Toyota's JIT Revolution
Toyota's JIT Revolution
“Toyota’s focus on JIT is a continual problem-solving process (not an inventory reduction plan)
illustrates why the automaker is a JIT leader not only in its industry but all of industry.”
A Legendary Production System
In the mid-1990s, more than 50 executives and engineers from major automobile companies
worldwide visited Toyota Motor Company's (Toyota) manufacturing complex at Georgetown,
US, to study the Toyota Production System (TPS). The visit also included an intensive question
and answer session, which lasted for 5 hours each for two days a month. Even though the visitors
were from competing automakers, including Ford and Chrysler. Toyota did not deny them access
to the plant.
The TPS aimed to produce world-class quality automobiles at competitive prices. It was built on
two main principles, Just-in-Time (JIT) production and Jidoka.
JIT was used not only in manufacturing but also in product development, supplier relations and
distribution. Analysts remarked that despite imitating Toyota's JIT for many years, no other
automaker in the world had been able to make their production systems and processes as
efficient as Toyota had done. Analysts felt that though other leading automakers like Mercedes-
Benz, Honda and DaimlerChrysler excelled in advanced engineering techniques, engine
technology and styling, they did not match Toyota in efficiency, productivity and quality.
Executives of rival companies also appreciated Toyota's manufacturing and product development
systems. Officials at GM commented, "Toyota is the benchmark in manufacturing and product
development." A top executive at Ford said, "Toyota is far ahead in developing markets that the
real race is for the second place." Some executives at BMW also considered To yota the best car
company in the world.
The early adoption of JIT principles by Toyota seemed to have helped the company achieve
significant success. It helped the company respond quickly to changing customer needs and offer
high quality products at low costs, thus increasing customer satisfaction.
Toyota’s History
Toyota's history goes back to 1897, when Sakichi Toyoda (Sakichi) diversified into the
handloom machinery business from his family traditional business of carpentry. He founded
Toyoda Automatic Loom Works (TALW) in 1926 for manufacturing automatic looms. Sakichi
invented a loom that stopped automatically when any of the threads snapped. This concept of
designing equipment to stop so that defects could be fixed immediately formed the basis of the
Toyota Production System (TPS) that went on to become a major factor in the company's
success.
In 1933, Sakichi established an automobile department within TALW and the first passenger car
prototype was developed in 1935. Sakichi's son Kiichiro Toyoda (Kiichiro) convinced him to
enter the automobile business. After this the production of Model AA began and Toyota Motor
Corporation was established in 1937. Kiichiro visited the Ford Motor Company in Detroit to
study the US automotive industry. He saw that an average US worker's production was nine
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times that of a Japanese worker. He realized that the productivity of the Japanese automobile
industry had to be increased if it were to compete globally.
Back in Japan, he customized the Ford production system to s uit Japanese market. He also
devised a system wherein each process in the assembly line of production would produce only
the number of parts needed at the next step on the production line, which made logistics
management easier as material was procured according to consumption. This system was
referred to as Just-in-Time (JIT) within the Toyota Group.
The JIT production was defined as 'producing only necessary units in a necessary quantity at a
necessary time resulting in decreased excess inventories and excess workforce, thereby
increasing productivity.' Kiichiro realized that by relying solely on the central planning
approach, it would be very difficult to implement JIT in all the processes for an automobile.
Hence, TPS followed the production flow conversely. People working in one process went to the
preceding one to withdraw the necessary units in the necessary quantities at the necessary time.
This resulted in the preceding process producing only quantities of units to replace those that had
been withdrawn.
Toyota flourished during the Second World War by selling trucks and buses to the army and the
company launched its first small car (SA Model) in 1947. After the war, the company faced a
series of financial problems. A financial support package from a consortium of banks (after the
intervention of the Bank of Japan) helped Toyota tide over its problems. The package consisted
of a series of steps that included downsizing and restructuring the company into separate
manufacturing and sales divisions. As per the revival package, The Toyota Motor Sales
Company Ltd. was formed in 1950. In the same year, Kiichiro resigned.
By 1952, Toyota made a turnaround and in 1953, the company appointed distributors in El
Salvador and Saudi Arabia and started exports. Meanwhile, Taiichi Ohno (Ohno) took charge of
the company. In 1957, Toyota entered the US market through its subsidiary, Toyota Motor Sales,
USA. In 1959, the company began its first overseas production in Brazil and over the next few
years, developed a vast network of overseas plants. Besides manufacturing, Toyota started a
global network of design and Research and Development facilities covering the three major car
markets of Japan, North America and Europe.
By the early 1970s, Toyota's sales exceeded that of Chrysler and Volkswagen and its production
was behind that of only General Motors (GM) and Ford. Toyota continued its efforts to make its
production system more efficient and also developed flexible manufacturing systems. It also
began to tap the markets in the Middle East and by 1974 the Toyota Corolla, (launched in 1965)
became the largest selling car in the world. In 1984, Toyota entered into a joint venture with GM
and established the New United Motor Manufacturing Inc. (NUMMI).
By the early 1990s, as Toyota expanded its overseas operations, the excessive capital spending
affected its profit margins. Tatsuro Toyoda (Tatsuro), who took over as the company President in
1992, began to control costs by eliminating all unnecessary expenditure. In 1995, after Tatsuro
resigned due to health reasons, Hiroshi Okuda (Okuda) became Toyota president. In 1996,
Toyota consolidated its production in North American production units into the Cincinnati based
Toyota Motor Manufacturing (North America).
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In 1999, Okuda replaced Chairman Shoichiro Toyoda and Fujio Cho (Cho) became the
president. In the same year, Toyota listed its shares on both the New York and London stock
exchanges. By the end of 2001, the company's net income had reached $5,447 million and net
revenue reached $106,030 million (Refer Exhibit I for the company's financial performance over
the years).
According to analysts, Toyota's success in both the local and global markets was mainly because
of its state-of-the-art and well-planned operational strategies. The company had continuously
focused on gaining a competitive advantage through implementation of innovative and path-breaking
ideas on its production floors. TPS worked on the basic idea of maintaining a
continuous flow of products in factories in order to flexibly adapt to demand changes. The most
important feature of TPS was the way it linked all production activities to real dealer demand
through implementation of Kanban, JIT and other quality measures that enabled Toyota to
manufacture in low quantities.
A Brief History of (Just-In-) Time
Lean Manufacturing is not especially new. It derives from the Toyota Production System or Just
in Time Production, Henry Ford and other predecessors.
The lineage of Lean manufacturing and Just in Time (JIT) Productio n goes back to Eli Whitney
and the concept of interchangeable parts.
`Just-in-time' is a management philosophy and not a technique.
It originally referred to the production of goods to meet customer demand exactly, in time,
quality and quantity, whether the `customer' is the final purchaser of the product or another
process further along the production line.
JIT - Background and History
JIT is a Japanese management philosophy which has been applied in practice since the early
1970s in many Japanese manufacturing organizations. It was first developed and perfected
within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer
demands with minimum delays. Taiichi Ohno is frequently referred to as the father of JIT.
Toyota was able to meet the increasing challenges for survival through an approach that focused
on people, plants and systems. Toyota realized that JIT would only be successful if every
individual within the organization was involved and committed to it, if the plant and processes
were arranged for maximum output and efficiency, and if quality and production programs were
scheduled to meet demands exactly.
JIT manufacturing has the capacity, when properly adapted to the organization, to strengthen the
organization’s competitiveness in the marketplace substantially by reducing wastes and
improving product quality and efficiency of production.
There are strong cultural aspects associated with the emergence of JIT in Japan. The Japanese
work ethic involves the following concepts.
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 Workers are highly motivated to seek constant improvement upon that which already
exists. Although high standards are currently being met, there exist even higher standards
to achieve.
 Companies focus on group effort which involves the combining of talents and sharing
knowledge, problem-solving skills, ideas and the achievement of a common goal.
 Work itself takes precedence over leisure. It is not unusual for a Japanese employee to
work 14-hour days.
 Employees tend to remain with one company throughout the course of their career span.
This allows the opportunity for them to hone their skills and abilities at a constant rate
while offering numerous benefits to the company.
These benefits manifest themselves in employee loyalty, low turnover costs and fulfilment of
company goals.
In the early 1930s, the technology used by American automobile companies was superior to that
used by Japanese companies. Kiichiro therefore decided to learn new automobile production
techniques from American manufacturers. He soon realized that to catch up with the Americans,
he had to master basic production techniques. He then reorganized the production system in
Toyota in a unique way. This reorganization eventually led to the development of JIT concept.
In the early 1970s, Taiichi Ohno (Ohno) implemented JIT in Toyota's manufacturing plants. The
JIT system was aimed at avoiding waste, reducing inventories and increasing production
efficiency in order to maintain Toyota's competitive edge. Ohno also believed that customers
should receive high quality products in the shortest time. Initially, JIT was used as a method for
reducing inventories in Toyota's shipyards, but later it evolved into a management p hilosophy
including a set of techniques.
Developed by the Japanese, the JIT production system was one of the most significant
production management approaches of the post-WWII era. The system comprised a set of
activities aimed at increasing production volume through the optimum use of inventories of raw
materials, work- in-process, and finished goods. In a JIT production system, a workstation gets a
part just in time, completes its work and the part is moved through the system quickly.
JIT was based on the principle of producing only what is needed and nothing more than needed.
The Japanese believed that anything produced over the quantity required was a waste. Cho
defined waste as, "Anything other than the minimum amount of equipment, materials, parts and
workers (working time) which are absolutely essential to production." JIT did not allow any
surplus as it believed that "effort and material expended for something not needed now cannot be
utilized now." (Refer Table I for requirements and assumptions of JIT).
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The Experiments of the Toyota Production System
Rule Implied
Hypothesis
Problem
Signals
Responses
1 How People
Work
>Specifications
document all work
processes and include
content, sequence,
timing and outcome.
>The person or
machine can
perform the work as
specified
>If the work is
done as specified,
the product is
defect-free.
>The work
procedure
varies from
specification
>Defective
Products
>Improve training
>Improve Process
Capability
>Modify the work
specification
2 How Work
Connects
>Connections with
clear YES/NO signals
directly link every
customer and
supplier.
>Customer requests
have a known,
specific volume and
mix.
>The supplier can
respond to requests.
>Responses do
not keep pace
with requests.
>Supplier is
idle waiting for
requests.
>Determine true
mix and demand.
>Determine true
supplier capability.
>Retrain/improve/
modify.
3 The Physical
Arrangement
>Every product and
service travels a
single, simple and
direct flow path.
>Every supplier in
the flow path is
required and
suppliers not on the
flow path are not
required
>A person or
machine is not
needed.
>Unspecified
supplier
performs work.
>Determine why
supplier was
unnecessary; redes
ign flow.
>Determine reason
for unspecified
supplier; redesign
flow.
4 How To
Improve
>Workers at the
lowest feasible level,
guided by a teacher
(Sensei), improve
their own work
processes.
>A specific change
causes a specific,
predictable
improvement in
productivity,
quality or other
parameter.
>Actual result
varies from
expected
result.
>Determine why
the actual result
differed from the
prediction.
>Redesign the
change.
5 Problem
Alarms
>Integrated failure
tests automatically
signal deviations for
every activity,
connection & flow
path.
>Automatic alarms
prevent defects or
sub- standard
performance.
>Defects are
passed through
to the next
operation.
>Sub-Standard
Performance.
>Analyze and
institute new or
improved alarms.
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Table I
Just-In-Time Production System
What it is
 Management philosophy
 'Pull' System through the plant
What it does
 Attacks waste (time, inventory,
 scrap)
 Exposes problems and bottlenecks
 Achieves streamlined production
What it requires
 Employee participation
 Industrial engineering/basics
 Continuing improvement
 Total quality control
 Small lot sizes
What it assumes
 Stable environment
JIT could be applied to any manufacturing environment including job shop, batch production or
repetitive production. The ideal lot size as per JIT was one. A worker had to complete one task
and pass it on to the next workstation for further processing. If workstations were geographically
far away, efforts were made to reduce the transit time.
The advantages of JIT included price flexibility, reduction in product variation, quick
response to customers' demands, high quality products at low cost for consumers, and
above all, customer satisfaction. The system also offered the advantages of low inventory
investment, shortened lead times, and early detection of quality problems.
The Kanban
Kanban was an essential component of Toyota's JIT concept. The Japanese referred to Kanban
as a simple parts-movement system that depended on cards and boxes/containers to take parts
from one workstation to another on a production line. Ohno had developed the idea in 1956 from
the super markets in the US, which had devised an effective system for replenishment of store
shelves based on the quantities picked by the customers.
Initially, Ohno used pieces of paper contained in rectangular vinyl envelopes to convey
information (called Kanban). In a period spanning three decades, Kanban developed into a
sophisticated information system that ensured production in required quantities at the right time
in all manufacturing processes within the factory.
The essence of the Kanban concept was that a supplier delivered components to the production
line only when required, thus eliminating storage in the production area. Suppliers delivered
desired components when they received a card and an empty container, indicating that more
parts were needed for production. In case of line interruption, each supplier produced only
enough components to fill the container and then stopped. Since Kanban was a chain process in
which orders flowed from one process to another, the production or delivery of compo nents was
'pulled' to the production line (Refer Box “Pull and Push Systems”). In the traditional forecast
oriented method, parts were 'pushed' to the line (Refer Exhibit I for a comparison of the Kanban
philosophy with the western philosophy).
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Pull and Push Systems
In a pull system, the production of a certain product starts only when a demand or request is
made by the buyer. The consumer of the product 'pulls' from the last link of the production chain.
This last link pulls its preceding link and so on. In western companies, the push system was
considered to be more cost-effective. Push systems were schedule-based projections of what
demand was expected to be. Based on historical information (updated on a weekly or monthly
basis), a computer program processed the information giving a detailed sub-schedule for buying
materials and producing goods. This schedule pushed the production in order to comply with the
expected demand. The disadvantage of the push system was that predictions did not always
coincide with facts. This resulted in either excess or inadequate inventories.
Exhibit I
Toyota’s Kanban Philosophy vs Western Philosophy
Factors Toyota's Kanban Western Philosophy
Inventory A liability. Every effort must be
extended to do away with it.
An asset. It protects against forecast
errors, machine problems, late vendor
deliveries. More inventory is "safer".
Lot sizes Immediate needs only. A minimum
replenishment quantity is desired for
both manufactured and purchased
parts.
Formulas. We're always revising the
optimum lot size with some formula
based on the trade-off between the
cost of inventories and the cost of set
up.
Set ups Make them insignificant. This
requires either extremely rapid
changeover to minimize the impact
on production, or the availability of
extra machines already set up. Fast
changeover permits small lot sizes to
be practical, and allows a wide
variety of parts to be made
frequently.
Low priority. Maximum output is the
usual goal. Rarely does similar
thought and effort go into achieving
quick changeover.
Queues Eliminate them. When problems
occur, identify the causes and
correct them. The correction process
is aided when queues are small.
If the queues are small, it surfaces
the need to identify and fix the
cause.
Necessary investment. Queues permit
succeeding operations to continue in
the event of a problem with the
feeding operation. Also, by providing
a selection of jobs, the factory
management has greater opportunity
to match up varying operator skills
and machine capabilities, combine set
ups and thus contribute to the
efficiency of the operation.
Vendors Co-workers. They're part of the
team. Multiple deliveries for all
active items are expected daily. The
Adversaries. Multiple sources are the
rule, and it's typical to play them off
against each other.
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vendor takes care of the needs of the
customer, and the customer treats
the vendor as an extension of his
factory.
Quality Zero defects. If quality is not 100%,
production is in jeopardy.
Tolerate some scrap. We usually
track what the actual scrap has been
and develop formulas for predicting it
Equipment
maintenance
Constant and effective. Machine
breakdowns must be minimal.
As required. But not critical because
we have queues available.
Lead times Keep them short. This simplifies the
job of marketing, purchasing, and
manufacturing as it reduces the need
for expediting.
The longer the better. Most foremen
and purchasing agents want more
lead time, not less.
Workers Management by consensus. Changes
are not made until consensus is
reached, whether or not a bit of arm
twisting is involved. The vital
ingredient of "ownership" is
achieved.
Management by edict. New systems
are installed in spite of the workers,
not thanks to the workers. Then we
concentrate on measurements to
determine whether or not they're
doing it.
At Toyota, two types of Kanban cards were used: one, to move parts from one place to another,
known as the Conveyance Kanban card, and the other, to authorize the production of parts,
known as the Production Kanban card. (Refer Figure I). A standard size container was used to
store parts and each card was treated like a coupon. (Refer Box Illustration).
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Illustration
Suppose a container of item X is required in work center A. As a first step, a production Kanban
card is issued to work center A. The work center withdraws a container of raw materials from its
inventory. The container of raw materials also included a conveyance Kanban card. Work center
A removes the conveyance Kanban card from the container and sends it to the proceeding work
center where it serves as an authorization to pick up a container of raw materials.
Three types of information were exchanged using Kanban. Pick up information guided the
earlier stages regarding parts to be produced for the succeeding stages. Transfer information
indicated when the parts had to be produced for the succeeding stages. Production information
was transmitted from the earlier stages to the later stages to inform the workers about the product
mix and other operational matters.
To make the Kanban system effective and reap maximum benefits (Refer Table II) from it, Ohno
framed six rules:
 Later process went to the earlier process to pick up products.
 The earlier process produced only the amount withdrawn by the later process.
 Should not pick or produce goods without a Kanban.
 A Kanban should be attached to the goods.
 100% defect free parts were required.
 Reduce the number of Kanban.
Table II
Advantages of Kanban
1. A simple and understandable process
2. Provides quick and precise information
3. Low costs associated with the transfer of
information
4. Provides quick response to changes
5. Limit of over-capacity in process
6. Avoids overproduction
7. Minimizes waste
8. Control can be maintained
9. Delegates' responsibility to workers
The Kanban cards were re-circulated and the number of cards controlled work- in-progress (WIP)
in the system. In this way, the activities of final assembly were linked to previous operations by a
chain system of card ordering that 'pulled' production through the factory.
Another important component of JIT was Heijunka (production smoothing). JIT's principle of
building only the required number of items helped keep the production costs low. Heijunka
helped in the accomplishment of this principle by creating a consistent production volume.
Heijunka averaged the highest and lowest variations of the orders. The variations were then
removed from the production schedule. This ensured that the right quantity of parts was
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produced with minimum workforce. Heijunka took care not only of the total volume of items but
also the type of items produced and the other options.
Problems with JIT
Although many automobile companies around the world adopted JIT, the system was far from
perfect and difficult to implement. It was based on the key assumption that sources and channels
of supply were constantly reliable and dependable. Analysts felt that it did not take into account
the possibility of labor strikes at automotive plants. Moreover, JIT involved high set up costs
and Special training and reorganization of policies and procedures in the company were
necessary to implement JIT. The supplier relations of the company also needed to be improved to
ensure timely delivery. In the absence of good supplier relations, JIT increased the risk of
inventory shortage. Organizational culture also seemed to play a crucial role in the
implementation of JIT. Many companies outside Japan reported difficulties in the
implementation of the concept.
Another problem seemed to be the difficulty of removing the 'human element' from the systems
that generate requirements.
An analyst commented, "Computer algorithms, they say, go only so far. Good people, with
lengthy experience at reading the ups and downs of the industry are still a must." Most
companies felt that people should be actively involved in the system.
Moreover, there could be many barriers to the successful implementation of JIT. For JIT to be
successful, companies had to ensure that they did not make frequent changes in production
planning and that their forecasting procedures were reliable and did not result in under or over
forecasting of demand. Other barriers could be equipment failure and employee absenteeism.
Analysts felt that Toyota's JIT was a complicated process and that its success inside a plant
depended mainly on highly experienced, highly motivated managers. Outside the plant, JIT's
success depended on a network of capable suppliers that operated in sync with Toyota's
production processes. In fact, according to some analysts, Toyota was not able to replicate the
JIT production system in an efficient way in any of its operations outside Japan. John Paul
MacDuffie said, "Toyota hasn't developed a single facility that is as efficient as the ones it has in
Japan."
Future of JIT
Although Toyota's JIT had some drawbacks, it offered several advantages over other
manufacturing processes. Because of the early adoption of JIT, Toyota benefited more from the
system than other automobile companies (Refer Exhibits II & III).
By 2000, JIT was adopted by many Japanese companies, as well as some US car companies.
Analysts felt that JIT was not only a process that could be applied to manufacturing, but also a
philosophy that governed the attitude of a successful business. According to one analyst, "Using
JIT, Taiichi Ohno had revolutionized production. The market clearly reflects the success of JIT.
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The concept has made Japanese products affordable and reliable in quality. Quality is no longer a
privilege - it is a standard accompanied by low cost."
Exhibits II
Plant Productivity
*For products low in demand, one batch = 7 days use.
Exhibits III
Comparison of Different Auto Manufacturers
Future directions for research
Just- in-Time concept has changed the way manufacturing organizations do things. Some of the
JIT concepts are completely opposite to traditional ways of thinking. It is human nature to resist
change, and the implementation of JIT system is typical of this. People resist these new ideas and
call them risky. But it is important to realize that JIT will not work if it has to be forced against
everybody’s will. Voluntary participation and training is necessary.
Being a philosophy, JIT does not restrict itself to high technology manufacturing environments
which make extensive use modern technologies like flexible manufacturing systems (FMS) or
computer integrated manufacturing (CIM). JIT philosophy is valid in any manufacturing
environments, regardless of the level of automation in the technology hardware. Similarly, the
philosophy is not limited to any specific type of industry nor does the size of the organization
matter. Organizations of different sizes, in a variety of industries, have successfully implemented
JIT philosophy. Indeed, some applications have shown that JIT is eminently suited to non-manufacturing
situations as well as, such as in service and administrative work situations. It may
not be possible to shift from traditional manufacturing system to JIT system at once. To start
with companies may try to implement JIT elements that are easy to implement.
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Developing countries like India to expand the base of JIT applications in India. As service sector
as growing very fast in developing countries like India but poorly managed. JIT can be very
useful in improving the performance of service sector. This becomes another area for future
research.
Companies currently using JIT
 Harley Davidson
 Toyota Motor Company
 General Motors
 Ford Motor Company
 Manufacturing Magic
 Hawthorne Management Consulting
 Strategy Manufacturing Inc.
Conclusion
Hence, we can see that to have a Total JIT manufacturing system, a company-wide commitment,
proper materials, quality, people and equipment must always be made available when needed. In
addition; the policies and procedures developed for an internal JIT structure should also be
extended into the company’s supplier and customer base to establish the identification of
duplication of effort and performance feedback review to continuously reduced wastage and
improve quality. By integrating the production process; the supplier, manufacturers and
customers become an extension of the manufacturing production process instead of
independently isolated processes where in fact in clear sense these three sets of manufacturing
stages are inter-related and dependent on one another. Once functioning as individual stages and
operating accordingly in isolated perspective; the suppliers, manufacturers and customers can no
longer choose to operate in ignorance. The rules of productivity standards have changed to shape
the economy and the markets today; every company must be receptive to changes and be
dynamically responsive to demand. In general, it can be said that there is no such thing as a KEY
in achieving a JIT success; only a LADDER; where a series of continuous steps of dedicat ion in
doing the job right every time is all it takes.
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