Absence of “Value Added” in the TPS literature

When improving operations, the only distinction of practical relevance is between necessary and unnecessary activities (See Occam’s Razor… and Whack-a-Mole). It really doesn’t matter whether they physically transform a product or whether a hypothetical customer would be willing to pay for them; the only thing that matters is whether they are needed to get the job done. Eliminating the unnecessary means getting the right things done, or being effective. The step after that is getting these things done right, or being efficient.

The American literature on Lean is centered on Value Added — defined as “what the customer is willing to pay for.” As I indicated, this is not the case for the Japanese literature or even the American literature on the Toyota Production System (TPS). I listed some examples from my personal library in Occam’s Razor…, and would like here to give more specifics.

1. “Value Added” in the TPS Literature

The following books on TPS — ranging in vintage from 1977 to 2009 — contain no reference that I could find to value added:

  • Fundamental Principles of Lean Manufacturing, Shigeo Shingo (1977). The English title contains “Lean Manufacturing,” a term that wasn’t coined until a decade after this book came out. Shingo’s title translates to “Original intent of plant improvement” (工場改善の原点的志向).
  • Zero Inventories, Robert W. Hall (1983). This was the first book in English to cover the technical content of TPS. ‘Doc’ Hall is an American academic, who researched Japanese sources. He is still active today in the AME, and was inducted in the Manufacturing Hall of Fame in 2012.
  • Kanban, Just-In-Time at Toyota, JMA (トヨタの現場管理:カンバン方式の正しい進め方, 1985). This is based on training materials from one of the oldest manufacturing consulting firms in Japan.
  • The Evolution of a Manufacturing System at Toyota, Takahiro Fujimoto (1999). Fujimoto is an academic who studied the emergence of TPS in the history of Toyota and, in the process, explains many details of its development in the 1990s.
  • The heart of introducing TPS (トヨタ生産方式導入の奥義)Mikiharu Aoki (2009). The author left Toyota in 2004 after 26 years to become a consultant. He is still in his fifties, and what he describes is not your grandfather’s TPS. Still, there is not a word about value added.

There are mentions of value added in a few books on TPS, but they are brief and no connection is made with customers’ willingness to pay. In these books, what is called “value added” is what physically transforms the product, a definition that, incidentally, has its own problems. Following are the books I have on TPS that contain a fleeting mention of value added:

  • Toyota Production System, Taiichi Ohno (トヨタ生産方式, 1978). “Value Added” is discussed on pp. 57-58, and that’s it: two pages out of a 132-page book. The English translation includes the following diagram, which does not quite match the Japanese original:

    Ohno's-pie-chart-of-operator-time-in-translation

The original, Japanese diagram was as follows, with my  own annotations in red:

Ohno's-pie-chart-of-operator-time

There are differences in both style and content:

      • The “Value-added work” caption in the translation does not make sense in its context and does not match the original, which is just one word, “sagyo” (作業) which just means work or operation.
      • The bullet lists in the translation do not match the starred captions in the original, which only contain the first two items. I don’t know why the translator added items to each list.
      • The original figure is in the style of a comic strip, which is almost standard for the Japanese literature on manufacturing. It is not intended to impress readers of the Harvard Business Review, but to communicate with people who read manga while riding trains to work.

One vital feature of this discussion is that it is exclusively about the breakdown of operator movements. It is not about materials handlers, managers or any kind of support groups, whose work is branded as intrinsically “non-value added” by managers who have read the US Lean literature.

Why this narrow focus on production operators? Most organizations have a subgroup of members who fill its purpose while all others support them. In a hospital, it is the surgeons; in aviation, the pilots; in the military, the shooters; in car racing, the drivers. In a manufacturing company, it’s the production operators. And their time is particularly precious because they work in sequence, so that, if you delay any one of them, you delay the entire production line. This is not true of the support staff, who work mostly in parallel.

Even in the restricted sense that he uses, if Ohno had felt that this was an important concept for TPS, he certainly would have used it elsewhere in his book. But he didn’t.

  • Toyota Production System, Yasuhiro Monden, 2nd Edition (1993). Monden is a professor of production management at Tsukuba University, who has been granted extensive access by Toyota. Value Added appears once, on p. 179 of this 423-page book, where he repeats what Ohno had written. 
  • 25 keywords of the Nissan Production Way (実践日産生産方式キーワート25, 2005). This book is about Nissan, not Toyota. Keywords 11-15, on pp. 62-83 are about “the pursuit of Value Added production” (付加価値生産)。 “Value-added tasks,” however, are simply defined as the ones that physically modify the product.
  • The Birth of Lean, Koichi Shimokawa and Takahiro Fujimoto (Ed.) (2009). There is one instance of “value added” on p. 52.
  • The Toyota Way, Jeffrey Liker (2003). On p. 27, it says “The first question in TPS is always ‘What does the customer want from this process?’ (Both the internal customer at the next steps in the production line and the final, external customer.) This defines value. Through the customer’s eyes, you can observe a process and separate the value-added steps from the non-value-added steps.”
  • Since “internal customers” are really downstream operations that don’t pay, the willingness-to-pay criterion is not applicable, which explains why Liker changes it to what the customer “wants from the process,” and it may not be a physical transformation. For example, what car assembly wants from painting inspection is the assurance that the bodies started on the final assembly line are free of paint defects.

    Later, on p. 89, the concept migrates to an engineering office. Finally, on p. 280, value-added work is “the actual transformation process core to the service that the customer is paying for.” So the willingness to pay that was excluded on p. 27 is back in, and so is the physical transformation, apparently mashing together the US Lean and Japanese TPS versions of value added. Again, this concept is only referenced in three of the book’s 330 pages, which strongly suggests that it is not important. Toyota is just not that into it.

2. Value Added in Lean

In light of this, why have American Lean authors focused on value-added? They zoomed in on a minor detail, changed the meaning from physical transformation to willingness to pay, and made it the foundation of Lean.

My personal guess is that they felt it necessary to attract decision makers under the influence of business schools and  uncomfortable with TPS plain talk. If we need to intellectualize the notion of waste elimination, however, we can do it in other ways, for example by stating as principle that a factory in never Pareto-optimal, meaning that it can always be improved.

In fact, it is fortunate that the concept of value added plays such a negligible role in TPS, because, as discussed in More Musings on Muda,  its definition in terms of physical transformation doesn’t withstand scrutiny much better than that in terms of willingness to pay. In particular, it is not applicable to anyone who does useful work that does not physically change a product.

In addition, in both senses, “value-added” is an attribute that an activities possesses or lacks. In economics or game theory, value added is a quantity of money.

In economics, the value added of a business is the difference between sales and external inputs, where the external inputs are materials, energy, and outsourced services. In other words:

Value\: Added = Sales - \left ( Materials + Energy + Outsourced\: Services \right )

This is the basis for Value-Added Taxes (VAT) in countries that charge them and. Aggregate it over an entire country, and you get its Gross Domestic Product (GDP).

Out of this Value Added, companies have to pay for people, facilities and equipment, and taxes. I have found this concept useful in several contexts. For example, a plant’s value added per employee is a better measure of productivity than sales per employee, because you can’t game it by outsourcing.

I have also found it useful to compare a company’s value added per employee with industry averages that you can retrieve from sources like the US Bureau of Labor Statistics or the Economic Census. But it is clearly not applicable to one production operator at one work station.

In game theory, the value added of a player is the amount by which his presence increases the size of the pot. A player who joins a poker table puts more chips in play. A company that sells software to run on a given hardware platform increases the value of this platform, while a competitor providing alternative hardware to run the same software reduces it. As explained in Brandenburger and Nalebuff’s Co-opetition, it is a useful concept in business strategy, but also irrelevant at the level of an individual work station.

Yet another use of the term is found in corporate finance, where the Economic Value Added (EVA)  is the difference between a company’s net, after-tax profits and its cost of capital.  The idea is that, unless a company has a positive EVA, its investors would be better off putting their money elsewhere.

None of these uses is applicable to a work station on the shop floor of a manufacturing plant, and there is no way any of them is connected to the notion of willingness to pay.

Focusing on what customers are willing to pay for is a direction that might be given to Marketing. Top management must of course be concerned with customers, but also with suppliers, employees, the local community, the environment,  local and national governments, not to mention creditors and investors.

Because TPS is a system that was developed by an actual company with all these stakeholders and more, it encompasses approaches to supply chain management, human resources, corporate social responsibility, and finance. In this context,  the notion that only activities add value only if customers are willing to pay for them is not helpful and is inconsistent with the more general usage of “value added”  as a technical term.

The Lean Body of Knowledge

Efforts at implementing Lean have become pervasive in manufacturing, branching out from the automotive industry to electronics, aerospace, and even food and cosmetics, not to mention efforts to adapt it to construction, health care, or services. As a consequence, the knowledge of Lean, proficiency in its tools, and skills in its implementation are highly marketable in many industries.

There is, however, no consensus on a body of knowledge (BOK) for education in the field, and my review of existing BOKs and university courses confirms it.  A consensus is elusive because Lean emerged as the accumulation of point solutions developed at Toyota over time, rather than as the implementation of a coherent strategy.

As Takahiro Fujimoto explains, there was no individual thinker whose theories started the company down this path. Decades later, we are left with the task of reverse-engineering underlying principles from actual plant practices. Those who have attempted it produced inconsistent results because they have gone at it like the six blind men with the elephant: their personal backgrounds, mostly in business school education, management, or even psychology allowed them to see different slivers of the Toyota system but not the whole, giving, in particular, short shrift to its engineering dimension.

In the following paragraphs, first I explain what I think the Lean BOK should be. Then I review five programs offered in the US by universities and professional societies and highlight where they differ.

My view of the Lean BOK

A well-rounded program for manufacturing professionals would provide Lean skills to all the professionals involved in designing and operating manufacturing plants. Organizations that are successful at Lean do not rely on one department to “do Lean” for everybody else. Instead, Lean is part of everybody’s job. There are basics that everybody needs to know, and then there are different subsets of skills that are useful depending on where you work in the plant.

Beyond the common background, the knowledge should be organized around functions performed by people. In this way of thinking, Visual Management, for example, would not be a stand-alone subject, because factories don’t have “visibility managers.” On the other hand, plants have assembly lines, machining or fabrication shops, shipping and receiving departments all in need of visual management. As a consequence, visual management is part of the training of professionals in assembly, machining, fabrication, logistics, quality, maintenance, etc. And each one only needs to know visual management as it is relevant to his or her position.

Over time, Lean should  migrate into the mainstream of manufacturing and industrial engineering, and lose its separate identity, both in industrial practice and in engineering and management education. This has been the fate of successful innovations in manufacturing in the past. For example, the “American system of manufacture” to which we owe interchangeable parts is now only a subject for historians. It is not the object of a standard or certification, and nobody explicitly undertakes to implement it. That is because its components — engineering drawings, tolerances, allowances, routings, special-purpose machines, etc. — have all become an integral part of how we make things. Likewise, in Japan, TQC is no longer a topic, as its most useful components have just fused into the manufacturing culture 30 years ago. This is what must happen to Lean in the next 30 years.

Lean proficiency should be built around manufacturing functions, not Lean tools. From foundation to superstructure, we see the following hierarchy — originally defined by Crispin Vincenti-Brown — and structure the body of knowledge accordingly:

  1. Manufacturing and industrial engineering of production lines is the foundation, covering every aspect of the physical transformation of materials and components into finished goods. This is about the design and operation of a production lines using different technologies and working at different paces.
  2. Logistics and production control build on top of this foundation, covering both the physical distribution and the information processing required to make materials available to production and deliver finished goods.
  3. Organization and people covers both what an implementer needs to know in order to lead the Lean transformation of an organization, and to manage it once it is underway. The first part is about Lean project and program management; the second, about the alignment of operator team structures  to the production lines, continuous improvement and skills development, and support from production control, quality assurance, maintenance, engineering, and HR.
  4. Metrics and accountability. This is about appropriate metrics for quality, cost, delivery, safety, and morale. In routine operations, this also means collecting the data needed, computing the metrics, and communicating the results in a way that provides useful feedback. On projects, this means estimating improvements. In both cases, metrics in the language of things need to be translated into the language of money for top management.

A hypothetical participant who would master all  of the above  would understand both the philosophy and the tools of Lean, their range of applicability, and their implementation methods. He or she would possess the following skills:

  1. How to read a plant, assess its performance potential, set strategic directions, and start it moving in these directions. This entails the following:
    • Characterizing the demand the plant is expected to respond to.
    • Mapping its current, ideal and future value streams and processes and detect waste.
    • Assessing its technical and human capabilities.
    • Setting strategic directions for improvement.
    • Identifying appropriate improvement projects for current conditions and skill levels.
  2. How to generate or evaluate micro-level designs for takt-driven production lines or cells in assembly, fabrication, or machining by focusing on flows of materials and movements of people. The tools include spreadsheet calculations with Yamazumi and work-combination charts, jidoka, board game simulations, full-size mockups, and software simulations as needed.
  3. How to generate or evaluate macro-level designs for plants and supply chains, involving the organization of:
    • Internal and external logistics.
    • Milk runs.
    • Water spiders.
    • Heijunka and Kanbans.
    • Lean inventory management.
  4. How to apply the right tools for quality improvement, addressing:
    • Process capability issues with statistical methods/Six Sigma
    • Early detection and resolution of problems through one-piece flow and systematic problem-solving.
    • Human-error prevention through poka-yoke/mistake-proofing.
    • Planned responses to common problems through Change Point Management (CPM), embedded tests and other tools of JKK.
  5. How to organize people to execute and support takt-driven production, and in particular:
    • Set up a systems of small teams, team and group leaders, to carry out daily production as well as continuous improvement activities.
    • Set up a Lean daily management system with performance boards and management follow-up routines.
    • Generate and maintain a system of posted standard work instructions.
    • Apply Training-Within-Industry (TWI).
    • Set up and dimension appropriately a support structure for logistics/production control, maintenance, quality assurance, engineering, human resources, supply chain management and customer service.
  6. How to manage the Lean transformation of a plant from pilot projects to full deployment.
  7. How to select and deploy relevant metrics to monitor manufacturing performance and estimate the impact of improvement projects both in the language of things and in the language of money.

This BOK is dauntingly large, and new wrinkles are added daily.  Fortunately, you don’t need to master all of it in order to be effective.

Review of existing BOKs

I took a look at a few of the existing training programs offered by various institution, for the purpose of identifying the underlying BOKs. Table 1 shows the list. My comments follow.

Table 1: A few Lean training programs in the US
University of Kentucky Lean Systems Certification
University of Michigan Lean Manufacturing Training
SME Lean Certification
University of Dayton Get Lean
Auburn University Lean Certificate Series

1. The University of Kentucky program

The University of Kentucky’s program includes Core Courses — a train-the-trainer program — and Specialty Courses — for professionals outside of production operations. Some but not all the specialty courses are targeted at functions within the organization but others are about tools. Just the core courses add up to three one-week training sessions, while each specialty course is typically a one- or two-day workshop.

From the University’s web site, however, I cannot tell when, or if, participants ever learn how to design a machining cell, or an assembly line, or how to reduce setup times. In the core courses, it’s great to talk about mindsets, culture, and transformational leadership, but where is the engineering red meat?

The specialty courses address planning, improvement methods, logistics, supplier development, and other unquestionably important topics, but offer nothing about manufacturing or industrial engineering.

2. The University of Michigan program

The University of Michigan has a program of two one-week sessions with three-week gaps between sessions. This program does cover cell design, materials handling and factory layout,  and even rapid plant assessment, that are certainly relevant engineering topics, but I didn’t see anything about the design of lines that are not cells, autonomation, or the Lean approach to quality. There is a module about integrating Six Sigma with Lean, but there is a lot to Lean Quality that has nothing to do with Six Sigma, such as mistake-proofing.

There is also some coverage of logistics, organization, and accountability, but not as much as in the University of Kentucky program.

3. The SME

The SME has published a document entitled Lean Certification Body of Knowledge, in which the major headers are:

  1. Cultural Enablers
  2. Continuous Process Improvement
  3. Consistent Lean Enterprise Culture
  4. Business Results

Organization and People issues are treated in 1. and 3. The first two line items under Cultural Enablers are “Respect for the individual” and “Humility.” I am not sure how you can teach this or test for it, particularly humility. It is followed by techniques that have to do with implementation. The topics  in 3. have more to do with management once Lean is started, but it doesn’t say it in so many words.

All Engineering and Logistics is lumped under Continuous Improvement, which is clearly a misnomer because many of the Lean techniques in these areas are radical innovations that have nothing to do with continuous improvement. Inside this section, the choice of topics and their structure is surprising. For example, the only method of data collection considered is the check sheet, and it ranks as high in the hierarchy of topics as poka-yoke or one-piece flow.

As the name suggests, Business Results covers metrics and accountability.

The weight of the different areas varies with the level of certification. At the Bronze level, for example, Continuous Improvement counts for 60%; at the Gold level, only for 15%.

4. The University of Dayton

I have ties with this institution from having taught courses there  for many years, and I am still listed among their Experts. But I am not involved with their GetLean Certification program. It is an 8 to 10-day curriculum with a core of 5 days on the following topics:

  • Introduction to the Lean Tools
  • How to Develop New Metrics in a Lean Culture
  • Human Error Reduction: Root Cause Analysis
  • Fundamentals of Negotiation
  • Strengthening Your Business Services using LEAN Tools
  • Managing Projects in a LEAN or Six Sigma Environment
  • Managing an Efficient Supply Chain

The choice of topics may seem odd. For example, you might wonder what Fundamentals of Negotiation is doing in a Lean training program, or why Root Cause Analysis only appears under Human Error Reduction. What about root cause analysis of process capability problems?

5. Auburn University

Of all the Lean programs reviewed here, Auburn University’s probably has the deepest roots, through the influence of JT Black, whose passion for Lean goes back to the late 1970s.

The list of subjects they cover is as follows:

  • Principles of Lean
  • Value Stream Mapping
  • 5s
  • Total Productive Maintenance (TPM)
  • Quick Changeover
  • Pull / Kanban / Cellular Flow
  • Sustaining Continuous Improvement
  • Lean Office
  • Lean Accounting
  • Rapid Improvement Event
  • Problem Solving

If anything, this program has too much of the red meat that is lacking in some of the others. It could, without harm, emphasize Logistics and Management a bit more.

Conclusion: no consensus

Even when considering the programs solely on the basis of their published syllabi, it is clear that their graduates will have received vastly different instruction, and that the designers of these programs have no common view of what the Lean Body of Knowledge is.

Steven Spear on Problem-Solving with JIT: Not Bad for an Academic Paper

Steven Spear’s The Essence of Just-in-Time:Imbedding diagnostic tests in work-systems to achieve operational excellence  is a working paper from Harvard Business School in 2002 focused on the interaction between JIT and problem-solving. It is an important topic, only briefly alluded to in Lean Logistics and covered in more detail in When to Use Statistics, One-Piece Flow, or Mistake-Proofing to Improve Quality, but there are many other improvement opportunities besides product quality, and shining a light on their relationship with JIT is useful.

Spear’s paper is worth reading because he did his homework: it is based on research that involved immersion in a Toyota supplier support team, visits to seven Toyota plants and 12 suppliers in Japan and the US, and working as an assembler in a non-Toyota plant for comparison. I recommend in particular sections 4 to 7. Section 4 is a case study of mattress manufacturing at Aisin Seiki, from which the following sections draw general conclusions.

You have to look past the other sections, which mainly reflect Spear’s membership in the academia tribe. His research is described as an “ethnographic study,” which conjures up the image of an American or European spending 15 years among the Guaranis of Paraguay recording what they are willing to share of their language and culture. That this vocabulary should be used in a study of Lean reflects how alien the world of manufacturing is to academia.

As an academic, Spear is obligated to reference other academics, but not non-members of the tribe, no matter how major their contributions. For example, the only Japanese author in the bibliography is Takahiro Fujimoto, from the  University of Tokyo, but neither  Taiichi Ohno nor Shigeo Shingo appear. Section 3, on Methods, opens with “Many scholars argue…” With all due respect, the arguments of scholars don’t amount to a hill of beans in Manufacturing, because, unlike Computer Science or Biology, it is not a field to which they have contributed much. From Taylor and Gastev to Ohno and Shingo, the key innovators in Manufacturing have almost all been self-taught, Lillian Gilbreth being the exception with a PhD. Why was Spear’s research not done in an Industrial Engineering department, where its content would normally place it? As I found in my own ethnographic studies of academia, the need for grants pushes researchers in other directions, like genetic algorithms.

How well do we know the history of Lean?

In Woody Allen’s Midnight in Paris, the hero’s nemesis is an academic  who constantly lectures on historical details that he often gets wrong. Introductions to Lean, nowadays, often include a section on history, but no source is quoted, there are many inconsistencies with otherwise known facts, and some of the interpretations are confusing.

Manufacturing practices are like life forms. Some appear and go extinct, while others endure forever. Some 2-billion-year old fossils on the shore of Lake Superior match living organisms in Australia’s Great Barrier Reef today. Likewise, some of the oldest ideas on making things are still practiced today. Knowing who developed what techniques when and why is not just about giving credit. Not only does it occasionally make us rediscover a lost art, like TWI, but it also helps us understand its current relevance.

Getting the timeline right matters because of causality; causality, because it explains motivation; motivation, because it determines current relevance. People invent solutions because they have problems. If we are still facing the same problems, we can adopt or adapt their solutions. The people of Toyota found solutions to overcome crises throughout the life of the company, which eventually coalesced into a system, as explained by Takahiro Fujimoto. Their techniques are easiest to understand within their historical context.

The history of manufacturing is poorly documented. We know the exact wording of speeches made by Cicero in the Roman senate in 63 BCE, but we don’t know how the Romans made standard swords, spears,  helmets, and other weapons to sustain hundreds of thousands of legionnaires in the field (See Figure 1). Documenting how things were made has never been a priority of historians, and they rarely have the technical knowledge needed.

Figure 1. Cicero and a Roman soldier

Official histories are not to be trusted. School children throughout the world sit through classes where they hear an official account of history intended to create shared narratives. With titles like “Call to freedom,” the manuals make no pretense at objectivity (See Figure 2). In business, it is even worse: official histories are spun by the Public Relations departments of the companies that became dominant in their markets.

Figure 2. Cover of an 8th grade history textbook from the US

The real stories are found in the products, facilities, and documents left over from operations. Jim Womack can still visit today the hall where Venetians assembled galleys 500 years ago.  Examining  sewing machines at the Smithsonian, David Hounshell noticed that  Singer stopped engraving machine serial numbers on parts around 1880, from which he deduces that they mastered interchangeable parts at that time. From memoirs, memos, drawings, specs, photographs and movies we can also infer the methods that were used and the conflicts that took place.

Most of us cannot do this research; we rely on professional historians. They quote their  sources, infer cautiously from the facts, and don’t attempt to answer all questions. By contrast, white belts at history produce glib narratives, make up dialogs among historical figures, and presume to know their inner thoughts. As readers, we should tell the difference.

Did Sakichi Toyoda visit Ford in 1911? Several of the historical notes on Lean claim that he did, but there is no mention of such a visit in  Mass and Robertson’s essay on the life of Sakichi Toyoda. According to their account, Sakichi Toyoda did visit the US and the UK in 1910, to see textile plants and apply for patents, and was back in Japan by January, 1911. Even if he did come in 1911, we may wonder what he might have been impressed with, considering that the first assembly line didn’t start until two years later.

Some of these accounts also state that Sakichi Toyoda invented an automatic loom in 1902. According to other accounts, his work at that time was on narrow steam-powered looms, and his first successful automatic loom  was the Type G in 1924, which included a shuttle-change system developed by his son Kiichiro, who later founded the Toyota car company with the proceeds from the sale of the Type G patent in the UK.

Did Henry Ford invent Lean? Many accounts claim he did. This is puzzling because the term Mass Production was coined specifically to describe the Ford system. If Ford invented Lean, then Lean Manufacturing and Mass Production are the same, and we are wasting our time explaining  how they differ. If Henry Ford invented Lean, then Issac Newton came up with relativity.