Coordination and Lean

January 18, 2010 - Tags:

Going back 20 years, the national bestseller The Machine that Changed the World: The Story of Lean Productionby Womack, Jones, and Roos devotes three chapters to supply chain coordination, dealing with customers, and managing the lean enterprise. The main ideas in these chapters have been translated into action in the Toyota supply chain setting. It is worth recapitulating the key difference between lean and mass production approaches to dealing with these three issues. “Don’t be fooled into thinking that Western suppliers have been moving toward lean supply. They have not. . . . Indeed, without a fundamental shift away from a power-based bargaining relationship, it is almost impossible to move toward lean supply.” In an almost fatalistic statement, the authors conclude the chapter on supply chain coordination with, “How can the Western post-mass-production supply system move toward true lean supply? We suspect that the key means will be the creation of lean-supply systems in the West by the Japanese producers.”

In the chapter on customer relationships, they write that coordination is essential even in distribution. Thus, lean manufacturing by taking away the luxury of excess enforces careful planning to coordinate every activity. The present-day efforts toward customer relationship management seem to reflect these concerns. In the last of three prophetic chapters, Womack, Jones, and Roos write about the emergence of the global enterprise. They note that Toyota trailed Honda and Ford. Today, Toyota’s global presence rivals that of these firms. It seems to us that the principles of the lean production system underlie a great amount of the success of Toyota and other firms that have adopted them. Nevertheless, people are at the core of achieving these successes. As support to these ideas, we summarize below an e-mail from the chairman of the Lean Enterprise Institute (LEI) to all subscribers:

Many firms have introduced lean tools, starting with value stream mapping, then attending conferences and performing experiments on lean. We do not mean that the rules are meaningless or that if they are practiced to less than perfection, the results will be a disaster. As an example, look at the Lean Enterprise Institute (www.lean.org) that has advocated lean thinking for over a decade. Their “Five steps of lean implementation” are as follows: “specify value, map the value stream, and make the remaining steps flow, let the customer pull, and then pursue perfection relentlessly.” Many organizations have adopted some (or most) of these steps. For example, according to a survey by Industry Week/Manufacturing Performance Institute 2007 Census of Manufacturers, 17.8 percent say continuous improvement programs led to a major increase in productivity and 67.2 percent report some increase.

As John Kerr wrote in his summary of Lean: “Despite the difficulty of implementing a lean system, companies have begun to consider it as a processimprovement tool, not just for manufacturing, but also for everything from transportation management to accounting. The beauty of the lean philosophy is that it focuses everyone on what matters, which is what the customer needs. This means that everything else is seen as non-essential and therefore as a cost that can be taken out, whether it is buffer stock or a business process that requires multiple manual sign-offs.”28 Despite the tremendous gains to be had, he cautions that several experts consider the PDCA cycle to be the hardest to follow because it is people intensive. He also suggests that lean production can be adopted by any manager.

Conclusion

Liker in his book on the Toyota Way summarizes at the very end the choice that managers have to make when deciding whether to treat the process management ideas of the Toyota Way as a toolkit or to adopt the Toyota Way to transform the organization into a learning enterprise. He frames the question on whether the focus is toward short-term success or long-term building of a top-notch learning organization.

Somewhere in this debate it seems the humble beginnings of the Toyota Way have been forgotten. Taiichi Ohno started with changes on the shop floor and they spread outward to the rest of the organization and outside it. For example, in the initial stages, Liker writes that Toyota did not have the bargaining power to convince suppliers to do things its way. All Toyota could offer was the opportunity to “grow together and mutually benefit in the long term.” Even when Toyota became powerful it did not forget these beginnings. It views new supply chain partners cautiously. Matching value and commitment is essential before the supplier, dealer, designer, or contractor is taken into the family. Despite this caution, it has managed to grow. Despite the focus on the details, the Toyota supply chain functions as a single entity with a common purpose. Despite the long haul, it continues to produce superb supply chain players.

The sustained learning, growth, and adaptation of Toyota never cease to amaze bystanders. The Toyota Way is a small description of Toyota’s endeavors to create a world-class organization. Our description of it is an even smaller small subset. We have tried to set out what we have learned by following its ways, albeit incompletely.