Nice Toyota "Root Cause" Problem Solving Example in USA Today

The other ‘Big 3’: Japanese car giants caught in sales skid, too – USATODAY.com

It was Kaizen Week in the paper, apparently, as the word appeared twice — first in this article about Ford and now in this article about the Japanese automakers.

It’s no surprise that the Japanese are struggling in this global economic crisis period. They’re not immune to huge drops in sales:

Japan’s Big 3 aren’t as bad off as some of their Detroit brethren. No talk of bankruptcy contingencies like General Motors (GM) or Chrysler or mass layoffs. But their fiscal years drew to a sorry close Tuesday. Toyota predicts it will post a net loss of $3.8 billion, its first net loss for a year since it started reporting the result in 1963. Nissan has been on track for a $2.8 billion loss. Honda expects to be in the black, but with operating profit down 81.1%.

If this were the WSJ, they’d be going into their “see, just in time doesn’t work” mode, as they often do.

So, as with the Detroit automakers, cost cutting is the rage:

“Everything is up for grabs at this point. There is nothing we aren’t looking at,” says Irv Miller, a Toyota vice president. Already, Toyota has suspended costly dealer events.

Honda is pulling back from sponsorships, events and advertising. Honda’s criterion for cuts? “We have a saying: D.I.S.C. — Does It Sell Cars?” Executive President Dick Colliver says.

Honda could also ask, “does it add value?” from a customer perspective.

Are they laying off employees? Well, yes and no:

Trying to find ways to cut payroll costs without breaking their no-layoff pledges, Toyota and Honda have created voluntary buyout programs. Both are cutting salaried worker pay and bonuses and shortening factory workweeks. Honda, for instance, announced 13 more non-production days through July to trim production by 62,000 vehicles.

And although there are no involuntary layoffs among permanent staff, neither company has had any qualms about letting go “temporary” workers, who may work the lines full time but have not achieved full-time status.

Here’s the Kaizen example — note that “kaizen” means “continuous improvement,” not necessarily a week-long “kaizen event”:

Sales troubles and cutbacks are bringing no letup in the Japanese fixation on continuous self-improvement, kaizen, and elimination of waste, muda.

At Toyota’s Torrance headquarters, the computer room was too warm. The easy answer would be to dial down the air conditioning. But following the company’s principles, workers tracked down the root cause, a blocked duct. By following kaizen, a problem was fixed without extra cost, spokeswoman Sona Iliffe-Moon says.

Workers also found they had excess office supplies languishing on shelves — a clear call for muda. So they created an intranet trading post: Workers with too much of something — file folders, binders, Sharpies, copier toner, whatever — list it, and employees in other departments can come by to trade or plunder.

“It might seem small, but if one department uses the excess of another department, there’s some significant cost savings,” Iliffe-Moon says. “All these cost savings add up.”

The computer room example is nice example of “root cause problem solving.” Seems much more sophisticated than GM “saving money” by not replacing batteries in clocks… keep in mind, also, this example was from California, not Japan.

The “supplies exchange” seems like a good idea that any large organization could adopt, even hospitals, with all of the different departments… who’s got extra latex-free gloves??

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

3 Comments on "Nice Toyota "Root Cause" Problem Solving Example in USA Today"

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  1. Karthik Chandramouli says:

    Attention to detail and obsessing about “the little things” is critical to operational excellence, but sometimes they come at the expense of seeing the big picture.

    Why is it that the most superficial kaizen — optimizing inventory of office supplies — gets so many precious inches of print from USA Today, but no one asks the simple question — why did Toyota’s vaunted Pull System fail to perform?

    Because it is a conventional Push system that did not react to changes in demand. How long did it take before the factory producing cars and trucks that weren’t selling finally stopped production?

    Did they adjust takt time? Yes, several times. But Toyota still ended up with as much as 120 days of inventory on some models — and this was long before the economic meltdown occurred.

    The converse mentality of “JIT doesn’t work” is that “Toyota walks on water” and both are equally insidious.

    I hardly think that a “trading post” for office supplies is something that warrants mention in a national newspaper. Maybe the local newspaper in Torrance can cover these “breaking news” stories, but the magnitude of the auto industry crisis warrants a harder look at what successful companies are doing to reinvent themselves.

    So far, all I’ve seen is that you can buy a Hyundai (and now, a GM) vehicle and give it back with no penalty if you lose your job.

    What is Toyota or Honda doing to ensure a truly demand-driven Pull System that is flexible and responsive to real customers and dynamic markets?

    US automotive sales processes are still stuck in the 1950s and have not benefited substantially from any Lean improvements that add value for the customer.

    The opportunity is huge, but inertia weights heavily against reinventing the sales model from a Lean perspective. Will they go back to business as usual after the economy picks up?

  2. Mark Graban says:

    Kathik – thanks for your insights.

    I’ve wondered that same question about how a “pull” system leaves so many Toyota cars sitting in parking lots or on ships.

    I don’t think you were accusing me of being a blind Toyota-lover… but I’ll point out the post I did about Toyota’s overproduction:

    LINK

    As for the supplies exchange… granted that might seem a bit trivial even for the USA Today. But, I think it’s evidence of how lots of little improvements — driven by employee initiative and creative — can add up to huge savings for a company. I’d hope more people learned that lesson, but a great number probably went out and blindly mandated “you must do a supply exchange because Toyota does it” to their employees who are too scared to take initiative or risks because of their bad culture.

  3. Karthik Chandramouli says:

    Mark,

    I wasn’t taking any shots at you, more so at the media — which doesn’t spend much time trying to get to the heart of issues, and is now trying to fight for its survival as a result of its limited attention span.

    I agree about thousands of small kaizens having a big impact over time, but the reporter in this case ignored the white elephant in the room (overflowing ports and excess channel inventory) and instead focused on discretionary expenses at Honda and Toyota — fully ignoring what is the biggest opportunity to change the auto industry sales model.

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