the toyota kaizen continuum: a practical guide to implementing lean

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Page 1: The Toyota Kaizen Continuum: A Practical Guide to Implementing Lean

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

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Page 3: The Toyota Kaizen Continuum: A Practical Guide to Implementing Lean

The Toyota Kaizen Continuum

A Practical Guideto Implementing Lean

Page 4: The Toyota Kaizen Continuum: A Practical Guide to Implementing Lean
Page 5: The Toyota Kaizen Continuum: A Practical Guide to Implementing Lean

The Toyota Kaizen Continuum

A Practical Guideto Implementing Lean

John Stewart

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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)

This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. The authors and publishers have attempted to trace the copyright holders of all material repro-duced in this publication and apologize to copyright holders if permission to publish in this form has not been obtained. If any copyright material has not been acknowledged please write and let us know so we may rectify in any future reprint.

Except as permitted under U.S. Copyright Law, no part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers.

For permission to photocopy or use material electronically from this work, please access www.copyright.com (http://www.copy-right.com/) or contact the Copyright Clearance Center, Inc. (CCC), 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged.

Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identifica-tion and explanation without intent to infringe.

Visit the Taylor & Francis Web site athttp://www.taylorandfrancis.com

and the CRC Press Web site athttp://www.crcpress.com

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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

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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

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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

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8.2.3 RapidImplementation......................................................... 1918.2.4 Stabilization.......................................................................... 1928.2.5 ContinuousImprovement....................................................195

8.3 Conclusion......................................................................................195

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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

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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

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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.

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xiii

TheAuthor

John.StewartistheoperatingpartnerforMonomoyCapitalPartners,aNewYork-basedprivateequityfund.AtMonomoy,Johnisresponsibleforportfoliomanagement.Hehasworkedwithnumerousbusinessesofvarioussizestoincreasetheirbottomlineresults.PriortojoiningMonomoy,JohnworkedforToyotaMotorCorporationforeighteenyears.HestartedwithToyotaontheshopfloorandworkedhiswaythrougheachleveloftheorganizationuntilhefoundhimselfresponsibleforToyota’slargestEuropeanmanufacturingdivision.JohnwasselectedbyAutomotive Newsasoneofthetopyoungprofessionalsintheautomotiveindustryin2007.

Johnismarriedtohiswonderfulwife,Leslie,andtheyhavefourchildren:JohnII,Sarah,Andrew,andMatthew.

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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

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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.

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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

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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

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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.

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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

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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:

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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.

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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.

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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.

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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.”

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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

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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.

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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

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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

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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.

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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

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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.

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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.

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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

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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

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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.

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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

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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

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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

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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.

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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.

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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

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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.

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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).

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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).

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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.

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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.

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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

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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.

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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.

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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

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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.

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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

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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.

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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.

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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.

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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.

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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

Conveyor 1

Problem 1:

Cake flow from conveyor 1does not match the flowfor conveyor 2.

Cakes Waiting

FrostingLayer 2(Auto)

FrostingLayer 1(Auto)

CornSyrup

Application(Auto)

SpeedConveyor 1

= Conveyor 2

Figure2.20 ChocolateCakeLine:BeforeKaizen.

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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

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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

Conveyor 2

Conveyor 1

Solution:Based on the input variable

needed to output a 3 tiered cake,conveyor 1 should run at 1.3 times

the speed of conveyor 2.

Develop Takt Time (Line Speed)for Cake Line Based on Planned

Production and PlannedWorking Time.

Solution:

Eliminate Auto Corn Syrup Applicationand develop simple manual application.Eliminate 2 people.

FrostingLayer 2(Auto)

FrostingLayer 1(Auto)

Corn SyrupApplication

(Manual)

Speed = Conveyor 2 × 1.3

Takt Time = Planned Working TimePlanned Volume

1. Frosting machine frosts every other set of cakes.

2. Cake Assembler assembles cakes as follows: 2.1 Cake A is set on top of cake B. 2.2 Cakes AB are set on top of cake C.

Eliminate Cake Waitingand Cake Stacker 2.

C

CB

BA

A

Cakes Waiting

Figure2.21 ChocolateCakeLine:AfterKaizen.

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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

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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.

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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

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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.

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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.

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56  ◾  The Toyota Kaizen Continuum

Supp

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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

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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.

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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

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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.

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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.

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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)

Production Kanban(order)

10804-4I0

10804-4I0 300950829-01-2

P-201P-201.02

Kanban

Figure3.4 SimpleKanbanExample.

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Why the Toyota Production System Makes Sense  ◾  63

Figure3.5 HeijunkaBox.

Figure3.6 KanbaninUse.

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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.

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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.

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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

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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

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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.

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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.

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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

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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.

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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).

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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)

Production Kanban(order)

10804-4I0

10804-4I0 300950829-01-2

P-201P-201.02

Kanban

Figure4.7 SimpleKanbanExample.

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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.

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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

Japan

Toyota City

United States

Georgetown, KY

3 Days

3 Days

10 Weeks

10 Weeks

Figure4.9 ToyotaJapanSupplyChaintoU.S.Operations.

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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.

KY

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Figure4.10 FluctuationatToyota;Georgetown,Kentucky.

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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.

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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.

Traditional Kanban System

More Kanban = More Fluctuation

Supplier

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50% Reduction in Kanbans

ToyotaGeorgetown, KY

ToyotaGeorgetown, KY

Order Kanban

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FaxEmail

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Return Trucks with Order Kanban

Return Truck - No Kanban

Delivery Trucks with Kanban

Figure4.12 E-KanbanSystematToyota;Georgetown,Kentucky.

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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

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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

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touchwiththesepeopleandtosupporttheminourpursuitoftheidealcon-dition.Whenthebenefitofagreatinitiativebecomescleartotheworkersthemselves,thebenefitinvalueissoonseenbythecustomers.

Manycompaniestodayhavegenuinecustomerservicepolicies;unfortunately,theyonlycomeintoplayoncetheproducthasbeenpur-chasedbytheendconsumer.BecauseeverysequentialprocessinsideToyotainvolvescustomers,anytimetheyhaveaproblem,itmeansthefinalcustomerhasaproblem.Itisaleader’sdutytomakesurethatthatproblemiseliminated.TaiichiOhnosummeditupbestwhenhesaid,“Noproblemdiscoveredwhenstoppingthelineshouldwaitlongerthantomorrowmorningtobefixed.”

Figure4.13 Genchigembutsu(Go,See,TakeAction).

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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.

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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

Make Clear and Simple Strategyfor Analysis and Countermeasure

1. Clear and Simple Strategy2. Short- and Long-Term Schedule (Control Point as Well)3. Visual Control for Standard Tracking

10080604020

0Indicator

Current

Ideal

Target

Must UnderstandBoth Gaps

Clarify the IdealSituation

Grasp the CurrentSituation

Clarifythe Gap

C/M Ideaand Plan

TakeAction

Standardizeand Stabilize

Figure5.1 GapManagementPhilosophy.

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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

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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).

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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

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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

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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

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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.

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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

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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.

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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.

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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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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

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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.

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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.

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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

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havetoattachalabeltoaparticularpartbeforeitcanbeconsideredcom-plete(Figure 5.17).Thefirstthingthathastobedoneistopeelthebackingoffthelabeltoexposetheadhesiveside.ThemotionoftakingoffthatlabelbackingisNVAW;itisoverprocessingbecauseitisnotnecessary.Now,ofcoursethebackinghastoberemovedforthelabeltostick,butisitsome-thingthatwehavetodo?Therearelabelgunsthatremovebackingsastheyapply,aswellasdispensersthatremovebackingsastheyarepulled.Ifwedonotproperlyclassifywaste,thenwewillmorethanlikelynotbeabletoimplementtheappropriatecountermeasure.

Ifyouarethinkingtoyourselfthatsomethingassimpleasremovingthebackingfromalabelisatrivialimprovementatbest,thenIdonotknowif

Hand startfastener

(Over-Processing)

Tightenfastener(VAW)

1 2

Figure5.16 Overprocessing.

Figure5.17 OverprocessingExample(LabelInstallation).

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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.

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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.

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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.

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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.

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114  ◾  The Toyota Kaizen Continuum

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Waste Management … Improving the Manufacturing Process  ◾  115

Iden

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116  ◾  The Toyota Kaizen Continuum

Iden

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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.

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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

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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.

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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.

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isbyassemblingthetwocomponentstogethertoformoneproduct.Theindividualcomponentshavenovaluetothecustomerbecausethecustomerisonlywillingtopurchasethefinishedproduct.OftenwhenIamdiscussingVAWandNVAWwithmanagement,theyassumethattheVAWrateoftheproductisthemajoritywhen,asthisexampleillustrates,itisusuallytheopposite.ThefirsttimewedidathoroughanalysisoftheassemblyprocessesatToyota’sfacilityinGeorgetown,Kentucky,theVAWratewas27%!Don’tbeshockediftheVAWrateofyourprocessismuchlowerthanthis.

BecauseVAWgenerallyentailsadesignchangetopartsorcomponentstoaccomplish,again,thisissomethingthatisverydifficulttoimproveduringaprocesskaizenevent.Giventhisillustration,itisessentialtoclassifythetypeofworkproperlytodeterminewheretherealopportunityforimprove-mentisintheprocess.

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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

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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.

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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

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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.

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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

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0.25 0.5 1.0

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Figure6.5 SimpleVisualControlExamples.

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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

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todiscusstheproblemsidentifiedandthesolutionstothoseproblems.Examplessuchastheseenablethemanagementteamtoquicklygraspthesituationandtoknowwheretheyneedtogotoimprovetheopera-tion.Theprocessofsimplifyingtheseprocesseshighlightsthesignificantinformationandminimizesmanagementnoise.Thisconceptenablesthemanagementteamtobemuchmoreeffectiveintheirdailymanagementoftheproductionfloor.Evensomeonewhohasnorealexperienceinmanufacturingcanattendthemeetingandknowtheareasthatneedtobeaddressed.

Standardizedworkisanotherexampleofvisualcontrolthatmustbefundamentallyunderstoodthroughouttheorganization(Figure 6.8).Whenwethinkofthecomplexityofthemanufacturingprocess,itseemslikecommonsensethatworkersneedsimpleinstructionsthatdetailhowtobuildtheproduct.Overandoveragain,Iexperienceorganizationsthathavenosystematicmethodfortransferringthenecessaryknowledgetonewemployees.Intheautomobilemanufacturingprocess,instructionis

Safety

Incidents

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KPI Board

Figure6.7 KPIBoard.

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neededforeachoperatorontheproductionlinetoteachhimwhichpartsgoonwhichvehicle.InToyota,thisprocessisespeciallycomplexbecausemultiplevehiclesareproducedonthesameproductionline.Workersmaybuilduptofivedifferentmodelsonthesamelinewithcountlessvariationstoeachmodel.ThishasbecomemorepressingasToyotaexpandstheircurrentproductoffering.AsToyotaexpandedthemodellineuptocaptureadditionalsales,existingproductioncapacitywasretooledtoproducethenewmodelsontheoldlines.Inoneinstance,theluxurysportcoupefromLexuswasbeingproducedonthesameproductionlineasataxicab.OnecanimaginethatthereisnotalotincommonbetweenataxicabandtheLexusSC470!

Recently,Toyotahasspentagreatdealofengineeringresourcestosim-plifytheproductionmethodology.Thissystemofmanufacturingfocusedonsequencingeachvehicle’spartsandcomponentsanddeliveringthemjustintimefortheassemblyofthatparticularvehicle.Asonecanimag-ine,thiswasastaggeringundertaking.ThemethodofimplementationwasaconceptknowninToyotaassetpartsupply(SPS)(Figure 6.9).This

QC

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Date: 5/22/2010 By: Art of Less

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Figure6.8 StandardizedWork(STW)Chart.

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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.

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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.

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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.

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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

IdealPosition

�e journey to the ideal state:

Standardize

Standardize

Kaizen

Kaizen

• Eliminates waste• Produces in quality• Generates cash flow

Standardize

Figure6.12 KaizenContinuum.

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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

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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

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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

Jack Frasier, Sales andMarketing VP

$375,000

Chris Taylor,Supply Chain Director

$150,000

Finance

Human Resources

Operations

Plant Engineering

Marketing

Sales

Materials

Purchasing

ApplicationEngineering Logistics

Figure6.13 OrganizationChart.

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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

Final Line– Cosmetic

InspectionLine Off

Trim Line– Wiring and Interior1

2

3

Figure6.14 AssemblyPlantLayout.

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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,

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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

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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.

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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

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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.

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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

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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

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employedtofindthebestmethod.Eachfacilityoftenwillengineeramethodtoperformthesametaskadifferentwaytounderstandwhichmethodistheoptimumone.Oncetheoptimummethodhasbeendeter-mined,itthencanbestandardized.

Tofullyunderstandtheconceptofautonomation,let’sconsideranotheruniversalmanufacturingprocesstotheautoindustry,windshieldinstalla-tion(Figure 6.18).Itmightmakesensetohavearobotinstallthewindshield,

Figure6.17 TireandWheelInstallation.

Figure6.18 WindshieldInstallation.

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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.

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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.

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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.

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production,thepartshavetocyclefromstationtostationeveryfiftysec-onds.Inmanycompaniesthathavesometypeofmonitoringsystem,theprocesswouldonlyproduceanalarmiftherobotfailedtomeettherequiredfifty-secondcycletime.Ifthenotificationcomesattheendoftheprocess,thereisnoalternativebutfortheproductionlinetostop,andthiswillreducetheproductivityoftheline.Evenifthedelayoccurredatthebeginningofthecyclefortheequipment,thiswillnotbeclearlyunderstoodiftheequipment’sonlywarningistostopproduction.

Toimprovethereliabilityofthisprocess,wecouldtracktheprocessoftherobotasitcompletesitsprocessanddeterminethetargetforeachopera-tion(Figure 6.21).Ifanyoneoftheoperationswithinthecyclewasdelayed,theequipmentcouldnotifyanoperatorwhocouldcorrecttheoperationandmaintaintheflowofproduction.Theabilitytodetectanoperationindelayisessentialforcreatingreliableoperations.

Standard Work Combination SheetTakt Time

Cycle Time

Work Group Product Team

Product Sales Final Product

1 of 1

Manual

OperationName

Units/Shift

Time

300

ProductName/#

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95

Step Description

DatePrepared 12 Mar. 20XX

TotalsPrepared

ByReviewed

Bywww.Velaction.com

ver. 10/19/2008 ©2008Jimmy John Q. Supervisor

60 18

1 Process A 15 3

2 Process B 15 3

3 Process C 5 15 3

4 Process D 15 3

5 Process E 5 3

6 Process F 5 3

90 Sec

78 Sec

Step

#

Man

ual

Aut

o

Wal

k

Automatic

Operator

Walking Waiting

Takt

tim

e =

90 S

ec

Figure6.21 StandardizedWorkCombinationTable.

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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.

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Eventhoughalloftheseprinciplesarebasic,theyshouldbetakenforgranted.Itisessentialforexecutivesandmanagerswhoseektoimprovetheirbusinesstotrulyunderstandthecurrentsituationontheshopfloor.Policiesandproceduresaregreat,buttheyareonlyasgoodastheorganiza-tion’sabilitytoimplementthem.Themostgiftedandcharismaticleaderintheworldcannotfillallofthegapsinanorganizationthatdoesnotexecuteatalllevels.

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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

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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.

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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

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themanagersinthebusinessunderstandingthecoststructureofthebusi-ness.Itisabasicaccountingconceptthatmanybusinessesmaketoocom-plex.Understandingthesebasicprinciplesisessentialforanorganizationtosuccessfullyimprovetheoperationsofthebusiness.

7.2.1 Fixed and Variable Costs

Formanagementtounderstandtheorganization’scosts,theymusthaveacompleteunderstandingofthecostsofdoingbusinessinrelationtothevolume,orsaleslevel.Therearetwotypesofcosts;fixedandvariable(Figure 7.3).Althoughthisseemselementary,mostbusinessesdonottrulyunderstandthesecostsandtherelationtovolume,orsales.

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Figure7.2 TugofWar.

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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.

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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.

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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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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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Figure7.8 IncreasedCostModel.

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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

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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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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.

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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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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.

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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.

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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.

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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

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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.

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Figure8.1 KaizenContinuumGPS.

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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.

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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

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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.

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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

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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

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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.

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IamfrequentlyaskedwhatlevelofROIIlookforinaproject.Thisanswervariesfromprojecttoprojectandfromcompanytocompany.Agen-eralruleofthumbforanyinvestmentisiftheinvestmentwillpayforitselfinthecurrentfiscalcycleandrecoveratleastonedollar,thenthatprojectshouldbeimplemented.ThisisnottosaythatIhaveseenalotofprojectsthathaveaone-to-onereturn.Withanoperationalimprovementproject,itisrarewhentheprojectcannotbeimplementedandproduceanannualizedreturnofthreetoone.Ifduringtheassessmenttheoverallprojectisclosetoaone-to-onereturn,itisnecessarytodigdeeperintothedatatomakesuretheprojectreallycangeneratetheimprovementandthatthecostsarealittlemoredialedintotheactualplan.

Theotherthingtobeconsciousofisthetyrannyofthecalendar.Ifyouidentifyaprojectforthenextfiscalyearandyouplantogenerateonemilliondollarsofsavingsfortheyear,thelongeryouwaitintheyeartoimplement,themoreactualsavingsneedstooccur.Ifmyprojectisgoingtosaveonemilliondollarswhenimplementedonanannualizedbasisandittakesmesixmonthstoimplement,evenifIstartdayoneofthefiscalyear,themaximumreturnIcancreateforthatyearishalfamilliondollars.

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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.

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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.

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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

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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.

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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.

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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

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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

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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

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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

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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

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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

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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.

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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

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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.

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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.

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