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  • Toyota knows how to make cars.

  • It does it so well it became the first company to produce more than 10 million a year.

  • Its success is rooted in a special system and began what's now known as "lean manufacturing", an ethos emulated by companies around the world to make products faster, cheaper, and better.

  • Here's how Toyota changed the way we make things.

  • Following the Second World War, Japan was left in a precarious economic position.

  • Steel and other metals are scarce.

  • Already disadvantaged by lacking natural resources, materials were hard to come by and companies had to be creative to compete.

  • Toyota's founder Sakichi Toyoda had started a loom business, but it was his son Kiichiro who founded the motor company in 1937.

  • They were used to working within narrow margins.

  • As the shortage of materials increased during the war, the number of headlamps on its Model K truck was reduced to one, and it only had brakes on one of the axles.

  • The turning point for Toyota's Production System would come in the early '50s, when Kiichiro's cousin Eiji would travel to the US with a veteran loom machinist, Taiichi Ohno.

  • They visited Ford's River Rouge plant in Michigan and were impressed by the scale of the operation, but knew that in cash-strapped Japan, companies didn't have the resources for such a system.

  • Having months' worth of stock sitting in a warehouse would tie up precious capital they didn't have.

  • Instead, what truly impressed Ohno was a visit to a supermarket, a Piggly Wiggly, according to legend.

  • Japan didn't really have self-service stores at this point, and he was struck by the way customers could choose exactly what they wanted, when they wanted.

  • He decided to model his production line on a similar idea.

  • With a "supermarket formula", only enough parts were produced in the first phase to replace what was used in the second, and so on.

  • This is where the "Just-in-time" system really took shape.

  • Toyota was able to eliminate much of the waste in Ford's system, making smaller numbers of parts to be used when it needed them, allowing the company to operate on a tight budget.

  • As part of this, Ohno developed "kanban", a sign-based scheduling method which shows goods in, goods in production, and goods outit's now seen as a precursor to bar codes.

  • Ohno and Toyoda also noticed that American car companies were still employing many of Henry Ford's early production techniques.

  • They kept operations at full tilt in order to maximize efficiencies of scale, but then had to repair defective cars after they rolled off the line.

  • Ohno believed this caused more problems and didn't encourage workersor machinesto stop making the mistake.

  • So, he placed a cord above every station which any worker could pull to stop the entire assembly if they spotted a problem.

  • The whole team would work on it to prevent it from happening again.

  • As teams identified more problems, the number of errors began to drop dramatically.

  • Combined with a culture of continuous incremental improvement called "kaizen", the Toyota Production System built a brand known for making reliable and affordable cars.

  • But Toyota was also getting good at producing cars quickly.

  • In 1962, the company had produced 1 million vehicles.

  • By 1972, they'd produced 10 million.

  • It was around that time that the efficiencies of their factories enabled Toyota to produce a car every 1.6 man hours, much lower than their competitors in the US, Sweden, and Germany.

  • And as the oil crises of the decade sent gas prices higher,

  • cheap-to-run Japanese cars became much more appealing to Americans, whose powerful but gas-guzzling vehicles suddenly became very expensive to run.

  • Today, Toyota has made over 250 million vehicles.

  • Others have looked to them to learn the lessons of "lean", combining craft with mass production, avoiding waste, while striving for constant improvement.

  • Boeing is perhaps the most famous, restructuring a plant to better suit TPS.

  • Intel is another long-time lean ambassador, and is exploring the principles in the context of AI and the Internet of Things.

  • A Canadian hospital even used Toyota's system to decrease wait times in its ER.

  • The Toyota Production System changed not just how cars are made globally but how we approach making things, full stop.

  • It also showed there is always a better way to make a product.

Toyota knows how to make cars.

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