The Toyota Difference Makes for Smooth Ride

By Robert J. Martin

Published by Business First in the June 16-22, 2006 issue

In many ways, Toyota differs from U.S. automakers. Toyota is highly profitable, their sales are growing, and they are expected to surpass General Motors as the world’s largest auto manufacturer. They are renowned for quality and innovation.

A timely example is Toyota’s early introduction of reliable, fuel efficient hybrid autos. The exceptional business performance is a reflection of Toyota’s original business philosophy which is demonstrated in three important areas: operational excellence, employee relations and supplier development.

Continuous improvement, emphasizing long-term business sustainability over short-term financial performance is at the core of Toyota’s operational excellence. The Toyota Production System empowers employees at all levels with the authority and responsibility to continuously improve their operations.

Every year, thousand of incremental improvements are made in each plant. Over the past thirty years, Toyota’s operations have been refined to eliminate waste in all forms resulting in extraordinarily efficient and effective operations. Toyota has readily shared this operational philosophy with the world.

It is best known as lean manufacturing. Regrettably, U.S. automakers have used lean manufacturing as a methodology to reduce production costs, and have failed to adopt it for long-term business-wide improvements. Short-term financial performance continues to drive U.S. automakers.

U.S. automakers claim that the costs associated with their production workers and retirees are primarily responsible for their competitive failures.

They have a point, but these costs are unreasonably high because prior generations of managers tried to buy the loyalty of its workforce instead of working with them to earn their respect and cooperation.

An adversarial relationship continues between U.S. automakers and the unions that represent their workers.

The automakers seem to display an attitude that they will succeed in spite of their workers, replacing workers with technology whenever possible.

Workers seem minimally engaged in the success of the business and apply little of their knowledge and experience to operational improvements. Worse yet, creative energy that could be applied to business improvements is wasted in hostile labor negotiations and workplace grievances.

The failure of U.S. automakers to effectively use human capital is also demonstrated in their relationships with their suppliers.

Although all automakers require their suppliers to reduce costs, increase quality and improve operations, Toyota works with its suppliers as critical members of their business team.

U.S. automakers use their buying power as a weapon, ignoring their suppliers business pressures or even failure.

Supplier development seems more of a threat than an opportunity to build a business relationship. Toyota’s philosophy is that their suppliers need to make a reasonable profit.

They will work with their suppliers to make a profit as well as meet Toyota’s requirements. Successful suppliers are important to Toyota, because they realize that this is critical for their long-term success.

Yes, Toyota is different, but there is no secret to their success. Their methods have been widely published, closely studied and widely imitated.

These methods work not only in Japan (a common belief in the 1980s), but have been successfully replicated in Toyota plants throughout North America. U.S. automakers seem unable to catch up.

Surely, Toyota has a head start, but U.S. manufacturers have never seemed to understand that Toyota’s most meaningful difference is its relationships with people. While U.S. automakers have pursued technical excellence at the expense of its people, Toyota has always realized that engaging people, employees and suppliers in their pursuit of business excellence is of the utmost importance.