In August, Olivier Larue publsihed a book entitled The Toyota Economic System: How Leaders Create True Prosperity Through Financial Congruency, Dignity of Work, and Environmental Stewardship, which 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.
When I spoke with Olivier this month, I asked him, "Why do you believe that the various components of the Toyota Production System (TPS) constitute a humanitarian economic system rather than just a production system?" Here is his complete response:
Many people associate societal economic progress with the creation of goods. However, from the era of craftsmanship to the advent of mass production, the way we organize work also plays a pivotal role in enhancing living standards.
The Toyota Production System represents the most recent methodology in this realm and possesses the potential to become the third and most advanced production system. It comprises three distinctive elements: the better-known technical element, which focuses on eliminating unevenness, waste, and overburden; the familiar managerial element, which prioritizes human safety and development; and the lesser-known philosophical element, which serves as the guiding principle for both the technical and managerial elements. When all three elements are simultaneously implemented, the benefits derived from adopting TPS are not confined to a company's gains alone. Instead, as with previous production systems, these benefits extend to the broader spectrum of our society. However, this is particularly pronounced with TPS because it is not primarily the result of technological advancements, as was the case with mass production systems. TPS also emerges from the application of human principles guided by a distinct philosophical concept of efficiency that markedly deviates from the efficiency favored by the mass production system.
Rather than fixating on a singular notion of efficiency—individual efficiency—with the belief that it will yield the optimal level of efficiency for all, TPS centers around total and true efficiency through the elimination of waste to remove the trade-offs inherent in optimization. Total efficiency entails resolving issues that hinder all factors or actors from attaining their full benefits. True efficiency entails eliminating costs rather than transferring them elsewhere. Eliminating waste entails increasing the ratio of value-added activity in work.
The principle of total and true efficiencies through the elimination of waste is not confined to the shop floor, where TPS originated.
• The principle of total efficiency doesn’t stop at a particular line, process, or piece of equipment which should not be boosted independently from the efficiency of preceding or subsequent processes. Total efficiency extends to the broader realm of efficiency management. For instance, it applies in the boardroom, where the pursuit of profit should not come at the expense of cash flow. Profit is undoubtedly essential for competitiveness, but it is equally crucial and substantially more efficient to achieve sufficient cash flow from operations to meet financial obligations promptly.
• The principle of true efficiency is not restricted to the shop floor either, where the aim is to use the minimum number of workers, equipment, and materials required to produce only what is needed. True efficiency also implies not trading one self-worth in the workplace for better comfort at home, or raising the living standards of people in the present at the expense of the future when payments are due later.
• The principle of eliminating waste is not limited to increasing the portion of value-added activity in the work, reducing unevenness and overburden to reduce cost but it also extends to reducing the environmental footprint as a result of all activities, value-added or not.
Together, the philosophies of total and true efficiencies through the elimination of unevenness, waste, and overburden extend to all the stakeholders of society that contribute to a firm's success. This includes customers, employees, and the ecological environment of our planet. Each benefit supports the other as opposed to itself individually regardless of the cost to others. When all parts of the system reap their full benefits without incurring future costs, it coalesces into an economically humanitarian system. It contrasts with a more primitive economic system based on competition where losers are necessary in order to have winners.
Of course, this call for a specific course of action necessitates problem-solving, and the unattainable remains beyond our reach. However, what is attainable is not always accomplished unless guided by economic humanitarian principles. As Pastor Tim Keller reminds us of what the critical philosopher Jurgen Habermas said “Science might tell us what is, but it doesn’t tell us what ought to be.” Today, The Toyota Production System offers possibilities beyond what a company can gain from adopting it. It presents an opportunity to eliminate socio-economic and environmental contradictions that have historically compelled economic trade-offs.
What do you think of Olivier's thoughts regarding the far-reaching effects of the Toyota Production System? Do you feel TPS can be an "economically humanitarian system"?