Schonberger Lean

Schonberger & Associates

Visual Management: What’s Effective?

Most effective: • Kanban (visual-flow management) – big thing• 5S – Visual management of thousands of

small things that add up to big things• Visual recording of every glitch; organizing

same via Pareto, fishbone, etc.

Effective: In workplace, visual plots of process trends; displays of employee cross-skilling

Less effective: Management metrics on display (highly aggregated, tend to trigger “tampering” with in-control processes)

(Slide added—not in evening presentation)


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Turns Inventory Turnover – Paccar

Up 2.1% per yearfor 38 years


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Purchased materialsWork-in-processFinished goodsTotal

TerexDays of Inventory

Bought Genie 10/02


The Confused State of Lean: Comparing Regions, Industries,

Companies

PDM, Puget Sound APICSWednesday, Dec. 12, 2007

Presenter

Richard J. Schonberger

177 107th Ave., N.E., #2101

Bellevue, WA 98004 USA – Tel/Fax +425-467-1143

This presentation includes research and topical materials incorporated into a forthcoming Richard Schonberger

book (John Wiley & Sons):

Best Practices in Lean Six Sigma Process Improvement:

A Deeper Look

. . . with Telling Evidence from the Leanness Studies


Topics and Tendencies• Birthplace of lean has grown fat• U.S., hotbed of lean sliding; Europe doing better• Lean bureaucratized: Fat on administration• Long-term lean: Good in A-D OEM’s, not suppliers;

good in automotive suppliers, not OEM customers• Long-term lean: Cash & customer allegiance at

compound interest• Lean can do worthy service even if firm going

bankrupt• Several ways to get lean, not just the “lean core”• Internal lean getting the attention; external lean

promises much more• Inability to keep lean going, hold lean gains. Why?


Sustainable Lean – Best to Worst, by Region#

Sample Recent

Sectors Score Size Trend 1 Nordic countries .79 66 2 United Kingdom .67 80 3 Southern Europe .66 72 4 Brazil/Canada/Mexico/Israel .66 92 5 United States .59 566 6 Asiana/South Africa .58 106

Global Average .58 1,269 7 Germany/Austria .55 62 8 Benelux/Ireland .49 34 9 Japan .37 191

As of 9/18/07

#Positive 10-to-50 year trend, 2 points; same but lapse last 5-7 years, 1 point; negative 10-or-more-year trend, minus ½; 5-or-more-year reversal of long negative trend, plus ½

*Includes companies acquired/merged/dissolved/privatized in last 5 years


The “Leanness Studies”: 1260+ global companies rated on long-term (at least 10

years) inventory turnover

Points & Grades:

2 points (10 or more years up) = A

1 point (Same but flat or down past 5-7 years) = B

Zero points (No pattern, 10 or more years) = C

- 1/2 point (Down 10 or more years) = D or F

+ 1/2 point (Good up recovery, 5 or more years = B+, C+, D+, F+


Lean/Six Sigma: Bureaucratized

Elevated to management programs, lots of . . .• Planning• Organization (e.g., Widget University, Deere

Production System)• Projects run by professional staff• Name-dropping, jargon, puffery, foreign terms• Management (high-level) goals & metrics• Numerical benchmarks• Follow the leader the fads• All lead to high cost administration (SG&A)


Lean/Six Sigma: Bureaucratized (continued)

Less . . .• Work-force involvement & process ownership• Work-force knowledge & commitment• Continuous process data collection• Quick, low-level, low-cost implementations• Innovative approaches• Global best-practice benchmarking (beyond

your industry, country)• External (supply/customer pipelines) activity• Results?


Long-term Lean: Compound Effects


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Turns

FordGeneral MotorsDana (bankruptcy)

Inventory Turnover

Up 2.0% per yearfor 32 years

A B

A

Up 2.7% per year for 26 years


“Lean” and Close Surrogate, Inventory

• Lean’s main benefits:– Reduce response time—in all things– Find problems before they fester, before

trail of causes grows cold– Halt dependence on age-deteriorating

item forecasts• Inventory (catch basin for multitude of ills)

Each inventory unit . . .– Lengthens discovery time, fouls causal

trail (lean/quick beats lot traceback)– Adds lead time (& carrying costs), loses

touch with customer & real demand


Improving the Inventory Trends

• Inventory is an echo

• Inventory reduction as managed goal fails:– Is easily manipulated– Must be seen as result of process

improvements in every corner of the greater enterprise


Besides Dana . . . other major vehicular suppliers in or emergent

from bankruptcy:

Collins & Aikman, Delphi, Dura Automotive, Eagle-Picher, Federal Mogul,

Modine, Tower Automotive

Collins & Aikman, Eagle-Picher, Federal Mogul, Modine much better off because of many-year compounded lean benefits

(insufficient data for Delphi, Dura, Tower)

Aerospace-Defense OEM’s



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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

General DynamicsLockheed-MartinNorthrop Grumman

Inventory TurnoverTurns

C+

A

C

Up 5.7% per year14 years


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Turns

BoeingRaytheonBombardier (Canada)

Inventory TurnoverGame-Changer

Modular deliveries from modular, 1st tier suppliers. Unloads millions of parts, reshuffles core competencies for mutual gain

CC

C

Aerospace-Defense Suppliers



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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Ducommun IncRockwell AutomationGoodrich


D+

C

D


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

EsterlineTextronUnited Technologies


DC

C

Car OEM’s



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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

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Audi (Germany)

DaimlerChrysler (Germany)

BMW (Germany)

Inventory Turnover

C

D

D

Down 3.4% per year, 18

years


years

Chrysler acquired by Daimler in ’98, sold in ‘07


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Turns

Renault (France)*Peugeot-Citroen (France)*Porsche (Germany)*

Inventory Turnover

*Overstated – Based on sales, not cost of sales

CC

C


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Honda (Japan)Nissan (Japan)Toyota (Japan)

Inventory Turnover

Up 2.1% per year, 27 years

D

A C


years

Vehicular ComponentsProducers (91 inLeanness Database*)

Grades:29 A’s5 B’s39 C’s13 D’s5 F’s

*52 in Mergent list of 1000largest global corporations


Car Assemblers (25 in LeannessDatabase)

Grades:4 A’s2 B’s12 C’s5 D’s2 F’s


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Turns

Magna International (Canada)

Valeo (France)*

Dorbyl (S. Africa)*

Inventory Turnover



*Overstated: Based on sales, not cost of sales


A

AA


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

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Borg Warner

Donaldson Inc.

Federal Mogul

Inventory Turnover


A

C

B


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

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EatonDanaArvinMeritor*

Inventory Turnover



B

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A


54 Motor-Vehicle Companies Rated on Long-Term Leanness

Harley-DavidsonPaccar-Kenworth HondaTennantMagna Int’l.Thor IndustriesGeneral Motors Hindustan MotorsJLG IndustriesFord MotorHitachi ZosenTerexTata MotorsKawasaki HeavyKubotaIvecoNissanFiat

RenaultPorschePeugeot-CitroenAlvisIsuzuDaimlerChryslerAGCOVolvoClaas KgaANacco IndustriesMitsubishi MotorsNavistarYamaha MotorsScaniaWinnebagoTrinity IndustriesToroMillat Tractors

PolarisKomatsuCaterpillarDeereAudiBMWManitowocFleetwood Enterpr.Suzuki MotorsNissan DieselDaihatsu Motors*Fuji Heavy-SubaruHino Motors*VolkswagenToyota MotorsOshkosh TruckChampion Enterpr.Toyota Industries*

As of 5-3-07 *Toyota subsidiaries


Autos, Crucible of Lean – Best to Worst Trends

1 Harley Up 3.9%, 20 years 3 Honda Up 2.1%, 27 years10 Ford Up 1.9%, 32 years (down sharply last 4 yrs.)13 Tata Up 5.5%, 13 years (slump ’98-’03)17 Nissan Up 2.8%, 11 years (after 20 years down)23 Isuzu Flat erratically 28 years (up last few years)26 Volvo Flat 12 years (after 10 bad yrs.; better last 6)32 Scania Flat 11 years (after 6 good years)36 Millat Tr. Flat very erratically, 17 years40 Deere Down 2.8%, 13 years (up last few years)42 BMW Down 3.4%, 18 years (less decline last 14)51 VW Down 3.8%, 10 years (after good 16 years)52 Toyota Down 4.0%, 13 years (after 6 flat years)

As of 5-3-07


Unsung Stars of Lean – A Few ExamplesAmerican Greetings (greeting cards, etc.) Up 3.2% per yr. for 20 yrs.Andrew Corp. (satellite telecom equipment) Up 2.6%, 24 yrs.Applera (life-science instruments, consumables) Up 4.0%, 18 yrs.CCL Industries, Canada (aerosol containers, labels) Up 2.4%, 20 yrs.Cleveland: Brush Engineered Products (2.9, 20); Eaton (2.1, 30); Nordson (3.8, 17); Parker Hannifin (3.4, 17)Gunnebo, Sweden (cash/personal security equipt.) Up 3.1%, 24 yrs.Hitachi Cable, Japan (wire & cable) Up 1.8%, 26 yrs.Illinois Tool Works (diverse industrial products) Up 3.2%, 20 yrs.Kulicke & Soffa (wafer saws, die bonders, etc.) Up 4.4%, 20 yrs.L.S. Starrett (coordinate measuring machines, tools) Up 1.7%, 35 yrs.Messer Griesheim, Germany (metalworking, other) Up 1.9%, 32 yrs.Rolm & Haas (chemicals) Up 1.8%, 20 yrs.SKF, Sweden (bearings) Up 2.5%, 29 yrs.Thomas & Betts (electric connectors, steel towers) Up 2.5%, 30 yrs.Woolworths, Australia (supermarkets, other retail) Up 2.3%, 20 yrs.Xerox (copiers) Up 2.0%, 40 yrs.

As of 10-25-07

The “lean core” (basic Toyota

system) and other potent ways

to get lean



The Lean Core (Partial List)

• Physical resources: Plants-in-a-plant/ cells, kanban/pull system, quick setup, small lots/containers, point-of-use tools/materials/equipment

• Human resources: Few job classifications, cross-training/job rotation, operator-based quality and maintenance (TPM)

• Supplier partnership: Supplier reduction/ certification, external kanban, dock-to-line deliveries


More Pathways to Leanness

• Collaboration in pipelines: 2X to 10X greater lean opportunities

• Movement of production: To most capable entities (e.g., contract electronic services)

• De-proliferation: Ripple effects of DFMA; reduced numbers of product models, customers, suppliers (via intensive 80-20 analysis at ITW)

• Process data: Superior to conventional high-level goals & metrics


Still More Lean Avenues

• Pipeline Synchronization/Collaboration: Specialty of Dell, Wal-Mart, Zara (Spain), H&M (Sweden), 7-Eleven

• Mining Outside Knowledge/Talent/ Experience: Terex acquisition of Genie

• 3D Product Design/Planning: In manufacturing, even more in construction

• “Big Idea” Business Models: Such as Dell-direct


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Turns Inventory Turnover

Acquired by Danaher

Fluke: Up 3.2% per year, 18 years

Danaher: Faded lean star?


Pipelines/Collaboration:

Greatest Lean Opportunities


Lean Inside vs. Lean in the Pipelines

• Inside: “Lean core”– Perfected mostly at Toyota in 1960s– Gets 90% of companies’ effort– Easy stuff: You own it, see it, measure it

• Pipelines: Tight supply/customer chains– Typical manufacturer: 2X to 10X more

opportunity to improve than inside– Much supply-chain talk, little progress– Hard stuff; “hot potato,” no one

responsible; phony metrics


Lean Supply-Chain Accounting(Re Inter-Company Inventory/Lead-Time)

Problem. In numbers-driven companiesinventory accounting often main obstacle tolean supply chains. What to do . . .

1. Gamesmanship. Recognize accounting-based game—getting inventory on other party’s books—just hides the problem

2. Impacts. Reveal high cost & non-cost impacts of that hiding

3. Metric. Employ joint inventory to halt the gamesmanship


Inter-Company LeanBuilding on a “lean core” foundation

Lean efforts in logistics pipelines benefit greatly when piggy-backed upon strong lean achievements inside.

That is, lean inside provides an anchor of demand predictability and stability for pursuit of lean outside.


Lean Inside Lean Supply ChainExample: Graco, Minneapolis (sprayers, compressors)

Phase 1. Became among world’s best in “lean core”Phase 2. Closed many branch warehouses• Benefits (expected): large inventory reductions• Greater benefits (unexpected):

1. Relying on Graco’s quick response (same-day ship for orders in by noon), distributors slashed their inventories

2. Frequent orders smoothed/leaned out Graco’s production, purchasing, administration, etc.


Why Does Lean Fade?

Are There Antidotes?


Lean’s Soft Underbelly

• Many smallish practices; no “Big Idea”: Hard to keep all up-and-running; easy to cherry-pick

• Focused on wastes: Doesn’t resonate with sales/marketing, finance, senior execs, owners/investors, the public, customers

• Needs rivers of process data: Gets trickling streams

• Easily bogged down: In analysis (and popular analysis tools) with over-reliance on projects


Popular Lean/6-Sigma Tools

Operational Tools (Lean Core)• Cells/product-focused units• Quick changeover• Kanban (queue limitation)• Cross-training/job rotation• 5S/visual workplace• Takt-time scheduling• One-piece flow• Fail-safing• Total productive maintenance• Supplier partnership

Analysis Tools• 6 sigma (statistical

analysis) projects• Kaizen events• Value-stream mapping• Spaghetti charts• Value-add/non-value-

add analysis


Lean’s Native and Potential Strengths

• Native: Simple, common-sense, quick-acting, low cost, all-stakeholder beneficiaries


Tapping Lean’s Full Potential

• Re-focus: On universal customer wants/ deliverables: ever better quality, quicker response, greater flexibility, higher value

• Data recording: Of every process glitch or hiccup—job of all employees

• Workteam-based continuous improvement: In parity with dis-continuous project-team improvement

• Look outside your industry: E.g., leading-edge retailers, and 3P distributors

• Highest-potential gains: External pipelines


“Big-Idea” Business Models Highly Favorable to Lean

• Dell-Direct: Spawned many innovations for synchronization of suppliers, customers, Dell

• Every-day low prices (EDLP): In its cause, Wal-Mart became global innovator in logistics, IT

• 80-20 in all things: ITW cuts to good customers, suppliers, products, parts, plants, machines . . .

• Unique business models (easy to understand, hard to deny, flywheel-like momentum, all-stakeholder beneficiaries): They crown Dell, Wal-Mart, ITW as new, global kings of lean


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Turns Inventory Turnover – Dell Inc.

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5.8%, 17 years


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1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006Year

Wal-Mart: Up 2.8% per year for 16 years

Turns Inventory Turnover

Illinois Tool: Up 3.2% per year for 20 years

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Long-Term Lean Trends – Evidenced by Positive Inventory Turnover Patterns Without Recent Lapses – Best to Worst, by Sector#

Sample Sectors Size 1 Telecom 35 2 Distribution/wholesaling 54 3 Petroleum 46 4 Semiconductors 40 5 Paper 28 6 Electronics 23 7 Paper-converted products 55 8 Metalworking/machining 26410 Machinery 11511 Pump/hydraulic/pressure 6312 Electric 8213 Sheet metal 6814 Instruments/test equipment 4315 Plastic/rubber/glass/ceramic 22416 Vehicular components 10317 Forest products 49

Sample Sectors Size17 Apparel/sewn products 4818 Vehicles (light) 3919 Food/beverage/tobacco 13720 Furniture 1921 Personal-care products 3322 Liquid/gas/powder/grains 32723 Aerospace/defense 5724 Retail 13925 Motors & engines 6626 Heavy industrial vehicles5327 Basic metal processing 6328 Medical devices 4729 Wire & cable 3030 Chemicals 10831 Textile 4132 Pharmaceuticals 67

As of 9/16/07

#Positive 10-to-50 year trend, 2 points; same but lapse last 5-7 years, 1 point; negative 10-or-more-year trend, minus ½; 5-or-more-year reversal of negative trend, plus ½

*Includes companies acquired/merged/dissolved/privatized in last 5 years


Related Articles by Schonberger“Faltering Lean,” Industrial Engineer, Nov. 2007, p. 22.“Doing Off-Shore Assembly Right, Industrial Engineer, Aug. 2007, p. 26.“Japanese Production Management: An Evolution—With Mixed Success,” Journal of Operations

Management, 25, Issue 2, March 2007, pp. 403-419.“Supply Chains: Tightening the Links,” Manufacturing Engineering, Sept. 2006, pp. 77-92.“Lean Extended: It’s Much More (and Less) than You Think,” Industrial Engr., Dec. 2005, pp.26-31.“Lean så in i Norden,” (“The Nordic Countries: Lean Leaders”) Verkstäderna (Sweden), No. 5, May

2005, pp. 46-50 (co-author).“U.K.: Less Keen on Lean?” The Manufacturer (U.K.), Special Issue, 2005 Lean Manufacturing

Report, April, 2005, pp. 5-9. “Quadrant Homes Applies Lean Concepts in Project Environment, Interfaces, Nov.-Dec. ‘04, 442-

450.“Make Work Cells Work for You,” Quality Progress, April 2004, pp. 58-63.“Mandate to Grow,” Cost Management, March-April 2004, pp. 43-44.“Is South African Manufacturing Lean?” Management Today (S. Af.), Feb., 2004.“The Right Stuff, Revisited,” Manufacturing Systems, Sept. 2003, pp. 26-30.“Canada Needs to Go on a Lean Diet,” Advanced Manufacturing, July-Aug 2003.“How Lean/TQ Helps Deter Cooking the Books,” Cost Mgmt., lead article, May-June 2003, pp. 5-14.“Your Lean Team: Use It or Lose It,” Target, cover-story article, 1st qtr., 2003. “Kanban at the Nexus,” lead article, Production & Inventory Mgmt. Journal, 3rd-4th qtrs., ‘02, pp. 1-12.“Jack Spratt Diet: Schonberger Talks Lean with the Likes of Toyota,” cover story article, The

Manufacturer (U.K. edition), Nov. 2002, pp. 34-37.“Lean and Fat Factories,” cover article, The Manufacturer (U.S. ed.), Nov. 2002, pp. 16-19.“Leaning the Wrong Way,” Decision Line, Sept.-Oct. 2002, pp. 15-17.“The Lean League,” in White Paper: “The Road to World Class Manufacturing 2000,” The

Manufacturer (U.K.), 2002, pp. 26-31.“Lean Is as Lean Does,” Manufacturing Engineering, June 2002, p. 104.