In my 25 years of experience with Toyota - working with the company in Canada, China, Japan and the United States - I've seen the tremendous impact that the Toyota Production System (TPS) has had in the auto market, as well as countless other environments including healthcare, aerospace, government, office and administrative.

If this first-hand experience has shown me one thing, it's that TPS is not the source of Toyota's problems. Moreover, TPS continues to be the leading method for continuous improvement - and the company's most powerful tool in overcoming its recent challenges.

In a recent edition of John Shook's Lean Management column, he interviewed Jeff Liker, a professor of Industrial and Operations Engineering at the University of Michigan, about the troubles that have recently hit Toyota. Liker said:

I see the recalls as a very, very, very poor indicator of fundamental problems. They are rare, isolated engineering issues that, in this case, seem to have nothing to do with the health of TPS in plants or even product development. So far the more than six million vehicles recalled revealed three problems - an aftermarket floor mat that was misused by the public, a sticky pedal based on a composite material selected with a supplier about six years ago, and a software coding error made early in 2009. For a vehicle with about 3000 parts per model that is not a lot of errors in six years.

The most important challenge Toyota faces right now is to stay consistent with its values and principles at a time of extreme growth. So far, throughout the company's history, it has done this.

A most notable example occurred back in the 1990s, when Fujio Cho saw that the Toyota Way was weakening as the legions of Japanese co-ordinators and trainers failed to keep up with the company's North American growth. 

He knew the Americans needed to become more self-reliant so, during his tenure as President of Toyota Motor Manufacturing Kentucky (TMMK), he started to develop a formal Toyota Way document. After ten years of work, he led the company to write The Toyota Way in 2001, which was eventually used as the guidebook to ensure a consistent global culture.

Cho had the foresight to see that the Toyota Way would not automatically sustain itself. Further efforts led to Toyota Business Practices - the concrete problem solving method to put the Toyota Way into practice. Then came a version of the Toyota Way for Sales and Marketing.

Toyota's recent problems are different - but the challenge is the same. The company's thinking has always been to "seek quality, and volume will follow". But the looming prize of becoming the world's number one automaker led some managers to replace the company's "quality first" policy with a "plan for volume and achieve volume" approach.

Does this mean that TPS has taken a hit? Not at all. The deficiencies for Toyota came from the managers, not the gemba. It is likely that the burden of keeping pace with the increasing complexity of today's automobiles exceeded the pace of building capacity at the gemba.

People should remember that the Toyota Production System was born in a crisis.  If there's one thing that Toyota does well, it's to think its way out of a crisis. The next few months should be interesting as Toyota recaptures market share but faces judicial challenges.


FROM THE BOOKSHELF

The evolution of a manufacturing system at Toyota
by Takahiro Fujimoto

The "Toyota Bookshelf" certainly contains a number of worthwhile titles, but given my article about faults at Toyota, this book seemed to be particularly worthwhile.

Evolution of Manufacturing Systems at Toyota gets my vote for being the most insightful, even if it is somewhat dry. The take home message here comes when Fujimoto describes how Toyota has responded to change. This book tries to highlight the role of system processes that aren't deliberately planned.

It builds on the author's past works on functional analysis of planned manufacturing systems in the automobile industry and Toyota in particular.

Fujimoto points out that there is also an evolutionary approach - one that evolves as it encounters unplanned change or circumstances. He points out that manufacturing systems aren't merely a product of deliberately planning. This is particularly important since we are often left with the impression that the Toyota Way is somehow completely planned out ahead of time.

It's important to note that some of Toyota's successful routines have originated unintentionally; that they were the result of dealing with unanticipated events.

This book gives us general idea of how a company's organizational capabilities were born and helps us understand particularly how Toyota has created its style of manufacturing system and capabilities.

To quote Ohno, father of TPS, Toyota remains focused on reducing waste and increasing flow. New and recent challenges will spur Toyota on to a new standard of work, even if the change was unexpected. This reliance on standard work and kaizen to reduce waste and increase flow is at the heart of Toyota.


QUESTION FROM THE FLOOR

QUESTION: We’re a custom fabrication shop. We've brought some Lean tools in to the manufacturing floor and we've seen some good progress. We're still shipping product late. Where else should we apply Lean?

ANSWER: Congratulations on getting Lean started and on seeing good results. Be sure to maintain those successes. To answer your question, think about the office.

I tell people that half of the time they're late is because of the office side of their business. It's relatively easy to see waste, impediments to flow or to do a 5S on the manufacturing floor. It's not that it's really harder to see waste in the office, but people aren't used to looking there.

What's worse is that waste in the office can be more costly than waste on the floor. When a large invoice is not collected, a sales proposal is delivered late, or a quote contains errors, these wastes translate into lost business and chip away at the bottom line. Millions of dollars can be at stake.

You're often looking at the flow of information when you do a value stream map for the office. An information flow can cut across more fiefdoms than a materials flow. Get a wide range of people involved in doing the information VSM, including people from the floor.

Bear in mind that front office people are often unaccustomed to being held to the same process standards as shop floor employees. There are almost always re-dos. Information travels back and forth instead of flowing smoothly.

Do the VSM for the office and administrative functions. You'll be pleasantly surprised when you start to deliver on your A3 problem solving!

 
Dr. Timothy Hill is an Industrial and Organizational Psychologist and Certified Lean Six Sigma Black Belt with global expertise in Human Resources/Human Capital. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

The following is an excerpt from a new book by Shigeo Shingo, the co-creator of the Toyota Production System, entitled Kaizen and the Art of Creative Thinking. It is reproduced with permission from PCS Press.

FINDING THE CAUSE: IN PURSUIT OF PURPOSE
It is said that humans are the only animals that act based on reason. In fact, every action throughout our life has purpose; at least, that is how it should be. Due to the force of habit or sheer laziness, we often act without asking ourselves "why" or considering the true purpose of the action.

"Why do we eat?" If this question were asked, many would answer, "To gain nutrition, so that we can enjoy a long and healthy life."

The reality may differ. Sometimes we eat just because food is there, or just to enjoy the momentary satisfaction of having food in our mouth. Even worse, we might eat a certain food because we saw it on a TV commercial, and are unwittingly serving the purpose of benefiting a company's bottom line, instead of our long-term health.

For the most part, human action is based on reason.

Nevertheless, we often forget our purpose or misunderstand what the ultimate purpose really is. Consciously pursuing the purpose and reasoning behind one's action is just as important in manufacturing as it is in our daily lives. Indeed, sometimes the solution to a problem is discovered only in the process of realigning our actions with their true purpose.

FOUR PURPOSES OF IMPROVEMENT
The purposes for factory improvement, for example, may include the following:
1. Increasing productivity
2. Improving quality
3. Cutting time
4. Cutting cost

The fulfillment of these purposes can act as a gauge for how well we are improving the factory. Conversely, failing to fulfill these purposes means there are problems that need to be fixed.
Thus, if we take the time to refine our actions on the basis of their intended purpose, problems will often disappear.

The success of this concept is contingent upon how well we identify and define our purpose. Think of the pursuit of purpose as a three dimensional concept where:
• X: represents the clear purpose of goals.
• Y: represents single or multiple purposes. If multiple, clarify each.
• Z: serves to fulfill the ideal to be reached, such as future state not-stock production.

SCRATCHING THE SURFACE
Knowing the job and knowing the purpose of the job are two very different things. We may know our job to the letter, but indifference or a lack of awareness as to why the job needs to be done can greatly limit our success.

TRUE PURPOSE OF INVESTIGATION
I was meeting with the president of N Mining Company in Kita-Kyushu when there was a knock on the door. It was Mr. Y, the mining director, and Mr. K, the accounting director. They had just returned from investigating the feasibility of acquiring a competitor's mine that was (fiscally speaking) about to go under. I offered to leave while they gave their report, but the president insisted that I stay and listen.

"Things are in terrible shape, as we expected," said Mr. Y.

"Their mining has been reckless and the roads and preparation facilities haven't been maintained well at all."

"Their accounting practices are just as bad," chimed in Mr. K., the accounting director. "There are many outstanding ac- counts; payables that haven't been paid off and receivables that haven't been collected. It's completely unorganized."

Seemingly finished with their report, the president, who had been almost silent, opened his mouth. "Is that all?"

"Well . . . yes," replied Mr. Y, reluctantly.

The president cocked an eyebrow at me, "As we all know, R Mining Company is on the verge of bankruptcy. Isn't it expected that their operations would be in dire straits?

"I didn't send you to confirm the obvious. I sent you to discover whether there's still any potential left in the mine. Of course their operations are in shambles! But it's possible there's hope buried somewhere underneath, and I expected you to dig a little to find it!"

This episode taught me the importance of extending our thoughts beyond the job and onto the true purpose of our work, especially if it is not obvious from the given instructions. Confirming the development potential of the mine prior to acquisition was a crucial factor in the decision for N Mining to buy. Consequently, ascertaining this information was integral in the company's investigational purpose. Although not specifically instructed to do so, had the two men considered this as their purpose upon their visit, perhaps they would have returned with information that could have served the growth of their company.

Green is the new black. It's hard to pick up a newspaper in the early 21st century without being assaulted by messages about the environment. If it's not climate change then it's toxic spills. Manufacturers have responded with a variety of new controls and lean processes. Unfortunately, this diligence hasn't extended to IT operations. It's time to explore green for the IT department. But do it for the bottom line.

Manufacturers that ignore environmental issues face government fines, boycotts, and rising operating costs due to inefficiencies. Sony, for example, spent more than $130 million in 2001 when the Dutch government banned its PlayStations due to toxic levels of cadmium. In 2004, Dupont was fined $16.5 million(US) by the Environmental Protection Agency (EPA) and suffered public outrage as information surfaced about the dangers of Teflon. GE, on the other hand, was able to identify tens of millions of dollars worth of inefficiencies through IT-driven environmental performance monitoring and resource management. These cases demonstrate that green - or the lack-thereof - can have an impact on the bottom line.

Manufacturers have responded to these threats through efficiency improvements to both planning and manufacturing execution. Unfortunately, IT itself is often forgotten in these initiatives. Info-Tech Research Group data indicates that only 14 per cent of IT managers in manufacturing are "very concerned" about energy efficiency (versus 25 per cent for other industries) and only 10 per cent have budget allocation for green IT projects. Furthermore, only six per cent of manufacturers consider their IT operations to be "very green" (compared to nine per cent for other industries). The news isn't completely dismal. Manufacturing IT departments are aggressive in pursuing strategies such as rightsizing IT equipment (23 per cent) and server consolidation/virtualization (50 per cent). But why aren't they doing more?

Consider these figures. Info-Tech Research Group numbers from 2006 indicate that IT spend in manufacturing accounts for 2.5per cent of revenue. This value is nothing to sneeze at considering that manufacturers spent seven per cent of revenue on compensation, 26 per cent on materials, and one per cent on electricity during the same period (US Census Bureau).

And there's lots of room for improvement. Data centres, for example, have 10 to 30 times the energy requirement (and cost) of an equivalent sized office space and power and cooling account for an average of 20 per cent of data center budgets. While hardware costs have generally decreased, electricity costs continue to increase. So what can IT managers do today to bring lean and green processes into their own shops? Here's a quick list of suggestions:

• Improve airflow management and cooling capacity. Almost 60 per cent of the cold air supplied to the data centre is wasted due to poor airflow. Poor airflow management decreases the cooling capacity by 50 per cent or more. To improve efficiency move existing equipment, separate hot/cool airflows, enclose rack aisles, and improve air transfer across floor/ceiling plenums. A complimentary strategy involves liquid cooling. It is more efficient than traditional air cooling and can reduce cooling costs by as much as 50 per cent. Unfortunately, it's not cheap at about $25,500 for a one-rack setup or between $300 and $400 per server blade.

• Pursue rebates from utilities. Utility companies have incentives to counter the rampant energy consumption of data centers. PG&E offers rebates ($700 to $1,000 per server) for Sun Microsystems' energy-efficient Sun Fire T1000 and T2000 servers, and rebates for server consolidation. Avista Corp, meanwhile, offers rebates (up to $3,600 per rack) for liquid cooling-enabled servers.

• Seek more efficient power supplies. A server rack drawing 20 kW of power consumes more that $17,000 per year in electricity, not including air conditioning. Switching to efficient power supplies can yield $5,000 per server rack per year in energy savings.

• Investigate economizers. Airside economizers bring in cool outside air when weather conditions permit, thus reducing the burden on air conditioning units. Waterside economizers provide cool water from rooftop water towers for chilled-water air conditioning. Depending on outside conditions, an economizer can reduce cooling costs by 60 per cent.

• Make the switch to DC. Fully 11 per cent of data center energy consumption is related to power conversion. Enterprises can achieve between 10 per cent and 20 per cent energy savings by switching to DC-powered equipment. DC servers are cheaper to run but they may cost a premium of up to 30 per cent to buy.

Lean and green thinking for manufacturing should extend beyond the shop floor. Most data centre operations are ripe for improvement. Applying a few green principals can minimize energy use in the data centre. And it will help erase some of the red from the financial books.

George R. Goodall is a Senior Research Analyst at Info-Tech Research Group in Toronto. You can reach him at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Manufacturers move from Lean to agile manufacturing to adapt to dynamic global markets

Lean manufacturing is a term applied to companies that are very good at managing what is in their control, and finding ways to continuously improve areas within their shop management that prove to be inefficient. But manufacturers that have worked for years to get Lean and become Leaner may be wondering, "What's next?"

Agility is the ability to thrive and prosper in an environment of constant and unpredictable change. Agile manufacturing deals with the things that are not readily controlled. This relatively new concept is seen as the next step after Lean in the evolution of production methodologies, but many have not yet begun to implement these new tactics. In fact, a recent study found that while 40 percent of respondents are engaged in Lean manufacturing, less than four percent pursued agile manufacturing.

The basic concept of agile manufacturing is developing what could best be called a nimble mindset when it comes to understanding market environments. In short, rapid changes in the market environment are not something to be feared, but should be seen as opportunities to beat the competition to the punch. Rapid changes in the market call for rapid responses. This notion of changeability is at the heart of new movements in manufacturing based on production agility.

AGILE MANUFACTURING IN THE JOB SHOP
Agile manufacturing represents a complete shift in the mindset of production industries in the 21st century; one in which there is both a greater relationship between technology and worker skills, and greater customer access to, and demands upon, the core competencies of their manufacturers/vendors.

By its denoted value, agile manufacturing implies a sense of flexibility. In today's dynamic global marketplace, where the business variables are often unknown and changing, it is incumbent on the manufacturer to be able to respond to evolving demands at a pace that, in the past, would simply be considered unrealistic. However, the modern job shop has itself evolved to this point of accommodating increasingly shortened lead times and 90-degree engineering changes. Paperless routers facilitate computerized linkages from sales order generation to the tracking of shipments. Shop floor wireless systems account for inventory levels, automated purchasing and materials movement. Engineering schemata (particularly changes in design and construction) can be relayed directly to machine operators via graphical user interfaces as they are generated.

In other words, technology and technique have evolved in manufacturing so much so that agility could very well be considered state of the art. Agility is a result of streamlining to sharpen processes on the shop floor to hasten order fulfillment and, in doing so, maximize capacity for increased productivity.

THE ROLE OF ERP
Technology is an enabling factor in agile manufacturing. Identifying the right technology that helps the whole shop share a common database of parts and products, and production capacities and trouble spots within the supply chain, is key. Responding deftly to customer demands, materials shortages or other contingencies is crucial, considering that small initial problems are typically amplified down the line.

A first step toward becoming an agile manufacturer is developing the means by which business intelligence of the marketplace is made meaningful, and production is wholly synthesized through integration. ERP software brings all areas of the manufacturing operation into a single, real-time database where the actions of one department never happen in isolation; where all aspects of the operation are capable of responding quickly to customer demands. Particularly suited for agile manufacturing, ERP software provides the basis for rapid communications and the exchange of data, as well as the means by which responsive actions can be made quickly to ensure competitive advantage.

The manufacturer that has made the effort to instill agility through ERP has the competitive advantage when it comes to quickly transforming knowledge into new products and services for its customers.

AGILE MANUFACTURING IN THE REAL WORLD
While agile manufacturing is still a novel concept and has not yet been fully implemented across the broader spectrum of manufacturing, some early adopters are already seeing the benefits.

Humanetics, a precision metal works company based in Dallas, Tex., is an example of the sort of agile thinking taking place in manufacturing today. Not only is its workforce occupationally dimensional, the production model is one that takes advantage of the unique strengths of each of the company's four facilities. With the acquisition of a plant in Wuxi, China, Humanetics is able to produce products for the Asian market using local labour and resource efficiencies. However, Humanetics has also found that it can create a hybrid manufacturing model by combining Chinese overhead efficiencies (initial labour and materials) in alliance with American quality standards (for finishing) to provide low-cost, high-quality finished goods for a global marketplace.

To maintain real-time connectivity between a large database of shop information, Humanetics implemented a robust ERP software system that provides the company with the capability to navigate production schedules, inventory management and cost accounting for the information flowing from all four of its geographically dispersed plants. As orders are taken, processes are planned accordingly to ensure that throughput is efficient, international movement of parts is smooth, quality is maintained and delivery is on time. Ultimately, it is its agile ERP software system that provides a sense of total flexibility to what Humanetics does as a multi-location manufacturer.

AGILE MANUFACTURING TOMORROW
In a global economy, windows of opportunity open quickly and can close just as fast. The more agile the manufacturer, the greater the rewards to be gained from being the first responder to customer needs. Expanding the customer-base through emerging and diverse markets necessitates the quick reflexes that result from the consistent improvement of business intelligence.

Innovation in the market provides the greatest growth opportunities for companies who are quickest because of their concerted efforts to be agile.

Dusty Alexander is the president of Global Shop Solutions, an ERP software provider based in The Woodlands, Tex.