Thinking back from the Customer

Lean thinkers know that you can learn a great deal about an organisation by finding a good spot on the shop floor or office floor (the Gemba) from which to spend time observing what is going on. From here you can see just how the work is organised and how management thinks. The shop floor really is a reflection of management.

But there is another very good place where everyone should spend some time observing what is going on – and that is at the point where the end customer buys or uses the product or service. This might be the hospital ward, the call centre handling telecom breakdowns, the supermarket (particularly at the back of the store) or the car dealer. The supply chain really is a reflection of the interface with the end customer. 

We have spent a lot of time studying these kinds of situations and it is remarkable what you can learn from this vantage point. Unfortunately most manufacturing folks do not get to see beyond the shipping dock, because what happens downstream is not their responsibility. Likewise those at the customer interface spend little time thinking about the supply chain that feeds them. This is a big mistake, because what happens at the interface with the customer has profound effects all the way back up the value stream and vice versa.

In our experience efforts to spread lean beyond the factory and across the supply chain cannot realise their full potential unless they start by working back from the end user or customer. Developing suppliers upstream from manufacturing is only half the story. It is at the customer interface that the initial Mura (variation not caused by the customer) is created that causes lots of Muri (overburden) that in turn causes all the Muda (waste) throughout the supply chain. 

Mura feeds on Mura all the way upstream (triggering the well known Forrester effect) and unless the root causes of Mura are addressed the supply chain will be much longer, less responsive, more expensive and less able to deliver the right products on time. Buffering against Mura upstream helps a lot, but is only a sub-optimal solution. We discovered that you can only really address the root causes of Mura passed upstream by collaborating with those who deal directly with the end customer. The good news is that this actually opens up a very powerful win-win-win opportunity to serve customers better while at the same time improving the efficiency and profitability of the retailer, distributor or service provider as well as the manufacturers up the supply chain.   

This is where value stream managers should begin their work – by thinking back from the customer, understanding the root causes of Mura and working out the win-win-win opportunities for working together with their customers and their retailers, distributors or service providers. There is as much potential for lean dealer/distributor development as there is for lean supplier development upstream.

The new Creating Lean Dealers workbook by Dave Brunt and John Kiff is the first step by step guide to unlocking this win-win-win potential. Once you begin measuring real customer fulfilment it is surprising how few cars are serviced and repaired right-first-time-on-time – typically between 30 to 70%. This level of service is very common across industries if you could but see it.

However as almost no attempt is made to diagnose the work to be done until the customer turns up it is not surprising that they then have to scramble to find the necessary parts, have to hold lots of parts in stock, can’t really plan the time it will take to do the work and can’t streamline the flow of work through the workshop. An unreliable and infrequent parts supply system just adds to the problems.

Turn this round by developing a structured dialogue with customers a few days ahead of their arrival to pre-diagnose the work. This changes unpredictable work into predictable work, for which you can pre-order the kit of parts and accurately plan the time to do the work. This makes it possible to segment the types of work, standardise the sequence and flow cars through the workshop, doubling the productivity of the same staff.

It also makes it possible to order kits of parts for each job as they are needed rather than holding lots of parts in stock. And this signal of true demand makes it possible to create very cost effective rapid replenishment loops back upstream all the way to the manufacturer, with minimum Mura. The end result is 90% plus customer fulfilment, doubled productivity in the workshop and levelled orders making it possible to produce and ship in line with demand.

Creating Lean Dealers shows how this same logic can transform all the other activities of a dealership – from new and used car sales to body shop and customer account management. It will be a wake up call to the auto industry still wedded to customer satisfaction scores and in denial about how poorly their sales and service processes actually perform. But it also has some very practical lessons for many other activities, from sales and service of all kinds of equipment and infrastructure to managing diagnostic and treatment processes in healthcare.

The car dealership turns out to be a great place to learn to see customer fulfilment and what drives the supply chains that feed them. If we are serious about redesigning end-to-end value streams to create more value for customers using less resources and generating higher profits we all need to find our own spot at the interface with our customers.

Yours sincerely
Professor Daniel T Jones

PS. Creating Lean Dealers will be available from LEA at the end of next week – from www.leanuk.org

The Next Ten Years of Lean

Attending the 10th anniversary celebrations of Jim Womack's Lean Enterprise Institute in the USA set me thinking about the next ten years of lean. The lean movement around the world has achieved great things in the last decade. Between us all we have infected organizations in almost every sector across the globe with lean. Some are well down the path while others like services and healthcare are in the early stages.

We have figured out how to break the mental models blocking progress with lean in sectors like distribution, process industries, healthcare, construction and the public sector. And we have written down much of the core lean knowledge to enable us to design value streams in all kinds of situations. We have also created a huge army of lean practitioners and lean consultants and have established 14 Lean Institutes in each of the main economies to support the dissemination of lean.

Those who say the glass is half empty rather than half full - and I think this reflects different temperaments - rightly say there is still a huge amount to be done. They ask how many organizations even remotely approach Toyota's level of lean performance. The answer is not many. But in most industries outside automotive what counts is using lean to leap ahead of your competitors.

So what are the challenges ahead and what should our agenda be for the next decade? One way to look at this is to imagine looking back from 2017 and asking what we would like to see done by then. Here is my list - I would be interested to hear yours.

First I would like to see one organization in every sector that has progressed far enough in their lean journey to be using lean to change the business model in their industry. By this I mean building on their newly developed lean capabilities to rethink the product, the service, the processes and the location of what they do to serve their customers in a very different way. A bank that could custom manage all my cash, investments, pensions, insurance policies etc. conveniently with little hassle and for a reasonable price. A car company who could manage all my needs for personal mobility. A retailer who could search for and deliver all the things I need to run my household etc. Some firms like Tesco are thinking this way - most are still asleep to these opportunities.

Second I would like to see as large a body of knowledge and publications on lean leadership, lean management and lean strategy as we now have on lean process design and lean operations. Part of this will involve the systematic evaluation of the different transformation models being used by firms and by consultants, to distil what works from what does not. Part of it involves working out what managing a process focused organization will involve. In part it will also mean rethinking lean strategy back from the customer rather than forwards from our existing assets.

Third I would like to see lean thinking as a core part of the curriculum - from teaching problem solving in primary schools to teaching lean management in executive education courses. Because lean knowledge is only really learnt experientially this will entail fundamentally rethinking the way education is delivered.

Fourth we have not been very good at reaching out beyond the lean movement to articulate the potential societal benefits of lean. For instance economists and liberal commentators still think management is a black box where firms must be efficient to maximize their profits. They really do not understand the powerful dynamic lean introduces in every sector which transcends arguments about structures and ownership.

The HR community is still suspicious about whether lean enhances or diminishes the experience of work. Again we need to document those lean work practices and experiences that unlock the enthusiasm we have all seen and dispel myths like standardization kills creativity - when done right it does exactly the opposite.

Lean also has a lot to contribute to environmental movement as it is increasingly driven by evidence rather than often incorrect emotional responses. In almost every case a new lean business model will involve less unnecessary human effort, transport, energy use and pollution.

If we can do all this then lean will be well on the way to becoming the dominant business model, replacing the mass production business model developed by Alfred Sloan and Jack Welch.

Yours sincerely
Professor Daniel T Jones

PS. More talks – at Manufacturer Live in Coventry on 17 October and at the Human Resource Society in London on 13 November as well as Lean Summits in Utrecht, Holland on 5-6 November, Zurich, Switzerland on 7 November, Aachen, Germany on 8-9 November, Wroclaw, Poland on 20-21 November, Paris, France on 27 November and Istanbul, Turkey on 3-4 December.

PPS. We will be launching a new Creating Lean Dealers workbook next month and have added the Mapping to See training kit, the Getting the Right Things Done and Lean Product and Process Development books, the Lean Administration 2 and Lean Maintenance workbooks and the CD of the proceedings of the first Global Lean Healthcare Summit to our bookstore on www.leanuk.org