Toyota Way (Final part)

TPS tools help us in achieving Toyota way. The below two principles help us in understanding the TPS tools more effectively and most commonly used terms hereafter.

Kaizen:

Kai- Change

Zen- Good

So Kaizen means change for good. Any improvement (small or big) done to eliminate waste is called Kaizen.

 Kaizen has to be done to reduce the gap either in occurrence type or setting type. This change for good should happen continuously and so the term ‘Continuous improvement’.

Kaizen is not innovation; the following table from one of the earlier Japanese text books (1986) helps me in validating my statement.

  
Reducing any of the listed below 7 types of Muda (Waste) is called kaizen.

  
As mentioned earlier, Overproduction is the biggest muda and it leads to all other muda’s (as you read in the example of Curious case of vegetable seller) and so it should be attacked first.

 Muda is present in all the processes. Any process will have only 20 to 30% processing time and 70 to 80% non processing time. We must develop critical eye in order to eliminate muda from the non processing time. Of course there will be some muda in the processing time too, but the scope is less if the process is designed as per standard work.

   This also reminds me of the famous quote by Robert Bosch.

 “There is nothing that cannot be improved further”

Genchi Genbutsu:

This is always associated with 3G:

1)    Gemba: Actual place.

2)    Genbutsu: Actual thing.

3)    Genjitsu: Actual situation.

 Imagine Sherlock Holmes sitting at his desk and solving crimes. Funny isn’t it?

Same applies to the Engineers or Managers who sit in office and try to analyze causes for the problems in the shop floor. 

Genchi Genbutsu means ‘Go and See’ at the actual place (Gemba) to truly understand the actual thing in the actual situation.

 Taiichi Ohno used to draw circles in the shop floor and asked Engineers to stand inside the circle and observe the process for improvement which is now widely known as ‘Ohno circles’. 

 ‘Seeing is believing’ approach helps in identifying the exact root cause for the problem as well as to identify the waste in the process. The longer we observe the process, more the number of problems that comes to the surface. No problem is the biggest problem!

 These are the steps that can be followed here:

1.    When a problem arises, go to the actual place; observe the actual thing at the actual 

      time (Situation).

2.    Identify the problem.

3.    Take temporary or counter measure on the spot.

4.    Find the root cause and take a permanent measure.

5.    Standardize the solution to prevent recurrence of the problem.

 A request to managers and supervisors is to ensure at least they spend quarter of their time in the actual work place. This will keep more than half of their troubles away.

Management by walking around in HP:

•          In the early days of Hewlett-Packard (H-P), Dave Packard and Bill Hewlett devised an active management style that they called Management by Walking around (MBWA). Senior H-P managers were seldom at their desks. They spent most of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a solid grounding from which viable strategies could be crafted.

•         Going to the source is not limited to only production but to any field of work. Once we start observing the process, we must build a habit of questioning ourselves again and again. Preferably Why Why Why? Till we get a solution/root cause to our problem. These problems are golden eggs. Why’s are not limited to just 5 times. That’s a myth. Sometimes we might get the solution at 2^nd time or 20^th time of asking ‘why’. 5 why is the name of a technique and not limited to just 5 why’s! It’s a thumb rule to ask why a minimum of 5 times to go to the root of the problem.

Most of the times, this analysis leads to the Method we are following and need to improve that.

Let’s take a simple example to understand this theory.

Bulb is not switching on

Why?

There is no power supply to the bulb.

Why?

The fuse is not working.

Why?

There is no power supply to the fuse.

Why?

There is no power supply in the wire.

Why?

The socket is damaged.

Why?

The plug was not put correctly.

So the root cause here is plug was not put correctly and hence the socket was damaged. The socket should be replaced and care must be taken while inserting the plug.

As you can observe in this analysis, instead of replacing the socket, if the bulb or fuse was replaced, then the problem would have not been solved. Taking a wrong countermeasure is not only a waste of time and money but also might cause more problems.

Another key point to remember here is the verification of the 5 why. 5 why can be verified if it satisfies the therefore condition. Let’s verify my root cause.

The plug was not put correctly therefore the socket was damaged, therefore there was no power supply in the wire, therefore there was no power supply to the fuse, therefore the fuse was not working, therefore there is no power supply to the bulb, therefore the bulb is not switching on.

If it doesn’t satisfy this condition, then there is a mistake in the analysis.

I will give one of the 5 why analysis done by me to eliminate wrong part supply to customer.

Please do the therefore analysis and give feedback to me .

This completes the Toyota way module.

Toyota way (Part 2)

Let’s discuss about the second pillar now.

Continuous improvement involves three principles: Challenge, Kaizen, Genchi genbutsu.

I think this is what keeps Toyota move ahead of its competitors globally. If these practices are followed religiously, it will make wonders in any company. I call this as a culture to be created and followed.

 Many of them complain that although these are the best practices, why there was a mass recall of cars and labor unrest at Toyota’s manufacturing plants.

 The answer to this question lies in the question itself. These are best practices only if followed. It is as simple as that when a company as big as Toyota and the originator of these practices doesn't SUSTAIN them, it is bound to fail and to be noted that not only Toyota but any other company too fails if it doesn't respect its principles.

Challenge:

Everyone take up challenges. Sometimes we achieve them, sometimes we can't and other times we will change the challenge for better or reduce its priority as it is difficult to achieve. It is the same in running a company but with necessary backing and more stringent plan to achieve the target.

Let’s take up an example to understand this well.

I run 5 km every weekend.

I started running a year ago. When I ran the first time, I took around an hour to complete the task. I didn't have a challenge then. My aim was to complete 5 km and was not time bound. After which I decided to have a target and that was to run in 15 min which was close to impossible. Is it even a realistic target?

This is the same mistake we do at our work too. The targets should always be SMART and not superfluous.

Specific

Measurable                                       

Achievable

Realistic

Time bound

Without knowing our target, it is difficult to understand where we stand and what is necessary to achieve the target. In production terms, we call the target as Standard and where we stand now as Actual. The difference between the two is called as Gap/Abnormality. Unless we understand this, we will never be able to identify problems. After all Toyota way is all about problem solving.

(Note: I have found that many companies don't know what their actual is, it is very important to grasp the actual data, I’ll talk about this in KPI- Key Performance Indicators monitoring in the later posts)

In my example, my actual is 1 hr to complete a 5 km run and my standard is to complete in 15 min. Let me analyze this target setting in a SMART way.

1. Is my target Specific?

Yes, a run to keep myself fit.

2. Is my target Measurable?

Yes. 5 km run.

3. Is my target Achievable?

It’s very difficult.

4. Is it Realistic?

Not very much.

5. Is it Time bound?

I don’t know by when I want to achieve my target.

So after making an analysis on this, I got to know that 15 min is very ideal. I had to set a realistic target now. I practiced for a few days and took sample data over time and fixed the target as 25 min (A minimum of 6 months data is desirable in production/services).

 This was more realistic and achievable and I set 6 months as the time to achieve this feat which makes it time bound. I made a week by week target plan to achieve my standard. Now, I was more determined to achieve weekly targets in order to win the challenge (Small continuous improvements over time).

After 6 months, I ran in 24 min 32 sec. 

I was happy about this and then I stopped running for the next six months (I was lazy J). Now, I want to change the standard to 20 min.

I want to do PDCA in this activity before going for the new standard. PDCA is important at every stage of an activity. (Thanks to Shewart and Deming for teaching us this beautiful concept)

Plan to run 5 km within 25 min.

Do the running; I took 31 min 16 sec (This is what happens when you don't sustain, things can get really      

      worse).

Check against the target. A GAP of 6 min 16 sec found.

Act upon this.

My first target is to achieve my best. This is called Occurrence type of gap analysis (Every day there will be one or the other abnormality in the production line, this leads to the occurrence type of gap. We must eliminate this before going for a new standard. For ex: If efficiency target is 95%, and we are able to achieve 90~92% over a period of time. We must first achieve 95% consistently and then go for a higher target).

Once I achieve my best i.e. 25 min, only then will I be able to go for the new standard of 20 min. This is called Setting type of gap analysis (Once we eliminate or minimize the occurrence type, then we can go for setting type of gap analysis in production and achieve result. In the previous example, after achieving 95% consistently, we should aim for higher target).

Solving the occurrence type and maintaining it is called Sustenance. Solving the setting type and meeting the new standard is called Improvement.

The activity done to achieve both is called Kaizen, which we will discuss in the next topic. Before going to the kaizen section, I want to touch upon another topic called hoshin kanri which is very much linked to challenge.

Hoshin Kanri

Ho- Direction

Shin- Needle

Kan- Control or channeling

Ri- Reason or Logic

For a company to know its goals and work towards it, we need a direction and should control our movement through a strong logic to achieve the desired result. Just like how we need a compass to guide a ship in an ocean to reach our destination (Hoshin) and a good captain to take us there (Kanri).

Hoshin:

To set and prioritize mid to Long-term Management Plans and Annual targets, while engaging all levels of the organization to clarify their own targets and strategies.

Kanri:

Drawing up Problem solving strategies, constantly implementing them, checking for results, if not achieved adopting countermeasures

This is a detailed vision plan to achieve the results. The example I quoted about running previously was related to just one person. This is the main tool we use to break up the vision and set targets (Challenges) to each department and then to each group and then to every member in the group. In this way, every member contributes to achieve the company Hoshin.

A collective plan for the whole company can be done by following Hoshin Kanri, more information can be obtained online and in need of any clarifications, you can contact me.

In the final part, we will discuss about Kaizen and Genchi Genbutsu. 

Toyota way (Part 1)

There are many journals, books and websites to explain Toyota way in broader approach and they provide extensive examples but my objective is to help beginners understand this concept in a simpler and concise way.

I will explain this concept in 3 parts for better understanding.

Generally 14 principles are associated with Toyota way. I really don’t understand why all of them are given in Toyota way (Maybe because there is no TPS way). There are 5 operating principles and other principles are explained in the house of TPS (which will be our next topic). Toyota way is like the heart and TPS is the brain, as I mentioned in my first post. TPS are the tools employed to maintain the integrity of Toyota way and driving force for improvements. I will discuss about these 5 operating principles now. This is the systematic way to go about it. Let's follow the step by step approach.

Maybe this house didn't make much sense in the first post. Let's crack the case now.

Respect for people involves two principles:

Respect and Team work:

Man forms an important factor to any organization. A leader who can effectively control man (which is the only resource that can think) can run an organization efficiently. No two persons think completely alike. Appreciating the common things and respecting the differences keeps the relationship going. One person alone cannot achieve much but a group of people collectively can achieve a lot.

 One of my ex company head always said this “I don't want one person taking 100 steps but 100 people taking one step”. An organization can never grow no matter how much an individual contributes, if a group of people collectively contribute even a little, the results can be amazing!!

I would like to share my own experience in this regard.

After my TPS training, I was asked to take up a theme activity (Jishuken) at one of our vendors and do quality improvement. I was excited about this as I was the leader of the activity. We formed the team and the team comprised of inter-disciplinary departments. Following are the steps of any theme based activity.

1.      Select theme

2.      Grasp present condition and identify weak areas

3.      Set target

4.      Analyze the causes and implement countermeasures

5.      Check results

6.      standardize the solution

7.      Reflect on the process

I don’t want to go in depth into these steps as theme based activity is considered to be the last step of TPS. This is just for your understanding and I will explain these activities in case studies separately in the future. I will continue with my story.

As the activity leader, I gave individual tasks to the members and asked them to close the issues. I didn't want to explain the whole activity to each of them as I wanted only me to get all the credits (I learned this mistake very soon, few people don't understand this, I pity them). They completed the activity assigned to them but when we reached the step 5, we hadn't made any progress. I was bewildered.

Root cause:

They made every possible effort to ensure that their individual process doesn't produce any defect. When a holistic analysis was made, defects were made in the previous process or in the subsequent process which they had obviously overlooked as they were busy improving their own process. These sorts of activities are prevalent even to this day. Results cannot be achieved by individual contribution alone. Everything is interdependent in an organization and team work is the only way to make a progress. Now read respect and team work in the above house and analyze the problem by your self.

Individual growth doesn't ensure company's growth always and in the long term an individual will definitely fail trying this approach but working in a team towards the company's growth will definitely ensure individual's growth in the long term.

Team work works!!

The Goal of TPS

Now, let's understand TPS in more detail. The philosophy of TPS is simple. It considers only the below three factors.

i) Lowest Cost

ii) Highest Quality

iii) Least Time

to manufacture and deliver a part or service to customer.

Any activity carried out should be directed at achieving any of the above 3 without compromising on the other. This is the golden rule of TPS.

What is the goal of any organization?

Of course making profit is the primary goal of any organization.

Others include:

* Carrying out a social mission

* Providing job opportunities and improve employee's living conditions etc

I would like to share the same example I often use in my training.

Consider a pen manufacturing industry. The company has no competitors. The cost to manufacture a pen is 10 Rs. He WANTS a profit of 10 Rs, so he sells the pen at 20 Rs.

After a few years, a new manufacturer started selling the pens at 18 Rs maintaining the same quality (People don’t mind spending very little more for higher quality but not every time).

 The price war started and finally both the manufacturers were selling the pens at 15 Rs but only one of them was making profit. How?

He reduced the manufacturing cost of the pen.

Manufacturer A:

Input cost: 10 Rs

Selling price: 15 Rs

Profit: 5 Rs

Manufacturer B:

Input cost: 8 Rs

Selling price: 15 Rs

Profit: 7 Rs

 This is the secret of TPS. TPS is a profit making IE (Industrial Engineering).

When Toyota had to make profit without increasing the selling price of the cars, they had no other option but to reduce the manufacturing cost by utilizing optimum resources (Man, machine, material etc), reducing rejections and many other activities which we will learn in the subsequent posts.

Increasing the sales also increases the profit of an organization. If you reduce the input cost and then increase sales, it will give more benefits.

“With good sales technique and skillful advertising, one might be able to deceive the buyer for a while but it would not last long”

-          Kiichiro Toyoda

I would like to quote one more example to give a better perspective of TPS.

Curious case of a vegetable seller:

In a small town, there lived a vegetable seller. He used to go to the nearby village everyday and buy vegetables from the farmers. He sold these vegetables in the town. He was making good profit.

After a few months the demand for the vegetables was more. He started buying more and more vegetables from the farmers and was selling them. The shelf life of the vegetables was two days. He used to bring two days stock of vegetables and went to buy on the alternate days.

On a particular day, only a few vegetables were sold. The next day was no better. Same problem arose and by third day the remaining vegetables got rotten. The money invested was a waste. Now, he decided to buy a refrigerator so that he can keep vegetables fresh for a long time. He invested in a refrigerator and had to pay for the power and other overheads. He started buying vegetables required for one week and kept them in the refrigerator.

He had to spend more money now to buy a week’s stock but had to wait for another week or longer to get back the invested money. The profit was coming down because of the other overheads involved.

After a while, he recruited one person to bring the vegetables from the refrigerator to his shop. This again ate away a portion of his profit. Within a few days, the demand fell again. This time he had to cut down on the price and incurred losses.

This is a typical case in most industries.

If you can observe, the problem started only when he started keeping more stock. History tells us that demand is always fluctuating and not increasing or decreasing. More stock or over production is the biggest waste in any company and includes other hidden wastes (Read 7 types of wastes (Muda) online). Now, let’s see the same case in TPS way.

1)      When the demand increases, we should not buy/keep excess inventory. Always smaller the lot, the better it is. Instead of buying excess vegetables, he could have gone more number times to fetch the vegetables rather than buy more. Cost of a commodity will most of the times be more than transportation cost by a huge factor. So, we should follow small lot- high frequency principle.

2)      By following small lot-high frequency, he could have saved the investment on the refrigerator and additional charges incurred because of it. He can avoid the number of times (reduce transportation cost) going to village if the demand is less and increase the frequency when the demand is more. Irrespective of the demand, cost incurred by refrigerator (fixed assets/ auto machines in a firm) is constant.

3)      If the cost of vegetables per day was 1000 Rs, he was selling the vegetables the next day and getting back the invested money within a day.  

After buying the refrigerator, to buy 7 days stock he had to spend 7000 Rs and had to wait for 7 days to completely recover it, if the market situation changes during that time, then he will lose part of the investment or most of it. The goal of the organization should be to reduce the lead time as much as possible to avoid the factors not in our control.

People feel this is just common sense and not TPS. The funny part is TPS is just common sense. Do anything but follow the golden rule of TPS to achieve profit.

COST REDUCTION should be the goal of any organization to make profit.

(Actually Productivity Improvement should be the goal of a company but I link all the factors of productivity to cost and so I have mentioned COST REDUCTION. Many people confuse Productivity improvement to be increasing the production numbers which is not so. I will talk about this later when I clear the air between productivity improvement Vs efficiency improvement in one of the future posts)

Let's discuss about the house of TOYOTA WAY  in my next post.

The Beginning

I hold my undergraduate degree in Industrial Engineering and Management. It is not a sought after branch in Engineering. Not many people know that a branch with this name exists. Frankly, I didn't know myself. I chose this branch only because this was the only available branch in the college which many considered to be one of the best in the state. I wanted computer science, I promised my dad that I will study hard in my first year, get good marks and change my branch to computer science.

Well, I did get good marks, but decided against changing the branch. Most of my seniors were engaged in many extra curricular activities. I didn't find any other branch students interested in these activities. I liked this and this was my strongest reason to hold back.

During the placements, it was heartbreaking to see so many software firms taking away everyone on whom ever they could lay their hands upon irrespective of the branch. I waited and waited but had to succumb to family pleasure and choose one of the software companies. After one week of joining the firm, I got an interview call from an Automobile manufacturer and the rest is history.

 I was shown the following houses again and again during training. I had learned it by heart in my undergrad years but had no practical experience of the same. I was for the first time happy about my branch of Engineering and proud. After 4 years of ignorance, I entered a world where people without this knowledge are ignored. The future was mine.

It was very boring then but today I understand that this should be the core of any organization in the world. Any TPS/ Lean activity revolves around only these two houses. These two are the heart and brain of any company. Oh, of course bread and butter also!! Lean is the term given by western countries. I am very much used to the term ‘TPS’, so I hence forth will use TPS during the course of future discussions.

Sherlock Holmes

                                           

     

I think most of us know him. He is my childhood hero. I always relate my work to his. Probably most Lean gurus agree with me. He is a problem solver, goes to the crime scene to understand facts (Genchi Genbutsu), solves the problem and prevents the culprit (problem) from committing the crime again (Recurrence prevention). I admire him a lot and this rejuvenates me to solve problems. I love solving problems.

Let’s go back to history now.

Mr. Ford started the mass production of automobiles and is widely regarded as the ‘father of mass production’. Also, he was the first to introduce the conveyor based production which is still prevalent today.

As an Industrial Engineer, I don’t like glorifying facts. I rather love talking about problems J.

The American industrialists were very good managers and managed the mass production by managing people. Importance was not given to the other resources- material, machine and other assets.

“I served our country with the weaving machines. I want you to serve the country with automobiles”. Sakichi Toyoda San to his son Kiichiro Toyoda San.

(I request readers to read about Toyoda family to understand few historical important issues)

World war and Oil crisis hit the Japanese hard; they didn't have the resources to do anything. This can be considered as the reason for the origination of TPS. On the other hand, Americans had resources, ample resources; after all automobile manufacturing began there. The profit making philosophy of America went like this.

“Cost of automobile decreases drastically in proportion to the increase in the quantities produced”

Yes, mass production does help in cost reduction and most of us think this is the only way to reduce cost. When Ford started car manufacturing, they had no competitors. They decided the profit margin and sold cars.

Japanese couldn't do the same because of economic crisis. The people couldn't buy expensive cars and the manufacturer was not able to afford the high cost resources.

They had to solve this problem.

Readers should also note that it was impossible for Japanese to follow American manufacturing/ Industrial Engineering blindly. They had their constraints. They had to introduce the American system but to the Japanese conditions.

The then president of the Toyota Motor Corporation, Kiichiro Toyoda San challenged the employees to beat Americans within 3 years.

This was an impossible challenge. Very few people believed this to be possible; one of them was Taiichi Ohno San (My real life superhero).

On a scale of 1 to 10, Toyota stood at 1 and Ford at 10. It was a big challenge.

Birth of TPS:

“9 Japanese were doing a job 1 American was doing. It could not be that one American was putting out 10 times more physical work; it must be that Japanese were wasting something. If we could eliminate the waste, productivity should rise by a factor of 10. Basic idea of TPS IS ABSOLUTE ELIMINATION OF WASTE”

-          Taiichi Ohno

In the next studies, I want to focus on the goal and purpose of TPS.