Thoughts on Lean and Kaizen

A few weeks ago I had the opportunity to meet with Hayashida san, a retired Japanese gentleman who used to be the factory manager for a Lexus plant. This post is based on the notes I made during his presentation and during the long Q&A after his presentation, with many references to my earlier posts. Hayashida san uses the original term TPS rather than the western term Lean.

It all starts with building the foundation on 5S - if you do not (continuously) pay attention to sorting and being organized, how can you expect Kanban, one piece flow or other principles to work? Slipping back from 5S always happens because we are concentrated on the task at hand - it is important to keep on repeating the importance of the basics. See earlier posts for 5S definition or 5S video. He sees the first 2S most important: Sort and Straighten - sort out the tools and equipment you really need, straighten and keep them in order and remove everything you do not need.

You need to have an idea management system - but "An idea it self has no value, it must be implemented (to be recognized). If it did not work well, that's no problem, let's just improve again." To build a culture that supports continuous improvement, do not expect break trough ideas, but recognize small steps. Small Kaizen is valued a lot - that creates the base for continuous improvement culture.

Related to this some comments from the book I often refer to The Elegant Solution: Toyota's Formula for Mastering Innovation by Matthew E. May. He starts his book by noting that Toyota implements 1 million ideas each year. He continues, Do the math: 3000 ideas a day. That number, more than anything else, explains why Toyota appears to be in a league all their own, playing offense on a field of innovation, while their competitors remain caught in a crossfire of cost-cutting.

Here’s the thing: it’s not about the cars. It’s about ideas. And the people with those ideas. But not just any ideas. Mostly tiny ones, but effective ones nonetheless—elegant solutions to real world problems. Not grand slam home runs, but ground ball singles implemented all across the company by people that view their role not to be simply doing the work, but taking it to the next level…every day, in some little way. Good enough never is. When an entire organization thinks like that, it becomes unstoppable.

For Matt's own summary of his book, see my earlier post. In a recent podcast Matt emphasises the need for a simple idea management system where immediate supervisor can decide on implementing and rewarding the ideas on spot – without a company wide screening process.

See also my earlier posts on culture that supports ideas, getting ideas from customers and What’s blocking your ideas?

Hayashida san comments that Toyota VP has always been a TPS man, except for the past 3 years. Toyota "got greedy" and made some bad decisions in the US - like Texas plant capable only to produce one model which is against TPS principles.

"I do not think we were wrong to expand our business in an attempt to meet the needs of customers around the world. But we may have stretched more than we should have, and that made us unable to capitalize on Toyota's traditional strengths." said Mr. Toyoda, Toyota's new president on his speech June 25.

Even Toyota’s Lean production is not working based on pull as much as they let us believe. "The sea of new cars, 57,000 of them, stretches for acres along the Port of Baltimore. They are imports just in from foreign shores and exports waiting to ship out -- Chryslers and Subarus, Fords and Hyundais, Mercedeses and Kias. The customers who once bought them by the millions have largely vanished, and so the cars continue to pile up in Baltimore and at ports around the globe. ... Last month, when space filled up at one Swedish port, Toyota was forced to lease a cargo ship as a sort of floating parking garage for 2,500 unsold cars." (Washington Post, April 3, 2009) as cited on my post about Beer game pull system simulation.

Related to “getting greedy”or not, the recent floor mat recall is a heavy blow on Toyota’s quality reputation.

Hayashida san continues saying goal setting and follow up are essential. Goals are cascaded down from corporate level and translated into clear individual actions. Corporate, (division), plant and depart level goals are done annually, section (and team) level actions every six months and individual goals quarterly. Performance evaluation is based on achievement of goals and bonus is linked to performance. Bonus is not directly linked to meeting the goal target (missing an ambitious goal can be rewarded better than exceeding a secure goal). There must be a group function to watch over that there are no conflicting goals - in Toyota matrix that is Production control or the Chief engineer (who reports directly to top directors).

Again, it's in the culture: "Many Japanese businesses start their day off with a morning meeting, where workers line up and chant the company's slogans as a way of inspiring motivation and loyalty, and as a means of keeping the company's goals fresh in their minds."

With Hoshin Kanri goal setting "the daily crush of events and quarterly bottom-line pressures do not take precedence over strategic plans, rather, these short-term activities are determined and managed by the plans themselves.”

Essential management skills constitute a cycle of goal creation, commitment, feedback, reward, and accomplishment, with human interaction at every turn.

Do not reward performance against planned or budgeted target, but actual performance. Jack Welch adds that "this kind of budgeting can only happen if compensation is not linked to budget but to actual performance against previous year and competition."

Back to Hayashida san - Standardize - work to the standard - and improving the standard on small Kaizen steps. Use small steps that result to new standard rather than aiming too high. Naturally in some cases you must also have radical top down improvements. Ask first what we can reduce to make this better, not what we can add. And remember to keep it simple!

The key to implementing TPS outside shop floor is to standardize work so it does not depend on one person only. On shop floor problems surface automatically because they interrupt the flow. In an office environment if you have a problem, report it to surface the problem. Don't fix it your self but share with others who can learn from solving the problem and eliminate the root cause avoid the problem to happen again.

For TPS and continuous improvement it is essential that you have enough resources close to the shop floor who have time to concentrate on Kaizen, not only on daily production quota.

Hayashida san advices you not to try to copy the TPS tools as such, but try to understand the philosophy behind them and to figure out how to implement that in your environment. Peter Drucker has said: "Management is doing things right, Leadership is doing the right things." It's good management to implement the tools and processes the right way, but it requires good leadership to figure out which tools are really essential for you.