Evolving Excellence

New at Superfactory - July 2009

Each month new articles, book reviews, and other content are added to the Superfactory website. The new content is featured in the monthly e-newsletter which goes out to 50,000 subscribers worldwide, and we will also post a monthly heads-up on this blog.

New content in July includes:

The featured article is from Michael Balle and is titled Who Teaches the Teachers?  The following is a brief excerpt, and you can read the entire article here.

I was recently walking through a factory shop floor that was essentially a machining shop (20-odd mills, drills and turns of varying age and design) with one small assembly cell stuck at the end of the hall. In this cell, the local lean team had worked very hard at implementing all the lean tools and improved quality, productivity and eliminated WIP by going to single piece flow. They were still struggling with regular supply in small containers, for the usual organizational issues with logistics. This was not bad at all, considering the general panic about 20% lower volumes than at this point last year. They’d managed to reduce headcount faster than falling demand, and to do so without traumatizing the operators, who had participated actively to the “lean implementation.”

The featured book this month is Follow the Learner by Sami Bahri.  The following is a brief summary, click here for more information.

'What does it really mean to be a learning organization? What does it take to get the people in a nonmanufacturing environment to think of work in terms of flow? How do you build a culture based on lean principles and lead that culture as it continuously evolves? Dr. Sami Bahri describes how he and the staff in his dental practice tackled each of these questions. The book describes how their organization transformed their work and their thinking from a traditional batch approach to one focused directly on the needs of the patient, not on the needs of the practitioners. It explains the technical changes that they made in the way that they scheduled and treated patients, as well as the understanding of the human interactions needed to make this new model succeed.

Gemba Academy has released several new modules in their School of Lean: the 7 Wastes course and the first modules of the Quick Changeover course.  Take a look at how Gemba Academy is revolutionizing online training, on demand, in High Definition HD quality.

We continually update the other major sections of the website, including:

• PowerPoint Presentations: Over 50 downloadable PowerPoint presentations on lean manufacturing, quality, enterprise, and safety concepts.
• Factory Toolbox: Almost 300 downloadable forms, procedure templates, assessments, and tools to help you not reinvent the wheel.
• Events Calendar: a listing of lean excellence seminars, workshops, training, and conferences worldwide
• Topic Information: Summaries and resources on over 40 enterprise excellence topics.
• Virtual Factory Tours: Web and streaming video tours of over 100 factories.

For all you LinkedIn junkies, we have created a LinkedIn group for Superfactory, which now has over 2,000 members.  Join the group to  network with other Superfactory enthusiasts and to show our logo on your profile.  If you haven't explored LinkedIn, check it out to see why over 17 million professionals use it for networking.

We are always looking for new articles and other content.  Contact us via the Superfactory website if you would like to contribute to our knowledge base.

Is Business Learning the Value of Experience?

By Kevin Meyer

I subscribe to three of the Kiplinger Letter publications - the original Kiplinger Letter, the Kiplinger Tax Letter, and the Kiplinger California Letter.  Each weekly edition is a concise 2-3 page summary of economic, political, policy, and business data, news, events, and forecasts and generally right on target.

The economics section of the July 2nd edition of the Kiplinger Letter discussed the current employment situation, and had the following interesting comment:

Who’s more likely to be laid off these days, a younger worker or an older one? A younger one. The pattern of past recessions is being turned upside down in this downturn. More employers are deciding that they get more bang for their buck with experienced workers, even though their pay may be higher. One reason: Their institutional memory. Another: Their work ethic. Employers say they don’t need to tell oldsters to turn off their iPods, remind them how to dress or to come in on time.

Bang for the buck?  Could that mean... value?  An older pair of hands has more value than a younger pair?  Well, ok, I thought that was what they meant before the "turn off their iPods" comment. 

On that final note, perhaps we're experiencing what every generation has to experience at least once: a downturn creating a recognition that there's also value in working hard... and taking work seriously.  Prosperity isn't handed to you on a silver platter or in a success redistribution check from the government.

Although these days I've started to wonder.

Throwin' the MEPs Under The Green Bus

By BILL WADDELL

When I write anything about Bush, Obama, Congress or the EPA a great wailing begins from some readers that they are not interested in politics - urging me to stick to lean.  For those who struggle to see the nexus between Washington, DC and lean manufacturing, or between environmentalism and lean, try this one on for size:

Senator Sherrod Brown from Ohio is pushing something called the IMPACT Act- Investments for Manufacturing Progress and Clean Technology.  It will, among other things, more than triple the funding for the Manufacturing Extension Partnerships - the MEPs - but redirect their efforts from lean manufacturing to focusing on helping "manufacturers access clean energy markets and adopt innovative, energy-efficient manufacturing technologies".  The good Senator is shooting to give the MEPs an additional $300 million a year for this effort - a pretty nice increase over the $120 million the Senator and his cronies gave them for their core mission - lean manufacturing. 

For those who may have been living in a cave and are unaware, the MEPs are the meagerly funded - embarrassingly under-funded - backbone of lean manufacturing in the United States.  They are the front line out there in all fifty states teaching the fundamentals of lean to thousands of manufacturers.  The Bush administration tried to kill them off completely - twice.  The Obama administration has kept them alive - with less money than was budgeted for new office furniture for the Department of Homeland Security.

And now the Democrats in Washington finally want to fund the MEPs - because the only use for factories they can see is "to put our existing manufacturing sector to work, and to scale up to meet the new demand created by the cap and trade program, is to have a dedicated source of funding for investments in component manufacturing,” according to Mr. Phil Angelides.  And how, you ask, is Phil Angelides?  He is the chairman of an organization called Apollo Alliance - the lobby that actually wrote the bill for the good Senator.  His claim to fame is that he was California State Treasurer from 1999 to 2007.  You all know how well the treasury of the State of California fared on his watch. The Apollo Alliance is a collection of labor unions, radical environmentalists and liberal Democrats.  And they are writing legislation to kill the MEPs and break the back of lean manufacturing.

So we get Cap and Trade to raise manufacturing costs by an estimated 20%, and our manufacturing base redirected to support it by 'producing clean energy technologies', instead of what their customers want.

If this goes through, your local MEP won't have the funds to teach your people the ins and outs of kanban or kaizen, but they will be fully staffed to provide the technical support you need to manufacture wind turbine blades.  Is that connection between the environmental full court press from Washington and lean manufacturing direct enough? 

Boeing's About Face Runs Smack Into Traditional Accounting

By Kevin Meyer

Just the other day I told you how Boeing has apparently learned a lesson and is making an about-face on its outsourcing strategy by buying the assembly operations of a key supplier, Vought.  Well yesterday the deal happened, and the writeup in the Wall Street Journal itself explains why companies continue to go down the path to outsourcing hell.

Boeing Co. agreed to acquire manufacturing operations from one of its key suppliers on the delayed 787 Dreamliner aircraft at a cost of $1 billion. The purchase of a plant in North Charleston, S.C., from Vought Aircraft Industries would mark the second time Boeing has taken over a key part of the Dreamliner's supply chain. Boeing is paying $580 million in cash and will forgive $422 million in cash advances paid to privately held Vought for work on the 787.

The move gives Boeing additional control over a sprawling global supply chain that has created numerous problems for the 787, leading to delays in testing and production.  Those delays have cost Chicago-based Boeing millions of dollars in penalties and concessions and have damaged the companies credibility with customers.

Let's repeat some of those negatives, as they'll soon provide the 2x4 we'll use to smack some people upside the head.  Cash costs, sprawling supply chain, delays, penalties, concessions, damaged credibility.  Pretty expensive, eh?  Since it's almost always overlooked, we'll also tack on the human cost of tens of thousands of years of experience, knowledge, and creativity that Boeing shed as part of their outsourcing adventure.

But some people just don't see that.  In the same article whiz-bang analyst Robert Spingarn at Credit Suisse had a slightly different perspective.

"While such a transaction should afford Boeing greater control over 787 production, we see another negative in that Boeing is bringing more fixed cost into the company."

What rock has this dude been living under?  In what universe has moving "fixed cost" outside of the company been a good thing for Boeing?  So you shed some massive assembly operations, tens of thousands of years of knowledge and experience, but you've somehow created a good thing because if times get rough the assembly operation is magically "flexible" because you can demolish a supplier instead of yourself?  In the words of Dr. Phil, "how's that working for you?"  I know, stupid question.

But here's the really scary part:

Robert Spingarn, aerospace and defense analyst at Credit Suisse (nyse: CS - news - people ), ranks first among all his peers on Wall Street in Forbes.com's 2008 survey of America's best stock analysts. Spingarn earns the award with solid judgment, as measured by our data partner Zacks Investment Research, in both forecasting earnings and picking stocks over a three-year period.

And now you know one reason why it's so hard for public companies to implement lean manufacturing.  Not only do they have to come to grips with the often counterintuitive nature of lean, but they have to battle the traditional accounting and short-term mindset of the capital markets... and the analysts and investors that reward companies that play by traditional rules.

After years of telling them they were going down a very expensive path, I do have to hand it to Boeing for changing direction.  I just hope their shareholders also recognize it's a good move.

The Soul Of Lean

by BILL WADDELL

I have often made feeble attempts to describe why publicly traded companies find it virtually impossible to embrace lean manufacturing, and its principes of respect for people, it's long term perspective and its focus on crating value for the customer.  Both Kevin and I have long tried to point out the destructive affects of outsourcing as a business model.  A master wordsmith has emerged on the matter to state the case much more eloquently than I ever have ...

"Today's international economic scene, marked by grave deviations and failures, requires a profoundly new way of understanding business enterprise. Old models are disappearing, but promising new ones are taking shape on the horizon. Without doubt, one of the greatest risks for businesses is that they are almost exclusively answerable to their investors, thereby limiting their social value. Owing to their growth in scale and the need for more and more capital, it is becoming increasingly rare for business enterprises to be in the hands of a stable director who feels responsible in the long term, not just the short term, for the life and the results of his company, and it is becoming increasingly rare for businesses to depend on a single territory. Moreover, the so-called outsourcing of production can weaken the company's sense of responsibility towards the stakeholders — namely the workers, the suppliers, the consumers, the natural environment and broader society — in favour of the shareholders, who are not tied to a specific geographical area and who therefore enjoy extraordinary mobility. Today's international capital market offers great freedom of action. Yet there is also increasing awareness of the need for greater social responsibility on the part of business. Even if the ethical considerations that currently inform debate on the social responsibility of the corporate world are not all acceptable from the perspective of the Church's social doctrine, there is nevertheless a growing conviction that business management cannot concern itself only with the interests of the proprietors, but must also assume responsibility for all the other stakeholders who contribute to the life of the business: the workers, the clients, the suppliers of various elements of production, the community of reference. In recent years a new cosmopolitan class of managers has emerged, who are often answerable only to the shareholders generally consisting of anonymous funds which de facto determine their remuneration. By contrast, though, many far-sighted managers today are becoming increasingly aware of the profound links between their enterprise and the territory or territories in which it operates. Paul VI invited people to give serious attention to the damage that can be caused to one's home country by the transfer abroad of capital purely for personal advantage. John Paul II taught that investment always has moral, as well as economic significance. All this — it should be stressed — is still valid today, despite the fact that the capital market has been significantly liberalized, and modern technological thinking can suggest that investment is merely a technical act, not a human and ethical one. There is no reason to deny that a certain amount of capital can do good, if invested abroad rather than at home. Yet the requirements of justice must be safeguarded, with due consideration for the way in which the capital was generated and the harm to individuals that will result if it is not used where it was produced. What should be avoided is a speculative use of financial resources that yields to the temptation of seeking only short-term profit, without regard for the long-term sustainability of the enterprise, its benefit to the real economy and attention to the advancement, in suitable and appropriate ways, of further economic initiatives in countries in need of development. It is true that the export of investments and skills can benefit the populations of the receiving country. Labour and technical knowledge are a universal good. Yet it is not right to export these things merely for the sake of obtaining advantageous conditions, or worse, for purposes of exploitation, without making a real contribution to local society by helping to bring about a robust productive and social system, an essential factor for stable development"

This and more is from Pope Benedict VI's Encyclical Letter Caritas in Veritate- Charity From Truthfulness.  It is well worth your time to read the whole thing, and it confirms that we hold the moral high ground in urging our wholistic understanding of lean upon the manufacturing world.