Kevin Meyer

Life and leadership at the nexus of lean and zen.

Ohno’s TPS

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I began re-reading today the classic book Toyota Production System: Beyond Large-Scale Production by Taiichi Ohno. As I was perusing Ohno’s Preface I came across a series of quotes that I found useful.

Quote 1:

“The most important objective of the Toyota system has been to increase production efficiency by consistently and thoroughly eliminating waste. This concept and the equally important respect for humanity…are the foundation of the Toyota production system”

It is interesting that on the first page of the Preface of the book published by Norman Bodek and company over at Productivity Press in 1988, there is mention of the equal importance of waste elimination and respect for humanity.

I work at a company that is going through a bit of Lean conversion in the manufacturing groups. We teach an Introduction to Lean class to everyone (In fact, I’ll be teaching a session tonight). In that training we do not emphasize the point that waste elimination and respect for humanity are equally important even though one of the icons of Lean and one of the co-creators of the Toyota Production System mentions how important this concept is in the 3rd paragraph of his book. This book, by the way, was published in English over 20 years ago and in Japanese over 30 years ago.

By the 5th paragraph of the book Ohno made the following statement:

Quote 2:

“We are now unable to sell our products unless we think ourselves into the very hearts of our customers, each of whom has different concepts and tastes. Today, the industrial world has been forced to master in earnest the multi-kind, small-quantity production system.”

These are words of wisdom written in the 70’s but even more applicable today. How many of the problems we are experiencing today could have been mitigated by reducing the vast inventory of products built in mass and carried over worldwide supply chains. We simply need to get into the hearts of the customer and “make each item one at a time.” (Paragraph 7)

In the same way that each customer needs us to enter their hearts to provide them true value one at a time, we should seek to enter the hearts of the learners we are mentoring in Lean and provide them guidance one at a time. Tonight I’m going to make it a point to focus on the respect for humanity pillar of Lean in equal proportions as the continuous improvement pillar. What are you going to do?

“Annual Expenditure Twenty Pound Ought and Six”

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I read articles and listen to commentary about the bailout of the US financial industry and wonder, “Does giving people money solve their problems?” I’m not an economist or a financial guru so I won’t try to pontificate too much in this post, but I am a concerned citizen of both the United States and the World. Each of us has a relative or a friend that has been bailed out on multiple occasions and then chooses to spend the bailout funds unwisely. Eventually this same person manages to slip back into the same hole that their beneficiary just dug themselves out of.

Why? Why do we help? And why do they fail to improve?

I don’t know. I just sit back in awe at the spectacle that is before us. You have to admit that it is a very interesting and tragic conundrum that we find ourselves in. How can the financial industry be spending the Federal Aid package by providing bonuses?

How? Easy. Someone internally just wrote the checks and it was done. This is the same thing that our dysfunctional family and friends do with the money we provide them. They write a check just the way they did before we gave them the money. And the great thing for them is that once you give somebody money they can do whatever they want with it. After all, it’s their money now isn’t it?  If you didn't think the money would be spent wisely maybe you shouldn't have given it away.  Or maybe you should have been more careful about how much, to whom, and under what conditions it could be spent.

In Charles Dickens classic, David Copperfield, he wrote,

"Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery."

This was written in 1849. 160 years ago and yet it is as true now as it was then. In the book David Copperfield learns this valuable lesson from Mr. Micawber who is thrown in jail for spending “twenty pound ought and six”. While visiting Mr. Micawber in jail young David is promptly told by the man that spending beyond his means would make him “miserable”. Immediately following this statement Mr. Micawber convinces David to lend him a shilling for Porter. The Micawber family moves into the prison with Mr. Micawber and enjoys a more luxurious life than before thanks to friends and family that feel bad for them and send assistance to them in their “dire” circumstances.

We are a society that has annual expenditures of “twenty pound ought and six”. This is not limited to just the financial sector. It goes across many sectors and even into personal finances. The long-term result of outflows exceeding inflows, according to Mr. Micawber, is misery.

So what do we do now?

What should Toyota do?

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A good friend of mine, Dan Peters, sent me a link to one of the many articles emerging in the last 24 hours on Toyota’s 11 day shutdown of its domestic plants in the first part of 2009.

“Toyota will stop output for six days in February and five days in March”

It is actually 14 days if you count the three days in January, but who’s counting.

Dan happens to be one of the smartest guys I know when it comes to Lean and Theory of Constraints so I value his thoughts and our discussions. I’m going to quote Dan so you can get the gist of the conversation.

“I can’t see the auto market recovering to its recent levels anytime soon, so they are going to be carrying a lot of non-productive capacity. I wonder how they will turn it into productive capacity. Or worse, I wonder if I’m going to have to eat my words about how Toyota doesn’t do layoffs”

My response was that Toyota should take all of its excess productive capacity (people in particular) and send them out to consult other companies that are desirous to become lean. They could charge a fair rate and provide a good service. In the end it would avoid the layoff catastrophe and help their people hone their skills.

Here is Dan’s response:

“Instead of the government giving $30B to our automakers, they oughta give a third to Toyota for consultants to go straighten out our big three, and the other two thirds to Toyota for consultants to go advise the federal and state (and maybe even local for large metro areas) governments themselves. Then, when they trim away half of the current budget from all levels of government, they’ll have funded themselves, plus a nice fat tax break for the rest of us. Don’t think I’ve ever heard of a better win-win.”

What do you think Toyota should do with its excess capacity?

Painting a Clearer Picture

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Sometimes the US – China relationship seems more like a Monet than a Rembrandt. The impression (no pun intended) that is most commonly portrayed is that China is stealing US jobs. However, the reality (pun intended) may not be so clear cut. Take for instance the following quote from the Wall Street Journal:

“Few politicians talk about it, but 406 out of 435 Congressional districts have seen triple-digit export growth to China from 2000-2007.”

That is pretty substantial growth in all but 29 of the Congressional districts. Some speculate that over the next few years that may increase as a result of the recent and tragic disasters in the Sichuan province.

“U.S. exports to China are growing five times faster than any other export market. This is less a function of the falling dollar and more of rising Chinese demand for U.S. products.”

Why the interest in the US? Doesn’t China have the capability to manufacture everything on its own?

“Put simply, they need what we make – from chemicals and components to turbines and telecommunications, from drugs and medical devices to sewage and sanitation equipment. If a product requires modern technology and precise engineering, chances are, China needs it.”

I guess that has to make the US feel good. Everyone likes to feel needed and US manufacturing is definitely needed. So don’t believe everything negative you hear about US manufacturing and the US economy.

“If the International Monetary Fund is right and the U.S. economy is slipping into a recession that will ripple out into the global economy, then that ripple will stop at China’s shore. China’s demand will help absorb the shock of our solvency crisis.”

So the reality is that we may have a friend in China.

Watanabe vs. Gates in the PowerPoint Arena

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I just wanted to give Garr Reynolds from Presentation Zen credit for this one. He tracked down an article (in Japanese) by Mr. Watanabe, CEO of Toyota that cites him berating the use of PowerPoint. Apparently the old A3 has turned into pages and pages of A4.

“Watanabe said that (in the good old days?) they used to use one piece of paper to make a clear point or proposal, or to summarize an issue, but now everything is in PowerPoint, he says, which uses many sheets of paper and expensive colors…but it’s a waste.”

Finally, somebody at the top has noticed these wasteful presentations that are getting shoved down our throats. I wish my CEO would make a similar comment. I can’t even count how many meetings I’ve been in where the use of an A3 would have cut the meeting time in half or eliminated the need for it at all.

Reynolds goes on to clarify Watanabe’s statements:

“The CEO is not saying that PowerPoint is necessarily harmful (he does not mention its use for actual presentations), but he is saying printed "documents" made with the presentation tool tend to have less content, less clarity, and yet use more paper/ink and take more time.”

Yep, that pretty much sums it up. But I think the bigger issue is that PowerPoint has destroyed the critical thinking skill of synthesizing information to make it accurate and concise. This is one of the more powerful components of the A3 process. With PowerPoint you can throw every piece of information attained into the slide deck and if that gets crowded just build a section called “Backup” and throw it in there.

Rant over for now.

TPS in Semiconductors

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The semiconductor industry boasts of building the most complex products on the planet. If you have never toured a facility you may be interested in viewing this video. The investment to build a new facility with the latest technology costs several billion dollars. Clayton M. Christensen, Steven King, Matt Verlinden, and Woodward Yang describe the environment:

Walk into a multibillion-dollar chip-fabrication plant—a fab—and you may very well get the impression that the industry is headed for a spectacular meltdown. One of the first things you’ll see is a bay the size of two basketball courts packed with equipment for projecting a lithographic design onto wafers. Nearby, you’ll find a towering bin, called a stocker, filled with wafers waiting to be processed by this equipment. The wafers are worth from US $10 million to $100 million—all of it idle inventory.

If you are a regular on this blog, pick your jaw off the floor and continue reading about why this inventory buildup occurs:

To amortize the $5 billion investment in a fab over a five-year schedule costs more than $3 million a day. Conventional wisdom holds that to generate that much money you must keep all the equipment running all the time, even if that means creating large unused queues of wafers. What’s more, to justify that scale, you have to produce a semiconductor product in volumes of at least 5000 to 10 000 wafers per month.

Anyone that has worked in a facility with high equipment costs has heard this argument from the cost accountants. But read on to see how Lean impacted this organization:

In just seven months, the organization was able to reduce the manufacturing cost per wafer by 12 percent and the cycle time—the time it takes to turn a blank silicon wafer into a finished wafer, full of logic chips—by 67 percent. It did all this without investing in new equipment or changing the product design or technical specifications.

That’s what we’re used to hearing when people talk about Lean. That means cheaper electronics for you and higher stock prices for those of us invested in the semis.

This article describes the Lean philosophy that was followed by the consultants. It should look familiar if you have ever read the article by Spears and Bowen entitled The DNA of the Toyota Production System.

Spear and Bowen distilled TPS into four rules, which in summary are (1) highly specify activities, (2) clearly define the transfer of material and information, (3) keep the pathway for every product and service simple and direct, and (4) detect and solve problems where and when they happen, using the scientific method.

Read the article.  There are several other salient points that might interest you. I’ll try to blog about a few of them and share additional insights into what Lean looks like in the semiconductor industry.

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