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That’s an iron computer!

In 1963, Toyota opened a new transmission shop at the Honsha plant, and they needed to find a way to transmit signals to indicate where to send parts on conveyors to the assembly line. Figuring out how to transmit the signals was a challenge. Today, you just program a PLC or type stuff into a computer, but they didn’t have PLCs or computers back then. They had to do something…

What Toyota did was to install limit switches at the places where the conveyor was headed. Actuating a combination of switches at process No. 6, for example, might signal conveyor No. 2 to send a part. They did it by putting wooden rings on certain flag poles and used ring combinations to provide more-complex switching and signaling. The system did work.

Taiichi Ohno was showing the system to a vice president from Ford, who visited the plant after the system had been up and running for quite a while. The Ford executive froze at one place and wouldn’t budge for about 30 minutes. He was staring at the signaling system. When he finally spoke, he said, That’s an iron computer!” That was an electrical signaling system with toggle switches, the first and only “computerised” process Toyota had back then. What a technologically humbling experience for a globally admired company known for the development of a superior total management system: the Toyota Production System (TPS)

In the following sections we’ll identify the constituent methodologies of the system, focusing on the role technology has played to stabilize production and procurement by mitigating internal variability and market signal errors.


The Toyota Production System Methodologies in a Historical Context

  • First stage: Flow production, 1946 to 1955

    Toyota began deploying production equipment in the sequence of successive processes rather than in groups of similar machines; this type of layout is a prerequisite for the development of a pull-system methodology. One objective Toyota was steadfast to achieve was to optimize the material flow rather than maximize the worker’s productivity (i.e., prioritize flow to reduce lead time). To accomplish this objective, Toyota began to experiment with multi-process handling, where one worker operates several machines. This first gigantic step engendered a natural evolution towards cellular manufacturing, small-lot production, Total Quality Control, and other TPS techniques (please see Figure below).

  • Second stage: Development of an internal pull-system, 1956 to 1965

    Toyota developed a pull-system methodology for integrating production lines. That effort focused initially on linking lines that produced units, such as engines, transmissions and suspensions, with the lines that fabricated parts for those units.

    The objective was to achieve the Just in Time production of parts by the various processes in the necessary amounts at necessary timing for assembling a vehicle as a final product. If such is the case, it can be said that only the final assembly line that performs vehicle assembly is the process that can accurately know the necessary timing and quantity of the parts. Therefore, the final assembly line goes to the preceding process to obtain the necessary parts at the necessary time for vehicle assembly. The preceding process then produces on the parts withdrawn by the following process.

    In the late 1950s, the pull-system produced higher synchronization and body inventories were reduced (inventories were reduced by synchronization, not by waste elimination practices). It should be noted that Toyota is not a “zero inventory” company, although it is sometimes referred to as such.

    It’s important to emphasise that to achieve the synchronization of a JIT pull-system is easier said than done; and then, to consistently execute this multi-echelon process is an enormous challenge. Most companies have not mastered this challenge, condition that subjugates them to perpetually execute Kaizen in the flow production stage (i.e., companies are stuck in the first stage limbo).

  • Third stage: Development of end-to-end pull-systems, 1966 to 1975

    In this stage, Toyota established pull-system linkages between the vehicle assembly lines and the processes, including outside parts manufacturers, that supply components to those lines. It synchronized the fabrication of parts on in-house production lines and at outside suppliers with the production sequence on the vehicle assembly lines.

    Toyota introduced production leveling (heijunka) to help them react to demand changes and utilise their capacity in the best possible way.

    Two other key achievements of this stage were Product Development Routines and the Black Box Supplier System. Due to space restrictions, we’ll only discuss the latter. The Black Box Supplier System refers to a certain pattern of transactions in which a parts supplier conducts detailed engineering of a component for an automobile maker on the basis of the latter’s specifications and preliminary designs. This practice is known to be prevalent in the Japanese industry and one of the sources of its competitive advantage.

    In brief, given the fact that in the automotive industry 70 to 80% of the cost of the automobile is controlled by the suppliers, it’s essential that the parts or units are manufactured with the best designs, and delivered by means of a synchronized end-to-end supply system.

  • Fourth stage: Development and Adoption of Digital Solutions, 1976 to date

    Toyota employed electronic communications equipment to link activity alongside the vehicle production lines with activity in the previous processes. That helped them fine-tune the timing of production instructions and of sequential delivery.

    However, a new round of innovation became necessary in the fourth stage. The increasing diversity in vehicle models and model variations necessitated innovations in replenishing line-side stocks of parts and assemblies. Toyota needed to create sophisticated in-house logistics systems, and it needed to tap the potential of newly emerging electronic and communication technologies. Advanced technology became part of the tale of the TPS.

    By the late 1970s, Toyota had found itself achieving world-class flexibility and efficiency at the same time.
    As for production processes and techniques, the 1980s continued with system expansion. The basic elements of Toyota’s production system were in place, but Toyota continued to refine its system. Micro electronics, computers, and new process technologies arrived on the shop floors, but they did not change the basic pattern of the Toyota-style manufacturing system.


What is Toyota Doing Now?

To capture what Toyota is doing today, we’ll refer to declarations made by Akio Toyoda and presentations given by key executives in charge of its digital transformation.

In a nutshell, Toyota’s digital transformation can be summarised in the following initiatives:

  • Faster time to PDCA/problem solving.
  • Real time, faster data driven decision making.
  • Real-time visualisation to improve team member control and empowered decision making.
  • Connected data to enable predictive and prescriptive insights.
  • High factory flexibility, chiefly to realign internal and external materials flows, and improvements during periods of volatility.

A key theme expressed by Toyota is that all the digital initiatives will not alter the ethos of the TPS, but they will enhance it to migrate from Mass Production to Mass Customisation, by preparing themselves for whatever the future of mobility will be.