We Do Not Make What We Do Not Sell: No More Trucks in Indiana

It is no mistake to say that the people at the top of Toyota, the President, CEO, Chairman and other executives all thoroughly understand production control. How many CEOs in the world can say this? In a word we might say that in TPS terms “production control” is to “make what the customer wants, when they want, in the right amount, quality and cost.” It is management itself. Much like industrial engineering, production control is a field that has been long neglected and is only slowly being recognized its importance, thanks in part to the popularity of lean manufacturing.
The more I learn about what Toyota means by production Control (生産管理), the more I see that it is different that what we mean by production control in the West. Production control is a comprehensive activity of planning, organizing production and related activities including purchasing, managing inventory and production cost controls. Production control has a very important position within Toyota, one might say that the “control” implies an integrating and oversight function for the end-to-end value stream, extending beyond production.
A Wall Street Journal article on July 11, 2008 titled Toyota Shifts Gears To Build Prius in U.S. struck me as an example of this. The North American automotive market has been hit hard by high fuel prices and the slowing economy. The Big Three automotive manufacturers have struggled with excess capacity for years and now even Toyota is experiencing same.
In Taiichi Ohno’s Workplace Management, he says repeatedly that “we do not make what we will not sell” as a simple way of explaining that their production control and even their entire manufacturing philosophy is based on synchronizing supply with demand. Ohno fought and taught for decades to make this a reality at Toyota. So when Toyota found themselves recently “making what we will not sell,” namely big, gas-guzzling pick up trucks, they stayed true to their principles and decided to idle these factories.
But Toyota has taken a different path than the Big Three in addressing the excess manpower:
The 4,400 workers affected by the plan won’t be laid off, the company said. Instead, they will undergo quality, safety and productivity training. A Toyota spokesman declined to comment on the cost of keeping those workers on the payroll.

Kaizen and respect for people. Without decades of kaizen they would not have the cash and profit to ride out these hard times by holding on to their people. Without the philosophy of respect for people, they wouldn’t do it in the first place. In their wisdom, I’m sure Wall Street will punish them for this position.
Toyota made a big push into trucks recently in order to capture a piece of that U.S. market. But instead of stubbornly sticking to a bad plan, they have identified the problem, stopped the line (literally) and they applied kaizen their business plan so that they will “only make what we can sell”. The truck plant in Indiana, and the new plant in Mississippi (planned for trucks) will both make the gas-electric hybrid vehicle Prius. The San Antonio, Texas plant will be the only place to build trucks. This is a brilliant example of the senior leadership of a company understanding production control from a total business perspective and limiting deadly overproduction.
The Prius is a fine car, but wouldn’t you rather drive a fully electric and 100% sensible Tesla? Why not lend some capacity to mass producing these beauties, Toyota?

---