Lean Business Specialists - Nestadt Consulting

Wise Words - New Angles

A summary of Dr Richard Schonberger's presentation

Melbourne September 2004

By Kevin Nestadt, Rebekah Smith & Barrie Dempster

Is Lean losing it's way?

Schonberger presented his research showing long term public company inventory turnover trends as a powerful and classic measure of "leanness", and that this correlated closely with "competitiveness", and in some cases, share price performance.

Recent trends however showed that few companies "get it", and that the trend towards Lean has stalled. Corporate stars however include Dell Computers and Wal-Mart who have continued to increase their inventory turns despite high growth, & global supply chains.

In contrast, the giant of manufacturing competitiveness, and innovator of lean concepts, Toyota, has experienced reducing inventory turns.

Some reasons why "Leanness" hasn't persisted in many of our companies? complacency, lack of investment in training & management turnover.

The thread of Schonberger's presentation were the 16 World Class Principles (WCP) to which he attached stories, examples and pictures. These are 16 benchmark areas of world class, each with a rating scale of 1 - 5. For more information on the WCP, or completion of the WCP, click here...
World Class by Principles

Back to Basics

Schonberger emphasized that inventory reduction only comes with intensive management of the basics, and that it is these basics that are not highly evident, if at all. i.e. 5S, setup time reduction, quality, TPM, multiskilling, cellular layout, JIT/kanban, customer/supplier linkages etc.

To illustrate this point he asked the audience:
(1)How many of you believe changeovers are an important part of your competitiveness?
(2)How many of you monitor each and every changeover time?
To question 1; many raised their hands - to question 2 - very few.

He talked about the 4 P's of TPM being Preventive, Predictive, Periodic and Personalised, with first responsibility going to the users of the equipment

"Don't set inventory reduction goals" he asserted, "as these are easily manipulated, and a reflection of multiple improvement initiatives". He talked about the need to address JOINT customer/supplier inventory, not just internal inventories.

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Priorities

To achieve improved competitiveness/leanness he recommended "firing" unworthy customers, products & suppliers. Increasing the organisation's focus on money making customers can have far more impact than anything one can do inside the business

Training is the best investment a company can make. Learning is critical and can also happen through visiting suppliers and other companies, joining professional associations and collaborating with other organizations.

He emphasized that organisations need to focus OUTWARDS on "customer/supplier" collaboration as the main source of competitiveness", with the main thrust on "ever better quality, quicker response, greater flexibility, and higher value".

He talked about getting face-to-face with people, internally & across the supply chain not only via electronic means, as has become so popular these days.

Quality

"In God we trust... all others must bring data" Deming

"Torture the data and it will confess" Anon

Some of the "back to basics" quality suggestions included:

Collect data continually to know where to focus efforts.

Train employees to collect data and make improvements.

Acknowledge that 85% of all problems are not due to employees.

Use skill charts, focus on cross training then job rotation.

Connect staff with customers and their needs

How to Compete against Large Organisations, Low Cost Nations?

He said that "while small companies have many advantages over large ones... big company's are fat, slow and inflexible - they typically are scoring well on the WCP scale... smaller companies don't seem to have the knowledge, bigger companies have experienced people, are members of associations, & use consultants..."

Local manufacturers also have advantages over low cost nations including China. They can respond quickly to changing customer requirements (hourly, daily etc) , work "hand-in-glove" with their customers, and provide more integrated technical support. Supply chain inventories can also be minimised.

The global sourcing paradox is that price, quality & delivery are matched by costly inventory (on the sea, in warehouses) for quick delivery & inspection for quality. Advanced sourcing requires lean/quick suppliers who are likely to have good process quality.

Sourcing from "low cost nations" is often justified by significant labour cost savings. He said that while labour as a % of total cost is increasingly less significant, it is people practices (multiskilling etc) in these low cost countries that are often not progressive. He cited evidence of labour inflexibility, many single task jobs, social dissatisfaction & high labour turnover. One Chinese case study showed the extent of labour time losses & waste due to the high number of workpiece hand-offs.

Performance Measurement

During his visit here, we visited a number of companies in Melbourne's South East, and I could see him becoming increasingly frustrated at seeing measures such as throughput & efficiency on visual scoreboards. Exasperated, he finally told one management team that "these numbers were management performance metrics, and workers simply did not relate to them... workers were interested in numbers such as quality, and things they could do something about..."

He said we should acknowledge that shop people think differently - that satisfaction is achieved by being able to say "we got all the orders out today" not "productivity was up 5%" . It is easier for staff to rally around customer concerns.

Schonberger summarised that "the best control system relies on the fewest of controls. He talked about realtime feedback, and the need for customer feedback, for example, to go directly and quickly back to the source.

Lean Champions and Sustainability

Schonberger said it was critical to have good people to help drive improvement and that organisations would have to keep their "lean teams" challenged. "You either use them (lean team or lean champions) or lose them". He described a situation where a "lean champion" had been poached by another company partly due to the first company not wanting to grow.

Training staff at all levels will ensure the "lean" momentum is sustained, even if senior management changes. "Empowerment is better than endullment"

Nestadt Consulting & Dr Richard Schonberger

Kevin Nestadt is an affiliate of Dr Schonberger and has used the World Class by Principles Benchmarking tool for over 10 years. He has also helped to contribute data to Dr Schonberger's book "World Class Manufacturing - The Next Decade". Kevin has helped to bring Dr Schonberger to Australia in 1993, 1994 and again this year.

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Acknowledgements

We would like to acknowledge Sandra George and her team at South East Networks, City of Greater Dandenong, as well as Archie Cowan of the Victorian Government's Office of Manufacturing for helping to make Richard's trip to Australia a reality.

And of course, we would like to thank Richard Schonberger himself for travelling half way around the world, generously sharing his knowledge and experience and for his enthusiasm for a dawn-to-dusk work schedule. Much appreciated Dick.