The Lean Thinking Process

LEAN is a term used in the U.S. for what was originally known as the “Toyota Production System”.  Lean was developed by Toyota to improve the performance of their manufacturing environment. It is also referred to as lean production, lean thinking, lean enterprise, etc. 

The Lean thinking processis is realtively straight-forward and uncomplicated.  Basically, it takes a system (or process) approach to waste elimination and begins with selecting a Key Process.  That process is then mapped mapped as it operates today.  The Lean team then begins to identify sources of waste in that process by using various quality tools designed to measure and collect data.  Since most key processes are composed of several sub-process, sources of waste are generally associated with a particualr sub-process rather than the whole key process.  The wasteful subprocess is re-engineered and the changes are documented.

Finally once the process change has been tested and there is a good probably the process doess ndeed eliminate waste, Customer Pull is established.  In Lean thinking a process is not initiated until there is a customer demand for the product of the process.  By implimenting a customer pull type of system, no energy is expended, nothing is produced before it is required thus eliminated huge inventories of unused product and avoiding the spending of money before it is time…. all sources of company resource waste.   The pull system also has the advantage of allowing a company to make rapid process changes to meet changing market demands without loosing substantial sunk costs.

Continually re-implementing the Lean process results in what is refered to Continuous Process Improvement or CPI.

A Five Step Process for Improving Customer Service

All businesses have customers and those customers have free will to do business anywhere they choose.  Research confirms that manufacturing customers tend to do business more where they feel satisfied with a combination of two particular areas, service and quality. 

Unfortunately, the one place mangers most often get off track is attempting to guess what satisfies their customers.  Quality is relatively to measure, the product is either to spec or it is not.  For customer service, “knowing” rather than “guessing” what customers expect is paramount for manufacturing businesses. It is extremely important for a manger to personally observe the customer experience to get a feel for what’s working and what isn’t working.  The Japanese word for this form of observation is “Gemba” which literally means the place that truth is found. 

Here is a simple five step process for improving customer service:

1. Define the level of customer experience you want to achieve
   Do your front-line employees know what a customer is worth to the business?  For instance if a customer spends $10,000 per quarter for the next 5 years, they’re worth $200,000 to that business. Losing just 5 customers can mean losing more than a $1 million in sales. A customer’s total experience is made up of many small experiences with a supplier.  The total of all those experiences determines a happy, loyal customer or one who is lost, never to return.  Manufacturing companies generally can not compete on price alone in today’s marketplace, customer experience becomes the ultimate differentiator in making sales.
2.  Communicate the customer service mission to employees
   Make sure all employees have learned the customer service processes.  Many companies try surveying customers; unfortunately they use they try to use the feedback in an effort to catch employees doing something wrong; whereas, rewarding positive customer service is highly effective in getting the customer service point across. Making a big deal of the top performing employee goes a long way toward communicating management support for creating stellar customer service.
3. Monitor performance to ensure that service expectations stick
   Timely, frequent data monitoring is key to analyzing your company’s performance. Developing metrics to measure customer service and fredquently collecting data will ensure accurate information to make decisions with confidence.  Personal customer experience interviews are equally important.
4. Generate relevant, timely performance reports with employees
   Immediately notify evaluation results to managers and employees while the experience is still fresh in their minds helsp employees be aware of current issues.  Keep continuous records over a period of time and develop a trend analysis for reporting performance.  Such vital information helps decide if the trend is a process issue or training issue and which fix to apply.  Regardless of the data type, well-managed measurement programs validate what’s really happening.
5. Share customer feedback, give personal recognition
   Constantly communicating performance results (good & bad) creates a feedback loop to front-line employees that will reinforce the desired behaviors and your company’s commitment to high quality customer service.  Reward top employees often enough so they appreciate the gesture.

 Always remember that true understanding of your customer’s experience is business power. If you choose to improve your company’s level of service then the rewards will naturally come to your bottom line through customer retention and repeat business.  You’ll also be rewarded with new business gained through word-of-mouth.

Strong Customer Relationships result in greater profits

The American Management Association states that 65% of a business’ profit comes from repeat customers. What is so great about that, one asks? Well, most importantly repeat customers have a much greater profit return to a company than new customers. This is because it requires much less advertising cost and effort to acquire repeat customers.

Repeat customers demonstrate the quality of business business relationships each time they make a purchase or refer a business to another person. The more purchases or referrals the better the relationship is considered to be. It is easy to see why the ability to build good customer relationships is something successful businesses have in common. To begin building a good customer relationship a business and their customer must first see a mutual beneficial in working together.  It is important to note here that the two most important factors in developing good customer relationships are communication and loyalty.

Communication is defined as any contact made with a customer. This includes visual appearances, voice conversations, email, advertising, third party referrals, and business correspondence such as invoices and receipts for example. Measuring customer satisfaction is a relatively straightforward process because customers can easily quantify their feelings into understandable categories such as “good”, “excellent” or “dissatisfied”.  However, building customer loyalty is considerably more complicated because the foundation of a customer relationship is built on mutual trust and respect.

Trust is not easily defined or measured but it is easy to give an example. City residents “trust” that the police department will come to their rescue in an emergency.  We believe we can trust the police because of their past history. Every day we read about police actions in the newspaper, we see police in actions on television, we hear police stories from friends, or we may witness police behavior first hand. Moreover, police departments actually communicate to us, as their customers, what we behavior should expect from police officers. How many times have we seen the words “to protect and serve” printed on a police vehicle?

Manufacturing businesses have the same with customer relationship building issue as does the police department or any other customer driven business. When trying to build good customer relationships business mangers and employees alike must prepare themselves by learning how to communicate to the customers the value customers bring to their business. A new communication opportunity could happen when a customer contacts a business by phone or through an internet inquiry; or, it could be something as simple when a customer walks into a place of business. Not until this happens does it become possible for a meaningful dialog or communication to take place with the customer where the customer ends up understanding how important they are to the business. 

The next challenge becomes communicating the high value the business offers to the customers and even to the customers’ friends.  Hopefully the communication to the customer was clearly understood and if the customer sees high value in the business they will make a purchase. 

Constantly collecting information about what items creates value for customers and then accurately analyzing the relevant information allows a business to predict customer behavior.  Armed with the knowledge of customer preferences and the ability to make necessary business changes to be more in tune with customer needs dramatically improves customer trust and loyalty which builds a stronger customer relationship.

Word of the day: GEMBA

The Toyota Production System and similar quality systems based largely on the methods of W. Edwards Deming have given rise to a group of quality words that are becoming commonplace in the American language. 

One of the less known words but equally important words is Gemba. This Japanese term means “the place where the truth can be found.” Applied to quality management it originally meant the manufacturing floor.  The idea being that to solve a problem (in essence “find the root cause”) quality engineers must go there [manufacturing floor] to understand the full impact of the problem.

Toyota management is known for their high presence on the shop floor (the Gemba). Management presence in the Gemba informs management decision-making and speeds resolution of problems. This Gemba attitude is driven by the belief that all customer value is created in the Gemba and the quality found in the Gemba will determine the success of the company.

Glenn Mazur, in his paper, Quality Function Deployment (QFD), defined Gemba to mean the customer’s place of business. Mazur’s vision was that for any customer-driver project (or business) to truly understand their customers’ problems or opportunities for improvement; that entity must travel to the customer’s place of business (or work environment if internal) and observe.  Mazur reasoned that it was only by first hand knowledge gained using all of one’s senses to gather and process data that the truth about a problem could be revealed.  He taught that any other decision method could only be used making means of partial guesses.

Quantum Components understands the concept of Gemba and has instituted an open visitation policy to all customer and supplier visits a like.  Similarly Quantum employees are encouraged to take every opportunity to visit customers and supplers to observe first hand how others perform their work in the belief that hi-value process improvements are always based on collaboration. 

To visit the Quantum Component facilities and learn more about what we do, simply contact Danny McQuay, president or Timothy Gikas, manager of quality at (830) 997-3516 or vist www.Quantum-Components.com for more information.

How to achieve flexible resource capacity

Work begins in most organizations when orders are booked or forecasted. In the perfect business world, organizations wouldn’t begin production until there was confirmed purchase order for their good or service.  After all, when organizations take a guess at future market demand, they often guess wrong which results in wasted resources or missed opportunity. Too many wasted resources and you’re out of business. 

The ideal situation is for a company to always have the available resources necessary to meet increases in demand. Sadly, the perfect world doesn’t exist for a very logical reason.  Few organizations’ business models allow maintaining idle resources just for the sake of being flexible to market changes.

From a customer satisfaction standpoint it makes sense for a company to maintain change flexibility and be able to meet all changes in demand both up and down.  But how can that happen in a LEAN organization?  One of the best ways to maintain flexibility to change is to maintain a flexible resource capacity. The term resource capacity refers to the availability of equipment, machinery, supplies, personnel, information or other necessary resources. 

Many companies pursuing a LEAN Methodology turn to their key suppliers as a necessary part of the solution because the key suppliers business model is flexible by design.  Generally key suppliers service several different customers in one area of expertise.  Thus, when demand is reduced as one customer sees a market downturn chances are a supplier’s other customers are not experiencing the same degree of demand reductions.  Therefore the overall impact of one company’s downturn is easier absorbed collectively by all of a company’s key suppliers.

How does a company develop key supplier relationships out of their pool of suppliers?  The fact is the more a company treats their supplier as a branch of their own organization, the better able the supplier will be to work as a business partner.  The key supplier will naturally help to fulfill the company mission statement just as any committed employee would do.  

Many companies make the mistake of equating a sole-source suppler to a key supplier and are quickly disappointed.  Key suppliers will always embody a sense of sharing and will work hard to make a customer’s business a complete success.  A sole-source supplier simply has all of your demand for a product.  Which type of suppliers does your organization have? 

If a company feels suspicious that their key supplier might steal business, then that company is using the wrong supplier.  Noncompete clauses in contracts with the supplier can also help reduce the chances of someone trying to cut you out of the loop but they are by no means a substitute for a good key-supplier relationship. 

Six Sigma projects can show significant cost savings even in small departments

Excerpted from:  Stars and Stripes Pacific edition, Sunday, July 1, 2007 in an article by Jimmy Norris
YONGSAN GARRISON, South Korea —

The 8th U.S. Army held a ceremony last week to celebrate the certification of its newest Six Sigma “green belts.”Certified green belt Joseph Rushing, a work supervisor at the Materiel Support Center-Korea, explained his green belt project which was to investigate why MSC-K’s battery shop had a backlog of about 3,000 batteries waiting to be recharged and put into tactical vehicles.

The battery shop processed about 16,000 depleted batteries a year, of which about 75 percent were unserviceable. Records showed many batteries depleted quickly after being put back into vehicles.

“We also charged the full price to the vehicle expenses, as if it was a new battery, but we had no guarantee on them,” said Rushing. “Many used batteries would only last three to five months, but procedure dictated that we couldn’t get rid of them as long as they would take a charge.

”Rushing said the situation was costing about $270,000 a year in person-hours to produce batteries that could fail.He said the problem was solved last November when, instead of recharging the used batteries, the shop began selling them to a contractor for a gain of about about $9,000.

Now the battery shop no longer handles used batteries. With the backlog eliminated, they were able to reduce the processing time on a new battery from nine days to three, a 2/3 savings of all battery shop man-hours.

The shop, which had been allocated three employees, had actually been using a total of six to keep up with work load — three of whom were borrowed from other sections within MSC-K. Rushing said the new processed eliminated the backlog which allowed the shop to release the borrowed workers to sections of MSC-K with a greater need.  The battery shop will document a savings of about 8760 man-hours of labor per year.

Going Global Is Going On Today

I recently discovered a web site selling residential property in Dubai.   http://www.alineah.com/  What amazed me the most was how easy the web site seems to make it to buy reasonably priced property in Dubai.   Consider that fact, in addition to the fact that Dubai has one of the highest standards of living in the world plus the high rise apartments being advertized come with a front row view of the BARJ  (the tallest building in the world scheduled to be completed in Summer 2008).  The cost is another amazing fact.  Apartments sell for 1/2 to 1/3 of similarly priced apartments in San Francisco Bay Area or the NYC area and similarly priced to Austin TX.  For example, I  priced a 925 sq ft apartment, 1 bedroom, 1 bath, 1 parking space, 8th story view facing the BARJ and received a quote of $296,678.  This price included all costs associated with buying the property.  One more item to consider.  There are no corporate taxes or personal income taxes in Dubai.  Is it any wonder that Halliburton moved their corporate headquarters to Dubai?

These words were taken from the Alineah web site:

Multi-national companies continue to choose Dubai for their business operations. A variety of immense investment opportunities become visible day by day and this has been influenced by the fact that no corporate or personal taxes have to be paid. All this makes Dubai irresistible and recognizable as a real wonder in the new world. There is a fact that Dubai have the development in construction

Dubai is a city that is contemporarily, generous and compassionate; this keeps its doors open to the world. It offers great infrastructures like modern schools, healthcare facilities…. also it has become the new Home of various nationalities who bring their office business and cultures so that that all share the same spirit : “To live and work together in harmony“.  Dubai’s standard of living is comparable to the world’s most advanced nations which makes it one of the 21st century most successful stories.

Now if it has not already done so, it should set one to thinking about the Thomas L. Friedman book “The World Is Flat”.  The fact is, doing business all over the world is getting easier and easier for those willing to change and embrace a new way of operating their business.  Sooner or later all companies will be required to make the choice as to the way they wish to conduct business… globally or locally.  Going global will most likely require changes first in a company’s basic work processes and second in the computer technology being used.

Quantum Components has already made the choice to conduct their business on a global level.  QCL began their metamorphesis by re-organizing the company in to self-managed work teams (SMWT) plus gaining their ISO 9001:2000 certification at the same.   Their next step has been to embrace a strong Continuous Process Improvement Program and to begin building quality into the culture of the company.  To learn more about Quantum Components and their quality management system visit http://www.quantum-components.com.                                                               

Team Work Yields Customer Kudos

Big customer kudos went to Lewis Hardin and Robert Stange last week, QCL lathe team leaders, for their outstanding effort in expediting the production of a customer’s new complex part.  Drawing from over 28 years combined machining experience, Lewis and Robert collaborated after regular work hours to perfect the Citizen FL32 machine solution used to manufacture the part by identifying the most effective way to tool the lathe and write the necessary CNC machine program.

The customer’s order was quickly completed and the expedited shipment arrived in time to meet the customer’s manufacturing schedule. Several years ago, Quantum Components converted their company to a self-managed team style of operation with expectation that strong team style communications would improve Quantum’s ability to respond to customer’s needs.  

The results to date have been marked improvements in customer satisfaction and on time deliveries.  For more information about Self Managed Work Teams at Quantum contact Danny McQuay, president dmcquay@quantum-components.com, or Timothy Gikas, mgr of quality tgikas@quantum-components.com or Leslie Hoy, contract – team developer leslie@hiperformance.net.

Peer Reviews: A good idea, but there are Pitfalls (post 2 of 2)

 Process Vulnerabilities

 [continuted from part 1]

 Another problem is employees drafted for peer review groups already have full time jobs.  Where is one expected to find the extra time?  Unless peer reviews are a part of an employee’s job description or are only conducted during slack times, taking employees away from their assigned tasks to conduct a peer review automatically lowers productivity in that employee’s home area.

An outfall out of this ”pitfall” (using the rational that the company is cutting expenses by choosing only internal employees for PRGs) is that measuring the effectiveness and efficiency of their peer reviews is viewed as a low priority matter.  (Effectiveness = the defects found vs. actual defects. Efficiency = the number of defects found / per hour of peer review preparation and review).  Thus, peer review group findings often fall far sort of their true potential for creating high-value process improvements.  Even worse, the problem often goes un-noticed because no benchmark was set from which one could measure [Effectiveness & Efficiency]. 

It is imperative that top management shows strong support for the benchmarking initiative from the beginning.  If top management fails to show strong support, it is almost certain the PRGs process will be treated as a low-value initiative by employees and lower management both. It is easy to see why picking the correct peer review group and benching that peer review group’s performance is vitally important; otherwise, the “Process Improvement Project” may actually end up costing more than it saves. 

By always benchmarking the performance of a peer group it becomes much easier to select the correct mix of team member skills for future PRG sessions. If a small businesses is serious about Continuous Process Improvement then usually means collaborating with an outside entity such as customers, suppliers, or a similar business.  This allows companies to share similarly skilled employees on each other’s peer review groups. 

One of the greatest advantages of collaborating with outside entities is that it does not remove from the work force of the company being reviewed.  Thus the review is conducted in a normal “steady state” rather than an atypical situation.

Quantum Components encourages customers and suppliers alike to visit our facilities on a regular basis.  We have learned first hand how valuable and cost saving comments are to building a strong CPI program and an efficiently run company. 

Peer Reviews: A good idea, but there are Pitfalls (post 1 of 2)

Process Vulnerabilities  [ Part 1: ]

A process vulnerability occurs is when a part of the process workflow is missing, is inefficient or it is simply not working as intended. Ultimately, this vulnerability causes waste of company resource and user dissatisfaction with the product. One-way companies try to identify process vulnerabilities is by conducting peer reviews. This is a great idea in theory. In addition, typically, after a peer review group identifies process vulnerability, a Process Improvement Team is dispatched to the fix the identified problem and life goes on. Unfortunately, for small companies the idea of Peer Review Groups has pit falls, which must be considered.

the Pitfall:
Companies tend to define peer review as intra-company groups (I.E. one department is asked to review the next) which limit PRGs to only internal employees. Company leaders often use the cost cutting rational: By drafting existing internal employees for PRGs, it saves valuable time and labor expense over the expense of using outside reviewers.

Using only internal employees has potentially severe ramifications from the start. Small companies typically do not have multiple experts in each work process but rather they have a few experts for many processes. Therefore, it is highly unlikely that a peer review groups will be composed of experts in the exact process being reviewed.
(end part 1)