Art Byrne returns to the podcast to share CEO-level lessons from decades of Lean transformations and his new book, The Lean Turnaround Answer Book. The conversation covers Lean strategy, cost accounting pitfalls, private equity turnarounds, and why Lean must be a fundamental management system–not a cost-cutting program.
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My guest for Episode #505 of the Lean Blog Interviews Podcast is Art Byrne, who was a guest back in Episode 158 about 12 years ago — we discussed his book The Lean Turnaround.
Today, we're discussing his new book, The Lean Turnaround Answer Book, an edited compilation of his “Ask Art” columns published by the Lean Enterprise Institute.
Art Byrne has been implementing Lean strategy in various U.S.-based manufacturing and service companies, such as Danaher Corporation, for more than 30 years, including The Wiremold Company, which he ran for 11 years. He retired as an Operating Partner at the private equity firm J. W. Childs Associates L.P.
In this episode, Art revisits the podcast after twelve years to discuss his new book, The Lean Turnaround Answer Book, an edited compilation of his “Ask Art” columns from the Lean Enterprise Institute website. Art shares his extensive experience implementing lean strategies across various industries, including his notable work with Wiremold and his role in private equity at JW Childs Associates. The conversation also covers Art's motivations for writing his books and his continuous efforts to disseminate lean knowledge, addressing the practical challenges and questions that arise in Lean implementations.
Art elaborates on the essence of Lean principles, emphasizing the need for a fundamental shift in organizational philosophy and strategy. He recounts his experiences in transforming companies through Lean methodologies, including detailed anecdotes about reducing setup times, managing inventory, and improving operational efficiency. Art highlights the significant impact of lean on organizational performance, customer service, and financial health. The discussion also touches on the challenges of aligning traditional cost accounting with lean practices and the importance of engaging the finance department in the lean journey. Overall, Art's insights offer a comprehensive guide to Lean implementation, reinforced by real-world examples and practical advice.
Questions, Notes, and Highlights:
- Tell us about the book and how this one came to be…
- Cost accounting and inventory?
- Orry Fiume – “Real Numbers” book
- The strategic value of setup reduction?
- How was Lean utilized in your private equity work? How was your role different as a PE partner?
- Looking for companies with a certain Lean potential? What factors are you looking for?
- Best Lean turnaround story? More likely a smaller PE company than a large public company?
- But Lean is not the default management approach for manufacturing? Higher than 10 years ago?
- Boeing – did they forget what Shingijutsu taught them?
- The problems caused by “make the month”
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Automated Transcript (Not Guaranteed to be Defect Free)
Introduction and The Origins of the Book
Mark Graban: Well, hi everybody. Welcome to the podcast. I'm Mark Graban. Our guest today is Art Byrne. He is a returning guest; he was here with us back in Episode 158. That was twelve years ago, if you can believe it. Back then, we discussed his book that was new at the time, The Lean Turnaround. Today, we are discussing his newest, latest book, The Lean Turnaround Answer Book.
It is an edited compilation of his “Ask Art” columns that were published on the Lean Enterprise Institute website. Art has been implementing Lean strategy in various US-based manufacturing and service companies, such as Danaher Corporation. He has been doing this for more than 30 years. He was at the Wiremold Company, which he ran for eleven years, and he is retired as an Operating Partner at the private equity firm J.W. Childs Associates LP. But Art is still busy with the book and other things.
So, welcome back to the podcast. How are you, Art?
Art Byrne: Fine, thank you, Mark. Nice to be with you.
Mark Graban: It is good to have you back. Tell us a little bit, if you would, about things that you are still actively involved with in trying to help people with Lean.
Art Byrne: My objective in writing a book the first time was really just to pass on the knowledge that I had gained over all the years. As you know, those of us that have been very involved in Lean, we all learned it from somebody else. Since they helped us, you always feel obligated to pass on that knowledge. So, I wrote the first book, The Lean Turnaround, and that went over pretty well. We sold a lot of books and got a lot of questions. The main question I got from that book was, “Well, gee, this is great, but how do you really do this stuff?”
There is a lot of theory, and you say, “Here is a theory of Lean,” but how do you actually do it? So that prompted the second book, which is called The Lean Turnaround Action Guide. The Action Guide is really like a case study. It is a Lean implementation. We took a traditionally run company with five years of financial forecasts and history, and then we step-by-step converted it to Lean. In the end, we showed what the financial history looked like five years later under Lean, which was obviously quite different.
I thought it was a good example if you wanted to see how you would go about this. This was really just the way that I have gone about it pretty much everywhere. It is a very good case study, and that, in turn, generated other questions. Fortunately, LEI, the Lean Enterprise Institute, gave me some space on their weekly Lean Post to answer those questions.
I have been doing that for about eight years or so, and I had over 100 articles on the Lean Post. It seemed to have a pretty good readership; we did a few webinars and got big attendance. When they asked me to stop, I said, “Well, gee, I don't want all this knowledge to go away.” We selected 70 of the articles, and we organized them into a book, which we now call The Lean Turnaround Answer Book, which is actually being published today for the first time. It has been in Kindle form for a week and a half, but today was the publishing date.
Mark Graban: Congrats.
Art Byrne: A good day for us to talk. It really answers just about every normal question about Lean that you could imagine. It is in article form, but it gives you answers to a lot of things. We have organized it into five sections.
Lean Fundamentals and Organizational Structure
Art Byrne: One section is the Lean Fundamentals, because you need to understand what those are to have any chance at doing this. Lean, to me, is not some manufacturing thing; it is a philosophy and a strategy on how to run your business. You need to understand what those fundamentals are before you can even attempt this.
Then we have a second section on Lean Management, which we get a lot of questions on. Then How do you implement it is another section. And then, What is the organizational structure that you need?
If you think of it, organizational structure creates a lot of the issues and problems that companies have. If you are organized in a functional way, the waste that creates is enormous, but nobody can see it because that is the traditional way to organize a company. In manufacturing companies, for example, the way that we fundamentally organize is by type of equipment. So, all the punch presses are in one department and all the drilling machines are in another department.
It seems like somebody decided that machines are happier if they are right next to other machines just like them. But, of course, for making the product, that makes no sense whatsoever.
Mark Graban: Right. For flow, right?
Art Byrne: So we have a whole section on structure and the structural changes needed to implement Lean. Then there is a catch-all section on some other thoughts that didn't fit into the other sections. Things like Lean Accounting, which people overlook. But if you don't switch to Lean Accounting fairly early on in your journey and you try to go with traditional standard cost accounting, it fights everything that you are trying to do in Lean. You are trying to get rid of inventory; standard cost accounting loves inventory.
There are some other things in that section that are kind of fun or interesting, like: Can you use poetry for Lean? People will say, “What, are you crazy?”
Mark Graban: Did you say poetry?
Art Byrne: Poetry.
Mark Graban: I want to make sure I heard you correctly.
Art Byrne: It is just a fun story about one of the companies that we acquired when I was running Wiremold. We bought this company and we were doing the first Kaizen events. During the event, I went out into the factory and we had this huge area of Work-In-Process (WIP) inventory. These were racks 30 feet high in the air and 50 or 60 feet long. Millions of dollars sitting in there in WIP inventory.
So I went out and I hung up a sign on every rack. I said, “Parts Hotel Closing. This rack comes down by [Date].” Then I went to the next rack and put another sign a month later: “Parts Hotel Closing.”
As I am walking back, a lady pokes her head out of this little office and she said, “Hey, you, what are you doing? My people are all upset.” I said, “Oh, do you run this area?” She said, “Oh, yes, I am.” She had on this funny hat. I guess she was pretty well known in the plant because she always wore these different hats; she was very outspoken about everything. I said, “Great, come with me and I'll show you what I want you to do.”
I took her back and showed her the signs. I said, “Look, every time I want you to take these racks down and get rid of this inventory because it is all waste. Every time a rack comes down, I want you to send me my signature so that I know it came down.”
She looked at me and said, “Well, okay.”
A month later, I was at the plant doing another Kaizen and she came up to me and hands me my signs. Then she hands me a poem. Her name was Barbara, and she called herself “Dame Barbie and Her Merry Men.” King Arthur had ordered this inventory to go away. It was a fun poem. I said, “Barbara, thank you. That is really great.” She looked at me and said, “Well, you know, we aren't done.” I said, “What do you mean?” She said, “Well, I gave you a poem. You have to give me a poem.”
So I said okay. I went into the cafeteria before the wrap-up meeting on Friday, and I wrote a poem about the Parts Hotel. At the meeting, I read her poem, and I read my poem. This went on every month for about eight or nine months. In the end, we freed up something like $2.5 million worth of inventory and 20,000 or 30,000 square feet of space that we could use for other things. It was just a story about how you have to have fun with this. You have to enjoy yourself as you go along.
Mark Graban: I am trying to picture this. Was this a heartfelt poem, like an ode to inventory? It wasn't some sort of Limerick thrown in your direction?
Art Byrne: No, she kind of got it. Then I wrote The Parts Hotel, which talked about all the inventory sleeping there. “We take great care of our parts. We let them sleep for a long time. Sometimes they rust.”
Mark Graban: It is more like the parts have an apartment lease. They are there for months, not days.
Art Byrne: In a way, it got the point across to everybody in the business that, “Hey, this is really wasteful. We need this money for new equipment. We need this money to invest in new products. Instead, it is just sitting here in a big pile of inventory, sleeping.” You can say, “Well, that sounds a little nutty,” but it was very effective in this particular case.
Mark Graban: At the same time, as you were setting this target for closing the hotel, I am sure they realized their goal was not to find a different place to store the parts. This is where I am sure machines were being moved into cells and other changes that would actually improve flow, right?
Art Byrne: Absolutely. All that stuff was going on at the same time. I asked somebody at one point, “How did Barbara reduce all this inventory?” They said, “Oh, everybody is afraid of Barbara. Whenever we took inventory out, she just said it can't come back.” So they didn't want to cross her, and that is how it came down. But we made a ton of money doing that.
The Problem with Traditional Accounting
Mark Graban: For those listening, I want to ask one follow-up question about the cost accounting and inventory. You can check my understanding if I don't have this right. Is it fair to say one of the problems is that running the machine and cranking out more parts–even if they are going into inventory–makes the cost per piece seem lower from an accounting standpoint? Is that one of the dysfunctions?
Art Byrne: Yes and no. Basically, under absorption accounting, you are absorbing the overhead costs based upon either man-hours or machine-hours. Let's say machine-hours is pretty common.
Let's say that we have ten machines needed to make Part A. We come in today and one of the machines is not working. That means we cannot make any Part A's today–nothing we can sell. But the accounting department says, “Oh, run all the other machines full blast.”
So now I am making nine other parts. I can't sell anything, so all I am doing is stacking up inventory. But, I am also getting absorption hours off of these machines running these parts. The absorption hours are taking the overhead and moving it up into inventory so it doesn't hit this month's P&L (Profit and Loss statement).
From an accounting point of view, the accountants say, “Hey, we had a really good day.” From an operations point of view, I say, “Wait a minute, I didn't make anything that I can sell.” But accounting says, “Oh no, that was good, you did a good job.”
What happens is that people understand this fairly quickly. The guys running these functional departments understand that as they get near the end of the month, if they are short of absorption hours–they are looking at absorption hours, not the customer–they don't want to get yelled at. So, they start making parts that have the most absorption hours. We don't happen to have any demand for those parts, by the way, but they make absorption hours so the month will look pretty good and everybody will be happy.
On one hand, with Lean, we are trying to get rid of the inventory because it is hiding the waste. Over here in the finance department, they are mad at you if you start dropping inventory because when you drop inventory, the overhead that was thrown up in there before starts to come out. Today's overhead has no place to be absorbed. So, you are getting a double shot of overhead. The finance department screams its head off while Lean is being implemented and good things are happening. They say, “You have to stop this. This is crazy. Our earnings look terrible.” Our cash flow looks pretty good, but our earnings don't look good.
If you don't change the accounting fairly early on, you are just going to have a battle with the finance department for a long time. We had that experience. We had a lot of companies come visit us at Wiremold. They would go home, start their own Lean conversion, and be making good progress. About a year later, they would call us and say, “Can we send our CFO and a few of his people to see you for a week? They are all upset and they just don't understand.” We would say, “Okay, send them over and we'll see if we can straighten them out.”
What they are looking at from their absorption point of view and what is really going on are completely different. Besides, in my opinion, absorption accounting is something that cannot be understood by humans. It tries to create standard costs for every product out to four decimal points. If you ask people in the business how many believe that the standard costs are actually correct, no hands will go up. I have tried this many times. Nobody believes the standard cost, but the finance department believes them. People set their prices based upon standard costs that aren't correct, which means either you are going to leave money on the table or you are going to overprice the thing and lose market share just because your standard costs were wrong.
Mark Graban: And Orry Fiume was your CFO at Wiremold, is that right?
Art Byrne: That's correct.
Mark Graban: So you and Orry were on the leading edge of not just identifying these dysfunctions, but figuring out how to better align accounting and finance with Lean and operations, right?
Art Byrne: That is right. Orry was a unique finance guy in that he is a very good strategic thinker as well. He wrote one of the better books on Lean Accounting called Real Numbers with a lady named Jean Cunningham, who used to be the CFO at a company called Lantech. I think that was very helpful to a lot of companies.
I'll tell you a story about Orry. When I first got to Wiremold and we started doing Kaizen, for the very first Kaizen, I had all of my senior executives on one team or another. I think we had four teams with Shingijutsu there. I said, “Orry, I want you to be on the Setup Reduction team.”
He's the finance guy and he says, “But I'm the finance guy. I don't know anything about setup reduction.” “Orry, I want you to go on the team.” “But we are going to close the books this week. The auditors are coming in to start the annual…” “No, no, no. You gotta get on the team.”
So he finally goes out on this team. It was a Setup Reduction team. They went from 90 minutes setup time to 5 minutes over the course of one week. That was pretty normal for us at Wiremold; our average setup reduction result after a one-week Kaizen was a 90% reduction on any kind of equipment.
Anyway, Orry is still the finance guy, so he decides to keep track. He says, “If you are going to reduce setup time, it has got to be capital intensive. We are going to spend a lot of money.” So he kept track the whole week: How much money did we spend to go from 90 minutes to 5 minutes? I think it was $100.
Because he was such a good strategic thinker, it dawned on him right away: “Boy, if we can do this and it doesn't cost us money, think of the strategic impact on the business that setup reduction is going to have.” He became my best disciple, really helped everybody else get on board.
The Strategic Power of Setup Reduction
Art Byrne: He just understood it. Yet, I have seen over and over people see something like that and just say, “Well, that was interesting, but I don't know what it means, and we are not going to do it again.” But think about how strategic setup reduction is. No one would ever think about that.
Let's take an example: We have two companies, A and B. They buy the exact same equipment from the same vendor and then they compete against each other.
- Company A (the market share leader) takes 1 hour to change over his equipment.
- Company B (coming from behind) figures out how to change the machine in 1 minute for hardly any money.
You ask yourself: Who has the lowest cost, A or B? Obviously, the guy who can change it in 1 minute is going to have much, much lower cost. First of all, he can run the machines for 59 minutes more than the other guy can.
Then you say, “Alright, let's say they can only each afford 1 hour of changeover time a day based upon their demand.” Who has the best customer service? Obviously, B has much better customer service.
- Company A can only make 2 different products a day: the one before the changeover and the one after.
- Company B can make 61 products a day: the one before the changeover plus 60 changeovers.
All we did was reduce setup time. It didn't cost us a lot of money. Now I have got the lowest cost and the best customer service. To me, that is pretty strategic. It is not some fundamental manufacturing thing or a cost reduction program. But you would never call in the security analysts and say, “Hey guys, we want to talk to you today about a strategic thing called Setup Reduction.” They would think you were completely crazy because people don't understand the value of Lean. They don't understand what it does for you from allowing you to be a time-based competitor. All of which comes from simple things like setup reduction.
Private Equity and Lean
Mark Graban: I want to come back and ask you a little bit more about the book, Art, but I am curious to explore your transition from being a CEO to working as a partner in Private Equity. How did your role change, or how was Lean utilized in private equity? Were you trying to convince CEOs to care about things like setup reduction?
Art Byrne: In a way, it didn't change at all for me. At Wiremold, we bought 21 different companies, so I always had to convince the new CEOs why to do Lean and how we were going to do it. Moving into private equity, at the time, J.W. Childs had about 17 or 18 different companies in the portfolio. I became Chairman of four of them.
As Chairman, my basic role was to implement Lean in the companies I was responsible for. I wound up having to fire about three or four of these CEOs because I couldn't get them to come along with it. You can't wait. In the private equity business, we are trying to triple our investment in about five years. It doesn't always happen, of course, but you have to have some target. I can't wait for these guys to come along and get on board.
With the rest of the companies, my role was to try and help them understand Lean and to get them started. I spent some time doing Kaizen events with some of the other companies. So the role was really kind of the same–showing people, doing Kaizen, getting companies to do this stuff.
We had a company that made suits, Joseph Abboud. I went there–they were in Fall River, Massachusetts, one of the only plants left in the United States that actually made clothing. I said, “How long does it take you to make a suit?” They said, “Six weeks.” “No, no, we want the one-day suit.”
Trying to teach them how to do the one-day suit took some time, but we got things like that to happen in very different kinds of companies. It had a big impact, not always from me being there all the time, but I was the initiator.
In the companies I was Chairman of, I did spend a lot of time. I attended a lot of Kaizens and really pushed hard to get these guys to do what they should do. We had a company called Esselte; they were in the filing business–lever arch files and hanging file folders (Manila folders). That was an industry declining at about 4% per year because of laptops and iPhones. Even there, where the business declined 4% a year for all the time we owned it, because of Lean, we were still able to get 3.5 times our money back when we sold that business.
We were able to stay ahead of the curve, consolidate, and close factories. This was about a $1.1 billion business when we bought it, but it wasn't making too much money. In the end, we were down to just the European portion of it, but we were doing quite well in a business that was declining just because of Lean. I think we freed up over $200 million worth of inventory and 2 million square feet of space, all through different Kaizens.
In that particular case, the biggest factory in Europe was in Poland. Every year we had a “President's Kaizen.” We had John Childs (Head of J.W. Childs), myself (Chairman of Esselte), the worldwide leader of Esselte, and the European president of Esselte all present for a whole week doing Kaizen on the shop floor in a factory in Poland. This sent a tremendous message through the business that, “Hey, we are serious about this. We are going to spend our time on the shop floor. You better pay attention and get on board.” They did a really tremendous job.
Mark Graban: I know there are some private equity firms that seem to have a Lean-based approach for how they want to help create value. I imagine there is a certain profile or formula–looking for companies that might be undervalued by a more traditional financial view, where a Lean thinker would see potential in transforming operations.
Art Byrne: I don't know for sure, but I think most of the private equity companies are basically a bunch of finance guys. They've traditionally been that way. They have learned to find somebody who knows Lean and hire them when they need them in certain companies. I think that is more the model.
But I would get involved. When we were looking at a new company, I would be part of the due diligence. Part of that was just to walk around the factories. I could give you a pretty good idea right off the bat what was possible. For example, if I look at a traditional company that turns its inventory three times, to me, that is a goldmine.
In my experience, a company that turns inventory three times usually has:
- 25% to 40% too many people.
- Five to six times too much inventory.
- 50% too much space (where they store the inventory).
- Long lead times.
- Periodic quality problems (due to batching and inability to solve problems that happened weeks ago).
You look at a company turning inventory three times, and you should be able to make a lot of money by turning that company around. It generates a lot of cash flow. At Wiremold, we found that when we bought a company, we could pretty much always get our cash back in about three years because almost all these companies were turning inventory about three times. We could get it to six times at the end of the first year, eight times at the end of the second year. It gave you a strategic advantage on how much you could bid for the company because you had this enormous cash cushion of wasteful inventory that you could just pick up and use.
Why Most Lean Transformations Fail
Mark Graban: With all of those benefits, is it fair to say that Lean is still not quite the default management system, even in American manufacturing companies?
Art Byrne: Oh, I would say by far it is not. If you asked me ten years ago, I would have said maybe 15-20% of companies have thought about Lean or tried it. Today, that number might be 50%. But if you ask how many of those companies are successful at becoming a Lean enterprise, I think the number drops down to about 5% to 7%.
Not many become successful. The reason is that almost every company that thinks about Lean from a traditional point of view looks at it as a cost reduction program. They don't change anything else. The sales force is still selling big batch orders and giving volume discounts. Everything else is in the batch. If that is your approach–just reducing costs–you are not going to be very successful. With Lean, everything has to change.
I'll give you an example. When I first went to Wiremold, one of my first questions was, “What percentage of our shipments go in the last week of the month?” For a batch manufacturing company, that applies to everybody. The answer in Wiremold's case was 50%.
I said, “50%? We are going to try and level load the production.”
If I ship 50% in the last week of the month, I have to be staffed to do that. But that means I am massively overstaffed the other three weeks. Why were we doing that? We found that it was our sales terms. Our terms forced our electrical distributors to order in the last week of the month because they got an extra 2% cash discount if they paid by the 10th day of the month following. They are going to get 45 days sales terms. In the distribution business, margins are low (3-5%), so that 2% cash discount was a big deal.
I said, “We can't deliver value to these customers with these sales terms.” We changed it. We actually had a 5% cash discount; the industry was at 2%. I said, “We are going to go out to everybody and give them a choice. You can keep the 5%, but you have to order and pay us twice a month. Or, you can go to the industry terms at 2% and do it the same way.” Of course, everybody changed. They wanted the 5%.
That flattened the order rate, but it wasn't enough because they still ordered off their MRP systems, ordering three or four months' worth at a time. The orders were very lumpy. So we went back to the distributors and said: “Look, we deliver to you every Thursday between noon and 2:00 PM. You carry four months of our inventory, yet we deliver every week. That is a big waste. Tell us what you sold every day, and we will have it on next Thursday's truck. We will drop your inventory from four months down to maybe three weeks. Then, we want you to take some of that money and add back extra SKUs of ours that you weren't carrying before.”
The distributors who did that saw their sales of our products go up by about 10%, and their profit on our products went up by 20% because they became known as the guy who always had the odd Wiremold products. It was a two-step process, but that leveled out our demand and production. Nobody else in the electrical industry did it because they were batch guys.
Mark Graban: And I'm sure it didn't take long to prove to the distributor with a Lean production system that you could reliably make those deliveries, so they didn't have to have the “just in case” buffer inventory.
Art Byrne: Right. They were pretty skeptical, so it took them quite a while.
Mark Graban: Yeah. When you talk about sales incentives and lumpy sales… 25 years ago, I joined Dell Computer. They had amazing flow through the factory–very much single-piece flow. But they also conditioned their customers to wait for the end-of-quarter discount. The natural demand was probably very level, but they had this enormous hockey stick effect that was detrimental. That is why I don't like to label them a Lean company, even back then.
Art Byrne: I remember years ago, I introduced Boeing to Shingijutsu back in the early 1990s. I gave a speech at Boeing to about 800 of their management people. I said, “The airplane business, in terms of seat miles and passengers, is a steady business. It grows at 2-3% a year. But your business is very cyclical. The reason is your lead time is 14 months to make an airplane. You have got to get it to six weeks.”
I am sure they looked at me like, “Who is this idiot?” Then Shingijutsu showed them how to make a 737 in less than a week. Once you do that, it changes the way customers look at you. It changes everything.
Think about the automotive companies. For years, they would just build inventory and then have big sales discounts. Customers and dealers learned: Don't buy anything until they offer the big discount. Then the cycle would repeat.
Mark Graban: It begs the question regarding Boeing, with recent events… did they forget everything Shingijutsu taught them?
Art Byrne: Maybe not all of it, but a lot of it. The last couple of years, I made a couple of visits to Spirit AeroSystems (formerly part of Boeing). When I got there, the Shingijutsu training had completely disappeared. I was able to get them back doing some Lean stuff.
From what I have read, Boeing did a bunch of stupid things. Toyota taught us that the way to quality and low cost is to stop the line. Boeing had been taught “stop the line” by Shingijutsu. A lot of their recent problems seem to be that they were pushing “don't stop the line” again. They had “travelers”–work supposed to be installed in Station B didn't get installed until way later. They didn't have the tools and expertise there, so they wound up with problems.
They also moved their headquarters from Seattle (near the factory) to Chicago, then to Washington, D.C.–a nutty place to run anything out of. Then they outsourced the Dreamliner. They basically outsourced it and had all kinds of delays because their partners couldn't do what they said they were going to do.
“Make the Month” vs. Lean
Art Byrne: You can point fingers at executive decisions, but I think a lot of those go back to the concept of “Make the Month.” Most traditional companies run on “make the month.” One of the articles in the new book is: “What happens when ‘make the month' meets Lean?”
They are not compatible. If you run things on “make the month,” think about what you are doing. It takes three weeks to close the books, then you have a big review of what happened last month. You are looking backward at something you can't change.
My first introduction to Lean was my first General Manager job at General Electric. We created a small Kanban system between myself and another factory (my supplier) about 45 minutes away. We bought a truck and created Kanban cards for these little arc tubes for high-intensity lamps.
I said, “The truck will come every morning. We will give you the Kanban cards we used yesterday, and you bring them back tomorrow.” My inventory dropped from 40 days to 3 days. Their inventory went from probably 60 days to zero. They just made the ones that came back on the Kanban cards every day.
But no one in GE cared because it was all “make the month.” No one cared about inventory or cash flow. But we saw that customer service got better, costs went down, quality got better, employees were happier, and the shop floor was safer. I said, “Look, wherever I go from now on, I am going to try and learn more about this Lean stuff.”
The “make the month” companies can't learn that. At GE, the drive for “make the month” was a real negative thing overall. When you push people that hard for that one thing, they make decisions that aren't good for the business long-term.
Mark Graban: Now, of course, the last five years, GE brought in Larry Culp, formerly CEO of Danaher, to work on the Lean transformation at GE. Art, I really want to thank you for talking today. Hopefully, I asked you questions that you didn't address in The Lean Turnaround Answer Book.
Art Byrne: I think a lot of those things are covered in the Answer Book because the articles pretty much cover every question someone could have about Lean–organizational structure, fundamentals, management changes.
Mark Graban: I'll encourage the readers to go check it out: The Lean Turnaround Answer Book. Maybe if somebody does have a question that is not addressed, I can invite you back.
Art Byrne: I enjoy answering those kinds of questions because that is really how people learn. Lean is nothing but a series of leaps of faith into the unknown. Every time you change things, create a new cell, in the back of your mind, there is the question: “What if this doesn't work?”
Mark Graban: But when we can rely on the experience of people like you who know what happens when you take the leap, that gives people more confidence.
Art Byrne: That is correct.
Mark Graban: Well, I hope people will check out Art's latest book, The Lean Turnaround Answer Book. The Lean Turnaround is still read very widely; my wife's CEO gave her that book two years ago. So, Art, thank you again for being here on the podcast. Really appreciate it.
Art Byrne: Mark, great to see you again, and thank you for having me.
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You should let him know that his new book is under Art Bryne instead of Art Byrne, so it isn’t on his main profile.
By the way, I’m currently enjoying the Audible version of The Lean Turnaround.
Good catch. I’ve let Art and his team know.
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