March 2, 2016 Industry Forum Blog There are several different perspectives on how lean is best achieved. But the one I am used to deploying centres on changing from push to pull systems and the reduction of batch sizes. The key is to ensure that you, as the supplier, never overproduce. Remember overproduction is one of the 7 Wastes! It means making or providing more than the customer wants at that point in time. This applies if you are a manufacturing company or a service provider. If you are starting to plan your lean system, or doing future state Value Stream Mapping I would recommend you use these 7 principles as a start point. You don’t have to incorporate each one in your solution. Some will be more relevant than others for your circumstances. Consider each one and design what works best for you. 1. Make (or provide) what product the customer wants, when they want it, in the quantity required This is about introducing a pull system instead of running a push system. Ideally you need to be able to make (or supply the service) to order. To do this you need to: Ensure your capacity equals demand. Work at exactly the same rate as the customer wants to consume the product (takt time). If you cannot do this then you will make to stock instead 2. If the downstream customer demand varies, then level the demand internally to allow you to introduce pull and flow within your process Customers do not always send in their orders in a level format, however you must level it across all your own functions to eliminate waste. Flow means producing or processing one piece or unit at a time, with each item passed immediately from one process to the next without being stored or waiting. In later blogs we will look at some of the methods you can use to do this. 3. Minimise the amount of inventory throughout the system Inventory between processes, departments and different organisations represents a lack of flow, costs you money and extends the lead time of the process. All of this is bad for your cash flow cycle! As a guideline only allow inventory where the supplying process cannot keep pace with the next downstream customer. Ensure the quantity of inventory is standardised and controlled. 4. Minimise the amount of transport required Exactly the same issues apply where you have excessive transportation as they do for inventory. Try to eliminate the distance items are transported, rather than substituting a faster form of transport. 5. Minimise the amount of information processing in the information flow Excessive processing of information in a system is a waste. The less the information is processed, the less chance there is of order corruption occurring. Ideally you should design and deploy formal communication systems that are visual, are located in the area where the process is carried out and can be viewed and used by everybody. 6. Minimise and standardise the lead time The shorter the lead time, the quicker the response to meet the customer order. It also means you can complete the cash flow cycle more quickly. 7. Visually manage the process All the elements of the pull systems, working to takt (or other target) and information flows you have set up, need to be maintained for your lean system to work. Visual Management is the tool for this. If you would like to find out more about the principles, let me know, or contact the Industry Forum team who will be pleased to help.
February 24, 2016 Industry Forum Blog The sight of Standard Operation Procedures (SOPs) being used in the workplace is a familiar one in best practise companies. But will these paper based documents become relics in the digital factory? Why do we have them? SOPs capture the best current method for doing each job. They detail how to use manpower, materials and machines in a safe way, to ensure we get the right output performance every time. Having eliminated variation from the process we expect it to run in a predictable way. To maintain this standard, and prevent abnormalities form occurring, we encourage the sheets to be used at the place of work. Initially we use them to train employees in the best method. Then they are used at set periods to check that employees are following the correct sequence of tasks and the associated quality, ease and safety points. As in the pictures, they are often displayed as close as possible to the place of work, for reference. Or used to investigate when an abnormality has occurred. The sheets are also used to check that the process is operating as it should in terms of time and layout. Is this the best we can do? Paper based procedures are a vast improvement on having no agreed standards. They capture the knowledge accumulated by individuals over the years. Training becomes more comprehensive, allowing people to reach a higher level of skill more quickly. They improve communication of the best methods, not just to immediate colleagues but those in other departments or on other sites. However in today’s world, the use of physical documents is a slow process and feels out-dated. And using them to conduct spot checks on an operation is never going to prevent abnormalities from occurring. What can emerging technologies offer us? The automotive and aerospace sectors are already experimenting with virtual and augmented reality (VR and AR) technologies. Here are a few examples showing how well designed digital products may well replace the physical piece of paper, but keep the benefits of standardisation. Training operators in an immersive environment can happen off line before full scale production starts. Tests show that errors and time to assemble are reduced, even for first time users. An immersive environment allows a person to interact with 3D virtual items.Assembly tasks, or checking the running condition of equipment, is enhanced by having an AR overlay of information and instructions on top of actual physical items. The information can be anything from physical position to temperature, speed and flow rates. Have a look at this video of the Daqri Smart Helmet. This device projects the information in front of your eyes and also doubles as a hard hat with safety goggles. Now imagine the possibilities of AR technology linked to SMART products and tooling. Prevention of abnormalities caused by following the incorrect procedure. Live tracking of actual versus target performance with instant alert. Ability to very quickly update procedures and communicate them. Faster problem recognition. Ability to instantly capture issues and share world-wide. Ability for the user to request more information through the system and receive answers from archives almost instantly. So while the introduction of paper SOPs has improved the repeatability of tasks, the introduction of technology will further improve the prevention of abnormalities and speed up the detection and resolution of other issues. Let me know what you think about the future of our paper SOPs.
February 17, 2016 Articles The UK is not alone amongst advanced countries in facing a productivity challenge currently. The sixteen most developed countries in the world economy are reporting a sharp drop in total factor productivity (TFP) in the current decade compared with the rate of increase achieved in the noughties up to the crash in 2008. TFP relates to how capital and labour used and covers issues such as knowledge and skills. But beyond that common theme, despite a lot of analysis, researchers are struggling to explain why productivity problems are so widespread. This may mean that each advanced country has to work out its own solution to its productivity puzzle. The UK, for example, also achieves a lower overall level of productivity than many competitor nations. Although the UK is behind Europe in the percentage of GDP that is spent on research and development, the quality of UK science and technology stands out. In FP7, the seven year EC R&D programme which finished in 2013, the UK tied with Germany, the largest EC economy, in securing the top share of funds -7bn euros – in the face of very strong competition to get projects funded. This is an important indicator of the UK’s potential for high value growth as is the thriving digital start-up scene here, the largest in Europe. Currently the average value added per person in the UK digital sector is £92k per annum, well above the national average. The UKCES 2015 skills survey finds that skills shortages vacancies are on the increase in the UK having jumped by over forty percent between 2013 and 2015 to 206,000. Machine operatives are particularly in short supply and the specific skills which are hard to find include workload management, teamwork, complex analytical skills, time management, customer service and management and leadership. This is a familiar portfolio in terms of the skills needed to drive operational excellence and boost added value. Employers who report skill shortage vacancies often see the consequence as delay in the introduction of new products and difficulties in embedding innovative work practices. UKCES suggest that digitisation is rapidly changing the skills needs of employers across the economy. Job roles are becoming more complex and staff are expected to work more flexibly. Against this background employers’ concern over the lack of high level analytical skills available to them is an important and worrying finding. The volume of training delivered in 2015, 118m staff days, was over 4 per cent higher than in 2013 and in excess of the 2011 volume suggesting that the downward trend in training volumes of recent years may have come to an end. The growth in the workforce plus the increased level of recruitment activity are thought to have been factors in this growth. UKCES report that employers who have adopted high performance working and ambitious product/market strategies are more likely to train their staff. These employers are actively exploring more innovative ways of delivering training using digital tools. About two thirds of UK employers provide some training for their staff in any one year currently and around the same proportion of employees are trained annually. It is widely accepted that an important factor in the UK’s economic performance is the long tail of badly managed mostly smaller firms compared with more productive competitors such ad the U.S. On top of that, it is estimated that around two million employees in UK firms are in jobs that do not make full use of their skills and qualifications. In its UK Futures Programme, UKCES is working with business to pilot innovative solutions to major workforce development issues including raising productivity in small firms by increasing management and leadership. Issues being addressed include the skills base for innovating in manufacturing and better management and leadership in supply chains. Within the EC workplace innovation has been taken up as a priority for increasing competitiveness with the specific goal of increasing its adoption in small and medium sized enterprises. A Europe-wide learning network (EUWIN) has been launched to improve the performance of organisations and the quality of jobs in a sustainable way. The network distributes evidence on the benefits of modernising the workplace and working condition and raises awareness via regional workshops and social media. In January the Department of Culture, Media and Sport and the Department of Business published a study of the UK’s future digital skills needs. In line with the recent UKCES research, this study found that shortages of digital skills already persist and this threatens the UK’s growth potential. This applies right the way across the economy, not just to the digital sector. For example, the CBI ‘Gateway to Growth 2014’ study found that approximately two thirds of businesses reported that their employees had weaknesses in IT skills competencies, a 4% increase from the last survey which in 2009. The concept of Industry 4.0 refers to the anticipated development in manufacturing operational excellence through the widespread Integration of digital techniques. The basic principle of Industry 4.0 is that by connecting machines, work pieces and systems, businesses are creating intelligent networks along the entire value chain that can control each other autonomously. Industry 4.0 is closely linked to the Internet of Things. Although the concept started with a German study it has been taken up in Horizon 2020, the successor to FP7 in the CREMA project Cloud Based Rapid Elastic Manufacturing which started in January 2015 .The European automotive supply chain is heavily involved in CREMA with UK representation coming from Tenneco UK and DotNet IT . Work has started on updating the UK skills regime in the light of the burgeoning digital skills agenda. In February of this year the Skills Funding Agenits published its Review of Publicly Funded Digital Skills Qualifications. It finds that in many cases the occupational standards on which many existing qualifications are based are more than five years old. This study compliments the Shadbolt Review of Computer Science Degree Accreditation and Graduate Employability which is currently under way. Most of the UK workforce in 2020 is already in employment and so updating vocational courses of new entrants including apprentices must work hand in hand with workforce skills development for existing job-holders. Further information: enquires@if.wearecoal.work +44 (0)121 717 6600 Download Article (pdf)
February 12, 2016 Industry Forum Blog There’s no doubt about it, today’s emerging technologies are changing our business models. Not only are companies looking to utilise the benefits of cloud computing, Big Data and the Internet of Things to improve the development of new products and their manufacture. They are also realising that there is money to be had turning a product business into a sales and service business. So not only can we use the data we collect to monitor how we are performing and make improvements. We can now analyse it and add value to it by turning it into information that other people will want to buy. Here are a couple of different examples. Selling information to the end user Farming equipment manufacturers, John Deere, now make tractors that have full connectivity with their own web portal. This allows farmers to effectively connect with all their employees, contractors, equipment and the John Deere support teams. They can receive information on when and where to plough and fertilise their fields, the best routes to take while sewing and harvesting and have remote health checks run on their equipment. The information package as a service is a big feature of the product itself. Selling information to other parties Traditionally commercial TV channels have made money by selling advertising space in the breaks between shows. As viewing habits change with more people watching on catch up, and on different devices, there are fewer opportunities to reach potential consumers with advertising. One cable TV company in the States, The Weather Channel, found their advertising revenue under threat from the use of smartphone weather apps. Their response was to correlate weather patterns with the sales of different products. I wasn’t expecting this, but they found that women buy different hair products depending on the forecast. This is clearly where I have been going wrong with my hair!! The upshot was, they approached Proctor and Gamble Co. As a result of P&G changing which version of Pantene products they advertised and when, sales increased by 28%. Read the article. A note of caution While cloud-based services, like Facebook, may get away with selling information about you to other parties, it’s not to everyone’s taste. Facebook uses various data it analyses about you, to sell to others. For example, it uses your photos to determine if you put on weight e.g. over the holiday periods. Then it sells that information to companies who target you with diet-related products. However, Mattel’s new talking Hello Barbie doll has provoked the #HellnoBarbie social media campaign. Hello Barbie is an internet-connected doll. She records what a child says to it during play, sends it by Wi-Fi to the cloud where it is stored and analysed by a software company called Toy Talk. Conversations at a later date with the doll appear to be real, as Barbie recalls facts that the child mentioned before. Maybe she mentions a favourite band or a trip that the child has gone on. The problem is this. How will Toy Talk or Mattel go on to use the information? Will they sell it to other parties to earn more revenue? Will the children be subject to subtle advertising; the latest record by their favourite band or an offer at the theme park? Read their response. So what are you doing in your business? Could you use emerging technologies to analyse
February 12, 2016 Articles 5,000 jobs vacant in UK automotive due to skills shortage New Automotive Council report reveals depth of skills shortage facing the sector. Up to 5,000 current vacancies in the automotive industry causing significant impact on business operations.1 Groundbreaking new Automotive Council report sets out skills requirements for UK automotive sector, with engineers most difficult to recruit. UK automotive industry workforce now the most productive in Europe – but growth potential could be undermined by lack of new talent. 9 February, 2016 Up to 5,000 job vacancies in the UK automotive industry could be vacant due to a skills shortage affecting the sector, according to a new report published today by the Automotive Council. The report1, which was developed by automotive industry consultants SMMT Industry Forum on behalf of the Automotive Industrial Partnership, surveys a range of British-based automotive firms, from vehicle manufacturers to component suppliers, to identify the areas of employment most difficult to recruit, and provide an important means for industry and government to tackle the skills issue. Around 19% of the unfilled vacancies cited in the report are identified as ‘critical’ and having a significant impact on company operations. Of the top 10 job types for which recruitment is most difficult, the majority are in engineering – with the top two in-demand roles being design and production engineers. The knock-on effect, according to the report, is that companies are hiring temporary contractors and increasingly recruiting from abroad. The renaissance of the UK automotive industry since the recession has brought significant success to the sector and helped to sustain just under 800,000 jobs across Britain. 2015 was the best year in a decade for car production with 1.59 million vehicles built2, and volumes are forecast to reach an all-time record two million by 2020.3 The UK also achieved notable success in productivity levels, which have increased 40% since 2010 to make UK labour productivity the highest in Europe.4 But this success could be undermined by the lack of skilled engineers to fill new jobs, despite efforts made by companies to increase training and apprenticeships.5 Jo Lopes, Chair of the Automotive Industrial Partnership and Head of Technical Excellence, Jaguar Land Rover, said, “These are very significant findings which present a valuable basis for government and industry to jointly tackle this issue head-on and ensure that the growth potential of the industry in the coming years is fulfilled. The Automotive Industrial Partnership has already made some important steps since its inception – including the introduction of a range of training programmes – and it will have a crucial role to play in addressing the skills challenge.” Skills Minister Nick Boles said, “Our automotive workforce is the most productive in Europe and this goes a long way to explaining why production hit record levels last year. “But this report shows we cannot be complacent. The sector needs to maintain its high productivity and international competitiveness and address the required demand of skilled workforce, engineers and designers. That’s why our apprenticeship reforms are putting employers in the driving seat, to deliver the high-tech, long-term skills our economy needs. “The Automotive Industrial Partnership is a good example of government and industry working together, and I welcome this report.” Mike Hawes, SMMT Chief Executive, said, “The automotive industry has already invested heavily in apprenticeships and training for existing staff to grow and develop a new generation of skilled workers. However, even more support is needed. The struggle to fill vacancies is holding back growth and opportunities for business, and it is essential that both government and industry work together quickly to identify ways to plug this gap. Future schemes must focus on quality not just quantity – and more support is needed to promote STEM subjects in schools.” The Automotive Industrial Partnership was initiated in early 2015 by the Automotive Council to bring together major automotive businesses in order to help ensure future skills needs are met for UK vehicle manufacturers and supply chain companies. Since its inception, the Partnership has developed a ‘jobs framework’ – an industry standard hierarchy of roles – to make it easier for companies to structure positions and for employees to follow clear career development paths. It has also implemented a number of new training programmes, and is developing the Automotive Apprenticeship Matching Service to retain more high calibre apprentices in the industry.6 In addition to the new personnel needed, there are also many new training requirements due to the adoption of new automotive technologies in the industry. According to the report, 71 different types of learning are required for more than 20,000 people working in the industry – 15% of whom have an immediate need for new training. The most critical training requirements are in lean manufacturing (minimising waste), advanced problem solving and tool making. The report sets out a range of recommendations to tackle the skills shortage. These include the implementation of a co-ordinated approach to STEM (science, technology, engineering and mathematics) subjects in schools, as well businesses ensuring that apprenticeship opportunities on offer from government are maximised. Notes for editors 1 About the report: Employers’ views of the jobs and skills required for the UK automotive industry Devised by the Automotive Industrial Partnership, the report features a survey of 61 UK automotive companies, including eight vehicle manufacturers and 23 suppliers, collectively employing around 83,200 people in the UK. It identifies where the main gaps lie in skills availability, as well as how critical these gaps are 2,500 vacancies from the companies surveyed were found to be ‘difficult to fill’ or ‘challenging’, which when extrapolated to the whole industry (around 160,000 people employed), puts the potential number of these jobs at almost 5,000. The full report can be downloaded at www.automotivecouncil.co.uk, www.automotiveip.co.uk and www.smmt.co.uk (after 00:01 on Tuesday 9 February). 2 SMMT Production International Exchange (PIE) data 3 SMMT/AutoAnalysis 2015 report: The future of UK automotive manufacturing in 2025 and beyond (http://bit.ly/1PaNEQG) 4 Automotive Council 2015 report: The international competitiveness of the UK automotive industry (http://bit.ly/2089pHc) 5 SMMT: 2015 Automotive Sustainability Report (http://bit.ly/1P09Cla). Training provided by automotive firms rose from 2.5 days per employee to 3.3 days in 2014. 6 For more information, visit http://www.automotiveapprenticeships.co.uk About the Automotive Council The United Kingdom Automotive Council was established in December 2009. It is a joint UK government-industry organisation tasked with establishing the UK automotive sector as a world leader. The Automotive Council aims to: Create a transformed business environment for the automotive industry in the UK to provide a more compelling investment proposition for related industries; Develop further the technology roadmaps for low carbon vehicles and fuels, and exploit opportunities to promote the UK as a strong candidate to develop these and other technologies; Develop a stronger and more competitive automotive supply chain; Provide a stronger public voice for the industry to support the value of the industry to the UK and to global partners; Ensure a strategic, continuous conversation between government and the automotive industry in the UK. www.automotivecouncil.co.uk Media contacts Ben Foulds (SMMT) 020 7344 9222 bfoulds@smmt.co.uk Jason Raj (BIS) 020 7215 5946 jason.raj@bis.gsi.gov.uk Further information: enquires@if.wearecoal.work +44 (0)121 717 6600 Download Article (pdf)
February 3, 2016 Industry Forum Blog No, I’m not being heretical. I do follow structured problem solving methods and use a single, tightly defined effect to describe the problem at the head of a Fishbone diagram. But sometimes …….. just sometimes, bend the rules a little. Use the structure of your Cause and Effect (or Ishikawa) Diagram to help with a different kind of problem. A big, unstructured problem – not at all tightly defined! This way of using a Fishbone was shown to me by Hiroshi Seino, one of my Nissan Master Engineers. He called it a Chaos Fishbone. Instead of using the diagram to explore all the potential causes that result in a single effect, use it to organise your team’s response to a larger, more open question. How does this work? So for example let’s ask the question “How can we encourage people to submit more ideas for improvement?” This is still an issue that exists in the workplace, but it’s not in the form of a tightly defined, single effect. (The latter would be like “What stops the two screw holes on the Model X handle lining up?) Follow these steps with your team: Write your question or issue in the box where the effect goes. Get your team to brainstorm ideas (causes) and write each on a sticky note. Place the notes on the appropriate bone of the diagram (man, material, machine, method and environment). Place identical ideas on top of each other. If there are any bones that have no or very few ideas then prompt the team to fill the gaps. Although these steps are pretty much the same as you would use in normal cause and effect analysis, you will now get a lot more variance in the ideas generated. This is because you weren’t too specific about the issue you were investigating. Not being specific in normal problem solving mode is usually a disaster. It results in more possible causes making the next step harder. However in a Chaos Fishbone it’s the reverse. The open question encourages a huge and varied number of causes. Using the Fishbone structure organises and groups the huge volume and variety of ideas making the next step easier. The next step In normal problem solving the team select the most likely basic causes to investigate further. The countermeasure for each root cause is put in place and the result monitored. If there are a lot of basic causes to select from and investigate, the process of analysing the root cause becomes cumbersome and time consuming. On the Chaos Fishbone the next step is to spend some time grouping similar ideas together. This rationalises the mass of notes and develops themes. The team then select the top theme(s) they wish to work on. As each theme contains a number of ideas, or causes, they can develop a good solution or approach to try out. And again the team implement it and monitor their results. Try it out So let me know if you have used a Chaos Fishbone and how it went. Or maybe you will give it a go at the next opportunity. Begin with something realistic though – the solution to world peace may be a little too challenging to start with.
February 1, 2016 Articles Malcolm Jones, Principle Engineer at Industry Forum, has over 20 years experience in lean. One of the less well known groups I studied with while undertaking my education in Japanese manufacturing practices was the TP Management Group at the Japan Management Association. TP Management, Total Productivity Management (not to be confused with TPM, Total Productive Maintenance), is an overarching policy deployment practice which incorporates Lean, TQM, TPM et al as required. In TP Management terms, these processes are means to actualise business strategy, not the strategy itself. Like the Deming Prize for Quality and the JIPM TPM Prize, there is a TP Prize,but with far less prescriptive criteria. TP Management is based on a foundation of principles and in awarding the TP Prize the assessors are looking for innovative examples of the application of those principles. The winners of the TP Prize, inaugurated in 1985, include plants from Toshiba, NEC,Canon, Toyota Auto Body, Matsushita Electrical, Hitachi, Mitsubishi, Nissan Motor and Sekisui Chemical. In my own visits to TP prize-winning plants I saw examples of implementation at Matsushita Refrigeration, NEC Satellite Communications, Sony, Snow Brand Dairy products and Shiseido cosmetics. One research paper, presented at a TP Prize conference in the 1990’s has greatly influenced my thinking about manufacturing strategy. As TP is a nonprescriptive approach, the researchers were interested in how companies chose to actualise the policy deployment process in their operations, and came up with 11 approaches, split into 2 categories. The two basic categories were ‘programmes for actualising the business strategy’ and ‘programmes for strengthening the internal environment’. This mirrors Western thinking about strategy which distinguishes between market based approaches and competency based approaches. In TP terms, Total Productivity is a function of both Product Power (the attractiveness of the product to the market – product innovation) and Resource Utilisation (the effectiveness of the processes to deliver the product –process innovation). Both are necessary and neither is sufficient, although the company’s position in the supply chain may have an influence on where a company focuses its resources. Figure 1: Upgrading through TPM The competency (resource utilisation) based strategies identified were: Programmes for Strengthening the Internal Environment: 1. Use TPM as the Base 2. Develop through JIT 3. Move from DC (Direct Costs) and FC (Factory Costs) to TC (Total Costs) 4. Build Integrated Partnerships with Customers and Supplier 5. Restructure to maximise the use of systems and human resources 6. Practise True Policy Management The first three of these have a focus on the trilogy of Quality, Delivery and Cost. TPM is seen as the application of TQC type process to automated manufacturing based on equipment efficiency. In their interpretation TPM expands a TQM approach focused initially on improving quality by reducing variation to a focus on reducing costs and leadtime based on eliminating equipment losses (zero targeting). In its final TP led development, policy deployment is used to expand the focus to include customer, employee and social satisfaction indicators, improving product competitiveness through early management processes, expanding employee autonomy and incorporating environmental concerns though the Safety,Health and Environmental Pillar activity. Figure 2: JIT Construction System In Western industry we see this approach being used most prominently in FMCG (fast moving consumer goods) and process industries. Used by consumer giants such as Unilever and Proctor and Gamble this approach has been combined with the supply chain approach, numbered 4 above, with Supply Chain being added as an explicit TPM Pillar activity. Again, if we think in Western strategy terms of those factors which are merely qualifiers, rather than differentiators which give competitive advantage, then this makes sense in industries under intense cost pressure from retailers and consumers and required to produce at low cost with 100% effective availability. As the ability to produce the right quality at the right time is a mere qualifier in FMCG, quality and leadtime focused approaches in the factory have never gained too much traction in industries which are inherently lean in their flow production processes. The way the extended supply chain is managed does give competitive advantage in consumer industries, together with a reliable low cost manufacturing base. The TPM concept of ‘vertical startup’, the problem free introduction of new products and equipment and rapid ramp up to production rate is also key in these industries where product innovation is also a key driver of competitive advantage and growth. Figure 3: Supply Chain Optimisation Although we can point to Western precursors, the JIT approach was developed in Japan, beginning at Toyota in the 1930s. Lean is best thought of as a Western description of this approach and the term ‘lean’ itself has struggled to gain currency in Japan itself. Those companies in Japan taking a JIT approach to leadtime reduction tend to focus on flexibility as the competitive feature of their Lean systems. One example is in Japanese modular house building. It is common for a Japanese family to move in with relatives while an existing house is demolished and a new one put up on the same site. This has led to demand for modular housebuilding where major structures are pre-fabricated in the factory and then assembled on site, reducing the time the family is without their own home. Although design is modular, each house is unique and the demand for short leadtimes has led to the development of Lean systems which reduce the total leadtime from sales to construction. Lean is ubiquitous in Western engineering industries, particularly in automotive and aerospace, but here it is a qualifier, not a differentiator. This has led to the development of alternative forms of lean – Agile Manufacturing and Quick Response Manufacturing for example, but these are fundamentally lean approaches with the emphasis on flexibility which we see in the Japanese development of JIT. One area where Lean has proved to provide competitive advantage is in the US healthcare industry and this is being mirrored in the socialised healthcare systems of Europe. As a result of the lack of intrinsic differentiation to be derived from Lean production systems, suppliers to OEMs tend towards a value adding strategy where modules rather than components or materials are supplied and the ability to add value to a module is used to differentiate. Figure 4: TP Portflio This focus on the product power, not just resource effectiveness, is used to secure ongoing business, as this form of differentiation also increases the barriers to entry for lower cost suppliers. Although Lean and TPM can both be seen as cost reduction strategies, Lean in the elimination of waste and TPM in the reduction of losses, the cost reduction approach identified by the JMA researchers is based on reviewing management accounting processes. Japanese management accounting in advanced manufacturing companies has tended to focus on driving the behaviour required by the company’s chosen strategy. One example I have seen is the allocation of indirect costs to products based on set-up times in a company where the strategy is based on small batch flexibility. The cost reduction strategy identified here however is based on what Western accountants have called Value Stream Costing, a switch from trying to optimise costs in specific areas to optimising overall cost, even if that means sub-optimal costs in some area – insufficient recovery of some equipment asset costs for example. Figure 5: TP Deployment This is an example of the link between Lean and Systems Thinking as developed by Jay Forrester and his colleagues at MIT. The fundamental principle of systems thinking is that you cannot optimise a system by individually optimising its parts. It is probably fair to say that the accounting principles derived from the mass production management strategy of GM in the 1950s have hung on longer than the mass production system principles themselves and accounting is in some sense playing catch up with operations. Value Stream Costing and other activity based accounting approaches which aim to directly apportion costs and reduce misleading allocations are central to these efforts. After considering these three approaches to Quality, Delivery and Cost Improvement the researchers went on to identify three further extensions of these, the first of which is extended supply chain management. The approach here is an extension of the overall optimisation approach to include the upstream and downstream supply chain, forming a true partnership from supplier to customer. Using the logic of systems thinking described above, where optimising individual operations leads to a suboptimal system, this requires the sharing of data between all parties, following a gain sharing philosophy. This necessitates an unusual level of transparency between the various parties in the supply chain, but this has the added benefit of reducing demand amplification, the phenomenon whereby variations in the actual end customer demand are amplified by the supply chain transactions, creating far greater variability in the final production schedule. The fifth approach is termed restructuring, but this is deceptive in Western terms. The approach outlined here is based on aligning company systems with business objectives and emphasising the development of human resources. The closest parallel in Western business literature might be the concept of the Learning Organisation and indeed one compelling characterisation of the development of Toyota in the 20th century was its ability to function as a learning organisation. The development of the learning organisation, and in particular formal lessons learned systems, is only one part of this approach, the other being the alignment piece which is based on monitoring the links between the attainment of business objectives and the development of the company’s constitution. The most sophisticated versions of this system see companies tracking both their constitutional strengths through assessments such as The 20 Keys or even ISO 9001, 18001, 55001 etc, actual performance in meeting their business targets and the constitution building activities. The TP Portfolio is a diagram which links activity and performance and illustrates if a company is in a performance ‘bubble’ where the results are not the result of activity controlled by the organisation, but rather by external factors out of their control, or indeed in the ‘engine racing’ zone where there is intense activity but poor results due to misalignment with the strategy. The final competency based strategy is based on a full blown Policy Deployment system using TP Management concepts and the ‘catchball’ process of agreeing objectives at various levels in the organisation. This is most often seen in Western manufacturers in the form of the X-Type Policy Deployment matrix, originally developed by Ryuji Fukuda. These however tend to be based solely on performance objectives and omit the alignment with constitutional objectives which is characteristic of TP Management. These are six generic manufacturing strategy approaches and each company needs to modify and combine as required by the overall business objectives of the company. One way of looking at how to develop your own strategy is to compare your own situation with the general development of manufacturing over the last 60 years. The graph below illustrates how in aggregate terms the world has changed from one in which there was more demand than supply and where Quality and Delivery could be seen as differentiators to one where supply exceeds demand and Cost and Innovation are now seen as differentiators and Quality and Delivery merely qualifiers. Figure 6: Supply and Demand Trends In markets where quality is still a differentiator, an approach such as Six Sigma, improving quality through reducing variation may be appropriate. This is not considered in our Japanese examples except as a precursor to TPM as the companies surveyed were no longer active in markets where Quality is an important differentiator. If delivery performance, particularly in terms of the extended supply chain is a differentiator in your marketplace then an extended Lean/Supply Chain approach could be valuable. In markets where price is still a differentiator, then a well developed TPM approach can give significant benefits, especially when including Supply Chain development in an FMCG environment. Advanced TPM approaches can also be beneficial when product and process innovation are key differentiators in over supplied markets. Where overall costs are an important consideration, new accounting approaches aimed at optimising total costs are especially useful. Mature Lean organisations may also wish to reflect on the opportunity for developing advanced policy deployment system to ensure that their systems are aligned with changes in the market place. The strategy development process is based on first deciding what markets to be in and then what capabilities are required to deliver value to that market. This is sometimes described as ‘where to play and how to win’. The approaches outlined above are ‘ways to win’ and which combination is developed will depend on where you decide to play. I have not detailed any of the market led approaches based on product innovation, but one alternative is to recognise your current capabilities (how you win) and then investigate new markets where these winning characteristics enable you to join the game. This can be as one of three types of innovation led companies – need seekers, who actively engage with the customer; market readers, who closely watch markets and competitors; and technology drivers, who launch innovative products in new markets based on their strength in R&D. Further information: enquires@if.wearecoal.work +44 (0)121 717 6600 Download Article (pdf)
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January 27, 2016 Industry Forum Blog I never truly understood how important a clearly explained vision statement is to the success of an organisation, until I recently came across two very different cases. Like many managers, I thought that vison statements were the icing on the corporate cake. A set of clever words designed by expensive, external consultants to make the company look and sound world class. A vision statement is supposed to describe the possible and desirable future states of the organisation, like this one of Harley Davidson’s. “We fulfil dreams inspired by the many roads of the world by providing remarkable motorcycles and extraordinary customer experiences.” Then I learned that the vision statement is at the pinnacle of Policy Deployment methodology. Policy Deployment, or Hoshin Kanri, is the organising framework for planning, implementing and reviewing the changes required to move an organisation towards its vision. This started to make sense to me, the vision acts like a goal for the organisation, a direction to travel in. In fact the aim of Policy Deployment is to point everyone in the organisation in the same direction and navigate them to the desired end point. And this is what I have observed, without a clearly stated vision and an organising framework even the best intentioned business can miss an opportunity. Company A A small establishment with less than 80 staff, led by “John” who has lots of passion and enthusiasm. He believes that everybody can see what they are trying to achieve and that the old vision statement is just a bunch of nice, but empty words. John doesn’t plan for longer than a year as he believes any plans he makes can be wiped out in an instant. Results show that their overall performance has been steadily improving over a number of years. So why do I think they would benefit from a revamped vision statement and supporting plans to cover a medium term period? I observed a management meeting where each department reported back on what it had been doing. Despite the very differing formats it was clear they had good intentions, worked hard and were individually proud of their achievements. However, as they asked questions of each other it became apparent that there were some overlaps in effort, some areas that had been missed and no clear priorities on which actions to take. Nowhere were there links to the budget. In this case a clearly stated vision and supporting plans would help the team to all pull in the same direction, to prioritise actions and allocate spending accordingly, resulting in even better overall performance. Company B A larger establishment of 200 staff, and a division of a multinational. The site has a beautifully crafted infographic depicting their vision, with specific performance targets covering a 3 year period. They report that all their indicators have just turned green. So what could be better? When I questioned a few different people they found it very difficult to explain what the performance measures on the graphic meant and how what they do directly affects the results. So while the end destination and yearly targets are very precisely quantified, it is harder to motivate individuals to contribute to achieving the targets. In both cases it’s about harnessing the power of every individual in the company. When people have a vision that is clearly explained and translated into co-ordinated action plans, then their efforts can be aligned to give the best result for the effort put in. So, how well do you use your vision statement?
January 25, 2016 Insights It is a common understanding that some of the most effective businesses globally devote a great deal of attention to managing and developing their supply chains. In recent years the Government, the CBI, the Automotive Council and the All Party Manufacturing Group have all published important reports and studies of the performance of the UK supply chain and the scope for improvement and expansion. This focus of attention is partly because there are major growth opportunities in the short, medium and longer term thanks to the investment undertaken and planned in various sectors including rail, civil nuclear energy, renewable energy and automotive. Aerospace and medical equipment are two more sectors where the growth prospects are good. But supply chain firms may well not understand these growth prospects or be properly equipped to make the most of them. Current Supply Chain Challenges and Opportunities The Industry Forum Manufacturing Advisory Group (MAG) met recently to discuss current supply chain challenges and opportunities. They looked at recent data from the premier professional association for supply chain and operations management, APICS, which shows that chronic supply chain disruption persists but is not always easily visible. As a result, it is often neglected by management who underestimate the adverse consequences. A survey of over 500 businesses found that 73 per cent experienced supply chain disruption with an average of five incidents. In nearly 40 per cent of cases, the disruption originated below tier one in the supply chain. One in five firms experienced losses in excess of one million Euros. MAG confirmed that there are difficulties in getting supply chain information about 2nd level suppliers and beyond. Difficulties can have serious impacts on the whole supply chain. Problems are not necessarily a matter of large scale external upheavals, although they can be damaging. Common business issues like access to finance with the prospect of insolvency can be major risk factors too. As is in any risk management exercise, it is important to gather specific information about the situation under consideration and examine it for significant patterns. APICS suggest that primary manufacturers often do not realise the extent to which their own behaviour is part of the problem, especially their failure to communicate effectively what their actual requirements are. Often, this is because these requirements have never been properly specified.There is, unfortunately, a widespread tendency to place all the accountability for supply chain performance on the suppliers. Skills gaps are a problem and even where procurement professionals are actively involved, there is a tendency for them to see their role narrowly in accountancy terms and to be dominated by short term financial pressures. Higher levels of management are often, quite simply, unaware of the situation and may lack the background to appreciate the potential seriousness of the situation. This state of affairs would be of concern if the business environment was static but current and future developments make it more urgent to address the issues. Many commentators believe that competition is no longer company to company but supply chain to supply chain. In some cases, stakeholders see this in national terms, as for example competition between the Indian and Chinese automotive supply chains and their ability to support ambitious national medium term goals. A number of important trends are relevant to the growing importance of supply chain competitiveness, including the blending of manufacturing and services offerings (servitisation), the opportunities arising from strategic re-shoring elements of supply and a clutch of digital developments, including the emergence of the Internet of Things (IoT) and the insights available from Big Data analytics. MAG emphasise the increasing importance of customer value as a driver, especially as customisation becomes a key competitive differentiator. All of this is making supply chains ever more complex, as product life cycles are getting compressed in many sectors. Benefits, barriers and bridges to effective supply chain alignment MAG stress that effective supply chain management is about much more than materials management or basic purchasing parameters. It is important that supply chains managers are able to think on a broad scale – in terms of the value chain, for example. This means that quality rather than cost or delivery becoming the key driver, with quality evolving to mean the provision of superior quality through a personal offer for each customer. Supply chain management is often introduced to a firm as part of new product development. This is quite understandable but the approach needs to be elevated to company level and integrated into the overall product strategy. This means getting a proper alignment between the marketing strategy and the supply chain approach. Without this degree of integration, the scope for productivity growth is limited. It is important that the performance metrics used for the supply chain align with the firm’s overall performance yardsticks and those used to drive marketing. MAG have found that questions of the firm’s overall global configuration come to the fore as supply chain management improves. The firm’s components and processes should be placed in the localities and countries which offer the best combination of cost and efficiency. This is often a matter of the suitability of the workforce, particularly as supply chains become more complex and the capability to respond immediately to changing customer requirements grows in importance. However, firms need to recognise that creating a comprehensive supply chain map takes time and resource to construct. Nonetheless, the benefits of a full description of the whole global supply chain are substantial. How to embed customer responsive supply chain practices MAG stress that the core of better supply chain management is developing higher levels of trust. An important tool in this regard is the Mutual Value Index, which measures the customer value to supplier and supplier value to the customer, and provides the overall context for improvement initiatives. It is vital to stabilise the relationship with suppliers so that there is sustained engaged relationship with suppliers. MAG members have concluded that it takes on average, ten years to establish real trust between customer and supplier. It is important that primes are careful with their supply chain during a downturn as a prime will depend on the supply chain when demand picks up again. Sharing cost savings between customer and supplier is also vital. Any programme of this kind must have high level sponsorship within the business if it is to succeed. This should be expressed in overall corporate objectives and metrics that are aligned to this. A good understanding of the balance between cost and value is essential. This must be at the heart of any New Product Introduction (NPI) programme which is to succeed and value will always be value as perceived by the customer. Suppliers must be involved as early as possible in the NPI programme. Primes must appreciate that developing a good understanding in the supply chain is as important as upgrading their own staff. Companies throughout the supply chain must understand the value chain forward as well as back. Everyone needs to understand their position in the value chain and the influence that flows from that position, especially the influence that they have on the delivered end product. Better information flows are important and social media is an important new tool for this. Job shadowing is another way of developing better overall strategy understanding along the supply chain. The global automotive supply chain uses the Materials Management Operations Guideline/Logistics Evaluation (MMOG/LE) as a self assessment questionnaire for suppliers to score their competency in materials planning and delivery. It is designed to validate that a supplier has robust materials planning and delivery processes in place to support business objectives. In the global automotive supply chain, many vehicle manufacturers require suppliers to use this took. MAG suggest that this approach might also be useful in other industry sectors. Balancing supply and demand can raise productivity The formal definition of supply chain management is the process which integrates, coordinates and controls the movement of goods, materials and information from a supplier to a customer to a final consumer. More and more sectors are getting to be like automotive, where the cost of bought in goods and services are a high proportion of total revenue. This means that the total purchased cost is often a lot greater than added value. This trend alone justifies making supply chain management a priority. It is vital to assess the costs of different potential suppliers in terms of total landed cost. With customisation and rapidly changing consumer preferences, re-shoring can emerge as the most cost-effective solution. When supply and demand are in balance, the supply chain is increasingly value driven and this means a greater contribution to added value without unproductive limitations. Higher added value means higher productivity. This way of looking at the supply chain is described as ‘holistic’. Adopting an integrated perspective in this way overcomes limitations on productivity growth. This means making planning rather than manufacturing the centre of the management process. The keywords in the best approach are supportive, collaborative, dynamic and flexible. If you’d like more information on our Supply Chain Courses, and also the opportunity to complete a free Supply Chain self-assessment, click here to find out more. Further information: enquires@if.wearecoal.work +44 (0)121 717 6600 Download Article (pdf)
