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In the short run I fully recognize and agree that a change in top management can be the kiss of death to Lean programs – even successful ones. Often times a new CEO (or whomever is in charge of the Lean effort) comes along and due to reasons of insecurity, lack of knowledge, or simply a differing belief system he or she will abandon the program. I have seen this play out quite a few times and the result is usually not pretty. Employees see this sort of change occur a couple of times during their career and pretty soon all change programs are viewed as “flavor of the month” items that will eventually go away. As a result very few people are committed or true practitioners. It is a sad state of affairs but unfortunately all too true in many companies.

This situation reflects a couple of problems that I see and I will try to describe them in order. For starters deep down we seem to have a strong belief in and perhaps need for charismatic leaders in most organizations. In other words when the system or processes are weak and people are underdeveloped then we need a strong charismatic leader at the helm to provide direction, make decisions, and exhort people onto greater effort and achievement. Of course sometimes this can be done in completely non Lean ways through manipulation or coercion, etc. Often mediocre companies need a positive, deeply committed, and energetic person to get started. Successful Lean turnaround stories are chalk full of these sorts of leaders (not the manipulative despots I was referring to).

However relying upon the CEO (or any single executive) to drive the Lean program year after year is not necessarily going to produce results in the long run. Whether we are talking about “enlightened lean leaders” or “autocratic despots” I think we are talking about two sides of the same coin. In other words although extremely different circumstances and scenarios are involved both cases are subsets of what I call relying upon “management by personality” instead of “management by a true lean system”. Of course companies are happy and successful when they have a great leader and markets lavish praise and rewards upon successful leaders. However even well run companies can falter when the great leader retires. This happens even when succession planning is carefully conducted. Will Apple Corporation still be successful in a few years now that Steve Jobs has passed away? I for one am certainly curious.

The problem as I view it is that strong leaders often do not necessarily excel in the rare combination of making people, products, systems, and processes all stronger even after they leave. For a true “system” to be built and to sustain it has to be stronger than the “personality” of the person at the top. In other words a company is truly lean when it can withstand a change in top management and the direction is not substantially changed from True North (or whatever buzzword you like to apply). In my personal opinion that is one of the most remarkable accomplishments of Toyota Motor Corporation over the years. Yes they have carefully chosen their top executive over the years but it has not always worked out the way they anticipated.

Here is an list of all the Toyota top executives since 1937. (Note that TPS architect Taiichi Ohno is not on the list. He never rose above VP of Manufacturing).

1) 1937-1941 Risburo Toyoda

2) 1941- 1950 Kiichiro Toyoda

3) 1950-1961 Taizo Ishida

4) 1961 – 1967 Fukio Nakagawa

5) 1967-1982 Eiji Toyoda

6) 1982-1992 Shoichiro Toyoda

7) 1992-1995 Tatsuro Toyoda

8) 1995-1999 Hiroshi Okuda

9) 1999-2005 Fujio Cho

10) 2005-2009 Katsuaki Watanabe

11) 2009 – Current Akio Toyoda

Okay how many were you able to name off the top of your head. Probably not very many. In reviewing the list Toyota has had only one truly great CEO in my biased opinion and that was Eiji Toyoda. More than any person in the company’s history I believed he made the key decisions, developed people, promoted systematic ways of doing things, and made the culture what it is today. Several others are of course quite good while a couple of others are viewed as pretty weak in hindsight. Despite this wide variety of leadership talent Toyota has managed to stay quite strong in terms of Lean improvements over the years. Why? Because people like Eiji Toyoda were smart and capable enough to build a system that was logical and resilient enough to withstand the forces of change at the top. That in my opinion should be a goal for any executive promoting lean and not just choosing the right successor (i.e. personality) to keep the program going in the short run.

Sometimes invoking Toyota as an example does not resonate well with some parties. I use it only as a reference point for comparison and not the answer to everything under the sun. Let’s change the analogy entirely and shift from production to politics which I admit is really an apples to oranges comparison. However it can provide some food for contemplative thought I believe. Why is it that the Prime Minister of France or the United Kingdom for example can change (or the President of the United State for that matter) and the underlying republic or democracy stays in tact decade after decade? Of course bad events like wars and recessions occur but neither country has reverted back to a pre-democratic state or a fallen under the spell of a dictator…(yes I can think of some good jokes and exceptions here and there of course especially in the United States).

I’d argue that a strong reason is that the constitution, democratic processes, and culture of the countries aforementioned is strong enough to withstand the tide of a change in leadership from conservative, to moderate, to or liberal and back again. In companies pursuing Lean we do not yet have this sort of constitution and series of checks and balances well thought out yet. We have Boards of Directors representing shareholders picking CEO’s and in some cases grooming replacements. This all strikes me as logical but also still susceptible to management by personality. We need to move closer to a consistent system of management by Lean Thinking that sustains over the forces of personality.

In conclusion I admit my political analogy is full of holes (public versus private, etc.) and may distract some parties. Toyota may or may not be your cup of tea either…However I think both cases are food for thought for executives to think about. How will you build the equivalent of a constitution, a series of checks and balances, and a culture that is strong enough to sustain in the long run?

True North is one of the common buzzwords of the past decade used to help explain parts of the Toyota Production System or Toyota Way. For starters I am not a big fan of buzz words like True North. The problem is that these terms can often obfuscate as often as they help to clarify. This one however is fairly harmless and probably does some good. The term itself is not really part of the original Toyota Production System. Old timers like Taiichi Ohno never used the phrase and I never used it in my time with the company either. The concept it embodies however is quite simple for the most part.

The role of True North inside Toyota is similar to its basic meaning in English. True north (geodetic north) refers to the direction along the Earth’s surface towards the North Pole. In reality the geodetic north differs from magnetic north, and grid north etc. but that is not really necessary for our question here (click here for description). In navigation or in Lean implementation you need a way to get from point A to point B without getting lost. It is easy to move between two points if you are familiar with the terrain and the distance is fairly short. In real life and in lean implementation however this is not always the case. It is easy to get lost, sidetracked, disoriented, or tired and confused. To help in navigation it helps to have a fixed unchanging point for reference i.e. True North. The same basic need exists in lean implementation.

Now lets move onto the definition of the term. As I mentioned earlier the term True North is fairly new (past dozen or so years) with respect to the Toyota Production System. Inside of Toyota in Japanese there has long existed the phrase “aru beki sugata” which roughly translates as “ideally the way things should be”. That phrase was used frequently by many different people in the company when I was an employee. It was a natural part of the corporate language regarding how we wanted things to be in certain circumstances (production, HR, development, purchasing, engineering, etc.). The particular phrase True North in English started to be used fairly often in presentations made by the Toyota Supplier Support Center (TSSC) in North America in the past decade. The following graphic is the one most commonly used in terms of definition.

In other words in production for example an ideal state would encompass customer satisfaction with zero defects, 100% value added work, lot sizes of 1, and production in sequence and on demand. Employee development would entail physical and mental safety, job security, and professional challenge. It reflects not what we can do but what we should do. It should occur with everyone every minute of every day. In reality of course no one is near this level of performance (certainly not Toyota). However as a reference point I think this notion certainly has some value.

So how does this concept contribute to lean results as asked in the original question? Well it depends upon your point of view. Some proponents of True North will have you believe it is an actual compass point to use in your lean journey and this is perhaps the key to obtaining results. In contrast I think it is merely a nifty chart and catchy buzzword that just helps explain the concept of True North with respect to Lean Thinking inside of Toyota. It alone does not produce any results. Its chief importance is in communicating the notion that there is an ideal state to shoot for and it is not subjective or changing all the time…Just having the chart or concept straight in your mind however does not make you any more likely to obtain results. Just like having a good compass or GPS device does not make me any more likely to win the next version of the Iditerod Great Sled race up in Alaska.

The final part of the question asks if Lean can be done without True North and this answer again depends upon what is meant by the question. In the narrow sense yes you can accomplish Lean without the True North concept as expressed above…after all the chart in question is only about a decade old and old timers like Taiichi Ohno did not use it during their heyday when spectacular improvement results were achieved. However in a broader sense I do think that you need something akin to either the phrase we used in Japan “aru beki sugata” or True North in English for Lean to flourish. In order to align people you need a concept and a reference point that is solid like True North or some other analogy. Plus everyone who ever worked at Toyota from 60 years old to today can glance at the chart and at some level say “yeah that is basically what we were working toward in an ideal sense in production”.

The only minor problems I have with True North as depicted above is that it leaves out any mention of profit or growth although you could of course argue that those will naturally fall in place if you follow the path to True North. Quality is expressly mentioned but productivity in indirectly reference by the 100% value added comment. The other nit picky criticism I have is that like most things in TPS this chart relates to the Production part of Toyota’s Way. It does not directly tie in very well to product development, engineering, IT, HR, purchasing or other functions. Of course it can be extrapolated to work in those ares it just takes some translation work. This chart and term in English (True North) was mainly used by the Toyota Supplier Support Center for work in the supply base for communication and explanation reasons. For that purpose it certainly has some value in addition to the ones I mentioned above.

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Art Smalley: Lean Success

We have discussed the topic of why so few companies really show substantial progress when it comes to lean implementation quite a few times on this web site. I won’t rehash all those topics in detail since they are available for those interested in a variety of different posts by different authors. For the last decade or more I have been lamenting about this topic in speeches, articles, interviews, and client discussions, etc. At least I am not the only one unhappy with the state of lean these days. One of the best ways to improve is to study failures and learn from those mistakes. Mistakes I’ve continually seen in lean programs come in a variety of different sizes and types. There is no one single root cause to conveniently pin the blame on or to enact a proper countermeasure. Shortcomings in leadership at the executive level as well as front line level are often evident. Companies fall in love with various fads or tools or fall under the spell of a certain consulting style and often run into roadblocks. Simple mistakes are made on fundamental concepts in the lean arsenal as well during implementation.

If I had to pick one graphic to explain the problem it would be the following image which I have been drawing on white boards for about a decade now. I’ll use that as a spring board for talking about success in a moment. The lean programs that I observe which are not succeeding very well make some form of the following mistake. They mistakenly equate implementing some sort of process or tools or even a system with achieving results. That is dangerous and naive thinking. Assume for example a company is in Zone 1 in the 2 x 2 diagram below. This company has neither standard processes or achieved much in the way of results. It is “Low” in regards to both dimensions. Obviously the company wants to be in Zone 4 which has “High” level or excellent business and manufacturing processes as well as great results.

In order to get out of the chaotic quadrant of Zone 1 companies embark upon a lean improvement program and start implementing different tools, concepts, or impressive sounding topics. Value stream mapping, Kaizen events, Kanban, Standardized Work, long lists of rules or principles, or even A3 reports fall into this category. The belief is that since Toyota uses some of these items then these must be the way the get to Zone 4 and better results in addition to better processes.

Unfortunately this is often wishful thinking. A lot of places that I visit are simply moving from Zone 1 straight north up to Zone 2. They can point to a lot of impressive activity, showcase quite a few implementation areas, and list some some positive local results. For the company as a whole however there is usually not a lot to show in terms of sustained financial or operational results. The Lean wallpaper looks good but the structure behind it is not that impressive.

What I term as success conceptually is Zone 4. In other words the company has figures out a way to study, standardize, and improve all types of processes AND concurrently obtain actual results in terms of profit, quality, productivity, delivery, and other important areas. Unless there is change for the better (i.e. Kaizen) in the form of results to show for the implementation then there is no success to brag about….

We can debate endlessly about how to move conceptually from Zone 1 to Zone 4 but the intellectual stimulation alone won’t move the needle for companies. Real problems have to be solved and leaders have to be developed for any organization to succeed. I have a list of questions that I run through when debating this sort of thing. My list is more tactical in nature than strategic by design (I’d be happy to discuss corporate strategy or finance at a different time!). If you can answer these questions to the extent that Toyota has and achieve results then you’ll be achieving success in lean.

1. How will you satisfy the customer and obtain a profit for your organization? Smart companies pay attention to the latter half of the question as well as the customer value angle.

2. How will you surface the vital few things for the organization to work upon and focus energy on these areas? This is simply Juran’s dictum of “vital few versus trivial many” or the “Pareto” concept.

3. How will you build in quality 100% of the time at the source process. In other works how will you achieve Jidoka in practice?

4. How will you design, manufacture, and delivery product (or services) 100% Just-in-Time?

5. How will you ensure that process availability is 100% when needed? Redundant capacity is not allowed as a solution.

6. How will you standardized work practices 100%? This includes all human work and not just shop floor duties.

7. How will you train and develop natural work team leaders who can do all the above in their area of control?

8. How will you sustain and improve over time? In other words how will you deliver results that matter and outdistance the competition.

I could go on with the list and include a few more things but this is enough for general discussion. I frame these items in the form of questions since I think the process of arriving at the solutions is very important. We can’t just copy what is seen or reported about Toyota’s shop floor. Trust me, I worked there and you’ll have to do they hard work (thinking, doing, learning, improving, etc.) that they did there in order to get similar results. Otherwise you’ll tend to wind up in Zone 2 as I cautioned up above. Answer these questions in detail, implement the countermeasures correctly, obtain best in class results and in my opinion you will be very successful in your Lean endeavors.

Art Smalley: Tools, Rules, Principles, and Lean Wallpaper

I have had a long and somewhat tortured fascination with regards to this topic and other similar questions. In terms of background when I returned to the United States from Japan in the mid 1990′s after working for Toyota Motor Corporation it was difficult for me at least to recognize many of the efforts that were supposedly modeled after the Toyota Production System (TPS).  Some of it was frankly bewildering. The Lean movement has gone through many phases and efforts and I am certain that this will continue. I have commented in speeches, articles, and other areas over the past ten years about why I think Lean is different from the Toyota Production System and what are some of the causes for this dissimilarity.

Honestly however it would not bother me if Lean were different from TPS and managed to achieve sustainable results (or improvement that is the real key over time not just sustaining) while developing people. Unfortunately I do not see this happening very often. And when I see it happening it tends to be very local in nature and highly dependent upon a select group of people that understand it well and practice it consistently.

As Michael Balle pointed out in his response you need a certain critical mass of people to become both versed and skilled in the topic in order to improve and sustain those improvements. Unfortunately I do not see that occurring in most companies attempting Lean principles. Instead companies tend to become fixated on items like” tools” (value stream mapping, standardized work, A3 reports, etc.). Or they create unfortunate but well intended “rules” for people to follow. Neither case will necessarily produce results (let alone sustained or improved results) over time for multiple reasons. Sometimes I derisively call this the Lean wallpaper approach where lots of neat looking things are posted on walls but there is very little to show in the way of actual results.

The latest shift in Lean over the past few years has been to put more emphasis on the “thinking” and “managing” aspect of TPS as a solution to the reality that not many companies attempting lean are succeeding. This adjustment is a piece of the puzzle but it will not be the magic elixir either. We can pontificate about Lean principles, the scientific method, experiments, excellence, etc. but in some fashion we are just moving from “shop floor wallpaper” to fancier “management wallpaper” and comfortably distancing ourselves from the reality of the shop floor (i.e. genba) in the process.

Unfortunately just saying smart things does not make us perform better just as hanging the basic laws of thermodynamics on the wall does not necessarily make the average person a better physicist. The Lean movement tends to talk about the “map” rather than the “actual terrain” and how to get from point A to point B. Both have value but if physical progress is the goal eventually you have to put the map down and start moving in the intended direction. A compass (i.e. a tool) of course helps on your journey as does the concept of True North (a principle) but eventually you run into actual mountains, or rivers or other barriers that have to be crossed in order to get to your intended destination. The compass or dogmatic concept is no longer so useful in knowing the best way to proceed. Alternatively another way of saying this is that the Lean movement has a fascination with “know what” type of knowledge but not “know how” type of knowledge when in reality both are required. Let me give you a fictitious example I sometimes recite.

A piece of production equipment (a lathe in this case but substitute whatever you are most familiar with) is not performing well on the shop floor. It is only up about 68% of the time, produces over 5% scrap, and has some other associated problems. This single machine is causing lots of associated problems in terms of excessive over-time, quality complaints, and on-time delivery problems for a certain product line. The first lean experts visited and held kaizen events to improve flow, the pace of production to the customer, and moved many things around in the spirit of improvement. Things looked better and indeed were cleaner but the lathe unfortunately still did not run very well.

A couple of years later the next set of lean experts visit the site and said the answer was to standardized the work, draw a value stream map, conduct a 5S event, or implement a pull system, etc. and this would generate improvement . However performance of the lathe or area still did not substantially improve. In other words they were stuck at a very wide river without a way to make good progress.

The next lean expert who visited a couple years later said the key was to emphasize principles like “build-in-quality” or to execute “jidoka” in terms of thinking on this machine. This expert is conceptually right but in reality does not know how to fix the lathe either…so the team retreats to the conference room and considers either “problem solving” or “experiments” for example. That is always a comfortable approach especially from the confines of the meeting room where we can produce more management wall paper about how to cross the river.  Of course good problem solving efforts often will eliminate at least some of the problems if the company has some skill in this area. Just as often however the problem solving or experimenting can go sideways and produce nothing but frustration.

Finally a couple years later a retired 65 year old man from Toyota named Tom is called in to look at the lathe. He is honest and says that he knows very little about paint, plastics, welding, or stamping or other areas. He did not bring along a fancy map but he has a lot of practical knowledge about lathes including this particular one. He asks a strange question i.e. “What is your problem?” …The team fumbles around with the question and states that they want to be lean, standardized, level, scientific, and excellent, etc. In other words they talk about how they want to be described rather than how they will get across the river. Finally one person says we need to get to 90% uptime on this machine and less than 0.5% scrap. Tom asks some questions about the material hardness of the part, the tooling program, the cutting tool and a few other items. Armed with a dial indicator gauge Tom makes a few basic measurements on the machine (the actual terrain) and points out that the adjustment gibs on the machine are worn and unfortunately will either need to replaced or shimmed in the short term for a temporary countermeasure.

He also points out that the lathe’s main spindle run out is 50 microns which is eating up most of the tolerance of the part and hence causing most of the scrap. A spindle head in Toyota has about 5 microns of run out. He insists that the bearings in the spindle head be replaced and proper preload be set on the bearings upon re-assembly to improve the run out measurement. He also suggests changing the rake angle of the cutting tool and altering the position with respect to the part mid-line. Finally he chastises everyone for the oil and hydraulic leaks and insists they be fixed as well, etc.

The Lean team is puzzled by his recommendations but with his guidance implements what he suggests and lo and behold the machine now runs at 95% uptime and now has a 2.0 Cpk in terms of process capability and makes virtually no scrap. The machine runs better than ever and the area performance kicks up a notch as well. The team learned a few things in the process as well. Of course there are other problems galore elsewhere on the site. Everyone is happy though for the moment so the teams asks Tom to be their adviser on these other areas but being an modest man he says “No I probably can’t help you much over there. For starters I don’t know those other machines very well. Also you will learn more in the long run if you fix them yourself.”

This fictional situation mirrors a large segment of the Lean movement today. A cluster of people like to run workshops and produce “change”. Unfortunately the change is not always for the better nor does it sustain or develop people. Some people attempt to counteract this by copying the tools or rules of Toyota and assume that using the tools or rules will produce the same results. Unfortunately this faith in tools or rules does not necessarily fix the problem either.

Still others (and I fall into this trap as well) then advocate the distant intellectual safety of promoting problem solving, kaizen, critical thinking, excellence, the scientific method, or whatever spin or flavor of the moment we put on the topic of improvement in conjunction with Lean principles. There is a certain smug moral certainty associated with this position but I think it also comes dangerously close to intellectual sophistry. We can say neat abstract things that sound great on paper but in the end those words don’t produce improvements or build capability either (i.e. hanging the laws of thermodynamics on the wall problem). Being high level and vague also lacks practical specificity on the shop floor (e.g. how to fix the lathe’s spindle run out situation or other problems).

In the end as Michael points out only people produce change and sustain or improve the results over time. You need a critical mass of people that have both the right thinking patterns (know what) but also the right technical knowledge (know how). I think the Lean movement has made some real progress on the former dimension of “know what” in the form of principles, tools, frameworks, kaizen, scientific method, etc. over the past 20 years. Unfortunately I don’t see as much advancement on the actual technical “know how” dimension of the equation and until that problem is solved actual performance results will not match up with the associated performance expectations.

Art Smalley: Toyota and Capital Investment

In the previous post I responded to a question about capital investment and the Ohira plant of Central Motors (a Toyota affiliated company producing the Yaris) that is gaining some attention in the press. There are few specifics known about the facility.  Only snippets of news are leaking out in the press or from site visits. I made a few observations about the reports on the facility but instead of pontificating about a facility I have never even seen in person I will opt to speak more in general terms about Toyota and its capital investment decisions. The following is simply my opinion on the topic based upon my time spent with the company and from observing it over the years. There are many possible angles to probe on this topic but I will stick to the following few points for the sake of brevity. In future Lean Edge posts I’ll discuss this topic in more detail as needed depending upon the question.

Until the mid 1980′s virtually all of Toyota’s heavy capital investment existed in Japan around Toyota City. A few knock down type facilities or lower volume plants existed around the world but Toyota was reluctant to spend vast amounts of capital investment overseas due to its conservative nature and production expertise in Japan. (Note: Here is a link to all Toyota production facilities worldwide – as you can see some such as Brazil, South America, and Australia have quite old roots.) This production approach in reality had worked for decades in terms of mainly producing domestically in Japan and then shipping product for export overseas. Eventually however political pressures and the rising cost of the yen (it dropped from 360 to under 100 yen to the dollar) forced Toyota to start investing more directly and producing product overseas. Full sized plants in North America, Canada, the United Kingdom, France, and many other sites were launched with great success. It took great amounts of coordination and effort but Toyota proved that it was able to open full scale engine, transmission, chassis, and vehicle plants overseas that met its internal standards for safety, quality, cost, and productivity. This strategy was such a success in hindsight that the opening of Central Motor’s Ohira plant in Japan to produce the Yaris produced a stir in the media as the first Toyota affiliated new vehicle plant in Japan in about eighteen years. Think globally and produce locally indeed became a permanent fixture in the strategic investment philosophy of the company.

Toyota is also very structured in its approach to capital investment when it comes to new facilities in Japan or overseas. I see many companies that constantly evaluate what parts to make in-house and what to outsource with very large degrees of freedom. Toyota of course does this type of evaluation as well but with fewer degrees of freedom in my opinion. For example it is normal that in the case of a full sized engine plant Toyota will spend capital and make its own engines, transmissions, and chassis shops. In those plants there are core components that Toyota will make such as the cylinder block, cylinder head, cam shaft, crank shaft, connecting rods, and pistons. The remaining parts will be purchases from the outside. In other words Toyota makes the difficult, expensive, high value added items and leaves the more commodity type of items to the supply base. Of course some purchased parts are very technical and difficult but if you look closely then affiliated companies like Denso, Aishin, or other family companies are involved in production of those items. Toyota does not leave much to chance.

Toyota pursues this investment path since they have a high degree of confidence that they are more efficient than anyone else in producing these difficult and high value added internal components. Also these items are of course tightly linked to product development in terms of performance attributes (e.g. cylinder stroke and bore and horsepower) as well as product quality. So as a matter of basic principle these types of items are kept in-house which drives capital expenditure on equipment decisions at least. Exceptions exist but usually there are practical considerations to the equation. For example when I worked at Kamigo plant in Japan we had our own casting, machining, and engine assembly shops on site. In Georgetown Kentucky it was not feasible to build a casting plant contiguous to the engine plant for a host of cost and environmental reasons. So those raw items were either purchased from Toyota affiliated companies in the U.S. or sent overseas from Japan for several years. Later on Toyota built an aluminum casting plant outside of St. Louis, Missouri. Again exceptions exist to everything I just outlined but the basic pattern is repeated over and over.

Toyota’s capital investment philosophy is consistent not only in engine, transmission, or chassis plants but also on the vehicle side of the equation. Stamping, body weld, paint, plastics, and final assembly are the main shops in the vehicle plants. Toyota works over and over with the same equipment vendors to refine its manufacturing processes and integrate the processes with the production system. Equipment is not just purchased at the lowest cost and then fit into the plant. Suppliers have worked with Toyota for decades in most cases on tooling and equipment. In general the more technical and difficult the shop the few suppliers there are for the process. For example in precision cam shaft or crankshaft grinding we only had one supplier of equipment for this process. In hindsight some shops in Toyota such as assembly departments have done a reasonably good job of finding equipment vendors overseas who can meet Toyota’s standards. In other cases however like machine tools for engine or transmission plants Toyota still struggles and basically brings over virtually all the equipment and tooling from Japan.

Because of this specificity regarding the production process encyclopedias of technical standards known as Toyota Manufacturing Standards (or TMS for short) exist and are the primary documents that specify Toyota’s overall company standards for manufacturing. This has nothing to do with standardized work on the shop floor. In addition to the TMS documents there are more specific production technology standards as well. For example in my world we relied up several thick in-house manuals regarding machine tool specific standards (called MTS for short) when purchasing metal removing equipment for our engine plants. On top of that layer there was a final layer of even more specific “project standards” that spelled out what would be done for a given project. Normally TMS covered half of the content, MTS another quarter or so of the content and the final bit was wrapped up in specific binders full of project standards. For example the engine plant in Kentucky has its own specific set of Toyota Motor Manufacturing of Kentucky (TMMK) project standards for this latter portion. Virtually every overseas plant does have it own detail project standards especially when it comes to electrical and safety related requirements which are different country to country or even state to state.

While Toyota’s philosophy for capital equipment was highly standardized I don’t want to give the impression that it was 100% static or rigid. In fact it was quite practical and adjusted on a case by case basis in accordance with several parameters and local needs. I will outline several items in no particular order that struck me in hindsight. Toyota always considered the difficulty of the capital equipment and the receiving sites proven ability to manage such equipment. Plants might start up with just assembly lines in year one and then graduate to more complex processes such as machining, stamping, or welding in year two. After many years of honing their skill in opening plants Toyota does this plant opening process in a far more bold fashion today. However when opening an overseas engine plant back twenty years ago might take three years to start up considering the full transfer of equipment for assembly, and then major component manufacturing such as the aforementioned pistons, connecting rods, cam shafts, crank shafts, cylinder heads, and cylinder blocks.

In general like most companies lower cost regions of the world received less automation and simpler equipment from Toyota. Higher wage countries like Japan and the United States received the latest automation and higher levels of technology. For simplicity at least in the old days lines or processes were graded as either A, B, C, or D level in terms of automation complexity. In general an A level line or process meant fully automated especially in terms of loading and unloading of processes. It would of course entail CNC controls in machining and PLC controllers and other precision measurement devices. B lines were one step less complex and would have auto loading features but usually required manual unloading of parts. The machines would have PLC controls along with some CNC or hydraulic controls as well. C type lines were less automated and had manual load stations and simple auto eject features to unload the machine. PLC’s exist at this level today but originally these lines were pretty basic in terms of production technology and relied a lot more on hydraulic and pneumatic controls for actuators. The final D level of lines was fully manual in terms of loading and unloading of parts out of fixtures. PLC’s no doubt even exist on these types of lines today but they originally had very limited levels of production technology and were mainly hard wired. Very few of these lines exist any more in Toyota except in isolated instances around the world. You’ll sometimes hear that Toyota aspires to build one type of process or line but that is simply an uninformed viewpoint. Toyota builds a manufacturing line based up standards that fit the cost and capability structure of the facility in question. What works for one country does not always work for another country. Also Toyota has to evaluate the product mix being made in the facility, the volume, future design requirements, and the technical ability to maintain the equipment especially outside of Japan. Each plant and project is a little different especially when you get down to the project level details.

Finally I will comment that Toyota practices Kaizen in capital equipment areas just as it does in production and in product development for that matter. I know of several examples where machines that used to cost tens of millions of dollars not go for one half to one third of that amount today. Unfortunately a lot of the lean world has fallen into the trap that “flow” is all that is needed to describe Toyota’s core principles. Flow is part of the Just-in-Time Pillar of the production system and perhaps the most amazing visual part of the system along with takt time, pull systems, and leveling. However this “flow” is done across capital equipment that has been worked on for decades and operates at very high levels of availability as well as very high levels of process capability. Most organizations are seduced by the topic of flow but have gaping holes in their capital equipment base in terms of philosophy, standards, availability, and process capability. Toyota gets the details of this latter content working well and the result you see on the surface (or tip of the iceberg) is the fancy flow and JIT stuff. Equipment is studied at each purchase point in terms of cost, cycle time performance, safety, quality, reliability and productivity for improvement. Suppliers are asked to jointly work with Toyota and make machines better, cheaper, faster, and safer each generation. New technology creeps in that adds cost and complexity just as other parts are simplified. Then the whole cycle is of course repeated again and again at the appropriate interval.

I could continue to elaborate and provide more specificity in detail but I hope this paints a generic picture of Toyota’s practices on capital investment. Every piece of capital equipment is scrutinized for improvement potential. That is true at the time of purchase as well as during the time that Toyota owns the equipment. There are exceptions to everything I outlined above but they are generally just exceptions and not the rule. And also if you scratch deep enough and ask why there is usually a very valid reason why the deviation from standard was made in the first place. If you want to emulate Toyota’s overall success then I advise organizations to think hard in all the dimensions of product, process, and people. Just implementing some set of “rules” or “tools” in production or attempting improvement “events” won’t get you very far but I agree might work as a good starting point. In the long run to capture success you’ll have to practice systems of improvement in terms of product development, process technology, and people development as well. The common struggle I see is for companies to blindly believe that if they just draw a complete enough value stream map, with a good pull system, and a standardized work chart then they will become “lean”. I am not a believer in that equation. Toyota is a master at taking cost out of the product and process while maintaining quality, developing people, and meeting customer expectations on time. Increasingly Toyota also does this with shorter lead-times for both product development and process development which can of course strain the system at times. Regardless in my opinion the lean movement needs to evolve a step further from where it is today to get past the rules and tools or event based approaches for the shop floor workshops. The movement will need to develop further in order to improve product development or capital investment as it pertains to production equipment. It is not a simple task but one that will pay off tremendously if mastered to the level that Toyota has accomplished.

Art Smalley: Ohira Plant and Investment

There are several parts to this question and I will probably break up my thoughts into two different posts on the topic of capital investment. The question asked pertains to a new plant in Ohira Japan located north of Sendai that is associated with Toyota Motor Corporation. This plant in actuality is owned by a Toyota affiliated company known as Central Jidosha in Japanese or Central Motors in English. Toyota has a financial interest in the company but technically it is not owned or operated by Toyota Motor Corporation (TMC). Still as the opening ceremony for the plant was attended by several Toyota executives you can see it does of course have a tight relationship with TMC. And of course the plant is producing the Toyota Yaris for shipment overseas. (Some details are here on the plant in this article).

This plant has gathered some attention for different reasons. It is the first Toyota affiliated vehicle plant to open in Japan in about eighteen years. Growth and investment since that time have been mainly overseas. The Ohira plant is also attracting attention due to a different final assembly line configuration. At least in sections the cars travel side to side rather than nose to tail style in order to save space. Also the overall line shaped is somewhat U-shaped in nature (do not assume that it is a U-shaped cell or collection of these cells however). Automation was limited in the plant to the bare minimum necessary and kept flexible as possible. Some observers are commenting that this facility perhaps is a model plant for how Toyota will attempt to build low cost facilities overseas in the future (click here for that article).

To be clear I have not visited this facility and I don’t personally know anyone who works there either. It seems that facts about the cost of the facility are hard to come by. Some comments in the press are suggesting as the question posed here that the plant costs 40% less than a traditional facility. In the Ward’s article that plant was reported to cost about $573 million dollars. However that number is not for certain and it may be somewhat less. Unless we know the exact amount of investment for the plant and the associated production volumes it is tough to give any sort of detailed or satisfactory answer on this topic. The plant is currently producing 250 cars per day with 900 employees on site. At full production it is expected to produce 120,000 units per year and employ 1,900 per employees.

Those numbers if correct don’t necessarily stand out to me as being game changing numbers. A full size plant can easily top one billion dollars in investment but on the other hand it also produces normally around 240,000 units per year for Toyota. With overtime and a few weekends, etc. 300,000 units per year is possible. So frankly I don’t yet understand where the reported 40% improvement figures comes from. It is possible that the plant was built for much less that noted above or it is possible that it is being compared to more complex and expensive facility in the Toyota network.

In order to properly answer the question I’d have to obtain some more specific figures (that are not publicly available) for investment cost as well as the different types of capital equipment in the facility. For example what type of equipment is in the stamping, body weld, paint, plastics, and final assembly departments, etc. and how is it being used. In due time these types of numbers and facts do tend to leak out but right now they are not known so the “40% lower” figure to me is a bit perplexing. Since I can’t execute good Toyota practice by going to the genba and getting all the facts I am going to have to pass on the specifics of this Central Motor Ohira site and the related question. Instead in a follow up post I will provide some insight on what I observed over the years about capital investment inside of Toyota Motor Corporation.

One last observation on this post however is that using affiliated companies to produce lower volume vehicles such as this one is part of Toyota’s investment strategy. It does not make economic to sense for the higher cost parent company to produce every vehicle for the corporation. Often there are niche products or items that make sense for the product portfolio of the company that just don’t justify a full sized facility on their own. Toyota Auto Works, Kanto Auto Works, Toyota Shatai, Central Motors, Arako, and other affiliated companies all currently produce or have in the past made vehicles that were sold under the Toyota name plate. In this way Toyota uses lower cost affiliated companies to produce lower volume product for the company flagship. This Ohira plant located north of Sendai for Central Motors producing the Yaris falls into that category as a further example.