TPS's process design in American automotive plants and its effects on the triple bottom line and sustainability

Int. J. Production Economics 140 (2012) 374–384

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Int. J. Production Economics journal homepage: www.elsevier.com/locate/ijpe

TPS’s process design in American automotive plants and its effects on the triple bottom line and sustainability Amy L. Bergenwall a, Chialin Chen a,n, Richard E. White b a b

Queen’s School of Business, Queen’s University, Kingston, Canada ON K7L 3N6 College of Business, University of North Texas, Denton, TX 76203-5017, USA

a r t i c l e i n f o

a b s t r a c t

Article history: Received 29 October 2010 Accepted 30 April 2012 Available online 11 May 2012

Many people assume that Japanese management practices, the Toyota Production System, have been whole-heartedly implemented by American automakers for more than two decades. However, the recent financial and operational crises faced by American automakers indicate that a performance gap still exists between their production processes and those used by their Japanese counterparts. In this paper, we conduct a case study to identify differences in the seven Toyota Way principles associated with process design between American automakers and Toyota from the triple bottom line perspective to investigate the effects of different process designs along three dimensions of sustainability: economic (profit), social (people), and environmental (planet). Through the within-case analyses, we identify the similarities and differences of process designs in two American automotive plants and the Toyota Production System to establish essential information for the triple bottom line analyses. We then conduct cross-case analyses to explore the effects of different process designs not only on the traditional profitability performance measures but also on workforce management and environmental performance measures. Our research findings provide new insights into the current status of Toyota Production System implementation and its effects on the triple bottom line and sustainability. & 2012 Elsevier B.V. All rights reserved.

Keywords: Toyota Production System Manufacturing process design Case study Automobile industry Triple bottom line Sustainability

1. Introduction Many companies in North America have reportedly adopted Japanese management practices, the Toyota Production System (TPS), which is also described as ‘‘The most significant operations and supply management approach of the past 50 years y’’ (Jacobs and Chase, 2011). Automobile manufacturers were among the first to implement Japanese management practices in America, starting from General Motors’ New United Motor Manufacturing, Inc. (NUMMI) joint venture with Toyota and Ford’s AutoAlliance joint venture with Mazda in the 1980s; however, until recently, were viewed as lagging in productivity such as total labor hours per vehicle compared to their Japanese rivals. GM, Ford and Chrysler, driven by their continued effort to adopt and implement lean practices, have made substantial strides to narrow the productivity gap between them and their Japanese counterparts (Cable, 2009). Unfortunately, there still remains a wide gap in profitability between the three American automotive manufacturers and their Japanese automotive counterparts. While Toyota continues to be the industry benchmark of automakers, American automakers have

n

Corresponding author. E-mail address: [email protected] (C. Chen).

0925-5273/$ - see front matter & 2012 Elsevier B.V. All rights reserved. http://dx.doi.org/10.1016/j.ijpe.2012.04.016

been faced with various problems including bankruptcy reorganization, declining demand, high operational costs, and overproduction. Some research suggests that TPS has contributed to the cumulative reduction of inventories in American manufacturers since the early 1980s (e.g., Chen et al., 2005; Swamidass, 2007); however, other research shows mixed results about the benefits from TPS and further suggests these may be short-term benefits (e.g., Biggart and Gargeya, 2002; Ahmad et al., 2004; New, 2007). In addition, few American companies have effectively adopted the TPS to its full potential (Spear and Bowen, 1999; Liker, 2004). Still, the current severe problems of declining demand, high operational costs, and overproduction experienced by American automakers raise a number of interesting questions: Is there an ‘‘Americanized’’ production system that differs from Toyota’s? If yes, what are the major differences in process design between Toyota and its American counterparts? In addition, Schonberger (2007a) suggests that Japanese production management has evolved over the last thirty years and it continues to evolve. He calls for ‘‘y better ways of tapping the hearts and minds of customers, advances in the management of innovation itself, and insights in how to sustain and build on best practices y’’ (p. 417). Our communication with managers indicates that some of the differences in TPS process design not only concern the traditional profitability performance measures, but are also related to workforce management and environmental performance measures—the triple bottom line (Elkington, 1998). Consequently,

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another interesting question: Is the ‘‘Americanized’’ TPS production system sustainable? To answer the above questions as well as to better our understanding of TPS implementation, we conduct a case study of the similarities and differences in TPS process design in two assembly plants of two American automakers to investigate the effects of the Americanized TPS processes on the triple bottom line dimensions: economic (profit), social (people), and environmental (planet). Our case findings provide new insights into the current status of TPS implementation and its effects on the triple bottom line and sustainability. The remainder of the paper is organized as follows. In Section 2, we review relevant literature. In Section 3, we discuss the design of the case study. The within-case analyses of TPS process design are presented in Section 4. In Section 5, we perform cross-case analyses to identify the effects of different process designs on the triple bottom line dimensions as well as to provide important insights and implications. Concluding remarks are in Section 6.

2. Literature review 2.1. Toyota Production System The Japanese management practices pioneered by Taiichi Ohno and his colleagues in Toyota were introduced into America in the early 1980s (Holweg, 2007; Schonberger, 2007a). However, the introduction of this new management approach was quite confusing, as it was often presented in different versions, i.e., just-in-time manufacturing, total quality control, and employee involvement (Schonberger, 2007a). In addition, several different names were used to refer to this new approach, such as just-in-time (Sugimori et al., 1977), Toyota Production System (Shingo, 1981; Monden, 1983), Japanese management practices (Schonberger, 1982), zero inventory (Hall, 1983), and lean (Krafcik, 1988; Womack et al., 1991). Eventually, most people began to realize that this new management approach must be viewed from a holistic perspective and the different versions and practices must be integrated and tightly linked into one system. Consequently, Japanese management practices evolved into ‘‘y a mutually reinforcing set of best practices’’ (Schonberger, 2007a). Today, TPS is the epitome of a production system that comprises those best practices integrated and tightly linked. Through the remainder of this paper, we use Toyota Production System (TPS) to refer to this holistic integrated production system that had its roots at Toyota. The implementation of Toyota Production Systems in American manufacturers has been exhaustively studied by researchers during the past thirty years. Relevant areas which have been studied include system performance and effectiveness (e.g., Sakakibara et al., 1997; Brox and Fader, 2002; Fullerton et al., 2003), implementation and adoption issues (e.g., Sohal et al., 1993; Wafa and Yasin, 1998; White et al., 1999), purchasing and supply management (e.g., Dong, et al., 2001; David and Eben-Chaime, 2003; Matson and Matson, 2007), quality management (e.g., Flynn et al., 1995; Sriparavastu and Gupta, 1997; Kannan and Tan, 2005), and human resources and organizational issues (e.g., Daniels and Burns, 1997; Germain and Droge, 1997; Yasin et al., 2003). The different TPS process designs adopted by firms, however, have not received adequate attention in the literature. To further explore this issue, we conducted a review regarding the screening processes for identifying firms which have adopted TPS in the existing literature, and found that the screening procedures used to identify the so-called TPS firms in surveys and case studies were not consistent. Industrial sector appears to be the most frequently used criterion for identifying firms which have implemented TPS (Lieberman and Asaba, 1997; Callen et al., 2000; Laosirihongthong and Dangayach, 2005). Another criterion

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commonly used to identify TPS firms draws on managers’ self perception/identification and/or researchers’ own knowledge about an organization’s history of TPS implementation (Sakakibara et al., 1997; Kristensen et al., 1999; Fullerton, 2003). Still other studies have identified TPS firms based on implementation of Japanese management practices (White et al., 1999; Brox and Fader, 2002). We conclude after reviewing the above literature that many differences exist in process design between plants classified as using TPS. 2.2. Triple bottom line Although research has shown that there have been gains made from companies as a result of adopting TPS (e.g., White et al., 1999; Fullerton and McWatters, 2001; Kannan and Tan, 2005), it appears that the improvements seen over the last couple of decades are diminishing (Schonberger, 2007b). During this time of diminishing gains, a new stream of research has evolved that focuses on the notion of sustainability (Ferdows and De Meyer, 1990; Noble, 1995; Narasimhan et al., 2005; White et al., 2010). This stream of research provides support for the concept that building different organizational capabilities does not involve tradeoffs, but involves building cumulative capabilities through sequential and simultaneous development. Analogous research relating to sustainable development involves the relationship between lean production and environmental performance (Rothenberg et al., 2001; King and Lenox, 2001; Yang et al., 2010, 2011); the findings are mixed. Rothenberg et al. (2001) suggest there maybe tradeoffs involved between lean production and environmental performance and other research suggests that lean production and environmental performance are complementary (King and Lennox, 2001; Yang et al., 2010). Yang et al. (2011) found a mediating variable was needed to resolve the conflicts between lean production and environmental performance. Clearly, more research is needed in this area (Rothenberg et al., 2001). Elkington (1998) draws on first-hand experience and case studies of companies largely located in Western Europe and North America to suggest that the evolution of environmentalism and associated societal expectations will increasingly create pressure for companies to achieve sustainable development or face extinction. He posits that in order for organizations to achieve sustainable development, they need to address the three dimensions of the triple bottom line: economic (profit), social (people), and environmental (planet). He states: Future market success will often depend on an individual company’s (or entire value chain’s) ability to simultaneously satisfy not just the traditional bottom line of profitability but also two emergent bottom lines; one focusing on the environmental quality, the other on social justice (p. xiii). In reference to TPS, Elkington suggests that this production system and its underlying concept of elimination of wastes (muda) ‘‘ypotentially provides an extraordinary boost for progress against the triple bottom line’’ (p. 203). Elkington argues that increasingly societal awareness and concern creates pressure on companies to be accountable for and perform against the dimensions of the triple bottom line. He describes seven waves of change already underway which include changes in markets (customers and financial), people’s values, transparency of companies’ reporting, life-cycle technology, business partnerships, consideration for future generations, and corporate governance. His argument suggests that automobile manufacturers will have to increasingly develop green products and processes with lower emissions and less energy

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consumption, and reduce the total carbon footprint. In addition, they need to establish long term business partnerships where the entities collaborate to continuously not only reduce wastes but also seek to eliminate sources of wastes throughout the value chain. Furthermore, automobile manufacturers need to develop metrics where they can be held accountable for performance and reporting systems that will allow stakeholders to know the progress of performance against the dimensions of the triple bottom line. Organizational strategies need to be created where companies make decisions aligned with the long-term and for the good of future generations. Finally, companies need to invest in those activities that allow for development of the future in each of the three dimensions of triple bottom line. Other researchers have developed additional support for the concept of applying the triple bottom line approach to achieve sustainable development (e.g., Jamali, 2006; Markley and Davis, 2007; Srivastara, 2007; Carter and Rogers, 2008). In particular, Jamali (2006) suggests that an organization can improve its movement toward sustainable development with a management approach that integrates the triple bottom line and develops learning organization characteristics. Markley and Davis (2007) provide evidence to support the notion that organizations can improve their competitive advantage by focusing on the triple bottom line. Carter and Rogers (2008) develop a conceptual framework for understanding sustainable development in the field of supply chain management. These researchers go on to develop research propositions in their study.

2.3. Summary Even though the evidence suggests that organizations must go beyond their traditional focus on profitability (Elkington, 1998), most research in this area is still in its infancy and metrics for assessing the triple bottom line performances are evolving. In particular, there has been minimal work in the existing literature which jointly considers the triple bottom line performances of TPS. To the authors’ knowledge, our paper is the first comprehensive case-based research that explores the effects of different TPS process designs on the triple bottom line dimensions and sustainability. Through identifying the similarities and differences of process designs in two American automotive plants, our case findings lead to new understanding of the current status of TPS implementation in an industrial sector most frequently used to screen for TPS firms (e.g., Lieberman and Asaba, 1997; Callen et al., 2000; Laosirihongthong and Dangayach, 2005) as well as new insights to the effects of different TPS process designs not only in the traditional dimension of profitability but also in the social and environmental dimensions.

3. Research design

3.1. Research questions The research questions for the case study are formally stated as follows: What are the major differences in TPS process design between the Toyota Production System and the production systems used by American automakers? What are the causes and effects of the differences in TPS process design between Toyota and its American counterparts on the economic, social, and environmental performances? To answer the research questions, the exploratory case study was designed to allow for identifying the major differences in TPS process designs as well as to collect and analyze data from the multidisciplinary perspective to explore the effects of those differences on the triple bottom line performances of the organizations studied. 3.2. Instrument development and site selection Because of the lack of consensus on the interpretation and meaning of TPS implementation in the literature, one major challenge in developing research instruments for this case study involves selecting criteria to benchmark and compare different TPS process designs. To deal with this issue, we elected to focus on the process design principles associated with the Toyota Production System. We draw from Spear and Bowen (1999) and Lander and Liker (2007) to support our research which focuses on principles rather than practices. As suggested by Spear and Bowen (1999), companies have not been particularly successful in their adoption of TPS because they focus on tools and practices rather than operating principles. Lander and Liker (2007) argue ‘‘y that the only way to develop true Toyota-style systems in environments vastly different from those for which the lean solution has already been developed, is to apply the same principles that people in Toyota have used to shape what is recognized today as TPS’’ (p. 3683). They further suggest that, since each organization is different, instead of trying to implement specific tools, the idea is to design a comprehensive system that satisfies the principles. Therefore, the source of information of TPS used in the case study is The Toyota Way by Liker (2004), a widely accepted guidebook for the implementation of TPS. While the book lists a total of fourteen TPS principles, seven of the principles which are directly relate to TPS process design are used to form the basic criteria for data gathering. These seven principles from The Toyota Way are:

 Create continuous process flow to bring problems to the surface.

 Use ‘‘pull’’ systems to avoid overproduction.  Level out the workload (heijunka).  Build a culture of stopping to fix problems, to get quality right the first time.

 Standardized tasks are the foundation for continuous improveOur research utilizes the methodology of exploratory case study, which is generally aimed at defining the questions and hypotheses of a subsequent study or at determining the feasibility of the desired research procedures (Yin, 1989). As suggested by Stuart et al. (2002), paucity of theory, complexity, and lack of well-supported definitions and metrics are factors which favor the use of case studies. Given the lack of consensus on the interpretation and meaning of TPS implementation as well as the distinct procedures used by various researchers to identify TPS firms, we elected to use case-based research to provide detailed comparison and analysis of the TPS process designs by major automakers.

ment and employee empowerment.

 Use visual control so no problems are hidden.  Use only reliable, thoroughly tested technology that serves your people and processes. A detailed list of the seven principles and the associated practices investigated in the case study based on Liker (2004) is given in the Appendix. Since the focus of our study is TPS process design, the other seven principles in Liker (2004) are not investigated in this study. Two assembly plants of two American automakers in Ontario, each with more than ten years of experience in TPS implementation,

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were selected for the case study. Although differences may exist in some individual plants, major automakers in America are known for adopting processes under the same manufacturing paradigm over time (Rubenstein, 2008). Therefore, we consider a detailed study of one assembly plant which has adopted TPS for an extended period of time for each automaker representative. Plant 1 (owned by Company 1) and Plant 2 (owned by Company 2) both had over 2500 hourly and salaried workers. Each plant’s production line features two slightly different mid-size SUVs, and consists of the body-build, paint, trim, chassis, and pre-delivery departments. 3.3. Data gathering and analysis A pilot study was first conducted in one of the two assembly plants to refine the instrument used in the data gathering procedure. During the formal case study, interviews were conducted with two separate managers, a line manager and a supply-chain coordinator, in each plant. Our investigation utilized semi-structured interviews to examine whether and to what extent each of the principles and practices listed in the Appendix are implemented and their operational effects on the triple bottom line dimensions. Each interview took about 60–90 min. For each principle, the degree of implementation was assessed, and its potential effects on eight topic areas, including inventory, quality, process flow, supplier management, flexibility, management behavior, labor, and environment, were explored. Given the nature of the semi-structured interview method and the distinct characteristics of many of the JIT practices listed in the Appendix, we used the ‘‘topic areas’’ as the guidelines as opposed to the same set of questions to investigate each principle during the interviews. Additional archival data, such as collective agreements and financial reports, were also collected for further analysis. Subsequently, a tour of the assembly plant allowed for further verification of the information gathered during the interview. Once the interviews were concluded, we first performed a within-case analysis for each assembly plant to summarize the research findings along the seven principles for TPS process design. We then performed cross-case analyses to explore the effects of the major differences in process design on the triple bottom line dimensions. To allow meaningful comparisons among different process designs, we classified the extent of implementation of each associated practice of the seven principles of TPS process design by each of the two assembly plants into three categories: ‘‘Fully Implemented,’’ ‘‘Partially Implemented,’’ and ‘‘Not Implemented.’’ We also utilized lateral and conceptual thinking to link our research findings to other studies in literature in order to identify the effects of the different TPS process designs from not only the traditional profitability prospective but also the perspectives of workforce and environmental management.

4. Within-case analyses of operations process designs The within-case analyses of process designs in the two selected assembly plants will be presented along the seven major principles and associated practices of TPS process design listed in Appendix. For each principle and associated practices, we first present the qualitative data gathered from the semi-structured interview tool, and then discuss our subjective interpretations of data. It should be noted that the within-case analyses establish essential information about the current statuses of TPS process design as the precursor of our successive analyses. Most effects on the triple bottom line, however, cannot be directly identified through within-case analyses without cross-analyzing the TPS process designs of the two assembly plants and Toyota. We thus note the potential effects whenever applicable as we present each individual finding from the within-case analyses while leaving

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the more extensive discussions of the effects on the triple bottom line dimensions to the cross-case analyses. 4.1. Principle 1: Create continuous process flow to bring problems to the surface For the first two practices, redesigning work process and creating flow to move material and information, both plants (Plant 1 and Plant 2) have reengineered their manufacturing processes to create continuous flows in their attempt to eliminate wastes (muda) in the following areas: waiting, unnecessary transport, and unnecessary movement. (1) Waiting: Takt time is used to keep vehicles flowing at a constant rate and each work station is balanced to keep employees busy, thus reducing wait time. There is a parts store in each plant that holds smaller nut and bolt items, and any larger inventory arriving on trucks is scheduled to move quickly to its designated work station. (2) Unnecessary transport: Any necessary inventory materials are stored near the workstation. (3) Unnecessary movement: The assembly processes are engineered so that during assembly, as vehicles move along the line, each required process is performed on the line. Materials and tools are delivered to or located at the work station to reduce the amount of worker movement. In terms of the third practice, both plants have made efforts to make the flow more evident through their organizational cultures. Through their dedicated efforts to reengineer process flows and eliminate wastes, the reduction of inventory throughout the plants has made the flows much more evident to the employees. As an interviewee in Plant 1 points out, a few years ago, a visit to the plant may have been confused with a visit to an inventory warehouse. According to the interviewee, having witnessed the ongoing reduction of inventory, the workers have developed a positive attitude toward continuous improvement of process flow. Overall, both plants appear to have fully implemented the three practices for creating a continuous process flow. 4.2. Principle 2: Use ‘‘pull’’ systems to avoid overproduction Both plants (Plant 1 and Plant 2) have reengineered their processes to implement the second practice of this principle: minimize your work in process and warehousing of inventory. In particular, Plant 1 has fully implemented the second practice to minimize its work-in-process and warehousing of materials inventory. The plant has an integrated upstream supply chain system that allows its suppliers to monitor the production at the assembly plant with the use of an electronic barcode system which works like a Kanban system. With this information, suppliers calculate when and how much material to send so it arrives just in time and in the right quantity. All deliveries are made by truck in small shipments (less than truck load) to maintain the utmost flexibility. By and large, a pull system is achieved up to the point of final assembly. For Plant 2, the plant makes extensive use of distribution centers upstream in the supply chain where replenishment comes from suppliers across North America. The structure of the system is similar to a hub and spoke network as most parts are shipped by trucks from suppliers to the distribution centers. Then, parts are shipped from the distribution centers to the assembly plant at the time needed throughout the various stages of the assembly process. Only a few suppliers (especially those of larger parts like motors) ship parts and components directly to the plant, bypassing the distribution centers. To schedule delivery of material, the assembly plant uses supply-chain software in order to receive parts just-in-time for assembly through separate doors along the assembly line. Signals are sent to suppliers as vehicles move along the assembly line so that materials may be shipped (to the distribution centers or to the assembly plant) to replace the ones

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that are used. Given the extensive use of distribution centers by Plant 2, it appears to have only partially implemented the second practice. However, the use of distribution centers leads to shipments with full truckloads with a variety of different parts to the assembly plants, and suppliers can also ship full truckloads to the distribution centers since they serve a number of plants. This distribution strategy has interesting implications on the environmental performance, which will be discussed later when we cross-analyze the research findings. Both assembly plants, however, have not implemented either the first practice of providing customers with what they want and when they want it, or the third practice of being responsive to the day-by-day shifts in customer demand. Both plants have significant amounts of finished inventory which remain on the grounds for extended periods of time before being shipped to dealerships or consumers. This build-up of finished goods inventory demonstrates the plants’ shortcomings in implementing a demand-driven pull system. The pull created by the barcode technology or supplychain software ends at the assembly plant as the assembly plant is acting like the final customer whose demand calls for producing a fixed number of vehicles each day. Both companies’ union agreements stipulate a minimum number of working hours for union members. Therefore, the production schedules are largely driven by demand forecasts and plant capacity as opposed to actual demands. It is a common management practice to keep the workers productive while they are being paid, often resulting in management focusing on maximum capacity utilization. According to Liker’s (2004) description of TPS, ‘‘In the Toyota Way, ‘pull’ means the ideal state of just-in-time manufacturing: giving the customer (which may be the next step in the production process) what he or she wants, when he or she wants it, and in the same amount he or she wants.’’ (p. 105). Therefore, it appears that the two plants investigated have not implemented the first and third practices of using pull systems to avoid overproduction. Even though parts and components were ‘‘pulled’’ from upstream to reduce inventory in both assembly plants, there is still a pushbased system downstream in the supply chain—a finding with interesting implications on workforce management and environmental performance. Figs. 1a., b., and c. summarize our findings under Principle 2 with the conceptual structures of the supply chains of Toyota and the two investigated assembly plants. 4.3. Principle 3: Level out the workload (heijunka) Through their reengineering efforts, both assembly plants have implemented the two practices associated with this principle: leveling out the workload (mura) and eliminating overburden to people and equipment (muri). In terms of mura, the total volume of orders of two slightly different SUV models placed over a period are leveled out so that the same amount and mix are being made each day at each plant. Such a production schedule allows for making different modifications to each individual vehicle on the production line. Each vehicle frame is given a special barcode that signals to the worker what the specifications are for the vehicle. Any vehicle may be one of two different SUV models with different options such as a moon roof or a special GPS system. Due to state-of-the-art bar-coding system, modifications can be made to the vehicles in a timely fashion before they begin their journey along the production line. In terms of muri, each assembly plant adjusts the production schedule in order to level out the workload during operating hours. The traditional stop/start approach of the batch process has been eliminated, and the entire process is balanced so as to reduce stress on workers and machinery. Overall, it appears that the two practices associated with the third principle have been fully implemented in both assembly plants.

Pull Pull

Assembly Plant Dealerships

Suppliers

Push

Pull

Assembly Plant Dealerships

Suppliers

Pull Pull

Push

Assembly Plant

Suppliers

Distribution Centers

Dealerships

Fig. 1. Conceptual supply chain structures of TPS and Plants 1 and 2. (a) Toyota Supply Chain, (b) Plant 1’s Supply Chain and (c) Plant 2’s Supply Chain.

4.4. Principle 4: Build a culture of stopping to fix problems, to get quality right the first time It appears that the first, second, third, and fifth practices associated with this principle are all fully implemented by both assembly plants. For the first two practices, both plants emphasize quality for their customers, and employ all the modern quality assurance methods. In terms of the third and fifth practices, the equipment is designed to automatically shut down if something is out of line or not functioning properly (autonomation). This helps build a culture of getting quality right the first time. In addition, Andon buttons are present at each work station in both plants, and workers are trained and encouraged to make use of the lights to stop the line should other problems be detected. Poka-yoke devices are present at various points along the assembly lines, and some of the machines used for frequent quality checks are technologically state-of-the-art. Both assembly plants, however, appear to only have partially implemented the fourth practice of building support systems to quickly solve the problems and put countermeasures in place. After an Andon button is pushed, the lines in both Plants 1 and 2 stop immediately. At Toyota, the line continues moving for about twenty seconds, giving Toyota managers time to first try to address a potential production or quality problem. One cited reason for immediate line stoppage in the two plants investigated is for worker safety. In addition, the interviewees indicated that the lines may stop for other relatively ‘‘minor’’ reasons, such as leaking fluids and visibly damaged parts (e.g., dented doors). The inconsistency in reasons for line stoppage is an indication that neither plant operates an effective support system with countermeasures in place—a finding with implications on workforce

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management. This suggests that neither plant is capable of solving a potential production or quality problem quickly. 4.5. Principle 5: Standardized tasks are the foundation for continuous improvement and employee empowerment The first practice, using stable, repeatable methods, appears to have been fully implemented in both assembly plants. Standardized and repeatable jobs are designed by industrial engineers in conjunction with ergonomics and time studies for the entire assembly line. The standardized work at each assembly plant consists of three elements: Takt time, sequence of doing tasks and/or processes, and specific quantity of stock on hand. Takt time is used to maintain consistent timing for each worker to complete their tasks. The sequence of performing tasks is standardized, so the workers are trained to perform the tasks in a designated sequence to maintain consistency in quality and ensure workplace safety. The Kanban-like system provides a specific quantity of inventory on hand to ensure that individual workers have the materials they need to accomplish the standardized work. These three elements allow each station to maintain predictability, timing, and regular output rate. In addition, the line managers have received training in each station, and are expected to audit the tasks performed by each worker. There exists one difference in both Plant 1 and Plant 2 compared to TPS: Both plants use computers to post information about tasks being performed as opposed to using standardized work sheets—a finding with implications on workforce management and environmental performance. The second practice of capturing accumulated learning, however, is only partially implemented in both plants. Employees at both plants are encouraged to suggest ways to improve process flows, but suggestions are not routinely submitted by the employees. Each operator over time may develop improved approaches for performing a job; however, their approach may not always be transferred to the next operator. Consequently, accumulated learning is not always captured—a finding with implications on workforce management. Frequent updating does not occur, and innovation and improvement are thus hampered. In summary, the standardization of tasks has been implemented to some extent at both assembly plants with differences regarding the use of standardized worksheets, the capturing of accumulated learning, and employees contribution to innovation and continuous improvement. 4.6. Principle 6: Use visual control so no problems are hidden For the first and third practices regarding using simple visual control systems to help people determine the standard conditions and to support process flow and pull, both assembly plants have emphasized the five ‘‘S’s,’’ and every piece of inventory is assigned a specific place to be stored, and ‘‘shadows’’ are painted for tools at each work station. As for the second practice of avoiding the use of computer screens, some of the visual control tools for improving value-added flows at both plants are based on modern computer technologies. Along each assembly line, there are computer screens at each station that signal workers what tasks to perform on the next vehicle. While management in each plant maintains that workers are trained not to be distracted by computer screens, our observation suggests that the second practice is not implemented. It also appears that the last practice of reducing reports to one piece of paper, ‘‘capturing all you need to know on one sheet of paper,’’ is only partially implemented in both plants. While there has been effort in each plant to reduce the amount of paperwork with the use of computer technologies to create a ‘‘paperless’’ environment—a

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finding with environmental implications, we still observed excess information in some rather lengthy financial and quality reports. Overall, both assembly plants appear to have implemented the use of visual control tools with differences concerning the use of computer screens and emphasis on paperwork reduction.

4.7. Principle 7: Use only reliable, thoroughly tested technology that serves your people and processes The guiding principles for technology adoption used in Plants 1 and 2 are different from that used in TPS. The most important goal for adopting a new technology for Plant 1 is achieving costsaving benefits. Innovative manufacturing and information technologies with the potential to reduce operating costs can be seen throughout the assembly line including new robots performing line tasks, RFID-capable forklifts that are signaled for inventory replenishment, and computer screens providing real time information at each work station. Productivity and inventory levels are monitored by computers, and the computers send signals to the suppliers when new materials are required. Some of these new technologies, however, do replace workers in the assembly line, and, on the other hand, require skilled employees to perform additional tasks including auditing inventory, ensuring that robots are working correctly, and maintaining the computer system; this is contrary to the first practice of using technology to support, not to replace people—a finding with implications in workforce management. It also appears that the second practice is only partially implemented in Plant 1. In particular, any technology under consideration for adoption, regardless of whether old or new, is evaluated in the traditional cost-saving manner, whereas preference is given to an ‘‘old and proven’’ technology at Toyota. Our observations also show that the third, fourth, and fifth practices regarding technology adoption are only partially implemented in Plant 1. A separate pilot area for experimenting on new technologies does not exist. While the testing to ensure that a new technology does not conflict with the plant’s culture or cause any process disruption occurs on line, and employees are encouraged to accept new technologies, it appears that employee empowerment may not be well developed when compared to that at Toyota. The overall goal of the technology adoption practices, in Plant 1, focuses more on achieving cost-saving benefits as opposed to providing support for workers and improving process flow and stability. Similar to Plant 1, application of technology in Plant 2 is fairly advanced. Much of the assembly process used in Plant 2 is reliant upon advanced manufacturing and information technologies, including production, scheduling, inventory tracking, and quality testing. Skilled workers are employed to cycle check inventory, monitor and maintain robots and machinery, and make any scheduling changes overriding the plant’s computerized system. In many cases, new technologies replace the work that a human performs; this is contrary to the first practice of technology adoption of Toyota. Plant 2 has the goal of being a leader in manufacturing innovation; consequently, the plant is more open to adopting new and innovative technologies, but sometimes the adopted technologies are unproven. Based on this observation, we believe that the second practice of technology adoption is not implemented. It also appears that the third, fourth, and fifth practices of technology adoption are only partially implemented in Plant 2. While any new technology needs to go through a thorough testing process and cost-benefit analysis, the overall goal is more focused on the technical and financial performances as opposed to improving process flow and stability.

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Table 1 Summary of case study findings. Principles

The Toyota Way practices

Plant 1

Plant 2

1. Create continuous process flow

1. Redesign work processes to achieve high value-added, continuous flow 2. Create flow to move material and information fast and to link processes and people together 3. Make flow evident throughout your organizational culture

Fully Implemented Fully Implemented Fully Implemented

Fully Implemented Fully Implemented Fully Implemented

2. Use pull systems

1. Provide customers with what they want, when they want it, and in the amount they want 2. Minimize your work in process and warehousing of inventory

Not Implemented Fully Implemented Not Implemented

Not Implemented Partially Implemented Not Implemented

3. Be responsive to the day-by-day shifts in customer demand 3. Level out the workload

1. Eliminate overburden to people and equipment and unevenness in production schedule 2. Work to level out the workload of all manufacturing and service processes

Fully Implemented Fully Implemented

Fully Implemented Fully Implemented

4. Build a culture of stopping to fix problems

1. Quality for customer drives your value proposition

Fully Implemented Fully Implemented Fully Implemented Partially Implemented Fully Implemented

Fully Implemented Fully Implemented Fully Implemented Partially Implemented Fully Implemented

2. Use all the modern quality assurance methods available 3. Build into your equipment the capability of detecting problems and stopping itself 4. Build support systems to quickly solve problems and put in place countermeasures 5. Build into your culture the philosophy of stopping to get quality right the first time 5. Standardized tasks are the foundation for continuous Improvement

1. Use stable, repeatable methods to maintain the predictability, regular timing, and regular output 2. Capture the accumulated learning by standardizing today’s best practices

Fully Implemented Partially Implemented

Fully Implemented Partially Implemented

6. Use visual control

1. Use simple visual indicators to help people determine whether they are in a standard condition 2. Avoid using a computer screen when it moves the worker’s focus away from the workplace 3. Design simple visual systems at the place where the work is done, to support flow and pull 4. Reduce your reports to one piece of paper whenever possible

Fully Implemented Not Implemented Fully Implemented Partially Implemented

Fully Implemented Not Implemented Fully Implemented Partially Implemented

7. Use reliable, thoroughly tested technology

1. Use technology to support people, not to replace people

Not Implemented Partially Implemented Partially Implemented Partially Implemented Partially Implemented

Not Implemented Not Implemented Partially Implemented Partially Implemented Partially Implemented

2. A proven process that works generally takes precedence over new and untested technology 3. Conduct actual tests before adopting new technology in business processes, manufacturing systems, or products 4. Reject technologies that conflict with culture or that might disrupt stability, reliability, and predictability 5. Encourage your people to consider new technologies when looking into new approaches to work

5. Cross-case analysis of effects on triple bottom line In this section, we cross-analyze the TPS process designs of the two assembly plants to explore the effects on the triple bottom line dimensions as well as to derive important insights and implications. Table 1 summarizes the major similarities and differences among the practices used in the two American assembly plants and Toyota based on the seven principles for TPS process design. The practices associated with two of the principles, create continuous process flow to bring problems to the surface and level out the workload, as shown in Table 1, are fully adopted by American automakers, and appear the same as those benchmarked in TPS. The practices associated with three other principles, build culture of stopping to fix problems, standardize tasks for continuous improvement and employee empowerment, and use visual control so problems are not hidden, have been either fully or partially adopted with minor differences found in the practices of building support systems with countermeasures, capturing accumulated learning,

avoiding use of computer screens, and reducing reports to one piece of paper. Major differences, however, exist in two principles: use pull systems to avoid overproduction and use only reliable, thoroughly tested technology that serves the people and processes. For the two American automakers, most of the associated practices of these two principles are either not implemented or only partially implemented. In the sections that follow, we cross-analyze the effects of the major differences in process design on the economic dimension (profit), social dimension (workforce management), and environmental dimension (planet)—the triple bottom line. 5.1. The economic dimension: Profit We start with the effects on profitability of the similar supply chain structures of the two assembly plants with a pull system upstream and a push system downstream, as depicted in Fig. 1. The design of the pull system upstream with the two principles, ‘‘create continuous process flow’’ and ‘‘level out workload,’’ enables each

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plant to create more efficient manufacturing processes. This complemented with the adoption of the three other quality and process control principles, ‘‘build a culture of stopping to fix problems,’’ ‘‘design standardized tasks,’’ and ‘‘use visual control,’’ resulting in increased effective capacity as well as reduced amounts of defective items, work-in-process and raw material inventories (Lieberman and Demeester, 1999; Kros et al., 2006). However, the push system downstream in the supply chain where production schedules are largely based on available capacities presents a mismatch to the pull system upstream; this may cause serious problems of over-production and excess inventory of finished products with negative impact on a firm’s profitability due to the lack of responsiveness to demand change. When demand exceeds capacity, the problem may go undetected since producing at full capacity is indeed the right way to deal with high demand. As demand starts to decline, however, overproduction and excess inventory of finished products become a serious consequence. The efficient pull system upstream in the supply chain may even aggravate the financial problems caused by overproduction, overcapacity, and excess inventory if the increasingly higher production goals cannot be justified by external market demands. Plant 2’s extensive use of distribution centers also has some interesting implications on profitability. On the one hand, while the interviewees at the plant maintained that the extensive use of distribution centers is not likely to affect the operations of continuous process flows since the distribution centers simply work as flow-through centers (assisted by advanced supply-chain software), an additional echelon in the system at the least increases the complexity and difficulty in managing a pull-based supply chain with potential negative impacts on profitability. On the other hand, since one major goal of TPS is to reduce inventories (Shingo, 1981; Schonberger, ; Hall, 1983), even the smallest glitch in the supply chain can bring production to a standstill (Alternburg et al., 1999). Therefore, the pooling of part inventories at the distribution centers provides the company with an opportunity to conduct risk pooling among multiple assembly plants for different part types; this can reduce inventory levels and operations costs under uncertain part demands (Simchi-Levi et al., 2002). Another potential opportunity of the extensive use of distribution centers is to prevent short-term production stoppage due to labor strike or other possible supply problems. The overall effect of adopting advanced technologies on profitability in the two investigated assembly plants is an area which requires more attention. While the decisions to adopt advanced technologies were based on cost-benefit analyses which focus on achieving economic efficiency and cost saving, it appears that the potential negative impacts of advanced technologies on the TPSbased system (e.g., problems in employee empowerment due to their over-reliance on machineries) have not been fully analyzed. One major implication is that, while many of the productivity-based performance measurements, such as total labor hours per vehicle, number of vehicles per employee, percent downtime, and breakeven quantity, can be used to measure profitability along the respective independent dimensions, they may not be adequate for assessing the overall profitability contribution in a TPS-based system. A new set of performance measures based on the integrated effects of a number of traditional and new operational and financial factors, such as return on assets, return on sales, flexibility, and quality (Nakamura et al., 1998; Williams et al., 1995; Fullerton et al., 2003), need to be developed to accurately assess the operational and financial success of TPS implementation. 5.2. The social dimension: People On the outset, the ‘‘Americanized’’ TPS processes used in the two assembly plants appear to offer employees more job protection and

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security in many aspects, as exemplified by the practice of immediate line stoppage to ensure workplace safety. It has been well documented that worker management in Toyota is significantly different from that in its North American counterparts whose assembly plants are mostly unionized with significantly fewer hourly workers. In contrast, all the Toyota’s manufacturing plants in Japan as well as the transplants in North America are nonunionized. The potential impacts of unionization on TPS implementation were noted by researchers and practitioners in the early 1990s (Deshpande and Golhar, 1995). Many North American automakers also agreed to the so-called ‘‘guaranteed employment security for life’’ for union members, i.e., not to lay off employees unless compelled to do so by severe economic conditions that threaten the long term viability of the company, in order to ensure the partnership with unions for TPS implementation (Adler, 1995). The no-layoff agreement, which leads to rather inflexible production capacity, would certainly contribute to a company’s using a pushbased system downstream in its supply chain since it is a common practice to keep workers productive while they must be paid within the minimum working hours stipulated in union agreements, a major finding from our case study. While it appears that the push-based system downstream in the supply chain due to the minimum number of working hours specified in the collective agreements is a direct result of unionization in the two assembly plants, it should be noted that the preferred negotiation position taken by automobile manufacturers in the face of strong product demand in the 1990s was to maximize capacity utilization while the unions actually preferred flexible work-time arrangements (Kumar and Holmes, 1997). That is, the requirement of minimum working hours specified in the collective agreements is actually more in line with the manufacturers’ preferred position (i.e., utilization maximization). Therefore, the automobile manufacturers are also responsible for the problems associated with overproduction and excess inventory due to the mismatch between the push- and pull-based systems used in their supply chains. In addition, the traditional cost-benefit analyses used to justify the more aggressive approaches (in the two assembly plants studied) for technology adoptions may give management more incentive/pressure to achieve higher production goals in order to decrease the payback periods of new technologies. One implication is that the flexible work-hour approach, which is more consistent with the TPS principle for designing a pull-based system, should be reevaluated in the current reorganizing processes by automakers and union members.1 The finding of the extensive use of modern technologies in the two assembly plants also has some important implications on workforce management. On the one hand, the operations of some of the advanced technologies in both assembly plants require extra attention from workers, a possible distraction from the value-added work. In many situations, skilled workers are hired and trained to ensure the proper operations of new technologies. Additionally, the effort to increase employee empowerment for continuous improvement may be hampered by the adoptions of new technologies since ‘‘it is easy to kaizen people, but hard to kaizen a machine’’ (Liker, 2004). On the other hand, unions in America have traditionally attempted to protect job security by using jurisdictional boundaries (i.e., limiting the worker’s area to only one function); this causes problems in a TPS environment which requires cross-trained employees capable of performing multiple tasks (e.g., Sevier, 1992; Deshpande and Golhar, 1995). Therefore, the more extensive use of modern technologies in the 1 It should be noted that, after the Canadian Auto Workers (CAW) split from the United Auto Workers (UAW) in 1985, CAW emphasized the more traditional labor-management model while UAW adopted a more ‘‘cooperative’’ labormanagement approach (Yanarella, 1996).

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two assembly plants may alleviate the pressure on employees when performing multiple tasks as studies have shown that multi-task jobs tend to lead to a higher injury rate at the workplace (Barling et al., 2003). In addition, a process design with fewer tasks performed by an employee may reduce some of the other potential human costs from TPS implementation (Klein, 1989). The overall effect of adopting advanced technologies on workforce management in the Americanized TPS processes is also an area that needs further attention from both researchers and practitioners. Our case study has identified a number of potential issues in managing human capital in the two assembly plants, including the lack of standardized work sheets, the inability to accumulate learning, and the procedure of immediate line stoppage, which hampers developing people/partners and organization learning. Recently, Shook (2010) reports the differences in organizational culture and learning between General Motor’s regular assembly plants and the one operated under NUMMI, General Motor’s joint venture with Toyota. One interesting future study is to investigate whether and how culture changes occurred as a result of TPS implementation in those Americanized TPS processes. 5.3. The environmental dimension: Planet From the perspective of environmental management, the pullbased system upstream in the supply chain of each of the two assembly plants, which has led to reduced amounts of defective items and work-in-process and raw material inventories, appears to be a rather environmentally friendly production process in terms of reducing the amounts of material extraction and manufacturing wastes in a vehicle’s life cycle. However, the mismatch between the pull- and push-based systems observed in the two plants’ supply chains and the resulting problems of overproduction and excess inventory may cause negative impacts on the state of the natural environment. In particular, most American automakers use such practices as seasonal clearance sales or offering employee discounts to all customers to eliminate excess inventories of finished products; such practices are likely to increase the total number of old/new vehicles on the road with higher amounts of emissions during use and higher amounts of consumer wastes at end-of-life. The extensive use of distribution centers observed in Plant 2 has some interesting environmental effects as well. It has been reported that the adoptions of TPS by many Japanese firms in the 1980s actually worsened the air quality in Tokyo (Qian et al., 2000). This is because implementation of TPS requires parts and components to be delivered to an assembly plant just in time in smaller lots often resulting in suppliers’ sending out half-empty trucks, thus requiring more trips to satisfy the same volume of part demand from an assembly plant with higher levels of energy consumption and emissions. From the perspective of environmental conservation, pooling part inventories at the distribution centers leads to fuller truck loads with decreased numbers of trips among suppliers, distribution centers, and assembly plants. Therefore, the extensive use of the distribution centers may be a more environmentally friendly practice in a TPS environment. The adoptions of advanced manufacturing and information technologies observed in the two assembly plants also have some important environmental implications. On the one hand, the applications of advanced information technologies, such as computerized information systems, in the Americanized TPS processes have created a ‘‘paperless’’ environment in the two assembly plants with the benefit of reducing the large amount of paperwork for documentation typically required in TPS. However, the operations of some of the advanced machineries and technologies, such as robots and computerized information systems, may also lead to

higher energy consumption than TPS processes which operate most production and quality control jobs manually. One important area for future research is to conduct systematic, life cycle based study (e.g., Klassen, 2000) on the overall environmental impacts of both the traditional and ‘‘Americanized’’ TPS process designs identified in this study.

6. Conclusion In this paper, we study different TPS process designs by American automakers and investigate their effects from the interdisciplinary perspective of the triple bottom line. The case study methodology is used to design semi-structured interviews with line managers and logistics coordinators in two assembly plants of two major American automakers. Our findings show that the two assembly plants have implemented two of the seven major TPS principles in process design: ‘‘create continuous process flow’’ and ‘‘level out workload.’’ Three other principles ‘‘stop to fix problems,’’ ‘‘design standardized tasks,’’ and ‘‘use visual control’’ have also been implemented to a lesser extent. Major differences, however, still exist in two principles: ‘‘use pull-system’’ and ‘‘use only reliable, thoroughly tested technology.’’ Based on the research findings, we investigate the effects of Americanized TPS processes along the three dimensions of the triple bottom line: economic (profit), social (people), and environmental (planet). Our study has contributed to the body of knowledge of TPS through bettering the understanding of the effects of TPS implementation in the American automobile industry as well as identifying the key differentiating factors in TPS process designs for developing future research instruments. In addition, through our investigation of different ‘‘Americanized’’ TPS process designs, we have derived a number of useful managerial insights and implications for improving the triple bottom line of a company with the TPS-based process to achieve sustainability.

Appendix. TPS process design principles and practices (Liker, 2004) Principle 1. Create continuous process flow to bring problems to the surface.

 Practice 1: Redesign work processes to achieve high value-

 

added, continuous flow. Strive to cut back to zero the amount of time that any work project is sitting idle or waiting for someone to work on it. Practice 2: Create flow to move material and information fast as well as to link processes and people together so that problems surface right away. Practice 3: Make flow evident throughout your organizational culture. It is the key to a true continuous improvement process and to developing people. Principle 2. Use pull systems to avoid overproduction.

 Practice 1: Provide your downline customers in the production





process with what they want, when they want it, and in the amount they want. Material replenishment initiated by consumption is the basic principle of just-in-time. Practice 2: Minimize your work in process and warehousing of inventory by stocking small amounts of each product and frequently restocking based on what the customer actually takes away. Practice 3: Be responsive to the day-by-day shifts in customer demand rather than relying on computer schedules and systems to track wasteful inventory.

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Principle 3. Level out the workload (heijunka).

 Practice 4: Reject or modify technologies that conflict with

 Practice 1: Eliminating waste is just one-third of the equation



for making lean successful. Eliminating overburden to people and equipment and eliminating unevenness in the production schedule are just as important—yet generally not understood at companies attempting to implement lean principles. Practice 2: Work to level out the workload of all manufacturing and service processes as an alternative to the stop/start approach of working on projects in batches that is typical at most companies.

Principle 4. Build a culture of stopping to fix problems, to get quality right the first time.

 Practice 1: Quality for customer drives your value proposition.  Practice 2: Use all the modern quality assurance methods available.

 Practice 3: Build into your equipment the capability of detect-

 

ing problems and stopping itself. Develop a visual system to alert team or project leaders that a machine or process needs assistance. Jidoka (machines with human intelligence) is the foundation for ‘‘building in’’ quality. Practice 4: Build into your organization support systems to quickly solve problems and put in place countermeasures. Practice 5: Build into your culture the philosophy of stopping or slowing down to get quality right the first time to enhance productivity in the long run.

Principle 5. Standardized tasks are the foundation for continuous improvement and employee empowerment.

 Practice 1: Use stable, repeatable methods everywhere to 

maintain the predictability, regular timing, and regular output of your processes. It is the foundation for flow and pull. Practice 2: Capture the accumulated learning about a process up to a point in time by standardizing today’s best practices. Allow creative and individual expression to improve upon the standard; then incorporate it into the new standard so that when a person moves on you can hand off the learning to the next person. Principle 6. Use visual control so no problems are hidden.

 Practice 1: Use simple visual indicators to help people deter  

mine immediately whether they are in a standard condition or deviating from it. Practice 2: Avoid using a computer screen when it moves the worker’s focus away from the workplace. Practice 3: Design simple visual systems at the place where the work is done, to support flow and pull. Practice 4: Reduce your reports to one piece of paper whenever possible, even for your most important financial decisions.

Principle 7. Use only reliable, thoroughly tested technology that serves your people and processes.

 Practice 1: Use technology to support people, not to replace 



people. Often it is best to work out a process manually before adding technology to support the process. Practice 2: New technology is often unreliable and difficult to standardize and therefore endangers ‘‘flow.’’ A proven process that works generally takes precedence over new and untested technology. Practice 3: Conduct actual tests before adopting new technology in business processes, manufacturing systems, or products.

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your culture or that might disrupt stability, reliability, and predictability. Practice 5: Nevertheless, encourage your people to consider new technologies when looking into new approaches to work. Quickly implement a thoroughly considered technology if it has been proven in trails and it can improve flow in your processes.

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