Why It Doesn’t Work
In the competitive business environment improving business systems and process is critical to sustainable growth and survival. There are at least two different systems of improvement. The traditional improvement also maybe called rational improvement was born out of a rational european philosophy and developed prior to the industrial revolution. The rational improvement system was begun in Europe, but was perfected in the U. S. beginning with Frederick Taylor and integrated into the university system in the early 20th century. The other system that might be called the pragmatic improvement system was born out of the skeptical philosophic tradition, specifically Pragmatism. Pragmatism is an American philosophy created in the 19th century by Charles Sanders Peirce and grew through the works of William James, Oliver Wendell Holmes and John Dewey. Specifically when it comes to business improvement, the pragmatist philosopher C. I. Lewis plays a key role because of his influence on Walter A. Shewart and W. Edwards Deming. Even though the two systems can and do use the same tools, language, and measures, they are radically different in their presuppositions and philosophical underpinnings. The history of the two systems are as well different.
Rational Improvement “Tayorism”
Before the Industrial Revolution markets were localized and there was no need to enlarge the volume of goods. Goods were produced under two different methods, the “Guilds” and the “Domestic” system. The merchant guilds were the buyers and sellers of the goods. The Craft guilds were the makers of the goods. Each guild was protected from the competition by local officials that did not allow outside products to enter their jurisdiction and in turn taxed and licensed the guilds for the protection. Craft guilds also suppressed innovation. People worked in the craft guilds feared innovation because the technology in their view would replace people that did the work, therefore the guilds tried to slow innovation. The “Domestic” method was at one time the corner stone of the system of production. Under this system the merchant procure the raw materials and contract the work out to individuals and families. The families, using their own labor and equipment, would complete the work and return it to the merchant for a wage. The lack of progress using Domestic system was due to the simple tools and technology used by individual and families and had little incentive or ability to improve them. Also, the Domestic system had small scale productions and limited division of labor. The Domestic and Guild systems were entire adequate for the time because it served limited markets and limited capital investment.
The industrial revolution with its steam power for locomotive and steam powered boats enlarged the market and made the need and ability for large scale production with mechanization. The Industrial Revolution caused cost to come down for example, Andrew Carnegie when he started in the steel industry in the 1800s iron rails for railroads cost $100 per ton. When he left the industry one ton of steel cost just $12. Also, during this time the ability for individual to purchase more increased. Daily wages in manufacturing increased 50% between 1860 and 1890. Real wages, the purchasing power of the same dollar, increased 60% during the time. Individuals started to move from agriculture business to manufacturing.
Individuals in Transition
Some of these individual coming from an agriculture background would work in the factory for a while saving the money they earned and then took a break from work to rest or relax as a farmer may do between planting and harvest or during the winter. Management was trouble by this practice and to combat this, many managers lowered wages so employee could not save up money as easily. The management philosophy over time was developed was that the most efficient worker was the hungriest worker. This went against what Adam Smith wrote in 1776 in “Wealth of Nations” that higher wages would make workers more active, diligent, and expedient, but he did warn employers that some employees will over work themselves and it was the responsibility of the employer to make sure that it did not occur.
New Market Structure
The market dynamics at the time was driven by the equation, price equals cost plus profit. Philosophers of the free market society stated price is a function of desire of the product and its scarcity in the marketplace. The problem that arose over time was that companies were unable to control the price of their product. Desire grew with individual purchasing power, but the power of industry lowered scarcity at a faster rate and left individual business to the fate of the marketplace. Some companies feeling uncomfortable with this situation tried to monopolize and control the scarcity of their product. This would allow them to set the price and guarantee a profit of a specific rate. In the U.S. The government saw this tacit as immoral and in 1890 past the Sherman Antitrust Act. This forced businesses inward in order to control cost and guarantee profits. If a business could lower their cost quicker then the competition it could set a price that would cover the cost plus the profit that it guaranteed its stockholders. Without the ability to control price by scarcity, the need to lower cost to be competitive became a necessity for survival. A man named Frederick Taylor started a method of lowering cost later called Scientific Management.
The United States saw the drive of efficiency as the one way to grow an economy. An illustration of this idea was President Ted Roosevelt’s statement, “Our largest question increasing our national efficiency is important to the country as a whole. We can see our forests vanishing, our water going to waste, our soil being cared away by floods, and the end of our coal and iron is in sight. But our largest waste is the waste of human effort. This waste goes on everyday because of such acts as our blundering ill directed or inefficient activity. We can see the waste of material things, but the awkward, inefficient or ill directed movements of men leave nothing visible or tangible behind them.” Frederick Taylor’s quest was to reduce the waste of human effort that was difficult to see or measure.
Frederick Taylor’s approach was a very deliberate approach built step by step from a statement of the problem to what actions to take in order to reduce the effect of the problem. The approach was philosophically rational in that Taylor produced the reasons for the problems and used tools to mitigate the effect. Taylor stated that it is the best for everyone (workers, managers, and society) that workers and machines achieve the highest productivity. That each man and machine is turning out the largest output possible. In Taylor words “Maximum propensity can existed only as a result of maximum productivity”. Taylor’s philosophy began with this statement. He then formulated reasons that everyone was not working toward a goal of maximum productivity, which would benefit everyone. Taylor did not study history to discovered problems of transiting from an agricultural, guild, or domestic worker to an industrial worker, but worked in the factories to come up with the causes of low productivity.
Taylor’s Statement of the Problem
Frederick Taylor listed three causes for the lack of productivity. The first cause was the belief by workers that any increase in output each man or machine will result in the end of throwing a large number of men out of work. Individuals did not realize that lower the cost allow more people the ability to purchase the products and would most likely increase the amount of people working. Second, the defective system of management makes it necessary for each workman to work slowly to protect his best interest. Third, the inefficient rule of thumbs, in determining what is a fair day’s labor was inadequate. These are the three conditions that cause the lack of productivity and Taylor felt there needed to be a new system of management to combat these issues.
The old system of management left each workman with the final responsibility for doing his job practically as he thinks best with as little help and advice from management. Taylor set out to change this old system of management. The new system of management needed to use an alternative method of determining a fair standard of a day’s work. Also, in the new system of management managers needed to realize that workers are self-centered and will abuse the manager’s trust in two different ways. First the workers have an inherent laziness and the desire to take it easy. The other way that employees abuse the manager’s trust is through systemic laziness. This means that employees that want to perform at the best of their capability are forced to by the others to conform to a group norm controlled by all which was always lower then their ability to work. This feeling may have come from some companies lowering the pay piece rates when performance hit a certain point. Finally, managers must realize that any man phlegmatic enough to do manual work was too stupid to develop the best way. Taylor believed that this new system management would help employees, management, and society. He said, “As long as some people are born lazy or inefficient and others are born greedy and brutal as long as vise and crime are with us there will be a certain amount of poverty, misery, and unhappiness with us also”. Taylor went about change the management system with the diligence as a prophet of efficiency.
Taylor Builds A New Management System
Taylor did not build his system of management because of his dislike or disrespect for the workman. In fact he began his career after turning down the opportunity to go to law school and went into an apprenticeship as a pattern maker and machinist at Enterprise Hydraulic Works of Philadelphia. At Enterprise Taylor developed empathy for the workers point of view. The problem as Taylor saw it was poor management practices and the lack of harmony between management and the worker. Taylor saw workers as they were in a Machiavellian sense. Taylor moved from Enterprise to Midvale Steel and spent twelve years experimenting and developing a new system of management. While he was at Midvale he realized he lacked scientific education and enrolled in a home course study at Stephens Institute of Technology. He never attended class except for the exams and graduated with a degree in mechanical engineering.
Taylor’s One Best Way
While at Midvale Steel Taylor began to change the old management practice to a new system of management. First, he wanted to change the practice of using the rule of thumb to build a standard to a method of establishing the “one best way” of performing the task. He abhorred the technique of building a standard based on past performance leaving up to the worker to be motivated to make the rate and cutting the rate if the worker made too much. Taylor had a different approach to setting rates called time study. Time study as it name implies evolves a careful study of the time in which work ought to be done rather than the time that it is being done. After the standards were built workers would see that the standards were fair and they would work against their nature tendency to take it easy. Also, pay incentives were used to pay individual work instead of positions. The plan was to stimulate each man’s ambition and pay him for his individual work without limiting him in work or pay. This way an individual could work without affecting the workers around him combating the problem of systemic laziness. Because the time study and rates were built by experts the job of determining the “one best way” was not reliant on the ability of the worker. The worker’s ability to determine the method to complete the work was taken from him and put into the hands of management. This new system of management would take care of the problems that the old system of management produced.
New Management Responsibility
After the rates were built the rest of the system was the duty of management. First, management was to place each man with the right job according to his ability. Second, each worker should be called upon to turn out the maximum amount of work which a first rate man of his class can do and thrive. Third, when a workman does the work of a first class man should be paid 30 percent to 100 percent according to the nature or work he does be on the average of his class.
Taylor said that it would take a business between two to five years to implement his system of management. After the system was completed the price of the product would be back into the hands of the management in the business and the assurance of a profit. Taylor left Midvale Steel with this knowledge and became General Manager at Manufacturing Investment Company (MIC) a convert of wood products into paper fiber. He did not have an overwhelming success at MIC resigning because the financiers of the business were in his words were only interested in making money and absolutely no pride in manufacturing.
One thing that he did learn at MIC was a technique to calculate cost, which would be important to calculating a price for products. He learned the accounting techniques from R. D. Hayes, a former railroad manager, who had revamp the company’s book system and hired William Basley an expert railroad accountant. Taylor was impressed by the Hayes-Basley system of accounts and added to his new system of management. With this new knowledge of accounting, engineering background, and his new system of management he decided to become a management consultant and left MIC.
Taylor’s influence of the US industry and the university system
The first client was Simonds Rolling Machine Company and was very successful. The outcome of the work was that thirty-five women did the work of 120 accurately improving by two-thirds, productively increased from 5 million to 17 million bearing a month. Wages averaged 80 to 100 percent more then before the system was implemented. Taylor also worked with the Du Pont Powder Company and Pierre du Pont to install a cost accounting system. Pierre du Pont became the CEO of GM and pick Alfred Sloan to take his place when he left GM. Taylor also worked with Joseph Wharton at Bethlehem Steel. Joseph Wharton went on to open the first U. S. business school at the University of Pennsylvania. Taylor also taught a course in his system of management at Harvard in the area that eventually became the Graduate School of Business Administration.
Taylor had many troubles implementing his ideas at various locations. The unions that needed the workers to be united went against Taylor’s ideas that promoted individualism. Watertown Arsenal was a client of Taylor and the union had a strike in order to stop the implementation of his ideas. Taylor actually did not blame the workers, but blame the premature implementation without the pre-work required to build the rates. He stated that many were using his techniques without using philosophy in which his system was built. He was also a witness in a congressional hearing investigating his system of management. Even some business people had anti-Taylor views for example Henry Cabot Lodge a decent from an early textile tycoon spoke of ending the days of slavery “brought about by men such as Taylor who thought it profitable to work the slaves to last point and let them die.”
The problem that Taylor was discovering that the new system’s most important feature was not the techniques, but the mental revolution that needed to take place in the employees and the managers. Taylor stated, “not a single element, but the whole combination constituted his system. It was not a system of calculating cost, a functional foremanship, a scheme of paying men, nor any efficiency devices. It was a complete mental revolution on the part of working men engaged in a particular establishment or industry. A complete mental revolution is needed on the part of these men as duties towards work, towards their fellow men, and towards their employer. And without this complete mental revolution on both sides my system does not exist”. Taylor’s biggest task it seems was not to change the activities of workers and management, but to change their beliefs and then their behavior.
Taylor’s Global Influence
Taylor’s ideas and writing were distributed to different parts of the world. Taylor’s Scientific Management was translated in Japanese in 1912 by Yokinori Hoshino. Taylor’s ideas were then used by Yoichi Ueno in Japan. Ueno felt Taylor’s ideas of harmony, cooperation, mutual interest, and a mental revolution between labor and management fit well in Japanese culture. One of the places that Scientific Management was not applied was the Ford Motor Company. The ideas used at the Ford Motor Company were not of Scientific Management, but another philosophy that will be discussed later.
Taylor changed the roles of management and workers. The management role was to determine the work rates fairly using time studies. The workers were to complete the work according to the standards. As for the worker’s initiatives Taylor stated that he did not want any initiative, all we want of them is to do what we say and do it quick. His system added cost accounting to the management tasks. It was important to know the cost in detail in order to price the product profitably. Also, the management structure was aligned around the function in which the manager was responsible. The task of the worker became the focus of management’s effort. Labor efficiency became an important metric in U. S. businesses. Labor and machine utilization became the focus of a successful manager.
Taylor At Work Today
Many companies today successfully use Taylor’s management system with excellent results. An international air express package service uses many of the elements of Taylor’s management system. At this company a tremendous amount of effort is used to discover the best methods for each and every task. This activity is complete by many well trained and educated industrial engineers. After a decided best method is found that method is communicated to those people in the company that need to learn, train, manage, and perform the different methods. Books of the methods are distributed throughout the system documenting the exact method for each activity. Managers and trainers work with employees to make sure that everyone knows the “Best Practice”, the company’s name for the “best way”.
Producing a Standard
After the best methods have been developed the Industrial Engineers go to work breaking down the methods into tasks. Time studies are done to calculate a standard for each task. An example of such a standard it should take an average employee .7 seconds to take a step. The methods standards come from the amount of summed tasks it takes to complete the method. From all the time studies the company can get reliable cost for completing each task and method. This allows management to forecast how much labor used for the service and the associated costs.
Managing By the Standard Rates
The job is not completed by just building the standard rates the company must manage their people by them. To do this the company has built a world-class information technology (IT) solution to collect data on the performance of each employee to the standards. Each employee carries a remote data collection device called a tracker. This device captures not only what the employee is doing, but the total time an employee is spending working a particular function. Functions are a series of task, for example to deliver a package to a customer an employee will have to stop the vehicle, put it in park, put the parking brake on, reach for a number of items, . . . , Etc., and enter the customer transaction into the data collect device. When this information from the employee’s tracker is compared to the standard rates, the company’s computer can calculate the employee’s percent of efficiency and the manager of the employee can retrieve that data at her office. It is the manger’s responsibility to act, when any employee does not meet at least a standard efficiency. If the employee needs training or discipline it is the manager job to make sure the employee is making the rates. If the manager does not act to negative variance the manager’s boss must act, which may include discipline of the manager.
Paying for performance
For those employees exceeding the standard rates extra pay and raises are given. For each 5% over 100% of the standard, a bonus and a raise are given every six months. This pay is used to make it individually worth the employee’s effort to not only meet but exceed the rate. Group pay in the form of a bonus is also given every six month to promote working together. This is to support rates in which are done as a team, such as a package sort activity.
A key activity that promotes improvements at the company is the Station Review Process (SRP). SRP is like it name suggest is the review of local station’s processes. The stations are rank by performance in efficiency. Those stations that ranked the highest in opportunity participate in the SRP. The first step of the process is to review station process, by industrial engineers, in order to determine which methods are not following Best Practices. The next step is to build unique rates for specific difficulties that the station faces. Those rates are put into the computer. Those methods that are not performed according to Best Practice are pointed out to management. Training of local management on how to monitor and document those activities that are not completed as the Best Practice. The industrial engineering team departs and the management team is given 90 days to improve to the processes to the standard rates. If the rates improved the SRP is over for the station. If they do not improve the documentation is reviewed by the industrial engineers. If the documentation is not produced the management is disciplined accordingly. If the documentation was completed the management can be given more time, perhaps another 90 days, or that the SRP would start back at step one. The SRP can be a very effective way to increase local performance to the standard. The company has made profits and grown consistently.
There are a number of investments that need to be made to implement this management system. The investment in labor in terms of industrial engineering is considerable. A significant ratio of employees need, to be educated and train in industrial engineering techniques. To be effective managing by the standard rates the industrial engineers produce resources need to be used to calculate variances from the standard. There is also a cost of communicating the Best Practices and rates to all employees and managers. Today it is usually done in the form of an IT solution. Also, managers and employees need to be trained to us the technology that keeps track of the variances. The system tends to produce a large amount of level 3 waste that will be discussed later. Local employees are not evolved in the design of the work. Worker’s roles are to work to a standard and local management’s roles are to manage to the standard. As systems of control become more engrained into processes and the culture systematic change become difficult. The tools of systematic change are complex and difficult to use as the system becomes more complex.
Rewards of the System
System can be very successful in a local area and can be successful in the marketplace depending on the competition. Even though the manager’s job is not easy under this system, it is simple. The manager’s best attribute that is needed is the courage to enforce the standards and variances that are calculated for her. There is a tremendous amount of centralized control on the process and improvement efforts. Labor cost can be come more predictable under this system. Certain individual feel, because the standard rates were calculated by trained professional that the system is fair to the individual employees.
Another Improvement Method “Pragmatic”
The Problem of Taylorism Shown in the Automotive Industry
Carl Barth worked with Frederick Taylor at Bethlehem Steel and when Taylor left Carl Barth went with him to start a consulting firm. Taylor saw Barth as the mathematical genius behind Scientific Management. The request for implementation of Taylor’s management system became numerous. Carl Barth was asked to help George Babcock to install Taylor’s management system at Franklin Motor Car Company.
At that time cars were produced in batches and Franklin Motor Car Company was producing five cars a day. The management at Franklin was not structured and in disarray. It led to many problems one of which was the labor turnover rate at 425 percent. The biggest problem was the company was losing money. Carl Barth and George Babcock implemented Taylor’s system of management and the results were dramatic. Output increased to 45 cars a day and labor turnover was 50 percent and the company was making money. The process was still done in batches. The gains were due to a dramatic increase in efficiency of the workers only. Carl Barth went on to lecture at the University of Chicago and Harvard University. Later Henry Ford changed the system of manufacturing automobiles to a flow system that produced a car at a much lower cost. In the automobile industry Taylor’s system was used before Henry Ford’s system, but not afterwards.
Henry Ford’s different way
One of Frederick Taylor’s associates pointed out what Henry Ford did at Ford Motor Company should not be confused with Taylor’s Scientific Management. Henry Ford developed a new and different idea that had an alternative philosophy. Henry Ford as a young inventor in 1896 got some advice from Thomas Edison “There is a future for any light-weight engine that can develop a high horsepower and be self-contained…keep on with your engine. If you can get what you’re after, I can see a great future”. This might seem like an understatement, but in 1903 with $28,000 Henry Ford formed the Ford Motor Company. Five years later he produced the Model T priced at the amazingly low price of $825.
At first, like other automobile manufactures, Henry Ford used a station build process to assemble the automobiles. The way system worked was that the automobile was built at one station and did not move. The components and parts were moved by cart or hoist into a station where the car was built. Then idea of continuous flow processing was conceived. The automobiles in this new system would move a production line where the work was completed to each car as it move through the factory. A team of people that worked in the factory developed the system over many years, continually improving and adjusting. Henry Ford is generally considered the father of continuous flow processing, but some consider him just the sponsor of it. The results of system were undeniable. Conversion of the system from a station build to a flow allowed exponential growth in output and equally impressive decrease in cost. In 1909 the station build process produced 13,840 automobiles. In 1914, during the conversion to flow, Ford produced 230,788. Finally, 1916 Ford produced 585,388 Model Ts. The increase output and decrease cost was reflected in the price of the Model T. In 1909 the price was $950, then in 1914 $490, and in 1916 the price was $360. This increases in output and reduction in cost was not due to Taylor’s management system as many may think. Ford denied this by stating, there was not “…any systematic theory of organizational or administration, or any dependence on Taylor’s scientific management”. Taylor never even saw Ford’s assembly lines, but when Frank Gilbreth visited, he observed the workers were required to, “adjust to the line rather the work to fit the worker. This is the fundamental philosophical differences between Henry Ford’s system and Frederick Taylor’s system. Ford’s system put everything subordinate to the flow of the value and Taylor’s system concentrated on the movement of the workers. The former system is value based the later functional based.
Ford’s “just-in-time” Inventory
Ford was also interested in the removal of waste in all areas of his operation. He developed the “just-in-time” system of production and inventory handling. Ford anticipated how flows could be planned and coordinated to minimize inventory. Ford’s idea was to have productive capacity instead of safety stock. This idea would be counterintuitive in a Taylor mind set. Extra capacity would be held in reserved and not fully used all the time. This would cause the under utilization of the employees. Ford’s rational was that the extra inventory would cost more because it would have to be moved, stored and managed. He considered the extra unused capacity to be more cost effective then extra inventory.
To reinforce his philosophy Ford started a program to pay his employees not for meeting production standards, as Taylor and others, but for staying on the job and following Ford’s rules. This was incomprehensible to other leaders with different philosophies. He gave raises to all employees to at least $5 a day. The $5 a day pay was also meet with confusion and criticism. Other Detroit employers commented that his pay policies were “economic madness”, “industrial suicide”, and “socialism”.
Ford’s Organizational System
Ford’s factories differed in organizational set up then other companies. They had no organizational chart, no specific descriptions, no lines of authority, and few job titles; Ford once threw his finance chief into panic when visited the accounting department and dumped all files, commentary on the overabundance of red tape and records. Ford’s main interests were in the throughput of the value through the system and his elimination of any waste, including structure, finance, policy, or procedure driven that delayed throughput. He increased throughput by building a system that produced one large continuous batch. Toyota used his ideas of increasing throughput by reducing setup times and designing production lines that produce many different types of products with little delay from switching from product to product. Ford drove the need to produce different products out of the marketplace due to his pricing strategy.
Ford’s Production Methods
Ford’s philosophy of increasing throughput caused some innovative techniques in inventory and tool acquisition in the plants. He moved inventory stocks to the assembly staff rather than have the worker leave the workplace to get materials. He also eliminated tool rooms and put the tools where they are needed at point of use. Some of the inventory was delivered to the factory at the point where the inventory was needed skipping the materials department in the process. Henry Ford placed machines in the sequence in which the value was added to the throughput. This caused a decrease in machine utilization, which would seem unwise in the Taylor’s philosophy, but increase the flow of value and reduced cost to the system. The amount of extra investment in machines is paid back by the reduction of work-in-process inventory and raw materials. It also put more labor in the process of producing products rather than moving inventory to keep the machines at a high utilization rate. In the process of reducing inventory more of the floor space is used to produce the product. Ford said, “The machines are arranged, not only in the sequence of operation, but to give everyman and every machine every square inch of space that is required and not more”.
Ford’s philosophy of increasing throughput affected the inventory planning and procurement policies. We buy only enough to fit into the plan of production. If transportation were perfect and an even flow of materials could be assured, it would not be necessary to carry any stock whatsoever. To go even further back in the inventory process Ford built a system to keep track of raw materials all the way back to the provider of the materials. “Men are stationed at junctions and other points throughout the country to see that the trains are not delayed. If it is delayed more than an hour, the fact is known at the headquarters.”
Ford built a system that minimized the role of direct supervision and replace them with the system. He stated that “Real leadership is unobtrusive, and our aim is always to arrange the material and machinery to simplify the operations so that practically no orders are necessary. This went against many of the traditional teachings of Taylor which encouraged many different kinds of bosses. Taylor’s early system was to have a team of supervisor which concentrated on an individual aspect of work. He outlined a group of foreman that the individual work would interact. A Gang Boss, Speed Boss, Repair Boss, Inspector would direct worker activity. Also, the individual worker would have different clerical functions to deal with such as Instruction Card Clerk, Time and Cost Clerk, Order of Work Route Clerk, and Disciplinarian.
Ford and Standards
Ford also claimed that standards should be set by someone that works in production; otherwise the standard would not lead to further progress. In Taylor’s system the standards were to be set by management or someone trained in time-study techniques.
Ford’s Global Influence
Ford’s associates spread the assembly techniques to other companies and industries. But Ford’s philosophies and techniques did not become part of business schools as Taylor’s had, but they did travel to Japan through a man called Taiichi Ohno.
Ford Goes To Japan
Taiichi Ohno considered one of the most influential contributors to the creation of the Toyota Production System confesses that many ideas came from reading about Henry’s Ford’s experiences. In Ohno’s book he quotes Ford.
“My theory of waste goes back of the thing itself into the labor of producing it. We want to get full value out of labor so that we may be able to pay it full value. It’s use – not conservation – that interests us.”
Ohno took many of Ford’s ideas and extended and adapted them for a smaller Japanese economy. The Japan’s economy would not allow the economies of scale that the U. S. economy would with one product. So Ohno and others started a production system with small batch sizes, different products on the same line and Ford’s philosophy of reduction of waste. He broke Ford’s ideas of waste reduction down further by identifying seven types of waste, overproduction, delays, transport, over-processing, inventory, motion and defects. Ohno also, took ideas from the American supermarket where he observed customer can get what they need, when the need it, and at the quantity that they need it. Over the years the Toyota Production System develop techniques to support the philosophy of waste reduction and customer service. These techniques such as Just-In-Time, Kanban, Set-up reduction, Visual Controls, Production leveling, Poka-Yoke, and etc., are the thing that is usually associated with Toyota Production System.
The economic conditions in Japan lead Onno to the equation Price equals Profit plus Cost. He unlike Taylor believed that efficiency gains only make sense when it is tied to cost reduction. The capacity of your factories is determined by the work you complete plus the waste that is in the system. To increase capacity and reduce cost and organization would just have to identify the waste in the system and remove it using the techniques provided. Since Japan had to market to consumers outside Japan they had to deal with a global economy where customers had control of price and the only way to compete was to reduce cost quickly and continually. This was their biggest level to produce greater profits.
Ohno And Standard Rates
Ohno’s philosophy on how to achieve profits affected the way work rates were set. Rather giving the workers a Tayloristic standard, Ohno believed that standards should not be forced down from above, but set by production workers themselves. Standards set from the outside of the process, limits production capacity. Employees were trained to use the waste reduction techniques, set their standards, and continually improve.
Ohno’s Thoughts About Ford
This concentration of waste reduction and customer service has allowed Toyota to over take Ford Motor Company who Ohno said left the true faith in which Ford believed. “I have no intention of criticizing Henry Ford. Rather, I am critical of Ford’s successors who have suffered from excessive dependence on the Ford system precisely because it has been so powerful and created such wonders of industrial productivity. However, times change, no longer can manufactures “push” their products onto the market. We must let the marketplace pull the goods they need, in the amount and at the time they need them.” Ohno and others develop their ideas and called it the Toyota Production System.
Toyota Production System Transformation
The Toyota Production System is not just a production system, but its strength is in its management system. Toyota techniques for years were used to produce more cars in the correct quantity, but not necessarily better. The problem of quality brought Toyota to W. Edwards Deming and his ideas about quality and how to achieve it. Ohno became a gradual convert of Deming as he saw the Toyota Production System and Deming’s ideas were wholly compatible.
W. Edwards Deming
W. Edwards Deming was an American statistician that was sent to Japan after WWII Japan in 1947. There he was shocked by the devastation, poverty, and industry in shambles. He began to lecture to standing only crowds in 1950 about quality and reducing variation in production processes. In the subsequent years Deming’s influences were dramatic on Japanese industry including Toyota. He became the first American to be awarded Japan’s Second Order of the Sacred Treasure. Many Japanese companies used Deming’s philosophy of how to manufacture quality products. Toyota integrated Henry Ford’s, Ohno’s, and Deming’s philosophy into the Toyota Production System and became a world force in automobile manufacturing.
Deming Comes Home
Deming’s ideas came home in 1980 when an NBC program called “If Japan can…Why can’t we?” , which featured some of Deming’s thoughts, after the program a Deming revolution began and Deming began to work with Ford Motor, GM, Dow Chemical, Hughes Aircraft, Florida Power and Light and other companies. Deming went to Japan to teach statistical process control and came back with a philosophy of management. He wrote about the seven deadly diseases that caused the decline of U.S. industries. The cure for the disease is for leaders to follow his 14 points of management. Deming stated, “such a system formed the basis for top management in Japan in 1950 and subsequent years.” Deming felt that U. S. managers looked for a quick fix, a lazy way to appear to be up-to-date, rather that true employee involvement in making improvements. If fact Deming attributed 95% of all errors to the systems under which people worked, not the people themselves. The problem with U.S. Managers in using Deming’s methods is not the misunderstanding of the techniques, but the training of the managers through the University system that taught and trained the Tayloristic philosophy, which evolved in the rational tradition since the early 20th century. Later in his career Deming promoted a philosophy of change called the “System of Profound knowledge”. The System of Profound Knowledge has four precepts.
1. Appreciation for a system.
2. Knowledge about variation.
3. Theory of knowledge
4. Psychology of people
This philosophy is radically different from Frederick Taylor’s. It focus on the system, knowledge and people.
Square Peg Round Hole
Other organizations try to copy the success of Toyota by trying to copy the behaviors. Many companies in the U.S. have tried to copy Ford, Ohno, and Deming under programs called Total Quality Management, Six Sigma or Lean. They have been frustrated by their inability to replicate Toyota’s performance. Many visitors to Toyota assume that the secret of Toyota’s success must lie in its culture roots. Mistakenly placing techniques of improvement into an organization, that has a different philosophy, is like putting a square peg into a round hole, it doesn’t work. It is like trying to play football without the players understanding the importance of the ball. The culture at Toyota has a lot to do with the success. The real question is why the culture at Toyota is the way it is and why a majority of U.S. companies are different.
The problem lies with management and its development over the last 100 years. It’s not that management is unaware of the need to change; it’s that the business systems philosophy will not allow it. Trying to copy techniques of philosophy and placing it in another may help marginally, but it frustrates management and employees in the process, gains are not sustained, and causes companies to bounce from one program of techniques to another. At Toyota the techniques of improvement is there because of the philosophy. The real work of management is to change the philosophy of improvement and the business systems that get in the way of the new way of thinking. If this happens people will seek out the techniques.
Pragmatic Approach at the air freight company [insert]
TPS Philosophy At Work
An illustration of how a philosophy drives different behavior was examined in a Harvard Business Review article “The DNA of the Toyota Production System”. The philosophy of the Toyota Production System was explained in four rules.
How people Work
Rule one was “How people work”. The rule states that the work will be highly specified as to content, sequence, timing and outcome. At a Toyota manufacturing plant a car seat is installed the bolts are always tight in the same order, the time it takes to turn each bolt is specified, and the torque to which the bolt should be tightened. Such exactness is applied not only to the repetitive motions of production workers, but also to the activities of all people regardless of their function specialty or hierarchical role. An American car company completes the car seat in a different way. Some operators may put the front bolts on first and some operators the back. Some operators may put all the bolts on and then tighten and others may tighten as they go. All the variation adds up to poorer quality, low productivity, and higher costs. But more important it hinders learning about quality, productivity, and costs. Because variation hides the link between how the work is done and the result that it produces. An example in a Toyota plant, work is design as a sequence of steps such as the process of installing a seat. The process is design as a sequence of seven tasks all of which are suppose to be completed in 55 seconds as a car moves at a fixed speed through a workers zone. If a production worker finds himself doing task six, installing the rear seat bolts, before task four, installing the front seat bolts, the job is being done differently then it was design and something must be wrong. This is done in away to make problem detection simpler and immediate. American companies design process to control people and to make sure the get the work done. The American philosophy allows the work sequences and methods deviate from design because the importance is on the activity of the worker not the value that the work creates. The standard set for the completion of work is the goal. The TPS philosophy is set up to learn and detect problems therefore the strict adheres to design is necessary to achieve that goal. It starts with the philosophy of Deming’s which states, “85% to 96% of business problems are created by process not the people”. Without this fundamental thought problems in the system will be hidden by the people who will be blamed for the problem. If you take this system of problem detection, TPS philosophy, and put it in a control and blame people philosophy, Taylor philosophy, there will be frustration on the part of managers and workers who will be blamed for the occurrence of the problem. There will be tremendous resistance when trying to put the TPS techniques into an organization with a Tayloristic management system. The problem is the philosophical differences, controlling people versus problem detection.
How People Connect
Rule two of the Toyota Production System is “How people connect”. Every connection must be standardized and direct, unambiguously specifying the people involved, the form and quantity of the goods and services to be provided, the way requests are made by each, and the expected time in which the request will be met. At Toyota kanban cards and andon cords are set up as direct links between suppliers and the internal customers. This is an influenced by Ford’s idea that the system needs to direct activities not a supervisor. In the U. S. requests for materials or services take a convoluted route from the worker to supplier via an intermediary. Any supervisor can be called on to help any call for help because a specific person has not been assigned. The disadvantage of this approach as Toyota recognizes it is, when a problem is everyone’s, it becomes no one’s and the employees are left to deal with it as best as they can. The best employees are seen as the ones that can take care of problems on their own usually through informal relationships and procedures. The Toyota system requires workers to ask for help at once is counterintuitive to American managers which encourage workers to resolve problems on their own before calling for help. What happens is that problems remain hidden adding continuing cost because the causes are unnoticeable and unresolved. The solutions remain undetected and are not shared across the system. The problem becomes bigger when workers are called on to decide which problems are big enough to warrant a call for help. Problems mount up and only get resolved much later without the valuable information about the real causes which was lost. The solutions are usually expensive with more controls and inspection treating the symptoms instead of the cause. Taylor’s system is set up to focus on individual worker and the TPS philosophy is to continually build knowledge of the system. Putting the philosophy of gaining knowledge in a Taylorist system frustrates management and workers because the pride is workmanship is centered on their individual ability to solve problems. They are not designed as a participant in gaining and building knowledge. They feel that the only control they have left is taken. Its two different philosophies the former is focused on individual performance and the latter a system which individuals participate in building knowledge. The impulse of the Tayloristic philosophy is to deal with the consequences of the problem quickly and get back on the standard. Divisions in the company can have the job of dealing with a consequence of problems in order to get the worker back on the standard that has been set.
How The Production Line Is Constructed
Rule three is “How the production line is constructed”. All production lines at Toyota have to be set up so that every product and service flows along a simple, specified path. That path should not change unless the production line is expressly redesigned. No forks or loops to convolute the flow of any supply chain. For example, goods or services don’t flow to the next available machine, but flow to a specific person or machine if for some reason that person or machine is not available it is seen as a problem and it may require the line to be redesigned and an opportunity to be gained. Many see this logic means that each production line is used to produce a unique product or service, quite the contrary each production line can accommodate more products than other production systems. Help requests are also set up as the production line. The help comes from a designed supplier. If this supplier is not available a designed alternative helper is called upon. In some Toyota plants this pathway for assistance is up to five links long connecting the worker to the plant manager. This rule that each pathway is specific assures that an experiment will occur each time a product or service is produced. The hypothesis is embedded in the pathway according to rule three. All suppliers are connected to the pathway and any supplier not connected is not necessary. This is true of any inventory that is held as well. For example Toyota does not pool inventory even though in doing so it would reduce the over all size of the inventory it needs in the short term. That may sound paradoxical for a management system that abhors waste, but the paradox can be resolved if one consider the system in which it occurs. Each inventory item is designed in a pathway distinct to a problem. This allows all involved to focus on the reduction of problems and the reduction of inventory in the long run. Even the inventory is set up in terms of the value that it supplies. Taylor’s philosophy promotes optimization of inventory. TPS philosophy match inventory to the problem which makes the holding of the inventory necessary. When the problem is identified over time a solution can be found and the reduction of inventory is a result in the long term. When you co-mingle the inventory in order to optimize it you lose the reason for its being and take away the ability of its reduction. Short-term optimization philosophy prevents the long-term cost reduction of inventory. The information about the reason for the inventory is more important then the optimization of it.
How To Improve
Rule four states “How to improve”. Any improvement to production activities, to connections, or pathways must be made accordance with the scientific method, under guidance of a teacher, and at the lowest possible organization level. This idea revolutionizes the whole the function of the manager. A manager-worker relationship changes to a mentor-mentored relationship. Workers are assigned a leader who trains them in framing problems to formulate a test of hypothesis. In other words she teaches them how to use the scientific method to design the teams work in accordance to the first three rules. Because of the first three rules the system is set up for discovery and improvement. The system is set up to give the people in the processes the knowledge or ability to improve. It places them in the proper management structure, gives empowerment, and the mentoring support necessary. The system itself is a conduit of change and improvement. The front line worker makes improvements to their job. The supervisors provide direction and assist as teachers. If a worker has a problem how she connects to supplier within the immediate assembly area then two workers make improvements with the assistance of a common supervisor. When improvements are made on a larger scale Toyota ensures that the improvement teams created consisting of the people who are directly effected and the person responsible for supervising the pathways involved. The process remains the same even at the highest level. At a factory level the plant manager is involved with the redesign going from three production lines to two. He is not only involved because it was a big change, but because he is responsible managerially for the lines. This way Toyota is assured that learning takes place at all levels of the company. Toyota will bring in outside to help in quality, not of the decision making process, but the quality of the learning process. The idea is that you are building capacity to build capacity, rather than just building capacity. Someone looking at the behavior from outside the system is often confused because decision about work is made at a low level. That is because the nature of the problem determines who should solve them. In two machine divisions at Toyota each of which have three independent production shops. The production people in the first division answer to shop managers and the process engineers answer directly to the division head. In the second division the engineers reported to the three shop managers. Neither of the structures are adherently superior. The problems in the different divisions required a different reporting structure. Inconsistency in behavior is caused by the consistency of the philosophy. Toyota ensures that people will clearly state their expectation they will be testing when they have implemented what they have planned. They have integrated the shared vision of that which motivates them. When they state the expectation it doesn’t mean something philosophically abstract, but measurable. The goal of the idea perfect output of a person, group of people or machine be defect free, can be produced in the batch of one, can be supplied on demand, delivered immediately, produced without waste, and in a safe environment physically, emotionally, and professionally for every employee. TPS philosophy believes that people are the most significant corporate asset and the investment in their knowledge and skills are necessary for competitiveness. That is why every manager is expected to be able to do the job of who they supervise. They teach the workers how to solve problems and the management system is set up to support that philosophy.
They Are Different
The TPS philosophy has grown out of the rich heritage of the Pragmatic philosophy of Deming’s “Theory of Profound Knowledge” and is different from Taylor’s philosophy. Taylor’s philosophy is set up for a group of people to set a standard and workers are to perform to those standards. The manager’s job is centered on employee performance to the standards. In the other Pragmatic philosophy the manager’s job is centered on being a teacher of how to improve. This philosophy increases the rate of improvement because everyone is involved and the system is set up to be a conduit of improvement. A company with Taylorist philosophy cannot compete with a company with the Pragmatic philosophy in the long term, not because the people don’t have the ability to improve, but the system makes it difficult or impossible to change. Giving people new techniques such as Lean, Six Sigma, or Theory of Constraints is not the only change needed, a more fundamental change to the organization system is also necessary. The techniques itself may produce incremental changes in the short term, but to be competitive, systems must change in order to compete with improvement center companies. Some industries currently don’t have any improvement center companies yet. Specifically in those industries, the companies that make the change first will cause a dramatic disruption in the industry. Those companies depending on the old philosophy will not be able to match the rate of improvement.
As Toyota Closes In On GM, Quality Concerns Also Grow, (2004, August 4). Wall Street Journal, p A1.
Breyfogle III, Forrest W., 1999, Implementing Six Sigma, by, John Wiley & Sons, Inc.
Deming, Edwards W., 1982, Out of the Crisis, Massachusetts Institute of Technology Center for Advanced Engineering Study.
Dennis, Pascal, 2002, Lean Production Simplified : A Plain-Language Guide to the World’s Most Powerful Production System, Productivity Press.
Dean Jr., James W., 2003, Total Quality : Management, Organization, and Strategy, 3rd Edition, Thomson South Western.
Gardiner, Stanley, C., Blackstone, John, H., Gardiner, Lorraine, R., The Evolution of the Theory of Constraints, Industrial Management, May-June 1994.
Goldratt, Eliyahu M., 1990, Theory of Constraints, North River Press.
Lawler, Edward, E., (1994) Total Quality Management and Employee Involvement: Are They Compatible?, Academy of Management Executive, Vol. 8, No. 1, p 68-76.
Kanigel, Robert, 1997, The One Best Way: Frederick Winslow Taylor and the Enigma of Efficiency (Sloan Technology Series), Viking PressMcNary, Lisa, D, (1997) The System of Profound Knowledge: A Revised Profile of Managerial Leadership, Leadership & Organization Development Journal, v18, p229-235.
Nolan, Thomas W., 1998 Quality Improvement Through Planned Experimentation 2nd edition, McGraw Hill.
Ohno, Taiichi, 1988, Toyota Production System : Beyond Large-Scale Production, Productivity Press.
Russell, Bertrand, 1945, The History of Western Philosophy, Simon &Schuster, Inc.
Shewart, Walter A., 1939, Statistical Method from the Viewpoint of Quality Control, Dover Publications, Inc.
Smith, Adam, 1776, Wealth of Nations, Prometheus Books.
Spear, J., Steven., Bowen, H., Kent, (1999, September) Decoding the DNA of the Toyota Production System, Harvard Business Review, p 40-47.
Taylor, Frederick, W.: The Principles of Scientific Management , 1911
Wheeler, Donald J., Chambers, David S., 1992, Understanding Statistical Process Control, Second Edition, SPC Press.
Wilson, James, M., (1995) Henry Ford’s Just-In-Time System, International Journal of Operations & Production, v15, n12, p 59-76.
Zemke, Ron, (April 1993). A Bluffer’s Guide to TQM, Training, p 48-55.