Lean Production

Based On The Book

“The Machine That Changed The
World”
By

Womack, Jones & Roos

MIT’s 5 Year $5 Million Research

Project On The Automobile Industry
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Manufacturing Differences

 Ford Model T - 1908  Toyota - 1955

 Standardized  Customized parts produced by

“interchangeable” parts computer-aided flexible
produced by gauges machining cells
 Parts “simpler” to attach  Higher skill level for assembly
needed
 Skilled interchangeable labor  Life-time guarantees to trained
force labor force
 Low variety and high volume  High variety and low volume
products products
 After the fact quality control  Quality “first time”; the 5
Why’s
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Manufacturing Differences (Cont.)

 Ford Model T - 1908  Toyota - 1955

 Division /specialization of  Work teams with flexible job

labor descriptions and multiple
 Vertical integration of most skills
parts  Suppliers as partners in
 Dedicated machines; long set- development
up time  Set-up time from 8 hrs to 3
 Management stock price mins
focused and short-run
oriented  Management customer
focused and long-run oriented
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 GM v. NUMMI v.Toyota
Single Site Statistics-- 1987
Statistic GM Farmingham NUMMI Fremont Toyota Takaoka

 Assembly Hours
per Car 31 19 16
 Assembly
Defects per 100 135 45 45
Cars
 Assembly Space 8.1 7.0 4.8
Sq. Ft per Car per
Yr.
2 weeks 2 days 2 hours
 Inventories of
Parts (average)
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Relations with
Suppliers
 Mass Production  Lean Production
 Adversaries  Team members
 Not part of design process  Part of design process
 Contracts awarded on  Contracts on ability to meet
competitive bidding target costs
 Future price increases after  Future cost savings shared
“foot in the door”
 Same product over time  Better product over time
 Secretive to other suppliers  Active supplier associations
 Short term relationship  Long term relationship
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 People
Differences
 Mass Production  Lean Production

 Variable cost  Fixed Cost

 Limited Skill Set  Flexible
 Follow Procedures  Innovate
 Drones  Problem Solvers
 Individual  Team Member
 People Are Expenses  People Are Assets
 Short Term Relationship  Long Term Relationship
 Functional Leader  Project Leader

Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Career Path Differences
Example - Engineer
 Mass Production  Lean Production

 Entry Level:  Entry Level:

 Functional Focus Only  Assby, Mktg., Engineering

 Path:  Path:
 Drive Train Jr. Engineer  Drive Train

 Drive Train Dept. Manager  Body

 Drive Train Sr. Engineer  Project Team

 Drive Train Dept. Manager  Special Development

 Short Term Relationship  Long Term Relationship

Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Other Differences

 Mass Production  Lean Production

 Retain Shareholders with  Interlock Ownership, e.g.

Cosmetic Quarterlies Pension Fund Owners
 During Downsizing Each  During Downsizing help Find
Stakeholder is on their own “Safe Haven”
 Quality Circles Are an  Quality Circles Are for Team
Assigned Extra Duty Problem Solving
 JIT - Push Inventory to Others  JIT - Reduce Inventory
in the Chain Throughout the Chain
 Process Improvements by  Process Improvements by the
Specialists Brought In Team Members
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Marketing / Distribution
Automotive Industry
 Mass Production  Lean Production
 Independent dealer  Company owned
 Not involved in product  Full involvement in product
development development
 No link to factory  Direct link to factory
 Sold from inventory  Made to custom order
 “Herb Tarlick” salespeople  Knowledgeable salespeople
 No formal training  Full product training
 One time sale  Life time loyalty
 Infrequent mktg. survey  Constant feedback
 Short term relationship  Long term relationship
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.
 Key Message
Lean Production requires all organizational
elements and relationships to be in harmony
with the production process. Success requires
forging long term “win-win” relationships with all
stakeholders.
Employees
Suppliers
Customers
Shareholders
Dealers
Recyclers
Copyright, Ansari, Bell, Klammer and Lawrence, Management Accounting: A Strategic Focus, Irwin-McGraw-Hill, 1999.