This is where the TPS varies significantly from American-based approaches to managing variation in results and failure to attain results as well. The Kaizen approach systematically analyzes why a process did not result in the intended goal being attained, and often there is Six Sigma and root cause analyses performed to understand the factors that led to the process not delivering the planned for results (Harrington, 2003). All of these factors that comprise the TPS are often duplicated by competitors (Dyer, Nobeoka, 2000) so much so that there are often attempts to emulate down to the use of continuous flow, production leveling, pull systems, quick changeover, takt time, and production leveling (Kotani, Ito, Ohno, 2004). Yet the many attempts to bring more predictability and less variation into those industries that have inherently higher levels of demand variability often fail (Dyer, Hatch, 2004). There are many factors behind why companies attempting to emulate the TPS do not attain the same or higher levels of performance and foremost among them is that many companies cannot make the transition to the philosophy of Toyota regarding this system. Toyota sees TPS as a manufacturing philosophy that can short the time between when a customer places and order and receives their car, taking into account make-to-order and highly customized aspects of each auto produced (Kotani, Ito, Ohno, 2004). Toyota specifically targets the engineering out of wasted time, resources, and steps in getting a customers' order completed on time (Shook, 2009). There is a high level of intensity and urgency to getting customers' orders out accurately, to the highest quality possible and with minimal if any interruption due to waste. This philosophy pervades the TPS implementations across supplier partners and is directly responsible for how quickly Toyota is able to create long-term learning ecosystems (Dyer, Nobeoka, 2000).

How the Toyota Production System Plans and Manage Spare Parts Production

The catalyst of the TPS development, implementation and continual refinement through Kaizen and integration to Jidoka is in minimizing variations in demand for limited or small production runs (Kotani, Ito, Ohno, 2004). As spare parts have a greater degree of uniformity given the requirements of the JIT systems used for product planning and development, Toyota has been able to attain high levels of accuracy, quality, and repeatability of production processes as a result. JIT techniques are used to standardized spare parts within models families and between product model generations as much as possible to minimize any potential of stock-outs and variations in quality. JIT is then used as a spare parts planning system as well to ensure highest possible levels of parts commonality across product models and when possible, across product generations. Standardization of parts has also been possible given supplier collaboration (Dyer, Nobeoka, 2000). The TPS was designed to withstand much greater levels of product variability than spare parts and Maintenance, Repair and Overhaul (MRO) product design and production (Hassler, 2008).

As a result the process workflows have been continually improved to reduce waste, attaining high levels of lean manufacturing performance. The steps that Toyota takes in planning, procuring and collaborating with suppliers for spare parts follow this sequence of steps. First, existing workflows are evaluated from a supplier collaboration and fulfillment standpoint to see if there is the potential to significantly reduce time, costs, or material use. The use of Kaizen-based principles also apply to the supplier collaboration planning, production and execution of sample and full production run orders (Myers, Cheung, 2008). In conjunction with this first phase of supplier coordination and supply chain planning, quality management goals and objectives are defined, in addition to minimal acceptable quality levels which are essential for Jidoka-based strategies to be in place prior to the spare parts being produced. Next, the initial production schedules are defined through constraint-based systems that take into account forecasts, lead times, quality standards, takt time and production leveling. Using their Enterprise Resource Planning (ERP) system in conjunction with a Demand Management suite of applications, Toyota works with its suppliers to create a Value Stream Map. The intent of the map is to define how spare parts workflows will be used within inventory services in addition to order processing for fulfillment of service depot and dealer orders (Black, 2007). Figure 3, Value Stream Mapping for Spare Parts illustrates the outcome of an iterative series of process improvement cycles and the development of staging and storage locations...

The centralization of processing and pick sheets is automated through the use of Toyota's ERP systems and its Demand Management modules that coordinate forecast and orders and pull-based replenishment. The result is a value stream map which illustrates how all potential wasted time, materials and movement are taken out of the spare parts procurement, manufacturing and fulfillment process. As processing is managed by the centralized ERP system Toyota relies on to automate Kanban (Wee, Wu, 2009) calculate Takt Time (Kotani, Ito, Ohno, 2004) and manage pull-based replenishment (Hassler, 2008) this entire process is measured and evaluated continually to see how it can be improved over time. Figure 3 shows an advanced iteration of value stream mapping specifically for spare parts sourcing and fulfillment.
Figure 3: Value Stream Mapping for Spare Parts -- Macro View

Once a value stream map has been defined for each specific spare part, Toyota will next standardize on the most optimized workflow possible and integrate it into the broader TPS.

While Toyota still relies on batch-oriented transaction approaches to integrating with suppliers including Electronic Data Interchange (EDI) (Kotani, Ito, Ohno, 2004) the latest advancements have been in the development of online portals which are part of the broader TPS Intranet that is global in scope (Gong, Wang, Lai, 2009). The purpose of the portals on the TPS Intranet is to coordinate and manage all data needed by a supplier to collaborate with Toyota and with other suppliers as well. The portals deliver financial forecast data, pricing agreements; also include copies of contracts and specific data about contract performance. In addition the portals also provide suppliers with insights into new product demands and invite them to bid on new product plans. The use of the portal as a cross-supplier collaboration platform is also designed into the TPS global intranet. Using applications that are designed to allow for integration to suppliers the intranet becomes the foundation for the TPS-based knowledge network (Dyer, Nobeoka, 2000).

Figure 5: Supplier Transaction Workflow

What is also included in the portal are an entire series of metrics or key performance indicators (KPIs) that provide each supplier with real-time feedback as to their performance on each program they participate in. There is a balanced scorecard by vehicle model, programs that include multiple vehicles and aftermarket program performance as well (Dyer, Nobeoka, 2000) (Dyer, Hatch, 2004). Suppliers also get analysis tools to understand which specific lots of their products did or did not meet the minimum levels of quality performance and criteria as defined by Toyota as well. It is important to note that the teams responsible for on-boarding suppliers to the Toyota Production System invest a year or longer teaching suppliers how to use the metrics and KPIs to bring about significant change in their own organizations (Dyer, Nobeoka, 2000). Toyota specifically does this to bring the culture of quality and the TPS core values into the cultures and organizational values of their suppliers. This also has been found to be an enabler of greater levels of trust across suppliers as well, as many receive this full year of support for no charge and often suppliers will go through the same learning processes at the same time (Dyer, Hatch, 2004) (Dyer, Nobeoka, 2000).

Toyota then strives to create a cultural fit as much as a system and process fit with its suppliers, and given the inventory and transaction velocities for spare parts, the extent to which there is tight process integration is the extent to which an optimal level of performance can be achieved. For Toyota, trust and the value of relationships with suppliers, and the shared ownership of performance is just as critical if not more so than systems and IT-based integration as well (Dyer, Nobeoka, 2000). What occurs therefore is more of an acclimation process supported by technology rather than vice versa, which is often the case in American auto manufacturers who concentrate primarily on technology enablement first. Despite the recent quality management problems that Toyota has had globally, the TPS has set a solid foundation for recovery by combining JIT and Jidoka, orchestrated by the use of Kaizen processes that seek to continually improve the entire ecosystem.

Assessment of the Current Economic Conditions and Toyota's Position

The combined effects of the subprime mortgage crisis and its effects on interest rates, in conjunction with the reduction in employment globally quickly impacted industries that rely on consumer credit as the catalyst of their growth. As…