Why was Taiichi Ohno so interested in getting material and information to flow, and why is it still important to do so today?
Achieving material and information flow would allow Toyota to more closely synchronize supply with customer demand, in addition to the quality and lead-time reduction benefits.
Ohno-san was also concerned about how overproduction resulted in saturating the market with vehicles and which would reduce profits. This, in turn, would lead to price wars, further reducing profits.
So while the connection between Ohno, flow, and cost reduction (via waste elimination) is readily apparent to most people, he was also very concerned about profits in terms of assuring that the company could survive coming out of the wreckage of World War II — as well as having to compete against other auto companies in buyers’ markets for vehicles
Toyota needed to produce profits for investing money in the capital intensive growing automobile business. The same needs apply to just about any business that produces a physical product.
Unfortunately, most people do not get the connection between overproduction, buyers’ market, profits, and kaizen. Nor do they get that flow is the lowest total cost way to produce. These are important relationship that many more business leaders should be aware of.
So what should you do? Focus on creating flow!
For more details, please see “Taiichi Ohno the Businessman” and learn more about kaizen. And don’t forget to read these books:
