The Toyota Production System (TPS) is one of the best operations improvements systems, which can radically transform how organisations work and succeed. But few companies have benefited by applying the lean management techniques pioneered by Toyota, as much as Toyota itself. McKinsey Partner Stefan Roggenhofer, who has co-authored Journey to Lean, believes that's because the people part of the TPS equation is often overlooked.
And only companies that realise and account for the interdependency of structural and human aspects can become truly lean
Why do companies have difficulty in implementing lean? Many companies say they are applying the principles of lean. But very few have achieved the efficiency levels of Toyota.
Why is that? In my work over the past eight years, I have found that the hurdles in correctly applying TPS principles take two forms. The first issue is that most people, when they try to understand lean, see only the technical details.
They learn all the buzzwords "" kanban, J-I-T (just in time), jidoka and so on. But they fail to seek a match between these principles and the existing infrastructure. They don't check whether their systems have the capability to support the implementation of lean.
There are several "experts" who understand the tools required for building a lean organisation. They can set up kanban systems, organise kaizen workshops "" and they offer these services to companies, and are often recruited.
It's not enough. The reason lean has worked so brilliantly at Toyota is that the lean it practices is not a collection of tools "" it is a system.
The people at Toyota know how to fit the tools together so that it forms a cohesive whole and creates real bottom-line impact. Which is, after all, what companies are seeking.
The other problem is that proper implementation of lean requires changing the mindsets of people. This often becomes an issue because most organisations that seek to implement lean are full of people with engineering backgrounds.
They are more comfortable with tangible matters, but find themselves unarmed when it comes to emotions.
And if you don't understand people and don't make the efforts to help them achieve their goals, then technology isn't going to be of much use to you.
That is why it's important to understand that transforming into lean is not a project you can just plan and execute. It's a journey.
And, as with all journeys, you begin by planning where you want to go. But once you set off, you go through your plan and see the obstacles on the path.
And you adjust your plans "" and the journey "" accordingly.
One factor is critical in determining whether a company's journey to lean will be successful or not. And that is the degree of involvement of the senior management of the organisation.
The decision to implement TPS can't be policy no. 8 or whatever "" the commitment to a lean transformation must be absolute. And all efforts to building a lean organisation have to be led by top managers "" this is not a task you can delegate.
It is also critical that the CEO of the company has a decent understanding of the elements involved in the transformation. If TPS is being implemented at the engineers' level or an outside consultant has been brought in "" without the active involvement of the company brass "" then the organisation will come undone at the first crisis.
Because no one is qualified to make a decision, and the person who can make the decision is not up-to-date with the problem.
One important issue in embarking on lean transformation is visible commitment by the leaders to the task. This can take many forms. For instance, assume the company needs to increase capacity, for which it has ordered extra machinery.
The managers may tell those down the line, "We're now trying to build a lean organisation and we can increase capacity with the existing equipment.
So we're cancelling our order for the extra machines." That will serve as a demonstration of faith in the employees' ability to implement lean.
Companies implementing lean practices will do well to remember that not everybody will react positively to the changes. After all, TPS involves making people work to a set standard and they may find that constraining.
One way of getting around this is by making employees feel they are more than just executors of plans decided by other people. If workers feel they have something to contribute and their suggestions are valued, their level of engagement will go up.
Why should a company implement lean? Look at the results "" typically, over two to three years of implementation, most companies report a 25 per cent reduction in costs, capital expenditure is down by half and the quality defect rate goes down "" in factors of 10.
That is particularly relevant to Indian companies. After all, as competition increases, quality requirements by customers are also increasing.
It has been my impression that, unfortunately, TPS is not very widely used in India. (Of course, I believe suppliers to Toyota here have implemented TPS and benefited from it.)
In fact, there is a huge opportunity for successful implementation of TPS in this country. Consider what happened in North America in the 1980s and 1990s.
That was the time Japanese companies were pushing aggressively into the region and North American companies woke up to the sudden threat these companies posed.
Then, people agreed that TPS was an important reason why the Asians were succeeding but added that the Japanese culture and people were so distinctive "" and so different "" that replicating their techniques would be difficult, if not impossible. They were proved so wrong.
It will take a while, but I see no reason why TPS shouldn't work in India as well. Perhaps the biggest challenge in implementing lean in India is that the supplier base often poses problem.
A company may work hard at following lean practices in its organisation, but if it doesn't have a reliable supplier network, all that effort is wasted.
Of course, it's not an insurmountable problem "" in most cases creating a buffer should be enough. For instance, when Toyota started off in the UK, suppliers who matched the quality it wanted were hard to find. Initially, therefore, Toyota worked with Japanese suppliers.
So, while suppliers do need to be accounted for, they aren't a knockout factor.
