Your Lean Year in Review

Happy New Year!

As 2006 ends, I hope many of you had a GREAT lean year. Please add your comments about your lean accomplishments for the year, or at least one key lean accomplishment.

I was very fortunate to do a consulting project with a hospital laboratory. In a 14 week project, we significantly changed the lab layout for improved flow, implemented 5S and visual management, put new "standard work" in place, started a kanban system, and worked on learning to manage in a "lean way." The team learned new problem solving methods (such as the "5 Whys" and started eliminating workarounds by fixing root cause problems.

It was just a start, but we reduced the lab Turnaround Time (lead time) by 35% without adding headcount while freeing up 250 square feet of space. Doctors (and patients) are more consistently getting test results on the patient chart on time for morning rounds (85% on time versus 60% on time), which makes them very happy.

The hospital is just starting their lean journey, in this department, and throughout the hospital. They know they are not "lean" and done after an initial project. They know it is an ongoing effort and a new way of operating. The beauty of the above results is that my client team did it. I helped, but I don't deserve all the credit (nor will I claim it).

For that, and so much more, I'm very thankful for 2006.

Additional Lean Challenge Entries

Thanks to all who had entered the Lean Challenge contest. The winning entry is here and I'll post a few more expert replies to the scenario next week, so check back in.

Here are two more challenges -- I'm putting them over on the "Lean Board" if you'd like to comment or discuss the challenges there.

Challenge #1 -- How to get leadership on board early on?

Challenge #2 -- How to get leadership engaged with TPM activities?

Lots of leadership challenges, a definite theme there. You can check out some earlier Podcasts with Norman Bodek and Jamie Flinchbaugh that focused on how to get upper leadership on board.

Waste in Collecting Tolls

TxDOT to motorists: Pay up even if tolls are tiny

I've heard economists say that tolls roads are a very inefficient way of collecting taxes (you have to build tollbooths and hire people to collect tolls, etc.). Gas taxes, vehicle registration fees, even sales tax are more efficient collection methods.

Some states are addressing that with "Tolltags" or other automated methods that you can sign up for. I use a "Tolltag" for airport parking at DFW, which is very efficient for me (I barely have to stop and I get invoiced/billed automatically). Most toll automation schemes I've seen, such as "Open Road" tolling in Illinois give you the automated option but still have toll booths for those of us (say, from out of state) to stop and pay our 80 cents or whatever.

In the Dallas area, though, we have a new toll road, referenced in the article above. If you don't have a Tolltag, the state takes a picture of your license plate and mails you a bill. The state saved the money of building toll booths, but wow this seems like a very inefficient system.

The state is paying 30 cents to mail out a 25 cent bill to drivers. The driver then spends 39 cents to mail a check in. I'm not sure which is more wasteful, the state "forgetting" to add the $1 processing fee or having that processing fee (or the processing itself) to begin with. Also, with the current system, Texas cannot bill or collect from out-of-state drivers.

Such waste. I'm not endorsing him for President, but do you think "lean government" proponent Tom Vilsack could do a lot to promote lean thinking, waste reduction, and just plain common sense to government around the country?

Quality is Free in Healthcare?

Hospital cost, quality are at odds

In the manufacturing world, the old "mass production" thinking said there was a tradeoff in cost and quality, that high quality must inherently cost more to produce (due to more inspections, high quality materials, etc.). Toyota and lean thinking helped us understand that quality can be free if you build in quality, if you practice continuous improvement, etc.

A lower cost product CAN be high quality. People didn't believe that with Toyota and some Americans assumed they were "dumping" products below cost. They thought high quality had to be expensive and Toyota was cheating somehow if good quality cost less.

Now, in healthcare, some of these same assumed tradeoffs pop up -- that high quality healthcare somehow MUST cost more to provide. This ignores the idea that healthcare quality can be improved through lean methods and by preventing quality problems from occurring.

The article I've linked to, above, says:

In metro Denver at least, UnitedHealthcare found that, on average, hospitals charging the least also provide the highest-quality care.

Hospitals and health care experts say that's because lower quality often leads to more complications and infections, which means more days in the hospital and much higher medical bills.

That shouldn't be surprising at all. Preventing hospital-acquired infections is something that can be achieve through lean methods, namely Standard Work, and following best practices consistently. More days in the hospital doesn't necessarily mean more revenue for the hospitals, especially when Medicare is paying a fixed amount for the patient.

For those who have discussed the idea of the healthcare "market", page 2 of the article highlights some cases of how different hospitals charge different prices for the same procedure. I guess that's an argument that prices are NOT being set by the market, as some of you have pointed out before. People are learning that the hospitals that charge the most aren't necessarily offering the highest quality of care.

Here's an earlier article on this same topic, of how quality problems hurt hospitals' bottom lines. That shouldn't be such a news story, eh? The old thinking was that hospitals might actually MAKE money off of an infection, but it actually costs them more to treat the patient than they might receive in additional payments for giving that care. Hospital acquired infections SHOULD cost hospitals -- it provides the right incentive to focus on improving quality through lean methods.

IW Webcast: Lean Tools

Here's an Industry Week webcast that promotes:

Six Sigma, Lean, or Kaizen? Using the Right Tool for the Right Problem



I hope they will also cover the cultural and management aspects of lean. Lean isn't just a "tool", it's really much more than that.

Either way, hope it's a good webcast.

Live Internet Broadcast
Sponsored by SAP, in association with Intel and HP
Thursday, January 11, 2007 - 2:00 p.m. EST (GMT -05:00, New York)
Estimated Length: 1 hour

Lean Blog Carnival

Kevin Meyer used to do a lean "blog carnival", so maybe it's now my turn. There are many great blogs out there and here's a highlight of what's been really good recently.

• Kevin's blog had a feature on Whirlpool's understanding (or mis-understanding) of lean principles.
  
  
• Karen Wilhelm appears to be having a lot of fun with her SME Lean Reflections blog, evidenced by this "Night Before Christmas" lean parody. She's also a frequent comment maker on this blog, which is very appreciated.
  
  
• The "Daily Kaizen" blog is nice team blog from a Seattle hospital that is going through a lean transformation process. Here is the latest in their regular "Quote of the Week" series.
  
  
• Hal Macomber's "Reforming Project Management" blog has a number of posts about Toyota and their success. This post takes the excuse makers to task, whether it's GM or our U.S. Congress not understanding why Toyota is successful.
  
  
• Mike Wroblewski's "Got Boondoggle?" lean blog has been quiet lately, but here is a post of his on "Kindergarten Lean"
  
  
• Kathleen Fasanella's "Fashion Incubator" blog might not appear to be a lean blog, at first glance, but there are often great lean lessons that apply to more than apparel making. Here is a post that talks about good inventory management, 5S, and visual management strategies.
  
  
• Jon Miller's "Gemba Pantarei" blog has a new layout and a post about 5 Things he wishes Toyota would do once they become #1 in global auto production.
  
  
• Mark Edmondson had some complaints about the U.S. Post Office not properly forecasting the demand for holiday stamps, on his Lean Executive blog. On Dec 22nd or so, I overheard a woman who was angry at my local post office because all they had left were generic blue snowflake stamps, nothing more holiday-ish than that.
  
  
• Tom Peters asks this question about leadership and CEO compensation: Why is the ratio of pay for 4-star General to the average soldier about 6 to 1, while the ratio for a CEO to average worker is 250 to 1?
  
  
• Peter Abilla is a kindred spirit -- he's the type of guy who would take a bad fast food experience and draw a process map, while blogging about it and reference queuing theory. My kind of guy.
  
  
• Joe Ely recently restructured his "Learning About Lean" blog to focus more on his own personal lean journey. I hope he continues to share more details about his lean work.
  
  
• The "Presentation Zen" blog has a post on rules for simplicity in presentations. We've probably all been guilty of powerpoint abuse, so it's good to think about how to create impactful presentations (high value) with minimal waste.
  
  
• Seth Godin writes about marketing, but there are often leadership or business lessons to be learned. This time, he links to a website with a 1972 McDonald's training video and he says, "It's clear that a motivational video is not the solution--if it were, our service problems would be long gone." Ala W. Edwards Deming, slogans and external "motivation" aren't always the answer to our organizational challenges. Substitute leadership! Seth also challenges Verizon wireless on the "value" of putting banner ads on customers' cell phone browsers.
  
  
• John Hunter's "Curious Cat" blog has a post on why extrinsic motivation fails to motivate.
  
  
• The "Consumerist" blog often features customer service horror stories, a reminder of the sheer amount of waste in the world, including this attempt at getting a mattress from JC Penney.

So many great blogs, so little time! I hope you'll continue to spend more time with this blog in 2007, however!!

LeanBlog Podcast #14 -- Dave Gleditsch, Pelion Systems

LeanBlog Podcast #14 is a discussion with Dave Gleditsch, the Chief Technology Officer for Pelion Systems, a leading provider of software for lean manufacturing applications. I first met Dave after I read his Industry Week columns and traded some emails with him. He has a great background in manufacturing and lean, so I think he has an interesting perspective to share on lean and techonology. Don't worry, this podcast isn't a sales pitch for Pelion's software. I think you'll enjoy the discussion.

MP3 File (Right Click to Save-As)

Show Notes and Approximate Time, Episode #14

• 2:00 What prompted you to write your first column?
• 2:30 The real issue was a poor definition of what lean really is, lean has some very concrete things for improving and innovating.
• 3:30 It's not just cost cutting, it's about maximizing customer value with the minimum required resources.
• 4:20 At American Standard, lean helped save the company, but it also became a platform for growth
• 5:00 Do traditionally cost driven people automatically focus on lean as only a cost cutting tool?
• 6:00 In the boardrooms, the real cost is gross margin expansion -- impacting the top line AND the bottom line (lean and six sigma are great tools for that). You can't just cut costs on the path to growth.
• 7:00 How first introduced to lean concepts?
• 9:20 Had a lot of lean experience at HP in the 1980's, worked with Shingo, Hall, Schonberger, etc. Had to try to interpret the original Shingo "Green Book."( A Study of the Toyota Production System from an Industrial Engineering Viewpoint)
• 10:40 Hall's book Zero Inventories
• 11:00 Dave working with Shigeo Shingo
• 12:00 More about Dave's experiences with lean at American Standard
• 15:20 What is Pelion Systems? What services and technology do they offer?
• 18:40 Pelion had the first web kanban portal
• 19:10 What business problem is Pelion helping to solve?
• 20:45 Can technology help speed up or further a culture change?
• 24:00 You have to look at more than manufacturing, but also at how different parts of the companies work together.
• 25:20 What about the The Toyota Way principle about technology? "Use only reliable, thoroughly tested technology that serves your people and processes." What about the anti-technology bias that tends to exist in the lean world?
• 30:15 What about companies who have been burned by ERP or technology promises in the past? Does that make it challenging for a software company today? What about technology vendors who seem to promise a "silver bullet" solution for manufacturers?
• 35:00 Is the software industry learning from past rollout mistakes? Are companies using the technology evolving?
• 35:25 How Pelion operates with a clear customer charter, business case, etc.

If you have feedback on the podcast, or any questions for me or my guests, you can email me at leanpodcast@gmail.com or you can call and leave a voicemail by calling the "Lean Line" at (817) 776-LEAN (817-776-5326) or contact me via Skype id "mgraban". Please give your location and your first name. Any comments (email or voicemail) might be used in follow ups to the podcast. Click here for the main LeanBlog Podcast page with all previous episodes.

Lean Blog Challenge Contest Winner

Here's the winner of the Lean Blog Challenge Contest. Congratulations to Rich, the winner of an MP3 player pre-loaded with the first 13 episodes of the Podcast.

Have advice for Rich? Feel free to post your comments here. Check back for responses from some leading lean thinkers, including Jamie Flinchbaugh, David Meier, and Bill Hanover.

--------------------------------------------

Mark and Lean Blog Readers,

I am currently a lean leader for a 4 Billion dollar corporation. My background is as an operations and plant manager, and I am currently working with a division that manufactures sealing products for various motion control industries and markets. We are a growing business that is doing well financially. The corporation credits our lean efforts for driving growth and margin, and has a somewhat comprehensive lean system based on TPS. The greatest lean challenge I am coming up against in this business is common but very difficult to break through: A culture of urgency, or what Stephen Covey calls "urgency addiction." This urgency addiction often results in a breakdown of lean tools and systems, cultural barriers to leader standard work, and a failure to fully complete lean transformations.

A culture of urgency (and the resulting reverence for heroics non-conventional solutions) makes the sustainment of lean tools nearly impossible. For example, we have worked hard to implement finished goods stores and kanban in many of our facilities. Unfortunately, these systems are often ignored or pillaged when urgent demands interfere. What better way to overdrive monthly results than open up our shipping window and empty the finished goods stores? I'm driven to reduce inventory for that end of month snapshot anyway! And why would I build products to "go on the shelf" when I have urgent customer expedites?

Urgency addiction is also a major barrier to the implementation of standard work, especially for our leaders. The implementation of standard work for operations leaders has been met with disinterest at best and outright hostility at worst. Who has time to work through a checklist of items that have me auditing and checking areas that are running well? Why would a 5S audit or quality check take precedence over a customer quality crisis? Who has time for these daily accountability huddles?

Finally, the culture of urgency stands in the way of fully completing lean transformations. I am currently involved in a project to reduce raw material inventory, and we are approaching the problem through the use of kanban and the reduction of supplier minimum lot sizes. Yet it is a battle not to have this project seen as an "inventory exercise" that could also involve calling off receipts until next month and manipulation of the data. Why do we need kanban when I can just use MRP? Who has time to review demand and kan ban levels anyway? Suppliers will make me pay more for smaller, more frequent shipments anyway. As soon as the process is brought back into control through focused, heroic efforts the team will likely move on to the next crisis without establishing a system to prevent future recurrences.

I am currently attempting to battle this culture of urgency through leader standard work, visual factory tools, regular accountability reviews and audits (a factory "cadence"), and training on effective problem solving techniques. Yet last week I had a senior member of the staff come and ask me why his team had to waste time on these things when they were "hitting all their numbers." So I continue to conduct training, coach our supervisors, and lead lean events knowing that many of our employees will nod their heads and think "that's a nice concept..." and then return to their work seeking pats on the back for their heroic efforts and process workarounds.

In appreciation for any wisdom and advice,
Rich

Lean is not "Mean"

For a lean, mean machine

Here's another journalistically-lazy reference to "lean and mean," this time in an announcement for an Intro to Lean seminar in Florida. Ugh. Lean is not "mean." Lean calls for respect for employees and not laying them off as a result of lean improvements. It's too bad that the words rhyme. It's also too bad that too many companies misunderstand lean and use it to slash jobs. Oh well.

Ford's Mulally meets with Toyota

NY Times: Ford and Toyota Chiefs Met in Tokyo

MSNBC: Ford's Mulally signals co-operation with Toyota

In the NY Times today... apparently they fired up Mark Fields' private jet and flew off to Japan last week to meet with Toyota Chairman Fujio Cho. They weren't talking partnership or merger, but rather:

Japanese press reports said executives from Ford and Toyota discussed development of hybrid-electric and hydrogen powered cars and ways that Toyota could help Ford improve its manufacturing efficiency.

Interesting. Is this part of Toyota's political sensitivity while on the verge of becoming #1 in global auto production. Would it really help Toyota, in the long term, if Ford were to fail? It's no surprise to Ford watchers or readers of this blog that Mulally wants to learn from Toyota. It's part of Ford's political sensitivity (back in Detroit) that they kept the visit secret and don't want to be embarrassed that they ran to Toyota for help?

For his part, Mr. Mulally is a student of the Toyota Production System, which emphasizes the elimination of waste throughout all aspects of a company’s operations, as well as stressing continuous improvement on the assembly line.

He implemented a form of the system when he ran the airplanes division at the Boeing Company, where he worked before joining Ford in September.

But that journey is nothing new for Mr. Mulally, who made the trip dozens of times while a Boeing executive, both to see Boeing customers in Japan and to hone his knowledge of Toyota’s manufacturing methods.

In the first quoted paragraph above, I'd expect people to say that TPS "emphasizes continuous improvement on the assembly line, as well as the elimination of waste throughout all aspects of a company's operations." I'd expect it be said that way because most people think, incorrectly, that TPS and lean are concepts for the factory floor only.

Alternative headline would have been "Mulally and Mullet meet with Toyota." I try to take the high road, but it's tough...

More news articles, via Google, most of which probably don't use the word "mullet."

More on Mulally's "First Impressions"

Here's what jumped out at me from Friday's WSJ articles on Alan Mulally: his "war room" and his "first impressions." (both articles require paid WSJ subscriptions, I believe).

Free version of the war room article is here.

In the "war room" article, reporters are taken to the command center for the Ford turnaround.

The posted pages contain charts, graphs and lists of Ford products and markets -- his road map to turn around the troubled auto maker. There are also photos of Ford executives in charge of various divisions, to show who is accountable. Pages are coded in red, yellow and green, indicating the severity of the problems.

There is an element of visual management, a lean concept, in the red/yellow/green. That's not rocket science. But, later in the article, there' s a discussion about how Mulally handles the color coding (a more important point):

When one manager offered up the poor performance of his unit, some Ford executives were stunned by Mr. Mulally's reaction. He applauded, saying: "Great visibility." Mr. Mulally coached his team on using the colored graphs and lists. "We got to the yellows and the reds pretty quickly...within a month," the CEO says.

When a color improves, "it's a chance to celebrate," he adds.

Mulally is trying to change a culture that traditionally HIDES its problems to one that discusses them openly, without fear of being embarrassed or unduly criticized. I like that leadership example and it's a move toward a Toyota Way type culture (a baby step, but an important one).

The article shared an example of how Ford execs don't share information openly (due to a culture that favored competition and looking good over cooperation and sharing problems, I'd guess):

After Mr. Mulally asked each business head to present his results and forecasts, he complained that the numbers didn't make sense. "Why don't all the pieces add up for the total corporate financials?" he recalls asking.

"We don't share everything," he says one manager replied, explaining that Ford executives ran their units without meshing with other divisions, occasionally holding back some information. Mr. Mulally was floored. The next week, executives came back with complete figures.

Mulally's push for a "lean global enterprise" isn't just about manufacturing efficiency:

Mr. Mulally also scrambled to familiarize himself with Ford's vehicles. Recently, on a table in his office, he laid out 12 different metal rods that Ford uses to hold up a vehicle's hood. He wanted to demonstrate to managers that this kind of variation is costly but doesn't matter to consumers.

It's a great lesson in defining value from the customer's standpoint as opposed to the engineer's standpoint. GM used to play the game of being concerned that a Cadillac owner wouldn't want to share parts with a Chevrolet. Ridiculous. Cadillac customers want performance and styling that's better or different than a Chevy, not under-the-hood parts that they would rarely see (like windshield washer reservoir caps).

In his "first impressions" email to the company (sent around in October), Mulally emphasizes the cultural point again:

I've started weekly Business Plan Reviews with the senior leadership team. Together we look at one set of data on one screen. We talk to each other with candor and respect. We are all determined to get to one plan for our company. We will all participate, and we will all support each other's efforts to succeed. I don't yet know everything I need to know about Ford, but I do know that this is the only way I can work.

"Candor and respect" -- again, that sounds like the Toyota Way. Mulally is building around a "3 P's" strategy of sorts:

• PEOPLE: A skilled and motivated work force.
• PRODUCTS: Detailed customer knowledge and focus.
• PRODUCTIVITY: A lean global enterprise.

Not bad for an airplane guy. It goes to show that leadership transcends different industry boundaries. Mulally is using the same management playbook that he learned at Boeing and from studying Toyota. That said, he's trying to learn the auto industry:

Shortly after his arrival here, Mr. Mulally and his new troops bought books to better understand one another. The new CEO read the 1926 classic "Today and Tomorrow" by Henry Ford. He also met with the Ford family at the Henry Ford Museum complex early on. Ford managers began passing around "The Machine That Changed the World," often cited by Mr. Mulally for its in-depth story of Toyota's manufacturing operation.

As we've discussed here on the blog.... is "Machine" really the most recent and most relevant book Mulally could be passing around? What about the Toyota Way series? What Jamie's "Hitchhiker's Guide?" What advice would you give Mulally, on books or otherwise?

Mulally's Early Lean Leadership at Ford

By Dan Markovitz, Timeback Management

(Mark's note... Dan has been a unofficial, yet very welcome, contributor to the blog for a few weeks now. We should see him posting directly soon. But for now, here is a post he sent me via email).

On Friday, the WSJ published an article on Alan Mulally, Ford's new CEO. The article, taken together with the article on Katsuaki Watanabe and Toyota from two weeks earlier reveals a key difference between a lean approach to business and, well, business as usual.

The article on Ford states that:

As part of his push for uniformity, Mr. Mulally is moving Ford to combine its global operations, modifying its current structure of separate businesses by brand and region. Mr. Mulally was shocked to discover that the plan before his arrival was to "operate our eight Fords."

In the executive suite he shares with Chairman Bill Ford, Mr. Mulally says he asked Mr. Ford why he hadn't integrated the company.

He says Mr. Ford agreed that integration was desirable, but told him it was difficult. Every time Ford had considered forcing integration, a new hit product -- such as the Explorer, Taurus or F-series truck -- would come along and propel profitability without tough changes, explained the fourth-generation Ford leader....

Ford has tried before to cut vehicle-development costs through the strategy of engineering a car once to serve markets world-wide. In the 1990s, Ford also tried to undertake a sweeping reorganization to run as one company, globally, rather than as a collection of regional fiefdoms. But these prior efforts failed, in part because the company's executives and managers resisted the pressure to give up their turf.

So here's a company that's struggled for quite awhile, but never could find the executive commitment to improve, because every once in awhile they'd get a hit product. Now, contrast this institutional complacency with Toyota:

Toyota's chief executive officer is a worried man. He thinks Toyota is losing its competitive edge as it expands around the world. He frets that quality, the foundation of its U.S. success, is slipping. He grouses that Toyota's factories and engineering practices aren't efficient enough.... U.S. and European car makers have spent years struggling to overhaul outdated operations and work practices to better compete with Toyota. By some measures, some of those companies are catching up. Now, driven by a severe dose of institutional paranoia, Mr. Watanabe is trying to move the target.

Mr. Watanabe, 64 years old, wants kakushin, or revolutionary change in how Toyota designs cars and factories....

"We know our resources are stretched thin; there's no doubt about that," Mr. Watanabe says. "But at least we are beginning to know where our problems lie now. Our biggest fear is: What if those issues get stuffed in a desk drawer?"

Toyota -- profitable, growing, and ready to take the #1 spot -- is terrified. They have every reason in the world to continue business as usual, but they don't. The institutional culture -- that is to say, Lean -- makes it impossible to rest on their laurels. Continuous improvement (whether you call it kaizen or kakushin) is built into the company's DNA.

Does Ford stand a chance? Can Mulally make the necessary changes in how the business is run? He's got a tough row to hoe. It's not enough for him to see the need for improvement; it's not enough for him to squeeze out waste in manufacturing. He has to change the culture at Ford. He has to change the way people think and act.

Lean is a state of mind, not simply an exercise in cost reduction. And that state of mind must permeate every aspect of the organization, from the machinists to the accountants to the administrative assistants.

Error-Proofing Enhances Quality

Society of Manufacturing Engineers

Catching up on some old links and articles I never did get around to publishing... here's a good overview of error proofing (not "fool proofing" or "dummy proofing") from the SME and their magazine.

Remembering the "Value Add"

Since I often focus on the "waste" and problems in life and the working world, today's a great day to stop, step back, and focus on the value added aspects of life.... family and friends.

Best wishes to all for Christmas and for the holiday season. Best wishes to our blog readers from around the world.

Feliz Navidad
Buon Natale
Glædelig Jul
Joyeux Noel
Frohe Weihnachten!
Christmas Alegre
Vrolijk kerstfeest
Peace on Earth

New book from the LEI

New Hybrid Book Takes a 'Novel' Approach to Strategy Deployment: Financial News - Yahoo! Finance

Has anyone read the new book from the Lean Enterprise Institute? They are sending me a copy that I hope to review in the near future.

More on Toyota's Jump to #1

Not breaking news, but more article about Toyota's expected leap to #1 in global auto sales in 2007.

The NY Times and the International Herald Tribune both chimed in. All quotes below are from the IHT article.

Toyota Motor said Friday that it planned to sell 9.34 million vehicles next year, a figure that analysts said would be big enough to put it ahead of the troubled General Motors as the world's largest auto company.

Toyota reported global group sales this year of 8.8 million cars and trucks, below GM's forecast for 2006 sales of 9.2 million vehicles. But the figures Friday showed the two rival car giants on starkly different trajectories, with Toyota expecting to add a half million in vehicle sales in 2007, at a time when GM is closing plants and laying off workers.

Both papers recount the long journey that Toyota has taken:

Surpassing General Motors would be a crowning achievement for Toyota, a company that got its start in the 1930s by reverse-engineering GM and Ford cars, and that spent decades catching up with Detroit. It would also end GM's 81-year reign over the global auto industry, and mark another step in the rise of Asian carmakers.

Much of the analysis is about how Toyota will have to be politically sensitive after knocking off GM. I'd rather focus on how this validates the Toyota Production System, rather than focusing on the currency advantages or all the other reasons (excuses) that the old Big 3 would give.

Toyota's rise would also prove a victory of sorts for its unique corporate culture, the so-called Toyota Way, which is rooted in an obsession with craftsmanship and constant improvement, or kaizen. Analysts said the Toyota Way would likely become enshrined as the industry's gold standard and the model to mimic or surpass for new challengers from South Korea and China.

"This proves that the Toyota Way is more than just an odd, quirky theory," said Chester Dawson, author of the book "Lexus: the Relentless Pursuit." "Being No.1 means Toyota now sets the standards that everyone has to beat."

Toyota has seen an increase in quality problems and recalls -- now that they are #1, will the media quit treating them as the underdog?

"Now that it's Toyota's turn on top of the industry," said CSM's Yokoi, "Toyota has to figure out how to keep from following GM into decline."

Given Toyota's business acumen and track record of continuous improvement, I doubt that's likely.

One thing jumped out from the Times article:

Ford’s new chief executive, Alan R. Mulally, readily says he is an avid student of Toyota, something no Detroit leader in the past would admit.

For American consumers, Toyota vehicles have been “a better value proposition” than Detroit’s products, said Mr. Mulally, who owned Toyota and Lexus cars before joining Ford in September.

That gives Ford an interesting perspective -- having a CEO who learned about lean in a different industry and one who actually owned Toyota products.

Hyundai's Definition of Quality

Business Week Article

by Mike Lopez

Business Week ran an article about some of Hyundai's recent problems. One of them seems to be a misguided quality program. Although the article says that,

In recent years, no other major automaker has boosted sales and quality as fast the the Korean company.

The article later goes on to say that Hyundai's idea of quality is not Lean.

Rather than improving the way it makes cars to minimize defects à la Toyota Motor Corp., Hyundai stepped up inspections and testing. The result: It needs two-thirds more man-hours to build each car than Nissan and Toyota do.

This is a great example of focusing on local optima (great quality) at the expense of systematic improvements (continuous improvement of the manufacturing process and lower costs).

Great Post on Evolving Excellence

The Idiot Grinch of Fake Lean

I know a lot of you probably also read the Evolving Excellence blog, but be sure to check out this post. Kevin Meyer's doing his best to channel the outrage we usually get from Bill Waddell. I hate to see companies emulating Jack Welch, particularly because investors and folks seem to respond to that (they don't know any better). Like fictional characters on TV, they think Jack Welch is a god (another funny example here).

The manufacturing company that Kevin writes is getting rid of employees as the result of efficiency gains brought by lean, and they're bragging about it and what good leaders they are (vis a vis the comparisons to Welch). That completely kills morale.... I don't see how people can't understand that.

I wrote this week about Rugar guns and how they were doing buyouts (hopefully somewhat generous) and not backfilling people who left via attrition.

With lean, here are the preferred approaches for handling "excess" people (just my opinion):

1. Use lean to grow. Free up people and resources to add equipment, increase production, add new product lines, etc.
   
2. Utilize people in different ways -- people in the factory might be great in a sales or technical role working with customers. Maybe employees can be part of lean teams or kaizen event facilitation roles.
   
3. Allow people to leave via attrition (retirements, etc.) and don't replace them. This isn't as painful to an organization as layoffs would be.
4. If you have to let people go, provide generous buyouts with job retraining, career search help, etc.

Once you give in to the temptation of mass layoffs, you'll fall into the business death spiral. The good employees who are left will be upset and might leave on their own, given the chance. This isn't a good cycle to get into.

The only exception to the above might be a true crisis situation, as in "we have to get rid of 30% of the staff or we'll all lose our jobs." If you've lost a major customer or major product line, then that's a different situation altogether. Yes, Toyota did some mass layoffs in the early 50's, but management took responsibility and promised to never do that again. Quite a different approach than the companies that lay off employees constantly.

The hospitals I work with have all made very public "no layoffs because of lean" pronouncements and it's a great help.

Why Quota for Nurses Isn't Cure-All

WSJ Article ($) | Free Version of Article

Thanks to Dan Markovitz for pointing this article out to me a few days ago:

At IHI's patient-safety conference today in Orlando, Fla., Ms. Rutherford is presenting an alternative to ratios: a redesign of medical-surgical units so nurses, who may spend only a third of their time on direct patient-care activities, can reduce time spent on paperwork, charting, finding supplies and resolving operational problems.

Amen to that. The Institute for Healthcare Improvement (influenced by Steven Spear and others) is doing a great job with lean concepts.

There's so much waste in nurse's work and in a nurse's day. It's not their fault, it's the way the system is designed (or not designed), lack of lean thinking, etc. I've seen this waste in many hospitals and many different patient settings. It's clearly systemic and needs fixing.

I disagree with the push for arbitrary patient:RN ratios because you can't generalize the number of nurses needed any more than you could mandate by law how many employees GM and Toyota need. Different hospitals with different layouts, different patient populations, different nurse skill/training levels, etc. will all require different staffing levels. Laws to mandate these ratios might have many unintended consequences. For example, hospitals might close rooms when they don't have enough nurses, meaning fewer patients can get care. Is it worse to have overstretched nurses or closed rooms?

I worked recently with a major city hospital that didn't have a law mandating it, but they were shutting down rooms because they had their own internal mandates for patient:nurse ratios. This was already a hospital that was having trouble meeting demand, as rooms were full, the ER was backed up, and they were having to turn away ambulances (something that should be a criminal act, if anything). They have to fix their processes and not just turn away patients.

Some hospitals are starting to get it, the idea of reducing waste rather than giving up and closing up rooms/units. Some hospitals will be like GM and Ford, making excuses and placing blame. Others will fix their problems and will reduce waste.

Here are some letters to the editor from today's WSJ on the topic.

Appointments and Wasting the Customer's Time

No, I'm not complaining about the old "4 hour window" for service appointments. I ran into a new type of waste this morning.

I had a plumber appointment, with a 10 to 12 noon window (which I am OK with). I was on the phone already and missed a call that was coming in. Turns out it was the plumber (through a national brand name) calling to confirm I would be home. So, I called back 10 minutes later and was told the tech was now busy because I didn't take their call. It's now probably going to be another hour before they get someone out here and they'll miss their window of time.

I told the phone rep that this practice of their was irritating, that I was here when I told them and they didn't tell me I'd have to answer the phone before they sent a person out. She said basically, "well it's policy because sometimes customers aren't home when they say they will be."

So, they are wasting my time and punishing me because of what other customers do to them. Nice, huh? Ironically enough, when I missed the plumber's call, I was on the phone with a different contractor, a guy I hired to put up Christmas lights for me (because I'm gone from home too much) and he had broken a front window and he's working to get a repair job lined up. The waste of "defects" leads to other waste for me, the waste of waiting, as a customer.

This reminds me of healthcare, where everything is oriented around not wasting the doctor's time. Here, the plumber is inconveniencing customers in the name of not wasting the plumber's time.

That's wrong. That's not customer focused. I should send them a copy of Lean Solutions: How Companies and Customers Can Create Value and Wealth Together. I guess next time, I'll use a local plumber so I don't have to deal with rude call centers and silly processes.

I do realize, that if this is worst thing I have to complain about today.... my life is very fortunate and cushy. A good thing to remember and to be thankful for over the holidays.

Financiers Discover that Manufacturing Lives

How Financiers Pursue Profit At Skidding Auto-Parts Maker

Here's another article in the WSJ's "Wow, we still build stuff here" series (my unofficial title). This article talks about how private equity firms (including Wilbur Ross) are putting money into auto suppliers, expecting to, get this, actually make money.

In a South Side neighborhood dotted with junked cars, crumbling houses and shuttered factories, a New York private-equity firm is betting it can make big money in a battered business: manufacturing wheel hubs and engine parts for cars and trucks using union labor.

KPS Special Situations Funds has put more than $23 million into Jernberg Industries since 2005. It aims to at least double its money in three years or so. Jernberg, which supplies parts to Detroit's Big Three auto makers, tumbled into bankruptcy court in 2005, joining a raft of other auto-parts makers there.

Thankfully, the story isn't strictly about closing plants, busting unions and slashing wages. Being an auto supplier is tough, considering you get squeezed mercilessly by non-lean automakers, at least the ones that don't believe in long-term collaboration with suppliers. But, there is hope (for suppliers and for American manufacturing):

The new owners are freezing pay and are moving from pensions to 401(k). That's not an unreasonable request, nor is asking employees to pay $100 a month for heathcare (again, welcome to the 21st century). Sure, it's a pay "cut" but it's better than having the factory shut down.

When KPS bought Jernberg's assets out of federal bankruptcy court in 2005, it got right to the point with the parts maker's roughly 700 workers. In a four-hour meeting that July with local union leaders, KPS co-founder Michael Psaros told them he needed to reduce labor costs by 20%. His plan, he said, was to eliminate jobs, freeze wages, cut overtime pay, raise health-care premiums and eliminate pensions.

It's nice to see that the private equity folks aren't just beating up on the "workers" (I put that word in quotes because I hate the term.... assembly workers also think and managers also work, but I digress).

Mr. Psaros, who is 39, took charge of turning the company around. KPS, as it typically does, swept out top management. "We will not back the guys who caused the train wreck in the first place," says Mr. Psaros.

Often, the new owners are fixing things that the old conductors of the train wreck neglected:

With the new labor deal in hand, KPS invested about $17 million in the plant, installing new machinery, repairing long-damaged equipment and fixing up workers' locker rooms and other facilities. "The only thing I'm mad about," says Mr. Robinson, "is they didn't get here five years ago, before it got so bad."

The article doesn't talk about lean, but you can't avoid trying some semblance of lean, being in the auto industry. It sounds like they're actually trying to improve the process, not just slash labor costs:

Workers say Jernberg's previous owners were loath to take big chances, citing tradition or cost. KPS managers, they say, seem willing to listen to their suggestions. For example, workers figured out that by changing the layout of plant machinery, Jernberg could save 10,000 trips a month by the forklifts.

Sounds like they might have fighting chance. A better chance than if the new owners merely moved a bad process to Mexico.

Last Day for the Challenges Contest

Today is the last day to enter the contest, see more details here.

If you'd like to enter, you have until 5 PM central time.

Happy Holidays!

We have winner (12/27)

"Tag" - 5 Things You Don't Know About Me

StartupGarden: Tag in the Blogosphere

OK, this is not Lean related, but I try to show a little personality around here once in a while. My friend, and fellow blogger, Tom Ehrenfeld, was pulled into a blogger game of "publish 5 things about yourself that most people don't know."

I'll bite. Sorry to anyone who finds this not "Value Added." Maybe this post is a goofy Christmas present of sorts, or just a waste of time.

1. I've met and shaken hands with Vanilla Ice. I was seated directly behind him on an America West flight from Phoenix to Fort Lauderdale (in first class) in late 2002. He was pretty happy to be recognized, especially since I knew his real name, "Rob Van Winkle."
   
   
2. I am a classic "band geek," having played drums in my high school marching band for 4 years and the Northwestern University Marching Band. Before the movie "American Pie" came along, I actually told stories that started with the phrase "This one time, at band camp...."
   
   
3. I've met and shaken hands with MC Hammer. Met him in a Daytona hotel lobby in 1996 or so. He was happy to talk about my hometown team, the Detroit Pistons (who were associated with "Hammer Time" back in the 1989-90 championship season, or so).
   
   
4. I sat in the front row (right behind home plate) for all 19 innings of the 1984 Detroit Tigers loss vs. the Cleveland Indians. I was 10 years old, I refused to leave the game before it was over, to the chagrin of my family. The game was one of the 5 losses in the Tigers 35-5 start. Just my luck, eh? But still, a very memorable game. I remember most of the details, including how Tigers pitcher Glenn Abbott committed two fielding errors in the 19th to basically lose the game. Can you blame him, it was 1 AM or so (I remembered that before googling it).
   
   
5. I've been seated at a Roulette table next to the rapper Flava Flav (at the Bellagio in Vegas, 2004). I was about to say hi when the guy sitting to the other side of him tried to say hello and Flav said "Don't touch me when I'm playing." I decided not to say hi.

All true. I swear it.

Maybe I can get fellow lean bloggers, Bill Waddell, Kevin Meyer, Joe Ely, Jon Miller, and John Hunter to play, by posting 5 things about themselves on their blogs (or posting comments here).

Lean and Green

Sir Richard Branson: Making the Skies Green - Enterprise Management - MSNBC.com

Thanks to blog reader Marc for sending this my way. He points out the parallel between waste elimination (a typical lean concept) and the environmental push to reduce greenhouse gas emissions. Sir Richard writes:

" and we have now established that aviation could cut fuel use 25 percent by changing simple procedures. For example, at JFK airport in New York, the average long-haul plane takes 60 minutes to get from the gate to takeoff, and burns seven tons of fuel in the process. By towing planes out to the takeoff point instead, we would save 10 percent of that fuel. By changing procedures for landing, so that planes wait on the ground for an available gate rather than circling in the air, we would save even more fuel. Together with 33 other airlines and airport operators, we are attempting to bring about these changes industrywide."

Toyota has long talked about the need for environmental stewardship and has thrown out some long-term goals of zero emissions and pollution free vehicles. Back in May of 2005, I blogged about Toyota's lean and green strategy for waste reduction.

Lean Guns, Again

12/18/2006 - Smith & Wesson Buys Thompson/Center Arms - Outdoors - Chattanoogan.com:

Yesterday, it was the maker of Ruger firearms... today it's Smith & Wesson acquiring a company and claiming that is lean manufacturing expertise will create value:

"... the acquisition 'increases opportunities for both Smith & Wesson and Thompson/Center Arms. Smith & Wesson's ability to provide capital for growth and expertise in lean manufacturing processes will provide critical support for our new product pipeline and our need for increased capacity based on strong customer demand."

Is this another Danaher story, but with firearms?

I should have called this post, "Go Ahead, Make Me Lean" since Dirty Harry used a Smith & Wesson...