Lean Six Sigma Academy

Man, oh man.  The lean and business blogosphere feels as if it’s about to explode.

Ever since everyone’s “model” of how to run a business (a.k.a. Toyota) has run into serious trouble people seem to be jumping off the TPS bandwagon faster than Brett Favre fans.

It goes something like this, and I am paraphrasing:

“Thank you Toyota for helping to get this lean thing started. We really appreciate it. But you obviously don’t follow your own system or perhaps your system actually sucks so I’m leaving you. After all, my company hasn’t recalled millions of widgets (lately). Oh, and good luck with that brake problem. It definitely sucks to be you.”

Or here’s another version of what people are saying, again paraphrased.

“I have told you all along that following Toyota was not the way. Sure they have some good tools that they stole from the Americans… but I think you’ll agree now is the time to stop following them. They’re washed up. They’re too big. I mean, come on, they can’t even design a floor mat! Let’s do this thing on our own. After all, we can design floor mats and brake pedals that don’t stick… right?”

Get Out

Again, I am paraphrasing here… but this is the general feeling I’m getting from around the web.

You know what I want to say to all these folks jumping off the Toyota bandwagon?

Don’t let the door hit you in the ass on the way out.

Failure is Inevitable

You see, what people seem to be forgetting is every one of us has or will fail.

It all started with an apple a long time ago.  We’ll all fail in business, in our personal lives, and in our spiritual lives.

To be sure, if there’s  a certainty in life it’s that failure is indeed inevitable. The question then becomes how do we respond to this failure?

Do we say we’re sorry for our mistakes and attempt to fix it as fast as possible while implementing countermeasures so it never occurs again?

Or do we point fingers and hide like cowards praying we don’t get sued since the “cost benefit analysis” says we’re better off waiting for law suits then we are fixing all those Pintos, I mean widgets.

Toyota is Not Infallible

Toyota never promised us they wouldn’t falter… especially since they’re operated by men and women.

And Toyota never asked us to write books about them or learn about how they operate their company.

No, we did that on our own. And I, for one, am glad since I’m a better person for it.

I’m Here For the Long Haul

So am I am jumping from the TPS bandwagon or trying to “separate” myself from Toyota in these hard times? No way.

I’m here for the long journey. I still have so much to learn from them as well as from my own personal failures and successes.

And, alas, I’m prepared for all the bandwagoner’s to come crawling back on their bellies as they attempt to climb back on board the TPS wagon once things settle down. And they will settle down. This, I’m sure of.

What about you?

Where do you stand? Are you prepared to fight through this problem with Toyota or are you jumping for cover?

As regular readers of this blog know, I am not a big “news” reporting guy.

In other words, I rarely read a news story and then bang out an article around it since, honestly, this type of writing bores me beyond words.

But, unless you live under a rock, you’ve no doubt heard about how Toyota is up against it in a big way making this a bit more than your normal, every day, news.

And then Brian, a reader of the blog, sent me the following email making me feel even more compelled to offer my two cents. Here is what Brian asked.

Ron – What are your thoughts on how Toyota is handling this huge recall? They seem committed to finding root cause (using 8D methods like 5 Whys? etc) since they suspended sales of 8 models. But I think they should have drilled deep to ID root cause & corrective action BEFORE they suspended sales… because the media seems to be grilling Toyota over the “half-baked” plan of suspending sales before recall actions happen. Huge PR black-eye for Toyo, don’t you agree?

I’ve owned Toyota car for many years, luckily our RAV4 is not in the recall this time.

All the best,
Brian

Jidoka

Most lean practitioners understand the concept of Jidoka. It’s a pillar of the Toyota Production System.

The basic premise of jidoka is to immediately stop what you’re doing once an issue has been identified.

At that point, if it’s feasible and safe, a temporary solution may be implemented allowing things to start back up.

Then, a more thorough root cause analysis will be done allowing for a permanent countermeasure to be implemented ensuring the problem never occurs again.

When to Stop the Line?

Now, many are questioning the way Toyota is handling this. Some think they’re crazy for stopping production like they have.

Me, I don’t think they’re crazy at all. In fact, if anything, I think they waited too long.

I am not sure when they first realized the severity of the problem… but I am guessing it was some time ago. So, once the problem was identified I think they should have stopped production then and there.

But, to be fair, perhaps they did stop as quickly as possible. I am there so I don’t want to be too judgmental.

Sticks and Stones

Now, what about the press? Is the Toyota PR team doing the right things?

My guess is Toyota is far more concerned with finding a root cause and implementing a countermeasure then they are about how to spin the press machine.

So, sure, Toyota is feeling the pain right now. Their stock has taken a beating and many of their competitors are jumping for joy.

But it will not surprise me to see Toyota not only survive this devastating issue but also come out of it stronger than ever.

What do you think?

So, I’m curious. What do you think about the way Toyota is handling this problem? Are they doomed to become the next GM begging for bail out money? Or will they come out of this stronger than ever?

I am sorry.

These three words have been ringing about in my mind for the past week or so. No, I didn’t do anything terrible… in other words I am not personally sorry for anything.

The reason these words have been stuck in mind is because current Toyota President Katsuaki Watanabe, in response to the news that Toyota expects to lose $8.6 billion during this fiscal year, recently stated:

“Of course the external environment doesn’t help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry.”

Initially I was taken aback by Mr. Watanabe’s humility and courage for taking personal responsibility

Then I struggled with the idea that perhaps it’s easy, and dare I say convenient, to say you’re sorry when things go wrong.

My children often reply with these same three words when they’ve made a mistake. And if I sense they are truly contrite I may go easier on them.

So, I’m curious, what are your initial thoughts when you read Mr. Watanabe’s words?

Are you more willing to give him a pass since he says he’s sorry and they are, after all, the mighty Toyota?

Or do your eyes roll back in your head as you think to yourself… sorry doesn’t pay the bills, pal.

What do you think?

Guest Post by Jason Stokes

As practitioners of lean, we’re all in favor of using this powerful methodology to ensure we efficiently manufacture to customer demand while increasing throughput at the lowest possible cost.

However, often times it seems we only focus on half the equation – filling the demand that customers have for our products.

Toyota Stagnant

Toyota is often heralded as the champion of lean, through books like The Toyota Way, through Taiichi Ohno’s teachings, and through countless blog posts that reference the stellar way they do business. Why, then, if Toyota is a manufacturer we all need to emulate, are they not gaining business over their competition, especially Honda?

Toyota’s sales were down 8.3% by volume YTD in August. Honda’s sales were up 1.2%. These numbers would probably look worse in dollar amounts, given the product mix.

Honda Delivers

What gives? Simple.  Toyota is a great manufacturer. Honda makes vehicles people want to buy.

Honda manufactures 9 models for sale in the United States:

5 Trucks / SUVs / Vans:

1. Odyssey - Minivan
2. Pilot - Large SUV
3. CR-V - Small SUV
4. Element - Medium SUV
5. Ridgeline - Pickup Truck

4 Cars:

1. Fit – Ultracompact Car
2. Civic - Compact Car
3. Accord - Mid Size Car
4. S2000 - Sport Convertible

Toyota needs to Rationalize?

Toyota, by comparison, manufactures 18 models:

9 Trucks / SUVs / Vans:

1. Sienna - Minivan
2. RAV4 - Small SUV
3. FJ Cruiser - Small SUV
4. 4Runner - Medium SUV
5. Highlander - Medium SUV
6. Land Cruiser - Large SUV
7. Sequioa - Large SUV
8. Tacoma - Pickup Truck
9. Tundra - Pickup Truck

9 Cars:

1. Yaris - Compact Car
2. Corolla - Compact Car
3. Camry - Mid Size Car
4. Avalon - Full Size Car
5. Prius - Hybrid
6. Scion xA - no idea
7. Scion xB - no idea
8. Scion tC - Compact Car
9. Scion xD - no idea

Toyota’s car sales were down 8.3%, while their truck sales were down 16.8%.

Toyota, by virtue of its product mix, has set itself behind its primary competitor. It has added considerable complexity to the mix, by adding the Scion line of cars and a bevy of virtually indistinguishable models, along with a large stable of trucks and SUVs, which, as we are all well aware, have been hammered by high gas prices.

The Prius

Toyota’s one bright spot, the Prius, actually sold less through August 2008 than through August 2007. With customers clamoring for this vehicle, what happened? Toyota wasn’t able to predict demand well enough and was caught without the ability to sell its cars.

Keeping it Simple

Honda, on the other hand, has kept its product offerings simple, and has been able to capitalize on the small car push by selling 10% more Accords and Civics this year than last.

By marketing cars that people want to purchase instead of a stable of SUVS with no demand, Honda has kept sales flowing in the face of a tough market.

Customer is King

We must always remember that while we can be the leanest manufacturer in the world, it matters little if no one wants to buy our product.

Takt time = Net Available Time / Customer Demand

What happens to takt time if customer demand is zero?

If you don’t already read Jon Miller’s excellent blog you’ll want to pay a visit and read his most recent article “Toyota’s Top Engineer on How to Develop Thinking People.”

The original article Jon references is in Japanese making it useless to most readers of this blog (and me)!  Luckily, Jon was raised in Japan and speaks and reads Japanese so he is able to translate it for us.

Here is a small snippet.

Hayashi: I was really afraid of Mr. Ohno when I was young. But I think he was developing thinking people. He never gave us the answer. When he gave us an assignment, he would just stand by and watch us fail, even if he knew the answer.

If you read one blog today (OK two since you are reading this one) make it Jon’s.  Here is the link.

When I launched Google News this morning my eyes were immediately drawn to the headline “Toyota Posts First Profit Drop in Three Years.”

To summarize the article:

Net income fell 28 percent to 316.8 billion yen ($3 billion) in the three months ended March from 440 billion yen a year earlier, Toyota said in Tokyo today. That was lower than the 375.2 billion yen median of six analyst estimates compiled by Bloomberg. Sales rose 3.8 percent to 6.57 trillion yen.

The article went on to say that slowing sales in America and a stronger Japanese currency have largely contributed to Toyota’s challenges.

While this news is not great for Toyota, it could be much worse.

GM reported a first-quarter loss of $3.25 billion last month because of deteriorating performance in North America.

With this said, there was one aspect of the article that did catch my eye with particular interest.

Toyota plans to raise prices for models including the FJ Cruiser sport-utility vehicle, Yaris compact and Prius hybrid by as much as 2.1 percent in North America later this month to help offset rising materials costs.

Much is made of the fact that lean producers should focus their efforts on reducing costs since the market sets the price. As I mentioned in a previous article, some lean practitioners seem to slightly misinterpret Taiichi Ohno’s famous formula: Profit = Price – Cost.

While I’m not sure you can classify these models as “luxury” vehicles as Ohno calls them in his explanation of this formula, one could argue hybrid cars are in such great demand Toyota, in fact, can set the price a little higher and get away with it.

What do you make of all this? Is Toyota in trouble? Or are they in the best position to come through these tough times better than their competition?

Subscribe to LSS Academy

If you enjoyed this article please consider subscribing to our full feed RSS.  You can also subscribe by email and have new articles sent directly to your inbox.

Big, big news today as a top Toyota executive in the US, James Press, has been “poached” by Chrysler. This is at least the second big named Toyota person to jump ship for no doubt huge money.

Chrysler said Press will be charged with overseeing the vehicle maker’s North American sales, international sales, global marketing, product strategy and service and parts operations. The newly minted Chrysler executive also gains a seat on Chrysler’s board of directors and will also be appointed to an executive position at Cerberus Capital Management.

I am not sure what to make of this… but my initial, gut instinct, is this. Toyota is much bigger than one man. They will continue to prosper just fine without Mr. Press.  And I will not sit here and judge Mr. Press for his decision. I hope it works out for him.

My friend Mark over at the Lean Blog posted a respect for people question from a question he saw on the Lean Insider blog. 

For those new to this blog respect for people is an extremely important aspect of lean.  In fact many would say it is the most important aspect.  I would agree.

However, I sometimes wonder if the whole respect for people aspect of lean gets carried away from time to time.  I blogged about this before when we discussed whether laying people off was really anti-lean.  Now, as I explained after posting that article laying people off as a result of “lean activity” is the surest way to kill the initiative.  I don’t think anyone in their right mind would argue that.

But what if Toyota offers to relocate its worker to another American city (e.g. San Antonio, Kentucky, etc.) instead of staying in California?  Would that be respectful enough?  What if they also offer, to those not wanting to relocate, a sweet severance package on top of 90 additional days on the payroll where the employee could search for another job with the help of Toyota Human Resources and career counselors.  Would that work?

For some I am sure the only move Toyota can make in order to be “respectful” is to stay in CA and work to become more competitive.  After all, they will claim, Toyota wrote the book on respecting people so how dare they let that silly “for profit” aspect of their business model get in the way.

Ah hell, I don’t know.  What do you think?

Guy Kawasaki had an interesting post today in reference to the types of stories people like to talk about.  There were nine types discussed… but one immediately caught my eye.

David vs. Goliath. In the story of David and Goliath, the young Hebrew David took on the Philistine giant Goliath and beat him. It is the way Southwest Airlines conquered the big carriers, the way the once unknown Japanese car manufacturers took on Detroit, and the way social media is taking on the media giants. Sharing stories about how a small organization is taking on a big company is great business sport. Rooting for the underdog grabs our emotions, creates meaning, and invokes passion. We like to listen to the little guy talk about how he’s going to win and why the world—or the industry—will be a better place for it.

I am assuming one of the Japanese car manufacturers referenced is Toyota.   I have never thought of Toyota as a type of David.  I mean they are Toyota!  But when I stop to think of their history and how they rose from near death the parallel’s to the young David are strong.

The Irony

The irony of the situation is what happened with David after defeating Goliath.  In his older years David had some, well… let’s call them issues with the beautiful Bathsheba.  These issues included the sins of adultery and even murder.  Bad stuff indeed.

David, for those that don’t know how the story ends, did go on to repent and live his life in a contrite manner but the effects of his sins would never escape him.

Who is Toyota’s Bathsheba?

No one can argue that Toyota has slain the mighty Detroit 3.  Well, some may attempt to make the argument but they are in deep denial and should seek mental assistance in my humble opinion.

In this light, Toyota may be likened to the older David who did some terrible things and paid dearly.  While Toyota’s sins may not be adultery or murder (at least I sure hope not!) there could be other sins creep in like building too many plants, getting complacent with quality, and losing focus on the simple things that has helped them get to where they are today.

The Rest of the Story

Only time will tell how Toyota deals with its success.  I, for one, hope they continue to prosper.  But it’s never easy being on top since everyone is gunning for you and eventually some new up and coming company will become the new David.  And when this happens many will be all too happy to watch the mighty goliath fall.

Click here to watch a free video of Dr. Shankar Basu, president and CEO of Toyota Material Handling, USA.  This is NOT a sales pitch so don’t worry and Dr. Basu even speaks about reducing transportation which he half jokes will hurt his organizations business.  The video starts slow but stick with it as it covers lots of important ground.  Mr. Basu offers details behind Toyota’s success, including:

• Toyota Production System
• Kaizen
• TQM
• Push versus Pull
• Genchi Genbutsu
• Kanban
• Heijunka
• Jidoka
• Respect for People

He also discusses how the Toyota Way as discussed in Jeffrey Liker’s book “The Toyota Way” is actually a bit dated.  He mentions how the Toyota way was modified a bit in 2001.  This comes toward the end of the video.  The video is 54 minutes long but since the video is just of him standing there talking you can easily turn up the volume and work on other things while listening.

Again, click here to watch the video.  If that link doesn’t work try this one (you will have to register with this link which is free).