Lean New Year’s Resolutions for a Recession

For the past two years, I have posted lists of Lean New Year’s Resolutions. The lists from 2006 and 2007 could apply to any situation. This year I decided to create a list particularly relevant to our current economic problems.

So here are my resolutions, in no particular order:

I will regard my knowledgeable, experienced employees as assets and will not lay them off when business is slow.
I will use the downturn as an opportunity to improve operations.
I will attempt to cut costs through process improvement rather than outsourcing or offshoring.
I will use the downturn as an opportunity to provide additional training to employees.
I will solicit ideas from my employees as to how we can cope with the recession.
I will seek to maintain good relations with my suppliers despite my ordering less from them.
I will communicate with my customers to find out how I can best provide them with value during difficult times.
I will use the downturn as an opportunity to expand my knowledge of lean by attending a conference.
I will use the downturn as an opportunity to expand my employees’ knowledge of lean by having them attend a conference.
(Shameless plug:) I will use the downturn to expand my knowledge of lean by reading some new lean books (and sharing them with my employees).

Add your resolutions below. Happy New Year!

For the Lean Advocate on Your List: Lean Furniture

For those who believe lean should apply to everything:

Designer Daniel Harper has created what he calls I-lean furniture, promoted as being ideal for “Bars, Lounges, coffee houses, for teachers, rest areas, bus stops, loft style spaces, impromptu gatherings.”

Only $1200.

Yes, I know this embodies a different definition of lean. But I couldn't resist.

I'll be on vacation for the next week. Happy Holidays!

Charities Need to Learn About Lean

Like a lot of people, I go through an end-of-year ritual of sending donations to a variety of charities I support. The end of the year serves as a deadline that encourages me to make the donations so I can deduct them when I file my income taxes.

In going through that ritual this year, I came to the conclusion that there’s a lot of waste in how charities solicit donations – and at least some of that waste could be eliminated by taking a lean approach.

The waste is primarily in the form of the junk mail the charities send me. Once I’ve donated to a charity, over the next year I might receive more than a dozen letters (some multi-page), brochures and “gifts” to get me to donate again. And that doesn’t include the emails.

(Also, some of those “gifts” are really stuck in old ways of thinking. Several different charities send me personalized return address labels. Who writes letters anymore?)

Now I know that charities have extensive experience with direct mail. I’m sure they closely track the return they get on their mailing campaigns, and I’m sure they wouldn’t engage in them if they didn’t consider them worthwhile.

Yet I believe they could sharply reduce their expenses – and stop annoying me – if they engaged in a little lean thinking.

What, exactly? Lean is all about creating value for the customer – and the customer defines value.

They are sending me sales pitches for a cause that they hope I will conclude has value. They already know I consider it valuable because I donated previously. I would view their organization as having even more value if they only sent me one or two reminders asking me to donate again in the following year, rather than a dozen.

But they don’t know that. Why not? Because they only solicit my money, and not my feedback (at least not about their marketing techniques). They might give me the option of getting off their mailing list, but not of receiving fewer letters.

Value is defined by the customer. To know how the customer defines it, you have to listen to the customer.

I wish more charities understood that.

P.S. When it comes to actually making a donation, about half the charities I dealt with gave me the option of donating online – which I view as very convenient. With the others, I have to mail a check or a credit card number back to them (and pay the postage myself). That is inconvenient for me, and it takes more time for the charity to actually get their money. More waste that could be eliminated.

The Tennis Ball Exercise

I wrote previously about a kaizen event I attended recently at Food Sciences Corp. in Mt. Laurel, New Jersey. I wanted to describe a particular exercise we experienced at the event that, in the space of a few minutes, helped teach some key improvement principles.

I’m sure this is not a new technique, but it was one I had never experienced before.

Sal Runfola, director of operations at Food Sciences and the person directing our event, had six members of our group stand around a conference room. He gave a tennis ball to one man, who was instructed to toss it to someone else. The second person had to toss it again, but only to someone who hadn’t touched it before. This went on until the sixth person had the ball.

This created a “process” for tossing the tennis ball. It had to be touched by each person, in the order established by the first set of tosses, and that order could not be changed.

Next, Sal gave three tennis balls to the first man and told him to send each one through the process, one after another. This effort was timed; it took 10 seconds.

Sal then ordered the group to significantly reduce the time it took for three balls to go through the process.

The men rearranged themselves, so that instead of standing on opposite sides of the room, they were in a line, in process order. With this formation, processing three balls took four seconds.

Sal’s response: Not good enough.

Ultimately, the men formed a tight circle, their hands in the center, so that the first man could simply drop the balls, having them roll down the hands, touching each man in order. Cycle time was reduced to one second.

The point Sal made afterward was that he had told the group to improve the process, but had not said anything about how to improve it. The men had to come up with that themselves.

And that’s what lean, in at least one respect, is all about – getting those directly involved with a process to creatively come up with improvement ideas while managers get out of the way.

Want your people to learn lean? Go buy some tennis balls.

The Irony and Sadness of Ford and Boeing

I find several kinds of irony in the fact that, of the Big Three American automakers, Ford is the only one that looks like it may survive the current economic crisis without a huge government bailout.

(And before anyone launches an argument with me, yes, Ford is seeking some of the $25 billion the government is providing for technology improvements, which does smell somewhat like a bailout. But unlike GM and Chrysler, Ford is not telling the government it also needs additional funds simply to survive. Ford did ask for a line of credit, which comes close to a bailout. However, GM and Chrysler are a lot closer.)

Lean manufacturing is almost synonymous with the Toyota Production System. But Toyota did not originate all of the principles that make up lean. Some of them go back to the original master of mass production, Henry Ford. (Read Henry Ford’s Lean Vision: Enduring Principles from the First Ford Motor Plant by William A. Levinson.)

Ford lost its way and for many years engaged in the same kind of non-lean manufacturing as GM and Chrysler. And like those two companies, Ford lost market share and fell on tough times.

Ford’s efforts to solve its problems have achieved more than those of the other Detroit automakers. And those efforts have come under the leadership of Alan Mulally, former CEO of Boeing – a company known for embracing a lean strategy. I see that as ironic, though it may be just a vindication of lean principles.

However, there is certainly irony in the fact that Mullaly is helping turn Ford around at a time when Boeing is facing problems. And other than the world economic crisis, Boeing’s biggest problem is construction of the delay-plagued 787 Dreamliner – which was conceived when Mulally was CEO.

I don’t know whether Mulally was involved in the decision to outsource a great deal of the design and construction of key components for the Dreamliner. That decision is the source of many of the current problems, largely through poor communication with, and oversight of, suppliers. One would think he had to have given at least some support to that strategy.

Sometimes we learn from our mistakes, sometimes we don’t. It appears that the lean education of the U.S. automotive and aerospace industries is, at best, incomplete.

Which of Your Processes are Most Important?

Determining where to focus your improvement efforts can be a challenge, but an important one. That idea was reinforced for me recently by reading about a keynote address given at a healthcare conference.

The address was by Don Berwick, CEO of the Institute for Healthcare Improvement, speaking at IHI’s annual National Forum this week in Nashville. (Productivity Press was at the conference. Check out our books on healthcare management.)

Berwick’s address was described in one of my favorite blogs, Life as a Healthcare CIO, written by Dr. John Halamka, CIO of the CareGroup Health System, and also CIO and Dean for Technology at Harvard Medical School. He writes:

Don hypothesized that 80% of healthcare can be reduced to approximately 100 processes. If we focus on perfecting these 100 processes, we're likely to make a major impact. IHI will soon implement an Improvement Map as a next step to the 5 million lives campaign.

That’s an intriguing idea. If true, it probably applies to nearly all organizations and industries, not just healthcare.

Do you agree? Can your business be reduced to 100 (or so) processes? How do you prioritize which processes to perfect?

Why You Should Speed Up Processes When Business is Slow

This guest posting is written by James Jelinek and Fletcher Birmingham, co-authors of Quick Changeover Simplified: The Manager’s Guide to Improving Profits with SMED.

Question: As a plant manager, why should I have my people work on reducing set-up and changeover time now? The market is so slow, we don’t have enough orders to keep the machines running.

Answer: You are not alone. As recession deepens, you will have plenty of company.

Every indication calls for a severe recession of 12-18 months, but it will pass.

If your plant truly is so slow that you don’t have enough orders to keep the machines running, perhaps workforce reductions are needed. However, this short term “fix” can have very long term negative impact as a solid experienced workforce is a treasure to be protected. I recommend you consider the following before you act.

While recessions are hard, at times they can be a great opportunity to take actions to improve your operation.

Eliminate any “D” players – many other employees may be wondering “what’s taking so long?” Sometimes we (myself included) keep people too long when we have high growth periods simply to keep up with the work load. Now may be a time to trim dead weight. Better yet, other “A” players may come on the market. This may be a good time to trade up.

An acquaintance of mine – Red Scott of Vistage – once said “a little success can lead to a lot of overhead.” I bring this up to remind all of us that improvements can be found in the office as well as the shop floor.

This may be a terrific time to really talk to your people about what it will take to not only survive this recession, but to emerge stronger. They will understand this message. They read the paper and understand the threat. My experience tells me they will appreciate the challenge and the leadership. They will rise to the occasion. The book Good to Great states the “Stockdale paradox” (Admiral James Stockdale): “you must maintain unwavering faith that you can and will prevail in the end, regardless of the difficulties to confront the most brutal facts of your current reality. Whatever they might be.”

Specifically, with respect to set up reduction and changeover time I offer the following thoughts.

Reducing set up and changeover time is a necessity in good times and even more necessary in bad times. The firm having the most efficient cost structure has the advantage. If your industry is truly distressed, this factor could determine who is the “last man standing.” I would also advise that now may be a good time to focus on your per piece run times as well. Recently, we have done this on certain key parts we run. We were able to work with our tooling vendors to find ways to reduce run times 30-50 percent. While set up was not affected, as we only changed the perishables, I ask you to focus on both set up and run.

Remember that reducing set up and changeover not only reduces cost, but enhances flow-through. This factor can allow you to offer shorter deliveries. This offer should be well-received by customers who want to keep inventories low. I see a potential competitive edge. This may be a good time to “take market share.”

Finally, I would highly recommend that you do something now. Do not hesitate. This recession is an opportunity to take actions that will enable your firm to emerge “leaner, meaner, and stronger on the other side.” Even if things are so dire that the excess capacity cannot be used to serve other customers, action can be taken to cut expenses and conserve cash.

Have Toyota’s Managers Lost Respect for Their Workers?

A key principle of lean is respect for people, and I generally regard Toyota as better than most of its competitors in following that principle. Therefore, I’m a bit puzzled by recent reports of steps Toyota is taking to address the current slowdown in business.

The actions being taken are not confusing on their face. Toyota announced it would reduce production in Japan and reduce management bonuses.

Toyota didn’t say how much it would save by cutting bonuses. The amount is probably not huge, and I suspect that action is somewhat symbolic. Nothing wrong with that. Symbols can be important. With this one, Toyota is saying managers, not just line workers, must sacrifice.

What troubles me is that Toyota said its 10-percent cut of bonuses for 8,700 managers in Japan excludes top executives.

Why exclude top executives? None of the news stories I’ve seen about the announcement explains this.

The Toyota announcement isn’t receiving major coverage. It is understandably overshadowed by the spectacle of the CEOs of the Detroit automakers appearing in Washington again to beg for bailout money. (Don’t get me started.)

But on the surface, it certainly appears that Toyota is giving its top managers special and preferential treatment. And that appears disrespectful to the thousands of lower-level employees.

Perhaps there are good reasons for the exclusion. If so, I’d like to hear them.

What Went Wrong With Boeing’s Dreamliner

One of the features of a lean supply chain is the close working relationship between different companies in the chain – a relationship that should be a trusting partnership.

In this kind of relationship, the partners provide each other with honest and timely communication. They understand each others’ capabilities, they set reasonable if ambitious goals, and they help each other where appropriate.

This relationship also requires a manufacturer to oversee its suppliers with utter diligence and constant awareness of what is happening.

According to its chief competitor, Boeing – a company with enough experience in lean initiatives to know better – apparently failed to establish these kinds of relationships with its supply chain partners on the problem-plagued Dreamliner program.

In an exclusive report on his blog, FlightBlogger, Jon Ostrower describes a competitive intelligence report prepared by Airbus on Boeing’s Dreamliner program. (Kudos to Jon for an excellent piece of reporting.)

Ostrower notes that the Airbus report contains copies of slides labeled BOEING PROPRIETARY, “raising questions about the methods and sources the European consortium utilizes to collect its data,” he comments. That is a serious issue, but one I won’t be discussing here.

While there have been many reports of Dreamliner’s problems and delays, the Airbus analysis – and Ostrower’s reporting of it – provide more detail and bring into sharp focus some of the things that went wrong. Ostrower writes:

Airbus believes Boeing's early production issues fundamentally originated in a lack of oversight on both design and assembly integration for the high level of outsourcing.

All of this was further exacerbated, according to Airbus, by "low-wage, trained-on-the-job workers that had no previous aerospace experience" working at supplier partners. Airbus believes "inadequate supplier capability in design," contributed further, citing as an example that "Vought had no engineering department when selected" by Boeing.

Combined with an "insufficient supply of frame, clips brackets and floor beams" the result was a "loss of configuration" control stemming from production records on "deferred work that were found to be incomplete or lost in transfer." In addition, parts that did arrive complete to final assembly were "found to be completed incorrectly" requiring additional rework in Everett.

In addition, Airbus cites a quality assurance cycle time that was not in line with the production rate demand, as well as a "lack of qualified non-destructive inspection/quality assurance personnel (NDI/QA) and equipment at Tier-2 and -3 suppliers."

Some bloggers and analysts raised questions from the outset about Boeing’s decision to outsource so much of the work on the Dreamliner, often to companies located far away.

This may be oversimplifying, but it appears that Boeing simply lost control of the Dreamliner production – or perhaps never had it in the first place.

It’s a sad story. We can only hope it teaches lessons – not just to Boeing, but to other companies as well – for the future.

The Missing Solution for Healthcare Waste

Remember the famous statement by an advertising executive who said he knew half of his advertising was wasted, but he didn’t know which half?

That seems to be the state of healthcare in the U.S. today. Everybody agrees there is a lot of waste. But no one seems to know what to do.

Actually, that’s my assessment. The people in healthcare think they know what to do. But they just don’t get it.

I come to that conclusion after reading a recent article in The Washington Post. The article, by Ceci Connolly, quotes a variety of top healthcare executives as agreeing about the vast extent of waste in healthcare.

The article also says they agree about the solution.

Yet among physicians, insurers, academics and corporate executives from across the ideological spectrum, there is remarkably broad consensus on what ought to be done.

A high-performance 21st-century health system, they say, must revolve around the central goal of paying for results. That will entail managing chronic illnesses better, adopting electronic medical records, coordinating care, researching what treatments work best, realigning financial incentives to reward success, encouraging prevention strategies and, most daunting but perhaps most important, saying no to expensive, unproven therapies.

Those are not bad ideas, but they really don’t get to the nitty gritty of solving the problem. For example, I agree with the idea of realigning financial incentives to reward success. But once a hospital sees that eliminating waste is in its financial best interest, then what? How does it eliminate the waste?

What is missing from the list in the article is a focus on process improvement – aka lean. Healthcare leaders need to understand how to identify waste, how to eliminate it and how to measure improvement.

To be fair, one of the people quoted in the article is Gary Kaplan, chairman of Virginia Mason Medical Center in Seattle. Virginia Mason is one of the few institutions that really is making progress by applying Toyota principles. For example, the article includes a description of how the hospital saved money by focusing on physical therapy for people with back problems, and not requiring them to have MRIs, because they realized there was no evidence the MRIs did much good.

But there are far too few institutions making these kinds of efforts. Here’s hoping that changes in the future.

A Lean Initiative Can Be a Real Eye-Opener

I firmly believe that the most important benefit of any lean initiative is not the improvements that may be achieved in cycle time or inventory or cost, but in how it changes the way people think.

That point – and I’m certainly not the first one to make it – was reinforced for me recently when I took part in a kaizen event. Called “The Machine Whisperer” (love that name), it was sponsored by the Association for Manufacturing Excellence and hosted by Food Sciences Corp. in Farmingdale, NJ.

Food Sciences processes and packages dried food products, primarily for weight-loss. The two day event featured a half-day of training, then a day and a half of actual work, as those of us involved attempted to improve the performance of a large, complex bagging machine. (There were nine of us in the group, not counting the folks from Food Sciences – seven from manufacturers, myself, and Pat Panchak, editor-at-large of AME’s Target magazine.)

Food Sciences had already been through some TPM training and several previous kaizen events. They had achieved some impressive improvements in performance.

It’s all about breaking away from old ways of doing things, looking at operations with “new eyes,” as some members of our group put it, and thinking of them in new ways.

The best example I can think of occurred not during our event, but earlier in the Food Sciences lean journey. Sal Runfola, director of operations and the person guiding us, described how the company began tracking machine stoppages – something that had never been done before. The data gathered revealed that during a particular four-hour period, one machine stopped – briefly – 38 times. Now there is information that will focus your mind! The operator was so used to dealing with stoppages, he had no idea they occurred that often. And neither did anyone else.

However, what was more important than the actual data was that Food Sciences came to see the value of collecting that data. And that type of recognition is what lean improvement is all about.

How has lean helped you to think differently? How has your company benefited? Share your experiences below.