Jul 30 2014

“Studies show…” or do they?

Various organization put out studies that, for example, purport to “identify performances and practices in place among U.S. manufacturers.”  The reports contain tables and charts, with narratives about “significant gaps” — without stating any level of significance — or “exponential growth” — as if there were no other kind. They borrow the vocabulary of statistics or data science, but don’t actually use the science; they just use the words to support sweeping statements about what manufacturers should do for the future.

At the bottom of the reports, there usually is a paragraph about the study methodology, explaining that the data was collected as answers to questionnaires mailed to manufacturers and made available on line, with the incentive for recipients to participate  being a free copy of the report. The participants are asked, for example, to rate “the importance of process improvement to their organization’s success over the next five years” on a scale of 1 to 5.

The results are a compilation of subjective answers from a self-selected sample. In marketing, this kind of surveys makes sense. You throw out a questionnaire about a product or a service. The sheer proportion of respondents gives you information about the level of interest in what you are offering, and the responses may further tell you about popular features and shortcomings.

But it is not an effective approach to gauge the state of an industry. For this purpose, you need objective data, either on all companies involved or on a representative sample that you select. Government bodies like the Census Bureau or the Bureau of Labor Statistics collect useful global statistics like value-added per employee or the ratio indirect to direct labor by industry, but they are just a starting point.

Going beyond is so difficult that I don’t know of any successful case. Any serious assessment of a company or factory requires visiting it, interviewing its leaders in person, and reviewing its data. It takes time, money, know-how, and a willing target. It means that the sample has to be small, but there is a clash between the objective of having a representative sample and the constraint of having a sample of the willing.

For these reasons, benchmarking is a more realistic approach, and I know of at least two successful benchmarking studies in manufacturing, both of which, I believe, were funded by the Sloan Foundation:

  • The first was the International Assembly Plant Study, conducted in the late 1980s about the car industry, whose findings were summarized in The Machine That Changed The World in 1990. The goal was not to identify the distribution of manufacturing practices worldwide but to compare the approaches followed in specific plants of specific companies, for the purpose of learning. Among other things, the use of the term “Lean” came out of this study.
  • The second is the Competitive Semiconductor Manufacturing Program, which started in the early 1990s with a benchmarking study of wafer fabrication facilities worldwide. It did not have the public impact of the car assembly plant study, but it did provide valuable information to industry participants.

The car study was conducted out of MIT; the semiconductor study, out of UC Berkeley. Leadership from prestigious academic organizations helped in convincing companies to participate and provided students to collect and analyze the data. Consulting firms might have had better expertise, but could not have been perceived as neutral with respect to the approaches used by the different participants.

The bottom line is that studies based on subjective answers from a self-selected sample are not worth the disk space you can download them onto.

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Jul 20 2014

The Toyota Production System (TPS), Philosophy, and DNA

According to Ranga Srinivas, “TPS is a ‘Philosophy’, not a system (System in TPS is given by Western world). That philosophy is in their DNA.”

We tend to get carried away with metaphors, and I think we need to get back to earth.

Louie de Palma

In Japanese, TPS is not only NOT a philosophy, it is not even a system, but just a method! The term is Toyota Seisan Hoshiki (トヨタ生産方式), and Hoshiki means “method,” not “system.” It reminds me of Louie de Palma, the Danny de Vito character in the series Taxi, saying about his girlfriend,  “She sees something in me that no one ever saw, something that isn’t there.”

Let us study TPS for what it really is: the best known way to make cars. And, if Mark Graban can learn from it and improve hospitals, it’s wonderful. But let us not go to a car maker for philosophy. It’s the wrong shop.

Saying it’s the best known way to make cars is not talking it down; it’s what drew me to it. Philosophy is also a wonderful thing, but corporate philosophy is to philosophy as advertising is to poetry. If you parse it, it should be to understand the image management wants to project, not what the company does.

There is a Japanese word for philosophy (tetsugaku, 哲学). Googling “toyota tetsugaku” yields a single occurrence on the Toyota website, in one paragraph about “Business strategy” (hoshin), which translates as follows:

“Toyota aims to be a good corporate citizen through the provision of clean and safe products, to contribute to the prosperity of society, and earn the trust of the international community. I will introduce the vision for the future and Toyota’s philosophy, which is alive in the Toyota Production System and the corporate concept.”

For comparison purposes, this is what GM says about itself on its website:

“In order to achieve our goals, GM has remained committed to the following formula for success:

  1. Move faster and take risks to achieve sustained success, not just short-term results
  2. Lead in advanced technologies and quality in creating the world’s best vehicles
  3. Give employees more responsibility and authority and then hold them accountable
  4. Create positive, lasting relationships with customers, dealers, communities, union partners and suppliers, to drive our operating success.”

I have the greatest respect for TPS, and have experienced its adaptability to industries ranging from making frozen foods to computers and aerospace.  And I understand that you can’t go to a hospital and tell administrators, doctors, and nurses that you are going to help them with a method for making cars. You not only have to adapt it, you must also present it in such a way that they will listen. For 25 years, the word “Lean” has been used for this purpose. It has also been abused, to leverage the respect inspired by TPS in order to promote unrelated ideas.

We also need to be careful about references to DNA in this context. I believe it started with Spear and Bowen Harvard Business Review Article Decoding the DNA of the Toyota Production System. Culture is nurture; DNA, nature. Your culture is the way your family, school, and society molded you; your DNA is the genetic program that made you.

Generally, we should treat national culture as irrelevant to manufacturing. If Japanese business leaders in the late 19th and early 20th century had considered it relevant, they would have decided that manufacturing was a product of European and American culture that could not be transplanted to Japan.

About housekeeping habits specifically, I remember being impressed, while walking the streets of Rotterdam at night, by houses with the drapes pulled and the lights on to let passers-by admire spotless living rooms. What we saw in factories in the same country, however, told us that the cultural obsession with neatness in daily life did not carry over to the production shop floor.

DNA is even less relevant. In every society, there are misguided individuals who believe that having been born into a particular group makes them better at some activities; the rest of society calls them bigots. If DNA had anything to do with manufacturing excellence, it could not be achieved by learning. You can learn a method, master a system, and even assimilate a culture, but you can’t change your DNA.

 

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Jul 10 2014

What is “Operational Excellence”?

Who would not want something called “Operational Excellence”? “Excellence” is superlative goodness, and “Operational” suggests a scope that includes not only production, logistics, and maintenance in Manufacturing, but also administrative transaction processing like issuing car rental contracts or marriage licenses. The boundaries are fuzzy, but Marketing and R&D are not usually considered part of Operations.

Hearing “Operational Excellence” for the first time, everybody takes it to mean whatever they think is the best way to run operations, which makes it unlikely that any two people will have the same perception. If marketers of consulting services can prevail upon a profession to accept such a vague and generic term as a brand, they can sell pretty much anything under this label. By contrast, the Toyota Production System (TPS) specifically refers to the principles, approaches, methods, and tools that Toyota uses to make cars. When you first hear it, you may not know what those are, but you know that you don’t know. Another difference between “Operational Excellence” — also known as “OpEx’ or “OE” — and TPS, is that the first is a goal, while the second one is a means to achieve the unmentioned but obvious goal of thriving in the car industry.

Chevron OE
OE at Chevron

It is an increasingly popular term, perhaps because of its very lack of precision. Google it, and you find, for example, that, Chevron “has spent more than 20 years expanding systems that support a culture of safety and environmental stewardship that strives to achieve world-class performance and prevent all incidents. We call this Operational Excellence (OE),…”  So, at Chevron, OE is about avoiding accidents that directly hurt people and oil spills that ruin the environment.

It is certainly not what it means to the  Institute for Operational Excellence. Its website has a glossary that contains exclusively terms from TPS or Lean, like Andon, Cell, Chaku-Chaku, 5S, Kanban,…, which strongly suggests that Operational Excellence is just the latest avatar of TPS when applied outside of Toyota. For 25 years, “Lean” has reigned supreme in this role but may finally be getting stale after so many botched implementations.

Shingo Prize for OpExThe Utah State University website, on its Jon M. Huntsman School of Business page, has a directory entry for The Shingo Prize for Operational Excellence. The Shingo Prize site itself, however, while using “excellence” in almost every sentence, does not refer to operational excellence. The theme of this year’s Shingo Prize conference, in Sandusky, OH in May, was “Enterprise Excellence,” which sounds like a further generalization. But, digging deeper, you find that the Shingo Model Handbook contains “operational excellence” 31 times, “Lean” 7 times,  “Toyota”  twice, and “TPS” never.

 

Shigeo Shingo
Shigeo Shingo
stuck_gear-teeth
Stuck gears on the Shingo Prize page

The Shingo Prize page uses as a banner a picture of three gears with the teeth enmeshed in such a way that they can’t move, a picture that would have seemed odd to an engineer like  Shigeo Shingo. His legacy is primarily contributions to production engineering like SMED, Poka-Yoke, and line/work station design. On these subjects, you cannot see daylight between Shingo’s work and the Toyota Production System (TPS). Therefore, when you see a document called “Shingo Model Handbook” that refers repeatedly to Operational Excellence and never to TPS, you can’t help but conclude that Operational Excellence is just another name for TPS.

UC Berkeley OE Program Office Team
UC Berkeley OE Program Office Team

UC Berkeley has an Operational Excellence (OE) Program Office. Based on the family picture in its Spring 2014 Progress Report, it has 12 members. UC Berkeley has a total workforce of 29,000, of which 2,000 are full and part-time faculty members, and about 36,000 students. It works out to 1 member of the OE Program Office for every 2,417 members of the work force and 3,000 students. They present themselves as  internal consultants, with access to funding and expertise in “project management, change management, strategic planning, campus engagement, financial analysis and planning, business and data analysis, and communications.” The director of the office has been on the administrative staff for 13 years and reports to the university’s chief administrative officer. This is yet another take on it.

Do the proponents of Operational Excellence do a better job of capturing the essence of TPS than their predecessors in Lean, World-Class Manufacturing,  Synchronous Manufacturing, or Agile Manufacturing? The above-mentioned institute has a page defining Operational Excellence as “the point at which ‘Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.’” 

At first, it sounds like another version of True North, as explained by Art Smalley. Taking a closer look, as a general statement, it does not make much sense. It implies that every employee of every organization is involved in something that can, at least metaphorically, by described as a “flow of value” to customers. It is no stretch to see how this applies to a hot dog street vendor, but how does it work for, say, a firefighter? A firefighter serves the public by putting out fires, but the value of a firefighter resides in the ability to put out fires when they occur, not in the number of fires put out. A firefighter “seeing a flow of value to customers” is a head scratcher. As for “fixing the flow before it breaks down,” it conjures up the image of a plumber repairing a pipe that doesn’t leak.

Even Wikipedia editors are uncomfortable with their article on Operational Excellence. They denounce it as “promoting the subject in a subjective manner without imparting real information.” The definition is indeed short and confused:

Operational Excellence is an element of organizational leadership that stresses the application of a variety of principles, systems, and tools toward the sustainable improvement of key performance metrics.

Much of this management philosophy is based on earlier continuous improvement methodologies, such as Lean Manufacturing, Six Sigma, and Scientific Management. The focus of Operational Excellence goes beyond the traditional event-based model of improvement toward a long-term change in organizational culture.

It says what Operational Excellence is an element of, what it is based on, and what it goes beyond, but not what it is. And much of what these few words say raises eyebrows:

  1. The emphasis on metrics is a throwback to Management-By-Objectives, an approach that has historically not led to excellence at anything but gaming metrics.
  2. Lean Manufacturing, Six Sigma, and Scientific Management are emphatically not continuous improvement methodologies. Continuous improvement is a component of Lean but by no means all of it. Six Sigma is not continuous improvement at all, and Taylor’s “scientific” management was about preventing operators from colluding to curtail output, not improving processes.
  3. Continuous improvement is not event-based.  Contrary to what the name suggests, “Kaizen events” don’t do continuous improvement. This format was actually developed in the AME in the 1990s based on the realization that just continuous improvement could not accomplish changes of the scope that was needed.
  4. TPS/Lean, when correctly implemented, has always been about a long-term change in organizational culture.

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Jun 28 2014

40 Years on, the Barcode Has Turned Everything Into Information | Wired

“Without the barcode, FedEx couldn’t guarantee overnight delivery. The just-in-time supply chain logistics that allow Walmart to keep prices low would not exist, and neither would big-box stores. Toyota’s revolutionary kanban manufacturing system depends on barcodes. From boarding passes to hospital patients, rental cars to nuclear waste, barcodes have reduced friction like few other technologies in the world’s slide toward globalization.”

Source: www.wired.com

 

Michel Baudin‘s comments:

While this article exaggerates a bit, the fact is that the bar code is the first successful auto-ID technology, so successful in fact that more advanced technologies, like RFID or even QR-codes, have yet to displace it. There are barcodes on Kanbans, but you really cannot say that the system depends on them, because Kanbans were used early on without barcodes more than two decades.

The 40th anniversary of the barcode is an opportunity to remember, or learn, who invented it and why. This article does not credit the actual inventors, Norman Woodland and Bernard Silver, who patented it in 1952, but only supermarket executive Alan Haberman, who made its use practical to improve inventory tracking and speed up checkout. In 1974 he led an industry committee to adopt the barcode as a vehicle to implement a Universal Product Code or UPC. It is as much the story of the emergence of a standard as a story of technology.

In Manufacturing, barcodes are used almost everywhere to identify warehouse locations and stock keeping units, to validate picks, and to track component serial numbers. While celebrating the success and the usefulness of this technology, we should, however, remain aware of its limitations. Even in supermarkets, barcode reading remains a largely manual process. A human still has to wave around small items in front of a reader, or a reading gun in front of large items, and it often takes multiple attempts before you hear the beep confirming a successful read.

Fully automatic barcode reading is occasionally found in manufacturing operations where the environment is clean, with good lighting, high contrast, and a controlled orientation. QR codes are less demanding. They can be, for example, etched on the surface of a metal workpiece, and read inside the work enclosure of a machine-tool.

RFID tags hold the promise of full automatic reading at a distance. It has made them successful in public transportation passes like the Octopus card in Hong Kong or the Navigo card in Paris, as well as in electronic toll collection in the Fastrak system in California.

Barcodes are also limited to IDs and cannot be updated. As a consequence, they have to be used in the context of an information system that contains all the data keyed on the ID, which can be “the cloud” in a supply chain, or a local manufacturing execution system in a factory. By contrast, a high-end RFID tag can locally contain the entire bill of materials of a product moving down an assembly line, its current location in the process, and any measurements that may have been made on it at earlier operations. For a finished product, it can contain the entire maintenance history of a unit.

 

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Jun 27 2014

Fundamental failings in “Lean” procurement | Supply Chain Digital

A side-loading truck

“The famous Lean approach, adopted by companies all over the world, considers the expenditure of resources on anything that doesn’t create value for the end customer as waste and seeks to eliminate unnecessary processes within this framework.

The concern, however, is that companies are losing out by either not fully understanding the practice or not committing themselves enough to the change in thinking adopting it requires.”

Source: www.supplychaindigital.com

Michel Baudin‘s comments:

The points in the article are valid, and could be summarized by saying that, in procurement/supply chain management/logistics, efficiency should never be pursued at the expense of effectiveness.

The more fundamental mistake, however, is the half-baked notion that “anything that doesn’t create value for the end customer is waste.”  Any business activity involves tasks the customer is never aware of, let alone values, and a narrow-minded focus on what customers are “willing to pay for” blinds managers to the need and the benefits of, for example, supporting suppliers.

Customer willingness to pay is not an actionable criterion to identify waste. An activity is waste if, and only if, your performance does not degrade in any way when you stop doing it. If eliminating it does not degrade your quality, increase your costs, delay your delivery, put your people at risk, or make your employees want to quit, then it is waste. But, even with a proper perspective on waste, eliminating it only improves only efficiency, not effectiveness. It’s about getting things done right, not getting the right things done.In a manufacturing company, procurement/supply chain management/logistics is the pit crew supporting production, and the business benefits of doing this job better dwarf any savings achieved through efficiency.

Reducing order fulfillment lead times, introducing new products, or customizing them helps the business grow. And it may require spending more rather than less on the supply chain, for example by moving trucks that are not 100% full.

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Jun 25 2014

5S: It’s not About What is Done but Who Does It

In yet another discussion of 5S in the TPS Principles and Practice discussion group on LinkedIn, Ryan Ripley asked about the real meaning of the 3rd S, “shine.”  As several contributors pointed out, the 3rd S in 5S is Seiso, which translates to Clean, not Shine. As discussed in an earlier post, translating the 5Ss by five English words that begin with S is a misguided effort that results in systematic mistranslations.

For the first 4Ss, an earlier, imperfect but more accurate translation that I heard in the UK was R.I.C.K., which stood for:

  1. Remove — take all the items that are not routinely needed out of the work space.”
  2. Identify — assign and label locations for all routinely needed items.
  3. Clean — clean the equipment and the floors.
  4. Keep clean — enforce the daily discipline of doing 1 through 3.

I would add Second-Nature for the 5th S, because it means practicing the first four until they are assimilated to the point that enforcement is no longer necessary. This makes the acronym R.I.C.K.S. The translation as Sort, Straighten, Shine, Standardize, and Sustain is not remotely accurate and should be abandoned rather than plumbed for intellectual depth.

What is essential about the 3rd S, “Cleaning” is not what the task is but who does it. A janitor will wipe the oil off the floor and that’s it, the job is done. If the operator does the cleaning, then the hand guides the eyes and draws attention to details like frayed cables, broken dials, or puddles that weren’t there before. It works as an early warning system, and a stepping stone towards autonomous maintenance.

A challenge in organizing for operators to do this is that it is not direct production work. Much of what we do in designing operator jobs is making sure that they are relieved of all tasks that do not directly move the product towards completion. That is why, for example, assemblers should not have to unpack parts but instead should have parts unpacked by others and presented to them within arm’s reach, oriented for ease of assembly.

In the same logic, you might imagine that it makes sense to have others pick up after the operators, putting each tool back where it belongs and cleaning the work space. I remember a production manager in a car plant responding to the idea of setting aside the last 5 minutes of each shift to 5S by saying “that would cost us three cars.”

In reality, of course, I never heard of production performance going down as a result of doing 5S, but it is not a priori obvious.

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