In 2008, Toyota outsold General Motors to become the world's biggest automaker, a title GM had held since 1931. Toyota's success has been attributed to an innovative production system anchored by a set of company values collectively known as "The Toyota Way." However, recent setbacks may have a negative impact on Toyota's preeminent position in the automotive industry.
The Toyota Production System, or TPS, is the company's renowned production model. The principles of TPS are sometimes referred to as "lean manufacturing." Established in the years after World War II, TPS is designed to get the most out of every available resource, be it human or machine. One of the overriding goals of TPS is the elimination of waste. Wasteful practices, termed "muda" in Japanese, can be everything from the idleness of employees to an overabundance of inventory.
One of Toyota's key company values is known as "kaizen," a Japanese term that means "continuous improvement." Following the kaizen principle, the company focuses on ongoing, incremental innovations as opposed to sudden "game changing" ideas. Kaizen is seen as the responsibility of every employee, not just those in research and development. Matthew May, in his book "The Elegant Solution," estimates that Toyota implements a million new ideas a year, most of them coming from ordinary factory workers.
Another core value is known as "genchi genbutsu," a phrase which roughly translates as "go to the spot." It is the practice of thoroughly understanding a problem by confirming information through personal observation. For example, a manager will go to the factory floor to observe a process and interact with workers to understand a situation rather than relying on computer data or second-hand information. The practice applies to executives as well as managers. Toyota Chairman Akio Toyoda has been known to visit auto dealerships unannounced to personally inspect vehicles outside of the factory.
Toyota's long-standing reputation for quality and reliability has taken a hit in recent years. Since 2009, the company has recalled nearly 24 million vehicles due to safety concerns. In addition, Japan's devastating March 2011 earthquake is expected to cause supply problems through the end of 2011. These setbacks are likely to allow GM to reclaim the title as the world's number one-selling automaker by the end of 2011. Yet Toyota's storied culture of resourcefulness and innovation should help the company successfully confront many of its current and future challenges.
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