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.
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?
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!
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?
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.
Kevin Meyer over at Evolving Excellence had a post earlier this week about about how some companies getting involved in vertical integration of their supply chains. This gets back to the basics that Henry Ford started in the earlier 20th Century. Henry Ford was very interested in creating a vertically integrated supply chain that he controlled. He owned the forestry area to the lumber mills to the assembly that used the wood. He controlled the entire supply chain. Because of this he was able to use the waste in the lumber mills to create new and different products which generated more revenue. Henry Ford saw that he could get a better product to his customer faster when he controlled the supply chain.
While this may not mean companies are bringing manufacturing back to the U.S., it does have the same principles as bring the “on-shoring” movement. It is about getting the supply chain closer to the customer and having better control over it so the company can reduce lead time, waste, and cost. The more integrated the supply chain is, the more important it becomes to have it location regionally where transportation isn’t a large factor in lead time.
Imagine if the fresh produce (tomatoes, lettuce) you bought at your grocery store was grown in Asia and shipped by boat over to the U.S. I know that is on the extreme end. So where do you buy your fresh produce? My wife and I don’t buy much, if any, from Walmart anymore. Why? Because, it doesn’t really seem that fresh. Walmart has contracts with farmers all around the country and it takes a lot of time to get through their supply chain. We buy our produce from the local/regional chain, because they have contracts with local/regional farmers so it gets through the supply chain and to the store shelf quicker. An even better way is to buy directly from the farmer at the farmer’s market. That is just about as fresh as it gets, because the farmer picks it and that week brings the produce to the market to sell. Typically, it isn’t any older than a week.
I, for one, am glad to see some companies start to get more vertically integrated.