why is Honda playing with robots? Or, for that matter, airplanes? Honda is building a factory in North Carolina to manufacture the Hondajet, a sporty twin-engine runabout that carries six passengers. Or solar energy? Honda has established a subsidiary to make and market thin-film solar-power cells. Or soybeans? Honda grows soybeans in Ohio so that it can fill up cargo containers being shipped back to Japan. The list goes on. All this sounds irrelevant to a company that built some 24 million engines last year and stuffed them into everything from cars to weed whackers.
Since 2002 its revenues have grown nearly 40%, to $94.8 billion. Its operating profits, with margins ranging from 7.3% to 9.1%, are among the best in the industry.
The wellspring of Honda’s creative juices is Honda R&D, a wholly owned subsidiary of Honda Motor. Based in Saitama, west of Tokyo, R&D engineers create every product that Honda makes – from lawn mowers to motorcycles and automobiles – and pursue projects like Asimo and Hondajet on the side. Defiantly individualistic, R&D insists on devising its own solutions and shuns outside alliances. On paper it reports to Honda Motor, but it is powerful enough to have produced every CEO since the company was founded in 1948.
The engineer in Fukui [Honda’s president and CEO] cannot help but be intrigued by what his former colleagues are up to, and his office is only a few steps away from Kato’s. But even with the CEO just down the hall, says Kato, “We want to look down the road. We do not want to be influenced by the business.”
mistakes like the Insight are also the exception. R&D has provided Honda with a long list of engineering firsts that consumers liked, including the motorcycle airbag, the low-polluting four-stroke marine engine, and ultralow-emission cars.
With plants in 27 countries, more new factories under construction and workers speaking languages that include Russian and Turkish, Toyota’s top executives are trying a difficult balancing act – replicating the company’s success and operating principles in other countries while ceding more control to these new outposts at the same time.
Next year, it expects to sell more than 10.4 million cars worldwide, double what it sold in 2000.
At Motomachi, more than 3,000 tasks on the assembly line have been translated into video manuals that are displayed on laptop computers above 30 simulated workstations, situated where their functions would be carried out inside the factory.
The videos show everything from the correct way to hold a screw to the best way to hold an air gun so that a worker’s hand will not tire in a few hours. This month, workers from Toyota’s plant in Thailand took part in training required for jobs in their plant’s paint shop. Listening as an interpreter translated from Japanese into Thai, the workers were shown how to bend their knees and spray a water gun across a clear panel of Plexiglas.
In a Commonwealth Fund-supported study comparing preventable deaths in 19 industrialized countries, researchers found that the United States placed last. While the other nations improved dramatically between the two study periods (1997–98 and 2002–03) the U.S. improved only slightly on the measure.
Rankings: 1) France 2) Japan 3) Australia 4) Spain 5) Italy 6) Canada… 18) Portugal 19) USA. Maybe the United States is last but still not significantly behind?
According to the authors, if the U.S. had been able reduce amenable mortality to the average rate achieved by the three top-performing countries, there would have been 101,000 fewer deaths annually by the end of the study period.
It might seem like a stretch to compare the lowest ranked country to the average of the top 3, but, for all those that feel the USA is the best health care system it raises the questions of why they don’t think 100,000 annual deaths is a significant enough problem to lower their opinion of the current system. And remember the USA system costs something like twice as much as the average system: up to 16% of GNP in 2006.
I must say I would rather have the Toyota mindset shown by those talking about the USA health system instead of the claims of how the current USA health system is number 1. In Toyota’s horrible last year they still had a profit of about $14 billion (I believe something like 20 companies have every made that much). The United States health system sure has some things to point to positively but the system seems to be losing ground to the rest of the world more and more quickly while many cling to a belief it is the best system around.
Workplace Management by Taiichi Ohno is an excellent management book. Taiichi Ohno is known as the father of the Toyota Production System (TPS), also called lean manufacturing. He dictated the text to the Japan Management Association (in a series of interviews in 1982), which gives the book a sense of listening to him talk about the ideas. I found the conversational tone made it very easy to read and reminiscent of Dr. Deming’s tone in many places.
Ohno focused a great deal on the faulty perceptions derived from cost accounting thinking. He discussed the importance of not letting your understanding be clouded by thinking with the accounting mindset. “If you insist on blindly calculating individual costs and waste time insisting that this is profitable of that is not profitable, you will just increase the cost of your low volume products. For this reason there are many cases in this world where companies will discontinue car models that are actually profitable, but are money losers according to their calculations. Likewise, there are cases where companies sell a lot of model that they think is profitable but in fact are only increasing their loses.” page 32
Another area covered in the book is the whole concept of one piece flow (with quick changeovers of equipment, just in time, small lot production…). This is one of the true innovations within the Toyota Production System. I don’t think this book alone can convey how it works and why it is important but this book does a good job of giving another take on these ideas, from the person most responsible for making it work at Toyota.
The book is full of wonderful quotes including:
“There is a sequence for implementing automation that must be followed, even though it is hard. Automation just for its own sake is a problem.” page 81
“If you are observing every day you ought to be finding things you don’t like, and rewriting the standard immediately. Even if the document hanging here is from last month this is wrong.” page 125 Continue reading →
This is a key lesson because with attention to quality, the company begins a journey on a “virtuous circle” of simultaneously improving quality and lowering costs. As quality improves, there are less rework, scrap and waste of all kinds. As products become more attuned to customers’ needs, there is less effort spent producing items people don’t want. Costs go down. Quality improves. Thus paying attention to quality becomes the primary competitive strategy. Understanding this is vitally important.
An interesting point is that the assembly line had a goal of only 97% uptime. They did not want 100%. It was believed that a goal of 97% was better (more realistic) and prevented quality problems from being slipped through. If the goal is 100%, the employees would say that something was not really a problem and let it go to keep at a target of 100%. With a target of 97%, the employees would not be pressured to let things go and stop the line to correct the problem!
The conventional wisdom has been that expanded trade would result in the United States losing low-pay, low-skilled manufacturing jobs, said David Swenson, an economic scientist at Iowa State University. But “a lot of the jobs that we have traditionally thought of as high value, high quality, high benefits are in trouble, too.”
The conventional wisdom was that the rest of the world would not be able to compete with the United States for high wage, high value jobs. It turns out the rest of the world is much more able to compete for that work than was expected. Continue reading →
This year again provided impressive showings by India and Thailand: of the 6 awards 3 went to Indian Companies and 3 went to companies in Thailand. And this is not a fluke, a unit of the TVS group (India) has been awarded in each of the last four years, see, “Deming medal for Lucas TVS and SRF.”
2004 The Deming Prize for Individuals
– Mr. Akira Takahashi, Senior Adviser to the Board, Denso Corporation (Japan)
2004 The Deming Application Prize (alphabetical order)
– CCC Polyolefins Company Limited (Thailand)
– Indo Gulf Fertilisers Limited (India)
– Lucas-TVS Limited (India)
– Siam Mitsui PTA Company Limited (Thailand)
– SRF Limited, Industrial Synthetics Business (India) SRF press release – pdf format
– Thai Ceramic Company Limited (Thailand)
In recent years, Thailand and India have been the home to nearly all awardees: 6 of 7 in 2003, 2 of 2 in 2002 and 3 of 4 in 2001. Prior to this new trend, nearly all awardees were based in Japan, the exceptions being:
– Sundaram-Clayton Limited Brakes Division (India) 1998
– AT & T Power Systems (U.S.A.) 1993
– Philips Taiwan, Ltd. (Taiwan) 1991
– Florida Power and Light (USA) 1989