KAIZEN THE TOYOTA WAY

REPORT ON KAIZEN

Presented By Babur Rafiq

ACKNOWLEDGEMENT

First I would like to thank Almighty Allah for giving me the tendency with which I carried out this report. It is by His blessing that I had an opportunity to able to write this report. I would like to gratefully acknowledge the enthusiastic supervision of Miss Shahina during this work. I am grateful to all my friends, for being the surrogate family during the many years I stayed there and for their continued moral support there after.

Table of Content

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Description

Page No.

1. 2. 3. 4. 5. 6. 7. 8. 9.

Abstract ------------------------------------------ 04 Kaizen Background------------------------------05 Toyota Reinvents the Need for Kaizen--------05 Introduction to the issue------------------------ 06 Implementation of Kaizen---------------------- 08 SWOT Analysis---------------------------------- 14 Conclusion -------------------------------------- 16 Recommendation-------------------------------- 17 References ---------------------------------------18

ABSTRACT.

The case looks at how Kaizen was adopted by Toyota Motor Corporation to improve productivity and efficiency in its production systems. The case examines in detail the labor crisis faced by Toyota in the early 1990s and how the company used Kaizen to modify its assembly line and wage systems in order to make them human friendly. The case also details the concept of Kaizen and the pre-requisites for its successful implementation in an organization. "Human beings think our way is the best, but at Toyota, we are told we have to always change. We believe there is no perfect way, so we continue to search. The goal is to break the current condition through Kaizen." -Shoichiro Toyoda, Chairman, Toyota Motor Corporation, in December 2000.

KAIZEN BACKGROUND 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 Toyota 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.

TOYOTA REINVENTS THE NEED FOR KAIZEN In the early 1990s, the Japanese automobile major, Toyota Motor Corporation (Toyota) was facing acute labor shortage. The emergence of high wage jobs and a shortage of young workers due to the low birth rates in Japan in the previous two decades were the primary reasons for this. The number of women and aged people was increasing in the country's labor pool. These people avoided heavy manufacturing work. Toyota's strong focus on improving productivity and production efficiency over the decades had created strained work atmosphere as the workers were reportedly over burdened. This led to an exodus of young workers from the company.

INTRODUCTION TO THE ISSUE A. WHAT IS KAIZEN? The Kaizen is a Japanese word Kai means Change and Zen means Better. In other words it meanschange for betterment or improvement.

KIAZEN BY CHART

KAIZEN
Japanese

KAI CHANGE

ZEN BETTER

CHANGE FOR BETTERMENT OR IMPROVEMENT

Kaizen, which in Japanese means good (zen) change (kai) is a philosophy that motivates people to constantly improve their surroundings. I personally find the idea not only inspiring but also inspired. I grew up on the wrong side of the Iron Curtain. The Communistic system discouraged people from making improvements and so people seemed to have gradually lost their natural tendency to try to make things better. As a result I grew up in a pretty gray and very stagnant environment. Then a simple electrician and a few other workers in some shipyard decided to change a few things (who
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gave them that faith that their efforts might actually destroy the Communistic system?!). Their determination led to a total change of the political and economic system which gave way to progress. Now two decades later everything around me is in constant movement. Pretty much everything is improving. People are happier they seem to be more confident in their own abilities. Many of them are the same people who back then during Communism, would just go through the motions but now, they are new creatures. Actually they are more creators than creatures. As Steven R. Covey put it: they act instead of being acted upon. What needed to happen to make similar changes in our production plant? Only two things: The workers needed to be asked to share their ideas for improvements and they had to feel that their ideas were welcomed. The worse thing that we as managers could do would be to say: If your idea is so simple why didnt you share it before? We have wasted so much money for so many years because you didnt care to share this simple solution?! Imagine how you would feel if this was the response to your suggestion? I know I would have a hard time sharing any improvement ideas in the future.

CONTINUOUS IMPROVEMENT

Kaizen and the idea o f Continuous Improvement do not suggest that everybody should all of a sudden become managers or that anybody can start doing things in his or her way. Order and structure are very important elements of any organization. What my experience with the Toyota System and Kaizen Philosophy taught me is that empowering the workers doesnt have to lead to chaos but if done properly will lead to greater efficiency. Individual workers know more about their particular parts of the production process than anything else. Each one of them is a creative individual. Ignoring their knowledge and experience and not allowing them to use their natural, creative potential is waste or big muda as my boss would say. IMPLEMENTATION OF KAIZEN The modification began with the management deciding to allow plants to set their own annual production efficiency targets. The production divisions council, which checked the plants objectives occasionally modifying them, taking into account the company's profit targets, replaced the production allowance councils. After approval, these objectives became the Kaizen norm of each plant in terms of production efficiency. The method of determining the production efficiency was altered to make it less constrained as the standard time was fixed by measuring the time really required for worker's operations whereas earlier standard time was fixed on the basis of the best standard time marked in the past. During the exciting days of learning about and implementing the Toyota System I asked one of our youngest workers Lukas, what he would change in our production plant if he owned it. His reply was: Ive never thought about it. But he started looking around and thinking about it. I know this because a few days later he shared his first idea of a small but significant improvement. About once a month our cars were loaded on a container and shipped out. Our forklift would lift three cars held together by specially designed metal construction, with 3 workers on each side making sure the cars were safe. The most dangerous part was the place between the gate of our building and the container which was standing
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outside. Lukas stated the obvious: The reason why seven people are needed to carry the cars out of the building instead of just one instead of one is because of that step and the bad quality pavement right outside. If we fix it only the forklift operator will be needed to take the cars out of the building. We fixed the problem (with very low costs) and from then on our monthly shipments were less costly and, who knows we might have avoided some nasty accident which we were just asking for with the uneven pavement . This is how the era of Kaizen began in our company. From that point forward our production plant was not run with 3 heads and 60+ hands, but with 30+ heads (and at least one extra pair of hands that no longer avoided getting dirty yes the Toyota System totally changed my attitude about my role as a manager).

Kaizen - continuous improvement You can imagine what implementation of this improvement must have meant for Lukas. I think it changed that young worker even more than the question So, what would you change?. After that experience he started treating the company as his own home and he got to the point that he had ideas for improvement on a daily basis. Others started joining him and gradually our work stations were becoming less dangerous, more pleasant and more efficient. The whole production process now makes much more sense than before and it just feels like a more friendly place. How nice it is to know that next week things will make even more sense and our workers will work not harder but smarter and perhaps safer. Probably the greatest outcome of Kaizen is that the workers are happier because our plant is no
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longer a battle field between the management and the workers but they feel appreciated and have the appropriate sense of pride in the difference they make. APPLICATION OF KAIZEN AT INDUS? 1. Culture (DNA to be changed) 1. Commitment. 2. RESPECT for People. 3. OPEN Communication System. 4. TEAM Work. 5. HUMAN Resource Development. 6. EMPLOYEE Involvement

2. Application of Tools. a. Suggestion System. b. Quality Circle. Top Management commitment for implementation of Kaizen concept is one of the most important FACTORS in our success. Commitment is catalyst for high goals. It gives courage to progress, accepts challenges and promotes Progress.

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ENCOURAGE TEAM WORK LETS DO SOME exercise. A>.Today we do not need a HERO. A single step forward takenby one hundred people is more important and valuable than one hundred steps forward, taken by a single man. (Shuichi Yoshida)

Participation and team work is the key of success for company. Various tools such as Suggestion system and Kaizen circle are formed to increase the participation and involvement of employee in their job and in order to increase the value provided to customer.

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(CHANGE IN COMMONLY USED TERMINOLOGIES)

WORKERS SUPERVISORS PERSONNEL MANAGEMENT GROUP CREATIVITY CONFERENCE THEM YOU & I ORDERS TEAM MEMBERS TEAM LEADERS, COACH, TRAINERS HUMAN RESOURCE (CONSULTANTS) TEAMS KAIZEN WORK MEETINGS US WE CONSENSUS, MAKING THE EMPLOYEES PRINCIPLE & AGENTS.

DAILY SHOP FLOORMEETING

This is an essential part of plant management to attend daily shop floor meeting to discuss production and quality related issues.

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DAILY SAFETY CIRCLE MEETING There is a flurry of activities before the shift begins such as swiping of company cards, cleaning of individual work places, morning exercises and a quick safety circle meeting

REASONS FOR SUCCESSFUL ABSORPTIONAT INDUS

TOP MANAGEMENT COMMENTMENT AND SUPPORT FROM TOYOTA.

STARTING FROM SCRATCH.

RECRUITMENT OF YOUNG AND FRESH STAFF.

APPLICATION OF KAIZEN CONCEPT

HUMAN RESOURCE DEVELOPMENT & TRAINING

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SWOT ANALYSIS A way to identify and analyze a company's goals by assessing its strength, weaknesses, opportunities, and threats. An advantage to SWOT analysis is that it separates internal factors (strengths and weaknesses) from external ones (opportunities and threats). This allows the company to match what it could do in theory with what is possible in reality. Another advantage is the fact that conducting SWOT analysis is straightforward if the company conducting it is honest with itself. See also: Qualitative Analysis STRENGTHS A Motivated and extremely productive work force. Low cost, high quality factory operations guided by just in time. Long-term partnerships with suppliers. Careful market research and short design to show room cycles so as to keep models closely aligned with market demand. Custom order production and superior customer service. Being the undisputed quality leader in automotive manufacturing. Having outstanding labor relations. Informal contact among employees at all levels of the company. Strong employment relationship. Every worker is adding value to the car. Long-term relationship with supplier. WEAKNESSES Customers not segmented Production operation not very good as the product needs to be reworked Customers are not being involved in the process Limited Research and Development done as compare to competitors High level of responsibility on employees shoulders Lack of flexibility in the company Lack of a proper sales force

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 Few layers in Organizational hierarchy, resulting in less opportunity for promotions. Continuous stress on employees due to kaizen (Continuous improvement). OPPORTUNITIES The government pursued two major initiatives to promote automobile self-sufficiency in the quasi-closed economy. First, the ministry of international trade and industry limited imports to about 1 % of the Japanese market. Second, a plan was proposed to rationalize the auto industry through mergers and specialization. Additional government measures to strengthen and protect the ability of the industry to compete included protective tariffs, restrictions on foreign capital participation and loans, accelerated depreciation, special import arrangements for machinery and technology, and long term, low interest loans for the auto parts industry. Quota imposed by US government is beneficial for Toyota in the sense that it enabled Toyota to charge a premium price and to replace its inexpensive one, which were loaded with many options. After US market, Western Europe has emerged as largest market for new car sales in the world. Although Toyota faces fierce competition form Nissan in Europe but its present market leader status in Finland, Denmark, Norway and Ireland can be more beneficial if the trade barriers among European countries are eased. THREATS Rising gasoline prices triggered by decisions of the OPEC oil cartel to hike crude oil prices substantially. Declining economic growth on a global scale. Continuing trade frictions due to trade imbalances between Japan and other countries and the lack openness of the Japanese market to import. Declining exports due to import restrictions in the United Sates and Europe and strict domestic content laws in other countries.
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 Expanding demand in the Japanese auto market. Escalating competition in the low priced car market by the entrance of several newly industrialized countries. Increasing sales of imports. CONCLUSION Kaizen involves every employee in making changein most cases small, incremental changes. It focuses on identifying problems at their source, solving them at their source, and changing standards to ensure the problem stays solved. Its not unusual for Kaizen to result in 25 to 30 suggestions per employee, per year, and to have over 90% of those implemented. For example, Toyota is well-known as one of the leaders in using Kaizen. In 1999 at one U.S. plant, 7,000 Toyota employees submitted over 75,000 suggestions, of which 99% were implemented. These continual small improvements add up to major benefits. They result in improved productivity, improved quality, better safety, faster delivery, lower costs, and greater customer satisfaction. On top of these benefits to the company, employees working in Kaizen-based companies generally find work to be easier and more enjoyableresulting in higher employee moral and job satisfaction, and lower turn-over. Kaizen is often translated in the west as ongoing, continuous improvement. Some authors explain Japans competitive success in the world market place as the result of the implementation of the Kaizen concept in Japanese corporations. In contrast to the usual emphasis on revolutionary, innovative change on an occasional basis, Kaizen looks for uninterrupted, ongoing incremental change. In other words, there is always room for improvement and continuously trying to become better.

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Originally a Buddhist term, Kaizen comes from the words, Renew the heart and make it good. Therefore, adaptation of the Kaizen concept also requires changes in the heart of the business, corporate culture and structure, since Kaizen enables companies to translate the corporate vision in every aspect of a companys operational practice. According to Imai (1986), an important advocate of Kaizen, Kaizen means improvement. Moreover it means continuing improvement in personal life, home life, social life, and working life. When applied to the workplace Kaizen means continuing improvement involving everyone managers and workers alike. Believers of this theory maintain that managers of production operations cannot stand still; continuous development and improvement is critical to long term success. RECOMMENDATION In practice, Kaizen can be implemented in corporations by improving every aspect of a business process in a step by step approach, while gradually developing employee skills through training education and increased involvement. The principle in Kaizen implementation is: 1. Human resources are the most important company asset, 2. Processes must evolve by gradual improvement rather than radical changes, 3. Improvement must be based on statistical/quantitative evaluation of process performance. Support throughout the entire structure is necessary to become successful at developing a strong Kaizen approach. Management as well as workers need to believe in the Kaizen idea and strive toward obtaining the small goals in order to reach overall success. Therefore, all members of an organization need to be trained in a manner to support this idea structure. Resources, measurements, rewards, and incentives all need to be aligned to and working with the Kaizen structure of ideas.
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Implementing Kaizen as a part of all daily activities leads to continuous improvements

References:Adler P. (1998), Nummi: de l'autonomie du travail la socialisation de la production?, in J.P. Durand, P. Stewart and J.J. Castillo (1998) Adler P., Goldoftas B., and Levine D. (1998), Stability and Change at NUMMI, in R. Boyer, E. Charron, U Jrgens, and S. Tolliday (1998), op. cit., pp. 128160 Boyer R., Charron E., Jrgens U., and Tolliday S. (1998), Between Imitation and Innovation, Oxford University Press, London Durand J.P., Stewart P. and Castillo J.J. (1998), L'avenir du travail la chane: Une comparaison internationale dans l'industrie automobile, Editions la Dcouverte, Paris (Teamwork in the Automobile Industry, Macmillan, London)

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