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ОглавлениеWhat Is a Lean, World-Class Production System?
Lesson 1: People, not technologies, are the key to world-class performance.
I sat in the classroom listening to Yoshiki Iwata, then president and later chairman and CEO of the international consulting firm Shingijutsu Ltd., as he addressed another group of business leaders from around the world. This was my fourth in a series of trips to expose managers to the principles of lean, world-class production, and Iwata was teaching us about Just in Time (JIT), the production system his mentor, Taiichi Ohno, had pioneered at Toyota Motors.
My mind drifted back to 1966 and a U.S. Army Civil Affairs Advisory Course in which I had participated prior to becoming an infantry advisor to the South Vietnamese army. Speaking at Fort Gordon, GA, instructor, historian, and Fulbright scholar Dr. Bernard B. Fall had declared, “Technology doesn’t win wars, people do. Soldiers do.” He had both the academic and practical insight to inform this claim; by the time of his death by landmine the following year, he had traveled to Indochina five times and authored seven books on the subject, most notably Street Without Joy. I gained first-hand experience with Dr. Fall’s teachings in my 1967 tour of duty. In the hot Vietnamese sun, and later in Mr. Iwata’s classroom, I realized that a balance of people and technology was the key to both military and production victory.
What a great message, a simple message, that has been taken up and put into practice now at great companies everywhere, including Boeing, where I tested and refined such tenets of lean, world-class production. Technology is indispensable to most industries, but companies all over the world struggle to strike the balance between people and technology. Furthermore, one of the first truths managers face in trying to change their organizational cultures is that, although many companies build great products, so do their competitors. Companies may work hard on research and development or on cutting-edge tools for connecting with customers, but so do their competitors. No one can claim a monopoly or even a significant advantage in technology. Patents expire. Innovations can be reverse-engineered. Particularly when viewed from a long-term perspective, technology is rarely more than a brief edge that quickly dulls.
Where a company can develop a substantial advantage is in its processes, which are created and refined by people. A well-run process can result in the least waste, the highest quality, the lowest price, the shortest cycle time, the most satisfied customers. Processes that achieve these essential elements are more than just efficient; they are the key to competitive advantage. Such processes should be protected as core competencies and examined relentlessly for ways to improve or refine them. And if your processes aren’t anything special, that’s even more reason to get your people focused on improving and revolutionizing them, without further delay.
My definition of a world-class company, which I’ve tried to distill down to its very essence, is this: World-class companies are those that aggressively focus human potential to excel, far beyond all known or imagined standards of business performance. That focus means doubling productivity, increasing quality by factors of 100, cutting costs in half, achieving five or 10 times as many work-in-process inventory turns, reducing lead times by a factor of five or 10, and reaping equivalent gains in cash flow, profitability, and longevity.
World-class competitiveness is an ideal, a philosophy, and a quest. It is both a goal and a way of thinking and behaving to reach that goal. Really harnessing the power of people and putting them to work to create a lean, world-class production system, however, is easy to say but harder to do.
To get started, leaders must make a leap of faith, and they must truly believe that competitive advantage comes from unleashing the creativity of their people. And the best way to foster that belief is for those leaders to go out on the floor and get their hands dirty with the people doing the work.
More than 100 managers from around the world took notes that day in the classroom with me, as Iwata shared lessons from his life-long experience with JIT manufacturing. Those managers would soon practice the techniques he discussed on the shop floor, getting hands-on experience during a two-day kaizen event hosted by Hitachi and led by Shingijutsu consultants who specialize in helping companies to develop JIT systems. The following week, Iwata’s consultants would take these managers on tours of companies that have implemented JIT production. This combined learn/do experience was and continues to be powerful. Through it, managers learn the concept of kaizen, the continuous improvement essential for achieving JIT operations. Many participants are then required to begin implementing kaizen within a few weeks of returning home. The shift from classroom studies to hands-on, action-oriented learning is essential for changing the management culture to emphasize people rather than technology.
Produce only what is needed
“Taiichi Ohno,” Iwata told us, “said, ‘We need to do something extraordinary to compete, to produce efficiently. We need to reduce the input and produce the same output to improve efficiency and productivity.’ Taiichi Ohno thought the only efficient way was to produce what was needed.
“In most cases, though, companies make more than what is needed. We add extra; we overproduce. In addition, we deliver too quickly. Such a system of cushioned quantities and schedules makes warehouses necessary to store the goods made in excess quantities and delivered too early. Companies I have visited produce more than what is needed, and they have inventory but still miss deliveries. Because of this wasteful situation we need Just in Time.”
This strict philosophy demands that we know how to get our work force to produce exactly what is needed, in the amount needed, when it is needed.
Fielding a team of multi-skilled players
Mr. Iwata concluded his teaching session by saying, “People are multi-skilled, but suddenly when they go to work, they develop the habit of only doing one thing. Can you evenly divide the time of production between different jobs that need to be done? The answer is ‘no.’You cannot do that because of the great variability between many human operations. You need multiple-skilled people. They all need to be able to do three jobs — their own jobs, the previous job, and the next job.” Just in Time, then, is not simply about inventory scheduling, but how people are put to use.
“You should submit wisdom to the company. If you don’t have any wisdom to contribute, submit sweat. If nothing else, work hard and don’t sleep. Or resign.”
—Taiichi Ohno
Chihiro Nakao, a co-founder of Shingijutsu and a student of Taiichi Ohno, pointed out during a 2004 talk that employees and managers both must have clarity around what a given job really is, who the customer is, and what product they want. Hospital employees, for example, ultimately are not paid to drag carts through hallways. Whether they are surgeons, nurses, technicians, or admissions clerks, they are paid to help cure patients. Too much focus on individual tasks, rather than the true job of filling the customer’s need, obscures potential, segregates work groups instead of integrating them, and limits individual contributions.
It’s not always easy, of course, to change how you employ people. The people themselves resist what is unfamiliar simply because it’s not what they’re used to, or because they’ve learned to mistrust any change at all as a potential threat. Layoffs, plant closings, salary cuts, furloughs, mergers, and relocations have all contributed to this mistrust, and attitudes about change will generally reflect the nature of recent change in the company. If you are implementing lean production because your company is struggling or in crisis, you’ve got a solid motivation, but don’t be surprised by resistance. Yet you don’t need to talk to employees for very long to understand that, when defensiveness and turf-protection can be taken out of the equation, most people prefer jobs with variety and challenge. Human beings generally enjoy using different skills and contributing in multiple ways, rather than being regarded almost like machines themselves, endlessly installing identical bolts or shepherding the same process ad nauseam.
Taiichi Ohno eliminated job classifications at Toyota to give workers greater flexibility. He compared the way a factory should operate for the company to the way the human body operates for an individual. Specifically, the human body functions in good health when it is properly cared for, exercised frequently, and treated with respect. As anyone familiar with repetitive-use injuries knows, that respect includes not requiring a given part to do the same thing, over and over again, for too long without introducing variety. When the body is healthy, however, the autonomic nervous system responds even when we are asleep, and it is only when a problem arises that we become conscious of our bodies. Then we respond by making corrections. The same thing happens in a factory or a business; we should have a system in place that automatically responds when problems arise.
Our competitive advantage is us
Since my career at Boeing began in 1978, I’ve seen a lot of changes as well as a lot of things that never seem to change. My job, and my privilege, has been to learn from the best and the brightest in the world, to help create a vision of lean, world-class production, and to help get that vision implemented at Boeing and elsewhere.
I’ve come to the conclusion that real competitive advantage lies in how we develop and focus human potential on the way we do business. And developing and focusing human potential is not easy. It’s difficult to change managers who are used to the old, autocratic ways of management by control. It’s difficult to simplify long-entrenched bureaucratic processes. It’s difficult to flatten and streamline organizations when those involved fight desperately to protect their turf. And it’s difficult to earn the trust of employees and genuinely empower them to make needed changes and improvements.
When I mention empowerment, I run the risk of using a buzzword that is rapidly losing meaning. When it comes to gaining a competitive advantage, I’m talking about the empowerment that counts most: the freedom to challenge and change standard operating procedures, workflow design, and bureaucratic procedures. This is the freedom that is most often denied to first-level employees.
All these difficulties challenge us. But difficulty should not dissuade us from embarking on a journey that can yield such rich rewards. Many have gone before us and prevailed.
Just in Time is not new
Just in Time is the secret weapon that can lead to lean, world-class production, but it is not new. Most human endeavors can be viewed as production systems, and our ancestors have employed just-in-time production systems throughout history to ensure survival and victory. Indeed, humans continuously improve production techniques because our success and survival depend on that improvement.
In the late sixteenth century, for instance, the Republic of Venice developed the world’s first large-scale assembly line and industrial plant. The Republic could not possibly afford to maintain a peacetime fleet large enough to repel attackers, but it certainly needed one that it could deploy if it were threatened. So it created a plant that stood ready to build an entire fleet of warships on short notice. The plant, which employed 1,500 workers on 60 acres, once set 100 ships afloat in just six weeks. This phenomenal output resulted from highly effective production techniques that were nothing short of enlightened, even by today’s standards.
Two centuries later, production of weapons again confirmed the value of effective manufacturing systems. While in France, Thomas Jefferson had seen how the French used standardized parts in the manufacture of firearms. As vice president, Jefferson persuaded the U.S. military to require interchangeability of parts in a 1798 contract for 10,000 muskets. Eli Whitney of cotton gin fame rose to the challenge. To quickly provide high-quality muskets to the nation’s forces, Whitney’s factory in Connecticut used advanced production techniques such as ordered and integrated workflow, standard interchangeable parts, focused factory areas, dedicated machines, and error-proofing mechanisms to minimize product variations across craftsmen.2
A book first published in England in 1859 is known to have inspired Sakichi Toyoda, founder of Toyoda Automatic Loom Works, the parent firm of the Toyota Group. As already noted, Henry Ford, a contemporary of Toyoda, also pioneered efforts to improve manufacturing efficiency. Ford focused on the total elimination of non-value-added wastes. As a result, he was able to mine iron ore on a Monday and, using that very same iron ore, produce a car coming off the assembly line on Thursday afternoon. Although his emergency was not a military one, Ford was trying to build and dominate a brand-new industry. He was quite literally trying to change the world. Like the other forerunners of just-in-time manufacturing, Ford implemented lean methods to survive and prevailed, this time on the commercial battlefield.
The concept of lean manufacturing, so earnestly studied by American industry today, derives mainly from the Toyota Production System, which got its start about 1950 when Toyoda’s nephew and eventual successor, Eiji Toyoda, followed his uncle’s example and visited the Ford Motor Company plant in Rouge, MI.
The younger Toyoda learned a lot from Ford, particularly from Ford’s mistakes, and the resulting production system, which has been refined over time, will serve as our model throughout the rest of this book.
Beginning the journey to world class
Shortly after I joined Boeing, I became a student of Drs. Juran and Deming, and I helped introduce their principles around the company. W. Edwards Deming advised our senior managers that they must know exactly what to do, and they must involve the workers to get that knowledge. A Deming quote that Boeing managers also took to heart was, “The timid and the fainthearted, and people who expect quick results, are doomed to disappointment.” Deming’s famous 14 key principles of management began to gain traction.
In the spring of 1985, Boeing Aerospace Company President Henry “Bud” Hebeler invited Dr. Joseph M. Juran to conduct his seminar, “Upper Management and Quality,” for executives of his division. In that pivotal session, Juran stressed that the key to management innovation is the pursuit of total quality.
Later, at a private dinner, Juran was asked to estimate the cost of poor quality at Boeing. Without hesitating, he responded, “Thirty percent of sales.” This huge number prompted contemplative silence as the meal continued. Such teachings of Juran and Deming, along with contributions from others, laid the groundwork for Boeing’s journey.
By the end of that same year, Jim Blue had been named vice president of Quality Assurance for Boeing’s Commercial Airplanes Group. The division’s executives were receiving angry letters from airline customers complaining about poor quality. A letter from the CEO of American Airlines said, “We thought you could only buy Monday-morning cars, but now you’re delivering Monday-morning airplanes.” Clearly, organizations across Boeing were ripe for improvement.
Waste you can see
One of the first executives to implement the ideas of Juran and Deming at Boeing was Bill Selby, then director of operations for Defense and Space and later to become vice president and general manager of the 737 and 757 programs for the Commercial Airplanes Group. In 1987, he dumped $15 million in waste, collected over a 90-day period, onto the factory floor of Boeing’s Everett, WA, plant. Then he talked about that waste with an audience of more than 4,000 employees. People still reminisce about that speech, in which Selby observed, “It is the system that management has put into place that created this waste, not the people doing the work.” Not only was he right, but his attitude helped to engage the people doing the work in helping to correct the problem.
In a subsequent interview for a Boeing publication, Selby said, “We’ve tended to put [quality improvement] under productivity, with the connotation that you have to work faster or something like that. There is so much to be gained by eliminating waste — not making as many mistakes as we do. We have to continue to come up with better processes and methods to do our jobs. We have to strive to make fewer errors. There’s no question: If you can do something once instead of three times, you’ve improved your productivity.”
Before you can start to put a lean, world-class production system in place, you must identify concrete examples of material waste. Then, get started on waste reduction. These efforts will lead to effective cost-cutting and solid process improvements. Ultimately, both your company’s survival and its success depend on these improvements.
Waste that is hard to see
In most companies, however, the biggest waste is not material such as Selby had strewn on the Boeing factory floor. Instead, it is waste that is harder to see: the failure to leverage resources of all kinds. Taiichi Ohno identified seven types of waste:
1.Waste of overproduction
2.Waste of time
3.Waste of transportation
4.Waste of processing itself
5.Waste of inventory
6.Waste of motion
7.Waste of making defective products
Manufacturing industries tend to rely on advancing technology for productivity and profitability improvements. American companies typically build new factories (and close old ones), add new equipment, and search high and low for costly, high-tech solutions or improvements. Yet history shows us again and again that the biggest resource available to companies is not technology, but people. The failure to leverage the power of people is the greatest single source of waste. I’ll say it again in different words: Focusing on people instead of technology, empowering them to use their potential, is the key to world-class competitiveness. Technology can reduce waste, but not as well, in the long run, as thoughtful people can. A strong team of dedicated people — machinists, analysts, engineers, vice presidents, middle managers, assistants, designers, etc. — can get rid of the wastes that you can’t easily see, as well as the wastes that you can.
The beauty of simplicity
People are your best route to eliminating waste. As simple as that may sound, it’s one of the hardest lessons for many companies to learn. Why? Precisely because it is a simple solution, and we tend to think that solutions, especially the solutions to big problems, should be complicated. Moreover, just because it’s a simple truth does not mean it’s an easy one to act on.
A company that makes the most of its people, however, can become increasingly leaner and pursue stretch goals and strategies. Taking a stretch approach to business literally means “lean everything” — not just lean production but lean marketing, lean administration, lean development and, not least, lean management. A company can’t begin to achieve “lean everything” without developing and focusing the potential of its people.
Compliance is not commitment
Along with the challenge of empowering people to reduce waste, another lesson many companies learn with great pain is the difference between compliance and commitment.
In the 1980s and 1990s, North American companies spent years complying with quality principles without being quite committed to them. They didn’t really begin to change the way they did business until they actually put the education, the theorizing, the philosophizing, and the campaigning into real-life work situations. Compliance is nice, but it tends to mostly reflect lip service or managers who want to keep in step with chic business psychology. Compliance is going through the appropriate motions, but commitment results from the appropriate emotions.
This distinction explains why some companies succeed in turning things around and other companies do not. Having a clearly defined mission statement without the supporting change in structure doesn’t get the job done. Such statements are rhetoric, plain and simple. On the other hand, commitment is rooted in deep passions and beliefs and driven by a sense of urgency to motivate and inspire people to action. Commitment also requires a conviction that there really is no other way. Only commitment succeeds.
The new frontier: people
We need to strike the right balance between people and technology. Technology alone doesn’t win competitive wars. The right technology, applied by people at the organization’s lowest level, who are empowered to design and decide its application, can win those wars.
The “new frontier” for competitive advantage is people, not technology. The most successful companies, not only in manufacturing arenas such as aerospace but also in service-oriented businesses, are those companies that best cultivate and focus human potential. I truly believe it’s that simple.
Out-sourcing is currently in vogue, particularly with North American companies looking for lower labor costs. This trend is misguided, and here’s why: You cannot effectively cultivate and focus the potential of human beings on the far side of the world, or anywhere outside your own organization, over whom your only influence is economic.
Shingijutsu’s Yoshiki Iwata, in his visits to Boeing, took this attitude a step farther. He used to ask us, “Why don’t you do everything inhouse? You think it is cheaper to have a supplier do it, but your people are smart. Your brains can improve these processes, and you can’t improve them if the processes aren’t here for you to observe and adjust. If you think using a supplier would save you 20 percent, decide instead to improve the process by 20 percent.” The smaller the proportion of the work that your company actually does itself, the less chance you have of being better than competitors. They can use the same suppliers as you do.
There are arguments in favor of suppliers, of course, ranging from specialized expertise to capital investments in equipment. Most of these arguments do not apply, however, to the out-sourcing of processes or components you’ve already been handling internally. And as Iwata’s colleague Chihiro Nakao notes, “If you leave processes in unimproved states, other consultants are going to tell you to off-load them. But if you can’t produce a part or product or complete a process well and cheaply, how can you be sure your suppliers can — particularly given that they must add the cost of purchasing processes, billing processes, and perhaps transportation, to get the goods to you? Are they better thinkers than you? Do they know what you want more clearly than you do? Do they have your best interests in mind? Traditional consultants will tell you that suppliers can do it more cheaply, but don’t listen to them. If it is cheaper for suppliers to make your parts, isn’t it cheaper for them to assemble them, too?” One might add design, marketing, and sales to the list. What’s left for your company to do? What’s stopping your supplier from doing it better and putting you out of business completely?
Particularly in the automotive industry today, it’s vogue for big-name manufacturers — really, former manufacturers — to out-source even assembly. Some firms really contribute little more than the marketing of established brands. That business model is fine if consumers truly are willing to pay for the cachet of a name — and will continue to do so for the foreseeable future, even as they figure out the name is a facade. Do you really want to stake the future of your company on that bet? Once you off-load processes, you lose control, and it may be very costly to retrieve them again.
“Don’t even think about out-sourcing,” Nakao says categorically. “It looks to you like Toyota out-sources, but for any product, if they outsource 80 percent of it, they make 20 percent inside. Suppliers have to be able to cut the cost of the product to Toyota in half to get the business.
“Then Company A and Company B might each make 40 percent of the product, but all parts are made in some quantity inside Toyota. If you ask the suppliers who their competition is, they will say ‘Toyota.’ Company A doesn’t worry about B, because they know Toyota will always give half of the work to each supplier. But they do worry that Toyota will take 30 percent of the work inside instead of only 20 percent. That motivates them to continue improving; the enemy is Toyota. And what does Toyota do? Kaizen, every day. So Toyota’s suppliers must, too. If they are that capable, fine. Toyota allows the supplier to have the work. And everyone keeps trying harder.”
Instead of out-sourcing, retain control and improve the process, and you can more than match the savings you think you will gain by outsourcing. In the meantime, you will avoid the crushing morale impacts that out-sourcing initiatives can have on employees.
Committing wholly to the goal of relying on human potential as a central corporate strategy requires courage, ingenuity, integrity, and a passion for the human spirit. The idea gets a lot of lip service and a certain amount of compliance, but not many companies are able to make the full commitment. Fewer still can honor it in ways that work. But the few that can and do are enormously successful.
Boeing’s commitments began with an emphasis on learning. In the early years of the company’s journey, from 1990 to 1991, seven study missions took 100 top executives to visit Japan for tours of the Toyota Motor Company and many other firms. After seeing world-class production systems in Japan, these executives came back with a new vision of what world-class performance was, and they started implementing it. They didn’t wait around; they knew what to do and started doing it. Simple.
But not easy.
