Could ‘lean’ business thinking – a strategy concept embraced religiously in organisations such as Toyota, where it was invented, and practiced by strong-performing companies like Intel and Ryanair – be the key to restoring Ireland’s lost competitiveness?
In recent weeks, public-sector bosses and blue-chip business leaders piled into an event in Dublin, sponsored by Fujitsu, where the author of The Toyota Way, Jeffrey Liker, outlined how lean thinking and operational excellence can be wielded as a strategic weapon.
Ireland needs to think strategically again. Countries like Poland and Singapore want to recreate our recent success story. Not only are they copying our tactics, but they are also better at them.
“Don’t let a problem get into the next operation. Stop and fix the problem. Track quality, and every time you do it again, make sure it’s above standard every time,” explained Liker, a professor at the University of Michigan, at the event.
The Toyota Way, or simply ‘lean’ as it is known throughout the corporate world, has resulted in Toyota producing the highest quality cars with fewer man-hours, less inventory and fewer defects than any other manufacturer in the world.
At Intel in Leixlip, lean principles have helped the 5,000-strong organisation remain valuable in the eyes of the global corporation because it can offset high costs of electricity and the workforce with greater efficiency.
Liker explained that Toyota’s lean principles were born during the manufacture of looms in Japan in the Thirties. “This has been an evolution that has been going on for decades.
“Basic concepts like just in time (JIT), the delivery of the right part to the right place just when its needed, were introduced by Toyota in the Fifties and the concept of building in quality, never letting problems get into the next step and raising the standard every time was honed.”
A key principle that should be looked at, said Liker, is the notion of standardised work.
“The challenge is that every time you make an improvement to a process, how do you make that improvement stick? The only way it sticks is if you document it and train everybody to do that job the new way until you come up with a better way.”
Another waste that should be watched in blue-chip and public-sector Ireland is the employment of expensive consultants who just come and go.
“It’s the workforce that should own the changes. Experts leave. Get the people in the work area to understand their job because they’ll still be there tomorrow.
“If there’s a problem, get them to visualise the problem through charts, models and toys. Study the trends, track quality and every time you make an improvement, improve on it the next time.”
Liker discovered the Toyota Way when he became fascinated by how much better the Japanese were at making cars than Americans.
“They were continuously improving how they made the tools, the metal they cut, how it was painted, how they worked with suppliers and how everything was delivered. There was no one answer, but tens of thousands of improvements happening all the time.
The problems afflicting America’s car industries today, Liker believes, are due to the accumulated costs of many decisions over the past 50 years, including pension and healthcare obligations. “The other part is the management decisions they made. All auto companies in the US had profitable years. General Motors was making $9bn in profits. It kept making investments, spreading itself thin, and when the credit crunch came it didn’t have the money to get through.”
Surviving today’s downturn is key and Liker said lean will get firms through. “This downturn could last for months or years, but it won’t last 20 years. When business picks up, firms need to be well placed to take advantage.
“They need to look at where the growth will come from. Lean is not about closing down plants and making people redundant.
“Lean is about building up quality, developing people and ensuring they are motivated to improve. The companies that will thrive in the upturn will have the capacity to cater for demand.
“Businesses are constantly downsizing, so they’re losing capacity. There’s also the chance that competitors are struggling more than they are and they should be positioned to take competitors’ customers.
“Smart companies are saying: ‘how can I come out of the recession stronger?’”
Liker says that Toyota has a policy of not laying people off, guaranteeing lifetime employment. “In a time of downturn, the extra people they don’t need are kept in the operation, trained up and given the task of studying every aspect and detail of the operation.
“Every time there’s a problem, they are tasked with finding the root cause, finding a counter measure. This gives businesses the opportunity to reflect, train people and fix problems so that when business rises, everybody will be more skilled than they are now.”
By John Kennedy
Pictured: broadcaster John Bowman interviews Jeffrey Liker at the recent Fujitsu Executive Event, which was held at the Irish College of Physicians