1st Edition

The Toyota Economic System How Leaders Create True Prosperity Through Financial Congruency, Dignity of Work, and Environmental Stewardship

By Olivier Larue Copyright 2023
    294 Pages 67 B/W Illustrations
    by Productivity Press

    294 Pages 67 B/W Illustrations
    by Productivity Press

    294 Pages 67 B/W Illustrations
    by Productivity Press

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    This book analyzes the purpose and relationship between the different elements of the Toyota Production System (TPS) and how they add up to an economic system rather than just a production system that brings engineering and managerial solutions to businesses. It argues how TPS can be viewed as a science as opposed to a tool-based technique.

    Our society faces unprecedented economic, social, and environmental challenges. Thankfully, TPS offers solutions. These solutions are born out of Toyota's dissatisfaction with simple cost-benefit analyses and trade-offs. It challenges the antiquated model of economies of scale and radical individual asset efficiency. The Toyota Production System offers technical and managerial innovations that eliminate pre-existing financial, socio-economic, and environmental contradictions. The result is congruency between several factors and agents of our society that have conflicted in the past.

    Specifically, TPS does the following:

    • Financially, TPS creates congruency between the Income Statement and the Statement of Cash Flow by pursuing total instead of individual efficiency.
    • Socio-managerially, TPS reconciles the creative nature of people with the mundane requirements of modern industrial work by re-introducing craftsmanship into industrial operation.
    • Economically, TPS lessens the conflicts between economic growth and environmental stewardship by eliminating, unevenness, overburden, and waste instead of only chasing economies of scale.

    These innovations bring financial benefits to the corporation, social benefits to the workers, and economic and environmental benefits to society at large. Each benefit supports the others as opposed to itself individually. The result is true instead of apparent efficiency. This is measurable, repeatable, and worth making into a scientific discipline, which can be taught and applied more widely not just to business haphazardly, but systematically to the broader aspects of our economies.


    About the Author


    Part 1: The Ideal: Its Philosophy, Principles, and Goals

    Chapter I: Production Systems’ Contribution to Human Progress6

    Initial condition: Craftsmanship6

    Current condition: The great mass production system6

    Target Condition: The Toyota Production System

    Chapter 2: Toyota Production System (TPS) as a system

    The three elements of TPS: What TPS does

    The unity of the three elements displayed in the house of TPS

    Part 2: Reconciling the Financials: Technical innovation by congruency Between Income and Cash Flow

    Chapter 3: The traditional mass production system and its inherent contradiction as a system of economies of scale based on individual efficiency

    Batch of conveyance to reduce cost conflicts with quality and lead-time

    Batch of production to reduce cost conflicts with quality and lead-time

    Batch processing means relying on a long-range forecast

    Trade-offs factors instead of innovating

    Chapter 4: The Toyota Production System and its inherent harmony: Approach to reconciling income and cash flow

    Stop and notify, the first element of jidoka

    Continuous flow as the first element of Just-in-Time

    Takt time is a new datum with which to calculate and organize resources

    Separate Man and Machine Work

    Pull system, the second element of Just-in-time

    Jidoka and Just‐in‐time conclusion

    Heijunka: Leveling work by varieties

    Standardized work

    Conclusion on the technical element of TPS

    Part 3: Industrial Craftsman. Managerial Innovation by reconciling the creative nature of people with the mundane requirements of industrial work

    Chapter 5: Manage based on a vision of the Ideal—True North

    The purpose of the ideal

    Application of the Ideal

    Images of the ideal

    Chapter 6: Kaizen, a scientific problem-solving activity

    Observation (plan)

    Hypothesizing (do)

    Testing (check)

    Draw a conclusion (act)

    Chapter 7: Institutionalization of problem-solving by developing experts: Learning problem-solving and solving learning-problems


    Confirm by yourself

    An intimate relationship between learning new tasks and scientific problem-solving


    Demonstrate results by improving efficiencies

    Chapter 8: Practical Principle-based performance indicators

    Managing by Total and True efficiency

    TPS metrics: Measuring and managing the 4M of the shop floor

    Chapter 9: Managing human development with "A4 and A3"

    Using Material and Information Flow A3 to manage total efficiency and achieve true efficiency through the elimination of unevenness, overburden, and waste

    Part 4. The broader socio-economic benefits of the TPS method

    Chapter 10: Reconciling economic prosperity with environmental stewardship.

    The asset driven mass production system is push system

    The customer driven Toyota Production System is a pull system

    Economic innovation

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    Olivier Larue is a senior executive consultant and president at Ydatum, Inc., which partners with public corporations and private equity clients in operation design and management. He has more than 30 years of hands-on experience with the Toyota Production System (TPS). He worked with the Toyota Supplier Support Center in North America (TSSC), Operations Management Consulting Division in Japan (OMCD), and New United Motor Manufacturing (NUMMI) before founding a consulting firm in the Bay Area focused on implementing TPS in a variety of industries.

    Olivier has led organizations, from Fortune 500 to minority companies, in the design and implementation of industrial engineering and managerial business solutions for 25+ years with documented savings exceeding two billion dollars. He has the expertise and hands-on experience with TPS/Lean enterprising and has developed hundreds of leaders around the world. Olivier excels at working with everyone from executives to shop floor operators to deliverer higher quality products and services at a lower cost and with a shorter supply lead time based on the Toyota Production System.

    He earned an MS from Saint Mary’s College of California, a BS in Business Administration, Management and Operation from the Faculte des Sciences Economiques of Rennes 1, France, and a Bio Resources Management Bac D’ from Theodore Monod Lycee, France

    Study this book to fully understand the complex thinking and simple practices that have gone into the evolution of the Toyota Production System (TPS). The application of these principles have been adopted by the most successful businesses around the world.

    -- Jeff Colvin, Principal, D3Strategy 

    The book offers an expanded view of TPS as a system and explanations that will accelerate your learning and up your game. It is a great resource for anyone who wants to get a better understanding of TPS and how to use it to improve operations while simultaneously optimizing the P&L and the Balance Sheet. The author provides detailed explanations of the various components of TPS and how they fit together to create an effective system. Overall, this is an excellent resource for anyone looking to learn about TPS. Highly recommended.

    -- Ken Friedman, CEO,  Bestop Premium Accessories Group


    This book is for those of us growing up in the throes of Operations and either blindly or faithfully trying to adhere to the Toyota Production System (TPS) principles. Now, we can learn from one trained by the masters and go beyond the mechanics of production. TPS is truly more than a production or Operations system, it is an economic system. When explained in this holistic light, a new world of opportunity is opened to us. In his book, Olivier does an impressive job of explaining and defending this systemic visualization for all of us.

    -- Michael Rowen, COO, Adient Aerospace


    This book takes the reader on a journey into the depths of TPS and its applications in manufacturing settings, the author's anecdotes are invaluable in showing nuances of the TPS and bringing deep insights into production and the interactions of humans, the working space, the organization, and lean principles. The book offers practical concepts and a vision for how lean thinking can be applied over a wide array of processes.

    -- Farook Hamzeh, PhD, PEng., Associate Professor, Hole School of Construction Engineering; Faculty Associate, Nasseri School of Building Science & Engineering; Advanced Construction Technologies and Integrated Building Design; University of Alberta

    During the course of the past 15 years, I have had the privilege of working closely with Olivier Larue on numerous projects. I have personally witnessed organizations undergo significant transformations and maximize productivity, all under his tutelage. I have no doubt that his book will serve as an invaluable guide for organizations seeking to embark on the Lean Manufacturing journey, as well as for seasoned professionals aiming to deepen their understanding and refine their practices.

    -- Eduardo Guimaraes, Vice-President of Operations, Duravent Group