Kaizen
When I first started transitioning, I was looking around and debating new names – one that I very nearly settled on was ‘Kaizen’ – a gender neutral Sino-Japanese name meaning ‘good change’. Got to admit, still very tempted by it.
It’s also a concept that refers to activities that are continuously improving functions across a business. It’s a holistic approach that takes into account all employees at all levels, and was made famous in business circles as one of the 12 pillars of the Toyota production system. In fact, to quote them directly;
Kaizen (English: Continuous improvement): A philosophy that helps to ensure maximum quality, the elimination of waste, and improvements in efficiency, both in terms of equipment and work procedures. Kaizen improvements in standardised work help maximise productivity at every worksite. Standardised work involves following procedures consistently and therefore employees can identify the problems promptly.
Within the Toyota Production System, Kaizen humanises the workplace, empowering individual members to identify areas for improvement and suggest practical solutions. The focused activity surrounding this solution is often referred to as a kaizen blitz, while it is the responsibility of each member to adopt the improved standardised procedure and eliminate waste from within the local environment.
https://mag.toyota.co.uk/kaizen-toyota-production-system/
I’m writing about this today because we are seeing some terrible delays in logistics, the car manufacturing industry has been hit hardest by these supply line issues and… Somewhat ironically have Toyota to blame.
Eighty years ago, as japan emerged from world war two, Japan was starting to develop a trade relationship with the US. American car manufacturers at the time had incredible economies of scale and their process was batch manufacturing, popularised by Henry Ford – At any given time, an assembly line would exclusively produce one model of one type of one vehicle.
Once that batch had been done, the assembly line would be recalibrated and they would switch to another model, and so on. In this manner, they could use their production lines at super high speeds and efficiencies.
Toyota on the other hand was small and slow. Domestic cars in Japan had limited demand and required a lot of different vehicle types, so they didn’t have the scale to make batch manufacturing work with the same efficiency as in the US. This meant higher prices for consumers than American cars, but there just really wasn’t any other option… So they created one.
The Toyota Production System
It started with two core principles; first off Autonomation, or the efficient use of automation. Complete automation would mean machines building the cars, diagnose problems and fix those problems, but what about problems with the machines? It would be very costly to have a machine designed to detect and fix problems with itself, so autonomation in this sense is about automating things *which machines can do better than humans*, so machine assembly and fault diagnosis, while critical problem solving is very much a human skill.
The second principle – the one that is causing so much stress on global systems today – was ‘Just-in-time manufacturing‘, a practice that is used everywhere today, and is a very simple concept: Each step in the manufacturing process should end when the next one is ready to start.
With some exceptions your coffee shop doesn’t start making your coffee before you’ve ordered it (Yeah, I’m looking at you, New Zealand, with your delicious pre-prepped flat whites), and in the same way, the Toyota system doesn’t ship the components for the windshield until the glass production factory is ready to start making the windshields.
They won’t start making windshields until that final assembly line is ready to put all the pieces together.
And that assembly line doesn’t start putting the pieces together until there is room at the dealerships for the new cars.
Holding inventory costs money without making money, so in the production system, excess inventory is a type of waste (Future me: do a post on the seven wastes and Muda Mura and Muri). Elimination of excess inventory is elimination of waste, and that leads to production efficiency.
Creating this system took Toyota from being on the brink of bankruptcy in the 50s to being the largest auto manufacturer in the world, and the concepts they put into their production system are in *every* business textbook, though sometimes very watered down. Just-in-time is now the norm and has become integral to the way that the world operates.
The short product lifecycles of today’s innovation and tech industries could not afford to sit on stock, nor wait a year for full batches of a product to be made before launching – Their competitors would smoke them. J-I-T is nearly a goal in itself now. Many people saw the bottom line of ‘Elimination of waste creates massive efficiency gains’ and decided to just run with that, but…
Most businesses are doing it wrong.
What most manufacturing businesses failed to consider was *why* it worked for Toyota.
They ignored the fact that Japan’s small physical size made for very short domestic supply chains. The chain is less vulnerable to things going wrong.
They ignored the production levelling – Finding that average daily demand and producing that, ignoring short term changes in demand. If your average is 200 a day, you make 200 a day.
They ignored that eliminating excess inventory is different from eliminating all inventory.
They ignored the principle of growing strong teams of cross-functional workers, predicated on respecting people – Lord save me from command and control style managers.
They ignored the culture of stopping and fixing problems, to get the right fix in the first time. How many times has your company installed a duct tape solution, only to still find it in use a year later?
They ignored huge sections of the TPS and implemented the bits that looked good in the short term, and as a result, created a less effective, a less resilient system. It has short term savings though, which impresses shareholders.
Supply chain disruption is inevitable
Back in 2011, a huge earthquake shook Japan and took down a lot of industries for a while. The factories that made the resin for the windscreens were able to get back up and running quickly, however the supply chain for semiconductors is a long one that was not as resilient. it took months to get the factories operational again.
So, in recent years, Toyota has started to build up a stockpile of 3-6 months’ worth of semiconductors, which *on the face of it* goes against the concept of eliminating waste, especially excess inventory, right? But semiconductor inventory is not excess because that excess will eventually become a necessity when there is a supply chain disruption. you know, like the Suez canal, or the LA ports.
This is why Toyota is the only major vehicle manufacturer who has been unfazed by the recent semiconductor shortage.
What we learn
So what we learn from this is that 1) Toyota is unsurprisingly good at following its own system and 2) every other manufacturer in the world misunderstood and implemented a flawed copy of the system.
Just in time manufacturing is more efficient when you do not compromise resilience of your supply chain. It’s philosophy and art more than it is a hard equation.
Running as close to the edge as possible is the most efficient manner to manufacture…
…until it isn’t.
And the ruthless pursuit of short term profits at the expense of long term growth is the ultimate fool’s game. If your supply chain has steps in several countries just to save a penny per item sold, you have completely missed the point.
Constructing a resilient supply chain requires long term thinking, but most companies have not fostered an environment that rewards that. As the world comes out of the pandemic and all of the issues that it has caused, there will likely be a great many companies who drop their version of just-in-time manufacturing, as the alternative is to admit that they didn’t implement it well.
Toyota on the other hand have shown that just-in-time can be both efficient and resilient, if you can truly identify what is excess.
-Morgan Grey