1.2. The Hard Side of Toyota

Toyota's best-known secret weapon is its brilliant and unorthodox system of manufacturing, which it pioneered during the mid-twentieth century as an alternative to traditional mass production. The Toyota Production System (TPS) has enabled the manufacture of high-quality, reliable cars at a lower production cost. This system also has made Toyota nimble in response to fluctuating market demand and able to produce cars fast to match the orders coming in from dealers. Toyota's renowned logistics management system has also been a significant operational advantage for the company, enabling it to monitor inventory levels for parts and raw materials as well as finished products, and keep those levels low.

This optimization of resources in the production of cars allows Toyota to maintain a strong cash-flow position. In combination, these systems keep Toyota competitive in their operational costs. Its short cycle for product development has also been the focus of frequent study. Because Toyota takes substantially less time to introduce a new car compared with many of its global competitors, it can respond more effectively to changes in customer needs.

Both for-profit and nonprofit organizations are now trying to learn and adapt Toyota's methods and processes. Chrysler recently hired two senior Toyota executives to help revive its struggling auto business, and the Japan Post Service recently appointed a former chief of Toyota Motor Italy as its first CEO. In ...

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