We are in danger of not learning from the crisis

STAUFEN MAGAZINE 2021 | No. 4 | Frank Krause | Leadership and Organizational Development

Self-deception after insufficient implementation

Flashback: You were advised more than 20 years ago to adopt a solution that would improve the process landscape. The solution consisted of an effect cycle involving three reinforcing measures. The goal? To reduce everything that the customer is not willing to pay for and thereby shorten the lead time. You called this form of potential “waste”.

The first measure was to secure processes, the second was to link them together – or at least get them operating as closely as possible to each other. The third measure was to balance process times. All three measures should allow you to reduce waste because it would no longer be necessary if processes were “immune” to disturbance.

Increasing interlinking should increase implementation pressure to stabilize freedom from disturbances. The result would ideally be a disturbance-free and fully interlinked customer-customer process. J. P. Womack and D. T. Jones gave this process landscape a name in 1996: the “lean” enterprise and called for an end to the industrial “cold war” along the value chain.

Back to the present: Much has changed since then. Numerous processes became more stable. Many processes were linked, but many – too many – forms of transport remained. Especially in global networks, the concept of “parts tourism” remained. Coordination between “customers” and “suppliers” improved. We are still a long way from an initiative to streamline the value stream that encompasses the participants in the value stream, as the two authors called

for in their bestseller. Nevertheless, waste has been eliminated. Now, during the crisis, supply chains collapsed in many places and the cause was quickly identified. The number of “safeties” should not have been reduced. Others said that the idea of “just-in-time (JIT)” was leading in the wrong direction. Processes are “always” unstable and reducing safety (stocks) is a dangerous
path. That is what the crisis would have proven.

But is that true? This question will be answered in this article. To do so, it is necessary to look at the lean enterprise’s maturity level regarding implementation. What was the maturity level of implementing lean principles before the crisis? How far had the two elements “disturbance free” and “flow” progressed? A look at our “25 Years of Lean Management” study from 2016 shows: Only 7% of all companies had implemented elements of a lean enterprise. This was particularly evident in indirect areas. 20% of all companies surveyed admitted to having achieved only 20% here.

The current criticism of the JIT concept runs the risk of self-deception. It is not the idea of JIT that needs to be discarded – it is more urgent than ever. JIT is not the cause of poor delivery performance; rather, insufficient implementation of the principles has put us in this predicament. One could compare this with stopping an antibiotic treatment. A patient believes he already overcame an “illness,” so he reduces the dose and the symptoms return.

So let’s be honest and remember what we (should) have known for more than 25 years: JIT not only introduces freedom from disturbance in our processes (in direct and indirect areas), but it also interlinks individual processes so that waste can no longer occur between them. This requires guiding principles that have been around for a long time: for example, insisting on working with suppliers that are “nearby,” instead of “global parts tourism.” The crisis has clearly shown the risks that arise when value chains
are “spread” across the globe. Organizing interfaces requires hard work and fatal dependencies arise if they are torn apart.

Does this mean that we must abandon globalization or “roll it back”? No, but we should strive for what we learned in the mid-1990s with regard to value stream design: creating uninterrupted value streams. The idea of “local for local” has been around for a long time. It should be the guiding principle in the future. Let’s do ourselves and the environment a favor and reduce transportation of information and materials to a minimum by creating complete and self-contained systems near to our customers. To achieve this, our valuation and cost accounting systems must be further developed – a “cost per unit” strategy must no longer be the measure of all things. It must be worth something to us to transport as little as possible. The focus is on the lowest waste level operation of the value stream, not on the suboptimization of a part of the company, be it controlling, logistics or production. There are traditional examples, such as Ford’s “River Rouge” plant from 1928, as well as many modern Toyota sites in the USA2). Let’s hear from James P. Womack, Founder and Director of the Lean Enterprise Institute:

“The ideal industrial future, of course, would be each of us producing our own goods in our basement. Right? Then everyone would have exactly what they need, at exactly the time they need it. Of course, this will not happen in this extreme form, but I believe that in the future we will see more and more production in relatively small, financially independent, operationally integrated units within individual sales regions. These factories will look like…well, like smaller versions of Toyota City. Toyota is highly de-integrated according to a traditional understanding, which means that it produces virtually no parts itself. From a process point of view, on the other hand, the company works in an extremely integrative manner, engaging in brilliant joint process management with its first, second and third-tier suppliers. This is the future.”

Source: www.brandeins.de, Artikel „Womacks Weisheiten“

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