Sep 1 2015
Managers’ near universal reaction to the challenge of improvement is that their own operations are already run as effectively and efficiently as possible, given external constraints, including fickle customers, unreliable suppliers, local labor laws, worn-out equipment, a rickety transportation infrastructure, and the weather. The internal problems are so puny compared to the external ones that it would be futile to address them. Who cares about doubling operator productivity when labor costs are 5% of the cost of goods sold? Why should we reduce production lead times to one day when component purchasing lead times are four months?
The gist of all these reactions is that the causes of problems are all external and the solutions are for others to change. The managers are saying “My own organization is optimal, and performance cannot improve unless my suppliers, customers, and complementers get their act together.” As discussed before, such a statement is never true, as there is no such thing as business operations that cannot be improved. Even if there were, however, the question would remain of how you persuade others to improve. The following paragraphs review some of the issues that arise when you try.
Compliance Versus Engagement
Business relationships are rarely between equals to whom the relationship is of equal importance. A multinational car company that buys 80% of the output of a small parts supplier is in a position of strength, and so is the monopoly supplier of a special steel to a small manufacturer of surgical implants. Such positions enable you to make the other parties comply with any requirements you issue.
If you say that, within 18 months, you will only buy from suppliers that you certify as Lean, your suppliers will immediately start a Lean program that your auditors can bless, regardless of whether your own operations measure up. Large corporations are notorious for imposing on suppliers standards and procedures that they do not comply with themselves.
Whatever they think of the initiative, the suppliers will comply as a cost of doing business. They will go through the motions, study your scoring criteria, and make sure their facilities look Lean enough to be certified. They will game your system. This is not the same as embracing Lean as a means of improving performance on their own terms.
Credibility is of the essence if you want a wholehearted engagement. If you can show your own facilities, and say “We had these problems, this is how we solved them, and we’ll be happy to help you do the same,” it is different from issuing a mandate. As Bill Clinton once put it, you are using the power of your example rather than the example of your power. Once you have their attention, and they want to work with you, however, you must still show respect and not arrogantly tell them what to do.
How Much Internal Improvement Is A Prerequisite?
Given that Lean implementation is a journey without end, waiting until you are completely done within your company before approaching others would mean waiting forever. All your production lines do not need to be showcases before you can credibly solicit others to follow in your footsteps. You must have something to show that demonstrates that you are practicing what you preach and are successful at it, but it does not have to be everything. If you can show just one production line to suppliers who provide parts to it, it is enough to get started, with these suppliers.
Role Of Management
In Lean implementation, the rule that you should improve your own operations before getting others to do the same applies to organizations, not individuals. In manufacturing organizations, you encounter individual engineers, technicians, and even operators who not only think about ways to improve their work but implement their ideas without anyone’s backing or permission, confident that their contributions will be appreciated. And sometimes they are, but, more often, instead of being viewed as examples to follow, they are branded as insubordinate and “not team players.” Individuals should not be expected to take such risks.
The initiative must come from management, with the top decision maker sufficiently involved to make his or her commitment obvious to all. The impetus must come from the CEO, or at least from the Vice President of Manufacturing. In companies with multiple facilities, plant managers usually do not have enough authority. It is also for management to decide when implementation has proceeded far enough to want to engage partner organizations like suppliers. By that time, there usually is a steering committee of upper management to review that decision.
When You Don’t Have The Power
Power is not just a matter of perception. A small, local supplier objectively cannot compel a large, multinational customer to change its ways. Economic power, however, is not the only kind. Expertise is also a form of power, and, if you have developed it in house, you may be able to use it to influence an organization that could choose to ignore you. In this situation, what matters is the reputation of the individual expert rather than the company. I know of a small electronics assembly company was able to lead suppliers larger than itself. The assembly company’s “supplier development group” was its Lean champion, whose achievements were known to and respected by the suppliers. And he was humble when dealing with them.