Let's Make Lean Work
Cultural change requires continuous, visible effort, particularly by top management
By Michael Paris
Paris Consultants Inc.
Lean manufacturing offers potentially huge short-term and long-term productivity gains, along with big savings in work-inprocess inventory and working capital. All this should strengthen North American manufacturers against their global competition. But we are hardpressed to find a successful example of lean other than Toyota, which launched Lean 50 years ago.
The impermanence of any manufacturing improvement plan has long been obvious. In the mid-1980s, Tom Peters and Robert Waterman cited 20 companies in their groundbreaking book In Search of Excellence. Five years later, half the companies were gone.
Is there something intrinsically wrong with Lean? Not at all. If blame must be assigned, the fault lies not within our stars but within ourselves, as Shakespeare had it in Julius Caesar. We don't follow through. For some basic understanding, let's consider what Lean is not:
- It's not a project or a program or an initiative.
- It's not an approach or a practice or some kind of indoctrination.
- It's not a journey, as that implies a destination or some sort of end point.
To be successful, Lean has to be a culture. It is exactly that for Toyota—the foremost champion of Lean and its biggest beneficiary. After all, five decades spans the careers of two generations of workers and managers. That's culture.
Culture in manufacturing is what gets done automatically, even reflexively—almost as if it is the default answer when the question of what to do next arises. Culture is what gets done without a lot of discussion and introspection. That's what distinguishes it from programs, initiatives, approaches, practices, indoctrinations and journeys. Culture is DNA.
The culture of Lean is also inclusive. No one can be left out, or allowed to opt out—not the CEO or the CFO, or the janitor, or anyone in between.
The good news is that many companies train their people for Lean. They offer frequent classes at convenient times (often on paid company time), culminating in a prestige-laden black belt.
Nearly all managements see Lean as a valuable skill for workers and firstline supervisors. It's on a par with Six-Sigma production or error-free machine tool programming. Many consulting firms, mine included, regularly take on Lean engagements.
The bad news is that training rarely reaches very high up in the ranks. For Lean to be effective, for it to become part of the DNA as at Toyota, top management must be closely involved—on a daily basis. Production, maintenance, and support people cannot by themselves implement Lean—any more than they could run the business by themselves.
To make change happen, the people in an organization must believe Lean will not blow over in a few weeks, and then it will be back to business as usual. To make beneficial change happen, everyone in the organization must accept three things:
- Lean really is a new and better way of doing things, and everyone will be better for it.
- Lean is here to stay, even though it will not happen overnight.
- Top management will not only kick off the program but will be part of the change. Management will roll up its own sleeves, open its checkbook, and step up to higher risks and rewards.
Management must be visible and supportive, and must take prompt, appropriate action wherever and whenever possible. Top management must sell the idea to the rest of the organization; photo opportunities and public relations are no small part of this selling activity.
Unfortunately many top managers have never really understood Lean. Vice presidents and C-level executives take a big and visible part in launching Lean, and they hand out the black belts. But as for instilling a culture of Lean, they just don't get it.
Many top-management groups still demand quick fixes and silver bullets. Regardless of what the consultants and the sellers of computer systems promise, management still must manage the business. Increasing the number of digital systems, and embedded controls such as key performance indicators (KPIs), will not put the company on autopilot route to guaranteed success.
If any Lean program is to succeed, management must understand its part of the commitment, and be as educated as possible about what Lean really is, what it can do and what it cannot do.
Why? Top management may not say so, but they perceive Lean as yet another improvement program. That means committees are formed, meetings held, needs prioritized, tasks assigned, and milestones picked. Statistics are gathered and posted for all to see. Lean seems well-managed in these instances, but only as just another program, another initiative, a clutch of new projects—as anything but a culture change. Lean will fail if management persists in seeing Lean as a vaccination instead of a vocation.
Toyota has never tolerated this one-shot approach. Toyota managers start every day thinking of some way to improve the organization, allocate resources better, make production more efficient, raise quality, or lower cost. Nothing less will work, no matter how hard dedicated people try.
We believe in setting goals for Lean, but only as a jump-start. Project goals are by definition short-term, and get everyone's attention. Early, verifiable success builds buy-in and creates momentum. But sooner or later goals are achieved or dropped in favor of something trendier.
Our consulting engagements reinforce this. Every company we work for has something it calls Lean. After we tour the factory, it's obvious when Lean is deprived of management attention.
- Work areas are cluttered with unneeded tools and supplies.
- Work instructions are missing or out of date.
- WIP inventory reappears as buffer stocks "just in case the line goes down." It's far better to make sure the line never goes down.
- Tables reappear, and WIP soon covers them. Some parts have gotten dusty, sitting for weeks.
- Workcells and production lines revert to section-bysection operation. Buffer stocks—the antithesis of Lean—are the enablers.
- Work areas are littered and messy.
Where the pressure to be Lean has slacked off, no statistics are needed.
The culture that fosters Lean is lived, day in and day out. At the heart of Lean is kaizen, Japanese for continuous improvement, every day, never ending. Every improvement has ripple effects that bring to light problems. Each is solved in its turn.
The reappearance of WIP inventory may be only half the problem. The other half is that the Lean program was narrowly focused just on reducing WIP. Most, if not all, the other aspects of Lean were ignored. The classic Lean approach is to focus on eliminating five wastes: wasted effort, wasted motion, wasted processes, wasted resources, and wasted cost.
Had those wastes not been ignored, none of the back-sliding and reversion (bullet points, above) would have occurred. The companies would have a huge return on Lean investments, rather than a return of basically zero, compounded by Been-There-Did-That cynicism. Management's familiarity with the vocabulary of Lean counts for little.
Our engagements also provide some surprising insights. One big jolt is that in many supposedly Lean factories, sometimes nothing whatsoever gets done. We have spent entire days in million-square-foot factories with no welding sparks, no machine-tool chips flying, no overhead cranes rumbling past, no dodging forklift trucks, and only a handful of workers visible.
The answers to this situation fall into three groups, none of which can stand alone:
- Effective planning, which must be done from the CEO and president-level down, as well as from the factory floor up.
- Continuous realignment, to form the basis of business strategy and (ironically) even the organizational structure.
- Focusing on added value. This can be defined as any improvement in a product or a process that a reasonable customer will pay for. It is the inverse of the Five Wastes.
Planning, realignment, and added value work best, we find, when they are incorporated in a Lean context and culture. That keeps them in focus, in sync, and moving forward. They go beyond Lean as Lean is commonly understood. But then Lean itself evolves—and has to—meeting changing conditions and seizing new opportunities. New technologies emerge every day, and so do new competitors with lower cost structures. The rules of the game—in particular the unspoken assumptions in the business plans—keep changing.
In this environment, every manufacturer must rethink its positions, thoroughly and often. Should a given company even be a manufacturer? If management insists on trying to make commodity products in a high-labor-cost market, maybe not.
Less dramatically, many companies need to:
- Rethink which markets to serve and which to exit.
- Rework how markets will be approached.
- Retool products, again and again if necessary.
This applies as well to all businesses—not just manufacturers. It even applies to consulting firms.
If everything else is changing, shouldn't initiatives and programs promoted by management keep changing? Doesn't it stand to reason that the culture, the DNA, ought to change too? The answer from nearly all North American manufacturers is, "Hey, sure, why not?"
The answer from Toyota is an emphatic no.
That is because Toyota understands that the fundamentals of manufacturing have not changed in 300 years. Every manufacturer still wants to solve a recognized problem with a new product. To do so, the manufacturer has to persuade the intended customer that the product works and that its price is fair.
That Toyota gets it shows in every new vehicle and factory. The first product it offered in North America—the Toyopet, introduced way back in 1962—was a worse flop than even the much-maligned Ford Edsel. Toyota quickly grasped the ramifications, and retooled. In 1963 they decided to make only high-quality automobiles, and sell them at reasonable prices. That dictated Lean. The Big Three Detroit carmakers have been playing catch-up ever since.
Getting maximum benefit from Lean requires a well-thought-out comprehensive plan, as does anything managed effectively. Like all good plans, this one starts with a realistic assessment of the firm's effectiveness in reducing waste. Waste is insidious, and its propensity to get worse is widely underestimated.
Planning for Lean starts with asking a fundamental question: "How Lean could we be if we had no constraints, and could do anything we chose?" The plan creates an ideal, and then adjusts it to deal with real-world constraints. (There are, by the way, fewer constraints than most managers believe.) From this comes the Pragmatic Ideal, followed by a step-by-step plan to achieve it.
A caveat on planning: Stick to it. A good, comprehensive plan may take years to fully implement, and during those years the plan evolves continually—amid numberless distractions.
Lean is not rocket science. Most of its calculations can be done on the back of an envelope. A few projects will require computer simulations, and the remainder can be handled with time studies and spreadsheets.
Continuous realignment is really about applying Lean to the org chart. All alignments need goals such as product breakthroughs, market opportunities, and desired customers. Any activity that doesn't directly help the company reach them, or doesn't support those direct efforts, is waste.
Line units, those with direct P&L responsibilities, should get some attention, but the real org-chart emphasis for Lean should be on staff (support) units. Staff units should function like pipes, processing information and resources between the line units. But staff units lack the discipline of P&L accountability.
Many organizations are still hampered by these structures. They were originally put in place to make the organization function more smoothly—as units for specialists in marketing, finance, operations, sales, engineering, and human resources. These experts would function more effectively than in product-focused units where everyone was a jack of all trades.
But the specialists tended to forget why they were set in place, and for whom they worked. As they lost sight of their mission and become inwardly focused, they morphed into silos. In extreme cases, silos somehow became quasi-independent business units. Some are so wasteful they resemble smokestacks. Over time, these organizations became so independent that they resented any outsider's advice on how they should contribute to the success of the overall organization.
If Lean, or any other worthwhile goal, is to be achieved, every part of the organization must mesh, and function, with every other part. All the parts—P&L units as well as pipes, silos, smokestacks—must be harnessed to the same goals and objectives, if anything worthwhile is to be achieved. That is alignment.
Focusing on added value is a great way to ensure a top-line Lean payoff—more revenue—in addition to all the bottom-line benefits. Added value is a pricing strategy or, to be more accurate, a repricing strategy. The idea is that a manufacturer should demand a reasonable rate of return on its expertise, its ability to respond quickly to customer needs with services like rapid prototyping, taking on tasks that customers offload, production engineering (efficiency) and applications engineering.
Yet very few companies price this way. They settle for a markup—a standard 40%, say—on top of a cost roll-up. Doing so violates Lean because extra points of profit margin are foregone—wasted. Sadly, managements that pride themselves on carefully counting costs often overlook the benefit, the value to the customer, of all those added services. (Worse, we often find that markups and roll-ups may be off, sometimes considerably.)
The processes and plans of Lean should be reflected in mission statements, those corporate declarations of who we are and where we are going. Mission statements should point toward what the company strives to be, and what it wants to achieve.
A mission statement should foster direct, specific action. This should be what the company works continuously toward—its accepted goals. It should emphasize (key point) that striving for the goals never ends. Why "never ends?" The acceptable norms (industry standards) that constitute high quality and excellence have changed dramatically in the last two decades. The norms will continue to evolve and rise. Given global competition and finicky customers, the thrust will always be toward ever-higher quality. Today's younger engineers and managers can barely conceive that acceptable quality levels, expressed as defects per million, were once expressed as defects per thousand.
Excellence, of course, is a moving target (like value), almost by definition. Mission statements should always steer clear of verbiage about what the company is or what it stands for. Is and stands for represent the comfortable status quo. Global competition demands dynamic approaches to everything in business. The status quo was where we were yesterday, not where we should be today, and certainly not where we are going to be in a Leaner tomorrow.
This article was first published in the September 2007 edition of Manufacturing Engineering magazine.