Just in Time by Toyota: The Smartest Production System in The World

Summary

In this episode of 'Selling Breakdowns,' Alex Berman explores Toyota's innovative 'Just In Time' (JIT) production system, which emerged in post-war Japan. The JIT system, developed by Taiichi Ohno, optimizes production by minimizing inventory and wait times, focusing on adding value at each stage. It leverages Japan's small size for efficient, on-time deliveries from suppliers, reducing costs and emphasizing quality over quantity. The JIT philosophy challenges traditional 'Just In Case' approaches, promoting efficiency, quality, and trust in staff, making it applicable to various business areas.

Takeaways

• 🏭 Just In Time (JIT) is a production system created by Toyota post-World War II to optimize efficiency and minimize waste.
• 🌏 Post-war Japan's scarcity of cash and resources led to the innovative JIT approach, turning limitations into strategic advantages.
• 🔧 JIT philosophy focuses on producing only what is needed, reducing wait times, and minimizing inventory to save on warehousing costs.
• 🚚 The system relies on frequent, timely deliveries from suppliers, which is feasible in Japan due to its relatively small size.
• ❌ Risks in JIT include supply chain disruptions that can halt production if suppliers fail to deliver on time.
• 🔍 JIT encourages continuous improvement by questioning each production step's value addition and eliminating non-value-adding activities.
• 💡 The JIT approach can be applied to various business areas, promoting efficiency, quality, and cost savings.
• 🛠️ JIT demands high-quality control and perfect functioning to avoid the need for spare parts or extra time buffers.
• 🤝 The philosophy can boost morale by entrusting staff with consistent performance, fostering a culture of respect and trust.
• 📈 JIT contrasts with the 'Just In Case' approach, which involves maintaining buffers to mitigate risks, potentially leading to wasted resources.

Q & A

What is the main focus of the video 'Selling Breakdowns' by Alex Berman?

The main focus is to explore the Just In Time (JIT) production system created by Toyota in post-war Japan, explaining how it works and how its philosophy and practices can be applied to various areas of business.

What challenges did Japan face after World War 2 that influenced the development of Just In Time?

Japan faced a lack of cash, scarce resources, and limited land for factory expansion, which led Taiichi Ohno at Toyota to develop the Just In Time system to overcome these challenges.

How did Taiichi Ohno turn Japan's post-war problems into advantages for Toyota?

Taiichi Ohno managed to turn the problems into advantages by gradually creating the Just In Time system, which focused on minimizing waste and maximizing efficiency in production.

What is the core principle of the Just In Time production system?

The core principle of JIT is to produce only what is needed, when it is needed, and in the amount needed, thereby minimizing wait times and inventory costs.

How does Just In Time reduce the need for inventory?

Just In Time reduces inventory by ordering parts and materials as soon as they are needed rather than keeping a stockpile, which eliminates the costs associated with warehousing.

What is the potential risk associated with the Just In Time system?

The potential risk is that any disruption in the supply chain can shut down the entire production system since there are no spare parts or buffer stock to fall back on.

How did Toyota use Japan's geographical size to its advantage in the Just In Time system?

Toyota leveraged Japan's relatively small size to ensure suppliers could deliver parts on time due to short travel distances, which was crucial for the JIT system's success.

How does Just In Time influence the quality of production?

Just In Time forces a focus on quality to maintain efficiency, as there is no room for errors or faulty parts, which would disrupt the production process.

What is the difference between the 'Just In Time' and 'Just In Case' approaches?

Just In Time focuses on minimizing waste and risk by producing or ordering only what is needed, while Just In Case involves maintaining buffers such as extra stock or staff to handle potential issues.

How can the Just In Time philosophy improve morale among staff?

The JIT philosophy can improve morale by showing trust in staff to perform consistently without the need for excessive buffers or safety nets, which can be motivating and foster a sense of responsibility.

What are some ways businesses can apply the Just In Time philosophy beyond manufacturing?

Businesses can apply JIT by focusing on efficiency in all areas, such as improving communication between departments, enhancing quality control to reduce the need for backups, and streamlining services to minimize resource waste.

Outlines

00:00

🏭 Introduction to Just In Time Production

Alex Berman introduces the concept of Just In Time (JIT) production, a system pioneered by Toyota in post-war Japan. The system was developed by Taiichi Ohno to address Japan's lack of cash, scarce resources, and limited land for factory expansion. JIT aims to streamline production by minimizing wait times and reducing inventory costs. The philosophy questions every aspect of production to ensure it adds value, leading to a highly efficient process with minimal room for error. Toyota's use of JIT leveraged Japan's small size for timely supplier deliveries, although it carries the risk of supply chain disruptions. JIT not only saves on inventory and labor costs but also fosters a culture of perfection and quality, making it applicable to various business areas.

Keywords

💡Just In Time (JIT)

Just In Time (JIT) is a production strategy that aims to minimize waste by producing only what is needed, when it is needed, and in the amount needed. In the context of the video, JIT is highlighted as a system created by Toyota post-World War II to address challenges such as scarce resources and limited cash. The video explains how JIT minimizes inventory costs by reducing the need for warehousing and storage, which is a significant advantage as it eliminates the expenses associated with holding excess stock.

💡Taiichi Ohno

Taiichi Ohno is recognized as the father of the Toyota Production System, which includes the Just In Time methodology. The video credits Ohno with turning Japan's post-war challenges into advantages by developing JIT. His innovative approach to production is a central theme, illustrating how he implemented and refined various changes throughout the 1950s and 1960s, leading to a system that was eventually adopted worldwide.

💡Inventory

Inventory in the video refers to the stock of parts and raw materials that a company keeps on hand. The traditional approach was to maintain a warehouse filled with these items, which led to significant costs. JIT challenges this by aiming to reduce inventory to a minimum, thereby saving on the expenses associated with storage, power, staff, and security for items that are not directly contributing to the production process.

💡Production System

A production system encompasses the processes and methods used to manufacture goods. The video discusses how Toyota's Just In Time system revolutionized production by streamlining operations to work with only what is necessary at each stage, thereby minimizing wait times and waste. This system is a key element in the JIT philosophy, emphasizing efficiency and the continuous improvement of production processes.

💡Quality Control

Quality control is the process of ensuring that products meet certain standards of quality. In the video, it is mentioned as a critical aspect of JIT, where the focus on efficiency necessitates high-quality production to avoid the costs associated with rework or returns. The video suggests that JIT forces a company to invest in quality control, as errors or defects can disrupt the just-in-time flow and lead to significant losses.

💡Risk Management

Risk management in the context of JIT refers to the strategies used to mitigate the potential disruptions in the production process. The video points out that JIT systems carry risks, such as supply chain issues that could halt production if parts are not delivered on time. Toyota leveraged Japan's small size to manage these risks effectively, ensuring that suppliers could deliver parts just in time to maintain production without excess inventory.

💡Efficiency

Efficiency in the video is discussed in terms of the JIT system's ability to optimize production by eliminating waste and reducing costs. It is noted that JIT pushes for the most streamlined processes, where every step adds value to the product. This concept is central to the JIT philosophy, which seeks to create a production system with minimal room for error and maximum output for the resources used.

💡Value Addition

Value addition is the concept of ensuring that every step in the production process contributes to the final product's value. The video explains that JIT encourages companies to scrutinize each part of their production and eliminate any steps that do not add value. This approach not only reduces costs but also enhances the overall quality and appeal of the product.

💡Just In Case

Just In Case is a contrasting approach to JIT, where companies maintain buffers to mitigate risks, such as carrying extra stock or over-staffing. The video uses this term to illustrate the traditional思维方式 that leads to waste and inefficiency. JIT, on the other hand, aims to avoid such waste by ensuring that every resource is used optimally and efficiently.

💡Workload Management

Workload management refers to the process of balancing the amount of work with the available resources. In the video, it is mentioned as a challenge that can be addressed by improving inter-departmental communication and understanding. JIT principles can help in managing workloads by ensuring that departments are aware of each other's capacities and statuses, preventing overburdening and inefficiencies.

💡Moral and Trust

The video suggests that implementing JIT can have positive effects on employee morale and trust. By adopting a JIT system, companies demonstrate trust in their staff's ability to perform consistently without the need for excessive buffers or safety nets. This approach can lead to a more engaged and motivated workforce, as employees feel valued and empowered to contribute to the company's efficiency and success.

Highlights

Post-war Japan's challenges led to the creation of the Just In Time (JIT) production system.

Just In Time is a smart production system that minimizes waste and maximizes efficiency.

Toyota's Taiichi Ohno developed JIT by turning Japan's post-war problems into advantages.

JIT evolved through incremental changes in the 1950s and 1960s, gaining global attention in the 1970s.

The core of JIT is to produce only what is needed, minimizing wait times and inventory.

Traditional production kept warehouses full; JIT aims to eliminate the need for such stockpiles.

JIT can lead to significant cost savings by reducing the expenses associated with warehousing.

The philosophy questions each production step: 'Is this adding value to the product?'

JIT requires a high level of efficiency with minimal room for error.

Toyota leveraged Japan's small size for reliable, just-in-time supplier deliveries.

Supply chain issues can disrupt JIT, emphasizing the need for a robust system.

JIT not only saves on inventory and staff costs but also fosters a culture of perfection.

Efficiency in JIT is achieved without compromising quality, unlike traditional methods.

Just In Time and Just In Case are two contrasting approaches to business operations.

Just In Case involves carrying extra stock and over-staffing to minimize risk.

JIT avoids the waste of resources by preventing issues rather than preparing for them.

Better quality control and inter-departmental visibility are key to JIT's success.

JIT can improve staff morale by demonstrating trust in their consistent performance.

The Just In Time philosophy is applicable to many areas of business beyond manufacturing.

Transcripts

I’m Alex Berman and you’re watching SELLING BREAKDOWNS.

Whenever you buy a complex piece of equipment such as a TV or a car, do you ever wonder;

how exactly it all came together?

Well, ever since the industrial revolution, that “how” has been a vital question for

many businesses.

Today, we’re going to look at how in post-war Japan, Toyota helped to create one of the

smartest production systems that we have, named “Just In Time”.

We’ll look at how it works and how you can apply the philosophy and practises to many

other areas of business.

After World War 2, Japan faced some difficult problems; they didn’t have a lot of cash,

resources were scarce, and there wasn’t a lot of free land to expand factories.

However, Taiichi Ohno at Toyota managed to turn these problems into advantages by slowly

creating the Just In Time system.

The idea didn’t all come at once, it’s more that through the 50s and 60s, various

changes were implemented and improved until the 70s were the wider world began to realise

the benefits and adopted a similar approach.

So, what is Just In Time?

The philosophy is to make the entire production system only work with what it needs and to

minimise wait times between each stage.

The big saving is normally around inventory.

Before Just In Time, a company would keep a warehouse filled with the parts and raw

materials it needed.

When supplies were getting low, they would reorder when they had just enough to keep

going until the new delivery came.

But Toyota realised; what if you just keep making that same order, as soon as the next

one arrives?

That way, you never need to keep this stockpile of spare parts.

The cost savings were huge since warehousing is seriously expensive; you need to pay for

a massive space, power, staff, security, and for parts that are just sitting there, waiting,

not making you money or adding value to your product.

And this is the core of Just In Time; you look at each area of production and ask “is

this adding value to the product?”

If it isn’t, maybe there’s a better way to do it.

You cut everything down to it’s most efficient form, with almost no room for error, which

is where the risk in Just In Time lies.

Toyota used Japan’s relatively small size to its advantage.

You could rely on suppliers delivering exactly on time because they only had to travel small

distances.

If you get problems with supply then it can shut down the whole system.

But it’s normally worth the risk; the savings are huge, on inventory and staff costs.

More than this though, you are forced to create a working philosophy that there is no room

for error; you don’t have spare parts or spare time so you have to make sure everything

functions perfectly.

Often efficiency comes at the cost of quality, but not in this case.

In Just In Time; you are forced into quality in order to be efficient.

That’s why it’s applicable to many other areas of business.

The best way to think about it is if we simplify everything to two approaches; Just In Time

and Just In Case.

With Just In Case, you are trying to minimise risk by always giving yourself a buffer.

You’ll carry extra stock so you can swap out faulty items.

You’ll over-staff certain areas because they’ve occasionally had too much work to

deal with.

You’ll support a service that just a few customers ask for.

With Just In Time, you don’t simply cut these areas and cross your fingers that nothing

bad happens.

No, you work out how you can avoid them happening in the first place.

Because this is money that is wasted unless a bad thing happens, you’re effectively

investing in mistakes.

Better quality control means staff can trust the stock they have so they don’t need a

back up.

As for workloads, the only reason one department is hit by a workload they can’t handle is

because there is not enough visibility between departments.

If your sales team know the capacity of production and its current status, then they won’t

put in an order that can’t be filled.

And as for offering a service with limited customer appeal, well, maybe you cut it out

completely or just find a way to merge it with other services so the resources it requires

are absolutely minimal.

When done well, the Just In Time philosophy should be good for moral too because the whole

point of it is telling your staff “I’m trusting you to perform consistently” and

I think most of us respond well to that kind of respect.

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