Cutting Costs the Toyota Way

By Jeremy Smerd

Feb. 27, 2009

For at least a decade, other industries including health care have embraced the ethos of high quality and super-efficiency pioneered by Toyota, now the world’s largest automaker by sales volume.

    But it took the initiative of a medical director at Toyota before the company applied its own Toyota Production System principles to its health care providers in the U.S. in the same way it did its suppliers of auto parts.

    “We got elbow-deep into the activities of our radio manufacturer, but we were totally hands off with all of our health care suppliers,” says Ford Brewer, medical director for Toyota Motor North America, which is based in Lexington, Kentucky. “I felt, ‘Dang, there aren’t a few things we can apply to health care; there are tons of things we can apply, an unending number of applications.’ “

    About five years ago, with pressure mounting to shift rapidly rising health care costs to employees, Brewer began tackling the problem of reducing those costs by using the Toyota Production System. Toyota’s competitors in Detroit had already begun sending employees to improve the efficiency of local hospitals.

    Toyota looked at inefficiencies in its benefit design. Among other changes, it established an on-site pharmacy to reduce time and movement and to avoid higher-priced retail outlets. Then the company looked at its on-site health clinics.

    The engineers who once worked with radio makers were soon standing in doctor’s offices with clipboards, noting each step in the process of visiting the doctor. The engineers eliminated obvious forms of waste, known as muda in Japanese.

    “When we took out what was obvious muda, we realized we didn’t need 3.5 of the nine people working in the clinic,” he says.

    Other examples of muda were quite simple. The laptops used by doctors in the clinics needed their batteries changed several times a day. The engineers moved the batteries from the back of the clinic to the front, making them more readily available to the doctors. It was a classic redesign to reduce unnecessary effort and wasted movement.

    Because of Toyota’s policy against laying people off, other health care workers were reassigned—for example, to treat only those patients who come into the clinic without an appointment. Employees afraid that improved efficiency will cost them their job are unlikely to support any waste-reducing changes the company is trying to make, Brewer says. Reassigning employees rather than firing them is a good way to ensure employees are supportive of these kinds of quality- and cost-improvement efforts.

    In 2007, the Toyota Production System faced a big test when the company looked at the quality and cost of a local hospital’s emergency room that was used by employees.

    “Anytime you try to introduce TPS you hear, ‘Look, you don’t understand, this is not an assembly line; we’re not making cars, we’re seeing patients,’ ” Brewer says.

    Toyota asked for patience, and the hospital cooperated. Soon, engineers discovered that two nurses averaged three minutes to do triage on a patient, while most others took 15 minutes.

    “Anytime you have that kind of variation, a TPS engineer will perk his ears up,” Brewer says.

    The wide variation was a sign that engineers would likely find big savings by introducing standardization in the triage process. Changes introduced by Toyota reduced emergency room wait times from 53 minutes to less than 20 minutes with the same amount of staff. Volume increased by 25 percent. The company, however, did not look at the quality of care provided, just its efficiency.

    Brewer credits the improvements to the fact that the engineers came to health care with a fresh perspective.

    “That’s probably the biggest difference between having TPS people go into a hospital versus having hospital people run their process improvement,” he says.

Workforce Management, February 16, 2009, p. 23Subscribe Now!

Jeremy Smerd writes for Crain’s New York Business, a sister publication of Workforce Management.

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