I am the president and owner of Prannt PLC, a maker of programmable logic controllers used in industrial machinery and integrated assembly lines. About one year ago, my plant was profitably serving more than 200 customers across the globe and expecting revenue growth of 5% to 10%. We were a decent manufacturer, but we needed a way to be more productive and get more from our people and plant.
So the plant manager and a team of department managers delved into lean manufacturing — they read books and workbooks, attended conferences and workshops, played various lean simulation games, and brought in a few gurus to look around. They were convinced — and they convinced me — that the plant could improve significantly if we began mapping our value streams, pulling work through the plant from the customer back, and working in small lots with highly organized systems to move these components and materials around the plant.
It’s been more than six months since we’ve transitioned our plant over to lean value-stream management, and things look great: 5S housekeeping has cleaned up all areas and makes the place shine; piles of inventory that used to crowd the plant have been reduced and moved into supermarkets; highways are marked everywhere through the plant and material handlers whip back and forth through the colorful grid; visual displays show all our daily goals and outputs; and everybody seems so much more organized.
Looks however are somewhat deceiving. Our operational and business results are no better than before:
- With less inventory on the floor in finished goods and WIP we are having a harder time shipping product on time to the customer.
- Any sort of equipment downtime ripples back through plant, like a domino toppling over production schedules in all departments. The same is true for quality problems as well.
- Operators have been given the power to stop the line, which they do frequently instead of figuring out how to fix anything.
- All performance measures — quality, delivery, customer satisfaction — are now down, and, even with the reduced inventories, per-unit manufacturing costs have not improved and are slightly worse. How can that be?
The bottom line is that profitability is down, customers are leaving, and I haven’t seen an inch of freed-up capacity; sadly, we don’t need capacity now. What can I do, including tossing out this lean mumbo jumbo, before the whole company goes in the tank?
By Art Smalley
This description is unfortunately a pattern I hear and see all too often these days. Without actual data or observation it is difficult to assess the situation properly, but I can offer some general insights from similar cases I have witnessed. There could of course be significant financial factors or leadership issues involved here as well, but I will focus in on the more typical operational topics I tend to observe.
Companies in the U.S. and other parts of the world have done a wonderful job in many cases of using the concepts of lean manufacturing and other methodologies to make improvements. Often, however, some companies struggle or even fail to improve when you examine the details more closely. Companies are quick to show off their lean model line areas or their best six-sigma projects, for example. However, when I ask to see a five-year trend chart showing overall metrics relating to cost, quality, delivery, productivity, safety, etc., I often get a blank stare. If and when produced it usually shows little or no improvement trend at all. There is often just a lot of nice window dressing to show on the plant floor.
The Toyota Production System (TPS) was born out of necessity in the engine and transmission machine shops of Toyota Motor Company under the direction of Eiji Toyoda and more specifically his production manager Taiichi Ohno. It was driven by a dire need to improve in multiple dimensions after a financial crisis nearly bankrupted the company in 1951. After 2,146 employees (roughly one-third of the company) were let go in a restructuring effort, improvement efforts become very serious. The goals in manufacturing were simply to make the highest possible quality at the lowest possible cost in the shortest lead-time. Some luck was also involved as orders for trucks from the U.S. military during the Korean War helped keep the company afloat while improvements were made. Two decades of hard work evolved into what was eventually called the Toyota Production System. The first handbook summarizing some of the TPS concepts was drafted internally around 1973 into an 80-page manual. The Western world has been learning about it piece by piece and tool by tool ever since.
A frequent issue I observe when I visit a company struggling to improve is similar to the old “hammer and the nail” syndrome. Companies and individuals are excellent at grasping onto a tool (fill in the blank with value-stream mapping, standardized work, 5S, kanban, kaizen workshops, etc.) and using it everywhere since, of course, it is a good tool. Sometimes it works and sometimes, as in your case, it doesn’t produce results. The inherent problem to this approach is that often the main problems are never well-defined up front and thus ignored. Toyota’s leadership, by way of contrast, knew exactly what its main problems were particularly with respect to cost, quality, and productivity back in the early 1950s. They set out to solve those problems and along the way developed specific tools (i.e., the aforementioned items and others) that would help them. In the West we tend to reverse this process by using tools and assuming that it will solve our problems.
Driving improvements in lean or TPS involves both “art” and “science.” The artful part of the equation is the leadership ability to motivate people and focus finite resources on the right set of problems to fix. Prannt PLC may have disproportionately worked on a lot of flow- and inventory-related issues, for example, but failed to address other underlying problems such as equipment downtime, process capability, productivity, and supervisor skill sets. The result would then be improvements in some areas but not in other perhaps more critical dimensions. In other words, you may have worked on the wrong end of the Pareto chart of opportunities.
We can debate about what tools or approach to use in lean efforts, and I personally am pretty ambivalent on the whole topic. Tool-centric approaches, as I have cautioned, are a double-edged sword. They give people something to do quickly but there is no guarantee that is it is the right thing or most urgent task to accomplish for the business. In the end you have to produce measurable results for the company and the customer in order to survive and flourish. When this does not happen it is management’s responsibility to stop and reflect and ask “Why?” and figure out the proper next steps. This of course is nothing more than a derivative of the scientific method of thinking and the “Check” part of the PDCA cycle that Toyota embraced in the 1960s. This organizational ability is still one of the keys to long-term success in any organization even today.
In your case at Prannt PLC, go back and start at the beginning. Identify the main problems in manufacturing (for example) and sort them into categories. Compare these problems to the action items of the past efforts, and I’m sure you will see some large gaps in areas — otherwise you would have seen more progress. At the management level the overall practice and system of PDCA management needs to be established. Set the overall plans in place, make sure action items are linked to problems and the identified root causes, check if the actions are making a difference, and then act accordingly. At the employee level, this means rigorous application of problem solving in conjunction with the principle of TPS or lean. As obvious or peculiar as this may sound, the early days of TPS in Toyota were much more like this than the extensive mapping and workshop activities I often see in companies today.
Art Smalley is President of Art of Lean, Inc. and maintains a website that is a resource for lean practitioners (www.artoflean.com). He also is the author of Creating Level Pull (Lean Enterprise Institute, 2005), which received a Shingo Prize in 2005. Art was one of the first foreigners made an employee of the Toyota Motor Corporation in Japan and played a number of prominent roles in production operations throughout Toyota. He subsequently served as Director of Lean Production Operations at Donnelly Corp. in the U.S., and later worked as a consultant with McKinsey & Company. He also is a senior faculty member of the Lean Enterprise Institute. Art can be reached at artsmalley@artoflean.com.
By Thomas K. Wright
It’s as tough — and dangerous — to diagnose and prescribe based on a few reported symptoms in a manufacturing context as in medicine. But it’s our job, so we’ll try. Not having been involved in the lean implementation at Prannt, one doesn’t know how deeply into their culture lean has been accepted, but there are several — and we hope not too obvious — observations to be made.
First, you’re only six months in. While we’d certainly like to see improvements that are apparent to all, lean is a journey. Keep in mind Taiichi Ohno’s analogy of lowering the water and exposing rocks; Prannt has now clearly found a number of them. Rather than raise the water back up, let’s blast the rocks.
- It would appear the production process has not been balanced to match the takt time of demand. Less inventory should adversely impact customer shipment performance only if manufacturing is not building to pull, either actual order or a stable forecast. What are Prannt’s demand-management processes, and how accurate is demand forecast?
- Any lean system must buffer for variability. An enterprise cannot be lean until sources of variability — quality and machine availability — have been addressed. If buffers — whether inventory, time, or capacity — are removed before the variation has been addressed, bad results are inevitable. Has Prannt considered utilizing six sigma in conjunction with lean?
- If an operation is producing bad product that cannot be corrected within takt time, the line should be stopped. Instantiating a culture of responsibility to match empowerment is a key to lean success, and is the toughest challenge in many lean implementations. Clearly it is an issue here, and provides an opportunity to further train and involve associates on the line. This issue is likely related to the comments on quality and machine downtime. Of course, stopping a line should not be without consequences; each instance is an opportunity to drill to root cause and effect either change in the process or the operator’s training and rewards.
- The last observation is the toughest to comment on without detail. Again, noting common causes here, successfully implementing lean often involves rethinking performance metrics. One simple example: removing piles of inventory, which have absorbed burden in a traditional standard-cost model, will flush dollars from a balance sheet asset to an expense and can show a short-term degradation in financial performance. Similarly, traditional models can show per-unit costs up as volume is reduced to only what is necessary.
- Quality, too, is not as simple as it might seem. Is Prannt measuring first-pass yield? Defects per million/defects per million opportunities? Are you now catching quality defects in house that previously made it to customers?
We won’t dispute that Prannt’s implementation of lean appears to have caused operational difficulties. But now is not the time to throw the baby out with the bath, rather, let’s have a look at the rocks uncovered, address the issues, and continue the journey. Keep the faith!
Thomas K. Wright is an Industry Principal, Automotive, SAP Americas (www.sapmanufacturing.com). Tom can be reached at t.wright@sap.com.
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