Gemba Keiei, Chapter 8: Limited Volume Production is to Produce at Low Cost

The title for this chapter is awkward in English. It comes from the problem of trying to translate the nuances of Japanese words that have the same sounds but different meaning due to an intentional replacement of one of the kanji (Chinese characters) to create a new word.

Taiichi Ohno uses the term “genryou production” in the title of this chapter, meaning “limiting the production volume to just what the customer needs” as in the opposite of overproduction, one of the 7 wastes.

This is in unlike the “genryou” which simply means “reduced volume” or “lower volume” contrasting traditional high volume production to decreased production volumes. You could say that Ohno’s meaning is to limit intentionally, as opposed to production being reduced involuntarily by market conditions.

There’s a lot of this type of word play in Japanese and you will find quite a bit of it in Japanese Lean lingo also. For example, “jidoka” means “automation” but there’s also jidoka (replace the ‘do’ with a slightly different kanji) which means “autonomation” or “autonomous working” and indicates the ability of machines or people to work intelligently and stop the process when errors are detected. This jidoka was coined by Sakichi Toyoda when he invented his automatic loom and jidoka today is a pillar of TPS.

Taiichi Ohno uses the meaning for the new “genryou (limited) production” in order to make his point in this chapter. While it is easier to reduce costs when you have high volume production and can benefit from economies of scale, when you are faced with “limiting volumes” or making just what the customers want, cost reduction is a lot harder. If the customers will buy 10,000 units, you have to reduce cost at that volume even though the cost per unit would be cheaper if you produced 15,000 units.

It may be true that the cost per unit is less to produce 15,000 but the company is less profitable if you make 5,000 pieces that do not sell right away because you create the wastes of transportation, inventory, motion, defects, etc. to manage the extra units. Even if your customer demand is growing to 11,000 units for instance, Taiichi Ohno says it is important to limit production to 11,000 and to do kaizen to reduce cost at this limited volume.

The first “genryou” is also used when boxers try to eat less in order to “make weight” so they can fight in the lower weight class. Ohno uses this as a metaphor for how companies must be careful when they are doing this traditional “genryou” by “dieting” in order to become Lean and more competitive. If done well, you cut out the fat and you are more fit. If done poorly, this can result in less muscle and energy, losing the fight for both the boxer and for the company doing “genryou” (weight loss or Lean).

The lesson for today is to use Lean and kaizen not as a downsizing tool (reduced volume through outsourcing or reductions in staff) but as a way to make the organization more fit (enabling limited volume or JIT production).

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