Exceeding Expectations — Toyota
by Tim Walker
November 19th 2007
Toyota's success has been splashed across the business headlines lately. During the past year, the Japan-based company has surpassed General Motors as the world's #1 car maker. It has even passed everyone but GM within the US car market. Not bad for a car company that barely had a business in North America 40 years ago.
Toyota attained its current lofty position thanks to processes it was already putting in place way back then, especially the production methods that have made it the envy of manufacturers -- of all types -- around the world. Although Toyota is also good at marketing, finance, and the other functions that drive large corporations, the key to its triumph in the marketplace has been its ability to produce better cars faster and cheaper than its competitors.
At the core of its manufacturing process is something called the Toyota Production System (TPS), which has become the object of endless analysis among project managers and manufacturing specialists, and the subject of countless business-school case studies. The TPS is built around the concepts of Muda, Mura, and Muri -- “waste,” “unevenness,” and “overburden.” These are the undesireable qualities within manufacturing systems that the TPS seeks to eliminate.
The individual steps in this process of elimination are so mundane that they are often almost undetectable: A new way of gathering kits of parts makes it slightly simpler for workers to install seat belts. A slight amendment to an assembly line saves welders a few steps on their feet and a few steps in the welding process. A line worker spots a chance to improve the design of a car frame that makes assembly slightly easier -- and because Toyota has exquisite feedback systems already in place, the worker's idea quickly makes it back to the engineers who can put the change in motion. In most cases, the particular tweak is no big deal.
Taken together, though, they are a very big deal. These constant innovations squeeze out imperfections, not just in the cars themselves, but in the processes by which the cars are made -- and even in the processes by which the processes are improved. Applied the wrong way, such broken-record perfectionism could be a recipe for stagnation; applied with Toyota's trademark can-do spirit, this perfectionism fuels a never-ending quest for excellence, which in turn has built the foundation for Toyota's virtuous circle of staggering profitability.
The company isn't perfect -- it has had a few product recalls lately, and like its rivals it faces a US market that looks shaky for 2008. But for the most part, Toyota has run rings around its biggest competitors in the US, achieving results that are startling in comparison to Detroit's record of woe. While the Big Three of Ford, GM, and Chrysler struggle to introduce hit new models that might “save” them, Toyota mostly stays with a tried-and-true lineup of models that changes little from year to year. While it has expanded its market reach with the luxury Lexus make and the hipster Scion marque, Toyota never needs saving by any one model, any one blockbuster fiscal quarter, or any one marketing incentive scheme.
The Big Three have disappointed their investors -- not to mention Americans who would like to take more pride in the US auto industry -- with their massive and uneven restructuring efforts. Toyota has achieved the pinnacle of success with restructuring efforts of its own, only its process of restructuring has been going on hour by hour and day by day for several decades now. Toyota makes a habit of exceeding others' expectations by setting its own expectations so high -- always just a little bit above where they were yesterday.
Comparable large companies known for manufacturing excellence and constant improvement of manufacturing operations include General Motors (especially in its aircraft engines and turbine businesses) and Intel Corporation