Gemba Keiei Chapter 13: Improve Productivity Even with Reduced Volumes

Taiichi Ohno pulls a lesson for Lean manufacturing out of the rice farming situation in the early 1980s in Japan. The government of Japan paid farmers to decrease the area used to cultivate rice in order to limit overproduction of rice. While it might seem like a good idea to reduce overproduction, the political reason for this was to sustain the artificially high price of rice, maintain the income of farmers, and get the vote of the farmer for the politicians supporting this policy. Until not too long ago, the votes of farmers weighed more than that of city dwellers.

Taiichi Ohno points out the uselessness of this policy. When Japanese farmers were told to reduce cultivation area by 10%, they became 10% more productive and produced the same amount of rice over a smaller area. The policy of the Department of Agriculture, Forestry and Fisheries stated that less area should be used to grow rice, but it did not state that the production output should be reduced. The farmers planted the rice seedlings more densely in a smaller area, resulting in higher yields per acre, and the same output. The ingenuity of doing more with less is the essence of kaizen.

Taiichi Ohno says people, whether in agricultural ministries or in industry, think the same way and use bad arithmetic and do not value productivity (rice produced per acre) instead measuring only utilization (cultivated acreage). When manufacturing companies restructure and get rid of older, underutilized machines they are often replaced by newer machines that produce more. Taiichi Ohno says that this is not productivity improvement.

Taiichi Ohno says it’s important to think more deeply about productivity. It’s a mistake to think that your current productivity is the best. It’s also important to get rid of the idea that unit cost is reduced when you increase production volume. Taiichi Ohno argues for cutting the link between increased production volume and productivity. In other words, increasing output by 10% with the existing people, or adding 10% more people and getting 20% more output is not the right way to think about productivity.

How can companies improve productivity when their volumes decrease? “In Japan we can’t get rid of people” when volumes go down, says Taiichi Ohno. This is no longer true, but 20 years ago the system of lifetime employment was still in place.

Taiichi Ohno may have been most concerned about the era of decreasing production volumes that Japan was coming out of at the time he wrote this. Japan industrialized and grew very rapidly, then was shocked with declining volumes and was forced to adjust from mass production to high mix low volume production. This cycle has repeated itself at least once since the 1980s, most recently with high volume work going from Japan to China and the low volume, complex work remaining in Japan.

Taiichi Ohno gives examples of how to improve productivity (although in fact they are cost reduction ideas) when production volumes go down by 10%. If 10% less machine capacity is needed, reduce the machine speeds by 10%. Says Ohno, “It is commonly said that increasing machine speed by 10% increases energy consumption by 20%, and reducing speed by 10% saves 20% energy consumption.” Since there is a exponential (rather than linear) relationship for variable torque motors’ speed and power consumption, reducing by 10% should save much more than 10%. The math may not be exactly right, but the idea is correct.

Continuing on the assumption that labor cost is fixed, Ohno suggests that when production volumes are reduced you can use people to transport materials on carts by hand instead of using forklifts. This would save fuel, wear on the tires, etc. Instead of pallets, transport smaller quantities so that people can move them by hand. If you are using electricity to run an air compressor to provide air for pneumatic chucks, shut it off. Let the people use a turn a wrench to close the chucks by hand.

Shut it all off, go back to basics and save money, says Taiichi Ohno. Look for kaizen idea in the smallest, most unlikely places. It might sound primitive, or even impractical, but these are the musings of Taiichi Ohno, one of the great masters of kaizen, on how to improve productivity even with reduced volumes.