Month: August 2009

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Clarity for the Customer

I have come to expect very little from most airlines, especially for the parts of the “service” that doesn’t involve actually sitting in the airplane. Still, some airlines make their policies more clear than others. Alaska Air, for example, is explicitly clear that I can hold a reservation for 24 hours and cancel with no penalty. They say so on the web site during the online booking process.

NWA (soon to be Delta), on the other hand, is somewhat less transparent. Thus, I had to call the “Elite Reservations” number, and talk to a human being to confirm the 24 hour cancellation policy. Of course I could have gotten this from their web site, I suppose. Maybe it is somewhere in here. Could this be any less clear if had been deliberately obfuscated? What purpose is served by serving up confusing information in the most difficult-as-possible to read format? How does this help their business? Or do they feel they have to trick their customers into buying the product?

I often wonder about things like this. Some companies just seem to get a thrill out of making it difficult for their customers to do business with them.

Penalties

CHANGES ANY TIME CHARGE USD 150.00 FOR REISSUE. NOTE – DOMESTIC TICKETS ARE VALID FOR ONE YEAR FROM DATE OF ORIGINAL PURCHASE. THE TICKET MUST BE EXCHANGED AND THE NEW ORIGINATION DATE MUST BE WITHIN ONE YEAR OF THE ORIGINAL PURCHASE DATE DESIGNATED ON THE ORIGINAL TICKET. . TICKETS MUST BE REISSUED WHEN ANY VOLUNTARY CHANGE IS MADE. THE NONREFUNDABLE VALUE SHOULD BE PLACED IN THE ENDORSEMENT BOX ON THE REISSUE TICKET . IF MULTIPLE CHANGES ARE MADE AT THE SAME TIME ONLY ONE CHANGE FEE WILL APPLY. IF FARES WITH DIFFERENT CHANGE FEES ARE COMBINED ON THE SAME TICKET THE HIGHEST FEE OF ALL THE CHANGED FARE COMPONENTS WILL APPLY. . GDPR – GUARANTEED DAY OF PURCHASE RULE DECREASE IN FARE AFTER TICKET PURCHASE. . IF A DECREASE OCCURS AFTER A TICKET IS PURCHASED AND PRIOR TO ANY TRAVEL ON THE TICKET OR A NEW FARE FOR WHICH THE PASSENGER QUALIFIES BECOMES EFFECTIVE THE DIFFERENCE IN FARE MAY BE CREDITED. FOR COMPLETE DETAILS SEE PARAGRAPH VI BELOW. . I. PRIOR TO DEPARTURE A. CHANGES TO DEPARTING FLIGHT ARE PERMITTED FOR APPLICABLE CHANGE FEE PROVIDED THE CHANGE IS MADE TO THE SAME ORIGIN/DESTINATION AND SAME TICKETED TRAVEL DATE AND SAME BOOKING CLASS. . B. CHANGES TO DEPARTING FLIGHT INVOLVING A CHANGE TO ORIGIN/DESTINATION OR DIFFERENT TICKETED TRAVEL DATE OR BOOKING CLASS ARE NOT PERMITTED. SEE CANCELLATIONS . II. PRIOR TO DEPARTURE – CHANGES TO CONTINUING/ RETURN FLIGHTS WHEN THERE IS NO CHANGE TO ORIGIN/DESTINATION OR STOPOVERS. . A. CONTINUING/RETURN FLIGHTS MAY BE CHANGED TO A LATER DATE FOR THE CHANGE FEE WITHOUT REGARD TO THE ADVANCE RSVN REQUIREMENTS PROVIDED THE CHANGE MEETS ALL OTHER FARE RULES. . CONTINUING/RETURN FLIGHTS MAY BE CHANGED TO AN EARLIER DATE FOR THE CHANGE FEE PROVIDED THE CHANGE MEETS ALL FARE RULES. THE ORIGINAL TICKET ISSUE DATE MAY BE USED TO MEASURE THE ADVANCE PURCHASE REQUIREMENT. . B. IF A CHANGE IS MADE TO A BLACKOUT DATE OR THE CHANGE VIOLATES THE DAY/ROUTING/ FLIGHT /SEASONALITY/TRAVEL DATES OR BOOKING CODE REQUIREMENTS TRY THE FOLLOWING OPTIONS . B.1 RE-PRICE THE CONTINUING/RETURN PORTION WITH FARES IN EFFECT ON THE DATE THE ORIGINAL TICKET WAS ISSUED. ANY DIFFERENCE IN FARES PLUS THE APPLICABLE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE NO RESIDUAL VALUE APPLIES AND THE FULL CHANGE FEE SHOULD BE COLLECTED. . B.2 THE ENTIRE TICKET SHOULD ALSO BE REPRICED WITH CURRENT FARES. ANY DIFFERENCE IN FARES PLUS THE CHANGE FEE SHOULD BE COLLECTED. IF THE TICKET PRICE IS LOWER WITH CURRENT FARES THE DIFFERENCE IN FARES LESS THE CHANGE FEE MAY BE CREDITED TO THE PASSENGER IN THE FORM OF A NONREFUNDABLE MCO. THE MCO MUST BE EXCHANGED WITHIN ONE YEAR OF THE MCO ISSUE DATE. . B.3 IF THE RESULTS OF B.1 – B.2 ABOVE RESULT IN MULTIPLE PRICING SOLUTIONS THE LOWEST SOLUTION WOULD APPLY. . III. PRIOR TO DEPARTURE – CHANGES TO CONTINUING/ RETURN FLIGHTS WHEN THERE IS A CHANGE TO ORIGIN/DESTINATION OR STOPOVERS. . A. REPRICE THE CONTINUING/RETURN PORTION WITH A CURRENT FARE. ANY DIFFERENCE IN FARES PLUS THE APPLICABLE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE THE DIFFERENCE IN FARES LESS THE CHANGE FEE MAY BE RETURNED IN THE FORM OF A NONREFUNDABLE MCO. THE MCO MUST BE EXCHANGED WITHIN ONE YEAR OF THE MCO ISSUE DATE . B. THE ENTIRE TICKET SHOULD BE REPRICED WITH CURRENT FARES. ANY DIFFERENCE IN FARES PLUS THE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE THE DIFFERENCE IN FARES LESS THE CHANGE FEE MAY BE RETURNED IN THE FORM OF A NONREFUNDABLE MCO. THE MCO MUST BE EXCHANGED WITHIN ONE YEAR OF THE MCO ISSUE DATE. . IV. AFTER DEPARTURE – CHANGES TO CONTINUING/RETURN FLIGHT WHEN THERE IS NO CHANGE TO ORIGIN/ DESTINATION OR STOPOVERS. . A. CONTINUING/RETURN FLIGHTS MAY BE CHANGED TO A LATER DATE FOR THE CHANGE FEE WITHOUT REGARD TO THE ADVANCE RSVN REQUIREMENTS PROVIDED THE CHANGE MEETS ALL OTHER FARE RULES. . CONTINUING/RETURN FLIGHTS MAY BE CHANGED TO AN EARLIER DATE FOR THE CHANGE FEE PROVIDED THE CHANGE MEETS ALL FARE RULES. THE ORIGINAL TICKET ISSUE DATE MAY BE USED TO MEASURE THE ADVANCE PURCHASE REQUIREMENT. . B. IF A CHANGE IS MADE TO A BLACKOUT DATE OR THE NEW DATE VIOLATES THE DAY/TIME/ROUTING /TIME/FLIGHT/SEASONALITY/TRAVEL DATES OR BOOKING CODE REQUIREMENTS TRY THE FOLLOWING OPTIONS. . B.1 THE CONTINUING/RETURN PORTION SHOULD BE RE-PRICED WITH AN APPLICABLE FARE IN EFFECT ON THE DATE THE ORIGINAL TICKET WAS ISSUED. ANY DIFFERENCE IN FARES PLUS THE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE NO RESIDUAL VALUE WILL APPLY AND THE FULL CHANGE FEE SHOULD BE COLLECTED. . B.2 REPRICE THE CONTINUING/RETURN PORTION WITH A CURRENT FARE. ANY DIFFERENCE IN FARES PLUS THE APPLICABLE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE THE DIFFERENCE IN FARES LESS THE CHANGE FEE MAY BE RETURNED IN THE FORM OF A NONREFUNDABLE MCO. THE MCO MUST BE EXCHANGED FOR WITHIN ONE YEAR OF THE MCO ISSUE DATE. . B.3 IF THE RESULTS OF B.1 – B.2 ABOVE RESULT IN MULTIPLE PRICING SOLUTIONS THE LOWEST SOLUTION WOULD APPLY. . V. AFTER DEPARTURE – CHANGES TO CONTINUING/ RETURN FLIGHT WHEN THERE IS A CHANGE TO ORIGIN/DESTINATION OR STOPOVERS. . A. REPRICE THE CONTINUING/RETURN PORTION WITH A CURRENT FARE. ANY DIFFERENCE IN FARES PLUS THE APPLICABLE CHANGE FEE SHOULD BE COLLECTED. IF THE REPRICE RESULTS IN A LOWER FARE THE DIFFERENCE IN FARES LESS THE CHANGE FEE MAY BE RETURNED IN THE FORM OF A NONREFUNDABLE MCO. THE MCO MUST BE EXCHANGED WITHIN ONE YEAR OF THE MCO ISSUE DATE. . B. IF THE CHANGE IS TO A CO-TERMINAL THE DIFFERENCE BETWEEN THE APPLICABLE FARES MUST BE COLLECTED IN ADDITION TO THE CHANGE FEE. FOLLOW- THE POLICIES LAID OUT ABOVE ON HOW TO RECALCULATE THE DIFFERENCE IN FARES. . VI. GDPR – GUARANTEED DAY OF PURCHASE RULE . DOMESTIC PASSENGER TRANSPORTATION IS SUBJECT TO RULES/FARE/ROUTINGS AND CHARGES IN EFFECT ON THE DATE/TIME THE TICKET IS ISSUED/PTA PURCHASED UNLESS SPECIFIED IN THE FARE RULES. . DECREASE IN FARE AFTER PURCHASE . IF A DECREASE OCCURS AFTER A TICKET IS PURCHASED AND PRIOR TO TRAVEL ON THE TICKET OR A NEW FARE FOR WHICH THE PASSENGER QUALIFIES BECOMES EFFECTIVE THE DIFFERENCE IN FARES WILL BE CREDITED PROVIDED . 1. THERE ARE NO CHANGES TO ORIGIN/DESTINATION/ STOPOVER POINTS/FLIGHTS/DATES. . 2. ALL CONDITIONS OF THE NEW/REDUCED FARE MUST BE MET. THE ORIGINAL TICKET DATE OF ISSUE MAY NOT BE USED TO SATISFY THE ADVANCE RESERVATION/TICKETING REQUIREMENTS. THE BOOKING CODE OF THE NEW/REDUCED FARE MAY DIFFER FROM THE BOOKING CODE ON THE ORIGINAL TICKET. . . FOR TICKETS ISSUED ON/BEFORE 11NOV08 THE PASSENGER WILL RECEIVE A NONREFUNABLE MCO LESS A 50.00USD ADMINISTRATIVE SERVICE FEE. . FOR TICKETS ISSUED ON/AFTER 12NOV08 – THE PASSENGER WILL RECEIVE A NONREFUNDABLE MCO LESS A 150.00USD ADMINISTRATIVE SERVICE FEE . THE MCO CAN BE USED FOR FUTURE TRAVEL PURCHASE. THE MCO MUST BE EXCHANGED FOR A TICKET WITHIN ONE YEAR OF THE MCO ISSUE DATE. CANCELLATIONS TICKET IS NON-REFUNDABLE. NOTE – 1.CUSTOMERS FIRST POLICY. . 1. WHEN RESERVATIONS ARE MADE AND TICKETS ARE PURCHASED ON THE SAME DAY REFUNDS EQUIVALENT TO THE AMOUNT PAID WILL BE PERMITTED UP TO 1 DAY AFTER THE TICKET IS PURCHASED AT NO CHARGE. ANY CERTIFICATE OFFER WILL BE DEEMED USED AND WILL NOT BE REPLACED. 2. FARES ARE SUBJECT TO CHANGE AND NOT GUARANTEED UNTIL A TICKET IS PURCHASED. . B.WHOLLY UNUSED NONREFUNDABLE TICKET POLICY. . A WHOLLY UNUSED NONRFND TKT MAY BE APPLIED TOWARDS THE PURCHASE OF A NW/KL DOMESTIC/ INTERNATIONAL FARE/TICKET. -PROVIDED TRAVEL ON THE NEW TICKET ORIGINATES WITHIN 1 YEAR OF THE ORIGINAL PURCHASE DATE AND THE TICKET IS EXCHANGED NO LATER THEN 365 DAYS AFTER THE ORIGINAL TICKET ISSUE DATE. . -ANY NONREFUNDABLE VALUE IS CARRIED FOWARD IN ALL SUBSEQUENT REISSUES. THE NONREFUNDABLE VALUE SHOULD BE PLACED IN THE ENDORSEMENT BOX ON THE REISSUE TICKET. . -LIMIT OF ONE TKT MAY BE APPLIED TOWARDS A NEW TICKET. -APPLICABLE CHANGE FEE APPLIES. . C. TICKET VALIDITY AND CANCELLATION FEE . 1. TICKETS WILL BECOME INVALID/EXPIRED 366 DAYS AFTER THE DATE OF THE FIRST UNUSED COUPON AND MAY NOT BE USED OR EXCHANGED FOR TRANSPORTATION AFTER THAT TIME AND DATE. . 2. ONCE THE TICKET BECOMES INVALID – THE FARE AND RELATED TAXES AND FEES WILL BE REFUNDED. SIMULTANEOUSLY WITH THE REFUND NW WILL IMPOSE A CANCELLATION FEE EQUAL TO 100 PERCENT OF ALL AMOUNTS COLLECTED BY NW FOR ISSUANCE OF THE TICKET – INCLUDING – THE FARE AND APPLICABLE TAXES/FEES AND ANY OTHER CHARGES. – SEE GENERAL TARIFF RULE 105 – . D. EXCEPTION TO FEE COLLECTION. . IN THE EVENT OF THE DEATH OF THE PSGR A REFUND IS PERMITTED. THE CHANGE FEE WILL BE WAIVED.

This, of course, is the example of communications they let the customers actually see on their “award winning web site.” Therefore, I have to assume this is communication at its very best. I wonder what the pilots and crew have to deal with – and how much it distracts them from getting the job done safely and efficiently.

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The Lean Manager: Part 2 – The Basics

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This is Part 2 of a multi-part review. Part 1 is here.

In my review of Kaizen Express back in May, I took LEI to task for two things – First, I didn’t feel Kaizen Express contributed anything really new to the body of knowledge. I would have been satisfied if it had more clearly explained what had been said before, but it didn’t do that either. Second, and more importantly, I felt that Kaizen Express, and the LEI in general, were propagating the conception that the tools were what defined “lean” and that “the tools” were “the basics.” I disagreed on both points, and still do.

I am now about halfway through The Lean Manager, and I believe this book is addressing those issues – and hopefully challenging some of the thinking within the publishers. In other words, in its content, this book is everything that Kaizen Express isn’t. Get it. Read it. Do what it says, and you will actually be implementing the basics.

What makes this different? Instead of revolving around technical descriptions of the tools, this book clearly shows the proper relationship between the tools and the two most important aspects of what makes the Toyota Production System work:

  • Leaders (and how they lead and what they lead – and it isn’t implementing the tools)
  • People (yes, other books pay lip service by mentioning shop floor engagement, but The Lean Manager is all about shop floor engagement)

The authors start to hammer home the point in Chapter 2, Everybody, Every Day. In one of the many lecturettes they use to convey the key points via their characters, Amy, a corporate consultant, sums it up:

“Everybody, everyday solving problems, that’s the only answer to the Pareto dilemma. You’ve got to visualize two flows in the plant. One: the product flow[. . .].  Two: the problem flow to the person who finally solves the problem. [. . .] you shouldn’t funnel all problems to your key technical people. You should protect them to work on the really difficult issues. What you have to organize is the problem solving in the line!”

And with that, the rest of the story follows – this fictitious plant manager under fire in this fictitious company sets out to do that.

The subsequent chapters (so far – remember, I haven’t finished the book yet) are Go and See, which hammers home the importance of the leaders – all of the leaders being present, not just to witness problems, but to ensure they are being solved by the right people, in the right way. Further, they must break down any barriers which impede that flow. And it’s not just the leaders. Ultimately, the entire shop floor is organized so that everyone is immersed in genchi genbutsu every time a task is carried out or work is performed. This becomes the check in PDCA.

Chapter 3 is titled Managing is Improving and begins the confront the psychological and organizational aspects of the changes that are now coming to a head in the story. This part requires the most creativity on the part of the authors, as it is an entirely human process. Because it is a human process, not a technical one, it is impossible to write a technical manual on how to do it. It requires knowledgeable, dedicated leadership that is humble enough to stake out a position that might be wrong, knowing that doing so improves the chance of learning something.

And that has been the issue in our industry. It is far, far easier to describe the tools in excruciating detail than it is to confront the leadership and organizational change issues. And because the technical descriptions predominate the literature (including, and especially what has come out of LEI for the last 10+ years), it is far easier to believe that “implementing the tools” is something that leaders can delegate to specialized technical staff.

This book, so far, is (rightly) turning that thinking on its ear.

Continued at Part 3.

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The Lean Manager: Part 1 – Customers First

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I just started reading this book, and my initial feeling is that it is a winner. Rather than producing a batch review of the whole thing at the end, I thought I would employ “one chapter flow” and share my impressions with you as they are formed. As I write this, I honestly do not know where it is ultimately going.

I am excited about this book because it is challenging the decades-old paradigm of kaizen events run by specialists (while simultaneously trying to justify the change activity to the people who hired them in the first place). In its place is a leader who knows what he is doing, and appears to be starting to lead by asking tough questions.

Even with that initial endorsement, this book appears to be following the standard formula established by Eli Goldratt in The Goal.

  • Manager finds out factory is being closed. News is devastating to his personal life.
  • The Jonah character emerges and teaches him how to save the operation.
  • He applies what he learns and saves the day.

While there is nothing wrong with this structure, it is wearing a bit thin, at least to me. So I hope that the authors are going to find an interesting twist that surprises me. Still, because this is a novel with a point, vs. an attempt at classic literature, I’m not going to spend much time on the literary style.

The two main characters (so far) are Andrew Ward, the manager who finds out his plant is being closed, and Phil Jenkinson, the new CEO, with the double role of bringing the bad news (closing the plant) as well as filling the role of the Jonah (or sensei in this case, I suppose).

In the opening chapter, Jenkinson’s style is authoritative, bordering on confrontational. Without knowing the culture of this fictitious company, I can’t say whether his blunt, direct approach is from necessity or because he simply doesn’t have the skills to ask tough questions without pushing people back. I’ll hold judgment on that part. My hope is that the book doesn’t teach this approach as how it has to be done, because in my experience, it doesn’t have to work that way.

The message, though, is crystal clear. The old way isn’t cutting it. Leaders, not staff, are responsible for results (safety, quality, delivery, cost). Leaders are expected to know the hot spots in their operations. Leaders are expected to be involved in the details – not to micro manage, but to develop the capabilities of others. (That last one is a bit of an extrapolation on my part.) “Lean” is not a program, not projects run by a staff of specialists, it is how we will manage the company.

The notable quote from this chapter comes in a shop floor lecture given by Jenkensin and nicely sums up the relationship between process and results.

“Results… are the outcome of a process. What we want are good results from a controlled process because they will be repeatable. Bad results from an uncontrolled process simply mean that we’re not doing our job. Good results from an uncontrolled process…only mean we’re lucky. Today, bad results from a controlled process just says that we’re stupid: We expect different results from doing the same thing over again.”

Based on that, I sketched out this little matrix that captured my response and the key points.

process vs results

But the technical nuances aside, this story is clearly developing into one about leadership. The key issues, so far, are:

  • Safety, quality, delivery, cost, are line leaders’ responsiblity, with assistance from technical staff – who are also experts.
  • Though it is certainly a culture shock, the leader is teaching by asking questions.
  • The various character’s reaction to the confrontive authoritative style is predictable. I am uneasy, at this point, with that approach being held up as an example of the best way to get this done. But it is only Chapter 1.

GO TO PART 2

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First: Define Value

A couple of days ago, in “The First Steps of The Lean Journey,” I said that there really is no first step, only the next step from where ever you are right now.

I admit that I left out a big assumption there – that you know where you are trying to go.

More specifically, that you really know the value you create.

Bas Mathijsen has posed the question here on The Whiteboard, as well as in a post in the LEI Forums where asks (paraphrasing) “Who defines customer value?” and “What is customer value?”

Good questions, and we don’t spend enough time there.
I have seen a lot of “improvement” effort dissipated because there was no clear idea of what the process was supposed to actually deliver.

As obvious as it seems, customer value is defined by no one but the customer. The transaction need not be monetary, or even commercial. A volunteer for a non-profit organization gives up time (and possibly money) and gets something in exchange. Usually that is some level of emotional satisfaction. A nonprofit that needs to attract volunteers needs to be conscious of this.

Since it is subjective, different customers are going to define “value” in different ways. Dan Sullivan once put it really well with this analogy (paraphrasing):

My neighbor has a really nice lawn. When he buys a lawnmower, he is interested in features like evenly cutting, ease of starting, how well it manages the clippings. But maybe I am looking for different things in a lawnmower. Maybe I hate mowing the lawn. I might be looking for a lawnmower that cuts the grass just below the roots.

Clearly these customers define “value” in different ways.

The other factor to keep in mind is that this isn’t a black-and-white thing. The value the customer finds in your product or service can be enhanced or diminished by an almost infinite matrix of circumstances. These include the magnitude of the (customer’s) problem you are solving, the degree of emotional satisfaction that is gained from your product or service, how easy (or aggravating) your sales and customer support processes are, the customer’s perception of your quality and a host of other intangibles. All of these translate into what (if anything!) the customer is willing to part with to get your product or service. Indeed, we have all heard of things that couldn’t be given away, or that had negative value.

The only real way to know what the customer truly values is to be the customer. This great little piece by Dan Markovitz on Evolving Excellence clearly shows how not to do it. Read the article, then do the opposite.

So, the customer defines what is valuable to him. What does the company do?

The company has to take their best information about customer value and translate it into specifications for the product and service they are going to provide. QFD is one formal way (though not the only way) to do this. Ultimately that becomes the product design. It is now up to production to actually deliver it at the target cost.

All well and good. Where this comes apart is (as always) at the seams.

Marketing and engineering “know best” and provide the “voice of the customer” when the customer actually isn’t even in the room.

The product may be specified, but the details aren’t worked through. There is only the most casual system to ensure that what is specified is actually what is built and delivered. Do you have a specified go/no-go outcome defined for each intermediate step in your process? Does that go beyond the product, and into the conditions required for success?

Delivery dates are given in terms of a range of time. In the USA the “cable guy” is famous for telling you he’ll be there between 9:00am and 4:00pm. We all laugh at how aggravating that is. But then think nothing of quoting “4-8 weeks” for a delivery window. WHEN is it supposed to be there?

Is your product support “leave it on the doorstep and run?” Do you follow-up with the customers and see what is, and is not, meeting their expectations? Do you solicit complaints (not simply collect them)?

All of these actions (or lack of them) will diminish your customer’s perception of value. Reputation and brand can carry past some transgressions, especially if there is really good follow-up. But even a 100 year old brand can be damaged, and the company is likely the last to know (not for want of clear signals).

The first step is “define value” but, to be clear, that means understanding what each and every step is doing to provide value to the next step in a long chain that both begins, and ends, with the customer.

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Reducing Inventory

Yesterday’s post on vendor managed inventory touched on a couple of things about “lean” and reducing inventory that I’d like to explore further.

All too often “inventory reduction” has been a way to “sell” a lean manufacturing implementation. The reduction of inventory becomes the objective. While this isn’t inherently a bad thing, it is all to easy to get caught up in the trap of “management by measurement” and do it the wrong way.

Reduced inventory is a result of good kaizen, but it isn’t the justification for doing it. The purpose of kaizen is to solve problems, specifically the problems that disrupt the smooth flow of work and creation of value. Solving those problems saves time – worker’s time, customer’s time, leader’s time because everything runs more smoothly and predictably.

The primary reason that inventory is there is because things aren’t smooth and predictable. Once they are, you can take some of it out.

The necessity to have inventory at any given point in the system is evidence of a problem that has not yet been solved. (Including, sometimes, simply having poor inventory management, which is another way of saying “overproduction.”)

By asking “What must we do to live without this piece of inventory?” you can uncover the next problem to solve, and then make a decision to solve it.

If it is solved, then inventory can be reduced. But it doesn’t happen automatically, you have to actually take it out of the system and keep it from coming back.

But in any case, this is a lot different than just shoving the ownership of the inventory onto someone else.

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October 8: Speaking at Seattle ASQ Meeting

correction: I had typed “October 10” for the date. That was my mistake. It is October 8th.

I will be speaking at the October 8 meeting of the Seattle ASQ on the topic of “The Continuous Improvement Ideal: Principles to Engage Your People.”

From the ASQ event page:

You may have heard of Toyota’s principle of stopping the line when an anomaly occurs, and you know that an engaged workforce is an asset to any organization. During Mark’s presentation, “The Continuous Improvement Ideal” on October 8th, you will take a deep dive into how these two seemingly separate concepts are actually intertwined and can drive day-to-day continuous improvement. This process of continuous incremental improvement engages people in ways that are more powerful than chartered process-improvement projects. You will come away with the common denominators that make these concepts universal in manufacturing and in service environments.

If you would like to attend, you can register here. The event is open to all.

Agenda:

  • 5:45 – Dinner and networking
  • 6:45 – Section Announcements
  • 7:00 – Speaker Presentation

Location:

Coast Bellevue Hotel
625 116th Avenue Northeast
Bellevue, WA 98004
View Map

Public thanks to my long-time friend Mike Bresko of General Physics, and Program Chair for the Seattle ASQ for this opportunity.

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Vendor Managed Inventory vs. Less Inventory

Almost every shop I have visited has, or is thinking about, initiating a “vendor managed inventory” program of some kind.

The pressure to do this is especially strong when there is a big push to improve working capital positions and increase inventory turns. And, to be honest, the way traditional accounting counts inventory turns, getting the inventory “off the books” is certainly one way to do it.

It follows, then, that vendor managed inventory can improve inventory turns, at least on paper.

In reality, though, unless the inventory itself is actually removed from the value stream, all that has happened is the valuation has been slid from one ledger to another. All of the costs are still in the system, they are just in different columns now.

It is the physical presence of inventory, not who owns it, that is evidence of some kind of problem. So “reducing” inventory by transferring ownership really doesn’t change the system at all.

The “documented cost savings” are often only an “on paper” artifact of traditional cost accounting, when the actual cash outlay of the organization doesn’t really change very much.

Then there is the added cost (often hidden) of managing distribution from a consignment stock, a tendency for supplier’s representatives to “sell” by stuffing bins as full as possible, and a host of other little things that can add up.

Don’t get me wrong, vendor managed inventory can, in theory, be done superbly and truly help. The problem is that it usually isn’t, and doesn’t.

Don’t push your problems onto your suppliers.
Solve them instead.

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The First Steps of The Lean Journey

“Where do I start?” seems to be one of the most commonly asked, and most intensely discussed and debated, topic on the various discussion forums over the years. Yet a clear consensus hasn’t really emerged.

Normally I don’t wade into those discussions when the question is asked generically. The reason is that without specifics about the situation, it is really hard to answer. There isn’t a clear set of step-by-step directions that say “Start here” followed by (2), (3) and so on.

Here’s how I look at it.

The theoretical end-game (which you likely never reach) is perfect one-piece-flow at takt time, with a perfectly safe work environment, producing 100% defect-free product, with no environmental impact, delivering it exactly when the customer needs it, without any wasted motion.

The practical end-game comes when the laws of physics and the limits of known technology become the limiting factors for further progress. (And even in that case, this is a usually a limit of human knowledge, which can be improved.)

The beginning is where ever you are.

There is no first step.
There is only the next step that moves you incrementally and tangibly toward perfection.

That next step is going to depend largely on what you are starting with.

The variation of starting points is what confounds the efforts to set down a formula. Any abstract attempt to answer the “Where do I start?” question must build in assumptions that answer the “Start from where?” question.

Here are a couple of examples.

If there is so much clutter and junk that people have to move things out of the way just to get work done, then absolutely, begin with the classic starting point – 5S. That can take anyone a long way as they learn to question why something is out of place, and come to realize that introducing new things into the workplace can will alter the way work is done. Best to do it on-purpose than randomly.

On the other hand, if the place is fairly neat, and most of the things are where they need to be, or close, and “looking for stuff” is not a huge impediment to the work, then I might be inclined to let workplace organization naturally evolve as part of the effort to establish some degree of stability.

If there is a hugely varying customer demand signal hitting the shop floor every day, calculating takt time is an exercise in frustration. If nobody believes it is possible to stabilize the demand, they aren’t much interested in hearing about takt. So the “first steps” might be to work on a leveling system so people have some solid ground to stand on.

It comes down to what is, right now, disrupting the effort to smooth out the work.

Maybe it’s quality and tons of rework. Then we’ve got to work on that. Or part shortages. Then at least contain the problem until a long-term solution can be put into place.

Sometimes it is leader’s knowledge. They don’t believe, or don’t understand, how improvement is possible. Countermeasure? Because “knowledge” is the next impediment to improvement, the “first step” becomes some kind of leader education, study mission, or other experience that is going to give them some confidence that they can do better (and it won’t be painful to get there).

If the organization has a lot of functional silos that are disrupting each other, it could be really beneficial to take a cross-functional team through a really deep exercise to understand how their system works and why it performs as it does. (this is a good time to use the current-state value stream map or a makagami.)

How do you know?
Ah – and that is why people ask the question in the first place.
As much as I hate to say it, I think the answer is “from experience.” This is one place where it might be worth your while to bring in someone who has done this a few times and get an opinion.

But if they tell you where to start without first personally assessing where you are, I’d question the quality of the answer. “There is no substitute for direct observation,” or, to use the Japanese jargon, genchi genbutsu. You can’t answer the question without first understanding the specific situation. At least I can’t, which is probably why I stay out of those debates.

I’d like to hear what you think. Feel free to leave comments.