Why Companies Often Think They Are Lean—But Aren’t

When I first began learning about TPS, I was enamored of the power of one-piece flow. The more I learned about the benefits of flowing and pulling parts as they were needed, rather than pushing and creating inventory, the more I wanted to experience the transformation of mass production processes into lean processes first hand. I learned that all the supporting tools of lean such as quick equipment changeovers, standardized work, pull systems, and error proofing, were all essential to creating flow. But along the way, experienced leaders within Toyota kept telling me that these tools and techniques were not the key to TPS. Rather the power behind TPS is a company’s management commitment to continuously invest in its people and promote a culture of continuous improvement. I nodded like I knew what they were talking about and continued to study how to calculate kanban quantities and set up one-piece flow cells. After studying Toyota for almost 20 years and observing the struggles companies have had applying lean manufacturing, what these Toyota teachers (called sensei) told me is finally sinking in. As this article attempts to show, the Toyota Way consists of far more than just a set of lean tools like “just-in-time.”

Let’s say you bought a article on creating one-piece flow cells or perhaps went to a training class or maybe even hired a lean consultant. You pick a process and do a lean improvement project. A review of the process reveals lots of “muda” or “waste,” Toyota’s term for anything that takes time but does not add value for your customer. Your process is disorganized and the place is a mess. So you clean it up and straighten out the flow in the process. Everything starts to flow faster. You get better control over the process. Quality even goes up. This is exciting stuff so you keep doing it on other parts of the operation. What’s so hard about this?

I have visited hundreds of organizations that claim to be advanced practitioners of lean methods. They proudly show off their pet lean project. And they have done good work, no doubt. But having studied Toyota for twenty years it is clear to me that in comparison they are rank amateurs. It took Toyota decades of creating a lean culture to get to where they are and they still believe they are just learning to understand “the Toyota Way.” What percent of companies outside of Toyota and their close knit group of suppliers get an A or even a B+ on lean? I cannot say precisely but it is far less than 1%.

The problem is that companies have mistaken a particular set of lean tools for deep “lean thinking.” Lean thinking based on the Toyota Way involves a far deeper and more pervasive cultural transformation than most companies can begin to imagine. Starting with a project or two to generate some enthusiasm is the right thing to do. The purpose of this article is to explain the Toyota culture and the principles it is based on.

Here is one example of what I find disturbing in the lean movement in the U.S. The Toyota Supplier Support Center (TSSC) was established by Toyota in the U.S. to work with U.S. companies to teach them TPS. Its leader, Mr. Hajime Ohba, (a disciple of Taiichi Ohno who founded TPS) fashioned the center after a similar Toyota consulting organization in Japan. They have worked with many U.S. companies in different industries, in each case doing a “lean project” which consists of transforming one production line of a company using TPS tools and methods—typically in a 6-9 month period. Usually companies come to TSSC and apply for these services; however, in 1996 TSSC took the unusual step of approaching an industrial sensor manufacturing company that I will call “Lean Company X.” It was strange that Toyota would offer to help this company because Lean Company X was already widely regarded as a best-practice example of lean manufacturing. It had become a common tour site for companies wishing to see world-class manufacturing in the U.S. Lean Company X even won the Shingo Prize for Manufacturing, an American—based award in honor of Shigeo Shingo, who contributed to the creation of the Toyota Production System. At the time they agreed to work with TSSC, the plant’s world-class manufacturing work included:

  • Established production cells
  • Problem-solving groups of workers
  • Company work time and incentives for worker problem solving
  • A learning resource center for employees

The Shingo Prize at the time was based largely on showing major improvements in key measures of productivity and quality. The reason TSSC wanted to work with Lean Company X was for mutual learning, because it was known as a best-practice example. TSSC agreed to take one product line in this “world-class” plant and use the methods of TPS to transform it. At the end of the nine-month project, the production line was barely recognizable compared with its original “world-class” state and had attained a level of “leanness” the plant could not have thought possible. This production line had leapfrogged the rest of the plant on all key performance measures, including:

  • 46% reduction in lead-time to produce the product (from 12 to 6.5 hours)
  • 83% reduction in work-in-process inventory (from 9 to 1.5 hours)
  • 91% reduction in finished-goods inventory (from 30,500 to 2,890 units)
  • 50% reduction in overtime (from 10 hours to 5 hours/person-week)
  • 83% improvement in productivity (from 2.4 to 4.5 pieces/labor hour)

When I lecture at companies on the Toyota Way, I describe this case and ask, “What does this tell you?” The answer is always the same: “There is always room for continuous improvement.” But were these improvements small, incremental continuous improvements?” I ask. No. These were radical improvements. If you look at the original state of the production line at the beginning of the nine-month project, it is clear from the results that the company was in fact far from being world-class—12 days of lead-time to make a sensor, 9 hours of work-in-process, 10 hours overtime per person-week. The implications of this case (and cases I’ve seen even in 2003) are clear and disturbing:

  • This “lean plant” was not even close to being lean based on Toyota’s standards, despite being nationally recognized as a lean facility.
  • The actual changes implemented by the company before TSSC showed up barely scratched the surface.
  • Visitors were coming to the plant convinced they were seeing world-class manufacturing—suggesting they did not have a clue what world-class manufacturing is.
  • The award examiners who chose to honor this plant in the name of Shigeo Shingo did not understand any more than the visitors what the Toyota Production System really is. (They have improved a great deal since then.)
  • Companies are hopelessly behind Toyota in their understanding of TPS and lean.

I have visited hundreds of companies and taught employees from over one thousand companies. I have compared notes with many of those I have taught. I have also visited a number of the U.S. plants that were fortunate to have received assistance from TSSC, which has consistently helped companies achieve a level of improvement like “Lean Company X.” Unfortunately, I see a persistent trend in the inability of these companies to implement TPS and lean. Over time, the lean production line TSSC sets up degrades rather than improves. Little of what Toyota has taught ultimately is spread to other, less efficient production lines and other parts of the plant. There is a “lean production cell” here and a pull system there and the time it takes to changeover a press to a new product has been reduced, but that is where the resemblance to an actual Toyota lean model ends. What is going on?

The U.S. has been exposed to TPS for at least two decades. The basic concepts and tools are not new. (TPS has been operating in some form in Toyota for well over 40 years.) The problem, I believe, is that U.S. companies have embraced lean tools but do not understand what makes them work together in a system. Typically management adopts a few of these technical tools and even struggles to go beyond the amateurish application of them to create a technical system. But they do not understand the power behind true TPS: the continuous improvement culture needed to sustain the principles of the Toyota Way. Within the 4P model

I mentioned earlier, most companies are dabbling at one level—the “Process” level. Without adopting the other 3Ps, they will do little more than dabble because the improvements they make will not have the heart and intelligence behind them to make them sustainable throughout the company. Their performance will continue to lag behind those companies that adopt a true culture of continuous improvement.

The quote at the beginning of this chapter from Mr. Fujio Cho, President of Toyota, is not just rhetoric. From the executives “up to” the shop floor workers performing the value-added work, Toyota challenges people to use their initiative and creativity to experiment and learn. It is interesting that labor advocates and humanists for years have criticized assembly line work as being oppressive and menial labor, robbing workers of their mental faculties. Yet when Toyota sets up assembly lines, it selects only the best and brightest workers, and challenges them to grow in their jobs by constantly solving problems. Similarly, Toyota staffs sales, engineering, service parts, accounting, human resources, and every aspect of the business with carefully selected individuals and gives them the directive to improve their processes and find innovative ways to satisfy their customers. Toyota is a true learning organization that has been evolving and learning for most of a century. This investment in its employees should frighten those traditional mass production companies that merely focus on making parts and counting quarterly dollars while changing leaders and organizational structures every few years.