The title of this post originated with Mr. Hajime Ohba, former President of TSSC (Toyota Supplier Support Center), in his introduction to Toyota’s “True North” concept. I covered this in my discussion of what’s a “Team” to do to be successful in their Lean/TPS journey. To see why I chose this title – keep reading.
In my last post, I first reviewed the history and importance of “lead time reduction” in the evolution of the basic framework and philosophy of the Toyota Production System (TPS). I also pointed out that Taiichi Ohno seemed to purposely avoid the mention of lead time in his writings and public statements during the period when TPS was starting to get attention in the West. And for whatever reason, today’s Lean literature seems to have lost, or forgotten, the importance of reduced lead time in achieving its stated goals of higher quality, lower cost and on-time delivery.
But in this post, I would like to concentrate on the Paul Ericksen case study that vividly illustrated the direct correlation between lead time reduction and higher quality, lower costs and improved deliveries. Remember that Paul was solely trying to reduce lead time from his suppliers to be able to adequately supply a new customer with strict delivery requirements. Lead times from suppliers were reduced by 78%. But, unexpectedly, supplier quality defects were reduced by 84%, late deliveries were reduced by 73% and cost savings at the suppliers ranged from 11% to 20%. “Why”?
I would now like to really focus and concentrate on the “cause and effect” behind this “why”. Lead time reduction does lead to higher quality and lower costs (its impact on delivery should be obvious to everyone, I hope). I have touched on this topic on many occasions in past blog posts. But I’m not sure I have pulled all the pieces of this puzzle together in an adequate manner to make this phenomenon obvious to everyone. I hope to do that here. (I will include links to past posts where applicable).
Remember Ohno’s equation for present capacity?
Present capacity = work + waste
According to Ohno, only work that is needed is “real work” and the rest is “waste”. (I like that definition of “value-added”).
And I said:
“So if we take all the resources allocated to a given system (present capacity), these resources will generate a combination of work (needed, value-added) and waste (non-value-added). And if we remove some of the waste from the system, we will be able to 1) generate more work with the given capacity, or 2) reduce the capacity while achieving the same amount of work. We will reduce costs.”
Pretty straightforward. And remember that quality defects are also a waste (they are definitely not needed). So if we remove that type of waste, by finding it at its source, we will increase quality. (And free up even more capacity).
But don’t we all know that anyway? After all, Lean practitioners always talk about eliminating waste….and talk and talk and talk…. But where does this “lead time” thing fit in?
Well, if we will remember, all of Ohno’s 7 wastes are also a waste of time. Thus, if we remove waste from the system, we will reduce the time that the system requires to do the needed work. We will waste less time. Lead times will be reduced. You have improved the process flows within the system. Remember that thing embedded within the JIT pillar of the basic TPS House? Remember that thing called “continuous flow”? If we remove the waste, we improve the “continuous” in continuous flow.
But this brings up a very important consideration when stressing the importance of lead time reduction. You can also reduce lead time by running the system faster. Why not just turn up the “speed dial” and get our lead time reduction that way? Well, all that means is that we are wasting time at a faster rate. We are consuming unneeded costs at a faster rate. That doesn’t sound good. Sounds a little like “overproduction” and muri to me. Remember, we want to shorten the river, not speed it up. The customer controls the “speed dial”, not us.
So if we can reduce the lead time by removing the unneeded wastes, we will improve quality and cost. And we can approach this quality and cost improvement goal from either end. We can concentrate on identifying specific waste and remove it. Or we can concentrate on identifying wasted time and remove that. Today’s Lean tends to emphasize the first method and ignore that second method. Paul Ericksen proved that the second method works just as well, or maybe better.
Or we can do both…… Maybe…… Read on.
There is one other little thing that we should consider. And that little thing is the difference between “efficiency” and “effectiveness”. According to Russell Ackoff:
“Efficiency is a matter of doing things right; effectiveness is a matter of doing the right things.”
And Peter Drucker elaborated on Ackoff’s thinking:
“One might better be doing the right things wrong than doing the wrong things right.”
One of the best examples of the contrast between “doing things right” and “doing the right things” that I have seen is the different way that western businesses and Toyota approached the problem of increasing complexity in production planning and control (this, of course, goes back a few years, or to be more accurate, decades).
The basic problem was that planning and control of various separate but connected production centers was becoming difficult due to the increase in the number and complexity of the products being produced. The information flow as to what was produced and what was not produced at any given production center for any given time frame was getting very hard to manage. Accurate production plans for each work center were becoming near impossible to create.
Western businesses decided to tackle this problem by computerizing the information flow between the various work stations and the production control department. MRP was born! Traveling pieces of paper were almost eliminated. Everyone was happy. Doing things right became much easier. (Except, of course, for those Excel spreadsheets that were necessary to enable MRP work-arounds. But that was also on a computer – Right? – so no problem!).
But Toyota had a lingering distaste for computers that had developed over the years. Well before the advent of MRP, they had decided to go in another direction. Instead of continuing to set production plans for each work center, they decided to only schedule the last process group in the production flow. That work center would then pull product from the upstream process groups using traveling Kanban cards. Production control was now out of the loop for those upstream work centers and they were happy. But not everyone was immediately happy. Doing the right thing was difficult. They did the right thing wrong for quite a while, but kept getting better at it.
But we now know how this all turned out. Eventually those who were “doing things right” paid a dear price to that Toyota company that was “doing the right things”.
(Note: Based on my experience, once the production floor has been transformed to linked manufacturing flow cells, the MRP shop floor planning module can usually be deactivated).
So why am I bringing this up in a discussion about lead time and waste?
Well, If you have read my previous post, you will recall that in that 1977 Toyota paper, everyone was focused on lead time reduction. That was the key “policy variable” that they were all focused on. Their Kanban system was subordinate to that. They saw Kanban as a tool to clearly demonstrate where their production processes caused interruptions in flow. They could clearly see where time was being wasted. And they relied on their employees, who could see the waste in real time, to fix it. Their focus on lead time allowed them to focus on the waste that threatened lead time. It worked.
The western companies that switched to MRP also focused on waste – the waste in a process that should have been eliminated rather than optimized. They focused on the wrong waste. Again, they concentrated on doing things right. Toyota concentrated on doing the right things. The West was efficient, but Toyota was effective.
What We Should Do! — Not What We Can Do!
In my experience over several decades and hundreds of Teams, I have found that the most powerful metric that I can choose to guide successful Lean/TPS transformations is lead time reduction. A focus on significant lead time reduction (>50%) seems to help break the mind out of the day-to-day paradigms that inhibit innovative thinking. Most people are not used to consciously dealing with time and flow and doing so seems to free the mind to go into unexpected places. Time is the lost factor of production. We need to find it again and use it to our benefit.
“Cleaning up and organizing a shop floor does not produce a lean flow. Besides, why extend a lot of up-front effort to organize material and information that may not even exist once overproduction is routed out? …The point of these examples is that concentrating on lean techniques first is doing it backwards and won’t give the results we want. Flow comes first…” [emphasis in original]
“Flow comes first”. Do the right thing. Do what we should do. And how do we measure the effectiveness of flow? Lead time of course!
Which brings me one more time to this:
Thus the underlying principle behind TPS/Lean is the systemic creation of the shortest possible lead time for the continuous flow of materials and information in order to generate the highest quality and lowest cost.
Do the right thing!
“Lean is concerned with making the most of time by enriching the time we have and wasting less of it.”
[In my next post, I will explore how we can determine if what we are doing is what we should be doing. How do we measure the effect of doing “the right things”?]