Lean Thinking

by Daniel T Jones

  It is obviously possible to combine lean techniques with high-tech mass production. For example, the firm we have just cited applies the concepts of Total Productive Maintenance (another idea originating in the Toyota Group, at Nippondenso) and self-managed work teams (consisting only of technical support staff because there are no direct workers) to its fully automated production system. However, there is a fundamental problem with the strategy in most applications, notably that it is a classic case of optimizing one tiny portion of the value stream while ignoring the costs and inconvenience to customers created elsewhere.

  To achieve the scale needed to justify this degree of automation it will often be necessary to serve the entire world from a single facility, yet customers want to get exactly the product they want exactly when they want it. This is generally immediately. It follows that oceans and lean production are not compatible. We believe that, in almost every case, locating smaller and less-automated production systems within the market of sale will yield lower total costs (counting logistics and the cost of scrapped goods no one wants by the time they arrive) and higher customer satisfaction.

  When one looks at smaller Japanese companies, like Showa, the record is more mixed with many still essentially batch producers. (Showa formed a self-help group with ten other firms in the Fukuoka area in the late 1980s and many of these firms have made dramatic progress in applying lean techniques, but many other nearby firms have continued along their traditional path.)

  And the farther one travels from the manufacture of discrete products the more Japanese practice looks similar to (or even inferior to) practices elsewhere in the world. To take an important example: Distribution is still largely conducted in the multitiered, batch-and-queue manner described in Chapter 4 before Toyota began applying lean thinking. (It’s curious that the international debate about the Japanese distribution network has focused on its impenetrability to foreign producers. We have never seen any mention of the efficiency of the actual activities being performed at each level, which seem to be a major drag on the Japanese economy as a whole.)

  Finally, regarding services, it’s clear that many Japanese firms—for example, domestic airlines—offer a high level of quality and customer satisfaction but by means of batch-and-queue methods which doom them to high costs.

  So, after forty years, the Japanese economy is leaner than most by virtue of some superlative manufacturing activities, but it is still not lean enough and much of even its strongest activity, manufacturing, is not lean at all. The implications become clear when we look at the world situation and Japan’s future .

  Tiny Showa; Mighty Toyota: The Japanese Challenge Today

  We believe that the world has now changed in a fundamental way: Lean techniques are spreading rapidly to all regions, and currencies have fundamentally realigned as American domination of the world economy has come to an end.

  As a result, tiny Showa now has interesting lessons to teach other Japanese firms, even mighty Toyota. Showa has refocused its efforts on the Japanese domestic market and diversified into products which meet emerging Japanese needs, public and private. Its lean production system reinforces its lean ordering and product customization capabilities to deliver exactly what customers want exactly when they want it. The direct manufacturing costs may be higher than making the product in Sri Lanka or Burkina Faso (if this is technically possible), but total costs (including logistics) are lower and the combination of low cost, superlative quality, customization, and immediate delivery is unbeatable. At the same time, Showa is establishing a top-to-bottom production system in its other major market of sale.

  This is not the only imaginable path of adjustment, of course. An alternative way to surmount the changes in the world economy is for Japanese firms to become technological innovators and pioneer new classes of products which no one can duplicate. (The world will then either buy them at whatever cost and with whatever wait, or do without.) This may preserve the ability of Japanese firms to serve the entire world market from one location even if logistics costs are high and customers cannot custom-order. However, as we will explain in some detail in Chapter 12 , the underlying reasons why Japanese manufacturing firms have been better than foreign competitors at embracing lean techniques—company- rather than function-based focus of careers and the relative weakness of technical functions—make it very difficult for Japanese firms to be technological leaders. A few may succeed, but most will fail.

  A second solution is for firms to “hollow” themselves out by importing a high fraction of the actual manufacturing content in their products, conduct assembly in Japan using high-tech mass production, and continue to export the finished products to world markets. The problem here, as we’ve seen in every chapter, is simply that firms in Europe and North America are rapidly figuring out how to conduct lean manufacture within the region of sale. (Indeed, Toyota, through its direct investments in North America and Europe, has been the most effective teacher.) To repeat, oceans and leanness are usually incompatible. This strategy will often be a loser.

  The third way out is to find new things for Japanese manufacturing firms to do at home while aggressively replicating lean systems for product development, order-taking, and physical production in every major region. This is clearly the winning combination. Tiny Showa is in fact a model for Toyota.

  An additional, and very important, step is to begin applying lean thinking to Japanese distribution systems and services. Otherwise a reorientation of the economy from selling manufactured goods to foreigners at high margins to serving new domestic needs may cause a steep drop in the standard of living. Indeed, the fear of this drop has apparently deterred government policymakers from pushing Japanese firms in the direction we believe is essential.

  The Steps Are Always the Same

  We’re now at the end of our march around the world, from North America, to Europe, to Japan. At every stop we’ve found that all firms—including Toyota—face the same challenges in embracing lean thinking, and that managers must take the same steps. We’re therefore ready, in the next chapter, to summarize just what these steps are and how you can take them as quickly as possible.

  CHAPTER 11

  An Action Plan *

  We hope you’ve learned to distinguish value from muda and that you want to apply lean thinking to transform your business. But how do you “just do it”? We’ve learned from examining successful transformations across the world that a specific sequence of steps and initiatives produces the best results. The trick is to find the right leaders with the right knowledge and to begin with the value stream itself, quickly creating dramatic changes in the ways routine things are done every day. The sphere of change then must be steadily widened to include the entire organization and all of its business procedures. Once this is in hand and the process is irreversible inside your own firm, it’s time to start looking up- and downstream far beyond the boundaries of individual firms to optimize the whole.

  GETTING STARTED

  The most difficult step is simply to get started by overcoming the inertia present in any brownfield organization. You’ll need a change agent plus the core of lean knowledge (not necessarily from the same person), some type of crisis to serve as a lever for change, a map of your value streams, and a determination to kaikaku quickly to your value-creating activities in order to produce rapid results which your organization can’t ignore.

  FIND A CHANGE AGENT

  Maybe the change agent is you, and if you run a mid-sized or small business like Pat Lancaster we hope it is. However, if you are the senior leader of a large organization, you may not have the time or opportunity to lead the campaign yourself. You’ll need your chief operating officer, or your executive vice president of operations, or the presidents of your subsidiary businesses to introduce the necessary changes, and these individuals may need some direct-report helpers as well. Sometimes there are inside candidates for these jobs, but often it’s necessary to go outside for a Wendelin Wiede-king or a
Karl Krapek or a Mark Coran.

  Individuals with a make-something-happen mind-set are not a commodity available freely, but in the fifty firms we’ve looked at it was possible to find the right change agent, and generally after only a short search. While chief executives in organizations failing to get started on a lean transformation often tell us that the problem is a lack of good candidates to take on the challenge, we generally find instead that it’s reluctance to bring in executives who will introduce truly fundamental change.

  GET THE KNOWLEDGE

  The change agent doesn’t need detailed lean knowledge at the outset but instead a willingness to apply it. Where can the knowledge be obtained?

  There are lots of resources for learning in North America, Europe, and Japan. Lean firms are themselves continually improving and most are happy to include visitors—in particular their customers and their suppliers—in their improvement activities. Freudenberg-NOK, for example, has involved more than five hundred executives from outside firms in its three-day kaizen activities over the past four years. And there is a vast literature available, some of it very good, on various lean techniques and when to apply them. 1

  Because most change agents new to lean ideas need considerable time to master them, additional help is usually needed right away. In particular, firms will need someone in-house, like Ron Hicks at Lantech or Bob D’Amore at Pratt, who can act as the expert in quickly evaluating the value stream for different products and initiating kaikaku and kaizen exercises. In our research, we’ve been struck by just how many managers there are in Japan and North America, and increasingly in Europe, who are masters of lean techniques but who are frustrated with their ability to implement them in their current organization. This may make these experts available to you. 2

  Even if you find one or more executives with the necessary knowledge, they may well need outside help to move your organization ahead rapidly. There are many consultants claiming lean credentials and some of them are very good. But several cautions are in order. Any consultant who has no links back to the roots of lean thinking and who relies mainly on seminars and off-site classroom instruction, or who wants to do the improvement for you with a large team of junior consultants without fully explaining the logic of what is happening, should be avoided. Similarly, a consultant offering massive offensives to quickly fix specific activities—the pulling-rabbits-outof-hats phase—but with no interest in working with you to create an organization which can sustain lean concepts for the long term is unlikely to be of real help in the end. This is the type of activity—usually aimed simply at quick headcount reduction—which has given the reengineering movement such a cynical cast and has caused so many reengineering projects to fail the moment the consultant leaves.

  In addition, it’s unlikely you’ll find one adviser who can impart all the knowledge. Applying QFD to product development, introducing lean techniques on the shop floor, and creating a self-help supplier association require different skills and firms may discover they need a portfolio of advisers for specific types of knowledge.

  One underused resource for firms all over the world is the generation of Japanese now in their sixties who helped pioneer lean thinking and create order out of chaos in the 1950s and 1960s. (For example, Yuzuru Ito, who took retirement from Matsushita and is now working to introduce lean quality tools across the entire United Technologies group.) The nature of these individuals seems to be that they can’t stop trying to eliminate waste, no matter how many years past “retirement” they may be. Like Ohno and Shingo in the generation before them, who continued to conduct improvement exercises right up to their deaths, they have no desire to slow down.

  We’ve heard many Western firms give excuses for not availing themselves of this resource—the two most common being that Japanese of the immediate postwar generation typically speak only Japanese, and that these pioneers in lean implementation are too demanding (having learned this from Ohno and other leaders of the Japanese miracle after the war) and short on diplomacy when their clients fail to follow through.

  But these are only excuses. Many of the change agents we’ve studied developed a successful relationship with a Japanese sensei after a careful search and a period of learning how to work with each other. Typically, the executive made several requests for help before an arrangement was finally worked out. For example, George David at United Technologies asked Ito to come to UTC on a half dozen occasions before he finally agreed and George Koenigsaecker asked his Japanese advisers to visit his plant many times before they agreed. For the true sensei, the change agent’s level of commitment is the single most important issue.

  Finding a sensei who does not speak your language (and therefore needs an interpreter) can even be a help because it highlights the unusual nature of the interaction: This is not just another consultant peddling another quick fix; it’s someone changing your whole way of thinking about your business. Similarly, any teacher who doesn’t vigorously protest when a pupil fails to live up to his promises and potential is probably more interested in a secure fee than in lasting change.

  A final point about lean knowledge is very important. The change agent and all of the senior managers in your firm must master it themselves to a point where lean thinking becomes second nature. What’s more, they should do this as soon as possible. If the change agent doesn’t fully understand lean thinking, the campaign will bog down at the first setback (and there will be a first setback). So he or she (or you) must truly understand the techniques of flow, pull, and perfection, and the only way to gain this understanding is by participating in improvement activities, hands-on, to a point where lean techniques can be taught confidently to others. While doing this, the change agent needs to involve the other senior executives of the firm as well, so everyone’s knowledge is brought up to a minimum level to grasp the power of lean thinking.

  FIND A LEVER BY SEIZING THE CRISIS, OR BY CREATING ONE

  We have not found an organization free of crisis that was willing to take the necessary steps to adopt lean thinking across the board in a short period of time. So if your firm is in crisis already, seize your invaluable opportunity. Just remember that you can achieve spectacular results on cost reduction and inventories in six months to a year, but it will take five years to build an organization which can sustain leanness if your change agent is hit by a bus.

  In the 1990s, most executives in North America, Europe, and Japan have come to realize that even large firms are more fragile and more prone to crises than they had imagined. 3 At any given moment, however, most organizations aren’t in crisis, and a substantial fraction is doing very well. How can you, as the change agent, take a seemingly secure organization (for example, like IBM in the 1980s) and introduce lean thinking, which you know will be needed to head off a crisis in the future?

  One approach is to take some subunit of the organization which is in crisis and focus all your energies on applying lean remedies to it. 4 Ideally, this would be a business unit with a set of product families, but it could be a single plant, one product development group, or even one product line in a plant or one development team for a specific product. This is also the way leaders who are not near the top of their organization can take the lead on a lean breakthrough: Apply lean thinking to your own troubled business unit or facility, or get transferred to a unit which is in a crisis. Then, once dramatic change has been introduced in the unit, the leaders of other units can be invited over for hands-on learning and can take ideas back.

  Even if no sub-unit of your business is in crisis, there may be an opportunity for dramatic change if you can find a lean competitor. (In our role as advisers to firms we’ve often wished that Toyota would diversify to compete against our clients!) For example, we recently encountered a case where a classic mass-production firm’s competition was mediocre and generally not a threat. However, one small business unit of a key competitor had recently made a lean transition with striking results. By focusing on this one instance of superi
or practice it was possible to introduce significant change in the corresponding business unit of the client, which then started a change process across the firm.

  Yet another approach is to find a lean customer or a lean supplier. When John Neill at the Unipart Group in the U.K. set out to transform his company at the end of the 1980s, a key element of his strategy was to begin supplying Toyota and Honda in the United Kingdom because he knew they would make demands on Unipart’s performance far beyond those of any European-owned customer. He realized that the customer would not only create the crisis but could also offer hands-on assistance in introducing lean methods to resolve it.

  For the truly bold executive there is one more lever of change available, and that is to consciously create conditions in which there will be a firm-threatening crisis unless lean actions are taken. For example, we’ve studied a manufacturer of long-lead-time, complex machinery which has recently begun to sell a critical new range of products, set for initial deliveries in a couple of years, at prices that can only be profitable if the firm quickly adopts lean methods to bring down costs dramatically across the board. This is clearly a high-risk path, but if the change agent truly wants to create a crisis, there are many ways to orchestrate one.