Porsche Gets Its Speed from Toyota

I just read this great article over at the Bloomberg Businessweek site titled Porsche ‘Shock Therapy’ Spurs VW, Lufthansa Efficiency Drive. Other than pointing out that Porsche currently has the highest profit margins in the industry, the article discusses how Porsche, under the auspices of CEO Wendelin Wiedeking, began benchmarking Toyota's Lean production techniques back in the 1990s. This current success could indeed be attributed to the lessons learned from Toyota.

One section of the article -- "Taught By Toyota" -- points out how Porsche fully embraced a JIT (just in time) delivery system in cooperation with its suppliers: "Porsche took steps to fine-tune cooperation with suppliers to ensure factories received parts just when they were needed on the assembly line."

For years, Toyota has been operating its "Toyota Production System Support Center" at its North American manufacturing and engineering headquarters in Kentucky "where it holds ongoing seminars for outside companies, as well as schools, hospitals and charities." It appears Porsche has followed this lead as well as it has established its own consulting division and has worked with such clients as "Deutsche Lufthansa AG, Volkswagen AG, and Meyer Werft GmbH" who have "all turned to Porsche to make their manufacturing processes more efficient."

In 1993, Porsche "had a net loss of 122 million euros ($162 million) and sales of no more than 14,000 cars" and now in 2010 posted an "operating margin in the automotive unit in the fiscal first quarter of 19 percent" and earned honors in J.D. Power & Associates’s annual quality study.

What do the readers of this blog think of Porsche's success? Does it come as a surprise? Is Porsche building a new culture within its organization?

Lean Labor Management

I recently read a very informative article by Stephen Jannise on the Software Advice site that covers a concept often left out of Lean manufacturing discussions: lean labor management. This article pinpoints three key effects that Lean principles can have on labor management, particularly within the manufacturing industry. These effects are:

• The metrics of effort and success will differ from a non-Lean environment because the goals for productivity have changed.
• Employees will be expected to work with greater flexibility and adapt to unique problems that arise each day.
• Relationships between co-workers, superiors, and subordinates will be reshaped to emphasize managed cooperation over individualized labor.

Jannise continues with a more detailed analysis of each of these areas and makes some crucial points, such as: "If managers in a Lean workplace are going to convince workers to handle more complex tasks, then they must devise ways to reward flexibility," but the overarching theme reinforces an overall transformed mindset. All those involved in the Lean initiative must be ready to exit their respective comfort zones and realize that the majority of the traditional metrics and behaviors not only don't apply, but will ultimately prove detrimental.

The A3 Problem-Solving Process

One of the most effective problem-solving approaches used by Toyota is the A3 report. "A3" is actually a paper size (11" x 17") that was used at Toyota to keep problem-solving documentation consistent, structured, and clear.

I recently spoke with Daniel D. Matthews, who spent 14 years as trainer, coach, and implementer of Lean Manufacturing at Toyota and recently published a book titled The A3 Workbook: Unlock Your Problem-Solving Mind. I asked Dan: "What would you say is the biggest mistake people make when trying to solve problems and how can the A3 problem-solving process help?"

Here is his complete response:

"The one mistake that is consistent from class to class is that participants jump to potential causes or even countermeasures before they fully understand the characteristics of the problem.

My first step is to coach them to ignore their natural inclination to take some kind of action. In the A3 problem-solving process, you are encouraged to delay acting on the problem until you have stated it clearly and precisely.

It is critical that you identify the facts that explain what is actually occurring and try to make your first 'sense' of the problem more specific. To do this, you must remove the subjectivity and replace it with facts.

To accurately depict the current situation, it is important to look at existing data related to the situation. Make sure that you go and see the situation for yourself; don’t rely on others to provide you with the information you need.

The data you gather will also help you later in the process when you have to break the problem down. To truly understand the problem, you must break it down into specific characteristics. The key to solving any problem is to follow the process and let the facts lead you instead of acting on your opinions and feelings."

Are you using A3 reports to solve problems? Do they hasten the path to the root cause?

Lean and Human Resources

I first met Cheryl Jekiel -- vice president of Human Resources for the Flying Food Group -- at an annual Association for Manufacturing Excellence (AME) conference a few years ago, and she recently published a book titled Lean Human Resources: Redesigning HR Processes for a Culture of Continuous Improvement.

I asked Cheryl to succinctly explain just how organizations can achieve greater success by applying what's now called "Lean Human Resources." Here is her response:

"Better performance requires knowing where you are, followed by setting the right goals and then taking effective steps to achieve them. Your goal achievement process works best when business managers and HR Managers partner together to involve everyone in the workplace -- which for many of us is a significant challenge. Many (if not most) attempts to improve results fail when your management team tries to go it alone. Applying Lean to the Human Resources (HR)function can provide a roadmap for how your organization can avoid the common mistake of leaving HR on the sidelines while you develop and execute your strategies. Building performance based strategies into all your people-related processes, such as recruitment, training, performance management and rewards, is not only the best way you can achieve new levels of success, but it prevents failure from leaving the HR out of the equation.

In addition, the positive impact of involving employees in the daily goals of your organization and understanding the needs of your customers generates noticeably more motivated employees. This enthusiasm creates a positive momentum that generates even more productivity and better customer service on all levels. In addition, more involved employees are great candidates for enlarging their job content to include more of their skills, such as teamwork, problem solving, and process improvement (which are often left untapped). Lean HR provides methods for putting more into job responsibilities in a step-by-step manner, including what processes must be changed to allow employees to participate more fully on a daily basis.

Lean HR is not a program to run through your organization, but a whole new way to utilize the talents inside your organization. Your customers will be quickly able to see that your organization is one where everyone is involved and on the same page about 'the customer comes first.' The results will also reflect satisfied customers who are willing to pay more for products and services from an organization that accesses their people more effectively."

Do any of you work in organization in which the Lean initiative has Incorporated the Human Resources department? Were there any initial barriers? Did it ultimately enhance success?

The Improvement "Trap"

During the past few years, I've attended many insightful presentations given by Michael Bremer while participating in conferences focused on Lean initiatives and performance improvement (most notably at the Association for Manufacturing Excellence's annual conference). Michael has currently authored a book (along with Brian McKibben) titled Escape the Improvement Trap: Five Ingredients Missing in Most Improvement Recipes. I recently met with him, and during our conversation, I asked him to explain just what is the "improvement trap" and how can companies escape it. I'm reproducing his reply here:

"For the most part, companies typically approach the business of improvement in very much the same way their competitors do. They appoint some smart person to lead the effort, and that person finds areas to improve, typically using improvement teams to attack waste and remove obvious non-value adding activities. Meanwhile, the organization conducts its business in the same manner it always has. Performance and efficiency might get better, but they get better in the competitor’s company also, so as a result, nothing much changes. That is the trap.

If an organization wants to break out of that trap, it must look for levers that can truly differentiate the organization from the competition. People laud and strive to emulate the Toyota Production (or Thinking) System (TPS). And it is indeed very powerful -- one of the best improvement methodologies of all time. But when did Toyota start to make lots of money? It was not after 20 years of TPS, although that did provide a solid foundation. Toyota started making the big dollars when they launched Lexus and redefined the customer buying experience for purchasing a luxury car. New value creation rarely gets talked about in improvement programs, yet is one of the most important areas an organization can develop."

Have you worked for a company that has invested much time and capital into an improvement initiative only to ultimately retain (or lose a bit of) the established market share? What do you think of Michael Bremer's point about the importance of new value creation?

True Cost Versus Piece Price in the Supply Chain

Chris Harris is one of the authors of a new book titled Lean Supplier Development: Establishing Partnerships and True Costs Throughout the Supply Chain, and I recently asked him the following questions in an email: "Why shouldn't the decision of where to source a purchased component be made on piece price alone? And, just what is 'true cost' and why should it be considered?

Here is Chris Harris' concise reply:

"The piece price of an component -- the comparison of one supplier’s piece price to another’s -- is typically the driving factor for selection of one supplier over another. But unfortunately, piece price only tells us a fraction of the cost that is actually borne by your organization when sourcing a component. The piece price only takes into account the price for which the supplier is willing to sell the item -- it usually includes the supplier’s manufacturing costs and overhead costs and profit, but it may or may not include factors such as the cost to you, the customer, for transportation of the component to your location and many other concealed costs.

When you evaluate a supplier’s cost, I believe you should always use a true cost methodology. The true cost methodology does indeed consider the piece price as a part of the equation but also takes into account other costs that fall into one of three categories: change costs (the cost of switching from one supplier to another), risk costs (the cost that you can reasonably predict could occur in the course of doing business with a supplier), and ongoing costs (the costs you'll bear during the duration of time that the new supplier is providing you with product)."

What are your considerations when purchasing parts or components? Do you use any type of "true cost" model?

Is Target Cost Management Important?

I recently had a conversation with Jim Rains, author of a new book titled Target Cost Management: The Ladder to Global Survival and Success. I must admit, I began our conversation in quite a blunt fashion by asking him right up front: "Why is target costing even important?" Here is his direct response:

"Target costing is important for a very simple reason. When it is performed properly in any major corporation it sets the stage for constant, consistent, acceptable and predictable levels of profitability. Predictable infers that there is a profit plan; a long term profit plan. All companies need to make money to stay in business, but only the best are able to sustain it forever. Making money must be the bottom line measure for any company’s success, but the real difference in companies that excel in target costing is that they achieve long term profits over a period of many years, literally decades, as opposed to a short term profit horizon.

The main activities of comprehensive target costing are:

• Planning for target cost and target profit.
• Confirmation of the target cost and profit and allocation to main portions of the product.
• Assisting and promoting the activities of target cost and profit and managing them in product planning, development, design and manufacturing preparation stages.
• Achieving the target cost and profit by the activities of all areas of the business.
• Evaluating target costing activities for continuous improvement."

I surely appreciated his response, but it then begged the question: "If target costing is so effective, why aren’t more companies implementing it?" Jim replied:

"This answer is more complicated but in short target costing is not easy. It is almost never easy to be the best at anything. The best athletes in the world at their sport work endless hours to separate themselves from their competition. Long term profitability that is constant, consistent, acceptable and predictable takes a fully dedicated leadership team that knows, follows and embraces the proper corporate strategy for target costing to flourish."

Do work with or know of any corporations that use target costing for long-term profits? Have these corporations been successful?

Lean Doing and Lean Thinking

A recent article over on the ThomasNet news site, authored by David R. Butcher, confirms what a lot of Lean champions have been declaring for many years -- Behavior profoundly changes an organization, not tools.

Capgemini Consulting recently released a report titled Lean for the Long Haul, which surveyed more than 150 executives responsible for leading Lean initiatives, and concluded that behavioral changes are what sustain an effective Lean transformation. What ultimately derails the Lean journey? Resistance to change and a lack of focus/commitment.

Placing a strong emphasis on the implementation of tools and the deployment of specific techniques does have a galvanizing effect as they do get all associates involved and encourage enthusiasm. In addition, tangible results are immediately revealed through waste-reduction efforts. After a year or so, however, sustainability becomes a major issue if routine "Lean doing" supersedes "Lean thinking." Without behavioral change, the initiative will ultimately wither.

Lean initiatives that survive the in the long term focus on:

• Leadership.
• Recognition.
• Strategic Alignment.
• Performance Management.

Has any readers of this blog ever been involved in a Lean initiative that has hit the "plateau" stage because some of the crucial Lean thinkers failed to create the correct culture and have moved on after instituting only the effective techniques?

Redeveloping Product Development at Volvo

I came across this interesting article that provides a little insight into how Volvo developed one of its new trucks -- the Volvo FMX. According to Gunnar Eliasson (a market manager for Volvo Trucks), customer input and specific requirements are now influencing the design of Volvo's trucks in a much more direct fashion. As product lifecylces are much shorter due to increased competition, response to customer demands must be more immediate.

With the Volvo FMX, the development process included customers, drivers, sales staff, and marketing specialists and then prototypes were built and tested after input and "wish lists" were distilled. A very crucial point of the article is a quote from Jeffrey Liker (author of The Toyota Way) who noted that this new process is what separates Lean product development from traditional product development: "In Lean production, specialists work together freely across several departments and areas, all so as to be able to better meet customer demands. At the same time, this approach promotes constant learning about the production processes and understanding of how product development is conducted."

Do you know of any companies that include this type of input very early in the process? How has it affected lead times?

Most companies' major concern with this type of process is the dissemination of important "secrets" to competitors. The more various "outsiders" involved in the development process so thoroughly increases the potential for leaks. Eliasson, however, reveals that the priorities and outcomes have greatly changed: "The benefits of inviting customers into the product development process far outweigh the risk that information might spread to our competitors."

Lean Culture in a Pharmaceutical Company

Over at the PharmTech.com site, an article by Christian Houborg details a case study on how Lean can drive the creation of an improved culture within pharmaceutical companies. One of the main issues the author addresses is how pharmaceutical companies should integrate a Lean methodology into their current good manufacturing practice (cGMP) approach. Houborg's case study examines the approach used by Lundbeck (an international Danish pharmaceutical company engaged in the research and development, production, marketing, and sale of drugs for the treatment of psychiatric and neurological disorders). The four-phased approach consisted of:

1. Building consensus in the management group.
2. Building the pilot and proving that it works.
3. Running a large number of Lean events and building a culture around these events.
4. Increasing the focus upon Leaders after two successful years.

The fourth phase is quite interesting because it revolved around a Lean leadership development program, which itself followed four sequential modules:

1. Lean Leadership Foundation -- concentrates on getting the basics accurate.
2. Lean People Leadership -- focuses upon the qualities and needs of the individual manager's team.
3. Lundbeck Lean Acceleration -- the existing situation in the company is analysed, with consideration of what had and had not worked with the objective of speeding up the transformation further.
4. Sustaining Lean -- sustaining momentum is discussed and all participants present the result of their Lean project.

These four modules geared toward the leaders are probably instrumental in sustaining the Lean gains by preventing stagnation and backsliding -- This is the point where the organiztion prgresses from applying techiques to developing an improvement culture. The most important part of the article is summed by the author when he states that the "approach is much more than just about waste elimination; Lean has become a complete business paradigm. Employees that were earlier engaged in Lean teams are now partnered with the top managers, driving Lean culture in their area together."

What are your thoughts on this case study? Does Lundbeck's Lean system contain facets missing from most initiatives?

The Wall Street Journal and "The Drawbacks of Lean Manufacturing"

Back in July, an article, authored by Daisuke Wakabayashi and Jung-ah Lee appeared in The Wall Street Journal that reported such companies as Apple Inc. and Nissan are experiencing delays in production because their respective suppliers cannot fill the currently increased demand for certain parts required in popular products. The authors claim that the reason for this these shortages stem from "the drawbacks of lean manufacturing methods, which call for carrying little inventory but make supply snags tougher to offset" and generally believe that "the pitfalls of Lean manufacturing methods, a hallmark of cash-rich and efficient companies, arise when parts either prove faulty or in short supply."

Previous to this article, I had never seen Apple referred to as a Lean organization -- I've come across no other articles that have described the company as such, and I've never seen Apple reference it in its literature. Surely the authors could have provided a bit more discussion about Apple's global supply chain and how it functions before making the claim to help warrant their argument.

This article has come up quite periodically during discussions with colleagues during the past month, and I'd very much like to hear readers' opinions and thoughts about it. What was your reaction when you first read this article?

The Lean Plateau

According to this article on the Supply Chain Brain forum, which details survey results provided by Capgemini Consulting, "dissatisfaction with lean initiatives is highest one to two years after initial launch." As expected, the initial enthusiasm resulting from practical process improvements of first-time kaizen events and the application of Lean tools soon gives way to stagnation or backsliding because "long-term behavioral changes have not yet become embedded in the organization." In other words, if an organization's culture is not altered or transformed, the Lean initiative will eventually hit a sluggish plateau.

The article contends that the absence of four correctly functioning key factors -- Leadership, Recognition, Strategic Alignment, and Performance Management -- often lead to an initiative's inability to sustain. I have always maintained that there is that crucial disconnect between the application of Lean tools and and true behavioral change when participants are just "applying" but not "understanding." In your experiences, what causes Lean initiatives to stall? Can participants who expressed enthusiasm and optimism for the Lean initiative when it commenced, but are now disheartened at two-year mark, be reinvigorated?

So Lean, What Have You Done for New Hampshire Lately?

According to this article authored by Catherine Blake and published on the Business NH Magazine website, the New Hampshire Manufacturing Extension Partnership (NHMEP) the economic effect of Lean in New Hampshire during the past five years has been "305 new jobs, 593 retained jobs that didn't go off-shore or get eliminated, $194.9 million increase in sales, $75.2 million spent on new investment, and... $29.1 million in cost savings." The article contends the reason why all companies don't embrace Lean initiatives "has everything to do with human capital" and the investment in training to build Lean culture. What many New Hampshire manufactures don't know is that a grant is available "for qualified prospects through Governor John Lynch's job training fund."

Some of the New Hampshire companies that have benefited from successful Lean adoptions are: RF Hunter (a maker of oil filtration systems), Salient Surgical Technologies (a developer of technologies to simplify surgeons' work), High Liner Foods (a processor and marketer of seafood products), and BAE Systems (a global defense, security, and aerospace company).

Lean as a Political Platform

The Lean Insider blog is not endorsing any particular candidate for the Senate seat in Washington state, but in terms of political angles, I could not help but find one of independent candidate Paul Akers' positions quite interesting. In this article published on the Edmonds Beacon site, Akers (the owner of FastCap -- a product development company that makes woodworking tools and equipment) believes he is a different type of candidate because he is a "Lean manufacturer" and "Lean thinker" and would use this methodology to reshape the government culture if elected.

Although many politicians speak of eliminating waste in government, Akers feels most don't have the proper skills to accomplish it. He contends, however, that his background in owning and managing a company that "empowers people to eliminate waste every day" makes him especially qualified.

Here's Akers' summation of his "10 to Lean" plan: "You cut taxes by 10 percent, you cut spending by 10 percent, across the board, for three consecutive years, and implement a Lean strategy throughout the federal government. Every federal agency will have one Lean thinker who will teach people how to eliminate waste and increase quality. By default, that will shrink the size of the federal government, shrink spending, create more jobs, and more opportunity for everyone with lower taxes. It’s a winning formula."

I'm sure this is the first instance in which I've heard such an explicit use of Lean as part of a political campaign. What are you thoughts? I welcome all insightful comments.

Staying Lean (and Beautiful) While Outsourcing

In the June 2010 issue of GCI magazine, David Becker, in an article titled Speed to Market: Becoming Lean Through Outsourcing, contends that although outsourcing is usually incorporated to just save costs, it actually can save time, foster creativity, and improve quality and flexibility. Becker focuses on the beauty-products industry in which "taking a product from trial to mass production" can be the most wasteful and time-consuming task in product development. As in most industries, full supply-chain development and partnership, which should be based on constant communication and realistic expectations, is crucial to any product.

An interesting quote comes from Justin Ames, director of custom manufacturing at Neways Inc. (a company that focuses on the research and development, manufacture, and fulfillment of personal care products): "Look for companies on a continuous cycle of implementing initiatives. Neways Inc. is obsessed with quality and on-time deliveries. If one of our initiatives positively affects this measurement, then we build on it. If it doesn’t, we review it, change it, or throw it out and try something else." Essentially, Lean customers can foster Lean suppliers and Lean Suppliers can enhance Lean customers.

Please feel free to comment or cite examples in which a supplier has hastened or energized a customer's Lean initiative.

Manufacturing Today... In a Nutshell

I recently browsed across this clear and concise article by Stephen Jannise titled "A Plain English Guide to Modern Manufacturing Methods" on the Manufacturing Software Advice website. Stephen maintains that modern manufacturing should comprise three main concepts:

1. Reducing waste.
2. Maintaining quality.
3. Accelerating production.

The reduction of waste focuses on seven methodologies: Just-in-Time (JIT), Kanban, Just-in-Sequence (JIS), Total Productive Maintenance (TPM), Quick Response Manufacturing (QRM), Cellular Manufacturing, and Single-Minute Exchange of Die (SMED).

For maintaining quality, the concepts that enhance Six Sigma are listed: Define, Measure, Analyze, Improve, Control (DMAIC); Define, Measure, Analyze, Design, Verify (DMADV); Critical to Quality (CTQ); Quality Function Deployment (QFD); and Suppliers, Inputs, Process, Outputs, Customers (SIPOC).

Accelerating production is crucial because of the customized needs of the modern consumer. To maintain flexibility, manufacturers embrace: Machine Flexibility, Routing Flexibility, Computer-aided Design (CAD) and Computer-aided Manufacturing (CAM), Computer-integrated Manufacturing (CIM), and Taguchi Loss Function.

Stephen essentially contends that for a current manufacturing operation to remain successful, it must embrace an initiative that combines both Lean and Six Sigma. I found this article a great primer on the targets and techniques all manufacturers should be incorporating into their respective business strategies. What are your thoughts? Do you think Stephen has has overlooked any important areas?

The Seattle Children's Hospital Improves Its Own Health

On Friday, July 9, The New York Times published a revealing article about the continuous performance improvement initiative (C.P.I.) at the Seattle Children's Hospital. Not only has this initiative dramatically improved patient care, but it helped cut costs per patient by 3.7 percent, which resulted in a saving of $23 million.

The article interviews Patrick Hagan, the hospital's president (as well as co-author of the forthcoming book Leading the Lean Healthcare Journey: Driving Culture Change to Increase Value), about the use of tools used most notably at Toyota such as kaizen. Hagan believes that "the highest-quality care also is the most cost-effective because we make fewer mistakes and create better outcomes."

An interesting part of the article deals with initial resistance to C.P.I. from doctors because many thought some patient-care decisions would be removed from the physicians. Dr. John Waldhausen, the division chief of pediatric general and thoracic surgery at the Seattle Children's Hospital, changed his mind as the initiative developed. He states that "C.P.I. is the same scientific method we learned in medical school, including hypotheses, data collection and analysis. It is not opinion and conjecture — it is data-driven."

Customization Versus Price

Do you think the buying habits of online shoppers are changing rapidly? According to this revealing article by Peter Crawfurd published on the Huffington Post site, the habit of conveniently purchasing a variety of standard items quickly and cheaply from one online retailer might be evolving into a different buying pattern: customers are seeking more personalized and customized products at affordable prices with quicker delivery times.

One of the goals of Lean production is dynamic flexibility -- to efficiently produce customized products in the smallest lot sizes possible while satisfying customer demand and clearing a reasonable profit. Crawfurd cites some companies that are currently striving to follow this model (including his own ShirtsMyWay.com), but do you think customization at this very individual level will ultimately survive and overcome the expense? Is this the model that most online retailers will soon be adapting?

Lean and Theory of Constraints

The article titled Lean: One Size Does Not Fit All, authored by Tim Sramcik and recently published on the SearchAutoParts.com site, raises many important points. Sramcik believes there are five crucial myths that often derail leaders at the outset of a Lean implementation in an auto repair shop:

1. There's a single lean model shops can adopt.
2. Lean, by itself, can supply you with answers.
3. The lean journey is predictable and affordable.
4. You can count on your staff to buy in.
5. Lean is the only way.

I was particularly intrigued by his discussion of myth #5 in which he describes some shops using other methodologies such as Theory of Constraints (TOC) to remove bottlenecks and increase productivity. He states that "TOC stands in contrast to Lean because its intent is using existing resources to spur substantial growth. Instead of doing more with less, shops maintain reserve sources... to handle spikes in work, thereby expanding the customer base."

Sramcik goes on to quote John Fagan -- the manager of Smail Collision Centers in Greensberg, Pennsylvania -- "With lean, your capacity is limited. You can only do so many jobs a day, and the only way to grow is to open a new location." Do you agree with this statement? Is Lean really relegated to increasing flow and reducing waste but not for spurring growth and increasing market share? Please post your thoughts.

Improving Healthcare in the Lehigh Valley

I recently read this interesting white paper titled Using Lean Management to Improve Access to Both Psychiatric and Medical Care, authored by Dr. Michael W. Kaufmann, the chairperson of the department of psychiatry at the Lehigh Valley Health Network. He documents four quality improvement projects using Lean methodology. The four projects focused on: a collaboration plan for medical floor transfers, inpatient psychiatry units, an ancillary reduction project, and an emergency department LOS (length of stay) reduction project.

The most revealing section explains the two main reasons for the success of the projects: 1. A collaborative, interdisciplinary approach, which ultimately results in a “peaceful, silo-busting approach." 2. Buy-in from key stakeholders.

What are your reactions to the results and the lessons learned?

Lean Logistics Meets Zero Emissions

The future design of ocean cargo marine terminals, specifically, and the efficiency of global supply chains, in general, may defined by a concept unveiled by Wallenius Wilhelmsen Logistics. According to this article, the "Castor Green Terminal" will be powered solely by the sun and the wind -- By using no fossil fuels, these groundbreaking terminals will release no harmful emissions into the atmosphere.

Although the wind turbines and solar photovoltaic roof panels will provide the main source of power, these terminals will also harness their own water supplies. Rain water will be collected from the roofs and then stored in underground tanks.

Complementing the intelligent design of these terminals will be the processes by which they will run -- Lean production techniques "focusing on the elimination of waste and adding value" will be applied during each stage of the cargo’s movement through the terminal. In addition, all waste from such facilities as workshops and paint shops will be considered "a resource to be recycled used for heating or properly transferred."

Can the future of global supply chains and logistics really be imagined without "Lean, green, and clean" sensibility?

The 2010 Lean Logistics Summit

From Tuesday, June 22 through Wednesday, June 23, the leading authorities -- authors, researchers, and company representatives -- on the subject of lean logistics will gather at the 2010 Lean Logistics Summit in Cincinnati to discuss experiences and share insights. This conference is the newest addition to the series of fine targeted summits, which include the Lean Accounting Summit, the TWI Summit, and the Lean and Green Summit. Like these other Summits, the Lean Logistics Summit will take a focused look at a specific aspect of the Lean enterprise. This year's agenda of speakers and presenters is quite impressive.

To read a very helpful article on mapping a Lean supply chain authored by Robert Martichenko, one of the keynote speakers at this summit, click here.

Traditional Change Models and Lean and Six Sigma Implementation

I recently posed the question -- Do traditional change models help or hinder Lean and Six Sigma implementation? -- to Larry Solow and Brenda Fake (authors of What Works for GE May Not Work for You: Using Human Systems Dynamics to Build a Culture of Process Improvement) and I've decided to post their reply here:

"We believe the answer is 'yes!' While we are glad many Lean/Six Sigma leaders and project managers attempt to address organizational change at some level... it is not nearly enough. Change today can no longer depend on a linear six or seven step model that is easy to follow in 'the change plan' or project charter. Those models fail because linear plans fail to address the complexity of the problem itself and the larger systems in which they are embedded.

We as Lean and Six Sigma leaders owe it to ourselves, the projects, the employees, and the customers to look at business improvement change through the lens of complexity. This requires today’s successful Lean/Six Sigma professionals to understand the initial conditions for why a change is needed, and the many moving parts that are impacted by the improvement. It is not enough to analyze the problem in a vacuum. It is critical to be able to see and influence the patterns of the relationships to the business improvement, set the initial conditions, and implement improvements that can adapt to rapid and unpredictable changes in order to sustain themselves beyond the initial implementation."

Feel free to post your thoughts or comments.

William Balzer Makes the College Connection

William K. Balzer (author of Lean Higher Education: Increasing the Value and Performance of University Processes) will appear on the College Connection radio show discussing the implementation of Lean in a university administration environment.

College Connection is the public’s radio link to information about Oklahoma’s colleges and universities and the importance of college degrees for individuals and for the state. On the air since 2004, the state-wide, weekly program targets a general audience and features news on higher education issues and interviews with education experts and newsmakers from around the state and nation.

Here are the air times and radio stations:

Saturday 10:00 a.m. & Sunday 10:30 p.m.
KOKC- AM 1520 Oklahoma City

Sunday 6:00 a.m.
KOCU-FM 90.1 Altus
KLCU-FM 90.3 Ardmore
KYCU-FM 89.1 Clinton/Weatherford/Elk City
KCCU-FM 89.3&102.9 Lawton/Ft. Sill/Duncan
KMCU-FM 88.7 Wichita Falls, TX.

Sunday 6:30 p.m.
KOSU-FM 101.9 Okmulgee
KOSU-FM 107.5 Stillwater
KOSU-FM 91.7 Tulsa/Bartlesville

Monday & Wednesday 4 p.m.
KSSU-FM 91.9 Durant

The show will also be archived on the College Connection web site.

Alaskan Lean

I had the pleasure of meeting Patrick Anderson -- the director of Chugachmiut (a Tribal consortium created to promote self-determination to the seven Native communities of the Chugach Region of Alaska) -- at the recent TWI Summit in Las Vegas. He told me about his organization and its Lean initiatives -- in fact, they are detailed right on the Chugachmiut site.

While perusing the site, I noticed a link to Patrick's engaging blog and perused some of the entries including this recent post about a kaizen event in the human resources department. In addition, Patrick participated in a podcast on the Lean Blog site hosted by Mark Graban in which he discusses applying Lean principles to healthcare delivery in Alaska.

NYU Langone Medical Center Embraces Lean & Six Sigma

The NYU Langone Medical Center partnered with the Institute for Management and Executive Development (IMED) at the Rutgers University School of Business in Camden, New Jersey to become a "world-class" and "patient-centered" medical facility according to this article on the Rutgers University Continuing Studies site.

Martin Costa, the director of Organizational Development and Learning at NYU Langone Medical Center, is now the director of the new Lean Management Office as well. He states that, other than the benefits of waste-reducing pilot projects and increased operational efficiency, "we are creating a different atmosphere here in terms of how people identify, address, and collaborate on solutions." It appears this initiative is not focusing merely on cost-saving activities, but creating a cross-functional, team based culture.

In addition, it seems change is occurring from the top down -- Martin points out that “one of the most valuable gains is a deeper knowledge of how to be effective as a leader of change.”

Can any Lean initiatives sustain if the leadership of an organization does not embrace and direct the culture change?

Is This Really a Surprise?

The University of Leicester recently published a press release titled "Quality Management Means Lean Management" that details a 22-year study (conducted by Stephen Wood, Professor of Management and Director of Research, University of Leicester School of Management) of the integrated use in British manufacturing of a set of Lean management practices in which employee empowerment was a major component. The conclusion? "We found in all 22 years that those firms that used the integrated Lean approach have higher levels of productivity (measured by value-added)."

One very interesting point caught my eye: "... pioneers in integrating these practices (the total approach) outperformed even those that subsequently adopted it. Later adopters caught up in practice usage by the end of the period studied, but their productivity growth was not sufficient to catch up with those which had adopted it earlier." This conclusion reinforces the benefit of building Lean into the culture of an organization -- the "pioneers" would not have able to sustain their rates of improvement if Lean was simply reduced to the application of a set of tools.

Are any readers of this blog surprised by the conclusion of this study?

Brett Wills on The Lean Nation Radio Program

Brett Wills –- author of Green Intentions: Creating a Green Value Stream to Compete and Win -- will be a guest on the The Lean Nation radio show May 19th from 4pm to 5pm (EDT) on 790 AM Talk and Business, hosted by Karl Wadensten. He will discuss important Lean and Green topics, and he's looking forward to sharing his insights on air to a wide audience of business leaders and change agents.

You can listen to his appearance live on 790AM (Citadel Broadcasting, ABC Affiliate) in Providence, Rhode Island. The show is also globally available via a live audio stream at 790business.com. Brett would love to hear your opinions and answer your questions, so feel free to call in to the show. The call-in number is 401-437-5000 or toll free at 888-345-0790. If you can’t tune in live, a podcast will be available after the show.

The Lean Nation is a new show on 790AM and airs from 4 pm to 5 pm, weekdays and streams online at 790business.com. The Lean Nation features real world examples and actionable advice from local and national business leaders on how to reinvent yourself into a Lean operation in business and in life. The show's host, Karl Wadensten, is the president of VIBCO, a Rhode Island manufacturing company. During the past three years, VIBCO has created a Lean Revolution using lean methodologies (based on the Toyota Production System).

3P at GE

According to this article posted on Business Wire portal, all major products manufactured by GE at its appliance and lighting facility in Louisville, Kentucky will be developed using Lean techniques. More specifically, the company is embracing a 3P (production, preparation and process) strategy.

It appears that Dirk Bowman, GE Appliances manufacturing leader, has the correct outlook and expectation because he states that "the journey will take several years to fully implement" and realizes that a Lean initiative is not merely a quick fix or a simple program to exploit short-term profits.

3P is a powerful tool that often results in the elimination of multiple process steps and dramatically reduces rework. Have you used 3P in the product development process?

Mike Osterling Explains the Differences Between Lean on the Shop Floor and in the Office

Over at the Velaction site, I came across this quite helpful podcast that features an interview with Mike Osterling conducted by Jeff Hajek. Mike discusses how Lean in the office differs from its implementation on the shop floor. He explains how to manage changes, the difference in ownership of jobs, how to recognize abnormal conditions, and what to do to manage the pace of work.

Mike was one of the principal founders of San Diego State University’s Lean Enterprise Certificate Program, where he continues to teach, and is the co-author of The Kaizen Event Planner: Achieving Rapid Improvement in Office, Service, and Technical Environments.

The 2010 TWI Summit

I am currently attending the 2010 TWI Summit in Las Vegas and am quite glad to see a steady increase in attendance since this conference's formation. The TWI (Training Within Industry) program was established more than 60 years ago by the the US government during World War II to increase productivity and standardize work during a time of crisis. The goals were to: get more done with less machines and manpower; improve quality, reduce scrap by achieving standard work across workers and shifts; reduce safety incidents; decrease training time, especially for temporary workers; reduce labor hours; reduce grievances; and transfer knowledge from a skilled, retiring workforce to an unskilled, green workforce.

The conference will feature presentations by well-known authorities and authors on the subject such Patrick Graupp, Bob Wrona, and Don Dinero.

Has TWI been instituted in your organization? This program became an essential part of the Toyota Production System, but for many years, it remained in obscurity, and many organizations instituting a Lean initiative overlooked it.

Is the Pharmaceutical Industry Ready for Lean?

I recently read this comprehensive article on the Pharmaceutical Processing magazine website titled "How to Unlock $43 Billion in Value by Improving Working Capital Management." The section on what differentiates the pharmaceutical industry from other industries in working capital performance is quite revealing. Although three main areas are defined -- inventory turns, accounts receivable, and accounts payable -- it is the information on inventory that caught my eye.

The article claims that inventory turns are poor in the pharmaceutical industry due to three specific reasons:

1. A “no stock-out philosophy" -- the high margins and impact on patients maintain this philosophy.
2. FDA regulations -- which add to lead times.
3. Unique labeling requirements and SKUs -- which result in greater inventory complexity.

In regard to improving performance, the article first suggests that pharmaceutical companies should adopt lean production techniques. In addition, it suggests using Toyota's two main metrics: cost structure and return on sales.

Do any readers have any experience working with pharmaceutical companies? Do you agree with the suggestions posited in this article?

Toyota from the Inside?

I've been acquiring and editing books about the production system, culture, and tools used at Toyota for many years now. Some of these books were written by leaders formerly employed by the automaker, and most are analytical and explanatory.

It was quite refreshing to read this article on the Kentucky.com site about a book written by Tim Turner, a team leader at Toyota's Georgetown plant. The book, titled One Team on All Levels: The Story of the Toyota Team Members, compiles true narrative stories composed by actual Toyota employees illustrating teamwork, principles, leadership, and values. All proceeds from the sales of book will be donated to the Toyota benevolent fund, which helps team members in times of need.

It quite interesting to read what working at this Georgetown plant actually means to this cross section of team members. This book gives a glimpse past value stream maps and A3s and reveals a part of the "on the ground" culture of dedication -- to improvement and each team member.

The writing of the book started in 2008, so the recent recall and associated developments at Toyota are not addressed in the book, but as Turner states in the article, "... the chapter's not yet written for our company, and we're all in the right mode."

Has anyone read this book yet? Feel free to share your thoughts.

Are Electronic Networks the New A3s?

I recently read this short article titled Lean Project Ideas by Dan Antony, which appeared on ehow.com. The article reviews basic concepts as defining value streams, identifying waste, kaizen events, and automation. The section that specifically caught my attention advises to "implement social media" -- that is, using electronic tools to share and illustrate improvement ideas throughout the company and worldwide locations. For example, Siemens has established an internal blog so employees can share benefits worldwide almost instantaneously while Microsoft is encouraging its employees to use podcasts to proliferate ideas throughout the organization.

A3 reports have used by Toyota for decades to document improvements, and this problem-solving tool has gained much popularity and use in the US during the past few years. A3s were named after the size of paper used to document a particular solution -- but it's the concept, and the thinking behind it, that holds the real power. Are electronic networks the next logical step in the evolution of A3s?

Lean... For the Beginning of the New

Last week, the New York Times published this great article detailing a fresh approach to creating new companies dubbed "Lean start-up." The companies that have initially embraced the method are Internet based -- "Free open-source programming tools and easily distributed Web-based software drive down the cost of developing new products and services."

Although the "Lean start-up" concept applies to both both product design and market penetration, the most important benefit is its early emphasis "and constant focus on customers." Eric Ries, who is credited in the article with coining the term Lean start-up, believes that the traditional start-up model can lead companies to invest too much in "one technology path and one business plan" -- thus, losing their ability to change and adapt to the market. Steven Blank, cited in the article as "serial entrepreneur," adds this very interesting definition: "A start-up is a temporary organization designed to discover a profitable, scalable business model."

I would surely appreciate hearing the reactions of Lean advocates and those involved in Lean initiatives to the points raised in this article.

Lean in Higher Education

Many initiatives and interventions in higher education have met with mixed success --The objective to dramatically improve colleges and universities has often plateaued after intial benefits or outright failed. I asked William K. Balzer (author of Lean Higher Education: Increasing the Value and Performance of University Processes), "Why would the results be any different after the application of Lean in a higher education environment?" His response makes some strong arguments in regard to the benefits:

"Lean Higher Education (LHE) is different in many important ways and can result in significant improvements in the critical services and processes that are central to colleges and universities. First, LHE is a comprehensive approach to institutional change and improvement based on an established set of principles and practices, increasing the likelihood of a long-term impact on faculty and staff attitudes and behaviors.

Second, LHE strikes a balance between the long-term needs of the institution and its employees. The elimination of unnecessary steps and activities that add expense and no value to the university saves resources, and it also allows overburdened employees to redesign their work so that it is more meaningful and satisfying.

Third, LHE offers an established set of practical tools for implementing change and improvement. LHE provides an established set of steps to understand, diagnose, and improve college and university services and processes with confidence.

Finally, there is considerable evidence of support for the effectiveness of LHE principles and practices. More than 50 years of use in a broad variety of organizations, business sectors, and cultures provides strong support for the 'transportability' of Lean principles and practices to higher education. In fact, a growing number of applications of LHE demonstrate significant improvements in college and university processes that result in better service to students, reduced costs for the institution, and greater employee ownership over how their work is done. Overall, LHE holds great promise for improvements in higher education at a time where resources are declining, greater accountability is expected, and higher education’s role in economic development and quality of life is increasingly important."

Thinking Lean and Becoming Green

This article by Ron Harper on the canadianmanufacturing.com site completely reveals how Cogent Power Inc. (an Ontario-based manufacturer of transformer cores and components) is experiencing "green" benefits from its Lean efforts. Through the use of tools such as value stream mapping and kaizen, Cogent reduced both cost and waste in four main areas: electrical power demand, natural gas use, nitrogen consumption, and landfill usage. In addition, kaizen events reduced the waste in packaging design and its components as well as skid design. The results of this initiative are not only benefiting the organization itself -- its suppliers and customers are dramatically lowering their respective costs as a result of Cogent's efforts.

It appears Cogent Power started on its Lean journey back in 2004, and it's reassuring to see the organization's discussion of continuous improvement on the "Culture & Focus" part of its website.

Lean and Green in Connecticut

The conntact website (an online Connecticut business news journal) features a fine article on how the Connecticut State Technology Extension Program (ConnSTEP) worked with the state of Connecticut to develop a two-day event that helps companies become more sustainable by prioritizing and implementing green initiatives.

According to the article, three area companies -- Uretek of New Haven, Cooper-Atkins Corp. of Middlefield, and R.C. Bigelow of Fairfield -- are the first participants in the "program that would help develop new jobs in emerging industries such as energy efficiency, alternative energy development and production, and other environmentally friendly fields."

The article details the strides these companies have made toward reducing both physical and dollar waste. One of the most important aspects, as Judy Wlodarczyk (director of environmental and energy services for ConnSTEP) points out, is introducing companies to "a holistic, integrated approach to the manufacturing process."

Feel free to comment on these companies' improvements as detailed in the article. Do you believe they are on the right track?

Printing Lean

The World Association of Newspapers and News Publishers (WAN-IFRA) has just published a special edition of its magazine called EXTRA that focuses specifically on Lean production. This edition examines some of the most efficient printing plants around the world: the Rossel Printing Company in Belgium; Independent News and Media in Newry, Northern Ireland; the Presse-Druck und Verlags GmbH in Augsburg, Germany; and the Chunichi Shimbun in Japan.

The issue contends that each of these printing plants not only have seven main characteristic properties in place -- suitable technical equipment, less hierarchical work organization, personnel qualification and motivation, quality management, continuous improvement process (CIP), just-in-time (JIT), and process orientation -- but the full potential arises from the correct interaction among them. In addition, there is a specific article dedicated to the extant to which automation has transformed newspaper production.

Please share your comments on these case studies.

The Natural Barriers to Change and Lean Initiatives

I often come across online articles that discuss the implementation of a Lean initiative as akin to purchasing a new tool box, so I was impressed when I found this article on a blog site devoted to change management. This article succinctly explains the common barriers that hinder the transformational change needed to successfully reap the benefits of a Lean initiative.

In regard to those barriers associated with senior management, the article states that "measurements and rewards may be counterproductive." That is, managers might be driven to perform in ways detrimental to a Lean initiative because their objectives and incentives might be tied to an outdated accounting system or value of inventory. In addition, the article captures what I believe to be the most important cause of resistance to change by front-line employees and operators: They "will see the change to Lean as a loss of turf or status or as a downgrading of their skills."

I'd certainly like to hear you reactions to this article. Do you think it is accurate? Are there any important barriers missing from the discussion?

An A3 Report is a Working Document

Assembly Magazine featured an impressive article authored by Austin Weber, titled "A3 Mistakes to Avoid," in a recent online edition. The piece quotes both Durward Sobek and Art Smalley (co-authors of a definitive book on the subject -- Understanding A3 Thinking: A Critical Component of Toyota's PDCA Management System) and Jamie Flinchbaugh.

A3 reports have gained much popularity during the past decade, and the rush to exploit their benefits has lead to misuse -- most notably, users treating the report as just another "form" to complete and file away. Essentially, the power of the A3 report derives not from the report itself, but rather from the development of the culture and mindset required for the systematic implementation of these reports. In addition, as Sobek points out, these reports should not be filled with excessive written narraration: "An A3 should contain lots of information displayed graphically."

Do you use A3 reports in your organization? Have they aided communication and problem solving?

Innovation and Lean Development

In a recent e-mail discussion with Timothy Schipper and Mark Swets (authors of Innovative Lean Development: How to Create, Implement and Maintain a Learning Culture Using Fast Learning Cycles), I asked them both to succinctly explain to me why innovation and lean development are important skills for an organization to develop and foster. They replied jointly, and I am posting the response here as many readers will find it quite interesting:

"What you need to know about the problem or solution to an opportunity may only become apparent as you try to solve it. The key to design is the effective management of the dual exploration of both the problem space and the solution space. Rapid learning cycles bring both effectiveness and efficiency to any product or service innovation challenge. A design team faces two difficulties: the first is to understand the problem, and the second is to find a solution. There is no logical, straight line to success. The team or individual must work back and forth between solution and problem, between innovative ideas and the requirement definitions. Multiple learning cycles provide the way out of this messy problem. The problem and the solution co-evolve in the same design process."

What are your thoughts on this response?

NASDAQ OMX and Lean IT

According to this press release, the world's largest exchange company, NASDAQ, has undertaken a global lean information technology (IT) initiative with the assistance of BMC Software. Although the specifics are not given, the overarching goal, according to Carl-Magnus Hallberg (NASDAQ OMX's senior vice president of global IT services) is "to more quickly deliver the right business services to our colleagues and our customers."

Although the application of traditional lean manufacturing concepts to IT on larger scales is only just beginning, many common IT problems -- poor executions, slow application response times, misused hardware, and narrow processes that marginalize innovation -- are "wastes" in the classic lean sense. One of the major differences between the implementation of lean in traditional manufacturing environments and information technology is the mapping of the value stream. The physical manufacturing value stream is quite easier to visualize than the virtual stream of IT. Has any reader here headed or participated in a lean IT initiative? What were your common problems?

Comprehensive Lean and Green Resources on the EPA Site

The U.S. Environmental Protection Agency (EPA) offers on its website a wide array of resources -- from publications and reports to case studies -- for integrating and maximizing the environmental benefits of lean. Most notably, the agency features its Shingo Prize-winning Lean Manufacturing and the Environment report from October 2003. This report was crucial in establishing the relationship between lean and the environment because it was one of the first official documents that pointed out opportunities for further enhancing organizations’ environmental performance through their lean initiatives.

In addition, the case studies illustrate examples from many different industries, but one of the important facts about many of these initiatives is that the implementation of lean concepts and tools resulted in improvements in environmental performance even when lean activities were not initiated for environmental reasons.

Has your organization experienced environmental benefits through its lean initiative? Have any readers used these EPA resources? If so, please post your thoughts.

Three Free Videos on Integrating Lean and Green

I recently viewed this three-part video series by Carlos Venegas (author of the book Flow in the Office) on the Straus Forest website. Carlos concisely discusses and illustrates the integration of Lean and Green. In addition, he includes this 12-point tip sheet directed specifically to environmental, health and safety (EH&S) professionals.

One of the most important points is discussed by Jennifer Tice (from Ross & Associates) in the third video titled "How Lean and Green Can Go Viral" -- although particular pilot projects might be limited in scope in regard to improvements, the awareness and empowerment gained by front-line employees might have a "ripple effect." That is, these employees begin to scrutinize their other daily processes with a "Lean eye" and begin to see waste as well as improvement opportunities that they did not think about previously.

What is your opinion of these videos?