Time Based Management Leveraging Lean Sigma for Growth
Time Based Management Leveraging Lean. Sigma for Growth Bonnie Smith October 8, 2004 TBM Consulting Group Generating Rapid Sustainable Business Improvement
Time Based Management TBM Lean. Sigma® Manufacturing Lower costs, higher quality, increased responsiveness – fast TBM Consulting Group Generating Rapid Sustainable Business Improvement
Client-Focused Capabilities Lean. Sigma® Manufacturing n Achieve unprecedented new efficiencies and performance improvement in quality, cost, delivery and service – on the shop floor and in critical business processes Lean. Sigma® Institute n Interactive workshops that give your business teams the necessary tools for increasing Lean awareness and skill building, at every level of your organization Lean. Strategy n TM Convert your operational excellence into sales growth and market share, through world-class strategic breakthroughs, implemented at the speed of Kaizen Lean. Sigma® Service n Streamline and simplify complex business processes and quickly pull dramatic new efficiencies to the bottom line
Global Reach Manufacturing Consulting, Training & Support United Kingdom Germany France Canada United States Mexico Brazil China
How is it that… Market Share (U. S. %) 1995
How is it that… Market Share (U. S. %) 1999
How is it that… Market Share (U. S. %) 2002 (Q 1)
How is it that… Dell – Direct Model 1 -2 Hours Customer Phone/ Internet Dell Sales/Order Entry Dell Factory (Lean Assy) Computer system in 4 -5 days, or less Pull Suppliers
How is it that… HP-Compaq – Traditional Model Customer Retailer HP-Compaq Forecast Order Showroom Forecasting Forecast Order Entry Forecasting Supplier Inventory Production Planning Factory Margin erosion 15 – 20% Inventory
How is it that…
Insulation for Downturns n “Analysts: 2001 a Terrible Year for PC Vendors” “… 2001 was a ‘bloodbath’…. Dell Computer continued to defy the trend, growing 18. 3 percent and moving past Compaq as the top vendor based on total shipments. All the other major vendors showed double-digit declines worldwide. ” News. Factor Network, January 2002 n “Rivals help improve Dell's outlook” “Dell Computer on Thursday raised its revenue and earnings outlook for the second quarter, saying it continues to gain market share from computer rivals. ” CNET News. com, July 2002
The Common Thread? Lean Manufacturing n Improve responsiveness through operational excellence, n Leverage existing assets n Time-based strategies eliminate unnecessary time and cost n Short lead time to customer n Build Every model every day – or build to order
Today’s World Issues You May be Facing n Lost market share n Sluggish growth / profit erosion n Lack of speed / long lead times n Culture problems / initiative failure n Supplier/distributor inefficiencies n Offshore competition / outsourcing
Conventional Thinking “To achieve significant competitive advantage or perform ahead of our industry, we need: ” 1. To spend money (margin, investment or both) 2. A top-level “strategic” initiative (“silver bullet”) 3. A breakthrough new product or “And, during downturns, we’ll cut costs and technology reduce staff to preserve share and profitability”
Conventional Thinking Typical “Silver Bullets” n n n Automation New equipment Latest technology Plant expansion New computer systems/software MRP or ERP
Conventional Thinking vs. Lean “Silver Bullets” n Often expensive and impractical n Benefits often illusory or temporary, always with a downside n Often end up as “flavor of the month, ” eroding morale and management credibility Lean § Only approach that generates immediate, dramatic and sustainable improvement – without additional capital § Benefits have no downside § Builds morale
Are You Really Lean? Minimum performance levels for the Lean n manufacturer Lead times 1/4 -1/2 industry n n n avg. Inventory turns greater than 48 x Productivity up 1% or more/month Growth rates 3 -5 times industry avg.
Evolution of Lean. Sigma® Ford
Our Consistent Focus
Time-Based Strategies Lead-Time Reduction Critical for driving improvement to your customers
Time-Based Strategies Wasted Time and Activity Core Process Value Excessive Motion Defective Products (Walking to Next Task, etc. ) (Identifying, Handling, Fixing) Excessive Inventories OPERATIONAL LEAD TIME Unneeded Processing Time n n Waiting (Often Result of Unbalanced Tasks) Defective products Overproduction Inventories Excess motion Overproduction n Transportation (Movement to Storage area) Processing Transportation Waiting Lead time reduction: identify and eliminate waste
Kaizen Breakthrough Methodology · A cross-functional team based process for rapid improvement with: · Bias for action · Creativity before capital · Focus on results · Focus on physical transformation · Learn by doing · Overcome resistance · Instill change culture Promote Rapid Change Through Involvement!
Our Approach Kaizen Breakthrough Experience At the end of the week, each Kaizen team has achieved dramatic operational improvements
Lean. Sigma® Process Improvement 6 Sigma (3. 4 DPM) (233 DPM) Process Capability Process Optimization 46 Sigma (6, 210 DPM) Create Flow Waste Elimination (66, 807 DPM) 1 - 2 Sigma (308, 537 DPM) Lean Kaizen 3 Sigma Logic & Intuition Sigma Kaizen Design for Lean. Sigma 5 Sigma
Stages of a Growth Strategy Suppliers Manufacturer Distribution (You) Operational Excellence § Lean Enterprise § Cultural Transformation Market Channels Customers
Stages of a Growth Strategy Suppliers Manufacturer Distribution (You) Operational Excellence § Lean Enterprise § Cultural Transformation Value-Chain Transformation § Distributors § Lean Suppliers Market Channels Customers
Stages of a Growth Strategy Suppliers Manufacturer Distribution (You) Operational Excellence § Lean Enterprise § Cultural Transformation § Asset Leverage Value-Chain Transformation Leveraging Lean for Growth § Product Development § Channel Development § Strategic Acquisitions Market Channels Customers
The Lean Perspective “The secret is in the dirt. ” Ben Hogan n Your most powerful competitive advantages are on the plant floor n Lean will create dramatic performance breakthroughs, quickly and continuously
See for Yourself Go to the scene of the crime… “It is not necessary to change. Survival is not mandatory. ” W. Edwards Deming
Stage One: Operational Excellence Lean Enterprise Key Factors 1. Process capability n Worker productivity n Defect reduction or elimination n Equipment uptime 2. Flexibility and responsiveness n Lead-time reduction n Reduce set-up/changeover time n Inventory reduction Critical Tools n KPO offices/teams Pat Mitchell
Successful Transformations Pella Premium windows and doors; Pella, Iowa 1992 Sales: $300 million 2003 Sales: $1. 1 billion
Successful Transformations Pella Lead Time ▼ 8 weeks to 1 Productivity ▲ 13% per year Sales ▲ 20% per year Profitability ▲ 35% per year Without additional capital
Stage One: Operational Excellence Reflected in Business Performance Market Share Customer Satisfaction Sales Growth Profitability
Stage One: Operational Excellence Cultural Transformation Key Factors 1. Long-term commitment 2. New management philosophy 3. Performance aligned with business objectives 4. Cross-functional participation 5. Focus on productivity 6. No-layoff policy
Stage One: Operational Excellence Impact of Kaizen Breakthrough When Lean Started at Delphi n Plant losing money for over ten years History of headcount reductions/downsizing n Morale: “defeated” n Mandate: fix or exit
Stage One: Operational Excellence Impact of Kaizen Breakthrough One Year Later n n n Plant profitable, without layoffs High morale/enthusiasm Culture of continuous improvement Delphi model operation “Our teams were getting wins every week. They’d say to me, ‘This really works!’” Gabor Deak, Delphi Executive Director, South America Gabor Deak
Asset Leverage Lantech Packaging equipment; Louisville, Kentucky; Product price range: $6 -400 k 1992 Sales: $39 mm; Employees: 330 1996 Sales: $80 mm; Employees: 350
Asset Leverage Lantech Lead Time ▼ 12 weeks to 2 Productivity ▲ 17% per year Sales ▲ 20% per year Profitability ▲ 28% per year Without additional capital
“Our results in terms of profit and growth have been awesome. There is no question that we would not be the company we are today without Lean. Sigma and Kaizen. ” Pat Lancaster Chairman, Lantech, Inc.
Stage Two: Value-Chain Synchronization Key Factors Distributors n Link to customer demand n Reduce lead time n Reduce inventory Paul Adelberg
Stage Two: Value-Chain Synchronization Streamlined Distribution – Speed, Lower Costs Phase One - Lead time 91 days Mfg. Ship Store Phase Two - Lead time 55 days Mfg. Ship Store Phase Three - Lead time 39 days Mfg. Ship Store §Closer to customer §Linked to actual demand Value chain inventory turns Customer FG turns Availability 3 to 7 9 to 14 85 to 97%
Stage Two: Value-Chain Synchronization Applica Retailer Inventory n n Replenish based on customer point of sale Maintain/increase margins 4 weeks or less Competitor Retailer Inventory n n Based on forecast Obsolescence – continuous mark-downs/clearances 16 weeks or more
Stage Two: Value-Chain Synchronization Competitive Advantage n “Price wars are a dead-end strategy. ” n “We can help our retailers cut inventory 75% and eliminate forecasting, sell-ins and mark-down sales – while our competitors still make them jump through those hoops. ” “Now it’s not about price – it’s a business partnership. ” “None of our competitors can do that. ” n Harry Schulman President and COO, Applica
Stage Two: Value-Chain Synchronization Key Factors Lean Suppliers n Focus on strategic suppliers n Senior management commitment n Implement pull system
Stage Two: Value-Chain Synchronization Pella Supplier Kaizen Improvement Before After Glass Inventory 17 days 6 hours Breakage/Scrap 3. 0% 0. 3% ($2. 0 MM/yr) Scheduling Weekly batches Line sequence Floor Space 25, 000 sq. ft. On line
Stage Three: Leveraging Lean for Growth Key Factors 1. Product development 2. Channel development 3. Strategic acquisitions
Stage Three: Leveraging Lean for Growth Key Factors 1. Product development n n n Product line expansion Innovation Voice of customer
Stage Three: Leveraging Lean for Growth Reducing Lead-Time for New Product Development DLS
Breakthrough New Products Maytag – “Intelligent Innovation” Jet. Clean. II® First three-rack dishwasher Neptune® First washer/dryer with touchscreen controls Operational excellence releases creativity
Breakthrough New Products Maytag “We had very consistent performance and it provided a very high quality dishwasher. Many people at Maytag couldn’t understand why we would attempt to make such a drastic change in the manufacturing process that was considered to be our best. ” Bill Beer President, Maytag Appliances Leveraging operational excellence into the future
Success Stories Situation n Network Hardware Management System n Traditional rack-based systems not adequate for today’s data center needs Complex installation – floor and ceiling Solution n I-Frame supports multiple components cleanly, with exceptional strength Fewer parts – easier installation, floor mount only Provides more rack space, frees up valuable floor space To market, from scratch, in six months Largest competitor wants to license product
Stage Three: Leveraging Lean for Growth Key Factors 2. Channel development n n Improve competitive capability Enter new channels 3. Strategic acquisitions
Stage Three: Leveraging Lean for Growth Pella Example n n Product line expansion – from windows to full-line Plant expansion – 3 to 10 Entered home center channel – $0 to $300 mm Three strategic acquisitions
Stages of a Growth Strategy Suppliers Manufacturer Distribution (You) Operational Excellence § Lean Enterprise § Cultural Transformation Value-Chain Transformation § Distributors § Lean Suppliers Leveraging Lean for Growth § Channel Development § Product Development Market Channels Customers
Stages of a Growth Strategy 1992 Andersen AW $300 million annual sales n Begins Lean $1. 5 billion annual sales n Business as usual
Stages of a Growth Strategy 2003 Andersen AW $1. 1 billion annual sales n Sales up 250%+ n Net profit from 5% to 14% n More profitable than Andersen $1. 7 billion annual sales n Sales up 13%
Thank You TBM Consulting Group, Durham, North Carolina 800 -438 -5535 www. tbmcg. com
- Slides: 58