If Amazon doesn’t care, I sure do! Welcome back Barnes & Noble.
Barnes & Noble is the US’s largest remaining book chain but, under James Daunt, each of the 600 stores is meant to run like an independent bookstore
Source: ‘Amazon doesn’t care about books’: how Barnes & Noble bounced back | Barnes & Noble | The Guardian
Record spending on manufacturing construction heralds a made-in-the-U.S. rebound, stoked by green-energy incentives and concerns about foreign supply chains.
Source: America Is Back in the Factory Business – WSJ
How Steinway (Still) Makes Pianos | Mental Floss.
For those of you who have the time (8 minutes), watch the video of how Steinway manufactures pianos in NY. Great video describing the craftsmanship that goes into each piano. I’m not sure how many new pianos they manufacture each year (as you will see they are a job shop with very manual processes), but the process described and captured in the video is very impressive. What they do at Steinway is clearly a work of art.
Rindge Leaphart
Good article- Fix The Machine, Not The Person | Lifehacker Australia. that illustrates that many times the problem with under-performing organizations is one of process / procedures and not necessarily people. How many times has one of us jumped to the conclusion that person X is not doing a good job versus surveying what organizational constructs might be contributing to the issue? While the NUMMI Plant referenced in the article might be somewhat of a dated example, it is a good reminder to take a step back and consider what processes / procedures / organizational culture issues might be causing performance issues versus assigning blame to the people.
Rindge Leaphart
Many people have heard of the term Just in Time (JIT) as it relates to manufacturing, production scheduling, or delivery. But have you heard of Just in Case (JIC) manufacturing? It is a term I coined years ago. I coined the term one day while walking through a plant that only produced finished goods to order. The business did not actively stock finished goods. They stocked raw material and some sub-assemblies in order to produce with relatively short lead times, but in general they did not stock finished goods. During the walk through, I looked at a work order for a part that was being machined. The operator was machining lets say 30 parts, yet the sales order associated with the work order only called for 15 or 20 parts. I asked the machine operator and his supervisor why they were machining more parts than were called for by the sales order. The response I received was quite curious: “this is a really tough part to machine and we have many rejects, thus we produce extra parts just in case (italics added) we have to scrap a part.” At that point a new term was born: Just in Case (JIC) manufacturing. I asked the operator how often they actually had to scrap a part. Neither he nor his supervisor could answer the question.
I told the supervisor that I suspected that they were overproducing and tying up unneeded cash in inventory. Additionally, this was a plant that was trying to improve on-time delivery. I explained to the supervisor that if they were tying up capacity by producing excess and unneeded parts, that they were impeding their ability to produce on-time with short lead-times. The supervisor assured me that this didn’t happen often. I then asked the supervisor to take a walk with me to the warehouse. I asked the supervisor if he was sure they didn’t overproduce on a regular basis. He assured me they didn’t. I then asked one of the warehouse employees to pull up several recently completed work orders for parts that had been delivered to inventory. When we checked several of the recently completed work orders, we found that a large percentage of them were completed for quantities that were larger than what the sales order called for. At this point the supervisor was a little embarrassed, but there is more to come. Employees on the floor ALWAYS and I mean ALWAYS know more about what is going on in a plant than supervisors and managers. Knowing this, I engaged the warehouse employees in a conversation on this subject and they assured us that this happened on a regular basis. Once again, the supervisor was embarrassed. At this point the employees told me about the T location. Being an inquisitive lad, I asked what is the T location. Their response: “oh that the is the trailer we have outside where we store all of the production overruns.” At this point the supervisor was quite embarrassed.
As you might imagine the supervisor was besides himself. But being a smart guy he put a stop to the overproduction and eventually eliminated the T location. With several other changes we were able to improve the plant’s on time delivery performance as well as their financial performance.
Key takeaways / reminders from that day: 1. I learned on that day that Inventory is the Root of All Evil. If you want to know if you have a problem in manufacturing, check your inventory levels to make sure you don’t have an issue with JIC manufacturing. 2. I learned about JIC manufacturing. It is more endemic than you might imagine. Walk the floor and check your work orders to see if you have a case of JIC. 3. Always talk to the hourly employees, because they know what is really taking place on the floor.
Has anyone else encountered similar issues?
Rindge Leaphart
What type of business are you responsible for managing? Is it a distribution center (DC)? Is it an assembly facility? Is it a machine shop with assembly and DC characteristics? Is it a chemical plant? No matter what type of business you manage, you should have a solid set of metrics that measure whether your business is: A.Meeting customer expectations, and B. Performing in an efficient and profitable manner. I’m not going to spend time discussing measures of profit. Instead, I will focus on operational metrics that have served me well in the past. Many of these metrics may seem like common sense, but you would be surprised by how often they are overlooked and in some cases not even tracked. Also, I hope not to bore you with an never-ending list of metrics. Sometimes you can get buried in the metrics and lose track of how the business is really doing. There is always a balance that one must strive for.
Below are a list of metrics that I always like to have in my tool bag:
Different businesses use different metrics. The ones above are ones that I have always found useful. What metrics do you track in your business?
Rindge Leaphart
This might be my last post on the particular subject. I had a discussion the other day with an executive at a flexible packaging / label firm. The discussion reminded me of the fact that some industries can’t just add labor and more hours when trying to improve on-time delivery (OTD). Industries that rely on labor for assembly / manufacturing can put in overtime to get back on schedule. Some industries, though, that rely more on machinery and the capacity of that machinery find it harder to stay on schedule and especially get back on schedule. Since I started off with a comment on the label company, let me expand. In a printing or label industry you have to keep your presses running. Changing over jobs on presses can take anywhere from 3-6 hours if not more depending on the complexity of the job. In my experience it is particularly challenging to stay on track with the promises you have made customers.
The best way to stay on schedule is to stay on schedule. What I mean by that, is that your operations team, especially your planners have to OWN the schedule. You cannot let sales own the schedule. Salespeople are typically concerned with what their customers want and may not be very concerned with the overall health (OTD) of the system and how the business is performing for other customers. Customers always have unplanned needs. That is the way the world works. My view is that a business should do their best to assist with the unplanned needs of their customers. Having flexibility (some excess capacity) in your system is key to responding to emergency needs. But sometimes the emergency requests become normal and it throws the entire business off schedule. Sales people should always feel free to call and jockey for improved deliveries or assistance with rush orders. But, the planners should own the schedule and have final say with input from management. If you fall into the trap of letting sales dictate your schedule, then your OTD and customer satisfaction will suffer.
Managing the business and rush orders is a delicate balance that is fraught with issues. That is why management must coalesce around what the goals of the business are and who has what responsibility. Once again, no knock on sales. They are a lifeblood of an organization. But once that job is dropped into the funnel, it is time for operations to do their thing and keep the business on schedule.
Rindge Leaphart
During my last post (http://wp.me/p2kKle-C), I discussed On-time Delivery (OTD), its importance, and a key step to improving OTD. Let me take a quick step back. The thoughts that I am sharing are not brilliant strategic insights. They are insights learned over the years about how to significantly improve operational performance. As stated in my earlier post, many small to medium sized companies don’t focus on these small ideas, which deliver outsized gains. These posts are focused on doing the seemingly little things that need to be done to make sure the big things (revenue generation, customer satisfaction, etc) get done. Now, back to our regularly scheduled programming.
So you have kicked of your production meeting. What is next? Or more appropriately, what other activities should you be working in parallel? Before I move on to answering that, I want to stress the importance of guidance, leadership, and behavior modelling to attendees of the production meeting. If you have a need to put a meeting like this in place, there is a good probability that people are not accustomed to performing at the level your organization wants or needs. People may not have an idea of what they should and shouldn’t do. People may not be sure what to do when they reach a crossroad and have to make a decision to improve performance. With regards to crossroad, I am not referring to a moral dilemma, but instead a business dilemma. This is where your leadership is most important. At the early stages of the production meetings you have to consistently and constantly model the behavior you want them to emulate. You have to demonstrate to them your thinking process when it comes to making decisions. You have to show them how to do the right thing and not the easy thing. You don’t want them to become clones of you, but you want them to think and do things differently than what they were doing. Many people don’t need to be told what to do, but they do need to be taught how to fish. I do believe this is quite important because it sets the tone for the organization. It also pushes people outside of their proverbial comfort zone and causes them to start thinking differently, and hopefully acting differently.
Okay, I’m off of my soap box. In conjunction with the production meetings, you probably need to do things differently in your purchasing organization as well. Over time, I have come to find that organizations neglect the data in their ERP/MRP systems. As such, the data is outdated and causes havoc within your system. I strongly suggest that the purchasing team scrub the data in the system. Specifically, scrub lead times to make sure they are accurate. Scrub buyer codes and make sure each part has a valid buyer code for someone in the purchasing organization. It never fails that an organization overlooks the purchase of a critical part because it had a buyer code of someone who no longer works for the company. While you are at it, make sure the manufacturing group is also scrubbing your Bill of Materials (BOM) to insure that routings, revision numbers, etc are all correct. Cleansing the data is a time consuming task, but it has to be done. My view has always been to get it done as quickly as possible. Please do not overlook the importance of cleansing your system data. It is neither fun nor easy, but it pays huge dividends.
I will discuss other steps in future posts.
Rindge Leaphart
The Operational Turnaround – what they don’t Teach you in Business School: Part 1
As my 15 year reunion looms, I decided to share my thoughts on operational turnarounds at manufacturing / assembly / distribution companies. I learned a lot at business school, but I can’t say what I learned really helped with my first operational turnaround. Don’t get me wrong, I picked up some great concepts at b-school, became more adept (like everyone else) at analyzing large amounts of data, and learned how to identify core issues to resolve. And while those skills came in handy, they were not what brought the ultimate success at my first or latter turnarounds. By no means am I disparaging business school or the valuable education experience one gets. Is there more business schools can do in this area? Maybe. At business school, we tended to focus on broad strategic issues, which most of us want to go on to face someday. I also took several operational strategy courses, but once again those focused on broad strategic issues. There was no class on how do I deal with a $50 million manufacturing division that is A. not delivering product on-time, B. that has a host of angry customers, and C. is not collecting cash from customers in a timely basis and in fact has over $1 million of receivables older than 6 months. How do I deal with a division where everything that can be broken is broken? Fortunately, at business school I was forced to work harder than I ever did before and that skill came in handy with my first and latter turnarounds.
One of the keys areas that I have found that often gets overlooked with small to medium sized companies is on-time delivery (OTD). In several cases I have found that companies don’t even measure OTD. From my perspective OTD is one of the most important keys to customer satisfaction, which is the key to revenue growth. If you don’t deliver on-time, your customers will find someone else who will. Some customers are loyal and will point out to you that you are not delivering on-time, but they eventually will leave if you don’t get it together. Typically in this scenario you may also find a significant numbers of past due orders, which obviously translates into sales that haven’t been completed and thus cash that has not been collected. So what do you do in this situation? I have seen many companies initially focus on reducing past due orders. My experience is that is the worst thing you can do. By focusing on past dues you take your eye off of current orders, which will in turn go past due if you don’t have a mechanism for keeping orders from becoming delinquent. This point was driven home to me with my first turnaround. I had 3-5 material expediters chasing past due orders. In a chance conversation with them, I asked: “if you guys are chasing past dues, who is focusing on keeping orders current?” Their collective response was: “the system” aka MRP / ERP. That is when the proverbial light went off in my head and we made major changes to our operational group. If you find that your company is not delivering on-time, I suggest the ideas that follow. Make sure you have a DAILY production meeting. At that meeting make sure you have members from production, scheduling, purchasing and customer service. If you don’t already have a daily production meeting be prepared for a lot of griping from team members. Don’t be swayed. Require them to meet every morning to discuss current and upcoming orders. Require them to look at orders that are due to ship in the next 5-10 days. Require people to discuss any material or production issues with the orders. If there are issues, press them on their recovery plan. Make sure you drive home the fact that there is an organizational wide focus on OTD and that they have to do their part in making sure orders ship on-time. There is no magic to this, just plain old fashioned hard work. If you are having issues with orders not shipping on-time, this is probably the most important step you can take to improving OTD and thus customer satisfaction. In upcoming posts, I will describe other critical steps that one should consider in an operational turnaround.
Regards,
Rindge Leaphart
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