Gemba Panta Rei

According to a Trackback at the end of Bill Waddell's latest inspiring post full of big ideas, there are only 27 hits on Google for the phrase Put People on the Balance Sheet. We'll I'm adding #28. Thanks to the Flying Aqua Badger for calling this t our attention (who is the Badger and what does he want?).

What does it mean to put people on the balance sheet? The balance sheet is a financial document where you list your assets and liabilities. They must equal each other and balance out. Machines and buildings are assets. Inventory is an asset (ha!). People generally don't show up at all, or they do as liabilities in some form.

Why should people be assets? First of all, people are idea generators. Ideas can make you money. Read Norman Bodek's book about Quick & Easy Kaizen and you'll be convinced. We haven't yet built machines that can come up with ideas or solve practical day to day problem as well as people can. Probably never will. People have the ability to learn an incredible amount of things. And people's skills and knowledge can be used to make money. If you are an employer, you should pay attention to this part. If you give people education and encouragement, they will do kaizen. People are really good at it.

No less than bestselling author of the book Good to Great, the guru Jim Collins, tells you to "get the right people on the bus" and then figure out where you're going. In other words it's people first, then strategy, market, product, process, etc. If you get the people part wrong, good luck with the rest of it. If it's so important to have the right people on your team, and you're going to spend money and time educating them in your strategies, products, and processes, then why would they be anything other than assets?

I'll relate a real-life example from a client of what can happen if you don't put people on the balance sheet as assets. This company's cost of labor is less than 5% of the cost of goods sold. Materials makes up 90% and the rest is overhead. Because of this, their production processes are designed so that productivity is 20% to 30% lower than it could be if it were designed according to Lean manufacturing principles with one-piece flow, right-sized machines, quick changeover tooling, etc. But that's just another 1% or so and this is not a big business case for changing how they look at labor. What's more, the direct labor is mostly outsourced to temp labor companies so this company can take away or add labor on demand.

But this comes at a high total cost. Their people are not as well-trained as they could be, the manual processes are not fool-proofed or well-designed, and since they can always throw a bit of labor at sorting through bad incoming materials, they live with a high Cost of Poor Quality (which they do not measure, but is evident to the trained eye).

Their equipment is quite a bit larger than ought to be, since labor cost is not an issue and the managers and engineers are happy to let people sit in place and batch and queue all day. As a result the value added per square meter in the factory is quite low. This doesn't matter as long as you don't need to build more factories, and all the cost and complexity this requires. This company is in high growth mode however, and they need to break away from the "direct labor doesn't matter" thinking before they put up too many more factories of the same type.

Manufacturing (and all work) is fundamentally built around people. A process is the junction of the 4Ms - man, material, machine and method. Materials are assets, machines are assets, methods (intellectual property) are assets, so why not man (people)?

And last but not least, it's a good idea to put people on the balance sheet in the asset column because Toyota does it. I wouldn't jump off a bridge if Toyota did, but I'd recommend copying just about anything else you can about Toyota's philosophy and operating system. At Toyota it's success through kaizen and respect for people.

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Iowa state representative Phil Wise wants to spend $250,000 to set up a Lean Manufacturing Institute in the hopes of keeping manufacturing in the state, according to a February 26, 2006 article in The Hawk Eye. The government of Iowa has been progressive when it comes to Lean manufacturing in the past, so this sounds like good news.

Community colleges taught 7,425 people about Lean manufacturing in 2005, according to the article. What does the Lean Manufacturing Institute plan to teach? Hopefully not this, from the article:

Lean manufacturing is considered an amalgamation of various quality–control concepts that reduce inventory, downtime and defects to improve design, manufacturing and distribution.

It sounds like this definition was put together by a committee. I suppose the word "amalgamation" is better than "hodge-podge".

The Lean Manufacturing Institute aims to "provide executive level, in–depth training assistance to manufacturing entities in the state." My advice is to the Lean Manufacturing Institute is to go light on the "various quality-control concepts" and let the community colleges continue to train the thousands who will implement Lean manufacturing. Instead the institute should spend the valuable time of these executives on marketing, selling, accounting and managing for a Lean enterprise. I don't think that's asking too much for $250,000 of taxpayer money.

To keep jobs in Iowa, the Lean Manufacturing Institute will need to teach about a lot more than how to improve productivity and efficiency. To survive and thrive as a manufacturer competing with lower cost countries today you need not only Lean manufacturing but also products that customers want, and a marketing and sales strategy that makes sure you can connect customers with your products and services effectively.

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The February 25, 2006 article in Macleans highlights Toyota's approach to kaizen at the product design and production preparation process. The challenge of 50% cost reduction in the foundry were announced in 2003 and 300 Toyota engineers were put to work on developing a new process. The photographs in the article give you a peek at the new casting process at Toyota.

While noting that GM has cut production hours for engines and Ford has made some progress in simplifying the number of engine types used, the article points out:

The question that General Motors should be asking itself is, why make a total of six V6 engines and borrow another from Honda, adding complexity and resultant cost to the automaker's bottom line, when the only truly competitive GM V6 to Toyota's 3.5, or for that matter Honda's 3.5-, Nissan's 3.5-, Hyundai's 3.3- and 3.8-, or Ford's all-new 3.5-litre V6, is the 3.6-litre unit only available in the Cadillac CTS, SRX and STS, plus the Allure? Wouldn't it be simpler, more efficient and therefore potentially cheaper to make one extremely good V6 engine, rather than five that don't really measure up to the competition?

The Pittsburgh Tribune-Review also picks up the same story and gives a description of cellular manufacturing of engines through the casting processes, creating a "mini-factory" and reducing work in process.

While many business leaders today hold their noses at work that is done in factories and chase after something called innovation (products of tomorrow), a company called Toyota steadily cuts cost by large margins by kaizen and genchi gembutsu - making a better manufacturing process for the products of today.

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Taiichi Ohno pulls a lesson for Lean manufacturing out of the rice farming situation in the early 1980s in Japan. The government of Japan paid farmers to decrease the area used to cultivate rice in order to limit overproduction of rice. While it might seem like a good idea to reduce overproduction, the political reason for this was to sustain the artificially high price of rice, maintain the income of farmers, and get the vote of the farmer for the politicians supporting this policy. Until not too long ago, the votes of farmers weighed more than that of city dwellers.

Taiichi Ohno points out the uselessness of this policy. When Japanese farmers were told to reduce cultivation area by 10%, they became 10% more productive and produced the same amount of rice over a smaller area. The policy of the Department of Agriculture, Forestry and Fisheries stated that less area should be used to grow rice, but it did not state that the production output should be reduced. The farmers planted the rice seedlings more densely in a smaller area, resulting in higher yields per acre, and the same output. The ingenuity of doing more with less is the essence of kaizen.

Taiichi Ohno says people, whether in agricultural ministries or in industry, think the same way and use bad arithmetic and do not value productivity (rice produced per acre) instead measuring only utilization (cultivated acreage). When manufacturing companies restructure and get rid of older, underutilized machines they are often replaced by newer machines that produce more. Taiichi Ohno says that this is not productivity improvement.

Taiichi Ohno says it’s important to think more deeply about productivity. It’s a mistake to think that your current productivity is the best. It’s also important to get rid of the idea that unit cost is reduced when you increase production volume. Taiichi Ohno argues for cutting the link between increased production volume and productivity. In other words, increasing output by 10% with the existing people, or adding 10% more people and getting 20% more output is not the right way to think about productivity.

How can companies improve productivity when their volumes decrease? "In Japan we can't get rid of people" when volumes go down, says Taiichi Ohno. This is no longer true, but 20 years ago the system of lifetime employment was still in place.

Taiichi Ohno may have been most concerned about the era of decreasing production volumes that Japan was coming out of at the time he wrote this. Japan industrialized and grew very rapidly, then was shocked with declining volumes and was forced to adjust from mass production to high mix low volume production. This cycle has repeated itself at least once since the 1980s, most recently with high volume work going from Japan to China and the low volume, complex work remaining in Japan.

Taiichi Ohno gives examples of how to improve productivity (although in fact they are cost reduction ideas) when production volumes go down by 10%. If 10% less machine capacity is needed, reduce the machine speeds by 10%. Says Ohno, "It is commonly said that increasing machine speed by 10% increases energy consumption by 20%, and reducing speed by 10% saves 20% energy consumption." Since there is a exponential (rather than linear) relationship for variable torque motors' speed and power consumption, reducing by 10% should save much more than 10%. The math may not be exactly right, but the idea is correct.

Continuing on the assumption that labor cost is fixed, Ohno suggests that when production volumes are reduced you can use people to transport materials on carts by hand instead of using forklifts. This would save fuel, wear on the tires, etc. Instead of pallets, transport smaller quantities so that people can move them by hand. If you are using electricity to run an air compressor to provide air for pneumatic chucks, shut it off. Let the people use a turn a wrench to close the chucks by hand.

Shut it all off, go back to basics and save money, says Taiichi Ohno. Look for kaizen idea in the smallest, most unlikely places. It might sound primitive, or even impractical, but these are the musings of Taiichi Ohno, one of the great masters of kaizen, on how to improve productivity even with reduced volumes.

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The Director of Human Resources for one of our clients had an “ah-ha” moment about her role in supporting Lean manufacturing and how to combine kaizen with respect for people. After we benchmarked a company effectively involving everyone with kaizen, she asked us with great concern “How can we ask our people to ‘work smarter, not harder’ when in fact they will be working harder?”

At the exemplar kaizen factory we visited, workers were working steadily for 7 hours (shift of 8 hours minus breaks). At our client’s factory, the rules regarding breaks were taken more freely. Material shortages created ‘natural’ breaks in the production lines, and a certain amount of downtime due to chatting and socializing was tolerated during work hours.

As a result of these policies and conditions, the Director of Human Resources admitted that her workers put in closer to 6 hours out of an 8 hour shift. As kaizen activity improves material and information flow improved and steady one-piece flow was in place, the workers would be working 7 out of 8 hours.

Her point was that the workers aren’t stupid and would see the result of kaizen as working harder, not smarter. She believed in kaizen but felt it was not respectful to go forward with their Lean manufacturing education efforts without addressing this issue. I am no human resources expert so I had to think about this before giving her an answer.

The kaizen answer to this question is:

The company pays people to put in 7 hours of work out of 8 hours at the factory. Both sides need to honor this agreement. That should be non negotiable item. Management has set a false expectation that 6 hours of work is OK for 7 hours of pay, so the need to admit that they were wrong and correct it.

People will probably feel tired and bored after a week of working in the new way, 7 hours out of 8 instead of 6 hours out of 8. This is natural since they are taking fewer breaks and doing one more hour of physical work per day. Management should respect the intelligence of their people and apologize for this temporary discomfort.

The way to approach this situation is to see that it is a great opportunity for kaizen. As people will be very aware of work that is difficult, annoying, dangerous, or unclear it is the perfect opportunity to educate people about waste and how to get rid of it through giving their kaizen ideas.

The goal for the team leaders and group leaders at this factory is to get kaizen ideas out of people, no matter how small, before people get used to working 7 hours and it no longer bothers them.

The goal for the engineers should be to kaizen the work through the use of low cost automation (jidoka), mistake proofing (pokayoke), etc. so that it feels like you are doing 6 hours of work even though it’s 7 hours of work.

I’m all for hard work if “hard” means “challenging”. If “hard” means anything in the neighborhood of difficult, dirty, unpleasant, dangerous, boring, etc. then hard work is kaizen fodder. Do hard work once, complain about what makes it hard, stop complaining and do kaizen so it's never hard again. In a Lean manufacturing workplace based on TPS principles it’s not your job to do work that is hard – it’s your job to think of ways to eliminate what makes the work hard. That’s the challenge for our Director of Human Resources.

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How does kaizen improve safety and ergonomics? A February 21, 2006 article in Occupational Hazards titled Using Kaizen to Improve Safety and Ergonomics gives a good illustration. Citing a need for speedy resolution of safety issues and the involvement of the experts (the people who do the work everyday) the article explains what kaizen is and how it is used effectively to improve quality. From the article:

"Kaizens are characterized as short bursts of intense activity driven toward resolving a specific problem or achieving a specific company goal in a short period of time."

The article advocates integrating kaizen efforts with efforts to better safety and ergonomics. An example of the Lean manufacturing principle of 5S is given as a way to improve not only productivity but safety at the same time. In addition, the following safety kaizen results are given:

- 90% reduction in severity rate while improving factory throughput by 15% at TRW Cookeville, Tennessee over a 2 year period (Humantech, 2002)

- Cost savings of $100,000 per year from a single ergonomics improvement project at Honeywell (Material Handling Engineering, March 1999).

- 27% reduction in recordable injuries between 1998 and 2000 at Denso by applying ergonomics and kaizen (Smith, 2002).

Although the article accurately describes kaizen events and the activities of kaizen teams, there is more to kaizen than week-long events. Kaizen is part of everyone's job, everyday. Kaizen is working from (or creating) standards and finding better ways to perform the work. High performance organizations do this, just as winning atheletes do at the Olypmics do. It's not the job of the kaizen office to do kaizen, or the quality department's job to maintain and improve quality. It's not the safety department's job to kaizen safety. Who's job is it? It's worth saying agian: kaizen is part of everyone's job, everyday.

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Last week Stephen Crate who writes for the blog at iSixSigma.com on Lean government turned me onto the great work being done with Lean government at the State of Maine. Many thanks, Stephen!

According to information on Stephen Crate's blog:

- The Maine Department of Labor began their Lean transformation in 2003
- The State of Maine adopted "Bend the Curve" to reverse their looming $9 million budget shortfall.
- They combined Lean manufacturing principles with the emerging public sector strategy of "public value"
- They are improving the quality and efficiency of the services they provide at a lower cost

The State of Maine DOL goals are:
- Provide the same or better customer service
- Shift the work of the department to match customer expectations and needs
- Achieve efficiencies by fundamentally changing how work gets done
- Improve intradepartmental collaboration and service integration
- Decrease expenditures by at least $9M and significantly reduce staffing levels over three years while minimizing layoffs

This is being done through a combination of leadership development for managers and front line staff, continuous improvement based on mapping current states and setting target future states, and evaluating and increasing the public value of services provided.

Take some time to look through State of Maine Department of Labor pages. The website is an absolute wealth of information on the work they are doing with Lean government, some of the tools and approaches they are using (Value Stream Mapping for one) and a well-maintained news and events pages. Whether you're a Lean government practitioner or just a kaizen enthusiast there's value here.

Speaking of value, Stephen Crate also pointed out a very good article titled Creating Public Value: An Analytical Framework for Public Service Reform by Gavin Kelly, Geoff Mulgan and Stephen Muers of a group called the Strategy Unit of the U.K. government. Worth a read, but this one is more for the serious Lean government advocate.

"Public value" is a new term to me, and it is explained as a service that the constituent (or customer) "is willing to give up something in return for it." Having our customer define value as whey they are willing to pay for is old had to us in the private sector, but refreshing when coming from a government agency. Go Maine DOL!

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Following up on Lean government news from Scotland, an article in The Buchan Observer tells of the challenges of making ends meet in Aberdeen. Costs are rising, as are fees and taxes but 16 million punds sterling have been saved through kaizen efforts. Sensibly, part of these kaizen savings will be reinvested in kaizen. From the article:

This will include strengthening the authority's highly-regarded Kaizen Blitz team, which develops ways of efficient working; extending the contract of the council's Best Value Audit co-ordinator, and reinforcing and developing consultation and engagement with residents, businesses, community planning partners and employees.

How I would love to pay taxes to a government that does kaizen.

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Who says they can't? Dr. James Womack that's who, in his article this week, titled Why Toyota Won. You can read it here if you have an online subscription to the WSJ or if you don't, it's reproduced here. I enjoyed the article. The kaizen mindset I've been trained in forced me to think, "Very good Dr. Womack, but how can you do better next time?"

The good doctor has been taking some hits in the Lean manufacturing blogs for being a lightweight in the positions he took on the issues of the failings at GM and Delphi. In the article this week Dr. Womack steps up, saying Motor City needs a new business model, rather than a new car model. The key points are, in his words:

• GM and Ford can't design vehicles that Americans want to pay "Toyota money" for
• GM and Ford are clueless as to how to work with their suppliers
• GM and Ford have miasmic management cultures
• GM and Ford cling to their wide range of brands
• GM and Ford still treat customers as strangers engaged in one-time transactions

Positive commentary on Dr. Womack's article has been all over the Lean manufacturing blogs this week. Bill Waddell adds his insight by drawing comparisons between the Ford and Firestone of Mr. Ford's and Mr. Firestone's days, and the sad corporate break up over poor quality vehicles and tires that happened a few years ago. Bill draws a case in point of how the corporate cultures of the big U.S. automobile firms today have created dysfunctional the supply chains. Bill laments:

The days when men of integrity cut mutually beneficial deals, investing family fortunes and family reputations on the strength of the other man's word are tragically, long behind us. Supplier management is becoming a legal function.

The days of integrity and honor may be behind Ford and Firestone, but luckily not for all companies in all countries. Building mutually beneficial relationships with customers, suppliers, the community and employees is part of the well-documented secret to Toyota's success. So why is it so hard to copy?

Deep questions of business and human nature like this can't always be answered by people who got GM and Ford into trouble in the first place (i.e. MBAs, engineers, financial analysts, PhDs, etc). A wider search is called for when the answer affects the lives and well-being of so many. Let's look to the clergy. The Reverend Dr. Leander Harding draws parallels between the WSJ article and the situation that parishes find themselves in today. Here are a few excepts from the Reverend's blog (with a few minor spelling corrections made, but not noted):

[...] good systems have the capacity to draw forth excellence from the ordinary and bad systems have the capacity of demoralizing and defeating those who are otherwise extraordinarily competent. The systems in which many of our clergy find themselves are zero sum, no-win games. The problem is particularly acute in small parishes where the cost of doing business outstrips any reasonable expectations of gain and tends to drive the joy out of the ministry for priest and people alike.

Toyota has done a better job of brining out the best in average people through their focus on kaizen, while the atmosphere at the competition did the opposite. The same happens in ministry, apparently.

The system many clergy find themselves in is to be given the mandate to turn around a financially fragile parish in the face of daunting demographics and really crushing competition.

These soul-searching words from the Reverend could have come from troubled minds of Mr. Wagoner or Mr. Ford.

In spite of more than a generation of congregational studies and sincere efforts to reorganize diocesan structures around making congregations more effective, in most places we haven’t been able to come up with “a development system that tries out many approaches to every problem, then gets the winning concept to the customer very quickly with low engineering cost, low manufacturing cost, and near perfect quality.”

Combined with values that respect people, fact-based management is superior to faith-based management. The human beings that make up the religions, governments and even large corporations of the world aren't always ready to see this.

As a way forward to constantly improving the system of congregational ministry I suggest taking another clue form Deming. One of his principles was “Eliminate fear.” It would be a salutary thing to become very specific about identifying the sources of fear in the system and then trying methodically and systematically to eliminate them, identifying quickly the best practices. For example there is tremendous fear around financial issues for most parish clergy and vestries.

Such honesty is refreshing. Fear can drive the wrong behavior. In corporate USA sometimes it seems the executives' only fear is about their golden parachutes opening properly, and that as they float down in their parachute they might lose the name of the executive recruiter who will land them in their next job.

What do Toyota executives fear? Complacency is often mentioned, and I've heard Hyundai whispered. The Japanese Toyota executives probably fear loss of face. They would lose face as business leaders if Toyota ceases to exist profitably turning out products for the next generation or if they fail to leave a planet on which the next generations can drive Toyota products. Being Japanese executives, their mobility is also limited should they lose their job. When is the last time you heard of a Japanese executive being hired to head a non-Japanese multi-national coporation? At Toyota this fear, tempered with respect for people, drives kaizen.

What is needed is not quick fixes or the famous “entirely new paradigm for ministry,” but doable, improvements that open the door to other improvements and open the door to improving the system constantly and forever.

Kaizen in the ministry..? Reverend, we're waiting for your call.

Back to the WSJ, Dr. Womack closes his article by saying:

There is no mystery about the lean business model. All of the elements are operating in this country every day at Toyota and at many other American companies in a range of industries. What is mysterious is why GM and Ford can't embrace it [...]

Why indeed? I'll take a crack at it. Leading with the term "business model" reveals that Dr. Womack is still seeing the issue in Wall Street's terms. That's ultimately short-term profit driven thinking. If I learned anything from my time working with the Japanese, it's long-term thinking. It is closely tied to the idea of corporate social responsibility, since the longer your business planning horizon is the more you are likely to include customers, employees, suppliers, the planet earth, community, etc. in the picture. Business models are a subset of all of that, and by nature narrower in scope of concern.

Toyota is highly profitable. They pay attention to Wall Street and Wall Street to Toyota. But Toyota is genuinely worried that they may not be around in 50 years because the car market will be saturated, polluting cars will have been banned, the planet will have overheated, or other things those of us concerned with profit this quarter might find ridiculous. Toyota will spend money and time planning for these long-term contingencies before they will cut corners to please Wall Street analysts for next quarter's earnings.

You could call it a business model, but it's corporate citizenship. It's knowing you're a king and wanting to rule the land of Toyota in a just and honorable way. Wall Street measures and reward quarterly earnings growth. I can't think of a better way to kill long-term thinking in the minds of our business leaders (I probably could if I tried but I'm making a point here).

The success of Toyota is about more than profit. It's also about people. There's a human dimension at Toyota, based on long-term thinking and turning fear into a drive to do kaizen. If you don't have this in you, how do you get it? Perhaps it is cultural, generational or simply a matter of human nature vs. the right kind of nurturing. I'm not an expert in the business of peoples' souls. You will have to ask your priest, imam, pastor, guru, rabbi, swami, psychoanalyst, spiritual leader or business coach.

It's not faith, it's fact: when you find harmony in your business process between people and profit, you win.

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In Lean government news, kaizen is taking place in the Scottish government according to the Scotsman online news. An article titled The Man Who Would Save Scottish Industry on Sunday profiled kaizen consultant, excuse me, resultant Stuart Ross. Mr. Ross has been doing good work with kaizen not only in Scottish industry but is also bringing Lean government to Scotland.

Mr. Ross' presentations and kaizen results with the Aberdeen Council have attracted the attention of the finance minister no less, according to the article:

The council's planning department wanted to speed up its process. As a result of changes now introduced, the time for processing applications has been reduced from up to eight days to three. In half of cases it takes just one day, and uses half the resources. There were similar improvements in the social work department, where no jobs were lost, but instead more staff were employed with clients rather than in paperwork.

Quoting Mr. Ross in the article:

"Lean thinking can be applied to almost any process, but the key is the involvement of those who actually do the work. I passionately believe that companies, councils and the NHS can make major improvements across all their key measures once they learn how to involve their staff in the elimination of wasted time."

Well stated. And he's doing this with a disability that would sideline most kaizen consultants. That's one less excuse to do kaizen. With more people like Mr. Ross we'll win the battle against waste one person, one process, one department, and one government at a time. This is very exciting stuff.

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The reason we call this trip the Japan Kaikaku Experience is because this learning experience takes place in Japan and because a "kaikaku" or "transformation" happens in people's heads by the end of the week. The kaikaku for me this time was deepening my understanding of how the managers we met this week viewed kaizen.

Broadly, kaizen to Japanese managers means any activity that improves the bottom line by cutting out waste. The 5-day kaizen events is nearly unknown, and instead there is a variety of ways kaizen is done from suggestion systems, “jishuken” improvements of work through 1-hour per week or 2 and 3 month projects, as well as management cost reduction kaizen activities that last 3 to 6 months. Kaizen is an integral part of managing as well as working.

Here is a selection of questions (Q) from our international team on the Lean manufacturing benchmarking trip, and the answers (A) of Japanese managers from various host companies. I wrote these down because although in each case they may appear to be very simple answers, the difference in assumptions and thinking between the person asking and the person answering was very enlightening in every case:

Q: How do you continue to get ideas from people after many years of kaizen?
A: Ask your newest employees what makes their job hard.

Q: How do you get people involved in kaizen?
A: Participating in kaizen is not an option, it’s part of the job.

Q: What tools, such as six sigma, do you use to do kaizen?
A: We use two tools: a video camera and a stop watch.

Q: Is it difficult to get new ideas for kaizen?
A: No. Every month the line speed changes and the production situation changes, so there are always new ideas.

Q: What are some of the keys to successfully using the kaizen philosophy to improve the bottom line?
A: Think “now things are the worst”. Even after you just did a great kaizen and you reduced cost don’t spend any time basking in the glory, but rather think that this is the new low point from which to keep improving.

Q: What motivates the suggestion system?
A: It is a communication tool. The important thing is to make improvements and be conscious that you are doing it.

One example of this from the PR department at Toyota was the local hotel list they provided to out of town visitors. The kaizen was to put the website addresses of hotels instead of the actual hotel contact information on a piece of paper. This allowed individuals visiting Toyota to choose their hotel by viewing the website. The savings are somewhat dubious, but it counts as the kaizen idea for that month, and maybe next month or a month after that it will lead to a money saving idea from this person.

These are some of the biggest impressions from this trip that gave me the kaikaku experience and refreshed my thinking about kaizen.

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One of the highlights of this Japan Kaikaku Experience trip was the visit to KTC. This company has more than 40 years of history making strong, high quality hand tools. They supply tire wrenches for new Toyota cars and they also make the tools used by Toyota F1 pit crew. They were fortunate enough to have Toyota managers introduce them to kaizen and TPS. They have been doing kaizen for over 20 years. After 20 years of kaizen you might expect to see so-called "advanced Lean manufacturing". At KTC this takes the form of a diligent execution of the basics.

Their 5S wasn't perfect, but it was practical. I've been in drop forging, machining, and plating operations that were much, much worse. The focus of 5S activity at KTC is not looks. For them it's 5S for safety, quality and productivity. Posted on a large signboard outside one of their buildings is the green safety cross showing days without a lost time incident. The record of 8,900+ days (24 years) without a lost time incident told the story. As a factory heating, forging and machining metal day in and day out this is quite an accomplishment.

"How is this level of 5S maintained?" one of the members of our group wanted to know. Daily, weekly and monthly 5S activities exist at KTC but this is not the secret. For KTC 5S is not an activity that is separate from the day to day running of the business, it is an integral part. For instance in the sales office as well as the R&D offices you bring out only the files you need to do today’s work because it makes it clear and visual what you have to do. You clear your desk at the end of the day because this is the most effective way to work. This is one of those "non-negotiable" items that make up a culture of a company.

Another non-negotiable item is involvement in kaizen. At the level of foremen, supervisors and workers there is what they call "jishuken" or autonomous kaizen activity. This involves all employees and the ideas tend to be small, local improvements that make your job a little bit easier or safer. Doing kaizen is a condition of employment and not something that you can opt out of. People have to work while thinking about how they can make their job easier. It sounds so simple that we were left thinking "Why wouldn't everyone want to do this?"

At the management level kaizen takes the form of projects that last several months. A manager's job is mostly kaizen, and the lesson here was that the more you do kaizen the less you have to manage. Kaizen projects are focused on cost reduction, and even the quality, safety and environmental kaizens are linked to cost reduction. "How do they train the managers to be able to run kaizen projects?" another member of our group wanted to know. The answer was that they don’t, since it is by learning how to do kaizen as part of your job in engineering, production control, etc. that you become a manager at KTC.

"How do you motivate people to do kaizen?" was another question, and here again we received some valuable advice. At KTC it's the job of leadership to effectively link external motivation (desire for promotion and pay raises), internal motivation (desire for growing and developing as a person) and kaizen activity. Directing people to accomplish their goals by doing kaizen - in my understanding that's the KTC way.

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Toyota posted a 34% rise in third-quarter net profit, clearing $3.34 billion in the quarter ended Dec. 31, 2005. This hit the news just about as we were finishing our tours of Toyota Kamigo and Tsutsumi plants. It’s easy to copy what you see, and fail. U.S. companies touted as Lean and in bankruptcy have proven that. This is because you copy only what’s happening on the surface without building in the thinking process into the people who work within your organization.

Kaizen mindset by all management. It’s never “ok”. It is never good enough even if the factories are busy and you are making a lot of money. Here are several key concepts that Toyota makes very clear when you walk through their exhibition hall, lavishly renovated last year.

- Harmony of people and machines
- Harmony of the company and the environment

It was unstated, but "harmony of the company and society" was another one evident in their social responsibility statements and environmental work. Chariman Okuda's words last year that Toyota should raise prices and give GM some "breathing room" are evidence of the same kind of very big picture thinking.

There were videos teaching Jidoka, kanban, andon, suggestion system and other practical aspects of TPS in the exhibition hall. What’s the thinking behind each one? In Toyota’s words JIT, Jidoka, and their production philosophy is all about respect for people and never-ending kaizen.

There was also an amazing diorama (reduced scale model) of the factory assembly line. I took photos of this model, an actual miniature assembly line (which moves), which I will share below:

This picture shows the "raku raku chair" which is an employee kaizen idea to eliminate wasteful and unsafe motion of getting in and out of the car:

Here's another photograph of the diorama showing the material replenishment tuggers as well as a display board above the aisle for visual management of line status:

If you want to see the real thing, you'll have to come with us.

We were going to visit the Motomachi plant, but there was a last minute change of plans because trouble in the paint line had shut down the assembly line. It would have been fun to see how the managers and engineers were responding to the problems in the paint shop, but alas, this was not to be. Toyota did not have the excess inventory in the system to prevent the factory shutting down.

One thing that struck us is that our host from Toyota told us that they consider 97% to 98% performance better than 100%. If you achieve 100% you will not see the problems. It is better not to be perfect so you can see opportunities to get better. If you aren’t stretching your system you will not see it fail by 2% to 3% and find where you still need to improve it. If you get to 100% and think you've won, be careful - the best in the world aims for 98%.

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We have fun on the Japan Kaikaku Experience, but not that much fun. We're talking about the kinds of pipes and joints you use to build things, not smoke. Here is an example of a parts picking station with sensors built in as a pokayoke (mistake-proof).

Practically every company in Japan that is serious about kaizen now recognizes that the Toyota Production System is a superior model and should be copied. One thing you will see a lot of in these factories is the home-made, pipe & joint style of cart, workstation, even frames of production equipment such as clean rooms. On our first day our group visited two companies doing an excellent job of making flexible equipment suited for one-piece flow using the Yazaki (Creform in the U.S.A.) brand of pipe & joint. Here's another example of an assembly workstation built using this material.

What are the advantages of the pipe & joint system? There's a cost advantage compared to buying a ready-make shelf or cart, there's reusability since you can dismantle and rebuild the cart if your needs change, and there are two other factors.

At one company there were clear divisions of "I design", "I build" and "I use". With this material since the equipment you want can be made and changed so quickly you can create a team and do this very quickly, in effect forming a small kaizen group to build factory equipment or office furniture. This lets you make what you need quicker if the person using it can design and build it, and it also breaks down organizational walls between these functions.

The biggest learning perhaps was the way the pipe & joint material lets you answer the question: "How fast are you improving?" Our host drew this chart to illustrate his point. On this chart, which would you rather be, company A or company B?

What about on this chart? Would you rather be company A or company B?

The lesson is that it’s not where you are today but how quickly you are getting better by doing kaizen.

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This week I will be blogging from Japan. Internet access providing, I hope to be sharing bits of wisdom we gain each day with you on what is now our 17th Japan Kaikaku Experience trip. So far I have mostly spent time between the airport and hotel meeting and greeting clients who are joining us this week on our Lean manufacturing experience trip.

Even though it's been mostly airport and hotel, I have noted a few kaizen examples at Narita airport. The NAA (Narita Airport Authority) was privatized not too long ago. This means there is a profit motive now, instead of it being a government function (not necessarily profit-driven and waste-aware). The kaizen examples are minor things, but noticeable to a frequent traveler.

As you arrive and enter the queue for the immigration check, there are bright signs that say "45 minutes", "30 minutes" and "15 minutes" along the winding queue. This lets you know about how long you will wait. Psychologically, seeing a huge line at immigration after a 9 hour flight can be demoralizing so knowing that the wait is 30 or 45 minutes is a good customer-focused kaizen. They also hand random people cards and ask them to give them back when they leave the queue, in effect checking to see how quickly the line is moving.

They have a "puller" at the end of the queue who tells you "26", "31" etc. and points you towards the available waiting spot for the next immigration inspector. You stand at the end of the queue for barely a few seconds before being told to go wait in the "next up" position. My first thought was that this was an unnecessary task, and just another example of Japan's attempt at full employment.

This person acts as a takt time mechanism as well as a pull mechanism. As a queue with a single exit point, but multiple service points (immigration inspectors) if you left it up to each person to find the open spot, you introduce variability since I may be reading a book as I wait, instead of paying attention to the next open spot.

For what it's worth, I also saw a suggestion box soliciting improvement ideas from travelers, which wasn't there before.

I took the shuttle bus on the way from the hotel to the airport to pick up a group arriving on a later flight. There is a check point where you need to show ID before you enter the airport grounds. Here two security officers enter the bus and everyone must show their passport or ID before the bus can move on. Previously, it was one security officer per bus. Why two security officers? One of them goes straight to the back of the bus and starts checking there, and the other officer checks the front half of the bus. As a result, the time that the bus is stopped is cut by half. This cuts the lead-time through the checkpoint in half and keeps traffic moving. This is very helpful in heavy traffic or if you're running late for your international flight. This same idea is often used in set up reduction.

There is growing and wide recognition in Japan now that TPS is a superior business management method, and is to be copied. This is true in both the public and private sectors. For example, the new Nagoya airport was designed and built under the guidance of a Toyota executive and this public-private joint venture was completed under budget, and on time.

I don't know for a fact whether the people at Narita Airport Authority study TPS and do kaizen. I do know that JAL Air Cargo has begun implementing TPS, so perhaps. Small signs of kaizen are evident even in my first minutes after arrival in Japan. The week is off to an encouraging start.

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