part0015

When Joe Day, the president of Freudenberg-NOK General Partnership (FNGP) of Plymouth, Michigan, began in 1992 to introduce lean thinking in the North American alliance between the world’s largest seal and gasket makers, 1 he noticed something very curious. No matter how many times his employees improved a given activity to make it leaner, they could always find more ways to remove muda by eliminating effort, time, space, and errors. What’s more, the activity became progressively more flexible and responsive to customer pull.

For example, when Freudenberg-NOK set out to reorganize the manufacture of vibration dampers in its Ligonier, Indiana, facility, an initial kaizen event achieved a 56 percent increase in labor productivity and a 13 percent reduction in the amount of factory space needed. However, in revisiting this activity in five additional three-day kaizen events over the next three years, it was gradually possible to boost productivity by 991 percent while reducing the amount of space needed by 48 percent, as shown in Table 5.1 . What’s more, additional improvements are possible and planned for the future.

This seems to defy all logic. After all, there are diminishing returns to any type of effort, aren’t there? Kaizen activities are not free, and perfection — meaning the complete elimination of muda —is surely impossible. So, shouldn’t managers eventually stop efforts to improve the process and simply manage it in a steady state, avoiding variances from “normal” performance?

As we have reviewed data similar to those in Table 5.1 with senior managers in many firms around the world, we have found two prevalent reactions. One is that steady-state management—management of variances—really is the cost-effective approach once an activity has been “fixed.” The other was summarized by a senior manager of an English firm, which had done nothing to fix its product development, scheduling, and production systems but was planning to do something. “Why didn’t FNGP get the job done the first time! Why didn’t they conduct a thorough planning exercise to identify the perfect process at the outset so they wouldn’t waste three years before finally getting it ‘right’?”

Both reactions show how traditional management fails to grasp the concept of perfection through endless steps, which is a fundamental principle of lean thinking. Because FNGP is one of the most relentless pursuers of perfection we have found, their approach makes an excellent illustration of what perfection means in practice and how to pursue it.

There is an alternative, radical path to perfection, a total value stream kaikaku involving all the firms from start to finish. Glassmaking for the automotive industry provides an interesting example. Currently in North America, Japan, and Europe, manufacture of the fixed glass for cars and trucks (excluding the glass mounted in doors which moves up and down) involves very similar steps no matter which companies perform them. (These are shown in Figure 5.1 .)

The first step is the glass float, a vast device in which silica is melted and floated on a reservoir of liquid tin. Sheets of glass are pulled off the float, cut into rectangular shapes, and carefully cooled. Because of the size of the typical float and the problem of getting batch-to- batch consistency, large batches are produced and stored for considerable periods before shipment to the glass fabricator.

The glass fabricator cuts the glass to net shapes (discarding about 25 percent in the process). The net shapes are then heated to just below the melting point and positioned in dies of the desired shape, where they are “drooped” (without any pressure) or “pressed” (using an upper die to stamp them into shape) into the final geometry needed to precisely fit the frame of the car. Again, the complexity of changing the dies and the problems of achieving batch-to-batch consistency have caused glass fabricators to manufacture enormous batches of a given part number and to store them before shipment to the glass encapsulator.

The encapsulator takes the glass from its own incoming storage and inserts each piece in a molding machine which injects some form of rubber or plastic (most commonly polyvinyl chloride) into a channel around the perimeter of the glass to create a waterproof seal and an expansion joint for attaching the glass to the steel auto body.

After some additional storage at the encapsulator, the glass is shipped to the auto assembly plant, where it is installed in the car.

Clearly, there would be substantial gains from incrementally improving each step in this process. For example, pull systems like those described in the last chapter could be introduced for each replenishment loop and tool changes could be speeded up, particularly by the glass presser, to make smaller batches. However, there would still be enormous amounts of muda due to the distant location of the four plants involved and the large amounts of time-consuming, expensive transport. What’s more, quality problems causing high levels of scrap would still be difficult to address because of the long time lags between the pressing, encapsulation, and installation steps, where problems with the previous step are most likely to be discovered.

A radical leap toward perfection in this process would involve right-sizing the glass float for the amount of product needed by a specific customer, dramatically reducing batch sizes in the pressing step and conducting it at the end of the float to save the energy required to reheat the glass, then conducting the encapsulation step in continuous flow at the next workstation from the pressing step, and finally locating this whole activity across the road from the auto assembly plant so the pull of the plant could be answered instantly (as shown in Figure 5.2 ).

No one has pursued this approach because, like most truly radical rethinks of a value stream, a number of firms (four in this case) would need to cooperate in changing their methods by forming a lean enterprise for this product (which might best be defined as all of the fixed glass needed for a specific auto assembly plant). However, if a lean enterprise were formed to rethink the whole value stream, additional radical reconfigurations would no doubt follow as the enterprise asked: What is the real value here for the customer and how do we create it? At a minimum, it would be necessary to rethink the proper location for product design (the auto company, the glass presser, the glass encapsulator, or some alliance of all three?) and the flow of service and crash parts .

In fact, every enterprise needs both approaches to pursue perfection. Every step in a value stream can be improved in isolation to good effect. And there is rarely any ground for concern about investing to improve an activity which will soon be replaced altogether. To repeat the lesson from Chapter 3 : If you are spending significant amounts of capital to improve specific activities, you are usually pursuing perfection the wrong way. Going further, most value streams can be radically improved as a whole if the right mechanisms for analysis can be put in place.

However, to effectively pursue both radical and incremental improvement, two final lean techniques are needed. First, in order to form a view in their minds of what perfection would be, value stream managers need to apply the four lean principles of value specification, value stream identification, flow, and pull. (Remember, you want to compete against perfection, not just your current competitors, so you need to be able to gauge the gap from current reality to perfection.) Then, value stream managers need to decide which forms of muda to attack first, by means of policy deployment (often called hoshin kanri in Japan, where these ideas originated).

At every step we’ve noted the need for managers to learn to see: to see the value stream, to see the flow of value, to see value being pulled by the customer. The final form of seeing is to bring perfection into clear view so the objective of improvement is visible and real to the whole enterprise.

We’ve just presented an example for glassmaking: a radical rethink of the whole value stream so that all value-creating steps are conducted immediately adjacent to the customer and exactly when needed. Toyota certainly had a picture of perfection—derived from its mastery of lean principles—when it set out in 1982 to rethink its Japanese service parts business, and then in 1989 when it began to apply the same concepts in North America. And Tesco needs a vision of perfection for the value and value stream of its beverage lines, as described in Chapter 2 .

Paradoxically, no picture of perfection can be perfect. If the value stream for automotive glass could be reconfigured as we suggest, it would then be time (immediately!) to imagine a new perfection which goes even further. Perfection is like infinity. Trying to envision it (and to get there) is actually impossible, but the effort to do so provides inspiration and direction essential to making progress along the path. We’ll return to this theme in Part III .

One of the most important things to envision is the type of product designs and operating technologies needed to take the next steps along the path. As we have seen repeatedly in the preceding chapters, one of the greatest impediments to rapid progress is the inappropriateness of most existing processing technology—and many product designs as well—to the needs of the lean enterprise. A clear sense of direction—the knowledge that products must be manufactured more flexibly in smaller volumes in continuous flow—provides critical guidance to technologists in the functions developing generic designs and tools.

In addition to forming a picture of perfection with the appropriate technologies, managers need to set a stringent timetable for steps along the path. As we will see in the examples in Part II , the greatest difference between those organizations that have done a lot and those that have accomplished little or nothing is that the high achievers set specific timetables to accomplish seemingly impossible tasks and then routinely met or exceeded them. The low achievers, by contrast, asked what would be reasonable for their current organization and disconnected value streams to accomplish, and generally defeated themselves before they ever set out.

Firms which never start down the path because of a lack of vision obviously fail. Sadly, we’ve watched other firms set off full of vision, energy, and high hopes, but make very little progress because they went tearing off after perfection in a thousand directions and never had the resources to get very far along any path. What’s needed instead is to form a vision, select the two or three most important steps to get you there, and defer the other steps until later. It’s not that these will never be tackled, only that the general principle of doing one thing at a time and working on it continuously until completion applies to improvement activities with the same force as it applies to design, order-taking, and production activities.

What’s critically needed is the last lean technique of policy deployment. The idea is for top management to agree on a few simple goals for transitioning from mass to lean, to select a few projects to achieve these goals, to designate the people and resources for getting the projects done, and, finally, to establish numerical improvement targets to be achieved by a given point in time.

For example, a firm might adopt the goal of converting the entire organization to continuous flow with all internal order management by means of a pull system. The projects required to do this might consist of: (1) reorganizing by product families, with product teams taking on many of the jobs of the traditional functions, (2) creating a “lean function” to assemble the expertise to assist the product teams in the conversion, and (3) commencing a systematic set of improvement activities to convert batches and rework into continuous flow. The targets would set numerical improvement goals and time frames for the projects—for example: Convert to dedicated product teams within six months, conduct improvement activities on six major activities each month and at least once on every activity within the first year, reduce the total amount of inventories on hand by 25 percent in the first year, reduce the number of defects escaping to customers by 50 percent in the first year, and reduce the amount of effort required to produce a given amount of each product by 20 percent in the first year.

Most organizations trying to do this find it easiest to construct an annual policy deployment matrix, as shown in Figure 5.3 , which summarizes the goals, the projects for that year, and the targets for these projects so everyone in the entire organization can see them. In doing this, it’s essential to openly discuss the amount of resources available in relation to the targets so that everyone agrees as the process begins that it is actually doable.

It’s also important to note that the process is top-down in the first step of setting goals but top-down/bottom-up in subsequent steps. For example, once the specific projects are agreed on, it’s essential to consult with the project teams about the amount of resources and time available to ensure that the projects are realistic. The teams are collectively responsible for getting the job done and must have both the authority and resources from the outset.

As the concept of making a dramatic transition begins to take hold, we often observe that everyone in an organization wants to get involved and that the number of projects tends to multiply. This is exhilarating but is actually the danger signal that too much is being taken on. The most successful firms we’ve found have learned how to “deselect” projects, 2 despite the enthusiasm of parts of the organization, in order to bring the number of projects into line with the available resources. This is the critical final step before launching the lean crusade.

We’ve now reviewed the basic lean principles, the five powerful ideas in the lean tool kit needed to convert firms and value streams from a meandering morass of muda to fast-flowing value, defined and then pulled by the customer. However, there’s a final and very serious paradox inherent in introducing thinking in real organizations to pursue perfection.

The techniques themselves and the philosophy are inherently egalitarian and open. Transparency in everything is a key principle. Policy deployment operates as an open process to align people and resources with improvement tasks. And massive and continuing amounts of problem solving are conducted by teams of employees who historically have not even talked to each other, much less treated each other as equals.

Yet the catalytic force moving firms and value streams out of the world of inward-looking batch-and-queue is generally applied by an outsider who breaks all the traditional rules, often in a moment of profound crisis. We call this individual the change agent.

In fact, there is no way to reconcile this paradox, no way to square the circle. The change agent is typically something of a tyrant—what one of our most thoughtful research subjects calls a “Conan the Barbarian”—hell-bent on imposing a profoundly egalitarian system in profoundly inegalitarian organizations.

Yet there are tyrants and there are tyrants. Those who succeed in creating lean systems over the long term are clearly understood by the participants in the firm and along the value stream to be promoting a set of ideas which have enormous potential for benefiting everyone. Those who fail (like many of the failed leaders of reengineering campaigns) are either identified as narrow technocrats with no concern for the very real human issues inherent in the transition, or they are dismissed by the organization as self-promoters who are simply seeking to advance their own position by riding the wave of the next “program.” Both quickly fall victim to organizational lassitude, if not to active sabotage.

Because lean systems can only flourish if everyone along the value stream believes the new system being created treats everyone fairly and goes the extra mile to deal with human dilemmas, only beneficent despots can succeed. We hope that many readers of this book will take up the mantle of the change agent. And we are equally hopeful that self-promoters and cold-blooded technocrats will look elsewhere.