Bodo Wiegand heads the Lean Management Institute, which is the German affiliate of the Lean Enterprise Institute. In his latest newsletter, on Wiegand’s Watch, he discusses the case of a company he recently visited that is rushing to invest €12.3M ($13.4M) in a new warehouse and new machines but "doesn't have the resources" to improve current operations.
"It is with this enigmatic sentence that one of my Japanese mentors introduced the growing difficulty with continuous improvement. What it means is that at the beginning of an improvement program or when starting in a new area, the first and usually the easiest actions bring big improvement, hence the “easy” 50%. This is also…"
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Michel Baudin's comments:
I have been using this method, but for the categorization of improvement ideas within a project rather than whole projects. For example, starting a SMED project on a machine with a 30-minute setup time, you find that you can get it down to 12 minutes in one week for $300 by organizing and prepositioning tool carts. This is your A idea.
Then you find that, by modifying a fixture on the machine, you can get it down to 4 minutes, in three months for $5,000. That's your B idea. Finally, you discover that an automation retrofit can get it down to 2 minutes, in a year for $50,000, and it is a C idea.
The one issue I have with applying this kind of thinking to whole projects is that the scope of "low-hanging fruits" changes over time with the skill level of the work force. Much of what appears inaccessible at the outset of your transformation becomes cheap and easy by its third year.
I also find that how long and how much money it will take to implement an idea is easier for teams to work with than a metric like ROI. The economic justification of improvement projects is a difficult and sensitive subject.
Last week, Beau Keyte sent me a copy of Chapter 10 of his book The Complete Lean Enterprise, entitled Leading in the Future State, and we have been exchanging thoughts about it by email since. Many of my words below are already in my account of the Central Coast Lean Summit, where this conversation started; what is new here is the back-and-forth.
"It seems to be popular these last years and more recently to explicitly state that Lean is not (only) about cost reduction or cost cutting. See the recent posts by Mark Graban or Matt Hrivnak. So let me be somewhat controversial in this post (which I think is allowed to spark the discussion) and drop a bombshell: I think Lean is about cost reduction."
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Michel Baudin's comments:
I know that much of the TPS literature is about "reducing costs," but it never includes any discussion of money! Ohno is even quoted as saying "Costs are not there to be measured, but to be reduced." On the face of it, it makes no sense, because cost is an accounting term intended to represent the monetary value of all the resources spent to achieve a result.
Whether you manage operations with paper and pencil as in 1920 or use the state of the art in information technology (IT), you need clean data. If you don't have it, you will suffer all sorts of dysfunctions. You will order materials you already have or don't need, and be surprised by shortages. You will make delivery promises you can't keep, and ship wrong or defective products. And you will have no idea what works and what doesn't in your plant.
I have never seen a factory with perfect data, and perhaps none exists. Dirty data is the norm, not the exception, and the reason most factories are able to ship anything at all is that their people find ways to work around the defects in their data, from using expediters to find parts that aren't where the system thought they were, to engineers who work directly with production to make sure a technical change is implemented. Mei-chen Lo, of Kainan University in Taiwan, proposed a useful classification of the issues with data quality. What I would like to propose here is pointers on addressing them.
Last Friday, together with 140 other participants, I attended the Central Coast Lean Summit at CalPoly in San Luis Obispo, CA. where the keynote address by Sam MacPherson was about Lean leadership. It was a recurring theme in other presentations as well, particularly from Steven Kane, and in Beau Keyte's Lean Coaching Café. Ken Snyder described the evolution of the Shingo Prize since inception. There were also several case presentations, from healthcare, government, and academia.
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Translated from Russian: "Every production manager knows that the amount of work in process (WIP) -- stacks of parts lying between machines waiting for processing -- should be reduced. In contrast to the raw materials in the warehouse, work has already been done on it, and its cost increased by the amount of value added. This makes it an illiquid asset - in contrast to raw materials and finished goods, it cannot be sold. In addition, WIP costs extra space, heating, transportation and personnel. But, before reducing WIP, it is necessary to properly evaluate it..."
Michel Baudin's comments:
Even though it has a German name meaning "Wood Expert," Holz Expert is a consulting group based in Moscow and specialized in the furniture industry.
I had not heard of them before, but Oleg Novikov pointed out this article to me on Facebook. It is well done. If you can't read Russian, check it out with Google translate. They explain all the assumptions needed for the formula to be applicable, and give examples from furniture manufacturing. They even include a smiling picture of John D.C. Little.
Working with Russian clients, I was surprised that they insisted on mathematical formulas in consulting reports. To them, it was essential to the credibility of the recommendations, a feeling that I have never encountered among their counterparts anywhere else.
According to the previously cited guide from ERP Focus, choosing an implementation consultant is the second step of ERP implementation, right after selecting a vendor. In the consulting business, being a certification as an implementer from a leading ERP vendor is known as a license to print money. Even vendors of ERP products acknowledge that their customers spend more to implement the software than to buy it, and that much of this cost goes into consulting fees. The following are a few thoughts about the process of ERP implementation and the roles played by consultants, contractors, and the in-house IT team. Continue reading
Bodo Wiegand heads the Lean Management Institute, which is the German affiliate of the Lean Enterprise Institute. In his latest newsletter, on Wiegand’s Watch, he discusses the significance of recent problems in well-known German corporations, specifically VW, Siemens, and Deutsche Bank. The VW emissions test scandal has been covered in the media worldwide. Siemens executive were indicted for bribery last year in Greece, for acts related to the Athens Olympics in 2004, and the top management of Deutsche Bank was replaced in 2015 after scandals that included manipulating the London inter-bank lending rate (Libor), and mis-stating financial reports.
A free guide that you can download from ERP Focus makes vendor selection the first of an 11-step implementation process, while defining success is the last. In other words, they have you choose who you buy from before having a clear idea of what you are trying to accomplish.
It reminds me of a meeting at a client site where ERP implementation was about to begin. "This train has left the station," I was told. The purpose of the meeting was to draw a "Value Stream Map" for the whole plant, in preparation for ERP, and the participants included managers from Manufacturing, Quality, Production Control, Maintenance, Purchasing, Sales, and Engineering.