Sep 17 2012
See on Scoop.it – lean manufacturing
It is time to take stock of what lean means, how it can be applied to the UK public sector and dispel some misconceptions, says Colin Cram, who will chair Public Service Events’ Lean Government conference…
See on www.publicservice.co.uk
Sep 17 2012
(Picture from TYWKIWDBI)
The complete wording of Deming’s Point 4 is as follows:
“End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.”
Today, you will encounter no one involved with supply chain management who would argue against the idea of basing purchasing decisions on the total cost of having the item on hand when needed for production and developing collaborative relationships with suppliers. The idea of single-sourcing every item, on the other hand, makes many managers nervous, but, without such a committed relationship, you cannot have information exchange at the depth required for collaboration to pay off.
As of 2012, however, very few companies have followed through on this recommendation. What we have seen instead in the past 20 years instead is “We’ll skip Lean and go straight to China,” based exclusively on temporarily cheap labor, without due consideration to local infrastructure, quality and productivity issues, and logistics. Companies that are “reshoring” after being burned at this now have an opportunity to implement this most specific and least controversial of Deming’s 14 points.
It breaks down into the following specific recommendations on what is now called supply chain management:
In this area, companies don’t behave like individuals. Whether you buy food, clothing, household appliances, or the services of a plumber, you don’t systematically choose the lowest price. Like the astronaut on the launch pad, you do not want every part in the rocket to have been made by the lowest bidder. Even if you are hunting for bargains, you also consider quality, delivery, and the availability of support. You willingly pay more for appliances that are reputed for working well, lasting long, operating quietly, match the design of your house, and have spare parts and service readily available.
In principle, a company’s purchasing agents should think the same way. When they don’t, it is because they are evaluated on the prices they are able to negotiate and because they are not familiar with the actual use of the materials or equipment they buy. If you hired a third party to do your shopping, with instructions to find the lowest prices, you are unlikely to be happy with the results or even to same money over time.
Because they don’t use what they buy, purchasers rely on specs to decide whether a supplier’s product meets the company’s needs. As Deming points out, however, conformance to specs is never synonymous with fitness for use, no matter how carefully the specs are written. Specs only work as a one-way filter; if a product is out of spec, you know you can’t use it, but, if it is within specs, it does not guarantee that you can. Juran distinguished between true and substitute characteristics. The true characteristics are what you are really after, like the taste of a cake. Unfortunately, you cannot verify it without eating the cake, so you use substitute characteristics that you can measure, like the cake’s diameter or the sugar content of the ingredients. If they are out of specs, you know there is something wrong with the cake, but they can all be within spec and the cake still taste awful.
Relying on specs in purchasing is therefore taking necessary conditions and treating them as sufficient. But how do you avoid doing this? Deming does not say. I recommend the following:
For manufacturing, it means considering everything it takes to have good materials within arm’s reach of the production operator for as long as the line is running on this product, as opposed to the price on a purchase order. For equipment, it means looking at the total cost of ownership (TCO), also a term that was introduced after Out of the Crisis came out.
The only issue Deming raises is that of quality, but it is not the only one, particularly when you consider switching from a supplier located 10 miles from your plant to one that is 6,000 miles and 10 time zones away in an unfamiliar country. You have to consider transportation, longer lead times, communications and travel.
Furthermore, discussing cost and quality in the same breath leads naturally to thinking about what the literature calls “cost of quality.” The literature on quality defines this cost as the sum of the direct costs of failure, appraisal and repair, and omits the impact of quality on sales, as being too “controversial” and difficult to measure. This “cost of quality,” however, is the tip of the iceberg; it grossly underestimates the business consequences of quality problems, as shown, for example by the Firestone tread separation issue in 2000 or Toyota sticky accelerator pedals in 2010. A car maker’s reputation for quality is its crown jewels, and the answer on how much effort it should put into nurturing is is whatever it takes.
While transportation costs are relatively easy to calculate, the cost of expanding lead times from days to weeks or months is, in some cases, much larger than the cost of having inventory in transit. For example, toys sold in the US during each Christmas season are made in China the previous summer, but you cannot tell bestsellers from duds until late in the fall, by which time there is nothing you can do to adjust the supply.
To follow Deming’s recommendation here, you consider not the unit price of the item but all the outflows of funds generated by the decision to buy it for a given supplier for as long as you intend to do it, knowing that this may vary from a few months for fashion-related items to several decades for airplane parts. The question is not the price of one unit but, for example, what it takes to make, say, 1,000 usable units available on your production line every day for the next four years. And you have to write at least a best-case, worst-case, and most likely scenarios of how it may unfold in terms of volumes, quality and delivery performance, and technical support of the supplier. Each scenario results in cash flow schedules that can be compared.
Such an analysis cannot be done without making assumptions about product life, demand, and supplier capabilities. It is more complex than picking the lowest bidder, but the stakes are high.
What happens when your single supplier fails? It happened to Toyota with the Aishin Seiki fire of February, 1997. The plant was Toyota’s single source of proportioning valves for Toyota in Japan. Toyota’s factories shut down within four hours of the fire, the supplier network was mobilized, production was restarted within a week, and was back to full volume in 6 weeks. In the Japanese press, the fire was initially viewed as a failure of Toyota’s system; by the time it ended, it was a vindication of it.
If you buy thousands of items, even with a single source for each, you will have hundreds of suppliers. If you have a policy of having at least two sources for each item, you will have even more suppliers and more complicated relationships to manage. Deming emphasizes the impact on quality, but it touches in fact every aspect of supplier relations. Juggling multiple suppliers for each item is playing the field; having a single source, a monogamous relationship.
If, for each item, you have a single source for whom you are a major customer, your plan for dealing with emergencies like the Aisin Seiki fire is to rely of the strength of your supplier network to come up with an appropriate response. The Wall Street Journal article about the Aisin Seiki fire in May, 1997 described the response of Toyota suppliers as the manufacturing equivalent of an Amish barn raising.
Sudden surges in demand are not an issue in car manufacturing, but they are in other industries, like semiconductor production equipment. If you are a machine shop making components for this industry, you may see demand doubling overnight simply because one semiconductor company placed a big order for machines in a new wafer fab. You know that sudden changes in the economy may cause this order to be cancelled, and you cannot count of other orders filling up you slack capacity once this order is filled. In this case, rather than investing in additional equipment that is unlikely to be permanently needed, suppliers have been known to make second-sourcing agreements with competitors to provide surge capacity. One consequence of such arrangements is that the parts arriving at the customer plant may come from different suppliers. From the customer’s perspective, however, it is still a single-sourcing arrangement, because the primary supplier remains responsible for quality and delivery.
A six-year contract representing 30% of your sales to be a customer’s sole supplier of a component sets the stage for a different working relationship than a one-year contract representing 10% of your sales, in which you are one of a stable of suppliers among which the customer splits the demand. Exclusive, long-term relationships are clearly a required foundation for the collaboration that the entire literature on supply chain management agrees should take place between suppliers and customers, but generally doesn’t.
“Arms around” is better for both sides than “arm’s length” and adversarial. So why is it so rare, and what can we do to make it more common? The abundant literature on supply chain management fails to see what I think is the elephant in the room: unlike a plant, a supply chain is ruled by the interaction of multiple, independent economic agents. This is discussed in Chapter 19 of Lean Logistics (pp. 341-352). The summary is as follows:
In the lean supply chain, the traditionally adversarial, arm’s length relationship between supplier and customer makes way for a collaborative approach, centered on long-term single-sourcing agreements, and extensive exchanges of business information and technical know-how. This approach increases the total payoff of the relationship, but transitioning to it is difficult because it requires behavior changes on both sides.
Sustaining it over time also requires management to consistently forgo the short-term windfalls that can be reaped through a unilateral return to the adversarial approach. That supplier and customer should collaborate to increase the total payoff does not prevent each one from negotiating aggressively with the other on sharing this payoff.
Once you acknowledge that a collaborative relationship takes a long time to build and are easily destroyed by either side, you can manage it accordingly and give it the attention it requires.
Sep 14 2012
See on Scoop.it – lean manufacturing
Discussion started in the IndustryWeek manufacturing network on LinkedIn:
There are thousands of high-mix, low-volume (HMLV) manufacturers whose factories forge, injection mold, fabricate and machine hundreds — sometimes thousands — of parts with different manufacturing routings.
So how does one adopt and adapt Lean for jobshops and other HMLV environments?
See on www.linkedin.com
Sep 13 2012
See on Scoop.it – lean manufacturing
L.A.M.E. (Lean As Mistakenly Executed) is giving Lean a bad name. The article’s lead paragraph says is all:
“The lean manufacturing model, when applied to knowledge work, is a race to the bottom where humans are reduced to robots and creative output to widgets. The work is process-mapped to death, and management demands “faster, better, cheaper.” The concern is not for the experience of the end customer or the growth of the company, but rather ‘what can the customer live without so that we can save more money?’”
How do you respond to this? Following is a comment I posted:
What I find striking in your story is that you never mention what your office was supposed to be doing, which suggests to me that the “Lean” approach was the deployment of generic tools under the mistaken assumption that they would help regardless of whether the office was architecting skyscrapers or processing insurance claims.
First, you have Toyota, the company where Lean was invented as a means of becoming a better car maker. It worked. Then you have had many people who used Toyota’s reputation to peddle simplistic, dumbed-down copies of Toyota’s system under the Lean label. It didn’t work, and they are giving Lean a bad name.
Then you have had more people further simplify and double-dumb down the approach to port it over to offices, and it seems to be what you experienced.The starting point should be the work: what it is, how much of it there is, and how it varies over time. Then you look for ways to improve effectiveness, which means producing more relevant, higher-quality output faster. Finally, you worry about efficiency, which means eliminating waste in the process. And waste is by definition stuff you are better off not doing, like printing and disributing reports nobody reads.
My recommendation to you is to go back and study the original, rather than the output of a multi-stage telephone game.
See on lukerumley.com
Sep 12 2012
Deming’s 3rd point is the first to mention quality, and it is specific, even if its implementation is sometimes a tall order. Its complete statement is as follows:
“Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.”
The idea that quality should be built into the design of the products and into the processes to manufacture them has come to be generally accepted in the past 30 years, and implemented in many industries. You never hear anyone arguing against it. At the same time, final inspection and test has never completely disappeared, even in the car industry. Engines, for example, are all tested before moving on to assembly, even at the best manufacturers, and body paint is visually inspected by people.
In the details he gives about this point, Deming acknowledges that there are exceptions where no one knows how to build quality into the process. In particular, he mentions integrated circuits. It is still true in 2012, and the economic importance of this “exception” has grown in the past 30 years. There are also other, older technology products for which there is no alternative to sorting the output. Lead shot, for example, is produced by pouring molten lead into a sieve, collecting the solidified drops, sorting the ones that are sufficiently round based on their ability to roll down chutes, and recycling the others.
Oddly, Deming includes “calculations and other paperwork” in a bank among the activities for which mistakes are “inevitable but intolerable.” Today, an individual using on-line bill-pay to settle a utility bill expects that the exact amounts will be properly debited and credited without human intervention. If, on the other hand, you are occasionally transferring $300K from Russia to the US, you can expect humans to validate the transaction.
At least in Out of the Crisis, Deming does not distinguish between inspection and testing. Inspection is a manual process, subject to human error and to dilution of responsibility when a product is subject to multiple inspections, which is why he describes it as ineffective as a filter for defectives. At the end of their process, however, integrated circuits are not inspected by humans but tested on automatic test equipment that, if properly calibrated, provides consistent results. The relevance of these results depends on the human process of programming the test equipment; the productivity of test operations, on the sequencing of the tests.
Because inspection and test is perceived as “non-value added,” it has a bad odor in the Lean community, and is ignored in its literature. Today, however, it is something we have to do, and we might as well do it well. Deming discusses it in Chapter 15 of Out of the Crisis; I, in Chapter 16 of Lean Assembly .
Sep 18 2012
Bodo Wiegand Up Close and Personal with Forklifts
Bodo Wiegand heads the Lean Management Institute, which is the German affiliate of the Lean Enterprise Institute. The following is a translation from German of a large excerpt from his September, 2012 newsletter, Wiegand’s Watch:
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By Michel Baudin • Blog clippings • 0 • Tags: Flow, Forklift, Lean