Beyond Toyota: How to Root Out Waste and Pursue Perfection
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I D E A S A T W O R K
tomers showed no evidence of lean-
Lantech achieved ness when adjusted for the ups and
unimaginable results by downs in the business cycle.
We concluded that the problems
applying lean thinking to were twofold. Although many man-
agers had grasped the power of indi-
every aspect of its business. vidual lean techniques - quality
function deployment for product de-
velopment, simple pull systems to
Beyond Toyota: replace complex computer systems
for scheduling, and the creation of
work cells for operations ranging
from credit checking and order entry
How to Root Out Waste in the office to parts fabrication in
the plant-they had stumbled when
it came to putting them all together
and Pursue Perfection into a coherent business system.
That is, they could hit individual
notes [and loved how they sounded)
but still couldn't play a tune. And
even those managers who could car-
ry a tune found it very hard to intro-
duce comprehensive change in those
mature organizations that make up
the great bulk of every national
economy at any point in time.
We therefore set out in 1992 to
identify and articulate a comprehen-
by James P. Womack and Daniel T. [ones sive lean business logic, which we
now call lean thinking. We studied
Six years ago, we wrote, with that they were adopting lean tech- 50 companies throughout the world
Daniel Roos, The Machine That niques - techniques for relentlessly in a wide variety of industries-from
Changed the World. The book sum- and continuously eliminating waste the company that had pioneered
marized the Massachusetts Institute from an operation. And in that the approach, Toyota, to such re-
of Technology's study of the global heartland of global manufacturing, cent initiates as Japan's Showa Manu-
automohile industry, which docu- the automobile industry, it was soon facturing, Germany's Porsche, and
mented the great performance ad- impossible to find a manager any- U.S. companies ranging from giant
vantages that a hest-in-class lean where who did not profess to he Pratt & Whitney to relatively small
manufacturer such as Toyota had "getting lean." Lantech, a manufacturer of wrap-
over typical mass producers in West- Those claims were mostly wishful ping machines. We believe that enu-
ern countries. When we presented thinking. When we looked more merating the five steps those lean
our evidence, we feared the indus- closely, we found plenty of just-in- companies have taken will be useful
trial equivalent of an immune reac- time delivery systems that involved to managers everywhere.
tion, in which managers in other re- nothing more than the relocation of
gions and industries would reiect inventories from the company we fames P. Womack advises compa-
were visiting to the next nies on how to apply lean thinking
company upstream. In of- to their operations and maintains a
fices and plants, we found research affiliation with the Japan
unlinked islands of lean Program at the Massachusetts Insti-
operating techniques. tute of Technology in Cambridge,
And we found many al- Massachusetts. Daniel T. Jones is a
legedly lean product- professor of management at the
development groups that Cardiff Business School of the Uni-
were nothing more than compart- versity of Wales and the director of
lean techniques as irrelevant to their
mentalized organizations with new its Lean Enterprise Research Centre.
circumstances or impossible to im-
labels. One statistic in particular ex- This article is adapted from their
plement. Instead, we discovered that
posed the truth: the inventories that book Lean Thinking: Banish Waste
we were battering down an open
the North American, European, and and Create Wealth in Your Corpora-
door. We encountered scores of man-
Japanese economies need to support tion, to be pubhshed by Simon &)
agers in industries as diverse as aero-
a given level of sales to end cus- Schuster in September 1996.
space and construction who told us
140 HARVARD BUSINESS REVIEW September-October 1996
I D E A S A T W O R K
1. Define value precisely from the stream almost always exposes enor- 4. Design and provide what the
perspective of the end customer in mous-indeed, staggering-amounts customer wants only when the cus-
terms of a specific product with spe- of muda in the form of unnecessary tomer wants it. Letting the end
cific capahilities offered at a specific steps, hacktracking, and scrap as the customer pull the product from the
price and time. As the late Taiichi product proceeds from department value stream in this fashion ehmi-
to department and from nates muda in the form of designs
company to company. that are obsolete before the product
The organizational can he introduced, finished-goods
mechanism for defining inventories, elaborate inventory-
value and identifying the tracking systems, and remaindered
value stream from con- goods no one wants.
cept to launch, order to 5. Pursue perfection. As lean tech-
delivery, and raw materi- niques begin to he applied up and
al to finished product is down the value stream, something
the lean enterprise - a very odd starts to happen. It dawns
Ohno, one of the creators of the leg- continuing conference of all con- on those involved that there is no
endary Toyota Production System, cerned parties to create a channel for end to the process of reducing effort,
put it, all industrial thinking must the stream, dredging up all the time, space, cost, and mistakes
begin by differentiating value for the muda. For a full explanation of this while offering a product that is ever
customer from muda - the Japanese concept, see our article "From Lean more nearly what the customer ac-
term for waste. Production to the Lean Enterprise" tually wants.
While seemingly straightforward, IHBR March-April 1994).
Why should that he? Because the
this step is actually hard to carry out 3. Make the remaining value- four initial steps interact with one
and for a very simple reason: for any creating steps flow. Making steps another in a virtuous circle. A more
product more complex than a tooth- flow means working on each design, precise definition of value always
pick and for any service more com- order, and product continuously challenges the steps in the value
plicated than a haircut, value must from beginning to end so that there stream to reveal waste, and getting
flow across many companies and is no waiting, downtime, or scrap value to flow faster always exposes
through many departments within within or between steps. This usu- hidden muda. Then, the harder cus-
each company. Although each entity ally requires introducing new types tomers pull, the more the impedi-
along the route may or may not de- of organizations or technologies ments to flow are revealed, permit-
fine value for the end customer, it and getting rid of "monuments" - ting them to be removed.
certainly will define value for itself- machines whose large scale or com-
to turn a profit, to advance the ca- plex technology necessitates operat- The Lean Revolution
reers of those in each department, to ing in a batch mode. at Lantech
utilize existing production assets
Many Western managers mistak- Applying these five concepts re-
fully, and so forth. When all those
enly believe that flow is something quires a complete organizational
definitions of value are added up,
one can achieve only gradually transformation, and it's difficult for
they often conflict with or cancel
through kaizen, or continuous incre- the uninitiated to know where to
out one another. Consequently, fail-
mental improvement. However, by start. Lantech of Louisville, Ken-
ure to specify value correctly hefore
first practicing kaikaku, or radical tucky, provides an excellent exam-
applying lean techniques can easily
improvement, lean thinkers at com- ple of how to make the leap in an ex-
result in providing the wrong prod-
panies we have studied were often isting operation.
uct or service in a highly efficient
ahle to transform in a single day Lantech's founder, Pat Lancaster,
way-pure muda.
the production activities required to is a heroic American type. He grew
2. Identify the entire value stream make one product from a batch-and- up tinkering in the family work-
for each product or product fam- queue system to a continuous flow. shop, convinced from an early age
ily and eliminate waste. The value As a result, they douhled productiv- that he could he an inventor. In
stream is all the specific actions re- ity and dramatically reduced errors 1972, when Lancaster was 29, he had
quired to hring a specific product and scrap. A similar rearrangement his big idea: a new way for manufac-
through three critical activities of of product-development and order- turers to wrap their products for
any husiness: product definition scheduling activities produced gains shipment. He and his brother invest-
(from concept through detailed de- of comparable magnitude. When pro- ed $300 in simple metalworking
sign and engineering to production cesses truly flow, products that re- tools to build their first wrapping
launch), information management quired years to design take months, machine, rented a small warehouse,
[from order taking through detailed orders that required days to process and went to work under the corpo-
scheduling to delivery), and physical are completed in hours, and the rate name of Lantech.
transformation (from raw materials throughput time for physical pro-
duction shrinks from months or Lancaster's idea was a device that
to a finished product in the hands of
weeks to days or minutes. would stretch-wrap pallets of goods
the customer). Identifying the value
with plastic film so that they could
HARVARD BUSINESS REVIEW September-October 1996 141
How Lantech Makes Its Stretch Wrappers
Storage of
incoming
components
be sbipped easily from plant to plant years. Soaring energy prices created corrosion-inhibiting base coat and a
within a manufacturing system and an overwhelming advantage for cosmetic finish coat to the complet-
then onward, as fmished products, stretch-wrapping. By 1979, Lantech ed frame. The subassembly depart-
to wholesalers and retailers. In con- had sales of $13.4 million and em- ment built component systems from
trast to traditional shrink-wrapping, ployed 158 people. parts purchased from suppliers. And
in which plastic bags are placed Lancaster had created his initial the final-assembly department at-
loosely around palletloads of goods design and his first machine in a tached the component systems to
and then shrunk in an oven until continuous flow of activities. So the frame.
they fit tightly, stretch-wrapping Lantech was born lean, like most In pursuit of efficiency, Lantech
would pull plastic wrap tightly start-up businesses. However, when built its four basic types of machines
around the palletload as it rotated on he began to make his product in vol- in batches; it fabricated and assem-
a turntable, eliminating the energy, ume, in the late 1970s, it didn't seem bled 10 to 15 machines of a type at
equipment, effort, and time required practical to run an established busi- one go. However, because customers
for heat-treating. ness that way. Lancaster hired an ex- usually bought only one machine at
Lancaster soon discovered that a perienced operations manager to run a time, the company had to store
complex set of precision rollers his new plant, an engineering direc- most of the machines in each batch
tor to create a variety of configura- in a finished-goods area until they
could exert a smooth force on the
tions of the basic concept, and a were purchased. A stretch wrapper
plastic to stretch it before it was
sales director to manage thus had to take quite a circuitous
a sales force of inde- route during its creation. (See the
pendent distributors. It exhibit "How Lantech Makes Its
suit of seemed natural for the Stretch Wrappers.")
operations, sales, and en- Complexity increased exponen-
gineering managers to or- tially as Lantech tried to move the
ganize Lantech into a se- orders gathered by the independent
ries of departments, each sales force through the office and
with a specialized task. the plant. Because the $10,000-to-
In the plant, the sawing $150,000 machines were usually
department used metal saws to fash- customized, the sales force had to
wound around the pallet. Eventu-
ion frame members from steel contact Lantech for authorization
ally, his system could wrap with
beams. The machining department before quoting a price.
a given amount of plastic an area
7.5 times the size that a shrink sys- drilled and punched holes in the Proposals were sent for cost analy-
tem could wrap. steel to create points for attaching sis to the engineering applications
When Lancaster obtained patents component systems. The welding department, which then sent the ac-
for his concepts in the early 1970s, department welded together the ceptable price back to the sales force.
they were so general and broad that parts for the machine's frame. The Once the customer accepted the
he could fend off competitors for painting department applied both a price, the order traveled from the
142 HARVARD BUSINESS REVIEW September-October 1996
I D E A S A T W O R K
morning, work- stretch wrapper or delayed the deliv-
ers in every de- ery date and built a properly config-
partment - saw- ured machine from scratch.
One Cell's Production Flow: The Q Model ing, machining, Soon the master schedule devel-
welding, paint- oped in the scheduling department
ing, subassem- and the ever changing demands from
bly, final assem- the sales group were pulling the
bly, touch-up, and plant in opposite directions. Expe-
crating - picked diters from the order management
up a printout department moved through the
^ T with their tasks
plant with a "hot list." They visited
Fina^cissembly track ^ J for the day. At departments in sequence and or-
the end of the dered the workforce to make just
day, every depart- one item of a batch so that they
ment reported could take that part immediately to
its progress to the next department and move it to
the scheduling the head of its queue. In an extreme
department. situation, it was possihie to get a
This system stretch wrapper built in less than
was fine in the- four weeks. However, doing so
ory but always a caused the schedule for other ma-
mess in practice chines to slip and created the neces-
because of the sity for more expediting.
sales staff through engineering appli- conflict between customers' chang- The system sounds chaotic, and it
cations, design, and credit checking ing desires and the logic driving the was. But in most of the industrial
before returning to design, which production system. Lancaster and world, such an approach was and
generated a bill of materials-a list of his operations manager directed is the standard method for mak-
every part needed to manufacture each department to do its work in ing products when there are many
that specific machine. The order batches. They wanted to minimize possihie versions, when the produc-
with the bill of materials then went the time Lantech's
to the production operation's sched- machinery was idle
uling department, where a comput- during the changeover
erized material-requirements-plan- to making a new part,
ning (MRP) system assigned it a as well as to mini-
place in the master schedule. Be- mize opportunities to
cause every department had a queue misset machines. But
of orders, there usually were delays. their approach inevi-
As a result, orders generally took 12 tably produced a typical batch-and-
to 14 workdays to travel from the queue environment, in which each tion process is complex, and when
sales staff to the scheduling depart- part waited its turn at the entrance throughput times are long.
ment, even though the actual pro- to each department and then re- Lantech's departmentalized engi-
cessing time was less than 2. turned to a central parts ware- neering process for developing new
house to await its next processing models employed a similar hatch-
Because the movement of prod- and-queue approach. To create a new
step. Incoming steel usually spent
ucts through the plant was so errat- design, it was necessary to have the
16 weeks at Lantech before reaching
ic, the company created a separate marketing staff, engineers from sev-
the shipping dock as a completed
order-management department eral specialties, the purchasing staff,
machine, even though the total time
within the sales group to enable the and operations planners working to-
required to perform all the fabrica-
independent sales force to commu- gether. The marketing group ascer-
tion and assembly steps was just
nicate with the plant about where tained what the customer wanted,
three days.
the machine was in the production and the chief engineer translated
process and to expedite the order if Confronted with long throughput those desires into engineering speci-
the customer was getting restless. times, the sales force frequently fications. One mechanical engineer
(See the exhibit "How Lantech tried to beat the system in order to then designed the moving mechani-
Processes Orders.") secure machines for customers cal parts, and another designed the
The MRP system melded a long- faster. A favorite approach was to frame. An electrical engineer de-
term forecast for orders with ac- order machines on speculation and signed the control system, and a
tual orders as they were received to then, when a real customer was manufacturing engineer designed
create a daily production sched- found, to alter the options very the fabrication tools. Once the de-
ule, which assigned tasks to each late in the production process. The signs of the product and the tools
department in the plant. Each factory then either reworked the were finalized, an industrial engi-
HARVARD BUSINESS REVIEW September-October 1996 143
I D E A S A T W O R K
neer from the production depart- or her desk. To get rush projects fered in only very minor ways from
ment designed the route the model through the system, Lantech again previous models. And we made tons
would have to take through the had to turn to expediters. In practice, of money."
plant to he built, and the list of nec- it usually took a year to introduce a Then, on June 26, 1989, Lantech
essary parts was placed in the sched- minor improvement and three or lost a patent-infringement suit
uling computer. Meanwhile, the four years to introduce a new family against a competitor that was offer-
purchasing staff lined up suppliers of machines, although the time it ing lower-priced clones of Lantech
would have taken if proj- machines. The verdict threw open
ects spent no time in the market. By the end of 1989,
queues or backtracking clones with roughly comparable per-
was only a few weeks for formance started to appear every-
minor improvements and where. "The bottom fell out of my
six months for a new pricing, and I knew worse was com-
family of machines. ing as soon as the husiness cycle
In summary, Lantech turned down," Lancaster says. "In
conducted its three major my heart, I knew that Lantech was
activities - creating new walking dead."
for parts not made at Lantech. [See designs, managing information on No quitter, Lancaster tried most
the exhihit "How Lantech Develops what to make, and physically pro- of the remedies popular in the U.S.
New Products.") ducing its machines - in a classic business community at tbe time.
In its infancy, Lantech had only a hatch-and-queue manner. Many His first approach was to reorganize
half dozen engineers, but even then steps added no value, nothing flowed, the company into separate profit
communication barriers were suh- customers couldn't pull, and manag- centers for "standard products" and
stantial as a design moved from the ers focused on minimizing variations "specials" (those requiring exten-
marketing group to the chief engi- in operations rather than on pursu- sive customization) in order to in-
neer to the mechanical engineers to ing perfection. crease accountability and to move
the electrical engineer to the manu- Until 1989, Lantech was ahle to the highly customized products out
facturing engineer to the industrial tolerate those deficiencies. "We of the path of machines sold in bigh-
engineer. Getting from the initial were selling a top-priced product er volumes. After a visit to Milliken,
concept to a complete production- that had major performance advan- the South Carolina textile giant, he
ready design required rework and tages over competitors' products be- also introduced total quality man-
hacktracking, and as the company cause of my patent position," Lan- agement in order to put the voice of
grew and more engineers were caster recalls. "We offered so-so the customer first and foremost.
added, the communication prob- quality in terms of manufacturing Lantech's "good enough" standard
lems worsened. defects in machines delivered to cus- for the acceptahle level of delivered
What's more, each engineer typi- tomers. We took more than a year to defects and customer service was
cally had a stack of projects on his develop 'new' machines, which dif- replaced with talk ahout perfection.
How Lantech Processes Orders
Engineenng
applkations
by product
144 HARVARD BUSINESS REVIEW September-October 1996
I D E A S A T W O R K
How Lantech Develops New Products
Old Batch-and-Oueue System New Continuous-Flow System
Dedicated product teams
work together in one kxation
Marketing Industrial Purchasing
engineering
Team Design in concurrent _
leader development La ndi
Manufacturiru Mechonical Electrical Manufacturing
engineering engineering engineering engineering
Industrial
engineering
the next few years, The third approach to the crisis scbcduling system tbat gave every
initiated a second approach: an ef- was a new production method called worker direct access to the status of
fort to create an empowered orga- Max-Flex. Tbe idea was to slash lead every macbine in production. "It
nization and to build trust between times by building inventories of ma- seemed to be a wonderful marriage
management and the workforce and ior components far in advance, tben of technology and democracy/' Lan-
assembling machines to customers' caster recalls. "Everyone could look
among the different departments.
specifications very quickly when an intt) tbe computer to see what was
Lancaster replaced those senior
order was confirmed. Tbe going on all over the plant and get
obiective was to over- their work orders immediately. Our
come Lantecb's pricing slogan was Data to tbe People."
wanted to work disadvantage by promis- The new system required a new
together in teams, but we ing more rapid delivery of
macbines witb customer-
computer, a new management-infor-
mation-system department, and
-^-^ oil revved up v/ith speeified features. workers on tbe floor to update the
nowhere to go/' Lead times fell from 16 computer when tbey completed each
task. As Jose Zabaneh, the manu-
weeks to 4. But tbe costs
were enormous. Engi- facturing director, notes, "Pretty
managers who had A command- neering changes were frequent. As soon, workers were fully 'in control,'
and-control style with managers a result, it often was necessary to yet tbe system was wildly inaccurate
willing to work in a team-based or- retrofit the mountain of components because many items simply never
ganization, and the eompany con- tbat had been built in advance. In ad- got entered. The old MRP system
ducted extensive training in team dition, the cost of carrying that was slow but 99% accurate. Our
processes, team leadersbip, and indi- mountain was substantial. But, new 'democratic' system was a com-
vidual interaction. most exasperating, despite Lantech's plete catastrophe; instead of infor-
best efforts at planning production, mation, we bad given muda to the
Those programs were an essential
cases quickly arose in which one people." Making matters worse, tbe
start, but they lacked a direct con-
critical component needed to eom- magnitude of inputs and cbanges
nection to the company's core activ-
plete a machine was lacking. (Tai- made the computer run very slowly.
ities. As Bob Underwood, a longtime
ichi Obno noted long ago tbat tbe A consultant recommended buying
production wt)rker, puts it, "We
more inventory you bave, tbe less a mueb more powerful computer.
learned to respect one another and
wanted tt) work together in teams, likely you are to have tbe one part By the end of 1991, Lantech's or-
but we were all revved up with no- you actually need.) Tbe solution was ders were failing despite price reduc-
wbere to go." The factory was still a new team of expediters to get tbe tions, and the factory was unable to
a mess. Product developnient was missing components built. accommodate tbe continual sbifts in
still too slow. And tbe sales force Yet a fourtb approacb to the crisis demand. "We hegan losing money,
was still playing games to beat tbe was better information technology. and our fundamental ideas on bow
lead-time problem. In 1991, Lantech installed a new to run tbe business were in a melt-
146 HARVARD liU-SINESS REVIEW ScptfinKT-Ottubcr
down," Lancaster says. Then he dis-
covered lean thinking by accident:
when he advertised an opening for
the position of vice president for op-
erations, one person responded with
some highly unusual ideas. That
man was Ron Hicks.
Although Ron Hicks does not look
like a revolutionary, he started a rev-
Which is shorter? A - B, or A - C? olution when he went to work for
Lantech in March 1992. He had
learned how to be a revolutionary
while serving as operations vice
president of Hennessy Industries, a
manufacturer of automotive repair
tools in Tennessee that had become
a lean organization.
To transform itself into a lean or-
ganization, a company needs three
types of leaders: someone who is
committed to the business for the
long term and can be the anchor that
provides stability and continuity;
someone with deep knowledge of
lean techniques; and someone who
THINK
can smash the organizational barri-
ers that inevitably arise when dra-
matic change is proposed. Lancaster
filled the first role, Hicks the second,
and Zabaneh the third.
AGAIN
In the newly empowered spirit
of Lantech, Hicks was invited to
Louisville and interviewed by the
people he would manage. His simple
proposal to them came as a revela-
tion: Lantech would immediately
form teams to rethink the value
To solve the problem, try insightful thinking. stream and the flow of value for
every product in the plant and for
At the law firm of Dickstein Shapiro Morin & Oshinsky, every step in order taking and prod-
uct development. Lantech would
our clients benefit from our ability to see complex identify all the activities required at
the time to design, order, and manu-
issues clearly and implement successful strategies. facture a stretch-wrapping machine,
would eliminate those tbat were not
Our attorneys value the kind of creative thinking that truly needed, and then would per-
form in a rapid sequence those that
converts obstacles into opportunities.
did create value - processing one
machine, one design, one order at
a time. Batches, queues, backflows,
and waste-muda of all sorts-would
be banished. The value stream would
DICKSTEIN flow smoothly, continuously, and rap-
SHAPIRO idly. Hicks got the job.
MORIN c -
OSHINSKY Eliminating Wasteful
Activities and Creating Flow
As it happened, the lean trans-
W A S H I N G T O N DC
formation at Lantech was easy in
one important respect: customers
For Solutions: http://www.dsmo.com
I D E A S A T W O R K
were satisfied with the company's fulness of moving parts back and machining station, it proceeded an
stretch-wrapping equipment. Be- forth from central storage to each hour later about four feet to weld-
cause its value to them was not in department, the long waits, and the ing. Fourteen hours after the start of
question and because Lantech un- delayed discovery of quality prob- parts fabrication, the completed ma-
derstood that value, the company lems would be eliminated. chine was ready to ship.
could safely skip the first step in ap- The first production cell, which To make this simple system suc-
plying lean thinking. would make the company's new- ceed, Lantech needed to change a
Upon joining Lantech, Hicks im- est product line, the Q model, was generation of thinking ahout work
mediately went to work with a sim- the acid test. A kaikaku team of and how people work together. First,
ple plan to untangle the flow of Lantech's best workers quickly re- because all the jobs were directly
value by establishing a dedicated thought the value stream and flow. linked, with no buffers of invento-
production process for each of the In less than a week, all the equip- ried parts, it was essential that all
four product families. His plan ment was moved into a new configu- employees think about standardiz-
called for disbanding the production ration. Only the painting booth, a ing their work so that a given task
departments and regrouping the ma- classic monument, survived as a de- would take the same amount of time
chinery so that all the equipment partment. But once parts had gone every time and also would be done
needed to make each of the four through the painting booth, they re- correctly on the first attempt. By de-
models was located together in four turned to the individual cells for sign, either the whole cell was work-
separate production cells. Lantech subassembly, final assembly, test- ing smoothly at the same pace or
also would have to "right-size" ing, and crating. (See, in the exhihit everything came to a halt. For that
many of its tools-get rid of the huge, "How Lantech Makes Its Stretch reason, every task needed to be care-
overly complex machines |or monu- Wrappers," the chart "One Cell's fully described in a posted diagram
ments) and install smaller saws and Production Flow: The Q Model.") so that everyone in the production
machining tools-so that they could Each morning, every hour, the saw cell could understand what every-
fit in the work cells. This step was operator would start production of a one else was doing.
the kaikaku phase-the time to tear new machine. A kit of all the frame Second, because machines were to
things apart and recombine them in parts required for the machine was he made only when ordered, it was
a totally different way. Not only ready hy the end of the hour and was important to introduce the concept
would products flow continuously rolled approximately three feet to that Toyota calls takt time. Takt
from start to finish, but the waste- the machining station. From the time is determined by dividing the
uming Advanced Negotiation Program
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I D E A S A T W O R K
number ui orders placed by cus- own department. As long as we met and gave unfaltering support to the
tomers in a given period into the our daily production quota, we were new approach despite the setbacks.
amount of available production time left alone. What's more, the real kick Hicks and his technical consultant,
in that period. For example, if cus- in the work was 'fire fighting,' in Anand Sharma, had the skills to
tomers were asking for 16 Q models which the 'Lantech Volunteer Fire work the bugs out, and Zabaneh pro-
a day and the plant was running one Department' went into erisis mode vided the emotional energy - what
eight-hour shift, takt time would be to get an emergeney order through Ohno once called "the defiant atti-
one half hour. the system or to elimi-
Establishing takt time was critical nate a sudden produc-
to avoid the natural tendency to pro- tion bottleneck. I was
duce too fast, building up wasteful one of the best fire-
inventories, and was the best way to
fighters at Lantech
and I loved it,"
constont, the
focus the work team on getting all
the work done in the available time. Hicks was propos- d
When demand slackened and takt ing a new system j
time was increased, it would be pos- of standardized work
sible to move some workers to other and takt time, which
tasks, such as maintenance. Simi- sounded like the kind of regimen tude" - t o keep the kaikaku team
larly, an inerease in demand and a that has traditionally caused produc- moving ahead even when no one
shortening of takt time would pro- tion workers to chafe. Moreover, he knew how to solve the next prob-
vide an excellent opportunity for was proposing to make complete lem. Gradually, and then more and
applying kaizen to the activity - for streteh wrappers, one at a time, in more rapidly, value began to flow.
figuring out how the same number precise response to customers' de- By the fall of 1992, Lantech had
of people could produce a complete mands, and that idea seemed both converted its entire production sys-
machine in less time by further re- illogical and impossible to a group tem from departmentalized batch
fining each task and eliminating of employees with 20 years' experi- methods to continuous flow in cells.
ence as batch thinkers. Finally, he Even the production of the largest
more muda.
claimed that if the work was stan- machine, the $150,000 H model,
Finally, beeause customers or-
dardized by the work team, the ma- flowed continuously with a takt
dered each of the four basie models
chines were realigned to permit con- time of one week.
of stretch wrappers with a wide vari- tinuous flow, and takt time was
ety of options, Lantech also needed The impact of the new approach
adhered to with no working ahead, on performance was remarkable.
to figure out how to perform equip- there would be no more fires to
ment changeovers quickly. That way, Although the plant's workforce re-
fight. "It didn't sound like much fun, mained virtually constant at around
all variants of a basic model could and I thought it would never work,"
be made in a continuous flow with 300, the number of shipped ma-
Underwood says. chines doubled between 1991 and
no stoppage.
When the kaikaku team organized When the new cell concept was 1995. Moreover, Lantech could pro-
by Hicks proposed the new cell con- ready to go, it didn't work. All kinds duce a machine in about half the
cept and the elimination of produc- of problems suddenly emerged, and space previously required, the num-
the widespread feeling was that ber of defects reported by customers
tion departments, many production
Hicks was pushing an fell from 8 per machine in 1991 to .8
impractical concept. At in 1995, and start-to-finish produc-
that point, Zabaneh, the tion time for the Q model |which
manufacturing director, had the highest volume and the
played the primary role. shortest takt time) fell from 16
"I was so fed up with weeks to 14 hours.
our failures and so taken A promise that Lancaster had
with the logic of the new made to his workforee in 1992 clear-
system that I threw my ly helped Lantech make the transi-
heart into it," he recalls. tion so quiekly: he had announced
"I called a meeting of the work- that no one would be let go as a
workers and managers were baffled
toree and announced that I would result of the conversion. Instead,
or dismayed. As Bob Underwood,
stay all night and all weekend to Lantech assigned the freed-up work-
one of the most highly skilled work-
work on the problems we were en- ers to a companywide kaikaku team
ers on the floor, notes, "We were
countering but that I would not to plan the improvement of other ac-
used to a system in which each of us
spend even one second discussing tivities. (These eventually included
had a set of hard-earned skills-in my
the possibility of going back to the office activities and helping suppli-
case, it was the ability to adjust non-
old batch-and-queue system." ers deliver parts just in time.) Under-
conforming parts so they would fit.
We were used to doing our own work wood, the original skeptie and chief
As the transformation got under
as we saw fit at our own pace in our fireman, headed the team. After
way, Lancaster took the long view
152 HARVARD BUSINESS REVIEW Septcmbtr-Octoher 1996
every improvement, Lantech trans- time required to get an order into
ferred the best workers in the re- production from three weeks to only
vamped process to the kaikaku two days.
team, making it clear that the as-
signment was a promotion, not a Letting the Customer Pull
punishment. the Product
As the lean revolution gained Lantech also found that it no
Change
ing I Leadin momentum in the plant, the com-
panywide kaikaku team turned its
longer needed most of its computer-
ized scheduling system and retired
attention to Lantech's office. As its mainframe. It retained its MRP
JohnP.KoRer
Lancaster puts it, "If we could make system to provide long-term produc-
208 pages-324.95 a machine in 14 hours, how could tion forecasts to suppliers, which
we live with an order-taking and still needed to know the capacity
credit-checking process that re- they would require to serve Lantech
John P Kotter quired three weeks? And why did we for one or two years. However, the
need an elaborate product-tracking MRP system was no longer used to
order parts from suppliers. Most sup-
Power of
system to keep customers informed
about the status of their product if pliers delivered parts right before
we could schedule it and make it in the production cells needed them, or
only a few days?" just in time. Under Lantech's kanban
system, when a cell used a small box
Lantech employed the same tech- of parts, a card was sent immediate-
The Balance niques it had used in the plant to ly to the supplier of the box, telling it
Scorecard transform the office. The kaikaku that it had to deliver another.
Imslattng Smegy team, including all the workers in-
into Action
volved in the process and one out- At Lantech, day-to-day produc-
Robert S. Kaplan
side technical consultant (Sharma), tion scheduling could now be done
and David P.Norton
on a large white board
in the sales office, where
336 pages • S29.95 orders were written as
soon as they were con-
firmed. During our visits
to Lantech, the slots on
the hoard were filled
from three days to two
collectively mapped the entire value weeks ahead of the current date,
flow and looked for wasted time and and the plant was only manufactur-
effort. As the team rethought the ing machines with firm orders.
steps and as orders began to flow The highly visible white board
The Truth about
continuously from one adiacent was a remarkable spur to the sales
the National worker to the next, with no depart- force, particularly during any time
Debt mental barriers, the best of the freed- when the blank space was increas-
Five Myths and up workers once again were assigned ing. It is an excellent example of yet
One Reality to the kaikaku team to lay the another lean technique: visual con-
Francis X. groundwork for tackling the next lrol. One of the principles of lean
Cavanaugh activity. They remained on the team thinking is that if every employee
192 pages • $22.95 until growth in output or new busi- can see the status of an activity, he
ness initiatives created a need for or she will be able to take appropri-
them elsewhere. ate action.
After Lantech had applied those The sales office sent the roster
techniques to its entire order-taking of machines to be made each day to
and plant-scheduling system, it un- the four production cells. The new
derstood its costs much better, streamlined order flow was a strik-
which enabled it to set prices for ing contrast to the old labyrinth.
each machine more scientifically. In Rethinking the product develop-
addition, the company now could ment process was the final step in
or call (800) 545-7685 or (617} 495 6192.
explain its prices to distributors and Lantech's transformation. From the
Mention priority code 1110. customers more clearly, which elim- early days of the plant conversion,
inated time-consuming haggling [a Lancaster knew that he would need
Harvard Business School Press major source of muda). Finally, the to grow his business dramatically in
changes in the systems slashed the order to keep everyone busy as pro-
Boston, MA 02163
http://www.hbsp.harvarcl. edu
HARVARD BUSINESS REVIEW September-October 1996I D E A S A T W O R K
ductivity zoomed. That meant turn- without much success. A few bet- work nonstop until they had com-
ing strategic thinking on its head. the-company projects were pushed pleted their projects. The company
"I didn't have time to find a new through by a designated "dictator" simply dropped the lower-ranking
business to go into, and I didn't have or a "heavyweight" project leader. projects-the kind that had formerly
the money to buy out a major com- But in general, Lantech relied on so- clogged the engineering department.
petitor. Instead, I needed to revital- called lightweight team leaders to Under the new product-develop-
ize and expand my product range so coordinate the activities of the nu- ment system, a design progressed in
that I could sell more in an estab- merous technical specialists, who, a streamlined fashion.
lished market I knew well," he says. in reality, continued to pursue their The S Series, the first product to
Realizing that his batch-and- individual priorities. In no case was come through the new system, dem-
queue product-development system the team leader - dictator or light- onstrated the potential of the ap-
would take years to come up with weight coordinator-responsible for proach. Launched in mid-1995, the
market-expanding products, he de- ensuring that the product pleased S Series was developed in a year -
cided to make new-product designs the customer and made money for a quarter of the time it had taken to
flow continuously, like orders and Lantech during its production life. develop its predecessor. It took only
machines, "We needed a design to In 1993, Lantech went to a new about half the hours of engineering
move continuously from the initial system of dedicated teams led by a that it would have required in the
concept to the launch of production. "directly responsible individual" old days. And its defect rate was sub-
That meant no stopping because of clearly charged with the success of stantially lower than that of previ-
the bureaucratic needs of our organi- the product during its lifetime. The ous new products.
zation, no backflows to correct mis- annual corporate-planning process Any business must be measured
takes, and no hitches during produc- identified the major products to be by its ability to make enough profit
tion ramp-up," he says. developed and ranked them. The to renew itself. If the transition
Lantech had experimented with company assigned a dedicated team at Lantech had cost a fortune in
various types of development teams of specialists to each of the top-rank- new investment or had disrupted
in the late 1980s and early 1990s ing products and told those teams to the company's ability to satisfy
Lantech's Performance Leap
Development time for a new product family
Enu>loyee hours requirM to malw one machine
MonutocfuntiQ space por nvochine 100 square f M t
Average number of dafecls per delivered mochbte 8
Value ef fafprocess and finished-gotKfs inventonr* $ 3 ^ mflBon
Production throuoiput lime 14 hours to S days
Product-fwlivery lead timet
'Sales more than doubled between 1991 and 1995. If Lantech's traditional sales-toinventory ratio had held constant aikast $5.2 million in inventory
would have been needed to support the 1995 solos vc^ume.
'^Jhis is the period between the placonwni of the a.'skmer's order and the delivery of the rriachine. In 1991, most of tbis time was spent in the prodiKtion
system. In 1995, when sales soared and demand outstripped Lantech's production cafXicity, most of it was wailing time fof a proaoction siot.
156 HARVARD BUSINESS REVIEW September-October 1996I D E A S A T W O R K
customers, it would have been an What's more, Lancaster sees no ness gurus would have people be-
interesting technical exercise but end in sigbt. He notes tbat as layers lieve tbat tbe coupling of low-cost,
hardly a revolution in business prac- of muda are stripped away, more easily accessible data witb interac-
tice. In fact, the amount of invest- muda is always exposed. Despite tbe tive educational software for knowl-
ment required was virtually zero. performance leap tbat Lantech has edge workers will produce a great
For the most part, workers freed up made, it can identify as many oppor- leap in productivity and well-being.
by the elimination of inefficient tunities for improvement today as it We are skeptical.
could four years ago. In tbe past 20 years, we bave seen
Based on four years of tbe robotics revolution, the materi-
studying organizations als revolution (remember the predic-
like Lantecb, we bave de- tion tbat cars would bave ceramic
••f » veloped tbe following engines and airplanes would be built
rules of tbumb: Convert- entirely of plastic?), tbe micro-
ing a classic batcb-and- processor and personal-computer
queue production system revolution, and the biotechnology
rocesses. to clearly specified value revolution. Yet domestic product per
streams tbat flow contin- capita - tbe average amount of value
uously as tbey are pulled by tbe cus- created per person - in all tbe devel-
tasks reconfigured the tools and re-
tomer will double labor productivity oped countries has remained stuck.
thought the office and development
tbrougbout tbe system [for direct, For tbe most part, tbe problem is
processes. And the transformation
managerial, and tecbnical workers, not tbe new tecbnologies tbem-
reduced the amount of computers,
from raw materials to delivered selves. Tbe problem is tbat tbey
space, and expensive tooling that the
product) wbile cutting production often are misapplied and initially
company required. (See the table
tbroughput times and inventories by
"Lantech's Performance Leap.") affect only a small part of tbe
90%. Errors reaching tbe customer,
The effect on customers was economy. A few companies, sucb as
scrap witbin tbe production process,
equally dramatic. Lantech's share Microsoft, grow from infants to gi-
job-related injuries, time to market,
of the stretch-wrapping market and tbe effort required to develop ants overnigbt, but tbe great majori-
zoomed from 38% in 1991 to 50% new products will usually be cut in ty of economic activities-construc-
in 1995, when the company sold balf. And a wider variety of products tion and housing, transportation,
2,585 units and had revenues of will be able to be offered at modest the food supply system, manufactur-
$60 million. As a result, the com- additional cost. ing, and personal services - are af-
pany, which had suffered a large oper- fected only over a long period, if at
ating loss in 1991, was generating Moreover, tbose gains are iust tbe all. New tecbnologies and invest-
solid profits by 1993 and had be- beginning. Tbey are
come the industry's leading finan- tbe kaikaku bonus
cial performer by 1994. from tbe initial radical
realignment of tbe val-
Pursuing Perfection ue stream. By making
In an ironic twist, Lantech has re- continuous incremen-
vitalized itself by banishing batches tal improvements in '*'
and their associated muda from the tbeir pursuit of perfec-
design and production of a product tion, companies can usually double ments in buman capital may gener-
wbose sole use is to wrap batches of productivity again witbin two to ate growth over tbe long term, but
products for shipment witbin com- tbree years and balve inventories, er- lean thinking bas demonstrated the
plex production and distribution rors, and lead times. Because a com- power to produce green shoots of
ebains. Lancaster, tberefore, bas em- pany can put operations tbrougb growtb all across tbis landscape
barked on a new strategic exercise: kaikaku and kaizen scrutiny over within a few years.
to tbink tbrougb how tbe emerging and over again, indefinitely, it will Lean tbinking always works wben
world of small-lot production and never reacb an end to tbe improve- applied in a comprebensive way.
continuous flow will affect his cus- ments it can make. Tbe problem is a sbortage of man-
tomers' packaging needs. Results of tbis magnitude could be agers with tbe knowledge and ener-
Meanwhile, Lantech as an organi- tbe antidote to stagnation in tbe ad- gy to make tbe leap. Wbat compa-
zation is steadily striving for perfec- vanced economies. Conventional nies and tbe wbole world need now
tion-a state in wbich every action in thinking about economic growtb fo- is more Pat Lancasters taking heroic
the organization creates value for cuses on new technologies and addi- measures to define value correctly,
tbe customer. The pace of Lantech's tional training - a focus that helps to identify the value stream, and to
improvement activities bas not explain tbe fascination witb tbe make value flow more and more per-
slowed. Every major activity in tbe falling costs of computing power and fectly at the pull of the customer. ^
company undergoes a three-day witb tbe growing ease of moving Reprint 96511
kaizen several times a year. data around tbe planet. Many busi- To order reprints, see the last page of this issue.
158 HARVARD BUSINESS REVIEW Septemhcr-October 1996You can also read
