Toyota's JIT Revolution

ICMR regularly updates the list of free cases. To view more free cases, please visit our site at frequent intervals.

<< Previous

Background Note

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 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 suit 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 This resulted in the preceding process producing only quantities of units to replace those that had been withdrawn.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.

Next >>

---