Needed: A Lean Enterprise Standard

Needed: A Lean Enterprise Standard The steady hemorrhage of American manufacturing jobs today and the decline of the Ford Motor Company during the 194...
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Needed: A Lean Enterprise Standard The steady hemorrhage of American manufacturing jobs today and the decline of the Ford Motor Company during the 1940s are prima facie evidence of the need for a lean management system (LMS) standard that has the same stature as the ISO 9000 quality management system (QMS) standard. This article will show that: (1) The success of lean enterprise (once known as scientific management) in protecting high-wage American jobs while delivering unprecedented and almost limitless wealth is unquestionable. (2) The best-managed company can lose its lean culture and methodology unless it has a LMS. (3) Any LMS standard will be synergistic with ISO 9000 and with the ISO 14001 environmental management system (EMS) standard. The history of American manufacturing supports the first two assertions. An outline for a LMS standard will include the synergies with ISO 9000 and ISO 14001.

Lessons from History The history of lean enterprise offers three compelling lessons: (1) Lean enterprise protects manufacturing jobs from low-wage competition. (2) Lean enterprise's effectiveness has been proven by results that far exceed those of Six Sigma or any other productivity and quality improvement system. (3) A LMS standard could have saved the Ford Motor Company, the birthplace of lean enterprise, from decline during the 1940s.


(1) Lean enterprise protects jobs from low-wage competition The good news is that the United States has an off-the-shelf tool for stopping and perhaps even reversing the loss of manufacturing jobs. The bad news is that we are not using it. An original purpose of lean manufacturing (once known as scientific management) was to protect high-wage American jobs from cheap offshore labor. Henry Towne, a past President of the American Society of Mechanical Engineers, wrote in his foreword to Frederick Winslow Taylor's Shop Management (1911): We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes. Taylor added in Principles of Scientific Management (1911), "…the one element more than any other which differentiates civilized from uncivilized countries— prosperous from poverty-stricken peoples— is that the average man in the one is five or six times as productive as the other." Lean manufacturing can make workers so productive that their jobs would be safe even if their offshore counterparts worked for free. This is because, if the per-unit American labor cost drops below the cost of shipping the same product across the Pacific Ocean, the offshore competitor is out of the running even if its labor cost is zero.


Furthermore, trans-Pacific shipping adds delivery lead times that are totally inconsistent with just-in-time production systems. (2) Lean enterprise delivers proven and incontrovertible results Can lean enterprise really make labor costs insignificant while workers earn $15 or more dollars an hour? Practitioners like Taylor and motion efficiency pioneer Frank Gilbreth started the scientific management movement but Henry Ford developed it into a synergistic management system that delivered unprecedented prosperity. The colossal productivity of Ford's Highland Park plant was evident even by 1915: Ford's success has startled the country, almost the world, financially, industrially, mechanically. It exhibits in higher degree than most persons would have thought possible the seemingly contradictory requirements of true efficiency, which are: constant increase of quality, great increase of pay to the workers, repeated reduction in cost to the consumer. And with these appears, as at once cause and effect, an absolutely incredible enlargement of output reaching something like one hundred fold in less than ten years, and an enormous profit to the manufacturer. —Charles Buxton Going, preface to Ford Methods and the Ford Shops (Arnold and Faurote, 1915).

Better quality and lower prices for customers, higher pay for workers, and hundredfold productivity improvements all resulted from what we now know as lean enterprise. No one has even suggested that Six Sigma can achieve results of this magnitude. Six Sigma did not prevent layoffs— which are inconsistent with lean culture because no workers are going to make productivity improvements that they think are going to put


them out of jobs— at Motorola during the recent economic downturn. Ford, on the other hand, rode through the post-World War I depression as if it wasn't even there. Japan certainly found Ford's results persuasive because Taiichi Ohno adopted his methods as the Toyota production system (Levinson, 2002, and Levinson and Rerick, 2002). (3) A LMS standard could have maintained Ford's manufacturing supremacy If the Ford lean enterprise system was so good, why did the company lose its manufacturing supremacy in the middle of the last century? Levinson (2002) contends that the company was effectively decapitated by the loss of three central figures within the space of a few years. Henry Ford was incapacitated by a series of strokes, Edsel Ford died, and production chief Charles Sorensen retired. Sorensen had been the plaster that held the plant [River Rouge] together. When word came through that he was leaving, real panic swept through the Rouge. When Sorensen left, the Rouge lost its soul (Bennett, 1951, 298). Once this happened, management became the province of exactly the kind of people whom Henry Ford said were unfit to lead any enterprise: In the decade following World War II, Ford's Whiz Kids created a corporate culture based on a financial paradigm, in which virtually every business decision was a function only of profitability (Hoyer, 2001). Standardization (making the best known way of doing the job the standard for the job) and best practice deployment (sharing the best known way to do a job with similar activities) were central parts of the Ford business system. Henry Ford did not, however, standardize the management system that had rendered him such impressive service. He


had never really considered the idea that his company would one day have to get along without him. "Mr. Ford, like many men of his kind, never had a successor, they just can't acknowledge that such a thing is possible" (Sorensen, 1956, 333). This is why Ford's lean culture declined to the point where it had to relearn much of its own heritage from the very people whom it had taught to make cars. When Ford executives visited Japan in 1982, "One Japanese executive referred repeatedly to 'the book.' When Ford executives asked about the book, he responded: 'It's Henry Ford's book of course— your company's book" (Stuelpnagel 1993, 91). A LMS could have saved Ford's lean culture despite the loss of key personnel. It is now time to correct this omission by developing a LMS standard that has the same force and stature as ISO 9000.

State of the Art and Suggested Direction Internet searches for LMS standards reveal little. The Automotive Industry Action Group (AIAG) has considered the idea but it has yet to deploy a standard. This is unfortunate because lean enterprise delivers exactly the kind of price reductions that automakers want. The Society of Automotive Engineers (SAE) has published J4000, "Identification and Measurement of Best Practice in Implementation of Lean Operation," but it does not seem to be in widespread use. The American Society for Quality is, however, looking into the development of a professional certification in lean manufacturing. Some companies will doubtlessly complain that a LMS standard is another "burden" on top of ISO 9000. First, ISO 9000 becomes a burden only when management treats it as a costly annoyance with which the company "must" comply to "get the certificate." It is a moneymaker if it is treated as a system for reducing quality costs. Second, lean enterprise


encompasses much of ISO 9000. If you do one, you are automatically doing a good part of the other. For example, ISO 9000's requirement for training records, skills matrices, and the like is synergistic with the frequent need for employee cross-training in lean enterprise. Lean enterprise is even more compatible with ISO 14001. Henry Ford made enormous profits by avoiding environmental waste or finding uses for it, in an era when he could have legally dumped into the river whatever wouldn't go up the smokestack. Basic Considerations Continuous improvement (kaizen), standardization, and best practice deployment were the foundation of Henry Ford's lean enterprise system. The organizational culture empowered every worker to identify and eliminate all forms of waste (muda). The LMS standard must therefore incorporate the following features. This is by no means a comprehensive list but, where applicable, the tie-in with ISO 9000 is shown. (1) Lean culture and leadership •

Lean culture and leadership tie in directly with ISO 9000's provisions for management responsibility. ISO 9000 requires management to define, disseminate, and support the organization's quality policy through communications, policies, and periodic reviews. Little extra effort is required to add lean policies and methods to this aspect of ISO 9000, especially given the synergy between quality and lean methodologies.

How does management train and empower organizational members to identify and eliminate waste?


Does top management show commitment to the lean culture? Do top-level managers practice what Tom Peters calls management by wandering around (MBWA)? Do managers spend time in what Masaaki Imai calls gemba (the value-adding workplace)? Henry Ford practiced visible leadership by talking with workers on the shop floor instead of trying to manage from a corner office.

How do performance measurements and rewards support a lean culture? Never forget that discharging workers whom productivity improvements make unnecessary is the kiss of death for lean.

Do financial metrics support a lean culture? For example, the Theory of Constraints measures only throughput (finished goods with customers for them; more is better), inventory (less is better), and operating expenses (less is better). Traditional measurements like overhead absorption and equipment utilization for its own sake produce dysfunctional results.

Do employees receive recognition for making their jobs more productive?

How does management break down organizational barriers and encourage cross-functional teaming? "The health of any organization depends on every member— whatever his place— feeling that everything that happens to come to his notice relating to the welfare of the business is his own job" (Ford, 1922).

(2) Lean infrastructure •

Is there a closed-loop corrective action (CLCA) system that drives improvement projects to completion? Any modification of plan-do-check-


act, such as the modern Ford company's TOPS-8D (team oriented problem solving, eight disciplines) or Six Sigma's DMAIC (Define, Measure, Analyze, Improve, Control), will work as long as it is used diligently. ISO 9000 already requires CLCA for reacting to quality problems. A LMS simply extends this requirement to proactive improvements. (3) Continuous improvement, standardization, and best practice deployment •

ISO 9000's requirement for controlled work instructions (section 5.5.6) already covers standardization, or making the current best-known way of doing a job the standard for that job. Best practice deployment means sharing this standard with related operations. How does the business assure that similar processes and operations are aware of improvements that they might find useful?

(4) Lean methodology: audit for its use where applicable. Lean audits can easily be combined with ISO 9000 audits, again due to the strong synergy between many lean and quality management methods. In each case, the auditor checks to make sure that policies and work instructions support the indicated management system, and that those policies and work instructions are being followed. The automotive QS-9000 standard already calls for many of the continuous improvement activities that appear on this list. •

Error-proofing (poka-yoke) and self-check systems, synergistic with the ISO 9000 provisions that cover inspection and testing.

Setup time reduction (single-minute exchange of die)

Lot size reduction (going from batch processing to single-unit flow)


Design for manufacture (DFM) and robust design (designing the product to make it less susceptible to variation), synergistic with ISO 9000:2000 7.3 (Design Control) and cross-functional design teams

Quality Function Deployment (also known as House of Quality), synergistic with ISO 9000:2000 5.2 (Customer Focus)

Just-in-time (JIT) production control or another pull system

Motion efficiency, ergonomics and human factors support ISO 9000:2000 sections 6.3 and 6.4 (Facilities and Work Environment) by reducing the chance for repetitive motion injuries. There is little evidence of such injuries under Henry Ford despite the jobs' repetitive nature, probably because the jobs were designed to minimize physical effort. The design of jobs to avoid bending doubtlessly prevented many back injuries.

5S-CANDO (Clearing up, Arranging, Neatness, Discipline, Ongoing improvement)

Visual controls

Workplace lighting, a consideration identified by Frank Gilbreth and treated under ISO 9000. Fluorescent lights are cheap but are they really consistent with maximum productivity?

Value stream mapping

Reduction of handling and transportation, synergistic with ISO 9000:2000 7.1 and 7.5.4 (Handling, Storage, Packaging, and Delivery). Less handling and transportation means fewer opportunities for product damage as well as shorter cycle times. Placement of tools in the sequence of operations (as


in work cells) instead of a departmental or "farm" layout supports this objective. •

Cycle time reduction (supported by inventory reduction, shorter transportation distances, and smaller lot sizes)

Kaizen (continuous improvement), generally synergistic with ISO 9000:2000 section 8.5, "Improvement."

Preventive maintenance, synergistic with ISO 9000:2000 section 7.5.1(Process Control) and supported by the ISO 9000 requirement for quality records like maintenance logs

(5) Supply chain management •

Does the company practice supplier development by teaching its suppliers lean methodology? This consideration can piggyback onto ISO 9000:2000 section 7.4, Purchasing.

How does the company manage its logistics to minimize transportation time, delivery lead time, and costs?

(6) Environmental management •

How does the company avoid making environmental waste or else find commercial uses for it? This aspect of the LMS ties in very strongly with the ISO 14001 standard for environmental management systems.

Conclusion The effectiveness of lean enterprise has been proven by the overwhelming bottom line results of the Ford Motor Company's first few decades and its adoption by Toyota. The concept of ISO 9000 recognizes that quality management systems are a prerequisite


for world-class quality. It is now time to apply the same principle to lean management systems. Only through lean enterprise can the United States stop and possibly reverse the deadly loss of its manufacturing capability and the well-paying jobs that go with it.

Bibliography Bennett, Harry, as told to Paul Marcus. 1951. Ford: We Never Called Him Henry. New York: Tom Doherty Associates, Inc. Ford, Henry, and Crowther, Samuel. 1922. My Life and Work. New York: Doubleday, Page & Company Ford, Henry, and Crowther, Samuel. 1926. Today and Tomorrow. New York: Doubleday, Page & Company (Reprint available from Productivity Press, 1988) Ford, Henry, and Crowther, Samuel. 1930. Moving Forward. New York: Doubleday, Doran, & Company Hoyer, R.W. 2001. "Why Quality Gets an 'F': What happens when the bottom line overrides a focus on customer needs." Quality Progress, October 2001, 32-36 Levinson, William. 2002. Henry Ford's Lean Vision: Enduring Principles from the First Ford Motor Plant. Portland OR: Productivity Press Levinson, William, and Rerick, Raymond. 2002. Lean Enterprise: A Synergistic Approach to Minimizing Waste. Milwaukee: ASQ Quality Press. Sorensen, Charles E., with Samuel T. Williamson. 1956. My Forty Years with Ford. New York: W. W. Norton & Company Inc. Stuelpnagel, T. R. 1993. "Déjà Vu: TQM Returns to Detroit and Elsewhere." Quality Progress (September), 91-95 Taylor, Frederick Winslow. 1911. The Principles of Scientific Management. New York: Harper Brothers. 1998 republication by Dover Publications, Inc., Mineola, NY Taylor, Frederick Winslow. 1911. Shop Management. New York: Harper & Brothers Publishers About the author William A. Levinson, P.E., is the principal of Levinson Productivity Systems, P.C. He is a SME certified manufacturing engineer and enterprise integrator, with an APICS certification in production and inventory management. He is also an ASQ Certified Six Sigma Black Belt, CQE, CQM, CRE, and CQA 11


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