Jan 25 2012
IndustryWeek : Quality is Every Workers’ Focus at Life Technologies
Via Scoop.it – lean manufacturing
A case-study of the Lean approach to Quality.
Via www.industryweek.com
Jan 25 2012
Via Scoop.it – lean manufacturing
A case-study of the Lean approach to Quality.
Via www.industryweek.com
By Michel Baudin • Press clippings • 1 • Tags: Lean manufacturing, Quality
Jan 25 2012
Via Scoop.it – lean manufacturing
Correctional Industries – a division of the Department of Corrections that puts prisoners to work, combining job training with the production of uniforms, food and office furnishings used by government agencies – was one of the first state agencies…
Via www.thenewstribune.com
By Michel Baudin • Press clippings • 0 • Tags: Government, Lean manufacturing
Jan 25 2012
Via Scoop.it – lean manufacturing
Toyota Australia today announced plans to cut 350 jobs at its Altona manufacturing plant, in what it is referring to as a “response to operating conditions.”
Toyota is an ordinary company, after all… In 2010, they mishandled a quality problem; today, they are laying off people. In 1950, when Kiichiro Toyoda laid off Toyota employees, he resigned as CEO. The article here does not suggest in any way that the CEO of Toyota Australia is likewise falling on his sword.
Another reason to call what we do Lean rather than TPS is that we have some control over how Lean evolves.
Via www.themotorreport.com.au
By Michel Baudin • Press clippings • 0 • Tags: Toyota
Jan 25 2012
Via Scoop.it – lean manufacturing
Blog post at Lean Blog : Mark’s note: Today’s guest post by Bart Sellers is a timely contribution to follow up to yesterday’s post about the ThedaCare Business Perf[..] (RT @MarkGraban: New Post: Guest Post: Is your management system the constraint…
Via www.leanblog.org
By Michel Baudin • Blog clippings • 0 • Tags: Kaizen, Lean, Management, Suggestion Systems
Jan 24 2012
Is there a difference between Lean and the Toyota Production System (TPS)? This is a recurring question. The short answer is yes, but, when you look deeper, it is an issue of packaging as well as of substance.
If you are working in a car company, you cannot openly say that you are using Toyota‘s production system. How could you borrow such things from a competitor, especially if you have been in the business 50 years longer? It is embarrassing to employees, and a weak marketing message. So, regardless of how much you actually use from TPS, you must call it your own “Production Way” or “Operating System,” or…
A generic name like Lean clearly has many practical advantages over TPS. This being said, the minute Lean branched out from Toyota, divergence was to be expected. Major tools of Lean, like Value-Stream Mapping or Kaizen Events are either minor or non-existent in TPS, while the jidoka column of TPS is largely ignored or misunderstood in Lean. See Art Smalley’s presentation at the 2006 Shingo Prize conference, or Working with Machines. The combination of Lean with Six Sigma is also popular in the US, even though Toyota evaluated and passed on Six Sigma.
The umbilical cord, however, was never broken, and the promoters of Lean still use Toyota as a reference. Clearly, nobody would be interested in Lean if it weren’t backed up by the Toyota story, and this raises the question of how far Lean can drift from TPS and still retain this vital link.
The following two comments in the Leadership and Lean The Top 5% discussion group on LinkedIn, highlight the issues. This is what Allison Corabatir has to say, based on her experience at Magna:
There is a lot in a name…. When one says they are implementing TPS, it usually means they are taking a cookie cutter approach and assuming what worked well for Toyota would work well for them too. Obviously, there is no denying that their tools are great and we should learn from Toyota, but in reality, some of the tools need to be tailored to the culture and operation of the company we are working for. […] some tools like VSM does not get enough attention with TPS ( I am a big fan of VSM) and some approaches are totally missing (We put a lot of importance to employee recognisition and rewards). I prefer using the term “lean” and making the system our own.
Who would argue with that? Anna Johnson, on the other hand, describes a very different experience:
My experience with TPS has been that there is a greater emphasis on retention, and lowering of costs through collaboration and teamwork and attrition, whereas while lean equally emphasizes cost cutting, headcount reduction seems more acceptable through RIFs…
When Anna says that Lean “emphasizes cost cutting, headcount reduction,” she describes a 180-degrees turn away from TPS. This version of “Lean” isn’t just a watering down but a betrayal. It is taking the approach with which financial managers have hurt US Manufacturing from the 50s to the 70s, and calling it Lean to mislead audiences into believing that it is Toyota’s approach.
Anybody can slap the Lean label on anything, and it is only a matter of time until this free-for-all makes it worthless. It results in implementations that are best described as L.A.M.E. (Lean As Mistakenly Excecuted) or L.I.N.O (Lean In Name Only). To avoid this, you have to start from the underlying principles of TPS and deploy them in an context-appropriate fashion, but it is easier said than done, because Toyota didn’t do a great job of articulating these principles and we have to reverse-engineer them from TPS.
Lists of principles can be long, abstract, vague and toothless like the UN’s Universal Declaration of Human Rights, or short, specific, and actionable, like the US Bill of Rights. In The Toyota Way, Jeffrey Liker spells out specific and actionable principles, but there are 14 of them, which is too many to remember. The Lean Enterprise Institute has 5 principles, easier to remember but focused exclusively on the flow of materials. They say nothing, for example about human resources. You could claim to follow these principles while practicing yo-yo staffing, hiring massively in boom times and laying off in recessions.
The HBR article on Lean Knowledge Work summarizes Lean principles as follows:
There are good reasons to use the word Lean rather than TPS to designate what we do. Lean evolves in many different directions as it inspires people in different industries to pursue improvement in ways that work in their context, and it is healthy that they should do so. But there will always be bandwagon jumpers just using the label to sell products or services.
By Michel Baudin • Asenta selection, Management • 21 • Tags: Lean, Lean manufacturing, Toyota, Toyota Production System, TPS
Jan 27 2012
Improvement project financials – the hurdles
From a discussion in the PEX Network & IQPC – Lean Six Sigma & Process Excellence for… on LinkedIn:
Answer: You seem to be using the term ROI for payback period or breakeven time. This is a common indicator for investments but often considered insufficient because the purpose of the investment is not just to get your money back but to make a profit on it. That is why project evaluations often also include the Internal Rate of Return (Excel function IRR).
If the cash outflows of your project were loans and the inflows reimbursements, the IRR would be the interest rate of that loan. The IRR is based on the entire life of the project, not just how long it takes to break even.
Looking at both the payback period or breakeven time and the IRR makes sense. You wouldn’t want to do the project if it took 15 years to break even, even if the IRR were 50% because management is not that patient and because the numbers 15 years into the future are iffy. On the other hand, if the IRR is 0%, the project is financially pointless even if you recover you money in 6 months.
Answer: Not quite. NPV, or Net Present Value, is the value today of a schedule of future cash flows. To calculate it, you have to assume a Discount Rate, the ratio by which a dollar a year from now is worth less to you than a dollar today, in the absence of inflation. The NPV is a sum of money, not a ratio.
The IRR, or Internal Rate of Return, is the discount rate for which the NPV of a schedule of cash flow is zero. If you lend money at a given interest rate, and use that interest rate as discount rate, the Net Present Value of the borrower’s payments over time will match exactly the amount of the loan, and the interest rate will equal the IRR.
That is why I was saying that the IRR compares your investment with a loan, and, if the outgoing and incoming cash flows of your investment were loans made and repaid, the IRR would be the interest rate. The IRR is not a trivial calculation manually, but no problem with the Excel IRR function. Pocket calculators with financial functions usually do it as well.
Many companies have hurdle rates on both payback period and IRR, and MBAs are trained to use it. Once you get the hang of it, the logic of the IRR is compelling. Its weak point is that it depends on predictions of cash flows far in the future, and this brilliant logic is applied to fuzzy numbers. That is why you complement it with a metric that has a short-term focus.
If you need to learn about this, I recommend Chapter 6 in Eric A. Helfert’s Techniques of Financial Analysis. It provides clear explanations for professionals who are NOT specialists in finance.
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By Michel Baudin • Management • 0 • Tags: Financials