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 / First Quarter 1997 / Issue 6(originally published by Booz & Company)


The Art and Practice of Japanese Management

The Lean, Mean Machine

The original ideas might have come from across the Pacific, but it was two Japanese -- Kiichiro Toyoda, the head of Toyota, and Taiichi Ohno, his right-hand man -- who transformed these theories into a new system of production. They did so by turning themselves into students of management -- visiting American plants for months on end during the 1950's and studying mass production, to see what made it so successful and how it could be bettered. They found the system rife with muda -- a Japanese term that encompasses wasted effort, wasted material and wasted time. Nobody except the assembly worker was adding much value, they noticed, and the emphasis on keeping the line running at all times meant that errors multiplied endlessly.(2)

The two executives eventually put all the pieces together to produce an entirely new system of production -- dubbed the Toyota manufacturing system by Toyota and "lean production" by almost everybody else. Its genius was to shift the focus of manufacturing from economies of scale to "economies of time."

It did this in three ways. The first was by making every employee a quality checker, responsible for spotting errors as they happen and correcting them immediately. Instead of installing a quality department, as its American rivals did, Toyota gave workers the right to stop the production line as soon as they saw errors.

The second improvement came from introducing "just-in-time" production. In the rest of the world, manufacturers made their components "just in case" they were needed. They filled bins, pallets and warehouses with days' or even weeks' worth of costly parts, which gathered dust until they were finally needed. The Japanese started making components "just in time," with parts arriving just as they were needed on the production line.

The third way to save time was "demand pull." Components in Western factories were traditionally delivered by "supply push" arrangements, with goods piling up when they were not needed. With "demand pull," they are made to order. At Toyota, for example, a kanban, or card, is attached to every box of supplies describing its contents. Returning the card to the supplier automatically reorders a further shipment.

This procedure challenges the entire basis of mass production, which was (and in many parts of the world still is) the dominant manufacturing philosophy. Mass production depends on two things, economies of scale and specialization. Workers, it is supposed, need to get more and more specialized in order to do their jobs more efficiently. And factories need to get bigger and bigger to achieve economies of scale. However, as the Japanese realized, this system also entails two costs.

The first is the inability of a classic mass-production system to respond to rapid changes in demand. Mass producers tend to be much keener on keeping standardized designs in production than in experimenting with new products, partly because of the heavy costs of changing the production line and partly because their specialized workers are happiest with what they know. A change in fashion may mean that the factory has to close down for months as machines are recalibrated and workers retrained. It may also force producers to throw away huge quantities of expensively stored but now obsolete inventory. By the time it is capable of mass producing the new product, the demand may have changed once again.

The second cost is an unacceptably high rate of faulty products. Large batches make it difficult to detect defects. This means that a defective part may not reveal itself until the finished car finally breaks down. It is easier for the next person on the assembly line to check a small batch. And a worker making only a small batch is likely to feel more like a craftsman, and less like a cog in a huge machine.

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