A Study of the Toyota Production System by Andrew P. Dillon

Author:Andrew P. Dillon
Language: eng
Format: epub
Publisher: Taylor and Francis

When Demand Decreases

Decreases in demand can be a difficult problem. Typically, companies assume that demand will increase. When actual demand is lower than projected, they overproduce and accumulate inventory since they equate machine idling with loss. At Toyota, overproduction is regarded as waste and inventory is not permitted.

There are several steps production management can take when demand decreases:

• In parts fabrication, workers can be given more machines to handle

• In assembly, tact time can be increased and the number of workers reduced

These measures may prevent overproduction, but how does one utilize the surplus man-hours that result? Toyota’s basic philosophy is that it is better to allow workers to be idle than to overproduce. Furthermore, in Japan, management is responsible for protecting a worker’s job — companies rarely lay off workers during slow periods and then call them back when demand increases.

Workers can be kept busy with the following types of tasks during low demand periods:

• Repairing small leaks throughout the plant that have been neglected (this saved one company close to $5,000 in water charges)

• Maintaining and repairing machines that have been neglected during the regular production cycle

• Practicing tool and die changes

• Fabricating jigs and fixtures for planned improvements

• Producing in the plant what was previously done by outside suppliers. (From an accountants’ perspective, this might be viewed as a loss since labor costs for in-house fabrication are generally higher than a supplier’s. On balance, however, since surplus man-hours constitute waste, it may be advantageous to produce some items in the plant.)

As these examples suggest, decreases in demand are far more difficult to handle than increases. Therefore, even during times of average demand, a company should continuously seek to make improvements so that demand can be met with the fewest workers possible. Toyota has followed this rule and, as a result, its labor costs are 20 to 30 percent lower than those of its competitors.

It would be wrong to assume that producing with the fewest workers also means producing with the smallest number of machines on the floor. Instead, excess machine capacity should be retained so that when demand increases, additional workers can be hired and production increased. Without this policy, machines are run at full capacity and operating rates become all-important. If demand increases under such circumstances, workers can be added but machines cannot. Therefore, to anticipate increases, we are forced to overproduce and carry a large inventory during low demand periods. This creates numerous burdensome and wasteful costs.

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