10. Jun. 2014

Extending Process Innovation Across an Industry

by Jon Miller

Sometimes innovation is so obvious, after the fact, it makes us wonder "what took us so long?"

There was an article on the front page of the June , 2014 Nihon Keizai Shimbun titled 14 Automotive Companies including Toyota Unify: Costs to be Halved through Common Parts Specifications. All 14 Japanese automotive and motorcycle companies have agreed to share or create common specifications parts and materials.

The purpose is to drastically lower development and production costs. By working together, these companies will reduce redundant investment and improve competitiveness of Japanese vehicles. They will start by consolidating to common raw material metals, plastics and semiconductors, and sharing development of technologies for the introduction of self-driving cars by the year 2020. The article reports that an approximately 5% cost reduction has been achieved in purchased parts cost due to the standardization of parts and reduction of part numbers across the auto industry in Japan. This is not unique to Japan, in fact Daimler, Volkswagen and Bosch have already begun to standardized parts across development, production and procurement.

Bravo, I say to these 14, for catching up to the cutting edge of the 18th century. Although interchangeable parts were introduced and forgotten by militaries dating back for at least two millennia, standard parts that could be fit to any unit on an assembly line have been a fixture of manufacturing for a little over two centuries. At the level of individual brands, companies achieved interchangeable parts long ago. Automotive mass production was born in 1913 with Henry Ford's work. One hundred years later, we're just managing to extend the process innovation of interchangeable parts beyond the single corporation or multi-corporate supply chain to an entire industry. Across differing industries and sectors, there is barely a hint of this type of sharing yet.

How long do we have to wait for other process innovations to expand across entire industry sectors? Entire economies? The world?

Why do we fail to adopt process innovations for decades? Because these old ideas have already "been done” or tried, and can’t possibly be an innovation today? Because of false economies of scale that bind us to existing designs, patterns and tools? Because having a different design of invisible widget from your competitor gives a sense of advantage? Because creating new habits is difficult for adult humans?

One illustration of why we don't adopt innovations may seem comical. In late medieval Japan, human transport wasn not on a wheeled wagon but in a carriage carried ont he shoulders of 4 men. The reason for this, some have theorized, is not because the wheel was unknown but because labor was so abundant and cheap in that period. We have seen similar phenomena in how people are utilized in factories and service businesses within lowest labor cost countries. The technology or process innovation may be available, but there is no urgent need to adopt it, or to realize the savings.

KAIZEN™ and its mature, systematic implementation through everyone in an organization is at least a half century old, if we trace it to the Toyota Production System.

How many more years will it take for the KAIZEN™ method of management to be adopted across your industry?

How many different decades-old or even centuries-old innovations are you ignoring?

What is your justification for not adopting these and for not realizing the savings today?

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