I came across a very interesting article over on the Ensia site titled Manufacturing Goes Lean and Green written by Justin Miller.
The article focuses on Highwood -- a manufacturer of synthetic woods -- that considers its product and its manufacturing facility environmentally friendly.
Although the company was designed as a "green" operation, it started embracing Lean methodology years after inception and here are the results that grabbed my attention:
"In 2009, for example, Highwood cut its energy consumption for lighting by more than 50 percent just by retrofitting its facility with high-efficiency fluorescent light bulbs. With help from MEP (Manufacturing Extension Partnership), the company installed solar panels, which now provide about 20 percent of its energy needs"
"Highwood not only has reduced its landfill waste by 70 percent, but has reduced monthly removal fees by roughly 65 percent."
I'm sure these results came after embracing nontraditional mindsets, which certainly evolved the culture within the organization. The most important test for Highwood will be sustaining and expanding this new culture of challenging the traditional way of thinking.
I am always interested in hearing stories about organizations that are combining their formal Lean initiatives with "green" policies as it is proven to be the natural extension of Lean thinking and implementation.
What are your thoughts on this article? Do you think Lean initiatives can ultimately lead organizations to "closed-loop, zero-waste processes"?
I came across a very interesting article over on the Ensia site titled Manufacturing Goes Lean and Green written by Justin Miller.
The article focuses on Highwood -- a manufacturer of synthetic woods -- that considers its product and its manufacturing facility environmentally friendly.
Patrick Graupp, the foremost thought leader on the topic of Training Within Industry (TWI), has authored an important new book titled Building a Global Learning Organization: Using TWI to Succeed with Strategic Workforce Expansion in the LEGO Group. He wrote the book with two coauthors, Gitte Jakobsen and John Vellema, both employed by the the LEGO Group. The book completely outlines the actual organizational and planning models used by the LEGO Group to build a true Global Learning Organization.
I recently met with Patrick at the 2014 TWI Summit in Nashville and asked him: Why should a multinational company develop a Training Within Industry (TWI) program? What makes LEGO’s unique? Here is his complete reply:
Companies struggling to achieve and sustain gains from their Lean programs have come to realize the vital role Standardized Work plays here and just how difficult it is to achieve. It takes tremendous amounts of skill and effort to get literally everyone in an organization performing tasks in the same way. When this vision of consistent processes and performance expands to include facilities in different countries, with varying languages and cultures, the complexity magnifies exponentially. However, as the LEGO Group recognized when they began to rapidly expand their worldwide production, children don’t care whether their LEGO pieces are made in Denmark, Hungary, Mexico or China, but they have to all fit together perfectly and this requires stable quality across all production sites.
What the TWI programs, especially the Job Instruction element, give to this multinational effort is a “common language” around which leaders and operators can communicate effectively. By creating a simple but clear structure for “breaking down” a job into its essential elements, the What and the How and the Why, and then providing an effective “4-Step Method” by which any person can be trained in that job, TWI has allowed any LEGO associate regardless of where they live or what language they speak to learn the job identically to any of his or her counterparts, even in facilities in separate countries. While employees are being trained in their various native tongues, of course, the content and methodology of the training is consistent following the TWI method.
What is truly unique and special about the LEGO Group is that in implementing their global training system they made the conscious decision to regard equally all LEGO employees around the globe thus abandoning the old culture of “headquarters knows best.” This was no easy task. But it embodied the Lean philosophy of Respect for People in the most fundamental way -- across borders and cultures. As one top executive is quoted in the book expressing this new approach: “Any employee of the LEGO supply chain should be able to move from any factory to any other factory and notice nothing else but the language and the local temperature.”
In my own personal experience teaching the TWI courses around the world, everyone understands and agrees with the principles embodied in the TWI methods. In other words, they transcend differences in cultures and attitudes and represent what is fundamental to people from any society. With these foundations in place, TWI skills allow leaders in any country to effectively lead people by building strong relations that lead to good results. When a multinational company attempts to implement their own vision of leadership and business overseas, they would be wise to bring these methods with them.
What do you think of Patrick's reply? Has your organization instituted any type of TWI program?
A new book by Tim Hutzel and Dave Lippert titled Bringing Jobs Back to the USA: Rebuilding America’s Manufacturing through Reshoring was published this month. This book continues the theme of their first book, Keeping Your Business in the U.S.A.: Profit Globally While Operating Locally.
As many US businesses have relocated operations to different parts around the world for supposedly cheaper labor costs and materials, I asked Tim and Dave why should a US company now consider reshoring and reestablishing its manufacturing back in the USA? Here is Tim and Dave’s response:
Some reasons may stem from the original motivation to offshore. Was it strictly cost? If so, what costs were considered? In many cases, the labor cost was the driving force. If that is the case, then looking at the current offshore labor costs, as well as the near term labor cost trend, may paint a very different picture from the original. The rapidly rising middle class in China is eliminating that country’s labor cost advantage.
Another cost is transportation. Energy costs have increased markedly from the days when many companies began their offshoring operations. This is another development that may make domestic manufacture appealing.
Travel costs and time spent coordinating with offshored production are trackable and must be included. While travel costs are calculable, the opportunity costs are probably ignored. That is, could executives traveling to offshored locations be using that travel time in much more productive ways? Also, could the staff time spent dealing with offshore production issues, including complicated logistics, be more productively spent on other matters?
There are also hidden costs that burden the offshoring company in ways it fails to recognize. Scrap and rework can be immense and also unpredictable costs. Do batches of product arrive and sometimes need rework? When that happens, are those costs tracked accurately and reflected in the actual cost of the imported product? What about outages – are there times when product is en route, and stock outages occur prior to arrival? What is the cost of an unhappy customer? Are customers driven to competitors’ products? That can be an unacceptable cost. It can also be difficult or even impossible to measure.
Is the cost of stocking large inventories completely and accurately covered? To avoid outages, extra stock may be kept and stored. Is stock sometimes damaged, or even lost, and are those costs captured? Is a heavily stocked product susceptible to obsolescence through design changes?
Perhaps the most difficult costs to identify are those that result from the distance between production and design/engineering. Are product improvement opportunities lost due to the disconnect between these two entities? Are there quality problems that result in substandard product, which can lead to lost market share? How can such subjective or camouflaged costs be measured, even though they are very real? Sadly, we are convinced that costs like these have been left out of the offshoring equation for many companies.
What do you think of Tim and Dave's points? Do you think that the era of US companies locating their operations offshore because of supposed cheaper costs are drawing to a close?
I had an opportunity to talk with Norton Paley about his just-published book Clausewitz Talks Business: An Executive’s Guide to Thinking Like a Strategist. I started with the obvious questions: “Why did you select Clausewitz?” and “What influence does his concepts have on today’s business problems?” Here’s his response:
Carl von Clausewitz is regarded as one of the greatest Western military thinkers. Many eminent scholars consider his epic 1832 classic, On War, the most distinguished Western work on war ever written.
In recent years, his insightful concepts have gained serious attention among business executives, as have other military classics, notably Sun Tzu's The Art of War. As significant, interest has spread from the C-suites to the lower echelons of organizations as individuals increasingly accept the parallel of how military concepts apply to business.
I've taken Clausewitz’s original text and interpreted and transposed his most durable ideas on leadership and strategy to help executives think like strategists. To my knowledge, this book represents the first serious effort to tap into his entire work and extract his remarkable lessons on strategy for business application.
Readers can now see how to integrate his lasting historical references with modern business practices and thereby uncover potential solutions to some of today’s more critical competitive problems.
“Can you give examples of Clausewitz’s better known concepts?”
Here are some of his timeless principles:
• In conflict, even the ultimate outcome is never to be regarded as final. The outcome is merely a transitory evil for which a remedy may still be found in a variety of possible conditions at some later date.
• Two basic principles underlie all strategic planning: First, act with the utmost concentration; second, act with the utmost speed.
• What matters is to detect the culminating point of actions with discriminating judgment.
• Action in conflict is like movement in a resistant element. Just as the simplest movement, walking, cannot easily be performed in water, so in conflict it is difficult for normal efforts to achieve even moderate results.
• The opponent’s capabilities must be neutralized; that is, they must be put in such a condition that they can no longer carry on the conflict.
• Just as a businessperson cannot take the profit from a single transaction and put it into a separate account, so an isolated advantage gained in conflict cannot be assessed separately from the overall result.
“How would you sum up the advantages of your book?”
The central aim of the book is to help individuals think strategically about such managerial issues as human behavior, leadership, and organizational culture. If the book provides executives with a better understanding of how to face up to competitive struggles and apply appropriate strategies to outmaneuver the competitive obstacles they face, its purpose will have been achieved.
What do you think of Paley's interpretation of Clausewitz? What books have influenced your business leadership and strategy?
Why are many of our organizations almost allergenic in their responses to innovation? Why do we penalize those courageous individuals who challenge the status quo by swimming against the tide? What can we do at work to ensure that dissenting voices speak up and make us reflect on where we are going and what we are really trying to achieve?
I recently put these questions to Bill Templeman, author of the just-published book, Leadership Basics for Frontline Managers: Tips for Raising Your Level of Effectiveness and Communication. I wanted to know why this dynamic happens and what managers or anyone in a leadership position can do about it. Here is his complete response:
All organizations with any sort of hierarchy are prone to believing in their visions and plans for the future; the stronger the culture, the greater the belief that “We are on the right path!” It is no secret that business plans become documents of faith, just like party platforms become documents of faith for politicians. The CEO of a major hi-tech firm recently said that he measured his executives’ teamwork skills by assessing their degree of commitment to the corporate business plan. But what if this plan is flawed?
Admiral John Godfrey, the former Director of Britain’s Naval Intelligence Division, in analyzing "Operation Mincemeat," a highly successful World War II espionage operation, identified two major weaknesses of the Nazi’s command structure: "wishfulness" and "yesmanship."
Wishfulness is that tendency among individuals and organizations to believe information that supports their own view of reality while simultaneously to reject all contradictory information. Yesmanship is the tendency of those with less positional power to agree with those who have greater power, mainly out of fear. Yesmanship is an enabling behavior for wishfulness.
What can we do to ensure that wishfulness and yesmanship do not distort our business planning and decision- making? How can we encourage people to speak their truth?
• Be the change you want to see in your people. If you want the truth, you must speak the truth and be the truth.
• Encourage debate and dialogue. Welcome ideas that conflict with your own assumptions.
• Hire people who are likely to disagree with you on business issues.
• Instead of arguing with dissenters, ask for explanations of their thinking.
• Treat everyone according to a set of worthwhile values.
• Build a culture of trust by demonstrating trust.
• Show your commitment by demonstrating everything you believe in through your own behavior.
• Cherish your dissenters and critiques.
How far would Bill’s ideas go in your organization in terms of encouraging new thinking that goes against the current? Are there other ways you could discourage the toxicity of conformity at work?
Joao Neiva de Figueiredo and Mauro F. Guillén recently edited and published a book titled Green Power: Perspectives on Sustainable Electricity Generation, which provides a systematic overview of the current state of green power and renewable electrical energy production in the world.
During a recent conversation with Joao Neiva de Figueiredo, I asked: "What are the key considerations for adoption of sustainable power generation practices around the world?”
Here is his very enlightening response:
In analyzing different examples and situations of power generation around the world, it becomes apparent that some conditions favor sustainable energy practices:
1. Consistency with a country’s or region’s geographic, climactic, anthropological, historic, and social characteristics. Understanding a country’s natural and cultural endowments is necessary for the development of a successful green energy set of policies. Electricity generation technologies must be consistent with a region’s environment. For example, the fact that important energy sources in Iceland are geothermal, in Canada and Brazil are hydro, and in Denmark are aeolic, indicate paths to success in each of those parts of the world.
2. The need for a systemic approach when considering the mix of different potential generation technologies to be adopted. It is necessary to consider the interaction among the different components of the electricity system (generation, transmission, distribution) and of those with a country’s traditions to propose sustainable programs. For example, Germany capitalized on a strong bottom-up sentiment in favor of green energy (resulting from a cultural tradition of respecting nature) to implement successful policies.
3. The advisability of incentive alignment not only among different stakeholders at each point in time, but over time. Because power generation projects need high levels of capital investment, take time to be developed and built, and have a very long useful life, consistency of policies over time is extremely important. Northern European countries have provided a positive example of this as energy policies benefited from continuity (albeit with slight adaptations) even as different political parties alternated in power. The counterexample is French Polynesia, where in the first decade of the millennium alternating political parties in power led to inconsistencies in energy policy.
4. The desirability to continue research and implementation efforts to mitigate the negative effects of fossil fuel. Because some countries do not have natural endowments favoring the immediate adoption of green energy sources, there will be a transition period during which fossil fuels are a major component of energy generation. China’s efforts to improve “cleaner coal” generation technologies alongside the effort towards wind and solar generation are a case in point.
5. The necessity for increased efficiency in energy consumption. It is encouraging that in recent decades some countries (albeit few) have been able to decouple their per capita GDP growth rate from their per capita energy consumption rate. The path towards a sustainable world is not limited to electricity generation: better use of energy generated is also a requirement.
What do you think of Joao's explanations? How has green power production and dissemination in your part of the world affected your business? Has your organization established a "lean and green" initiative?
David M. Anderson recently published a book titled Design for Manufacturability: How to Use Concurrent Engineering to Rapidly Develop Low-Cost, High-Quality Products for Lean Production, and I just had to ask him a few questions, such as: Don’t all manufacturing companies design products for manufacturability? How could they not? Why will all manufacturing companies benefit from a book that shows them how to design products for manufacturability?
Here is David’s complete answer:
Engineering schools usually teach students to just design for function. This book completes that education by showing company engineers, and their managers, how to also design for low cost, design in high quality, enable Lean production with standardization, and design for fast ramps to stable production.
Of all of these goals, cost is the most misunderstood to the point that counterproductive policies can actually raise total cost. For example, pressuring engineers to lower "cost" but primarily quantifying only parts’ cost will encourage them to specify cheap parts, which will raise quality cost even more. Another cost myth is that cost can be easily reduced after design, but the book shows that 80% of cost is determined by design and that trying to reduce cost later drains resources from new product development and introduces many new variables that will delay product development and raise many other costs.
The book shows management how to structure new product development efforts so that design teams: (1) have enough multifunctional resources available early to work together in complete concurrent engineer teams and (2) have a higher proportion time up-front time to do a thorough design that avoids delays to fix things later and, paradoxically, gets products faster to paying customers.
A key element of this thorough up-front work is to optimize product architecture and develop families of products so that Lean production factories can quickly and easily build many standard product variations (build-to-order) and specials (mass customization).
How does your company determine product costs? What are your biggest barriers to fast product development?
Chris Harris recently co-authored a book titled Capitalizing on Lean Production Systems to Win New Business: Creating a Lean and Profitable New Product Portfolio, which can help an organization take its current Lean knowledge and translate it into a step-by-step methodology to win and launch new business. I asked Chris: “Why is it necessary to plan for new products in the context of a Lean enterprise system?” Here’s his answer:
Production facilities that have had success implementing their Lean enterprise systems may have more to gain by utilizing their Lean thought process to quote and win new business; planning in a Lean context can take place before the new product ever hits the production floor. Common questions can now be answered in the context of a facilities’ current Lean enterprise system.
For example, those in a Lean facility have likely gained an effective understanding of their machine capacity through the optimization of their equipment utilizing small batch production. They may have an efficiently run plan based upon the most efficient changeover sequence. If they do, when a new product comes about, they must investigate how that new product would fit into the sequence to effectively know how the new product will fit into their production system.
There are other issues to consider, such as:
• How will this new product flow through the current production system? A rough value stream map may help with this question.
• Where will the purchased parts be purchased, how much will they cost, and how much inventory is needed? The Plan For Every Part (PFEP) may help to determine location, cost, and delivery frequencies leading to an answer to this question.
• Will people need to be hired or will the current amount of labor be sufficient? Standardized work for the new product before it is ever produced may help with this question.
• How will the final assembly areas and work-in-process (WIP) areas receive their material for production and be scheduled for production in the current production system. Understanding the importance of a timed delivery route utilizing a tugger and how a new product fits into that route may help in answering this question.
• How will you ensure that the new product is launched successfully on time? Constructing a plan with a three-team approach to develop a new product acquisition and launch plan may help in this area.
These are certainly not all of the areas that must be considered when attempting to win new business, but they do offer some insight in to how a Lean enterprise system can systematically plan -- not only how to win new business, but how that new business will fit into their current system and be profitable!
What do you think of Chris's ideas on creating a new product portfolio? How do you think an effectively running Lean system within an organization can help secure new business?
Nick Katko recently published a book titled The Lean CFO: Architect of the Lean Management System, and it fully explains why chief financial officers (CFOs) must rethink their traditional management accounting systems. During a recent conversation, I explicitly asked him: "What are the basic reasons why a CFO, who works for a company engaged in a Lean Initiative, must become a Lean CFO?" Here is his complete reply:
Lean is a money-making business strategy. Companies that adopt a Lean business strategy are successful because they accomplish two tasks very effectively. First, they employ Lean practices everyday, everywhere, all the time. On a daily basis, the Lean company focuses on three tasks: delivering value to its customers, flowing all business processes, and relentlessly eliminating waste. Second, the leadership of the company clearly understands exactly how Lean makes money and communicates the link between Lean practices and more profits to every employee in the business. They understand the economics of Lean.
The economics of Lean can be explained in basic terms of supply and demand. Let’s look at demand first. By focusing on creating and delivering customer value, the demand for your company’s products or services increase and you command better prices. Financially, this means the growth rate of your revenue should increase compared to your historical growth rate and should be better than industry averages.
The supply side of the equation focuses on your supply of resources. Your supply of people, machines, and facilities are responsible for creating and delivering customer value. By focusing on creating flow and continuous improvement, the productivity of your resources will improve dramatically. Using Lean practices to create flow means that resources will maintain productivity levels regardless of short-term fluctuations in demand. Continuous improvement practices mean that the productivity of your resources will achieve consistent annual improvements in productivity of 10% to 20%.
The financial impact of maintaining and improving your resources’ productivity is that the rate of increase in the cost of those resources (i.e. your operating expenses) will slow down and be less than the growth rate of your revenue. The difference in growth rates between revenue and costs means your company will make tons of money with lean.
So where does the CFO fit into all of this? As CFO, you chart the financial strategy of your company. Whatever the business strategy, you need to project the financial impact of the proper execution of the strategy. You also have oversight of the management accounting system: the measures and methods that are used internally to measure how well a company is performing at any time. How you present the financial benefits of Lean and how you determine how to measure it will be the determining factor of whether a company adopts Lean as the business strategy or thinks of lean as “part” of a business strategy.
As the Lean CFO, you need to understand the economics of lean so that you can align the financial strategy with how Lean makes a company money. You must make the necessary changes to financial measurement and reporting systems to measure the execution of the Lean business strategy. I believe this is the single most important factor that prevents companies from realizing the true financial potential of Lean. Your ability to translate the language of lean into the language of money will make it clear to everyone in your business why the proper implementation and daily execution of lean practices are necessary.
As the CFO, you are the resident expert (and owner) of the measurements. It is very important for you to change the financial and operational measurement system so that the measures drive Lean behaviors. Traditional measures, of course, will drive traditional behaviors. That is what they are designed to do. But these traditional measures will obscure and undermine the vital changes required by the economics of Lean.
If you change to a Lean business strategy, you cannot account, control, and measure it using the old methods. The most important contribution of the CFO is to lead these changes. To go Lean, you must understand how the principles of Lean create the economics of Lean.
What do you think of Nick's perspective? How does your company measure its manufacturing practices? In your company, has the CFO directly supported or unknowingly hindered the the Lean initiative?
Robert Baird just published an interesting new book this month titled The Four Components of a Fast-Paced Organization: Going Beyond Lean Sigma Tools, and I had the opportunity to speak with him about some of the topics presented in the book. One of the questions I asked was: "How do you create a culture of continuous improvement beyond Lean Sigma tools?" Here is his complete response:
If you look at the characteristics of a successful organization, you will find speed as one of them. Staying ahead and achieving business results at a pace faster than competitors is a distinct advantage. Within Lean, we have some focus on just-in-time, lead time, and on-time delivery, but what are we doing about it? Are organizations focused on improving their organizational speed? We found when there is a focus on speed then industry-leading improvements come with it and people are motivated to keep going, momentum is created, and all employees are engaged to execute the strategy. These are the outputs or effect on an organization when implementing all four of the components -- leadership and mentoring, process design and visual value streams, organization structure for sustainment, and fast knowledge sharing -- of a fast-paced organization. Implementing one, two, or three of the components will certainly achieve results but not the sustained world-class results we are looking for.
We all want a culture of continuous improvement, learning, and customer orientation and this is what the four components were designed for. Following the implementation steps will inherently develop all of these organizational characteristics. It starts with the Leadership and Mentoring component. The Leaders must be on board first and then each of the other three components are to follow. The Leadership and Mentoring component provides the base which sustains the momentum and starts the culture. Leaders take responsibility for developing people who are trained, motivated, and supported to identify, solve and fix problems. Leaders must empower people to be capable of process ownership. Leaders must guide and support a production system of continuous flow and quality products and service. Finally, leaders must build a learning organization. They are responsible for operational excellence.
What do you think of Robert's response? Do the leaders in your organization drive the culture? Are there both leaders and mentors in your company?