The consumer goods industry is waking up to lean in a hurry. With rising
input prices and powerful retailers trying to keep the lid on prices they
have few other places to go. It is finally time to try lean. But they may be
disappointed if they just think lean is another form of cost cutting. No
question that applying lean tools like TPM can improve asset utilization.
But the real potential of lean is much greater than this.
I get frequent requests to go and explain lean to senior management
groups. Before I go I usually set the lean enthusiasts in the organization
(and there are always some early adopters of lean in these companies)
some homework to do which will help us together to make a powerful case
for lean.
The starting point is to discover the degree to which you are currently
disappointing your customers today - how many orders do you satisfy
completely on time, in full and invoiced correctly? Then go and talk to
your marketing folks and ask how much more they think they could sell if
you met every delivery on time, in full and invoiced correctly. They may
not believe this is possible - but persevere.
Ask them how much more they could sell if you were also able to produce
30 per cent more of your high volume products with your existing
resources. Then ask them what difference it would make if production
could be varied to respond to changes in demand in days rather than
weeks. And finally ask them whether supplying much fresher products to
the market could also increase sales.
The next step is to analyze your product mix using the methodology
explained in
Breaking Through to Flow. You simply can't do lean on all
your product lines at once - so start with the few high volume products
that account for most of your production and sales. Treat these differently
to all the other products using levelled production, or as Toyota originally
called it “patterned production”.
Then check the per cent variation in demand for these products and you
will see you need much less buffer stock of these products than you think.
So you can let this buffer stock absorb the variation in demand which is
how you can implement leveled production for these items rather than
constantly changing the production schedule as invariably happens now.
By so doing you could create the essential precondition to really go to
town with lean - basic stability - even where you did not think it is
possible.
The next step is to walk the physical flow back from the end customer for
these products - counting the steps, time, touches and inventories as you
go. Wherever the product stops ask why - is it because you can't rely on
getting product when you need it? Or is it because you only make and
ship the product once every few weeks? Or is it to buffer against
fluctuating demand? Or all three - but how much of each?
Turning these observations into a value stream map for these products
following Learning to See
and particularly asking the questions outlined in
that book will reveal all the improvements to make this product flow from
door to door.
Next ask how often production ships its orders on time and in full as
planned to the warehouse. Ask planning how often they issue a
production schedule - maybe once a week for batches every several
weeks. Then find the data to see the gap between what was planned and
what was actually produced.
What you are seeing is the degree to which the planning system rather
than buffer stocks are being changed in line with customer orders. You are
also seeing the degree of order amplification being passed upstream. If
you look at the electronic point of sale data for these products and
compare it with the orders your company receives you will see most of
this amplification is caused by the way data is handled and not end
customer demand. This amplification is an invisible curse created by the
algorithms in the planning systems requiring extra buffer stocks and
capacity to meet artificial peaks and troughs in demand.
Now you have the basics to establish the business opportunity for lean
and a series of actions that could be implemented to meet it. Put this into
an A3 proposal so we can begin the dialogue to refine the plan before
presenting it to top management.
Yours sincerely
Professor Daniel T Jones
Professor Daniel T Jones
