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LEAN Process Innovation & Sustainable Continuous Improvement… Our Most Formidable Competitive Weapons
Brought to you by:
Volume 02, Issue 01 January 12, 2015
CONTENT
THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE
4Understanding
Hoshin Kanri
6Helpful tips &
Building capability
2Peering into 2015
Visions of 2015 — Canada, US and UK Perspectives
Produced by: Dave Hogg
Telephone: 519-741-9732
E-mail: [email protected]
Thank you to our partners:
The ATJTake…
As we view the rubble of the energy/oil crash (which continues to worsen as this issue is being produced) and compare it to where we were after the 2008 recession, we can acknowledge that perhaps some kind of correction was due. Going forward on this front, our choices will make a difference
The impact of falling fuel costs is not the same across the board, and some will be wounded. But there is still much
optimism among manufacturers in North America – and it is rising, according to the Institute of Supply Chain Management’s rating of 58.6 (Anything >50 per cent indicates growth). Why wouldn’t Canadians be optimistic with an 87c dollar in play? Not to mention the potential game-changer approaching in 2016 and 2017, with the arrival of CETA, the European trade pact, which would open doors to 28 largely tariff-free EU countries and their 500 million potential customers.
For aspiring industry winners the work be-gins with a hard look at where exporting fits in one’s current vision, and by initiating the immediate steps to learn what is involved. If you belong to a LEAN manufacturing con-sortium, it will be much easier to get started as you can draw on each other’s experience. Also, do not underestimate the help both Canadian and US governments can provide, but remember that it all starts with you and the clarity of the vision you craft.
The New Year is not shaping up to be a “business as usual” year. It promises to be filled with many adrenalin-pumping op-portunities along with increased pressure to
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THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE
harness the contributions of all employees. Your workforce will need to be equipped, aligned and inspired by the right leader-ship, a need that is intensifying as many companies are finding themselves thrust into the new digital environment coupled with an accelerated pace of change and a host of innovative processes, such additive manufacturing (AM).
One thing we must all work towards in 2015 is changing the image of
manufacturing! Manufacturing is tomor-row’s wealth generator. It has changed and is continuing to change, and now it’s time to remind everyone – at every op-portunity – that of our three largest wealth generators, manufacturing is also the largest integrator of people, processes and technology and returns the largest ROI rate to our economy! And that means jobs for our children and others. Let’s not be silent in 2015.
Peering into 2015Visions of 2015 — Canada, US and UK Perspectives
Success depends on many factors, but it begins with an understandable vision of the ‘future desired state’ wanted by the organization. Vision’s job is simple — it’s to give direction. Period. If it does not give direction don’t call it a vision
“Smooth seas do not make skillful sailors.”
African Proverb
Here are the top five Perspectives on 2015 from each country:In Canada: (CME Surveys, Jeff Brownlee, VP, Canadian Manufacturers & Exporters)1. Skills — CME surveys confirm a con-
tinuing challenge for skilled employ-ees — not just in Western Canada, but all across the country. There is pressure to develo programs to deliver skilled people. Manufacturers report an aggressive acceleration in the US of training priorities to meet their skill shortages as well.
2. Exports and new markets — With an unprecedented number of free trade agreements, plus a low dollar, all that’s needed is the initiative and desire to take advantage of new markets throughout the EU, China, Latin America and Mexico. With CETA’s emergence in 2016, watch for developments from CME and the Enterprise Canada Network.
3. Productivity/Innovation — We know from the lessons of the recession that just trying to compete on exchange rate is not wise.
Good visions consist of four well thought-out components that fit these requirements:
1. Leader initiated;2. Shared and supported;3. Comprehensive and detailed;4. Positive and inspiring.
In short, the clearer the vision, the better the alignment of all elements of the organization with the business objectives to be achieved. Not to mention the great potential for eliminating waste.
To assist those of you considering the appropriateness of your visions for 2015, here are the broad perceptions of Canadian, US and UK leaders, as they share their perspectives. No two com-panies are the same – and there are no silver bullets. How these perspectives are interpreted is totally up to your company to determine.
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Continuous improvement in the investment in new technology to ac-celerate productivity is a solid consid-eration, especially for niche markets.
4. Additive Manufacturing (AM) — 3-D printing coupled with the Internet of Things (IoT) demands attention if you have not been watching. These forces are adding quality, cost reductions, and velocity to manufacturing pro-cesses and winning time-to-market challenges.
5. Financing/Investment — This is not new but the pressure and will to invest in R&D is accelerating. The need to work with financial institutions to enable them to better understand your busi-ness has never been greater – especially with new technologies increasingly defining competitive success.
In the US: (Mike Kotelec, Industry Week, Nov. 14, 2014)1. Manufacturing comeback driven
by the (SMAC Stack) — Social, mobile, analytics and cloud factors are becoming essential technology toolkits for enterprises to drive higher customer engagement and growth. Included is the need to innovate to force cultural change within a histori-cally conservative “if it’s not broken don’t fix it” industry.
2. Social Media — To further impact business model innovation — Social media has become the preferred communication platform. It is forcing manufacturers to become more customer-centric. Business to business models are becoming out-dated because consumers are better informed as they compare, select or buy from smartphones or tablets.
3. Internet of things (IoT) — will in-crease automation and job oppor-tunities — Renewed focus on STEM (science, technology, engineering, math) education enabling workforce to manage highly technical systems for greater automation. Employees now freed up for more R&D. IoT driving
efficiencies as businesses save on labor and service costs.
4. Greater Capital Investment — Even though recovery continues, recent surveys show upticks in capital investment funding as manufacturers focus on value through innovation, original design and speed to market.
5. The Emergence of “Next–shor-ing” — Occurring because of a more technical labor force to man-age supply chain operations that’s combined with increasing wage rates in Asia, higher shipping costs and the need to accelerate time to market to meet consumer demands. This is leading more companies to develop products closer to where they will be sold — hence “next shoring”. The faster inventory is moved to the consumer, the sooner the warehouse, shipping and dock goods costs can be freed up.
In the UK: (David Wright, Head of Manufacturing, Innovate UK, The Manufacturer Dec. 8, 2014)1. Small businesses will be more
confident in accessing resources — The pace of innovation in 2015 will require winners to recognize it as central to their innovation suc-cess. Smaller businesses will access finance, resources and capabilities they otherwise wouldn’t to tap the innovation cycle. More are having the confidence to engage in the system.
2. Pressure to meet the capacity needs of manufacturers moving back from the East — Re-shoring is occurring because of the increased understanding of the impact of “total acquisition cost” thinking. Costs such as uncertain or unreliable supply chains factors, product quality and adjacency to customers are given close consideration.
3. Spotlight on the pace of innova-tion — The pace of innovation across multiple sectors including automotive, where the development cycle is
now more like 3 to 4 years for a new car, is driving the pace even further. Successful companies will be those having a speedy innovation mindset which is the root to competitive advantage. 2015 will see greater pace needed in differentiation, enhance-ment of business performance and in achieving market disruption.
4. Application, rather than invention — in 2015 more attention will be diverted from the euphoria of discovering exotic materials to how innovators are putting them to work to improve health, the environment, travel, and much more. [Editor’s note: a return to Edison thinking to focus on commer-cialization of investments]
5. 3-D or Additive Manufacturing (AM) — Already widely adopted in aero-space and automotive, AM in 2015 will be applied more broadly across the manufacturing spectrum. This will include the reduction of wastage associated with today’s component parts. Another driver is the increased design freedom. Now, previously unachievable parts with features such as voids and internal angles are now easily formed. Complex forms can be made that eliminate the need for joins, welds and expensive production support processes such as tooling.
“As 2014 passes, hardly a ripple was visible for the 100th anniversary of Flow Manufacturing — now known as the Toyota Production System — the world’s best. And there was no mention of the 25th anniversary of LEAN Manufacturing. For manufacturers, there is much to do to earn the respect needed to ensure we capture the attention of the right new talent from a society that knows little about us – and to build a lasting infrastructure for our societies and economies.”
- ATJ
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Understanding Hoshin KanriATJ welcomes Jeff Liker’s article to help clarify the value of Hoshin Kanri. As we enter a new post-recession era of uncertainty that could be even worse than 2008, many will be impacted negatively by the energy/oil price inconsistency. In most cases, they will be forced to do more with less, requiring brutal attacks on wasteHoshin Kanri is defined in terms of Policy or Strategy Deployment. In a nutshell, it’s a management process that aligns — both vertically & horizontally — an organization’s functions and activities with its strategic objectives. It’s typically an annual specific plan developed with precise goals, actions, timelines, responsibilities and measures.
In other words, when in place, it provides clear insight into the corporate strategies and policies needed to enable every being in the organization to know how their actions impact the value delivered to the customer. Looking at it from another perspective, companies must behave more like an orchestra where everyone is well trained for their tasks (i.e. must know the music) and takes the necessary time to produce what the customer will pay for, while constantly striving for improvement. This may sound formidable, but it is required to win in intense competitive environments. Jeff Liker sets the stage for understanding the challenges Toyota faced that caused them to adopt Hoshin Kanri to survive. As you read Jeff’s firsthand analysis, consider whether you’ve been in a similar scary position. Jeff’s observation of how Hoshin Kanri helped Toyota improve to become the biggest and best auto company in the world may be a starting point for understanding how to put Hoshin Kanri to work.
Large corporations and healthcare facilities are increasingly adopting Hoshin Kanri. We thank Industry Week Magazine (Oct 19, 2014) and Jeff Liker for his permission to share this with you.
Hoshin Kanri Helps Toyota Improve for the Long Term
When the 2008 Lehman Brothers bankruptcy triggered a global recession, Toyota Motor
Company lost money. In December of that year, with a photo of Toyota board members bowing in shame, a New York Times headline trumpeted, “Toyota Expects its First Loss in 70 years.” “They’ve caught the same cold that Detroit has caught,” said Christopher J. Richter, senior analyst in Tokyo at Calyon Capital Markets Asia. “Everything is going wrong for Toyota this year.”
My reaction was anger at the idiocy of some of these articles. How could Toyota be compared to the Detroit automakers who were on the verge of bankruptcy? Why the focus isn’t on the 70 years of profit-ability and the huge cash reserves Toyota had piled up for a crisis just like this?
However, I soon discovered Toyota did not share my point of view. They were very unhappy about their loss. It was not because of the loss of a few billion dollars which they could absorb like an annoying mosquito bite. It was because, through serious reflection, they found serious weaknesses.
In Toyota Under Fire we chronicle how Toyota responded to the worst global recession since the Great Depression. Of course they downsized, but they did it by
reducing a temporary workforce designed to absorb inevitable downturns in the business cycle. Management bonuses and overtime were eliminated. Less energy was used. Travel was reduced. But the jobs of long-term team members were protected.
I visited two of the hardest hit plants — truck plants in Indiana and Texas — and watched as people frenetically worked even though about half the production workers were not needed for production, with sales down about 40 per cent from planned capacity. They were busy because they had gone from two shifts to one shift, maintaining a high production rate, and about half of the people produced cars for four hours, while the other half observed and worked on kaizen, and then they reversed roles.
The Japanese executive in charge of the Indiana plant calmly explained that they were investing in the future: “Every winter has its end,” he explained to me. And they were preparing. He showed data on the average age of vehicles and how more were being junked than purchased, and they needed to prepare for the expected sales boom — the boom we are now experiencing.
Back to the first loss of money in 70 years. Toyota did a great job of utilizing and developing their human resources
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THE LEAN EXCHANGE: HELP TO ACCELERATE TO YOUR LEADING EDGE
with very low demand, but their reflection still identified a serious problem. There had been signs the truck market was declining in the United States, where gas prices were rising. There were even signs of the recession to come given the inflated housing market. Yet, Toyota in North America had built months of inven-tory of trucks. When gas prices almost doubled in the US during the summer before the 2008 recession, Toyota was stuck with enough inventory to stop making any large trucks and sport utility vehicles for three months; during this time they did daily training and kaizen on the shop floor. Then the recession hit and the pain continued.
Toyota could offset a good deal of the downturn, reducing labor costs by about 20 per cent through eliminating the vari-able workforce (the temporary pool) and overtime. But still 80 per cent of costs were fixed. The board of directors set a target to reduce fixed costs to 70 per cent so that Toyota, famous for its ability to flexibly respond just-in-time, could be ready for the next downturn.
Turning this goal into action is one of Toyota’s strengths and it is done through the Hoshin Kanri process. The target of lowering the break-even point required changes in all parts of the enterprise, including product development (e.g., more standard architecture and parts,
value engineering), production control (satisfying customers while leveling the schedule, even with high variety), produc-tion engineering (developing simple, slim, flexible systems, often with lower capital investment and more manual work), sup-ply chain (collaborating with suppliers to better respond to flexible volumes), and manufacturing (launching new vehicles more quickly, simple automation for ma-terial delivery, parts kitting, changing takt while balancing workload more quickly). Thousands of organizations developed plans for achieving higher flexibility and worked through the kaizen process of experimenting and learning.
By the time Toyota had achieved the lower break-even and billions of dollars in cost reduction, another problem eased up — the yen went from about 80 yen per dollar to about 110 yen per dollar. Since Toyota is committed to keeping jobs in Japan to benefit Japanese society, and maintain their hotbed of innovation in Japan, they benefited greatly, leading in the 2013-14 fiscal year to the most sales and the most profit of any auto company in history.
With the huge demand of 2014, and the deep cash reserves Toyota maintains, one might expect a massive spending spree — buying companies, buying new automated equipment, buying new plants in low-cost countries. Toyota did none of
those things. They continued belt-tight-ening and Akio Toyoda announced there would be no new plants built. The Hoshin Kanri goals became: Do more with less. Find ways to utilize existing capacity while improving throughput, thereby producing more autos per square foot.
Toyota does not want creeping fixed costs to put them in the same bad situa-tion in the next big economic downturn. They will be ready because of intensive and continuous improvement with a purpose.
You can contact Jeff Liker at: [email protected]
Holiday Thoughts to Ponder for our Future
“People who love the arts and humanities should endeavor to appreciate the beauty of math and physics. Otherwise they will be left as bystanders at the intersection of arts and science where most of the digital age creation will occur. They will surrender control of that territory to the engineers. So if you want to innovate, think, crazily work with others, and be creative — keep up with your maths”
Fareed Zakaria’s paraphrase from Global Public Square (10am Sunday mornings), of Walter Isaacson’s (Steve Jobs biographer) thoughts on Why innovation needs both art and science.
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5 Gemba Walking TIPS
1. The Walk Mode Always enter the office or shop floor with your mind in a ‘Go-see — Ask why — Show respect’ mode. If you lack it, practise it until it is automatic and genuine. Feel good about practising it at home until you do get it. In fact, make it into your own personal KATA. 2. Begin every single question with: What — Why — How — Who — When’ And make every sentence a question. Every sentence! What is happening here? Why is this being done? When is that going to happen? What do you think we need to do? How can I help you? What could you use to make the process work better?
3. Make your questions positive and objective — NOT judgmental Put on your ‘Dragnet’ hat (for those who remember Jack Webb) and ask for, “Just the facts ma’am, just the facts.”
4. NEVER tell people what they need to do It robs people of a piece of their dignity, sense of worth and accountability — all of which are needed desperately on our floors and in our offices. 5. How you talk to people matters Big time! Always talk with people in a conversational style so they can know you are trying to learn, or help. If people are talked to with respect, and detect no hint of judgment or ‘entrapment/blame’ in your voice they will feel more in control, more important, valued and most importantly, they feel will valued as a part of the process. By always speaking in this way, employees begin to believe you are sincere and the conversation expands. That can be invaluable. As trust will begin to grow — and with more trust comes an increase in morale and competence, which is soon followed by increased achievement. It pays to remember Hertzberg’s research, which demonstrated that the greatest motivator of the human spirit is achievement, and its affirmation generates the motivation for even greater achievement.
BUILDING CAPABILITY
The Issue’s Book ..............Lead with Respect — A novel of Lean practice, Michael Balle, Freddie Balle. Introduced in late 2014, its sales are accelerating. It details how to apply attitudes to the LEAN tools you use now and enables rapid development of a LEAN culture. www.ocapt.com
Articles .............................What Lean Really Is, Dan Jones, September 2014. High value to leaders finalizing their thinking. (Extensive footnotes included).This Link connects to Dan’s reservoir that taps into some of the richest LEAN issues and applications on the web. http://www.leanuk.org/article-pages/authors/daniel-t-jones.aspx
Events/Resources ............The Toyota KATA Summit, February 18–19, 2015 — Fort Lauderdale, FL Whether you’re experienced in, or just exploring KATA, this first-ever IK/CK Summit brings together KATA practitioners, innovators and creators. Theme: Turning Lean Concepts into Reality, with the Improvement Kata (IK) and Coaching KATA (CK) with both Mike Rother and Bill Costantino. KATA Summit Web: http://katasummit.com/ Tip: High value home of Mike Rother: http://www-personal.umich.edu/~mrother/Homepage.html
Unique LEI 2015 Lean Transformation Summit, March 4–5, 2015. New Orleans. Check the link below. All presentations focus on “What can you do Monday?” by providing practical knowledge to take back to your organization and experiment with. It’s designed to help you take something you’ve heard and turn it into something you’ve learned. http://www.lean.org/Events/2015_lean_transformation_summit.cfm
AME/CME Canadian LEAN Conference, June 1–4, 2015, Winnipeg, MB. Organizers are still looking for best practices for the few spots left to be on the program. If you know excellence when you see it, email your nomination to Ian Marshall at [email protected] and watch the site grow. This is an outstanding program — and keynote presenter Art Byrne alone is worth the price of admission. Visit the expanded site at: www.lean2015.com
Early Bird Registration extended to January 16th
