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The Toyota Production System (TPS) -The Pillar...

The Toyota Production System (TPS) -The Pillars of TMHE (Photo credit: Toyota Material Handling EU)

More than 50 years ago, in Nagoya, Japan, Taiichi Ohno and his team at Toyota began quietly perfecting what has come to be called the Toyota Production System (TPS). It has also come to be called Lean production. While it is widely known as a collection of tools including kaizen, kanban, andon and more, the real article—the Toyota Way—is not a set of “tools” at all. It is a deeply held philosophy for doing business that leads to a culture that can—and frequently does—extend beyond the four walls of the firm itself.


The genius of TPS—the system that has made a post-WWII, nearly destitute company at worldwide leader in the automotive industry—is that Toyota recognized two key things:

  1. You can’t build a lasting house without a carefully laid foundation; and
  2. A house is for peoplepeople are at the center and heart of the house.

Building on a sound foundation

Lean has certainly been the most far-reaching management concept to be brought forward in the last 50 years. And, at the foundation of the TPS “house” a long-term philosophy that guides each action.


It is this underlying philosophy and long-term view provides a sense of purpose that guides and governs short-term decision-making. This keeps the whole organization—the whole system—working and growing toward a common purpose.


The company focused first on creating value for its customers will tend to automatically generate value for the society and the economy in general. The value generated for the customer becomes the ultimate measure for every action and function carried out within the company.


Trusting the people in the house

Operating within this foundational principle, the people in the Toyota house are then encouraged to be responsible and self-reliant, trusting in their own abilities and insights. This enables workers to contribute to their highest potential—to bring to their work all that they have to offer.


This stands in stark contrast to the philosophy that we too frequently hear expressed (or, at least, tacitly acknowledged) by owners, executives and managers in companies to whom we are introduced. Probably the worst case I ever came face-to-face with was when consulting for a young and successful entrepreneur some years ago in El Paso, Texas.


On more than one occasion, this young CEO said to me, “Everyone who works for me is an idiot.”


After hearing this repeated several times over the course of a few weeks in our meetings together, I finally said, “Well, Danny, I guess that makes you the Chief Idiot, since you are the one who hires these people, pays their wages, and keeps them around.”


He looked up at me somewhat dumbfounded—but he got the point: either you trust the people in “the house you’re building,” or you do not. If you genuinely do not trust them, then you ought to get rid of them and get people you and can and do trust.


Giving meaning to the work being done

My experience has been that almost all employees want to do a good job for their employers. There are very, very few truly “bad apples” in the crowd. The vast majority recognize that their continued employment at their present job depends upon the company continuing to make money.


However, managers and executives frequently send mixed signals in their communications to their employees.


Not long ago, an executive management team asked me: “How can we keep employees from taking shortcuts that cause the data in our ERP system from being accurate?”


This was one of those cases where valueless complexity was gumming up the works. All too frequently the workers where forced to make a no-win decision: Do I serve the customer’s needs, or do I serve the demands of the ERP system? They were frequently choosing the former over the latter. (An excellent choice, in my opinion.)


Here’s what I told the CEO and the executive management team:

“I firmly believe that your employees want to do the right thing. But, right now, the complexity of your systems is forcing them to make a choice. On the one hand, you have made it clear to them that a first priority is to ‘serve the customer’—get the orders out the door. On the other hand, you have made the workers equally aware that you are very displeased when the ERP system’s inventory gets ‘screwed up’ because the data entry isn’t complete or on-time.


“Your employees are making, it seems, the very decision that—in your heart of hearts—I think you really want them to make. They are choosing to serve your customers’ interests and taking action to get the products produced and shipped, even if it means working around the ERP system to get it done.


“Remove some of the valueless complexity with which you have burdened them and you will give these workers a real sense of meaning in their efforts to serve your customers. Plus, they won’t have to struggle with the ongoing moral dilemma of which of your mandates they should obey day after day.”

If you ask them…


Generally, the front-line workers are very much aware of valueless complexity. They may even have tried to speak up when such complexity was foisted upon them.


But the edict had come from on-high: “This is how the work must be done from now on.”


Toyota has built more than 50 years of success and become a world-class company because they believe that “no one knows more about the machine than the man running the machine.” They have learned to listen to “the people in the house,” and learned, thereby, to constantly cut away at valueless complexity in the process of delivering a winning customer experience.


We have learned that unlocking “tribal knowledge—learning once again to listen to all the people in the house you and your management team are building—is the fastest way to begin a successful process of ongoing improvement (POOGI).


The same thing applies, by the way, to listening to all of the participants in your supply chain. Listening to your supply chain partners—up and down the supply chain—can bring, not only dramatic improvements in performance, but also dramatic reductions in risk.


Think about it. What is your company’s philosophical foundation, and how are you building a house for people on that foundation?



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Monuments to waste

Posted by RDCushing Feb 24, 2014
English: Employee at Display at the Toyota Mus...

English: Employee at Display at the Toyota Museum in Nagakute-cho , Aichi-gun, Aichi Pref. Japan demonstrates the development of Toyota brand. By Bertel Schmitt (Photo credit: Wikipedia)

Deryl Sturdevant, writing recently for McKinsey relayed the following story:

“…[T]he manufacturer… had recently put in an andon system, to alert management about problems on the line. Featuring plasma-screen monitors at every workstation, the system had required a considerable development and programming effort to implement. To my mind, it represented a knee-buckling amount of investment compared with systems I’d seen at Toyota, where a new tool might rely on sticky notes and signature cards until its merits were proved.


“An executive was explaining to me how successful the implementation had been and how well the company was doing with lean. I had been visiting the plant for a week or so. My back was to the monitor out on the shop floor, and the executive was looking toward it, facing me, when I surprised him by quoting a series of figures from the display.


“When he asked how I had done so, I pointed out that the tool was broken; the numbers weren’t updating and hadn’t since Monday. This was no secret to the system’s operators and to the frontline workers. The executive probably hadn’t been visiting with them enough to know what was happening and why.


“Quite possibly, the new system receiving such praise was itself a monument to waste.”

Sturdevant, Deryl. "Insights & Publications." (Still) Learning from Toyota., Feb. 2014. Web. 20 Feb. 2014.

Making “simple” effective


We are big believers in inherent simplicity. That is to say, we believe that the complex the problem appears to be, the simpler the real solution to the problem is likely to be.


Even though we are an information technology company, we also help our clients realize effective solutions that do not involve technology at all.


In fact, at times, we actually advise against spending on more technology when simpler solutions—not involving computer technologies—may be just as effective for our clients.


Two examples come to mind. Both of these examples, however, end up to be negative.


First, several years ago, we were involved with an extremely innovative firm that produced products that had little or no competition. That is not to say that the products were easy to sell—the sales cycle could be long and complex, and may involve many different parties.


Despite our best advice, this firm decide to spend more than $150,000 building integrations between their CRM system and their ERP system simply so their salespeople would not have to learn to use “two systems.” This $150,000 expenditure brought the firm no competitive advantage and in no way contributed to increased Throughput or profitability.


In the end, it was complexity that was costly to build and costly to maintain. The far, far simpler answer would have been to simply use the CRM system for managing the sales process and train the users to employ the ERP system for order management.


When all was said and done, many of the executives and managers agreed that our advice at the outset of the project was absolutely correct. The simpler solution to the problem would have been far better.


To some degree—through software maintenance costs—this firm is still paying the price today for that decision of nearly a decade ago.


The second example that comes immediately to mind is a firm that had originally set out to upgrade its ERP system and eliminate (along the way) many of the modifications and extensions to their ERP software that had contributed to their nicknaming the system after Frankenstein for its monstrous hideousness.


For some reason—again driven by the sales department—they felt that there were certain features in their custom order entry system that they just could not live without. As a result, they decided that they would have their in-house development staff build a replacement application that would have all the features they felt they needed.


Our advice at the time was, “We think you should try to adapt, as much as possible, to the standard ERP order entry and maintenance process and then, where absolutely necessary, modify the ERP system to adapt to your specific needs.


“No, no,” came the answer. “We can’t do that” for any number of reasons—which they listed to their own satisfaction.


Later, they came to the conclusion that they didn’t have the resources to really complete this project, so they asked us to undertake the development of their customer order management system. We reluctantly agreed.


Then, some many months later—and having spent more than $80,000 on the project—they decided to call it all off.


Interestingly, they decided that they could, in fact, live with only a slightly modified version of the ERP’s sales order entry system. This firm is doing just that today.


Use sticky-notes where sticky-notes will do

If the “improvement” you and your management team are about to undertake can be accomplished effectively with sticky-notes or something similarly low-tech, then—for goodness sake—do it that way! At the very least, do it the simple way until you can clearly be shown that adding more complexity will provide a hard ROI (return on investment) by either increasing Throughput, reduce inventories or investments that would otherwise be required elsewhere, or hold the line on operating expenses while supporting significant growth.


Everything else is likely to turn out to be nothing more than another “monument to waste.” But that won’t keep some senior executives from touting them as “successes.”



Let us hear your thoughts on this important topic by leaving your comments below. You may also contact us directly, if you prefer.

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English: Mass production of Toyoda automated l...

English: Mass production of Toyoda automated loom. Display the Toyota Museum in Nagakute-cho, Aichi-gun, Aichi Pref. Japan. By Bertel Schmitt (Photo credit: Wikipedia)

McKinsey recently published an article by Deryl Sturdevant, former president and CEO of Canadian Autoparts Toyota (CAPTIN) from 2006 to 2011. The article bore exactly the same title as this article—because, frankly, I couldn’t think of a better title to describe what needs to be said.


So very much of what Sturdevant brings to the for in his article bears repeating and even reinforcement.


Only the utterly uninformed would disagree with fact that the introduction of the Toyota Production System (TPS) has dramatically changed the face of operations and given fresh insights to executives who are open to learning such things.


My own experience is that a great many managers and executives expend no small amount of time, energy and money trying to make improvements and, in the end, frequently reap very little for their investment.

The Goal is Continuous Improvement

Sturdevant follows the Toyoda Way in stating that “the goal is continuous improvement.”


As valuable as this statement is, I think there remains some lack of clarity in this statement of “the goal.”


I have come to believe that many managers and executives tire of laboring on “continuous improvement” when what may clearly be defined as “improvement” does not lead to any significant contribution where it really matters—on the bottom-line.


As a result, we have come to agree wholeheartedly with Eliyahu Goldratt in more narrowly defining “the goal.”


If continuous improvement is to lead to real and measurable improvement on the company’s bottom-line, then “the goal” must be redefined as this: The goal is to make more money tomorrow than you are making today.

Wasteful “Improvements”

Is there such a thing as improvements that are “wasted” on an enterprise?


In our view, the answer is a resounding, “Yes!”


Some 30 years ago, I recall reading in a business publication how one of the “Big Three” automakers in the U.S. had invested some several millions of dollars “improving” its accounts payable department. This led to significant “improvements” in the speed and accuracy with which the firm was able to process vouchers and get payments into the hands of their vendors.


Meanwhile, this same automaker continued to report losses in the hundreds of millions—perhaps, billions (but I don’t recall the details now)—on it’s bottom-line.


In light of its continuing and mounting losses (ultimately, even the federal government was invited to intervene), is it fair to count the expenditure of these millions on accounts payable as “improvement”?


It seems clear to us that far more significant improvements leading to actual “profits” were what the company really needed before counting minute gains in “efficiency” as real “improvement.”


In this case, we assert, that this “improvement” effort was a very real “waste” of time, energy and money.

What Keeps Companies from Making Real Improvements?

The Toyota Way has produced real bottom-line improvements for the company worldwide on the basis of two essential “pillars”—(1) kaizen, the philosophy of continuous improvement) and (2) respect and empowerment of people, especially those actually doing the work on the line.


In his article, Sturdevant asserts—and we agree—that one of the largest barriers to “continuous improvement” is complacency.


If a company has, at some time in the past, undertaken an effort that led to significant “improvement,” managers and executives frequently spend months—or, sometimes, years—congratulating themselves on their success. Whenever you meet them, they point backwards to what they have done in the past for improvement.


The problem is that these managers and executives become self-satisfied—complacent—at the results achieved in the past. They stop looking forward to what improvement could look like if “continuous improvement” were really a part of their firm’s culture.


This would never occur in an business culture truly focused on “continuous improvement.” Sturdevant tells us:

“…[I]n Toyota’s culture… as soon as you start making a lot of progress toward a goal, the goal is changed and the carrot is moved. It’s a deep part of the culture to create new challenges constantly and not to rest when you meet old ones. Only through honest self-reflection can senior executives learn to focus on the things that need improvement, learn how to close the gaps, and get to where they need to be as leaders.”

Too Many Conversations Like This

Reading Sturdevant’s cogent article reminded me of a conversation I had recently with CEO of firm that has national reach, is a leader in its industry, and has demonstrated remarkable leadership in several ways.


Some months ago, we had worked with this firm, helping them get a start on a POOGI—a Process of Ongoing Improvement). The CEO contacted me to thank us for helping them make significant improvements.

“I feel we gained a lot from having you on site and were able to streamline work flow to our benefit at Christmas and since then.”

To be fair, this CEO recognized that the firm still has “more improvement opportunities” ahead of them. Nevertheless, I got the distinct impression of the presence of at least a temporary complacency—a self-satisfied looking backward. What was absent in the brief conversation was any forward-looking drive for ongoing improvement.


Once again, the good had become the enemy of the best: the “good” being some improvement; whereas, the “best” being a process of continuous improvement.



Let us hear your comments on this topic by leaving them below, or you may contact us directly.


We look forward to hearing from you soon.


See Sturdevant, Deryl. "Insights & Publications." (Still) Learning from Toyota., Feb. 2014. Web. 20 Feb. 2014.

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