Lean allows you to bring the customer directly onto the shop floor so that the associates who are actually making the product can see and feel the actual customer demand in real time. While this may seem like a simple concept, and makes a lot of sense, it is almost the exact opposite of how most traditionally managed companies do business. In fact, I could go so far as to say that most traditionally managed companies do not understand this at all; and even if they could grasp the concept, their organization and systems are so far removed from this that it wouldn’t take them very long for them to just reject it out of hand.
But why? In the old “craft” days, if you wanted something made, the best way to get it done was to go directly to the person who made it and place your order. The closer you were to the production source, the better off you would be. Unfortunately, as companies evolved and things got more complicated, we drifted away from this. Some automation occurred, and we came to rely more on machines, moving from a “craftsman” making a complete product, to various departments making only component parts that would later be assembled into a final product. For productivity’s sake we organized our equipment into functional departments of the same, or similar, machines so that we could realize the savings from having one man run more than one machine at a time. The emphasis was on how many pieces per hour a machine could produce. The faster the better, regardless of demand.
Because the machines were grouped in departments by type of machine, each functional department was focused on making only component parts and not the whole product. The setup times varied by type of equipment, and were a secondary thought to the main thrust of how many pieces could be made per hour. The long setup times forced companies to make things in batches to minimize the down time caused by long setup times. In addition, the fact that the functional departments could be a long way from each other, physically, meant that component parts had to travel long distances to become a finished product. This required sophisticated production planning, and only exacerbated the long lead times required to make a final product due to the batching and long setup times.
The bigger failure, however, was that this structure, and batch approach, forced companies to separate the customer from the shop floor by design. Just think about it: with functional departments, long setup times, long travel times and long lead times, where would you plug the customer in anyway? Companies facing these conditions would separate the production floor from the customer all together. MRP and various forecasting systems helped to cement this reality. The shop floor was totally separated from the customer and was told to “just make the forecast.”
Production of course had little input into this forecast, typically came from Marketing and Sales. Production was expected to just shut up and make the forecast. The fact that the long lead times always forced the forecast to be wrong was seen as a different issue. “We need a better forecasting system.”
And that is where most traditional companies sit today; making big batches to hit a forecast that is almost always wrong, with little direct connection between the actual demand and the people who build the products to satisfy that demand. This of course results in having way too much of some products (which will eventually lead to inventory write-offs) and not enough of others, creating stock outs and unhappy customers.
So how can lean change that and bring the customer back into the equation? Well, it won’t happen overnight; and it will never happen if you think of lean as just a cost reduction program and not as a business strategy.
You have to start by understanding that what you are trying to do is deliver more value to the customers. In order to do this better than your competitors you have to be focused on removing the waste from your own operations always. You can start with the 5s and get things cleaned up and organized. Next, focus on setup reduction for every piece of equipment. Our experience at Wiremold showed that we could achieve about a 90% reduction in setup time on almost any type of equipment after a one week kaizen. That gave us the basis to initiate flow throughout the organization. We set up one-piece-flow cells where a small team of people could make the product complete from raw material to in the box in a very short time (minutes not weeks) with very little travel distance.
We reorganized away from functional departments to value stream (product family teams in our case) teams where the team leader had all the equipment necessary to make the products in his/her product family complete from raw material to shipping to the customer. These steps cut the floor space we needed by about 50%, increased our capacity, shortened our lead times (from 4-6 weeks to 1-2 days), greatly improved our quality and drastically lowered our costs.
All that was nice, but what we really wanted was to deliver more value to the customer. That meant we had to have the customer present on the shop floor where everyone could see and feel his demand. To do this we created a kanban quantity for every single SKU (we had about 35,000 of them). For example, for high volume products one kanban might equal a full pallet of product. For smaller volume products, it could be 30 boxes or maybe even 5 or 10 boxes. Once these kanban quantities were established, then every time the new orders coming in throughout the day reached a kanban quality for a certain product, a kanban card for the proper quantity would print in the cell where that product was made. The cell leader was then responsible for getting it made as soon as possible. With very short (1-3 minute) change-over times we could switch quickly from one product to the next.
We discontinued using the MRP system to release orders to the floor. The only way something got made was when the next kanban printed out and in effect said, “make me next.” Because the kanban cards were directly connected to the orders coming in throughout the day, our various production cells and the people in them could feel the customer demand in real time as it was happening. We in effect brought the customer directly to the shop floor. This allowed us to engage everyone in our quest to deliver more value to our customers than our competitors could. Having the entire workforce engaged in this effort is the key to success. You can’t do that if you separate the customer from the shop floor. But, once the customer is present, it is amazing how well all our team members responded to his demand.
In the quest for productivity most traditionally managed companies have organized themselves into functional departments of similar types of machines. They take setup time as a given and thus produce in big batches. The majority of the workforce never sees the final product but just make various components. Production then is made to forecast, not demand, and the customer is totally removed from the shop floor via MRP and forecasting systems. The lean approach reduces setup times, creates flow, improves quality, lowers cost and drastically shortens lead times. A good kanban system allows you to convert customer orders as they come in throughout the day to kanban cards printed in the cells where the product is made. This in effect brings the customer directly to the shop floor in real time and allows all associates to feel the real demand.