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August 29, 2005

Effective ERP Implementation

I recently read about a Japanese company called OKI Electronics that went through implementing a new ERP system. They had a few good rules that I thought were quite smart and something I think all of us can learn from.

ERP Implementations - we all hear of nightmares trying to implement them, of work becoming harder once they were implemented, of IT people complaining that no-one tells them what they really want, so they have to keep re-doing heir work. Finally, in order to save time and effort and to meet a deadline, people having to change the way they work to match the system.

People having to change the way they work to match the system. Isn't there something philosophically wrong with that? If everyone who buys the software has to do their operations the same way, where does the competitive advantage go? That's a scary thought.

In order to combat this, this company made some rules for Lean ERP implementation:

1. What can be done visually or structurally will not be made part of the computer system. E.g. If scheduling of sub assembly is done by Kanban, then that would not be part of the computer system.

2. The role of the system will be regulated to capture and store necessary data. Data processing must be done in accordance with the IT skill level on the Gemba. (Gemba in this case will mean engineering, sales, shop floor).

3. IT's role will be the following:
a. Establish guidelines for the downloading of data and ensuring security.
b. Teach the different gemba's the skills they need to process the data.

Using this they were able to cut the implementation costs dramatically and were also able to shave down their IT department from 7 people to 2. Also they avoided the expense and waste of having IT come up with methods that were either useless or not very helpful to the gemba, since they people that needed the data were coming up with the method of processing it themselves.

You may think that this is a small 100 person company. This is actually for a $6 billion company. Proof that you don't need an expensive comprehensive system when you "Manage by principles with an eye on the Gemba."

If you are interseted in visiting this company to learn how they are overcoming these challenges, let me know and we'll try to organize a benchmarking tour of them in one of our Japan Kaikaku Experience study missions.

August 28, 2005

Work Content for Line Leads

A line lead (or team leader) is defined as a leader of 5- 6 people in an area. There's a lot of discussion on what a good line lead is. What is a good mix of work content for line leads?

One school of thought is that the lead should be a working lead. Basically he / she is supposed to work 100% and manage their team as well. The other school of thought is that they just need to supervise. Better to try to improve your team's performance by 20% than to work yourself.

One Lean approach is to work 50% of the time and do Kaizen 50% of the time. While this sounds good in theory, it's very hard for the lead to draw the line at 50%. Practically, the lead will end up working 100% of the time or shuffling paper 100% of the time.

While 50-50 is good in theory, can we make a rule that will make it easy to practice? The rules needs to be 50% work and 50% Kaizen. In this case 50% work means "help when the team is delayed". That's it. You can call it 'relief work' rather than line work. If the team is on time, then concentrate on Kaizen. If they are behind, or there is trouble, provide relief.

This does pre-suppose that the line or area to be worked on is staffed adequately without counting the Lead. Since problems will occur, however, the Lead is there to help the team catch up and implement Kaizen so that it becomes a more robust system.

August 27, 2005

Strong Supervision: The Key to Long-term Kaizen

A few weeks ago I had lunch with Tom Berghan, Lean Manager at Genie Industries. He is an avid student of the Toyota Production System and is always good for practical insights into ground-level Lean implementation. Tom observed that as American manufacturers are outsourcing, Toyota is keeping work in-house. When the world is flattening their org charts, Toyota is adding layers of supervision. Toyota is running contrary to several of today's popular trends in manufacturing, yet they are very successful.

Sitting in an airport lounge in Amsterdam, I spotted the article "Flatter is Not Necessarily Fitter" in the Financial Times, August 21, 2005 issue. This article talked about Tom's point, that Toyota is very hierarchical yet successful, seeming to disprove the "the flatter the better" idea of modern organizational theory.

After briefly comparing the effectiveness of Chinese-type family businesses, the success of GE with cutting out levels of middle-management, Honda's ability to form and reform teams effectively within a hierarchy, and Toyota the FT article concluded that it's more important to align the organization structure with the company strategy than to worry about whether it's flat enough.

While this is certainly true, I wonder if it doesn't miss the point. It's not the visible organization structure that matters, it's the function of the positions within the organizational hierarchy and how they control or support those under them that matters.

In a factory when you have work that is flowing one at a time paced to takt time, and workers are empowered to stop the line whenever they spot a problem, you need supervision and team leaders at 1:5 or 1:6 ratios so that immediate response and corrective action can be taken. These supervisors also need management support for problems that are outside of their scope of influence. If managers have to field problems from 10 supervisors, there痴 no way to cope. Again, Toyota has found the ratio to be closer to 1:5.

How do the rest of us compare in terms of the supervisor-to-worker ratio, and what does it say about our effectiveness? I've enjoyed taking informal polls of the ratio of workers to team leaders or supervisors from among our clients. Some interesting findings:

1. A large electronics manufacturers had over 100 workers per supervisor. The factory scoreboard looked good on the indirect labor measurement, and direct labor was low, but the assembly area looked like a mess. There was no ability of the supervisors to check quality, train the workers, or make daily improvements. This was reflected in quality, inventory, and on-time metrics on the factory scoreboard.

2. How much training are these supervisors given in problem solving, teamwork, and leadership? An embarrassed admission of "None" is the most common answer.

3. Every company that has come to us asking for help in fixing their broken or stalled Lean implementation has had either a lack of training for supervisors or too many workers per supervisor. Strong supervision is the key to sustaining long-term kaizen.

4. When training supervisors and team leaders in kaizen and leadership skills through our Managing Daily Improvement program, we often hear "All we have time to do is paperwork. Where are we going to find the time for training people or kaizen?"

5. In one extreme case the supervisors at large transportation equipment company complained that by the time they finished the last performance review, it was time to start all over again with the first employee on the list. This would be as funny as a Charlie Chaplin move it if wasn't so tragic.

Solutions to challenges like these have included cutting out as much paperwork as possible, using as much visual management as possible to make communication easier, and training more team leaders to support the supervisors' large span of workers. Shockingly, this can mean adding more layers of supervision and management.

Many companies are reluctant to commit full-time people to Lean implementation until they see both the results and how critical it is to have people full-time supporting these efforts. They are even more reluctant to add supervisors and team leaders in order to break up work groups of 15 to 25 into groups of 5 to 7. Often these supervisors can be "working leaders" who may be 25% to 75% direct and perform the training and improvement functions the rest of the time. Even then adding this indirect labor is difficult.

It's simply beyond the ability of most people in roles of supervision or management to respond effectively to daily problems that occur within a span of 15 to 25 workers, without delay. Since most modern organizations are "flatter", the resulting delay causes a lack of flow, local optimization, batch & queue scheduling and execution of work, leading to later discovery of problems, bigger fires, more fire-fighting... the typical cycle of business as usual for traditional manufacturing or office environments.

One question that is consistently asked to the executives of host companies by participants on the Japan Kaikaku Experience, our Lean study mission, is the ratio of direct to indirect labor. A typical Japanese company today has 2 or 3 times as many middle managers as an American company. This always surprises the participants. There are many takeaways from the study mission that the participants put into practice right away at their companies when they return home. The lesson about smaller spans of supervision and adding layers to the organization chart doesn't yet seem to be one of those.

Going back to the FT article, let's keep it simple and accept that the strategy of the company should be what determines the organization structure. For a Lean operations strategy you start with the customer who determines the takt time of your business and then you organize all of the activities in your value stream to meet that takt, one at a time. The structure to support this smooth flow will be dictated by the process and work content, the type of problems that arise and need to be solved, and what it takes to support and sustain a Lean system in your particular business environment.

Simply using cost calculation based on ratios of direct to indirect labor is not only harmful but useless since this is disconnected from the realities of the Gemba (actual workplace). Rather than just reducing indirect labor by itself, calculate the cost of losing the gains you made through Lean implementation by not having strong supervision in place. Make the investment in people (just like you would in safety, process capability, or capacity) and train or add supervisors in key places.

A lot of things about Lean manufacturing are counter-intuitive to people educated or experienced in manufacturing management. The harder you push, the slower your processes move. One piece at a time is faster than 10 pieces at a time. And now we have to learn that a smaller span of supervision is more effective than a larger span. That's why they call it continuous improvement.

August 25, 2005

Gemba Keiei, Chapter 6: The Blind Spot in Cost Calculation

Let's start off with a bit of background on the Toyota Production System (TPS) and what has come to be called Lean manufacturing in the West. One of the pillars of TPS as envisioned and developed by Kiichiro Toyoda, Taiichi Ohno, and Shigeo Shingo is the idea of Just in Time production. This is not the same as the "just in time inventory" fad of the 1980s which for the most part left bitter memories of failed implementations and lingering beliefs that "we are different" or "it won't work here".

Just in Time is the design of production activity to be closely synchronized with customer demand according to the three principles of Takt Time, One-Piece Flow, and Downstream Pull. One of the major goals of Just in Time is to prevent the mother of the 7 wastes - overproduction - by making only what the customer needs, when they need it, in the right amount.

Taiichi Ohno began implementing TPS in the machining area of Toyota. Toyota in those days was working in a very traditional manufacturing way. The machining processes were vertically optimized in mass production mode. This resulted in the typical evils of batch & queue including low productivity, high inventory, and defects.

Taiichi Ohno begins the chapter by saying that there is a misconception in the minds of people who calculate cost. They believe costs can be lowered on the basis of volume produced without considering the actual customer demand. One of the challenges with kaizen and implementing Just in Time production is that traditional accounting rewards high equipment utilization, absorption of cost, and counts inventory as an asset. These things are in fact examples of overproduction (waste) that is driven in part by how we calculate cost.

Ohno says "Make only as much as the customer will buy. Don't make things the customer won't buy" but the cost accountants reply "What are you talking about? Of course it's cheaper to make 20 than to make 10."

Ohno recognizes that in terms of simple math what the accountants say may be true but says the reality of costs is not so simple. Here he introduces the famous three equations for cost. Mathematically they are the same. They are very different in terms of the point they bring across. The equations are:

1) Price - Cost = Profit
2) Profit = Price - Cost
3) Price = Cost + Profit

At first glance these all appear to be the same. Equations 1 and 2 are identical, only flipped horizontally. Equation 3 simply subtracts cost from both sides of the equation and is mathematically identical. However Taiichi Ohno stresses that the thinking behind each of these equations is fundamentally different, and that is something difficult for cost accountants to understand.

In the case of equation 1 the market is competitive and the price is set by the customer. If the market will bear a $1.25 selling price and your cost is $1.00 per unit then your profit will be $0.25.

In the case of equation 2 you need to make a certain profit, let's say $0.25 per unit. So here you have to increase the value and increase the price so that if your cost is $1 you can now sell it for $1.25. You gold-plate it if you have to, says Ohno. If you can't reduce the cost you have to increase the value so you can increase the price and get a better profit margin.

Taiichi Ohno illustrates this using a story from 1974 - 1975. An economist asked him why Toyota only sold cheap cars to the United States. Why not sell high value-added luxury cars that cost 10 times more, but only sell 1/10th as many?

In the case of equation 3 the math may be the same but the underlying thinking is different, says Ohno. If $0.25 is a fair profit and the cost per unit is $1, then you may set the selling price at $1.25.

However if the customer can purchase the same thing elsewhere at $1 then you can not set the price this way. This is typically something that governments will do to set prices in order to insure a "fair" profit to the producer, but markets (where customers make the choice) typically do not behave this way.

This is the classic "cost plus" (equation 3) of U.S. government contracts. In these cases often you must pass on the cost savings to the government when the contract is renewed. If your profit is $0.25 and your cost has been reduced to $0.50 through kaizen the new selling price to the government is $0.75. This is good for the taxpayer perhaps, but still not so market-driven.

Taiichi Ohno clearly states that he prefers equation 1. This is the only equation that allows for an increase in profits based on cost reduction. If the selling price remains at $1.25 and your cost is reduced as a result of kaizen to $0.75 now you can take a fair profit of $0.50.

"Costs do not exist to be calculated. Costs exist to be reduced." Out of all of Taiichi Ohno's famous quotes, this one is my favorite.

Even after seeing these three equations explained many times by my teachers and reading Ohno's explanation in the original Japanese it's easy to get tangled up in the math and confused. The most useful way to understand this perhaps is that 3 is the "cost plus" approach and that 2 is the "price plus" approach, and 1 is the "cost minus" approach. Most of us do business in a "cost minus" market. Even if you don't there's no harm in remembering that costs exist to be reduced.

August 20, 2005

Gemba Keiei, Chapter 5: Misconceptions Hidden within Common Sense

This is a short chapter. The chapter seems to act as a thematic bridge. Taiichi Ohno begins by talking about the importance of making a mindset shift in order to achieve breakthrough kaizen results, and ends the chapter by talking about the misconception of economies of scale. In the chapters following this one Taiichi Ohno argues against large volume production based on equipment utilization, traditional cost accounting, and local optimization. He introduces that theme by saying “This is not common sense. Get ready for a different way of thinking.”

When a misconception becomes accepted as common sense progress stops, says Taiichi Ohno. For example there may be a way of doing things that is not great but is low risk so that becomes the accepted norm. Even if the rewards are small, if the risk is small then this is often the preferred method under "common sense".

Ohno argues for a change of mindset "to go beyond common sense". He says that it's better to go after the big reward, recognizing that there may also be big risks. These big risks simply need to be counteracted. It takes courage to step outside of common sense, but this is the way "to go beyond".

Whether it's top management, middle management, workers, or labor union representatives, people tend to accept common sense, even if it is wrong. People may think a certain method is the best, or even know that it is not but accept that it can not be changed.

If you do kaizen based on an extension of your current thinking, your results will be limited to 10% or 20% improvement. Ohno says you have to turn your thinking upside down. To find a new path to success, a mindset revolution is required from everyone in the organization.

This is particularly true when implementing one-piece flow. People think its common sense that making a large batch of parts is quicker than working on one piece at a time. In fact, traditional cost accounting will tell you that after a changeover it's cheaper to run 10,000 pieces on a press instead of 1,000 pieces. It's no wonder that misconceptions hide within "common sense".

At the closing of the chapter Taiichi Ohno relates the story of a question he once received. "If Toyota was able to reduce changeover times on a press from 1.5 to 2 hours down to 10 minutes, why not produce a 20,000 piece run instead of a 10,000 piece run?" The argument was that now that you have more available press time you should produce more in the time saved through SMED and quick changeover kaizen.

Ohno ends by saying that this is such a different way of thinking so that giving a direct answer to this question would have been useless. Yes, that may be what the arithmetic says... was Ohno’s answer.

August 15, 2005

Gemba Keiei, Chapter 4: Go See What Didn't Work with Your Own Eyes

Taiichi Ohno starts this chapter by pointing out that it's relatively easy to convince the people on the Gemba (factory floor) by having them try the new way and see that is better than another way, but that this is harder to convince managers, senior managers, and supervisors.

In disagreements between managers each side thinks they are right. If the managers don't believe that the new way is better than the current way (the way they know or think is right) then they won't support it. If they don't support it then the people in the factory won't try it and this limits you ability to make gains in productivity through kaizen.

Ohno says that managers have differing ideas or points of view they should try one way for a day and another way on the next day. Let the results show which is the better idea. Each side should try as hard as they can to demonstrate that their way is better. They should pursue their ideas with conviction.

Taiichi Ohno says that this type of conviction is not the same thing as being stubborn and unwilling to change your ideas. If you believe yours is a good idea, try it and see if it works. There may be some things that don't quite work, but there will also be some benefits. Go see what didn't work with your own eyes, says Ohno.

Taiichi Ohno scolds managers just for listening to reports and saying "So it didn't work after all" rather than seeing the new idea in action with their own eyes and verifying if it works or not, and why.

Here Ohno uses a very important phrase. Most people trying to implement Lean manufacturing or Lean transactions have met the objection of "We tried it before and it didn't work" at least once. Ohno says "I didn't see that failure for myself. Please try it again so that I can verify it."

He uses the example of the regrinding of the cutting tools from Chapter 3 as an example. The manager in this case said "We tried centralizing regrinding during the war and it didn't work." Ohno says to the manager, "I wasn't there to see it. Let me see it fail again. If I understand why it failed then I'll accept your answer." When Ohno observed the trial, the system worked and he theorizes that the Toyota managers didn't try hard to make centralized regrinding succeed because the army procurement made them do it during the war.

Ohno does say that while observing the trial of the new method there were many things that had to be worked out. People knowledgeable in grinding, the metals involved, the machines used, the angles of the tools, etc. had to be consulted so that standards could be established. Taiichi Ohno says that by using a kaizen process like this you can establish standards that allow anyone to perform a process that in the past was limited to specialists and experts.

In today's world, this is why it is so vitally important for Lean initiatives to always empower and involve the "experts" - the workers themselves - in the changes. The kaizen event process is an excellent way to make rapid change happen while making sure there is ownership in the changes. This is an effective way to take the ideas and experience of a larger group of people can be used to solve problems that arise.

Taiichi Ohno ends the chapter by saying "That was in days immediately after the war. I don't think people do things that way anymore." It's hard to tell if he is being sincere or not. I suspect he is being ironic, as I'm sure he met many people still had the same bad habits in the days when he was writing this book.

In my experience, even today there are still plenty of organizations full of people who do not "go see" to understand what didn't work. People prefer to debate in a comfortable office, sixty years since the war, and 23 after Taiichi Ohno first penned those words. That is why Gemba Kaizen and learning by seeing and doing is so effective in helping people change how they work.

August 13, 2005

Wipro Studies TPS to Achieve Lean Transactions

I'm very excited about an article in Business Week titled "Taking a Page from Toyota's Playbook" on how Indian info tech companies are adopting the Toyota model. As an example, Wipro visited a Toyota factory to study TPS, concluding "The goal for Wipro is to become the Toyota of business services." These people get it.

How is Wipro applying what are essentially Lean manufacturing principles (Toyota Production System) to transactional processes? Here's the link to the Business Week article, or read on for the executive summary. The takeaways are:

Factories: no walls. Offices: walls, cubicles personal desks. Why?
At Wipro cubicle walls were removed so that the workers handling the transactions would work side by side at long tables. The process flowed step by step down the line (presumably one piece at a time).

Move beyond the "information transactions are not like production" misconception
At Wipro paperwork processing is done like an assembly line with people lined up along tables. Visual signs hanging over the tables identify that these are work stations for AR, Travel, etc. rather than individual desks. The process is designed to flow.

Timing the transactional work
Wipro did time observations and redesigned the work areas to improve productivity.

Team leaders supporting workers and monitoring performance
There is a 10-minute startup meeting each shift. Team leaders set goals at the beginning of each shift. Digital display boards show the status of their performance. A red lamp indicates when there is a bottleneck or a problem (andon) and supervisors can immediately address the problem.

People resist the transition from "craftsman" style work to production line work
At Wipro the changes were made without training and change management considerations. They had to do a reload and train the workers on TPS principles and why things were being changed in the way that they were.

TPS means having a Kaizen mindset
Wipro adopted Toyota's kaizen suggestion system. These ideas are typically small, local, and practical. Wipro made The Toyota Way by Jeffrey Liker required reading. Kaizen suggestion boxes were set up. The quick response by management to these small ideas and quick recognition and reward through simple gifts and tokens of appreciation from management keeps morale high.

Measuring results in Lean office
Productivity improved 43%. Rework was reduced from 18% to 2%.

Business Process Outsourcing is increasingly moving back office operations such as call centers, accounting, human resources, claims processing, etc. to India. On the one hand it's a shame when workers are displaced when these jobs move offshore. On the other hand, here we have a clear blueprint of what we have to do with our remaining jobs, whether they are healthcare, research, government, financial services, or manufacturing, to remain competitive. Aim to be the Toyota of your industry.

August 11, 2005

Mr. Toyota Goes to Washington

The August 12, 2005 article in the Wall Street Journal titled "Toyota Lobbies to Avoid Blame Amid U.S. Auto Industry Woes" explains how Toyota is adding a sixth lobbyist in Washington D.C. in an effort to avoid being bashed for the woes of Ford and General Motors in the near future.

Toyota is aiming to increase market share in the U.S. to 15% by 2008. Toyota wants to overtake GM and be number one. Toyota has never missed such stated goals. This will come at the expense of GM and Ford's market shares and this will likely result in plant closures and displaced workers at American automobile giants.

But this is 2005. It's been nearly 20 years since the sledgehammer-to-the-hood Japan-bashing was at its peak. Could that same combination of fear and ignorance that led to smashed imports come back? Is Japan-bashing still a real concern in the U.S.A.?

At a rural county fair not far from our office there's a demolition derby that happens each autumn and one of the highlights is when everyone rams and destroys a Honda vehicle. Perhaps Hondas are really fun to demolish and the fact that Honda is a Japanese brand is irrelevant.

One of our consultants recently returned from a visit to a customer in Michigan where a Lean trainer there told how she was pressured by her co-workers into trading in her Toyota for an American car. She bought a Kia from the Ford dealership. The Toyota was built in the U.S.A. The Kia was not.

If the argument is that Toyota's profits are ultimately repatriated to Japan that's true, but this is after paying American taxes. And what's more, if this profit allows Toyota to build more factories in America and hire more U.S. workers, what's not to like?

One of our clients from the Detroit area came to us this year explicitly stating "We want to be a Toyota supplier. We see that this is our future." Toyota people visited them told them 'no' due to the instability of their production system. So this company came to us looking for help in rapidly implementing TPS to improve quality, lead-times, and cost and qualify as a Toyota supplier.

Are these indicators of Toyota and other Japanese firms becoming more a part of the fabric of American society, or less? I don't have the answer, but Toyota brass seem to want some insurance. According to the article they are trying to build a "Toyota caucus" of politicians from a dozen or so states with Toyota operations in order to avoid becoming the scapegoat for Detroit's troubles.

Hopefully Toyota's concern for the need to lobby politicians in unnecessary and the money they are spending on lobbyists is muda (Japanese word for waste). But since we have these Toyota lobbyists in Washington, why not have them spend some of the time lobbying our politicians on cutting out the waste of taxpayers' money. Tell them about something called Lean government.

August 8, 2005

Three Useful Phrases for Kaizen

Finding myself in challenging discussions while coaching "change adverse" individuals from time to time, I try to make myself humble and ask "What would sensei do in this situation?" I cycle through the words and actions of Mr. Nakao, Mr. Nagata or Mr. Shimbo of the Shingijutsu Company. Usually I can select an appropriate approach.

Catching myself doing this lately I realized there are three basic phrases that if used in combination and with a measure of respect, almost never fail to move the discussion in a positive direction. These three are "Show me" "Why?" and "Just try it."

"Show me" is a good way to move the discussion out of the meeting room and to the factory, the evidence, and the facts. The "genchi gembutsu" (go see the facts) approach almost always clears up misunderstandings, exposes the truth (or truths), and focuses the discussion on what matters.

The "Why?" phrase is an opener to the 5 why root cause analysis process. There are three typical outcomes of the 5 why process. The first is the very simple and practical actions to address the known root cause of the problem. The kaizen activity can be tested and the results of the test will be visible.

The second is the unknown or invisible root cause. There may be multiple interacting factors, or it may not be visible, such as a transactional process. This is where you can use a Design of Experiments or call in your Six Sigma Black Belts.

The third type of root cause is systemic, structural, or strategic and points kaizen activity away from the Gemba to the office processes and executive suite. These are useful for elevating the issue and expanding Lean implementation beyond the factory.

If the managers in question are reluctant to go to the Gemba, can not or will not show you the facts, this says an awful lot about their position in the debate. It is probably not based on fact. The "Why?" question can come in handy again here.

Even after you have used the "show me" phrase and then the "why?" questions have identified the actionable root cause, people don't always act. At this point only evidence can trump mistaken convictions. So you can say "just try it". It's only a test. If it doesn't work, we can switch it back, or try something else.

Sure it takes a degree of authority to get away with using such a limited vocabulary in trying to convince smart and experienced people. Without a certain degree of respect and credibility it's very difficult to lead change in any environment. I've found that when leading change it's actually easier to use fewer, simpler phrases than to throw around a lot of fancy jargon.

Start with humility, the willingness to admit when you are wrong, and the confidence that the kaizen process will help you meet your goals. Then listen until you find the right time to use the three phrases.

August 5, 2005

Gemba Keiei, Chapter 3: Misconceptions Reduce Productivity

In this chapter Taiichi Ohno illustrates the idea that "misconceptions reduce productivity" by telling several stories from the Gemba at Toyota. The point Ohno makes in this chapter is that demonstrating the superiority of one piece flow is a simple thing, yet it something rarely seen on the Gemba.

In the first story Ohno wanted to show that inspecting one at a time was quicker and took less work than inspecting in batch. "Try it one at a time" Ohno says. "No, this way is faster" replies the inspector. After trying one at a time, the inspector completed 5,000 pieces in regular hours, rather than requiring overtime as the batch method did.

People have the misconception that picking up 20 or 30 pieces and lining them up on the table and inspecting them all at once is faster. Once you try it, and you see it's easier, quicker, and less tiring to do one at a time people lose their misconception. Ohno recognizes here that there may be an objection from the worker due to the lost overtime pay.

Ohno tells another story from Toyota of a process to machine a hole in bar stock, shortly after the WWII (likely the late 1940s or early 1950s). The machine operator was hand feeding the machine even though the machine had automatic feed machine. The young machine operator proudly tells Ohno that he is making 80 pieces per day.

When asked why the operator didn't just start the machine and let it run on automatic feed, the operator replied "I think it's faster to operate it manually." The reasons given were that since automatic feed was faster the tool wore down quicker, resulting in defective products. Manual feed let the operator have a better feel for the wear on the tool.

"How long does it take to make a hole?" Ohno asked. "Thirty seconds." The young operator replied. "That's 120 pieces per hour." Ohno pointed out. The young operator was silent. There were 7 working hours per shift in those days. The operator was only producing 80 pieces, when at 30 seconds per piece he could have done that in 40 minutes.

Ohno points out "You should put in more than one hour's work per day." The young operator protests that he is working hard. Ohno's point is that the worker things he is working productively (working hard) when he is not at all productive (high value added output).

The manual process takes 30 seconds. The operator is working hard. The automatic process takes 40 seconds. The operator has the misconception that it is faster. But it is less productive at the end of the day. This is because after making 3 pieces by hand the tool is hot and begins to dull. So the operator takes the tool to the grinder to sharpen it. Then he makes 3 more parts at 30 seconds per piece. The cycle repeats. The operator thinks this is productive work.

Ohno demonstrates how you can produce 80 pieces more productively. You need one part every 5 minutes to produce 80 in 7 hours. By using the automatic feed and making one piece every 40 seconds, you can let the machine run, let the tool get hot, cool naturally for 4 minutes, and run the next piece with no grinding needed. You can use the same tool for 30 or even 50 pieces without regrinding.

The grinding wheel is a shared resource. Not every operator has one. So when the young operator goes to regrind the tool there are 5 or 6 people standing there and waiting. A different lathe operator runs parts as fast as he can, then goes to regrind his tool also. So this results in a wait, and in the end you average only 2 parts every 10 minutes, even though you think you can make one piece every 30 seconds.

In the same way Ohno explains that some operators will place 10 or 15 parts on a drill press, drill them, and take the parts off and put them in a box. Then the next parts are loaded, drilled, unloaded. There is a lot of wasted motion and even though these workers think they are doing skilled, productive work, in the end they are less productive.

These stories are great demonstrations of the wastes (waiting, motion, transportation) associated with working in a batch and queue method. The chapter also demonstrates how people have the misconception that batching is faster.

This misconception is alive and well today. With the spread of Lean manufacturing and knowledge of the Toyota Production System, more people are implementing one piece flow. Yet there is still too much focus on local optimization (making things as fast as you can through one process) instead of overall optimization (making things as fast as you can through the whole process).

Look for examples of misconceptions that reduce productivity at your own company and use them to educate people about Lean transaction and Lean manufacturing, as Taiichi Ohno does in this chapter.

August 1, 2005

Developing Team Leaders through Kaizen

Many companies ask some variation of the question. "Why aren't we seeing bottom line results after the kaizen event improvements?" There is more than one answer, but I recently came across a good illustration of one typical situation.

This manufacturer of transportation equipment has been doing kaizen for a while and the teams show productivity improvement numbers at the end of the week. Yet the CFO doesn't see the difference, and the factory manager can't put a finger on how these changes are affecting the numbers he watches. Very simply, they aren't freeing up people from the area that has been improved.

If a job that took 6 people can now be done with 5 due to kaizen and productivity improvements, you must reallocate that 1 person and do the work with 5. The Standard Work and the operator cycle time balance charts should reflect this. Instead many companies skirt this issue and allow the 6 people to finish the work sooner, pull in some work from next week, do more clean up, or spend time on improvement projects that in theory should yield future gains in productivity.

This is the wrong approach folks. I am absolutely not saying that this 6th person should lose their job. They should be assigned to work under the Lean Manager to help other areas implement Lean, or participate as a kaizen team member. The line that has been kaizen must run with the new staffing and demonstrate productivity improvements.

Ideally the business will grow due to lower costs and quicker lead-times and the person that has been freed up can be rotated back into a production position. In some companies where the gap between the growth in business and the people freed up is great, you sometimes temporarily see a larger group of "nomadic" Lean specialists who form almost a permanent kaizen team going from area to area working on improvement projects.

One deadly mistake some companies make is to select the most junior or the least skilled of the 6 people and free up that person. Although like many things in Lean it may be counterintuitive, you need to free up the most experienced and skilled person and assign them to the "kaizen pool".

Hopefully this is basic stuff for the Lean Managers, Lean Champions, Kaizen Facilitators, etc. out there. But it seems this lesson hasn稚 fully sunk in yet with the management of companies working towards Lean.

This has the effect of requiring the level of Standard Work to be well defined so that newer workers can follow it as effectively as the more experienced workers. It also gives others to step up and fill the shoes of the person that has been freed up. This creates opportunities for upward mobility that helps motivate Lean implementation and kaizen team activity.

We often have to coach our clients' management that the best way to increase the abilities of their people and build a strong organization to support Lean is to free up the best people from the team as a result of the productivity improvements that are made. This can be tough advice to swallow, but it is essential for several reasons.

The corollary of this rule is that when you are selecting your Lean champion or full-time Lean manufacturing facilitators, you take the best possible person you can spare. The position they vacate should be a necessary and desirable one. This will avoid the problem of assigning someone to manage or lead the change who everyone knows is 'underemployed' in their current position.

The challenge to the employer is that when you lose the best employee on your team this can result in a short-term drop in productivity.

A friend of mine who is a manager at a Seattle area company that does carpentry and home renovation projects for high end houses had a similar challenge. He has an employee who had previously been the production manager of a small window manufacturer. We'll call him Rick. Rick had experienced Lean manufacturing in his window company, increasing throughput some 30% without adding resources.

My advice to my friend was to have him coach Rick so that he works himself out of a job. Rick should coach and train the younger workers under him so that they can increasingly take on the skilled work and estimations that he does. It may require Rick to take an active part in hiring. In that way he can train his replacement and move up into the supervisory position that would challenge him.

Doing this requires a well though out strategy so that you don't pull out your most experienced workers without first converting the tribal knowledge into documented procedures, Standard Work, and cross-training charts and other process level Visual Management tools. You also need the absolute understanding and commitment of top management to operate in this way. Kaizen is about more than improving your processes; it is also about improving your people.