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In recent decades, the Toyota Production System has garnered significant popularity among managers from different business domains. While initially developed for the automotive industry, it was eventually adopted in other industries and applied to both products and services. The following paper evaluates the Toyota Production System by reviewing its core components and approaches and determining their relevance outside the manufacturing sector.
Early in the course of its development, Toyota Motor Corporation experienced operational flaws in the manufacturing process and a series of drawbacks associated with the quality of its products. Its underperformance was especially apparent in comparison to Western leaders in the industry, such as Ford and General Motors. This discrepancy prompted the company’s management to organize a visit to the United States to implement successful manufacturing practices. However, the visit found little to no improvement in its systems in several decades (Toyota n.d.). While the productivity of the employees was similar, the American system contained several inefficiencies. Based on these observations, a new production system was developed by management in collaboration with the engineering department. The system was primarily oriented toward the reduction of waste and elimination of inconsistencies, and it became the foundation for what is now known as the Toyota Way.
In its current form, the Toyota Production System is determined largely by the company’s corporate approach. By extension, the latter is based on four core components. The first one is its philosophy – a compilation of ideas and values that are used to obtain a general sense of direction and understand the company’s vision. In simple terms, the philosophy can be described as striving to add value to customers, partners, the community, and society in general (Kuhlang et al. 2013). The second component processes, which, once selected appropriately, inevitably lead to the right results. The third component is people, an umbrella term that includes company leaders, employees, and partners. According to the Toyota Way, organizing the interactions between stakeholders is essential for effective performance. Finally, the fourth component is problem-solving. This component is defined by the Genchi Genbutsu concept, often translated as “go and see,” and specifies the need for a first-hand approach as a necessary prerequisite for improvement. Also, the fourth component combines a thorough consideration of options and continuous improvement through reflection and learning (Trenkner 2016).
The Toyota philosophy was initially developed specifically for manufacturing processes in the automotive industry. However, its success was so striking that other organizations eventually sought to adopt it. Once it became apparent that its universality leads to wide applicability in industries that do not include manufacturing, its scope of applications expanded to other fields, including healthcare, governance, finance, and the administration of non-profit organizations, among others (Teich and Faddoul 2013). However, it is important to understand that the overarching approach that allows for such flexibility and diversity of uses also poses a considerable barrier to the consistency of implementation (Utureanu and Dragomir 2015). In many cases, the discrepancy results from a lack of understanding of the overall direction and piecemeal adoption of selected tools without utilizing the concepts of the Toyota Way.
One of the main objectives of the Toyota Production System is waste reduction. According to the Toyota Way, waste (defined as Muda, or futility) is among the most significant contributors to the inefficient allocation of resources in an organization (Modi and Thakkar 2014). It is important to understand that waste is defined as an activity that is not associated with value-added to the product or service (Sheth, Deshpande, and Kardani 2014). Since the willingness of the customers to pay for the products or services is viewed as a metric of value-added, it is tempting for the management to determine waste by its relevance for end-users. To further differentiate between different types of waste, the Toyota Production System introduces two distinct types of waste. The first type of waste is comprised of actions and processes that do not add value and are not necessary for the customers.
This is the most intuitive type of waste and is universally agreed to be a detriment. The majority of waste reduction practices are directed primarily at this type (Gao and Low 2014). The second type includes actions that do not add value but cannot be easily excluded due to their importance in the manufacturing process. One such example is quality control, which is an essential part of continuous improvement. From the customers’ standpoint, quality control does not necessarily increase their readiness to pay for the product. At the same time, it requires resources and time allocation (Mitra 2016). However, compliance with safety standards requires an inspection to take place. As a result, the procedure cannot be eliminated and should instead be optimized to provide the necessary benefits at a lower cost, which is a much more difficult task.
The original Toyota Production System identifies seven types of waste. The first is transportation that occurs during the production cycle. In addition to expenses associated with the process, transportation opens up the possibility for damage and deterioration (Banawi and Bilec 2014). The common approach to transportation waste reduction is product flow mapping, which allows for identifying inefficiencies and redundancies in the system. Once identified, waste can be reduced by eliminating unnecessary processes and bringing others closer to each other.
The second form is inventory, which is traditionally associated with raw materials in the manufacturing process. An excess inventory does not provide benefits for the organization while occupying valuable storage space. In many cases, it also requires the allocation of resources for storage to prevent deterioration (Rahman, Sharif, and Esa 2013). Despite the obvious connection to physical products, inventory is equally applicable to any unfinished product or other work in progress outside the manufacturing field. Since in this state the product does not generate revenue, it represents a setback to productivity and should be minimized.
The third form of waste is excess motion. Similarly to transportation, its adverse effects include damage to the product and additional time necessary for the delivery of the final product. However, unlike transportation, motion focuses specifically on actions that comprise the production process. The adverse effects of motion include the deterioration of equipment, injuries to employees, and downtime, all of which are applicable outside the manufacturing sector.
The fourth form is waiting, which is the total time when a product is not being processed or transported. The most common source of waiting is a queue before each subsequent operation. Waiting is often observed to be the result of poor material flow, excessive production runs, and large distances between facilities (Ko and Kuo 2015). These points are often referred to as bottlenecks and result in a slowdown of the entire organization.
The fifth form of waste is overproduction, which results from creating a component that cannot be utilized for production. The excess products need to be stored, which leads to the inventory issues described above and creates additional barriers to quality control (Wahab, Mukhtar, and Sulaiman 2013). Also, overproduction disrupts the optimal allocation of resources. It should be mentioned that overproduction is relatively difficult to detect and address due to the complexity of the phenomenon.
The sixth form of waste is overprocessing or performing actions that are irrelevant to customers. For instance, the organization may use equipment that can provide an excessive degree of quality or precision. In addition to the high costs of such equipment, it requires additional skills and maintenance efforts from the operators and may slow down the process. Interestingly, overprocessing may occur as a result of the misapplication of the Toyota Production System – for instance, in the form of installation of unnecessarily expensive monitoring equipment (Kundu 2015).
Finally, the seventh form defects, whose elimination creates additional expenses and time constraints. Usually addressing other forms of waste results in a significant reduction of defect occurrence.
As can be seen from the information above, TPS has tremendous potential for wide application. The majority of approaches to waste are oriented primarily around manufacturing processes. Nevertheless, with minor adjustments, they are equally applicable to other industries that provide products and services to customers.
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To address the occurrence of waste, the Toyota Production System uses the process of continuous improvement. To achieve the desired level of improvement, a company needs to adopt three fundamental principles. The first one requires formulating a long-term vision and incorporating in it a readiness to face challenges and demonstrate creativity to overcome them.
The second aspect, known as kaizen, is arguably one of the most recognizable components of the Toyota Way. Kaizen is a broad concept that requires the determination and engagement of the stakeholders in the pursuit of quality. It can be implemented through a variety of methods, with the PDCA cycle being one of the most popular ones. The cycle in question, also known as the Deming cycle, is a simple procedure that consists of four steps (plan, do check, act) (Lewis and Cooke 2013). The simplicity of the method allows for a wide range of applications in different industries and contributes to the sustainability of its effect. For PDCA to be successfully implemented, it should be supported by a root cause analysis, usually in the form of 5 Whys or similar interrogative techniques. It should be pointed out that PDCA and 5 Whys are not based on a rigid set of principles – rather, they can be used as broadly defined approaches.
Finally, the third component is Genichi Genbutsu, translated as “go and see.” This aspect of continuous improvement outlines the recommended approach to problem-solving through a hands-on approach. According to the Genichi Genbutsu principle, an effective solution needs to be based on primary data, preferably collected on site. As can be seen, all components of continuous improvement can be applied outside the manufacturing industry with minor adjustments.
After demonstrating excellent results in the automotive industry, the Toyota Production System garnered widespread recognition in many domains of organizational development. The simplicity and accessibility of the system’s components allow for its use in multiple industries and about almost any product or service that can benefit from value-added. As was determined in the analysis above, its core components are not rigidly specified, which provides an opportunity for adjusting it to numerous applications. Thus it can be viewed as a valid generalized approach that allows for flexible and cost-efficient solutions.
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