The Answer is Easy…Better Forecasting

Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

Have you ever sat in a meeting where the discussion is about the high (sometimes low) inventory levels?  Do you frequently hear the answer of, “Once we get our better forecasting tool in place our inventories will be better.”?

This is a strong sign the company has not fully embraced lean thinking.

A lean company would not even have a discussion where forecasting tools are the solution.  A lean company is closely connected to their customers.  The goal is to make one product when one product is bought by the customer.  I know this isn’t easy for all companies, but the discussion would be around how to move in this direction.  Not how a better forecast can be generated.

There is one thing I can guarantee about a forecast.  It is WRONG!

I have never heard anyone say, “Man, I nailed that forecast!  I hit it right on the nose!”

Don’t misunderstand me.  I do believe there is a use in looking forward and understand what is coming.  A company would like to understand if a peak or a valley of the product sales might be coming.  This can help set and adjust maximum kanban levels for that period of time.

A forecast is good to understand directionally where volumes are heading.  Forecasting is not a good basis for your entire inventory strategy.

It is a difficult mindset to change.  When you do and act on that new mindset, the dividends it pays are enormous.

Lean Says, “Do the Right Thing”

A question that I get quite often is “What does lean say to do?”

My short answer, “Do the right thing for your situation at this time.”

When lean is not understood people think lean has magic answers for them.  This is easy to do when the mindset is lean is a bunch of tools and concepts that just need to be put into place.

They think lean can answer their questions.   Lean does not answer your questions.  Lean helps you to be able to answer your questions.

When lean is understood to be a way of thinking, a set of principles to help guide how you go about solving a problem then it is easier to understand that lean says, “Do the right thing for your situation at this time.”

A popular example is when people think “Lean says I have to have level flow, because I have to eliminate waste.”  If their business does not allow level flow or it does not make sense at that time they can get discouraged and believe lean is not for their business.

Hospitals are a great example.  Early on they tried to implement level flow, but they couldn’t because people getting sick is out of their control.

When it is understood that lean is about creating value for the customer, people have a different lens.  One way to deliver value is to eliminate waste so I have more capacity to do value added activities.  Level flow is one way, but in a hospital there are many other ways.  Once the thinking was understood, hospitals started to embrace lean.

The next you you hear someone ask, “What does lean say to do?”  Answer by saying, “Think in a different way and do what is right for your situation at this time.”

You Must Teach a Man to Fish

“Give a man fish and he eats for a day.  Teach a man to fish and he eats for a lifetime.”

This quote comes to mind when thinking about my role as a lean transformation leader.  Lean is about how we think and behave.  I don’t want to just do things differently.  I want to teach and coach others how to think and behave in a way that aligns with the lean principles.  There are two major reason for this.

Reason 1

I want the changes that I make to be sustainable.  If the people involved in the changes don’t think in a lean way then at some point the changes will not be sustained.  The metrics/results/process will slide backwards.  In my experience, it slides at least to the previous state if not even further backwards.

The best example is a manufacturing facility that Joe and I worked at together.  At one point, the facility was in the red with revenue over $100 million.  The company decided to “go lean”.  Joe and I, as well as another friend of ours, were tasked with leading the lean initiative in our facility.  We became part of the plant staff.  The plant manager and the department managers listened to what we had to say.  They let us lead the lean initiative. Joe and I did a lot of great things from a lean perspective.  In three years, the plant was in the seven figure profit range while revenue had dropped 25%.

This was a collaborative effort to use lean.  Everyone played a part in the success.  But in a big way, Joe and I failed.  We both moved on to bigger and better opportunities.  During the turnaround of the facility we did not change the way the plant manager and department managers thought.  When some traditional mindsets started to creep back in, we were there to guide back to a lean mindset, but we never really changed their beliefs.  We hadn’t taught them to fish.  Within a couple of years, the facility was back in the red and back to traditional batch-and-queue mass production manufacturing.  The results were not sustainable.

Reason 2

The second reason overlaps with the first.  When you transform another person’s thinking, not only will results be sustainable, you have another person who can educate and transform the thinking of others.  The lean thinking allegiance starts to spread.  Instead of one person trying to transform thinking, you now have two.  And so it spreads.

Transforming people for traditional ways of thinking to lean ways of thinking is not easy.  The better the support system that is built the easier it is to continue to transform people’s thinking.  There are times when a great support system is very reassuring.

These are the two biggest reasons why transforming the thinking is just as important as delivering the changes, driving results.

 

Inverse Inventory Effect

Conventional thinking says, “The more inventory there is on-hand the better the serviceability rating and on-time delivery rate.”

Have you heard that one before?

Lean thinking says the inverse is true.  “The lower the inventory on-hand the better the serviceability rating and on-time delivery rate.”

How can this be?

I have read studies and heard others talk about the lean perspective.  Even more compelling, I have implemented and witnessed the lean thinking perspective be proven right time and time again.

Traditional thinking of more inventory is better seems to make sense, but what happens is the inventory is never of the right product needed at that time.  The economic scales of mass production says to produce a lot of the product when running it to minimize setup and overhead costs.  Following this thinking means the company does not switch over and start to produce Product B early enough and is out of stock on Product B when ordered but there is an abundance of Product A in the warehouse.

Lean thinking produces just the amount of each product needed so when it is ordered there is enough and overall there is less inventory.

I watched as assembly line employees got upset because we took 80% of their component inventory away from the assembly line storage.  The assemblers thought they would never have enough product to keep the line running.  We explained they would have only 2 hours of component stock at the line and the line would never shut down.  By the end of the third day, the assemblers were happy with the new inventory system because they had more space, but more importantly they had the right components at the right time.  They reduced the time the line was down waiting on components by 90% compared to when they had a ton of inventory at their finger tips.  This occurred one-by-one across all five assembly lines in almost exactly they same manner.

Less inventory does deliver better serviceability and on-time delivery rating.

This does not mean just go out and reduced the inventory without a plan just to reduce it.  It is being mindful of what is needed, when and how to get it there on-time.  It is easier to see what is there when there is less.

What is your experience with reducing inventory?

Lean Construction

Over the last decade we have seen lean start to permeate many different industries.  Healthcare is one of the most prominent areas.  Another more publicized area lean is permeating is government work. A challenge was even given to all the Presidential  candidates.  This is a great start.  It shows that more and more people are starting to understand lean is about the way we think and see things.  It is not about tools such as: 5S, Standardized Work, Quick Changeovers, or level loading.

Picture from Quality Digest Magazine Article

There is one industry that has been slowly adopting lean, but rarely gets mentioned.  That is the construction industry.  More and more construction companies are trying to adopt lean principles and thinking into the work they do.  Lean construction is more than just the building phase of construction, but also includes the design phase.  Lean construction involves owners, architects, designers, engineers, constructors, and suppliers.   It is all inclusive from end-to-end.

There is even the Lean Construction Institute.  It was established in 1997.  This isn’t a new concept to the industry.  It just doesn’t seem to get well publicized.

There is a good article from 2007 about Lean Construction.  In the article it says:

Lean construction provides a solution that works for all three groups-the owner, the contractor and the worker-because it’s founded on collaboration, communication and mutual respect. Not only does the conventional design-bid-build environment not produce the best results for any of the three groups, it actually pits each of them against each other and creates a downward spiral of lose-lose. Lean construction works because it focuses on maximizing value and eliminating waste.

It is a win-win for everyone with a focus on what is important to the customer.

Therefore, lean construction focuses on identifying and delivering products or services on which the client places high value. A few things that clients often place high value on are:

•     No change orders
•     High quality-meaning conformance to requirements
•     On-time delivery

It is great to see industries outside of manufacturing and healthcare understanding the lean principles and embracing them.

If anyone works for a lean construction company, I would love to hear from you and ask you questions about implementing lean in the construction industry.

 

The Customer Feedback Loop

The focus of lean is first and foremost on the customer.  What is of value to the customer is the first question that should be asked?  A lot of organizations do a good job of asking for feedback from their customers.  What usually is missing is the feedback loop back to the customer.

While visiting an offsite location of the company I work for I saw this book in the cafeteria.

(Click on Image to Enlarge)

This is left by the company that services the cafeteria.  Not only does the company ask the customers fore feedback and suggestions, the fourth column is a feedback loop to the customer.  It is a reply letting the customer know what if the suggestion is possible or what work they are doing on the suggestion.  The company is completing the loop.

Too many times companies ask for the feedback do not complete the loop back to  the customer.  This is good example of giving feedback to the customer so they know they are being listened to.

If you want feedback from customers, then make sure you they know you are using it.

Harvard Business Review Blog Talks U.S. Manufacturing

If you are a regular reader of Beyond Lean, you may know that I am a very big supporter of U.S. manufacturing.  I believe it is the foundation for economic prosperity for our country or any country for that matter.  Lean thinking and principles can help guide any business to success and overcome many economic and governmental situations.

Recently, the Harvard Business Review Blog has had posts talking about much of the same.  Here are a few of the posts.

The U.S. Needs to Make More Jobs More Creative

The authors break jobs into two categories.

But we were able to classify all jobs as either creativity-oriented or routine-oriented. And within the routine-oriented classification, there are three distinct types: routine-physical (e.g. an auto assembly plant worker); routine-service (e.g. an accounts payable clerk); and routine-resource (e.g. a coal miner).

The authors explain that creative-oriented jobs pay more and pose a great question.

…the real challenge for the U.S. economy is what to do with routine-oriented jobs in dispersed industries.

And their response to this:

There is no quick fix for this problem. But my view (and Richard’s) is that we have to rethink how we utilize workers in our advanced economy.

…But I believe that America can influence the slope of the line of increasing creativity-oriented jobs by leaning toward creativity; giving workers the encouragement and space to innovate; utilizing the most of their brain, not the least of it. That would be the grass-roots way out of America’s economic doldrums that everyone is looking for.

I interpret this as engaging everyone in the organization, even those doing what is considered a routine-oriented job, in innovating the business.  Innovating is also about how to change the process to be better.  Engage the minds and hearts of the employees not just the hands and feet.

Unglamorous Freelance Manufacturing Could Boost U.S. Competitiveness

The U.S. competitiveness debate too often devolves into a cry for more Apples and more Ciscos on American shores, when what the country really needs is more Hospiras.

More what?

Hospira is an advanced contract manufacturer.

The author talks about the importance of manufacturing for innovation.  Something I believe to be true and how we must open our mind to what the definition of innovation can mean.

In the U.S., “innovation” typically means just one thing to people: novel gadgets. Few policy makers realize that much of the innovation that has propelled China’s economy, for example, is of the incremental or process type. Many of us admire Apple for its originality but tend to forget the importance of its power-supply innovations, all of which were done in China by a Taiwanese company.

When it comes to process improvements, American companies are stagnating at best, and in many cases slipping backward. Policy makers need to appreciate the value of keeping incremental and process innovation in the United States.

I don’t agree that the U.S. needs policy makers to give tax breaks and help U.S. companies realize the importance of manufacturing to all types of innovation.  There are U.S. companies that have realized that on their own.  I’m sure even Apple has realized the importance of the innovations from their suppliers.  It is the companies that need to realize the benefits of this and make the effort to change their thinking around this.

It’s Time to Bring Manufacturing Back to the U.S.

A growing number of executives of U.S.-based companies are repatriating their manufacturing capabilities — moving some production operations back from overseas.

Many companies have been moving manufacturing back to the U.S.  In fact, enough have done it the movement has a name…reshoring or onshoring.

The post talks about governmental help to support this movement.  While, the governmental help would be nice it is not necessary.  There are plenty of companies that have made the move without help from the government.

Here are three bullet points the author says the governmental help recognizes:

• Companies compete on cost and responsiveness, and this balance shifts dramatically when labor costs rise and the locus of demand shifts.

Labor cost has nothing to do with responsiveness.  Quick lead times and location has to do with this.  When total cost is looked at from end-to-end companies usually find that cheap labor really isn’t lowering their cost either.

• Local talent and skills are essential to productivity and innovation. Long-term depletion of manufacturing skills will make it hard to reverse the trend.

I think this is right on.  It will be hard to reverse the trend but I think with more companies bringing manufacturing back to the U.S. this is helping to keep the skills from depleting.

• Research and development incentives provided by the U.S. government must be tied to manufacturing operations. Otherwise, whatever is developed with taxpayer money could easily be moved to other regions associated with low-cost manufacturing.

I don’t agree with this.  This comes down to a company’s morals and beliefs.  If they want to move some innovation out of the country they will do it.  Their are companies innovating and manufacturing in the U.S.  It just may not be the high profile company like Apple.

It is great to see more and more discussion about the importance of manufacturing in the U.S.  That was not the case just a couple of years ago.  Especially on a high profile site like HBR.  The authors there are still spouting off too much about how the government needs to change regulations.  They need to start asking how all the companies that have already moved manufacturing back to the U.S. did it.  If they did, they might start writing more about Lean and end-to-end value stream thinking.

Small Businesses Growing in Wisconsin

BizTimes.com which is an online magazine focusing on business in Milwaukee and Southeastern Wisconsin had a great article about small businesses that are growing during the economic downturn.

The overall article is good and highlights several companies.  The first company highlighted was Bradley Corp. which makes commercial bathroom fixtures and equipment.  The article mentions the expansion to a new facility with a lean design.  In fact, that is the only mention of lean in the three page article.

What I liked was the approach and and strategy the company took to growth and planning.  Brian Mullet is the president of Bradley Corp.

“As a company, one of our foundations is we don’t look to make changes on a quarterly basis, we look more towards a long-term vision,” Mullett said. “There’s no better time than now, than today, to build a new building.”

In an example of Bradley’s forward-looking investment plan, the company purchased the 32-acre property for its new lean manufacturing plant in 1997, knowing it would allow for flexible use in future expansions.

More from the article…

The key to Bradley’s success, Mullett said, is a family focus on planning far ahead for growth. There are always five-year, three-year and current year plans in place.

“I’m the fifth generation here in the business, so I think that’s been distilled into our family,” he said. “It allows us to plan and be more effective in our business.”

This is more evidence of how thinking long-term has helped a company grow even during uneasy times instead of changing directions several times because of short-term thinking.  It sounds like they may not be a publicly held company which can make it easier sometimes, but it sounds like the family values planning long-term.  The family bought land in the 1990s and held onto it for over a decade waiting for the right time to build on it.  It would have been way to easy to think short-term and build immediately on the land so they were paying for two pieces of property or sell it to get more cash during hard economic times.

I can’t say if they are a lean company or not, but thinking long-term is a good quality to have to build a foundation of lean thinking.  Small businesses are going to be where more jobs come are going to come from to help with the employment rate.  I hope more of them are thinking long-term.

I don’t know what is in the cheese in Wisconsin but I hope it spreads to other states and if it has how do we advertise it more.

King County Washington Turns to Lean to Help with Budget

I came across an article on Monday about a county government in Washington state using lean to help reduce the budget shortfalls.

Lean is not traditional top-down budget cutting. It is often a five-day “event” where a single department — for example, one processing car-tab renewals — puts every job on a board and figures out how to streamline and improve the process. Employees are active participants.

While it sounds like they do understand lean isn’t just a budget cutting device cut from traditional slash and trash, they may still need some help to understand it is more than 5-day events.  It is about the thinking and how they operate day-to-day.  At least they are starting somewhere and they are getting some help with it.

Boeing has loaned a Lean consultant part-time to King County to share the wisdom, which is good community involvement.

No matter what you think about Boeing’s lean efforts, it is good to see someone willing to help the government offices get started.  It can show the government office how powerful lean can be so they want to continue.

What was the first process they tackled?  One we all hate……car license plate renewal.

The time between the county receiving an envelope with a check for car-tab renewal to the moment of putting the tabs in the mail declined from 19 days to 5.

Wow!!!  Almost 75% reduction.  Can they help my DMV?!!!

Sounds like the officials were impressed enough to invest more and start to tackle other budget issues.

The sheriff’s overtime budget is up next and could be fruitful. About 6 percent of sheriff office spending, $4.5 million, goes to discretionary overtime.

The county wants to spend $600,000 for Lean facilitators and implementers.

That’s a lot of money in a county lacking funds. But if working with employees to find redundancies and savings can save real money, it may well be worth the investment.

The reason the county government wants to use lean is…

The county takes in 3 percent in additional revenue annually while general-fund costs increase by roughly 6 percent. That has created a need to find an annual 3 percent efficiency boost every year. Lean is all about getting a grip on the cost-spending curve so services remain the same, but new ideas discovered through innovative sessions wring out more efficiencies.

While usually I would say lean is about growth, in this case it is about cost cutting.  Government offices can use lean slightly differently.  They need to keep the budgets low and operate within the tax money they receive.  The key is NOT to let service slip.  In fact, it should increase.  If a government office can do this extremely efficiently, then an ideal state would be to eventually start to lower taxes or have a tax give back because they are operating with such a big surplus of cash.

The government may be the one place where using lean to shrink the right way is what it is all about.

I hope the King County offices continue to have great success.

Control What You Can Control

Have you ever gotten frustrated that another department was pushing product to you when you weren’t ready for it or sending defects to your area or your manager was unclear about the priorities?

It is even more frustrating when you start to understand lean thinking and concepts.  We want everyone to see the world through the lean lens we have developed.  If the everyone else would see it that way then we could make a real difference.  If they don’t we feel beaten down, like we may never get better.  The waste we see can become extremely frustrating.  As lean thinkers, we may even want to give up because others aren’t seeing the big picture.

This is a common problem I have seen with people that have truly bought into lean thinking in an organization that has not.  I have had that those feelings and thoughts myself.  This is when we have to remember to control what we can control.  We have to remember there is no end to a lean transformation there is only the next step.

If we concentrate on making our work better and applying the thinking to our own world, we can slowly start to make a difference.  For instance, if you are frustrated that your boss isn’t clear about the priorities, take what you think are the priorities and write them on a whiteboard with a header of “Top Priorities for the Week of XXX”.  Make the board visible.  Let your boss see it.  That way a discussion can be had if necessary.  If he asks why you are working on something point to the board and say these are what you consider the top priorities.  Eventually, your boss will start to use the board too.

I have seen managers in non-lean organizations use lean thinking to just their little world.  As they did, their performance increased and they got increased responsibilities.  This led to their reach of lean thinking expanding to others.  The more that got exposed the better things were getting.

Lets be clear.  It still was a slow process over a few years, but these managers had a clear understanding of what they could control and they controlled it using lean thinking.

Control what you can control.  Lead by example.  Understand others may never come along the journey.  None of this is easy especially when you buy-in to the lean thinking, but it will help keep your sanity.