Explore the Chinese way of lean production

Marcus Chao:
President, Lean Enterprise China


A Toyota house: essentials to lean production

Gasgoo.com: Dr. Chao, would you please tell us something about Lean Enterprise China? What's its mission?

Marcus Chao: Lean Enterprise China (LEC) is a non-profit organization aimed at promoting and educating lean thinking in China. Our mission here in China includes 1) We provide lean tools books in Chinese; 2) We provide training & workshops as well as on-site consulting to help Chinese corporations to achieve lean transformation; 3) We hold Lean Summit China and invite Lean masters abroad to share their wisdom, we also ask Chinese enterprises to share with us their thoughts on lean implementation. On October 23-24, 2007, we will hold the second Lean Summit China at Crowne Plaza Fudan Shanghai. It is our hope that more people can better understand what Lean is all about.

Gasgoo.com: Lean derives from the Toyota Production System (TPS). How did Toyota achieve its success? 

Marcus Chao: TPS is very simple. Essentially, it consists of two parts: 1) how to identify a problem and solve the problem; 2) how to improve itself continuously. In early 1960's, Toyota had a survival crisis. It had no money, no market, no resources and the Japanese economy was stagnant. At that time when the American automakers, turned out one thousand vehicles a day, Toyota could hardly put out several thousands vehicles a year. To survive the crisis, Toyota created JIT (Just In Time) inspired by a similar system in supermarket operations, it also closely followed Dr. Deming's PDCA principles (Plan, Do, Check and Act): namely, make a plan first, then implement the plan, next check the result of implementation and make some adjustments accordingly. For over sixty years, Toyota has been improving continuously and that's vital to its success. 

Gasgoo.com: Nowadays, many Chinese enterprises are trying to copy the Toyota model of success, but very few can make it. In your opinion, what are common problems to Chinese enterprises?
 
Marcus Chao: I think most Chinese enterprises have not grasped the essentials of Toyota Production System. Let me put it this way. TPS is just like a house: it has a foundation which includes respects for employees and the 5S Approach, and etc. And the house is erected by two pillars: the first one is "Just In Time". It means delivery of the right material in the right quantity at the right time to the right place, so it is essential to the balance of production. And the second pillar is called "autonomation" or "automation with a human touch". That means a man monitors a machine; when something is not working properly, the machine will stop working and the man will go to find out the problem and fix it. In the Toyota system, the most important thing is the "men", or the employees. Toyota has worked out a good system to protect its employees and its employees have to take care of the house at the same time. This system is the key to Toyota's success.

Chinese enterprises don't have such a system. Most of them have only one or a few tools at hand. Some Chinese business executives say "I began to follow 5s principles in 2000 and I have finished with Lean principals." To these executives, I would say "you have not started yet; you have just taken a small step." Others say: "I have a lot of suppliers around us. They have good stockpiles of auto parts for us and I can use these auto parts anytime I want." I say this is not a good supply chain. When you have a large stock of auto parts, you have to pay for the stockpiling and that would increase your operational costs. A good supply chain does not mean you have a large stock of auto parts. A good supply chain means you have a lot of suppliers around and when you need something, you tell these suppliers and they will deliver these auto parts in time.  

Some business executives think Lean principles are nothing but lean production. However, they are not aware that TPS covers the whole business management, which includes supply chain, the development of new products, manufacturing, delivery and marketing. When a business leader believes Lean principles are nothing but lean production, he cannot succeed.

A common problem for a lot of Chinese business leaders: they do not encourage their employees to find a problem and find a solution to this problem. On the contrary, they try to reduce a big problem to a small problem and make a small problem invisible and they will be happy with that. In fact, "no problem" is the biggest problem. When a problem becomes invisible, you don't know what you need to do. Many Chinese business executives do not make on-site studies; instead, they are busy with meetings, sitting in front of a computer for hours to study the company's operations. This does no good at all. Rather than listening to reports made by their subordinates or secretary, they need to go to the production sites and take a look themselves. I think this problem is not unique to Chinese business executives; it is a problem in the United States too, but the problem is more prominent here in China.

Leadership and corporate culture is key to lean implementation

Gasgoo.com: When Chinese companies try to practice Lean principle, they can grasp only parts of these principles. I think the reason is they lack the ability to identify problems, fix these problems and improve themselves.

Marcus Chao: I think these abilities have to be nurtured in the practice. Toyota has been striving to improve themselves for about 70 years. Its management team is persistent in implementing lean principles and encouraging the employees to find problems and fix them. The executives should take a lead in the lean training, and inform their subordinates of the challenges and what should be done. In lean implementation, it's easier to find the problems with suppliers and customers. But it's no use complaining. Lean thinking starts from inspecting on our own works, and improving ourselves first. 

Many Chinese company executives still don't really like their staff exposing problems. He may say that he encourages staff to find more problems. But when problems were exposed, he may become angry and blame "the trouble maker". If a worker is blamed in exposing problems, if he would be discouraged to do so, then the executives or managers have to make self examinations, and change the situation if they really want to implement lean principles.

Gasgoo.com: That means the executives play a vital role in the lean implementation.

Marcus Chao: That's correct. You can choose implementing lean from the top to the bottom or the other way around, but I recommend the from-top-to-bottom approach. The bottom workforce may don't know the challenges a company is facing with, but company leaders know the challenges and goals of their company. On the other hand, company leaders should also listen to workers' advice, because workers have the first hand knowledge. So leaders should often make on-site visits and help workers solve problems. The power of exemplary actions is unlimited. If the high level leaders can do so, the middle and low level leaders will follow suit. Then the lean operation can be implemented thoroughly. So in lean implementation, leaders play a vital role.

Gasgoo.com: So the leaders must convince the whole company that "we must stick to lean principles". The leaders must be able to mobilize everyone's efforts in implementing lean principles.

Marus Chao: Certainly. But crisis awareness is also a must. Few companies, if any, will take steps to adopt lean thinking unless they have a sense of crisis. Don't compare you to others; compare you to yourself and see if you are making progress. 

Recently, I visited Toyota's factory in Taiwan. At the entrance to a workshop, I saw a bulletin board. On the board, there are goals laid out by this workshop: what objectives it will achieve in the next three months. If every department of a company works this way, the company will be undoubtedly successful.

Gasgoo.com: So they are very clear about their goals. 
 
Marcus Chao: Exactly.  They are always improving themselves. Improving has been part of their corporate culture. They use charts and diagrams to indicate their goals. Even before you enter their factory, you can have a sense of what they are doing now and what objectives they want to achieve.

Gasgoo.com: It must be very difficult to keep improving all the time. Is Toyota's success a unique phenomenon to the Japanese culuture? The American auto makers also want to learn from Toyota's success, but the result is not as good as expected. It seems that lean principles work only in Japanese enterprises?

Marcus Chao: Well, if we say Lean production works only for Japanese enterprises. Let's take a look at Japanese companies. There are many failed Japanese enterprises, which are even worse than Chinese or American enterprises. In the Japanese automotive industry, Toyota, which is followed by Honda, is the only successful company. Nissan merged with Renault, Isuzu and Suzuki are also not very successful either. Another point is, why Toyota does better than American companies in America, while both Japanese and American companies in America hire American technicians and American workers? Why Toyota is also doing well in Europe and Asia? I think lean implementation is not an issue of culture.

But Toyota's corporate culture has a great impact on its lean implementation. There are five principles in its culture:
1. How to identify your value. Why the customer should buy your products, not other companies?
2. Truly understand the the work process, from the raw material purchase to designing to manufacturing and to sales. Many Chinese companies don't really understand what we call the "Value Stream." They think they know, but what they know is different from the actual process workers are doing.
3. Let the value stream flow and eliminate any wastes in time and effort.
4. Convert a process to a lean operation according to the customer's requirements,
5. Constinuously improve yourself under the principle of PDCA.

Gasgoo.com: Some leaders may know the process, but they haven't mapped it, so it may be distorted in the implementation. How to make the process consistent in the whole company?

Marcus Chao: It's simple: with a pencil and a piece of paper, you can map the value stream. Others can express their opinions on the map. After discussion, a final map comes out. Then, the company can moving forward to achieve its goal. Without the clear value stream mapping, much efforts and time would be wasted.

Challenges of lean implementation in China

Gasgoo.com: What's the challenge of lean implementation in China?

Marcus Chao: First, many Chinese companies still have some misunderstanding on lean production. Some think that lean is a tool for cutting jobs, while actually it is the efficient use of current resources, so it is especially useful to a rapidly growing company. Some think that lean is applicable only to the production stage, while it can apply to the entire process.

Secondly, some companies are not steadfast in implementing lean. When their lean practices don't work out,  they think lean is useless; They start to learn six sigma, but they find six sigma still useless. They are changing from one method to another, but they get nowhere. Toyota, however, is always moving forward and improving.

Just emerged from a planned economy to a market economy, China has some unique problems that can only be solved by the Chinese people. Now it seems that there is still some old mindsets in China, such as "more work, more pay". But in the developed countries, this idea is old, because nowadays there is hardly a product done by one person only; workers have to cooperate with each other. In modern industry, if we still believe in "more work, more pay", then we may produce more than customers' actual needs and result in waste. How to cast off the stereotyped ideas is a problem that not all the Chinese companies have solved. I think those who have solved the problem can share their experience with others. Then, we see the Chinese labor force is flowing too fast. Many rural labors are jumping from one temporary job to another, and the high quality talents also jump from one company to another. Another long standing belief is that leaders' knowledge, opinion and decisions are the most authoritative, disregarding the workers' expertise on a specific area and opinions on the actual implementation of a decision. The workers are not encouraged to identify problems, and they are only asked to implement the leaders' decision, no matter it is right or wrong. So I think it's a challenge for the Chinese leaders to encourage the company to find problems and solve problems one by one. Instead of confronting a problem, the Chinese people have a tendency to hide a problem or sweep them under rugs.

Gasgoo.com: Many companies may be too eager to learn the lean tools, and they have ambitious goals. But when they feel the goal is too difficult to achieve they conclude that lean thinking does not work in China.

Marcus Chao: That's possible. Every action a company takes should be consistent with its objectives. But many actions in some Chinese companies are not result-oriented, so the top managers don't see any visible results, they would back away from these objectives. So the company is very blind in implementing lean, or six sigma, or lean six sigma, etc.

Gasgoo.com: For those Chinese enterprises that are successful in lean production, what do they have in common?

Marcus Chao: I think the entire workforce of a company, from the top to the bottom, should work together to enhance quality, identify wastes from the routine work, and eliminate these wastes, and ultimately have a clearer understanding of customers requirements. The most important thing is the five principles I said just now.
I have just visited over 70 corporations in different industries. I cannot tell which one is most successful in lean practices. But I will invite the good companies to share their achievements at our Lean Summit. I hope to get better understanding on the challenges the Chinese lean learners face, and we should solve the problems together with corporate leader and the experts in the industries. My dream is that some day every company can get useful information from LEC, and share their improvements with other companies. I wish the dream can come true.

Gasgoo.com: Thank you very much joining us.

Marcus Chao: Thank you.


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