Of the hundreds of walks that Dr. Womack and Mr. Jones have taken since the mid-1980s, perhaps the most significant was conducted by Mr. Jones in 1995, at the Tesco supermarket chain. At that time, Tesco was an unusually innovative grocer operating largely within the U.K. Mr. Jones had consulted with Tesco supply chain director Graham Booth for six years. By streamlining the chain’s warehouses, they had exposed the chronic lateness of many Tesco suppliers: More than 20 percent of the grocer’s goods arrived behind schedule. In fact, only the providers of fresh fruit and fish, propelled by high spoilage rates, consistently delivered on time. Why couldn’t the suppliers of cans and boxes do the same?
Mr. Jones and Mr. Booth started at the grocery aisle for soft drinks, walked back to the shipping dock, and then drove back to the bottling plant. “This single can,” Mr. Jones recalls, “took five minutes to drink; but it sat for five weeks on pallets at the bottler’s, and for 21 days in Tesco’s back rooms.”
Suddenly, it was obvious how much of Tesco’s profits depended on the processes it shared with other companies. Over the next few years, Tesco entered into strategic partnerships with many of its suppliers, including Procter & Gamble, Unilever, and Coca-Cola, sharpening distribution schedules wherever possible. Weekly shipments were replaced with daily deliveries. To accommodate the stepped-up timetable, cans and bottles were carted on wheeled pallets that snapped directly into the shelf fixtures. The sitting time for a can of cola shrank to five days.
Tesco parlayed its lean strategy into an impressive overall financial performance — nearly doubling annual sales and net income between 2001 and 2004 — a burgeoning global strategy, and a pioneering role as the first major supermarket chain to run a Web-based delivery business profitably. It now owns 35 percent of the Safeway grocery chain in the U.S. and hundreds of stores in South Korea, Japan, China, Southeast Asia, and Eastern Europe. Tesco is becoming Wal-Mart’s most challenging competitor in today’s emerging consumer economies. (See “Welcome to Tesco, Your Glocal Superstore,” by Victoria Griffith, s+b, First Quarter 2002.)
“We experimented first with retail systems linked to distribution processes, and then moved on to inventory management, key performance measures, store design, product mix, supplier relationships, and ultimately our supply chain strategy,” says Mr. Booth, who retired in 2002. “The hardest part was breaking through our corporate mind-set.”
The Tesco walk was a turning point for Dr. Womack and Mr. Jones as well. Previously, they had essentially based their practice on codifying and adapting Toyota’s famous manufacturing production system so other companies could replicate it. They had first encountered that system as part of the research for a seminal book they coauthored, The Machine That Changed the World (HarperCollins, 1991). During the late 1980s and early 1990s, they had expanded on Toyota’s ideas, incorporating concepts from supply chain management, the quality movement, total productive maintenance principles, and MIT systems theorist Jay Forrester. But they always remained focused on one key Toyota precept: muda. Translated from Japanese, muda means “waste,” but in the Toyota-Womack-Jones lexicon, it represents any excess interruption, misalignment, unnecessary work, or ingrained redundancies that add no value for customers. By dispassionately removing muda from all parts of a corporate system, Dr. Womack and Mr. Jones taught managers not just to slim down bureaucracies and speed up processes, but also to breathe new life into corporate strategies. Hence the name for their approach: “lean thinking.”