In Search of the Best MRP Manufacturers

By Mark Edmondson, Lean Affilliates

Lean Blog readers - I need your input. I'm looking for the best performing manufacturing companies who use MRP to signal delivery from their suppliers. In other words, who are the top performing manufacturing companies that employ the classic MRP push process across their value streams?

Once we have your nominees, I'll contact them to come up with the short list of the best batch and queue manufacturing companies we can find. My intention is to then contact them and ask for an on-site visit to witness and document their actual operational performance: Total cycle time, inventory turns, delivery performance, quality, total cost.

What initiated this?

Today I had a conversation with a consultant, Tom, who works for one of the major systems integration firms. (I don't feel right saying which one, but you know the players: Accenture, Bearing Point, CSC, Deloitte, EDS, IBM Global Services are some of the largest.) He's in their SAP practice and works mostly with manufacturing companies. I've known him for awhile so I felt ok asking the awkward questions:

Me: Are you guys still recommending MRP systems for manufacturing companies?

Tom: Of course we are. Our core competency is partnering with clients to identify best practices that create world-class, demand driven, agile enterprises.

Me: So, does that mean you guys recommend MRP systems for manufacturing companies?

Tom: Yes. MRP is the core of SAP Operations - the PP (Production Planning) module.

Me: How do you recommend that MRP be used? Do you recommend MRP for planning combined with a pull process for signaling delivery? Or do you recommend MRP for both planning and signaling delivery of dependent demand items?

Tom: We recommend the standard SAP installation template we've developed. This approach delivers world-class best practices while providing rapid customization and implementation.

Me: So, does that mean you guys recommend MRP for planning and delivery of dependent demand items?

Tom: SAP One with its common applications and single image, real time database enables visibility across the entire value stream that enables a demand driven supply chain to achieve an adaptive lean six sigma manufacturing enterprise. (My note: This was a phone conversation, and even though I was taking notes as fast as I could, this may not be an exact quote. But it's close.)

Me: Come on Tom. Help me out here. What does your firm's practice recommend to clients regarding how they implement MRP?

Tom: It's a vanilla installation designed to minimize implementation time. Our clients use MRP for planning and for notification to the supply base of dependent demands.

Me: Why doesn't your firm recommend a pull system?

Tom: We have a world-class lean six-sigma practice. I think they do that.

Me: So you recommend and implement both MRP push and pull systems? What's the criteria for which is recommended?

Tom: It mostly depends on the customer's environment.

Me: For example?

Tom: Well, if the client wants an MRP system, that's what we deliver. We're customer focused.

Me: Ok. Well, for your MRP clients, how well do those implementations work?

Tom: Great. We have hundreds of MRP reference clients.

Me: Really? I'd like to talk with a couple of the most successful MRP implementations. I'm really interested in learning what level of performance a batch and queue company can achieve. Who can you hook me up with?

Tom: Well Mark, let me get back with you on that.

And that's how the conversation ended. I felt that I pushed Tom already, so I didn't drive for names at that point. But I'll give Tom about a week, and then check in with him. I really want to share with you who the successful MRP customers are.

And I also want your nominees for best MRP manufacturing company.

Stay tuned; I'll share the results as they come in.

Frustrated Champions

By Mark Edmondson, LEAN Affiliates

Last week I had three unrelated yet similar phone conversations that you, an executive in pursuit of excellence, may find of interest. These calls had several similarities:

- All are with experienced mid-level professionals (they report to a director, VP level) who are the champion for their company’s operational change initiative (lean, six sigma, operational excellence, etc.)

- All are with profitable, large to mid-sized manufacturers or distributors ($200 million, $1.2 billion, $5 billion)

- All are passionate about making a difference for their company by creatively applying lean and/or six sigma. They all expressed a vision and the desire for transformational changes that would represent a breakthrough for their company.

- Although this was my first encounter with these folks, all seemed like articulate, informed professionals.

…and all were frustrated with leadership and looking for another job. The irony is that their management thinks highly of them.

So what’s the problem?

These champions were frustrated because senior management wasn’t serious about making any changes beyond superficial work on the plant floor.

These champions were frustrated because senior management abrogated their leadership role by delegating operational excellence and lean to someone else within the organization.

These champions were frustrated because senior management’s priority was with “easier” and “faster” ways to achieve bottom line results: mergers, acquisitions, divestitures, outsourcing, squeezing vendors, and reducing headcount.

It reminded me of a letter from James Womack I received awhile ago that addressed this issue of lack of leadership commitment. His message makes sense: As a professional, you make a difference with the the support you have. I agree, yet these conversations are witness to the cost of this misalignment of intention over a long period of time - you risk losing your good talent.

I’m not a headhunter, but if you’re looking for three high-caliber and somewhat altruistic operations professionals, give me a call.

Is new technology the best investment for your next dollar?

By Mark Edmondson, LEAN Affiliates

I made a day trip to the Assembly Technology Expo in Chicago last week. What an adventure. After all, here’s an event dedicated to the latest automated innovations for manufacturing: Over 600 leading suppliers were there, from AGI Corporation (tooling and automated handling for PCB assembly) to Zierick Manufacturing (interconnection devices). I’m always fascinated with the latest technology for manufacturing, and it was fun to put my business card in all of those fish bowls and hope that I won something.

But as I looked over the Technology Pavilion and saw all of that equipment from all of those large companies, I couldn’t help but wonder…

What if American industry spent just a fraction less on material handling equipment, and just a fraction more on improving their process flow?

What if American industry spent just a fraction less on “Machine Vision Systems” (it looked really cool), and just a fraction more on teaching their people with how to see waste?

What if American industry spent just a fraction less on automated storage and retrieval systems, and just a fraction more on creating level pull and reducing inventories?

I like cool new technology just as much as the next engineer, but I sense that most companies could make much more progress by shelving their next automation project and spending that next dollar on their processes, management systems, and developing people.

Deming's Personal Notes While a Hospital Patient

By Mark Edmondson, LEAN Affiliates

The current issue (see page 2) of the Deming Institute's newsletter includes an article by Deming, "Some notes on management in a hospital". It's a series of daily notes Deming made as a patient while hospitalized in the late 1980s.

In his analytical manner, Deming outlines several basic processes and poor ergonomics that result in a dangerous environment (like major errors and omissions with logging administration of meds).

The good news: He really liked the food.

He was a bit of a pioneer with thoughts about "Lean Healthcare".

The question is: Are hospitals better today?

Weak Link: Management’s Relationship with People

Inspired by an article in Workforce Performance Solutions Journal Oct 2005 and personal experience.

Waves of downsizing, employer demands, job disenchantment and technologies that keep employees plugged into their jobs both day and night have taken their toll. If recent surveys are any indication, more than half the workforce is fed up. Pollster Gallup has found that 40 percent of American workers feel disconnected from their employers, with 19 percent being “actively disengaged” from their workplaces.

Disenchanted workers pull down productivity, increase churn and darken the morale of the people around them. The annual economic costs are huge: as much as 100 billion euros in France, $64 billion in the UK, and a whopping $350 billion in the United States.

How can management reduce the losses caused by an exhausted and demoralized workforce?

Emerging research suggests that workplace toxicity is the major impediment to employee morale and performance. The top reason people leave comes down to their relationship with their boss; indeed, less than one-third of managers are perceived as strong leaders.

So, rather than dive headlong into lean, six-sigma, a technology-based solution, or other means to improve performance, first examine the effectiveness of the people who are tasked with leading your employees:

· How often do they communicate with their direct reports?

· What is the quality of their interaction?

· Can they convey your company’s vision in an inspiring manner?

· Are their conversations transforming – or merely transactional?

· Do people leave meetings with their superiors feeling energized – or sapped?

Taiichi Ohno once said that the heart of the Toyota Production System is “management’s commitment to invest in its people to promote a culture of continuous improvement”. Lean and TPS are powerful – but fulfilling Ohno’s vision first requires that management understands your company’s vision, and then be able to inspire, coach, and lead their people.

Our recommendation: Be sure that on-going management development and coaching are an integral part of your company’s lean transformation. Have resources available for managers to learn and get help. Consider on-demand 1-to-1 management coaching that’s provided on a confidential basis. Offer your supervisors assistance with facilitating their team meetings to demonstrate a positive approach for team learning. All of these elements are a bit on the soft-side, but they’re often the missing pieces when we learn why a lean transformation has stalled or failed.

Mark Edmondson
LEAN Affiliates

Should Your COO Learn Japanese?

By Bill Waddell

(Note from Mark Edmondson: Here's a recent article written by LEAN Affiliate Bill Waddell that I think many of you will find interesting.)

The terms “Lean Manufacturing” and “Japanese” are hardly synonymous. This may come as a shock to a number of manufacturers, and even more consultants, who seem to think that a prerequisite to becoming lean is rote memorization of the Japanese language. In fact, the originators of the Toyota Production System were very forthcoming that they learned it all from Henry Ford.

Most Americans think that Ford’s great contribution to manufacturing was the assembly line, but there is no mention of assembly lines in Shigeo Shingo or Taiichi Ohno’s writings about the Toyota manufacturing powerhouse. Rather, the principles learned from Ford that made an impression with Ohno and Shingo are based on the relentless pursuit of continuous flow, absolute quality, and effective synchronization. The economic objective Ford, and later Toyota focused on was continually improving real cash flow, rather than the theoretical objective of Return On Investment.

But while Americans are memorizing the seven types of ‘muda’ (waste) and proclaiming their lean experts to be ‘sensei’, these principles learned from Ford were lost on the American manufacturing community. It turns out they were lost on much of the Japanese manufacturing community, as well...

Link to Entire Article

"Siren Song": Enjoy Increased Confidence and Satisfaction with Wonderware

by Mark Edmondson

This post may be shameless about poking fun at a real software product, but I couldn’t resist:

Make better business decisions faster

Achieve increased profitability

Drive operational improvements

Substantially decrease total cost of ownership

Standardize best practices

Confidently meet delivery dates

Correct product quality variations

Enjoy increased income with consistently satisfied customers

Take a proactive approach to production and performance management

Align your business objectives and manufacturing operations

With Wonderware… the total automation and information software solution.

These are actual excerpts from a full page ad for “Wonderware” in the December issue of "Managing Automation" magazine. The html version: http://www.wonderware.com/ad/ppm/

Is it just me, or does Wonderware sound like something that Victoria's Secret would stock?

Earlier "Siren Song" Posts

Your Mission as Change Agent

By Mark Edmondson

As a lean professional, here are two facts you already know about you and your company:

1. Over 95% of your body mass consists of water.

2. Over 95% of your company's activities consist of waste.

Yet, you’ve probably also learned to be careful when telling your CEO or COO that most of their business activities are waste. The more enlightened executives may accept your diagnosis as an opportunity, but be prepared for the more common reaction: disbelief, denial, and defensiveness.

So how do you present your diagnosis of pervasive waste to senior leadership?

You can try reason and logic. Explain that pervasive waste in business is a fact, just like pervasive water in their body is a fact. It's really nothing to get upset about. Tell them to be smart and regard it as good news, not an admission of poor performance. After all, pervasive waste offers tremendous opportunity for a breakthrough improvement.

You can appeal to their short-term financial challenges. Walk them through the numbers: For example, let's say you have a value stream with a 5% profit margin. And let's say that you reduce the waste in this value stream from 95% to 65%. What's the result? From a financial perspective, it's a breakthrough. You just decreased costs 30%, and increased profits by a factor of 6 or 7.

As a professional, you know that breakthroughs like this are often a rote challenge from a technical perspective. It's just not that difficult for a top shelf lean professional to identify and help reduce waste to a level of 65%.

But your real challenge is not technical – it’s organizational. And it’s not rational – it’s emotional. You must gently help leadership recognize and accept the blind spots they may be facing about their own success.

This may not be easy. When your CFO has been struggling to improve profits by 2% through traditional margin squeezing, it can be dicey for you to confidently declare that you can increase profits by a factor of 7x in a few months. Possible reactions can range from laughter to furled eyebrows to crossed arms. Disbelief, denial, defensiveness.

Now a brief commercial word about outside change agents: That’s why some of our best clients are those who already have lean-savvy professionals on staff. They realize that sometimes it just takes an organizational outsider to reassure leadership about what’s possible. They know that a seasoned change-agent who has experience handling emotional and organizational issues can hasten progress – and results.

We’re back. So your mission as a lean professional is to fulfill the role of enterprise change agent. Technical competency is given. You must evolve from being a technical resource on the production floor and fill a much bigger role. Your company needs you to skillfully guide leadership quickly past their emotional blind spots. Your company needs you to challenge leadership when their goals are not set high enough. Your company needs you to understand each step in the change process – complete with anticipated technical and people challenges. And your company needs you to execute effectively and rapidly.

That’s your mission as your company’s lean change agent. Are you in?

Please Hold

By Mark Edmondson

Seth Godin's (author of Purple Cow and All Marketers are Liars) blog often has pearls of lean wisdom - even though he's a marketing guy. Check out his recent post, "Please Hold", wondering why companies spend so much energy and money getting prospects to call, only to place them on hold.

Like processes in other parts of the enterprise, processes in sales and marketing are often broken too.

First the V-Pill; Now it's the V-Chain

Article Link

By Mark Edmondson

Do you experience lumpy product demand?

Do you suffer from “outsourced manufacturing and third-party logistics across a multi-enterprise network”?

Has “demand management, transaction processing, and order fulfillment using paper-based systems led to excessive amounts of leg work expended on expediting”?

Well you can Forgetaboutit!

Just install V-Chain, and you’ll miraculously reap new profits!

What is V-Chain you ask?

“V-Chain™, operates within heterogeneous IT environments and across multiple business partners to execute shared supply chain processes. The Web-native system combines connectivity, execution, planning, and metrics to create a single backbone in support of structured collaboration, something even the best ERP system can't do on its own.

I couldn’t have said it more clearly myself. I couldn't have even made this up myself.

(Mark Graban here) --> sounds like another "siren song" of manufacturing software!

Lean and Outsourcing

By Mark Edmondson

Bill Waddell’s post on Evolving Excellence makes a humorous yet tragic point about how lean is too often confused with outsourcing. Prepare to laugh out loud and cry.

Real story: This year our team visited an $800 million mid-west manufacturer who told us they had "already implemented lean on the plant floor." When we walked their plant they showed us the receiving dock loaded with inventory. From there, fork lifts pushed inventory to "final assembly". They called the pallets “kanbans” yet no pull system existed. It turns out that their "lean initiative" boiled down to outsourcing their sub-assembly operations, leaving only final assembly and packaging in-house- and resulting in a major layoff.

If you stepped back and looked at the whole value stream, no muda was eliminated. Jobs were merely shifted from their plant (union) to the supplier (non-union) resulting in added complexity with transportation, longer cycle times, and worsened labor relations.

My Affiliate finally asked the question: "When you say 'lean', does this mean the same thing as 'outsourcing' to you? Sadly, the answer was yes.

Lean Consumption at the Post Office

By Mark Edmondson

Today I went to the local post office to buy holiday stamps and Priority Mail boxes. (An aside: Priority Mail for gift parcels is a great deal – you can cram as much stuff as possible into your free “flat rate” box that will arrive in about 3 days – all for about the price of the box alone at the UPS Store.)

After waiting in line for 20 minutes, the clerk motioned me forward. (Note to self: avoid the PO at lunch time; half the clerks go on break just in time for their noon customer rush.)

“I’d like to buy some Christmas stamps, please.”

“I’m sorry sir, we’re out of holiday stamps.”

“When will you get some more?” I asked hopefully.

“They’re backordered now, but we should have them by the end of the month.”

“But the end of the month is after Christmas.” I said lamely.

“We have these salsa dance stamps – they have some nice holiday colors in them.” the clerk suggested.

I appreciated the unexpected empathy; maybe the Post Office really does care. I pictured salsa dance stamps on my Christmas card envelopes and wondered if anyone would notice. Dancing is part of the holidays, isn’t it? My mind went tilt. Next subject.

“Well, how about some flat rate Priority Mail boxes?” I needed to ship some Christmas gifts.

“I’m sorry, we’re out. You can just use your own boxes and put Priority Mail stickers on them.”

She didn’t understand. Call me thrifty, but I like using the free Priority Mail boxes. Especially the flat rate variety that you can cram full with the heavy stuff for no extra charge. Besides, did I mention the price of boxes at the UPS Store?

I left empty handed. I was an eager customer thwarted from spending money.

The US Postal Service is experiencing monumental market shifts: email, on-line bill pay, FedEx Ground, UPS Stores, Google adwords. Their market share is shrinking all around.

All that’s left for them is neighborhood junk circulars and…holiday mail.

A good first step might be for the post office to stock stamps and boxes so I can do business with them. Maybe if the Postmaster General read Womack’s new book Lean Solutions, it would make a difference. I'll get their lean transformation started and just mail him a copy myself...damn, I don't have any Priortiy Mail boxes.

See you at the UPS Store.

(from Mark Graban --> here is an LEI case study on Canada Post using lean, great reading)

Encounters with Peter Drucker

From Mark Edmondson:

Peter F. Drucker passed away on November 11, eight days before his 96th birthday. Since he was a professor at Claremont Graduate University while I attended neighboring Claremont McKenna College in the late 1970s, I had the opportunity to meet Professor Drucker after a couple of his on-campus seminars. After over 25 years, I still remember two lessons from those seminars which later influenced my professional path as a manager and change agent:

• Management's vital role to anticipate the future and be a change leader.

• The importance of continuously eliminating waste in an organization. (He called it “organized abandonment” at the time.)

Professor Drucker was truly one of the early “lean thinkers” who I believe complements the works of Ford, Deming, and Shingo. His brilliance is not only how he addressed modern thinking on management from organizational change to process improvement, but also how he anticipated them by decades.

If you're just starting your Drucker library, a good first addition is The Essential Drucker, a compilation of his greatest writings. But my favorite Drucker book is The Effective Executive, first published in 1966 and still in print today. If you're a new manager and want straight, sound advice about how and where to focus your efforts, read it. If you're a seasoned executive and want a practical handbook for improving as a leader, read it.

The current issue of "The LEAN Executive" eNewsletter is a special tribute to Peter Drucker that lean thinkers may find of interest.

Professor Drucker, thank you for your contributions and inspiration. You made a real difference for me, countless others, and society.

Two Common HR Practices That Sabotage Lean Initiatives

Our consulting firm has two HR requirements before we’ll work with a client:

1. No regular employee will lose their job as a result of improvement activities.

2. No “forced ranking”. This means that there is no ongoing practice for selecting a predetermined number of employees for termination. See the article “The ABCs of Rank and Fire Management” for more about this:
http://www.leanlibrary.com/RankandFireManagement.html

Our team has decided to not work with several prospective clients because of these requirements. Why?

First, we have a conscience. Our mission is to improve the quality of people’s work – not take it away.

Second, we’re pragmatic. We know from experience that layoffs as a result of improvement activities and forced ranking will sabotage any lean initiative. Creating an environment of fear destroys teamwork, and the process of engaging employees grinds to a halt.

What are your thoughts?

Do you know of a company that practices on-going layoffs or forced ranking, yet also has a successful lean initiative?

Or maybe you have an example of a lean initiative that failed because of these issues?

Mark Edmondson
www.LEANaffiliates.com