The Perfect Engine: Driving Manufacturing Breakthroughs with the Global Production Systemby Anand Sharma, Patricia E. Moody, Lloyd Ward
Most manufacturing companies with batch-and-queue "push" production systems have been blindsided by today's consumer who expects quality products and services delivered on demand and customized to individual taste. In The Perfect Engine, manufacturing experts Anand Sharma and Patricia E. Moody describe for the first time how leading "pull" production/i>
Most manufacturing companies with batch-and-queue "push" production systems have been blindsided by today's consumer who expects quality products and services delivered on demand and customized to individual taste. In The Perfect Engine, manufacturing experts Anand Sharma and Patricia E. Moody describe for the first time how leading "pull" production pioneers build to order by reducing inventory, decreasing cycle time, minimizing floor space, and eliminating waste.
Drawing on scores of examples and detailed case studies of three leaders in the demand economy field Maytag, Pella, and Mercedes-Benz Sharma and Moody demonstrate how these companies achieved astonishing results using the pathbreaking LeanSigmaSM Transformation. Combining lean production and quality elements from the famous Six Sigma process, LeanSigma produces annual productivity gains of 15 percent to 20 percent. In addition, the authors show, inventory turns more than quadruple; cycle times drop by more than 70 percent; and floor space reductions of 30 percent to 50 percent are not uncommon. Sharma and Moody provide immensely readable explanations of key technical aspects of the processfor example, how cell-based one-piece flow can replace batch-and-queue with dramatically improved lead times and inventory turnover. A chapter on a revolutionary design technique the authors call Design for LeanSigma or 3P (product and production preparation) shows how to build flexibility into the product design and the production systems at very low risk, which will be especially helpful when forecasts and customer orders deviate from original projections, as they usually do. Further, the Designfor LeanSigma method is devised to produce profitability at short-term volume projections, which makes it a perfect tool for the new demand economy. Essential, timely, and important, The Perfect Engine is perfect reading for this new manufacturing era.
- Free Press
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- 6.12(w) x 9.25(h) x 1.00(d)
Read an Excerpt
Chapter 1: A Better Way
Stepping into the huge kitchen cabinet assembly plant, you are assaulted by the sights, sounds, smells, and by-products of a very busy operation. There is a thick haze of sawdust in the air and on the floor. Mile-high racks of parts storage hold an accumulation of dusty laminated doors and trim pieces. A fleet of fork trucks race down the aisles, moving empty bins and depositing fresh crates of piece parts in open areas that become acres of in-process inventory storage.
Your eyes, stung by paint and glue fumes, burn, and you start to sniffle and sneeze as the vapors and dust settle in on your clothing. Tiny bits of particulate matter float by.
At shift change, operators blow the sawdust off their equipment with air hoses; the material makes fine grit underfoot until hours later, when a sweeper comes by to stir up new piles of sawdust and pieces of laminate. He works his way through the plant, pushing and piling mountains of accumulated trimmings -- evidence of yesterday's, and last week's, and last month's endless attempt to make schedule. Please customers. Fill trucks. Get paid.
Out at the shipping dock, trucks appear hourly to unload heavy sheets of plywood and laminate. Suppliers hustle boxes of hardware and drawer fixtures while shipping clerks, overwhelmed with the press of paperwork and fork trucks and upstream demands for more raw material, move from one disconnected operation to another.
On the floor, fork trucks rush pallets of raw material to cutting machines; the big saws' high whine makes it impossible to understand operators' shouted explanations of their process. Everything about this plant is busier,noisier, dirtier, and heavier than what one would expect from a twenty-first-century North American manufacturing giant.
This particular building houses final assembly for a high-volume producer of premium wood cabinetry. It's a complex operation and, with a booming construction economy fueling strong demand, every day is an opportunity.
The best way to understand the scope and rhythm of any facility is to follow one complete product from receipt of raw material down to various processing steps, into final assembly, packaging, and the shipping dock. This plant, however, presents a special challenge because its multiple subassembly and processing departments feed huge variety to the final assembly lines. It is possible to walk through key subassembly areas that feed the final assembly line, and each one of them is an eye-opener.
Down on the white door line a team is tackling one gigantic lamination machine that seems to stall out once per shift. The work stoppage ripples outward and causes immediate downstream disruption as four expeditors from final assembly converge on a lone table saw operator. Larry is a six-year veteran of endless rush orders, expedites, and firefighting. The expeditors are impatient and they wave scraps of paper bearing endless parts shortage lists in his face -- "line's down," "gotta have it," "can't find it," "big customer," and "won't wait" punctuate their demands.
Confronted with four orders for hot shortages, Larry silently moves to his small work cell and begins, one by one, to cut parts. There's a quiet determination about him that belies the hopelessness of his task. Every day, Larry's work routine becomes a long series of interrupted and equally frantic calls for help from downstream assembly workers who cannot keep their lines running, who must pull incomplete cabinets off to the side while they wait for missing pieces.
In fact, what was designed to be a smooth line-of-sight assembly has been transformed by a nightmare process filled with missing doors and damaged trim pieces into a line interrupted, a broken series of incomplete customer orders. Everything waits; nothing flows. And yet, final assembly is where all the sins, all the missed deliveries and quality issues and design problems make their very visible appearance. While operators can still be expected to work the occasional miracle, they simply cannot run lines with no parts. Henry Ford knew this, countless appliance and electronics and computer factories proved this, and certainly the competitors know this.
It's every operations manager's nightmare, every customer's frustration, and Larry's problem. But this hurry-up-and-wait way of running manufacturing is not atypical -- thousands of factories across the world struggle from day to day with the same uneven pace, the same horrific ergonomics and the same frustrated customers.
Throughout the plant there are other signs of a bad operation -- an imbalance of huge computer-controlled machines played off against highly used, small, manually operated equipment. Long lines are broken by accumulations of mismatched parts, operators working to keep up a desperate pace, and workers who wander from one operation to another. At the end of the day they return home not knowing exactly what they have produced, or how they may have accomplished some vital piece of the company's mission.
For years customers have ordered semicustom products -- oak, maple, or birch cabinets of any size or height configuration -- for promised delivery within six to eight weeks. A few orders make the quoted lead times, most don't. Marketing has learned the danger of exact promises and production doesn't know the difference.
Recently, Custom Kitchen Cabinets, Inc., has encountered strong competition from lean producers who quote two-week deliveries on most items. Management would like to improve lead times and continue to grow volumes -- but the usual fixes, such as overtime, more operators, the addition of seven high-speed cutting machines, are not working.
It doesn't have to be this way. After 150 years of integrating various manufacturing processes into smooth flows that balance associates with process and materials, lean producers are proving every day that there is a better way.
Why Become Lean?
- Customer-centric focus
- Quality product and service
- Increased responsiveness
- Employee empowerment
- Intense competition
- Focus on waste elimination
- Action and results orientation
Lean and Beyond
What Custom Cabinets wants to do -- make money and grow the business -- is what every manufacturer in every industry wants. Despite all marketing and strategic plans, however, Custom is prevented by its own broken and flawed manufacturing processes from accomplishing anything greater than simply making payroll. Bad manufacturing simply won't support good growth and profits.
A map of Custom's main assembly process shows a dangerous mix of batch-and-queue or "push" production. They have a heavy dependence on large, automated equipment and spaghetti-like flows that frequently circle and loop back on each other. With such flows, line-of-sight manufacturing is an impossibility.
Feed the Machine
Further, Custom is drowning in piles of work-in-process and raw material inventory. With so much cash tied up in inventory and storage and handling systems, it will be difficult for Custom to refocus on new products or faster deliveries, especially when the market takes a cyclic downturn. E-commerce will produce a predictable back-room response for Custom. Even as customers go online to place their orders, Custom's stressed manufacturing system will run faster and faster to meet nanosecond waves of demand with nineteenth-century methods. It simply won't work.
Batch-and-queue production is inefficient and expensive. Lean manufacturing, especially comprehensive systems like the LeanSigma Transformation, offers producers the opportunity to work smarter with fewer associates, less material, and lower costs. Moving to pull systems such as this -- with cellular production, single-piece flow, and repeatable, consistent quality -- requires management determination and leadership, as well as visible support.
The Era of Good Manufacturing
Incredible results from elegant, lean manufacturing processes continue to carry the pioneers -- like Wiremold, Lantech, Pella, Maytag, Mercedes-Benz, and Vermeer -- into new areas of opportunity. These companies are the early adopters whose management saw and immediately understood the potential from adopting lean production and design methods.
Over fourteen years after the first North American implementations, these companies use kaizen breakthrough methodology and LeanSigma Transformation to create manufacturing process innovation. They have designed and implemented brilliant but simple information systems to control and track costs, to integrate with the extended enterprise.
Lantech has drawn on the wisdom of kaizen to redesign its design process. Hartford, Connecticut's Wiremold has acquired a dozen smaller producers with its freed-up cash flows. And Pella Corporation, once a small, perfect player in a large market, has transformed its manufacturing capabilities to take the lead in a growing market. In merely six years Pella has more than doubled its sales in a relatively slow growth industry while, at the same time, increasing its profitability by 250 percent, without any infusion of additional capital or resorting to layoffs. Mercedes Truck Operations in Brazil, in the heart of traditional automotive pressures, has demonstrated that manufacturing process excellence is cross-cultural. Maytag is building an innovation machine to compete with Third World labor rates and mass production methods. Vermeer is not only improving its existing manufacturing, it is using LeanSigma concepts to design and develop new machines and new products.
For some CEOs, tackling internal processes such as manufacturing, engineering and marketing may not be hot on their list of favorite activities. Manufacturing is especially unappealing because factories are usually dirty, noisy, even dangerous places. But production is where wealth is created and where customers are captured and retained. With flawed processes, marketing may make the call and close the deal, but without deliveries of high-quality, value-priced product, the customer will be disappointed and sales will dwindle. The challenge is not terribly complex or expensive. Simply put, lean processes can be a big step because of the push systems and heavy assembly line-type flows that are already in place. Moving to a very different and simple system requires parting with tradition and one's comfort zone and going through the pain of change, and it is the most difficult challenge for management. Essentially, most manufacturers must tear down processes that have worked, although not well, before they can build back up, the right way.
Manufacturing in a Changing World
While the 1950s and 1960s may be known as decades of stability and growth, the 1980s and 1990s launched huge shifts for business. Marketing, information systems, and workforce management saw enormous shifts in the philosophy of management, as well as the preferred methods of expanding markets and capturing customers. The possibilities seemed endless if factories could just make enough "stuff."
What began as an exploration into better ways to control electronic processes at Bell Labs in New Jersey blossomed into a whole new focus on basic production processes. Manufacturing became an area of interest, but it was not yet seen as a revenue generator. It was more a cost center line item, or at least a barrier to unlimited market and profit growth.
While manufacturing was just beginning to see the way to more customer responsiveness, MBA classes still taught classic marketing and strategic push planning. The schools churned out executives who well understood how to tempt and push a market until consumers were ready to buy, and willing to wait. Mass media draws like TV ads and even print media were guaranteed investments that would lead consumers, even create a market. How wonderfully predictable and safe this approach proved for so many years to so many companies -- giants like Procter and Gamble, the cereal producers, General Motors, and even IBM.
Shifting Consumer Behavior
Manufacturing in a changing market means that the older triggers of newly created consumer demand don't always work, and don't quite buy producers the longer lead times and predictable responses that they had grown accustomed to. Consumer behavior shifts and is as unpredictable as a teenager's fashion sense.
Each new vehicle or entertainment or personal communications device is loaded with as many technology devices as the computer industry can cram into products. With the month-long life cycle of most high-tech technology products, it is inevitable that bigger consumer products -- like cars and trucks, and even lawn mowers -- will undergo life cycle growth and decline that parallels the electronic industries'. Here today, junk tomorrow. There is no way that manufacturers operating at "ordinary" or "traditional" human design and production speeds can "push" into such markets, or even successfully follow and respond to monthly product redesign swings.
New, New, New
Whenever new technologies create new markets, the dominant players' competitive game ups the ante for all the other players. Success draws success, and new levels of furious competition inevitably raise anxiety levels, even for companies that believe they are somewhat protected by patent and trademark laws. Hewlett-Packard's first hand-held calculators were high-end, beautifully designed, but expensive devices. As soon as backwards data entry became passé, however, dozens of competitors rushed in with cheaper devices. Prices dropped from close to one thousand dollars for the first machines to well under fifty dollars in about ten years, with incredible lessons about the power of improved manufacturing methods and costs.
Excellence Is Achievable
We have the answer for many production questions and we think producers already, unknowingly, have the means to become more flexible and responsive, to satisfy a consumer's shifting demands. And fortunately for CEOs, good models of lean production such as the Lantech and Wiremold success stories mentioned above exist now on every continent. There are wonderful lean auto assembly plants in Brazil and Turkey, home appliance manufacturers in Mexico and China, camera producers in Scotland, and dozens of smaller, agile producers at second- and third-tier levels supplying automotive, electronics, and aircraft industries.
Here's an example that highlights the difference between mass production and lean production:
A pen is an assembly of about a dozen metal and plastic components and one subassembly. To build a single red pen using old-fashioned, mass production methods, many big pieces of equipment and a series of human assemblers would be brought together to produce huge batches of shells, cartridges, and clip subassemblies. The entire production process might take two dozen process steps, from cutting, shaping, and painting raw metal to inserting a cartridge supplied by an outside supplier, testing the pen, and wrapping it for shipment with thousands of others.
Typically, if a customer wanted to order one dozen red ink pens and two dozen black ones, he might not expect to receive the completed order for several days or weeks unless it happens to be available from inventory.
The production sequence of operations, following raw material cutting, would include running large batches of individual components through various operations, to eventually meet at final assembly. On the way these component batches move several times back to material storage areas, where they get counted and recounted and wait to be moved again. At every process step, actual batch quantities change due to quality problems -- a typical batch-and-queue process.
Actual value adding time, from material cutting, machining, painting, assembling, and packaging, is only a few minutes. But with a batch-and-queue setup, the complete process takes an undetermined amount of time. Nevertheless, eventually, the customer will accumulate the pieces of his original order for one dozen red and two dozen black pens.
Cell-Based Lean Production
Lean production methods, on the other hand, are rooted in simple flow production based on actual demand. Everyone in the operation, and especially the customer, understands what will ship and when, because the entire process is laid out and run to be visible. Machines and operators work to meet the customer's pull signal; cells bring people and material so close together it is possible to change configurations very quickly, and to identify and fix problems equally well.
The pen cell runs with fewer operators and has no automated conveyors or warehousing systems -- capital investment and automation are kept appropriately under control. One dozen red and two dozen black pens are produced in minutes, and in sequence, packed and shipped.
Which approach is more manageable? The flow cell.
Which approach allows easy expansion? The flow cell Which approach produces higher quality with less waste? The flow cell.
And which approach is the right basis for e-commerce applications to tie production rates to Web-based demand-pull? The flow cell, of course.
As powerful as cell-based production is, it is only a small part of the transformation an enterprise must realize before becoming a perfect engine. Cell-based manufacturing is no more than an exercise in furniture-moving unless you have a change in culture, dedicated leadership, and commitment to customer responsiveness.
This culture of customer responsiveness is a core tenet of the lean philosophy. And we have taken the philosophy one step further, to LeanSigma. As a company progresses on the lean journey, and after having reaped the low-hanging fruit, intuitive improvements become difficult. This is when companies require more advanced statistical tools to root out abnormalities in processing systems. For this reason, we have added some of the sophisticated tools of Six Sigma. When Six Sigma tools are combined with the lean sense of urgency -- giving birth to LeanSigma -- the results take an enterprise from its most basic beginnings to truly advanced levels of improvement. After a decade spent working with hundreds of companies, we knew that a holistic approach was needed to complete a transformation that is both cultural and tactical in nature, enabling an atmosphere where every gain is sustained.
The LeanSigma Transformation
LeanSigma Transformation is how we describe the journey a company takes, from traditional business and manufacturing to one-piece flow and perfect quality. It is an enterprise-wide process to eliminate waste and create a culture based on continuous improvement and consistent measurements.
The LeanSigma Transformation takes a company from an intuitive level -- in which trained operators and engineers can begin to see and fix issues -- to the more complex. At the higher level, where issues are not obvious to the casual observer, we use statistical tools to uncover abnormalities. The journey can take an entire enterprise from the first steps to the most advanced -- from an initial kaizen creating the first working cell, to deploying LeanSigma black belts to discover the causal effects of raw materials and processing on finished quality. Each level of transformation takes place in a cross-functional team environment, fueled by kaizen breakthroughs, with collaboration and data collection and analysis driving cultural change.
An integrated physical and cultural transformation can yield amazing results. Our experience has shown that companies that have done this with diligence and strong leadership can realize 15 to 20 percent growth in sales and earnings, year after year, without spending any more capital or deploying other assets. And without layoffs. They have learned to exploit the hidden potential of the entire workforce without the restructuring and layoffs that have become so common.
This is a journey that concentrates the energy of an entire enterprise and focuses efforts to serve customers better, faster, with better-quality products and responsiveness, ultimately leading to gains in market share. This is the core goal of a LeanSigma Transformation: profitable growth that serves all the constituents of an enterprise.
Broken down, there are four publics that all producers serve. There is the customer, who wants quality products with unique value quickly and reliably. There are employees, who need a sense of involvement, a feeling of ownership and greater connectivity to the enterprise. There are value chain partners, who want growth of their own company even while they become part of a synchronized, successful value stream. Finally, there are the shareholders. They want sales growth, profit growth, and reliability.
Too many organizations are driven first to please investors, trying to fulfill their needs with every fluctuation of the market. Or some organizations focus on employees, and so they satisfy internal needs and only listen to each other. This focus is inside out, beginning with internal assumptions that can be like mushrooms growing in the dark.
We say that if we meet the customer's needs first -- in terms of quality, value, and responsiveness -- and we align our employees to help us achieve these goals and help them feel enthusiastic doing it, and we bring along our partners as true partners, then we ensure the long-term profitability and growth of the organization. And we satisfy investors.
Three very profitable and diverse organizations -- Maytag, Mercedes, and Pella -- tell stories of rejuvenated production strength and flexibility. Hundreds of other companies, and their suppliers, employing collectively hundreds of thousands of associates, have experienced the power of the LeanSigma Transformation:
Quoted lead time reduction from 12 weeks down to 2 Annual productivity increase 17%
Annual sales growth 20%
Annual profitability growth 28%
Wiremold Started transformation in 1991
Quoted lead time reduction from 28 days down to 2 Annual productivity increase 18%
Annual sales growth 33%
Annual profitability growth 75%
Pella Started transformation in 1993
Quoted lead time reduction from 8 weeks down to 1
Annual productivity increase 13%
Annual sales growth 20%
Annual profitability growth 35%
Wiremold increased the worth of the company fifteenfold in nine years, from approximately $50 million in 1991 when its sales were $60 million and profits were slightly more than break-even, to a company that was sold for $77 million in 2000. At Pella, sales have grown two-and-a-half times and the profitability rate has also grown two-and-a-half times as a percent of sales. If Pella were a public company, its valuation would be multiplied five to six times what it was in 1993.
What Pella and Wiremold know is that if a company grows sales without increasing its rate of profitability, net worth growth will be the same as sales growth. However, in both cases, the profitability growth was much higher than the rate of sales growth, resulting in a dramatic growth in the net worth. This is the type of value creation that the LeanSigma Transformation is designed to deliver.
Step by Step
After working more than ten years with large multinationals and small companies alike, we have uncovered a few simple truths. Becoming a better company, and a better enterprise, is not a quick or simple process. And nobody arrives. Like the engineers of the Toyota Production System who assisted TBM in bringing lean principles to Europe and the Americas, we believe that improvement is continuous. LeanSigma is a process that transforms organizations, but LeanSigma does not bring them to a destination. If you stop, after all, you're out of the game.
There is no end to continuous improvement, but LeanSigma Transformations certainly have a beginning. We have found that setting up companies for success is just as important as giving them the right tools. That's why we discourage a batch-and-queue company from starting its quality-focused programs, for instance, with the statistical analysis tools of Six Sigma. Those tools are not truly effective until engineers and executives can clearly see and understand their own processes.
Kaizen Breakthrough: Change for the Better
All waste reduction and flow activities are centered on kaizen events. In the beginning kaizen events typically last a week, although the more advanced companies employ shorter, more directed "point kaizens" to attack flow issues. What is important in this case is the team. For each kaizen a cross-functional team of operators, engineers, and business office associates, suppliers, and, sometimes, complete outsiders is assembled. Working together, the team views and attacks the problem from a variety of angles, encouraging creative solutions. Once an idea passes group muster, the team implements immediate change, with full company support. Implementing the Lean Production System is the first step for any company, as teams use kaizens to spur change, shift the company culture, and embrace continuous improvement.
Six Sigma Capability
In the mid-1990s, many companies saw the improvements Jack Welch of GE was trumpeting with Six Sigma and rushed to climb on the bandwagon because in Six Sigma, there was a lot to like. Using methods practiced at Motorola, specially trained experts used statistical analysis tools to uncover nagging quality problems. Companies could find enormous savings in rework and scrap. But there were underlying problems with most Six Sigma programs that few were willing to discuss: the system of black belts and master black belts tended to create elite "masters" who were disconnected from the shop floor and spent, typically, six months on a project.
Being true believers in kaizen methodology -- in the sense of urgency and bias for action that make real improvements possible in five days, instead of six months -- we studied Six Sigma from several angles before we were ready to implement it. Now we have discovered an elegant synthesis of lean and Six Sigma: LeanSigma.
As the factory or office becomes a more visual workplace, with each job defined in standard work and organized to fit the rhythm of the customers' demands, the more rigorous tools of a LeanSigma black belt can be used in harmony with jidoka. Black belts attack problems that are more deeply rooted in the systems. Using statistical analysis, LeanSigma black belts and green belts find the root cause of nagging quality issues, and they drive abnormality and variation out of the process. This advanced LeanSigma work is tied to a mentoring system that ensures that each project is supported and that it aligns with business objectives.
From LeanSigma champions at the executive level, to the highly trained black belts they mentor, to the operator-level green belts, each team member knows he is being assisted in this critical work.
Lean Production System
When TBM first began introducing American and European businesses to the continuous improvement principles and techniques of the Toyota Production System in the late 1980s, the focus was on removing wasteful batch-and-queue systems from shop floors, and on creating one-piece flow. This is where all companies begin: reducing inventories and the ugly build-up of work in process that sits between processes.
The next step is to organize factory floors to create simple working cells. Eventually, supervisors walk across assembly areas and see at a glance whether a team is meeting takt time and fulfilling that day's orders.
Using the techniques of just-in-time, work areas are organized to ensure that each operator gets the materials needed to complete the task exactly when he needs it. Just-in-time is a strategy to create one-piece flow, which will eliminate the excess inventory that hides production problems. Jidoka, the second pillar of the Lean Production System, is a system to respond to the abnormalities that just-in-time exposes. Elements of jidoka include visual management techniques, andons or other methods to stop production lines when problems occur, and poka yoke devices. In short, jidoka principles instruct us to pay close attention to problems, to analyze the issues and eliminate roadblocks.
All of these activities must be rooted in a planning system that smoothes out volume fluctuation to make the best use of all resources. If your company sells an item on a daily basis, we say, you should build that item every day.
In no time, these lean activities branch out from factory floors and into the business office where teams attack wasted motion in order fulfillment, customer service -- even the accounting department. At two of the best lean companies, for example, Wiremold and Lantech, accounting executives now produce real-time financial reports, not two weeks after the period's close, but on the same day. They have also found innovative ways to reduce the amount of time spent chasing daily invoices and transactions.
From the business office, the Lean Production System moves upstream to suppliers and downstream to distributors. Each company in the value stream becomes leaner, more profitable, and more capable of the flexibility demanded by today's markets. We have seen that discrete companies linked by common vision and goals can become partners instead of adversaries.
Design for LeanSigma
One critical step in the transformation process is applying LeanSigma principles to the biggest, most important investment any company makes: product development and launch. This step involves knocking down initial capital investments and carefully building quality into every product by reducing variation in the process. With Design for LeanSigma, teams concentrate on three vital areas of product development, ensuring that poor assumptions and bad process are rooted out before they are hard-wired into a product:
- Concept Development, which is the translation of the voice of the customer into product specifications and conceptual drawings or models. Key tools might include a House of Quality, which helps formulate customer requirements, product specifications, and competitive benchmarks into a product concept.
- Design for Manufacture and Assembly focuses on minimizing the number of parts required for design, to ensure quality and make sure it can be produced within Lean Production System principles.
- Process Development is preparation for production: creating assembly lines, material flows, and layout that are simple, functional, and ensure ongoing flexibility. Companies that are leveraging growth into new plants also use the principles and tools that apply here.
The best lean companies are using newfound strengths in Design for LeanSigma to aggressively compete in their own markets with product innovations and flexibility that their competitors are not prepared to meet.
LeanSigma Value Chain
Finally, the LeanSigma Value Chain reflects TBM's emphasis on integrating and aligning all elements of an enterprise to create a synchronized system that rests on the foundation of business planning and control tools. Instead of focusing exclusively on the activities of one shop floor, one business office, and one company, our methodology takes into consideration the entire value chain -- from suppliers to the distribution network and customers. Using strategies in supplier development, we assist companies as they transform suppliers into reliable partners, while teams improve logistics and distribution channels. In a time when electronic linkage can pull product on demand directly from suppliers, producers, and distributors to consumers, with little time and few steps in between, each entity in an enterprise must be connected to each other. Working in the Value Chain, we create line of sight across companies.
Evidence of the LeanSigma Transformation is visible now in Brazil, in Mexico and China, France and England, Iowa and Connecticut. But nowhere, perhaps, has it been more dramatic and quick than in the hill country of Cleveland, Tennessee, at Maytag's center for cooking products at the foot of the Great Smoky Mountains.
Maytag's Industrial Evolution
The heart of Maytag, headquartered in Newton, Iowa, is innovation. The Cleveland, Tennessee, plant is the launch site of many new products for Maytag, as well as its first steps in a long series of successful kaizen activities for manufacturing transformation.
Harding Gamble, age seventy-four, a Maytag veteran who started in the shop at age sixteen in 1939, describes Maytag's transformation: "I have never in my life seen anything changed as much as I have in this operation in the last few years. Compared to the way we used to do things, and the way we do them now, well, there's just no comparison."
Harding's observations spring from the LeanSigma initiative in Cleveland, which combines lean manufacturing and Six Sigma principles with intelligent innovation.
Harding witnessed the change when Maytag Cleveland Cooking Products converted its recreational-vehicle cooktop and range assembly areas to lean lines. Work first started in 1997 and has expanded into all areas of the Cleveland plants. The objectives were rapid improvement in productivity and quality and elimination of waste.
The Cleveland plant is making history, proving that new products and processes offer opportunities to update its more traditional product lines. Physical plant challenges -- nineteenth-century buildings on hilly terrain, connected by driveways and parking lots -- complicate the layout and process flow with varying degrees of difficulty.
While the physical plant may remain a challenge, however, the people are Maytag's greater promise. It's not the machinery or the automation, and certainly not the buildings that appreciate. The physical assets of any business inevitably depreciate, but the people appreciate constantly. When companies invest in people, give them the right tools and training, and put them in an environment in which they can improve continuously, the entire company benefits from a constantly appreciating asset. Investment in human capital results in more positive employees -- adding value to the company and shareholders alike and, most important, giving the customers better quality and delivery. Maytag's dedication to investing in its workforce has caused the company to expand its LeanSigma programs. Hourly associates completing forty hours of training earn three hours of college credit toward a two-year Associate Degree at the local community college. Teaching combines both classroom and shop floor activities.
For workers this is a serious investment in keeping their livelihood in the rolling hills of southeast Tennessee, as well as improving their quality of work life with better job design and ergonomics. It is also at the heart of Maytag's strategy to compete with GE and Whirlpool initiatives. Associates have removed inventory and improved housekeeping and quality as well. Perhaps Maytag's greatest contribution to the application of lean manufacturing in new areas is its intensive implementation of Design for LeanSigma.
The Power of Simulation: Design for LeanSigma
In August 1998, design teams assembled to create an efficient production process well in advance of typical manufacturing engineering cycles. Associates barricaded themselves in the simulation lab to design, develop, and even simulate manufacturing a new cooking product scheduled for public debut before the Maytag Gemini made its appearance in 1999.
Working shoulder to shoulder, eighteen designers, engineers, quality technicians, and upper management created a mock assembly line on which simulated models of the new cooking product were actually built. Next, team members assembled the pilot unit.
Design for LeanSigma Rules
1. Creativity before capital
2. Quick and crude versus slow and elegant
3. Simple, inexpensive, and dedicated equipment
4. Develop a minimum of seven alternatives for each issue
5. Select the three best designs and create lifesize mockups
6. Combine the best features of three into one
7. Simulate the best design and the process before committing to hard design or process investment
Ramin Zarrabi, Kaizen Promotion Office head, said, "We are making discoveries now that normally aren't made until far into the manufacturing future of a new product -- this process brings all LeanSigma principles into the initial stages of a new product. Unlike traditional kaizen, this process doesn't wait to fix what's broken in an existing manufacturing process. Rather, it starts from scratch."
Dan Sullivan, a TBM managing director, sees Design for LeanSigma as the way for an organization to make changes in its process. "We do it from the get-go, from the very start, to minimize the trauma of new product launches."
Gregg Greulich, senior director of R&D, is just as enthused about Design for LeanSigma. "This technology is filling a huge gap in the whole preproduction process. I'm excited about this from the design standpoint because it allows engineers to design a product for assembly and not with the idea of designers drawing it up and hoping shop floor operators can build it."
Tom Briatico, Cleveland vice president and general manager, believes "the most powerful feature of this development tool is driving quality at the source and mistake-proofing the assembly process."
Set your goals and targets high because you are competing against the entire world.
Throughout its Cleveland operations, kaizen leaders have racked up impressive results. In the West Plant, team members reduced cycle time and learned valuable lessons in waste reduction as they right-sized equipment and rebalanced lines. Shop-floor operators, rather than engineers, redesigned work stations and redistributed job assignments themselves.
In fabrication, a line of five 250-ton presses achieved 56 percent reduction in setup time using standard setup procedures, visual displays, and performance boards to maintain standard work. Their application of LeanSigma methods to a highly complicated porcelain process helped to substantially improve first-pass yield and identify what variables cause defects. Using the one-week kaizen structure and applying Six Sigma tools of process maps, FMEA and DOE, defects were reduced by 60 percent. This approach also increased throughput.
In the year after TBM started working at Maytag associate teams conducted over 124 kaizen events, and more than 1,400 employees participated. The kaizen events yielded improvement in the unit output per employee from 25 percent to 35 percent; floor space was reduced by 83,000 square feet, or 27 percent in the affected areas. Line inventory was reduced by 50 percent to 60 percent. Team members also produced between three and five safety improvements per event. Repair rates declined by 75 percent. Kaizen impact also avoided $7 million in capital expenditures, Maytag estimated, including $5 million related to lean versus traditional approaches (e.g., conveyors), $1 million in equipment for new products, and another $1 million for capacity.
Gemini was the first new product to apply lean concepts to assembly. Gemini results included:
- 40% reduction in service call rates
- 20% reduction in final assembly labor
- 50% reduction in line length
- 50% reduction in repair rates
Although Maytag Cleveland associates realize they have much to do and many more areas to transform, the early lessons from going lean are powerful testimony to their pioneering work. Tom Briatico has come to believe that lean implementation is less about physical change and more a change of mindset as we think about how we work.
Ten LeanSigma Lessons Learned at Cleveland
- Real change does not take place in the classroom
- Start small and learn from mistakes
- Respect shop floor employees (management's customer)
- Learn on the shop floor (top management)
- Maintain an obsession for defect and waste elimination
- Design and build small and inexpensive equipment
- Have an obsession for maintaining standard work
- Design methods so operators cannot make a mistake, or pass defects on to the next operation
- Create a model line as a learning laboratory where the transformation should be deep vs. wide
- Be prepared to uncover many rocks -- treat these discoveries as golden opportunities to make the process robust and free of abnormalities.
E-Supply Chain Strategy
Giving customers what they want means also meeting demand for high variety and customization on demand. The Build-to-Order Project launched in late February 2000 was designed to pick up where simple Web-based order taking left off. We could all see that there was a big gap between Web-enabled organizations that take orders, create new designs, manage their supply chains, and ship via Web connections at nanosecond speed, and the "fronts" -- businesses that use e-commerce for order taking with no back-room support. Big warehouse networks and premium shipping arrangements, like the ones maintained by Amazon.com, are an expensive substitute for truly e-enabled production networks.
Ford and GM think they have pioneered it, and hope they are moving toward the 3-Day Car envisioned at the Tokyo Auto show. In the appliance world, Maytag wants to do Web-based business the right way.
Maytag's Ramin Zarrabi and Sam Swoyer of TBM, build-to-order project leaders, recognize that their group's vision is an aggressive one: customer orders on day one, product ships on day five. Charged with implementing four or five examples in twelve to eighten months, the proposed systems will build and showcase Maytag and its partners' capabilities, as well as serve as an enterprise-wide beta experience.
Five pilot project possibilities are:
1. Collaboration between Maytag Cleveland and Fleetwood, a California recreational vehicle producer. As each small cooktop/oven unit was installed in a California RV, the assembly line in Tennessee would know immediately via electronic kanban, triggering production of another unit.
2. A new high-end refrigeration product, code-named Alaska, that is built to customer order at low volumes, with considerable internal variety.
3. A high-end outdoor grill destined for home users.
4. Commercial cooking units fitted to upscale hotels.
5. A Hoover commercial product.
Art Learmonth, Maytag vice president of manufacturing and engineering, tends to be a little conservative, in his own words. Learmonth believes that process -- clear, simple, degreased good process -- takes precedence over big software solutions. Naturally, Learmonth is anxious to test the robustness of Maytag lean manufacturing muscles by leveling production and rendering it more responsive and flexible. Along the way, Learmonth believes that by executing a perfect e-enabled operation, Maytag will have proved once and for all that this business does not need pockets or trailer trucks of inventory to get by.
Mercedes-Benz do Brasil
In 1953 Mercedes-Benz do Brasil, a division of DaimlerChrysler headquartered in São Paulo, began an expansion of operations to produce trucks, buses, and passenger cars to support domestic and export orders. Thirty-six years later, three plants produce over fifty thousand vehicles.
Employing more than twelve thousand associates in Brazil, Mercedes captured almost half of the domestic luxury car market, 70 percent of buses, 14.1 percent of light trucks, and 33.9 percent of trucks. Total corporate capital investment stands at $308 million, U.S.
Clearly, investment in Brazilian operations has reached levels of strategic global importance for Mercedes. And so have the systems and training the company has poured into its three model plants.
The success story is quite young, as the new Brazilian economy has just begun to settle into tier-one levels of productivity and efficiency, in less than ten years.
The Kaizen Breakthrough
In 1991, the challenge for most Brazil-based manufacturing companies was simple survival. Although the Brazilian government legislated a change from a closed to an open economy, businesses continued to be buffeted
by continuous inflation and strong external competition. High-cost inventory and production practices had to change for companies to stay in the market.
Mercedes' Karsten Weingarten had heard of the power of kaizen, and a tour of WABCO, a division of American Standard, persuaded him. WABCO's first kaizen reduced setup time on a double-spindle boring machine from four hours to twenty minutes. The time to set up a numerically controlled lathe was cut from one hour to four minutes. Overall, assembly line productivity -- another desperate need for so many Brazilian plants -- increased significantly as work-in-process inventory dropped by 82 percent.
Mercedes' successful introduction of kaizen and LeanSigma Transformation is notable for its iterative, comprehensive approach. Starting with sixteen kaizen events in 1994, the operation has steadily increased its commitment and kaizen expertise to a rate of about seventy events per month. Improvement opportunities cover a full range of plant operations and processes, from rear axle assembly to gear and differential case manufacturing cells.
One thousand five hundred and twenty-seven kaizen events at Mercedes-Benz in Brazil produced these results:
Setup time -64.0%
Lead time -92.0%
"Under One Flag...the Best Axle Manufacturer in the World"
The Brazilian operations are a diverse global mix of workers from different regions, religions, and races, which is another reason for associates' pride in their achievements "under one flag." They have created a faster, cleaner approach to vehicle production, rooted in Henry Ford's vision of integrated production. With smaller, dedicated lines, the pull process reaches all the way back to first-tier suppliers. Production smoothing of the assembly lines and its feeder operations are a model of lean processes. Computer systems found to be a barrier to lean flows were shut down so that the vehicle assembly line schedules could be sequenced for three days, giving materials pros three days to execute parts plans.
Weingarten's goals of agility, quality, and profitability, incorporated in a plan called Factory 2000, hinged on worker involvement. Sixteen full-time kaizen experts trained by TBM work in-house to conduct and plan LeanSigma work.
What started out as a seemingly new, alternative concept in manufacturing philosophy has mushroomed into a dynamic grassroots revolution which may shortly become the norm. After this impressive transformation, LeanSigma concepts are now being applied at DaimlerChrysler operations in Argentina, Mexico, the United States, and Turkey with the help of TBM consultants.
Pella Corporation, headquartered in Pella, Iowa, is a producer of premium windows and doors. In 1999 Pella was the second-largest window and door manufacturer in North America, with seven U.S. plants and one in the Netherlands. Employment totaled five thousand directly employed by Pella and one thousand people employed by eighty one-step distributors in the United States and Canada. Expansion into new market segments and distribution channels, including one thousand Home Center locations and various lumberyards, promised unlimited growth in market share and profits.
But before the company began its kaizen journey, Pella's world was somewhat limited by operations' performance. Although the Pella stamp on windows guaranteed quality and product innovation, in 1985 the marketplace was indicating that Pella products were expensive. Long lead times and unreliable delivery performance made it hard to do business with the company and its distributors.
Further, there was a certain complacency about market growth that masked changing business conditions. In 1987, when sales took a dip and new product introductions taxed Pella's traditional production and distribution resources, it was clear that Pella needed a new, reliable, consistent process.
In December 1992 three Pella executives from operations, engineering, and finance attended a public Shop Floor Kaizen Breakthrough event conducted by TBM, hosted by Carrier Air Conditioning in Arkansas. The Pella executives knew the climate was ready for big changes and saw the possibilities in the kaizen breakthrough. One month later, in January 1993, Mel Haught, Gene de Boef, and Herb Lienenbrugger arrived on the shop floor wearing jeans, ready to begin. Within the week, Haught became Pella's internal kaizen champion. Seven years and thousands of kaizens later, Pella has become a model continuous improvement pioneer.
Pella associates have experienced the power of kaizen in all areas of the operation, from engineering and production down into the supply base. Kaizen work started on the shop floor, but by 1994 Pella had incorporated white-collar improvement in its Business Process Improvement Program, championed by the senior vice president of finance. Design for LeanSigma teams headquartered in Pella's spacious Product and Production Preparation lab created brilliant and innovative solutions to process flow and shop floor challenges.
In 1994 Pella began a long series of design events with Gene de Boef, vice president of engineering, as corporate champion. Because 85 to 90 percent of the cost of new product is locked in at the time of product and process design, Pella was determined to design right the first time. Team members focused on improving ergonomics, removing complexity, using creativity before capital, and accelerating the concept-to-market cycle.
Results of their labor appeared early, including overall reduction in development time by over 50 percent. Further, team members believe that designing processes to support only next year's volumes will ensure profitability at startup, not three years down the road.
One of Pella's most outstanding and visible contributions to manufacturing reform is its innovative approach to capital expenditures, the machines and facilities that support process. Not surprisingly, when Pella kaizen associates advanced through various departments, removing big equipment monuments and replacing the behemoths with smaller, smarter solutions, the writeoff of fixed assets ballooned.
Lessons Learned -- Business Process Kaizen
Most of Pella's "Customer Hassle Factor" and untimeliness was administrative, not operations related. This finding was an eye-opener. Planners discovered that about one-third, or 28 percent, of the seven-day total lead time could be attributed to manufacturing. Eighteen days, or 72 percent, was administrative. Because of this performance gap, Pella launched a Business Process Improvement initiative in 1994, under the oversight of the senior vice president of finance. Teams attacked paperwork flows from product concept through launch, even including review of the new employee hiring process and monthly financial closing time.
Benefits Not Flowing to End Customers
With such incredible results, Pella executives were surprised to learn that despite cuts in processing time all over the plant and the office, benefits were still not flowing through to end customers. It was as if all the good results were loaded into a narrow-ended funnel and one by one, bit by bit, small advantages leaked out to consumers.
Nineteen ninety-five saw the beginning of a concerted effort to open up the valve. Pella associates conducted the first kaizen events at independent distributors -- an effort that created the Office of Distributor Process Improvement, headed by the senior vice president of marketing and sales. Again, high-level executive support stood behind every associate's effort.
Another lesson kaizen team members learned at Pella was that kaizen efforts were not coordinated -- team members were fixing pieces of many, many processes instead of all the pieces of a single process. As powerful as individual projects were, their impact was limited to specific flows. Team members wondered if more integration would get kaizen work done faster, with less pain. In the next two years, teams began a program to identify core and supporting processes, with the goal of understanding and managing the whole company by process.
Pella's wonderfully creative and quietly dedicated workforce is key to how the company continues to rack up success after success. Seven best practices continue to keep the spirit alive:
1. Dedicated resources, reporting to senior management, including the development of an Advisory Committee, and the Kaizen Promotion Office
2. Management carefully monitors and adjusts for possible employee kaizen burnout
3. Kaizen rolls into the MBO (management by objectives) process
4. Strategic planning process includes kaizen programs
5. Twenty-five percent of profits are shared with employees
6. CEO's message: When in doubt, be bold
7. Celebrate the wins!
President and CEO Gary Christensen says, "Fundamentally, kaizen works and kaizen is one set of disciplines that unleashes human energy and creativity. It's noteworthy that the principles of kaizen run headlong into the principles of the way business management had been executed in the sixties, seventies, and eighties -- the command-and-control John Wayne version in which one cowboy rides in and makes all the difference. But that symbolism is not nearly as powerful as what organizations and people working in concert can do."
Christensen has a visceral knowledge of the challenge this presents to his corporate peers. He recalls that after one kaizen event, co-author Sharma asked him whether he was pleased with their impact at Pella. Christensen assured Sharma that he was and expressed deep thanks, but said, "But I do have one bone to pick with you.
"When I was a young man and was making presentations, I had great passion, but I learned to ask permission to do certain things. Now I find myself turned around -- the decisions get made by the teams during the kaizen and I have to come to a kaizen presentation to learn about them."
The reversal, says Christensen, "speaks to the power of kaizen, to the difference in the management environments, and why it takes somebody who absolutely knows it works to be a change agent, to help the company. They cannot, however, do it just for the company. I think the reason kaizen is having such a positive impact in Pella is that we know that kaizen also makes a difference in the lives of our employees."
Global Success Stories
At England's Unipart, which manages aftermarket and spare parts for Jaguar and Rover, workers proved that a LeanSigma Transformation works in distribution and logistics operations as well as it does in the basic production. By improving layout and reducing space, teams were able to integrate two other businesses, Hewlett-Packard and Honeywell parts distribution, in the same facility.
Associates redesigned the process of ordering parts, stocking, picking, packaging, and then delivering orders to dealers. To do this they improved relationships with suppliers, and developed twenty-four-hour emergency delivery systems. Mike Herr, TBM Europe's managing director, believes the Unipart experience underlines a basic lean principle: Don't lay off people; use the gains to grow the business.
Black & Decker
Another British operation, Black & Decker in Spennymore, County Durham, in northeast England, is a high-volume producer of power tools like drills and lawn mowers. The company saved one million pounds in labor costs in two and a half years of kaizen activities. Black & Decker drastically reduced space requirements, enough to close its plant in Italy and bring production back to England. All these improvements were accomplished without additional bricks and mortar. New production methods have improved turns to forty per year, compared to the high teens in prekaizen years. Black & Decker was also pleased to be able to reduce temporary labor.
Polaroid, Hill-Rom, Tofas
Polaroid's Scotland facility, faced with a corporate threat to outsource production to China, has survived the threat and developed a strong business base supporting innovative production, three years after its LeanSigma Transformation began. Hill-Rom France, and Turkey's Tofas, an auto plant whose supply base was devastated by earthquakes, all point to the power of kaizen and workforce engagement.
Think about it: every minute, one perfect car. A near magical assemblage of 6000 parts from 300 suppliers touched by dozens of human and robotic hands, slips off the line at hundreds of auto plants around the world every minute. LeanSigma Transformation, a product of the individual contributions of Henry Ford, Toyota's Taiichi Ohno, Shigeo Shingo, Dorian Shainen, Robert Shewhart, and thousands of empowered production associates, has spawned a revolution in quality and production process. Lean principles have been implemented across all industries, at all levels -- from first-, second-, and third-tier automotive suppliers, to aircraft manufacturers, plastics, electronics, and even financial services. The combination of lean manufacturing principles, Design for LeanSigma, the Lean Production System, LeanSigma Value Chain, and an eye to the next generation, Distributive Manufacturing, is an exciting, redrawn approach to sustained growth in sales and earnings.
If you want to transform your enterprise to grow faster with fewer resources, better quality, more responsiveness, you must do it different. And better.
Copyright © 2001 by Anand Sharma and Patricia E. Moody
Meet the Author
Anand Sharma, named one of "America's Heroes of Manufacturing" by Fortune, is the founder, president, and CEO of TBM Consulting Group, the fastest-growing manufacturing consulting firm in the world. He has spent the last two decades developing and implementing manufacturing improvement programs in a variety of companies throughout the world. He has worked extensively with some of the leading consultants responsible for the Japanese Industrial Miracle at Toyota Motor Company.
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Clear advice, well supported with real-life examples, and expressed in easy to understand language.... The Perfect Engine will help us all better contribute to our lean transformation program.
Every mfg. company executive should rush out and buy this book. Using LeanSigma methodology, Sharma is at the cutting edge of modern mfg processes. Our company has achieved dramatic results following his philosophy and we are successfully applying this concept to our back-office operations.
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