In 2005, Toyota produced one vehicle approximately every four seconds somewhere in the world, while at the same time, setting the benchmark for product quality. Toyota perennially wins national and international acclaim in all of the major automobile quality ratings. For instance, Toyota’s flagship LEXUS nameplate has earned the top spot in JD Power’s Initial Quality Survey for over 10 years running. On top of all this, Toyota is profitable; in fact, very profitable. Toyota set record profits 2003, 2004, and 2005 earning over $10 billion annually even while their North American competitors saw significant drops in earnings and losses.
But other companies have also been successful. What makes Toyota intriguing is that its success has been sustained over an extremely long time period by most business standards. From the ashes of World War II, Toyota initially struggled to maintain solvency, but rose over the following decades to become Japan’s leading manufacturer. As it grew, Toyota began seeking markets outside of Japan, and by the early 1980’s Toyota was well established in the US market, Toyota has grown each year for the last 50 years, and has not experienced a loss in net earnings since the early 1950’s. This is standout performance in an industry characterized by cyclical ups and downs.
Toyota is also intriguing because its business and management philosophy is unique, its approach to manufacturing exceptional and counterintuitive, its collective understanding of operational dynamics breathtakingly insightful. Toyota is perhaps most well-known for its production system, first documented in a detailed 80-page handbook published internally in Japanese in 1973. The first English publication on it appeared in 1977 by Sugimori, et al., as a high level summary. However, it wasn’t until the early 1990’s that the uniqueness of Toyota’s system became well-known with the publication of the book The Machine that Changed the World. In it, the MIT professors detail the strikingly robust, flexible, and efficient systems they observed in Japan, and dubbed it “lean manufacturing” for their ability to design, produce, and deliver higher quality products in volume with a fraction of the resources of their North American and European competitors. The manufacturing community learned later that the model of lean manufacturing was the Toyota Production System (TPS).
Toyota has been remarkably open in sharing its system with others, even establishing the Toyota Supplier Support Center to provide consulting assistance to US companies wanting to operate more efficiently, at no cost to the client. More recently, we’ve come to understand that Toyota’s uniqueness extends into many other areas as well, including product development and logistics. Cottage industries are sprouting in many arenas to provide assistance and training in lean tools and concepts, and putting them into practice. Lean applications that were once targeted primarily at high-volume manufacturing plants are rapidly finding their way into other sectors of the economy, including engineering, financial services, transportation and logistics, healthcare, food and beverage services, and government (including military operations). Toyota’s impact is being felt well beyond the automotive industry.
The ups & downs of the entrepreneur & their business.
