Business Lean

Attending National Manufacturing Week? Get lean!

noreply@blogger.com (Ultriva Inc) — Mon, 22 Sep 2008 15:38:00 +0000

This week is the National Manufacturing Week trade show and conference, held outside Chicago. It’s the annual gathering of manufacturers and suppliers who come together to network and exhibit their products. This year, I was honored to be invited by Kenneth Brant to sit on a conference panel about lean manufacturing — Ken is the manufacturing research director for Gartner Group. He’s been hard at work contacting panelists, reviewing presentations and making sure anyone attending walks away with valuable insight into lean.

I’m joined on the panel by several important thought leaders and prominent lean practitioners. The panel will cover a lot of ground from lean and Six Sigma to lean’s relevance in today’s business climate. One aspect that is near and dear to my heart is IT and lean. I’ve been blogging about this [see my Sept. 18 post] recently. It IS possible for IT and lean to co-exist and in fact lean can be integrated with an MRP/ERP system. I’ll focus some of my remarks on this topic and show why technology is critical and how it can help lean companies to sustain and scale.

Real-life case histories on lean implementations will also be presented. I’m excited that one of Ultriva’s customers, Trane, will be profiled. Trane is a huge HVAC company that has seen tremendous benefits in deploying lean solutions in a relatively short time frame. I could tell you more about how they achieved this, but you’ll just have to attend the panel tomorrow (Tuesday, Sept. 23) from 9 a.m. to noon at the Donald E. Stevens Convention Center, Rosemont, Illinois. Not attending the show? Watch this space. I’ll be blogging about Trane soon!

IT and Lean – can’t we all just get along?

noreply@blogger.com (Ultriva Inc) — Thu, 18 Sep 2008 17:44:00 +0000

Over the last 30 years I‘ve seen corporate IT evolve from a business process function to an autonomous powerhouse. In the 70s and early 80s, for instance, IT was primarily implementing technologies that supplemented business functions: hardware, networks, productivity software, and tools that automated manual functions.

During the late 80s and early 90s, however, manufacturing systems became a necessity for running a shop floor. As a result, many shop-floor personnel, especially from materials, scheduling and planning, collaborated closely with IT to successfully implement MRP systems.

By the late 90s, MRP had transitioned to ERP, with the focus shifting to sales, order processing, financials and other corporate functions taking precedence over manufacturing. Corporate executives became the decision makers for purchasing ERP systems with IT owning the deployment. Interestingly, the deployments involved more technology people than business people and if business people were involved, they were outside consultants.

Around the turn of this century, fueled by Y2K problems and the growth of Internet, the transition or evolution, was complete. IT was the owner and final arbiter of all technologies, irrespective of who the end-user was. IT no longer consisted of a good mix of process and technology people; it was overwhelmingly technology people driving businesses. One of the major business magazines even went so far as to question whether the CIO was on par with, or more important than, the CEO.

Since then, IT has provided the latest and greatest technology to the organization, but in the process has quite unconsciously isolated and neglected core business functions. It’s not surprising then, that the IT department can frustrate the very users it is chartered to help. In the manufacturing function, users are busy processing orders, building products, procuring raw materials, shipping goods and collecting money, often hamstrung by an IT department that does not understand the types of systems they need.

The first challenge to this IT dominance came when SalesForce.com devised a quick and simple software tool for sales people to manage their contacts and prospects. This challenged the multifunction, corporate-wide software from Siebel Systems, then the darling of IT. Siebel took months to deploy and users had no control over the deployment or management of it. As soon as an easier tool came directly to end-users to help manage the sales function, IT was cut off from the process. Virtually overnight Siebel, a billion dollar-plus company, saw its market capital significantly eroded.

Nowadays, as I tour manufacturing companies around the U.S., I notice the larger the company, the more anguish end-users are experiencing with their IT department. This problem directly affects the core business when the plant embraces lean manufacturing. Lean is the antithesis of batch processing as well as building to forecast — and these two tenets form the DNA of manufacturing systems within the current ERP systems. Meanwhile, lean practitioners are embracing ‘pull’ methodologies like Kanban and demand-driven scheduling to reduce inventories, eliminate stock-outs and increase shop-floor efficiencies to improve customer satisfaction. To make matters worse, most of the lean gurus have been preaching that technology is not required to implement lean on the shop floor. This has left a huge gap between lean’s potential benefits and the reality of what it actually did accomplish, which has slowed the pace of lean implementation across the corporation.

I believe IT has a chance to add tremendous value. Lean programs normally demand real-time responses as compared to batch processing. They normally demand collaboration with business partners (suppliers and customers). They need integration of scanners, RFID and other evolving technologies to automate traditional processes of ordering, scheduling, receiving and shipping. IT has already made several successful transitions to adapt to a market situation. It is time to change again.

IT needs to embrace the concept of enabling business through technology. Whether becoming a SaaS provider or a conduit for application access, it needs to become an integral part of the business unit. IT can play a significant role by combining best-of-breed programs with existing infrastructure. Similarly, IT leaders can become business decision makers instead of the gatekeepers they are today. A good alliance between the business function and IT will ultimately lead to better decision making overall.

Ephraim Schwartz, over at InfoWorld, recently wrote a very good article about this. It is appropriately titled: IT needs to get lean on manufacturing.

Manufacturers: try out our new Lean Assessment Tool

noreply@blogger.com (Ultriva Inc) — Tue, 29 Jul 2008 07:17:00 +0000

Walk through any manufacturing facility and you’ll notice they all have the same type of charts displayed on the walls, or bulletin boards or electronic displays highlighting results of lean six sigma programs. The shop floor constantly runs Kaizens to improve factory-floor operations.

Surprisingly, most of the emphasis on the shop floor has been on streamlining production, relaying the machineries, reducing production down time, and optimizing production capacity. Everything is focused on activities within the four walls of the factory shop floor. A very small percentage of these activities revolve around improving on-time-delivery, or improving supplier collaboration or material availability — processes that are occurring outside the facility.

In spite of these well-intended and dedicated efforts, when I walk through a typical shop floor, the two most common statements I hear are: “I have too much inventory” and “I can’t find what I want.” Why don’t we see more emphasis on having the right parts – raw material, work-in-process, and finished goods – at the right place?

It is not as if practitioners are unaware of the issues or don’t want to focus on inventory problems; it’s just difficult to collect necessary data to do this analysis. As with everything else, diagnosing the problem (what/where/who) is 80 percent (or is it 99 percent?) of the effort involved here. The data that is available in MRP systems is transactional and batched. Even though the data may be current and accurate (mostly) it is not possible to clearly identify when a stock-out happened (MRP back-flushes only when the material is available) or why someone ordered so much.

Our goal in developing the Lean Assessment Tool (LAT), which we announced today, is to aid the diagnostic process by removing the complexity and presenting the data in a form that can be easily understood not only by lean practitioners but also by material management people.

I like to think of it as an MRI scanner for inventory management. Using a patent-pending simulation engine, the Lean Assessment Tool back-simulates the MRP transactions, calculating the on-hand inventory for each day of a historical period (6 months, 1 year etc.). It then superimposes the consumption-driven replenishment pattern to estimate the potential inventory reduction for each day as well as the overall average for the period.

The Lean Assessment Tool identifies, for each part, the following:
- Standard daily usage (average consumption for the period)
- Safety stock (based on service levels, lead time)
- Consumption variance (S/X ratio – standard deviation/mean)
- Potential stock-outs
- Average inventory needed to meet the consumption pattern

The key aspect of this tool is that the basic premise is your actual consumption, not forecasts or planned demands. So it is possible for you to do “what if” analysis by manipulating the supplier’s lead time, standard lot size, the safety stock service levels, average consumption etc. — in real time. The inventory savings will be automatically recalculated to show the impact of your changes.

Whether your replenishment methodology is MRP or something else, the Lean Assessment Tool will clearly show where the problems lie and the areas for potential improvement. The tool is highly visual so you can see a graphical representation of your actual consumption, your current replenishment and Kanban replenishment patterns – all on the same graph.

Try it – it is free. Enjoy!

Lean Production And Kanban Outside The Plant Floor

noreply@blogger.com (Ultriva Inc) — Tue, 21 Aug 2007 23:09:00 +0000

It is sometimes assumed by industry novices and veterans alike that the tenets of Lean production and Kanban stop on the plant floor. While you can argue that it all begins (or ends) on the plant floor, middle management and the executive suite play a critical role in Lean success.

While the signals inherent in, for example, Kanban cards are typically acted upon by the floor employees, it can be critical to the success of a Kanban system to make management aware of what's happening on the floor. In our experience, there is no better way to learn what's happening on the floor than by deploying a strong Electronic Kanban or broader manufacturing software program, allowing management to receive the same signals floor employees are receiving without having to set foot on the floor.

Additionally, the support of management is absolutely vital in extending Kanban down the supply chain. Without the championing of management, adoption can be slow to take hold at suppliers reluctant to embrace new practices. In the end, it is ultimately a partnership that makes eKanban work and that partnership is best forged at the management level.

The Lean Contractor?

noreply@blogger.com (Ultriva Inc) — Thu, 16 Aug 2007 05:31:00 +0000

We are having work done on our kitchen now by our contractor, Brent. I feel we can refer to him as "our" contractor, as this is his 3rd major project at our house since we bought it in 2000. Each time, I've had the oppotunity and pleasure to do more than a trivial amount of work under Brent. Unlike previous times (which is perhaps unfortunate since I've written a lot of checks to him), Lean thinking is now part of who I am. As a result, I've taken to analyzing Brent's lean production techniques.

On the Lean adherent side of the ledger, Brent is relentless in his goal of minimizing defects. He is careful and detailed in everything he does, even the smallest things, and the results are that we have never seen more than an inconsequential defect in any of his work. If he thinks he is headed in that direction, he works to rectify the situation immediately, effectively shutting off the assembly line. And if he in fact ends up with a defect, he goes back and fixes it. It has to appear well after the completion of the project for it to not be repaired.

On the downside, Brent's tireless efforts to perfect everyhing he does takes his focus away from the production process. Case in point, tomorrow Brent will be working on building a new stairwell in our house. The stairs are to be tiled, a new rail installed and the walls painted. As he tends to focus on one minute area at a time, he often misses an opportunity to cut waste in his production process.

Today, he was painting several walls in our kitchen. He first primed. He had put the primer in a pan and dedicated a roll to the prime. As he finished priming, he washed the roll and brushes, then painted, went on a supply run, then painted another coat when he returned.

I asked him why he didn't prime every wall needing prime when the equipment was already out. He said it was because he was painting kitchen walls today, not working on the stairwell. When I suggested he could have saved set up and tear down costs (which aren't big, but still...) by having primed every wall today, he looked at me confusedly.

Just an observation here, but a focus on quality does not translate to an evolution towards Lean. In Brent's case, it's just not the way he works. Now, imagine having to change the culture of a plant or plants to apply their thinking more broadly.

Lean Myths -- Kanban Will Drive Up My Shipping Costs

noreply@blogger.com (Ultriva Inc) — Thu, 16 Aug 2007 05:30:00 +0000

Another excuse we frequently hear for not deploying Kanban or Lean production is that moving from push to pull will drive up shipping costs. To a Lean skeptic, the potential for increased shipping costs outweighs the potential gains from a transition.

Well, you can probably guess that we think these skeptics are wrong. Shipping costs don't always increase. First, shipping frequency tends to already be an issue. The problem is the shipments tend to come in several large bulk orders, then lots of smaller orders to attempt to ameliorate the impact of poor forecasting. With a Kanban system, where pull drives replenishment, the number of orders typically doesn't change dramatically, rather the variance in order size changes. The end result of a Kanban implementation is typically a much smoother order curve, not higher shipping costs.

Now, let's talk benefits. Even where shipments are more frequent, doesn't it seem the tradeoff is worth it? Lower inventory, increased turaround times, fewer rush orders, more on time deliveries... Independently, each variable would likely offest any increase in shipping costs. Taken in aggregate in a lean manufacturing operation, the benefits of utilizing, for example, kanban cards or an electronic kanban system far outweigh any potential costs.

Anything more than a marginal increase in shipping costs is unikely. But those costs are quickly and easily more than offset in any successful Lean impelmentation.

Mattel Follow Up: Chinese Manufacturer Kills Self

noreply@blogger.com (Ultriva Inc) — Tue, 14 Aug 2007 06:52:00 +0000

Following up on our recent post on Mattel's Toy recall, I saw this article on CNBC. Wow! Obviously, Chinese authorities are cracking down on those believed to be responsible for recent quality failures in Chinese factories. We all know quality failures can kill, but this isn't quite what I expected. Sadly, this story doesn't appear to be over. Mattel is rumored to be preparing to announce another toy recall and blame for the first incident seems to be moving further down the supply chain.

So what are some takeaways from this unfolding tragedy? On this side of the Pacific, it seems that American companies might be wise to not be so disconnected from their suppliers. While Lean producton can help manage the supply chain, the more distant each supplier gets from the end product, the less influence they'll ultimately have. Moving a kanban system down the supply chain is not easy. However, as more such incidents occur, companies might no longer have a choice to act.

Ultimately, I think market forces might determine how much control companies like Mattel will demand over their overseas suppliers. Consumers will demand more accountability (and if they don't get it regulators will). And those demands will ultimately work their way down the supply chain. While Lean might not ultimately be the response from companies like Mattel, visibility will. And how do you get visbility...?

Distance is still a challenge. Physical Kanban cards don't work across the ocean so well in a real-time world, but electronic kanban can. We try to avoid the open promotion of our manufacturing software when possible on this blog, so let us instead promote eKanban, of which we are a provider. While no solution is perfect, eKanban provides the best chance of driving quality all the way across the supply chain.

The Lean Dentist

noreply@blogger.com (Ultriva Inc) — Thu, 09 Aug 2007 06:20:00 +0000

Check out Mark Graban's podcast on the Lean Dentist at Leanblog. Very interesting to hear about Lean thinking applied in a place you'd never imagine. If you think it doesn't apply it you, you'll be surprised what you might learn.

Getting "Lean" At Home

noreply@blogger.com (Ultriva Inc) — Thu, 09 Aug 2007 06:14:00 +0000

Great post on on reducing "defects" in one's personal life over at Evolving Excellence. The Lean thinking parallels aren't hard to draw to the business world. If we can't get over our negative behaviors at home, why should we expect we'll easily get over them at work?

Is Lean Harder In Public Companies?

noreply@blogger.com (Ultriva Inc) — Tue, 07 Aug 2007 17:42:00 +0000

Read a good post yesterday on the Gemba Panta Rei blog on the hiring of Bob Nardelli as Chrysler's new CEO. One of the more interesting considerations they address in Nardelli's move from Home Depot to Chrysler is that Chrysler is owned by a private equity company, Cerberus Capital, meaning Nardelli does not have to publicly answer to shareholders and Wall Street on a quarterly basis.

What this arguably does is give Nardelli and his charges a longer runway to implement Six Sigma and Lean production at Chrysler, which begs the question... is Lean production, Kanban, and other such components/derivatives of the Toyota Production System more difficult to execute within publicly traded companies?

Like any other business decision, be it a new marketing strategy, a new product rollout, or a Lean implementation, the runway you get within a public company is directly correlated to your ability to articulate the message behind the strategy. If it comes with a good track record of financial performance, then the runway is lengthened. Google, for example, on one hand, is pursuing a number of long-range initiatives, like attempting to bid for wireless spectrum space, but is also turning in butt-kicking financial performance on a quarterly basis. Thus, Google's long-term forays are blessed. GM, on the other hand, will get a longer runway as soon as its very public, quarterly bleeding stops.

In the end, the runway reflects the circular effects of good performance. Good managers turn in good performance and get a pass to address long-term issues. If a CEO turns in quarter after quarter of growth and he wants to implement a Kanban system, shareholders will have patience. As his Electronic Kanban implementation further improves the bottom line, he can put Kanban cards across all his facilities and suppliers. More benefits accrue and he gets to address more long-term issues.

Manual Kanban vs. Electronic Kanban

noreply@blogger.com (Ultriva Inc) — Mon, 06 Aug 2007 17:04:00 +0000

We've talked about both Kanban and Electronic Kanban in previous posts here. Kanban is inclusive of Electronic Kanban and what we'll call Manual Kanban for purposes of comparison in this post. Manual Kanban, as you've probably guessed, is basically non-Electronic. Both include all the basic components of a Kanban system.

We're defining these terms because we want to address a commonly asked question we hear from prospective clients within the sales cycle? Should we implement a "manual" Kanban system before we implement Electronic Kanban.

The short answer is NO. A good Electronic Kanban system will not just support traditional Kanban activities, but ensures a few other activities are supported making it ultimately more efficient. With a good eKanban system, you can can still print out Kanban cards and reuse these cards over and over. Customers can also use a manual Heijunka board so that everyone can see the status of all material and production in conjunction with Electronic Kanban so there's no real difference there between the two systems.

But there are some significant advantages to eKanban as well. Quality software will let users calculate when cards should be added or deleted from the system and when a card is lost, missing, or where it was last seen, helping to keep a Kanban system on track. Good manufacturing software will also integrate with most ERP systems, allowing integration across the network. But the most significant advantage comes with the bar code scanning inherent in most Electronic Kanban implementations. With bar code scanning, you ensure a level of integration and accuracy of inventory that is hard to attain manually.

Furthermore, we've found there's no real advantage from learning Kanban manually before upgrading. As shop floors and companies in general become more integrated with electronic systems (and most have ERP implementations of one kind or another), one could argue it might be more difficult to integrate a "manual" Kanban system into your Lean production facility than an Electronic one.

Subrime Loan Mess: Could Lean Have Helped?

noreply@blogger.com (Ultriva Inc) — Mon, 06 Aug 2007 06:13:00 +0000

Another topic all over the papers these days is the subprime mess? While the root cause of this debacle will probably most often be identified as greed, I have been wondering what role process played in the whole mess. Could Lean thinking, a Lean production like system within the industry have made a difference? I don't necessarily know the answer to this, so I'd love to see some reader comments, but I'm still going to muse on it a bit anyhow:)

The process of getting a mortgage begins with your application. You fill in a great deal of information about your personal and financial life. The application allows someone (presumably an underwriter) to review the information you provided and pull a credit report on you. The credit report says even more about your financial life. Based on your application data, the credit report, and the amount you are borrowing vs. the value of the property, and a few other considerations, you are then approved or disapproved.

During the last few years, more and more creative mortgage instruments appeared to allow people to get into bigger, more expensive homes, often when they frankly should not have qualified for such a home based on their application. The driver was finding a payment that would match the applicant's ability to pay the monthly bill, not necessarily the other factors that contribute to the long-term viability of the prospective borrower. As a result, more and more gets approved and there are a lot of suspect borrowers out there in what is still a strong job market. It will get worse whenever the job market begins to worsen.

So where did things breakdown? Hard to blame the sales guy. If they are told a product is for sale, they sell it. Is it the underwriters fault? Well, yes, but who within the underwriter? Is it the individual who gave the thumbs up? Likely, the rules of the game for him have changed. He got the message from on high and applied looser standards than were previously applied. So, the company making the loan is at fault? Okay, sure. But someone further up the chain is funding/buying their mortgage portfolio? So are those guys at fault?

Seems somewhere there was a breakdown in the process and people who shouldn't have gotten loans, got loans. But who is to blame? Everyone?

And back to the original question: Would Lean have made a difference?

Toyota Reports Strong Earnings

noreply@blogger.com (Ultriva Inc) — Fri, 03 Aug 2007 23:23:00 +0000

A bit late to the game, but thought I'd note that Toyota reported record earnings. While benefiting from currency fluctuations, relative to their peers, the results are particularly impressive? Lean production? Kanban? Hmmm...

Mattel Toy Recall: Could Lean Have Helped?

noreply@blogger.com (Ultriva Inc) — Fri, 03 Aug 2007 22:02:00 +0000

If you have small children (and even if you don't), you are likely aware that Mattel issued a substantial recall of nearly 1M toys across 83 products manufactured from mid-April to early-July in the last few days. The recall was prompted by the use of lead paint by a Chinese contract manufacturer. As we are a blog examining topics in Lean production and Kanban systems, we wonder: Can Lean prevent such breakdowns in the supply chain?

While we'll often extoll the numerous virtues of Lean in this blog, Lean itsself could not have prevented this problem. But it could certainly have made it less likely.

Why? Because Lean production gives you greater visibility across the supply chain. And that visibility should give each successive party further up the chain, from floor supervisors, to Mattell QA engineers, the opportunity to identify and fix the problem.

I actually suspect if you look at Mattel's processes, some elements of Lean are deployed. So if that's the case, why didn't it work? As we said, Lean isn't foolproof. It takes the full participation of employees and management to make a successful Lean operation. Remember our piece on Management By Walking Around? Having visibility isn't enough. You have to use it.

Lean and Hospitals

noreply@blogger.com (Ultriva Inc) — Fri, 03 Aug 2007 07:52:00 +0000

The application of Lean principles has tremendous value outside of the manufacturing sphere of which we at Ultriva typically concern ourselves. The Lean Blog continues to provide excellent coverage of Lean applications in medical system and medical systems in need of Lean applications. His latest is a hospital in Australia having trouble finding beds for emergency room patients. One proposed solution: stopping elective surgery. Seems like there's a problem with the system. Sounds like a little Lean thinking would help. Click here to read more.

Lean Myths -- I'll Need A New Team Of Experts

noreply@blogger.com (Ultriva Inc) — Fri, 03 Aug 2007 07:44:00 +0000

Now and again, as we seek to educate on Lean production and Kanban, it's helpful to play the role of devil's advocate. While Lean has its passionate fans, last week's Wall Street journal article on production problems in Japan in the aftermath of last month's earthquake, shows there are also of plenty Lean skeptics.

A common reason we hear to NOT implement Lean is the need for dedicated project resources. Apparently, to Lean skeptics, the need is so great it can outweigh any gains from making the switch.

Our experience tells us that estimate is way off. If you can reduce inventory levels by 50%, increase turnaround times by 50%, and increase turns, you are going to both save money and make money.

This is not to say there is no need for some dedicated resources for a time for an Electronic Kanban implementation, for example. But a model Kanban system involves all of the employees in supporting the system. Kanban cards don't work if no one receives the signal. You can't build a new team outside the existing one and let them operate in a vacuum. Instead you appropriately train and equip an existing workforce so it can do more with less.

The project team should be and typically is temporary in a Lean implementation. If it's not temporary then it suggess something is wrong with the approach.

In our experience to roll out a Kanban system generally requires 1-2 people to lead the project. Once it's rolled out, floor employees, material managers, buyers and planners will be using Kanban on a daily basis and maintaining Kanban replenishment will be part of the normal routine. If the implementation is successful, we find these folks are spending far less time expediting orders, placing order, making forecasts, etc. And when they aren't focused there, they can focus on finding the right suppliers to maintain lower levels of inventory and dedicating their time to meeting the demands of their clients, helping both the top and bottom line.

So... a new team of experts? Nope, your existing employees are the key to success in Lean.

Electronic Kanban vs. Kanban -- It's Evolution

noreply@blogger.com (Ultriva Inc) — Mon, 30 Jul 2007 18:35:00 +0000

Previously, we defined Kanban in a post on this blog. If you are a regular reader, you have no doubt also heard us frequently mention Electronic Kanban, as we are purveyors of Electronic Kanban software. So what exactly is Electronic Kanban (or eKanban)?

We defined Kanban as a signaling methodology that prompts the movement of materials within a production facility or company. Electronic Kanban users employ technology to replace non-electronic components like Kanban cards with electronic signaling or messaging.

While Electronic Kanban could utilize things like a stop signal and still techincally be "Electronic", we think of it as more of a manufacturing software driven system that encompasses barcode scanning to accurately measure parts inventory throughout the supply chain. The use of a part would be noted through barcode scanning and depletion could then electronically signal a need for replenishment across the production process.

In our Ultriva system, everyone from floor employees to managers accesses a single web portal to receive signals and alerts while their activities within the production process are automatically updated through barcode scans.

At its core, despite the fact that activities and signals are transmitted and received through a different format, the principles of Electronic Kanban and Kanban remain the same:

1) The signal, which drives activity or movement is still at the center of the system
2) The system becomes a demand-driven system with or without the deployment of technology
3) The signaling system remains highly visual and simple and is inclusive of all employees. As web usage has become mainstream, so has the ability for workers across a supply chain to utilize the web to manage a Kanban system

If both Kanban and Electronic Kanban inherently drive the same positive outcomes, what is the advantage of Electronic Kanban? Simply put, when inventory tracking and signaling happens automatically, it requires fewer humans to make it happen and it happens instantaneously, which translates to less waste and more speed and accuracy across the supply chain -- exactly what you want to see in a Lean production system. While the deployment of a Kanban system will drive lower inventory, lower costs, and faster turnarounds than a supply chain without, an eKanban system will drive even greater benefits.

Is There A Lean Employee Deficit?

noreply@blogger.com (Ultriva Inc) — Mon, 30 Jul 2007 17:21:00 +0000

Two recent articles in respected manufacturing publications highlighted a topic of interest for us at Ultriva: The difficulty of finding and retaining manufacturing talent.

The first was an article from the American Society for Quality published last week in Reliable Plant about the aggressive luring of Lean manufacturing experts to the services sector. The article quotes Jack Stiles, the president of an executive search firm, that experts are enjoying 20 to 30% pay raises to take their Lean thinking from manufacturing to service industries, like Healthcare or Banking. A Bain executive, Mark Gottfredson, adds "There is a whole industry luring away Toyota and General Electric people".

Then today, Industry Week's Traci Purdum published a piece online entitled "Help Wanted". The article looks at the difficulty manufacturer's are having in filling jobs from the plant to the management suite.

While each looks at different segments of the work force, both address the same problem: skilled labor shortages. This isn't news to us. We've been hearing it from our customers.

While you might think we look at this as a great opportunity, you'd only be half-right. Sure, automation helps companies reduce their need for labor and we're in the automation business, but skilled labor is required to identify the problems and prescribe solutions, like Lean production, for which automation is the answer. It's in our best interests, naturally, for our customers to stay in business and it takes the right talent to do that.

So what's the problem? Why is the manufacturing sector having a tough time attracting and retaining talent.

The American Society for Quality thinks Lean implementation failures might be to blame, while Purdum places much of the blame on industry image.

Well... they probably both have a point, but we think the image problem is the greater of the two. Let's face it -- if you've grown up in the last 40 years, you haven't heard many stories about the golden era of American manufacturing. This despite the fact that pockets of industry have provided tremendous rewards to many firms' shareholders and employees.

To address the issue, it's going to take a pretty darn good marketing effort, as well as some targeted hiring. Purdum's article cites the company ATS, who focuses recruiting efforts on ex-military personnel. That's a great solution for that company, but the manufacturing industry as a whole will have to start younger to change its image if it wants to avoid future employee deficits.

Kids who don't want a college degree but do want a skilled job need exposure to manufacturing industry opportunities early. Same with engineers. While many engineers will change focus during college, industry perception might make it tough to get them thinking about that particular sector. Better PR is needed. We know this is a tall order, but it will have to be addressed or the industry-at-large could face a worker-deficit, in which case, no one wins.

Amazon Blowout Quarter - What's The Secret?

noreply@blogger.com (Ultriva Inc) — Sun, 29 Jul 2007 19:04:00 +0000

Amazon's announcement of it's second quarter results brought a massive increase in the price of the stock in its aftermath, creating billions in additional market cap for its investors. I did not think to cover it here until reading the excellent management blog, Curious Cat, and its take on the quarter. That post made me realize -- I knew Amazon, having worked with them in the past and I felt I could add some insight to their success here.

I had extensive experience working with Amazon in a previous job several years ago. I was running eCommerce for a luxury consumer products company at the time. We had made the decision to private-label outsource our website and fulfillment operations to Amazon. What I saw there was some of the best discipline around the implementation of automated processes I've seen. While it can leave you with a feeling of discomfort when outsourcing to rely so heavily on electronic processes, there was no doubt we quickly accrued positive benefits through waste reduction as a result of their processes. What I in effect saw were Lean principles in action.

We moved from a labor intensive inventory management process to a highly electronic one in which automated signals starting with consumer web orders triggered re-orders from our wholesale warehouse to Amazon distribution facilities. The end result was a highly efficient system that, outside of new product introductions, tended to run itself, allowing my team to focus its energy on marketing and customer acquisition and not inventory management. To see long-awaited improved financials is not surprising given what I saw several years ago when working with them. And I think I know their secret.

Lean Auto Manufacturers Shut Production In Wake Of Quake - Kanban Blamed

noreply@blogger.com (Ultriva Inc) — Thu, 26 Jul 2007 23:52:00 +0000

The July 16th quake in Northern Japan apparently didn't just injur 1,000 people and destroy hundreds of buildings. It also crippled Japanese industry in other parts of the country. In the wake of the quake, automobile and heavy equipment manufacturers found there reliance on a single piston ring from Riken, whose regional factory was damaged in the quake, forced the temporary closure of their plants. Toyota, for example, closed all 12 of its domestic facilities delaying delivery of 50,000 cars.

As covered on Leanblog, apparently some of the financial press, found Lean, and its fostering of close relationships between Lean manufacturers and their suppliers, was to blame. The Wall Street Journal even went so far as to say "Blame It On Kanban".

It's curious that Kanban would be blamed when it's highly like non-Lean manufacturers would have been similarly affected by the factories of damaged suppliers. While it's true, Lean production does not promote excess inventory that could offset supply issues in the event of natural disaster, I would love to see a journalist present a case that suggests the money lost in the rare natural disaster offset the money saved during the thousands of days over which no natural disaster hit. Since earthquakes and hurricanes don't seem to impact the American Auto manufacturers, seems they should be doing better if blame lies in Lean production.

Kanban In Low-Volume Environments

noreply@blogger.com (Ultriva Inc) — Tue, 24 Jul 2007 18:23:00 +0000

One reason we often hear from prospective Electronic Kanban clients who are thinking of moving to Lean production , but haven't, is that their operation is too small or lacks the complexity to make a Kanban system necessary. In most cases, we humbly disagree with this assessment.

Remember, what we've previously said: There is no magic to Lean thinking -- it's just common sense. And common sense is typically good business.

Kanban best practices usually apply regardless of the manufacturing environment. Whether it's high mix or low mix, high volume or low volume, so long as there is a reasonable number of repeatable tasks, a Kanban system with Kanban cards and other best practices makes sense. While a factory might not have a high number of activities, it often still has a real opportunity to eliminate waste in each activity by moving to Lean. If it depletes some of the same parts repeatedly in its activities, then it's hard to imagine a Kanban system would not be helpful.

An instance where Lean production might make less sense is when supply consumption is really variable and/or infrequent. An example of this could be some sort of made-to-order, artisan's operation. In this case, the artisan could prep an end customer for a long lead time upon purchase and then order supplies to manufacture. However, even he could still have a fair amount of standardization. If an artisan's factory was making grandfather clocks, for example, would it still use the same parts for each clock regardless of how the face or wood differed?

Regardless of classification, the decision should really come down to best managing demand. If demand cannot be accurately forecast, then manufacturers will order parts with customer orders or carry safety stock. If they order only upon customer order, they've got a long turnaround time to their end customers. If they carry safety stock, then they'll ultimately carry too much inventory.

In either case, regardless of size, Kanban is a good solution. Many customers don't want to wait for their order and will go elsewhere. And sitting on inventory has cost implications. Ultimately, both will eventually tilt a manufacturer to look for efficiency gains and they'd be wise to turn towards Lean for answers.

Management By Walking Around Reduces Waste

noreply@blogger.com (Ultriva Inc) — Mon, 23 Jul 2007 20:36:00 +0000

I read a short post on the excellent management blog, Curious Cat, the other day on the subject of Management By Walking Around (MBWA). MBWA espouses the importance of seeing what's happening in your business in order to know how to improve it.

Sounds like common sense, doesn't it? If it also sounds like Lean Thinking, it should. The Toyota Production System strongly encourages observation, for without it, your liable to miss kanban that could drive improvement. How would you know your workers are idle if you don't see them idling? I guess you could be told... but it's always good to see it without another's interpretation.

If you are a manager or employee in a company attempting to implement Lean principles, it's imperative to see what's going on. Management reports, Electronic Kanban, and spreadsheets with yellow, green, and red are vital management tools, but they're only part of the solution. A commitment to Lean is a commitment to change in all practices. So get out there, see and be seen.

Why Is Kanban Better Than Min/Max Replenishment?

noreply@blogger.com (Ultriva Inc) — Sun, 22 Jul 2007 21:56:00 +0000

We all understand how difficult it is to change the wheels on a moving bus. If you've heard that analogy applied before, it was probably to justify why business transformation or a change in process is so difficult.

We've certainly heard the metaphor used to explain the entrenchment of Min/Max Replenishment systems. It's about the only excuse left because reality suggests it just doesn't make sense when compared to Lean manufacturing. Min/Max leads to higher inventory levels and higher inventory levels lead to higher costs. Higher costs are tough to swallow in the highly competitive global manufacturing world.

Why does min/max drive higher costs? The min/max approach promotes large and infrequent orders. These large orders result in significantly higher than needed inventory levels for several days or weeks during each replenishment cycle.

Min/max drives larger orders for several reasons. First, fear of stock-outs. Second, it's typically calculated on inventory levels that come from historical ERP functions. These ERP calculations are highly dependent on accurate bills of material and detailed tracking of scrap and defective material. Missing or inaccurate data in any of these areas leads to inaccurate data and inaccurate data makes for poor forecasting. If you fear stock-outs and you tend to have unreliable forecasts, how do you compensate to avoid stock-outs? You overshoot. When you overshoot, you carry higher inventory levels than you should carry.

In contrast, Kanban is based on more frequent, smaller orders and therefore lower inventory levels. With Kanban (or Electronic Kanban), you order upon or near depletion, replenishing what you need as you need it. Because Kanban cards or bar coded labels are tracked where the material is consumed, inventory data can be tracked very reliably, driving a demand-driven system that promotes lower inventory levels and lower costs.

It is hard to change the wheels on a moving bus, but case study after case study is proving a Lean business is a better business. Eventually, the wheels must be changed.

What is Kanban? A Brief Overview

noreply@blogger.com (Ultriva Inc) — Thu, 19 Jul 2007 12:02:00 +0000

As with Lean, a web search for definitions of the Japanese word Kanban will yield a variety of answers: "signpost", "billboard", "signal", "signal card" among others. At Ultriva, we define Kanban as more than a signal, but rather a signaling methodology that is a key component of Lean.

In our definition, Kanban has four primary components:

1) The signal -- At its core, Kanban is about the use of a signal or signals that represent an instruction to drive some sort of activity. The instruction, in a factory, for example, could be to build a component or order more parts.
2) Demand-Driven -- In Kanban, signals are demand-driven. A Kanban card is used to drive production because demand suggests the need for production. A supplier will get an order for components because their customer has consumed or will shortly consume all it's components.
3) Visual and Simple -- Kanban utilzes signals easily understood by the recipient. It could simply be the presence of a card that drives action or it could be some other kind of symbol that is not open to interpretation - an empty supply cart for example. Regardless of the type of signal, it's presence very clearly states: "order more", "Im out of... ", "build more....", etc.
4) And lastly, it puts the employees in control. When Kanban is utilized in a manufacturing business, for example, the employee should have total control to reorder a part or supply a part, based on an activity or process HE or SHE controls. Rather than have a semi-detached buyer order parts for a line employee, the line employee signals his need, setting off a chain that results in the replenishment of parts.

To illustrate, think of a bin full of widgets for a motor on a factory floor. The depletion of that bin prompts the usage of a card to signal the need for more widgets. That signal is received and filled by the supply room who brings out more parts to the factory floor. Bringing out those parts, now leaves the supply room near inventory depletion prompting the use of another card for the widget supplier. The recipient supplier sees the signal and schedules shipment and/or prodution as a result.

Signals prompt action, demand drives the signals, simple visual cues are used, and those employees who are part of the process ultimately drive activity.

So why does Kanban matter? Kanban is a key component of Lean. It helps create the link between the different cells in a supply chain to keep the chain moving. By clearly and simply communicating needs throughout the supply chain, waste is reduced and waste reduction ultimately results in significant financial benefits to its practicioners.

There is a lot more we can say about Kanban and we will in future posts.

P&G Goes Lean?

noreply@blogger.com (Ultriva Inc) — Wed, 18 Jul 2007 18:42:00 +0000

Mark Graban posted an interesting article on his blog the other day regarding Proctor & Gamble and what I'll characterize as Lean thinking. To drive sales in developing countries, where low-income people carry their daily wage with them, P&G is adjusting its product mix and pricing to meet the needs of the consumer. While it does pertain directly to Lean manufacturing, it's a great illustration of how business realities force cost reduction and ultimately drive waste elimination throughout the supply chain.