Today’s column is pretty self-explanatory. I would have liked to say a fair bit more about the system and how it works, but there’s a haiku like pleasure in getting it down to 800 words (OK well, that’s not haiku, but you get my meaning). Here it is:
I FIRST came upon the remarkable achievement of Japanese manufacturing in 1983 while working on the new car plan for my boss, John Button. I was in awe of how the Japanese had somehow designed an entire new system of industrial production and human relations that managed to minimise bad behaviour and give people the tools and motivation to do their best.
It’s a lot easier said than done. And the story has gone on from the Japanese getting the best out of their workers and suppliers to us getting the best out of ourselves and each other on the internet.
It takes me back to Adam Smith, the founder of modern economics, explaining how slavery seemed like the cheapest form of labour but was really the most expensive because the slave had no stake in his own productivity. If he had particular aptitude or suggested ways to economise on his own labour, he would probably cop a beating for laziness.
Before Toyota radically redesigned it, factory production was built on the managers’ need to speed up the line and cut costs. They used largely unskilled labourers, whose incentive to work mixed fear and need with job insecurity, piece rates and/or production targets.
But Toyota showed how cheap labour was really more expensive. They spent 10 times more than their American competitors on training and they treated their workforce as ”knowledge workers”. Rather than pushing them to keep up with a production line over which they had no control, workers were organised into co-operative teams that met to optimise their productivity in ”quality circles”.
Eliminating waste was a great catch cry, but in Toyota’s hands, it was infused with purpose and almost Zen-like meaning. It sought to eliminate three kinds of waste:
Muda – triviality or unproductiveness.
Mura – unevenness or irregularity.
Muri – unreasonableness or absurdity.
Toyota factories used less space and reduced inventory holdings from weeks to hours. But the savings on rent and interest weren’t really the point. Workers were steeped in statistical control so they could endlessly hunt down mura, or irregularities. This showed up various processes for the muda (trivialities) and muri (absurdities) that they were. For instance, inspecting for quality after mistakes had been made, rather than getting it right the first time.
”Just in time” inventory further forced the elimination of irregularities and accelerated the feedback by which problems could be identified and solutions found. It also drew suppliers into the system and built trusting long-term relationships in which product and process design was shared between suppliers and the car maker.
The result was extraordinary. Japanese plants often doubled the West’s labour productivity while achieving much higher quality. When the Americans returned to learn from Toyota, they often imitated tokens and tricks, such as reduced inventory and quality circles. But as one of the architects of the new system – American process-control engineer Edwards Deming – observed, they copied, but ”they don’t know what to copy”, for they were encountering a whole system that relied as much on its understanding of people as it did on technology and systems.
Toyota’s ideas have spread throughout most Japanese manufacturing and have been transplanted on foreign shores. But, to my surprise and disappointment, none of this captured economists’ imagination. They’ve heard of ”just in time” production but regard it as no more than a shift of a curve on one of their diagrams.
It’s not utopia but the move from adversarial, rent-seeking, fearful workplaces to Toyota’s more enlightened system was something Adam Smith would have recognised as progress.
Toyota’s past achievements also pointed to the future. In tapping into the unique capabilities of all its people – not just in its own factories, but in those of all its suppliers – it anticipated today’s networked approaches. Indeed, anticipating ”open-source” production methods, Toyota insisted that its facilities, and those of its suppliers, become ”knowledge commons”, in which firms would help each other by sharing expertise.
And one of the great strengths of open-source production – for instance coding open-source software such as Linux, or contributing to Wikipedia – is the way it taps into intrinsic motivation: people do it because they want to and because they care about the outcome.
Eric S. Raymond, author of an early bible on open source, The Cathedral and the Bazaar, could be channelling Toyota’s obsession with eliminating waste when he observes: ”Painful development environments waste labour and creativity; they extract huge hidden costs in time, money and opportunity.”
Which brings me back to Smith, who gazed on the great promise of early capitalism and dreamt that human freedom, capability, dignity and wealth might grow together. That’s better than some shift on an economist’s diagram.
Postscript: In case anyone’s interested – here’s the interview of the column – though it ranges rather more widely.