Reflections on Cost, Productivity, Value, Waste & Quality;Part 1 Value - the Prime Focus for Improvement

There would appear to be general agreement that much of the current interest in waste and ‘lean’ is traceable back, in one way or another, to the Toyota Production System (TPS). In “The Toyota Way” (McGraw Hill ISBN 0-07-139231-9), on page 7 author Jeffrey Liker, introducing the TPS, quotes Taichi Ohno (the person credited as the originator of the TPS) as follows:

“All we are doing is looking at the time line from the moment the customer gives us an order to the point when we collect the cash. And we are reducing the time line by reducing the non-value-added wastes.”

In his November 2009 Quality World article ‘The Unnatural Environment”, Tom Johnson offers some profound insight into the focus of the TPS:

“So, if Toyota’s operations yield low costs and little waste, it is not because Toyota relentlessly strives to subtract parts. Instead, it is because the company’s constant focus on improving relationships among parts produces features such as direct, short connections & simple, unambiguous pathways without workarounds.”

In other words, the focus, or starting point if you like, of Toyota’s efforts is VALUE

not waste (aka cost). Waste (cost) reduction is a CONSEQUENCE of this focus on VALUE. This is congruent with Deming’s Chain Reaction (where ‘Improve Quality of Product and Service’ is synonymous with ‘Improve the added value for the customer’) – not a surprising fact given that Toyota ascribe much of their practice & success to the teachings of Dr Deming.

This highlights a subtle but very profound issue – there is a world of difference between a focus on ‘cost reduction’ (were most current efforts generally appear to start) & a focus on ‘adding value’.

In his book “Fourth Generation Management” (Mc-Graw-Hill Inc ISBN 0-07-03715-7) Brian Joiner shines further light on this issue. On page 23 he writes:

“What if we try to enter the Deming Chain Reaction at “Decrease Costs”? Or at “Return on investment?” Many companies have taken this route ... but it is doomed to failure. By starting at “Decrease Costs” instead of “Improve Quality”, they don’t eliminate the causes of the cost. One cost cutting drive therefore leads to further problems, which leads to another cost cutting drive. The situation spirals downwards.”

By looking at our own processes & systems with a focus on VALUE (as defined by the end customer) we are in effect ‘stepping into their shoes’ – a very good place to be since it is they who use (or not) our product & service!

In part 2 we will reflect a little more on the Deming Chain Reaction