Despite the Recalls, Service Businesses Can Still Benefit from Adopting Toyota Practices

Contributor: Debashis Sarkar
Posted:  03/04/2010  12:00:00 AM EST
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Tags: Lean | Toyota recalls | Toyota | continuous improvement | 5S | Kaizen | ICICI Bank | Debashis Sarkar | Methodologies, Statistical Analysis, and Tools | Process Management

A lot has being written about Toyota and its ability to wade through the current crisis. We all know about the range of complaints, from unintended acceleration to brake-failure resulting in the company having to recall 8 million cars, forcing Toyota to suspend its North American sales and production of eight models, including its best-selling Camry, after regulatory pressure. It has also been discovered that these problems have occurred in China, Europe, the Middle East and Latin America. All this led to Akio Toyoda, President of Toyota Motor Corporation, having to testify before Congress on February 24, 2010.

Analysts are already talking about the time frame it will take for Toyota to recover from the repercussions of the recall. Some are comparing Toyota’s ordeal to that of Volkswagen’s back in the mid-1980s when the Volkswagen Audi was linked to around 700 accidents and a few deaths. It took almost a decade and half for Volkswagen to get up to the same level of sales volume as it did in 1985 when the company sold about 74,061 cars; Volkswagen more precisely reached this mark in 2000 when it touched a sales volume of 80,372 cars.

The objective of this column is not to elaborate on the reasons why these problems happened but to assess how the adoption of Toyota practices will likely impact service companies. Some business leaders are already starting to tell me, in muffled voices, that is, that we need to be careful about implementing Toyota practices within a service business environment. As I am a great believer of Toyota’s quality practices, these comments disappoint me, and I fear that these remarks have cast a shadow on the power of Toyota practices for service businesses.

Lean is Here to Stay

My response to all these leaders is that you can have your views on the latest Toyota product recalls, but it would be myopic to abandon Toyota practices within your service businesses. Lean has a lot to provide to service companies, and we have just started to scratch the surface. Whatever time it may take for Toyota to recover, Lean is here to stay and its implementation is a must for service businesses keen to create a continuous improvement culture and create efficient performance-based processes that are in sync with results that customers value.

I can say with confidence that Toyota practices will be adopted by service companies knowingly or unknowingly to make their businesses better. Service companies may call these practices “Lean” or something else, and their need to adopt such practices may not necessarily arise from a love for Toyota or because of the practices’ Japanese lineage, but arise from a business compulsion to be trim, agile and fit.

Toyota Practices in Brief

So, what are these Toyota practices that service businesses are adopting in pursuit of operational excellence? While the list is large, I am highlighting a few of them:

  • Culture of continuous improvement: A culture that champions employees to improve processes everyday rather than just solely focusing on conducting formalized improvement projects in some parts of the company.
  • Wastes: Refers to the seen and unseen activities in a process that do not add value to the customer. Toyota has taught us to categorize wastes into eight types that can be very successfully applied to service businesses. Educating employees at all levels of the company to identify and appreciate the hidden wastes of Lean, in addition to encouraging employees to proactively report problems/abnormalities,  is a key tenet of a Lean system.
  • 5S: A five step approach that targets workplace organization and creates an efficient and productive workplace. 5S is foundational to building a continuous improvement culture.
  • Standardized Work: Refers to the best-known method of doing a job that describes how an individual should carry out his/her work. Standard work helps to sustain the improvements that have been carried out and to also proactively improve them going forward. A standard work comprises a specific work sequence, takt time and standard work-in progress.
  • Value Stream Thinking: A philosophy of casting a business around product families and embedding systems thinking within the company.
  • Genichi Gembutsu: As mentioned in The Toyota Way, Genichi Gembutsu is about “going to the source to find the facts to make correct decisions, build consensus, and goals at our best speed.”
  • Kaizen Events/Lean Breakthrough: A vehicle for carrying out improvements on  a focused work-area by a dedicated team with an objective to achieve a spectacular improvement within a period of five-six days.
  • Continuous Flow: An approach to creating flawless processes that ensures customer requirements get met within the shortest lead time. The “flow” concepts of cycle time, takt time, multi-skilling, pitch, small batches (since single-piece-flow is often not possible in services), load balancing, cell-based layout, etc., are used  to reduce lead times, improve productivity and weed out inefficiencies.
  • Pull: A system designed to provide the customer with what is needed, when the product/service is needed and in the right quantity using a signal from a customer process. 
  • Management by A3: An approach of using an A3 sheet (297mm by 420mm) to summarize problem solving, strategic planning, proposal writing and status reporting. It should just not be thought of as a tool for visual depiction but as an approach for problem solving and team engagement. It’s also a brilliant invention for PDCA (plan-do-check-act)  management.
  • Visual Management: A technique of managing the performance of the workplace through visual tools and depiction that allows “continuous flow” and helps team to know the health of the Lean system. In a service context, visual management may require usage of technology.
  • Jidoka: A philosophy that encourages teams to stop a process (in a services context) during an abnormality and take countermeasures and separate man and machine’s work. Application of Jidoka may not be possible in customer facing processes but can be tried in back-office processes. In a services context, Jidoka is also about automating processes and letting employees do more efficient work.
  • Level Processing: A principle that endeavors to make sure that “types” and “quantities” of processing are leveled in a stipulated time frame. It can be very effectively used in back-office processes in a service context.
  • Level Selling: A principle that endeavors to smooth the sales spikes over a time period such as month, journey-cycle, etc. The skewing often happens at the end of a reporting period and is influenced by incentives, bonuses, promotions, etc. The Lean intervention is targeted towards smoothening these spikes and stopping the artificial demands that get created. This is just not a problem in manufacturing companies but also a problem faced by services companies.

As this is just a partial list, I look forward to hearing from the readers on practices and principles of Toyota that can enhance the performance of service businesses.

My Final Thoughts on Toyota Practices

Please do not shun Toyota practices because of the latest recalls. Toyota’s commitment to quality can be gauged from the fact that they have stopped production in the United States to make sure things are set right. I am confident that the company will rise like a phoenix only because of these practices that it has built over all these years.

Contributor:   Debashis Sarkar

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