The Toyota Production System -- A Humanitarian Economic System?

In August,  Olivier Larue publsihed a book entitled The Toyota Economic System: How Leaders Create True Prosperity Through Financial Congruency, Dignity of Work, and Environmental Stewardship, which analyzes the purpose and relationship between the different elements of the Toyota Production System (TPS) and how they add up to an economic system rather than just a production system that brings engineering and managerial solutions to businesses. It argues how TPS can be viewed as a science as opposed to a tool-based technique. 

When I spoke with Olivier this month, I asked him, "Why do you believe that the various components of the Toyota Production System (TPS) constitute a humanitarian economic system rather than just a production system?" Here is his complete response:

Many people associate societal economic progress with the creation of goods. However, from the era of craftsmanship to the advent of mass production, the way we organize work also plays a pivotal role in enhancing living standards.

The Toyota Production System represents the most recent methodology in this realm and possesses the potential to become the third and most advanced production system. It comprises three distinctive elements: the better-known technical element, which focuses on eliminating unevenness, waste, and overburden; the familiar managerial element, which prioritizes human safety and development; and the lesser-known philosophical element, which serves as the guiding principle for both the technical and managerial elements. When all three elements are simultaneously implemented, the benefits derived from adopting TPS are not confined to a company's gains alone. Instead, as with previous production systems, these benefits extend to the broader spectrum of our society. However, this is particularly pronounced with TPS because it is not primarily the result of technological advancements, as was the case with mass production systems. TPS also emerges from the application of human principles guided by a distinct philosophical concept of efficiency that markedly deviates from the efficiency favored by the mass production system.

Rather than fixating on a singular notion of efficiency—individual efficiency—with the belief that it will yield the optimal level of efficiency for all, TPS centers around total and true efficiency through the elimination of waste to remove the trade-offs inherent in optimization. Total efficiency entails resolving issues that hinder all factors or actors from attaining their full benefits. True efficiency entails eliminating costs rather than transferring them elsewhere. Eliminating waste entails increasing the ratio of value-added activity in work. 

The principle of total and true efficiencies through the elimination of waste is not confined to the shop floor, where TPS originated. 

• The principle of total efficiency doesn’t stop at a particular line, process, or piece of equipment which should not be boosted independently from the efficiency of preceding or subsequent processes. Total efficiency extends to the broader realm of efficiency management. For instance, it applies in the boardroom, where the pursuit of profit should not come at the expense of cash flow. Profit is undoubtedly essential for competitiveness, but it is equally crucial and substantially more efficient to achieve sufficient cash flow from operations to meet financial obligations promptly. 

• The principle of true efficiency is not restricted to the shop floor either, where the aim is to use the minimum number of workers, equipment, and materials required to produce only what is needed. True efficiency also implies not trading one self-worth in the workplace for better comfort at home, or raising the living standards of people in the present at the expense of the future when payments are due later. 

• The principle of eliminating waste is not limited to increasing the portion of value-added activity in the work, reducing unevenness and overburden to reduce cost but it also extends to reducing the environmental footprint as a result of all activities, value-added or not. 

Together, the philosophies of total and true efficiencies through the elimination of unevenness, waste, and overburden extend to all the stakeholders of society that contribute to a firm's success. This includes customers, employees, and the ecological environment of our planet. Each benefit supports the other as opposed to itself individually regardless of the cost to others. When all parts of the system reap their full benefits without incurring future costs, it coalesces into an economically humanitarian system. It contrasts with a more primitive economic system based on competition where losers are necessary in order to have winners. 

Of course, this call for a specific course of action necessitates problem-solving, and the unattainable remains beyond our reach. However, what is attainable is not always accomplished unless guided by economic humanitarian principles. As Pastor Tim Keller reminds us of what the critical philosopher Jurgen Habermas said “Science might tell us what is, but it doesn’t tell us what ought to be.” Today, The Toyota Production System offers possibilities beyond what a company can gain from adopting it. It presents an opportunity to eliminate socio-economic and environmental contradictions that have historically compelled economic trade-offs. 

What do you think of Olivier's thoughts regarding the far-reaching effects of the Toyota Production System? Do you feel TPS can be an "economically humanitarian system"?

Eco-friendly = Profitable

I came across a very interesting article over on the Ensia site titled Manufacturing Goes Lean and Green written by Justin Miller. The article focuses on Highwood -- a manufacturer of synthetic woods -- that considers its product and its manufacturing facility environmentally friendly. 

Although the company was designed as a "green" operation, it started embracing Lean methodology years after inception and here are the results that grabbed my attention:

"In 2009, for example, Highwood cut its energy consumption for lighting by more than 50 percent just by retrofitting its facility with high-efficiency fluorescent light bulbs. With help from MEP (Manufacturing Extension Partnership), the company installed solar panels, which now provide about 20 percent of its energy needs"

"Highwood not only has reduced its landfill waste by 70 percent, but has reduced monthly removal fees by roughly 65 percent."

I'm sure these results came after embracing nontraditional mindsets, which certainly evolved the culture within the organization. The most important test for Highwood will be sustaining and expanding this new culture of challenging the traditional way of thinking.

I am always interested in hearing stories about organizations that are combining their formal Lean initiatives with "green" policies as it is proven to be the natural extension of Lean thinking and implementation.

What are your thoughts on this article? Do you think Lean initiatives can ultimately lead organizations to "closed-loop, zero-waste processes"?

Can Lean Be Green?

On May 19, at the upcoming Institute of Industrial Engineers (IIE) annual conference in Puerto Rico, Keivan Zokaei will introduce his latest book, Creating a Lean and Green Business System: Techniques for Improving Profits and Sustainability, which he co-authored with L. Hunter Lovins, Andy Wood, and Peter Hines.

I recently spoke with Keivan about his book, and I asked him: "Why should companies bother incorporating sustainability and 'green' aspects into their Lean initiatives? Here is his complete answer:

Lean and green is not about protecting the planet; it is about protecting your company’s purse. I am encouraged by the proactive approach of a few leading-edge companies for whom going "lean and green" has become a key economic driver. Take elite firms such as Toyota, WalMart, DuPont, Tesco, Unilever, Procter & Gamble, Marks & Spencer, General Electric, and General Motors – all of whom have invested heavily in greening their products and processes during the past few years.

Unilever plans to double revenue over the next 10 years while halving their environmental impact. General Electric aims to reduce energy intensity by 50% by 2015. Toyota has already reduced emissions per vehicle by 37% between 2001 and 2012. Similarly, DuPont committed itself to a 65% reduction in greenhouse gas emissions over a 10-year period up to 2010. In 2007, DuPont saved $2.2 billion through energy efficiency. In the same year, its total declared profits was not much more than $2 billion.

The secret is in a simple yet powerful realization that environmental and economic footprints are aligned. When we prevent physical waste, increase energy efficiency, or improve resource productivity, we save money, improve profitability and enhance competitiveness. In fact, there are often, huge “quick wins," thanks to years of neglect. Today, the “greening industry” movement stands where the “quality movement” stood around 40 years ago. During the past 30 to 40 years, industries realized better quality can be (and often is) cheaper to make. By the same token, going “lean and green” is free – and in fact much cheaper. Lowering our impact on the environment, rather counter-intuitively, means lowering costs. I see the same phenomenon as we have observed in the evolution of our thinking about quality. Those companies who move fastest are the billionaires of tomorrow.

What do you think of Keivan's points? Have any of you incorporated green issues into your Lean initiatives? What have been the hurdles?

Comprehensive Lean and Green Resources on the EPA Site

The U.S. Environmental Protection Agency (EPA) offers on its website a wide array of resources -- from publications and reports to case studies -- for integrating and maximizing the environmental benefits of lean. Most notably, the agency features its Shingo Prize-winning Lean Manufacturing and the Environment report from October 2003. This report was crucial in establishing the relationship between lean and the environment because it was one of the first official documents that pointed out opportunities for further enhancing organizations’ environmental performance through their lean initiatives.

In addition, the case studies illustrate examples from many different industries, but one of the important facts about many of these initiatives is that the implementation of lean concepts and tools resulted in improvements in environmental performance even when lean activities were not initiated for environmental reasons.

Has your organization experienced environmental benefits through its lean initiative? Have any readers used these EPA resources? If so, please post your thoughts.

Three Free Videos on Integrating Lean and Green

I recently viewed this three-part video series by Carlos Venegas (author of the book Flow in the Office) on the Straus Forest website. Carlos concisely discusses and illustrates the integration of Lean and Green. In addition, he includes this 12-point tip sheet directed specifically to environmental, health and safety (EH&S) professionals.

One of the most important points is discussed by Jennifer Tice (from Ross & Associates) in the third video titled "How Lean and Green Can Go Viral" -- although particular pilot projects might be limited in scope in regard to improvements, the awareness and empowerment gained by front-line employees might have a "ripple effect." That is, these employees begin to scrutinize their other daily processes with a "Lean eye" and begin to see waste as well as improvement opportunities that they did not think about previously.

What is your opinion of these videos?

A Lean Six Sigma and Environmental Practices Survey

James Marsh, a PhD candidate at Sheffield Hallam University in the UK, is currently researching the environmental benefits and/or trade offs resulting from Lean and Six Sigma initiatives. Mr. Marsh is analyzing the key differences from various industries and departmental functions and would like Lean and Six Sigma leaders and team members from the widest cross section of global companies possible to complete this survey he created.

This survey takes only about 5 to 10 minutes to complete, and all users retain their anonymity. Please do participate and feel free to pass this survey on to other colleagues actively involved in Lean and Six Sigma initiatives -- the more data gathered, the more accurate the research.

Quick Wins on the Green Journey

The third and final part of my discussion with Brett Wills (author of Green Intentions: Creating a Green Value Stream to Compete and Win) focused on the areas of any organization where quick improvements could be accomplished. Brett has some important suggestions here:

"When starting out on the green journey, one does not have to dive in head first. There are many initiatives that can be undertaken to realize significant cost savings without tying up large amounts of resources. Not only will these initiatives realize cost savings, they will go a long way in gaining the buy-in needed to develop a greener culture.

Here are a few quick wins to get started with:

1. Air Compressors -- Identifying and repairing leaks in air compressor lines can result in hundreds even thousands of dollars in annual energy savings. In addition, many times the PSI level is far too high for what is actually needed. By simply lowering the PSI level a few notches, one will see immediate savings.

2. Peak Shaving -- A close examination of one’s electric bill will reveal a hidden peak demand charge. This charge is based on the one-time largest draw of energy over a 15-minute window. For example, turning on all the lights, motors, equipment, computers and so on at the same time will draw a large amount of energy for a short period of time. With a peak demand charge anywhere from $5+ per kW, one can save a great deal of money by simply staggering start ups. Often times the electricity provider will help with this project at no cost.

3. Computers -- Although the energy consumption of a single computer is relatively low, adding up the energy consumption from all computers represents a significant cost. Many times computers are left on overnight so that updates and maintenance tasks can be performed. By simply scheduling these activities to occur on a specific night, computers can be shut off at the end of each day to realize cost savings.

4. Water Coolers -- It is cheaper to use water coolers that treat tap water than to use water coolers that are fed from a bottle.

5. Hot-Water Tanks and Pipes -- Uninsulated hot-water pipes and tanks result in large amounts of heat loss requiring greater amounts of energy to keep water at desired temperatures. By insulating these tanks and pipes, heat loss is minimized resulting in lower energy consumption and ultimately, cost savings.

6. Side Skirts -- For transport and logistics companies or those with fleets of trucks, there is a simple way to dramatically increase fuel consumption, with very little investment. Side skirts for tractor trailers greatly reduce drag and can increase fuel savings by as much as 15%.

These are just a few of the many quick wins that can be had by putting on the green lens. Harvesting this low hanging fruit is an effective way to start realizing cost savings and build momentum for a more comprehensive green transformation. The key is to have a process or a 'road map' to follow."

A Lean and Green Benchmark

To continue our discussion of sustainability and green manufacturing, I present part two of my “digital dialogue” with Brett Wills (author of Green Intentions: Creating a Green Value Stream to Compete and Win). In this post, he presents a great case study in “green thinking”:

"In business for more than 30 years, Interface Inc. is a publicly traded company with 2007 annual revenues of $1.08 Billion. They are headquartered in Atlanta, GA and have offices in more than 100 countries.

Interface is arguably best known in the green world for being a leader in industrial ecology by closing the loop on carpeting. Their ability to take back their carpets and make new carpet out of it with relatively minimal environmental impact in the process has shown that green thinking is not only possible it is practical and just plain good business.

Under the leadership of founder and chairman Ray Anderson along with the support of key change agents such as senior engineer Dave Gustashaw, Interface has a vision of being the world’s first environmentally restorative company by 2020. That’s right, environmentally restorative, not environmentally friendlier or even neutral but to actually have a positive impact on the environment.

Interface looks at waste not only form the customer’s perception of value but also extend that thinking to include the environments perception of value. Although they admit they still have a long way to go, their results serve as inspiration for what can be achieved with a commitment to banish all forms of waste. Have a look at the remarkable stats of their 15-year 'lean and green' journey, you will be amazed.

Cumulative avoided costs from waste elimination – $372,000,000
Total waste sent to landfills from manufacturing – down 66%
Total energy use – down 45%
Total renewable energy use – 27%
Percent renewable or bio-based materials in products – 25%
Net absolute greenhouse gas emissions – down 82%
Water – down 75% modular, 45% broadloom
Post consumer/industrial diversion from landfill – 133,000,000 lbs.
Safety – 60% reduction in recordable accidents.

Still think that going green is a financial drag and a “nice to do” in good times?

The trick to achieving results with green is to have a process and road map to follow. The lean and green process provides this map.

* Information extracted from the an article appearing in the Association for Manufacturing Excellence’s Target Magazine (Volume 24, Issue Number 5). The article was written by Dave Gustashaw and Dr. Robert Hall.

Green… Just Plain Smart Business

My recent posts on "lean and green" and sustainability have generated some emails from practitioners working in this area. Brett Wills, author of Green Intentions: Creating a Green Value Stream to Compete and Win, sent me some fairly detailed insights that I'd like to share here in three successive blog posts. Here is part one:

"Attitudes of customers, employees, and stakeholders are changing. Indicators are constantly showing they are increasingly attracted to those companies who respect the environment and people and are committed to improving sustainable processes. For some, however, there is an illusion that going green is a financial drag. This thinking inhibits the change that is necessary to compete and win in today’s economy. Fortunately, this thinking is rapidly changing as more and more companies continually post results to the bottom line.

Companies like Coca Cola, Kraft, Heinz, Toyota, Interface and HP are showing how going green cuts costs, grows market share, strengthens brands, and increases competitiveness. These companies are clearly illustrating that going green is no longer a 'nice to do' program in good times but a key ingredient to succeeding in the new, reset economy.

The rub is that going green can be difficult if one does not have the tools, techniques, and thinking required for a successful green transformation. The good news is that all the ingredients needed for a successful and profitable green transformation are readily available. In addition, one can quickly learn to apply these tools to immediately realize cost savings and other business benefits with little to no investment and quick implementation.

One such tool is the lean and green process that allows one to quickly uncover the often hidden and costly green wastes laying in an organization. Committing a relatively small amount of time to learning and applying this process will allow one to immediately begin harvesting the low-hanging fruit. These quick wins enable one to get the buy-in and support needed for continuous green improvement.

Whichever way one looks at it, competing and winning in today’s new economy requires a strategy that includes green."

Will Environmental Sustainability Drive Social Sustainability?

Although environmental sustainability has entered many strategic corporate business plans -- due to either the pressures to comply with stringent legislation or to satisfy the demands of the growing numbers of ecologically minded consumers and investors -- one must wonder if social sustainability will be part of the package. It appears that corporations are finally publicly recognizing their failings in this area. This article commenting on Nike’s recently published fiscal 2007 to 2009 Corporate Responsibility report raised some interesting points.

Many of Nike’s environmental goals seem decidedly lean, such as “to achieve zero waste in the supply chain and have products and materials that can be continuously reused – no pre- or post-consumer waste” and produce products “using the fewest possible materials and designed for easy disassembly, while allowing them to be recycled into new product or safely returned to nature at the end of their life.” But, social sustainability might be the larger issue for companies such as these that have had controversial track records during the past 20 years in regard to the exploitation of unsafe working conditions, employee wages, and child labor most notably in factories in Southeast Asia.

One of the original guiding principles of the Toyota Production System was “respect for humanity,” and Nike appears to be openly addressing the employee problems within the more than 600 contract factories the company uses. Can large corporations that outsource manufacturing to so many different factories – in various developing countries with different laws and reporting standards – ever really manage and influence the systemic mindset and culture throughout these plants? Do you think that corporations whose supply chain is composed of factories working on a strictly defined contract basis (that also produce products for many other organizations as well as competitors) can ever fully partner with them in the Toyota tradition?