Eliminate Waste in Government - Abolish the Fed

A NY Times article points out a surprisingly somewhat neutral story about the Federal Reserve, and a plan from the administration to expand its market smothering powers.

"The administration is proposing to make the Fed responsible for identifying “systemic risks,” like the bubble in housing prices and the explosion of reckless mortgage lending that started the worst financial crisis since the Great Derpression."

Actually, this is misleading. It is the largest one year drop in the market since the great depression. It is the largest drop in GDP since the recession of the early eighties, hardly comparable to the Great Depression. I digress...but sometimes facts are funny things...especially to the NY Times.

So, who here didn't see the housing bubble coming? Raise your hand...go ahead. O.k., now ask yourself this very important question: why does the Fed need to be given this power? What does this new power really mean?

“I do not know of any clear examples in which the Federal Reserve acted in advance to head off a crisis or a series of banking or financial failures,” said Allan H. Meltzer, professor of economics at Carnegie-Mellon University and author of a comprehensive history of the Fed.

Mr. Meltzer ticked off a long list of financial collapses — the Latin American debt crisis of the 1980s, the savings-and loan collapse of the early 1990s, the collapse of the dot-com bubble and the recent binge in reckless mortgages — and argued that the Fed had either failed to take preventive action or made things worse.

“We all know that the Federal Reserve did nothing to prevent the current credit crisis” Mr. Meltzer said. “It has not recognized that its actions promoted moral hazard and encouraged incentives to take risk.”

The Times stops short of suggesting the Fed was actually part of the problem, bringing interest rates so artificially low that anyone was encouraged to purchase a home. Couple that with other regulatory agencies and committees, who manipulated market forces for political reasons and one has to ask if the Fed might have a little too much power. Let's not get started on the bailouts, strongarming banks into acquiring toxic banks, inflating the monetary supply etc.

One has to wonder if this activity is just simply wasteful. Instead of granting the Fed more power, how about abolishing the Fed? What value does the Federal Reserve provide in our daily lives? Can anyone put this in plain terms for me? Otherwise I'm going to wake up tomorrow and not wonder: "Geez, I hope the Fed is looking out for me and my family's future today!"

The Cause of Lean Failure

I've been thinking a lot lately about why the spirit of continuous improvement dies. Notice I didn't say Lean initiative, or Six Sigma program. What I'm talking about is why, when asked if Lean is successful in a your plant, the response is usually, "no?"

There may be a lesson learned in TWI. After the war ended, the TWI Service was decommissioned. A few companies carried on the TWI programs in their plants. If most had carried them on, we would see evidence of that today. In fact, only one company today yields evidence that TWI has been part of their culture for nearly sixty years: Toyota. As regular readers of the blog may know, the government of Japan set up a similar TWI program as a service to business. An American consultant trained them in TWI in 1950-51.

Some say that in the U.S., TWI died for several reasons. One, since the service was decommissioned along with its free services, so did the interest in the program. Although interest waned at a national scale, many former employees of the TWI service started their own consulting firms around the country. Recall that Lowell Mellon, the TWI wartime representative for Cleveland, had hundreds of clients after the war. He provided the J-skill training in 1950-51 and was called back to Japan to deliver Problem Solving training to JITA in 1964. The TWI Foundation, was a non-profit consortia that continued the programs through the 1970's. In short, the program didn't die, but it sure did suffer as time went on.

Another reason explaining the death of TWI is that companies had no incentive or the culture capable of adopting TWI principles. In fact, this level of resistance is a common excuse of change agents when trying to create change in any organization. It isn't the consultants fault, or the leaders fault, it is the people. This is a similar argument when lean is not adopted by a group. In fact, American culture is often to blame.

This reasoning doesn't stand a basic litmus test: if American companies wouldn't use TWI after the war, bringing on the premature death of TWI, then why would the Japanese blindly accept the program? Further more, many companies in the U.S. did use JI for many years after the war, such as Kodak, Union Carbide and others. Even if we assume that the Japanese were obligated to indoctrinate business in TWI, under order from the occupation forces, how does that explain the lasting effects of TWI on Japan? Wouldn't the level of resistance have been greater if you were told to do something you may not want to do? To this day, the Japanese authorities still offer TWI J-skills for supervisors, nearly sixty years after they were trained. It is still offered in the five day, two hour format. In reality, not all companies use TWI, a very similar situation to the U.S. scene. There are two known Japanese companies that use JI today: Toyota and Canon. There are more known U.S. companies using JI today than those known in Japan. Americans are perfectly capable of adopting principles, yet we continue to be extremely hard on ourselves.

No, if the program worked during the war, and it worked in a post war Japan, it could certainly be easily adapted to peacetime production. What then is the reason for the slow demise?

I have my thoughts on socio-political events at the time which may have discouraged the level of training TWI aimed to provide, but have yet to vet those ideas.

In combination with those ideas, there is a much bigger factor. Mellon had hundreds of clients in Cleveland, he spread national programs to Japan and Indonesia. Likewise, the TWIF spread the program to dozens of countries and domestic companies. The program didn't die, but it did fade away. The most likely reason is twofold in my humble opinion:

1) Standardization. People don't like it because of our human nature that yearns for individual freedom, yet we crave it for making our collective lives easier. So we struggle with the concept of standardization. TWI (and Lean) is all about the Standardize/Improvement cycle. How many future leaders are being practically taught how to work in this cycle in their undergrad business or MBA program? I don't know how else to say this.

2) Lack of Self Discipline. Again, something we know we need, but we struggle to stay in one place and master one thing before moving on to the next. Unfortunately, we are taught to move quickly from one achievement to the next without following up and monitoring the process. This behavior spreads like a cancer.

The problem then, is leadership. TWI is a simple proven concept that would be difficult to improve upon, yet it provides the most powerful standardization/improvement cycle skill set I have seen to date. Despite the proven results, old and new leaders alike think they can dream something up that is better for the sake of the company culture, policy, flexibility, inability to understand the program, etc. There are many stories in the TWI archives how this, "I can do it better" bastardization of the program ruined many a company's' TWI program.

The paradox, which hardly anyone can see on day one of training, is that TWI (and Lean) is extremely flexible and adaptable to most any situation. In combination with this urgent need that is difficult for the masses to grasp, we really struggle with the level of patience and perseverance needed to master these types of skills.

In learning about the TWI program, many parallels can be drawn to Lean. Lean has been around, in the mainstream, for a good twenty years now in some form or another. It is starting to lose its luster. Why? Not because of the Lean concept itself, Rather, the problem is us. We are getting bored with it, or more specifically it isn't giving us the results we were promised.

Lean isn't flashy. It can sometimes be excruciatingly tedious as we watch small improvements add up over long periods. But what is driving that steady growth? You guessed it: standardization, self discipline, improvement, self discovery and growth for all. If we want lean to stick around for another 25 years, we need to get back to basics.

2009 TWI Summit Keynote Address Now Available

Patrick Graupp's Keynote Address is available through the TWI Summit - To Japan and Back: Insights on My TWI Journey

Hear Pat’s insights on TWI in Japan and learn how his early experiences as a trainer there shaped his passion for TWI. After working with TWI in Japan for many years, Pat returned to the U.S. and became a pioneer in reintroducing TWI in the U.S. The lessons he learned along the way will enlighten experienced practitioners and TWI beginners alike.

SPECIAL APPEARANCE: Patrick's mentor in Japan, Mr. Kazuhiko Shibuya, will address the Summit with Patrick translating to English. Mr. Shibuya learned TWI in the early 1960s from the first Japanese Masters! Don't miss your chance to hear this historically significant event that ties together TWI's past with today!

Keynote Address Available Here

Best Flow Training Money Can Buy!

You can have learn while you are eating! This weekend, go to a Fourth of July picnic dinner. Watch in amazement how a hundred people will willingly queue-up and somehow make it through the line with their four year olds in under 10 minutes with a heaping plate of great summertime food!

Planning, teamwork, layout, preparation and expectations are all part of what you are seeing. Now imagine if you had to do this everyday! This is the challenge for the workplace leaders! How to get this level of consistency and flow to occur everyday!

Happy Fourth!

Fail to Plan = Plan to Fail

Thanks, Phil, for the holiday weekend laugh!

Dear Sir,

I am writing in response to your request for additional information in Block 3 of the accident report form. I put "poor planning" as the cause of my accident. You asked for a fuller explanation and I trust the following details will be sufficient.

I am a bricklayer by trade. On the day of the accident, I was working alone on the roof of a new six-story building. When I completed my work, I found that I had some bricks left over which, when weighed later were found to be slightly in excess of 500lbs. Rather than carry the bricks down by hand, I decided to lower them in a barrel by using a pulley, which was attached to the side of the building on the sixth floor. Securing the rope at ground I went up to the roof, swung the barrel out and loaded the bricks into it. Then I went down and untied the rope, holding it tightly to ensure a slow descent of the bricks.

You will note Block 11 of the accident report form that I weigh 135 lbs.

Due to my surprise at being jerked off the ground so suddenly, I lost my presence of mind and forgot to let go of the rope. Needless to say, I proceeded at a rapid rate up the side of the building. In the vicinity of the third floor, I met the barrel, which was now proceeding downward at an equally impressive speed. This explained the fractured skull, minor abrasions and the broken collar bone, as listed in section 3 of the accident report form. Slowed only slightly, I continued my rapid ascent, not stopping until the fingers of my right hand were two knuckles deep into the pulley.

Fortunately by this time I had regained my presence of mind and was able to hold tightly to the rope, in spite of beginning to experience pain. At approximately the same time, however, the barrel of bricks hit the ground and the bottom fell out of the barrel.

Now devoid of the weight of the bricks, that barrel weighed approximately 50 lbs. I refer you again to my weight. As you can imagine, I began a rapid descent, down the side of the building. In the vicinity of the third floor, I met the barrel coming up. This accounts for the two fractured ankles, broken tooth and several lacerations of my legs and lower body.

Here my luck began to change slightly. The encounter with the barrel seemed to slow me enough to lessen my injuries when I fell into the pile of bricks and fortunately only three vertebrae were cracked. I am sorry to report, however, as I lay there on the pile of bricks, in pain, unable to move, I again lost my composure and presence of mind and let go of therope and I lay there watching the empty barrel begin its journey back down onto me. This explains the two broken legs.

I hope this answers your inquiry.

'Leanability' - TWI Guest Blogger: Sean Jordan

TWI Blog reader and friend, Sean Jordan, weighs in on lean failure rates and how to judge the 'lean-ability' of an organization:

“How do we judge failure?” Well, I am thinking that judging failure means that we failed to achieve a standard. Hmm, what is the standard for Lean? [I love IW’s Lean survey from March, 2008. As I think out loud, do the survey respondents really understand what their Lean initiative was supposed to achieve?)

When I evaluate ‘Lean-ability’, I want to know about the popular 4 P’s in your organization: Philosophy, People, Problem Solving, and Process. If you can improve (at any pace) to solve problems AND sustain the advances, then you are being successful. Organizations are different, so the pace of change should be set accordingly. With good leadership, a strong Hoshin can be set to achieve a balance of Safety, Quality, Cost, Delivery, Value and Teamwork.

The blog post about the next 3 M’s of Lean are linked to the Lean Failure rate post. Judging the failure of Lean means breaking the Myth. Perhaps SME, AME, NIST MEP, and others should go on the attack about breaking the Myth? Perhaps one popular topic floating around the Lean world that should be banned is “The Next Generation of ….(sorry, I started to throw up in my mouth a little bit) “The Next Generation of Lean.” Here’s an idea, let everyone know that implementing the 4 P’s is hard and can appear boring. Yet is rather effective and fun if done properly. Recently Toyota learned about getting away from its steadfast philosophy.

Finally, I myself am trying to reduce using the word Lean. The myth and assumptions about Lean are so vast that the work itself is a distraction from starting an effective conversation. After working with hundreds of companies, I found mentioning the word ‘Lean’ creates unneeded drama as compared to mentioning ‘let‘s solve some problems and get better.’ Sometimes, when someone calls me the ‘Lean Guy,’ chills go down my spine and everyone looks at me like I’m the lawyer on television at 3 a.m.

Cheers! Let go solve more problems!

www.graspthesituation.com

Jobshop Lean

A really concise and excellent article on how to apply takt time to a jobshop. Actually, jobshops are a more common phenomena in many businesses. The thinking can be applied to hospitals, retail and financial services, R&D or in the government and universities. Essentially, the trick is to find patterns of work in a sea of chaos. The closest hint you will find in mainstream lean literature is the concept of pitch. This is what the article is really describing, the application of pitch to different value stream products: easy to handle, harder to handle, toughest to handle. The article calls finding this pitch the common denominator. We can find common denominators in many things: container sizes, product types, cycle times, ease of use, etc. The trick is in quantifying it in terms of pitch.

I've worked with teams to apply this concept in two different ways: one was with the building of customer configured control panels. All the panels were "different." But by finding the common assembly patterns, we were able to create a flow line with the right amount of workstations and feeder lines for the manufacture of customized control cabinets on a four hour takt time.

Another application was in injection molding. The average plant takt time was about 6/1000th of a second, spread across forty machines that can run many different products at any given time. Kinda makes it tough to use one takt time, doesn't it? Most people would say lean and JIT doesn't apply. But the group found the common denominator: how often does a person have to pack product, i.e., take product away just-in-time for the machine to be able to eject more product without disrupting the cycle? This is something the people quantified and level loaded.

Bottom line: when takt time is too variable or too small to balance against - you need to find the pitch or as this article calls it - the common denominator. This is the first step in creating level flow.

3M’s of Lean: Myths, Misconceptions and Misunderstanding

Leansters know the ‘good’ 3Ms of Lean are mura (extra burden), muri (imbalance) and muda (waste). Today, we can add three more ‘bad’ Ms’s to the list: myths, misconceptions and misunderstanding.

There are many examples of bad 3M’s about Lean in the news. Here is yet another...

From Crain’s Cleveland Business, the title, “Swagelok Boss: Lean Operations Not for Us” begs us to read immediately. Why? For those familiar with the company, Swagelok is a successful, privately owned, billion dollar company. It has never had a layoff in its sixty-five year history, despite being headquartered in Solon, Ohio – a state that has taken its share of manufacturing hits. As I scanned the title, I wondered if we might learn something from this manufacturer via the author Dan Shingler:

“But he (Mr. Anton of Swagelok) hardly was spouting the gospel as they've (audience) come to know it. Manufacturers have been told to be lean, to keep inventories low and turnarounds fast, to make stuff “just in time” for delivery — and to jettison employees quickly when there is not work for them to do.”

Mr. Anton said Swagelok has often been successful doing the opposite.

“We will selectively build inventory to keep people working,” he said. “I know that sounds very non-lean and old-fashioned, but it's consistently worked for us."

I’m trying to remember the last time I heard of anyone serious about lean make the recommendation that employees be jettisoned when there is a downturn, or, when employee layoffs resulted in a lean success. Instead of explaining the rationale behind Swagelok’s inventory strategy as a solution to meet the needs of the customers and business, the article sets the tone for the usual hit piece on Lean: here is why it can’t work here, it doesn’t work for our customers, therefore take your Lean thinking and…

I digress.

“…plenty of area companies are sweating out the decision of whether to keep employees they hope to need later, or to cut costs while the slump is on. Some have no choice but to let people go. But many are putting their employees through extra training, hoping that when the economy does turn, they'll have the same skilled workers as before, but with even higher, more diverse skill levels.”

So this is the strange dichotomy of the media and Lean. Media thinks Lean = Layoffs. And this is the first M, myth. Lean is hardly about layoffs, although some companies end up resorting to layoffs and everyone seems surprised. Leansters, if you are saying Lean is going to avoid layoffs – STOP, you can’t make that promise unless you are in the driver’s seat. Would we be surprised if layoffs came without Lean? No, the layoffs came because of leadership, which is the main reason why lean initiatives or no, companies sometimes fail.

Lean has been evolving into something bigger than simply JIT inventory reductions, JIT is a rudimentary and crude explanation of Lean at best, if not half the story. This is the second M - Misunderstanding. JIT doesn’t mean ZERO inventory. It means the right inventory at the right time at the right quantities. If Swagelok’s strategy is to scale back on low use SKUs and ramp up high use SKUs, is it possible that they have weighed the cost of inventory against the cost of attrition and retraining? It is possible, yet instead of digging deeper, Mr. Shingler portrays not one of Swagelok’s strategies in the article as anything remotely Lean, except for the prospect of layoffs in a downturn. Leansters know that the extra training and skill building now in the downturn will make Swagelok stronger when the economy rebounds, assuming cash flow can support it. Yet, the media story is that these activities are not Lean simply because somebody is temporarily increasing their inventory for critical SKU’s in a downturn in order to keep their valuable employees. Isn’t Toyota, at a basic level, doing the same thing as Swagelok?

“Mr. Anton is going one step further. He said he has hired a handful of high-level technical people, including one Ph.D.-level employee, who were brought on specifically to help the company develop products for the years ahead. ‘This is a great time to be building your talent pool,’ Mr. Anton said.”

Well, I give him points for being half lean just for not hiring another MBA. ;)

Seriously though, here is another M - Misconception. Lean is very much about growth. Many people think that Lean = low variety of products and services when coupled only with high volumes. Toyota has 17 base vehicle models in the U.S. market with many configurations. Ford has 18 and that is after they brought back two versions (sedan and wagon) of the Taurus only after enduring consumer backlash over the discontinuation of one of the best selling vehicles ever. And for years now, Ford has been scaling back from their heyday and Toyota has been expanding trying to “emulate” GM, according to new Toyota leadership. So who is Lean? According to this anti-lean article, Swagelok is doing some very 'non-Lean' things, like increasing the skills of its people and developing new products in preparation to skewer the competition when the economy rebounds? But they aren’t Lean, eh?!

Perhaps the problem here is the label itself. The word Lean conjures up images of fads, programs and initiatives, which turn people off to the discussion quickly even when they may have much in common. Perhaps the term could be better used as an adjective that best describes the way people think and act when confronted with a problem. I could be wrong, but I wonder if Swagelok is thinking Lean and doesn’t know it.

Lean Failure Rates

Believe it or not, blogging comes with its hazards. One of those is to publish a “fact” that you can’t back up. Part of the plan here at the TWI Blog is NOT to aspire to be like the NY Times, sometimes known for their sloppiness. Despite our best intentions, mistakes can be made when our guard is down and we take things for granted. So, from time-to-time, we have to backtrack and understand the situation after we have jumped to a conclusion...OUCH!

When thinking the other day about small kaizen in blogging, I threw out a number to make a point: 95% of lean implementations fail. Mark Graban and Karen Wilhelm called me out on that number. Mark asked: “Is this just an anecdotal number?” Karen went further and asks: “How do we judge failure and who would want to admit failure?" These are great questions that cast some doubt over the infamous 95% figure.

Let’s start with the percentage of lean implementation failures. After doing some more digging, my conclusion is that the 95% is "mostly" anecdotal with some supporting figures. For your reference, following are several “claims” about CI/Lean failure rates with the web link to that claim. There are two categories: 1) Straight Failure Rates in descending order, and 2) Supplemental Data, (which may help us begin to understand the phenomena)

Straight Failure Rates

a) Clifford Ransom numbers - 98%+ lean failure rate

b) “More than 95% of all lean implementations fail to provide sustainable results, even with the involvement of highly skilled engineers.”

c) 90% of all companies that head into 5S fail. 90% of the companies that head into LEAN fail.

d) It is estimated that 70% or more of companies that attempt to implement lean fail when using mainstream practices.

e) According to Mark Eaton of EEF South, a far lower number are successful than you might think – less than 30%. And of those who realize the improvements less than 50% are able to sustain it, slipping back to previous or lower performance levels.

f) +50% failure rate

g) and within an LEI forum, a member claimed another anecdotal estimated 75% failure rate.

Supplemental Evidence

a) "Only 2% of the companies reported achieving World Class manufacturing status."

b) The 2007 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers is a study of manufacturing metrics, management practices and financial results at the plant level.

17.8% say continuous improvement programs led to a major increase in productivity:

67.2% report some increase

12.4% report no change

2.2% report some decrease

0.5% report a major decrease

c) 10-20% of leaders in a typical organization are unable or unwilling to make the lean conversion.

Conclusion

Judging from this information, it is safe to conclude that a sentiment or perception exists that the majority of lean implementations fail. We can't really go beyond claiming more than a general sentiment because none of these sources provided anything beyond the straight failure rate and we don't necessarily know what 'failure' means. So perhaps if one survey model was redone with another survey's failure criteria, the failure rate could drastically change. Its all relative.

For the record, the 95% from SME has been in my head for some time now. After this little bit of research, I will not be making this claim anymore. To be fair, it is not clear where SME obtained this figure. Although one can sneak by with this claim in the sloppily researched blogosphere, after seeing more anecdotal data I’m far from being, statistically speaking, 95% confident that 95% of lean implementations fail! It makes sense to revise this figure with something all industry can relate to.

Trying to find this common ground that all can relate to is where the problems begin in trying to understand the failure rate. Each member of industry defines failure differently from the next. To that end, it is tempting to put up a survey on the TWI Blog to try and gauge lean failure rates in 2009, but there is not enough traffic here to get a decent sample size within a meaningful period. Plus, we have yet to answer the second question posed by Karen:

“how would we judge failure?” which is the core question of any such survey.

One definition might be that the company stopped “doing Lean”. Another definition could be that the company filed for bankruptcy. Yet another could be bound by employee satisfaction levels. Or perhaps the leadership is evaluated in some way. So, this definition is left to others to offer up: what is the definition of a lean initiative and how would we judge it as a failure? Your comments please.

Lean IT - take two

Received a report about a broken link. This should work now...

Link will take you to a really thoughtful post about how TPS thinking can be applied to IT.