Toyota's pedal troubles: result of too much or not enough lean manufacturing?

Toyota may have lost sight of its legendary lean manufacturing philosophy as it rapidly expanded and added suppliers.
Written by Joe McKendrick, Contributing Writer

SmartPlanet colleagues Andrew Nusca and Larry Dignan have been doing a great job following the debacle involving Toyota’s sticky gas pedals, and point to discussions about how the automaker's aggressive adherence to efficiency collided with its aggressive global expansion.

Toyota issued a public apology for the faulty parts, and has announced details on how it will fix the problem. (Larry provides details here.)

The Toyota gas pedal snafu also puts a taint on the auto manufacturer’s legendary emphasis on lean manufacturing. Some analysts are speculating that the company’s relentless drive to lean processes may have undercut quality in an increasingly complex enterprise and product line. In a new Wall Street Journal analysis, Daisuke Wakabayashi speculates that “Toyota’s recent problems highlight how certain elements of this approach—eliminating overlap by using common parts and designs across multiple product lines, and reducing the number of suppliers to procure parts in greater scale—can backfire when quality-control issues arise.”

David Olive of the Toronto Star, however, says the trouble is that Toyota may have abandoned its lean principles as it grew into a global powerhouse with many moving parts. As Toyota grew, it fell prey to the same "big-company disease" that humbled General Motors:

"As Toyota quickly ramped up production of its vehicles, its employees strayed from the automaker's 'Toyota Way' of exacting quality control and continuous improvement in manufacturing methods."

Toyota’s more long-term track record over the decades — along with many other companies — demonstrate that lean manufacturing is very effective at improving quality overall while wringing inefficiencies out of supply chains and operations. But these principles need to cover today's highly extended enterprises.

In fact, cost-cutting itself, the prime mission of every C-level executive these days, essentially becomes a secondary consideration of the lean approach. As organizations adopt lean methodologies and practices, streamlined costs become a natural byproduct of the process. I recently spoke with Steve Bell, author of Lean Enterprise Systems: Using IT for Continuous Improvement, about the philosophy behind lean, and he points out that you don’t cut costs simply because costs need to be cut, Steve adds. “The quickest way to lose weight is to give blood, but the patient isn’t very healthy when you’re done. You’re weakened, and you’ve lost a lot of your intellectual capital. If you simply try to attack cost, and short-term cost reduction, all you end up doing is killing the patient.”

Lean means more than simply cutting costs or streamlining, Steve says. Lean, as successfully applied to manufacturing, means doing things “simpler, faster, better, cheaper,” he says. “Notice that the last item on the list is cheaper. If you adopt a systems perspective into every business process. You find where the waste is and you drive it out, focusing on doing things faster and with higher quality, cost will naturally be driven out of the system.”

In lean, the focus is on collaborative teamwork—represented by all parts of the business—to deliberatively and systematically tackle problems.

The Toyota issue points to one of the risks in today's loosely coupled organizations -- which rely on networks of contractors to provide products and services. In Toyota's case, the errant gas pedal assemblies were produced by U.S. firm CTS Corp., which says it manufactured the pedals based on Toyota’s design specifications. But there are large networks of providers that underpin many products and services these days, and the core companies need to better provide ways to build in quality, testing, and accountability.

Ann All provides additional analysis, and agrees that Toyota needs to apply its lean manufacturing principles to its extended supply chain, to get back on track with quality and customer satisfaction. She notes, however, that lean practices such as using common parts and designs across multiple product lines and reducing the number of suppliers in order to procure parts in greater scale are extremely effective in reducing waste, but also introduce greater risk into processes. A supplier not adequately addressing a quality issue will be felt far more deeply, as it has been with Toyota.

In the WSJ article, Wakabayashi quotes Yoshinori Iizuka, a University of Tokyo engineering professor and former head of the Japanese Society for Quality Control, who advocates good design and adequate testing to minimize quality-control problems resulting from widely used parts.

The problem in its bigness, Olive notes, is that by the 2000s, a majority of its employees were outside of Japan. Thus, company managers Toyota "could no longer rely on word of mouth to convey the firm's managerial and manufacturing methods." And it showed in slipping quality -- "from 2004 to 2007, Toyota recalled a staggering 9.3 million vehicles – a number exceeding its total annual output, and up from 2.5 million recalls in the three years previous to 2004."  To put things in further perspective, Olive notes that in 2005, "Toyota's rate of recalls as a percentage of vehicles on the road hit 10.1%, compared with 6.8% from GM and 2.5% cent at Chrysler Group."

In 2007, Olive also observes, then-CEO Katsuaki Watanabe acknowledged that Toyota was aware that quality issues were jeopardizing the company. "The world-class quality that we've built is our lifeline." Three years on, the vaunted Toyota Way had still lost its way.

This post was originally published on Smartplanet.com

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