Same Name, Different Game: Part 2
Lean manufacturing requires more than focusing on waste elimination and single-piece flow. Many traditional habits, such as accounting practices and capital equipment expenditure, must change.
Successful lean manufacturing requires a new way of thinking by everyone in the organization, not just individuals on the plant floor. Indeed, finance, purchasing, sales and marketing professionals must also adopt a new mindset or lean initiatives will fail.
To explore the pros and cons of lean manufacturing, ASSEMBLY magazine hosted a panel discussion at the recent Assembly Technology Expo in Rosemont, IL. Key personnel from five leading manufacturers discussed their lean initiatives. The panelists were:
- Dave DeVault, manager of manufacturing at the John Deere Waterloo Works (Waterloo, IA). He oversees a tractor assembly line, an engine assembly line, a drivetrain assembly line and a foundry. The facility is currently in the midst of an ambitious 5-year lean program.
- Mike Herscher, leader of the lean enterprise office at Boeing Commercial Airplanes (Seattle). His responsibilities include education, training and support of implementing pull production, Six Sigma quality, and value stream analysis and alignment at some of the largest assembly plants in the world.
- John Smith, senior vice president of Ross Controls (Troy, MI), a leading manufacturer of industrial valves. He is responsible for overseeing two production facilities in the United States and five plants overseas.
- Steve Sperlazza, president of Vibration Control Technologies (Ligonier, IN). The company assembles torsional vibration dampers for the auto industry. Last year, it was awarded the Shingo Prize, an annual award that recognizes manufacturers for streamlining their production processes and cutting out waste.
- Matt Wehr, manager of operations and management development at Toyota Motor Manufacturing North America (Erlanger, KY). He is responsible for supporting the Toyota Production System within the Georgetown, KY, plant and its suppliers’ plants.
The following is an edited transcript of the panel discussion.
Q: Waste elimination is a key principle of lean manufacturing. What steps have you taken to eliminate waste in your production process?
Wehr: At Toyota, we have a culture where there’s waste elimination occurring every minute of every day by every operator. To accomplish that, we spend a lot of time with our operators, understanding where they’re at and [determining] the next challenge that they’ll be facing. We develop team members to be problem solvers who are able to eliminate waste and not accept the way things are today. Once we accomplish that, we have continuous improvement that drives waste out of the production system.
DeVault: Waste comes in every shape and form you can imagine. You have to look at material flowhow the man touches that material and how the machine helps the man transform that material. Ultimately, you have to go after the waste that’s included with transformation of the material in your shop.
Sperlazza: It’s a relentless and continuous process. We use visual shop floor management tools. In addition, senior management conducts a walk-about each day to get a quick snapshot of the key metrics and see what’s going on.
Smith: Lean has made a difference in the way we think about what we do and save in wasted areas. For instance, we did a kaizen in our repair department, where we get valves that we built in the 1960s back for repair. Someone asked, "Why do we repair them? Why not do a rebuild?" We did that and we were able to take the cycle down from 60 days to 30 days. The way we were doing it was a waste. We still have the same amount of people in the workcell and still get the same volume in, but now we get the product out the door in one-third of the time. The whole idea of never giving up and being relentless is key.
Herscher: We’ve achieved some dramatic results. It used to take 140 days to produce overhead stowage bins, from raw material to installation in an airplane. It’s now a two-day flow. We now build stow bins today that get installed in the airplane tomorrow.
Sperlazza: You have to go back and revisit things. Don’t think that you can’t improve upon something that you introduced 6 months ago. There may be some new technology that has been introduced since you launched the product that may help make it leaner and eliminate some more waste. It’s a never-ending process.
Herscher: We’ve applied one-piece flow, cellular manufacturing and standardized work to reduce the internal cost of components for a 737 deicing duct system from $38,000 to $3,500.
Q: What is the best way to distinguish value-added tasks from non-value-added operations on an assembly line?
Smith: I think value-added is a finance-driven term. Every single person in your shop is value-added. If not, then why do you employ them? I think the accounting folks have built a "wall" that distinguishes between things that have value to a customer and things that don’t. If you are doing things in your shop that have no value to your customer, then you shouldn’t be doing them.
Wehr: We look at things from the customer’s perspective. If a customer will pay for it, then it’s value added. Otherwise, it’s not value added. The customer is buying a vehicle. It doesn’t matter to him whether we have to move material from one side of the building to the other. We relentlessly pursue ways to eliminate anything that we can identify that a customer wouldn’t actually pay for, such as changing materials from one form to another. For example, if we have parts that come into the plant in packaging, we have very strong initiatives to eliminate the packaging without driving up the overall cost. Just-in-time costs money, so you have to figure out where all the value is coming from.
Sperlazza: You have to go out and analyze your process with value-stream mapping. It’s important to identify what is adding value and not adding value. You want to eliminate all non-value-added activities.
Herscher: This is always a really interesting conversation, particularly when the work that people do is non-value added and they try to describe it as value added. We’ve tried to avoid that debate by talking about value added, non-value added, essential and nonessential. We use three tools: value-stream maps, standard work combination sheets and value-added/non-value-added timelines. All three of those help people identify what adds value and what doesn’t, and where to go focus on eliminating non-value added. We also use 3P [production preparation process] tools.
Q: Some people believe that lean manufacturing means "manual assembly" or spending less on capital equipment. How true is that and what is the role of automation in a lean environment?
Wehr: We use automation for three primary purposes. We look at the process and say, "Is there a reason why the operator is tied to that machine?" If operators are tied to the machine, then we automate and figure out a way to allow them to operate more than one machine. We also use automation for hard work or nasty jobs. If there are ergonomic and productivity benefits, we’ll consider automating the process. And we automate for anything that has to do with quality. If there’s a recurring problem and we need to have an operator watching to make sure that it doesn’t happen, then we would automate that process. Primarily, we go in with the mindset of not automating anything beyond the initial setup unless it has to do with one of those three areas.
Sperlazza: A lot of companies have different justifications for capital. We ask the following questions: Does it fit our cellular model? Is the technology going to add value? It’s a balancing act. When you add technology, you typically have to bring the skill sets with it to maintain it. That’s where a lot of companies fall down. You’ll get a support group that comes in and starts up a new piece of equipment and debugs it. But, the first time you have a problem, you’ll typically run into some roadblocks, even if you do some good training.
Smith: A lot of what we do is customer-driven or engineered to order. Unless the volume is there, we really don’t look toward any additional automated equipment. If it’s a capacity issue, then we measure that to find out if we need to buy additional equipment.
Herscher: Our company is going through a big change. We’ve gone past the time when we would go buy the fanciest, most complex machine. We focus on using automation for dumb work, dangerous work or dirty work. We think about our operators and mechanics as surgeons. We’re putting a lot of effort today on chaku-chaku lines. It’s a lean manufacturing concept that allows one-piece flow and automates things that tie operators to a machine. I thoroughly suggest that you look at chaku-chaku as a method for manufacturing. That’s where we’re putting a lot of technology today. [Chaku-chaku means "load-load" in Japanese. It is a method of conducting single-piece flow in which the operator proceeds from machine to machine, taking a part from the previous operation and loading it in the next machine, then taking the part just removed from that machine and loading it in the following machine. Chaku-chaku lines allow different parts of a production process to be completed by one operator, eliminating the need to move around large batches of work-in-progress inventory.] We’re also getting rid of large drilling and riveting monuments. We’re building our own machines that are right-sized to go in flow production lines.
DeVault: We just converted a 95 percent manual weld line for all our cab frames over to a 95 percent automated line. In our drivetrain plant, we’re adding machines that offer better quality, consistency and more flexibility to cut out the cost of capital that’s invested in tooling. Because of product line changes, the mix changes on a continual basis. [As a result] your adaptability in component manufacturing is directly tied into the capital cost of your tooling off of those machines.
Sperlazza: Technology certainly has its applications in a lean environment. You have to weigh all the benefits from it. Can you use it elsewhere when that program is done? Is it flexible enough that it’s not just going to be thrown in the trash pile?
Herscher: Our procurement practices have changed dramatically from the implementation of lean manufacturing. Any capital expenditure now goes through process action teamspeople who have state-of-the-art knowledge about manufacturing a certain kind of component, such as composites, sheet metal or machine parts. Those people are really well trained in the Toyota Production System principles. We used to write a specification that would go to a machine engineering group that would turn that into a specification. They would take it out and get RFQs or some kind of quoting process. Usually, they would buy something that we didn’t need; some bigger, more complex, high tech, new whiz bang thingusually a monument that was not easily moved. Now, when we talk to people who buy things, all those red flags go up. The behavior has changed dramatically.
DeVault: You should look at what value a piece of equipment contributes. If it doesn’t have a core competency associated with it, if it doesn’t give you a competitive advantage or it does not give you a cost advantage, why have it in your factory? It actually goes back to the contributed cost to the whole value stream map of getting the product to the customer. Can [a new piece of equipment] shorten that time? That’s a major change in the way you look at bringing new equipment into your shop.
Herscher: There’s an ongoing technology lust that focuses on how big, how fast. Is it better to build a five-axis part on a five-axis machine and spend capital or build it on a three-axis machine with two setups? If you’re really good at two setups, the answer is the three-axis machine. We have developed in-house "moonshine" shops that prototype equipment, then actually build it and put it in production. They’re [located] in the factory that’s building the part they’re building equipment for; they’re not a separate group off-site somewhere. We can build 90 percent of anything that we can buy. It’s a message that we’re trying to send to the major machine tool houses. We need right-sized, highly flexible, reconfigurable, moveable, really cheap stuff. The riveting machine I mentioned earlier is a $400,000 piece of equipment. We’re now building in-process machines for less than $15,000 that do the same function. They’re smaller, they’re on wheels and we can move them around.
Q: Can traditional cost accounting principles be used in a lean manufacturing environment? What types of alternative cost justification criteria should be used to create and sustain a lean operation?
Sperlazza: Traditional accounting methods need to be tailored to your lean improvement efforts. But, it will vary by your application and what’s important to your customer. Some benefits from lean are very difficult to measure. Some companies build very complex systems to try to measure savings, but that’s non-value-added activity. We look at some fundamentals, such as the number of major and minor kaizen events. We look at hard and soft cost savings. Hard cost savings, such as eliminating labor, are very simple and easy to capture.
Smith: When we first started lean, one of our board members asked us: "Does your manufacturing strategy match your marketing strategy?" We had to think about that. We discovered that it was actually the accounting system that drove us not to have a match, because the system had changed. Marketing had changed what they were selling and how they were selling it, but the plant floor never changed. Manufacturing was doing everything off of a standard cost system. So we abandoned standard cost and went to an actual cost system.
Herscher: When we started our lean journey, I started in the component factories. They tend to get a lot of overhead laid on top of the direct hours, so it was really hard for us. Before lean was an accepted strategy in our company, we had people constantly challenging us. They kept trying to get us to run business cases and ROIs on the activity. Eventually, the compromise we came to with the leadership in our organization was, "Trust us; if we underwrite our business plan and we have confidence that it’s not an anomaly [and] it really was a systemic change, then we will quarterly review that and give you back in our business plan what we think the rewards were from the lean implementation." Once we put that methodology in place quarter after quarter after quarter, we under ran our business plans and gave the money back. People quit bothering us about implementing lean. Today, you don’t see us doing ROIs on eliminating waste. [We know] what we’re supposed to do every day when we come to work; regardless of what function you’re in, [the goal] is to eliminate waste.
DeVault: I’ve been tainted by 20 years of Jack Welch and total cost management [I previously worked at General Electric]. Activity-based or standard cost didn’t really make a difference to him. He went after total cost. The bottom line was that sales-over-expense ratios better get better every year.
Sperlazza: You have to be very diligent in tracking things such as scrap reduction, delivery Arial or work in process. You have to tailor some of your lean metrics to your systems.
Smith: Activity-based cost helps you find the total cost that you put into a product, whether it’s engineering or a specific manufacturing step. Activity-based cost is something that companies should look at very closely to tie together their lean efforts.
Q: How do you monitor the success of your lean manufacturing program? Are there some key variables that you measure?
Sperlazza: We look at several areas. Each midlevel manager has a quarterly review of their policy deployment metrics: their activities, how well they’re doing and what help they may need on obtaining those goals. We have monthly state-of-the-business reviews where there’s a report on all key metrics. It all rolls up to the bottom line. We want to be forward looking. The plan can change at any time. If there’s a key area or something that’s changed in our business environment that we need to address through lean systems, we’ll prioritize that.
Smith: We have certain metrics in each cell that we pay attention to, such as on-time delivery and throughput. We hold each major subset accountable to the improvements that they say they’re going to make when we do our business plan.
Wehr: We look at two things on a regular basis. Is there a productivity improvement? Is there an inventory reduction? That’s our key. With everything that we do, we look to see if we’re progressing.
Herscher: We use traditional metrics. We’re in the process of trying to figure out what the dashboard of the future will look like. We know it will address footprint reduction, flow time reduction, inventory reduction and quality improvement. We view cost as being a result, not an activity.
DeVault: It’s pretty straightforward: safety, quality, cost and delivery. There’s nothing more important than safety to anybody who works for our corporation. Safety is lost-time injury and recordable, first-aid incident rates. Quality is the best way we can touch the customer. Quality is the cost of quality on a tractor. It goes from per tractor base to the returns on allowances so you can see the health of the field. Cost is broken down into labor, overhead and material. Delivery must be 99 percent or better because we’ve already given our customer a choice.
Q: There are many different books that address lean manufacturing. Can you recommend one?
DeVault: Fast Track to Waste-Free Manufacturing, by John Davis, is an awesome book. It takes the Toyota Production System and puts it into cookbook fashion.
Herscher: You can read a book and get some superficial understanding. But, I would recommend finding people who know what they’re doing and learn from them. That’s how I was taught. You can read the concepts, but I don’t think you really get it until you’re in the factory really understanding people who have designed and implemented the Toyota Production System.
Smith: If you’re going to do lean, you have to be a leader. You’re going to have to work with people and bring them along. They’re going to have to want to follow you. The 21 Irrefutable Laws of Leadership, by John Maxwell and Zig Ziglar, is a fun book to read. It has a lot of great tips about different personalities, such as how you deal with them and how you bring people along. It’s not a lean book, but it certainly would help you.
Sperlazza: You can’t [learn lean manufacturing] out of a book. Books will help you, but humans all learn at different levels and different rates. Some people can read and comprehend very well and some cannot. You need a teacher who will serve as a focal point and commonize the tools. The acronyms and lingo that you use in your organization are critical. They can’t keep changing or you will confuse people. Use all the tools, including videos, on-site training, off-site training and team exercises.
Herscher: Watch out for shysters. There are a lot of people out there selling stuff [that they call] lean manufacturing. Be very careful with who you hook up with.
Wehr: Always think about the source. Recognize what the source is and whether or not it’s a primary source.