We are all familiar with the notion that lean tools and methods provide a solid basis for continual improvement of operations. We’re also accustomed to the idea that a successful lean initiative takes months, even years, to implement effectively. One source that I checked says that it takes 10 years.
Lean methods are not generally thought to be crisis intervention tools. If anything, lean tools too often tend to go out the window when hard times hit. We think this is a mistake. Our experience has been that organizations need to double down on lean methods during a crisis.
Ron once found himself in exactly the circumstance where managers tend to say, “We don’t have time for lean. We’re in crisis mode.” A supplier had made promises that it suddenly realized it couldn’t keep. Failure to deliver on those promises would cause the customer substantial financial harm, to the tune of $20 million in lost sales. The supplier would likely be driven out of business. The first steps the supplier took to meet its targets were the familiar “let’s throw a lot of resources at the situation” approach. New equipment was purchased and installed. Fifty new associates were hired. All of this new investment resulted in an output of just one-third of what was needed to meet the customer’s demands. Those 50 new associates ended up doing rework because quality took a nosedive.
The supplier was in peril and called Ron’s company to let them know that it was unlikely that it would be able to fulfill its contractual obligations. Ron’s company replied that it would make sure that the supplier suffered significantly if it didn’t meet its promises. The supplier was considering the drastic step of filing for bankruptcy as a way out of its troubles. At that point, Ron was sent to provide what aid he could. At the time of his arrival, the supplier was more than 5,000 units behind schedule on delivery. Ron’s bosses demanded that at least 1,000 units be shipped within two weeks of Ron’s arrival. Each subsequent week, the ship quantity would increase by 1,000 units, until a rate of 4,000 per week was established. We’ve seen cliennts “put lean on the back burner” simply because they got a bit busy. This scenario provides an example of an operation that’s a long way past “busy.”
Let’s take a step back and discuss Ron’s options. Ron knew that throwing the kitchen sink at the issue had already been tried and found wanting as a tactic. Other managers in his position might have been tempted to double-down on that approach, but Ron was wise enough not to. It wasn’t likely that more of the same would work. Ron had enough experience at that point to know that simply exhorting everyone to work harder was the wrong path to take.
Instead, Ron deployed several primary principles of lean:
1. Assess the current state
2. Engage others in developing the desired state
3. Organize the workplace
4. Make the work flow
5. Make metrics visible
6. Put in systems to support and sustain the gains.
Assess the Current State
Ron’s first step was to assess the lay of the land. He counted up the amount of work-in-process. He asked lots of questions of anyone and everyone. Some of the questions sought technical information. Other questions sought broad information about culture and morale. That data-gathering effort led to analysis, during which Ron determined that the factory employed twice the number of associates that were needed to make the product. So not only did production levels need to improve from 30 units a day to more than 800 per day, but it needed to be done with half as many people and it had to be done in eight weeks.
Engage Others in Developing a Desired State
In collaboration with the managers and other associates at the plant, Ron developed a recovery plan. He got others engaged in that planning by asking for ideas and input. He had many ideas of his own, of course, but he knew that having buy-in for whatever plans were developed would be essential. He also knew that the best way to get that buy-in would be to include others in its development. Rather than say, “Here’s what we’re going to do, now get going,” he said, “Here’s what I’m thinking is a good course of action. Is there anything that I’ve missed? Is there anything that needs to be added?” Those sorts of questions led to plans toward creating and sustaining a mutually desired state.
Organize the Workplace
Phase one of the plan was devoted to organizing the entire operation. It started with a complete purging of the shop floor, including work in process, finished product, assembly stations, air, and electric drops. Anything that remained after this purge was cleaned and sanitized.
Make the Work Flow
The large amount of work in process Ron found was a clear indicator that material just didn’t flow through the manufacturing process. The collaborative plan called for conveyors to be chopped up, assembly benches re-aligned, utilities re-configured, and layouts modified. By the end of day three, a new process was born.
Make the Metrics Visible
When the ultimate production target was first posted (800 units per eight-hour shift), the associates groaned. Most felt the target was too high. Further, Ron emphasized that the target represented first-pass quality of 100%; if it couldn’t be shipped as soon as it came off the line, it didn’t count toward the target. (Remember, the current production rate stood at 30 units per shift and that included product that needed rework.) Interim daily and even hourly targets were set and posted. The associates quickly got accustomed to the improved flow and were soon crossing out the interim targets and setting them higher. By week six, two weeks ahead of schedule, the crew was putting 800 units per shift on the racks.
Policies and systems to sustain the gains
Company leaders designed a compensation model that, eventually, led to wages far above what they were accustomed to. A production output standard for the plant as a whole was established. When the plant exceeded the standard, wages went up. When the plant fell below the standard, wages went down. Poor quality factored into the wage calculations so that high production coupled with good quality was rewarded.
Instrumental to the operation’s ability to achieve, then sustain the remarkable gains made was a set of “rules of engagement” that the leadership team developed and reinforced day by day. These rules of engagement were posted widely and frequently communicated. Everyone in the operation was assessed and received frequent feedback, positive and constructive, as to how well he or she was adhering to these rules of engagement.
1.) We will work as a team and be measured as a team.
2.) Everyone will be cross-trained and will be expected to master all the assembly steps. Everyone will be expected to understand the needs of his or her internal customers and suppliers.
3.) If a problem or defect is discovered by a member of the assembly team, that associate will be expected to stop the line and then make their teammates aware of the problem. The team will decide together how to best deal with the issue in real time and move on.
4.) If an assembly team member has an improvement idea, it is his or her responsibility to pitch to the team. The team will develop action plans to ensure implementation within 24 hours.
It is amazing just how fast things can happen when you want them to. Four rules of engagement; that was it. Along with a good plan and a group of engaged associates, that was all that was needed to turn the business around and to sustain the gains.
Lean concepts and methods work whether the company is doing well or in a deep crisis, as this case illustrates. It’s important to note that a strong emphasis on the engagement of associates was apparent at every stage of the initiative. That, we think, is the real moral of the story: lean works, even in a crisis, because engaging associates in improving operations always works. Especially in a crisis.
