Blog Archives

Who is Your Real Customer?

Lean is focuses on adding value for the customer.  But, who is your real customer?

Many groups will talk about supporting another group within the organization.  The focus is on making the internal customer happy.  Delivering what they need and want.

Internal customers are important.  As a supplier, the focus should be on delivering what the internal customer wants.  But, they are not your real customer.  The real customer is still the end user or the consumer of the organizations product or service.  That never changes.

Even if a group never touches the value added processes making the product or service, the group should be focused on the end customer.  As the group works with the internal customer, questions should be asked if what the internal customer needs/wants lines up with adding value for the end customer.

Common thought is it’s not the support group’s job or position to ask because the internal customer group is assumed to already know what is being asked for is adding value.

Amazon.  Zappos.  Danaher.  Safelite.  Organizations that have figured out it is EVERYBODY’s job to focus and ask questions about what adds value to the end customer have a significant competitive advantage.

Lean Culture Change

Recently, I had the opportunity to tour a local company that does sheet metal work.  The company does not advertise being lean, although they are a part of our lean consortium.  When you walk in the manufacturing facility you would be surprised at what you DON’T see.  There aren’t 5S markings or visual production boards or kanban levels anywhere to be seen.

What the company is doing is the hard work.  The are working to change their culture.  They are focusing on it everyday from the leadership down to the floor.

The company is Webco Manufacturing.

What they have done is come up with The Webco Way.  Thirty-one fundamentals for everyone to focus on improving.  Here are just a few:

  1. Do the right thing
  2. Check your ego at the door
  3. Take ownership
  4. Practice blameless problem solving
  5. Be process oriented
  6. Continuously improve everything you do
  7. Embrace change

These are just a few.  I encourage you to visit Webco’s website to see the complete list and a description of each.

You might think 31 is a lot to remember.  I did too, but it is working for them.  They focus on one fundamental every single day.

A fundamental is chosen for the week.  A member of the leadership team sends out their perspective of the fundamental for the week every Sunday night to everyone with e-mail in the company.  During the week, every meeting consisting of more than 2 people is started by reading the quick description of the fundamental and giving an example of how it is brought to life.

This includes meetings with supplier and customers.  The meeting could be 1 Webco employee and 5 suppliers but they will start the meeting with the fundamental of the week.  This is to let customers and suppliers know what they are trying to do and helps to drive the same expectations from their customers and suppliers.

Webco may not claim to be lean, but the culture they are driving and the way they are going about it sure seems like a lean culture to me.

What are your thoughts?

Innovation and Learning

Earlier this week I had a post about how learning is essential to the lean mentality.  A video from the Born to Learn website on the My Flexible Pencil blog got me thinking about this subject.

The subject is still on my mind as I work with some of the innovation groups at my company.  These are groups that are coming up with new product ideas for the company.  One process I have been working with the group on is how to collaborate with our suppliers to modify and create better and more cost effective products.

The company has had relationships with the suppliers for 20+ years.  These relationships have strictly been about execution of product manufacturing.  The company would design a product and tell the supplier to build it.  Over the last couple of years, the company has gotten more behind innovation and re-organized its structure to support the new behaviors that are wanted.

Now, the innovation groups would like to have the suppliers’ collaboration in designing new products, defining what technology could be used to meet the consumer insights and how to make it more cost effective.  This is great.  Except there is one catch.  The suppliers have been trained to not make mistakes and just execute.  They have not had the experience of bringing up ideas and even failing with them.  How will the customer react?  Will they be unhappy?  The suppliers are accustomed to having to execute to the specs or receiving lashes for not delivering on time and within cost.

It is similar to telling your kids to sit still and not touch for years.  They become really good at it.  Then all of a sudden telling them they can run around and touch and play with things.  Could you imagine the look of horror on their faces after having the opposite pounded into them until they were incredible at it?

Even in business we have to continue to give outlets and experiences for people to try new things and be accepting of failure.  This doesn’t mean to try anything at anytime and be reckless about it.  But having a plan and trying things that haven’t been done before or even retrying things that were attempted in the past when business conditions were different.

Innovative products, ideas, and processes come from experimenting.  Experimenting is about learning.  So, without learning innovation is not possible.

Lean Leadership Blog

Yesterday, I had the honor of being a guest blogger over at the Lean Leadership blog ran by Christian Paulsen.

The post talks about how a true supplier relationship is built on trust and integrity.  If you want a true partnership and collaboration with your suppliers you can’t be looking to ditch them at the first sight of saving a penny.  Working with the suppliers during bad times to help them get better is a great way to build the trust and shows integrity on your behalf.

Here is a link to the blog.

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.

Clear and Revelant Metrics

Over the last several years I have become very passionate about metrics.  Are they correct?  Do they drive the right behaviors?  Are they being looked at and used?  Not until recently did I spend some time reflecting on metric characteristics in areas that were using them successfully to drive improvement.  The two characteristics that I found were clear and relevant.  It sounds so simple and easy but I have seen so many failures in doing this.

First of all the metrics need to be relevant to the employees that are targeted to use them.  I have learned to ask the employees in an area I visit if the metric displayed mean anything to them.  A vast majority of the time the answer is ‘no’.  It used to be shocking at first but unfortunately now it isn’t.  This creates busy work for people maintaining the metric and adds waste to the system.  More importantly, it shows underlying disconnect between the people creating the metric (supplier) and the people using the metric (customer).  If the levels of management have a disconnect with the metrics, it is pretty safe to assume there are many more disconnects with in that supplier-customer relationship.

It isn’t only important that the metric is relevant to the people using it, it must also be clear.  It must be clearly understood, clearly connected to cascading up goals, and the goal must be clearly stated.  Too often, I see examples of metrics that are very unclear to the user.  An example might be having front line hourly employees using standard cost metrics.  It is very unclear what the front line employee can do to affect the standard costing.  This leads them to not drive improvement.  Another metric that I find very unclear is OEE (Overall Equipment Effectiveness).  This is one that is used by many companies to drive improvement.  I find it very unclear.  It is a product of three factors: yield’ uptime, and machine efficiency.

OEE = Yield x Uptime x Machine Efficiency

So, if OEE changes which one caused it to change?  Or worse yet, what if OEE stayed flat but it was because uptime increase and yield decreased?  Would anyone know?  The equipment is still performing the same according to the OEE.  In order to understand what is happening, you have to break apart the metric into the three components, so why add the over processing?  I have seen OEE misused so many times, but that is for another discussion.

When I have seen clear and relevant come together, I have seen greater improvements and greater buy-in.  One great example was an area manager where I work.  When asked if the current metric (packages completed) meant anything to the employees they said ‘no’ and ‘they don’t pay any attention to it’.  His uptime on a line was 2.6 hours / shift.  He wanted to get more packages per shift but that metric didn’t mean anything to the employees but uptime did.  The area manager connected number of packages completed in hours of uptime in order to make it relevant to the employees on the floor.  Then he took away all other metrics in the cell and asked them to hit 5.0 hrs of uptime per shift (he also gave them some problem solving help).  Within the first week the cell was hitting hours of uptime per shift.  Three months later he had to increase the goal to 6 hours per shift.  The area manager has been able to reduce the number of cells needed by 50% and eliminate the need for temporary employees in his area.  When an employee is asked what is their goal they clear state, “Six hours of uptime per shift.”  The connection between uptime and all the other management goals is clear as everything else has moved in the proper direction, cost, delivery, OEE, etc…..

So whenever you are looking at metrics, make sure they are clear and relevant and I will bet that once that connection is made you will be very successful.