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Counting Down the Top 10 Viewed Posts of 2011 – 10 Thru 6

2012 is now in full swing.  Before 2011 is too far in the rear view mirror, I thought I would recap the Top 10 most viewed posts on Beyond Lean for 2011.

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!

10. Dilbert Leading Transformation (July 2010) – Previous Year Ranked #3 – The Pointy-Haired Boss wants clear responsibilities and employee engagement.

8.  Making Leader Standard Work Visual (June 2011) – An example of a visual board from a group I worked with.  The board makes the tasks and if they were completed by the managers visual.

7.  Beyond Lean Joins Twitter (February 2011) – Beyond Lean announces the venture out onto Twitter.

6.  Redbox Produced in the U.S. Using Lean (October 2010) – Previous Year Ranked #5 – News article about Redbox manufacturing using Lean to produce the Redbox dispensers close to it’s customers in the U.S.

My next post will count down the Top 5 viewed posts of 2011.

Don’t Over Complicate the Formula

People are enamored with kanban systems.  This can be a good thing, but all too often they don’t understand kanban systems are there to help highlight make problems visual.

The first thing almost everyone jumps to is the calculation for the minimum and maximum levels for the kanban.  I have seen some formulas that would make a mathematician with 3 PhDs blush.  I don’t understand the need to have a complex formula.  For years now, I have used what I see as a basic quick and easy formula to calculate the min and the max.

Min = Lead Time + Safety Stock

Max = Min + (Min/2)

Lead time is the time it takes from the moment the component is ordered until it is received and ready to be used.

Safety Stock is the amount of stock to hold because of something that could occur to delay the lead time.  Base this on where you are getting the parts from, how often does something go wrong, etc…  For example you might hold a little more safety stock for something you purchase from a company 300 miles away versus a component that is made in-house.

If the process is working smoothly, you will receive the component you ordered right as you get into the safety stock.  When the minimum level is set properly, you will feel freaked out because you believe you will run out and right about that time the components will arrive.  It is a weird feeling that you will adjust to, but makes you heartbeat fast the first few times until you get used to it and trust the process.

The maximum is something a friend and I completely made up several years ago.  There is no reason it has to be this.  I continue to use it because so far it has worked well for me over the last decade.  I always round up to the nearest full day.

Example:

Min = 2 day lead time + 1 day of safety stock = 3 days

Max = 3 + (3/2) = 4.5 round up to 5 days

The only other number that is needed is the quantity of the product used per day.  This is used to translate the number of days to a quantity of the component.

1 day usage equal 500 parts

Min = 3 days x 500 parts = 1500 part

Max = 5 days x 500 parts = 2500 parts

The point of the kanban min/max levels are to get you in the ballpark.  It shouldn’t be an exact science because you will probably round to nearest full carton or order quantity anyway.  Plus, min/max levels should NEVER stay static.  They are dynamic and change.

I wold recommend on having what you might think is a little too much inventory to start.  You can always adjust your kanban min/max levels down as you understand your process.  If you start with too little of inventory, you will run out of parts and people will not have faith in the new process and give up early on before it has a chance to work.

Get rid of the waste in your kanban calculation and go and see your process to understand if your kanban min/max are appropriate.

Technology Can Help the Go and See Process

This is part of my reflections from the OpsInsight Forum in Boston.

There were a lot of technology companies presenting at the forum.  The companies had a lot of pretty cool technology that could be used.  AT&T presented their business mobility solutions.  It was not around the iPhone.  It was technology designed to bring real-time visibility to supply chain needs, inventory and performance dashboards.

I was very intrigued by what they were presenting.  The lean thinker in me thought to slooooooow down.  What would be the purpose of the technology?  How would it help?  It does no good to implement technology on something that will not drive any action.

Real-time technology for inventory, supply chain needs, and dashboards can have a negative effect.  If the leadership is not in the habit of going and seeing what is happening all real-time technology will do is allow a quicker solution response without understanding what is actually happening.

The real-time technology can be a great enhancement for leadership that is in the habit of going and seeing.  The quick alert of an issue can allow them to get to the area to witness the problem before it disappears.  Since the leadership sees the problem in real-time they have a better understanding and can have a countermeasure in place quicker.

Without the real-time technology, the leadership may not find out about the issue until it has disappeared which means they have to wait for the issue to come up again in order to understand the problem or spend time recreating the issue.  The team loses time before they can have a countermeasure in place.

If the leadership does not have the go and see mindset then all the real-time technology in the world will not help change the behavior.  Technology is a wonderful thing, but “with great power comes great responsibility.”

My Continuous Improvement: Personal Kanban

As I look for ways to improve, I am inspired by other lean thinkers and bloggers.  I see what they are trying and look to how that might work for me.  I try and experiment with things in order to make my job easier and to feel more in control and organized.

I decided to start a series that will be based on what I have tried in order to make my work better.  It may be small or large things and most likely it was an inspiration I got from someone else.  I hope that by passing along what I have learned that it may inspire others the way others have inspired me.

About seven months ago I read Tim McMahon’s blog post about the benefits of his personal kanban.  I decided that this was something I was going to try.

I decided this was something I was going to try to improve my work.  I spent a few months deciding how I was going to go about this before jumping in and trying it.  Finally, I did give it a try.  I wish I had better news, but my first and second iterations were not very successful.

I tried using note cards and a bulletin board to move the work.  I chose my value stream to be WIP Queue, In-Process, and Completed.  I color coded the tasks by which customer I was serving since my role is internal consultant.

I found I was re-prioritizing the work on a constant basis, mainly because my customers were re-prioritizing their work.  Plus, like Tim I don’t sit still.  I am out in the manufacturing plants or in different parts of the main building all the time so I don’t get to see the bulletin board as much.  I really liked my digital task list that syncs with my Blackberry.  Having the tasks mobile was very helpful.

I was also having trouble squeezing time in to complete these tasks, but I started blocking time off on my calendar to work on some tasks.

In the end, the experiment was a failure.  But, I did learn what worked and what didn’t and why.  I still want to improve my work flow so further reflection and study is necessary.  With Tim’s recent post about how and why he digitized his personal kanban, I was exposed to digital tools that I did not know existed.  I will now take the time to look at some of the tools Tim presented and conduct some research of my own to figure out the best way to incorporate the right tools to help with my process.  Find the tools to fit the process, don’t fit the process to the tools.

Not all improvements work out and I think it is to highlight those and talk about those as much as the ones that did work.  Happy improving!

Follow Up to Japan Crisis and Lean Philosophy

Last week I wrote a post about how the earthquake was the cause for the supply chain interruption at Toyota, not lean (post here).  It was centered around an article I had found on Bnet.  Since then two other articles have been written regarding the Japanese crisis and lean.

The first was written by Margaret Hefferman (article here).  She starts out by saying:

Beyond the tragedy of the Japanese tragedy, the industrialized world is experiencing a profound philosophical aftershock. Much of our business theology about lean, mean just-in time manufacturing, about re-engineering, outsourcing and globalization is wrong.

Again, this quote makes you wonder about the understanding of lean.  This is the only mention of lean in the article.

But one of the reasons why the business impact of the natural disaster is so widely felt is because our supply chains are now so immense.

The rest of her article talks about how a supply chain spread across the world creates great complexity.  It also makes a company more vulnerable to natural disasters, political uprisings, and harder communication between people.

I think Margaret makes some great points that actually support the lean philosophy on complexity in supply chains and supplier relationships.

The second article was written by Jeff Haden (article here).

You absolutely should learn from what is happening in Japan — just don’t overreact.

Jeff is right.  We should use this as a learning experience but don’t overreact to this crisis.  Jeff gives some good advice on what companies should NOT do during this time.

• Increase inventory. Running out of supplies, materials, and finished goods could cripple your business.  So can the carrying costs involved with maintaining excess inventory “just in case.”  Maintain inventory levels based on more likely risks:  Spikes in demand, late deliveries, or production/quality problems.
• Add suppliers. Some Japanese firms are unlikely to resume production for months, so some businesses are scrambling to find other sources.  Still, don’t create multiple redundancies in your supply chain. You will only add administrative costs, additional complexity to your purchasing systems, and pay incrementally higher supply costs since smaller order quantities typically mean higher prices.  (If you are largely dependent on one supplier for a key supply, definitely establish other sources.)
• Fatten manufacturing. Lean manufacturing practices are under fire in some circles, sometimes due to a lack of understanding of lean manufacturing.  Lean manufacturing isn’t complex; it’s simple.  Simple is good.  Adding buffers and additional WIP and redundant capacity and crewing typically decreases productivity and increases cost.
• Stop outsourcing. Working with freelancers or outsource partners in other countries exposes your risk to service interruptions.  Bringing those functions in-house exposes your business to higher costs.  Treat outsourcing like you do your supply chain:  Don’t rely on a sole source.  Have backups in place.  Know who to call in an emergency.  While it may be tempting, bringing every function in house could result in a financial disaster for your firm.  (Bottom line: If it made business sense to outsource before the earthquake, it makes business sense to outsource now.)
• Change because you think you have to. Your ability to adapt is what makes you a successful business owner.  Make changes to your business model based on logic and foresight, not because you feel you have to do something in response to a crisis that may never impact your business.  Sometimes the best response is no response, especially if you’re already doing most things right.

This all sounds like it is right in line with the lean philosophy and not in contradiction to it.

Jeff ends with what companies should do.

What should you do in response to the Japanese crisis?  Take a close look at inventory levels, at the strength of your supply chain, at potential weaknesses in your manufacturing/shipping/sales processes, and at how you manage any outsourced functions.  Look for glaring weaknesses.  Just don’t work to create plans and systems that will mitigate every possible risk.

Pause, reflect, make smart changes where necessary, and stay focused on what made your business successful in the first place.

Sounds like good advice to me.  Companies shouldn’t overreact and add inventory and suppliers because a giant “What If”, but we shouldn’t ignore what happened either.  We should learn from it and apply changes that make sense to mitigate risk without the company getting away from what made it successful to begin with.

Be smart…don’t react without understanding.

Toyota Fails Due to Earthquake…Not Lean

I will warn you this post is going to be a rant.  One that I can’t help and I feel is necessary to do.

A couple of days ago I found an article on Bnet.  The title was “Lean Production: Another Casualty of the Japanese Quake?“.  The title caught my eye so I decided to give it a read.  I would have been better off not reading it.

The first part of the article had some good information and was informative, but then came this paragraph:

When complex systems break down, they really break down

The old model of having a plentiful supply of components on hand was costly and inefficient, but it had one big plus: It made it easier to recover quickly from an economic downturn or a natural disaster that disrupted business. In a nutshell, it was durable, if dumb.

My jaw hit the floor from shock when the author mentions that traditional supply chains are costly and inefficient but defends them again because it is quicker to recover from a natural disaster.  What!?  Can you imagine sitting in executive meeting that goes like this:

Person 1: “Are supply chain is really working well.  The costs are down and we are delivering great value to the consumer.”

Person 2: “But what happens if a once in a lifetime 9.0 earthquake causes a tsunami that knocks the earth slightly off its axis?  Will our supply chain work then?”

Person 1: “Great point.  We should triple our inventory immediately.”

The lean model allows for an automaker like Toyota to produce better cars and adjust more nimbly to fluctuations in demand. But because it’s accordingly more complex and required more brain- and communications power to operate correctly, it’s vulnerable to the type of catastrophic breakdown we’re now witnessing in Japan.

Where is he even hearing about lean?  In all my time studying and learning about lean, I have never heard that lean is complex and requires significant communication power to operate.  If someone understands that lean at the basic level is about eliminating waste then how can you draw the conclusion that it is more complex?  At the fundamental lean is the complete opposite of this statement.  It is about making things simpler, including communication.

There is more but I just can’t stomach it.  Plus, a lot of it has already been said very well by some of my counter parts in the comment section of the article.  I really appreciate Steve Martin from theThinkShack kicking off the comments.  Also, Mark Graban from the LeanBlog, David Kasprzak from MyFlexiblePencil, and Joe Dager from Busines901.

I encourage you to go and read their very thoughtful insights and your own if you would like.  I didn’t have an account and as upset as I was I didn’t want to take the time to sign up for the free account to post something and then never use the account again.  So, I decided to use my blog as my forum for this one and didn’t want to rehash some of the great insights from others.

I appreciate your patience on this rant and now I will return your to your regularly scheduled program.

For as long as I can remember, I have been working to reduce inventory.  My experiences have always been with companies that employee a few hundred people or more and have revenue of at least \$100 million a year.

Now I am working with a company of two people and revenue of under \$10,000.  It is the very small company that my wife has started out of our home.  Last year was year 1 and it went pretty well.  Well enough that this year we decided to take a few more calculated risks in order to grow the business and reach more customers in the area.

Because my wife is the marketer, salesperson, developer, manufacturer and everything else ‘er things have to be run a little differently.  We have kept the manufacturing batches rather small so far.  One batch of 8 bars of soap per run.  With more risks we have to add inventory.

One risk we have taken is adding our product to local store.  We own the product until it is sold at the store.  This almost doubled our inventory since we have to have inventory ready for internet orders and the events we do around the area.

Another lesson we learned last year was 90% of the events we participated in are from Sept. – mid-Dec.  It was very hard last year to make only the soap sold in the 5 days or so between events.  This year we are going to participate in bigger events, plus some of the same events from last year.  As we get more and more repeat customers, the making just-in-time is going to be harder and harder.  So this year we will building inventory of our main products ahead of time.

While we will be adding more inventory earlier, we believe this is the right thing to do this year.  We can’t afford to hire someone to work for us and trying to raise two kids while running a business is hard enough to do without pulling all-nighters to make product.

We know it will tie up cash for a little longer but we are willing to take that risk this year.  What are your thoughts?

Different Types of Kanban

I know my last post was about the concept of kanban.  It has been a concept that springboarded a lot of my learning over the years.  It may have started with implementing a kanban system but ended up learning about visual management, the seasonality of the business, what the customer is demanding, and change management.

There are two important learnings that I have had when implementing a kanban system.  Two that I thought I would share.

The first lesson is that when a kanban system is mentioned people jump to a conclusion that all materials will be handled in one way.  All the materials will be set with a min/max.  The min being the reorder point and the max being the point to fill the order to.  This assumption scares people because setting everything to a min/max system would mean increasing inventory overall and holding inventory on some parts for a very long time.  This is not a smart thing to do.  People need to know that a system can be put into place that takes each component into consideration and does the right thing for that component.

This brings me to the second lesson.  What is the appropriate way to handle each component?

So far, I have learned three ways to handle a component in a kanban system.

The first way is the typical kanban replenishment system.  A minimum is set for a reorder point based on lead time and safety stock.  The maximum is the highest quantity wanted on hand at one time.  I have found the best time to use this is when a component is used on a nearly daily basis and in high quantities.

The second way is another typical way.  The non-replenishment kanban.  This is a kanban that is filled but not recirculated.  I have found this to be best used when a component is needed for a very short period of time, a day or week, and then the component is not used for a long period of time.

The third way is what I call a seasonal kanban.  It is a component that will be used frequently and with higher demand but only for a short period of time, a month, two, three.  It is long enough that a non-replenishment kanban is not proper to use and a replenishment is too permanent.  What I have done is set up the component on a replenishment kanban but when the use is winding down, I convert it to a non-replenishment.  When the season is over the component has no inventory so things aren’t stored for an unnecessary amount of time.

Using a combination of these three can make for a very efficient system.

SMED Part 3 – Reducing Trials

A commonly used lean tool/concept in manufacturing is Single Minute Exchange of Dies (SMED) or quick changeover.  By definition changeovers from one job to the next is waste.  It does not add any value to the product/service, nor is the customer willing to pay for it.  Since it is waste but necessary in many operations, the goal should be to be as quick and as efficient when changing over as possible.

Shigeo Shingo showed how getting changeovers done in just a few minutes can reduce the batch size that can be produced, which creates less inventory and increases the cash flow.  When achieved, a changeover that is done in less than 10 minutes will save a lot of money.  The ideal state is to get the changeover to instantaneous so no capacity is lost.

During my time I have seen what I call three levels of the SMED concept that can help depending on where you are with implementing quick changeovers or lean.  This is the third of three parts explaining the different levels I have seen.  I hope this will help others with their SMED efforts.

The last topic in this three part series is about reducing the number of trials at start up.  The definition of a changeover is from the last good piece of the current run to the first good piece of the next run.  So any trials to align or purge or anything else in order to get a good piece is considered part of the changeover.

Here are a few suggestions to get the thinking started on how to reduce the number of trials during a start up:

• Pre-set adjustments – This is where you can adjust your machine quickly to a pre-determined setting that should be very close if not exact for the job you will be running
• Offline fixturing – Create a fixture offline that simulates the functionality of the machine.  Then set up the press to receive the pre-positioned die just like the fixture does.  This should help on the accuracy of the process.
• Set pins – Build pins that would allow a fixture (such as a screen) to be set in the same place every time.  This will help with pre-set adjustments and sliding in a fixture that was aligned offline to be accurate each time.

The three things I have discussed about SMED are not the only parts of SMED.  There is a lot more to SMED and quick changeovers that can help.  Learning to become very quick with changeovers can really help drive the business in reducing inventory and increasing cash flow.

SMED Part 1 here

SMED Part 2 here

SMED Part 2 – Quick Releases

A commonly used lean tool/concept in manufacturing is Single Minute Exchange of Dies (SMED) or quick changeover.  By definition changeovers from one job to the next is waste.  It does not add any value to the product/service, nor is the customer willing to pay for it.  Since it is waste but necessary in many operations, the goal should be to be as quick and as efficient when changing over as possible.

Shigeo Shingo showed how getting changeovers done in just a few minutes can reduce the batch size that can be produced, which creates less inventory and increases the cash flow.  When achieved, a changeover that is done in less than 10 minutes will save a lot of money.  The ideal state is to get the changeover to instantaneous so no capacity is lost.

During my time I have seen what I call three levels of the SMED concept that can help depending on where you are with implementing quick changeovers or lean.  This is the second of three parts explaining the different levels I have seen.  I hope this will help others with their SMED efforts.

Another big concept in SMED that I have seen help many times, is the quick release and tool modification concept.  Too many times, I have seen examples of turning screws or bolts that are 2 inches long in order to secure something.  Quick release clamps give the functionality of holding something in place without the need to screw something in.

(click on image for larger view)

The example above shows a screw with a knob that was used on 4 corners of a screen to hold it in place.  A team changed this to 4 lock down clamps that take less time to secure than one of the screw knobs.

Another concept is trying to find ways to modify tools that are used in order to prevent wasted movement during the changeover.  I worked with a team one time that needed 2 different size wrenches to do the changeover inside a piece of equipment.  Everything they needed the other size they would have to get out of the equipment, get the wrench and then get back in to work.  The team decided to cut the two wrenches in half and weld the sizes they needed together in order to make things quicker.  Here is another example:

(click on images to see a larger view)

On the left the operator has to scoop the powder and then strain it into a container and then pour it into the machine.  The modification on the left had the strainer built right into the pour slot for the powder on the machine.