The Machine That Changed the World

The Story of Lean Production-- Toyota's Secret Weapon in the Global Car Wars That Is Now Revolutionizing World Industry

James P. Womack, Daniel T. Jones, Daniel Roos

• Publisher: Free Press
• Year: 2007
• ISBN:
  9781416554523
• Topic: Business
• Subtopic: Automobile Industry
• Index: Business

The classic, nationally bestselling book that first articulated the principles of lean production, with a new foreword and afterword by the authors. When The Machine That Changed the World was first published in 1990, Toyota was half the size of General Motors. Twenty years later Toyota passed GM as the world's largest auto maker. This management classic was the first book to reveal Toyota's lean production system that is the basis for its enduring success.Authors Womack, Jones, and Roos provided a comprehensive description of the entire lean system. They exhaustively documented its advantages over the mass production model pioneered by General Motors and predicted that lean production would eventually triumph. Indeed, they argued that it would triumph not just in manufacturing but in every value-creating activity from health care to retail to distribution.Today The Machine That Changed the World provides enduring and essential guidance to managers and leaders in every industry seeking to transform traditional enterprises into exemplars of lean success.

1 THE INDUSTRY OF INDUSTRIES IN TRANSITION

Forty years ago Peter Drucker dubbed it “the industry of industries.”¹ Today, automobile manufacturing is still the world’s largest manufacturing activity, with nearly 50 million new vehicles produced each year.

Most of us own one, many of us own several, and, although we may be unaware of it, these cars and trucks are an important part of our everyday lives.

Yet the auto industry is even more important to us than it appears. Twice in this century it has changed our most fundamental ideas of how we make things. And how we make things dictates not only how we work but what we buy, how we think, and the way we live.

After World War I, Henry Ford and General Motors’ Alfred Sloan moved world manufacture from centuries of craft production—led by European firms—into the age of mass production. Largely as a result, the United States soon dominated the global economy.

After World War II, Eiji Toyoda and Taiichi Ohno at the Toyota Motor Company in Japan pioneered the concept of lean production. The rise of Japan to its current economic preeminence quickly followed, as other Japanese companies and industries copied this remarkable system.

Manufacturers around the world are now trying to embrace lean production, but they’re finding the going rough. The companies that first mastered this system were all headquartered in one country—Japan. As lean production has spread to North America and Western Europe under their aegis, trade wars and growing resistance to foreign investment have followed.

Today, we hear constantly that the world faces a massive overcapacity crisis—estimated by some industry executives at more than 8 million units in excess of current world sales of about 50 million units.² This is, in fact, a misnomer. The world has an acute shortage of competitive lean-production capacity and a vast glut of uncompetitive mass-production capacity. The crisis is caused by the former threatening the latter.

Many Western companies now understand lean production, and at least one is well along the path to introducing it. However, superimposing lean-production methods on existing mass-production systems causes great pain and dislocation. In the absence of a crisis threatening the very survival of the company, only limited progress seems to be possible.

General Motors is the most striking example. This gigantic company is still the world’s largest industrial concern and was without doubt the best at mass production, a system it helped to create. Now, in the age of lean production, it finds itself with too many managers, too many workers, and too many plants. Yet GM has not yet faced a life-or-death crisis, as the Ford Motor Company did in the early 1980s, and thus it has not been able to change.³

This book is an effort to ease the necessary transition from mass production to lean. By focusing on the global auto industry, we explain in simple, concrete terms what lean production is, where it came from, how it really works, and how it can spread to all corners of the globe for everyone’s mutual benefit.

But why should we care if world manufacturers jettison decades of mass production to embrace lean production? Because the adoption of lean production, as it inevitably spreads beyond the auto industry, will change everything in almost every industry—choices for consumers, the nature of work, the fortune of companies, and, ultimately, the fate of nations.

What is lean production? Perhaps the best way to describe this innovative production system is to contrast it with craft production and mass production, the two other methods humans have devised to make things.

The craft producer uses highly skilled workers and simple but flexible tools to make exactly what the consumer asks for—one item at a time. Custom furniture, works of decorative art, and a few exotic sports cars provide current-day examples. We all love the idea of craft production, but the problem with it is obvious: Goods produced by the craft method—as automobiles once were exclusively—cost too much for most of us to afford. So mass production was developed at the beginning of the twentieth century as an alternative.

The mass producer uses narrowly skilled professionals to design products made by unskilled or semiskilled workers tending expensive, single-purpose machines. These churn out standardized products in very high volume. Because the machinery costs so much and is so intolerant of disruption, the mass producer adds many buffers—extra supplies, extra workers, and extra space—to assure smooth production. Because changing over to a new product costs even more, the mass producer keeps standard designs in production for as long as possible. The result: The consumer gets lower costs but at the expense of variety and by means of work methods that most employees find boring and dispiriting.

The lean producer, by contrast, combines the advantages of craft and mass production, while avoiding the high cost of the former and the rigidity of the latter. Toward this end, lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in enormous variety.

Lean production (a term coined by IMVP researcher John Krafcik) is “lean” because it uses less of everything compared with mass production—half the human effort in the factory, half the manufacturing space, half the investment in tools, half the engineering hours to develop a new product in half the time. Also, it requires keeping far less than half the needed inventory on site, results in many fewer defects, and produces a greater and ever growing variety of products.

Perhaps the most striking difference between mass production and lean production lies in their ultimate objectives. Mass producers set a limited goal for themselves—“good enough,” which translates into an acceptable number of defects, a maximum acceptable level of inventories, a narrow range of standardized products. To do better, they argue, would cost too much or exceed inherent human capabilities.

Lean producers, on the other hand, set their sights explicitly on perfection: continually declining costs, zero defects, zero inventories, and endless product variety. Of course, no lean producer has ever reached this promised land—and perhaps none ever will, but the endless quest for perfection continues to generate surprising twists.

For one, lean production changes how people work but not always in the way we think. Most people—including so-called blue-collar workers—will find their jobs more challenging as lean production spreads. And they will certainly become more productive. At the same time, they may find their work more stressful, because a key objective of lean production is to push responsibility far down the organizational ladder. Responsibility means freedom to control one’s work—a big plus—but it also raises anxiety about making costly mistakes.

Similarly, lean production changes the meaning of professional careers. In the West, we are accustomed to think of careers as a continual progression to ever higher levels of technical know-how and proficiency in an ever narrower area of specialization as well as responsibility for ever larger numbers of subordinates—director of accounting, chief production engineer, and so on.

Lean production calls for learning far more professional skills and applying these creatively in a team setting rather than in a rigid hierarchy. The paradox is that the better you are at teamwork, the less you may know about a specific, narrow specialty that you can take with you to another company or to start a new business. What’s more, many employees may find the lack of a steep career ladder with ever more elaborate titles and job descriptions both disappointing and disconcerting.

If employees are to prosper in this environment, companies must offer them a continuing variety of challenges. That way, they will feel they are honing their skills and are valued for the many kinds of expertise they have attained. Without these continual challenges, workers may feel they have reached a dead end at an early point in their career. The result: They hold back their know-how and commitment, and the main advantage of lean production disappears.

This sketch of lean production and its effects is highly simplified, of course. Where did this new idea come from and precisely how does it work in practice? Why will it result in such profound political and economic changes throughout the world? In this book we provide the answers.

In “The Origins of Lean Production,” we trace the evolution of lean production. We then look in “The Elements of Lean Production” at how lean production works in factory operations, product development, supply-system coordination, customer relations, and as a total lean enterprise.

Finally, in “Diffusing Lean Production,” we examine how lean production is spreading across the world and to other industries and, in the process, is revolutionizing how we live and work. As we’ll also see, however, lean production isn’t spreading everywhere at a uniform rate. So we’ll look at the barriers that are preventing companies and countries from becoming lean. And we’ll suggest creative ways leanness can be achieved.

THE ORIGINS OF LEAN PRODUCTION

2 THE RISE AND FALL OF MASS PRODUCTION

In 1894, the Honorable Evelyn Henry Ellis, a wealthy member of the English Parliament, set out to buy a car.¹ He didn’t go to a car dealer—there weren’t any. Nor did he contact an English automobile manufacturer—there weren’t any of those either.

Instead, he visited the noted Paris machine-tool company of Panhard et Levassor and commissioned an automobile. Today, P&L, as it was known, is remembered only by classic-car collectors and auto history buffs, but, in 1894, it was the world’s leading car company.²

It got its start—and a jump on other potential competitors—when in 1887 Emile Levassor, the “L” of P&L, met Gottlieb Daimler, the founder of the company that today builds the Mercedes-Benz. Levassor negotiated a license to manufacture Daimler’s new “high-speed” gasoline engine.

By the early 1890s, P&L was building several hundred automobiles a year. The cars were designed according to the Système Panhard—meaning the engine was in the front, with passengers seated in rows behind, and the motor drove the rear wheels.

When Ellis arrived at P&L, which was still primarily a manufacturer of metal-cutting saws rather than automobiles, he found in place the classic craft-production system. P&L’s workforce was overwhelmingly composed of skilled craftspeople who carefully hand-built cars in small numbers.

These workers thoroughly understood mechanical design principles and the materials with which they worked. What’s more, many were their own bosses, often serving as independent contractors within the P&L plant or, more frequently, as independent machine-shop owners with whom the company contracted for specific parts or components.

The two company founders, Panhard and Levassor, and their immediate associates were responsible for talking to customers to determine the vehicle’s exact specifications, ordering the necessary parts, and assembling the final product. Much of the work, though, including design and engineering, took place in individual craft shops scattered throughout Paris.

One of our most basic assumptions in the age of mass production—that cost per unit falls dramatically as production volume increases—was simply not true for craft-based P&L. If the company had tried to make 200,000 identical cars each year, the cost per car probably wouldn’t have dipped much below the cost per car of making ten.

What’s more, P&L could never have made two—much less 200,000—identical cars, even if these were built to the same blueprints. The reasons? P&L contractors didn’t use a standard gauging system, and the machine tools of the 1890s couldn’t cut hardened steel.

Instead, different contractors, using slightly different gauges, made the parts. They then ran the parts through an oven to harden their surfaces enough to withstand heavy use. However, the parts frequently warped in the oven and needed further machining to regain their original shape.

When these parts eventually arrived at P&L’s final assembly hall, their specifications could best be described as approximate. The job of the skilled fitters in the hall was to take the first two parts and file them down until they fit together perfectly.

Then they filed the third part until it fit the first two, and so on until the whole vehicle—with its hundreds of parts—was complete.

This sequential fitting produced what we today call “dimensional creep.” So, by the time the fitters reached the last part, the total vehicle could differ significantly in dimensions from the car on the next stand that was being built to the same blueprints.

Because P&L couldn’t mass-produce identical cars, it didn’t try. Instead, it concentrated on tailoring each product to the precise desires of individual buyers.

It also emphasized its cars’ performance and their hand-fitted craftsmanship in which the gaps between individual parts were nearly invisible.

To the consumers Panhard was trying to woo, this pitch made perfect sense. These wealthy customers employed chauffeurs and mechanics on their personal staffs. Cost, driving ease, and simple maintenance weren’t their primary concerns. Speed and customization were.

Evelyn Ellis was no doubt typical of P&L’s clients. He didn’t want just any car; he wanted a car built to suit his precise needs and tastes. He was willing to accept P&L’s basic chassis and engine, he told the firm’s owners, but he wanted a special body constructed by a Paris coachbuilder.

He also made a request to Levassor that would strike today’s auto manufacturer as preposterous: He asked that the transmission, brake, and engine controls be transferred from the right to the left side of the car. (His reason wasn’t that the English drove on the left—in that case, moving the controls to the left side of the vehicle was precisely the wrong thing to do. Besides, the steering tiller remained in the middle. Rather, he presumably thought the controls were more comfortable to use in that position.)

For P&L, Ellis’s request probably seemed simple and reasonable. Since each part was made one at a time, it was a simple matter to bend control rods to the left rather than the right and to reverse the linkages. For today’s mass producer, this modification would require years—and millions or hundreds of millions of dollars—to engineer. (American companies still offer no right-side-drive option on cars they sell in drive-on-the-left Japan, since they believe the cost of engineering the option would be prohibitive.)

Once his automobile was finished, Ellis, accompanied by a mechanic engaged for the purpose, tested it extensively on the Paris streets. For, unlike today’s cars, the vehicle he had just bought was in every sense a prototype. When he was satisfied that his new car operated properly—quite likely after many trips back to the P&L factory for adjustment—Ellis set off for England.

His arrival in June 1895 made history. Ellis became the first person to drive an automobile in England. He traversed the fifty-six miles from Southampton to his country home in a mere 5 hours and 32 minutes—exclusive of stops—for an average speed of 9.84 miles per hour. This speed was, in fact, flagrantly illegal, since the limit in England for non-horse-drawn vehicles was a sedate 4 miles per hour. But Ellis didn’t intend to remain a lawbreaker.

By 1896, he had taken the Parliamentary lead in repealing the “flag law” that limited automotive speeds, and had organized an Emancipation Run from London to Brighton, a trip on which some cars even exceeded the new legal speed limit of 12 miles per hour. Around this time, a number of English firms began to build cars, signaling that the automotive age was spreading from its origins in France to England in its march across the world.

Evelyn Ellis and P&L are worth remembering, despite the subsequent failure of the Panhard firm and the crudeness of Ellis’s 1894 auto (which found a home in the Science Museum in London, where you can see it today)...