All around the world, people drive Toyota cars, they built up a reputation as good cars to own. The other car companies, thankfully, have made remarkable improvements and are competitive. The architect of the Toyota Production System was Taiicho Ohno and a book was recently published Taiicho Ohno’s Workplace Management, Special 100th Birthday Edition by McGraw Hill, 2013. The book gives insights into how Mr. Ohno approached his job and has lessons for everyone, whether you work in manufacturing or not.

1. Need a strong sense of humility – if the normal person is right 50% of the time, he is wrong 50% of the time. The trick is therefore to change gracefully. Try something, measure the results and if it does not work, correct and try again.

2. Why Mr. Ohno believes we are wrong 50% of the time – look at the letter T. It looks like the vertical line is longer than the horizontal line, in fact they are the same length. It is called an optical illusion or misconception. There are many things in this world that we cannot know until we try something. Very often the results will not be what is expected. If you try and it is not correct, admit a mistake and try again.

3. Misconceptions Hidden within Common Sense – often times things are set down in particular way because they have always been that way based on the premise doing it that way has no big advantages, as well as no big disadvantages. However the better approach is if you eliminate the disadvantages, you will be left with the big advantages.

4. We produce only what we sell. Costs do not exist to be calculated, costs exist to be reduced. The important issue is to try various methods to see which ones reduce cost and which do not reduce cost.

5. If you get the forecasts about sales wrong, the opportunity lost to make a profit causes no actual harm, while an actual loss causes financial harm. It may feel like a loss, but it is not a loss on the company’s books. An example if you made 10,000 units but could have sold 15,000 you have an opportunity loss of 5,000 but it is not a real loss.

6.There is misconception about production  people believe “it cost less to make 15,000 units than to make 10,000 units. However if you only sell 10,000 units, what happens to the other 5,000? Are they put in storage, to gather dust? Is the storage not a cost? Inventory control is a key in thinking of how to produce the 10,000 at the lowest cost possible.

Linking to dividend producing stocks, how does the companies whose shares you own function? The philosophy of Mr. Ohno is to look at failure and costs, two things after producing profits that companies prefer not to focus on. Mr. Ohno believed we fail 50% of the time and how we look at costs in order to reduce them is key. Given the previous statement, do your companies you invested in look at failure as learning opportunities and do they focus on true costs rather than accounting costs.

There are more questions than answers, till the next time – to raising questions