Business Book Review

Saturday, March 24, 2007


“TPS is not a toolkit. It is not just a set of lean tools. … It is a sophisticated system of production in which all of the parts contribute to the whole. … When looked at more broadly, TPS is about applying the principles of the Toyota Way.”
“If production levels—the output—varies from day to day, there is no sense in trying to apply those other systems, because you simply cannot establish standardized work under such circumstances.”
“First work out the manual process, and then automate it. Try to build into the system as much flexibility as you possibly can. … And always supplement the system information with ‘genchi genbutsu,’ or ‘go look, go see.’ ”
Liker contends that if a company does not understand the culture behind TPS, even though it has all the tools and techniques of TPS in place, the real work of implementing lean has just begun. Essentially, TPS is about applying the principles of the Toyota Way so that workers are contributing to the improvement of the system and of themselves. The Toyota Way encourages, supports, and demands employee involvement, for it is people who bring the system to life by working, communicating, resolving issues, and growing together. Thus, it is a culture even more than a set of efficiency and improvement techniques.
Based on the author’s 20 years of studying Toyota, he offers 14 principles that constitute the Toyota Way and form the basis of the culture behind TPS. For ease of understanding, he divides these principles into the four categories—Philosophy, Process, People/Partners, and Problem Solving—that correlate to the four high-level principles (genchi genbutsu, kaizen, respect, and teamwork) explained in Toyota’s own internal Toyota Way training document.
Long-Term Philosophy
Principle 1: Base management decisions on a long-term philosophy, even at the expense of short-term financial goals.
The Right Process Will Produce the Right Results
Principle 2: Create continuous process flow to bring problems to the surface.
Principle 3: Use “pull” systems to avoid overproduction.
Principle 4: Level out the workload (heijunka)—work like the tortoise, not the hare.
Principle 5: Build a culture of stopping to fix problems, to get quality right the first time.
Principle 6: Standardized tasks are the foundation for continuous improvement and employee empowerment.
Principle 7: Use visual control so no problems are hidden.
Principle 8: Use only reliable, thoroughly tested technology that serves your people and processes.
Add Value to the Organization by Developing Your People and Partners
Principle 9: Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
Principle 10: Develop exceptional people and teams who follow the company’s philosophy.
Principle 11: Respect your extended network of partners and suppliers by challenging them and helping them improve.
Continuously Solving Root Problems Drives Organizational Learning
Principle 12: Go and see for yourself to thoroughly understand the situation (genchi genbutsu).
Principle 13: Make decisions slowly by consensus, thoroughly considering all options: implement decisions rapidly (nemawashi).
Principle 14: Become a learning organization through relentless reflection (hansei) and continuous improvement (kaizen).
Throughout the company, every person has a philosophical sense of purpose that supersedes any short-term decision making, and all work, grow, and align the entire organization toward a common purpose that is bigger than making money. Generating value for the customer, society, and the economy is the starting point, and every function is evaluated in terms of its ability to achieve this objective. Each person understands his or her place in the history of the company and works to bring the organization to the next level. Thus, individuals strive to be responsible, to act with self-reliance, to trust in their own abilities, and to maintain and improve the skills that enable them to produce added value.
Toyota strives to cut back to zero the amount of time that any work project is sitting idle. When a customer places an order, this triggers the process of obtaining the raw materials needed for that specific order. These materials then flow immediately to supplier plants that immediately fill the order with components that flow immediately to a plant and are assembled. The completed order then flows immediately to the customer (the entire process is designed to take a few hours or days, rather than a few weeks). Creating this kind of one-piece flow, whether of materials or of information, and using small lots and closely situated processes, exposes any inefficiencies or defects that demand immediate attention, motivating everyone concerned to fix the problem. It is an approach that builds in quality, creates real flexibility, results in higher productivity, frees up floor space, improves safety, improves morale, and reduces cost of inventory.
Toyota provides its downline customers with what they want, when they want it, and in the amount they want. This practice of letting consumption initiate material replenishment is the basic principle of JIT, which minimizes work in process and warehousing of inventory by stocking small amounts of each product and frequently restocking, based on what the customer actually takes away. Thus, Toyota is responsive to day-by-day shifts in customer demand and does not rely on computer schedules and systems to track wasteful inventory.
Pulling a system to avoid overproduction goes hand in hand with heijunka. Eliminating waste is just one-third of the equation for making lean successful. It is also necessary to eliminate any overburden to people and equipment (muri) that comes as a result of uneven production schedules (mura). Thus, as an alternative to the stop/start approach of working on batches that is typical at most companies, Toyota levels out both volume and product mix of all manufacturing and service processes. Instead of building products according to the actual flow of customer orders, which can swing up and down wildly, it takes the total volume of orders in a period and levels them out so the same amount and mix are made each day in a predictable sequence, spreading out different product types and leveling volume. This provides Toyota the flexibility to make what customers want when they want it, reduces the risk of unsold goods, balances use of labor and machines, and smoothes demand on upstream processes and the plant’s suppliers.
Nonetheless, warns Liker, there are some basic requirements to meet before any of these benefits can be garnered. Not only must the first three principles, be in place, principles five, six, seven, and eight must also be adhered to. Because Toyota believes that quality should be built in, devices are built into machines to detect abnormalities and automatically stop an operation. Moreover, in the case of humans, the company gives them the power to push buttons, or pull cords—called andon cords—which can bring an entire assembly line to a halt. Every team member has the responsibility to stop the line every time something is out of standard. Thus, quality is the responsibility of every individual, and every individual is empowered to make it happen.
Because building in quality is a principle, not a technology, quality control is simple and involves team members, rather than a lot of complex statistical tools. It entails: going and seeing, analyzing the situation, using one-piece flow and andon to surface problems, and asking “Why?” five times when a problem is uncovered, in order to get a root-cause analysis and to discover the proper countermeasures.
At Toyota, standardized work is not intended to be a coercive management tool imposed on a hapless workforce; quite the contrary. Rather than enforcing rigid standards that make jobs routine and degrading, standardized work is the basis for empowering workers and innovation. As a foundation for flow and pull, the organization uses stable, repeatable methods everywhere to maintain the predictability, regular timing, and regular output of its processes. In this way (by standardizing today’s best practices), it can capture the accumulated learning about a process up to a point in time. This allows creative and individual expression to emerge from those actually doing the work so that they can improve upon the standard and hand this learning off to the next person.
In Japan there are “5S programs” for eliminating wastes that contribute to errors, defects, and injuries in the workplace (i.e., for cleaning it up, making it visual). These five S’s are: (1) sort—separate items and dispose of what is not needed); (2) straighten—make a place for everything and put everything in its place; (3) shine—as a form of inspection, clean up, so as to expose abnormal conditions that could hurt quality or cause machine failure; (4) standardize—develop systems and procedures to maintain and monitor sort, straighten, and shine; and (5) sustain—impose self-discipline to maintain a stabilized workplace as an ongoing process of continuous improvement. Nonetheless, the Toyota Way is not about using 5S to maintain a clean and shiny environment, but to support a smooth flow and to help make problems visible.
At Toyota, visual control refers to the design of JIT information of all kinds, integrated into the process of value-added work, to ensure fast and proper execution of operations and processes. Its well-developed visual control system (which includes such lean production tools as kanban and andon) increases productivity, reduces defects and mistakes, helps meet deadlines, facilitates communication, improves safety, lowers costs, and generally gives workers more control over their environment. And, because the Toyota Way recognizes that visual management complements the visual, tactile, and auditory orientations of humans, it seeks a balance and takes a conservative approach to using information technology to maintain its values. It does not avoid information technology, but creatively uses the best available means to create true visual control.
Although Toyota does not lead the industry in acquiring technology, Liker notes that it is a global benchmark on how to use value-added technology that supports the appropriate processes and people. At Toyota, new technology is introduced only after it has been thoroughly evaluated and tested, with a broad cross-section of people, to ensure it adds value to the process and does not conflict with the principles of valuing people over systems, using consensus decision making, and eliminating waste. If it meets these criteria, it is used to support continuous flow in the production process and help employees perform better, according to Toyota Way standards.
Throughout Toyota’s history (with the Toyoda family, behind the scenes, carefully selecting and grooming), key leaders have been found within the company, at the right time, to shape the next step in the company’s evolution. Unlike typical U.S. companies that at every crisis, go “shopping” for new CEOs and presidents to take them in new directions, Toyota develops its leaders to live and thoroughly understand its genchi genbutsu culture day by day. Leaders must demonstrate this ability and understand how work gets done at the shop-floor level. Leaders must teach their subordinates the Toyota Way, which means they must understand and live the philosophy. And, they must support the culture continuously so that it can create the environment for a learning organization and lay the foundation for genuine long-term success.
Toyota encourages its employees to work diligently, to do their jobs perfectly, and to strive for daily improvement by building a system that conforms to the principle of developing exceptional people and teams who follow the company’s philosophy. This is not a matter of adopting simple solutions or applying motivational theories as an afterthought. Rather, it is about making the training of exceptional people, and the building of individual work groups, the backbone of the company’s management approach—one that integrates the social system with the technical system. Toyota’s “respect-for-humanity” social framework and its culture of continuous improvement fully support the system in which one-piece flow drives positive problem-solving behaviors and motivates people to improve.
Toyota also follows a principle of finding solid partners and growing together with them so both can benefit in the long term. New suppliers must prove their sincerity and commitment to Toyota’s high performance standards for quality, cost, and delivery. If they demonstrate this, they get larger orders, are taught the Toyota Way, and adopted into the Toyota family. Once inside, they are not kicked out except for the most egregious behavior. As Ohno has stated, “Achievement of business performance by the parent company through bullying suppliers is totally alien to the spirit of the Toyota Production System.” It is unthinkable for the company to switch suppliers simply to save a few percentage points in cost. Nonetheless, Toyota is not an easy mark. Just as it challenges its employees to improve, it challenges its suppliers to develop by setting a series of aggressive targets and challenges.
Liker has found that genchi genbutsu is the factor that most distinguishes the Toyota Way from other management approaches. Tables and numbers may measure results, but they do not reveal the details of the actual process being followed every day. Thus, whether they are in manufacturing, product development, sales, distribution, or public affairs, people trained in the Toyota Way take nothing for granted, nor do they rely on reports, but go and see for themselves. Moreover, observing is not enough, employees and managers must also “deeply” understand the processes of flow and be able to provide critical evaluations and analyses.
According to Alex Warren, former senior vice president of Toyota’s manufacturing plant in Kentucky, Toyota will spend nine to ten months planning a yearlong project. Then it will implement in a small way with a pilot project and be fully implemented by the end of the year, with virtually no remaining problems. This is in direct contrast to most American companies that tend to spend about three months planning, before implementation, and then spend the rest of the year correcting all the problems they encounter.
For Toyota, how a decision is arrived at is just as important as the quality of the decision. Underlying the entire process of planning, problem solving, and decision making lies careful attention to every detail including: (1) finding out what is really going on (genchi genbutsu is an important part of this); (2) understanding underlying causes (asking “Why?” five times); (3) broadly considering alternative solutions and developing a detailed rationale for preferred solutions; (4) building consensus within the team, including employees and outside partners; and (5) employing very efficient communication vehicles to complete the first four items, preferably using one side of one sheet of paper. This five-step approach helps to uncover facts that could lead to many problems down the road, it gets support from all parties before implementation begins, and a great deal of learning is achieved up front before anything is planned or implemented.
Liker believes that this last point, learning, is Toyota’s greatest accomplishment. The company is a true learning organization, for it views continuous improvement as a relentless companywide process in which superiors motivate and train subordinates, predecessors do the same for successors, and team members at all levels share knowledge. As he has emphasized, the Toyota Way is far more than tools and techniques—it is designed to push everyone to think and grow through a process in which mistakes are used as opportunities for learning. This involves: perceiving the problem, clarifying it, determining the root cause of the problem, providing effective countermeasures, evaluating the results, and standardizing the approach. Then, the new knowledge is transferred to the right people so as to make it part of the company’s repertoire of behavior.


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