In the periods of high growth before the oil crisis, the usual business cycle consisted of two or three years of prosperity with, at most, six months of recession. At times, prosperity lasted longer than three years.

Slow growth, however, reverses this cycle. An annual economic growth rate of 6 to 10 percent lasts at most six months to one year, with the next two or three years realizing little or no growth or even negative growth.

Generally, Japanese industry has been accustomed to an era of “if you make it, you can sell it,” and the automobile industry is no exception. I am afraid that, because of this, many business managers aim for quantity.

In the automobile industry, the Maxcy-Silberston¹ curve has been used frequently. According to this principle of mass production, although there are limits to the extent of cost reduction, the cost of an automobile decreases drastically in proportion to the increase in quantities produced. This was proved thoroughly in the era of high growth and the principle has become embedded in the minds of people in the automotive industry.

In today’s slow-growth era, however, we must downplay the merits of mass production as soon as possible. Today, a production system aimed at increasing lot sizes (for example, operating a die press to punch out as many units as possible within a given time period) is not practical. Besides creating all kinds of waste, such a production system is no longer appropriate for our needs.

Imitating America is not always bad. We have learned a lot from the U.S. automobile empire. America has generated wonderful production management techniques, business management techniques such as quality control (QC) and total quality control (TQC), and industrial engineering (IE) methods. Japan imported these ideas and put them into practice. The Japanese should never forget that these techniques were born in America and generated by American efforts.

August 15, 1945, was the day Japan lost the war; it also marked a new beginning for Toyota. Toyoda Kiichirō (1894–1952), then president of the Toyota Motor Company,² said, “Catch up with America in three years. Otherwise, the automobile industry of Japan will not survive.” To accomplish this mission, we had to know America and learn American ways.

In 1937, I was working in the weaving plant of Toyoda Spinning and Weaving. Once I heard a man say that a German worker could produce three times as much as a Japanese worker. The ratio between German and American workers was 1-to-3. This made the ratio between Japanese and American work forces 1-to-9. I still remember my surprise at hearing that it took nine Japanese to do the job of one American.

Had Japanese productivity increased at all during the war? President Toyoda was saying that we should catch up in three years, but it would be very difficult to raise productivity by eight or nine times in such a time period. It meant that a job then being done by 100 workers had to be done by 10 workers.

Furthermore, the figure of one-eighth or one-ninth was an average value. If we compared the automobile industry, one of America’s most advanced industries, the ratio would have been much different. But could an American really exert ten times more physical effort? Surely, Japanese people were wasting something. If we could eliminate the waste, productivity should rise by a factor of ten. This idea marked the start of the present Toyota production system.

The basis of the Toyota production system is the absolute elimination of waste. The two pillars needed to support the system are:

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. A company establishing this flow throughout can approach zero inventory.

From the standpoint of production management, this is an ideal state. However, with a product made of thousands of parts, like the automobile, the number of processes involved is enormous. Obviously, it is extremely difficult to apply just-in-time to the production plan of every process in an orderly way.

An upset in prediction, a mistake in the paperwork, defective products and rework, trouble with the equipment, absenteeism — the problems are countless. A problem early in the process always results in a defective product later in the process. This will stop the production line or change a plan whether you like it or not.

By disregarding such situations and only considering the production plan for each process, we would produce parts without regard to later processes. Waste would result — defective parts on one hand, huge inventories of parts not needed immediately on the other. This reduces both productivity and profitability.

Even worse, there would be no distinction between normal and abnormal states on each assembly line. When there is a delay in rectifying an abnormal state, too many workers would make too many parts, a situation not quickly corrected.

Therefore, to produce using just-in-time so that each process receives the exact item needed, when it is needed, and in the quantity needed, conventional management methods do not work well.

I am fond of thinking about a problem over and over. I kept thinking about how to supply the number of parts needed just-in-time. The flow of production is the transfer of materials. The conventional way was to supply materials from an earlier process to a later process. So, I tried thinking about the transfer of materials in the reverse direction.

In automobile production, material is machined into a part, the part is then assembled with others into a unit part, and this flows toward the final assembly line. The material progresses from the earlier processes toward the later ones, forming the body of the car.

Let’s look at this production flow in reverse: a later process goes to an earlier process to pick up only the right part in the quantity needed at the exact time needed. In this case, wouldn’t it be logical for the earlier process to make only the number of parts withdrawn? As far as communication between the many processes is concerned, wouldn’t it be sufficient to clearly indicate what and how many are needed?

We will call this means of indication kanban (sign board) and circulate it between each of the processes to control the amount of production — that is, the amount needed. This was the beginning of the idea.

We experimented with this and finally decided on a system. The final assembly line is taken as the starting point. On this basis, the production plan, indicating the desired types of cars with their quantity and due date, goes to the final assembly line. Then the method of transferring the materials is reversed. To supply parts used in assembly, a later process goes to an earlier process to withdraw only the number of parts needed when they are needed. In this reverse way, the manufacturing process goes from finished product back to the earliest materials-forming department. Every link in the just-in-time chain is connected and synchronized. By this, the management work force is also reduced drastically. And kanban is the means used for conveying information about picking up or receiving the production order.

Kanban will be described later in detail. Here, I want the reader to understand the basic posture of the Toyota production system. The system is supported by the just-in-time system, already discussed, and autonomation, described in the next section. The kanban method is the means by which the Toyota production system moves smoothly.

The other pillar of the Toyota production system is called autonomation — not to be confused with simple automation. It is also known as automation with a human touch.

Many machines operate by themselves once the switch is turned on. Today’s machines have such high performance capabilities, however, that a small abnormality, such as a piece of scrap falling into the machine, can damage it in some way. The dies or taps break, for instance. When this happens, tens and soon hundreds of defective parts are produced and quickly pile up. With an automated machine of this type, mass production of defective products cannot be prevented. There is no built-in automatic checking system against such mishaps.

This is why Toyota emphasizes autonomation — machines that can prevent such problems “autonomously” — over simple automation. The idea originated with the invention of an auto-activated weaving machine by Toyoda Sakichi (1867–1930), founder of the Toyota Motor Company.

The loom stopped instantly if any one of the warp or weft threads broke. Because a device that could distinguish between normal and abnormal conditions was built into the machine, defective products were not produced.

At Toyota, a machine automated with a human touch is one that is attached to an automatic stopping device. In all Toyota plants, most machines, new or old, are equipped with such devices as well as various safety devices, fixed-position stopping, the full-work system, and baka-yoke foolproofing systems to prevent defective products (see the glossary for further explanation). In this way, human intelligence, or a human touch, is given to the machines.

Autonomation changes the meaning of management as well. An operator is not needed while the machine is working normally. Only when the machine stops because of an abnormal situation does it get human attention. As a result, one worker can attend several machines, making it possible to reduce the number of operators and increase production efficiency.

Looking at this another way, abnormalities will never disappear if a worker always attends to a machine and stands in for it when an abnormality does occur. An old Japanese saying mentions hiding an offensively smelly object by covering it up. If materials or machines are repaired without the managing supervisor’s being made aware of it, improvement will never be achieved and costs will never be reduced.

Stopping the machine when there is trouble forces awareness on everyone. When the problem is clearly understood, improvement is possible. Expanding this thought, we establish a rule that even in a manually operated production line, the workers themselves should push the stop button to halt production if any abnormality appears.

In a product like the automobile, safety must always be of primary importance. Therefore, on any machine on any production line in any plant, distinctions between normal and abnormal operations must be clear and countermeasures always taken to prevent recurrence. This is why I made autonomation the other pillar of the Toyota production system.

Implementing autonomation is up to the managers and supervisors of each production area. The key is to give human intelligence to the machine and, at the same time, to adapt the simple movement of the human operator to the autonomous machines.

What is the relationship between just-in-time and automation with a human touch, the two pillars of the Toyota production system? Using the analogy of a baseball team, autonomation corresponds to the skill and talent of individual players while just-in-time is the teamwork involved in reaching an agreed-upon objective.

For example, a player in the outfield has nothing to do as long as the pitcher has no problems. But a problem — the opposing batter getting a hit, for example — activates the outfielder who catches the ball and throws it to the baseman “just in time” to put the runner out.

Managers and supervisors in a manufacturing plant are like the team manager and the batting, base, and field coaches. A strong baseball team has mastered the plays; the players can meet any situation with coordinated action. In manufacturing, the production team that has mastered the just-in-time system is exactly like a baseball team that plays well together.

Autonomation, on the other hand, performs a dual role. It eliminates overproduction, an important waste in manufacturing, and prevents the production of defective products. To accomplish this, standard work procedures, corresponding to each player’s ability, must be adhered to at all times. When abnormalities arise — that is, when a player’s ability cannot be brought out — special instruction must be given to bring the player back to normal. This is an important duty of the coach.

In the autonomated system, visual control, or “management by sight,” can help bring production weaknesses (in each player, that is) to the surface. This allows us then to take measures to strengthen the players involved.

A championship team combines good teamwork with individual skill. Likewise, a production line where just-in-time and automation with a human touch work together is stronger than other lines. Its power is in the synergy of these two factors.

Frequently we use the word “efficiency” when talking about production, management, and business. “Efficiency,” in modern industry and business in general, means cost reduction.

At Toyota, as in all manufacturing industries, profit can be obtained only by reducing costs. When we apply the cost principle selling price = profit + actual cost, we make the consumer responsible for every cost. This principle has no place in today’s competitive automobile industry.

Our products are scrutinized by cool-headed consumers in free, competitive markets where the manufacturing cost of a product is of no consequence. The question is whether or not the product is of value to the buyer. If a high price is set because of the manufacturer’s cost, consumers will simply turn away.

Cost reduction must be the goal of consumer products manufacturers trying to survive in today’s marketplace. During a period of high economic growth, any manufacturer can achieve lower costs with higher production. But in today’s low-growth period, to achieve any form of cost reduction is difficult.

There is no magic method. Rather, a total management system is needed that develops human ability to its fullest capacity to best enhance creativity and fruitfulness, to utilize facilities and machines well, and to eliminate all waste.

The Toyota production system, with its two pillars advocating the absolute elimination of waste, was born in Japan out of necessity. Today, in an era of slow economic growth worldwide, this production system represents a concept in management that will work for any type of business.

After World War II, when Toyoda Kiichirō, father of Japanese car production, advocated catching up with America in three years, this became Toyota’s goal. Because the goal was clear, activity at Toyota became focused and vigorous.

My job until 1943 was in textiles, not automobiles; this was an advantage. In fact, the idea of automation with a human touch was obtained from the auto-activated looms of Toyoda Sakichi’s textile plant. When I moved to automobile production, although I was new, I could spot its merits and shortcomings in comparison to the textile plant.

During postwar rehabilitation, Japan’s automobile industry had a rough time. Domestic production for 1949 was 25,622 trucks and only 1,008 passenger cars. Insignificant as domestic production seemed, Toyota’s production plant was filled with eager people trying to do something. President Toyoda’s words “Catch up with America” generated this spirit.

In 1947, I was in charge of the No. 2 manufacturing machine shop at the present main office plant in Toyota City, then called the Koromo plant. To catch up with America, I thought of having one operator care for many machines and also different types of machines rather than one person per machine. Therefore, the first step was to establish a flow system in the machine shop.

In American as well as in most Japanese machine shops, a lathe operator, for example, operates only lathes. In many plant layouts, as many as 50 or 100 lathes are in one location. When machining is completed, the items are collected and taken to the subsequent drilling process. With that finished, the items then go to the milling process.

In the United States, there is a union for each job function with many unions in each company. Lathe operators are allowed to operate only lathes. A drilling job must be taken to a drilling operator. And because the operators are single-skilled, a welding job required at the lathe section cannot be done there but must be taken to a welding operator. As a consequence, there are a large number of people and machines. For American industries to achieve cost reduction under such conditions, mass production is the only answer.

When large quantities are produced, the labor cost per car and depreciation burden are reduced. This requires high-performance, high-speed machines that are both large and expensive.

This type of production is a planned mass production system in which each process makes many parts and forwards them to the next process. This method naturally generates an abundance of waste. From the time it acquired this American system until the 1973 oil crisis, Japan had the illusion that this system fit their needs.

It is never easy to break the machine-shop tradition in which operators are fixed to jobs, for example, lathe operators to lathe work and welders to welding work. It worked in Japan only because we were willing to do it. The Toyota production system began when I challenged the old system.

With the outbreak of the Korean War in June 1950, Japanese industry recovered its vigor. Riding this wave of growth, the automobile industry also expanded. At Toyota, it was a busy and hectic year, beginning in April with a three-month labor dispute over manpower reduction, followed by President Toyoda Kiichirō’s assuming responsibility for the strike and resigning. After this, the Korean War broke out.

Although there were special wartime demands, we were far from mass production. We were still producing small quantities of many models.

At this time, I was manager of the machine shop at the Koromo plant. As an experiment, I arranged the various machines in the sequence of machining processes. This was a radical change from the conventional system in which a large quantity of the same part was machined in one process and then forwarded to the next process.

In 1947, we arranged machines in parallel lines or in an L-shape and tried having one worker operate three or four machines along the processing route. We encountered strong resistance among the production workers, however, even though there was no increase in work or hours. Our craftsmen did not like the new arrangement requiring them to function as multi-skilled operators. They did not like changing from “one operator, one machine” to a system of “one operator, many machines in different processes.”

Their resistance was understandable. Furthermore, our efforts revealed various problems. For example, a machine must be set up to stop when machining is finished; sometimes there were so many adjustments that an unskilled operator found the job difficult to handle.

As these problems became clearer, they showed me the direction to continue moving in. Although young and eager to push, I decided not to press for quick, drastic changes, but to be patient.

In business, nothing is more pleasing than customer orders. With the labor dispute over and the special demands of the Korean War beginning, a lively tension filled the production plant. How would we handle the demand for trucks? People in the production plant were frantic.

There was a shortage of everything from crude materials to parts. We could not get things in the quantity or at the time needed. Our parts suppliers were also short on equipment and manpower.

Because Toyota made chassis, when many parts did not arrive on time or in the right amounts, assembly work was delayed. For this reason, we could not do assembly during the first half of the month. We were forced to gather the parts that were arriving intermittently and irregularly and do the assembly work at the end of the month. Like the old song “dekansho” that tells of sleeping half the year, this was dekansho production and the approach nearly did us in.

If a part is needed at the rate of 1,000 per month, we should make 40 parts a day for 25 days. Furthermore, we should spread production evenly throughout the workday. If the workday is 480 minutes, we should average one piece every 12 minutes. This idea later developed into production leveling.

Establishing (1) a production flow and (2) a way to maintain a constant supply of raw materials from outside for parts to be machined was the way the Toyota, or Japanese, production system should be operated. Our minds were filled with ideas.

Because there were shortages of everything, we must have thought it all right to increase manpower and machines to produce and store items. At the time, we were making no more than 1,000 to 2,000 cars a month, and keeping a one-month inventory in each process. Except for needing a large warehouse, this did not seem too big a burden. We did foresee a big problem, however, if and when production increased.

To avoid this potential problem, we looked for ways to level all production. We wanted to get away from having to produce everything around the end of the month, so we started by looking inside Toyota itself. Then, when outside suppliers were needed, we first listened to their needs and then asked them to cooperate in helping us achieve leveled production. Depending on the situation, we discussed the supplier’s cooperation in terms of manpower, materials, and money.

So far, I have described, in sequence, the fundamental principles of the Toyota production system and its basic structure. I would like to emphasize that it was realized because there were always clear purposes and needs.

I strongly believe that “necessity is the mother of invention.” Even today, improvements at Toyota plants are made based on need. The key to progress in production improvement, I feel, is letting the plant people feel the need.

Even my own efforts to build the Toyota production system block by block were also based on the strong need to discover a new production method that would eliminate waste and help us catch up with America in three years.

For example, the idea of a later process going to an earlier process to pick up materials resulted from the following circumstance. In the conventional system, an earlier process forwarded products to a later process continuously regardless of the production requirements of that process. Mountains of parts, therefore, might pile up at the later process. At that point, workers spent their time looking for storage space and hunting for parts instead of making progress in the most important part of their jobs — production.

Somehow this waste had to be eliminated and it meant immediately stopping the automatic forwarding of parts from earlier processes. This strong need made us change our method.

Rearranging the machines on the floor to establish a production flow eliminated the waste of storing parts. It also helped us achieve the “one operator, many processes” system and increased production efficiency two and three times.

I already mentioned that in America this system could not be implemented easily. It was possible in Japan because we lacked function-oriented unions like those in Europe and the United States. Consequently, the transition from the single-to the multi-skilled operator went relatively smoothly, although there was initial resistance from the craftsmen. This does not mean, however, that Japanese unions are weaker than their American and European counterparts. Much of the difference lies in history and culture.

Some say that trade unions in Japan represent a vertically divided society lacking mobility while function-oriented unions of Europe and America exemplify laterally divided societies with greater mobility. Is this actually so? I don’t think so.

In the American system, a lathe operator is always a lathe operator and a welder is a welder to the end. In the Japanese system, an operator has a broad spectrum of skills. He can operate a lathe, handle a drilling machine, and also run a milling machine. He can even perform welding. Who is to say which system is better? Since many of the differences come from the history and culture of the two countries, we should look for the merits in both.

In the Japanese system, operators acquire a broad spectrum of production skills that I call manufacturing skills and participate in building up a total system in the production plant. In this way, the individual can find value in working.

Needs and opportunities are always there. We just have to drive ourselves to find the practical ones. What are the essential needs of business under slow growth conditions? In other words, how can we raise productivity when the production quantity is not increasing?

There is no waste in business more terrible than overproduction. Why does it occur?

We naturally feel more secure with a considerable amount of inventory. Before, during, and after World War II, buying and hoarding were natural behaviors. Even in this more affluent time, people bought up tissue paper and detergent when the oil crisis came.

We could say this is the response of a farming society. Our ancestors grew rice for subsistence and stored it in preparation for times of natural disaster. From our experience during the oil crisis, we learned that our basic nature has not changed much.

Modern industry also seems stuck in this way of thinking. A person in business may feel uneasy about survival in this competitive society without keeping some inventories of raw materials, work-in-process, and products.

This type of hoarding, however, is no longer practical. Industrial society must develop the courage, or rather the common sense, to procure only what is needed when it is needed and in the amount needed.

This requires what I call a revolution in consciousness, a change of attitude and viewpoint by business people. In a period of slow growth, holding a large inventory causes the waste of overproduction. It also leads to an inventory of defectives, which is a serious business loss. We must understand these situations in-depth before we can achieve a revolution in consciousness.