The open secret of (Toyota's) success(msnbc.msn.com)
msnbc.msn.com
The open secret of (Toyota's) success
http://www.msnbc.msn.com/id/24457074/
10 comments
Every time I read about the failing American automakers, I wonder how much of their downfall can be attributed to the cost of their unionized workers' benefits and salaries. I heard somewhere (probably a hyperbole) that 60%+ of the cost of manufacturing a GM car can be attributed to the company's payment of pensions/retirement money. Does anyone happen to know where I can get data about this?
Toyota can use their expensive workers to do the same work in 50% of the time with 80% higher quality. That is where the real savings are.
The whole point here is that Toyota's workers are much cheaper. That's a fact.
Each worker isn't much cheaper. My dad retired from GM in 2005, and the Toyota plants here in the US pay $1/hr less than he made. There is a decent discrepancy in health insurance, but not enough to totally justify the difference.
The key is what gibsonf1 pointed out. Each worker at Toyota is much more productive than each worker at GM (and most likely other companies).
They also benefit from a halo around them of 'superior quality'. I'm not entirely sure if a big quality difference actually still exists (it definitely did once), but in the minds of many, Toyota will always be the 'reliable choice' which allows them to charge more for their vehicles than GM can for it's equivalent.
It also didn't help that GM made ugly cars for years, and even today is only marginally improving. I sincerely hope the Volt actually happens as planned, both for nerdy reasons, and because it'd be nice if GM didn't blow a golden opportunity to save itself (and my dad's retirement).
The key is what gibsonf1 pointed out. Each worker at Toyota is much more productive than each worker at GM (and most likely other companies).
They also benefit from a halo around them of 'superior quality'. I'm not entirely sure if a big quality difference actually still exists (it definitely did once), but in the minds of many, Toyota will always be the 'reliable choice' which allows them to charge more for their vehicles than GM can for it's equivalent.
It also didn't help that GM made ugly cars for years, and even today is only marginally improving. I sincerely hope the Volt actually happens as planned, both for nerdy reasons, and because it'd be nice if GM didn't blow a golden opportunity to save itself (and my dad's retirement).
You are overlooking retiree benefits. GM workers are much more expensive. The per car cost of current retiree medical benefits is staggering.
That is a real number. Look at GM's annual report.
Sweetheart deals by unions in the 70's prior to Japan coming into the picture are a part of what is causing GM to falter.
That doesn't explain their ugly ass cars though.
Sweetheart deals by unions in the 70's prior to Japan coming into the picture are a part of what is causing GM to falter.
That doesn't explain their ugly ass cars though.
Details of Toyota processes applied to chip fabrication was recently posted on this forum ( http://news.ycombinator.com/item?id=180671 ).
I have always liked this ChangeThis document about Toyota:
http://changethis.com/29.01.ElegantSolutions
The idea that a very large company can constantly improve their quality and productivity while maintaining focus on customer value is a compelling one. I'm guessing that a company managed in this Lean way is also a good one to work for, and may serve as a counter example to PG's assessment that working in a traditionally structured top-down corporation is mind-numbing, which is true. In a Lean company the best ideas win, while in the top-down company politics wins. The Lean company manages the system, not the people.
Toyota has demonstrated the efficacy of a new paradigm in management - they use Lean for all functions including engineering, design, finance, production. The big news for us small companies is that the same techniques can be used at any scale with the same positive results, as has been happening at my architecture firm and startup.
Toyota has demonstrated the efficacy of a new paradigm in management - they use Lean for all functions including engineering, design, finance, production. The big news for us small companies is that the same techniques can be used at any scale with the same positive results, as has been happening at my architecture firm and startup.
I like the similarities between this story and "deliberate practice" ... makes a lot of sense to - move slow but move everyday in the right direction... I'm sure this relates to their quality also.
For anyone interested in the operations side of business, Jeffrey Liker's "The Toyota Way" is a fascinating read. ERP/Supply Chain software seems pretty expensive and useless compared to simple mechanical or paper kanban systems, coupled with regular time spent together talking about how to improve the process (kaizen), so the improvements come from the people with the most knowledge of the system: the ones actually doing the work.
I wish change management at my workplace followed a similar practice. We have dozens upon dozens of "good, revolutionary" ideas. Time, effort, and energy spent investigating these options and implementing them then goes to the next, leaving past solutions to rot.
Slow, steady change makes the stable foundation from which strong ideas arise.
Slow, steady change makes the stable foundation from which strong ideas arise.
Nice read, but please, let's give credit where credit is due:
http://en.wikipedia.org/wiki/W._Edwards_Deming
"Deming is widely credited with improving production in the United States during World War II, although he is perhaps best known for his work in Japan. There, from 1950 onward he taught top management how to improve design (and thus service), product quality, testing and sales (the last through global markets)[1] through various methods, including the application of statistical methods. Deming made a significant contribution to Japan's later renown for innovative high-quality products and its economic power.
It was the U.S. that spearheaded the rebuilding of Japan's heavy industries after WWII.
Kinda makes me wonder if 50 years from now, we'll be reading a similar article about the Middle East.
http://en.wikipedia.org/wiki/W._Edwards_Deming
"Deming is widely credited with improving production in the United States during World War II, although he is perhaps best known for his work in Japan. There, from 1950 onward he taught top management how to improve design (and thus service), product quality, testing and sales (the last through global markets)[1] through various methods, including the application of statistical methods. Deming made a significant contribution to Japan's later renown for innovative high-quality products and its economic power.
It was the U.S. that spearheaded the rebuilding of Japan's heavy industries after WWII.
Kinda makes me wonder if 50 years from now, we'll be reading a similar article about the Middle East.
Actually, Toyota's innovation goes far beyond the necessary foundation that Deming laid out and many US companies ignored.
Of course.
"many US companies ignored"
Kinda mind boggling, isn't it? Maybe that's another reason why startups have gained so much traction these days.
"many US companies ignored"
Kinda mind boggling, isn't it? Maybe that's another reason why startups have gained so much traction these days.
Even more mind-boggling, if logic were the standard for judging these things, is how US auto makers have ignored Toyota's management innovations and continue on their merry way into decay. Porsche adopted lean fully, and the results for them have been also quite compelling. Audi is also going lean. On the service side, Rockwell Collins has had enormous success with adopting lean for their engineering.
good but reasonably priced cars, period.
Well yes, but the real question is: how do you make a good car for a reasonable price?
And the answer is in all those details of the manufacturing process as described in the article.
And the answer is in all those details of the manufacturing process as described in the article.
Their ability and commitment to measure nearly every aspect of production and processes is pretty amazing. This is very relevant in the space of tech companies and startups: Measure! Measure! Measure! (anything and everything from site analytics and bug reports to closing a sales cycle with clients)
The term 'Corporate Culture' gets thrown around a lot, but I think Toyota has done a great job of preserving & innovating their culture. Being as big as they are, that is a huge achievement.