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During the past decade, Japan’s major source of competitive advantage in the global automotive industry has been its ability to bring new, high-quality products rapidly to market. Simultaneously designing a product and its manufacturing system (often referred to as concurrent or simultaneous engineering of overlapping tasks) is generally seen as the salient characteristic of this competitive edge; Toyota, the most successful Japanese automotive company, is credited as one of the originators of concurrent engineering (CE).1 To compete, U.S. companies have implemented CE, largely through organizational design, creating highly structured design processes and multifunctional, often collocated, design teams, with intense communication among team members, including supplier engineers.2 Several U.S. companies (most notably, Chrysler and Ford) have reduced the length of the product development cycle, in part through such organizational changes.3
Our research has found, however, that Toyota uses a relatively unstructured development process, its multidisciplinary teams are neither collocated nor dedicated, and, in the case of suppliers, Toyota communicates intensively about product development with a smaller portion of its supply base than do U.S. auto companies (but Toyota suppliers give their customer higher marks for communication effectiveness than U.S. suppliers give their automakers). Moreover, while in most cases CE seeks to freeze specifications quickly, Toyota’s engineers and managers try to delay decisions and provide their suppliers with hard specifications very late in the process. And, while conventional concurrent engineering reduces the number of prototypes, Toyota’s suppliers seem to multiply prototypes, in some cases to an apparently absurd degree.
The Second Toyota Paradox
In our view, the first Toyota paradox is its production system, which includes delivering just-in-time; breaking production into lots far below “minimum economical order quantity”; having each worker, rather than professional inspectors, check the previous worker’s results; allowing any worker to stop the line and installing automatic line stops; adding many tasks to a single workstation; and encouraging workers to redesign their own jobs, rather than having trained industrial engineers break the work down and prescribe procedures. Few guessed that these methods would prove compatible with, and perhaps essential to, factory efficiency well above Japanese companies’ already high average.
Toyota’s use of what we call set-based concurrent engineering is the second Toyota paradox. We believe that Toyota’s development innovations may be nearly as important as the Toyota production system — and as confusing at first glance.
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1. K.B. Clark and T. Fujimoto, Product Development Performance (Boston: Harvard Business School Press, 1991);
S.C. Wheelwright and K.B. Clark, Revolutionizing Product Development: Quantum Leaps in Speed, Efficiency, and Quality (New York: Free Press, 1992); and
G. Stalk, Jr., “Time — The Next Source of Competitive Advantage,” Harvard Business Review, July–August 1988, pp. 41–51.
2. J.L. Nevins and D.E. Whitney et al., Concurrent Design of Products and Processes (New York, McGraw-Hill, 1989), pp. 1–24.
3. D.C. Smith, “Chrysler’s LH Team,” Ward’s Auto World, March 1992, pp. 38–39; and
R. Mitchell, “How Ford Hit the Bull’s Eye with Taurus,” Business Week, 30 June 1986, pp. 69–70.
4. A. Ward and W. Seering, “Quantitative Inference in a Mechanical Design Compiler” (Montreal: Proceedings of the First International ASME Conference on Design Theory and Methodology, September 1989), pp. 89–97; and
A. Ward and W. Seering, “The Performance of a Mechanical Design Compiler” (London: ICED Proceedings of the 1989 International Conference on Engineering Design, August 1989), pp. 39–45.
5. M. Smitka, Competitive Ties: Subcontracting in the Japanese Automotive Industry (New York: Columbia University Press, 1991); and
T. Nishiguchi, Strategic Industrial Sourcing: The Japanese Advantage(New York: Oxford University Press, 1993).
6. K.B. Clark, “Project Scope and Project Performance: The Effect of Parts Strategy and Supplier Involvement on Product Development,” Management Science 35 (1989): 1247–1263; and
R. Kamath and J.K. Liker, “A Second Look at Japanese Product Development,” Harvard Business Review, November–December 1994, pp. 154–173.
7. Clark and Fujimoto (1991); and
P. Hammett, W. Hancock, and J. Baron, “Producing a World Class Automotive Body,” in Engineered in Japan: Japanese Technoloy Management Practices, J.K. Liker et al., eds. (New York: Oxford University Press, 1995).
8. We questioned fifteen different suppliers about eighteen different product lines (two of the Toyota suppliers and one of the non-Toyota suppliers in Japan about two different product lines). We also interviewed Toyota’s general managers of styling and body engineering, an ex-general manager of body engineering, senior managers in stamping and welding development, and about fifteen line engineers. Respondents at other OEMs were generally less senior, and the total number of interviews at other OEMs combined is only slightly larger than the number at Toyota. For each kind of development, we have data for Toyota or a Toyota supplier and at least one other company, so we can clearly contrast Toyota with other companies along the critical axes, but we cannot compare other companies with each other.
We conducted the interviews in Japan primarily in English, although a Japanese translator with substantial engineering expertise was usually present. Since the Japanese companies sent only English-speaking managers and engineers to the interviews, translation was rarely necessary.
9. M. Cusumano, The Japanese Automobile Industry: Technology and Management at Nissan and Toyota (Cambridge, Massachusetts: Harvard University Press, 1991).
10. Toyota Annual Report (Tokyo, Japan: Toyota Head Office, 1994).
11. Smith (1992).
12. The LH line is Chrysler’s “cab forward” midsized and large cars, including the Dodge Intrepid, the Chrysler Concorde, New Yorker, and Eagle Vision. They were the first vehicles designed using Chrysler’s platform team organization and, at the time, held a record for fast development time in U.S. automotive practice.
Comparing companies on vehicle development time is a complex matter. For example, are the starting points comparable? In our interviews, Toyota engineers claimed that Chrysler engineers on Neon and LH had worked twice as long on body development before getting management approval (the official time the stopwatch starts) and had complete math data in their CAD system, while Toyota got management approval based on the clay models, and the CAD data still needed a great deal of correction to catch up with the clay models.
13. Smith (1992).
14. Kamath and Liker found this to be generally true of major Japanese automakers in dealing with suppliers involved in design. Toyota, Nissan, and Mazda all have simple, one-page development processes and focus on end dates for key events that then pull the supplier’s activity toward concrete milestones. See:
Kamath and Liker (1994).
15. J.K. Liker, R. Kamath, S.N. Wasti, M. Nagamachi, “Supplier Involvement in Automotive Product Design: Are There Really Large U.S./Japan Differences?” Research Policy, forthcoming.
16. Shigley’s textbook is admittedly an old, very traditional view of engineering design. More contemporary views such as Wheelwright and Clark and Pugh depict far more concurrent processes closer to a set-based view. But students of mechanical engineering were less apt to be exposed to these books than Shigley, which decades of practicing engineers were raised on. See:
Wheelwright and Clark (1992); and
S. Pugh, Total Design (Reading: Massachusetts: Addison-Wesley, 1991).
17. Pugh (1991);
J.E. Shigley and C.R. Mischke, Mechanical Engineering Design, fifth edition (New York: McGraw-Hill, 1989).
18. G. Taguchi and D. Clausing, “Robust Quality,” Harvard Business Review, January–February 1990, pp. 65–75.
19. G. Sussman and G. Steele, “Constraints — A Language for Expressing Almost Hierarchical Descriptions,” Artificial Intelligence 14 (1980): 1–39.
20. D. Chapman, “Planning for Conjunctive Goals” (Cambridge, Massachusetts: Massachusetts Institute of Technology, Artificial Intelligence Laboratory, Technical Report 707, 1985).
21. Clark and Fujimoto (1991).
22. The body design process described here is composite information collected during interviews with the general manager of body engineering at Toyota, the general manager of styling design, a group of body and design engineers (eight in total), and a former general manager of body engineering who is a currently a vice president in Toyota’s U.S. operation. Our example focuses on the design and development process in the clay model stage.
23. There was some disagreement on this point among different groups of engineers we visited. Some claimed they do not intend to delay fixing hardpoints so that castings are ordered before they are fixed, and would only do so if the program was behind schedule.
24. Hammett et al. (1995).
25. Although the information in this example reflects only the specific experiences of the interviewees in one large division, the descriptions are consistent with reports from other areas and other companies.
26. Smitka (1991).
27. D.E. Whitney, “Nippondenso Co. Ltd.: A Case Study of Strategic Product,” in Liker et al. (1995).
28. Clark and Fujimoto (1991).
29. This has significant implications for non-Japanese auto parts suppliers which want to break into the Japanese market, especially with regard to Toyota. They need to aggressively pursue presentation time at Toyota to introduce Toyota engineers to its products, and also provide large amounts of data on their product.
30. Nishiguchi (1993); and
J.H. Dyer and W.G. Ouchi, “Japanese-Style Partnerships: Giving Companies the Competitive Edge,” Sloan Management Review, Fall 1993, pp. 51–63.
31. This is rapidly changing in the United States at Ford and Chrysler, with movement toward the Japanese practice of target pricing. General Motors still uses a more traditional competitive bidding system. See:
Liker et al. (forthcoming).
32. Liker et al. do not show separate data for Toyota in this publication. The results reported in this paper are based on a separate unpublished analysis done for Toyota comparing their suppliers to the average for other Japanese companies and U.S. companies.
33. Whitney (1995).
34. Clark and Fujimoto (1991).
35. See J.K. Liker, D.K. Sobek, A.C. Ward, and J.J. Cristiano, “Involving Suppliers in Product Development in the U.S. and Japan: Evidence for Set-Based Concurrent Engineering” (IEEE Transactions on Engineering Management, forthcoming).