A LEADER’S STUDY GUIDE TO

The Gold Mine

The Gold Mine: a novel of lean turnaround, by Freddy and Michael

Ballé, is an attempt to capture the human challenges facing leaders in
a lean transformation. The company in this story is fortunate to work
with a sensei. A true sensei (taken from the Japanese for teacher, or in
this case master) does more than simply teach. He or she makes sure
that lean leaders and team members stay on the straight and narrow
path of lean outcomes, and avoid politics, rationalizations, or other
human obstacles. Above all, a sensei helps generate the continuing
lean discussion at the heart of continuous improvement. Indeed, this
is why The Gold Mine was written as a novel: it highlights the nature
of the human interaction beyond the cold dry facts of lean principles
and tools. Learning lean has far more to do with emotion and behavior
than simple cognition.
This study guide is designed to help lean practitioners who do not
have access to a lean sensei. It seeks to generate collective reflection, or
in lean terms, hansei. Author Jeffrey Liker says hansei “is not simply a
philosophical belief system at Toyota, but a practical tool for
improvement.” The practice of hansei can help you confront your
experiences with the stories told in the book so as to deepen your

1
understanding. This process should help you to develop the critical
insight to see a problem and then apply lean tools as a solution. As easy
as this may sound, many people try to apply the tools without doing
the upfront thinking first.
As you discuss the principles of lean that are uncovered in The
Gold Mine, keep a few points in mind:
Lean is a system. Lean is far more than a toolbox of techniques. It’s
a system in which each tool is linked to all others according to
fundamental principles. One of the key roles of a sensei is to make sure
practitioners don’t get so enamored with their favorite tool that they
forget to keep their bearings on both the purpose of the tools (improve
customer satisfaction by reducing waste), and the links with all the
other tools (how often do you hear of successful tool changeover
reduction without reduction of batch size?).
Lean is a practice, not just a philosophy. Learning only occurs by
doing, and lean happens at the kaizen focal point, when something in
the system is changed to reduce waste. The senseis constantly reinforce
this practical blend: learn to see, take action, compare results, reflect,
and take the next required steps. It is part of their job to be impatient
with talk and concepts, with over-cautious plans, and to constantly
remind practitioners of genchi genbutsu: go and see for yourself, and
then, just do it. This aspect of the sensei’s teaching is best conveyed by
stories and vignettes in the lean tradition, which form the underlying
basis for The Gold Mine. Every situation in the book is based on a
sensei anecdote or story taken from the oral tradition of lean.
Lean is fundamentally about knowledge gained from rigorous problem-
solving. Indeed, the sensei’s role is to push the lean practitioner not to
be satisfied with the first answer that comes to mind, but always to
explore the question further, experiment, and ultimately learn, so as to
continuously improve systems and operations.
So please put The Gold Mine to work. This study guide is designed
to help working groups to explore and apply lean principles, regardless
of where you may currently be on your own lean journey. This guide

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presents a summary and the key challenges in each of the book’s
chapters. The discussion points and resources that follow are selected
to support further team discussion and learning. At the end of the
guide you will find a lexicon of relevant lean terms. The Ballés
recommend that you read one chapter a week, and meet to discuss its
principles and to explore the key questions. Keep in mind that no one
company will find an exact “fit” in terms of industry, or situation, or
level of mastery: the point is to learn by reflecting on the experience
shared in this story.
The Ballés’ experience with numerous lean turnarounds (both
sustained and failed) revealed to them that successful lean managers
get obsessed with lean. They continually talk about lean, they explain
everyday occurrences in terms of muda, flow, and takt; and they spend
far more time on the shop floor driving lean than they do dealing with
corporate politics. While this guide can never substitute for such
gemba learning, it can help you take the next step forward on your
path to perfection.

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4
 Chapter One

PROFIT IS KING, BUT CASH RULES

CHAPTER SUMMARY

Phil Jenkinson is a young entrepreneur with a struggling business.

Despite healthy products, his company faces a serious cash crisis. And
so he meets his sensei, Bob Woods. Bob is a retired automotive
executive who has led many successfully automotive supplier
turnarounds, yet has turned his back on industry to return to his first
love of boats and sailing. Bob is brought back into the lean turnaround
game by his son, Mike, who wants nothing to do with industry, but as
Phil’s best friend is convinced that his father’s know-how and
experience can help Phil save his company. Like many senseis, Bob
initially rejects the notion that he should get involved. Eventually,
however, he listens to Phil explain his problems, which show up as
insufficient productivity and high inventory despite growing sales, all
of which are now conspiring to create a cash crisis that is pushing the
company to the brink of bankruptcy. Phil laments that his company is
close to defaulting on its payments to suppliers, and can’t pay back the
high interest the banks are charging for the debts Phil and his partner
guaranteed when they bought the ailing company.
The underlying challenge in this chapter is to understand the true
nature of the crisis. In this case, it’s neither a problem of sluggish sales,
nor Phil’s diagnosis of low profitability (although there is some of
that). The primary culprit is poor cash flow due to low inventory turns
and high cost of goods sold. The company has extremely poor output.
If it could simply sell more products (and they do have a backlog of
orders) without increasing overhead or labor cost, it could postpone
the immediate risk of collapse and begin to turn around its prospects.

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 DISCUSSION POINTS

Before moving into the details of lean, it is important to have an

overall grasp of the business challenge you’re facing. Companies often
treat a fleeting symptom, such as defects in one product or challenges
training employees in a new policy, as the primary problem when in
fact their core challenge lies deeper. So at the outset of any serious lean
initiative, the participants must develop a shared understanding of
the key challenge facing them. So ask yourself, as a fundamental
beginning point for your lean journey:

What is your fundamental business challenge?

RESOURCE

Ohno, Taiichi. 1988. The Toyota Production System: Beyond Large-

Scale Production. Portland, OR: Productivity Press.
After retiring from Toyota, lean pioneer Ohno wrote this
appealing series of essays that give a high-level explication of Toyota’s
system. Don’t expect a set of actions to put into practice on Monday
morning from this book—yet Ohno provides fascinating insights into
such topics as how Toyota developed the system in response to its
post-World War II resources and abilities, and what it consciously
adapted from Henry Ford. While many of the “Ohno stories” that Bob
Woods tells may be apocryphal, they are often told and retold in the
lean community for teaching purposes. This delightful book clarifies
many core TPS concepts, and gives an insight into Ohno’s character
and outlook.
By providing a vivid history of TPS, Ohno explains the particular
context in which it evolved, which is another way of explaining the
specific problem the system was designed to address:

6
 Needs and opportunities are always there. We just have to drive ourselves
to find the practical ones. What are the essential needs of business under slow
growth conditions? In other words, how can we drive productivity when the
production quantity is not increasing?

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 Chapter Two

GOLD IN THE FLOW

CHAPTER SUMMARY

Phil and Mike drag a reluctant Bob to the factory, where he shows
them how to quickly evaluate the efficiency of a factory by observing
ongoing operations. Phil eventually convinces Mike’s father to help
out, on the condition that Bob won’t have to deal with any politics. If
people don’t do as he says, Bob warns, he will take a walk. Phil eagerly
accepts, and they return to the plant, where they are joined by Amy
Cruz, the firm’s HR manager. Bob teaches them to see what he calls
the “gold in the flow,” or the potential value lying dormant in the
plant. By carefully tracking the flow of materials and work involved in
making different products, they identify the various wastes in the
process and see how this affects the performance of the plant. They
then focus on a specific area and look at the key metrics of quality,
productivity and inventory on that part of the process, and discuss the
kind of targets for improvement on this line.
The challenge here is to visualize the entire flow of materials and
information through the factory, and to realize that every product
that gets held up because of waste reduces the contribution of all the
fixed costs of the plant to profitability. Similarly, the company is
penalized by every product not shipped to the customer, which counts
as inventory that is being financed by the company (parts cost, labor
content, holding and handling costs).

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 DISCUSSION POINTS

At this early stage, Bob is basically trying to open Phil’s eyes, to

see his shop floor as a flow of value that is broken by many obstacles
that reduce productivity and erode cash flow. Seeing the shop floor in
this manner is a key lean skill. Without it, you are prone to implement
lean tools as isolated improvements instead of parts of an integrated
system. In practice, of course, learning to see is challenging in one’s
own plant, where old habits, politics, and other human considerations
often blind us to the real work. So ask yourself if you can “see” the
process by which you create value for your customer.

Can you trace the value stream all the way from raw material
through production and into the arms of the customer?

RESOURCE

Rother, Mike, and John Shook. 1998. Learning to See: Value Stream
Mapping to Add Value and Eliminate Muda. Cambridge, MA: Lean
Enterprise Institute.
This detailed workbook represents an excellent introduction to
value-stream mapping. Rother and Shook share both the principles,
and the practice, of diagramming every step involved in the material
and information flows needed to bring a product from order to
delivery. While Bob Woods introduces the notion of value-stream
mapping only after he has determined that Phil and Amy have
developed a gemba attitude later in the book, other lean senseis
emphasize this way of thinking earlier in the teaching process. For
readers looking to figure out where the gold is being held up in their
processes, this workbook is the best place to start.

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 The authors make it clear that developing a mapping proficiency
is as much about spotting waste as it is about tracking how well
materials flow through the value stream.

Value-stream mapping is a pencil and paper tool that helps you to see
and understand the flow of material and information as a product makes
its way through the value stream. What we mean by value-stream mapping
is simple: Follow a product’s production path from customer to supplier, and
carefully draw a visual representation of every process in the material and
information flow. Then ask a set of key questions and draw a “future-state”
map of how the value should flow.
Doing this over and over is the simplest way—and the best way we
know—to teach yourself and your colleagues how to see value and, especially
the sources of waste. Practice drawing value-stream maps and you will
learn to see your shop floor in a way that supports lean manufacturing. Just
remember that the point of getting lean is not “mapping,” which is just a
technique. What’s important is implementing a value-adding flow. To
create this flow you need a “vision” of the flow. Mapping helps you see and
focus on flow with a vision of an ideal, or at least improved, state.

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 Chapter Three

TAKT TIME

CHAPTER SUMMARY

In order to ascertain a realistic target for headcount reduction on

the mechanism line, Bob asks Phil to time the operators as they work.
Yet the mere mention of stopwatches triggers angry resistance from
Dave Koslowsky, the factory’s production manager, which leads to Bob
walking out, as promised. Amy charms Bob into accepting a
compromise, in which he continues to talk to Phil and herself, on his
turf, at the yacht club, and to give them homework from there. Bob
then explains how building to customer demand, according to takt
time, is the key to understanding the productivity problem. He
teaches them how to ascertain the target number of operators that
should be on the line. He also explains that the first step to lean
improvement is basic process stability, and in the case of an assembly
line, stopping defects in the process. He suggests a “red bin” system
to isolate non-conformity at every workstation. He adds to this by
discussing the impact of variation in the customer cycle on
productivity, and advises them to start reducing the variation in the
operators’ cycle before tackling more detailed inefficiency.
The theme of this chapter is to understand the impact of one type
of variation (quality) on process performance. There are two core
points. The first is understanding takt time, which should be the
North Star to regulate production processes, and is often
misunderstood during lean implementations. The second is to use the
process of calculating the target number of workers to train yourself to
identify variation on the line. This will enable you to move on to
analyzing your value-added work versus non-value added work. Keep
in mind that to the worker, all activity is work, whether value added

11
or not. Variation, however, caused either by man, machine, material, or
method is a major problem regarding performance and must be dealt with.

DISCUSSION POINTS

While there are several key challenges posed in this chapter, start
with this simple query:

Where—and how—are you producing waste?

As a starting point try the following exercise. With your team,

develop a list of items that reveal waste. How can you tell, just by
seeing and without asking any questions, how well the plant is
operating? Then, pick a product and follow it through the plant or
office, noting where inventory builds up, finished pieces sit
unnecessarily, defects are built in, and so forth. Consider how often
your work produces examples of the seven wastes:

1. overproduction of parts beyond customer demand

2. waiting of the operator
3. transport of parts or components
4. unnecessary processing
5. inventory of parts at the workstation
6. motion of the operator
7. non-conformities and rework

You can use your discoveries from this exercise as a starting point
for kaizen work. Remember that you have created this waste through
flawed process. Now that you have identified it, you can use the
following methods to eliminate the systemic causes of muda.

12
 Takt time, which figures prominently in the chapter under
discussion, represents a key area to start: What is the takt time of the
line or cell your team is focusing on? (This can be the same product
family identified in the mapping exercise) Over how many weeks have
you averaged the customer demand to calculate the takt time? How
many shifts are you taking into account? What are the main sources of
process instability on this cell or line?
In exploring these questions, you will gain a finer understanding of
what is truly working, and what isn’t, on the gemba. Operators should
note unreliable equipment which has never been fixed by maintenance
or engineering; spot non-conforming components which have to be
reworked before they can be used; and identify material handling
glitches which cause waiting, additional storage, and transport. In an
office or other setting, this disciplined analysis will reveal examples of
unnecessary work and rework, systemic failures to close loops, and
overlapping and often varying forms and procedures.

RESOURCE

Rother, Mike, and Rick Harris. 2001. Creating Continuous Flow:

An Action Guide for Managers, Engineers, and Production Associates.
Cambridge, MA: Lean Enterprise Institute.
This workbook explains, in simple step-by-step terms, how to
introduce and sustain lean flows in pacemaker cells and lines. A sequel
to Learning to See, this workbook shows how to move from seeing how
work and materials are organized to setting a production rhythm and
applying the principles of continuous flow. This is an essential guide
for the type of work that Amy and Phil tackle when redesigning the
production cells and lines.
In particular, this guide explains why producing to takt time in a
continuous flow is tied so strongly to identifying waste:

13
 Lean manufacturing strives to achieve continuous flow in even greater
measure, because it is the most efficient way of turning materials into products:

• Minimum resources are used. The amount of people (direct and indirect),
machines, materials, buildings, handling equipment, etc., required to
make a product is kept to a minimum. This means higher productivity
and lower costs.

• Shortened lead times, which permits quicker response to the customer

and a shorter “money conversion cycle” (time between paying for raw
material and getting paid for the products made out of those
raw materials.)

• Problems such as defects can quickly become apparent instead of

remaining hidden. Problems can be identified quickly and corrected
before proceeding. It is easier to identify root causes of abnormalities
when they are detected as they occur.

• Encourages communication between operations, which become linked in

“customer-supplier” relationships.

Any item produced before it is actually needed by the next processing step
creates waste, such as extra handling, counting, storage and so on. When
you see batching of even one extra piece, you should realize that you have
used an operator’s time to process and handle an item that was not needed.
You could have used that person’s time and skills to process something that
was needed!

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 Chapter Four

STANDARDIZED WORK

CHAPTER SUMMARY

Phil, Amy and Mike meet up with Bob, who is busy clearing out
the hold of his yacht to prepare for a new coat of paint. This leads to
a discussion about standardized work, which is defined as always doing
the same operations in the same order, and employing the Five S
exercise. Phil and Amy are surprised to hear Bob’s unusual take on
Five S as the starting point of standardization and people involvement.
There’s a key takeaway in this chapter: after takt time, standardized
work is the second foundation of lean practice, one that is all too often
obscured by the glamour of flow, kanban, and other exotic terms.
Repeating the same operations in the same order absolutely needs to be
understood by all in order to secure the lean gains beyond the initial
kaizen workshops. Mastering Five S on the shop floor is a fundamental
starting point of a process, which eventually leads to autonomous
teams. It is not a mere “clean your room” tool, but rather, the core
starting point to involve operators and generate suggestions. As such,
Five S should never be underestimated.

DISCUSSION POINTS

Use a discussion—or better yet a practice—of the Five S exercise

to assess standardization in your workplace. This understanding can be
gleaned from the following question:

How well is the work defined, and how rigorously does the
team focus on doing the same activities in the same sequence?

15
 Discuss the impact of non-standardization on your every day factory
and/or office environment and find the most glaring cases of waste.
Remember that standardized work is dynamic because the standard is
always being improved; it’s creative, and not just following routine.

RESOURCE

Liker, Jeffrey, and Meier, David, 2006. The Toyota Way Fieldbook:
A Practical Guide for Implementing Toyota’s 4Ps. New York, NY:
McGraw-Hill.
This comprehensive guide to implementing lean represents one of the
most practical and wide-ranging resources for students. Far beyond any
description of specific tools, this workbook strives to give a feel for what
TPS is really about. Blending stories with charts, tips, and exercises, the
fieldbook sheds light into many lesser-described aspects of TPS, such as
the development of people through constant problem-solving. Phil and
Amy could certainly benefit from such a discussion, particularly chapter
six of this resource, “Establish Standardized Processes and Procedures.”
This chapter explains why standardized work forms the basis for
kaizen. In addition to providing strategies and tips for establishing
standardized processes and procedures, the authors clarify why it matters:

The work of developing standards begins early in a lean implementation

and is a common thread throughout the development of lean operations. The
creation of standardized processes is based on defining, clarifying (making
visual), and consistently utilizing the methods that will ensure the best
possible results. As such, standardization is not applied as a stand-alone
element at specific intervals. Rather, it is part of the ongoing activity of
identifying problems, establishing effective methods, and defining the way
those methods are to be performed. And it is driven by people, not done to people.
People doing the work understand it in sufficient detail to make the biggest
contributions to standardization.

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 Chapter Five

IT’S ALL ABOUT PEOPLE

CHAPTER SUMMARY

In this chapter, Phil and Amy find themselves both exhilarated

and disturbed by what they’ve learned running workshops. They’ve
discovered that, first, quick results are in fact easy to obtain by
working with the operators. Second, they’ve found out that the
operators have been complaining about causes of variation in their
work for years, yet because management never paid attention, they
have lowered their expectations of them. Phil and Amy want to build
on the gains obtained from the workshops in day-to-day operations.
Bob’s third key concept of sustaining lean, after takt time and
standardized work, is kaizen. To introduce it, Bob invites Phil, Amy
and Mike to join him at the Yacht Club for the preparation of the first
spring regatta. He shows them how the best skipper operates and
details the key roles of supervisors and team leaders in sustaining lean.
And he reveals the heart of the system: “it’s all about people.”
This chapter shows how the greatest challenges in lean truly involve
people. Shifting supervisors from their traditional role of looking for
missing parts and ad hoc rescheduling of people and production, to a
mentoring job of developing work standards and training operators to
work at the standard, is a fundamental lean leap. Indeed, one of the
critical issues all lean companies face, Toyota included, is a constant
dearth of good supervisors. Bob also defines the team leader role, which
is an operator, not part of the hierarchy, for every team of five to seven
operators, who makes sure hourly production targets are achieved by
solving all the little mishaps which can happen in day-to-day operations
and create variations in the work cycle. Overall, Bob’s insight in lean
management is that you have to “produce people before producing parts.”

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 DISCUSSION POINTS

Use the themes of this chapter to explore the role and actions of
supervisors and line workers. One of the secrets of sustaining lean
improvement is investing in enough management and technicians to
resolve problems as they appear on the gemba, rather than simply listing
them as priorities set by management in their offices. This investment
in shop-floor leadership pays for itself in spectacular productivity gains.
The primary question raised is:

Are supervisors truly involved with daily shop-floor

improvement?

Examine this topic through questions such as: How much support
do our front-line people really get? When a machine is stopped, or a
defect appears, or a problem arises with a customer being served, do we
see shop-floor management and/or technicians come running? Are
operators ever left to fend for themselves with technical problems? Are
supervisors focused on solving operators’ problems rather than ordering
them about? An interesting shop floor exercise for your supervisors is
to ask them daily: “What have you done to help operators reach their
targets today?”
Above all, simply having this discussion should raise and explore
some fundamental questions about how well the team leaders are
supporting the workers. The way in which individuals grapple with
the questions should shed light into how well they are being
empowered to be problem solvers, and how well management works
with the workers to identify and solve problems.

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 RESOURCE

Liker, Jeffrey. 2004. The Toyota Way: 14 Management Principles

from the World’s Greatest Manufacturer. New York, NY: McGraw-Hill.
An excellent, detailed book that combines a thorough reporting of
Toyota’s practices with an insightful codification of the company’s
practices. Liker’s deep knowledge of Toyota’s practice over the past 20
years brings extra rigor to his explanation of the principles, and reveals
the essence of its managerial system better than any other text to date.
This book answers Phil’s questions about the core principles of TPS,
providing a different focus than that of Bob Woods. This resource will
help keep you focused on the right managerial practices by making the
underlying principles explicit.
Here’s how Liker limns the basis, for example, of deeply observing
and then solving problems at the source:

The practice of genchi genbutsu is easy to adopt as a corporate policy and

new hires can be sent out to the shop floor to “go and see” and then report
back on what they see. But at Toyota, this is not simply a lesson for the
neophyte to learn. The executive or manager must go, see, and really
understand the actual situation at the working level. Managers are not just
managing technology or tasks; they are promoting the culture. The absolute
core of the Toyota philosophy is that the culture must support the people doing
the work. Management must demonstrate a commitment to quality every
day, but ultimately quality comes from the workers.

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 Chapter Six

LEVEL TO PULL

CHAPTER SUMMARY

Now that Mike, Phil, and Amy have enjoyed significant results
on the mechanisms sub-assembly lines in terms of increasing daily
production with the same resources, while consistently hitting the
new production targets, Bob drags them to the local supermarket to
see how pull works on an entire flow. The first important pull
concept is the “shop stock,” or supermarket. Work-in-process, or
WIP, should be held at the cell as output from the process as opposed
to being held as material and components waiting to be transformed,
since lean processes always stress flow over storing excess material.
This leads Amy to draw a parallel from her experience working
in a fast food restaurant, most of which have a shop stock behind the
counter. This inventory contains several rows of standard burgers for
the “runners,” models most people are likely to purchase because
they are basic standards. When one of these burgers is sold at the
counter, the salesperson tells the production staff to make another; or
in other words, the counter pulls stock replenishment in the burgers’
shop stock. The advantage of this system is that customers ordering
standards can be served in a few seconds by helping them from the
stock; and that if several customers want the same type of burger at
the same time, they are all held in the buffer. Also, the rotation
prevents burgers from going stale. At low traffic periods, the shop
stock is often kept empty.
The system is lean because it pulls on a controlled stock and
delivers goods to customers just-in-time, while the staff resources in
the kitchen vary according to the demand at various hours of the day.
In industry, flow can be complicated by the fact that changeovers are

20
hardly ever instantaneous, so batching might be a necessary evil.
And so Bob explains how to use takt time to build a leveled
production program, which pulls continuously on the production
cell as with the burger stand. Later, at a dinner party with a lean
academic specialist, he details to Phil the link between pull, leveling
and tool changeover.
The key challenge in this chapter is getting a feel for pull
production as opposed to push production. It is important to realize
that for a just-in-time system to deliver lean results in terms of labor
cost and capital utilization, the pull signal must be “leveled” as much
as can be, both in mix and volume. This is a critical lean insight to
gain, because without it your team will never be able to reap the cash,
labor and capital benefits from just-in-time techniques such as kanban.

DISCUSSION POINTS

As you explore the details of push and pull production, or even the
finer nuances of Steve McAllister’s “square, circles, and triangles”
demonstration as a way of understanding the dual implications of
reducing batch size and increasing internal delivery in order to reduce
WIP, focus on the idea of creating level pull. Have all your discussions
to date given you the ability to track products along the value stream,
identifying waste and standardizing operations, so that you can now
pace the production and ensure “pull”?

Does the work flow, and is it regulated by the pace of

customer demand?

21
 RESOURCE

Smalley, Art 2004. Creating Level Pull: A Lean Production System

Improvement Guide for Production Control, Operations, and Engineering
Professionals. Cambridge, MA: Lean Enterprise Institute
This excellent workbook shows how to continue the lean
transformation from a handful of isolated improvements to an entire
level, pull-based system. As Amy and Phil are learning, implementing
lean ideas beyond point optimization and flow in just one value stream
requires conducting system kaizen to create a lean production system
that ties together the flow of information and materials supporting
every product family in a facility. Even Bob Woods tends to focus only
on one of Phil’s products when explaining pull, although he mentions
other elements of the system. This guide works through the details of
facility-wide pull systems in an instructive manner and clearly
addresses the thorny issues of leveling in mix and volume.
Achieving this state is no easy task, as Smalley points out:

Continuous flow of materials and products in any production is a

wonderful thing, and lean thinkers strive to create this condition wherever
possible. The reality of manufacturing today and for many years to come,
however, is that disconnected processes upstream will feed activities
downstream. Additionally, many internal processes are currently batch-
oriented and function as shared resources. The major challenge in this
situation is for downstream processes to obtain precisely what they need when
they need it, while making upstream activities as efficient as possible. This
is where leveled demand and pull production are critical.

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 Chapter Seven

KANBAN RULES

CHAPTER SUMMARY

Phil and Amy badger Bob into returning to the factory, where he
compliments them briefly about their progress before pointing out all
they’ve done wrong. This starts a new round of discussion about how
to establish a kanban, as well as a discussion of basic kanban rules, and
more importantly, an inquiry into a kanban’s true purpose. Bob tries
to clarify by asking them to visualize the entire flow in the plant, from
the truck preparation area in dispatch, to the shop stock at the
conveyor and at the mechanism lines. He also introduces the heijunka
board, which tells the material handler how to do the picking from the
conveyor’s shop stock into the truck preparation area. Amy and Phil
complain about the difficulties they are experiencing with Kevin
Lorenz, the plant’s logistics manager.
A couple of weeks later, Bob accepts an invitation to return to the
factory once more when Phil and Amy hit a wall. This visit leads to a
loud argument with Lorenz, who ends up being publicly humiliated
by Bob’s friend Harry, who suggests to Phil that he should fire Lorenz
right then and there. After everyone calms down, Bob admits that the
plant is not progressing as fast as it should, particularly on the
inventory front, and takes the blame for not being more involved. He
has tried to advise at arms length, which can’t work with lean
transformation. In the end, Bob will have to return more often to the
shop floor to help Phil and Amy with their lean implementation.
The key challenge in this chapter is to see lean flow as a logistics
issue as well as a production one. Production needs to be stabilized,
which will only happen if logistics maintains a steady pull on the
production cells and regularly supplies the cells with the needed

23
components and materials. On the shop floor, leveled pull is realized
by the heijunka board, or leveling board, which simulates the
customer’s use of the product in its own production line. Bob teaches
them that kanban is a kaizen tool, not the other way round. That
kanban was not invented to relieve production from worrying about
logistics. On the contrary, kanban’s purpose is to fail every time the
flow gets out of standard conditions. Because no one wants the kanban
to fail (which can stop the entire plant), shop-floor management must
constantly make sure that production and logistics glitches are solved
in real-time. Kanban is in fact a tool to schedule production in a way
that problems will appear visually immediately, at the point of the
problem, so that they can be resolved right away.

DISCUSSION POINTS

Is your team familiar with all the basics rules of kanban?

• The following process comes to withdraw from the previous process.

• The following process only produces what has been withdrawn.
• Production or withdrawal only happens with corresponding
kanban cards.
• No parts are allowed on the shop floor without a kanban attached
to them.
• Zero defects in the parts delivered by the upstream process.
• Reduce the number of kanban over time.

Regardless of whether you work in an office or factory, the

principles of kanban apply. Discuss each kanban rule with your team,
and clarify its purpose. Talk about the broader purpose of kanban as an
indicator of where the process is broken or suboptimal.

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 Can you draw out on paper a complete kanban loop with:

• Heijunka board
• Kanban posts
• Kanban waiting file

Are all members of your team clear on the difference between a

production instruction kanban, and a withdrawal kanban? Can your
kanban help standardize the flow of material and information
throughout the plant or office?

Does your kanban reveal the sources of waste and the health
of your processes?

RESOURCE

Harris, Rick, Chris Harris, and Earl Wilson. 2003. Making

Materials Flow: A Lean Material Handling Guide for Operations,
Production Control, and Engineering Professionals. Cambridge, MA:
Lean Enterprise Institute.
This hands-on workbook teaches how to create continuous flow by
supplying purchased parts to the value stream in an optimal manner.
It builds on the lessons of Creating Continuous Flow, showing how, to
quote from its foreword, “to create a circulatory system that takes full
advantage of your carefully created areas of continuous flow while also
meeting the needs of other production areas still in batch mode.” This
guide would come in handy to Phil and Amy as they try to sort out
logistics toward the end of this story and address the new challenges
exposed by the successes the company has created.

25
 The authors spell out how this workbook helps lean practitioners
build on their past successes:

Many facilities that are lean in terms of operating their individual

processes are still mass producers in supplying these processes. They lack a
Plan for Every Part (PFEP). (Indeed, some facilities seem to lack a plan
for any part!) They lack a properly located and managed purchased-parts
market. They lack a rigorous material delivery route using standard work.
And they lack pull signals to tightly link their areas of continuous flow to
the supply of materials. The consequence is starvation of processes, loss of
flow, and a major waste of effort and money in keeping too much inventory
and spending too much time hunting for missing items.

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 Chapter Eight

GEMBA ATTITUDE

CHAPTER SUMMARY

In this chapter, Bob shifts Phil and Amy’s focus from the
mechanics of flow and kanban back to the core of lean, which is
attitude. He takes them back to the shop floor, pushing them to learn
to see by looking intently at the equipment, and of course, at the
operating conditions, which people create. Bob points out that beyond
the usual tools, such as SMED and TPM, the heart of lean is rigorous
problem-solving. Indeed, to obtain results after the initial quick wins
from these tools, one must follow the five why exercise rigorously, so
as to always resolve the fundamental cause of any problem. Secondly,
Bob demonstrates the “just-do-it” element of the lean attitude in
organizing an impromptu build of the cabinet assembly cell, working
with the operators and shop-floor technicians. These shop-floor actions
lead to another run-in with the plant’s management structure and
force Phil and Matt, his partner, to finally make a stand for or against
total lean implementation.
The key point of this chapter is that while many try to lean their
operations, few succeed. The authors believe that although people
get mesmerized by the technicalities of lean tools such as kanban and
leveling, they often completely miss several core principles of lean:
never by-pass a problem and work with the operators to continuously
improve operations. In that respect, this is probably the most
important chapter of the book, and raises a fundamental issue for
you to ponder: are you really walking the walk, or are you just
talking the talk!

27
 DISCUSSION POINTS

This chapter addresses the practical details of your lean

implementation effort, and should prod you to examine the reality of
your initiative. Remember, the “just-do-it” nature of lean means you
should be doing lean rather than simply discussing it. And as this
chapter reveals, tackling and even resolving difficult challenges only
exposes new ones. And so you must set aside time to continually
examine the quality of its efforts. Ask yourself: are our lean
improvement initiatives as robust as the processes we are improving?
How much time do we really spend simply looking at operations? Do
we walk the gemba at the very least once a day to look at production
boards and check the response time from technicians to operator
problems? Do we hold all meetings at the gemba, with the real people
in front of the real parts?
Finally, how committed are we to these efforts? Once we’ve
achieved progress, is everyone willing to press forward? At this point,
the question for your group is more of a challenge:

Can we take these lessons directly to our gemba and see how
well they are working?

RESOURCE

Ohno, Taiichi. 1988. Workplace Management. Portland, OR:

Productivity Press.
In this modest and accessible series of short pieces, Ohno shares
the most personal perspective of Toyota management. His essays range
from historical pieces on Toyota’s history as a weaving company to the
application of TPS to white collar work, and all are based on his
extensive experience and unshakeable belief that learning must be
derived from direct observation.

28
 This perspective certainly guides his teachings on the way that
workplace supervisors must, for example, be seen doing very specific
things as opposed to merely having a physical presence:

What you have to do is go into the plant and walk along at a rate of
several hours per 100 meters. No one is going to rely on you as long as you
cover those 100 meters rapidly.
“Why work standing up,” you might ask a worker. “Nobody’s going to
complain if you’re sitting down.” If you have the worker use a certain tool
sitting down because it is more comfortable that way, word will get around
fast. People will talk about the supervisor who came along and showed them
how to make their jobs easier. Then others will ask you to come take a look
at their work stations. Pretty soon, you will have a hard time covering those
100 meters in the workplace.

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 Chapter Nine

THE HEIJUNKA WAY

CHAPTER SUMMARY

Phil faces a new unexpected problem as Bob informs him that his
work is done. Now Phil must step up and manage the transformation.
It’s Phil’s plant, and he should lead, or let it go. Phil reluctantly
chooses to stay and lead the continued lean effort. Yet he also
persuades Bob to continue to advise him, and asks Bob to state his
vision of lean principles. Bob then explains the use of value stream
mapping, or MIFA (Material and Information Flow Analysis.) Phil
and Bob also discuss the tricky issues of leveling in volume as well as
in mix, and understanding the relationship between JIT shop floor
techniques and the MRP. They explore how to protect the production
process from volume variations in customers’ orders, and how to avoid
passing on these variations to their suppliers, which would increase
the likelihood of missing parts, and hence return variation in the
production process.
The focus on this chapter is on management, and the need to
maintain both a big picture outlook and a detailed vision of the plant
at the same time. Bob helps Phil to visualize the plant’s processes as
a continuous flow, and enlarges the vision to include customer and
supplier effects on the total supply chain.

DISCUSSION POINTS

In recent years, much has been made of value-stream mapping as

a first step to lean transformation. Oddly enough, this is a well-known
Toyota tool which the senseis often introduce late in their supplier

30
plants they help, fearing the tool could become a distraction from
genchi gembutsu: go and see. So be sure that your maps are serving
the right purpose of focusing your attention on the work itself. And at
this point, it’s important to see the whole of the work, to see how the
elements of the system relate and support one another, and to see the
extended value streams in the workplace.
The key question here addresses the systematic impact of your
lean efforts. Armed with the tools and principles discussed to date,
take a step back and assess how well the system works as a whole.
Ask yourself:

How are the different elements of our lean system

supporting or hindering each other?

RESOURCE

Womack, James, and Daniel Jones. 2002. Seeing the Whole: Mapping
the Extended Value Stream. Cambridge, MA: Lean Enterprise Institute.
Learning to see, and to map, value streams, represents a powerful
step in identifying and removing waste. But there’s always room for
improvement. This comprehensive guide teaches users of value-stream
mapping how to extend this field of view beyond the facility level to
see all the steps and time needed to bring a typical product from raw
materials to finished goods. Now that Phil has begun to see the flow
of value, this workbook would prove particularly handy as he
continues to pursue lean with customers and suppliers.
As the authors point out:

Looking at the whole has always seemed natural to us and doing so will
always suggest ways to slash costs while dramatically improving
responsiveness and quality. Yet most managers we have encountered on our

31
value stream walks want to stand in one place and look only at one point—
their machine, their department, their plant, their firm. Often, the machine,
the department, the plant, and the firm are performing well on traditional
measures—high labor and machine utilization, low defects, on-time
shipments—and the managers are pleased with their achievements.
However, when we get managers to change their focal plane from their
assets and their organization to look at the product itself and what is
actually happening on its long journey, they immediately realize that the
performance of the entire value stream is abysmally suboptimal. Indeed, most
wonder how they have worked for years in traditionally compartmentalized
operations and somehow failed to notice the waste everywhere.

32
 Chapter Ten

KAIZEN FOREVER

CHAPTER SUMMARY

Working life being what it is, Phil encounters a new round of

challenges. Although he has had spectacular results in the lean
turnaround of his plant, his managerial problems are mounting.
Moving from lean production to creating a truly lean enterprise that
can sustain shop-floor successes is no small task. Bob organizes a plant
tour by his own sensei, visiting from Japan. The sensei seems to
scarcely notice Phil’s achievements, choosing instead to chastise him
for ignoring quality concerns. This leads to a discussion about jidoka,
the lesser known pillar of the Toyota Production System, and the
various techniques associated with building quality into the products:
andon, autonomation, poka-yoke, etc.
The overall message of this chapter is that the race to lean is
unending. While Phil has reached a new level of performance, he now
faces a new order of problems, which have been uncovered precisely by
having sorted out the most obvious issues. In terms of lean maturity,
this represents a coming of age for Phil. He realizes that the true secret
of lean success is that, regardless of how expert one gets, every
individual remains a student who must be open and devoted to
continuing their lean voyage of discovery.

DISCUSSION POINTS

After reading The Gold Mine, and discussing it with your team,
ask if you are truly ready to seek out a sensei to help you in your
transformation. Seeking a sensei is not an admission of defeat. On the

33
contrary, as this appears in every serious lean conversion, it is the first
sign of real commitment. Seeking a sensei helps you sort out true lean
wisdom from mere drivel. And the process will naturally bring your
team in contact with the lean community at large, which will have
increasing returns as true Lean Thinkers are always eager to share their
successes and pass on free advice. So ask: who’s your sensei? And more
important, once you’ve established this, ask the most important
question of all:

What’s next?

RESOURCE

Womack, James, and Daniel Jones. 1996. Lean Thinking: Banish Waste
and Create Wealth in Your Organization. New York: Simon & Schuster.
This fundamental resource, which popularized the principles of
lean production to a broad audience, could just as easily serve as the
first resource to consult for further learning. Yet the nature of lean’s
unending continuous improvement qualifies this book as an important
ally at any point in a lean lesson. Spanning companies in different
industries and countries, the authors draw from elaborate research to
extract a handful of powerful principles that define lean practice.
Extremely useful, especially to hold up against the definition of lean
as proposed by Woods senior.
Here’s how they explain the never-ending challenge that rewards
even the most accomplished lean leaders:

Just as the introduction of lean thinking forces problems and waste to

the surface in all operational areas, new organizational problems will
inevitably arise as you apply these ideas. As you shrink your traditional
functions, which were formerly the key to career paths in your organization,
many employees will start to express anxieties about where they are going

34
and whether they will have a ‘home.’ And as you place more employees in
development and production activities relentlessly focused on the here-and-
now, you may begin to wonder about their hard technical skills. Are your
engineers retaining leading-edge capabilities or are they simply applying
over and over what they already know?
Perhaps most striking, as you take all of the excess inventories and
waste out of your internal value streams, you will become much more aware
of the costs and performance problems of firms above and below you along
the stream, including your suppliers’ suppliers and your distributors’
retailers. Offering them technical assistance will be necessary, but it won’t
be sufficient. To move farther down the path to leanness, it will soon be
apparent that you will need to work with all the participants in a value
stream in a new way.

35
 A LEAN LEXICON FOR THE GOLD MINE
(Adapted from the Lean Lexicon: an illustrated glossary for
Lean Thinkers, 2d edition)

Continuous Flow
Producing and moving one item at a time (or a small and consistent
batch of items) through a series of processing steps as continuously as
possible, with each step making just what is requested by the next step.

Cycle Time
How often a part or product is completed by a process, as timed by
observation. This time includes operating time plus the time required
to prepare, load, and unload. Also, the time it takes an operator to go
through all work elements before repeating them.

Five S
Five related terms, beginning with an S sound, describing workplace
practices conducive to visual control and lean production. The five
terms in Japanese are:

1. Seiri: Separate needed from unneeded items-tools, parts,

materials, paperwork-and discard the unneeded.
2. Seiton: Neatly arrange what is left-a place for everything
and everything in its place.
3. Seiso: Clean and wash.
4. Seiketsu: Cleanliness resulting from regular performance
of the first three Ss.
5. Shitsuke: Discipline, to perform the first four Ss.

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Five Whys
The practice of asking why repeatedly whenever a problem is encountered
in order to get beyond the obvious symptoms to discover the root cause.
Heijunka
Leveling the type and quantity of production over a fixed period of
time. This enables production to efficiently meet customer demands
while avoiding batching and results in minimum inventories, capital
costs, manpower, and production lead time through the whole value
stream. Roughly, it means “levelization” in Japanese.

Inventory
Materials (and information) present along a value stream between
processing steps.

Inventory Turns
A measure of how quickly materials are moving through a facility or
through an entire value stream, calculated by dividing some measure
of cost of goods by the amount of inventory on hand.

Jidoka
Providing machines and operators the ability to detect when an
abnormal condition has occurred and immediately stop work. This
enables operations to build in quality at each process and to separate
men and machines for more efficient work. Jidoka is one of the two
pillars of the Toyota Production System along with just-in-time. It’s
related to the Japanese word for automation, but with the
connotations of humanistic and creating value.

37
Kaizen
Continuous improvement of an entire value stream or an individual
process to create more value with less waste. The word is Japanese for
gradual, continuous improvement. There are two levels of kaizen:

1. System or flow kaizen focusing on the overall value stream. This

is kaizen for management.
2. Process kaizen focusing on individual processes. This is kaizen
for work teams and team leaders.

Kanban
A kanban is a signaling device that gives authorization and
instructions for the production or withdrawal (conveyance) of items in
a pull system. The term is Japanese for “sign” or “signboard.” Kanban
cards are the best-known and most common example of these signals.

Muda, Mura, Muri

Three Japanese terms often used together in the Toyota Production
System (and called the Three Ms) that collectively describe wasteful
practices to be eliminated.

• Muda: Any activity that consumes resources without creating

value for the customer.
• Mura: Unevenness in an operation; for example, an uneven work
pace in an operation causing operators to hurry and then wait.
• Muri: Overburdening equipment or operators.

Pull Production
A method of production control in which downstream activities
signal their needs to upstream activities. Pull production strives to
eliminate overproduction and is one of the three major components of
a complete just-in-time production system, along with takt time and
continuous flow.

38
Sensei
The Japanese term for “teacher.” Used by Lean Thinkers to denote a
master of lean knowledge as a result of years of experience

Seven Wastes
The categorization of the seven major wastes typically found in
mass production:

1. Overproduction: Producing ahead of what’s actually needed by

the next process or customer. The worst form of waste because
it contributes to the other six.
2. Waiting: Operators standing idle as machines cycle, equipment
fails, needed parts fail to arrive, etc.
3. Conveyance: Moving parts and products unnecessarily, such as
from a processing step to a warehouse to a subsequent
processing step when the second step instead could be located
immediately adjacent to the first step.
4. Processing: Performing unnecessary or incorrect processing,
typically from poor tool or product design.
5. Inventory: Having more than the minimum stocks necessary for
a precisely controlled pull system.
6. Motion: Operators making movements that are straining or
unnecessary, such as looking for parts, tools, documents, etc.
7. Correction: Inspection, rework, and scrap.

Standardized Work
Establishing precise procedures for each operator’s work in a
production process, based on three elements:

1. Takt time, which is the rate at which products must be made in

a process to meet customer demand.
2. The precise work sequence in which an operator performs tasks
within takt time.

39
 3. The standard inventory, including units in machines, required
to keep the process operating smoothly.

Takt time
The available production time divided by customer demand. For
example, if a widget factory operates 480 minutes per day and
customers demand 240 widgets per day, takt time is two minutes.
Takt is German for a precise interval of time.

Total Productive Maintenance

A set of techniques, originally pioneered by Denso in the Toyota
Group in Japan, to ensure that every machine in a production process
always is able to perform its required tasks.

Value Stream Mapping

A simple diagram of every step involved in the material and
information flows needed to bring a product from order to delivery.
The first step is to draw a visual representation of every step in a
process, including key data, such as the customer demand rate, quality,
and machine reliability. Next, draw an improved future-state map
showing how the product or service could flow if the steps that add no
value were eliminated. Finally, create and implement a plan for
achieving the future state.

Waste
Any activity that consumes resources but creates no value for
the customer.

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 A LEADER’S STUDY GUIDE TO

The Gold Mine

Lean Enterprise Institute

One Cambridge Center
Cambridge, MA 02142 USA

Copyright © 2006 Lean Enterprise Institute

First Edition
All rights reserved

This study guide is based on a work of fiction. Names, characters,

businesses, organizations, places, events, and incidents are the product
of the authors’ imaginations or are used fictitiously. Any resemblance
to actual persons (living or dead), events, or locations is coincidental.

Lean Enterprise Institute ISBN: 0-9763152-8-9

Lean Enterprise Institute web address: www.lean.org
Design by OffPiste Design, Inc.
Printed in the United States of America

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