Think Outside the Bottleneck, Part I

If you’re considering launching Continuous Improvement with a pilot project, you may be wondering where to begin. How do you know which project, of many possibilities, to choose? Most people would advise you to start at the bottleneck. While I agree that the bottleneck needs to be fixed, I don’t recommend starting there because the real cause of the bottleneck may lie elsewhere in your operations.

The Pacing Step

I suggest you begin with what’s called the pacing step. This is the last step before the product or service is delivered to the customer. All difficulties upstream will typically show up here, regardless of where in the stream the bottleneck occurs.

How it Works

Here’s an example. A client of mine, a company that does a lot of metal work, was certain that their bottleneck was the welders. In fact, they’d known for years that the welding cell was the bottleneck, and they weren’t sure they could ever change it.

The condition they wanted to shift was one of on-time quality. The pacing step in this situation was one assembler right before shipping. When we arrived at his department we found an array of parts laid out on the floor. When we asked if he was getting ready to ship, he replied that he couldn’t because there were parts missing, and when that happens he would typically go and do something else until the parts show up.

So here we have the waste of inventory of the parts lying on the floor, the waste of unused space, wasted time stepping over the parts, potential damage from lift trucks rolling by, and the list goes on. In fact, all the eight wastes of Lean were beautifully presented in this one situation.

In my next post I’ll explain how we found the real cause of the problem. It wasn’t where we thought it would be…

© 2012 – Rick Pay – All Rights Reserved

Cause and Effect in the Supply Chain

With floods in Thailand disrupting auto manufacturers and hard-disk drive producers, supply chain interruption is again making news. After the earthquakes and tsunami in Japan in March, Just in Time (JIT) was impugned in the press. Let’s take a look at what JIT really is, and why it is still a viable approach.

JIT is not just an inventory program, it is a waste reduction methodology. When the Toyota production team coined the term JIT they were looking for ways to eliminate waste, and one way was to minimize inventory. This brings us to cause and effect.

The following diagram was created by Alan Weiss, and shows past/future and cause/effect. I’ve added examples of what this would look like when we apply it to supply chain management. Smart companies stay in the “preventive” quadrant to address root causes or potential supply chain interruptions and prevent them from happening in the first place.

Let’s say we’re looking at mitigating the risk of fire. To prevent a fire from occurring, we could have the fire marshal come in for an inspection, remove flammable materials, or put up no-smoking signs. Contingency plans are important, but ideally we want to prevent the fire.

In the case of stock outs, we could address past problems by switching freight methods or changing suppliers, but ideally we want to set the stage for future success, and one way of doing that is by building sound supplier partnerships.

© 2011 – Rick Pay – All Rights Reserved

Do You Need Kaizen Events to Make Improvements?

Many Lean practitioners seem to take the position that the way you do process improvement is through Kaizen Events. In a Kaizen Event (sometimes known as a Kaizen Blitz) a team of people focus on a given work area or problem, and they develop and implement improvements. While these events can take from a half day to a full week or more, the definition of the event put forth in “The Kaizen Blitz” (AME – 1999) suggests that three days is best. This is not incremental improvement; it suggests significant improvement over a short period of time.

But do you need to wait for a Kaizen Event to make improvements? NO! I was talking to a manufacturing executive the other day that has many small activities going on all at the same time (he won’t even refer to it as Lean) that resulted in about a 7% annual cost reduction/profit improvement on total sales! He believes that continuous improvement by itself empowers people in operations to make many improvements which over time, add up to big numbers. Some of the improvements might take only minutes to identify, plan, do, check and adjust. Others may take hours, days or even weeks depending on the scope. His thought is – don’t limit people to an event to make improvements. Empower them to make them continuously and it becomes part of the culture.

© 2010 – Rick Pay – All Rights Reserved

Is Lean Losing Its Fizz?

It is interesting how things come in threes.  Just this last week, I have spoken to three heads of Operations about their Lean journey, and all three noted that it seemed to be going flat.  In most cases, they had been on the road to Lean for over two years, but due to various circumstances, the improvement from Lean was declining and the enthusiasm on the part of the employees had almost disappeared.  In one case, he rejuvenated the process, but that is another story.

In January there was an article in the Wall Street Journal that suggested that 60% of companies that tried process-improvement initiatives failed to achieve desired results.  Another article about the same time suggested that after five years, 70% of companies polled were no better off than when they started.

A few questions to ask yourself:

  1. Has your organization achieved real gains beyond the initial low hanging fruit of process improvement?
  2. Have those improvements been sustained over the longer term?
  3. Is your organization still enthused about Lean or other process improvement initiatives?

If the answer to any of the above is no, you are probably headed to the same result as the 60% of companies cited above.  It’s time to take action to be sure your improvement initiatives yield the highest result and are sustainable.

To find out more, visit my website and look under the Industry Resources section.

© 2010 – Rick Pay – All Rights Reserved

Do High Inventory Turns Lead to Low Service?

An article in the April 26, 2010 issue of Bloomberg Businessweek (formerly just Businessweek) discusses how John Deere customers are unhappy with Deere’s ability to ship more quickly and meet customer demand. It seems that Deere, one of the leading farm equipment producers in the world, responded to the recession, in part, by improving its inventory turns to 12.3% of sales (8.1 turns). The article infers that such high turns (among the highest in the industry!) are reason to believe Deere cannot service their customers on time. Many of its distributors are complaining that they cannot get the equipment they need to meet orders. It seems the “inventory squeeze” thus caused bad feelings with their customers and led many to seek out competitors.

Well, I guess this suggests you cannot sell out of an empty wagon, even if it is a John Deere wagon! I say, hog wash (pun intended)! Having high inventory turns has little to do with weak service levels. All one has to do is look at Dell with over 100 turns and a shipping lead time of about 7 days to know that there are other reasons that service levels are low, such as poor planning, weak supply chains and waste in production just to name a few. I have a client that went from 6 turns to over 11 in just six months while reducing their order lead-time from over 90 days to below 30 and significantly improving their shipped on time. If you are having service level issues, look in the right places. Inventory is only one area to “till” for possibilities.

Know Parkinson’s Law to Reduce Waste

Parkinson’s Law – work expands so as to fill the time available for its completion, first appeared in 1955 in an article in The Economist. This law applies to almost every manufacturing and distribution company I have toured. If times are slow, people seem to be working just as hard as if times are busy. They can be masters at this to help save their jobs.

I have also seen the law apply to inventory. Just the other day I was touring a plant and there were gas bottles in a rack. The rack was filled by the supplier and the key word is filled. The rack was big enough to hold about 15 bottles, yet the usage was about one per week. Thus, when filled, there was 15 weeks’ worth of bottles. The supplier visited the plant weekly to resupply various items. Why should the company buy so much when two, maybe three would do? Clearly, being careful to size storage containers correctly can contribute greatly to inventory reduction and matching of expense to activity.

Watching for Parkinson’s Law in any company should help reduce waste and increase profitability.

© 2010 – Rick Pay – All Rights Reserved