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The state of lean manufacturing in Canadian industry

There are Toyotas in our midst. That’s the good news. The bad news is that lean has been misappropriated, misapplied and just passed over as another management fad. But first, the good news!

Lean has taken hold in the manufacturing sector, better than in the health care industry, the office and other sectors. A great deal of this success can be laid at the feet of Toyota and its suppliers for pulling us along, but a very large portion is due to organizations seeing the need to transform their businesses, becoming more customer- and process-focussed, and thereby earning the savings and efficiencies that they’re seeing now.

People really do see the need for human capital models, a different view of accounting and the radical differences that running lean organizations can bring. Moreover, they see that these things all have a multiplying effect. You can’t really have a lean organization run by old-fashioned accounting rules, just as you can’t run your lean organization without putting your people first, training them well, taking time to select them and empowering them so they can become the changes they want to see.

In this regard, John Shook was right when he talked about the A3 being the change agent for lean organization culture change. Toyota doesn’t do “organizational change”; they practise it every day with every suggestion.

The bad news is that we still have organizations that say, “What we’re doing is good enough,” or “We’re too busy to change.” Most economists agree that one of the most immediate causes of the problems in manufacturing, at least recently, is the rise in the value of the Canadian dollar. This reflects an overriding interest in cost grazing as opposed to finding efficiencies in what you’re doing right here. Cost grazing has manufacturers moving their production operations all over the world to places where rates of pay are dramatically lower. They argue that when the Canadian dollar goes up, they must look for “efficiencies” in lower cost because most of their costs are labour.

This is the wrong way to think. Toyota builds cars where they sell them and does not cost graze. They save millions of dollars every year through their employees’ kaizen suggestions. They hire well and they hire those people who can do kaizen well. They then keep those people, realizing a return on investment for their training that multiplies for every year they remain working. Data suggests that every Toyota facility of about 3,000 people will save over $100 million a year. This will more than offset any labour cost.

These organizations do not consider their error rates, reject rates, quality defects and so on. Like the GM scandal with low-cost ignition switches, they are not putting the customer first and then getting their error rates down to Six Sigma (3.4 or fewer mistakes per million).

I had one client in southwestern Ontario that had an 80 per cent error rate for their number-one product and they (initially) thought that was fine. They would simply throw the defects back into the smelter and make more!

Consider the downfall of a major Canadian handset manufacturer. They had such a high error rate that they had to overproduce just to break even. They weren’t watching the competition and they certainly weren’t watching their error rates!

Where are we now?

Though thousands of jobs have been lost in the manufacturing sector since 1972, I believe that this sector can make a recovery. It’s already starting, but lean needs to be an integral part of the recovery.

We need to truly value our employees and listen to our customers. We can do this by having our senior leaders practise what they preach, go out there and do their gemba (go and see) walks, and entrust their employees with the powers to make change. We need to trust the employees to become the changes they want to see. Then we need to sustain this success so it doesn’t turn into the flavour of the month.

We need to differentiate between capacity and utilization. I often hear, “Our people are busy right now, and they don’t have time to be lean!” Fine. Your people may be busy, but busy at what? Are they busy creating value or are they waiting on a machine, some process or someone to get back to them? Are they waiting while they could be doing something else? I remember stories about Taichi Ohno walking up and down lines asking why someone was just standing at a machine. “They’re waiting for that machine,” was often the answer. “Can’t this person prepare work for the next cycle,” would often be his reply. Ohno was great at looking at a situation and seeing waste. Too many people do not see waste — they see how it’s always been done. Are your employees working to the best of their capacity?

We need to just do it! Lean, at its core, is simple. Look for waste and eliminate it! Since Ohno first shared the Toyota Production System outside of Japan in 1978, everyone has been in a hurry to emulate Toyota’s success. They forget that it took decades of work to get to that 1978 point. Go ahead, put up a lean board, get employees’ feedback and input, and allow them to make changes. Someone once asked me, “Does this mean I get to fix the stuff that’s been bugging me for 20 years?” When I said yes, he replied enthusiastically with, “I’ll take more of those A3s!”

I was flying to Ireland to teach a group of Black Belt students about strategy deployment (Hoshin Kanri) and I thought this would be a good book to relax with. After all, Pascal Dennis is a Canadian lean sensei and spins a good yarn.

It turned out that this book was a great read! Along the lines of Andy and Me, it told the story of the struggles that a hypothetical person (Tom Papas) was going through. I felt that this story resonated with every one of my client organizations.

This book does a great job of explaining a very broad variety of topics related to the lean quality improvement philosophy. It is not meant for a fully lean or mature organization. After all, how many of us are there? It is easy to read, even down to the quick and dirty.

It also does an excellent job showing how the lean approach can be applied outside of the manufacturing setting, and illustrating how lean production is only one part of a business system that affects all parts of a company’s operations and strategy.

The book does a good job of indicating just how deep each topic goes and how much more there is to learn than what can be covered in the book.

It tells the story of a fictional auto plant manager who has transformed his plant with lean thinking and now has to spread the philosophy to the other parts of the enterprise. As a novel, the book is not likely to be made into a film anytime soon, but the story moves rapidly and (spoiler alert) has a happy ending, so it doesn’t take away from the book’s value.

Question: We tried lean once years ago. It started off okay, but then it petered out and we kind of lost it. Now I’m thinking about bringing it back, but the folks have said it failed and they don’t really want to try again. Any help?

Answer: Don’t call what you’re doing “lean!” I’m only half joking here. In fact, where I’ve seen lean fail is when they put together all kinds of change management, organizational development and lean guidance teams. For the most part, this is a waste of time. You need to start off simply with a couple of lean events — perhaps a simple kaizen or something larger. Then you need to have a conversation about those events (hansei) and somehow annotate them and make them available to others so that they won’t make the wheel all over again. Then you need to share these successes for others to see (yokotan). Share these gains with your senior leaders for them to see and become involved with.

Establish your own local successes and spread the news about them. Don’t follow the guidance from a mature lean organization if you’re not a mature lean organization. The Toyota Kata approach to coaching and mentoring will work well when you’re ready for them. In organizations that are just starting (or restarting) their lean journey, I recommend just asking the first two questions from the Toyota Kata. Coach people to become better problem solvers by asking them about what their target condition actually is and what their current state actually is.

If you can instill a sense of problem solving, keeping an eye open for waste and getting them to do something about it, I think you’ll overcome any resistance you might find.

This column originally appeared in the June 2014 issue of Manufacturing AUTOMATION.