Toyota Production System in Indiana

Photo by Daniel R. Patmore

Via Evolving Excellence, Indiana plant president passes on lessons:

Q. Is it different teaching the Toyota Production System to American team members than it is to teach it to Japanese?

A. It's not so different. Americans are eager to learn. American team members are more serious about job security, so their motivation is higher than that of the Japanese.

The Japanese are more obedient to the boss. Americans show more individual initiative. Once they understand why we have to continue kaizen, we get a much better result than you'd expect.

Q. What are the biggest misconceptions about the Toyota Production System?

A. Sometimes it's misunderstood as a management tool to bring cost down. Or that it's effective even if only a portion of TPS is introduced, such as kanban. (Kanban is inventory replenishment.) That's not the Toyota Production System.

Kanban is easy to introduce as a logistics system, but its purpose is not to reduce logistics costs. It's a tool to bring problems to the surface. Not many people understand that. As we reduce inventory, all problems come to the surface, and that way you solve problems and your system gets stronger.

Toyota Manufacturing Powerhouse

Great required reading via Evolving Excellence, Relentless, Detroit News:

As Toyota expands rapidly, it is also grappling with a shortage of skilled managers and engineers. When it decided in June to build its seventh North American assembly plant in Woodstock, Ontario, officials said one reason they chose that site was because the new factory could be overseen by the team running its nearby Cambridge plant.

Last month, the normally acquisition-shy Toyota bought nearly half of GM's 20 percent stake in Fuji Heavy Industries Ltd., in part to bolster its ranks of researchers and engineers.

Now, some Toyota executives in fast-growing regions are coaxing former managers out of retirement. Less than a year after Ed Ohlin retired, the 21-year company veteran and former head of its Mexican sales operations is back on the payroll, helping his former boss Yoshimi Inaba build a sales network in China.

"He was looking for someone who understood the Toyota culture and had brought it to another country. I'd done that," said Ohlin, who now works in Beijing

Unusual among automakers, "they don't hide a lot," Coventry said. "It's like going to the Super Bowl and having the opposite side throw their playbook on the table. It's as if they feel they can still beat you on the field."

I like this. Toyota has greatly advanced management practice worldwide through their actions.

In a reflection of Toyota's team-oriented approach, its executive pay is paltry by U.S. standards. Analyst Ron Tadross at Banc of America Securities estimates the total annual compensation of Toyota's CEO at under $1 million - about as much as a vice president at GM or Ford Motor Co. makes in a good year.

The executive pay crisis in America is a symptom of the failure of American management to understand their role. Executives are part of the system and have acted shamefully in allowing obscene pay for a few while claiming they must force others to suffer (due to "the market"). It seems more people are willing to point out the ludicrous excesses recently. Hopefully that will start to result in actual action to move back toward a more equitable distribution of the income of American companies.

Related posts:

• CEO Pay: Obscene
• Management Improvement

Not the End of Process

The End of Process by Ross Mayfield

If a knowledge worker has the organization's information in a social context at their finger tips, and the organization is sufficiently connected to tap experts and form groups instantly to resolve exceptions -- is there a role for business process as we know it?

Yes. There are some interesting comments spurring by this post but essentially I think the post is in no way a compelling argument that process management is not a very good management practice.

In a response to the original post, Nicholas Carr wrote an excellent post, Process Matters:

Structured, well-thought-out processes are also essential to most knowledge work, from product development to financial analysis to software engineering to sales and marketing. And the more complex the effort, the greater the need for clear processes. Far from making business less effective and agile, the increasing attention to process has increased effectiveness and agility.

Related post:

• Managing Innovation

ToC Conference Recap

Thoughts on TOCICO by David Anderson:

"Subordination happens first!" In the 5 focusing steps, the third step is to subordinate the rest of the system to the decision made in step 2 to fully exploit the capacity constrained resource. I had observed in my work with the XIT Sustained Engineering group (the subject of my paper for the conference), that the subordination actions always had to happen first before the constraint could be fully exploited. However, this is counter-intuitive given the order of the steps. As Eli reminded the audience, step 2 is "Decide what (and how) to exploit." This then leads to a set of subordination decisions which make exploitation possible. Subordination always happens first.

Related Posts:

• Management Science for Software Engineering (including David's presentation at the conference)
• ToC in UK Surgery
• Critical Chain, TOC Email List
• Theory of Constraints (ToC) articles
  

Lean Forest Products

On The Move
NRRI Forest Products promotes 'lean' manufacturing processes by Chuck Watson:

"Since U.S. furniture manufacturers typically had lead times greater than four to eight weeks, China could build and ship products to the U.S. within that same timeframe, for less cost."
...
His project team focuses on wood materials innovation and manufacturing, improvement in this vital industry, employing the lean manufacturing model initiated by Taiichi Ohno (Toyota)
...
A one-week "Kaizen Blitz" (overhaul) restructured the entire facility, he said. "We reduced the amount of floor space necessary by restructuring, retooling and discovering more efficient use of space,’ Benson said. "It changed the way we thought about our business."

Carnival of Lean Leadership #3

Carnival of Lean Leadership #3 from Evolving Excellence once again does a great job of collection links to posts worth reading, including:

• A big welcome to Norman Bodek, who has started his own blog, Kaikaku. Norman is well known for his Shingo Prize winning books. His first post is on Kaikaku and Kaizen as the "twin sisters" that can drive world class competitiveness.
• Six Sigma Blog adds to the holiday cheer with a post on "Thanksgiving Design of Experiments"... what is the most effective way to pop your popcorn?
• Curious Cat has a similarly themed post on productivity improvement from R&D and innovation.
• Slacker Manager has a post on "the Drucker paradox"... why are his ideas so widely read but so rarely practiced?

Each of the lean carnivals offer some great posts and reinforce the idea that there are great ideas being shared online. I also find it interesting how well represented lean manufacturing and lean thinking are. In the lean carnival that is not surprising but in the worthwhile management information online I have long been frustrated with how little good management improvement information was online.

The influence of the lean blogs in the last year has been remarkable. Prior to that there really was a small set of sites that provided excellent content and they often were lacking in various ways. The Center for Quality and Productivity Improvement (which my father, Bill Hunter, co-founded with George Box - so I am biased) has great reports but the site itself is not good.

The Center for Quality Management has a great journal online but stopped publishing it. The Institute for Healthcare improvement had some good info online but in the last year has made much more great material available.

I helped make some great material from the former Navy Total Quality Leadership Office available online as well as the Small Business Guidebook to Quality Management. And the Curious Cat Management Improvement library I believe is very helpful.

There were other good sites like Quality Digest, Poka-Yoke, Clemson University (Deming Electronic Network...) but overall it was very slow going over the last ten years for those seeking great management ideas online.

It seems to me the push from the lean community is greatly adding to the worthwhile management improvement material available online which is something I am thankful for.

Performance Transformation

Six steps to success - How to drive performance transformation by Gautam Kumra (India):

Other companies encourage "lean" thinking, which began as an automotive-inspired and assembly-oriented methodology but which today is as established in many financial processes, service industries and parts of the public sector. "Lean" projects depend not just on rolling out new techniques but on changing basic ways of working.

Process Leadership

Process Leadership by Daniel T Jones:

the most promising approach is to create a small team, led by a high potential executive, operating initially outside the normal departmental structure and reporting to the top. They must be free to challenge the conventional wisdom, the firm’s current assets and relationships. Their job is to evaluate the core value creating processes of the organisation from the standpoint of the customer, and to work out how to flow value to the customer smoothly and with minimum effort.

More lean thinking articles

The Economist on Drucker

Trusting the teacher in the grey-flannel suit:

He was a harsh critic of the assembly-line system of production that then dominated the manufacturing sector - —partly because assembly lines moved at the speed of the slowest and partly because they failed to engage the creativity of individual workers.

The biggest problem with evaluating Mr Drucker's influence is that so many of his ideas have passed into conventional wisdom "in other words, that he is the victim of his own success. His writings on the importance of knowledge workers and empowerment may sound a little banal today.

I look forward to the day when this next idea is conventional wisdom, and the practice stops:

In the late 1990s he turned into one of America's leading critics of soaring executive pay, warning that "in the next economic downturn, there will be an outbreak of bitterness and contempt for the super-corporate chieftains who pay themselves millions."

Superior Customer Experiences

Grow Your Business Through Superior Customer Experiences by D. Randall Brandt and Rodger Stotz:

In that study, Oakley found that there is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and improved financial performance. Employee satisfaction is a key antecedent to employee engagement. He also found that organizations with engaged employees have customers who use their products more, and increased customer usage leads to higher levels of customer satisfaction.

Managing organizations is a complex endeavor. Employee satisfaction is one factor in an interdependent system that a manager must consider. The challenge is managing the interactions. Most decisions will impact many different facets of the organization. How you weigh the competing desires for profit, pleasing customers, providing good jobs for employees, etc. is what management is about.

This is not a zero-sum game. Good managers grow the pie so all the stakeholders can get more benefit (customers, investors, employees...).

The Man Who Invented Management

The Man Who Invented Management, a cover story in Business Week on Peter Drucker.

Peter Drucker On Leadership

Peter Drucker On Leadership:

Effective leaders check their performance. They write down, "What do I hope to achieve if I take on this assignment?" They put away their goals for six months and then come back and check their performance against goals. This way, they find out what they do well and what they do poorly. They also find out whether they picked the truly important things to do. I've seen a great many people who are exceedingly good at execution, but exceedingly poor at picking the important things.

More on Peter Drucker:

• Management Guru Peter Drucker 1909-2005
• More Articles by Peter Drucker
  

Problems with Lean Manufacturing Awards

Dangers in Lean Manufacturing Awards from the Got Boondogle blog:

My simple understanding of lean principles is to focus on the pursuit of company survival for eternity with the elimination of waste while adding value for customers, enhancing quality of life for employees and contributing to society. The pursuit of lean manufacturing awards is not on the list of objectives.

Another good post from an excellent blog that is well worth reading. Much can go wrong when pursuing an award.

I am not convinced pursuing an award is definitely a bad idea. It might be that the pursuit of an award can help the organization focus. However, I also see the dangers and would have to guess in most instances it is less effective to pursue management improvement awards than just pursuing improvement of the organization.

A Great Day for Georgia-Pacific

A Great Day for Georgia-Pacific by Bill Waddell

The Koch people also said that G-P would be much better off not having to deal with "the distraction of quarterly reports" and they would be able to "execute strategic decisions much faster" if they did not have to drag Wall Street along with them.
...
They previously had been a Honda North America supplier, but have done so well they are going to sell automatic transmission shifters to Honda world wide, including in Japan. They have been described by one lean expert as "the poster boy for the Toyota Production System". Imagine that! A U.S. company - in Michigan, no less - supplying Honda in Japan. So much for lean not being enough and U.S. companies having to be lean and in China in order to turn a buck.

Lean Education Academic Network

Lean Education Academic Network, is a group of academic and industry people interested in bringing lean content into academic programs. The Leaneduc email list will send you announcements from the network.

From Exclusive Q&A with Jim Womack, Part 4:

We recently came across a new industrial engineering text from a major American publisher titled something like "Principles of Lean Engineering" in which the first chapter was about ... Economic Order Quantity! It got Jim so mad that he decided it was time to bring together all of the right-minded engineering faculty along with operations faculty from business schools to create the just-formed Lean Education Academic Network (LEAN). The idea is for right-minded faculty to share all of the existing teaching materials and then devise the kind of textbooks and teaching materials that should have been universally used years ago.

Conclusion of Jim Womack Interview

Interview with Jim Womack part 5 of 5 has been posted by the Lean manufacturing blog. Each part provide valuable insights, from part 4:

Toyota has recently said that it will now make a major effort to apply process thinking to dealer networks, probably beginning in Europe, and all of us who buy cars should wish them every success. We are making a major effort in this book to show how a totally different system of sales and service would work and we hope that a few dealers and then a lot will drink the Cool-aid.

from part 3:

Why should Dell (and Microsoft and…) just quit wasting the time of their premiums customers? If they could get their brains in gear, they could quit wasting the time of all their customers and save themselves a lot of money in the process. (But they would have to treat each customer problem as a kaizen opportunity, rather than just a nuisance to be disposed off at as low a cost as possible with an out-sourced, off-shored help line.)

Great stuff.

Management Pioneer Peter Drucker 1909 - 2005

Management expert Peter Drucker passed away at age 95. See: Peter F. Drucker Information from Claremount University and our previous post.

Here we list links to some of his work.

There is an excellent podcast of an interview with him on NPR (Peter Drucker - podcast interview) on management, the state of the world today and where we are headed. A profound view from Peter Drucker in his 95th year.

His revised edition of the Effective Executive is due out in January.

Post-Capitalist interview with Peter Drucker in Wired, 1993 (Post-Capitalist Society book by Peter Drucker):

International economic theory is obsolete. The traditional factors of production - land, labor, and capital - are becoming restraints rather than driving forces. Knowledge is becoming the one critical factor of production. It has two incarnations: Knowledge applied to existing processes, services, and products is productivity; knowledge applied to the new is innovation.

When you look at it that way, the last 40 years of economic history begins to make some sense.

Civilizing the City, Peter F. Drucker, 1998:

The 20th century, now coming to an end, has seen an explosive growth of both government and business -- especially in the developed countries. What the dawning 21st century needs above all is equally explosive growth of the nonprofit social sector in building communities in the newly dominant social environment, the city.

The Shape of Things to Come, Peter Drucker 1996:

The present people in organizations are still stuck in the 19th-century model of the organization. When big business first emerged throughout the industrial world around 1870, it did not emerge out of the small businesses of 1850 -- it emerged independently. The only model available, the most successful organization of the 19th century, was the Prussian Army...

The Prussians succeeded because they had created an organization. They were the first ones to use modern technology effectively, which in those days meant railroad and telegraph. Business copied the command and control structure of the Prussian army, in which rank equaled authority. We are now evolving toward structures in which rank means responsibility but not authority. And in which your job is not to command but to persuade.

Managing Knowledge Means Managing Oneself by Peter Drucker:

Every time you do something that is important, write down what you expect will happen. The most important decisions in organizations are people decisions, and yet only the military, and only recently, has begun to ask, "If we assign this general to lead this base, what do we expect him to accomplish?" Three years later they look back at what they had written. They have now reached a point where 40 percent of their decisions work out.

Peter Drucker: Mr. Management, Mike J. Brewster, Business Week, 2004.

ToC in UK Surgery

UK surgeon uses TOC approach to double capacity and eliminate waiting lists by Clarke Ching via Carnival of Lean Leadership II

First, he has identified himself - or surgeons in general - as the current system constraint:
...
Second, he's figured out how to exploit himself as the constraint - i.e. how to make him as efficient as possible:
...
Third, he's subordinated the other resources in the process to make sure he is as busy as possible:

Excellent post illustrating how Theory of Constraints can be used to analyze why an improvement is effective.

• Improving health care articles

Dell Ranked as Top Supply Chain - Toyota Sixth

The Top 25 Supply Chains for 2005, AMR Research:

Supply chain leaders are able to shape demand, instantly respond to market changes, and crush their competitors. According to AMR Research benchmarking data, leaders carry 15% less inventory, are 60% faster to market, and complete 17% more perfect orders.
...
The first component of the ranking is publicly available financial data, which comprises 60% of the total score: return on assets and inventory turns each accounts for 25%, and trailing 12 months’ growth accounts for 10%. The second component of the ranking is AMR Research’s opinion, which is 40% of the total score.

Related post: Dell's Supply Chain

Womack and Jones Webinar

The Lean Enterprise Institute is offering a free 1 hour webinar with James Womack and Dan Jones on November 15th at 2 PM (US Eastern Time).

Jim will deconstruct this broken consumer-provider-manufacturer model and show how to repair it using the six principles of lean consumption. The principles will be illustrated with examples of companies already leading the way from the age of mass consumption to the age of lean consumption and lean solutions.

Jim will also describe how the familiar value-stream mapping tool can be applied to consumption and provision streams to identify and remove enormous amounts of wasted time, human effort, and resources. It’s simply a matter of teaching everyone involved how to see the current state and how to envision a much better future state.

Related:

• Lean Solutions: How Companies and Customers Can Create Value and Wealth Together by James P. Womack and Daniel T. Jones.
• Lean Manufacturing Webinar

Eight Essential Tools for Six Sigma

Eight Essential Tools by Ron Snee, Quality Progress:

In my experience, eight tools are used most frequently in Six Sigma projects - all eight use statistical thinking and methods. The tools are: process maps, cause and effect matrices (CE), failure mode and effects analysis (FMEA), measurement system analysis (MSA), process capability studies, multi-vari studies, design of experiments (DOE) and process control plans.

Ron is the co-author of 2 excellent books on Six Sigma:

• Six Sigma Beyond the Factory Floor: Deployment Strategies for Financial Services, Health Care, and the Rest of the Real Economy by Ron D. Snee and Roger W. Hoerl, 2004.
  
• Statistical Thinking : Improving Business Performance by Roger Hoerl and Ronald D. Snee, 2001. A great book on how to apply statistical thinking to improve business results. More details on Statistical Thinking.

and many articles:

• More articles by Ron Snee

Lean Hospitals

Hospitals Turning Into Lean Machines by Megan Myers:

The push toward adopting more efficient strategies in health care largely stems from a crucial need to reduce health care costs.

In 2002, health care expenditures in the United States were $1.6 trillion, or 14.9 percent of the nation's gross domestic product.

Meanwhile, studies have estimated between 30 percent and 60 percent of the costs of providing health care services is waste.

To cut that waste, hospitals are looking at their organizations from a patient's perspective. That means breaking down the systems and starting fresh.

• Lean Principles in Health Care
• Saving Lives: US Heath Care Improvement
• Health Care Improvement Links
• Health Care Improvement Articles
  

Communication Failures Impact Quality

Outsourcing Communication Impacts Quality by Kevin Meyer:

She immediately knew what I was talking about, and said that it has been a problem for about six months. The margin at the bottom of the statement is about an eighth to a quarter inch too wide, thereby pushing the address upwards. Unfortunately she didn't know if and when it was going to be resolved, but after some friendly prodding she gave me a number at their corporate customer service center in the United States.

Read the rest of the post, it is a good reminder of the failures that are far too common in companies today. Even with improvements there is still so much poor service that those helping companies manage more effectively are nowhere near running out of opportunities to improve.

Lean Manufacturing: The 3rd Generation

Lean Manufacturing: The 3rd Generation by David Drickhamer:

A Toyota executive recently attributed the company's long-term success to "brilliant process management." Such processes are everywhere in business, including office and administrative work, areas where Toyota itself is working on how to extend TPS thinking. This is where Couch invokes TPS2, or "business-process kaizen," and the challenge of dealing with non-physical inputs and outputs and much longer time frames than on the shop floor, such as the three-year product development cycle. Just as kanban cards are a method for transforming intangible information into a physical form, office applications of lean make work and information flow more visible.

Lean Manufacturing in Forest Products

Lean Manufacturing - An Idea Whose Time is Coming to Forest Products? by Thomas G. Dolan

In fact, while many understand the basic concepts and have tried various implementations as quick fixes to problems, most miss its full and lasting potential. The full capability of the lean philosophy involves creating a culture of observing and learning and an ability to implement, to innovate, and to continuously improve.

More lean thinking articles.

Dell's Supply Chain

Two articles on Dell's supply chain.

Living in Dell Time by Joshua Lutz:

The aftershocks of the port closings reverberated for weeks. Many companies began to question the wisdom of running so lean in an uncertain world, and demand for warehouse space soared as they piled up buffer inventory to insure against labor unrest, natural disasters, and terrorist attacks. But for Dell, the episode only reinforced the value of living on the knife's edge.

Inventory Decisions in Dell's Supply Chain by Roman Kapuscinski, Rachel Q. Zhang, Paul Carbonneau, Robert Moore and Bill Reeves:

Many components lose 0.5 to 2.0 percent of their value per week, and a supply chain packed with yesterday’s technology is nearly worthless. With its direct sales, however, Dell carries very little inventory: the whole organization concentrates on speeding components and products through its supply chain. Dell delivers new products to market faster than its competitors and does not have to sell old products at a discount, because it has none.

Dell's stock has been taking a beating recently, but I remain positive on the second to worst performer 10 stocks for 10 years post. Just over 6 months since the post Google leads the pack up 77% (Toyota is next up 27%) while Pfizer and Dell are down 19% and 17% respectively (the only other decliner is Cisco down .5%).

Toyota Supply Chain Ideas for Big Box Stores

Teaching the Big Box New Tricks - What Toyota knows about supply chains - and how to apply it to almost anything, even megastores - from Fortune.

At the RDC, cola is now received directly from the supplier's bottling plant in wheeled dollies. They are rolled directly from the supplier into the delivery truck to the stores. And once at the stores, the dollies are rolled directly to the point of sale, where they take the place of the usual sales racks. This innovation eliminates several "touches," in which employees moved cola from large pallets to roll cages, to the stores, and then onto dollies to reach the shelves, where they were handled one last time. (In drawing their provision-stream maps of the original process, Tesco discovered that half its cost in operating this provision stream was the labor required to fill the shelves in the store.)

Based on material from Lean Solutions: How Companies and Customers Can Create Value and Wealth Together, by James P. Womack and Daniel T. Jones.

Articles by James Womack

The 10 most important business developments

The 10 Most Important Business Developments by Cameron Crotty, relating to the semiconductor industry:

The Quality Revolution

The competitive pressure sparked a surge of quality initiatives throughout the U.S. chip industry, all based on statistical process control and the concepts of continuous improvement pioneered by W. Edwards Deming: Six Sigma at Motorola; Copy Exactly at Intel; and Total Quality Management, which was first introduced by the U.S. Department of the Navy. It also provided a jump start for the field of yield management, which turned out to be perfect timing for a pair of companies founded in 1976: KLA and Tencor.