IT and Lean – can’t we all just get along?

Over the last 30 years I‘ve seen corporate IT evolve from a business process function to an autonomous powerhouse. In the 70s and early 80s, for instance, IT was primarily implementing technologies that supplemented business functions: hardware, networks, productivity software, and tools that automated manual functions.

During the late 80s and early 90s, however, manufacturing systems became a necessity for running a shop floor. As a result, many shop-floor personnel, especially from materials, scheduling and planning, collaborated closely with IT to successfully implement MRP systems.

By the late 90s, MRP had transitioned to ERP, with the focus shifting to sales, order processing, financials and other corporate functions taking precedence over manufacturing. Corporate executives became the decision makers for purchasing ERP systems with IT owning the deployment. Interestingly, the deployments involved more technology people than business people and if business people were involved, they were outside consultants.

Around the turn of this century, fueled by Y2K problems and the growth of Internet, the transition or evolution, was complete. IT was the owner and final arbiter of all technologies, irrespective of who the end-user was. IT no longer consisted of a good mix of process and technology people; it was overwhelmingly technology people driving businesses. One of the major business magazines even went so far as to question whether the CIO was on par with, or more important than, the CEO.

Since then, IT has provided the latest and greatest technology to the organization, but in the process has quite unconsciously isolated and neglected core business functions. It’s not surprising then, that the IT department can frustrate the very users it is chartered to help. In the manufacturing function, users are busy processing orders, building products, procuring raw materials, shipping goods and collecting money, often hamstrung by an IT department that does not understand the types of systems they need.

The first challenge to this IT dominance came when SalesForce.com devised a quick and simple software tool for sales people to manage their contacts and prospects. This challenged the multifunction, corporate-wide software from Siebel Systems, then the darling of IT. Siebel took months to deploy and users had no control over the deployment or management of it. As soon as an easier tool came directly to end-users to help manage the sales function, IT was cut off from the process. Virtually overnight Siebel, a billion dollar-plus company, saw its market capital significantly eroded.

Nowadays, as I tour manufacturing companies around the U.S., I notice the larger the company, the more anguish end-users are experiencing with their IT department. This problem directly affects the core business when the plant embraces lean manufacturing. Lean is the antithesis of batch processing as well as building to forecast — and these two tenets form the DNA of manufacturing systems within the current ERP systems. Meanwhile, lean practitioners are embracing ‘pull’ methodologies like Kanban and demand-driven scheduling to reduce inventories, eliminate stock-outs and increase shop-floor efficiencies to improve customer satisfaction. To make matters worse, most of the lean gurus have been preaching that technology is not required to implement lean on the shop floor. This has left a huge gap between lean’s potential benefits and the reality of what it actually did accomplish, which has slowed the pace of lean implementation across the corporation.

I believe IT has a chance to add tremendous value. Lean programs normally demand real-time responses as compared to batch processing. They normally demand collaboration with business partners (suppliers and customers). They need integration of scanners, RFID and other evolving technologies to automate traditional processes of ordering, scheduling, receiving and shipping. IT has already made several successful transitions to adapt to a market situation. It is time to change again.

IT needs to embrace the concept of enabling business through technology. Whether becoming a SaaS provider or a conduit for application access, it needs to become an integral part of the business unit. IT can play a significant role by combining best-of-breed programs with existing infrastructure. Similarly, IT leaders can become business decision makers instead of the gatekeepers they are today. A good alliance between the business function and IT will ultimately lead to better decision making overall.

Ephraim Schwartz, over at InfoWorld, recently wrote a very good article about this. It is appropriately titled: IT needs to get lean on manufacturing.

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.

Lean and Hospitals

The application of Lean principles has tremendous value outside of the manufacturing sphere of which we at Ultriva typically concern ourselves. The Lean Blog continues to provide excellent coverage of Lean applications in medical system and medical systems in need of Lean applications. His latest is a hospital in Australia having trouble finding beds for emergency room patients. One proposed solution: stopping elective surgery. Seems like there's a problem with the system. Sounds like a little Lean thinking would help. Click here to read more.

Amazon Blowout Quarter - What's The Secret?

Amazon's announcement of it's second quarter results brought a massive increase in the price of the stock in its aftermath, creating billions in additional market cap for its investors. I did not think to cover it here until reading the excellent management blog, Curious Cat, and its take on the quarter. That post made me realize -- I knew Amazon, having worked with them in the past and I felt I could add some insight to their success here.

I had extensive experience working with Amazon in a previous job several years ago. I was running eCommerce for a luxury consumer products company at the time. We had made the decision to private-label outsource our website and fulfillment operations to Amazon. What I saw there was some of the best discipline around the implementation of automated processes I've seen. While it can leave you with a feeling of discomfort when outsourcing to rely so heavily on electronic processes, there was no doubt we quickly accrued positive benefits through waste reduction as a result of their processes. What I in effect saw were Lean principles in action.

We moved from a labor intensive inventory management process to a highly electronic one in which automated signals starting with consumer web orders triggered re-orders from our wholesale warehouse to Amazon distribution facilities. The end result was a highly efficient system that, outside of new product introductions, tended to run itself, allowing my team to focus its energy on marketing and customer acquisition and not inventory management. To see long-awaited improved financials is not surprising given what I saw several years ago when working with them. And I think I know their secret.

Management By Walking Around Reduces Waste

I read a short post on the excellent management blog, Curious Cat, the other day on the subject of Management By Walking Around (MBWA). MBWA espouses the importance of seeing what's happening in your business in order to know how to improve it.

Sounds like common sense, doesn't it? If it also sounds like Lean Thinking, it should. The Toyota Production System strongly encourages observation, for without it, your liable to miss kanban that could drive improvement. How would you know your workers are idle if you don't see them idling? I guess you could be told... but it's always good to see it without another's interpretation.

If you are a manager or employee in a company attempting to implement Lean principles, it's imperative to see what's going on. Management reports, Electronic Kanban, and spreadsheets with yellow, green, and red are vital management tools, but they're only part of the solution. A commitment to Lean is a commitment to change in all practices. So get out there, see and be seen.

What is Kanban? A Brief Overview

As with Lean, a web search for definitions of the Japanese word Kanban will yield a variety of answers: "signpost", "billboard", "signal", "signal card" among others. At Ultriva, we define Kanban as more than a signal, but rather a signaling methodology that is a key component of Lean.

In our definition, Kanban has four primary components:

1) The signal -- At its core, Kanban is about the use of a signal or signals that represent an instruction to drive some sort of activity. The instruction, in a factory, for example, could be to build a component or order more parts.
2) Demand-Driven -- In Kanban, signals are demand-driven. A Kanban card is used to drive production because demand suggests the need for production. A supplier will get an order for components because their customer has consumed or will shortly consume all it's components.
3) Visual and Simple -- Kanban utilzes signals easily understood by the recipient. It could simply be the presence of a card that drives action or it could be some other kind of symbol that is not open to interpretation - an empty supply cart for example. Regardless of the type of signal, it's presence very clearly states: "order more", "Im out of... ", "build more....", etc.
4) And lastly, it puts the employees in control. When Kanban is utilized in a manufacturing business, for example, the employee should have total control to reorder a part or supply a part, based on an activity or process HE or SHE controls. Rather than have a semi-detached buyer order parts for a line employee, the line employee signals his need, setting off a chain that results in the replenishment of parts.

To illustrate, think of a bin full of widgets for a motor on a factory floor. The depletion of that bin prompts the usage of a card to signal the need for more widgets. That signal is received and filled by the supply room who brings out more parts to the factory floor. Bringing out those parts, now leaves the supply room near inventory depletion prompting the use of another card for the widget supplier. The recipient supplier sees the signal and schedules shipment and/or prodution as a result.


Signals prompt action, demand drives the signals, simple visual cues are used, and those employees who are part of the process ultimately drive activity.


So why does Kanban matter? Kanban is a key component of Lean. It helps create the link between the different cells in a supply chain to keep the chain moving. By clearly and simply communicating needs throughout the supply chain, waste is reduced and waste reduction ultimately results in significant financial benefits to its practicioners.


There is a lot more we can say about Kanban and we will in future posts.

What Is Lean?

Wondering what's behind Toyota overtaking GM as the largest auto manufacturer on the planet or how about the incessant rise in the price of Danaher's stock? At Ultriva, we think it's Lean.

The origins of Lean probably go back as far as the factory, but it probably makes sense to begin our historical overview with Henry Ford and the moving assembly line which significantly reduced standardized production times. The success of Ford, led to a transformation in global manufacturing. Processes evolved and improved, taking a significant leap forward with Toyota's quest for increased efficiency after the Second World War. One man who rightfully gets a lot of credit in the birth of Lean is Toyota executive, Taichii Ohno.

Legend has it than when Ohno came to the Unitied States to examine American assembly lines, he was less impressed by the factories he saw than the American supermarket What did he observe there? Real-time replenishment of inventory. A product was removed from the refrigerator and what happened? Another one took it's place. It did not take shelf-space until it was needed and demand for the product drove it's replenishment. It was likely only a small driver in the insipiration behind the Toyota Production System (TPS), but it's a great story and, as you'll see shortly, it's a great illustration of the principles of Lean.

TPS with its emphasis on waste reduction, continuous improvement and doing more with less was, in a way, a culmination of many of the principles of Lean, even if Lean did not yet have a name. Finally, in the 1990s, Jim Womack coined the term and Lean as a philosophy, methodology, and discipline was born.

So what is Lean? Search the web and you'll find many related, but varied definitions. We too have ours. Combined with the genesis story above, we think the spirit, if not the definition, of Lean can be reduced to 3 basic tenets:

1) Lean is first and foremost about the elimination of waste. Waste can be wasted shelf-space, wasted time, wasted money, wasted effort... it's all waste. In the supermarket example, the grocer eliminated wasted shelf-space through a demand-driven system of replenishment. A mik is taken, another takes its place. Which leads to our second tenet of Lean:
2) The elimination of waste transforms an organization, a process, an operation... into a demand-driven one. What this basically means is that if someone doesn't want IT, IT is not produced, because producing IT would be wasteful if no one wants IT. Demand for a carton of milk drives the replenishment of milk on the store shelf. That milk was not "produced" on the shelf until it there was demand for it. This then leads to our final tenet:
3) Demand driven businesses cost less to run than their forecast-driven counterparts. This should be intuitive. If you aren't wasteful in your operations, you should have lower costs than your competitor.

Lean principles are frequently applied in manufacturing. We'll touch on this in greater detail in future posts, but Lean manufacturers produce based on demand signals. Demand signal production is visible throughout a Lean manufacturing operation. A line worker demands a part from the supply room when he's depleted (or nearly depleted) what he has (often using a Kanban card, which we'll discuss later). As the stockroom depletes to satisfy the line worker, demand should drive the replenishment of that part from the supplier. Demand drives replenishment throughout and in doing so, waste is eliminated. Perhaps the line requires less space because unneeded parts aren't stacked up or the supply room is smaller because the part is acquired from the supplier only when needed. Less wasted space means lower costs. Or maybe there is less wasted communication based on estimates of needed parts, helping to save additional time and money. As our expertise is in manufacturing software, we believe that the more automated the process is, deploying, for example, electronic kanban software to send signals, typically the more efficient an operation will ultimately be.

Lean principles can be successfully applied in other industries. There is a burgeoning movement, for example, to apply Lean in the healthcare sector (covered here). As waste elimination is smart business, Lean has applications across industries. Today, Lean is being adopted by companies across the globe and driving impressive business results.