Toyota by Toyota Reflections From

Reflections from the Inside Leaders
on the Techniques That

Revolutionized the Industry
Edited by
Samuel Obara and Darril Wilburn
TOYOTA
by TOYOTA
Reflections from the Inside Leaders
on the Techniques That
Revolutionized the Industry
Edited by
Samuel Obara and Darril Wilburn
CRC Press
Taylor & Francis Group
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Contents
Foreword.................................................................................................ix
Introduction............................................................................................xi
About the Authors............................................................................... xiii
Chapter 1 Courage, Humility, Kaizen................................................. 1

Darril Wilburn
The Toyota Way 2001...................................................................2
Courage, Humility, Kaizen at the Heart...................................4
Teaching Others..........................................................................14
Chapter 2 Stability and Standardized Work..................................... 21

Gerson Valentim Damiani
Importance of Standard Work.................................................27
Why Work Using Standards?.................................................. 28
Operational Procedures, Work Instructions, and Work
and Labor Procedures................................................................29
How the Work Was Done at Toyota: Standard Work
before Technology......................................................................31
How Standard Work Was Done at Toyota after the
Introduction of Technology......................................................32
Factory Layout........................................................................35
Objectives of the Layout.......................................................37
Human Factor........................................................................38
Problems in the Implementation of Standard Work.............39
Where to Place Standard Work Instructions........................ 40
Chapter 3 Jidoka................................................................................. 43
Renato Eiji Kitazuka, with Carlos Moretti
Origins........................................................................................ 43
Jidoka as a Pillar of the Toyota Production System.............. 44
So, What Is the Purpose of Using Jidoka?.............................. 48
Using Jidoka...........................................................................49
Implementation Stages of Jidoka.........................................51
iii
iv • Contents
It Was Too Early.....................................................................53

Conclusion.................................................................................. 54
Chapter 4 Just-In-Time and Kanban................................................. 55

Carlos Yokio Fukamizu
Just-In-Time............................................................................... 56
Introduction.......................................................................... 56
Introduction of Jidoka and Just-In-Time as the Pillars
of TPS.......................................................................................... 56
Jidoka...................................................................................... 56
Just-In-Time Manufacturing................................................57
Just-In-Time (JIT).......................................................................58
Concept...................................................................................58
Total Customer Satisfaction.................................................59
More Evident Waste in the Manufacturing...................... 60
Continuous Flow Process (One-Piece Flow) and
Pull System.............................................................................62
Lean Methodologies for Waste Elimination......................63
Examples............................................................................63
Kaizen (Continuous Improvement)....................................63
Kanban as a Technique of JIT.................................................. 64
Conclusion...................................................................................69
Chapter 5 Problem-Solving PDCA.................................................... 71

Sammy Obara
Definition.....................................................................................71
Why Problem Solving Is So Important along a Lean
Transformation...........................................................................71
What Is PDCA?...........................................................................74
Do You Really Need a Method?................................................74
How and Where to Find Problems..........................................75
The Mosquitoes Case.................................................................76
How Well Do You Understand the Problem?.........................76
Genchi Genbutsu: The Point of Cause.....................................77
How Well Can You State the Problem?...................................78
How Well Do You Understand the Causes?...........................81
Doing Well What Does Not Need to Be Done................. 84
Project Management..................................................................85
Contents • v
A Quick Note on Deadlines......................................................85

Standardization......................................................................... 86
Recognition.................................................................................87
A Higher Level of Recognition................................................ 88
Yokoten: Spreading the Learning Laterally........................... 90
What Is Next?..............................................................................91
Chapter 6 Toyota Kaizen Methods.................................................... 93

Art Smalley
Step 1: Discover Improvement Potential.............................. 100
Step 2: Analyze the Current Method.....................................102
Step 3: Generate Original Ideas..............................................105
Step 4: Make a Kaizen Plan.....................................................107
Step 5: Implement the Plan.....................................................108
Step 6: Verify the Results.........................................................109
Summary...................................................................................109
Chapter 7 Kaizen Culture:

The Continuous Improvement Engine...........................111
Stephen J. Ansuini
The Key Elements of a Kaizen Culture..................................112
Visible Sponsorship and Support by Management.........112
Leadership Support.........................................................113
Clear Purpose and Aligned Goals.....................................115
Evolving Continuous Improvement System....................117
Phase 1: Introduction—Participation Emphasis........117
Phase 2: Transition—Participant Development........ 120
Phase 3: Process Maturation........................................ 122
Summary.................................................................................. 124
Chapter 8 Elimination of Waste in Product Design...................... 127

Patrick Muller
Value Engineering/Value Analysis........................................127
Waste in Process Design.....................................................127
Waste in Product Design................................................... 128
Toyota’s Purchasing Philosophy........................................129
Fair Competition Based on an Open-Door Policy.....130
vi • Contents
Mutual Prosperity Based on Mutual Trust.................130

Abide by the Law.............................................................131
Toyota’s Purchasing Practices............................................131
Cost Breakdown..............................................................131
Target Costing, VE/VA, Kaizen....................................132
Value Engineering/Value Analysis.................................. 134
History............................................................................. 134
At Toyota, Suppliers Challenges.................................. 134
VE/VA and FMEA..........................................................135
VE/VA and Marketing...................................................135
Practical Example...........................................................136
Chapter 9 Adapting Lean for Made-to-Order/High-Mix,

Low-Volume Organizations............................................ 137
Greg Lane
OSKKK to Learn and Transform...........................................139
Learning the Processes before Managing Them..................140
Constraints Require More than Quick Fixes.......................141
Process Focused, Not Product Focused................................143
Segregating Parts to Manage Differently..............................146
Managing in Real-Time Necessitates Other Lean
Principles...................................................................................149
Proportionally More Indirect Costs Necessitate
Lean Accounting......................................................................152
Failures.......................................................................................155
Summary...................................................................................156
Chapter 10 Lean Logistics.................................................................. 159

Robert Martichenko
Part 1: Purpose + People.........................................................159
Introduction.........................................................................159
Purpose.................................................................................160
Customer and 3PL Collaboration......................................161
People and Planning............................................................162
Part 2: Process...........................................................................163
Logistics Route Design........................................................163
Pull Replenishment.............................................................164
Contents • vii
Velocity and Understanding the Importance

of Lead-Time Reduction.....................................................165
Driving Velocity...................................................................168
Manufacturing Plant Integration......................................169
Leveled Flow.........................................................................170
Trailer Yard Layout and Visual Management.................172
Quality at the Source and Discipline of Process.............173
Lessons Learned and Conclusion...........................................174
Chapter 11 Leading a Kaizen Culture............................................... 177

Bob Plummer
A TPS Symphony......................................................................178
Discovering the Kaizen Culture.............................................179
Creating and Sustaining the Kaizen Culture
in American Factories.............................................................182
Implementing TPS Methods...................................................185
Back to the Beginning..............................................................187
Leaving GM...............................................................................188
Chapter 12 Hoshin Kanri................................................................... 189

Alistair Norval, with Darril Wilburn
What Is Hoshin Kanri?........................................................... 190
Why We Need a Strategic Planning System.........................191
What Does This Result In?......................................................192
Countermeasure to Strategic Planning Problems................192
Hoshin Kanri Enables Organizations to Develop
Strategic Plans That Are..........................................................192
True North................................................................................193
Tree of Focused Activity..........................................................194
Plan, Do, Check, Act (PDCA).................................................196
Management Process...............................................................199
Catchball................................................................................... 200
Key Thinker...............................................................................201
A3................................................................................................201
The Power of Hoshin............................................................... 203
Summary.................................................................................. 205
Foreword
Aim therefore at great things.

—Epictetus
Why another book about the Toyota Production System (TPS or Lean)?
Because we haven’t locked in the basics, and failing to do so will have
consequences.
TPS has proven effective at reducing human misery, while enhanc-
ing human potential, in manufacturing and related endeavors. The past
decade, Lean thinking has spread into fields as diverse as health care, busi-
ness services, and construction. We need to help the good people in these
areas.
Sammy Obara and the Honsha team are well suited to this task. We have
been friends and colleagues for over a decade now. The opening chapter
in this volume—“Courage, Humility, Kaizen”—reflects the character and
purpose of the Honsha group.
We must begin with Purpose, as Epictetus reminds us. Tools are second-
ary, yet many self-styled Lean “experts” focus on them entirely. I suppose
it’s easier, but it does Lean learners a great disservice.
What is our Purpose? Addressed honestly, this hard question triggers
the necessary reflection on shortcomings and weaknesses that are the fuel
for improvement. It is a recurring theme in this volume. My Senseis at
Toyota taught me, “No need, no activity!”—excellent advice. So define
your Purpose, and pull in the elegant tools of Lean as needed.
Hansei, the Japanese word meaning humble and frank reflection, is
another important concept in this book. Reflection, often glossed over,
is fundamental to TPS and the PDCA cycle. This book records the reflec-
tions of several Toyota veterans—reflections on how they learned TPS and
how they’ve applied the learning in companies around the world.
My study of Aikido prepared me for the Toyota “way.” I understand it as
Do or path—one that I will walk the rest of my life. I’ve no doubt that the
Honsha team will be there walking with me.
Pascal Dennis
President, Lean Pathways Inc. (www.leansystems.org)
Author of The Remedy, Andy & Me, and other books.
ix
Introduction
Why should you buy another book on Lean? The number of Lean publica-
tions has been increasing as more and more organizations seek ways to
remain competitive during tough times.
Is there really a need for more books? Are there really new techniques
that have not been explored? How much more can you write about a topic
that at its essence is simple and timeless? Will more discussion about Lean
lead to complicating the topic? Can you be innovative without inventing
complications to the system?
Perhaps the answer we want to hear is that yes, you should buy another
book about Lean (even if you got this one as a gift, please read it).
The purpose of this book was never to cover the well-covered topics
regarding the “how-to” of Lean implementation, or the concept of the
“complete toolkit” as Lean is often regarded, much less to teach you any-
thing new about Lean methodologies. Also, it is not the goal of the authors
to make you an expert on the topic they wrote about.
Rather, the purpose of each author was to share their own experience
when they first learned the Toyota Production System (TPS) while work-
ing at their Toyota divisions. How they learned a specific methodology,
technique, or concept that they chose to share with you. Because each
author had a unique learning experience, you get the advantage of seeing
the different approaches used to teach, as well as the unique way these
authors translate that learning to the reader. The authors are not profes-
sional writers but consider themselves professional learners and students
of Lean. Knowing this, they did their best to transfer what they learned to
you, the reader. While each author has a unique approach, you will also
see common threads emerge as they broke down their barriers of conven-
tion to accept a totally different way of thinking: The Toyota Way.
The most common thread that weaves together their stories is that they
all had to learn the hard way. We wish we could tell you that by reading
this book you will be able to learn the easy way. But alas, this is not pos-
sible. We do hope that you see yourself in our experience and struggles,
that you are strengthened by the knowledge that you have many compan-
ions on this Lean journey, and that we all have stumbled. Those of us who
have been on the path for some time also know that there is no magical,
painless way to learn Lean.
xi
xii • Introduction
Another common thread throughout this book is the utmost respect

each author has for Toyota and our mentors, many times referred to as
our Senseis.
In future books we will certainly cover additional topics, but we will
also see some of the same topics being described by others who learned
through different contexts and situations. The abundance of different and
unique experiences can, by itself, be an effective Sensei.
Altogether, this book combines a total of 105 years of inside Toyota
experience in divisions as diverse as sales, training, logistics, manufactur-
ing, and human resources. It brings experience from people who worked
closely with Taiichi Ohno, the greatest TPS Sensei, and those who worked
with his direct students such as Fujio Cho. It brings experience developed
over years of immersion at Toyota locations such as the United States,
Brazil, Venezuela, Europe, and Japan. Finally, it brings the personal testi-
monials of those who learned by living the system.
For our students, we know that many days you are frustrated by the
difficulty in learning Lean. We know that some days you wish we had not
been so tough on you. It is our hope that by reading these chapters, you
will see that the light bulb had to go off in our heads, too. We had our
discovery moments too. We made our share of mistakes until we learned
that humility and courage go hand in hand with the Kaizen spirit. And
although situations may change, these principles will never change.
Enjoy!
Sammy Obara and Darril Wilburn
About the Authors
Stephen J. Ansuini
I started working at Toyota Motor Manufacturing, Kentucky (TMMK),
in 1987 in the skilled trades development area with responsibility for
the development of intermediate and advanced maintenance training.
In 1988, I developed the initial TPS for the office (Office Lean) and TPS
for Maintenance (also known as TPM). From there I started the TMMK
Suggestion System in 1989, and supported Quality Circle deployment in
1990. During this time, I also supported the Toyota Motor Manufacturing,
Indiana plant start-up by providing instructor development and training
for the maintenance team members. I later provided pre-hire assessment
and system development support for Toyota Motor Manufacturing Baja
California, Mexico, in 2004. I supported the Toyota Motor Manufacturing
Texas plant start-up in 2005. I then moved to the North American
Production Support Center (NAPSC) located in Georgetown, Kentucky. I
retired from Toyota in May 2007 with more than twenty years of experi-
ence. Prior to Toyota, I worked at Mack Trucks for ten years and served in
the U.S. Marine Corps before that.
With Honsha I have worked with the State of Washington as well as one
of the largest mortgage banks in the United States. I am also owner of the
Center for Employee Development. I have had several Fortune 100 compa-
nies as clients in Lean capability building, realizing significant reductions
of safety incidents, improved inventory turns, and reduced costs of opera-
tions. I am also working with Jackson Community College to establish
a Lean Environment Simulator (LES) that will be available for classes in
early 2012; it will immerse the participants into a manufacturing environ-
ment where they can experience Lean principles and tools in an eight-
hour class.
[email protected]
www.honsha.org
xiii
xiv • About the Authors

Starting my professional career at Toyota Brazil (TBD) in September 1990,
I had the opportunity to work at Toyota’s Tahara plant, one of the premier
plants in Japan. In Brazil I was able to work with Sakamaki-san, one of the
people who helped Taiichi Ohno with the implementation of the Toyota
Production System. I left Toyota in 2007 as a supervisor of the areas of
press, forging, heat treatment, machining, and rear axle assembly.
Within a few months of leaving Toyota, I was granted the privilege to
join Honsha as an associate. The first company that I began to support as
a Honsha Sensei after leaving Toyota was The Tech Group, where I did not
speak any Spanish, yet managed to learn it in eight weeks in Mexico—spe-
cifically in the beautiful city of Guadalajara—where I met the Virgin of
Guadalupe, whom I keep close to my heart to this day.
One of the projects I think I can say made history was the work done at
Carl Zeiss Vision Tijuana, where we changed a twenty-five-year-old pro-
cess of how to make lenses for eyeglasses. For me it was a great honor to
have worked with Sammy and Fukamizu in this project, but I cannot for-
get Rodolfo Moreno, the engineering manager who believed in the project
from the beginning.
Another project that I cannot stop talking about is Mars Spain, where
the plant manager Demetrio Otero, originally from Recife City, Brazil,
had a very difficult mission. Demetrio invited Honsha to help change the
company and culture of the people in the plant. After one year, the Spain
plant became the Lean benchmark across Europe among the company’s
sites.
Now as a senior associate at Honsha, I can say that all the projects I have
done in these four years have been a great honor, always visiting compa-
nies with a passion to teach what I learned throughout my sixteen-year
career at Toyota. I would like to take this opportunity to thank the clients
with whom I have worked in these past years for their trust.
I cannot forget to thank my Senseis who taught me so much at Toyota;
they are Sakamaki-san, Ichii-san, Niyama-san, Torata-san, Nakata-san,
Ando-san, Carlos (Coloral)-san, and Fukamizu-san. I believe these men
are who taught me everything I know about Lean; I can say with certainty
that I learned from the best Senseis in the world.
I want to deeply thank my wife, Solange Romera Damiani, who has been
both mother and father to our children over the past four years while I
About the Authors • xv
spent many days away from home and abroad in order to teach what I have
learned at Toyota. To you, my wife, I say, I love you as much as always.
Thank you for being in my life.
To my children, Rennan Romera Damiani and Giovanna Romera
Damiani, thank you for collaborating with your mother all these years
that I have been far away, by studying hard, getting good grades in school,
and mainly remaining humble, honest, and responsible. Dad loves you
dearly. Remember this.
Special thanks to my good friend Francisco Estrada (Paco), for having
helped me a lot in the translation of this chapter. Thanks, my friend.
[email protected]
www.honsha.org
Carlos Yukio Fukamizu

I worked for Toyota do Brasil from 1988 to 2004, and between 1990 and
1993 at the Toyota Japan, Kamigo plant.
As production manager, I conferred with management and production
staff to plan, direct, and oversee production control of the consumer prod-
ucts manufacturing facility using TPS methodologies. The methods were
essential to analyze technology and resources needs required for coor-
dinating and directing projects, and making detailed plans to improve
safety, quality, productivity, and cost reduction.
I was also responsible for QC circle activities focusing on the improve-
ments of work conditions, and creating a good working environment for
the employees resulting in improved safety, quality, and productivity.
To pursue a new challenge, I left Toyota in 2004 and moved to the United
States to work as a Lean manufacturing engineer in an American company.
Since 2008 I have worked as a consultant in Mexico, Spain, Lithuania, the
United States, as well as South America. I have had great experiences and
results implementing TPS concepts in various industries such as pet care,
glass lenses, metallurgy, banks, restaurants, and electronics parts. In my
experience, the implementation of Lean is the same for any kind of pro-
cess, regardless of the type of industry. Of course all Lean journeys must
start with a deep understanding of processes, customers, and culture.
[email protected]
www.honsha.org
xvi • About the Authors
Renato Eiji Kitazuka

Just after I graduated as a mechanical engineer at Faculdade de Engenharia
Industrial in Brazil, I joined Toyota do Brasil for an amazing journey.
Toyota had been in Brazil for fifty years, manufacturing the same product
for that entire time. Then Toyota decided to expand its product portfolio
by localizing the Corolla. I was hired to work with the localization of com-
ponents as well as support and develop suppliers to meet the requirements
of the famous Toyota Production System (TPS).
Prior to Toyota I worked in a very traditional mass production com-
pany. After joining Toyota, TPS became a passion for me. After learning
TPS at the source, I decided to move to new challenges and learn more
about implementing it outside the Toyota environment, so I joined Delphi
Automotive Systems to lead the Lean implementation at a facility in
Jaguariuna.
The work in Jaguariuna opened the world’s doors for me and I worked
at implementing Lean in companies in South America and Europe. After
almost ten years in the manufacturing business, I decided to move on to a
new challenge and implement Lean concepts in an education service busi-
ness at my current employer CTB-McGraw Hill, in Indianapolis, Indiana.
As my passion for TPS guides my career, my passion for my family
guides my life: my parents are the models who shaped who I am; my wife
Alessandra is my other half, she is who gives me confidence to overcome
all barriers and challenges; and my sons Bruno and Diego are my happi-
ness, my major accomplishment still in progress.
[email protected]
www.honsha.org
Greg Lane
My twenty-two years of worldwide Lean implementation began while
working with Toyota when I was one of a handful of people selected to be
developed as a Toyota Production System Key Person through specialized
training in Japan by Toyota’s masters including Mr. Ohba, then returning
to train others at NUMMI (Toyota and General Motors joint venture). I
joined Toyota to learn their successful production system after working as
an engineer (having a BS in mechanical engineering) for more traditional
manufacturers, and then completing a Masters in business administration.
About the Authors • xvii
My Lean implementation work has taken me to thirty-two countries

and allowed me to support diverse types of organizations. Continuing
my Lean education has been significantly enhanced by personally buying
and profitably transforming my own manufacturing company; this really
connected the principles to my own profit and loss. The principal type of
support I focused on during the past eight years has been “made-to-order”
(job-shops) within small- and medium-sized businesses, including divi-
sions of large corporations such as Continental and Whirlpool in areas
where a traditional Lean approach has proven difficult.
I also share my experiences as a faculty member of the Lean Institutes in
the United States and Spain, as well as lecturer of post-graduate Lean stud-
ies at the University of Barcelona and the University Polytechnic Catalunia.
I have published two mainstream books and various magazine articles:
• Made to Order Lean—Excelling in a High-Mix, Low-Volume

Environment (Productivity Press, New York: 2007)
• Mr. Lean Buys and Transforms a Manufacturing Company—The True
Story of Profitably Growing an Organization with Lean Principals
(CRC Press, New York: 2010)
[email protected]
www.LowVolumeLean.com
Robert Martichenko
I am the chief executive officer of LeanCor, LLC. LeanCor’s purpose is to
support its customers in preparing their people, perfecting their processes,
and successfully implementing and operating the Lean supply chain.
To accomplish this purpose, LeanCor delivers Lean third-party logistics
services, warehousing, and facility management; Lean training; and Lean
supply-chain consulting services.
I have years of supply chain, logistics, and Lean implementation experi-
ence. This experience includes multiple Lean supply chain implementa-
tions supporting successful organizations, including Polaris Industries,
Mitsubishi Caterpillar, and Toyota Motor Manufacturing.
I authored the books Success in 60 Seconds and Everything I Know about
Lean I Learned in First Grade, both published by the Orloe Group. I also
co-authored the logistics management book Lean Six Sigma Logistics,
xviii • About the Authors
published by J. Ross Publishing, and co-authored the workbook Building

the Lean Fulfillment Stream, published by the Lean Enterprise Institute.
In addition to leading LeanCor, I am a senior instructor for the Lean
Enterprise Institute and the Georgia Tech Supply Chain and Logistics
Institute.
In addition to my professional experience I hold a Bachelor’s Degree in
mathematics, an MBA in finance, and am a trained Six Sigma Black Belt.
[email protected]
www.leancor.com
Patrick Muller
As supplier development manager at Toyota Motor Marketing &
Engineering Europe, I was introduced to TPS at TMC in Japan. During
my eight years at Toyota, I lived and breathed the “Toyota Way” on a
daily basis. My team was responsible for creating and maintaining a Lean
European supplier base, focusing on quality, cost, and delivery by means of
Lean technical support. It was key for my team to ensure advanced quality
and capacity planning to enable on-time launches. I worked closely with
Toyota Purchasing and Development as technical support using VE/VA
methodology in the design of products and as a key player in supplier price
negotiations.
I have worked as a Sensei in various business sectors’ headquarters and
sites around the world: automotive industry (Toyota, Ford), plastic manu-
facturing (Saint Gobain), food industry (Mars, Agrana Fruit), health care
(CHCL), optical manufacturing (Carl Zeiss Vision), packaging industry
(Portola Packaging), and U.S. defense electronics (Natel Engineering) and
financial institutions.
I am currently employed at Rockwell Collins in Melbourne, Florida, as
a principal Lean consultant.
[email protected]
www.honsha.org
Alistair Norval
I graduated from the University of Toronto in 1979 with a degree in chemi-
cal engineering and began my professional career at Kodak Canada Inc. in
Toronto, Ontario, Canada. I spent the early part of my career doing process
About the Authors • xix
engineering and moved on to quality assurance. I was very fortunate to be

part of a division that was chosen to be a pilot on Lean implementation for
the Eastman Kodak Company. After a successful pilot, Lean was rolled out
throughout the entire company, starting in manufacturing and eventu-
ally moving to sales & marketing, research & development, and the sup-
port functions for the organization. During this time, I received in-depth
training from leading international Senseis, including many Toyota veter-
ans such as Pascal Dennis, author of several Shingo Prize-winning books
including Getting the Right Things Done and Lean Production Simplified.
I was presented with a wonderful opportunity to join Lean Pathways,
Inc., and have spent the past five years with them continuing my Toyota
production system education. There I work with leading organizations
worldwide on continuous improvement and assist them in using Lean to
drive improved business results. These organizations are from a variety of
industries, including discrete manufacturing, continuous chemical pro-
cesses, new product development, health care, and service organizations.
Kimberly Clark, Lockheed Martin, Magna International, Group Health
Cooperative, and MultiCare Health System are a few examples of organi-
zations I have had the pleasure of working with.
My passion is to apply Lean thinking across the enterprise to achieve
consistently superior business results. I enjoy working with leadership
teams and developing their Lean thinking and their Lean management
processes to align, focus, and motivate organizations to become the best
they can be.
[email protected]
www.leansystems.org
Sammy Obara
I was first hired by Toyota in Brazil as an intern for the prototype division
of product development. The remainder of my thirteen years as a Toyota
employee was split among different sites such as Honsha and Motomachi in
Japan, Toyota de Venezuela (TDV), New United Motor Manufacturing Inc.
(NUMMI) a Toyota–GM joint venture in the United States, and several other
shorter assignments that included Toyota sites in Europe, Kentucky, and very
recently in the Philippines. Although my education is in digital technology,
information systems, and technology management, I use very little technol-
ogy in my work as a Lean practitioner and in my day-to-day activities.
xx • About the Authors
In mid-2011, I had counted a little over 300 companies that I had been
to, on either a Gemba walk or doing hands-on Lean stuff. Some of my
most memorable experiences include a great company that makes pet food
and M&Ms. I have been to twelve of their sites from Brazil to Siberia, and
they struck me as the model for Lean culture. Another company that I
had the honor to work with makes diamond for the mining industry. In
addition to its seriousness about Lean initiatives, it uses a good part of
its resources (money and people) to help poor communities. Many of the
senior executives spend weeks in Kenya every year in efforts to drive out
poverty. Unfortunately, I was not given enough pages to list all the com-
panies and their interesting characteristics, but I am glad to have been
exposed to such a fascinating universe of Lean practitioners.
Today I help coordinate Honsha.ORG in North America. Honsha is an
alumni association of former Toyota professionals. I also teach at San Diego
State University, where I live and help other institutions in California. I
would like to dedicate my chapter to my twin boys Andy and Ryan, and
especially to my wife Miki, who gave me all the support (and brought ice
cream) during my long battle trying to finish my chapter.
[email protected]
www.honsha.org
Bob Plummer
I began my career with fifteen years of experience leading manufacturing
operations, including Toyota experience at NUMMI, followed by fifteen
years of experience as division president and CEO of both manufacturing
and service companies. I have a Bachelor of Industrial Engineering degree
from Kettering University and an MBA from Harvard Business School.
While in the roles of division president and CEO, I implemented TPS
in several businesses. Two of my larger implementations included Portola
Packaging, a $200 million global plastic packaging manufacturer, and
Siegel-Robert Automotive, a $450 million automotive components manu-
facturer. When implementing TPS and Kaizen, I emphasize the important
role of leadership.
As partner at The Stunsl Group, I consult with CEOs to develop and
implement strategies to build and strengthen their businesses.
[email protected]
www.honsha.org
About the Authors • xxi
Art Smalley
I am a specialist in the area of world-class methods for operational
improvement and have served numerous companies around the world. I
was one of the first Americans to work for Toyota Motor Corporation in
Japan, first studying at different universities in Japan and then learning
TPS manufacturing principles in the Kamigo engine plant where Taiichi
Ohno was the founding plant manager. During my stay at Toyota, I played
an instrumental role in the development and transfer of both precision
equipment and TPS methods to Toyota’s overseas plants.
After a decade in Japan, I returned to the United States and served as
Director of Lean Manufacturing for Donnelly Corporation. I subsequently
joined the international management consulting firm of McKinsey &
Company and was one of the firm’s leading experts in the area of Lean man-
ufacturing for a period of four years. During this time I counseled numerous
Fortune 500 clients on operational matters involving Lean implementation
and led specific cost, quality, and delivery improvement projects.
In 2003, I launched my own company, Art of Lean, Inc., and now divide
my time serving a diverse base of manufacturing clients such as Parker
Hannifin, Delphi, Schlumberger, Gillette, Sandia National Laboratories,
and many other companies in areas of operational performance
improvement.
In addition, I serve as senior faculty member and periodic advisor to
the Lean Enterprise Institute and its global affiliates, delivering lectures
to leading manufacturing executives around the world. Through the
institute, I have published the definitive workbook guide on implement-
ing basic pull production methods titled Creating Level Pull, which was
awarded a Shingo Prize for distinguished contribution to manufacturing
knowledge in 2005. In 2006, Art was inducted as a lifetime academy mem-
ber of the Shingo Prize for Excellence in recognition of my contributions
to manufacturing. In 2008, I also co-authored the Shingo Prize award-
winning book titled A3 Thinking with my friend and colleague Professor
Durward K. Sobek. In 2010, I published Toyota’s Kaizen Method: Six Steps
to Improvement with Isao Kato.
[email protected]
www.artoflean.com
xxii • About the Authors
Darril Wilburn
During my seven-year stay at Toyota I was a leader in the development and
implementation of some of Toyota Motor Manufacturing’s highest profile
leadership development programs including the Toyota Way 2001 (Toyota
core values and principles) implementation at Toyota’s largest manufactur-
ing plant in North America. I worked with The Toyota Institute in Japan,
assisting in the development of the Toyota Business Practice, and co-lead-
ing the global pilot of this program as well as the North American Senior
Executive sessions. While at Toyota, I studied the Toyota Production
System as a student of OMDD, Toyota’s internal Sensei group. I was also
part of the team that launched Toyota Motor Manufacturing Texas, where
I led the assimilation and training of those new to Toyota management.
As a senior associate at Honsha, I have had the opportunity to work with
the public and private sectors on projects that reflect the current global
economic condition. Working with one of the largest mortgage banks in
the United States, our team has implemented a redesign of the workflow
to increase productivity and reduce cost and lead-times. I am also work-
ing with the State of Washington to develop a Lean culture that will help
transform the way state government does business.
Other clients include M&M Mars, Valero Energy, Kimberly-Clark,
Monomoy Capital Partners, and Toyota Motor Manufacturing. I am also
an active speaker delivering presentations and keynote addresses on Lean
Principles around the globe, including
• Harvard Business Review-Latin America, lecture series in Chile,
Ecuador, and Mexico
• Lean Conference in Brazil
• M&M Mars Latin American Leadership Team Retreat
• Abu Dhabi Talent Conference
• Washington State Government Lean Seminar
• Lithuanian Prime Ministers Conference
• Minister of Defense, Lithuania
• ISM University of Management and Economics, Vilnius, Lithuania
• Monomoy Capital Partners Annual CEO meeting
Without the love and support from my family, Marcy, Sydney, and Ryan, I
could not do what I love to do, so I thank you and dedicate this book to you.
[email protected]
www.honsha.org
1
Courage, Humility, Kaizen
Darril Wilburn
I consider myself one of the luckiest people to have worked at Toyota.

Everyone who works at Toyota receives invaluable training and on-the-
job development, and I was no exception. What made me so lucky was the
chance to work at three locations as well as being involved in high-profile
projects. I had the opportunity to work at Toyota Motor Manufacturing
Kentucky, the largest plant in North America; the North American cor-
porate headquarters; and finally to be part of a new plant start-up team at
Toyota Motor Manufacturing Texas. In addition, I worked on significant
projects such as The Toyota Business Practice and The Toyota Way 2001.
Most significant was the opportunity to be trained by Toyota’s internal
TPS group, Operations Management Development Division (OMDD). I
am forever grateful for the opportunities afforded me while at Toyota and
thank all the wonderful teachers and leaders who did their best to teach
me The Toyota Way.
With a background in education, process improvement, and leadership
coaching, I was hired in the late 1990s as a Development Coach at the
Kentucky plant. My job was to teach and coach members of the leadership
team on how to improve their “people” skills. I was assigned several man-
agers to meet with and develop strategies that would allow them to work
with their people more productively. My typical manager was one who
was quite good at the technical aspects of the job but had a more difficult
time developing the type of relationship that fostered mutual trust, a key
component in the Toyota Production System (TPS).
The position of Development Coach at the Kentucky plant was a new posi-
tion and one that was established by my first Sensei. She believed strongly
that Mutual Trust was a key in the development of a TPS culture. She also
believed that we could develop people in leadership positions who did not
naturally possess the skills needed to build mutual trust. When assigned a
new leader to coach, I chose to spend much of my time on the floor with these
1
2 • Darril Wilburn
leaders in order to understand their work conditions and the situations that
they were in every day. My Sensei insisted on the Gemba (Japanese word
meaning “where the work is done”) approach, and I came to understand
why. The Gemba approach allowed me to gain true insight into their situ-
ations, where they struggled and where they excelled. They were proud to
show me their production lines and introduce me to the people they worked
for. Yes, I said the people they worked for; it was common for Toyota leaders
to consider the people on the teams they managed to be people they worked
for and not people who worked for them. This was a new mind-set for me
but I came to see it as an essential element in establishing a TPS culture.
These Gemba sessions with the assigned leaders became something that
looked forward to to every day. I hope I was able to add some value to
those I was assigned to help, possibly through new insight and improved
working relationships. But I am also sure that I learned much more from
them than they learned from me. These Gemba sessions were the begin-
ning of my journey to learn TPS from the people perspective as well as the
technical manufacturing perspective. It was fascinating to see how TPS
functioned. Not to be too dramatic, but it was like hearing a symphony
with many components, parts, and people coming together at the right
time to produce a quality product. When I work with clients today, I strive
to help them develop this rhythm of work and unity of purpose.
I became more and more fascinated with TPS and had a strong desire to
learn more about not just the production part of TPS, but how it evolved
and how people functioned within the system. I shared this with my Sensei
and she said, “Darril, you have the people part of the TPS equation. If you
can combine that with the technical aspect, then you will have a power-
ful combination. Learn the principles behind the tools and how respect
for people (customers, team members, society) drives the system.” And so
that became my objective: to understand this connection between people
and process, the elements that make TPS one of the most studied but least
understood work systems.
THE TOYOTA WAY 2001

In 2001, Toyota developed the internal document called The Toyota Way
2001. Toyota had grown very quickly around the world and struggled
to convey the essence of what makes the company great to its newer
Courage, Humility, Kaizen • 3
associates. When Toyota was a small company and centrally located in

Japan, it was possible for senior leaders to teach team members in groups
or one-on-one. The rapid growth made it impossible to disseminate the
Toyota Way in the same fashion. Under the direction of then Toyota Motor
Corporation President Fujio Cho, Toyota’s Global Human Resources
Division researched and developed The Toyota Way 2001 as a way to
communicate to global Toyota team members the “DNA” of Toyota. In
the introduction, Mr. Cho states, “In this booklet we have identified and
defined the company’s fundamental DNA, which summarizes the unique
and outstanding elements of our company culture and success. These are
the managerial values and business methods that are known collectively
as The Toyota Way.”
In true Toyota form, the “Way” was condensed into a thirteen-page
booklet. Someone once told me that they heard that the booklet took ten
years to write. I told them I was not sure but it sounded right and added
that it probably took one year to write one-thousand pages and nine years
to condense it to thirteen pages!
Once published, Mr. Cho challenged each global region to disseminate
the Toyota Way to the people at their locations. I was fortunate enough to
have the responsibility to develop the program we would use in Kentucky
to teach members of the management team. During the development pro-
cess, I was able to meet and learn from the great leaders at Toyota Motor
Manufacturing Kentucky.
Here I share the Honsha version of The Toyota Way that is based on the
foundational Lean principles of Continuous Improvement and Respect.
Within these two principles lies the heart: Courage, Humility, and Kaizen.
Toyota uses slightly different words; here I have attempted to take the orig-
inal concepts and find the deeper root.
An example is Genchi Genbutsu. This is a key element of The Toyota
Way and is often quickly translated into “Go and See.” As with many
Japanese words, the quick translation fails to capture the essence of the
word. At the Kentucky plant, many people used the phrase “Go and See”
in place of Genchi Genbutsu but often the action was “Go and Watch” or
“Go and Do,” neither of which captured the essence of Genchi Genbutsu.
When I asked one senior executive, Hiro Yoshiki, what Genchi Genbutsu
meant to him, he explained the purpose [my paraphrase] as follows: “The
most important reason to ‘Go and See’ is to learn, learn deeply about the
situation and what is needed from you. The second reason is to teach by
asking the questions that lead team members to correct answers. The third
reason is to be seen.” This third reason did not sound very humble to me
but I came to realize the meaning. By being seen, you are able to convey to
everyone that the situation is important to you and that the people work-
ing on the problem are important. You and others also build a mutual
understanding of the situation and thus can arrive at solutions quickly.
This was a key learning point for me. The fourth reason to go and see,
said Hiro, is so you do not have to go and see anymore. This sounded very
strange to me until he explained further. “We want to go and see but not
the same problems again and again; we want to see new problems. Plus, if
the time is taken to teach, then problems are avoided in the future because
team members have a higher skill level.”
If we are to learn, teach, show respect, and develop others, we must go to
the part of our business where value is created for the customer. In manu-
facturing, we call it the “Floor”; others call it the “front line.” Whether it is
manufacturing or service or a nonprofit agency, the message is still the same:
Show your learning spirit, your humility by practicing Genchi Genbutsu!
COURAGE, HUMILITY, KAIZEN AT THE HEART

When we develop Courage and Humility we will then be able to practice
Kaizen. These three elements work together and allow us to show respect
for people and to develop a culture of Continuous Improvement. It was
during my study of TPS with OMDD that Courage, Humility, and Kaizen
came to life.
OMDD uses emersion as the preferred way to teach TPS. My first lesson
was early one Monday morning at a parts supplier’s plant location. With little
more than an introduction, we started and I was taken to a work cell that
made hinge parts for car seats. My Sensei told me, “Darril-san, this is your
work area; please find 100 problems, I will return in 2 hours to see your list.”
This was all very new to me. I had spent many hours observing the well-oiled,
highly efficient production line at Toyota. But this was obviously not Toyota.
The production area was a mess; there was no standard work and no hint or
any kind of order. In this case, it seems that identifying waste would be even
easier. But it was not. I do not know if it was a lack of experience or a lack of
confidence but I found it difficult to see any problems, let alone a hundred
problems in two hours. How would I do that? Just getting organized as to
how I would observe was difficult so I observed the team members and the
machines from outside the cell, pacing around it like a timid puppy for two
solid hours, looking for the elusive problems. At the end of the two hours,
my Sensei returned to find that I had exactly two problems on my list. I was
ninety-eight problems short of the goal!
He looked at me and then wiped his hands over his head and down to
his face. He must have been thinking, “Oh my, what kind of idiot do I have
here?” After he composed himself, he said, “Tell me what you see.” So I
described to him what the team members were doing but that I did not see
any problems. I still struggled to identify the problems. My skill level was
so low that one obvious item not on my list was a neatly hung mallet that
was used to slam each part into one of the machines. This problem should
have been obvious to anyone! At least they had it on a string so the team
member did not have to reach very far for it; that should make it good,
right? I was so naive.
At this point he was even more frustrated. “Darril-san, come with me,” he
said. In a private meeting room with a flipchart, he started to explain to me
how to observe in order to deeply understand the work. He explained that
at first that it is not my job to correct the work but to understand it, then to
make improvements. I had long been an admirer of Dr. Stephen Covey’s The
Seven Habits of Highly Effective People and what he was explaining to me
was Habit 5, “Seek First to Understand, Then to be Understood.” From this
perspective it really made sense to me. This was also a fundamental lesson in
The Toyota Way element of Humility. Humility insists that we understand
so that we may develop better solutions. Taiichi Ohno said, “Observe the
production floor without preconceptions and with a blank mind.” This is
what my Sensei was trying to teach me with actions, not just words.
He continued to teach me his approach, and he wrote the word “Muri”
on the flipchart. He explained that Muri is part of the three Ms of waste:
Muri, which translates as overburden; Mura, which translates as uneven-
ness; and Muda, the most famous element, which translates as waste and
has seven components. He explained that we must approach our deep
understanding of the process first from the perspective of the people doing
the work. We must look for Muri and eliminate it from the process. We
must also send the correct message that our purpose is first to improve the
work for the people doing the work. This will help us gain buy-in with the
team when we go deeper into the improvement process. At this point we
only looked at Muri. He asked me to list what I observed in the process that
could be considered Muri. I recognized that using the mallet to hit each
part, several hundred times per day, would be considered overburden, so
that finally made it to my list. I could see walking inside the cell as overbur-
den. My list had grown somewhat, but from my Sensei’s perspective it was
still incomplete. “Darril-san,” he asked, “what is the best way to increase
your understanding of the process and your ability to see the Muri?”
“I will observe more closely and with an eye for Muri,” I replied.
“This would of course be helpful, but what can you do that would deepen
your understanding more quickly?”
“Are you saying I should actually learn the job?”
“I am not saying, I am asking.”
“Then I will need to learn the job in order to more deeply understand the
process and to see the Muri more closely.”
Now the lesson of Humility was even more profound. Not only was I
learning new skills from a Lean/TPS perspective, but I also needed to
learn how to do the manufacturing job I was observing. I was not only a
student of the Sensei, but now also a student of the team members I had
been observing. I approached the team and asked if they would teach me
their work process. They all smiled as if to say, this is going to be fun! “Of
course,” they said.
After donning the appropriate personal protective equipment, I started
on the first machine in the process that connected the first two flat steel
plates and began to turn them into seat hinges. This had looked so easy
from the outside looking in. The team member teaching me the job had
several laughs as I fumbled to keep up with the speed of the process. I
would turn the raw material the wrong way, drop the parts, and was very
slow and awkward. After a day on the job, I was able to pick up the process
and do it with help from the team member assigned to me. I was not able
to do it as quickly or with the quality of the team member, but with her
help I understood the process much more deeply. Looking through the
lens of Muri, I was able to add many problems to my list.
The next machine was the infamous “mallet hanging from a string
machine” that I mentioned previously (Figure 1.4). The first action was to
pick up a flat steel part, apply gooey lubricant with a brush to the section that
would be moving against the previous piece; then put this into the machine
by placing a hole in the part onto a small peg in the machine, and then
smack the part with the mallet so it fit tightly even if it was already tight.
Well at least it was standardized. This seemed very wrong but I wanted to
learn from the worker perspective so I did as instructed. As I did this pro-
cess, I realized that smacking the part with the mallet was indeed overbur-
den and caused a bit of pain at the end of the rotation—not to mention the
possible damage to the part itself. I also realized that the reason the parts did
not always fit snuggly on the small peg was that the peg had become worn
over time and when the part was even slightly off center, the peg might not
allow the part to fit correctly. The mallet was obviously a countermeasure
to this problem but it was not the result of deep, 5-Why problem solving. In
this case, as in many others, the result of shallow problem solving is more
burden on the worker. This was powerful learning for me.
One process called for the worker to add pins and grommets to a
machine for processing. The hand motions used required reaching, hand-
ing off the parts from one hand to the other, and crossing arms to place
the parts in the machine. This is also a burden on the worker…my list
was growing.
Over the next couple of days I learned each process in this same way.
When my Sensei came back and asked me what problems I had on my list,
I showed him that the list had grown, and he seemed a bit more pleased. He
asked me if I had not seen these same things before. Of course, I had seen
the steps in the operation while I observed the process, but not through
the eyes of Muri. I also discovered that I was hesitant to judge the steps in
the process. When I observed the process and saw something question-
able, like the mallet, I told myself, “There must be a perfectly good reason
for doing that.” When I told my Sensei about this rationalization of what I
was seeing, he said, “When you observe the process, look for fact; don’t be
concerned with whether there is a good reason for the action or not. If the
action causes burden, then write it on your list as a problem. If the action
is wasteful, then write it on your list as a problem. Maybe it will turn out to
be a problem we work on now or one we don’t work on for a while, but put
it on the list anyway.” This skill took the combination of both Humility
and Courage—the humility to understand the process and the courage to
identify the problems. It is not common practice to gladly raise problems
to the surface in most work environments. I have observed that we are
more likely to place a mallet on a string and smack a part than we are to
actually recognize the problem and solve it at its root cause. I realized that
I was very timid in my observation and that I must be more courageous in
challenging myself to see more deeply.
Muri was an important lesson. Not only had I gained so much insight
into the work itself, but also the process we were using to eventually make
improvements. I was able to build strong relationships with the team mem-
bers, thus setting us up for rapid Kaizen in the near future. This step of
building the relationships with the team is not to be skipped if you are an
“outsider” coming into the team. Learning from the perspective of Muri is
a great way to foster relationships.
Several years later when I was beginning my consulting career, I had a
client who made cast aluminum parts. It was a hot and dirty job, and I
remember being a bit intimidated by not only the work, but also the sea-
soned veteran workforce. The plant was nearly sixty years old and many
employees had been there for more than forty years.
On my first day at the plant, I immediately thought back to the lessons I
had learned from my Sensei. Observe from the perspective of Muri: learn
the process deeply. One of my first actions was to find the most grizzled
veteran on the process I was assigned to and ask him if he would be will-
ing to teach me the components of the position as if I were a new hire. He
growled but agreed. I mustered as much humility and courage that I had
and began to learn the job. Because of the inherent danger of the job, I was
never allowed to do it alone but, with the veteran by my side, I eventually
was able to accomplish most of the tasks. After that first week, the gen-
eral manager of the plant sent a letter to the managing consultant stating
that “We really liked working with Darril. He immediately developed an
excellent rapport with the caster operators; in fact, he ran the casters for
a bit (under the operator’s supervision) to learn the job.” I was obviously
pleased that one of my first consulting jobs was going so well but I was
shocked that the act of learning the job before attempting to help improve
the process was seen as so unusual. What other way would be effective? It
was growing up at Toyota that taught me the power of small things such
as learning the process, working at the Gemba, and building relationships.
These small things are really the big things.
Having exposed me to the concept of Muri, my Sensei now moved on to
Mura and Muda. There was a great example in this plant of how Mura or
“unevenness” can lead to Muri. There was no set work pace or takt time
established in the cell. The goal was seven pallets of parts on the dock
by the end of the day on Friday. The practice was to work as fast as you
could until you achieved the seven pallets and then take it easy for the
rest of the week. This usually happened at some point on Friday morning,
depending on how the machines ran. Quality was also an issue. I asked
the area supervisor about the quality measures for this operation and he
expressed that there were many issues with rejects and scrap. I asked the
team about the safety record for the area, and they expressed that they had
a new person in the cell because one person was out on medical leave and
that they had many missed days on the team due to injuries. It does not
take a rocket scientist to see the possible correlation between increased
work speed and the quality and safety issues of the cell. We would not be
able to attack all the issues during our stay but we could set up the process
to minimize both Muri and Mura.
This fit well with my next learning: Muda, or the seven types of waste.
In order to see waste, my Sensei helped me and the team begin standard
work. We established the takt time and developed a pace setter, which for
us was someone standing at the end of the cell with a stopwatch and not
allowing the worker to put a part in the box until the appropriate time.
Eventually, this method led to the team working at a steadier pace that
was not prone to cause injury. It also helped us see the waste as it hap-
pened. We also helped establish standardized work for each of the pro-
cesses in order to more closely match the cycle time with the takt time.
Once we were working with a standard, my Sensei and I returned to the
training to discuss Muda. I knew the seven types of waste but had not
really been trained to use them in any meaningful way. He explained one
of the wastes and asked me for examples from the process. Because I had
spent so much time learning the process, it was much easier to develop
examples. After I exhausted examples from memory, we walked out to
the floor and he asked me to find more examples. I think he was test-
ing me to see how deeply I understood the process by asking me to first
work from memory. The first waste we focused on was waiting. I was
able to see people waiting on the machine to finish cycling before they
could work, or waiting to put the part into the box at the end of the cell.
Before we established standard work in the cell, there was lots of activity;
it looked very busy all the time, except for Friday afternoon. Was all the
work actually adding value? It was hard to tell before the standardized
work. Taiichi Ohno once said, “Wasteful action is not work.” This was a
great example of just that. In a sense, the team was saving up all the wait
time in the process until Friday. By developing the takt time and stan-
dardized work, I was able to see the waste as it occurred and not have to
wait myself until Friday to see it.
Before we moved on to the other types of waste, my Sensei made a point
about the person standing in front of the machine. He explained that this
waiting is one of the worst types of waiting. He said, “When we allow
a human being to wait for a machine and just stand there, what we are
saying is that the machine and the human are of equal value or maybe
even the machine is more valuable since the human is waiting for it. Never
allow this to happen. It does not show respect for people!” Today, when
I am with a client and touring a production area, I still see this and am
quick to challenge the leadership to develop ways to engage the person in
other work while the machine is working. It is better for the machine to
wait on the person than for the person to wait on the machine.
We rotated between the meeting room and the floor with each of the
other six forms of waste and each time the list of problems grew until even-
tually there were more than 100! Before this experience I could only see
with the eyes I had developed over my lifetime—eyes that were trained, by
my upbringing and the places I had worked, to overlook problems. Now
I was developing a lens with the knowledge of Muri, Mura, and Muda. It
reminds me of the movie “The Sixth Sense,” about a boy who had a special
ability to see and communicate with people who were no longer living.
This was his sixth sense. In the movie, the boy mumbled to his doctor, “I
see dead people, they’re everywhere.” After learning to see the workplace
through the lens of Muri, Mura, and Muda, I find myself mumbling, “I see
waste, it’s everywhere.”
As illuminating as it was to begin the development of an “eye for waste,”
just seeing the problems and not solving them would itself be a waste.
It was this phase of my training that was even more challenging than
the first. Now I actually had to work with the team to develop and imple-
ment improvements. Many of the people going through this program at
the same time I was had much more experience on the floor and were also
very good at fabricating in the maintenance workshop. They could con-

ceive of something that would help improve the process, like a gravity-fed
chute for parts delivery for example, and then quickly produce the device
after cutting and welding the metal.
The team and I had developed several ideas that we wanted to imple-
ment but we needed help to fabricate the items. Usually you can work
with the plant’s maintenance department for help but in this plant the
resources were scarce. I spoke with my Sensei about this problem, and he
brought me a pair of scissors and some heavy yellow tape. He then pointed
me to the stack of used cardboard in the corner. “Darril-san, be creative!”
he said. Again, this was my opportunity to practice both Courage and
Humility. The Courage to find another way and the Humility to be the guy
using cardboard and tape while the others were welding and fabricating!
Soon the work cell resembled a police crime scene with all the yellow tape.
We made a small box out of tape and cardboard to hold lubricant to improve
the process of brushing lubricant on each part. We made parts chutes for one
machine so we could load parts from outside the cell to the operator. This was
the machine that required the operators to cross their hands and reach often
to complete the process. We dropped the cardboard and tape chutes into the
machine and placed them near the point that the parts would be loaded in
order to complete the process. This, combined with new standardized work
for this process, allowed us to reduce operator time from over thirty seconds
to less than fifteen seconds with a higher degree of ergonomic safety.
Some interesting developments resulted from our use of cardboard
and tape in our Kaizen efforts. After a few days of cutting and taping
and changing the designs several times and re-cutting and re-taping, my
Sensei took me to one of the other cells where the students were fabricat-
ing metal and welding. He asked me if I saw anything different there as
compared to my cell. Obviously there were lots of nicely constructed parts
chutes and tables made from metal. It did not resemble a crime scene
because there was no bright yellow tape. It did not have piles of failed
attempts as seen in my cell with the ripped-up cardboard and peeled-
away yellow tape. It was the failed attempts that my Sensei asked about
further.
“Why do you think there are no failed attempts here?” he asked.
“I guess they got it right the first time,” I responded.
“Maybe so, maybe so. I want you to think about this question and get
back to me later.”
I kept working that day but the question was on my mind. Had I failed
that much more than the other students? Were they really that good? Or,
had they invested so much time and effort in the construction of these
beautiful works of metal and welding that they were reluctant to try some-
thing else if the results were not what they expected? I shared this with
him later in the day and he responded, “I think you are correct. They did
not adopt the true spirit of Kaizen. Humility says that we don’t really
know so we must understand and then try many things to see if we have
the right solution. If we don’t, we try again. That is the beauty of cardboard
and tape; you are demonstrating that you are not quite sure and you want
to be sure before you make it permanent. If I have invested so much in
my idea and I have not trialed my idea quickly and inexpensively first,
then I am reluctant to change my plan and will try to make it fit. I think
they approached Kaizen with only Courage and not a good combination
of Courage and Humility. You may think you failed more than they did
but actually you were able to learn faster and make improvements faster.
This is Kaizen.”
The lessons were clear. If we want to build a culture of long-term, sus-
tainable continuous improvement, then we must first develop the Courage
to challenge our thinking, to expose problems, and to solve them. It is also
vital that we combine our Courage with the Humility to deeply under-
stand the current situation, including the needs of the customers. If we can
combine these two principles, it is then that we can Kaizen and develop
the culture of continuous improvement.
When we attempt to Kaizen with just Courage, we may find ourselves
in a similar trap as my fellow students. Kaizen in that case may look like
a bully trying to prove that he is right. Kaizen with only Humility is too
slow to act and is always looking for more and more understanding before
action. It is the combination that makes Kaizen work.
TEACHING OTHERS
Several years later, I remember those lessons along with many others as
I teach those outside of Toyota. Inside Toyota, we take many things for
granted, not the least of which is the culture of continuous improvement
that has been developed over the years. In Toyota, problems are readily
exposed so they can be solved. Visual management is a key component in
exposing problems as they occur. Tracking visuals such as Andon boards
and production count boards are commonplace.
I have had the opportunity to work as a consultant in many non-man-
ufacturing but still production-related businesses. One example, and
you might be surprised, is a mortgage banking company that works to
modify mortgages. It is no secret that the U.S. mortgage industry has been
in financial upheaval for several years. The volume of requests for mort-
gage modifications far outpaced the capacity of banks to process them.
In a sense, these were production facilities with information coming in
one side, and the product, an approval or denial, coming out the other.
Activity takes place between the beginning and the end of the process, and
in that way it is much like constructing an automobile. If this is true, then
the same principles of Courage, Humility, and Kaizen should also apply.
Honsha was asked to assist this company in increasing its capacity as
well as maintaining high quality. We began with one group so we could
understand the current capacity as well as the work itself. With this in
mind, one of the first questions I asked the management team of this area
was a seemingly simple question: “Are you ahead or behind?” I was sur-
prised to see the surprised looks on their faces.
“What do you mean?” they asked.
“Are you producing your product ahead of your demand, with your
demand, or are you behind your demand?” I replied. Still they were confused.
“I guess we are behind because there is no end to the work,” one said.
“Will you be able to catch up?” I asked.
“I don’t know,” one replied.
With this exchange I knew we had a lot of work to do. As we toured the
workplace, there was a glaring lack of visual understanding of the current
condition. Employees were simply doing what they do with little knowl-
edge of how the company was performing. I talked with other members of
management as well, and it seemed that no one had a clear understanding
of their condition other than it was “bad!”
We worked closely with one particular manager and his group to
develop clear measures of productivity. We dug deeply into the process,
becoming humble students and learning the process almost as well as the
people doing the work. Working closely with the manager and the team,
we established pilot process improvement experiments that allowed us to
understand and increase capacity, while maintaining high quality. We
asked that the team visualize its production progress with simple white-
boards showing plan versus actual and the difference. This was a culture
change for them, exposing problems, understanding capacity and if we
are ahead or behind, and allowing anyone who walks by to see this infor-
mation. The act of visualizing their status took a combination of Courage
and Humility—the Courage to show current condition and the Humility
to admit there was a problem. It was not unusual to walk around the
workplace and see production tracking but it was always just one number:
what was produced, not what should have been produced and comparing
the two. One without the other is meaningless.
This was made evident during one meeting with a group of managers
at this same location. There was a crisis, and they had to develop a plan to
process a large number of modifications in the next two weeks. A mem-
ber of senior management gave a pep talk explaining the importance of
getting this work done and how she knew they could do it, just like they
had done it in the past. She encouraged them to try really hard and main-
tain a great attitude. It was much like a pregame speech that a high-school
coach might give. It was very inspiring, and everyone left feeling great. I
could only assume that there was additional strategy beyond “You can do
it.” I was not a regular attendee at this meeting so I did not know what to
expect.
The next Monday we had a status meeting to see how we were progress-
ing on the “crisis.” The meeting consisted of the managers and the same
member of senior management. The process went like this. The member of
senior management asked each manager what the production was for that
day. She then recorded the number on her sheet (their ability to get real-
time data from the computer system was limited). After each number, the
team would clap for the reporting team. I did not clap; I was not sure what
to clap for. Were these good numbers? Were we ahead or behind plan? For
someone with a Toyota background, it was very confusing. We also discov-
ered that the original goal was not static, that new requests were coming
in each day, so not only did we have to eliminate the “crisis” number but
we also had to outpace what was coming in with increased productivity.
After this meeting I asked to meet with the member of senior manage-
ment. I asked her if the meeting had gone as planned and if she was con-
fident that we would be able to make the goal. She assured me that all was
well. I then asked what the plan was, how could we be sure that we could
make the goal. As it turns out, there was no plan beyond the pep talk
and hoping that we made it. This was very frustrating but I remember
the patience my Sensei had shown me in the past. So I asked her what she
might expect from each person in production. Her expectation was ten per
day per person. So if we multiply this by the number in each group, can we
consider that our plan? If there are seven in the group, then the expecta-
tion is seventy per day? She agreed, although this was not really a plan and
not really a reflection of the reality of production. She had not spent much
time on the floor and did not have a clear idea of actual productivity. She
only had reports. Taiichi Ohno once said, “Data is, of course, important
… but I place greatest emphasis on fact.” Reading reports at your desk will
give you the data. Only going to the floor will give you fact!
Regardless of this disconnect, I decided to use the numbers she supplied
for the next step. I asked her if I could facilitate the production meeting
the next day and actually compare planned production to actual produc-
tion. She agreed.
The next day I started the meeting with a flipchart with a grid of each
group number, and a space for Plan, Actual, and Delta (the difference
between the plan and actual) next to the name. I asked the first manager,
“What was the production of the group today?”
“Seventeen”
I posted the number under “Actual” and I asked him, “How many peo-
ple do you have in the group today?”
“Eight at work today,” he said.
I multiplied eight by ten and placed eighty under “Plan” and sixty-three
under “Delta.” I smiled and thanked him. There was no clapping. This
went on for the next seven managers and each time it was like the air was
being sucked out of the room. In the previous meeting we were just look-
ing at production and had no way to know if we were making progress
against the goal. Now we were dealing with reality, with fact, not just data.
At the end it was clear that we would never reach our goal without a dif-
ferent strategy. This was a very humbling exercise and the point was well
taken. We must be humble and accept the facts, and we must be coura-
geous and solve the problems, through Kaizen, that arise from our new
understanding.
It took several months but this team eventually developed and began to
understand their work in a new way. The success was evident when one
manager we had worked with in the pilot group was asked in a meeting
with his senior manager about the possibility of adding a component to
the current process. Once the request was made, he outlined the process
for the senior manager on a flipchart and how much time each step took.
He estimated how much time the new element would take and added it to
the process time. He calculated the impact on productivity and then said,
“We can do this new element but it will cost us, in the short run, X amount
of production per day per team. Is this a price you are willing to pay?” The
senior manager was a bit astonished at this display of facts and said, “No,
not at this point but can you work on the Kaizen of the process so that we
can add this element in the future and not risk production or quality?” His
answer was, “Of course!”
I had witnessed him a couple of months before in a similar situation.
He was asked about his team’s production during a meeting, and he was
immediately defensive. After complaining and making excuses, he gave in
to the request and then complained about senior management to his people.
We coached him on these points. He must have deep understanding of his
team’s capacity as well as the work process. Only then would he have the
information he needed to respond with facts, not with emotion and excuses.
He obviously learned a great deal and was able to put it into practice.
Lean is simple as a concept, but practicing Lean is difficult. When we
focus on the foundation of Courage, Humility, and Kaizen, we can begin
to learn it deeply and make our practice more meaningful.
2
Stability and Standardized Work
Standardized work is one of the techniques that the Toyota Production

System (TPS) uses for joining optimum operators, machines, and mate-
rial, to provide products with quality and low prices to their customers.
The standardization of operations seeks to maximize productivity by
identifying and standardizing the work elements that add value, eliminate
waste, level between processes, and define the minimum level of in-pro-
cess stock. A standard routine for operations flows in a steady and lev-
eled stream of production, requiring a small amount of parts and different
machine layouts.
When I (Gerson Damiani) worked at Toyota, I learned the importance
of having the work standardized; it helps leaders and managers recognize
where the wastes are and how to quickly act to eliminate them. I learned
standardized work very oddly; I was just beginning as a Group Leader in
Production when something very interesting happened in my life, which I
wish to share with you now.
After obtaining my Engineering degree at Santa Cecilia dos Bandeirantes
University in Santos, Brazil, I spoke to my manager to request an oppor-
tunity to work in Toyota’s Engineering area. That was when Niyama-
san asked me, “Why do you want to be an Engineer of the Press line?”
I replied, “Because I think there are many wastes that we can eliminate
more quickly using PDCA (Plan-Do-Check-Act) and Kaizen along with
the Production operators.”
After many conversations, Niyama-san said, “Gerson, I have a position
for the area of Engineering, but I also have a position as Group Leader of
the Press line, for which I believe you fit the profile I’ve been looking for.”
Then I said, “No, wait; I had only made the request to be an Engineer, not
a Group Leader. Besides, the escalation process always starts as a Leader,
then Group Leader, then flow Supervisor; am I right?” Then my manager
said, “Gerson, you don’t need to be a Leader; I have a plan for you. First,
21
22 • Gerson Valentim Damiani
I’ll transfer you to the Press area, for you to help the Press Attendants, and
then we will see about your promotion, all right?” So, we moved forward.
After a week, I was transferred to a Press area to then discover that the
Manager was retiring, and that the other Group Leader would be leav-
ing Toyota. So, I would be responsible for the area along with another
Supervisor named Nakata-san, one of the best leaders I’ve ever worked
with, along with Niyama-san, because we always worked together through-
out the transition of the SBC Toyota Plant from a car plant to a plant for
making car safety parts. The transformation was very complex because we
had to greatly improve employees’ awareness about how to make products
with excellent quality.
Then after making changes to the plant, one day Niyama-san asked me,
“Gerson, how was it today in the Press area?” I said, “Fine, we complied with
the plan from production scheduling, no accidents occurred, no incidents
(Hiyari Hato: the possibility of an accident), and we had a 0.05% rejection
of parts today.” Then Niyama-san said, “Gerson, I did not ask you this. This
is the minimum a person in charge must know at any time of the day. I’m
inquiring about the problems that occurred in the area.” Then I said, “I do
not know what problems you’re talking about, boss.” So, Niyama-san said,
“Very well. Tomorrow, I want you to define an area where you can observe
all the employees working. You’ll stay there for thirty minutes and then tell
me what type of problems occurred within the thirty minutes.” I said, “Very
well. I will do this tomorrow.”
The next day, after defining the tasks for each employee, I went to an area
where I could watch the employees for thirty minutes. I looked and looked
and found nothing; Niyama-san appeared and asked, “Well, how many
problems did you find?” I said, “None. Everything is perfect.” Niyama-san
said, “Of course not; twenty problems occurred right in front of you, and
you did not see one problem? I said, “Where were you standing to detect
twenty problems? Because I was here and did not find any.” Niyama said,
“Gerson, tomorrow, you’ll stay in the same place and observe more closely.
Try to find them, because they are happening right in front of you.”
The next day, I was at my post to observe for another thirty minutes. I
tried with all my might to identify the problems, but could not find any-
thing, and once more, there appeared Niyama-san, asking how many prob-
lems I’d found, and my response was none. Again, he informed me that
there were twenty. This took place throughout the whole week. On Friday,
I detected one problem, whereas he observed seventeen. Niyama-san then
said, “Gerson, why are you not paying attention to the Operation? Look,
Stability and Standardized Work • 23
you must pay attention to how each operator is working. You should know
the operation standard. If you do not know the standard, you’ll hardly be
able to see problems. So, here; take the standard work instructions (450 in
total) and study them one by one.” Then I said, “All right, boss, I’ll study
all of the work instructions.”
After a week of studying all the operational standards at home, I think
my son Rennan was ready to work for Toyota, because he was always at
my side asking how things were, since I had to read the work instruc-
tions. For me, it was very good because I was able to teach my son and
also study.
After a week, I returned to the same point of observation, ready to detect
the problems on the line. I stayed for thirty minutes and could not see
anything; then my boss came to ask how many problems I’d detected. I
said none, and I had studied all the steps, and yet I still could not see. His
answer was, “Because you still have junk in your mind. Gerson, you have
to concentrate on the movement of the operators’ hands, the sequence
of the operation. This is important to ensure the stability of the line and
guarantee good products.”
During the week, I stayed at my post to see where the problems were,
talk to the operators, and follow the production standards. On Friday, I
had found seventeen problems and my boss had found eighteen. He then
said, “Now, every time you come to see me for a signature, you have to
bring me five problems that you saw on the line, and not only problems,
but also the actions you will take to solve the problems.”
When I started to look at the process, I discovered that for a work
instruction to be well-followed, it depends on the head of the area oversee-
ing each of the steps written in the standard, because people always want
to change something to improve the way of performing the operation, and
with a lot of discipline, this is possible. It’s not a problem to change things,
but first we must test to know if the change will be beneficial.
When working on a line where the takt time is very low (i.e., fifteen
to twenty seconds), any change you make can reduce the cycle time by
one to three seconds, which can unbalance the line, which in turn will
result in the accumulation of work-in-process (WIP) inventory between
workstations.
Takt Time: Takt is a German term for speed, pace, or rhythm. Production
time (takt time) is the reference used for the production line (finished
product) market demand; hence, it associates and determines the pace of
production to the pace of sales, represented by the following equation:
AvailableProduction Tim eperD ay

TaktTim e=
Custom erD em and perD ay
Example:
27,600seconds
TaktTim e= = 60 seconds part
460pieces
To use takt time, it is necessary to know the “actual work time,” that is, the
time from the beginning to the end of the shift, subtracting the operator’s
line stops for coffee, meetings, cleaning, etc.
I’ll share with you something that happened to me when I was assessing
a medical components company. While on the shop floor, I noticed that
there was a great deal of WIP inventory between each operation; but why
would this happen? At Toyota, being trained to look for waste, it becomes
somewhat logical to identify where problems may be.
When I was training people in standardized work according to Toyota
standards, I could see that people were already accustomed to problems,
and then I remembered my lessons from Niyama-san. Although the waste
was apparent, people did not believe that more waste could be found; for
this, I had to prove to them that there was much waste on the line, as evi-
denced by the following:
• Waiting: There was no workload balancing between the operators.

One operator produced less than the others; therefore, this operator
was the bottleneck in the process.
• Inventory: There was a lot of inventory between operations.
• Overproduction: Producing faster than the takt time to generate
WIP inventory.
• Scrap/Rework: The people who were the bottleneck in the process
had to work at a faster pace, frequently causing the product to require
rework or to be scrapped.
• Motion: The person who replenishes the assembly components must
perform his or her cycle more times than the standard dictates due
to the rejected products on the line.
• Overprocessing: Due to the amount of rework, there was a quality
inspector performing 100% inspection of the parts.
• Transport/Conveyance: Production was often stopped to check the
quality of the finished product, which had to be taken by forklift to a
separate area and await its release by the Quality department.
Notice that for this one example, we can see all seven wastes occurring on
the same line.
After pointing out the waste to the people being trained, I had to prove
that it was possible to better balance the line, thus avoiding the waste. Then
after watching the videos, we filled out the Standard Work Combination
Sheet and did a Yamazumi chart before going to the shop floor to do
Genchi Genbutsu (which refers to evidencing for oneself where and how
problems are occurring).
On the floor, we began to balance activities by operator according to
takt time, where the variation between operator times could not be greater
than two seconds. We practically stayed all day at the line, testing and
proving that it was possible to improve the operation without the opera-
tors having to work excessively on the line.
By the end of the day, we were able to balance the line, yet we still needed
to validate the positions and standardize the activities of each operator on
the line. On my visit the following month, I found that people were not
inspecting the consistency of the operation and that the Standard Work
Instructions were not in the work area. I asked why they were not working
according to the procedures. The reply was that they did not have time to
standardize the operation as per the performed test.
For me, the following was the greatest lesson I received from Niyama-
san: Regardless of what you do now, do it in accordance with the standard.
People lose sight of the importance of standardized work for operations.
With a standard, it is much easier to find waste.
Stability in the process will be based on how the work instructions are
written, how the operators are performing the operation based on the
standards, and, of course, it will depend heavily on the leaders, managers,
and supervisors making daily checks (hour by hour) of how the operators
are doing the work. Do not worry about this taking a long time; when we
already know the standard, a noncompliance error can be detected within
a minimum of cycles of the operator.
After learning this lesson from Niyama-san, the company sent me to
Toyota Japan to learn more about standardization and TPS.
When I was at Toyota in Japan in 2001 to receive training on how to pre-
pare the plant to produce the redesigned Corolla, the following occurred
to me: I was in Engineering, which was on the mezzanine above the pro-
duction lines, with glass windows that enabled everyone to see the pro-
duction. I looked for my boss and asked where the coffee machine was.
My boss, Ando-san, said, “Gerson, before answering your question, may
I ask you a question? Who is the king in a factory?” I said, “That’s easy—
the president, for he can command and dictate here at Toyota.” Ando-san
shook his head and said, “Gerson, think a little more before answering.
I’ll ask again: Who is the king in a factory?” I thought harder, but could
not find an answer, yet I didn’t tell Andon-san that I did not know; I said
it was the director. After the president, the director is the one who has the
most power. Ando-san, again, shook his head. He said, “Gerson, let’s go to
the factory for a tour, so you may understand some basic things about the
culture of Toyota.”
We went to Production, where we went through some lines, and dur-
ing this time, Ando-san did not say one word. Then we reached the coffee
break area in Production, located between the production lines (assem-
bly, welding, bodywork, painting, etc.). Ando-san then said the following:
“Gerson-san, I will ask again, and if you do not respond correctly, you
have to pay for the coffee; if you answer correctly, I’ll pay for the coffee.
Now respond: Who is the King in a company?” I thought about it with all
my might to avoid paying for the coffee, but I did not know the answer.
While I continued thinking, Ando-san said, “I want a cappuccino” and
laughed at the situation. I was trying to find an answer that was right in
front of me, but could not see it because I was thinking with reasoning
instead of with my heart. In the end, I could not continue and told Ando-
san, “Though I’ve tried to find the answer with all my strength, I do not
know the answer.” Then he said, “The first great virtue of man is to recog-
nize when he does not know, in order to learn; but many men always say
they know and then they disappoint later, because no one can fool every-
one forever; remember this always, Gerson-san.”
After this happened, I asked Ando-san what the answer was. He replied,
“You have to discover it for yourself; it’s around you all the time. Look,
Gerson-san, if you think with your heart, you will find the answer.” Then I
looked ahead, and there was a machine operator with a stopped machine,
and it took less than a minute for several people to approach to help him
with the line that was down. Then I thought, it can only be the operator.
Ando-san then asked, “Well, what’s the answer?” I said, “The operator.”
“Why?” he asked. I replied, “I think it’s because it is the operator who pro-
duces the product, and looking at these people helping with the line, I got
that impression.” Then Ando-san said, “Excellent observation; but there’s
something more that I will explain now. If the operator wants to build a
high-quality product, he will; if he wants to make a product that will have
to be reworked, he will; if he wants to make a product that will be rejected
at the end of the line, he will. But how do we have the operator make only
top-quality products? The answer is to help the king. If we help the king,
he will only make products of excellent quality. For example, now the line
has stopped; he saw what had happened and could not identify where the
problem was, so he sought help, and see how many people wanted to help
the king. Gerson-san, this is the essence; do not forget. Now, pay for the
coffee; I have to work.” After this, my perception of my employees changed
dramatically. Not that I did not care about my employees, but I would have
to pay much more attention than I had thus far.
This is why it is very important to involve employees in the develop-
ment of procedures for the operation of the plant—so they will feel like
they are owners of their process and strictly follow the procedures to
ensure stable operations.
IMPORTANCE OF STANDARD WORK

Standardized work is a technique whereby you are in the base of the Toyota
Production System. Standard work is a reference in Toyota and is consid-
ered one of the most important techniques of TPS because we know that
when we have a standard procedure, we can adequately maintain quality
products from the beginning to the end of the project; that is, the first car
is as good as the 500th or 500,000th car.
For this purpose, Toyota’s assembly lines train people in a line parallel to
the actual production line, performing the same activity as would be done
on the assembly line. They also teach the operators skills. For example, put-
ting their hand inside a box with screws and having to remove five screws;
this should be repeated twenty times, and the operator should not remove
more or less than five screws. Operators must repeat this process again and
again until they remove the five screws consistently in twenty repetitions.
On the assembly line, before the worker enters the line, he or she must
pass several skill tests; operators cannot proceed to the next training event
until they have passed these tests.
But why is this important? At Toyota, every second of production is
extremely important, because each activity described in the work pro-
cedure has a time to be executed. If an operator fails to remove the five
screws from the box, this may delay the flow of production.
WHY WORK USING STANDARDS?

The first question we have to ask ourselves is why should we do standard
work? If the answer is “to do our jobs better,” this is partially correct; if the
answer is “to maintain a standard in our daily activities,” it is also partly
true; but if the answer is “we want the work of our operators to be easily
implemented and easily trained,” then it is correct
Whenever we think of standard work, we want to have repeatability in
the operation, where it depends on the person carrying it out. That is, the
operator must perform the operation repeatedly without making any mis-
takes in the sequence of the operation.
Many companies spend a lot of time trying to create long trainings, where
the employee ends up abandoning a Just-In-Time (JIT) work experience due
to the high demand and many documents and regulations that he or she
must fill in the manufacturing process. More questions that we must ask
include: Does it add value to our product? What is the purpose of taking
several hours or weeks to train an operator? Without these questions, we
would not find that the hours of training are too long, and at the end, after
weeks of training, the operator joins the line and cannot perform the activ-
ity that was defined. But why does this happen? The answer is very simple:
Our training has no objective. We train because we have to meet the com-
pany equipment, yet ultimately, we do not manage to reach the goal.
We have several ways to do standard work, but we must never forget

when doing standard work that we have to think simple. This means cre-
ating a procedure where anyone can be incorporated at any point of the
assembly line and perform the activity with only a simple explanation so
that we succeed in maintaining the operators’ repeatability in each activity.
If we make a standard operating procedure in which the operator has
doubts regarding how to perform the operation, then our standardized
work is half done. This is why it is important for the leader or line manager
to create the standard. The knowledge acquired during years of experience
can help make a simple and objective standard.
In companies where it is the operator who may have more experience
than the leader or supervisor, you need to make use of the operator’s expe-
rience to develop operational procedures.
In many companies, the standard is defined by production engineers
who know how to do an activity but do not know the details of how to
make a quick and repetitive activity ensure the quality of the products or
services to be performed.
When it comes to standardized work, we must ask ourselves the fol-
lowing: What is the work that I do on this machine? At my workstation?
If we do not create a standard manufacturing process, this will never
change. What changes is when you increase or decrease the takt time,
place more people in the process, or remove people, but the activity itself
never changes; hence, the importance of standardizing the manufacturing
process is to ensure repeatability and quality processes.
OPERATIONAL PROCEDURES, WORK INSTRUCTIONS,

AND WORK AND LABOR PROCEDURES
Operational procedures, work instructions, as well as work and labor proce-
dures all refer to the same thing; their objective is to standardize the operation.
People often think that to do standardized work is only to standardize the
operator’s tasks, but in this case we want to standardize the manufacturing
operation because the goal is for anyone to arrive at the location where they
need to make a part, read the work procedure, and perform the operation
only with a simple explanation from the leader of the production line.
What is the procedure for training? After describing the work proce-
dures, with the description, key point, quality, and safety, the leader goes
to the operator who has to perform the activity and carries out step-by-step
instructions of the transaction by reading the procedure and explaining it

to the operator. Then the operator must perform the operation by reading
the work procedure. After performing the operation, the operator repeats
the operation, but this time he or she must explain to the leader what to
do; that is, the trainee becomes the trainer. This method eliminates several
hours of training that a person usually requires in other companies.
I have a brother-in-law named Marcelino Edjalma, who worked at a
vehicle assembly plant. He assembled the car’s seat belt. When he would
need to go to the bathroom and had no other person to cover for him, he
would start working ahead in the seat belt assembly line to allow time to
go to the bathroom. When he returned, he would be behind by three to
four vehicles, so he would take the belts that he had not fitted and enter
the assembly operation of other workers in order to mount the belts until
he reached the point where he had left off. But the question is: How could
he manage to do this?
I think the time of his operation was faster than the takt time of the
process because if he had only the precise time, he could not perform his
activity more quickly, even if he wanted to. This is because when we do
operator balancing, we must take into account all the movements of the
operator. In case there are any operations that could fatigue the operator,
Kaizens are made during the tryout and Goshi.
A tryout is different from Goshi. Tryouts are used, for example, to test some
production jigs. The quality process never uses tryouts to verify production
capacity at Toyota. Goshi, on the other hand, is a simulation of the maximum
production capacity, to observe how operators are working by checking the
product flow and operators. This event takes place in an hour. While the
operators are working on the production line, the leader, chief, supervisor,
manager, engineering, maintenance, and quality control are outside the line
watching all the items that need improvement as soon as possible to achieve
the line speed according to the takt time defined by the customer.
In Goshi, we also check how the movement of material near the line will
work, as logistics personnel will replenish the line and remove the product
from the line to where the product will be taken, to the one responsible for
its release and dispatching. So you see, the entire process is verified from
the material input to the delivery of the product to the customer.
At Toyota, we would generally perform two or three Goshi before filling
the line. Usually, it takes an average of two to three days to reach the ideal
production. Depending on the process, this is achieved after three hours
of production; hence, the customer takt time can be reached very quickly.
Usually, people agree that companies have a learning curve; thus, it

takes one or two weeks to reach the takt time. This occurs when the oper-
ating rules are unclear to the operator, and when the training system is
not optimal, such as providing the procedure to the operator and saying,
“Follow the process and give it your best!” How can a person do his or her
best if he or she has never made this product before?
I was at a company once where the supervisor seemed like a foreman
with a whip in his hand; if the operator did not make the part on time,
the supervisor would shout and insult the operator, calling him a “jack-
ass.” I asked the supervisor why he reacted this way with the operator.
His answer was, “If there’s no whip, things don’t work.” It was then that
I started training them in standardized work and explained the impor-
tance of following the standard operating procedure, which was designed
to perform the activity within the takt time. Then the operators began to
offer suggestions for making activities faster and with less physical effort,
to help all operators achieve the defined takt time.
Sometimes, bosses forget that they have to assist operators, because if we
help the operators, we will achieve greater productivity.
A problem in many companies is that they do not know the purpose of
applying Seiri, Seiton, Seiso, Seiketsu, Shitsuke (5S). They think that it is
just to make areas more beautiful and orderly. Of course, after the imple-
mentation of 5S, everything will look neat and better overall, but what is
the purpose? For those of us who work at Toyota, it is simple: It serves to
make sure that waste can be seen in less than ten seconds. With this, one
can work to quickly eliminate waste and avoid a costly operation.
HOW THE WORK WAS DONE AT TOYOTA:

STANDARD WORK BEFORE TECHNOLOGY
Before, without any technology to help standard work activities, the staff
of Toyota developed a technique to time the activities performed by the
operator; but how was this done? Let’s look at the detailed steps.
First, one would write what the operator does for each activity and then
time the activities ten times consecutively, and consider the time that was
repeated the most during the ten repetitions. This is how I learned it at
Toyota Japan, as it was explained by my Sensei. The idea was that I learn
from Toyota’s history and experience, and ensure that more attention be
placed on the standardization in order to eliminate waste.
I learned to check the process without using a stopwatch. It is very sim-

ple; you count 1,001, 1,002, 1,003…. When you pronounce the numbers,
it takes the same amount of time as using the counter. It is important for
leaders to check the operation time without using a stopwatch. Nakata-san
would stop in front of the line with his arms crossed and start to count the
cycle time for each operator. If he discovered any unbalance in the line,
he would call me to ask where the problem was. I needed to identify the
same issue, but without using a stopwatch to check the operators’ cycle
time in the process. After discovering the problem, I would call my group
leader and ask him the same question: Where is the problem? The group
leader needed to find the problem without using a stopwatch either. When
the group leader found the problem, he was required to call the produc-
tion team leader to ask the same question; the team leader, using the same
process, once he found the problem, was required to talk to the operator
regarding the unbalance in the line and explain the importance of follow-
ing the procedure.
This was the most challenging part of standard work, as there were
many activities performed by the operator; but with a lot of persistence
and perseverance, it was the beginning of the first standard work activities
in the machining area and, later, in other departments.
Once the standard time was established, there had to be a written work
procedure, so the operator could do the same repetitive activity in the
same way. But how could this be done without technology?
The staff began by describing the operation step by step, and after tim-
ing each step that was taken, the problem was that oftentimes the operator
did not perform in the same sequence as in the previous repetition. This
initially made it a bit difficult to standardize the activities.
As the years have gone by at Toyota, some things have changed, but we
have never forgotten the initial basis set by our Senseis Taiichi Ohno and
Sakichi Toyoda.
HOW STANDARD WORK WAS DONE AT TOYOTA

AFTER THE INTRODUCTION OF TECHNOLOGY
After technology (video cameras, computers, etc.) arrived, standardiza-
tion activities became easier to perform. We could use video to record an
activity and then describe the operation being performed.
Toyota has developed a system whereby after making a video, it can be

played back in a program that displays tens of seconds. You may wonder,
why tens of seconds? The answer is simple: because every second you can
win at Toyota is like finding gold. Let’s do an exercise now to clarify what
I am saying.
Imagine that we conduct a Kaizen that reduces one second in a final
assembly line. If we do the math, we’ll find gold. Here we go:
1 second × 400,000 vehicles produced in a year will give me 400,000

seconds gained in a year, right!
We divide the gain by the takt time of the production line to see how
many cars we can produce in the time we have gained. Here we go:
400,000 seconds / 60 seconds (takt time = processing time of the assem-
bly line for a car) = 6,666 cars a year
Now multiply this number of cars by the sales value, and we have
the following:
6,666 cars × $ 18,000 (value used for reference only) = $119,998,000
After this calculation, I think everyone will be thinking: How can I save
one second in my process? Well, it takes us awhile to understand our needs.
But let’s return to our current era at Toyota Brazil. We are using the con-
cept to evaluate a video recording of five repetitions (cycles) of the same
operation, then discarding the longest and shortest times and averaging
the three remaining times. This is very different from what Toyota was
doing previously. We learned this new methodology with Sakamaki-san
in Brazil as demonstrated in the following figure. This must be done for
manual, movement, and automatic activities.
After describing each activity, we will have to standardize the activi-
ties, and for this, we must consider some important factors before start-
ing the standardization.
To begin the preparation of standard operating procedures, the first thing
we must verify is the lead-time (total execution time of the operation), that
is, adding the complete cycle time of each operation plus the times that do
not add value. The latter are called non-value-added times because we must
do them due to their importance for the continuity of the process, but add
nothing to the product. For example, exchanging a barrel of welding wire
and doing inspections during an exchange of carbide inserts for machining
are the activities for which we have to stop the process to carry out the task,
in order to maintain the quality of the manufactured products.
Once the lead-time is defined, we need to set the number of operators

needed in our process. How do we do this? We take the lead-time and
divide it by the takt time as follows:
Lead Tim e
O peratorQ uantity=
TaktTim e
After defining the number of operators on the line, we must balance each
activity that the operator must perform, using the Yamazumi diagram,
which means balancing the workforce as in the example in Figure 2.1.
With the graph, we can divide the operations among the operators so
that their workload is exactly the same, because if this does not happen,
there may be dissatisfaction among some operators that may cause delays
in production and a revolt, causing a problem for the area chief, which
would then be difficult to reverse.
Once a balance is established between the operators, they must define
the flow, which should follow the balance achieved before, as in Figure 2.2.
Note that the layout of the production cell shows how the operator must
walk during the operation, but we can also see a cross figure, which means
that we must be aware of operator safety. There is also a diamond figure,
which means that these points in the process require that inspections be
carried out during the manufacturing of products. We also have an X
figure inside a circle, called Temochi, representing the standard inventory
FIGURE 2.1
Yamazumi diagram.
FIGURE 2.2
Standard work diagram.
within the process, which we use to provide faster part changing on the
machine or to guarantee the number of parts that the machine requires, as
some machines are made to produce more than one piece in the process.
Factory Layout
The layout of the factory determines the way in which the resources of
materials, information, and customers flow through operations. What I
learned at Toyota was that a good layout can bring many benefits to opera-
tors and productivity by reducing waste.
The key point to creating a good layout is to think simple and not com-
plicate the task. To think simple, we must always consider the movement
of the operator’s hands as well as the operator and product movements.
I have made many changes in layouts since leaving Toyota. I have taught
people that you always have to find an easier way of doing things in a pro-
duction line.
I undertook a project at a company in Guadalajara, Mexico, where we
needed to increase productivity to meet customer demand and decrease
scrap at the line. Looking at the layout, there were two separate areas per-
forming sequential processes of a product (a press and an assembly oper-
ation), with five days of WIP inventory kept between them. The actual
problem, I found, had more to do with a myth: people were told that the
two processes could not be physically connected due to the presence of
a vertical injection machine in one of the areas, although there was suf-
ficient space to place the assembly line adjacent to the vertical injection
press.
The problem was that no one considered calculating the takt time to
verify whether the line had capacity before attempting to locate the two
areas together.
After two days of observing the areas separately, taking time for each
activity, and documenting the movements of the operators, we began to
draw the new layout with the vertical press. After defining the new layout,
we discovered that the old layout required ten operators. By balancing the
line activities according to the takt time, we estimated that the new layout
would need only five people.
The key point was to take the time of the injection molding and the
curing time of the rubber element applied to the product, which, after
application, required a twenty-minute wait in order to dry the product,
before the testing process could start the testing process. In order to wait
twenty minutes for the product to cure, we created a standard inventory
called Temochi in Japanese.
Before moving the layout, we performed trials in some points of the lay-
out to verify if the line balance was right and define the standardized work
procedure for each workstation.
Immediately after moving the layout, the operators felt uneasy with the
new way of producing; but after showing them the importance of follow-
ing standardized work procedures in the operation, they started feeling
more confident in their ability to achieve productivity without rejections,

which is what occurred through the implementation of standardized work
in their area.
The experience was very good for me because it was one of the first com-
panies that I worked with after leaving Toyota, doing what I had always
learned: Find the easiest layout for the operation, using standard work as
the basis.
Layout changes such as the location of a machine in a factory or a prod-
uct in a supermarket may affect the flow of materials and people through-
out the operation, impacting the cost and overall efficiency of production.
An improvement in the layout of the production line yields the follow-
ing benefits:
1. Elimination of transport man-hours

2. Faster feedback regarding quality to help reduce defects
3. Reduced man-hours by reducing or eliminating waiting for a
batch or process
4. Reduced production cycle
When we arrange the layout of a production line, not only must we think
of the flow of the operator, but we must also consider how the product flow
in the line should be. We must think of how to make the operator exert
minimum effort and, if possible, have something to move a piece from one
machine to another.
Objectives of the Layout

The objectives of developing a proper layout are as follows:
1. Minimize the size of the plant, therefore reducing the costs of opera-
tor motion, transport, space, and capital for facilities.
2. Remove the excess centralized inventory of materials, components,
and units purchased or manufactured.
3. Minimize disruptions to the factory due to change and to enable
future growth.
4. Avoid locating offices or support services in the perimeters of the
factory.
5. Reduce the space occupied by the formal corridors of the factory in
relation to those occupied by the production processes.
One day, a friend invited me to verify the layout of a press factory that made
products for automobile assembly and computers. When I entered the facil-
ity, it seemed to me like a messy factory producing inventory, with no pro-
duction flow. There was too much waste of transport and operator motion.
He asked, “What did you see in my process?” I replied that I did not see
anything because it was very difficult to observe something with all of the
disorder and lack of organization. Then he said, “Seriously? I thought the
layout of the factory was much better now.” To this, I replied, “Better for
whom?” For the operators, it was much better because they did not have to
work much; they were always moving to find something, not to mention
the waiting time for a press change, etc.
My friend looked me in the eyes and said, “Then how would you change
the flow from what it is now?” I said, “Very simple. All you have to do is
think simple; don’t complicate things. Make the flow visible, simple for
the operation, where the operator can work and not have to walk all day.”
He then said, “Gerson, I have a new plant that I want you to see to verify
how the flow is. Can you take a look?” I said, “Sure!” When he showed me
the layout, I could not believe it; the same mistakes that the old plant had,
the new one had, even before starting the process. Why was this happen-
ing? Often, it is very complex for people to think simple; they always want
to make more complex things that do not work and only bring more waste
into processing.
I told my friend that he should change the layout to have more flow and
arrange the machines to make it easier for handling forklifts. After six
months, I visited my friend again to see if he had taken my advice. To my
surprise, he had not changed anything; it was a new factory with the same
mess as the old one.
I asked him why he had not changed anything as per what we had dis-
cussed. His response was that there was no time to think of another mode
despite his attempts to change.
Sometimes, what is easy for one person is too complex for others. At
Toyota, we received training to look at the problem and solve it as fast as
possible, always avoiding waste in the process, so that the flow is the sim-
plest and easy to visualize.
Human Factor
In TPS, productivity is a key factor, and its increase is a constant target.
Meanwhile, the human factor in TPS is closely correlated with productivity.
PROBLEMS IN THE IMPLEMENTATION

OF STANDARD WORK
Problems that occur in the implementation of standard work are typi-
cally simple to solve. The problem is that people do not want to make
the necessary improvements because they take time, and in the end,
you lose the implementation.
In many companies that implement Lean, there is standardized work.
The problem is that it is implemented badly. Quite often, the standard-
ization is not done by the Leader or Supervisor of the area, but by the
Engineer of the area, who does not possess the same type of experience as
the Leader and Supervisor of the area.
The Engineer does not know the details of the operation; the Engineer
often has excellent technical knowledge but does not have all the details
on how to make the operation faster and more appropriate. But why am I
writing this? When you have to write the key points of the operation, the
Operator and Team Leader possess much more knowledge with which to
define the standard operation, as mentioned previously.
Another question is: Why do people not want to stay within the stan-
dard? The answer is simple: Because we forgot to explain why the operator
must follow the standard.
In a company in Mexico, after the implementation of a standard, the
Operations Leader would audit every line operator to verify whether or
not they were all following the work procedure according to standard
work. At first, the Leader had to review every thirty minutes, then one
hour, and then every two hours, four hours, until she reviewed only once
each shift.
She reviewed the work standard and hours of operation (the takt time
was 10.5 seconds). The operators initially had trouble with the operation
sequence because they were already accustomed to operating the wrong
way, but the Leader, upon detecting a deviation, would talk to the opera-
tors about where they were making the mistake, and then stayed close to
the operator until more than ten parts were produced, to see if the opera-
tor had understood the explanation.
An extremely important point refers to the photos that are placed in a
standard work procedure. Many companies use pictures taken from too
far away or that are very difficult to make out. This is why, often, the opera-
tor does not follow the standard.
The pictures must show how to perform the operation. They must offer
details to achieve a good operation so that there is no doubt in the opera-
tor’s mind at the time of the operation.
Toyota rigorously follows its standards; at all times, the Leader is review-
ing the work of each operator.
WHERE TO PLACE STANDARD WORK INSTRUCTIONS

Where to place operational standards is the big question that everyone
asks. The answer depends on the process you have, because there are oper-
ations in which the standard cannot be physically placed in front of the
operation. So, the answer is, “It depends.” But if you ask where the best
place is to put the work instructions, the answer is, “where the operator
has to perform the task.” This is so that if an operator has a question dur-
ing the process, he or she can look at the standard and perform the activ-
ity safely.
The problem occurs when there is a Kaizen done to the line; one has to
change the standard work instruction so that other employees can per-
form the task in the same way. But why is this a problem? You need time to
make a change to the standard work instructions, and quite often, we have
no time to change them, which then makes the daily checks useless, and
the Kaizen is lost over time.
At Toyota, when we want to do Kaizen on the line, first we test to prove
that the Kaizen is really going to bring a benefit to the area. Then we
check to see that it will not cause an imbalance in the line. When there
is an imbalance, we need to redistribute the activities between operators,
which may generate another change in the standard work instructions.
This is why standardized work is not easy to do, and why so many com-
panies have their procedures in a binder—to avoid seeing that they need
to make revisions.
Toyota’s operational standards are in front of the operator. In the case of
forging and foundry, they are next to the operation, because the heat can
burn the instruction sheets. But before doing the activity, the operator must
see how to do the operation, and then the leader or manager must observe
whether or not the operator is following the work according to the standard.
I hope this chapter on standardized work has helped answer any ques-
tions you had regarding this topic.
The most important point is to make things as simple as possible first,

and then think of how to improve the process.
I have no doubt that if you do not have good standardized work, you will
certainly have many quality problems in your process. If you do have stan-
dardized work, be certain that it is being followed correctly; use the expe-
rience of the “king” to help create good standardized work procedures.
Just to finish, I want to make it clear to you that for the implementation
to have passion, you must perform the implementation of each technique
with joy, not simply implement because you must. Remember that Lean is
for the organization; once it is well-implemented, it does not fall back. The
implementation of Lean may be lost only when the system depends on a
person. We must acknowledge that the system cannot rely on a single per-
son; the system depends on all employees every day, hour by hour, minute
by minute. When I left Toyota, nothing was lost with my absence; do you
know why? The system was all standardized. It does not depend on a per-
son; it depends on the operators wanting to perform their tasks according
to the standards.
3
Jidoka
Renato Eiji Kitazuka, with Carlos Moretti
More than a technique or a tool, Jidoka is the principle that pursues qual-
ity production and decouples the process from direct supervision. Over
time, Jidoka became one of the two pillars of the Toyota Production
System (TPS) (Figure 3.1).
ORIGINS
By the end of the nineteenth century, years before Toyota Motors
Corporation was founded, the principles that guided its famous produc-
tion system were already being practiced by Sakichi Toyoda, a visionary
man considered by many as the Father of Japan’s Industrial Revolution
and the inventor of Japanese inventors.
In his childhood, Sakichi observed his mother working very hard mak-
ing cloth for the family on a manual loom. It troubled Sakichi to see his
mother working so hard to produce such a small quantity of cloth. This led
him to invent a loom that eliminated some of the wasteful motion in tradi-
tional loom work. He continued to build on this initial invention, and he
eventually developed a loom company. As the company grew, he was per-
plexed by one of the biggest issues in looming: If one thread broke without
being noticed, hours of precious work and much raw material would be
scrapped. To prevent this, a person was dedicated full time to monitor the
machine and stop it when a thread breaks. Sakichi realized that just add-
ing extra workers to the job would not solve the problem. He figured out
that one possible solution could be to decouple the looming work supervi-
sion from its operator, and by doing so, free him/her more time to per-
form value-added work. Step by step, he implemented small changes and
identified new opportunities to improve the process’ design. This tech-
nique, of achieving higher levels of efficiency and quality through small
43
44 • Renato Eiji Kitazuka, with Carlos Moretti
FIGURE 3.1
House of TPS.
improvements, became his legacy, the Kaizen Culture. Finally, after many
attempts, Sakichi developed a mechanism that would automatically stop
the loom if a thread broke. Far beyond a simple quality device Mr. Sakichi
introduced a guideline, a principle adopted by Toyota as the essence of TPS
called Jidoka, a Japanese word for automation that has a deeper meaning
at Toyota: automation with a human touch or autonomous automation.
JIDOKA AS A PILLAR OF THE TOYOTA

PRODUCTION SYSTEM
At Toyota, people know that “the right process will produce the right
results.” Therefore, one of the main goals of Toyota’s management teams is
to improve processes by eliminating waste. On the other hand, predicting
all the potential failures of a given process is nearly impossible. So, the best
way to achieve the “perfect process” is to stop the process and fix every
small error immediately after it occurs and before it reaches a critical level.
I used to work in a fastener company, and I can recall an example where
an oil leak was identified within one of our main client’s assembly lines.
After our client’s final inspection team detected a certain number of defec-
tive components, the whole batch of parts was segregated. As our client
Jidoka • 45
pointed to one of our items as a probable source of problems, we started a

problem-solving process.
There were many different parts that could have caused the oil leak—for
example, gaskets, joints, bolts. I was assigned to support the problem-solv-
ing process focused on the bolted joint.
It took us a few weeks to finally find the “root cause”: a variation in the
torque control system, which was not assuring the proper pressure over
the joint, thus leading to the oil leakages.
As a solution, the torque control system was adjusted accordingly and
new parameters of inspection were added to the process.
Although, at the time, it sounded great, deep in my mind I was not sure
that the root cause had really been eliminated. “What if the inspection
fails?” I wondered.
A few years later, when I was working at Toyota, one fact called my
attention at the engine assembly line: to my surprise, other than sophis-
ticated torque control systems, I had seen in many engine assembly lines
that Toyota was using very simple and cheap mechanical torque wrenches
to ensure proper torque application.
I asked the assembly line leader why Toyota didn’t use electronic or
pneumatic devices. He told me that some time ago, Toyota had also run a
similar problem-solving project due to an oil leak issue.
I didn’t know it then, but I was about to learn a more effective way to run
a real problem-solving project!
Toyota had never considered any component as being part of the prob-
lem! Using the Jidoka concept, after the torque inspection failed, they
immediately realized that there was an issue with the torque application
system and the assembly line stopped. The team in charge of solving
the problem identified that the pneumatic system adopted to apply the
torque over the fasteners was highly susceptible to variations within the
air pressure lines and that jeopardized the stability of the whole process.
As a countermeasure, for small production volumes, they adopted a very
reliable and well-known technology: a simple mechanical device that did
not depend on air pressure.
Experts in the matter might say that I am oversimplifying the technical
part of this case, and indeed I am. It is not my goal to discuss the prob-
lem and solution, but emphasize that it merely took Toyota a few hours
from the moment they detected the problem to put the countermeasure
in place. Thanks to the Jidoka principle, they were able to stop the pro-
cess, narrow it down to the specific cause without being diverted by other
potential factors. The result was that the problem’s analysis was drastically
simplified.
At Toyota, the elements of building a solid process are compared to
building a solid house. This is visualized in the House of the TPS, built
over a strong foundation of process stability, with two strong pillars—Just
in Time and Jidoka—that sustain its protective roof (competitive cost).
(See Figure 3.1.)
As with any house, the roof will only be as steady as the pillars are
strong. But what we experience when working with companies outside of
Toyota is that they love to implement Just in Time, because of the inven-
tory reduction they experience. On the other hand, these same companies
are reluctant to stop the processes when something goes wrong. “The show
must go on,” they say.
We call this the “toolbox approach,” that is, choosing the tools and tech-
niques that help solve an urgent need, but do not look at building a sus-
tainable culture of Lean. There is no doubt that this approach will lead to
the construction of a weak house!
Lean techniques should be used in the same way as when you start a
course of antibiotics: You take them all as prescribed and not just when
you want to or because you like or dislike them. Fujio Cho, former presi-
dent of Toyota Motor Company, said the following:
Many good companies have respect for individuals, practice Kaizen and
other TPS techniques. But what is important is having all the elements
together as a System. It must be practiced every day in a very consistent
manner—not in spurts—in a concrete way on the shop floor.
I’ve been deploying the Lean Culture over the past ten years, working
with different business and cultures. I must confess that I am still learning
the TPS through the House analogy. Ironically, I was a little bit disap-
pointed when I was introduced to it.
My first weeks at Toyota were incredible! Every day, I learned new busi-
ness administration techniques. My boss, a patient teacher—or Sensei, in
Japanese—spent a great deal of time with me. During one of our learning
sessions, I asked him for something to read about the TPS. He gave me a
copy of Toyota’s internal handbook. After reading it, I thought, “How is
that possible? One of the most powerful production systems in the word is
based on a house analogy? What about the ‘do-it-yourself instructions’?”
Jidoka • 47
After that, I started searching for explanations everywhere, except among

external sources, but I found no descriptions of techniques.
A few years later I left Toyota to be a Lean Agent in an auto parts com-
pany. It was a brand-new facility, built over Lean concepts and considered
by many as a model Lean plant. In truth, I was seduced by their outstand-
ing Lean structure and their amazing, fully detailed Lean manual, The
Lean Production System Manual. This handbook had complete, detailed
instructions on how to implement a Lean system. All the requirements for
a Lean company were listed there. The company also had lots of experts
running training sections and developing Lean projects. I had definitely
not seen that structure at Toyota. In fact, at that time, I could say that their
Lean system was better than Toyota’s.
On the other hand, something was intriguing me; despite the fact that
the above-mentioned structure had been implemented, the basic con-
cepts were not in place! There was a huge distance between what they had
written and what they really did. The procedures that were performed at
Toyota in a natural way were just neglected.
I started asking myself, if the structure here is so great, then why has
Toyota had more success deploying Lean than my new company has ever
dreamed of?
After experiencing failures and successes in deploying Lean techniques
in different processes, I learned that the simplicity of Toyota’s TPS material
was actually its major advantage. The principles embraced by the House of
TPS guide workers to drive their efforts to strengthen the system’s founda-
tion and pillars, without inducing them to apply a specific technique. I had
just underestimated the power of that analogy!
We still observe companies that focus their efforts on deploying Lean
techniques. Thus, Lean becomes another program for “specialists,” and
department performances are measured by the number of Lean tech-
niques that are implemented.
The bad news about this approach is that when Lean becomes a task for
specialists instead of everyone’s duty, your Lean deployment process will
need direct supervision to achieve the desired quality level. And as we see
below, the Jidoka principle is just the opposite: We should decouple the
process’ quality from direct supervision.
When deploying Jidoka, the Lean expert does not play the auditor’s
role, but rather the teacher’s role—a Sensei who imparts knowledge and
shares his experiences. Instead of using books, the Sensei guides his pupils
through “learning-by-doing sessions” and then makes the technique’s pur-

pose very clear to everyone.
This may be considered one of Toyota’s major success factors—no mat-
ter which Toyota facility you work in, the House of TPS is present.
SO, WHAT IS THE PURPOSE OF USING JIDOKA?

1. Built-in quality. This is ensured by preventing the defective prod-
ucts/services from being delivered. This technique means that
you are going to dedicate yourself to only obtaining products/
services with the customer desired quality level. The process
should be designed to identify problems immediately after they
occur and induce workers to always follow the correct procedures.
Although it sounds simple and obvious, in most cases, this feature
is neglected.
2. Decouple quality and process flow from direct supervision. The poka
yoke, developed by Shigeo Shingo, is a Japanese term meaning mis-
take-proofing, and is a key technique to decouple the quality of a
process from direct supervision by stopping operation as an issue
arises and to request assistance to correct the process. As Shingo
used to say: “Most people know how to ride a bike. But it doesn’t
mean that they know how to fix it. So, why would it be different with
a process?”. The Jidoka principle provides for autonomy. When we
manage to decouple the execution of a given task from direct super-
vision, we better utilize resources and free up time of skilled workers
for more value-added tasks, and thus, improving the process.
Years ago, I worked for a fastener manufacturer. This company had

a very skilled group of engineers working in the Production Planning
department. They were supported by many technicians working on the
shop floor, monitoring the production and inventory levels and provid-
ing vital information to develop the Material Requirement Plan. All their
tasks were aided by powerful production planning software.
The production plan team was considered by many to be “the com-
pany’s brain and heart.” They were respected by all other areas. I also
have to say that they were the most stressed team in the company, always
working extended hours under high pressure. Unfortunately, despite all
Jidoka • 49
the resources and efforts consumed by this structure, it was not error-
proof! They frequently experienced planning reviews, extra freight, and
fines for late deliveries. At least a quarter of the whole facility area was
dedicated to staging the finished goods. Considering the “in-process
inventory,” we could say that more than half of the floor space was dedi-
cated to inventory.
Later, when I started working at Toyota in Brazil, I almost went into
shock when I met the single engineer who was responsible for planning
the parts production and the whole assembly line.
As a matter of fact, in Sao Bernardo, Brazil, we had small production
volumes but the complexity of a car assembly line is much bigger than the
complexity of a fastener production facility.
I thought, “How is it possible? My friends from my previous job were
always complaining about how hard it was to keep things running and
how busy they were. How could a car manufacturer run the entire plan-
ning department with a single engineer? I mean, just one person was
assigned to dealing with forecasting, production orders, machines’ sched-
ules, follow-ups, inventory control, etc.!”
A tour with Toyota’s production planner revealed to me many of Toyota’s
world-famous techniques. When I was introduced to Kanban, a technique
developed to support the Just in Time pillar, I understood that it was also
applying, in full, the principles of Jidoka. A Kanban system is designed
to be run by workers from the shop floor, as it decouples the production’s
control from the production planner’s direct supervision; there is no need
for “experts” or follow-ups. The complex “puzzle” of adjusting the pro-
duction planning is replaced by a very simple task that is executed by the
workers in real-time (see Chapter 4 for more details about Kanban).
Here, we must emphasize the importance of understanding the purpose
of Jidoka. If Toyota had applied Jidoka according to its direct translation—
automation—as most companies actually do, they would have developed
very complex software to plan its production. By adequately understand-
ing the technique’s purpose, Toyota aimed its efforts at decoupling the
Production control from direct supervision.
Using Jidoka
When I worked at Toyota, I had one of the most valuable experiences dur-
ing the launch of a new engine’s assembly line. I was working as a Product
Engineer. My office was located in an administrative building far from the
manufacturing site, and I was required to deliver training at the assem-

bly line. It was my first long visit to the manufacturing site, having spent
only a few days there since I had been hired. It would also be my first
real contact with Jidoka. When I visited the assembly line, the first thing
that caught my attention was that the line was mostly manual. Just a few
very complex tasks were automated with very simple devices. I really was
expecting robots and very high-tech machines in the assembly line. “The
Japanese are the experts in automation,” I thought.
So, I asked a friend how they could have Jidoka in place if there were
no electronic devices running on that line. My friend told me that there
were just a few robots on the whole site, and they were mostly dedicated
to hazardous tasks or high-precision-level activities. The other activities
were manual, but that, indeed, Jidoka was in place on that assembly line.
I have to confess that I became a little bit frustrated when he told me
that Jidoka was a cord hanging over each workstation, used to turn on
a lightboard, the Andon board. These boards were used to show when a
workstation needed support.
Actually, I didn’t understand my friend. How could those simple cords
ensure the quality of the whole process? As an engineer, working in a
fastener manufacturing company, I visited many assembly lines, where I
saw very sophisticated and automated equipment used to control the pro-
cesses. Could it be possible that a cord attached to a red ball was the great
secret of the famous TPS?
When you look at an iceberg floating in the sea, you can’t see what lies
underwater. Likewise, at a glance, I could not see all the details hidden in that
process. After spending some time observing the assembly line activities, I
understood why Toyota was so confident in its production system: Those
cords were just symbols—symbols of everyone’s commitment to quality.
Looking “underwater,” I understood that the behavior and the culture
were much more important than fancy high-tech equipment. At Toyota’s
assembly line, everything was inducing the correct activities. On the floor,
there were indications and borderlines used to show the workflow to the
operators. Each workstation had the correct material and tools for its
application. There were few opportunities for mistakes. In fact, making
mistakes was more difficult than doing the right things.
After all, if those features failed, a new opportunity for improvement
was identified—an opportunity for all team members to work and design
a better process! That’s why the Andon cords were so important, and inter-
rupting the process was an expectation when problems occurred. I was
Jidoka • 51
fascinated by the concept of the Andon cords being quality gates, where
operators verified their work and decided whether the product would
move on or if assistance would be needed.
So, you may ask, “When should I start implementing Jidoka?” Well,
without knowing your process, this would be a very difficult question to
answer. There is no strict formula, but there are a few guidelines.
Implementation Stages of Jidoka

Most companies fail to implement Jidoka because they do not fully under-
stand the principle, and as a result, they misunderstand the basic needs of
implementation. A quick assessment will be very useful in identifying the
stage of implementation that a company has reached.
To start the implementation of Jidoka, let’s go back to the “House of TPS”
analogy. You will only be able to build the pillars—JIT and Jidoka—when the
House’s foundation is solid. Thus, we could say that, first of all, you and your
team should have systematic problem-solving skills. This is a very important
landmark because, in fact, all of Toyota’s techniques are countermeasures
established after problem-solving processes (see Chapter 5 for more details
about PDCA problem solving). Trying to implement Jidoka before having
basic stability will compromise the whole structure of the House.
Once you have team members who are able to solve problems by elimi-
nating their root causes, you should start developing processes and meth-
ods that detect problems as soon as they occur.
Although problems occur daily, it is not so easy to see them happen-
ing or learn from them. This probably happens due to the heritage of our
childhood, when errors and problems were subject to punishment. As a
result, we perceive problems as our personal faults and we tend to hide
them. As managers, it is our duty to show our team members the benefits
of bringing problems to the surface. Taiichi Ohno, the father of the mod-
ern TPS, stated that “No problem is the biggest problem.”
Bringing “problems to the surface” is the greatest challenge in building
the Jidoka Culture. It will take time, discipline, and effort to gain people’s
trust and confidence that the revelation of problems will not result in pun-
ishment. One of the best ways of empowering Jidoka’s implementation is
to deploy a Kaizen Teian program (see Chapter 7).
But how can we ensure that all the problems of a given process will be
discovered? Utilizing inspections is a possible answer. Although inspec-
tion is one of the seven wastes—overprocessing—it is almost impossible to
recognize problems if we don’t use inspection procedures. The third stage

of Jidoka is implementing effective quality gates or inspections points to
identify process errors.
We can classify inspections into three types:
1. Judgment inspections: Where a finished product is compared to

a standard. If anything goes wrong, the product is scrapped or
reworked.
2. Informative inspections: Where feedback is provided on the process
and corrective action is taken. The informative method may also pre-
vent errors by using statistical tools and analyses to predict process
tendencies.
3. In-source inspections: The most used methodology at Toyota, where
simple devices make the 100% inspection feasible and reliable, with-
out the interference of human fatigue and attention.
In-source inspections are the most powerful techniques used by Jidoka

implementation. The basic principle is to “discover” the errors before they
even occur. We can achieve this using Poka Yokes. As stated above, these
devices induce the correct execution of the process or stop errors from
occurring. Poka Yoke is the key technique used by Toyota to make prob-
lems visible. It is also used as fuel for the Kaizen Teian, promoting the best
utilization of team intellect.
We must remember that we are susceptible to mistakes. As a matter
of fact, whenever the circumstances and environment induce mistakes,
sooner or later, they will occur. To reach the fourth stage of Jidoka and
create an environment and circumstances that induce quality, we should
ally Poka Yoke devices, 5S, standardization techniques, and the Built in
Quality process.
At a pick-and pack-company that I visited years ago, one common issue
was that incorrect material was shipped to the wrong destination due to
material being placed in the wrong package. In fact, the process was not
badly designed. They did have software to control the operation and a
good control method was in place: After scanning a package identification
label, a worker would assign a shipping order to it; the system listed the
order’s contents, and as the worker scanned the package with the required
material, it was marked as completed by the system. All these procedures
would assure a good process, except by the line organization, that is, a poor
5S. Multiple packages were opened, and the workers were easily confused.
Jidoka • 53
Wondering which package was under work, it was easier to place materials
in the wrong packages than to place them in the correct ones. Was this an
issue of bad people or bad processes?
After we have gone through all of those steps (a built-in quality environ-
ment, which means an environment with a strong 5S, a high level of stan-
dardization, in-source inspection methodologies, and Poka Yoke devices
in place), we can reach the final level of Jidoka: decoupling the process’
quality from direct supervision. At this level, you and your team will reap
the biggest benefits of Jidoka and will be able to put Andon boards, escala-
tion charts, and the ultimate interruption cords in place, minimizing the
chance of errors and reducing skilled labor waste.
It Was Too Early

In the past several years, Lean practices have spread around the world
to many different fields. As a result, it is not difficult to find a company
that uses Lean techniques to promote the continuous improvement of its
processes. I have had the chance to visit many of them, and I’m happy that
I learned a little bit about their different processes. I love to understand,
or at least, try to understand, how the raw material is transformed into a
part. I love “seeing” the flow of people and information inside a bank or
an insurance company.
During one of these visits, something very interesting caught my atten-
tion. We were walking through the maintenance department of a com-
pany that produced hinges, and I saw an Andon board, covered with dust,
in the corner of a small room, buried under three or four boxes.
The production manager, one of the three people with me, noticed that
I was looking at the board and said, “Ah! That board…. It did not work at
all!” Actually, what really caught my attention was the lack of 5S within
the room, but of course, I asked him why it did not work.
He replied, “Because, after the Andon board was in place, we had to stop
the assembly line at least five to six times per shift. This tool really does
not fit our company.”
“So, tell me about your team’s problem-solving skills,” I said.
“Two of them are going to complete the training sessions next month.
The others are going to begin their sessions after them.”
Well, blaming the Andon board for “stopping” the assembly line is the
same as blaming the knife that you used as a screwdriver for cutting your
finger. As James Womack says, “We are stuck in the Tool age.”
Unfortunately, that manager, like many people, misunderstood the

Andon board’s purpose: to stop the process in order to solve problems.
By misunderstanding it, he did not notice that his team was not trained
properly in problem-solving techniques. They were barely dealing with
the problems’ symptoms, let alone eliminating their root causes. Another
point that should be highlighted is that they decided to put Andon boards
in place too early, before the process was stabilized. Worst of all, in that
manager’s mind, stopping the process was not good at all. In order for
Jidoka to work, the company must see problems as good to have and work
diligently to uncover them in order to solve them from the root cause.
CONCLUSION
Many companies deploy Lean techniques in a random sequence.
Specifically talking about Jidoka, this “toolbox approach” leads them
to use fancy Andon boards, escalation charts, and to stop the processes
whenever a problem is detected, even though those companies don’t have
basic skills in problem-solving techniques. As a result, management teams
will deal with a problem’s effects instead of seeking its root causes. This
superficial approach jeopardizes Jidoka’s reliability, as the process becomes
ineffective and unpredictable. Ironically, having a predictable process is all
that we want when deploying Lean techniques.
In order to enjoy all of Jidoka’s greatest benefits, a given process should
naturally induce its correct execution—built-in quality—without direct
supervision. This high maturity level will only be achieved when you and
your team deeply understand the process, know all of its fragilities, and
realize that stopping it and effectively fixing its problems is a health habit.
Indeed, this is a long journey. Nevertheless, “short-cuts” must be
avoided. The more deeply you understand your process’ weaknesses, the
easier it will be to have a strong Jidoka pillar for your House of TPS!
4
Just-In-Time and Kanban
Carlos Yokio Fukamizu
My first contact with the methodologies of Lean Manufacturing happened

in an American company, not at Toyota. After obtaining my degree in
Production Engineering, I was in doubt as to where I should start my pro-
fessional activities.
Shortly thereafter, I received a job offer to work in Recife, a town in the
northwestern part of Brazil; this place was known for its famous beaches
and 365 sunny days a year. Of course I accepted the offer, initially think-
ing of the time at the beach I could have every day.
I started my job as a process engineer. I was responsible for defining
the stages of heat treatment between the steps of aluminum sheets lami-
nation, and I realized this company had a method of work that made
me curious; work teams were tasked to improve devices, processes,
tools, etc. The teams were composed of people from different areas and
responsibilities with a common goal of continuous improvement; each
one had a leader responsible for the team, including organizing meet-
ings, materials, schedules, classrooms, etc. The activities of each of the
members were discussed according to the tasks and goals set in previ-
ous meetings, there was visual control of the activities of each group
member, and they were very strict with the dates of beginning and end
of each task.
The methodology used in this company at that time left a very good
impression. After researching more, I realized it was deeper than I imag-
ined. It was aimed not only at continuous improvement but a whole phi-
losophy of implementation of a production system; it was the culture based
on the improvement of man with the obsession to always be improving the
processes to pursue waste elimination.
The vision of this company for continuous improvement in the elimi-
nation of waste radically changed the way I used to think and act as a
process engineer.
55
56 • Carlos Yokio Fukamizu
Years later, while working at Toyota, I learned more about the culture
and principles this company was implementing; it was clear they already
used many of these principles of Toyota Production System (TPS), in par-
ticular, Kaizen, or continuous improvement.
JUST-IN-TIME
Introduction
The concept of Just-In-Time (JIT) at Toyota was established after years
of continuous improvement within the production processes, aiming to
manufacture the vehicles demanded by customers in a fast and efficient
manner, making the delivery time to be as short as possible.
JIT was not simply an inventory reduction, or the solution to bad man-
agement. It focuses attention on how the skills and knowledge of employ-
ees can best be used to improve productivity, safety, and quality. It is also
about how to engage and commit all levels of the organization to aim
toward the same objective.
JIT is one of the pillars of the TPS and Kanban is a means of application
to reach the concept of production in Just-In-Time.
In this chapter we also examine case studies and projects I developed in
non-automotive companies using the Kanban system.
INTRODUCTION OF JIDOKA AND

JUST-IN-TIME AS THE PILLARS OF TPS
Both concepts are deeply connected; it is not possible to have JIT production
if Jidoka’s concept is not efficiently deployed in the productive processes.
Jidoka
This concept was applied to the first mechanical loom developed in 1896
by Sakichi Toyoda, founder of Toyota Motors Corporation group.
The traditional looms from that time used to waste materials due to the
poor quality of products; such things used to happen when the cotton
Just-In-Time and Kanban • 57
threads got broken, creating noticeable defects in the manufactured woof,

which was very frequent at that time.
To eliminate the defect, Sakichi Toyoda installed various mechanical
devices made of metal plates on the cotton threads and in case any threads
got broken during the manufacturing, the metal device slid and automati-
cally stopped the equipment without the operator’s command, thus avoid-
ing the production of a defective woof.
Therefore, Sakichi Toyoda’s concepts and ideas resulted in machines capa-
ble of automatically stopping in case any defects occurred. The separation of
man and machine becomes possible; the quality process is made within the
productive processes by operators, avoiding that the production of defective
products is sent to the next process, a crucial rule for JIT production.
Just-In-Time Manufacturing
Before the beginning of World War II, Kiichiro Toyoda, Sakichi Toyoda’s
son, traveled to the United States to study the American automotive industry,
especially the Ford Motor Company, and returned to Japan carrying a deep
knowledge about Ford’s Production System and was determined to adapt a
system of production that aligned the Japanese market and its low demand.
With his experience acquired in the United States during his studies,
Kiichiro Toyoda started the automotive operations utilizing JIT in 1937.
Kiichiro’s system was to provide the sub-steps of the productive sub-
processes for the production sequence (e.g., machining, painting, welding,
etc.). The JIT concept was to eliminate the waste, producing only the nec-
essary, when necessary, and just in the necessary amount. Nevertheless, it
was still hard work because American production was eight times bigger
than that of the Japanese; increasing the productivity was a matter of sur-
vival for Toyota.
Another major milestone in the development of TPS was the work of Taiichi
Ohno. Kiichiro Toyoda invited Ohno, machines manager at that time, to
develop a more efficient production system in order to increase productivity.
In 1956, with the concepts taught by Sakichi Toyoda (Jidoka) and
Kiichiro Toyoda (JIT), Ohno traveled to the United States to visit auto
factories, intending to improve the Japanese low productivity when com-
pared to the American one.
At this opportunity Ohno observed countless opportunities to improve
productivity, such as production cells full of inventory (WIP), vast storage
areas, excessive movement of parts, long setups, high rejection levels, etc.
However, his most important discovery in the United States was not made
during his visit to the factories, but rather when he got to know a super-
market. Self-service stores virtually did not exist at that time in Japan, and
Ohno was very impressed. He was amazed by the way customers chose
exactly what they wanted and in the amount they wanted it. He admired
the way supermarkets restock goods in a simple, efficient, and effective way.
At this point began the concept of pull production systems and that
Kanban will be a crucial technique for the success of the JIT concept,
which is discussed on page 64.
JUST-IN-TIME (JIT)
Concept
As discussed, the JIT concept was created due to the necessity of eliminat-
ing waste, producing only the necessary, when necessary, and just in the
necessary amount.
In August 1988, I took a position as process engineer at Toyota do Brasil;
at that time, I met Haraguchi, general production manager. Haraguchi-
san had solid knowledge about the TPS (Toyota Production System) con-
cepts he was taught by Taiichi Ohno, founder of the TPS.
Haraguchi-san used to teach new engineers everything concerning the
TPS, and I owe much of my professional life’s development in this area to
his teachings. At that time, I was assigned responsibility for the processes
of heat treatment, casting, and forging, and tasked with elaborating and
improving these production process areas.
Toyota do Brasil was inaugurated in January 1958 and was the first fac-
tory built outside of Japan, starting the manufacturing of the Land Cruiser,
which later would be named Bandeirante, a name sold only in Brazil, and
finishing its assembly in 2001 with the building of the new factory Corolla
in Indaiatuba, São Paulo.
Although producing the Bandeirante, an old-fashioned vehicle, for
more than forty years, Toyota do Brasil was loyal to the concepts taught
by Sakichi Toyoda and Kiichiro Toyoda. The most interesting process in
understanding the JIT concept was that the whole daily production plan
was sent only to the vehicle assembly line; we knew exactly how many
vehicles, types, colors, accessories, etc., should be assembled that day. The
assembly line used to work on a moving conveyor belt, where operators

assembled the parts as a function of each step of the subassembly accord-
ing to a standard time: the takt time.
Takt time was a number defined as a function of the available time
of daily work divided by the daily demand. With it, it was possible to
determine the production time necessary for each vehicle. This num-
ber was essential to the production subprocesses, such as machining,
welding, painting, chassis, etc., processes that supplied the parts for
the assembly operation, determined their production capacity in terms
of human resources, production, productivity, machine capacity, etc.
Every process was initiated in the final phase of manufacturing, that
is, the assembly operation used the necessary parts as a function of the
daily production plan and the subprocesses only supplied the amounts
used by the assembly operation. There was the rule of the subsequent
process to ensure that only the necessary amount used by assembly
was supplied; in this case, the assembly operation was responsible for
getting the used part, thus deploying the pull system. In this manu-
facturing process, Kiichiro Toyoda’s concept of producing only the nec-
essary, when necessary, and in the necessary amount (JIT) becomes
very noticeable.
Obviously, today this concept is widespread in Toyota’s whole opera-
tional chain, from suppliers, dealers, on through to the final customer.
It is also evident that now the production chain is very clean; any prob-
lems in the production chain, such as missing parts, broken machines,
inefficient processes, etc., could generate a complete stoppage of produc-
tion. Therefore, Sakichi Toyoda’s concept (Jidoka) of never sending defec-
tive parts to the subsequent process becomes crucial to JIT production.
Total Customer Satisfaction

My prior idea of customer, working at an American company, was more
directed toward the final customer, that is, the one at the last phase of the
operational chain, not worrying about how the intermediary processes
were being made. Many times, these processes were inefficient; each one
was interested only in meeting production targets assigned to him or her
and with a huge amount of inventories between the processes that hid the
problem and the urgency reaction about solving the problems was not a
common practice among employees. I could only understand better the
idea of customer total satisfaction working at Toyota.
The JIT production concept requires the production chain operational

processes to be efficient and effective. Toyota has a different idea of “cus-
tomer.” The idea was that every prior process had a subsequent process as
its customer. Forging, for example, had machining as its main customer
and this last one, in turn, had assembly as its main customer and so on,
thus operating systematically in the pull system process, that is, producing
exactly the amount spent by the subsequent process.
This system of JIT, combined with the pull system, required that the
processes be highly efficient; that process quality be inserted in the pro-
duction process, such as operational rules, error-proofing devices (Poka
Yoke), operators training according to operational rules, TPM, etc.; and
that such processes ensured that defective parts were not sent to the sub-
sequent process.
More Evident Waste in the Manufacturing

Producing with a JIT system has as a goal the complete elimination of
waste. In my opinion, the definition of waste is any unnecessary input or
any undesired output in a system, specifically in the manufacturing pro-
cess. Thus, waste is any resource spent in the production of a product or
service beyond what is strictly necessary.
Eliminating waste means analyzing every activity performed at the fac-
tory and eliminating those activities that do not add value to production
and product.
Working as a process engineer at Toyota, Haraguchi always encouraged
us to use the practice of Kaizen (continuous improvement); our group of
engineers had as its purpose reporting to him at least five daily Kaizens
deployed in production.
At that time, the Kaizen concept at Toyota do Brasil was to build a cul-
ture of continuous improvement; the idea was that everything could be
improved. With almost 500 employees, the participation rate in Kaizen
exceeded 90% of employees with an average of five Kaizens deployed by
employee per year.
The work method in the JIT concept requires deep teaching and learn-
ing about waste, being able to recognize that it is an essential step and that
Kaizen practice is very important in order to recognize and reduce waste
to a minimum.
Following is a description of the most common types of waste found in
a manufacturing process. The manufacturing in JIT processes makes the
waste noticeable in every process and creating a culture among employees

that says waste can be eliminated or reduced to the maximum is funda-
mental in the JIT production concept.
1. Waste of waiting: This type of waste refers to the operator who is

waiting for the execution of a task, due to, for example: machines
breakage, not balanced processes, missing raw material, or simply
because he is looking at the machine while it processes the product.
2. Waste of transportation: This type of waste refers to the activity
of transportation and movement of materials that does not add
value to the manufactured product and is necessary due to pro-
cess and facility restrictions, which impose great distances to be
traveled by the material during processing and also accumulation
of inventories in the sub-processes, generating significant move-
ment of materials.
3. Waste of processing: This type of waste is more common than we
imagine. I believe everyone has already seen cases in which an addi-
tional process is aggregated in order to solve a quality problem. I
had an experience like this in Forging, where we were manufactur-
ing the forged front axle of the vehicle. The process did not provide
deburring after forging, but we used to do it due to a clearance of the
tool that generated the burr in the forging process. The solution was
simple: promoting a system of preventive maintenance of the tool.
So any element that adds cost and does not aggregate value to the
product is subject to investigation and elimination.
4. Waste of movement: This type of waste is always present in opera-
tional tasks performed by operators in production processes. The ideal
way of analyzing the waste of movement is with the deployment of
Standardized Work, thus it is possible to analyze and reduce to the
maximum the movements that do not add value to product and
process.
5. Waste of inventory: This type of waste refers to any material or prod-
uct in an amount superior to the one immediately necessary to the
subsequent process (customer). In an ideal state, if the flow between
processes is balanced, the inventory would not have to wait until the
material or product was processed.
6. Waste of reprocess and defects: This type of waste refers to prod-
ucts out of specification, and also includes reworking and products
returned by customers.
7. Waste of overproduction: This type of waste refers to producing more

than necessary, faster and before the necessary term required by the
customer. Toyota believes this is the most critical waste and consid-
ers it the main cause of all types of waste.
Continuous Flow Process (One-Piece Flow) and Pull System

As discussed, in the JIT concept, the purpose of production is to manu-
facture products demanded by customers in a fast and efficient way with
the shortest delivery time possible, and the process with a continuous flow
(one-piece flow), in its optimum state, means that products are processed
and transferred directly from one process to the next, one part at a time.
Additionally, it is the most effective way of processing and transporting
products and materials, having as a result a minimum use of resources as
manpower, machines, raw material, auxiliary material, space, and short
manufacturing lead-time, thereby obtaining in this way a better knowl-
edge of customers’ demands.
Obviously, the flow process of a part is an ideal state, but Toyota’s goal is
to reduce the batch size between productive processes.
One-piece continuous flow deployment depends on processes.
Machining, for example, was one of the processes that could apply this
concept. Machining production process layouts were designed in the
shape of U cells, with inflow to raw material and outflow with the finished
product. There were cells in which an operator handled more than twenty
machines and devices; however, these productive cells were not dedicated
only to one type of product and with this my job as a process engineer
was to promote the continuous improvement, particularly in the setup of
machines and devices of the productive cell—it was common to have more
than ten setups per cell.
Other processes, such as casting, forging, stamping, and so on, did
not have this possibility of one-piece flow; it is impossible, for example,
to stamp a part of the vehicle and do the setup for the manufacture of
another part. The idea here is to use the concept of one-piece flow with a
dramatic reduction in the size of the batch, and it can only be achieved by
reducing setup times.
With the size of the part batch scaled for these processes, the pull system
automatically made the production orders to be scheduled as FIFO (First-
In-First-Out), and here Kiichiro’s JIT concept is also evident once only
required items are manufactured, in the time and quantity demanded.
Lean Methodologies for Waste Elimination

According to Taiichi Ohno, 99% of the activities of a production chain, for
example, are activities that do not add value to the product, and only 1%
are activities that do add value to the product manufactured. How many
of us have assessed a manufacturing process from its order to the finished
product? Do we produce inventories that will only be used long after? Is
rework a constant? And is the level of rejection beyond acceptable? Do we
have over-process due to process and quality deficiency? Is the breakdown
of machines a constant? Are there operations with unequal activity time
cycles, causing the operator to wait? Large and uncontrolled setup times?
So, how can we improve continuously? Learning to see the waste and to
recognize waste is opportunity for improvement.
The “hunch” of Taiichi Ohno was to analyze such wastes more deeply,
aiming at their total elimination and thus reducing more and more the
lead time of the process.
We know many Lean techniques today, such as: 5S, SMED, PDCA,
Standardized Work, TPM, Jidoka, Kanban, Poka Yoke, Kaizen, etc.
What would be the purpose of the creators of these methodologies? The
answer lies precisely in the analysis of Taiichi Ohno, in his relentless pur-
suit of the total elimination of waste.
Examples
SMED: This methodology was created based on the extensive tooling

changeover times in the stamping processes that used to take hours,
sometimes days, thus leading to high inventories of raw materials, WIP,
finished products, and a logistics structure too large for handling, and
theses are all non-added-values that only increase the costs and lead-times
of the process.
Standardized work: Standardizing the operations process, analyzing in
detail the operator’s movement, standardizing work sequence activities,
standardizing quality processes within the process, performing an ergo-
nomic and safety analysis on every operation activity, etc.
Kaizen (Continuous Improvement)

Since joining Toyota, this method of ongoing improvement is taught to
all employees. Toyota understands that those who do the work are the
experts and can detect waste and abnormality quickly. Using this poten-
tial of human resources as a basis for ongoing improvement and problem
solving was essential for the strengthening the TPS.
Toyota, in my opinion, does not seek cost reduction with Kaizen activi-
ties; rather, it aims at introducing the culture of total elimination of waste,
that everything can be improved from the implementation of good ideas
that will become Kaizens.
KANBAN AS A TECHNIQUE OF JIT

The Kanban system was inspired when Taiichi Ohno went into a super-
market in his visit to the United States; and today we see that many of
the characteristics of supermarket systems are embedded as rules in the
Kanban system. Some examples include
• Consumers choose what they want, in the amount they want, and
buy. The analogy here, in the manufacturing process, is a pull sys-
tem, the subsequent process search for the required amount in the
previous process and it manufactures only the amount withdrawn
when necessary, and the production order of the products follows
the typical sequence in which the products were withdrawn by the
subsequent process.
• Customers minimize the activities of the employees at the supermar-
kets by carrying their own goods to the cashier. The analogy here, in
a manufacturing process, is that human and transport resources are
used with greater efficiency; only the products and materials needed
for that production moment are handled and transported.
• Instead of using large inventories of products for item replacement,
the supermarkets replace only the products that were sold, reducing
the stock and the physical space of such products. Analogy with the
pull system.
As seen previously, the most efficient method of JIT production is con-

tinuous flow, that is, to connect the processes with standardized invento-
ries calculated so that the operating cycle is completed.
However, it is not always possible to connect the manufacturing pro-
cesses, due to the distance between the processes, unequal cycle times,
factory layout, work shifts, etc. Kanban artificially aims at the connection
of those processes that, for some reason described, could not be connected.
Taiichi Ohno clearly describes that TPS is a production method, while
the Kanban system is only a means of applying the method. Therefore, the
Kanban system is a means of application for the JIT production method.
Many times we mistakenly hear that Kanban is an inventory control system.
Kanban is a programming system drawn to meet customers’ needs
and facilitate the visual management of the production throughout its
processes; in other words, we can visually manage activities related to
transport, manufacturing, operation, and prompt response to demand
fluctuations; decentralize factory control by assigning the production/
inventory control to supervisors/operators; provide the production with a
greater reactive capacity due to changes in demand; supply materials syn-
chronously in time and quantity as needed at a given process; etc.
At Toyota do Brasil, I had my first experience with the Kanban system;
the project was to connect the forging, heat treatment, casting, and subse-
quent processes with the Kanban system.
At this time I met Mr. Sakamaki, who was also himself a disciple of
Taiichi Ohno, receiving his knowledge of TPS directly from the master.
Sakamaki-san had been sent from Japan to Brazil so that he could have a
deeper understanding of what TPS was. He was a very strict person when
it came to teaching and applying the method, as almost all Senseis and
disciples of Ohno were.
We started by implementing the Kanban system in the forging pro-
cess, which was provided with two presses of 1,600 tons and 2,500 tons
only; at the time, the forged parts were exclusively for the single model we
manufactured in Brazil, the Bandeirante. And within his first visit to the
process, Sakamaki-san identified that the inventory level was too high,
there was a load unbalance between the two presses, and the tool setups
required too much time, thus generating a very high batch production per
part. Therefore, our major focus before implementing Kanban was mak-
ing the process stable, leveling the loads of the two presses, and making
improvements for the dramatic reduction of setup times on both presses.
The Bandeirante was composed of about 120 forged parts, with a
demand of 25 vehicles at the time. The balancing was performed by taking
into account the work hours of the morning and night shifts based on the
daily demand required by production planning. With that we dedicated
two families of forged parts: one to the 1,600-ton press and the other to
the 2,500-ton press.
The next step was to improve the times for tool setups on both presses.
The application of the SMED concept and definitions of internal and
external setup, coupled with Kaizen, were important for the significant
reduction of tooling changeover times.
• External setup: Activities that can be performed while the equipment
is working, for example, preparing the next raw material in the pro-
cess area.
• Internal setup: Activities that must necessarily be performed with
the equipment stopped due to safety and process constraints and
process; for example, we cannot manually adjust the tooling with
the machine in motion.
When we started, the average setup was around forty-five minutes per
tool, and there was a standard heating process to normalize the temper-
ature of the tool before starting the forgery, which was very important,
because if it was not done well, there could be a breakdown in tooling; this
step utilized almost 50% of the total setup time; the process was consid-
ered an internal setup because it was held soon after the assembly of the
tooling in the press and used gas burners for doing so.
First, we started listing all the setup activities and split them into internal
and external activities with their respective times; after that, we analyzed
which internal activities could become external activities with the Kaizens.
Having this definition in mind, we promoted countless Kaizens in the
setup process; the main one was building a second base with a rotating
device where we could assemble the tooling of the top and bottom table off
the machine and, once the entire tooling had been assembled, we could also
preheat the tooling outside the machine; all these previously considered
internal activities were now external ones. Thus, we achieved an extraordi-
nary reduction in setup time of over 90% with these Kaizens implemented.
We could now think of how to implement Kanban within the forging
process and, for the kind of forging production that was produced in
batches, the Signaling Kanban (Triangle) was ideal, because it created the
connection between the forging process and the subsequent process with a
continuous flow of production in small batches. With the dramatic reduc-
tion in setup time, now it was also possible to reduce the size of the batch
and create the desired flow.
The next step was to calculate the batch size for each part based on pro-
duction’s average daily demand, which at that time was twenty-five vehi-
cles a day; batch sizes ranged depending on the quantity of parts used per
vehicle (e.g., two parts per vehicle for a same forged item). The calculation
of the batch size was as follows:
1. Demand (25 vehicles/day) × Quantity of parts/vehicle (120) = 3,000

forged parts/day
2. Calculating the number of setups per day:
Mean time for production of 3,000 parts = 910 min
Available time for setups = 960 min (2 shifts) – 910 min = 50 min
Setup mean time = 5 min
Number of setups/day = 50 min/5 min = 10 setups/day
3. Calculating the batch size:
Daily demand/Number of setups = 3,000/10 = 300 parts
Note: For parts needing, for example, two parts per vehicle, of course,
the batch size was 600 parts, and so on.
The batch size computation, as we saw previously, refers to an opti-
mum condition in which the process does not have line shutdown
problems, so it is important to know the production efficiency to
add a safety inventory for each batch size.
In the optimum state, for example, for a batch of 300 parts and a
daily consumption equal to the demand (twenty-five vehicles),
we have in this case (300/25 = 12), twelve days of inventory turn-
over—this means that for an optimum state, we would have to
produce the same part every twelve days.
4. Calculation of Order Point (OP):
We can imagine the OP as a Kanban trigger; that is, it is the com-
puted and defined inventory so that the production operation of
the part begins.
The calculation of the OP took the preparation time of the raw mate-
rial; for the forged parts, it was required to cut the rolled steel
bars into the corresponding sizes and weights, the setup time of
the tool on the press, and the predetermined safety inventory.
For example, let’s assume that the batch size is 300 forged parts, the
OP computed is 50 parts, and the Kanban attached to the con-
tainer is for 50 parts. When the first part was removed from the
container, the trigger was activated as production order a forged
part.
The next step now is to build up the inventory fluctuation based on the
spin of the forged parts.
350
300
Inventory Consumption
250
200
150
100
50
0
#1
#7
#13
#19
#25
#31
#37
#43
#49
#55
#61
#67
#73
#79
#85
#91
#97
#103
#109
#115
Part Number
Above shows the part numbers for the inventory consumption and as
the stock of the parts reach the respective OP, the Kanbans are raised to a
production Kanban position and usually the part’s production sequence is
in accordance with the Kanban’s raising sequence.
As said before, Kanban decentralizes the factory’s production control by
assigning this responsibility to the supervision and the operators; but for
this to happen without any failures, it is critical that the rules of the Kaban
system are followed:
• Defective parts are not to be passed on to the following process.

• The following process goes to the preceding process to withdraw parts.
Part Number
Machine Part Name Tool No
Forging storage area:
Machining storage area:
Container type
Lot size Parts/

Container
O.P
• The quantity of parts produced must equal the quantity of parts

withdrawn by the following process.
• Parts must not be produced or conveyed when there is no Kanban.
• Kanban must be attached to the actual parts.
• The number of actual parts must be the same as specified on the Kanban.
The following are the required pieces of information that a Kanban

should have:
1. Part number
2. Part name
3. Location in the inventory area (subsequent and lower process)
4. Machine where the part will be manufactured
5. Number of the tool corresponding to part
6. Batch size
7. Type of container and quantity of parts per container
8. OP (Order Point)
CONCLUSION
Kanban is an alternate solution when continuous flow is not possible;
in cases where continuous flow is present, there is no need for Kanban
signaling.
Kanban is not a technique for reducing stock, it only manages the inven-
tory. In some cases, by implementing the Kanban system, we can even
increase the inventory; the quantity as seen above depends on the calcula-
tion of batch size.
The implementation of the 5S methodology is important to keep the sys-
tem working.
Standardized operation works regarding Kanban’s working; rules and
flow are important for the system to work out.
5
Problem-Solving PDCA
Sammy Obara
Albert Einstein has been attributed to having said, “We can’t solve prob-
lems by using the same kind of thinking we used when we created them.”
DEFINITION
Simply defined, a problem is a deviation from a standard. Failing to see
the elements that are intrinsic to a problem can cause us to lose focus
on how to solve the problem. For example, a common step to most peo-
ple is to jump into a solution before analyzing what is really causing
the problem. Another mistake is not identifying the standard or not
understanding its deviation. Typical assumptions like these can cause
the best-intentioned team to lose focus and get lost along the problem-
solving effort.
WHY PROBLEM SOLVING IS SO IMPORTANT

ALONG A LEAN TRANSFORMATION
When introducing and implementing Lean techniques, a set of challenges
inevitably comes attached. For example, we cannot connect processes
without hitting several problems; we cannot lower inventory levels with-
out unveiling new problems each time we try.
With so many new problems being created so fast, solving them in an
effective way becomes vital to solidify the success of each step in the Lean
journey. Adopting early a methodology that has been proven effective
can avoid the frustration of the constant hitting or missing. In today’s
71
72 • Sammy Obara
competitive environment, the winner is whoever misses the least, and

thus the need for a proven scientific method to solve problems.
I received one of those chain e-mails recently with the following meth-
odology to find the root cause of a problem. The person who sent me that
e-mail said: Here is a “scientific method” to problem solving. The e-mail
read as follows:
“FACT: England and the US have the highest rates of heart attacks
The Japanese eat very little fat
The French eat a lot of fat
They suffer fewer heart attacks than the British or the Americans
The Japanese drink very little red wine
The Italians drink excessive amounts of red wine
They suffer fewer heart attacks than the British or the Americans
CONCLUSION: The Root Cause of Heart Attacks
Eat and drink what you like. It’s speaking English that kills you.”
Jokes aside, that e-mail made me pose two questions: First, how well are
we using the problem-solving methods that are widely available and have
been proven effective? Sometimes the impression is that we overlook the
connections between the facts and always end up with the solution we had
preconceived way before we started.
The second question: Why are we so afraid of problems? In many orga-
nizations I work with, they simply abolished the word “problem.” This
forbidden word has now officially been replaced by “opportunities.” And
shame on you if you still use the old-fashioned word “problem.” This atti-
tude tells me that people really have a great fear of problems.
My colleague Darril Wilburn always tells his class that “Problems are NOT
opportunities. Problems are problems!” He explained to me that his Japanese
Sensei (EVP Nate Furuta at Toyota Motor Manufacturing North America)
used to say that to make sure people understood that there is a totally dif-
ferent sense of urgency and importance depending on which word you use.
I had to meditate more on that as I too became used to calling problems
opportunities. It took me a while to get back to the original terminology.
Human nature has a tendency to disguise words so that they become
appealing. It happened with words such as “used cars,” which became
“pre-owned” (same thing, more appealing); and if you put the word “certi-
fied” in front of it, it is almost better than new. In the corporate world, the
“inspection” department became “quality control,” then “quality assur-
ance” department, and it is still changing.
Problem-Solving PDCA • 73
Today, when I hear the word “opportunity,” I always think of those peo-
ple selling time-share resorts. Not only do they use the word “opportu-
nity” every few minutes, but they also make it sound like there is a sense of
urgency: If you do not buy it now, you will be forever frustrated; you will
be the only loser around.
I think the point is exactly that with opportunities. It may even sound
like there is a sense of urgency, but there is not. An opportunity—you can
choose to take it or leave it. Thus, some people choose not to buy the time-
share, regardless of how good the sales pitch was.
A problem, on the other hand, does not leave room for choice. You must
solve it because if you don’t, it will only grow bigger and more difficult to
face. A problem does not leave you a choice of running away, no matter
how bad the sales pitch was.
Do you really want to disguise your next problem? Are you that afraid
of it?
Before switching gears, we still have to figure out why we are so afraid
of problems.
Let’s ponder: For one, the concept of problem itself tells us it is not a
good thing. We always relate problems to very visible and negative conse-
quences whenever there is one occurring: low morale, high pressure, time
consumption, and so much more.
74 • Sammy Obara
Another reason for the fear of problems is the frustration of having

them come back constantly. Former Secretary of State John Dulles once
said, “The measure of success is not whether you have a tough problem to
deal with, but whether it is the same problem you had last year.” In other
words, what makes your mechanic good is not how many times he has
fixed the same problem in your car. Perhaps by solving problems, we mean
that the same problems will not come back the same way again.
So, if people are afraid of problems because they keep coming back,
what would it be like if they could solve problems once and for all? Would
people lose their fear and become problem seekers?
There are certainly other reasons why we are afraid of problems (some
will stem from punishment from the boss, retaliation from customers,
etc.); however, at least we can eliminate one of the reasons if we use an
effective problem-solving method—one in which problems can be solved
once and for all. One that ensures a thorough application of a key element
called root cause analysis.
Of course, a good and proven scientific method to solve problems will
prevent the same problem from happening again. But finding such a
method among so many others available may sound like a daunting task.
WHAT IS PDCA?
PDCA is one of those methodologies that has been proven effective by
world-class organizations. The letters stand for Plan-Do-Check-Act. Used
correctly, it can ensure that you never have the same problem again. Used
wrongly, however, and it may lead you to trying to banish the English lan-
guage from the planet in the name of preventing heart attacks. For even a
scientific method can be applied in the wrong way.
DO YOU REALLY NEED A METHOD?

We have been solving problems since we were babies. During this period,
we solved problems such as hunger, pain, and tiredness just by adjusting
our crying volume and frequency. We grew a little older and started play-
ing with toys that stimulated trial and error; we had to pass geometric
shapes through holes that resembled a star, a hexagon, and a circle. A little
later in life, we came across real problems at school, work, and in other
situations. We may not realize it, but what we have been using to solve
today’s problems are the same techniques we learned in our early lives,
namely, trial and error, forcing a result, and in a more adult version, crying
at times. This is what inspires many of us to look for the best methodolo-
gies or techniques to solve a problem.
HOW AND WHERE TO FIND PROBLEMS

We tend to solve problems that are imposed on us via a crisis: the equip-
ment broke, the material is defective, the delivery is late. Out of curiosity,
what is really the proportion of problems that we need to solve right away
against those that we can solve in a proactive mode?
At Toyota, many of its problems come from internally created crises.
From corporate tops to local departmental supervisors, each level creates
higher standards that they want to meet each year. To close the gap in all
levels, smaller teams are formed to attack the problem. This methodology
of continuously improving standards has been largely studied under the
label of “Policy Deployment.”
This approach allows, to a certain extent, proactivity within teams and
establishes a culture of working ahead of the problems to prevent them
76 • Sammy Obara
from becoming problems. So, it is natural to say that if you are bad at find-
ing problems to solve, policy deployment will help you find several.
But never mind if you still do not have a Policy Deployment approach in
practice at your organization. There are other ways to find problems, and
an easy one is when you stop running away from them. When you stop
neglecting them, you start seeing them as problems rather than as a time-
share opportunity that you can pass if you do not want it.
THE MOSQUITOES CASE

When I was an intern at Toyota, based out of Honsha headquarters in
Japan, I was assigned to work for a few years at the Overseas Planning
Engineering Division. Our division had Toyota transferees from more
than twenty countries, and many of us became quite good friends.
A vivid example from those days that my colleague Bunchai-san, from
Toyota Thailand, shared was how they used PDCA to reduce the number
of mosquitoes in the plant. Although this happened in late 1993, the struc-
tured method made such an impact on me that I still think of that example
when tackling highly technical problems.
I use this example to point out how I solidified my PDCA understand-
ing. I hope it has the same effect on you.
HOW WELL DO YOU UNDERSTAND THE PROBLEM?

Toyota Thailand, also known by the initials STM (Siam Toyota
Manufacturing), is located in a country with a tropical climate, and mos-
quitoes are a common nuisance.
Through employee surveys, STM found out that 65% of the employees
were complaining about the high incidence of mosquitoes in the factory.
Compare that to the second-highest problem—noise in the factory—with
a mere 24% of the complaints, or the third one—too much dust—at 8% of
the complaints.
The first thing they did after realizing the magnitude of the dissatisfac-
tion was to form a PDCA team comprised of people who could add to the
scope of control over the problem—the people related to employee rela-

tions, to environmental affairs, and to facilities. Although they did not
enlist a mosquito expert to be part of the team, they invited such an expert
for a small lecture and Q&A session.
They chose a fun name for the team: Doctor Smile.
They also investigated the point of cause.
GENCHI GENBUTSU: THE POINT OF CAUSE

In Japanese, Genchi Genbutsu roughly translates to “real place, real stuff.”
Only by going to where the problem is really happening can we thoroughly
understand it.
Point of cause helps to understand the what, where, when, who, why,
and how of the problem:
• Where mosquitoes would be more common (a few areas were more

prone to mosquitoes than others).
• What types of mosquitoes were there, and which ones would bite (it
turns out that only female mosquitoes bite).
• When the mosquitoes were more active (from July to November, the
rainy months for that region).
78 • Sammy Obara
• How they bred (that type of mosquito had a fast life cycle, where, in
just a few days, an egg would become a mosquito and lived for just a
few weeks).
• How they lived, entered the plant, bit employees, etc., etc. (the find-
ings were too numerous and could fill this chapter).
The team even set up a sticky screen that would enable them to count how
many mosquitoes were caught in each area and when. This screen proved
essential to do a later checkpoint and compare the results of each of the
countermeasures they were testing.
All these answers together directed everyone’s attention to the right
places. I learned that planning to solve a problem was a critical step. If they
were not capable of counting mosquitoes, how would they know if their
solution was helping the problem or making it worse? And if it was help-
ing, by how much was it helping? Imagine them adopting some solution
that was, in reality, not affecting the real problem. For how long would they
keep that fictitious solution given the not-so-fictitious cost to keep them?
Sometimes, we get caught in the fast lane and do not plan how we will
solve the problem. We end up shooting in all directions very fast, hoping
that one of the bullets will hit the mark.
The point of cause, or Genchi Genbutsu, will determine how well
your problem will be solved. Therefore, Genchi Genbutsu should never
be replaced with other artificial methods such as collecting information
from your computer screen, reports, phone calls, hunches and guesses.
You must go to the floor; there is no substitute for it.
HOW WELL CAN YOU STATE THE PROBLEM?

The planning phase continued. Because they took serious care as to how
the problem would be stated, the problem statement kept everyone’s efforts
focused on the single problem.
A good image to remember is of a mountain that we must climb. But
there is so much clutter, fog, and many obstacles that we are discouraged
from taking on the journey. Now imagine that on top of it all, we cannot
even distinguish what is the real mountain that we will climb.
A problem statement can be compared to a flag on top of the mountain,
very clear and visible so that all of the members of the team will be clear as
to where to go, joining forces instead of dividing and getting lost.
A problem must be stated clearly, accurately, concisely, and in such a way

that it can be measured. Having met these criteria, the entire team will be
able to attack the same problem, or in this analogy, climb the same mountain.
Another benefit to having a clear statement is that it removes clutter from
the long path of solving a problem; on the other hand, a mountain path
that is full of obstacles will discourage and distract people on the team.
An example of clutter that can harm this first step is when there is what
I use to call “junk words” (I substantiate this concept in an experiment
that I share in the following pages). Some well-intentioned problem solv-
ers may get intimidated just by the amount of clutter (or complexity) that
appears to be on that mountain. They also get discouraged and, therefore,
disengaged in the problem.
I have seen problem statements that simply read “too many customers
complaints. We need to pay more attention when we take the orders and
deliver the products.”
Let’s review the issues with such a statement:
It is too broad a mountain to allow anyone to focus on what the issue
really is. Remember that if the team cannot clearly see the mountain they
have to climb, then they may be all climbing different mountains. And
dividing people on the team in these early steps means dissolving the
brainpower needed to pursue the one problem you want to solve.
Another typical aspect of this problem statement is that it thinks it is
bringing the solution already. Interestingly enough, even good managers
still think that problems can be solved by this magic command: “Pay more
80 • Sammy Obara
attention.” They have been trying that command for centuries; it has not
worked well, but they just keep insisting on it.
One of the toughest aspects of following scientific methodologies to
solve problems is that most of them require you to collect data and infor-
mation to a great extent before you get into the solution phase. They forget
that we are wired to always be a step ahead and ready to implement some-
thing fast. This is because we need a sense of accomplishment, and col-
lecting data for hours on end does not give us that sense. Remember how
successful that motto of Nike was? “Just do it.” I think it would not be too
successful if it said, “Just plan first.”
Another aspect of that statement is the clutter that I mentioned earlier: The
term “too many” is formed by junk words. Here is my take on junk words:
I did an experiment in my classes where students had to answer how
much is an expensive car. The only thing I said was, “Luxury cars are just
too expensive.”
Answers varied from $35K to $150K (a factor of five times). This was a
huge variation especially considering it was a class of well-educated Lean
practitioners from the same country and exposed to the same markets.
When hearing that sentence, nothing struck us as weird or odd. As a
matter of fact, it is such a common communication pattern that I took
that one straight from the headline of a leading newspaper that distributes
almost two million copies.
Junk words can be identified by their effects on the statement. They add
to the length but do not add to the value of the sentence. In the case of
the car, we can eliminate the word “just” or “too,” and chances are we
still have the same variation in the answers. How about if we switch the
word “expensive” to “cheap?” Will the variation still be there? (The answer
in my experiment is yes.) And note that we switched the word not with
a synonym, but with something exactly the opposite. How about if we
eliminated the word “luxury?” Would the answers change much?
The experiment indicated that for some people what can be a real bar-
gain, such as a $35K luxury car, to others can be “just too expensive.”
What would have happened if we had just eliminated everything that is
not adding value to the sentence? Would we still have variation? (Again,
yes and high.)
Does that not mean that we can eliminate three quarters of the sen-
tence and still get the same flawed perception? Perhaps this is the reason
our problem-solving meetings are taking sixty minutes while we could do
them in only fifteen minutes. Perhaps this is the reason why problems are
difficult to solve; the thinking inside the head of each team member can
vary by factors of several times.
We all have our own perceptions and that is not going away anytime
soon as our perceptions come from personal experiences, expectations,
education, values, gender, age, and the list goes on. Still, by being aware
of that can help us improve the way we approach a problem. Eliminating
such “junk” is crucial to bring everyone to the same mountain; it is like
eliminating the obstacles on the way so they can all join the hike.
Being measurable in a problem statement can eliminate this variation
in perception. On top of that, it will allow you, in the progress of solving
a problem, to check against the initial condition to see whether or not you
are closing the gap between the current and ideal situation. Finally, com-
bining a measurable statement with all the data (exhaustively collected
during our point-of-cause phase) will let you establish what a reasonable
goal can be.
GOAL: A plan with a deadline. A common practice in solving problems
is that goals are set by the “bosses” according to factors totally disconnected
to the problem, such as quarterly numbers and other metrics for their man-
agerial performance report. Rarely do we see goals being set by people who
did diligent investigation of the problem. The farther away you are from
the point of cause, the more unrealistic the goals tend to be. This may be
the reason why Toyota lets teams that are actually hands-on solving the
problem, establish their own goals. Naturally, those teams will know what
is realistic after they have been through the Genchi Genbutsu exercise.
The goal statement always carries a strict deadline and consequently it
keeps the team focused on the climbing of the mountain.
To me it still sounds weird to put the word “strict” together with the
word “deadline” as I just did, but I use that redundancy on purpose. You
will see why on the quick note about deadlines in a few pages.
HOW WELL DO YOU UNDERSTAND THE CAUSES?

The planning phase still remains crucial when you start pursuing the pos-
sible causes of the problem. A fairly simple method to dig deeper into the
causes and get to the root cause is the Five Why’s. By simply and continu-
ously asking “Why?” to a cause, we can explore the causes down to their
roots—the cause behind the cause.
82 • Sammy Obara
Back to our example from Bunchai-san, his team first asked why people
were complaining so much about mosquitoes. The obvious answer came
from their trap device: there were too many mosquitoes inside the plant.
But, why? The answer was because they bred too fast during the rainy
season. But the team, knowing that this was a superficial cause, asked why
they bred so fast. Among other logical answers, one was that there were
too many breeding spots near the factory. A few more “whys” later, they
identified the main breeding points as being some of the gutters as well as
a small pond behind the building.
My colleague at STM mentioned the long ordeal, preparing to prove (or
disprove) the root causes; after all, going after the wrong lead could end up
being costly and useless.
Their PDCA mentality drove them to do small checking events after
testing localized solutions. By temporarily deactivating some gutters, they
evaluated the effectiveness of that countermeasure.
By checking the amount of mosquitoes close to the pond, they evaluated
how much evidence there was that would prove this to be a real breeding site.
Another critical element in describing the problem and its causes lies
in how we display the findings from the extensive data collection/Genchi
Genbutsu. Contrary to traditional beliefs that a good report is a thick one,
the PDCA method forces us to weigh in on the importance of each con-
tributing factor to then decide what to leave out and what to make part of
the vital few indispensable pieces of data.
Something I really learned to appreciate was how effectively Toyota can
communicate via charts, diagrams, and graphs; provided of course that
you have good data, charts are a much faster and accurate means to con-
vey information. They also help eliminate misinterpretation, which is so
common when working in a diverse team. And their objectivity helps con-
dense lengthy explanations of the data.
My colleagues from STM used Pareto charts to show the quantity of
mosquitoes per area. The Pareto chart makes it easy to distinguish the
areas that had more mosquitoes, thus helping them decide where to
tackle first. They believed that by attacking 20% of the areas with more
mosquitoes, they would be reducing by 80% the number of complaints.
Their belief was derived from the Pareto law, which states that 20% of the
causes are responsible for 80% of the problem. They also used trend charts
showing when along the year mosquitoes would be more active. This gave
them a clear indication as to the best time to test their countermeasures.
It also helped them determine breeding cycles and elements that could
affect the incidence of mosquitoes in the factory, such as weather and

factory conditions.
Another chart they had was called the cause-effect diagram, commonly
known in Toyota as the Ishikawa diagram (probably because the person
who popularized this diagram was Mr. Kaoru Ishikawa—not Mr. Fishbone
as some might think). They used the Ishikawa diagram to plot the results
from their extensive brainstorming session where they asked the five
whys. Once neatly distributed across the diagram, it was easy to under-
stand the probable root causes for the mosquito infestation. I learned that
brainstorming for causes can only be effective if the people participating
in it have been through their Genchi Genbutsu (yes, to the point of cause).
How else can they contribute to the “whys” if they do not understand the
what, when, where, how, and who? Brainstorming for innovation and rev-
olutionary ideas may benefit from the wild guesses of diverse contributors.
But the same thing is not true when you want to collect probable causes of
a problem. As a rule of thumb, if you want to participate in a 5 whys ses-
sion, you must first perform a proper Genchi Genbutsu.
Only after the extensive checking stage did they take the next step:
Implementation, the “Do” part of PDCA.
84 • Sammy Obara
Doing Well What Does Not Need to Be Done

The “D” part of PDCA. Trystorming, the hands-on version of brainstorming.
Our human nature brings satisfaction when we see things getting done.
It is that pursuit of a sense of accomplishment that many times supersedes
the inquiries to check and evaluate if what we did had a positive and sus-
tainable effect. As most brainstorming sessions, theirs generated several
potential root causes and I guess this can be seen as the good news. The
bad news was that there were several potential root causes. Yes, too many
root causes can cause overwhelming workloads involving the selection,
prioritization, proving and disproving them, etc.
In our story, they used a mini-PDCA method, testing out their root
causes until they could prove or disprove each of them. Their proven root
causes led to testing some countermeasures that included these three: (1)
installing fly traps in the entrances to each of the buildings, (2) weekly
application of an insecticide in certain spots, and the one I liked the most,
(3) contemplated bringing fish and raising them in the pond behind the
plant so they could eat the mosquito larvae before they hatched.
Each of their countermeasures was proven on a small scale prior to exe-
cution and next I use the three countermeasures I described above to show
what I mean by small scale. I call it trystorming, which is trying quickly
several countermeasures, almost as if you are in the middle of a storm.
Trystorming is the antidote when team members are already exhausted
from meticulous and thorough brainstorming and they are borderline
becoming too comfortable in their chairs. I think there is some truth
to the adage “analysis paralysis,” in that after some time sitting, think-
ing, and talking, we become paralyzed by the inertia and our bodies are
numbed up like zombies at the end of a long movie.
That is why, back in our example, their trystorming occurred quickly
with several trials at the same time. Needless to say, they took good
care not to cross-contaminate their results with the results from paral-
lel experiments. The way they used the trystorming concept on those
countermeasures I cited included them installing one fly trap first, and
checking results before they bought several more for all buildings. The
next one, they checked the effectiveness of different brands of insecticide
and applied them in different corners of the plant to see how they worked
before they made it a weekly practice. The final one, they checked if the
fish would really eat that type of larva and survive that type of water before
they bought and released 200 fish into the pond.
It becomes clear that the implementation phase must be done in a way such
that it constantly checks for the effects of what is being implemented. Imagine
what it would be like bringing hundreds of fish to the pond all at once, only
to later find out they could not survive that new condition. Chances are that
dead fish would attract even more mosquitoes and other insects.
This careful process of planning, testing, and checking for results before
standardizing a solution is exactly like having mini-PDCAs within a PDCA.
PROJECT MANAGEMENT
Once the team had a consensus on what had to be done, they distributed
those countermeasures among themselves and each responsible team
member established his or her own timeline, always observing the dead-
line in the goal statement.
Although each team member is responsible for implementing and
checking the effectiveness of his or her own countermeasures, once they
are all implemented, they collectively check the results against the goal.
In this case, the goal was not to reduce the number of mosquitoes—or
mosquito bites for that matter. It was just to reduce the number of com-
plaints from workers by August 1994. And that, they did!
A QUICK NOTE ON DEADLINES

When a team commits their goal to a deadline, it should mean that they
would do whatever it takes to keep to what they committed to. I hear fre-
quently a variation of that term as the “drop dead date.”
It is funny to me to see so often people misusing the term “deadline.”
Sometimes they even use the term “strict deadline,” as if there was another
type. They commit to one but when it is the due date, they justify their
missing the date and propose a new “deadline.” But is a deadline not
something definite? Finite? Does it not imply an end to it? As many other
things that are about to die, you can do whatever it takes to prevent it from
dying but once they are dead, they are dead. You mourn the loss, you learn
from it, but normally you do not resuscitate a dead pet, person, or line. I
mean, a line for some reason is often resuscitated in many organizations
86 • Sammy Obara
out there. I wonder if people do not respect deadlines just because they
know they can keep postponing them. Should that date then not be called
“faintline?” If you cannot make it, you can still keep coming up with new
dates; after all, that date is not really dead, it just passed out for a while.
What would it be like if we all started calling those dates what they really
are, faintlines? When they are to be seriously respected, then we can call
them deadlines. No need to distinguish deadlines as “strict” and “flexible.”
Continuing with our case, their after-PDCA survey showed a drop
from sixty-five to twenty-one complaints in the same time period. Quite
an impressive number, judging by the fact that this had been a problem
plaguing that site for so many years.
STANDARDIZATION
One thing that still fascinates me in every Toyota site I visit is their level of
standardization. I see that as one of the keys to Toyota’s success.
STM used standardization in several ways to ensure maximum return on
their PDCA as well as to pave the way for the continuous improvement cycle.
For example, to make sure that the insecticide countermeasure would
be consistently applied, they created a chart showing where to apply and
with what frequency, depending on the time of year. To make sure the fly
traps never lost their effectiveness, they had a calendar reminder showing
when and who should be emptying and cleaning the trap. In addition to
that, there was a standardized instruction sheet showing how to clean and
hang the trap.
Also, to maximize their gains, they presented their PDCA to the neigh-
boring plants: an electronics manufacturer, an engine plant, a consumer
goods plant, etc.
I am not sure how much further they could have driven down the num-
ber of mosquitoes, but it is reasonable to expect more positive effects for
STM and for the entire region once the other companies implemented
Toyota’s solutions.
The standardization is the “A” part of PDCA, and we can only stan-
dardize what has been validated along the implementation-check phase
(or “DC” part of PDCA). Standardizing without checking for effectiveness
is a mistake that, if ignored, can perpetuate bad practices for a long time.
RECOGNITION
Rewards and recognition is a two-word term that I rarely heard being used
together in Toyota. Perhaps this is because they perceive these words as
not being related to each other, or perhaps because they think rewards
reach the intellect and recognition the soul. (I heard that one from my
first Toyota Senseis, Mr. Sakuta, in 1986; he is no longer with us but his
teachings impacted several lives in our production engineering division.)
What I noticed about rewards is that there is a huge difference between
monetary rewards at Toyota and that of other big companies. While most
companies reward employees with enticing monetary prizes, sometimes
proportional to the amount of money they saved, in Toyota the rewards
could many times be less than a fraction of the huge savings. Often, the
rewards would even be the same for a $1000 savings as for something two
or three times as much.
It seems that what they would consider more was the effort, the team-
work, the correct use of concepts such as standardization and Yokoten
(which is explained next).
The result of this was a reward amount that seemed just symbolic com-
pared with other companies. With that, they created a culture where
money (or reward) is no longer the major goal in improvement efforts.
88 • Sammy Obara
Now on to the recognition aspect. In a highly standardized environ-

ment, it is easy to identify changes; no matter how small they are, they
stand out. Add to that the culture of Genchi Genbutsu where leadership is
on the floor frequently, and they can observe those improvements within
the day, if not in real-time.
This combination of improvement visibility with the constant presence
of leadership on the floor allows for prompt and frequent recognition from
the manager to the person executing the improvement.
Immediate recognition methods vary from public praise all the way
down to positive coaching where the operator is asked why she did it the
way she did it, what kind of waste she thought she was eliminating, how
she would ensure that the improvement stays in place, etc.
At least from my own experience with my Sensei, the Socratic coach-
ing was more common than the praises. Very early in my career, I had to
learn to be prepared for the series of questions my Sensei would challenge
me with, and the best way to be prepared was to anticipate the questions
and have the answers built into the improvement I was implementing. So
instead of letting him ask me how I would ensure consistency in that new
process, I would have already created a standardized document for him
to see. Instead of waiting for him to challenge me with the “whys,” I had
already prepared the “becauses.” Sometimes I wonder if they perpetuated
this practice to create a culture of thinkers, because it really does increase
the sense of preparedness in the workforce.
It is interesting to me that well-schooled managers sometimes fail to
understand that if they do not recognize the efforts of their people, their
people will fail to understand what is important to the manager and con-
sequently to the company. Culture is only reached when values are shared,
and how in the world will the masses share the same values of the com-
pany if their leadership does not recognize what is valuable? By the same
token, praise is often mistaken as the only means of recognition, and man-
agers do that often to motivate their people. The key mistake is that they
miss great opportunities to develop their people through good coaching.
A HIGHER LEVEL OF RECOGNITION

In addition to instant and constant recognition, Toyota also excels in the
higher levels of recognition, the other end of the spectrum.
One of the ultimate ways to recognize a good PDCA project, such as the
mosquito one, is to bring it to Toyota Headquarters in Toyota City. Every
year, Toyota sponsors the annual Kaizen and PDCA convention, where
only the best PDCAs from each plant around the world are presented
before the highest executives in the company.
Those ten minutes of fame are so coveted that teams go beyond their
regular functions to win a ticket to present their projects. I frequently have
seen teams meeting on weekends at someone’s house, or taking evening
classes to better understand the details of their projects. I am not sure the
team at STM took classes, but I know they found an insect expert and got
a few learning sessions from him.
This annual event in Toyota City has been happening at a global level
since 1986, and I think it was easy to understand why it became such a
desired event to attend.
Right when you enter the Toyota Hall where the event takes place, you
can see the amount of planning and importance they put into this single
day. You can see the signs and distribution materials exclusively prepared
for the convention, the staff impeccably rehearsed to make this a flawless
event, the agenda detailed down to the minute of each presentation. By
the way, STM’s presentation was scheduled to start precisely at 10:23 a.m.
and finish at 10:39 a.m., including a time for comments from Toyota execs
and hand-off. The commemorative photo was planned from 4:08 p.m. to
4:13 p.m.
Everyone knew that that day would not bring in more business to Toyota,
nor would it increase its sales or benefit the bottom line. In reality, it is a
day devoted solely to recognition. Toyota could easily save a lot of money
by not bringing so many people from all over the world and tying up so
many executives for the entire day just to listen to what had been done, for
something they had already capitalized on.
The constant coaching leading to that one day of recognition was a
clear demonstration of how much Toyota cared about the development
of its collaborators.
Now, make no mistake, STM did not get to that ultimate recognition
point without a lengthy process of instant recognition sessions. For several
months and iterations, the team probably had to hear constant questions
such as: What did you do to prevent mosquitoes from coming back? How
will you spread this learning to other companies and also to other Toyota
plants? Needless to say, Senseis do not expect verbal answers but, rather,
concrete displays that all challenges have been satisfied.
90 • Sammy Obara
This solid demonstration of value and care can be summarized as genu-

ine recognition and not just as a “feel-good” event.
YOKOTEN: SPREADING THE LEARNING LATERALLY

Very common to companies that are bigger, we see the same processes
done differently depending on the person, department, site, etc. The big-
ger the company, the more different ways of doing the same thing. One of
the smallest companies I worked with had only fifteen employees. It was
a surfing school in San Diego where, in addition to the owners, everyone
else was a surfing instructor. After a day of learning their procedures, I
came to realize that all the instructors did exactly the same thing, just in
different ways. They had fifteen different ways of conducting the warm-
up exercises, of teaching the hand signs, of covering the land lesson, of
coaching students in the water, of repairing a board, of… you name it; in
all cases, there was no reason why they needed do it in different ways. They
just did not know any better. But a reasonable assumption is that among
those fifteen ways of conducting a class, there would be an optimum one,
perhaps combining the warm-up from an instructor with the coaching
from the other and at the end, you would have the standardized module
with the best timing, customer satisfaction, cost, quality, etc.
Worthy of pointing out, even in a micro-sized, single-site business, there
are difficulties in adopting a standard procedure. Now imagine scaling up
that size a few thousand times.
A company as large as Toyota, with full plants located all over the world,
has a much more intimidating challenge. To capitalize on the efforts of
one improvement in the welding of a bracket for the Corolla in Turkey,
they would need to report that to all plants that use the same process and
produce the same vehicle.
The same thinking goes for the PDCA on mosquitoes. Once STM’s
PDCA had concluded (which means tested and validated), STM sent its
report in A3 format (approximately our 11×17 paper size) to Toyota head-
quarters in an overseas department that could identify what other loca-
tions could benefit from such an initiative. Also, those neighboring plants
that received STM’s A3 were also part of the Yokoten activity. Sharing
the learning was done on at least two levels, wherein STM independently
helped local companies and also at the corporate level where Toyota would
help them spread the word to other sister plants.
Yokoten is key in implying a faster speed in Lean transformation. The
efforts invested in the sharing of best practices in a Yokoten fashion will
pale in comparison to the benefits from the accelerated learning.
WHAT IS NEXT?
When referring to PDCA, we always do so as if it was a cycle, something
that never ends. So it would be natural to think that we should do another
PDCA on the mosquitoes so we lower the complaint to a better level.
Because the metric chosen was not number of mosquitoes, but the num-
ber of complaints, in this case the complaints about mosquitoes became
second to complaints about noise level.
The PDCA cycle continues, and it is still attacking the same metrics:
Complaints.
The major cause for complaints has now become the noise level, at
twenty-four complaints. Time to start the cycle all over again.
Well, that is how I learned the essence of PDCA. Thanks for letting me
share this with you, and I hope you learned something new too.
6
Toyota Kaizen Methods*
Art Smalley
The topic of Kaizen is not new or unique to Toyota Motor Corporation.

The term “Kaizen” roughly translates to “change for better” and is nor-
mally equated with Continuous Improvement in English. The concept
of Kaizen inside Toyota has various roots that should be mentioned for
reasons of clarification. Also unlike the Western world where Kaizen is
typically a big event over a fixed period of time (e.g., five days), Kaizen in
Toyota is more a process consisting of six basic steps that anyone or any
team can do over any period of time. In this chapter I briefly introduce
the background of Kaizen methods inside Toyota, some of the origins, key
concepts, and the six basic steps of the process.
The word “Kaizen” in Japanese is written with two kanji characters
meaning to change and for the better. Unfortunately, the origins of the
term are not exactly clear in terms of etymology. The word “Kaizen” is
Chinese in origin and has roots as far back as the Qing Dynastic period
in China from 1644 to 1911. The term has always meant improvement
although it was not used exactly as in the specific sense we use it today in
Lean manufacturing, business, or process improvement.
In the early part of the twentieth century, the term “Kaizen” gradu-
ally started to appear in published Japanese works. However, it was not
a word widely used by the general population. “Kaizen” was mainly used
as a technical term in books and did not cross over into the modern spo-
ken vernacular. Starting around the early twentieth century, the indus-
trial engineering movement in the United States and other countries
made methods-based improvement a priority. Works by Fredrick Taylor
Frank, Lillian Gilbreth, and others in the field became popular topics.
Translations of these books into Japanese no doubt spurred the need for
* Note: This chapter is condensed from a previous work titled Toyota Kaizen Methods: Six Steps to
Improvement, authored by Art Smalley and Isao Kato and published by Productivity Press, Inc. in
2010. For parties interested in a fuller treatment of this topic, please refer to that work.
93
94 • Art Smalley
a specific word to mean improvement in this sense and adaptation of the

Chinese characters representing “Kaizen” likely occurred. Indirectly, all
these works affected Toyota and other companies inside Japan.
In terms of specific direct influences, there were several particular items
that influenced the development of Kaizen inside Toyota. Kaizen methods
inside Toyota are chiefly a logical extension of Sakichi Toyoda’s found-
ing precepts, the Training Within Industry (TWI) Job Methods course,
and several classroom lectures known as the P-Courses taught by Shigeo
Shingo from 1955 to 1981 inside Toyota. The Kaizen course borrows ele-
ments from each of the preceding training courses and also adds unique
Toyota elements.
Before diving into the basic steps of Kaizen at Toyota, there are some
related topics that are worth highlighting in terms of general position-
ing that affect thinking patterns concerning this topic. Kaizen training
at Toyota identified some specific beliefs about how improvement should
be carried out. For example, a typical question posed for discussion was,
“How do you increase productivity?” Participants normally responded
with typical answers such as increasing the number or workers, adding
machines, working overtime, or working harder. From a sheer numbers
point of view, those answers might deliver more units of production but
they do not qualify as true Kaizen. In an ideal case, Kaizen seeks to pro-
duce greater quantities of quality product that can be sold using existing
manpower, machines, and time constraints. None of the first three typical
answers accomplishes that goal and the fourth one—working harder—is
neither sustainable nor desirable.
In Kaizen, Toyota wanted leaders to be able to separate work quantity
input-based improvements (more machines, more time, more people, etc.)
from work quality or method-related improvements, for example, change
the nature of the work to be easier and better. In other words, leaders driv-
ing Kaizen needed to eliminate waste or unnecessary details in the exist-
ing process.
It is possible to make more items by increasing equipment or personnel,
but those come at an obvious drawback—increased cost! There are two
ways to improve production that do not add cost to the equation but only
one of those ways is desirable from a Toyota point of view. By improving
the quality of their work, teams can in fact produce greater quantities of
quality product using existing resources. In modern-day terms, this is of
course often referred to as “working smarter” and not “harder.”
Toyota Kaizen Methods • 95
5 Ways to Increase Production

1. More workers
Current:
1 worker
1 machine = 100 units “Quantity” 2. More machines
1 hour based approach
3. Work longer
How to increase
production?
4. Work harder
“Quality”
based approach
Future: 5. Reduce waste &
1 worker make easier S
1 machine = 120 units TP al
1 hour Go
A second preliminary concept discussed in the Kaizen skills course was

the notion that how you performed work eventually affected cost. The pre-
vious discussion point often drives this point home, but for confirmation
the following content was also discussed.
At the time this course was developed, the intended audience was
almost exclusively from the manufacturing ranks. As such, the typical
graphic used was a manufacturing flow sequence that highlights contrast-
ing styles. Whether or not you are in manufacturing today is not of any
consequence. There are ways of doing work that involve inefficiency in
your current style of operations. That inefficiency might be rework, down-
time of machines, delays in response times, waiting by personnel, or other
problems. It is a leader’s task to identify more efficient ways of doing things
that involve a better sequence and quality of result.
Sometimes, discussion of these previous concepts caused some concern
on the part of employees. For example, “I work hard for the company,” “I do
my best all the time,” and “I am very efficient in my day-to-day work rou-
tine” are commonly held beliefs. To help reconcile this subjective self-held
viewpoint versus reality, Toyota developed the following concepts over the
years of the Kaizen course and Toyota Production System (TPS).
Most people feel they are very busy at work and sometimes overwhelmed
during peak work hours or rush periods. The reality is that most of what
people consider “work” is not value added from the customer point of view.
96 • Art Smalley
Inventory B Inventory C
Miss C
Mr A Mr B
Inventory A Inventory D Finished
Raw Product
Material Processing Methods
Affect Cost
Finished
Raw Mr A Mr B Miss C Product
Material
Work vs te
as
Waste Value
W
d/
Added
Non- ue Adde
Motion
Val
l
ta
en
Incid
TPS first focuses
here for improvement
Toyota taught leaders to think of work as true value-added operations to

the customer, incidental items required in the current state of operations,
and pure waste in the operation.
In reality, true value-added work is quite a small part of our normal
jobs. Customer requirements spell out the form, fit, content, function, etc.,
of what they desire. The intermediate steps we use to get that end result
are usually not specified. A machine such as a lathe, for example, might
remove metal to a certain final dimension and surface finish required by
the customer. Which exact type of lathe, the tool, the holder, the storage
location of materials, or the exact program used to make the part, is nor-
mally not specified. Only making the required final dimensions and speci-
fications as indicated in print in this case are value added to the customer.
The rest of the operation is not entirely value added and can be studied for
improvement. In reality of course, the value-added portion can be ana-
lyzed for improvement as well but that is usually not the initial starting
point for Kaizen.
Incidental waste pertains to work that is required in the current state of
the operation that is not valued added but still must be done in the cur-
rent process. For example, the movement of material is not value added to
the customer but still some minimal amount must be done in order to get
parts from the delivery truck to the process and back again to the shipping
dock. Pure waste, on the other hand, is excessively moving materials from
one storage location to another location multiple times.
To help leaders and employees see that not all work is value added,
Taiichi Ohno coined the terms Muda, Mura, and Muri to explain the con-
cept he was articulating. Muda is waste, Mura is un-levelness, and Muri is
overburdening the person or process. All three of these different phenom-
ena are disruptive to efficient production operations.
Muda:
Any form of waste
in the process
Muri:
Unreasonable Mura:
burden on Unlevel
people or workloads
machines,,, on people
or machines
98 • Art Smalley
Even more specifically, Taiichi Oho codified seven typical types of

wastes in the mid-1960s:
1. Over-production
2. Excess inventory
3. Scrap and rework
4. Wait time
5. Conveyance
6. Excess motion
7. Over-processing
As the original list of seven wastes was created inside Toyota, many com-
panies have altered the list and added their own forms of waste as well.
Failures to utilize human potential, inefficient systems, wasted energy, etc.,
are frequent additions to the list. The original list is not perfect and was
intended to serve as a way to highlight examples for employees to iden-
tify areas for improvement. For parties outside of manufacturing, the list
requires translation into relevant examples. For example, waiting for mate-
rial might instead relate to waiting for documents to arrive or be processed.
Scrap and rework might pertain to mistakes in documents or transactions.
The final critical concept that relates to the introduction of Kaizen is
the principle of cost reduction. Kaizen can be conducted for a variety of
reasons, including quality, lead-time, productivity, safety, and other items.
Ultimately, however, in Toyota we were also crystal clear about the need
for cost reduction.
As mentioned earlier, the automotive industry is a highly competitive
industry with many complementary products. Establishing a reputation
for quality is critical for any industry. In the long run, companies must
also make a profit. A former president of Toyota Motor Corporation, Taizo
Ishida, used to remark frequently about the need “to defend your castle by
yourself.” By this comment he meant that it was proactive and helpful to
take your destiny into your own hands and not leave your personal fate
up to others. One of Toyota’s methods of embracing this concept was the
principle of cost reduction.
In the simplest sense, profits are determined for a company by three fac-
tors: sales price, cost, and volume. For general discussion purposes, these
three elements can be represented by the following equation:
Profits = (Sales Price – Cost) × Volume

Cost Reduction Principle
Sales Sales
Price A Profit B Price A
Profit A Profit A Profit B
4
Sales 10 2 Sales 10 2
Price B Price B 4
8 8 8
6
Sales Price
Sales Price
Cost 1
Cost 2
Cost 1
Cost 2
Cost Plus Principle Cost Reduction Principle
Given this simple equation, how can a company earn greater prof-
its? There are only three levers for the equation: increase the sales price,
increase the number of units sold, or reduce the cost. In general in com-
petitive industries, raising prices is difficult and customers may simply
turn to alternative offerings from competitors. Simply making more
products is no guarantee of making money either…the result may just be
excess inventory or waste. The only sustainable way to increase profits is
to focus on cost reduction.
Importantly, reducing cost does not mean simply cutting costs or jobs.
Reducing costs means eliminating waste in any process that does not add
value to the customer. Less inventory, fewer defects, less waiting time,
etc., all lead to greater productivity of the factors involved in production.
This is the true spirit of Kaizen—establish more efficient uses of exist-
ing resources by taking out the waste or unnecessary details that do not
add value. Companies that can accomplish this goal will reduce costs and
help improve profits. By emphasizing this formula, Toyota made sure that
everyone realized they had a direct hand in the success of the company.
In general, there were six main steps to Kaizen inside Toyota and the
steps are related to other methodologies, such as the scientific method
and general problem solving. The big difference is that in Kaizen, as we
will observe going forward, there are more degrees of freedom and greater
emphasis on generating original ideas. In general, all improvement meth-
odologies follow the pattern of Plan-Do-Check-Act (PDCA) in some basic
fashion and in this sense Kaizen is fundamentally the same.
100 • Art Smalley
Discover
Improvement
Potencial
Analyze the
Current
Methods
Evaluate
the New
Method
Six Steps
of Kaizen
Generate
Original
Implement Develop an Ideas
the Plan Implementation
Plan
STEP 1: DISCOVER IMPROVEMENT POTENTIAL

The first basic step of Kaizen at Toyota is to discover improvement
potential. There is a slight technical difference between problem solv-
ing and Kaizen that is worth emphasizing. In problem solving you are
typically trying to close a gap to a known standard. The root cause
for this gap is pursued until the gap is closed. In Kaizen there does
not technically have to be a problem or a gap from standard. Process
performance might be fine or at standard, however you still need to
improve for some reason. For example, you might be at 100% on-time
delivery but with a lead-time of five days. A good example of Kaizen
would be to maintain 100% on-time delivery with a lead-time of two
days or less.
Discovering improvement potential is sometimes obvious but helps to
embody certain attributes when pursuing improvement. Negative defeat-
ist thinking will never lead you to any gains. Here are some basic things to
keep in mind when searching for improvement opportunities.
Always keep the spirit of inquiry alive when you are conducting Kaizen.
Do not settle for simply understanding “what” is going on in any process.
Seek to understand “why” it is the way it is and exactly “how” it works.
Often this process of investigation takes some time in the beginning, but
in the end it always pays rewards.
Practice the Toyota concept of “Genchi Genbutsu” at every opportunity.
That is, go and see the actual objects in question at the actual workplace.
Don’t accept second-hand information or reports, as these often will
mislead you or fail to ask all the right questions. Just as detectives visit
their crime scenes for investigations, you need to visit your worksites for
detailed observation as well.
I also suggest that you throw away all preconceived notions about the
process or situation you are facing. There is nothing wrong with having
opinions or hypotheses when you start out. However, be careful that these
do not function as blinders that limit your ability to obtain better ideas or
different points of view. Sometimes the best ideas are not always the first
ones you come across.
When assessing improvement potential, always practice thorough obser-
vation of the work site. This is related to the concept of Genchi Genbutsu
but do not fall into the trap of seeing things once at a high level and think-
ing that you understand all the details. It often takes multiple observations
to understand the details of any process, so plan on spending some time
“getting under the hood” of the process and learning what makes it tick.
The final point regarding attitude and posture toward discovering
improvement potential is to strictly adhere to the concept of “AQD.” By
this acronym I mean that you should strive to be analytical, quantitative,
and detailed. The term “analytical” means, roughly, to break things down
into smaller pieces for study. This helps tremendously in Kaizen if you can
break things down into understandable, interrelated components. Second,
strive to be quantitative and measure things accurately. Do not accept ver-
bal qualitative statements such as “good,” or “long,” or “hard,” for example.
Learn to measure things and be precise. Finally, I also suggest being as
detailed as possible. Practice the technique of peeling back the layers of the
onion until you are very clear and close to something that can be improved.
If you embody all these attributes, they will make it easier to conduct
Kaizen in general and also easier to identify improvement opportunities.
Of course these attributes do not generate ideas or answers for you but
they help stimulate the mind in a positive direction that will be of ben-
efit during the entire process. In addition, there are also some traditional
techniques that Toyota often employed during Kaizen activities to help
generate improvement areas. I will outline several of the more common
ways to find improvement opportunities.
102 • Art Smalley
One of the simplest ways is to compare performance or any process

or area to the existing standards and look for opportunities to improve.
Technically, if you are short of the standard, you are in problem-solving
mode but that is okay if you are looking to improve. If you are meeting all
or many of your standards, then you have to question if the standards are
now too low in terms of difficulty and need to be raised. This is an excel-
lent way to create the need for Kaizen in many instances.
Additionally, a great way to find opportunities for improvement is to
create something we called a “production analysis board” at Toyota. Write
down the expected production rate for the shift in small increments, such
as every fifteen minutes or at least every hour. Then for one day collect data
about how well the process is able to meet the expected rate in terms of
actual output. Also note the reasons why the process falls behind, moves
ahead, speeds up, slows down, etc. These details will always provide great
insights for Kaizen opportunities.
Another proven technique is to visit the work site and spend time iden-
tifying all the forms of waste that exist in the area. The seven waste cat-
egories are an excellent starting point and exist in every operation in some
fashion or other. Take these points and list all the examples of them that
you find, and that should lead to many areas of Kaizen opportunity.
The final avenue that I will mention in this discovery-related step is to prac-
tice the concept of 5S. In Japanese the words Seiri, Seiton, Seiso, Seiketsu, and
Shitsukei relate to a disciplined method of organizing and cleaning an area.
In English they roughly mean to put, sort and arrange things into proper
positions. Once items are properly stored, then properly clean the items,
label them, etc., and ensure they remain in a state of cleanliness. Finally, the
last S refers to the Japanese word for discipline. Practice discipline to ensure
that the gains you have made in terms of organization are sustained.
Any of these methods should work in terms of identifying improvement
opportunities. Often you might know right away what you need to improve
due to demands from the customer or senior management. When that is
not the case, simply looking to improve any of these methods should help
you identify multiple areas for improvement.
STEP 2: ANALYZE THE CURRENT METHOD

The second basic step of Kaizen is to analyze the current methods in place
for the process or processes you are observing. There is no one magical way
to analyze processes. Your goals should drive what you look at in detail
and how you study the process. I will list some of the more common types
of analysis that have been of use over the years at Toyota. You will have to
use other methods as well, depending on the nature of your situation.
The most elemental form of analysis is something called “work element
analysis.” This is a fancy way of saying that you should write out all the
steps of an operation in sufficient detail and then begin the step-by-step
process of questioning each step. First ask exactly what this step is and
what its fundamental purpose is. Then ask why that step is necessary.
Look for steps that you can eliminate. Additionally ask, “where” the step is
done, “when” it is done, “who” is doing it, and, of course, “how” it is being
done. This method is referred to as the 5W 1H technique for investigation.
Repeat it over and over as needed until all the steps in the process are cov-
ered and sufficiently examined.
In an ideal case, you are looking for steps to eliminate; however, that is
not always possible for every step. Because we are looking for improve-
ment, be sure to also consider what can be combined, what can be rear-
ranged, or finally, what can be simplified. This step-by-step process is
referred to as ECRS, the acronym for eliminate, combine, rearrange, and
simplify. Each of these letters represents a different analysis and improve-
ment angle for consideration. Often, this simple technique is all you need
to generate valuable improvement opportunities.
A second common technique inside Toyota for analyzing processes is
time study. Many critical elements of Toyota’s system are founded upon
time-based concepts. Takt time, Just-In-Time, and cycle times are just a
few well-known examples. Time studies have their associated strengths
and weaknesses but almost always the time required to complete a task is
one aspect of productivity. Measuring times for an operation on a step-
by-step basis is a valuable way to analyze processes and factually find out
how long different tasks are taking to complete. Steps that take a long
time to complete or vary considerably are often excellent candidates for
Kaizen.
A technique that is similar to time study is that of motion study.
Normally we use the phrase “time and motion study” as if it was a single
technique, but the roots and methods are quite different. Time studies,
as mentioned above, merely look at how long some step or process takes
to complete. It says nothing about the fundamental motions required to
complete that step. For time studies to have any meaning, however, the
times must be related back to either work elements or discrete motions
104 • Art Smalley
for identification purposes. Time merely reflects the action being taken;
however, it is not the motion or action in and of itself.
There are special symbols that can be used in motion analysis when this
sort of detailed observation is required. The symbols are quite old and
were formed by the husband and wife team of Frank and Lillian Gilbreth.
Eighteen basic symbols can be used to depict most human motions and
they are quite detailed in nature (e.g., extend hand, grasp, remove, etc.).
There is not enough space in this chapter to explain the symbols but they
are easily found in old Industrial Engineering textbooks or on the Internet
for interested parties. When motion study is combined with time study,
it can become a powerful technique for generating many small improve-
ments that can add up to something very big in the end.
If you combine work elements, time, and motion study in a particular
way, you will arrive at a form of analysis known as standardized work at
Toyota. Standardized work is a chapter or book all by itself in terms of dif-
ficulty and precision. If you are familiar with the concept, however, it can
be a tremendous way to analyze certain types of operations. In a general
sense, what you seek to do is establish a takt time or rate for a process and
then align work elements for a given operator or set of operators up to that
rate. In other words, you are attempting to balance the work to the rate of
customer demand. When this analysis and activity is put into place, work
rates are more closely aligned with customer demand and the practice of
overbuilding is usually stopped. In addition to stopping this overbuilding,
there is normally a large gain in terms of productivity and quality as well.
When machines are the focus of improvement of work instead of human
operations, then a different lens is normally needed to spot improvement
angles. For machines in most production shops, the areas of mechani-
cal breakdown, changeover time, minor stops, speed losses, scrap, and
rework, for example, represent excellent areas for improvement. Normally,
one or two of these areas predominate in terms of impact on production.
It is good practice to measure the extent of these losses and then pick the
largest one or two for deeper study and analysis.
One more uniquely Toyota style of analysis is that of Material and
Information Flow Analysis (MIFA). In the world outside Toyota, this prac-
tice is known as value stream mapping due to the success of a well-known
workbook published on this topic. The basic concept of the analysis is
to measure the lead-time throughout the facility for a given product or
component. Normally, the actual value-added time for any item is mea-
sured in minutes, whereas the lead-time is measured in days. Analyzing
scheduling patterns, process flow, inventory amounts, and other angles

often highlights many areas of improvement.
As I cautioned at the beginning of this step, there is no single way to
analyze a process. Your goal will determine what you will look at in real-
ity. For example, if you are strictly looking to improve quality, then none
of the items alone mentioned above will likely be sufficient. Other tech-
niques related to improving process capability then make more sense to
employ. Normally, however, some form of work element analysis, time
and/or motion study, standardized work, machine loss analysis, or mate-
rial and information flow analysis is a great way to look more deeply into
a process and generate ideas for improvement.
STEP 3: GENERATE ORIGINAL IDEAS

The third step in Toyota’s Kaizen method is to generate original ideas for
improvement. Just as there is no one magical way to analyze a process,
there is no one magical way to generate ideas. We can, however, provide
some basic advice regarding the idea generation process and highlight
some methods that have been used in the past to help spur thinking.
Often there are roadblocks that stifle our creative thinking process and
we need to be mindful of these pitfalls. Otherwise, even the best of teams
can become sidetracked and fail to generate improvement ideas. One
common problem is simply force of habit. We repeat something over and
over again until it becomes second nature. That habit is healthy in many
respects but it does not always help in implementing Kaizen. Be prepared
to always challenge the current status quo and be open to experimenting
with new methods in Kaizen.
As set of related roadblocks are those of preconceptions or common
sense. Often we unintentionally have mental roadblocks that hinder our
thinking. For example, in the area of machine setups, it was common sense
to run large batch sizes on equipment that ran multiple part numbers and
were difficult to change over. Common sense said to run fewer change-
overs because they took away from valuable production time. Uncommon
sense challenged the assumption behind this idea that changeover time
was fixed and set out to reduce that time component until it was negligible.
Emotion can also be a powerful force that limits our creative think-
ing power. We need both logic and emotion to form opinions and drive
106 • Art Smalley
actions. However, the emotion of fear of failure, for example, can force us
to become hesitant or overly cautious. In Kaizen we need to remind our-
selves from time to time that it is okay to fail as long as no one is injured
and the damage is not irreversible. Some of our best learning comes from
failing and learning why something does not work. Often it requires a sec-
ond or third time to get things right, and we need the patience and persis-
tence to follow through on these sorts of items. Be careful so that you don’t
allow emotions to stifle trial and error and the associated learning process.
In terms of practical advice, there are several things I suggest that you
attempt when generating ideas. One very important rule is to separate idea
generation from that of judgment. Often we are quick to judge and dismiss
ideas that are new or different. In generating original ideas, I suggest that
you strive for quantity of improvement ideas first and then whittle those
down later to select the most promising few. If you apply the lens of judg-
ment too often or too early, you will inadvertently stifle the creative thinking
process as idea generation and judgment utilize different parts of the brain.
Other points of practical advice include thinking from different angles
and combining ideas with others. For example, if a task like fastening a
bolt takes too long or is difficult, the right approach might not be to do
this task faster or make it easier using the same mechanism. The best
idea might be to eliminate the need for the fastener in the first place and
secure it via another method. This alternative way might link in with
someone else’s idea about how to apply a new method for fastening the
items in question.
Over the years there have been a variety of documents created to help
people generate ideas, and I suggest that you research and apply these tech-
niques as needed. Some of the methods are simple, such as mental check-
lists. Alex Osborn was regarded as the “father of classical brainstorming.”
He created several checklists that asked a series of questions pertaining
to reusing, borrowing, changing, enlarging, reducing, substituting, rear-
ranging, reversing, and combining items. Often, these thought-provoking
questions can be used to stimulate idea generation.
Industrial engineers also have created various rules for motion econ-
omy. These rules can apply to use of the human body, arrangement of the
workplace, or the design of tools and equipment. Reviewing these check-
lists and—more importantly—creating your own for your respective situ-
ation is a great way to encourage the thinking process and to make sure
you are considering multiple angles.
Another fundamental piece of advice is to encourage the practice of ask-

ing questions and clarifying the purpose of various items. The fundamen-
tal 5W 1H technique for asking Why, What, Where, When, Who, and
How is very useful for analysis as well as idea generation. After asking the
5W 1H questions, review everything in the context of can we eliminate it,
can we combine it, can we rearrange it, or can we simplify it for improve-
ment? This questioning process is always useful for generating new ideas.
The final and most famous method for idea generation is that of brain-
storming. Almost everyone is familiar with this process and it needs no
introduction. When applied correctly, it is a very useful technique for
idea generation. Be sure to keep the group to a reasonable size so that
participation is manageable. The four basic rules for brainstorming are to
suspend criticizing during the idea generation phase, encourage speaking
freely, seek quantity, and encourage thinking collaboratively. Employing
an assigned facilitator and scribe are also useful techniques for running
an effective meeting.
STEP 4: MAKE A KAIZEN PLAN

In Kaizen we normally try to implement improvement ideas as soon as
possible. Sometimes that ideal can be done right away but at other times
it takes a while to implement some items. In either case, it is important to
have a plan in place to guide the actions that need to be carried out. The
plan does not need to be elaborate or overly complicated. However, it does
need to contain several key elements for it to be a viable plan.
First, the plan must make clear what is going to be done in terms of
either corrective actions or altered methods to improve the current state.
The action items should be as specific as possible and detailed enough to
be clear. If the what part of the plan is not clear, then people are left to their
own interpretations of the task and confusion might be the result. Take
time to draft what is going to be done in a clear fashion and review it with
all necessary parties.
Second, the plan should also contain who is going to do the task and by
when. Plans that do not assign either responsible parties or a due date are
rarely completed. In order to get things done, a person or someone repre-
senting a group of people needs to own action items for clarity. This person
108 • Art Smalley
may in reality coordinate the completion of the work but there needs to be
a single point of ownership for clarity and accountability. Likewise, with-
out a due date, tasks will drag on for an extended period of time and not
ever be completed. In Kaizen we have to make clear who is responsible for
action items, along with a due date.
Additionally, in some plans it is also useful to include how the action item
will be done if that is not self-evident. In other cases, the what and how
are often mixed into one statement regarding the purpose of the proposed
action items. In either case, it is also useful to make it clear where the work
will be done and what the expected result is for the item in question. For
example, if changing the assembly technique at station six is implemented in
hopes of reducing difficulty and saving time, what is expected? Just expect-
ing “better” is not always a clear indication of what to expect. If you expect
to cut the cycle time in half, then include in the plan that the expected result
is to reduce the time required from sixty seconds to less than thirty seconds,
for example. This will give you something more specific to check later on
when you are evaluating the success of your action items.
STEP 5: IMPLEMENT THE PLAN

Implementing your Kaizen plan is essentially the “Do” phase of the
Plan-Do-Check-Act (PDCA) management cycle. Creating a good plan
as outlined in Step 4 is a healthy step toward implementing your plan.
Implementation normally involves a mix of short-, medium-, and longer-
term items to complete. Here are a few things to keep in mind.
During implementation it is very important to communicate with all
affected parties about what is being done. Often, Kaizen breaks down due to
failures to explain and coordinate with affected parties. Part of being a good
Kaizen leader is skill in both leadership and communication. Be sure to con-
duct updates and review the plan as needed during implementation phases.
Second, do not forget to provide proper training and instruction as
needed. The act of Kaizen implies change, and therefore various standards
and ways of doing things in the process are altered. Take the time during
implementation to make sure that training, when required, is adequately
conducted for anyone affected by the change. Having a good job instruc-
tion training plan in place as part of the Kaizen implementation is always
a good idea to increase the chances of success.
Another key point during implementation is to remain positive and

enthusiastic about the change. It is always likely that you will run into
unforeseen problems during implementation. Take the time to address
those items, revise plans, and alter methods as needed. Success is often a
matter of sticking to the Kaizen process and repeating it as needed. If at
first you don’t succeed, try and try again.
STEP 6: VERIFY THE RESULTS

The final important step of Kaizen it to check and verify your results.
Unless you produce results that generate measured improvement, you
have not done true Kaizen. In other words, activity alone does not ensure
achievement. There are several key points in this step to keep in mind.
One key point is the importance of using standards as a method for mea-
surement. Another is honestly assessing if you have met your goal. If you
did meet the goal, then measure by “how much?” Was it as in the amount
as expected? If not, then by how much did you miss and why not? These
are critical actions to complete during the final step of Kaizen.
The other unstated part of this final phase is deciding what to do next.
If you are satisfied with your results, can you replicate this elsewhere?
What needs to be done in order to sustain the gains you have made? These
questions and others should be considered during the completion of your
Kaizen implementation. One useful way to help facilitate this discussion is
by holding a brief Kaizen presentation report at the conclusion of the activ-
ity. Have the team explain their task and identify the improvement oppor-
tunity they were seeking. In addition, have the team explain the analysis
methods they used and what improvement ideas they identified. Also, have
them explain the implementation sequence and the results obtained from
the project. As part of the closing discussion, review what was learned, how
this can be shared and sustained, and what else might be done.
SUMMARY
This chapter attempted to explain some of the history, concepts, and basic
steps associated with Toyota’s Kaizen method. I always remind people to
110 • Art Smalley
think of Kaizen as a process and not an event or activity. The process of

Kaizen can be practiced by individuals, teams, or special groups brought
together for a particular purpose. The goal of Kaizen is to generate
improvement results for the organization and to develop the skill of the
participants involved in the activity. The opportunity for Kaizen is end-
less, and the process is always rewarding for those willing to undertake
the journey.
Note: For further details on this topic, including specific worksheets,
examples, and more in-depth explanations, please refer to the book titled
Toyota Kaizen Methods: Six Steps to Improvement authored by Art Smalley
and Isao Kato, and published by Productivity Press in 2010.
7
Kaizen Culture:
The Continuous Improvement Engine
Stephen J. Ansuini
A Kaizen Culture is evident when all levels of the organization take

ownership for continuous improvement. If the Lean principles make up
the bricks of a Lean organization, then the Kaizen Culture is the mor-
tar that binds them together. Team members engaging in continuous
improvement is an outward expression of the company’s internal com-
mitment to placing the customer first and giving creativity the respect
it deserves.
As we begin the Lean journey, we must support continuous improve-
ment at all levels of the organization because it is the engine that drives
so many aspects of Lean and certainly drives team member engagement.
Organizations must empower their employees so they take it upon
themselves to resolve the problems that occur within their area of respon-
sibility. Through employee involvement a company progresses along the
Lean journey more easily and more efficiently than they ever thought pos-
sible. In an empowered workforce, daily work is accomplished
• With higher quality

• At a lower cost
• With greater safety
• In a more timely manner
The Kaizen Culture must be seen as a way of doing business and not
as another thing “we have to do.” It is clearly illustrated time and again
within Toyota organizations that involving all levels of employees yields
far more success than those companies that do not encourage their work-
ers to improve their work area and process. To be competitive in today’s
global market, organizations need the collective creative power of all
employees. Collaboration is the way we do things!
111
112 • Stephen J. Ansuini
The value of collaborative intelligence yields a Gestalt effect; that is, the
sum of the improvement efforts is greater than its individual parts. This
is often used to describe a Lean environment. Lean can be compared to
a complete ecosystem. You can take bits and pieces of it and use them
to better an organization and become more competitive; but to truly be
Lean, each component must be working in harmony with all the others.
Removing one will cause the overall system to be less than its potential.
THE KEY ELEMENTS OF A KAIZEN CULTURE

To build a Lean workplace, a Kaizen Culture must also be part of the jour-
ney so that the progression toward an empowered workforce is perma-
nent. So what are the key elements of a Kaizen Culture? Kaizen Cultures
are encouraged and developed over time through
• Visible sponsorship and support by management

• Clear purpose and aligned goals
• Evolving continuous improvement system
Visible Sponsorship and Support by Management

Visible management support has many characteristics that provide ample
opportunities for the Lean leader to successfully nurture a Kaizen Culture.
Some of these will likely fit the current culture and thereby provide a segue
Kaizen Culture: The Continuous Improvement Engine • 113
for a more empowered Lean culture. Here are four specific characteristics
Lean leaders can follow that will develop a Lean culture:
1. Continuous Improvement system support

2. Employee recognition (formally and informally)
3. Promotional activities
4. Mutually established goals
Leadership Support
Nothing is more important to a team member’s sense of success than to

know that what he or she does is appreciated, is important, and makes a
difference. Team members feel successful when leaders take notice of what
they are doing. Leaders must show sincere interest in their efforts. Leaders
who walk the shop floor and show interest in team members and their
activities will keep their workforce engaged in actively seeking another
opportunity to improve their work. This means that the leaders must be
willing to speak with team members and sometimes hear things that they
wish were not so. Keeping this open communication will foster effective
job relations and strengthen the workplace.
The cost to the company to have this “face time” with team members is
the leader’s time. This time is not lost but is an investment in the Kaizen
Culture. This was demonstrated to me by my plant president, Mr. Fujio
Cho. Mr. Cho was the president of TMMK (Toyota Motor Manufacturing
Kentucky, Inc.) from December 1988 until October 1994. Mr. Cho shared
with me on numerous occasions that the quarterly tour was one of his
favorite activities because he got to Gemba Genbutsu. Go to the actual
place where the work is done. Spending time with the team members
at their place of work and talking with them about their improvement
brought smiles to Mr. Cho and the team members. I would accompany
Mr. Cho on a tour through the plant to visit specific improvement ini-
tiatives. The improvements were selected through a series of elimination
activities until each department leader had one representing his area. Even
this elimination process brought recognition to even more team members.
Managers would nominate one or two from their areas. The department
leaders and their direct reports would discuss these and do their own
Go-and-See activity with the nominated team members. The department
leader would select the one to represent that department. This typically
meant we would do our Gemba walk to no less than eight specific work
areas scattered through the 1.2 million-square-foot facility. The team
members valued their time with the president and were very proud to
have the opportunity to show their accomplishments. Other team mem-
bers were motivated to try to get an improvement activity that would get
them on the list. A week after the tour, all the team members nominated
would be invited to a luncheon with the president. Mr. Cho would recog-
nize each team member and would present plaques and a special pin that
could only be received by those on the president’s list of quarterly recogni-
tion improvements. Each team member would also tell a little about their
improvement activity. Mr. Cho identified the improvement he selected
and shared why it was number-one on his list. We also had other execu-
tives present and alternated seating so every team member was next to an
executive. We enjoyed a good meal and fellowship.
The quarterly recognition gifts were sought after as a visible representa-
tion of the pride they had in their work. As these team members proudly
displayed their recognition items, other team members would ask them
how they got it and the team member would get to tell his story again
and get a little more recognition. Not only were the desired behaviors
reinforced, but oftentimes the other team members were inspired to get
involved as well.
Team
Members
Line Supervisors
Middle Management
Executives
Leader
The improvement activities recognized contributed to achieving busi-

ness goals so that everyone was a winner. Department leaders would seek
implemented improvements for recommendation for this quarterly recog-
nition activity. Team members would seek the prestigious recognition of
the quarterly reviews. And others would be encouraged and inspired to
improve their work areas.
Clear Purpose and Aligned Goals

Lean is all about alignment of business goals and clearly cascading them
through the organization. The process is referred to as Hoshin Kanri. This
is cascaded from the top corporate levels indicating goals and insight about
future and developmental goals. As it goes to the regional level, the country
level, the state level, the plant level, etc., each subsequent annual plan supports
the goals on the annual plan directly above. The effectiveness of this process
can only be realized when the plans are clearly communicated. This process
should also be applied in the annual planning for the suggestion system.
The Hoshin can have a significant impact on how you plan and execute
your continuous improvement system. All that is done would ultimately
be supporting the highest-level corporate goals. There are many items
that should be considered when developing your suggestion system and
its annual strategy. This is one thing that can have the greatest impact on
developing a Kaizen Culture. To grow your Kaizen Culture, consider the
following points:
• Publish goals and progress monthly

• Success measurement criteria
• Simple administration
• Short cycle time
• Automated monthly reporting
• Continuous improvement (CI) advocates
• Local administration
• High implementation rate
• Focus on immediate work area
• Emphasize employee participation
• Participation recognition and awards
• Recognition of employees
• System integrity
• Categories of improvements (include both tangible and intangible)
Clear goals will drive clear behaviors. So, clearly identifying the goals
and targets of the suggestion system will encourage the right behaviors.
We needed to get team members in the habit of looking at things with
“Kaizen eyes,” so we initially set our goals at participation rate and the
quantity of suggestions. The Steering Committee was in place for the first
year and a half of the suggestions system and was instrumental in driv-
ing the right behaviors in their direct reports, meeting monthly for the
first six months and then going to quarterly meetings for the remaining
year. After that, an annual report to the company board provided enough
information that the suggestion system was developing the desired effect.
The suggestion system had a significant impact on guiding the organiza-
tion to a Kaizen Culture. The suggestion program also reflected the orga-
nization’s mission and values so the company would remain on the proper
course. Thus, we needed to ensure that the targets and administration
of the suggestion system did not contradict our values or the long-term
direction. For example, if one of our values is to get all team members
engaged and empowered to make improvements in their immediate area
of responsibility and I publish a goal that encourages only large savings
improvements, then I am not aligning the goal with our values. Many
small improvements by many team members are aligned with and power
the continuous improvement engine.
I recall the two primary measures of success when we launched our
improvement program and how simple they were. Sometimes we try to
make things more complicated than they need to be; so in your organiza-
tion, keep it simple. It is beneficial for the team member, the administra-
tion, and the company to follow that path. Savings was not and cannot be
the focus of a successful long-term continuous improvement program that
desires to develop a Kaizen Culture. Discussion later of the phases of an
involvement program will clarify this target as just one of the stages in the
life of a continuous improvement initiative.
I witnessed each department take on the challenge of getting team
members actively engaged in the improvement process. Friendly com-
petition between leaders was evident. Monthly statistics were posted on
the boards located at all employee entrances and near all six cafeterias.
Team members would go out of their way to see the latest information,
and increased activity was evident in the areas falling below the number-
one position.
With this spiraling increase in formal improvement submissions, it was
necessary to ensure that the process was as efficient as possible. The last
year I had responsibility for the involvement program, we had in excess of

150,000 suggestions from 5,050 employees of a total workforce of 7,300.
That represents an average of thirty-plus implemented improvements
from each participating team member. Across the total company employ-
ment level (7,300), this would yield an average of twenty suggestions per
team member (= 150,000/7,300). Now granted, only approximately 15% of
the suggestions had tangible savings but that was not the primary focus
of the suggestion system. Even taking this into consideration, there were
documented hard-dollar savings that were consistently between two- to
fourfold that of the total cost of the suggestion system. So if the total cost
of the administration of the suggestion system as $100,000, then the total
savings as between $200,000 and $400,000. Any accountant would love a
program that yields twice the investment, or more, to run it.
Evolving Continuous Improvement System

Like all major systems, the TMMK suggestion system went through three
distinct phases. There are at least three phases that should be considered
to develop a kaizen culture:
Phase 1: Introduction – Participation emphasis 1 to 3 years

Phase 2: Transition – Participant and development 1 to 2 years
Phase 3: Process maturation – System evolves as the Lean culture grows
and matures
Phase 1: Introduction—Participation Emphasis
Planning the launch of an employee involvement system goes beyond the

first year, the next ten years, and even generations. We must consider the
activities and account for the evolution of the involvement program if we
seek long-term success. To accomplish great things, we must enable our
team members to begin where they are comfortable and grow from there.
To announce the new suggestion system, a letter from the president was
mailed to every team member’s home. Included in this envelope was a nom-
inal gift. If the team member was hired more than six months prior, he or
she received a $25 gift certificate and those with less time received a $15 gift
certificate. The letter thanked the team members for their contributions and
said that if they had a substantial improvement that they would like to sub-
mit for additional award recognition under the new suggestion system to
do so within ninety days. Although there were thousands of improvements,

no team member took advantage of that offer. And so, the TMMK team
members began their continuous improvement journey toward becoming
a Kaizen Culture. We had less than 200 suggestions that first month. Six
years later, the highest month was greater than 17,000 suggestions. Clearly,
the team members were on the track toward a true Kaizen Culture.
In the United States, our culture has a tendency to recognize the “heavy-
hitters” and allow the small improvements to occur. Our team members
are most comfortable with small improvements at first, so we must recog-
nize and encourage many small improvements. The large improvements
will continue to come; but to get the culture to develop into a Kaizen
Culture, everyone must be engaged on a daily basis looking for improve-
ment opportunities. To get everyone engaged, we must focus on the many
small improvements that surround every team member. We must help
them develop the “Kaizen Eye.” In a business context, some would argue
that we must track and report the costs and savings associated with the
effort. Perhaps there are those who would argue that we should function
as a profit center. This route will only lead to short-term success and not
achieve the desired Kaizen Culture mentality in the workplace. Certainly
we must take fiduciary responsibility and track costs and savings but that
does not mean that we emphasize them. I formally reported quarterly to
the executive board the improvement statistics. I would provide a hard
copy of the number of suggestions and the number of team members par-
ticipating. This information was broken down from the company level to
the department level. I would also verbally share the following:
• Cost of administration
• Number and percent of intangible improvements
• Number and percent of tangible improvements
• Savings confirmed by accounting
At every opportunity, I would encourage the leadership to focus on the

number of improvements and participation rate when they discussed this
with their direct reports and cascaded the information down to the shop
floor. I would see Mr. Cho do the same with those he interacted with when
we had our recognition Gemba Walks and Luncheons. He would always
emphasize the person and their abilities. I recall several specific instances
of this. When Mr. Cho asked, “How did you discover the improvement?”
One team member answered that he knew that the temperature of the
fluid was too low because he kept a tropical fish tank and its set tempera-
ture was approximately that of the fluid. Another responded that when she
was fastening the feedbag onto her horse one evening, she thought that
the clip would be the perfect solution to a problem of parts coming loose
in the dip tank of paint. And another used a bass boat seat to improve the
ergonomics of a job. The examples seemed endless. Team members would
see an improvement based on their hobbies or some recreational activity.
Savings was not a secret, and we published them annually on the infor-
mation boards I mentioned earlier. But that was not the focus! This initial
phase could last from one to three years. In some organizations it may take
even longer. Culture change is a slow process if we want the change to be
permanent. And this continuous improvement process is just one of the
many facets needed to drive the culture change.
There is an expectation that leadership is responsible for properly admin-
istering the suggestion system process, ensuring consistency, and mini-
mizing abuse. Whenever we provide incentives for a particular behavior,
people quickly rise to the challenge. Some may try to abuse the system.
To reduce abuse, it is important that a central monitoring point be estab-
lished to ensure consistent adherence to the rules and guidelines of the
system. Regular reviews and feedback to those not in compliance will help
drive the understanding that the rules should be followed.
Phase 2: Transition—Participant Development
Team member development is necessary if the improvement process is to

grow and evolve. Some development is accomplished from participating
in the improvement process itself. However, we are seeking to increase
the team members’ effectiveness in addressing improvements that require
problem-solving and investigative abilities. If the organization has a spe-
cific problem-solving process, such as Six Sigma (DMAIC), each team
member should be educated in this process and be given opportunities to
apply these new skills. This will require that we first develop the leadership
so they can coach and mentor their direct reports in this problem-solving
process. Formal training should be augmented with panel reviews and
coaching sessions with leaders. So the problem-solving training would
begin with the leadership long before it is deployed to the floor. “Leaders
as teachers” is a very effective way of increasing the company’s ability to
deal with ever-increasing challenges and thrive in a global market.
Mr. Cho was a leader and very much a teacher. He used everyday occur-
rences to share situational learning to all who worked with him. The time
I got to spend with Mr. Cho was enjoyable. It was often challenging and
would require honing my skills, but he knew that to continue to raise the
bar is the challenge that drives so many of us to greater things.
Leadership must walk the talk by modeling the company’s problem-

solving process and adhering to its values and principles. To this end, it
is critical that the company values be published and made visible to all.
Reinforcement of the values should be evident in the daily business routine.
The Lean principles should be enumerated and published as well as
woven throughout training so that team members learn to integrate them
into their daily routines. The Toyota Production System (TPS) has five
precepts and fourteen principles. The five precepts are not as well-known
or published but nonetheless date back to 1935. The five precepts were
originally published by Sakichi Toyoda on October 30, 1935. They are
Precept 1: Always be faithful to your duties, thereby contributing to the

company and to the overall good.
Precept 2: Always be studious and creative, striving to stay ahead of
the times.
Precept 3: Always be practical and avoid frivolousness.
Precept 4: Always strive to build a homelike atmosphere at work that is
warm and friendly.
Precept 5: Always have respect for God, and remember to be grateful
at all times.
Organizations that take the Lean journey seriously should consider

developing their precepts and their principles. It does not matter how
many you identify, it is just important that they are identified and woven
throughout daily work and evident in business decisions. In this way, all
team members will begin to better understand and embrace the direction
of the company.
I would also like to point out that missing from Toyota’s list of prin-
ciples is something that most organizations need to include in their list of
Lean principles. Have you any thoughts? Well, there is nothing address-
ing team member engagement and empowerment. This is not an over-
sight by Toyota. The reason it is not called out in Toyota’s principles is
that the engagement and empowerment of team members is so engrained
in the Toyota culture. It is a clear expectation from the first moment a
team member enters the work group that they will look at how they can
improve things within their area of responsibility. Continuous improve-
ment by all is part of their daily routine. Opportunities abound to take the
initiative to shine by engaging in continuous improvement. Many leaders
include this aspect as one of the many items reviewed when it comes time
to promote someone.
Phase 3: Process Maturation
This is probably the most elusive phase of the continuous improvement

journey. The fundamentals of the Kaizen Culture do NOT change. It
becomes clearly evident that the level of problem solving the team mem-
bers demonstrate is much higher. Additionally, the level of the problems
resolved is increasingly more difficult. This yields greater benefit to the
company by improving the team member’s work satisfaction and lowers
the operating costs of the company.
We have a tendency to leave some of the foundational pieces behind
because we feel we have outgrown them. In reality, all aspects of Lean
should remain but yet grow and evolve as the organization continues down
the Lean journey path. I like to say, “You cannot take a jet plane to the Lean
destination. You must take the journey step by step.” Patience in the begin-
ning will yield a lasting and thriving Lean culture in the organization that
will take the company to the next level and beyond. If the “culture change”
is rushed, it will not be long-lived. Early efforts to force culture change
usually meet with a strong passive-aggressive response. Be cautious!
Promotion Activities
There are an endless number of things that can be done in this space. Our
Quarterly Recognition process discussed earlier was a huge favorite of our
team members. Not just the workers, but also the leadership. I can recall
on several occasions over the course of three years that Mr. Cho would
say how much he looked forward to the quarterly tours where he could
get out and meet the team members and celebrate their accomplishments
with them. It was clear that he was a leader with great concern for his
team members and their development. This was made very personal for
me when we had the dedication ceremony of the NAPSC in Georgetown,
Kentucky. After Mr. Cho was gone for more than seven years, he still
greeted me by name. What a great leader! He inspired greatness in all who
worked with him.
Promotion activities included
• Monthly recognition by the immediate supervisor and leadership

within the team member’s section in front of their peers
• Quarterly recognition (discussed earlier)

• Annual participation awards
In addition to these company-wide efforts, each department would have

activities within their sections that were structured as a result of what the
team members wanted as recognition. Some liked T-shirts, others hats.
Trinkets and pins were appreciated, and many would wear these pins on
their hats and uniforms.
Special promotion themes were also done when we wanted to reduce
problems of a specific type. For example, we would have a “Reduce Slips,
Trips, and Falls” promotion for three months in areas experiencing higher
than average incidents. Department heads could also establish a focus
theme for their areas. When new processes were established, we would
have a very short “blackout” period. “Blackout” periods typically lasted
between thirty and ninety days while the equipment and processes were
stabilized. Once stable, team members could make improvement sugges-
tions and benefit from the change, the award, and the recognition. What
better thing than to improve your working environment and get recogni-
tion and an award or gift for doing so!
Another aspect of our improvement system that team members really
liked was the ability to accumulate award points ($1 = 1 point) up to one year
and receive a cash award for their many small contributions. We had a $500
minimum required to get a cash award. The reason for this was that this
amount would be more likely to be memorable. So every time they used the
new appliance that was paid for with their suggestion awards, they would
be encouraged to participate even more. Our award points were based on
approximately 3% to 8% of the first year’s savings. The larger the savings
realized, the smaller the percentage of the savings would be awarded.
Cost of Operating a Continuous Improvement System

A company is in business to make a profit but a continuous improvement
program should not be operated like a profit center. If the company breaks
even on a process that improves morale and team member engagement, it
is far ahead of where it once was.
SUMMARY
There are several lessons I learned during the evolution of our continuous
improvement process. Team members frequently said that the turn-around
time was an excellent indicator of how important a Kaizen Culture mind-
set was to the leadership team. We had an average cycle time of forty-
five days from submission to payment. The way the system was structured
allowed for such a short processing time. The line supervisor was responsi-
ble for working with the team members and supporting their improvement
ideas. It was not until the improvement was implemented and proved itself
that the suggestion would be submitted. Implementation was required. It
was the expectation. We had in excess of 97% implementation rate during
the six years I was responsible for the improvement process.
I recall an improvement initiative that the team members decided
would take a year plus before they could submit it. They were proposing
an improvement of a plastics process that was sensitive to both tempera-
ture and humidity. So the team said they needed to pilot the change for
one year so they could confirm that the quality was not adversely affected.
Another “hot button” for team members was that the evaluation process
was not only quick, but reflected the trust in the team members’ ability
to make wise choices. The improvement needed to be real, and the team
members would confirm its effectiveness before they would consider the
improvement implemented. Management frequently asks the question,
“What about all the ‘junk’ suggestions? Don’t we need to ‘police’ them
and not pay for improvements that have little or no measurable sav-
ings?” Statistically, policing a healthy improvement process is often cost
prohibitive so the system design and guidelines are critical to minimize

this type of abuse. Training and easy-to-follow objective guidelines are
used by the line supervisors. Questions and concerns raised by partici-
pants can be discussed with the administrative staff of the improvement
process. Improvements submitted by the line supervisor as implemented
were processed and paid with rare exceptions. In one year we had an aver-
age of thirty implemented and paid improvements per team member.
Only about 8% of these had large savings that were verified during the
reviewing and payment process—and that 8% yielded a 4:1 payback to the
company when the total cost of all suggestion payments was compared to
the measured and verified savings of the 8% group of suggestions. If we
were to ignore or disallow intangible suggestions, it is very likely that we
would not have received all the large savings suggestions.
Visible commitment by the leadership team was important in getting
the Kaizen Culture growing and evolving. It is not enough for leaders
to say, “I support the continuous improvement process.” They must be
visible in that support or it will not mean anything. We had eight depart-
ments that each had its own approach to support the continuous improve-
ment process.
Another lesson learned was that the credibility of the involvement pro-
gram will often be identified with the administrator and influenced by
the level of visible leadership support. So it is imperative to take this into
consideration when planning your system.
Training will vary with the phase of the program. The initial phase
training is nothing more than explaining the rules and guidelines of the
involvement system and getting team members interested in participat-
ing. As the system progresses into Phase 2, a more structured training
process that includes QC tools, problem solving, and PDCA training will
prove effective in moving the culture in the right direction. I would also
suggest meeting facilitation training as many members will want to work
as a team in solving the tougher problems. The progression to Phase 3 is
much the same except a deeper dive into problem solving and statistical
process control is beneficial. All of this will raise the company’s effective-
ness in its particular niche.
8
Elimination of Waste in Product Design
Patrick Muller
During a Lean transformation we tend to concentrate a lot on elimina-

tion of waste in our process designs. But how do we tackle waste in our
product designs?
VALUE ENGINEERING/VALUE ANALYSIS

Waste in Process Design
When I started working for Toyota in the early 1990s, little literature was
available on the Toyota Production System (TPS) or what we know com-
monly today as Lean manufacturing. Most of what we learned we obtained
from our Japanese Senseis.
We learned by being challenged, questioned, and by a hands-on
approach. We did not know that we were applying “Lean” methodolo-
gies. “Lean” became better-known terminology after Jim Womack, Daniel
T. Jones, and Daniel Roos wrote their great best seller The Machine That
Changed the World. It described Toyota’s manufacturing process as “Lean”:
a constant striving to put the value to the customer first, to eliminate the
waste along the value stream.
In the meantime, many books have been written on “Lean” topics—
from Lean tools to Lean culture—and I am sure many more will be writ-
ten (you are reading one right now!).
When we look at the Lean methodologies, the focus is mainly on how
we can identify and eliminate/reduce waste in our processes, whether they
are manufacturing processes or administrative processes. What started in
a manufacturing world is now applied to numerous industries. Most of us
are familiar with the seven types of waste (Muda), which are defined as
overproduction, inventory, transport, waiting, motion, over-processing,
127
128 • Patrick Muller
and defects/rework. We also know that Mura and Muri (variation and
overburden, respectively) have a negative effect on our processes. We have
all studied several methodologies to help us identify these wastes from just
simple observation at the Gemba, so profoundly taught by Taiichi Ohno,
to more sophisticated approaches such as Value Stream Mapping.
Once we identify the waste, we can eliminate or reduce it by means
of Kaizen or problem-solving techniques or other methodologies. But it
always amazed me that not so much attention has been paid to the identi-
fication and elimination of waste in the actual design of a product (not the
development process).
Waste in Product Design

Despite some ups and downs, Toyota is and has been overall a successful
organization. It is one of the most studied companies in the world. Many
are eager to imitate Toyota by copying techniques. One of my Senseis told
our suppliers they should not just copy what they see on the surface but,
rather, understand the purpose and the concepts behind what they see.
Only then we can understand the true meaning behind a lot of the Lean
principles. I urge you to do the same. See if these principles can apply with
or without modification to your circumstances.
At Toyota it is also common practice to pay careful attention to the
waste in product design.
So how can we define waste in the design of a product? Similar to the
waste in processes, here waste is also defined as “non-value-added for the
customer.” However, here we do not define activities as non-value-added
(seven wastes) but, rather, value is seen as “function” in relation to “cost”
(Value = Function/Cost).
Each product design has a primary function but it can have additional
functions as well that might not necessarily be required or desired by the
customer, yet they add cost to the product.
On the other hand, we might also have an expensive design (e.g., mate-
rial choice) that does not necessarily increase the value to the customer.
Increasing the value by looking at the functions and the cost of the prod-
uct design is known as Value Engineering/Value Analysis.
Value Engineering/Value Analysis is a methodology that is commonly
used in Toyota’s purchasing practices. These practices follow a defined
Toyota Purchasing Philosophy. This philosophy is what makes the rela-
tionship between Toyota and its suppliers quite unique.
Elimination of Waste in Product Design • 129
Analysis of
necessary functions
Selection of a less
expensive design Product Elimination of
which meets Design unnecessary functions
customer
requirements
Less expensive design

meets safety and
quality requirements
Driver’s door
Before After
Toyota’s Purchasing Philosophy

My senior coordinator, Saka-san (name changed) introduced me to Toyota’s
purchasing philosophy, which is based on the following three core elements:
1. Fair competition based on an open-door policy

2. Mutual prosperity based on mutual trust
3. Abidance by the law
Fair Competition Based on an Open-Door Policy
This principle means that a potential supplier can always request to

become a Toyota supplier. But it also immediately outlines the funda-
mental principle of an open-door policy. An open-door policy means that
Toyota is welcome at any time at their suppliers. It also, practically, means
that Toyota demands an open cost breakdown approach from its suppliers.
This implies that raw material, purchased material, labor and processing,
and overhead cost as well as margins, which in the end define the price of
the product, are disclosed in detail.
I have seen many potential suppliers that are eager to start working with
Toyota but some do have a problem with this “open door” = “open book”
principle and back out. This open-door policy requires mutual trust.
Single sourcing is avoided; healthy competition among a few select sup-
pliers is encouraged.
All selected suppliers are evaluated regularly on their performance and
competitiveness. Those that perform better usually will receive the larger vol-
ume share. And those that perform less will get a smaller volume share but
will also get the opportunity to improve on their weaknesses. This approach
stimulates fair competition within the supplier base for similar commodities.
Mutual Prosperity Based on Mutual Trust
Proper due diligence in supplier selection can take a long time. Toyota
sees the relationship with its suppliers as a crucial long-term partnership
for their common success. Toyota invests considerable time and resources
to assist its suppliers when they need it. However, it does remain the sup-
plier’s responsibility to deliver the results.
Toyota Supplier Technical Support usually takes this role. Their engi-
neers usually have a strong TPS background to assist their suppliers. But
in addition to assistance, Toyota will also continuously challenge its sup-
pliers to improve on all levels.
Toyota Purchasing and Toyota Supplier Technical Support will seek
ways to improve suppliers’ quality, reduce cost, and improve delivery
times. Many Toyota suppliers will tell you that it can be quite stress-
ful to be a Toyota supplier due to the continuous challenge to do better.
However, they will also say that they feel respected, challenged, and valued
by Toyota. In the end, both parties are in a win-win partnership.
Abide by the Law
All business should be conducted in full compliance with the law by all
parties. This principle is applicable to Toyota as well as its suppliers. Prior
to engaging in a customer-supplier relationship, Toyota performs a due
diligence to make sure business can be conducted in a legal way.
Toyota’s Purchasing Practices

Cost Breakdown
Toyota suppliers must submit a complete cost breakdown for the parts they
will supply to Toyota. This means that the supplier must provide detailed
cost information regarding the following: raw material (how much used,
unit price, and supplier information), purchased components (quantity,
unit price, and supplier information), processing and labor costs (man
hour costs, machine hour costs, manual cycle time, machine time, and
yield…), overhead costs, and margin.
The Toyota buyers will verify the accuracy of this information in detail
in order to determine if the price quotation is acceptable. They will use
this information in their price negotiations as well as to establish cost
tables. Cost tables contain historic cost information of parts related to
their physical characteristics and allow the buyers to do cost estimations
for future products.
Overhead
Raw
material
cost
Unit
Price
Processing Sub
and assembly total
cost
Purchased
parts
Profit
Target Costing, VE/VA, Kaizen
Toyota follows the principle of target costing when designing new prod-
ucts. The market price of the new planned product as well as the margin is
basically being set in advance (in view of competitive pricing and required
profit margin), resulting in a maximum target cost that must be achieved
after the development of the new product.
This target cost is translated to target costs for every component that
will need to be supplied/manufactured. Toyota as well as its suppliers are
required to achieve this target cost. In order to achieve this, they will chal-
lenge the design aspect as well as the processing aspect. In other words,
“How can we add the most value at the cheapest cost?” This brings us to
value engineering/value analysis and Kaizen.
Kaizen, which tackles waste in processes, is explained in more detail in
Chapters 6 and 7 of this book.
Target vehicle cost Target component cost
Cost estimate
VE/VA
Cost
estimate
If Kaizen
Target cost
Below is an extract from a public annual report issued by Toyota Motor

Corporation to the U.S. Government that gives an idea of the impact of
these cost reduction efforts.
Cost Reduction Efforts (Extract)

During fiscal 2011, continued cost reduction efforts reduced operating
costs and expenses by ¥180.0 billion (approximately $2.2 billion).
The effects of cost reduction efforts include the impact of fluctuation
in the price of steel, precious metals, nonferrous alloys including alumi-
num, plastic parts, and other production materials and parts. In fiscal
2011, raw material prices were on an increasing trend; however, continued
cost reduction efforts, by working closely with suppliers, contributed to

the improvement in earnings by offsetting the effects from price increases.
These cost-reduction efforts relate to ongoing value engineering and value
analysis activities, the use of common parts resulting in a reduction of part
types and other manufacturing initiatives designed to reduce the costs of
vehicle production.
Note that the negative impact of raw material price increases in the fiscal
year was completely offset per the cost reduction efforts by working with
their suppliers. Only a successful partnership and a continuing strive to
get waste out of design and processes can make this happen.
Value Engineering/Value Analysis

History
The concept of VE/VA was first practiced by General Electric during

World War II. Due to the lack of raw materials and supply, the company
was forced to redesign products with other available materials. In doing so
they were able to make products with the same function at a cheaper cost.
VE/VA grew into a discipline of defining value as function in relation to
cost, a methodology to obtain cheaper design cost.
What is the difference between VE and VA? Value engineering is applying
this practice prior to the production stage. Value analysis is applying this
practice after the production stage, or in other words, on existing products.
Needless to say, value engineering is more cost-effective than value analysis.
At Toyota, Suppliers Challenges
Toyota adapted the VE/VA concept in its design process and purchasing
practices. Suppliers are challenged to present VE/VA ideas to the Toyota
Purchasing Division. Presenting VE/VA and Kaizen is part of the supplier
evaluation. Each idea is evaluated in detail: What will be the impact on
value to the customer? What will be the impact on safety? (It should never
be compromised!) What is the impact on quality, part cost, tooling cost,
etc.?
Many ideas are presented but not all ideas are implemented due to the
rigorous evaluation. Some ideas might not seem to have a high impact
on the unit cost but the volume of sold parts can make the cost impact
considerable.
VE/VA Proposal Form Supplier:

VE Part Number: Model:
VA Part Name: Author:
Proposal N°: Issue Date:
Present Design Cost Reduction Proposal
Estimated Reduction: Weight effect

Per piece Number per assembly Estimated per year Estimated tooling cost Tooling lifetime Before After
Unit Cost Units Units Unit Cost Units

Lead Time:
VE/VA and FMEA
A good practice to introduce VE/VA is in conjunction with preparing

the Design FMEA (failure mode and effect analysis). While performing
a Design FMEA, each function and component of the product concept is
evaluated in detail to verify potential failures, to determine what the cur-
rent risks are with the current controls in place, and how we can improve.
This is a good time to also ask the following questions for a VE/VA: Is the
function needed? Can we make it at a lower cost with, for example, a dif-
ferent material without jeopardizing safety and quality?
VE/VA and Marketing
When we perform VE/VA on a product design, we need to make sure we

include an evaluation from a marketing point of view. Theoretically, we
can make a product cheaper by elements, what some would consider “mar-
keting” value.
A good example of can be found in the packaging of a product: We can
take an existing product with great colorful pictures, and add high-qual-
ity packaging to make it very attractive to the customer. We could rede-
sign it and keep just the bare essential value (the content of the product).
However, by doing so we might impact our customer base profile. So, we
need to partner with our marketing division with a common goal: Give the
best value-added product to our customer at the most competitive price.
Practical Example
You are a manufacturer of ink cartridges for printers. Competition is fierce

so we task a team to perform a benchmarking study and a value analysis
on our product.
We put a cross-functional team together with the following representa-
tion: design, manufacturing, purchasing, quality, and sales and market-
ing. We evaluate the total package: product and packaging. We decide to
analyze the packaging first.
The first step is to define the primary function of the packaging. Protect
the ink cartridge from damage from point of manufacturing to point of
use (put it in the printer). What could be some secondary functions (easy
to transport, attractive, informative, etc.)?
In order to perform the value analysis, we need to apply “Go and See”
(sounds familiar?). So be the customer and evaluate how you would “use”
this packaging. What are the unnecessary functions? Could you redesign
this packaging and be more cost-effective?
1 2 3 4
5 6 7 8
9 10 11
9
Adapting Lean for Made-to-Order/High-
Mix, Low-Volume Organizations
Greg Lane
With North America and Europe losing a large share of traditional “high-
volume manufacturing” to offshore competition and low-cost country
sourcing, the West is left with predominately either: short lead-time prod-
ucts, engineered products, high-variation/low-volume items, or made-to-
order products and services. While most Lean “tools” are centered around
and have proliferated based instead on higher-volume and lower-variation
products, the “principles” behind these tools as well as Lean manage-
ment techniques can be profitably adapted to low-volume, high-mix, and
even job-shop organizations. Those who think “we don’t make cars” and
therefore Lean will not work, need to take a step back and understand the
underlying concepts, not the highly publicized tools.
The Toyota training and mentoring I received helped prepare me for
transitioning these principles into the world of lower volume and higher
variation as my Sensei was continuously asking, “What is the root cause?”
and “What principle are you going to use in your Kaizen?” This coaching
stuck with me through the years and helped me to always reflect on what
underlying “principle”—not on the specific methodology—I needed to
utilize and then in adapting that principle concept to the problem at hand.
My story in practically adapting Lean principles into a job-shop envi-
ronment began with my desire to be responsible for my own profit and
loss statement. As an engineer who had predominantly been involved in
manufacturing, although financially limited as to the size of company my
personal assets (as well as some leveraged financing) would permit me
to own, I ended up purchasing a profitable high-variation, low-volume
manufacturing organization. We built mostly metal and plastic parts
and small subassemblies predominately for semiconductor equipment
137
138 • Greg Lane
manufacturers (mostly OEMs). Knowing nothing about this business

or the market, I only had my Toyota experience and common sense to
contribute, although the “Lean” concepts required a bit of massaging to be
profitable in this made-to-order environment.
My Lean journey began at Toyota, in the higher-volume, lower-variation
automotive industry, although I had to learn that the true flexibility is
realized in the underlying concepts. Though during the six years in which
I owned my job-shop, as well as a long period of specialized support in
the transformation to “Lean” management of other high-variation compa-
nies, I have learned a few additional tricks based on my Toyota experience
and share a few of those key learnings in this chapter.
Never during my tenure as a business owner did I propose that we “imple-
ment Lean”; instead, I used the concepts adapted from Lean thinking to
manage, grow, and increase profitability. I followed how I had witnessed
the Toyota Production System being utilized within Toyota; it was just the
underlying way they operated the business, instead of trying to “implement”
their production system. I did not introduce improvements with Japanese
names, as this held no value for my team. Instead, everything was done in a
systematic way to better the business and ensure job security in this unstable
and cyclical high-technology market. By always sharing the bigger picture
and relating every targeted improvement to the overall strategy, the neces-
sity for continuous improvement was justified throughout my tenure with
the team.
Clarifying our strategy (our organization’s version of Hoshin Kanri),
and deploying it throughout each level within my small organization, pro-
moted successful and profitable improvement ideas. I would not call this
“policy deployment” as I have heard others do, as such infers deploying
“policies”; instead, this was deploying the strategy to each level, allowing
input and clarity as to how each person’s indicators and related actions
supported the overall profitability and growth of the company (just as
important to my team was how this profitability translated into job secu-
rity and some form of personal reward). With this structure in place, each
level in the organization was able to better propose actions that resolved
real problems in meeting the organization’s overall objectives.
Not only did this strategy deployment ensure our success and priori-
tize our improvements (i.e., which Lean concepts I could adapt to support
our objectives), but it has also always been fundamental in the success-
ful transformations I have supported in both high-mix/low-volume as
well as high-volume organizations. Without this link, I have witnessed
Adapting Lean for Organizations • 139
companies “implementing Lean” with mixed success, as it is often viewed

as additional work with only short-term gains and rarely has any longevity
in the form of management support.
OSKKK TO LEARN AND TRANSFORM

As the basis for both learning and transforming the business, I utilized
a lesser-known Toyota methodology called OSKKK. I began learning
this practical technique during my key person training at Toyota’s plants
in Japan during 1992, and became further acquainted while supporting
Delphi Automotive during a period in which Toyota production control
manager Yoshinobu Yamada was introducing OSKKK throughout many
of Delphi’s operational divisions.
The acronym OSKKK has nothing to do with the Ku Klux Klan, but
instead is a form of the PDCA (Plan-Do-Check-Act) cycle. The steps in
this process are: Observe Deeply, Standardize (in some cases, you might
first need to Stabilize), then Kaizen of the flow and process, Kaizen of
equipment, and finally Kaizen of layout. It should be viewed as a never-
ending loop; once the Kaizen’s (meaning continuous improvement) first
cycle is completed, then observation and standardization will again
be required. The first steps appear as common sense, which they are,
although often after only short observation periods, we “impatient prob-
lem solvers” already know the root cause and jump directly to solutions.
The “Kaizen” (continuous improvement) steps are in the order of effec-
tiveness and sorted from least to most costly to implement. The conflict
with this Kaizen sequence (improve process and flow, then improve
equipment, and finally improve the layout) is that it works against human
nature. It is often more tangible and exciting to either work on layout
issues or address equipment improvements (including investments in new
or higher technology equipment) than to tackle process and flow issues
that are normally dominated by years of using the same method, conflict-
ing opinions, mediocre buy-in, or a general sense comfort with the way
it has always been performed. It is frequently after “confrontational” or
uncomfortable questioning that the effectiveness of the existing processes
can be improved; remember that all of the existing processes have a bit
of personal ownership. Many of our processes are not standardized and
continuously improved, but instead have evolved with the people filling
140 • Greg Lane
those roles and are based on their talents and backgrounds (this is espe-
cially true for indirect and administrative processes).
LEARNING THE PROCESSES BEFORE MANAGING THEM

Following my positive and profitable experience from Toyota’s guide-
lines that new employees typically begin with a hands-on learning
period regardless of their position, my first months at my new com-
pany were spent working my way up, beginning as a machine operator.
Difficult as this is to imagine for the modern, educated manager, this is
a valuable utilization of his or her talents, prior to jumping into “high-
level” decisions and reviews. For me it is beyond a doubt the difference
between a manager’s misguided direction of improvement ideas and the
successful evolution of supported and profitable improvements. OSKKK
was my methodology to learn as I progressively worked through the
various jobs and tasks (just as I had done when I started at Toyota).
Not being a naturally patient person, this period of humbly learning
without jumping in and quickly introducing change (in other words,
not performing “machine-gun” improvement) required discipline and
restraint, but its necessity was reinforced by the lack of standardization
I found. I knew from my former TPS training that trying to remove
waste where standardization was nonexistent, was itself a wasted effort.
In my business, “tribal knowledge” was king, so instead of just losing
sleep imagining the hardships we would experience by the departure
of any single employee with critical tribal knowledge (undocumented
processes) in his or her head, I learned by day and documented by night.
Later, these standards would be the basis of structured improvements
based on constraints in meeting our strategy deployment. (Note: At this
time, the “strategy” had not been developed; it only came after gaining a
much deeper and better understanding of the shop and office processes as
well as gaining the “voice of the customer” through customer visits. I had
hired the former manager to stay on-board during this period until I had
learned enough that I could begin to lead.) This hands-on learning was
also necessary preceding my introductions to the customers (to gain an
understanding of what was important to them), as sharp customers are
able to quickly identify those leaders who cannot relate to the realities
of the business.
CONSTRAINTS REQUIRE MORE THAN QUICK FIXES

Understanding and linking constraints to our business objectives requires
that we have both robust strategy deployment and an understanding of
our constraints (or bottlenecks) prioritized in relation to our strategy.
It is easiest to first think of bottlenecks on the shop floor. Most would
agree that in high-variation businesses the bottlenecks are more difficult
to locate because they are constantly moving, depending on many factors,
including changes in customer demand, changes in model mix, etc. We
need ways to visualize these bottlenecks in real-time, so that we can work
to also minimize them in real-time. In other books* I have demonstrated
examples of how these visualizations can help identify and elevate bottle-
necks in the shop and indirect processes in real-time, but here I would like
to move on to where the bigger constraints traditionally reside in high-
variation or made-to-order businesses.
In high-variation organizations it is likely that the majority of high-
impact improvements lie waiting within our flow of information (our indi-
rect processes). Remember that in high variation, proportionally more of
our resources are dedicated to managing the flow of information that is
associated with more complicated products and services as well as smaller
quantities and highly technical orders. Typically, 50% or more of our payroll
goes for our indirect costs. Planning within these organizations is one spe-
cific area of general weakness often observed. However, if you have “proper
metrics” and indicators, they should help to identify issues within this “flow
of information,” and many of these will be related to lead-time. When work-
ing with Toyota, it appeared that there was always an awareness and often
a measurement versus a standard for lead-time, although I find that many
other organizations do not have that as their focus.
Planning was not only a key constraint within my business, but it is
a primary area of opportunity within the organizations I support. There
are various levels of planning that involve different stakeholders and have
different functions within an organization. Figure 9.1 is an outline of the
typical levels and planning functions, starting with the “Master” plan. All
organizations should have similar clarity when visualizing and improving
their planning processes. Each of the three levels should have a tool that is
* Made to Order Lean-Excelling in a High-Mix, Low-Volume Envirnoment (Productivity Press,
New York: 2007) and Mr. Lean Buys and Transforms a Manufacturing Company—The True Story
of Profitability Growing an Organization with Lean Principles (CRC Press, New York: 2010).
142 • Greg Lane
Levels Who PDCA - Improve

Marketing/sales/ Monthly review of
Rolling monthly forecast bus. develop/ops/ actual vs. forecast
supply chain & reasons for
Move into difference
MRP planning
Weekly schedule (as applicable) Prod. control/ops/ Weekly review of
(fixed & rolling) sales/supply chain actual vs. schedule
& isolate: Ops, supply
chain issues
Fixed daily schedule Ops/team leader Daily tracking:

day-by-hour Pareto reasons,
min. 24 hour firm i.e. OEE, std. hours,
Cross training matrix quality mtls, improved
cross training, etc.
FIGURE 9.1
Levels within production planning.
used to visually gather and communicate the information, and this “tool”
should be the basis of a PDCA (Plan-Do-Check-Act) cycle for improving
your planning. This can often be a good starting point when a company
realizes a problem or bottleneck within its delivery or profitability. Within
Toyota, production control was considered absolutely a critical function;
in other enterprises it is only viewed in a supporting role.
Returning to my company’s Lean journey, after I completed learning the
shop and office processes and had met my customers to better understand
their needs and opinions of how well we were solving their problems, I
was ready to develop my strategy deployment (to avoid “machine-gun”
improvements). As I disseminated my profit and growth objectives
through my relatively flat organizational structure, I realized that a key
constraint was my ability to forecast and plan, and the estimating pro-
cess was crucial to both. Essentially, a made-to-order (job shop) business
can do very little forecasting; in my case we rarely had more than a two-
week customer lead-time, so that was our basic forward-looking horizon.
Although based on various factors in our current estimates (type of part,
customer relationship, part specifications, etc.), we could forecast a little
longer term. However, a critical shortcoming was that we lacked any sort
of feedback or improvement loop in the estimating process, so we were
unsure of our estimating accuracy and this accuracy directly affects sales,
profitability, and our ability to plan operations by their cycle times. In
this type of business, your estimate really replaces or becomes your takt
time (Takt Time = time available/customer demand). Once the customer
confirms his order based on your estimate, this is your link to what the
customer needs and what is commercially acceptable; if you maintain

the material costs, estimated cycle times, and your G&A (General and
Administrative) costs are absorbed as expected in your estimate, you will
earn the anticipated margin. So if the estimating process is so critical, why
was there no improvement cycle built in? And why did it lack basic perfor-
mance indicators? This was a critical starting point for me, as improving
this process would likely affect both profitability and growth targets.
PROCESS FOCUSED, NOT PRODUCT FOCUSED

To improve an indirect process such as estimating, I needed the team to
first visualize the process in the same way. This requires that you basi-
cally follow a standard and have some process stability, although like
most of our processes we did not utilize a standard method. Although
as with most high-variation businesses, those likely to have hundreds to
thousands of part numbers, we needed to focus on a standard “process”
instead of how we handled individual parts (as we had many types). What
I call “process mapping” is a method to reach a common visualized under-
standing of the current status of an indirect process (involving flow of
information, whereas flow of material utilizes Value Stream Mapping) as
a basis for discussing and identifying improvements. Process mapping is
also a method that supports OSKKK, as you must first Observe, then agree
on a Standard, followed by identifying areas requiring Kaizen (improve-
ment). Our first map to visualize our estimating process was done with
Post-It® pads on the wall but has been redrawn and shown in Figure 9.2.
In reality, this “current state” map represented approximately what we did
more often than not, but our process was not stable or well-standardized
to begin with, so “current state” was actually closer to “best case.”
Indirect processes essentially represent a flow of information and
although harder to grasp and map than the flow of material (as done in
value stream mapping), it is vital to reach a consensus on where the infor-
mation flows, and where it stops and waits. We want to keep the information
flowing just like when using Lean methods to improve material flow; any
time the flow stops, there is an opportunity to improve. When information
flow is stopped, it is more difficult to see as this often resides in computers
or in-baskets, and some of these might be well outside your organization
or control; but just as with material, lead-time is critical and therefore we
always show a timeline at the bottom of the process map. Remember that
Key Estimating Process - Current State March 1998
Task or
Decision Problem Solution Y = yes
Action
N = no
Not able to
How received? Not always No standard
open all
Clarity of RFQ? clearly format
drawing files
(software) Delay as explaining
buyer does Y reason for
Need to Inform non-quote
Request not have
Customer understand Inquire N Will N manager &
Received the missing access to
Print Confirm N required hours Y if customer can customer pay then inform Present
customer drawings & drawings
Service drawings all drawings to answer accept another date an expedite customer of proposal to
request for print for
144 • Greg Lane
included about capacity (later date) premium? no-quoting customer

quotation estimators Estimator should affected parts
Y first determine Capacity
Should first check with material & allow
operations on available planning not
purchase extra always clear
capacity to meet lead-time to
due dates Process has
obtain pricing
no feedback
Quote: Put together loop
Decide N Specify any Ask operations if
if any drawing Set-up per operation Specify there is available quotation based
necessary on standard
should be no cycle time per necessary capacity to meet Process has
out-sourcing pricing (std.
Estimater quotes operation material request dates no customer
services hourly rates)
Extra time input taken
(outside cycle) into account
Y Extra loading
Time lag
getting
Unclear or supplier
missing Inform what pricing
Inform what
specifications materials
outsourcing
from estimator require vendor
requires require Provide
pricing
Purchasing external pricing estimates for
material &
Not always
outsourcing
know who can
perform certain
services
Ensure Ask manager for price
Can Y
manager is adjustments (additional
Operations meet request comfortable mark-up or mark down
dates? issuing a based on customer,
“no-quote” market, etc.)
N
Discuss with
Not always
manager for
available
Manager approval to no
quote some or
all drawings
1/2 Day 1/2 to 1 Day 1/2 to 2 Days (Depending size of quotation)
FIGURE 9.2
Process mapping with swim lanes and lead times.
something you might initially think is outside your “control” likely remains
in your “influence” (normally if you gather the facts demonstrating what the
problems cost the organization, you can influence change).
After finally getting the current state drawn (I use the word “finally”
because this involves more time and discussion from the cross-functional
group than you would imagine), you need to note the problems encoun-
tered at each step; those are shown in the broken lines in Figure 9.2. Even
if someone immediately jumps to suggesting an improvement, I always
ask them to write it as a problem; if someone is unable to articulate what
problem their idea is likely to resolve, it might be a “nice-to-have” but not
as high a priority as some other solutions. Once the problems are identi-
fied, then you can brainstorm for solutions (usually displayed on green
Post-Its, but not shown in Figure 9.2).
When you start identifying problems on the map, you are likely to find
the team justifying unstable processes based on factors being outside their
control (i.e., customer demands, changes to orders, etc.); they see them-
selves as victims and try to get others to commiserate. The conversation
instead needs to demonstrate where we have “influence” on these areas
although we may not have “control.” Often you must first work on “sta-
bility” even before “standardization”; sometimes firefighters cannot even
imagine standardization because they are busy justifying all the reasons
they cannot establish stability.
Using similar methods to visualize your bottleneck processes (pri-
oritized from your strategy deployment) avoids isolated “machine-gun”
improvements and can directly help in prioritizing improvements by
focusing only on those that have a correlation to the measurements you
want to improve. In my example of our estimating process, one objec-
tive was to improve lead-time (as shown in the timeline at the bottom of
Figure 9.2); but we also wanted to focus on quotation accuracy, and this
map clearly shows that there is no feedback loop to improve the process or
gain input from the customer. I needed to base our planning, pricing, cost
allocations, and profit margins on accurate quotations, so that any solu-
tions in this area were profitable for the business.
We utilized similar maps for other process as dictated by our strategy
deployment and OSKKK. Keep in mind the criticalness of the documen-
tation and improvement of these indirect processes. A 2002 study * look-
* Rasmus D.W. (2002). Collaboration, Content and Communities: An update, Giga Information
Group, Inc. May 31, 2002, Malabar, FL: Gigatel.
146 • Greg Lane
ing at how an organization’s knowledge is maintained found that 80% of

this knowledge is stored in people’s heads, while 16% is stored in unstruc-
tured databases (i.e., people’s hard drives, spreadsheets, etc.) and only 4%
is stored in structured databases. While that figure might have changed in
recent years, it still represents an alarming situation; this is exasperated by
nonstandardized processes that were apparent in my company and many
other organizations I have supported. Perhaps more timely is the near-
ing retirement of many baby boomers, which will siphon off considerable
experience and should prioritize better knowledge management.
SEGREGATING PARTS TO MANAGE DIFFERENTLY

If you produce a commodity and build to a constant demand, or manu-
facture to maintain a warehouse full of finished goods, the subsequent
discussion is likely not applicable. However, if you build a product with
high variation, then you will find this useful.
While not all businesses have sales distributions that follow the 80/20
rule of Pareto’s Principle (20% of something is responsible for 80% of the
results), many do. This is true for high variation and even made-to-order
organizations. First let me clarify the type of sales distribution to which I
am referring and then how it affects the management. Many organizations
have 80% of their sales (based on sales price) coming from 20% or less of
their total part numbers sold during that period. Analyzing this is typi-
cally referred to as ABC part analysis, and usually a simple spreadsheet
will prove how applicable this is. Normally, the last six months of sales data
(one year or more of data for seasonal businesses) is sorted by descending
sales order and those products accounting for 80% of sales are considered
“A” parts while the next 15% of sales value makes the “B” parts and all
remaining are the “C” parts. This requires some additional filter based on
volumes, exceptions, and marketing intelligence of what is really repre-
sentative of “A,” “B,” and “C” parts, respectively; but for our purposes, this
explanation should be sufficient. The reason for undertaking this exercise
is that these categories of parts might benefit from different management
systems assuming they cannot all be economically made “just in time”;
in other words, you are not able to quickly adjust your capacity to the
customer’s varying demands. Remember that ideally we want to build the
part only when the client needs it and then keep it flowing through our
processes, although typically because of lead-time expectations, capacity
Manage these Differently
100% Strangers
95% Repeaters C-parts: remaining 5% of part
numbers (non-stock materials)
80% B-parts: next 15%
of part numbers
% Sales by Invoice Value
Runners
A-parts: 80/20 rule
(stock materials)
20% 35% 100%

% Total Part Numbers
FIGURE 9.3
Pareto’s Principle (80/20 Rule) applied to high variation manufacturing.
issues, and supplier and manufacturing problems we might have to utilize

other options. This ABC distribution is visualized in Figure 9.3.
One option is that some or all “A” parts can be put onto a pull system
(typically a “Kanban” replenishment system) with relatively low risk of
obsolescence and minimal inventory carrying cost. This type of pull sys-
tem would not involve finished goods inventory; instead, it might entail
work-in-process inventory of “A” parts directly in front on the process
in which the majority of variation is introduced. This helps to improve
lead-time and better balance our less-flexible capacity with the variations
in customer demand. How to qualify particular parts for replenishment,
how to calculate these levels (Kanban levels), and how the planning works
are discussed in detail inside my book Made to Order Lean*. Figure 9.4
helps visualize the first advantage of how this small amount of inventory
of “A” parts improves the balance of capacity and demand variation.
Some “B” parts might be managed by a two-box (or pallet) exchange sys-
tem. This means that you would have one box or pallet in inventory from
which you are currently shipping parts to customers, while the other box
or pallet is waiting to be replenished. Very likely, many “B” parts would
be left as a “make to order” only when there is demand from the client.
Finally, “C” parts, your “strangers,” are entirely too risky to manage with
a replenishment system; therefore they would only be manufactured when
there is an order. Managing with this segregation of your parts into “A,”
“B,” and “C” categories allows more options in planning (including many
* Productivity Press, New York: 2007.
148 • Greg Lane
Combined Demand Line for A, B & C parts
(Most B parts & none of the C parts would be

held in a WIP inventory (or replenished), so they
would only be manufactured at the time of the
Forecast or Actual Volume
Ship from replenishment customer’s order)

inventory (Kanban)
Available capacity
(less flexible, slower
to increase/decrease,
has a cost implication
to change)
Use excess capacity
to refill inventory of
A parts (Kanban parts)
1 2 3 4 5 6 7 8 9
Time in Weeks
FIGURE 9.4
WIP inventory (Kanban) utilized to improve balance of capacity and demand.
simplified visual planning options instead of trying to plan these parts

with traditional Material Requirements Planning (MRP) logic).
These optional ways to manage parts differently link back to both the
planning discussed earlier and the importance of a feedback system for
your estimates. Managing your parts by segregating them into “A,” “B,”
and “C” allows you to use some visual planning techniques for your
daily operations planning (this is the lower level of planning displayed in
Figure 9.1, the “fixed daily schedule”). Because the basis of this planning
is likely to begin by utilizing your estimated times, it also creates the feed-
back loop that helps to evaluate the accuracy of your estimating process;
if you plan based on this time and do not achieve the plan (assuming no
outside problems), it is likely that the estimated time was not correct. This
should also lead to a better understanding of your specific profit margin
on a part-by-part basis. The connection between managing by “A,” “B,”
“C,” and using visuals to plan demonstrates how Lean principles are con-
nected and only cherry-picking a few principles can be dangerous.
On the contrary, my job-shop really did not allow me to identify “A”
parts; we had no ability to know whether a part was likely to receive a
repeat order; and although we asked our customers for forecasts, nothing
of substance ever materialized. Our market intelligence allowed a bit of
guessing based on the type of part, revision level, and past history with
the customer, but beyond this it was pure gambling with very poor odds.
Although we did evolve to using our quotations as the basis for planning
our machines, Figure 9.5 shows our first attempt at an hourly scheduling
FIGURE 9.5
My first “day by hour” board for one CNC machine.
board for a particular machine. Other than creating a feedback system

for our estimating process and allowing us to better plan and utilize our
capacity, this board was linked to capturing our problems in real-time,
which helped not only in prioritizing the issues, but also in determining
other Lean principles that we needed to incorporate.
MANAGING IN REAL-TIME NECESSITATES

OTHER LEAN PRINCIPLES
As our boards began to quantify which were our reoccurring problems
and their corresponding costs to the organization, like most organizations
150 • Greg Lane
we were overwhelmed with problems and had few resources to resolve

them. Toyota had its team leaders as its first real line of defense, and I
needed a similar solution. I was lucky in that I did not suffer the typical
business school mentality of direct-versus-indirect employees, thinking
direct employees added the significant value. Therefore, I was able to look
at a position in terms of the quantifiable value it brought to resolving our
customers’ problems. My shop foreman was partial supervisor, partial
problem solver but had always been challenged to operate a machine as
often as he could, which typically amounted to more than 50% of the day.
Instead, I proposed to transform him into a full-time team leader. New
responsibilities were to include everything from minimizing set-up times,
to eliminating material shortages, root-cause problem solving, and a host
of other duties that translated into more responsibility. I proved this to
be of great benefit by comparing a few previous months of the machine’s
OEEs (Overall Equipment Effectiveness) to the OEEs after he had been
functioning in his team leader role for a few months. What this proved
was the following: I was seeing an average of 7% to 8% OEE improve-
ment on our critical machines after the first few months. A rough transla-
tion of the savings based on our five main machines (which at the time
were averaging over thirty hours of scheduled production per week) was
30 hours per week × 5 machines 8% improvement = 13 additional hours
of production per week. If you now multiply the additional 13 hours per
week that I gained (you have to assume that I was able to sell most of that
capacity, which was realistic for us) and multiply by the average of $60 per
hour for which we sold our machining time, that was a total of an addi-
tional $780 per week of machine time, which almost covered Tom’s total
wages (without benefits); but you must remember that Tom also still ran a
machine when covering for absenteeism and performed many other value-
added activities such as functioning as the supervisor. This was only the
beginning, as we made further OEE improvements and expanded the team
leader role to resolve other types of problems. It proves the correct decision
was made and implies you should not get hung up on the number of direct
and indirect employees but instead on the value each position is adding.
Most managers unknowingly accept 70% to 80% effectiveness of their
entire workforce as they randomly struggle to resolve their own prob-
lems. Instead, providing a team leader (Toyota had approximately a 1-to-5
ratio of team leaders to members during my tenure) can increase the
entire team’s effectiveness to more than 90%. Other than overcoming the
mind-set of direct versus indirect, problems in transitioning to team lead-

ers reside in the selection process, the job description, developing man-
agement support, and mentoring this person. Even if you feel you have
an existing position similar to a “team leader” in your organization, get
a hold of a copy of Toyota’s team leader responsibilities (available in my
other books) and compare your current job description to Toyota’s. You
are likely to discover that you have a vastly different concept and are miss-
ing out on some profitable benefits.
Our daily planning boards also identified the opportunity for more
cross-training to minimize lost time. This was not only apparent on the
shop floor, but just as critical in the office. Again, visualization was the key;
when I took over the company, the status of cross-training was also being
done in the supervisor’s head based on tribal knowledge. We were always
too busy to train but somehow always found the time to make up for the
shortfalls this caused. The first step was to get some form of agreement on
our current status; this was done through visualization. Figure 9.6 is an
example of a chart similar to the one we used for our indirect tasks in the
front office.
The format to display this information is not important, but for high-
variation companies it is the underlying principle being demonstrated that
is critical. For example, in the shaded-circular quadrants, you see the cur-
rent status (normally this is first completed by the manager or supervisor
and then publicly displayed, which draws in various and often unsolicited
opinions from the team); naturally, the distinction between the four lev-
els of training is subjective, but it is a far cry better than only that envi-
sioned in the supervisor’s head. Next, you can add your future training
plans (show shaded squares in Figure 9.6); you might also display the sta-
tus of any standardized documentation that exists that are displayed at
the top of Figure 9.6 with R = red (no documentation), Y = yellow (partial
documentation), G = Green (complete documentation). Having this visual-
ized is likely the first step toward improving your cross-training, thereby
creating more standardized operations, reducing downtime, minimizing
ergonomic issues, and improving process effectiveness as more people
contribute their ideas for improvement. The principal importance of this
technique is to increase flexibility, thus allowing you to better balance your
capacity with your fluctuating demand; this is even referenced in Figure 9.1
as critical when making the daily plan. Again, this demonstrates how many
Lean principles are connected as a system to make improvements.
152 • Greg Lane
Skills Matix-Purchasing Department

Status of the Standardized Date for
G G R R Y R R R R Key:
Operations (Documentation) Training/Notes
Trainee, requires
Requisitions
Prioritize Purchasing
into System
Input Purchase Requisitions
for Stock Items
Place Purchase Orders
for Non-Stock Items
Place Purchase Orders
on the System
Set-up New Stock Item
Terms for New Stock Item
Negotiate Prices and
Purchasing Status Report
Configure Weekly
Purchasing Status Report
Configure Monthly
Excess of $5,000
Approve 1X Purchases in
assistance to
perform this task
Able to perform
task alone
Able to perform
task and update
system
Able to train others
and modify
standardized
procedures
Training completed
1 Beverly Jones Feb 06
Training completed
Planning to train
2 Frank Callahan Feb 07 to this level in the
Employee
3 Brenda Fisher future

Training completed
4 Roger Moore Feb 07
5 Derek Ford
6 Jessica Shipmen G - Low risk
Y - Medium risk
Status of Cross Training G G G R G R R R R R - High risk
FIGURE 9.6
Skills matrix with current status and training plan.
PROPORTIONALLY MORE INDIRECT COSTS

NECESSITATE LEAN ACCOUNTING
One of the more interesting parts of my journey was how I pulled us out of
our worst sales slump caused by a cyclical downturn in the semiconductor
equipment industry. I used an extremely basic adaptation of activity-based
costing (considered a method of Lean accounting). This increased our reve-
nues (and margins), bringing us back to profitability. Activity-based costing
more accurately allocates overhead, indirect and fixed costs (including G&A
costs), to the type or family of parts that consumes these various levels of
activities and their related costs. The downturn exasperated our sales prob-
lems because customers now had more time to shop around on the reduced
level of quotations they were soliciting. Our hit rate on transforming quo-
tations into orders previously ranged between 65% and 70%; it had fallen
below 50%, and this was on a significantly reduced volume of quotations.
I figured that our fixed costs were equal to or lower in many cases than
those of our competitors. I also knew that our labor and material esti-
mates were very accurate based on our weekly review of quoted versus
actual costs and working time on each order. Therefore, I speculated that
the only reason we could be losing orders to our competitors (other than
their own quoting errors) was that my allocations of fixed costs were being
incorrectly assigned, or I was demanding too much profit. I had reduced

the margin to the minimum acceptable; consequently, I was determined
to more accurately allocate fixed costs. My assumption was that my basic
quotation method did not truly allocate the indirect costs appropriately to
the parts consuming these costs.
Remember that in high-variation/low-volume businesses, often half or
more of your payroll covers the indirect positions. In the worst case, these
large amounts of indirect costs combined with the other fixed and over-
head costs are all lumped together and allocated (to a product or service)
based only on direct labor hours; compounding this inaccuracy would
be basing these generalized allocations on imprecise direct labor hours.
Because I knew that my direct labor hours were accurate and it was too
difficult utilize another basis, I decided direct labor hours should remain
my reference in distributing my indirect costs.
After reading a few books on activity-based costing, I realized I did not
have the time or resources to implement the core concepts to the level
of detail described, but the concept was sound and would likely improve
the accuracy of my costing so I simplified how I allocated my activities
to the parts and customers consuming them. I decided to work on two
general levels: the shop and the office. I created an arbitrary point system
in the form of a matrix (one for the shop and another for the office); the
more points assigned, the more “activity” or time that was proportionally
consumed. Then I would only need to relate these points to a cost factor.
I had to first determine the characteristics that most directly affected my
overhead. I will quickly discuss the first matrix I built for the office so that
you can conceptualize what I was doing.
I began by listing both the characteristics of our parts, the types of ser-
vices we provided, and how our customers affected the activity levels of
the various indirects who worked in the “office.” Then I put these in a
two-dimensional matrix in ascending order from left to right and top to
bottom based on the increasing level of activity they consumed. Then, by
looking at proportionally how much more of the person’s time they would
normally consume, I started assigning them points. Figure 9.7 shows the
first matrix I drew up for the office indirect functions.
In the matrix, additional points are equated to additional indirect activ-
ity being consumed by that product or customer; this opened up the
opportunity to reassign these overhead costs more accurately instead of
utilizing only various rates for work centers, often leaving the majority of
costs applied like spreading butter on bread. I also developed a similar but
154 • Greg Lane
(+1) Easy customer (+2) Difficult customer

(on time pay, good (not on time pay, poor
terms, etc.) terms, etc.)
Office Activity Rating
(+1) Easy (+2) Difficult (+1) Easy (+2) Difficult
ship & pack ship & pack ship & pack ship & pack
requirements requirements requirements requirements
(+1) Minimal or (+1) Short bill of material 1+1+1+1= 1+1+1+2= 1+1+2+1= 1+1+2+2=
standard customer (1–5 items) and no outsourcing 4 5 5 6
support requirements
(few changes, easy (+2) Medium bill of material(6–15
5 6 6 7
sales support, std. items) and outsourcing 1–2 services
specifications, (+3) Long bill of material (16 + items)
qty., etc.) 6 7 7 8
and outsourcing 3 or more services
(+2) Increased (+1) Short bill of material
5 6 6 7
customer support (1–5 items) and on outsourcing
requirements (freq.
(+2) Medium bill of material (6–15
changes, extra sales 6 7 7 8
items) and outsourcing 1–2 services
support, additional
specifications, (+3) Long bill of material(16+ items)
qty., etc.) 7 8 8 9
and outsourcing 3 or more services
FIGURE 9.7
Assigning arbitrary points to influences resulting in heightened activity levels.
Conversion of Office Activity Rating to an Hourly Cost

Office activity rating 4 5 6 7 8 9
Hourly office cost $12 $14 $16 $18 $20 $22
FIGURE 9.8
Simplified “activity-based costing” for estimating office indirect costs.
more detailed matrix for the overhead costs in the shop (not shown). Now
I had to connect these with a dollar value to more accurately distribute
these points. Although I had various rates for my work centers, I predomi-
nately utilized computer numeric controlled (CNC) mills and during the
late 1990s these had a shop rate of $60 per hour. On average, my fully
burdened labor for the direct operators in the shop averaged about $20 per
hour; therefore, the other $40 per hour was successfully covering all the
overhead, fixed, and indirect costs. The only shortfall was likely the accu-
racy of how these costs were being allocated. I knew from my financial
statements that about 60% of my costs after removing direct labor were
being consumed in the shop and the other 40% were supporting the office
(people, equipment, and miscellaneous fixed costs). Therefore, one could
calculate that $24 per hour ($40 per hour × 60%) was associated with the
shop and $16 per hour ($40 per hour × 40%) was linked to the office. Now
all I needed to do was connect this to my matrices.
I played with some different theories, but I finally settled on linking
this hourly cost to the midpoint of this arbitrary scale in each matrix,
Figure 9.8 demonstrates this for the office matrix.
The $16 per hour that I knew the office was costing was plugged
into the midpoint of “6.” I then examined quite a few actual cases of
time spent on various orders in the office and felt that if I increased
or decreased $2 in my labor cost, respectively, for each point, that I
would have covered my actual costs. When both matrices were taken
into account, my CNC mill work centers would then have a rate that
varied from $48 per hour (utilizing the least indirect effort in the office
and shop) to a maximum of $74 per hour, instead of $60 per hour cover-
ing all levels of activity that the part or customer demanded. Now for
each quotation I had the extra steps of qualifying a point level in the
shop and office matrices, but it was usually only a matter of a few sec-
onds. I do not want to mislead you that this was always the only basis
for the actual price the customer was quoted. I consider this portion the
technical quotation; then this was almost always adjusted up or down
depending on the “strategic” pricing factor. In other words, depend-
ing on our current workload, the particular customer, the likelihood it
would lead to further work, etc., we would adjust the price we presented
to our customer, but at least we knew more accurately the true cost and
could make better decisions.
In the end, unless this leads to increased profitability, it is only additional
effort. In my case, over the next few months the hit rate on quotes climbed
from the low 50% to the low 60% with the average earnings-before-inter-
est-and-tax (EBIT) increasing from the low 40% to just over 47%. I slowly
refined this concept and although it would not likely be considered true
activity-based costing, it dramatically increased my profitability.
FAILURES
I had my share of failures from the “school of hard knocks.” One example
is that I never designed a very effective bonus system. I wanted to motivate
and share profits with my employees when we worked together to increase
profitability, and although any accountant can define how profitability is
calculated, I had significant financing to repay and varying salary levels
for myself and other indirects that left it hard to define true profitability
and put it into any profit-sharing plan. Ideally, I would have connected
a bonus system to the goals defined in my strategy deployment. In the
end, my only bonus system was based on attendance; and although better
156 • Greg Lane
than no bonus, it did not always drive home the points that I felt were
important.
Another area where we often deviated was in following the order
established by OSKKK. For example, we were by no means far enough
through our journey of improvements to begin Kaizening our layout; but
because of some external factors, it became prudent to move the business.
Naturally, we used this opportunity to improve our layout in both the
office and shop with a “Lean layout.” It also happened on other occasions
that changes in our business environment offered us an opportunity to
introduce improvement, and OSKKK was never intended to be so rigid as
not to take advantage of an opportunity to introduce improvements.
SUMMARY
By sharing a few of the Lean concepts I successfully adapted to a high-mix
job-shop, I hope you see more clearly how you often have to return to the
Lean “principles” instead of a specific Lean “tool” (often being described
for a higher-volume or lower-variation application). Frequently, the prin-
ciple will lend itself to a profitability improvement if correctly supported
by management. This is a critical reason for failure with many of the Lean
journeys that begin at the “tool” level; you need to cultivate and develop
the right culture. I did not discuss in this chapter since my journey was
made easier and likely was more successful because I had the continu-
ous improvement characteristics engrained into my character; actually,
this was the strong characteristic and advantage I brought to the business.
Although there are many schools of thought and publications to help with
this, it will likely require the most effort. Strategy Deployment, OSKKK,
Plan-Do-Check-Act, A3 (complete problem resolution contained on A3
size paper), and other Lean principles will all help to shape and reinforce
this. In the type of business environment discussed in this chapter, you
will need to focus on improving your office and shop processes instead of
trying to focus on individual product improvements. This will be strongly
linked to the people within those processes as the procedures are rarely
planned and standardized; instead, they have developed over time based
on the people working within them, the knowledge and skill they bring,
along with many other factors in the ongoing development of your busi-
ness. Methodologies such as value stream mapping and process mapping
discussed in this chapter will help in understanding and improving them.

No matter your goals or the plan for your Lean journey, you need to take
advantage of all problems and changes your business environment throws
at you as opportunities to introduce improvements through Lean prin-
ciples. I hope this helps to expand the paradigm that Lean can be adapted
to profitably support all types of businesses.
10
Lean Logistics
Robert Martichenko
“When the student is ready, the teacher will appear”
—Buddhist Proverb
PART 1: PURPOSE + PEOPLE

Introduction
It is amazing how fast time flies when one is having fun helping orga-
nizations implement Lean thinking. It seems like only yesterday that
I graduated from university with a degree in mathematics. What was
most startling upon graduation was how few companies were looking
for graduates of mathematics! Fortunately, I was given an opportunity
to learn at a very progressive, entrepreneurial trucking/logistics com-
pany in Cambridge, Ontario, Canada. After several years of working in
the Canadian trucking industry, I was offered a position with a third-
party logistics company that was responsible for supporting portions of
the inbound logistics processes for Toyota Motor Manufacturing. My
role would be to lead the efforts for my organization on site at a Green
Field Toyota Facility in the United States. For a young professional in the
logistics industry, I was aware that this was a great opportunity. In hind-
sight, what I did not realize was that this experience would be a catalyst to
define who I am today, both personally and professionally. Although this
experience is now over a decade in the past, I continue to learn from the
memories of conversations, tactical experiences, and strategic principles
that were taught to me along the way. In fact, the experience of supporting
Toyota Motor Manufacturing provided the foundation for my own third-
party logistics firm, the LeanCor Supply Chain Group.
159
160 • Robert Martichenko
As a young professional who was born in northern Ontario, moving

to the Midwest of the United States was quite a big deal. When I arrived
at the factory (Toyota’s Green Field Plant) for the first time, it was liter-
ally a huge steel building set in the middle of nothing but cornfield. I was
immediately given a tour of the “will-be factory” in process, including the
strategy deployment room (Hoshin) where the timeline for the entire fac-
tory construction and implementation was being managed on one wall.
This was my first experience with “red” and “green” conditions, outlining
plan, do, check, act (PDCA) relative to the entire project. From that day it
would be another ten months of work before we had the first vehicle come
off the new line. I can sincerely say that my learning started that first day.
The factory and all construction sites were clean, and a safety culture
was clear and evident. People took their time to introduce themselves to
me and they made sure I knew how to contact them if I needed assis-
tance. The “open-office” concept for desks and workstations was startling,
with a sea of desks in one room seeming as large as a football field. A
busy hub of collaboration and teamwork hummed and moved with what
looked like planned chaos and great purpose. I was surprised to see the
plant president’s desk right in the mix with all other leadership and team
members. On that first day, I saw (but did not yet understand) the essence
of 5S (Safety), Hoshin Planning (Strategy Deployment), Teamwork, Waste
Elimination, Visual Management, and other principles of the Toyota
Production System (TPS).
My role was to support the implementation of the logistics processes
between the supply base and the factory, so it did not take long to start
getting into the purpose of our work.
Note: For purposes of my essay, I will use the terms “TPS” and “Lean”
interchangeably. While supporting Toyota we did not use the term “Lean”
but rather “TPS.” Since my Toyota experience, I use the term “Lean” to
describe principles and techniques from the thinking of many historical
people and companies, including influences from Henry Ford, William
Deming, and Toyota Motor Manufacturing.
Purpose
The core purpose of the factory was to meet customer expectations by
building the highest-quality vehicle at the lowest possible total cost, all
while respecting all team members and the community and world at large.
Lean Logistics • 161
My (and my team’s) purpose was to play our part in this greater vision
by connecting the supply base to the new factory using principles based
on the Toyota Production System (TPS). The core principles of our work
were to design and implement an inbound logistics system based on pull
replenishment, velocity, leveled flow, and lead-time reduction. While these
are the TPS logistics principles, the tactical elements to successfully imple-
ment these principles would quickly take us into transportation manage-
ment, cross-docking, and process management systems to support the
higher-level TPS principles of stability, standardization, quality at the
source, flow, and waste elimination.
What I remember most about the first part of my work was the steadfast
focus on TPS principles. Not once did I hear “our job is minimizing trans-
portation cost” or “we need to only buy parts from a supplier in truckload
quantities.” The focus was always on the core purpose of our work, which
was to connect the supply base to the factory using TPS principles of pull,
velocity, leveled flow, and lead-time reduction. That is not to say that we
ignored transportation cost. Quite the contrary, managing transportation
costs became an obsession; however, it was not the guiding principle or the
primary driver of our work.
I define a guiding principle as something “that you just believe, no data
required to support your belief; you just know it’s the right thing to do.”
This was my first lesson supporting Toyota Motor Manufacturing. You
absolutely must have guiding principles to guide your supply chain and
logistics efforts. In this work it was pull, velocity, leveled flow, and lead-
time reduction. In subsequent years I have learned that the absence of
guiding principles only serves to create a business environment where
senior leaders continuously tamper with the business by changing strate-
gies and directions as frequently as business conditions change. This in my
opinion serves only to confuse customers, team members, and all other
stakeholders in the supply chain.
Lesson 1: You must have guiding principles in place to support sup-

ply-chain and logistics strategy.
Customer and 3PL Collaboration

I worked for a third-party logistics (3PL) company to whom Toyota out-
sourced portions of its logistics operations. At first I was surprised to
learn that Toyota outsourced portions of its logistics processes, namely
transportation and cross-docking management. Is Toyota not the best of

the best in logistics, after all? I quickly learned that Toyota’s idea of out-
sourcing is very different from that in other organizations. What I have
seen all too often is that a company wants to outsource a function because
it does not understand the process and just wants to avoid it. Nothing is
further from the truth with Toyota. They strategically outsource processes
they feel other companies can operate successfully; however, they never
leave the process from a thought leadership point of view. It may not be
a Toyota truck going down the road; however, Toyota and TPS thinking
have been a part of where the truck is coming from, where it is going, and
what is on it. This is true collaboration. While it may not always be fun
for the 3PL company, the successful relationships are those where the 3PL
company embraces what it can learn from its customer. I personally tried
to learn as much as I could from Toyota—on the job, through reading, and
through asking questions. I learned quickly that an environment where
people focus on problem solving is an environment where if the student is
ready, teachers will appear in all corners of the building.
Lesson 2: Supply-chain collaboration is about understanding the

strengths and weaknesses of all supply-chain partners and work-
ing with and teaching all partners in the supply chain.
People and Planning

When I arrived at the factory I was the second employee on site represent-
ing my company. The first was a talented young logistics engineer who was
laying the groundwork. He helped me immensely to start to understand
our task and the Toyota culture. Between the two of us, combined with
excellent support from our corporate offices in Canada and the United
States, we had to go from a team of two to a team of over fifty people within
six months. Those fifty people would need to have experience in logistics
engineering, transportation, fleet management, and the most important
role on the team, the actual truck driver who will be responsible to pick up
and deliver parts from the supply base.
Building the team was the most important part of our work. It was my
first lesson in understanding the principle of “quality at the source.” In
other words, get it right the first time. We were in a hurry, but we tried not
to be hurried. We interviewed people several times before we made a deci-
sion. Leaders from corporate came to the factory to support interviews.
We reached out to universities and asked for their “star” players. We knew
that if we hire the right people up front then we will be successful with
our operations and processes. Processes do not run themselves. People are
required to implement and sustain brilliant processes.
Over the first few months, Toyota expected us to hire and train the team
that we would need in place for the Start of Production (SOP). We brought
people in, including truck drivers, when there were no actual routes to run
and no freight yet to pick up. Why? Because teaching and educating our
team members on TPS, planning, and more planning was part of the cul-
ture. Many would criticize that there may have been too much planning,
however I never saw it that way. I have been involved with many projects
since my Toyota experience where the people and planning side was not
taken seriously. The results (or lack of results) were obvious very quickly.
Lesson 3: People development and process planning are critical to

the initial and sustained success of any operational undertaking.
PART 2: PROCESS
Logistics Route Design
With people getting in place and processes being developed, our first real
“logistics” task was to create a route design to connect the supply base with
the factory. This was set up as a week-long focused initiative in a confer-
ence room with a cross-functional team from Toyota and my organization.
We started by outlining our purpose and plan for the week, and then set
up tollgates for each day of the week. The below are the high-level steps of
the process we used (note that much of the process was manual, with only
limited aid of computer programs):
1. We plotted each supplier on a map of North America (it was nice to

see that Toyota embraced sourcing domestically).
2. We identified the projected volumes per day and week for each
supplier.
3. We ran the projected volumes through our packaging file (PFEP) to
get “cubic” volumes from each supplier. This allowed us to under-
stand how much space each supplier would require on a trailer.
4. We regionalized the suppliers into geographical clusters for multi-

stop milk run route development, direct routes to the plants, or
routes to be picked up to run through a cross-dock with parts ulti-
mately heading to other Toyota factories.
5. We targeted the number of pickup and delivery frequencies we
wanted for each supplier.
6. We finalized the routes, named them, and began the work of running
miles and developing route specs (standard work for our truck driv-
ers) to ensure a driver or team of drivers could safely run the route
and adhere to all rules under the Department of Transportation
regulations.
While the above list of steps may seem simple, it was far from trivial.
During that week, we routed hundreds of suppliers supplying thousands of
part numbers combined. The task did not only include getting parts to the
plants, but also getting returnable containers back to the suppliers using the
same TPS principles of pull, velocity, leveled flow, and lead-time reduction.
To say the task was complex and daunting would be an understatement.
Although my entire career at the time was in logistics, I had never par-
ticipated in a route design this large in scale. I remember feeling that “there
must be a software package that can do all this for us.” However, that was
not the point of the exercise. Manually plotting the suppliers ensured that
we understood the names of the suppliers; manually plotting supplier vol-
umes ensured that we understood the volumes and part complexities for
each supplier; and manually building routes ensured that we understood
each route implicitly. I learned later that forcing a process to be completed
manually is known as putting a “fingerprint” on the process. Simply allow-
ing a computer to do the work for you does not allow you to understand the
work. That is not to say that over time we did not automate some processes
that could be automated; however, when you do something the first time,
there is no greater lesson than to perform the process manually.
Lesson 4: For any big initiative, develop a cross-functional team and

perform the process manually the first time.
Pull Replenishment
Pull replenishment (or Just-In-Time) is defined “replenishing in the
exact quantity as was consumed in the previous period and having the
replenishment arrive only when the parts are required.” I think pull has
been oversimplified by many companies; and because of that, many people
feel it is easy. Nothing could be further from the truth. The essence of pull
is that “if I used it today, then I need to replenish it in the same quantities
for tomorrow.” The fundamental premise is that “if I used it today, then I
will need it again tomorrow.” This works for Toyota yet it seems to elude
other organizations. The fact that it works for Toyota is the brilliance of
the TPS. The heart of TPS is stability. The heart of stability is “how can we
make every day look the same.” If every day looks the same (that is, our
production schedule each day can mirror the day before), then pure pull
will work. In other words, if today is the same as tomorrow, and I used
parts today, then I will need those same parts in the same quantity tomor-
row. Under these circumstances, there are no complicated algorithms (or
MRP) required to determine part requirements. Simply order what you
used today from the supply base for tomorrow.
It would be naive to say that Toyota or any other organization achieves
this utopian state of every day looking exactly the same; however, this was
the goal of production planning and the materials function during my
Toyota experience. It was yet another nonnegotiable guiding principle of
Lean supply-chain management.
Our job of logisticians was to take the work of the production planners
(who focused on stability) and to connect the production plan to the sup-
ply base. At no point did the plan start with the supplier simply shipping
parts. It always started with the production schedule, which downstream
was connected to actual customer demand, and upstream was connected
to supplier replenishment.
Lesson 5: Pull starts with customer demand and then dovetails into
the production schedule and then upstream to the supplier.
Velocity and Understanding the Importance

of Lead-Time Reduction
Velocity is an ambiguous word in logistics. When we say velocity, we are
talking about increasing the speed of flow of material and information in
the supply chain. This is about reducing lead-time, a core principle of Lean
thinking. I often tell people that as a student of Lean, I became a thinker
of “economies of time” as opposed to “economies of scale.” The theory of
lead-time reduction may seem simple but is far from intuitive. The theory
of economies of time is fundamental to our understanding of Lean.
The worst waste of all is overproduction. Overproduction is defined as

building more than you need to service customer demand or building ear-
lier than you need to meet customer demand. From an inbound logistics
point of view, overproduction can be defined as ordering more parts than
you need or ordering parts earlier than you need them. Overproduction
is considered the worst waste of all because it creates all other wastes. As
soon as you have material or finished goods that are not required by the
customer, you are forced to store, transport, rework, and wait on those
goods to be required by the customer.
So, if overproduction is the worst waste, why overproduce? Because of
lead-time dynamics.
Let’s review a few definitions of lead-time:
• Outbound-logistics lead-time: The amount of time it takes to stage,

ship, and transport an order to the customer upon receiving a cus-
tomer order.
• Manufacturing-replenishment lead-time: The amount of time it takes
to manufacture your product after you receive a customer order.
• Inbound-logistics lead-time: The amount of time it takes to order
and receive material from your supply base in order to manufacture
your product.
With these definitions in mind, we can define total lead-time as the

amount of time it takes for us to order material from our supply base
through to when we deliver the product to our customer. (A more rigor-
ous definition of lead-time would include the time it takes to get paid from
the customer after receiving a customer order.)
If you could design the ideal supply chain, it would be a process where
you build to customer order (Build to Order or BTO) only. You would carry
no inventories and only initiate your inbound supply chain and manufac-
turing processes after receiving a customer order. The brilliance of BTO
is that you eliminate overproduction because you do not order material
from your suppliers or manufacture finished goods until you have a firm
customer order. As well, there is no need for warehousing or storage of
any kind as you simply flow product to the customer upon completion
of the manufacturing process. In essence, this is the definition of a pull
system, where the customer order triggers all supply-chain activities to
fulfill the order, resulting in no overproduction. Supply-chain profession-
als need to focus on eliminating overproduction because it creates other
serious wastes such as excess inventory, excess warehousing, and excess

transportation. BTO also eliminates the need for forecasting, which in
turn results in the elimination of excess inventories due to inevitable fore-
casting errors. Eliminating the need for forecasting is another key area
that the Lean supply-chain professional needs to focus on.
BTO is the perfect solution to a waste-free supply chain, but it requires a
specific dynamic to be in place to succeed:
• Total lead-time must be less than customer-order-to-delivery lead-

time expectations.
For instance, if a competitive environment states that customers expect to

receive a product in ten days after placing an order, a BTO process would
require you to be able to order and receive material from your suppliers,
and then manufacture and ship the product to the customer in less than
ten days. Although many of us never will reach the state of perfect BTO,
this needs to be the stretch goal for the Lean supply chain.
When we are not faster than our customer, we are forced to guess (fore-
cast) what they may need, and when we guess we will guess wrong. If we
can reduce the lead-time, we will get closer to our customer demand and
will therefore reduce the horizon of guessing, and this will result in less
waste of overproduction.
This was the guiding principle of our work on Toyota’s inbound supply
chain.
Lead Time & BTO

The Ultimate Business Model
Build to Order = No Overproduction
Supply LT MLT+OL Customer LT BTO
Supply LT MLT+OL Customer LT Forecast

Driving Velocity
Velocity is a powerful method to reduce lead-time. From a tactical
point of view, the only way to create velocity is to move smaller ship-
ments (lot sizes) more frequently. This was our goal during our initial
work at Toyota.
We started with a minimum factory delivery frequency of four deliv-
eries per day for any and all part numbers. High-volume suppliers (part
numbers) may deliver as many as sixteen times per day. Once again, these
guiding principles of velocity guided our work in logistics engineering
and transportation management. At no time did we simply try to fill up a
truck to minimize transportation costs. The goal was to create velocity in
order to connect to the factory and reduce overall lead-time. Interestingly,
a huge benefit of velocity is a substantial reduction in inventory and all
related inventory-carrying costs.
Sadly, I have to admit that I was not a believer in velocity in the beginning.
“How could this make sense?” was a question I asked myself many times.
In fact, I pressed the point to extremes with a senior Toyota coordinator
who mentored me during my tenure.
“Show me the math, show me the numbers; this will cost too much in
transportation” was a sentiment I asked many times.
“No numbers needed Robert, just believe it is right,” was the answer I
continuously received.
I did not relent and one day my coordinator finally got frustrated with
me and said, “You want numbers… look at Toyota’s global performance in
cost, quality, and delivery!”
“What does that have to do with anything?” was my initial reaction.
I suspect it took two years for me to truly learn the lesson. My head was
in the weeds, trying to minimize inbound transportation costs only. My
coordinator saw the big picture. This big picture started with customer
demand, then went to the leveled production schedule and then continued
upstream to the supplier. The goal was never to minimize inbound trans-
portation costs, but rather to create velocity in order to connect to the
factory and the customer, ultimately to reduce the overall supply-chain
lead-time and total cost of the entire system. Ultimately, this also leads to
a reduction in overproduction, the grandfather of all waste.
It is important to stress again that I am in no way saying that we ignored
transportation costs; it simply was not the main driver of our work.
Therefore, our job was to create velocity and “manage” transportation

costs. We had a plan to accomplish this.
Lesson 6: Reduction in lead-time must be the goal of the logistician.

We must believe in “economies of time.”
Manufacturing Plant Integration

Volume is the Lean logistician’s best friend. The more volume we have, the
more flexibility we have to consolidate material to drive velocity. While
this may sound like “economies of scale” thinking, it is a harsh reality to
driving velocity (increased delivery frequency) and managing transporta-
tion costs at the same time. In order to accomplish our velocity goals at
Toyota, we needed to consolidate all freight that was available in the entire
Toyota North American network. This meant collaboration with all fac-
tories in order to look at the entire network and not simply each factory
in isolation. Once an organization combines all volumes, velocity goals
can be met and transportation costs can even be reduced in totality. We
call this the “triple crown” in Lean Logistics where we increase delivery
frequency, reduce inventories, and even reduce transportation costs. In
seems completely counter-intuitive, yet I can tell you that it is possible.
What it requires is commitment to the hard work of standardizing pro-
cesses across an entire organization.
The transportation aspects of the factory integration of supplier vol-
umes include milk run deliveries and cross-docks to consolidate and
redirect material from suppliers to specific factories. The goal is send
one truck into a supplier and pick up all material for all factories that
the supplier services on the one truck. The truck picks up at the supplier
and delivers to a predetermined cross-dock where material is unloaded
and consolidated with other suppliers going to a specific factory. In
doing so, pick-up routes are optimized and line hauls to the factories
are optimized as well. We achieve our frequency goals and have full
trucks in the supply chain at the same time. Yet, this logistics technique
of milk runs and cross-docks is the relatively easy part of the work.
The challenging part of the work is not the physical flow of material
but rather is in the information flow! Factory supplier codes must be
harmonized, part numbers must be standardized, and suppliers must be
Enter the Cross Dock

Inbound Outbound
Materials Materials
from Suppliers to Customers
Cross Dock
Suppliers
consolidate
and then are
redirected to
each factory.
educated on how to pick and pack parts destined for multiple factories. A
high-frequency cross-dock-based transportation network will live and die
on information flow. This is where the real work begins; recognizing the
benefits of this important work are immense.
Lesson 7: Consolidate all volumes in the entire network and com-

plete the hard work relative to information flow.
Leveled Flow
There is no point in creating velocity if you do not level the flow of mate-
rial. For example, what is the point of going from one delivery per week
to five per week if all deliveries arrive Monday morning? Velocity will
accomplish its goal of lead-time reduction and inventory reduction when
we level the increased frequencies over available working time. This gets
to the heart of “takt” where we design the inbound network to connect to
the factory in rhythm (or cadence) to factory needs.
A simple and powerful technique to accomplish this is the inbound fac-
tory receiving schedule. The receiving schedule is a simple way to level
part number deliveries over available working time. If we are unloading
fifty trucks per week, we should service ten trucks per day. If we are work-
ing ten hours per day, we should service one truck per hour. Once this
receiving schedule is built, we design the transportation system and parts
to flow from suppliers to the factory using this receiving schedule.
Shipping & Receiving Schedule

Dock Schedule
7:00 8:00 9:00 10:00 11:00 12:00 13:00
Dock
1
2
3
A 4
5
6
7
Receiving Days ETA Sleep Unload Dock

Route M T W R F Time
1 X X X X X 5:00 2:00 7:00 A
2 X X X X X 4:45 3:00 7:45 A
3 X X X X X 6:30 2:00 8:30 A
4 X X X X X 6:15 3:00 9:15 A
5 X X X X X 8:15 2:00 10:15 A
6 X X X X X 8:00 3:00 11:00 A
7 X X X X X 10:15 2:00 12:15 A
Implementing a receiving schedule is an example of standard work in

logistics. The point is that all flow of material is planned and coordinated.
Plan versus actual condition can be measured, and problems can be high-
lighted immediately. In many respects, the receiving schedule is the true
logistics bridge to connect the external supply base to the internal factory.
It is a fundamental technique that is required for Lean Logistics to be suc-
cessfully implemented.
In my experience at Toyota, the receiving schedule was a fundamental
technique to be used. It was nonnegotiable and its use was a given. Therefore,
I assumed it was basic in all organizations. History has now proven my
thoughts wrong. In working with other organizations, implementing a
disciplined receiving schedule can prove to be challenging. The main rea-
son is that many receiving departments feel that truck arrival and flow of
material is a chaotic process that cannot be managed. Disciplined mate-
rial receiving requires trucks to arrive only during their scheduled arrival
times (windows times). In the event that trucks do not run on time, then
the entire schedule will collapse. While I do not deny this is true, it should
not stop us from driving the implementation of the receiving schedule in
order to level the flow of material. At Toyota we recognized this challenge
and used the trailer yard to mitigate the disturbances and variances inher-
ent in common cause variation in the external transportation network.
Lesson 8: Level the flow of materials and implement a disciplined

receiving schedule.
Trailer Yard Layout and Visual Management

Of all the lessons I learned while supporting Toyota, one of the most impor-
tant was relative to the trailer yard. The trailer yard is simply the space
allocated for inbound trailers to be placed while waiting to be unloaded
as per their window of time in the receiving schedule. I will never forget
when our Toyota coordinators asked us how many trailer spots we needed,
as we were required to asphalt and pave these spots to get ready for the
factory “Start of Production” date. As logistics engineers, we did what we
do and we concluded that we needed more than 200 spots. The answer we
received from our coordinators was that we would get only 100 spots—not
even 50% of our request! We were dumfounded and confused. “How will
we ever make this work?” was our immediate response. So we went to
work to attempt to make it work.
With our requested 200 trailer spots we would not require any discipline
of process. A trailer would simply show up and find an empty spot in the
yard. With the approved 100 spots we would need an extreme amount of
discipline. Each trailer spot would need to be named, each inbound route
would need to be allocated to a certain spot when it arrived at the fac-
tory, and it could only stay in that spot for its allocated time, as we would
need that spot for another planned route when it arrived at the factory. In
Yard Control
Yard Layout
Yard Location 1 3 5 7 9 11 13 15 17 19 21 23
1 1 2 2 3 3 4 4 5 6 7 8
21 21 22 22 23 24 51 51 52 52 53 54
Yard Location 2 4 6 8 10 12 14 16 18 20 22 24
Key = Returns
Live Freight
other words, we had to “turn” the trailer yard in the same way you turn
inventory in a warehouse. While this may seem ludicrous considering all
the space we could have paved in the mass of cornfield, by having the
minimum amount of trailer spots, we were forced to plan to the smallest
level of detail in order for the system to operate. In addition to this, visual
management was naturally created. For example, if a route arrived and
the preplanned trailer spot was not open, that meant that a trailer had not
been shuttled to the factory unloading dock as per our plan. Therefore,
the trailer yard itself highlighted abnormalities with the receiving sched-
ule, which highlighted potential problems with the material receiving
function inside the plant. This was truly a system of visual management
cascading into several aspects of the operation. This was my first funda-
mental lesson in visual management. That is, that true visual management
connects people to processes and processes to processes.
Lesson 9: Use asset and resource minimization to force process disci-

pline and visual management.
Quality at the Source and Discipline of Process

Quality at the source is defined as “getting it right the first time.” In logis-
tics, this manifests itself in “getting it right as far up in the supply chain as
possible.” In most inbound logistics networks, suppliers get an order, they
ship, and then when the parts arrive at the factory the factory hopes they
receive what they ordered. If they don’t, then an expedite process will ensue
and the factory may shut down. This is not quality at the source. Getting
it right the first time means that we have a way to ensure that suppliers are
shipping the right parts at the right time prior to the supplier loading the
parts on a truck. This process is known as “driver pick-up verification.”
This verification process is completed by the truck driver who is respon-
sible for picking up the parts. Acting as an agent for the manufacturer,
the driver is trained to verify all perfect order components of the sup-
plier order. To accomplish this, the driver is armed with a manifest that
outlines in detail what the supplier is to ship that day. Prior to the freight
being loaded on the truck, the driver verifies that the order staged for ship-
ping has the right parts in the right quantity in the right packaging with
the proper labeling and any other variables critical to quality of the pro-
cess. By doing this, the driver recognizes any issues with the process. For
example, if the supplier is supposed to ship twenty steering wheels and
there are only eighteen on the rack, then the process is stopped immedi-
ately by the driver. Called Jidoka in the Lean lexicon, this is the act of stop-
ping the process immediately when an abnormality is detected. Hence, we
uncover an error and avoid a defect. In this case, the driver would inform
the supplier of the parts shortage and a solution would be developed right
there on the spot in real-time.
Compare this process to one that has no mistake-proofing mechanism
in place. The driver would arrive at the supplier and have the truck loaded
with whatever the supplier had ready to ship at the time. The trailer would
arrive at the manufacturing facility and upon inspection they would real-
ize that there are two steering wheels missing (if it is detected at all!).
However, at this point it is too late, and a parts shortage will likely result,
possibly shutting down the manufacturing line and at the very least result-
ing in an expensive expedite.
Quality at the source teaches us to detect errors as quickly as possible.
In logistics, this means we need to have mistake-proofing tools in place for
all critical processes. In practice, this means we should look at processes as
far up the supply chain as possible. The goal is to detect and resolve issues
prior to their becoming a burden on the organization.
We must develop processes and train our drivers to verify parts on the sup-
pliers shipping dock before the parts are allowed to be loaded onto the truck.
While this may seem simple in concept, it can be very difficult in application.
For driver verification to take place, we need to collaborate with suppli-
ers, have stability with training and keeping trained drivers on the team,
and we need a support structure of logistics coordinators to perform the
track-and-trace function of managing the routes.
Lesson 10: A Lean Logistics system focuses on quality at the source

and error-proofing all critical processes as far up the supply chain
as possible.
LESSONS LEARNED AND CONCLUSION

It would be a gross understatement to say that my Toyota experience
was good for my career. It literally defined who I am today as a supply
chain professional and businessperson. Today, the LeanCor Supply Chain
Group helps companies drive Lean thinking in their logistics processes
and supply chains. While it is impossible (and not advisable) to attempt to

turn other organizations into Toyota, many of the principles I learned in
those days are the guiding principles we use with other organizations. In
other words, processes and techniques can be different to meet the needs
of a particular organization; however, the guiding principles should be
consistent in Lean Logistics. These are pull replenishment, velocity, lev-
eled flow, and lead-time reduction. From a tactical point of view, the les-
sons I learned and the lessons I urge all organizations to embrace are
Lesson 1: You must have guiding principles in place to support supply

chain and logistics strategy.
Lesson 2: Supply-chain collaboration is about understanding the
strengths and weaknesses of all supply-chain partners and working
with and teaching all partners in the supply chain.
Lesson 3: People development and process planning are critical to the
initial and sustained success of any operational undertaking.
Lesson 4: For any big initiative, develop a cross-functional team and per-
form the process manually the first time.
Lesson 5: Pull starts with customer demand and then dovetails into the
production schedule and then upstream to the supplier.
Lesson 6: Reduction of lead-time must be the goal of the logistician. We
must believe in “economies of time.”
Lesson 7: Consolidate all volumes in the entire network and complete the
hard work relative to information flow.
Lesson 8: Level flow of materials and implement a disciplined receiv-
ing schedule.
Lesson 9: Use asset and resource minimization to force process discipline
and visual management.
Lesson 10: A Lean Logistics system focuses on quality at the source and
error-proofing all critical processes as far up the supply chain as possible.
11
Leading a Kaizen Culture
Bob Plummer
Kai’ zen: (noun) change for the better
I arrived in Fremont, California, in February 1993, nervously excited and

greatly anticipating the learning experience that lay ahead. I had been
selected to receive one of the two dozen coveted two-year GM Coordinator
positions at New United Motor Manufacturing Inc. (NUMMI), the GM/
Toyota joint venture managed by Toyota. Although I had no way of know-
ing, walking out of my career-long stint with what would become Delphi,
the GM components division, and into the GM Coordinator position would
prove itself as one of the most profound learning experiences of my career.
NUMMI was conceived nine years earlier to provide a learning labora-
tory for its joint venture partners—each partner with its own objectives.
GM wanted to learn how Toyota manufactured vehicles of vastly superior
quality and lower cost, while Toyota wanted to learn about GM opera-
tions with an American workforce, in this case, workers represented by
the United Auto Workers (UAW).
When the venture was formed in 1984, GM significantly trailed Toyota
in assembly labor hours per vehicle and in the J.D. Power annual new car
survey, which ranked car models by defects per vehicle. At the same time,
Toyota did not yet have a vehicle assembly plant in North America.
At the point of my arrival at NUMMI, GM had sent thousands of mid-
level managers to visit NUMMI and receive tours of the facility. More
than a hundred GM Coordinators before me completed assignments like
mine: learning and teaching Toyota Production System (TPS) methods to
GM visitors and then returning to implement TPS methods back at GM
facilities after their assignments had concluded.
After nine years in the learning laboratory, GM had been largely unsuc-
cessful in transferring TPS methods to its own factories. Recognizing that
177
178 • Bob Plummer
GM had not yet found the right formula for successful execution—and not
wanting to personally labor in vain to meet the same fate—I established
two personal goals for my experience at NUMMI. First, learn about the
TPS methods. Second, determine why GM failed in applying the TPS in
order to develop methods that allowed successful implementation of the
TPS in a non-Toyota factory.
A TPS SYMPHONY
My assignment as GM Coordinator of Assembly at NUMMI provided full
access to the plant, all training classes available to team members, as well
as participation in the 285T truck launch project. While working on the
truck launch, I spent three weeks in Japan at Toyota facilities: the 4 Runner
and Lexus plants in Tahara, a machining plant in Motomachi, and two
assembly plants in Toyota City.
My first goal remained to learn the TPS methods themselves. As such, I
quickly discovered how fundamental these methods were to the Lean lexicon
used today: standard work, 5S, PDCA (Plan-Do-Check-Act) problem solving,
Heijunka (leveling and smoothing), Muri (overburden), Mura (unevenness),
Muda (waste), Kanban (Just-In-Time), material conveyance and production
control, Jidoka (error proofing), building quality in station, SMED, takt time,
Andon (visual management), balance boards, team structure (group leader,
team leader, team member), the model change process, A3 report writing,
and perhaps most importantly to my goals, Kaizen (a change for the better).
Learning the TPS methods and their effects on the plant was fascinating.
Each individual method as a part of the system enabled the plant to oper-
ate smoothly, efficiently, and in unique harmony. The combination of all
the methods in use reminded me of one of Beethoven’s pieces resounding
in a symphony’s performance hall (Figure 11.1). I could see many different
instruments, with different purposes and functions, blending together as
if under the leading and tempo provided by a conductor. My manufactur-
ing experiences within GM up to that point were typified by pressure and
varying degrees of chaos, conflict, and management/union disharmony.
Now I saw a factory designed and operating as intricately as the inter-
twined notes of an orchestral piece.
The harmony I saw so clearly at NUMMI and other Toyota plants left me
to ponder the question: What was producing the excellent productivity,
Leading a Kaizen Culture • 179
FIGURE 11.1
The harmony of TPS.
quality, and output on a day-in and day-out basis at NUMMI and at the
plants in Japan? Was it the TPS methods? Or was it something else?
That question led me to reflect on the discouraging fact that for nine
years GM’s top manufacturing leaders observed, studied, learned, and
reworked these methods in their own factories with poor results. These
were smart, experienced leaders and their failure was not due to incom-
petence or a lack of effort and motivation. There had to be something else
that made TPS work in harmony. I needed to figure out what it was.
DISCOVERING THE KAIZEN CULTURE

As I dug further, I came to the realization that many elements of suc-
cessful TPS implementation required the involvement of top company
leadership—leadership, in particular, beyond the plant level. Perhaps the
conductor of this symphonic interrelated system was the CEO himself.
Then, discovery. I toured two plants in Toyota City in the same indus-
trial complex and operated by the same company, and making similar
sized passenger cars. What I expected—to see two sets of identical produc-
tion processes—was not what I found. Of course, both plants had a body
shop, paint shop, and assembly area. But when I looked at the individual
180 • Bob Plummer
operations, I began to notice slight differences. Then it hit me: Kaizens.

Different individuals implemented Kaizens on each line over time based
on the individual’s ideas as a result of assessing the needs of the situation,
which also had a varied layout, process equipment, and production model
mix. There were literally thousands of Kaizens.
Everywhere I turned I saw small improvements. On the assembly line
with a very high model mix, I noticed light screens and Andon lights indi-
cating which item to select line side corresponding to the Katishiki (mani-
fest) for the vehicle in station, as there were many potential part choices.
On the other line, I discovered that the parts presentation line side was
already sequenced in the line-side storage container. Toyota had chosen
to test the idea of off-line sequencing on this particular line. In another
example, on the high-mix assembly line, a team leader built a unique elec-
tronic/pneumatic device that selected the correct owner’s manual for a
vehicle, based on information stored in the radio frequency identification
tag of the vehicle coming into station. The device selected from among
more than two dozen different manuals—written in several languages—
and dropped the correct manual on the top of a small ramp that looked
like a mini ski jump. From there, the manual slid down the ramp and
landed on the floor of the front passenger seat. A team leader, not a factory
engineer, constructed this device.
The Kaizens in the five plants in Japan far outnumbered those at NUMMI,
and the realization left me awestruck (Figure 11.2). A vast majority of the
FIGURE 11.2
Kaizen team members create competitive advantage.
Kaizens were quite simple and not as complicated as the ski-jump or the
lightscreen processes. The genius of TPS struck me and presented a key
question: How can a competitor keep up with a company that is continu-
ally and frequently using significant quantities of ideas of all its employees
to implement improvements that eliminate waste of time and energy? The
answer is: They can’t. They can’t unless they improve just as rapidly. In my
opinion, the Kaizen Culture is the reason Toyota is the leading car manu-
facturer in the world and will remain so as long as it sustains that culture.
Recently, I read Alan Weiss’ book, Million Dollar Consulting. One of
Weiss’ recurring concepts in the book is “The One Percent Solution,” a
phrase he coined and a concept that Toyota implements precisely. The
One Percent Solution describes the transformational benefit of continu-
ous improvement. Weiss explains that if every day a person implements
a change (a Kaizen, in Japanese) that improves a business process by 1%,
then in 70 days the process will have been improved by 100%. Looking
at this concept mathematically, the transformational effect of compound
continuous improvement is clear: 1 × 1.0170 = 2, or 100% improvement.
Toyota leadership executes TPS in such a way that it produces the same
transformational effect.
What, then, is the key to generating the transformational effect of thou-
sands of Kaizens within a single organization? I sat in on a presentation
for NUMMI managers and GM Coordinators on TPS by a team mem-
ber from Toyota’s Operations and Management Development Division
(OMDD), considered within Toyota to be the elite group of TPS masters,
and I discovered the answer. The speaker described TPS in very simple,
fundamental terms: Create an environment where team members imple-
ment Kaizen. Frankly, I did not think he would provide such a simple,
straightforward, no-nonsense answer. I expected, and had prepared myself
for, an elaborate explanation with charts and graphs and complicated
implementation methodologies. Strikingly though, when quizzed about
the time frame of implementation in an American factory, he responded,
“More than ten years.” Perhaps his benchmark was NUMMI. At nine
years old, it continued to lag behind its Japanese counterparts in strategic
TPS implementation. Leadership is responsible for initiating, fostering,
and implementing an environment conducive to team-member Kaizen. If
American factories did not follow suit, our more than ten-year time frame
until seamless implementation would not be too far-fetched.
The picture—and the symphony of moving parts—was slowly becom-
ing clearer. TPS is more than just methods alone. The objective is for team
182 • Bob Plummer
members to implement Kaizen and to use the methods to support and

sustain their individual Kaizen efforts. There is a harmony between lead-
ership, team members, and TPS methods. The symphony moves as indi-
vidual players, and as a collective group.
CREATING AND SUSTAINING THE KAIZEN

CULTURE IN AMERICAN FACTORIES
The leaders at Toyota and the philosophies they modeled and taught dem-
onstrated the dramatic role that a TPS leader plays in the change-accepting
culture that exists in a Toyota facility. In my observations of this unique
culture, I concluded that Toyota leaders implemented eight philosophies
that have a profoundly positive effect on creating and sustaining a success-
ful Kaizen Culture:
1. Customer first: It is a simple truth that a company would not exist

without customers. Not surprisingly then, the needs of the customer
are of primary importance at Toyota. A philosophy of “customer first”
embodies several elements that are not to be compromised, includ-
ing quality, delivery, features, performance, and excellence. It is every
team member’s job to put the customer first. For example, if I was a
line operator and I realized that I had misassembled a part, I would
pull the Andon cord to alert my team leader that I have a problem and
stop the line if necessary so the defect is not passed to the next opera-
tion. In this example, the external customer is highlighted, but the
needs of internal customers are also a crucial aspect of this philoso-
phy. There were numerous examples of the needs of internal custom-
ers being met with extraordinary priority and importance. Of course,
leadership oversight also played a role in assuring that commitments
were met when personal performance in this area was lacking.
2. Team member safety and security: The physical safety of every team
member is of primary importance at Toyota. Leadership backs up this
point with weekly safety meetings among team members, measure-
ment of safety incidents, and safety slogans shown on signs distrib-
uted throughout plant facilities. Leadership communicates openly
and regularly that they care about the safety of team members, which
then proved it a genuine concern. In Japan, the commitment to the
team, and a renowned commitment to low turnover, are well known

to Toyota team members. This philosophical commitment satisfied
team member security concerns and removed a significant barrier
to team member Kaizen. Without the trust in each member’s safety
and security, team members would be disinclined to participate in
Kaizen that improved productivity and resulted in fewer workers
required in production.
3. Mutual trust and respect: Mutual trust and respect both among
peers and between managers and team members is a foundational
element of this revolutionary culture. In order for the ideas of all
team members to be heard and used to Kaizen operations through-
out the company, each team member needs to be heard and to hear
what others have to say. If their thoughts and opinions are ignored,
valuable input and the future participation of the individual in the
Kaizen are lost because of the denied efficacy of the individual. If
their thoughts and opinions are instead highly valued, not only can
team members contribute, but they want to contribute. When team
members feel valued, important, and significant because they are
trusted and respected, the organization can then tap into the cre-
ative power and potential to implement Kaizen that exists within the
individual. Team members are energized, excited, and proud of their
work and can transform an organization by contributing to success-
ful change in their work processes. They are uniquely qualified to
execute improvements in their work because they know more about
it than anyone else in the organization. When their effort to Kaizen
is combined with support, direction, training, and resources pro-
vided by their team leader or group leader, all the team members in
the organization can become a powerful transformational source of
thousands of Kaizens.
4. Teamwork: Companies vary with extreme degree in the culture of
the workplace and how it treats its worker—including the nomencla-
ture for the worker himself. Some are “employees.” Some are “associ-
ates.” For Toyota, they are “team members.” Every time this phrase is
spoken, which is often dozens of times in a single day, the company
reinforces an important philosophical point: Everyone in the organi-
zation is a member of a team, working together with others to achieve
a common objective. The team method includes many aspects of
activity that Toyota wants to promote: working together, supporting
one another, making decisions together, solving problems together,
184 • Bob Plummer
trusting and respecting one another, helping one another, and suc-
ceeding together. Additionally, I observed that individual character
traits of personal discipline and honor are personal traits that played
a significant role in meeting commitments to other team members,
and promoting this team culture.
5. Communication: The culture in these plants demonstrated a philo-
sophical value that almost over-emphasized communication. There
were daily team meetings, a daily plant newsletter, company-wide
meetings, visual and audio tools that allow knowledge of the status
of an operation at a cursory glance possible, performance feedback
tools, quality and productivity feedback tools, planning meetings,
the Nemawashi process, and A3 reports. A culture that so values
communication to its team members allows access to a massive array
of information in multiple mediums, at multiple levels, in order
to equip the team member with the latest knowledge and skills to
improve his or her contribution to the team and to the company.
6. Direction and establishing improvement goals: Toyota leadership
provides coordinated direction of the company using the Hoshin
Kanri (policy deployment) process. Using this trickle-down process,
company strategies, initiatives, objectives, and goals flow from the
top of the company down to the department and finally to the indi-
vidual team member. The flow of this process creates a coordinated
improvement effort and harmony between functions and team mem-
bers within functions that results in the corporate-wide achievement
of improvement goals.
7. Knowledge, teaching, and modeling: Over the course of my own career,
I have found that no organization can rise above the level of its leader.
If the leader of an organization does not understand Heijunka, for
example, the organization cannot be expected to maintain smooth
and level production. As such, the existence of knowledgeable lead-
ership is vital to the success of TPS in both foreign and American
plants. Particularly in organizations where TPS is not practiced or
understood, it is critical for leaders to have sufficient knowledge of
a Kaizen Culture and to be able to both teach and model the desired
behavior and methods associated with Kaizen and TPS.
8. Support and resources: The organization structure used in Toyota
includes support resources, both human and capital, for Kaizen.
The Group Leader-Team Leader-Team Member structure itself
provides for team member support and Kaizen activity. Toyota
plants have Kaizen areas equipped with materials and tools that
team members can utilize to implement Kaizen in their work
areas. For larger Kaizen projects, I repeatedly observed where
leaders supported the projects with people and capital. For exam-
ple, Toyota approved a $1.5-million project that I developed to
replace the seat assembly robot and relocate it further upstream
in the final assembly line. The justification for the investment was
increased line space available for final inspection and reduced
final line downtime.
9. Genchi Genbutsu: The practice of Genchi Genbutsu means going to
see on your own in order to personally grasp the situation and make
the best decision. Genchi Genbutsu is a foundational method that
enables leaders to sustain TPS and the Kaizen Culture because prob-
lems are not solved in the conference room. Problems are solved out
on the shop floor or office at the point of cause, where the problem
is occurring. The quality of decision making using this method is
several times more effective than the conference-room method. I
personally learned the value of this method during my training at
NUMMI and numerous times since then. I discovered that in the
conference room, accurate facts required to solve a problem or make
a decision are generally not available. Also, because there is inad-
equate access to the amount of data required to make a good deci-
sion, there is a tendency to make assumptions that are incorrect. The
result is usually ineffective decision making. Conversely, when prac-
ticing Genchi Genbutsu and seeing for yourself at the point of cause,
the access to more accurate and more complete data can be achieved,
which improves the quality of the decision being made.
IMPLEMENTING TPS METHODS

Successful TPS implementation requires leaders to evaluate the value
streams within their company and identify opportunities to eliminate
waste through the application of TPS methods. Knowledge of customer
requirements, market responsiveness, the current value streams, and the
TPS methods is required for a successful implementation.
Having implemented TPS methods in non-Toyota facilities, I have
learned that there are interactions between the methods and there is an
186 • Bob Plummer
implementation order that should be followed when using these methods.

Some methods have prerequisites that should already be in place in order to
function properly. In my own experience implementing these methods in
non-Toyota facilities, I found that the prerequisites for an effective Kanban
system are Heijunka and takt time (standard rate of production), and the
prerequisites for Heijunka and takt time are small lot production, and even
further, the prerequisites for small lot production are setup time reduction,
one-piece flow, and process stability. Leaders of TPS implementation, there-
fore, need to orchestrate the implementation of methods in their correct
sequence.
However, the effective application of some methods is not within the
control of manufacturing alone. Achieving a smooth and level Heijunka,
or workload, requires the involvement and cooperation of senior business
leaders in general, and the sales and marketing function in particular.
Without this apparent cooperation, it is impossible for the plant to operate
at a constant output rate and workload for months at a time.
My observations at the Toyota plant pointed to significant cost-benefits
that a workload, implemented in such a way, allowed (Figure 11.3).
Heijunka enables manufacturing to optimize its manpower and produc-
tion cost. As a hypothetical illustration, a Toyota assembly plant knows that
during every hour of every day for the next three months that fifty-eight
vehicles per hour will be produced and they will have the following option
content: 60% of the vehicles will have automatic transmission, 30% with
sunroofs, 35% with high-trim content, and 40% with side curtain airbags
(and the list continues). The plant can then optimize manpower loading
throughout the plant to provide only the minimum amount of manpower
required to support this option mix. Maintaining this smooth workload
for such an extended period requires a coordinated corporate-wide effort.
Manpower
Savings
Workload Manpower
Waste
Workload
Before Heijunka After Heijunka
FIGURE 11.3
Heijunka eliminates waste corporate-wide.
It requires well-organized Heijunka. And it takes leadership to recognize

the role that each function plays in supporting TPS.
The standardized model-change process is another TPS method that
has successful application beyond the control of manufacturing. In my
experience and observations, an extraordinary amount of plant-wide
focus and resources is required to complete a model-change smoothly.
Manufacturing is the recipient arm of the process, which is usually man-
aged by other functions in the company. In Toyota, model-changes are
done frequently and regularly, every four years for many models. When
this regular cadence exists, manufacturing resources (manufacturing
engineering, supplier quality control engineering, production control and
planning, and manufacturing management) maintain a more level work-
load of changeover activity at all times. Resources outside manufacturing,
such as product design and engineering, also maintain a regular cadence
and workload.
These observations have led me to conclude that TPS leaders should
identify functional interactions between sales, marketing, finance, engi-
neering, human resources, and manufacturing. Effective implementation
of TPS methods can be achieved when leaders implement them from an
organization-wide perspective. TPS methods are not just for manufactur-
ing and, even more importantly, the full benefits of TPS cannot be realized
if only manufacturing implements them.
BACK TO THE BEGINNING

When I stood observing the plant at the start of my work with NUMMI,
my eyes were opened to a symphony of parts and players in TPS methods.
But what I came to discover throughout my time there was that the har-
mony I experienced was not just created by the TPS methods themselves.
The conductor is leadership and the harmony exists when leadership sus-
tains a Kaizen Culture where the Kaizen potential of team members is
unleashed throughout the entire organization. TPS methods support the
Kaizen Culture; they are not the reason for the culture.
Once I had learned about the harmony of the TPS methods, leader-
ship, and the Kaizen Culture, it became clear to me why TPS had not
been transferred successfully to GM. In most GM facilities there exists
an acrimonious relationship between workers and management, which is
188 • Bob Plummer
typified by staunch resistance by workers and the UAW to participate in

conceiving and implementing productivity improvements. Undeniably so,
I had discovered the core reason GM had made such little progress imple-
menting TPS during the previous nine years. GM and UAW leadership
had not only failed to establish a Kaizen Culture, where all team members
implement Kaizen, but had instead fostered acrimony between workers
and management.
Unfortunately, the culture of disunity in the relationship between the
UAW and GM management was so entrenched that a culture of change
could not possibly be implemented by anyone other than the top leader-
ship of GM and the UAW. Until those key leaders decided to and worked
for change, GM would have to settle for implementing as many meth-
ods as possible but stopping short of unleashing the potential that exists
within team members to embrace successful change—to Kaizen—and to
then transform the company.
LEAVING GM
As a determined pupil of the successful Toyota Kaizen Culture, and
understanding what lay between GM and that goal, I made the difficult
decision to leave GM. GM’s ability to remain competitive with Toyota
and other similar organizations concerned me. Instead, I went on to
implement TPS first in a growing non-union global packaging company
whose leadership was very supportive of TPS methods and creating this
revolutionary Kaizen Culture. That experience, which was followed by
others, became the first of several additional stories of TPS observation,
learning, strategy, and change that are for other chapters, in another
book, another day.
12
Hoshin Kanri
Alistair Norval, with Darril Wilburn
Hoshin Kanri is known by many other names—Hoshin Planning, Policy

Deployment, Strategy Deployment—but all refer to the same thing.
It’s all about “Getting the Right Things Done versus just getting things
done.” Too often we put a lot of hard work into getting things done but
fail to ask the question: Are they really the right things that will move the
organization forward? In football terms, are we running back and forth
between the sidelines, or are we moving the ball down the field? We’ve
seen, in many organizations, a disconnect between individual activity and
the higher-level strategy. Hoshin Kanri helps connect all levels of the orga-
nization so that everyone is aligned with the strategy. The result is that we
can answer the question with facts and not “I think so.”
This chapter discusses how Lean is applied to management processes
and how the use of Hoshin Kanri reduces the waste in those processes and
the waste in the entire organization.
As I began my own personal Lean journey in the mid-1990s, I was
amazed at the Japanese terms and all the new techniques and wanted to
learn as much about them as I could. Like many people, I became enrap-
tured by the techniques. I chuckle to myself as I think back on those times.
Fortunately, I was lucky enough to have a Sensei who would guide me
and steer me in the right direction. Pascal Dennis, who worked at Toyota
Motor Manufacturing Canada (TMMC) and later went on to author sev-
eral Shingo prize-winning books on Lean including Lean Production
Simplified and The Remedy, coached and shaped my thinking around
Lean. Specifically, that Lean is not just about techniques; in fact, tech-
niques are the small part, rather, Lean is about people. Pascal taught me
that because Lean was about people, there were a few key concepts that I
needed to learn:
189
190 • Alistair Norval, with Darril Wilburn
• Engaging people
• Problem solving
• The role of management
If we can do these things, we can turn a Lean transformation into some-

thing special. That is, the achievement of successful business results in a
way that is consistent with the TPS principle of “Respect for Humanity,”
which is part of the foundation of the Toyota Production System (TPS):
• Continuous improvement
• Elimination of waste
• Respect for humanity
To do this, we need a systematic way of driving improvement throughout

the organization, one that allows us to make improvements in a way that is
consistent with the values of the organization and one that does not sacrifice
the fabric of the organization to meet short-term business results. I have seen
companies achieve targeted earnings by eliminating spending on mainte-
nance or by laying off experienced people and replacing them with cheaper,
less-experienced labor, or by overworking people in broken processes, or by
neglecting quality and customer service. Eventually, these tactics erode our
working relationships and destroy our ability to plan for the future.
All systems need a purpose. The business processes we use within the
system must be organized to achieve that purpose. The purpose of Hoshin
Kanri is to crystallize the strategy of the organization and to engage the
power of the people to pull the organization into the future.
WHAT IS HOSHIN KANRI?

Hoshin Kanri is a Japanese term that can be broken down into four kanji
or thoughts, as illustrated in Figure 12.1.
Japanese is a very visual language. I remember being on a trip to Japan
around the millennium and being very impressed with the visual displays
of food, train schedules, and directions. Although I did not speak or under-
stand Japanese, the visuals made it easy to get around. For example, plastic
food in window displays of restaurants made ordering food easy. In the case
of Hoshin Kanri, we can picture the Kanji or thoughts as the following:
Hoshin Kanri • 191
FIGURE 12.1
Hoshin Kanri.
Management, Direction, Logic, Control
Together they give us
A system for developing strategic goals and bringing them to reality.
WHY WE NEED A STRATEGIC PLANNING SYSTEM

Many organizations suffer from problems in their strategic planning sys-
tems. As I observe organizations, several problems become visible:
• No strategic planning system and so default to financial planning

and the budget becomes the strategic plan.
• Command and control systems that do not engage people doing the
work in the development of plans to achieve the organizational goals;
often, these result in plans that are impractical and do not address
the larger issues.
• Great strategies that are never transmitted to the rest of the organi-
zation and thus remain in the domain of the “ivory tower.”
• Lack of a complete PDCA loop; they plan over and over again and get
caught in Plan, Plan, Plan; or alternate between Plan, Do, Plan, Do;
or worst of all just Do, Do, Do; and in most cases they never have a
complete PDCA cycle.
• Planning by the numbers without a sense of what is actually happen-
ing gained by “Going to Gemba,” talking to customers, suppliers,
and employees.
WHAT DOES THIS RESULT IN?

Dysfunctional organizations where people
• Are pulled in many different directions

• Are pulled in the wrong direction
• Have no clear vision of what is really important
I once worked with an organization that had thirty-one different strate-

gic objectives. I could not see how anyone could focus on thirty-one dif-
ferent things, and yet the organization insisted that all thirty-one things
were critical and needed to be done. It is easy to see how many Strategic
Planning issues lead to the cartoons we all enjoy.
COUNTERMEASURE TO STRATEGIC
PLANNING PROBLEMS
Toyota’s countermeasure to these common strategic planning problems is
Hoshin Kanri. Toyota developed it in the mid-1950s and has been using
it ever since. Hoshin Kanri is founded on the Scientific Method through
PDCA. It is a blend of both data analysis and intuition based on experi-
ence gained at Gemba.
Hoshin Kanri has three purposes:
1. Focus on the vital few instead of the trivial many

2. Align the organization to these focus areas
3. Rapid response to problems
HOSHIN KANRI ENABLES ORGANIZATIONS

TO DEVELOP STRATEGIC PLANS THAT ARE
• A balance of central control and local autonomy
• Neither too rigid nor too loose
• Engaging of team members by allowing PDCA to flourish
• A communication method for facilitating dialogue
This last point is worth exploring a bit more. One of the major problems
organizations face in today’s world is an overload of data and a lack of
information that is useful. Laptops and PowerPoint have allowed people
to create mammoth presentations replete with embedded files and fancy
graphics that are so big that they lose the essence of the problem. I worked
with a large corporation once that gave me a ninety-eight-page summary
of their strategic plans. The original document was almost 900 pages
long—so long, in fact, that no one could read it and therefore make either
head or tails of it.
There is a great quote by Winston Churchill on this:
“This Treasury paper, by its very length defends itself against the risk of
being read”
—Winston Churchill
Hoshin Kanri is a way of boiling down the strategy into its bare essence
so that it is understandable and thus enables people to engage in dialogue
on it.
TRUE NORTH
Sounds great, but as we align the organization, what do we align the orga-
nization with?
We align the organization with achieving True North, which is the stra-
tegic and philosophical direction the organization is heading toward. I
always thought True North was a great image for the direction organiza-
tions wanted to take. Picture True North as the North Star, Polaris, guid-
ing mariners across the rough and stormy sea and leading them to a safe
harbor (Figure 12.2).
True North consists of two parts:
1. Hard business objectives (such as Revenue, Earnings, EDIT, and

Working Capital). These appeal to the head and are the hard busi-
ness targets that must be achieved.
2. Soft or broad brush goals. This is a vision or direction for the organi-
zation that appeals to the heart. It is often inspirational in nature and
represents both who you are as an organization as well as what you
FIGURE 12.2
True North.
value. It is critical in the engagement of team members, who often

have difficulty relating to high-level financial goals. It allows us to
test our plans against a set of goals to ensure consistency.
One of the best broad-brush goals I have ever seen was a health-care
provider who used the broad-brush goal of “Affordable Excellence.” It rep-
resented both who they were, a health-care provider with a long-standing
reputation for health-care excellence in the community, and what they
needed to do to continue to succeed in the community in the future,
which was to make that same level of care more affordable. It became very
motivating for the front-line staff who could relate to both parts. It also
allowed them to test their plans against it. Are we doing things that are
not consistent with providing the community with affordable, excellent
health-care services?
TREE OF FOCUSED ACTIVITY

Now that we have a True North, what is next? How does this help an orga-
nization to align and focus?
We start by asking the question: What is preventing us from achieving
True North?
What boulders block our pathway? These typically are framed as prob-
lems with the countermeasures to these problems becoming the key areas
of focus for us to work on.
Sounds good so far, but what is different?
The key is to split work into two basic types of work:
1. Routine work
2. Improvement work
Improvement work refers to the breakthrough things we need to do

to drive the organization toward True North and achieve the goals we
have set. Routine work, on the other hand, is all the day-to-day things we
need to do to run the business and deliver value to our customers. It also
includes daily continuous improvement work. Things we need to improve
but which are not the breakthrough improvements that will make a differ-
ence in the organization achieving True North. Many of these items are a
type of problem solving that returns us to a standard rather than driving
the standards higher and higher. Routine work takes most of the time of
the people in the organization.
Let’s go back to the example of the organization that had thirty-one
critical improvements. They had a war room with wall charts indicating
the status of the thirty-one areas. Red and green were highlighted. There
was a perfunctory review, but usually dates were adjusted on most items
and the comments on progress were weak. To the people doing the work,
there was no clear focus. They worked on whatever was pushed or was the
current hotspot.
Even worse are organizations that try to solve this problem by tying in
the thirty-one key focus areas to a Human Resources-sponsored annual
commitment plan. With each item worth about 3% of a grand total num-
ber that defines people’s contribution to the organization for the year, how
does this help people know what to focus on? That is not to say that one
should not set personal commitment plans; just set them to make it clear
to people what you want them to focus on.
In dealing with organizations over many years, my experience would
say that organizations can only focus on five or six breakthrough items
at any one time. So the key becomes pruning the list and de-selecting
certain items to get to the vital few focus areas that will lead to break-
through improvement. Typically, what I observe is that people think that
because things are important, they must be breakthrough. Things can be
True
Hard Business Goals north Broadbrush Business Goals
Focus Focus Focus Focus Focus

area A3 area A3 area A3 area A3 area A3
FIGURE 12.3
True North and focus areas.
important but all we need to do is stay the course or make small improve-
ments. We still need to monitor these to ensure that we do not fall back,
yet we do not need to focus our improvement activities on them. They are
important but routine work.
The key is to focus our improvement efforts on those few things that will
lead to breakthrough improvements. We need to align the improvement
activities of the organization to do those things. We gain alignment through
• Structure: improvement teams

• Communication: dialogue leading to consensus
This leads to a tree of focused activity. The top is True North, and support-
ing True North are five or six key focus areas (Figure 12.3).
PLAN, DO, CHECK, ACT (PDCA)

The last thing that Hoshin Kanri does for us is to bring in a rapid response
to problems. This recognizes that “No plan goes according to plan.”
Problems are natural. Toyota excels in its ability to make problems visible
and to swarm all over them once they have surfaced. When I deal with
organizations, I always ask: Has anyone ever had a plan go exactly accord-
ing to the original plan? This always gets a few chuckles and smiles. Things
change during the execution of the plan. There are many unknowns when
the original strategic plan is put together that cause problems when they
FIGURE 12.4
PDCA.
come to light. Knowing this, the last part of Hoshin Kanri is a very rapid
PDCA cycle where we do the Check/Act phases in frequent, small lot-size
cycles.
PDCA (Figure 12.4) is a short form of Plan, Do, Check, Act, the cycle
made famous by Dr. W. Edwards Deming, who many consider to be the
“father of modern quality control,” based on his study of the Shewhart
cycle.
PDCA is based on the Scientific Method, which can be summarized as
• Hypothesis
• Experiment
• Evaluate
These correspond to Plan, Do, and Check; Act completes the cycle and
drives us back to the beginning with changes to the Plan/Hypothesis
based on what we have learned.
As I think about this and how it applies to strategy, some great examples
come to mind. One that I would like to highlight is General Dwight D.
Eisenhower, who was the Supreme Allied Commander at the time of the
D-Day invasion of Europe on June 6, 1944, on the beaches of Normandy.
He and his staff outlined an invasion plan that remains the largest
amphibian invasion in history. The plan was deployed through the various
units becoming more and more detailed and tactical as it got closer to
the front-line troops. During this planning, they were faced with many
daunting unknowns—weather conditions, the moon, tides and currents,
strength and readiness of the Nazi forces; would the naval bombardment
be effective?
Did they stick rigidly to the plan? Or did they have an overall plan with
objectives that were to be met but minute tactics that were being changed
after going through a rapid Check/Act process on the day of the battle?
Of course there were many mini, rapid Check/Act cycles as they learned
more about the unknowns. The detailed plans were changed so they could
meet the overall objectives.
The Plan is a hypothesis:
If we do these actions in this time frame, we will get these results.
The key to a hypothesis is that it is testable and that is it binary. This means
that we can boil the hypothesis down to a Yes/ No question. We either did or
did not get the results we expected. Many times these are expressed as Red
and Green, which are great visuals for the binary condition. I am personally
not in favor of Amber/Yellow because it is not consistent with the Scientific
Method and is often misused by organizations as a way to hide the truth.
My observation of most organizations is they stick with a monthly or
quarterly review of their strategic plans. The meetings often look like this:
• Most of the time is spent on Green or items that are in good shape.
Long, detailed explanations are given and everyone feels good about
them.
• Only a short period of time, often five minutes or less, is left toward
the end of the meeting to review the items that are Red and need the
most help. No detailed problem solving is done, and a few action
items are hurriedly assigned.
In summary, a Check/Act process is shallow even during the infrequent

times it is done.
As stated before, most companies spend the bulk of their time in the Plan
and or Do phases. Check and Act get very little time and are often short-
changed in the management process. Even when Check is done, it is often
a check against the results and not a complete check of the hypothesis.
Now compare this to what a Toyota Check and Act process would look
like.
The hypothesis remains the same:
If we execute these plans in this timeframe, we will achieve these results.
The questions asked around it would be:
• Did we achieve the expected results?

• Did we execute the plans?
• Did we meet the planned time targets?
• Did the execution of the plan cause the achievement of the results?
Wow! So much richer and so much more can be explored and looked at.
For this reason, most of the time (up to 90%) in the Check/Act meetings
is spent dealing with Red items—but Red items are not just results; Red
items are anything that deviates from the plan. This allows us to enter the
Act phase, which entails
• Launching problem solving on any Red condition

• Standardizing and locking in any learning points
Often these are recorded using a Book of Knowledge to ensure that the
organization continues to build its capability.
MANAGEMENT PROCESS
In either case, we need to reflect on why things are Red or why things are
Green. This deep reflection leads to insights that allow us to keep strength-
ening our systems.
This general process develops into the Management System. The
Management System for strategy centers on the annual process. It follows
the following process:
• Develop the plan:

• Reflect on last year’s results and execution of last year’s plan
• Consider True North and this year’s objectives and strategies
• Determine the barriers preventing the achievement of the objectives
• Develop countermeasures to these barriers or problems
• Deploy the plan:

• Assign Key Thinkers
• Catchball
• Determine any capabilities the resources need
• Check the plan:
• Rapid, fast cycles
• Standardized work for management
• Make the status visual
• Adjust the plan:
• Reflection and learning points
• At mid-year and year-end, a deeper reflection on the objectives
and execution of the plan
• Identify systems that need to be strengthened
• Book of Knowledge to record key learning
CATCHBALL
This same basic management process exists at all levels of the organiza-
tion. To link the levels together and to deploy the Tree of Focused activity
within the organization, we need to utilize a process called catchball.
Catchball is a process that links the strategies to the functional organi-
zation and allows them to be deployed throughout the organization. It is
the opposite of management just setting blanket objectives such as reduce
costs by 5% everywhere. It is based on the principle that the people closest
to the work know the most about the work and the associated problems and
so must be involved in the setting of the tactics that will allow the strate-
gies to be met. It allows the strategies to be translated as they are deployed
throughout the organization. As the strategies are deployed, they become
more and more concrete as they get closer to the value stream. As they
are translated, catchball forces frank, fact-based dialogue on the transla-
tion. Ideas are tossed back and forth. All parts of the plan are open for
discussion. The sessions are usually short and iterate several times, with
each iteration bringing the teams closer to consensus. Once consensus is
achieved, the plans are signed off and locked in for the year. The key is to
get many ideas tossed out and good open dialogue without rambling on
and on with war stories. This creates buy-in and eliminates many tradi-
tional organizational barriers and excuses to deploying strategy.
KEY THINKER
To facilitate this process and to ensure the plan optimizes the entire
value stream and not just individual units, we use a functional called a
Key Thinker. The Key Thinker must be a person who can scan the entire
horizon and pull various groups together to come to a consensus. A Key
Thinker must also be the conscience of the group to ensure that real prob-
lems are put on the table. Generally, this is a person who is more senior in
the organization and thus has the experience and political clout to make
things happen even though he or she does not have a line responsibility.
Each focus area would have a Key Thinker who is responsible for
• Facilitating the overall catchball process

• Capturing the ideas arising from catchball and reworking them into
the plan
• Writing the A3
• Ensuring problems get surfaced at Check/Act
• Supporting problem solving
Typical examples of a Key Thinker would be
• Chief Engineer in Development or Shusa

• Finance for Cost A3
• Supply Chain Manager for Delivery A3
In summary, the Key Thinker needs to be a senior person who can

break down silos in the organization to ensure that value flows through
to customers.
A3
Finally, to keep things crisp we use a methodology called the A3 to boil
things down to their pure essence, which enables us to keep focused. I
remember one time asking my Sensei what an A3 was and watching him
smile. I thought it was another Toyota technique and was surprised to
learn it referred to an A3 size of paper. Everyone in the world outside the
Strategy A3
Foucs:
Performance, gaps, and targets This year’s action plan (milestone chart)
Reflection on last year’s activities and results
Rationale for this year’s activities
Followup/unresolved issues
Signatures: Author:
Version and date:
FIGURE 12.5
A3
United States knows that A2, A3, A4, etc. refer to metric sizes of paper.
In this case, an A3 is about the size of an 11" × 17" piece of paper. The
thing about an A3 is that it encompasses the entire management process
thinking on a single piece of paper. It is laid out like this (Figure 12.5):
• The upper left-hand side consists of the background and overall

problem statement.
• The middle and bottom left-hand side contains the reflection sum-
mary, causal analysis, and conclusion stated as a hypothesis.
• The right-hand side consists of the countermeasures as a plan, com-
plete with who does what by when.
• Finally, the bottom right-hand side has any unresolved issues that
need follow-up.
The catchball and iterations continue to refine the A3 until it crystal-

lizes the strategy into a plan that is concrete. Boiling down the strategy
to an A3 allows the Key Thinker to tell the strategy as a story. Hoshin
Kanri is a story-telling approach to strategy. Listening to a story that is

interesting, persuasive, and compelling becomes engaging of our team
members. People pay attention. People relax and feel free to engage in
dialogue. They understand why and buy in so that the execution of the
plan is much smoother.
The key is that the story told in an A3 must be a short story, not a full-
length novel such as War and Peace by the great Russian novelist Leo Tolstoy.
To make it into a short story requires time. The iterations from catchball
help but the A3 must be refined to its essence, which then makes it easy to
communicate.
There is a famous quote from Blaise Pascal that sums up this concept
behind an A3:
“I would have written a shorter letter, but I did not have the time.”
Blaise Pascal
Take the time to refine the story. Use simple diagrams, bullets, and visu-
als—a picture is worth a thousand words. Finally, do not fall into the trap
of trying to squeeze as much information onto an A3 as possible using
size-6 font. Make it easy to read. Less is more!
It takes time to gather our thoughts to tell a short story. Lean is about
reducing waste, and the A3 is a key methodology to help reduce waste in
the management process. Once the A3 is signed off, we can use it as the
basis of the Check/Act process.
THE POWER OF HOSHIN

My colleague Darril Wilburn often cites this example when explaining the
power of Hoshin to focus an organization on the important things and
to illustrate Toyota’s discipline in seeing a plan through. In 2000, Toyota
Motor Corporation in Japan established its Vision 2010. This vision was
used to set mid- to long-term Hoshin items for regions around the world.
It was determined that the North American region should have, as one of
its themes, “Self Reliance.”
I was working at the North American manufacturing headquarters
at the time in Human Resources and was on one of the teams charged
with understanding and deploying part of the Hoshin to address “Self
Reliance.” The leadership first considered what was meant by self-reli-

ance. It was determined that one way to measure self-reliance was the
number of Japanese engineering resources needed to support a major
model change. Let’s say it took a hundred such resources in the year 2000.
If we could reduce this number to zero by 2010, we would be considered
self-reliant at least by that measure. (There were many other indicators of
self-reliance.)
One of the key elements of the catchball function is for the previous
level in the organization to translate the objectives for the next level in the
organization so that it is meaningful to them. Our cross-functional work
team was given the objective of recruiting and developing the next gen-
eration of engineers with the goal of self-reliance. We continued to break
down this objective and determined that if we were to be self-reliant, we
needed to boost the skill level of engineering co-ops and eventual new-
hires. There were numerous activities that preceded this point but the
highlights included choosing additional universities that we would target
for talent and developing a program that would facilitate rapid skill devel-
opment and experience with model change. We called it the “Engineers in
Training Program.”
As often happens, people on the team change, and this team was no
exception. Soon after we developed the plan, I transferred to another
Toyota location. Good planning facilitated transfer of duties and the pro-
grams were developed and the recruiting focus adjusted. The plan was
rolling along without me.
In 2008, after leaving Toyota, I was asked to come back to conduct
Problem-Solving coaching training for the management team and engi-
neers at one location. During one of the classes, we were doing introduc-
tions and one of the students introduced herself as a new-hire to the location
and that she was a recent graduate of the first class of the Engineers in
Training Program. Now for me this was a wonderful moment for several
reasons. One, it was the culmination of a project that had started several
years previous. Two, I was amazed at the discipline it took for a company
to keep focused on the objective for so long despite changes in leadership
and team composition. I explained to her that she was a living, breathing
countermeasure to a problem that was first established eight years earlier
in Japan. She was probably just entering high school when she was, in a
sense, “dreamed up.” I was so excited to meet her that I even gave her a
hug (in the least offensive, non-policy-breaking way I could). I am unclear
on the success that Toyota Motor Manufacturing North America had in
closing the gap of model change support needed, but I am quite sure that
at least one of the plans was nurtured and implemented.
This is the power of Hoshin, clarifying the right things to do and provid-
ing the structure for the discipline needed to see it through.
SUMMARY
Hoshin Kanri—a simple, elegant system for strategic planning within an
organization but not an easy one to master. My experience shows that it
takes most organizations three years to learn the process, which sounds
like a long time but is only three cycles of the annual process. The key is
to begin by knowing where you are going and what is stopping you from
getting there.
Industrial & Manufacturing Engineering / Manufacturing & Processing
What is our Purpose? Addressed honestly, this hard question triggers the necessary
reflection on shortcomings and weaknesses that are the fuel for improvement. It is
a recurring theme in this volume. … Hansei, the Japanese word meaning humble
and frank reflection, is another important concept in this book. Reflection, often
glossed over, is fundamental to TPS and the PDCA cycle. This book records the
reflections of several Toyota veterans—reflections on how they learned TPS and
how they’ve applied the learning in companies around the world.
—Pascal Dennis, president of Lean Pathways Inc. and
Shingo Prize-winning author
Written by former Toyota associates, Toyota By Toyota: Reflections from the

Inside Leaders on the Techniques That Revolutionized the Industry focuses
on the purpose of Lean methodologies, techniques, and principles. It compiles
more than a century of combined experience from management-level employees
who supply little-known insights about the Toyota Production System (TPS)—
featuring many who worked directly with Taiichi Ohno.
The book illustrates experiences at Toyota locations around the world, including
the United States, Brazil, Venezuela, Europe, and Japan. Associates from various
divisions, including sales, training, logistics, manufacturing, and human resources,
provide diverse points of view regarding the application of the Lean principles
discussed. In each chapter, TPS experts:
• Share their story about when and how they learned the specific Lean
technique, methodology, or concept
• Describe the Lean technique, along with its benefits and pitfalls
• Supply helpful implementation tips
A common thread that weaves these stories together is that the contributors had
to learn their lessons the hard way. Although there is no magical, painless way
to learn Lean, the authors hope that by sharing their experiences and struggles,
you can avoid having to struggle through the same lessons. Readers will benefit
from seeing the various approaches used to teach, as well as the unique way these
authors translate that learning to the reader.
K13796
ISBN: 978-1-4398-8075-3
90000
www.crcpress.com
9 781439 880753
w w w.productivit ypress.com

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Reflections from the Inside Leaders

on the Techniques That

No claim to original U.S. Government works

International Standard Book Number-13: 978-1-4398-8076-0 (eBook - PDF)

Chapter 1 Courage, Humility, Kaizen................................................. 1

Chapter 2 Stability and Standardized Work..................................... 21

It Was Too Early.....................................................................53

Chapter 4 Just-In-Time and Kanban................................................. 55

Chapter 5 Problem-Solving PDCA.................................................... 71

A Quick Note on Deadlines......................................................85

Chapter 6 Toyota Kaizen Methods.................................................... 93

Chapter 7 Kaizen Culture:

Chapter 8 Elimination of Waste in Product Design...................... 127

Mutual Prosperity Based on Mutual Trust.................130

Chapter 9 Adapting Lean for Made-to-Order/High-Mix,

Chapter 10 Lean Logistics.................................................................. 159

Velocity and Understanding the Importance

Chapter 11 Leading a Kaizen Culture............................................... 177

Chapter 12 Hoshin Kanri................................................................... 189

Aim therefore at great things.

Another common thread throughout this book is the utmost respect

Gerson Valentim Damiani

Carlos Yukio Fukamizu

Renato Eiji Kitazuka

My Lean implementation work has taken me to thirty-two countries

• Made to Order Lean—Excelling in a High-Mix, Low-Volume

published by J. Ross Publishing, and co-authored the workbook Building

engineering and moved on to quality assurance. I was very fortunate to be

I consider myself one of the luckiest people to have worked at Toyota.

THE TOYOTA WAY 2001

associates. When Toyota was a small company and centrally located in

COURAGE, HUMILITY, KAIZEN AT THE HEART

very good at fabricating in the maintenance workshop. They could con-

Gerson Valentim Damiani

Standardized work is one of the techniques that the Toyota Production

AvailableProduction Tim eperD ay

• Waiting: There was no workload balancing between the operators.

IMPORTANCE OF STANDARD WORK

WHY WORK USING STANDARDS?

We have several ways to do standard work, but we must never forget

OPERATIONAL PROCEDURES, WORK INSTRUCTIONS,

instructions of the transaction by reading the procedure and explaining it

Usually, people agree that companies have a learning curve; thus, it

HOW THE WORK WAS DONE AT TOYOTA:

I learned to check the process without using a stopwatch. It is very sim-

HOW STANDARD WORK WAS DONE AT TOYOTA

Toyota has developed a system whereby after making a video, it can be

1 second × 400,000 vehicles produced in a year will give me 400,000

Once the lead-time is defined, we need to set the number of operators

more confident in their ability to achieve productivity without rejections,

1. Elimination of transport man-hours

Objectives of the Layout

PROBLEMS IN THE IMPLEMENTATION

WHERE TO PLACE STANDARD WORK INSTRUCTIONS

The most important point is to make things as simple as possible first,

Renato Eiji Kitazuka, with Carlos Moretti

JIDOKA AS A PILLAR OF THE TOYOTA

pointed to one of our items as a probable source of problems, we started a

After that, I started searching for explanations everywhere, except among

through “learning-by-doing sessions” and then makes the technique’s pur-