Bypassing any expected change management effort or cultural transformation, nothing gets a group of employees moving than an executive order. That’s exactly what the Governor of the State of Washington did – has executed an executive order for government employees to apply Lean in their work.

I’m as surprised as you are. When I first read the executive order, I thought it was a joke, but it’s very real. On the one hand, I find it encouraging. On the other hand, the notion of an “executive order” feels a bit contrary to the spirit of lean. Either case, I find it as a positive event in the adoption of Lean in Government.

The Governor’s executive order has led to a Bill that is now up for a vote in the Washington State Legislature. The Bill is titled “Maximizing the use of Lean Strategies in State Government“.

What is more encouraging is that the Office of the Governor released a blog post, detailing the current successes of Lean so far in their application in government. In the words of Wendy Korthuis-Smith from the Office of the Governor:

Some positive examples include:

• Department of Social and Health Services reengineered its Community Service offices – moving more staff to the frontline to serve clients and consolidating 63 call centers into one statewide call center. Since then, DSHS saw a 99 percent reduction in wait times for community services – from 4 weeks to 5-45 minutes – and the number of dissatisfied customers dropped from 98 percent to less than one percent.
• DSHS increased its outreach to encourage more parents to use online resources to pay and obtain child support payments. As a result, more clients are shifting to online payments and distribution – saving the agency $600,000 and improving accuracy and efficiency.
• The Department of Corrections avoided spending $1.3 million in additional food costs by standardizing its menu at all 12 prisons across the state.

I find all of this as very positive. What do you think?

Below is the text of the Executive Order.

· · ·
EXECUTIVE ORDER 11-04
LEAN TRANSFORMATION

WHEREAS, our current economic climate with lower revenues and higher demand for services
requires state government to continue to streamline operational processes and prioritize limited
resources; and

WHEREAS, the citizens of Washington expect state government to deliver needed services with innovation, efficiency and integrity; and

WHEREAS, we must continue to transform government into a leaner, 21st century organization that is more effective and efficient, and put our state on a trajectory that ensures a strong financial foundation for years to come; and

WHEREAS, Washington, with a long-standing commitment of using tools to improve government performance, has already embraced the Lean philosophy with several agencies
reporting results which demonstrate it can reduce waste, eliminate delays, save money and provide high quality service to the public; and

WHEREAS, Washington has already established a strong performance management culture through Government Management, Accountability and Performance (GMAP), a management tool that relies on performance measures for a disciplined approach to decision making; and

WHEREAS, Lean builds on the GMAP program as a proven management approach used by a wide range of public and private organizations to increase customer satisfaction and employee morale, improve productivity, eliminate waste in processes and improve the quality of products
and services delivered; and

WHEREAS, government has partnered with Lean subject matter experts in the private sector to learn how to apply Lean methods and tools to eliminate waste, save time, standardize workflow, reduce backlogs and decrease process complexity; and

WHEREAS, Washington is already seen as a model for performance improvement practices that encourage innovative and responsible ways of providing goods and services; and

WHEREAS, it is necessary for state agencies to take additional steps to do more with the resources we have available.NOW, THEREFORE, I, Christine O. Gregoire, Governor of the state of Washington by virtue of the power vested in me by the state Constitution and statutes do hereby order and direct:

All executive cabinet agencies to begin implementing Lean by:

1. Learning about Lean principles, concepts and tools;
2. Completing a Lean project by August 31, 2012;
3. Deploying efforts to build capacity for Lean, while embedding Lean in the agency culture; and
4. Reporting Lean results and lessons learned to the Governor’s Office by August 31, 2012.

The Governor’s Accountability and Performance staff will work with internal and external
partners to:

1. Provide enterprise-wide guidance on initiating Lean implementation;
2. Provide resource options to assist agencies in Lean deployment;
3. Develop an enterprise roadmap for effective Lean implementation, including a
4. Lean learning path for leaders, practitioners, managers, supervisors and employees; and
5. Report progress and results of agency and interagency Lean implementation.
6. No later than October of each year, the Governor’s Accountability and Performance staff shall report to the Governor on progress made by state agencies in implementing the provisions of this order.

This executive order shall take effect immediately. Signed and sealed with the official seal of the state of Washington on this 15th day of December, 2011, at Olympia, Washington. By:

/s/

Christine O. Gregoire

Governor

BY THE GOVERNOR:

/s/
Secretary of State

Legislating The Toyota Production System: Making the Application of Lean the Law is a post from: Lean Six Sigma Consulting

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Have you ever pressed the closed button in an elevator? Or, have you played with an office thermostat because you were either too hot or too cold? Or, did you press the “walk” button on the crosswalk this morning? Did it work? If so, you’ve been deceived.

Since we are psychological creatures, the solution to some of our problems might not actually solve our problems – we just think they do. Such is the case with placebo buttons.

What is a Placebo Button?

A Placebo Button is a device that when activated – turned on, turned off, pressed, depressed – actually does nothing. We just think it does. In effect, if we are cold, the countermeasure is to turn up the heat. When we actually do turn up the heat on the office thermostat, nothing happens but we feel warmer. It turns out that those within the HVAC industry understand this practice well. By some accounts, over 50% of office thermostats actually do not work and over 90% of elevator buttons to close the elevator actually do not work either.

Root Cause Analysis Through Deception is a post from: Lean Six Sigma Consulting

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In Lean, inventory is often viewed in a negative light. Indeed, inventory is one of the 7 deadly wastes. Is the traditional position of Lean justified in thinking so negatively against inventory and the warehousing that goes along with it?

Single Piece Flow, while an ideal state for a company to be at, is not realistic when it comes to warehousing. Why? Well, there is a fixed cost any time product is transported. This is especially high when the carrier is ship or plane or train; and to amortize this fixed cost it is necessary to fill the carrier to capacity. Consequently, a distributor may consolidate shipments from vendors into large shipments for downstream customers.

Similarly, when shipments are consolidated, then it is easier to receive downstream. Trucks can be scheduled into a limited number of dock doors and so drivers do not have to wait. The results are savings for all involved in the supply chain.

Put another way, suppose there’s a large retailer with thousands of suppliers. Imagine if those suppliers replenished each retail store directly. That scenario would mean that each trailer would leave the supplier mostly empty or Less-than-truckload (LTL). The model might be illustrated as follows:

In the example where each supplier replenishes each store directly, we achieve the following transportation plan:

Vendors v * Stores s = # of direct shipment transportation runs.

And, each direct shipment will likely be less than truckload and the consequent costs will be much higher.

The alternative is to have a consolidation warehouse. In this scenario, we have Vendors or Suppliers that have inbound shipments to a consolidation warehouse, then that warehouse delivers direct to the stores. The result is the following transportation plan:

Vendors v + Stores s = # of direct shipment transportation runs.

In this scenario, the costs incurred is much lower and the shipments will likely be larger with lower fixed costs. This model might be illustrated by the picture below:

So, despite the negative attitude toward inventory and the field of warehousing in general, lean advocates need to understand the warehousing can be strategic and can actually reduce the overall landed costs in the supply chain.

How a Warehouse Can Reduce Costs and Increase Service Level is a post from: Lean Six Sigma Consulting

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Apple recently released their Apple 2012 Supplier Responsibility Report, which highlights the audits conducted in 2011, violations that occurred with their outsourced manufacturing and supply chain, and corrective actions put in place. Apple was very transparent in the creation of this report and I applaud them for that. Part of the report is spent on discussing the need for a Management System within its supply chain and manufacturing partners. I predict that for Apple suppliers and manufacturers to remain compliant with the Management System requirement, more and more of them will adopt lean management as part of their business.

There’s much media hype on Apple and their decision to outsource their manufacturing and supply chain, such as the iPhone Supply Chain. The media hype has largely been focused on the human rights violations made by their outsourcing partners. For example, here are some cited by Henry Blodget in a recent article ¹:

• The Chinese city of Shenzhen is where most of our “crap” is made. 30 years ago, Shenzhen was a little village on a river. Now it’s a city of 13 million people — bigger than New York.
• Foxconn, one of the companies that builds iPhones and iPads (and products for many other electronics companies), has a factory in Shenzhen that employs 430,000 people.
• There are 20 cafeterias at the Foxconn Shenzhen plant. They each serve 10,000 people.
• One Foxconn worker Mike Daisey interviewed, outside factory gates manned by guards with guns, was a 13-year old girl. She polished the glass of thousands of new iPhones a day.
• The 13-year old said Foxconn doesn’t really check ages. There are on-site inspections, from time to time, but Foxconn always knows when they’re happening. And before the inspectors arrive, Foxconn just replaces the young-looking workers with older ones.
• In the first two hours outside the factory gates, Daisey meets workers who say they are 14, 13, and 12 years old (along with plenty of older ones). Daisey estimates that about 5% of the workers he talked to were underage.
• Daisey visits other Shenzhen factories, posing as a potential customer. He discovers that most of the factory floors are vast rooms filled with 20,000-30,000 workers apiece. The rooms are quiet: There’s no machinery, and there’s no talking allowed. When labor costs so little, there’s no reason to build anything other than by hand.
• A Chinese working “hour” is 60 minutes — unlike an American “hour,” which generally includes breaks for Facebook, the bathroom, a phone call, and some conversation. The official work day in China is 8 hours long, but the standard shift is 12 hours. Generally, these shifts extend to 14-16 hours, especially when there’s a hot new gadget to build. While Daisey is in Shenzhen, a Foxconn worker dies after working a 34-hour shift.
• Assembly lines can only move as fast as their slowest worker, so all the workers are watched (with cameras). Most people stand.
• The workers stay in dormitories. In a 12-by-12 cement cube of a room, Daisey counts 15 beds, stacked like drawers up to the ceiling. Normal-sized Americans would not fit in them.
• Unions are illegal in China. Anyone found trying to unionize is sent to prison.
• Daisey interviews dozens of (former) workers who are secretly supporting a union. One group talked about using “hexane,” an iPhone screen cleaner. Hexane evaporates faster than other screen cleaners, which allows the production line to go faster. Hexane is also a neuro-toxin. The hands of the workers who tell him about it shake uncontrollably.
• Some workers can no longer work because their hands have been destroyed by doing the same thing hundreds of thousands of times over many years (mega-carpal-tunnel). This could have been avoided if the workers had merely shifted jobs. Once the workers’ hands no longer work, obviously, they’re canned.
• One former worker had asked her company to pay her overtime, and when her company refused, she went to the labor board. The labor board put her on a black list that was circulated to every company in the area. The workers on the black list are branded “troublemakers” and companies won’t hire them.
• One man got his hand crushed in a metal press at Foxconn. Foxconn did not give him medical attention. When the man’s hand healed, it no longer worked. So they fired him. (Fortunately, the man was able to get a new job, at a wood-working plant. The hours are much better there, he says — only 70 hours a week).
• The man, by the way, made the metal casings of iPads at Foxconn. Daisey showed him his iPad. The man had never seen one before. He held it and played with it. He said it was “magic.”

The list of embarrassing violations go on and on, leading Henry Blodget to ask all Apple users:

The bottom line is that iPhones and iPads cost what they do because they are built using labor practices that would be illegal in this country — because people in this country consider those practices grossly unfair.

That’s not a value judgment. It’s a fact.

So, next time you pick up your iPhone or iPad, ask yourself how you feel about that.

Need For a Management System

The Apple Supplier Code of Conduct has a requirement for all its suppliers to have a Management System in place. Specifically,

Apple requires that our suppliers establish management systems that ensure compliance with each section of its Code as well as applicable laws and regulations. Suppliers’ management systems must be capable of identifying and mitigating operational risks. They should also help suppliers make continuous improvements to their standards and practices. This section of the Code provides a foundation for its other elements: Enforcement of the standards we’ve defined in the Code’s other areas depends on suppliers setting up the right management systems.

Our audit programs examine both business practices and the management systems that can sustain those practices. There may be cases where our audit reveals compliance in actual practice, but the underlying management system may not be strong enough to assure ongoing compliance. For this reason, Apple audits include examination of the management systems—such as policies and procedures, roles and responsibilities, and training programs—underlying every category in our Code.

Training is an important tool we use to call attention to the need for our suppliers to strengthen management systems. Training also empowers workers, raising their awareness to their rights—an important part of our efforts to drive our suppliers to adopt socially responsible management systems and practices. As part of our audit programs, we follow up to see if training programs result in changes to the workplace. For example, last year, audit scores went up for management systems compliance in underage hiring prevention following the extensive training we delivered.

In sum, Apple is requiring suppliers and manufacturers to have in place:

• Risk Assessment and Management: A process to identify environmental, health and safety, business ethics, labor, human rights, and legal compliance risks associated with their operations; determine the relative significance of each risk; and implement appropriate procedures and physical controls to ensure compliance and control the identified risks. Risk assessments for health and safety must include warehouse and storage facilities, plant and facility support equipment, laboratories and test areas, bathrooms, kitchens, cafeterias, and worker housing.
• Performance Objectives with Implementation Plans and Measures: Written standards, performance objectives, targets, and implementation plans, including a periodic assessment of the Supplier’s performance against those objectives.
• Audits and Assessments: Periodic self-evaluations to ensure that the Supplier, its subcontractors, and its next-tier Suppliers are complying with this Code and with applicable laws and regulations.

If some or most of them haven’t yet, I predict that several Apple outsource manufacturing and supply chain partners will begin to adopt lean management to remain in compliance with the Apple requirement for a management system. This can be good or bad: if the suppliers remain true to the spirit of Lean, then good things can come of it. If the outsource manufacturers and supply chain partners decide to adopt the “lean and mean” mantra, they can use Lean management as an excuse to continue to treat their people badly.

All in all, I applaud Apple for being transparent in their report. As far as Management Systems go, I anticipate hearing poor treatment of employees to be linked to “lean and mean” management, bringing all true lean advocates to an uproar.

Apple Supplier Responsibility Report: Requiring Management Systems is a post from: Lean Six Sigma Consulting

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We, lean folks, sometimes develop a narrow worldview that lean is just for manufacturing. While we know that lean is being applied to many different industries, we are sometimes surprised to hear of companies applying lean, especially if they are unconventional companies we never expected to be adopting lean; such is the case with AOL.

We’ve all heard of AOL – America Online. “You’ve got Mail” has become a staple phrase in our lexicon. What people don’t realize is that AOL is also a company that has adopted lean and lean is a part of their continuing cultural transformation.

In fact, recently, CEO Tim Armstrong, in a letter to all AOL employees used the word “Kaizen” in his letter, encouraging all AOL employees to contribute to the mission of doing better in 2012.

I came across a case study on how AOL has implemented lean thinking that I think will be helpful. At the time of this case study, AOL had implemented a blended version of both Lean and Six Sigma and appears to have followed the DMAIC approach for the case study. Continue below to learn more about how lean was applied in the AOL Broadband Division.

AOL Broadband

Under the AOL Broadband division is a group called the Carphone Warehouse. Below is some history on this group:

• The Carphone Warehouse was set up in 1989 by Charles Dunstone. Today it is Europe’s leading mobile communications retailer, generating annual turnover of £4bn (year ending March 07), offering customers impartial and expert advice, the widest choice of the latest products and unbeatable service.
• The company operates across 10 markets and employs over 17,000 people.
• The vision and core values first introduced by Charles remains unchanged and the company continues to be driven by a total dedication to customer satisfaction:
• The Carphone Warehouse’s Product Truth: A product bought from The Carphone Warehouse will not only be the most appropriate for the customer’s needs, it will also benefit from a comprehensive range of products, services and after-sales care that cannot be found elsewhere.

As with most businesses, The Carphone Warehouse operates a customer service center. AOL Broadband claims that their Customer Service Center is unlike the traditional customer service center which they define as:

• Operators working from a script
• Non-expert operators (call screening)
• Incompetent or untrained operators incapable of processing customers’ requests effectively
• Overseas location, with language and accent problems
• Automated queuing systems—this sometimes results in excessively long hold times
• Complaints that departments of companies do not engage in
• Complaints that departments of companies do not engage in communication with one another
• Deceit over location of call centre (such as allocating overseas workers false English names)
• Requiring the caller to repeat the same information multiple times
• High staff turnover, low moral

Contact centers are traditionally Efficiency driven, with the following supporting metrics:

• Average Handle Time (AHT)
• Call volumes
• Queue times
• Agent & customer
• Abandoned Calls

To their credit, they realize the following realities:

• Competition is more intense
• A more balanced approach is required on service delivery & value creation with the strategic direction of the business
• Call centre performance is more important for delivering CRM
• The growth in off-shoring of contact centres is having positive & negative impacts
• Regulation is constraining and demanding a new response
• Cost improvements are required to ‘plug’ falling prices & margins
• Customer are more disloyal & demanding of consistency & service
• Staff retention is critical to a consistency of delivery

Because of the new realities of customer service, AOL Broadband decided to apply the concepts found in lean manufacturing and six sigma. Doing so meant having a dedicated process team that:

• Focusing on Customer touch points
• Lean thinking & methodologies
• Value Stream & process mapping
• Identification of process improvements from Customers
• The Pursuit of Excellence at AOL Broadband perspective
• Integrated knowledge management strategy
• Customer call listening
• Proactively supporting Waterford as a centre of excellence and sharing best practice.

And this team applies Lean methodologies that are focused on delivering maximum value and eliminating waste:

• Using the DMAIC approach
• Understand the drivers of contacts
• Creating value
• Analysing root cause
• Measuring end to end response & process capability
• Transforming culture & engaging staff
• Building change capability & agility

Given AOL Broadband’s new approach, they decided to look at Repeat Calls.

Customer Service Repeat Calls

Repeat Calls presents a significant opportunity for improvement for AOL. Some data supports this:

• The current level of repeat calls are costing the business €2.38 million over budget.
• This addition cost & call volume also affects service levels & the overall quality of service.

Define

Problem Statement

The initial problem statement is stated below:

Data Collection

Some initial data collection was taken, primarily from the call logs from the call center. Below is the data collection plan.

Measure

The initial data pointed to the following major areas of opportunity:

Apparently, for all repeat calls during the data collection period, 53% of the cause can be attributed to the customer service agent behavior.

Analyze

After the Pareto above was obtained, the next step for the AOL Broadband team was root cause analysis:

Following root cause analysis with the team, they organized their findings into a second level Pareto Chart below:

Once the root caused were identified and validated and quantified, the next step to address these primary call drivers was for the team to brainstorm practical solutions or countermeasures in the Improve Phase.

Improve

A number of insights were gleaned from these sessions.

• Current AHT targets were restricting first time fix rates
• Need for more skills & training for bottom performers.
• OSP Contracts were driving wrong behaviours.
• Culture of Tech Support lead to lack of ownership, lack of interest in resolution & AHT myopia.

To address the findings above, several improvements were made. One of those areas was in reporting. This new report included the following:

• New Stake Holders Report Created.
• Repeat Call Volumes & AHT.
• Call Driver Tracker Created to Capture Call Reasons.
• New Control Dashboard Created.

Before scaling changes to the entire enterprise, the AOL Broadband team decided to pilot the changes in a small scale at first. Their pilot test consisted of the following:

• A group of 24 Agents running 2 pilots schemes set up.
• 1 team using new operating procedures brought about by initiative.
• The second team being used as a control to benchmark against.
• Data Capture tools in place.
• Reporting set up on scheduled basis.
• Communication & Training was delivered to both teams.

Results from Pilot Test

Based on early results from Trial. The following Data shows significant business benefits. By Improving the time taken with each customer on the initial call, the team reduced repetition on subsequent calls. Through Improvements to the AOL Broadband Knowledge Base & the new operating procedures, the team forecasted a potential benefit of €2.1 Million per year and €600,000 to the end of the current financial year.

While the improvements to reporting might seem trivial, they were not, for the changes in reported added critical items that were not previously collected and reported on. The team made other changes in training and in also policy changes, involving human resources.

Conclusion

• Lean Must be led by the Top Managers
• Aligning contact strategy & delivery with the business goals
• A Lean approach will contribute to an improved Customer experience and retention rates
• Reduced resource costs
• Better Agent engagement & working environment
• Lean Green belt training is vital
• Cross functional team works well
• A more customer centric methodology based on adding value and reducing waste
• Release resources to focus on growing the value proposition
• Makes the contact centre a key strategic tool
• Lean thinking is applicable to all industries

Below is Tim Armstrong’s email to all AOL Employees:

AOLers –

I hope you all have a great New Year’s and are spending this time with family and friends. As we close 2011, I wanted to share some reflections on the year and look forward to some important themes for 2012. In 2011 we accomplished a great deal as a team and we set the company up for long-term growth in key segments of the Internet’s future. We are leaving the year a healthier and more disciplined company – and a company poised for continued improvements in 2012.

Looking Back – 2011:

During 2011, AOL touched over 250 million global consumers, millions of customers, tens of thousands of publishers, and a growing list of important partners. Our transformation has been substantial and we continued to invest in our bold strategy throughout the year. From a tangled set of brands, products, regions, and technology platforms two years ago, we now have a company that contains powerful brands, powerful products, and a simplified technology foundation that will allow us to scale in key markets.
In the last 24 months we have completed an impressive list of concrete items that form the foundation for our work in 2012:

• AOL grew OIBDA sequentially for the first time in 3 years in Q3 2011
• AOL grew total Advertising year-over-year for the 2nd consecutive quarter in Q3 2011
• AOL grew Global Display advertising year-over-year for the 3rd consecutive quarter in Q3 2011
• AOL grew Third Network Revenue year-over-year for the 2nd consecutive quarter, and sequentially for the 5th quarter in a row in Q3 2011
• Search revenue declines were the lowest in almost 2 years in Q3 2011
• We implemented the new search product in 2011 as part of our significant 5 year extension to our Google search partnership
• Subscription declines continued to moderate and the core subscription business is now leveraged into selling broader subscription services
• Video viewers, views, and revenue all grew at over 100% Y/Y during Q3
• Huffington Post expanded from 27 sections to over 50, opened two new countries, and increased video insertion rates to over 70%
• Patch expanded from 30 towns to over 850, added over 10 million unique consumers, and increased to over 5,000 new customers
• Mobile pageviews doubled during 2011 and mobile advertising was integrated into AOL’s core advertising system
• We launched major redesigns, partnerships, and new products across all of AOL’s endemic content brands, including Engadget, TechCrunch, Moviefone, MapQuest, the AOL Homepage, and AOL Mail
• AOL re-entered the International marketplace as we had planned to do after the successful International restructuring of 2010
• We announced major partnerships (Examples: The Sporting News, Move.com, Everyday Health, Cambio, Yahoo/MSN, Vivaki, Le Monde, El Pais, and a number of branded entertainment deals)
• We simplified over 30 advertising and content platforms to 5
• We restructured our advertising systems, sales structure, go-to-market strategy, and integrated video, local, and mobile into the core advertising business
• AOL Technology Operations fundamentally rebuilt AOL’s core serving, data-center, and platform infrastructure, and it launched the first “lights-out” data center in 2011
• We repurchased close to 10% of the company’s outstanding shares at attractive valuation levels during Q3 and Q4
• We restructured the company from 10,000 employees and contractors to approximately 5,000 employees, while recruiting approximately 2,500 new team members
• We exited approximately $250M of unprofitable revenue and sold non-core assets
• We removed over $500M in expenses
• Having begun 2010 with ~$100 million cash and acquired significant assets for the company since then, we are ending 2011 with ~$400 million in cash

The corporate groups, which work to support our business units, also had a series of important accomplishments during the year. We were able to streamline operations and costs throughout the company. AOL continues to get more and more nimble – we are doing more with less.

The technology infrastructure got many needed upgrades and new capacity built on cloud computing infrastructure. Our M&A team was able to do fantastic deals for the company, including the Huffington Post deal. Business Development was able to set up large partnerships with device, wireless, and important content partners. The finance team was successful in driving our rigorous company planning process and an improved forecasting system. The HR team consolidated the recruiting process, the review process, and the level of transparency we have on our team leaders and performance. Our legal team continues to counsel and guide us through our transformation and the re-entry into new markets. Our brand marketing continued to re-invent how AOL is perceived, as well as started the process of building a house of brands that have global appeal and consumers love.

We also learned a number of important lessons during the year. The first lesson was around maintaining and accelerating a culture of high expectations. “Beat the Internet” has been an important theme in the turn-around of AOL. In 2010, we had a very strong year of organically improving our experiences. In 2011, we spent needed time on integrations and transforming our brand portfolio. In 2012, we will be back to maniacal improvements of our consumer experiences and a host of important product launches.

In 2012, we must be a culture centered on the principle of Kaizen, the practice of constant improvement – and that applies to all of our products as well as all of our corporate services.

The second lesson is centered on a more ruthless consistency of only operating within our strategy and giving our teams the ability to work on important projects that will accelerate our transformation. With the Top Box priorities we launched in 2011, the company was able to move key growth initiatives and say no to the projects that were not important to the long-term success of AOL. In 2012, we need to be even more disciplined, and we have room for improvement on this front.

The third lesson is the need for a deeper injection of a consistent technology thread in our product development. We need a more technology-centered differentiation in all of our products. We have to avoid building products that are just incrementally getting better or trapped in the cycle of only building features for other platforms – we are not a feature company. We have to solve real human problems with our products and technology.

A lesson for 2012 will be the need to shift our talent culture from one where talent changes result from brand changes to one where talent is a corporate asset that we grow within our streamlined stable of brands. I would expect us to continue to be a very attractive place for the world’s best talent and a place that our current talent will see opportunities for growth and exciting challenges.

Ending 2011, we believe our stock price does not reflect what our team achieved during the year. In our opinion, the company remains undervalued, and we will eliminate the value gap by improving our operating results through the disciplined execution of our long-term strategy. Execution is the most important driver of our valuation growth, and we’re going to have another big year of improvements in 2012. We reinforced this view by executing the stock buy-back program.

Looking Forward – 2012:

We enter 2012 for the first time in many years with one agenda item – to create. The word “create” defines everything we are trying to accomplish as a 21st century digital media company. We are creating world-class experiences and delivering high-value content that is rooted in the innovative spirit that defines our industry and AOL.
There are some specific areas that we would like to see created and built during 2012. We want products to be created and built with a technology-centric model that is differentiated and leverages our investment in content and operational scale. We have great examples our of engineering teams’ game-changing products at AOL, but 2012 is the year we move from examples to an always-on technology process for products – including the internal tools we use as a company.
As part of the focus on technology and building, we have scheduled a weekly engineering meeting with the executives where our engineers will have an open platform to show product work and ideas. Alex Gounares and I have been planning the session, and we have made it part of our executive session every Monday. We expect the engineering teams and operations teams to press the company on innovating all areas of our business.

We will also be adding a deeper process around talent recruitment and talent management internally. Creating great Internet experiences for our customers starts with being a place where our people can thrive at work, where they know how their efforts contribute directly to the company’s important purpose in the world; where they can learn and grow in their careers; where they are paid for performance and have opportunities to build wealth; and where the environment supports high performance at a sustainable pace. I’ve been working closely with Chief People Officer, John Reid-Dodick, to review our people strategy to ensure we are competitive in these dimensions and that we are innovating to create opportunities for our people to learn and grow in ways that lead our industry.

We will also be going deeper into our purpose and mission as a company in 2012. We are building the first branded media and technology company of this century – a mission we started in 2009 and we must drive that mission forward in 2012. To create a more meaningful purpose behind our mission we must measurably improve consumers’ lives. We need to be the brands that people rely on to make themselves smarter, wiser, healthier, sexier, faster, funnier, more connected, more interesting – and more fulfilled. As much as the digital age has disrupted many aspects of life and work, the basic tenants of what people care about endure. Our purpose will move further into touching all aspects of human lives in more human ways – online and offline. The Internet has been built by discrete segments of people and there is a big opportunity to expand the design, content, and services to some of the most meaningful groups of consumers in the world.

We also want to continue to create a more profitable company in 2012. Growing healthy profits while we re-create a powerful Internet asset in AOL is our goal and it has to be the foundation of our mission and purpose. Being a very healthy company will allow us to provide more and more powerful services to our global audience.
As a reminder, here are the 2012 company goals we’re focused on:

• Unique Visitor Growth
• Revenue Growth
• Adjusted OIBDA
• Free Cash Flow
• Consumer Net Promoter Score
• Advertiser Net Promoter Score
• Employee Pulse Survey Index

In closing out 2011, I want to thank all of you for your effort and contribution, and for the passion you bring to work every day. We have a company that is poised for growth and the external world hasn’t seen or recognized our hard work yet – they will take note during 2012.

For 2012, let’s create. We’re set up and organized to have a great year. Our mandate is to create awesome products, sell those products, and have fun transforming one of the best brands in the world. Let’s go get it done – GO AOL – TA

Kaizen at AOL is a post from: Lean Six Sigma Consulting

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This article is a guest post from Noeradji Prabowo, a continuous improvement practitioner in Indonesia. In this article, he shares a simple and effective application of Kaizen and the Kaizen frame of mind to a common activity in business meetings: drinking coffee.

Learn more about Noeradji Prabowo after the article.

Beginning in November 2011, we held training at a motorcycle tire manufacturer; in the class room we’ve encountered an interesting idea of kaizen. For participants, we provided drinks: tea or coffee are provided in a stroller or a drink cart. The result is often dirty floor because water, tea, or coffee spills from the cart onto the floor.

To cope with spills on the floor, we decided to add place holders in the stroller or cart, thereby eliminating the non-value added work of mopping spilled water, tea, or coffee spills on the floor.

About Noeradji Prabowo

Noeradji Prabowo is a Senior Consultant at PQM Consultants – a Consulting Firm that specializes in helping clients in consulting and training to build continuous improvement culture by making “productivity and quality improvement through people” works.

He is a Consultant who specializes in area of Productivity and Quality Improvement. He has served as consultant for shop floor management teams from various industries, services and manufacture, national and multinational companies, by providing consulting and/or training to make improvement happen in their workplaces through strong genba-oriented processes.

Some of his experiences are helping client’s organizations in building “Sustainable Excellence” by creating visual and error-free workplace; Creating Disciplined People and Bright Factory through 5S implementation; creating reliable equipment by eliminating its losses through Total Productive Maintenance implementation; building quality culture through Total Quality Management; people development through Management Development Program, and creating a flow production process, pulled processes and reduce excessive inventory by implementing Operation Excellence program.

He began his career as a Field Coordinator at Schlumberger(oilfield and information Services Company). He then joined PT Cold Rolling Mill Indonesia (steel manufacturer) as counterpart of HAY Management, to set up Compensation System.

He obtained his degree in Physics (Padjadjaran University) and post graduate diploma in Production Management (Institute for Management Education and Development/IPPM).

Training he has attended among others: Program for Quality Management, Statistical Process Control, Shopfloor Management, On the Job Training Instructor, Total Productive Maintenance and ISO 9000, Understanding the ISO 14001 Specification, Implementing EMS, Strategic Thinking, Toyota Way. He has also attended Quality Management Training in Singapore, Osaka, Japan and Detroit, USA.

Kaizen in Everyday Life is a post from: Lean Six Sigma Consulting

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I had an opportunity to visit a local Jiffy Lube for an oil change recently. I needed to change the oil in our car before moving to Tennessee. In the process of getting an oil change, I learned how Jiffy Lube approaches work and their adherence to metrics.

This Jiffy Lube had 4 bays and at the time I was there, 3 were occupied.

While my car was waiting, I had a good conversation with the shift supervisor at Jiffy Lube. I asked him about their approach to work and how they hold themselves accountable. Here is what I learned:

• Instead of dividing up his team and have a few work on each car, he has the whole team work on 1 car at a time. Without knowing it, he was applying the principle of single-piece flow. And then I asked him why not divide up your team and work on all 3 cars at the same time. He said something profound and very pragmatic:

“It’s just faster to work on one car at a time. We get ‘er done that much quicker.”

• They religiously keep track of time the second the car enters the bay until the car exits the bay. This supervisor said they monitor how they do per week and have a daily standup every morning to discuss how the previous day went. In that meeting, they go through some simple problem solving on how to go faster that day. Again, without knowing it, this team is applying some level of PDCA.
• For this team, it’s not good enough to track time based data internally, they publish it in a large screen in the waiting room. As the picture below shows, my van was in Bay 4 and was in the Bay for 17:21 minutes and a total time of 19:56 minutes. It begs the question, though, why the Isuzo in Bay 2 was in the bay for just a few minutes but was there for 1 hour. Interesting.

Additionally, without knowing it, this supervisor – or this Jiffy Lube for that matter – was applying some other best practices for how to manage queues, such as the application of one piece flow I explained earlier. It’s great to see effective and practical applications of Lean and Queueing.

Have you seen any lately? Share your thoughts here.

Jiffy Lube Oil Change and Queueing is a post from: Lean Six Sigma Consulting

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This post is sponsored by the University of San Francisco’s Supply Chain program. Learn more about the program and their focus on sustainability at the end of the post.

Don’t Let Suppliers Rack up Bogeys on Your Sustainability Scorecard

A sustainability scorecard is a system for companies to measure the sustainability of their different suppliers.  These scorecards typically measure recyclable materials, water and energy use, greenhouse gas emissions and various forms of waste for the complete supply chain.  Companies with high marks on their scorecard are demonstrating their commitment to supply chain management best practices to their stakeholders.

At this point a sustainability scorecard isn’t required of businesses, but more and more companies expect that as time goes by, more and more of their customers will be requesting information on the organization’s carbon footprint. Those that do collect data and analyze their supply chain will certainly see some benefits.

Who is Leading the Way?

Wal-Mart

Wal-Mart has implemented a broad, corporation-wide sustainability initiative called the Wal-Mart Packaging Scorecard.  This software tool grades the company’s packages on how environmentally friendly they are, and buyers can now use this online tool to help with their purchasing decisions for all the store’s products.

The environmental impact of the package is now as important as the product inside it, and through this initiative, Wal-Mart plans to reduce its supply chain packaging by five percent over the next two years. This type of scorecard is available to all buyers, and allows them to make informed decisions about their purchases.

Proctor and Gamble

This company is using a new scorecard that will help pinpoint the areas where increased effort is necessary to achieve long-term sustainability.  Proctor and Gamble’s ambitious vision contains several objectives that will help its sustainability score grow:

• To have all its plants powered by 100% renewable energy
• To use 100% recycled or renewable materials for all its packaging and products
• To have zero waste going to landfills from its factories and consumers
• To manufacture products please consumers while also maximizing conservation of resources

Proctor and Gamble’s scorecard is an excellent example of how a sustainable initiative can begin with the retailer then move down the supply chain.

IKEA

IKEA recently introduced its Sustainability Product Score Card, which helps the company stock its shelves with the greenest furniture products possible.  This method rates the individual products and not the suppliers; however, if the products themselves are sustainable, then the supply chain would tend to be more or less sustainable as well.

IKEA’s Score Card contains a list of product criteria, such as renewable energy during production, energy efficient production, recycled material and other more general requirements.  Unlike Wal-Mart, IKEA customers will not have access to the score card; instead the company will use it internally to measure its own progress and the sustainability of its products. Over the next several years, IKEA hope to be able to label its entire inventory of home furnishing products as 90% sustainable.

Why are Sustainability Scorecards Important?

Scorecards allow organizations to clearly define, measure and communicate their sustainable vision to the public.  They identify how their sustainable goals are an integral part of the organization’s larger mission, and provide a means to monitor sustainability in a formal, measurable and ongoing way.

A commitment to sustainability sends a clear message to your consumers that you care about your company’s impact on the environment. Supply chain analysis can lead to exciting new innovations, cost savings, reduced energy use and waste streams, better brand reputation and increased business opportunities for your company.

University Alliance submitted this article on behalf of The University of San Francisco’s online program. The University of San Francisco provides all the tools and resources necessary to gain a sustainable supply chain management certification online.

For further information please visit http://www.usanfranonline.com.

Supply Chain Sustainability and the Scorecard is a post from: Lean Six Sigma Consulting

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We’re pleased to have Derek Singleton present an article on Manufacturing Software and argue for how traditional ERP software can better support the principles of Lean Manufacturing. ERP and MRP have traditionally been at odds with the principles of lean. So, in his article, he also asks you, the reader, for advice on how else traditional ERP or MRP software can improve to better support the principles of Lean. Please chime in with your own thoughts.

Thanks to Derek and read more about him after the article.

Three Ways Manufacturing Software Can Adjust to Lean Principles

There’s a long-standing debate between manufacturing planning strategies. The debate is between proponents of material requirements planning software–better known as MRP software– and lean manufacturing advocates.

The crux of the dispute boils down to whether sophisticated software tools are needed to adequately plan production. Proponents of MRP software believe that today’s complex manufacturing challenges require formal planning tools to get an accurate picture of the production requirements. Lean advocates, on the other hand, argue that these planning tools actually get in the way of accurate planning because they’re too slow and transaction-intensive to pace to actual consumption, or adjust to demand fluctuations.

Three Components to Incorporate in Manufacturing Software

I see three main ways that manufacturing software can evolve to adapt to the demands of lean manufacturing. Each way focuses on bringing lean principles front and center of manufacturing software packages.

1. Make Value Stream Mapping a Core Software Component

One of the most important tools in lean manufacturing is create a value stream map to outline the flow of information and materials in the manufacturing plant. Modeling how information and materials flow through a shop floor will allow manufacturers to more easily identify production bottlenecks.

2. Monitor Cycle Times Intensely

The most important metric to know in manufacturing is how long it takes for materials to arrive on the dock and to leave in a completed product. In order to improve cycle times, these times need to be monitored and tracked. A subset of monitoring and tracking cycle times is keeping track of production status.

3. Locate Key Places to Add or Remove Inventory

While there’s ample functionality in manufacturing software for determining what to stock and how much to stock, there is little functionality to help manufacturers figure out where to stock. Functionality that can tell a manufacturer where to stock will help them figure identify the best places to protect against volatility, which will ultimately help avoid product shortages.

These are a few ways that I can see manufacturing software changing to adapt to the requirements of lean manufacturing. However, I’d like to hear your thoughts.

What needs to change in manufacturing software to adapt it to lean manufacturing principles?

About Derek Singleton

Derek is the ERP Market Analyst at Software Advice, which he joined after graduating from Occidental College with a degree in political science. He writes about various topics related to ERP software with particular interest in the manufacturing applications, such as manufacturing resource planning software. In his spare time he enjoys training in boxing and martial arts.

How Manufacturing Software Can Adjust to Lean Principles is a post from: Lean Six Sigma Consulting

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I haven’t written in a while. I apologize for that. You see, I’ve been quite busy. I recently accepted a position with a great company based in Nashville Tennessee. So, on December 19, 2011 we moved from Utah to Tennessee. The company moved us, so that helped a lot, but there was quite a bit still to do in moving my family from a place we’ve grown to love and established as our home for the last 6 years. Along the way, I learned a few things that I’d like to highlight here.

1. Over time, unless one actively practices 5S daily, a family tends to accumulate a lot of stuff.
2. Practicing and implementing 5S in a family isn’t quite as easy it is to do at work or in other settings.
3. Having a good attitude and being an example of positivity makes a big difference in times of change and transition.
4. Moving a big family and catering to each person’s needs is hard.
5. Moving can also be exciting.

I’ll share more lessons-learned in the next coming weeks. For now, I have some boxes I need to unload. Happy Holidays and Have a wonderful new year everybody. And as always, thanks for reading shmula.com – I do not take your attention for granted. Thank you.

Moving to Nashville Tennessee is a post from: Lean Six Sigma Consulting

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An article in the New York Times explains the reason why manufacturing the iPhone in United States will likely never happen ¹:

Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

The article goes on and explains that it is flexibility and NOT cost that makes China so competitive. With added commentary that the Middle Income in America will continued to get squeezed and eventually disappear, the article is overall very unoptomistic on the prospects of America being able to compete with China. Indeed, the article claims that flexibility of that type is unheard of and virtually impossible in America.

I don’t know about you, but I’m glad that this type of Taylorism and inhumane treatment of people is not allowed via government legislation. True, whenever the government steps in, lead time increases and costs also increase, but sometimes the price for liberty requires added precautions and boundaries that keep people from treating others inhumanely. Freedom has bounds.

In general, there are two things wrong with the New York Times article:

1. It is celebrating slavery. By claiming that flexibility will, in its current state and in the end, beat out America, the article is inadvertently celebrating slavery. If the price of flexibility for a company like Apple means that people work 14 hours and $17 a day and are woken up in the middle of the night and given a biscuit and tea to then work some more because of a last minute design change from Apple, then China wins on flexibility.
2. Their definition of “flexibility” fails to acknowledge the power of Lean Manufacturing for last minute changes the article describes. In fact, lean manufacturing – properly applied and executed – shines in situations where there are last minute changes, provided the operation had Heijunka in place and was already operating on a single piece flow philosophy. But that approach doesn’t require people waking up in the middle of the night and slavery-like conditions. It requires a well-formed and designed operation built on the tenets of lean manufacturing.

Despite Apple’s Code of Conduct for suppliers, last minute design changes like the article describes will continue to “train” suppliers to treat their people badly. Indeed, Apple will continue to be demanding on the one hand, but making it almost impossible for suppliers to comply to its demands on the other.

Celebrating Supply Chain Slavery is a post from: Lean Six Sigma Consulting

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While waiting for my kids’ swimming lesson to start, the kids and I waited at the only available seat at our local recreational center, which was in the corner of the building next to the men’s bathroom. As we sat down, my 2 year old started playing with something attached to the wall. And, as I motioned to tell him to please stop hitting whatever he was hitting, the title on top of the object caught me by surprise: Employee Suggestion Box

Goal of an Employee Suggestion Program

I believe that the goal of a suggestion system or employee suggestion program is the following:

To engage the maximum number of people and consider the maximum number of ideas and implement the most impacting of those ideas in the fastest amount of time with the least amount of cost.

There are, of course, times where it’s appropriate to go through an experimentation process where the most impacting ideas might not be the ones enacted upon. In this case, the process of experimenting and learning for the team and company is just as valuable as the result.

From a practical perspective, managing a suggestion system really boils down to the following questions, which can be considered at the team and department level:

• How many incoming suggestions can we handle per week?
• At what response time can we handle those suggestions?
• Of those accepted, what % were implemented within 3 (enter your number here) days?
• Of those implemented, what were the benefits for the department and company?

In my next several posts, I’ll cover the topics that allow for an effective suggestion system within a company that meets the goals I set forth in this article:

To engage the maximum number of people and consider the maximum number of ideas and implement the most impacting of those ideas in the fastest amount of time with the least amount of cost.

Namely, I’ll cover:

1. Resources for a Suggestion Program
2. Roles and Responsibilities of Managers, Supervisors, and Team Leads
3. How to manage Idea Generation
4. Structure of Suggestion Card
5. Training in Problem Solving Fundamentals
6. Recognition and Reward of Employees
7. Alignment to Company Objectives

Suggestion Box: Employee Kaizen Ideas is a post from: Lean Six Sigma Consulting

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We’re pleased to have Robert Lockard step in with a guest post and share his thoughts on the What, How, and Where of Inventory Management. This is his installment on Inventory Management Systems.

Read more about Robert after his article.

In my last post I gave a word to the wise about the why’s of using inventory management software. This time I’m going to delve into the details of what, where and how to manage a warehouse.

The What

The purpose of a warehouse is to store parts and products that you need to fulfill customer orders. So it makes sense that you want to stock up on products your customers want and avoid holding onto a bunch of slow-selling products that will just sit in your warehouse for months. That’s what we call lean warehouse management.

To keep your warehouse lean, start by tracking sales trends to see which are your most popular products. We’ll get to how to do that in a minute. By figuring out which products are your top sellers, you can make smarter decisions about when to reorder products, how many to order and which locations to send them to. Plus, you can set up your warehouse to make it easier to get to those hot sellers.

The Where

Even if you have all the right parts and products in your warehouse, if they’re not well-organized and easy to find they won’t do you much good. You need to have an efficient system for receiving products, putting them in the right places and then locating them when an order comes in.

A good way to set up your warehouse is to group products together. Find out which products customers often order together and then store them near each other. Sometimes the connections can seem obvious (like peanut butter and jelly), but other times you might see buying patterns you wouldn’t have guessed without doing some research. Also, you should put your top-selling products close to the warehouse entrance to save time on receiving and shipping.

The How

The best way to identify what your top products are and where you should store them is to use warehouse management software. With barcode scanners, you can track orders, sales and more. Then they can filter all that information into reports, revealing information that would otherwise be tedious to compile. To find the right products to ship, you can use those same scanners to lead you through a map of your warehouse.

It can even help you monitor seasonal trends. If a product is popular during the summer, but not the winter, you can only stock up on it during the right time of year and not be stuck with too much the rest of the time. For manufacturers, you might consider using manufacturing inventory software to not only keep your warehouse well-organized, but also to speed up the production process with multilevel bills of materials, automatic work orders and other tools.

Next time I’ll talk about the positive results you can expect by using lean inventory management tactics.

About Robert Lockard

Robert Lockard works at Fishbowl, the maker of the No. 1 requested inventory management solution for QuickBooks users.

Robert is a prolific writer, having written more than 600 blog posts, hundreds of Web pages and dozens of news articles. He studied public relations at Brigham Young University and graduated with a Bachelor’s degree in 2006.

He has written on a variety of subjects, such as real estate, online marketing, QuickBooks inventory management and film reviews. Robert lives in Orem, Utah with his wife and two children. He loves running, biking, reading and watching movies with his family.

What, Where, and How of Warehouse Management is a post from: Lean Six Sigma Consulting

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We’re pleased to have James Lawther share his thoughts today on Service Excellence. He does this through a recent family vacation to Spain, where he, his wife, and kids experienced the all-wonderful joys of international travel with kids and, of course, 15 luggage bags.

As can be expected, our readers as well as our article contributors are of the international flavor. This means, of course, that some of what you’ll read today might seem misspelled. But don’t worry, that’s just James’ inferior non-American English coming out (just joking).

Thanks James and to all our international readers and contributors.

Read more about James Lawther after his article.

Picture the scene

I had just spent two weeks in Spain on holiday with my wife and young children and was on the homeward bound leg, experiencing the joy of international travel:

• I’d stood in a check in queue, with my bored children
• I’d stood in an oversize baggage queue with my fractious children
• I’d stood in a security queue with my vocal children
• I’d stood in an emigration queue, with my obnoxious children
• I’d stood in a boarding queue, with my fighting children
• I’d stood in an immigration queue, with my sulking children

All that was standing between me and a short ride home to a cup of tea (and the opportunity to dump my children in front of the TV) was the baggage reclaim queue.

Nearly there

I just had to wait for my luggage on the carousel

I have been here before; my expectations were not set high

To my amazement as I walked up to the carousel the belt started, things were looking up, then, even better, one of my bags circled round, I grabbed it, maybe that well earned cup of tea was going to materialise far faster than I thought

May be the children would shut up

May be my wife would stop looking at me like it was my fault

Then the belt stopped

It had delivered precisely 5 bags, one of them was mine

The others weren’t

After 25 minutes it finally started up again and looking like Sherpa Dad with 15 bags I set off to find my car.

What is going on?

What sort of operational system does that to a customer?  Starts working the instant they want it to, then stops, stone cold dead, finally delivering the goods half an hour later to a man who has lost the will to live?

Now, I can’t swear this to be the case, but I will lay a bet.

I bet it is all to do with targets and incentives.

The airline has a service level agreement with the baggage handling company.

It says something like:

“The first item of customer baggage from each plane must be on the carousel within 5 minutes of the plane landing”

There are stiff financial penalties associated with non compliance.

To avoid these severe financial penalties the baggage handling company has a crack team of baggage handlers (a small fast bloke and a big strong bloke).

The minute the plane lands the small bloke launches himself into the hold and throws out 5 bags.  The big chap then manhandles these into a wheel barrow and sprints across the tarmac to deposit them on the luggage belt.

Job done the rest of the crew wander up and eventually the bags appear.

I may be a little off with the exact details, but I stand by my bet.  Do you want to take it?

So what can be learnt?

1. If you apply a big enough incentive you will get the outcome you asked for
2. Often the outcome you asked for is not what you really wanted
3. Your management dashboard will tell you your service level agreements are being met, everything is great
4. Everything is not great
5. There is no substitute for going and looking at what is actually happening
6. There is no substitute for going and looking at what is actually happening
7. (I know I just said that, it is the important bit)
8. Finally, if you are fit, strong and handy with a wheelbarrow there are lots of job openings in the UK’s major airports.

James Lawther gets upset by operations that don’t work and apoplectic about poor customer service.

James has worked for numerous large manufacturing, retail and service companies including Unilever, Mars and Capital One a variety of operational improvement roles. He also ran his own operations improvement consultancy where his clients were as diverse as local and national government, debt collectors and magic circle lawyers.

He is currently head of Operational Excellence for a FTSE 100 insurance company.

Visit his web site “The Squawk Point” to find out more about service improvement.

First Bag on the Belt is a post from: Lean Six Sigma Consulting

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Signs and symbols without context has no meaning.

Context matters. But, rarely do we consciously think of it; in fact, we almost always assume without really realizing that the subject of which we are talking about is really relative to other parts of the story. We take it for granted.

For example, take the picture below, which says: “Do you have any suspicious moles?”

Without context, the sign doesn’t mean much. But, when the sign above is coupled with the image below of a primary physician’s office or a hospital room, then it takes on a different meaning:

Putting the two together, the sign inquires of the person reading it to consider any strange looking moles and to have those moles checked by a physician for any signs or symptoms of skin cancer.

Do you see what just happened? The sign by itself – without context – could be understood as strange, funny, and even weird. BUT, the sign coupled with the context of a physician’s office all of a sudden takes on some meaning.

What else in your life is like that? In the world of process improvement, can you think of situations where, by itself and without context, a tool such as Kanban, Process Map, or something else doesn’t have meaning unless there’s context attached to it?

What do you think?

Why Context is Important is a post from: Lean Six Sigma Consulting

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Toyota’s supply chain is a vast network of suppliers providing auto parts to the Toyota plant. If there’s any defects in the products as provided by its supply chain, then it will likely manifest itself in the finished good: a defective and potentially unsafe Toyota vehicle.

The Quality Advisory Panel addresses this concern and makes the following inconclusive advice:

Some commentators have suggested that Toyota’s recent quality and safety problems may be partially the result of inadequate oversight of its suppliers. For example, Toyota recalled over one million Corolla vehicles because of defects in the engine control module manufactured by one of Toyota’s suppliers.

Even though Toyota engineers reviewed the supplier’s proposed production process, there was a problem with that process resulting in some units developing electrical shorts that could not be found by inspection. Toyota has explained that it has already taken steps to strengthen its oversight of suppliers.

Although the Panel did not undertake a detailed review of Toyota’s supplier oversight in its first year, it looks forward to learning more about Toyota’s initiatives in this area and their implementation in the coming year. Of course, the Panel recognizes that mitigating the adverse effects of the earthquakes and tsunami on the company’s supply chain will remain Toyota’s focus for the foreseeable future.

Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question “Who is Responsible?” more difficult to answer; consequently, this has led to the old adage of “if everyone is responsible, then nobody is accountable”.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

Greater oversight of the Toyota suppliers is wise. Toyota already has a very strong Toyota Supplier support, but that is primarily focused on the adoption by the supplier of the Toyota Production System. An added level of oversight ought to be on the safety side of things. That, in addition to the quality focus, will enable Toyota to get back on track and maintain its brand, known for quality and safety.

Toyota Supplier Quality: Quality Advisory Panel Opinion is a post from: Lean Six Sigma Consulting

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For the past several months, I’ve been reading and reviewing Yoshihito Wakamatsu’s book “The Toyota Mindset”, which outlines what he calls the The Ten Commandments of Taiichi Ohno. These are, what we now know as basic practices in lean manufacturing, but Wakamatsu explanation brings to light the HOW, and not just the current what of the practice.

Below are the review pages and the specific topic I have attempted to summarize. I have learned a great deal from Wakamatsu’s book. I hope that as you read my reviews below, you will learn as well and grow as a practitioner of continuous improvement.

To read my reviews of Wakamatsu’s book on Taiichi Ohno, please visit the links below.

• Taiichi Ohno on Standard Work
• Taiichi Ohno on Genchi Genbutsu
• Do Not Act Spoiled
• Learn from Previous Masters
• Wastes Hide, Disclose All Mistakes
• Truth and Understanding
• Innovation and Craftiness
• Teach Others to Think
• Intelligent Automation
• Taiichi Ohno on Leadership

Taiichi Ohno: The Toyota Mindset Book Review Summary is a post from: Lean Six Sigma Consulting

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Let’s assume that you are the head of process improvement at your company. And, you were given the task of answering the following question:

Should our employees walk or run to get their job done?

How would you answer that?

This question is a classic Operations Analysis, Cost Analysis, and Capacity Analysis question. To illustrate how I’d answer this, I’m going to use an example of a meat processing process: Fresh Hamburgers.

PS: If you are vegetarian, please forgive the example. Just replace the meat example with one that is more suited to your liking.

Okay, back to the illustration. Suppose the process to produce fresh hamburgers is the following:

1. Cows Enter
2. Meat is Processed
3. Meat is Delivered

The manager of the meat processing plant is curious to know the following:

1. Should the cows run into the processing room?
2. Should the cows walk into the processing room?

Under the surface, the question is really about Capacity and the Cost implications for Walking or Running. Given this, let’s now ask more detailed questions:

1. How much meat can be processed (capacity analysis) when the cows walk versus run?
2. What is the cost involved (cost analysis) when the cows walk versus when the cows run?

Capacity Analysis / Production Analysis

Okay, a couple of assumptions to make our example a bit easier to deal with:

• Each cow can make 20 hamburgers.
• The shop is open for 10 hours, 5 days a week.
• Given the current labor, when the cows walk, 10 cows can be processed in 1 hour. This means that roughly 2000 hamburgers can be processed in one day if the cows were to walk (20 hamburgers / cow * 10 cows/hour * 10 hours/Day).
• Given the current labor, when the cows run, 25 cows can be processed in 1 hour. That means 5000 hamburgers can be processed in one day.

Cost Analysis

Assuming that labor increases in proportion to the increase in processed meats and overhead increases disproportionally (because of sunk costs, equipment, and other expenses). Here is the assumed costs analysis:

The conclusion, then, to the question of whether the Cows should walk versus run, the cost analysis shows us that by the cows running, we reduce costs by $0.10 on each hamburger.

So, if we were to base our decision on costs alone, it makes sense for the cows to run. But, of course there are other considerations. For now, we’ll leave the analysis as it stands and move on to other business applications.

Business Applications

It’s not often that one needs to manage cows running, so here are a few other business problems for which the analysis above can apply:

1. In a build to order operation such as Bike Assembly, Personal Computers, etc.
2. In any restaurant operation
3. In a fulfillment operation, having pickers walk versus run (safety aside), etc.

Capacity Analysis, Cost and Production Analysis: A Lesson From Hamburgers is a post from: Lean Six Sigma Consulting

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We’re pleased to have David Kasprzak as a guest writer today. In his article, he explains the concept of Waste, as understood in Lean Manufacturing and the Toyota Production System, but he takes it further by explaining the concept of waste within the context of Results Oriented Work Environment (ROWE).

As a sneak peak, would you agree or disagree with the maxim:

For Many, Just Showing Up to Work is Waste.

Read more about David after the article.

To most workers, Lean initiatives (and other improvement efforts) suffer from a critical flaw – that you are supposed to engage in them only once you get to work.  What isn’t addressed is that a lot of waste might come from just showing up.

What if, instead of attendance, we focused only on the results?  What if where you work was irrelevant as long as the work got done?  What if meetings were optional, hours were idiosyncratic and people were allowed to manage their effort, to be measured just on the results?  What if we didn’t need to be baby-sat 40 hours a week?  What if we trusted people to do their assigned tasks and just got out of the way?

That sounds like a lot of time spent on finding ways to keep people “utilized” would end.  Or, in other words, a lot of waste eliminated and the ultimate in respect for people achieved – so much so that people are respected to the point of being trusted.

Enter ROWE, the Results-Only-Work-Environment developed at Best Buy corporate Headquarters in Minneapolis.

The ROWE environment demands a relentless focus on one thing: The work.  What else does your customer require?  Do you need to be in the office at 9:15?  What is the difference between 9:15 and 8:55 anyway – in terms of results?  Does your customer value your physical presence, or the outputs you generate?  Does your act of taking up space in a specific location add value?

Usually, it does not.

So, if value isn’t created by your presence in a specific location, for a specific duration, then you can choose to create value from anywhere, at any time, right?  That’s what the creators of ROWE came to understand – value is independent of location.  Value creation is also completely independent of time.  In a ROWE, time spent working is irrelevant.  It simply doesn’t matter how long you work, or how short.  It’s just about getting the work done.  Or, in other words, it’s about the value you produce – not the time you spend in producing it.

ROWE focuses on the elimination of Sludge – the negative attitudes that keep people justifying, rationalizing and accepting each others’ (and their own) judgments of others based on the time they are putting in, and where they do it.  Or, in other word, “Waste” – time spent doing an activity that no one wants – which includes gossip and finger-pointing that burns up time and energy and causes work to become a burdensome, panicked, boring chore to be survived rather than enjoyed.

The parallels with waste, value, and the elimination of Muri in the work environment, all familiar concepts to Lean thinkers, are clear.  It makes me wonder if it’s time to re-think what waste and value mean, and to develop an understanding of how the way we conceive of work is woven into the lives of the people doing the work, too.  After all, shouldn’t work be something you do, not someplace you go?

About David Kasprzak

In order to create a forum for “Discussing management excellence and the pursuit of work and life synthesis,” David created the My Flexible Pencil blog. On his blog, David addresses both workplace and family situations by applying ideas derived from Lean, Project Management, Organizational Behavior and his Master’s-Level education in Political Science and Business Administration. He has authored guest posts for several lean and project management blogs, frequently contributes to Linked In Q&A and Discussion forums, and his comments on the Harvard Business Review article “Lean for Knowledge Work” will be published in the magazine’s December print edition.

While working as a cost & schedule analyst for over 10 years in the Defense and Government industry for organizations such as the DEA, CSC, BAE Systems, and Raytheon, David realized that the sources of either good or poor performance usually rested in the habits, practices and mindsets of both the leadership and the led. As a result, he turned his attention away from a strict focus on metrics and towards the “people side” of improvement. This shift in focus began his journey towards developing a deeper understanding of the relationship between personal enjoyment and organizational success

His vision is for a new paradigm of work to become the norm, in order to bring a sense of humanity to the workplace and make personal fulfillment the means to profitability, rather than something that gets in its way. Currently, he continues to work in program controls while authoring his blog and attempting to create his own work/life synthesis.

David lives near Nashua, NH with his wife and 2 sons. He can be contacted via email at david@myflexiblepencil.com.

Results Oriented Work Environment and Waste is a post from: Lean Six Sigma Consulting

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Has the complexity in the integration of software, electronics, and engineering in Toyota vehicles contributed to the safety and vehicle recalls? Does the Toyota Information Technology have anything to do with its safety issues?

According to the Toyota North American Quality Advisory Board believes it might, but has not found evidence to establish this hypothesis as fact. In their words,

The Panel also had initial concerns regarding integration of mechanical and electrical engineering in Toyota’s design and production processes. Specifically, the Panel was initially concerned that automotive manufacturers, which were historically dominated by mechanical engineering needs, could be challenged by the need to integrate increasing levels of electronics and software into modern vehicles.

Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question “Who is Responsible?” more difficult to answer; consequently, this has led to the old adage of “if everyone is responsible, then nobody is accountable”.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

While the panel did not find evidence to support their hypothesis, they do provide examples and situations in which the integration between electronics, engineering, and software might lead to potential safety issues:

For example, the Panel was concerned that automotive manufacturers may be relying too heavily on suppliers that specialized in electronics and software and may have relinquished too much control over the design of key vehicle components. Furthermore, because it is easier to make changes to software than hardware, a related concern was that software changes could be made without adequate consideration of all the potential consequences. The Panel has not identified any significant issues with Toyota’s ability to fully integrate electronics and software or its processes for ensuring that changes in software do not cause unintended consequences.

Whenever there are several moving parts and whenever integration between complex systems is involved, it increases the risk associated with that product development. It is wise for the Panel to bring caution to this and awareness to the Toyota team to pay attention to this area of its Toyota product development process.

Toyota Software, Electronics, Engineering Quality Issues is a post from: Lean Six Sigma Consulting

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Taiichi Ohno was a believer in Standard Work. While this fact is broadly known, his approach to Standard Work is less known and many saying attributed to him that are probably false. In this article we discuss Ohno’s approach to Standard Work and also the motivations behind its practice.

To read my reviews of Wakamatsu’s book on Taiichi Ohno, please visit the links below.

• Taiichi Ohno on Standard Work
• Taiichi Ohno on Genchi Genbutsu
• Do Not Act Spoiled
• Learn from Previous Masters
• Wastes Hide, Disclose All Mistakes
• Truth and Understanding
• Innovation and Craftiness
• Teach Others to Think
• Intelligent Automation
• Taiichi Ohno on Leadership

Taiichi Ohno on Standard Work

Taiichi Ohno’s belief and approach on Standard Work was borne out of experience. In his words,

I think it was 1933 or 1934, when I was working in the Toyota textile factory, that I was told by my supervisor to create a Standard Work manual. I tried to find some reference books in the bookstore but I had absolutely no luck in coming up with any useful information. At the time, every standard work manual tended to be quite idealistic. Mine turned out like that too. It was so unrealistic that no one on the shop floor was able to follow it.

After reflecting on his own experience, Taiichi Ohno concluded the following which led to the current approach at Toyota on Standard Work:

No matter how great the principles behind a manual are, it has no value if it cannot be applied in practice. We’re not living in an ivory tower. Work can never be standardized based only upon your ideas and demands without validating facts on the shop floor. Focus on one problem at a time and try to accomplish continuous improvement no matter how small it may be. This is how you can collect useful clues as to what standard work should be.

In sum,

1. The reality of the shop floor is clearly reflected in the standard work
2. Standard work must be realistic and applicable on the shop floor
3. Standard work must lead to continuous improvement opportunities

Standard Work is Not Absolute

It goes without saying that standard work is not absolute. In his words,

It’s wrong to think that you need to fabricate your own standard work idea only because it is being compared to ones made by others. Impressive standard work is never absolute in practice. First, pick a starting point that fits you the best and create a solid foundation which will help you gather useful clues for establishing a more desirable and attainable achievement of standard work . . .

Do not aim for perfection. Create a lenient standard work to begin with.

Indeed, on this experience and approach, the now popular If there is No Standard, then There is no Kaizen mentality has come to be.

Taiichi Ohno: Standard Work Must be Practical is a post from: Lean Six Sigma Consulting

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There are numerous methods of preventing error or preventing defects. We discuss several of those in my series on Poka Yoke Examples. But, rarely, do we see an example of Poka Yoke where humiliation and embarassment was the primary method of preventing human error. Until now.

The subway sign below shows a passenger getting caught by the automated doors. The sign is mean to warn passengers not to get caught between the closing doors. The sign says the following:

It’s painful to get caught between the closing doors. Even more [painful] are the eyes of those looking at you.

In other words, it’s physically painful to get caught between closing doors at the subway. But, even worse, are the other passengers pointing their fingers at you because you were stupid enough to get caught between the closing doors.

That’s the overall message. It’s both descriptive and witty. But, would it help you avoid making this mistake?

I think the concensus is that the sign is witty, catches your attention, but ultimately it probably won’t prevent people from making this mistake.

What is interesting is the message about embarrassment and humiliation.

What do you think?

Poka Yoke Example: Prevent Error Through Embarrassment and Humiliation is a post from: Lean Six Sigma Consulting

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Are Quality and Safety synonymous? According to the quality advisory panel, they are not. But, Toyota believes they are, which is a possible root cause for the safety issues Toyota has been experiencing with its vehicles.

According to the Panel,

Toyota has traditionally treated safety as an integral subset of quality. In the Panel’s view, this suggests that logically, if a quality vehicle is produced it will, by definition, be a safe
vehicle. The Panel believes that safety and quality are different attributes and that a process that produces quality vehicles will not necessarily produce safe ones. In fact, comparatively few of Toyota’s UA recalls over the past two years had anything to do with vehicle quality in the traditional sense, i.e., they were not related to defects traceable to the manufacturing or assembly processes.

This finding, while simple, is quite significant. The worldview that quality and safety are distinct and different is important because while a vehicle might be of high quality, that doesn’t necessarily mean that it is safe. This simple fact is a possible root cause for the troubles Toyota has had with its safety record, according to the North American Quality Advisory Panel.

Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question “Who is Responsible?” more difficult to answer; consequently, this has led to the old adage of “if everyone is responsible, then nobody is accountable”.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

Continuing,

Because Toyota incorporates safety into quality, Toyota did not have an senior executive designated with overall responsibility for safety until recently. Nor could the Panel identify a clear management chain of responsibility for safety. The Panel understands that from Toyota’s perspective, everyone at the company has a responsibility for safety and that safety is ingrained in everything Toyota does. However, the Panel has been concerned that this safety philosophy might suffer from the old adage “when everyone is responsible, no one is accountable”5 and that not having a single executive responsible for safety on either a regional or company-wide basis might diminish accountability for safety issues raised both inside and outside the company.

Since Quality and Safety were one and the same, there was no executive oversight over safety. This is an organizational mistake that the panel points out, but one that is important. If there’s no organizational steward over safety, then logically safety won’t be a focus.

Having the quality advisory panel point this out is a good recommendation that will lead to a better Toyota in my opinion.

Toyota Safety Ratings: Quality Advisory Panel is a post from: Lean Six Sigma Consulting

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Continuing my review of Wakamatsu’s book on Taiichi Ohno, today we’ll explore his views on Genchi Genbutsu, which means “go and see” and how the principle of Genchi Genbutsu can validate truth and expose falsehoods and lies, sometimes found in presentations and excel spreadsheets.

To read my reviews of Wakamatsu’s book on Taiichi Ohno, please visit the links below.

• Taiichi Ohno on Standard Work
• Taiichi Ohno on Genchi Genbutsu
• Do Not Act Spoiled
• Learn from Previous Masters
• Wastes Hide, Disclose All Mistakes
• Truth and Understanding
• Innovation and Craftiness
• Teach Others to Think
• Intelligent Automation
• Taiichi Ohno on Leadership

Those Who Believe in Lies are Fools

Taiichi Ohno believed that one should base their judgments on his or her experience on the shop floor, not from a document alone. Ohno believed that data can be manipulated and that there is often bias and falsehood in presentations found in excel spreadsheets and powerpoint presentations. His antidote? Visit the shop floor.

If you base your judgments on documents you received, you’re most likely going to make wrong decisions. If you have even the slightest doubt in the information you received, you must step onto the shop floor for verification. For example, there was a president of a company who did not have sufficient technical knowledge, as he had been accustomed to mainly administrative types of work. Therefore, he made it a rule to visit the shop floor whenever he faced uncertainty with the documents given while an executive meeting took place. Consequently, he often discovered that what had been told in the meetings were false assumptions.

According to Wakamatsu, Taiichi Ohno was fond of sharing that story, hoping to illustrate that a simple gesture such as spending time on the shop floor can prevent poor decisions and bad judgments. Furthermore, when the company knows that the president visits the shop floor often, it actually can ensure that data and presentations in the future will be more accurate, since workers know that the president will always validate what he or she reads with his or her experience on the shop floor.

Fudging the Numbers

Because of frequent practice of the principle of Genchi Genbutsu, Taiichi Ohno became very adept at detecting lies and falsehoods. For example, when reviewing production numbers, he made it a habit to go to the shop floor and observe the workers first hand. In his observation, he would discover that the numbers were often better on paper than on the production line itself. Why?

It turns out that a common method line managers and team leaders often did was to help on the production line, making the production numbers look better than they really are. The role of team leaders and line managers are not to be on the line, but instead to observe and generate continuous improvement ideas. Since their role is not in production, their time doesn’t count and makes the production numbers look better than they really are.

Ohno’s message: practice Genchi Genbutsu.

Taiichi Ohno: Validate Truth on the Shop Floor is a post from: Lean Six Sigma Consulting

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There are obviously differing strategies and definitions and answers to the question “what is good customer service?” I think in general, the answers fall into three camps:

1. Perfect service in order to prevent a customer service contact.
2. If we did something wrong, then please contact us and we’ll make it right.
3. Contact us for anything, we appreciate the interaction and wish to build a human connection with you.

Jeff Bezos explains the Amazon Customer Service strategy in a recent Wired interview ¹. His answer supports what I’ve argued for a long time regarding customer service strategy and Jeff Bezos’ answer places Amazon Customer Service squarely in the “perfect service so the customer doesn’t have to contact us” camp.

Levy: Two years ago, you bought Zappos. Was that an attempt to absorb their so-called culture of happiness and customer service?

Bezos: No, no, no. We like their unique culture, but we don’t want that culture at Amazon. We like our culture, too. Our version of a perfect customer experience is one in which our customer doesn’t want to talk to us. Every time a customer contacts us, we see it as a defect. I’ve been saying for many, many years, people should talk to their friends, not their merchants. And so we use all of our customer service information to find the root cause of any customer contact. What went wrong? Why did that person have to call? Why aren’t they spending that time talking to their family instead of talking to us? How do we fix it? Zappos takes a completely different approach. You call them and ask them for a pizza, and they’ll get out the Yellow Pages for you.

Notice Jeff Bezos’ use of the terms “Root Cause” – yes, his worldview is very steeped in lean six sigma and it shows in his language and in the overall strategy of customer service at Amazon.

I wrote a post, showing the Amazon approach to Customer Contacts, but using the iPhone Customer Service as a case study.

But Jeff Bezos makes a point to say that the Zappos Customer Service model is fine too, but it’s just not the Amazon worldview.

What is Good Customer Service is a post from: Lean Six Sigma Consulting

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We’re pleased to have Robert Lockard step in with a guest post and share his thoughts on the reasons why organization might want to consider an Inventory Management System. He explains why small businesses that require seamless integration with quickbooks should consider an Inventory Management System and the benefits of having an Inventory Management System to their bottom line.

Read more about Robert after his article.

Every company needs an inventory management system. Whether you’re in wholesale, retail, service or virtually any other industry, you have to keep track of your products. Here are five reasons why it’s so important to use small business inventory software:

1. Stop products from spoiling.

If you have too many products in your warehouse, you increase the risk that they will become obsolete, damaged, spoiled or stolen before you can sell them all. Depending on which industry you’re in, you’re probably more worried about some of these risks than others. For example, if you’re in the technology industry, you don’t want your expensive products to become outdated, damaged or stolen, but you probably don’t care about their freshness date. Food producers, on the other hand, put product spoilage high on the list of inventory management concerns.

2. Stop paying hidden costs.

Having too much inventory doesn’t just increase your risk of paying more in the future; it costs you more money all the time. Where will you store the extra inventory? You may need to buy a larger warehouse than you really need or rent trailers if your warehouse isn’t big enough. Plus, you have to provide security to prevent theft. And don’t forget about the money that’s tied up in inventory that you could have used to hire personnel or grow your business in other ways.

3. Stop disappointing customers.

On the other end of the inventory spectrum, if you have too few products in your warehouse, you face a whole other set of risks. Your customers don’t want to wait too long to get their orders shipped to them. So if you run out of the products they’re looking for or if your picking, packing and shipping processes are too slow, you could drive customers away.

4. Stop wasting time.

Inventory management can be time-consuming, especially if you’re trying to do it by hand or in Excel spreadsheets. Speed is everything in business. How fast you reorder products, ship customer orders and update your inventory records could make or break your company. That’s why an automated inventory management system is so important. Scanning product barcodes and setting up automatic reorder points can save valuable time by streamlining complex processes.

5. Start planning ahead.

You can’t afford to be purely reactionary in your inventory management. You need to start planning ahead and being proactive. Instead of being unprepared for sudden spikes in sales, try to notice these trends ahead of time by monitoring social media channels for mentions of certain products and looking at historical records to spot seasonal upticks in sales. All of this is easier said than done. It goes back to having a powerful inventory management system to free up your time and do most of the data analysis for you.

About Robert Lockard

Robert Lockard works at Fishbowl, the maker of the No. 1 requested inventory management solution for QuickBooks users.

Robert is a prolific writer, having written more than 600 blog posts, hundreds of Web pages and dozens of news articles. He studied public relations at Brigham Young University and graduated with a Bachelor’s degree in 2006.

He has written on a variety of subjects, such as real estate, online marketing, QuickBooks inventory management and film reviews. Robert lives in Orem, Utah with his wife and two children. He loves running, biking, reading and watching movies with his family.

Why Use an Inventory Management System is a post from: Lean Six Sigma Consulting

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After a disappointing earnings call where Toyota’s profit dropped by 18%, Toyota announces that they will be recalling 420,000 vehicles because of a crankshaft problem. Specifically,

The safety recall to replace the crankshaft pulley on the V-6 engine affects 283,200 Toyota and 137,000 Lexus vehicles in the U.S., the company said. Worldwide it covers 550,000 cars. ¹

This means that total safety recalls by Toyota will bring that number to over 9 million cars recalled. This is disappointing indeed.

In a previous post, we discussed some of Toyota’s global centralization and decentralization challenges as a root cause of their quality problems, today we’ll discuss the second of the findings from the Toyota Quality Advisory Panel. In their opinion, the attention given to outside complains held less importance than complains from within the company.

Please read our series on the findings from the Toyota Quality Advisory Board:

1. Toyota North American Quality Advisory Panel Conclusions: The high-level summary of the findings from the quality advisory panel.
2. Balance Between Local and Global Management Control: How can Toyota best balance decision making between Toyota Motor Corporation in Japan and its regional operations in the North America and the world?
3. Responses to Problems Raised by Internal and External Sources: The panel found that problems raised by sources external to Toyota were not treated as seriously as those found within Toyota. The panel claims that this violates the tenets of the Toyota Production System.
4. Management Responsibility for Quality and Safety: Because Toyota treated Safety as a subset of Quality, the panel believes that this has led to the blurring of the lines and makes the question “Who is Responsible?” more difficult to answer; consequently, this has led to the old adage of “if everyone is responsible, then nobody is accountable”.
5. The Challenges of Integrating Electronics and Software: Has the integration of software led to safety problems?
6. Management of Supplier Product Quality: As Toyota becomes more and more decentralized, has Toyota maintained the rigorous supplier quality requirements it once had?

According to the Panel, Toyota held outside feedback in less esteem than feedback from within. In the Panel’s words,

The Panel has observed that Toyota did not adequately apply the key principles of the TPS (Toyota Production System) and the Toyota Way to its management and decision-making practices. The Toyota Way is founded on the core pillars of continuous improvement and respect for people. A fundamental principle of continuous improvement is genchi genbutsu, which means that one must “go and see” the source of the problem in order to determine its root cause. The Panel feels that Toyota applied this and other aspects of the TPS and the Toyota Way too narrowly in two respects.

Apparently, hubris and pride on Toyota’s part had to do with why feedback was treated differently depending on the source:

First, while it is clear that Toyota applies the TPS process and the Toyota Way to problems or flaws found internally, Toyota does not appear to treat feedback from external sources, including customers, independent rating agencies, and regulators, the same way. For example, it doesn’t appear that Toyota applied genchi genbutsu as quickly and thoroughly as it could have in investigating and seeking out the root causes of customer complaints regarding issues such as UA. On the vehicle assembly line in Toyota factories, when a problem on a vehicle is spotted, any line worker can pull a rope called an “andon cord” to stop production so that the problem can be quickly fixed. But when external sources have complained about quality and safety issues, it has often taken Toyota too long to pull a metaphorical andon cord and quickly try to solve the problem. Instead, Toyota initially reacted to consumer complaints such as UA, “sticky pedals,” and other issues with a degree of skepticism and defensiveness.

Continuing, the quality advisory panel points out that Toyota failed to apply TPS to its decision making process, allowing defects in its vehicles to continue despite outside feedback that was largely met with doubt:

Second, Toyota did not apply the principles of TPS and the Toyota Way adequately to identify and avoid repeating management decision-making errors with the same thoroughness and dedication with which it applies them in its manufacturing process. Although Toyota is in the car manufacturing business, it—like most modern corporations—is also a decision factory. Toyota’s reputation in North America increasingly will be based as much on the quality of its decision making as on the quality of its vehicles.

The above conclusion from the quality advisory panel is both pointed and cuts to the core of Toyota. On the one hand, Toyota is well known for its manufacturing rigor, yet on the other hand, the principles the Toyota Production System is founded upon wasn’t applied outside of manufacturing, leading to poor quality problems to continue.

In the next part of our series, we’ll explore the panel’s conclusion on Toyota’s worldview regarding Management Responsibilities for Quality and Safety.

Toyota Venza Recall: Quality Safety Advisory Board is a post from: Lean Six Sigma Consulting

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Continuing my review of Wakamatsu’s book on Taiichi Ohno, today we’ll explore his views on Urgency and how to prevent acting spoiled or how to prevent spoiling your workers. In other words, how to instill a continuous improvement mindset in your workforce.

To read my reviews of Wakamatsu’s book on Taiichi Ohno, please visit the links below.

• Taiichi Ohno on Standard Work
• Taiichi Ohno on Genchi Genbutsu
• Do Not Act Spoiled
• Learn from Previous Masters
• Wastes Hide, Disclose All Mistakes
• Truth and Understanding
• Innovation and Craftiness
• Teach Others to Think
• Intelligent Automation
• Taiichi Ohno on Leadership

Taiichi Ohno is known to have said the following:

You have such a spoiled way of thinking. Execute your duties with a sense of urgency.

In context, he would say the above to companies that had too much work in process. Why? In his mind, Ohno believed that having too much work-in-process makes defects and delays tolerable, and creates an organization accustomed to delays, defects, and problems on the line. In his words,

Zero work-in-progress items is the ideal. We must acknowledge the true purpose of reducing them, though. We are not competing for who has the least number of work-in-progress items. If we have too much of it, we will fail to identify problems, that’s why we must strive to reduce it.

Continuing,

Reduction of work-in-progress items causes the production line to stop. This does not mean that the reduction was teh cause, it means that there was a serious problem with the shop floor to begin with and that the problem has been hidden due to the abundant amount of work-in-progress items. If we start seeing a problem as a result of reducing such items we must fix it immediately by continuous improvement. Repeating such an effort will enable us to reduce it to zero.

So, in Ohno’s mind, work in process “hides” problems and is an enabler of continued mediocrity. His goal in reducing WIP was to expose the problems and shine a light on them, which fosters a continuous improvement culture.

His approach to expose problems and to help workers visualize the problems was simple:

1. Limit work in progress
2. Limit the number of workers

Taiichi Ohno: Do Not Act Spoiled is a post from: Lean Six Sigma Consulting

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In previous posts about my recent cruise vacation, I shared about a Poka Yoke Toilet and the Customer Relationship Management at Carnival Cruise. Today, I want to share a little bit about the Kano Model, Animal Towels, and how Carnival Cruise delights the customer.

The Kano Model attempts to explain the basic fundamental features required for a product to meet a customer need. Any other features above and beyond those that meet the basic customer need can fall into two categories:

1. Features the customer doesn’t care about
2. Features that delight the customer

The easiest way to think about the Kano Model is to use the analogy of the spoon.

Analogy of the Spoon

Suppose you are on a deserted island with no eating utensils. Then, to your surprise, you find a spoon made our of gold. Under normal circumstances, finding gold would be a good thing, but on this deserted island, gold has no value. But, the utility of the spoon, on the other hand, with its curved end used to scoop food and other material has a very high value.

But, to your disappointment, this object made out of gold turns out not to have a curved end and cannot scoop anything. In other words, it’s not even a spoon. It’s just a gold whatever.

The Lesson

It’s a silly analogy, but the point is this: on this deserted island you need to have your basic needs met. Providing a gold like-spoon object but doesn’t actually have the ability to scoop food or any other material will not meet your needs. And, even though the object is made out of gold, it still doesn’t do any good. In other words, it has no value to you.

Carnival Cruise

The Carnival Cruise staff did an amazing job. They truly took great care of us. All of our needs were met. But, they went above and beyond. One example of delighting the customer is their daily surprise of the guest with Animal Towels.

The carnival cruise cabin staff doesn’t just clean your room, but they give you daily mints and they also surprise the guest with really cool towel animals that add that extra oomph for the guest when they enter their newly cleaned room: It’s just not a clean room, which every guest has come to expect, but it’s a clean room with a surprise that makes the guest smile. Now that’s delighting the customer.

Here’s a picture of me learning how to make an animal towel:

Below are several examples of Towel Animals:

Carnival Cruise Reviews: Delight the Customer is a post from: Lean Six Sigma Consulting

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We know that a Poka-Yoke approach is a much more effective approach to preventing mistakes and errors. But, sometimes, we see the approach of providing a “do not” sign only, which by itself, is not effective. But, coupled with a process or system that prevents the human from making mistakes or the error from being made, then that’s a great balance to warning the person as well as preventing the person from making the mistake in the first place.

So, what does this article have to do with skateboarding? Read on.

I took my kids to a park last week and I noticed the park benches had these metal plates in the middle of them. At first look, I thought that was awkward. Then, I realized that those metal plates were there to prevent skateboarders from rail sliding across the park bench and ruining the edges of the bench. In other words, if a skateboarder tried to rail slide, his or her skateboard would end up getting destroyed – and, nobody wants their beloved skateboard ruined.

Are the metal plates more effective than a mere “No Skateboarding” sign? Yeah, I think so. This is a practical example of Poka-Yoke: it’s a method that prevents the defect from happening in the first place.

No Skateboarding Sign: A Poka Yoke Approach is a post from: Lean Six Sigma Consulting

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