Month: April 2009

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Back to Basics

The Lean Enterprise Institute is taking up a “Back to Basics” theme.

But what, exactly, are “the basics” of the Toyota Production System?

This is critically important. Permit me to cite an analogy.

Look at a house. What do you see? What would you say are “the basics?”

At first glance, all houses have walls, a roof. They have a door. They are divided into rooms for various activities and purposes. A “basic house” is going to have an entry, a living room, a kitchen, a couple of bedrooms, a bathroom. More complex houses will have more rooms, fancier architecture, higher grades of materials, be bigger, but the basics are all there.

OK, that is a basic house.

I make this point because when people talk about the basics of “lean manufacturing” they talk about the things you can see. If I open up Learning to See, and turn to the “Green Tab” the chapter’s title is “What Makes A Value Stream Lean.” That chapter is primarily (right after the talk about waste and overproduction) a list and description of “Characteristics of a Lean Value Stream.”

  1. Produce to your takt time.
  2. Develop continuous flow wherever possible.
  3. Use supermarkets to control production where continuous flow does not extend upstream.
  4. Try to send the customer schedule to only one production process.
  5. Distribute the production of different products over time at the pacemaker process (level the production mix).
  6. Create an “initial pull” by releasing and withdrawing small, consistent increments of work at the pacemaker process. (Level the production volume).
  7. Develop the ability to make “every part every day” (then every shirt, then every hour or pallet or pitch) in fabrication processes upstream of the pacemaker process.

Now I have to say right now that I have always loved this chapter. I cannot count the number of people I have referred to “The Green Tab” as a fundamental primer. It includes all of the basics, just like our house.

In their latest book, Kaizen Express, the LEI has brought out some more detail on these same points, and added a few “rooms” to the house. One critical aspect they add is various topics that add up to quality. (It’s kind of like leaving out the kitchen or the bathroom if you don’t mention that.) They talk about zone control, line stop, and countermeasures to quality problems. (I will do a full review on this book soon.)

Then on page 99 starts four pages on Employee Involvement where they talk about practical kaizen training (PKT), and suggestion programs.

Let’s go back to our house. The things we said were “the basics” were the things you see when you look at it from the street, and go inside and walk around in it. But in an industrialized country, the modern single family residence is a miracle of accumulated knowledge and technology. The basics are the things that keep it from sinking into the ground, from catching on fire, from leaking and rotting. They are the things you can’t see, but unless you understand them, your house may look like the one next door, but it won’t perform like the one next door.

I have been in dozens of factories that had takt time, some semblance of continuous flow, pull systems, supermarkets, all of that stuff. They had run hundreds, maybe thousands, of kaizen events, and had suggestion programs. All of these things were visible just by walking around.

Yet most of them were stuck. They had reached a point when all of their energy was being expended to re-implement the things that had slid back. Three steps forward, three steps back.

They had read Ohno’s book, they knew the history of the Toyota Production System. They understood all of the engineering aspects of the system, and could install very good working examples of all of it.

But something wasn’t there, and that something is the foundation that keeps the house from sinking into the ground. It is the real basics.

Kaizen Express hints at it on pages 99 – 102, it is true employee involvement. And here is a real basic: Employee involvement is created by leader involvement. Not just top leaders, all leaders, at all levels.

To be honest, a lot of technical specialists don’t like that very much for a couple of reasons. First, engaging the leaders, at all levels, is really hard. It is a lot easier to get things done by going straight to the gemba and doing it ourselves – we show people how to do it, we “engage” them in the initial implementation, and everything is wonderful for the Friday report-out.

But I contend that the foundation of the Toyota Production System is the leadership system. It is the system of leadership that holds up all of the walls that we call takt, flow and pull. Those things, in turn, enable the leadership system to function better. The “characteristics of a lean value stream” evolved in response to the leadership system, in order to strengthen it. It is a symbiosis, an ecosystem.

“But it didn’t start out as a leadership system.” No, it did not. The history of how the Toyota Production System evolved is well documented, and the leadership system was less designed than it evolved. But let’s go back to our house analogy.

Primitive houses only have the “basics” I described above. They don’t have sophisticated foundations, some are just built on skids (if that). But because they lack the basics, most of those primitive houses don’t last.

And there is the paradox. When we say “back to the basics” we cannot only refer to the chronological history of how the system developed. We have to take the most successful, most robust example in front of us today, and we have to look at what fundamental thing holds this thing up and lets it grow more robust every day.

So let’s take a look at what Toyota teaches when they teach someone the basics.

The article Learning to Lead at Toyota was written back in 2004, but I still feels it offers a lot of un-captured insight into the contrast between what Toyota thinks are “the basics” and what most others do. I want to encourage everyone to get a copy, and not just read it, but to parse it, study it, and use it as an “ideal condition” or a benchmark. Compare your “lean manufacturing” and your leadership systems to what is described in here. Ask yourself the question:

Do we really understand the basics?

Note: There are now links to my study guides for Learning to Lead at Toyota on the Resources page.

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Is Quality Losing to Cost?

Tom posed an interesting question on The Whiteboard.

Has anybody else noticed that quality is taking a back seat lately due to the tough economic conditions? Things are tough everywhere, but I’m seeing more and more evidence of companies taking short cuts (to cut costs) where the end result is poor quality.

I’ll say what I think, but I would also like to invite anyone else to comment as well. This is an important issue.

Background:

First, it is important to understand that the term “quality” carries at least three definitions. There may be more, but here is how I came to understand them.

  1. Grade: The product’s position in the market.
  2. Fitness for use: Whether the product is suitable for the customer’s intended purpose.
  3. Conformance to specification: Whether the product is as the producer intended it.

Some examples.

Grade:

In air travel, there are two (and sometimes three) grades of service offered on a typical flight. Coach is basic transportation. It gets you there quickly and safely. First Class gets you there just as quickly and just as safely as coach. But there are more amenities offered, the seats are bigger, in general it is more comfortable. First Class is a higher grade of product.

In the automobile market, we have expensive luxury cars, such as top-end BMW or Lexus. We have middle grade cars, we have basic cars. Even within a specific make and model, there are different trim levels that each carry a different “feel” as well as a different price.

Thus, the grade of the product reflects an effort to create higher value by adding features and amenities that probably go above and beyond the basic purpose.

It is important to understand that the grade of the product is set by the producer’s decisions on market position. They are trying to deliver more value in order to command higher prices.

Fitness for Use:

Fitness for use is defined from the perspective of the customer. The product is sold as being suitable for some purpose, and the customer buys it to fill a need. How well it fills that need is ultimately defined by the customer’s experience of the product in use. This is probably the easiest to screw up, as many companies tend to rely on internal experts or the highest-paid-person’s opinion rather than getting their shoes dirty and actually paying attention to what customers do with the product. It is easy to delete or alter a feature which turns out to be very important to the customer. Customers can also surprise you and find uses which were never intended by the original design.

Conformance to Specification:

Once the research is done, and the product designed, some kind of production system must be established to actually produce the product (or actually deliver the service, it is the same issue). Conformance to specification defines how well the product delivery actually matches the design intent. Where a Hilton Hotel may offer a higher grade of room than Motel 6, if both rooms are clean, ready for guests, and meet their respective hotel’s standards, then both conform to specification. The Hilton will have some kind of specification for how they deliver room service. Motel 6 has a Denny’s next door.

One More Example

If I am interested in knowing what time it is, a $35 Timex will do exactly the same job as a $5000 Rolex. With today’s quartz technology, they are both accurate within a second or two per month. So if knowing the time is my intended use, both watches are fit for use.

Clearly, however, there is a difference. The Rolex is a higher grade of product than the Timex. If my purpose is to demonstrate wealth or success, or present an extravagant gift, the Rolex is also more fit for that use.

But if they each work out of the box exactly as intended, have no scratches or other defects, then both watches conform to the specifications of their respective manufacturers. Both companies have excellent reputations for “quality” in that sense.

So now to Tom’s question.

Companies facing dramatically declining sales are under great cost pressure. Very few have limitless sources of cash to burn, and publicly held companies must also maintain the goodwill of their investors. In addition, many companies have credit covenants which require them to maintain certain ratios of debt, liabilities, assets, liquidity, etc, or face issues with their banks.

With that background, let’s look at how these pressures could drive decisions that affect quality.

Deliberate decisions are most likely to affect grade. Cheaper materials may be substituted, amenities or extra services can be cut back. Anyone who flys frequently has seen the steady erosion in previously “free” services and amenities as airlines come under increasing cost pressure. The danger here, of course, is that these decisions also reduce value in the eye of the customer, and with that, can reduce the price they are willing to pay or send them to a competitor. Thus, these “savings” can end up backfiring unless the entire industry is following pretty much the same path.

I think the more dangerous effect of turbulent times, however, is in the area of conformance to specification. But I don’t think this is the result of deliberate shortcuts. Rather, I think it is an unintended consequence at the intersection of a couple of other factors.

First, relatively few companies, be they production and manufacturing or service delivery, have an effective system of assuring that things are done the way they expect. When times are good, and employment is stable, the people develop their own individual feel for what is right and do their very best to do it. The level of quality will reach some kind of tolerable norm which may, or may not, conform to the specification.

Now mix things up. Lay off some of your workers, and move the others around. Different people are doing different jobs. Because the work is not well specified in the first place, and because there is likely no process to transfer “how to do it” (like TWI Job Instruction), people have to learn the hard way – by making mistakes. Add to the mix a perceived time pressure, and people will take shortcuts in a good faith effort to get the job done the way they think they are expected to.

If the “specification” itself is poorly defined as well, then the new “norm” for the organization could very well end up different (and worse) than what it was before. Add to that a management culture of acceptance of “what is, is” (an excused-based culture, more common than you think, especially in large companies), and you get a seeming erosion.

So here’s what I think – if Tom is seeing an erosion of quality, he is likely seeing the effect of the economic turmoil rather than deliberate decisions to cut corners. Further, is impossible to deliberately cut corners if no one has ever defined where the corners are in the first place. And that situation is more normal than not.

What is your view?

Do you see quality eroding?

If so, why do you think it is happening?

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Reprise (again) – Know Your Supply Chain

AP IMPACT: Chinese drywall poses potential risks

Although I hate to judge before all the facts are in, it’s beginning to
look like a huge set of customers got burned (once again) by quality problems from China.

Before I go any further, I have to say that I have spent loads of time in China. I have very close Chinese friends. The Chinese are like everyone else in the world – hard working honorable people. But, just like everywhere else in the world, now and then someone takes shortcuts with known technology, or doesn’t understand the “Why?” behind industry standard practices, and rarely, there is a real crook.

The great question, though, is “To what degree are the importers, builders and contractors culpable, and to whom?”

The U.S. arm of the Chinese company is swearing up and down that their product meets U.S. standards. Pretty standard rhetoric for muddling the issue.

I don’t even want to get into the legal issues here. They are going to be very messy.

But if you bought a car, and it turned out that the imported, outsourced seats were emitting noxious fumes, I doubt you would turn to the seat manufacturer to resolve the problem.

OEM’s? Know your suppliers, know your supply chain.

Unfortunately we will end up with a ton more government regulation as a result of industry being unable or unwilling to assure its own quality, and that is going to cost all of us.

Kind of makes the term “toxic assets” more real, doesn’t it?

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John Shook: Purpose, Process, People

Like many of us, John Shook has been commenting in his column about GM at a precipice seemingly of its own making. One of the questions he has addressed in a couple of columns is “What did GM learn from NUMMI?” or perhaps more precisely, “Why didn’t GM learn from NUMMI?”

John’s latest column, titled Purpose, Process, People, points out rather bluntly:

My answer to that question remains that GM actually learned far, far more than most people realize about process but didn’t get very far with the people part.

In an earlier column, John raises the possibility that perhaps GM and Toyota each view the world through different lenses of vastly differing purpose (what I could call core values, the things that aren’t written down, they just are within an organization).

Yes, GM wants to survive — hence the humbling appearances on Capitol Hill by Wagoner and the two other Detroit CEOs. Yet had GM been seeking long-term survival a la Toyota, it would have made different decisions all along. GM wants to survive, all right, it wants to survive so it can continue to make money. Toyota on the other hand, wants to make money to survive.

Think about that: Toyota makes money to survive; the Detroit 3 exist (survive) to make money. Those contrasting senses of purpose will take you down very different paths.

This conclusion lines up perfectly with GM’s behavior regarding their NUMMI opportunity.

…  And so it went — Toyota running NUMMI operations, GM selling Novas while dispatching people to NUMMI to learn.

… [by 1994] at least, GM still didn’t know how to make a small car profitably and still didn’t understand TPS. And here we are today. So the question remains: why not?

Why not indeed?

So we have a situation where Toyota is running a GM car plant, building an excellent small car. GM seems to have been treating it as a factory, with an ROI, rather than for what it really was: A learning laboratory for the GM as a whole. Yes, they sent thousands of GM people there “to learn” and then brought them back into their old work environments and what? Somehow expected these smart people to transform the company?

Here is what I think happened.

NUMMI was a factory. So who do you send to a factory?

You send factory managers. You send line managers. You send supervisors. You send people who have jobs in a factory so they can work with their NUMMI counterparts and learn from them. Makes perfect sense, doesn’t it?

And, as a sidebar to all of this, what was Toyota learning? They were learning how to transplant the TPS outside of Japan. They were learning how to teach their system to people who didn’t grow up in it.

Let’s look at the process Steven Spear outlines in Learning to Lead at Toyota. In this case, an experienced, seasoned senior leader comes from a U.S. auto company to Toyota. They need to teach him “how to lead at Toyota” and they need to do it reasonably quickly.

They don’t sit him down to Death By PowerPoint orientations. They don’t have him go through the financial. (at least not right away). They don’t put him in classes. And most importantly, they didn’t have him shadow another factory manager to “learn the job.”

Instead, they send him to the shop floor to, essentially, learn to be a Team Leader – a senior hourly Team Member. He has to un-learn how to provide the answers, and learn how to guide people to their own solutions. He has to learn to let go of the goals and targets and understand that those goals belong to the Team trying to meet them, not the boss. His job is simply to help them push their capabilities.

So what would it have taken for GM to have a chance to “get” what the Toyota System is all about?

Where was Roger Smith? Where were the other executives from Detroit? Ironically, this time period really marked the beginning of GM’s decline. My conjecture was that NUMMI was “a factory” and these senior corporate leaders felt they had nothing to learn there that could not be picked up with a tour and a briefing. It was profitable, they were sending “their people” to learn why. Good ‘nuf.

Actually, this pattern happens in nearly every “lean manufacturing implementation” out there. The senior leadership is “committed” to the point where they are willing to hire the experts and have them teach people how to “be lean.” But, in truth, this is about changing the way the company is run. Very few “lean implementations” succeed without a transition in top leadership. Of those which do succeed, few of them survive the next leadership transition unless that person was carefully developed within the system.

Kaizen is a process of learning, and only people can learn.


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4S, 5S, 6S

Staight left an interesting post on The Whiteboard a couple of days ago:

You’ve discussed 5S but Novaces, for example, has a 6S system. I think it would be great if you talked about different consultant companies and their processes.

Novaces, it turns out, is a consultancy apparently based out of New Orleans. In the nature of full disclosure, I have to say that I know nothing about them other than what is on their web site plus they (apparently) teach 6S rather than 5S. I render no opinion either way about their competency or capability.

There are a lot of good consultancies out there. There are a lot of mediocre ones. There are some that are charlatans. I suppose one of the great ironies of the business is that, if you are capable of reliably vetting them on their competency, you probably don’t need them in the first place.

For the sake of the discussion, though, I want to limit myself to the population of really good ones. These are the ones who are primarly there to teach the clients how to engage in the kind of sharp critical thinking that charactarizes high-performance organizations.

The good consultancies will have an approach that applies the same principles. And here is the key point:

As long as the basic principles of the thinking structure get embedded, it really does not matter that much how they do it. If a consultancy wants to differentiate itself by using 6S, or 4S, instead of 5S, there is little difference in the result if they are any good.

Let’s take the different numbers of ‘S’ and really take a look at why this is true.

Though they may have adapted 5S today, originally (a long time ago) Toyota taught 4S. The idea of “self discipline” or “sustaining” didn’t come into it because that was embedded thoroughly in the culture. It was taught elsewhere.  Likewise for safety. It isn’t that they leave it out because they didn’t have it called out as an ‘S’, they just include it somewhere else.

What is the 6th S? I don’t know what Novaces uses, but I have most commonly seen it as Safety. It isn’t a bad thing to include it, but in reality, as long as relentless daily problem solving is applied to safety issues somewhere, somehow, there isn’t a right or wrong way to teach it or do it.

Some consultants claim to “fill in the gaps” of “lean manufacturing.” They add hyphens or create three letter abbreviations to differentiate their product. Because the term “lean manufacturing” originally referred to the observed results of the Toyota Production System, and not the system itself, there is a lot of room to make claims that it leaves things out because the method was never really defined in a holistic way.

“Lean manufacturing” not withstanding, IF you stipulate that “lean manufacturing” is the “Toyota Production System” and then understand that, to Toyota, this is their entire management system – it encompasses everything they do – then to claim “lean manufacturing” has gaps is to claim that Toyota somehow leaves something out. I don’t think so. Sure, they slip up like everyone else, but their management system is pretty thorough.

For example, I have heard things like “we are lean, now we need quality.” Hello? If you aren’t obsessive about quality, if you aren’t applying immediate detection, stop, correction and countermeasure investigation to every quality problem, how can you possibly claim you are “lean?” If you aren’t doing these things, you are just making defective goods very efficiently.

But I also understand that there ARE companies that think they have implemented lean, and have totally left out the quality component. So if it makes sense to them, (the customer) to find a consultant to help them “fill in the gap” then great. They still get there.

And that is the point. Getting there.

One last point. To get there you have to pick a course and stick with it. What trips up a lot of companies is they get to the point where they are “stuck” without examining (in the mirror) the factors that are causing it. Instead, they switch course, and say “AH! It must be Theory of Seven Sigma” that will get us there. But in reality, because all of these approaches require a change in the way everyone thinks, without that fundamental shift, they end up in the same place a little later…

Cause remember, no matter where you go… there you are.

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The Market Sets Prices, Not The Supplier

Murdoch says papers should charge on Web – Yahoo! News

Robert Murdoch believes that newspapers will have to start charging people for access to their online editions. That’s well and good, so long as the laws of demand and supply balance at a point where that works.

But so far, that isn’t working. In today’s web 2.0 world, news and quality commentary is available pretty much anywhere.

In the words of a famous folk singer from Hibbing, Minnesota, “The times they are a’changin.”

Still, in times of shifting paradigms, people cling to what they know, and that includes business models that have worked in the past.

I predict we will see the traditional publishers concede more and more of the “everyday” news to the “free” online model, and retreat into what they perceive as more and more specialty premium content.

At some point they will be very good at delivering a product that over-delivers the needs of their customers.

The “flip” described by Clayton Christensen in “The Innovator’s Dilemma” is already occurring in news delivery. This is just part of the story.