CHAPTER 2
THE ROLE OF THE TOP
The focus of this chapter is on the management needed to sustain a successful Toyota Production System implementation. It covers techniques and engineering that “wow” people and the management needed to deliver that wow.
“Profit comes while pursuing flow.”
The Management and Structure Needed to Have a Successful Toyota Production System Deployment
In this chapter, I want to introduce the kind of management that is required if everyone from the top management to the lowest employee is to understand Ohno’s teachings and put them into practice, and also to focus his efforts and joyfully improve his workplace.
In most instances, when a company decides to implement the Toyota/Lean system, it hires professionals in these methodologies. The majority of the training is done by “Lean experts,” outside consultants who focus on the methodologies or “how to” and make a production system to go along with them. In such a situation, what often happens is that the supervisors have to learn by trial and error how to manage the new workplace. Since everything is new, trying to determine and do what is required of them takes all their efforts, and they don’t have enough time left to manage the operations. The very task they were hired for—to be a steward of operations—disappears.
For a successful Lean (TPS) effort, the corporate culture as well as the management style will need to change. It’s in everyone’s best interests to teach managers how to manage a Lean workplace so that they can keep improvements happening and so that doing Lean becomes part of their job.
I’ve seen a lot of workplaces and met a lot of business managers who were very happy with the initial results of the Lean deployment, but when they tried to deploy Lean principles to other lines, not only were the results not as good, but the motivation of their employees was going down. Thus, instead of its being a great thing, Lean was adding to their stress.
I once was shown a line that had been “kaizened” in the past—I still remember it quite clearly. It was obviously a production line that a lot of people had spent a great deal of effort on creating and improving. When I saw it, however, its old grandeur was gone; work in progress was piled up in certain areas, and the company was doing only one changeover a day. It really hurt me to see something that people had put so much effort into looking so unkempt. How had it gotten to this point? I felt that I had to find the answer using the Five Whys and get to the root cause. This incident really made me think seriously about how to avoid such situations in the future.
Luckily, I was in a department at the time that allowed me to see many companies that were implementing the Toyota method. Some were doing well and were on a trajectory to keep improving. Others were just giving the method lip service. I was able to analyze these situations from various points of view, such as implementation methodology and acceptance of the system. As a result of my analysis, I came to understand that the Toyota Production System does not work very well with the traditional management style of getting orders from people in higher positions and dealing with their various demands.
Companies that start doing Lean and make various improvements to get flow going, come to require a Lean management style. In other words, as things start improving, the time will come when the rules and regulations that used to govern the company don’t fit with it any more. If one understands this, corrective action can be taken, and the company can go from a traditional management style to a Lean one when the time comes. This is very important, so I will go into more detail.
I named this “Management for the Toyota Production System,” and I put it in a booklet. We tested the theory by giving this booklet to people who had just become managers and teaching them the principles in it. However, the new managers who were the “students” had already been influenced by Ohno, so I didn’t see a marked difference in how they acted.
I then became the manager of the forming department. These people were working in batches, not in the one-piece-flow or kanban method seen in the machine shop or the assembly shop, so they could understand the differences quite well. We kept the role of the leader in mind and helped people see how their role changed as we put in the new management to accommodate our new system. That helped each line improve consistently and continuously.
I also learned a lot from the forming department, which I added to my management booklet. When I became the president of Toyota’s Taiwan plant (Kuozui Motors), we implemented the program not just in the factory, but also at the suppliers. As a group, we kept the focus on flow.
In order to have a successful flow, the skill level of production and production engineering is key. Our team included the top management from our suppliers, so each supplier also saw great benefits. It really underscored for us that if the top management is pulling the system through, much better results can be expected.
Even in production, there are times when decisions must be made by top management. For those times, it is really useful to have a sturdy information pipeline for communicating between the shop floor and top management. If you don’t, you miss the opportunities to make timing decisions that will give the greatest benefit. That is why, as top management, you need to know what is going on in the gemba.
The role of top management is crucial. In companies where everyone can see that top management strongly desires results, there is a tendency to have high-pressure management (I call it management by terror). Normally this does get results, but then they tend to taper off.
Any company will improve at first. The important thing is to have a structure that allows it to continue to improve all the time. In order to create this, it is necessary not just to push on productivity, but to have a situation where the people who are doing the work understand and accept the system, are able to use their talents in their job, and are acknowledged. As I keep repeating, “Profit comes after flow.” First develop people, then continue to develop people, and keep developing people all the time.
In Chapter 2, I will be mainly focusing on the foundations required for management for the Toyota Production System. The wrong definitions will often lead to the wrong conclusions, so I want to define some terms. Let’s start with the word structure.
Companies have functions that allow the different departments to do what they are supposed to do. To enable the different functions to understand each other and carry out operations smoothly, there are rules. And operations is required to put it all together. Functions and rules are decisions, but operations is always done by people. Structure is built upon functions, rules, and operations. Normally, what people mean when they speak of structure is actually functions. Management is done by operations, and that role is given to people with different backgrounds and experience levels. No matter what, management will be largely influenced by the manager’s experience, attributes, and personality. However, if people understand their function and the rules of their position along with the manufacturing fundamentals, although there may be differences, I feel that a fairly level operation is possible.
Therefore, to ensure that different managers don’t result in substantially different management, I would like to introduce both the fundamentals and the methods that Toyota uses to get continuous improvement. This is the management required to operate the Toyota Production System that I learned as a worker, manager, and executive, and making it happen is the job of top management.
The Role of Top Management: People Who Can Change the Structure (Rules, Organization, and Operations) Based on Changes the Production Environment Faces
The definition of “top management” or “the head” is a person who can change the company’s rules, function, and operations based on its changing needs. So when the word top is used, it doesn’t necessarily mean the president. Ohno was the top even when he was a section manager in the machine shop.
When you realize that it took Ohno 30 years as the top to build the Toyota Production System, it really isn’t a stretch to say that “for better or for worse, the success is based on the top management.” However, it’s quite common to hear the factory manager or head of site say to a production manager, “Well, it looks like we’re going to do Lean now, so I’m going to let you drive it. I’ll stop by two or three times a month to see how you’re doing, OK?” The people may feel, “We’d better be serious about this, since the head of site is watching us,” but this method of deployment isn’t something that will last long. In fact, it’s probably better not to start at all.
Things may go well at first, but then for some reason they start to not go so well, and in the end many companies will testify that they are now worse off than they had been before. Many may be puzzled about why this happens, but once standard work is in place, the flow of materials is a lot faster than it used to be, and problems that had previously been hidden start becoming very visible. There is much less work in process, so those who are repairing machines or equipment or dealing with quality assurance are no longer able to keep up with the speed required.
For companies that have a long history of doing things, attempting to put in a system that will require a different way of thinking will probably require changes in the company’s structure. When a company starts moving the Lean efforts forward without knowing this, the older and more experienced workers start resisting because they can no longer do things the way they have done them before. The longer the history, the stronger the culture that allowed people to get work done under the previous circumstances, which makes it harder for them to implement a Lean culture.
A company culture is made up of its long-established rules, organization, and operations. Changing these aspects of a culture is a huge challenge, and therefore the new way will keep running into problems with “the way we do things around here.” A smart set of executives will ask the question: What current rules do we have that will get in the way of our going toward more flow or more of replenishment pull style? Which of these rules will need to be changed, and how will we change them? Most likely, not only rules but the organization structure will have to change.
The solution to this is not for top management to come to the gemba and work with the workers in doing kaizen. Its role is to understand the interrelationship between the rules, organization structure, and operations and change them step by step. Top management must be a step ahead so that the employees don’t feel afraid or lost in the midst of the changes. That is the role of the top.
In the initial stages, think of your measures not as growing profit but more as growing people. Ohno changed Toyota’s whole company organization by taking the time needed and by working with the people under his direct control. That helped him overcome the deeply set culture that had developed in the shop floor over the years.
The Foundation of Operations: How the Top Should Look at Things from Four Perspectives
We have examined the importance of the role of the top. If you are thinking about using the Toyota Production System in your company, you need to understand what it means to implement the Toyota Production System and what it means to develop a structure for making things. I want to explain this from a management perspective, one that is simple and easy to understand.
This is very simple, but many people seem to need a lot of time to understand it. Once you understand it, though, the rest of the “putting in the structure” topics will make a lot more sense. After you read this chapter, I would encourage you to reread Ohno’s teachings in Chapter 1. I am sure that things in that chapter that were a bit confusing when you read them before will be a lot more understandable. You will probably have a clearer picture in your mind of Ohno giving directions to the people of that day.
What is important for me is that the perspective is easy to understand and that this method is actually useful for people at the top who have to manage the business, not just the production. “Easy to understand” is a very important concept in the Toyota Production System, since team leaders and supervisors have to make decisions without delay. It’s important that we do not use difficult words or concepts and that we value simplicity. I have also written this section for top managers who don’t understand the shop floor, but still feel that if the company doesn’t change, it will lose its competitiveness or even not survive. It will be a great way for you to see problems and areas that need fixing.
As explained before, the only person who can really change the rules, the organization structure, and operations to make a company a vibrant place is the top. So in order to create an environment in which the employees and managers can use their strengths and talents, you must first learn how to view a manufacturing facility and understand just-in-time. Once you can understand the gemba and see improvement opportunities, good management that influences the whole facility and then the numbers that prove the good management will become familiar.
The Four Categories of Things
In the Toyota Production System, material flow is the most important element. Generally speaking, we call raw materials, work in process, and finished goods “things,” but we can divide them into four different categories based on a value-added analysis. This is a foundational way of looking at the gemba, and if you can learn to see things this way, more issues will be apparent.
The four categories of things are the following:
1. Waiting. This means that nothing is being done to them. For example:
• Parts made by an area that is working multiple shifts that are delivered to a section that is working a single shift
• Parts made to accommodate people who are taking vacation
• Parts needing rework
• Maintenance parts
• Extra parts made for the customer working more days
• Parts needed to accommodate changeovers
• Safety stock for equipment breakdowns or sudden absenteeism
• Parts for design changes and plant shutdowns
• Parts between processes on fully automated equipment
• Finished goods waiting to be transported
2. Being inspected. This is the stage where judgments are being made concerning whether the things made meet the specifications and requirements. For example:
• Work in process that is being inspected
• Parts being carried into the inspection room to be checked
3. Being transported. Parts that are in the process of being transported. For example:
• Things that are on a conveyor (before and after processing)
• Parts that are being pulled for the next process and being carried between lines or processes
4. Being processed. The shape or structure of things is being changed. For example:
• Things that are being cut by equipment or being welded or assembled
• Things that are undergoing any structural change, such as heat treating
• Cooling and/or quenching of high-temperature parts
All four of these categories are necessary in order for things to be completed, but when they are looked at from a work perspective, the processing category is different. Work means that the process is moving forward; in other words, it is getting closer to the final process. In the processing stage, the shape of the object changes. Shape in this case is not only the outward appearance but can also mean the hardness or structure of the object. Value is added because the shape is being changed. On the other hand, waiting, inspection, and transportation don’t change the shape of the product, so no value is added. Not only that, but the time spent on those activities increases the cost of the final product.
Processing increases value.
Waiting, inspection, and transportation increase cost.
I think this makes it logical that through activities designed to decrease waiting, inspection, and transportation, labor and managerial costs decrease and the objects get closer to their finished stage. The important thing is to improve the quality of the processing and to decrease waiting, inspection, and transportation, which will increase the ratio of processing to the total time spent.
As kaizen is done, we start seeing the limiting factors based on either skill or technical ability. When these get fixed through improvement, we get a safer, higher-quality, lower-cost structure and a well-timed organization. This organization has low in-process inventory with good engineering and a highly skilled workforce.
The reduction in waiting, inspection, and transportation and the increase in the ratio of processing to the total time spent is what we call flow. This flow is the key to the Toyota Production System and the most important goal for the activities on the gemba.
As an example, the kanban system is just a method for trying to achieve just-in-time. Just-in-time involves delivering to the customer (the next process) what is needed when it is needed and making only the amount needed. The kanban system just uses the kanban to show the previous process what is needed, the timing, and how much is needed.
Once you increase flow, the kanban system starts fitting really well. So the first step is to join the processes together in sequence, making it a one-piece-flow line, and then put in the kanban system.
What I would like you leaders to do is to go see for yourselves the four elements in your area. At the actual place, compare how much processing is happening with the other three elements. I think you will agree with me that you have lots of opportunity for decreasing cost, which is actually encouraging.
When you do go to the gemba, however, try not to ask the people who are working there many questions. The best thing for you to do is to just keep quiet and walk around. If you start giving orders, then you may confuse people. The first step is just to understand what is going on, and that’s it. If you continue to try to understand, you will see things that you didn’t see before. I am sure there will be issues that you will want to raise right away, but try to control those urges. If you don’t feel useful, try to think about how you will deploy this thinking and action companywide. That will be a much better use of your time.
How to Eliminate Waiting, Inspection, and Transportation
Next, we will discuss methods of reducing waiting, inspection, and transportation. Knowing this will help you have a much more fruitful time when you walk around the shop floor trying to analyze the current situation. Here are some specific actions that can be taken.
Waiting
• Write down the reason, how long the part will sit there, and the manager responsible.
• Reduce finished goods inventory; do a pull system based on a kanban.
• Reduce changeover times.
Inspection
• Try doing inspection within the process.
• Make dedicated inspection jigs for each process or each part.
Transportation
• Move processes closer together.
• Transport a fixed amount each time.
• Pull a set amount by kanban.
I am sure that if you compare the ratio of what is being processed (worked on) to the three elements of waiting, inspection, and transportation, you’ll be quite surprised at how small the ratio of processing to the others really is. If the processing time for one part is one minute and it is in a box of 20, then it will take at least 20 minutes for that part to get to the next process. If you can join the processes and create a one-piece flow, you now do not need the boxes that used to hold the 20 parts, and 19 units of work-in-process inventory have now been eliminated, removing the need to use that much cash to carry inventory. It depends on the industry, but normally the ratio of processing to the other three elements is 1:100 or even 1:1,000.
Once I was visiting a factory that was making aluminum parts. The production engineer was proudly explaining improvements that had been made in the core technology of casting. After the explanation, he asked me, “Do you have any comments or notice anything?”
I said, “The aluminum parts get heated up, processed, and washed and basically become light-emitting objects. Those objects were on pallets all over the factory, and they were so shiny that I was getting blinded, so I couldn’t see anything. I was just trying to be safe and not trip over myself.”
I was being sarcastic, but what I was really trying to say was, “Where’s the improvement that came from your great engineering?” Not only did cash become “things,” but normally those things will get more of the three elements that we don’t like done to them.
The methodology of reducing the three elements is important, but for people at the top, it’s more important that you think this way. Understand the scariness of inventory and try to manage with that fear in your heart.