Surviving low growth — Taiichi Ohno on just-in-time and autonomation

Surviving low-growth — Toyota’s Taiichi Ohno on just-in-time, autonomation, and waste

Enduring lessons in business, production, and management from Taiichi Ohno and the Toyota Production System

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Necessity is the mother of invention
Rational supermarkets and just-in-time systems
Autonomation, stopping devices, and baka-yoke
Kanban and the autonomic nervous system
The vicious cycle of waste
Preventative care and track relays
Isolated islands and the five whys
Ford, Toyota, and slow growth

Necessity is the mother of invention

Following the devastation of the Second World War, Toyota and other Japanese automakers had to catch up fast to Ford and General Motors if they wanted to survive. Toyota knew that if they could eliminate waste and implement quality engineering, they could keep up with American mass production. And so they did.

When the 1973 oil crisis and subsequent recessions hit, companies and nations around the world suffered. The aftershock ate into Toyota’s bottomline too, but not as much as it did with others. Toyota’s competitive edge widened and people began to notice. Fast forward to today and Toyota remains among the most efficient and innovative automakers in the world.

So how did Toyota do it? “Necessity is the mother of invention”, writes Taiichi Ohno — father of the Toyota Production System (and author of the book by the same boring name). The Toyota system, Ohno says, rests on two pillars: (1) “just-in-time”; and (2) “autonomation”; and a handful of practical business philosophies.

Rational supermarkets and just-in-time systems

Curiously, the inspiration for Toyota’s production system began not with Ford or General Motors but with supermarkets across the United States. “The intimate relationship between the supermarket and the style of daily life in America” had left a deep impression on Ohno. It was in stark contrast to Japan’s door-to-door hawkers at the time.

At a supermarket, you “can get what is needed”, “at the time needed”, “in the amount needed”, Ohno observed. Each transaction happened “according to need”. It was rational. Recognizing this, Ohno began to envision Toyota’s manufacturing lines as a sort of supermarket — giving rise to the “just-in-time” concept at the company.

Such a system requires you to look at the “production flow in reverse”. You are thinking about final assembly and working backwards, requesting only the components and material you need when it is needed. Such a model, as we’ll discuss later, reduces waste substantially.

As Ohno explains:

“Just-in-time means that, in a flow process, the right parts needed in assembly reach the assembly line at the time they are needed and only in the amount needed. … With the possibility of acquiring products at the time and in the quantity needed, waste, unevenness, and unreasonableness can be eliminated and efficiency improved… The thing to remember is that it is not only “in time” but “just in time”.
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Autonomation, stopping devices, and baka-yoke

The second pillar of the Toyota Production System is autonomation or “automation with a human touch”. Ohno recognizes that modern machines are so fine tuned that even minor perturbations can render everything after it defective. Autonomation seeks to minimize the build-up of errors in manufacturing.

One example of this at Toyota is the use of “an automatic stopping device”. When a sensor or person detects an abnormality, the entire machine is stopped. While abrupt and costly in the short run, it “forces awareness on everyone”. So, by eliminating problems collectively, repeatedly, and consistently, you minimize large defects over the long run.

In Japan, they call this baka-yoke — “idiot-proofing”. The goal is to install as many defect detection and prevention devices as you can without overburdening its users. Toyota machines, for instance, will not start unless the inputs provided are exactly to specification. Defect-free manufacturing demands consistent quality.

Kanban and the autonomic nervous system

To Ohno, organizations resemble the human body. They contain autonomic nerves that function without conscious command from the brain. Just imagine what might happen to the human body if basic functions like respiration and digestion required as much cognition as mental arithmetic or driving a car demands.

Toyota, in its early years, “began to think about how to install an autonomic nervous system”. They wanted judgment to happen “autonomously at the lowest possible level”. One manifestation of this is kanban — a practice that requires every single process to carry with it information about pickup, transfer, and production.

The goal here is to unify and systemize factory movements. Purchases, productions, sequences, and assemblies, after all, should occur with good reason. Kanban also allows for effective retrospection, quality control, production leveling, and waste elimination. It’s a simple yet effective system that many enterprises fail to appreciate, even to this day.

Table 1. The rules and functions of kanban

Rules for use	Functions of kanban
(1) Later process picks up the number of items indicated by the kanban at the earlier process	(1) Provides pick-up or transport information
(2) Earlier process produces items in the quantity and sequence indicated by the kanban	(2) Provides production information
(3) No items are made or transported without a kanban	(3) Prevents overproduction and excessive transport
(4) Always attach a kanban to the goods	(4) Serves as a work order attached to goods
(5) Defective products are not sent on to the subsequent process. The result is 100% defective-free goods.	(5) Prevents defective products by identifying the process making the defectives
(6) Reducing the number of kanban increases their sensitivity.	(6) Reveals existing problems and maintains inventory control

Source: Adapted from “Evolution of the Toyota Production System” in Ohno, Taiichi. (1978). Toyota Production System on Audio Tape: Beyond Large Scale Production.

The vicious cycle of waste

From movement and transportation to error rates and stock-on-hand, much of the Toyota production system’s focus is on waste elimination. “There is no waste in business more terrible than overproduction”, writes Ohno.

He attributes the problem in part to our insecurity with inventory. Perhaps as a byproduct of our evolutionary quirks, or of our cultural history as farming societies, we are often worried about not having enough. Hoarding, as such, feels comforting.

Hoarding in production, however, is expensive. The accumulation of primary waste — excess inventory, intermediate goods, and raw materials — generates secondary waste by way of more operators, storage, maintenance, and managers.

Waste begets waste.

Growth is very good at masking inefficiency. But when economies stall and competitors scramble, the ill-disciplined will be left flatfooted. Waste minimization requires just-in-time experience and “a revolution in consciousness” from the start.

“Management’s responsibility is to identify excess manpower and utilize it effectively. Hiring people when business is good and production is high just to lay them off or recruiting early retirees when recession hits are bad practices. Managers should use them with care. On the other hand, eliminating wasteful and meaningless jobs enhances the value of work for workers.”
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Preventative care and track relays

But with less excess materials, you become more exposed to production hiccups. “Preventative maintenance” and autonomy are paramount for this reason. Ohno parallels the issue to medicine. It is usually easier, after all, to prevent diseases than to cure them. “Toyota’s strength”, he says, “does not come from its healing processes… [but] from “preventative maintenance”.

Similarly, the true value of machines does not depend on accounting concepts like “depreciation” or “residual value” (although they may be helpful guides). Ohno reminds readers that machine value depends ultimately on “the earning power it still retains”. Careful maintenance, he says, is usually more cost-effective than extravagant replacements.

When thinking about waste and overproduction, Ohno tells readers to remember the story of the tortoise and the hare. People incorrectly conflate high-speed with high productivity. “Speed”, he says, “is meaningless without continuity”. What’s more, people and machines without the “endurance for high speeds will have shortened lifespans”. Asking people and their machines to work harder and faster is rarely the solution for raising efficiency. Systems matter.

“The work arena is like a track relay — there is always an area where the baton may be passed. If the baton is passed well, the total final time can be better than the individual times of the four runners. … I always tell workers they should be skillful in baton passing.”
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Plant-first principle

It goes without saying that implementing just-in-time production, autonomous systems, and appropriate kanban practices is not easy. Mistakes in prediction, specifications, linkages, and whatnot will have flow on effects. As Ohno reminds, “a problem early in the process always results in a defective product later in the process”.

For this reason, Ohno emphasizes the “plant-first principle” — that time in the plant is invaluable to management. Hewlett Packard co-founder Dave Packard popularized a similar idea in The HP Way with “management by walking around”. You cannot learn everything from your perch on the ivory tower. Sometimes, you need to be on the floor and closer to the problem.

“The time that provides me with the most vital information about management is the time I spend in the plant, not in the vice president’s office.”
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Isolated islands and the five whys

Similarly, Ohno sees production and organization not as isolated islands but as a constellation of interconnections. He describes, for instance, how Toyota founders Sakichi Toyoda and Kiichiro Toyoda “had the overview of chess players”. They “studied the entire picture… and were constantly designing strategies” accordingly. Complete analysis requires us to study change in context of the operator, the subgroup, the division, and the organization as a whole.

Sounds obvious, no? In any large enterprise, however, there is a tendency for operators, managers, and executives to stick to their own lane. Each of them, in their attempt to minimize effort, pursues temporary band-aids for their islands and nothing more. This can lead, in turn, to feedback and unintended consequences elsewhere. What the company needs are solutions on the ground floor that are considerate of the big picture.

As Ohno reminds (noting my emphasis):

“Understanding” is my favorite word… Careful inspection of any production area reveals waste and room for improvement… We have to see each area’s role and function in the overall picture… When confronted with a problem, have you ever stopped and asked why five times?… To tell the truth, the Toyota production system has been built on the practice and evolution of this scientific approach. By asking why five times and answering it each time, we can get to the real cause of the problem, which is often hidden behind more obvious symptoms.
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Ford, Toyota, and slow growth

For its time, the Toyota Production System was quite distinct. Where “the Ford system symbolizes mass production” in the United States, Toyota was emblematic of “small lot sizes”, “quick setups” and eliminating overproduction.

Which model is superior? Ohno isn’t so sure. But it’s become clear, at least from the late twentieth century onward, that the economics of mass production alone cannot guarantee success. In an era of low growth, lean ships are just as necessary. So, an enduring company prepares not only for growth, but for continuity when growth is no more.

While Ohno published his book in the late 70s, the general themes for industry and management remain just as relevant today. Most industries must eventually make the transition from growth to maturity. When you’re on this wave, attention to waste and autonomation can be the difference between life and death in business.

As Ohno observes:

“In today’s slow-growth era… we must downplay the merits of mass production… At Toyota, as in all manufacturing industries, profit can be obtained only by reducing costs… Toyoda Kiichiro recognized that the market always demands reasonably priced products… Regardless of how good a car we make, it will mean nothing unless we make it economically… Appealing to patriotism here would be useless… Good marketing and skillful advertising might allow us to deceive the buyers for a while — but not for long”.
Taiichi Ohno. (1978). Toyota Production System: Beyond Large Scale Production.

Sources and further reading

Ohno, Taiichi. (1978). Toyota Production System.
Ford, Henry. (1926). Today and Tomorrow.
Packard, Dave. (1995). The HP Way.