The Toyota Production System explained without management speak

The Toyota Production Sytem (TPS) is explained as a sort of philosophy. We are given rules to follow. The problem with this is as with any commandments, we do things without knowing why and because we don't know why we frequently do the wrong thing.

I believe TPS should be explained as an optimization approach. To better understand what the optimization is I suggest an analogy that is easy to mentally picture and which correspond as closely as possible to real production.

Water tank analogy
Production can be compared to control the flow of water in and out of a water tank. Water flowing into the tank can represent finished products or work in progress. The tank itself represent factory space allocated to inventory or buffers. The water in the tank represents the finished goods or work in progress stored.

Water flowing out represents sales of finished products or work in progress going into the next machine for further processing. On both tubes going in and out of the tank have different diameter. For incoming water this usually represents maximum production capacity. For outgoing it can mean the same or maximum demand for finished products by the market.

On both tubes there will be valves that control the flow, from either no flow to max flow or something in between. For the different valves one has different control. The production valves can obviously most of the time be turned up and down and will. The demand valve on the other hand is totally out of control for the factory. But even the production values will not be under full control because machines:

1. Break down occasionally


2. Need maintenance


3. Have irregular production speed

Optimize flow and water level
There are two elements in in this setup which needs to be optimized. That is the flow of water out of the tank and the water level in the tank. Water flowing out can represent sales or goods going to further processing. So naturally we want this as high as possible otherwise we lose sales or lose production capacity.

We also want to have the size and the water level in the tank as low as possible. We could pretend that the weight of the tank and water represents capital bound in work in progress, finished goods and factory floor space consumed. Capital is of course not free. If we assume it was borrowed we have to pay interest on it. Thus the more we have of it the more we money is spent on paying interest.

So while water level represents cost, water flowing out represent income. We need to find a balance to generate as much revenue as possible.

Two extreme approaches
There are two extreme ways of optimizing this problem. Either ignore the water level and seek to bring the flow out to the max. Or ignore the flow out and seek to have the water level as low as possible.

Traditional Production
Traditional manufacture represents the first approach. To get as utilization of machines or sales as possible, one builds huge tanks and allows the water level to reach enormous levels. This creates a lot of weight from the tank and thus a lot of costs. The problem with this is that squeezing out a little more production or sales when one already is at high utilization requires disproportionate high water level. The same is known from queuing theory. For the shopkeeper to be fully utilized the queue of customers have to grow extreme.

Misunderstood Just In Time Production
In the other end of the specter people have gotten so obsessed with cutting inventory that according to our analogy they entirely removed the water tank. In case of sales, one can now never sell more than maximum production at any given time. A lot of sales are lost or alternatively a lot of production capacity is lost. Cost is reduced dramatically, but sales is reduced even more dramatically. This conclude that TPS doesn't work and leave it.

Real Toyota Production System
The optimal solution is of course something in between. One can do this by regulating the water level in the tank at a certain level. Then we don't get as much water in it and we don't need to make it so large. This reduce costs. When water level starts falling we increase flow of water in (we increase production). When water level increases we reduce flow of water. In a few instances the tank might run empty. But because it is seldom the amount of lost sales or lost production capacity is minor. On the other hand the low water most of the time leads to low costs.

So how large should the tank be and what should the water level be? This all depends on the irregularity of the outflow of water. The more regular the water flows out the smaller we can make the tank and water level. This is perhaps the key insight of TPS: It is the irregularity that decides water level. If we want to reduce water level we have to reduce irregularity.

Some places we can reduce irregularity and other places we can't. Between machines we can reduce irregularity by letting in-tubes and out-tubes have very similar diameter and by making sure that valves don't open and close too frequently out of our control. On the factory floor this corresponds to getting machines that are more compatible with each other in production speed and which are more dependable. They can be made more dependable by either getting better machines, maintaining them better or drive them less hard to avoid breakdown. Getting very high output in periods is worthless if it creates more breakdowns because that creates irregularities which require higher water level.

But in some places we can't affect irregularity. There is nothing to do about the random fluctuation in product demand.

From this it becomes obvious that in some places we need larger water tanks and higher average water level than other places. Specifically we need more inventory for finished goods than for work in progress.

But also if no dependable machines exist for a certain production step we need to have a bigger buffer.

The tree steps of TPS
For this reason I suggest 3 steps for implementing TPS. Note this is not Toyotas own recommendation but my own based on reinterpreting what TPS is all about in terms of a optimization technique similar to regulating the flow of chemicals in a chemical process.

1. Identify the irregularities. This can be done by reducing lot size or as in the water tank example by reducing the size of the water tank and the water level. On will quickly discover were irregularities exist because flow of water will stop in parts of the system.


2. When irregularities have been identified, determine which ones one can do anything with and try to replace machines, improve their maintenance etc at the problem areas.


3. Reduce buffers or lot sizes in the areas were irregularities have been reduced but retain buffers were no reduction of irregularities was possible.

By following these steps it should be possible to improve the production process without going to extremes that will just hurt the process. However trying to balance machines with each other and reduce irregularities will lead to periods of production loss, while one figures out what needs to be improved.