Toyota Offers a Lesson in How to Get Back Up After Falling Down

Only five years ago, the Toyota Production System—and the company that spawned it—were the envy of the manufacturing world. Then Toyota buckled, and “TPS” became yesterday’s glory. But now a humbled and wiser Toyota is launching a new, global, “modular” manufacturing system that is meant to re-establish its former pre-eminence in making automobiles. There are lessons other CEOs can learn from Toyota's rise back up from the manufacturing ashes.

The gold standard for mistake-free, low-cost automotive production, TPS gave the world manufacturing concepts such as “just-in-time inventory,” supplier parks and “continuous improvement.”

The company pointed with pride to key features of the system, such as the authority of any worker on an assembly line to shut it down momentarily if he or she saw a quality problem or an issue that needed to be handled. Toyota even allowed competitors to come in and examine TPS, nurturing a cottage industry of consultants and authors who distilled the lessons of TPS and communicated them to the world at large.

“Toyota was once the gold standard for mistake-free, low-cost automotive production.”

But that was then, and this is now. Toyota—humbled by the Great Recession beginning in 2008, the 2010 recall fiasco, natural disasters in 2011 and toughening competition over the last few years—has launched a new system called Toyota New Global Architecture. The first vehicles to be launched under the new program will be the Prius and Toyota’s Lexus luxury vehicles, according to The Wall Street Journal.

“This has been a period to rebuild Toyota’s development and manufacturing procedures,” Executive Vice President Mitsuhisa Kato said at a briefing at Toyota’s headquarters in central Japan, the Journal reports. “The entire company is working on a structural reform so that we can grow in a more sustainable way.” Toyota didn’t say how much savings the cuts are expected to deliver.

But in the meantime, another challenge facing Toyota is that Volkswagen has arisen with the first truly global modular production system, which it calls MQB, an acronym from the German name. The company—which continues to spar with Toyota for global sales-volume leadership each year—launched MQB in 2012 as it began to deploy what the Journal called “a building-block system that allows it to develop platforms on which multiple brands can be built in the same factory and often on the same production line, a savings over designs that often required one factory per model.”

Hirohide Nagakawa, a Toyota engineer involved in platform development, told the newspaper that in 2012, when Volkswagen started to sell its first vehicles built under MQB, Toyota engineers benchmarked and studied them carefully, at times adjusting its own development targets.

Now the world will see if Toyota has learned such lessons well. The company used to teach the world TPS, but now Toyota is learning how to innovate all over again.

How innovative is your company? Have your manufacturing processes kept up with change? Don’t become the Toyota of your industry. Study how to disrupt your business and then do it, before someone else does.


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