This article is prepared by Leyla Is and Sanjeev Baitmangalkar, experts within the field of Lean Management and cultural transformation.
Recently we introduced our methodology on how to implement Lean within a municipality. We were then asked by the municipal executive committee how they could change the behavior of the citizens if they are elected for, at most, two term of office.
Within the private sector there is a clear leadership that makes sure that the customers get what they want at the right time, of the right quality and at the right price. If customers’ needs are not met then the customer will turn to another supplier, but only after a period of dissatisfaction. This transition is often the hardest period to handle for a company. Dissatisfaction starts to haunt the entire organization, creating stress while it tries to satisfy the most displeased customers.
Further, this creates a sense of powerlessness and uncertainty over the organization´s own processes. It is during these periods that most of the 7+1 wastes (waiting, over-processing, inventory, motion, transportation, defects, overworking and not utilized creativity) appears.
Compare this to a situation where citizens of a municipality are unhappy with the municipality executive committee, because of that it puts most of the resources into fighting fires. This leads to a stagnation of development, because all the resources are put towards firefighting. What happens? The population starts to decrease, the older people move out and there are no ambassadors left to attract new citizens.
It is often at this stage Lean is being discovered, when a company or a municipality finds itself in a crisis. At this point the costs are really high, and so is the level of dissatisfaction both from customers and the own organization. The leaders decide that the organization will go through a rationalization.
What happens? Changes become too focused on costs and the individuals are forgotten. The importance of changing the usual internal behaviors within the organization, behaviors that led to the situation at hand, is forgotten.
An example of an effective municipality in Sweden is Habo. They have been ranked several times as Sweden’s best municipality within all categories. This is a municipality with a population of just 10 830 people, but with Sweden’s lowest unemployment rate.
The Municipal Director sees value in stimulating the local businesses and watching over the general mood of the population. In this case their small size is an advantage. It allows the municipal director to be more visible through physical presence and also makes it easier to get a general understanding of the current situation.
Further, this leads to a good capability of recognizing potential problem areas and preventing them from growing.
Moving from service lean, let’s go to India and see how the industries and Sensei there are changing the course of businesses by addressing lean. There has been much discussion and debate (and it goes on) on various blogs as to what will succeed and what will not, how to start, what to do and what not to do, and the views and recommendations have varied from heavy focus on tool applications to building culture.
In our experience there is no template that one can apply to succeed with transforming organisations and making them true lean. The lean journey has to be custom made for each organisation. While the principles remain the same, the application and process may vary. The trick is in understanding how to apply the TPS thinking, principles and philosophy to any business process. This competence develops when one successfully turns around one or more discrete companies to lean from the CEO’s chair (or from any position where the buck stops).
Instead of narrating from any of our success stories, let us share a recent exercise started four months ago with a product maker; and although this is at the beginning of a process that will go on, we hope that some ideas here may help you.
Background: This Company has been in existence for about three decades; has been a pioneer and market leader in its field in India; has a good technology base, is owner managed; their products are well accepted in India and being exported to parts of Europe, Americas and the Middle East. The Company diversified into other businesses akin to its core competence and built multiple businesses, each a separate Company. From what I see, the Automation solutions they provide are amazing. The working style as we found it was non-professional; the structure was departmentalized or compartmentalized as though warring kingdoms had been set up; and hence the results were always below expectation or potential.
The Company grew to the size of a few billion Rupees over the last decade and a half. The Company had invested huge sums of money in Europe and East Asia into Research and Manufacturing plants. The product and manufacturing strategy, markets, and timing did not work, and the Company incurred huge losses. The strategic thinking in these ventures was not well thought of. The partners decided to separate and divided the businesses amongst themselves. The liabilities were left with the parent Company as the others walked out with their share of divided companies, leaving the parent Company to saddle the losses. Strategic vision was lost in problems, emotion and lack of many understandings.
Having tried and unable to turn it around they decided to seek assistance from someone who had hands-on successes with turnarounds and lean transformation. That is when they got in touch with Sanjeev Baitmangalkar and in his very first discussions with the Managing Director and on the same day with the management team; he told them a few things which if they could commit to, only then he would be willing to invest his time:
1. That the secret to succeeding with lean is more in building the culture and less in merely trying to imitate the tools, and that he, along with his Senior Management team should commit to a prescribed routine critical to their success.
2. That Sanjeev Baitmangalkar would not spoon feed them, but would teach them the ‘how to think’ and attitudes that would help them succeed in becoming lean.
3. Since lean was a way of life and had a different discipline and character, Sanjeev Baitmangalkar would teach them and they should embrace those character qualities that would help them change and thereby succeed.
4. That we would use only those tools as and when required to solve the problems.
5. That this was a journey of initial four to six years before they could imbibe the culture and produce good lean results, and they should have the patience, commitment and focus. Later on they must keep improvising.
They all agreed to make the commitment and we agreed to move forward.
Four months ago typically the performance indicators looked like:
This Company had worked with a lean consultant for many years, who had taught 5S and material Kanban. In the name of Kanban they had learned to store material and built huge stationary inventory. Not having a well structured new product development process, coupled with the batch and move concept, and ‘what if’ thinking; they had added undesirable inventory. The concept of lead times although was understood, yet appeared to be absent in the daily speak and hence there was no focus on throughput and build times.
Demand: The Company always had good pending orders on their books. But because of long throughput times, deliveries went haywire and customers preferred to reschedule them. The entire thinking on execution was akin to the MRP thinking; hence the ‘push’ system had prevailed. Everything they purchased was done with the batch and move thinking which also included supplier MOQ’s thus allowing for large inventories, and the shortages controlled their results.
With some imports requiring long lead times, the inventory value jumped when each such item was inwarded, because the quantity had to cover the long lead time. This threw the cash flow out of gear even with large working capital facilities from the banks. Figures showed over many months that the buying was more than the sales. They purchased the components and raw materials for the control panel and gave it to the subcontractor to assemble, instead of setting up the vendor to buy the material required and supply the finished panel. And like this many processes were topsy-turvy and had inbuilt unnecessaries, duplication and wastes. Any part of the business process I looked at, at best I found it to be poor.
People: Although departments existed like kingdoms and were warring in nature; Sanjeev Baitmangalkar felt that the people or the team at senior level (Department Head’s and above) was a set of good and well-meaning people. It is not that the others were bad, but it was this team that would be in the leadership of change. They had all along lacked being led and guided by good and professional leadership. We found them willing to address the crises and bring about the change, if shown the way. We found them (most) willing to change in their habits and inculcate a new routine and exhibit a new behavior. We found some great attitudes here inspite of their tough situation and past failures. We found the workmen willing to learn and embrace lean.
Although some training was taking place, we found that it lacked; connectivity to improving business processes, improving seamless transfers between processes, focus on waste removal and improving the added value, problem solving and improving reliability, standardisation and rationalisation, new machining technologies, leadership development etc. We also found that if taught, people were willing to learn.
The Journey thus far: The visible ‘wastes’ were:
Over production – over production was happening on the regular production items because of the batch and move thinking. More than that was the over procurement – which is the same as asking the vendor to produce and supply with no correlation to demand and consumption.
Over processing – this waste was prevalent in the form that components once machined and sent to assembly, would be sent back for rework because of geometrical inaccuracies. Also on many parts certain work was done that should have actually been done in the earlier operations.
Inventory – huge amount of imbalanced inventory existed in an irrational manner. It included obsolete designs, scrap items, parts not used over four years etc.
Transportation – lots of transportation waste was visible in parts that were sent to vendors for either further processing or assembly. This could have been avoided applying the thinking of sourcing complete parts and assembly. Besides delays this involved the costs of freight and documentation, storage, protection, counting, issues and receipts, and inspection.
Waiting – this was the biggest waste visible. The assembly lines waited for material and the machine shop waited for raw material. The waiting time also enlarged the build and throughput times, thereby affecting timely deliveries.
Rejections – not threatening, and can be improved further.
Movement – the idle movement of men inside the factory was visible, but was largely owing to work stoppages due to material shortages.
Since the Company was in a crisis situation; after we had done our due diligence the first thing I did was tell all of them how bad and serious the situation was. We had to show them all or most of the mistakes they had made in strategy and business processes. We began to get all of them together and talk about it. Initially there was resistance from some quarters, everybody was not convinced that lean could be a good turnaround strategy. The meetings and discussions used to be ‘I am right, you are wrong’; ‘I know best’; ‘it did not happen because you did not do it’; ‘don’t tell me what to do’; ‘you do your lean, I will do what I have to do’ etc.
I avoid jargon totting because many switch off when someone starts dropping jargons or foreign language terminologies. When I first practiced lean neither had the word lean been coined nor had all those wonderful authors published their books, and yet we developed the JIT thinking and did the same things sans all jargons and terminologies. So I use the language that the weakest link understands. Through an interactive process focusing on the problems and their solutions; We got them to accept reality and start thinking, sharing and talking about it. We evolved a fact sheet monitoring the performance (results) regularly. We measure the change in about one hundred plus different measurements regularly (the spread comes because of different verticals). This was envisioned for everybody’s involvement. To develop better understanding and appreciation I made them draw just one map and we have been using the learning from that map across all product related processes. Subjects like Kanban, Workplace Organisation, Lean Principles, and Standard Operation etc. were more taught interactively at the Gemba and the workshop was a demonstration of its actual implementation. This is absorbed better than power points.
Tools are easy and people can understand. Sustained use of the tools will produce results. Yet, even though people understand the tools, why do they not use them over time and keep improvising? Because sustained use without being told to do so needs habit creation that results in change of behavior. The character that does this is very different to the character that does not do it. To succeed it is necessary to build the character and those qualities that will sustain the habit and change the behavior. So Sanjeev Baitmangalkar began coaching to build the character that will sustain lean thinking and use of the tools to solve problems.
Lean transformation is led from the top. It cannot be subcontracted to the middle and expected to succeed. This was a point (condition) in my opening meeting. The Managing Director and another active Director are involved on a day to day basis. They follow the schedule (time table) worked out for them. They sit and control all meetings they are supposed to be in. Every day they sit with the respective team and solve customer complaints using the Fish Bone diagram. They attend vendor meetings and address the issues. They meet customers and listen to them. They sit with the Designers and lend inputs into Standardisation and Rationalisation. Four months ago they were issuing instructions from their corner rooms and expecting things to be done. Today they are at the Gemba. They sit as many times possible in the Quality Circle meetings and provide the motivation. Everybody in the leadership team reads books on TPS and shares what they have learnt from it with the others.
The workmen have been taught their roles relative to the stage we are in as far as lean implementation goes, and they carry out their responsibilities well. Every day when the siren rings at 11:00 hours they all do their 5S work. We started Quality Circles to invite their creativity through helping them learn, identify and solve problems. The problems they have identified and solved thus far (in this short time) are amazing, some of the solutions have cut many man shifts in the process times.
Like we said before, this is just the beginning. Some improvements made so far (to share a few):
1. Build times have come down – 10 to 18 days and being reduced further.
2. Procurement lead times have come down – 10 to 30 days and being reduced further.
3. Time to correct problem in manufacturing has come down – 4 to 12 days and being reduced further.
4. Number of suppliers has come down – 341 nos and being reduced to half in the first stage.
5. Floor space reduced in assembly area by approx. 30% and being reduced further.
The lean journey and doing turnarounds is always very interesting, the more challenging it is, the more exciting it becomes. Our methods are unconventional, and we don’t follow an expected pattern. We custom design the journey for each organisation. So it has been a very fascinating journey so far. But this is only the very beginning. There is a long way ahead before something more significant can be achieved. And when we do, we hope to share it with you again.
About the Principal Author: Sanjeev Baitmangalkar is the CEO & Principal Consultant of Stratmann Consulting, rendering assistance in the areas of Lean Manufacturing, BPR & Turnarounds, Supply Chain Management, Industrial Marketing, Machine Tools and product development, working with overseas and Indian clients. He is an empanelled lean consultant on the Prime Ministers ‘Global Manufacturing Competitiveness Program’, an accredited lean consultant with the Quality Council of India and the Ministry of Small & Medium Enterprises under the Industry Ministry Government of India. He has also worked as the Managing Director of Roots Multiclean Ltd (a German Joint Venture), Director & CEO with the Texmaco Group in South East Asia, and as VP & SBU Head with the Kirloskar Group in India. He has also publications on various management subjects such as Lean Manufacturing, Leadership, Ethics, Core Competence, Strategy, Process, Team Work, BPR & Turnarounds, and Case Studies etc to his credit.