Study: Planning is Key for Successful Lean Implementations

For a successful lean implementation, focus intently on planning, communication and training before beginning implementation.

            That appears to be the conclusion of a recent study of U.K. manufacturing companies, conducted as part of a Ph.D. research program.

            All of the companies involved in the study were at various stages of lean implementations, and all of them were dissatisfied with the results of those implementations.

            The researchers conducted what are described as organizational culture assessments. From these assessments, they identified three problem areas:

 

• Communication: “Employees saw the type and level of communications as being inadequate in engaging them with Lean, often inconsistent and contradictory.”


• Training and Development of Employees: “Insufficient training and development of staff before and after the initial implementation of Lean made left employees not knowing what it was all about, and how to operate in the new ways of working. This extended to managers also.”


• Planning: “Overall, employees felt that there was a lack of coherent planning and direction, which led them to doubt the ability of the management to manage, as well as to lead?the implementation of Lean.”

 

            This reinforces the idea that lean is not just a set of tools you start throwing at problems, but a broad, strategic approach to business that requires high-level planning and coordination, as well as extensive communication and training.

            I can’t help thinking of the home-repair television program “This Old House,” whose slogan is “measure twice, cut once.” Perhaps the equivalent slogan here would be “plan twice, implement once.”

 

Demand for $2,500 Car Drives Innovation

I previously wrote about the efforts of Tata Motors in India to build a car and sell it for only $2,500. The plan is intended to respond to huge customer demand in India for low-cost cars. It is achievable because Tata is embracing a lean manufacturing strategy.

In today’s edition of The New York Times, writer Heather Timmons says that what Tata is doing represents a “revolution” that “could change what most of the world drives.”

Toyota and Renault-Nissan are among several other companies also seeking to build low-cost vehicles in India, though they won’t all have sticker prices as low as $2,500. With one of the lowest average ages of any large nation, and a population that is not affluent, the demand for this type of vehicle is huge. So the foreign carmakers are eagerly jumping into the Indian market, joining a small number of local auto manufacturers.

And according to the Times, India is only the beginning:

If global manufacturers can figure out how to make small, cheap cars in India, they are expected to start exporting them to other fast-growing markets where the proportion of car ownership remains small — places like Southeast Asia, Africa and the Middle East.

By the way, since my first article, Tata has named its new vehicle; it is called, appropriately, the People’s Car.

Of course, the key to making these cars successfully is making sure your production methods are as good as they can be – in other words, lean.

Part of that involves tossing aside old ways of thinking. The article says that

…manufacturers and suppliers will need “exceptional creativity and inventiveness,” Wolf-Henning Scheider, president of Robert Bosch’s gasoline services division, said in a speech in June. “Slimmed down versions of existing components and systems are not sufficient.”

Daryl T. Rolley, general manager for international operations at Ariba, a sourcing and procurement company working closely with Tata, agreed. “There are so many legacy costs built into a design, and trying to engineer those out is difficult,” he said. “It’s better to start with a clean sheet of paper and engineer low costs in.”

There is also some interesting description of an existing plant in India operated by Maruti Suzuki, a joint venture between Maruti of India and Suzuki of Japan.

…inside Maruti’s gates, the company has created a self-sufficient, streamlined island: 4,700 Maruti employees work inside the gray buildings, as do at least as many employees of suppliers, whose warehouses and production plants ring Maruti’s main factories.

The site generates its own electricity and recycles its own water. Inside the main factory are all the materials the company needs for two hours of production at the current rate of one car built every 21 seconds. The nearby suppliers’ warehouses stock materials for hours more.

Maruti, which is still majority owned by Suzuki, has plans to increase its already highly automated process, with the goal of cutting its production time in half and trimming costs. Already, giant swiveling robots do much of the welding. Manpower is employed mostly to check for errors.

“We have made the entry for our competitors smoother,” Mr. Khattar of Maruti said.

I’m not clear on whether Maruti is actually involved in a lean approach or is simply focused on automation. I hope it is the former.

The article also notes there are concerns that rapid growth in the number of cars in India could contribute to the country’s pollution problems and increase the number of accident fatalities.

Now if lean concepts could be applied to address those problems, and not just manufacturing issues, that would truly be innovation.

Improving Patient Flow is Now a Trend

Along with other lean blogs and healthcare blogs, I’ve been posting a variety of items about how growing numbers of hospitals are applying lean principles to their operations. It’s nice to see this trend confirmed by an article in mainstream media.

A recent article by the Kansas City Star describes recent developments at hospitals in that region. One is Olathe Medical Center. The article, by Robert Cole, notes:

 

Olathe, and nearly every other major Kansas City hospital, continues to spend large sums to add new diagnostic clinics, critical-care equipment and services that include trauma and high-risk maternity.

But patient flow, from the parking garage to preadmission testing areas to oncology suites, is becoming a key aspect to expedite health-care delivery.

An Olathe spokesman, Mike Jenkins, is quoted as saying that

…patients are immediately triaged by a nurse when they arrive at Olathe’s emergency room. They’re taken to ER suites, and registration is completed at the bedside using wireless handheld computers.

“They’re not sitting and filling out paperwork,” Jenkins said. “Families feel much better knowing that the patient is already being treated.”

St. Joseph Medical Center in Kansas City is also mentioned.

 

St. Joseph recently completed a remodeling of its ER waiting room and registration area. The medical center tries to locate high-volume outpatient services convenient to front entrances, an increasing health-care trend.

 

In fact, St. Joseph is making a promise:

In June, St. Joseph began marketing 30-minute guaranteed emergency room service.

If a patient doesn’t see a doctor within 30 minutes of their check-in, they receive two free movie passes. But extreme emergencies take precedent, said Gordon Docking, CEO.

“If someone comes in with chest pain or stroke symptoms, they go right to the head of the line,” he said.

Personally, I find that to be a strange incentive. What do movie passes have to do with healthcare? If I’m so sick I find it necessary to travel to an emergency room, and I end up having to wait a long time to be treated, a couple of movie passes aren’t going to make me feel better, emotionally or physically. However, I’ll at least give St. Joseph credit for putting itself on the line (albeit in a strange way) by publicly promoting its commitment to better service.

 

But my main point is not about what Olathe or St. Joseph is doing. It is that what they are doing appears to be part of a trend.

 

Another example is a recent news release from Signature Hospital Corp., which owns and operates four hospitals in Texas, Arkansas and West Virginia. The company announced a quality and safety initiative, one focus of which is the application of lean principles. (Another focus is the implementation of a new computer system designed to link financial and clinical databases across the organization.)

 

I hope and believe the trend is real. Lives will be saved as a result, and some pain will be eliminated from the hospital experience.

 

What examples of the trend have you seen? Tell us by posting comments below.

Identifying a Truly Lean Company

A recent posting on LinkedIn Answers asks the rather intriguing question, How does one find a truly progressive company?

            The writer says

 

I am seeking a way to find a company that is truly interested in continuous improvement, team building, and personal growth. I have encountered companies that say they are committed, but in reality have no interest in anything other than maintaining the status quo. Are there tell-tale signs or questions than can be asked in an interview that would be indicators of those where the management is behind continuous improvement?

 

            So far, nine people have posted responses. While all of the responses are well-intentioned, and a few may even be helpful, none of them seems to address the question from a lean perspective.

            Rather than try to address this myself, I thought I would throw it out to all of you blog readers. How can you tell if a company is truly committed to a lean philosophy and strategy? Can you find out, or at least get some idea, from an interview? What else should you be looking at? What are the signs of a lean operation? I look forward to your comments.

 

Continuous Improvement of Air Safety

I was fascinated by a story this week about improvements in air safety. While I may be stretching things a bit, it seemed to me to be a good example of an attitude of continuous improvement in the airline industry.

The New York Times reported that fatal crashes of airplanes in the United States have declined 65 percent over the last 10 years.

            Part of the reason is technology, such as improvements in cockpit instruments that help planes steer clear of mountains when visibility is poor.

            However, the story also says

 

…part of the explanation certainly lies in the payoff from sustained efforts by American and many foreign airlines to identify and eliminate small problems that are common precursors to accidents.

One oft-cited example is a discovery in the last decade by US Airways (then US Air) that many of its planes approaching Charlotte Douglas International Airport in North Carolina were coming in “high and hot,” too fast and at a steep angle.

As a result, airplanes were conducting “unstabilized approaches,” meaning pilots had to fiddle with flaps, throttle and other controls just before landing.

The US Airways discovery at Charlotte was something new because the airline did not demonstrate it after a crash or from pilot reports.

The airline instead tapped into the system that feeds information to one of the “black boxes,” the flight data recorder, and siphoned off a stream of data that went to a removable recording device. Then it analyzed flights by the hundreds and looked for unusual patterns, a technique now common with airlines.

Convinced, the FAA changed the approach procedure there, and the airport installed a system to guide planes at a proper angle.

 

…In other places, improvements have been as simple as better signs on taxiways to prevent planes from moving into the path of other aircraft.

 

“It’s not one thing. It’s a series of small things,” said John Cox, who was an Air Line Pilots Association safety representative for 20 years. Many of those small things were minor problems observed in everyday operations, he said, then counted, scrutinized and eliminated before they caused an accident.

 

I doubt that those involved in these improvement efforts were familiar with lean principles or terminology. However, what is important is that they were not simply being reactive. They were studying processes that, on the surface, seemed to be working reasonably well and looking for ways to improve them. And that is what continuous improvement is all about.

 

A Different Approach to Engineering Education

            Incorporating lean into the curriculum of engineering and business colleges is a good idea, but it involves more than teaching students lean principles. It should involve teaching them to think in a lean way – always striving for improvement, always seeking to focus on the customer and eliminate waste.

            That is why I was impressed by an article in the Sunday magazine of The New York Times this week about Franklin W. Olin College of Engineering in Needham, Massachusetts.

            The college officially opened in 2002, funded by $400 million from the F. W. Olin Foundation. Tuition is free, though students do pay about $12,000 per year for room and board. Non-engineering courses are offered through arrangements with other nearby colleges.

            However, the most distinctive feature of the college, according to the article by John Schwartz, is its approach to education:

 

Most engineering schools stress subjects like differential calculus and physics, and their graduates tend to end up narrowly focused and likely to fit the stereotype of a socially awkward clock-puncher… Olin is stressing creativity, teamwork and entrepreneurship — and, in no small part, courage…

 

Its method of instruction has more in common with a liberal arts college, where the focus is on learning how to learn, than with a standard engineering curriculum…

 

Alison Lee, a recent graduate now in South Korea on a Fulbright scholarship, said the process of solving seemingly insurmountable problems is an Olin rite of passage, like the project that was given to her and her fellow students: build a robot that can climb a wall. When it worked, she said, “it was the moment of realization that I could do anything.” The problem-based process is good preparation for the real world, said another student, Meenakshi Vembusubramanian. “You’re not going to go into a job and get a thermodynamics problem set,” she said. “You’re going to have a problem that’s badly defined.”

 

Benjamin Linder, an assistant professor of design and mechanical engineering… pushes his students not to just follow instructions. “Engineering,” he says, “has traditionally been focused on doing it right, but not on what’s the right thing to do.” That means designing products that are environmentally friendly and that respond to the needs of the people using them and not just to what the purchasing department wants. He urges his students to be more than team players. The goal, Linder said with utter earnestness, was to teach fledgling engineers “how to be bold.”

 

There was no mention of lean in the article, and I didn’t find any lean references on the college Web site. Nonetheless, Olin strikes me as encouraging a mind-set that is thoroughly consistent with lean thinking, and I hope lean is or becomes part of its curriculum.

Also, other college engineering programs are adding lean to their offerings, and I’m sure they are producing fine engineers who are independent thinkers. But Olin does seem to have more of a focus on this goal than most other schools.

The article did sound one cautionary note:

Richard K. Miller, the president of the school, admitted he is concerned that few of the class of 2006 are going on to graduate study in engineering or jobs in the field. Some graduates have told him that they are not happy in their first jobs and feel like cogs in a machine. “I’m hoping to get the message to our kids that a little bit of patience and endurance could pay off in the end,” he said. Still, “this is one of the things that keeps me up now.”

In some companies, he says, the freethinking products of Olin might have trouble fitting in. “Does industry want people like that? I think that’s a very good question, but I think this goes beyond what industry wants,” he said. “This is the right thing to do — this is what industry needs. If the country had more people like this, we’d be in a much better situation.”

 

Lean and Forecasting: What Do You Need?

I was amused and a bit intrigued by a new report from a supply chain software and services company. The report from Supply Chain Consultants is entitled “Forecast Less and Get Better Results” and is written by authors Tom Wallace and Bob Stahl.

In a news release, Wallace comments,

 

In today’s era of lean manufacturing and sales & operations planning (S&OP), it has become more apparent that the approach of a highly detailed long-term forecast is not necessary. Instead, an aggregate planning tool that only uses detailed analysis for a short-term plan produces more valid results with better indicators of the future. Additionally, an aggregate approach in executive S&OP requires less work and enables a company to perform valid simulations quickly.

 

The news release claims the report

 

…challenges conventional forecasting and planning wisdom that states that companies need to project forecasts and plans far into the future at a detailed, highly granular level.

 

Is that conventional wisdom? It probably is among people who believe in forecasting. Personally, I don’t know, but I do know I have often heard the old adage that the forecast is always wrong.

More to the point, forecasting is something you rarely hear discussed among lean advocates. In a pull system, you produce based on customer orders, not forecasts.

Of course, you do need some type of high-level forecasting to plan purchasing, staffing and so on. But I wonder whether Wallace and Stahl are really saying anything that lean devotees haven’t known for some time.

What degree and level of forecasting does a lean operation need? That is the real question. If you have answers, please post them below.

Creating a Satisfying Workplace

Does a lean strategy make a company a good place to work? I would certainly think so, since a fundamental concept of lean is respect for people. And a column this week in The New York Times reinforced that idea.

            The column was written by Milton Moskowitz, who co-authored (with Robert Levering) the book “The Best Companies to Work for in America,” published in 1984. Since then, the two of them have developed an annual update of the list, published every January in Fortune magazine.

            In his column, published as a “Preoccupations” article in the Sunday edition of the Times, Moskowitz writes:

As a result of our surveys, people are always asking me what makes for a good workplace. Early on, Robert and I came up with this definition: A good workplace is one where management trusts the employees and where employees trust the management.

Of course, there’s more to it than that. We do evaluate companies on various attributes — communication, training, recognition and rewards, pay and benefits, fairness, camaraderie, celebrations. But our primary measuring rod is the employee response to the survey, including voluntary comments.

Employees enter yes-or-no responses as to whether they agree with statements like these: “I feel I get a fair share of the profits of this organization,” “I am proud to tell others I work here,” and “There is a minimum of politicking and backstabbing here.”

A not-so-surprising lesson is that it takes more than high pay and lavish benefits to make a work force happy. Employees tell us how important it is to work for a company whose culture embraces fairness, teamwork, education, fun and contributions to society. And they thrive on being engaged in the company’s mission.

            That certainly sounds like a description of lean culture. Which raises an interesting question: Why isn’t Toyota on the Fortune list?

            The list is compiled by the Great Place to Work Institute, a research and management consulting firm co-founded by Levering. I’ve read their eligibility guidelines, and – unless I am misinterpreting them – there is nothing that would exclude Toyota.

            To be considered, a company must first be nominated. Is it possible that no one has ever nominated Toyota? Possible, though it seems unlikely.

            Once a company is nominated, it must agree to take part in the review process, which includes sending surveys to at least 400 randomly selected employees and completing a Culture Audit questionnaire. Did Toyota receive a nomination and then decline to participate?

            Another possibility, but one I view as the most unlikely, is that Toyota was nominated and participated, but just didn’t make it on to the list.

            Does anyone have any information about this? (I have contacted both Toyota and the Great Place to Work Institute. The Institute won’t discuss companies not on the list. Toyota hasn’t responded yet.)

            By the way, the top 10 companies in the 2007 Fortune list are, in order:

• Google


• Genentech


• Wegman’s Food Markets


• Container Store


• Whole Foods Market


• Network Appliance


• S.C. Johnson & Son


• Boston Consulting Group


• Methodist Hospital System


• W.L. Gore & Associates

Consultant: Sourcing from China is a Mistake

At least one consulting firm actually understands that going abroad to reduce manufacturing costs is a bad idea.

            Lean advocates have long argued that the increased waste from overseas sourcing – in the form of additional transportation plus longer cycle time – makes no sense. Unfortunately, too many businesses and consultants believe – wrongly – that the lower production costs in China make up for any negatives.

            Kudos to Boston Consulting Group, which issued a report earlier this year entitled Surviving the China Rip Tide: How to Profit from the Supply Chain Bottleneck.

            BCG cites a variety of factors other than actual manufacturing that contribute to costs, including delays caused by bottlenecks at ports and the increased risk of stocking items that don’t sell because you had to purchase them too far in advance.

            The authors of the report – George Stalk, Jr., and Kevin Waddell – don’t say you should never outsource from China. Rather, they argue that if you do pursue that strategy, you should be focusing on your supply chain processes:

 

We believe strongly that a firm focus on reducing time and variability in the China-anchored supply chains serving North America and Europe can help companies dramatically reduce their costs, improve their margins and build competitive advantage. We believe that such performance improvements will dwarf the more conventional profit-improvement efforts now under way at most of the companies we are familiar with. We also believe that companies should be looking closer to home (North American companies to Mexico, Central America and South America and Western European companies to CEE), where the cost-of-labor penalty is more than compensated for by superior supply-chain performance that is significantly less variable and virtually unaffected by port and surface-capacity constraints.

 

In their rush to source from China, many companies are blindly walking into a strategic trap. The trap is thinking that sourcing from China will result in lower product costs, when in reality the supply chain dynamics will, in many cases, drive up overall costs and reduce profitability, thereby creating an opening for a competitor. The only hope for these companies is that all of their competitors will make the same mistake. But competitors that do not source from China – or that focus on supply chain speed – will be competing with a different set of economics. The first company to see and correct the strategic error of sourcing from China without an appropriate investment in supply chain dynamics to minimize costs will seal the fate of its competitors.

 

            Stalk and Waddell don’t actually use the word “lean” in their report. But they seem to understand.

 

            Incidentally, in a posting on the same topic, Kathleen Fasanella at the Fashion Incubator blog writes about the book Birnbaum’s Global Guide to Winning the Great Garment War. She comments:

 

His greatest lesson is that it's a wasted exercise to chase the lowest cost production considering the variables of quotas, the nation of origin politics and general conditions including infrastructure. If anything, I think this book is more likely to convince you to produce domestically than not.

Accenture Buys George Group: An Encouraging Acquisition

Earlier this year, I leveled some criticism at consulting firm Accenture for what I believed was a misguided article on their Web site about cost control. I suggested that people at the firm paid lip service to lean principles without really grasping their true essence.

            Now comes word that Accenture has acquired another consulting firm: George Group, a name that is pretty well known in lean and Six Sigma circles.

            I have no personal experience with George Group, and I am not trying to say anything good or bad about the quality of their work. However, I do know that what it calls Lean Six Sigma is one of the firm’s specialties, along with areas it labels Fast Innovation and Conquering Complexity. Founder Michael George has written several books, including one on Lean Six Sigma for Service (not published by Productivity Press).

            In a news release, Mark Foster, chief executive of Accenture’s management consulting and integrated markets group, said the acquisition “will significantly expand Accenture’s capabilities in process excellence and next-generation process re-engineering.”

            George Group employs 250 people, which is equal to about 0.16 percent of Accenture’s global workforce of 158,000. So I don’t know how much influence George Group will actually have on its new owner’s operations.

            But I hope Foster is right in suggesting there will be a real impact (even though I don’t care for his use of business jargon like “next-generation process re-engineering.”) Accenture is so large that its work has an impact on a sizable number of businesses. If this acquisition improves Accenture’s understanding of lean, and subsequently helps more of its clients become lean, then I hope this deal works out well for both parties.