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Lean Thinking… in all its forms

Lean

Lean ThinkingLean is an addictive drug.

But I’m not talking about the nasty mixture of cough syrup and soda that is hooking young Americans on codeine and promethazine.

I’m talking about the current favourite method for reducing corporate corpulence, which has been popular for nearly twenty years.

But don’t for one moment think Lean is a passing fad. Its day will come, for sure. But its pedigree is a rich one. And whatever will replace it must share many of its aspirations and principles, just as Lean shares much with TQM*, BPR* and much that has gone before.

Continue reading Lean Thinking… in all its forms

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Muda: The 7 Wastes of Lean

The 7 Wastes
The 7 Wastes
The 7 Wastes

Waste is a bad thing. So, any wise manager will do well to eliminate it. You just need to know where to look. One of the many contributions of Taiichi Ohno and his Toyota Production System (TPS) was to catalogue 7 Wastes that we need to eliminate.

The 7 Wastes are now a fundamental part of the concept of lean thinking; whether applied to manufacturing, services, or public administration. By understanding them, you can make just about any process more efficient.

Continue reading Muda: The 7 Wastes of Lean

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Eliyahu Goldratt: Theory of Constraints

Eliyahu Goldratt was an Israeli business thinker, who popularised his approach to transforming the performance of business processes with a novel. Co-written with Jeff Cox, The Goal has been one of the most influential business books of the late Twentieth Century.

Eliyahu Goldratt
Eliyahu Goldratt

Short Biography

Eliyahu Goldratt was born in 1947 and lived his life in Israel. He studies Physics at university, gaining his BSc at Tel Aviv University, and his Masters of Science and Doctorate of Philosophy degrees from Bar-Ilan University. His PhD research was into the physics of fluid flow, and afterwards, he applied this thinking to systems within organisations.

He used an algorithm that he had developed during his doctoral studies as the basis for creating production scheduling software, which he called Optimized Production Technology. In 1975, he founded a company with the same name, to implement the software within Israeli companies.

The company grew, opening subsidiaries in the US (1979) and the UK (1982), changing the business name to Creative Output. It started to provide training alongside software implementation. In 1984, Goldratt published ‘The Goal‘. This was a business book, about process optimizaton, in the form of a novel. Jeff Coz provided the creative writing, while Goldratt set out the principles. The Goal became an international best seller.

The book’ success, and Goldratt’s response, created tensions with the company’s shareholders, and in 1986, he left Creative Output and founded AGI, The Avraham Y Goldratt Institute (named after his father). Through the late 1980s and the 1990s, Goldratt continued to develop his ideas, which became known as The Theory of Constraints (or sometimes just as TOC).

In 1997, Goldratt retired from AGI, but continued to found consulting businesses and write books, applying his Theory of Constraints to arenas like marketing and project management. He died at a relatively young age, in 2011.

The Theory of Constraints

The Theory of Constraints was not new when Goldratt conceived it. There are many antecedents both for its primary application in process engineering and for other applications like the Critical Chain approach to project management, set out in his 1997 book, ‘Critical Chain‘.

Indeed, many of Goldratt’s ideas are applied in Lean Manufacturing, and overlap substantially with those of Taiichi Ohno. The essence of Goldratt’s approach is three questions and a five step process.

The questions are intended to direct changes that will optimise a system. They  are deceptively simple:

  1. What to change?
  2. What to change to?
  3. How to make the change?

The principle that Goldratt based his theory on is also very simple. If there nothing is preventing a system from achieving higher throughput, then its throughput would be unlimited. This is obviously absurd, so there must be constraints. When you find the constraints and lift their capacity, the system’s capacity and productivity (to achieve its goal) will increase. So the steps for doing this are:

  1. Identify the system’s greatest constraint.
  2. Decide how to exploit the system’s constraints.
  3. Subordinate everything else to the above decisions.
  4. Elevate the system’s constraints.
  5. When you have lifted the system’s constraint, go back to step 1.

Goldratt likened the limiting resource or asset, which constrains the rest of the system, to a drum. Its beat determines the rhythm of the system. If you cannot raise its tempo, you must do everything you can to avoid wasting its capacity. To maximise throughput at this constraint, other elements of the process, that feed it, need to have surplus capacity, to create a buffer  and reduce risk that, if they fail, the constraint will kick in.

This is a principle Goldratt applied in a variety of contexts, and there are now a great many of businesses that consult on these applications.

Goldratt’s legacy has been a highly analytical approach to finding cause and effect. Some criticise it for its simplicity and others because it may not produce the most optimal solutions. And of course, others are concerned about the extent to which he did or did not acknowledge his debt to earlier thinkers. His 2006 article, ‘Standing on the Shoulders of Giants‘ does explicitly reference the Toyota Production System very clearly.

For us, however, the message is clear. The Theory of Constraints is widely used and has made a large contribution to the productivity of many businesses. So for that reason, any manager should have at least a passing understanding of its principles.

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Taiichi Ohno: Lean Production

The engineer behind many aspects of the Toyota Production System (TPS) can justly be described as instrumental in creating one of the world’s great manufacturing businesses. But his influence goes far wider, with many of the management ideas that we take for granted originating as a part of the TPS. I promised you we’d look at him when we examined the lessons from his boss, Eiji Toyoda, so let’s see what we can learn from Taiichi Ohno.

Taiichi Ohno

 

Short Biography

Taiichi Ohno was born in China, where his father was working on the Manchuria Railway, in 1912, and grew up in the Aichi prefecture of Japan, attending the Nagoya technical High School. In 1932, he joined the Toyoda Automatic Loom Works, which had been established by Sakichi Toyoda, who was highly innovative in the looms he designed and built. When Toyoda sold off the loom business to a British company, he determined to invest the money in an automobile business, to be headed by his son, Kiichiro Toyoda.

Kiichiro Toyoda set out to learn from US motor manufacturers, and started manufacturing vehicles in 1936 and it was he who first introduced the idea of ‘Just in Time’. However, it was when Taiichi Ohno was tasked with increasing productivity that the company started to make the breakthroughs which would later form the groundwork for Toyota’s great commercial achievements of the 1960s onwards, under Eiji Toyoda.

In looking at Toyota’s productivity levels shortly after the war, Ohno realised that the gap in performance between Toyota and the top US manufacturers of a factor ten could not be due solely to a poor Japanese workforce. He considered that the significant factor was waste; ‘Muda’. As he experimented, and took on board Kiichiro Toyoda’s ideas of Just in Time production, he gradually, over the years from 1945 to the mid-1970s, built up a coherent set of principles and practices that has come to be known as the ‘Toyota Production System’.

Towards the end of his life, Ohno spoke and wrote extensively (most notably: ‘Toyota Production System: Beyond Large-Scale Production‘) about the TPS – perhaps more than his superiors really felt comfortable with. In doing so, he frequently used the metaphor of a supermarket to describe how Just in Time principles work. He had first seen, and been captivated by, supermarkets on a visit to the United States in 1956. Ohno died of heart failure in May 1990.

The Toyota Production System

The three principles at the heart of the the Toyota Production System are easy to state:

  1. Produce components just in time for their use (‘Just in Time’ production)
  2. Build quality in every part of the process (‘Jidoka’)
  3. Create one continuous process (the ‘Value Stream’)

Just in Time Production

As if the phrase Just in Time has not become well-enough known, it is supported by an idea and a practical tool that have each become central to manufacturing processes world-wide… and, indeed, to other business and organisational processes.

The first of these – and Ohno’s starting point for his reforms – is the idea of waste, or ‘Muda’. Ohno waged a systematic campaign to eliminate all possible forms of waste. In so doing, he identified the seven categories that are often known as the ‘Seven Wastes’.

  1. Defective Production – producing defective products
  2. Overproduction – producing more than is needed
  3. Waiting – idle, non-productive time
  4. Transporting – the wasted time and risks of damage or loss
  5. Inventory – holding unnecessary stock and therefore incurring capital costs
  6. Motion – the wear and tear and the accidents that arise in moving things around a plant
  7. Excessive Processing – over-specification of components, or unwanted functionality, for example

Some people add other wastes to Ohno’s original seven, most commonly placing Non-used employee talent (wasting skills) between number 3 and 4 in my ordering, so create the mnemonic acronym: DOWNTIME.

Ohno also developed a system of signboards that track progress of goods through the manufacturing process, which are called ‘Kanbans’. The kanban board is now widely used to track progress in projects throughout commerce, especially in managing software projects under agile project management methodologies.

Quality

Ohno examined every part of the manufacturing process and looked for ways to reduce errors, increase safety, and improve reliability. When he found them, he instituted rigorous staff training. The principle of building quality into everything is ‘Jidoka’. And, although he did not originate the idea of continuous improvement, known as ‘Kaizen’, Ohno’s concept of Jidoka involved daily improvement in a cycle of detecting problems, stopping production, removing the cause of the problem, and then incorporating the improvements into the standard workflow.

Another of Ohno’s greatest innovations is his problem solving methodology, the Five Whys, a way of getting at the root cause of a problem. This intelligent approach to stopping a machine when a fault arises and injecting human problem solving is Ohno’s idea of intelligent automation, or ‘autonomation’; ‘ninben no tsuita jidoka’.

Value Stream

Instead of seeing a factory as a series of inter-connected processes as Henry Ford had done, Ohno saw it as one continuous connected process. And ensuring that its efficiency is optimised is the idea of work levelling; ‘Heijunka’. This is central to eliminating waste, or Muda and is about rearranging (dynamically) the allocation of work to ensure that every resource is fully utilised at all times.

Introducing Change

Many of Ohno’s ideas seem obvious to us now but they did not at the time. And, inevitably, he encountered much resistance from the Toyota workforce. He employed one principal strategy to deal with this, that had two simple components: patience and persistence. Evolving the Toyota Production System took thirty years and, no doubt, it is ongoing today.

Adoption outside of Japan

Outside of Japan, Ohno’s ideas have been widely adopted and modified. The TPS is now more generally known as ‘lean manufacturing’ and the principles of lean thinking are increasingly being applied throughout the economy in sectors like retailing, services, telecommunications and even government service.

There does seem to be a difference, however, between Ohno’s and the two Toyodas’ philosophy and that of modern western businesses with which I am familiar. Here, we see organisations seeking to use lean principles to ‘sweat their assets’ to cut staff numbers and compel them to work harder to achieve greater productivity with fewer resources. Toyota instead thought that by making its process more efficient, its workforce could produce more without significant increases in the cost base, and so exploit new markets to create more profit.

At the heart of this is a different approach to pricing. The Western approach is to lower your cost base as low as you can, to determine a profit level, and then to sell at the price that these dictate.

'Typical' Western approach to pricing

Toyota’s success was build on a different philosophy: that the market fixes the price it will pay, and you optimise your processes to set your unit costs. Your profit is the difference.

'Successful' Toyota approach to pricing

Learn More

Toyota describes the Toyota Production System on their website, at: http://www.toyota-global.com/company/vision_philosophy/toyota_production_system/

 

 

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Lean Thinking

The Management Pocketbooks Pocket Correspondence Course

This is part of an extended management course. You can dip into it, or follow the course from the start. If you do that, you may want a course notebook, for the exercises and any notes you want to make.


Imagine that you were an Egyptian overseer, responsible for building a great pyramid for your Pharaoh. How would you want to organise things?

  • Would you want to start by knowing exactly what your Pharaoh wants?
  • Would you want to fully understand every part of the process?
  • Would you want to understand how stone moves from being part of the wall of a quarry to a perfectly fitting part of your Pharaoh’s pyramid?
  • Would you want to ensure that the giant blocks of stone arrived fast enough so the men on the ramp always had a stone ready to move up?
  • Would you want to make sure stones got up to the top of the ramp fast enough to make sure that they were there as soon as the last stone was placed on the pyramid?
  • Would you want to avoid stones arriving too fast and causing a bottleneck?
  • Would you want to make sure every stone was perfect to avoid having to stop and find a replacement or re-dress the stone on site?

If your answer is yes to all of those questions, then congratulations: you are instinctively an ancient Lean Manager.

Lean thinking is not new: the ideas have been around for a very long time and accumulated in industry over the years. But there are a few names that are strongly associated with its emergence as a driving force in organisational effectiveness in the last years of the twentieth and early years of the twenty first century.

The thinking was done by the founder of Toyota, Sakichi Toyoda, his son, Kiichiro Toyoda, and their postWW2 production chief, Taiichi Ohno. The Toyodas set out how a production line could work best, avoiding the problems of Henry Ford’s original ‘don’t stop the flow of the line if anything goes wrong – sort it out at the end’ approach. When they could not make it work due to the flaws in their supply chain, it was Ohno who then solved the practical problems.

The message came out in a landmark study by researchers from The Massachusetts Institute of Technology (MIT). This was published in the 1991 book ‘The Machine that Changed the World’ which introduced the world to the term ‘Lean’. Two of its authors: James Womack and Daniel Jones, went on to write a series of influential books, spelling out how to apply the lean principles they had researched at Toyota, starting with ‘Lean Thinking’ and becoming even more practical, with ‘Lean Solutions’.

The Value Chain

At the heart of Lean Thinking is an understanding of the value chain, which we discussed in an earlier post. Lean thinking starts by defining value from the point of view of the end customer for your products or services. When you do this, you usually find that only a small proportion of your activities directly contribute to that value (from the customer’s perspective). The rest – including some parts of what Michael Porter described as Primary Business Activities are only necessary as supporting this value creation.

Performance improvement comes first from eliminating steps and interactions that are not necessary for value creation and then, redesigning those that are to be as effective and efficient as possible. This means less wastage due to delays, re-work, duplication, scrapping below quality products, and oversupply.

The five principles of Lean Thinking are set out below.

The Five Principles of Lean Thinking

Waste

At various points, Lean Thinking decries wastage. The Toyota production chief set out seven sources of waste that destroy value.

  1. overproduction
  2. excessive inventory
  3. defects
  4. delays
  5. unnecessary transportation of goods
  6. unnecessary movement of materials
  7. unnecessary processing or materials

Where is there waste in your organisation?

Further Reading

In 1997, James Womack founded the Lean Enterprise Institute. Its website is a valuable source of resources for understanding more about Lean thinking.

In our Management Thinkers series, you may like Taiichi Ohno: Lean Production.

From the Management Pocketbooks series:

  1. Improving Efficiency Pocketbook
  2. Improving Profitability Pocketbook
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