The Idea Generator: Quick and Easy Kaizen

The Idea Generator: Quick and Easy Kaizen

* The best people to ask about how to improve how work gets done are the people who do the work not the people they report to.
* If you can create an environment that allows people to feel that offering ways they can improve their own method of working without fear of being seen as a critic, heretic or fool you will get a lot of creative input.
* Impose the constraint the the change must be something that the person can do themselves, to improve their own way of working.
* Make it clear that it's okay if the change does not work as expected.
* Make it clear that we learn more from analyzing why something did not work than we do from analyzing why something did work.
* Encourage people to try something else if the first suggestion does not work.
* Encourage people to write down their suggestions.
* Implement a system that reviews and says yes/no to the suggestion within one working day of it being written and submitted.
* Keep all the suggestions and their effects in a location where everyone can see them and learn from both the items that worked and did not work.

"Nearly all companies do not work like this. Most companies pay lip service to the intellectual capital of their staff.

- Every Pair of Hands comes with a Free Brain -

Treat your people with empathy and respect and you will nearly always be surprised at how well people respond - it's amazing but they might even start treating you with empathy and respect as a result"

- review notes summarized from Digby Christian

Extreme Toyota p 150 - 157

Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer
Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

A good team is not a cozy team
Those providing feedback should complain, and the others should listen sincerely, and then we have a friendly fight – both sides have the same goal

The 1st item on my list of priorities is to make this an organization where nobody hides concerns or problems and where constructive discussion takes place routinely. Without such discussion people will tend to let problems slide with slapdash solutions that barely scratch the surface.

Authority, responsibility, and accountability reast with the person, not a title or years of seniority

Title and rank are irrelevant in discussions of quality. Confronting your boss is acceptable. Bringing bad news to the boss is encouraged. Ignoring the boss is excused in the process of coming to the right decision.

There’s nothing that’s decided in a top down manner. No matter what, if it’s too bizarre, employees either modify the msg or will not accept it (silent rejection).

There will always be differences of opinion in important matters between HQ and the local operations. In those instances, we shouldn’t blindly follow HQ, but do what we believe is right even I f it might cause friction.

Pricing is often a point of conflict between the local operation and HQ, but viewed positively, the back & forth on pricing is a healthy process of information exchange that leads to deeper understanding of the situation.

There are no reprisals if local operations ignore HQ’s advice or if subordinates disobey orders from their supervisors, refusal to listen to others is a serious offense. Listen thoroughly to everybody’s opinion is our calling.

However visionary the people at the top may be, it’s the people at the bottom who have the actual information about what can and cannot be done; where all essential information is processed and frontline employees make the judgments that take into account local conditions and the opinions from the top

…continually questioning and probing to find the better way

People rarely reach senior positions if they are the preacher type (someone who doesn’t listen to others).

Established association to foster consistency in advertising on national television, regional papers & local radio stations sponsored by local dealerships. – contrast to past practices of advertising in stages, 1st by the manufacturer, then distributors & finally dealers.

Extreme Toyota p 100 - 150

Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer
Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

Gen Y
These consumers, especially women, are more educated than any previous generation; more ethnically diverse; more than 1/3 nonwhite; and optimistic about their income prospects including economic support from parents.

Their overexposure to contemporary marketing techniques makes them more demanding as consumers and more skeptical than other generations about the messages in television commercials and magazine advertisements. They are also more sophisticated in their awareness of technology and their expectations of design, quality & safety stds in a car. The car is a symbol of self expression for more people than is was for previous generations.

Capturing the interest of this highly attractive segment was not easy; This demographic strived to be different, not only from previous generations, but from one individual to another. Is also demanded to be entertained and to be given an opportunity to explore, while expecting hassle free products and services in addition to the usual product performance criteria. Innovation was the order of the day. Rethink the conventional business model in all respects.

For the 1st time in its history, the Toyota Engineering Department shared vehicle drawing with the Specialty Equipment Marketing Association in the US before launch to encourage independent accessory manufacturers and tuners (who modify cars) to develop accessories.

The Global Kn Center makes a repository of best practices worldwide available; it encouraged distributors around the world to use its educational programs, but the decision to do so is up to each distributor.

By not forcing the adoption of specific practices, they ensure distributors retain the flexibility to use the documented best practices as they best see fit; allowing local best practices to grow into global best solutions tailored to each local market.

The company’s relentless pursuit & dissemination of the values
Founders 4 Philosophies
1) Tomorrow will be better than today
2) Everybody should win
3) Customer 1st, dealers 2nd, manufacturer last
4) Go & see things for yourself, first hand

Toyota has persevered through hardship, and over the long term, b/c of a naivete in the mindset of people who see obstacles only as challenges; they genuinely believe that they can overcome all obstacles.
Hence, obstacles become a source of power to energize people, who are, by nature, optimists at heart. This naïve optimism leads the co. to set impossible goals, and it has been passed down from the founders of Toyota, whose slogans are filled with this spirit of naivete and optimism.

“Endure a 100 times, strengthen yourself a 1000 times, and you will complete your tasks in short order.”

“To do what you believe is right, to do what you believe is good, and doing these things right then and in a way is a calling from on high. Thus, do it boldly, do as you believe, do as you are.”

The point is, you have to be brave and persevere whether there is opposition or not; you have to think hard and come up with solutions until you succeed, and once you have done your best, most thorough work, you will find things turning on their heads, and that becomes a source of power.

Continuous improvement is the habit of wanting to do a little better every day by eliminating waste and continuously becoming more efficient. It is an attitude of never being satisfied with the status quo, which is why you persistently conduct experiments.

We must discard our narrow elf interests and endeavor to serve the greater good. Neglect your duties and you’ll bringruin upon yourselves; fulfill your responsibilities and you’ll find yourselves enhanced. If each person makes the most sincere effort in his assigned position, the entire co. can achieve great things.

To contribute to society through ( the manufacturing of automobiles).

Factory workers as Knowledge workers
There is a wisdom of experience which can only be gained on the factory floor; expect every assembly line worker to direct their wisdom toward originating ideas for imrpvoing base costs, quality, and safety.
The job of the line manager is to create an environment in which line workers easily make suggestions and are supported to implement those suggestions.

We understand that we are just not all that smart; we have to work very hard. We have to rely on other people to do the very best job they can, every day of the week and every month of the year, in order for us to achieve mutual success.

Customer 1st, dealers 2nd, manufacturer last:
The priority in distributing the benefits of (_____) sales should be in the order of the customer 1st, the (_____) dealer, and lastly manufacturer. This is the best approach for winning the trust of customers and dealers and ultimately brings growth to the manufacturer.

The contribution of the team is greater than the sum of the contributions of each individual

One team, one aim, working together

Every team member has the responsibility to stop the line each time they see something that is below standard. That’s how we put the responsibility for quality in the hands of our team members. They feel the responsibility for quality in the hands of our team members. They feel the responsibility; they feel the power. They know that they count.

Who do you think is paying your salary? The company is not. It’s the customers. They buy our (_____), and the company uses that $ to make the next car than then sells it. Your salary comes from that transaction.

Since it’s the customer who pays our salary, our responsibility is to make the prouct they want, when they want it, and deliver quality that satisfies them.

Lexus Covenant:
Do it right from the start by providing the finst car ever built with the finest sales network, treating each customer as though they were ‘a guest in our home.’ Every dealer, mgr, & associate had to sign on the covenant, and it became common practice for all everyone to sign it once their training became complete.

1st Lexus recall
- each reported failure had occurred only once, without incident or injury; decision made to recall
- all 8000 car owners were sent letters signed personally
- production of replacement parts was ramped up & service personnel were trained
…proceeded to pick up every car directly from each owner’s home, providing a free replacement car. The repaired car was returned washed and with a full tank of gas. For customers in Alaska, personnel from the nearest area office made house calls by plane to make the repairs. All repairs were covered by Lexus, and completed in 20 days.
- dealers were thanked for the recall

If you have not seen something 1st hand, then your view of that thing is not credible. Top execs are the 1st to ask ‘have you seen it?’

Root causes of problems are revealed by on site investigation & inquiry.

Command respect by walking the talk

How can you expect to do your job without getting your hands dirty.

Try to solve problems with your own hands.
Before you say you can’t do something, try it
Never try to design something without 1st gaining at least 3 yrs hands on experience.

5 why’s

1) Why did the robot stop?
B/c the circuit was overloaded, causing a fuse to blow

2) Why was the circuit overloaded?
B/c there was insufficient lubrication on the bearings

3) Why was there insufficient lubrication on the bearings?
B/c the oil pump on the robot was not circulating sufficient oil

4) Why was the pump not circulating sufficient oil?
B/c the pump intake was clogged with metal shavings

5) Why was the intake clogged with metal shavings?
B/c there was no filter on the pump

Everybody know everything

The culture of communication is open & personal
Info flows freely up and down the hierarchy and across functional & seniority levels, extending outside the org. to suppliers, customers & dealers.

Personal relationships are of primary importance.
Email cannot replace real, human communication in the flesh. This requires cultivation of the skill of listening intently to all opinions in an environment of free and open exchange & in face to face interaction.
The result is an accumulation of relationships in an analog web that in many ways outperforms even the most advanced computer.

How the nerve system enables everyone to know everything

1) Open and lateral dissemination of know how
2) Freedom to voice contrary opinions
3) Frequent face to face interaction
4) Making tacit knowledge explicit in the Toyota way
5) Formal and informal organizational support mechanisms

Yokoten – unfold or open sideways

Give credit to the person or unit that came up with the idea 1st, but it is okay to steal best practices from others or have our best practices stolen by others.

Create an open and flat environment by having everyone work together in a large room with no partitions. (obeya)

Visualization (mieruka)

Posting all information on the walls helps improve communication, and b/c we’re human, if we share a common awareness of the issues, we will move in the same direction.

Everyone has to feel free to voice contrary opinions to top management & headquarters.

Extreme Toyota p 50 - 100

Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer
Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

- you will never accomplish anything if you only harp on the risks

- let’s give it a try
- don’t be afraid to make mistakes
- initially we may experience some setbacks in entering the market, but all the time we’ll be gaining precious experience and gradually improving our business performance
Plan - develop an action plan
Do – put solution into action
Check – verify results
Act – make necessary adjustments to the action plan & solutions

- problem solving is considered to be a critical capability that is implanted in all employees early in their careers through vigorous training

- until employees 10th year, repeatedly administer a 3 stage training process designed to develop problem solving skills

- learning to solve problems well is the absolute minimum requirement for success
- Toyota Business Practices (TBP) 8 step process

1) Clarify the problem
2) Break down the problem
3) Set a target
4) Analyze the root cause
5) Develop countermeasures
6) See countermeasures through
7) Monitor both results and processes
8) Standardize successful processes

- the most practical way to realize mission impossible is the think deep but act small, taking measured steps & never giving up
- different from other is the way it thinks in this process and organizes it

• Think of the ”objective of the objective”
• Break down large, complex problems into smaller or more concrete problems
• Start small and take incremental steps
• Repeat experiments even if they fail
• Institutionalize successful practices
• Continue to raise the standard

Author: Date:
Objective of the Objective

- most important step to clarify the problem
- involves clarifying tha ultimate objective in relation to the more immediate aims
- objective should have public & society in mind, otherwise managers ask things like “Do you really expect to be a full fledged member of this company with the kind of objective you’re written down?

- considered critical every function in the project be represented & local operations understand all potential problems they might encounter

- ignore established customs & routines & concentrate on creative innovations

p 83
- Fireside chat meetings; face to face
- started as meeting between heads of Division and dealers to ease the minds of dealers by disclosing the company’s plans for surviving a crisis
- a candid exchange of opinion in small groups was very effective as a method of communication building relationships
- these practices were not made official, but sharing them as recommendations allwed Toyota to gently institutionalize such successful new practices while ensuring dealers the freedom to discover what worked best for them

- many company’s do not put enough time & effort into embedding effective new practices into their processes

- Once we solve a problem and reach a nedw level we have to raise our standards, otherwise they deteriorate as the environment changes and new problems arise… When new problems suddenly become visible, we have to reconstruct our indicators and renew our objectives [and raise the bar].

- Before you say you can’t do something, try it.
- An engineer who has the ability to criticize but does not take action is not able to make ____.

- failure is viewed as an everyday event at the company – a mechanism for learning
- you have to fail to progress
- when something goes wrong it is viewed as an opportunity to take corrective actions and learn
- if you’re 60% sure, take action
- taking action and not succeeding is okay because doing nothing is worse
- expensive learning lesson

- consider that those who did not succeed with one set of circumstances might succeed with another
- rely on results of experimentation to learn what works and what doesn’t but this process cannot succeed if employees feel they have to hide bad news or fabricate positive results.
- Encourage all employees to admit problems exist, make them visible and see them as opportunities for improvement, to identify their root causes and take concrete countermeasures to prevent problems recurring over the long term

- data is important, but put the greatest emphasis on facts; (data can be skewed)
- saw these practices no only as a motivating force, but as a duty of employees that enable the company to be of service to humankind. The ultimate purpose was not only to make $ but to do good for society

5 Main Principles of Toyoda

1) always be faithful to your duties, thereby contributing to the company and to the overall good
2) always be studious and creative, striving to stay ahead of the times
3) always be practical and avoid frivolousness
4) always strive to build a homelike atmosphere at work that is warm and friendly
5) always have respect, and remember to be grateful at all times

- one of the recent presidents carries a sheet with him listing the principles and makes reference to them in his speeches

By their nature, experiments at the outset draw more naysayers than believers b/c there is no assurance of success.
PCDA, 8 steps, A3

Local customization provides an outlet where local employees can direct their creative energy toward “satisfying the specific needs of customers and fulfilling the aspiration of growing local business.”

Local customization comes 1st, followed by model integrations, shared platforms, and common parts to reduce complexity. Not the other way around, nor at the same time. Global co. who choosing 1 optimal solution may be very efficient but sacrifice the creative potential of employees in local ops.

Extreme Toyota p 1 - 50

Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer
Extreme Toyota: Radical Contradictions That Drive Success at the World's Best Manufacturer

Emi Osono
Norihiko Shimizu
Hirotaka Takeuchi

P 3
Hard Side of Toyota: Toyota productions system, allowing the manufacture of higher quality, more reliable products at lower cost; and faster response to fluctuating market demands in meeting current orders and faster product development cycles.

Soft Side
Practices related to HR, culture
- a shift from the industrial (focus on lines, machinery, automation) society to the knowledge (smarts in people) society; growth depends not just on operational efficiency but also people and org. capability
- Toyota positions people at the center of all things.
- Factory workers accumulate wisdom from work on the lines; ideas come from anywhere, even outside the firm

• Toyota’s mgmt is predominantly male & Japanese & they have no plans to relocate their head office from rural setting to central Tokyo
• Many people attend Toyota meetings, including several who do not participate in the discussion, and many whose responsibilities bear no relation to operational or financial performance. In its sales org they deliberately assign more employees to regional offices than other auto co.
• Structure is formal & bureaucratic; many top execs are inaccessible to middle mgrs. & reflective of rigid hierarchies in Japanese culture
o Visitors meeting a middle mgr wear a visitor badge 7 receive a 35 degree bow from reception
o Meeting with an exec means no badge & a 90 degree badge
• Up and In culture – instead of our rise through the ranks or pushed out. Employee retention is high & employees work hard & compete with each other.
• No clear strategic focus. They seem to try anything & everything to stay ahead of all the others, and tries to be good at all of it.

- the company actively embraces and cultivates contradictions instead of passively coping with them
- we are constantly confronted with 2 opposing propositions, sometimes 3, sometimes 4. It is a way of deliberately introducing a positive level of tension into the workplace on a regular basis. Each organizational unit avoids making any kind of compromise and we argue it out till the end across the units.. This process ensures that we come up with the best solution.

1) Moving gradually and also taking big leaps

Content is accumulated gradually, over many years, however the results enable the company to make great leaps forward

2) Cultivating frugality while spending huge sums (R&D, manufacturing facilities, brand equity, dealer networks, HR development)

3) Operating efficiently as well as redundantly

Toyota holds a lot of meetings attended by a lot of people, many of whom do not participate in the discussion.

4) Cultivating stability and a paranoid mindset

Constantly hammer in messages like “Never be satisfied”
“There’s got to be a better way”
“Reform business when business is good”
- doing nothing and changing nothing is the worst thing to do in the new century
“No change is bad”
Creating a list of high expectations, some which may be close to impossible to conceive.

You have to put your life on the line in order to make something good. If you compromise in the process, nothing good will come of it. If you listen to this person’s and that person’s opinion, your spiky horns get dull. You have to keep sharpening your horns.

Seize every opportunity to instill an atmosphere of urgency.

5) respecting bureaucratic hierarchy and allowing freedom to dissent

The voicing of opinions contrary to those of top management or headquarters is an everyday occurrence.
Dissenting against your bosses, not blindly following their orders, bringing bad news to them and generally not taking them too seriously are all permissible behaviours.
Voicing concerns about the status quo does not illicit any fear or stigma about bad mouthing the company.
They portray confidence they are doing the right thing by providing constructive criticism.

6) Maintaining simplified and complex communication
Constantly describe yourself in easily understood terms. A3.

Relentless focus on the human being as the center of production and consumption drives continuous success.

Taylorism – management scientist Frederick Taylor prescribed scientific methods & procedures such as time and motion studies to eliminate conflict and contradiction in the workplace and increase efficiency on the factory floor.
- learning by doing and being forced to reconcile our unique perspective with those of others who disagree with us

6 Opposing Forces driving the company’s expansion, and keeping it from breaking apart:

Expansive Forces
1) Impossible Goals
a. Solutions should be found that are not compromises or an easy way out of conflicting demands but is optimal
2) Experimentation
a. Includes 8 step problem solving process, the practice of defining objectives and breaking down complex tasks using A3 analysis, and the institutionalization of new practices in the organization
3) Local Customization
a. Customizes its products and operations to match the level of consumer sophistication in each locale

Integrative Forces
4) Founders’ philosophies
a. Continuous improvement mindset/kaizen
b. Values of respect for people and their individual capabilities
c. Teamwork
d. Humility
e. Putting the customer first
f. Seeing things first hand/genchi genbutsu
5) Nerve system – open communication, cross training of knowledge to ensure everyone knows everything
6) Up an in
a. Performance evaluation assess the ability to handle issues creatively, resilience, and trust from other employees/jinbo

- the six forces keep the company in a state of disequilibrium, where contradictions coexist generating healthy tension and instability.
- all companies facing a shortage will carefully and creatively allocate them to maximize returns. Danger lies in overabundance of resources.

- setting goals that seem difficult or even impossible to achieve, pushes beyond conventional practices and drives continuous reinvention & growth

p 44
The #1 enemy is it’s own success, causing people to coast and not move to the next challenge, stay on top of things, challenge the current situation, or doing anything that might disturb the current success in the efforts to gain future success. What are you going to do next?

- the essence of strategy is choosing what not to do

Career Scarevertising

"Life’s too short for the wrong job" the message of this brilliant ambient campaign by, a German job search portal.

Think about the interaction in this guerrilla marketing campaign. What's the impact for those looking at themselves in the mirror in the cape.

The campaign, by Scholz and Friends, won Gold at the ADCE Awards 2008.

More marketing stuff at

Jim Fannin Radio Show with Jim Murphy

Follow this link

- performance coach to collegiate, professional, and Olympic athletes in multiple sports, as well as a business turn-around specialist and motivational speaker


90 Second Rule

I would think this also applies to interactions with everyone, including staff & employees. Thanks to Jim Fanninn:

If you’ve been away from someone you care about at least 2 hours, the next 90 seconds have a bigger impact on them than spending hours and hours on them later. Walk in the door and be fully engaged in the moment. Regardless of your day prepare to focus your energy toward the people that matter most. See their every facial and hand gesture. Hear every voice tone or inflection.

give them my full attention for at least a few minutes.

Truth Behind Lean Success

You must turn it over to the people who do the work. Train them
and then let them run. The lean leader’s job is less command-and-control.
Set policy deployment, the targets, and turn it loose. Provide
the resources and — another big part of the job — take away the
obstructions and obstructive people.
The antithesis is when leadership is focused on posturing and
gaining status, engaging in “smart speak,” with executives talking to
one another and never really getting their hands dirty.

I believe it takes 30 kaizens to understand, 60 to lead, and 120
to strategically integrate the process from front to back.

Being lean is not a competitive advantage. It’s not an end state.
The competitive advantage is lean momentum: Are you moving
faster than your competitor and faster than the market. That’s the
competitive advantage.

Excerpts from "The Truth Behind Lean Success

Leadership & Strategy First

Approach summary on a website recently visited,

Our approach to helping clients’ transform their businesses rests on recognizing three vectors for change:

1. Leadership.

2. Strategy.

3. Operational and process excellence.

Leadership is where it all starts – where executive leadership sets the vision and establishes the purpose and direction of the business.

Strategy is the means whereby leadership has identified how the business will establish a competitive position in the marketplace and serve its customers from a position of strategic advantage.

Operational effectiveness builds the system and process capabilities required to satisfy the corporate strategy.

A key difference in our approach is our recognition that direction is needed before speed and quality. There is no point in having excellent speed and quality operationally if it is achieved with the wrong products and services targeted to the wrong markets and customers.

Decision Making

Human beings are hard-wired for bad decision making in complex situations.
We hone in on answers before examining all the facts, and then seek evidence to confirm our answers.
We are adversely influenced by emotion, loyalties, and group think.
However, decision making can be improved when we encourage conflict and question our assumptions.
A devil’s advocate review should be built in early to the strategy process, and again at the key design stages and when near completion for a last chance to review the full strategy.

Execution over Ideas

The big idea is LESS important than good execution.
Most think that the big, NEVER BEFORE TRIED, idea is more important but there are lots of companies that do very well with good execution of fairly mundane things.

The only thing that is in infinite supply is ideas; There are probably more than 25 million smart Americans in their basements at any one time trying to come up with the next bid idea (like, say, Google). They are generating a huge volume of new ideas; that tends to suggest, in economic terms, a surplus of ideas while the skills to implement them are in much shorter supply and, hence, the latter will generally attract a higher price.

The market for new ideas, such as it is, tends to put a low price on them (just try to sell your BIG IDEA at a business model stage and you will see: a) how hard it is to do that and b) just how little you will get for it). Obviously, a startup that combines some type of innovation with good execution is better off than one with just sound execution.

Lean Thinking p304 - end

Lean Thinking

P302 - end

- gambles on product technology are unnecessary as long as the company can quickly match any successful innovation by more daring competitors. Toyota can quickly copy the products others pioneer and win decisively because it continues to pioneer brilliant processes its competitors have taken halting steps to copy.
- may of the most effective change agents succeed in the long term because there is someone behind them putting a rigorous system of lean processes in place, someone who can take over and push improvement continuously ahead when the change agent leaves or moves on to other issues
- for firms with access to a master sensei, invest early in systematically writing down the knowledge of the sensei and inquire about the big picture before too many process kaizen events are lined up. [the sensei has a detailed master plan of how all the parts will eventually fit together to create a complete lean production system, not usually revealed at the outset. Initially the most valuable aspect of the sensei’s exercises is the raised consciousness of the managers involved in the change process and their enthusiasm for tackling other problems using the knowledge they are slowly acquiring.]
Map your Value Stream
- The objective in each case is to write down all of the steps in the process as it currently operates to define what we call the Current State. For each step we urge managers to ask a set of very simple questions. Dows the step create value for the customers? Is the step capable? (Does it produce a good result every time?) Is it available? (Can it produce the desired output, not just the desired quality, every time?) Is it flexible? (Can it be changed over quickly from one product to the next so that items can be produced in small lost or even lots of 1?) Is capacity for the step adequate so the product doesn’t need to wait on the process? Or is there too much capacity (due to designing equipment in large increments of capacity based on demand forecasts that are often wrong?)
- Steps not creating value should be eliminated; steps that are incapable, unavailable, inflexible, inadequate and under or over capacitized should be perfected. The relation between the steps is also important. Does the information coming back from the customer flow smoothly without delays? Does the product moving toward the customer flow at the desire of the customer rather than at the push of the producer? Is demand levelled at each stage so small perturbations are smoothed rather than amplified?
- By writing down all the steps as a team, it’s possible for everyone to see the whole value stream under discussion and to agree on its current level of performance

Scan p317

- the current state summarizes the performance of the steps, shows the inventory currently accumulating between them, compares value creating time (very small) with total throughput time (large), and helps managers envision the initial flow kaizen needed to drastically compress the through put time for the product, eliminate wasted steps, and rectify quality, flexibility, availability, and adequacy problems.
- In this case, the specific steps required are to improve the capability (1st time quality), availability (uptime), and flexibility (changeover time) of the 4 weld and assembly steps and to eliminate inventories impeding flow by turning the 4 steps into a cell. Setup times of the stamping press are greatly reduced to permit the production of much smaller batches, further reducing inventories.
- The Material Requirements Planning (MRP) system previously giving production orders to every step in the process is disconnected, replaced by a simple pull system sending kanban signals from the heijunka box (demand levelling device) at precisely paced intervals.

Scan p319

- It is always possible to make further progress by designating the future state, once achieved, as the new current state and beginning the improvement cycle again.

Scan p 320

- to get the attention of self-absorbed functions, it can be helpful to change reporting arrangements and move personnel under a product line manager or team leader, at least for one product generation.
- More mature lean firms get brilliant results from giving the value stream manager complete responsibility for the value stream and the success of the product but hardly any direct reports or traditional authority.
- Instead the value stream manager develops the vision for the product, determine the current state of the value stream and envisions the future state. He treats the functions as the suppliers of the essential inputs (engineering, operations, purchasing, sales, lean knowledge) needed to reach this state. If the function fails to perform, the value stream manager goes directly to the COO or director of the office of value steam managers to describe the problem, get to the root cause and install a fix
- Product line manager overseeing an entire product may work with a number of value stream managers at lower levels taking responsibility for different courses of the value stream. For example, a chief engineer (toyota’s term for a product line manager overseeing an entire automotive platform) works with a development leader in design, a value stream manager in the assembly plant, and value stream managers in each of the component plants working on major items assembled into the finished product. Each manager is essentially doing the same job but with varying scope – wide at the top and narrow at the bottom.
- With mature lean firms, the value stream manager is the critical player in the org. Once the functional departments are enlightened, it is not needed to change the organizational chart and move people onto product teams for each new product family. Instead, the value stream manager explains to the functions what they need to do as his suppliers to ensure the success of the product. And they do it
- Lean promotion function should be created to house the functional expertise from old fashioned industrial engineering, quality, and maintenance departments. Once differing vocabularies and professional rivalries are stripped away, all these experts are in pursuit of the same goal: the perfect process.
- The challenge is to create a dialogue between all experts so the value stream manger gets consistent, quality advice in a single voice.
- The lean promotion office should be small, except for periods when excess employees from line jobs are being redeployed and put to work on short term kaizen projects. It needs only a few experts who are willing to master all the knowledge and methods needed to create perfect value streams and to teach this knowledge, as necessary, to value stream managers and line employees.
- When you’ve fixed something, fix it again.

Policy Deployment
- forces you to make decisions about what is really most important for the organization and what is truly achievable. It also exposes the contradictions between the plans of every unit of the organization as these affect the other units.
- It can only be led by the senior executive
- The actual plans emerging from policy deployment exercises have been found to be good for about 3 months only. Remember a principle: a value creation system must be flexible and responsible because forecasts are always wrong.
- Planning is invaluable but plans are worthless.
- Going through the process forces everyone in the organization to understand the needs and constraints of everyone else and greatly heightens consciousness about the most promising future path even if the specific course of action chosen during the process needs frequent modification.

Scan p328, 330, 331, 332

- locate engineers next to the point of production to gain the many benefits of co-location

Lean Math

Think about the location for producers currently in high cost areas.

- start with the piece part cost of making your product near your current customers in high wage countries
- compare this # with the piece part cost of making the same item at the global point of lowest factor costs, probably dominated by wage costs. (the low factor cost location will almost always offer a much lower piece part cost)
- add the cost of slow freight to get the product to your customer.

This completes the math many purchasing departments seem to perform a.k.a. mass production math.
For lean math add some additional costs to piece part plus slow freight costs to make the calculations more realistic:

- the overhead costs allocated to production in the high wage location, which usually don’t disappear when production is transferred. Instead, they are reallocated to remaining products, raising their apparent cost.
- The cost of the additional inventory of goods in transit over long distances from the low wage location to the customer.
- The cost of additional safety stocks to ensure uninterrupted supply.
- The cost of expensive expedited shipments (you’ll need to be careful here because the plan for the item in question will typically assume that there aren’t any expediting costs, when a bit of casual empiricism will show there almost always are)
- The cost of warranty claims if the new facility or supplier has a long learning curve.
- The cost of engineer visits, or resident engineers at the supplier, to get the process right so the product is made to the correct specification with acceptable quality.
- The cost of senior executive visits to set up the operation or to straighten out relationships with managers and suppliers operating in a different business environment. (this may include all manner or payments and considerations, depending on local business practices)
- The cost of out of stocks and lost sales caused by long lead time to obtain the correct specification of the part if demand changes
- The cost of remaindered goods or of scrapped stocks, ordered to a long range forecast and never actually needed.
- The potential cost, if you are using a contract manufacturer in the low cost location, of your supplier soon becoming your competitor

These additional costs are hardly ever visible to senior executives and purchasing managers who relocate production of an item to a low wage location based simply on piece part price plus slow freight.

3 more costs to complete lean math, which are hard to calculate but sometimes very large:

- currency risks, which can strike quite suddenly when the currency of either the supplying or receiving country shifts
- country risks, which can also emerge very suddenly when the shipping country encounters political instabilities or when there is a political reaction in the receiving country as trade deficits and unemployment emerge as political issues
- connectivity costs of many sorts in managing product handoffs and information flows in highly complex supply chains across long distances in countries with different business practices.

Lean Math typically says products fit into 1 of 3 categories:

- for products where rapid customer response can substantially raise sales and selling prices (probably including the higher end shoes produced by the firm just mentioned), work hard to conduct every step of the production process as near the customer as possible. In many cases, the full application of lean techniques to production steps that are located immediately adjacent – a process we call value steam compression – can produce an acceptable combination of higher revenues and lower costs in a high labour-cost location

- for products that are more price sensitive but where rapid customer response is stell important, to co-locate all steps in the design and production process – that is, complress the value stram including engineering –at a low labour cost site within the region of sale. For US & Canada – Mexico, Western Europe – Eastern Europe. By using trucks, which are fast and cheap, rathe than boats, which are cheap but slow and often require fast but expensive airfreight backup to deal with inaccurate forecasts, it is steill possible to replenish products in 2 or 3 days as they are sold or consumed rather than waiting weeks or maintaining large just in case stocks near the customer.

- Finally, for commoditized products that have a fairly high value to weight ratio and where demand can actually be forecast due to stable sales point, even outside the region of sale. (The best approach is to compress the value stream to conduct as many steps as possible, including engineering, at the low cost point, requiring only a single transport link to move the finished item from the point of design and manufacture to the market of sale.)

- Still bearing in mind currency risks (rapid), country risks (of trade protection in the receiving country and political chaos in the shipping country), and connectivity costs (ranging from air freight expediting to unplanned engineer visits to the other side of the world to deal with quality issues) that are inherent in managing decompressed value streams. When all factors are weighed, the 3rd category is much smaller than most managers currently think.

- depending on the problem, auto mechanics are independent extensions of the failed quality assurance teams (of auto manufacturers)

- use the same method to separate workers, to separate suppliers

- 3 types of attitudes towards lean: All about lean, I’ll wait and see, I won’t change


Chaku-Chaku – load – load
- operator proceeds from machine to machine taking a part from the previous operation and loading it in the next machine, then taking the part just removed from that machine and loading it in the following machine, etcetera
Five S
- Seiri – organization - separate - tools, parts, instruction from unneeded materials and remove the latter
- Seiton – tidiness - sort – neatly arrange and identify parts and tools for ease of use.
- Seiso – purity - conduct a clean up campaign
- Seiketsu – cleanliness - means to conduct the last 3 frequently intervals to maintain a workplace in perfect condition.
- Shitsuke – discipline - form the habit of always following the 1st four S’s

Five Why’s
- asking why 5 times whenever a problem is encountered, to identify the root cause of the problem so effective counter measures can be developed and implemented

Heijunka – production smoothing

Hoshin Kanri – policy deployment – a strategic decision making tools for a firm’s executive team that focuses resources on the critical initiatives necessary to accomplish the business objectives of the firm. By using visual matrix diagrams similar to those employed for quality function deployment, 3 to 5 key objectives are selected while all others are clearly deselected. The selected objectives are translated into specific projects and deployed down to the implementation level in the firm. Hochin kanri unifies and aligns resources and establishes clearly measurable targets against which progress toward the key objectives is measured on a regular basis

Jidoka – autonomation – transferring human intelligence to automated machinery so machines are able to detect the production of a single defective part and immediately stop themselves while asking for help, allowing one operator to over see many machines. With proper use jidoka employees could be performing preventive maintenance and routine housekeeping or tending to logistics.

Kaikaku – radical movement to remove muda

Kaizen – continuous, incremental improvement
Kanban – card regulating pull
Keiretsu – group of firms
Poka-yoke – mistake proofing device/procedure

Seven muda
- overproduction ahead of demand
- waiting for the next processing step
- unnecessary transport of materials
- overprocessing of parts due to poor tool and product design
- inventories more than the absolute minimum
- unnecessary movement by employees during the course of their work (looking for parts, tools, prints, help, etc.)
- production of defective parts.


Ohno’s defect list
- defects (in products)
- overproduction of goods not needed
- inventories of goods awaiting further processing or consumption
- unnecessary processing
- unnecessary movement (of people)
- unnecessary transport (of goods)
- waiting (by employees for process equipment to finish its work or on an upstream activity).

Transparency is used as an alternative to visual control to indicate the need to everyone to see all of the activities occurring along a value stream flowing through many departments, functions, and firms. Visual control carries the connotation of top down control of employees and facilities, which is the antithesis of lean thinking.

Cycle Time – the actual amount of time needed to complete a given task and move it along to the next step in production. All tasks must share the same cycle time to achieve flow. For takt time of 60 seconds, all tasks must be completed in 60 seconds or less.

MRP hides the parameters of batch sizes, throughput times, and capacity managers should be seeking to improve on every day. The internal logic of the production algorithms is so complex it is impossible to tell intuitively and visually that production was off track until a crisis emerged.

Eliminating waste and creating value requires a systematic approach and endless attention to detail.

To make the system itself incapable of crating peaks and troughs in orders unrelated to end customer demand, Toyota has installed a series of filters into each level of the ordering system that allow only those orders to be passed on that correspond to the normal ordering pattern for that dealer or PDC. Orders outside these limits must be explicitly authorized by head quarters before they are accepted, to eliminate both clerical mistakes and panic orders based, for example, on rumours of shortages or of imminent price increases. (a poka-yoke device in the ordering system to filter out noise)

Deploying air and electrical lines from the ceiling every few feet sot that any machine could be moved anywhere on the floor and hooked up immediately.

In a desperate but largely successful effort to sustain buyer interest until new models could be introduced, Porsche began to launch a variant of the 911 every 6 months. This kept Porsche’s name in the auto enthusiast magazines because journalists seemed incapable of resisting the offer to test drive “the new Porsche” even if the newness consisted only of minor modifications such as a Targa top or refined transmission.

Technical descriptions of how to evaluate jobs for fatigue and stress can be found in “On the Development of TVAL (Toyota Verification of Assembly Line) and Its Applications.” Toyota City: Toyota Motor Corporation, 1994
“Development of Assembly Line Verification” Society of Automotive Engineers Technical Paper 940890, 1994.
Both by Yoshinori Eri, Atsushi Nimi
- papers recommended to anyone implementing lean techniques, particularly in factory settings.

Learning to See. Rother & Shook. 1998
How the world has changed since the machine that changed to world. Womack. 2000.
Both Brookline Mass.

The Toyota Production System. Operatons Managemetn Consulting Division and International Public Affairs Division, 1995

Mihaly Csikzentmihaly. Flow: The Psychology of Optimal Experience. 1990.
The Evolving Self: A Psychology for the Third Millennium. 1993. both New York HarperPerennial

Lean Thinking p202 - 302

Lean Thinking

P202 - 302

- Participants in the initial improvement projects must include all of the senior managers as well as the primary workforce.
- Workers may find if difficult of impossible to believe that the problem was inside (Porsche) rather than outside in the marketplace.
- The union only agreed to working with the Japanese consultants if their workers would conduct their own parallel workshop to show that if change was really needed it could perfectly well be achieved by long term employees rather than outsiders (which worked to prove they could not, and later they were to join the consultant led group).
- The first kaikaku was to get rid of the mountains of inventory and the treasure hunting for parts which occupied a substantial fraction of each assembler’s daily effort. Then make the parts flow from receiving to engine assembly to the final assembly plant very rapidly with no stopping, no scrap, and no backflows to fix defects.
- Parts kits for each engine were built up in a kitting area on the floor below and sent to assembly in little carts at exactly the rate engines were being assembled. (The kits were themselves a poka-yoke device because the parts were placed on the cart in their exact assembly sequence. Any part skipped over would be spotted immediately).
- Over a 2 year period, teams gained the experience to join with work teams and conduct activities without outside help. Every work team would conduct a major weeklong improvement project on it s activities every 3 months, in addition to taking immediate action on improvement suggestions from work team members at any time.
- because natural attrition is about 3% per annum, given the age of distribution of Porsche’s workforce, an additional 30% reduction in the workforce can be achieved in the next decade without resort to layoffs if no additional sources of production volume can be found.
- Both workforce and union were initially quite upset at the affront to their competence and their role. The lean msg was the traditional craftsmanship was mostly muda; correction of mistakes which should never have been made, movement to find parts and tools which should be immediately at hand, wasteful motions through a lack of careful analysis of how to do the job, wasted time while watching machines which could be taught to monitor themselves, waiting for missing parts, and inventories everywhere due to batch and queue methods.
- There is a higher form of craft, which is to proactively anticipate problems in a team context and to prevent them while constantly rethinking the organization of work and flow of value to remove muda. The direct worker and the work team subsume many of the traditional activities of ‘management’ while improving activities at a far more rapid rate than management alone ever could.
- They began with those suppliers most receptive to lean thinking. Use the initial success of these firms to encourage the more reluctant suppliers to join in.

Porsche version of the JIT game

- Going to the supplier, they usually insist there’s nothing to improve.
- 5 senior managers take roles in a 4 stage process folding and packing 3 colours of paper boxes.
- 1st person bundles up and delivers quantities of unfolded boxes in 3 colours to the 2 pre-assembly stations. Quantities are in response to a customer order. One pre-assembly station folds the small boxes while the other preassembly station folds the small boxes and both stations secure their boxes with a rubber band. The boxes are then passes ahead to the assembly station where the 4th player opens the large box and places the small box inside. The player writes out a ticket, folds it, places it on top of the small ox and then closes the large box and secures it with a rubber band. The box is then passed to quality control/dispatch where the 5th player opens the large box and checks to see that the ticket is present and properly written. This player signs and stamps the ticket before placing it back on top of the small box. The large box is then closed, secured with a rubber band, and delivered to the customer.
Scan p 209
- Players are told to work at their own pace to produce the 3 colours of box in response to the customer order. Soon every player is trying furiously to complete his tasks, 1st for one colour of box, then for the next. However, a juge mountain of boxes quickly builds up in front of the 4th player, who has a bigger job than the others. In addition, the customer announces that he wants to change his order, to receive first whichever colour of box the team has left till last. This quickly produces even more of a pile up as the wrong colour boxes are pushed to the side so the right colour can get through.
- Team of 5 is then asked what’s wrong and what could be done about it. Answer is always the same: 4th player is the bottleneck so we need to add another worker to the assembly step and build a storage area between steps 2 and 3.
- You then suggest that instead the 5 players should try a pull system by making only 5 boxes at a time and only when asked (pulled) by the next player downstream. To the players amazement, the whole activity proceeds smoothly, with only a tiny buildup of boxes between steps 2 an d3. They then play 2 more rounds, reducing the lot size to 3 and then to 1, eventually achieving perfectly smooth flow and no buildup of boxes at all.
- Next you say the customer is going to vary his order at random between the 3 colours of boxes and asks what will happen. The supplier executives recognize this situation as the key headache in their lives and predict chaos. But, with no boxes piled up in inventory, it’s a simple matter to switch from one colour to the next.
- Move the game to reality suggesting that the exact same techniques should be introduced in the activities required to make (parts). “Lets take a set of activities for one (part) and do it today.”
- Then stay for a week or two to remove all the waste the team could find and to standardize the process and develop follow-up steps so the new level of performance is sustained.
- The understanding with the suppliers management from the beginning from the outset was that the cost saving would be precisely calculated and divided 3 ways: 1/3 to the supplier, 1/3 to Porsche (you), and 1/3 as a pass through to the customer.
- Due to Porsche’s success, many companies not supplying Porsche asked for help. Porsche started Porsche Consulting, an external consulting practice.
- as results begin appearing in physical production, power will shift from the product engineers to the operations managers, the activity central to the firms success.
- Inventory reductions will free up cash (which was used to fund a new product program).
- to keep the core workforce busy and reap the full financial benefits for the lean transition, he needed to double sales very quickly at constant prices.
- instead of retaining the centralized scheduling dept. the reengineering team eliminated the scheduling department and gave the task of scheduling orders to the marketing group in each product team.
- Production teams were told to schedule backwards (working to takt time) to precisely synchronize orders with available production slots at a point exactly (4) days before shipment when the firm order needed to be inserted in the production schedule.
- Orders with incorrect information must never be passed forward by the designers and engineers. Scheduling equivalents of poka-yoke devices have been developed to make sure all mistakes are caught. The customer must be educated to understand the company only needs (4) days of lead time before the product is ready to ship so that there is little point in specifying exactly what is wanted (and then changing the order repeatedly) until it is time to build it. They must also be educated the company now ships exactly on schedule.
- Final element of the ordering and scheduling system is it is completely open for everyone along the value stream to see (customer, distributor, product team, component and materials suppliers). Only the product team can change the information on the electronic schedule board, but everyone with an interest in the outcome can electronically check on the status of orders at any time. Another example of visual control.
- The objective is to take full advantage of the strengths of a lean firm by customizing and manufacturing in the market of sale and developing strong relations with local customers. There is no intention to export.
- 2 of the basic lean concepts in physical production, automatic machine and line stoppage whenever a mistake is made so no bad parts will be passed forward to interrupt the downstream flow (jidoka), and a pull system so that only parts actually needed are made (JIT)
- “Companies making even a modest profit never use the Toyota Production System. They can’t. On the other hand, there are nearly bankrupt companies that implement the TPS to the fullest, knowing they won’t lose much even if it fails – this is the advantage of a defiant attitude.”

Ohno’s Insights

1) Self-monitoring looms – that used devices measuring thread tension to shut themselves down immediately if a thread broke and the loom began to make defective cloth. Using this as inspiration, he quickly devised a set of simple limit switches and go/no-go gauges so that machines, once loaded, could do their work to completion without human intervention and stop working immediately if they detected an error in their efforts. These devices make it possible for one worker to superintend many machines and perform quality checking as well, intervening only to load machines and deal with malfunctions.
2) when you have lots of inventory you are always one part short – solved if each processing step went frequently to the previous processing step and picked up exactly the number of parts needed for the next increment of production. Ironclad rule: the previous step would never produce more parts than the next step had just withdrawn.
3) Machines should be moved from process villages into cells. There, in a horseshoe pattern, they would be placed in the exact sequence required by the part begin made. By focusing on the needs of the machines, rather than the traditional skill sets and work methods of the workforce, or conventional thinking about scale economies, he focused the value stream and eventually perfected the concept of single piece flow. By adding/subtracting workers from a cell, he could increase or reduce the rate of production to keep it exactly synchronized with the pull of the market.
- “Common sense is always wrong.”
- Teach through hands on demonstrations to your direct reports, as the ideas are often counter intuitive & difficult to accept unless you try them yourself. Ohno created much of the ‘knowledge,’ and was the relentless ‘change agent;’ ‘force on continuity’ (played by the president), who steadily backs Ohno; these are the 3 roles found essential in every successful firm studied.
- ‘customers for life’ selling system; thinking very hard about how to shorten the order cycle to a point very near the day of manufacture so unwanted cars would not be built.
- the continuing de-integration of Toyota and other suppliers was apparently caused by the desire of Toyota managers to spread risks and to gain the advantages of a lower wage base for subcontracted parts.
- This had the brilliant effect of the group structure - which was to create permanent relationships between firms whose wages and executive compensation depended on their individual performance rather than on the performance of the whole group.
- As the Toyota group supplier costs fell, the 190 firms soon discovered they could make much more money selling to customers other than Toyota who did not understand the logic of lean production.
- Later Ohno directed a new group of direct reports he had trained, the Production Research Office, or Operations Management Consulting Division (OMCD), to set up mutual help groups among Toyota’s 42 largest and most important suppliers. The companies were divided into 6 groups of 7, each with a team leader from one of the companies. Groups were asked to conduct 1 major improvement activity each month between them, with the technical assistance of OMCD. Results of the activities were then to be examined by senior executives of the other 6 firms whose task was to offer suggestions on how the activity might be improved even further. Next, the suppliers were asked to establish their own OMCDs and get on with the task of making every activity lean. The transformation is pulled along by (Toyota) demanding continuing reductions in part costs on every part every year from every supplier. Suppliers will eventually need to reduce costs by teaching their next tier suppliers the TPS, forcing the TPS to trickle down the entire supply chain.
- Toyota later reorganized its products into 3 platform groups, overseen by truly heavy weight managers with a much higher level of dedicated engineering resources. The objective is to focus on product families which share components rather than on stand alone products (each of which still has its own chief engineer), to dedicate engineering resources to the platform groups, and to streamline the flow of designs all the way into production so new vehicles can be carried from concept to launch in twenty seven months.
- High tech automation only works if the plant can run at 100% output and if the cost of indirect technical support and high-tech tools is less than the value of the direct labour saved.
o This lesson was taken to heart with a return to a much lower level of automation in final assembly and a reorganization of the assembly line so that related activities (electrical system) are installed and then tested in one focused area. This gives the workforce immediate feedback on whether everything has been done correctly, a key factor in creating a psychological sense of flow.
- Actual level of human effort involved: Toyota asked work teams to precisely determine the amount of fatigue and stress caused by each motion and then summarize these for each job, allowing the company to jobs comparable (or to adjust the effort level for older workers or those with physical problems) and to answer critics who have frequently claimed that the TPS system demand an impossible pace from workers.
- If unacceptable levels of stress and fatigue are discovered, the work team then kaizens the activities to redesign jobs and develop simple operator assist mechanisms.
- RAV4 – reducing the # of parts and simplifying their fabrication can be much more effective than either automation or a fast work pace in reducing product costs. Ex. RAV4 take a max of 3 strikes to complete in the stamping shop while panels in other models generally require 5 strikes. Going from 5 strikes to automatically reduces tooling bills by 40% and increases the throughput of the stamping shop dramatically. Many other components in the RAV4 have been simplified as well, and Toyota estimates it has reduced the human effort needed to assemble a RAV4 by 20%, compared with the most comparable previous product, even while reducing the amount of assembly automation, the cost of production tools, and slightly reducing the work pace.
- as customers want to get exactly the product they want exactly when they want it (immediately), 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 for scrapped goods no one wants by the time they arrive) and higher customer satisfaction.
- Alternative way to surmount the changes in the world economy is 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)

An Action Plan

- 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 must be steadily widened to encompass the entire organization and all its business procedures. Once this in hand and the process is irreversible inside your own firm, it’s time to start looking up and downstream bar beyond the boundaries of individual firms to optimize the whole.
- Getting started; overcoming the inertia present in any brownfield org.; 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 result which your organization can’t ignore.
- Individuals with a make something happen mind set. Usually the problem executives have finding good candidates is a reluctance to bring in executives who will introduce truly fundamental change.
- Change agent doesn’t need detailed lean knowledge at the outset but instead a willingness to apply it.
- 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 50’s, 60’s…
- 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 needs an interpreter) can even be a help because it highlights the unusual nature of the interaction: it’s someone changing your whole way of thinking about your business. This is not just another consultant peddling another quick fix; Similarly, any teacher who doesn’t vigorously protest when a pupil fails to live up to his promise and potential is probably more interested in a secure fee than in lasting change.
- 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 1st setback). So he 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, then change agent needs to involve the other senior executives of the firm as well, so everyone’s knowledge if brought up to a minimum level to grasp the power of lean thinking.
- Finding a lever by seizing the crisis, or creating one
o Take some subunit of the organization which is in crisis and focus all your energies on applying lean remedies to it Once dramatic change has been introduced in the unit, the leaders of other units can be invited over for a hands on learning and can take ideas back.
o If no sub unit is in crisis, there may be an opportunity for change if you can find a lean competitor. By focusing on one instance of superior practice it was possible to introduce significant change in the corresponding business unit.
o Find a lean customer or lean supplier, as the will make demands on your performance. The customer will not only create a crisis but may also offer hands on assistance in introducing lean methods to resolve it.
o Boldest move is to consciously create conditions in which there will be a firm threatening crisis unless lean actions are taken. Example: traditional manufacturer who begins to sell a critical new range of products, set for initial deliveries in a couple of years, at prices hat can only be profitable if the firm quickly adopts lean methods to bring down costs dramatically across the board.
- If major investment is required, you’re not getting lean.
- Market based societies permit to exist and thrive those firms which do a good job of identifying and serving customer needs rather than the firm’s own interests.
- It’s advised people start with an activity that’s performing very poorly but which is very important to the firm; you can’t afford to fail, potential for improvement is very large, and you will find yourself drawing on resources and strengths you didn’t know you had in order to ensure success.
- Demand immediate results; immediate feedback is critical; the improvement team and whole workforce should be able to see things changing before their eyes. This is essential to creating the psychological sense of flow in the workforce and the momentum for change within your firm.
- Don’t waste time on benchmarking if there is any way to get your firm moving without it. Benchmarking as a way to avoid the need for immediate action is itself waste.
- Once you dive in, if nothing dramatic is accomplished in the 1st week of working on a problem activity – typically a halving of required effort, a 50% reduction of work in process, halving of space requirements, and a 90% drop in production lead time – you’ve either got the wrong sensei or you are not really a change agent. Figure out which it is and take action immediately.
- As soon as the 1st round of improvements are in hand, it’s time to start linking the different parts of the value stream for a product family. Convert the next upstream processes to flow and also establish a level schedule and a formal pull system. As you do this, “backward steps” are bound to occur b/c the precise purpose of these techniques is to expose and eliminate all types of waste. It’s only when the flow stops that you know you’ve found the next problem to work on.
- Once you have flow an pull started on the shop floor, it’s time to go to work on your ordering system. Kaikaku in the office is not as easy to see as moving machines on the shop floor, but it’s equally vital. Start with office activities directly linked to the activities you just changed on the floor. Prepare the way by involving office staff in the early shop floor kaikaku weeks – where they can play a useful role just by asking questions: why do you do it this way? After tey grasp the fundamentals and see the potential, they are ready to ask the same questions about office work. Once a bridgehead is established, go to work on all of your activities related to selling, formal order taking and scheduling.
- At the same time you start to introduce pull in production and order taking, you need to start thinking about flow and pull in product development for each product family. This is particularly the case b/c for most firms the quickest way to grow sales in order to absorb freed up production resources is to speed up products already in the pipeline.
- Once they understood that waste of overproduction translates in the warehouse world as a “faster than necessary pace” and that levelling incoming orders is a necessary precondition for creating flow, they make rapid progress.
- The next leap is to create an organization which can channel the flow of value and keep the stream from silting up again. Devise a practical strategy to fully utilize all of the resources being freed up.
- Doing this requires reorganizing your business by product families with someone clearly in charge of each product and creating a truly strong lean promotion function which becomes the repository of your hard earned skills. It also requires a consistent approach to employment in your firm and a willingness to remove those few managers who will never accept the new way. Finally, it means creating a mind set in which temporary failure in pursuit of the right goal is acceptable but no amount of improvement in performance is ever enough.
- Your sensei will need a place to sit down (although a good sensei doesn’t sit very often). Your process mappers will need somewhere in the organization to call home. The extra people you will soon be freeing up will need a place to go (lean function). Your improvement teams will need logistics support. Your operating manager will need continual education in lean methods and periodic evaluation of their efforts to make sure there is no backsliding. You need a permanent lean promotion group and it should report directly to the change agent.
- A good idea is combine your quality assurance function with your lean promotion function so that quality enhancement, productivity improvement, lead time reduction, space savings, and every other performance dimension of your business are considered equally and simultaneously. Initial attention to ‘standard language’ so everyone is using the same terminology, and a consolidation of the quality and lean functions is an excellent investment, so operating managers don’t think quality assurance experts and lean experts are telling them to do different things.
- Our rule of thumb is when you convert a pure batch and queue activity to lean techniques you can eventually reduce human effort by ¾ with little or no capital investment. When you convert a ‘flow’ production setup to lean techniques, you can cut human effort in half (mostly by eliminating indirect activities and rework plus line imbalances). And this is before your lean development system rethinks every product so it is easier to make with less effort. Meanwhile, in product development and order taking, converting from batch and queue to flow will permit your organization to do twice the work in half the time with the same # of people

Devising growth strategy to absorb resources at the rate they are being freed up
- pass cost savings directly through to gain volume
- speed up development of projects in the pipeline to spur sales and increase market share
- focus on shortening production lead times, delivering exactly on schedule, and making exactly the configuration of product the customer wants, again to boost sales of conventional products.
- Try to convert their product from a good to a service and add downstream distribution and service activities to their traditional production tasks.
- Integrate backwards upstream to consolidate previously scattered production activities into single piece flow

- in every organization there was a small group of managers, generally less than 10% who simply could not accept the new ideas. Hierarchical personalities needing a clear chain of command and something to control were particular problems.
- To repeat: as you begin the process, most managers and employees will not understand what you are doing but will be neutral to positive if you make employment guarantees. Take action quickly to remove those managers who won’t give new ideas a fair trial.
- At the end of the 1st improvement initiative on an activity, tell the line management and the work team that in 3 months it will be time to fix it again. It’s critical to get your employees to understand at the outset that no level of performance is ever good enough, and there is always room for improvement. This will usually mean moving every machine and changing every job.
- In the early years of the lean transition, the lean promotion function will have to take the lead in planning successive improvement campaigns. Increasingly over time, improvement becomes the most critical job of the product team leader and the primary workforce. You must instil the idea that management is no longer about running activities in a steady state and avoiding variance. Instead, it’s about eliminating the root causes of variances (so they permanently disappear and managers can stop fighting fires) while improving performance in periodic leaps that never end. How much did you improve performance? Must become the critical question in evaluating managers.
- An energetic general manager at Pratt took on a task which was correct in principle but too ambitious in practice. When this manager and his direct reports to other jobs were reassigned instead of fired (the usual step taken in the past), a critically important message that mistakes in pursuit of the right goal are not a failure.
- When at the same time a general manager of another component center was terminated for anchor dragging on the lean conversion (in an operation that was performing no worse than it had historically), he sent the complementary message it’s not acceptable to do nothing to improve your operation on the grounds that the risk of failure is too high.
- Getting these 2 messages across is a critical task of the change agent

- once you’ve got momentum (in the 1st 6 months of the transition) and have rethought your organization (over perhaps the next year), you’re a long ways toward your goal of a lean transformation. Additional steps are important to make the new approach self sustaining. After initial inertia, the # of proposals for improvement will snowball and you’ll need a mechanism for deciding what’s most important to do now and what can wait until resources are available. You will need to create a new way to keep score and to reward your people so they will continue to do the right things, and to make everything in your firm transparent so everyone can see what to do and how to improve. You will need a systematic method for teaching lean thinking to every employee (including customers’ and suppliers’ employees along your value streams). Finally, you’ll need to systematically rethink your tools, ranging from monster machines in the factory to computer systems for scheduling, with the objective of devising right sized technologies which can be inserted directly into the value stream for individual product families.
- The experience of taking on too many lean initiatives once the ball is rolling is the norm, so it’s vital to use the tools of policy deployment to reach agreement across your whole organization on the 3 or 4 lean tasks your firm can hope to complete each year. Example: reorganize by product families, introduce a lean accounting system, kaizen every major production activity 4 times, and kaikaku order taking and scheduling.
- Even more important task for your annual policy deployment exercise will be to identify the tasks you can’t hope to succeed at just yet but which some parts of the organization will badly want to tackle right now. You’ll need to publicly acknowledge these are important but they will need to be ‘deselected’ until the next year or the year after, when resources are available.

Lean Accounting
- many firms today still run standard cost accounting systems, although many more have made some move toward activity based costing. The latter is a great advance, but you can go even further. What is needed is value stream/product based costing including product development and selling as well as production and supplier costs so that all participants in a value stream can see clearly whether their collective efforts are adding more cost than value or the reverse.
- Once you reorganize by product family and shrink your traditional functions with their allocated overheads, it becomes a lot easier to assign rather than allocate costs to products so that product team leaders and their team members can see where they stand. Your own accounting group should be able to figure out how to do this – you don’t need a consultant – but we strongly recommend you start with the chief financial officer and involve him in several weeks of hands on improvement activities to get started. Then ask the simple question: What kind of management accounting system would cause our product team leaders to always do the right (lean) thing?
- You may still need a financial accounting system for your profit and loss statement, which does strange things like value potentially obsolete inventory as assets, but you won’t need or want ot show it to your product team leaders. Make a gradual transition from your current system to the new lean approach over a year or so to avoid chaos.

- Ideal compensation scheme pays each employee in exact proportion to the value they add, as value is determined by the customer. Actually doing this may present insurmountable technical problems & may only be achievable with enormous, non value adding effort.
- In a lean firm, usually the simplest and cheapest method of calculating compensation is generally the best. This mean paying a market wage to employees based on their general qualifications (whatever assembly workers or entry level product engineers receive on average in the area of a facility) along with a bonus tied directly to the profitability of the firm. Because a lean firm should be substantially more profitable than average, the bonus should be a significant fraction of total compensation (Wiremold set a target for its bonus to be about 20% of base pay, on the presumption it should be at least this much more profitable than the ‘average’ manufacturing firm in its area and industry).
- Considering bonus schemes, it will become apparent the total amounts on offer, while substantial, will not be enormous. This underlines the reality the primary incentive for working in a lean system is that the work itself provides positive feedback and a psychological sense of flow.
- Incentive pay is really a carry over from the old days of piecework and is sometimes used today to deal with the perception that work pace is harder in lean systems. In fact, the pace of minute to minute exertion is the same. The difference is that lean systems identify and eliminate practically all of the non-productive slack time for employees at every level. Therefore, it initially feels as if the work is harder, but after a period of acclimation, when a lack of waste begins to seem normal, people often report that the pace is actually much easier than before. Trying to buy the allegiance of your workforce to a lean system with cash is approaching the problem from the wrong direction. Stress the positive aspects of the new work environment.
- Regarding separate bonus’ for members of each product family, lean accounting makes them technically feasible, but we thin they’re also a bad idea. In lean systems work tasks are evaluated very carefully by the work team itself to achieve an even pace with no wasted time. Looking across a firm, the pace of work inside each product family should be very similar. What’s more, it will frequently be necessary to reassign employees from one product to another, sometimes after an interlude in the lean promotion function, as the needs of the business change. Reassignments will generate continuous conflict if bonuses vary from product family to product family because of varying competitive conditions in the marketplace.
- Benchmarking others usually wastes time you could better spend doing the right thing. However, benchmarking your internal performance, especially your rate of improvement, is critical. It’s also vital to create a ‘scoreboard’ which shows everyone involved in a value stream exactly what’s happening in real time. These don’t need to be complicated or require significant investment. Simple diagrams and process status boards can be used, with little in the way of language or math skills.
- It has become conventional wisdom higher levels of management should learn to listen to the primary work team since they know the most about how to get the job done. Unfortunately, this bit of common sense is only half right. Your primary workforce probably does know the most about the hard technical aspects of getting isolated jobs done (including all the deviations from poorly maintained official procedures which are necessary in order to get products made at all). What primary workers and front line managers typically don’t understand is how to think horizontally about the total flow of value and how to pull it. Nor do they typically understand the methods of root cause analysis to eliminate the need for fire fighting. Therefore, if you ask your primary workforce to implement lean techniques or permanently solve problems today, you are likely to get a rush of suggestions followed by general disillusionment when they fail to work properly.
- To gain lean skills, your workforce needs training of a special type. The faculty is entirely line managers (which means they must learn operational skills themselves, skills rarely mastered by senior managers in western firms) and the skills being taught are precisely those needed immediately for the next phase in the lean transition.
- Lean learning and policy deployment can be carefully synchronized so knowledge is supplied just in time and in a way that reinforces the commitment of managers and all employees to doing the right thing. Everyone learns the same approach to problem solving and everyone experiences the direct benefits of continuous learning. Over time, the investment in training can also be directly connected to the resulting improvements in the business.

- includes production equipment, information management systems, test equipment, prototyping systems, organizational groupings, accounts receivable
o large, fast, elaborate, dedicated, centralized tools are more efficient is the cornerstone of batch and queue thinking
- for every activity ask them to work backwards by asking: What kind of tools would permit products in a given family to flow smoothly through the system with no delays and no back loops? And what types of tools would permit us to switch over instantly between products so there would be no need to make batches?
- 2 small machines with only the features you needed generally cost much less in total than one big one with all the bells and whistles.
- Much of your new tooling can be built inside your firm using excess materials at very low cost by excess people freed up by lean techniques (consider throwing away your industrial equipment catalogues and getting directions to your local junkyard)
- You will realize more and more you can provide most value streams with their own dedicated equipment to completely cut out bottlenecks at monuments and stoppages due to changeovers. When the value stream shifts its course, you can quickly redeploy your right sized tools to serve new needs. Tackling your major monuments and completely replacing them with right sized apparatus will probably only get into full swing after several years of making the best of what you have already.
- make sure your suppliers and distributors are following your lead, that you are creating value as close to your customer as possible, and you are making lean thinking automatic and bottom up, rather than merely top down.
- The only alternative is to actually fix their production, product development, and order taking systems by sending them your lean promotion team. (this is also an excellent way to be alert to broader trends in industry and to keep your lean thinkers sharp by continually exposing them to new situations) Don’t do this until you’ve fixed your own activities which the supplier or downstream firm links into, but then go as fast as possible and accept no excuses. “We’ve done it quickly. We know you can, too. Here’s how. Let’s get going.”
- To make this approach feasible, it’s obvious you will need to winnow down your upstream and downstream partner list and prepare to work with them for the long term. When you go to help them, don’t charge for your help. Instead, agree up front on how you are going to share the savings. (Porsche and its suppliers decided on a 3 way split: suppliers 1/3, Porsche 1/3, customers 1/3) It should be easy to get paid back as well in better quality and shorter lead times for your products.
- Point out there is an extra ‘win’ for your suppliers in this ‘win win win’ situation because they will learn how to cut costs and lead times on all of their activities but will probably not need to pass these savings along to their other customers who are still bogged down in short term, market based thinking. They can steadily gain business by under pricing batch and queue competitors in the supplier community.
- As soon as your suppliers and downstream customers start to improve their in house performance, insist they send their newly created process improvement teams to fix their own suppliers or downstream customers. (Remember your suppliers and downstream partners are typically no more integrated than you are) Set continually declining target prices and continually increasing quality and reliability goals, which make if impossible for them to relax.
- It will help this process to bring your 1st tier suppliers together in a supplier association for mutual learning of the type long utilized by Toyota. Your 1st tier suppliers may then with to draw up a short list of 2nd tier suppliers they wish to work with. Then the resources of the 1st tier suppliers can be concentrated on a much smaller number of 2nd tier firms. Similarly, the assembler firm near the customer at the end of the physical production stream may need to join forces with other lean minded assemblers to take on the most intractable ‘batch head’ raw materials suppliers and show them a better way.

- Some firms can exist happily by doing everything in only one place. The mystique in their products protects firms of this type from knockoffs. In addition, volatility in some export markets, due to currency shifts or changes in tastes, can be tolerated if no one market accounts for a large fraction of total sales. The world as a whole will provide a stable enough market.
- Some firms are happy to take advantage of export opportunities as they arise but to treat them as a windfall rather than a core aspect of the business.
- For most products with global market potential, the correct global strategy is to develop a complete design, order taking, and production system within each major market of sale. This makes it much easier to communicate with the customer and also makes it possible to design, produce and deliver the product very quickly with just the right specifications. ‘High tech’ mass production at a centralized global location and a far flung design and production system seeking to find the lowest wage cost for every activity along a complex value stream can never achieve these combined objectives. These alternative strategies optimize one course of the value steam at the expense of the whole.

Convert from Top-Down Leadership to Bottom-Up Initiatives
- initially the process improvement group will work top-down because the pressing need is to change the way your employees think by directly demonstrating a better way. Over time the process improvement group will focus more making every line manager a sensei and every employee a proactive process engineer. The function can then tackle only the very toughest problems where line managers still need outside help. This is the present day assignment of the Operations Management Consulting Division within the Toyota group.
- There is a critical transition as you move your organization through the lean transformation, a point when managers must become coaches rather than tyrants and employees become proactive. This transition is the key to a self sustaining organization. Note: if you are the change agent, you may become the biggest problem. Change agents sometimes want to continue commanding change from the top when those on the bottom were quite capable of sustaining it on their own.
- One solution is to change your behaviour, another is simple to move on. Many of the best change agents we’ve encountered seem to work best by converting an organization over a period of several years, then turning senior management over to a more collegial personality, and moving on to another firm still full of ‘concrete heads’.

- whenever encountering a would be change agent who wants to transform his firm, ask: are you willing to work very hard, accept the one step backward which comes with 2 steps forward, and stick to your task for 5 full years?

- Often an extended period may be required for the transformation because a large number of people including senior leadership must be taught to see the difference between value and waste. And a significant period of experimentation by ordinary managers – complete with backward steps – is necessary before everyone begins automatically to apply lean thinking and move the organization ahead from the bottom and middle ranks. It’s only at this point the change agent can step in front of the bus without being missed and it’s at this point also that the full financial benefits of lean thinking are apparent. From this point we believe there will be no turning back and the change agent may even want to move on to a new challenge.

Scan p270

- Of course, even a brilliantly performing firm can fail for reasons beyond anyone’s control – an unsuspected shift in consumer tastes, the sudden appearance of a new technology which totally eliminates the need for the old product (clothes pin after the home dryer, vacuum tube after the transistor), but with a lean tool kit, the chances of succeeding will soar.

PART III - Lean Enterprise

- When asked: What’s new here? What are you saying that we haven’t heard before? – We are putting the entire value stream for specific products relentlessly in the foreground and rethinking every aspect of jobs, careers, functions, and firms in order to correctly specify value and make it flow continuously along the whole length of the stream as pulled by the customer in pursuit of perfection.
- Objectives for the lean enterprise: Correctly specify value for the customer, avoiding the normal tendency for each firm along the stream to define value differently to favour its own role in providing it (example, manufacturer who thinks the physical product itself is the customer’s primary interest, the independent sales and service company that believes responsive customer relations account for most of the value to bring a product from concept to launch, from order to delivery, and from raw material into the hands of the customer…). Then identify all the actions required to bring a product from concept to launch, from order to delivery, and from raw material into the hands of the customer and on through the its useful life. Next, remove any actions which do not create value and make those actions which do create value proceed in continuous flow as pulled by the customer. Finally, analyze the results and start the evaluation process over again. Continue this cycle for the life of the product or product family as a normal part, indeed the core activity, of ‘management.’
- Mechanism of the lean enterprise is also very simple: a conference of all firms along the stream, assisted by technical staff from ‘lean functions’ in the participating firms, to periodically conduct rapid analyses and then to take fast strike improvement actions. Clearly someone must be the leader, and this is logically the firm bringing all of the designs and components together into a complete product. However, the participants must treat each other as equals, with waste as the joint enemy.
- This is not the norm because jointly analyzing every action needed to develop, order and produce a good or service makes every firm’s costs transparent. There is no privacy. The question of how much money (profit) each firm along the value stream is going to make on a specific product is unavoidable.
- All the parties willingly negotiate a set of principles to guide their joint behaviour in the future and then devise a mechanism for mutual verification that everyone is abiding by the principles. These principles may be something as follows:
o Value must be defined jointly for each product family along with a target cost based on the customer’s perception of value.
o All firms along the value stream must make an adequate return on their investments related to the value stream.
o The firms must work together to identify and eliminate waste to the point where the overall target cost and return on investment targets of each firm are met.
o When cost targets are met the firms along the stream will immediately conduct new analysis to identify remaining waste and set new targets.
o Every participating firm has the right to examine every activity in every firm relevant to the value stream as part of the joint search for waste.

- A simple example of a problem to be overcome is the need for a firm far up the stream to invest in new technology to produce in small lots rather than large batches. Because most of the benefit is gained by downstream firms but all of the costs are borne by the upstream firm, some means must be developed for the former to compensate the latter.
- As the introduction of lean thinking forces problems and waste to the surface in all operational areas, new organizational problems will inevitably arise as you apply these ideas. As you shrink traditional functions, which were formerly the key to career paths in your organization, many employees will start to express anxieties about where they are going and whether they have a ‘home.’ Employees assigned to a particular product team to apply their skills to the value stream may begin to wonder is they are ‘going anywhere’ and get confused about ‘who I am’ (I trained as an electrical engineer but I seem to spend most of my time on integrative tasks which don’t utilize all of my training). While the actual work is likely to be much more rewarding than in the previously disconnected world of departmentalized batches and queues, the lack of perceived progression and the loss of a commanding skill may be dispiriting.
- It is bad for the enterprise if employees gradually lose their edge and simply spend all their time applying what they already know to standard problems (the generalist engineer problem) – a potential weakness in competing over the long term with a (German) firm which has extremely strong technical functions.
- A new form of career must be devised, and ‘alternating career’ where employees go back and forth between applying what they know in a team context and taking time out to learn new skills in a functional setting. The idea would be to assign employees to product teams for the life of a development exercise or during a product’s production life, but to send them back to their home functions when a project is completed or they are no longer needed. In the home function, they could receive training on new skills, or work on advanced projects which apply existing skills to the limit, or analyze the flow of engineering, order taking, and production activities as a technical adviser to a lean enterprise seeking to identify and eliminate waste.
- A new concept of career in which more and more skills are gained and applied to more and more difficult problems is both good for the employee and good for value flow. Gaining the agreement of employees that this is the path to the future is the key to self perpetuating lean enterprises.

- Rethink departments: traditional functions should not perform traditional tasks
- Engineering should not engineer, in the sense of performing routine engineering on a product. Purchasing should not purchase, in the sense of making individual purchase decisions and holding the hand of the supplier in getting products to launch. Operations should not direct employees in day to day production activities. Quality should not conduct detailed audits of products or conduct fire fighting exercises to eliminate problems with a specific product. These are all tasks for the dedicated product teams, dealing with the issues of the present.

- What functions should do is think about the future.
- Product engineering should work on new technologies that will permit products to do new things for the user and develop new materials and methods which make it possible to eliminate fabrications steps and reduce costs. Tool engineering should work on right sized devices – from computers to production hardware – which make is possible for product teams to create value in continuous flow and rapidly shift over between product variants. Purchasing should identify the set of suppliers a firm will work with in the long term and develop a plan for each supplier to ensure they will have the technologies plus the design and production capabilities to assure the highest quality performance. Quality should develop a standard set of methods which the product teams can apply to ensure ever product is right every time with no backflows and no ‘escapes’ of bad products to the customer.

- Every function would provide a home to employees with given technical specializations (including production workers who must become operations specialists able to detect and eliminate waste). A primary job would be to systematize current knowledge and procedures and teach these to function members as needed (JIT knowledge b/c most knowledge is quickly lost if not immediately applied). The functions other job would be to search for new knowledge and summarize it in a form which can be taught when needed.

- Firms provide the link between streams; they are the means of crossing from one valley to the next in order to make max use of the technologies and capabilities accumulated by each firm’s technical functions. They also provide the means of shifting resources – people, space, tools – from value streams which no longer need them to other steams which do. From this if follows most firms will want to participate in multiple value steams, often with different upstream and downstream partners.

- In American management, the industrial finance system asks each firm to optimize its short-term performance but ignores the performance of the whole because no shares of a whole value stream are traded in any market.
- German firms face a adjustment challenge in addressing the jobs problem at the outset and in creating a system of alternating careers for all workers.
- Ask an NEC employee who he is and the answer will always be “an NEC employee,” as opposed to an engineer or some other functional skill
- While the German firm needs to accustom employees to working in horizontal teams, the typical japanese firm needs to accustom employee to the idea skills must be continually upgraded and carried to the cutting edge through periodic in function assignments which overcome the generalist employee problem.
- The horizontal kieretsu, rather than individual firms or the vertical [supply group[ keiretsu, are the essential mechanism for redeploying people from one valley to another in this situation because most individual firms have stuck to a very narrow range of products and cannot easily shift people within their own operations, all of which face the same problems.
- Most of the reductions in cost are due to cutting the wages of personnel and using older equipment. This is another instance of simply shifting cost burdens rather than reducing the amount of effort needed to get the job done.
- The manufacturer can size its production capacity for a steady stream of vehicles because the mobility provider can counteract the business cycle by replacing vehicles at a steady rate.
- Revitalize a highly mature “product” by converting it from a hassle laden good to a hassle free service
o What goods can be turned into services?

Lean Thinking p104 - 202

Lean Thinking

P 104 - 202

From Thinking to Action: The Lean Leap

- nicks, scratches, damage, etc from moving machines from department to department during production can be eliminated by doing performing all activities in one place or eliminating inventory (which removes the steps of storing/moving in and out of inventory – which increases the possibility of damage)
- Long lead times encourage the sales force to figure out how to beat the system. One approach is to order on speculation and as a customer is found, alter the options requested (or even the base model) very late in the production process – resulting in more rework or slip the delivery date and build from scratch
- The factory may be pulled in opposite directions by 2 conflicting planning systems – master schedule worked out by the scheduling dept based mostly on sales forecasts and the ever changing demands from the sales group intent on pleasing actual customers
- Latter demands met by team of expediters moving through the plant with a ‘hot list’ – order long overdue for shipment or where the sale would be lost if the product was not reconfigured to the new specification.
- the more inventory you have, the less likely you are to have the one part you actually need
- Standard work: the best way to get the job done in the amount of time available and how to get the job done right the first time, every time. By design, either the whole cell is working or nothing is working. Every step of every job was soon charted by the work team and posted for everyone to see.
- Takt time: the # of orders to be made each day to meet the orders in hand divided into the # of hours in the day.
o Important point about takt time: when order do not require the full utilization of equipment and workers, takt time is increased
- Machinery is slowed down and each of the multi skilled workers in the cell performed several of the jobs in the cell while excess workers were put on other tasks
- when new cells are converted often all kinds of problems long submerged, suddenly emerge. More steps may need to be included into the standard work charts; poor tool maintenance may stop the cell, component supply to the cell may not be dependable. People’s support may diminish at this point.
o Someone may need to step up and let the workforce know they will stay and work to fix all the problems encountered with the new ___, but will not spend 1 second discussing the possibility of going back to the old system.
- 3 attributes are essential for any organization making the lean transition: taking the long view, technical virtuosity, and a passionate will to succeed. These may be possessed by a single individual, or shared by a group of leaders; eventually they must be shared by the whole organization
- promise no one will be let go b/c of the lean conversion. Instead, create a kaizen team from freed up workers, deployed to plan improvement of other activities. Perhaps putting the chief ‘fireman’ at the head of this team.
- After every improvement, the best (not the worst) workers in the revamped process are transferred to the kaizen team, making clear this is a promotion, not a punishment
- The steady growth in output due to the newly competitive firm will mean within a short period these workers will be needed again for production work
- Wages were increased, as workers became highly skilled. This also caused turnover to be reduced.
- **because each machine is now being made with ½ the formerly needed hours of human effort, a 23% wage increase is easily affordable
- for each product to be produced, the cell is given the name of the actual customer & delivery date
Rethink the product development process (one of the final steps)
- it will be necessary to grow the business dramatically in order to keep everyone busy
- expediter: person who slows down all other projects to get his through
- revitalize and expand product range to sell more in an established market you know well
- slash costs even further & dramatically improve quality and flexibility for the customer
- a corporate annual planning process identified the major projects to be developed that year & ranked them. A team of dedicated specialists was designated for the 2 top ranking projects. Other projects in engineering were dropped/deselected
- if all needed skills were available a working prototype for the top ranked project could be put together in a week.
- The major objections to dedicated teams – work flow is uneven, so some team members will be underutilized some of the time and teams will be in conflict for scarce skills needed at specific points in development – were overcome in 2 ways
o It developed that team members actually had much broader skills than they had ever been asked to use; They could quickly develop additional, narrow skills to address specific problems.
o A bit of careful scheduling could identify conflicts from on e team to the other and back
- Investment required: substantially zero
- Tools are moved around and reconfigured, by workers freed up from inefficient production tasks
Work as ‘Flow’
- workers in manufacturing cells move toward seeing the entire work flow from raw materials to completed machine. Takt time, standard work and visual control (including work charts for all tasks) give an immediate sense of how the work is proceeding. Multi-skilling and job rotation make full use of each worker’s skills & the frequent repetition of kaizen events gives an opportunity to participate actively in work design. The constant elimination of waste and the movement of workers out of work cells as more efficient methods are discovered mean the work is a constant challenge. There are few interruptions in the form of line stoppages and sudden demands to shift to a completely different task to deal with a crisis.
- The situation in the office is very similar; visual control in order taking makes it clear to everyone where the firm stands and the new order entry system in which one employee can perform the whole task makes it possible to bet immediate results. The kaizen process in the office melds thinking and doing, planning and acting
- Rethinking development work gives sense of feedback as everyone involved in a project works in the same space and projects move rapidly to completion. Previously, a majority of development activities were never completed because market conditions changed before the cumbersome development process could be concluded. Employees respond positively to gaining new skills and being encouraged to use all the skills they’ve always had. The lack of interruptions and conflict over which task to work on next has come as a great relief.
- **Lantech worked to revitalize itself by banishing batches and their associated waste from the design and production of a product whose sole use is to wrap: batches! Pat Lancaster embarked on a new strategic exercise to think through the nature of packaging his customers will need to in the emerging world of small lot production, single piece flow and right located facilities. He needs to be ready with the right sized, right tasked process machinery likely to be needed in the future in order to provide the desired value for the customer.
Harder Case: Wiremold
- MRP might have a 50% extra margin added to the safety stock calculation
- Reliance on enormous batches and mountainous inventories may mean they can tolerate slow tool changes and skimp on tool maintenance. If a tool is defective, there may be plenty of time to send it out for maintenance and get it back before actually running out of parts; tools may have deteriorated to a shocking extent without the management ever realizing what was happening – which will change once inventory is reduced.
- As a result of the exposure to new thinking, they gave no thought to going back to the old way, but instead set out to find someone who could implement the new way.
- GE – ‘make the month’ mentality where everything was evaluated on the basis of short term financial performance, where some think they may not be allowed to take the more difficult steps in creating a lean organization. In creating continuous flow there is often 1 step backward for every 2 steps forward, and instant result management culture may not be able to deal with it.
- conveyors (which are really moving warehouses)
- If I come to your plant, will you do whatever I tell you to do.
- “Just do it” mindset – how much improvement is possible in a given period of time will be fundamentally and permanently altered
- they were aware of the scene they causing; but on another level, they were prying him people loose from their bureaucratic, departmentalized, batch & queue past (moving machines in minutes, when many hadn’t been moved in years, and executives wouldn’t have dreamed of touching any machinery themselves) – they demonstrated how to create flow and what a few determined individuals can do.
- ‘president’s kaizen’ in which the presidents of all the companies and their operations vice presidents were required to participate hands on every 6 weeks in a 3 day kaizen event in a plant. They moved machines themselves and in many cases learned the realities of the shop floor and the ordering & scheduling system for the 1st time
- most change agents want to run their own show

Dealing up front with Extra People and Anchor Draggers
- excess people problem – offer early retirement package (generous), knowing once production development system working right, sales growth would absorb remaining excess people
- production people accepted offer but not enough office staff
- de-layering conducted, classifying every job in management as either
o value creating (defined as the ability of Wiremold to pass the costs of the job along to the customer)
o non-value creating (from the standpoint of the customer) but currently necessary to run the business (ex. The environmental expert helping the company meet government regulations, Type 1 waste)
o non-value creating and unnecessary (Type 2 waste)
- then classified each manager as either
o able to create value
o able to create value with some development of skills,
o unable to create value , even with development (usually due to unwillingness to change their attitudes about the organization of work)
- about 10% of existing management will not embrace the new system; some people don’t make the adjustment to eroding the hierarchy. It’s essential these anchor draggers find some other place to work or the campaign will fail.
- People in the 1st two categories were matched up with jobs in the 1st two categories to create a new organization structure with a new roster of players. Others were given a generous severance and within 30 days the new structure was in place. 1 outsider was recruited.
- He was determined to be generous with people while making it clear that in the future everyone must create value by working together in a different way.
- Then he called a meeting of the entire workforce to announce no one would lose their job as a result of the improvement activities that would start immediately. He was giving job guarantees to his union workforce without asking anything in return except that they be open minded to change.
- **Taking away the fear of job loss is at the heart of lean conversion.
- If you lay someone off after an improvement project, no one will be helping to complete another.

scan p133

- The single most effective action in converting an organization to lean practices is for the CEO to lead the initial improvement activities himself. If they are not willing to do this for whatever reason (fear of working hands on), they never really learn anything about change at the level where value is really created
- They have to get out of their old ‘by the numbers’ manner; big changes require leaps of faith in which the CEO must say ‘just do it,’ even when it seems contrary to common sense.
- If the CEO spends time in real operations learning just how bad things really are and begins to see the vast potential for improvements, he will make the right decision more often.
- conducted 2 day sessions on lean principles for 150 employees followed immediately by 3 day kaizen exercises so employees could use the skills they had just learned.
- Then take managers and union heads together and a walk through the plant and through engineering & sales departments. There will be waste everywhere and they will now be able to see it. Tell them they will convert every process into continuous flow and we will learn about pull.
- Results can be achieved very quickly – if you can’t get a major improvement in 3 days, you are doing something wrong.
- Once this mentality is reinforced by results, and employees begin to believe management’s guarantee that no job will ever be lost due to improvement activities – improvement can become self sustaining.
- Smash departmental barriers to focus everyone’s efforts on the value stream by creating dedicated production teams for each product family. Individual departments are eliminated (purchasing, manufacturing, scheduling (MRP) groups, engineering departments, stamping, rolling, molding, painting, assembly, etc.), and personnel are reassigned to product teams provided with all of the resources needed to produce a specific product family.
- The team leader, product planners, buyers, factory engineers, production supervisors, production associates, etc are all co-located on the factory floor immediately adjacent to the realigned machinery producing in single piece flow cells
- The group is given everything it needs to be self sufficient, eliminating dependency upon a department or the departments need to follow the master schedule, eliminating excuses due to equipment needs
- Due to the shock white collar workers may experience if they think themselves to hoity-toity to be around factory workers, it may be beneficial to implement a casual dress code. ‘neckties cut off circulation to the brain and inhibit teamwork’
- Office workers may somehow feel their appearance rather than their skills and contributions made them feel special –
- Reassignment to product teams may also be a shock to the process specialists like machinist department who may have traditionally hoarded their tricks of the trade
- But everyone soon comes to like the new process as they can actually see the value flowing
- traditional standard cost “absorption” accounting allocated costs by labour and machine hours in accordance with mass production thinking. Production managers know they have to “absorb” allocated overhead by spreading it over as many machine and labor hours as possible, giving an incentive to keep every worker and every machine busy – to make numbers – by producing inventory, even if the inventory consisted of items which would go unpurchased.
- Acitivity Based Costing is based on cost drivers, which is really just a different way of allocating overhead. There is still too much allocation of aggregated costs downward, when things should be working from the bottom up
- Better thinking is to organize production by product families, then let each product team do its won purchasing and buy all its own tools. A simple system can be devised to assign real costs to each product line. Product specific cost analysis. Only a small fraction of cost is an allocation outside the control of the team, specifically occupancy costs for whatever space the team is using in a plant. Even in this case, the team is charged only fo rhte space it actually uses, so costs can be reduced by using less
- Wiremolds new ‘scoreboard’
o Productivity of the product team (sales per employee)
o Customer service (% of products delivered on time)
o Inventory turns
o Quality (# of mistakes made by the team)
- These things are prominently posted for all to see at all times. To improve, smooth flow of products through the system, with no backflows for reworking quality problems, no scrap, no in process inventories. Productivity is measured as end market sales per employee
- Expectations
o Reduce defects, as shown in the quality indicator, by 50% every year
o Improve productivity, expressed as sales per employee in constant dollars, by 20% every year
o Deliver 100% of the product exactly on time
o Increase inventory turns to a min of 20/yr
o Increase profit sharing to 20% of straight wages
- Variance analysis is performed (but not based on standard costs); when trend line diverges from performance targets, team collectively searches for the root cause of the variance rather than manoeuvring to make the numbers.

- teach every employee the principles of lean thinking (identifying the value stream, flow, pull and the endless pursuit of perfection, plus lean techniques (standard work, takt time, visual control, pull scheduling, single piece flow)
- and periodically re-teach them
- Middle mgmt may feel threatened by the transition and the removal of all safety nets. When in doubt they will take you right back to making batches and building inventories unless you reinforce the message through continued teaching, coupled with continuous hands on improvement exercises
- Union rules – restricting stampers to stamping etc, make it impossible to introduce flow &improve every activity, so he went to the union after initial retirement offers accepted and offered job guarantees for the remaining workers in return for their cooperation in working in a new way
- People may be wary of ironclad job guarantees; they may say what if your sales fall off? 5 lines of defence before showing people the door
o Reduce overtime
o Put the extra people on kaizens (to get future payback
o In source some components from marginal suppliers we plan to drop anyway (remembering that our equipment is now highly flexible
o Cut the workweek across the board
o Most powerful: develop new product lines to grow the business
- The employees are all now highly skilled and you don’t fire skilled people due to short term business fluctuations
- every manager in an org must understand the basic activities of that org, notably product dvlpmt, production operations, and sales/scheduling, and the only way to learn was intense exposure to systematic principles
- Ask – what business are we really in? Review ongoing dvlpmt programs and deselect those which do not support a specific business
- Remaining are placed in a product plan, showing their target dates for introduction
- A 3 person team (marketer, designer/product engineer, and production/tool engineer) is sent to talk directly with prospective customers in the building design and construction community to come up with a broad definition of the product through an initial QFD process
- A multifunctional team is formed to develop a detailed product specification in engineering language, co-located in a dedicated space and included the team leader from the appropriate product family, the production planner, the production/tool engineer (from original team) and a buyer. They are told to achieve a target cost determined by estimating the market price and subtracting an acceptable margin.
- Thinking about manufacturability has been present from the beginning.
- No distinction between this ‘business process’ – order taking, scheduling, delivery - And the firms’s physical production
- The shipper withdrew parts fromt eh rack and pushed empty parts containers down a return chute, the only signal for the product team to make of a given part
- Reward workers for good results through a profit sharing plan funded with 15 % of pretax profits, paid quarterly by check, and was committed to increasing this to 20%
- Reduce the # of suppliers; take time with each remaining supplier to improve its performance; start with the most critical suppliers
- After improving suppliers, expect something in return for your trouble, like negotiating a range of special services
o Such as absorption of materials cost increases for extended periods and extra short runs for certain low volume applications

Growth Strategies
- Regarding supplying needs in-house: ask yourself, ‘What physical activities can we incorporate directly into a single piece flow production process?’ Doing this also reduces the # of suppliers, making improvement of the remaining suppliers easier.
- Growth strategy: buy up small firms with allied product lines (and who use batch & queue methods) in order to increase the scope of your product offerings.
- Look for companies who’s family management can no longer run them successfully and want out, then consolidate them into your operations (where you’ve freed up room on the floor).
- Rapid introduction of new products, utilizing the new product development system
- Your fundamental strategy is the rapid introduction of lean techniques into production, order taking and product development
- during tough times, companies may dip into their inventories of parts to repair rather than ordering new
- consider setting up a company within a company, borrowing from owners and using underutilized plant space and tools
- attract the most experienced engineers in the industry
- raw material is received through the front of the shop and flows through the various manufacturing departments to the shipping area at the rear
- Traditional manufacturing: in the event no problems were found, it was shipped – this final safety net created an ‘assemble it, then tinker until we get it right’ mentality
o They do what comes naturally in engineering cultures far removed from the customer by endlessly reengineering designs in search of novelty and a better solution, no matter how slight the performance gain. Often this results in quite different production methods for practically identical parts, making their manufacture with the same tools in a common flow cell & business unit impossible.
o Solution – if any engineer wished to adopt a new design approach differing from the norm, it was his responsibility to convince the relevant team it is superior, reducing the # of schemes proposed. & saving costs
- Our lean sensei’s central contribution was to change permanently our sense of what was possible and in what time frame.
- Second change agent brought in, Krapek, one he knew would steamroller any obstacle to get the job done. He is the most relentless executive at following up in the world today.
- It’s impossible to introduce lean, flow concepts piecemeal and in an organization where the senior management doesn’t understand them and where the very structure of the organization doesn’t support them.
- determine by evaluation which physical activities should be performed
- Product Centers – one for each category of parts plus an eighth perhaps for final assembly
- Most employees reassigned to the product centers
- All of the production work involved in making a (rotor) could be conducted in nearly continuous flow in one large room\
- Unions must accept the notions of multi-skilling, job rotation, multi-machine operation, and continuous movement of jobs and work between plants to accommodate a changing value stream.
o And the hourly headcount would be reduced permanently, flexible working and active participation in job design and the development of standard work would be the new norm, and the state would help with retraining any of the displaced workers.
- Managers who earnestly try should be retained, even if it requires moving them to other jobs within the company
- To make a lean transformation happen in an extraordinarily in grown org, it may be necessary to replace a much higher fraction of the mgmt
- A lean room can be surveyed entirely from the front door
- assessed the headcount and determined he would never need more than 60% of the workers. Surveyed the line management and found a substantial fraction would never be able to work in the environment he planned. A onetime headcount reduction and rapid mgmt changes quickly produced a personnel level he know he could defend and a mgmt team he could lead
- value stream map, reconfigure business units so they precisely channelled the flow of value for each product family, and reconfigure every machine so it could be moved easily at any time by the workforce.
- Then move machines into cells laid out in the same sequence as processing steps so single piece flow occurred in as many cases as possible.
- Monument: any machine which is too big to be moved and whose scale requires operating in a batch mode (ex. Hub airport, centralized computer, centralized engineering department)
- Planners often believe extremely long runs of parts would be possible, permitting completely automated mass production – but in practice they need to make small #’s of a wide variety
- Example of obsolete thinking: The twin objectives of speeding up the actual (grinding) – what you might think of as a ‘point velocity’ within a lengthy process – and the desire to remove all hourly workers because of their ‘high’ cost per hour both miss the fundamental point. What counts is the average velocity (plus the length of the value stream) and how much value each employee creates in a typical hour
- Make only what is needed when it is needed.
- Cut headcount at the outset to a level which can be sustained for the long term, replace managers who can’t adjust to the new system, standardize work, and deal with quality problems so work can flow continuously. Then introduce continuous flow.
- Quality Assurance can become the classic corporate superego or nagging nanny, checking up on production employees to make sure they hadn’t taken shortcuts on quality in order to meet production targets; creating a negative, reactive reputation for quality assurance.
o If also meant production managers refer any alleged quality problem to a series of material review boards, which decided long after the problem was first noticed whether parts rejected by quality assurance were acceptable to ship
- Only 150 employees were retained for this function, the rest being assigned to business units on the plant floor to directly resolve quality issues as they arose.
- …if Otis couldn’t compete with Japanese firms in Japan, we would eventually lose to them elsewhere
- It is necessary for senior executives to realize they will need to take steps backward along with steps forward and the trick is to hold an absolutely steady course.
Scan p 186 chart
- it will be necessary to eliminate the waves of sales, followed by droughts, which make it impossible to run (Pratt) on a level schedule even though end user demand (airline passenger miles) is very stable.
- As costs fall, freeing up resources for new initiatives, it is much easier to see what to do next, including up-skilling your workforce; fundamentally different cost structure for existing operations will often suggest a very different strategy from what would have been pursued if the old cost structure had been taken as a given
- Even when this is done, strategic issues will remain of whether the aircraft engine business itself is viable and how the company will need to deploy its activities around the world to better correspond with its markets of sale. One promising path is to rethink whether (Pratt) is in a product or service business, and the dramatic reduction in costs plus lean thinking may make it possible for (Pratt) to take the engine overhaul and maintenance business away from independent repair firms and from the hard pressed airlines as well. For example, can flow thinking make it possible to perform a complete engine overhaul overnight at a (Pratt) facility so that planes never need to be out of service and airlines do not need to keep large stocks of space parts plus a considerable number of spare engines.
German firms – intense focus on the product itself, its superior performance being the firm’s most important concern.
American firms – typically run by executives with a financial background who were comfortable dealing with public equity markets.
Japanese – senior executives tended to have had experiences in a variety of functional areas within their firms.
Porsche – brilliant product engineers who believed strongly that the firm with the best product, designed by the best engineers, would win in long term competition.
- Porsche carried a second business as an engineering consultancy. Auto companies & parts makers often wanted help on narrow technical problems. The knowledge base to address these problems. The knowledge base to address these problems required deep depositories if know how in each department, ready for sale to outside organizations.
- Porsche was primarily interested in the contribution of purchased parts to the performance of the car, not in their cost, the frequency and reliability of deliveries, or the % of defective parts. (plus performing 100% inspection on incoming goods in a vast warehouse b/c lack of skills to help suppliers improve production operations).
- The ability of the workforce to rectify technical problems was probably unmatched anywhere in the world due to the high skill level of workers
- Designs were high on performance and low on manufacturability. Far from protesting, the skilled workers resolutely shouldered the burden of making unmakable designs, often by means of lengthy adjustments and fitting of parts.
- The operating was to quickly put all of the parts on the car, then test highly skilled troubleshooting and rework process which eventually produced a product with a world class low level of defects as reported by customers.
- After having everyone read The Machine.. and arranging for a study tour of Japan, he remembers the 1st shock was the Japanese car companies they visited were willing to show them everything – no one in the Japanese auto industry considered us serious competition and so they were very open. This was a major affront to our self image, terribly discouraging.
- Following trips to Japan (4+) included managers and shop floor workers, and members of the union).
- Kaizen Institute
- A defect detection and reporting system was instituted so everyone in every area of production could see immediately where mistakes were occurring and what was being done about them.
- Suggestion system where work team members were rewarded for submitting suggestions for improving both quality and productivity.
- Group leader reviewed suggestions immediately and took responsibility for implementing them quickly. Suggestions per employees rose from 0.06/year to 12.
- Set measurable targets, monthly and annual, for each cost center and for each work team along 4 dimensions:
o Cost, measured by reductions in hours of fabrication and assembly effort, and reductions in the amount of rework, scrap, and breakdown time for machinery.
o Quality, measured as the # of 1st time through defects per component or per vehicle and defects discovered in the final road test of each vehicle.
o Logistics, measured by on time delivery to dealers, on time delivery of parts to the next manufacturing operation, and reduction sin inventory levels
o Motivation, measured by suggestions per employee, housekeeping , absenteeism, accidents, and PVP workshops and training hours per team
- A drastic improvement activity must be conducted in (engine assembly) along with many other places and that these must start immediately, indeed that day.