Featured in Lean Management Journal, June 2015 | Download PDF
Many manufacturers have been employing lean tools for years to increase efficiency, reduce inventory, improve on-time delivery, and more. And while their efforts yield improvements, the result is often a culture of continuous improvement and produces slow, incremental progress that plateaus over time. But in the past decade, there’s been a dramatic shift in the way some innovative companies have approached lean that has enabled them to realise top-line results in months, not years.
Breakthrough the Lean Plateau
Setting a goal of perpetual improvement doesn’t guarantee the business will grow. Instead, more progressive companies have shifted their approach by setting a destination for their lean efforts. And that destination is operational excellence, when “Each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”
Instead of simply creating lean value streams and implementing flow, these organisations create self-healing value streams and implement autonomous flow that doesn’t require management intervention for seamless delivery of a product or service to the customer. When companies achieve operational excellence, management no longer needs to hold meetings to prioritise or expedite to resolve problems in the flow. Instead, they can focus on activities that grow the business – and the only meetings that take place are those focused on growth.
Several companies stand out as examples of organisations evolving their approach to leverage advanced lean principles and achieve operational excellence – and business growth. Among these organisations are Dexter Magnetic Technologies, Hypertherm, and A-dec.
From Tools to OpEx
Prior to 2010, Dexter Magnetic Technologies (DMT) produced standard magnetic components but knew it had to become more of a sub-assembly and assembly provider to deliver more value to its customers. To achieve its goal, it had to change its processes as well. That’s when Dexter decided to introduce value streams.
Previously, Dexter had employed traditional lean tools like product-level kaizen events, SMED and 5S activities. “Our focus was more on attempting to implement tools,” explained Bob Brinley, president of Dexter. “But spurred by a grant from the state of Illinois aimed at employee development and growth, we decided to bring in training on operational excellence.”
"The company did not strive to get better each day. Instead, it set a destination for its journey."
Once employees understood the destination of operational excellence, they knew what the company was trying to accomplish across the board, making it easier for the company to deploy value streams in both the business side of the operation and on the shop floor. Within three months of designing value streams, Dexter, had completed implementation in its Chicago manufacturing site.
And now? The operation, which produces between 300 and 700 different types of products or assemblies every month, runs autonomously, without management intervention. “No one assigns work to operators anymore,” said Bob, “The concept of first in, first out for the day-today assignment of tasks is so ingrained in the people on the floor that they just do it.”
“And it’s visual,” Bob added. “In any cell, anyone can tell if we’re on time or not. And that’s true in our offices as well. For example, our engineers have screens above them that show if a project is on time. And in our sales quotation department, we have a FIFO board that shows whether we’re on time.”
The impact of OpEx on the organisation can be felt from the ground up. “Employees have a sense of empowerment,” shared Bob. “No one wants to have to be told what to do and now, employees have control of their day.”
And even with 200 to 300 jobs flowing through manufacturing daily management only meets for 30 minutes a day. “We meet from 7:30-8 a.m. and, using our MRP system, value stream mapping, FIFO and work cells, we make sure product is moving through,” explained Karl Bethke, director of operations. “That’s all we spend on a dayto-basis on prioritisation.”
As a result, managers have been able to migrate to higher level, more strategic roles. Five years ago, a production manager or supervisor spent 95% of their time on allocating work to employees. But today they spend just 5% on work allocation people and 95% on employee development, system improvements, and other activities that will help grow the business.
With operational excellence embedded in the culture at Dexter, the company has been able to further its goal of becoming a value-added supplier. “We’ve always been a technological leader but what operational excellence has enabled us is speed to market,” said Bob. “Before we achieved operational excellence, we were at 70% on-time delivery. Now we’re at 95%. And that gives us a competitive advantage because we now have threeto four-week shorter lead times on average. Customers are bringing us their new products because we can get them done quicker from design to build.”
And it’s not just existing customers coming to Dexter. The company proactively focuses on new business because it now has the processes in place – from quoting to build – to handle the influx of projects. And they’re processes customers can see. “When customers visit, they can see how our value flows to them when they walk out on factory floor, and that gives them the confidence to do business with us,” said Bob. “For us, operational excellence is a sales advantage.”
Today, Dexter has a pipeline of over $US12m for defined projects, and the company expects to double its sales within the next five years. “Because we did operational excellence the way we did, it created opportunities for growth in a sustained manner,” explained Bob.
Hypertherm Elevates Lean to Compete Globally
"With operational excellence embedded in the culture at Dexter, the company has been able to further its goal of becoming a valueadded supplier."
Like many organisations, Hypertherm, a manufacturer of industrial cutting solutions based in New Hampshire, applied lean tools like kaizens, setup reduction, and point-of-use tooling, as well as more advanced lean methodologies like value stream mapping. But unlike other companies who have taken similar approaches to create a journey of continuous improvement, Hypertherm’s journey was different.
The company did not strive to get better each day. Instead, it set a destination for its journey: to create an operation that ran autonomously. In other words, its destination was one of operational excellence, where flow occurs without the need for management intervention, even when it breaks down.
The company began by establish¬ing cells to build product at the rate of customer demand, but as its business evolved and grew, it could only go so far with cells, and needed to extend this thinking to its end-toend value streams. That’s when it decided to implement the principles of flow through all areas of its operation, from the receiv¬ing deck through fabrication, assembly, and shipping. It did this with the intent of having end-to-end value streams in its operation running the same way its cells did: without management interven¬tion. But it didn’t stop there.
Today, Hypertherm’s value streams have evolved to the point where they operate without production control. Fabrication areas operate off visual signals, with a minimal amount of management or need for setups. Hypertherm uses ther¬mometer boards consisting of green, yellow, and red zones that let the associates at each process know how the flow is progressing. The visual connections between processes also authorise associ¬ates on what to work on next and tell them whether a breakdown has occurred or is imminent. Associates use standard responses to cor¬rect breakdowns in flow if they do happen, and management becomes involved only infrequently.
“Operations aren’t a fundamental business problem,” said Jim Miller, the vice president of manufacturing for Hypertherm. “[It] gets time; it’s not ignored. It’s not like we don’t want to talk about it. It’s that we don’t have to talk about it.”
Because Hypertherm consistently delivers product without issues, management has been able to shift from running the operation to devoting its added time to being more competitive in the marketplace. For example, team leaders in the production area are tasked with ensuring daily production quantities are met and orders are shipped on time. But that’s not how they spend each day now. Rather, they focus on offense, or activities that grow the business, such as teaching production associates, in training, and meeting with the sales department to satisfy future customer needs. Moreover, very little management in manufacturing and no production control department greatly has greatly reduced overhead and product costs to the customer.
“Going forward, we’re going to keep pushing the envelope for how autonomous our operations can be in terms of not relying on management for their day-today functioning,” added Miller.
Achieving Operational excellence has enabled Hypertherm to shift its focus from daily operations to future growth. And it’s succeeded.
- Hypertherm manufactures about 97% of its product in the US with a local labour force, yet sells 60% internationally
- The company has never had a layoff in its 40-plus-year history, even at the height of the recession with a production workforce 20% larger than needed
- Hypertherm built a training school offering college credits on its campus to meet the demand for associates to run its high-end machining
- The organisation completed construction of a new 14,685m² Cutting Technology Center in 2012 to accommodate plans for continued growth over the next ten years.
A-dec Advances Lean to Drive Customer Satisfaction
A-dec, an Oregon-based manufacturer of dental chairs, cabinets, delivery systems and lights, is home to approximately 1,000 employees who design, built, and market the company’s equipment to dental professionals worldwide.
In 2000, A-dec embarked on a lean journey in its manufacturing operations. Five years later, the company wanted to expand the concepts and formed a special lean team focused exclusively on applying traditional lean concepts into its administrative processes. While A-dec realised improvements from its efforts, it sought to achieve another level of performance, and decided to learn how to design lean value streams to create operational excellence in the company’s office areas.
One of the first areas it decided to target was customer service. In that department, 20 customer service representatives and five customer service specialists were charged with processing a high volume of orders – an average of 1,200 new orders per week – as well as 150 order changes. Due to the custom nature of the company’s products, each order was complex, with as many as 100 line items.
After completing a training programme on achieving operational excellence in the office, the team responsible for applying lean to the area started by gathering data about its processes. Orders came in by fax, web, or phone, and were sorted accordingly. Some were further grouped by product or by date. A complicated sequence for completing orders often meant a customer service specialist was missing information during order entry and had to take the order to a customer service representative, who would call the customer for details – often delaying the order up to six days. While customer service published an order-entry processing time of 24 hours for online orders, it usually took three to five days. Faxed orders typically had a five-day backlog. And change orders often had a week-plus wait.
The system in place prompted many concerns, including:
- Orders lacked the necessary information to make it through the system the first time
- Orders took too long to get through their system
- The process lacked visual indicators
- When demand spiked, there was no course of action
- Management intervention was needed to control action
- Defects were allowed into the system, creating disruptions in the flow
Once the team had a grasp of the current state, it began its transformation by using the nine design guidelines of operational excellence to design its future state. Now, when orders arrive, an “Evaluator” immediately picks them up and sorts them into a specific process family designed for flow. Orders in each family are logged in, starting the processing clock, and flow through a specific FIFO lane with folders indicating the timeframe when the orders arrive. To prevent disruptions in the flow, a customer service representative that has a working knowledge of the orders reviews them for proper information before submitting them into flow. If the information is complete, it goes into another FIFO lane and flow begins. If information is missing, the Representative contacts the customer. With this method, a steady flow of processing occurs at the rate at which the customer needs the orders, or takt time.
And to help employees in the flow see the status of order entry, a visual system of red/yellow/green lights above the customer service specialist’s work cell is used. If volume goes beyond the normal level (yellow), the team has a pre-authorised response to the condition so no decision making is required from management.
“This process has had a tremendous impact on our order entry,” said Gail Wilson, customer service specialist, “Before, we would struggle through some of the more complicated orders only to give them back for questions or call the customer and hold them at our desk. With the new process, they are screened and all questions are answered before they’re submitted to order entry. We are touching orders fewer times and they are entered more quickly with less errors.”
Today, A-dec’s customer service department operates very differently:
- Average lead-time decreased from five to six days to less than two hours.
- During the final week of the company’s annual price adjustment period (before new pricing takes effect) in 2013, customer service took in the equivalent of three weeks’ worth of domestic orders and processed them in 3-1/2 days vs. more than seven business days.
- Customer satisfaction has soared, thanks to the improvements in order speed and accuracy.
- Little or no management is needed to ensure the seamless processing of customer orders.