August 8, 2015

Birth of Lean

Resource: WWII had ended & Japan was struggling with, Adopting to the challenges, Implications of Agreement:

Birth of Lean  Resource: WWII had ended & Japan was struggling with, Adopting to the challenges, Implications of Agreement:










WWII had ended & Japan was struggling with:
– Limited capital
– A small domestic market
– Demand for a wide range of vehicle types
– High energy costs
– Competition was high as automakers from other countries were
eager to establish themselves in Japan
– Japan was in a depression and the Americans had restricted
– Toyota was facing bankruptcy
– Toyota president (Kiichiro Toyota) proposed firing ¼ of workers,
which caused a revolt
– The Toyota’s union was strong due to American had
strengthened labor union rights (1946)

Adopting to the challenges:
– Toyota & union worked out an agreement
• ¼ of workers were let go
• Kiichiro Toyota resigned
• Works got 2 guarantees:
– Lifetime employment
– Pay graded to seniority and tied to company profitability through
a system of bonuses
• Workers agreed to:
– Flexible work assignments
– Help the company continually improve
• Workers were essentially a fixed cost as a result

Implications of Agreement:
– Workers were essentially a fixed cost, same as the
machinery, however the equipment could be
depreciated. Therefore, Toyota had to get the
most of its workers.
• Continually train the work force to gain benefit from
their skills, knowledge & experience.
• The employment contract was now based on
cooperation, flexibility & mutual benefits.
• The company and workers became partners rather than