Operations Management
Toyota Production System (TPS),
Just-in-Time (JIT),
and Lean Manufacturing
Handout
Dr. Ahmad Syamil, CFPIM, CIRM, CSCP
http://www.clt.astate.edu/asyamil/
asyamil AT yahoo DOT com

APICS
www.apics.org
• Old Name: The American Production and Inventory Control Society
• New Name: The Association for Operations Management -
Advancing Productivity, Innovation, and Competitive Success.
• APICS offers four internationally recognized professional certification
programs:
1. CPIM: Certified in Production and Inventory Management
2. CFPIM: Certified Fellow in Production and Inventory Management =
CPIM + extensive knowledge sharing with others through presenting,
teaching, publishing, and other APICS educational activities.
3. CIRM: Certified in Integrated Resource Management
4. Beginning 2006: Certified Supply Chain Professional (CSCP) designation
is designed for professionals interested in increasing their knowledge of
supply chain management, those currently working in the field of supply
chain management (SCM), and for those individuals working with
enterprise resources planning (ERP) systems.

Why Toyota?

Toyota is now the world's largest
carmaker
• Toyota sold 2.348 million vehicles in the
first three months of 2007.
• General Motors (GM) is estimated to have
sold 2.26 million cars and small trucks
during the same period.

Why Toyota?

Why Toyota?

Why not Toyota?
• GM lost $10.6 billion in 2005.
• GM's pension obligations under funded by about $31
billion
• GM will eliminate 30,000 jobs and close 12 North
American factories by 2008
• Ford earned $2 billion worldwide, but lost $1.6 billion in
its North American operations.
• Ford is shutting 10 plants and laying off 25,000 hourly
workers.
• Daimler paid $36 billion for Chrysler in 1998.
• Chrysler reported a $1.5 billion loss for the third quarter of
2006 and a $2 billion loss for the first quarter of 2007.
• DaimlerChysler finally sold 80.1% of Chrysler to Cerberus
Capital for $7.4 billion in May of 2007.

Why Toyota?

History of Manufacturing Management

History• Sakichi Toyoda, the founder of the Toyota group of
companies, started Toyota as a textile machine
company.
• Kiichiro Toyoda, son of Sakichi and founder of the
Toyota automobile business, developed the concept
of Just-in-Time in the 1930s. He decreed that Toyota
operations would contain no excess inventory and
that Toyota would strive to work in partnership with
suppliers to level production.
• Taiichi Ohno, Toyota's chief of production in the post-
WWII period. He was THE main developer of Toyota
Production System (TPS).
• Dr. Shigeo Shingo: A consultant to Toyota.
PS: Shingo Prize is the highest manufacturing
excellence award in the U.S. The prize is given both
to companies and individuals who contribute to the

History (cont.)
• Toyota Production System (TPS) drew wide attention from the industrial
community because Toyota was a profitable car company in Japan
during and after the oil embargo in 1970s.
• Outside Japan, dissemination began in earnest with the creation of the
Toyota-General Motors joint venture-NUMMI (New United Motor
Manufacturing Inc.) in California in 1984.
• Widespread recognition of TPS as the model production system grew
rapidly with the publication in 1990 of The Machine That Changed the
World: The Story of Lean Production, the result of five years of
research led by the Massachusetts Institute of Technology.
• The MIT researchers found that TPS was so much more effective and
efficient than traditional, mass production that it represented a
completely new paradigm and coined the term lean production to
indicate this radically different approach to production.
• The term was coined by John Krafcik, a research assistant at MIT with
the International Motor Vehicle Program in the late 1980s. He then
worked for General Motors and now is a Vice President of Hyundai,
U.S.

Toyota Production System (TPS)
• Definition: The production system developed by Toyota
Motor Corporation to provide best quality, lowest cost, and
shortest lead time through the elimination of waste.
• TPS is comprised of two pillars, Just-in-Time and Jidoka
(autonomation) , and is often illustrated with the "house"
shown on the next slide.
• TPS is maintained and improved through iterations of
standardized work and kaizen (continuous improvement),
following Plan–Do-Check-Act (PDCA Cycle from Dr.
Deming), or the scientific method.

House of Toyota

Toyota Production System (TPS):
Related Terms
• Ohno System
• MAN (Material as Needed) - Harley
Davidson
• MIPS (Minimum Inventory Production
Systems) - Westinghouse
• Stockless production - Hewlett Packard
• Zero inventory production system
• Lean Manufacturing/Production - MIT

How to make money?
Profit equation: Sales – Cost = Profit
Traditional pricing strategy: Cost + Profit = Selling price
Example:
When the cost goes up, the product selling price is raised to
reflect the higher costs and maintain the desired level of
profit.
Some even argues that the profit added should be large
enough to cover potential losses if the product does not
sell well.
Toyota accepts neither this formula nor these arguments!

Toyota’s philosophy
• Selling price – Cost = Profit
• Customers decide the selling price.
• Profit is what remains after subtracting the cost from it.
• The main way to increase profit is to reduce cost.
• Consequently, cost reduction through waste elimination
should have the highest priority.
• Toyota’s paradox: Reducing cost (waste), will reduce lead
time while increasing quality and customer satisfaction.
• How? We will discuss it soon.

House of Toyota

• Attacks waste
– Anything not adding value to the product
• From the customer’s perspective
• Exposes problems and bottlenecks caused by
variability
– Deviation from optimum
• Achieves streamlined production
– By reducing inventory
What Does Just-in-Time Do?

Waste (“muda” in Japanese) is
‘anything other than the minimum
amount of equipment, materials,
parts, space, and worker’s time,
which are absolutely essential to add
value to the product.’
— Shoichiro Toyoda
Founder, Toyota
© 1995 Corel Corp.
Introductory Quotation

Variability Occurs Because
• Employees, machines, and suppliers
produce units that do not conform to
standards, are late, or are not the proper
quantity
• Engineering drawings or specifications are
inaccurate
• Production personnel try to produce before
drawings or specifications are complete
• Customer demands are unknown

Continuous Flow
• Producing and moving one item at a time (or a
small and consistent batch of items) through a
series of processing steps as continuously as
possible, with each step making just what is
requested by the next step.
It is also called the one-piece flow, single-piece
flow, and make one, move one.

Continuous Flow Production
Flow with JIT
Traditional Flow
Customers
Suppliers
Customers
Suppliers
Production Process
(stream of water)
Inventory (stagnant
ponds) Material
(water in
stream)

Push versus Pull
• Push system: material is pushed into
downstream workstations regardless of
whether resources are available
• Pull system: material is pulled to a
workstation just as it is needed

Traditional U.S. Manufacturing Firm:
Push (“old style” MRP / Material
Requirements Planning System)
• The production of items at times required
by a given schedule planned in advance
Material
Information (Production Schedule)
Work
Station 1
WS 2 WS 3

Pull (JIT) System
The production of items only as demanded for
use or to replace those taken for use.
Material
Information (via Kanban/Card)
Work
Station 1
WS 2 WS 3

• Japanese word for card
– Pronounced ‘kahn-bahn’ (not ‘can-ban’)
• Authorizes production from downstream
operations
– ‘Pulls’ material through plant
• May be a card, flag, verbal signal etc.
• Used often with fixed-size containers
– Add or remove containers to change production
rate
Kanban

Triangular Kanban
Part #
Trigger (Reorder) Point
Part Description Location
Date Triggered Lot Size
Tool #
Machine #

Kanban

Figure S12.5

Basic Fixed-Order Quantity Model and
Reorder Point Behavior
R = Reorder point
Q = Economic order quantity
L = Lead time
L L
Q QQ
R
Time
Number
of units
on hand
1. You receive an order quantity Q.
2. Your start using
them up over time. 3. When you reach down to
a level of inventory of R,
you place your next Q
sized order.
4. The cycle then repeats.

Kanban
The function of Kanban ≈
The function of Inventory Reorder Point
(ROP)

Kanban System
• Single card
– Move only containers
with C (Conveyance)-
kanban)
– e.g.: Kawasaki
• Dual card
– Move only container
with C- kanban
– Produce only when
authorized by P
(Production)- kanban
– e.g.: Toyota
Transparency 17.5

• Traditional: inventory exists in case problems
arise
• JIT objective: Eliminate inventory
• JIT requires
– Small lot sizes
– Low setup time
– Containers for fixed number of parts
• JIT inventory: Minimum inventory to keep
system running
Inventory

• Reduce ripple effect of small variations in
schedules (e.g., final assembly)
• Production quantities evenly distributed over
time (e.g., 7/day)
• Build same mix of products every day
– Results in many small lots
– 1 month = 20 working days
– Item Monthly Quantity Daily Quantity
A 40 2
B 60 3
Heijunka = Leveling (Smoothing) Production
Schedule using Mixed Model Sequencing

A
A A B B B C
JIT Small Lots
Large-Lot Approach
Time
Time
A A B B B C
A A A B B B B B B C C
JIT produces same amount
in same time if setup times
are lowered
Small versus Large Lots
Small lots also increase flexibility to meet
customer demands

Photo S12.4

40 10 4
40 10 4
10 10 1
÷ =
÷ =
÷ =
Heijunka = Leveling (Smoothing) Production Schedule using
Mixed Model Sequencing = Uniform Plant Loading
Product Demand Requirements
Monthly Daily
800 20 40
800 20 40
200 20 10
÷ =
÷ =
÷ =
A
B
C
Largest integer that divides into all daily requirements evenly is 10
Product Daily Requirements Divided by 10
A
B
C
Mixed-model sequence
A-B-A-B-A-B-A-B-C Repeat 10 times per day
Transparency 17.7
Determining Production Sequence

Cycle Times
Working time per day = 480 minutes
Daily requirements: A = 40 units; B = 40 units; C = 10 units
The system cycle time = 480/(40+40+10) = 5.33 min/unit
Product Requirements Cycle Time
480 40 12
480 40 12
480 10 48
÷ =
÷ =
÷ =
A 40
B 40
C 10
Transparency 17.8

Scrap
Work in process inventory level
(hides problems)
Unreliable Vendors Capacity Imbalances
Lowering Inventory
Reduces Waste

Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity Imbalances
WIP
Lowering Inventory
Reduces Waste

Scrap
Reducing inventory reveals
problems so they can be solved.
Unreliable Vendors Capacity ImbalancesWIP
Lowering Inventory
Reduces Waste

Customer
orders 10
Lot size = 5
Lot 1 Lot 2
Lot size = 2
Lot 1 Lot 2 Lot 3 Lot 4 Lot 5
Reducing Lot Sizes Increases the
Number of Lots

…Which Increases
Inventory Costs
Lot Size
Cost
Holding Cost
Total Cost
Setup Cost
Optimal
Lot Size
Smaller
Lot Size

Unless Setup Costs are Reduced
Lot Size
Cost
Holding CostTotal Cost
Setup Cost
Original optimal
lot size
New optimal lot size

Quick setup = Quick changeover
• Reducing setup cost ≈ reducing setup time
• Setup reduction time is a prerequisite to lot size
reduction
• SMED (Single Minute Exchange of Dies)
method
• The method has been developed by Toyota and
then expanded by Dr. Shigeo Shingo (a
consultant to Toyota), and has proven its
effectiveness in many companies by reducing
changeover times (non-value added times) from
hours to a less than 10 minutes

Setup Components
• Internal Setup: consists of setup activities that must
be performed while the machine is stopped.
• External Setup: consists of setup activities that can
be carried out while the machine is still
operating.
It is desirable to:
1. Convert as much internal setup to external setup
2. Improve the setup procedure

Systematic Setup Reduction

Setup Reduction

Setup Reduction:
Standardizing die holder heights reduces the need to
exchange fastening bolts

Setup Reduction Techniques

Quality At The Source
• Doing it right at the first time.
• Jidoka allows workers to stop production
line
• Andon lights signal quality problems
• Under capacity scheduling allows for
planning, problem solving & maintenance
• Visual control makes problems visible
• Poka-yoke prevents defects

House of Toyota

Jidoka
• Toyota Production System (TPS) is supported by two pillars: Just-in-
Time and Jidoka
• Jidoka = Autonomation = Automation with “human” intelligence.
• Sakichi Toyoda, founder of the Toyota group of companies, invented
the concept of Jidoka in the early 20th Century by incorporating a
device on his automatic looms that would stop the loom from
operating whenever a thread broke. Dr. Shigeo Shingo then developed
his idea further.
• This enabled great improvements in quality and freed people up to do
more value creating work than simply monitoring machines for quality
(separating people’s work and machine’s work).
• Eventually, this simple concept found its way into every machine,
every production line, and every Toyota operation.

Jidoka Techniques
• Poka-yoke (mistake or error proofing)
– A form of device for building-in quality at each production
process.
– This device may take many shapes and designs.
– Typical types of Pokayoke are sensors, proximity switches,
stencils, light guards and alignment pins. Simple circuitry is
usually used to operate these electrical error proof devices
as they should be of low cost and simple design.
– Goal: Finding defects before they occur = Zero Defects
– Statistical Quality Control (SQC): Finding defects after they
occur
• Visual management including using Andon Lamp

Poka-Yoke Example
Exhibit 7.10

Visual Management
Andon Lamp
• Red - line stoppage
• Yellow - call for help
• Green - normal
operation

Kaizen
• Change for better = continuous
improvement
• Kaizen workshop or Kaizen event:
A group of Kaizen activity, commonly lasting
five days, in which a team identifies and
implements a significant improvement in a
process, e.g., creating a manufacturing cell.

GEMBA
• GEMBA" is a Japanese word meaning "real place", where
the real action takes place. In business, GEMBA is where
the value-adding activities to satisfy the client are carried
out.
• Manufacturing companies have three main activities in
relation to creating money: developing (designing),
producing and selling products. In a broad sense, GEMBA
means the sites of these three major activities.
• In a narrower context, however, GEMBA means the place
where the products are made.
• The term is often used to stress the that real improvement
can only take place when there is a shop-floor focus on
direct observation of current conditions where work is
done, e.g., not only in the engineering office.

Five Golden Rules of Gemba
• Masaaki Imai promoted Kaizen to people outside Japan through his two highly
acclaimed books:
1. Kaizen: The Key To Japan's Competitive Success.
2. Gemba Kaizen: A Commonsense, Low-Cost Approach to Management
• He preaches the Five Golden Rules of Gemba, the first of which is 'When a
problem (abnormality) arises, go to gemba first'. So what's gemba? It's the
shop floor, or equivalent. Once there, you apply
Golden Rule Two: check with gembutsu (relevant objects).
Three: take temporary counter-measures on the spot.
Four: find the root cause.
Five: standardize to prevent recurrence.
Standardization is the managing part of getting good gemba. You also need
good housekeeping (Imai is very keen on cleaning machines) and muda, the
elimination of waste. But all hinges on getting away from your desk. Obey the
master Imai. GO TO GEMBA!

5Whys: Finding the root cause of a
problem.
• 5 Whys analysis as an effective problem-solving technique. It is also used in Six Sigma.
Example:
• Why is our client, Hinson Corp., unhappy? Because we did not deliver our services
when we said we would.
• Why were we unable to meet the agreed-upon timeline or schedule for delivery? The job
took much longer than we thought it would.
• Why did it take so much longer? Because we underestimated the complexity of the job.
• Why did we underestimate the complexity of the job? Because we made a quick estimate
of the time needed to complete it, and did not list the individual stages needed to
complete the project.
• Why didn't we do this? Because we were running behind on other projects. We clearly
need to review our time estimation and specification procedures.

Plan-Do-Check-Act
(PDCA/Shewart /Deming Cycle)
• Plan: Go to the real place/factory flow (gemba), obverse
the real thing/product (gembutsu), get the real fact
(genjitsu). Focus on reducing response time, lead times,
exposing wastes in your process
• Do: Conduct Kaizen. Create models of excellence so
others can aspire to. Flow everything: product, information
material replenishment, services.
• Check for direction by aligning activities with long-term
business direction
• Act: Take actions to sustain and accelerate improvement
activities
Source: www.leanbreakthru.com

Similarity between 3 Gs and MBWA
• The 3 G's (Gemba, Gembutsu, and Genjitsu, which
translate into “actual place”, “actual thing”, and “actual
situation”).
• In the early days of Hewlett-Packard (H-P), Dave Packard
and Bill Hewlett devised an active management style that
they called Management By Walking Around (MBWA).
Senior H-P managers were seldom at their desks. They
spent most of their days visiting employees, customers,
and suppliers. This direct contact with key people provided
them with a solid grounding from which viable strategies
could be crafted.

5S: Workplace organization/Housekeeping
• 5s: Important part of Kaizen/Lean Manufacturing
• The S's stand for:
– Seiri - keep only what is absolutely necessary, get rid of things that
you don't need, i.e. simplify or sort.
– Seiton - create a location for everything, i.e. organize
or straighten.
– Seiso - clean everything and keep it clean, i.e. cleanliness or
sweep.
– Seiketsu - implement Seiri, Seiton and Seiso plant wide, i.e.
standardize.
– Shitsuke - assure that everyone continues to follow the rules of 5S,
i.e. stick to it or self discipline.
• 5S in the US: Sort, Straighten, Sweep, Standardize, Self Disciple
• 5S + 1S (Safety) = 6S (Hytrol, etc)
• 5S + 2S (Safety and Security) = 7 S (Agilent Technology that was part
of Hewlett Packard)

5S
• 5S is simple to begin and gives good benefits.
• Each individual in an organization is asked to get
rid of overburdening items.
• Red tag attack: A red tag attack is the strategy of
a group of people going through the plant and
putting red tags on everything that has not been
used within the last 30 days. The items that
people feel are necessary to "hold on to" must be
justified to their superior, or the item is taken out
of the plant!

5S in a Factory
Factory tour: Toyota vs.
others.

5S in Office
• Before 5 S
• After 5 S

Standard Work
When manpower, equipment, and materials are used in the most efficient
combination, this is called Standard Work.
There are three elements to Standard Work:
1) Takt Time
2) Work Sequence
3) Standard Work-in-Process
Once a Standard Work is set, performance is measured and continuously
improved.

Standard Work Sheet
Scope of From Raw mat er i al Date Reviewed:
Operations To Heat Tr eat ment Janary 7, 2000
Quality Safety Standard Work Standard WIP TAKT Cycle Crew
Check Precaution in Process Quantity Time Time Size
FG
223.4 min12.1 min10
RM

The Importance of Standardized Work:
Without it, all improvement efforts using Kaizen to eliminate
waste (muda) are not sustainable. You will go back to the
original position before Kaizen.

Manufacturing Cell

Worker Routes Lengthened as Volume
Decreases
Cell 5Cell 5
WorkerWorker
22
Cell 2Cell 2
WorkerWorker
11
Cell 1Cell 1
WorkerWorker
33
Cell 3Cell 3 Cell 4Cell 4
Figure 11.4Figure 11.4

Workload balancing
• Aims at maximizing operator utilization
based on the given takt time.
• Is the key to adjust JIT lines to demand
fluctuations
• Requires flexible operators

Production Line Balancing

Improving Lead Time:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Current Situation
Percent of Lead Time
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
Approach # 1: Reducing Value Added (VA) Time by 50%
VA
Approach # 2: Reducing Non Value Added (VA) Time by 50%
NVA (Non Value Added)
NVA
NVA
VA
VA

Value Stream MappingSM
What?
Why?
Who?
When?
Where?
How?
• A visual tool for identifying all activities of the planning,
and manufacturing process to identify waste.
• Provides a tool to visualize what is otherwise usually
invisible.
• The leaders of each product family need to have a
primary role in developing the maps for their own area.
• Develop a current-state map before improvements are
made so that the efforts and benefits can be quantified.
• On the shop floor, not from your office. You need the real
information, not opinion or old data.
• Next page

Value Stream Map Symbols
Spot weld
ABC
plating
C/T = 30 sec
C/O = 10 min
3 shifts
2% scrap rate
Process
Finished
goods
Vendor Data box
3,000 units
= 1 day
Inventory
Push Supermarket:
the location of a
predetermined
standard inventory
Physical pull
Mon
and
Wed
Shipment
C/T = Cycle Time
C/O = Change over or setup time

Current Value Stream Map

Future Value Stream Map

Attributes of Lean Producers - they
• use JIT to eliminate inventory
• build systems to help employees product a
perfect part every time
• reduce space requirements
• develop close relationships with suppliers
• educate suppliers
• eliminate all but value-added activities
• develop the workforce
• make jobs more challenging
• reduce the number of job classes and build
worker flexibility
• apply Total Productive Maintenance (TPM)

The Five Steps of Lean
Production/Toyota Production
System Implementation
• Step 1: Specify Value
Define value from the perspective of the final customer. Express value in terms of a
specific product, which meets the customer's needs at a specific price and at a specific
time.
• Step 2: Value Stream Mapping.
Identify the value stream, the set of all specific actions required to bring a specific
product through the three critical management tasks of any business: the problem-
solving task, the information management task, and the physical transformation task.
Create a map of the Current State and the Future State of the value stream. Identify and
categorize waste in the Current State, and eliminate it!
• Step 3: Create Continuous Flow
Make the remaining steps in the value stream flow. Eliminate functional barriers and
develop a product-focused organization that dramatically improves lead-time.
• Step 4: Create Pull Production
Let the customer pull products as needed.
• Step 5: Perfection
There is no end to the process of reducing effort, time, space, cost, and mistakes. Return
to the first step and begin the next lean transformation, offering a product which is ever
more nearly what the customer wants.

Comparison of
MRP (Material Requirements Planning),
JIT, and TOC (Theory of Constraints)
Loading of operations
Batch sizes
Importance of data
accuracy
Speed of scheduled
development
Flexibility
Cost
Goals
Planning focus
Production basis
Checked by capacity
requirements
Planning afterward
One week or more
Critical
Slow
Lowest
Highest
Meet demand
Have doable plan
Master schedule
Plan
Controlled by kanban
system
Small as possible
Unnecessary
Very fast
Highest
Lowest
Meet demand
Eliminate waste
Final assembly schedule
Need
Controlled by
bottleneck operation
Variable to exploit
constraint
Critical for bottleneck
and feeder operations
Fast
Moderate
Moderate
Meet demand
Maximize profits
Bottleneck
Need and plan
MRP JIT TOC