Lean Production And Kanban Outside The Plant Floor

It is sometimes assumed by industry novices and veterans alike that the tenets of Lean production and Kanban stop on the plant floor. While you can argue that it all begins (or ends) on the plant floor, middle management and the executive suite play a critical role in Lean success.

While the signals inherent in, for example, Kanban cards are typically acted upon by the floor employees, it can be critical to the success of a Kanban system to make management aware of what's happening on the floor. In our experience, there is no better way to learn what's happening on the floor than by deploying a strong Electronic Kanban or broader manufacturing software program, allowing management to receive the same signals floor employees are receiving without having to set foot on the floor.

Additionally, the support of management is absolutely vital in extending Kanban down the supply chain. Without the championing of management, adoption can be slow to take hold at suppliers reluctant to embrace new practices. In the end, it is ultimately a partnership that makes eKanban work and that partnership is best forged at the management level.

The Lean Contractor?

We are having work done on our kitchen now by our contractor, Brent. I feel we can refer to him as "our" contractor, as this is his 3rd major project at our house since we bought it in 2000. Each time, I've had the oppotunity and pleasure to do more than a trivial amount of work under Brent. Unlike previous times (which is perhaps unfortunate since I've written a lot of checks to him), Lean thinking is now part of who I am. As a result, I've taken to analyzing Brent's lean production techniques.

On the Lean adherent side of the ledger, Brent is relentless in his goal of minimizing defects. He is careful and detailed in everything he does, even the smallest things, and the results are that we have never seen more than an inconsequential defect in any of his work. If he thinks he is headed in that direction, he works to rectify the situation immediately, effectively shutting off the assembly line. And if he in fact ends up with a defect, he goes back and fixes it. It has to appear well after the completion of the project for it to not be repaired.

On the downside, Brent's tireless efforts to perfect everyhing he does takes his focus away from the production process. Case in point, tomorrow Brent will be working on building a new stairwell in our house. The stairs are to be tiled, a new rail installed and the walls painted. As he tends to focus on one minute area at a time, he often misses an opportunity to cut waste in his production process.

Today, he was painting several walls in our kitchen. He first primed. He had put the primer in a pan and dedicated a roll to the prime. As he finished priming, he washed the roll and brushes, then painted, went on a supply run, then painted another coat when he returned.

I asked him why he didn't prime every wall needing prime when the equipment was already out. He said it was because he was painting kitchen walls today, not working on the stairwell. When I suggested he could have saved set up and tear down costs (which aren't big, but still...) by having primed every wall today, he looked at me confusedly.

Just an observation here, but a focus on quality does not translate to an evolution towards Lean. In Brent's case, it's just not the way he works. Now, imagine having to change the culture of a plant or plants to apply their thinking more broadly.

Lean Myths -- Kanban Will Drive Up My Shipping Costs

Another excuse we frequently hear for not deploying Kanban or Lean production is that moving from push to pull will drive up shipping costs. To a Lean skeptic, the potential for increased shipping costs outweighs the potential gains from a transition.

Well, you can probably guess that we think these skeptics are wrong. Shipping costs don't always increase. First, shipping frequency tends to already be an issue. The problem is the shipments tend to come in several large bulk orders, then lots of smaller orders to attempt to ameliorate the impact of poor forecasting. With a Kanban system, where pull drives replenishment, the number of orders typically doesn't change dramatically, rather the variance in order size changes. The end result of a Kanban implementation is typically a much smoother order curve, not higher shipping costs.

Now, let's talk benefits. Even where shipments are more frequent, doesn't it seem the tradeoff is worth it? Lower inventory, increased turaround times, fewer rush orders, more on time deliveries... Independently, each variable would likely offest any increase in shipping costs. Taken in aggregate in a lean manufacturing operation, the benefits of utilizing, for example, kanban cards or an electronic kanban system far outweigh any potential costs.

Anything more than a marginal increase in shipping costs is unikely. But those costs are quickly and easily more than offset in any successful Lean impelmentation.

Mattel Follow Up: Chinese Manufacturer Kills Self

Following up on our recent post on Mattel's Toy recall, I saw this article on CNBC. Wow! Obviously, Chinese authorities are cracking down on those believed to be responsible for recent quality failures in Chinese factories. We all know quality failures can kill, but this isn't quite what I expected. Sadly, this story doesn't appear to be over. Mattel is rumored to be preparing to announce another toy recall and blame for the first incident seems to be moving further down the supply chain.

So what are some takeaways from this unfolding tragedy? On this side of the Pacific, it seems that American companies might be wise to not be so disconnected from their suppliers. While Lean producton can help manage the supply chain, the more distant each supplier gets from the end product, the less influence they'll ultimately have. Moving a kanban system down the supply chain is not easy. However, as more such incidents occur, companies might no longer have a choice to act.

Ultimately, I think market forces might determine how much control companies like Mattel will demand over their overseas suppliers. Consumers will demand more accountability (and if they don't get it regulators will). And those demands will ultimately work their way down the supply chain. While Lean might not ultimately be the response from companies like Mattel, visibility will. And how do you get visbility...?

Distance is still a challenge. Physical Kanban cards don't work across the ocean so well in a real-time world, but electronic kanban can. We try to avoid the open promotion of our manufacturing software when possible on this blog, so let us instead promote eKanban, of which we are a provider. While no solution is perfect, eKanban provides the best chance of driving quality all the way across the supply chain.

The Lean Dentist

Check out Mark Graban's podcast on the Lean Dentist at Leanblog. Very interesting to hear about Lean thinking applied in a place you'd never imagine. If you think it doesn't apply it you, you'll be surprised what you might learn.

Getting "Lean" At Home

Great post on on reducing "defects" in one's personal life over at Evolving Excellence. The Lean thinking parallels aren't hard to draw to the business world. If we can't get over our negative behaviors at home, why should we expect we'll easily get over them at work?

Is Lean Harder In Public Companies?

Read a good post yesterday on the Gemba Panta Rei blog on the hiring of Bob Nardelli as Chrysler's new CEO. One of the more interesting considerations they address in Nardelli's move from Home Depot to Chrysler is that Chrysler is owned by a private equity company, Cerberus Capital, meaning Nardelli does not have to publicly answer to shareholders and Wall Street on a quarterly basis.

What this arguably does is give Nardelli and his charges a longer runway to implement Six Sigma and Lean production at Chrysler, which begs the question... is Lean production, Kanban, and other such components/derivatives of the Toyota Production System more difficult to execute within publicly traded companies?

Like any other business decision, be it a new marketing strategy, a new product rollout, or a Lean implementation, the runway you get within a public company is directly correlated to your ability to articulate the message behind the strategy. If it comes with a good track record of financial performance, then the runway is lengthened. Google, for example, on one hand, is pursuing a number of long-range initiatives, like attempting to bid for wireless spectrum space, but is also turning in butt-kicking financial performance on a quarterly basis. Thus, Google's long-term forays are blessed. GM, on the other hand, will get a longer runway as soon as its very public, quarterly bleeding stops.

In the end, the runway reflects the circular effects of good performance. Good managers turn in good performance and get a pass to address long-term issues. If a CEO turns in quarter after quarter of growth and he wants to implement a Kanban system, shareholders will have patience. As his Electronic Kanban implementation further improves the bottom line, he can put Kanban cards across all his facilities and suppliers. More benefits accrue and he gets to address more long-term issues.