Category Archives: Supply Chain
New followers of the blog can use this as an opportunity to read posts they might have not seen in the past. While, long time followers can use this as an opportunity to re-read some of the top viewed posts.
This post will count down the 10th thru 6th most viewed posts of 2012. Enjoy!
5. Sportscenter Has Killed U.S. Manufacturing (June 2012) – Previous Year Ranked #3 – Manufacturing is fundamental. The U.S. has lost it’s sights on the fundamentals and is just worried about the flashy. The U.s. needs to get back to the fundamentals in order to get back on top.
4. Need the Mental Toughness of a Navy SEAL (February 2012) – Inspiration of a Navy SEAL got me thinking about the mental toughness it takes to create change.
3. 5S in the Office (September 2010) – Previous Year Ranked #1 – Most viewed post for two straight years now. A look at using 5S in the office. What is going too far and how to use 5S in the office properly.
2. Keys to Sustaining 5S (September 2011) – Tips to help sustain (the 5th ‘S’) the gains made from implementing 5S.
1. Why Are Lean People Seen As Lean People? (February 2011) – Previous Year Ranked #2 – Exploring the question as to why lean people are not seen as more than just lean experts. Looking at a process from end-to-end seems like a good business practice no matter what the role.
I look forward to more posts in 2013!
Last week, I caught a blog Why Apple Has to Manufacture in China. I read hoping to find some practical reasoning as to why it was critical that Apple manufacture in China. I read the post twice and I couldn’t find any reason it was critical for Apple to manufacture in China.
The post does say labor cost is not a reason to manufacture in China.
It is not an issue of labor costs. In fact, labor costs play a very small role in the equation — both for Apple and for Timbuk2.
The post compares Apple to Timbuk2, a company that makes custom bags. Two different business models, Timbuk2′s custom production versus Apple’s mass production. Here is what the post has to say about this.
Timbuk2 manufactures in the US because it produces custom-made bags, orderable through its handy web site, and customers ordering custom bags cannot wait for weeks for a bag to come from China by boat, while shipping by air is expensive and there would still be some uncertainty due to customs clearance. A very similar logic lies behind fashion retailer Zara’s choice to manufacture in Europe, also an expensive location in terms of labor costs. Of course, Timbuk2 does also produce many bags in China but these are mass-produced, non-customized bags, sold wholesale at a fraction of a price of a custom bag, and they are not time-sensitive.
Apple does not produce custom products and so it does not need to deliver quickly — all of its products are standard and mass-produced; just like the standardized bags for Timbuk2, so there is no reason to stay close to end-customers. Moreover, Apple does not change its assortment often — the new iPhone will probably be for sale for another year or two.
There is no need for mass producers to be close to the end-customer?! Really? So it is OK to spend a couple of months to get new phones to the U.S. or pay for air freight (which is quite expensive), if there is a defect in a batch of phones? Not in any business model I know of. That delay risks the loss of customers and costs the company more money than is needed because of the big batches that may have to be reworked or thrown out. Also, when the life-cycle of a product is coming to an end it may cause more phones to be thrown our or discounted because of the large batches.
The post is contradicting itself because it says cheap labor is only a small part of the total cost, but then does not take total cost into consideration when looking at all the freight and inventory and possible obsolescence costs.
So why else is it important for Apple to manufacture in China?
Apple is a huge company and as a New York Times article published in January this year details, its production volumes and often unpredictable engineering changes require manufacturing flexibilities and engineering capabilities on a scale that is simply unavailable in the USA.
Exactly my point about inventory above. The post goes on…
In China, by contrast, manufacturers can deploy thousands of collocated engineers to introduce needed changes overnight, and large supply of labor allows to ramp up and ramp down capacity quickly. There is simply no factory capable of employing 250,000 workers day and night in the USA, surrounded by flexible and capable suppliers. So the location decision isn’t really about labor costs — it’s about manufacturing risk and where that risk is best managed.
Because Apple has bad processes upstream, it is OK to disrupt the lives of thousands with no regards downstream to fix the problem. Reminds me of the saying, “A mistake by you, does not necessitate an emergency by me.” Again, raising the cost to produce.
- Mass producers don’t need to be near the end-customer
- Disrespect for people is OK when fixing a problem you created
Apple may be on top of the hill today, but 2-5 years from now they won’t be. As competitors, like Samsung, close the gap managing cost is going to grow more important. Fixing your processes so engineering changes are not needed overnight and locating close to your end-customer so when you do have an engineering change you don’t have tons of inventory to dispose of is a great way to manage your cost.
I have not been very high on GE as a company. I have dealt with too many command-and-control managers that came from GE and Jack Welch I think is the single most overrated CEO in history. He destroyed GE’s manufacturing to gain his golden parachute.
It has taken awhile but GE seems to be making strides in a great direction. A year or so ago, GE announced the building of a manufacturing complex in Louisville, KY dedicated to building their appliance lines using lean manufacturing.
An article last week highlighted some of the reasons and the results from the first venture in GE’s new dishwasher plant. My favorite heading in the article is “Washing Away Decades of Outdated Manufacturing Practices”. AMEN!!!
So what did GE hope to accomplish by investing $150 million in the new facility?
When planning to make GE’s newest dishwashers, the manufacturing leaders had several challenges: to build new production lines in a space-constrained factory where existing lines would keep providing about one in every five homes with a dishwasher; to create a process that would leverage Lean manufacturing principles to reduce the time it takes to make each dishwasher; to reduce operational costs and unnecessary work for employees to improve productivity while increasing quality.
They needed to reduce cost and delivery time and increase quality. Something lean can help improve all of. Not one while sacrificing others.
How was lean going to help?
Relying on a new culture of continuous improvement and a collaborative work environment, fostered by Lean manufacturing principles, GE took employees from every discipline needed to design, build and operate the new lines and co-located them in one location so communication could be instantaneous and fluid. Each member of the team had a voice and a role–from engineering, to advanced manufacturing to the operators who assemble the products – all were on one team with a common goal – to improve the processes and products.
Great ideas and they seem to be working very well. The results listed in the article are incredible. Here are just one bullet point listed as a result.
Included production workers in the designing of work stations and processes, improving efficiency and ergonomics by reducing parts inventories and movements to complete tasks; in developing new job instructions to help eliminate quality issues and improve safety; and in improving the timely supply of parts to work stations. As a result, the overall production time per unit was reduced by about 65 percent.
Great to see the employees doing the work involved in the improvement process. With all the great results this is what I was the most happy to read.
Now, their dishwashers will be loaded with more U.S. parts than ever before. In fact, about 85 percent of the parts in GE new dishwashers will be made in the U.S. — including an increased number made at Appliance Park in Louisville, Ky
It shows that manufacturing close to the consumer in a “high cost” country can be competitive in any industry. Kudos to GE for attempting to change their manufacturing ways.
About a year ago, when I was merely a “Guest Post”-er, I wrote this little piece about some really interesting things I read about in a book called Guitar Lessons written by the co-founder and namesake of Taylor Guitars. As a companion to both that post and the one earlier this week with some personal Lean inspiration, I wanted to share another link and story that fits both categories.
(As an aside, it was brought to my attention that I may have quoted an incorrect number in the previous post, but I wasn’t able to get confirmation on that. If anyone with Taylor would like me to correct it and is willing to help, let me know.)
This really cool piece of information comes in the form of the most recent copy of the company’s magazine “Wood & Steel” and is written by the other co-founder (and CEO) of the company, Kurt Listug. (If you clicked on the file, I’m referring to “Kurt’s Corner” that shows up on the left side of the .pdf page 3 or magazine page 4). In his ‘Corner’, Listug refers to a “Process Improvement Project” that sounds, as a whole, like it was build on some hardcore Lean principles. I don’t pretend to know enough about what goes on at their facility to make a judgement either way on what or how they are doing what they do. What I do know is that it excites me to read about companies using these types of concepts (whether built directly on Lean/TPS or not) to do things like 20% increases in daily production, improved quality, reduced queue times from weeks to next day, and growing employment built around value adding work. These successes, whether I had a hand in them or not, remind me of why I chose to work in this field. I have no idea what Taylor’s path looks like from here, but I do appreciate reading about companies that are working to try to be the best they can be.
I realize I sound like a fanboy for Taylor and that’s fine. If I didn’t own a couple of their guitars, I wouldn’t have received the magazine to read in the first place. But, in addition to the small piece above, I highly recommend at least 2 other pieces in that publication. The first is a piece on Taylor’s involvement in Ebony supplying in Cameroon. (It starts on magazine page 12, pdf page 7). On it’s own, it’s a fascinating story about a company getting involved in its own supply chain, finding a way to work with existing government regulations, creating a better situation for the people and the forests in the area, and pretty much turning that in to a role supplying their competitors. From a purely business standpoint, I’d read an entire book on the way this evolved, regardless of what company was involved. The other small piece is from an ongoing bit they started called “What are you working on?” where they talk to people that work in their factories about their jobs. (Magazine page 28, pdf page 15). As somebody who is engrossed with manufacturing, I find it fascinating to see what people do in their plants.
I hope you enjoyed reading some of the pieces (if you were able). I always enjoy seeing what other people are doing to make their business run better and I love finding little bits of inspiration in places where I’m otherwise looking for a distraction.
Have a great weekend!
After reading this piece and this response, I have spent a lot of time thinking about the Lean definition of value. (For those who didn’t click the links, the first is an article from a NPR intern who claims to only have paid for something like 1% of her music library and the second is a response from someone who teaches about the music business discussing the damage of those choices.)
As a quick reminder, the “Lean” definition says that in order for a step to be value added the thing has to be done right the first time, physically change the thing, and be something the customer is willing to pay for. It’s that last piece that has me hung up lately. I have zero insight on the recording or distribution of music to understand how much the recording process qualifies for the first two. I’m also not specifically speaking to music, although it makes a great basis because almost everybody has an opinion on music.
My line of thought overall goes something like this: Doesn’t the consumer bear some responsibility for paying a fair amount for something that they value? How much responsibility does a consumer have? And who defines what a “fair” amount is?
Almost anybody who has ever been involved in business can point to something they were involved in that was done well, but died because nobody was willing to actually pay enough money or buy enough of them to keep it alive. In the case of music, does this mean that not paying for (or sharing or stealing, however you want to phrase it) has become so institutionalized in culture that we risk its survival? Or does this mean that those who make the music are being treated like temp labor with the knowledge that if they won’t make it for a low price, someone else will? Maybe it’s just an offshoot of the rest of a capitalistic society where only the best of the best do well enough to make a career out of it and the rest move on.
In the US where the popular notion is that we care about things like locally grown food, fair trade coffee, and what happens to the people that make our iPhones at Foxconn, I don’t think there is a lot of real thought about what is truly value added and how our behavior as consumers fits in. I’m not saying that I do (or should) care whether or not everyone who built my truck, for example, is a self-actualized human being who is prospering in an encouraging and happy auto assembly plant. Even I’m not as big of a dreamer as to think that could or should be a likely scenario. Heck, I’m barely convinced that most of the people that I give my money to for their music even really enjoy what they are doing and are fulfilled by it. I do believe that we, as “Lean” thinkers, can use our ability to focus on the definition of value a little better as both producers and consumers. Maybe these are the kinds of discussions we can have with family and friends to help shape the way they look at their consumption. I think our observations have to go beyond just pointing out waste and go towards quality feedback we could provide to the people we give our money to, giving them a better understanding of how to make their business work.
A few weeks ago, Ultimate Factories on National Geographic premiered an episode about LEGO. My son is a HUGE LEGO fan and seems to have almost the whole LEGO City setup. So this episode really caught our attention.
My son loved watching the artist/builders design the new Police Station and seeing all the sets being made in the factory. What caught my attention were the things that seemed lean like.
Here is the full episode. It is 45 minutes long. Below are some highlights I picked out with time markers as to where they are at in the video.
(1:15 – 4:10 in video) Right off the bat, the show describes how the artist/builders go about designing a product. The product manager takes his team out to real life sites of what they want to build to study them. They look at what the site has and needs to feel authentic. It is truly direct observation of what the team wants to build.
(6:40 – 10:00 in video) LEGO takes full advantage of standardization as much as possible. The Police Station turned out to be a 700+ piece set, but none of the pieces are new and require tooling to be made. Because the designers were able to build the Police Station out of existing pieces they were able to use that budget to design a police dog that is brand new adding to the experience. My lean lens sees this as cost management in order to reinvest in innovation. The innovation leads to a better experience and more revenue.
(36:12 – 36:20 in vide0) The video does not talk about 5S but there is some evidence of it. In this clip, you can see the tape outlines on the floor for the staging of finished product.
(36:20 – 38:10 in video) In the 1990s, LEGO went through a period when sales were declining. LEGO decided to go and see why this was happening. They discovered their products were not meeting the needs of the adult customer, which is 50% of their market. People were hacking the Mindstorm systems and creating bigger sculptures with the robotics. They didn’t try to shut the hackers down. LEGO embraced them and created new products. They still invite customers to come in and help with designs. They are focusing on customers needs. Everything starts with the customer.
These are some of the quick examples I picked out. If you notice, nothing I saw focused on lean manufacturing although I believe I saw some lean like things in manufacturing and distribution too.
I would highly recommend watching the full video because it touches on every aspect of business. From customer focus to product development to manufacturing to logistics. It is very complete. If you are a LEGO fan, this video is a must see.
In the comments below, tell me what you saw from a lean perspective. What did I miss?
New followers of the blog can use this as an opportunity to read posts they might have not seen in the past. While, long time followers can use this as an opportunity to re-read some of the top viewed posts.
This post will count down the 10th thru 6th most viewed posts of 2011. Enjoy!
5. Comparing Lean Principles to the 14 Toyota Principles (July 2010) – Previous Year Ranked #2 – The first part of a three part series where I compared the lean principles I learned from the Lean Learning Center to the Toyota Principles. This post covers the first five Toyota Principles.
4. Seth Godin and Failing Better (April 2011) – This post dives into a post from Seth Godin talking about how to fail so you learn faster and use that to your advantage.
3. Sportscenter Has Killed U.S. Manufacturing (June 2011) – Manufacturing is fundamental. The U.S. has lost it’s sights on the fundamentals and is just worried about the flashy. The U.s. needs to get back to the fundamentals in order to get back on top.
2. Why Are Lean People Seen As Lean People? (February 2011) – Exploring the question as to why lean people are not seen as more than just lean experts. Looking at a process from end-to-end seems like a good business practice no matter what the role.
1. 5S in the Office (September 2010) – Previous Year Ranked #1 – Most viewed post for two straight years now. A look at using 5S in the office. What is going too far and how to use 5S in the office properly.
I look forward to more posts in 2012!
Final review is the blog Lean Reflections. Karen Wilhelm is the author of the blog. Karen and I met last year during the Blog Carnival roundup. It was her roundup post last year that encouraged me to try new blogs this year. That led to me discovering Squawk Point and All Things Workplace. Thanks, Karen!
Karen’s post are thought provoking. Here Karen raises the question of understanding the brain more might help lead us to understand why people resist change and lean.
This post talks about Temple Grandin and her ability to use visual thinking to see the improvements that are needed in the process flow of the livestock industry. It stresses the point that we need to pretend we are the product moving through a process. Be the thing in order to better understand what is happening to the thing.
Karen’s blog is a great read.
Don’t forget to look for more reviews from other bloggers during the Blog Carnival Annual Roundup.
A couple of weeks ago there was an article in the Hartford Business Journal talking about more offshore outsourcing that was returning to the U.S. The article sums up why companies are returning the best:
The argument goes: when total cost is considered, production is cheaper locally; there is less concern about quality and intellectual property theft when dealing with a domestic company; and with new lean practices, more streamlined production lowers domestic costs.
“Company after company has learned by keeping things closer together, that leads to a stronger overall value chain,” said John Shook, chairman and CEO of the Lean Enterprise Institute, based in Cambridge, Mass. “I see a lot of companies bringing things back.”
This is a hard lesson for companies to learn. As mad as I would like to get over companies making the choice to chase cheap labor, I have to remind myself they were playing with the rules as they understood them. Ten plus years ago, value stream accounting was not known. The only system most people knew was the standard costing system. This view did not take into account the quality and lead time aspects of chasing cheap labor.
Value Stream accounting is now more widely known, thanks to efforts like the Lean Accounting Summit. If companies continue to chase the cheap labor costs, I really don’t have any sympathy for them. The article lists other reasons Arcor sees offshoring as not a good idea:
Arcor has advantages over offshore companies when competing for local work, Francoeur said. Particularly when a client is developing a new product, there’s a lot of back and forth between Arcor and the customer, which would be slowed significantly if the client had to wait days for a project to be shipped from an offshore company.
New products tend to be more sensitive to copying and intellectual property concerns, and clients trust local companies more when dealing with sensitive information, Francoeur said.
With more and more companies learning total cost is better the more local you are to your market, no matter where in the world you are located, hopefully, it will be come the norm to stay local. We have to continue to talk about total costs and keep pushing the topic with leaders in our companies. We can use the companies that left and came back as examples and eventually we will get there
The other night while watching TV I saw the commercial below for Bath Fitter. Bath Fitter is a company that retro-fits new acrylic bathtubs, showers, and surrounds to give an updated look to your bathroom. Can you pick out the things that caught my attention from a lean perspective?
I can’t speak to the quality of their product because I have never used them, but there two things that caught my attention. The vertical integration of the supply chain and the lifetime guarantee. The commercial is only 30 seconds that I checked out their website and it mentions the the vertical integration and lifetime guarantee also.
Bath Fitter has control of the product from raw material to installation. This control allows them to better guarantee the quality by knowing exactly how it is made, not outsourcing it to someone that could take shortcuts to manufacture the product without Bath Fitter knowing. Also, they control the measuring, installation, and customer facing representative. By doing this, Bath Fitter would be able to get accurate and fast feedback about how the product is being used, quality issues, or the ease of installation.
This is very similar to Henry Ford controlling everything from the raw materials (mines for metals and saw mils for wood) to manufacturing to the first dealerships. The tighter control over the supply chain allowed costs to be reduced AND quality improved. Not just one or the other.
The lifetime guarantee Bath Fitter promises indicates the confidence in their quality of product and installation. I know some companies (and Bath Fitters could be one, I don’t know) play games with the lifetime guarantee making it impossible to actually get a claim on the guarantee. A reason they can make the guarantee and feel good about it is because they controlling the supply chain from start to finish.
What do you think? Does Bath Fitter have some lean like qualities?