This article considers Toyota’s lean principles that have led to a new approach to management in many industries, with a focus on satisfying the needs of the customer, and not wasting time and money on activities that do not ultimately add value to the customer.
History of Lean
The term lean was first used by Womack, Jones and Roos to describe the Toyota Production system. It means far more than simply cutting costs, as the history of lean production shows.
In the early 20th century, American car manufacturers such as Ford and General Motors developed mass production systems. These allowed car manufacturers to produce thousands of identical cars, using standardised parts and components. The moving production line was introduced, where the car body moved along a conveyor belt, and at each stage, factory workers added components to it until the finished product came off the production line. The resulting economies of scale meant that the motor car became much more affordable to the average family.
In 1950, Eiji Toyoda, an engineer, and member of the family that started the Toyota Company, visited the Ford Rouge plant in Detroit. He studied the production techniques being used at Ford closely and on return to Japan discussed them with his production manager Taiichi Ohno. The two of them came to the conclusion that the methods used at Ford could not be copied directly at Toyota. Over the years, they made several innovations that we now refer to as lean:
- More flexible production lines allowing smaller batch sizes
- Greater involvement of employees
- Elimination of non-value adding functions
- Identifying the root causes of problems
- Constructive relations with suppliers
- Greater contact with customers
1. More flexible production lines
One feature of mass production was the difficult set up processes for the machinery. A particular machine might be used to make parts for several different cars. Setting up the machine to make a particular part was a difficult process requiring precision. If the set-up was not correct the parts being made would be useless. It often took two days to set up a machine, and skilled engineers were required to perform the task.
In the mass production factories, the solution to the long set-up process was to have long production runs, making hundreds or even thousands of a particular part before resetting the machine to make parts for a different model. Alternatively, a dedicated set of machines might be used for one particular car, meaning that once the initial set up had taken place, no further set ups were required.
In the early post-war years, Toyota was a small company producing for the domestic market. Demand was insufficient to allow the company the luxury of having long production runs when only a small number of units of each part were required. Toyota spent time investigating a quicker way of setting up the machines so that production could feasibly take place in small batch sizes. In some cases, such as the stamping machine, they managed to reduce set up times from typically one day to three minutes. What’s more, the production line staff were trained to do the set-ups, so it was not necessary to employ engineers.
The small batch sizes meant that the volume of work in progress and the associated inventory holding costs were much lower; as soon as a part was made in one process, it was used in the next. An unintended advantage was also discovered; because parts from one process were used almost straightaway in the next, any defects were noticed very quickly. Thus, any faulty machine set-ups would be corrected before many bad units had been made.
A further advantage was that the factories became much more flexible, allowing a wider variety of products to be made. Having shorter set-up times allowed machines to be used to produce a greater variety of parts and, therefore, cars.
2. Greater involvement of employees
The motor industry is very cyclical. Workers in the mass production plants were well aware that their job might be lost in the next economic downturn. Not surprisingly staff had little motivation to do more than the minimum.
Staff at Toyota on the other hand were offered jobs for life – a guarantee that they would not be laid off during the next downturn. They were also provided with a steep career path, where promotion led to a high increase in salary. In return, employees at all levels would be expected to become involved in helping to continuously improve the operations.
The teams would be expected to have meetings periodically with the industrial engineers, to discuss ways to improve the production process. Toyota recognised that the assembly workers on the floor, far from being replaceable, were a great source of knowledge.
3. Elimination of non-value adding functions
In the mass production factories, the assembly workers were given very basic monotonous tasks to perform. The foremen who supervised the workers did not perform any assembly tasks. Engineers reset the machines, housekeepers cleaned the factory area, and so on. The assembly workers were treated with little respect and considered to be easily replaceable.
In Toyota, production was based on teams. All members of a team were highly trained, and could do all tasks – assembly, machine sets-ups, and cleaning the factory area. The team leader replaced the foreman, but unlike the foreman the team leader would perform assembly tasks as well as coordinating the team. This led to more motivated teams and ensured that no wages were wasted on indirect labour that did not add value to the final product.
4. Identifying the root cause of problems
In the production lines of Ford and General Motors, workers were required to perform their tasks at the right speed to avoid slowing the production line. Defects inevitably did occur, such as the discovery that a part was defective after it had been assembled. The production line could not be stopped, however, and so the defective unit would continue its journey through the rest of the production line, with the defect becoming compounded. At the end of the line was a rectification department where faulty cars would be investigated and fixed. It was fairly typical that 20% to 25% of all cars produced would end up here.
In the Toyota factory, if a worker spotted a defect, he would pull a cord that would stop the production line, so the error could be fixed. Workers were then required to identify the cause of the error using a technique called ‘the five whys’. The five whys approach involved firstly asking why the defect arose. Having identified the cause, then it was asking why the cause arose, and so on, thus drilling down to find the root cause that would then be fixed. Such errors were unlikely to arise again. These days, virtually no Toyota cars require reworking when they come off the production line.
5. Constructive relations with suppliers
The mass production approach to sourcing the various parts for the vehicles was to design the parts in-house. The majority of the parts would also be made in-house, while various suppliers who would be asked to bid to make the parts that could not be. Often, the lowest price suppliers would win the business. Suppliers would therefore be more interested in keeping their costs down than in helping the manufacturers to improve their products by offering the latest innovations.
Toyota did not design the parts, but would tell the suppliers what was needed – for example, a braking system that would stop a 1,000kg car that was moving at 100 kilometres per hour within 60 metres. The supplier would then be required to use their own expertise to design and produce such a system. Thus, Toyota could benefit from the expertise of their suppliers and save time on detailed design of all components needed.
Toyota would pay their suppliers a price that would enable them to make a fair profit, but would work with the suppliers to reduce costs using techniques such as target costing. Cost savings would then be shared by the two organisations.
In order to overcome the problem of coordinating the supply of parts from suppliers and avoiding over or under production, Ohno had the idea of the famous ‘just in time’ or ‘pull’ system. The idea of this was that a part would only be produced when an instruction was received from the next link in the supply chain. There would be no producing for inventory and no need for buffer inventory. The point of this was not only to reduce inventory levels and associated costs, but to put pressure on all parts of the supply chain to become more responsive to changes in demand.
Zero inventory is an ideal that has not been achieved in practice, even at Toyota. A small amount of inventory is still maintained, particularly in the final processes of the production line. This is to avoid failing to meet demand when there is a sudden spike. In spite of this, the principle of just in time leads to a more responsive supply chain focused on meeting the changing demands of customers quickly.
6. Contact with customers
The Western car manufacturers tended to sell through dealers, who would be pressured to buy a certain number of cars from the factory with their own finance. Toyota, on the other hand, had sales teams that sold directly to customers. Contact was maintained with customers with the object of ensuring product loyalty when the customer replaced their existing cars. Customer feedback was also fed back into the design process much more thoroughly than the Western manufacturers who typically relied on a small number of focus groups to establish what customers wanted.
Toyota’s flexible approach to manufacturing enabled the company to produce a wider product range, and to design new models much quicker than the western car manufacturers. Womack et al reported that, in 1990, Toyota was producing as many different products as General Motors, even though at the time the company was half the size of GM.
In 2001, Toyota launched ‘The Toyota Way’, which aimed to take lean beyond its manufacturing and product development into all other areas of the business. Even after 60 years, lean is still evolving within Toyota.
Adoption of lean outside of Toyota
Thanks to the success of Toyota, many organisations in various industries have aimed to copy the lean principles, and a variety of lean methodologies have evolved to help organisations become lean such as The Flow Framework, developed by Kate Mackle, described by Bicheno and Holweg in The Lean Toolbox. The Flow Framework is a methodology that focuses the attention of organisations on the flow of goods or services through the system and aims to eliminate lead time and bottlenecks.
Plenty of lean implementations have not been successful. Bicheno and Holweg believe the reason for this is that many organisations think lean is a one off programme. It is actually a culture of continuous improvement, and its success relies on the continued support of management. Predictably, managers in many businesses lose interest in initiatives that do not produce immediate improvements to the bottom line.
Lean information systems
Lean principles can be applied to information systems. Features of a lean information system are:
- reports and other outputs from the system should only be produced if they add value – that is if they are useful to the decision makers
- reports should only be sent to those who need them
- information should be processed quickly so that users do not have to wait for it. Generally, real-time processing is preferred to batch processing as batch processing introduces delays
- waste should be avoided. Duplication of data should be eliminated so data is only entered into the system once
- continuous improvement – the providers and users of information should meet regularly to review the usefulness of existing information and identify improvements
- adaptability – information systems should be flexible enough to meet special ad hoc needs or changing needs of managers over time. An information system that can only produce a standard set of reports is not lean. A system that allows managers to create their own customised reports from databases is more likely to be lean.
The Five S Model
The Five S model is a popular tool that has been used by many organisations as part of a lean methodology. The Five S model lends itself neatly to information systems. The objectives of the model are to reduce waste, improve productivity and remove variation. Variation means variation in production or output. It is variations that lead to stress at peak times, and that leads to errors.
The Fives Ss are:
- sort (structurise)
- simplify (systemise)
- scan (sanitise)
- sustain (self-discipline)
Sort means sort out the items in the workplace. Items that are not used should be thrown out as they are just taking up space and getting in the way. Those items that are used less frequently should be kept away from the workplace, in cupboards or in store rooms. Sorting should be repeated regularly – for example, every six months.
Simplify involves putting items in the best place, where they will easily be found when needed (eg a carpenter might keep the tools that he uses every day on shelves or in cupboards close to his work bench, while those tools that are used less often will be located further from the bench).
Scan refers to continuously scanning the workplace for things that are out of place and need tidying away. It also involves performing routine maintenance tasks, such as lubricating the machines.
Standardise means setting standards or procedures once the sort and simplify processes have been performed to make it easier to keep the workplace sorted and simplified. Colour coded stickers could be introduced – for example, indicating which locations items should be stored in.
Sustain – the use of the Five S Model should not be a one-off exercise, but should continue to be used after its introduction, and become part of the routine in the workplace.
The Five S Model can be applied to information systems as follows:
Sort the information transactions that flow around the organisation. Questions should be asked about what is the minimum information that is required for planning, controlling and decision making, and operating the various business processes. The time accuracy trade-off can also be applied here, where 90% accurate in half the time may be preferred.
Simplify means identifying the best methods of communicating the information. At Toyota, key information was communicated to all employees on the factory floor using large TV screens. Simplify also considers the way the information is stored in the system, such as the file structures to avoid duplications.
Scan involves regularly auditing the reports and who is actually using them. It also involves removing obsolete data such as old customers or inventory items that are no longer used.
Stabilise includes coming up with standards such as standards for reports and rules about who should be copied in on emails.
Sustain involves continuously performing the above four steps and therefore continuously improving the information systems.
The lean principles that evolved in the Toyota car factories have led to a new approach to management in many industries. They attempt to focus on satisfying the needs of the customer, and not wasting time and money on activities that do not ultimately add value to the customer. Lean principles can also be applied to information systems to ensure that only useful information is produced on a timely basis.