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Getting Lean — the Route to World-Class Production

Lesson 2: If you are going uphill and taking one step at a time, you are headed in the right direction.

Many companies are plotting a course toward becoming a world-class enterprise. Not many, however, understand that a lean, world-class production system is neither new nor easy to implement. Companies like Toyota that are successful world-class manufacturing operations have accomplished their status one arduous step at a time. There is no such thing as becoming a world-class company overnight, and no such thing as becoming world-class at all without a continuous-improvement tool in every employee’s tool belt. That’s because world-class manufacturing is centrally concerned with production processes; culture change is not enough.

Toyota’s history is discussed in Chapter 3, but the elimination of waste had its own early advocate in the United States.

Henry Ford: The father of cycle time management

Henry Ford hated to waste time. In 1926, he wrote, “Time waste differs from material waste in that there can be no salvage. The easiest [to make] of all wastes, and the hardest to correct, is the waste of time, because wasted time does not litter the floor like wasted material.” Between 1913 and 1914, Ford doubled production with no increase in the workforce. Between 1920 and 1926, cycle time or production lead time in his operations was reduced by 90 percent from 21 days to two days.³

The secret of Ford’s success in creating a new process model for automobile manufacturing was continuous-flow assembly. The concept of a moving assembly line, one that produces product at the rate at which the product can be sold — no less and no more — is the foundation of lean, world-class production. Continuous-flow assembly eliminates the wastes of inventory and batched work in process, and reducing cycle time is critical for adapting the flow to the pace of the market demand.

The Toyota Production System: Involve everyone

Toyota was one of many Japanese manufacturers trying desperately to build something from what little was left of Japanese industry following World War II. Because his company’s survival depended on it, Taiicho Ohno took Ford’s continuous-flow concept and ran with it. Instead of Ford’s reliance on maximum lot sizes and minimum numbers of setups, Ohno strove to reduce lot sizes to eventually produce each and every product uniquely. Instead of grouping machines together by type, Toyota arranged machines to match the sequence in which they were used in the manufacturing process, so that products could flow in smaller lot sizes, even individually, from one machine to the next. The triggers used to control this flow represented another big change.

Similar to, but more strict than, Ford’s original production system, the Toyota Production System is founded on two basic requirements:

•First, top management must make a strong, visible commitment to the system and participate directly in implementing it. Middle managers must be instructed to do likewise.

•Second, all employees must participate in the system. Full participation is essential because the Toyota Production System works by establishing a smooth, continuous flow through the entire production sequence.

As you might note from that description, the Toyota Production System is not for the apathetic. It places pressure on both managers and employees to be involved and vigilant in making improvements. This pressure, however, makes for a stimulating workplace where managers and employees can take charge of their collective destiny.

Lean thinking

Before you start to think about how you might apply continuous flow or the Toyota Production System to your business, however, you must understand lean thinking.

Lean thinking is a new paradigm. World-class production requires less of everything compared with mass production. As noted by James P. Womack and Daniel T. Jones in their book, Lean Thinking: Banish Waste and Create Wealth in Your Corporation⁴, “lean” means:

•Half the human effort in the factory.

•Half the manufacturing space.

•Half the investment in tools.

•Half the engineering hours to develop a new product in half the time.

The on-site inventory required is far less than half. Lean means fewer defects and the ability to produce a greater variety of products.

When a lean-thinking enterprise achieves these “half” reductions, it tries again to reduce by half. This belief that you can always find more waste to cut away will lead you to a lean, world-class production system.

The important number: zero

Understanding these basics of lean production is necessary in making the shift to a world-class paradigm. The world-class paradigm is outside most managers’ thinking and far outside their comfort zone. The world-class paradigm is zero — zero defects, zero change-over time, zero inventory, even zero quality control. The word zero suggests both a bull’s-eye or target value and an aggressive agenda for improvement. Such goals are basic to world-class production.

The “Nine Zeros” of world-class production, as set forth by author and lean consultant Thomas L. Jackson:

1.ZERO customer dissatisfaction

2.ZERO misalignment

3.ZERO bureaucracy

4.ZERO stakeholder dissatisfaction

5.ZERO lost information

6.ZERO waste

7.ZERO non-value-adding work

8.ZERO breakdowns

9.ZERO lost opportunity

The concept of zero tends to invite resistance. Managers typically say, “Reduction is fine, zero might be a good theoretical goal, but we can’t possible reach zero in ‘real life.’” We are part of a culture that believes defects and waste are inevitable, or at least, the costs or risks of completely eradicating them are not worth the incremental gain. We use this belief to tolerate and even perpetuate them.

Yet there are serious consequences to accepting any performance short of zero defects. And there are also examples all around us of processes that, although they may not have quite reached zero defects, are much, much closer to that ideal simply because their managers and their customers refuse to tolerate more. Don’t believe me? Here are some examples of the errors U.S. society would have to put up with if we were willing to accept a defect rate of even one-tenth of one percent (0.01 percent):

•Two major airliner crashes each week

•500 mistaken surgeries each week

•16,000 pieces of mail lost every hour

•22,000 erroneous bank account deductions each day

•2 million lost IRS documents each year

•Between 11,500 and 24,500 preventable hospital deaths (due to error, not disease) each year

The responsible institutions have become as good as they are now because society will accept nothing less. Many organizations would be ecstatic about a 99.9 percent quality performance, because that would be so much better than usual. But they will never reach even that level of imperfection until they aspire beyond it to zero. Perhaps, unlike the air travel industry, they simply have not faced the pressure to do so — or perhaps they are already under that pressure, don’t realize it, and will simply go out of business rather than meet the challenge. You can be sure that if they do go out of business, they won’t blame their tolerance for errors and waste. They’ll blame global competition, an uneven playing field, corporate acquisitions and mergers, or a host of other realities they didn’t feel they could control, rather than their own wasteful and error-prone processes.

Zero defect performance, with zero waste, is possible. This is a key tenet of lean thinking. Lean, world-class production starts by removing all waste from production and then goes much further. It also focuses on removing all waste from the organizational structure and from management practices. It is aggressively customer-focused, with “customer focus” viewed as nothing less than eliminating customer dissatisfaction by knowing and serving the customer well.

Leading your company toward flawless performance

In a lean, world-class production system, the job of leaders is to plan carefully and execute flawlessly to avoid misalignment of goals. The system fights bureaucracy by empowering employees and managing through teams. The culture of empowerment eliminates waste by instilling a mind-set of waste elimination. Over time, all non-value-added work is eliminated. World-class maintenance strives to eradicate breakdowns and all equipment-related losses. Finally, world-class engineering eliminates lost opportunities to respond to market changes.

It takes time to get to the Nine Zeros, but working toward them also buys time by helping you build an organization that can still be thriving and growing a century from now. The proof is in the legacy of a Japanese weaver who started working toward zero in 1902 and whose name still resonates in markets and business schools around the world.