Introduction 1.4: Heavy Lean Principles

The practices of Heavy Lean were developed to address the specific process constraints associated with heavy parts and heavy machines.  However the primary principles of Heavy Lean are universal across all types of processes.

1.    Maximize value.

Any process converts inputs into outputs.  Inputs are the raw material of the process.  Outputs are the products or services created by the process.  Heavy Lean has an unrelenting focus on maximizing the value from the outputs of a process.

2.    Minimize waste.

Waste is the opposite of value.  An activity of a process may create any combination of value and waste.  Reducing waste is one method to achieve the first principle of Heavy Lean.  Minimizing waste also lowers costs by not paying to produce what no one wants.

3.    Achieve continuous flow.

The outputs of one activity of a process flow to become the inputs of the next.  Outputs flow to inputs across functional boundaries and even organizations.  One of the primary inventions of Heavy Lean is how to achieve continuous flow while maximizing value and minimizing waste.  Continuous flow produces more value faster with less waste.

4.    Pursue perfection.

Another invention of Heavy Lean is that perfection is possible.  New methods to increase value, lead to new methods to reduce waste, which in turn lead to new methods for achieving continuous flow.  Any enhancement resulting from the first three principles creates new opportunities to apply the other principles in the ongoing pursuit of perfection.

Figure I.1:  Spiraling in on Perfection

 

The definition of perfection cannot be known in advance.  It takes a journey.  Applying the principles of maximize value, minimize waste, and continuous flow defines each today what is possible tomorrow.

None of the Heavy Lean principles listed above specifies a practice for how to realize those principles.  Toyota developed practices based on the principles of Heavy Lean in the pursuit of perfection over the last 50+ years.  Those practices not only allowed Toyota to maximize value, minimize waste, and achieve continuous flow.  They also allowed Toyota to increase both employee and customer satisfaction, improve quality, reduce cost, and increase revenue year-after-year.^[i],[ii]

If only Heavy Lean practices weren’t so heavy.  The opportunities and constraints of heavy manufacturing processes are greatly different than those found in information intensive environments.  Information workers do not have the same operational characteristics as heavy machines or their operators.  Information does not have the same flow characteristics as heavy parts.  A different approach is needed to apply the principles of Heavy Lean to information-centric processes.

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[i]    James P. Womack, Daniel T. Jones and Daniel Roos, The Machine that Changed the World, HaperCollins  (1991) pg. 80

[ii]  Jeffery K. Liker, The Toyota Way, McGraw Hill (2004) pg. 5

Introduction 1.3: Heavy Manufacturing Constraints

There are constraints associated with any process that involves heavy machines and heavy parts.  The practices of heavy manufacturing must operate within those constraints.

1.    Heavy parts are hard to move.

Because heavy parts are hard to move they don’t have complex flows.  They follow a serial process where each activity is performed one after the other in sequence.  It is not easy to move heavy parts back and forth around the plant.  Nor is it possible to make copies of heavy parts. 

2.    Heavy parts are hard to misplace.

It is pretty easy to spot a heavy part.  They are very visible.  They don’t go missing very often.  It is obvious if a heavy part is not where it is supposed to be and because of its weight if it is not where it belongs chances are it didn’t get very far away.

3.    Heavy machines are hard to move, but once in place they stay there.

No one likes to move heavy machines around a plant.  It can be done but change is hard.  However if a change is necessary, heavy machines will move as required.  And once moved a heavy machine will not try to move back.  It will stay in place and do its job.

4.    Heavy machines just do what they are told.

The operation of a heavy machine is linear in nature.  A heavy machine does not care what changes are made to it or its surroundings.  Heavy machines are predictable.  For every action that occurs with a heavy machine there is a probable reaction.

5.    Heavy machines do only one thing at a time.

Heavy machines have a specific purpose.  They are poor at multi-tasking or doing multiple tasks at the same time.  It can be difficult for heavy machines to quickly switch from one activity to the next.  Once it is working, getting a heavy machine to perform a brand new task can be very challenging.

The constraints of heavy parts and heavy machines provide both advantages and disadvantages in the adoption of Heavy Lean practices.  The lack of complexity of heavy manufacturing processes enables current and future state improvement analysis to be performed in less than a week due to.  Many process enhancements can literally be done overnight.  Process changes can be performed without warning because the machines don’t care.

The disadvantage of a process with heavy parts and machines is the lack of flexibility to adapt to changes in the operational environment.  It is difficult to rapidly handle changes to the mix and volume of work or to the resources available to perform that work.  The multi-tasking of ad-hoc parallel processes by multiple independent interchangeable resources is not an option with heavy manufacturing. 

Heavy manufacturers perform well given the constraints of heavy parts and heavy machines.  The relative simplicity of that operational environment over one that includes primarily information intensive processes has its advantages.  But the opportunities and constraints associated with information processing are not the same as heavy manufacturing processes.  There is much to be learned in principle from manufacturers, but care must be taken to avoid the application of heavy manufacturing practices where they don’t fit.

Introduction I.2: The Invention of Heavy Lean

Manufacturers have an advantage in process innovation because their processes are material intensive and therefore largely visible.  They get to see their process every day.  They see what works and what doesn’t.  As a result they take action to improve what they see.

Mass production replaced the craftsman era of manufacturing in the early 1900’s.  Craftsman that worked on a product from beginning to end were replaced by specialists in an assembly line, each using standardized parts to create some portion of the final product.  Mass production techniques “catapulted Ford to the head of the world’s motor industry and virtually eliminated craft-production companies unable to match its manufacturing economies.”[i]

The principles and practices of mass production were soon adapted to business processes.  The flow of paper in the office was not much different than the flow of material on the assembly line.  Mass production gave us the serial business process; each step of the process standardized and performed by specialists.

Beginning in 1950 Taiichi Ohno helped to develop the Toyota Production System for their heavy manufacturing operations.  The term Lean was coined by International Motor Vehicle Program researcher John Krafcik to describe the Toyota Production System “because it uses less of everything compared with mass production – half the human effort in the factory, half the manufacturing space, half the investment in tools, half the engineering hours to develop a new product in half the time.”[ii] 

Lean has now replaced mass production as the primary method for innovating manufacturing processes. Its rise has been rapid.  Heavy manufacturers outside of Toyota first began to adopt Lean in the 1990s, with other non-heavy industry sectors beginning to adopt Lean in the 2000s.

Lean is referred to in this book as Heavy Lean.  This distinction is made because Heavy Lean was originally developed to support heavy manufacturing; with its heavy machines and heavy parts.  The practices of Heavy Lean were developed with all of this heaviness in mind.

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[i]   James P. Womack, Daniel T. Jones and Daniel Roos, The Machine that Changed the World, HaperCollins  (1991) pg.30

[ii]  James P. Womack, Daniel T. Jones and Daniel Roos, The Machine that Changed the World, HaperCollins  (1991) pg.13

Chapter 1 Summary

• The advent of computers broke the constraints associated with paper-based processes, but by so doing also broke the control structures and visual cues used to manage information processes.

• Process is a flow of activities that when executed consume resources for the purpose of creating value.

• The purpose of process is to create customer value, not to control the resources of an organization. Different levels of process control may be required depending on the value being created.

• The cost/benefit of an information process can be determined by analyzing the incremental value created by each activity as well as the incremental cost to produce that value.  Summing the total value and cost of all of the activities of a process establishes its cost/benefit.

• The process cookbook model provides recipes for completing individual activities but is not sufficient to govern the interactions between multiple chefs creating multiple dishes from multiple recipes for multiple patrons.

• It is possible to tell the approximate age of an organization by looking at its process rings-on-a-tree since processes are continually added but rarely taken away.

• The bottleneck principle:  People downstream of a bottleneck are given more work to stay busy until they too become a bottleneck.  This principle applies until all process activities are bottlenecked.

• Fit is a process strategy for maximizing the value created from available resources.  Function is a process strategy for minimizing the cost of the individual activities of each process. 

• Together Fit and Function address the issues of the process cookbook, process rings‑on-a-tree, and process spaghetti to increase an organization’s competitive advantage.

• Glean implements the strategies of Fit and Function to glean the maximum customer value from the available resources of information processes.

Chapter 1.9: Process Strategy

Operational Excellence is a philosophy for increasing the efficiency and effectiveness of process Function.  Michael Treacy & Fred Wiersema in the Discipline of Market Leaders describe operational excellence as an unrelenting focus on driving down costs.[i]  They refer to both the tangible and intangible costs of:

·         Operating cost

·         Total ownership cost

·         Inconvenience cost 

Where inconvenience cost includes the intangible costs stemming from annoyance and irritation. 

But as Michal Porter points out, operational excellence is necessary but not sufficient to maximize the value of process.[ii]  To glean the maximum value from an organization’s resources requires more than operational excellence.  It also requires that the processes of an organization fit in value alignment with each other.  A process without Fit can be highly efficient and effective at creating redundancies and wasted effort.  It could result in an organization going really fast in the wrong direction. 

Value Optimization is a philosophy for increasing process Fit.  Value Optimization is an unrelenting focus on increasing value.  Operational excellence takes a transactional view for reducing costs.  Value Optimization takes a system view for increasing value.  Together they help organizations achieve one or more of the following:

·         Produce a fixed customer value at a reduced cost

·         Increase the customer value produced at a fixed cost 

·         Raise competitive differentiation 

Applied together, the philosophies of Operational Excellence with its focus on Function and Value Optimization with its focus on Fit create highly efficient and effective processes.  Figure 1.11 is a drawing by the artist M. C. Escher called “Day and Night.”  Function is represented by the efficient flight of the geese.  Fit is represented their ability to fly both day and night; and by the smooth passing of two flocks of geese, without a single ruffled feather.  Together the combined strategy of Fit and Function enables the geese to complete their migrations efficiently and effectively.

Figure 1.11:  Combining Fit and Function

Flying is a function geese perform well.  But if they could not fit into a pattern of flying day and night it would take them much longer to reach their annual destination. 

Southwest Airlines is used as a case study for combining the strategies of process Fit and Function.  In “The Discipline of Market Leaders” Treacy & Wiersema refer to Southwest Airlines as a leader in operational excellence.  They discuss how airplane standardization reduces the variety associated with maintenance and other functions; where variety is the destroyer of efficiency.  In “What is Strategy” Porter notes, airplane standardization also creates an effective fit with the process of gate turnarounds. By executing faster gate turnarounds than its competitors, Southwest benefits from more frequent departures and the greater use of its equipment.

 The process strategies of Fit and Function address the issues of the process cookbook, process rings-on-a-tree, and process spaghetti to increase an organization’s competitive advantage.  Function, with its focus on cost reduction, is by itself not enough to fill the gaps in the process cookbook model, eliminate the formation of layer after layer of process, or stop process bottlenecks from forming.  Together process Fit and Function apply a system-view to maximize process value while minimizing cost.

Figure 1.12 is a matrix of strategies for maximizing process value.  The left side of the chart lists the two process components: process execution and process flow.  The top of the chart lists the two process strategies: Fit and Function.  Each quadrant of the chart describes the approach for achieving the Fit and Function of process flow and execution. 

Figure1.12: Process Strategy Matrix



Focusing on only one process strategy, such as applying operational excellence to just quadrant #4, leaves on the table opportunities to maximize value and minimize cost.

Each quadrant of the process strategy matrix includes a strategy for maximizing process value and minimizing cost.  Each strategy can be used independently or in combination with the one or more of the other three.  However not applying all four strategies of the process strategy matrix at the same time reduces opportunities to maximize value, lower cost, and therefore increase competitiveness. 

Glean implements the strategies of Fit and Function to glean the maximum customer value from the available resources of information processes.  Later chapters will discuss the principles behind these strategies and practices for their implementation. 

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[i]     Michael Treacy and Fred Wiersema, The Discipline of Market Leaders, Addison-Wesley (1995)

[ii]    Michael J. Porter, What is Strategy?, Harvard Business Review, November-December  (1996)

Chapter 1.8: Process as a Competitive Advantage

Eiji Toyoda did not begin to develop what became to be known as the Toyota Production System (or Lean as it is called the USA) as part of a process improvement program.  He did so to help Toyota become more competitive.  In 1950 Toyota was “determined to go into full-scale car and commercial truck manufacturing, but it faced a host of problems.”[i]

·         The domestic market was tiny and demanded a wide range of vehicles – luxury cars for government officials, large trucks to carry goods to market, small trucks for Japan’s small farmers, and small cars suitable for Japan’s crowded cities and high energy prices  

·         The native Japanese work force was no longer willing to be treated as a variable cost or as interchangeable parts

·         The war-ravaged Japanese economy was starved for capital and foreign exchange.

·         The outside world was full of huge motor-vehicle producers who were anxious to establish operations in Japan and ready to defend their established markets against Japanese exports

In the thirteen years prior to 1950 Toyota had produced a total of 2,685 automobiles.  When compared to the 7,000 automobiles produced per day produced by a single Ford plant in 1950 it was apparent that Toyota would not be able to compete with Detroit’s ability to mass produce a wide range of vehicles using the same practices. 

Eiji Toyoda engaged the Toyota workforce in a continuous incremental improvement process that indeed changed the world.  In 2008, for the first time in 78 years, Toyota sold more cars and trucks around the world than GM; the former number one automobile manufacturer.[ii]  Toyota achieved its objective of becoming more competitive. 

Michael Porter describes companies as “a system of activities in which competitive advantage reside.”[iii]  These activity systems are not merely a discrete collection of independent activities that can be optimized to perform a particular “function.”  They must “fit” together as part of an integrated system to create a sustainable competitive advantage.

Such systems, by their very nature, are usually difficult to untangle from outside the company and therefore hard to imitate. And even if rivals can identify the relevant interconnections, they will have difficulty replicating them. Achieving fit is difficult because it requires the integration of decisions and actions across many independent subunits. 

Fit is a process strategy for maximizing the value created from available resources.  Not only must activities be designed to maximize the value created by their parent process, they must also be designed to help maximize the value of as many other processes as possible.  Fit looks for relationships between otherwise seemingly unrelated process activities that if strengthened would result in greater value produced by the activities as a whole.  The strategy of Fit is for each process to fit-like-a-glove with the other processes of an organization. 

Fit is the companion strategy to Function.  Function is a process strategy for minimizing the cost of the individual activities of each process.  Whereas Fit focuses on process value alignment, Function’s focus is on cost reduction.  Fit and Function are the Yin and Yang of process strategy.  At least one, preferably both, are necessary to achieve a competitive advantage. 

As Porter describes, for a company to compete:

It must deliver greater value to customers or create comparable value at a lower cost, or do both. The arithmetic of superior profitability then follows: delivering greater value allows a company to charge higher average unit prices; greater efficiency results in lower average unit costs. 

Toyota achieved a sustainable competitive advantage by delivering greater value at lower costs than GM and the rest of the automobile industry. They achieved process Fit and Function by continuously looking for ways to reduce the cost of each activity; as well as how each activity could increase the value of other process activities; including those of suppliers and customers. 

 

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[i]   James P. Womack, Daniel T. Jones and Daniel Roos, The Machine that Changed the World, HaperCollins  (1991)

[ii]   Inside Wheels.ca, Toyota Knocks GM from No. 1, The Associated Press (2009)

[iii]  Michael J. Porter, What is Strategy?, Harvard Business Review, November-December  (1996)

Chapter 1.7: Process Spaghetti

With paper reduced, people are the most visible component of any process.  Not only are they easy to spot, but in many information intensive organizations they are the most expensive resource.  When it comes to improving processes, this makes people, and the work they do, targets for scrutiny.  One of the unwritten laws associated with any expensive resource is that it must be busy all of the time. 

Suppose somebody in an organization is not busy.  What happens?  They are given more work to do.  They may be given work that is part of their current process, or it may be work from another unrelated process.  What probably wouldn’t happen is an analysis of why their current activities did not keep them busy.   

Because of their roots in paper, the activities of most information processes are performed in a serial order.  Each activity is executed one-at-a –time and the next not started until the prior is completed.  Since paper was expensive to copy, parallel processes were rarely used.  Because of the process rings-of-a-tree phenomenon, the serial process flow model is still prevalent even after paper is eliminated. 

A natural characteristic of any serial process is that it creates bottlenecks.  An example of this is a highway.  Where one section of a highway can be smooth sailing, the next section can be stop-and-go, followed by a section where traffic is again flowing freely. 

A bottleneck in a serial process slows the amount of work getting through just like a bottleneck in a highway.  If work starts to pile up behind a bottleneck, the people downstream of the bottleneck will soon run out of things to do.  Then what happens?  They are given more work to do. 

Another characteristic of a serial process is that bottlenecks can independently move up and down a process.  Watch the bottlenecks of a highway and you’ll notice that some bottlenecks always occur at the same location while other bottlenecks appear to move randomly up and down the highway. 

The same occurs for serial information processes.  One day a bottleneck could be located at one activity in a process; and the next day at another.  Bottleneck locations change as the mix of work and the available resources change.  If a bottleneck moves, people with plenty of work to do, may suddenly not have enough.  Then what happens?  They are given more work to do.  

As bottlenecks shift from one location to the next, the cycle of handing out more work to keep people busy continues.  If a bottleneck is temporarily removed so that someone downstream now becomes too busy, nothing is usually done other than to ask them to work harder.  But the bottleneck moves again so that the same person now has too little to do, they are given more work. 

Finally, the ongoing effort to make sure everyone is busy results in a status quo where everyone always has too much to do.  This status quo is called process spaghetti. 

Figure 1.10 is a depiction of the bottleneck principle of process spaghetti.  Process A, B, and C are each serial processes.  Each box indicates one or more activities executed by one or more people.  The first activity of each process is numbered A-1, B-1, C-1; the second A-2, B-2, C-2, etc.  Note that the same people are responsible for executing the activities of A-2, B-2, and C‑2.  In this example these people originally only had activity B-2 to perform.  But over time they were given the work of A-2 and C-2 to keep them busy.

Figure 1.10:  Process Spaghetti and the Bottleneck Principle

 

People downstream of a bottleneck are given more work to stay busy until they too become a bottleneck.  This principle applies until all process activities are bottlenecked. 

As process spaghetti begins to develop it causes even more spaghetti.  Suppose the people responsible for activities A-4 and B-3 were only recently given activity A-4 because of a bottleneck at activity B-2.  Since it’s a new activity for them they want to make sure it’s done well, so they decide to do all of the A-4 work before any B-3 work.   

Now under this scenario, the people responsible for activity B-4 no longer has enough to do, because B-3 is now bottlenecked.  Then what happens?  They are given more work to do. 

Process spaghetti once formed is very difficult to unravel.  Suppose there was an effort to remove the bottlenecks from Process B in Figure 1.10.  If the people responsible for activities A-2, B-2, and C-2 were told to prioritize B-2 work over everything else, then a logjam of work would suddenly flow to B-3.  The size of the bottleneck for the people responsible for A-4 and B-3 would increase.  In addition, work flowing to A-3 and C-3 would be reduced further; bottlenecking those processes.  The net result of removing the B-2 bottleneck could be a reduction in the value created by all three processes. 

A lot of progress can be made removing bottlenecks before anyone notices a change in created value.  It can take months to clear a single process of its bottlenecks without impacting too negatively otherwise seemingly unrelated processes.   

The time and cost it takes to unwind process spaghetti is not the only issue.  It can also be difficult to sustain management commitment.  Bottleneck removal projects can quickly run out of steam when management runs out of patience waiting for a positive result from a Process B; while hearing about all the problems cropping up with Processes A and C.