Page 41 - How To Implement Lean Manufacturing

22 Cha pte r T w o

The Business Definition
In his book, The Toyota Production System, Beyond Large-Scale Production, (Productivity
Press, 1988), when asked what Toyota was doing, Ohno is quoted as saying:
Beyond this discussion, there is little that would lead
you to believe this is a business model. There are no
discussions of markets and market share, no discussion
“All we are doing is
of stocks and earnings per share, no discussions of
looking at the time line, from
paybacks and return on investment; only this discussion
the moment the customer gives
on the principle of cash flow, or more pointedly, how to
us an order to the point when use manufacturing to improve cash flow. He has no
” other financial discussions, not even the calculations
we collect the cash.
T. Ohno to justify manufacturing projects. The TPS is clearly not
a business system; it is a production system.

Several Revolutionary Concepts in the TPS
To appreciate the TPS and its genius, it is worthwhile to view some of its more revolu-
tionary concepts.
• Supplying value to the customer
• Reducing lead times
• Focusing on the absolute elimination of waste; especially the waste of inventory

None of these concepts are new, but some aspects of the TPS are attacked with such
a religious fervor that they seem almost a uniqueness of the TPS. Many businesses,
long before the TPS became popular, would attack one or more of these issues, but
none has packaged it in such an integrated way. Nor do they attack it with such single-
mindedness as is seen in the TPS.
The Supply of Value to the Customer
This is a revolutionary concept as used in the TPS.
From the early years of mass production, the metrics of manufacturing focused on
two parameters. Cost and production rate were the two items of major importance to
manufacturing firms. Sometime later, in the 1960s or even the ‘70s, quality became a major
issue. The typical plant manager was always working to meet the production schedule
to reduce the costs of production and make sure the product met the quality standards.
Of course, today, these three factors are always on the mind of any businessman.
However, Ohno began to think in other terms. He basically said, “I know what my
plant needs from my perspective, but what does my plant need from my customer’s
perspective? His answer became his key metric, it was value. He described it as those
things the customer was willing to pay for—which is what he called value.

Value-Added Work
To be defined as “value-added” work, the activity must meet these criteria:
• It is something that adds to the form, fit, or function of the product.
• It must be something that the customer is willing to pay for.