Enterprise Excellence

Teaching a Proud Japanese Company New Tricks of Lean: Going Deep before Going Wide

Jeffrey Liker and Tony McNaughton

(Note: This is a summary of a chapter written by Tony McNaughton, published in Jeffrey Liker and Jame Franz, The Toyota Way to Continuous Improvement)

It was 2005 when Tony McNaughton, classically trained in the Toyota Production System (TPS) in Toyota of Australia, joined me in our first visit to a Japanese manufacturer of heavy mining equipment. We refer to this in our book as JACO (Japan Company). JACO was part of a joint venture with an American company that had contracted us to teach lean primarily to their Chinese factory. We were to do an assessment of the current condition from JACO to the Chinese plant, and report our findings and recommendations at a meeting of all Asia-Pacific leaders in Beijing. JACO supplied major components to the Chinese factory so we went there first. We decided to start by mapping the value stream from JACO to China through the plants. What actually happened, and what we did not expect, was that Tony would become the lean advisor (sensei) for JACO.

What we found in our review of JACO and a several suppliers was both familiar and shocking. We were not surprised to find the company had a culture that shared many common features with Toyota like an obsession for quality, intense training (e,g, 1 full year of offline training to qualify to do simple welding on the production line), and team work.

What shocked us was how far they were away from TPS. We saw a traditionally scheduled, push-based system very weak in the main technical features of TPS. More importantly, the behaviour was not focused on daily problem solving and kaizen.

We spent most of the first day at the plant sitting in a conference room while one Japanese member after another tediously read power point slides with broken English. Dante’s hell anyone? Finally, we got a chance to walk through the plant. In one sense we could see this magnificent factory, rich with a Japanese flavour, with massive production lines and automation everywhere. The place was clean with lots of signage and color-coding like most Japanese factories. Yet, there were also clear opportunities:

There was neatly piled inventory everywhere—classic indicators of independent efficiencies and processes not balanced.

We witnessed slow responsiveness to abnormalities as they occurred.

There was little evidence of root cause analysis with problem solving.

We noticed a changeover of a piece of equipment which we were told took about 30 minutes—a 5 minute job at most Toyota plants.

Division Managers were in meetings most of every day and not really in touch with what was occurring within their zones of control. They relied on more meetings to find out what was happening in their factories.

As we moved through the value stream we counted inventory and measured cycle times to prepare the value stream map. Both the Japanese plants and the China plant already had value stream maps since the parent company had required it some years back. In both plants the maps were outdated and inaccurate—obviously not being used for real kaizen.

In preparation for the Beijing presentation we took photos, as the Japanese executives cringed. As Liker was jovially taking a photograph of yet one more pile of inventory that was in place for no apparent reason we recall one of the executives standing in front of it screaming “this is not usually here.” He was correct in this particular case. The plant had a fatal accident while setting up a new production line so the line was shut down by local authorities until they could solve the problem at the root cause. So they had built up inventory in advance of the shutdown. Of course, we could see through this short-term situation and it was apparent that they were still very far from linked processes. Tony and I huddled and agreed we would suggest that they accept our help in teaching them TPS. They were horrified at the thought. The vice chairman of the company politely informed us that the company already deeply understood TPS and had learned from the best in Toyota; they did not need an Australian to teach them, especially one who did not speak Japanese.

Presentation of Current Condition in Beijing

After going through a similar review of the China plant, where they were delighted to have our help, we presented our consolidated evaluation feedback Beijing, China. For the Japanese plant we focused on one component, a bearing plate, as it moved through the factory. We highlighted in the Japanese plant:

Bearing Plate Current Situation

Scheduled Push System

Uncontrolled Inventory Buffers (WIP)

No or poor level of Visual Management

Long and uncoordinated Changeovers

Back up Production Lines for buffer capacity

Poor 5S. (Hard to 5S in push system)

Poorly Controlled Material Handling Movement

No Andon system

Process imbalance

No Problem Solving using Scientific Method (PDCA)

We objectively, and perhaps too brutally, provided the feedback on the current state to the regional leadership along with the photos of the plant, including the inventory. As part of our assessment we had requested a future state value stream map from the Japan plant in advance of our visit to the Bearing Plate line. This told much more of what the site was thinking and what was in focus. When we first saw it we were alarmed to find the JACO Team had defined a future state that showed little understanding of basic TPS principles:

Proposed Bearing Plate Future State Vision – (2 years from current state)

More advanced scheduled push system

Uncontrolled inventory buffers

Departments still sub optimized for independent efficiencies

No visual management systems

Shorter but still uncoordinated changeovers

Eliminate back-up production lines for buffer capacity

Poorly controlled material handling movement

No plan for andon

Conservative lead time reduction

Waiting on Heat Treat (technology solution) to start kaizen (about one year away)

A major upgrade of scheduling software from MRP to MRPII which they assumed would solve many of their production problems.

Liker gave the summary of the current state of JACO relative to Toyota Way principles:

Philosophy : Strong history and long-term philosophy

Strong history and long-term philosophy Process : Good Quality Control, TPM, Process Improvement

But: Weak at overall lean material and information flow.

People and Partners : Strong Foundation of developing excellent people and partners

Strong Foundation of developing excellent people and partners Problem Solving : Culture of kaizen at process level but weak value stream kaizen

Culture of kaizen at process level but weak value stream kaizen Conclusion : Build on strengths and dedicated effort with value stream or system kaizen!

Liker’s American style straight shooting could be quite abrasive, especially to the Japanese culture of public politeness. But it had a surprisingly positive result. The senior manufacturing executive from JACO apologized profusely and said he agreed with our observations and was ashamed he had not realized it. He said he was particularly ashamed that there was “no flow.” He then announced that he welcomed the sensei support of “McNaughton-san.”

So, in a bizarre situation, a great Japanese factory of a global iconic company, with Toyota just down the road and sharing suppliers - was asking for help from a Toyota veteran from Australia! “Teach us how to apply the Toyota Production System.” Tony was ready for the challenge and was very much looking forward to working in Japan once again.

Starting with the Valve Body Model Line

Taught in the traditional way by true Japanese master trainers from Toyota, Tony believed the most effective way to teach TPS was to guide them through transforming a part of the operation, referred to in Toyota as the “model line.” They could learn by doing with his coaching. They could also appreciate the transformation process and how all the parts work together as a total system leading to high quality, on-time delivery and low cost. The Toyota Way Continuous Improvement describes the advantages and disadvantages of going broad across a large organization with tools, versus deep in one area building a system. This was deep all the way.

The greatest opportunity for cost reduction was in assembly, but that was an extremely complex operation and Tony wanted them to take on something more manageable and something that could illustrate an entire system of material and information flow. They selected a subassembly operation that acted like an internal supplier to the main assembly line. It was the constraint process so success there would make a visible difference. All too often senior management is very impatient and wants to spread lean wall to wall like peanut butter. The result is mechanistic and shallow. In this case the management wanted us to go slow and that allowed us to go deep. In fact, Tony refused to let them go beyond any step in the process until they had done it right so it would be sustained.

A key success factor was that the original pilot team members were then expected to take a leading role in facilitating and working with team members from the new pilots. In parallel to the expansion beyond the initial pilot, the Plant General Manager did something quite special, and unusual compared to our experiences outside Japan. He introduced a method of allowing selected individuals from each of the Divisions (Components, Fabrication and Assembly) to participate in the TPS activities with the TPS team on a full-time basis for 12 months. These were known as the 3G (Gemba 3). They played an integral part in the pilots as they brought explicit process knowledge, decades of experience, and credibility to the group.

Finally, Tony and the team got to real work at the gemba in August of 2005.

The approach taken with this pilot was quite standard for Tony.

Develop a current state value stream map – based on the actual situation. Identify problems with the current situation from a TPS viewpoint. Develop a future state value stream map that overcomes the current problems – aligned with business direction. Develop an Action plan to guide implementation. Get senior leadership support and deep understanding before proceeding. Use this pilot as a showcase for further expansion of lean.

The main lean concepts applied in the pilot were:

Balanced flow of product at customer demand rate (takt) Reduce product “sleeping time” in the value Stream Apply levelled pull-based replenishment to manage product flow Standardize work throughout the value stream. Visualize status of actual versus schedule Use reduced lead time as catalyst for exposing all problems Use PDCA Problem Solving as people development opportunities Practice process kaizen every day. Manager to follow up daily.

The overall flow in the current state map was straightforward. Raw castings of the valve body were supplied via a 3rd party Logistic Depot located close to the factory. The valve body is then machined, cleaned, de-burred, and there is a stem bore finishing process. Then the valve body is hand assembled.

The future State needed to deliver something that could represent a showcase for other areas so all the bells and whistles were designed in with exceptional visual management. The future state map looked similar to many Tony had developed. It was a bit more complex than expected for such a simple component because of the many stages of testing. Basically, parts were machined, assembled, tested, washed, painted, and palletized for shipping. The customers were different excavator assembly plants on the same site and overseas plants. The vision was a shift from to pull-based replenishment using kanban as the communication tool. Kanban came back to the pacemaker in assembly to order additional parts and a heijunka box was used to create a levelled schedule that would visually serve as a pacemaker for the process. Processes were connected through kanban with minimal WIP between processes.

One of the most dramatic improvements was in the assembly process itself. It was rebalanced to takt which led to a 25 percent increase in productivity (4 people to 3). It became a visual showcase with bright lights, signage, and the visual heijunka box.

Some tooling engineering was needed to create fixtures to that the valve body could be completed in one cycle in one flexible machining center. There were many individual kaizen assaults to fix processes like changeovers and improved maintenance procedures.

For those experienced in lean this model line perhaps sounds like a pretty straightforward application. It was actually far from smooth sailing, especially in the early stages. Tony came to the site for one week each month. Some months Tony would arrive to find very little progress from his previous visit. Some months they would slide backwards from the previous month. Performance would slip in some areas without apparent consequence. Sometimes Management was not even aware they had slipped in some areas until Tony walked the process with them and pointed out weaknesses in the process. Sustaining things was proving very difficult. There were some deep-rooted anti-lean behaviors throughout the floor.

Initially getting the middle management to the shop floor to understand what was actually going on was really tough. On a number of occasions Tony had to meet with the Plant Manager and Vice Plant Manager and express concerns that his Management – “are just not getting it.” There was no way he would entertain any expansion of this business improvement activity to other parts of the business while these cracks in the approach remained. It would have resulted in very shallow implementation and JACO would not have gotten the desired outcomes. Tony had learned from his sensei never to leave an area until 100 percent of the objective was reached.

The most serious problem was the lack of local mid-level management engagement and accountability. They were falling into the trap of a “TPS team doing it to them.” Tony had to try to get the core business to own this activity.

Some things they changed to take it up a level were:

Site consultation visit closeout with the site leadership team was shifted from a one-hour meeting in the plant manager’s meeting room to a review on the shop floor for two hours followed by one hour to confirm next steps. The closeout meeting was previously managed between the consultant and the pilot team members. This was changed to the Division Managers facilitating the review. The Division Manager would show the areas of focus. Production members from these areas would explain directly to the plant leadership what they were doing and how they felt about it. They would also communicate their problems and challenges in their zones. The Division Manager became a full-time member of the pilot team during consultation visits. Explicit homework assignments between visits and follow up mechanisms were put in place. Each month’s activity was summarized in a standard A3 reporting form (see figure 1).

Figure 1: A3 Monthly Status Reporting Form

Results

The results from the pilot line were quite impressive. (see Table 1). There was still huge opportunity, but it was a good start and certainly looked impressive. In the big picture, they did not represent significant financial numbers for the plant. What the pilot had demonstrated to the leadership was the size of the gap of what they thought was an acceptable level of performance and the behavior/culture necessary to drive real business improvement.

Table 1: Results Matrix: Simple, Few KPIs

KPI Current Target September 2006 Actual September 2006 Lead time 6.88 Days 3.2 Days 3.1 Days % Value Added 7.35% 15.8% 17% Casting Rework 7% 4% 4.5% Casting Rejects 6% 3% 5% Unplanned downtime 550 minutes/day 225 minutes/day 199 minutes/day

As a result of maintaining focus in the Component Value Stream Tony was able to teach and demonstrate real lean in a deep way. They spent 12 months learning from the pilot. This is a long time and Tony could have easily expanded beyond this pilot sooner. However, rolling out something half baked would have been a mistake—a common one many lean coaches make. It seems they see some improvement and want to leverage the gains quickly.

The Gemba 3 group did an amazing job of spreading what they learned across the rest of the plant over the next year. Tony continued his visits but was spot coaching and meeting about overall progress, weak points, and future direction. Then he dropped off to very occasional visits. He was most proud during a visit in January after the Great Recession first hit. The parent company had lost a great deal of sales, laid off masses of people, cut off suppliers, and was in a holding pattern with lean deployment. The Japan plant worked even more obsessively on TPS. The assembly line was where most of the labor worked. They had learned from Tony about standard work, eliminating waste, redesigning parts delivery and presentation, with small groups meeting daily for kaizen. They on their own took this up a notch and had brilliantly rebalanced the entire assembly line to a much slower speed with fewer people. It was such a proud day for Tony!