While the mass producers who are agog about innovation are right in line with the hare in the old ‘Tortoise and the Hare’ parable, lean manufacturers are a blend of the tortoise’s long term view and hare-like ability to change direction. While Ford and GM pine for the days when they had a product that thrilled the market, I can name no such Toyota product. Instead, they have had thirty or forty years of a range of good quality products – not a Mustang among ’em ‘ – and the ability to make whichever of them in any quantity the customers wanted. They have not led the market in minivans or hybrid cars, but they have been ready to move into them quickly and effectively when the market wanted them.
It seems to me that innovation is the darling of the professional manager who has been unable to grasp lean manufacturing. They are plodding down the highway, baffled that everyone else is going so much faster than them, unable to recognize the concept of the wheel. Most of them will still be trying to figure out a faster way to get from point A to point B than walking when they are laid in their graves with tire tracks running the length of their backs.
Barry "aka the Hillbilly" says
Another good point Bill. The way I see it, Toyota is basically fighting a war of attrition with the Big Three. Innovation is just the latest “catch phrase” that someone like Mark Fields can grab onto and look slick in front of the cameras. It doesn’t take brilliant management to form a team to decide which plants to shut down. Brilliant management does the right things over the years so you don’t have to close any plants down in the first place! But you’ll probably never see any of them on the cover of Forbes or Fortune. It’s always the Innovators who show up there.
As Toyota gets bigger, they could eventually even start to hurt their own clan (Honda, Nissan, Mazda, Subaru, Mitsubishi). The US and Japan Markets being mature means that as Toyota increases market share,the pressure will build on the others, until eventually there isn’t going to be enough chairs for everyone at the party anymore. Getting smaller by shrinking capacity just makes the Big Three weaker. Such a loss of capacity has to surely be considered a major failure by the management of the Big Three.
Toyota has built up a great deal of manufacturing engineering know how over the last 40 years. They are loathe to outsource what they see as critical components of the vehicle or critical manufacturing technologies. This carries over to their Management as well. I think its highly unlikely you will ever see Toyota outsource their top management to the US or Europeans. Toyota has maintained and kept their Manufacturing prowess while the Big Three have shrunk and sent a lot of things outside or have filled holes using outside contract employees. I suppose if you know how to build the Machines that make the alternators and starters and the cranks and the machines that assemble the cars, like Toyota, then you would have quite a bit of confidence that you could do it better than anyone else. They’ve been there and done that so to speak. Toyota doesn’t seem to be afraid of much of anything now, except for complacency perhaps. Their isn’t a single vehicle segment that offers safe harbor for the Big Three anymore. There’s no place to Hide!
What I am curious about is Toyota’s performance over the last say 35 years. I suspect that Toyota has done lean better than any other single company over the last 35 years. What I would like to see is a comparison of their margins and revenue growth over that time frame compared to the Big Three and the Biggest of the European Makers. Does anyone know if such an analysis has been done ??? I am assuming this information is public and would be available. I think that such an analysis will show an acceleration in the growth of Toyota’s margins as the company and their main suppliers leaned down and also significant revenue growth as they used quality and reliability as a weapon to gain market share. Such an analysis should provide a stark contrast between lean and mass production and shove that stake further into the Heart of Mass production. Every Car Toyota builds and sells to a satisfied customer drives that Stake a little deeper.
Toyota is bigger than almost all of the other Japanese Auto makers combined. Yeah I know not quite, but almost, perhaps 80%. Toyota is basically the 900 pound Gorilla even in Japan.
And as if there weren’t enough pressure on the system already, now Hyundai’s coming up fast in the rear view mirror. Hyundai will also add pressure to the system. Toyota can’t keep gaining marketshare forever, at least in the US. I am sure there is a group of Auto customers (i.e, loyal F150, Silverado and Ram people) who will never own a Toyota. But it seems there is still quite a bit of market share for them to grab until they get to that limit, such that one of the US companies might fall down.
As they say on the farm, the Big Three have a tough row to hoe. It’s going to be bloody from here on out. Everyone’s playing for keeps and one of them may well not survive.
Graham says
I would question your adroit assessment that:
“Such a loss of capacity has to surely be considered a major failure by the management of the Big Three.”
Surely it is perhaps more of a failure that unrequired capacity was ever created in the first place and the realisation that they can’t effectively utilise their capacity is a timely decision?
(ie, they’ve never sold as many cars as they could ever produce with that capacity)
Barry "aka the Hillbilly" says
I think that’s right Graham. What I should have said was such a loss of Market Share. I don’t have the numbers for GM’s plant capacity utilization from 1950 until now. Bill may actually have those numbers somewhere. It would be interesting to see what those numbers actually looked like with respect to the volumes they actually sold. Of course in the recent past, the last 20 years, their overall capacity was probably not being used fully, maybe it has been somewhere in the neighborhood of 80%??? But I remember that GM had about 50% of the Market at one time around the 1950 time frame.
What I was implying was that GM and Ford have lost significant marketshare and most of it has gone to Japanese and recently Asian Makers. I think that having at least 25 years to work on stopping the bleeding and still not being able to get the job done would surely be considered some form of management ineffectiveness or failure.
The loss of 25 % of share of the US market in GM’s case has forced many plant closures which might never be recovered. In today’s competitive environment it seems to me that it will be very hard for GM and perhaps even Ford to ever be able to build up their future marketshare enough to regain that capacity. The more US plants Toyota and Honda build the greater the pressure will be upon the domestics.
Of course you are right about the need to have so many plants in the first place. If GM had not followed their Large Scale Production Methods (Economy of Scale) then they would not have needed that many plants. Toyota and Honda build Flexible Multi Model lines that utilize the TPS. They also seem to be able to build these flexible plants much more frugally. I remember the GM Saturn facility cost somewhere in the several billion dollar range. That was suppose to be GM’s weapon to regain sales from Toyota and Honda. The recently announced Honda plant is suppose to be built for around 500 million.