Evolving Excellence

A Tale of Two Leans

2009-11-05T05:43:16-08:00

There was about as good an article on lean in USA Today the other day as you will ever find in the popular media, describing a lot of good things happening on the factory floors at Sealy, Marlin Steel Wire, Dana, Carlisle Tire and ConMed. The folks there are racking up all of the typical lean improvements - labor costs down, floor space saved, quality improved - all the things the lean community has been promising for a long time.

The gist of the article is that these companies have been dabbling with lean for a while, but when the economy cratered they got serious. "While a growing number of companies have adopted the practices through the years, the number of converts has grown substantially during the economic downturn," said a guy from Manufacturer's Alliance. I have to wonder whether much of it is going to sustain once the economy comes back if the commitment to lean was driven by the need to immediately put out fire that was burning out of control, rather than a genuine understanding that lean is a better way to manage the business.

You never know who these folks really are and whether they really speak with authority, but the article said, "Driving the lean movement is an urgent need to pare inventory, executives say. With revenue down and tight-fisted banks reluctant to lend, the makers no longer can afford to tie up hundreds of millions of dollars in raw materials that languish in factories for weeks or months." If that's the case the likelihood of any of these companies becoming sustaining lean enterprises is pretty slim. 'The banks won't finance our waste any more so I guess we have to do this lean stuff' is hardly the sort of leadership required for excellence.

You never know, however. It sounds like Marlin Steel Wire is the real deal. They are a privately held company which ratchets up the probability of their management making sane decisions by orders of magnitude. Their focus is on teamwork, quality, flexibility and hammering down lead times - all the right objectives. See is they take the next step and structure themselves into true value streams, take on lean accounting and really become a lean enterprise and not just a lean manufacturer. That will tell the tale of sustainability.

Lantech seems to be an excellent case in point. They have done all of the factory stuff and the fluffy,cultural side of lean, but have a sustainability challenge. They have all the characteristics of a company that is committed to lean, but has yet to realize that lean is first and foremost about management - not factory floor practices or culture. With their passion for lean, however, odds are they will take the next big step.

Some of the others mentioned, such as Dana and Carlisle Tire, don't really have much hope. They are tied to the automotive industry which begs the question, What took you so long? Their copies of The Machine That Changed The World must have got lost in the mail twenty years ago. Their lean effort seems to be aimed squarely at headcount reduction, which means that, now that their copy of the lean book arrived, they didn't understand it.

Sealy - the star of the story - is going to face some challenges. They started their lean journey as a privately held company, then went public and they now have to answer to Wall Street. It will be interesting to see how they weather the insatiable, anti-lean pressure.

I suppose stories like this one help the lean cause more than they hurt. The publicity is generally favorable, but when companies like Dana and Carlisle fail - and the odds are overwhelming that they will - it will feed ammunition to the the manufacturing naysayers.

The moral of the story is that there is lean ... and there is lean. The same old story applies. Some companies look lean and a few others truly are lean. Of course the writer for USA Today cannot be faulted for not knowing the difference, but it is very important for manufacturing management to know the difference between what is going on at places like Marlin and Lantech, and what is passing for lean at Dana.

Once Upon A Time In Manufacturing

2009-11-04T00:36:00-08:00

by BILL WADDELL

There are a lot of perks that come with being famous and powerful, one of them is that you can write a fairy tale with yourself as the hero and someone will publish it Don Sessions from Calzone Case shared one such yarn with me. This one spun by Steven Rattner describes how, once upon a time a prince named Steven Rattner rode his white horse to Washington where he rounded up a troop of gallant knights on their white horses, then they all rode to Detroit to valiantly save two damsels in distress. General Motors and Chrysler. Then Alexander Hamilton smiled down on them and everyone lived happily ever after.

True stories like - Once upon a time Joe and Vin Calzone set out "to build the highest quality custom case in the world, at a fair price with on-time delivery"; So they did it, building three factories, taking over the market, employing a lot of people, pumping a lot of good into three communities and making customers very happy along the way - don't get published in big time forums like Fortune Magazine bacause guys like Joe and Vin don't really have the right pedigree or the right connections. Calzone Case mainly makes cases for musical instruments and Joe Calzone is a musician at heart - as are a lot of people who work for him. How good they are is a matter of judgment. You can listen yourself to the company band (Fancy that - a company manufacturing products for the music market run by musicians who have a company band) called Trainwreck.

The fairy tale, on the other hand was written by the guy who "saved" the auto industry. While the Calzone boys built a business based on the notion that their knowledge of and passion for music gave them some ideas about how to make products that would have a lot of value for musicians, the Prince who saved Detroit came from a little thinner background. Brown University , reporter for the New York Times (losing money and struggling to survive), Lehman Brothers (bankrupt), Morgan Stanley(well, what can we say about Morgan Stanely that hasn't been said before), Lazard Freres (lawsuits, investigations, sleaze...), and then founder of the Quandrangle Group (under investigation by the New York Attorney general). Nothing in there about cars, manufacturing, or delivering an honest product for an honest price.

With this rather odd curricula vitae for a prince on a white horse to save the automobile industry, Mr Rattner describes how he first leaped into action by hiring a guy named Harry Wilson - a natural to get things going since Harry's mother had been ill treated in her manufacturing career, but Harry rose above it to get a degree from Harvard and made it big in the banking business. So Harry was put in charge of hiring a gang of bankers and lawyers - a "mini investment bank" and a "mini law firm" - to get GM and Chrysler back on track. Nobody who knew the first thing about the products or manufacturing was solicited - just a lot of people like our white knight - a 180 from the Calzone Case theory of business.

"The question for us was whether GM would be better off with Fritz [Fritz Henderson - GM CFO at the time and now the guy in charge] or with an outsider, as Ford (F, Fortune 500) had done in bringing in Boeing executive Alan Mulally. While nervous about whether Fritz could bring the change GM desperately needed, I was considerably more nervous about the likelihood of recruiting a thoroughbred CEO in the midst of the turmoil."

Heaven forbid the GM cultural boat get rocked; so rather than bring in anyone who knew something about cars or manufacturing, our white knight opted for the shrewd move of putting the current GM financial guy in charge. Can't go wrong with a money guy at the helm, I suppose, especialy since the Prince and his fellow knights determined that GM's problem was purely a cost problem. (There's a real surprise - a bunch of finace people got together and came to the stunning conculsion that GM's problems were financia!)

All of this is a long-winded exercise in preaching to the choir. With all of the investment bankers, economists, regular bankers, McKinsey wizards and the assorted collection of America's best and brightest running GM into the ground, then bailing it out, and now scheming and planning absurd moves like buying back bankrupt Chinese manufacturer Delphi - all with billions of dollars in taxpayer money - they demonstrated an amazing ignorance of the obvious.

GM failed because their cars do not provide value to the people who buy cars - regular people. So did Chrysler. Toyota, Honda, Ford, Hyundai and others did not need bailouts and salvation by the likes of our financial experts because they make better products.

Click on this link and see the only data necessary to understand why GM went bankrupt, and why the government financial restructuring cannot possibly succeed.

It is hardly a coincidence that, if you were to list the car companies in order of best finacial performance to worst over recent years, the list would be in about the same order as the reliability rankings. It does not take great genius to know what Joe Calzone knows - you make money selling products that represent a good value to the customer - you lose money when you don't. Even a wisp of that idea is nowhere to be found in the narration of the GM/Chrysler bailout project. It is as if the product never crossed their minds.

The saddest part of all is that people like Rattner take well deserved, hard earned money from guys like the members of Trainwreck and put it in the hands of their financial community cronies - most of whom wouldn't know an honest dollar if they ever came across one. He then has the gall to seek the blessing of Alexander Hamilton. Hamilton, author of the Report on Manufactures pointing out the critical nature of manufacturing to American success, and a driving influence to create the financial systems on Wall Street to provide capital for manufacturing would not "have been proud of you", Mr Rattner, your self-serving version of events notwithstanding.

I suspect he just might have enjoyed tapping his toe to Trainwreck, however.

Ritz-Carlton's Focus on the Customer

2009-11-03T00:31:00-08:00

By Kevin Meyer

We've often heard about the incredible customer focus at Ritz-Carlton hotels. Now a Forbes interview with RC president Simon Cooper sheds some more light on the subject.

Ritz-Carlton has become a leading brand in luxury lodging by rigorously adhering to its own standards. It is the only service company in America that has won the Malcolm Baldridge National Quality Award twice, and Training Magazine has called it the best company in the nation for employee training. Its unique culture starts with a motto: "We are ladies and gentlemen serving ladies and gentlemen."

So what kinds of unique things do they do?

We entrust every single Ritz-Carlton staff member, without approval from their general manager, to spend up to $2,000 on a guest. And that's not per year. It's per incident. When you say up to $2,000, suddenly somebody says, wow, this isn't just about rebating a movie because your room was late, this is a really meaningful amount. It doesn't get used much, but it displays a deep trust in our staff's judgment. Frankly, they could go over that amount, with the general manager's permission.
The concept is to do something, to create an absolutely wonderful stay for a guest. Significantly, there is no assumption that it's because there is a problem. It could be that someone finds out it's a guest's birthday, and the next thing you know there's champagne and cake in the room. A lot of the stuff that crosses my desk is not that they overcame a problem but that they used their $2,000 to create an outstanding experience.
There are stories about hiring a carpenter to build a shoe tree for a guest; a laundry manager who couldn't get the stain out of a dress after trying twice flying up from Puerto Rico to New York to return the dress personally; or when in Dubai a waiter overheard a gentleman musing with his wife, who was in a wheelchair, that it was a shame he couldn't get her down to the beach. The waiter told maintenance, who passed word, and the next afternoon there was a wooden walkway down the beach to a tent that was set up for them to have dinner in. That's not out of the ordinary, and the general manager didn't know about it until it was built.

Pretty incredible. Meanwhile how many of us have spending limits, even as experienced managers and executives, that preclude us from creating exceptional service. I often joke with my CFO that our shop floor operators have more financial authority than the company President as they can make $40,000 accept/reject decisions every day without any oversight, and we trust them completely, but our executives require multiple approvals for far less.

How about the concept of stand up morning meetings:

We use what we call "lineup," which is a Ritz-Carlton tradition. The concept comes from the early restaurants of France, where the chef got his whole team and all the waiters and waitresses and the maitre d' together at 5:30 in the evening. It's a sort of round table. Everybody is there. The chef communicates what they are going to be serving. For the Ritz-Carlton, we want every single hotel, everywhere in the world, every partner, every shift, to utilize lineup, which typically takes around 15 minutes every day. Part of the lineup everywhere around the world is a "wow story," which means talking about great things that our ladies and gentlemen have done. That is a wonderful training and communication tool, where every department layers on the department message. And it's based on having the same message everywhere, every day, and then each hotel layers on its own message.

Not only are issues and policies discussed and aligned, but successes are celebrated. That's a lesson and reminder for many of us who already have stand up meetings.

Finally, what is the key to their successful customer-centric culture?

A culture is built on trust. And if leadership doesn't live the values that it requires of the organization, that is the swiftest way to undermine the culture. No culture sticks if it's not lived at the highest levels of the organization. It takes an extraordinarily long time to build a culture.

Hear hear. Trust, driven from the top.

Finally, does anyone want to sponsor me to stay at a Ritz for a few days so I can investigate in more detail? I promise a great post will follow!

The Status Quo Degrades

2009-11-02T00:12:00-08:00

By Kevin Meyer

Stewart Anderson penned an article in the latest Quality Digest that took a look at several misconceptions about Toyota. I won't go into all of them, but one in particular did stick out:

Misconception #4: Toyota processes are fully standardized and never degrade.

Standard work is a key component of lean manufacturing, so what does that mean?

While Toyota does believe in and practice creating standardized processes, they also realize that even a standardized process will degrade over time. This happens for a variety of reasons—people forget to follow standardized work, standard operating conditions deteriorate over time, etc.

So if that's the case, then how do you control it?

Thus, Toyota takes the view that if a process is not improving, then it is degrading; there is no in-between state that can be indefinitely maintained, even with standardization in place. Because all processes will degrade, Toyota always insists on moving toward the next target condition once a previously-set target condition has been achieved and the new condition stabilized.
Toyota managers will always restandardize a process after every improvement, but they will not be content to rest there, since they know the new condition will deteriorate unless daily improvements are made.

If it's not improving, it's degrading. Period.

Sort of makes you wonder about those factories that became "lights out" operations filled with robots. Since robots can't really dream up improvements, what will happen?

Masking the Real Problem

2009-11-01T06:39:46-08:00

By Kevin Meyer

I promise to get off of this tax kick one of these days, but ignorance of the incredible influence of tax policy just burns me sometimes. And here in California it just hit again, effective today.

What would you do if your customer came to you and said they'd like a loan of 10% of what you planned on paying them for real goods and services, beginning immediately and revolving perpetually, and they'd then pay it back the following year with no interest? In effect asking you to for more cash that you then would not have available to purchase, or invest in, other essentials. What if you had no choice.

That's exactly what happened. Our state withholding just went up 10% today, but it will then just be refunded after we file returns next April. So they claim it's not a "tax increase" since over the course of the year it will balance out. This myopic travesty will bring in an extra $1.7 billion, which will then have to be paid right back out (assuming they don't start issuing IOU's again). And as with all government programs, there's no end point... next year I'll be giving them an extra 10% loan to be repaid the following year.

What would happen if you told your boss you needed to pull a few million from the corporate treasury to apply to your bottom profit line, but with the promise you would then return it the following year... when you'd ask for it again. Would anyone believe you really had higher profits? Would you still have a job? Would your margin problem ever be really fixed?

That's really the bottom line: it doesn't fix anything. Just a mask.

The accounting games politicians play. And they claim businesses are corrupt?