Toyota Management System

Overview
The Toyota Management System (TMS), also known as the “Toyota Production System,” allows its adopters to produce twice as much in half the time at half the cost with half the problems, and with a fraction of the inventory. Far more than a mere “production” system, TMS is a combination of three innovations: just-in-time production, total quality management, and hoshin kanri or policy deployment. Although Toyota is not the origin of all three innovations, it certainly has integrated them more effectively than any other company. Taken together, they form a powerful competitive advantage that, thirty-five years after the Oil Crisis of 1973-74 gave the Japanese auto industry a beachhead in the US — Toyota’s competitors are still struggling to replicate.

Just-in-time production
Just-in-time or JIT was invented by Toyota after World War II, based largely upon the model of continuous flow manufacturing created by Henry Ford in 1914. Ford’s production system was originally geared to mass production on a grand scale. Toyota adapted Ford’s system, which emphasized the elimination of wasted material and motion to the small lot production required by the small and fragmented Japanese postwar market. Toyota wrapped long production lines into U-shaped cells, cross-trained workers to operate multiple machines, and slashed changeover times, drastically reducing the need for work-in-process inventory.
 
To supplement its just-in-time cells, Toyota developed its famous system of kanban, or signal cards, which are used to link production cells that cannot be physically co-located or integrated. Kanban are also used to integrate the operations of suppliers and (in other companies) customers with the the requirements of production.
 
Quality at the source
Inspired partly by the ingenuity of Toyota’s owners and partly by Total Quality Management (known today as Six Sigma), which was imported into Japan after the war by the United States Government, Toyota integrated several types of quality checks into its production cells on the very front-line of operations, speeding both the discovery and correction of problems:
  1. Successive checks. Successive checks require each person involved in a process to inspect the quality of:
    a) work performed previously by others, and
    b) materials, tools, or equipment utilized in the process. 

  2. Self checks. Self checks require each person involved in a process to inspect the quality of the their own work.

  3. Poka yoke (mistake-proofing). For those steps and critical conditions in any process that are difficult or impractical for humans to inspect, process owners invent devices and procedures that quickly surface and either automatically correct problems, or which call management’s attention to them.
Hoshin kanri (policy deployment)
Hoshin kanri or policy deployment is a Japanese management system perfectly adapted to the management of Toyota’s decentralized decision-making process. Hoshin kanri has its roots in Peter Drucker’s MBO (management by objectives), which the Japanese adapted in the context of implementing TQM. Toyota implemented hoshin kanri as part of its TQM implementation in the early 1960s. Hoshin, which is still not well understood or appreciated by Western managers, has several key benefits:
  1. It allows management to align the organization around critical improvement targets that link the development of current capabilities to future performance and customer satisfaction.

  2. It enables the organization to manage by exception, so that the organization stays tightly focused on its strategy.

  3. It augments or even replaces the relatively slow mechanisms of management accounting with the ability to solve quality, cost, and delivery problems in close real time.

  4. It enables cross-functional planning, execution, and problem solving, which means that adopters of hoshin can solve the complex problems of modern production more effectively.

  5. It enables interorganizational cost management by providing a framework for customers, producers, and their suppliers to plan and execute in a coordinated fashion.