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June 30, 2006

Gemba Keiei Chapter 27: We Can Still Do a Lot More Kaizen

Taiichi Ohno starts the chapter with the surprising statement “We have done a lot of rationalization on the production floor and we are near the limit. It’s becoming common sense that administrative processes still need a lot of rationalization, but we can still do a lot of kaizen on the production floor. However the impact of kaizen is will get smaller compared to the effort required.”

Ohno observes that while getting the last one percent of improvement is hard, on the other hand heijunka (leveling the volume and mix of production) is quite effective yet people don’t realize this. By focusing on the proper sequencing of assembly (final assembly) and synchronizing the production of subassemblies, you can limit overproduction and improve the efficiency of the overall system.

When rationalization is focused on individual processes they may increase the output from 100 to 120 but if only 100 is needed to support the heijunka sequence of final assembly, the true kaizen would be to make only 100 using fewer resources.

“The important thing is to produce in sets.” Says Taiichi Ohno. Although this might make the unit cost of the part appear higher, the overall cost of the product will somehow be lower. Even if you produce engines very cheaply (unit cost) if you have several month of inventory but not one of every part you need to finish assembly and ship the product, this is not effective kaizen. The role of production control is to make heijunka and set production happen, says Ohno.

“You can only sell the parts when you have a set that is a product” says Ohno. “It’s a very simple idea to make only what you can sell in the amount that you can sell, but nothing is harder to do.”

Ohno foreshadows the need for Lean accounting when he says “When you think about producing in sets you realize that overproduction is a very bad thing. But the troublesome thing is that calculations don’t show this.”

Ohno says that you have to view overproduction (producing too much or producing too early) as a bad thing that should be the focus of kaizen. Rationalization can lead to individual process optimization so there is a limit but we can do lot more kaizen if you look at things this way.

Being able to produce 20% more with effort is worth less than just making the 100 that you can sell. In fact if you have the extra capacity to make 20% that you should realize that you have too many people. “When you look at administrative work from this perspective, it’s very wasteful.”

June 29, 2006

5S in the Office Saves Space, Expense Money and Time

Here are some photographs from a recent office 5S activity at one of our clients. Both 5S and a redesign of individual desks and workstations are part of the Lean office effort to help improve productivity and quality. The office layout is being redesigned to be more open and visual. What they have learned over the years through Lean office and office 5S is that they can be more productive using less space, and save money on office supplies to boot. Here's what their red tagging effort turned up.
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Here is the view of the office 5S red tag piles from the ohter end of the hall.
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Once they put supplies at point of use, they had to 5S the remaining extra offices supplies.
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And to prevent materials from being purchased before needed these visual management cards were added.
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A diagonal stripe was taped on to the spines of a set of binders. This very simple visual system shows at a glance if something is missing so you can find it and put the office back in order before disorder spreads. That way office 5S is easier to sustain.
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The office 5S red tag bin, as well as the trash cans are marked an made visual. Setting locations is one of the steps of 5S to standardize workplace organization.
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Speaking of 5S red tags, if you're looking for them or other 5S supplies, get them here.
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To date 175,300 red tags sold. That's a lot of red tagged items. Think about it.

June 27, 2006

The Top 10 Reasons to Start Lean Office and Lean Manufacturing at the Same Time

Most manufacturing organizations start their Lean journey on the factory floor first. Many soon recognize that meaningful, lasting improvement is only possible if Lean principles are also applied to administrative processes that support and enable manufacturing. Some companies have not yet recognized that Lean principles apply equally well to financial, human resource, engineering and administrative processes and use Lean primarily as a manufacturing tool.

We believe that Lean should be applied simultaneously to the factory and the office, rather than waiting to apply Lean office as the “next phase” after factory Lean has advanced to a certain level.

Here are the top 10 reasons to start Lean office and Lean manufacturing at the same time:

1. Gives the Lean manufacturing effort more credibility. Not just another attempt to cut out factory labor. Sends clear message that no one gets a free pass from Lean thinking.

2. Most of the cost is in the front office, or the decisions that come from it.

3. Creates capacity in the office, sales, engineering, and purchasing to start generating new sales to fill up the capacity Lean will create in the factory.

4. Unleashes the experience and creativity of the people in the office to solve all kinds of problems for the factory and for customers.

5. Helps the finance people understand Lean so that they will change both how they do accounting and how the tactical kaizen activities are chosen so that they connect to bottom line savings.

6. Involves customers and suppliers sooner in the Lean process, since the office people often have more direct contact with them.

7. Reducing the information flow lead-time is often a low-hanging fruit that improves cash flow and time to market.

8. Helps the Human Resource department understand how hiring and training needs to be done in order to support kaizen and Lean.

9. Avoids spending millions on IT by having IT specialists, users and decisions maters understand process flow first by mapping it out and redesigning it.

10. Almost any meeting can take less time and be more effective using Lean principles. The people paid the most can spend less time in meetings and more time at the gemba and with the customer.

So why do people wait to start implementing Lean Office? I spoke with a customer today whose office manager just went to see the office of another Gemba client. She watched their one-piece flow bill paying process. She returned to her own company, tried the same thing and saved 45 minutes on the first try.

Never mind if you've already started Lean manufacturing, or if you're about to begin. When you’re ready to take the step towards Lean office, come join one of our “hear, see & do” Lean office training sessions. Now you’ve heard about Lean office, but seeing is believing and doing is understanding.

June 26, 2006

Kaizen Song: I Stop the Line

It's a very busy week, no time to blog today. So I'll post another one of the kaizen songs I wrote back in the days when I had a lot more time on my hands. Please enjoy this musical interlude.

I Stop the Line
(To Johnny Cash’s “I Walk the Line”)

I keep a close watch on these parts of mine
I keep the work pace balanced to takt time
I see a defect coming down the line
Won’t make takt time, I stop the line

One piece flow is very easy to do
I start again each time my cycle’s through
Yes, I'll admit I never thought it was true
Won’t make takt time, I stop the line

They've got a way to get my parts to point of use
They bring me kits loaded on those tuggers
But the suppliers yes sometimes they lie
Won’t make takt time, I stop the line

And when I pull the cord the andons light
The foreman runs to see if I’m alright
We’ll catch up by the time we leave tonight
Won’t make takt time, I stop the line

June 25, 2006

Credit Suisse Does Gemba Research

An article in this month's Fast Company magazine asks Talk to Our Customers? Are You Crazy? The approach Credit Suisse is taking to understand the problems with their products and processes is basically research by going to the gemba.

This genchi gembutsu approach at Credit Suisse is challenging the assumption that executives in their suites can adequately know what customers want using reports, surveys or simply the belief that they know their customers well.

They have shown in fact that executives often do not know what the customers think about their company and their products because they are removed from the reality (genjitsu) of how the customers use their products and services (gembutsu) at the banks, ATMs and websites (genchi or gemba).

As a result of giving executives a few hours on the gemba to learn how to observe processes, talk to customers, and go through the customer experience themselves Credit Suisse is finding many process redesign projects that we would call kaizen. These include reducing wait times in ban queues, making clearer account statements, or simplifying application forms.

David McQuillen, who is responsible for taking Credit Suisse executives to the gemba on his "experience immersion" trips says "You can do this stuff in two or three days. You don't have to spend half a million dollars on research. Just go and observe." Amen.

June 22, 2006

Gemba Keiei Chapter 26: There Are No Supervisors at the Administrative Gemba

“Administrative work is done at the gemba just the same as the production gemba where we make things. The office is the administrative gemba.” Taiichi Ohno begins the chapter.

Gemba is a Japanese word meaning “actual place”. In fact it is written gen-ba but pronounced more like gemba. "Gen" means “real” or “actual” and “ba” means place. Gemba is the site, scene or place where it actually happens, whatever “it” may be.

“No one is watching the administrative gemba” says Ohno. The production gemba is easy to see, but departments where managers work is very hard to see. People in the office may look like they’re working very hard but it’s impossible to know whether that’s the work that is needed right now, he says.

“In the administrative gemba, the managers don’t have the brains or ideas to be ‘supervisors’. They have manager brains.” Ohno says. He is pretty blunt. “I think there are no supervisors at the administrative gemba. There should be.”

Taiichi Ohno continues to explain that supervisors must be able to instruct and also know how to evaluate the results of work.

“The traditional Japanese supervisor does not supervise work. They supervise how the people work. The same mistake is made in both the production gemba and administrative gemba. Supervisors should supervise the progress of work, but they supervise how the workers are moving about. This behavior must be kaizened.”

“I think the manager has an easier job. They can get by with just having knowledge. The supervisor not only needs knowledge but must also be able to demonstrate that they can do the work, in other words they must be able to teach.”

Taiichi Ohno says that there are no supervisors at the administrative gemba because the work is not visible and managers do not think the work requires supervision.

Back in the days when he wrote this chapter, Taiichi Ohno was teaching kaizen and the Toyota Production System to group company Toyota Boshoku. His students at Toyota Boshoku pointed out to him how well their workers were working. Ohno told them that just because the workers’ hands were moving fast did not mean that they were working. The focus on how the workers were moving leads to a search for faster hands, which is not the goal.

“As long as you are looking at motion and not the work, you will not develop the eyes to supervise work.”

Taiichi Ohno compares the supervisor to a manager or coach of a baseball team. A coach needs to be able to play, but a great player may not make a great coach. Just as a coach must know the strengths and weaknesses of the players and be able to guide the team to victory, the production floor and the administrative gemba both need to develop good supervisors.

“The trouble is, white collar folks on a management track are rotated to new positions. So no one is really seeing the work. People work in a position for a few years and then move on. No one really sees what work they did while in that position.”

Ohno criticizes that managers and supervisors don’t think “how much more have I accomplished than my predecessor?” He likens it to government bureaucrats who want to work without causing trouble for long enough to be promoted to higher positions.

“Managers don’t evaluate whether they are getting the same work done with fewer people than the previous manager did. Even at Toyota Motor Corporation this is true. They are not good at administrative kaizen. When they do kaizen they screw it up. The managers are not evaluated on the number of people working for them and the amount of work they accomplished.”

“Do managers think ‘my predecessor did his job with 50 people, I’ll do it with 40’ to themselves?” He asks.

“Managers should evaluate their work by saying ‘I did my job with 50 people last year, I’ll do it with 45 this year’ but they don’t. Instead they just want to make sure they get their job done from year to year. There’s no progress, but their salaries keep going up thanks to the union.”

Although Taiichi Ohno’s focus on labor cost reduction as a focus of office kaizen activity may not be as relevant today when there are so many greater opportunities for overall cost reduction by applying Lean principles to sales, design and planning processes, it is understandable.

Ohno spent many years struggling to cut costs in the factory. The lax attitude of the Toyota managers, the lack of effective administrative gemba kaizen and the non-existence of what he could recognize as supervisors in the office made him write this blunt assessment of Toyota managers and office staff, circa 1982.

June 21, 2006

How Toyota Uses Information Technology (IT) for Kaizen

There is a staggering amount of good material being printed these days in the Japanese press about kaizen, the Toyota Production System and issues of manufacturing and business competitiveness. I just wish I had more time to read the magazines and books that Brad Schmidt sends over from our Tokyo office, and share it with you.

If anyone out there knows of a grant to read Japanese literature and share summaries with English-speaking audiences, or some other scheme that would allow me to pay the bills e-mail me.

A recent article in Nikkei Business Press titled (in Japanese) Toyota’s Data is at the Hands of the CIO – Data is a Weapon for Kaizen Suggestions (Toyota no subete no jouhou wa CIO no temoto ni aru – data wo buki ni kaizen teian) contained a brief interview with Toytoa CIO Yoshikazu Amano.

Toyota has succeeded in reducing new vehicle development time from four years to between one and two years partly due to heavy investment in CAD tools and electronic parts list systems. Here are Amano’s comments on how Toyota uses information technology to do kaizen:

"At Toyota the Information System Department and I as the CIO have an absolute advantage when compared to other departments. The reason is that we manage all of the data from Toyota’s global operations. I have this data at my fingertips.

Looking at this data tells me a lot. For instance in sales I can see that some sales companies are successful at selling new cars while others are good at selling used cars or service. I can also see the difference in profitability between these companies. In the area of logistics I can see one department over here and another over there processing similar data, and that these departments may need to be reorganized and the transactions streamlined.

Part of my job as CIO is to take on these company-wide issues and use this data to make improvement suggestions when I have an opportunity to meet with the managing executives.

Of course, it requires more than me making suggestions for Toyota to make good use of IT. The departments who are the users of information technology must be motivated for IT use to spread. Fortunately, the departments who are users of information technology frequently contact me to ask “Can we use IT for this?”

The reason they ask me is that our company’s goals are set very high. These departments have goals such as “cut lead time to 1/3rd” and “cut prices in half” that are virtually impossible to achieve through our traditional way of doing business.

There are cases when people become desperate for help in achieving their goals they ask me “Can we use IT for this?” In order to achieve these things we need to approach information technology implementation from a cross-departmental approach."

He goes on to give an example of this from new vehicle development at Toyota.

Very cool. Despite what those in the business will tell you, information technology is not the solution to problems of how products sell or how we move materials from place to place. IT is a tool and an enabler to a world class operating systems, if you've already got one. If you don't work on that first. When information made visible is used to do kaizen according to the proper thinking (TPS philosophy) you can achieve results that traditional thinking could not.

June 20, 2006

Trying Out Herman Miller's New Cubicle: Not for the Lean Office

Herman Miller is credited for introducing the original cubicle. Instead of recognizing poor design and listening to the voice of customer, they have designed a better cube or according to designer Douglas Ball "an environment that offered a sense of territory and privacy, but also openness, all within a 6' x 8' footprint."

In the June 2006 issue of Fast Company staffers from the magazine tried out these new cubicles for ten days:

“…we took a new unit for a spin. A four-pod system--two 6' x 8' cubicles and two 6' x 6'--was installed in the middle of Fast Company's offices. The pods featured a sampling of window patterns--pebbled, ribbed, etched--with varying levels of transparency, on the walls and doors."

Although these new cubicles are far from an open office plan, the testers encuntered a typical privacy concerns that we hear about the open room Lean office layouts:

"Yikes! I just realized Jen can see my whole computer screen. Guess I'll have to cut back the time I spend on the Zappos.com shoe site." I guess you will. But wait, she has a better solution... "I position my movable hanging-file rack in her sight line for more privacy." Ah, human ingenuity.

The new cubicle that is supposed to offer territory and privacy doesn’t seem to do that. Remarks another Fast Company staffer:

"I've been in here long enough to be comfortable with the space but not happy with it. It's too small for people to enter and interact with me."

Walls and doors keep waste in and keep teamwork out. Open office = problem solved.

But don’t we need privacy so people can have private conversations in an office?

"There's a fight going on in an adjoining cube. I can hear it all. I feel like joining in, even though I have no idea who's right. So much for auditory privacy."

Yes, let’s keep the fighting behind thick walls and heavy doors rather than expose disagreements early and often so people can communicate, dispel misunderstandings and get on with working productively and safely. Lift rug, sweep problems under rug, lower rug. So much for problem solving in cubicle land.

There’s a glass sliding door between adjacent cubicles to let people communicate while maintaining privacy. How does it feel?

"It's great being able to chat with Jen when we want, but here's the problem: When you're done talking, it seems rude to slide the shutter closed. What's the etiquette for this?"

What's etiquette in normal social interaction (free from cubicle walls)? You smile and break eye contact or offer other appropriate social cues. The sliding glass shutter is just an awkward reminder that you are walled in.

"I'm starting to miss all my stuff. Linda says the idea is a paperless office, but I have no real place to put my books and can't personalize this workspace with posters. Am I more productive in this space? I may be. I have nowhere to go, so I just sit here and work."

As I said yesterday, designing a Lean office with productive, customer-focused, high quality workflow is not about the amount of space per person, the ability to personalize with posters or not, or having a papered or paperless office. Processes should be designed around Lean principles.

Redesigning the cubicle is a waste of time. Cubicles are based on a flawed philosophy of work that is command and control rather than empowering, denies collaboration, optimizes around individual processes rather than around customer-centered workflow, and seeks to bury problems rather than make them visible and fix them. The Lean Office is the open office because following Lean principles leads you to it.

June 19, 2006

Doing More with Less in the Lean Office

"An increasing number of local companies are shrinking their employees' work spaces" begins an article in the Puget Sound Business Journal titled Offices Getting Smaller. Well known firms in our neighborhood including Boeing and Washington Mutual are moving into smaller work cubicles and more conference spaces.

Scott Harrison, President and CEO of Bellevue, WA workspace design firm BarclayDean Interiors is quoted "There is a drive for creative and innovative ways to do more with less physical space."

The article claims the focus on reducing space to reduce overhead cost while promoting teamwork, collaboration and innovation is part of a national trend:

According to the International Facilities Management Association, per-employee square footage has been on the decline for years: from 589 in 1994, to 406 in 2002 -- a 31 percent decrease.

Who has four hundred square feet per person? That's just an amazing amount of work space per person. You have to be careful with statistics. For instance last week three of us visited a tier 1 automotive supplier employing 900 people in 500,000 square feet of factory, office and warehouse. That's an average of 555 square feet per person. Of course this is not a meaningful number, but 400 square feet of office space per person is a cubicle 20 feet by 20 feet. That is ridiculous.

The article reports:

Washington Mutual Inc. plans to save more than $15 million a year by consolidating workers into a single tower -- the new WaMu Center next to the Seattle Art Museum -- and reducing per-employee square footage from 264 square feet to 218, said Kent Wiegel, a senior vice president in charge of the move.

Is "how much space per person" even the right question to be asking? I could not find a description how the per-employee space was calculated in the IFMA report, so I have to assume that it is total space divided by total employees, including all shared spaces.

At the Gemba office near Seattle, Washington we live in less than 380 square feet of office space if you do not count the shared conference room, toilets, and walkway to the exits. In this space we have 8 desks, two arm chairs, a sofa, two bookshelves, four filing cabinets, an assembly and shipping area for training materials and workbooks, and all office equipment except the copier, which we share with another company.

Perhaps a better measurement would be value-added per square foot. Who cares if you use more space if people are generating more innovative ideas, solving problems for customers, and contributing to profit? The Lean Office will beat a non-Lean office hands down in this measure due to improved visibility, flow and ability to catch errors and solve problems early. Space is reduced naturally as workflow and business processes are redesigned to achieve these things.

The point is not the amount of space but how well you use the space you have to get work done. Again from the article:

According to Boeing spokesman Robert Jorgensen, the switch was intended to help reduce real estate costs and to encourage teamwork. The space features a variety of small- to mid-sized "collaboration rooms" which, when combined with an open floor plan, are intended to help people work together.

Just like putting factory workers in u-shaped arrangements of machines without point of use storage, cross training, pokayoke, and jidoka won't really help you achieve standard work and one peice flow, putting office workers in "collaboration rooms" and open floor plans aren't enough to guarantee teamwork and improve productivity.

The workspace needs to serve both the needs of the people and the performance of the business processes. The workplace should enable people to feel safe and comfortable, and the workspace should enable processes to flow and be visual. The workspace should allow people to make changes to the physical layout as needed in response to changes in personnel, customer needs, or business process design.

Before moving your office staff into smaller cubicles in the name of innovation and lower overhead, take a class on Lean Office principles or visit a real life Lean office and empower them to design how they collaborate and meet the requirements of internal and external customers.

Frank Mirabelli, Senior VP of Univar USA Inc., is moving his 300 person team from a cubicled office into a 2-wall plan with pods of three people. Said Mr. Mirabelli "we spent a lot of time making sure this is an employee-first environment" even though they have less space, according to the article.

If the design was really employee-first, it would be a spacious lounge with expensive chairs and gee-whiz desks. In Lean Office workspace design it is process first. Otherwise you will serve neither the profit nor the people.

June 18, 2006

Do Heijunka with Your Kaizen Efforts

Last week we performed an assessment at a tier one automobile manufacturer. This company has done some Lean manufacturing activities. Due to a large number of new product launches at the moment, kaizen activity appeared to us to be at a complete stop.

They were not unaware of this, but the lack of kaizen and Lean manufacturing activity in their factory was not their major concern. The new products, new tooling coming in, the relocation of production lines, and the customer’s engineers walking around the factory doing process trials were their main concern.

The engineer at this site in charge of both Lean manufacturing and coordinating these new product launch efforts (quite a large task he was handling admirably well) told us this is a typical 3-year cycle of “launch new products, then kaizen”. When they are in the middle of product launches, kaizen stops. When the launches are over, they can pay attention to kaizen again.

We think this is one of the reasons that we were able to spot some surprising lapses in line balance in work cells, unnecessarily long changeover times, and some wasted motion, transportation and waiting at various processes during our assessment.

Seen over a 3-year period, this batching of kaizen activity is similar to the “hockey stick” phenomena where orders are low at the beginning of the month and high at the very beginning of the month. This can be due to a variety of reasons including incentive structures to sales people or customers, upstream batch & queue processes delaying the flow or orders, or a lack of heijunka in scheduling.

It’s not unusual for organizations to go through cycles of very busy new product launch and start up, followed by several years of production, cost reduction efforts, and kaizen. The same is true for software platform launches in business processes as well as for hospitals building new buildings. There is often little or no kaizen or Lean thinking in the design, build and launch but plenty for the Lean and six sigma specialists to do after launch. To this behavior we say: do heijunka with your kaizen efforts.

What is heijunka? Heijunka is the term for production smoothing. It is averaging both the volume and mix of production to ideally be able to produce every product every interval (day, week, month, etc.). This every product every (EPE) schedule is the essential foundation for a stable pull system, and a prerequisite for implementing kanban. Heijunka enables you to not only create a stable material plan in the face of unstable demand, it also allows you to have a stable plan for labor and equipment capacity staffing.

What does it mean to apply heijunka to your kaizen efforts? This is where the discussion of kaizen becomes fractal. Instead of producing every product every day this means doing kaizen to every product every day (and ideally in every process every day). That is everyone’s job at a truly Lean enterprise.

How can you do kaizen on every product every day? You certainly won’t get far having 5-day kaizen events every week on every product. We’ve seen some firms try things similar to this, to bad effect.

Lean transformation in the midst of new product launches is not a series of 100 meter dashes, or a marathon, but rather something like what I call a “triathlon relay”. In a triathlon, athletes usually compete by swimming, cycling, and running in that order. The triathlon is an individual competition, not team competition. In a relay sport, a team runs (or cycles, or swims) set distances before handing off the race to the next person. A Lean transformation should be a combination of these two.

Applied to the business world, the Lean transformation triathlon relay works like this:

1) Swim. Cross deep waters to new shores. In business this is starting something new, like technology or process trials, new product launches, product or process redesign, building expansion, relocation of processes, etc.

2) Cycle. Once the new product or process is stable, the relay hand off is made to the jishuken teams or kaizen event teams. These teams sprint as fast as they can to cover the most distance in the shortest amount of time, as the cyclists do in a triathlon.

3) Run. This would be the persistent, daily problem solving by supervisors and managers, as well as the suggestion systems by all employees, autonomous maintenance activities, etc. to keep improvements pumping along over the long term.

Of course in the mean time the swimmers (marketing, design, etc.) would already be on their next project, starting the race all over again.

This lack of heijunka in kaizen efforts is unfortunate but not uncommon. Implementing Lean systems and processes only after products are launched into production is too late. It’s the same as waiting for a machine to break before it is fixed.

A common statistics whose source I can’t recall says 85% of product cost is determined in the first 15% of the product’s life cycle (design). If that’s the case then kaizen should not be shut out of the product launch just because you are too busy. Hire more people to do kaizen early and often. It will save you money.

Kaizen efforts should be at the front end of the life cycle and blended across the life cycle. The kaizen issues you could not address in time for launch are smoothed across the life of the product. In other words some of the kaizen events in the “cycle” and “run” stages are things you identified while swimming but didn’t have time to fix. Others will be things you didn't have the time or wits to think about at the design stage. This is why getting the experts who do the work every day on the front lines involved in kaizen is absolutely essential. The ideas of many trumps the knowledge of the few.

We often hear the objection “We do implement Lean principles in design” when we raise these points. The design engineers may indeed by very knowledgeable about Lean manufacturing principles and conscientious about how they are built in to new products and processes. Even at best, in most cases today they are swimmers competing in their own event. They leave it up to another team to do the cycling and the running.

In small businesses this happens more like a triathlon since it may be one entrepreneur who takes a product from concept to launch to delivery and cash collection (swimming, cycling, running). But as firms grow and people specialize it becomes more like a relay where one group (swimmers, cyclists or runners) all compete in what appear to be unrelated sporting events.

Many organizations tell us they don’t have time for kaizen because they are focusing all of their attention on that new hospital ward being built, or betting the future on the new products being tested in the factory, or waiting for the day when the new ERP or CRM system will make everyone’s life easier. If only.

The triathlon athlete completes all three races in the same day, instead of at different times, and must switch from one to the next even changing clothes and gear in order to compete. It is this type of flexibility that organizations need in order to win the race by combining large improvement projects with rapid improvement kaizen events and persistent daily problem solving by everyone.

June 17, 2006

Toyota Feels the Heat from Hyundai

The Autoblog is always good for some emotional point-counterpoint when it comes to the fates and doings of the automobile manufacturers in the United States. Today's post titled Toyota to suppliers: don't sell to Hyundai proves no exception with some spirited back-and-forth.

The gist is that Toyota does not want its suppliers on the island of Kyushu to sell parts it helped develop to Hyundai. What follows the article is a wealth of comments on whether this is fair or not by readers who clearly have an opinion on the issue.

Hyundai stated in April of last year that they intend to catch up and overtake Toyota in terms of quality by 2008. As Toyota plays an ever more aggressive game of offense in building factories and expanding their global operation, they are feeling the heat from Hyundai who is racing to catch up in terms of quality. Toyota is has a challenger, and is playing defense.

No more than two decades ago the quality of Hyunday cars was the butt of jokes. Not so today. Among the automotive parts supplers we work with there is a lot of talk of how the "New Four" automobile manufacturers (Toyota, Honda, Nissan, Hyundai) being more relevant to their future than the Big Three (GM, Ford, Chrysler).

Toyota learned what American manufacturing gurus had to teach them 50 years ago, and after adding a lot to this they developed the Toyota Production System, what we call Lean manufacturing today. Hyundai may be the company best positioned to either learn TPS and advance it, or to force Toyota to evolve their business system to stay on top.

June 16, 2006

Gemba Keiei Chapter 25: Work is a Game of Wits with Subordinates

Taiichi Ohno begins the chapter “In order to lead a large number of people in work, you have to be tough. But I think this is basically not a matter of giving orders or instructions, but a game of wits with subordinates.”

Ohno says that when you give orders or instructions to a subordinate you have to think as if you were given those orders yourself. In other words, you have to think about how you would solve the problem yourself. “If you lose the game of wits, you have to admit it.” Ohno says.

He says that most managers give orders based on what they want. The attitude of “You’re the expert, so go figure it out” is not acceptable. If you don’t match wits with your subordinates and try to solve the problem yourself, then when they come back and say “it can’t be done” you can only say “you’re the specialists, figure it out” or give up.

Taiichi Ohno is saying that even as a manger who has broader responsibilities you need to have not only the awareness of the problems but the ability to think about how to solve the problems yourself.

“If you lose the game of wits, you have to admit it or people won’t follow you as a leader.” He says this is because if you give orders and offer only complaints and not ideas or suggestions when subordinates run into challenges, they will not see you as a leader.

“You have to think about the problem together, and struggle together” to solve the problem with your subordinate, says Ohno. If you have no ideas or suggestions to give when your subordinates say “I tried it but it didn’t work” you still don’t give up but offer suggestions in this game of wits.

When finally there is some progress on solving the problem, you say “My suggestion was poor but you did good job thinking about it.” He says what is important here is to show an attitude of respect that the subordinate will understand.

“In order to be a leader you need to cultivate the mind” Taiichi Ohno says. But also, you need to change your attitude with some people. Everyone has a different personality. “You can say the same thing and some people will respond and some will not.”

Taiichi Ohno says “It’s not easy to say ‘follow me’ but when people do follow, you have a responsibility to take care of them through thick and thin.” Talking about how to lead Toyota Production System implementation on the factory, Ohno recommends saying “Get out of my sight if you can’t do what I say” but to be grateful and help these people who do follow you as much as you can. “Because it’s not all good things” Ohno says, about implementing the Toyota Production System.

This is a curious chapter. It is quite short, and written in a way that forces the reader to fill in a few blanks. But Taiichi Ohno’s tough but compassionate character comes through clearly.

June 15, 2006

The Lean Ranger in: The Workshop of the World, Part II

After a short layover at Gemba’s Shanghai office, Yang Kai and I are off to Guangzhou. Since it’s a domestic flight, the Security level is a little lower, but there are still lots of uniforms standing around.

I spot an ATM in the airport and withdraw the Chinese equivalent of $100 US – exactly 800 Yuan. It’s a sizable stack of Chairman Mao notes that proved to be hard to spend.

The taxi ride from the Guangzhou airport to Dongguan took us through the Chinese countryside. This part of the world straddles the Tropic of Cancer and looks a lot like Mexico. The weather was considerably warmer than Shanghai. I was expecting to see rice paddies and farmers in pointy hats – what I saw were a lot of excavators near the freeway, lots of tractors in the distance. Some cows, some chickens.

As we approached Dongguan, the scene became more urban. New buildings everywhere, soaring libraries, enormous soccer pitches. Our lodgings for the week, The Silverland Hotel is a new 5-star facility in downtown Dongguan. A night there will run you $50.00 US. After dinner Kai and I went for a walk.

In China, the sidewalk seems to be the center of commerce. Everything is for sale. A shoeshine is 25 cents; a DVD of ‘Brokeback Mountain’ is 75 cents. One young man with a shopping cart of tiny books, each with ‘My Diary’ in flowery script - ten cents apiece.

At 8 PM on a Sunday night, Yang Kai and I are walking the streets of Dongguan, recovering from dinner. Between a very informal Internet Café and a pharmacy, we spot an open storefront that sells industrial electric motors. The motors, some of them the size of V8’s, are encased in Plexiglas boxes mounted on sturdy pedestals. The walls are decorated with framed prints of the motors in action. A very nice lady behind a counter pressed brochures on us. Yang Kai explained in Chinese, “Thank you, but we are not in the market for electric motors right now.” “For a friend back home, then,” the nice lady insisted.

China is in business to do business.

After our walk, Kai and I got down to the specifics of our mission. Tomorrow we’re on at Cardamom Electronics. We’d worked out a rough plan a few weeks earlier, now it was time to review the basics.

Cardamom makes Printed Circuit Boards. A lot of PCBs, 24 hours a day, seven days a week. Their facility in Dongguan is one of the largest in the area, employing 2500 people. Most of their cards go into cell phones and PDAs from companies you know. Our mission here is to cut the time required to change the equipment over from one product to another.

Yang Kai had some thoughts on the root cause of the long changeover time. “They seem to walk back and forth a lot here, trying to locate the proper components,” he mused, “I wonder if they have proper notification of what’s coming next.” I made a note of this in my black book. I have been in Cardamom facilities in Europe and remembered that this was a recurring problem.

When the emphasis is on getting this job up and running, the importance of the next job fades. Especially when changing over from one PCB to another requires 10 people reloading 22 Surface Mount Device (SMD) machines and a variety of optical scanners and solder flow ovens.

Here’s how it works - the ‘unpopulated’ little green boards are loaded onto a chain driven conveyor system. First stop, the pasting machine. Here, solder is pressed through a silk-screened mask onto the board.

The freshly ‘buttered’ board is carried along on a conveyor belt through a series of ‘pick and place’ machines. These devices, with their red flashing lights, look like an electronic slot machine. When the conveyor stops, the machines gauge the position of the board, determines what resistor, oscillator or semiconductor is required, picks the component from a paper tape and sets it in place on the green board.

The components are mounted on a paper tape. The tape is wound onto large spools resembling movie projector reels.

Once all the components are on the board, it’s off to the oven where they heated until the solder melts and the connections are made. An optical scanner determines whether the right part is in the right spot. Other devices determine whether the electrical connections are correct.

So, eight movie projector reels slowly being consumed by an electronic slot machine. Twenty two slot machines standing side by side. One hundred Seventy Six opportunities to put the wrong part in the wrong place.

Approximately 21 minutes for the first completed board to appear at the end of the oven. Twenty one minutes before you know for sure that you’ve got the sequence right.

This is where Cardamom feels the pain. Getting those changeovers right the first time is the key.

Tomorrow we go in for real.

June 14, 2006

NHS Confederation Releases "Lean Thinking for the NHS"

The United Kingdom has taken an important step in leading the Lean healthcare movement today with the publication of Lean Thinking for the NHS by the NHS Confederation (National Health Service) based on studies done by the Lean Enterprise Academy. You can read the press release here, along with some interesting survey results.

There is also growing awareness for the need to apply principles of the Toyota Production System United States to improve patient safety and reduce cost. An article in the Wall Street Journal on June 14, 2006 titled Hospitals Move to Cut Dangerous Lab Errors reports on efforts healthcare professionals are making in Lean healthcare.

The article reports some interesting facts about a study of 335 pathology-related malpractice claims published last month:

…63% of these claims involved the false-negative diagnosis of cancer and 22% involved the false-positive diagnosis of cancer. One of the most persistent problems is the poor quality of specimens to begin with.

The reason is:

Even though it is usually apparent if the proper cells aren't present, "the lab will just make a diagnosis on what it gets," Dr. Raab notes.

The WSJ article reports that University of Pittsburgh Medical Center has been making improvements in these areas.

Dr. Richard Zarbo at Detroit's Henry Ford Health System (fittingly enough) started in January a pilot project based on study of the Toyota Production System:

…to speed up specimen-processing time in the surgical pathology lab, moving racks that load slides on a machine nine feet closer so technicians didn't have to walk back and forth so often, and processing smaller batches of slides every 20 minutes instead of waiting for the 60 slides necessary to fill the machine.

These are basic yet significant improvements any competent industrial engineer or an experienced assembly line supervisor could have helped this lab accomplish. Perhaps hospitals in the Detroit area should start hiring some of the factory workers GM and Ford are laying off and ask them to create process flow in hospital labs.

Also:

In 2001, the lab started an educational program and began rejecting inadequate blood samples through a strict specimen-labeling policy, reducing the number of defective specimens from 1,700 a month to just 30.

Great work Lean Enterprise Academy, doctors and others. Hurry up and get the hospitals Lean so you can work on Lean government.

June 13, 2006

Sell Complacency, Buy Kaizen

On June 12, 2006 Minyanville News & Views commentary money manager Ryan Krueger gave the advice "sell complacency, buy kaizen". He sees the U.S. as complacent, giving evidence for the eroding dominance as the number one economy, and labels the emerging markets "kaizen", eager to improve.

Although oddly Krueger isn't demanding Lean government, he makes some very good points regarding government waste:

- According to an AP story which quoted the IRS, the tax return they just received from General Electric (GE) was 24,000 pages long.

- The Standard Federal Tax Reporter, a reference book for accountants and tax preparers to summarize the code and make it simpler to use is over 60,000 pages.

- The FY 2006 budget requested that Congress allocate $41.4 billion for regulatory activities, a 4.8% increase. The regulators budget is growing at a faster rate than other nondiscretionary spending (up an amazing 46%, after inflation, since 2000). Staffing is at an all-time high of nearly a quarter million people.

- The number of registered lobbyists in Washington has more than doubled since 2000 to more than 34,750 while the amount that lobbyists charge their new clients has increased by as much as 100 percent. Only a few other businesses have enjoyed greater prosperity in this choppy economy.

He goes on to cite other examples of how the U.S. as the number one economy in the world is in many ways complacent (U.S. workers want "to retire early") while the emerging market countries are hungry (their workers want "to work"). Is this a fair characterization?

As a generalization, money managers aren't known for making decisions and stock recommendations based on being close to the gemba, where people may be equally concerned with working as well as retiring early. Yet I think "sell complacency, buy kaizen" is very good advice. In fact, you can extend this to "fire complacency, hire kaizen" or "demote complacency, promote kaizen" or "unlearn complacency, teach kaizen".

All kaizen activity, whether it is at a process level, at the level of product or service innovation or at an entrepreneurial level should begin with a denial of complacency, the thinking that you are ok. Before kaizen, say "now things are the worst ever" and after kaizen celebrate briefly and repeat "now things are the worst ever". Somebody somewhere in the world is saying those words and working hard to catch up with number one.

June 12, 2006

Lean Thinking & Google's 9 Notions of Innovation

I’ve written from time to time about the relationship between kaizen, Lean process and innovation in this blog. Innovation is the hot thing at the moment as the United States struggles to cope with what appears to be the increasing irrelevance of its manufacturing sector. Making things is out while thinking of things to make is in, it seems

The creative tends to resist confinement to process. Maverick marketing consultant Seth Godin asks innovators the very good question Why are you afraid of process?

Marissa Mayer is bringing process to innovation at Google. Keeping idea pitches to ten minutes each is one example of rigorous and time-based management. Another is her list of 9 Notions of Innovation.

Gerry Robideau of Gemba asked our team last week “How many Lean concepts can you see in Google’s approach to innovation?” He spotted these 9 Notions of Innovation in the June 19, 2006 issue of BuinessWeek:

Ideas come from everywhere
Google expects everyone to innovate, even the finance team.

Share everything you can
Every idea, every project, every deadline -- it's all accessible to everyone on the intranet.

You're brilliant, we're hiring
Founders Larry Page and Sergey Brin approve hires. They favor intelligence over experience.

A license to pursue dreams
Employees get a "free" day a week. Half of new launches come from this "20% time".

Innovation, not instant perfection
Google launches early and often in small beta tests, before releasing new features widely.

Don't politic, use data
Mayer discourages the use of "I like" in meetings, pushing staffers to use metrics.

Creativity loves restraint
Give people a vision, rules about how to get there, and deadlines.

Worry about usage and users, not money
Provide something simple to use and easy to love. The money will follow.

Don't kill projects -- morph them
There's always a kernel of something good that can be salvaged.

So I post he same question to you. Do you see examples of process thinking, kaizen, or Lean principles in the 9 Notions of Innovation from Google? Do you see the opposite of Lean in any of these? We’ll send a free KaizenBrain (Gemba version) to the first five people who post responses to this question, addressing how each of the 9 Notions is Lean or not. Gemba employees excluded. Void where prohibited.

June 10, 2006

Kaizen Song: Cycle Times They Are A-Changin’

Doing some 5S with computer files this weekend I came across a folder of "kaizen songs" we had made for fun a few years ago. The melodies are well-known folk, rock or country tunes. This one is called Cycle Times They Are A-Changin' and it's based on the Bob Dylan song of similar name. Let me know if you like this and I'll share some of the others.

Cycle Times They Are A-Changin’
(to the melody of Bob Dylan’s “The Times They Are A-Changin’”)

Come gather round managers wherever you roam
And admit that the stockpile around you has grown
And accept it that soon cash will be all but gone
If payroll to you is worth making
Then you’d better start flowing or you’ll be sitting at home
Cycle times, they are a-changin'

Come accountants and IEs who analyze with your pens
And start your stop watches, takt time’s come again
And don’t stop it too soon, for the work’s just begun
And there’s no telling who’ll be there working
For the assembler now will be later be in paint
Cycle times, they are a-changin’

Come salesmen and rep people please heed the call
Don’t stack parts in the doorway, don’t block up the halls
For he that gets the parts will be he that has pulled
There’s a battle in the warehouse and it’s raging
It’ll soon hit your commission and worsen your golf
Cycle times, they are a-changin’

Come schedulers who expedite all over the plant
Don’t say it takes longer with high customer demand
The manufacturing process is beyond your command
Your inventory is rapidly aging
Please get off of the shop floor if you can’t lend a hand
Cycle times they are a-changin’

The line, it is loaded, the pace, it is takt
The slow assembler will later be fast
And the pull system now will start with the last
The orders we’re rapidly filling
The first piece out of test will surely pass
Cycle times, they are a-changin’

June 8, 2006

Some Thoughts on Future State Value Stream Mapping

To paraphrase a military expression “The most dangerous thing in a combat zone is an officer with a map” in Lean manufacturing terms: “The most dangerous thing on the shop floor is a manager with a value steam map.”

I have nothing against value stream maps. In fact we offer a 1-day value stream mapping training class. Value stream maps are a great way for a cross functional team to make the overall process flow from customer request to fulfillment and collection payment all visible on one sheet of paper.

The effect of upstream and downstream processes on quality, cost and delivery can be identified and with a little training in Lean manufacturing fundamentals, you can identify the 7 wastes and greatest opportunities for kaizen. Value stream maps are very versatile and with slight modification can be used in manufacturing, distribution, healthcare, or fianancial and administrative processes.

The problem with much of value stream mapping as it is taught today is that the current state map or "as is" is presented as a simplistic opportunity to apply Lean tools and select kaizen events. Long set ups? Apply SMED. And so on, to draw the future state based on the equation that current state map + Lean tools = future state map. If only it were that easy.

Too often this process of developing the future state and the implementation happens quickly and in a meeting room away from the gemba. The future state map presented to management looks like a short cut blasting through many endemic and systemic problems with powerful kaizen dynamite.

It is an easy way out from the hard work of actually going to the gemba day after day and gaining a deep understanding of the issues in business and how things got to be that way. To quote another military expression, “The problem with the easy way out is that it's already been mined.”

Toyota did not become as successful as they are by implementing what we now call the Lean manufacturing tools. Those were the result of a pervasive culture of problem solving based on the genchi gembutsu philosophy of going to the actual place (gemba) to observe the actual products and equipment (gembutsu) and get the actual facts (genjitsu).

Effective future state value stream mapping requires not only a thorough understanding of how various Lean tools enable strong cash flow and profitability, but also a heavy dose of returning to the gemba with the value stream map in hand to ask the people who work on the front lines every day what are the problems they face each and every day.

The future state map drawn on A3 sized paper is portable. The future state value stream map should be circulated as widely as possible in the company. Ideally from CEO to janitor, with the questions "how does this affect you" and "how do you affect this".

It may seem like getting this wider input would take longer but it is this type of consensus-based decision making and problem solving that has made Toyota successful. There's nothing like a well thought out and pre-approved implementation plan to make major changes rapidly.

June 7, 2006

Gemba Keiei Chapter 24: Fight the Robot Fad

“We only started talking about ‘reduced volume production’ after the 1973 oil shock. Prior to that we could sell everything we made so cost reduction for mass production was easier.” Ohno goes on to say that although many other industries learned to cut cost with reduced volumes, to this day (ca. 1982) most automotive companies still think in terms of volume and not cost.

Taiichi Ohno warns against taking the short cut of using robots or automation before doing cost reduction first. “I think many are using robots because it is a fad. People think they need robots to keep up appearances, not really thinking about the effect of robots on cost.”

Ohno continues, “We’re not against robots or computers, both are necessary for progress. But don’t ignore the issue of how these things reduce cost. Robot manufacturers may not like my saying this. On the other hand, there is an Englishman who said that the use of robots and automation should be internationally banned around the year 2000, so perhaps you should buy them now while you can.”

By coincidence, there was an interview in today’s Asahi newspaper (June 7, 2006) with the President Nakayama of Yaskawa Electric Corp:

Q: In manufacturing sites, some workers voice concern that their jobs may be taken over by robots. How do you see the situation?

A: In the near future, robots would come to take over simple labor and physically demanding work. Eventually, as aging advances and the Japanese population declines, some industries would have to be thoroughly automated with robots or else they would disappear from Japan.

Still, robots cannot take over creative work and kaizen (progressive improvement) activities that Japanese companies are good at. It is important for humans and robots to coexist in harmony.

Important is an understatement. We visited Yaskawa Electric Co. earlier this year. Luke writes about Yaskawa here where he describes the scene of robots building robots as “surreal”. This clever book may prepare you for the day robots building robots gain artificial intelligence and decide that coexistence in harmony with humans is not to their liking.

Ohno admits that for sustained high volume production it makes sense to use robots, and for work that is unsafe for people robots should be used even at a higher cost. But Ohno says robots should not be used merely for the fad of “modernization”.

Ohno tells how his students at Toyoda Gosei would say to him “We can automate this process” but Ohno warned them against taking the step to use robots or to automate too easily. Automation should follow the proper steps, and be driven by a need. He likens it to buying a piano just because your neighbor bought a piano, regardless of whether you have musical talent.

Taiichi Ohno says the number one need for robots is to reduce cost. Following the principle of respect for people, robots should also be used to perform operations unsafe for humans even at a higher cost. He says sometimes a robot can not perform a dangerous or unpleasant task and a person must do it. However, people should not perform unsafe work because it is cheaper than using a robot.

“The worst use of automation is as a toy for engineers or kaizen specialists.” Says Ohno. This robot created by Toyota at the exhibition hall plays a mean trumpet. A technological marvel perhaps, but hat would Taiichi Ohno say about this toy?

Ohno predicts the words of President Nakayama of Yasawa Electric by saying “As labor cost increases in Japan and as the population ages there may come a day when robots will replace human workers in Japan.”

Ohno ends the chapter by asking the question “If the robot fad continues and we replace people with robots this is a problem. Robots don’t complain or ask for raises. Using robots to reduce cost may be good for the corporation, but is it good for the whole?” There must be harmony between cost saving technologies and the needs of humans, whether the "technology" is robots, outsourcing, office automation or Lean manufacturing.

June 6, 2006

Lean Manufacturing Mantras

One of my favorite Lean manufacturing moments was when a group of highly intelligent and committed Lean leaders from an American industrial giant that we took to Japan realized that the excellent company we were visiting had no idea what a value stream map was, had never heard of six sigma, and were making do just fine with only 3 out of the 5S.

To boot, this company was calling their world class Lean manufacturing effort TQC (Total Quality Control) and had been calling it that for decades. They never got the memo about the TQM upgrade, I guess. This company in rural Japan that nobody has heard of is profitable in spite of the China price, filled with smiling people, accident free, and virtually defect-free. It was like watching a group of comparative religion professors meeting a poor Buddhist monk meditating happily.

It’s tempting here to go sideways into the Lean manufacturing equivalents of the Four Noble Truths and the Noble Eightfold Path, but perhaps another time. In Buddhism Mantras are words you repeat over and over in order to keep yourself from getting distracted by thinking. The purpose of mantras is not to read them and talk about their meaning, but to use them as aids in mindfulness and meditation. Buddhists use mantras as mental guides to get your closer to your goal of ending suffering.

Plan, Do, Check, Act. Genchi gembutsu. Muri, mura, muda. Sort and Straighten. Takt, Flow, Pull. Don't discuss them or think too hard about them, just repeat them over and over. Keep the mantra simple, keep the thinking clear, get more done.

June 5, 2006

Giving Lean Healthcare a Bad Name

We're giving Lean healthcare a bad name in Jean's world. Jean is a nurse at a hospital where Lean healthcare practices based on the Toyota Production System are being implemented. At Jean’s hospital, it sounds like they are making a mess of it. She found this blog through the article What’s So Bad About Assembly Line Healthcare? and posted a comment explaining in her terms exactly what is so bad about Lean healthcare.

She also agrees with Darius Mehri’s assessment of Lean work as dehumanizing in her comment posted today.

Since Jean's hospital is not a Gemba client, we can not take sole responsibility for this awful experience Jean and her peers are having with Lean healthcare. However, I think WE all can take responsibility to ensure that when we practice Lean it is in ways that respect people, and that we have courage to speak against the use of Lean in ways that does not, as Jean is.

Healthcare in the U.S.A. is in enough trouble without Lean implementations creating hostile work environments for nurses, physicians and staff at hospitals. We need the experience and problem solving skills of everyone if we are going to fix healthcare. Any of us who work as consultants in Lean healthcare need to reflect on the work we do and ask ourselves if we are guilty of giving Lean healthcare a bad name in Jean's world.

June 2, 2006

Kaizen Consultant Asks: "Why is this Here?"

Last month I joined two kaizen consultants from our team to do an opportunity assessment at a tier one automotive company. It's good to see kaizen and Lean manufacturing efforts increasing at automotive factories in the United States. It's also interesting to see what people choose to call the things they do in their factories.

On our first of several walks through the factory we saw a small booth at the end of an automated welding line. There were people there with welding torches and grinders. Sparks flew.

I pointed at the booth and asked one of my favorite questions: "Why is this here?"

"It's an inspection process." The welding area manager said.

"What type of work do you do at the inspection process?" I asked very carefully.

"We inspect the welds and we fill voids." He said.

"What's your first pass yield for the robotic welding process?" I asked.

"About 40%" he said, looking away. "But we're working on it."

This was a repair station for an incapable robotic welding process. Sure they were working on the yield problem, but when you call it "inspection" you make it a legitimate process, and this allows you to continue "inspecting" for months and months. Call it "repair" and people will question much sooner why so many parts need fixing.

It's a simple question, but people answer "Why is this here?" in so many interesting ways. If only they would learn to ask it themselves, they wouldn't need kaizen consultants.

June 1, 2006

Physiognomy & Phrenology vs. Root Cause Analysis & Kaizen

For 27 years the Harbour Report has been measuring and comparing the performance of automobile companies, using metrics such as productivity defined as vehicles per man hour. This reminded me of a pair of dead sciences called physiognomy and phrenology. The former judged your human worth by what your face looked like, and the latter judged you based on the bumps on your head.

In the news today the productivity at Toyota dropped and their profits soared. The most productive automotive plant is belonged to Ford, and it is being closed. The Chinese automobiles you will see driving down the streets of the U.S.A. in a few years will have terrible productivity ratings in the Harbour Report, yet will cost half of Detroit's cars.

The Harbour Report tells us productivity isn’t keeping GM and Ford factories open. Maybe their capacity utilization wasn’t high enough? Toyota, at 106% utilization, is 27 points higher than Ford. But at 106% either this is a silly metric, somebody lied sometime, or Toyota is breaking the laws of physics.

These numbers reminded me of a recent late-night telephone conversation with an engineering director at a European telecom giant. We’ll call him Olaf.

“I don’t like OEE.” Olaf said. I listened. He thought the focus on global capacity utilization and OEE improvement was driving the company away from Lean manufacturing.

According to Olaf, his company’s emphasis on utilization results in a “running the machine even when there are no orders”. Further, to keep OEE high, process are separated and optimized to minimize disruption due to capacity imbalances. This de-synchronization creates work in process, which results in greater lead-times, higher obsolescence, etc.

It’s the first time I’ve heard of OEE being used to drive batch & queue manufacturing, but it can happen.

Paul Jarvis from our Shanghai office has stories from the front lines of Chinese manufacturing, both harrowing and hilarious. One of these stories from his previous career as a supplier development guy for an American OEM involves asking a supplier to see “the other set of books” in order to get their quality and costs under control. Soon Paul learned to ask the Chinese suppliers to show him “the other, other set of books”.

The savvy Chinese manufacturers kept separate sets of books because one was needed for the tax authorities, another to do business with their customers and suppliers, and yet another to truly understand their business.

Interestingly, as we understand human biology and the cause and effect of hormones on both human growth and behavior, some are suggesting that there is validity to physiognomy. Because it has been used in the past to prop up racism in the past, this is controversial. I’ve not read anywhere that researchers are recommending giving people bumps on the head or plastic surgery to fix their personalities, however. If anything, it’s hormone therapy or gene therapy they recommend based on root cause analysis and the scientific method.

The only two things that will tell you if kaizen is working are more cash collected and costs reduced. The rest of it is just bumps on the head. The point is that whatever you measure, it should be as close to costs and cash collected as possible. The root cause behaviors or actions that result in costs or cash collected need to be understood through direct observation in order for kaizen to succeed. We might all need an extra sets of books to see the true picture.