Toyota Expands “Kaizen” Globally

Toyota will globally implement initiatives to reduce inventory and improve factory productivity. Development, production, and sales will be integrated to identify parts needs and duplication, reducing the number of parts by up to 80% across 10 plants domestically and internationally. This initiative will be implemented at eight plants in the United States and Europe. Amidst rapidly shifting competitive focus in the automotive industry, particularly with electrification, Toyota will expand its “Kaizen” efforts to maintain its competitiveness.

Creating 35% of Factory Space into Surplus Space

Beginning in 2023, Toyota will implement a production efficiency improvement initiative called “AREA 35.” By streamlining inventory through reductions in similar parts and part selection, Toyota aims to create 35% of surplus space within its factories.

Toyota is the world’s largest automaker, producing and selling 10 million vehicles annually. It operates 54 assembly plants worldwide and approximately 4,300 Toyota dealerships in Japan. Its vast supply chain includes approximately 60,000 suppliers in Japan alone.

A single vehicle uses approximately 30,000 parts. Not only are there a vast variety of parts involved, but it’s also difficult to fully grasp the situation across sales, production, and development. There are often instances of nearly identical parts and inventory with low shipments taking up space.

Yoshifumi Ueda, head of Toyota’s “Mid-size Vehicle Company,” which oversees Toyota’s mid-size vehicle business, explained that AREA 35 addresses the challenge of “whether the assets needed to produce 10 million vehicles are fully utilized.” Toyota is not only investing in expanding production but also creating margins through a thorough review of its current production sites.

Toyota has also been working on reducing the number of parts available for individual models. AREA 35 “offers a bird’s-eye view, highlighting issues,” according to Ueda. Approximately 40 people from Toyota’s sales, development, factories, and purchasing departments serve as the executive committee.

This isn’t just about simply reducing the number of parts available. Toyota Vice President Yoichi Miyazaki explained, “While we have a wide range of vehicle specifications, some of them have little potential to boost sales.” AREA 35 aims to “accurately understand demand and rationalize the specifications and parts variety.”

Production in Japan could increase by 80,000 vehicles.

At the 10 plants implementing these measures, Toyota has reduced the number of parts by up to 80% and freed up an average of 35% more space. This translates to an increase of 80,000 vehicles annually in Japan.

Toyota initially focused on bulky, space-consuming components such as windshields, wiring harnesses, and headlights. For example, at the Motomachi Plant (Toyota City, Aichi Prefecture), the wiring harnesses for the instrument panel, which attaches instruments, have 101 part numbers. Of these, 42 are never used. Selecting only essential parts not only improves development and production efficiency but also contributes to employee convenience by creating space for rest areas, for example.

AREA35, primarily implemented in Japan, will be expanded by 2025 to 18 other plants, including those in the Czech Republic, Canada, and Texas, USA. Manager Yasushi Ueda stated, “This initiative is not over yet.” Each region and plant faces unique challenges. The plan is to share information and case studies, centered around the secretariat, and apply them to address challenges at each plant.

Toyota is expanding its business across the board, from internal combustion vehicles like gasoline vehicles to hybrid vehicles (HVs) that use both an engine and a motor, pure electric vehicles (EVs) that use only motors, and fuel cell vehicles (FCVs) that use hydrogen. R&D expenses for fiscal year 2025 (ending March 2026) are projected to increase 3% year-on-year to 1.37 trillion yen, and capital investment is projected to increase 8% to 2.3 trillion yen, both of which are expected to reach record highs. Increased investment is inevitable amidst the shifting focus of competition, such as electrification and autonomous driving.

Even the same model requires different parts depending on the power source. Therefore, proper management of parts variety is crucial for Toyota. The Trump administration’s tariffs are expected to drive global localization of vehicle production. Toyota’s diverse model portfolio is one of its strengths, and to maintain its competitiveness, it is essential to continuously conduct kaizen activities globally.