Feelin' Good in the Inventory-hood

George Koenigsaecker of Simpler Consulting proposes 9 ways Lean is different from our "natural" way to think. Here's his point 3.

I like having "some" inventory vs. believing inventory causes waste and also "hides waste" and prevents improvement in productivity, quality and flow.

Many people believe Lean is about getting rid of inventory, for the sake of just getting rid of inventory. Lean, however, is about seeing and eliminating waste. Inventory clutters the view and hides waste we would see otherwise.

We typically think of inventory as the physical stuff of production, which it is. But even in processes outside of production, "inventory" gets in the way. I had a marvelous illustration of that today.

One of my colleagues has ultimate accountability for collecting our Accounts Receivable. He took over that role early this year amid a very ovewhelming backlog of unpaid bills. Taking a deep breath and rolling up his sleeves, he went to work on this backlog with his team. As of November 1, our A/R is 58% below it's level on January 1. A tribute to diligence and paying attention to details.

What does this have to do with inventory? It hit me today when Greg commented "Now, when we have a genuine problem with a recievable, it stinks! It jumps out at us! We immediately know where the problem is and can attack it!" Do you see what he did? Greg and his team eliminated an "inventory" of receivables. Receiveables are just like inventory...they are a use of cash that adds no value. On a Balance Sheet they show up as an asset (just like inventory) yet we can't spend it or use it to create more revenue. This type of "asset" is an illusion. Furthermore, the older the receivable gets, the harder it is to recover (just like old, unrotated inventory). And, when we collect A/R, it translates, immediately, into cash. And our CFO is smiling these days when the subject of cash comes up.

By aggresively eliminating this "inventory" Greg and his team can now very easily "see" problems that arise with current A/R. And take action sooner.

Inventory is all around us, both in physical goods (stock material, work-in-process, unclaimed purchases), as well as in non-physical goods (plans not finished, phone calls not returned, bills not collected, ideas not acted upon). As George says, we "like" having these things around, they make us feel good, they make us feel useful, the provide job security. But they do not create value! And if we are not creating value, why are we here?

PS. Sorry for the gap from last week...a monster head cold has laid me out for a few days. Be glad you are not getting my germs....
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Grasping New Concepts

George Koenigsaecker of Simpler Consulting proposes 9 ways Lean is different. He prefaced the list with this statement.

The core concepts of Lean are not complex ideas, but they are difficult to apply because they are the opposite of what we currently believe.

In the manner of a good teacher, George captured a big truth in a simple way. A story our General Manager told this morning illustrates the point.

Our GM and his family were on vacation at a hotel in Arizona. Sitting in the warm sun on a cabana chair, Jeff noticed a little flip-up flag on the back of the chair. Being curious, he looked around and figured out that if he flipped the flag up, a server would walk up to him and take an order for a soda or munchies. No flag up meant the server left him alone, to enjoy a relaxing vacation. Jeff smiled, just thinking about that great time in a cabana chair.

This is a marvelous illustration of what George describes as a simple idea, opposite of what we think. We normally expect a waiter to come around and either ask or sense what we need. This hotel, rather, put all that power in the hands of the customer. The waiter did not have to scan all the folks lounging in the cabana chairs around the pool. Instead, he/she needed only look for flags. When a flag went up, immediate, personal service was delivered, right where it was needed, right when it was needed. I'd suspect that in so doing, the hotel required fewer people to deliver better service. And, can you imagine the tips that the waiter could earn by being very prompt and cheerful.

Two principles here; a clear, unambiguious signal for action and "production" is pulled by the customer, not pushed by the producer.

We'll move to George's point three on Monday...I'm taking a long weekend with my lovely wife. Enjoy your weekend.

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Musings on Root Cause

So what if there was an easier way to do root cause analysis? Could we, would we, do it better and easier and faster? Would that cause us to do less-firefighting?

This has me intrigued.

I scan my current knowledge of tools that could be applied:

• Five Why. A well known Lean tool.
• Fishbone Diagram. Separates material, methods, machines and personnel causes.
• Theory of Constraints. Goldratt offers a complex but effective root cause system, most notably described in "It's Not Luck"
• Phred Solutions, a small software firm in Colorado, is now offering a knowledge-based software tool, which is being used in several large companies, Shell, most notably.

The latter two are quite analytic. I've used Goldratt's technique with some success, but have not been able to transfer that knowledge to others. I suspect a Five Why worksheet might be more helpful as a realistic, easy-to-learn way of documenting the discovery of root cause. But, I wonder if I'm missing more than this.

I welcome your comments.

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George Koenigsaecker of Simpler Consulting describes nine ways that Lean doesn't make sense. His second point-counterpoint:

Fire fight today's problems vs. do root cause solution to stop the need to fire fight

In a Lean enviroment, the focus is on eliminating the emergencies and building a "quiet" workplace. Machines work properly; people work safely and steadily; materials appear when needed and in the amount needed; customers get what they ask for, quickly and without surprise.

For many of us, this sounds like a dream from some drug-enduced street philosopher of the late 60s. But George has seen it, I've seen it, many of you have seen it. Why is it so hard to get to?

• We like being heroes. It feels good to swoop in and "save the day". Other's salute us and say nice things in company newsletters. As such, we are not often willing to give up our spandex superhero outfits.
  
• Management reinforces heroism. Because it is so much part of our own nature, management is grateful for and recognizes the excellent fire-fighters amongst us. Since we don't have an appreciation for root-cause elimination, we don't even see it as being a better way. When's the last time you saw a big deal made over someone who is quietly effective because he/she preempts all the big fires?
  
• We like loud over quiet, flashy over subtle. This is a corrolary to George's first point, of batch vs flow. Batch is big and visible. Flow is often invisible. It is cool to fight fires. No one notices when there are no fires to fight.
  
• We don't know how to get to root cause. Perhaps this is the biggest problem. If we could do root cause analysis easily, could we do it better? Yes. Is it a habit which we could form? Hmmmmmm. I gotta say "Yes" to that question but it is a challenge.
  

I welcome your comments.


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Flow meets Batch in New York City

Another way we tend to Batch, rather than Flow, is in how we plan any big project. We want to do the plan, and then execute it. One time to plan, then we act as if it must go according to plan. "Plan your work, work your plan."

This is especially evident in construction projects. For a very good description of a Lean approach to Project Management, click the button "Reforming Project Management" on the left. My friend, Hal Macomber, hosts this fascinating discussion.

This came up in a conversation yesterday with a very good friend who lives and does medical research in New York City. An $8M expansion of his research lab has just broken ground (actually, it broke asphalt...he works in a densely populated part of Brooklyn...) next to his current lab. "We'll be dusty and messed up for years," was his comment.

Don and I have discussed Lean many times, so he wasn't surprised that I had some Lean comments about the grunge he would have to walk around to and from work for the near future. I focused on how one can get Flow in such a big project and how there were tools to deal with the fact that the future is both uncertain and unknowable. Don has a PhD, so is no dummy and saw the appeal.

As the discussion wound down, Don paused reflectively and said "Joe, there is nobody in New York City that has ever heard of such a simple way to run a project."

Well, I suspect someone in NYC has heard of Lean, yet his comment reflects reality...Batch is all around us in many ways. Flow is far less visible. It takes new eyes, a new way of seeing, a new way of thinking, a new paradigm to see flow.

Try this experiment today...find three places where you see batch. Perhaps a long stretch of highway construction blockage with only one small stretch actually having work done. Then, if you can, try to identify one place where there is flow. One hint: have lunch at a Wendys.

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Flow vs Batch

George Koenigsaecker of Simpler Consulting describes nine ways that Lean doesn't make sense. His first point-counterpoint:

"Batch production vs. 1 piece flow"

Why do we want to batch things together? I look at my desk...it is full of "Batch", translated as "I'll get to that when I can" or "I'll batch all those annoying little tasks together in one lump" or "I'll file all this stuff when I get around to it."

It's no different when we manufacture things. We want to lump all the same size trusses together, even though the timing of the orders may be quite different. Try as I did, I had little luck getting our wonderful pie-making volunteers to make one pie at a time.

I wonder if it isn't genetic, to some extent, or behavorial, found in our agricultural roots. We want to gather food when there is food to be had. I drive past massive piles of corn on the ground these days as the Indiana harvest season comes to a bountiful end. "Batch" surrounds us.

Flow, on the other hand, does not seem as evident. Probably for the very fact that flow, by definition, is moving. Thus, it doesn't stay in place very long. You can't go see "flow" nearly as easily as you can go see "batch." There is evidence of my work when I make a big pile of something. There is no remaining evidence if I make what the customer wants, just as he/she asks for it.

When I was at Wiremold in August, I arrived just before 5pm on a Monday, due to flight delays. One of my hosts, Hans Cooper, gave me a quick tour of the facility. Now, the production associates end their day at 4:30pm, so the plant was quite empty. Hans proudly showed me some of the assembly cells he had helped revamp earlier in the year. "Let me show you some of our surge suppressors that we make here," he said proudly. Then, he looked and looked...none were to be seen. "Wow, I guess they are all shipped." That was flow. No finished goods...it was all packaged and on a truck, heading for the customer. For the entire week I was there, the only time I could see product was during the work day. Even then, I had to look fast, as it quickly flowed through the cell, into a box, then onto a truck, backed up to the shipping dock.

Yeah, Batch feels better. Flow pays better. We take our pick.

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5,000 (almost) Apple Pies -- The final story

We did a wrap-up of our apple pie adventure on Monday night. While I was quite pleased with the operational aspects of the exercise, the financial results blew me away, to wit:

• We netted just over $20,000, to add to the school's tuition assistance fund
  
• We had 95 volunteers donate an average of 3.5 hours each to make pies
  
• This works out to over $55.00 per volunteer hour
  

I wonder how many non-profit fund raisers can point to that kind of productivity?? What a compelling statement to ask folks to be involved!! Plus, it was fun to work in a clean, orderly, U-shaped production facility where materials came to you and there was little clean-up, due to the minimal WIP!!

I hope to get photos posted this weekend.


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Why does lean feel weird?

George Koenigsaecker of Simpler Consulting has been a leader in Lean implementation in the US for 20 years now. I had the chance to hear George speak at a conference recently. Later, I spent another half hour in the hallway with him, pursuing details on both the human and the technical aspects of a lean system.

In his presentation, George identified nine ways in which a lean perspective runs counter to the way most of us think. Over the next couple of weeks, I'm going to describe them and then, in my own words, try to articulate how we run into this in a post-frame construction environment. I welcome your input.


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Wiremold Data

I found a much more readable version of the interview with Art Byrne that I mentioned last week.  I urge you to print it out and read and think carefully about.  I can attest to its accuracy.  Click Here to link to the interview transcript.

Why am I fascinated by Wiremold? Because:

• They started small
  
• They practiced clear focus
  
• They did it without major capital infusions
  
• They built a culture that built both people and quality
  
• They did it in very ordinary product areas
  

If they can do it, anyone can. But do we have the discipline??


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Still working on commenting software, Monday pm. It appears to work now...I added a comment, if someone else could check it and add one too, I'd appreciate it!!

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Straight Talk from Wiremold’s CEO

I mentioned last week that I had a mind-stretching time at Productivity Inc’s conference on Lean and TPM on October 10-11.

One highlight was an hour-long presentation from Art Byrne, the just-retired CEO of Wiremold. My notes were full and I wondered how I could communicate what I learned. Then my colleage, Gary Stewart, from the Wabash Valley Lean Network passed these links to me. If you want to stretch your mind about what is possible in manufacturing, go to these pages and read. Then go reflect on it. These two interview summaries contain virtually all of Art’s content that he shared at the conference.

After spending a week in a kaizen event at Wiremold in August, I can tell you, this is the real deal. Then, go take some action. Email me with your comments.

From The Society of Manufacturing Engineers

BREAKING THE MOLD AT WIREMOLD
Wiremold is a rare company. It has achieved national and international prominence not so much for the products it makes, but for the manner in which it makes them. Under the 10-year stewardship of Art Byrne, the company was one of the first in the U.S. to embrace the production and management techniques of the Toyota Production System. Since then, his company's sales have grown by more than a factor of four to $460 million, or by more than 38 percent per year. Its operating margin exceeds 12 percent. It continues to double inventory turns every two years and has improved quality by at least a factor of 10. In this article excerpt from Manufacturing News, Byrne offers some sound advice on what it takes to succeed and fail at lean.

Click here for interview summary.

From Manufacturing News

This is a longer interview from Art…prepare to blow away many of your preconceptions.
Click here for full interview text.


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5,000 (well, 4,502) Apple Pies – The Results

We finished the production of pies on Wednesday night, October 16. I’ve recovered from 17 hours on my feet that day and reflected on what happened. Here are my thoughts on implementing a lean system.

• Energy matters. We had a bunch of Purdue students from a service organization there join us for production each evening. Hard to measure the impact of injecting 20 college kids into a group of 35-50 year old adults, but it is positive. Especially in a volunteer system like this, the simple ability and tendency to move quickly matters.
  
  
• Material handling matters. While a simple understanding of lean pays most attention to the cell or assembly structure, a deeper understanding knows that how raw materials get to the cell is equally important. We saw this. Fortunately, we saw it quickly when it broke down and could correct it in minutes.
  
  
• Equipment breakdowns cost money. Our goal was 5,000 pies. We made 4,502. The difference??? The refrigerated trailer we rented broke down on night one…we had to cut off production two hours early. In those two hours, we could have easily made 500-600 more pies. This error cost our fund raising efforts at least $2,500. It was an expensive breakdown.
  
  
• Productivity goes way up. Compared to 2001, we made 50% more pies with 1/3 less manpower. Roughly speaking, this is an improvement in productivity of 80% to 90%. All by going to three u-shaped cells and using simple visual kanban for material movement. This blows me away.
  
  
• Satisfaction goes way up We had repeated comments from folks who worked the line that “wow, this is a lot more fun!” Anecdotal, perhaps, but we’ll have a lot easier time recruiting workers next fall since they enjoyed it this year.
  
  
• Humans want to batch, not flow. My biggest disappointment was how difficult it was to get to single piece flow (or single pie flow, as I jokingly termed it) in each cell. Our volunteers really, really wanted to push pies through in batches, not one at a time.
  
  
• WIP goes way down Despite the mini-batches, the cells physically limited the WIP. The small cells just wouldn't hold much of a "batch." So much so that when we shut down the lines at the end of Wednesday night, we went from full-bore production to the last pie in the box in only 16 minutes. We were producing at a rate of 450 pies per hour and still only had 16 minutes of raw apples in the system. That was cool.
  
  
• Gotta have metrics I did a simple tracking of how many pies per cell per hour we produced. Even this simple method of scrawled notes on a 3x5 card in my pocket gave us committee members insight on the fly during the hectic day of production. Lean systems have to have metrics.
  

All in all, it was quite an experience. We raised nearly $30,000 for the school scholarship fund. This works out to around $35/hour for the time contributed by the volunteers. This feels good for people to know that their time is well worth it.

Thanks for following this saga. It was fun.


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5,000 Apple Pies--Day One of Production

Yesterday, we had the first of two days of pie production. A few observations, before I head over for day two.

1. The Lean System we set up used half the space that the previous assembly line/batch/queue system used. The last several years, it used the entire gym floor. Now, we made just as many pies and nothing extended past half court.

2. Anectodally, our productivity was probably 1.5 to 2.0 times what it was last year. I don't know for sure, as it relied on some of the "veterens" remembering about how many pies we made with about how many people. We had lower turnout this year of volunteers, but still hit our numbers for the first day.

3. The three, identical, U-shaped cells worked great. The visual cues seemed to be obvious for the volunteers.

4. Having three cells let us ramp up and ramp down production according to the number of people we had at any moment.

5. Clean up was a LOT simpler. Far less mess than before.

6. Single piece flow was better but not perfect. What we did find, though, was that by confining the space and limiting the WIP, we simply did not have the space to build up too much inventory.

7. Possibilities for improvement are endless. My mind whirs.....

The Stats of Day One: 2,020 pies in just a little over 8 actual work hours. That's a cycle time of just over 14 seconds. I was shooting for 13, which would allow us to get 5,000 done in two 9 hour shifts. A freezer truck breakdown caused us to quit early last night (yes, we filled one entire semi trailer with apple pies). If we can keep the pace, we'll get done well today.


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