We use Kanban cards at Montie Gear to manage our inventory. The purpose of the cards is to make sure we don’t run out of inventory so we have the products you want, when you want them. Kanban is a way to use a simple formula to determine how much product to keep on hand by using customer demand and the time it takes to produce the product. You can hear more about Kanban cards at:
If you are going lean, the boss has to set the example. One of the places where I spend a lot of time is at the shipping desk. So my 2 second lean project for the week is cleaning up the shipping desk. Here are the results.
Questions, comments, videos, suggestions are all welcome!
Managing Production and Inventory in Context of Lean
by Montie Roland
Audio File: 2016 Mar – Managing Production and Inventory in Context of Lean.mp3
Good morning. My name is Montie Roland with Montie Gear in Apex, North Carolina. And I’d like to spend a few minutes talking about managing your production and inventory in the context of Lean.
So with Lean, you have a thing called a Kanban, and the ideas that you have established a level of inventory that you need to maintain in order to meet your customer needs and your anticipated customer needs. So, when we think about it, we’ve got two types of parts and assemblies. One is parts and assemblies that we’re going to use to make finished goods, and the others, of course, finished goods that we’re making in anticipation of sales.
There’s a lot of different sizes of companies out there and a lot of different types of products. And some products are built to inventory and some products are built to order. And so if we just look at Montie Gear, in the past I’m realizing we had this kind of crazy system that didn’t really serve us well financially. And so in the past what we do is that we would build a batch of products and in this, the reason why we build a batch is mainly because of we’ve got several processes where we need to have a minimum order. And there’s just no getting around that without having ridiculous costs. So let’s say that with slingshots, the two places where we have to have minimum orders – one is to cut the slingshot and then where we do our secondary machining ops. You do the set up – that’s a lot of the work – and so you really want to have a minimum batch size through the secondary machining. And then the other one is paint or finishing if it’s to anodize (it’s called finishing). So, finishing also has a minimum order and can get very expensive if you don’t do a minimum number of parts. So in this case, we’re not going to have a single piece flow through these external processes. But we can have single piece flow through our assembly area (maybe). Alright, so in the past what we did, somebody (usually me) would sit down and say, okay, we need to build this, this and this. I guess we’re getting low on this. And I don’t know, we’ll sell these. Well, there was a huge lack of scientific method here. And what that tends to do is that tends to eat up capital because if you’re building parts that you’re not going to use for the next year, that’s money that’s tied up; it’s really not doing you any good. And it’s not doing your customers any good either because its money you can’t spend on products that they really want. So the next step for us, I believe, is to create a chart or a spreadsheet that shows each product; what we sold last year, what we sold this year, and the year before. And that way we’ve got three years’ worth of sales. And then we can say, okay, well based on this historical data, we expect we’ll sell this many of this product this year. Then what I need to do is to take and apply a time to manufacture that good through all the processes. And the external processes occupy ninety percent (or higher) of our manufacturing calendar days for Montie Gear. So, paint, water jetting, machining; what have you. And so if I apply a calendar date or calendar time to each one of these products . . . so, for example, with a slingshot. Maybe generally the queue at ADR for the water jet cutting is two weeks. And let’s say the queue for paint is generally two weeks, and the queue for machining is generally a week. So, I’ve got a five week delay from the time I order to the time I get parts that are ready for us to assemble. In this case, we’re cutting the frames, we’re painting the frames and the side plates, and then we’re machining the secondary operations in the frames. And so I’ve got a five week delay. So then if I know that I’m going to sell -amount of slingshots this year, then I can take and multiply that sales number by five-over-fifty-two. Now, I take the yearly sales, multiply by five weeks, divide by fifty-two weeks to prorate it for five out of fifty-two weeks. And that tells me how many slingshots I should sell during the period while I’m waiting on more slingshots. So, I establish a number that I know I expect to sell while I’m making more. And then also, I need to factor in any seasonal demands. So, you know, look at, for example, Christmas. So we sell more slingshots at Christmas than any other time just before. So I need to also factor in the seasonal affect. So, the yearly sales and then bump it up by the percentage that is increased for Christmas sales. Now, I know what I need to keep on hand. But I also need to apply safety stock, because there’s always going to be some variation. So, I don’t know, let’s say our safety stock – we’ve got to come up with a metric for that – but maybe the safety stock is one month’s sales. So now what I’ve got is I’ve got my yearly sales, prorated for the amount of time it takes to make those pieces, and then times the yearly sales. I’ve got how many I need during the period when I’m making parts; what my safety stock is; and then any adjustments for seasonal variation. And that gives me a much better idea of how many I need to keep on hand.
Now, I’ve also got to factor in the effect of minimum orders on this, because I want to keep my production economical by ordering above the minimum order. But that gives me an idea of how many of each product I should stock. And that way I don’t have inventory sitting on the shelves that I’m just not going to sell. Now, this can get a little . . . you know, this is not a perfect system but this is an excellent baseline. And it works well for products – or I think it will work well for products like the slingshot, where we have continuous sales of those. We have other products that the sales are not as continuous and they have larger variations and swings. Like, for example, our RFID products. Because they’re commercial orders we may get an order for two hundred or two hundred and fifty or twelve hundred. But with those, and those big orders, the lead time is figured in and anticipated by the customer. So, that’s a little different situation to calculate. Now, however, on those, I think it is important to note that the longer it takes to produce your product, the longer you have to wait for the effects of the profit from that sale because obviously, you know, percentage of the sales . . . for a domestic sale, where there’s terms, you don’t get paid until you ship; if an international sale, you may get paid a deposit upfront and then paid when you ship. But so, the longer you wait to ship, the longer you wait to get paid and the longer you wait for the benefits of the profit from that sale. So that’s definitely an important consideration but for the purposes of looking at it from Kanban, it’s a little different.
So back to our slingshots and other things where there’s consistent sales. So now what we’ve got is we’ve got product, and then what I’m planning on doing is to then do an inventory once a month. And then on that inventory we’ll post in the bin where we keep each product (we have a bin for each product in our inventory . . . or for each product SKU; so there’s a bin with slingshots, there’s a bin with glove shots, arrow rests. And so some of our bigger sellers like slingshots, there’s actually multiple bins depending on what color your slingshot actually is.) So then what I can do is to do an inventory once a month; compare that to our minimum stocking level that we created, which was, you know, our time to produce and you know, relating that to time to produce versus sales, so we know how many is in there; plus, our seasonal variation during the period where we’re going to be making new parts; plus, our safety stock. So we watch that and then flag it during our inventory and pull a card out that says we need to make more of these. So that way then we collect those cards and then those cards then become an indicator that it’s time to produce more. And that’s a nice, easy solution. And I think, too, that when we’ll have to post what that minimum stocking level is so that when someone is withdrawing products for shipment, then they can watch that as well. So, for especially where there’s, you know, low numbers, like, for someone where the bin’s starting to look empty, they can check. So maybe it’s between inventories; they check and go, Hey, Montie, here’s the card for this; we’re starting to get low.
So, I think that’s one of the concepts is that you’ve got this visual indicator where this product, this produce and this product are getting low and then we can leave those cards in the bins and walk by to see them, or we can collect those cards and know that we’ve got to produce some inventory – or at least check to see what the inventory is to decide when we’re going to. And the same thing for goods that we use on a regular basis to produce those products. Now, that depends, too, on how long it takes to get those. So, for example, for slingshots, the lead time on these services we purchased or the parts we purchase, it’s fairly long in some cases. For other pieces like screws, it’s fairly short. So it may be that we order screws, you know, about the same time we send out slingshots for paint, because we can get screws in just a few days easily without expediting anything.
So this is kind of the thought process I’m having to go through to decide, you know, how we’re going to make all this work. And also it’s good, though, because now, all of sudden, I’ve got a framework, so I can use that framework to make buying decisions, and keeping those simple. So, now we have a simple process for deciding, you know, how many of something we should keep. It’s no longer a “gut-feel” thing or something where we have to wing it. Instead, we’ve actually applied a metric to that. And I think that’s part of the value of Lean is that now, all of a sudden, we’re using a simple tool, getting organized and, in this case, making sure that we have the inventory so we can get it to the customer quickly. But, also, at the same time, conserving our resources so we’re not stocking too much inventory. And having a simple system means a couple of things. One thing is that it’s something that can be taught, not something that’s a gut-feel or something somebody high up has to make a decision. Instead, by using a simple process we can give someone the authority to make a purchasing decision without having to go through some sort of process or get as much approval. And I think that’s one of the values of Lean is now, all of a sudden, you can scale a lot easier; as the company grows, you have a simple process and your associates or employees, contributors, what have you – can learn that simple process. You can audit that process because it’s simple; it’s not a gut-feel thing or it’s not some guy in the corner that guesses what the seasonal demand will be. Instead you’re actually using simple math to solve what used to be a complex problem. And I think that’s great.
So this is kind of how I’m looking at developing our inventory control to function in more of a Lean way. It’s kind of cool. I’m excited because it’s a simple solution to something I thought would be a . . . before I thought, Hey, this is going to be a complex, computerized, we-need-to-have-some-sort-of-software-to-manage-this; but, no, I mean, we can do it with a card stuck in the back of a bin that gets collected when inventory reaches a certain level. And that’s kind of a wonderful thing to keep it simple.
Well, comments and suggestions and questions and thoughts are always welcome – Montie (M-O-N-T-I-E) at Montie (M-O-N-T-I-E) dot com. If you get a chance, visit our Montie Gear site. We make some kick-butt slingshots and some other cool products. And Montie Roland, signing off. Have a great day.
Can you get so Lean (Lean Manufacturing) that you get lost in the process? You bet you can.
Lets talk about the Kano model. The Kano model helps you to organize your product development and management efforts between basic expectations, performance enhancements and delightful additions to your product. Understanding the difference and applying this model to your product management and design management ultimately serves as a reminder to not forget the joy of creating delightful products that please your customers is great ways. Don’t end up getting lost in the process and forget to delight your customers.
Join me and talk about the first steps in considering how Montie Gear could go Lean.
Normally, when you think about Lean Manufacturing it is in the context of a large manufacturer. Can a micro manufacturer go Lean? Six Sigma? Lets talk about it.
Comments welcome at email@example.com
Here is the transcription from the podcast……………………………………………..
Audio file: 2015 May 17 – Lean Thoughts 2 – Lean at Montie Gear – Can it be done.mp3
Time transcribed: 17:58 minutes
Hi. My name is Montie Roland. I’m with Montie Gear in Apex, North Carolina.
I want to spend a few minutes having a chat and a little bit of dialogue, and talk about the first steps towards implementing lean at Montie Gear.
So, I’ve been on this journey of learning lean. And, what does it mean? You know, what does it really mean? Not just, you know, overarching concept, but how do you make it work? You know, and how does combine work? How does, you know, work site visits work? How do MDI boards work? So, there’s all these things, these tools that lean uses to monitor your process and communicate to everyone.
So, now the trick is how to implement that in a very, very, small, micro-manufacturing environment. I’m going to make the argument that a lot of the tools in lean are going to apply even to a micro-manufacturer. And, at first, you sit there and say, “Well, yeah, if I want to tell John something, I’m going to lean across the table and tell him. I mean, there’s only three of us” – blah-blah-blah. Okay, so, I still think that there’s a place for lean within the organization because it helps you monitor your process. And in a small company, monitoring the process often doesn’t happen, because you assume it’s not worth it; you don’t have the manpower; you’re too busy putting out today’s fire; or just barely getting stuff out the door; keeping things resourced efficient. But, I think there’s more to it than that. So, one of the things that we want to do with lean is we want to optimize for flow first, and optimize for resource efficiency second. So, optimizing for flow means we want to get stuff out the door; optimizing as quickly as possible to the customer. So we want to add that value as quickly as possible. Whereas optimizing for resources means we want to do it as cost-effectively as possible. Well, the problem with putting too much of an emphasis on optimizing for resources is that it’s easy to create silos where people are thinking, Wow, I’m doing a great job. I’m cost efficient. But, then, what they’re doing isn’t necessarily getting the product out the door to the customer as quickly as possible, which interferes with cash flow. Because the quicker it gets to the customer, the quicker the cash flow happens, and the happier the customer, or more satisfied.
So, one of the things that we were already doing (and I didn’t realize how it already really fit into lean until after we started learning all this) is that . . . two things. One is that we were already doing single piece flow. So, in lean, lean’s going to most likely push you to single piece flow. So, single piece flow means that you build your products in a continuous manner down the line. So, in the past, you might have had facilities where someone with, let’s say, building a rifle – they’d make two-hundred-and-fifty barrels. And then everybody would go and they’d make two-hundred-and-fifty triggers. Then they’d go and make two-hundred-and-fifty stocks. So, what happens is that you’re putting all this in inventory while you’re finishing. This is kind of an extreme example. But with single piece flow, once we start the process of making a product, then it goes all the way through the process as quickly as possible. So, instead of having ten people making one part, we’re going to have ten people doing ten steps to make that part. So, now the advantage is that we have less inventory, and once we start making a product it goes through the line fairly quickly. So, if we were making all the pieces in a batch mode, then it takes a while when there’s a customer order for you to fill that order. Now, so, really quickly, there’s two ways that pull works. One is that you build to a certain level of inventory based upon your expected sales over a given period, and you maintain that inventory. So when that inventory is depleted, then there is a call to make more inventory, there’s an authorization to make more inventory, and that authorization results in the manufacturing floor making those parts to bring that level back up to that inventory level. The other way to do that would be you made-to-order, so you got an order for fifty, so now you make fifty. So, what we want to do is get that order through and out the door as quick as we can.
So, when we think about a slingshot and put it in that prism, a slingshot is a combination of batch and single piece flow manufacturing. For example, we’re not at a quantity level, where we make enough parts so that we paint every day. So as a result, we will make, for example, a bunch of slingshot frames, and then those will get cut at a vendor’s location. And they want to cut a minimum. You know, there’s work in setting it up, running it. And so they want to sell us a minimum of slingshots in a batch, otherwise it’s not cost effective to make them. So, there’s a batch of slingshots that’s cut on the waterjet, and then they go to paint as a batch. Now, and currently, we have two different processes that now I need to start rethinking now that I’m learning more about lean. One is that we’ll get the slingshots back; they go to the machine shop. Now, one of the things we haven’t invested in is specialized equipment to just drill the slingshot holes. So, they go to the machine shop in a batch and the holes get drilled in the slingshot frame. They come back to us and then we put the heli-coils in, and then they go out to be wrapped. So, so far, we’re not doing single piece flow; we’re doing small batches. But that’s driven by the fact we have to do it out-of-house, and it’s just not economical to do that as single piece flow – yet (the painting and the cutting). So, then what we do is those slingshots go to two places. Part of them go to the mountains, because we have capabilities there, and we anticipate inventory, we build to inventory, so probably two-thirds of them go to the mountains, get wrapped there. A third of them stay here. And the reason why we keep those here is to accommodate for anywhere that someone has a custom paracord color we want (because we wrap the handles with paracord), and it’s easy to do a color change. Or, we missed on our projections. So now this is a little bit of a challenge because now I end up, when they come back from the mountains after they get wrapped, so maybe two-thirds of my slingshots have already been wrapped in specific. And so those colors, it may be a third woodland camo, a third desert camo, a third black. So, now what I’ve got is I have frames that have paracord on them with heli-coils in them, and they’re ready for final assembly. So, generally, what we do is at this point we switch over and go to single piece flow. So, what I want to do is kind of put a bookmark here in our conversation, so we’re going to come back to this point.
So this is happening; our website, you know, our main customer contact point. And so folks are visiting the website and placing orders. So if you visit the Montie Gear website and you place an order, that order gets recorded on our website. And then, usually three times a week – Monday evening, Wednesday evening and Saturday, I’ll go and I’ll download new orders. So, when I download the orders, so I download it into a piece of middle-ware called T-HUB. T-HUB brings up a visual dashboard that shows me what has been paid for, what hasn’t been paid for, what has been shipped, what hasn’t been shipped, and what has been transferred to QuickBooks. And so I take this and I use T-HUB to print out a sales receipt. So I take those sales receipts and then we have a table. And so each sales receipt sits on that table and becomes the routing sheet for the order. What I didn’t realize in doing all this was I was already taking somewhat of a step towards a combine by how we set this up. So those sheets sit on the table. When Lars comes in, he instantly has a visual indicator of what needs to be built. Now, he can also go back to T-HUB and look it up. A lot of times, though, he doesn’t need to because I have already printed them out so he can take a look at it, and instantly know what he needs to build. So, this is a great way we’re communicating; so everybody knows how many orders we have that are unfulfilled. Now, kind of a next step on that would be to track days until shipment. So this is kind of one of the things that we need to do, is to track how long it’s been since the shipment.
Now another thing we need to do is automate the receipt of orders coming from Amazon. Right now, we don’t (and from eBay); right now we process those manually; so that’s a step. Once we get all that going through T-HUB, then we’ll have that computer visualization of, you know, what’s shipped and what hasn’t and what’s been paid for. And then we’ll also the table with a slip and a space for every order. So, as the order gets fulfilled, it gets passed to the next step. So Lars does single piece flow on the assembly – for example, the slingshot. Some products we build to inventory. Does single piece flow on the slingshot, puts it in a box, sets it for on the next table, where, when I come in then I take that box and ship it. Now, the beauty of it here is that we’re using this dashboard and we’re using the presence of this sheet of paper to show us, you know, so in an instant I know how packages I generally have to ship, because its sitting right there. So it’s very quick. Now, then what happens, I take that . . . after its shipped, I take that sales receipt and it goes into the “shipped sales receipt” or “done” pile. And then that gets filed away. And then, of course, the process of shipping it also means that T-HUB records it as being shipped. So, in this way, that’s a nice streamlined way of doing that. What we need to do to be more lean is to track, for example, number of days until shipment; you know, what was the reason why we didn’t ship on a day. So if Lars comes in, I need to track failures; you know, what we were missing, and then track how long it took to rectify that, who’s responsible. So maybe we don’t have a part or are missing some screws. So if we track that and find out that, Wow, we had seventy-seven times we were out of screws, and that held us up from shipping, then we need to keep more screws on hand; or we need to have a better way of monitoring that. So, at some point, what we need to do is actually to track our inventory so that there’s a card, so we can visualize, you know, what’s our safety inventory, what’s our normal consumption, so that when someone goes into the supermarket – which is where we store our parts that are ready to either for final assembly or to ship – when they go in that supermarket, then there’s an easy way to see what we’re low on. So that’s another aspect of lean that’s very common, is that you monitor that visually.
So, at this point, one of the things I’m starting to go after is to say, Okay, how do we monitor our process in a way that I can maintain (or everybody can help maintain), that’s not painfully expensive to monitor, but also lets everybody know where we are, how we’re doing, and gives us information for continuous improvement. So, that’s kind of the next step is to think that through; you know, is it a board? How do we track these things? And so, I’m open to suggestions. Anybody that wants to come by, make some suggestions on how to track this. You know, between X-Cart and T-HUB and QuickBooks, you know, what can we use to have a continuous monitoring of our process so that we can improve that; use our resources more wisely; and, you know, maximize our through-put flow-wise.
So, I hope this gives you a little insight into where we are now and kind of thinking and the process. It’s definitely a big challenge. A lot of these things, you’ve got to change at a very root level of how you do business and how you spend your day. It’s not just a matter of adding on a piece of software. A lot of times it’s a matter of just physically changing how you conduct your business. And that’s one of the tough things about lean, is that it’s a culture change. It’s not just something you throw over the top that adds a burden. If you do that, if all you do is just bolt it onto the top, you never really get a lot of benefit. You’ll never follow it. With lean, you’ve got to dig in and make a real in-depth change.
So, I hope this was a good talk for everybody. I appreciate you listening. Please don’t hesitate to send me an email. Come by the shop and you can see where we are in our lean transformation. And have a great day. Bye-bye.
10 years ago, the push was to go paperless. Is paperless too much of a good thing?
Data in your computer is passive. Yes you can manipulate it, share, mine it but you have to go ask for it. Why not make data active?
Lean Manufacturing techniques include tools to make your data active but getting it out in from of your employees and managers on daily basis. Put that data in front of your team an understandable and actionable format where it does the most good, i.e. right in front of them.
Lets explore the various facets of active vs. passive data. Comments and suggestions are welcome here or at firstname.lastname@example.org
Here is the transcription from the podcast………………………………………………..
Audio file: 2015 May 17 – Lean Thoughts 1 – Active vs. Passive Data.mp3
Time transcribed: 12:29 minutes
Hi. My name is Montie Roland. I’m with Montie Gear in Apex, North Carolina.
What I wanted to do is to share some thoughts with you today and have at least a one-way dialogue – it could become two, if you email me – about the difference between passive and active information. So I’d like to spend a few minutes talking about that. And maybe define it and have some examples.
One of the things that’s happened over the past twenty years is that we’ve had this head-long rush to get everything on the computer. So, we assumed that getting it on the computer is more efficient; is more cost-effective; is safer because you can back it up. And so we’ve created database after database after database. And one of the joys and the beauties of – and potentially harm – of doing this is that everybody can have access to information, without having to go down the hallway and grab something from a file cabinet. Now, of course, the horror is that can be hacked. Someone can get into that from across the world. Whereas, a file cabinet, you’ve got to physically be there to get into it. Now, a file cabinet can be broken into as well, but someone on the other side of the globe isn’t going to be able to do that without visiting here. So, we’ve created this electronic database that contains what we do. And the beauty of it is that everyone in your company can sit down, and if they have the right software and they have the access, they can read that data. The problem is that they have to go read it; they have to go look for it. So I’m going to call that passive data. Now, active data is data that’s right up in your face. And for those of y’all that are family with lean, you’re going to start going “Oh-ho, this is exactly where he is headed” because with lean the goal is to use vertical surfaces as . . . well, I shouldn’t say the goal. Lean is going use boards, charts and effectively, use your vertical surfaces as a way that in an instant you can look at a chart, and have an idea of that particular part of your business and what’s happening in there. And so in lean, there’s a lot of different charts and you chart different areas. And so the idea being that in seconds you can know what’s going on. So, let’s throw out an example. So, one example would be if I have a database of a soccer game. And what I’ve done is, through the magic of the computer and a vision system, I’ve tracked where the ball is, where the people are, what their speeds are, how fast they’re moving, how fast the ball is moving, how . . . blah-blah-blah. So, I have this giant database of excruciating detail regarding the performance of every player on the field. And somewhere in there I have the fact there was a goal scored at this point – point-oh-oh . . . twenty-seven minutes, three seconds and two milliseconds, the ball entered the net. So, if I want to know what’s happening in the soccer game, now I’ve got to have a way to visualize all that data. So, I’ve got to go to the computer; I’ve got to use my visualization tool; I’ve got do all this stuff. But the beauty of it is if I want to know what that player’s performance is, or that team’s performance is, I can do that ad infinitum. Now, let’s make a contrasting example. So, I’ve got the computer database with all this wonderful information. And then the contrasting example is I go to the game. So at the game, there’s several key elements involved – there are players on the field; there’s a ball; from where I’m sitting, I can see the ball. There’s two goals, there’s two goalies (or a football, for our European listeners). And so, I’m in the stadium. I can see the scoreboard. The scoreboard gives me a few pieces of information – what’s the score, what’s the time remaining in the half, what’s the, you know, which half are we in. And so, those pieces of information are there. I can see the ball moving. I can see the ball going in the net. Well, maybe I’m not sure. Did it miss the net? Or did it go in the net? Oh, I look at the scoreboard – boom! So, by going to a soccer game, I can instantly know what’s going on from anywhere in the stadium. So the beauty of it is that I don’t have to have a visualization tool; I don’t have to bring out my computer – it’s all right there, between the scoreboard with an absolute minimum of information (but the right information) – and – watching it unfold on the field, I always know what’s going on just by a glance. Whereas if I monitor this on the computer with this huge amount of data, I have to go to the computer; I’d have to figure out to get what I want and so forth. Now, I think it is important to, you know, throw out there, that you can have a visual board on the computer. I’m going to make the argument that the difference between something you printed this morning and what’s on the computer, effectively if the data is current, it doesn’t matter. And the beauty of printing it on the wall is that someone can walk by and in an instant and see it. And you’ve got a lot more wall space than you have monitor space.
So, yes, there are lean set-ups where people put their display, their information, on monitors. Now, that means you’ve got to bring that information into that display. Maybe it’s automatically from other systems. But the idea is that active information is something that you can glance at and get an answer. You may be glancing at a giant monitor; you may be glancing at a color print-out or a black-and-white print-out that’s hanging on the wall when you walk in the building. But one of the things you see with lean – and lean being, you know, the popular name for the Toyota manufacturing system, is you see active information that’s organized and updated, and that active information lets you know what’s going on. And is a way of communicating what’s going on in an instant because you look at a chart, you know what to look for, you see the colors, you see the ways that everything’s laid out. So now, in an instant, you’ve been updated. Which is a great way to communicate.
So, the opposite of that is passive information, where you’ve got to go to the computer, sit down, look it up on a spreadsheet or look it up here, or do what have you. And so, I’m going to make the argument that where you can use active information, you’re in a much better position because someone doesn’t have to spend the time to go look it up; and also, someone can walk in, know what they have to do, have a constant reminder of where they are and what they’ve got to do; how things are going – because it’s right there and that information’s available. That helps everyone in your organization make better decisions because they’ve got the information they need, and it’s timely and they can make decisions that are timely. And every day every employee makes thousands of decisions. So if you leave them in the dark, they’re guessing at what’s best for the company. If you inform them, give them a structure, educate them, and, you know, lay this all out, now, all of a sudden, those thousands of decisions can be decisions that are the best, the ideal ones, that help get the product out the door quicker with high quality and conserving resources.
So, that’s why I think understanding the difference between active and passive information’s important. And then, also, putting that understanding to use in terms of getting that information to everyone. Now from a Montie Gear perspective. So one of the things that I’ve been thinking about as I’ve been taking my journey into lean is how to implement that in a small company. So, maybe that’s a discussion for another time. But I hope that this has been a good bit of information for you. Give you a little better understanding of that difference between active and passive information, and why it can be so valuable to give your employees the information they need to make those good decisions all day long, every day. Because they’ve got the information they need and then they can act on it.
Join me as I chronicle my journey into lean manufacturing! This is part 1 of the series. Comments and suggestions are always welcome at email@example.com.
Here is the transcript from the podcast……………………………………
Audio file: 2015 May 17 – Lean Thoughts 0.mp3
Time transcribed: 15:50 minutes
Hello. My name is Montie Roland. And I’m with Montie Gear in Apex, North Carolina. Today, I’d like to spend a few minutes and talk about my journey into Lean, and what I’ve learned in the past few months.
So, let’s back up and let’s talk about, you know, what is lean? Lean is a popular name for the Toyota manufacturing system. Toyota has spent a lot of effort and time and intellectual capital in developing a state-of-the-art way to make cars. The Toyota manufacturing system is the model for the rest of the world. When you hear someone in business talk about that their company is lean, or they’re going lean or what have you, it’s about putting into practice that basically leaner, a version of the Toyota manufacturing system.
Toyota has a really, really, really well-thought-out way of making cars. And this applies to other segments of their business as well, not just manufacturing. It applies to their . . . to their dealerships; it applies to other areas that are ancillary to their manufacturing of their cars. They’ve got to sell them; they’ve got to service them. And so, as I understand it, the principals of lean and the application of lean has been put in place by Toyota throughout their entire system (as far as I know). I know that dealerships put it in place. They definitely put it in place on the manufacturing. And so, it’s important to have an understanding of what “lean” is.
So one of the guidelines behind lean is that you want to optimize your process. Now, a lot of times when you’re talking to someone about lean, first thing they say is, “Well, lean is about reducing waste.” And so, when someone says that and looks at you, you should say, “No! It’s not. It’s a by-product of lean, is reducing waste.” And you get a . . . sometime they’ll maybe tilt their head, look at you, and go, “Well, no. This is . . . in lean, we reduce waste.” So, I want to make the argument that in lean you’ve got two directions that you can do optimization; two main directions – you can always optimize, you know, a lot of different ways. But, there are two main directions that you can optimize for. One is that you can optimize for resources. So that means that you can try to keep everybody busy; you can try to make the best use of space; make the best use of materials; make the best use of personnel; keep your per-unit cost low. And that’s a good thing. However, the challenge with that is that you end up inevitably, by optimizing for resources, you end up developing silos. And by a silo, what I’m talking about is that if you’re, let’s say, the person that assemblies widgets; then, your pay and your bonuses may be directly driven by how many widgets you build. Well, and that’s fine until the point where the person who takes your widgets and ships them can’t keep up. At that point, you may be making widgets, but they don’t have the capacity to ship; or maybe the capacity to sell. So at this point, you’ve got an incentive to continue making widgets because if you’re not making widgets, well, you’re efficiency goes down. And when that efficiency goes down, your incentive goes down. So, now we have a problem because you can imagine that even if it’s not this severe of an example, every group is going to be evaluated based on that group’s performance. Well, when you do that, that’s great; what you’ve got to watch out for, though, is does that group’s performance help the company as a whole. And so they may be amazingly efficient – but – something they’re doing is the part of being so efficient may make someone else inefficient. At that point – mmm, maybe you’re not doing the right thing.
So, this is a natural outcome of building silos and optimizing for resources. So in lean you’ve got to do more than just optimize for resources. What you’ve got to do is you’ve got to optimize for flow. So when you optimize for flow, you have to establish communication between groups. Now, you may have a corporate culture that is absolutely wonderful, where people, you know, talk; they communicate. And everything is wonderful. But a lot of times you have a lot of communication within your group (whatever that group is – manufacturing, shipping) but a lot of times you don’t have communications, let’s say, with accounting. So, if want to optimize for flow, you’ve got to communicate. And that’s the first challenge. And that’s one of the things that lean really tries to address is that communication.
So, let’s talk about optimizing for flow. And what does that mean? Well, when I optimize for flow, I want to optimize for the speed at which I’m adding customer value. What that means is that when I get an order, I want to get that order in this customer’s hands as quickly as possible. Because when I get it in their hands as quickly as possible, then the customer is happier; more delighted or more satisfied. And also, I get paid quicker. So, I don’t have money sitting around in inventory or work-in-progress or what have you. So, lean is all about a customer pull. So, you know, the customer’s making an order – or – we’re filling to maintain an inventory – either one – but we’re going to refill that inventory after its depleted, so you want to refill it as quickly as possible. Or we want to ship as quickly as possible, depending on how the expectations of your customer are and how your industry works.
So what we want to do is we want to get that product made as quick as we can, get it out the door, get it to a customer, and, of course, that being a high-quality product that we made in somewhat an efficient way. So, now you can see what’s at odds is that the most efficient way when it comes to resources may not be the quickest. Now, I want to point out an example. Let’s say that we have four people making slingshots. And let’s say each slingshot takes a month to make (for one person). But let’s say that four people can make a slingshot in five-point-two days. So in this case, if I have four people working on a slingshot at once, there’s some inefficiency because four people have to work together, shared resources, what have you. But, I’ve got the capability to make one slingshot at a time, instead of four at once. And so, the trade-off is that if I look at the folks that make those slingshots and I say “You get paid by how many slingshots you make a month”, then they’re going to say “Well, I’ll make slightly more if we work on them separately”. But then, the trade-off is that it takes a month for one person to make a slingshot. Now, let’s say that I have four people making slingshots and it takes one-point . . . one week and an extra four days, or one month and four extra days to make four slingshots, but I do them sequentially. So, now I’m kicking out a slingshot at just over a week; so a little bit over every week I’m getting a slingshot out the door. Little less efficient – but – now all of a sudden I’m getting it to my customer quicker; I’m getting paid faster. So when you think about, you know, work-in-progress and inventory, that works out well. But it’s not quite as efficient. So if I organize for efficiency, then everybody’s going to want to make one slingshot per person. Or, excuse me, for resource efficiency, everybody’s going to want to make one slingshot per person. If I say I want to get these out as quick as I can, then I’m going to have all four people working on that slingshot, kick that slingshot out; now, I’m shipping a slingshot in a little over a week. So every week, almost, I’m kicking a slingshot out the door. And so this is one of the conflicts that built into lean. So, we want to be efficient and lean has a lot of tools to do that, but lean recognizes right off the bat that you can never be one hundred percent efficient because you also want to optimize for flow. If we’re a hundred percent efficient then the delivery time goes up because of multitasking, because waiting . . . it gets, you know, your deliver time goes up exponentially, not linearly, as you work on multiple things at once. A good example with our slingshots, is that let’s say that it takes a week to ship four slingshots. So now I’ve had four people working on slingshots for a month, and I’ve had . . . or I’ve had one person . . . or excuse, four people working on one slingshot at a time – well, now all of a sudden, if I had limited shipping capacity, then it’s important to not overburden that shipping capacity by forcing them to ship all four slingshots at once. Whereas, if I could spread that out, it may be that I have to have a fourth less people in shipping to ship slingshots, because I’m shipping one at a time, not four at a time.
This is definitely a very arbitrary example, but you kind of get the idea of this . . . dichotomy between optimizing for resources and optimizing for flow. And I think it’s a really important because if you consider lean just purely making your company more efficient then you really aren’t doing lean. You’re not. Lean is about monitoring your process. So, when we go to the next step here is that how do we optimize these things. Well, lean is not as much about the outcome as it is monitoring the process, and improving the process by everybody constantly improving. And so, when you think continuous improvement, you know, well, okay, that means people learn how to make widgets faster. No. Because at some point, a person’s going to sand a corner down only so fast; there’s no . . . that is going to peak, in a way. So instead what we want to do is monitor those processes so we know what’s happening. And so lean is all about monitoring the process, and by monitoring the process and educating the workforce and getting the workforce involved in monitoring, then all of a sudden, as a by-product, everybody’s making better decisions that improve productivity. So, I think that’s a really, really important part of that.
Well let me leave you with this for now. And I know I’ve kind of talked a little bit about lean, but it’s kind of a really neat way to run your business. It’s not a simple thing; it’s an all-encompassing thing. It’s not a couple of charts on the wall. It really is a way to run your business from stem to stern. Lean is not a partial change. It’s a culture change. Without the culture change, then the effectiveness of the lean efforts are dramatically reduced.
Well, Montie Roland, signing out. Have a great day. Bye-bye.