Balaji, a reader of LSS Academy, recently sent me the following question/comment via email:
Toyota, GM, and Ford are experts in state of the art assembly technology and in implementing Lean and Six Sigma process improvement methods and so on. Then why have GM & Ford failed? Even Toyota closed its branch production units in Japan? Though I’m also one Lean Six Sigma Black Belt I too lost the confidence that Six Sigma or Lean or TPS can’t do anything in this recession period.
Before getting started, let me first say that I’ve done some research and don’t believe Toyota has closed any production units in Japan. If I am wrong here feel free to comment below with a correction.
Also, before the lean purists get too excited Toyota does not practice “six sigma” the same way companies like GE and Allied Signal do.
With all of this said, Toyota is still struggling these days just like many other companies.
The company is still deep in the red, logging a net loss of 77.82 billion yen (US$817 million) for the April-June quarter.
How can this be?
So the million dollar question is how did this happen? How could the mighty Toyota, the company that “changed the world” with their production and management system, lose money like this?
The Reality of Running a Business
No matter how amazing your production or management systems are or how well you respect people or how conscious you are of the environment… if no one is buying your product or service problems are coming.
You don’t need to be a CPA to figure this out… if your expenses are greater than your sales you’re in for some trouble.
And it goes without saying that people haven’t been buying many automobiles the past few quarters and no one, including Toyota, saw it coming. Perhaps they should have… but they didn’t.
Now, to be fair, Toyota has weathered this storm about as well as any automotive company SINCE they have an amazing production and management system… but they are not infallible. Far from it.
Rise Up Continuous Improvement Practitioners!
So does this mean lean and six sigma practitioners like Balaji (or you and me) should pack up ship and run for the hills until the orders start flooding in again?
Of course not.
Your company needs you now more than ever. Specifically, they need you to:
- Attack the waste that is sucking operating income down the drain.
- Find better ways to manage the inventory that is tying up much needed cash.
- Reduce lead-times that will make you more competitive.
- Partner with your sales and marketing team to see how you can apply lean and six sigma principles.
- Stay positive while working to make things better EACH AND EVERY day even though you might feel like your boss is more focused on other things (like how to make payroll this week).
A “W” Recovery?
This market will eventually turn around. However, I’ve heard some economists claim that we might follow a “W” recovery pattern instead of the more common “V” recovery pattern we often see after recessions.
In other words, things could look better (like they seem to be now?) only to tank once more before the final recovery takes place.
But no matter how things recover one thing is for sure… the companies that work to become stronger during this recession by investing in continuous improvement will be the new winners of the post recession period. This I’m sure of.
What do you think?
Do you agree with me? Do you have any other thoughts on why lean exemplars like Toyota are losing money? Do you agree that investing in continuous improvement is more important than ever in these tough economic times?