Evolving Excellence

The Irish Could Learn From the Vietnamese

Along comes a story about workers at a Nortel plant in Ireland going on strike every Monday.

The Nortel telecoms plant at Monkstown in Newtownabbey was hit yesterday by   strike action in a row over this year’s pay deal.  Unite, the trade union, said that more than 150 test technicians and shop   floor workers had taken part in a half-day stoppage. Unite regional organiser Terry Collins said the action was taken after pay   talks broke down.

What's the beef?

He said: “We have been working closely with the company over the past 18   months on ‘lean manufacturing’ and have made £3m in savings at the Monkstown   plant. “Now is the time our members are paid back for all their efforts, Unite   members will be staging a half-day strike each Monday from now on.

I could play this story several ways.  First off, at least the company didn't follow the path of so many LAME lean companies and lay off the workers when productivity improvements were realized.  But that's not really what's going on here.  If this was a true lean effort this would never have been an issue.  Real lean requires the intimate involvement of the employees, and the organization recognizes the value of that involvement and their contributions.  The return to the employees may not necessarily be financial, but whatever it is is satisfying and beneficial to the employees.  However a core component of most real lean programs is a way to share the financial success with the employees.

Coincidentally, on the same day, there was a story out of Vietnam.

Diep Thanh Kiet, vice chairman of the Ho Chi Minh City Association of Garments, Textiles, Embroidery and Knitting, estimated that workers in the garment industry have seen their living costs surge by at least 40 percent this year. But their salaries have gone up just 12-15 percent, and many find it hard to make ends meet.

So what are they doing about it, and what's the risk?

While the annual attrition rate at garment firms is 5-20 percent, Kiet said some are now choosing to return home to work instead of moving to another factory in the city. It is much easier for a worker to get by on a salary of VND1 million (US$60) in Tra Vinh or An Giang provinces than to live in HCMC on VND1.6 million ($96) a month, he said. Businesses paying workers less than VND1.5 million a month face the highest risk of losing them, he added.

That's what's happening at traditional companies.  But some are taking a different path.

Nguyen An, general director of the Saigon Garment Joint Stock Company, said businesses that can keep their employees would be the winners. His company has started applying lean manufacturing principles to cut costs and has been able to raise the salaries of workers, he said.

He's realizing a double savings: by increasing productivity and sharing that financial reward with his employees, he is able to keep those employees.  What he may not realize yet is that he has also kept the knowledge, experience, and creativity of those employees... not just the pair of hands.

Just wait until the power of those brains, empowered by a lean manufacturing effort that truly values the input of the employees, really kicks into gear!

McKinsey Looks at Supply Chain Complexity

The McKinsey guys just published the results of a survey on supply chain management that has some interesting, albeit expected (at least by us!), conclusions.

Supply chains are increasingly global and complex, as companies aspire to support a variety of strategies, such as entering new markets, increasing speed to customers, and lowering costs. In this survey, we asked operations and other senior executives from around the world about their companies’ supply chain strategies, the factors that influence those strategies, and the ways their companies act on these factors. We also explored how well executives think their companies are meeting their goals, how they manage their supply chains, and the challenges involved in running a global supply chain.

Guess what, supply chains are becoming more complex!

The results show that supply chain risk is rising sharply. Executives point to the greater complexity of products and services, higher energy prices, and increasing financial volatility as top factors influencing their supply chain strategies.

Really!  Let's see... outsourcing an ocean or two away, translating knowledge into different languages and cultures, communicating across time zones, intellectual property... I can think of a few reasons.  So what's being done about it?

Relatively few respondents, however, say that their companies are translating the importance they place on these factors into corporate action.

Should I hazard a guess that this is driven by a reliance on traditional accounting methods?  What is risk?  What is knowledge?  How does that compare with the hourly cost of a pair of hands?  Inquiring minds want to know, especially since it doesn't show up on the P&L or balance sheet... until it's too late.  So since these guys have their heads buried in their P&L's, what happens?

Nor do executives express confidence that their companies are meeting the top strategic goals: reducing costs, improving customer service, and getting products to market faster. In addition, for all the public attention paid to environmental concerns, including global warming, executives report that such issues have little influence on supply chain strategies.

No kidding.  Maybe if they turned off their computers and actually followed their physical supply chain for a few days (or months... some are pretty damn long!), they'd get a sense of what's going on in the real world. 

Lean Olympians Take Time

A news story the other day caught my eye and got me to thinking.

One of the aims of the Olympics is to raise interest in taking part in sports - but it seems some people are pushing themselves a little too hard. A gadget helpline has been receiving calls from people wanting to know how to set their cycling and rowing machines to keep up with Olympians.

Yes, people are sitting at home and then, without any real training, trying to be "instant Olympians" on their exercise machines.

Ben Titchmarsh, of the Gadget Helpline, says their role is to help people when devices such as phones or iPods fail - and that they do not cater for faulty exercise equipment. But since the start of the Olympics, they have had around 50 calls from people wanting to keep up with the elite athletes they are watching on TV.

He said: "One woman said she really wanted to set her rowing machine so she could do the same number of strokes per minute as the Olympic athletes. She was obviously sitting in front of her TV and entering into the spirit of it all." He added: "Another caller wanted to adjust his exercise bike so he was cycling at the same number of miles per hour as the Olympians. And even though the track and field events hadn't yet started, people were also asking about settings for their jogging machines."

Obviously it doesn't work that way.

Sarah Hardman, a physiologist from the English Institute of Sport who has worked with Team GB's rowing squad added: "It's great that people are being inspired by the Games and the performances taking place across different sports, but each individual needs to know their limits."

"Olympic athletes have been in full time training for years and progressively work towards the standards they achieve."

And once again we can draw a lean lesson from this story, and especially that last line.  Real lean manufacturing takes a lot of time and effort.  You may hire one of the multitude of consultants to come in and put on a kaizen event, and you may realize some rapid savings.  But you won't be lean, and what little improvement you realize won't be sustainable.  Real lean takes years, a deep commitment from management, a major investment in training, and the guts to keep the faith even after inevitable initial failures.

For example runners in the women's marathon on Sunday would reach speeds of 12-13mph. "That's a phenomenal speed, and most people won't be able to keep up with it for more than a few seconds, let alone two hours.

Just like we want a lean transformation to last more than a few seconds.

 

The Fine Print Risk of Lean

Is lean manufacturing risky?  Perhaps, especially when it's implemented in a superficial manner.  But Cisco apparently believes it is also one of innumerable risks to its future performance.  "Innumerable" being the operative word, as it listed along with every possible calamity.  Of course it's pretty much the typical safe harbor statements found in any financial report, and one of the ridiculous consequences of a regulation that requires all potential risks be disclosed.  Of course the easy way to comply with that regulation is to brainstorm every possible risk, just in case, thereby making the statement a meaningless waste of ink.  Here's Cisco's:

This release may be deemed to contain forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding future events (such as our vision of the Internet, our entry into new and adjacent markets, our expansion plans, the power of our business model, and our ability to take advantage of market transitions and drive toward our long-term growth objectives) and the future financial performance of Cisco that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results due to a variety of factors, including: business and economic conditions and growth trends in the networking industry, our customer markets and various geographic regions; global economic conditions and uncertainties in the geopolitical environment; overall information technology spending; the growth and evolution of the Internet and levels of capital spending on Internet-based systems; variations in customer demand for products and services, including sales to the service provider market and other customer markets; the timing of orders and manufacturing and customer lead times; changes in customer order patterns or customer mix; insufficient, excess or obsolete inventory; variability of component costs; variations in sales channels, product costs or mix of products sold; our ability to successfully acquire businesses and technologies and to successfully integrate and operate these acquired businesses and technologies; increased competition in our product and service markets; dependence on the introduction and market acceptance of new product offerings and standards; rapid technological and market change; manufacturing and sourcing risks, including risks related to our lean manufacturing model; product defects and returns; litigation involving patents, intellectual property, antitrust, shareholder and other matters, and governmental investigations; natural catastrophic events; a pandemic or epidemic; our ability to achieve the benefits anticipated from our investments in sales and engineering activities; our ability to recruit and retain key personnel; our ability to manage financial risk; risks related to the global nature of our operations, including our operations in emerging markets; currency fluctuations and other international factors; potential volatility in operating results; and other factors listed in Cisco's most recent reports on Form 10-K and Form 10-Q. The financial information contained in this release should be read in conjunction with the consolidated financial statements and notes thereto included in Cisco's most recent reports on Form 10-K and Form 10-Q, as each may be amended from time to time. Cisco's results of operations for the three and twelve months ended July 26, 2008 are not necessarily indicative of Cisco's operating results for any future periods. Any projections in this release are based on limited information currently available to Cisco, which is subject to change. Although any such projections and the factors influencing them will likely change, Cisco will not necessarily update the information, since Cisco will only provide guidance at certain points during the year. Such information speaks only as of the date of this release.

Yes one paragraph, and I highlighted the lean statement in red for your convenience.  Just a few words ahead of "natural catastrophic events" and "pandemics and epidemics." 

I guess it's time to hunker down in a cave.

New at Superfactory - August 2008

Each month new articles, book reviews, and other content are added to the Superfactory website. The new content is featured in the monthly e-newsletter which goes out to 50,000 subscribers worldwide, and we will also post a monthly heads-up on this blog.

One brief announcement this month: for the last ten years the Superfactory website, and more recently the Evolving Excellence blog, have been operated by Superfactory Ventures LLC.  Over the last couple years the other services offered by the company have been expanding, so now it is time to rename the company to something more descriptive: Factory Strategies Group LLC.  The Superfactory website and Evolving Excellence blog will stay the same (like it or not!), but you can visit FSG to see our manufacturing consulting and assessment services.  On a final note, you'll notice that the core of our logo is a person.  This is because we passionately believe that the heart of a factory, and a lean transformation, is the knowledge and creativity of people.

New content in August includes:

The featured article is from Bob Emiliani and is titled Attention: We Can Stop Making the Same Mistake Now.  The following is a brief excerpt, and you can read the entire article here.

Having now recognized the importance of the “Respect for People” principle in Lean management, the Lean community is now more focused than ever on trying to change senior managers’ behaviors. However, efforts to change their behaviors in support of new, progressive management practices has, for several decades, largely fallen flat. Knowing this fact should motivate us to re-think the problem and identify processes that are more effective at changing leadership behaviors.

Wouldn’t it be great if top managers could easily see the wide-ranging benefits of Lean management and the vast array of improvements and human and organizational capability-building that are possible? If they could see it, then you would think that they would rush to change their leadership behaviors in order to secure the gains for the business and its stakeholders as soon as possible. But as we all know, this rarely happens. The usual outcome is for executives to take the business down the Lean path with little or no change in their leadership behaviors.

The featured book this month is Lean Hospitals by fellow lean blogger Mark Graban.  The following is a brief summary, click here for more information.

Drawing on his years of working with hospitals, Mark Graban explains why and how lean can be used to improve safety, quality, and efficiency in a healthcare setting. After highlighting the benefits of lean methods for patients, employees, physicians, and the hospital itself, he explains how lean manufacturing staples such as Value Stream Mapping and process observation can help hospital personnel identify and eliminate waste in their own processes, effectively preventing delays for patients, reducing wasted motion for caregivers, and improving the quality of care.

We continually update the other major sections of the website, including:

• PowerPoint Presentations: Over 50 downloadable PowerPoint presentations on lean manufacturing, quality, enterprise, and safety concepts.
• Factory Toolbox: Almost 300 downloadable forms, procedure templates, assessments, and tools to help you not reinvent the wheel.
• Events Calendar: a listing of lean excellence seminars, workshops, training, and conferences worldwide
• Topic Information: Summaries and resources on over 40 enterprise excellence topics.
• Online E-Learning Center: Fourteen interactive online presentations on the core concepts of lean manufacturing.
• Tools and Assessments: Downloadable assessment tools.
• Virtual Factory Tours: Web and streaming video tours of over 100 factories.

The Superfactory 20 list of companies with strong lean manufacturing programs was released, and the   stock performance of each of those companies is being tracked individually and as a group versus the S&P500.  Last year these companies outperformed the S&P500 by 20%... this year it isn't quite as hot.  Yet.  Check out the list and performance, updated hourly.

For all you LinkedIn junkies, we have created a LinkedIn group for Superfactory.  Join the group to  network with other Superfactory enthusiasts and to show our logo on your profile.  If you haven't explored LinkedIn, check it out to see why over 17 million professionals use it for networking.

We are always looking for new articles and other content.  Contact us via the Superfactory website if you would like to contribute to our knowledge base.