Lean Production. John Black

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.

2

       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.