasekara et al,
2001).
Toyota’s success globally can be attributed to the company philosophy of
continuously reducing costs through waste elimination. Toyota developed the Pull Systems

14. 11
and created the Just in Time techniques that made the Toyota Production System more
functional and efficient. Toyota pioneered the value added concept through the lean supply
chain. This allowed the company to detect waste in the value chain which is eliminated
(Wee & Wu, 2009).
The TPS since its inception created a group of first tier suppliers who were part of
the company. During the 1970s the company developed a second tier of suppliers through
kyoryoku Kai which is a supplier association. During the 1980s and 1990s Toyota spread its
chain of overseas part suppliers and distribution system (Jones et al, 1997). The TPS is
vertically integrated the main car parts are purchased from the first tier supplier who
acquire them from smaller suppliers from the second tier of suppliers. The company creates
subcontracting agreements with one supplier for a long term period to ensure quality,
reliability and meeting the delivery standards. Such arrangements allowed Toyota to exert
influence the suppliers and reduce costs (Winfield, 1994). Toyota has created a distinct
competitive advantage on its supplier networks allowing the company to add value to its
products. The competitive advantage stems from the raw material supply derived from 40%
of the components from the first tier component manufacturers and 42% from the lower
tier component suppliers. Toyota effectively integrated its suppliers based on its hoshin
kanri policy (Hines & Rich 1998).
Toyota’s supply chain management approach focuses mainly on resources that were
of critical importance. Toyota created a Keiretsu structure comprising of the dependent
suppliers that worked in close proximity to the Toyota factories. The company outsourced
aspects that were not critical to the ability of maximising the shareholder value. Toyota was
able to create such a supply chain because the supplier was relatively dependent on them in
highly contested markets. Toyota created an assembly based systems that was demand pull
and JIT based, it had dominant power relationships with the suppliers. This allowed the
company to be innovative and create a customised supply chain. Toyota also implements
effective controls over quality, cost and innovation. This allowed the company to maximise
the customer value. The lean production system at the company focused on the highest
level of quality to the customers. Toyota’s lean approach has both strategic and operational

15. 12
practice; the company operates a contested supply chain and market place. For Toyota to
be profitable it has to achieve sustained business success by operating on low margins and
satisfying customer needs. The supply chain at Toyota can be described as entrepreneurial
(Cox 1999).
7.0 Conclusion
The competition in the automobile industry and the resource scarcity lead to Toyota
creating a lean manufacturing system that was flexible and highly efficient. This
manufacturing system leads to cost reductions and makes a company more flexible. The Just
in tome approach in the Toyota production systems allows the company to be more
efficient and responsive to the marketing demand. Toyota’s production system is demand
responsive and customer centric which a major source of competitive advantage is for the
company. The production process at Toyota also emphasises on quality and employee
empowerment. The low inventory and continuous production system has allowed Toyota to
produce high quality vehicles with minimum defects and lowered costs. The Kanban system
at the company is used to provide complete information for the required raw materials. This
system also monitors the quality of all products. To implement lean manufacturing a
company must create an empowered workforce that has the right competencies to ensure
high quality production.
The basic aim of the TPS is to shorten the time taken to convert customer orders into
vehicle deliveries. To achieve the sequences from order to delivery in a single continuous
flow along with shortening the sequence to make the production process more smooth. This
has created a high level of productivity, better quality and a reduction in wastages. This
makes the Toyota automobiles more cost effective. . The TPS is a standard management
approach in supply chain that effectively provides the customers with products in a timelier
manner. The lean manufacturing philosophy seeks to eliminate waste, eliminate defects and
reduce lead times. Toyota has created a culture of efficiency and problem solving. This has
allowed the company to innovate its product and maintain high quality through continuous
improvement.

16. 13
The production system that Toyota has created uses less materials human effort,
manufacturing space and tools than the mass production systems. This production system
has decreased the use of inventory and created a system of zero defects and led to the
production of high quality automobiles. The production at the company maintains a
continuous flow of products allowing the company to adapt to the market needs and
demand patterns. The Toyota production philosophy has evolved from the experiences at
Toyota factories which is why it can be implemented at any location in the world. The
production system has made Toyota highly efficient and profitable.
The JIT systems ensure achieving fault free parts and each production process should
have the right part in the right quantity at the right time. The scheduling of materials is an
important principle of just in time. The aim of the Toyota production systems is to provide
the customers with highest quality products at the lowest possible cost. The production
concepts incorporate quality at each production stage. The Just in Time approach seeks to
get the right information about the market demand and the production is adapted to the
demand. The JIT systems leads to efficient inventory systems and only the required
quantities are procured in the production systems. The Kanban systems enable the working
of the JIT system by providing the information about the raw materials and keep a check on
quality. To ensure that the JIT system works, Toyota has implemented systems to motivate
employees and empower them. The Toyota production system is very efficient that has
made Toyota a competitive and profitable company.
Since the 1950s Toyota created the concept of continuous material flow, process
standardization and a pull system that is market responsive. It took the company decades to
refine the concepts such as JIT and make the production system more functional. The TPS is
characterised by cross organisational planning and long term objectives. This production
system relies on technology and the integration of all manufacturing activities. The focus on
meeting customer needs made the TPS highly successful the creation of the JIT philosophy
allowed the company to eliminate wastages and inventory to make the company more
profitable. Toyota’s supplier network and supply chain is another source of the company’s
competitive advantage. The company has created a close network of suppliers which are all
integrated with the Toyota Company.

17. 14
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