Management

MB in cell

Aug 6 2012

What to look for on a gemba walk

Gemba (現場) means actual place. As consultants, we ask clients to show us their gemba, and we exhort their managers to do it routinely. But we must have a clear idea of why we should go to the gemba and what to do once we are in it. In Manufacturing, the gemba is the production shop floor.

Consultants and Managers on Gemba Walks

For a consultant, the point of walking through a factory shop floor is to learn about its current state, complete through direct observation what could not be known through previously received written or oral input, and to validate or refute this input. For a manager, making daily rounds through the shop floor is different, and involves two-way communication.

The manager’s presence, body language, and attire are a message to the work force. Everybody watches the manager.He or she can listen and ask questions, but must be cautious not to give instructions to operators over the heads of supervisors.

Example: Scheduling

From documents received ahead of time or personal communication, the consultant might know that the plant is using dispatch lists from an ERP system. On the shop floor, he or she sees these dispatch lists and the way operators use them.

Manual annotations reveal where operators do not follow the recommended task sequence. A supervisor then explains how this is due to setups or missing parts. In other words, you don’t go to the shop floor to find out what the intended scheduling system. You go to find out how operators actually sequence the work, and what relationship it has with the scheduling system. A manager walking with the consultant would make a note of the situation, and follow up on it later with supervisors and Production Control.

What to See

Shop floor observations include the overall design of the plant for production and internal logistics, as well as operational details. You can tell whether it is a job-shop, a flow line, or a collection of flow lines. You can tell whether the flow of materials is visible, what kind of equipment is used for materials handling, and how much of the floor is used for warehousing versus production.

When you zoom in on individual stations, you can assess the level of automation and the attention that has been paid to the design of operator jobs. You can also check out the accuracy of the signage, the presence and use of andons, mistake-proofing devices, production monitors, and team performance  boards.

Tell-Tale Signs

It is quite possible to walk through the aisles and not notice that the plant is anything but a tight ship. The key to actually seeing is to not just watch but instead act. This activity yields information both directly and indirectly. Several tools are available to help you see better, some of which require more than a quick visit. They include the following:

  1. Using a Seven Wastes Checklist. The list of seven wastes helps you identify occurrences of them, whether you keep in on a paper checklist or in your mind.
  2. Following the flow. Pretending you are a work piece and following the process backwards from the end to the beginning,  noting where and how many times it waits for transportation or processing, how operators perceive upstream and downstream colleagues, the tools,  fixtures and storage devices  used at each operation.
  3. Counting. You emulate Sesame Street’s “The Count”  and start counting people, machines, parts or fixtures. That’s how you may notice that 20% of the people are walking in the aisles. You ask questions and find out that half of those 20% are going to or returning from the tool crib. You have not only discovered that the plant uses a wasteful method for distributing tools. You also have a ballpark estimate of the productivity improvements at stake in setting up tool pickup and delivery milk runs. Thus the simple act of counting people has led you to discover a pattern of wasteful operation. You will then recognize elsewhere. In other words, you have learned to see it.
  4. Hunting for bugs. Kei Abe came up with the “bug hunt” as a means of making managers aware of common small problems that are easily overlooked. 10 to 20 managers get each a stack of 10 red tags. They have 20 minutes to attach them to frayed cables, broken gauges or switches, puddles of oil, lubricant on the floor, devices held in place by duct tape,… Wherever I have seen this method used, all managers used up their stack of tags. They came away stunned by the sheer number of small maintenance problems they found.
  5. Conducting video time studies. These directly generates process time data, and indirectly causes you to notice details of the work that you would otherwise miss. For example, you see that an operator is much busier than a neighbor, or lit from behind behind and working in his or her own shadow, etc.

Other Perspectives

Other perspectives on this topic include the following:

  • Michael Bremer, in 2018,  has written a book on How to Do a Gemba Walk.
  • Eugene R. Goodson, in the May 2002 issue of the Harvard Business Review, published a paper entitled Read a Plant — Fast proposing a method for a small team to rate a plant in 11 categories–including safety, scheduling, inventory, teamwork, and supply chain. The recommendations are useful but insufficient, particularly in layout and workstation design. I also don’t believe in assigning scores on subjective scales, with categories ranging from “poor” to “best-in-class.”
  • Joseph Paris has a blog post called The Gemba Beyond the Window, with insights on the monetary value of the shop floor.
  • The AME’s Accelerating the Journey blog contains the following list of  “10 Questions asked on a Gemba Walk”:
  1. What are the business issues with this product?
  2. Who is responsible for the value stream for this product?
  3. How are orders from the customer received?
  4. Where is the pacemaker process, triggered by customer orders?
  5. How capable, available, adequate, and waste-free are assembly activities?
  6. How capable, available, adequate, and waste-free are the fabrication activities feeding assembly?
  7. How are orders transmitted up the value stream from the pacemaker process?
  8. How are materials supplied to the assembly and fabrication processes?
  9. How are materials obtained from upstream suppliers?
  10. How are employees trained in Lean procedures motivated to apply them?

I find these questions puzzling, for the following reasons:

  1. You don’t need to be on the shop floor to find the answers to questions 1, 2, 3, 4, 7 and 10.
  2. Questions 5 and  6, that are really about the shop floor, are leading. Asked in this form, they suggest that assembly and fabrication are indeed waste-free. What you are really after is finding out where the waste is, and where the processes lack capability or capacity.
  3. Question 4 implies that production is scheduled by heijunka on a pacemaker process and pull on other processes. The more general question is of how production is scheduled in the plant. As discussed above, only part of this answer is found on the shop floor.
  1. Question 10 implies that there should be a Lean training program. I don’t understand why training should be the only aspect of the company’s Lean program to rate a question. Before coming to the floor, I would ask whether the plant has such a program. On the shop floor, you should see its effects.

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Aug 1 2012

What about operators who do not want to be cross-trained?

Question from Bret Matthews on LinkedIn:

We have been talking about cross training our people in the different areas of our shop and the question we have yet to answer is:

What happens when a person that is great at one process fails to meet the expectation in another area?

Ideally, We would like to have a crew that could do any position needed.

Do we just accept that they could be better at some things than others?
What if they just choose to not meet the expectation because they don’t want to do that particular job?

You have two seemingly contradictory objectives:

  1. You want your work force to become multi-skilled.
  2. You want to show respect to your people, particularly if they have spent many years developing specialized skills. You don’t want to punish them for having done what the company used to expect.

This is how I would recommend managing the transition, and it involves  Human Resources:

  1. Create a new job category, that you may call “technical operators” or “superoperators” or “operator-technicians,” or any other name that conveys that they are an elite within the work force.
  2. Train the superoperators to be multiskilled and give them also extra training in areas like quality and problem-solving.
  3. Post the skills matrices on the team performance boards, and make each certification of an operator on a new skill a small ceremony at the daily team meeting.
  4. Establish a policy that all new hires will be recruited at a higher level of education, will receive special training, and will join this group.
  5. Setup a road map for existing operators to receive the appropriate training and join this group.
  6. Revise the wage system so that the superoperators earn slightly more than regular operators.

The idea is to allow the old categories to coexist with the new for the transition period, and eventually disappear. Most operators will come around when they see that the company is serious about cross-training and shows it in visible, concrete and tangible ways. For those who don’t, you need to find the best way to use the skills they do have. To the extent it’s not disruptive, they can stay in place, but they can also migrate to other functions in Maintenance, Quality, or even Training.

You should also keep in mind that cross-training is a never ending quest, because people who are fully trained on all the jobs in a shop are first in line to be promoted out of the shop and new people come in.

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Jul 31 2012

Kaizen and small things – A recent example

This picture shows a recent example of genuine Kaizen in a US factory. The workpiece in the vise is 28 ft long, and requires greasing in multiple locations. The operator on the left was tired of running back and forth to a fixed location to pick up the grease. The cart now contains everything he needs to apply grease anywhere on the work piece, and he wheels it back and forth as needed. To the right is the production supervisor for the area, who supports this and other similar projects.

How was it actually done? The production team from this area was given a budget of $500/operator to spend as they saw fit on supplies and devices for improvement projects at a Home Depot store. Their actual spend worked out to $113/operator, including the cart and bins you see on the picture and a magnetic sweeper.

It is a perfect illustration of the Kaizen concept. It is too small an improvement to warrant the attention of engineers or managers, yet it makes the work easier for the operator and makes him more productive. The only way to make sure such improvements are made is to enable and encourage the people who do the work so that they do it themselves. It is a valuable part of Lean, but it is not all of it. Higher-level issues must also be addressed, include make-versus-buy decisions and production line layout.

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Jul 30 2012

Stalin on how to motivate employees

On Facebook, Vitaly Podolskyi shared a telegram sent by Stalin to motivate a plant manager, which translates as follows:

Telegram Nr. 1
City of KOVROV
Kirkik Factory Nr. 2
To:  Plant Manager Kuriatnikov
Cc: Party Organizer Gureev

It has come to the government’s attention that suspicious characters in the factory inhibit the production of the Degtyaryov machine gun with a 73-bullet drum. This gun is now needed by our Red Army, like air, like water. This machine will save the lives of tens of thousands of Red Army soldiers. The faster we receive thousands and tens of thousands of units of this machine, the better for the Red Army, which is waging war against the Finnish White Guards. In spite of this, suspicious individuals in the factory, bought by enemies of the people, interfere with the work of producing the machine.

You have two to three days to set up mass production of the disk. To do it simply and without tricks, all you have to do is copy the Finnish drum. If production cannot be set up by this deadline, the government will put your factory under special control and shoot all the rats sitting in it.

J. Stalin
January 28, 1940

The object of this telegram was a machine gun designed by Vasily Degtyaryov, which I believe is the following one:

The Finnish gun that was its inspiration is the Suomi KP-31:

The Kovrov plant still exists and makes weapons, and the company is now named after Degtyaryov.

The original telegram is as follows:

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Jul 30 2012

Manufacturing can thrive in countries with expensive labor

The news may lead you to believe that almost everything is manufactured in China, and that what little is left is made in Mexico, India, or Brazil. The numbers about the world economy, however, tell a different story. Most of the manufacturing in the world still takes place  in advanced economies, where labor is expensive and where manufacturing employs a diminishing share of the labor force.

What the data says

The Curious Cat Economics blog contains several enlightening charts about the state of manufacturing in the world. Figure 1, for example, reveals that, as of 2010, three of the four largest manufacturing economies — the US, Japan and Germany —  were high-wage countries, with China as the lone exception.

Figure 1. Top countries by manufacturing output

I was first puzzled by what was meant by “Output” on the y-axis. It is in fact manufacturing’s contribution to the Gross Domestic Product (GDP). GDP is not a perfect metric, but it is supposed to be the value added of the entire economy, or its Sales minus External Inputs, the external inputs being purchases of materials, energy, and outsourced services. In other words:

Value\: Added = Sales - \left ( Materials + Energy + Outsourced\: Services \right )

Out of this Value Added, companies have to pay for people, facilities and equipment, and taxes. This metric has the merit of being widely available, in part because it is used as the basis for a tax in many countries. It is meaningful, but not a perfect measure of activity, and much confusion is created by the many uses of the term “value added” to mean other things.

Using data from the US Bureau of Labor Statistics (BLS), Figure 2 shows how these countries rank in terms of labor costs, with the special case of China shown in Figure 3. Labor costs in Figure 3 include both wages and benefits; they are total costs to the employers.

Figure 2. Labor Costs by Countries in 2010

The only cheap labor country among the top four is China, and it is not shown in Figure 2 because the BLS does not have data on China  past 2008. Figure 3, however, shows wages in China rising rapidly, and they have continued to do so since 2008. According to The Economist’s Intelligence Unit, average labor costs in China in 2010 were $1.84/hr.

Figure 3. Labor Costs in China between 2003 and 2008

Furthermore, as you can see in Figure 4, also from the  Curious Cat Economics blog, manufacturing’s share of the GDP is holding steady in the USA, Japan, and Germany.

Figure 4. Manufacturing as a share of GDP

Manufacturing remains a major component of the advanced economies, but this is compatible with a decline in manufacturing employment.  As China built the largest manufacturing sector in the world up from nothing in 35 years, some activity has clearly migrated there from Europe, the US, Canada, and Japan,  but the shift is nowhere near as massive as it is perceived to be. What has created this perception is that, in the G7 countries, manufacturing employment has decreased much more than manufacturing’s share of GDP. The high labor costs are coupled with high productivity, and it takes fewer people to produce the same value added. In the US, manufacturing dropped from a high of 40% of the labor force  in 1960 to about 11% today. In Japan, Nippon Steel’s Yawata Steel Works in Kitakyushu produces as much steel today as it did 45 years ago, with a work force that has gone from about 40,000 in the 1960s to 3,000 today. An auto parts plant in China will be swarming with people; its counterpart in Japan will have one operator taking care of 20 machines.

To take a closer look, I retrieved the data in Figure 5 from a variety of sources. All the numbers about GDP are from the World Bank; most labor costs, from the US Bureau of Labor Statistics (BLS). The grand total is $2 trillion short of the total world GDP for 2011 due to the exclusion of countries that don’t provide data on Manufacturing. The labor costs for China and India respectively come from the British magazine The Economist and from an Indian e-zine. Although these numbers are from respected sources, we should not forget that the quality of economic statistics, while nowhere perfect, is much better in rich democracies than in poor or authoritarian regimes. The collection of complete, accurate data sets is expensive, and you need a free press to keep rulers from manipulating this sensitive data, in particular growth rates.

Figure 5. GDP, Manufacturing GDP and Labor Costs

China is at the top of this ranking, but followed closely by the US and mostly other members of the G7 group. The remaining countries in the table are leading emerging economies often referred to as “BRIC” for Brazil, Russia, India, and China. Figure 6 summarizes the manufacturing GDP data in Figure 5 by country group.

Figure 6. Manufacturing GDP by Country Group

The BRIC countries together represent 2.7 billion people; the G7, about 725 million. The BRIC country labor costs range from $1.71/hr in India to $10/hr in Brazil;  the G7, from $29/hr in the UK to $43/hr in Germany. Yet the BRIC countries account for substantially less of the world’s manufacturing GDP than the G7, and, among the BRIC, China by itself accounts for two thirds.

Within the Asian context, according to the IMF, China’s labor costs in 2010 were already 3rd in Asia, behind Malaysia and Thailand, as shown in Figure 7:

Figure 7. Labor Costs in Asia

The IMF expects China to rise to second place by 2015, as follows:

“However, it is expected that China’s next five year plan will see mechanisms put in place to double the country’s minimum wage by 2015. That will raise the Chinese figure to $3,000 plus welfare of 50 percent, assuming the latter payments remain the same. This provides a total minimum salary overhead of $4,500. In reality, most salaries will be far higher. That will make China’s average labor cost second only to Malaysia and significantly more expensive than any other Asian country.”

How industrial economies emerge

The industrial revolution in Europe and the US was not an event like the American and French revolutions but instead a development that took more than a century to unfold. The emerging economies of today do not have this leisure. They need to catch-up in a few decades. The first one to do it successfully was Japan, starting in the 1860s with the Meiji era. Late 20th century success stories include South-Korea, Taiwan, Hong Kong, Singapore, Malaysia, and finally China. These countries all followed different paths, but share the characteristic that they relied on cheap labor to get started and that, as their manufacturing sectors matured, their labor costs rose and ceased to be the primary motivation for locating factories on their soil.

The challenges facing manufacturing companies in every country evolve over time. During the cheap labor phase, they are handicapped by the work force’s lack of skills, which is usually compounded by a rickety infrastructure of transportation, energy and communications, the lack of local suppliers for materials and services, and a weak legal system. For foreign companies, you also have the additional challenge of training and managing a new work force in a different language, possibly across many time zones, and of shipping the output to the target market.

Labor remains cheap only if the country fails to develop as hoped, in which case, the above-mentioned challenges persist. If the country succeeds, they are resolved, but labor is no longer cheap, and manufacturers there must compete both with cheaper labor counterparts in newer economies and with expensive labor in older ones. Vietnam’s labor today costs one third of China’s while China’s is one fifth of Russia’s.

Systematically searching for the cheapest labor implies walking away every few years from investments, not only in plant and equipment but in the development of a skilled workforce, an organization adapted both to a local culture and to the corporate culture of a multinational, and a local supply chain. It can only pay in industries where none of these issues matter.

In most industries, building a factory is a commitment to the area, region, and country for decades, and you make that decision for a variety of reasons, labor cost being only one of many factors. You may believe in the country’s potential as a market for your goods, want a hedge against exchange rate fluctuations, and defuse protectionist tendencies. In the car industry, this is why Toyota built plants in the US and Volkswagen in China.

To survive and thrive in advanced economies, manufacturers focus on products where labor costs matter least. Following are a few of the factors that play a part:

  1. Lean has sufficiently increased productivity.
  2. Not only are people used effectively but the level of automation is high, as is the case with products ranging from cars to detergents.
  3. The products have a high value added, like luxury watches from Switzerland.
  4. There is a high technological barrier to entry in the industry.
  5. The products are customized, which makes geographical proximity to customers an advantage.
  6. …

No advantage, however, lasts forever. Labor costs go up, and technological barriers fall. The German camera industry was a leader until the late 1960s, with brands like Rollei, Leitz, Zeiss, or Edixa. It was relying on the knowledge accumulated by generations of engineers over a century in optics calculations. By the late 1960s, however, computers were powerful enough for Japanese competitors like Nikon, Canon, or Minolta to replicate these calculations with software and take over the market. 40 years later, German cameras are collectibles but the German optics industry has not disappeared. It has shifted to high-end professional equipment for such applications as photolithography, and is still present in such mass-markets as eyeglass lenses.

Conclusions

Unless you are at the bottom or at the top of the scale, you always have competitors with lower wages and with higher wages. The US is a low-wage competitor to Denmark but a high-wage competitor to Mexico, which itself is a high-wage competitor to China. Now Vietnam is emerging as a low-wage competitor to China. Against high-wages you compete on price; against low-wages, through superior quality and higher productivity.

In countries that develop successfully, wages rise and competing through cheap labor is only a temporary opportunity. In recent years, Chinese wages have been rising at a rate in excess of 13%. At this rate, in 9 years, wages in the Pearl River Delta will be $12/hour, or higher than in Korea in 2003. The decision to contract out the manufacturing of a toy for the next Christmas season can be based on current wages, but the decision to build a car assembly plant should not be, because it will remain in operation for decades, and the decision makers must anticipate what wages and the work force will be 10 or 15 years ahead.

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Jul 29 2012

Metrics in Lean – Part 6 – Productivity of a Quality Assurance department

Response to a question in the IndustryWeek manufacturing network on LinkedIn:

For metrics of quality itself, see Metrics in Lean- Part 2 , but you specifically asked about the productivity of your Quality Assurance (QA) department, meaning that you are interested in its efficiency rather than its effectiveness. It is a legitimate concern, as long as you don’t pursue efficiency at the expense of effectiveness, which is common but not in the best interest of the organization as a whole.

Continue reading…

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