The Business Book

(Joyce) #1


See also: Reinventing and adapting 52–57 ■ The value of teams 70–71 ■ Creativity and invention 72–73 ■ Leading the
market 166–69 ■ Maximize customer benefits 288–89 ■ Simplify processes 296–99 ■ Time-based management 326–27

visit Ford’s Rouge plant in Detroit,
MI. Toyoda spent three months
studying the mass-production
technique pioneered by Ford at the
Rouge. On his return, Eiji reported
that he was impressed by the scale
of production that Ford achieved—
the Rouge was so big that it
required its own railroad, hospital,
and several fire stations. However,
he also believed that the factory
was riddled with muda—the
Japanese term for wasted effort,
materials, and time. Toyoda and his
colleagues set about developing a
new production system that sought
to replicate the output and
economies of scale achieved by
Ford, but in a less wasteful manner.

Seven types of waste
Shigeo Shingo, a Japanese
industrial engineer who worked
with Toyota in the 1970s, identified
seven types of waste, or muda.
The first type is overproduction.
Traditional manufacturers have
a tendency to mass produce in
advance of sales. These companies
try to forecast what they think
demand will be for their product,
then they make the goods that they
expect to sell. The main problem
with this system of manufacturing,
however, is that it relies on accurate
forecasting of demand. If the
forecast does not accurately match
demand, the company could be left
with mountains of unsold stock.


Waste is anything
that adds to a company’s
cost which is not
valued by the
customer, including...

Lean producers
try to eliminate
these wastes to
boost profits.








The second example of muda
is inventory waste. In addition to
stockpiles of unsold finished goods,
many mass producers keep stocks
of raw materials and work-in-
progress to reduce the risk of
production being halted. Stocks of
raw materials are held in case a
supplier fails to make a delivery, or
to protect against the possibility
that some of the raw materials
might be defective and unusable.
Stocks of work-in-progress, or semi-
completed products, are held just in
case a machine on the production
line breaks down. These can then
be inserted into the process to
ensure that production continues.
However, holding stocks of raw ❯❯
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