The Lion of Lean: An Interview with James Womack
Francis J. Quinn, Editor
Supply Chain Management Review July 1, 2005
For more than two decades, James P. Womack has been an articulate and relentless champion of lean, a management approach that seeks to create value and eliminate waste in all business processes. Womack’s interest in lean began in the late 1970s and early 1980s when he was a researcher at the Massachusetts Institute of Technology (MIT). One study in particular that he worked on—a landmark analysis of the competitiveness of the U.S. auto industry vis-à-vis Japan—opened his eyes to the competitive possibilities of lean production.
That experience ultimately led to the publication of The Machine that Changed the World, which he co-wrote with Daniel T. Jones and Daniel Roos. This business classic laid out the principles of lean production as they played out at Toyota. Womack’s next book was Lean Thinking, originally released in 1996 and recently published in its second edition. In this book, Womack and co-author Jones explain how lean can be applied in a broader business context.
For the past eight years, Womack has been a visible and prolific advocate of lean thinking as the president of the Lean Enterprise Institute (www.lean.org), which he founded in 1997. The institute offers a wide range of workshops, publications, and other resources designed to help organizations understand the principles of lean and put them to work. True to the philosophy that lean is not a destination but a life-long journey, Womack and Jones are working on a new book scheduled for release this fall called Lean Solutions. Clearly, the “lion of lean” has not lost his roar.
Supply Chain Management Review Editor Francis Quinn spoke with Womack at the Lean Enterprise Institute headquarters in Brookline, Mass.
Q:What got you interested in
lean in the first place?
A: Back in the late 1970s, I was a researcher at MIT working on a variety of transportation projects. And at that time, the U.S. automakers were starting to have all kinds of competitive problems with the Japanese. So given the long relationship between MIT and General Motors (GM’s long-time chairman, Alfred Sloan, was an MIT graduate who endowed the Sloan School of Management at MIT), we decided to conduct a study to figure out what was wrong and what could be done about it.
We concluded very quickly that the Japanese automakers’ advantage wasn’t trick currency or some kind of secret weapon. There was something fundamentally different about the way the best of the Japanese companies, led by Toyota, ran the business. And when I say the business, I mean the product development system, I mean the production system, I mean the supplier management system. I mean the system in Japan for dealing with customers. By 1982, my long-time collaborator Dan Jones and I concluded that the best Japanese auto companies were different from us. And with Toyota in particular, we quickly discovered that it was process, process, process, all the time. The ability to define processes, the ability to analyze them, the ability to improve them—they were just brilliant process managers.
So all of that led to our book in 1990 called The Machine that Changed the World, which told the story of how Toyota in particular was using lean production. In 1992, I left MIT and began on a new book with Dan called Lean Thinking, which told how companies could apply the principles of lean to create value while eliminating waste in their organizations. Then in 1997, I started the Lean Enterprise Institute. We write books, we teach workshops, we run conferences. And from time to time, companies call and say “How could I be the Toyota of the oil extraction industry?” Or “How would Toyota run a retail operation or a hospital or a post office?” So we go out and do these conceptual exercises and charge people an absurd amount of money to answer these questions and have some fun. It’s great—you could call it consulting, but it’s really conceptual about what should be done rather than implementation. I wish I could do that every day.
So that’s the long-winded answer of how we got into this.
Q:What are you working on
now at the Institute?
A: We’re now trying to write down all of the techniques you need to actually become lean. The Toyota teaching method is what we would call sensei-deshi, with the sensei being the great teacher and the deshi, the student. Basically, here’s how it works at Toyota: The kids get out of the university and join the company. Then they’re told, “Okay, you know how to do math, and you know how to read. Forget all the rest of the crap. We hope you had a lot of party time because now you’re going to be working long hours for the next 40 years, and we will teach you what you need to know. We’ll start by having you stay right here and look around for waste—muda in Japanese— and we’ll be back in a few hours.”
When the teacher comes back, he’ll ask the employee to tell him all about the waste he sees. It’s an empirical teaching method in which the sensei simply asks questions: “What do you think about this operation?” “Why aren’t you looking over here?” “Over there?” “Why is something happening this way?” They start with applications, and let you figure out the principles. Generally, the way we teach in the West is to start with principles, and then let the pupil to work out applications.
In addition to chronicling the lean techniques in the factory walls, we’re also working on workbooks on lean logistics, warehouse operations (yes, Toyota does have warehouses—for service parts), policy deployment, and many other topics.
Q:What’s the biggest challenge U.S. and Western companies have in applying a lean approach to their supply chain or other operations?
A: One big thing is that lean is a slow process, and Western managers like fast action. But beyond that, a bigger problem is there aren’t enough sensei around to teach the concepts hands on. So what do we do about that? And our answer at the Lean Enterprise Institute was, “Well, why don’t we take this knowledge, which is not secret, and write it down.” So that’s the contribution of the Institute.
Q:Why, suddenly, does everyone seem to be interested in lean and in the Toyota system? What took everybody so long?
A: For better or worse, people go with winners. And when a company is doing well, people say, “Gee, that’s who we ought to imitate.” Toyota is now on a tremendous roll. There are two parts to this. One is that they’ve now got product in every segment, and they’re just getting ready to open this big pick-up truck plant down in Texas next spring. That might be “all she wrote” for Ford and GM because it could really knock the bottom out of the pricing in their last highly profitable segment of the car market.
But the other thing Toyota has going for them is that they changed the technology perception of their products. Prius is the key example. It’s not that they’re going to sell that many Prius cars, but now they’ve suddenly positioned themselves as the guys that have both the market and the latest technology, which they are now applying in a wide range of their products. There’s no style in any of their cars, at least in my view. And yet the company is marching from victory to victory all over the world. So suddenly people are saying, “Oh, wait a minute, these guys are the winners in the post-bubble economy. We thought it was Jack Welch, but Jack’s gone and now GE is into ‘Lean Six Sigma.’” So the heightened interest in lean is partly just a fad—and I wish that weren’t true.
Q: What are the key components of lean, those core elements without which you really can’t have a lean operation?
A: Well, we begin with the premise that all value in life is the result of a process. Okay? A process is simply a sequence of steps that need to be done the right way in the right order at the right time to create value for a customer. That’s what a process is: a series of actions, right order, right way, right time. That’s what creates value.
But the most important question is what value the customer wants. So managers need to start with the customer and begin walking backwards from there. They need to look at all the things that they do and write them down on a simple process map. We call it a value stream map. How many of the steps are being performed because of the way the particular system works as opposed to what the customer wants? Did any customer ever come in and say, for example, “This car has really been reworked a lot, so I’ll pay more”? No, the customer came in and says, “I’m going to pay what I’m going to pay because here’s my estimation of how the car is going to work for me.” So there’s no value in all of those rework steps you have identified. It’s just waste.
So therefore when I see a situation in which a company has a clear definition of the value stream for each of its products, where they’ve looked at all the activities and are making a really good effort to eliminate the junk that doesn’t need to be done, where you see very high velocity so that things are flowing but only as the demand of the customer dictates, and where they have an improvement system that actually makes things better…then I know I’m looking at a lean operation. Now, most organizations have an improvement team, but they don’t actually have management linkage to make sure that the improvements actually happen. So when you see all those things, which is to say a lot of wasted activity being removed, clear definition of value, a clear value stream, high velocity, only making things for the customer as wanted (with no pushing items ahead before they are needed), and a mechanism in place that continually improves the process, now you have lean.
Q: What are the kinds of things companies typically find when they begin looking at their supply chain in an effort to become lean?
A: They typically discover that they seem to be picking stuff up and putting it down a lot. There are storage points everywhere, plus a tremendous volume of finished product. What’s the rationale? Well, the reason we have that buffer of finished product is that it takes us forever to get anything done, so we just have to guess what people want. And by the way, there are so many screw ups that even if we could do something quick, we may not do it right. So, again, we have to have this safety stock. Then there’s this thing with asset utilization. Our accountant says we have a factory, and we have to run it. In some extreme cases, such as the auto industry, we have a union contract where we have to pay our labor 95 percent of their regular salary just to stay home. Anyway, what you end up with is inventory lying around at every point.
What people need to do is envision a future state where you take all the waste out and then really get serious about reaching that goal. But over and over again I see companies that have a current-state map and a lovely future-state map. But when you take a walk, as I like to do, there’s absolutely no evidence that they’re working toward the future state. They’ll tell you that they’re serious about it, but it’s a year-long program and they can’t rush into things, and on and on. It’s all just staff bologna. That’s probably the single most frustrating thing: People know they have a mess with the waste and inventory all over the place. But they’re not really serious about doing something now to fix it.
Let’s just take one example in the purchasing area. People say, “Yes, we’re going to have a lean purchasing organization. And we’ll start by having target pricing.” You say, “Great, but how are you going to do target pricing?” “Well, we’ll set the prices 5 percent below what they are now and that will be our target pricing.” “Fine, guys, but you haven’t done any analysis. With true target pricing, you actually have to look at every step and figure out what it costs— including what’s happening out in the world right now with regard to materials. The costs are really going up, and this reality has to be factored into your pricing approach; otherwise, all you’re doing is squeezing your suppliers.”
Q: What’s the downside of
squeezing suppliers?
A: There are so many problems with this. Worst case, you can put them out of business and this affects your continuity of supply. More likely, you’ll create supplier churn. And it doesn’t matter whether you’ve already consolidated your supplier base from 5,000 to 50, you’re still going to have churn if the suppliers can’t benefit from their relationship with you. As for the prevalent attitude that if the suppliers screw up, we’ll just fire them, that doesn’t work well either. Competent suppliers will not be lining up for your business.
So when I hear people who claim that they are going lean by doing target pricing, and reducing suppliers, and tinkering with reverse auctions, I have to laugh. They’ve still got the inventories, the supplier churn, the waste that they had before. These situations actually become very embarrassing for me if it is a company I know well and have given some conceptual advice to. But I finally said, “Hey, look, embarrassment is muda, so I’m going to stop feeling embarrassed.”
Q: How should you work with your suppliers in a truly lean environment?
A: First and foremost, you have to be open and up front with them. You need to have an understanding that everybody needs to make a living—and that can be a tough one for some companies.
I was telling a Delphi Supplier Day crowd out in Detroit earlier this year about an interesting experience I had in 1982 in Japan. I wound up having dinner with the managing director for purchasing of Toyota. The company had only a very small number of suppliers, only two, or at most three, per category of need. And the most amazing thing was that they didn’t do bids. They would tell the supplier what something was going to cost. They would say, “Look, here’s the deal. This is our target cost based on what the end customer thinks this product is worth. We have to figure how to get to that target while you make money and we make money. So you have to figure how to take enough cost out so that there’s margin left for you.” In other words, they were working backwards from the customer all the way up the supply stream.
So I said to the Toyota executive, “You’ve only got two or three suppliers per category, and you never take bids. How do you know you aren’t being ripped off?” So this guy, who was around 60, gives me an incredibly frosty look and says, “Because I know everything.” Everything? “That’s my job,” he says. Basically, he was telling me that we do our homework, we know what things cost, and we also know where the waste is.
The second part to this is that if the supplier is not smart enough to figure out how to take the waste out, Toyota will go over and show them. And it’s basically not a voluntary exercise. There’s this relentless target costing. There is the expectation that real cost and prices always go down.
Q: Let’s say you’re a logistics or a purchasing manager who really believes in the things you’re talking about. What can you do to promote lean thinking in the organization?
A: Well, if I’m in one of those job positions, the first thing that needs to be done is what we call lean math, which is just figuring out what your total costs are. All too often, in purchasing groups in particular, we see a piece-part approach to costing. Basically, it’s the piece-part price at the factory gate plus slow freight equals total cost. You look at that and say, “Gee guys, is that really total cost? I can think of about ten other things that you might have to add in here, like how much expediting you’re going to have to do.” And the answer you typically get is, “Well expediting costs are not part of the plan. Of course, we are doing some expediting but…” Well expediting is never part of any plan. Where did you ever see a plan that said we’re going to make heavy use of expedited air freight? But in reality it’s a part of that total cost of using far away suppliers that you don’t know well and who have weak processes. That needs to be considered, so write it down on your total-cost tally.
After addressing costing, we need to look at the quality situation. Again, the line typically is, “Well, we’re dealing with this new supplier and right now we’re having a lot of warranty claims, but we have a plan, we’re going to fix that.” “Oh, really? When are you going to fix that?” “Well, we don’t actually have a date, we’re just going to fix it as soon as we can.” “Okay, that’s good. Why don’t we write down your real prospect for the cost of warranty claims this year.”
Knowing the total costs will enable you to do things in a very different way. So instead of the usual response of ordering in larger quantities to cut freight costs or beating down suppliers to get an extra 5 percent of the piece-part costs, you open up to different approaches. You begin to understand that maybe it’s okay to have slightly higher freight costs if you have less inventory in the system and if you’re responding more closely to
actual customer demand.
But before this happens, you’ve got to change the way in which people are compensated. You can’t be paying someone based on how well they’re cutting freight costs while the inventory costs are going through the roof.
Q: What’s the key to sustaining a lean program once you get it off the ground?
A: First off, when people come in and tell me, “We’re going to be at Toyota’s level in a year,” I tell them that while that may correspond nicely with their next promotion, it’s got absolutely nothing to do with reality. Lean is not a destination but a journey, as they say…a really long journey, at that. So it’s almost pointless to try to do this as a program. This isn’t a one-year program, it isn’t a five-year program or a ten-year program. In fact, don’t even call it a program. Don’t give it a label. Don’t call it anything. Just do it, and make it part of your everyday life.
Toyota has never had programs. They never declared back in 1950, “We’re going to do lean.” They said, “Gee, we’ve been thinking there’s got to be a better way to do this. We will now start down the path to determine how to do this.” And they’ve been at it ever since. The notion of a quick program is really the enemy of the long-term sustainable success. Putting a label on it is, in general, a bad idea. In some ways, I just wish people would quit using the term lean altogether.
Q: Instead of thinking of lean as a program, how should people think of it?
A: Think of it as process-focused management. As I said earlier, start with the customer.
What are the processes that will best serve the customer? Then how do you get your people to want to follow those processes and do things the right way? There are still an enormous number of managers out there who are dedicated to the proposition that people can be forced to do things the right way. In the long run, that doesn’t work. Everyone who touches the process needs to believe in it, to understand it, to recognize how it’s helping the customer. And that means everyone—from production associates to line managers to the staff support people. People either believe in this thing or they don’t—you can’t make them believe. The Toyota guys believe in what they’re doing. They understand the underlying logic and why it’s so important. In this kind of environment, nobody has to make you do anything. Nobody has to say to the employees, “Don’t stick your head in a bucket of water and keep it there until you turn blue.” You don’t have to tell people not to do things that everyone agrees are stupid.
Lean is not a game for quick studies, and it’s not a game for Speedy Gonzales. It’s not “I read the first page of your book, and I got it all.” And it’s not a game for the guy who’s doing it for one year in order to get his or her promotion so he can go to the next job. I talked about this recently at GE, which historically had a very rapid progression of management. The feeling there is that if you’re stuck in a job for more than a year, you must be doing something wrong. So I told them that maybe you should start thinking about keeping people at jobs for four or five years. All this jumping around just jumbles up all the information, and you lose all the continuity. Look at how much churn there is in purchasing, for example, and how much valuable information is lost about parts and products, about customers, and so on. You know, last year it was Bob, and then earlier this year it was Sally, and now it’s Ruth. They say, “Well we move people around because we’ve got a flexible, dynamic, and responsive organization.” Problem is: Nobody knows anything. There’s a lot of waste in inherent in this.
Q: Where does technology fit in a successful lean approach?
A: Lean people are always technology skeptics. They’re not Luddites, mind you, they’re just technology skeptics. They spend their time on creating a process that requires as little information as possible, while the rest of us try to figure out how can we get more and more and more information. Lean guys look at something and often notice that there’s a tremendous amount of completely irrelevant information collected and no information that’s actually useful to the management task at hand. They seek to make the process transparent, make it simple as opposed to complicated. And as they do that, they discover that actually they don’t need to know as much as they thought.
Put another way, lean folks want to simplify the process and take the wasted steps out before they want to talk about automating the information needed to manage it.
Q: Other than Toyota, how have companies done generally in implementing lean in their supply chain?
A: In every industry, there are companies that give it a go; some of them get somewhere, and some of them don’t. Tesco, the UK-based grocer, is an example of a success story. They have learned how to go beyond Wal-Mart. They came to Dan Jones ten years ago and asked, “How would Toyota run a grocery business?” And they’ve been working hard to become the Toyota of the grocery business ever since. You know, everyone thinks of Wal-Mart as the model of efficiency. But when I go into Wal-Mart stores and look at the excess inventory and wasted motions in materials handling, I just chuckle to myself. Now, Wal-Mart is vastly better than Kroger or Albertsons or typical grocers in North America and Europe. But they have a lot to learn from Tesco. What Tesco is doing is really just a Toyota knock-off: Small amounts frequently replenished, and let the customer be the trigger point at the scanner.
Perhaps the most interesting example is 7-Eleven in Japan. It’s probably the leanest grocery company on the planet, doing demand-driven replenishment multiple times during the day. Solectron is doing a good job of going lean in contract manufacturing. You find some examples in unexpected places, too. One of my favorites is the post office in Canada. Postage rates in the United States keep going up, and the USPS [United States Postal Service] is losing a fortune. On the other hand, Canada Post is keeping rates steady and pays hundreds of millions of dollars in profits to the Canadian government. What’s the difference? Canada Post went lean.
Q: Any final words on why top management in U.S. companies needs to start getting serious about lean?
A: We have just come through a long time period, ending in 2001, when companies could grow rapidly with new product technologies and acquisitions funded with rising stock prices. But now, as managers look across the industrial world, it’s hard to see much growth through these means. So, if companies want to grow, and most businesses do want to grow, they really need to do it organically by doing a better job for customers in the areas where they already compete. Remember that Toyota has grown steadily for 50 years offering one type of product—motor vehicles—in an industry that was already pretty mature in the developed countries at the time Toyota entered the game.
When it comes to organic growth, lean is a great answer. On the cost side, it’s obvious. But the real opportunity is on the value side where lean companies can offer customers better products developed faster at a lower cost while also taking all the hassle out of what we call the “provision stream,” which runs from the manufacturer through distribution and service to the customer’s actual point of use. Indeed, we think that “lean consumption” is the next big thing, going beyond lean production. Dan Jones and I have a book out in the fall (October 2005) called Lean Solutions that focuses on this next leap.
© 2005, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.
