Not so ‘Good to Great’

An executive asked my opinion about having his staff all read Good to Great by Jim Collins (2001).

It’s been years since I first read the book, one of many business books collecting dust in my library.  When I went back to the list of companies used for research I saw some I knew hadn’t sustained their ‘greatness’.  So I looked up their ticker symbols, and here’s the fate of the Not so ‘Good to Great’:

  • Circuit City bankrupt, Fannie Mae in conservatorship, Wells Fargo bailed out by US Treasury.
  • Only Nucor is really great, up over 400%.
  • All others track with the rest of the pack (DJI)

Not so Good to Great
The stocks:

  1. Abbott Laboratories (ABT)
  2. Circuit City
  3. Fannie Mae (FNMA)
  4. Gillette → Bought by P&G
  5. Kimberly-Clark (KMB)
  6. Kroger (KR)
  7. Nucor (NUE)
  8. Philip Morris  (PM)
  9. Pitney Bowes (PBI)
  10. Walgreens (WAG)
  11. Wells Fargo (WFC)

So given the crummy performance, I have to wonder about the premises made that these companies, that had previously gone from good to great, had some special common characteristics or just random chance.

 

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Supply Chain Kaizen

Euclides Coimbra latest book recently made it to the top of my reading list.

Coimbra Kaizen Logistics book

Kaizen in Logistics & Supply Chains is a well considered application of lean and blitz to the fields of logistics and supply chain management.  Here you will find detailed advice on flow, takt, cell design, kanban, internal and external logistics, standard work, supermarket design, water spiders, etc.  This book is a must read for any lean or six sigma practitioner interested in applying lean.  Well done Euclides!

Various supply loops are detailed. Mizusumashi Water Spider system is thoroughly and clearly described from the mechanical to behavioral.  Different types of kaizen workshops are also described:

  • Kobetsu Gemba Kaizen – focused improvement typically on OEE
  • Line Design Workshop – for value stream design and implementation (supermarkets, leveling, milk runs, right sizing containers)

Some of the vocabulary may take a little getting used to – ‘border-of-line’ seems to be what I know of as ‘point-of-use’, or line-side stock.  ‘Total Flow Management’ or TFM is just another way of saying Lean Supply Chain.  Don’t let the Japanese words distract you; Coimbra is being very precise – junjo is sequenced supply, kanban is continuous supply.

If you are working on improving your materials management, then you need to read this book, and apply it!

 

Total Flow Management

Euclides A. Coimbra and his associates at the Kaizen Institute have created a wonderful and detailed work on the application of continuous improvement to supply chains.  Here is a full exploration and application of lean from end to end of the extended value stream that they call Total Flow Management.  Two thumbs up!

Some of the graphics look to once have been powerpoint and when reproduced are to small and grainy to be able to read.  There isn’t an index so finding topics is limited to the table of contents.  The book is hard bound, and printed on good paper.

Some of the vocabulary is odd; “border of line” might be better said as” interface” or “borderline”.

Economic Order Quantity, or as referred to in this book, Wilson’s Formula, is treated in a refreshing way.

We can say that Wilson’s formula still applies today.  The only problem is when people assume that changeover time (or, generally speaking, ordering cost) is rigid and cannot be reduced.  Many people don’t think to do Wilson’s calculations because they are still misled by two strong paradigms: flow at any cost and efficiency at any cost.

The ‘flow at any cost’ paradigm is a rising paradigm that is currently gaining in popularity.  People hear about the wonderful Toyota Production System (TPS) and start to increase the flow by reducing the batch sizes blindly, without looking at Wilson’s formula.  What happens is that the CAPEX requirements explode, because the small batch sizes together with big changeover times decrease efficiency.  The result is that flow is indeed achieved – but at the expense of capital expenditure, not by internally reducing the changeover time and increasing equipment flexibility.  You can see this effect in many rich companies that are implementing Lean manufacturing and the TPS.

For a more in depth review check out Jon Miller’s posting on Gemba Panta Rei,
Review of Total Flow Management by Euclides Coimbra.

Building a Lean Fulfillment Stream

 

BuildingLeanFulfillment

 

Hot off the press from the Lean Enterprise Institute

Page 12 & 13 have a brief description of Coefficient of Variation and a SKU Scatter Diagram (weekly volume vs. SKU stability).  10 weeks usually isn’t sufficient for meaningful or statistically significant calculation of standard deviation.  25 data points would be better, and you might need a lot more if there’s any seasonality to deal with.

The guidelines given need to be tempered with the granularity of the data.  While a coefficient of variation of less than 1.0 can be considered stable for weekly data, it would be considered very noisy when using monthly data and quite stable when using daily demand.

This small quibble aside the authors Martichenko and von Grabe do a wonderful job describing lean principles for the supply chain, or as they prefer, the fulfillment stream.

 

 

Green and Lean

Hot, Flat, and Crowded Streamlined End-To-End Lean Management

Combining the questions of green and sustainability with the application of lean thinking to supply chain and logistics I offer these current publications for your consideration.

Hot, Flat, and Crowded, by Thomas Friedman, author of The World is Flat, presents two cases 1) the impact of global warming, population growth, rise of a global middle class through globalization, and 2) America’s loss of focus and national purpose since 9/11, combine to ever greater instability.  The rise of new powerful economic nations is completely changing the way the world works.  Whether you buy in to the doom and gloom you might give some thought to how solving these problems present the greatest economic opportunity of our time.

Streamlined: 14 Principles of building & Managing the Lean Supply Chain by Mandyam M. Srinivasan stresses systems thinking. It integrates two management philosophies: the theory of constraints and lean thinking, and illustrating how they complement and reinforce each other to create the smooth flow of goods and services through the supply chain. Thought provoking.

End-to-End Lean Management by Robert Trent describes a broad array of waste that affects all supply chains and shows how to make lean performance improvement a reality across your entire supply chain.  Trent he explains and details key lean objectives, including standardization, flow, optimization, and waste elimination.  An easy read.

 

 

 

Green Intentions

Green_IntentionsHot off the press, written by plant manager Brett Wills, with first hand experience on the challenges faced trying to move an organization in the green direction.  Part 1, Going Green, applies value stream mapping and the ‘seven wastes’ to identifying opportunities.  Part 2, The Seven Green Wastes, provides guidelines for reducing each of the wastes.

Available at Amazon and CRC Press

 

 

 

 

 

 

 

 

 

Slot3D

In most warehouses the material handlers travel empty more than 60% of the time.  Long pick paths and poor product placement can make labor even more inefficient.  Slotting your warehouse based on travel distance and customer demand can save 5-10% on labor.  When handling issues, product groups, order patterns are factored in an additional 3-5% labor productivity can be had.  Also increasing storage density can create free space for additional opportunities; more efficient put away, right sizing bins, promotions and new product roll outs.

Finding the warehouse ‘squatters’, the slow moving stock that’s sitting in the wrong place, isn’t too difficult.  Squatters force the pickers to travel further to get to the active product locations.  Over time squatters increase and migrate forward forcing longer and longer hunting trips.  A quick and dirty way to find the squatters is to take your picking transactions and count the number of transactions and sort by location.  A low number of picks in a location right next to one with high picks is a clue.  Depending on your location address naming scheme this sorting can be confusing.  Also, unfortunately spreadsheet slicing and dicing can only take you so far, typically only to making one pass on the product velocity.  When you add other factors besides distance and velocity you need a better tool than Excel.

Slot3D by IDS Engineering is a warehouse slotting tool that combines AutoCAD with an economic algorithm that is highly visual, flexible, and powerful.  Slot3D translates business rules into configuration parameters and along with SKU and order history calculates  the picking, replenishment, and storage costs for each item and slot in the warehouse.  The system recognizes different material handling equipment capabilities and location sizes and characteristics.  Rules and restrictions provide mechanisms to prioritize areas of the facility to produce golden zones, bulls eyes, and hot zones.  By allowing the user to structure the rules the software is flexible and not locked into a set of preconfigured algorithms.

The 3D capabilities of AutoCAD allow you to see the overall slotting optimization by providing a heat map of the facility.

 

Supply Chain Guru

Supply Chain design studies often target understanding the impact of new sourcing options such as switching suppliers, opening or closing facilities, new product line introductions, or business acquisition integration.  Each opportunity has potentially great financial advantage, but also carries risks as well.  The task then is to understand and quantify the risk – reward trade offs of operating cost vs customer lead time, inventory vs. service, fixed vs. variable cost.  Unfortunately the various business goals need to be balanced and the complexities managed of customer demand, product dimensions, geography, shipping modes and rates.  Sometimes a spreadsheet will do, often you need a more robust tool.

One complaint of modeling and simulation often heard is that the only one who understands the model is the modeler.  Fair enough when the math is dense and the model a bunch of programming code.

LLamasoft Supply Chain GuruSupply Chain Guru by LLamasoft is one of the best of the many logistic network optimization and simulation software packages on the market today.  With SC Guru model building is very visual.  Sure there is a ton of data to manage; addresses, sales orders, shipment details, product dimensions, sourcing, inventory, and transportation policies.  With the visual modeling native to the package you can display and interact with your data easily.  As a user you can quickly create views of the supply network based on product or customer groups, geography, shipping lanes.  Building the network diagram is as easy as with Visio or any other flow charting tool.  Geo maps are easy to populate with built in longitude and latitude lookups.  Distances come easily through the PC*Miler functionality.

Making the analysis more visual opens up the network study to greater team participation and leadership comprehension, and hopefully a better business result. 

Kanban

When asked recently to recommend reference books on Kanban here’s what I came up with…

https://i0.wp.com/ecx.images-amazon.com/images/I/51UInQwB3GL._SL500_.jpg?resize=165%2C250 Custom Kanban

Kanban for the Shopfloor is a straightforward implementation instruction manual.  The language is plain and simple.  The implementation checklist is complete.  Kanban Just-In-Time at Toyota is a translation of a book published by the Japanese Management Association in 1986 and is based on the seminars given by Taiichi Ohno to Toyota suppliers.  The language is a bit rough in places, but the concepts are presented in logical manner.  The philosophical parts may not play well with factory workers, the prior book would be a better choice.  Custom Kanban by Ray Louis comprehensive, detailed, and well written.  The methodical approach offers some 20 design options for adapting the kanban tools to a variety of situations.  This work is invaluable for implementers.  All three works can be found at Amazon and Productivity Press.

Five Frogs

Five Frogs are sitting on a log.  Four decide to hop off.  How many frogs are left?*

It doesn’t take much for good intentions to end up in disaster.  It’s been my recent fate to be involved in two failed mergers, one a postmortem, the next a trainwreck-in-progress.  Integrating distribution, logistics, information, management and financial systems; oh, and the people is a tough tough thing.  The deal makers fall in love with the potential synergies and then all too often with out a plan or a process hope that magic will happen once the deal is done.

"Five Frogs on a Log: A CEO’s Field Guide to Accelerating the Transition in Mergers, Acquisitions, and Gut Wrenching Change” by Mark Feldman and Michael Spratt is a great guide, and not just for mergers and CEO’s but for any organizational change event and those who are caught up in the maelstrom of clashing cultures.  A little light on methodology, this book will let you know what to expect from the merger/acquisition, encourage focusing on execution, the importance of communicating even when in the fog, it’s a virtual project plan for you and your leadership team. 

 

Read it!  Hopefully before, not after the chaos starts.

 

  

 

 

*Five. Because there’s a difference between deciding and doing. "Execution", the authors tell us, "is always more difficult than it seems."

 

 

 

Checklist

Check out Annals of Medicine: The Checklist by Atul Gawande in the Dec. 10. 2007 edition of The New Yorker for an insightful exploration of the medical application of one of the most basic of quality tools – the checklist.  I was astounded to learn that checklists aren’t a common practice in one of the most complex industries, the emergency room.  Setting up a machine, preparing for an audit, readiness reviews, planning a kaizen all have routine lists.  Flying a plane, launching a rocket, preparing for battle all have checklists.  Gawande describes how in 2001 Peter Pronovost, a critical-care specialist at Johns Hopkins, developed a simple five step checklist for inserting central line IV’s that dramatically reduced the odds of line infections, and the resistance he faced in implementing something so simple and yet so effective.

The Checklist – The New Yorker, Dec 10, 2007

 

 

 

 

 

 

 

 

 

Hoshin Kanri

At long last we now have a number of recent readable guides for understanding and implementing policy deployment in your organization.  My introduction to policy deployment was as a middle management participant feeding data and ideas into the cascading Catch Ball sessions we would have as new policies and strategies came rolling down the mountain.  Over the years I’ve been looking for good reference materials to offer to others as they struggle to comprehend the power and simplicity of the methodology.

First on my summer reading list was Hoshin Kanri for the Lean Enterprise by Thomas Jackson.  Tom Jackson explains how you can implement, identify and manage the critical relationships among your markets, design characteristics, production systems, and personnel to satisfy your customers and give you a competitive advantage.  Developed in Japan and practiced by Toyota, US companies like Bank of America, Acuity Brands, HP, Raytheon, Honeywell, Texas Instruments and others have institutionalized this robust tool set with dramatic results.

Jackson’s book is really a workbook with many examples, forms, checklists (on an accompanying CD), team exercises, road map, and a case study.  This would be a perfect self study guide for a motivated leadership team ready to embrace policy deployment and change management.

The basic premise behind the hoshin plan is that the best way to obtain the desired result is to ensure that all employees in the organization understand the long-range direction and that they are working according to a linked plan to make the vision a reality.  To accomplish this are a number of tools starting with the Shewhart Cycle (Plan Do Check Act), affinity (house of quality) diagrams, the X-matrix lean “balanced scorecard”, and A3 presentation/communication style.

Also known as Policy Deployment, this methodology was first documented by Yoji Akao in the late 1960’s and first seen in the West in the mid ’70’s at Japanese subsidiaries of western companies such as YHP, a division of HP.  Quality Function Deployment , QFD is a related tool set useful in group decision making in product and service design, brand and product management.  QFD transforms customer critical requirements into engineering characteristics.

Getting the Right Things Done

Getting the Right Things Done by Pascal Dennis is much the same as the two other works presented here but makes its approach at a slightly higher altitude.  This book chronicles the journey of the company and its President, an experienced lean leader who was hired several years ago to steer Atlas in the right direction. While Atlas had already applied some basic lean principles, it had not really connected the people and business processes so that the company could dramatically improve. Being good at point solutions doesn’t make a lean transformation.  Atlas’ challenge was to find a a way of focusing and aligning the efforts of good people, and the new delivery system, something that would direct the tools to the right places.  Enter strategy deployment.  The parable continues with the ins and outs of deploying Hoshin.

Jackson’s book is more tactical, Dennis’ perhaps more strategic, although both are implementation guides.  Pick one and give it a go!

 

 

 

100 Bullshit Jobs …

100 Bullshit Jobs...And How to Get Them Stanley Bing has done it again with his latest treatise on corporate life with 100 Bullshit Jobs…And How to Get Them. The scholarly discipline of Bullshit Studies has blossomed in the last several years, fertilized by a number of critical works on the subject and the growing importance of the issue across a wide range of professions. Now, best-selling author and lifelong practitioner Stanley Bing enters the field with a comprehensive look at the many attractive jobs now available to those who are serious about their bullshit and prepared to dedicate their working life to it. What, Bing inquires, do a feng shui consultant, new media executive, wine steward, department store greeter, and Vice President of the United States have in common? What, too, are the actual duties performed by a McKinsey consultant? Other than sitting around making people nervous? Could that possibly be his core function? Likewise, what does an aromatherapist actually do, per se? Sniff things and rub them on people, for big fragrant bucks? Is that all? The answer in all cases is "Yes." They all have bullshit jobs. And you want one too! My favorite of the hundred, of course, is Consultant. Bing writes, "Duties: Chopper in. Get your orders. Receive validation from senior officer, one that allows you to push staff people around a little. Schedule meetings in which people are forced to talk about things they probably would rather not. "Capture" the "findings" in big pieces of paper you post on the walls during the meeting. "Drill Deep" into "process" with employees. Identify "challenges and opportunities" and "reach for new solutions." Go off. Have several glasses of malbec. Write "findings," telling your client a mixture of the things he needs to hear, the things he wants to hear, and the stuff you tell everybody. Go home. Feel good, having left the problems you solved and the problems you created behind you."

 

 

 

Fast Innovation

Fast Innovation : Achieving Superior Differentiation, Speed to Market, and Increased ProfitabilityFast Innovation : Achieving Superior Differentiation, Speed to Market, and Increased Profitability by Michael George, James Works, and Kimberly Watson-Hemphill is a great synthesis of current thinking on product and service development. Chapter 2 "How to Become Fast" isn’t about designing faster, rather it’s about how lead time and task variation cause delays in project schedules. Two "Laws" are introduced:

  • Littles’ Law: Time-to-Market is inversely related to the number of projects in-process; the more projects you have, the longer all projects will take. The fewer projects you have, the faster the development process can flow.
  • Law of Innovation Variation: Project task time varies and is related to percent utilization and number of cross trained resources. Delays stack up. Without slack time or off loading of critical resources projects will be late.

 

 

To me, some of the most valuable material is found in Chapter 4, "The Value of Thinking in Three Dimensions":

  • product-service innovation
  • market definition innovation
  • process/business model innovation

I agree with them that although product and service innovation are the cornerstones of most innovation programs (e.g. Microsoft Windows and Voice-over-Internet-Protocol telephony), there are perhaps even greater opportunities in the other two dimensions, market definition innovation (which reflects the leverage possible from existing customer and supplier relationships) and process/business model innovation (which can create a competitive advantage that lasts longer than that from sustaining product or service innovations). The book isn’t a difficult read but will cause you to think, so if you don’t mind exercising your brain you might like picking this one up.

 

 

The Resilient Enterprise

The Resilient Enterprise : Overcoming Vulnerability for Competitive Advantage by Yossi Sheffi was a gift from Rebecca Kane Dow of ConnStep to thank me for a Lean Six Sigma presentation Ken Branco, Bill Southward, and I made at the Connecticut Shingo Conference in Hartford on November 16th. Several days on the beach in Key West during Christmas week was enough to polish this one off. Sheffi’s view is that resilient companies have a corporate culture that pushes decision making to the periphery. In Toyota anybody on the production line can stop the line if they find a problem. This culture of responsiveness and responsibility runs from the top to the bottom. “People in resilient organizations know that when disruption is evident there is no time to go through the bureaucratic processes.”To develop an effective supply chain the author describes three major areas of management initiatives:First, focus carefully on understanding the company’s supply chain vulnerabilities. This includes analyzing the types of disruptions that can occur, assessing their likelihood, and estimating their probable effects. Managers need to know what the new states might look like before they can design techniques, processes, and systems to manage them.  Second, create a concrete program to reduce the company’s vulnerability. Ways to do this range from reducing the likelihood of intentional disruptions, to intercompany and private-public collaboration for security, to systematic detection of disruptions, to resilience through redundancy. Third, vulnerability reduction is not enough; supply chain flexibility comes from process and structural changes achieved through interchangeability of parts and production facilities, through postponement, which customizes the product late in the production process, through flexible supply, and through customer relations management. These elements are critical because they allow a company to improve its resilience without simply adding costly inventory and capacity. Sheffi goes on to explain the importance of culture where he identifies six key cultural traits: (1) continuous communications among informed employees; (2) deference to expertise; (3) distributed power, which allows employees to take timely action; (4) knowledgeable, experienced management involved with the operations; (5) passionate employees who can be entrusted with the power to act; and (6) organizations conditioned to be innovative and flexible through frequent and continuous “small” challenges. Sheffi underscores the importance of company culture. “Company culture may be the real secret to the business success of the companies discussed in this book. . . . Day in and day out, this culture allows them to respond quickly and effectively to fluctuations in demand, small supply disruptions, and manufacturing woes.”

 

 

 

It’s a Flat World

The World Is Flat: A Brief History of the Twenty-first CenturyWith the Christmas holiday here I’ve managed to knock off another book; The World is Flat by Tom Friedman. The crux of the book is that over the Twentieth Century, the world began to go from a vertical, hierarchical structure to a horizontalization. Love that word, horizontalization. Things flattened out. As a meritocrat, I love this, because it means that instead of looking to solve a problem within a vertical silo, you look outward to who has the skills. So, it is becoming ever more possible for me to surround myself with complimentary people who do what I can’t.This flattening has 10 factors. The Berlin Wall falling (#1) broke down proverbial walls and opened eyes around the world. Netscape web browser going public (#2) and the software revolution in the 90’s (#3) connected software and connected people. It was this connecting that facilitated collaboration and factors #4-9 were collaborative extensions of that. (#4) Open Sourcing, (#5) Out Sourcing, (#6) Offshoring, (#7) Supply Chain, (#8) Insourcing, (#9) Informing (Google and the internet have put the world’s knowledge within grasp of all humanity). The “Steroids” (#10) of VOIP (Voice over Internet Protocol) and Wireless have just started, but have already changed the way we communicate. Flattenings #5-#8 have had significant impact on my life and career. Friedman helps put these developments into an interesting framework – distances geographical, political, social are disappearing.