David S. Read

As I read more and more about the Toyota debacle I’m struck by an apparently myopic management drive to cut costs.  In the case of Toyota it appears that cost cutting extended into quality cutting.  A company once known for superb quality had methodically reduced that aspect of their output.  This isn’t just conjecture; it seems that people inside the company had been aware of a decline in quality due to a focus on reducing costs.¹ Is there a general lesson to consider?

I believe the failure is one of misplaced focus. The focus when Toyota began cutting costs was to remove waste.  That waste could be found throughout their manufacturing processes.  Wasted materials, productivity, tooling, and equipment were all identified as Toyota’s management and workers struck out on a journey to reduce waste and improve productivity.  They ushered in a set of practices that others would soon adopt.

Head back to the 1950′s and you’ll find Taiichi Ohno² hard at work addressing myriad manufacturing shortcomings at Toyota.  Mr. Ohno is really the father of lean manufacturing and just-in-time inventory management.  He didn’t name them as such.  He was just trying to remove waste from the entire manufacturing process.  By the late 1990′s these concepts had become standard operating procedure at many firms.

It makes sense that a business would focus on reducing waste.  Although it may require effort to remove waste without reducing productivity, overall one would expect a leaner process to have an overall efficiency gain.  It would also seem that quality does not benefit from waste.  After many years of experience with these principles, companies have found that an approach of using only the resources that are needed when they are needed provides a sound basis for their operations.  So what happened at Toyota?  They apparently went beyond cutting waste.

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