Toyota's JIT Revolution

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Case Details:

Case Code : OPER006
Case Length : 12 Pages
Period : 1990 - 2002
Organization : Toyota
Pub Date : 2003
Teaching Note : Available
Countries : Japan
Industry : Automobiles

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"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."

- www.academic.emporia.edu (1998).

A Legendary Production System

In the mid-1990s, more than fifty executives and engineers from major automobile companies worldwide visited Toyota Motor Company's (Toyota)¹ manufacturing complex at Georgetown, US, to study the Toyota Production System (TPS). The visit also included an intensive question and answer session. 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.²

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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 Toyota 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.

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1] Toyota was the world's third largest automobile manufacturer in 2000, after General Motors and Ford.

2] A defect detection system that automatically/manually stops the production operation and/or equipment whenever an abnormal or defective condition occurs. Any necessary improvements are made by directing attention to the stopped equipment and the worker who stops the operation. The Jidoka system puts faith in the worker as a thinker and allows all workers the right to stop the line on which they are working.