Business Today

Lean is about a shared process: James P. Womack

As a research scientist at the MIT between 1975 and 1991, James P. Womack directed a series of comparative studies of world manufacturing practices. Impressed by Toyota’s ‘lean’ manufacturing system, he turned a lean evangelist in 1997. Since then, Womack has been propagating the lean religion. He spoke to BT’s R. Sridharan on the benefits and challenges of going lean.

     Print Edition: September 7, 2008

As a research scientist at the Massachusetts Institute of Technology (MIT) between 1975 and 1991, James P. Womack directed a series of comparative studies of world manufacturing practices.

In 1990, his years of research— more specifically, a five-year study on the future of the automobile—resulted in a seminal book on the revolutionary manufacturing practices developed by Toyota Motor Co. Entitled The Machine That Changed the World (co-authored with Daniel Roos, director of MIT’s International Motor Vehicle Program, and Daniel Jones, the programme’s European director), the book was a wake-up call for Detroit, until then home to the world’s largest vehicle manufacturers.

James P. Womack, Founder & Chairman, Lean Enterprise Institute
James P. Womack, Founder & Chairman, Lean Enterprise Institute
For the first time, the world at large discovered the secret sauce that Toyota had been using to grow relentlessly in global markets. Evidently, Womack, 60, was so impressed with Toyota’s ‘lean’ manufacturing system (so called because its secret lay in using less of everything: men, materials and money) that he turned a lean evangelist in 1997, when he set up the (nonprofit) Lean Enterprise Institute in Cambridge, Massachusetts. Since then, Womack has been travelling the world around propagating the lean religion. Recently in India for a seminar, Womack spoke to BT’s R. Sridharan on the benefits and challenges of going lean. Excerpts:

It is nearly two decades since you introduced the world to Toyota’s secret weapon: lean manufacturing. Has lean moved out of factories and into other businesses? What people have to realise is that lean is all about process—there’s a design process, supply management process, customer support process, and there’s a production process.

And yet, people think of lean as something that belongs in a factory. The challenge is to make people understand that everywhere where value is being created, it’s a process. Your core business is a process. Everybody can see that. But most managers have a difficult time seeing that everything else is just a collection of processes. So,first with regard to Lean World, we’ve been trying to spread the idea out of manufacturing, into everything else. And it’s worked pretty well.
 
Q. In businesses like financial services, don’t you already have a competitor in Six Sigma?
A.
When we wrote the book (The Machine That Changed the World), lean was about factories. Since then, there has been a gradual spread of understanding that, gosh, you could apply these ideas to the operational side of any business. Think about the insurance business. Where’s the greatest money spent in the insurance business? It’s in running policies and processing claims. Those are two, if I may say, industrial activities.

Q. Why is that not many companies, even in the US, have succeeded in implementing lean?
A.
What are the problem areas? Well, of course, I think they’ve succeeded, but it depends on your definition of success.

Q. Get the sort of results that Toyota has over the years.
A. So, let’s see. I went to Boeing in 1992. They were doing a disconnected batch-building process on aircraft and parts. Took forever. Tremendous amounts of rework and backflow. Typical job cycles— look for parts, look for tools, look for prints, look for help. You could just sit there and watch people build aeroplanes. When I first went out there, it took 45 days to assemble the 737 with a tremendous amount of effort. Now it takes eight days and with far fewer workers.

Q. Why haven’t Ford and General Motors been able to emulate Toyota’s success?
A. The ironic thing about the continuing decline of Ford and GM is that they’re vastly better companies than they were seven or eight years ago. GM and Ford, without the legacy cost in North America, are better companies. Let’s look at the new cars, the new Malibu versus the Camry. These cars are identical.


"If you have a bunch of people who were using picks and shovels and you give them a bulldozer, you don’t need to put lean into this"
And the latest durability stuff that’s done by the consumer organisations shows that three years later GM products were holding up against Toyota products. Then, look at transaction pricing, the actual pricing in the market, and you have a few thousand dollars below for a comparable car. And the reason it’s called legacy pricing is that the customer coming in says: “Okay, the only reason I’d buy this, is because of the money. I’d really buy the Toyota, because everybody knows it’s a better car and I’ll buy this car for $3,000 less.” So, they’re getting killed because they’ve got higher-than-average cost because of the legacy costs and they’ve got lower-than-average price within a segment because of legacy pricing. If you took that out of the equation, GM and Ford, around the world, are quite competitive. And it’s not because Toyota got worse, but because the other guys got better.

Q. Yes, GM’s and Ford’s non-US operations are profitable.
A. Exactly, and one of the ways out that people are now discussing is to create two companies. One is General Motors and the other is, say, Global Motors. The current shareholder gets one share each. General Motors is the North American business and Global Motors is everything else. Same thing with Ford. And then where are you now? You file for Chapter 11 with GM, so your equity is wiped out as a shareholder in that, but you’re holding a share in what was worth anything anyway. Then you get the court to sort this thing out and then you rewrite it... Something like that is likely in the next year.

Q. But why is there just one Toyota, so to say, in the global auto industry?
A. What is it that Toyota does right and others don’t seem to get right? Well, the actual corollaries that Toyota got right, which, by the way, is part of their problem now, is that they realised from the outset that this is a management issue. Toyota doesn’t hire anybody from other companies. All their managers are hired age 22, coming out of university and on the first day they’re told, ‘Gee, you know how to read, you know how to write, you know how to do math, please forget everything else, it’s irrelevant.

We will now give you an education.’ They start right here… this really happens… on your first day as a manager, you find on your desk a piece of paper inside of an A3-size sheet and your boss has written an issue in the upper left hand corner and your boss says, ‘Gee, you think that’s a business problem? What is the problem? By the way, you have no way of knowing anything about this, I guarantee.’

"The problem is to make people understand that everywhere where value is being created, it’s a process. Your core business is a process."
He says, ‘please go see, you’ll find out.’ So, this bright young University of Tokyo graduate comes out and says, ‘Boss we’ve got a problem and not only that, I think that I’ve got the answer’ and then the boss says, ‘Why do you think that’s a problem? Do you have any evidence? Please go and get me some evidence.’ Now we’re beginning the humbling. So, that’s what you do, that’s your initial management education. And by the way, if you pass the test, your boss says, ‘Oh great, here’s the next issue, and now you start over.’ And that’s what you do for the rest of your career.

Q. How does lean work in an environment like India’s where the power supply is unreliable, roads get washed away with every monsoon season, and large inventories are a necessary evil.
A. If they don’t give you power, you have to have your own power. You’ve got to decide that. In regard to the roads, they have to be able to deliver. If you can’t depend on things, then somewhere you have to install a safety stock. By the way, in the Toyota world, they’ve got lots of safety stocks.

Q. What are the other excuses you get to hear from people here who say lean won’t really work in India?
A. Let me give you an example. Last time I went down to the TVS operations in Padi (near Chennai), I went to the brake panel company. Their issue was they were supplying truck brakes to an unnamed manufacturer. And TVS said (to its customer), instead of supplying once a week, why don’t we supply once a day and then, why don’t we supply once every six hours. And the unnamed manufacturer said that would just mean more work in the warehouse because we got one month’s (brake panel) anyway. And when you ask why they have a month’s worth, you know, the answer is ‘none of our suppliers is reliable, you happen to be but we just keep a lot’. So, much of lean is about management of a shared process: that the supplier and the customer share a process.

Q. How much of this lean stuff goes on in China, which is now the world’s factory?
A.
If you have companies that pay ultra-low wages and they’re bankrolled by ultra-cheap bank loans, you can succeed at business as well. That’s very different from lean. And, by the way, if you have a bunch of people who were using picks and shovels and you give them a bulldozer, you don’t need to put lean into this. You just put more capital into this and you’ll get a better result. What’s been happening in China is that they’ve gone from sort of closed Soviet production to something that looks like old-fashioned Detroit production. I’ve seen a lot of Chinese stuff and I haven’t seen anything that’s good apart from a few things that are completely controlled by multinationals like Delphi. So, the notion that China is gonna be an industrial powerhouse because it has some management system that’s gonna power them to the top, this is just nonsense.

Q. How is Indian manufacturing in comparison? Where would you put it on a ‘lean’ scale of 10?
A.
I would have said 10 years ago that it’s zero. They were either classic craft or mass producers. What I saw in TVS in the brake plant six years ago, I would say was as good from a plant floor standpoint as what you would see in Toyota City. That was absolute proof that you could do this here. My guess is I’d find a lot of things that are better over there from what I saw six years ago. But what is more significant to me, which I think is the Indian advantage, is that most people running companies actually are business people as opposed to politicians (like in China). That’s a huge advantage.

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