Friday, August 31, 2007

We're Only as Good as Our Supply Chain

The best winning strategy for the future does not stop at our plant walls. Even if we are the most efficient manufacturer in our industry with the hottest products, our business will fail if we have a weak supply chain. We must extend our improvement efforts to include our supply chain.

Just look at the recently reported problems at Dell with their supply chain problems namely part shortages. Or just look at all the recent quality issues with products coming from China.

As labor costs decline as a percentage of product costs, we naturally start to focus on material costs for opportunities for improvement. Most companies up to now, play the games of “Beat up our Supplier” and “Chase the Globe for Lower Labor Cost” along with “Outsource it All”. Many companies have rightly earned a bad reputation with these strategies that aim solely at cost reductions at the expense of building a stronger supply chain. These companies will drop any of their suppliers to save a dime or less on piece part costs.

This method certainly has proven successful at pocketing some financial gains in the short run but will quickly cause deterioration in the supply chain. If we start to calculate the true cost of these methods over time, we may find out that our actual savings is much smaller than reported or even non-existent.

A better approach begins with completely changing our thinking of our supply chain. Our supply chain is the backbone of our value stream and everyone in the supply chain is linked together as partners. We are stronger when our suppliers are stronger. Toyota knows this lesson well.

As a valued partner, we should open our doors to our suppliers. We must share best practices, teach lean principles, coach and encourage continuous improvements. How many of our suppliers visit our facility? (I am not talking about sales reps) How about production, quality, engineering and even shop floor associates?

Do we invite our suppliers to join a kaizen event? Do we send our people to a supplier kaizen event? Do we communicate problems on a daily basis? Do we team together to solve problems or do we just send out formal corrective action requests? Do we listen to our suppliers?

It’s no longer good enough to just improve our internal processes. Our future success will not be based on how good we perform rather on how well our supply chain performs.

Sunday, August 26, 2007

My First Toyota Sales Experience

There is no doubt that I am big fan of the Toyota Production System and the resulting Toyota vehicle product line. Despite these positive feelings, I have never owned a Toyota. Each time I am in the market for a new vehicle, I ended up buying a domestic brand including Buick, Chevy, Ford, and Dodge.

Yesterday, I went down to a Toyota Dealership in Indiana (name withheld) with a serious interest in buying a Toyota this time around. This was my first official Toyota sales contact although my wife visited Toyota dealerships before. All the vehicles were outstanding (I especially liked the newly redesigned Tundra). In direct contrast to the Toyota vehicles, my first time Toyota Sales Experience was not impressive.

Understanding that Toyota Motor Company does not own the dealerships and has no direct control over their operation, I suggest Toyota take a closer look at the dealership experience for kaizen. If Toyota can influence improvements in this experience, they can make a huge impact on continuing their growth. Otherwise, they may lose customers, not on the basis of the products but on the poor dealership experience.

The first major mistake was the arrogance of the Toyota Salesman. He hyped the Toyota products for features and engineering while slammed every domestic car manufacturing company and their products. We told him of our comparison shopping of other brands and he made us feel we were stupid to even consider them. Not a good sales technique! I was always taught NEVER to say bad things about any of your competitors. We even told him that we bought one of those terrible domestic vehicles in the past and it performed great. I guess we were just lucky?

The Toyota Salesman continued on his ego trip when we told him of another Toyota dealership my wife visited earlier in the week. He promptly pulled out some regional sales data sheet proudly showing his dealership ranking was extremely higher in number of vehicle sales than this other Toyota dealership. He continued his error by telling us that all he cares about is increasing the number of units sold to increase their ranking. I was a little stunned. Talk about results based management! What about us, the customer? Are we only a number to add to his tally sheet? Another poor sales method!

After working through the numbers (which did not change much from the list price), he tried the old “What will it take to get us to buy this vehicle today?” routine. We told him that we were going to look around and do comparison shopping before we made any decision. Yet, he pressed on with the pressure for a decision today.

The next poor experience was when we offered to trade in our vehicle. He did the routine vehicle check and asked us what we wanted for it. When we told him our expectation for the trade value, he laughed and stated that there was no way. We have a newer model, low miles, domestic vehicle with great options that we rated using both Kelly Blue Book and Edmunds. He offered us 35% less that the book value for our vehicle which was more of an insult to our intelligence than a good opening sales technique.

As we departed, we thanked him for his time. Before we even made it out of the showroom door, this salesman was off helping the next potential tally sheet addition in the sales lot.

Despite this poor sales experience, I will give other Toyota dealerships another chance. It would be unfair to judge all Toyota salesmen on this sample size of one but many other potential customers might not give them a second chance.

Do your meetings start and end on time?

On our lean journey, we sometimes overlook the simple and obvious wastes. Take meetings for example. How many of your meetings start and end on time? For the past several months, I recorded the FPY (First Pass Yield) rate of meetings starting on time that I attended ending up with a poor 0% FPY rate. Not one meeting started on time and very few ended on time.

How much muda (waste) is accepted in your companies on a daily basis just because we can not start and end meetings on time. Is this problem just too complex to solve or do we just accept this waste as a by product of doing business today?

Of course, we should eliminate all unnecessary meetings as a first step. Then demand, encourage, reward, promote and expect all meetings to start on time and end on time.

Wednesday, August 08, 2007


"If your want one year of prosperity, grow seeds.

If you want ten years of prosperity, grow trees.

If you want one hundred years of prosperity, grow people."

Chinese Proverb

Opportunity Calls

As I pulled into the company parking lot, a steady rain fell from the morning clouds. I made my way down the hall, turned on the office lights and fired up my laptop. After a quick email scan, it’s time for my gemba walk. Before I could make it out the door, my phone rings. It was the company VP of Operations and he was not happy.

Apparently, the President of the company went out on the shop floor late yesterday afternoon and found a couple of issues related to our lean efforts. The President naturally passed these concerns to the VP and now to me.

“Mike, we have some problems.” said the VP with a serious tone. I quickly answered.” That’s great news!”

Wednesday, August 01, 2007

We Need Human Andons

With my last post on andon lights, I pointed out the seemingly widespread misuse of this simple visual tool. More importantly, we don’t stop to fix the problems and problems remain hidden. Andon lights are just tools. The real mission is the quick identification of all the interruptions to process flow and the speedy countermeasures to prevent the problems from occurring in the future. What we really need is human andons.

How many times do you or your employees see a problem and quietly fix it?

Is this the right thing to do?

Did you really fix the problem so it does not appear again or just fixed it this time?

Is the company in a better position by this approach?

Do these problems show up again later in the day? Tomorrow? Next week?

What if, starting immediately, every single employee in your company with every single task and every single process, takes on the additional role of human andon by identifying every single occurrence of interruption to the flow?

Would you be surprised by the results? A little overwhelming to think about the potential staggering number of flow interruptions our employees deal with every single day.

But think of all the opportunities for improvement? Call it kaizen heaven.

For some lingering reasons from the traditional management school of thinking, we do not welcome the news of problems. We prefer to hear only good news. We glorify news of some miraculous feats of managerial leadership that “pulled out all the stops, to muscle the order through the shop” but don’t talk about the problems encountered and countermeasures to prevent them. We still are caught up in placing blame for problems.

Until we removed the current equation (Problems = Blame) from our mindset and replace it with the lean thinkers equation (Problems = Opportunities), we can not go forward on our journey.