Becoming a Lean Company is Key to Successful Competition in the Global Marketplace

When I was writing the chapter on what manufacturers can do to save themselves in 2008 for my book, Can American Manufacturing be Saved? Why we should and how we can, one of my top recommendations was to implement lean manufacturing. I included the recommendation from Luke Faulstick, then COO of DJO Global, that any company embarking on the lean journey should rethink its offshore outsourcing. Now, I believe that any company that becomes a lean company will not need to offshore manufacturing to be globally competitive.

What has made me make such a bold statement? I say this partly because in the last six years, I have benefitted from attending dozens of two-to-four hour workshops offered by the San Diego Operations roundtable, now under the purview of CONNECT. Nearly all of these workshops focused on applying lean methodologies and tools to manufacturing, derived mainly from the Toyota Production System and identified as "lean" in the 1990s by James Womack who wrote The Machine That Changed the World.

The main reason, however,  is that I recently had the pleasure of reading the book, Lean Company, by Luis Socconini, founder and director of the Lean Six Sigma Institute (LSSI), as well as taking the Lean Six Sigma Yellow belt class offered by LSSI.

LSSI was founded in 1998 by Socconini in Mexico, expanded into other countries in Latin America and Spain, came to the United States two years ago, and is now headquartered in Chula Vista, Calif. Lean Company is Socconini's third book. All three are written in Spanish, but Lean Company is being translated into English and will be released in 2015. Since I have a degree in French and Spanish and have had the opportunity to maintain my Spanish fluency, I have been able to easily read his book.

Lean Company is the "everything you ever wanted to know to become a lean company" guidebook. Most companies are using the lean methodologies and tools to eliminate waste and improve productivity to become a lean manufacturer, but Socconini shows that there are processes in every critical activity within a company that can be made lean, so that you can become a "lean company."

In his book, Socconini presents a holistic approach to becoming a lean company through using a collection of strategies, methodologies, and tools that can be applied to any key process within a company to eliminate any type of waste and integrate every process. He also shows that you do not have to be a medium to large-sized company to become a lean company, even small companies can do so.

He presents an innovative way to use and implement the lean methodology and tools to improve the following processes:

• Talent development
• Marketing and sales
• Design (new product development)
• Logistics - planning, purchasing, warehousing, shipping
• Financial - budget, cost accounting, financial accounting
• Manufacturing
• Maintenance
• Service
• Quality
• IT

He writes that all of these processes need to be done in the shortest amount of time and with the best quality. Good management requires making the best decisions based on a strategic plan and using a simple system to evaluate results on a weekly basis instead of monthly as companies traditionally do in order to avoid the realization that it is too late to make the correct decision. Key points he makes in his book are:

Talent development requires that all jobs should be learned in the shortest amount of time and performed correctly; otherwise companies are wasting time, money and efforts trying to fix problems because personnel are not correctly trained.

Marketing and sales processes need to eliminate waste from complex procedures so that simple and dynamic decisions are driven by the real demand, not by forecasts.

The new product design process must be quick and reliable so that products will have the best quality at the lowest cost, saving millions of dollars in the long run.

The logistics process requires an integrated collaboration between sales, purchasing, inventory management, and shipping to keep the company running smoothly and meet the customer's needs consistently. Lean logistics develops a supply chain concept where all types of waste are eliminated creating a highly reliable value stream.

The manufacturing and service processes must respond with the best quality when the customer needs it. These processes are where it is necessary to implement continuous flow, quick set-ups, kanban to synchronize information and material flow, quality control at the source, Total Productive Maintenance, etc.

In the financial processes, companies need real cost calculations, continuous profit and loss calculations to make better decisions, better invoicing, inventory value calculations, credit, accurate accounts receivable and accounts payable by eliminating all the waste of those transactions.

The quality processes are so complex in traditional companies that sometimes they are designed more for external auditors and certification purposes rather than being simple and easily used internally to improve quality.

Socconini argues that one of the major constraints to the development of a company is its structure, usually organized by functional departments and separated from each other by barriers of command so that employees focus on working for their bosses rather than the company's clients.

A unique idea in the book is the recommendation that companies should be organized through the value stream structure, which integrates teams of people with multiple skills to achieve full potential in business and satisfy the needs of all customers.

Developing Highly Innovative Companies

The author also proposes a method to develop highly innovative companies and bring them quickly to their maximum level of development. He presents the following seven-step process for this methodology:

1. Company design – this is where the management team has to design the strategic plan, the value stream structure and the talent development process.
2. Define indicators - there are three levels of indicators:
   1. Company indicators that must be analyzed monthly
   2. Weekly indicators, analyzed by the use of a box score
   3. Process indicators, measured monthly by specific groups within the value streams.
3. Implement the Lean Six Sigma basics - housekeeping (5S), visual management, teamwork methods, and standard work. Those tools will be the foundation to any improvement effort.
4. Measure performance: To be able to understand the real priorities, every company should focus their improvement efforts on the bottleneck by drawing their value stream map. Understanding the real cost using lean accounting methods will be another important activity to cover in this step.
5. Analyze performance: Every company should measure their performance continuously to increase their chances of making better decisions. In this step, it will be necessary to spend at least 45 minutes every week in a box score meeting to evaluate any type of waste, variability and overburden. Results may be presented using Pareto analysis, trend graphs, cause and effect diagrams and brainstorming ideas to improve.
6. Preventive and corrective actions: If the performance analysis shows that a key performance indicator presents an opportunity to solve a problem or prevent one, then the methodology of using a problem solving technique or a failure mode and effect analysis (FMEA) is required.
7. Improve: when the performance analysis shows that the team hasn't reached the goal for any specific key indicator, then the improvement tool box must be opened to implement continuous flow, kanban, quick set ups, TPM, etc.

The book presents a composite case study of a mid-sized manufacturer of metal and plastic products that provides an excellent example of how a company can be restructured and redesigned to be a successful lean company wherein everyone is able to develop their talent to the fullest extent possible and experience satisfaction in performing their jobs at a high level while reducing their costs, inventory and delivery time to increase profits.

During my Yellow Belt class, I heard a real-life testimonial from a very small San Diego company, Apollo Sprayers International, by CEO John Darroch. He stated that his company was in such bad shape in 2012 before they received lean training from LSSI that they were in danger of going out of business. They had 15-day lead times for delivery, were so disorganized that they only produced 15-20 units per day, and had no standard operating procedures in their production style shop.

After training, he said, "We are consistently delivering product in 2 to 3 days that once took 3 weeks; we increased capacity by 100%, and our inventory is substantially lower. Apollo Sprayers is once again a thriving company with productive and motivated employees. I thank Lean Six Sigma Institute for leading us back to success.” By implementing continuous improvement, the latest data is that they now produce 60-70 units per day, which is a capacity improvement of about 300%.

Lean Company provides an innovative model for integrating everyone in the company to participate in a dynamic movement towards improving, working collaboratively, understanding the company as a whole, and finally presents a way to measure process, not people any more.

In conclusion, Socconini writes, "Lean Company is a system that requires a team that is integrated, prepared and disposed to think in a different manner respecting the form in which the company functions and is ready to change the old paradigm through simple and powerful formulas that significantly improve the functioning and results of the company." (My translation approved by Socconini.)

The philosophy and concepts presented in this book will contribute in a very positive way toward saving manufacturing in the United States for all sizes and types of companies, and will be necessary to design and redesign the companies of the future.