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Toyota Way Supply Chain
The Toyota Way and Supply Chain Management
Jeffrey K. Liker
Professor, Industrial and Operations Engineering The University of Michigan and Principal, Optiprise, Inc.

Presentation for OESA Lean to Survive Program 2005
© Copyright Jeffrey Liker 2/14/2005Lean Enterprise Excellence Building Page 1

Supplier Gap: Toyota vs Big-3
Supplier Improvement, 1990-96 Defects (parts per million) Sales/Direct Employee Inventories/Sales U.S. OEM (Chrysler, Ford, GM) -47% +1% -6% Toyota -84% +36% -35%

Toyota Supplier Advantage, 1996 PPM Inventories Output/worker 35% -25% 10%

Source: Jeff Dyer, based on 39 supplier plants serving Toyota + U.S. OEM

© Copyright Jeffrey Liker

2/14/2005Lean Enterprise Excellence Building Page 2

“4 P” Model of the Toyota Way e nb Ge nch iG u ts u

Problem Solving

ct +

Toyota’s Terms
Ka ize n

Te am wo

rk

(Continuous Improvement and Learning)

Continual organizational learning through Kaizen Go see for yourself to thoroughly understand the situation. (Genchi Genbutsu) Make decisions slowly by consensus, thoroughly considering all options; implement rapidly (Nemawashi)

People and Partners

Re

sp e

(Respect, Challenge and Grow Them)

Grow leaders who live the philosophy Respect, develop and challenge your people and teams Respect, challenge, and help your suppliers Create process “flow” to surface problems Level out the workload (Heijunka) Stop when there is a quality problem (Jidoka) Use pull systems to avoid overproduction Standardize tasks for continuous improvement Use visual control so no problems are hidden Use only reliable, thoroughly tested technology Base management decisions on a long-term philosophy, even at the expense of short-term financial goals

Process
(Eliminate Waste) ge len

Ch al

Philosophy
(Long-term Thinking)

© Copyright Jeffrey Liker

2/14/2005Lean Enterprise Excellence Building Page 3

Philosophy: Company Foundation
Toyota Motor Manufacturing MISSION Ford
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