I have spent a lot of years working in many different companies in many different industries. And one thing I have noticed is that departments with the biggest assets are the most difficult to work with when it comes to implementing Lean. I used to assume this was because it took big men with lots of testosterone to run big machines. And these sorts of "men's men" tended to be strong-willed, opinionated.and set in their ways. But during a recent discussion with a colleague about his challenges working in a large press shop at an automotive manufacturer another reason occurred to me; accountants.
My colleague and I were discussing his efforts to implement Lean thinking in this particular press shop. And in particular the tendency of the operators to over produce parts each shift in order to get their Parts per Hour up.
For the benefit of those who have never been in a press shop allow me to describe the scene. To start with presses are used in a variety of industries where metal parts are made. As I have described in the past, presses do to flat sheets of steel what your teeth do to a stick of chewing gum. These machines, that range in size from a household appliance up to and including behemoths much larger than a house, essentially do the same thing. Their "jaws" continually open and close as sheet metal is fed in one side, and formed parts fall out the other.
In an automotive press shop stamping presses can be massive. And it is truly a humbling feeling to stand next to one of these beasts as it chews up sheets of steel up to a quarter of an inch thick, and spits out massive parts used to make hinges, car frames, and even entire body panels. And despite the multitude of safety equipment designed to protect the people who work with these animals, one has the distinct feeling that a 6,000 ton press the size of a building wouldn't even notice a finger, a hand or even a whole person who happened to get "bit."
The other thing you notice about stamping presses is that they are fast. A typical press will "bite down" on its steel meal once every second or faster. So depending on how many bites it takes to make a finished part, it doesn't take long to fill a bin or a rack with metal parts ready to be welded, painted and turned into a car. In fact cycle time is one of the factors that drives up the cost of these pieces of equipment well into the millions of dollars. And that's where the accountants come in.
Whenever a company makes a capital purchase there is usually some sort of justification for the expenditure that has to be approved by someone entrusted to make these decisions. When a decision needs to be made to buy a new microwave oven for the lunchroom this is relatively straightforward. Usually a manager is authorized to approve such a purchase.
As the cost of the new asset goes up, however, so too does the required "justification" for the expenditure. And this makes sense. In theory any purchase of new capital should cover the Weighted Average Cost of Capital (WACC); another fancy accounting term used to make investment decisions. Or the purchase should not be made and company capital should be put into other purchases with a higher return on investment.
So how do you justify spending five million dollars on a brand new 6,000 ton stamping press? Well it's relatively simple. You figure out how many parts you are going to make on the press over its operating life, and divide that number into the cost of the press. For example if a company plans to make five million parts on a five million dollar press, then in simple terms each part "absorbs" one dollar of the capital cost. Again accountants and finance people can make this much more complicated but for this discussion this will do.
If the purchase is approved then the next few months are filled with lots of excitement and anticipation in the press shop. A whole bunch of people, usually from a foreign country speaking an exotic language, will set up groups of trailers and begin working on installing the new press. A select few members of the purchasing company, usually young engineers and seasoned operators, will be assigned to work with the foreigners to assist with the project and learn how to operate the new piece of equipment. And these people will assume a certain level of awe and respect from the rest of the employees who watch the proceedings from their workstations and secretly wish they too could be involved in the exciting new project.
Eventually the press will be ready to run for the first time. For this occasion a lot of people wearing clean white hard hats who normally never even go out to the press shop will start to hang around. And on the big day the entire company will be invited to witness the start-up of the new machine. Speeches will be made about how the new equipment represents the company's "investment in the future." There will be handshakes all around. And finally someone will hit the magic start button. The crowd will gasp as the mighty motors roar into action. And everyone will cheer as the massive jaws start to chew noisily into the fresh flat steel for the very first time. And for a few minutes, or at least until the little sandwiches and cold drinks are gone, everyone will be filled with a sense of pride and optimism.
And here's where it all goes wrong. I explained earlier that when the original decision to purchase the new press was made it was decided in this case that every part would earn $1 towards the $5,000,000 purchase price. Well now it's time for this machine, and its managers, to start paying their way. All of a sudden smart rational men who clearly understand that Over Production is one of the 8 deadly wastes will lose their Lean minds. Instead of producing just the number of parts needed for the weld shop on any given day, they will become intoxicated on the notion that it isn't metal parts dropping out of the press, but rather piles and piles of shiny new $1 coins. In fact they start to see not bins and bins of Work In Process stacked to the ceiling. But rather bins and bins of countless coins and treasure.
Their schedulers will try in vain to make them stop. But drunk on their new found ability to generate untold riches for their department they will yell "faster! faster!" to the frantic press operators. Eager to obey their task masters the operators will forgo die changes (and preventive maintenance) in order to feed the massive beast.
All through the day and all through the night the madness continues. In fact if the press manager walks out into the press shop and notices one of his beasts not eating he immediately demands an explanation. Each morning reports are produced and those who haven't kept their asset-intensive pets eating are called to account.
Huge production runs are justified in the name of "productivity." Warehouses are built, rack are set up, and faster and bigger material handling equipment is justified and purchased all in the name of covering the cost of the presses.
Eventually, sometimes, the situation reaches a crisis. At some point it will be time to pay for the orgy of over-production. Either the material handling department will finally put its hands up in despair and explain that it can no longer manage the massive amounts of inventory. Or the downstream production department's complaints of continual parts shortages will become too loud to ignore. Or the very same accountants who turned the presses into figurative cash machines will start to raise issues about working capital tied up in inventory. Or the sky-rocketing costs of scrap and obsolete inventory, a guaranteed byproduct of over-production.
So the next time you are talking to someone who has spent his life around huge capital assets such as presses, blast furnaces or even airplanes. And you are trying to convince them that, despite what the accountants say, they need only ever produce exactly what their customers need. Do not attribute their resistance or apparent lack of understanding to a hormonal imbalance brought on by years and years of exposure to more horsepower than most of us will see in a lifetime. But rather understand that theirs is a mindset forced upon them by the relentless urning to financially justify their assets no matter what the cost. And to them there is no sound more deafening than the sound of silence.
Monday, July 18, 2011
Monday, July 4, 2011
Still don't understand Lean? Spend a long weekend at an amusement park
When people, including myself, try to teach other people about Lean they often ask their clients to "imagine yourself as an order going through your organization." The idea is to get people thinking, not from the perspective of "this is how we do things here," but rather from the perspective "what do we do that adds Value?"
Of course if you are looking for a more personal way to relate to Lean there is the often cited example of taking a trip on an airplane. Anyone who has traveled this way can readily relate to the difference between Value and Waste. And they can easily imagine what it feels like to have shockingly little of the former, and scads of the latter.
Being the passionate devotee of Lean that I am I recently noted, not for the first time, another fantastic example of what it feels like on a personal level to be a "product" going through an organization's Value Stream. And in fact you will see that even my 11 year old kids quickly grasped the concept of Value vs Waste.
The location: America's largest indoor water park. The date: 4th of July Weekend. The result: the perfect combination of "personal experience" Value Streams and more customer demand than you can any organization could ever want.
As always I will start with defining Value from the customer's perspective. This is relatively straightforward since I happened to be the customer, or the one paying the bill. In this case my definition of Value included the following:
For those of you like me who have never seen one of these in real life allow me to explain. The idea is to simulate surfing. They do this using a large, wide curved ramp roughly the shape of a wave. Then they blast water up this ramp to make a thin wide wave. You then jump onto the "wave" using a boogie board and voila, you're surfing.
If this does not sound like the most amazing ride ever then I am not describing it properly. But if you do not believe me, just ask the dozens and dozens of people willing to wait almost an hour for a one minute ride.
Sensing that the Value was starting to turn into Waste I decided to ask my children "so do you want to know what Daddy does for work?" I won't say this completely replaced racing down a 1,000 foot water slide in terms of Value, but they were desperate enough to answer "OK."
"Well" I began, "what Daddy does is help companies figure out how to do a better job making their customers happy.
"That's so they can get more customers, right?" my daughter added.
"And make the owners richer!" my son piped in with a smile.
I allowed myself a fleeting fantasy of a double MBA graduation ceremony involving an unprecedented double valedictorian address sometime in the not so distant future.
"In fact you're both right" I said. "So to do that the first thing I do is help companies figure out who their customers are.
"That seems easy, why do they have to ask you?" I was quickly asked.
Fighting back the urge, as all consultants do more often than not, to justify myself I responded "Well it's not always so simple." "For example in here who do you think the customers are?"
"We are!!" they both shouted above the noise of the rushing water.
"Nope" I said. "I'll give you a hint. The customer is usually the one who pays the bills."
This stumped them for a minute and I realized that they still lived in that wonderful world where everything is free and there are no such things as taxes.
"Who is paying for us to come here?" I prodded.
"You and mommy?" my daughter asked more than answered.
"Close enough" I thought. And to my kids "that's right, I am the customer.
"But what about us?" my son asked, not liking where this was going.
"Well you're the most important part" I assured him. "Because the next thing I do is help my clients figure out what it is they do that their customers like. So for here, what do you think I want them to do?"
A little consideration, and then from my son "serve you beer?" Definitely the makings of a brilliant marketer.
"Well yes" I admitted. "But what else? Think about why Mommy and Daddy brought us here in the first place. Do you think this was our first choice for a vacation?"
More thinking. And then my daughter said "because we wanted to come here."
"Exactly" I agreed. "To Mommy and Daddy this place is doing the right thing when we are having fun and you two are having fun."
"That still doesn't seem very hard to do" my son pointed out. I could see he was going to give some poor managing partner fits one day.
"Well let's keep going then" I said. "So tell me what about this place do you think is fun."
"Everything!" they agreed happily.
"Oh really? So was it fun to spend all that time trying to find our locker only to find out that the key did not work and we had to go back and wait in line to get another one?"
"No that was boring" my daughter frowned.
"And was it fun when we had to wait so long for our breakfast and then the waitress brought you the wrong thing and you decided to eat it anyway because we wanted to get to the water park?"
"No that was disgusting" my son grimaced.
I moved in for the kill. "And do you think it's fun to wait in these line-ups?"
They didn't have to think about this. "No" they both agreed.
"So even a place like this does some things that its customers don't like. So just imagine how many more things a company that doesn't have water slides but only has offices or factories does that their customers don't like"
They had to think about that. And then from my son "OK so how do you fix things?"
"Well after we figure out who the customers are and what they like and don't like the next thing to do is to measure how often the company does the right thing and how often they do the wrong thing. Let's think about this Flowrider ride as an example. When would you say the company is doing the right thing?"
"When someone is on the ride" from my daughter.
"I would agree with that. And when do you think they are doing the wrong thing?" I asked.
"When you wipe out?" my son joked.
"I don't know about that" I said. "Even the wipe outs look pretty fun."
They looked around but couldn't think of anything. So I asked "have you been having fun on the ride for the past half an hour?"
They thought about it, and then "standing in line is no fun!"
"But how can you fix that?" my daughter asked looking a little worried that we might leave without getting a chance to ride.
"Well the first thing to do is measure the good things. So how do they measure the good part on this ride? Look around."
"They looked and then my son said "They have that clock at the back that starts at one minute for every new person. That's your time limit."
"Exactly!" I said. "So if each person has one minute, and you are the 15th person in line, how long should it be before you get your turn?"
"15 minutes!" he said happily.
"Well if everything was running perfectly I agree. But do you think everything is running the way it should be?"
We all turned to watch what was going on. A new person was standing at the top of the 'wave' and one of the two lifeguards was explaining to them how to hold the boogie board and how to jump onto the water. The clock had not yet started.
A minute or so went by and the person was still considering the instructions and presumably trying to get up the nerve to jump onto the wave. The clock still had not started.
Finally my daughter said "hey, their time should be up by now but they haven't even started the clock!" She was starting to see the waste and did not seem to be happy about it.
Another minute or so went by. Finally the person jumped onto the wave and was promptly swept off the board and back up to the top. The clock finally started to count down their 60 seconds.
"They took like five minutes before their turn even started" my son pointed out. "That's not fair."
"How many people could have gone in that time?" I asked.
"Five of us could have gone if they kept the clock going."
"So would you say the company is doing the right thing only one minute out of five in this case?"
Immediately suspicious of anything resembling math while on vacation from school my kids looked at me sceptically. So I continued. "If you got only one out of five on a test what percent would that be."
"20%" my son answered. And then "but we don't want to do math on our holiday.
I had to laugh. "OK but just so you know we could say that right now the company is only doing the right thing according to its customers 20% of the time, right?"
Not wanting to encourage any more math talk they chose not to answer. So I moved on. "So how do you think you would help this company do a better job?"
"Just push the people into the water?" my son suggested. They both laughed at this. And I thought about my own clients who had come up with similar ideas.
"Why doesn't the girl at the top teach the next person how to do it while the first person is on the ride rather than wait until they're done?" my daughter asked with wisdom beyond her years.
"That makes sense" I agreed.
"Or they could have two lines going, one from either side" my son chimed in.
"Well as long as it's safe" I pointed out.
"Or what about having a sign-up sheet so small groups of people could show up at designated times?" I suggested enthusiastically.
Blank stares. OK maybe it was too soon to get into Short Interval Scheduling. But we eventually got our "one minute turns." And the rest of the day was spent going from one Value Added activity to the next. And when the water park wasn't adding Value not only could my kids recognize it, but they had a steady stream of both creative and silly ways to make things better. Just like any customers would.
Of course if you are looking for a more personal way to relate to Lean there is the often cited example of taking a trip on an airplane. Anyone who has traveled this way can readily relate to the difference between Value and Waste. And they can easily imagine what it feels like to have shockingly little of the former, and scads of the latter.
Being the passionate devotee of Lean that I am I recently noted, not for the first time, another fantastic example of what it feels like on a personal level to be a "product" going through an organization's Value Stream. And in fact you will see that even my 11 year old kids quickly grasped the concept of Value vs Waste.
The location: America's largest indoor water park. The date: 4th of July Weekend. The result: the perfect combination of "personal experience" Value Streams and more customer demand than you can any organization could ever want.
As always I will start with defining Value from the customer's perspective. This is relatively straightforward since I happened to be the customer, or the one paying the bill. In this case my definition of Value included the following:
- My kids are being safely entertained
- My wife and I are as relaxed and comfortable as you can be inside the worlds largest indoor water park
For those of you like me who have never seen one of these in real life allow me to explain. The idea is to simulate surfing. They do this using a large, wide curved ramp roughly the shape of a wave. Then they blast water up this ramp to make a thin wide wave. You then jump onto the "wave" using a boogie board and voila, you're surfing.
If this does not sound like the most amazing ride ever then I am not describing it properly. But if you do not believe me, just ask the dozens and dozens of people willing to wait almost an hour for a one minute ride.
Sensing that the Value was starting to turn into Waste I decided to ask my children "so do you want to know what Daddy does for work?" I won't say this completely replaced racing down a 1,000 foot water slide in terms of Value, but they were desperate enough to answer "OK."
"Well" I began, "what Daddy does is help companies figure out how to do a better job making their customers happy.
"That's so they can get more customers, right?" my daughter added.
"And make the owners richer!" my son piped in with a smile.
I allowed myself a fleeting fantasy of a double MBA graduation ceremony involving an unprecedented double valedictorian address sometime in the not so distant future.
"In fact you're both right" I said. "So to do that the first thing I do is help companies figure out who their customers are.
"That seems easy, why do they have to ask you?" I was quickly asked.
Fighting back the urge, as all consultants do more often than not, to justify myself I responded "Well it's not always so simple." "For example in here who do you think the customers are?"
"We are!!" they both shouted above the noise of the rushing water.
"Nope" I said. "I'll give you a hint. The customer is usually the one who pays the bills."
This stumped them for a minute and I realized that they still lived in that wonderful world where everything is free and there are no such things as taxes.
"Who is paying for us to come here?" I prodded.
"You and mommy?" my daughter asked more than answered.
"Close enough" I thought. And to my kids "that's right, I am the customer.
"But what about us?" my son asked, not liking where this was going.
"Well you're the most important part" I assured him. "Because the next thing I do is help my clients figure out what it is they do that their customers like. So for here, what do you think I want them to do?"
A little consideration, and then from my son "serve you beer?" Definitely the makings of a brilliant marketer.
"Well yes" I admitted. "But what else? Think about why Mommy and Daddy brought us here in the first place. Do you think this was our first choice for a vacation?"
More thinking. And then my daughter said "because we wanted to come here."
"Exactly" I agreed. "To Mommy and Daddy this place is doing the right thing when we are having fun and you two are having fun."
"That still doesn't seem very hard to do" my son pointed out. I could see he was going to give some poor managing partner fits one day.
"Well let's keep going then" I said. "So tell me what about this place do you think is fun."
"Everything!" they agreed happily.
"Oh really? So was it fun to spend all that time trying to find our locker only to find out that the key did not work and we had to go back and wait in line to get another one?"
"No that was boring" my daughter frowned.
"And was it fun when we had to wait so long for our breakfast and then the waitress brought you the wrong thing and you decided to eat it anyway because we wanted to get to the water park?"
"No that was disgusting" my son grimaced.
I moved in for the kill. "And do you think it's fun to wait in these line-ups?"
They didn't have to think about this. "No" they both agreed.
"So even a place like this does some things that its customers don't like. So just imagine how many more things a company that doesn't have water slides but only has offices or factories does that their customers don't like"
They had to think about that. And then from my son "OK so how do you fix things?"
"Well after we figure out who the customers are and what they like and don't like the next thing to do is to measure how often the company does the right thing and how often they do the wrong thing. Let's think about this Flowrider ride as an example. When would you say the company is doing the right thing?"
"When someone is on the ride" from my daughter.
"I would agree with that. And when do you think they are doing the wrong thing?" I asked.
"When you wipe out?" my son joked.
"I don't know about that" I said. "Even the wipe outs look pretty fun."
They looked around but couldn't think of anything. So I asked "have you been having fun on the ride for the past half an hour?"
They thought about it, and then "standing in line is no fun!"
"But how can you fix that?" my daughter asked looking a little worried that we might leave without getting a chance to ride.
"Well the first thing to do is measure the good things. So how do they measure the good part on this ride? Look around."
"They looked and then my son said "They have that clock at the back that starts at one minute for every new person. That's your time limit."
"Exactly!" I said. "So if each person has one minute, and you are the 15th person in line, how long should it be before you get your turn?"
"15 minutes!" he said happily.
"Well if everything was running perfectly I agree. But do you think everything is running the way it should be?"
We all turned to watch what was going on. A new person was standing at the top of the 'wave' and one of the two lifeguards was explaining to them how to hold the boogie board and how to jump onto the water. The clock had not yet started.
A minute or so went by and the person was still considering the instructions and presumably trying to get up the nerve to jump onto the wave. The clock still had not started.
Finally my daughter said "hey, their time should be up by now but they haven't even started the clock!" She was starting to see the waste and did not seem to be happy about it.
Another minute or so went by. Finally the person jumped onto the wave and was promptly swept off the board and back up to the top. The clock finally started to count down their 60 seconds.
"They took like five minutes before their turn even started" my son pointed out. "That's not fair."
"How many people could have gone in that time?" I asked.
"Five of us could have gone if they kept the clock going."
"So would you say the company is doing the right thing only one minute out of five in this case?"
Immediately suspicious of anything resembling math while on vacation from school my kids looked at me sceptically. So I continued. "If you got only one out of five on a test what percent would that be."
"20%" my son answered. And then "but we don't want to do math on our holiday.
I had to laugh. "OK but just so you know we could say that right now the company is only doing the right thing according to its customers 20% of the time, right?"
Not wanting to encourage any more math talk they chose not to answer. So I moved on. "So how do you think you would help this company do a better job?"
"Just push the people into the water?" my son suggested. They both laughed at this. And I thought about my own clients who had come up with similar ideas.
"Why doesn't the girl at the top teach the next person how to do it while the first person is on the ride rather than wait until they're done?" my daughter asked with wisdom beyond her years.
"That makes sense" I agreed.
"Or they could have two lines going, one from either side" my son chimed in.
"Well as long as it's safe" I pointed out.
"Or what about having a sign-up sheet so small groups of people could show up at designated times?" I suggested enthusiastically.
Blank stares. OK maybe it was too soon to get into Short Interval Scheduling. But we eventually got our "one minute turns." And the rest of the day was spent going from one Value Added activity to the next. And when the water park wasn't adding Value not only could my kids recognize it, but they had a steady stream of both creative and silly ways to make things better. Just like any customers would.
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