Harvard Business Review

What Really Makes Toyota’s Production System Resilient

Summary.   Toyota has fared better than many of its competitors in riding out the supply chain disruptions of recent years. But focusing on how Toyota had stockpiled semiconductors and the problems of other manufacturers, some observers jumped to the conclusion that the era of the vaunted Toyota Production System was over. Not the case, say Toyota executives. TPS is alive and well and is a key reason Toyota has outperformed rivals

The supply chain disruptions triggered by the Covid-19 pandemic caused major headaches for manufacturers around the world. Nowhere was this felt more acutely than in the auto industry, which faced severe shortages of semiconductor chips and other components. This led many people to argue that just-in-time and lean production methods were dead and being superseded by “just-in-case” stocking of more inventory.

Yet Toyota, the originator of lean concepts, fared better than most of its competitors and passed General Motors to become the top seller in North America in 2021. People watched the company continue to churn out vehicles and concluded that it must have turned its back on its principles of minimal inventories and a pull production system. But the truth was that its performance during the pandemic highlighted how less understood aspects of its system actually led to greater resilience and a better capacity to accommodate disruptions.

“In reality, TPS [the Toyota Production System] is really what allowed us to do as well as we did,” Chris Nielsen, executive vice president of Toyota North America, told me. Nielsen oversaw quality and demand/supply management and managed through numerous disruptions over the last two years. In this article, Nielsen and Jamie Bonini, the president of the Toyota Production System Support Center (TSSC), share insights on how TPS has evolved and continues to adapt in a changing world.

Lean doesn’t mean zero inventory.

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