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Tesla vs. TPS: Seeking the Soul in the New Machine

by Jeffrey Liker
March 2, 2018

Tesla vs. TPS: Seeking the Soul in the New Machine

by Jeffrey Liker
March 2, 2018 | Comments (36)

Tesla has been a major disruptive force leading the charge of the future vision of electric, autonomous vehicles. Recently it has captured public attention by having one of its vehicles launched into orbit; and on a less publicized note, CEO Elon Musk challenged the auto industry with a bold vision of accelerating the pace of production through automation.

The auto industry got a wakeup call when Musk introduced the Tesla Model S to the world. Every aspect of the design, from appearance to speed to the digital user interface, was exciting and seemed to surpass the competition. When looking beyond the vehicle however, it became clear that Tesla’s execution was far from auto industry standards — late delivery with poor quality. Yet customers who were passionate about green technology rushed to buy the Model S and signed up in droves to place an order for the Model 3, which had yet to be designed. And so while his success has awakened the industry to the value of great design, especially in electric vehicles, Tesla’s inability to deliver may ultimately be its undoing.

While Tesla is disrupting this industry in many revolutionary ways it is looking for competitive advantage in what has been to date its Achilles Heel.  The company has struggled to manufacture their stunningly-designed (though not designed for manufacturability) vehicles with a high degree of quality. And yet, Tesla CEO Elon Musk believes he can also revolutionize manufacturing and create the disruptive force that leapfrogs old line automakers stuck in the dark ages of manual work. He explained in an earnings call to stockholders on February 7, 2018:

“The competitive strength of Tesla long-term is not going to be the car: It’s going to be the factory. We are going to productize the factory… The Model T wasn’t the product. It was the River Rouge . We will have a great product. But the factory is going to be the product that has the long-term sustained competitive advantage.”

Musk further explained: “The most fundamental difference is thinking about the factory really as a product, as a quite vertically integrated product.” Added Chief Technical Officer J.B. Straubel, “It's treating it as more of an engineering and a technical problem as well." Musk envisions the most automated vehicle plants in the world, where material delivery, manufacture, and assembly will be done without human intervention, and where his production lines will be far faster than the conventional manual assembly lines that he mocks: “Grandma with a walker can exceed the speed of the fastest production line.”

In a recent conversation about this topic, John Shook said that he believes Musk’s revisionist history of the River Rouge misses the mark:

“Henry Ford figured out much of this (the principles of flow) just a little over a century ago. But, that was a simple case, where achieving high speed production (very much as Elon now seeks) was relatively straightforward. The products were all simple and, more importantly, they were all the same. As soon as complexity was added (in the form of types of products and options as well as more complex technology like electronics), Henry's simple system broke down. What worked great as an initial attempt in Highland Park proved a disaster when he tried to scale it even more at the Rouge, adding complexity that the system wasn’t capable of handling. Half a century later, Toyota came along and figured out the next essential part of the equation, how to achieve the speed, but also the built-in quality, with the complexity of mixed model production.”

Tesla’s message is clear.  Manufacturing is seen as a technical engineering problem and the solution is automation, automation, and more automation.  We can imagine any of the great Toyota sensei asking:  But where are the people?  What is ironic is that almost one hundred years of management theory has observed that top-down, command and control organizations work very efficiently in a very stable environment, low on uncertainty.  When things are static and processes are stable, the most efficient form of organization is mechanistic.  On the other hand, when there is a good deal of uncertainty because of rapidly changing technology, lots of unexpected problems, and a turbulent environment, then an organic form of organization is far more effective.  Author Margaret Wheatley writes:

“Once we stop treating organizations and people as machines, and stop trying to re-engineer them, once we move into the paradigm of living systems, organizational change is not a problem. Using this new worldview, it is possible to create organizations filled with people who are capable of adapting as needed, who are alert to changes in their environment, who are able to innovate strategically.”

This conversation undoubtedly feels very familiar to folks in the lean community. We are dealing with the same clash in paradigms that has been going on at least since the early 1980s: lean management, which is thought to be a mere efficiency program, versus modern computer-integrated manufacturing.  In my view the lean paradigm has been winning this competition pretty handily, but the wolf repeatedly returns wearing new clothes.  This time in automotive it is part of a mosaic of a future vision of electric self-driving cars run by artificial intelligence that will be built in the most high-tech factories in history.  Much of the vision is being led by “Silicon Valley” computer companies that see the future of the auto industry, and ultimately all industry, as a natural evolution of the internet to assume digital control of our physical world.  For example, this is the vision of Industry 4.0. In this “new” automation paradigm there is little room for people—clumsy, error-prone people will even be pushed out of driving the products of the factory. 

Steven St. Angelo is Managing Officer and CEO of Toyota Latin America and Caribbean region. He recalls his younger days as an engineer at General Motors when CEO Roger Smith made a similar bold statement in the 1980s. Ironically, it was about the same time Smith agreed to a joint venture with Toyota that would become NUMMI — the most productive plant in North America without a lot of automation. While NUMMI prospered, Smith spent billions of dollars on a joint venture with robotics manufacturer Fanuc, purchasing Electronic Data Systems, and investing toward his vision of completely automated factories with lights turned out and no people. As St. Angelo recalls:

“He (Smith) also tried to automate out of GM’s problems. It was a disaster. I have many patents for automation, and I learned that if you can’t do a process manually… you will not be able to do it with a robot. Also, all automation works in a lab environment, however, when you add the ingredient of variation (product for example) it’s a new ball game.”

Tesla’s super-automated production line depends on hiring large numbers of bright young engineers who have not worked together, giving them a top-down vision of the desired product and process characteristics, and demanding they engineer and build it. It also depends on a good deal of purchased product subsystems and turnkey production lines from outside vendors. Speaking about Tesla’s Gigafactory for batteries, Musk called the experience to date “production hell,” but assured investors in an earnings call that help is on the way in the form of German automation companies that will deliver perfect systems that can simply be plugged in and played to perfection:

“We expect the new automated lines to arrive next month in March, and then it's already – it's been – it's working in Germany. So, that's got to be disassembled, brought over to the Gigafactory, and re-assembled and then brought into operation at the Gigafactory. It's not a question of whether it works or not. It's just a question of disassembly, transport, and reassembly.”

It is ironic that Tesla took over the factory formerly occupied by NUMMI, an icon of the Toyota Production System (TPS). In the early stages of Tesla production, Toyota sent top people to help.  Yet so much of Tesla’s vision of manufacturing is completely contrary to TPS: Spend large amounts of capital to automate everything possible. Rely on hiring many engineers to make it work rather than carefully developing talent from within. Repair in quality rather than designing and building in quality. Aim for an ultrafast assembly line instead of building to the rate of customer demand (takt). Note that the idea of people continuously improving does not seem to appear in the Tesla playbook. It seems like a vision born of the machine paradigm, not Wheatley’s living system paradigm. It is also interesting that in the gigafactories “production hell,” Elon Musk developed some appreciation of the value of people in crisis management:  "It has to some degree renewed my faith in humanity that the rapid evolution of progress and the ability of people to adapt rapidly is quite remarkable."

What Elon Musk is missing is exactly the point that has made Toyota so successful.  Toyota’s living system approach is exactly what has been missing from Musk’s mechanisitic view and needs to be at the center of his vision, not as an occasional response to a crisis.  Toyota is a learning organization with a long memory. In 1979, Toyota launched the Lexus LS400 with the most advanced automation in the company at its Tahara, Japan, plant, including robots in assembly doing jobs normally done by people. Sales were below expectations and the plant was underutilized. Toyota’s reflection was that the high capital costs were fixed and could not be adjusted to match demand.

Toyota prides itself on only building to actual demand and when demand is down the company wants the flexibility to reduce costs to remain profitable. This is possible with people. While Toyota provides long-term job security for its regular team members, it uses a variable workforce of agency personnel who can be released in a sales downturn. It also plans overtime, which can be eliminated. In the Great Recession Toyota cut management pay and in some plants limited production team members to 35 paid hours a week. And Toyota can always find useful things to do with team members not needed for production, but robots simply sit idle. Since the Tahara experience, Toyota reduced automation rather than accelerated it.

Toyota’s principles of production equipment are “simple, slim, and flexible” to work in harmony with people.  This is evident in the work of Mitsuru Kawaii , a Toyota Executive Vice President and member of the board.  Kawaii was sort of adopted by Taiichi Ohno as a production team member and rose throught the ranks to become a board member and is Toyota’s most prominent voice for TPS.  He has spent most of his career in automated factories.  He was raised on all the TPS principles of flow, built-in quality, standard and stable operations, making problems visible, and people relentlessly doing kaizen.  He began learning these principles in a mostly manual operation and then found he could continue to apply them as the plant became highly automated.   He explained to me that the foundational principles remain the same:  “Materials will be flowing while changing shape at the speed we can sell the product. All else is waste. Operators need to learn how to use the machine and the materials and their five senses to create a good part at a reasonable price. [And they need] intelligent automation to reduce as much as possible any transportation or movement that does not change the shape or form.” This means getting inside the equipment and redesigning it to eliminate waste.

Kawaii has been teaching team members the basics of TPS on manual “superskill lines” which they then apply to automated lines. One of his most impressive lines was developed to solve two problems at once.  He wanted to develop a manual line to teach the essence of TPS, and also wanted to deal with a serious problem Toyota is facing in hiring new workers.  There simply are not enough of them.  Typically as workers age they are taken off the assembly line and then retire.  Kawaii’s challenge was to develop an assembly line that can be safely staffed with senior workers, including retirees.   They created a low volume engine line with no automation and mostly no electricity.  Senior members who had retired from Toyota were rehired to develop the line with the constraint that it had to be all hand work without automation  They worked to create simple mechanisms, without electricity, to move engines in place, check them, and transfer them to other parts of the line.  The super skill line would make any fan of Rube Goldberg gadgets applaud with delight. Parts slide in and out, are raised and lowered, and moved by sliding on roller bearings. Bolts are put into slots — if one is missed a red light comes on — and operators reach up and pull a lever to bring down a tool to tighten the bolts. There is only a minimum of electricity and a minimum of physical exertion required by the operators. Yet they are building by hand a sophisticated Lexus engine out of heavy parts.

Kawaii explained, “If there is a defect at the end or something breaks down (in an automated line), you will be disassembling with your hands and replacing the parts. If you cannot do this, you cannot [be called] a high-skilled person. When you think of a high-skilled person, he has to know everything. If he is going to do a manual operation, he has to know for every part what will be the most appropriate strength to tighten the bolts for this location and that location. He needs to know everything.”  Ideas from the manual super-skill line are then brought to the automated line.  In most cases this results in simple “intelligent automation,” fitting Toyota’s vision of simple, slim, and flexible. 

Toyota is also famous for its Just-in-Time system, integrating the extended enterprise in a carefully orchestrated flow of thousands of parts to the right place at the right time.  Partnering with suppliers is also a matter of relationships and developing people.  John Shook shed further light on the importance of people in what can easily become a logistical nightmare:

“The tools required to run a great factory aren't merely math and engineering, but psychology and sociology. Social psychology and neuroscience. Organizational development and system dynamics - with "system" referring not only the technical side, which Elon and team will figure out, but also the much more complex social side. The social side is difficult in its own right - add the technical complexity of orchestrating the operational execution and timing involved in gathering and assembly thousands of parts that arrive at exactly the right place at the right time in perfect (down to the minute) precision for thousands of humans to choreograph themselves to the precise (down to the second) rhythm and you've got a social-technical challenge of epic proportions.” 

In my view Elon Musk has adopted an untenable mechanistic philosophy that will need to change if Tesla is to be successful as a mass producer of vehicles, no matter how well designed.  He will need to discover basic values that underlie operational excellence like developing people, building culture, continuous improvement, visual management, and work teams owning their processes.  In short, he will need to learn about, perhaps the hard way, lean management. Sitting back and counting your money while marveling at digital systems humming along sounds like a dream vision, but it is not reality.  Mass production is hard work.

Personally, I do not believe that digital manufacturing is the magic that will revolutionize manufacturing and suddenly make it easy to do.  I do think computerization will continue to evolve and be a central part of the future of manufacturing.  But automated factories will not run themselves. They will require even more maintenance and quick response to problems than manual systems and this will have to be done by people. Highlight problems, solve problems, at lightning speed in this complex computerized world. And even in a world of a lot of technology in the factories those who kaizen the automation, as being taught by Mr. Kawaii, will have a competitive advantage.  People will not be run out of town by smart robots anytime in my lifetime.  Perhaps when we see spectacular failures of blind automation, like the Roger Smith cautionary tale three decades ago, there will be a lean renaissance. 

This article is adapted from chapter 10 from the book in progress: Designing the Future: How Ford, Toyota, and Other World Class Organizations Use Lean Product Development to Drive Innovation and Transform their Business by James Morgan and Jeffrey Liker (LEI/McGraw-Hill, expected publication Fall 2018).

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
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Daniel Jones March 02, 2018
11 People AGREE with this comment

Congratulations - one of the best pieces on this whole story. The Tesla story will have a short shelf life and is ultimately a distraction. But the people-centric versus people-free views of the future will run and run. It has shaped the debate in Germany for the last 30 years or more. 

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Jeff Liker March 02, 2018
6 People AGREE with this reply

Thanks Dan.  I was mainly interested in using the Tesla story as a way to address the larger issue of a mechanistic versus people-centered view of the future of manufacturing.  I like many have been amazed by Tesla's sudden rise and do not want to take a position on their future success or failure.  

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kush pathak March 02, 2018
3 People AGREE with this reply

Thank you! So well written. It will be interesting to see this evolve. 

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Tracy Defoe March 02, 2018
3 People AGREE with this reply

Thanks for sharing this thoughtful article on a high-interest topic.  

For me, it seems Tesla is stuck behind what I call “The People Filter.” Many engineers and technical people I work with don’t even see or consider the people in the factory, yet so much depends on their experience and skills, and yes, social collaborative approaches to problems.  

I look forward to the book.

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Michael Ballé March 02, 2018
7 People AGREE with this comment

Thank you Jeff for this great piece, and a clear and coherent argument of the lean vs. lights-out factory concepts. 

I agree that I don't see how the fully mechanized concept of the lights-out factory can play out when you increase variety (more models), bring in at the same time product innovation and process innovation, and still don't build-in quality.

Clearly, every day friction eats fully automated for breakfast, to make a bad analogy.

However, in throwing the book at Musk I believe that we, in the lean community, are missing an important part of the puzzle - one that I think Akio Toyoda has picked up and is investing a lot in: connectivity.

Over-the-air software patches are just an amazing development. I'm the proud owner of a Toyta plug-in Prius which is a smaching machine, but I can't get a GPS upgrade that works, even by going to the garage. My hunch is that the model S over-the-air upgrades are a big story.

Should the path to full electric clear up (obstacles remain daunting) we are looking at 1/ adramatic reduction in the number of parts to be assembled (the numbers I've heard were from 30,000 parts to 3,000 parts, which seems astounding) and 2/ an ever increasing reliance on software to make the machine run.

With that in mind, the assembly process could be radically simplified. Although I believe that the ever present friction of material things makes a lights outfactoryunlikely in the extreme, I also think Musk is challenging accepted boundaries in the right direction - for all the BS and chariming of investors.

As an amazon executive pointed out to me, the non-variable, rule-based part of any job will, eventually, get softwarized and automated. Humans, however, will always be needed for the variable, judgment based part of the job (why amazon invested assively in bringing shelves to the pickers with robots, but hasn't tried as far as I know to automate picking itself).

The real question Musk is asking is: where are the variable steps in the production process. We read from his statements that he believes there are none, eventually.

Toyota, as always, is going at it the other way round, by using superskilled humans to clean the window and figure out where the variability is and how to reduce it through skill and ingenuity - in order to produce a different kind of automation, such as the karakuri, the raku-raku et al.

The end points might not be so dissimilar as all that... but Toyota clearly has a safer way to get there - but that makes less headlines as well.

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Jeffrey Liker March 02, 2018
1 Person AGREES with this reply

The blog was excerted from out new book on product development which goes into detail about Toyota's product of the future strategy.  In this blog I was focusing on the vision of manufacturing where people are central vs where they are not.  It was convenient that Elon Musk believes he can outdo the traditional manufacturing powers by productizing the factory and looking at it as purely a technical design problem--the opposite all of us in the lean community have been saying.  I see a new threat to whatever we have accomplished in making people central coming from the new belief that automation will make things better.  I agree that electric cars will greatly simplify the manufacturing process--mainly in the powertrain.  But the powertrain mostly comes to the line manufactured and then is inserted at one station, then there is dressing it but not a huge deal.  The assembly process is still quite complex, particularly with mixed model production.  And I have not seen other automakers with the equipment uptime of Toyota (often up to 97% for robots) as they do not devote the effort into continually improving the technology.

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Luke March 02, 2018

What a dissappointing and uninformed article. 

Such as shame, I loved your book (The Machine the changed the world) and it got me into the Auto industry. 

Whats almost ironic is that it was a change agent at the time and now you are such a proponent against change, continuous improvement of processes and fundamentals based engineering. Rather we should all copy Toyota who in recent times have lost their lean edge and moral compass. 

I would have hoped that you would have been just as keen to explore the next evolution of manufacturing, ironically coming from Nummi which once housed similar steps, but it seems you are stuck in 1985. 

It’s so hard when a hero and mentor loses their way. 

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Jon Miller March 02, 2018
4 People AGREE with this reply

I will take a contrary position to Dr. Liker.

What if the Tesla production system is powered by fewer people but enabled by AI engaged in IoT sensing and detection, big data-based prediction, and neural net deep learning loops, improving designs and processes, much faster than humans learning in the current way?

What if the "production hell" that seems so backward to TPS proponents is simply a phase of learning on their way to automation levels and styles unimaginable to the TPS classicist? 

What if the Tesla part count continues to go down? The Tesla has something like 18 moving parts, compared to 1,500 for a gas vehicle. It is the difference between building a controlled explosion on wheels and a laptop on wheels. The supply chain, the in-out plant logistics, the pull system, the flow, can all be radically simplifed.

Simplify, then automate, as the Lean mantra goes.

Since the dawn of humanity, we have relentlessly pursued the application of technology to reduce human effort. It is doubtful that the current state of TPS is the apex of this trend, or the optimal human-to-automation ratio.

Tesla is not there yet. But if they manage to stay out of their own way, technological advances can get them beyond classic TPS.

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Jeffrey Liker March 02, 2018
2 People AGREE with this reply

Jon, Very well stated.  That is exactly the Tesla paradigm.  Wish I had stated it so clearly.  I put versus in because I really do think that the view you expressed of the future of automotive and manufacturing is 180 degrees different from what we have called lean manufacturing based on the Toyota model.  It is hard for me to imagine a case where the Industry 4.0 vision turns out to be true and products are so simple and computers with AI are so smart that there is a reason for most of what we teach in lean thinking.  As you know developing people to be disciplined, creative. aligned, scientifc thinkers is really hard work.  Building culture is excrutiating.  If that is not necessary lets not bother.  Why make it hard on ourseives?  What I do believe is that we won't know whether the technology-driven model or the sociotechnical model will win over the next 30 years and I will be on the sidelines watching by then.  In the meantime I believe in what I write and teach, as I suspect most people believe what they write and preach.  But I have been surprised before.

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Glenn Mercer March 21, 2018
1 Person AGREES with this reply

If we just look at the engine/motor, a Tesla motor has less than 5 moving parts, and a modern I4 ICE has maybe 200.

If we add in the transmission, I think there is a similar ratio.

Then once we leave the powertrain, the (moving) parts count is very similar.  For both EV and ICE:

- windows move, window lift motors and mechanisms move

- in suspensions, springs, shocks, ball joints, links... the same

- in interiors, seats move, seat motors, HVAC blowers and controls and vents...

- in steering, ditto

- in brakes, an EV COULD have fewer moving parts, but with the hydraulic backup (you don't want the brakes to fail if the power goes out): similar

So... it all depends on your optic.  In the motor, the case is clear; in powertrain, ditto; in total car moving parts count, not so clear.  

 

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jeff liker March 02, 2018
5 People AGREE with this reply

I did not write The Machine that Changed the World, though I am flattered that you think so.  Great book!  The main point of the lean paradigm is continually improving and understanding the total system of people, processes and technology.  People and their creativity are at the center.  I see that continuing to evolve at Toyota every time I visit and tried to share some of what I see with the story about the super skill line which is quite a breakthrough in thinking about how to develop people to develop superior automated systerms.  I have not seen in any of my visits to Toyota that they stopped learning when the "lean paradigm" was named in the 1980s.  They are a remarkably forward thinking learning organization.  I leave on Cloud 9 every time I visit Japan and see their levels of innovation. What I learn from Toyota and try to teach is not there solutions to their problems--the technical details of their manufacturing systems--but the underlying thinking about how to build a high performance organization and keep it fresh.  Other companies have to find their own way and learn how to learn.

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JEDI March 08, 2018

Luke, you don't understand. Use the force (first thoroughly gather the relevant facts based on understanding the real thing, the actual place, the actual problem).  

USE THE FORCE! LUKE

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Bob Emiliani March 03, 2018

What strikes me about this article is the great misunderstanding (or non-understanding) of the mindset and motivations of wealthy industrialists. Over the last 200-plus years, there is a persistent disdain for workers that continuously propels wealthy industrialists towards technology-driven solutions in preference to socio-technical solutions. If Musk fails, many others will carry on, as there is a very long lineup of wealthy industrialists to fill the void. As things do tend to go in cycles (witness the renaissance of craftwork and small farming), there will eventually be a Lean renaissance once people tire of technology-driven solutions.

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jeffrey Liker March 03, 2018
1 Person AGREES with this reply

Bob,

I agree.  Elon Musk in many ways seems to me like an outlier. My coauthor, Jim Morgan, was almost hired by Apple and he was very impressed by how seriously they are taking manufacturing excellence.  They outsource almost everything but they discovered the need to invest heavily in manufacturing expertise to be leaders and have learned a lot about lean thinking.  However, I do see the seductive powers of the new vision of completely automated manufacturing bringing us back to the paradigm that people and their creativity don't matter.  That is what drove me to write this piece.  In the book chapter this blog is based on the main focus is linking product development to business strategy based on long term thinking, but learning through rapid PDCA cycles.

Jeff

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Cyrille Tichy March 04, 2018

Many thanks Jeff Like for your EXCEPTIONAL article about your vision of Lean & Toyota's experience and Tesla (Elon Musk) orientations about fully automated plants.
The danger here for me is that we do not compare apple with apple. Yes Automotive world will change slower than Musk hope but it will change. People rent more and more their cars, leasing is coming a normal way, car's power train will change dramatically for electric solutions but not only and last but not least people and not only young generation do not accept the fact that it's not possible to refresh FOR FREE the GPS of a car !
Considering the transportation is less and less about cars only. Knowing that many fly ticket are cheaper than parking at the airport !!! or going in many cities with your own car become a nightmare... For sure "global transportation" is moving, and car usage will naturally change, so cars will change. A new "ESSENTIAL CAR" like e-Ford T or e-"Volwagen" in his initial meaning or e-Citroen 2CV will be accepted for 70% and more purcentage of cars's utilisation.
As Michael Ballé comment, if we think of a 3000 parts cars versus 30000 as we produce today, how will become it's manufacturing ?
Without asking Darwin, do you think that Musk's vision has no sense at all ?
Cyrille TICHY

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Jeffrey Liker March 06, 2018

I agree.  I think that is why Toyota invested about $1.5 billion in the Toyota Research Institute in Silicone Valley and Boston and now announced another $3.8 billion for Toyota Research Institute--Advanced Engineering.  The focus is on software primarily for self driving cars.  This involves huge databases and many times the lines of code that are currently in an automobile.  They have taken the position that they do not want to contract out the software side to a California company and want that capability inhouse so they plan to compete with Alphabet and Apple and Google.  Will be interesting to watch.  One interesting thing as that they plan on applying TPS concepts to software development because of the sheer quantity of code that has to be produced.

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Abdo Kassisse March 04, 2018

Organization success is based on three main pillars: resources (people and tangible techno investments), clarified and controled methods (processes) and values (that builds a culture - capability of judgement and creativity).

Huge amount of resources increases your chances to deliver good products specially when they are supportted by written processes that create technical competence. 

But sustainability depends on a strong culture that is able to adapt to disruptive innovattion. People is the most strengh value capable to buid a strong culture to afford any business environment changes.

People centric management is still the main answer.

Abdo Kassisse

General Manager - Autoparts Company in South America

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Prateek March 05, 2018

Fantastic article and some real nuggets on the essence of LEAN are contained in here. 

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Steve Bell March 05, 2018
1 Person AGREES with this reply

Jeff,

Nicely done!  Digitization is an adaptive human-digital learning ecosystem. While digital capability—AI, IoT, and big data analytics to name a few—does enable rapid learning, often faster and more accurately than human capability alone, digital capability is necessary, but not sufficient. Value creation depends very much on human capabilities, among them creativity, vision, purpose, and the ability to act on learning in ways we have not yet incorporated into the digital realm.

The Fourth Industrial Revolution, just like the first three industrial revolutions (fueled by hydro-power, electricity, and computers) will have broad social and economic effects and unintended consequences that we simply cannot foresee. Today, ubiquitous data and “smart” machines are replacing humans in many knowledge-work applications. However, the data scientists and automation experts have learned that a person performing complex and variable operations, augmented by a computer, outperforms a computer alone – whether that’s playing chess or guiding robotic behaviors. Computers will continue to encroach on this domain over time, but where the boundaries will emerge, no one knows. This is something we have to learn, while ensuring that our humanity is not lost along the way.

It will be interesting to watch how a digital leader like Elon Musk learns and adapts the assembly line, and how this learning ultimately shapes his business model. Just as Tesla and other digital-native enterprises can learn from masters like Toyota and others, the Lean community can learn much from these digital leaders. I have been postulating for years that the dichotomy of “the business” and “IT/technology” must end. We are all the business, and we can, and must, learn together.

Steve Bell

LEI Faculty and Shingo Prize Winning author of Lean IT, Run Grow Transform, Lean Enterprise Systems

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Jeffrey Liker March 06, 2018

I agree Steve.  One of the interesting things that Toyota did when they created the Toyota Research Institute for software development (digital world) was to put in charge of it as CEO Gill Pratt who at DARPA funded a lot of the cutting edge research on ariticial intelligence and expert systems and robotics.  He hired James Kuffner who was at Carnegie Melon and a robotics expert who is now going to head the Tokyo advanced development company.  I asked the head of the Toyota Technical Center how they were socializing those people into the Toyota Way and he said they are not because they want the institute to evolve in its own way.  The software development task was different and Toyota did not want to impose their operating philosophy on it.  Now I hear that they will use TPS methods to improve the generation of code in the new Toyota Research Institute--Advanced Development so I suspect after their study period they feel more comfortable applying some of the strengths of their culture to software development. It is very, very early and it will be interesting how it plays out.

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Mark R Graban March 06, 2018

Hi Jeff - thanks for your thoughts.

Have had the chance to visit the Tesla plant, either on a public tour or with some insider's access? I'm guessing Elon isn't reach out to make those sorts of invites because he seems interested in leapfrogging Toyota instead of learning about their approach. That's my impression from reading his words and talking to somebody who works there in the Fremont plant.

I mention this not to brag, but I had a private 3-hour walkthrough of the plant last summer and, while I'm bound by an NDA I signed, I think it's safe to say that Telsa is not blindly following any sort of TPS model (or are they follow some standard practices you'd see in any older automaker).

So, I have information that I can't really write about.

I'm curious if Jeff has been there and also can't really say or if he's just reading about them. 

I mean this as a question of inquiry, not a criticism if you haven't been able to get inside the walls of the plant, Jeff. 

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Mark R Graban March 06, 2018

I meant "Have you had the chance to visit..." Jeff?

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Jeffrey Liker March 06, 2018

Mark,  I have not had an opportunity or tried to get one.  I have talked to quite a few people who have spent time there including Toyota veterans.  And I had a student who got a job there as a manufacturing engineer.  But I have not seen it first hand.  I did not suggest they are following the TPS model or traditional approach.  But my article was reacting literally to what Elon Musk said about his vision for a production system that leapfrogs all others,  and quoting him, rather than reacting to details of the factory as it is running today.  The paradigm he is professing is very much a technical view of the factory as a pure engineering problem.  I can't say that others actually running it now or in the future have that point of view.  I can say he is an influential guy so his paradigm can have influence on the way others think about the future factory.  That is more my concern than how Tesla's factory is set up or operating. Now if they have found a way to dramatically improve manufacturing with a whole new paradigm that will blow up the industry I would like to know about it.  But if that was true they would not have so many people there and they would actually be building some volume of Model 3s for sale.

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Sanjeev Baitmangalkar March 06, 2018

Jeff,

Can't expect anything less than a great thoughtful publication from you. Thank you for discussing various facets here ..

TPS is centered around people, use AI to remove people and there is nothing to discuss one over the other. Lean is a form of Efficiency Innovation where we do more with less. AI is creating products more like Sustaining Innovation - replacative products. Sustaining Innovation does not add to growth of jobs and economy as it has replacing ability and not creating ability (wrt to jobs & economy).

Even if Musk builds a fully automatic plant that produces cars, I will not compare it to Lean for it has so many aspects missing or in difference. Yes, investors have fallen in love with forms of efficiency innovation and sustaining innovation where returns are faster and more rewarding than or as compared to Growth Creating Innovations that we saw through the nineteen hundreds.

AI, Machine Learning and IoT have raised another discussion on the future of jobs. Although one view is that new technologies will create new jobs, the other is what will happen to those displaced from current jobs? For the skill gap widens and retraining may remain in theory. Todays college grads are not found suitable for these hightech jobs (looking at vacancies), let alone those displaced from autocomp companies or cab drivers!

So, if you take people out of the equation it is not lean but automation. What is there to discuss about automation then except cost of retooling! 

We may have forgotten that after the NMTBA Chicago 1982 where Mazak displayed an unmanned factory the whole world went ga-ga after automation. Especially Europe, as they thought it was their gateway to longer weekends and shorter working weeks! As customers drove demand for product changes, they realised the cost of retooling was very high and back tracked to single standing flexible machines. We will go through this cycle of learning in the early stages of AI, before we can understand the next normal - and that will not be without lean thinking.

Looking forward to this next book you talk about.

Best

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Jeffrey Liker March 06, 2018
1 Person AGREES with this reply

Sanjeev,

Great points!  Just read an article about massive numbers of people who spend all their time correcting AI errors, which then feeds back to improve the AI.  I have no doubt that all of the technologies being hyped today as the future of manufacturing are going to play an important role in the future of manufacturing.  I just do not think the process is going to go smoothly and linearly as many seem to assume.  What Toyota talks a lot about is harmony between people and technology.  So in the example of Mr. Kawaii and his super skill engine line that I wrote about, they are making very low volumes and the high volumes are on mostly automated lines with some people.  The point of the superskill line:  1)  Training people in the fundamentals of the manufacturing process so they understand and can improve what happens on the automated line, and 2) training people in kaizen on a simpler to understand process so they can bring kaizen, and some of the ideas they develop, to the automated line. The result is a true sociotechnical system, but they are not going back to 100% manual.  I suspect Toyota is one of the world's leaders in using robots in manufacturing. Their very large production engineering groups is inventing the manufacturing systems of the future as we speak.  I have not seen internal production engineering capability like that in another automotive company, but it is mostly hidden from public view.

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Glen Schmidt March 08, 2018
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Isn't is just a matter of time frame? I've been to Toyota - they too have areas with lots of robots and automation. Yes, GM (Roger Smith) was way too optimistic about the speed at which they could automate. Yes, Elon Mush is similarly brash. Yes, I'm a huge fan of lean, but I think the (slow but steady, if you want to call it that) march toward higher levels of automation will likely continue unabated - even at Toyota. 

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Owen Berkeley-Hill March 08, 2018

I remember the book, Comeback, which described the Hamtramck fiasco. Judge for yourself if this is a re-run of Roger Smith's manic obsession with robots:

https://books.google.com/books/about/Comeback.html?id=Q5QfVZuQs9UC

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Jeffrey Liker March 12, 2018
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Often people think of Toyota and they think of an assembly line with people doing repetitive manual work and pulling andon chords.  This is still true with the exception of a small number of jobs like putting sealer on windshields.   But go further back in the process, particularly welding and paint and there are robots everywhere.  Then go into engine and transmission and their are computer-numerically controlled machining centers everywhere.  That has been true as long as I have visited Toyota for over 30 years.  What is different?  1. Toyota is obsessed with maintenance.  Since the equipment is in series and they have very little inventory they aim for the equipment running as it should be about 97% of the time compared to most companies that think 75 or 80% is good.  And they will get 10 or more years beyond the recommended life of the equipment because of maintenance.  2.  They are continually improving the equipment inhouse while others wait for vendors to do periodic checkups.  3.  They design a lot of the equipment inhouse through production engineers who also know TPS.  4.  They aim for simple, slim and flexible--simplest automation that works with as little waste as possible.  5.  They want some percent manual jobs because they want flexibility when sales go up and down and assembly will remain mostly manual for many years to come.  Toyota's whole system, even when fully automated, depends heavily on people who are respected, invested in, and continually improving processes.  

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Glenn Mercer March 21, 2018

I guess if we imagine a long enough time frame... 20 years? 50? Toyota will be more automated.  But let's divide the plant up.  In stamping, welding, and painting automation is already sky-high.  A plant decides on automation levels in these shops based mostly on local labor cost.  if you're building a car in Thailand, why install an expensive robot when labor is $5 a day or whatever?

So we are really arguing about final assembly/trim.  In a modern car this is about 8 hours of labor.  At say $75/hour fully loaded that is about $600.  Average car transaction price in the USA is about $35,000.  Assume you can automate an order of magnitude more than today (currently trim is at about 5% automation: gas tank fill, windshield adhesive application and insertion, IP carrier, etc.), you get to 50% and save $300 in return for $X million of robotic investment?  So, while MAYBE we can automate trim (I am not sure we can), is it worth it?

And note that Toyota itself has said its automation level in final assembly has not budged in about 20 years.  So we are yet to see a trendline up.  When we do look at advanced trim automation concepts (check out Julie Shah at MIT robotics), it is all about collaborative automation: exotic exoskeletons and lifts to assist the human.  Will this reduce headcount in trim?  Yup, but it seems to be focused on reducing the "dumb" labor (walking 10 feet over and over again to go get a part), leaving the human to still do the "smart" stuff (like move the floormat half an inch when it shifted at the last station, to insert a fastener.)

Not sure what my point is (grin) other than to say it's final assembly we are talking about, automation economics may not pay there, and new automation seems more human-centered than human-displacing.

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Tim Bennett March 19, 2018
2 People AGREE with this comment

Excellent observation.  As a former Toyota Team Member (TMMTX) I 100% agree with your article.  I had the pleasure of taking you and your students on a tour through our plant several years ago.  Your insight to Tesla is spot on.  I say this because I passed up a position in the Tesla gigafactory based on most of the reasons you presented.  I truly believe Elon Musk does not want to be in the auto manufacturing business.  The Tesla is just a base to build his automation platform for the world.  If his priority was about producing mass electric vehicles he would have opened a second plant by now.  The established auto industry will take over the mass production of electric vehicles.  Case in point the Toyota ramp up of electric vehicles by 2025.

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Stephen Schutz March 19, 2018

This is the best analysis of the Tesla production reality that I’ve read. Thank you. 

Maybe a typo but I’m gritting my teeth reading that the Lexus LS 400 launched in 1979. It was 1989. Anybody who knows Toyota knows this without looking it up. Please change that. 

I would add that Volkswagen took Toyota’s lean manufacturing revolution one step forward by teaming Toyota’s amazing manufacturing process with the product genius of Ferdinand Piech, who was able to decide what customers would want—not just buy but WANT—much as Steve Jobs did at Apple. But I know that bringing desirable/not desirable into this discussion is not relevant to to your topic. 

Anyway thank you again. I can’t wait to read your book!

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Robert Nordmark March 24, 2018

I could get use of some explanation how to calculate to defend investments. I think of the many equipment or tool types that companies invest in but that could have a very low uptime figure since they are not used at all time in the production. Take for instance in the food production the very expensive machines to harvest, they are only used a small portion of the full lead time of production. If anyone could help to explain this or another better example how to have customer focus or value based thinking for cost of investments that are chosen or if certain bransches just cannot compete with ease in flexibility for varied sales demands?

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Glen Schmidt March 25, 2018
1 Person AGREES with this reply

I worked with a facility who asked that same question regarding acquisition of a (second) multi-million dollar machine. We turned the question around, and asked "how can we make better use of the first machine so that we don't need the second?" When we actually measured it, we found the utilization of the first machine to be 60%. Using lean op's principles the output could be doubled without acquiring the second. Of course that isn't always possible, but there may be other options - if you buy the machine can you do custom work (even for a competitor) to better utilize it? Conversely, can you outsource the work to someone who spreads the cost over larger volume? (Relative to your food production example, there are probably custom harvesters that can be hired.) etc. Of course you may need to just buy the machine if there are no other options - first calculate the ROI though.

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Robert Nordmark March 25, 2018

Thanks. I started to think about how many wastes there are lean wise for the cause that when human has to do a work one wants to save time. Maybe especially in private life, like the car and the laundry machine and the grass remover who most of time is on idle. There has to be other values than the money in the calculations. Also for inventory we in our household has a lot of clothes, toys, movies and tools but can only use one at a time. It´s interesting to compare and how to find the optional level of investments. I think for the farm it is a very special case not easy to do lean because of the growth process during each year. In Lean Accounting do you really use the ROI as the decision model? /Robert from Sweden

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Chetan Prabhu Desai May 05, 2018

Excellent write up Jeffrey, I agree with the central theme that it is people who drive the organization not systems. As organizations grow, we need to increasingly go from people dependency to system dependency. But people need to remain at the helm as drivers and using the system as tools.

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Ernesto Jorge May 23, 2018

What an excellent article, depicting the present and envisioning the future of manufacturing.

Even the comments are enriching, although they are not unanimous (or perhaps they are enriching precisely due to controversy!).

Congratulations, Prof. Liker. Another great piece of reading. Looking forward to the new book!

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