During the past weekend, I end up reflecting on how I have spent some summers of the past. I don’t know why. I just did for some reason. There was one summer 17 years ago that ended sticking in my mind that I thought I would share.
I was working for a consumer electronics company that had manufacturing in the U.S. and in Mexico. One fall, I was asked to help design a new manufacturing facility to be built in Mexico and they wanted it to be a Just-In-Time facility. This was my first time hearing about JIT, so I read up on the concept. Of course, 17 years ago almost all the material was about what it was and not how it worked.
The goal was to only have 2 hours of production materials at the production lines. I made a super fancy spreadsheet that showed how much square footage was needed in each area based on line speed, shelving, component size, packaging, etc…
In July, I was approached again and asked if I would spend the month in Mexico straightening out what was going on. The JIT system wasn’t working. There wasn’t enough room for everything.
My boss and I went over the spreadsheet three times before we went on our visit and verified all the calculations and formulas. It was all fine.
When we arrived the first day, we toured the plant. We where horrified. Televisions that were designed to stack 3 high were stacked 6 or 7 high. Boxes were being crushed and leaning. They looked like they could fall at any minute. Areas that were not designed for storage were stuffed and there were approximately 100 trailers in the parking lot with materials in them.
This was a brand new facility. It had only been open about 1 or 2 months. It was a disaster.
The first thing I learned was there was no ramp up period. On a Friday, one facility was closed. The following Monday this facility was opened and expected to run at full capacity. I had never seen any company do that before or since. There is always a ramp up period.
The second thing we learned and more importantly was there had been no training on JIT, what it was or how it worked. The facility was operating under old batch-n-queue mentality causing space to quickly fill up.
My manager and I were able to get the inventory under control through some strict inventory management processes and even get a more consistent delivery of materials to the assembly lines.
In the end, the company was not ready to run any differently. It was a shame. They ended up expanding the building and continued to run in a batch-n-queue manner. I believe the facility has been closed in the last 3 or 4 years.
It was my first exposure to JIT and all that it takes to run a JIT system successfully. I call it a system because it isn’t just about space and delivering parts. It is the management mentality to reduce changeovers, run in much smaller batches and solve problems. It really showed me how everything must work together.
Does anyone else have any horror stories from trying to implement a just-in-time system?
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.
Have you ever bought technology because it’s cool, whether it be for home or work? You look at it and think, “Wow! Cool! Look at all the features it has and the things it can do. This will be great!” Six weeks, six months, six years later you look back and realize you didn’t even use half of it’s capabilities. I would be a rich man right now if I just paid for the part of the technology that I did use. Maybe sitting on a beach somewhere warm.
Truth is we get enamored with the neat stuff. Myself included. What we end up doing is trying to fit our life (or process) into the technology. We go out of way to use it and then over time we realize it is more hassle than it is worth and we stop using it. Instead we should be looking at our life and seeing how the technology can support or enhance it. The technology is something that fits right into our life so well that it almost seems seamless.
This happens a lot at work too. The most common example is software. The IT department buys a software package with 100 different functions that could possibly help with work that is getting done. The found the software package because 10 of the functions fill a need that was asked by someone to go and fill. Then they find this wonderful product and the other 90 functions will save the rest of your world too. The department likes it too and so the software is bought. One year later, an audit is done. It shows only the 10 functions that were originally needed are being used, while the other 90 just sit. The company has wasted the money they spent on all these added features. Eight years later, someone needs to have a new feature. Everyone has forgotten about the extra 90 features the current software has, so IT goes out and finds another software package to add the new feature but it also, comes with all kinds of wonderful add-ons and so the cycle starts again. While all along, the original software had the feature and the company just needed to use it.
This is all waste. Waste of time, money, resources, and on and on. The technology we use should be Just-In-Time just like our material. Get what we need, when we need and at the time we need it. No more, no less. When the technology is bought, we need to ask how this technology will help support and enhance what we are doing AND make it easier for us to do. In other words, the technology needs to support our process and work. Don’t buy technology and then build the process or work to fit it’s capabilities. If the technology does not support what you are doing, then it probably isn’t something you want for your process.
ERP systems can be a great example of buying technology and then fitting your process to support the buying of the ERP system. Most companies doing lean well are taking the decisions an ERP system is making and make it visual out on the floor so anyone on the floor can make the same decision. Why? Because the ERP system does not support the process the lean company is trying to implement. (Side note: Who is going to be the first ERP system to go away from ERP and build a great lean software tool to replace ERP? Or does a software tool even need to be built?).
I’m not against technology. That is a bad rap that lean can get. I am against buying technology that does not support the process or the future state of the process. It must be proven and it must enhance and make easier what we are already doing.
Why do you think people still technology for the sake of buying technology? Have you seen this where you work?