Evolving Excellence

The Danger of Attacking Waste

Us leanies hate waste.  We go after it with a passion and vigor that has few equals.  But in our zeal could we be going too far, and actually decrease value?  That's the question that popped into my mind after reading Steve Conover's latest post over at The Skeptical Optimist.  You get a sense of where he's going from his opening ramblings...

I dislike waste as much as anyone else does.  Whenever a baseball pitcher gives up a hit, every pitch thrown during that at-bat turns out to have been wasted.  No doubt about it: all baseball pitchers are wasting their arms on a high percentage of their pitches. 

Whenever a tennis player loses a game, every stroke in it was wasted; likewise, losing the set wastes every game in it, and losing the match wastes every set. Both winning and losing tennis players are wasting a large portion of their energy and talent, aren't they?

If you haven't guess it, here's his point.

The problem with shallow thinking is that in most cases it's impractical or impossible to eliminate the waste, and in many other cases we shouldn't want to eliminate it.  Why?  Because much "waste" is inextricably built into a process that yields overall positive results.

We should still attack waste, but be more careful.

Don't get me wrong: waste that can be eliminated without any undesirable side effects should be eradicated without hesitation.  Let's give the positive, unpredictable surprise every chance to emerge.  Let's eliminate waste that we can isolate from productive spending.  Let's spend and borrow as necessary to encourage the positive Black Swans and to prevent the negative ones.  We need a paradigm shift, and all such progress generates some degree of "waste."  Why not focus on the former instead of the latter? 

Larry Kudlow correctly keeps reminding us of what Reagan used to say: "Okay, you showed me the manure. Now show me the pony."

So be careful when attacking waste.  Trying new ideas, new cell configurations, new training methods... even if they fail they will probably eventually add value.   

The Contradictions of Toyota

I'm generally not a big fan of Harvard Business Review articles, believing many of them to be a bit too detached from reality.  However last week they published an analysis of Toyota that was intriguing and insightful.  I still have bit of a problem with it, especially how it separates the human aspects from the Toyota Production System when in reality they are intrinsically linked.

I won't quote huge amounts of the article, but here are the salient points. 

Quite simply, TPS is a 'hard' innovation that allows the company to keep improving the way it manufactures vehicles; in addition, Toyota has mastered a 'soft' innovation that relates to corporate culture. The company succeeds, we believe, because it creates contradictions and paradoxes in many aspects of organizational life. Employees have to operate in a culture where they constantly grapple with challenges and problems and must come up with fresh ideas. That's why Toyota constantly gets better. The hard and the soft innovations work in tandem. Like two wheels on a shaft that bear equal weight, together they move the company forward. Toyota's culture of contradictions plays as important a role in its success as TPS does, but rivals and experts have so far overlooked it.

What are these major contradictions?

• Toyota moves slowly, yet it takes big leaps.  Example: gradual opening of factories overseas, and the leap of the Prius.
• Toyota grows steadily, yet it is a paranoid company.  Example: Steady growth but a culture of "there must be a better way."
• Toyota's operations are efficient, yet it uses employee's time in seemingly wasteful ways.  Example: Toyota meetings have on average more people than other companies.
• Toyota is frugal, but it splurges on key areas.  Example: reputation for spartan offices but $22 billion spent on factories and $170 million spent on Formula One racing. 
• Toyota insists internal communications be simple, yet it builds complex social networks.  Example: simple A3 reports for displaying data and projects, yet company-sponsored clubs for every conceivable social niche.
• Toyota has a strict hierarchy, but it gives employees the power to push back.  Example: employees believe they add value by giving bosses constructive criticism.  More on this later.

From this they authors identified "three forces of expansion" and "three forces of integration."  The forces of expansion are:

• Setting impossible goals
• Customizing products and operations to the level of consumer sophistication in each country
• Experimentation

The forces of integration are:

• Preserving the values of the founders
  • Tomorrow will be a better day
  • Everybody should win
  • Genchi Genbutsu (have you seen it yourself - go to the source)
  • Customers first, dealers second, manufacturing third
• Up-and-in people management: you don't need to move up to succeed
• Open communication
  • Disseminate knowledge laterally
  • Give people the freedom to voice contrary opinions
  • Frequent face-to-face interactions
  • Make tacit knowledge explicit
  • Create support mechanisms

Probably the most interesting, or previously unknown to me, aspect of the article was how far employees could push back, or even ignore, superiors.  In a strong process-oriented organization where all work is standardized you would expect orders to be carried out without question.  Sure a lot of discussion and push-back is expected and desired in a people-centered organization, but outright flaunting of authority?  Yet that's what happens.

Each individual in Toyota is expected to act according to what he or she thinks is right. Every employee enjoys the prerogative to ignore the boss’s orders or not take them too seriously.

Confronting your boss is acceptable; bringing bad news to the boss is encouraged; and ignoring the boss is often excused. In many of our interviews, employees told us how local operations had succeeded by refusing to obey orders or ignoring what headquarters had advised. For instance, the head of Toyota Motor Sales, U.S.A., Yukitoshi Funo, told us candidly: “Before I was sent to the U.S. in 1997 [as senior vice president], I made the rounds of several top executives in Japan. They told me to increase the number of sales outlets. These were executive vice presidents and managing directors. I went to the market to see the situation. Increasing the number of dealerships would have caused more intense competition and threatened proper management of dealerships. I decided to ignore everything those top executives told me.”

The full article is a great read with some good insights.  I'd encourage you to take a look.

Join Me in Japan!

Are you interested in visiting some of the best factories of the best lean manufacturing companies in the world?  Then join me on the Japan Kaikaku Experience the last week of October, presented by Gemba Research.  Gemba has been doing these trips for several years and has the experience and inside contacts to do it best. 

We build relationships with companies in Japan who we believe are world leaders in kaizen.  These companies have been doing kaizen in some form for between 5 and 50 years.  Each company has an active Suggestion System whereby employees suggest and implement 1 to 3 ideas per month, per person.

Each company faces unique challenges and has adapted Toyota Production System (TPS) principles faithfully but flexibly.  It is a sign of their commitment to Lean thinking that they are willing to show us the best of what they have done, believing that by sharing their knowledge they will themselves be challenged to rise to the next level.

What types of things will we see and learn?

The companies we visit have integrated the management philosophies with day to day execution of improvement activity.  The results that they have generated over the years are dramatic.  As an example, Toku Manufacturing is able to run nearly 300 machines with 35 people, all because of the advanced level of Jidoka (Low Cost Intelligent Automation) that they have achieved.

What companies will we visit?  Some examples:

We typically visit two or more Toyota sites depending on availability and areas of interest of our study mission group.  We visit at least one assembly plant in order to see one-piece flow assembly paced to Takt Time, kanbans, Andon boards, Just in Time delivery of materials, pokayoke, Standard Work, and other TPS principles.  We also visit an engine manufacturing facility to see Jidoka, TPM, Standard Work, and excellent examples of 5S and visual management.

Denso is a leading global supplier of advanced technology, systems and components. Worldwide, the company employs 87,000 people in 31 countries.  They have been a long-term partner of Toyota in developing both automobile technologies as well as Lean systems (namely kanban). Today Denso is continuously improving their operations and you will see excellent examples of kanban, one-piece flow cell, 5S, visual management, Standard Work, Jidoka, and other TPS principles in action.

At Toyota Home, you will see TPS in action in a high mix, low volume environment.  The work content from one unit to the next varies tremendously, yet each unit flows at Takt Time.  The 'show room factory' is an example of good 5S and visual management.  You will get an up-close look at how to make large, complex products flow one at a time.

I've decided to go on this once-in-a-lifetime type of trip and hope you will too.  For more information visit the Japan Kaikaku Experience at Gemba Research.

Spelling Impacts Perception of Quality

As of July 1st those of us in California will no longer be able to use cell phones without a hands free device, so I joined the throngs throwing money at companies lucky enough to have hands free products.  I did my research to determine what would work best with my iPhone and what would fit best in my car.  I then took the time to research the products that met my criteria, read numerous reviews, and even went down to Best Buy, Staples, and Circuit City to try out my top choices. 

After all that I settled on the Jabra SP5050 bluetooth speakerphone and of course I ordered it via Amazon to save the sales tax and since it's under their Prime program two-day shipping was free.  When it arrived I was immediately impressed with how sleek it looked and the build quality.  Then I opened up the "Quick Start Guide."  I'll quote directly from the guide:

1) Charge your Jabra SP5050: Incert charger and remove when fully charged.

"Incert"?  And how do I know it's fully charged?

2) Turn on your Jabra SP5050: Press the answer/end button to turn the speakephone on.  The Jabra SP5050 will automatically turn off 15 min. after it lost the connection to your phone.

"Speakephone"?  "...after it lost"?

3) Pairing the Jabra SP5050 with our phone: Press the answer/end button to turn the speakephone on.

"... our phone"... hey wait a minute!  What if I want to pair with MY phone?  And what's this "speakephone" gizmo?

4) Place the Jabra SP500 in your vehicle: The SP5050 sits discretely and conveniently on the sun vizor.

"SP500"... I thought I ordered the SP5050.  And where's my "vizor"?

5) Engage Night Driving Mode: In this mode the LEDs will be shut o, thereby reducing distraction during driving in dark conditions.

"shut o"... "during driving."

Five quick steps, nine mistakes.  The product looks and works great, but you'd think a company with 1,900 employees and a bevy of award-winning products could afford a decent translator.  Or at least a phone call to someone's American cousin.  Simple mistakes, big impression.

Dilbert in Real Life

After ranting and raving a bit this past week, we'll have some fun this weekend.  The following real Dilbert-esque quotes are going around the internet.  I have no idea if they are true, but I wouldn't be surprised if they were.  Tomorrow I'll continue the "fun" theme with a garbage video.  Enjoy!

A magazine recently ran a "Dilbert Quotes" contest. They were looking for people to submit quotes from their real-life Dilbert-type managers. These were voted the top ten quotes in corporate America:

"As of tomorrow, employees will only be able to access the building using individual security cards. Pictures will be taken next Wednesday, and employees will receive their cards in two weeks."
(This was the winning quote from Fred Dales, Microsoft Corp. in Redmond WA)

"What I need is an exact list of specific unknown problems we might encounter."
(Lykes Lines Shipping)

"E-mail is not to be used to pass on information or data. It should be used only for company business."
(Accounting manager, Electric Boat Company)

"This project is so important we can't let things that are more important interfere with it."
(Advertising/ Marketing manager, United Parcel Service)

"Doing it right is no excuse for not meeting the schedule."
(Plant Manager, Delco Corporation)

"No one will believe you solved this problem in one day! We've been working on it for months. Now go act busy for a few weeks and I'll let you know when it's time to tell them."
(R&D supervisor, Minnesota Mining and Manufacturing/ 3M Corp.)

"Teamwork is a lot of people doing what I say."
(Marketing executive, Citrix Corporation)

My sister passed away and her funeral was scheduled for Monday. When I told my Boss, he said she died on purpose so that I would have to miss work on the busiest day of the year. He then asked if we could change her burial to Friday. He said, "That would be better for me."
(Shipping executive, FTD Florists)

"We know that communication is a problem, but the company is not going to discuss it with the employees."
(Switching supervisor, AT&T Long Lines Division)

Anyone else want to fess up?  I bet there are more than a few more out there.  I'll give you one, from a boss at a previous company:

"We have to stop sitting on our butts and start sitting on our heads!"
(Division VP, telecom equipment company, about a month before he was fired)

And then there was the framed note on the wall in the office of my very first boss over 20 years ago, handwritten from his boss apparently just after a good performance review (go figure...):

"Welcome to the $100k Club!"

I left the company a few weeks after that note appeared... I simply couldn't stomach that "management style."

A $1.4 Billion Lesson in Standard Work

As if we didn't need another expensive example of why standard work is critical.

The Air Force said the first crash of a B-2 stealth bomber was caused by moisture in sensors and estimated the loss of the aircraft at $1.4 billion. The Air Force stopped flying B-2 stealth bombers for two months after the crash.

The crash probably could have been avoided if knowledge of a technique to evaporate the moisture had been disseminated throughout the B-2 program, Maj. Gen. Floyd L. Carpenter, who headed an accident investigation board, said Thursday.

Carpenter said the pilots and crew followed procedures and "the aircraft actually performed as it was designed. In other words, all the systems were functioning normally."

However, a technique learned by some two years ago that had gone widely unknown and unadopted probably would have prevented the crash, Carpenter said. The technique essentially heats the sensors and evaporates any moisture before data calibrations.

"This technique was never formalized in a technical order change or captured in 'lessons learned' reports. Hence, only some pilots and some maintenance technicians knew of the suggestion," according to Carpenter's executive summary of the accident.

The report said, "The human factor of communicating critical information was a contributing factor to this mishap."

Enough said.

Productivity: Eliminate Before You Optimize

I've long been a fan of Tim Ferriss and his best-selling book The Four Hour Work Week.  The book describes several methods to minimize and optimize life activities in order to create free time, although sometimes you have to deal with some ego-centric stories to get at the meat.  I've implemented some of his ideas to outsource small projects, refrain from checking email constantly, and live simply... and his concept works.  At least for me.

Today Tim had a fascinating post on his blog comparing his book with David Allen's Getting Things Done.  GTD has become wildly popular in corporate circles as it presumes to improve productivity through better organization, such as with emails.  Although Tim supports many concepts of the rival GTD system, he makes the following comment on GTD's overall philosophy:

Though David refers to desk-based inboxes, tickler files, etc. in certain parts of GTD, the broader concepts are frameworks for proper filtering of inputs (“open loops”) and definition of outputs (“next actions”), regardless of technologies used.

GTD is, however, a bottom-up approach to time management that — used in isolation — can lead to becoming very efficient (doing things well) but decreasingly effective (not doing the right things). Readers on this blog have suggested reading 4HWW [Four Hour Work Week] and 7 Habits prior to implementing GTD. The results and approaches are complementary rather than conflicting, but order is important.

He goes on to reiterate how the fundamental premise of The Four Hour Work Week is to reduce wasteful activities in order free up valuable time.  His final statement is what hit me:

Eliminate before you optimize.

The Four Hour Work Week eliminates wasteful activities.  Getting Things Done optimizes activities.  Sound familiar?

This is analogous to the conflict between lean manufacturing and six sigma.  Actually it's not a conflict; they are complementary philosophies just as Tim claims GTD is complementary to his 4HWW.  But the order of implementation is critical.

Six sigma does a phenomenal job of optimizing processes.  All processes.  If it is implemented prior to lean, there's a good chance that a lot of time will be spent optimizing... wasteful processes.  Which is why lean should be implemented prior to six sigma in order to identify and eliminate wasteful processes.  Then use six sigma to optimize what remains with lean providing oversight to ensure changes add value from the perspective of the customer.

Eliminate before you optimize.  On the factory floor and in your office.

Dell Cookie Dough

A recent article in the Lake Forester, a small newspaper based north of Chicago, was surprisingly accurate with regards to certain core aspects of lean manufacturing.  I'd like to give credit to the author, however there was no by-line.

For 100 years, manufacturing companies adhered to this mass production philosophy. Factories made products in bigger and bigger lot sizes. Workers became more specialized as the manufacturing engineers worked to standardize products to reduce costs and improve manufacturability. Products that ranged from automobiles to pharmaceuticals were manufactured in long production runs and the output was distributed in sophisticated supply lines that were designed to reach the ultimate customer. The distribution systems needed large warehouses to store finished goods while they waited for the customers to buy them.

In spite of the investment in these large plants and warehouses, this philosophy of manufacturing products in large lots began to change in the last 30 years. Pioneers in global manufacturing methods challenged this standardized, assembly line approach.

The author then brings that concept home by... bringing it home.

On a personal level, this idea really hit home recently when my wife and I geared up to make a batch of our chocolate chip cookies for a neighborhood get-together. We assembled the ingredients needed to make all 10 dozen cookies in one giant batch. This included bags of chips, blocks of butter, and several big sacks of flour. Everything was carefully measured into our biggest steel mixing bowl as we manufactured a giant batch of cookie dough.

After the first cookie sheet came out of the oven, we realized something was wrong. The canister of salt got mixed up with the canister of sugar. When we taste tested our first cookie, we found that we had manufactured a huge batch of cookie dough that included three cups of iodized salt rather than three cups of granulated sugar. We had to start over when we recognized the error. As we dumped this big batch of cookie dough, my wife remarked, "Too bad we didn't make only enough dough for the first dozen. We would have caught the error sooner."

He (yes, we can now infer the author is a "he" unless they're in a handful of states) has just done a great job of explaining one of the most counter-intuitive aspects of lean manufacturing: why smaller and smaller lots are more efficient than large lots.  The hidden cost of risk.

The author then gets to his article's primary premise: that Dell is a great example of why small lots work.

Michael Dell built a company on this philosophy of small lot manufacturing. In the process, he taught a world-class manufacturing company like IBM, by example, how to build computers. The idea is simple enough. Instead of making 100,000 identical personal computers on an assembly line and storing them in inventory while they wait for customers, Dell decided to design a system which would make one computer at a time and only make that particular computer when a specific customer ordered it.

And further explains the benefits.

Building computers one at a time means that there is no costly inventory of finished computers waiting for customers in a warehouse somewhere.

Small lot manufacturing also means that quality problems are caught quickly, as it would have been in my salty cookie experience. In a more agile manufacturing system and there is a built in ability to improve the system and lower costs on the fly.

Essential elements of such well known systems as the Toyota Production Process, Six Sigma Manufacturing, Cellular Manufacturing, and Lean Manufacturing are based on small lot, build to order systems. The customers see better quality, lower costs, and more responsive tailored products that are available more quickly.

Ah, but alas.  Dell missed the one critical aspect of lean: respect for people.  Without the people side of lean, they could not evolve rapidly.  By not evolving, they eventually found themselves in an unfavorable cost position compared to their competitors.  Without understanding that second pillar of lean, their cost reduction efforts are focusing on closing plants and shedding people, and even outsourcing manufacturing.  Why is why last month we took Dell to task.

Let's dispel once and for all the hubris that "Dell practically invented lean manufacturing."  Nothing could be further from the truth... both in terms of what company invented lean and in Dell being lean to begin with.  But without the core competency of supply chain management (note I did not say "manufacturing") that Dell did excel at, what is Dell?

Indeed.  Which could explained why I now drive a Mac.

TPS in Semiconductors

The semiconductor industry boasts of building the most complex products on the planet. If you have never toured a facility you may be interested in viewing this video. The investment to build a new facility with the latest technology costs several billion dollars. Clayton M. Christensen, Steven King, Matt Verlinden, and Woodward Yang describe the environment:

Walk into a multibillion-dollar chip-fabrication plant—a fab—and you may very well get the impression that the industry is headed for a spectacular meltdown. One of the first things you'll see is a bay the size of two basketball courts packed with equipment for projecting a lithographic design onto wafers. Nearby, you'll find a towering bin, called a stocker, filled with wafers waiting to be processed by this equipment. The wafers are worth from US $10 million to $100 million—all of it idle inventory.

If you are a regular on this blog, pick your jaw off the floor and continue reading about why this inventory buildup occurs:

To amortize the $5 billion investment in a fab over a five-year schedule costs more than $3 million a day. Conventional wisdom holds that to generate that much money you must keep all the equipment running all the time, even if that means creating large unused queues of wafers. What's more, to justify that scale, you have to produce a semiconductor product in volumes of at least 5000 to 10 000 wafers per month.

Anyone that has worked in a facility with high equipment costs has heard this argument from the cost accountants. But read on to see how Lean impacted this organization:

In just seven months, the organization was able to reduce the manufacturing cost per wafer by 12 percent and the cycle time—the time it takes to turn a blank silicon wafer into a finished wafer, full of logic chips—by 67 percent. It did all this without investing in new equipment or changing the product design or technical specifications.

That’s what we’re used to hearing when people talk about Lean. That means cheaper electronics for you and higher stock prices for those of us invested in the semis.

This article describes the Lean philosophy that was followed by the consultants. It should look familiar if you have ever read the article by Spears and Bowen entitled The DNA of the Toyota Production System.

Spear and Bowen distilled TPS into four rules, which in summary are (1) highly specify activities, (2) clearly define the transfer of material and information, (3) keep the pathway for every product and service simple and direct, and (4) detect and solve problems where and when they happen, using the scientific method.

Read the article.  There are several other salient points that might interest you. I’ll try to blog about a few of them and share additional insights into what Lean looks like in the semiconductor industry.

Ghost Kanban

An interview earlier today caught my eye, then churned my stomach.  Steven Brostek, director of production operations for Chrysler's Belvidere facility, discussed their materials initiatives with Bob Treblicock of Modern Materials Handling magazine.  Here's the exchange that roiled my burrito:

Modern: Since you're now using an integrated logistics center away from the plant to organize and deliver parts, did you significantly reduce storage at the plant?

Brostek: Yes, we did. We used to keep two days worth of parts at the plant. That meant maybe 500,000 square feet of storage space. In addition, we had a bullpen of 85 to 140 trailers full of parts waiting to be unloaded in the yard. Now, we keep about 2 hours worth of parts at the line. All of that storage space is devoted to manufacturing.

So let me get this straight... storage at the plant was reduced by about 500,000 square feet and a "bullpen" by moving all that stuff to an "integrated storage center" away from the plant.  Now only two hours of parts are kept on the line.  Woo hoo!  Really?

Minimizing inventory is obviously a core attribute of lean manufacturing.  As is point-of-use inventory.  Presumably not all of that monstrous amount of inventory was on the line, and was probably in an attached warehouse.  Now the warehouse (ok, ok... "integrated logistics center") is somewhere "away from the plant."  Has system inventory really been reduced by even a penny?  Or did they just add one more transportation leg to the supply chain equation?

Many of us have witnessed this at the Detroit Three auto factories, but primarily driven by suppliers who were being driven hard by the auto companies to "do kanban."  Did they reduce inventory?  Did they implement kanban signals back to the first, second and third tier supplier factories?  Nope.  In most cases they just pushed guesstimated production into semi after semi.  When the "kanban signal" came in they just drove one over to the auto factory.

A buddy of mine had a term for this nonsense: "ghost kanban."  You may think it's kanban, but it's really just an apparition.