Gemba Panta Rei

On the front page of the January 27, 2006 Wall Street Journal there was an article titled In Tot TV Shows, Money is in the Toys. I'm always delighted to find lessons about Lean manufacturing in unexpected places. The article told how the ability to effectively merchandise the toy version of a character on a children's TV show affected not only the look of the toy, but the design of the character in the TV show, and even what the character could do in the TV show itself. The marketers suggested design changes to the products (the characters in the Pocoyo TV show) considering what would sell and how the children would play with the toy.

In one case the neck of a duck called Pato was shortened because "the neck was too long to be made into a soft toy". Here is an example of the manufacturing side telling the creative side what to do, and winning. It's beyond design for manufacturing, it's design for manufacturing and merchandising. The people concerned with making money (marketing, merchandising) were stepping all over the creative people's territory - or you could say they were putting the customer first. This is Lean thinking.

It's been all over the news about how Ford is betting their future on "innovation". The news from Ford has received wide press, both positive and negative and I don't need to throw in my two cents here. However, I think an IndustryWeek article titled Continuous Improvement -- Auto Companies Must Change From Within was very thoughtful and provides some important context on this topic.

In summary, the IndustryWeek article made the case that the Toyota Production System is an internal value system or company philosophy, rather than a production system. The article criticized stock analysts and the corporate executives who pander to Wall Street for creating a focus on the term results rather than a commitment to long-term improvement. The author concludes that Ford and GM need to listen to customers and do kaizen, in order to survive.

What they need more than anything, though, is a solid establishment of internal values that refocuses every single area of the companies on continuous improvement and taking dictation from customers.

Says the author in the January 24, 2006 IndustryWeek article. I couldn't agree more.

One particularly telling statistic she cited to illustrate the difference between Toyota and an unnamed automotive OEM was this: the unnamed OEM had 140 types of catalytic converters for all models, while Toyota had 5. The complexity cost result from having 140 variations is immense. At this OEM, it's a case of the artist telling the manufacturing guy how long the duck's neck should be, never mind the customer. At Toyota, it's the other way around.

Innovation is about coming up with new things, which is all very well so long as you mind the length of the duck's neck. In Lean manufacturing there is a tool called Production Preparation Process (3P for short) which requires changes in the design of both the product and process in order to deliver what the customer wants at the lowest cost, on demand with zero defects. More than many other kaizen tools, the 3P approach requires an organization to change the way they look at how they sell, market, produce and design products. Success at 3P is one good indicator both of Lean manufacturing operationally as well as in philosophy.

On the darker side of the Wall Street Journal article about children's TV shows, what we have here is a captive audience of 2 year-olds being the targets of sophisticated marketing and merchandising campaigns. On the other hand, they're just toys. The automotive companies could learn a thing or two about listening to their customer and continuously improving their products and processes by tuning into children's television. They are full of happy stories and important life lessons. It couldn't hurt.

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The January 30, 2006 BusinessWeek article titled Would You Recommend Us? introduces something called "net promoter" scores being used by GE Healthcare to measure customer loyalty. Simplified, it's a metric based on how many customers would recommend the product heartily ("10") versus not at all ("0"). A high net positive response to the short survey asking "Would you recommend us?" is all that's needed to measure customer loyalty.

This is apparently earth-shattering stuff to the GE Healthcare execs. I always thought that unless you have a product that is addictive, a monopoly or an essential to daily life, customer loyalty is simply the customer choosing you again and again. What were they measuring before?

Mr. McCabe says it's not about the score but about "focusing on the customer." Look up from your metrics, Mr. McCabe. Your customers may have long left you by the time the numbers are in your hands. Go to gemba, GE Healthcare, and genchi gembutsu.

The most shocking bit of news came from this quote from Mr. McCabe: I have little doubt that this will be as big as Six Sigma was.

Was?

Is the Chief Quality Officer of General Electric saying that Six Sigma is dead at GE? Or maybe he meant that Six Sigma is still alive, but just not as big as in once was. I have to admit that this rocks my world a little bit. If there are any black belts from GE out there, help me up.

I won't believe Six Sigma is dead at GE until I'm standing next to Jack Welch at the funeral. In any case what's troubling is that a CQO at GE can say something that makes Six Sigma sound like the flavor of the last decade. As if this six sigma level process variability has been achieved (or is no longer important) and it's now a matter of finding something even more revolutionary, like asking the customer if they are happy with their purchase.

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At Gemba we do our best to practice what we preach. This means that we turn our Lean tools inwards on ourselves and work hard to develop a kaizen culture. One of the most visible ways we do this is through our “open office”. There are no walls in our office, so whenever there are consultants in the office we can see and hear each other from our desks. There are rooms for when private meetings or conversations are needed, but the majority of time everyone work in the same big open room.

We added “pokayoke” or “mistake proofing” to the many benefits of the open offices recently. A person named Craig Miller from Craig Miller Associates called asking for one of our consultants. He knew who he wanted to talk to, and he was friendly. He was glib. He got right through. He was a poacher.

I could only hear this side of the conversation but it was clear that our consultant was being offered a job with another consulting firm, was being asked about his salary, and was being asked if he knew anyone else who might be looking for a position

If we had cubicles or even individual offices with walls dividing us, the recruiter may have been able to hire away a valuable member of our team. He failed because in an open office environment it’s awkward to take a call from a recruiter and talk numbers, during work hours. Everyone can hear you.

In this case we learned that the open office is an effective pokayoke device for this type of call. The cost of hire is not insignificant for us, so every poach prevented is a major cost savings. Incidents like these make me a believer in Lean office and in practicing what we preach.

I’m not at all opposed to people taking better offers and moving on to positions that are more fulfilling. I’m not against recruiters who help people who are struggling to fill positions. I’m against people who find names of employees by any means possible and call during work hours in the expectation that the person at the end of the line is walled in and able to discuss a job offer. It’s unethical, in my opinion.

This incident raised my blood pressure for a while. It occurred to me to call Craig’s client (another Lean consulting firm whom he was foolish enough to name) and to offer their consultants more money (since he disclosed to our consultant the salary his client was offering) to join our firm. But that would be vengeful. Besides, I don’t really want to hire anyone from a consulting firm full of people easily lured away from their jobs by just a phone call from a stranger and the promise or more money.

If you are a consulting company and you would like to avoid having this recruiter call your employees and try to hire them away during work hours, call Craig Miller and ask him never to call you. Better yet, block your phone system from accepting calls from his firm.

If you are a consulting company and you are struggling to hire more consultants, call Craig. His technique will work on most consulting companies, so long as they don’t practice what they preach, like Gemba does. But I can’t vouch for the quality of people this will get you.

The next kaizen for Gemba is to strengthen our call screening process. Craig got through, and that was a failure of our call screening process. Stay tuned for an A3 Report of the results of our root cause corrective action for the call screening process in the near future in this blog.

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The Ford Motor Company presented their restructuring plan called "The Way Forward" today. Ford is planning to shake things up. In CEO Bill Ford, Jr's words:

"Here is what we will not stand for: incremental change, avoiding risk, thinking short-term, blocking innovation, tying our people's hands, defending procedures that don't make sense, and selling what we have instead of what the customer wants. In short, we will not stand for business as usual."

Mr. Ford is making some painful decisions that require courage. One of them is to reduce North American capacity by 25% by shuttering over a dozen plants over the next 7 years. Another is to stop playing the Wall Street short term profit game. Ford no longer issues a quarterly earnings guidance, and per Mr. Ford:

"Today, I am announcing that Ford Motor Company will no longer publish annual earnings guidance either." Bravo, Mr. Ford. Your great-grandfather would be proud.

Mr. Ford continues: "We must be guided by our long term goals of building brand, satisfying customers, developing strong products and accelerating innovation." My respect for him increases. This coupled with a true kaizen culture, and Ford could do great things again.

Time Magazine put Ford CEO Bill Ford on the cover for its latest issue, and featured him in an interview dated January 22, 2006. It's a good interview that sheds light on Mr. Ford's character as a leader. This should help build confidence in the Ford Motor Company, which is one of Mr. Ford's stated goals in the article. In response to the question "Isn't Toyota going to rule the world?" Mr. Ford says:

"No! My goal is to fight Toyota and everybody else and come out on top. I'm not ceding anything to Toyota. They're an excellent company, and they're a terrific competitor, but I look forward to taking them on."

It's great to hear these words. But I was surprised by Ford's response to the interviewer's question "How do you change your corporate culture?" Mr. Ford said:

"Interestingly, this doesn't require a tremendous amount of change to our culture. Innovation is going to be the driving force of this company going forward. But the good news is, that is very much the history and the culture of this company, all the way back to the Model T and the assembly line."

The interviewer points out that in the past not everyone at Ford Motor liked his ideas, and that he was called "naive" in the past. Mr. Ford's rejoinder was: "Well, yes. Let's see who's naive now."

Perhaps Mr. Ford is still a bit naive. The efforts of Mark Fields, who is Executive Vice President, Americas for Ford is featured in the Wall Street Journal today (see also his speech to the media available on Ford's website). The title of the article is "Way Forward" Requires Culture Shift at Ford.

According tot he WSJ article Mr. Fields is bringing what I would call a tremendous amount culture change to Ford through cross-functional teams, the message of "change or die" and slogans on the wall such as: "Culture is unspoken, but powerful. It develops over time -- difficult to change."

Albert Einstein said: "The problems that exist in the world today cannot be solved by the level of thinking that created them." Simply stated, company culture is how people think about themselves, what they think about the company and how this affects the actions people take. I'm no Ford culture expert, but if a different level of thinking is needed in order to solve the problems at Ford, they will need a culture change.

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Selling Lean manufacturing to the world isn't easy with headlines like Chrysler Cuts Trade Workers: In Lean Manufacturing Push, Automaker Also is Reducing Number of Job Classifications at Plants. Chrysler must be getting public relations advice from the same people as Merck. Read the January 22, 2006 Detroit News article for full details.

Chrysler is laying off some skilled trade workers "As part of the push toward Japanese-style lean manufacturing" according to a Chrysler spokesman quoted in the article. I guess I still have a lot to learn about Japanese-style Lean manufacturing.

To quote the article: Lowering employment costs and increasing productivity moves the automaker closer to goal of reaching parity with its Japanese competitors building cars in the United States.

I beg to differ. I think this approach will take them further from their goal of reaching parity. This type of "Lean manufacturing push" may put Chrysler's numbers closer to Toyota's in the short term but will stop organic, persistent daily improvement dead in its tracks.

Sadly, how Chrysler's actions and how they they communicated their intentions, and how the UAW responded will cost the workers at Chrysler more than anyone else. Read the letter from the UAW representative to the skilled trades and you'll get an idea of the impact this type of decision on the part of Chrysler management wil have on their efforts to become more productive. Following the advice in this letter just locks the two sides in a fruitless struggle. Who wants to hire workers who are only single-skilled, and furthermore have been trained to believe that sticking to a narrow range of skills is the key to job security? Invest in people and pay for skill and flexibility and both the worker and the company that invests in them will win.

Perhaps Chrysler management is facing off with the UAW on purpose, taking advantage of the confrontational atmosphere between automotive companies and unions that exist due to bankruptcies, GM's woes, etc. these days. It's hard to say why this would be.

Chrysler CEO Tom LaSorda made some good comments in an article last October, and recently told analysts that goal for 2007 is to build a car in 30 hours on average. "We will do more with less and that's the message," LaSorda is quoted in the article.

I'm all for doing more with less. It's how you do this that's at issue. The Lean Manufacturing Blog has useful suggestions on what Chrysler could do other than simply put people out of work. Suffice to say that for long-term organization change (e.g. Lean transformation) to succeed you need the help of the people in the organization. Telling them that eliminating their jobs is the essence of this transformation is not an effective strategy.

Unless you can offset the improved productivity (requiring fewer resources of all types to do the same work) through natural attrition or growth, you will have a very tough time at Lean manufacturing. In the end, kaizen must reduce cost. It's people that keep kaizen alive, so when you do kaizen please make a commitment to protect the jobs that have been kaizened. For Chrysler to announce that Lean manufacturing or kaizen will let you eliminate jobs is to demonstrate a lack of understanding what kaizen is all about.

If you want your Lean manufacturing efforts not to fail, never use these words: At Chrysler's Belvidere, Ill., plant, where the new Dodge Caliber small car will be built, the company expects to cut 5 percent to 10 percent of the body shop workers because of production improvements. This according to a Chrysler spokesman in the Detroit News article. The emphasis is mine, in case the point is missed.

I hope Chrysler is very successful at their "Lean manufacturing push" and cost reduction efforts. I hope Chrysler gives Toyota a real run for their money. I hope they design and build cars that customers want to buy and I hope they make lots of money in the process. I hope they hire back as many people as want to go back to work at Chrysler from their "jobs bank". That's one bank where I hope Chrysler makes more withdrawals then deposits.

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That's quite a big number. It's actually more vehicles than Toyota sold in the U.S. in 2005. It's more than double the number for 2004. It's not as many as some other car companies, but far from zero defects. A December 7, 2005 article in the Chicago Tribune titled So Far, Problems Seem to Just Roll Off Toyota's Back identifies that the customers' perception of Toyota quality seems to have lessened the public relations impact of this surge in recalls.

Autoblog picked up on this article and asked it's readers on January 18, 2005 "What's your opinion?" There are 31 reader comments and counting, from a cross-section of opinions, personal experiences and perspective on the quality of domestic and import automobiles.

One commenter on Autoblog makes the connection between software bug fixes (service packs) and automobile defect fixes (recalls, a.k.a. service bulletins): Oh, yes, Toyota learned some non-admittance techniques. Anyone know what a Service Pack is? An [deleted] set of bug fixes. I guess "Bug Fixes 2" just doesn't sound as good. Perhaps Toyota has simply done a better job of convincing their customers that their service bulletins (rework) are a service to customers.

In the January 9, 2006 issue of Forbes magazine there is a "Special Japan Advertising Section" which features the U.S. Ambassador to Japan calling the U.S.-Japan relationship "a model of what two countries can do when they share common values" and also the heads of 12 leading Japanese companies touting the virtues and bright futures of their firms.

One of these PR pieces is titled "A Dream Car for a Better Globe" and features Toyota President Katsuaki Watanabe who states, "Imagine that we produced only one defective car out of several million... Most people would say that's astoundingly good quality control. But if you're the person who buys that one car, from your perspective the defect ratio looks like 100%." At this point, "one in a million" defects is still a distant dream for Toyota.

Toyota has 2,411,117 opportunities for kaizen, but do they recognize this? The danger in non-admittance, or calling a defect a "service bulletin", is that you no longer consider it a priority problem. It can seem to be "under control" and fall of the kaizen radar. To the many thousands of customers affected by these recalls, they are still inconvenient and even dangerous defects. It's no time to be complacent.

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One way that is almost guaranteed to stop a Lean manufacturing effort in its tracks is for management to announce that Lean manufacturing will be used to eliminate jobs. It's hard to believe that anyone still does this, but the pharmaceutical manufacturer Merck said this in the January 12, 2006 Wilson Daily Times article. The article cites a press release announcing 97 job cuts out of a total of 360 of the Wilson, North Carolina factory, and proceeds to drop these gems:

The Wilson plant will be Merck's first North American site to transition to a lean manufacturing system.

Here I wince.

The new business system should help further cost reduction and increase efficiency.

Or maybe not, if Lean manufacturing has anything to do with involving the people who work this system. And finally:

Determining job cuts are part of the lean manufacturing system aimed at streamlining.

Here my jaw drops. Whoever wrote the press release could not have chosen better words to blacken the reputation of Lean manufacturing. Oh you poor Merck Lean Specialists with your heads in your hands after reading this article, my heart goes out to you.

Merck, according to their catchy motto, is "Where patients come first". There's nothing wrong with putting patients (customers) first. That's what keeps you in business. I guess shareholders come second, and employees come last.

You wouldn't guess this from reading the corporate identity they put forward. Here is a paragraph from Merck's Corporate Responsibility statement:

At Merck, our business is discovering, developing and delivering novel medicines and vaccines that can make a difference in people's lives. But our mission also entails something more. As a Company, we seek to maintain high ethical standards and a culture that values honesty, integrity and transparency in all that we do. Company decisions are driven by what is right for patients. And we are committed to our employees, to the environment in which we live and to the communities we serve worldwide.

I'll give Merck points for honesty and transparency. They certainly aren't trying to fool anyone with that press release.

The sub-section titled Valuing Our Employees starts out "Our employees are our single greatest asset." Whoever wrote the press release must have missed this part of the employee orientation.

I don't have enough information to second-guess Merck's decision to lay off a quarter of their workers at their Wilson, North Carolina factory. In the article the plant manager does call the layoffs "difficult decisions" yet necessary to remain competitive. Saying that the layoffs are made possible by Lean manufacturing does not demonstrate the type of good thinking we have come to expect from Merck, a company full of smart people.

At best, Merck's characterization of Lean manufacturing is a bad gaffe. At worst, it is cynical PR spin designed to send a message to Wall Street. In either case it shows a complete lack of respect for people.

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Gemba's consulting work at Blue Diamond Manufacturing, a division of DeLaval, has been featured at the national website of NIST (National Institute of Standards and Technology).

Here's a quote by Ken Johnson, the General Manager who had championed the Lean Manufacturing effort at Blue Diamond: "The real measurement of success here lies not in the great implementation of Lean Manufacturing to date, but to the real end result of the effort. Due to the changes we've made, DeLaval Blue Diamond Manufacturing has now positioned itself for success in the Asian market."

This project was a good example of how an MEP (in this case Washington Manufacturing Services) found some state grant money (JSP - Job Skills Program) to fund Lean manufacturing training from consultants (Gemba) that a small company would otherwise be unable to afford.

The purpose of JSP training is to keep local jobs through training to improve productivity, or at the very least to make the workers more employable due to the training they received. This should be one of the goals of every Lean training or implementation.

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In a January 12, 2006 Wall Street Journal article (which you can also find on the Pittsburgh Post Gazette) titled Just-in-Time Inventories Make U.S. Vulnerable in a Pandemic raises a question that is very common to organizations first starting out implementing Lean manufacturing. That question goes something like "Just in Time production is very good, but what about 'just in case' we get that big order? Shouldn't we have inventory?"

The article talks about how there is a short supply of some vaccines and even a lack of some drugs at many hospitals in the United States, and how this leaves us particularly vulnerable to pandemic outbreaks of disease. Part of the blame for this is placed on the "just in time" supply chain where stocks of these drugs have been kept very low in an effort to be cost-efficient. This paragraph from the article summarizes the main message in a nutshell:

"Most fundamentally, the widely embraced "just-in-time" business practice -- which attempts to cut costs and improve quality by reducing inventory stockpiles and delivering products as needed -- is at odds with the logic of "just in case" that promotes stockpiling drugs, government intervention and overall preparedness."

Remember that all inventory is a symptom of your problems. Some of these problems you may not be able to fix right away, but the goal of kaizen is the eventual elimination of all waste to achieve zero defects, zero inventory, low cost, etc. even if it takes a very long time. Building a warehouse and calling it good is giving up.

For those of us who have looked deeper into what "just in time" means at the place where it was coined and first practiced as a fully functioning system - Toyota - we understand that "just in time" is only possible where you have "heijunka" or a smooth and level loaded production schedule. When people are getting sick and dying, that's a demand spike that you can't smooth out by asking people to wait. It might be a good idea to buffer these spikes with inventory.

TPS would say carry inventory until you can "fix the problem" of your slow response time or the demand spike of a pandemic. So there is nothing inherently wrong with carrying inventory in a "just in time" system, so long as that inventory was there to support flow and buffer the problems you can't fix right now.

So what are some of the problems that exist with the vaccine manufacturing value streams that require this "just in case" inventory? The article explains that fewer companies manufacture vaccines because in a year with an outbreak that is less severe, there is less demand for their product. Not only is their business highly demand-variable, but if you are successful in keeping down the epidemic you sell less of your product. The free market may not be the best one for life-saving products like these.

Another revealing paragraph from the article states:

"Most if not all of the medical products or protective-device companies in this country are operating almost at full capacity," says Michael Osterholm, director of the Center for Infectious Disease Research and Policy at the University of Minnesota. "That's the reality of today's economy: just-in-time delivery with no surge capacity."

Anytime we hear "operating almost at full capacity" and "nor surge capacity" we need to ask: "How much of what you do is overproduction?" and "What's your OEE?" In our experience few pharmaceutical companies have clear answers to either of these questions. These are two areas of opportunity to realize potential improvements in production capacity at little or no investment.

Dr. Osterholm continues "Investors punish companies for having excess capacity they don't use." Perhaps production output and capacity utilization should not be the only ways that vaccine manufacturers are rewarded. If we keep fire stations open and fire trucks idle in case of an emergency, why can't we do the same for hospitals, doctors, and vaccine manufacturers? Speed and flexibility, or the ability to meet demand spikes rapidly for critical vaccines would be a good way to measure how effective these organizations are. This can be achieved through kaizen and the application of Lean principles, rather than inventory, as any Lean manufacturer can tell you.

The article also cites a reluctance on the part of the government to buy and own this stockpile of "just in case" inventory of medicine, as well as other legal barriers creating disincentives for companies to invest in medicines and processes to produce them quickly in response to pandemics. Despite the claim below by Dr. Bishop, there are things hospitals and government could do:

"You can't plan for a surge capacity in an emergency room of 500 or 1,000 patients from the 20 you see in a day," says Michael Bishop, a Bloomington, Ind., emergency physician who used to be on the board of directors for the national trade association for emergency physicians. "Nobody could afford to do that. You can't have 10 doctors and 100 nurses sitting around waiting for something to happen."

Why can't you? In kaizen you need to think of what you can do, not what you can't. Ask "why?" when you think you've hit a "can't".

When you need surge capacity you can hire out a hotel and make the guest rooms into hospital suites during a pandemic. It would probably cost you less than a stay in a hospital bed. It's not perfect, but it's better than what we have now which would be waiting for hours in an emergency room during a pandemic.

Create Standard Work in healthcare and cross train so that you can scale up and down in emergencies. You can have "reserve" nurses trained in triage or other basic medical treatment. How about a National Reserves of healthcare workers. Instead of being trained to fight, these reservists could be trained to heal in times of emergency. Flying American reservists into disaster areas to save lives (instead of the opposite) would be kaizen, change for the better.

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Governor Tom Vilsack has been at the forefront of his commitment to Lean government in Iowa. One example is the use of kaizen for the Air Quality Permit processingat the Iowa Department of Natural Resources. Another example of Lean government is through a program called Purchasing Results the state government uses something called Impact Narratives, which should a lot like making a business case, for spending tax payer money. This is a refreshing and encouraging difference in how elected officials treat taxpayer money.

Last year Iowa commissioned a team of consultants to make recommendations, including something called the Advanced Manufacturing road map. In his Condition of the State speech last week Governor Vilsack proposed to Create a large-scale statewide Lean Manufacturing Institute and he is funding it with $250,000 to start it up, according to this article.

I don't know if creating a Lean Manufacturing Institute at the state level is the right answer. Similar things have certainly been tried, with mixed results. In the end economic development is about a whole lot more than making operations Lean, and if our elected leaders fail to see the big picture and address systemic root causes of economic problems no amount of institutes will save us. But it's encouraging that Governor Vilsack seems to have a better grip than most people in his position.

What we can do is to educate our mayors, governors or congressman or ministers on the importance of kaizen and Lean operations for the future of the local and national economy. If they won't listen or learn you can kaizen the situation by waiting a couple of years and elect someone who will. That's the beauty of our system of government - we can directly elect many of our local government representatives.

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A posting on the Evolving Excellence blog titled Putting Perfume on a Pig paints a grim picture how a panel of some of the so-called best minds brought together by the U.S. Department of Commerce think of U.S. manufacturing. Making things is out, thinking about things to make is in - according to Bill Waddell's summary of the reports and proceedings of The National Summit on Competitiveness. Who needs coffee when you can wake up to news like this?

Based on information in this article the kaizen kudos we gave Connecticut Senator Lieberman have been suspended until further notice.

Speaking of Connecticut, do the states have any more clue than the federal government about the importance of manufacturing in general and Lean manufacturing in particular? Connecticut has been a hub of Lean activity and there are many manufacturers in that state who were early adopters and remain leaders in kaizen. There are plenty of Lean manufacturing successes in that state, and funds are being made available to further promote manufacturing and Lean in the Nutmeg State.

Going from federal to state was an improvement, so how about local government? The city of Jacksonville, Florida recently brought in Lean icon Dr. James Womack for their Regional Workforce Summit according to this article. Fear China and get Lean or else, fix problems rather than make workarounds - seemed to be the message from Dr. Womack.

It's no surprise that the government that is closest to the gemba - the citizens in the community they serve - has more sense about the importance of Lean manufacturing for the people in their community. It seems the further away leadership is from the the gemba - the place you add value - the less you are able to make wise and sensible policy. This is true in government as well as manufacturing.

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There has been labor unrest at the Toyota Kirloskar joint venture in Bidadi, India over the last week. Indian business news has covered these events, but there has been very little mention of it in American or Japanese news.

On January 8th, 2005 fear of physical harm to people and equipment caused Toyota Kirloskar Motor management to lock out workers who called a snap strike on January 6th. Production resumed at a reduced rate, due to management and office workers cross-trained in production processes.

The strike was called in protest to the firing of three employees, according to this article.

The union called the lock out illegal and requested the government act against Toyota management. Toyota management failed to show up for a reconciliation meeting on January 9th, 2005 saying the atmosphere was highly emotional and not conducive to discussion. Toyota management cited physical violence on the part of the strikers, while the strikers protested the working conditions, low pay and poor treatment of workers.

With production volumes dropping while the two sides failed to meet for conciliation, there was talk by Toyota management of the effect this labor action will have on future investment decisions at this location by Toyota. Talks between the two sides are scheduled to resume under a government mediator, according to a Wall Street Journal article on January 11, 2005.

This type of labor-management conflict between factory workers and management in foreign-owned factories in India is not new. Labor unrest rattled Indian industry in 2005. As early as August 2005 this opinion piece by B. Gautam in The Japan Times finds a broader lesson in labor unrest at the Honda facility in Gurgaon, India:

It must be understood that Gurgaon is merely the tip of an iceberg. As much as India would like to compete with China economically, India's labor force is culturally and politically very different from its counterpart across the Himalayas. Indians will not condone the kind of sweatshop economy that prevails in China.

As an important trading partner and source of FDI for India, Japan and its companies must understand that every country has its own social and cultural peculiarities, and these have to be taken into account while doing business.

This trouble in India is in stark contrast to Toyota's success at transplanting TPS at sites such as TMMK and NUMMI. Toyota still has some things to learn about putting respect for people front and center in their drive to dominate automobile manufacturing through localized production.

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Here is a link to an excellent article from September 2005 in the Manufacturing Engineering magazine about the GM-Toyota 50/50 joint venture NUMMI. In this excerpt form the article one of the team members who later became a team leader talks about how TPS and the kaizen culture was taught by Toyota manaters at NUMMI:

"First coming in with a new truck, there were a lot of TMC regular team leaders, group leaders, from Japan," Sanchez notes, "and they'd work with us closely, ensuring that we understood the basics: how to hold a body, hold our tools and equipment. We didn't call it ergonomics 15 years ago, but really that's what it is. It's just how to hold body and tools in the correct position.

"For them, it was everyday work, it wasn't anything special," he adds of the visiting TMC personnel who taught TPS. "When I became a team leader, I started understanding that behind everything we did there was a philosophy or some level of thinking that, as a team member, you didn't really understand."

This is a great example of a successful Lean transformation by a uniniozed American automotive company in the United States.

Posted by Jon Miller at 1:57 PM | Permalink | Comments (0) | TrackBacks (0)

One of the aims of a Lean business model based on the Toyota Production System is to deliver products and services just in time, or exactly what the customer needs, when the customers needs it and in the exact amount they need. Production and delivery of the product or service ideally happens just in time also, in order to not carry inventory.

This requires the minimization of set ups, transaction costs, and causes of downtime and loss which are at the root of so-called "economies of scale" that cause businesses to produce in batches larger than the customers are buying right now. SMED or Single Minute Exchange of Dies, as develped by Shigeo Shingo, helps you reduce changeover time, cut lot sizes ideally to one piece and fulfill this Lean just in time operational model.

When doing SMED or set up reduction one of the common expressions is "Pit Crew Kaizen". In an F1 or Nascar race the pit crew is responsible for working on the race car and returning it to the race track as quickly as possible. Fractions of a second make the difference between the winning car and the runner up. The pit crew who minimizes the downtime of the race car using good organization (5S), times and coordinates teamwork (Standard Work) and cuts out wasted motion helps win the race.

Toyota has an F1 team. Do you think their pit crew follows the "pit crew kaizen" method to cut down the time the car is stopped? An article today in the Sport Network titled My Visit to Cologne takes you on a tour of the Toyota F1 factory in France. Here's an excerpt:

"Our Kaizen engineers, had actually gone to Cologne to work with the pit crews a few weeks before and for those that didn't notice, Toyota consistenly was placing itself as one of the fastest crews in the pits, thanks to these engineers which actually were working to show each person on the crew how to reduce the amount of movements necessary to do their job in sequence, which shaves off those precious tenths of a second."

The whole article is interesting, and worth a read. The next time you need to reduce changeover times watch what a pit crew does and learn from them.

Posted by Jon Miller at 4:16 PM | Permalink | Comments (3) | TrackBacks (0)

There has been a lot of discussion about "failing to become Lean" on blogs, in newsgroups and in books lately. Reading press releases and financial statements of many less-than-truly-Lean companies, they would like the analysts and shareholder to think that Lean is doing good things for their share price. Yet there is a concern with the lack of success.

On Joe Ely's Learning About Lean blog there is a good post asking why people observe but fail to see. He points out that it goes back to humility, and being willing to admit ignorance and learn.

A blog entry by Bill Waddell cites a 98% failure rate of Lean efforts and points out the current lack of Lean marketing, Lean accounting and Lean management tools and practices. He also posts a helpful follow up to this article.

"Lean failures" is a troubling pairing of words. What does it really mean? How do you know you are Lean? Does it show up in your stock price? Is it your growth, cash flow or profitability? I would argue that these things are affected by how "Lean" you are, but they are affected as much by other factors as well, often outside the control of the people in the organization.

You are Lean when you see waste everywhere. You are Lean when you recognize how far you have come but how much furtheryou have to go. Lean is a culture change, a shift in how people think about their work. You are Lean when you embrace failure, without defeat.

Failure is viewed as a bad thing. There is the well-intentioned expression "failure is not an option." I would like to reopen the failure option. That's a bit of humor. To be serious, failure is essential to kaizen. Without failure you have no opportunity to learn how to solve problems and prevent future reocurrence.

Certainly failure with a capital F (to be unable to continue existing profitably) is to be avoided. That is the whole point of kaizen, and "becoming Lean" is all about creating a culture that promotes sustainable reduction of cost. But failures in the process of becoming Lean are necessary. Without them we could not succeed. You can't simply overlay the Toyota management system on top of your company, even if you could capture the essence and succeed at such a feat. You need to try, fail and learn from your failures to build your own Lean system based on the best available knowledge and tools (which today we happens to find mostly at Toyota).

Of the many lessons I was fortunate to learn from my Japanese teachers, one of my favorites is "now things are the worst ever". At the end of a hard week of kaizen, after giving praise to the kaizen team for the long hours and teamwork, the consultant concluded "You must think that "right now" things are the worst ever." There were puzzled looks and even some nervous laughter from the audience. Didn't we hire this expensive Japanese consultant to make things better? Why is he telling us that after a week, we must think that things are the worst ever?

Adults don't learn new behaviors by repeated use of a Lean tool. Adults learn through failure, asking "why" each time and finding how to make the tool work or to create new tools that do work for their particular situation. In order to do kaizen and keep working towards becoming Lean, you need everyone to think "The current situation is the worst. I can't stand it. I need to make it better." This is a significant culture change for most of us.

Posted by Jon Miller at 8:15 AM | Permalink | Comments (0) | TrackBacks (0)

I don't mean to be lazy about crafting a New Year's message, but once again the good people at Toyota have made my job easy.

This is the first New Year for Mr. Watanabe as Toyota's new President. In a memo titled New Years Greetings from Toyota President Watanabe gives us a view of what's in store for the de facto number one automobile manufacturer.

In his message Watanabe begins by stating that to grow in hyper-competitive market, technology and localization are the keys. Technology development is the domain of innovation, R&D and things to come. Watanabe uses language more familiar to followers of kaizen when talking of localization. He says Toyota will take actions along three lines to make sure the foundation for growth is stable. These three things are built-in quality, raising cost-competitiveness, and the reinforcement of core competencies - their flexible production system, their people, and the gemba kaizen.

"We will also use the principle of genchi genbutsu, or "going to the source" to evaluate our strengths and weaknesses, identifying problems and bringing them to the foreground." Here the emphasis on the first part of the sentence is Watanabe's. It is significant that he is calling on everyone at Toyota to go back to the gemba to find and fix problems.

I've heard it stated from Toyota people that becoming the number one automobile company presents a problem for them. The concern stated is "Once they are on top will we lose our drive to improve?" Several years ago fearing that their success was making Toyota complacent, Chairman Okuda of Toyota said on national television in Japan "I want everyone to change. Failure to change is a vice."

There is a hint of the long-term plan of Toyota in Watanabe's closing paragraph.

"As I have stated in the past, as the presence of automobiles increases and societal demands intensify, Toyota's very reason for existing is coming into question. Consequently, I hope to honestly, steadfastly and earnestly move ahead, taking another leap forward so that Toyota's continued existence and its business activities help lead to happiness for people all over the world."

Toyota's very reason for existing is coming into question. Those are heavy words for a Happy New Year message. How many company presidents who are faced with becoming number one in the world would say something like that to your employees worldwide on the first day of the year? Watanabe is saying "Happy New Year. I have bad news. We're going to be number one. This means we have to a tougher job. Get out of the office and go back to the gemba. Genchi gembutsu."

Posted by Jon Miller at 9:18 AM | Permalink | Comments (3) | TrackBacks (0)

There's a good article today in The Hindu Business Line that talks about how BPO (Business Process Outsourcing) firms in India are using kaizen, six sigma, Lean transactions and value engineering to streamline its already lowest-cost processes.

The article begins with a good brief history and overview of value engineering and continues by describing the current state of continuous improvement activities at several Indian BPO firms. The challenge for BPO firms is that their contracts tend to be long-term with a fixed price. The booming market means rising wages in India, and the appreciation of the rupee means there is a built-in requirement to lower cost year-on-year just to maintain margins.

There article gives several good short examples of value engineering. The attention to detail of the cost reduction activities of these companies is impressive. They leave no stones unturned, from transportation and communications to energy cost to benchmarking the cost per foot of carpeting and other equipment installation improving based on the benchmark.

Pramod Bhasin, CEO of BPO firm Genpact says "Dedicated Six Sigma, Lean and Reengineering teams continuously spot and improve processes for Genpact as well as its customers. Supported by 500-plus Six Sigma Black Belts and Master Black Belts, 150 Lean Coaches, these teams have implemented 400-plus breakthrough improvements, 3,000-plus Kaizen improvements that enhanced productivity by 6-8 per cent year-on-year. Genpact shares these benefits with customers."

Bhasin continues "Cost reduction is just part of the equation. Several countries will soon be able to provide services at costs lower than India's. While costs have to be reduced, it is important that BPO companies deliver business impact through process excellence to stay competitive."

Last year we received a call from a financial services outsourcing firm in India. They wanted more information about Hoshin Kanri so they could add that to their capability, along with Lean and six sigma. Their plan was to not only apply kaizen to the business processes that their customers outsourced to them but to use Hoshin Kanri as a value added service to present their customers with the best possible cost reduction strategy and deployment plan. Wow!

Posted by Jon Miller at 2:37 PM | Permalink | Comments (0) | TrackBacks (0)