From 0 to 60 to World Domination is a lengthy article discussing how Toyota’s success is the result of its unorthodox philosophies about engineering and business. Some excerpts below.
Irei projects are one that will be accomplished no matter what it takes…
Within Toyota, there is a rare and secretive designation for certain development projects known as irei, which is roughly translated as “not ordinary” or “exceptional” and refers to vehicles that the company will spend any amount on and go to almost any lengths to engineer, market and perfect.
Chief engineers go on lengthy expeditions to test designs…
Under its system, an engineer appointed to lead a new project has a huge budget and near absolute authority over the project. Toyota’s chief engineers consider it their responsibility to begin a design (or a redesign) by going out and seeing for themselves — the term within Toyota is genchi genbutsu — what customers want in a car or a truck and how any current versions come up short. This quest can sometimes seem Arthurian, with chief engineers leading lonely and gallant expeditions in an attempt to figure out how to beat the competition. Most extreme, perhaps, was the task Yuji Yokoya set for himself when he was asked to redesign the Sienna minivan. He decided he would drive the Sienna (and other minivans) in every American state, every Canadian province and most of Mexico. Yokoya at one point decided to visit a tiny and remote Canadian town, Rankin Inlet, in Nunavut, near the Arctic Circle. He flew there in a small plane, borrowed a minivan from a Rankin Inlet taxi driver and drove around for a few minutes (there were very few roads). The point of all this to and fro, Jeff Liker says, was to test different vans — on ice, in wind, on highways and city streets — and make Toyota’s superior. Curiously, even when his three-year, 53,000-mile journey was finished, Yokoya could not stop. One person at Toyota told me he bumped into him at a hotel in the middle of Death Valley, Calif., after the new Sienna came out in 2004. Apparently, Yokoya wanted to see how his redesigned van was handling in the desert.
Parts are made just in time via on-site parts suppliers…
There is no real inventory of parts, which is a hallmark of Toyota’s approach. Once a truck chassis begins its run on the factory line, an order goes out to, say, an on-site parts supplier that provides seats for the interior. At Avanzar, an independent company located in a large workroom adjacent to the assembly line, I watched workers build a car seat from scratch. They chose a raw steel frame with springs, put it on their own minifactory assembly line to add padding, then leather, and then they transferred it (via pulley, over a partition wall) to the Tundra assembly line, where it was installed in the truck. If the front seat had not been ordered 85 minutes earlier, it would not exist.
Assembly line efficiency leads to success in the showroom…
Improving efficiency in the factory, though, doesn’t necessarily lead to greater profits. Savings on the assembly line can mean a nicer dashboard without making the customer pay more for it. “If you’re efficient in the things the customer doesn’t see, then you can put it into the things the customer does see,” Ron Harbour, a consultant whose company rates the efficiency of auto plants, told me. A result is a car more popular with customers. Success on the assembly line, in this way, begets success in the showroom.
Being located outside Tokyo and frugality were two keys to Toyota’s development…
Toyota’s origins, in a rural prefecture, hours from the international influences of Tokyo, provided a beneficial insularity. The company began growing just after World War II, nurtured by government regulations that effectively shut out big American automakers. Still, the devastated postwar economy in Japan necessitated extraordinary resourcefulness: because there was a lack of materials and parts suppliers, for example, Toyota had to create them from scratch. Since the early 1930s, Toyota engineers have looked everywhere for inspiration while tearing apart American products to see how they work. Toyota’s systems and worldview derive from an economy of scarcity. In 1950, the company’s near-bankruptcy during a difficult year further defined its philosophy of frugality. Toyota soon began to focus obsessively on reducing muda — or waste — and building up a vast storehouse of cash for security.
The Toyota system was a “cognitive reframing of what is possible” which showed that quality and productivity can coexist…
Toyota’s executives recognized early on that improving the process by which cars are designed and built is just as important as improving the vehicles themselves. In the 1950s and 1960s, this conviction was famously driven by Taiichi Ohno, an engineer who never earned a college degree but who revolutionized modern manufacturing. Ohno was in awe of Henry Ford, but he recognized that the market for cars in postwar Japan — the market for any modern consumer product, he later posited — required greater flexibility as much as the traditional means of mass production. For Toyota to compete with American companies, it had to make small batches of many models (think of those 31 Tundras) that could satisfy all kinds of customers. Ohno, who died in 1990, took an anthropomorphic view of raw materials: just as an employee shouldn’t wait around without a task, neither should sheet metal or molded plastic. And so, at his factories in Japan, parts were created only in response to demand. Every worker was to focus on improving his efficiency, too (along with that of his co-workers). There was no best way to do something, but there were always better ways. John Paul MacDuffie, a Wharton professor of management, points out that the system was a “cognitive reframing of what is possible.” It showed that quality and productivity were not mutually exclusive; Toyota could indeed produce a greater variety of more durable cars more quickly than anyone else.
Source: Signal vs. Noise
Original Article: http://www.37signals.com/svn/posts/289-irei-genchi-genbutsu-muda-and-other-secrets-to-toyotas-business-success
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