In this brief chapter Taiichi Ohno emphasizes the need to do kaizen in order to be ready to compete with lowest cost production. When production volumes decrease, one strategy is to produce products with higher value added and higher margins. This strategy of moving up-market does not always work, so you need to prepare by doing kaizen to lower costs, says Ohno.
This message is very relevant today. Toyota is very active in doing kaizen even as they reach record profits and production growth. Not only that, according to a March 7, 2006 Automotive News article Toyota will compete with the Chinese automobile manufacturers by offering lower cost automobiles starting in 2010. Toyota appears to have learned Taiichi Ohno’s lesson to “do kaizen when times are good”.
Taiichi Ohno says that if you wait to do kaizen until business is slow, then you are forced to spend money just to reduce costs and become competitive. You spend money on your Lean manufacturing efforts when your margins are getting smaller and this takes your attention and cash at a time when you need it most to run the business. So do kaizen when times are good, and be ready for the eventual slow times.
When the economy is strong and you have a lot of business, you can cut costs effectively. If you try to lose weight when you are starving, you will not drop fat but muscle, and become weaker. When you are cutting people because you have no breathing room to cut costs, this is not true cost reduction or kaizen. The most important thing is to do kaizen when times are good, says Taiichi Ohno.
Doing kaizen when business is good can be difficult, because the numbers show that your financial performance is good. Why do what is difficult (changing people’s behavior through kaizen) when you can do more of what you are doing now – the same things that are making money today? This is the big mistake companies make.
Taiichi Ohno says that companies have a responsibility to maintain employment and make a profit. The only way to do this is to reduce cost. Costs are reduced by scientifically reducing waste from every process. “I think this effort is the most important job of Industrial Engineering” says Taiichi Ohno.
Taiichi Ohno uses a Japanese proverb similar to “An empty sack cannot stand upright” to express that it is very difficult to make good decisions and do kaizen to cut costs the right way when your business is struggling. By the same token, it is easier to do kaizen the right way when times are good. When you are poor and struggling to make ends meet it is hard to think beyond today. The lesson from Taiichi Ohno in this chapter is very clear. Avoid the trap of becoming comfortable with your success, and do kaizen when times are good.