Driving the wrong KPI – An efficient way to the inefficiency


I was hearing a story for few days now. No, this is not about the end of the world. This is about how a lean movement has created unnecessary issues in an organization. This particular organization, like most of the organizations opting in for lean, had high hopes about its lean movement. They have started implementing lean years back, and have seen some improvements to their processes. They have formed a central team which will be driving lean initiatives across its facilities. This central team will form the strategy and the local teams in each of the sub units will be implementing lean in their respective areas. Sounds great, isn’t it?

But there was a problem. They were not getting the results they wanted. People started their own “lean” movements within sub units. Now each sub unit is performing in their own way. Although sub units themselves may gain some advantage by doing this, for an outside observer, it is clear that organization was losing in totality. Sub units are not working in unison to solve the bigger issues now. But they focus only on their small area to make it efficient. Processes are getting sub optimized.
 
Why is this happening? Well, there might be more than one reason. But one very important reason is the way lean is implemented and driven. Each organization sub unit is made to compete against each other. Instead of coming up with a better solution in totality, each organizational element is unconsciously encouraged to do better than other, even if that meant a negative outcome at the organizational level. Each sub unit now wants to do better than other. So they stopped sharing their methods with the others. They create their own systems, which becomes unmanageable over a period of time. Even the so called best “Lean” plant may not be doing good in the big picture.

What is the take away from this story? Well you have to think critically about what you are driving through your lean initiatives. You will have to define your goals and then start thinking about methods of driving lean, especially in the case of a mature organization. Bigger the organization is, difficult it becomes to achieve the set objectives. But if managed properly and driven with a good vision and control, lean can benefit the organization in totality. If you do not drive the correct KPIs, you will be very efficient, in creating inefficiencies.

Cost of automation – a lean thought

You might know by now, I am not for cutting-edge technology. I believe technology is only a tool. We have to use it when it is required, in correct dose just as we would take medicine. If we take too much, it will not good for our health.

Today organizations drive their automation initiatives hard, expecting benefits like cost savings, improved quality and reliability. I have to admit, sometimes, automation is the only solution. But is it the case always?

One important observation I have made when I work with people is that, they are completely blind to the cost of automation. Some people introduce systems so complex, maintaining the system itself will cost them more. Sometimes these systems can hinder their quality and reliability too. All these are obviously, things automation wanted to remove from their systems.

One of the main automation systems is the documentation system. People use complex ERPs, computer systems and so on, only to increase their IT costs without realizing. From the cost point of view they might end up paying much more, although there can be improvements in data consistency and reliability.

As in anything to use any automation system optimally, we have to balance pros and cons. Automation for the sake of automating will just heart the organization.

I am sure you have good experience in this. Please leave your comments below. If you agree with me, please LIKE this by clicking the LIKE button below.

Batch Vs Single Piece Flow – What is the difference?

One of the key differentiator between lean manufacturing and traditional batch process method is the size of the batch. Traditionally, it is believed large batches are the way to go. Larger the batch, more efficient the machine will run, busier the people will be. So it is believed that it will be much beneficial to have larger batches.

In complete contrast, lean speaks about single piece flow, which essentially talks about a batch of the size of one. Lean shows benefits like the ability to get the product to the market first, inventory not hiding the damages, and not needing of intermediate steps and related costs like inventory holding and transportation.

Both mass manufacturing and lean manufacturing methods had their successes. But in today’s demanding markets, lean methods may be the way to go. But world needed some proof, which came as an experiment in the book called “Lean Thinking”. Basically the challenge was to fold some letters, put them in envelops, seal them and stamp them. The experiment concludes pointing lean as a clear winner.

Now this experiment is repeated on video by the lean six sigma academy. This is a really nice demo of the concept. Simple and to the point. Watch the video below and see how fast the single piece flow can become.

There is no one correct way to do things, or should there be?

One of the magic answers I got from my superiors when I questioned them as a junior, some years back, was “there is no one correct way to do things. You are free to find your own solution”. I got this answer as much as I got the other magic answer “it depends”. Now after years of experience, I am thinking should there be a correct way of doing things. Should we be able to answer a question in more direct manner while keeping room for improvements?

I believe there can be many ways of doing the same thing. But we should have only one way of doing it in our processes. This will help our internal customers as well as external customers. Selecting what we are going to do is something we should do after a proper analysis. But once selected, we should stick to the process. If we want to change it, that will be a Kaizan event.
The problem with ambiguity in processes is they can lead to exponentially large ways of doing things. Say you have three tasks in your process and you have four ways of completing each task. You end up with 64(4x4x4) possibilities of completing those three actions. One can select any of the paths, and they will achieve the final goal. But you will not be able to predict the outcome. The time taken to complete the process will vary depending on the path selected. Machinery required might vary depending on the selected path. WIP may also vary. I think you get the point.

Yes, you should have room for innovation and improvements. But you should have your base correct. Otherwise everyone will be confused. Everyone will tell you that “there is no correct way of doing things”.

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Is lean an innovation killer?

Have lean killed your innovative and creative mind? I am just thinking about this after visiting an exhibition displaying innovations from a lean manufacturer. They had some cool innovations in display, but I thought they could have done much more.

Lean by very definition is about PDCA cycles and small improvements done over a period of time. Continuous improvement projects, Kaizan activities are among the most popular things in any lean organization. At least most of these activities are to improve the way they do their work. Improvements are mostly targeted to solve an issue you have in your hand, not to think about a totally new way for doing things, or revolutionizing the way things are done. Lean is much more evolutionary than revolutionary.

If an organization exclusively focuses this kind of innovations, there is a good chance their competitors coming up with some completely new way of doing things and taking the competitive advantage. If Toyota has not revolutionized the auto industry with its JIT thinking, we all will be driving almost the same car, manufactured in a mass assembly line.

I think it is a mistake most of the organizations commit in the name of lean. Pioneers like Toyota are not stuck in the area of innovation. They have come up with tons of industry leading innovations. So next time when you think about lean and continuous improvement, think about how you can make room for big ideas and revolutionaries. Once revolutionaries give you the edge, evolutionary can take it from there to make it much more effective.

Recommended Book : How To Implement Lean Manufacturing by Lonnie Wilson

Mondays, Fridays, super deals and lean

Just like any of you I am really excited about this season. I love the shopping experience. I always wonder how a retailer can sell their stuff with such large discounts. Are they selling at a loss? Why can’t they always give this kind of a discount? I always wonder. Let’s remove the shopper’s hat away and let’s put the lean cap on.

How come a 55 inch 3D HD TV which was selling for about $4000 is available for about $ 1900? How a women’s watch can be sold for 50% of its original price? How a men’s watch can be sold with a 79% discount?  How come there are 50%+discounts on ladies shoes? Amazing isn’t it? Ideally, if anyone can offer a discount this season, they should be able to do so in any of the seasons. But why is that not happening? Are retailers and these big brands ripping us off?

We will have to check how this buying season works to understand these huge discounts better. Think about it? All the year, retailers and brand owners spend tons of money advertising asking us to come to them and buy from them. They use their advertising money to create their brands and creating a need in us. But we do not have money they are asking for to buy their product. So most of us want the stuff, but do not have the money or the mood for buying.

But in this season, we certainly have the mood for buying, and we somehow manage to keep some extra cash with us. So in this season all the ingredients are in place. We have a real or a perceived need for the products and services. We have the money and mood for buying. And everyone else is buying too. So why should we wait? This is the thinking behind this season.

So sellers do not have to spend tons of money on creating the mood and the need. They can spend this money as a discount to get more customers. In addition sellers do not want to carry the old inventory to the New Year. Especially electronics might be outdated in the New Year. So it will be actually profitable for them to sell their inventory as soon as possible. And some sellers may even lose some money on discounting products heavily so that they can drive as many customers as possible to their shops. Once the customer is in, they can sell other stuff to them. So overall the seller can make a profit. This is how some of the retailers get 40-50% of their annual sales in this season. Isn’t this amazing?

In addition, I am currently thinking about what are the gifts I should buy for my loved ones. I am in the process of preparing it. I want it to be interesting, useful and not so expensive. Can anyone help me? Any suggestions?

Why lean manufacturing wins over efficiency improvement movements?

In almost every organization, sometimes so called lean organizations there is a movement to improve the efficiency of a particular process of an activity. They measure efficiency figures in %, like 80% or 90%, and generally aim for an improvement of less than 10%. For an example if they are at 80% they would want to be in 90% range within a year or a month or whatever the timeline is set to. While this looks fine and absolutely required, does this provide the ultimate outcome organizations are looking for? Do these drives contribute to a better user experience? Do they lower the costs of the products to the customer? Do they help delivering the goods when the customer wants them? In most of the cases they don’t. This is because most of these improvements happen in isolation with minimal understanding of the bigger picture. Yes, they may put hours into work and get the efficiency of the work floor by 10%, reducing the cycle time by 1 day. But ultimately they will deliver their goods to the warehouse a day earlier and the goods will stay in the warehouse a day longer. That is all they have achieved. From the customer’s point of view, there is no change, hence no value is added, instead resources are wasted in the name of improvement.
In addition, it is much better to understand what are the wastes available in the process and attack them instead of trying to squeeze an improvement in an already value adding process, thereby putting more stress on already value adding operations. As a lean thinker, you must know what is value in relation to the lean definition. Value is defined from the customer’s point of view, not from your point of view. For an example, if you think you delivered great value by increasing the production efficiency by 10%, think again, and think how your improvement is translated to the customer value. If you fail to translate your savings to the customer value, you have failed.
Let’s us have a look at the below figures on how easy or difficult it is to add value to the customer using “Improve efficiency” and with “Lean Thinking”. Before that, we all lean thinkers understand, more than 90% of the resources can be categorized as “Muda” or waste in lean terms. That is more than 90% of the resources goes without adding any value to the customer. Below figures are based on that assumptions. 
While, “Lets improve efficiency” guys work in the Small Blue area (Which is about 10% of the total area), Lean works on the larger (90%) of the green area. Let’s say you managed a 10% improvement on the Value added activities. So you will have a net effect of 1% in the full spectrum. (That is 10% of 10% = 1%).
In contrast, when lean thinker does a 10% improvement in the green area, which is 90% of the spectrum, you will get a net improvement of 9%. This is 9 times the result you achieved by increasing the efficiency. Most probably eliminating the non-value added activities will be easier than squeezing some efficiency from already value adding operation. 
Original status
Normal Process. 90% of Non Value Added Activities + 10% Value Added Activities
1% improvement by increasing the efficiency of value added activity by 10%.

10% Efficiency Improvement on Value Added Activities. Net Improvement of 1%.

9% net improvement by increasing the efficiency of non-value added activity by 10%.
10% Efficiency Improvement on Non Value Added Activities. Net Improvement of 9%.
So what is the moral of the story? 
Try attacking non-value added activities. You can get greater improvement by doing so. Above example shows how 10% improvement in non-value added activities can translate to 9 times higher improvement to the 10% improvement made on non-value added activities. Please click the “Like” button below, if you like this post. 

A real lean thinker behind a truly lean business

I came across a fantastic video almost accidently. I really liked it and thought of sharing it with you. This video features the CEO of Amazon Jeff Bezos. I like Amazon for the fact every front end activity happen on the web. It is quick and easy to look for and buy things. You will get the help of other people in the form of comments and reviews to make a better decision. You can return the products if they do not feel they are of correct quality. I was looking for their latest Kindle and found this video somewhere in the middle of the page. I was very impressed with what Jeff had to say. I watched the entire video, which was about 40 mins in length. He starts his conversation talking about Kindle, but subsequently he goes into his business philosophy. That is where it all starts to become really interesting.

He basically answers questions like, who you should be looking at when you launch a product. How you can differentiate from others? How you can be the leader in what you do? How the social media is shaping people’s buying decisions? All seems to be a real application of lean thinking. Just have a look for yourself. (Sorry I cannot embed the video here as it is not allowed) please follow this link and find the video in the middle of the page.

Lean manufacturing and customer’s voice

Customer is the most important asset any organization would have. If there is no customer, there is no real need to have an organization. But the problem starts when the organizations grow and they forget about their customers. Organization forget what their customers want and as a result they do not make what their customers want, and end up making what they “think” their customers want. Most of the times, markets have proven that they were wrong. So manufacturer have no other choice but to try making a customer demand with multimillion dollar advertising campaigns. But story do not end there. What about your internal customers?

Everyone in the organization is a customer and a supplier at the same time. For an example, production department is the supplier for the sales department while they act as a customer to the stores and procurement departments. Although not given much thought, these internal customer supplier relationships are critical to the success of the organization too. This is where lean manufacturing comes up with the concept of customer’s voice. For me, voices of both the external and internal customers are equally important. What your customers think about you? Are they happy with your product or the service? Or, are they not? Who are your customers in the first place? What they like in general? If you get all these information how much more value you can add to your customer? How much value you will get in exchange? But the challenge is how to get all these data? Focus groups, market research can give you some insights. But information you gather through these methods are not conclusive and proven to errors.

But the reality is, it is much easier to get all the data about your customer today. You can not only understand what your customers think about your organization, you can also know what your customer thinks about your competitors, what your customers hobbies are and who are their friends and what they like and so on. You can even know how your internal customers like employees and shareholders feel about your organization. This is the power of social media.

For me one of the greatest ways to capture your customer’s true voice is using social media. There are plenty of them and each has their advantages and disadvantages. Today most of the organizations have their Facebook pages, Twitter streams and so on. But these platforms are not used to capture the customer’s voice as much as they can be. This can be due to lack of knowledge, or simple ignorance. Whatever it is, it should not stop anyone knowing more about your customer.

There are number of tools developed to help you in this regard. You can easily capture information you need and analyze them. If you need more information on how to use social media to capture the voice of your customers, you can download the free PDF titled “How Social Networking Can Support Engaged, Customer Centric Retailing”. This is a content rich document by SAP. It will show you the power of social media, and show how you can use the power of social media to get the customer’s opinion, known as customer’s voice in lean context.

To download your free copy, follow the link above, click the Request Now Button. Fill in the required information. You will get the download link in email. Make sure you leave your comments after reading the document.

What Japan Tsunami taught lean experts?

Questions were popping up after the massive tsunami hit the Japan on the reliability of the lean systems. Many people, including lean experts had their say on the subject. One of the common areas all the critiques comment on is the high vulnerability of the lean supply chain to a disaster.  Even if the manufacturer doesn’t suffer, if the supplier does, then the manufacturer will have to eventually stop his production. Yes, there can be contingency plans in place. But still it is a bigger risk. Any risk for your supplier is a risk for you. Even a single day delay from one of your key supplier, will eventually bring you in to a halt. This is what exactly happened after the Japanese tsunami. Production is still not into full capacity in Toyota, and the full output is expected only in the early June. This is scary, regardless of whether you follow lean or not.

But the truth of the matter is, lean is not disaster proofed. It is vulnerable to any disaster just like any other system would be, or even sometimes little more. But let’s not forget the problems your system face if it runs the non-lean way.

When the system is not lean, you obviously will not be tightly coupled to your supply chain as you would do in a lean scenario.  You may be able to go on for weeks, even if you do not get anything from your suppliers. What this means is you have this stock in-house. In case of a disaster, you will do much damage as your entire inventory will be destroyed. But one positive is, if you have stocks to work with, you will not be halted by the problems hit your supplying means. For an example, if your ports are damaged, you will not suffer, but only if you or your supplier is hit, you will suffer.

This goes to show, each system has its own share of risk, depending on the disaster they face. But the truth is, while we plan for the possibilities, we should work on probabilities. Not every day there will be a tsunami. But lean brings you savings, efficiencies and improvements every day. Probably, when you select the suppliers, you may go for a tight geographical grouping to avoid the associated risks. Or you may find a way to keep your operations going with some other means. Just another possibility for improvement.

But for me the most important lesson taught by this event was the fact that nature is very powerful, and we must respect it.