The Lean Report 2011

The Lean Report 2011

Sponsored by:

Results

LEAN SURVEY CONCLUSIONS - June

Foreword Lean Survey Yet Survey to implement Results Lean Correlation Analysis

careful application of tools and maintained through monitored staff engagement.

Foreword

Being lean is more than simply value stream mapping a business and eliminating waste, it is an opportunity to achieve greater productivity, reduce costs, increase profit and reduce a company’s carbon footprint.

In addition to eliminating waste, lean manufacturing seeks to provide optimum quality by building in a method whereby each part is examined immediately after manufacture, and if there is a defect, the production line stops so that the problem can be detected at the earliest possible time.

Jane Gray Editor, Lean Management Journal

Lean has done much to highlight flaws in management and operational practices.

As enthusiasm for lean implementation has continued, there has been a commitment to face challenges to productivity and tackle them with practically applied ideology.

These are indeed exciting times for UK companies, many of whom have emerged from the downturn with a stronger commitment to success and operational excellence. Making the most of tools that are on hand to facilitate lean should be considered as important assets in a company’s efficiency and productivity artillery.

External forces such as the economy, government and natural disasters will always be a concern for organisations seeking continuity. However, while those factors may not be controllable from the factory floor, utilising best practice is the most accessible option available for companies to best strengthen their operation.

The ideas behind what is now termed lean thinking can be linked to several sources, including great industrialists like Henry Ford and management thinkers such as W. Edwards Deming. Of particular note are the ideas originally developed in Toyota’s post Second World War manufacturing operations – known as the Toyota Production System – under the guidance of its chief engineer, Taiichi Ohno. These spread through its supply base in the 1970’s, and its distribution and sales operations in the 1980’s.

Ever since Ford invented the assembly line, industrial innovators have constantly focused on improvement through a multitude of different tactics. Lean manufacturing strategy seeks to manipulate an operation to produce a high level of throughput with minimum inventory. Change however needs to be sustained and this can only be achieved by 2

Contents

The Lean Report 2011 Contents Page Number:

Content:

4

Executive Summary

5

Survey results and analysis (Page 5) Survey Results (Page 19) Correlation Analysis (Page 23) Yet to Implement Lean (Page 26) Conclusions

27

Driving Value Creation through Operational Excellence TBM Consulting Group

29

TBM Consulting Group and Draka UK case study

33

Electronically enabling lean eBECS

37

eBECS and Talley Case Study

41

Minitab and Gold’n Plump Poultry case study

3

4

LEAN SURVEY Executive Summary

CONCLUSIONS - June

Welcome to the inaugural annual Lean Report 2011 sponsored by eBECS, TBM and Minitab.

and that is the unhelpful concentration on cost reduction. Nearly all the organisations responded that they are focused on internal efficiency improvement hoping to achieve cost reduction. Counter-intuitive thinkers (like Toyota and Tesco) know that cost reduction and efficiency improvement are outcomes and always take second-place in their improvement hierarchy. Effective delivery of customer value has primacy.

A survey by The Manufacturer magazine was conducted in July 2010, aimed at obtaining insight on how, and to what effect, Lean Thinking is being used by organisations. The report is structured into four sections as follows: A. ‘Survey results’ section which is based on all 212 responses B. ‘Correlation of analysis’ which looks at the inter-relations between answers to different questions.

C. ‘Yet to implement lean’ section devoted to responses in this category D. ‘Conclusions’ section

Other findings from the survey this year reveal: 25% of lean programmes have been running for five or more years, the majority (70% approx) are relatively new – less than five years 20% of respondents reveal that their organisations have used their own resources (‘not sought help’) in the implementation of a lean programme Of the ‘basic’ lean initiatives which have been adopted, 5S is the most popular 64% say the role of IT is ‘vital’ or ‘quite important’ However only 41% say that IT has enhanced lean wins 16% of respondents saved more than 21% on their inventory costs and 13% saved greater than 21% in terms of over production

The report found that more than two-thirds (70%) of respondents already have a lean program in their organisation while a further 11% have indicated plans to implement a lean program in the next 12 months. This level of adoption indicates a strong acceptance amongst industry of the benefits and necessity of lean. A wide range of drivers were indicated as the motivating objectives for implementing lean and, as might be expected, ‘cost reduction’ was the aim for 90%. In addition, 60% wanted to ‘improve quality’ and an equal number had ‘improving customer service’ and/or ‘improving supply chain efficiency’ as a goal.

Alongside the data, you’ll find expert analysis from: Barry Evans, Senior Research Associate in Lean Enterprise Research Centre (Cardiff Business School) Insightful articles from report sponsors and lean experts: eBECS, TBM and Minitab

While the level of engagement with lean is encouraging, achieving sustainable change requires a number of factors. These include: a will to change; investment of resources to take it forward; and support from senior and middle management. Unfortunately the survey re-affirms the conventional thinking that leads to 95% of lean implementation failing to achieve sustainable success,

From all at The Manufacturer magazine, we hope you enjoy the Annual Lean Report, 2011.

5

LEAN SURVEY

A nalysis – 2 0 11 A. Survey Results

Conducted by The Manufacturer magazine in 2010, this survey was aimed at obtaining insight on how, and to what effect, Lean Thinking is being used by organisations.

Figure 1 shows responses from 13 different named sectors and more returned as ‘other’. This shows how wide the diffusion of lean thinking has become since its origin in the automotive sector.

Figure 1: In what area of manufacturing do you operate

Response rate Over 200 Report structure The report is structured into four sections as follows A. A ‘Survey results’ section which is based on all 212 responses B. A ‘Correlation of analysis’ which looks at the inter-relations between answers to different questions.

C. A ‘Yet to implement lean’ section devoted to responses in this category D. A ‘Conclusions’ section

Automotive 13% Food and beverage 12% Aerospace and defence 8% Pharmaceutical 8% Metal working 7% Electrical 5% Chemical 4% Energy 4% Packaging 4% Textile 3% Construction 2% Medical device and equipment 1% High tech equipment 1% Other 25%

6

Results Lean Survey Survey Results

Figure 2 indicates that 70% of respondents have a lean program in their organisation while 19% do not. The remaining 11% plan to start a programme in the next 12 months. (Those that responded that they are ‘Planning to Implement in the next 12 months’ are further analysed in the section ‘Yet to Implement Lean’ – section C).

Figure 2: Has your organisation implemented a lean programme?

Yes 70% No 19% Planning to in next 12 months 11%

No 19%

Planning to 11% Yes 70%

Figure 3 shows that approximately 25% of programmes have been running for five or more years, the majority (70% approx are relatively new – less than five years).

Figure 3: When did you start your lean initiative?

7

Results Lean Survey Survey Results

A wide range of drivers were indicated as the motivating objectives for implementing lean – figure 4. As might be expected ‘cost reduction’ was the aim for 90%, and 60% wanted to ‘improve quality’. An equal number had ‘improving customer service’ and / or ‘improving supply chain efficiency’ as a goal. Perhaps surprisingly, less than 40% cited ‘professional development of staff’.

However there is copious case study evidence that sustained improvement is associated with organisations where work forces are encouraged to gain lean knowledge and skill and be the key drivers of lean improvement. The second highest response from figure 5 showed that 30% of respondents use ‘a large team with representatives from the shop floor to senior management and from all areas of the site’ to be responsible for the lean programme. While this is encouraging, a higher level of staff engagement would be more beneficial.

Figure 4: Which of the following were the key motivators for your business in the implementation of lean?

(Please mark as many as apply)

Figure 5: What kind of human resource allocation are you devoting to lean implementation?

8

Results Lean Survey Survey Results

Most organisations seem focused on their own operations for implementation (figure 6) – perhaps to be expected given the relative ‘youth’ of programmes as indicated above. However some are indicating implementation in their ‘suppliers’, ‘upstream supply chain’ or ‘downstream supply chain’.

Again there is plentiful case study evidence that shows significant and sustainable improvement arises from end-to-end initiatives.

Figure 6: In what areas of your organisation have you implemented lean initiatives? (Mark as many as apply)

Figure 7 shows that 20% of respondents reveal that their organisations have used their own resources (‘not sought help’) in the implementation of a lean programme. By implication the rest have sought help from a range of sources.

Figure 7: If you have sought help in the implementation of lean, what organisations have you approached?

9

Results Lean Survey Survey Results

It is encouraging to see that of the ‘basic’ lean initiatives which have been adopted, 5S is the most popular reply (figure 8). However, a significant proportion in Figures 9A report that their lean initiatives are ‘not meeting expectations’. This is possibly caused by organisations trying to ‘run before they can walk’ and not completing the required basic groundwork needed before they start on work which should follow later in their implementation ‘road map’.

Figure 8: Within your organisation, what is the current status of the following lean initiatives?

Adopted Planning to adopt Don’t plan to adopt

10

Results Lean Survey Survey Results

Figure 9: For each initiative you have adopted, please indicate the level of success.

Exceeding expectations Meeting expectations Not meeting expectations

11

Results Lean Survey Survey Results

Figure 10 supports the consistent finding that achieving sustainable change requires: a will to change; investment of resource to take it forward; and support from senior and middle management. Additionally lean requires a focus on effective delivery of customer value.

Figure 10: What obstacles stand in the way of improving efficiency, effectiveness and productivity in your organisation?

Major obstacle Minor obstacle Not an obstacle

12

Results Lean Survey Survey Results

Figure 11 shows that the major improvements are coming from ‘efficiency’ gains – internally focused ratios of utilisation of various resources. Organisations showing sustainable improvement focus much more on customer-facing measures such as ‘complete and on-time delivery’ or ‘increased product quality’ in the knowledge that the efficiency gains seem to automatically follow and are therefore produce a true ‘win-win’ situation.

Figure 11: For each of these potential benefits of lean manufacturing, how much improvement has there been?

Major improvement Minor improvement No improvement at all

The ‘correlation’ section looks in more detail at the benefits of lean programs to highlight where ‘root cause’ links might exist.

13

Results Lean Survey Survey Results

Figure 12 confirms the well understood evidence from exemplar lean organisations – improvement is founded on a workforce at ‘Gemba’ (in manufacturing the gemba is the factory floor) taking action using their knowledge and skill to make those improvements through, for example, kaizen activity.

Figure 12: What is the leading source of improvment in your organisation?

Figures 13 and 15 present somewhat of a paradox. 64% say the role of IT is ‘vital’ or ‘quite important’ (figure 13). However only 41% (figure 15) say that IT has enhanced lean wins – 59% say ‘IT has been a source of waste’ or ’IT has made a negligible impact’!

Figure 13: How important do you consider the role of IT in your lean journey?

Vital 26% Quite important 38% Not very important 30% Not important at all 6%

14

Results Lean Survey Survey Results

Figure 14 shows 72% of respondents have IT that either ‘meets their needs’ or ‘needs better integration of what we already have’. Only 28% feel that they need to ‘upgrade’, ‘buy new applications’ or ‘rip everything out and start again’.

Figure 14: Which of the following statements best describes how you feel about your IT systems/applications in relation to how they assist your lean journey?

We already have everything we need 33% We need better integration of what we have 39% We need to upgrade our existing systems 18% We need to buy some new applications 6% We need to rip everything out and start again 4%

Figure 15: Does IT enhance your lean initiatives?

IT has enhanced lean wins 41% IT has been a source of extra waste 20% IT has made a negligable impact 39%

Negligable impact 39%

Enhanced lean wins 41%

Source of extra waste 20%

15

Results Lean Survey Survey Results

Figure 16 reveals that the areas that respondents achieved the highest cost savings from their lean program. 16% of respondents saved more than 21% on their inventory costs and 13% saved greater than 21% in terms of over production. Respondents reported that transportation experienced the smallest reduction in cost with 75% revealing a drop in costs of less than 10%.

Figure 16: Across the ‘7 wastes’ what level of cost savings have you achieved from lean initiatives?

0-5% 6-10% 11-15% 16-20% 21%+

16

Results Lean Survey Survey Results

Figure 17 indicates that Inventory reduction is consistently the biggest source of savings, with defect reduction following second.

Figure 17: For each of the following periods of time, which of the ‘7 wastes’ have achieved the greatest savings?

90 days 6 months 9 months 1 year 3+ years

Figure 18 shows that 70% of respondents rate their lean programme as ‘successful’ or ‘very successful’ – indications of the root cause drivers of this are presented in the correlation section.

Figure 18: Overall how successful do you consider your lean programme to have been so far?

Poor 7% Very successful 21%

Very successful 21% Successful 49% Moderate 24% Poor 7%

Moderate 24%

Successful 49%

17

Results Lean Survey Survey Results

Figure 19 shows that 43% indicate that lean adoption is taking place (at ‘high’ or ‘medium’ level) in their upstream supply chain and 42% (figure 20) (again at ‘high’ or ‘medium’ level) in their downstream supply chain. Exemplar lean organisations who have achieved significant and sustained benefit would say that this ‘end-to-end’ approach is fundamental to their improvement.

Less than half of the respondents completed this question which is possibly not surprising given the relative ‘youth’ of lean programmes represented in this survey response data.

Figure 19: What level of lean adoption has taken place within your upstream supply chain?

High 5% Medium 37% Low 38% None 20%

Figure 20: What level of lean adoption has taken place within your downstream supply chain?

High 6% Medium 36% Low 38% None 20%

18

Results Lean Survey Survey Results

Figures 21 and 22 present a relatively encouraging picture that 55% (upstream) and 44% (downstream) say lean adoption is ‘improving’ in their supply chain.

Figure 21: Is lean adoption in your upstream supply chain improving?

Improving 55% Remaining the same 45% Reducing 0%

Improving 55% Remaining the same 45%

Figure 22: Is lean adoption in your downstream supply chain improving?

Improving 56% Remaining the same 44% Reducing 0%

Remaining the same 44% Improving 56%

19

Results Lean Survey Correlation Analysis

B. Correlation Analysis Table 1: ‘Length of programme / success of programme’ Success How Long have you been implementing lean?

Poor

Moderate

Successful

Very Successful

less than 12 months

0%

5%

5%

1%

1 - 2 years

2%

3%

11%

5%

2 - 5 years

2%

7%

15%

4%

5 - 10 years

2%

16%

6%

6%

over 10 years

1%

2%

5%

2%

Totals

7%

33%

42%

18%

Total 22%

Total 38%

100%

60% (table 1) rate their programme as ‘successful’ or ‘very successful’. Of this group, 22% have been implementing for less than two years and 38% from two to over 10 years.

Table 2: ‘Cost reduction level / other benefits rated as MAJOR’ Cost Reduction correlated to other ‘Major level’ benefits

Cost Reduction MAJOR

Cost Reduction MINOR

Cost Reduction NIL

Reduction in costs

42

36

4

Increased profitability

29

5

0

Complete and on-time delivery

19

10

0

Increased efficiency

30

7

0

Increased customer satisfaction

14

11

0

Increased product quality

14

4

0

Reduced inventory

21

10

0

Reduced waste

26

12

0

Reduced time to market

8

2

0

Employee retention

5

1

0

20

Results Lean Survey Correlation Analysis

Cost reduction was shown earlier to be the major motivator for (figure 4) and major source of benefit from (figure 11) lean implementation. However cost reduction is an outcome of other improvements. Table 2 shows what these improvements might be.

Conclusions: Profitability efficiency increases are evident in major cost reduction achievers.

The majority of respondents who’s businesses achieved major cost reduction also achieved a major increase in profitability, a major increase in efficiency, a major reduction in inventory and a major reduction in waste.

A high proportion of those that achieved a minor cost reduction also achieved a major reduction in inventory and a major reduction in waste. Fewer of them experienced a major increase in profitability or a major increase in efficiency suggesting a different focus for their lean projects.

Those that experienced no reduction in cost did not experience any major level benefits.

21

Results Lean Survey Correlation Analysis

Table 3: ‘Major cost reduction / potential root causes’ Of theses 42 replies Number who indicated ‘Major cost reduction’ benefits

Programme success

Level of Lean Adoption in Upstream Supply Chain

Level of Lean Adoption in Downstream Supply Chain

Collaboration – pressure from customers / suppliers

Role of IT in gaining success

42 replies

14 view their

3 high level of

3 high level of

3 getting

programme as very successful so far

adoption 22 medium level of adoption

adoption 17 medium level of adoption

extreme pressure 8 getting significant pressure

12 IT is vital 14 IT is quite important

16 IT is not important

18 IT has enhanced wins 7 IT is a source of waste 17 IT has made negligible impact

Table 3 was constructed to show where root cause might be found for the 42 respondents stating they had achieved major cost reduction benefits.

14 stated they had a ‘very successful programme so far’ 25 had a ‘high’ or ‘medium’ level of adoption in their upstream supply chain 20 had a ‘high’ or ‘medium’ level of adoption in their downstream supply chain 11 were under ‘extreme’ or ‘significant’ pressure to collaborate on lean from customers and suppliers This provides further evidence of the importance of ‘end-to-end’ action on the whole supply chain.

26 said IT is ‘vital’ or ‘quite important’ – 16 said IT is ‘not important’ However 18 said IT ‘has enhanced wins’ – 24 said IT ‘has made negligible impact’ or ‘is a source of waste’ NB. IT is not a prerequisite for every operation

22

Results Lean Survey Correlation Analysis

Table 4: ‘Level of success / potential sources of help’ Very Successful - 21% of respondents

Successful - 52% of respondents

Moderate - 20% of respondents

Poor - 7% of respondents

Help from DTI

4%

16%

5%

1%

Help from Business Link

1%

6%

1%

0%

Help from Fellow Manufacturers

7%

13%

4%

1%

Help from Consultants

7%

24%

10%

2%

Have not and do not intend to seek help

9%

5%

2%

2%

Table 4 indicates that most organisations had sought help from various sources. However for those claiming ‘major success’, the biggest proportion (9%) stated they ‘have not and do not intend to seek help’! This is consistent with the fundamental need to involve your workforce at all levels, develop their knowledge and skills and undertake improvement at ‘Gemba’. Help can of course be sought to address issues and sticking points, provide training on missing skills and advice on picking a route through dilemmas. Of those that consider their lean implementation to be successful or highly successful, 20% sought assistance from DTI, 20% from fellow manufacturers and 31% from consultants with only 14% not seeking help.

23

Results Lean Survey Yet Survey to implement Results Lean Correlation Analysis

C. Yet to implement Lean Figure 23: To what extent are your customers/suppliers applying pressure on you to collaborate on lean initiatives?

Extreme pressure from most of them 6% Significant pressure 14% Moderate pressure 32% No pressure at all 48% 52% are under pressure to collaborate on lean initiatives (figure 23) – this might be a ‘differentiator’ if you are a supplier looking to win / keep your customer’s orders or a source of competitiveness if you are a customer looking for supplier assistance to achieve consumer preference for your products.

Figure 24 presents a paradoxical picture. 85% say they want to achieve ‘cost reduction’. This doesn’t just happen. It arises from other drivers and root causes. Priorities for these should include Improving quality: 62% Staff skills training: 57% Improve customer service: 43% Reducing time to market: 43% All these are fundamental bedrock of lean and should be at 100% for sustainable improvement.

24

Results Lean Survey Yet to implement Lean

Figure 24: Which of the following are the key priorities for your business in the implementation of lean? (Please mark as many as apply)

Figure 25: In what areas of your organisation do you plan to implement lean initiatives?

(Mark as many as apply)

Figure 25 yet again shows a focus on internal action which is OK but supply chain ‘end-to-end’ is vitally important to achieve sustained benefit. There is little evidence here that this is widely understood.

25

Results Survey Results Lean Survey Yet Correlation to implement Analysis Lean

Figure 26: To what extent are your customers/suppliers applying pressure on you to collaborate on lean initiatives?

Extreme pressure from most of them 0% Significant pressure 10% Moderate pressure 19% No pressure at all 71%

Figure 27: What factors have influenced your organisation to not implement lean? (Mark as many as apply)

Figures 26 and 27 could be seen as a reason (excuse!) for inertia. It would be interesting to see how well (or perhaps badly) these organisations are faring in say two or three years.

26

LEAN SURVEY

C O N C LU S I O N S –2 011 So what does ‘effective delivery’ look like?

See below: Understand what customers value Create value streams: end-to-end including your suppliers and customers Create flow and pull in the value streams Strive for perfection

Improving quality

Improving customer service

Professional development of staff

and ‘Gemba-based’ improvement

Critically, the approach avoids

unintended consequences

AND continue again and again in the

spirit of continuous improvement

Lean Management Journal held a Lean Directors’ event last December on ‘Leading transformation in complex environments’. The headline stated that ‘with only 5% of lean business transformation actually achieving sustainable success, those who take on the mantle of leading change programmes must be either hugely confident, naively optimistic or simply crazy’.

The crucial question is, despite all organisations devoting time, effort and resource to changing their organisation – why do 95% fail? They achieve marginal, transient benefits at best – often there is no improvement or things actually worsen.

Cost reduction and efficiency improvement does not appear in this counter-intuitive approach. It is delivered however as part of the outcome of sustainable success.

However, Lean Thinking Principles (supported by copious case study evidence from companies like Toyota and Tesco) start with ‘value’. Thus understanding exactly what customers’ value and then designing effective mechanisms to deliver it is at the root of sustainable success.

The final irony is that organisations continue to do the same as they have always done – focus on cost reduction and efficiency improvement – yet expect that this time they will achieve a different outcome. This is a counterproductive mentality.

Depressingly, this survey re-affirms the conventional thinking that leads to 95% failing to achieve sustainable success. The survey shows that nearly all the organisations responding are focused on internal efficiency improvement hoping to achieve cost reduction. Cost reduction and efficiency improvement consistently emerge as the priorities. Internally-focused boundaries are the norm.

So try a different approach, the true lean approach. Think ‘effective’ and have good reason to be hugely confident and optimistic about achieving a lean transformation that delivers sustained success. Attempting a different approach can afford a business a new perspective to find where operational gains can be made. So step outside, take a look back, and move the business forward.

Counter-intuitive thinkers (like Toyota and Tesco) know that cost reduction and efficiency improvement are outcomes and ALWAYS take second-place in their improvement hierarchy. Effective delivery of customer value has primacy.

27

Results

LEAN SURVEY CONCLUSIONS - June

TBM Survey Yet Survey Group to implement Results Lean LeanConsulting Correlation Analysis

Driving Value Creation through Operational Excellence For nearly 20 years TBM Consulting Group has been guiding companies to above average sales growth, higher margins and superior profitability.

Our team has worked for discrete manufacturers, continuous process companies, and service firms during periods of high growth and bleak economic times. We can help your company balance the need for restructuring and cost cutting, permanently capture efficiency gains, and stay focused on customer needs so you can develop or capitalize on new opportunities.

We work with your senior leadership team to make your organization more flexible and responsive to customer needs.

Speed and agility are hallmarks of our approach. We help you learn to do more with less and to harness the creativity of each and every employee. Our most successful engagements result from intimate senior-to-senior relationships where we develop and implement improvement priorities that deliver sustainable business results aligned closely to top- and bottom-line performance improvements.

We serve a broad base of clients from a wide-range of industries and organizations including: Food & Beverage Medical Equipment & Supplies Pharmaceuticals Heavy Equipment Railways Apparel Manufacturing Technology Electronics & Electronic Components Industrials Healthcare 28

Financial Services Government We offer a broad suite of consulting services to help you achieve sustainable business performance improvements: Leadership and Culture Change: We help leaders foster a culture of change and continuous improvement through a blend of assessment-based team building and behavior coaching focused on vision and goal alignment, lead leadership skills and tools, and executive development.

Strategy Deployment Implementation: We help clients successfully achieve their most critical breakthrough objectives through a disciplined management process for strategy deployment.

We provide a proven framework and webbased software tools for selecting breakthrough strategic projects and establishing expectations and accountability. Our

LEAN SURVEY TBM Consulting Group

CONCLUSIONS - June

methodology and web-based software tools can help you execute superbly.

Supply Chain: We help clients synchronize production with customer demand, reduce working capital, eliminate excess pipeline inventory, shorten lead times, stabilize erratic demand, increase on-time delivery, and improve supply chain visibility.

Product Development, Innovation and Growth: We help clients to realize faster, more profitable revenue streams from new products by showing them how to leverage their customercentric culture for market differentiation and growth. We align activities to stand apart from the competition through voice of customer, value innovation, rapid product development and commercialization.

Continuous Improvement Training: TBM LeanSigma Institute builds awareness, commitment, skills and enthusiasm for your continuous improvement across all levels of the organization. We offer a range of interactive training and certification that will give your business teams the tools and coaching to launch or reinvigorate a performance management system. Our services include customized training, public workshops, onsite training, online training, certification, green belt and black belt training, benchmarking, and networking events.

as part of a comprehensive business management system based on human capital, process improvement, planning and performance tracking.

Superior ROI — Our work with clients generates rapid results with a minimum 3X to 5X annual return on your consulting investment, and we frequently return cost savings and revenue opportunities in excess of 10X or more.

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Our consultants reside close to your facilities and are based in our worldwide office locations including: United Kingdom, United States, Germany, Mexico, China, India and Brazil.

Knowledge Transfer — We understand the importance of proving a framework and structure to carry on improvements even when we’re around. We emphasize the transfer of knowledge and provide the tools, discipline, and hands-on experience for you to support your transformational activities internally.

Unconditional Guarantee — Our work is unconditionally guaranteed. If you are unsatisfied for any reason, we will re-do the specific intervention or refund your money. Period.

Visit our website to learn more: www.tbmcg.co.uk or call +44 1332 367378

TBM differs from other companies and consulting firms for the following reasons: Strategic Roadmap — We work side-byside with your leadership team to develop a clear roadmap for improvement that links to quantifiable business objectives.

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Contact us to discuss how TBM consultants can help your company survive today’s market challenges, seize a competitive advantage and gain market share with minimal investment and achieve a competitive advantage that’s difficult to replicate.

29

Results

LEAN SURVEY CONCLUSIONS - June

LeanStudy Survey Yet Survey to implement Results Lean Case Correlation Analysis

TBM Consulting Group and Draka UK case study Draka is a global manufacturer of electronic and communications cables with manufacturing facilities in more than 30 countries and more than 9,000 employees.

In 2007, the company engaged the assistance of TBM Consulting Group and utilised LeanSigma to improve output and drive sales growth.

Starting from scratch The Energy and Infrastructure Division of Draka in Europe employs 1,800 people at 13 locations and had 2007 sales of more than €950 million. Draka in Derby makes power cables, communications cables, cables for wiring traffic signals, and building cables — from high voltage to house wiring —using copper wire, with galvanised wire for armouring. At that time it was a very traditional unionised company which had been located in Derby for nearly 100 years, in various forms and owned by various companies throughout its history. In 2006, the company had not even heard of the word ‘lean’.

In late 2006, the company hired Ian Rice as operations managing director. Rice had practiced lean in his previous company and was anxious to implement lean at Draka. The first step, in June 2007, was to introduce the organisation to lean by holding awareness classes to familiarise everyone with lean terminology and concepts and to help them understand what role lean played in 30

LEAN SURVEY Case Study

CONCLUSIONS - June

serving, with employees who were used to doing things the way they’d always done them.

Getting people involved in the first few kaizen events required some encouragement.

supporting their strategy for growth. TBM conducted an initial assessment at the company, and the first kaizen event was held one month later. Draka Derby has three product streams: large, medium, and small cables. Using value-stream mapping, the company determined that the large cable area could gain the most from the application of lean methodologies. Large cables represented the greatest source of revenue and the greatest potential for growth within the company. The end goal was to increase output and sales, because the company knew the market demand existed and that it needed to increase productivity to capture additional market share.

The issues the company faced were: Typical of those encountered whenever a lean transformation is implemented: Union fears Job-loss fears ‘Flavour of the month’ ‘Us vs. Them’ mentality All show (just painting the machines) More work for the operators Paul Glenn, head of Draka’s Kaizen Promotion Office was effective at ‘press ganging’ people into teams. Momentum started to build and change began to occur more quickly once the company got over the hurdle of two or three events and got good results. Team spirit became evident once everyone understood that this was obviously very different from anything the company had done before. On top of those issues was the fact that the plant was unionised, so management also had to gain the trust and cooperation of the union.

Set-Up Reductions For the first six months of Draka’s lean journey, kaizen events were focused on set-up reductions. Set-ups were the first and most prevalent barrier to increasing productivity and so had to be addressed before anything else.

The team focused on the stranding process which was riddled with time-consuming machine set-ups that had the greatest impact on productivity.

The first set-up reduction event was held in July 2007 on the Number 1 PS1 stranding machine. The kaizen team introduced new tools, fitted safety guards to the machine, created standard operations, provided visibility of workload for the operation, repaired the loader mechanism, and replaced the bobbin locking pins. The team reduced set-up time on this machine by 30 percent and improved the Progressive 5S score from 0.3 to 0.7.

Union stewards were included on the first several kaizen events to give them the real flavour of what it was all about, and they saw for themselves that the kaizen process would actually improve work conditions for their members. Those stewards were then able to communicate to the rest of the organisation the positive changes that could be effected through kaizen.

The changes that helped to jump start cultural change: Machines were improved Methods were changed Jobs were made easier

The Culture Challenge Draka faced the dual challenges of a workforce that had never heard of lean and that was also well-established and long31

Results

LEAN SURVEY CONCLUSIONS - June

LeanStudy Survey Yet Survey to implement Results Lean Case Correlation Analysis Tools were given to help operators get the job done Operators saw their working environment improve Managers worked alongside operators (destroying the “us vs. them” mentality)

and keeps their involvement in the lean transformation process in front of everyone.

Future Focus While Draka is counting on standard work, hour-by-hour charts, 5S, “pit stop” changeovers, reduced batch sizes, and set-up reductions to help reduce lead times, it’s also looking at other areas where a lean approach can be applied. Given the cost of raw materials, it makes sense to make sure that Draka keep on hand only what they actually need or can sell in a timely manner.

Additionally, the company is working on improving relationships with suppliers and making physical reductions in the amount of materials — the copper that goes into the cable is obviously very expensive, as is the galvanised armour materials. As Draka moves forward, it will continue to use lean to help increase productivity, reduce lead times, and cut costs while also focusing on sustainment.

When the world economy turns around, the company plans to be in a good lean position to make the most of it.

Management also played a significant role in driving early cultural change by participating in the early events. Through their enthusiasm and support for the process they helped others to get on board. They got the message out that Draka was committed to lean and demonstrated enthusiasm for their experiences on those first kaizen events. One incentive the company used to encourage people to volunteer for teams was to take one person from each of the first six teams and send them as a group to Draka’s flagship factory in Prague, Czech Republic.

The company also started a newsletter, Lean Manufacturing News, to spread the word of events and the benefits that were gained from them.

Suddenly people weren’t waiting for kaizen events to make changes and improvements in areas that were not actually slated for events, and that’s when the culture really started to pick up and change. The cultural atmosphere at the Derby facility is completely different now than it was just three years ago. Once set-ups had been addressed, the company moved on to other issues, including the introduction of total productive maintenance (TPM), as well as creation of hour-by-hour charts for key machines and safety, quality, delivery, and cost (SQDC) boards throughout the plant. Every morning the management team walks through the plant and visits each station to review performance. This practice gives the managers an honest hands-on feel for what is happening on the shop floor 32

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Lean Survey Yet Survey to implement Results Lean Correlation Analysis

Electronically enabling lean ERP software and lean manufacturing have not traditionally been particularly congruous.

Traditional ERP has commonly supported a push type approach to manufacturing, a concept in opposition to principles of lean operating. Enter the eBECS lean ERP system, an approach to enterprise resource planning designed to work in tandem with lean and help deliver operational excellence.

Aside from the departure from the push type approach, there are a number of other fundamental differences between traditional ERP and lean ERP. Firstly, a lean system such as that offered

by Microsoft partner eBECS does not attempt to predict

what the market will need such as with a forecast. It will ensure a company actually manufactures what the market actually needs at the point it needs it and only adds value where value is required by the end customer.

While many companies feel that operating using a forecast is a prerequisite for the successful operation of their business, eBECS solutions director Andrew Rumney says this is most often not the case even in instances where a product requires a long lead time. “Lead times are often long but the actual touch time, as in the actual time physically spent on the product, is very small,” he says. “Typical figures indicate that 90% of lead time is actually spent in administration, handling, counting and moving. If a lead time is 30 days, fewer than three of those days involve time spent actually touching the product. All the rest is administration.” The solution therefore is to reduce the number of unnecessary steps in the process and only perform tasks that actually add value to the customer. The lean ERP system can assist in doing this.

In addition, Rumney says that if a company can reduce its batch size, then lead time can be reduced; a fundamental concept of the lean approach and lean ERP. With complex products with multiple configurations, a company would traditionally try and forecast what it thinks the market might need. Lean turns that on its head and as opposed to predicting what the market might need, lean reduces the amount of complexity so that the final assembly cell that can produce anything. It will then simply produce what the market needs at that moment in time by pulling from the supply chain the bits it needs. It moves complexity away from predicting what the market might need to making your supply process more flexible.

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LEAN SURVEY CONCLUSIONS - June

eBECS: Electronically enabling lean

amount of inventory in that supply chain by However, ordering from suppliers in a more than two-thirds. “We’ve got customers just in time format can be complicated that at any one particular moment in time are if a company’s raw materials are a rare still spending as much money as they were commodity. This doesn’t have to be so says spending with their suppliers but they are Rumney. He says that by using the lean holding 70% less inventory to do so,” system, a company can approach its supply says Rumney partners in a lean way as opposed to the traditional adversarial way Regardless of this reduction that companies deal with in inventory, Rumney says suppliers. “If you estimate “We’ve got that many eBECS clients what you will need over the customers offer their customers coming year in terms of that at any a guaranteed five day material costs, you can then turnaround time on small pay upfront a certain portion one particular batch orders. For larger of that cost to the supplier moment in orders they provide a with the requirement that time are still delivery date which may be the vendor be as responsive spending as more or less than five days. as possible when called “The lean ERP solution can upon. When the upfront much money differentiate between those payment has been spent, as they were two types of orders,” says another payment will be spending with Rumney. “We call it the lean made. This system works their suppliers order schedule by drum beat. very effectively if you have The parameters are set by a good relationship with but they are the manufacturer but for your supplier and you holding 70% example, any order that is communicate properly.” less inventory less than a day’s capacity to do so” (a buffered order) will be A lean ERP solution can scheduled immediately also facilitate greater and will be supplied with transparency for suppliers a guarantee of five days. If the order is and make them feel more of a partner. A larger and requires more than a day’s worth lean ERP solution can for example provide of capacity it will be given an appointed a a firm requirement for the next two days maximum amount of capacity in any one day and provide a ‘call off’ requirement for the and will be given a delivery date. The lead time next two weeks. The ‘call off’ requirement is for this order will of course be longer than if expected but won’t be confirmed until two we had made it a smaller order.” days before.

The benefit of such an approach is to prevent any one single customer from feeling that they need to order in large quantities.

Whilst large orders are obviously good, they are often infrequent and may impact

The lean approach to the world says it is far better to have one or two suppliers for a component than it is to have 10 because a partnership has to be generated. Once that is in place, it is possible to reduce the 35

Results

LEAN SURVEY CONCLUSIONS - June

Lean Survey Yet Survey to implement Results Lean Correlation Analysis

on a company’s ability to supply its other customers.

In most cases, companies that order in extremely large quantities do not require the entire amount of stock but simply don’t have faith in the security of supply.

“However,” says Rumney, “once those customers feel more confident that if they give you an order that you will supply it, then you are reducing the batch size that you have to work with but also the batch size that they are ordering. You have to educate your customers.”

Other features of the lean ERP system from eBECS. 1. Electronic kan-bans (see Talley Group case study on page 37) 2. Reduction of the number of transactions that are completed 3. Support the practices that a lean company implements such as vendor managed inventory.

4. Stocking through inventory visualisation 5. Lean accounting recording transactions at a high level only

“Typical figures indicate that 90% of lead time is actually spent in administration, handling, counting and moving” of lean requires consistent attention and is truly a never ending road. Reducing waste in all its forms is what lean is at the crux of the lean philosophy. The lean ERP system supports the lean approach. Lean ERP itself is not going to deliver the desired gains unless a company is also trying to do some of these lean projects internally. Techniques can then be drawn out of the lean ERP system such as visualisation, electronic kan-bans, flexible lead times based on order quantity and the transfer of information throughout the supply chain so that there is better visibility. These factors will then all support what a company is trying to achieve and provide a leg up on the journey to manufacturing excellence.

Implementing the lean concept in a workplace is by no means a silver bullet to improve operational efficiency.

The proper implementation 36

LEAN SURVEY CONCLUSIONS - June

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Results

LEAN SURVEY CONCLUSIONS - June

Survey Yet to implement Results Lean eBECSSurvey Lean and Talley Correlation Case Study Analysis

The undeniable business case for lean enabled ERP Medical equipment design and manufacturing company, Talley Group, underwent a lean transformation in 2003.

Although significant improvements were made, the process was far from complete. To realise the full potential of its lean improvements, Talley engaged the assistance of Microsoft ERP partner eBECS and implemented the first ever lean enabled ERP system with incredible results.

When first implementing lean, Talley put itself under the microscope and undertook to process map its entire operations. The operational functions at Talley had not undergone a large scale revision for 50 years.

Using a tailored version of the Toyota plan, the company was able to design out some of the inherent faults in its manufacturing process which had previously delayed its production.

The most extensive saving was the reduction of its product lead times which were reduced from 11.5 hours to 32 minutes.

While the production process benefited and was more efficient, the wider operation failed to keep up. “We implemented lean because the significant gains were going to be there,” says Talley’s head of manufacturing, Tyrone White. “A short time later however what emerged was that we had a lean operation but we weren’t operating it in a lean way because all our administration was an overhead. There were huge inefficient processes and the whole thing was backdated by days so the decision making process wasn’t very efficient either.”

Due to the increase in data flow associated with the faster manufacturing operation, the means by which the company formerly used 38

LEAN SURVEY eBECS and Talley Case Study

CONCLUSIONS - June

the principles of Lean but Talley were the first to implement the system. The solution provides comprehensive Lean functionality from the simple use of Kanbans, to sophisticated Lean Accounting concepts yet at the same time allows it to co-exist (and work with) with the traditional MRP world.

to manage information proved unworkable.

Compounding the issue and was the associated capacity the company had developed for ordering, manufacturing and shipping to all completed on the same day.

“We were looking for a departmentally integrated “What we have IT system that would give been able to do is “It’s an ERP system us the ability to manage that works with lean an increased amount of offer more to our manufacturing. The information, report on it, customers so the Microsoft system directly and reduce the overall relationships have mimics the manufacturing costs of administering improved and process, right down to the supply chain and the point of consumption logistics,” says White. we’ve been able of each item that is “At that time, each to gain business moved and each labour department had their and been able element that is put in to own system so making to launch new it. This means it is a true decisions for something lean ERP system. The as simple as a pricing products because system has the capability campaign for a new we’ve had more to trigger all of the marketing strategy was availability of manufacturing processes very difficult because information and right through to the we arguing over the supply chain.” information we were better control of giving to each other... costs” There were a number When the opportunity of gains made through came up to look at an Tyrone White the implementation of IT solution that would Head of manufacturing, Talley the software. During give them as owners’ the IT implementation, visibility of the company Talley once again engaged each function in total, right through accounts, sales and of the business so as to compile an up to manufacturing, they were keen to invest in the date process map of its operations with best technology they could.” the view of mapping them on to the ERP system. Once again this highlighted a large Lean on ERP number of touch points where work was Confident that an advanced ERP system duplicated in different departments. “There would produce the desired results, might have been three lots of very similar Talley chose to implement eBECS Lean information collation and reporting being Manufacturing for Microsoft Dynamics AX. carried out by three different departments,” The software package is not only the first says White. “Now the eBECS system collects genuine Lean ERP solution that is true to 39

Results

LEAN SURVEY CONCLUSIONS - June

Survey Yet to implement Results Lean eBECSSurvey Lean and Talley Correlation Case Study Analysis

system, Talley was very clear with its objectives which were to give the company real time access to information and reduce administration. “For that goal, we have seen the return on investment very quickly,” he says. “It is difficult when you’ve only had bad experiences to put into perspective what a good experience can mean. We were using our previous IT system to a very small degree and we were using a lot of offline systems. We don’t have offline systems anymore, everybody uses this system and have experienced a 12% reduction in administration.

the information which can then be used to produce whatever report is needed.”

In the supply chain, manufacturing and logistics departments, Talley experienced instant gains in the availability of information which allowed it to target new vendors. “Part of our business is a rental business; we rent up to 10,000 of our products to various people. Customers wanted certain information for billing and we were unable to give it to them but now we can. This means we can now win contracts for which we were previously unable to tender.”

One of the most impressive applications of the lean eBECS ERP system is its facilitation of electronic kanbans. With electronic kanbans the transactions remain the same as with a card system but the transactions are live at the point of consumption. Talley installed a number of electronic data collection points throughout the site. As the manufacturing process goes through its cycle, the staff on the shop floor scan each operation at source rather than the card travelling with product to the end of the process and then someone manually keying in all the transactions.

“What we have been able to do is offer more to our customers so the relationships have improved and we’ve been able to gain business and been able to launch new products because we’ve had more availability of information and better control of costs.

The management team is able to focus on dealing with business issues rather dealing with the issue of running the business. We have distribution partners through the whole of Europe and we have definitely been able to forge better relationships and develop new relationships in new parts of the world.

We have also been able to get much tighter control of costs in America. Internally we are able to manage our material better in reducing our inventory because we are not buying in things we don’t need to satisfy orders we have already manufactured.

instance there is an eight minute takt time through the manufacturing, then every eight minutes the system is updated with the consumption of labour and material for that process.”

“We have also seen the tangible benefits of lean and ERP working together and it is very difficult to dispute that because the facts are black and white and it works all day, every day for us. If I had any advice it would be to investigate lean enabled ERP to see what it can do. We invite all our customers to come and have a look at our system because we are very proud of how it works.”

We effectively reduced the width because every process is transacted after it’s finished and the process of conceiving the material and the labour happens immediately says White. “If for

A successful implementation White says that when it came to the implementation of its lean enabled ERP 40

Microsoft Dynamics Reseller of the Year eBECS and Talley group with Microsoft Dynamics AX – Lean ERP In early 2009, Talley Group implemented Microsoft Dynamics AX with a lean manufacturing module and a rental module developed by eBECS; a Microsoft Dynamics AX and CRM partner specialising in the design and delivery of solutions for manufacturing, distribution and the extended supply chain.

T

yrone White, manufacturing manager at Talley Group, has 15 years experience of Lean manufacturing and had overseen the transition of Talley in to a lean business. The time came to consider changing its incumbent ERP system, Epicor’s Vantage, and Tyrone and his team explored the options rigorously. “We looked at different applications and Microsoft AX really fitted all of our functional requirements for the business. Its familiar with the office interfaces because its MS, it also offered the Lean principles that we were looking for.”

He continues: “We needed the benefit that a modern Lean system would offer the business. So finding an organisation that had experience with Lean to help us introduce a Lean system was really important. Then there was the opportunity of having AX that would give us full end-to-end visibility on the reporting side that we needed to go that little step further with our customers and improve the business.”

Other strong features of the Microsoft AX product were: Mobile-based system – eBECSdeveloped handheld devices. “These scan products delivered in the field, that feeds data back into the system with the installer’s details and where he is. A real-time record of what’s going on,” says White.

A strong front end CRM system – eBECS had some CRM experience the other vendors didn’t.

Reporting and ROI – more analysis enables customers to see more clearly what they’re paying for, especially when renting equipment.

Has freed-up time so key people can get on with business growth.

Cost was very competitive. “All ERP solutions are ferociously expensive in isolation, but factor-in the measurable return on investment and MS AX came out on top.”

Good usability –“Among all the packages we saw, MS seemed to have what we were looking for regarding operation” Why eBECS? Lean expertise eBECS has a background in Lean manufacturing ERP solution implementation, as well as experience in the medical equipment market.

In 2007, Microsoft bought Lean Enterprise for Microsoft Dynamics AX from eBECS, whereupon the partners created the Lean Centre of Excellence www.leanceo.com. “That in itself shows to us their commitment to Lean manufacturing,” says White.

The Centre, a virtual resource for the Microsoft partner community, serves as an educational outreach and training facility for companies that need training on Lean capabilities within

41

MS Dynamics AX so as to further Lean projects within their companies. This venture and eBECS’ experience of Lean manufacturing was a big draw for Talley Group. Its lean module has fulfilled the main waste identification and removal criteria that Talley had specified.

White is delighted that the lean-enabled MS AX solution has perfectly matched the company’s needs and sees several more business benefits in the future including enhanced reporting and quicker invoicing. “It has actually been a really interesting experience because I think it is the first time I and the company have had this much commitment from a provider to get a programme off the ground,” he says.

Visit www.ebecs.com to watch the Talley Group Video Case Study Contact Stephen Wilson Tel: +44(0)1246 888555 Email: swilson@ebecs.com

Results

LEAN SURVEY CONCLUSIONS - June

LeanStudy Survey Yet Survey to implement Results Lean Case Correlation Analysis

Gold’n Plump Poultry gets a Birds-Eye View with Quality Companion Gold’n Plump Poultry integrates two improvement strategies: Six Sigma to address process quality and eliminate defects, and Lean to boost process speed and eliminate waste. Its commitment yields real dividends — in 2009, they saw $5.2 million in savings from quality projects.

Gold’n Plump Poultry is a large, fully integrated broiler producer in the US whose commitment to process excellence has helped them thrive even in tough times. However, according to continuous improvement manager, Dean Kirkeby, it has been the integration of Minitab Statistical Software that has provided the company with the tools it needs to effectively analyse its quality data and ensure the improvements continue.

With continuous quality improvement (CQI) projects being performed at multiple locations, using a variety of tools, it was hard for management to assess the total impact of quality efforts. “Projects were making a difference at all of our facilities, but there was no easy way to share all of the information,” says Kirkeby. “There were a lot of questions, information was missing, and there was a lack of consistency across projects. It was a challenge for managers to provide feedback to teams, and to demonstrate their successes to our executives.”

Now, using Quality Companion by Minitab, Gold’n Plump teams rely on one application to manage projects from start to finish. And the Quality Companion Dashboard utility makes it simple for management to monitor their progress and results. “With Quality Companion, there’s no question how much our projects help Gold’n Plump’s bottom line,” says Dean Kirkeby, continuous improvement manager. “You can see it right on the Dashboard.”

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Quality Companion provides the tools to execute improvement projects in one application. Teams use Companion’s Project Roadmap to create a detailed project plan, and built-in “soft” tools — such as process mapping and brainstorming—to complete each step.

aggregates the details of all a company’s projects, provided the solution. “The Dashboard really proved itself,” Kirkeby says.

“When my boss realised how easy it was to view the status of our CQI efforts with the Dashboard, he quickly went from a skeptic to a believer.”

Kirkeby first used Quality Companion to do value stream mapping (VSM), a primary Lean technique. Companion’s VSM tool makes it easy to track key variables such as inventory, takt time, and cycle time. As he

A year after Gold’n Plump began using Quality Companion, project quality has improved and teams complete projects more quickly. “And if someone wants more details, it’s all right there in your project file,” says Kirkeby. “Quality Companion furthers our CQI efforts,” Kirkeby says. “And that helps Gold’n Plump meet our ultimate goal: supporting and delighting customers.”

“Quality Companion furthers our CQI efforts, and that helps Gold’n Plump meet our ultimate goal: supporting and delighting customers” Dean Kirkeby Continuous improvement manager, Gold’n Plump Poultry

also began using its more than 100 builtin forms, including C&E Matrix, FMEA, and Project Charter, Kirkeby saw how Companion eliminates needless data re-entry. “Data you enter in one tool is used throughout the project,” he says. “So you can brainstorm in the fishbone tool, then share the information you’ve created with the next phase of the project.”

In addition to value stream mapping, Gold’n Plump also needed a way to better assess the overall impact of its quality efforts. The Quality Companion Dashboard utility, which 43

The Lean Report 2011