Well, the first reason is of course standard work, which requires that every operation is standardized as to task, sequence, time, and work in process inventory. The second reason is Zero Quality Control, which makes successive quality checks, self inspection, and source inspection an integral part of the standard work sequence. In effect, workers perform real time audits of every critical condition that might result in deviating from the cost or quality targets for the value stream, process, or operation in question. Hence, accountants are purely non-value adding, except for reporting to external agencies such as the IRS or the SEC (Securities and Exchange Commission).
While standard work and adherence to standard work are two miracles in and of themselves, Toyota has gone a step--a giant step--further. And this is where the A3 comes in.
The A3, which is on the one hand a project plan and on the other hand a team charter or contract between the manager and his/her organization, is the primary mechanism by which the standard work within the manager's span of control is adjusted. Here is how the A3 process works:
Every year Toyota develops a 12-month strategic plan in which managers throughout the organization draft A3s through which each manager is assigned specific cost and/or revenue improvement targets for the year. Each manager represents a node or "cell" in a network of relationships that defines the organization. Furthermore, a lean organization is defined as nothing more or less than a collection or network of such cells.
So far, there is nothing remarkable in this. The insight occurs when one realizes that each cell in the system is, quite literally, a lean production cell (whether for the "production" of products or of services). Moreover, each cell is governed by standard work.
Standard work is defined simply enough as a standardized series or sequence of standard tasks, each task performed according to a standard time, and supported by a standardized amount of work in process inventory.
Note that this is true at any level of aggregation. In a lean enterprise, the notion of standard work will apply to the simplest aggregations of tasks, sequence, time, and WIP (known as "operations") as well as to the most complex aggregations (known as "value streams") and to everything in between (known generally as "processes").
Whether focused on specific operations, grand value streams, or everyday processes, each manager's A3 describes generally or specifically how the standard work within that manager's span of control will be adjusted to improve process quality, process lead time (or delivery capability), or unit cost (which can be predicted based upon improvements in quality and lead time).
This deserves further reflection, because by definition (at least as defined by Toyota) the unit cost of a product or service must depend upon one or more of the four elements of standard work.
- Quality depends upon the tasks we perform correctly (or not;
- Quality also depends upon the sequence in which we perform these tasks;
- Cost depends upon quality (see 1 and 2 above), but also upon the time it takes to execute tasks and their sequences (because this determines the number of people, space, heat, light, and other material and information services required):
- Cost also depends upon the volumes of material and information consumed as well as the amount of material and information required (i.e., the work in process or WIP) to sustain a given level of production.
Meanwhile, the A3 and the radically decentralized A3 process address one or more of the four elements of standard work.
Furthermore, the process of strategy management, aka hoshin kanri, is defined completely in terms of the A3 process.
So, at a stroke, Toyota has dispensed with accountants not only on the shop floor (where front line employees conduct real-time audits), but also in strategic planning, and, for the matter, in new product development.
July 19, 2009