Forty years ago Peter Drucker dubbed it “the industry of industries.”1 Today, automobile manufacturing is still the world’s largest manufacturing activity, with nearly 50 million new vehicles produced each year.
Most of us own one, many of us own several, and, although we may be unaware of it, these cars and trucks are an important part of our everyday lives.
Yet the auto industry is even more important to us than it appears. Twice in this century it has changed our most fundamental ideas of how we make things. And how we make things dictates not only how we work but what we buy, how we think, and the way we live.
After World War I, Henry Ford and General Motors’ Alfred Sloan moved world manufacture from centuries of craft production—led by European firms—into the age of mass production. Largely as a result, the United States soon dominated the global economy.
After World War II, Eiji Toyoda and Taiichi Ohno at the Toyota Motor Company in Japan pioneered the concept of lean production. The rise of Japan to its current economic preeminence quickly followed, as other Japanese companies and industries copied this remarkable system.
Manufacturers around the world are now trying to embrace lean production, but they’re finding the going rough. The companies that first mastered this system were all headquartered in one country—Japan. As lean production has spread to North America and Western Europe under their aegis, trade wars and growing resistance to foreign investment have followed.
Today, we hear constantly that the world faces a massive overcapacity crisis—estimated by some industry executives at more than 8 million units in excess of current world sales of about 50 million units.2 This is, in fact, a misnomer. The world has an acute shortage of competitive lean-production capacity and a vast glut of uncompetitive mass-production capacity. The crisis is caused by the former threatening the latter.
Many Western companies now understand lean production, and at least one is well along the path to introducing it. However, superimposing lean-production methods on existing mass-production systems causes great pain and dislocation. In the absence of a crisis threatening the very survival of the company, only limited progress seems to be possible.
General Motors is the most striking example. This gigantic company is still the world’s largest industrial concern and was without doubt the best at mass production, a system it helped to create. Now, in the age of lean production, it finds itself with too many managers, too many workers, and too many plants. Yet GM has not yet faced a life-or-death crisis, as the Ford Motor Company did in the early 1980s, and thus it has not been able to change.3
This book is an effort to ease the necessary transition from mass production to lean. By focusing on the global auto industry, we explain in simple, concrete terms what lean production is, where it came from, how it really works, and how it can spread to all corners of the globe for everyone’s mutual benefit.
But why should we care if world manufacturers jettison decades of mass production to embrace lean production? Because the adoption of lean production, as it inevitably spreads beyond the auto industry, will change everything in almost every industry—choices for consumers, the nature of work, the fortune of companies, and, ultimately, the fate of nations.
What is lean production? Perhaps the best way to describe this innovative production system is to contrast it with craft production and mass production, the two other methods humans have devised to make things.
The craft producer uses highly skilled workers and simple but flexible tools to make exactly what the consumer asks for—one item at a time. Custom furniture, works of decorative art, and a few exotic sports cars provide current-day examples. We all love the idea of craft production, but the problem with it is obvious: Goods produced by the craft method—as automobiles once were exclusively—cost too much for most of us to afford. So mass production was developed at the beginning of the twentieth century as an alternative.
The mass producer uses narrowly skilled professionals to design products made by unskilled or semiskilled workers tending expensive, single-purpose machines. These churn out standardized products in very high volume. Because the machinery costs so much and is so intolerant of disruption, the mass producer adds many buffers—extra supplies, extra workers, and extra space—to assure smooth production. Because changing over to a new product costs even more, the mass producer keeps standard designs in production for as long as possible. The result: The consumer gets lower costs but at the expense of variety and by means of work methods that most employees find boring and dispiriting.
The lean producer, by contrast, combines the advantages of craft and mass production, while avoiding the high cost of the former and the rigidity of the latter. Toward this end, lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in enormous variety.
Lean production (a term coined by IMVP researcher John Krafcik) is “lean” because it uses less of everything compared with mass production—half the human effort in the factory, half the manufacturing space, half the investment in tools, half the engineering hours to develop a new product in half the time. Also, it requires keeping far less than half the needed inventory on site, results in many fewer defects, and produces a greater and ever growing variety of products.
Perhaps the most striking difference between mass production and lean production lies in their ultimate objectives. Mass producers set a limited goal for themselves—“good enough,” which translates into an acceptable number of defects, a maximum acceptable level of inventories, a narrow range of standardized products. To do better, they argue, would cost too much or exceed inherent human capabilities.
Lean producers, on the other hand, set their sights explicitly on perfection: continually declining costs, zero defects, zero inventories, and endless product variety. Of course, no lean producer has ever reached this promised land—and perhaps none ever will, but the endless quest for perfection continues to generate surprising twists.
For one, lean production changes how people work but not always in the way we think. Most people—including so-called blue-collar workers—will find their jobs more challenging as lean production spreads. And they will certainly become more productive. At the same time, they may find their work more stressful, because a key objective of lean production is to push responsibility far down the organizational ladder. Responsibility means freedom to control one’s work—a big plus—but it also raises anxiety about making costly mistakes.
Similarly, lean production changes the meaning of professional careers. In the West, we are accustomed to think of careers as a continual progression to ever higher levels of technical know-how and proficiency in an ever narrower area of specialization as well as responsibility for ever larger numbers of subordinates—director of accounting, chief production engineer, and so on.
Lean production calls for learning far more professional skills and applying these creatively in a team setting rather than in a rigid hierarchy. The paradox is that the better you are at teamwork, the less you may know about a specific, narrow specialty that you can take with you to another company or to start a new business. What’s more, many employees may find the lack of a steep career ladder with ever more elaborate titles and job descriptions both disappointing and disconcerting.
If employees are to prosper in this environment, companies must offer them a continuing variety of challenges. That way, they will feel they are honing their skills and are valued for the many kinds of expertise they have attained. Without these continual challenges, workers may feel they have reached a dead end at an early point in their career. The result: They hold back their know-how and commitment, and the main advantage of lean production disappears.
This sketch of lean production and its effects is highly simplified, of course. Where did this new idea come from and precisely how does it work in practice? Why will it result in such profound political and economic changes throughout the world? In this book we provide the answers.
In “The Origins of Lean Production,” we trace the evolution of lean production. We then look in “The Elements of Lean Production” at how lean production works in factory operations, product development, supply-system coordination, customer relations, and as a total lean enterprise.
Finally, in “Diffusing Lean Production,” we examine how lean production is spreading across the world and to other industries and, in the process, is revolutionizing how we live and work. As we’ll also see, however, lean production isn’t spreading everywhere at a uniform rate. So we’ll look at the barriers that are preventing companies and countries from becoming lean. And we’ll suggest creative ways leanness can be achieved.