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May


It's not the end of the line

Sun, 22nd May 2005

WHILE no one would wish to diminish the plight of the Rover workers, it's not all doom and gloom in the Midlands. Less than 50 miles up the road from Longbridge, another car company has quietly completed a pounds 50 million investment programme and recruited 1,000 extra workers to boost production from 220,000 to 285,000 cars a year, 85 per cent for export.

That brings the total invested on the site to pounds 1.2 billion. In its 13 years of existence the plant has steadily upped its purchases of parts from local suppliers. These now total pounds 450m, or 49 per cent of the total by value.

Admittedly Toyota Motor Manufacturing UK (TMUK), based at Burnaston in Derbyshire (it has another plant making its engines at Deeside in north Wales) benefits from a very different context from Rover. Its parent, on some measures, is currently the second-largest motor firm in the world after GM, and few doubt that it will take top spot in the next few years. It is also in robust financial health - in marked contrast to the big three US automakers, two of which are struggling to avoid junk bond status.

Yet those differences in circumstances are not coincidental. They are the consequence of profound differences in the way Toyota operates. 'Toyota is a an oddball company,' admits Sir Alan Jones, chairman of TMUK and 'managing officer' of the parent firm in Japan. 'We look at things in a holistic way.'

This is an unassuming way of putting it, but then Toyoto prefers actions to words, both in and outside the plant. Although it is happy to show what it does if people ask, it doesn't boast or preach about its unique approach.

T here is more to Toyota's holism than meets the eye. To understand it, it is necessary to back up half a century.

When the company was starting to make cars again after the war, it rapidly twigged that the mass-production methods of the Americans would have to be substantially altered to meet the very different conditions of Japan, where space, raw materials and skilled labour were in short supply and the customer base was smaller, poorer and more diverse.

The genius of Taiichi Ohno, who developed the Toyota Production System (or TPS) in the 1950s, was to take the standardised way of working pioneered by Henry Ford, and insert it in a process that reversed Ford's logic.

Instead of seeing production as a series of separate processes (press, weld, paint, assembly, sales) each delivering batches of products scheduled and optimised for economies of scale, Ohno saw it as a single pulse: a car 'pulled' through the different factory processes, from one end to the other, by a customer order. In this view, each process was both customer and supplier to the processes next to it.

As Ohno surmised, by optimising the pulse rather than the batch he could do away with the need to store work-in-progress while it waited between processes, thus saving space. By putting the processes close to each other, he no longer required expensive transfer lines.

But coupling work tightly together meant that you couldn't afford anything to go wrong. There was nowhere to house rejects, and no buffer of stock from which to draw new ones. Quality had to be right every time. So to 'just-in-time' delivery of parts was added a second principle of the TPS: automation with a human touch, or ' jidoka ', meaning the ability of those on the line to stop production instantly to correct mistakes on the spot if anything went wrong.

And finally, in a pull system, it was the customer that drove constant improvement , not obsolescence planned on high.

The implications of this way of working are far-reaching. The workforce is in control of the production process - so you had better educate, trust and respect it. The quality of goods received from suppliers is equally critical, so the same goes for them. This is why Toyota calls employees 'members'. It is also the reality behind Jones's remark: 'Company prosperity depends on member [employee] prosperity and supplier prosperity.'

Trust and respect are far from costless . For example, although Toyota is highly sensitive to demand, carrying inventory in the factory for hours rather than days, it freezes orders to suppliers for 20-day periods to give them continuity. It works with them long-term, too, for reciprocal benefit.

Likewise for members: when in 1996-7 currency movements and unsuitable models left TMUK badly exposed, it did not build for stock or have recourse to layoffs, instead keeping people working on process improvements that paid off later. 'That was an important decision point,' says Jones.

In the same way, 'Toyota didn't walk away from us then - although it could have done.' It has taken 11 years for TMUK to become profitable.

Holism explains many things that look paradoxical to outsiders. For instance, while some areas of manufacture are heavily automated, others are not.

'To understand what we're doing, we first do a process manually, then mechanise it, then automate - if we need to,' says Jones. So you may see a trolley of parts pushed a short distance by hand, or someone on a bike collecting up internal orders for new parts.

Or take work standardisation. Jones denies that this is a straitjacket or a dis incentive to initiative - it's the reverse. 'You have to have standard methods to know how to improve. Standard methods force discussion,' he says.

Although principles are common across all Toyota plants, detailed work methods vary. Comparisons show how and where further improvements might be possible. In that sense, standardisation is part of the open, visual management that is at the heart of the TPS.

The greatest difference between Toyota and Rover and other ailing car firms is financial. By treating production as a single end-to-end system, and focusing on shortening the period from order to delivery, Toyota forces into the open the costs of traditional methods - quality, missed forecasts, vast management overhead - that are usually hidden.

Unobsessed with internal and external league tables, Toyota has only one unchanging target: to improve against itself in cost and customer approval.

'It's sometimes hard,' notes Jones, 'to maintain the holism through thick and thin' - but not as hard as being Rover.

The Observer, 22 April 2005


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