Using Lean to Expand Capacity… Who Loses?

CJOnline / The Topeka Capital-Journal – Topeka Hallmark to absorb work

Is there a Hallmark card that says, “Sorry you lost your job?” They do, sort of.

When companies use Lean, it’s not uncommon to find extra capacity through efficiency and uptime improvements. That’s good for the growth and long-term future of the facility. That’s the case at a Hallmark cards factory in Topeka KS.

“We have excess capacity now to accommodate that,” O’Dell said. “We estimate production volume will increase by 10 to 15 percent.”

Hallmark employs 800 in Lawrence and 720 in Topeka.

“We have implemented lean manufacturing principles in Lawrence and Topeka,” O’Dell said. “We’ve made process improvements.”

This is a nice victory — a win for that factory. A bit of a problem — there are some “lose” plants who will be losing jobs as work is shifted from there to Kansas.

Hallmark Cards Inc. is moving manufacturing operations from three plants in Canada, Indiana and Arkansas to plants in Topeka and Lawrence, but no new jobs will result, the company said Wednesday.

The move will eliminate 335 jobs — 195 employees at Hallmark Canada in Toronto; 80 at DaySpring Cards in Siloam Springs, Ark., and 60 at Sunrise Greetings in Bloomington, Ind.

I wonder if they were also using Lean at the other plants…. or are they the losing factories because they didn’t use Lean?

This would be a real challenge if you’re using Lean at multiple sites… what if you increase capacity at each, but can’t spur an increase in sales to match? They have no choice but to consolidate to the plant deemed “best?” Many companies have a “No layoffs due to Lean” policy (which is smart). Would that mean “No layoffs due to Lean at this plant”??

Have you ever been in a similar multi-plant situation? What are your thoughts?

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Mark Graban's passion is creating a better, safer, more cost effective healthcare system for patients and better workplaces for all. Mark is a consultant, author, and speaker in the "Lean healthcare" methodology. He is author of the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, as well as The Executive Guide to Healthcare Kaizen. His most recent project is an eBook titled Practicing Lean that benefits the Louise H. Batz Patient Safety Foundation, where Mark is a board member. Mark is also the VP of Improvement & Innovation Services for the technology company KaiNexus.

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9 Comments on "Using Lean to Expand Capacity… Who Loses?"

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  1. curiouscat says:

    No layoffs should mean no layoffs at the company. If management fails beyond coping then layoffs may be necessary. Only with
    1) that failure being very openly acknowledged and explored and
    2) the only recovery option to having management’s failures survived by the company can people loosing their jobs be seen as a sensible solution.

    Otherwise, do something to put those people to good use (if you can’t even provide for the critical stakeholders of the organization you are suppose to manage I don’t see why you are managing). Offering buyouts is fine. Paying them to go work at suppliers until management can put them to good use is fine… Layoffs should only be an answer when the failure to manage was so poor that the company can’t survive without sacrificing people’s jobs to cope with such bad management.

    Failing to build the business so it can cope over the long term is far too common. It is not acceptable.

  2. Anonymous says:

    Keep in mind two things. First, some of these were purchased facilities, probably purchased because they couldn’t be profitable on their own. They’re Hallmark’s now, but that was probably very much part of the plan. Second, cards now compete with email, at a cost of $0. They are facing very tough competition, despite pretty much owning their market. We shouldn’t approach the no-layoff rule in a dogmatic way.

  3. Dean Bliss says:

    In my discussions about layoffs, I always separate “improvements” from “business conditions”. In other words, we will not lay off people due to improvements, but business conditions may dictate otherwise. The separation, IMHO, is vital to the trust component of Lean activities.

  4. Anonymous says:

    Yes, these were acquisitions some years ago. Some were but most had not taken on a lean approach. In the end these actions were more than likely done because of market downturns and consumer buying habits. Also, how do we know these plants & Hallmark were not way overstaffed in the 1st place? If my experience tells me anything, companies with multiple facilities (especially those that grew through acquisition) are almost always 2-3x overstaffed and very inefficient (thus the overstaffing). Just some food for thought.

  5. Mark Graban says:

    No easy answers to any of this, are there? That’s why I found this an interesting story to think about…

  6. Kevin Carrelli says:

    I also have seen the successes at factories that begin to use lean principles and gain excess capacity (more flexibility in scheduling, new product extension opportunities) then get swamped with work from less efficient locations. The result is usually the snake swallowing the elephant and the remaining factories must work for a long period to transition the moved business.

    It is always critical to determine what will be done with excess capacity at the beginning of a lean journey. Some may use it to down size their business to current market conditions, some will use it to gain capacity for new growth opportunities. Everyone needs to be working with the knowledge of what they are working towards.

    Agreed with Mark’s last comment, no easy answers.

  7. curiouscat says:

    I see the “no easy answers” as mainly a distraction. It is true managing a company is hard. It is true if you have 2 plants that fail to adopt good management practices that getting them to do what is needed is hard. But if that is your job – do it.

    But, if the CEO says, “the only solution I see is to steal from our suppliers.” Do we then say, oh yeah, it is a tight bind you are in go ahead and break into the supplier and take supplies you can’t afford? I think instead we would say the CEO is a bozo.

    Well when we accept the way most all layoffs are handled as “difficult decision” instead of lousy management we excuse bad management.

    Yes there are some circumstances where things are truly (after 5 whys…) beyond control of management’s ability to have planned for and cope with today. But not nearly as many as many claim as they make excuses.

    Lets see any salary or bonuses for the CEO, CFO… in the past 10 years greater than 10 times the salary of the people they say must be laid off returned prior to layoff. See how often layoffs happen then.

  8. Kevin says:

    There’s a whole other side to this story, and not a pleasant one. The article at the link below is slightly (!) biased, but makes some good points. China was involved, outsourcing overseas and domestically (down to their security service) was also involved. Combining lean with outsourcing will result in a jobs impact that destroys the heart of lean itself.

    LINK

  9. JWDT says:

    Kevin,
    Yes, the article is biased. The outsourcing was primarily done & completed prior to any form of Lean had been adopted in late 2006 early 2007. Lean at Hallmark has and was started in manufacturing in late 2006 and early 2007. Hallmark’s structure is very different than any other I have worked for or with either as an employee, benchmarked or consulted with.
    Let’s face, in today’s environment there is no ‘correct’ answer or perfect path, a lot of what we all do is what we believe is the right thing at the right time with the information at the time.

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