The Tenth Waste
“Waste number one: Inventory
Ohno first recognized that Inventory was a huge waste while we in America and most of the world looked at Inventory as a precious asset. The accountants put inventory on the Balance Sheet and managers knew that if they could create inventory then their profit went up. You didn’t have to sell the product to attain a profit; all you had to do was to build products and store them. In retrospect, that was kind of crazy.
When Ohno realized fully that inventory was a terrible if not the biggest waste, he asked Dr. Shigeo Shingo, an independent consultant and teacher to Toyota, “It is taking us four hours to exchange dies on this press; I would like you to see if you can find a way to reduce that to two hours.” When you reduce the change-over time then you can begin to reduce inventory. Shingo miraculously said, “Okay.” Several days later, Ohno came by and said to Shingo, “Two hours is no good, see if you can get it down to less then 10 minutes?” And Shingo said, “Okay” and within a short period of time Dr. Shingo developed his method (SMED – Single Minute Exchange of Die) to reduce the set-up times to less then 10 minutes. Inventory had to be stored and took up a tremendous amount of space; it tied an enormous amount of cash; it hid defects; it had to be moved in large lots; and it took weeks if not months to produce your total products.
I ordered a Buick in 1980 and waited 13 weeks to get the car while at the time Toyota could produce a car and deliver it in one week.”