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ISBN: 978-1-4398-4604-9
9 781439 846049
90000
The Toyota Kaizen Continuum
Stewart
Business Management
Written by a recognized leader in the manufacturing industry with nearly two decades
of experience working for Toyota, this book supplies a firsthand account of the realities
behind implementing the Toyota Production System (TPS). The Toyota Kaizen
Continuum: A Practical Guide to Implementing Lean presents authoritative insight
on how to use the TPS to drive operational value and improvement across all segments
of an organization.
Highlighting the valuable lessons learned directly from the TPS masters at the Toyota
factories in Japan, John Stewart provides a time-tested approach for implementing
a process of continuous improvement. Delving into his wide-ranging experience—
that includes time as a team member on the assembly line and managing the vehicle
assembly division for Toyota’s largest European operation in the United Kingdom—he
explains how to get the process started, how to get senior management excited about
the possibilities, and details a process for implementing the TPS in your organization.
• Written by an industry veteran named one of the Top 10 Automotive
Executives by Automotive News in 2007
• Unveils the methods used within the walls of the world’s premier
manufacturing organization
• Illustrates valuable lessons learned with real-world examples of TPS
implementations
• Describes five simple steps for executing change in any organization
The book includes case studies that illustrate real-life successes and failures behind
the walls of the world’s largest automobile manufacturing organization. Detailing a five-
step process for executing improvement initiatives, it supplies you with the tools and
understanding of the core principles of the TPS needed to implement and sustain a
culture of continuous improvement.
K12059
www.product i v i t yp re s s . com
www.crcpress.com
K12059 cvr mech.indd 1 7/20/11 9:49 AM
The Toyota Kaizen Continuum
A Practical Guideto Implementing Lean
The Toyota Kaizen Continuum
A Practical Guideto Implementing Lean
John Stewart
CRC PressTaylor & Francis Group6000 Broken Sound Parkway NW, Suite 300Boca Raton, FL 33487-2742
© 2011 by Taylor & Francis Group, LLCCRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government worksVersion Date: 20120209
International Standard Book Number-13: 978-1-4398-4605-6 (eBook - PDF)
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v
Contents
Preface............................................................................................... ix
The.Author...................................................................................... xiii
1 Introduction..................................................................................11.1 Don’tBelieveEverythingThatYouReadinaBook........................11.2 ABC’sofTPS.......................................................................................61.3 TheKaizenContinuum......................................................................9
2 Foundational.Elements.of.the.Toyota.Production.System (TPS)...............................................................................112.1 AnOverviewoftheToyotaProductionSystem(TPS)....................112.2 Toyota’sRecentTurmoil...................................................................122.3 AHistoryoftheToyotaProductionSystem(TPS)..........................132.4 KentuckyAlchemy...........................................................................152.5 KeepItSimple..................................................................................182.6 TheToyotaProductionSystemversusLeanManufacturing...........232.7 Standardization.................................................................................26
2.7.1 QuestfortheCube................................................................312.7.2 VisitingthePlantFloor..........................................................342.7.3 UnderstandingStandardized Work.......................................36
2.8 JustInTime(JIT).............................................................................372.8.1 ThePullSystem.....................................................................392.8.2 FlowProduction....................................................................432.8.3 TaktTime...............................................................................45
2.9 Jidoka................................................................................................502.10 ContinuousImprovement(Kaizen)..................................................512.11 DevelopingtheTools.......................................................................52
vi ◾ Contents
3 Why.the.Toyota.Production.System.Makes.Sense: Common Sense...............................................................553.1 CommonSense101..........................................................................553.2 UnderstandingValue........................................................................593.3 UnderstandingDemand...................................................................603.4 CommonSenseinAction................................................................64
4 Common.Misconceptions.and.Misunderstandings.Regarding the.Toyota.Production.System...................................674.1 TPSMisconceptionsandMisunderstandings..................................674.2 WhichWayIsBest?..........................................................................704.3 ToyotaProductionSystemHistoricalOverview..............................714.4 KanbanSystemOverview................................................................744.5 TheToyotaWay................................................................................804.6 TheCustomerKnowsBest..............................................................834.7 Go.See.Act......................................................................................83
5 Waste.Management ….Improving.the.Manufacturing.Process.One.Kaizen.at.a.Time....................................................855.1 GapManagement.............................................................................855.2 TheThreeM’s...................................................................................88
5.2.1 Muda......................................................................................885.2.1.1 Transportation..........................................................895.2.1.2 Waiting......................................................................895.2.1.3 Overstock.................................................................905.2.1.4 Overproduction........................................................905.2.1.5 Repair.......................................................................915.2.1.6 Overprocessing........................................................915.2.1.7 Non-Value-AddedWork(NVAW).............................91
5.2.2 Muri........................................................................................925.2.3 Mura.......................................................................................93
5.3 ClassificationofMuda......................................................................935.3.1 Transportation.......................................................................945.3.2 Waiting...................................................................................975.3.3 Overstock.............................................................................1005.3.4 Overproduction...................................................................1025.3.5 Repair...................................................................................106
Contents ◾ vii
5.3.6 Overprocessing....................................................................1085.3.7 Non-Value-AddedWork(NVAW)........................................ 111
5.4 MudaCountermeasureMethods.................................................... 1135.5 WasteEliminationExample........................................................... 117
6 The.Golden.Rules.of.the.Toyota.Production.System................1236.1 Fundamentals.................................................................................1236.2 TheGoldenRulesofTPS...............................................................125
6.2.1 Simplify................................................................................1256.2.2 Standardize..........................................................................1336.2.3 Specialize.............................................................................137
6.3 CapitalInvestmentGuidelines....................................................... 1416.3.1 TangibleReturnonInvestmentPeriod............................... 1456.3.2 Recycle,Redeploy,andReuse............................................. 1456.3.3 Simple,Safe,andReliable................................................... 149
7 Cost.Management.for.Profitability............................................ 1557.1 Understandingthe“DeathSpiral”.................................................. 1557.2 UnderstandingtheCostStructure.................................................. 157
7.2.1 FixedandVariableCosts..................................................... 1587.2.2 MinimumVariableCosts..................................................... 1597.2.3 Break-EvenPoint.................................................................1607.2.4 ManagingCosts...................................................................1637.2.5 ManagingCostExample...................................................... 165
8 Execution..................................................................................1698.1 FacingReality................................................................................. 1708.2 TheFive-StepProcessforExecutingImprovementInitiatives...... 171
8.2.1 Assessment:UnderstandingtheBusiness........................... 1718.2.2 SettingtheCourse...............................................................182
8.2.2.1 IdentifytheProjectLeader....................................1828.2.2.2 CompletelyUnderstandtheProjectAssessment...1838.2.2.3 CompletelyUnderstandtheProjectTarget............1848.2.2.4 IdentifytheProjectResources...............................1848.2.2.5 DeterminetheRolesandResponsibilities.............1868.2.2.6 DevelopthePlan....................................................1868.2.2.7 CompletelyUnderstandtheCosts.........................1878.2.2.8 Communicate.........................................................1888.2.2.9 Execution................................................................190
viii ◾ Contents
8.2.3 RapidImplementation......................................................... 1918.2.4 Stabilization.......................................................................... 1928.2.5 ContinuousImprovement....................................................195
8.3 Conclusion......................................................................................195
ix
Preface
WhenIbeganmycareerwithToyotain1989,IhadnoideaofthepaththatIhadundertaken.Istartedasoneofthefirstproductionlineemployees.Toyotacalledusteam members.WhenIleftToyotainMarch2007,IwasresponsibleforToyota’slargestEuropeandivision.OverthecourseofmyeighteenyearswithToyota,Ihadtheopportunitytolearnmanythingsthathavedefinedmeasanoperatorofcompaniestoday.
TodayIworkwithaprivateequityfirmwhereIamresponsibleforman-agingtheoperationsofadiverseportfolioofbusinesses.Asaninvestor,ourjobistoworkwiththemanagementteamofthecompaniestocreatevalue.Thevaluewecreateishowwecreateareturnforourinvestors.Inbothenvironments,Ihavelearnedmanythingsandhavesuccessfullyappliedthemtocreatevalue.However,duringthistransition,IhaveidentifiedsomeofthebarriersthatcompaniesthatlacktheresourcesandthestructureofacompanylikeToyotafacewhentryingtofollowtheprinciplesoftheToyotaProductionSystem(TPS).
Therearetoomanybooksthatarepurelyacademicexercisesthathavenorealsubstanceandnorealmeritforthemajorityofbusinessestryingtocreatevalueinthesedifficulttimes.Ifindithumorousthatsomehavesuc-cessfullyregurgitatedToyotaphilosophiesbydefiningasystembasedonautopianoperationalenvironmentandslappingabadgeofauthenticityonthecover.Someofthemorerecentpublicationsseemtobemoreofapublic-itystuntforaJapanesecompanythatwantstocontroltheimageofhowitisperceived.Evenifthisisthecase,thatisreallyofnoconcerntome.Myconcernisthattherearealotofbusinessleaderswhoarelookingtodriverealoperationalvaluethroughtheirorganization.IhavewrittenthisbooktoproviderealinsightintohowtousetheTPStodriveoperationalvalueinanyorganization.
Idon’tfaulttheauthorsoftheabovebooksfortheirfailuretoproviderealinsightintothesystem.Themajorityofmisconceptionsconcerning
x ◾ Preface
theTPSoriginatefromthesheernumberoftoolsToyotahasdevelopedforimplementation.ManyorganizationsaresuccessfulatimplementingsomeofthetoolsofTPS;however,withoutanadequateroadmap,theyoftenfindthemselveswanderingwithoutarealvisionofwhatneedstobeaccomplished.
WhenIwaswithToyotaIspentovereighty-eightweeksinJapanattheToyotafactorieslearningfromthemoderndayTPSmasters.Thesearepeo-plewhowillneverwriteabook,becausetheyaretoobusyactuallyimple-mentingthesystem.Ihavewrittenthisbookinordertoprovidethereaderwiththeinsightfromthesemasters.
Inotonlyhadtheopportunitytolearnfromthemasters,IwasalsoresponsiblefortrainingothersonaglobalbasisontheTPS.Duringthecourseofmycareeroftrainingpeopleaboutitsvariousaspects,IhavecometofindthattherearethreetypesofpeoplewhoareteachingtheTPS:
1.Self-ProclaimedMaster—Thosewhocanteachbuthaveneverdoneitthemselves
2.Master—Thosewhocanmastertheskillsbutcannotteachothers 3.MasterCreator—Thosewhohavemasteredtheskillsbydoingandcan
teachothers
EveninsideofToyota,therewerethosewhowouldteachbutcouldnotdoitforthemselves.ThiswasoneofthereasonsthatIhadsuchaloyalfollowinginToyota.IwasabletosuccessfullyteachothersbecauseofthemanysuccessesthatIhadbyimplementingtheseprinciples.
Duringmycareer,Ihavetalkedwithawidecross-sectionofpeople,manufacturersandnon-manufacturersalike,whotaketheToyotatourwiththehopeofgainingamorecompleteunderstandingoftheTPS.Mostpeoplerecognizedthetermsjust in timeandjidokaasprinciplesofTPS,yettheywouldlookattoolssuchaskanban,andon,andothersasTPSprinciplesaswell.Almostwithoutfail,theycameinwiththepreconceivednotionthatTPSisafixedsystem,thatthereisstandardizedworkfromstarttofinishonwhattodo,theequipmenttodoitwith,andthemannerinwhichitisimplemented.Actuallythisisfarfromthecase.EveninsideToyota!
Intruth,theonlyinflexibleaspectsofTPSaretheprinciplesofjustintimeandbuilt-inquality.Everythingelseissimplyatoolforhelpingyourorganizationtodowhateveritisthatyoudothebestwaypossible.
JustintimeandjidokaarethedrivingprinciplesbehindeverythingthatToyotadoes.Allthetoolsmentionedbeforearevalid,buttheyexistsolely
Preface ◾ xi
tofacilitateflowandquality.Ifyoustrivetounderstandthecoreprinciples,youwillgainabetterunderstandingoftheoutlyingprinciplesaswell.Ifthetoolsareusedwithoutthecoreprinciplesbehindthem,TPSceasestobeasystemandbecomesashort-termfad.
Therealquestionswemustconsiderarewhatisthebestwaytoensurejust-in-timedelivery,andwhatisthebestmethodtobuildqualityintotheprocess.Noteverysolutionistherightsolutionbasedonthecurrentcondi-tion,sobyaskingourselveswhatisthebestwaytoachievetheidealcondi-tion,wechallengeourselvestogetbetter.TothinkthatTPSisaninflexiblesystemandonceitisinplacethemoneywillflowandproblemswilldis-appearwillonlycausegianteconomicheadaches.Acrosstheorganization,Toyotamakesthousands ofchangesadaybasedonthefeedbackitreceivesfromitsoperatorsandworkers.
TPSisasystemthatsearchesforthebestmethodtogetthosethousandsofchanges,thesmallideasandinnovationsthat,acrosstheboard,areexpectedofeveryone,fromthetopfloortotheshopfloor.
ThegoalofthisbookistogiveyoupracticalexamplesofhowtoutilizetheprinciplesoftheTPStodrivevalueinyourorganization.Thisbookismeantforpeoplewholeaveworkeverydaywiththeirhandsdirtyandwithasenseofprideinwhathasbeenaccomplishedbytheirefforts.Enjoy.
xiii
TheAuthor
John.StewartistheoperatingpartnerforMonomoyCapitalPartners,aNewYork-basedprivateequityfund.AtMonomoy,Johnisresponsibleforportfoliomanagement.Hehasworkedwithnumerousbusinessesofvarioussizestoincreasetheirbottomlineresults.PriortojoiningMonomoy,JohnworkedforToyotaMotorCorporationforeighteenyears.HestartedwithToyotaontheshopfloorandworkedhiswaythrougheachleveloftheorganizationuntilhefoundhimselfresponsibleforToyota’slargestEuropeanmanufacturingdivision.JohnwasselectedbyAutomotive Newsasoneofthetopyoungprofessionalsintheautomotiveindustryin2007.
Johnismarriedtohiswonderfulwife,Leslie,andtheyhavefourchildren:JohnII,Sarah,Andrew,andMatthew.
1
Chapter 1
Introduction
1.1 Don’tBelieveEverythingThatYouReadinaBook
TodaytherearemoresourcesofinformationthaneverbeforethatrevolvearoundToyotaanditslegendaryproductionsystem.Nomatterhowitislabeled,theToyotaProductionSystem(TPS)issimplyalogical,common-senseapproachtomanufacturing.Unfortunately,mostoftheavailableinfor-mationonlyconcernsthetheoryofapplicationandoffersnovaluableinsightintothepracticalimplementationofTPS.ThisleadsthegeneralpublictothedangerousassumptionthatToyota’smanufacturingoperationsareautopianenvironment.ThepeoplewhoworkinToyotawouldbethefirsttosaythatthisisfarfromreality.
HavingworkedforToyotaforeighteenyears,IcantrulysaythatIhavenothingbutadmirationforallofthepeoplewhoIworkedwiththroughthoseyears.Theopportunitytoworkforacompanythatstartedasasmallimportcarmanufacturerwithlittle-knownmodels(whoknewwhataCamrywasin1987?)andgrewtobecomethelargestmanufacturerofautomobilesintheworldhasgivenmeuniqueinsightsintotheapplicationoftheTPSinvariousenvironments.
Thetrulyfascinatingaspectaboutallofthethingsthathavebeenwrit-tenaboutToyotaisthatToyotawouldneversaythesethingsaboutitself;thisgoesagainstthetruecultureofmodestyatToyota.Irememberoneoccasion,whenIwasworkingattheToyotafacilityinGeorgetown,Kentucky,andwehadbeeninvitedtovisitoneofoursupplierstoreviewtheirimprovementactivities.IwastravelingwithoneofToyota’srenownedexpertsontheTPSwhohadthewell-deservedreputationasaknowledgeableandsternsenseiwhenitcametoadheringtotheprinciplesofTPS.Hehadreprimandedme
2 ◾ The Toyota Kaizen Continuum
onmanyoccasionsforwhatmanywouldconsidertrivialissuesatourfacilityinGeorgetown.Givenhisprovenreputationasahardass,Iwascurioustoseehisresponsetooneofoursupplier’sfacilitieswheretheywerestillinastageofinfancywhenitcametoimplementationoftheTPS.
Aswearrivedattheplant,thefirstthingIsawwereoldpalletsstackedhaphazardlyagainstthesideofthefactory,followedbyagraveyardofobsoleteequipmentquietlyrustinginanadjacentfield.AsIturnedintotheparkinglotofthefacility,Ithoughttomyself,“Themanagementteamofthisfacilityhadnoideawhattheywereinfor.”ForsomereasonallIcouldthinkofwasatimewhenmysenseihadbeentouringmyfacilityandhadnoticedthelabelonthebackofapartsrack,knowninToyotaasaflowracklabel,thathadatrivialdiscrepancywiththestandard.
Mysenseihadlecturedforwhatseemedlikehoursontheprocessandmethodologyofthekanbanandhowtheflowrackwasonlytoholdnomorethantwohoursworthofstockandwhytwohoursandnottwohoursandoneminute,etc.Forafacilityinsuchastateofdisarray,Iwasexpectingthereprimandfortheplantmanagerofthesupplier’sfacilitytobeofepicproportions.
Weweregreetedbythepresidentofthecompanyandtheplantmanagerinaconferenceroom.Asweexchangedpleasantries,theysharedwithustheirunderstandingoftheTPSandwhattheyconsideredtobetheir
Figure1.1 DisorganizedPlant.
Introduction ◾ 3
operatingphilosophy.Wewerescheduledtogoonaplanttourafterlunch,butmycuriositygotthebestofme,andIaskedifwecouldgototheshopfloorfirst;theplantmanagergladlyagreedtomysuggestion.
Thedegradedexterioroftheplantwas,unfortunately,anaccurateindicatoroftheinterior.IwasbeginningtofeelbadaboutthecriticismthatIknewwascoming.IjusthopedthatIcouldsomehoweludetheonslaught.AfteryearsofexperienceatToyota,Ihadthickenedmyskintothepointwherecriticismwastakenprofessionallyinsteadofpersonally.AtToyota,everythingwasviewedfromthestandpointthattherewasalwaysanopportunitytoimprove.Evenwhenwereachedatarget,wewouldbecriticizedthatthetargethadbeentoolow,etc.
Aftervisitingtheshopfloor,itwasobvioustomethatthisfacilityandthemanagementteamdidnothavethissameframeofreference.Whiletheplantmanagerwasbusyinghimselfshowingustheoperationsandtheplanforimprovingtheoperations,Istudiedmytrainer’sbodylanguage,lookingforsignsofthereproachtocome.
Tomyamazement,wefinishedtheplanttourwithoutincident!Notonecriticismfrommysensei.Wereturnedtotheboardroomandhadlunchwiththepresident,plantmanager,andtherestofthemanagementteam.Thepresidentaskedmysenseiwhathethoughtaboutthefacilityanditscurrentoperationalinitiatives,andwherehethoughtimprovementwasneeded.Iwaswearingmybestpokerfaceandthoughttomyself,“Holdon,hereitcomes.”Iwatchedasmysenseistoodupandpolitelythankedthemforhavingusintheirfacility.Hethenspentthenextthirtyminutestellingthemallofthegoodthingshehadseenontheshopfloor.HopingthatmyfacedidnotrevealtheshockthatIfeltontheinside,Ilistenedintentlytohispraiseforwhathetermedbestpractices.Whenhehadfinishedhispraise,hetoldthemthattheymayrealizeadditionalopportunitiesbyemphasizingstandardizationandworkplaceorganization.Isatinmychairmomentarilystunnedandthought,“That’sit?Youhavegottobekiddingme,thisplacesucks!”Weexchangedourgoodbyesandsetadatetoreturninthreemonthstime.
Aswemadeourwaybacktotheplant,atfirstwerodetogetherinsilence.Afterfinallytryingtocomeupwiththerightwords,Iaskedmysenseiwhyhedidnottaketheopportunitytopointoutalltheareasintheoperationwheretherewereseriousconcerns.IremindedhimofhowhewouldalwaysfindthesmallesterrorsattheplantinKentuckyanddeliverabrowbeatinglecturetomeandmyteam.ItwasthenthatherevealedsomethingtomethattothisdayIhavefoundveryvaluable;heremindedmethatToyotahadbeenworkingforoverfiftyyearstoimplementTPS,andalthoughwedid
4 ◾ The Toyota Kaizen Continuum
manythingscorrectly,westillhadalongwaytogo.Sincewestillhadsomuchopportunityandroomforimprovementourselves,weshouldalwaysbehumblewhenworkingwithpeopletryingtoimplementtheTPS.Inregardtothecompanywehadjustvisited,theconditionofthefacilitywasobvious.Hadourgoalsimplybeentomeasurethembasedontheconditionofourfacility,thenwecouldhavespenthourspointingoutalloftheconceptsthathadbeenmisunderstoodandtheobviousareasofconcern.However,thegoalofourvisitwastoencouragethemtocontinuelookingattheiropera-tionwithacriticaleye,lookingforopportunitiesofimprovement;therefore,itwasmuchmorebeneficialforustodeveloparelationshipoftrustandmakeitourdutytoteachthemtoseethethingsthatwehadobservedandwereobvioustoourtrainedeyes.Theonlyrealwaythattheyweretoimprovetheirfactorywouldbeforthemtoseewhatwesawandtakeactionbasedontheirownunderstanding.
Mysenseiexplainedthatsincethepresidentandtheplantmanagerhadvisitedourfacilityearlier,theyunderstoodwhatafinelytunedoperationlookedlike.Heevenbelievedthattheywerereadyforustotellthemalotofnegativethingsabouttheiroperation.Therefore,whatbenefitwouldthathavehadfortheplantmanagementandinthelongtermforoursupplier?Bytakingtheopportunitytopointouteverythingthatwasseenaspositiveabouttheirefforts,mysenseihaddisarmedthemandthereforetheman-agementteamwasmoreopentooursuggestions.Byutilizingthismethod,mysenseihadbeenabletofocustheireffortsontheaspectsthatwouldbenefitthemthemost.Heexplainedtomethathadhechosentobesternandpointouteverythingthatwaswrong,itwasverypossiblethattheywouldnothaveaskedustoreturn,andthiscouldhavepossiblydiscour-agedtheirimprovementprocess.Thisnotonlywouldhavebeenbadforthemandtheiremployees,itwouldnothavebenefitedusatourfacilityinGeorgetowneither.
AsIlistenedtothewordsofmysensei,IwasremindedofalessonthatIwastaughtasachild;alwaysshowrespectwhileinanotherperson’shome,asyouarenotonlyrepresentingyourself,butyourfamilyaswell.Thisstoryofthesupplier’seffortstoimplementTPSillustratesthetrueessenceofToyotaculture;itisbuiltuponmodesty,notarrogance.Oncearroganceentersthesystem,complacencyisnotfarbehind.Manyofthebookscon-cerningToyotaonthemarkettodayhavenotdonejusticetothephilosophyofmodestythatissoimportanttothecultureofToyota.ThisissomethingthatToyotathemselveshaverecentlybeenlearningthehardway.WithallofthegrowththatToyotahasseenoverthelasttenyears,therewasa
Introduction ◾ 5
bigpushtobringinexecutivesfromotherautomanufacturers,mainlytheU.S.three(GM,Ford,andChrysler).SuchaninfluxofseniorleadersintheToyotaorganizationinNorthAmericahasnotallowedthebasicprinciplesofToyotatobethoroughlyunderstood;asaresult,modestyhasgivenwaytoarrogance.
AnotherfallacyfoundinmanycurrentbooksisthatToyotaisthepic-tureofperfection.Mostofthematerialdoesawonderfuljoboftellingthestoryofhowthingsshouldoperateinsideafacilitythatembracestheessen-tialphilosophyoftheTPS.ThereislittlereferencetotheproblemscausedbyimplementingtheTPS.Problemsexistforeveryorganizationthathasevertriedtoimplementleanmanufacturingconcepts,eveninsideToyotafacilities.
DuringtheyearsofToyota’sgrowth,therewerenumerousoccasionswhenthingsdidnotgoasplanned.ImplementingTPScannotonlybecostly,butitcanalsocausesignificantproblemsandposeasevererisktothestabilityoftheoperationifnotmanagedcorrectly.SomeauthorsinsinuatethattheTPSistheperfectwaytomanufactureproducts;thisisjustnotthecase.Thesearchfortheperfectwaytomanufactureproductsisthe TPS.
Takeamountainclimber,forinstance.Mountainclimbershavetopreparethemselvesformonthsandsometimesevenyearsbeforesettingouttoclimbamountain.Theystudyallfacetsofthemountain,theterrain,thegeology,theweather,andtheyevenspendtimeacclimatingtheirbodiestothecondi-tionsofthemountain.Iftheonlypurposeofamountainclimberistogettothetopofthemountain,therearemanymoreefficientwaystogettothetopofamountainthantojustclimbupthemountain.However,theaccom-plishmentfortheclimberdoesnotcomefromthesoleactofreachingthetopofthemountainitself;itcomesfromthecompletejourneytogetthere.Climbersoftenclimbthesamemountainmultipletimes.When,attheendoftheirclimbingcareer,theyaretellingstoriestotheirfriendsabouttheclimb-ingexperiences,theymayfocusnotonlyontheclimbsthatweresuccessful,butonthefailuresaswell.Foramountainclimbertheultimatesuccessmaycomefromreachingtheelusivepeakofthemountain.Often,however,themostrewardingpartofthejourneyisapointonthemountainwhereitdidnotlookasthoughtheywouldbesuccessful.Itwasatthismomentthatadecisionhadtobemadebasedontheprogressthathadbeenmade,theirphysicalcondition,andtheresourcesremaining.ThissameanalogyistrueforthosewhohavehadtheexperienceofimplementingtheTPS.Somerefertothisprocessastheirleanjourney.
6 ◾ The Toyota Kaizen Continuum
AtruestudentofTPSisonlyhappywhenheorsheisplacedinanearlyimpossiblesituationwithlittleornoresourcesandhastofindtheway.Thisistheindispensableattitudethatislackinginthosemanagersandexecutiveswhoonlystandonthesidelinesandcheerversusthosewhoactuallypreparethemselvesandparticipate.Thisisoneofthechal-lengesfacingToyotatoday.NewlyhiredexecutivesintheUnitedStateswhodonothavethebenefitofhavinggrownupthroughToyota’ssystemlackinsightintothebasicfoundationalprinciplesoftheTPS.Toyota’sabil-itytoproperlytrainseniormanagersgoingforwardwilldefinewhetherToyotawillbeabletoworkthroughthecurrentproblemsbeingexperi-encedintheToyotaoftodayinorderfortheToyotaofthefuturetobemorerepresentativeoftheToyotaofyesterday.
Justgoogling“Toyotabooks”willreturnoveronemillionhitsinafrac-tionofasecond.IactuallyenjoyreadingsomeofthevariousbooksandarticlesthataboundonToyotaandtheTPS.IfinditamazingthatsomeonecantouraToyotafacilityforafewdaysandauthorabookthatrestateseverythingthatisalreadyknown,withoutprovidinganyrealinsightintotheactualprocessofimplementingtheTPS.BasedonthefactthatToyota’ssystemisaprocess-drivensystem,thisiscounterintuitive.Thesemateri-alsaredisappointingfromacontentstandpoint,astheytendtoleavethereaderwithavoid.Unfortunately,mostoftenthevoidisthelackofanyrealsubstancethatwillleadthereadertowardafurtherunderstandingofhowtoputanyoftheconceptsintoaction.
Howcanyoulearntodriveacarfromsomeonewhohasneverdrivenacar?Althoughthissoundsridiculous,thisisexactlywhatishappeningatmanyuniversities,manufacturingfacilities,healthcareproviders,andofficesacrossthecountrytoday.Peoplewhohavespenttimewritingbooksglorify-ingToyotaineverywaypossibleleaveapathofdissatisfiedexecutiveswhohavetriedtofollowtheprincipleslaidoutas“Toyotaprinciples”onlytoendupwithaveryun-Toyotaresult.Mygoalforwritingthisbookistoprovidereaderswithanunderstandingofthetopicsthatcanbereadilyutilizedtotakeimmediateactionintheirrespectiveorganizations.
1.2 ABC’sofTPS
DuringmytenureatToyota,manypeoplewouldrequesttovisitoneofourfacilities.WheneverwehadguestsatGeorgetown,Iwouldbepartofthegroupthatmetwiththevisitorstotrytoexplainwhattheyhadseenduring
Introduction ◾ 7
theirvisit.Generally,peoplewouldvisittheGeorgetownfacilitytogainabetterunderstandingofthecompanyandseehowtheproductionsystemwasappliedforeveryday use.Manytimesthevisitorswouldactuallybecompetitorswhowouldcomefortheplanttourlookingforthe“secret”ofToyota.Whileshowingthemthefacility,IwouldexplainthephilosophyandpurposeoftheTPS,andtherewouldbeanexpectantlookintheireyes,asifIwereabouttoproducesomemagicthattheycouldtakebackandimmediatelyimplementintotheirownmanufacturingprocess.Thatlookwouldgraduallyfade,onlytobereplacedwithanimpassivefaceandsus-piciouseyes;theyalwaysthoughtIwasholdingout.Theproblemforthemwasthatthesolutiontheyweresearchingforwastoosimpleforthemtorealizethatitwasasolutionatall.
Withoutfail,whentheopportunitytoaskquestionsarrived,theywouldstarttoaskveryspecificquestionsaboutthisspecificprocessorthatspecificpieceofequipment.Theyweresearchingforsomething,eventhoughtheydidnotknowwhattheyweresearchingfor.Theybelievedthattheywouldknowitwhentheyhadseenitorwhentheyhadheardthecorrectanswer.OnetimeIactuallyhadsomeonesay,“Nowthatyou’veshownusevery-thingonthetour,whynotletuswanderaroundonourown?”Iwasalittlebittakenabackbytherequest,giventhefactthatthefacilityinGeorgetownisoversevenmillionsquarefeetofmanufacturingandofficeswithoverseventhousandemployees.Itriednottoberudeandaskedthevisitorifitwascommonpracticeathisfacilitytoallowvisitorstowanderaroundfreelyinsidehisfacility.Ofcourse,hesaidno.IexplainedtohimthatIwastryingtobecompletelyopenwithhimabouteverythingthatwedidandIwasnothidinganything.IaskedhimwhathewasreallyseekingfromthevisitthathehadnotbeenabletoascertainfromwhatIhadalreadypresented.Hesaidthatheknewthatwehadtobehidingsomethingfromhim.Hesaidthatallwehadshownwerebasicmanufacturingprinciplesandprocesses.HesaidthattherehadtobesomepieceofequipmentthatgaveToyotaacompetitiveedge,andallhecouldseewasverysimpleequipmentthatcouldbefoundatalmostanyautomanufacturer.ItoldourvisitorthatIhadattemptedtobecompletelyopenandthatIwouldbehappytoshowhimanythingthathewouldliketoseeandtoansweranyquestions.However,ifhewantedtounderstandthesecretofToyota,thenIwouldexplainthattohimaswell.IexplainedthatthesecrettotheTPSisnotapieceofequip-mentoraspecificmethod,andifhereallywantedtounderstandthesecrettoToyota,allhehadtolearnwashisABC’s.Hegavemeaconfusedlookandaskedmetoexplain.ThisiswhatIexplainedtohim:
8 ◾ The Toyota Kaizen Continuum
Asschoolchildren,weweretaughttoreadbyfollowingaspecificpro-cess,thesameprocessthatisfollowedtothisday.Wedidnotsimplypickupabookandstartreading;therewereaseriesofstepsthatwefollowed.Beforewecouldlearntoread,wehadtobetaughthowtomakebasicsounds;Iveryclearlyrememberbeingconfusedaboutallofthedifferentsoundsthateachletterhad.Beforewecouldtrulylearnthosesounds,wehadtobetaughtthealphabet.SincetheteacherknewthatlearningourABC’swouldhelpustounderstandthedifferentsoundsthatwouldeven-tuallyenableustoputthosesoundstogetherintowordsanddevelopthefoundationthatwewouldneedtoread,theteacherspentmuchofhertimemakingsureweunderstoodallofthelettersandtheirproperorder.
StephenCoveyteachesinThe 7 Habits of Highly Effective People*thatyouhavetobeginwiththeendinmind.Thisconcept,althoughsimple,isalsoquiteprofound.Unfortunately,manyofuswanttonotonlybeginwiththeendinmind,wealsowanttofinishwiththeendinmindaswell,andthequickerthebetter.Wehaveatendencytosearchfortheeasyway,orashortcut,andalthoughthisisnotalwaysabadthing,wehavetounder-standwhenitisappropriate.WhenwelearnourABC’s,wecannotjustbetaughttheAandtheZ.No,wearetaughtthatfirstthereisA,thenB,then
* Covey,StephenR,1989.The Seven Habits of Highly Effective People.Fireside.NewYork.
Figure1.2 ABC’s.
Introduction ◾ 9
C,andsoon,untilwereachZ.OurteachersandparentseventaughtusasongusingtheABC’stohelpusremembertheorder.Ibetthatyoucanrememberthatsongevennow.Itisthissimpleyetsolidfoundationthatallowsustolearnthedifferencebetweenaconsonantandavowelandtheindividualsoundsofeachletter.ItisonlyafterwehavethiscompleteunderstandingofourABC’sthatweareabletocombinelettersintowordsandwordsintosentences.
SowhatdoesthishavetodowithTPS?Simplyput,understandingtheTPSisthesameconceptastheABC’s.EventhoughweknowthatweareatsomepointalongthepathfromAtoZ—somewouldcallthistheleanjourney—weknowthatthedestinationofourjourneyistoendatZ.
InFigure 1.3,JisthecurrentstateandZrepresentstheidealstate.EventhoughweknowthatZismuchbetterthanJ,itisnotpossibletogettoZfromJwithoutmovingnexttoK.ItisonlythroughtheprogressionfromJtoKthatwewillgaintheknowledgeandunderstandingnecessarytomasterKandthenonedaymoveontoL.Therealimprovementisnotrealizedget-tingtoZ;itistheprocessofgettingtoZthathastherealvalue.
1.3 TheKaizenContinuum
OnewaytolookattheprogressiveprocessoftheTPSistolookatthecontinuousimprovementcycle.Irefertothisasthekaizencontinuum(Figure 1.4).SimilartotheABCmodel,whereweareisthecurrentsitu-ationandonceweunderstandwhereweneedtobe,theidealsituation,wecanidentifythestepsnecessarytogetthere.Ilikethisillustrationbecauseitmakessomebasicconceptsclear.Firstwehavetoassessthesituationandunderstandwhereweare,andbasedonwherewearewethenneedtoidentifytheidealsituation.Eventhoughwemayknowwhereweneedtoendup,wecannotsimplymovefromcurrenttoideal,inthesamewaythatwecouldnotmovefromJtoZintheprecedingexample.Thisshowswhythisprocessiscalledthecontinuousimprovementcycle;itisacyclethatmustbeadvancedonestepatatime.Forustomovefromthecurrentsituationtothenextstep,wehavetostandardizethecurrent
ABCDEFGHIJKLMNOPQRSTUVWXYZ
Current State Ideal State
Figure1.3 ABC’sofTPS.
10 ◾ The Toyota Kaizen Continuum
situation.Oncethecurrentsituationhasbeenstandardized,thenwecanunderstandwhatthenextstepisanddevelopakaizenplantomovetothenextstep.Ofcourseitwouldbegreatifwecouldmovedirectlytotheidealstate,butthatisthefascinatingaspectoftheTPS.Onceyoustartalongthejourney,youarealwaysmeasuringyourselftotheidealconditionandthecloseryougettothefinaldestination,themoreyourealizehowfaryouactuallyarefromachievingtheidealcondition.Inthefollowingchapters,wediscusshowtobegin,maintain,andsustainthecycleinyourdailyoperations.
CurrentPosition
IdealPosition
�e journey to the ideal state:
Standardize
Standardize
Kaizen
Kaizen
• Eliminates waste• Produces in quality• Generates cash flow
Standardize
Figure1.4 KaizenContinuum.
11
Chapter 2
FoundationalElementsoftheToyotaProductionSystem(TPS)
2.1 AnOverviewoftheToyotaProductionSystem(TPS)
Intheautomobileindustry,thenameToyotacarriesareputationofunsur-passedmanufacturingefficiency.Withtheiralmosttotaldominationoftheautomanufacturingindustryforthelasttwenty-fiveyears,Toyotahasbuiltafoundationthathassustainedthemasatruemanufacturinggiant.ThatfoundationistheToyotaProductionSystem(TPS).
Overfiftyyearsago,TaiichiOhnodevotedhislife’sworktodevel-opingwhatwouldbecomeknownasthemostversatileandproductivemanufacturingsystemintheworld.Basedonacommonsenseapproachtomanufacturing,itbecameasystemsynonymouswithquality,flexibility,andprofitability.Overtheyearstherehavebeencountlessbooks,consultants,andself-described“gurus”whohaveclaimedtohavesomesecretknowl-edgepertainingtotheTPS.Ihavepersonallyencounteredcompaniesthathaveattemptedtofollowthedirectionofsomeoftheseindividualsonlytoseethemspendmillionsofdollarstoendupreallyconfused.Asdiscussedinthepreviouschapter,therealsecrettotheTPSisthattherereallyisnosecret.TheTPSisasystematicprocessforimprovingoperationsinacom-pany,enablingthecompanytolowercosts.Onecouldsaythatthe“secret”isthesystem,butToyotahasnevergonetogreatlengthstoconcealit;there-foreIwouldnotrefertoitasa“secret.”
12 ◾ The Toyota Kaizen Continuum
Asyouwilldiscoverinthisbook,theTPSisasystematicapproachthatwhenappliedtotheoperationsofacompany,willdrivedownoperatingcosts.AlthoughthemostcommonpointofreferenceforTPSistheproduc-tionofautomobiles,TPShasbeenimplementedintheproductionofavastarrayofproducts,goods,andservices;fromconstructiontodentistry,theinfluenceofTPScontinuestogrow.KnownintheWesternworldasleanmanufacturing,thetermsareinterchangeableoncethebasicconceptsareunderstood.Myconcernisthatmanypeopleuseleanmanufacturingasacatch-allforallimprovementactivities.Ihaveyettomeetaplantmanagerwhohasnottoldme,“Wehavedonethewholeleanthing.”Thiscommentitselfgivesmeinsightintotheirunderstanding,orlackofunderstanding,ofthefundamentalprinciplesofleanmanufacturing.
2.2 Toyota’sRecentTurmoil
AshasbeenwitnessedrecentlyinthenewsconcerningToyota,anorga-nizationisonlyasgoodasitspeople.AlthoughToyotahasmadesomemisstepsinhowithashandledsomesituations,thisisareflectionnotsomuchontheTPSasontheindividualleadersinthecompanymakingthesedecisions.Asmentionedearlier,oneofToyota’skeyfactorsforsuccessistoremainhumbleandnottobecomearrogant.Overthecourseofthelasttenyears,Toyota’sleadershavefocusedthecompanytobecometheworld’slargestautomaker,evengoingsofarastopronouncethisgoalofgrowthastheir2010visionforthecompanyin2004.Likeanyorganizationthathasanoperatingsystem,thesystemisonlyapplicableaslongasthesystemisunderstoodandfollowedbythepeopleintheorganization.AsToyotabegantofocusonthe2010visiontobecomethelargestglobalautomaker,theresourcesoftheorganizationbecamestretched,andakeydecisionwasmadethathasturnedouttobeamassivemistake.Thismistakewastheplanthatwasdevelopedtofillthevoidintheleadershippositionswhilethecompanywasbusyexpandingatanexponentialrate.Upuntiltheyear2000,Toyotahadfilledmostinternalleadershippositionswithcandidateswhohadbeenthrougharigorousinternaltraininganddevelopmentpro-gram.AsthecompanybegantoexpandinNorthAmericaandChina,thestrainontheorganization’sresourceswastoomuchforthecompanytobearandthecompanydecidedtolookoutsideoftheirinternalsuccessionmodelsforexternalcandidates.Thelackofinternalcandidateswasdue
Foundational Elements of the Toyota Production System (TPS) ◾ 13
mainlytoToyota’sseverestandardforplantmanagementthatrequiresthatthepresidentforregionalmanufacturinglocationsbeolderthanfifty.
Basedontheseconstraints,Toyotabeganbringinginseniormanagementfromotherautomanufacturers,mainlyFord,GM,andChrysler.Someofthesehiresweregoodforthecompany;theybroughtinsomefreshmanagementperspectivesandwerequicktolearnthemethodologyoftheproductionsys-tem.Others,unfortunately,wereverylimitedintheirknowledgeofToyota’ssystemandcultureandquicklystartedtomanagetheorganizationbasedontheprinciplesoftheirformercompanies.ThisdivergencebyToyotafromthesystem,byhiringmanagersandleaderswhodidnothavetheknowledgeofthemanufacturingsystem,iswhatcurrentlyhasthefutureofthecompanyinjeopardy.Thesystemitselfisnottheproblem;theproblemisthepeoplemanagingthesystem.ThisissomethingthatToyotawouldseeforitself,iftheycouldclearawaytheirownarrogance.Onlytimewilltell.
2.3 AHistoryoftheToyotaProductionSystem(TPS)
OnequestionthatIamoftenaskedwhenintroducingpeopletothecon-ceptsoftheTPSis“WhyistheunderstandingoftheTPSsoimportanttotheworldofmanufacturing?”Theanswermaybesurprisingtosomeandobvioustoothers.Ifwelookatthemanufacturingindustrytoday,wecanseethattheimpacttheTPShasmadeacrosstheindustryisnothingshortofastounding.Unfortunately,theimpacthasbeenmarginalizedbytheleadersofindustrywhorefertoleanmanufacturing,theTPS,andotherJapanesemanufacturingsystems,asacatch-allforcontinuousimprovement.
Fundamentally,themostignoredandoverlookedaspectofanysuccessfulorganizationisthemanagementandleadershipoftheorganization.ManybookshavebeenwrittenthatcompareJapaneseandWesternmanagementstyles.Althoughunderstandingtheprinciplesofdifferentmanagementstylesisimportant,askanyhumanresourceprofessionalandheorshewilltellyouthatthereisnotonemanagementstylethatworksforallemployees.ThetraditionalWesternmanufacturingmethodologythatwasusedthirtyyearsagonolongerhasapplicationintoday’scorporateenvironment.ThisrelevancehaslesstodowiththeinfluencefromJapanesemanufacturingtechniquesthanitdoeswiththeevolutionoftheWesternworker.Aninter-estingaspectoftheTPSisthatitisanall-inclusivesystemforoperationsandmanagement.
14 ◾ The Toyota Kaizen Continuum
Thisfacthaspuzzledmanyintheautomobilemanufacturingindustryforyears.ItisironicthatFordhaspouredmillionsofdollarsintocopyingtheTPSatmanyofitsproductionfacilities,whileToyotagivesHenryFordalotofcreditforinspiringTaiichiOhno,thefounderoftheTPS.ItwasHenryFord’sadvancementinmanufacturingtechniques,specificallytheinventionoftheautomatedassemblyline,thatcanbeseeninalmosteverymanufac-turingfacilityinthemodernworld.HenryFordwasalsoavisionarywhenitcametotheeliminationofwaste.Itisawell-knownstorythatFordhadthepalletsthatwereusedfortransportingenginestothefacilityutilizedasfloorboardsinhisearlyvehicles.ThepuregeniusofHenryFordhasmuchmoretodowiththeadvancementofmanufacturingfroma“eurekamoment”perspectivethananythingdoneinthelasthundredyearsofmanufacturing.TaiichiOhnoonlytookthebasicmassproductionconceptsbeingusedatthetimeandadaptedhiscommonsenseapproachtoallthingsmanufactur-ingtodevelopwhatisnowknownastheTPS.
AllofthemainstreamautomanufacturerstodayhaveproductionsystemsthatarebasedontheTPS.WhetheritiscalledtheFordProductionSystem,theNissanProductionSystem,orother,theconceptsareallsimilar.Thecom-paniesthathavebeenthemostsuccessfularetheonesthatrealizethatthebestwaytodeveloptheirownproductionsystemistoadaptthephilosophiesandfundamentalprinciplesofthesystemtothecultureandcircumstancesoftheorganization.ForeverycompanytoseektooperateexactlythesameasToyotagoescompletelyagainsttheessenceoftheTPS.ThisiseventrueinsideofToyotaitself.Iftherewasonlyonerightanswerformanufacturingvehicles,thenwewouldexpecteveryToyotaproductionfacilitytobeexactlythesame.However,thatisnotthecase.Ofcoursetherearesimilarities,butoncloseexaminationtherearemanydifferences.
Intoday’sglobaleconomy,itisverygullibleforanorganizationtothinkthataproductionfacilityintheUnitedStatesisgoingtooperatetheexactsamewayasaproductionfacilityinChina.Thecultureoftheworkforceisasmuchafactorfordevelopingasuccessfulmanufacturingsystemasthemanufacturingsystemitself.Inthe1990s,GeneralMotorsstartedanaggressivecampaigntoimplementtheTPSattheirfacilitiesinEurope.EventhoughtheyheavilyrecruitedToyotaemployeestodirecttheproject,theprojecthadmixedresults.Intheplantsthatshowedthemostimprovement,theseniormanagementoftheplanthadfullyembracedthenewoperat-ingphilosophyanddevelopedanoperatingsystemthatwassuitablefortheplant’sculture.ThisledtheformerToyotamanagerstoconcludethatsimplyunderstandingthesystemisnotenough.Ifthecultureoftheorganizationis
Foundational Elements of the Toyota Production System (TPS) ◾ 15
notcapableofchanging,thenimplementingaspectsoftheTPSmightmakethecompanymoreefficient,butitcannotfixthefundamentalproblemswithintheorganization.
MygoalforwritingthisbookistohelpthereaderunderstandthebasicconceptsoftheTPSandthenhowtoputtogetherasystematicprocessintheorganizationthatwilldriveoverallvaluefortheorganization.ThroughmymanyyearsofimplementingtheTPSinarangeofoperatingenviron-ments,IhavedevelopedamethodologythatincorporatesthefoundationalprinciplesoftheTPSandincorporatestheminawaywhererealvaluecanbecreatedfromdayone.IhavenodesiretocreateagroupofcompaniesthatareworkingtoclonethemselvesafterToyota.
ThefactthatmanyindustrialgiantstodayareeagerlypursuingandapplyingaspectsandphilosophiesoftheTPSwouldleadtoimmediateadvancementsinproductivityoverconventionalmassproductionmethodsofyesteryearifitwerenotforthefactthatmostindustrialgiantsarealreadydoingahostofthingscorrectly.Thetruthisthatcompaniesthathavesur-vivedintothetwenty-firstcenturyarealreadydoingmanythingsthebestway.TheconceptsthatIdeliverinthisbook,althoughbasedontheTPS,havebeenenhancedtodriveshort-term,immediate,bottom-lineimpactinanyorganization.
2.4 KentuckyAlchemy
OneexampleofhowToyotaimplementedtheirsystemofmanufacturingwithsuccessisToyota’splantinGeorgetown,Kentucky.Toyotaenteredanonindustrial,ruralareaoftheUnitedStates,wherepeoplehadlittleornoexperienceinautomanufacturing,andbuiltthelargestandmostprofitablefacilityinToyota’sarsenal.Toyotacompletedataskthathasinspiredalmosteverymajorautomanufacturertofollowintheirfootprints.PriortoToyota’sfacilityinGeorgetown,littlewasknownconcerninghowtheruralworkforcewouldtransitionfromthefieldstotheassemblyline.WhatwasdiscoveredwasthattheworkersintheSouthwantedtoavoidtheinfluenceoftheUnitedAutoWorkersasmuchasthemanufacturersdid.Thiscombinationoflowercostlaborandworkethicthatbeganonthefarmwasacombina-tionformanufacturingexcellence.Toyotausedthisformulatoturnsteelintogoldandthenusedthatgoldtofinancetheirworldwideexpansion.Thishasnotgoneunnoticedbytheotherautomakersthathavecometobeknownasthe“newdomestics.”Foreigncompaniesnowseevalueinmanufacturing
16 ◾ The Toyota Kaizen Continuum
productsintheUnitedStatesforsaleintheUnitedStates.Thisoffersthesecompaniestheopportunitytotakeadvantageoflow-costlaborwhileatthesametimeaddressingpoliticalandnationalsentimentforbuying“American.”EverymajorautomanufacturerhasatleastoneplantintheSouth,andmanyhavemultiplefacilities.Ateachofthesefacilities,espe-ciallytheonesdevelopedwithinthelasttenyears,thelaborrateispenniesonthedollarcomparedwithwagesinthecompany’shomecountry.
HowdidToyotaachievesuccesswithGeorgetown?Simplyput,itwasthecombinationoftheconceptsbehindtheTPScoupledwiththerelentlesspassionforsuccessbytheworkforceinGeorgetown.AlthoughtheTPSisacomplexmanagementsystembasedon,andformedby,pureandsimplisticideals,TPSisnotmerelyasystemofbuildingefficientautomobiles;itismoreimportantlyasystemthatbuildsefficientpeople.Thesystemencouragesindividualstodevelopcreativesolutionstoeverydayproblems.
ThemanagerialnormforanaverageAmericanorganizationisatop-downmanagementstyleinwhichexecutives,managers,andengineershavesolediscretioninshapingthemethodsandvisionoftheorganization(Figure 2.1).Thissystemalwayshas,andalwayswill,produceenormousstressintheworkplace;itcreatesaninvisiblebuttangibledividinglinebetween“management”and“workers.”Whenthepeopleresponsibleforcarryingouttheplanofanorganization,orasIliketosay,thepeoplewho“dothework,”feelthattheyhavenothingtogainifthecompanyissuccessful,thenthecompanyisatadisadvantage.Thisisnottosaytheorganizationwillnotachievesomelevelofsuccess,buttheywillneverreachtheirmaximumpotentialbecausetheyhavefailedtotapintotheirmostvaluableresource:theirpeople.Theotherproblemisthatthedirec-tionfortheorganizationisdrivenfromthemanagementandnotfromthe
Mgmt.
Engineering
Supervisors
Employees
Customer
DI R
ECTI O
N
Figure2.1 ConventionalManagementPhilosophy.
Foundational Elements of the Toyota Production System (TPS) ◾ 17
customer.Managementinterpretswhattheybelievetobetheneedsofthecustomer.Thisisgreatifthemanagementteamiscorrect;however,oftenthemanagementteamspendsalotoftimeadjustingtheprocesstofine-tunewhattheexpectationisforthecustomer.Inabusinesslikeautomanufacturing,thiscanbecostlysincethecapitalnecessarytoretoolthefacilitytomakechangestothemodelcanbecostly.Ifmanagementiswrong,thenapopularproductcanlosethedemandovernightandadjust-mentscantakeasalongastwenty-sixweekstoimplement.
PerhapsCompanyXhassetanewgoaltodecreasetheamountoflaborhoursneededtoproducetheirworld-famouswidgets.Whobettertodeter-minewherethesavingsshouldcomefromthanthepeoplewholabortoproduceit?Foranengineeroramanagertogototheworkersanddeterminehowmanylabor-hourscanbesaved,andhowitcanbeachieved,isnon-sense.Inthesetraditionaltop-downorganizations,managerstendtosticktotheirdesksandengineerstotheirtables;theyareproblemchasersinsteadofproblemsolvers.Inthesetypesoforganizations,moreoftenthannot,thequickestsolutionistojustasktheworkerstodomore,orworkharder.InToyotathereisafamoussayingthatembodiesthephilosophyoftheTPS,andthatisto“worksmarter,notharder.”WherewouldthatleaveCompanyXintermsofitslong-rangestrategy?DoesCompanyXevenhavealong-rangestrategy?Howmuchharderdotheworkersneedtoworkforthecompanytoreachitsgoals?Unfortunately,thisisanoperatingphilosophythatiswide-spreadacrossalltypesoforganizations.
Contrarytotraditionaltop-downmanagementapproaches,theTPSisbasedonamanagementsystemwherethecustomerdrivesthedirectionfortheorganization(Figure 2.2).InToyotathisisknownas“customerfirst.”Notethatthedirectioninsidetheorganizationflowsfromtheteammembers,ortheonesdoingthework,downtotheengineeringandmanagementoftheorganization.Inthismodeltheroleofeveryoneintheorganizationistosupportthepeopledoingtheworkinordertoprovidethecustomerwiththelevelofproductthattheydemand.Whenyouthinkofit,theclosestpersontothecustomeristhelastpersontotouchtheproduct.Generallythisisateammemberonthefloor.NomatterhowwellapartisdesignedorhowsmarttheCEOis,iftheoperationdoesnotexecuteatalllevelsthenthecustomerwillnevergaintheintendedbenefit.
Whenconsideringwherethevalueisaddedintheorganization,theonlypeoplewhoactuallyprovideanyvaluetothecustomerarethepeoplemakingtheproduct.Everyoneelseintheorganizationprovidesnovaluetothecustomer.Itisonlythroughthistypeofthoughtprocessthatthe
18 ◾ The Toyota Kaizen Continuum
maximumvaluecanbeachievedintheorganization.Minimizingthepeopleintheorganizationwhodonotcreatevalueallowsfortheorganizationtominimizecosts.
2.5 KeepItSimple
TounderstandtheTPSistounderstandbasicprinciplesofsimplisticman-agement.Toyotahasbuiltareputationasaleaderintheautoindustryforbuildingqualityautomobilesatthelowestpossiblecost,butthatisnotthefactorthatdrivestheorganization,itisjustthedesiredoutcome.Thefocus
Customer
Team Members
Team Leaders
Engineering &Management
S UPPORT
DI R
ECTI O
N
ValueAdded
Figure2.2 CustomerFirstManagementPhilosophy.
Figure2.3 WorkSmarter,NotHarder.
Foundational Elements of the Toyota Production System (TPS) ◾ 19
oftheToyotaorganization,asacompanyaswellasaculture,isontheworkers,knowninsidetheToyotaManagementSystemsasteam members.Toyotahasmadeitselfsuccessfulthroughkaizen,orthesmall,continuousimprovementsineveryaspectoftheproductionprocess.Thebestideas,orkaizens,donotcomefrommembersofmanagement,butfromtheteammembersthemselves.OneofthestrengthsofToyotaisthatToyotabelievesinandencouragestheabilityofitsteammemberstosolveeventhemostcomplexproblemsintheorganization.Toyotadiscoveredintheearly1950sthatthemostvaluableresourcerestedinsidethemindsoftheemployees,anditbegandevelopingacontinuousimprovementprocessinordertotapthatresourceoftheorganizationandturnitintoaninnovationengine.ThatprocesswastheTPS.
Thefirstthingyouwilllearninsideanorganizationthatembracesthisphilosophyisthattheleadersoftheorganizationrecognizethatallmem-bers,fromthepresidenttothelineworkers,areteammembersfirst.Eachmemberhasthesameresponsibilitytotheorganization.Ialwaysliketosayitlikethis:“Weareallmembersoftheorganizationfirst;wealljusthavedifferentrolestoplaywithintheorganization.”
Anotherwaytolookatitislikeateamofrowers(Figure 2.4).Eachpersonintheboathasadefinedposition.Basedonposition,eachpersonalsohasadesignatedresponsibility.Aslongasallrowersworktogetherandfulfilltheirresponsibilityintheboat,theboatisabletobemaneuveredsuc-cessfullyandultimatelywillreachitsdestination.Ifonepersonintheboatdecidestodohisorherownthing,theboatbecomeslessstableandtheprogressoftheboatisrestricted.
Whentheboatisincalmwatersandtherowersarenotinsync,theprogressoftheboatisimpeded.Althoughtheboatisnotoperatingatpeakefficiency,thelackofsynchronizationbyonememberismoreanuisancethanadangertotheotherrowers.Theboatstillisabletoavoid
Figure2.4 RowingintheSameDirection.
20 ◾ The Toyota Kaizen Continuum
dangeralongthejourneysincethecalmwatersprovideanenvironmentwheretherowershaveenoughtimetocompensatefortherowerwhoisoutofsync.Asthespeedofthewaterincreasesandtheboatbeginstonavigatemoretreacherouswater,theresponsetimetothedangersintheriverisreduced.Anyonethathasbeenwhitewaterraftingknowsthatyouhavetobeawareofthedangersthatlieahead,andtherowershavetobeginpositioningtheboatevenbeforetheyapproacharapidiftheyhopetonavigatetheriversuccessfully.Iftherowersarenotinsyncwhentheybegintonavigatethefasterwater,whatwasmerelyanimpedimentinthecalmwatercanspelldoomforalloftherowersiftheyfailtonavigatetheboateffectively.
Thisisthesamescenarioinbusinessestoday.Whenabusinessisnotstressed,themarginoferrorismuchlargerthanwhenabusinessisoperat-ingunderstress.Forexample,ifaplantisoperatingat60%capacityandaparticularprocessisoperatingat50%efficiency,theoperationhastowork100%oftheavailablehourstoproducetherequiredvolume.Althoughthisisaproblem,theimpacttothebusinessisincreasedlabordollarsforrun-ningtheextrahours.Sincethebusinessisnotoperatingatcapacity,theplantmanagementnoticesthevarianceinlaborontheP&L(profitandlossstatement)butdon’tforeseeamajorproblem.Whenthebusinessisnotstressed,thenaturaltendencyformanagementistothinkthattheyhavetimetosolvetheproblem.Thisgenerallyisnotaproblemaslongasitisidentifiedandthemanagementteamhasaplantoaddresstheissue;however,moreoftenthannot,theinefficiencybecomesthenormandtheproblemcontinues.
Thenextmonththecustomerincreasesordersby30%.Theseniorman-agementinthecompanyareecstaticandhavealreadystartedmodelinghowtheincreasedsaleswillfalltothebottomlineoftheP&L.Astheplantbeginstorampupproduction,theyrealizethattheycan’tproducetherequiredproductbecausetheinefficientprocessisnotabletoproducetheincreasedcomponents.Eventhoughthecustomerisdemandingmoreprod-ucts,thebusinessisunabletocapitalizeontheincreaseinordersduetooneprocessbeingoutofsyncwiththerestoftheoperation.UnfortunatelythisisasituationthatIseeeverydayasIworkwithstressedoperations.
Inanorganizationthatistrulyintunewithachievingsuccess,allteammembersmustworktogethertoachievethegoalsofthecompany.Ifthecompanyissuccessful,thentheemployeeswillhavelong-termjobsecurityandthiswillhelpthemtobesuccessful.RegardlessofwhetheritisCompanyXorToyota,allcompaniessharethesamechainmetaphor:theyareonlyas
Foundational Elements of the Toyota Production System (TPS) ◾ 21
strongastheirweakestlink.IfCompanyXwantstoimprovethecostofthewidgetstheyproduce,theyhavetotakeananalyticalapproachtounder-standingwheretheproblemexists.InthecaseofCompanyX,theyarelookingforwaystolowercostsofthewidgets,sonaturallytheyneedtolookatallofthecostsintheorganization.
Organizationsarecomplexbynature.Thewordorganizationinsinu-atesthatthereareseveralthingsthatwhentheyactaloneholdnorealvaluebutwhenorganizedtheycreateanorganizationthathasvalue.Inthiswaybusinessesmimicnature,andthesimplertheprocesses,methods,andprocedurescanbekept,thebettertheorganizationwillbeabletoadapttochange.Thisconceptisconsistentlydemonstratedinnaturewherethesim-plerthelifeformis,themoreadaptableitwillbetotheenvironment.Manyrelativelysmallorganizationscreatesuchacomplexstructurethattheyfeelburdenedbythesystemtothepointofinactivity.
Forexample,Iwasonceworkingwithasmalldistributioncompanywithannualrevenuesofaboutonehundredtwentymilliondollars.WewereinameetingwiththeCEO,CFO,vicepresidentofoperations,andheadofmarketing.Thepurposeofourmeetingwastotrytoidentifywhytherewassuchalargepercentageofourproductinventorythatseemedtonotsellwell.Ihadconductedaninventoryofthetoptenitemsthathadthelowestsalesinthewarehouse,andweweregoingthrougheachitemtodiscusshowwecouldreducetheinventory.
Thefirstsignofaproblemcamewhenthephysicalcountoftheinven-torythatIhadmadedidnotmatchuptothefinancialreport.IdiscussedwiththemanagementteamwhethertherewasanaccountingmistakeorwhetherIhadmiscountedtheproduct.Toverifythecount,Isuggestedthatthefiveofusgoouttothefloorandcountthesetenitemsforourselvessowewouldknowexactlywhatthesituationwas.TheCEOsaidthathehadabetteridea(IalwayslovetoheartheCEOsaythis):weshouldjusthaveITrerunthereportandseeifthediscrepancywasanerrorinthesystem.TheCEOsaidthatitwouldtakeaboutsixhourstorunthereport.ItoldtheCEOthatweareonlytenfeetfromtheflooranditwouldtakeuslessthantenminutestoconfirmthisforourselves!Needlesstosay,wewenttotheshopfloorandcheckedtheinventoryourselves.
Thissituationisaclassicexampleofhowsomepeopleovercomplicateevensimpletasks.Icallthisorganizational paralysis (Figure2.5).TheCEOhadtrainedhimselfandhisorganizationtobelievethattheorganizationwasmorecomplexthanitreallywas,andthereforeasimpleprocessismadecomplex.Laterinthesamemeeting,wewerediscussingwhythere
22 ◾ The Toyota Kaizen Continuum
wasoneparticularitemthatwehadonlysoldoneofinthelasttwelvemonths.Itsoldforforty-fivedollarsandonlycostustendollars;however,togettheitemfortendollars,wehadagreedtobuyonethousandunits.WhenIsuggestedtotheheadofmarketingthatweshouldeliminatethisproductfromourlineup,allshecouldsaywasthatthiswasagreatitem,ithadhugemargins!Icouldnotbelievemyears.Iexplainedtoherthatwewerecarryingtenthousanddollarsworthofinventorytomakethirty-fivedollarsinprofit!Shesaid,“Whenyoulookatitthatway,itdoesn’tmakesense,butwegotsuchagooddeal.”
Eventhoughthesemayseemlikeoutrageousexamples,theyoccureverydayinorganizationsaroundtheworld.WhenIlookathowtocon-trolspendinginacompany,Iliketolookatitlikeapersonwhoisonafixedbudgetgoingtothegrocerystore.Ifyouhaveafixedbudgetofonehundreddollarstospend,thefirstthingthatyoudoismakealistofwhatyourneedsare.GenerallywhenImakemylist,Iseparatethe“need”itemsfromthe“want”items.WhenIamatthegroceryIpickupallthe“need”itemsfirst,andthenifIhaveanymoneyleftoverIwillpurchaseitemsfromthe“want”list.Typicallyitmakessensetomakealistofwhatweneedandonlybuyfromthatlist.IfIgettothegrocerystoreandtheyhaveaspecialoncorn,Idon’tbuyahundreddollarsworthofcornwhenIonlyneedonecan.InthissituationthediscountofthecornhasnovaluetomebecausethereareotheritemsIneedandIcan’tbuythembecauseallIhaveiscorn!
Figure2.5 OrganizationalParalysis.
Foundational Elements of the Toyota Production System (TPS) ◾ 23
AnotherscenariothatIfrequentlyrunintoiswhenIaskaquestionandthemanagementgivesmetheanswerthat“it’scomplicated.”Thistellsmethattheonlythingthatisreallywrongistheprocesswithinthecompany.Iftheorganizationhasthecontroloftheprocess,thentheorganizationshouldstrivetomakethesystemassimpleaspossible.Thisallowsforabnormalitiestobereadilyobservedandunderstood.Unfortunatelythisisnotthecaseinmanyorganizations.Manyrelativelysmallbusinesses(lessthanonebilliondollarsinrevenue)overcompli-catethemselves.NumeroustimesIhavehadspiriteddiscussionswiththeCEOofabusinessconcerninghowthecompany,throughinternalsystemsalone,isovercomplicatingitsownsituation.Sometimesweneedtostepback,lookattheoverallsituation,anddeterminewheretheorganizationstands.More often than not, if a manager sees something as confusing, then team members, and often the customer, will be confused as well. Makingthingsassimpleaspossibleforthepeopleonthefloor,orthepeoplecreatingthevalueintheorganization,andprovidingthemwiththesupporttheyneedisthetruepurposeofmanagementinsuc-cessfulorganizations.
2.6 TheToyotaProductionSystemversusLeanManufacturing
OftenIamasked,“WhatisthedifferencebetweenleanmanufacturingandtheToyotaProductionSystem?”ManypeopleteachingandconsultingonleanmanufacturingtodayhaveabasicmisunderstandingoftheTPS,which,intheend,canonlyhavenegativeeffectsontheorganization.Itislikehav-inganincorrectrecipeforbakingapie.Thereisawell-knownstoryofhowLorettaLynnmetherhusband.Shehadenteredabakingcontestandthepiesweresoldtothehighestbidder.AlthoughLorettahadsubstitutedsaltforsugarbymistake,hersoon-to-behusbandboughtthepieanyway.
Ifwearetounderstandhowtodrivevalueinourorganization,weneedtohavethecorrectrecipe.Althoughsomemaybeabletoswallowapieceofpieinwhichsalthasbeenusedinsteadofsugar,onlylovewillletthemeatitandsmile.Inbusinesswecan’tmakedecisionsbaseduponemotionsandthereforeweneedtomakesurethatnotonlydoesitlooklikeapiebutitalsohastotastelikeapie.Toanswerthequestionwhatisthediffer-encebetweenleanmanufacturingandtheTPS,theanswerisinhowyou
24 ◾ The Toyota Kaizen Continuum
defineeachofthem.TherearemanypeopleclaimingtounderstandtheTPSwhohavenorealunderstandingofthesystemandthereforedonotgetthedesiredresults.Ihavemetenough“senseis”intheworldofmanufacturingthatIcanseehowbusinessleaderscanfindtheexperienceconfusingandultimatelyfrustrating.Manypeopleworkingintheworldofleanmanufac-turingconsultinghaveneverreallyworkedforacompanywherethesystemwasimplementedwithanydegreeofsuccess.
Whenselectingaleanconsultant,orhiringaleanprofessional,itisimportanttounderstandwherethatperson’sexperiencecomesfrom.Althoughtherearemanygoodorganizationswithafoundationalunder-standingoflean,selectingaleanpractitionercanbeachallengingtask.JustastherearepeoplewhoareteachingleanmanufacturingwithacompleteunderstandingoftheTPSandcanhelpyourorganizationbecomeverysuc-cessful,thereareatleastasmanypeopleworkingintheindustrywithnorealcapabilitytohelpyourorganizationatall.EveniftheconsultanthasyearsofexperiencewithinToyota,thisdoesnotmeanthatthepersonhasadeepknowledgeoftheTPS.Aswithmostorganizations,noteveryoneintheorganizationhasanequalunderstandingofthebasicprinciplesandtheabilitytotransferhisorherknowledgeintoyourorganization.Therefore,choosewiselywhenselectinganyconsultantbutespeciallyaconsultantthatspecializesinleanmanufacturing.
OnetimeIwasrestructuringthebusinessofaseventy-million-dollarcon-tractmanufacturer.GenerallyIspendalotoftimeworkingwiththeseniormanagementintheorganizationtodevelopandimplementtherestructur-ingplan.TheCEOresearchedmybackgroundandseeingthatIhadspenteighteenyearswithToyotahedecidedthathewouldhireaplantmanagerwithleanmanufacturingexperience.Ididnothavetheopportunitytomeetthepersonbeforehewashired,buttheCEOassuredmethathewasatrue“leanguy.”
Whenthenewplantmanagerstarted,IgavehimafewweeksinthejobbeforeIscheduledavisittohisplant.SinceIknewwhattheplantlookedlikebeforehearrived,Iwouldbeabletojudgehisknowledgeofleanbaseduponwhatheworkedonfirst.WhenIarrivedattheplantthefirstthinghedidwasleadmeintoaconferenceroom—mistakenumberone.AswesatintheconferenceroommykneeshitsomethingunderthetableandwhenIlookeddownIwassurprisedtoseeacalculatoronthefloor.Thecalcula-torhadVelcroononesideandhadbeenattachedtotheundersideofthetable.Puzzled,Iaskediftherewasapurposeforattachingthecalculatorsto
Foundational Elements of the Toyota Production System (TPS) ◾ 25
thebottomofthetable?Thenewplantmanagerspokeupandwasbeamingwithprideasheexplainedthattheyoftenhadmeetingsintheconferenceroomandhehadnoticedthateveryonealwaysneededcalculatorssoheboughtcalculatorsandattachedthemaboveeveryseat.Ithoughttomyselfthatifthiswasthetypeofproblemhehadbeensolvinghewasspendingtoomuchtimeintheconferenceroom—mistakenumbertwo.
Aswecontinuedourintroductorydiscussion,theplantmanagersaidthathehadpreparedaPowerPointpresentationthathewouldliketosharewithme.Ithoughtokay;maybeheisgoingtoshowmesomeofthethingsthathehadbeenworkingonintheplant;thisdaymaybesalvageableyet.Ashestartedhispresentation,heexplainedthatthispresentationwashisphilosophyofleanmanufacturing.Hehadallofthebasicsofanyleanstory,buthemadesomestrangeadditionshereandthere.Forexample,whenhediscussed5S,heexplainedthathehadaddedasixthS,Safety—mistakenumberthree.
Iamalwaysleerywhenpeoplemakeuptheirownleanprinciples.Ioncehadalongdiscussionwithacolleague;hebelievedtheretobeeighttypesofwasteratherthantheseventypesrecognizedwiththeTPS.Hiseighthwastewasthewasteofhumaningenuity.Whenwehadthediscussion,IthoughttomyselfthattheeighthwastewasactuallythetimethatIwasspendingdiscussinghiseighthwaste!
JustwhenIthoughtIcouldtakenomoreoftheplantmanager’spresenta-tion,heshowedmeapictureofanopossumthataroadworkerhadpaintedoverintheroad.Thenextpictureheshowedmewasapictureofhimintheroadpickingupadeadopossum!AlthoughIunderstoodwhathewastry-ingtosay,Iwasabletoconcluderightthenandtherethatthisguywasmorethana“leanguy.”Needlesstosayhewasn’ttheplantmanagerforlong.
IfleanmanufacturingstayspuretoitsrootsthatarefoundedintheTPS,thenthetwoareinterchangeable.Unfortunately,intheworldofleanmanu-facturing,thatisgenerallynotthecase.ThedifferencebetweenleanandTPSisthatinleanthefocusisonthetoolsandwithTPSthefocusisonthesystem.TherearemanytoolsthatcanbeutilizedtoimplementtheTPS,buttheyarenotmandatory.AgoodexampleofthisisseenintheexampleIsharedoftheplantmanagerwhowantedtoaddthesixthS.WhocanarguewiththefactthatsafetyissoimportantitshouldbethesixthS?Theprob-lemisthathedidn’tunderstandthatimplementingTPSisaboutthesystem.Safetyhasitsplaceinthesystemandthatiswithintheconfinesofstan-dardizedwork,whichisoneofthefoundationalelements.Itisthesesmall
26 ◾ The Toyota Kaizen Continuum
distinctionsthatseparatetherealunderstandingoftheTPSwiththestudentsofleanmanufacturing.
MygoalistoequipthereaderofthisbookwiththeabilitytounderstandthebasicfoundationalelementsofwhatisknownastheTPS,andmoreimportantly,sometechniquesforimplementingthesystemwithsuccessinhisorherorganization.
ThemajorityofmisconceptionsconcerningtheTPSoriginatefromthesheernumberoftoolsToyotahasdevelopedforitsimplementation.Manyorganizationsimplementtoolssuchaskanbanandpoka-yokeandrealizesubstantialbenefitsinaveryshorttime.Unlesstheyhaveabroaderunder-standingofthesystem,theonethingtheywillneverrealizeisthetruepotentialoftheorganizationthatcomesonlyfromacomprehensiveunder-standingoftheTPS.Selectingspecificelementstoimplementisnotneces-sarilybad;itisjustlimitingandwillultimatelyleadtofrustration.
2.7 Standardization
Ispentovereighty-eightweeksatToyotabeingtrainedonvariousaspectsoftheTPSandtheToyotaWay.PartofmytrainingregimenatToyotaCity,Japan,wastolearnthebasicfoundationalprinciplesoftheTPS.InToyota,thesefoundationalprinciplesarerepresentedwithwhatisreferredtoastheToyotaProductionSystemHouse(Figure 2.6).
ThefoundationoftheTPShouseisstandardization:standardizedwork,jigs,tools,equipment,andlocationsforthoseitems.Withoutstandardiza-tion,therecanbenokaizen,orcontinuousimprovement;withoutstan-dardization,thehouseofTPSwouldcollapse.IfthereisoneareawhereIseethemostorganizationalopportunity,itisintheareaofstandardization.Uponthefoundationofstandardizationreststhetwopillarsthatsupportthehouse,just in timeandbuilt-in quality.Kaizen,orcontinuousimprovement,istheroofofthehouse.
ThroughtheyearsIhaveseenmanydifferenttypesofTPShouses.Manyofthehousesarecomplex,interwovenwithmanydifferentthreads.AtthecoreofallofthehousesusedtorepresenttheTPSarethesamefounda-tionalelements;however,manypeoplewanttoaddtothehouse.AlthoughIthinkitisbettertomaintainthebasicsimplestructureofthehouse,aslongastheunderstandingiscorrect,Ihavenorealpreferenceforwhichhousepeoplewanttoreferto.Aswejustdiscussedconcerningorganizationalcomplexity,theruleof“simplerisbetter”shouldapply.
Foundational Elements of the Toyota Production System (TPS) ◾ 27
ReferringtothehouseinFigure 2.6,standardizationisthefoundationforthecompleteproductionsystem.InToyota,itisunthinkabletoestablishaprocesswithoutfirstestablishingstandardizedwork.Standardizationisthebaseofanygoodoperationalcompany.ManytimesImeetplantmanag-erswhotrytoconvincemethattheirsituationismorecomplexanddiffer-entthananythingthatIhaveseenbeforeandthereforeitisimpossibleforthemtohaveanyformofstandardization.Ialwaysfindthisinterestingandinsightfulintothemindsoftheleadersoftheorganization.
Standardizationappliestoproducts,processes,systems,andprocedures.Priortoanyimprovementopportunity,standardizationmustbeachieved.Withoutstandardizationinplaceinanorganization,itislikebuildingahouseuponthesand.Aseachdaypasses,thesandshiftsandchangesandcandestroyanyimprovementsthathavebeenmade.Inanybuildingcon-structionproject,wewantthefoundationofthebuildingtobestrongandimmovable.Therefore,selectingthecorrectpositionforthefoundationandmakingsurethatthefoundationisdevelopedcorrectlyareessentialele-mentstoanyconstructionproject.
Whenwethinkaboutstandardization,theonetoolthatcomestomindaboveallothersisstandardizedwork.Manypeoplemisunderstandtheconceptofstandardizedworkasonlyhavingapplicationformanufactur-ingbusinesses.Standardizedworkisfundamentallyamethodofachievingrepeatabilityinanygivenprocess.Whetheritisamanufacturingprocessoraservice-orientedprocess,theprinciplesofstandardizationarethesame.Everybusinessisdevelopedutilizingvariousbusinesssystemsandpractices.
Kaizen
Goal: Highest Quality, Lowest Cost, Shortest Lead Time
Standardization
Just-in-time Built-inQuality
Figure2.6 TheToyotaProductionSystem(TPS)House.
28 ◾ The Toyota Kaizen Continuum
Ifthesesystemsandpracticeschangeeverytimetheprocessisutilized,thentheorganizationisgoingtohaveadifficulttimeprovidingaconsistentresultfromtheprocess.
Thisconceptcanbeseeninaprocessasbasicasprovidingthemonthlyfinancialreport.Iftheaccountingandfinanceorganizationfollowadiffer-entprocesseachmonth,thenthefinancialinformationwillvary,fluctuatingevenwhenthedataareavailableforseniormanagementtoreview.Ifthefinancialresultsforthepreviousmontharenotavailableforfifteentotwentydaysafterthecloseofthemonth,thenhowquicklydoesthisallowthemanagementoftheorganizationtorespond?Iftheaccuracyofthedatavar-iesfrommonthtomonth,howgoodarethedecisionsgoingtobethataremadebasedonthesedata?Everybusinessisdrivenbythesystemswithinthebusiness.Standardizationhasrelevancetoeveryareaofbusiness.
Whenwelookatstandardizationfromtheaspectoftheoperationsofthecompany,standardizationtranslatesintorealvaluefortheorganization.Whetheryouroperationinvolvesmanufacturingacomplexproductornotmanufacturingaproductatall,thekeytoefficiencyandtoqualityistohavearepeatableprocess.Forexample,ifyourprocessisacarefullycontrolledmetallurgicalprocess,liketheprocessusedinthealuminumdiecastindus-try,therearemanyoperationalvariablesthathavetobemonitoredandconsistentlyappliedtoensurethequalityoftheproduct.Inthissituation,standardizationisnotonlybeneficialbutitisalsoessentialformaintainingtherepeatabilityoftheprocess.Ineverymanufacturingandoperationalpro-cess,operationalparametershavetobemaintainedtosupplytheproducttothecustomer.Developingstandardizedworkisthekeytocontrollingtheseparametersandensuringtherepeatabilityoftheprocess.
Whydowewantrepeatability?Repeatabilityisessentialinanoperationalenvironment.Repeatabilityoftheprocessenablestheprocesstoproduceconsistentandreliableresults.Bydevelopingarepeatableprocess,wepro-videthefoundationforkaizen,orcontinuousimprovement.
Figure 2.7,whichillustratesthekaizencontinuum,showsthatpriortoanyimprovement,orkaizencycle,standardizationisrequired.Standardizedworkenablestheoperationtoclarifyabnormalsituationsimmediately.Standardizedprocessesandproceduresalsoenabletheorganizationtomaintainaconsistentlevelofqualityandsafetyintheprocess.Inthecon-tinuousimprovementcycle,thekeytomaintainingtheimprovementineachcycleisstandardization.Withoutstandardization,theTPSisliterallywithoutfoundationandthereforecouldnotexist.Manyorganizationsdoanexcellentjobofimplementingcontinuousimprovementinitiatives;however,withouta
Foundational Elements of the Toyota Production System (TPS) ◾ 29
systemthatincludesstandardization,manyofthegainsareoftendiminishedwithinsixmonthsaftertheinitialimplementation.
MaintainingstandardizedworkissuchacrucialelementoftheTPSthatToyotadedicatesfull-timeresourcestoverifyingstandardizedworkateachprocessonaregularbasis.Inthesamewaythatshitsuke,ordiscipline,isessentialformaintainingworkplaceorganization(5S),shitsukeisalsoessen-tialformaintainingstandardizedprocessesandprocedures.Manyexperi-encedpractitionersoftheTPSunderstandthefrustrationofimplementingthefiveS’sonlytofindthecompletesystemfalterduetoalackoffocusonthefifthS.Thesameistrueinthecontinuousimprovementprocess.Inmanyinstances,themereimplementationofstandardizedworkalonewillyieldtremendousoperationalimprovements.
Oneofthemostfrequentproblemswithimplementinganytypeofcontinuousimprovementprocessisthelackofstandardizationpriortostartingtheimprovementactivity.Nomatterhowsimpleorhowcomplextheoperationis,thefirststeptocontinuousimprovementmustbestan-dardization.Tofacilitatethecontinuousimprovementcycle,orthekaizencontinuumasIrefertoit,wemuststartwithastandardizedoperation.Oncethestandardizedprocesscanbeestablished,thenwecanstartonthepathofimprovingtheoperation.
BylookingatFigure 2.7,wecanunderstandthisconceptmorecompletely.Thecurrentsituationisrepresentedatthebottomoftheillustrationandtheidealconditionatthetop.Now,tobeginworkingtowardtheidealsituation,smallincrementalstepsofimprovementmustbeplanned.Aftereachstageofimprovement,notethestabilizationthatisrepresentedthroughstandardiza-tion.Thisprocesscontinuallyrepeatsitself,withthenextlevelofimprove-mentonlybeingattemptedoncealevelofstabilityhasbeenachievedfrom
CurrentPosition
IdealPosition
�e journey to the ideal state:
Standardize
Standardize
Kaizen
Kaizen
• Eliminates waste• Produces in quality• Generates cash flow
Standardize
Figure2.7 TheKaizenContinuum.
30 ◾ The Toyota Kaizen Continuum
thepreviousimprovementactivity.Itisthiscontinualprocessthatiscon-stantlyworkingtowardtheidealstatethatisthekaizencontinuum.
Ihavehadtheopportunitytoworkwithmanyindividualsandorganiza-tionsseekingtounderstandandimplementaproductionsystembasedontheTPS.Unfortunately,manyorganizationsfocustheirtimeandeffortontheelementsofthesystemanddonotunderstandthebasicfoundationalprincipleoftheTPS:standardization.
StandardizationisthefoundationuponwhichtheTPSreliestobuildabasethatwillyieldsustainableresults.Buildingasystemwithoutlayingoutthecorrectfoundationcanleadtosomeopportunitybutwillneverleadtorealizingthemaximumattainableresults.Implementinginitiativesinabusi-nessrequiresenergyfromthemanagementaswellastheorganizationitself.Thisenergyisinfiniteandthereforeitistheresponsibilityoftheleadersoftheorganizationtomakesurethatthemaximumreturnisgeneratedfromtheenergyexpendedtoundertakeanybusinessinitiative.ToappreciatetheimportanceoftheroleofstandardizationwithintheTPS,itisimperativetocompletelyunderstandtheprinciplesofstandardization.Idefinestandard-izationasthemethodofproducingaproduct,goods,orservicebywhichqualitycanbecontrolledintheprocessrepeatedlythroughthoroughcontrolofthevariationsintheprocessinordertoproducetheproductorservicewithinthedesiredspecificationandthetimeallotted.
Nomatterwhattypeofindustryorenvironmentthatwefindourselvesinvolvedwith,wecanalwaysbenefitfromstandardization.Withoutstan-dardization,therewouldbechaos.Ifwethinkofourroadsandhighwaysystems,wecanreallyappreciatetheprincipleofvisualmanagementandstandardization(Figure 2.8).Iamcontinuallyamazedatthecontrolbroughttopublictransportation,justbyvirtueofapaintedline.
Becauseofafewmillimetersofpaintonthepavement,vehiclescantravelwithinafewfeetofoneanother,creatingorderinasituationthatcouldbe
Figure2.8 Real-LifeStandardization(HighwayLines).
Foundational Elements of the Toyota Production System (TPS) ◾ 31
verychaotic.AlthoughifyouhaveeverdriveninrushhourtrafficinNewYork,youmayquestionanyconceptoforder;theselinesareabletoprovideguidancefortheoperationofmotorvehicles.Ifitwerenotforthepaintedlinesonourhighways,therewouldbemassconfusion.Thelinesprovideuswiththebasicinformationthatweneedtosafelynavigatethecourseaheadofus;therearelinesthattelluswhenitissafetopassanothervehicleandwhenitisnot.ThesamestandardizationandvisualcontrollessonsarejustasvaluableinorganizationsthatareattemptingtoimplementtheTPS.
Withoutstandardization,itisverydifficulttomanagetheworkplaceortoevenidentifytheabundanceofopportunitiesforimprovement.Oneofthemainbenefitsofstandardizationisthatitremovesvariationandexposesabnormali-ties.Justaskthesixsigmablackbeltsinyourorganizationhowmucheasieritistoidentifyandsolveaproblemwhenthetaskhaspreviouslybeenstandard-ized.Withoutstandardizationtheorganizationfallsintochaos,withthequalityoftheproductsufferingaswellastheoverallefficiencyoftheoperation.
Manycompaniesresisteffortstostandardizetheirmethodsandproce-duresbecausetheyfeelasthoughitlimitsthecreativityoftheworker;thiscouldnotbefurtherfromthetruth.Standardizationlevelstheplayingfieldandensuresthatthereisabasicunderstandingofwhatneedstobedoneandhowitneedstobedone.Althoughtheremaybemanyeffectivemeth-odstostandardizetheprocessesandproceduresofanyorganization,thepremisethatmustbefollowedisthatthestandardisonlyasgoodastheorganization’sabilitytofollowthatstandard.
Asstatedbefore,standardizationisthemethodbywhichqualitycanbecontrolledintheprocess.Inmanufacturing,themoreaprocessisrepeat-able,thebettertheprocesswillperforminregardtosafety,quality,andproductivity.Standardizationalsohelpstocontrolcosts.
2.7.1 Quest for the Cube
Ionceconductedakaizeneventinadistributioncenterforamultimillion-dollarorganization.Theorganizationwasgoingthroughadifficulttimeandwewerelookingforopportunitiestoreducecosts.Whenwestudiedthecosts,wefoundthatthetransportationcostswererunningabout40%higherthanthebudgetcalledfor.Theplantcontrollerchalkeduptheincreasetotherocketingcostoffuelprices.
Whenwebegantodigintotheproblem,wesawthatthecontrollerwascorrectinreferencetothetotalamountspentonfuelforthequarter(Figure 2.9).
32 ◾ The Toyota Kaizen Continuum
OftenIhavefoundthatpeopletendtothinkthatmostproblemsareoutoftheircontrol.InthisinstancethecontrollerwassatisfiedthathecouldexplainthevarianceintheP&Lbyattributingthedifferencetoanincreaseinfuelcharges,somethingthatwasoutofhiscontrol.Becausefuelsurchargeswereapartofthetransportationcontract,thecontrollerdidnotfeelcompelledtodoanymoreinvestigationintothevariance.NotsatisfiedwiththeanswerfromthecontrollerandnodoubtduetomytrainingwithToyota,Icouldnothelpmyselffromaskingwhythefuelchargeshadrisensodramatically.
CompanyXYZQuarterlyReport
2010 Quarter 1
Budget Actual
Gross Sales $(000) $57,486 $56,391
Return $(000) $2,307 $2,209
Net Sales $(000) $55,179 $54,182
COGS
Material Cost $(000) $44,371 $43,525
Labor Cost $(000) $3,231 $3,169
Transportation Cost $(000) $3,437 $3,675
Total COGS $(000) $51,039 $50,369
Gross Margin $ (000) $4,140 $3,813
Figure2.9 TransportationData.
CompanyXYZTransportationDetail
2010 Quarter 1
Budget Actual
Total Transportation Detail $(000)
$3,437 $3,675
Fuel Surcharge $(000) $1,467 $1,705
Fuel Rate $(000) $3.02 $3.03
Fuel Volume $(000) 486 563
Figure2.10 TransportationCostDetail.
Foundational Elements of the Toyota Production System (TPS) ◾ 33
Duringourinvestigation,wediscoveredthatthefuelrateshadactu-allyshownverylittlefluctuationduringthetwoquartersinquestion(Figure 2.10).Thissurprisedthecontrollerandaswedugalittledeeper,wefoundthatthereasonfortheincreaseinfuelchargeswasdirectlyrelatedtothevolumeoffuelpurchased.Duringthequarter,thequantityoffuelpurchasedhadincreasedindirectproportionwiththeincreaseinfuelcharges.Bynoweveryonehadcaughtonandwasaskingwhythiswasthecasewhenouractualsalesfortheperiodhadshownaslightdecline.Whatwediscoveredwasveryinteresting.Eventhoughouroverallship-pingdollarshadreduced,thevolumeofdeliverytruckshadincreasedby40%!Ofcoursewewerenotdone;wehadonlyidentifiedthecausefortheincreasedfuelcharges,andwestilldidnotunderstandthereasonfortheincreaseinthevolumeofdeliverytrucks.Inonerespectthecontrol-lerwascorrectinsayingthatfuelwasareasonfortheincreasedshippingcosts;however,hehadfailedtonoticethatitwasnotthepriceofthefuelthatwascausingtheincrease;rather,itwasthevolumeoffuelbeingpurchased.Aswecontinuedtoask“why,”wefoundthatthereasonfortheincreasednumberoftruckswasduetoaproblemwiththesystemthatdeterminedthecubeofthetruck.
Cubing,orutilizingthemaximumcapacity,iscalculatedforeachtruckandiscontrolledbyashippingprogram.Basically,theproblemwasthatthetruckswereshippingmoreairthanproducts.Toidentifywhyweweresendingouttruckswithouttheproperload,wetalkedwiththedriversandtheforktruckoperators,onlytofindoutthatbothwerefollowing“stan-dardized”procedures!Wewenttotheshopfloortomeetwiththeship-pingsupervisorandaskedifhewasawarethatthenumberoftruckshadincreasedandwhy.
Figure2.11 TruckCubeIllustration.
34 ◾ The Toyota Kaizen Continuum
Theproblemwasthatthestandardswerecreatedspecificallytoshowhowthetrucksshouldbeloadedandunloaded;theactualcubicfeetofthetruckhadnotbeentakenintoconsiderationwhenthestandardwascre-ated.Sincetheoverallvolumeofsaleshadremainedconstant,theproblemwasthatthevarioussourcesofrevenuehaddrasticallychanged,andthevolumewasmadeupofadifferentmixofcustomerorders.Althoughthetruckswererunninglight(belowcapacity)onthecustomerswithdeclin-ingrevenue,thetruckswereblowingout(overmaximumcapacity)onthecustomerswhoserevenuehadincreased.Thiswascausingtheshippingandreceivingsupervisortofollowstandardprocedureforablowout,andexpe-ditetheshipmentstothecustomers.Thiswasleadingtoevenmorecostsaswewerepayingpremiumfreightforthosedeliveries.
Tofixtheproblem,wedevelopedaminicross-dockingsystemthatallowedustomakesurethatthetruckswerefullycubedbeforeleavingthedock.Toimplementthissystem,wesetuptrucklanesintheshippingareaandappliedtapetothefloorthathadtheexactsamefootprintofthetrucks.Everytruckwascubedouttothemaximumcapacityandwasconfirmedbytheshippingsupervisor.Someofthemilkrundeliverieshadtobeadjustedtoaccountforthenewcustomermix.Althoughthisproblemcostussev-eralthousanddollars,itactuallysavedusmillions.Becauseweidentifiedthecauseoftheproblem,wewereabletoinstallasystemthatwasflexiblebasedupontheproductmixwewereproducing.Afterthat,wewereabletostandardizethesystemwithaprocedure.Nowtheprocessisadaptableandcanmeettheneedsofthecustomers.
2.7.2 Visiting the Plant Floor
WhenIgointoacompanytomakeanassessmentofwheretheopportuni-tiesareforremovingcosts,theprimarythingIlookforontheshopfloorisstandardization.Goodoperationmanagerswillalwaystakehavingavisitorasanopportunityto“spruceup”theplantfloorsothatitwillshowwell.Standardizationissomethingthatnomatterhowmuchworktheplantman-agementdoestoprepareforavisit,Icanseetherealstatejustbyobservingtheprocess.IdonotknowhowmanytimesIhavehadaplantmanagerreadmybioonMonomoy’sWebsite,andinordertoestablishsomecom-monlinkhewilltellmethathehasatotalunderstandingoftheTPS.IevenhadoneplantmanagertellmethathewentthroughToyota’s“TPSSchool”inJapan;itwasnotmyplacetotellhimthataToyotaSchooldoesnotexist.Althoughthereareformaltrainingprograms,thereal“ToyotaUniversity”is
Foundational Elements of the Toyota Production System (TPS) ◾ 35
onlyfoundonthegemba,orshopfloor.Byunderstandingtheplant’sadher-encetostandardizedwork,Icandeterminehowwelltheplantmanagementreallyunderstandstheconceptsofleanmanufacturing.
Theworstthingthataplantmanagercantellmeisthathehasa“com-pleteunderstanding”ofTPS,especiallyifthesituationisonewherewearelookingtobuythecompany.Iusuallyletthesewordsgoinoneearandouttheother.Therealindicationofaplantmanager’sunderstandingofTPScanonlybeseeninoneplace:theshopfloor.
WhenIgoonaplanttour,Ilikebeingrightnexttotheplantmanager;IhavedevelopedalistofspecificitemsthatIamevaluatingwhilevisitingthefactoryfloor.Therearecertainthingsthatareobservableandobvioustothetrainedeye;forotherthings,therearebasicquestionsthatIwillasktheplantmanagertogainanunderstandingofnotonlytheprocessbuttheplantmanagerhimself.OneoftheitemsthatIamlookingforisstandardizedwork.Iamnotnecessarilylookingforstandardizedworkcharts;Iammoreobservingtheoveralloperationtodetermineifthereisanylevelofstandard-izedworkfortheoperation.Thisconsistsoftheoverallvaluestreamaswellasspecificprocesses.WheneverIasktheplantmanageraboutstandardizedwork,Iusuallygetaresponsesuchas,“Yes,wehavestandardizedwork;everythingthatyouseeisstandardized.”DependingontheactualsituationthatIhaveobserved,thiscanbeaprettygoodindicationofwhetherthe
Figure2.12 SupervisorVisitingtheShopFloor.
36 ◾ The Toyota Kaizen Continuum
plantmanageractuallyunderstandsthebasicelementsofstandardizedwork.Moreoftenthannot,theplantmanagerisreferringtotheprocessbywhichtheproductismanufactured.Takecastingasanexample;theplantmanagerisfullyawarethatthecastingprocessisstandardized.Althoughthisistrue,whenyoulookatthebasicelementsofthecastingprocess,thestandardizedworkexistsinthedetailsoftheprocess.Inthissituation,Iwouldratherheartheplantmanagertellmethatheorshehasnoclueaboutleanmanufactur-ing,orTPS,thantoclaimheorsheknowsitallandisnotpracticingit.
2.7.3 Understanding Standardized Work
StandardizedworkisoneofthemostmisunderstoodcomponentsoftheTPS.SinceitistheveryfoundationofthesuccessoftheTPS,itisalsooneofthemainreasonsorganizationsfailwhenitcomestotheimplementationprocess.Theerrorliesinthefactthatsmallmanufacturingcompaniesareusuallyprocess-drivenorganizations;however,theprocessisnottheproduc-tionsystem,buttheactualmanufacturingprocess.Forinstance,inacastingprocess,themanufacturingprocessisfairlysimple(seeFigure 2.13).
Rawmaterialisdeliveredintheformofbillet,meltedinafurnace,castinapressoradie,trimmed,heattreatedandinspected,andthenpackagedandshipped.Thisisaverybasicmanufacturingprocessandtheorganiza-tionplacesvalueonbeingabletofollowthisprocessfromatechnicalstand-pointtoproducequalityproducts.Thisprocesshasoperatingparametersandstandardsforthemetalcomposition,melttemperature,castingpressure,trimmingstandard,heattreattimeandtemperature,customerstandard,andshippingquantity.Becausethisisanengineeredprocess,thereisalevelofstandardizationthatisengineeredintotheprocess.Inthissituation,whenaskingtheplantmanageraboutstandardizedwork,itseemsobviousthatthereisstandardizedwork.Thestandardsareclearandcloselyregulatedtoensurethatthefinalproductismanufacturedtotheseexactingstandards.Althoughthisisanecessityfortheprocesstobesuccessful,thisisnotwhatIamreferringtoasstandardizedwork.Iwouldrefertothisastechnicalprocesscontrol,notstandardizedwork.Standardizedworkisthedetailedprocessfor
Billet Heating FurnaceExtrusion Press
with Die Saw Aging Oven Packaging
Figure2.13 ProcessFlowIllustration:Casting.
Foundational Elements of the Toyota Production System (TPS) ◾ 37
manufacturingtheindividualproducts:howthecastingoperatorloadsandunloadsthecastingmachine,howthematerialisplacedaftertrimming,andsoon.Manypeoplewhocallthemselvesleanmanufacturingexpertsbelievethatstandardizedworkisonlyadocument,thestandardizedworkchart.Thisisfarfromthecase.Itistruethatstandardizedworkshouldhavedocumenta-tion,butthekeytostandardizedworkistheprocess,beitaperson,machine,orrobot.
Standardizedworkimplementedcorrectlyachievesrepeatabilityoftheprocess.Ifwelookatthecastingprocessagainasanexample,wecanunderstandthateventhebestcastingprocessisgoingtomanufacturedefec-tiveproducts;therearejusttoomanyvariablesintheprocesstobecon-trolled;defectswillinevitablyoccur.Itistruethatbetterorganizationshavebetterprocesscontrols,andtheyhavefewerdefects;however,theyhavedefectsnonetheless.Thekeyfromamanufacturingperspectiveistocontroltheabnormalitiessothatthecustomerdoesnotseeanyfluctuationinthelevelofqualitytheyarereceiving.InToyota,thisisreferredtoasjidoka,orbuilt-inquality.Forthistobesuccessful,eachprocessintheproductionprocesshastoachieverepeatabilitytoensurethatthenextprocessiscapa-bleofperformingtherequiredstandardizedwork.Thisisfollowedfromoneprocesstothenextwiththefinal,predictableoutcomeofsupplyingperfectproductsforthecustomer.
Standardizedworkisthebasisforcreatingthepatternofrepeatabilityfromoneproducttothenext,oneprocesstoanother.Throughtheutiliza-tionofstandardizedwork,theentireproductionprocesscanbemanaged.Withoutstandardizedwork,wastewillinevitablyproliferateandflowfromthetopdownthroughouttheorganization.Inaproductionprocesswherestandardizedworkisnotpresent,wastereadilyshowsitself.
2.8 JustInTime(JIT)
AswereferbacktotheToyotaProductionSystemhouseinFigure 2.6,thepillarsofthehousearejust in timeandbuilt-in quality.Justastheconceptofstandardizedworkismostoftenattributedtomanufacturingprocesses,thepillarshaveapplicationwithalltypesofoperations.
Justintimeisthecommonsensephilosophyofcontrollinginventorybyorderingandusingtherawmaterialsneededtoproduceonlytheproductsthatarenecessarytomeettheorderofthecustomer.Whentheconceptis
38 ◾ The Toyota Kaizen Continuum
fullyexploited,thedesireistooperatewithlittleornoin-processinventory,whichresultsinshortenedleadtimeaswellasfreeingupworkingcapital.Whenproperlyimplemented,just-in-timeproductionensuresthatwhatisbeingbuiltisneededandwhatisneededisbeingbuilt.Theconceptofbuilt-inqualityensuresthatwhatisbuiltisfreeofdefectsforthecustomer,andthereforeallproductsthathavebeenproducedareconvertedtofin-ishedgoods,minimizingworkinprocess.
Considerthesituationat95%ofallmanufacturingcompaniestoday.Allmanufacturingcompanieshaveaprocessthattakesacertainnumberofrawcomponentsandprocessesthosecomponentsintoaparticularproductthatisthensoldtothecustomer.Thecompanyonlymakesmoneywhentheproductbeingproducedcanbesoldtothecustomer.Anyproductsthatareproducedinexcessofwhatthecustomeriswillingtopurchasedoesnotprovidedirectvaluetotheorganizationtoday.Alloftherawmaterialsandpartiallymanufac-turedcomponentshavenovaluetothecustomer,astheyareonlywillingtopayforthefinishedproducts.Basedonthissituation,itonlymakessensetominimizeallexcessinventoriesandstrivetoproduceonlywhatthecustomeriswillingtopurchase.
Toachievethisprocess,theorganizationgenerallywillprepareaproduc-tionschedulethatwilldrivethepurchaseofalloftherawmaterialsandscheduleallofthenecessaryproductionequipmentandprocesses.Thesched-uleisdistributedtotherelatedproductiondepartmentswithintheorganiza-tionandthenecessarysuppliers.Theexamplewouldendhereiftheworldwereperfectandeverythinghappenedaccordingtotheplan.Nochanges,noadjustmentsarerequiredinaperfectworld.Allofthesuppliersareabletomeettheircommitmentswithoutaproblem,thecustomerorderdoesnothaveanyadjustmentpositiveornegative,andofcoursethemanufacturingdepart-mentrunsasplannedandeverythingisrightwiththeworld.
EveninsophisticatedorganizationssuchasToyota,itisrarethattheplaneverproceedswithoutchangesandalterations.Thereasonforthechangeissimple.Theconditionsunderlyingtheoriginalproductionplanwhenitwasfirstdevelopedaredestinedtochangepriortoandduringthetimetheplanisbeingimplemented.Dependingontheconditionoftheeconomy,thesechangescanoftenbequitesevere;anyonewhowasintheautomotivebusi-nessfromOctober2008throughMarch2009knowsthis.Notwithstandingtheradicalchangesthatindustryhasseenduringthegreatrecessionof2009,itisanenormoustasktocoordinatethesometimeshundredsandeventhousandsofindividualcomponentsthatneedtobemanufacturedtoproducethevolumeoffinishedgoodsattributedtotheproductionschedule.
Foundational Elements of the Toyota Production System (TPS) ◾ 39
Therefore,itisnotsurprisingthatoftentheproductionschedulehastobemodifiedtocompensateforthemanychangesthatoccurfromthetimethescheduleisinitiallydevelopeduntilthetimetheactualproductisproducedandshippedtothecustomer.Theabilityofanorganizationtomanagetheseschedulemodificationsspeakstoefficiencyoftheoperation.WhenIamvis-itingcompaniesforthefirsttime,Ispendagreatdealoftimeobservingtheproductionenvironment.ItisthroughtheseobservationsthatIamabletoidentifyhowcapabletheorganizationisinregardtotheoveralloperationsofthecompany.Whenthisprocessisnotmanagedeffectively,thesymptomsaregenerallyeasilyidentifiableduetobuildupofinventory,whichincreasestheleadtimeforthecustomerandconsumesworkingcapital.
Theconceptofjustintimeavoidstheseproblemsbyfollowingthreefun-damentalprinciples:
1.ThePullSystem—Buyonlywhatisneededandproduceonlywhatyoucansell.
2.FlowProduction—Leveledproductionwheretheproductionisalwaysmoving.
3.TaktTime—Synchronizedoutputbasedoncustomerdemand.
2.8.1 The Pull System
Thefirstfundamentalprincipleofjust-in-timeproductionisthepullsystem(Figure 2.14).Throughtheyearsthepullsystemhasgainedalotofnotori-etyinthemanufacturingworld.Thiscanbeattributedprimarilytooneofthetoolsutilizedinthepullsystem,thekanban.Althoughthekanbanisanexcellenttoolforimplementingapullsystem,itissimplyatool.OftenIfindinthevastoceanofmaterialsonleanmanufacturingandtheTPSthatthereisafascinationwiththetoolsutilizedbyToyotaandothersforimplementingjustintime.Althoughthisisnotnecessarilyabadthing,itisimportanttounderstandthatthesearesimplytoolsandthesystemcanbeimplementedutilizingvarioustools.Somepeoplewantyoutobelievethatwithoutthekanban,thepullsystemcannotbeimplemented.Thisisincorrect.
Therealessenceofthepullsystemistheflowofinformation.Intradi-tionalorganizations,informationispushedthroughthesystem.Sincemate-rialwillultimatelyfollowtheflowofinformation,thematerialendsupbeingpushedthroughthesystem,creatingstockpilesofinventoryatvariousstagesofthemanufacturingprocess.InFigure 2.15thematerialispushedthroughthesystemandthereisthirty-sixandahalfdaysofinventoryinthe
40 ◾ The Toyota Kaizen Continuum
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42 ◾ The Toyota Kaizen Continuum
system.Thisisalotofworkingcapitaltiedupinproductthathasnorealvaluetothecustomer.
Inapullsystem(Figure2.16),theinformationflowissimplified.Withoutchangingtherequirementsfromthecustomerandforthesuppliers,theover-allflowofinformationcanbemademoredirectandusefulfortheinternalprocess.Byusingsomesimplejust-in-timetools,includingkanban,theover-allmanufacturingprocessismademoresimplisticandinventoryiscontrolled.Thelevelofinventoryisstillnotideal,butitismuchimprovedfromtheinventorylevelinthepushsystem.Theinventorylevelinthepullsystemismaintainedatelevendays,whichistwenty-fiveandahalfdaysimprovementfromthepushsystem.Thisnotonlysimplifiesthemanufacturingprocessbutitreducesthelevelofworkingcapitalneededtomaintaintheprocess.
Althoughthismaysoundalittlecomplexifyouarenewtotheleanmanufacturingwayofthinking,fundamentallyunderthepushsystemyouareproducingwhateverisprocessedfromthepreceedingprocess,andyourabilitytoprocesstheworkinprocessfromthepreceedingprocessdeter-minesthelevelofinventorybetweentheprocesses.Withthejust-in-timesystem,theprecedingprocesspullsonlytheproductnecessarytocompletetheorder.Theprocesswherethepartsarepulledcanthenreplaceonlywhatwaspulled.Byfollowingthis,someofthebenefitsofthepullsystemarethefollowing:
◾ Excessinventoryiseliminated.◾ Productioninstructionistiedtotheprocessthatisclosesttothecustomer.◾ Theproductionprocessissynchronized.◾ Communicationisimprovedbetweenprocesses.◾ Theneedforgoodqualityandincreasedprocessreliabilityishigh-lighted,improvingtheoverallefficiencyoftheoperation.
Figure2.16 PullSystemExample.
Foundational Elements of the Toyota Production System (TPS) ◾ 43
2.8.2 Flow Production
Thesecondfundamentalprincipleofjustintimeisflowproduction.Continuousflowproductionisbasedontheconceptofeliminatingthestopsandstartsassociatedwithmanufacturing,thuskeepingtheproductionpro-cessleveledandmaintainingtheflowofthematerialthroughtheprocess.Flowproductionworksinunisonwiththepullsystemtoreducetheoverallmanufacturingleadtimeandreducethelevelofinventoryintheprocess.
Ideallyflowprocessingisachievedbyproducingproductoneatatime.Toachieveone-pieceflow,productisproducedoneatatimeandpassedtothenextprocess.Producingpartsinbatchesforthenextprocessisnotallowedundertheconceptofone-pieceflow.Byachievingone-pieceflow,wecanreducethestartsandstopsassociatedwithtraditionalbatchproduction.
Let’sconsiderFigure2.17.Inthisexample,ittakesoneminutetoprocesseachunit.Becausetherearefourprocessesthatneedtobecompletedpriortotheproductbeingreadytobesoldtothecustomer,therearefourmin-utesofprocessingrequiredtoproduceeachproduct.Therefore,theproduc-tionleadtimeforthisproductisfourminutes.
Nowlet’slookatamoretraditionalapproachtomanufacturing(Figure2.18).Inthisexample,productisstillproducedonanassemblyline,buttheproductsareproducedinbatchesoftwelveproducts.Inthisexample,aunitstillrequiresoneminutetobeprocessedthrougheachofthemanufacturingprocesses.Inadditiontothemanufacturingtime,eachpartnowhastowaitforthebatchoftwelvetobecompletedpriortomovingtothenextprocess.Thepartswaitanaverageofsixandahalfminutespriortobeingprocessedtothenextprocess.Whenwemultiplythiswaittimebyfourprocesses,eachproductwaitsatotaloftwenty-sixminutesandtakesfourminutestopro-cess;thereforethetotalprocessingtimeisthirtyminutes!Thisdoesnotevencountthewaitingattheendoftheprocessfortheproductstobepalletized.
IamnotsayingthattheTPSdoesnotallowbatchprocessing.Theimportantfactortounderstandisthatthesearejustconceptsthataretobeutilizedasmuchaspossibleinordertogettheprocessclosertotheidealstate.Ofcourseitisnotalwayspossibletoproducetheproductsoneatatime.However,byutilizingtheconceptofone-pieceflow,wecanminimizethelotsizeofthebatch,thusreducingtheoveralltimethatthepartspendswaitingforproduction.
Thegoalofflowproductionistoproducetheproductsinthelowestpos-siblelotthatenablestheproducttobeefficientlyproduced.
44 ◾ The Toyota Kaizen Continuum
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Foundational Elements of the Toyota Production System (TPS) ◾ 45
2.8.3 Takt Time
Thefinalfundamentalaspectofjust-in-timeproductionistakttime.Takttimeisthesynchronizationofproductionbasedonthecustomerdemand.Ironically,takttimehasitsrootsinGermany.TaktcomesfromtheGermanwordTakzeit,meaningcycletime.Thisisinterestingbecausecycletimeandtakttimearetwocompletelydifferent,thoughrelated,concepts.
Takt Time = Total Daily Production Time
Total daily customer requirement
Cycle Time = Total Daily Production Time
Total possible units produced
Takttimeisthetimethatisnecessarytoproduceoneproductthroughtheproductionprocess.Thistimeistakenbytakingthetotalcustomerrequire-mentperdayanddividingthisintothetotaldailyproductiontimeavailable.
Forexample,let’sassumethatthecustomer’sdemandforaparticularproductistwentythousandproductspermonth.Sincewehavetwentydaysofscheduledproduction,thisgivesusadailyproductionrequirementofonethousandproductsperday.Ifmyproductiondayisbasedonsevenandhalfhoursofproduction,thatgivesmefourhundredandfiftyminutesofpro-duction,whichmeansthateachproductrequirestwenty-sevensecondstoproduce.Mytakttimeforthisproductistwenty-sevenseconds.
Understandingthetakttimeforeachofthevariousprocessesisessentialinordertodeterminetheoptimalprocessflow.Ifeachprocessproceedsaccordingtothespecifictakttimerequired,thenonlythenumberofprod-uctsnecessarywillbeproduced.Takttimeisthedemandfortheprocess.
Figure2.18 In-ProcessInventory.
46 ◾ The Toyota Kaizen Continuum
Cycletime,ontheotherhand,isbasedonthecapabilityoftheprocess.Eachprocessmustbeabletocompletetherequiredcycletimetomeetthedemand,takttime.Oftenthecycletimeisnotcontrolled,andthisresultsinoverproduction.
AgoodexamplethatillustratestheimportanceoftakttimeversuscycletimeoccurredwhenIwasworkingonaprojectatabakery.Theprojectwastooptimizetheassemblyoperationforchocolatecakes.Yes,thisisarealexample;andno,itwasn’tassignedbymyten-year-oldson.
ReferringtotheillustrationinFigure 2.20,youcanseethatthechoco-latecakelineoriginallyhadfiveoperators.Theprocessstartedwiththefirstoperatorloadingthecardboardtraysthatthecakessiton.Itturnsoutthatthecakesneedhelpstayingonthetray,soitisnecessarytoapplydropsofcornsyruptoeachtraypriortoassemblingthecake.Theopera-torloadsthetrayintoanautomatedsystemforapplyingthecornsyrup.Becauseonlyonecakesitsonatrayforathree-layercake,thetray-load-ingprocesswasnotverybusy.Infacttheoperatorspendsthemajorityofhistimewaitingforthenextoperatortoremovethetrayandbeginassemblingthecake.Thisisaclassicexampleofmudaintheprocess,butwearen’tdiscussingmudauntilthenextchaptersoIwon’tgoonaboutthat.
Anotherinterestingaspectaboutthisoperationisthatthecornsyrupapplicationusedtobeamanualprocess.Theformermanagementteamhadhireda“leanguru”tohelpthemoptimizetheirprocess,andoneoftheresultsoftheimprovementeffortwastospendtwentythousanddollars
Takt Time is the unit ofmeasure for determing thedemand for each product.
Cycle Time is theactual time necessary
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Figure2.19 CycleTimeversusTaktTime.
Foundational Elements of the Toyota Production System (TPS) ◾ 47
buildingamachinethatwouldapplythetwodropsofcornsyruptothepapertray.Iaskedthefloormanagerhowmanypeopletheyhadontheoperationbefore,andhesaidtheyhadthesamenumberofpeoplebeforeandaftertheimprovementprocess.Iaskedhimwhatwastheeffectoftheimprovement,andhestatedthattheoperatordidnothavetomanuallyapplythecornsyrupandthissavedfivesecondsperprocess.Ifyoucanpic-turemescratchingmyheadtryingtofigurethisoneout,itisactuallyquitefunny.Again,thisisaclassicexampleofbeingwaryofso-calledgurus:notonlywastheprocessnotimproved,itwasactuallyworse.Thecompanyhadspenttwentythousanddollarstohavetheworkerspendmoretimewaiting.Thisisaclassicexampleofgoodintentionsgonebad.
Thenextprocesswasresponsibleforputtingthecakesonthetrays.Thecakescameoutoftheovenonaconveyortwoatatime,andthenthecakeclosesttotheoperatorwouldbeassembledtothecardboardtraywiththecornsyrup.Atthisprocessthecakestransferredfromtheovenconveyortotheassemblyconveyor.Thethingaboutthisprocesswasthattheovenconveyorandtheassemblyconveyorwererunningatthesamespeeds.Withtheprocessbeingtoassemblethree-tieredchocolatecakesandthe
Problem 3:
Two cakes enter frosting area are stackedand moved to next station. Worker onlyutilizing one hand and excessive waittime due to flow of cakes.
Problem 4:Cake stacker 2 does nothave enough volume ofcakes to keep busy.Excessive wait time.
Problem 5:
Excessive cake inventory for3rd tier reduces output ofcompleted cakes.Stagnant inventory.
Problem 2:
�ree people in tray loadingarea. Excessive wait timebased on workload.
Conveyor 2
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Figure2.20 ChocolateCakeLine:BeforeKaizen.
48 ◾ The Toyota Kaizen Continuum
cakesrunningdowntheconveyortwoatatime,thiswasboundtocauseaproblemsomewherealongtheline.However,whenIspoketotheoperator,everythingseemedtoberunningsmoothly.
Thenextprocesswasthecakestackers.Thefrostingmachineswereonthesamesideoftheline,anditwasthejobofthecakestackerstowaitforthecakethatwasassembledtothecardboardtraytopassthroughthefrostingmachineandthenassembletheothercaketothetray.Thissoundssimpleenough,butthisiswherewesawtheproblemwiththeconveyorspeeds.Sincethecakeswerefedtwoatatimefromtheovenandtheassemblyconveyorandtheovenconveyorwererunningatthesamespeeds,wheredoescakestacker#2processgetthecakestoformthethirdlayerofthecake?
Theanswerwasthecakewaitingarea.Itseemsthateverynowandthenwhenthecakestacker#2needscakesforthecakewaitingarea,theentireprocessisstoppedandthecakesareremovedfromtheassemblyconveyorandareplacedinthecakewaitingareatobeassembledasthetoplayerofthethree-tieredcakes.Duringthisprocessofabnormalhandling,thecakesoftenwouldgetdamagedandtherewasnotagoodmethodforcontrollingtheinventoryortheprocessforrestockingthecakewaitingarea.Thisledtooldcakesbeingstoredinthecakewaitingarea,anditalsoledtoassembledcakesbeingstoredinvariouslocations.Thiscomplicatedtheprocessandmadeschedulingnexttoimpossibleforthenextproductionline,whichwasresponsibleforpackagingthecake.
Duetothefluctuationoftheprocess,thesupervisorhadassignedafill-inpersontotheareatohelpwiththenonstandardwork.Thismeantthatwenowhadfivepeopletryingtoassembleathree-layercakewithfourprocesses.
Whowouldhaveeverthoughtthatassemblingathree-layerchocolatecakecouldbesocomplicated?
Thegoodnewsisthateventhoughtherewerealotofcomplicatingfac-tors,theprocesswasquitesimple.Oncetheactualprocessforassemblingthecakecouldbeunderstood,wewereabletoimprovetheefficiencyofthecakelinebyfocusingonthetakttimeofthecakeline(Figure2.21).
Thefirstthingwedidwasremovethetwenty-thousand-dollarpieceofequipmentthatthe“leanguru”hadinstalled.Wereinstatedthemanualpro-cessforapplyingthecornsyrupandcombinedthefirsttwoprocessesintooneprocess.Thesecondcountermeasureweimplementedwastounder-standwheretheproductionpacewascontrolled.Sincetheovenconveyorwasfixedandthetimetobakeacakewasengineeredbasedonthespeci-fiedtemperatureandtimethecakeneededtobeintheoven,wecould
Foundational Elements of the Toyota Production System (TPS) ◾ 49
understandtheprocessdemand.Weinvestigatedtoseeifthecakescouldrunthroughtheoveninrowsofthreeversusrowsoftwo,andthiswasnotpossiblewiththecurrentequipment.Thesolutionwastosimplyreducethespeedoftheassemblyconveyor.Byreducingthespeedofconveyor2sothatconveyor1ranat1.3timesthespeedofconveyor2wewereabletosupplythreecakestotheassemblyconveyorandmaintainanevensupplyofcakes.Sincethelinespeedshadbeenadaptedforathree-layercake,theoutputwascontinuousandwewereabletoeliminatethecakewaitingarea.Byreinstallingthefrostingmachinestoaside-by-sideconfigurationandestablishingapatternforthecakeproduction,wewereabletocombinethetwocake-stackingprocessesintooneprocess.Thisvirtuallyeliminatedallofthewaitingtimeintheprocess.Becausewehadleveledtheproduction,wealsohadeliminatedthenonstandardworkandthiseliminatedtheneedforthefill-inperson.
Whenyouexaminethenewprocess,you’llseewewereabletoaddressalloftheproblemsthatexistedintheprocessbeforethekaizen
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Figure2.21 ChocolateCakeLine:AfterKaizen.
50 ◾ The Toyota Kaizen Continuum
andwhilesimplifyingtheprocesswewereabletogofromfivepeopleneededtoassemblethecakestotwopeople.Thiswasasavingsofthreepeoplepershift.
2.9 Jidoka
ReferringbacktotheTPShouseinFigure 2.6,theotherpillaroftheTPShouseisjidoka,orbuilt-inquality.Thephilosophyofbuilt-inqualityisthatqualityisconfirmedateachprocess,resultinginthefinishedprod-uctsbeingdefectfree.Built-inqualitycanalsobereferredtoas“customerfirst.”Fundamentallythecustomerdemandsaproductfreeofanydefects;thereforeitiseveryone’sresponsibilitytoproduceunitsfreefromdefects.Theonlywaytoachievezerodefects,sometimesreferredtoasdeltazero,istoensurethateachprocesshastheabilitytoproducethelevelofqualitydemandedbythecustomer.Fromanoperationalperspective,thecustomerisalwaysconsideredtobethenextprocess.
Toachievebuilt-inquality,theprocesshastohavetheabilitytostoppro-ductionwheneveranabnormalityinoperationoccurs.Thisisreferredtoasautonomation.Autonomationisdifferentthanautomationinthattheprocess,whethermanualorautomated,hastheabilitytoidentifytheabnormalityandhaltproductionuntiltheproblemcanbecorrected.Thiscanalsobethoughtofasautomationwithahumantouch.
Therearesignificantbenefitstobuildingqualityintotheprocess.Thefirstbenefitisthatdefectsstopflowingthroughtheprocess,reducingthereworknecessaryaswellasreducingscrap.Thisimprovestheefficiencyoftheoperation.Thesecondbenefitisthattheequipmentismonitoredmorecarefully,andabnormalitiesintheequipmentcyclecanbecorrectedpriortoacatastrophicfailure.Thisincreasesequipmentuptime.Thethirdbenefitisthateveryonebecomesaninspector,andtheneedfordedicatedpersonneltojustconfirmtheworkcompletedbyothersisreduced.Finallyandmostobvi-ously,thistypeofsystemexposesproblems,thusmakingtheproblemseasiertosee.Forcingtheproblemstothesurfaceallowsmanagementtofocusontheissueanddevelopcountermeasures,resultinginamorestableoperation.
Oneexampleofbuilt-inqualityisthefixedpositionstop.Manyfactorieshaveproductionconveyors,andasimpleinnovationsuchasthefixedposi-tionstopallowsforabnormalitiestobeidentifiedandcorrected,minimizingtheinterruptiontoproduction.InFigure 2.22ofanassemblyline,whenaworkeridentifiesaproblemwithintheprocess,hepullsaropeknownasan
Foundational Elements of the Toyota Production System (TPS) ◾ 51
andon rope. Theandonropeactivatesalightknownasanandon light;gen-erallythisisaccompaniedbyanandon tone.Aslongastheprocesshasnotadvancedtothefixedpositionstop,theandonlightturnsyellowandthisactivatesalightonanandon board.Theandonboardislocatedinacentrallocation,whereitcanbemonitoredbythesupervisor.Whenthesupervisorhearsthetone,helookstotheandonboardandcanquicklyascertainwheretheproblemisinthisillustration,station2.Thesupervisorcanalsoseethatthelinehasnotstopped,sincetheandonboardhasayellowlight.Thesupervisornowrespondstothepointoftheproblemandworkswiththeemployeetoresolvetheconcern.Iftheconcernisresolvedbeforetheprod-uctadvancestothefixedpositionstop,thesupervisorwillpulltheandonropetoreleasetheline,andproductionisneverinterrupted.Iftheproductreachesthefixedpositionstop,theconveyorstopsandtheandonlightandboarddisplayredlightsindicatingthelineisdown.Thisingenioussystemisasimpleandeffectivetoolforbuilding-inqualitytotheprocess.
BasedonthefoundationofstandardizationrepresentedinFigure 2.6,andwithJustinTimeandBuilt-inQualityformingthesupportingpillars,theroofoftheTPShouseiskaizen,orcontinuousimprovement.Thecon-ceptofcontinuousimprovementisbasedonthephilosophyofincrementalimprovementintheprocess.
2.10 ContinuousImprovement(Kaizen)
Continuousimprovementisnotpossiblewithoutafirmfoundationofstandardizationintheorganization.ThisisillustratedinFigure 2.7.Eachincrementalstepinthecontinuousimprovementprocessmovestheprocessclosertotheidealstate.Althougheachelementofthehouse
1 2 3 4 5 6
0.25 0.5 1.0
Fixed Position Stop Fixed Position Stop Fixed Position Stop
Fixed Postion Stop Illustration with Andon
Andon Board
Andon LightAndon Rope
Figure2.22 AssemblyLineAndonExample.
52 ◾ The Toyota Kaizen Continuum
servesapurposeandtheyareallinterrelated,thepurposeoftheTPSiscontinuousimprovement.Withoutcontinuousimprovement,thevalueofthesystemcanneverberealized.Continuousimprovementisbothaprivilegeandacommitment.Ifthereisa“secret”elementtotheTPS,itiscontinuousimprovement.Continuousimprovementisadynamic,ever-changingprocess.InToyotawealwaysusedthesaying,“Younevermea-sureyourselffromwhereyouwere,onlymeasureyourselffromwhereyoushouldbe.”Oftenmanagementmemberstendtolookatwheretheyhavecomefromandbecomesatisfied;itisthisprocessofalwaysunder-standingthegaptotheidealsituationthatmakescleartheopportunityforcontinuousimprovement.Continuousimprovementcanalsobeveryfrustratingbecauseitislikeclimbinganever-endingladder.Seniorman-agersneedtobalancethelevelofrecognitionforimprovementwiththedesireforcontinuallydrivingtowardtheidealstate.Onlyahealthybal-anceofeachwillmotivatetheorganizationtomoveforward.ItwasoftenveryfrustratingtoworkforToyotabecausewecontinuallymeasuredourselvesfromtheidealcondition.ThisiswhytodayyouwillfindtheseniormanagementofeveryToyotafacilityaroundtheworlddiscussingeventhesmallestmarginsofgapstotheidealconditionintheiropera-tions.Manycompanieswouldbecompletelycontentwithanoperationalefficiencyof98.5%;however,itwasthisdrivefortheidealsituationthatallowedtheToyotaplantinKentuckytoachieve100%operationaleffi-ciencyin1999,somethingthathadneverbeenachievedatanyToyotafacilityintheworld.
2.11 DevelopingtheTools
Whathasbecomeknownasthegreatrecessionof2009haddevastatingimpactsacrossalmosteverybusinesssegment.Manybusinessesthatwereonthebrinkofcollapsepriortotherecessioncollapsedcompletely,whiletheonesthathavefoundthemselvesontheothersideofthecanyonarelookingbackwonderingjusthowtheymadeit.Currentlytherearemanycompaniesinawiderangeofindustriestryingtoadapttothechangedenvironment.Someofthecompaniesarelookingtowardleanmanufactur-ingandaresearchingforthetoolsthatwillenablethemtoimprovetheirbusiness.ThereareliterallyhundredsofbooksthathavebeenwrittenontheTPS,andtherearemanytoolsthatcanbeusedtomakerealimprove-mentinanyoperation.Thechallengethatmanybusinessesarefacingis
Foundational Elements of the Toyota Production System (TPS) ◾ 53
thattheydonotunderstandwhichtooltodeploytomaketheimprovementthattheyaresearchingforintheircompany.ThemanytoolsoftheTPSaregreattools;however,ifappliedwithouttheknowledgeandprinciplesofthesystem,thesetoolscanactuallycausemoreharmthangood.Manypeoplewithintherealmofleanmanufacturingareopposedtoutilizingtoolstoderiveshort-termgainsinthebusiness.PersonallyIthinkthattherighttoolsusedintherightcircumstancescanbeexcellentcatalystsforanorganization.Theorganizationfueledbytheopportunityprovidedbyshort-termgainscanoftengainmomentumtowardlongertermandsustainableimprovement.Thekeyistounderstandthetoolsandtohavetheknowledgenecessarytoutilizetheappropriatetoolinordertocapturetheopportunitythatispresented.Ofcourse,fortheorganizationtohavelong-termsus-tainedimprovement,theleadersintheorganizationneedtohaveamorecomprehensiveviewofhowtodevelopasystematicprocessforcontinuousimprovement.
Figure2.23 Tools.
55
Chapter 3
WhytheToyotaProductionSystemMakesSense:CommonSense
3.1 CommonSense101
Inthefourteenthcentury,anEnglishlogicianandFranciscanfriarnamedWilliamofOckhamintroducedaprinciplethathasbecomeknownasOckham’srazor.Thisprinciplestatesthatallthingsbeingequal,thesimplestsolutionisusuallythebest.Thisisespeciallytrueinmanufacturing.ThemostcommonmistakeIfindinmanufacturing,andespeciallyoperations,isthatseniormanagementwantstobelievethattheirprocessofmanufacturingeventhesimplestproductsisthemostcomplexformofmanufacturingandthatiftheyhavenotthoughtofasolutionthenitprobablydoesnotexist.
Apracticalapplicationofthispointcanbeseenwhenweexaminethenowfamouskanbansystem.SomanytimeswhenIamtalkingtooperatingmanagers,theygetcaughtupontheJapaneseterminologyandforgetthatthekanbanissimplyatoolformanagingaverysimpleprocessfoundinmanufacturing:theprocessofsupplyanddemand.
Whenwethinkoftheproductionprocess,fundamentallyitcanbebro-kendowntothebasicconceptoftheflowofmaterial,ormaterialflow.Ineveryoperatingcompany,sometypeofmaterialflowsthroughtheestab-lishedprocesses,andsometypeoffinalproductisproducedandiscon-sumedbythecustomer(Figure 3.1).
OftenIamaskedhowIamabletoapplytoolsthatarefundamentaltoanindustrysuchastheautoindustrytoabroadspectrumoforganizations.
56 ◾ The Toyota Kaizen Continuum
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Why the Toyota Production System Makes Sense ◾ 57
Theanswerissimple:allcompaniesoperateinsomecapacity.Itdoesnotmatterifthecompanyisamanufacturingcompanyoraserviceprovider.
Allcompaniesreceivesomething—let’scallitacomponent—whetheritisarawmaterialorinformation.Everycompanyhasaprocessandaplantodosomethingwith,orto,thecomponenttomeettheneedsoftheconsumer.Inamanufacturingprocess,thisisprettystraightforwardbecausethecomponentsreceivedareutilizedtomanufactureafinalprod-uctbasedontheneedsoftheconsumer.Everyprocessinamanufacturingoperationisdevelopedandexecutedtomanufacturetheproductneces-sary.Inadistributioncompany,thecomponentcanbeafinalproductsuchasawoman’sshirt,andtheprocesscanbetoreceivethatshirtfromthemanufacturerandthendistributeittothecustomer.Itcouldalsoentailcomminglingthatshirtwithapairofpantsfromanothermanufactureranddistributingthecombinedcomponentstothecustomer.Inbothcases,thecompanyisprovidingsometypeofserviceorvaluetothecustomer.Themorevaluabletheprocessorserviceistothecustomer,themoredemandiscreatedbythecustomer.
Whydoestheconsumerchoosetoordertheshirtfromthedistribu-torandnotjustorderitdirectlyfromthemanufacturer?Isn’titcheaperforthecustomertobuytheshirtdirectlyfromthemanufacturer?Theobviousanswerisyes,buttherehastobesomevalueintheservicethatthedistri-butioncompanyisproviding.Intheexampleofadistributioncompany,thevalueistheeconomyofscale.Let’sassumeweareorderingashirtfromamanufacturerinIndia.Ifashirtcosts$5.00tomanufacture,themanufacturerhastomakeaprofitsotheybuilda20%marginintotheshirtandchargetheconsumer$6.00fortheshirt.NowIwanttowearmyshirtnextweek,soIneedtoshipmyshirtbyair.Theshippingcost,onceIarrangetheship-pingmyself,is$3.95togettheshirttomyhouse.BecauseIamimportingtheshirtdirectlyfromIndia,Ialsohavetopaydutyontheitemandlet’sassumethatrepresents$0.50.Mytotallandedcostfortheshirtis$10.45.
Cost of shirt $6.00
Air freight $3.95
Duty $0.50
Total $10.45
Nowlet’sassumethevalueofthedistributioncompany.Thedistribu-tioncompanyordersfiftythousandshirtsandthereforethedistribution
58 ◾ The Toyota Kaizen Continuum
companyworksoutadealwiththemanufacturertolowerthemanu-facturingmarginto10%,or$0.50.Now,becausethedistributorisship-pingfiftythousandshirts,theyshiptheminadvanceoftheseasonbyboat,andbecausetheyareshippingsomanyotherproducts,theyareabletoworkadealbasedonthescaleoftheshipmentandtheshirtsareshippedfor$1,000,or$0.10pershirt.Thedistributorhastopaydutyandbecauseofthevolume,thedutyismuchless,$0.25.Theconsumerordersthesameshirtandthedistributorhastocoverthedistributioncostsandmakeamargin,sotheycharge20%ofthelandedcost.Theconsumerhastopaylocalshippingof$1.50.Thus,thetotallandedcostfortheconsumeris$8.52.
Cost of shirt $5.50
Freight $0.10
Duty $0.25
Dist Margin $1.17
Shipping $1.50
Total $8.52
Inthisinstance,theconsumersaves$1.93.Thisisthevaluethatthedistributioncompanyprovides.Thismakescommonsense.
Fromanoperatingperspective,iftheprocessofdistributingtheproducttothecustomercanbestreamlined,eliminatingwaste,wecanreducethecostsofdistributionandwethereforeincreasethevaluethedistributorprovidesfortheconsumerorwecanmaintainthepriceandincreasethemarginofthedistributioncompany.
Althoughthisisasimplifiedexample,itillustrateshowbasicoperationsapplytoallcompanies.TakingthetimetounderstandthebasicoperationofanyorganizationandthenapplyingthebasiccommonsenseprinciplesoftheToyotaProductionSystemdiscussedinthisbookwillleadtoincreasedvalueintheorganization.Whethertheorganizationisfacedwithpressurefromtheconsumertolowerprices,orwhethertheorganizationneedstoreducetheoveralloperatingcoststomaintaincompetitivenessinthemar-ketplace,theseprinciplesarearoadmapforimprovingtheoperationsofanyorganization.
Why the Toyota Production System Makes Sense ◾ 59
3.2 UnderstandingValue
AnothercommonsenseprinciplethatisreflectedintheToyotaProductionSystemthatappliestoeverybusinessisthattheoverallvalueofthebusiness,product,orserviceisdeterminedbythecustomer.Therefore,understand-ingtherequirementsofthecustomerenablestheorganizationtofocusonthecorrectthingsinsideoftheorganizationandmaximizethevalueoftheorganization.Themorevaluabletheorganizationis,theeasieritisfortheorganizationtoremainviable.Especiallyduringthechallengesofadowneconomiccycle,theseprinciplesmakemoresensethanever.
Manyorganizationsdeterminethepricethatthecustomermustpayfortheproductusingthefollowingmethod:
MaterialCost+OperatingCost+Margin=CustomerPrice
Thisistheconventionalwayoflookingatproductcost.Usingthismodel,thecompanysetstheprice,andthecustomerhasafixedprice.Usingthismodelisfinewhentheproductisinhighdemandandthereisalackofcompetition.Usingthismodel,thecompanycandeterminetheirmargins,andthereforetheyhavecompletecontroloverthecostoftheproduct.Whattheydonothavecontroloveriswhetherthedeterminedcostisintherangethatthecustomeriswillingtopay.
AnotherapproachusedinToyota’ssystemisforthecompanytohaveagoodunderstandingofthecostthatthecustomeriswillingtopayfortheproductbasedonthevaluetheproductprovidestothecustomer.Inthatcase,wewouldfollowthismethod:
CustomerPrice–MaterialCost–OperatingCost=ProfitMargin
Asthisformulaillustrates,thecustomer,orthemarket,determinesthepricefortheproduct;theprofitmarginisachievedbysubtractingthecosts.Oneofthebenefitsofthismethodologyisthatbecausethemarkethasdeterminedtheprice,themargincanbeincreasedbyloweringthecostofproducingtheproduct.Becausethecompanyhasdirectcontroloverthecostoftheproduct,theycanincreasetheirmarginbymanagingtheircosts.Althoughthismakescommonsense,thisapproachrequiresalotofdisciplineforthecompanytobesuccessful.ManytimesIhaveseenstressedbusinessesthatareunableto
60 ◾ The Toyota Kaizen Continuum
containtheirinternalcosts,andtheyarelockedintoafinishedproductcostwiththecustomer.Inthesescenarios,companiesgetthemselvesintoanega-tivemarginsituation.Oftenthisiscausedbecausetheproductrequiresarawmaterialwithalotofvolatilityintheprice(e.g.,plastic,copper,etc.).Intheseinstances,itisimperativethattheorganizationprotectthemfromthisfluctua-tionbyputtingintoplacepass-throughagreementsinthecontractforrawmaterialsorcomponentsthathaveahighdegreeofvolatility.Fromapricingstandpoint,thismakescommonsense.
Ifwethinkofthebasicfundamentalofsupplyanddemand,themanu-facturingprocessneedstobeabletoproducethenumberoffinishedproductsthatthecustomeriswillingtopurchase.Whenwethinkofmanu-facturinginthisway,wenaturallymuststartwiththecustomertounder-standhowmanyproductsthecustomeriswillingandabletopurchase.Thismakescommonsense.
3.3 UnderstandingDemand
Nowthattheorganizationhasagoodunderstandingofthepricethecustomeriswillingtopay,itisimportanttoworkwiththecustomerbasetohaveagoodunderstandingoftheoveralldemand.Ifthereisoneareaofbusiness
Figure3.2 CustomerReceivingProduct.
Why the Toyota Production System Makes Sense ◾ 61
wherebusinessesfailmiserably,itisanticipateddemand.Oncethecustomerdemandisunderstood,itmakescommonsensethatthemanufacturingprocessshouldproduceonlytheproductsthatthecustomeriswillingandabletopurchase.Iftheprocessproducesmoreproductsthanthecustomeriswillingtopurchase,thentheywillhavepurchasedmaterialandpaidfortheconversionofthatmaterialwhenthereisnowaytoconvertthefinishedproductsintocash.Thereforewecansaythatiscommonsensetoproduceonlywhatisnecessarytomeetthecustomerdemand.
Tobeabletoproducethedesiredfinishedproducts,wearegoingtohavetomanufacturetherequiredfinishedgoods.Tostartthisprocess,weneedsomemethodtotellthemanufacturingprocesshowmanyfinishedgoodsarenecessary;thisagainisjustcommonsense.Sinceweunderstandourmanufacturingprocess,wealsounderstandhowmaterialflowsthroughourprocessandthereforewehavetoincorporatethisinformationintoourmethodofcommunication.Forthesakeofsimplicity,let’sconsiderthattheeasiestwaytoinformtheproductionprocesswhatcomponentsareneces-saryistowritetheinformationonanindexcardandgiveittothedeliverydepartment.Let’scallthisindexcardakanban.Theliteraltranslationofkanbanissignboard(Figure3.4).
Nowthatthekanbanhasbeenreceivedfromthecustomer,thedeliverydepartmentcanscheduletheproductionbasedonthenumberofunitsthatneedtobedeliveredtothecustomer.Thedeliverydepartmentwilltakeallofthemanufacturingvariablesunderconsiderationanddeterminewhentheproductscanbeavailabletothecustomer.Becausethecustomeriswill-ingtopurchasetheproductsassoonaswecanmakethem,itmakescom-monsensethatweshouldproducetheproductsasfastaswecanorwith
Figure3.3 ExcessiveProducts.
62 ◾ The Toyota Kaizen Continuum
theshortestleadtimepossible.Todothis,thedeliverydepartmentwilltakethecustomerkanbanandbreakitintoproductionkanbans.Theproductionkanbanswillbebasedontheproductioncapacityoftheindividualproduc-tionprocessesandtheconveyancetimefromoneprocesstothenext.
Nowthattheproductionkanbanhasbeenestablished,thepullprocesscanbegin.Asdiscussedearlier,thepullprocessbeginswiththecustomerorder.Oncethecustomerorderhasbeendetermined,thenthedeliverydepartmentwillpullthenecessarypartsfromtheproductionprocessbyissuingaproductionkanban.Theproductionkanbanwillindicatetothemanufacturingoperationthenumberofproductsthatareneededtobepro-duced(Figure3.5).Themanufacturingoperationwillthenissuesupplykan-banstoalloftherawmaterialandcomponentsupplierstobeginproducingthedesiredmaterials.Oncethematerialshavebeenreceived,theproduc-tionprocesswillbegin.Onlyorderingthematerialsthatarenecessaryforproductionreducescostsforunnecessarymaterials.Althoughthisprocessseemslikeacommonsenseapproachtomanufacturing,manyorganizationsstruggletounderstandhowtomanagethisprocess.
Followingthisprocessensuresthattheminimumresourcesareutilized,thusproducingtheproductwiththelowestavailablecost.ThissystemofmanufacturinghasbecomesynonymouswithToyotaandisknownasthejust-in-time(JIT)methodofmanufacturing.Aswediscussedearlier,justintimeisoneofthepillarsoftheToyotaProductionSystemHousereferredtoinFigure 2.6.ThisisoneofthedrivingprinciplesthatcanbeobservedwhenexaminingToyota’smanufacturingmethods.
Withdrawal Kanban(demand)
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10804-4I0
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Figure3.4 SimpleKanbanExample.
Why the Toyota Production System Makes Sense ◾ 63
Figure3.5 HeijunkaBox.
Figure3.6 KanbaninUse.
64 ◾ The Toyota Kaizen Continuum
3.4 CommonSenseinAction
NotonlydoesthisprocessmakesenseforacompanylikeToyota,Ihaveseenfirsthandhowtheseprinciplesapplytoalltypesoforganizations.Itisonlybytakingastepbackandobservingtheprocessfromadistancethatwecanunderstandwherethecomplexityoftheprocessexists.Aswasillustratedearlierintheexampleofoptimizingthechocolatecakelineatthebakery,oftentheanswersforimprovingaprocessarecommonsensesolutionstoproblemsthatothershavespentalotoftimeandmoneyattemptingtosolve.
OneexamplethatisavividreminderofthisprinciplecomesfromaCEOwhoattendedatrainingprogramIdesignedinordertoteachseniorman-agementandlinemanagementthebasicprinciplesoftheToyotaProductionSystem.InitiallytheCEOwantedtoattendthetrainingsessiontounderstandwhatallofthis“TPSstuff”wasallabout.Enteringthetrainingasaskeptic,theCEOwassurprisedtoseethatduringatwo-weekcourseofintensivetrainingitwaspossibletomakesubstantialimprovementtothebottomlineofabusinessbyidentifyingandeliminatingwaste.
Oneexamplethatwasimplementedinvolvedthepurchasingdepartmentandthefabricationdepartment(Figure3.7).Whiletheywereconductinga5Sexerciseinthefabricationarea,theCEOnoticedthattherewasanunusualquantityofscraptubing.Oncetheycorralledandsegregatedthescrap,the
To Assembly Process
To AssemblyProcess
Before Kaizen After Kaizen
12' steel pipe
8' steel pipe
Figure3.7 ExcessivePipeSections.
Why the Toyota Production System Makes Sense ◾ 65
majorityofthescraptubingconsistedoffour-footsectionsoftubing.WhentheCEOaskedtheoperatorwhythereweresomanysectionsoffour-foottubingbeingthrownaway,theoperatorstatedthatthetubingcomestothefacilityinsectionstwelvefeetlong.Themajorityoftheproductsproducedrequireeight-footsectionsoftubing,sofourfeetoftubingisremovedfromeachtwelve-footsection.Thefour-footsectionsaretoosmalltobeutilizedforotherproducts,sotheyaresoldforscrap.
Needlesstosay,theCEOwasshockedthat30%ofthematerialwasbeingscrappedandsoldatscrapmetalprices.TheCEOcalledameetingattheprocessandbroughttheheadofpurchasingdowntoreviewthescrappedmaterial.Aftersomeinvestigation,thepurchasingmanagerfoundoutthatthecompanywasbuyingthetubingat$2.50perfootfromthesupplier.Whenthepurchasingmanagerspoketotheclerkresponsibleforpurchas-ingthematerialtounderstandwhythetubingwascomingintwelve-footsections,theyfoundoutthattheycouldgetthetubingprecutintoeight-footsectionsbutthatduetotransportation,thetubingpricewouldincreaseto$3.00perfoot.Becausethepurchasingclerkwasaskedtokeeprawmate-rialpricesdown,heneverconsideredbuyingtheshortertubing;afterall,aneight-footsectionat$3.00perfootcostthecompany$24.00whileatwelve-footsectionthatcost$2.50perfootwasonly$30.00.Thecompanywasreceiving50%moreproductforonly25%ofthecost.Whatthepurchasingclerkdidnotrealizeisthatsincethetubingwasusedineight-footsections,thecompanywaspaying$30.00forasectionthattheycouldgetfor$24.00.Reallytheywerepaying25%moreforthematerialthannecessary!
Althoughthisseemslikeitiscommonsense,moreoftenthannot,thisisexactlythetypeofsituationthatIexperienceworkingwithcompaniesofvarioussizesanddegreesofsophistication.Oftenthemostcommonsenseopportunityexistsinthemoresophisticatedoperations.
TheCEOinthisexamplewasoverwhelmedbytheopportunitythatwasuncoveredjustbyspendingsometimeontheshopfloor.HadtheCEOnotorganizedthe5Sactivityontheshopfloor,itcouldhavebeenmonthsbeforetheproblemhadbeenrevealed.Thisisaperfectexampleofhowthereallyvaluableopportunitiesareliterallyhidingallaroundusontheshopfloor.
Althoughtheseconceptsseembasicandsimple,thatisthewholepointoftheToyotaProductionSystem.Thegoalofanyoperationshouldbetomaketheprocesssimpleenoughthatanyonecancomeinandunderstandexactlywhatyouaredoingandwhy.Moreoftenthannot,themanagementoftheorganizationovercomplicatestheoperationtothepointthattheycan’teventellyouwhatisgoingonwithinthecompany.
67
Chapter 4
CommonMisconceptionsandMisunderstandingsRegardingtheToyotaProductionSystem
4.1 TPSMisconceptionsandMisunderstandings
IstillfindmyselfsurprisedattheabundanceofmisconceptionsthatsurroundtheToyotaProductionSystem.Ofcourse,Istartedmyeighteen-yearcareeratToyotaasaproductionemployee,somyeducationstartedfromdayone.ByimplementingcontinuousimprovementinitiativesthroughoutToyotafacilitiesandtieronesuppliers,Ihavetalkedwithadiversecross-sectionofpeople,manufacturers,andnon-manufacturersalike.Wheneverwewereworkingwithsuppliers,wefoundthattheyhadalotofperceptionspertainingtotheTPS.OftenpeopleconfusethebasicfoundationalprinciplesoftheTPSwiththetoolsthatareusedtoimplementthesystem.TheywouldcomeintotheactivitywiththepreconceivednotionthatTPSisafixedsystem,thatthereisstandardizedworkfromstarttofinishonwhattodo,theequipmenttodoitwith,andthemannerinwhichitistobedone.Sincejustintimeandbuilt-inqualityarereallythefoundationalprinciplesofthesystem,onecouldconsiderthemasinflexible,buttowhatend?
Justintimeandbuilt-inqualityarethedrivingprinciplesbehindevery-thingthatToyotadoes.Allofthetoolspreviouslymentionedarevalidtools,buttheyexistsolelytofacilitateimplementationofthesystem.IfyoustrivetounderstandthecoreprinciplesofTPS,itisinevitablethatyouwillgainacomprehensiveunderstandingoftheoutlyingprinciplesaswell.If
68 ◾ The Toyota Kaizen Continuum
thetoolsareusedwithoutthecoreprinciplesbehindthem,TPSceasestobeasystemandbecomesashort-termoperationalexercise.Thisisnotnecessarilyabadthing;itjustshouldnotbeconsideredimplementationofTPSorleanmanufacturing.
Therealquestionswemustconsiderarethefollowing:What is the best waytoensurejust-in-timedelivery?What is the best methodtobuildqualityintotheprocess?Thereisnocorrectsolutionforeverybusiness.Whateveryourproductis,thegoalofyourcompanyshouldbetoidentifythebestwaytomanufacturetheproductortocompletetheoperation.Byaskingourselveswhatthebestwayistomanufacturetheproduct,wecanbegintounderstandwhatisnecessarytoachievetheidealcondition.Itisonlybymeasuringourselvestotheidealconditionthatwecanunderstandwhatopportunityexiststoimprovetheorganization.ThekeytoimplementingtheTPSistounderstandandmanagetheexpectationsoftheorganization.Understandingthatthereisnota“silverbullet”thatwillinstantlytransformtheorganizationandthatchangecomesthroughincrementalsmallimprove-mentshelpsthemanagementteamtoframetheimplementationandsettheappropriatelevelofexpectations.
AtToyota,forexample,changesoccurasaresultofthousandsofsmallkaizensimplementedbytheemployeesintheirareaofresponsibility.Toyotavaluesthissystemsomuchthattheyhavedevelopedaglobalsystemtocapturethese“suggestions.”Employeesarerewardedforeachsuggestion.Throughthissystem,Toyotaisensuringthatthereisasystematicapproachtocapturetheideasoftheworkers.Aseachincrementofimprovementisimplemented,theprocessmovesclosertotheidealsituation.
Peoplewithamisunderstandingofthetrueessenceofthesystemoftenfindthemselvesfocusedonthetoolsandnotonfindingthebestway.ThesepeoplelookatTPSasafixedsystem,withspecificrulesthatmustbefol-lowed(Figure 4.1).Theyseemanyofthetoolsasmandatoryandthesys-temasfixedandinflexible.Thisistheproblemwithmanyofthepeoplewhocallthemselvesexperts.ThisisevenaprobleminsideofToyota,withthenumerousmembersofthemanagementteamwhodonothaveadeepknowledgeoftheproductionsystem.
IhaveamuchdifferentwayofillustratingthetrueessenceoftheTPS.Icallthisthefried eggillustration(Figure 4.2).Thecore,representedastheyolk,isfixed.TheyolkcontainsthepillarsoftheTPS,justintimeandbuilt-inquality.Aslongasthesephilosophiesarerespected,thenthesystemisflexibleaslongasyouareworkingtodeterminewhatthebestwayis.Thesystemisflexibletoallowfortheutilizationofsometools,whileothertools
Common Misconceptions and Misunderstandings ◾ 69
maybeignoredaltogether.Thekeytounderstandingthefried eggillustra-tionistounderstandthatsometoolsmaymakeperfectsensetoimplementexactlyhowaTPStextbookmighttellyouto,andothersmayhavetobealteredbasedontheenvironmentofyourorganization.Byhavingthecor-rectmind-set,wecanrestassuredthatselectingtherighttoolsismoreimportantthattryingtouseeverytool.Actuallytherearesomanytools
Just in TimeBuilt in Quality
Fixed Inflexible
Figure4.1 TPSMisconception:FixedTools.
Just in TimeBuilt in Quality
Flexible ContinuousImprovement
(Kaizen)
Figure4.2 TPSFriedEggAnalogy:FlexibleTools.
70 ◾ The Toyota Kaizen Continuum
used,itisimpossibletoconceiveascenariowherethiswouldbepractical.Awisemanoncesaidthathavingskillsisimportant,butknowingwhentousethemisevenmoreimportant.
4.2 WhichWayIsBest?
DuringthetimeIspentatToyotaMotorCorporationinJapan,IhadtheopportunitytobetrainedbyawidevarietyofcompanymasterswholivedandbreathedtheTPS.OnoneofmymanytripstoJapan,Ihadtheprivi-legetoundergoanintensivetrainingsessionatthehandsofoneofthecompany’srisingexpertsinallthingsTPS.Thetrainingsessionwasmadeupofmanylongsessionsatthefacility,wherewewouldeatbreakfast,lunch,anddinnerandworksixteen-plushoursaday.Itwasduringoneofthelate-nightsessionsthatIfoundmyselfsittingatatabletakingabreakwithoneoftheseniormastersinToyota’strainingsystem.IrememberitvividlybecauseIhadgrownupinToyotalookingtothispersonforguid-ance.Ihadjustbeenpromoted,andwesatatthetablewithequalrankinthecompanyalthoughseparatedbythegreatgulf,whichwashismanyyearsofexperience.
IwasatapointinmycareerwhereIhadenjoyedsomerecentsuccessinthecompanyandsomenotorietyfordevelopingamanufacturingmeth-odologyknownaslinesimplification.EventhoughIknewthatthemas-terhadmuchmoreknowledgeandunderstanding,IthoughtthatIhadearnedasliverofrespectfromhimbasedonmydiligencetounderstandallthingsTPS.
Aswesatatthetabledrinkingourdrinks,helookedupatmeandaskedmeasimplequestion.Hesaid“John-san,whichstatementiscorrect:(1)TPSisthebestway,or(2)thebestwayisTPS.”AtthetimeIwaseagertoimpressthemasterandspokewithoutthinkingdeeply.InstinctivelyIrespondedthatTPSisthebestway.ThereIwas,sittingatthetablewitha
Which Statementis Correct?
TPS is theBest Way.
�e BestWay isTPS.
Figure4.3 QuestionfromaMaster.
Common Misconceptions and Misunderstandings ◾ 71
truemasteroftheTPS,ontheflooroftheworld-renownTsutsumiassemblyplant,workingfornoneotherthanToyota,whoseproductionsystemwastheenvyofeveryotherautomanufacturer;ofcourseIthoughtTPSwasthebestway.
Needlesstosay,Iwaswrong!Thebestway,theMasterexplained,isTPSbecausetheessenceofthe
TPSisthepursuitofidentifyingthebestwayofdoingsomething.Therearenopredeterminedsolutionsforeverygivensituation;simplyput,findingthebestwaytodowhateveritisthatyouaretryingtodoistheessenceunder-lyingtheTPS.
4.3 ToyotaProductionSystemHistoricalOverview
ToyotastartedinasmallJapanesetownnamedKoromo,insouthcentralJapan,in1937.Bythetimethetown’snamewaschangedtoToyotaCityin1959,theyhadsevenmanufacturingfacilities,allwithinthirtymilesofeachother.Afterthewar,Japanwaslookingforsomecompanytoliftthemoutofthesevereeconomiccrisisthatwasplaguingthecountry.Toyotaandtheconceptforproducingautomobilesseemedtobetherightcompanyattherighttime.Eventhoughmuchofthepopulationcouldnotaffordtopur-chaseanautomobile,manyoutsidersweretravelingtoJapantohelpwiththerebuildingofthewar-ravagedcountry.SupportedbytheUnitedStates,theentireinfrastructurehadtoberebuilt.Coupledwiththefactthatpriortotheendofthewar,allproductionwasfocusedonsupportingthewareffortfortheimperialistJapanesegovernmentandthemajorityofplantshadbeendestroyed,thecountryneededsomemethodforprovidinglogisticaltransportationtotheforeignersaidingwiththerebuildingeffort.ThiswassolvedwiththeintroductionofthetaxicabinJapan.InitialproductionofvehiclesproducedtaxisforusebyforeignersintherebuildingeffortsortrucksforusebytheoccupyingAmericanforces.Becauseofthelackoflogisticalcapacityinthecountry,ToyotabuiltupthesupplybasetoproducetheirpopularCrowntaxicabattheMotomachiassemblyplantinwhatisnowToyotaCity,Japan.AllofToyota’ssupplierswerewithinthirtyminutesoftheplant.
Inthemeantime,KiichiroToyodahadarrangedavisittoFordMotorCompanyintheUnitedStatesthroughtheoccupyingAmericanforces.Thecommandersfeltitwasbettertohelpincreasethedomesticproductioncapacitytoproducethevehiclesnecessaryfortherebuildingeffortrather
72 ◾ The Toyota Kaizen Continuum
thanexpandFord’smanufacturingoperationsinJapan.AccompanyingKiichiroonthisvisitwasayoungandrespectedengineernamedTaiichiOhno.TaiichiworkedattheMotomachiassemblyplantandhadresponsibil-ityfortheenginemachiningoperations.
DuringthevisittotheUnitedStates,TaiichimarveledattheassemblylinebeingusedbyFordtoproducesomanyvehiclesinsuchashorttime.Theonlypointlackingseemedtobethelevelofqualitybeingproduced,astheFordmodelsseemedtobeplaguedwithvariousmanufacturingandengi-neeringdefects.
WhileonthetouroftheUnitedStates,theteamofJapaneseengineersvisitedasupermarket(Figure 4.4).Theengineersmarveledatthemanydiffer-entproductsavailabletoconsumersfromvariousfoodprocessors.ThemostremarkablepartofthesystemwashowtheAmericansupermarketsneverseemedtorunoutofanyoneproduct.Thiswasahugeprobleminpre-andpostwarJapan.Thesecrettothissystemofreplenishmentwasapullsystemthatwasdeterminedbasedoncustomerdemand(Figure 4.5).Ifcustomerswerepurchasingmorecornthangreenbeans,thecornwasreplenishedmoreoften.Thesystemwascontrolledbyreconcilingtheinventoryatthepointofpurchase,thustriggeringthereorderforthatparticularproduct.
TaiichiOhnoandtheToyotaengineersmadeseveralsuccessivetripstoAmericansupermarkets,evenrentingahomeinLosAngelestostudythismethodologymoredeeply.Outofthisstudy,TaiichiOhnodevelopedwhatwouldlaterbecomeoneofthepillarsoftheTPS,justintime(JIT).
Figure4.4 Supermarket.
Common Misconceptions and Misunderstandings ◾ 73
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74 ◾ The Toyota Kaizen Continuum
SinceToyotawasunderseverefinancialdistressafterthewar,itwasnec-essarytodevelopasystemtoincreaseproductionwithoutexpandingwork-ingcapital.EventhoughtheToyotaproductsbeingproducedwereinhighdemand,thebankswouldnotloanmoneytoacompanythatwasdedicatedtoproducingaproductthatthebankfeltwasnotviablegiventheeconomicclimateofpostwarJapan.Giventhesefinancialconstraints,TaiichitookthelessonslearnedfromtheAmericansupermarketsandappliedthemtothesupplybaseofToyota(Figure 4.6).IftherawmaterialscouldbereceivedbyToyota,convertedintofinishedproducts,andsoldtothecustomerpriortotheduedateoftheinvoice,thenproductioncouldbeexpandedwithoutreceivingfurthercreditfromanunwillingfinancialmarket.ThisseemedtobetheonlymethodthatwouldallowToyotatoexpandtheirproductioncapabilities.ThefirstJustInTime(JIT)systematToyotawassetupinorderforthesalescycletobereconciledwithinthenormalinvoicecyclewiththesuppliers.Atthetimethiswasbetween45and60days.Inordertoachievethisafewthingswerenecessary:
1.Theproductsbeingproducedhadtohavecustomerswillingtobuythemimmediately.
2.Thesupplybasehadtobelocatedclosetothemanufacturingplantsastonottieupinventoryintransportcausingexcesslevelsofrawmate-rialinventory.
3.Productionhadtobecontinuoussothattherawmaterialsbeingbroughtintotheplantcouldbeimmediatelyconvertedintofinishedproducts.
Tosatisfytheserequirements,TaiichiOhnosetaboutdevelopingatoolforimplementingJITproduction.ThesystemwasbasedonthesystemdiscoveredattheAmericansupermarketswherecomponentswerepulledfromtheirproductionlocationsbasedonneed.Taiichineededamethodforsignalingtotheprecedingprocessthatthepartshadbeenwithdrawnandneededtobeproducedand,thus,thekanbanwasdeveloped.
4.4 KanbanSystemOverview
Kanban,literallytranslated,means“signboard.”Soonafterthesystemhadbeendeveloped,eachproductionlineatToyotabecamea“supermarket”andsuppliedthenextline(the“customer”)withwhattheyneeded,whentheyneededit(Figure 4.7).
Common Misconceptions and Misunderstandings ◾ 75
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76 ◾ The Toyota Kaizen Continuum
Inthekanbansystem,thefirstandmostimportantfactoristhedemand.Tosatisfythefirstrequirementofthekanbansystem,onlyprod-uctsthatthecustomerwaswillingtopurchasewouldbeproduced.Toensurethiswasthecase,earlyToyotasalesmenwouldactuallytraveldoortodoor,canvassinganassignedgeographicareainordertounderstandexactlywhatthecustomers’requirementswere.Oncethedemandlevelwasknown,itwasnecessarytohavesupplierscapableofproducingtherawmaterialsnecessarytosupplytheToyotafactories.Thepostwarsupplybasewasinitiallynotcapableofproducingcomponentsinthedesiredlevels,andthiscausedmanysituationswherethelinewasstoppedduetoalackofcomponents.Thisviolatedthethirdprincipleofthekanbansystemofcontinuousproduction.Theunreliabilityofthesupplybasewasalsoaffectingthequalityoftheproductsandbecausethefinishedproductsalreadyhadbuyers,itwasessentialtohavedefect-freeproductsinordertomeetthedemand.
Toyotaquicklyunderstoodthatforthekanbansystemtooperateeffec-tively,itwouldbecomenecessarytoeducatethevariousrawmaterialandcomponentmanufacturersintheprinciplesofthekanbansystem.Suppliersthatquicklyadoptedtheseprincipleswerelookedonascollaborativebusi-nesspartners,andbusinessesthatcouldnotmeettherequirementweresubsequentlypurchasedbyToyota,andToyotamanagersweredispatchedtorunthesetroubledcompanies.Thiswasthebeginningofwhatisnowknownasthekeiretsu.
Withdrawal Kanban(demand)
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Figure4.7 SimpleKanbanExample.
Common Misconceptions and Misunderstandings ◾ 77
Oncethesupplybasehadbeenstabilized,Toyotabegantoseethefullbenefitsofthekanbansystem.Rawmaterialsandcomponentscouldbeordered,manufactured,anddeliveredreadilytocustomerswhohadprevi-ouslyorderedunits.
Understandingthehistoryofthekanbansystemandhowitwasdevel-opedisessentialtounderstandingJIT.EventhoughthekanbanwasanenableroftheimplementationofJITproduction,itisessentialtounderstandthatthekanbanisjustatoolforachievingJITproductionandthekanbansystemitselfisnotJITproduction.Thiscanbebetterillustratedbyunder-standingtheimplementationofthekanbansystematToyota’sfirstwhollyownedmanufacturingplantinGeorgetown,Kentucky.
WhenToyotainitiallystartedproductionintheGeorgetownassemblyplant,manyofthepartsandcomponentscamedirectlyfromJapan(Figure4.9).Oftenthesepartsweredeliveredinseacontainers,andtheentirepurchasingandproductionschedulingwasmanagedoutofToyota’sTsutsumiplantinJapan.Thiswasnecessarytogettheplantupandrunning;however,thetransportationcosttoshippartsfromJapanwashigh,andtherewasalotofpoliticalpressureintheUnitedStatesthatinorderforproducts,specificallyautomobiles,tobeconsiderednonimportproducts,themajor-ityofthepartsandmaterialshadtobesourcedinNorthAmerica.WiththeadventofNAFTA(NorthAmericanFreeTradeAgreement),partsproducedinCanadaandMexicoweregiventhesameconsiderationaspartsmadeintheUnitedStates.Oncethesupplybasehadbeendevelopedandthemajor-ityofcomponentsandrawmaterialswerecomingoutofNorthAmerica,
Toyota CityCalifornia
Figure4.8 ToyotaSupplyBaseinJapan.
78 ◾ The Toyota Kaizen Continuum
theGeorgetownplantbeganhavingproblemswiththeimplementationofthekanbansystem.ToyotasentovermanyexpertsfromJapantohelpdeterminethesourceoftheproblemandtogetitcorrected,astheunreliabilityofthesupplywascausingtheassemblylinetobehaltedfrequentlyandwascostingthecompanymillionsofdollarsaday.
Initiallywecouldnotunderstandwhatwascausingtheproblemwiththesupply.Weknewthattheproblemwasfluctuation,ormura,intheflowofthekanban;however,determiningtheexactnatureoftheproblemwaselu-sive.EveryoneinToyotawaspuzzledastothenatureoftheproblembecauseinternally,ourversionofkanbanwasanexactreplicaofToyotaMotorCorporation’skanbansystembeingusedwithoutprobleminJapan.Forsev-eralyearsToyotawouldsendpeopletotheplantinGeorgetownto“fix”theproblem,andoftenpeoplefromtheGeorgetownplantwouldtraveltoJapantolearnthesystem,tonoavail.Throughtheyears,theproblemwasimprovedandtheworkstoppagesdecreased.Initiallythiswasachievedbyincreasingthelevelsofinventory!Thiswasconsideredtabooinsidethecompany;how-ever,withthelackofasolutionforthefluctuationproblem,theincreasedinventorywastheonlywaytoensurethatproductionwasnotinterrupted.Thecostoftheincreasedlevelsofinventorywasenormous,andevenmorepressurewasappliedfromtheheadquartersinJapantosolvethisproblem.Bythistime,ToyotahadstartedproductionatanewfacilityinCanadaandthatplantwasexperiencingthesameproblemsastheGeorgetownfacility.
Finally,ateamofAmericanengineersusingthemostbasicoftoolsinToyota,knownasthematerialandinformationflowmap,orvaluestreamanalysis,identifiedtherootcauseoftheproblem.
Itturnedoutthatthesourceofthefluctuationwasnotthelevelsofinven-toryorthenumerousothercausesthathadbeenidentified(Figure4.10).We
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Figure4.9 ToyotaJapanSupplyChaintoU.S.Operations.
Common Misconceptions and Misunderstandings ◾ 79
hadliterallyspentmillionsofdollarstryingtosolvethisproblem,andtheproblemendedupbeingoneofsimplegeography.GiventhefactthatJapanisaboutthesamesizeasCalifornia(Figure4.8),thegeographyoftheUnitedStateswaswreakinghavoconToyota’skanbansystem.ThefluctuationthatwewereseeinginthekanbanwascreatedbythecomplexityofthesupplybaseinNorthAmerica.WhenToyotaoriginallystartedproducingproductsintheUnitedStates,Toyotawasaminorityproducerandhadtoutilizetheexist-ingsupplybaseoftheAmericanautomobilemanufacturers.Thismeantthatthesupplier’slocationwasdictatedbyeithertheproximitytotherawmaterialortheproximitytotheassemblyplantsoftheAmericanautomobilemanu-facturers.Inmanyinstances,thismeantthatsupplierswerehundredsoreventhousandsofmilesfromtheproductionfacilities(Figure4.11).Anydisruptionthatoccurredintheproductionprocesswasmagnifiedbythedistributionofkanbansinthesystem.Iftheplanthadalow-volumeday,thenthekanbansreturningtothecustomerwouldbelessthanthetargetproductionvolume,causingapartshortagewhenthatdeliveryreturnedtotheplant.
Notunderstandingthefullimpactthatthedistanceofthesuppliertotheassemblylocationwasacriticalerror,consideringthatwehadimplementedanexactreplicaofthekanbansystembeingusedatToyota’sfacilitiesinJapan.InJapan,theaverageToyotasupplierwaslessthanthirtymilesfromtheassemblyplant.Thisallowedforquickresponsetoanydisruptionintheoperation.
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80 ◾ The Toyota Kaizen Continuum
NaturallywhenToyotabeganoperatingfacilitiesintheUnitedStates,itmadesensetojustcopythesystemsthathadsuccessfullybeenimplementedandproveninJapan.Whenthekanbansystemwasimplemented,thesystemwassetupexactlylikeatraditionalkanbansysteminJapan.
WedevelopedasystemforNorthAmericathatwecalledthee-kanbansystem(Figure4.12).Byelectronicallysendingthekanbantothesupplier,wenotonlyeliminatedthekanbansonthereturntruck,wealsoeliminatedthenumberoftrucksneeded.Thee-kanbansystemmetwithresistanceanddebate,evenfromwithinToyotaMotorCorporation,becauseoftheelimi-nationofthereturntruckkanbans;thatwasjustnothowitwastaughtandimplementedinJapan.Onceweimplementedoure-kanbansystem,wesawremarkableimprovement;byeliminatingthatfluctuation,wewereabletoreducetheoverallfluctuationandtheamountofmaterialsneeded;weevensavedasubstantialamountofmoneyaswell.Why?BecausethebestwayisTPSandTPSisaboutsearchingforthebestwayofdoinganything.
4.5 TheToyotaWay
WehavetalkedalittleaboutthedifferencesbetweenTPSprinciplesandthetoolswehavetocarryoutthoseprinciples.ManyofthecompaniesthattrytoimplementTPSprinciplesreallyjustendupapplyingthetools.
Georgetown, KY
Figure4.11 ToyotaSupplyBaseintheUnitedStates.
Common Misconceptions and Misunderstandings ◾ 81
Forinstance,Icouldtaketheideaofkanbanandimplementitinamassvolumeproducer,makeafewimprovements,andsavethatcompanyloadsofmoney.Icouldimplementtheandonsystemorstandardizedwork,andthequalitywouldundoubtedlyimprove.Infact,thisisexactlywhatIseeinmanyoftoday’smanufacturingindustries,awatered-downversionoftheoriginal.
Theproblemis,onceimprovementinanareahasbeenquantified,thesamegreatresultsareexpectedconsistentlywithlesstimeandeffort,becausetheirattentionisalreadyfocusedonanotheraspectoftheplant.Eventually,thereisanandonsystemindiecasting,akanbansysteminassembly,andstandardizedworkinpowdercoating.ManufacturerswillfindthemselveswithalltheseTPSthreadsrunningthroughtheiroperationswithnoclueastohowtotiethemalltogether.Imentionedearlierhowfrustrat-ingtheToyotaenvironmentcanbeattimes;Icanonlyimaginethefrustra-tionsfacedbymanagerswhoimplementTPStoolsandhaveimpressive,quantifiableproductionandefficiencyresults,yetstillfacethesamebottomlineproblems.Theheadachesmustbeepic.
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Figure4.12 E-KanbanSystematToyota;Georgetown,Kentucky.
82 ◾ The Toyota Kaizen Continuum
So,thequestionnowbecomesoneofmanaging.Howcanamasspro-ductioncompanymanagethetoolscreatedforaone-pieceflowsystem?Isamanagementsystemneededtomanagethesystem?Isitevenpossibleforasystemtomanageanothersystem,andifso,whatliesattheheartofthatsystem?HowdoesToyotadoit?Theanswerisaneasyone:manageittheToyotaWay.
TheToyotaWayisnotasystem,process,orprogram;rather,itisamind-setwhereinthoughtandactionguidehowweinteractwithoneanotherandthewaywemanageonadailybasis.ManagingtheToyotaWayiscenteredontwoprinciples:
◾ Respectforpeople◾ Continuousimprovement(kaizen)
Traditionalorganizationstoday,especiallythoseinthemanufacturingindustryandcorporateAmerica,arestructuredwithmanagementatthetopfollowedbyengineering,supervisors,employees,andthenfinally,atthebottom,thecustomer.Inthisrelationship,theemployeeisclosesttothecustomer,yetthedirectionforproducts,goods,orservicescomesfromman-agement.Theprocessesarethendeterminedbytheengineers,whothendeterminetheworkstepsfortheworkertobuildqualityintotheproduct.
Thebasicphilosophyoftheseorganizationsoperatesontheassumptionthatthemostimportantpeoplearetheonesatthetop.Managementmakesallthedecisions,andworkerscarryoutthetasks.Oftenthisphilosophywillactuallyflowdowntothecustomer,andmanagementendsupdictatingtheproductthecustomerreceives.Itisthemodernequivalentofsaying,“Youcanhaveanycoloryoulike,aslongasitisblack.”Intheseorganizations,thereisnorespectfortheindividualityofeachpersonwithinthecompany.Althoughdisrespectisnotaconsciousdecisionorpolicyforthesecompa-nies,itmanifestsitselfsimplybytheirignoringthepricelessinputthattheworkerscangive.Thereisnomethodtocaptureideasthatwillmovetheorganizationforward.Motivatingtheworkforcebecomesnearlyimpossiblebecausemotivationmustcomefromthetopandgenerallydoesnottrickledowntotheworkersontheshopfloor.ACEO’sspeechcangetthefrontofficereallyfiredupandenergized,onlytobelostonthepeoplewhoactu-allyperformthework.
Intraditionalorganizations,itmakesnodifferencewhatdirectionmanagementwantsthecompanytotakeiftheemployeesarenotabletodiscernthefundamentalpurposeofwhatthecompanyistryingtodo.The
Common Misconceptions and Misunderstandings ◾ 83
greatestideasforimplementinganychangeinaworkenvironmentwillfallflatunlesstheemployeesbuyintoit.Becauseofthatexclusion,yourcus-tomerswillneverrealizeanybenefitsofmanagerialorganization,andyourstrategylosesallvalue.
4.6 TheCustomerKnowsBest
Fromabusinessstandpoint,weexistinordertoserveourcustomers.Ourcustomersaretheonlyreasonweexist.Thatissoimportantitdeservestobesaidagain:our customers are the only reason we exist.Customersdictatewhatlevelsofqualityandvaluetheyexpect,anditisthebusiness’sresponsibilitytofulfillthoseexpectations,period.Customers’needsmustbeputinfrontoftheneedsoftheorganization.Byfollowingthatsimpletruth,wearriveatthecon-clusionthatthe needs of the customers become the needs of the organization.
Withoutcustomers,thereisnobusiness.ThatisonereasonsomanysystemsareinplaceatToyota:theyaretheretounderstandthe needs of customers.Withoutthisbasicunderstanding,itmakesitdifficultforanycompanytobecustomerfocused,ortoshowthattheyholdrespectfortheirpeople.BecauseeverysequentialprocessatToyotaisconsideredacustomer,theyareasimportantasthefinalcustomer.BecauseToyota’slineworkersaretheclosestdirectcontacttheyhavewiththeircustomers,theyrealizethatwithoutthem,therewouldbenoproductforToyotatosell.Itistheworkerswhodetermineefficiencyandqualitylevelsbythesimplefactthattheyshowupforworkanddotheirjobsonadailybasis.
4.7 Go.See.Act.
Genchi gembutsu(Figure4.13)isthetermusedatToyotawhenproblemsarise.Ittranslatesto“go,see,andtakeaction,”anditsapplicationistakenveryseriously.Manyofthepeopleinvolvedinthelean/TPSworldconfusethistermwithgemba,whichmeanssimplytogoandsee.Althoughgembaisanimportantconcept,itsuseisgeneralizedforanyoneinthecompany.Genchigembutsu,ontheotherhand,isforthosewhosolveproblemsbytakingaction,whichistheheartandpurposeoftheToyotaWay.
Asaleaderinanorganization,Imightdevelopsomegreatinitiatives,butitwillalwaysbetheemployeeswhohavetocarryouttheimplementation;itwillbetheemployeeswhostandardizeit.Myroleasaleaderistobein
84 ◾ The Toyota Kaizen Continuum
touchwiththesepeopleandtosupporttheminourpursuitoftheidealcon-dition.Whenthebenefitofagreatinitiativebecomescleartotheworkersthemselves,thebenefitinvalueissoonseenbythecustomers.
Manycompaniestodayhavegenuinecustomerservicepolicies;unfortunately,theyonlycomeintoplayoncetheproducthasbeenpur-chasedbytheendconsumer.BecauseeverysequentialprocessinsideToyotainvolvescustomers,anytimetheyhaveaproblem,itmeansthefinalcustomerhasaproblem.Itisaleader’sdutytomakesurethatthatproblemiseliminated.TaiichiOhnosummeditupbestwhenhesaid,“Noproblemdiscoveredwhenstoppingthelineshouldwaitlongerthantomorrowmorningtobefixed.”
Figure4.13 Genchigembutsu(Go,See,TakeAction).
85
Chapter 5
WasteManagement …ImprovingtheManufacturingProcessOneKaizenataTime
5.1 GapManagement
TheToyotaProductionSystemwasdevelopedasacommonsenseapproachtoimproveproductivity.Itisthosetwowords,improve productivity,thatholdthekeytosomuchaboutTPSandhowitworks.TPSisnotspecificallydevelopedtobuildabettercar,nomatterhowwellbuilttheyare.TPSisdesignedwithpeople,processes,andoperationsastheinput,andqualityastheoutput.ThesimplicityoftheequationistheexactreasonwhyTPSwillworkforanything.Itisdesignedtoproducecommonsense,notanautomo-bile.Fortunately,Toyotadoesnothaveapatentoncommonsense.
ThegoalofTPS,inthebroadestofterms,istounderstandandimple-mentthebestwayofmanufacturingaproduct.Thebestwayoftencanincludeautomationaswellasthehumancontributiontotheprocess.TheunderlyinggeniusoftheTPSisthatitisfluidandwillworkinanyareaofoperations.OneofthekeyobjectivesofTPSistounderstandthecurrentconditioninrelationtotheidealprocess.Oncetheseitemsareclarified,wecandeterminethe“gap.”Byunderstandingthegap,wecandeterminethepathtowardachievingthebestwayofmanufacturing.
86 ◾ The Toyota Kaizen Continuum
AtToyota,thisphilosophyisknownasgapmanagement(Figure5.1).Thefirststepofgapmanagementistounderstandthegapbetweenthecurrentsituationandtheideal,ortarget,condition.Thisseemslikeasimpleconcept,yetonlyorganizationsandmanagersthathaveafirmunderstandingofthecurrentconditionwillbeabletouseit.Thepur-poseofgapmanagementistomakeclearandsimplebusinessstrategiesforanalyzingthecurrentandideal,ortarget,conditionsanddevelopingcountermeasuresthatclosethegap.
Therearesixstepstoimplementinggapmanagement(Figure 5.1).
Step1:Clarifytheidealcondition.Becausetheidealconditionisoftenunattainable,targetsareroutinelysetthatclosethegaptotheidealstate.Valuestreammappingisanexcellenttoolforunderstandingtheidealstateofanorganization.Manypeoplebelieveyoushouldgraspthecurrentsituationbeforeyouclarifytheidealcondition.Thismaybeconventional,butitisnotpreferred.Ifwestudythecurrentconditionpriortoclarifyingtheidealcondition,wewillconstrainourthinkingtothecurrentsituation.Averagemanagersmeasureprogressbymeasuringwheretheyarefromwheretheywere.Greatmanagersmeasureprog-ressbymeasuringwheretheyareandcomparingthattowheretheyshouldbe(theidealstate).
Step2:Graspthecurrentsituation.Understandingtheidealstateissomethingthatmanyorganizationsandmanagersglossoverasagiven.IcannottellyouhowmanytimesthatIhavesatdownwith
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Figure5.1 GapManagementPhilosophy.
Waste Management … Improving the Manufacturing Process ◾ 87
headsofoperationsinacompanyorevenCEOs,andtheyhavenoideawhatisactuallyoccurringontheshopfloor.Theyoftenhaveaverygoodunderstandingofwhattheythinkshouldbeoccurring,butrarelyisthisactuallyoccurring.Sadly,thisismorethenormthantheexception.
Step3:Clarifythegap.Althoughtargetsmaybeestablished,sincethegapisoftenvastbetweenthecurrentstateandtheidealcondition,bothneedtobequantified.Onlybyunderstandingboththeidealstateandthetargetwillyoubeabletounderstandtheprogressmadeoncethetargethasbeenachieved.
Step4:Developcountermeasureideasandaplantoimplementthecoun-termeasures.Whenthegapisunderstood,adefinableactionplantoachievethetargetmustbedeveloped.Oftenmanycountermeasuresarenecessarytoclosethegap.Itisessentialtounderstandthecontributionofeachcountermeasuretowardthetargetcondition.
Step5:Takeactionontheplan.Noplanhaseversolvedanyproblem.Peoplesolveproblems.Noplanisself-executing,soitisessentialthattheplaniscloselydevelopedsothatitcanbeexecuted.Toexecutetheplan,clearresponsibilityandaccountabilityforeachcountermeasurehastobeclearlyestablishedwhentheplanisbeingdeveloped.Itisthemanager’sresponsibilitytomakesurethattheplanisexecuted.
Step6:Oncetheideal,ortarget,conditionhasbeenachieved,thepro-cesshastobestabilizedandstandardized.Ihaveseenmanygreatplansgetexecutedandachievephenomenalresults,buttheyarenotsustainedandtheresultsdon’tlast.Anothersignofagreatman-ageristheemphasisheorsheplacesonsustainingtheresults.Itisonlythroughsustainableresultsthatrealvaluecanbecreatedfortheorganization.
Oncethesestepshavebeensuccessfullyimplemented,thentheprocessisrepeated.Becausetheprocessisnever-ending,theorganizationcontinuestogetbetterandbetterwitheachsuccessiveiterationofimprovementactivities.Eventhoughtheidealstateisrarelyachieved,thegapmanagementphiloso-phyensuresthattheorganizationisachievingthebestpossibleconditionfortheprocess.
Mostofthetimetheidealwayisnotpractical,andittakespeoplewithknowledgeoftheoperationtodeterminethebestway.Toyotaisfilledwithvariousexpertsonbuildingcars,andyetmanyofthemwouldhave
88 ◾ The Toyota Kaizen Continuum
adifficulttimeenteringyourfactoryandtellingyouwhatwillworkbest.ThesystemofTPSrespectstheexpertiseofthepeopledoingthework,andthereforeitisessentialforpeoplewithknowledgeoftheprocesstodeter-minethebestway.
5.2 TheThreeM’s
ForustobeequippedtoimplementTPS,oneofthemostfoundationalitemsistheabilitytounderstandtheareasofwasteinmanufacturing.InToyotathesearereferredtoasthethreeM’s(Figure 5.2):
◾ Muda—waste◾ Muri—overburden/irrationality◾ Mura—variation
AtToyota,wenevertoldpeopletoeliminatewaste.Instead,wewouldencourageourpeopletoidentifywaste.Itseemsonlynaturalthatoncethewastehasbeenidentified,itwillbeeliminated.Itisalsotruethatwastecannotbeeliminateduntilithasbeenidentified.Inthischapter,wewilltakeadeepdiveintounderstandingandidentifyingwaste.
5.2.1 Muda
Inthemostliteraltranslation,mudaispurewaste.However,mudacanbeorganizedintosevenspecificcategoriesofwastethatplaguethe
RepairOverstockNVAW
OverproductionConveyance
Waiting
Overprocessing
Muda Mura Muri
+5%
+5%
T .T.
Figure5.2 ThreeM’s(Muda,Mura,andMuri).
Waste Management … Improving the Manufacturing Process ◾ 89
manufacturingprocess.Determiningthecorrectclassificationofmudaisthefirststeptowarddevelopingacountermeasurethatwillreduceoreliminatethemudafromthemanufacturingprocess.Thesevenclassifica-tionsofmudaaretransportation,waiting,overstock,overproduction,repair,overprocessing,andnon-value-addedwork(NVAW).Eventhoughwastebydefinitiondoesnotaddvaluetothefinalproduct,somewasteisnecessarytocompletethemanufacturingprocess.Infact,itisonlytheproperunder-standingandclassificationofwastethatallowsustominimizethenegativeeffectsandmaximizethepotentialforprocessefficiency.Afterthisbriefintroductiontothemudas,wewilltakeacloserlookateachoneanddis-cussthebestpossiblecountermeasures.
5.2.1.1 Transportation
Thiswasteissoobvious,manypeopledonotconsideritawastebutanessentialaspectofbusiness.Absolutely,itisanessentialaspectofbusi-ness;frompaperclipstoaircraftengines,everythinggetsmovedaround.Sincetransportationisnecessaryformovingproductsfromonelocationtoanother,manymanufacturingcompaniesoverlookthisareaaswaste.Fromtheperspectiveofthecustomer,transportationitselfdoesnotprovidevalue.
Whentransportationisassumedtobeessential,anopportunityforkai-zenislost.Byclassifyingtransportationaswaste,weopenuptheoppor-tunitytominimizetheamountoftransportationinthevaluestreamofourproductandprocess.Transportationcanbeoneofthemorecostlyformsofwaste,especiallywhenweconsidertheoverallcostofdeliveringtheproduct.Frominternaltransportation(rawmaterialsandsubcomponents)toexternal(finishedgoodstocustomer),therearealwaysopportunitiestoreducetransportation.
5.2.1.2 Waiting
Whetheratworkorinourpersonallives,waitingtoolongforanythingproducesfrustration.Fromtheforty-five-minutewaitatyourfavoriteres-tauranttothehoursspentwaitingatanairport,frustrationcancauseahostofproblems.Thesefrustrationsmanifestthemselvesinourpersonallivesinavarietyofways,fromjaw-clenchedfingertappingtothefull-onirrational“snap”thatfindsuscursingthetoaster.Whereaswaitinginyourpersonallifeproducesmainlyintrapersonalfrustrationsandtheoccasionalbrokentoaster,waitinginaworkenvironmentcannotonlyproduce
90 ◾ The Toyota Kaizen Continuum
externalfrustrationsthataffectyouandthequalityofyourworkbutalsohasthepotentialeffectofloweringmoraleandproductivity.Waitingisoneoftheeasiestformsofwastetoidentify.Almostanyone,whentakenintoamanufacturingenvironmentandaskedtoidentifywasteintheopera-tion,willpointoutpeoplewaitingaswaste.OnemethodIuseforteach-ingpeopletounderstandtheproductivitylevelsofworkersistowatchtheirhandsandfeet.Itisreallyhardtoworkwithoutmovingyourhandsorfeet.
5.2.1.3 Overstock
Thefirstofourtwo“O’s”isoverstock.Intermsofanoperationonapro-ductionline,overstockishavingmorestock,orcomponents,thanareneces-sarytocompletetheprocess.Overstockhidesproblemsinthevaluestreamandcoststhecompanyadditionaloperatingcapital.Overstockincludesworkinprocess(WIP)butdoesnotincludefinishedproductinventory(FPI).
Ofcourse,somelevelofoverstockis necessarytoaccountforfluctuation(muri),whichwewilltalkaboutlater.
5.2.1.4 Overproduction
Thisiswhereyoufindthejust-in-caseattitudeasopposedtoajust-in-timemind-set.Oftenreferredtoasoverproduction,inventoryisoneofthehallmarksoftraditionalmanufacturingprocessesandacommonailmentofmanyAmericanmanufacturers.Overproductioncreatesmanyprob-lems.Wheredoyoustoreit?Howdoyoucontrolquality?Whenisenoughenough?Whothoughtthiswasagoodidea?Whydowedoit?Howmuchisthiscostingus?Manypeopleconfuseoverstockandoverproduction;hereareacoupleofwaystodifferentiatebetweenthetwo:
Overstockisanyworkinprocessthatisinexcessofaproductionlot.Overproductionisanyfinished productinexcessofwhatisplanned.
Anotherwaytorememberthisisthatalloverproductionisoverstock,butnotalloverstockisoverproduction.Overstockwillalwaysberawmaterials,subcomponents,andWIP;overproductionreferssolelytofinishedgoods.
Someinherentproblemsofoverproductionincludethepossibilityofhid-dendefectsorcontaminationoffinishedgoodsthatwouldrequiresecondaryprocessing.Anotherseriousproblemtoconsideristhefiscalstagnationfrom
Waste Management … Improving the Manufacturing Process ◾ 91
finishedgoodstiedupininventoryforwhichthecompanyisnotgettingpaid.Icannotstressenoughhowimportantitistoclearlyunderstandthediffer-encesbetweenoverstockandoverproduction,becausethereareveryspecificcountermeasurestobetakendependingonthewasteidentified.
5.2.1.5 Repair
Allrepairprocessesareinherentlymuda.Repairiswaste,pureandsimple.Repairisalsoagoodexampleofanecessarytypeofwaste.Inmanufactur-ingitisinevitablethatrepairwillbenecessary.Eveninthemostefficientandquality-consciousfacilities,itisnotarealisticexpectationthatprocesseswithmultiplemanufacturingvariables,includinghumanworkers,canconsis-tentlyproducevehicleswithoutsomelevelofabnormality.Somemightaskwhyweevenclassifyrepairaswasteifitisinevitable.Ifthewaste(inthiscase,repair)isnotidentified,thencreativesolutionscannotbedevelopedthatcanminimizethistypeofwaste.
Whenwethinkaboutthesevenwastes,Repairhelpstothinkofitintermsofvalue;whatisthecustomerwillingtopayfor?Thatquestioniswhatseparatesavalue-addedactivityfromanon-value-addedactivity.Aswecontinuetodiscussthesevenwastes,weshouldkeepthatdistinctionbetweenvalue-addedandnon-value-addedwastesinthebackofourminds.Keepingafocusonthesimplicityofwhatvalue-addedtrulymeanscanbeofgreathelpwhenidentifyingandclassifyingmuda.
5.2.1.6 Overprocessing
Thesixthclassificationofmudaisoverprocessing.Overprocessingistheworkthatiscompletedinexcessoftheworkrequiredtocompletethevalue-addedwork(VAW)inaprocess.Forexample,perhapsour60Thotchamberdiecastmachineconsistentlyleavesflashingthatmustberemovedbeforetheprocessiscomplete.Thisisclassicoverprocessing.Overprocessingcanalsobemoresubtleinnature.Take,forexample,applyingalabel;theworkofremovingthebackingpaperfromthelabelwouldbeconsideredoverprocessing.
5.2.1.7 Non-Value-Added Work (NVAW)
Thelastoftheseventypesofwastescanbeoneofthetrickiesttoidentify.Thesaying“youcan’tseetheforestforthetrees”isagoodanalogytodescribe
92 ◾ The Toyota Kaizen Continuum
NVAW.Manypeoplegetstuckinarigidlineofthinkingthatequatesnon-valueasbeingnon-essential.So,whenamanagerwalksbyandseesaworkersandingacabinetwitharandomorbitalsander,helooksattheoverallprocessasessential,andthereforevalue-added.Althoughasmoothcabinetsurfaceisessential,themanagercompletelyoverlookedthedistancetheworkertraveledtopickupthesander,thetimeittakestodecidewhichsandinggritisappro-priate,howthesandingdiscischanged,andsoforth.
Customersonlywantthefinishedproduct.Theygenerallydonotcareonewayoranotherabouthowitisproduced.Forexample,wehaveacustomerwhopaysforandwantsaredcar.Theexpectationofthatspe-cificcustomerisconvertedintodollarsonlyatthemomentthetriggeronthepaintsprayerispulled;theexpectationstopsassoonasthetriggerisreleased.ThatisVAWthatthecustomergladlypaysfor.Whatnocustomergladlypaysforispreppingthepaintsprayer,donningprotectivegear,oranyofthemotionsassociatedwiththemomentsleadingupto,ormomentsbeyond,theactualactofpainting.IfweasmanufacturersthinkofallthosemotionsuptoandbeyondthepaintprocessasVAW,thenwemisstremen-dousopportunitiesforkaizen.Identifytheworkforexactlywhatitis;con-sidernothingasbeingtoosmallorinconsequential.
Thesearethesevenspecificwastesclassifiedasmuda..Ifwewanttoeliminatewaste,itisparamountthatthewastebeidentifiedandclassifiedproperly;thecountermeasuresvarywidelybyeachtypeofwaste.
5.2.2 Muri
OurnextMismuri,whichisdefinedasoverburden.Overburdenoccurswhenworkersexhibitmoreeffortthanrequiredtocompletetheunit.Overburdencouldbeassimpleasaworkerwhocontinuallyhastodealwithpoorqualityfromthevendor,oritcouldcomeintheformofwalkingalongerdistancethannecessary.
Muriisoftencausedwhenmanagementtellsemployeestojustworkharder.Whenacomponentpartcomesintothewrongspecificationanditrequirestheworkertoreworkthepart,thiscancausetheworkertobearmoreburdenthanintended.Thisismuri.Similartotheconceptthatthecustomershouldonlypayforthevalue-addedportionoftheprocess,theworkershouldonlyhavetodealwiththeburdenthatisnecessarytomanufacturetheproduct.Thisensuresthatthelevelofphysicalexertioncanbemanaged,andthisenablestheproductionprocesstobemoreconsistent.
Waste Management … Improving the Manufacturing Process ◾ 93
5.2.3 Mura
OurfinalMismura,whichisfluctuation,orunevenness,eitherinprocessorproduction.ThisiswhereToyotareallydiffersfromothermanufacturers.UnderstandingthenatureoffluctuationincustomerordersgivesToyotatheabilitytocreatestabilitywithintheinternalmanufacturingprocess.Forinstance,acustomerplacesanorderforthefollowingcars:tworedcars,onewithpowersteeringandairconditioning,theotherwithaCDchanger;onegreencarwithleatherinterior;threeblackcars,onewithGPS,onewithasunroof,andallthreewithdifferentengines.TheTPSseekstofindthebestwaytoleveltheproduction.InToyota,leveledproductionisreferredtoasheijunka.
Althoughfluctuationgenerallymanifestsitselfintheschedulingprocess,itisprevalentinthemanufacturingprocessaswell.Supposeweareproduc-ingagroupofthreeproducts;onehasacycletimeoffortyseconds,oneoffiftyseconds,andthethirdtakessixtysecondstoprocess.Ifthedemandtime,ortakttime,forthefinishedproductsisfiftyseconds,thenourmanu-facturingandschedulingsystemshavetobeabletobalancetheworkloadtoensurethattheweightedaveragecycletime(WACT)islessthantherequiredtakttime.ThebrillianceofmanufacturingisgettingtheWACTasclosetothetaktaspossiblewithoutgoingover.Thisepitomizestheessenceofwhatleveledproduction,heijunka,isworkingtoachieve.
5.3 ClassificationofMuda
Nowthatthegeneralintroductiontotheclassificationofwasteshasbeencompleted,amoredetailedreviewofeachoftheseventypesofmuda,andspecificcountermeasuresforeach,iscalledfor.Foracomprehensiveunder-standingofthesevenwastes,seeFigure 5.21,amudasummarychart,laterinthischapter.Thischartisaneffectivetoolforidentifyingandclassifyingmuda.Itisonlythroughtheabilitytocorrectlyclassifymudathatacounter-measurecanbeachieved.
Forgeneralmanufacturingorganizations,theinitialfocusshouldbeonunderstandingthethreeM’sandestablishingamanufacturingsystemthatminimizestheimpactontheoperations.Althoughallwasteisinherentlybadformanufacturing,muriandmuracancausesignificantproblemsintheoverallmanufacturingprocess,whereasmudatendstomanifestitselfinallareas.OncethegeneralunderstandingofthethreeM’sexistsacrossthe
94 ◾ The Toyota Kaizen Continuum
organization,itisbeneficialtobeginworkingtoidentifyandfocusontheseventypesofmuda.Thesearethemostcommonareasforprocesskaizen.
Beforewebegindiscussionoftheseventypesofwaste,let’stakeamomenttoexaminethetheoreticalidealmanufacturingstate,one-pieceflow.
InFigure5.3,theworkersareeachproducingoneproductwithnoWIPinbetweenprocessesandnostockofanykind.Thecustomerispresentattheendoftheproductionlinetotakepossessionoftheproduct,achievingwhatmanywouldcalltheidealone-pieceflow.Althoughthismaybeidealfromaone-pieceflowstandpoint,itdoesnotnecessarilymeanthatithasthebestmanufacturingresult.ThegoaloftheToyotaProductionSystemisnottoachieveone-pieceflow;itistofindthebestwaytomanufacturetheproduct.Insomecases,one-pieceflowisthebestwayandinothersitisnot;however,theconceptisthedrivingphilosophybehindidentifyingandcountermeasuringwaste.Tooptimizethisprocessandfindthepathtothebestway,weneedtounderstandthethreeM’sandtheseventypesofmuda.
5.3.1 Transportation
Transportation,nomatterhowyoumoveit,pushit,shoveit,ordragit,willalwaysbewaste.Theonlypositiveaspecttothewasteoftransportationisthatitissoeasytosee.Whenyouseeanypartorpalletbeingmovedwithaforktruckinafactory,itiswaste(Figure 5.4).
Transportationisnecessaryinamanufacturingenvironment;however,classifyingitaswastewillforcetheorganizationtominimizethetrans-portationoftheproduct.WhenIgointoaplantandIwanttounderstandtheoverallflowoftheproduct,Ioftencompleteamaterialflowdiagram,alsocalledavaluestreammap.Manypeople,generallythosewhohavenotworkedinaplant,advocatespendingagreatdealoftimegatheringall
Figure5.3 One-PieceFlow.
Waste Management … Improving the Manufacturing Process ◾ 95
ofthedetailstocompletethevaluestreammap.Incontrast,thenecessaryinformationtomakea90%accuratejudgmentcanbegatheredinacoupleofhoursofwalkingaroundontheshopfloor.AnexampleofthistypeofdocumentcanbeseeninFigure 5.5.
Asweexaminethedifferentclassificationsofmuda,wewillalsoseethattheyinterrelateandoftenfeedoffofoneanother.Forexample,overstockandoverproductioncancausetransportation,andtransportationcancauseoverstockandoverproduction.
Ifwelooktothetransportationfigure(Figure 5.6),wecanseethatthiscouldbeanexampleofmanymanufacturingplants.Finishedgoodsarecol-lectedattheendoftheproductionline,andonceafullpalletofproducts
Transportation
Figure5.4 Transportation.
Supplier
DailyDaily
72 KanbanX O X O
Pitch: 37 minABABCD
Kanban postcollect daily:Send to supplierto replenish
TotalL CAD Time 3.5 DaysTotalProcessing 8 minutesTime
ShippingAss’y Test
2 Days
Insertion Bake Oven
ProductionControl
MonthlyForecast Daily
Order
30 DayForecast
Customer
Washer
1 Day
60" 60"120" 240"
90' 90' 90'
Figure5.5 Hand-DrawnValueStreamMap.
96 ◾ The Toyota Kaizen Continuum
iscompleted,thepartsmustbetransportedfromoneareatoanother.Thistransportationiswastecreatedbytheoverproductionoffinishedgoods.Becausetheproductshavetobetransportedfromoneareaoftheplanttoanother,thetransportationtimenowdeterminesalevelofoverstockthatisnecessarytoachieveasmoothflowthroughouttheoperation.
AswelookattheexampleshowninFigure 5.7,thequantityofproductinthecollectionpointhastobehighenoughthatonepalletofpartsisavailableeverytenminutesinordertopreventtheworkerfromwaitingoncethecyclehasbeencompleted.Thisalsodictatesthatthewarehousehasaminimumtimeoftenminutesplusonepallettoensurethattheycanshipshouldthecustomerpullanorderduringtheproductioncycle.Tominimizeoverallwasteintheoperation,thishastobelookedatholisticallyandnotonlyfromatransportationpointofview.Someorganizationsprefertominimizeinventoryandhavemanyshortcycleswithsmallloads.Thistypeoftransportationsys-temisreferredtoashigh-frequency,small-lotproduction.Otherorganizationsprefertominimizethetransportationandhavefewercycleswithlongercycletimes.Thisenablestheworkertohandlemoreproducts,butitalsorequiresmoreinventoryasthecycletimesincrease.Thistypeoftransportationsystem
Transportation
Overproduction Overproduction
Figure5.6 TransportationandOverproduction.
Collection Point
Cycle Time 10'
Warehouse
Figure5.7 CollectionPoint.
Waste Management … Improving the Manufacturing Process ◾ 97
isreferredtoaslow-frequencylarge-lotproduction.Thereisnorightorwronganswer;thebestsolutionforeachcompanydependsonthepriorityoftheorganization,andwhatisbestforeachmanufacturer.Theonethingthatshouldbeconstantistheabilitytorecognizeandclassifythewaste.
WhenIworkedforToyotainEurope,wewerefacedwithsomeuniquechal-lenges.TheplantintheUnitedKingdomhadgraduallybecomeisolatedfromthesupplybase.WhentheplantintheUnitedKingdomwasconstructed,GMandFordhadseveralmanufacturingplantsintheUnitedKingdom.AsGMandFordbegantomovetheiroperationstomainlandEurope,thesupplybasefol-lowed.ThiscompletelychangedthelogisticssituationforToyota.ThecostforthetransportationofpartsacrosstheEnglishChannelhadaseriousimpactontheoperation.Astheproblemwasstudied,itwasfoundthatthecubeefficiencyofthetransportationfrommainlandEuropewasasourceofconcern.Itwasfoundthat30%to40%oftheshipmentswerenotbeingutilized.Inmanufactur-inglingo,thisisreferredtoas“shippingair.”Asyoucanimagine,thecostfortransportationfrommainlandEuropetotheUnitedKingdomcameatapre-mium.Todecreasethevolumeofairbeingshippedacrossthewater,amethodformaximizingthecubeefficiencyhadtobedetermined.Asthesituationwasstudied,itwasdeterminedthattheimplementationofaconsolidationcenterinmainlandEuropecouldenabletheremovaloffluctuationfromcontainertocontainertobeminimized.Thisoperationwouldalsoenablethe“milkrun”logisticssystemtobeconsolidatedforthebroaderEuropeanoperations.(A“milkrun”isatransportationsysteminwhichonetruckwillpickuppartsfromvarioussuppliersbeforedeliveringtheproductstotheconsolidationcenter.)Thisconsolidationcenteriscommonlyreferredtoasacrossdock.Itmayalsobereferredtoasawarehouse.ThismayseemshockingtothosewhostudyTPSphilosophybecausemanypeoplebelievethatToyotaoperateswithoutware-housestostorecomponents.However,itisexactlythistypeofprocessthatistheessenceoftheTPS.Thesearchforthebestwayoftenwillleadanorganiza-tiontoconsiderunconventionalmethods.
5.3.2 Waiting
InFigure 5.8,anexampleofasimpleproductionline,wecanseethatthethirdoperatorhasnoworkandisidle.Thisidletimeisreferredtoaswait-ing.Inthissituation,operatorthreeiswaitingonoperatortwotocompletehisoperation.WaitinghasnovaluebecausenoVAWcanbeperformed.Waitingalsoisanindicatorofproblemsinthemanufacturingprocess.Ifweassumethatalloftheoperatorshavethesamecycletimeandtheconveyor
98 ◾ The Toyota Kaizen Continuum
iscontrollingthetakttime,thentherehadtobeaproblemwithopera-tiononeortwoinorderforoperatorthreetohavenowork.Inaproduc-tionenvironmentwhereanandonsystemisinplace,theoperatorwiththeproblemwouldhavestoppedthelineandalloftheotheroperatorswouldbewaiting,untilthelinerestarted.However,inacontinuouslineenviron-mentwhereanandonsystemdoesnotexist,thiswouldbeatypicalexam-pleofproblemsintheupstreamprocess.Theotherproblemcouldbethattheworkisnotbalancedandoperatorthreecompletedhisworkearlyandiswaitingforthecompletionofworkfromoperatortwo.Thereisanothertypeofwasteshowninthisscenariothatletsusknowthatisnotthecase.Itistheoverstockbetweenoperatoroneandtwo.Thisindicatesthattheproblemliesbetweenoperatoroneandtwo.Bycorrectlyidentifyingthewaste,wecanalsobegintheproblem-solvingprocess.
Waitingcanmanifestitselfinseveraldifferentways.Waittimecanexistforequipmentaswellasoperators.Itisalwaysbestiftheoperatorandtheequip-mentworkinharmonyandneitherhasidletimeintheoperation.However,asthosewhoareexperiencedinmanufacturingunderstand,thepaceofthemachinerydoesn’talwaysharmonizewiththepaceoftheoperator.Aswesearchforthebestway,whichofthefollowingsituationsshowninFigure 5.9isbetter?Inthefirstscenario,wehavethemachinewithalongercycletimethantheoperator.Thissituationisgenerallyreferredtoasamachine-basedcycletime.Inthesecondscenario,theoperatorhasalongercycletimethanthemachine.Thissituationisgenerallyreferredtoasanoperator-basedcycletime.
Whichisbest?Thetextbookansweristhatneitherscenarioisideal.ComingfromanenvironmentwhereIhaveneverpersonallyexperiencedtheidealsituation,whatdoweneedtoknowtodeterminewhatisthebestway?Todeterminethebestway,wehavetomakesurewehaveathoroughknowledgeoftheactualprocess.Understandingthescenarioalsoenablesustoidentifythecountermeasurestoimprovetheoverallefficiencyandmakethesituationbetter.Inthissituation,itisimportanttounderstandthedemandandthentocalculatethetakttime.Ifthemachinecycletimecan
1 2 3 4
Figure5.8 Waiting.
Waste Management … Improving the Manufacturing Process ◾ 99
processtherequiredworkwithinthetakttimeandtherequiredproductionlevelscanbeachievedduringthenormalshift,thenIwouldsaythatthesecondscenarioisthebestway.Thatdoesnotmeanthatitcan’tbebetter;however,ifthemachinehasexcesscapacity,thenitisbettertofullyutilizetheworker.Ifthemachinecycletimeisequaltothetakttime,thistellsusthatwemaybecapacityconstrained.Itisnevergoodfortheequipmentcycletimetoequalthetakttime,unlessitisanautomatedcell.Ifthisisthesituation,thenIwouldsaythatthefirstscenarioisthebestway.
Mostofthetime,peoplehaveatendencytothinkthatwaitingisgoodintermsofmanufacturing,becausegenerallywaitingindicatesthatyouareaheadoftheproductionplan.Ifthisisthecase,thenwecanseethatover-productionandoverstockcancausewaiting.Havingmorepartsthanneces-sarygivespeopleasenseofsafety,acomfortcushion.Theparadoxofthis,however,isthatmostpeoplecannotstandtowaitanddonothing.So,whatdotheydo?Theyfillthetimetheyhaveforwaitingbyperformingotherwork;thisNVAWgenerallyleadstooverproduction.Ithinkitisfascinatingtoconsiderhowwastegenerateswaste.
Letusassumethatamachinebreaksdown.Ifthereisanypreparationworkthatneedstobedonebeforethepartsaretobemachined,youcangenerallyfindthelineworkersfillingthatwaittimebypreparingthoseparts.Thatway,whenthemachinecomesbackon-line,theycanhitthegroundrunningwithafasterpace.Thisisonlyonewayinwhichoverpro-ductioncandisguiseitselfaswaiting.
OPERATING OPERATING
Worker waiting on machine. Machine waiting on the worker.
Figure5.9 Waiting.
100 ◾ The Toyota Kaizen Continuum
Theseareonlysomeofthethingswelookforassymptomsofwait-ing.Althoughthecausesofwaitingcanvarytoaninfinitedegree,themainreasonscanusuallybenarroweddowntoafew.Perhapsthereisunevennessinthemanufacturingcycle,ormaybethecycletimeoftheproductdoesnotmatchthetakttime;itcouldbeill-conceivedequipmentorprocesslayout.Acommonconditionwouldbeanimbalancedcondi-tion;onanassemblylinetherecouldbesomeprocessthatisnotbalancedappropriately,andthussomeworkersarewaitingwhileothersareover-burdened.Probablythemostfamiliarcauseofwaitingisbatchproduction.Batchproductioncreateswaitingtimebecauseeachprocessisproducingaspecificnumberofpiecesorproducts.So,ifoneprocesshasacycletimeofthirtyseconds,andthenextprocesshasacycletimeoffourminutes,theywouldneedveryspecificandappropriatecontrolstoensuretheydonotcreateunnecessaryinventory.
Thecountermeasuresvaryforeachoftheproblemsjustlisted.Forunevenflow,wewouldlookatleveledproduction,heijunka,toimproveourprocess.Ifanill-suitedequipmentlayoutiscausinganimbalance,wewouldlookatcreatingaU-shapedequipmentlayout;thisway,wecanhaveoneoperatoreasilyoperatingmorethanonepieceofequipment.Ifthereisaqualityproblem,trytoinstallapoka-yokedevicethatwilleitherdetectorcorrecttheproblembeforethedefectoccurs,orstopthelinesotheproblemcanbecorrectedpriortopassingontheproducttothenextprocessorcustomer.
5.3.3 Overstock
Backonourassemblyline,wecanseeanothertypeofwastehasmani-festeditself(Figure 5.10).Inthisexample,overstockhasmanifesteditselfbetweenoperatoroneandtwo.Asdiscussedearlier,thisindicatesa
Overstock
1 2 3 4
Figure5.10 Overstock.
Waste Management … Improving the Manufacturing Process ◾ 101
problemwithprocessoneortwo.Eventhoughoverstockisatypeofwaste,itisoftenusedtomaintainacontinuousflow.
Perhapstheeasiestwastetoobserve,overstockinmanyrespectsisthehardesttoeliminate.Toeliminateorreduceoverstockasmuchaspossible,therearemultiplecountermeasuresthatcanbeapplied.Toapplythemcor-rectly,thecauseandeffectofeachtypemustbequantified.Severalofthecausesofoverstockcanbetracedtothemanufacturingprocessandtheorganizationalculture.
Overstockiscreatingmorepartsandcomponents,orhavingmorerawmaterialsonhand,thanarenecessarytoachievetheoperatingplan.Figure 5.11isanexampleofhowoverstockcangetoutofcontrolifthepro-cessisnotmanaged.
Figure 5.11showsafine-lookingwarehouse,yes?Everythingappearstobeneatandeasytofind;IbetifToyotachronicallyoverproduced,theirwarehousewouldlookjustasorderly.Unfortunately,overstocksuchaspic-turedherewillhideeverytypeofwaste.
Ifwelookatthesameimageofawarehousewiththesevenwastesinmind,whatwasonceanorderlywarehousebecomesonegiantliability.
Generally,theeffectofoverstockisthatalongleadtimeisneces-sarybeforeanymaterialbecomesafinishedproduct.Thetimeittakesforaproducttomovefromrawmaterialtofinishedgoodsisreferredtoas
Figure5.11 OrderlyWarehouse.
102 ◾ The Toyota Kaizen Continuum
throughputtime.IfIhaveaday’sworthofoverstock,thenthatstockisnotgoingtobecomeafinishedproductforaday.Now,ifIhavetwoyearsofoverstock,whichIhaveseenmanytimes,itwillbetwo years beforeIseeareturnontheinvestmentmadefortherawmaterials,nottomentionalloftheassociatedcostsoflaborhours,processing,andwarehousing.Ihaveseenmanyenvironments,especiallyintheautomotiveindustrybutalsoinmanyothermanufacturingfacilities,wheretheexecutivesandmanagementbelievetheyhaverunoutofspacetocontaintheiroverstock.Sotheylookatbuildingawarehousetoalleviatetheirneeds.Itisonlyaftereliminat-inginventorythattheexecutivesandmanagementdiscoverthattheyhavemorespacethantheypreviouslythought.Oneofthebiggestproblemsthatcontributestooverstockisthefactthatmostpeople,fromthecompanypresidenttothelineworker,understandthatstockisnecessaryformanufac-turing.Onethingthatgenerallyisneglectedisunderstandinghowtocontrolthelevelofstockintheoperation.Weneedtohavepartsandsubcompo-nentstomakeafinishedproduct.WIPisnecessarytofacilitatecontinu-ousflow.TheproblemiswhenyouhaveWIPinyourprocessthatisdays,weeks,months,evenyearsold.Tocontrolthelevelsofstockintheopera-tion,standardizedworkhastobeinplace.Standardizedworkisacoun-termeasureforreducingoverstockinanoperation.Ofcoursestandardizedworkhasotherbenefits,butinreferencetostock,ithelpstodefinehowmuchofwhatisnecessaryandwhen.Withoutstandardizedworkinplace,anorganizationwillnotbeabletocontrolthelevelofstockandmaintainanoptimumlevelofproductivity.
WheneverIvisitafacilityIlookatthelevelsofstock,bothrawmaterialsandWIP,inanoperationaswellasthelevelofFPI.ThereasonIdothisistodeterminetheeffectivenessoftheorganization’sschedulingsystem.Moreoftenthannot,theschedulingsystemcreatesWIPandFPIandfailstoman-agerawmaterials.
5.3.4 Overproduction
Overproductionissimplyproducingmorefinishedproducts(FPI)thanarenecessarytofilltheavailableorders(Figure5.12).Theoutlinethatmostman-agersandsupervisorsfollowisbasedona“feeling”thatproducingmorethannecessaryislogicalincaseofmachinebreakdownorgeneraldowntime.Thisgivesthemabuffer,acomfortzone,ifyouwill,thatallowsthemtofeelatease,sothatif“something”happens,theycanstillfillcustomerorders.Thereisnothingwrongwithhavingabufferaslongasitismanaged.
Waste Management … Improving the Manufacturing Process ◾ 103
Ioncewasworkingwithalargeautomakerthatwaslayingoutanewvehicleplant.AsIreviewedtheplantlayouts,Isawthattherewasnobuf-ferbetweenthemanufacturingoperations.Iaskedwhytheyhadnotputinabuffer,andtheytoldmethataconsultantwhowasan“expert”ontheToyotaProductionSystemtoldthemthatToyotadidnothavebuffersintheirplants.Theyhadliterallysetuptheplanttoachieveone-pieceflow.Itoldthemthattheywerenuts!Inafactoryascomplicatedasonethatproducesautomobiles,itisessentialthatabufferexistfromonemanufacturingareatothenext.InToyota,thereareevenbuffersbetweentheindividualassemblylines.ThisagainisanexampleofamisunderstandinginthemanufacturingcommunitythatToyotaexistsforthepurposeofimplementingtheperfectproductionsystem.Toyota,likeeverygoodbusiness,existstomakemoney.Thekeytomakingmoneyinmanufacturingisproducinghighqualitywithareasonablecost.
Manypeoplearealsoconfusedbetweenoverproductionandoverstock.Inmanufacturing,therearefourbasictypesofinventoryinanoperation:
1.RawMaterial—materialsorcomponentsthatneedtobemanufacturedtoproduceavalue-addedproduct
2.WIP(WorkinProcess)—productthatispartiallyprocessedandisnotin-processstock
3.In-ProcessStock—productthatisdirectlybeingmanufacturedinoneofthemanufacturingprocesses
4.FPI(FinishedProductInventory)—finishedproductsthatcanbesoldtoacustomer
Akeytounderstandingoverstockandoverproductionisthe“over.”Inamanufacturingoperation,wearetakingrawmaterialsandprocessingthemintoaproductthathasvalueforthecustomer.Ofcourseyouaregoingtohavesomelevelofinventoryinallfourcategories.Fromawastestandpoint,
Overproduction
Figure5.12 Overproduction.
104 ◾ The Toyota Kaizen Continuum
anythingthatisinexcessofwhatisnecessarytoefficientlymanufacturetheproductisinthe“over”category.
LookingatFigure5.13,wecanseethatoverstockcanmanifestitselfinthreeofthefourinventorycategories;rawmaterials,WIP,andin-processstock.Overproductionappliesonlytofinishedgoods.
Overproductionalsocanmakemanaginganoperationmorechallenging.Shouldtherebeaqualityproblemwiththefinishedproducts,thecostforsortingandrepairingtheproductsincreases.Thiscouldaffectthelevelofqualitythatisdeliveredtothecustomer.Overproductionalsohidesmanu-facturingproblems.Goodmanagerswanttoseeproblems,nothidethem.Problemsareeasiertofixoncetheyarevisible.
OneofthegoalsoftheToyotaProductionSystemistoproduceproductsinthequantityneededbythecustomer.Onlyproducewhatthecustomeriswillingtopurchase.Productsonlyhavevaluewhenthereissomeonewhoisgoingtopurchasethem.
Ioncevisitedaglassmanufacturingplant,andtherewasinventoryinallitsformseverywhereyoulooked.Asweweretouringtheplanttherewasliterallymonths’worthofinventoryateachstageofthemanufacturingprocess.Whenwefinishedtheplanttour,thedirectorofoperationssaid,“Wouldyouliketoseethedistributioncenter?”Ithoughttomyself,howcouldtherebemore?Whenwearrivedatthedistributioncenter,itwasamassive1.2millionsquarefootfacilitycompletelyfulloffinishedgoods.Someofthefinishedgoodswereoversixyearsold.Thisisaclassicexampleofproducingmoreproductsthanthecustomeriswillingtopurchase.
InToyota,thiswouldnotbepossiblebasedonthemanufacturingcon-trolsthatareinplace.AnotherbigdifferenceisthatToyotasuppliestheir
Raw Material
FinishedProduct (FPI)
Conveyance FinishedProduct (FPI)
In ProcessStock
WIPWIPWIPWIP
WIP WIP WIP
Figure5.13 InventoryExamples.
Waste Management … Improving the Manufacturing Process ◾ 105
ownretailchannel,whichgivesthemcontrolovertheleveloforderstotheplants.Thisisoneofthebiggestchallengesinmanufacturingtoday.Itisespeciallytrueintheretailindustry.WhenyouareasmallcompanysupplyingamajorretailerlikeWalmartorTarget,thereisalotofpres-suretohaveproductonhandwhenitisordered.ThisisnotanexcusetocarryexcessivelevelsofFPI,butitdoespresentsomechallenges.AnotherkeydifferencebetweenToyotaandmostcompaniesisthatToyotaisself-funded.Mostcompaniestodayoperatewithsomesortoflendingfacility.Whenyouhaveacapital-basedlendingfacilityandyouwanttobegintheimplementationofsomeoftheconceptsdiscussedinthisbook,itmayseemcounterintuitive.Forexample,ifyourbankhasallowedyoutobor-rowmoneyonyourinventoryandthenyoureduceyourinventory,youcouldcausesomeproblemswithyourliquidity.ThisisachallengethatToyotaisnotfacedwith.Ofcourse,weallwishthatwedidnothavethebanksbreathingdownournecksandthatwewereself-funded,butformostofusthisisnotthecase.
Ithinkitmakessensetoeveryonetonothaveexcessivelevelsoffinishedgoods.Wewouldallbeveryhappyifwecouldsellallofthefinishedgoodsanddrawthelevelofinventorydownimmediately.Again,thisistheperfect-worldscenario.IoncehadadiscussionwithaToyota“expert”fromtheconsult-ingworld,andwewerediscussingwiththeCEOofacompanyhowtoreducethelevelsoffinishedproduct.Hissuggestionwastoshuttheplantdownfortwoweeksanddrawdownthelevelofinventory.Thisseemslikeagoodideaonthesurface,butlet’smakesomebasicassumptionsinourexample:
Finishedproductinventoryvalue=$5million Inventoryborrowingbaserate=0.50 Fixedcostrate=0.60 Variablecostrate=0.40 Weeklycosts=$3million
Inthisexample,thebankallowsustoborrowfiftycentsonthedollarbasedonourcapital-basedlendingfacility,whichmeanswearealreadyusingtwoandahalfmilliondollarsofthevalueoftheinventorytofundourcompany.Ourfixedcoststructureis60%ofourtotalcostsandmakingourvariablecosts40%.Forthesakeofthisexample,let’sassumethatthefivemilliondollarsofinventoryiswantedbythecustomer.IfweshutdownfortwoweeksandreduceourFPItozero,whathaveweachieved?Ifweselltheentireinventory,thatgeneratesfivemilliondollarsofcash,ofwhich
106 ◾ The Toyota Kaizen Continuum
wehavetopaytwoandahalfmilliondollarstothebankbecausewewerealreadyborrowingfiftycentsonthedollar.Duringthetwoweeksofshut-down,westillhadtolayoffallofourhourlyworkersanddidnotpaythem,andwedidnothaveanyofourvariablecosts.However,wedidstillhaveallofourfixedcostsandthatequalsmorethanthreeandahalfmilliondollarsofcostforthetwo-weekperiod.Let’sdothemath.
Sellallinventory $5million Repaybanks $2.5million Fixedcosts $3.6million Valuetocompany ($1.1million)
What?Weremovedfivemilliondollarsworthofinventory,anditcoststhecompanymoney?Thisisoneofthemajordifferencesinaself-fundedorganizationandonethatreliesonalendingfacilitytooperate.
AlthoughtheexamplepointsoutsomeofthechallengesofimplementingTPSintherealworld,itisnotanexcusetohavehighlevelsofinventory.Itjustillustratesthateverythingisnotassimpleaswhatiswritteninabook.Howdowereduceinventoryandnothaveanegativeeffectonthecompany?Hopefullyyouwillfindthoseanswersandmoreasyoureadthisbook.
5.3.5 Repair
Repairisperhapsthemostobviouswastetospot,andifapproachedcor-rectly,alsooneoftheeasiesttoremedy.However,itseemsasifmostcom-paniesarecontenttofocusonrepairingdefects,asopposedtoactuallypreventingthemfromoccurringinthefirstplace.Thecumulativeeffectsofdefectswillbeanincreaseinthecostoftheproductduetodecreasesinproductivitylevels,whichincreasesthetotalman-hoursduetotheneedfor
Repair
Figure5.14 RepairProcess.
Waste Management … Improving the Manufacturing Process ◾ 107
inspection.Dependingonyourcustomerrequirements,youmaybeforcedtohireanoutsidecompanytoinspectandsorttheproductpriortoshippingittothecustomer.Forthoseofuswhohaveworkedintheautoindustry,weunderstandhowquicklythosecostscanimpactthebottomline,nottomen-tionthepotentialdamagetothereputationoftheorganization.Thiscouldleadtomoredifficultyinthefuturetowinnewbusiness.Asabusiness,ourgoalistomakemoney,andcontrollingdefectssaves us money,whichinturncreatesstabilityforus,ouremployees,andourinvestors.Ioftentellthemanagementteamsinourcompaniesthatweworkreallyhardtomakemoney;weshouldworkequallyashardtokeepsomeofit!
Theneedforrepairiscausedbydefectsintheproducts.Iftheprod-uctsaremanufacturedcorrectly,thentheneedforrepairisreduced.Forexample,ifIamprocessingmetalthathastoreachacertaintemperaturebeforeIcanputitthroughthediecastprocess,anditdoesnotachievethatcorrecttemperature,thelikelihoodthatIamgoingtocreateadefectisincreased.Itisthatsimple.Sometimesitisasbasicasbeingawareoftheprocesscontrolparametersinordertoavoidcreatingdefectiveproductsinthefirstplace.
ManytimesIhaveobservedinstanceswhereinspectiontolerancesweresotightthatpartswithinstandardswerelabeledasdefective,thusincreas-ingthelevelofproductsneedingrepair.Asaresult,inventorylevelsareincreasedandmanufacturingcostsareincreased.Havinganunderstandingofwhatisgood,whatisnotgood,andtheparametersofwhatmakesapro-cessstableandrepeatablewillallowustolimittheneedforanyadditional
Figure5.15 Poka-YokeExample.
108 ◾ The Toyota Kaizen Continuum
manpower,aswellascreateanenvironmentwherewecanhavestandard-izedwork,whichresultsinlowermanufacturingcosts.
Thereareafewanecdotesinthehistoryofleanthathaveattainedmyth-icalstatus,andthebestknownishowShigeoShingooptedforthetermpoka-yoke(mistake-proof),asopposedtobaka-yoke (fool-proof).Thestorygoesassuch:Dr.Shingowasaddressingagroupofpart-timeworkersatanautomobilefactory.Histopicofdiscussionwashowtomaketheprocessofspot-weldingseatframesasfool-proofaspossiblewiththeintroductionofabaka-yokedevice.Uponhearingthis,thepart-timeworkerprimarilyresponsiblefortheoperationburstintotears,thinkingthatshewasconsid-eredafoolbyDr.Shingo,aswellasbyhercolleagues.Fromthatmomenton,Dr.Shingocoinedthetermpoka-yoketoavoidanyimplicationthatthedeviceswereneededbecausetheworkerswerefools.
Poka-yokeasacountermeasureisnearlyunbeatable.Itcanbeappliedtonearlyeveryaspectofproduction:equipment,parts,materials,and,moreimportantly,theprocessitself.Whenanypoka-yokedevicedetectsanerrororabnormality,itwilltriggereitherthemachineortheentireproductionlinetostop.Beforethelineormachinestartsupagain,thedefectissuewillhavebeenresolved.Inthismanner,qualityisbuiltintotheprocess,whichisthemosteffectivewaytoeliminatewaste.ThisconceptiscalledjidokainsideofToyota,anditisoneofthetwopillarsoftheToyotaProductionSystem.
Itdoesnotmatterwhattypeofproductthatyouaremanufacturing;ifacustomerbuysadefectiveproduct,youhavecreatedwaste.Onethingthatmanycompaniesseemtohaveforgottenisthat,moreimportantlythanwaste,youhavecreatedanunhappycustomer.
5.3.6 Overprocessing
Overprocessingiswhenmoreworkisperformedthannecessarytoprocessthework.Overprocessingisoftendifficulttoidentifyinafacilitywhereyouarefamiliarwiththeprocess.Manytimespeoplewhoareclosetothepro-cesshavebecomeaccustomedtoitandwillclassifyoverprocessingasVAW.IntheproductionlineexampleinFigure 5.16,theoperatorinpositiononeishand-startingafastenerandthentheoperatorinpositiontwoistighteningthefastener.Hand-startingthefastenerdoesnotaddvaluetotheproduct;onlytheactualtighteningaddsvalue.Toidentifyoverprocessing,wehavetohaveagoodunderstandingofVAW.
Anotherwayoflookingatoverprocessingisanyextrastepinaprocessthataddscostbutnovalue.Easy,right?Forinstance,letusassumethatwe
Waste Management … Improving the Manufacturing Process ◾ 109
havetoattachalabeltoaparticularpartbeforeitcanbeconsideredcom-plete(Figure 5.17).Thefirstthingthathastobedoneistopeelthebackingoffthelabeltoexposetheadhesiveside.ThemotionoftakingoffthatlabelbackingisNVAW;itisoverprocessingbecauseitisnotnecessary.Now,ofcoursethebackinghastoberemovedforthelabeltostick,butisitsome-thingthatwehavetodo?Therearelabelgunsthatremovebackingsastheyapply,aswellasdispensersthatremovebackingsastheyarepulled.Ifwedonotproperlyclassifywaste,thenwewillmorethanlikelynotbeabletoimplementtheappropriatecountermeasure.
Ifyouarethinkingtoyourselfthatsomethingassimpleasremovingthebackingfromalabelisatrivialimprovementatbest,thenIdonotknowif
Hand startfastener
(Over-Processing)
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1 2
Figure5.16 Overprocessing.
Figure5.17 OverprocessingExample(LabelInstallation).
110 ◾ The Toyota Kaizen Continuum
thereisanythingusefulyoucanlearnfromthisbook.Forexample,let’ssayyouownonemanufacturingfacilitythatonlyhasfourproductionlines,andeachlinehasanoperatorwholabelspartsorproductsaspartofhisorherjobfunction.Thephysicalactofgrabbingasticker,removinganddiscardingthebacking,andthenapplyingthestickerintheappropriateplaceandposi-tiontakesfiveseconds.Theoperatorrepeatsthisprocess40timesanhour.Thisequalsto3.5minutesperhourbeingdevotedtoapplyingasticker.Bigdeal,right?Afteran8-hourshift,thatnumberisover26minutes;afteraworkweek,2hoursand13minutes;afterafiscalquarter,27hours.So,27hoursperquarterforoneworkertoapplylabels;andwehavefourproductionlines,eachwithalabelprocess.Alladdedup,bytheendofthefiscalyear,youhavepaidout432man-hoursforapplyingalabel.
Now,letussaythatyouhaveintroducedasimplelabelgun;whenyousqueezethehandle,thestickercomesoutwiththeadhesivebackingexposed(Figure 5.18).Anotherexamplewouldbetohavethelabelsmanu-facturedontoarollandthendevelopasimplejigthatallowsforthelabelstoberemovedwithoutremovingthebackingpaperfromeachindividuallabel.Witheitherkaizen,thelabelinstallationprocessnowonlytakes2seconds,or1minuteand20secondsperhour.Thisaddsuptoroughly10minutesper8-hourshift;50minutesaweek;3.3hourspermonth.Thefiscalyeartotalforallfourproductionlinesis120man-hours,asavingsof312man-hoursperyear.Thelabelgunandjighavesavedyouquiteabitofmoneyforsuchatrivialprocess.Notbad,right?Truly,itisnotbadconsider-ingthatthegunandjigarearatherpassivecountermeasure.Amoreactive,
Figure5.18 OverprocessingKaizenExamples.
Waste Management … Improving the Manufacturing Process ◾ 111
dynamicimprovementwouldbetoautomatethelabelprocessandtakesuchamenialtaskoutofthehandsofyourworkers.
Theeffectsofoverprocessingarefoundintheabundanceofoperatorsandprocessesneededforproduction.Accordingly,asquiteabitofoverpro-cessingcomesfrombadprocesssequenceandbadworksequence,produc-tivitywilldeclineduetoanincreaseinrepairsfromthosebadsequences.Rememberthatrepairingdefectsis100%overprocessing.Theothersuspects,badflow,tools,jigs,andthelackofstandardizedwork,areallhereaswell.Someofthemosteffectivecountermeasuresherearetodocycletimebal-ances,rebalancetheworkload,andbuild-inqualitytotheprocess.Approachallimprovementsfromthestandpointofcommonsenseandrepeatability.
5.3.7 Non-Value-Added Work (NVAW)
ManypeoplereallygetconfusedaboutNVAW;afterall,isn’tallwastenon-value-added?Absolutely,allwasteisnon-value-addedwork.InFigure 5.19,wecanseethattheworkeratthebeginningofthelineisplacingaworkerordermanifestonthelinetotelltheotherworkerswhattypeofproducttheyaremaking.Althoughthisformisusefulintheoperation,itdoesnotaddanyvaluetotheproduct.ThisdiffersfromtheexampleweusedtoexplainoverprocessingwiththelabelapplicationinthattheapplicationofthelabelisVAW.Theapplicationofthemanifestdoesnotcontributetotheoperationotherthantogiveinstruction.AnothergoodexampleofNVAWisremovingcomponentsfromtheboxes;theremovalprocessaddsnovalue,onlytheinstallation.Thistooisnotoverprocessing,becausetheremovalofthecomponentrefersonlytothecomponentandnottotheendproduct.
Onceagain,likeoverprocessing,transportation,andwaiting,NVAWishardtoidentifybecauseithidessowellamongotherwastes,aswellasintheperceptionthatit,too,isnecessary.NVAWworkisanyworkthatdoesnotaddvalue,infunctionorappearance,forthecustomer.Forallofuswho
Figure5.19 Non-Value-AddedWork.
112 ◾ The Toyota Kaizen Continuum
makeourlivingwithoutmateriallycontributingtotheproductionprocess,IamsorrytosaythatweareaclassicexampleofNVAW.Foranyexecutivewhomightbereadingthisbook,ifyoucanreducemembersoftheman-agementteam,youareeliminatingwaste!However,pleasedonoteliminatethemuntilaftertheyhavereadmybook.
Alljokingaside,ifyourprocessisfilledwithNVAW,youwillhavework-erswhoareverybusybutarecontributingverylittlevalue,ifany,tothefinalproduct.NVAWcreatesanunstableworkenvironmentbyintroducingfluctuationintothemanufacturingprocess,whichnegativelyaffectsqualityandproductivity.ThankfullyIcansaythatmostNVAWisactuallyunneces-saryandcanbeeasilyeliminatedfromtheprocess.
WhenIamvisitingacompanyforthefirsttime,Igenerallyliketospendtimewiththemanagementteamtounderstandtheprocess.OnceIhaveabasicoverviewoftheprocess,Iliketovisittheplantfloorandwalktheoperationfromthestartoftheprocessthroughthefinalprocessesoftheoperation.Duringthesevisits,Iamobservingtheprocessandmakingajudgmentconcerningtheeffectivenessofthecurrentstateoperation.Asapartofthisprocess,Ineedtomakeahigh-levelassessmenttounderstandwhatlevelofimprovementcanbemadeintheprocess.UnderstandingthelevelofNVAWisakeycomponenttohelpmeunderstandtheoveralleffi-ciencyoftheprocess.
Igenerallyhaveonetotwohourstowalkthefloorinordertomakeahigh-levelestimateoftheopportunity.IemployaprocessthatIwastaughtatToyotainJapan,calledteashi.Theliteraltranslationmeanshandsandfeet.Byobservingthehandsandfeetoftheworkers,Icandeterminethegenerallevelofproductivityintheoperation(Figure 5.20).Itisnotpossibleforahumantoaddvaluetoaproductwithoutusingtheirhandsandtheirfeet.WhenIamlookingatthehandsoftheopera-tors,Iammakinggeneralobservationsofthepercentageoftimethattheirhandsareidle,orareperformingNVAW.Observingthefeetoftheworkerisarelativelysimplemethodforunderstandingthepercentageoftimeintheprocessthattheworkeriswalking.Byobservingthehandsandfeettogether,Icandetermineiftheworkerisworkingwhilewalking,orjustwalking.
Usingthissimpleprocess,Icangenerallydeterminetheimprovementopportunityofanoperationwithin10%oftheactualopportunity.
UnderstandingNVAWisessentialforunderstandingproductionefficiency.EventhoughNVAWisthemostapparenttypeofwasteinamanufacturingorproductionprocess,itisthemostdifficulttoidentifyandtocountermeasure.
Waste Management … Improving the Manufacturing Process ◾ 113
Asyouhoneyourskills,youwillunderstandthatidentifyingandcorrectlyclassifyingwasteisafoundationalelementofmakingrealimprovementinanybusinessprocess.
Manypeoplewilltellyouthateliminationofwasteisthekey;however,IhavefoundthatevensomeonewithoutanunderstandingoftheToyotaProductionSystemwilleliminatewastewhenthewasteisapparent.Therealchallengeistoidentifyandcorrectlyclassifythewaste.
5.4 MudaCountermeasureMethods
Nowthatthereisabasicunderstandingoftheseventypesofwaste,wecanbegintolookforwardtowardeliminationofwastefromourprocess.
Themudasummarychart(Figure 5.21)isagreattoolforidentifyingandclassifyingwaste.Ontheleftaretheseventypesofwaste.Asyoumoveacrossthepage,thenexttwocolumnssummarizethedifficultyforidentify-ingandtheneliminatingthewaste.Thenextcolumnindicatesthereactionthatmanagementshouldtakeoncethistypeofwastehasbeenidentified.Somepeoplemaytellyouthatyouhavetoeliminatealltypesofwaste;however,likeanythinginmanagement,itisnecessarytoprioritizetheopportunities.Thereactionindicatedforeachoneisjustasuggestion;youwillhavetodeterminetheprioritybasedonyourcircumstances.Thenextcolumnlistssomeofthecommonwaystoidentifythetypeofwaste.Thisisnotmeanttobeachecklistbutjustahelpfulillustrationtoproperlyclassify
Figure5.20 NVAWObservation.
114 ◾ The Toyota Kaizen Continuum
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Waste Management … Improving the Manufacturing Process ◾ 115
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116 ◾ The Toyota Kaizen Continuum
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Waste Management … Improving the Manufacturing Process ◾ 117
waste.Thenexttwocolumnsaretiedtooneanother;thefirstofthetwoillustratessomeofthegeneralcausesforthattypeofwaste,andthecorre-spondingrowinthenextcolumnindicatestheappropriatecountermeasureforthatparticularcause.
LikeallofthetoolsusedintheToyotaProductionSystem,themudasummarychartisjustatool,andthesuccessorfailurethatyouwillhavewithcorrectlyidentifyingandeliminatingwasteiscompletelydecidedbyyourexecution.
IwouldgiveToyotacreditforthesewastes,butchancesareyouhavethemtoo.Itismostimportanttorememberthatthereisnocorrectanswerthatcanbeappliedtoallsituations.Ihavegivensuggestionsforappropri-atecountermeasures,buttheyareonlysuggestions.TheToyotaProductionSystemisaboutachievingthebestcondition,andeachcompany’sbestcon-ditionisuniquetothatorganization.
5.5 WasteEliminationExample
NowthatwehaveestablishedabasicunderstandingoftheprinciplesofthethreeM’sandthesevenwastes,IwouldliketobrieflyillustratesomeofthebasicprinciplesthatIhavedevelopedtoimprove,orkaizen,theproduc-tionprocess.Theseprinciplesarenotreferenceeditionprinciplesthatcanonlybeeffectiveinautopianorganizationalenvironment;theyhavebeendevelopedbasedonmytwenty-twoyearsofoperationalexperience.TheseprincipleshavebeenappliedinawidedegreeoforganizationswithinandoutsideoftheToyotafamilyofcompanies.
OneoftheareaswhereIwasabletodevelopacertainlevelofprofi-ciencyatToyotawastheabilitytogointofailedbusinessunitsinsidetheorganizationandturnthemaroundquickly.Toconsistentlygetsuccess-fulresultsinatimeframethatwouldimpacttheoperation,Idevelopedasystematicprocessforlookingattheoperation,towhichIappliedalloftheprinciplesfrommyeducationatToyota.Thefirststepofmykaizenpro-cessbeginswiththeprincipleofgenchi genbutsu.AttheendofChapter4,Iintroducedgenchigenbutsuasanaction-orientedprincipleformanaginganyoperation.Genchigenbutsuisessentialforanymanagerwhowantstodriveimprovementintheorganization.Thewholepremiseofgenchigen-butsuisthatofexecution.Asanygoodmanagerknows,anyplanthathaseverbeendevelopedisonlyasgoodastheorganization’sabilitytoexecutetheplan.
118 ◾ The Toyota Kaizen Continuum
Topracticegenchigenbutsu,itisessentialforoperationalmanagerstospendtimeintheworkenvironmentwiththepeopledoingthework.Thisisoneofthemostbasicconcepts,andyetitistheoneconceptthatmanymanagersfailtounderstand.WhenIvisitacompanyandalloftheopera-tionalmanagershaveofficesseparatefromtheproductionfacility,withoutfailtheproductionoperationshaveglaringopportunitiesforimprovement.Howcanasupervisormanagepeopleifhespendsnotimewiththepeopleheisresponsibleformanaging?Organizationalexecutionhappensinrealtimeandmustbemanagedbyreal-timemanagers.Managerswhorelyondatacollectedattheendoftheday,week,ormontharenoteffectivelyman-agingtheorganization.
Nowthatwearemanagingourpeoplewheretheyaredoingthework,itwillbecomeevidentthatthereareopportunitiesforimprovingtheprocess.Itdoesnotmatterhowwedefinework.Thefactisthat,forustoexecutetheprinciplesofTPS,wehavetospendtimewiththepeopleaddingvaluetotheprocess.RememberthatmanagementisaformofNVAW.
Nowthatanareaforimprovementhasbeenselectedforimprovement,orkaizen,whatdowedo?Howdoweactuallyimprovetheprocess?
Thekeytomakingimprovementinanyprocessistocorrectlyclassifythework.EarlierwediscussedthedifferencebetweenNVAWandVAW.VAWisonlytheelementoftheprocessthatthecustomeriswillingtopayfor.Forthatreason,whenweclassifywork,itisimportantthatwehaveaveryclearunderstandingofwhatkindofworkitis,andwhatitisnot.WhenIamlookingataprocess,Iclassifyworkintothreedistinctgroups:
1.Value-addedwork 2.Unnecessarynon-value-addedwork 3.Necessarynon-value-addedwork
ThekeydistinctioniscorrectlyclassifyingunnecessaryNVAWandneces-saryNVAW.Althoughalloftheworkisnon-value-added,theapproachforimprovingtheprocesssignificantlychangesbasedonthisdistinction.
Aswelookataprocessforakaizenevent,weneedtobeabletoiden-tifyworkfromwaste,andthendifferentiateworkfromNVAW.WithintheboundariesofNVAW,weneedtounderstandthedifferencesbetweenneces-saryandunnecessaryNVAW.
UnnecessaryNVAWisrelativelysimpletocountermeasure,asopposedtonecessaryNVAWandVAW,whicharemuchmorecomplex.Wheninitiat-ingaprocesskaizenevent,Ialwaysemphasizetotheteamthattheyshould
Waste Management … Improving the Manufacturing Process ◾ 119
focustheimprovementactivityontheaspectsoftheprocesswheretheyhavedirectcontrol.Thisensuresthattheteamdoesnotbecomefrustratedwhenidentifiedactionsrelyonareasoutsidethescopeoftheteam.Thisalsoensuresthattangiblebenefitsareextractedfromtheevent.
LookingatFigure 5.22,unnecessaryNVAWisworkthatiscompletedbutisnotnecessarilyneededtobecompletedinordertomakeacompletedproduct,orunit.Inthisexample,theworkerisremovingthecomponentfromtheshippingcontainer.SomemayclassifythisasnecessaryNVAW,butthisisnotcorrect.Itmaybenecessarythatthisproductneedstobeshippedinthisparticularcontainerfromthevendortoensurequality,butforthisprocess,thisworkisnotnecessary.Thisworkisonlyrequiredbecausethisishowthepartispresentedtotheworker.Whenwearedoingaprocesskaizen,wehavetolookattheprocessandseehowwecouldoptimizetheprocess.Therefore,ifthepartpresentationweremodified,theamountofNVAWcouldbereducedoreliminated.
InFigure 5.23,theunnecessaryNVAWiseliminated,asthecomponentisnowplacedonaconveyor.Thepartispresentedtotheworkerinawaythatthetimerequiredforremovingthecomponentfromtheboxhasbeenelimi-nated.Assumingtheshippingcontainerfromthevendordoesnotchange,thecomponenthastoberemovedfromthecontainerbysomeone,sowhereistheactualprocessimprovement?Theimprovementcomesfromtwosources.First,theworkernowhasthepartpresentedontheworksurfaceanddoesnotneedtoturnaroundtoremovethecomponent.Thisnotonly
UnnecessaryNon-Value Added Work
NecessaryNon-Value Added Work Value Added Work
Removing components from shippingcontainers is unnecessary NVAW.
Retrieving tools andfasteners is necessary NVAW.
Fastening products together tomake a completed unit is VAW.
Figure5.22 TypesofWork.
120 ◾ The Toyota Kaizen Continuum
reducesthetimethatwasspentremovingthecomponent,italsoreducesthetimetoturnaroundandwalktothestoragelocation.Evenifweassumethatsomeonestillneedstoremovetheproductandplaceitontheconveyorandthattimeisequaltothetimetheworkerspentremovingthecomponentfromthecontainer,thebenefitisthetimetoturnandmovetothecontainerstor-agelocation.Eventhoughthesavingsissmall,thesavingswouldneverhaveoccurrediftheworkhadnotbeenclassifiedcorrectly.AtToyota,wewouldanalyzeaprocesstosaveahalfsecondfromaprocesswithacycletimeoffifty-fiveseconds!
IfwelookbackatFigure 5.22,wecanalsoseethatthenecessaryNVAWhasbeenidentifiedastheworkrequiredgraspingtheairtoolandpickingupthefastener.TheprocesstocountermeasurethenecessaryNVAWdiffersgreatlybecausewithoutchangingthecomponentsorthefinalproduct,wecannoteliminatethetimenecessarytocompletethesesteps.Thecomponentisdesignedsothatthetwocomponentshavetobeassembledtogethertomakeacompletedunit.Withoutchangingthisdesign,wecannoteliminatethistime.Again,theproperclassificationofthistypeofworkisessential.EventhoughthisnecessaryNVAWcouldn’tbeimprovedinthecurrentprocesskaizenevent,wecanprovidethisinformationtotheengineeringgroupforconsiderationwhenadesignchangeisnecessary.
Finally,theVAWillustrationinFigure 5.22showstheactualpartoftheprocessthatisvalueadded.Ofthisprocess,onlytheactualtighteningofthecomponentsisclassifiedasVAW.Becausethetwocomponentsarepur-chasedfromvendors,thevaluethattheworkerprovidesforthecustomer
Before Kaizen After Kaizen
Figure5.23 UnnecessaryNon-Value-AddedWorkCountermeasure.
Waste Management … Improving the Manufacturing Process ◾ 121
isbyassemblingthetwocomponentstogethertoformoneproduct.Theindividualcomponentshavenovaluetothecustomerbecausethecustomerisonlywillingtopurchasethefinishedproduct.OftenwhenIamdiscussingVAWandNVAWwithmanagement,theyassumethattheVAWrateoftheproductisthemajoritywhen,asthisexampleillustrates,itisusuallytheopposite.ThefirsttimewedidathoroughanalysisoftheassemblyprocessesatToyota’sfacilityinGeorgetown,Kentucky,theVAWratewas27%!Don’tbeshockediftheVAWrateofyourprocessismuchlowerthanthis.
BecauseVAWgenerallyentailsadesignchangetopartsorcomponentstoaccomplish,again,thisissomethingthatisverydifficulttoimproveduringaprocesskaizenevent.Giventhisillustration,itisessentialtoclassifythetypeofworkproperlytodeterminewheretherealopportunityforimprove-mentisintheprocess.
123
Chapter 6
TheGoldenRulesoftheToyotaProductionSystem
6.1 Fundamentals
Toapplytheprinciplesthatwehavediscussedinthefirstfivechapters,wealsohavetounderstandsomebasicfundamentalprinciples.Fundamentalsareimportantwhentryingtocreateanactionplan.Withoutunderstandingthefundamentals,executionsuffers.Wecanseethisconceptrepeatedintheworldthatweliveineveryday.Howmanytimeshaveweheardafootballcoachtalkafteralossthattheteamneedstofocusonthefundamentals?Anotherpracticalexampleofthiscanbeseeninoneofthebiggestchal-lengesaparentfaces:teachingateenagesonordaughterhowtodrive.
Automobilestodayarecomplicatedmachineswithmilesandmilesofelectronicwiresworkingwiththeengineofthevehicletomakeitfunc-tionbasedontheinstructionsreceivedfromtheoperator(Figure6.1).Eventhoughtheoperatordoesnotunderstandthedetailsofhowtheinternalcombustionengineworks,oncetheoperatorhasabasicunderstandingofthefundamentalprinciples—steering,braking,andaccelerating—heisabletoeffectivelyoperatethevehicle.Oncetheoperatorhasmasteredthesebasicprinciples,therearecertainelementsoftheoperationthathavetobemonitoredtomakesuretheautomobilefunctionsasintended.
Todayautomobileshavesystemsthatmonitorthesefunctions,andtheoperatorneedsonlytorespondtothewarningsprovidedbythevehicle(Figure6.2).Ifthevehicleexperiencesaproblem,anindicatorwilllightupintheinstrumentpaneltellingtheoperatorthatthereisaproblem.Iftheoperatorhastheskillsettofixtheproblem,heorshewillcompletethe
124 ◾ The Toyota Kaizen Continuum
repairandrestoretheoperationofthevehicletonormal.Iftheoperatordoesnothavetheexpertisetosolvetheproblem,thevehicleistakentoaspecialisttodiagnoseandrepairtheproblem.
ThissameprocessappliestounderstandingtheToyotaProductionSystem.WhenanorganizationisattemptingtoimplementtheTPS,itisessentialtounderstandthatalthougheveryoneneedstohavesomebasicunderstandingofthesystem,itisnotnecessaryforeveryoneinthecompanytohavethesamelevelofunderstanding.Therearecertainfoundationalele-mentsthatallmembersoftheorganizationmustunderstand.Thesefounda-tionalelements,orprinciples,arewhatIcallthegoldenrulesofTPS.
Goingbacktotheexampleofteachingateenagerhowtodrive,itisnotessentialthathebetoughthowthecarworks.Hedoesn’tneedtohaveacompleteunderstandingofthemechanicalandelectricalsystemsofthevehicle.Itisonlyessentialthatheunderstandshowtooperatethevehicleandwheretotakethevehiclewhenitisnotactingasintendedsoanyprob-lemscanberesolved.
Figure6.1 AutomobileFunctionExample.
Figure6.2 AutomobileWarningLightandMechanic.
The Golden Rules of the Toyota Production System ◾ 125
ThissamephilosophyisappliedatToyotawiththeunderstandingoftheTPS.AlthougheveryoneatToyotainteractsandisapartoftheproductionsystem,itisnotnecessaryforeveryonetobeanexpertinallaspectsofTPS.
AtToyota,wespentalotoftimedeterminingthefundamentalskillsnec-essaryforthelineworkersandtrainingthemonthesefundamentalskills.ManyofthetoolsusedtoimplementtheTPSarenotcompletelyunderstoodbyalloftheworkers,butbecausetheworkersunderstandthefundamentalprinciples,theyareabletosupporttheimplementationprocess.
6.2 TheGoldenRulesofTPS
TherearemanyideasandvisionsforimplementingtheTPS.MuchoftheinformationavailabletodayfocusesonthetoolsofTPSandnotontheprin-ciples.Thematerialavailableconcerningprinciplesfocusesonphilosophi-calprinciples,notreal-lifeprinciplesthatcanbedefinedandimplemented.ThesethreeprincipleshaveguidedmyunderstandingoftheimplementationoftheTPSforovertwentyyears.
SimplifyStandardizeSpecialize
TheseprinciplescanalsobereferredtoasthethreeS’s,butthiscanbeconfusing,especiallywhendiscussingthe5S’s;therefore,Isimplyrefertotheseasthegoldenrules.
6.2.1 Simplify
Simplifymeansexactlywhatyouarethinking.Thebasicprincipleisthatwhateverwedoshouldbesosimplethatsomeonewalkingoffthestreetshouldbeabletounderstandwhatwearedoingandwhywearedoingit.
Frommyexperienceworkingwithvariousmanufacturingandoperationalcompanies,Iseeapatternthatexists,wheremanycompaniesovercompli-catetheirproductsandprocesses.OftenwhenIammeetingwithaCEOorsenioroperationspersoninacompany,thefirstthingtheydoisexplainhowuniqueandcomplicatedtheirprocessesareincomparisontoacom-petitor.ManytimesbeforeIvisitafacility,peoplewillcheckmybackgroundandseethatIworkedformanyyearswithToyota,andtheywilltellmethat
126 ◾ The Toyota Kaizen Continuum
theyknowIhavealotofexperienceinmanufacturing,buttheirwidgetismorecomplextomanufacturethanmostothercomponents.IevenhadoneCEOwhowasproducingaverysimpleelectricalcomponentinformmethattheprocessofmanufacturingthecomponentwasmuchmorecomplicatedthan,say,producinganautomobile!Iwanttotellthemthattheproblemtheyshouldbesolvingiswhytheyhavedevelopedacomplicatedprocesstomanufactureasimpleproduct.
InToyotawesaythatweshouldmakeeverythingsosimplethatevenamonkeycouldunderstandtheprocess(Figure 6.4).Developingasimpleprocesssoundsso…simple.Actuallymostcompanieshavethecapabilitytomanufacturetheirproducts;therealchallengeistofindasimplemethodforproducingeventhemostcomplexproducts.
Which is more complicated? Hmm...
Figure6.3 SimpleImage?
Figure6.4 MonkeyonProductionLine.
The Golden Rules of the Toyota Production System ◾ 127
IrememberwhenIwasbeingtaught,byoneofmyteachers,somefairlycomplexthoughtprocessesrelatingtotheTPS.Hewasteachingmehowtodevelopstrategydocumentstoexplainandjustifytheprojectswewereundertakinginthevehicleassemblyplant.Thetypicalassemblymanu-facturingprocessusuallyinvolveswelloverathousandoperatorsontheshopfloorandliterallyhundredsofvarioustypesofautomatedandmanualequipmentprocesses.Wewouldspenddaysdevelopingasinglestrategydocument.Myteacherwasalwayssendingmebackagainandagainandagaintomakethestrategiessimpler.Weweredevelopingverycomplexideasthatwouldentailthecompanyspendingmillionsofdollarsandsome-timeswoulddetermineourdirectionforthenextthreetofiveyears.OneofthemostchallengingpointswasthatIwasalwaysforcedtocontainmystrategyonasimpleone-page8.5×11sheetofpaper.OhhowIlongedtousethenowfamousA3,or11×17paper.Ididnotfullyunderstanditatthetime,buttheonesheetof8.5×11paperforcedmetosimplifymystrategybyusinggraphicsandimagesinsteadofwordstodepictthecurrentandfuturestatesaswellasthedetailsoftheimplementationprocess.IworkedsohardatthisthatIsoonbecamequitefamousformyverysimplestrategydocuments.Itwouldnotsurprisemetoseesomeofthesesamestrategydocumentsbeingusedtoday.Thepointofdevelopingsuchsimpledocu-mentswasthatnoteveryoneinToyotahadthesamelevelofunderstandingoftheconceptsthatwerebeingdeveloped.Bymakingthedocumentverysimple,wewereabletoclearlyconveyourideastotheseniormanagementintheorganizationtogaintheirapproval,andthenusethesamedocumenttoexplaintheprocesstoworkersontheproductionline.TheeasywayistocreateaPowerPointpresentationwithahundredslides;however,bycon-tainingthestrategytoonepieceofpaper,anyonecouldpickupthestrategyandunderstandexactlythetargetsandintentoftheprocess.
Thesameprinciplesapplytoanymanufacturingprocess.Thekeypointistheabilitytotakeacomplexoperationandsimplifyitsoalmostanyonecandoitwithaminimalamountoftraining.Oneoftheconceptsforsim-plifyingthemanufacturingoperationisvisualcontrol.Thisissometimesreferredtoasthevisualfactory.Thepointisthatanyonewalkingontheproductionfloorshouldbeabletounderstandtheflowoftheproductionprocess.
Toyotaisfamousworldwideforitsmanymethodsofvisualcontrolandvisualmanagement.OneofthemostobviousthingsthatpeoplenoticewhentheyvisitaToyotafacilityisthevisualcontrol.Whetheritisthe1500mmstandardforthestoragerackheightintheassemblyplantorthe
128 ◾ The Toyota Kaizen Continuum
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Figure6.5 SimpleVisualControlExamples.
The Golden Rules of the Toyota Production System ◾ 129
andonsystemsthatprovidevisualinformationfortheflowofproduction,thevisualcontrolstandardatToyotaisstrikingwhenenteringafacilityforthefirsttime.
Oneexamplethatisobviouswhenyouenterthefactoryistheandonboard(Figure 6.6).Thisissimplyaproductionboardthatdisplaystheper-tinentproductioninformationduringthemanufacturingprocess.Thisisoneofthefundamentalsystemsthatisunderstoodbyalloftheworkersontheproductionline.Thissimpleboardkeepstheworkforceinformedoftheproductioncondition.Onthisboard,ifthelineisrunningnormally,thenameofthelineislitupingreen.Ifthelineisstopped,thenameofthelineisnotlit.Ifthelineiswaitingforworkfromthepreviousprocess,thisconditionisknownasshortandisindicatedbytheSHOontheandonboard.Iftheprocessiswaitingonthenextprocess,theconditionisknownasfullandisindicatedbytheFULontheandonboard.Variousworkposi-tionsareindicatedintheandonboard.Theseareactivatedbytheoperatorsandsignalthesupervisorswhereaproblemisbeingexperiencedontheline.Severalotherfactorssuchasquality,productiontargetsandactual,andsafetyitemsarealsodisplayed.Eachproductionlinehasanandonboard,andvarioussummarylinesarestrategicallyplacedthroughouttheopera-tionssothattheworkersandthesupervisorscanmonitorproductionandmoreimportantly,respondwhenanabnormalityoccurs.
Anotherexampleiswhatisreferredtoasthekeyproductionindicator(KPI)board(Figure 6.7).Onthisboard,allofthekeyperformanceindica-torsaredisplayedandupdatedonadailybasis.Theitemsthatmeetthetargetaredisplayedingreen,andtheitemsthatdonotmeetthetargetaredisplayedinred.Thisiswherethemanagementteamwillcometogether
1 2 3 4 5 6
0.25 0.5 1.0
Figure6.6 Andon.
130 ◾ The Toyota Kaizen Continuum
todiscusstheproblemsidentifiedandthesolutionstothoseproblems.Examplessuchastheseenablethemanagementteamtoquicklygraspthesituationandtoknowwheretheyneedtogotoimprovetheopera-tion.Theprocessofsimplifyingtheseprocesseshighlightsthesignificantinformationandminimizesmanagementnoise.Thisconceptenablesthemanagementteamtobemuchmoreeffectiveintheirdailymanagementoftheproductionfloor.Evensomeonewhohasnorealexperienceinmanufacturingcanattendthemeetingandknowtheareasthatneedtobeaddressed.
Standardizedworkisanotherexampleofvisualcontrolthatmustbefundamentallyunderstoodthroughouttheorganization(Figure 6.8).Whenwethinkofthecomplexityofthemanufacturingprocess,itseemslikecommonsensethatworkersneedsimpleinstructionsthatdetailhowtobuildtheproduct.Overandoveragain,Iexperienceorganizationsthathavenosystematicmethodfortransferringthenecessaryknowledgetonewemployees.Intheautomobilemanufacturingprocess,instructionis
Safety
Incidents
Scrap
Quality
CustomerComplaints
Suggestions
Downtime
Efficiency
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KPI Board
Figure6.7 KPIBoard.
The Golden Rules of the Toyota Production System ◾ 131
neededforeachoperatorontheproductionlinetoteachhimwhichpartsgoonwhichvehicle.InToyota,thisprocessisespeciallycomplexbecausemultiplevehiclesareproducedonthesameproductionline.Workersmaybuilduptofivedifferentmodelsonthesamelinewithcountlessvariationstoeachmodel.ThishasbecomemorepressingasToyotaexpandstheircurrentproductoffering.AsToyotaexpandedthemodellineuptocaptureadditionalsales,existingproductioncapacitywasretooledtoproducethenewmodelsontheoldlines.Inoneinstance,theluxurysportcoupefromLexuswasbeingproducedonthesameproductionlineasataxicab.OnecanimaginethatthereisnotalotincommonbetweenataxicabandtheLexusSC470!
Recently,Toyotahasspentagreatdealofengineeringresourcestosim-plifytheproductionmethodology.Thissystemofmanufacturingfocusedonsequencingeachvehicle’spartsandcomponentsanddeliveringthemjustintimefortheassemblyofthatparticularvehicle.Asonecanimag-ine,thiswasastaggeringundertaking.ThemethodofimplementationwasaconceptknowninToyotaassetpartsupply(SPS)(Figure 6.9).This
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Acme Corp.Standardized Work Combination Table
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Plant: Acme Product: Intake ManifoldArea: Machining Op _1_of_1_Process: Intake machining and pack Pg. _1_of_1_Shift: 2Volume: 900/shift
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Figure6.8 StandardizedWork(STW)Chart.
132 ◾ The Toyota Kaizen Continuum
systemenablestheworkerstosimplyfocusonassemblingthevehiclewhileotherworkersselecttheappropriatepartsandsequencewiththevehicles.Thegoalofthisprocesswastosimplifytheoperations.Sofun-damentalisthephilosophyofsimplificationthatToyotaliterallyhasspentmillionsofdollarstoretoolfactoriesaroundtheworldtoincorporatethisnewmanufacturingmethodology.
ThesimplifyconceptalsocanbeseeninthemethodologyToyotausesforimplementingautomation(Figure 6.10).WewouldthinkthatToyota,withitsdominantpositioninmanufacturingandsales,wouldemployallofthelatesttechnologiesinthemanufacturingprocess.Althoughthisistrueformanyoperations,itissurprisingtoseeallofthemanualoperationsinsidethefactory.Insomefactories,theprocessisentirelymanual.ThisisespeciallytrueindevelopingcountrieslikeIndiaandChina,butmanyofthesamemanualoperationscanbeseenatfacilitiesintheUnitedStatesaswell.Oneobviousreasonforthislackofautomationisobviouslytocontrolinvestment;however,themainreasonistokeepthemanufacturingpro-cesssimple.Althoughautomationcanmaketheprocesseasierforthelineworker,itdoesnotnecessarilymaketheprocessanysimpler.Infact,themoreautomationthereis,themorespecialmaintenanceandengineeringresourcesareneededtomaintaintheequipment.
Figure6.9 SetPartSupplyExample.
The Golden Rules of the Toyota Production System ◾ 133
6.2.2 Standardize
ThenextSofthethreeS’sisstandardize.Toyotaisworldrenownedforthedevelopmentofstandardizedwork.Manypeoplemisunderstandthepurposeofstandardizedwork.Inmanufacturing,therecanbenumerousvariablesintheprocess;however,thisisalsotruefornon-manufacturingoperations.Ascustomersdemandmorediversityandcustomizationintheproductsandservicesofferedbycompaniestoday,theoverallprocessofprovidingtheseproductsandservicesisbecomingmorecomplex.Thiscom-plexityincreasesthenumberofvariables,andthesevariablescausevariationintheprocessthatcanleadtoabnormalities.Abnormalitieswillresultinpoorefficiencyandpoorquality.Standardizedworkisamethodtoachieverepeatability.Anypersonwhohasworkedinamanufacturingprocesswilltellyouthatachievingrepeatabilityisthekeytoanefficientprocessthatmaintainsalevelofqualityintheproduct.Bydefiningthemanufacturingprocessthroughtheutilizationofstandardizedwork,wecancontrolabnor-malitiesandmoveclosertotheidealmanufacturingsituation.
Ithasbeensaidthatwithoutstandardization,therecanbenokaizen.StandardizationissofundamentaltotheTPSthatitliterallyformsthefoun-dationoftheTPShouse(Figure 6.11).Withoutstandardization,theTPSisliterallywithoutfoundation,andthereforewouldnotexist.
Companieswilloftenattempttoimplementkaizenwithoutfirstestab-lishingstandardizedwork.Althoughsomeimprovementcanbeachieved,
Figure6.10 AutomationExample.
134 ◾ The Toyota Kaizen Continuum
itwillinevitablynotbesustained,asthereisnostandardinplacetoreflecttheimprovedprocess.Therefore,notonlyisstandardizedworkessentialforkaizen,itisalsoessentialforsustainability.
WhenIamworkingwithacompanytoimprovetheirmanufacturingprocess,thefirststepthatIhavethemtakeisalwaysasimplestandardizedworkexercise.Generallyduringtheimplementationprocess,wewillseeefficienciesimprovefrombetween10%and40%.Theprocessofstandard-izationwillhighlightabnormalitiesintheprocess,andoncetheabnormali-tiesarecorrectedtheprocessisimproved.Althoughthisisanaturalprocessthatresultsinimprovement,itshouldnotbeconfusedwithactualkaizen,orcontinuousimprovement.Withoutaformalprogramofstandardizedwork,improvementsthataremadeintheprocessareoftenlostovertime.Aformalstandardizedworkprocessensuresthatasimprovementsaremadeintheprocess,thestandardizedworkdocumentationisupdatedandthispreservestheimprovementforthefuture.
Tofullyunderstandtheseconcepts,itisimportanttounderstandaphi-losophythatIrefertoasthekaizencontinuum(Figure 6.12).Simplystated,thekaizencontinuumisthepathtocontinuousimprovement.
Thefirststepinthekaizencontinuumisalwaysstandardization.Youstartwithastandardizedoperationorastandardizedtask,andthen,onlythen,onceyouhaveachievedstandardization,canyoureallymakethecontinuousimprovementcyclebegin.Onceyoucompletethefirstcycleofkaizen,thenyoustandardizeagainandyoukeepthatprocessgoinguntilyouachievetheidealcondition.Althoughtheidealsituationisrarelyachieved,eachcyclethatyoucompleteinthecontinuumtheoreticallyisastepclosertotheideal
Kaizen
Goal: Highest Quality, Lowest Cost, Shortest Lead Time
Standardization
Just-in-time Built-inQuality
Figure6.11 TPSHouse.
The Golden Rules of the Toyota Production System ◾ 135
situation.Therefore,ifyoufollowthisprocess,youcancontinuetoimprovetheoperations.Sometimespeopleaskmeifitisreallynecessarytotakethetimetostandardizeaftereachcycleofkaizen.Myansweris“absolutely.”Theprocessofstandardizationensuresthattheimprovementsachievedinthecyclearesustained.Afterall,itiseasytocreateimprovementinaprocess,buttherealvalueisonlyachievedifthevalueissustainedandtheprocessdoesnotreturntopreviousmethods.
Standardizationisalsoaverypracticalapproachtoconductingbusiness.IamoftenputinthesituationwhereIamintroducedintoabusinessandquicklyhavetoascertainthecurrentsituation.Ibeginwithadetailedanaly-sisoftheprocess.Alloperationalprocesseshavesomestepsoftheprocessthataremorecrucialandprovidemoreoverallvaluetothefinalproductthanothers.Byunderstandingtheratioofthetwo,Iamabletounderstandhowmuchwasteisbuiltintothecoststructureoftheoperations.Earlierwediscussedthisasvalue-addedwork(VAW)andnon-value-addedwork(NVAW).TheratioofVAWtoNVAWisessentialforunderstandingthecoststructureofanyoperation.
Standardizedworkisinstrumentaltounderstandingthebaselinecoststructureofthebusiness.Forexample,iftheoperationisproducingawidgetandthewidgethasfivecomponents,itisstandardizedworkthatenablestheoperatortounderstandthequantityofmaterial,theoperationalresources,andthelabornecessaryforproducingthewidget.Toooften,organizationshaveanelaborateMRP(materialrequirementsplanning)orERP(enterpriseresourceplanning)solutionwheretheprocessisengineeredtoproducethecomponentwithaspecificamountofmaterial,resources,andlaboronlyfortheactualexecutionofthestandardtobetrustedtoan
CurrentPosition
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Standardize
Standardize
Kaizen
Kaizen
• Eliminates waste• Produces in quality• Generates cash flow
Standardize
Figure6.12 KaizenContinuum.
136 ◾ The Toyota Kaizen Continuum
undisciplinedprocess.Theoperationsalwayshavehugevariancesinmate-rial,capacity,andlabor.
Standardizationisafundamentalcriterionforestablishinganefficientandeffectivebusinessprocess.ThegoalofstandardizedworkistodevelopaprocessthatcanbeperformedrepeatedlyinamannerthatpreservestheefficiencyoftheoperationbylimitingtheunnecessaryNVAW,ormuda.Theprocessshouldlimithumanmovementandoptimizetheutilizationofanyequipment,tools,and/orjigs.
Standardizedworkisaneffectivetoolforinvolvingtheworkersinthecreationofvalueintheprocessandmaintainingstandardizationinthepro-cess.Someorganizationsfocussolelyontheequipmentandtheplantfacili-ties.Theirgoalistoengineeraprocessthatrequiresaminimalamountofhumaninvolvement.Althoughautomationisagreattool(whenimplementedcorrectly)forincreasingefficiency,Ihaveseentoomanymanufacturingpro-cesseswithahighdegreeofautomationandalowutilizationofthework-ers.Thisscenarioleadstoworkerswhoaredetachedfromtheprocess,andbothqualityandefficiencyultimatelysuffer.
Thereisadelicatebalancewhenstandardizingaprocess.Ihavehadmanydiscussionswithplantmanagers,whileweareimplementingstandard-izedworkinthefacility,wholookatstandardizedworkasamethodforforcingworkerstocompleteaprescribedamountofworkintheprocess.Althoughstandardizedworkisaneffectivetoolforensuringthatameasuredlevelofqualityandefficiencyaremaintainedintheprocess,standardizedworkshouldneverbelookedatasabsoluteandinflexible.Standardizedworkshouldbethebasisforimprovementintheprocess.Ifweagainrefertothekaizencontinuum,wecanseethatpriortoanykaizen,standardiza-tionmustbepresent.Themosteffectivemethodfordeterminingstandard-izedworkistogettheoperatorsinvolvedintheprocess.Managerstendtothinkthatifyougiveworkersafreereinwithdeterminingtheirownpro-cess,theywillprescribeaprocessthatminimizestheactualworkcontentintheprocess.Thiscouldnotbefartherfromthetruth.
Irememberwhenweweredoingakaizenactivityononeoftheassem-blylinesatToyota’sfacilityinGeorgetown,Kentucky.OurdemandwasincreasingfortheCamry,andweneededtoincreasetheoutputonthelinebyloweringourtakttime.Weaskedeachoftheproductionemployeestoworktogetherwithotheremployeesonthelinetore-balancetheworkonthelineandtotellushowmanyprocessesweneededtoaddtoincreasetheoveralloutput.Itwassurprisingtofindthattheemployeesontheshopfloorhaddesignedtheirprocessestobemuchmoreefficientthantheindustrial
The Golden Rules of the Toyota Production System ◾ 137
engineersthoughtwaspossible.Managementwassoconcernedthatthenewprocessesweretooefficientthatweactuallyhiredsometemporaryemploy-eesduringtheinitialperiodtomakesurethatiftherewasaproblemonaprocess,wewouldhavesufficientstaffing.Thatturnedouttobeabigwasteofmoney,astheprocessesthattheworkershaddevelopedworkedwonder-fully.Thekeytothissuccesswasthattheworkersfeltaccountabletomaketheprocessworkbecausetheyhadaninstrumentalroleindevelopingit.
Whenstandardizedworkisdevelopedcorrectly,theworkers’movementsarelimitedtomaximizethevaluecreatedintheprocess,thusminimiz-ingwaste.Standardizedworkalsoensuresthatonlytheproductsthatarenecessaryareproduced.Bylimitingoverproduction,standardizedworkreducesworkingcapitaltoonlywhatisrequired.Becausetheprocessisstandardized,thislimitsfluctuationsininventorylevels.
Byonlyproducingthepartsthatarenecessary,standardizedworkregu-latestheworkandlimitstheopportunityfordefectiveproductstobemanu-factured.Ifdefectiveproductsaremanufactured,thestandardizedworkenablestheorganizationtoeffectivelyandefficientlycountermeasuretheprocessthatproducedthedefectiveproduct.
Standardizationhelpswhenproblemsoccurintheprocess.Standardizationenablesthejudgmentofnormalandabnormaloperationsinordertodetectproblemsduringtheprocess.Whentheworkplaceisnotstandardized,theconditionsarecontinuallychanging,virtuallymakingitimpossibletojudgenormalandabnormalconditions.Withoutstandardization,theoperationischaoticandunorganized,whichbreedsinefficiencyandhighercosts.
6.2.3 Specialize
ThethirdSofthethreeS’sisspecialize.Specializationisanimportantele-mentfortheTPSbecauseitisatoolthatenablestheorganizationtoclarifytherolesandresponsibilities.Organizationsdefinethemselvesbasedonhowtheymeasureuptocompetition.Specializingisanareathatcanofferacompetitiveadvantage.
Ihavehadtheopportunitytoexaminemanyorganizations,andoneofthecommontraitsofawell-runorganizationisthattherolesandrespon-sibilitiesaredefinedandunderstoodbyeveryoneintheorganization.Theabsoluteoppositeistrueoffailedorganizations.OverthelastfewyearsthatIhaveworkedinprivateequity,myfocushasbeenworkingwithbusinessesthatneedtobe“turnedaround.”Ina“turnaround”environment,thecurrentcourseofthecompanyisdeemedasnotviableanditisuptotheperson
138 ◾ The Toyota Kaizen Continuum
leadingtheturnaroundtodevelopanewplan.Intheseinstances,mostofthecompaniesthatIexperienceneedsignificantimprovementtomaintainalevelofstability.Manyproblemsexistinanorganizationthatisunderstress;oneofthemostformidableproblemsinstressedorganizationsisthelackofdefinedrolesandresponsibilities.
OneofthefirstthingsthatdowhenIgointoanorganizationistocre-ateafunctionalorganizationchartwiththekeymembersofthemanagement(Figure 6.13).IincludethesalariesontheorganizationchartsothatIcanunderstandwherethecostisinrelationtothescopeoftheworkandtheresponsibilityintheorganization.Itissurprisingtoseethenumberoforgani-zationsthatdonothaveasimpleorganizationchart.Iftheorganizationdoeshaveanup-to-dateorganizationchart,itisinterestingtoseewhatpositionsandwhatfunctionsreportdirectlytotheCEO.Infamily-runorganizations,itistypi-caltoseemostofthefunctionsreportdirectlytotheCEO.Corporateorphans(isolatedbusinessunitsoflargecorporations)tendtohaveagoodbasicstruc-turebutaregenerallyfilledwithtoomanylevels.Distressedorganizationsusuallylackclarityaroundtherolesandresponsibilitiesintheorganization.InFigure6.13,theorganizationisfairlysimple;however,therearetwofunctionsthattendtohavenodirectreportingstructure.Neitherapplicationengineering
John Jones, CEO$425,000
Nancy Smith, CFO$250,000
Tom Brown, COO$255,000
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Figure6.13 OrganizationChart.
The Golden Rules of the Toyota Production System ◾ 139
norlogisticsisformallyreportingtoanyonepartoftheorganization.Thislackofclarityusuallyresultsininefficiencyinthosepartsoftheorganization.Peopleask,“Whatisthebeststructureforabusiness?”Althoughtherearesomebasicorganizationaltemplatesthatcanbeusedwhenanalyzinganeworganization,thereisnocookie-cutterapproachthatcanbeusedforallorganizations.Eachorganizationhasitsownattributesandrequirementsthatmustbeunderstood.Thekeypointistomakesurethatthereisfunctionalclarityintheorganization.Withoutfunctionalclarity,itisdifficultforthemiddlelayersofthemanagementteamtounderstandthedirectionfortheorganization.
Inanorganizationwheretherolesareclearlydefinedbaseduponfunc-tionalresponsibilities,theabilitytospecializetheskillsetsintheorganiza-tionbasedontheskillsnecessaryineachfunctionshouldbebasedupontheknowledgeandabilitiesthatarenecessarytoadequatelyperformthefunction.Oncetheseskillshavebeendefined,therolesrelatingtothisareacanbespecializedtobringlikeoperationstogethertomaximizethevalueoftheseskills.Anexampleofthiscanbeseeninthebasicstruc-tureofanautomobileplant(Figure6.14).AtToyota’splantinGeorgetown,Kentucky,theplantisconfiguredphysicallyandorganizationallybasedontheconceptofspecialization.
Althoughthisexampleofanautomobileplantlayoutseemsbasic,itcanbeusedtounderstandtheconceptofspecializationwhenitisappliedtotherolesandresponsibilitiesintheorganization.Forexample,whenweconsidertheworkerswhoareinthetrimdepartment,theskillsnecessarytodotheirjobarequitedifferentthantheskillsnecessaryfortheworkersinthechassisandfinal
Chassis Line– Suspension and Powertrain
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Figure6.14 AssemblyPlantLayout.
140 ◾ The Toyota Kaizen Continuum
department.ThisisnotuniquetoToyotaandcanbefoundinmanufacturingplantswithnoknowledgeoftheTPS.Asdiscussedearlier,whenlookingatthegeneralphilosophyoftheTPS,thisconceptmakescommonsense.Conversely,eventhoughthisconceptmakescommonsense,Ihavebeeninsophisticatedmanufacturingcompaniesthatdidnotapplythisconceptatall.Specializingtheworkensuresthatthebestresourcesareavailabletoperformthenecessarywork.Whenlikeworkisbroughttogetherorganizationally,thetrainingtimecanbereducedandthequalityandefficiencyareincreased.
Specializationcanbeappliedtoallareasoftheorganization.Specializationensuresthattheneedsoftheorganizationarelinedupwiththecapabili-tiesoftheemployees.Thisprocessenablestheorganizationtomaximizeefficiencybyensuringthatitsresourcesarecontributingtothebusinessbydirectingtheenergyoftheindividualstothespecificneedsofthebusiness.
Althoughtheseconceptsseemsimplistic,theyarethebasisforoneofthemostefficientandeffectivemanufacturingmethodseverconceived.Itmakessensetosimplifytheorganizationwheneverandwhereverpossible.Itmakessensethattoproduceaproductwithhighqualityandahighlevelofefficiency,wehavetohaveastandardizedapproach.Itmakessensethattogetthemostoutofourorganization,processes,andequipment,weshouldspecializetheorganizationtoconcentratetheknowledgeoftheorganization.
ButaswethinkaboutToyotaandwethinkaboutthegreatsuccesstheyhavehadoverthepastthirtyyears,howdidasmallcompanythatstartedoutmakingloomsendupbeingthenumberoneautomakerintheworldfiftyyearslater?AlthoughtherearevariousbusinessstrategiesthatcanbeattributedtothesuccessofToyota,thebasisoftheirsuccesscomesdirectlyfromtheimplementationandadherencetothebasicfundamentalprinciplesthatwehavediscussedastheTPS.
WhenwelookatToyota,thereisnodenyingthatitisawell-runorganiza-tion.EvenifweweretosaythatToyotaisthepremiermanufacturingorga-nizationintheworld,thiscouldbedefensiblegivenitsrecenttrackrecordofmassiverecallsandpublicqualityproblems.WhenweconsiderToyota’sorga-nizationalstrategy,weseethecommonsenseapproachthatexistsinallcor-nersoftheorganization.Toyotadoesnothavethepatentoncommonsense,andtherearemanyorganizationsthatdoalotofthingswell.EventhoughotherorganizationsmaynotunderstandtheprinciplesoftheTPS,commonbusinesssenseprevails,andmanyofthesuccessfulattributesoftheseorgani-zationscanbeseeninthebasicprinciplesthatwehavereviewed.
Inmycurrentroleworkingintheworldofprivateequity,Iamcontinuallychallengedaswelookatalltypesoforganizations.Whenassessingacompany,
The Golden Rules of the Toyota Production System ◾ 141
IdeterminethebestmethodforapplyingtheTPSinawaythatgeneratesvalueintheorganization.Becauseallorganizationsaredifferent,thisisoftenchal-lenging.IfwerememberthatthegoaloftheTPSistodeterminethebestwaytomanufactureyourproducts,wecantakethisonestepfurtherandsaythatwhenapplyingtheTPStodifferingcompanies,theobjectistodeterminewhatneedstobedonetomakethecompanythebestatdoingwhatitdoes.
CertainlywecanusethetoolsthatwehavelearnedfromtheTPSandapplytheminvariouscircumstancestodeterminethebestway.AlthoughIhaveattemptedtosimplifythisconcept,Iamnotsayingthatthisprocessineasytoimplement.WhenIwasinchargeofthecutting-edgekaizenteamatToyota,thehardestpartofthejobwasnottofigureoutwhatneededtobeaccomplished.Thatwastheeasypart.Thehardestpartwastofindthesimplest,low-costmethodofimplementation.Unfortunately,thereisnotamysterioussingleelementoftheTPSthatwecantakeandjustapplytoanysituationandhavesuccess.Theprocessforfindingsuccessistolookateachsituation,determinethebestwayforthatorganizationtooperate,identifywhatmethodswillenablethemtomoveclosertotheidealstate,andthenworktoimplementthatmethodthroughouttheorganization.
Thesesameconceptsapplytoallareasoftheorganizationfromtheexecu-tiveteamallthewaydowntothefront-linehourlyemployees.WhenImeetwithCEOs,COOs,andCFOs,theyusuallythinkthattheseconceptsaregreat;however,theyconsiderthesegoodtoolsforthefront-lineemployeesandnottoolsthattheyneedtobeabletomaster.Evenonceweovercometheseniormanagementteambarrier,sometimesbyreplacingthemanagementteam,managementthinktheirorganizationsuniqueandaretoocomplexforsuchsimpletoolstofindapplication.Ihavehearditall;“Ourprocessistooscientif-icallypreciseforthistoapply,”or“WehavealotofSKUsandtheseconceptsaregreatforhighvolumeproductionbutnotshortrunmultipleSKUopera-tions.”Thesestatementsjustreinforcethelackofunderstandingthattheman-agementteamhasinregardtounderstandingthebasicfundamentalprinciplesoftheTPS.IhaveyettofindasituationwheretheprinciplesoftheTPSarenotapplicable.ItcouldbesaidthattheTPSisindustryagnostic.
6.3 CapitalInvestmentGuidelines
OneofthemanybarriersthatIrunintowhentryingtoexplaintothesenioroperationspersonintheorganizationtheconceptsofimprovingefficiencyintheoperationistherelianceoncapitalinvestmenttosolveallproblems.Nomatterwherethediscussionbegins,intheend,theplansthatsenior
142 ◾ The Toyota Kaizen Continuum
operatorshaveforoperationsalwaysincludecapitalinvestmenttopurchasebetter,fastermachines.Itisabsolutelytruethatcapitalinvestmentcanhelpimproveproductivity;however,thisshouldalwaysbethelastoption.
TheabilitytomanagecapitalinvestmentisoneofthemostpressingissuesIseeintheoperationalrealmoforganizations.Oftenthepersoninchargeofoperationsdoesnotunderstandhowtomakeimprovementsinefficiencywithoutaddingcapital.Thisquestforcapitalleadsmanyorgani-zationstothepointwherethewholeorganizationsuffers(Figure 6.15).Weoncelookedatacompanythatprideditselfonhavingthelargestmachinesintheworld.Ifthereisonlyonethingthatyougetfromthisbookinref-erencetocapitalinvestment,itshouldbethatyounever,ever,wanttobeknownforhavingthebiggest,fastest,ornewestanything.Inthissituation,thepurchaseofthelargestmachinescausedthecompanytooverleverageitselftothepointthatthebanktookoverandforcedthefamilythatownedthebusinesstoliquidatethecompany.Amodestapproachtocapitalinvest-mentisthebestbetforlong-termfinancialviability.
Traditionally,Toyotahasalwayshadamodestapproachtoinvestment;recently,however,ithasbecomeevidentthatthecurrentmanagementover-investedandthisledtoToyota’sfirstoperatinglossinoverfiftyyears.IsthisachinkintheproverbialarmorofToyota?Iwon’tgothatfar,butIwillsaythisissomethingthatwillbeaddressed,anditisunlikelytobeaprocessthatwillberepeated.
Ifyouhavevisitedmanyautomotivemanufacturingfacilities,youwouldbeoverwhelmedwiththelackofautomationinaToyotafactory.Ihavehadtheopportunitytovisitmanyfacilities,andIhavefoundthatmanyofthe
Value
Investment
Figure6.15 InvestmentandValueImage.
The Golden Rules of the Toyota Production System ◾ 143
automotivecompanieswiththeworstfinancialperformancearethecompa-nieswiththehighestlevelofautomationintheirprocess.
Althoughmanycompaniesseecapitalinvestmentasthemeansforachievingthehighestdegreeofefficiency,thisisnotalwaysthecase.ThephilosophyinToyotawasalwaystoutilizethecapitalinvestmenttoenhancethemanufacturingprocesswithafocusoneliminatingworkthatisburden-sometotheoperator.ItisrareinToyotathatcapitalisspentsolelyforthepurposeofperformingabasicmanufacturingfunctionfaster.
Thissameconceptcanbeseeninmanyotherorganizationsthathaveadoptedsimilarviewsfordeployingcapitalinvestment.Ihavehadtheopportunitytovisitotherautomanufacturers,andbothNissanandHondaalsosubscribetotheviewofminimizingcapitalinvestment.Allofthesemanufacturersproducehigh-qualityproductsveryefficiently;however,theydoitwithminimumcapitalinvestment.
AlthoughwecanseethefrugalrootsinthephilosophyoftheAsiantrans-plantmanufacturers,conversely,wecanseeacompletelydifferentapproachwhenwelookattheGermanoriginalequipmentmanufacturers(OEMs).TheGermanOEMstendtolookatmanufacturingfromaperspectivethatisbasedonengineering.AlthoughthisisamuchdifferentapproachthanthatoftheAsianmanufacturers,itisnotnecessarilyabadthing.TraditionalGermanautofactoriesarefilledwithcapitalequipmentthatensuresthehigh-estdegreeofprecision.Germansinterpretthispreciseprocessashighqual-ity.IhavealotofGermanfriendswhohappentobeengineers.Onenightwewerehavingadiscussionaboutthedifferencebetweenperceivedqualityandactualquality.MyGermancolleaguesbelievedthatthemoreprecisetheprocesscouldbeengineered,thebetterthequalitywillbeonthefinishedproduct.Itishardtoargueagainsttheconceptthatabetterprocessproducesabetterproduct.Mypointtothemwasthatbecausethecustomerdefineswhatisexpectedfortheperceptionofquality,anyprocessthatproducesaproductbetterthantheexpectationofthecustomeriswasteful.Forexample,whyproduceacarbodytotoleranceslessthan3mmwhenitisimpossibletodetectthedifferenceoncetheproductisfullyassembled?Inthisway,theGermansarespendinghundredsofmillionsofdollarstooverengineertheirvehiclesonlyforthecustomerstoneverappreciatethislevelofengineering.
Whenwelookatthesedifferentorganizations,wecansaythatmanyofthesecompaniesperformsuccessfully.Thekeypointisthatcapitalinvestmentdoesnotnecessarilyguaranteesuccessorfailure.ItcouldbearguedthattheGermanOEMsaretheonlyrealfinanciallycapablecontenderstotheAsianOEMs.MyonlywordofcautiontotheGermanOEMswouldbethat
144 ◾ The Toyota Kaizen Continuum
thedegreeofcapitalizationthattheyinvestintheirfacilitiesburdensthemwithmorefinancialrisk,andthereforethemarginoferrorintheexpandingmarketsbecomesriskier.Thisisreallythekeywithcapitalinvestment.Whencapitalcanbeinvestedandthatinvestmentreturnsthecapitalasintended,thereisnotanissue.Theissueisthatthisrarelyhappens.
Theotherrestrictingpointofovercapitalizationisthelossofflexibility.Itisverychallengingtodevelopapieceofequipmentthatcanbeusedformul-tipleproductsonthesameproductionline.ThisiswhyToyota’sphilosophyisthatpeopleareabletoadaptalotbetterthanmachines;thereforekeepingpeopleintheprocessgivestheproductionlinemoreflexibility.InToyota,capitalequipmentisgenerallyusedfortediousburdensomeworkorwhereahighdegreeofaccuracyisnecessary.Anexampleofthiswouldbearakuseat(Figure6.16),whichisatypeofequipmentusedtoimproveergonomicsforanoperatorperformingaspecificoperation.Figure6.16showsthattherakuseatenablestheworkertobeinthebestpositiontocompletetheoperationswhilereducingtheburdenfromsittingorsquattingrepeatedly.
Toyotadoesuserobotsinthemanufacturingprocess;however,theyaregenerallyusedforliftingheavyobjects,suchasabatteryorawheel.Inthesesituations,therobotwouldbemoreofapneumaticassistthatcouldbeusedformultiplevehicles.ThiswouldreducetheimplementationcostsandofferabroaderapplicationtothevariationfoundinaproductionlineatToyota.
InToyota,therearesomebasicprinciplesforequipmentcapitalization.Thefiveprinciplesappliedtoequipmentcapitalizationarethefollowing:
1.Tangiblereturnoninvestmentperiod 2.Recycle,redeploy,andreuse
Figure6.16 RakuSeatExample.
The Golden Rules of the Toyota Production System ◾ 145
3.Simple 4.Safe 5.Reliable
6.3.1 Tangible Return on Investment Period
Thefirstprincipleofequipmentcapitalizationisthetangiblereturnoninvest-mentperiod.Toyotahasanelaboratebutsystematicprocessforpropos-ing,approving,andimplementingcapitalrequestsknownastheringi shoprocess.Theringi,asitisknown,isan11×17inchpieceofpaperwithallofthenecessarydocumentationforprojectapproval.Theapprovalleveldependsonthecostoftheproject.Generally,ringirequestsareapprovedattheplantmanagerlevelandarebasedonanapprovedcapitalbudgetthatmeetswiththecorporatereinvestmentbudget.Theringiisbasicallyaproblem-solvingdocumentwherethecountermeasureisthecapitalinvest-ment.Theinitiatoroftheringiwilldocumentthecurrentsituationanddefinetheneedforcapitalexpenditure.Therequestwilldetailhowtheproposedcapitalspendwillmeettheneedthathasbeenoutlinedinthedocument.Theringialsoincludesasectionwhereapayback,orreturnoninvestment,calculationmustbecompleted.Inmostinstancesofcapitalexpenditure,investmentswithlessthanatwelve-monthreturnaremanagedattheplantlevelandcapitalexpenditureswithagreaterthantwelvemonthsofpaybackaremanagedbythecorporateengineeringlevel.Thegeneralguidelineisthatifthecapitalinvestmentwillpayitselfbackduringthefinancialperiod,thenitiseasilyapproved.Thisdiffersfromatraditionaltwelve-monthpaybackperiodinthatifittakesthreemonthstogetthecapitalimplemented,thenthepaybackperiodmustoccurduringthefinancialperiod.Therefore,inthiscasetheinvestmentwouldhavetobepaidbackwithintheremainingninemonthsofthefinancialperiod.Thisisagreatwayofmanagingtheengi-neeringresources.Oftentheengineeringdepartmentwillnotallocatetheirresourcesandprojectswillbecomedelayed,whichdelaysthesavingsforthecompany.Byholdingthemaccountabletothistightenedperiodbasedonthefinancialcycle,theprojectsareusuallycompletedontime.
6.3.2 Recycle, Redeploy, and Reuse
Thesecondprincipleofequipmentcapitalizationistheconceptofrecycle,redeploy,andreuse.Althoughthisseemslikecommonsense,manyorga-nizationsdonotlookforopportunitiestoredeployunusedassets,and
146 ◾ The Toyota Kaizen Continuum
thereforethecompletevalueoftheassetcannotberealized.Whencon-sideringcapitalrequestsinToyota,theoriginatorhastoconfirmwhethertheprojectcanbecompletedwithexistingcapitalthatcanberecycledforthenewproject.Oftenwhathappensisthatanexistingmachinewillbestrippedofthecriticalcomponents,andthosecomponentswillbeutilizedduringtheconstructionofthenewpieceofequipment.InToyotathisisreferredtoasthethree“R”check.Youwouldbesurprisedhowoftenyourunusedassetscanberedeployedtootherareasoftheoperation;manytimes,theyarefullydepreciated.WhenIwasatToyota’sGeorgetownfacil-ity,wehadjustretooledtheweldingdepartmentwithanewproductionlineafternearlytwentyyearswiththeoriginalline,andwehadalotofrobotsthatwerenotcapableoftheprecisionworknecessaryfortheweld-ingoperation.However,weredeployedtheserobotsintootherareasoftheoperationtoeliminaterepetitiveworkfromtheoperators,thusimprovingproductivityandreducingcosts.Thefactthattherobotswerefullydepreci-atedyetstillfunctionalmadethisaneasydecision.
Onceithasbeendeterminedthataninvestmentisnecessary,theorigi-natorisresponsibletomakesurethatthecapitalprojectconformstothefinalthreegoldenrulesofequipmentcapitalization:safe,simple,andreliable.Eventhoughthisseemsverybasic,itissurprisinghowcomplexanunrestrainedengineercanmakethesimplesttask.OverengineeringisoneofthemostprevalentproblemsthatIobservewhenvisitingmanufac-turingoperations.InToyotaitistheconceptofautonomation,whichistosayautomationwithahumantouch,thatdrivesthedevelopmentandimplementationofcapitalinvestment.Thisconceptistouseequipmenttosupporthumanbeingsindoingthework,notequipmentdoingtheworkonitsown.
Ihavehadtheopportunitytovisitmanyautomanufacturingcompanies,andeventhoughtheyarefacedwiththesameproblemsofmanufacturing,theyalldothingsalittledifferently;thisistrueeveninsideindividualToyotafacilities.ItisunderstandablethatifyouvisitedaToyotafacility,aNissanfacility,andaVolkswagenfacility,theymighteachemploydifferentmethodsofcompletingthesametask.ButwhywouldToyota,theworld’sbench-markforstandardization,employdifferentmethodsintheirvariousfacilities?Doesn’tthissoundveryun-Toyota?
Let’ssayweexamineaprocessthatisbasicanduniversaltoallautocompanies,forexample,installingthetireandwheelassemblyontoavehicle(Figure 6.17).WhywouldToyotafacilitiesemploydifferentmeth-odsforsuchabasicmanufacturingtask?InToyotathisconceptisoften
The Golden Rules of the Toyota Production System ◾ 147
employedtofindthebestmethod.Eachfacilityoftenwillengineeramethodtoperformthesametaskadifferentwaytounderstandwhichmethodistheoptimumone.Oncetheoptimummethodhasbeendeter-mined,itthencanbestandardized.
Tofullyunderstandtheconceptofautonomation,let’sconsideranotheruniversalmanufacturingprocesstotheautoindustry,windshieldinstalla-tion(Figure 6.18).Itmightmakesensetohavearobotinstallthewindshield,
Figure6.17 TireandWheelInstallation.
Figure6.18 WindshieldInstallation.
148 ◾ The Toyota Kaizen Continuum
sincetheweightandsizeofthewindshieldmakesitawkwardfortheworkertoinstall.Toeliminatethisburdenfromtheworker,wecouldusearobotthatinstallsthewindshieldinthevehicle.Robotsseemlikealikelyfitsincearobotisaprecisioninstrumentandthetaskofinstallingawind-shieldisarepetitivetask.However,thereisactuallyahighdegreeofvaria-tioninvolvedwheninstallingawindshieldontoavehicle.
Variationcancauseabnormalitiesintheoperationthatcanleadtoadefectiveinstallation.Foreveryproblem,thereisacountermeasurethatcanbeimplementedtosolvetheproblem.Modernengineershavedoneawonderfuljobofdevelopingahostoftechnologicaladvancementsthatcanbeutilizedtoaccountforthemanyvariationsofmanufacturing.Engineershavealargevarietyoftoolsattheirdisposalforsolvingthesetypesofproblems.Whetheritisaproximitysensor,avisionsystem,oranothertechnology,thesecaneasilybeaddedtotherobottoconfirmthequalityoftheoperation.Theproblemwiththisisthatthemoresystemsthatareintegrated,themorecomplextheoperationbecomes.Ifwegobacktotheoriginalproblemoftheglassbeingawkwardandheavy,theprocesshasbecomemorecomplicatedthannecessarytocountermeasurethisproblem.Theprocesshasgrownfromarobottoeliminatetheburdenontheworkertoamorecomplexpieceofequipment.Themorecomplextheequip-mentbecomes,themoreexpensivetheequipmentistodevelop,install,andmaintain.Themoremaintenancethatisnecessaryincreasestheoverallcostsbecausemoremaintenanceworkersarenecessarytomaintainandrepairthemachine.Becausemaintenanceworkersareconsideredskilledworkers,theycostmorethanproductionworkersandthisincreasesthevariablecostoftheoperation.
Toyotastrivestogotheotherway,tosimplifytheequipment,keepingsightoftheoriginalproblem.Forexample,whywouldyouwantarobottoinstallthewindshield?Youprobablywouldn’twantarobottoinstallthewindshieldforanyotherreasonthanthatthewindshieldisaverylargecomponentthatisawkwardtoinstalltothevehicle.Andsotherefore,inToyota,mostplantsuseasimplepieceofassistequipmenttoinstallthewindshield.Theassistequipmentremovestheburdenfromtheworker,atthesametimeallowingtheworkertoutilizetheprecisionnecessarybaseduponthevariablesofmanufacturing.Thisisthesimplicityoftheconceptofautonomation,wherethehumaninterfaceswiththeequipmentandtheequipmentisusedtoeitherimprovequalityortoreducetheburdenontheemployee.Inthisinstance,autonomationtakesonthetruemeaningofauto-mationwithahumantouch.
The Golden Rules of the Toyota Production System ◾ 149
6.3.3 Simple, Safe, and Reliable
Realizingthateverythingthatisimplementedfromanautomationstandpointisbasedonthesesimpleconcepts,wecansimplifythiswiththreebasicprinciplesofmechanicalautomation:
1.Simple 2.Safe 3.Reliable
Fromasimplificationperspective,theequipmentmustsolvetheproblemwiththelowestlevelofmechanization.Whendesigningapieceofequip-ment,equipmentthatisdesignedtofunctionmechanicallyversusequipmentdesignedutilizingelectricalorpneumaticcomponentsispreferred.Althoughthesesystemsoftenrequiremoreingenuitywhenbeingdesigned,theyareeasiertomaintain,lessexpensive,andmorereliable.
Fromasafestandpoint,wewanttomakesurethattheequipmentachievessomebasicmeasureofsafety,suchasmeetingOSHAguidelines.Moreimportantly,theequipmentisdesignedwiththeprincipleofplac-ingtheleastamountofburdenontheworkerwhilemaintainingsimplic-ity(Figure 6.19).Thegoalofautonomationistoremoveburdenfromtheworker;therefore,thelastthingwewanttodoisimplementapieceofequipmentthatincreasestheburdenontheworker.Oftenthisincreaseinburdenisnotintentional,andthatisoneofthereasonsthatToyotaspendssomuchoftheirengineeringresourcesconductingmanufacturingtrials.
Figure6.19 WorkSmarter,NotHarder.
150 ◾ The Toyota Kaizen Continuum
Manufacturingtrialsgivetheengineerstheopportunitytounderstandthe“real-world”applicationoftheirdesignsandtogainimportantinsightfromtheactualprocessandtheworkers.
Finally,whendesigningequipment,oneofthemostimportantelementstoconsiderisreliability.Ihaveseenequipmentthatcostsmillionsofdol-larstoinstallsittingunusedbecausethemachineisnotreliable.Althoughitisgreattodesignequipmenttobesimple,thisisnotenoughwhenweconsiderthattheuptimetargetinmostToyotafactoriesisgreaterthan99.5%.InmanyorganizationsthatIhavehadtheopportunitytostudy,theunreli-abilityoftheequipmentisbuiltintotheefficiencytargetasacostofmanu-facturing.Inmanyoftheseorganizations,equipmentuptimegenerallywillrunbetween80%and85%.Manycompaniesconsideruptimeof90%tobeexcellent,andothersseeitasanimpossibility.
Therearetwoimportantfactorsthathavetobeconsideredwhenconsid-eringequipmentreliability:detectionofoperationindelayandTPM(totalproductivemaintenance).
Thefirstfactorformaintainingthereliabilityofequipmentgreaterthan90%istheabilitytodetectthelinestoppriortothelineactuallystopping.InToyota,thisisreferredtoasdetectionofoperationindelay.Whenwecandetectthatanoperationisdelayedandwecanrespondtogettheprocessbackintoanormalcycle,wecaneliminateabnormalitiesandlinestop.
Asanexample,let’sconsideraroboticweldingcell(Figure 6.20).Inthiscell,therobothastocompletefourteenweldstocompletethecycle.Oncethecycleiscompleted,thepartisadvancedtothenextstation.Tomaintain
Figure6.20 RoboticWeldingCellExample.
The Golden Rules of the Toyota Production System ◾ 151
production,thepartshavetocyclefromstationtostationeveryfiftysec-onds.Inmanycompaniesthathavesometypeofmonitoringsystem,theprocesswouldonlyproduceanalarmiftherobotfailedtomeettherequiredfifty-secondcycletime.Ifthenotificationcomesattheendoftheprocess,thereisnoalternativebutfortheproductionlinetostop,andthiswillreducetheproductivityoftheline.Evenifthedelayoccurredatthebeginningofthecyclefortheequipment,thiswillnotbeclearlyunderstoodiftheequipment’sonlywarningistostopproduction.
Toimprovethereliabilityofthisprocess,wecouldtracktheprocessoftherobotasitcompletesitsprocessanddeterminethetargetforeachopera-tion(Figure 6.21).Ifanyoneoftheoperationswithinthecyclewasdelayed,theequipmentcouldnotifyanoperatorwhocouldcorrecttheoperationandmaintaintheflowofproduction.Theabilitytodetectanoperationindelayisessentialforcreatingreliableoperations.
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152 ◾ The Toyota Kaizen Continuum
Thesecondfactorforestablishingareliableoperationistohaveaprocessforensuringthemaintenanceoftheequipment.Themostwidespreadprob-leminoperationswithequipmentuptimelessthan90%isalackofmainte-nanceoftheoperation.Inmanyinstances,thisisafailureonthepartoftheoperationalmanagementteamtounderstandtheimportanceofequipmentandfacilitymaintenance.Ioftenampuzzledathoweasilyseniormanage-mentwillspendamilliondollarsforanewpieceofequipmentandthenwillnotallocatethenecessaryoperatingexpensestomaintaintheequip-ment.Thisiscomparabletopeoplewhobuyanewcarandneverchangetheoilorrotatethetires.Propermaintenanceisthekeytoachievingreli-abilityinoperations.
TheprincipleofTotalProductiveMaintenanceisthatmaintainingequipmentdoesnothavetobeexecutedsolelybyateamofspecial-ized,andgenerallyhighlypaid,workerswhounderstandeveryfacetoftheequipment.Eventhoughthemajorityoftheworkersarenotskilledemployees,theycanstillbeinvolvedinthemaintenanceoftheequip-ment.Involvingtheemployeeswhousetheequipmenteverydayincreasesthereliabilityandultimatelyimprovesuptime.Becausetheproductionworkersinterfacewiththemachinecontinuously,theyaremorelikelytoidentifyabnormalitiesintheprocessthatcouldleadtodefectiveopera-tionsanddowntime.
Figure6.22 MaintenanceExample.
The Golden Rules of the Toyota Production System ◾ 153
Eventhoughalloftheseprinciplesarebasic,theyshouldbetakenforgranted.Itisessentialforexecutivesandmanagerswhoseektoimprovetheirbusinesstotrulyunderstandthecurrentsituationontheshopfloor.Policiesandproceduresaregreat,buttheyareonlyasgoodastheorganiza-tion’sabilitytoimplementthem.Themostgiftedandcharismaticleaderintheworldcannotfillallofthegapsinanorganizationthatdoesnotexecuteatalllevels.
155
Chapter 7
CostManagementforProfitability
Oneoftheareasthatmanyorganizationsoverlookisthemanagementofoperationalcostsinthebusiness.Theoneareathattheorganizationcandirectlycontrolisthecosttooperatethebusiness.Ihavehadagreatdealofexperiencelookingatthecoststructureofbusinesses,anditistheexceptionwhenthemanagementhasanunderstandingofwhatproductsactuallyarecontributingtothebusiness.Mostmanagersthinktheyunder-stand,butfewactuallydo.Thecostofoperatingabusinessisnotalwaysproperlyunderstood.Ifabusinessdoesnothaveacompleteunderstandingofthecoststructureofthebusiness,thesalesorganizationcanbesellingproductsthatlosemoney.TheworstnightmarethataCEOcanhaveisatoplinethatisexpandingwithproductsthatarenotcontributingtotheprofit-abilityofthebusiness.Thisisexactlywhathappenswhenthecoststructureofthebusinessisnotadequatelyunderstood.
7.1 Understandingthe“DeathSpiral”
Oftenwithadistressedorganization,theproblemthatcausedthestressmayhaveoriginatedasaresultofexternalfactors.Eventhoughexternalfactorsmayhaveputstressonthebusiness,oftentheleadershipoftheorganizationcompoundstheexternalfactorsbyfocusingtheorganizationonthewrongthings.Whentheseniormanagersinanorganizationfailtorespondquicklyenoughtofacilitatetheturnaroundnecessaryinthebusiness,thecompany
156 ◾ The Toyota Kaizen Continuum
getscaughtinacyclethatisdifficulttoovercomeandcausesinstabilityintheorganization.Irefertothiscycleofinstabilityasthe“deathspiral”(Figure 7.1).
Thereareseveralfactorsthatareprerequisitesforfacilitatingthedeathspiral.First,thecompanyhastofacesomeexternalchallenge,forexample,anunexpectedincreaseordecreaseinsalesvolumeorrisingrawmaterialcosts.Next,thecompanyeitherdoesnotunderstandtheircoststructureandhowitisaffectedbythechangeintheseexternalfactors,ortheirknowledgeofthecoststructureofthebusinessisnotsufficienttoproduceanadequateresponsetoprotectthebusinessfromthestartofthedeathspiral.
Mostoftenthisexternalfactorisadeclineinsalescoupledwithanincompleteunderstandingofthecostofthebusiness.Whenabusinessgetscaughtinthiscycle,itisdifficultforsomeoneinthebusinesstoseetheproblem,andastressfulenvironmentturnsintoabusinessindistress.Stresscanbehealthyforabusiness;distressisnothealthyforanybusiness.Becausethedeathspiralisfacilitatedbystressplusthelackofunderstandingofthecosttooperatethebusiness,itisrelevanttospendsometimereviewingthebasicprinciplesforunderstandingandmanagingtheoperatingcostsofthebusiness.
Figure7.1 TheDeathSpiral.
Cost Management for Profitability ◾ 157
Duringtherecenteconomicturmoil,mostorganizationshavefoundthemselveswithsomedegreeofstress.Duringthisperiod,manyorganiza-tionshavebeenmanagingtheirfinanceswitha“paycheck-to-paycheck”mentality.Thecreditmarketshavebeendifficultandevennonexistentforcertainbusinesses.Thisstressonthecreditmarketsaffectedmostbusinessesbydecreasingoperatingcash,orliquidity.Thestressfromthecreditmarketswascompoundedbecausethesameproblemthatwasaffectingthebusinesswasaffectingtheircustomersandthevendors.Customerswerelookingforanextensionofpaymentterms,thusincreasingtheexposureofthebusinesstothemarket,whileatthesametimevendorswerepushingtheorganiza-tiontotightenterms,astheywerefacedwiththesimilarpressuresfromthefinancialmarket.Oncethisprocessbegins,itisverydifficultforanorgani-zationtorecoveritsliquidityposition.
Thisstresswasturnedtodistressinbusinessesthatdidnotadequatelyunderstandtheircoststructure.Whenabusinessislookingtobreakthecycleofthedeathspiral,thefirstthingthatneedstobedonebeforeanycounter-measure,orkaizen,activitycanoccuristounderstandthecoststructure.
7.2 UnderstandingtheCostStructure
Giventhis“tightened”market,itisessentialforbusinessestohaveanaccu-rateunderstandingofthecoststructureofthebusinesstoavoidthedeathspiral.Manybusinessestodaylackthebasicunderstandingofthecosttodobusiness.Understandingsimpleconceptssuchasbreak-evenanalysisorcostvolumeprofitanalysiscankeeporganizationsfromgettingcaughtupinthedeathspiral.Allcompaniesatsometimefindthemselvescaughtinthemid-dleofatugofwarbetweentheirvendorsandtheircustomers(Figure 7.2).Thisisanaturalprocessthatmanagersinthebusinessneedtomanageduringthenormalcourseofdoingbusiness.Ifthemarginsofthebusinessarehealthy,themarginoferrorforunderstandingthebusinessisgreaterandthereforeoftengoesunmanaged.Whatissurprising,eveninhealthyorgani-zations,isthemixofproductsthatactuallycontributepositivelytothebusinessandtheproductsthathavenocontributiontothebusinesswhatsoever.IamalwaysamazedoncethisanalysisiscompletedhowtheCEOandtheheadofsaleswilldefendbusinessthatdoesnotcontribute.
Howdobusinessesgetthemselvesinasituationwheretheyareproduc-ingproductsthatdonotcontributetothebottomlineofthebusiness?Thisisagoodquestion.Althoughtherearealotofcauses,itallcomesbackto
158 ◾ The Toyota Kaizen Continuum
themanagersinthebusinessunderstandingthecoststructureofthebusi-ness.Itisabasicaccountingconceptthatmanybusinessesmaketoocom-plex.Understandingthesebasicprinciplesisessentialforanorganizationtosuccessfullyimprovetheoperationsofthebusiness.
7.2.1 Fixed and Variable Costs
Formanagementtounderstandtheorganization’scosts,theymusthaveacompleteunderstandingofthecostsofdoingbusinessinrelationtothevolume,orsaleslevel.Therearetwotypesofcosts;fixedandvariable(Figure 7.3).Althoughthisseemselementary,mostbusinessesdonottrulyunderstandthesecostsandtherelationtovolume,orsales.
Vendor Customer
Figure7.2 TugofWar.
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Figure7.3 CostVolumeProfit(CVP)Analysis.
Cost Management for Profitability ◾ 159
Fixedcostsremainconstantnomatterhowthevolumeofthebusinessfluctuates,whereasvariablecostsfluctuatewiththelevelofvolume.Fixedcostscanberememberedasthe“DIRTI5.”
1.Depreciation 2.Interest 3.Repair 4.Taxes 5.Insurance
Otherfixedcostsaresellingandgeneraladministrativeexpenses(SG&A),rent,andothers.
Variablecostsshouldfluctuatewiththebusiness.Ifsalesvolumeincreasesordecreases,variablecostsshouldfluctuateatalevelproportion-atetotheincreaseordecreaseinthebusiness.
Variablecostsconsistofthefollowing:
1.Directlabor 2.Indirectlabor 3.Utilities 4.Supplies 5.Materials 6.Transportation 7.Benefits 8.Allothercosts
7.2.2 Minimum Variable Costs
Thereareinstanceswhenvariablecostscanactasfixedcosts.Thishappenswhensalesdeclinetoalevelwhereproductionisconstrained.Thesecostsarereferredtoasminimumvariablecosts(Figure 7.4).
Minimumvariablecostsapplytoitemswherethereisnotadirectrela-tionshipwithusage.Forexample,thereisacosttohavebasicutilityserviceintheplantwhetheronemachineisrunningorfivemachinesarerunning.Eventhoughthisconditioncanexistinseveraldifferentexpensecategories,itisimportantnottoconfusethesecostswithfixedcosts.Similartotheconceptthatwediscussedwithnecessarynon-value-addedwork,minimumvariablecostsneedtobeclassifiedcorrectlyinorderforthebusinesstodeterminetheircoststructure.
160 ◾ The Toyota Kaizen Continuum
7.2.3 Break-Even Point
Addingthetotalsaleslinetothecostvolumeprofitanalysis,theorganiza-tioncanunderstandthepointatwhichtheorganizationbeginstomakeorlosemoney.Thepointwherethesalesvolumecoversthefixedcostandvariablecostisreferredtoasthebreak-evenpoint(Figure 7.5).Everyoneinthebusinessshouldunderstandthepointatwhichthebusinessmakesmoney.Eventhoughyoucanhaveahighlyprofitableproductwhenapply-ingstandardcostingprinciples,thecompanycanlosemoneyifthetotalrevenuedoesnoteclipsethebreak-evenpoint.Asvolumeincreasesabovethebreak-evenpoint,thebusinessproducesmorevariablemarginthathas
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Figure7.5 Break-EvenPoint.
Cost Management for Profitability ◾ 161
asignificantcontributiononthebottomlineofthebusiness.Evenproductsthatdonotcontributefromastandardmarginbasiscancontributeoncethebreak-evenpointhasbeeneclipsed.ThisisoneofthereasonsthatCEOsandsalespeoplewilldefendnegative-marginbusiness.
Whentheminimumvariablecostisconsidered,thelossofthebusinessismagnifiedasthesalesleveldecreases.Basedonthisconcept,inasimi-larmethodthatprofitsarecompoundedastotalrevenueincreasesabovethebreak-evenpoint,lossesarecompoundedasvolumedecreasespastthebreak-evenpoint(Figure 7.6).Havingacompleteunderstandingofthecoststructureofthebusinessistheresponsibilitynotonlyoftheaccountingandfinanceteambutalsotheoperationsteamandexecutivemanagement.
Reducingfixedcostslowersthebreak-evenpointforthebusiness,thusincreasingtheprofitthecompanycanmakeatlowervolumelevels(Figure 7.7).Reducingthefixedcostsofabusinessisalsoreferredtoasrestructuringor,asIliketorefertoit,rightsizingthebusiness.Oneofthefirstthingsabusinessthatisexperiencingreduceddemandmustconsiderisaggressivelyloweringitsfixedcostsandminimumvariablecostsbasedonthecurrentrevenue.Thisisaneasyconcepttounderstand,butmanybusinessleadershaveadifficulttimecomingtotermswiththefactthatthevolumemaynoteverreturn.
Fixedcostreductionshouldgenerallybeaddressedasapartofthestrategicplan,orhoshin,fortheorganization.Planningimprovementtothefixedcostbaseofanorganizationisnotanewconceptandshouldbedone.Rightsizingthebusinessshouldonlybeundertakenwhenthebusinesshassustainedasignificantlossinrevenuewherethelikelihoodofreturningto
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Figure7.6 MinimumVariableCostImpact.
162 ◾ The Toyota Kaizen Continuum
previouslevelsisnotprobable.Thisoccurswhentherehasbeenadrasticchangeinthedynamicsofthemarket.Dependingonthemagnitudeofthechangeandtherelationtothebreak-evenpoint,thecompany’slevelofstressincreases.Ifthisstressisnotaddressed,itcanleadtodistressinthebusiness.Thisisthefirststageofthedeathspiral.
Justasdecreasingfixedcostsincreasestheprofitofabusinesswhensaleslevelsfluctuate,increasingfixedcostsdecreasestheprofitofabusiness,thusincreasingthelevelofsalesnecessarytocoverthecostofdoingbusiness,effectivelyraisingthebreak-evenpoint(Figure 7.8).Increasingfixedcostsinanorganizationshouldonlybeinvestigatedwhenthereissustainedrev-enuegrowth.Increasingcostsshouldalsobeapartofthestrategicplan,or
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Figure7.7 CostRightsizing.
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Figure7.8 IncreasedCostModel.
Cost Management for Profitability ◾ 163
hoshin,fortheorganizationandshouldnotbedoneinresponsetoshort-termfluctuationsinthemarket.
7.2.4 Managing Costs
Thereareseveralexpenselinesontheprofitandlossstatement(P&L)thatimpactvariablecosts.Generally,operatingcostsarethelargestareaofvari-ablecostthatisdirectlycontrollablebytheorganization.Onekeytobeingasuccessfulmanagerinanorganizationisknowingwhatcanbecontrolledandfocusingtheresourcesofthebusinessoneffectingchangeinthoseareas.Toooftenorganizationsgetofffocusandoverwhelmtheorganiza-tionwithtryingtoimprovethecoststhatcannotbedirectlycontrolledbytheorganization.Examplesofoperatingcoststhatcanbecontrolledincludethefollowing:
◾ Employeepay◾ Numberofemployees◾ Typeofemployees
− Salaried/Hourly− Direct/Indirect− Permanent/Temporary
◾ Benefits◾ Efficiencyoftheemployees◾ Scrap◾ Overtime
Whenrevenueisstable,managingoperatingcostsisrelativelystraightfor-ward(Figure 7.9).Duringtheseperiods,managersmustkeepcostsinlinewiththebudget.Mostmanagersareeffectiveatmanagingcostswhentherevenueisinlinewiththeplan.Unfortunately,thisisnotthenormalsitua-tionformostbusinesses.
Mostorganizationsdevelopoperatingbudgetsatthebeginningoftheyear.Managementneedonlytotracktheexpensesinrelationtothebudgettomakesurethatthebudgetisachieved(Figure 7.10).Thisseemsprettybasic.Organizationsthathaveanykindofimprovementprocesswillhaveaplanforsomebasiclevelofimprovementintheannualbudgettoreducetheoperatingcosts.Tojustachievethestatusquo,businessesmustincreaserevenueorreducecoststocompensateforannualpayandbenefitincreases.Thisactivityisplannedatthetimethebudgetiscreated,andresources
164 ◾ The Toyota Kaizen Continuum
areassignedtospecificprojectstoachievetheseresults.Inthissituation,managingthecostoftheoperationsisprettysimple,andifthiswerethecaseinmostorganizations,therewouldbenoneedforbookssuchasthis.However,howoftendoesayeargobywhenthereisnochange,positiveornegative,totherevenueline?
Whatiswrongwiththispicture(Figure 7.11)?Organizationsthatworktoabudgetanddon’ttrulyunderstandtheimpactofthecostsofoperatingthebusinessfindthemselvestryingtoexplainwhymarginshavebeendepleted.Oftenmanagersgetinamodewheretheyworkwithblindersonanddonotunderstandtheoverallimpactofcostsonthebusiness.Theprecedingexamplesareusedtoexplainthesebasicconcepts,andfewwoulddisagreewithanyconceptsthathavebeenintroducedtothispoint.Itisalsoimpor-tanttoexaminesomemorerealisticexamplesofwhatthemajorityofbusi-nessescanexpecttoseeinanygivenquarter.Thenextexamplehasbeendevelopedbasedonnumerousobservationsofactualbusinessesandhowthebusinessactuallyrespondstofluctuationsinrevenue.
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Figure7.9 StableRevenue.
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Figure7.10 ReducedCostBudget.
Cost Management for Profitability ◾ 165
7.2.5 Managing Cost Example
Figure 7.12isrepresentativeofatypicalmanufacturingoperation.Thefirstthingthatisobviousisthatsalesarebelowtheplannedbudgetby20%.Operatingcostsremainatthebudgetedlevelforsixweeksbeforeanyactionistaken.Typicallytheproblemisthatorganizationsdonothavereal-timemethodstomonitortheoperatingcostsinrelationtorevenue,andacorrec-tionismadeonlyafterthemonthlynumbershavebeenreviewed.Oncetheoperatingcostsbegintobelowered,theyareloweredtoalevelthatisnotproportionaltothelossinsales.
Oncetheseconditionsexist,thedeathspiralbeginstogainmomentum.Usuallythelackofresponsetoadeclineinsalesiscausedbyaprominentleaderintheorganization,whoisoptimisticthatthesalesdeclineisonlyananomalyandnotasignificantevent.OftenthisistheheadofsalesoreventheCEO.Atthebeginningofthedeathspiral,theleaderconvincestheorganizationthateverythingwillbefineiftheycanjustwaititout.Waiting,orasIliketosay,“doingnothing,”isthebestwaytofacilitatethedeathspiral.
InFigure7.12,thelaginresponsetimewasonlysixweeks;oftenIhaveseentheactualconditiontobesixmonthsormore.Financiallythisistrau-matictotheorganization,asthedeclineinsalesreducestheaccountsreceiv-ablewhilethecostsareincurredatthebudgetedlevel,thusreducingthecashavailableformanagingthebusiness.Evenwhenthecompanyrespondsimmediately,adropinsaleswillhaveimmediateeffectontheoperatingcapitalofthebusiness.Whentheseniorleadershipdoesnothaveacom-pleteunderstandingoftheconceptofthedeathspiral,theygenerallymakedecisionsthatcauseevenmorestressonthebusiness.
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Figure7.11 FluctuatingRevenue.
166 ◾ The Toyota Kaizen Continuum
NumeroustimeswhenIhavelookedatfailingbusinesses,evenwhenthecurrentownershipisfacedwithsellingthebusinessbecausetheyarenotwillingtofunditfurther,theseniormanagementhasfailedtotakethenec-essarystepstobreakthedeathspiral.
IfwelooktoFigure7.13,eventhoughithastakentimeforthecom-panytorespondtothedeclineinsales,byweektentheoperatingcostshavebeenloweredtoalevelthatisinaccordancewiththesaleslossexperiencedinweeksonethroughnine.Tomakethingsreallyinteresting,weseethatsaleshaveincreasedinweekten.Whatactionmakessense?Whatisthereactionbymostorganizations?Thisisthepointwheremanyorganizationsbreatheasighofrelief,feelingthatthingsaremovingintherightdirection,andtheyimmediatelyrespondbybringinginresourcestohandletheincreaseindemand.Theproblemwiththisisobvious.Eventhoughthecompanytooksixweekstorespondtoadecreaseinsales,theresponsetoanincreaseinsalesisimmediate.Inthisexample,althoughsaleshaveincreased,theyhavenotrisentotheleveloftheoriginal
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Figure7.13 AdjustingCostExample.
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Figure7.12 TypicalCostReaction.
Cost Management for Profitability ◾ 167
budget;however,becausetheorganizationhasbeenoperatingwithlowersalesandcostsatthebudgetedlevelforaperiodoftime,sixweeks,whensalesincreasethenaturaltendencyistoaddresourcesinproportiontotheincreasesinsales,whichresultsinoperatingcostsbeinghigherthanthebudgetedconditionandnotinadirectrelationshipwiththeincreaseinsales.
Thisisaclassicexampleofhowmanagement’sresponse,orlackofresponse,canjeopardizethebusiness.Manycompaniesthatareexperienc-ingfinancialdistressdonottaketheinitiativetosortoutthecompany’sproblems.ManyCEOstakeawait-and-seeapproach,andalthoughpatienceisavirtue,waitingforthesituationtocorrectitselfiscertaintoproduceonlyoneoutcome,andthatisthedeaththebusiness.Inthesesituations,orga-nizationalleadersdeveloparestructuringplanfortheorganization,whichpavestheroadtorecoverybyplanningforincreased,oratleastrecover-ing,sales.InChapter8,Ioutlineaprocessthattakesontheexactoppositeapproach.Theprocessidentifiestheopportunitiesthatexistinthecurrentorganizationwithinthecurrentstreamofrevenueandwithinthecurrentcostbaseofthebusiness.
169
Chapter 8
Execution
Inthisfinalchapter,Iamgoingtohelpyouputallofthepiecestogethersothatyoucanexecutetheprinciplesdiscussedthroughoutthebook.ThebasicconceptsreviewedherearebasedonprinciplestaughttomebymanyteachersduringmyeighteenyearswithToyota.Ihavetakentheprinciplesthattheyimpartedtomeanddevelopedthemintoasystemforexecutingimprovementinitiativesfortheoperationofanybusiness.Ifthereisonethingthatallcompanieshaveincommon,itisthatatsomelevelallcompaniesoperateinasimilarmanner.Everybusinessbuys“stuff”andsells“stuff.”Fromtheperspectiveofthissystem,the“stuff”isirrelevant.Theimportantthingistofocusonimprovingthingswithinyourscopeofresponsibilitywithintheoperation.Ifyouareafloorsuper-visorwhomanagesateamoffiveworkers,thenyouneedtobefocusedontheaspectsofthoseprocessesthatyoucancontrol.Formid-levelmanagerswhomayhavetheresponsibilityforadepartment,youshouldfocusyoureffortsontheopportunitieswithinyourdepartment.Theremaybemanyproblemspassedonfromotherdepartmentsthatplagueyourprocesses,butifyoudon’tcontrolthoseoperations,youwillonlybecomefrustratedifyoudevoteallofyourenergytotryingtosolveprob-lemsoutsideofyourareaofresponsibility.Iftheculturepermits,theseprinciplescanbeusedbyacross-functionalteamofmid-levelmanagerswhohavetheresponsibilityfortheareaofconcern.IfyouareaC-levelexecutive,thenyouhavenoexcuse.Ifyouapplytheprinciplesoutlinedinthischapter,usingthetoolsandmethodologiesdiscussedearlier,youwillhavesuccess.Afterreadingthisbookifyoustillhaveproblemsyoucan’tfix,givemeacall.Iamsuresomethingcanbearranged…foranominalcharge.
170 ◾ The Toyota Kaizen Continuum
OrganizationsthatarefamiliarwiththestrategicplanningprocessknownasHoshinKanriareawareoftheprincipleandpracticeofSWOTanalysis.SWOTanalysislooksattheStrengths,Weakness,Opportunities,andThreatsfacingtheorganization.TheStrengthsandWeaknessesareinternalfactors,whereastheOpportunitiesandThreatsareexternalfactors.OneofthemistakesC-levelmanagersmakeinfailingorganizationsisthattheyhavefocusedontheOpportunitiesandThreatsversusfocusingontheStrengthsandWeaknessesoftheorganization.Someseniorleadershaveamind-setthatlooksoutsideoftheorganizationforthesolutionstotheproblemsplaguingit.Thedangeristhattheorganizationcanexpendalotofeffortdrivingtowardaperceivedopportunitythatendsupcostingmorethantheorganizationisabletoafford.
8.1 FacingReality
Iworkedwithanelectronicsmanufacturingcompanythatwasafairlyhealthybusinesswith10%earningsbeforeinteresttaxes’depreciationandamortization(EBITDA)margins.Wouldn’tweallliketohavesustainedEBITDAmarginsofatleast10%?TheCEOofthisbusinesswasconvincedthatthefutureofthecompanywastodevelopbusinessinaforeignmarketwheretherewasnocurrentmarketforthecompany’sproducts.Theperceivedopportunitywasbasedonthechangeofagovernmentregulationthatwouldchangethedynamicsofthemarket“overnight.”Inmyexperience,“overnight”opportunitiesarenothingmorethandesperation.
Realsustainablebusinessimprovementcomesfromimprovingthethingsthatcanbecontrolledwithintheorganization.Idonotwanttosendthemes-sagethatexploringnewmarketsisbad.Everybusinessstrategyhasatimeandaplace.Foranorganizationtoexpandintoanewmarket,theorganizationshouldbeexperiencingsomelevelofstability,notstress.Ifsaleshavedeclined,theappropriatestepistoreducecosts.Oncethecostsareinlinewiththereducedlevelofsalesandthebusinesshasperformedwithsomedegreeofstability,thenalternativestrategiescanbereviewedforincreasingrevenue.Thisisadifficultrealitytofaceformanybusinessleaders.Itishardforleaderswhohaveworkedhardtobuildabusinesstoadmitthatthebusinessmaynotbewhatitoncewas.Whenthishappens,theorganizationneedstorespondandmakedecisionsbasedontheinformationthatisknown.Whenacompanyexperiencesthistypeofstress,theleaders’firstpriorityistoremovethestress.Intoday’sbusinessworld,whatcompanyisnotstressedatsomelevel?Manycompaniesareevenexperiencingsomeleveloforganizationaldistress.
Execution ◾ 171
8.2 TheFive-StepProcessforExecutingImprovementInitiatives
TheprimarygoalofthisbookistoequipthereaderwiththeinformationnecessarytotakethebasicconceptsoftheToyotaProductionSystemandimplementthemtoeffectrealchangewithintheirorganization.
InChapter7,thebasicconceptsoftheToyotaProductionSystemwerereviewedandsomeexamplesofhowtheseconceptsareappliedinrealbusinessesweregiven.ThesearebasicstepsthatIhaveappliedinvari-ousareasofoperationsatToyotaandthathavebeenrefinedtoapplytoorganizationsofvarioussizes,managementcapabilities,andorganizationalmaturity.Ihaveusedthissystematicapproachtoproduceresultsinmulti-billion-dollarglobalautomotivemanufacturersandinathirty-million-dollarcontractmanufacturingoperation.Inmyyearsofexperience,whetheritwasworkingwithatroubledsupplierwhilewithToyotaorwithafailingcom-panyinthedepthoftheworsteconomiccrisiswehaveseenintheUnitedStatesformorethanseventyyears,Ineverfoundanoccasionwherethissystematicprocessdidnotproducesignificantimprovementinanyorgani-zation.Idevelopedthisprocesstobeimplementedinarapidtimeframewherequantifiableimprovementcanberealizedtothebottomlineofthebusinesswithminimalcapitalinvestment.
TheProcess 1. Assessment:UnderstandingtheBusiness 2. SettingtheCourse—PlanningforChange 3. RapidImplementation 4. Stabilization 5. ContinuousImprovement
8.2.1 Assessment: Understanding the Business
Thefirststepforeffectingchangeintheorganizationistoproperlyassessthebusiness.ManytimeswhenItalkwithseniormanagerswhoareattemptingtoimplementanimprovementprocess,theyhaveaclearideaofwhattheywouldliketoachieveandevenunderstandtheevolutionofwherethebusinessshouldbepositioned.Oneofthemostbasicprinciplesthatmanagersoverlookisthattheydon’treallyunderstandthecurrentsitua-tionofthebusiness.Organizationalself-awarenessisoftenlacking.Although
172 ◾ The Toyota Kaizen Continuum
thegapbetweenthecurrentsituationandtheperceivedsituationvariesfrombusinesstobusiness,theoneconsistentfactoristhatagapexists.Thisisonereasonthatbusinessesmaybeginanimprovementprocessandmakesomeprogressonlytohavetheireffortsstifled.Whenthisoccurs,thepeo-pleintheorganizationbecomesdiscouragedandeventuallygivesupontheimprovementprocess,revertingbacktoaconditionequaltoorevenworsethantheoriginalcondition.Tryingtoeffectchangewithouthavingathor-oughunderstandingofthecurrentstatecanbecomparedtotryingtoplanatripwithoutknowingwhereyouare(Figure 8.1).
Forme,assessingthebusinessnotonlytellsmethecurrentstate,italsowillletmeknowtheareawhereIneedtobegintheimprovementprocess.Toeffectchangeintheorganization,IwanttofocusontheareawhereIamgoingtobenefitthemostfortheeffortexerted.Weoftencallthisgettingmore“bangforthebuck”(Figure 8.2).Iusetheassessmentperiodtolayoutmyroadmapforchange.
Itispossibleforanorganizationtoassessthecurrentstateusinginter-nalresources.Itisbeneficialduringtheassessmentphasetoutilizeoutsideresourcestoprovidetheorganizationwithanunbiasedviewofthecurrentstateofthebusiness.Inanorganizationwithmultiplesites,thiscouldbeaccomplishedbyutilizingmanagersfromotherfacilitiesorbyutilizinganoutsideresource,suchasaconsultant.Althoughusinganoutsideresourcemaybecostly,iftheresourceiscapable,thenthecostoftheassessmentwillbeinconsequentialgiventhepotentialimprovementopportunity.
GPS
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Destination
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Kaizen
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Standardize
Figure8.1 KaizenContinuumGPS.
Execution ◾ 173
OneoftheprimarytoolsthatIusewhenassessinganybusinessisthevaluestreammap(Figure 8.3).Intheworldofmanufacturing,thisisoftenreferredtoasamaterialandinformationflowchart.Avaluestreammapcanbeusedtogainacomprehensiveviewofthebusinessaswellastoanalyzeaprocessindetail.Itisamazinghowfeworganizationsactuallyunderstandthevaluestreamoftheirprocess.Whetheritisamanufacturingoperation,distributionoperation,orsalesorganization,themajorityoforganizationsfailtorecognizetheoverallbenefitofunderstandingthevaluestream.
IworkinanenvironmentwhereonanygivendayIcanbecalledontoworkwithawiderangeofbusinessesfromvariousbusinesssectors.Ihavehadtheopportunitytoviewhundredsofcompanies,andIspendalotoftimeassessingbusinessesandunderstandinghowcompaniesoper-ate.Unlikeaconsultant,IamalsoresponsibletomakesurethatwhateverIthinktheopportunityis,IamabletoinitiateaplanthatcanachievethelevelofimprovementthatIhaveidentified.OneofthetoolsthatIutilizetomakethisassessmentisthevaluestreammap.
Ihavefoundthatmostorganizationsonlyfocusonthepartofthevaluestreamthattheybelievehasvalue,whichgenerallyisthecoreofthebusi-ness.Thiscouldbeaplasticinjectionmoldingoperationthatonlyfocuses
Figure8.2 Bang-for-BuckAnalogy.
174 ◾ The Toyota Kaizen Continuum
ontheprocesstomoldthepartsanddoesnotconsidertheotheraspectsoftheoperation.Thisincludesbasicareasofmanufacturingsuchasconvey-ance,primarymoldingoperations,secondaryprocesses,assembly,packing,shipping,andinventorymanagement,tonameafew.
Whenweconsiderthatmanyorganizationsdon’tunderstandthebasicmanufacturingoperationsandtheircontributiontothevaluestream,thenitisnotsurprisingthattheseorganizationsdon’tfocusonthebroadercompo-nentsofthevaluestream,suchasdesign,sourcing,procurement,inboundlogistics,outboundlogistics,customerinventory,andsoforth.
Thisdoesn’tnecessarilymeanthatacompanythatdoesnotunderstandthefullvaluestreamoftheirproductorprocesscan’tbeprofitable.Manyorganizationsoperatewithnoknowledgeoftheirvaluestreamandarequiteprofitable.Thefacttheyareprofitablemaybethereasonthattheyarenotawareoftheopportunitythatsurroundsthem.
Mostsmallbusinesseshavelimitedresourcesandthereforetendtocon-centratetheirresourcesontheareasofthebusinessthatarecriticaltopre-servingcustomerqualityanddelivery.Anexampleisanentrepreneurwhohasanengineeringbackgroundandstartsamanufacturingbusinessthatisbuiltaroundhiscorecompetency,engineering.Thisisverycommontoseeinanentrepreneurialorganization.
Becausetheorganizationwasdevelopedaroundthetechnicalcapabili-tiesoftheentrepreneur,otherareasthatarenotrelatedtothetechnical
Supplier
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Figure8.3 ValueStreamMap.
Execution ◾ 175
competencyaretreatedasperipheralaspectsofthebusiness.Forexample,supplychainmanagement.Whenthecorecompetencyoftheoperationisbuiltupasatechnicalprocess,theoperationhaslittleconcernforthesupplychainotherthanensuringthattherawmaterialsareavailabletomeettheproductionschedule.Inthisexample,ignoringthesupplychainmaynothaveanimmediatenegativeeffectonthebusiness;however,thebusinesscannotperformatanoptimallevelunlessthereisacompleteunderstandingofthemanyprocessesthatmakeupthevaluestream.Thecompanywillonlyachievetheidealstatebyhavinganaccurateunderstandingofthecurrentstateofthebusiness.
Gettingtheassessmentprocessstartedcanoftenbeoneofthemostchal-lengingaspectsoftheprocess.Membersoftheoperationalmanagementteammaygetdefensivewhenopportunitiesareexposed.Thisiscompletelyanaturalreaction.Wholikesforsomeonetocomeintotheirhouseandpointoutallofthethingsthatmaybelacking?ItisatthisstageoftheassessmentprocessthatIamabletostarttoassessnotonlythevaluestreambutalsothecapabilityofthemanagementteamtoeffectchange.
WhenIamassessingabusinessandthemembersofthemanagementstartusingphraseslike“Iunderstandwhatyouaresaying,howeverwehavealwaysdoneitthatwayanditisimpossibletochange,”Igetcon-cernedforthemanager’slong-termviabilityofeffectingchangeinthe
Figure8.4 Mismanagement.
176 ◾ The Toyota Kaizen Continuum
organization.Ifamanagermakesthosetypesofstatementstotheownerofthecompany,howdoyouthinkthatmanagerwillcommunicatetotheorganization?
Anothersituationiswhenthemanagementteamhasthepointofviewthat“ifyouthinkthisisbad,youshouldhaveseenittwoyearsago.”Oneofthemostcommonbarrierstorealprocessimprovementiswhenmanage-mentattemptstodefinesuccessbasedonwheretheywereinsteadofwheretheyshouldbe.Managerswhoconstantlyrefertothepreviousconditionwillnevermeettheirpotential.Toimplementacontinuousimprovementprocess,itisessentialthatyouarealwaysmanagingyourselffromtheidealsitua-tion.Itisveryeasytoimproveabusinessfromthecurrentstateandthensitbackandrelax,beingsatisfiedwiththeprogressthatyouhavemade.Iamnotsayingthatitisnotimportanttorecognizeprogress.Ithinkitisessen-tialtocelebratemilestonesalongthepath,aslongastheorganizationstaysfocusedonthegoal.
Completingavaluestreamanalysisandagapanalysisisagoodstarttoanassessmentprocess(Figure 8.5).Thereareseveralothertoolsthatwehavediscussedthatareusefulforunderstandingthecurrentsituation.Break-evenanalysisandcostvolumeprofitanalysisareusefultoolsduringtheassessmentstage.Thekeyistogatherenoughfactstodriveactionablechangeintheorganization.Thisisanotherreasonthatitcanbebeneficialtohaveanothersetofeyeslookatthesituationtohelptodevelopthecurrentstatemap.Anunbiasedviewisvaluableandcanbringnewinsight.Goodmanagerswillbeopentolookingattheirorganizationfromdifferentperspectives.
Forseniorleaderswhoareassessingtheirorganizations,thisisagreattimetoassessthefunctionalmanagersintheorganization.Ifyouwanttoimplementacontinuousimprovementprocess,youhavetohavemanagers
PreviousCondition
Improvment %
% of Goal
CurrentCondition
Goal
Figure8.5 GapAnalysisChart.
Execution ◾ 177
whoarewillingtolookatthecurrentstateandrecognizetheopportunityforimprovement.
Agoodassessmentshouldyieldthefollowingresults:
1.Thecurrentstatevaluestreammap(VSM) 2.Theidealstatevaluestreammap(VSM) 3.TheopportunitiesidentifiedonthecurrentstateVSM 4.Aproject-by-projectsummaryoftheopportunities 5.Costestimatesforimplementationoftheprojects 6.Timeestimateforimplementation 7.Resourcerequirement 8.Estimationofresults(quantified) 9.Returnoninvestmentcalculation 10.Cashreturnestimate
InChapter4,webrieflydiscussedthevaluestreammappingprocess.Thisprocessisessentialforidentifyingtheissuesthatareaffectingthebusiness.Oncethisstepiscompleted,allofthatinformationhastobetranslatedintosomethinguseablefortheorganization.Asmentionedearlier,therearealotofpeoplewhocanpointouttheproblems.Thereisvalueinunderstandingtheareasofimprovement,butyoucan’tconvertthatvalueintosomethingthebusinesscanusewithoutaprocessforimplementation.
Duringthevaluestreamprocess,theopportunitiesthatareidentifiedcanbelookedatasproblemsthatneedtobesolved.Onthevaluestreammap,theseproblemsareindicatedasclouds(Figure 8.6).Thecloudscallattentiontotheproblems.UsingthetoolswediscussedinChapter5,wecanclassifytheproblemsaswaste.Forthewastethatisidentifiedasmuda,wecanusethewastesummarychart,Figure 5.21,todeterminetheactionthatshouldbetakentocountermeasuretheproblem.Withtheinformationprovidedinthisbook,abusinessleadercanfix90%oftheproblemsthattheyencounter.Sure,therearesomeconceptsthatwehavenotdiscussed.Askyourselfthisquestion:Ifyoucouldeliminate90%ofyourproblemsinthenexttwelveweeks,wouldyoujumpattheopportu-nity?Thewonderfulthingabouttheseconceptsisthattheyproducerealimprovementfromdayone.
Theeasiestandmostefficientwaytoquantifytheopportunitiesistoidentifythegapbetweenthecurrentstateandtheidealsituation.Oncethecountermeasurehasbeendesignedfortheprocess,wecancalculatetheimprovementthatwearegoingtoachieve.Seldomis100%ofthewaste
178 ◾ The Toyota Kaizen Continuum
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Execution ◾ 179
eliminated;however,byfollowingtheprocessofidentifyingandclassifyingthewaste,asignificantportionofthewastecanbeeliminated.
Whenanalyzingtheopportunities,don’tgetboggeddownwiththequantificationoftheopportunities.Itisallrighttoestimateatthisstage.Ittakestimeandexperiencetoidentifythecountermeasuresandtoestimatetheopportunityaccurately.Itistemptingtogetsofocusedonthedetailsthatitishardforthecompanytoevermovepasttheassessmentprocess.Ialwaystellmyteam,“Don’tlettheperfectbetheenemyofthegood.”Whenwearedebriefingtheprojectaftertheimplementationiscomplete,rarelyarethecountermeasuresthatareidentifiedintheassessmenttheexactcounter-measuresthatareimplemented.Thereasonforthisisthatonceyougetintoaprocessandgetmoreinformation,sometimesyouhavetobeflexibleandchangecourse.Theactualprojectmightchangebuttheoveralltargetsareachieved.Keepingthisinmind,youneedenoughquantificationtomakeanactionabledecision.
Iliketostructuretheassessmentwithalistoftheprojects,thecurrentstateoftherelevantkeyperformanceindicator(KPI),andthefuturestateoftherelevantKPIandthenquantifytheimprovementopportunity.Inmostoperations,aKPIthatisalwaysrelevantisheadcount.HeadcountisagoodKPIbecauseoncetheprojectisover,youcanconfirmtheheadcounthasbeeneliminated.IfheadcountisaKPIthatwillbeused,thenequivalentefficiencymustalsobecalculated.Thisisimportantbecausethesaleslevelisdestinedtochangeduringtheimplementation,andbycalculatingtheimpactineffectiveefficiency,theprojectcanbeassuredofanimpacttothebottomline.
ForthesummaryoftheassessmentIamlookingforsomegeneraldetailsoftheprojects.ThisisthestepthatIwarnedearlierwhereitispossibletogetboggeddownintoomanydetails.Atmost,eachprojectshouldhavea“before”and“after”slide.Becausetheprojectsaremeanttobethestartingpoint,orcatalyst,forkaizen,providingmoreinformationatthisstageisjustmuda.Foranexampleofwhattypeofdetailwouldbeintheslides,refertoFigure 2.20forthe“before”andFigure 2.21forthe“after.”
Onceeachprojectisdetailedatahighlevel,itisimportanttosummarizethecostsandunderstandthereturnoninvestment(ROI).Tounderstandthepotentialbenefitfortheproject,theROIcalculationhastocapturealloftheimplementationcosts.Thisisanotherareathatwillonlyimprovewiththemoreprojectsthatyoucomplete.ThelevelofdetailshouldbeaccurateenoughtogiveyouconfidenceintheROI,butnotsodetailedthattheproj-ectcannevergetofftheground.
180 ◾ The Toyota Kaizen Continuum
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Execution ◾ 181
IamfrequentlyaskedwhatlevelofROIIlookforinaproject.Thisanswervariesfromprojecttoprojectandfromcompanytocompany.Agen-eralruleofthumbforanyinvestmentisiftheinvestmentwillpayforitselfinthecurrentfiscalcycleandrecoveratleastonedollar,thenthatprojectshouldbeimplemented.ThisisnottosaythatIhaveseenalotofprojectsthathaveaone-to-onereturn.Withanoperationalimprovementproject,itisrarewhentheprojectcannotbeimplementedandproduceanannualizedreturnofthreetoone.Ifduringtheassessmenttheoverallprojectisclosetoaone-to-onereturn,itisnecessarytodigdeeperintothedatatomakesuretheprojectreallycangeneratetheimprovementandthatthecostsarealittlemoredialedintotheactualplan.
Theotherthingtobeconsciousofisthetyrannyofthecalendar.Ifyouidentifyaprojectforthenextfiscalyearandyouplantogenerateonemilliondollarsofsavingsfortheyear,thelongeryouwaitintheyeartoimplement,themoreactualsavingsneedstooccur.Ifmyprojectisgoingtosaveonemilliondollarswhenimplementedonanannualizedbasisandittakesmesixmonthstoimplement,evenifIstartdayoneofthefiscalyear,themaximumreturnIcancreateforthatyearishalfamilliondollars.
ProjectedImplementationCosts
Item PlannedCost
Implementation Costs
Capital & Expenses
Estimated Travel Expense
Initial Assessment
Initial Assessment Travel Expense
$595,000
$80,000
$45,000
$35,000
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Total Costs $760,000
Projected Annualized Achievement
Projected 2011 Impact
$3,663,000
$2,501,000
ROI (Annualized)
ROI (20xx)
4.8X
3.3X
Figure8.8 AssessmentROISummaryExample.
182 ◾ The Toyota Kaizen Continuum
Onceallofthesepointsarecompletedandyouareconfidentthatyouhaveagoodunderstandingofthecurrentconditionandnowhavearoadmapforimprovingtheoperation,itistimetoputtogethertheimplementationplan.
8.2.2 Setting the Course
Aplanisonething,butaplanthatwillexecuteyourprojectissomethingelsealtogether.Thereareninekeypointstodevelopingandexecutingasuccessfulprojectplan.
1.Identifytheprojectleader. 2.Completelyunderstandtheprojectassessment. 3.Completelyunderstandtheprojecttarget. 4.Identifytheprojectresources. 5.Determinetherolesandresponsibilities. 6.Developtheplan. 7.Completelyunderstandthecostsandsavings. 8.Communicate. 9.Execute.
8.2.2.1 Identify the Project Leader
Whenselectingaleaderforacontinuousimprovementproject,theleaderneedstobetechnicallycompetentintheprinciplesthatareneededfortheimplementationoftheproject.Itishelpfulifthepersonhastechnicalcom-petencefortheoperationaswell,butitismoreimportantthattheleaderunderstandtheToyotaProductionSystemprinciples.Ifanorganizationisnewtothistypeofprocess,Irecommendhiringaresourcewhoistechni-callycompetent,orbringinginacontractresource.
Theprojectleaderhastobeapersonwiththeauthoritytoexecutethechange.Forexample,ifthepersonisgoingtoimplementaprojectatoneplantinamulti-plantorganization,theprojectleadershouldreportdirectlytotheheadofoperationsortheCEO.Aprojectmanagershouldneverreporttotheplantmanageroftheplantthathastoimplementtheproject.Thisislikehavingthecatguardingthecanary.Bycreatingthisdirectlinetothetopoftheorganization,seniormanagerscansendamessageofcommit-menttotheprocesstotherestoftheorganization.Irecommendthisstruc-tureevenforanorganizationthathasafull-timecontinuousimprovementmanager.Thispositionshouldneverreporttoanyonewhodoesnothavetheultimateauthority.
Execution ◾ 183
Theprojectleaderhastohaveaproventrackrecordforexecutingproj-ects.Thereshouldneverbeascenariowhereaprojectmanagerisleadingaprojectforthefirsttime.SometimesCEOswillgetgunghoforimplementingleanmanufacturing,andtheywillsendsomeonetoTPSclassesandcreateacontinuousimprovementmanagerposition.Thisisabigmistake.Althoughthethoughtprocessisadmirable,thiswillinevitablyleadtofrustrationforthecontinuousimprovementmanagerandtheorganization.Ifaprovenleadercannotbefoundintheorganization,thenoneneedstobebroughtinfromoutsidetheorganization.Ifthegoalistohaveacontinuousimprove-mentpersoninsidetheorganization,thatpersonshouldworkdirectlywiththeoutsideresource.Itmaybenecessaryforthatpersontoworkthroughtwoorthreeprojectswiththeoutsideresourcebeforeheiscapableoflead-ingsuchanexercise.
Thisexperienceoftheprojectleaderisveryimportant.EarlierImen-tionedthatitisrareforaprojecttoimplementtheexactprojectfromtheassessment.Forthisreasonalone,theprojectleaderhastohaveenoughexperiencethatwhenthingsgowrongheorshecanmaketheappropriateadjustmentstogettheprojectbackonplan.TheonlythingthatIcanguar-anteeyouaboutanyplanisthatitisgoingtochange.Havingaleaderwhocanthinkonhisfeetisessential.
Theprojectleaderhastohavegreatcommunicationskills.Thisshouldn’tbeanafterthought;Ican’ttellyouhowmanytimesIhaveseenprojectsfailbecauseofpoorcommunication.
Theprojectleaderhastobeaself-starter.Beingassertiveisnecessaryforleadinganytypeofproject,butespeciallyforacontinuousimprovementproject.Lookforthetypeofpersonwhowillpushbackwithseniorman-agementinarespectfulmanner,andonceheunderstandsthetarget,willrunthroughabrickwalltoachievetheresults.Thesepeoplearerare,sooncetheyhavebeenidentifiedandhaveaproventrackrecordofsuccess,makesuretheyarecompensatedverywell!
8.2.2.2 Completely Understand the Project Assessment
Onceyouhavesuccessfullyselectedyourprojectleader,itisimportantthattheleaderandseniormanagementareonthesamepageinregardtowhatiscontainedintheassessment.Itisbestiftheprojectmanagerisidentifiedpriortotheassessmentandthenworksastheleaderor,ataminimum,par-ticipatesintheassessmentprocess.
184 ◾ The Toyota Kaizen Continuum
Iftheleaderwasnotapartoftheassessmentprocess,thenitisneces-sarytomakesurethatthereisacompletetransferofknowledgefromtheresourceswhoconductedtheassessmenttotheprojectleader.
Theleadermusthavethetechnicalabilitytounderstandallofthenec-essarytoolsthatwillbeutilizedduringtheimplementationprocess.Theleaderneedstogothrougheachprojectandunderstandbygoingtotheshopfloorexactlywhattheintentionisforeachproject.Ifthereareanyquestionsorconcerns,theyneedtobeunderstoodbeforetheprojectgetsstarted.Ifadjustmentshavetobemade,thisisthetimetomakethoseadjustments.Ifthereisamaterialchangetotheprojectopportunities,thentheROIshouldberevisitedtomakesurethattheprojectexpecta-tionsareunderstood.
8.2.2.3 Completely Understand the Project Target
Itistheresponsibilityoftheseniormanagementteamandtheprojectmanagertocompletelyunderstandtargetsoftheproject.Fortheprojecttobesuccessful,itistheresponsibilityoftheseniormanagementtoholdtheprojectmanageraccountableforachievingthetarget.Ifthetargetsareclear,aswehavediscussedearlier,thereshouldbenoconcerns.ThisisthereasonthatitisimportanttounderstandnotonlytheimprovementintheKPIbutalsotherelationoftheimprovementtofluctuationsinthetoplineofthebusiness.ThisiswhyIalwayscalculateeffectiveefficiencyinadditiontoheadcountreduction.Usingthissameexample,effectiveKPIsshouldbeestablishedforallprojectKPIs.Thisisveryimportantforachievingsuccess.
Itisalsotheresponsibilityofseniormanagementandtheprojectleadertobeonthesamepageforthecostsoftheproject.Nothingismoreaggra-vatingthanforeveryonetosignoffontheprojectandtheminutetheproj-ectstartscostinganymoney,theCEOorCFOactssurprised.Thisisneveragoodsituation.
8.2.2.4 Identify the Project Resources
Nowthattheprojectleaderhasbeenselectedandhasafirmunderstand-ingoftheexpectationsandthecostsfortheproject,heneedstoassembletheresourcestocompletetheproject.Theprojectleadermustidentifythededicatedpersonnelavailabletosupporttheproject.Projectsfailwhentheresourcesthatareassignedarenotcapableresources.Forthistypeof
Execution ◾ 185
processtobesuccessful,theorganizationneedstoputthebestresourcesavailableintheorganizationontheprojectteam.Thissendsaclearmessagetotheorganizationthattheprojectisimportant.
Iliketousetheprojectteamstoevaluatepotentialleadersforpromotionintheorganization.WhenIwaswithToyota,Iputtogetherasuccessionplanningprocessthatrequiredallhighpotentialstogothroughthecontinu-ousimprovementteam.
Oncethededicatedresourceshavebeenidentifiedandselected,theprojectteamshouldidentifythekeyresourcesthatneedtobeinvolvedintheprojectfromtheaffectedareas.Thisisagoodwaytogettheplantmanagerofaplantinvolvedintheprocess.Thisalsosetsuptheplanforsuccess,astheplantmanagerwillbereportingtotheprojectmanagerforallmattersrelatingtotheproject.Itisalsoagoodideatoinvolvethefloorsupervisorsintheseroles.Eventhoughtheyarenotdedicated100%totheteam,theycanbeverybeneficialforcommunicatingwiththehourlyworkforce.
Anotherareaofresourcesthathastobeidentifiedisthesupportingdepart-ments.Foramanufacturingprocess,thesupportingareascouldincludequal-ity,productioncontrol,andHumanResources.Themoreinvolvementthesedepartmentshavefromthebeginningoftheprojectthebettertheprojectwillflow.Sometimesthestrategyistoinvolvethesedepartmentsonlywhennecessary;however,thedrawbackisthathavingtobringthemuptospeedoncetheprojectisfullydevelopedcanbogthingsdown.Thebenefitofget-tingthesupportingdepartmentsinvolvedearlierintheprocessisthattheyaremoreapttoidentifypotentialproblemsearly,andthesecanbeincorporatedintotheplan.Thefewersurprisesthereareoncetheplanisinmotion,thesmoothertheimplementationprocesswillgo.
Theprojectleadershouldthinkthrougheachprojectandidentifyanymaintenanceorfabricationsupportthatwillbenecessary.Becauseequipmentmovesandfabricationmaytaketime,thesewillserveashardrestrictions,oritemswithastricttimeframe,duringtheplanningprocessandmustbeconsideredinadvance.Itisalsotheleader’sresponsibilitytomakesurethattherearesufficientresourcesforcarryingouttheplan.Insomecases,itmaybecomenecessarytobringinsometemporarysupportfromotherplantsforthedurationoftheproject.
Finally,theleaderneedstounderstandtherestraintsforeachresourcesothattheplancanbeproperlyresourced.Theleadermustremembertheseprojectsusuallyhavetotakeplaceduringthecourseofregularpro-duction,soitishisresponsibilitythattheimpacttocurrentproductionisminimized.
186 ◾ The Toyota Kaizen Continuum
8.2.2.5 Determine the Roles and Responsibilities
Thefirstkeypointconcerningrolesandresponsibilitiesisthateveryonemustreporttotheprojectleader.IftheCEOorheadofoperationsisgoingtocontinuallygivedirection,thenthatpersonneedstobetheprojectleader.Thisisnotabadidea,andIhighlyrecommendthisbecausethentherecanbenoexcusesforfailure.Iftheleaderwasselectedappropriately,thenhemusthavethefullauthorityandresponsibilitytocarryouttheproj-ectwithoutinterference.
Theleadershouldprepareanorganizationchartfortheprojectorganiza-tion.Theleadershouldincludealloftheresourceswhethertheyare100%dedicatedtotheprojectornot.Theleadershouldfocusonareasofrespon-sibilityandnotfocusonahierarchalstructure.Thefewerorganizationallevelsintheprojectorganization,thebetter.Foraprojecttobesuccessful,itneedsoneleaderandabunchofworkers.Whenitcomestoprojectman-agement,“manyhandsmakeforlightwork.”Iftherolesandresponsibilitiesareclearandtheappropriateresourcesareallocated,thentheplanhasagreatchanceforbeingsuccessful.
Whenputtingtogethertheprojectorganization,theleaderneedstothinkoftheskillsandfunctionsthatarenecessary.Takingaformalstepsuchasthiswillprovideclarityfortheteamandkeepegosincheck.
8.2.2.6 Develop the Plan
Finally,itistimetoputtheplantogether.Alotofstepstakeplacepriortomakingtheplan;thesestepswillensurethattheplanhasthebestchanceforsuccess.
Theleaderneedstodeveloptheplanwiththeprojectteam.Theteamneedstoconsideranyhardrestrictionsthatwillaffecttheproject.Forexample,ifaprojectwillonlytakefourweekstoimplementbutthepro-cessismanufacturingaproductforacustomerwithseverequalityrequire-ments,justgainingcustomerapprovaltomakethechangescouldtakelongerthantheimplementationoftheprojectitself.Thisisespeciallytruewhenworkingwiththeautomotiveoraerospaceindustry.Thesecustomerrequirementsneedtobebuiltintotheprojectplan.Anotherrestrictionthatcantaketimeinaplanisfabrication.Ifthereisalotoffabricationthatwillhavetooccur,therewillhavetobeaseparatefabricationschedulethatwillneedtocoincidewiththeprojectplan.Understandingtheserestrictionsiskeytodevelopingagoodprojectplan.
Execution ◾ 187
Basedontheprojectsthathavebeenidentifiedintheassessment,theprojectteamneedstoprioritizetheprojects.Prioritiesshouldbebasedonthebusinessneedandtheallocationofresources.Forexample,ifthereisaprojectthatisidentifiedthatwillimprovetheefficiencyofanareaby20%andthecurrentproductionisalreadyoperatingatcapacitywithovertime,thisareacanbeapriority,asitwillrelieveburdenontheplantoperations.
Theprojectteamalsoneedstoconsidertheorderoftheprojects.Forexample,itmaybenecessarytodoprojectsinfeederlinespriortoimprov-ingamainlineinordertoeliminateworkstoppages.
Whendevelopingtheproject,itisagoodideatoidentifykeymile-stones.Byidentifyingthesemilestonesinadvanceoftheproject,theycanserveashigh-levelcheckpointstomakesurethattheprojectstaysontarget.Themilestonesalsocankeepseniormanagersfrommicromanagingtheproject.
Iliketousecomputerprojectsoftwaretomanagemyprojects.Projectscanbesharedandmanagedeffectivelywithawidearrayofprograms.Whenusingthesesystems,itisalwaysgoodtorememberthe5W1Hruleformakingaplan:who,what,where,when,why,andhow.Makingsurethattheprojectwillanswerthesesixbasicquestionswillhelpyoutodevelopaplanthatisclearforeveryonetounderstandandsupport.
Oncetheplanhasbeenfinalized,alloftheprojecttimingshavebeenconfirmed,andresourceshavebeenassigned,theresourceloadneedstobeaddressed.Itistheleader’sresponsibilitytomakesurethattheworkisevenlydistributedbasedoneachresourcesallocation.Anoverloadedresourcewillbecomeabottleneckintheplan.
8.2.2.7 Completely Understand the Costs
Theprojectteamneedstounderstandthecoststhathavebeenprojectedfortheproject.Thecostsneedtobebrokendownintotwobuckets:expensesandcapital.Iliketohavethecostsbrokendownintosomebasiccategoriesforeachbucket.Forexpenses,thecostscanbebrokendownintoninecategories:
1.Buildingandequipment 2.Severance 3.Employeetransitionassistance 4.Plantinefficiencies
188 ◾ The Toyota Kaizen Continuum
5.Travel 6.Consultingfees 7.Contingencies 8.Permitting/Legalexpenses 9.Testing/Qualitycontrol
Forcapitaltheexpensescanbebrokendownintosixcategories:
1.Removalofequipment 2.Rearrangementofequipment 3.Inventorystorageandmovement 4.Equipmentinstallation 5.Fabrication 6.Contingencies
Oncethecostshavebeenallocatedtothesebuckets,itisimportanttoforecastthecostbyproject.Thisisnecessaryforindividualprojectleaderstounderstandtheconstraintsnecessaryfortheprojecttocomeinundertarget.Thesecostbucketsshouldbescheduledweeklybasedontheimplementa-tionplan.Invoicingdatesshouldbenoted,aswellastheactualcashdis-bursementsdatefortheexpenses.Whenworkingwithvendorselectionfortheproject,thetermsthatthevendoroffersshouldbeconsideredaswellastheavailabilityandtechnicalcapability.Payingovertimeallowsforamoreevendistributionofthefundsandwillenablethecompanytoreceiveanimpactfromthesavings.
Finally,itistheprojectleader’sresponsibilityforsettingupasystemtoapproveallcostspriortotheworkbeingcompleted.Thisisessential.Theleadershouldalwaysspendthemoneywisely,lookingforopportunitiestoreducecostswheneverpossible.Eventhoughfundshavebeenallocatedfortheproject,itdoesnotmeanthattheyallhavetobespent.Itisalsowisetoplantocomeinunderthebudgetsothattheprojectleaderhassomemoneyreservedincasesomeitemsrunhigherthanexpected.
8.2.2.8 Communicate
Communicationisthekeytothesuccessofanyplan.Nothingshouldbeassumedwhendevelopingthecommunicationplan.Itistheprojectlead-er’sresponsibilitytodevelopacommunicationplanthattouchesalllevelsoftheorganization.Thefirststepofaneffectivecommunicationplanis
Execution ◾ 189
tohaveameetingwiththeseniormanagement,plantmanagement,andtheprojectteam.Havingeveryoneinonemeetingensuresthateveryonestartsoffonthesamepage.Beforethemeetingtheprojectleadershoulddevelopwrittenexpectationsfortheprojectandforeachindividualintheprojectteam.Creatingwrittenexpectationsprovidesformoreclarityandaccountability.Thewrittenexpectationsshouldbereviewedduringthekick-offmeeting.
Fortheprojectteam,thereshouldbeaweeklyreporttoseniormanage-mentontheprogressoftheproject.Fortheweeklyreport,thereshouldbeatemplatethatcoversthefollowingaspects:
1.ProjectKPI 2.Projectmasterschedule 3.Accomplishmentsfromthepreviousweek 4.Activityplanforthenextweek 5.Costplanversusactual 6.Savingsplanversusactual 7.Feverchart
Theformatisnotimportant.Thereportwillprovidesomedisciplineforthemanagementoftheproject.OneelementthatIliketoincludeinmyprojectsiswhatIrefertoasa“feverchart.”Thefeverchartisusedtorateeachmemberoftheplantmanagementteamwhohasaprojectbeingimplementedinhisorherarea.Thefeverchartshouldalsoincludeseniormanagement,includingtheCEO.Eachpersonisratedassupportingornotsupportingtheproject.Iusegreentoindicate“supporting”andredtoindi-cate“notsupporting.”Itistheprojectleader’sresponsibilitytocompletethefeverchart.
Ihavebeenthroughmanyprojectmilestonemeetingswheretheprojectleaderhasreportedthateverythingisonscheduleandthateveryoneissup-portiveoftheproject.Laterwhenaproblemarises,theleaderisquicktopointtoamemberofmanagementasbeingunsupportive.Usingthefeverchartenablestheprojectleadertoaddressthisastheprojectisbeingimple-mented.Iftheprojectisbeingreportedtome,asaseniorleaderintheorga-nization,Iamresponsibleforholdingaccountablethosewhotheleaderhasindicatedas“notsupporting.”Thismayseemharsh,butitisnecessary.
Weeklymeetingsshouldbeheldontheshopfloorwheretheprojectisbeingimplemented,ifpossible.Asitisnotalwayspracticalforseniorman-agementtobeonsiteeveryweekfortheweeklymeeting,itisimportant
190 ◾ The Toyota Kaizen Continuum
toestablishmilestonemeetingsthatcorrespondtothemajormilestonesoutlinedintheprojectplan.Thesemeetingsshouldbeon-siteandfrequentenoughtoidentifyconcernsandmakeadjustmentssothattheprojecttimingcanbeadheredto.
Theprojectleaderneedstoworkdirectlywiththeplantmanagementtocommunicatetoalloftheprofessionalstaffoftheorganization.Eventhoughtheprofessionalstaffmayworkinanareathatisnotaffected,theyneedtounderstandtheprojectandtheopportunitythatitholdsfortheorganization.Thiswillenablethemtounderstandthatthereisadditionalstressonthefloormanagersandsupervisors.
Finally,theprojectleaderandtheplantmanagerneedtoholdameet-ingwithalloftheshopflooremployees.Althoughitisnotnecessarytogothroughallofthedetails,itisimportanttogivethemasmuchdetailasispractical.Thekeyistobetruthful.Ifthereductionwillmeanthattherearesomeemployeeswhowillbelaidoff,thishastobeshared.Theworstthingthatmanagementcandoistonotbetruthfulwiththeshopflooremployeesregardingthetargetsoftheproject.
Sometimespeoplethinkthatbecausetheyworkintheoffice,theyaresmarterthantheworkersontheshopfloor.Thisisnotthecase.Theemployeesontheshopflooraresmartenoughtoknowwhenmanagementislyingtothem.Creatinganatmospherewheretheworkforcedoesnottrustmanagementwilldoomanycontinuousimprovementactivity.
8.2.2.9 Execution
Iftheprojectleaderhasfollowedthestepsoutlined,theonlythingremain-ingistheexecution.AsIhavementionednumeroustimes,plansarejustpiecesofpaper.Itisessentialfortheprojectmanagerandallmembersofthemanagementteamtobealignedandunderstandthatitistheorganiza-tion’sprojectandthereforeeveryonesharesinitsexecution.
ThebottomlineisthatthefailureorsuccessoftheprojectrestswiththeCEOofthebusiness.IftheCEOisengagedandhastakenthestepsoutlinedtomakesurethattheprojecthasthebestchanceforsuccess,thentheproj-ectshouldbesuccessful.IftheCEOtreatsthisprojectassomethinghecancheckoffhislistandcomebacktosixmonthslater,thentheprojectwillprobablynotbesuccessful.
TheCEOneedstomakesurethattheenvironmentissuchthattheproj-ectmanagerisconfidentthatifhelpisneededthereissomeplacetoturn.Iftheprojectmanagerisexperiencingaproblem,thereissomeonewhocan
Execution ◾ 191
provideresourcestosupportsolvingtheproblem.Theprojectleadershouldalwaysfeelcomfortablereportingthetrueconditionoftheprojectandnotfeelpressuredtobeoveroptimisticduringtheimplementationprocess.
8.2.3 Rapid Implementation
Nowthatalloftheplansandresourcesareinplacetomakeourprocesssuccessful,theplanhastobeimplemented.Whetherthisisyourfirstcon-tinuousimprovementprojectorthehundredth,thekeyistoimplementtheprojectwithurgency.Itisdifficulttosellthelinetotheorganizationthatthecompanyistryingtoreconcilethecosttotherecentdownturninsalesandthentaketwelvemonthstomakethechange.
Thepaceoftheimplementationneedstobejustalittlefasterthanthecompany’sabilitytobearthechange.Thiswillenabletheorganizationtoexpandthecapabilitiesforimplementingchange.WhenwewereplanningthefirsttakttimechangeinfifteenyearsattheToyotaplantinGeorgetown,wetooksixmonthstoplanandimplementthechange.BeforeIleftformynextassignment,wewerecapableofchangingtakttimewithjustsixweeksofnotice.Witheachsuccessivechangethatwemade,wepushedourselvesfurther,andthroughthisprocesswewereabletoconditionthelinemanag-ersandtheworkersforthisprocessofchange.
Rapidimplementationalsoenablestheorganizationtogainmomentumduetothe“snowballeffect.”Thesamemomentumthatputtheorganiza-tionintothe“deathspiral”canbedirectedtowardchangeandbecomeapowerfultoolfortheimplementationteam.Asprojectmanagersandfloormanagershavesuccess,theygainconfidence;thisshouldbenoticedandadjustmentsmadetoquickenthepacewhenpossible.Thereisadelicatebalancebetweenurgencyandchaos,anditistheroleoftheprojectleadertoknowtheorganizationandbeabletoincreasethemomentumwhennecessarywhilebeingabletomaintainfirmcontrolontheprojectatalltimes.
Onethingforseniormanagersandprojectleaderstowatchforisearlysuccessthatleadstooverconfidence.Whenprojectandfloormanagersstarttakingshortcutsduringtheimplementationprocessinordertoexecutethechange,thiscanleadtoproblems.Keepingthemanagementteamdisci-plinedtoincreasethepacewithouttakingshortcutsisessentialformaster-ingtherapidimplementationprocess.
TherearesomemanagementtoolsthatIhavefoundtobeeffectiveformanagingthepaceoftherapidimplementationprocess.Oneofthese
192 ◾ The Toyota Kaizen Continuum
methodsiscalledthe“surgeday,”or“thrustday.”Astheprojectismakingprogressfromanimplementationstandpointandthefloormanagersareworkingwiththeworkerstostabilizetheoperationbeforethenextroundofchangesoccurs,organizinganeventtofocustheorganizationisagreattooltohaveatyourdisposal.
Fora“surgeday”tobesuccessful,allnon-necessarymeetingsandactivi-tiesintheplantshouldbecanceledandalloftheresourcesintheorgani-zationshouldbeassignedafocusareaontheproductionline.Thismightentailbringingalloftheengineerstotheshopfloorandidentifyingpiecesofequipmentthathavenotbeenmeetingthenewrates.Forthatday,theirjobistostaywiththemachineandidentifywhatabnormalitiesoccur.Oncetheyhaveidentifiedtheabnormalities,theyworktoresolvetheissue.Everyoneshouldknowthegoalsforthedayinadvance,andthereshouldbeaminorcelebrationifthegoalsareachieved.Smallthingslikefreesodasfromthevendingmachineareagoodreward.
Thekeyistogettheorganizationtooperateatcapacity.Youwillbesur-prisedathowmanyproblemsgetresolvedduringtheseactivities.Iwouldevenassignrolestomembersoftheseniormanagementteamtoshowoursupportontheshopfloor.Thiscouldbeanon-skilledjobthatwouldshowtheworkersoursupportformakingtheorganizationsuccessful.Ialwayslikedtospendthedayworkinginthefinalassemblyareamonitor-ingthelevelofqualitythatwasbeingproduced.Iftherewerebigissues,Iwouldstopthelineandbringtheproblemtotheattentionofthesupervi-sorfortheareaandtheworkerthatcreatedthedefect.TheobjectiveisnottoassignblamebuttoletthesupervisorandworkerknowthatthequalityproducedisimportantenoughthatIamwillingtospendmydaycheckingformyself.Thisgenerallyhadapositiveeffectonmoraleandenabledtheorganizationtostabilizequickly.
8.2.4 Stabilization
Asillustratedinwhatshouldnowbefamiliar,thekaizencontinuum(Figure 8.9),onceacontinuousimprovementprojecthasbeenimplemented,theorganizationneedstostabilizetofullyrealizethebenefitsofthechange.Stabilizationcanoftenbemoredifficultthanthekaizenproject.
Beforethekaizenisimplemented(Figure 8.10),theremaybesomeareasintheorganizationthatareexposedasproblem,orevenbottleneck,areas.Theseareasaretheareasthatrequireattentionsothatthedailyoperationresultsinachievingthetargets.Becausethenumberofresourcesisgreater
Execution ◾ 193
thanthedemandfromtheproblemareas,thisisrecognizedasthenormalcourseofbusinessandtheseareasdonotdemandimmediateattention.
Whenthekaizenactivityisimplemented,thewaterislowered;theproblemsthatwereexposedbeforeareamplifiedandproblemsthatwerebeingcoveredupbytheinefficiencyoftheoperationarenowexposedandcausingproblemsintheoperationaswell.Eventhoughthisseemslikeanundesirablescenario,thisisthedesiredconditionofkaizen.Itisonlythroughthisprocessofkaizenthatwecan“lowerthewater”andexposeourproblems.Aproblemthatisnotexposedcanneverbefixed.
Agoodexampleofthisisinventorylevels.Iworkedonaprojectinafacilitywherethereweretendaysofworkinprocess(WIP)betweentheprepareaandthefinalassemblyarea.Wewereconductingakaizenclass,andoneoftheteamsthatwasbeingtraineddecidedtotackletheproblemoftheexcessiveinventory.AkanbansystemwasimplementedthatreducedtheWIPfromtendaysdowntosixhours.Thisseemedlikeagreatsuccess,
CurrentPosition
IdealPosition
�e journey to the ideal state:
Standardize
Standardize
Kaizen
Kaizen
• Eliminates waste• Produces in quality• Generates cash flow
Standardize
Figure8.9 KaizenContinuum.
Before Kaizen After Kaizen
Figure8.10 LoweringtheWaterExample.
194 ◾ The Toyota Kaizen Continuum
andfromaninventorystandpointitwas;however,thisnowexposedanevenbiggerproblemintheorganization.TheprepareawasnotabletomaintainthepaceandproductmixofthefinalassemblyareawithonlysixhoursofWIP.Almostimmediately,thefinalassemblyareastartedexperi-encingdowntime.Theplantmanagementimmediatelylabeledtheprojectafailureandwasreadytogobacktotheoldway.
Itisonethingto“lowerthewater,”butwehavetobepreparedtodealwithwhatweuncover.Thisiswherestabilizationcomesintoplay.Itisimportantforallorganizationstohavestableoperations.Whenanorganiza-tionisestablishingacontinuousimprovementprocess,theneedforstabilityisessentialforfacilitatingthecycle.
Theshopfloormanagement’sdisciplineforutilizingthebasiccompo-nentsofthemanufacturingsystemwillbestrainedduringacontinuousimprovementproject.Thebasiccomponentsofthemanufacturingsystemwillbethebackboneofthestabilizationphase.Simplethingsliketrack-ingproductionhourly,andsupervisorsandengineersspendingtimeontheshopfloorwillmakeadifferenceinhowquicklytheorganizationcanstabilizetheoperations.Thereisreallynosubstituteforhavingacompetentmanagementteam.Thereisnoprocessthat“runsitself”;forthisreasontheorganizationhastobepreparedtomanagethechange.
Fromaprojectmanagementperspective,thequickertheoperationcanabsorbthechangeandstabilize,thesoonerthenextcycleofkaizencanbegin.Thisneedstobeincorporatedintotheplanandisalsosomethingthathastobemonitoredandadjustedduringtheimplementationprocess.
EstablishingoperationalKPIsthatneedtobemanagedduringtheimplementationoftheprojectishelpfulformonitoringthecontributionofthecurrentprojects.WhenconfirmingKPIs,itisessentialtomonitorawiderangeofthem.Forexample,aftertheimplementation,therecouldbeanabnormallevelofsupportprovidedbytheprojectteamfortheareasofchange.Althoughitisnecessaryfortheprojectteamtosupportthechangedprocesses,itisalsonecessarytomanagethelevelofsupportthatisbeingutilizedtoachievethecurrentlevelofresults.Byunderstandingthecurrentplantefficiencyandthelevelofsupportprovided,theprojectleaderandplantmanagementcandeterminetheappropriatestepsforstabilizingtheoperation.
Ihavewitnessedalotofreallygoodprojectslosemomentumandulti-matelyfailbecausetheprojectmanagerandtheplantmanagerfailedtomakesuretheplantwasstabilizingbeforestartingthenextlevelofactiv-ity.Thisistheleadingreasonthatmanyorganizationsgiveuponthe
Execution ◾ 195
continuousimprovementprocess.Nomatterhowwelltheprojectisman-aged,therewillbesomelevelofdisruptiontothecurrentcondition.Ifthisismanaged,theeffecttothecurrentoperationcanbemarginalized,butthishastobeunderstoodandresourcedeffectivelybeforetheactivitymovestothenextareaorproject.
8.2.5 Continuous Improvement
Continuousimprovement,orkaizen,istheessenceoftheToyotaProductionSystem.Thekaizencontinuumisaboutcreatinganenvironmentwheretheorganizationiscontinuouslylookingforwaystoevolvethecurrentprocess.Theprocessofcontinuousimprovementhastoinvolveeveryoneintheorganization.Thisisnotsimplysomethingthatcanbemandatedatthetopoftheorganizationandthenrolledoutlikeanew401(k)plan.Continuousimprovementisasystematicprocessthatneedstobeembracedbytheseniormanagementoftheorganizationandthenrolledouttoeverylevel.
Continuousimprovementisnottheresponsibilityofthecontinuousimprovementmanager;itiseveryone’sresponsibility.Intoday’shighlycom-petitiveglobaleconomy,theorganizationsthatcancontinuallyimprovetheirprocessesandproductswillbetheorganizationsthatsucceed.
Tosettheorganizationonapathforcontinuousimprovement,thelead-ersmustunderstandthatthereisaprocessthatneedstobeimplementedandmaintainedinorderfortheorganizationtogaintheresultsfromthekaizen.Toomanyorganizationsarelookingtoskipaheadandtrytotakeshortcuts.Theprocesscannotbecutshort;otherwise,theresultswillnotberealized.
8.3 Conclusion
IhavelayedoutaprovensystemforimplementingthebasicprinciplesoftheToyotaProductionSystemthatwilldrivevalueintheorganization.Somepeoplemayseemyapproachasashortcuttoresults;however,Iwouldarguethatmysystematicmethodologyfordrivingthecontinuousimprovementpro-cessthroughouttheorganizationisabalancedapproach.Gonearethedayswhenpeoplecouldbelievethateveniftheeconomytanked,everyone’sjobwouldbesafe.AsktheworkersofToyota’sGeorgetownfacility.Whenthereisadramaticshiftinthetoplineofthecompany,thebusinessmustrespondinmeasure,oritdies.
196 ◾ The Toyota Kaizen Continuum
Anyotherviewintoday’seconomyisnotbasedinreality.Businessesexistintherealworld,andforrealworldbusinessestodrivecontinuousimprove-ment,theyneedanapproachthattakestheprinciplesoftheToyotaProductionSystemandutilizesthemtomaximizetheimpactontheorganization.
Oncetheorganizationhassuccessfullyimplementedacontinuousimprovementcycle,itistimefortheprocesstorepeatitself.Thewholepointofthekaizencontinuumisthatitneverends.Therealwaysisthenextstepthatneedstobetaken.ThisiswhywhenmanagementtellsmethattheyhaveimplementedtheToyotaProductionSystem,Ihavetostopandevaluatewhattheyhavesaid.ItisnotpossibletoimplementTPS.Rather,youarealwaysimplementingTPS.Thisconveystheproperunderstandingofthesystem.
Finally,theorganizationleadershipneedstomakethecontinuousimprovementprocessthepriorityofthecompany’sstrategicplan.Therearelotsofgoodstrategicplanningprocesses,anditreallydoesn’tmatterwhatprocesstheorganizationutilizesaslongasitutilizesaprocess.Continuousimprovementshouldbehowtheorganizationisdefined.Itshouldapplytoalllevelsintheorganizationandshouldnotjustbean“oops”thing.
Mygoalforwritingthisbookistoequipreaderswithactionableknowl-edgethattheycanusetotransformtheirorganizationintothebestorgani-zationthatitcanbe.IfyouonlyunderstandonepointthatIhaveillustrated,understandthattheToyotaSystemisnotthebestwayofdoingsomething;rather,thebestwayofdoingsomethingistheToyotaProductionSystem(Figure 8.11).
Which Statement is Correct?
TPS is theBest Way.
�e BestWay isTPS.
Figure8.11 QuestionfromaMaster.
ISBN: 978-1-4398-4604-9
9 781439 846049
90000
The Toyota Kaizen Continuum
Stewart
Business Management
Written by a recognized leader in the manufacturing industry with nearly two decades
of experience working for Toyota, this book supplies a firsthand account of the realities
behind implementing the Toyota Production System (TPS). The Toyota Kaizen
Continuum: A Practical Guide to Implementing Lean presents authoritative insight
on how to use the TPS to drive operational value and improvement across all segments
of an organization.
Highlighting the valuable lessons learned directly from the TPS masters at the Toyota
factories in Japan, John Stewart provides a time-tested approach for implementing
a process of continuous improvement. Delving into his wide-ranging experience—
that includes time as a team member on the assembly line and managing the vehicle
assembly division for Toyota’s largest European operation in the United Kingdom—he
explains how to get the process started, how to get senior management excited about
the possibilities, and details a process for implementing the TPS in your organization.
• Written by an industry veteran named one of the Top 10 Automotive
Executives by Automotive News in 2007
• Unveils the methods used within the walls of the world’s premier
manufacturing organization
• Illustrates valuable lessons learned with real-world examples of TPS
implementations
• Describes five simple steps for executing change in any organization
The book includes case studies that illustrate real-life successes and failures behind
the walls of the world’s largest automobile manufacturing organization. Detailing a five-
step process for executing improvement initiatives, it supplies you with the tools and
understanding of the core principles of the TPS needed to implement and sustain a
culture of continuous improvement.
K12059
www.product i v i t yp re s s . com
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