Good afternoon and thank you for inviting me to speak during national manufacturing week.

Transcription

1 Atsushi Niimi - Speech in Chicago 02/24/2004 Manufacturing Week Speech in Chicago Tuesday, February 24, 2004 Atsushi Niimi, President and CEO Toyota Motor Manufacturing North America, Inc. Illustrated in 2014 by Emmanuel JALLAS with pictures coming from various Toyota and web sources. Good afternoon and thank you for inviting me to speak during national manufacturing week. Here are two words that are similar... but very different: flat and level. Flat is full of negative meanings. You certainly don't want your beer to be flat. People who are afraid of technology are members of "The Flat Earth Society." But level is completely different. A logical, calm person is "level-headed." Someone you trust is "on the level." Today I would like to talk about one of the foundations of the Toyota Production System - "heijunka" - which means level production. I'll discuss how Toyota is putting a renewed emphasis on this "back to basics" element. I will share some recent developments at Toyota that make heijunka... and our overall system... even more flexible and responsive to customer wishes. Level production is something that can have tremendous benefits to any manufacturer, and I hope my remarks will be relevant for your business too. Before I begin discussing heijunka, I would like to give you an update on Toyota's overall growth here in North America and our plans for the next few years. In North America... we now have ten manufacturing plants building everything from parts and components to engines and transmissions to full vehicles. And we have three additional plants under construction now... a truck assembly plant in San Antonio, Texas... a truck bed and pickup plant in Baja California, Mexico... and an aluminum engine block casting plant in Jackson, Tennessee. Last year, we built nearly 1.3 million vehicles here in North America, and by 2006, we will have the capacity to build 1.66 million. We now build ten models here, including the Camry, Corolla, Tundra, Sienna, and the Lexus RX 330. We've been fortunate that our sales continue to grow as well. In 2003, we passed the two million mark in annual North American sales for the first time ever.

2 And... most importantly... we continue to increase the number of Americans employed by Toyota. We currently have over 35,000 people in North America working in manufacturing, sales and R & D. And that does not include our dealers and people employed by our suppliers to work on our business. To put this in to perspective years ago we built zero vehicles in North America. Now... over 60 percent of the vehicles sold here... are built here! It is a bit of an understatement to say that this rapid growth has been a challenge for level production. So, before I begin talking about heijunka, I'd like to show a brief video that highlights what could happen if you don't have level production. This was definitely not one of our plants! Let me start by giving you a brief overview of heijunka and how it fits into the Toyota Production System. The simple definition of heijunka is production leveling. Here is an example that illustrates heijunka. Think about the last time you went to a Chicago Cubs game. In the hour before the first pitch, people trickled in... took their seats... and got ready for the game. But when that last pitch is thrown in the ninth inning, everyone stands and heads for the exits. And what happens? A massive bottleneck. This shows the needs for heijunka. Like many aspects of the Toyota Production System, heijunka was born out of necessity. In the early 1950's, Toyota needed to increase production of trucks for the U.S. to use in the Korean War. Unfortunately, though, there was a shortage of everything from raw materials to parts. We could not get things in the quantity or time needed. In fact, we literally could not do any production during the first half of the month! Those two weeks were spent gathering the parts that were arriving in no particular order. Then... we spent the second half of the month assembling the trucks. We realized this system would never work if production levels increased. So, out of this challenge, the system of heijunka was developed.

3 As you can see in this slide, heijunka is one of the main foundations of the Toyota Production System, along with standardized work and kaizen, or continuous improvement. This next slide really shows the essence of heijunka. The area on the left shows what production would look like if we were matched exactly to customer orders. Some days production would be very high... and some days it would be very low. But, you would always need to have the machinery, manpower and materials to produce at peak production. Of course, there would be significant idle time during the valleys. We call this waste muda. Friends, muda is definitely a four-letter word at Toyota. So the solution is to take all the orders for a certain period - a month... a week... a day... put them in a "pool" and then level out the production so that it looks like the area on the right. As you can see, it is not a straight line, but the peaks and valleys are less extreme and more predictable. This is heijunka. To give a simple example, let's say that over the period of a week, we get 700 orders for Camrys and 300 orders for Avalons. Now, of course, those orders don't come in at 100 per day of Camry. Some days it may be other days 65. But we pool together all the Camry and Avalon orders and then produce them in a level way. So, the production line would look like this: Camry, Camry, Avalon. Camry, Camry, Avalon. And so on.

4 This leveling takes place not only for the vehicle itself, but for various options, such as engine size, sunroofs, color and more. Each of these is levelized into a pool. Heijunka requires a company to rethink how they purchase from suppliers... how they design machines and tooling... how they develop work processes... and how they plan their staffing. Heijunka drives you to create flexible processes. But without heijunka, a company ends up with extra resources, idle time, higher inventory, higher cost... and more. People often ask about the relationship between heijunka, just-in-time, and quality. Well, heijunka is an idea to reach just-in-time production... and without built-in quality, heijunka would be impossible. Defects, of course, cause our production to fluctuate. So, coordination with our suppliers is essential. We probably have some folks from our suppliers here in the audience today... and they'll be the first to tell you that we're far from perfect in our heijunka. But... we are continually working to improve our heijunka and we have made some great strides in the last few years to improve the process. Today I'll share some of these recent initiatives. The first area I'd like to discuss is our newly implemented Global Body Line, or GBL. GBL gives us more flexibility to adapt quickly to customer demands by mixing several different vehicles on the same line. First, let me explain the concept. Our former system was called the Flexible Body Line. Similar to other automotive companies, our former system framed the vehicle from the outside. The best way to describe this process is to imagine folding a piece of paper from all four sides to make a box. Although very flexible and advanced for its time, this system was very large and expensive to maintain. One of the features of this system that we wanted to improve was the use of pallets. For those who may not know, pallets hold the frame of a vehicle together while the parts are welded.

5 On average, our old system required 50 pallets for each unique model type made on that line. The system was also not adaptable to low volume or manual welding, such as we have in countries like Vietnam. The new body weld process is more in line with Toyota's manufacturing concept - flexible, smaller, and simpler to use. It supports manual welding for low volume production and automatic welding in high volume areas. But here is the unique part of this process - the framing station can now frame the vehicle from the inside. This totally new concept features only one master pallet tool rather than 50 pallets. Now, access to the body by welding robots is easier, improving overall body accuracy while reducing the number of weld stations required to build the body. The end results are improved body quality, shorter robotic welding lines, reduced capital investment, and less time to launch new vehicles. Now it is possible to produce up to eight different vehicles on the same line by simply changing one master pallet. The benefits are nothing short of amazing. What is our initial investment when we install a new body line? Fifty percent less. Space savings? Fifty percent over the flexible body line. Maintenance cost? Fifty percent less. The cost of adding another car type to the line? Seventy percent less.

6 We are currently rolling out versions of the Global Body Line to our assembly plants here in North America, and an increasing number of plants around the world. Now I'd like to give you an example of how this new body weld process has changed our manufacturing in North America. Last year, we shifted production of the Solara Coupe and Convertible from our plant in Cambridge, Ontario to Georgetown, Kentucky. But in terms of the convertible, we did more than shift the site of production... we changed the entire way we build it. Previously, the Solara Convertible was manufactured by creating the same body shell as the Solara Coupe... then cutting off the top... adding the ragtop... and then continuing the assembly process. Along the way, we needed to add reinforcements to maintain the rigidity of a convertible. And the biggest question for North American manufacturing: can it be profitable to produce a vehicle that sells around 10,000 units... when we usually look for volumes of around 200,000 vehicles a year? Well, with the global body line, it was not only possible... but an improvement in the whole process. The all-new Solara convertible was introduced right here in Chicago a few weeks ago, and it has been designed from the ground up as a convertible. There is no cutting off of the top... no adding reinforcements... and is a more efficient way to produce a vehicle. So, how did we do it? First, the decision was made that the convertible would have a separate body line from the Solara coupe. So, an entire body shop was constructed in less than six weeks! As I mentioned earlier, our new body line process uses fifty percent less space. So we were able to use saved space to build a dedicated convertible body shop. The reason for creating a separate line was simple - the Convertible would have much more manual welding than any of the other vehicles produced at our Kentucky plant.

7 As I mentioned earlier, one of the key reasons for the creation for the Global Body Line was to support welding processes in both plants with high levels of manual welding - such as Vietnam - and high-volume automated plants such as Georgetown. For example, we produce five different vehicles in Vietnam - including the Camry, Corolla, and Land Cruiser. But their total annual volume is about seven thousand vehicles. Compare this to our Kentucky plant, which produced over 359,000 Camrys alone last year. But, we learned that the new body system can also be used to standardize these processes in the same plant! As you see in the pictures above, there is much more team member involvement in the Convertible welding. The Solara Convertible may prove to be a glimpse of the future of Toyota manufacturing - where we can produce more lower volume vehicles to better adapt to what the customer wants. Here's another example of how we're improving our operations to support heijunka. When our plant in Princeton, Indiana began plans for their expansion to a second line, they wanted to have the flexibility to have a "crossover" vehicle that could be produced on either line. This would allow them to be more flexible and responsive to customer needs. But there was a clear and obvious problem. The new vehicle coming to the Indiana plant - the Sienna - is car based. The two vehicles already being produced there - the Sequoia and Tundra - are truck based. For those of you not in the automotive industry, building cars and trucks on the same line is very challenging, and is almost never done in high volume production. The process of assembling those two types of vehicles is quite different in several key areas. Well, we decided that the Sequoia would be the crossover vehicle between these two plants. Now, if we operated in an environment that said "don't push the envelope..." this idea would not have even come up! People would have thought we were crazy... Instead, we saw this as a way to expand our flexibility even in our bricks and mortar plant design. Since I only have a short time with you here today, I can't go into the whole procedure of how we achieved this. But let me show you a picture of one the most critical elements in making this a success - the cabin/deck marriage. This is the part of the process where the engine and drivetrain are married to the vehicle - and it's quite different between cars and trucks. Our plant process engineers worked to design something that would work for both the Sienna and Sequoia... with a minimal amount of capital investment. And they succeeded. So, what did we do with this exciting new way of assembling vehicles? Nothing!

8 Shortly after the new line opened, we realized that customer demand for the redesigned Sienna was wildly exceeding our expectations. So, we only ended up producing the two vehicles together on the same line for a few months. Now, we're only making Siennas there. But we're ready to change our production mix as soon as we need to. On the manufacturing side of the business, we don't dictate what flexibility is... the customer does! Our business is really changing rapidly. Customers want more niche vehicles... more variety... and they want everything even more quickly. Does this sound similar to your business? In a perfect situation, things might look something like this: customers could walk into a Toyota dealer and order the exact, specific vehicle that they want... and have it immediately. This would be quite a challenge for heijunka! Well, we're nowhere near this yet, but we have made tremendous strides in the last year that I'd like to share with you. Six years ago, we launched an initiative called "NED" - or New Era Distribution. The vision of NED was simple: "Right Car, Right Place, Right Time" 100 percent of the time." Let me begin by explaining what NED is not: NED is not a build-to-order for the customer system NED is not a "five-day car" NED is not a way for customers to get any combination of options on a vehicle. We're sorry, but you just can't get a V8 in a Corolla! OK - now that I've gotten the negatives out of the way, let me tell you about the positives... and there are many... First of all, the concept of a "built-to-order" vehicle goes against heijunka, because it would disturb level production.

9 As this slide shows, if the overall demand for green Camrys is 20 percent of our order, we want to build 20 percent a month percent a day... and even 20 percent an hour. A sudden increase in popularity for green Camrys would really cause challenges for heijunka, all the way down the supply chain... But, we in the manufacturing side realized we could serve our customer better. Now, in the Toyota Production System, the customer is the next person or group down the line. So, our customer is not someone who walks into a Toyota dealer. Rather, our customer is the sales organization. So, could we help the sales folks be more responsive to their customers? The answer was yes. What it required was adjusting our entire supply chain system to allow for a certain amount of fluctuation in our production. I mentioned earlier that heijunka is achieved by putting orders into a "pool" and then leveling out production. Well, to achieve the targets of this initiative, we needed to shrink the pool. Instead of pooling orders for say, a month - we are trying to shrink the pool for certain options to less than a week. As you can see in the next slide, the orange band is the amount of deviation possible for a certain feature on the vehicle production.

10 So if the sales organization wants more green Camrys and fewer white Camrys and it fits in the range of allowance... we can change the production mix up to six days before the Camry is made. There's another element of this system that I'll briefly touch upon because it doesn't really focus on heijunka. Before we even consider changing our production plans, our sales associates are able to use an online system to put in a request for a virtual "trade" and swap allocations for vehicles that have not yet been built. This project is still being rolled out and is only available in our North American-built vehicles and options, such as color, sunroofs and stereo systems, but the early results are encouraging. At this point, we have been able to fulfill 85 percent of dealer requests for changes, because they fall within our heijunka limits. So, by realizing that there was a way to serve our customer better... we made the overall heijunka system more flexible. Yes, heijunka is challenging... but it is also very rewarding - and transferable to nearly any type of business. I'd like to conclude my speech by discussing how heijunka helped transform the Herman Miller company into an even more efficient manufacturer. Herman Miller, as you may know, is the second largest office furniture company in the country, and has been in business for over 80 years. Toyota has a division that works with companies to help them implement versions of the Toyota Production System in their businesses. When Herman Miller came to Toyota, they were facing the same challenges as most companies in the office furniture industry.

11 They were struggling with long lead times, high inventory and unreliable delivery commitments. The majority of products are built to each customer's order, and with so many products, each with their own potential feature and finish options, the number of combinations runs into the millions. Now, let me be clear. The heijunka concept was just one piece of the Toyota Production System that Herman Miller adopted as a foundation for reducing costs while improving quality and delivery time. By transforming from a batch manufacturer to levelizing their production, Herman Miller has been able to: Improve efficiency by balancing a variety of models on the same line... Reduce floor space required by lowering inventories... And improve reliability by eliminating batch orders. These next few charts show some of the improvements along key performance indicators for Herman Miller. A good example of their improvement is from their panels operations. Herman Miller used to produce up to two weeks worth of 60-inch panel cores, store them and eventually use as orders required. Now they produce only the panel sizes that customers order, as they order them. It used to take the company three days and three miles of assembly line to produce a panel. Now it takes less than eight hours and about 200 feet. I don't think I need to tell this audience what a huge difference that makes! I hope I've given you a good overview on the importance of heijunka to all manufacturing operations. I've been with Toyota for almost 34 years, and it's still a process I'm learning everyday! But level production saves a company time, inventory, space... and money. Levelizing uses both your manpower and machines more efficiently. Where's the road of manufacturing going to lead? If anyone tells you they know for sure, take their advice with a huge grain of salt! But those who are flexible are not bound by any roadmaps... but only by their imaginations and the will of their customers. Heijunka helps us stay level as we make our way down the road... because we never want our sales to be flat! Thank you for your attention.