Managing Your Complete System

A Complete System contains other external systems that impact your System. The Toyota Production System includes both customers and suppliers into their system. They use marketing to impact their customers which is much more normal than sending Toyota employees to a supplier to enhance their integration with Toyota.

Customers

First, I will discuss the relationship Toyota has with its Japanese customers. Toyota creates a very close relationship. Toyota representatives will hold periodic meetings to discuss car buying strategies. Since car buying has a plethora of aspects and the Toyota representatives have extensive knowledge of Toyota cars and where they are going, putting this together creates an advantage for Toyota and their customers.

This is not a hard sell but a cooperative arrangement.

Second, Toyota does not do with non-Japanese as they do with Japanese as listed above. As Toyota grew into new markets they were not able to develop the same relationships. Whereas the Japanese customers may welcome the expertise of the Toyota representatives non-Japanese customers may look at this with more concern for privacy.

For the non-Japanese Toyota customers, normal marketing efforts are used, just like everybody else. The next question is, what is the driving reason that Toyota focuses so much on its customers?

The ideal manufacturing environment or really any other environment is to have a constant demand for your product. This means that the production rate can be optimized for the customer demand. Ideally, if you create an environment with a constant demand your system, over time, will become right-sized for that load. This is referred to as “leveling out the workload”.

Next, let’s discuss the unique way that Toyota works with its suppliers.

Suppliers

6+ Sigma Performance

For a manufacturer, suppliers have a supreme impact on production performance and cost. An important quality metric is RTY or Rolled Throughput Yield. This is calculated by multiplying the quality throughput number of every process in the line of processes needed to produce a product or service. It might help with an example.

Toyota knows the quality throughput of every process that produces a car or anything else in their company. Consequently, by multiplying all these together you calculate the overall RTY. Let’s look at a simple example. Let’s say that you have a business doing the claims processing. If that business includes five processes the process quality metric may have this profile: 99%, 99%, 98%, 99%, and 99%. For this example, your RTY is 94%. Subsequently, if your goal is 99% then you’ve missed it by 5%.

The Toyota Production System is a 6+ Sigma system. Since the overall RTY can never be higher than the lowest quality process then every Toyota supplier must deliver products that are higher than 6+ Sigma. If a critical Toyota supplier is not supplying their product at a quality level acceptable to Toyota, Toyota will send Toyota personnel into that company to help them improve their quality.

2 Hours of Inventory on a Toyota Dock

Firstly, Here is another advantage to working with your suppliers. At any one time at a Toyota factory, they only have two hours’ worth of supplies on their loading dock. This minimization of inventory decreases operational costs tremendously. However, I’m going to take an aside here to discuss the strategic nature of inventory.

Inventory is a scourge. If you are a cement manufacturer and you have big piles of raw material then you are paying a lot of money for something you’re not using. This is the problem with inventory. However, inventory also has positive aspects. On the other hand, it helps you overcome minimal interruptions and supplies. Toyota also uses it strategically to minimize the effects of stopping a portion of the assembly line to fix a problem. Toyota will send employees to critical just-in-time suppliers to support their Toyota integration requirements.