We first met Andy Ward when he was struggling to save his plant from closure at the beginning of the book The Lean Manager. Since then he has helped lead a complete lean transformation at his company Nexplas; and recently, in the new book Lead With Respect, he plays sensei to Southcape Software CEO Jane Delaney as she struggles to transform her people through the use of lean methods and practice. In this interview Ward shares some of his thoughts on what he has learned. This is Part 1 of our interview with Ward. Stay tuned tomorrow for Part 2!
Hi Andy. In Lead With Respect, you’ve kindly shared with us many of your insights about the attitude a leader has to adopt to make lean work—
Ward: Yep, it’s all about people. Whatever you implement, what is the mission of the operator? How does it look from the value-adding cell? How will it work for customers? How can we link the smile of the customer, every day to team member’s insights on how we do the job?
Hmm, yes, thank you. In order to discuss attitude, you seem quite confident of the practical steps with which you introduce lean thinking in a new facility. Would you share some of that learning?
Ward: As to that, it’s not so complicated. First you focus on safeguarding employees, then protecting customers from whatever the company does to them. As quickly as you can you control lead-time and then work hard at reducing it. This will make all sorts of hidden costs appear, which you have to work with team members to eliminate. In the process they’ll learn to think more deeply about their own work and come up with suggestions that can completely change the way we look at operations.
Do you mind if we take this step by step? What do you mean by safeguarding employees?
Ward: Accidents, of course. And professional illnesses. People don’t come to work to get hurt, so the first thing to focus on is eliminating accidents. I ask my managers to immediately call me when there’s been an accident and to have a very specific analysis done in the next 24 hours. The first place I go to when I visit the gemba is where the last accident happen and we work very hard at understanding why it happened, as a team – from plant manager to team members. As a result, dangerous conditions and dangerous movements become apparent and then it’s a question of being persistent with ergonomics kaizen. No matter how long you go at it, you still find things to improve and people to teach. To me, this is the fundamental moral contract with employees. I will work with them on improving safety conditions and they will make an effort to follow safety recommendations. In doing so, we get to know each other pretty well!
Protecting customers from what the company does to them? Doesn’t that seem a bit harsh?
Ward: Harsh? Maybe, but when you’ve investigated as many customer complaints as I have you kind of wonder. As with accidents, the challenge is to reduce customer complaints by half every year. Customer complaints are always very interesting because customers who complain go out of their way to educate you about what matters to them. So the question is how fast can we learn? Very often, the company has done something to the unhappy customer for all sorts of internal reasons – mostly local optimization stuff. So the first step is to realize that the service department is the foremost learning platform you have in the company, and then focus on understanding every single complaint. As long as you’ve not understood exactly how the product, or service, got in the way of the customer doing what they wanted (whatever that was, and it can be weird), and you’ve tracked it back to either an operator mistake, a machine malfunction or a straightforward design cock-up, you’ve not learned. Now, the attitude problem is NOT GUILTY. There is naturally a lot of understandable defensiveness around complaints, and the role of the leader is to turn the investigation away from the blame game to exciting opportunities to learn. So, ask why, not who! And for pity’s sake stop evn intending to “educate customers”! We need to help them do what they want to do with our products, not teach them to use our products correctly!
About controlling lead-time? What does it even mean?
Ward: Delivering on time, basically. Lead-time breaks down into three components. First, there is customer lead-time – the time it takes to deliver at the customer’s from the moment the customer sent the order. Then, there is the production lead-time from the moment the customer order is in the system to the moment the part is made and ready for shipping. Finally, supplier lead-time is the time it takes for the supplier to deliver from the moment we’ve sent the order. One way of dealing with each of these lead times is to hold inventory, so that when an order comes, we can dip in a stock and ship. The stocks are replenished by batching, to optimize unit cost by maximizing equipment utilization. The lean way, of course, is to produce one by one on demand by reducing change-over costs. Most operations are somewhere in between these two extremes. The lean trick is that by reducing lead-times, we discover all sorts of inefficiencies, so delivery goes up and costs go down. However, we’ve found out the hard way that controlling lead-time, which is making sure parts are produced when they’re supposed to and not before or after, is the key to reducing lead-time safely.
The key to controlling lead-time is to set up a pull system as quickly as possible to visualize where we’re producing ahead of customer demand, and where we’re behind. A pull system with kanban cards is a contraption that lets us visualize the takt time, the tempo of customer demand, and so fight to reduce gaps – and try hard to stick as close to takt as we can – or pitch if we’re batching. In practice, this involves a lot of kaizen with team members to solve endless operational issues.
I see. Once you control lead-time, you can reduce it?
Ward: That’s it. With a pull system in place we can start taking kanban cards out and reducing batches. This will accelerate the flows and move us closer to the ideal of single piece flow through and through. At this stage, you hit the real endeavor of lean, as none of this is quick. First you have build the pull system, which can be a fight, but is a definite task, and then you seek perfection by tightening it. At this stage, persistence and good relationship with team members are critical because inventory is usually the symptom of a lack of specific process mastery. Not only do you have to reduce change-over time by doing SMED-type of kaizen, but you also have to improve step-by-step the reliability of the production processes. It’s an uphill climb, but incredibly enriching from the point of view of developing individual skills and, ultimately, firm capabilities.
So, as with quality issues, you now delve deep into problems that tend to involve team members, manufacturing engineers as well as product developers. To me, this is the real work of leaning the company. What I do every day is to keep up the drive to reduce lead-time without pushing too hard and discouraging teams. A balancing act, of sorts. But I have to say that although I tend to encounter resistance in the early phases of setting up the pull system, when it in place and people start working with it, they often surprise me. And the same goes with supplier lead-time. Once procurement has milk-runs with suppliers in place, the whole improvement spirit changes, and real collaboration starts to appear, even across company boundaries.
Which is when you get the cost benefits?
Ward: Sure, learning can only be measured by the results of action. By example, we can only see that we’ve improved safety is absenteeism goes down. This is a hard measure of the fact that people have fewer accidents, get fewer injuries and are less troubled by bad ergonomics, as well as by the fact that morale is high, so people will go the extra mile to show up for work even though they’ve run into a personal problem. Absenteeism has a large effect on our costs, both in terms of replacing missing team members and the disruption this creates. Therefore learning to create a safer work environment will ultimately show up in lower costs.
Better be lucky than good and often we stumble on low lying fruits early on, but yes, once the pull system is used to spur further kaizen we discover costs we’d not even considered before. Quality improvement drive sales, if you wish, and then as batches reduce, inventory goes down, and cash improves, quite spectacularly sometimes. But ultimately lean is about, well, lean, and reducing the costs every product carries. I tend to look out for material costs, capital costs and labor costs in that order. Every time we get closer to just-in-time we discover new costs, such as, for instance, having idle cells because the manufacturing tools are not flexible enough which means we have to move production team members around. This is not only a waste of their time, a labor cost but also a huge capital cost as the facilities need to be much larger than necessary, with all the related costs this involves. The fundamental insight is that kanban is a tool of kaizen, not the other way around. We should not improve in order to have a kanban system running and then move on. We keep taking cards out in order to have the pull system fall over and to bring everybody together in doing more kaizen and peeling the cost onion one layer at a time. This is what makes us lean.