My colleague Christian Dalle Nogare lent me a book (embarrassingly many) months ago, The Toyota Way by Professor Jeffrey K. Liker and it has taken the extreme of lying by a pool in the Dominican Republic to get me to the point of reading it.

Like many educated and experienced business managers, I had thought that I understood Lean, and the Toyota Production System (TPS). After all it couldn’t be that hard, or could it?

TPS House

I read the book straight through cover-to-cover (as much without stopping as a wife and family on holiday would allow), and every other paragraph I felt myself muttering, I was just so wrong…. What a brilliant book, what a world shaking approach to process improvement.

I completely underestimated the scope, scale and impact of Lean on business and how some of the key managerial levers that work in the car manufacturing world have more generic applicability in business. I would hate to have Toyota as a competitor, no wonder that Detroit is struggling to stay in business.

Let’s look at some of the statistics from 2003 (yes it is an old book but nevertheless valid today) - Toyota was making over $8 Billion profit, more that the top three US car manufacturing giants put together. Generating 8.3 times more profit margin that the industry average and seeing it’s stock price rise 24% in one year.

There are dozens of articles about Lean and TPS flying around in my head right now and no doubt these will surface as entries on the blog later but I wanted to start off by looking at how the core of Lean - the elimination of waste works and what it’s applicability is to IT Operations. On the way I wanted to look at a few other matters discussed in the book.

So what is Lean? Lean is the elimination of waste (note the word is elimination not reduction indicating the ruthless attention to detail that Toyota focus on this), systematically, constantly, every day, bottom up from the production line. Everyone is involved in Lean from the President of Toyota to the guys with spanners on the production line, Toyota’s suppliers, distribution channels and salespeople. Lean is cultural, all encompassing and complete, not just a set of management tools that can be adopted and dropped at will.

Why did Lean impress me? Both Toyota and the businesses I have been serving for the last decade specialize in Continuous Batch Flow Processing. Toyota make cars in batch, Investment Banks like Lehman Brothers and Deutsche Bank process financial transactions in batch, Telecommunications companies like Cable & Wireless and BT process orders for service and provide service in batch and Credit Card processing companies process Card Authorizations and Issue Cards in batch. Amazon process customer orders, Dell manufacture personal computers. All work in a continuous batch flow processing world.

Toyota fabricate cars from metal and assemble components, the other firms continuously process data. The principles are the same and the more I read the book, the more I could see the value of a systematic process of improvement.

I have deliberately (and with difficulty) focussed my comments on IT Operations and the basic Trouble to Resolve business process. Starting higher up the food chain at the Concept to Market or Lead to Cash processes would be even more interesting. Perhaps later….

So how does eliminating waste in a car manufacturing plant apply in Continuous Batch Flow IT Processing?

Perhaps the first thing is to understand what Toyota mean by value-add and non-value-add steps in a process. Value-add steps cannot be removed, for example in assembling a chassis, positioning the component on the chassis, placing the bolts in the component and tightening the bolts are value-add, everything else including fetching the next components, picking up the bolts, picking up the power tools, fetching the next component are all non-value-add. Toyota are pretty aggressive about eliminating waste.

By reducing Cycle Time, eliminating non-value-add steps, Toyota claim to produce best quality, lowest cost, shortest lead time, best safety and high staff morale. We can learn much from this approach.

Toyota have identified seven major types of non value adding waste in business and manufacturing processes. I list them here with both car manufacturing and IT aligned explanations:

Overproduction: Producing items for which there are no orders, of itself generates waste such as overstaffing, excess storage and transportation costs. Toyota partially address Overproduction by using Just in Time (JIT) manufacturing processes as well as customer pull to drive demand down the manufacturing process. Banking, Credit Card Processing, Telecommunications and Internet Shopping all use Customer pull to initiate the batch flow. The customer buys a financial instrument, orders a broadband service, uses her credit card at a POS terminal or orders a book from Amazon. Toyota level production (heijunka) to minimize overproduction.

Waiting (time on hand): Workers watching an automated machine (car plant) or sitting in the command center waiting for an event to appear on the Network Management Console indicating that there is a problem. Workers should be alerted by high visibility signals when there is a problem that needs service.

Unnecessary transport or handling: Carrying work in progress long distances (car plant) or passing incidents to another group for resolution - hand offs - in a command center.

Over-processing or incorrect processing: Taking unneeded steps to process the parts (car plant) or adding unnecessary steps to problem resolution in the command center. Being unable to resolve the problem in the command center leads to hand offs. When measuring trouble to resolve cycle times, over 90% is consumed waiting for hand-offs to complete. (Interestingly Toyota put producing higher quality products than needed into this category.)

Excess Inventory: Excess raw material or work in progress (car plant) or human, computing, storage and network resources in our IT shop. Excess Inventory drives up costs with no added value. An efficient IT shop minimizes the IT resources required to deliver business services in order that the business can compete effectively and drive up profitability.

Unnecessary movement: Time and motion problems, workers needing to change tools or move excessively on the production line (car plant) or not having integrated tools and systems that aid problem resolution in the command center. Unnecessary movement impacts Cycle Time.

Defects: Production of defective parts, correction, rework or inspection (car plant) or having to do work twice in the IT shop. The basic measure is Right First Time (RFT)