Manufacturing Blog

David K. Coombs
Leonardo Group Americas, LLC

It has long been a puzzle why so many Lean and Six Sigma implementations, launched with enthusiasm, fanfare, and abundant resources, fall short of expectations or, even worse, simply fail.  Satya S. Chakravorty, professor of operations management at Kennesaw State University and a seasoned Six Sigma/Lean practitioner, addresses this question in a recent Wall Street Journal article (January 25, 2010) :  “Where Process-Improvement Projects Go Wrong”.  

Chakravorty and his colleagues studied process improvement efforts in large companies over five years, and found that they tend to go through three stages:  first, a “stretching” phase, led by an expert or consultant, in which substantial gains are made and goals reached, with management offering support and encouragement;  second, a “yielding” period, in which management’s attention moves elsewhere and the enthusiasm wanes; and third, a “failing” stage, with the expert long gone and the training forgotten, in which the organization regresses to its old habits and performance levels.

In his article, Chakravorty refers both to “Lean” and to “Six Sigma”, but it appears that most of his focus and attention is on Six Sigma projects.  Speaking of one case study, he writes:  “With the departure of the Six Sigma expert, the teams at the aerospace company lost their objective voice and the person who performed the sophisticated statistical analysis that allowed them to prioritize the tasks that most affected performance.”  

Without opening a debate on the relative scope, content and merits of Lean vs. Six Sigma, we would offer a few observations.  The failed improvement programs all appeared to be heavily dependent on outside (Six Sigma) experts, who, of course, eventually left or moved on.  Unable to use the Six Sigma methodologies on their own, the teams bogged down and lost their sense of ownership for the project.  Worse, they came under pressure to keep up their normal production quotas – a clear signal of management’s divided priorities.  The programs added work (the statistical analysis) to the daily schedule, rather than emphasizing how to eliminate waste and improve work methods.  Finally, there was no mention of building the Kaizen or Continuous Improvement culture so crucial to a successful Lean transformation.
 
Chakravorty offers four lessons learned from his team’s research.  First, teams, especially in Six Sigma projects, need long-term support from the outside expert or consultant.  (We urge that training and certification of in-house resources take place much earlier on the time line.)  Second, performance appraisals and incentives must be tied to successful outcomes of the improvement projects.  Third, implementation teams should be relatively small – no more than six to nine members – and their timelines brisk and short.  And finally, executives must leave their observation posts and actually participate in the projects.

We at Leonardo Group Americas are often asked for our own top strategies for sustaining long-term Lean improvements.  Based on experience in hundreds of engagements, and coming more from a Lean rather than Six Sigma perspective, we emphasize the following five for optimizing the work, eliminating waste, building buy-in, and moving continuously towards perfection:

1)  Start with a bold vision for the enterprise – a vision articulated from the top and led forward by management’s example.

2)  Follow a reliable Lean Roadmap so that your implementation completes all the key work steps in the most effective sequence.

3)  Since Lean is all about creating Value as defined by the customer, focus your thinking and planning on the Value Streams – optimizing their flow, quality and responsiveness.

4)  Train your internal resources, and encourage your top managers to know Lean well enough to teach and implement it themselves.

5)  Sustain your Lean gains with robust Continuous Improvement and Kaizen activities, backed up by systematic reviews and audits.
     
Changing behaviors, habits and attitudes in the workplace is challenging at best.  But it can be done – the journey is exciting – and the long-term rewards are great for everyone involved.



 References:

“Where Process Improvement Projects Go Wrong”, Satya S. Chakravorty, The Wall Street Journal, January 25, 2010.
http://online.wsj.com/article/SB20001424052748703298004574457471313938130.html

“An Implementation Model for Lean Programmes”, Satya S. Chakravorty, European Journal of Industrial Engineering, Vol. 4, No. 2, 2010.
http://www.inderscience.com/search/index.php?action=record&rec_id=31079&prevQuery=&ps=10&m=or

How to Prevent Lean Implementation Failures:  10 Reasons Why Failures Occur, Larry Rubrich, WCM Associates, 2004.

Bosch Rexroth, a division of Robert Bosch and a member of the Lean Factory Group, has produced and released a podcast by Leonardo Group Americas principal Richard Rahn. Here's a summary of the topic discussed:

"Can softer floors and brighter lights really help a company become lean? Lean transformation affects more than business performance or improved material flow; it can also transform the places where we work, helping lift worker morale, productivity and contribution to continuous improvement. Lean transformation expert Richard Rahn of the Leonardo Group explains the major impact changing the 'look and feel' of the workplace can have on efforts to become lean."

Click here to listed to the 21 minute audio presentation, or click on the link below to read a review from the Industrial PR website. 

http://industrialpr.net/?p=35580

David K. Coombs
Leonardo Group Americas, LLC
October 8, 2009

Those of us who work in Lean tend naturally to be optimists:  most of the glasses we see are half-full, ready to be filled to the rim.  Admittedly, we sometimes tour a facility for which there really is no hope, but those are the rare exceptions.

So what are we seeing in the current economic turbulence – this enormous “re-set” for so many American industries?  Interestingly, we at Leonardo Group are visiting a number of plants  looking at attractive opportunities.  None of these are businesses-as-usual.  Rather, they’re all in the midst of strategic changes, plant moves, consolidations, and growth phases.  And their managers are employing Lean principles to speed up and optimize these restructuring efforts.

Some examples:

• A manufacturer of high-tech, Green building supplies needs to consolidate two plants into one while also adding substantial capacity – all within six months.  Lean will be their formula for success.
• An entrepreneur, spinning off from a well-established furniture company to build a premium niche product line, is preparing to open an entirely new production facility, designed from the ground up according to Lean principles.
• A remanufacturing company, enjoying the higher productivity and additional capacity resulting from a recent Lean line implementation, will now be taking on substantial new contracts in 2010 due to the closure of a sister facility in another state.
• A business owner and patent holder is bringing all the manufacturing for his product line back from the Pacific Rim to the United States, so as to better control engineering, quality and distribution.  His new facility here will be Lean from the start.

We applaud entrepreneurs like these.  They, and we hope many others, will be “off to the races” as we turn the corner into 2010.  Will your organization be there with them?

Paul Kobishop
Leonardo Group Americas, LLC
September 2, 2009

Lean, as we teach and practice it, is all about exposing waste in order to make continuous improvement possible, benefiting quality, cost, delivery and people. While we have not focused exclusively on the environmental benefits of Lean, the tools of Lean assist in environmental impacts by reducing the inputs required to build a product or deliver a service.

As discussed in a recent Wall Street Journal article, some large companies are explicitly identifying and measuring environmental impacts, including Wal-Mart, the US government, and the Christmas tree industry. These companies are also documenting the time investment and costs required to perform Life Cycle assessments. Wal-Mart, in an effort to reduce environmental impacts, is driving the life cycle up the supply chain, and requiring the suppliers to provide evidence of environmental impact for all products. While this will assist in the long term resolution of environmental issues, the suppliers will be required to absorb the cost.

The State of California has experience with the issues identified in the article regarding the calculation and planning for environmental impacts. In a well-publicized example, the environmental regulation requiring 3% of all cars sold by 1998 to be Zero Emissions was impossible at the outset, yet a calculation of environmental impacts was central to the plan. The electric car offers the only possibility for achieving zero emissions,  but the electric power to charge the batteries over the life of the vehicle has a greater environmental impact than the use of the fossil fuels. Not considered was also the cost and evironmental impact of  lead acid batteries, which need to be replaced during the vehicle's life. The lesson here: don't rely only on the math, but look at the bigger picture.

Our recommendation is this: the supply chain change which Wal-Mart is proposing can be accomplished through the application of Lean tools to eliminate waste. The Lean tools can continually be driven upstream through the supply chain, eliminating environmental and process waste, to improve delivery and create a more environmentally safe product.


References:
Retrieved on September 1, 2009 from http://online.wsj.com/article/SB125176415696374409.html, Hot Job: Calculating Products' Pollution by Ana Campoy

David K. Coombs
Leonardo Group Americas, LLC
August 27, 2009

Caterpillar Corporation, the global manufacturer of heavy equipment for construction and agriculture, has championed Lean thinking for many years, applying Lean and Six Sigma with great success throughout its production, product development and distribution organizations.  Today The Wall Street Journal reported that Caterpillar has taken another great Lean leap forward – this time in the procurement of prescription drugs for its employees and retirees.

Beginning in January, 70,000 Caterpillar employees and retirees will have their prescriptions filled directly by Walgreen Company, the large pharmacy chain, bypassing entirely the pharmacy benefits managers (PBMs) which typically coordinate and administer prescriptions for large, employer-based health plans.  In recent years the PBMs, originally developed to hold down drug costs, have been criticized for adding an unnecessary layer of non value-adding cost to the dispensing of prescriptions.  An article in The American Journal of Health-System Pharmacy recently stated that “The system for processing prescription drug claims is reminiscent of the highly bureaucratic organizations of the mid-twentieth century.”  Even worse, a striking chart in the same article shows that over the last decade the annual percentage cost increase in prescription drugs has been more than double the already breathtaking rises for hospital care and physician services.  

In a separate interview with aishealth.com, Todd Bisping, Caterpillar’s corporate pharmacy-benefits manager, remarked on the complexity of the prescription supply chain:  "There’s a whole plethora of organizations and people who have a touch point on a prescription drug from the time it’s manufactured to the time it ends up in one of our employees’ hands to take it.  This results in an estimated 10% to 20% premium on drug costs with little additional value.”

Commenting on Caterpillar’s decision to cut out the PBMs, Mr. Bisping put it in perfect, Lean terms:  “We learned we could take a complex and confusing process and simplify it to save significant amounts of money.”  His comment shows that the Lean management principles applied so successfully elsewhere at Caterpillar have now made their way to HR and benefits administration.  We at Leonardo Group Americas are convinced that administrative processes contain some of the greatest improvement opportunities in American Health Care.  Let’s follow Mr. Bisping’s lead at Caterpillar and go after them!

References:

“Walgreen to Provide Drugs to Caterpillar”, Karen Talley and Kelly Nolan, The Wall Street Journal, August 27, 2009.  
http://online.wsj.com/article/SB125131154049561261.html?mg=com-wsj

“Examining the Value of Pharmacy Benefit Management Companies”, Robert I. Garis et. al., American Journal of Health-System Pharmacy, 2004; 61:81-5.
http://www.htrx.com/pdfs/AJHP_article.pdf

“Wall-Mart Expands Rx Benefit to Employers, Targets Waste in Drug Supply Chain”, Neal Learner, aishealth.com, April 29, 2009
http://www.aishealth.com/DrugCosts/DBN_Wal-Mart_Benefit_Employes.html

David K. Coombs
Leonardo Group Americas, LLC
August 6, 2009


The Wall Street Journal reported recently on a new trend in retailing:  pruning down the huge number of product variations, or stock-keeping units (SKUs), on the nation’s shelves.  Driven by their desire to control more and more of retailers’ shelf space, consumer product companies introduced more than 47,000 new products, package sizes or variations in 2008 alone.  Retail chain operators, not to mention customers, have finally cried “Enough!”  And market researchers are hearing that shoppers feel overwhelmed and confused by too much to choose from – almost 50,000 items in a typical large supermarket.

We at Leonardo Group Americas don’t profess to be retail experts, but we do see a valuable lesson in this news – valuable to all of us who work to improve the efficiency, effectiveness and flexibility of value streams.  Complexity of any kind – of processing steps, inventory to manage, sequencing problems, excess transportation, and long lead times – always drives cost.  We would claim that the enormous product proliferation in consumer goods of recent decades, rather than delivering “greater choice and value” to the end customer, actually backfired by confusing that customer, and bloating the cost structure of the entire manufacturing and distribution value stream.  No one asked his retailer for 50 different versions of Oreo Cookies!

Two lessons come to mind.  First,  as a manufacturer or marketer, don’t be so consumed in your own struggles and world view (“We’re going to dominate Target’s shampoo department!”) that you lose touch with the living, breathing customer actually trying to select some shampoo.  Work hard and continuously to understand what really constitutes value for that decision-maker at the end of your value stream.  

And second, never underestimate the transformative power of re-simplifying a value stream which has become too convoluted or complex.  In our consulting work with hundreds of client companies, we have never led a Value-Stream Mapping session that did not result in surprise, astonishment, sometimes embarrassment, and always a drive to action among the participants.  “What?  We run invoices through all those departments?  And it takes four days?  Let’s map out how we’ll do it in four hours!”  

Unnecessary complexity also makes it very hard for management to see, and know, how things are going.  We recently finished a Lean line implementation for a remanufacturer with badly disjointed processes and piles of WIP everywhere.  The VP of Operations, whose mezzanine office overlooked the whole facility, exclaimed after the new line was running:  “Now I can see everything – units for the day, who’s ahead, and where we need resources!”
 
Perhaps the best-named book in the Lean literature is Learning to See, the well-illustrated text on Value Stream Mapping by Mike Rother and John Shook.  What’s so great about that title?  Because learning to see value, processes, and waste is the most valuable skill that you, your colleagues and your employees can gain and put to use.  Once you can see where your company’s real value comes from, attaining simplicity comes naturally – and with it, all those Lean benefits of lower cost, better quality, and improved timeliness that retain your loyal customers and attract new ones.  

Reference:  “Retailers Cut Back on Variety, Once the Spice of Marketing”, by Ilan Brat, Ellen Byron and Ann Zimmerman, The Wall Street Journal, June 26, 2009.