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]]>As an owner of the Dale Carnegie Mid-Atlantic franchise, McKonly & Asbury is able to offer an extension of services to our clients and friends of the firm, expanding our expertise in the areas of leadership, team building, and people development.
To that end, Dale Carnegie is offering a complimentary webinar for manufacturers entitled “Communicating with Different Personality Styles” on Tuesday, June 16th from 2:00pm - 3:00pm. This webinar will review the four different communication styles outlined by behavioral psychologists, and help attendees identify your dominant style as well as communication styles in others. Understanding the different communication styles will allow attendees to use this knowledge to build collaboration within their organization.
During this webinar, attendees will have the opportunity to:
If you are interested in registering for “Communicating with Different Personality Styles” on Tuesday, June 16th at 2:00pm, please contact Ed Cropper at ed.cropper@dalecarnegie.com or by calling (267) 618-6639.
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]]>The American football season is full swing. The NFL is celebrating 100 years of this game of athletic and mental matchups. As an organization, the NFL is concerned with increasing its income by providing an entertainment product. To this end, each year it makes changes to its policies as they apply to players and clubs. They adjust in-game rules when defenses become too stifling, so that games are viewer-friendly and high-scoring. They investigate new technologies to upgrade equipment in ways that improve player safety. The League tweaks officiating practices based on perceived flaws or egregious errors from the previous season, to mixed results.
With the agony and ecstasy of each week’s antics and heroics, I can’t help but dream about applying Lean principles to making the game better in general, and for my Seahawks in particular. At the moment I am doing some work with Total Productive Maintenance, or TPM, which deals with making plant operations and production systems more effective. Here are some thoughts on how to get the best out of an NFL franchise by applying TPM principles.
How does TPM Apply to NFL Franchises?
TPM deals with improving the effectiveness of how we use equipment to create value. In American football, teams can be viewed not as machines, but as complex social and athletic systems competing with each other. Despite some franchises being perennial losers and winners in the NFL, there is remarkable parity among teams in terms of talent. Each week demonstrates that on any given Sunday, any team can beat any other one.
TPM teaches us that winning is not about how good your machines are. It is about how well you minimize so-called equipment losses. Winning football is largely a matter of having an average or better game plan and executing it well. In other words, a League-average team that minimizes its mistakes and unwanted events will beat the on-paper elite team that bungles the execution of its game plan, almost every time.
The Six Big Losses in an NFL Game
In TPM, these unwanted events are categorized into the Six Big Losses. Here they are, restated with some American football examples
Breakdowns. Injuries. On this, more in a moment.
Changeovers and adjustments. Twelve players on the field as a result of a failure to execute personnel changes between plays. Illegal formation. Misunderstanding one’s assignment on a play. Sacks and tackles for loss resulting from to inadequate blocking or skilled players’ inability to create separation from defensive backs.It is the job of the defense ruin the plans of the offense however they can. It is the job of a good offense to find favorable mismatches and adjust the play calling to take advantage of it before the snap.
Reduced speed. Hesitation of players on offenses reading defensive coverages. Hesitation of defenders due to confusion over their assignment. Playing slower while in recovery from injury. Slower play due to dehydration. Slower play due to accumulated fatigue late in games or late in season. Mismatch between a player’s strengths and the team’s scheme.
Minor stops and idling. Slips due to rain, snow or poor field conditions. Calling time outs to correct confusion, crowd noise or mismatches. Delay of game penalties. False starts.
Defects. Dropped catches. Fumbles, interceptions, blocked kicks. Questionable play calling. Failure to read defenses. Failure to react to offensive formations. Personal fouls due to poor tackling technique. Skilled players running wrong routes. Busted coverages due to miscommunication among defenders.
Startup and yield losses. Slow starts in games. Slow starts to the season. Failing to adjust the game plan during to compensate for the opponent’s game plan. Bad judgments by rookie players due to lack of game and practice repetitions.
Putting It All Together: Overall Team Effectiveness
Overall Team Effectiveness. From the product of the metrics above we can calculate an overall effectiveness percentage for the team. A 53-man roster is never 100% available, performing at 100% of their speed and strength, or 100% mistake-free. If a team’s reality was more like 85% x 90% x 90% the team is only 65% as effective as their full potential. That leaves a lot of room for improvement. It also shows why on any given Sunday a 7/10 team running at 90% OTE can defeat a 10/10 team running at 60% OTE.
In manufacturing, systematically reducing the six big losses increases available equipment capacity. This is experienced as more time to add value and create product. In American football, the loss is not time but yards. When enough yards are gained in series, this results in points, and the team with the most points wins.
NFL coaches, trainers and players are aware of all of the above. But how much time do teams spend measuring and systematically reducing these losses? It may seem better for a running back to spend hours in the weight room or training to run faster. However, if they fumble the ball or can’t recognize and hit the hole in the defense, their superior athleticism is wasted. If all aspects of the game such as talent selection, training, game planning, play calling, etc. were viewed from a pure loss-reduction perspective, how different would an NFL franchise’s performance be?
Forced Deterioration and Player Injuries
Systemic aims of TPM include restoring equipment to good operating conditions, keeping them in good condition, and preventing environmental or operating conditions that cause deterioration. The wear-and-tear that NFL players put themselves through is the very definition of forced deterioration. These are large men colliding with each other at 15-20 miles per hour dozens of times over a three-hour period each week during a five month period. It is a violent sport. The League recognizes the importance of player safety for the sustainability of the game.
There are four TPM metrics to address breakdown losses, i.e. player injuries
Injury Rate is how often an injury happens. IR = (total number of injuries) / (total player-hours). This is expressed as injuries per player-hour. A player-hour is defined as time players spend in training, practice, in games when they could be hurt. For this metric, the fewer the better.
Mean Time Between Injuries is average time between injury events. MTBI = (total player-hours) / (total number of injuries). For the hours between injury metric, the longer the better.
Mean Time To Recovery is average time to recovery from injury. MTTR = (total recovery time) / (total number of recoverable injuries). The shorter this metric, the faster players are returning to full health.
Mean Time To Failure is similar to MTBI but unlike it, measures the average time span until a non-recoverable or career-ending injury event happens. MTTF = (total player-hours) / (total number of career-ending injuries). For this metric, the shorter the better.
These can be measured for the League as a whole and also per team. Data can be stratified by player position, years in the League, number of snaps played, by practice time versus in-game, preseason or in-season, and different weeks during the season, Sundays versus Mondays versus Thursdays. Sports medicine and data science can combine to predict and help prevent injuries from fatigue build up, inadequate recovery, acute and chronic physical burdens.
Focused Improvement for the Next 100 Years
Focused Improvement is just one of the pillars of a TPM program. It focuses on systematically reducing the six big losses. It quantifies, prioritizes, analyzes causes and targets corrective action one by one. Sincere and focused improvement of these metrics, starting with reducing injuries, can help the NFL entertain fans for another 100 years.
The above post was written by Jon Miller. Mr. is a co-founder and partner of The GEMBA Academy. Mr. Miller has served as CEO and board member of Kaizen Institute Consulting Group for 4 years. He has led dozens of lean transformation projects in a wide range of industries. He has helped thousands of people across 20+ countries understand and apply Toyota Production System principles. Mr. Miller co-authored the Shingo Prize-winning book, Creating a Kaizen Culture. He contributes to a variety of publications, including over 1,000 articles on his Gemba Panta Rei blog. Today Mr. Miller advises clients on their lean journeys and supports content development efforts at Gemba Academy.
To learn more about this post please contact Mr. Miller at the GEMBA Academy. To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
]]>Lean Production, as an approach to managing complex operations, was introduced more than 30 years ago. Yet, despite decades of Lean thinking and practice, the utter dominance of its industry by Toyota (the inspiration for lean), and the well-documented gains by those enterprises that have practiced lean in a high fidelity fashion, Lean is often viewed as a shop-floor skilled trade, to be assigned to subject matter experts in staff (not line) roles; and conducted through programs and initiatives rather than as fundamental to the means and methods of the firm.
A key reason is that Lean in particular, and other methods of achieving outstanding operations more generally, are primarily taught as the practice of tools and techniques—and not as a complete, coherent system of thinking that addresses the strategic concerns of senior leadership.
Think, for example, about how “C-level” topics are taught and practiced. Finance, for instance, is grounded in theory: basic thinking about how, say, to value transactions. Getting paid sooner rather than later is better; having the right (option) to delay decisions is better; and diversifying versus concentrating risk is better. From three simple principles, a wealth of models can be constructed, scenarios can be considered, and decisions grounded in sound theory can be made. Similarly, strategy is also taught and practiced on the basis of theory, about how to create and capture value. In Michael Porter’s competitive advantage parlance, we want to construct barriers that prevent customers and suppliers from defecting, thereby strengthening their dependency on us and our ability to extract value from the situation. We also want to construct barriers to prevent intruders, thereby protecting us from vulnerabilities that would diminish our ability to create and capture value. Out of those simple ideas, strategists can construct and consider myriad possibilities.
Yet, that same ‘basic thinking,’ cause and effect based approach is not how Lean, six sigma, or the more recent agile are taught and practiced. More commonly, operations-oriented thinking is presented as collections of tools—value stream maps, pull systems, standard work, poke yoke, 4-, 5-, or 6-S for lean—without an explanation or understanding of how why or when their use is appropriate. What happens? In too many cases, Lean (or six sigma) gets practiced in a cultish fashion—devotees measuring fidelity through ritualistic use of tools. Or, it gets practiced in an analogous fashion—this situation looks like high volume repeatable manufacturing, so Lean applies. This situation does not look like high volume repeatable manufacturing, so Lean does not.
That’s unfortunate, because as created and practiced at Toyota at the highest levels, TPS is an expression of sound theory about how to manage the complex and dynamic systems through which value is created and delivered.
The premise is that when we gather people to work across myriad disciplines towards common purpose, what they’re doing, why they’re doing it, and how they’re doing it will be subject to countless errors, misunderstandings, mistakes, and difficulties. Therefore, if we want a system to perform, then it must constantly be generating feedback to draw our attention to what is going wrong, so we can contain the problem and immediately swarm it to understand its causes and to develop corrective actions.
How do we build such feedback into systems? First, we make a strong declaration of what we believe will actually work. So, we build heijunka boxes (as one example) as a way to give expression to the customer demands we are expected to satisfy; we construct value stream maps for sequential operations as our “best guess” of what has to get done, in what order, by whom to succeed in meeting that demand; we declare how work will be triggered and released (in a pull system), and we create standard work to increase the chance that the people responsible for individual work components will succeed.
In Toyota’s often copied temple, all this “declaration” loads on the Just in Time pillar.
There’s more, however. Given that we are going to be wrong about something, we need to find out early often, so we can both contain the problem before it metastasizes and as a trigger to swarm the problem, understand its causes, to construct corrective actions. In Toyota’s parlance, that is the jidoka pillar, more generalized as being sure there are tests built into work to call out problems early and often. Poke yoke, andon, and the like all grow out of that belief that since surprises always occur, we need to see those so they can be quickly solved.
So, where does that leave us? Well, we probably want to avoid talking about Lean in ritualistic terms, we want to avoid advocating for Lean just because Toyota does it, and we want to avoid defining Lean by tools and particular practices alone. After all, a skilled electrician rarely joins the Board for high-level conversations.
Rather, we should anchor on the fact that enterprises exist to create and deliver value to someone appreciative. Doing so demands having knowledge about what to do and how to do it. All of that is built up by saying what we think we know (eg standard work), finding out what we don’t know (jidoka, poke yoke), and improving what we think and what we do (kaizen). Keeping this manta simple—success depends on relentlessly building capability, and capability is built by the clarity of feedback and the discipline of response—gives us the chance from spreading Lean from being viewed as (sometimes somewhere) useful shop floor tools to a more general pervasive way of thinking about how we conduct our business.
The above post was written by Steven Spear. LEI Faculty member, Steven Spear, senior lecturer in MIT’s Engineering Systems Division, senior fellow at the Institute for Healthcare Improvement, and author of The High-Velocity Edge: Market Leaders Leverage Operational Excellence to Beat the Competition, which received a 2009 Shingo Prize for Research Excellence is a well known thought leader for his expertise on how organizations compete on the basis of process excellence and execution. Mr. Spear can be contacted through the LEAN Enterprise Institute at www.lean.org. To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
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Why is it sometimes difficult to see the financial impact of successful continuous improvement efforts? If actions are inadequate to deliver results or if they are not sustain, it is not hard to see why. What if we can visit the process and see that the process is 30% more productive as result of kaizen activity, but the financial controller cannot see it? Below are five common mistakes that prevent us from seeing the financial impact of Lean efforts.
Mistake #1: Not agreeing upfront on how to measure success
The starting point is to involve stakeholders and to agree upfront on how to measure success. The definition of success may not always be financial, but sooner or later it needs to be so. Sometimes there is a direct financial impact, other times it is an indirect benefit that requires further action to realize savings. All continuous improvement activity should be measurable in one or more of the macro categories of People, Safety, Quality, Delivery, Cash and Cost. Once the main problems areas have been agreed and defined in terms of KPIs as the company measures them, perform Lean diagnostic activity. Collect data, make analysis, calculate estimated savings. If a consultant or CI specialist does not know how to do these things, stop and get the education first. It is necessary to know where the financial controller or equivalent person will look for the results, and how that translates to Key Performance Indicators at the gemba level. It helps to have P&L management experience, or at least basic familiarity with how to read balance sheets, income statements and cash flow statements.
Mistake #2: Improving the links but not the chainSome improvements fail to hit the bottom line because the gains are local, isolated and do not contribute to better overall flow. The countermeasure is to design and execute activities that will result in changes across a value stream or at least a defined segment of a demand-supply process chain. This is where the CI specialist or consultant needs to understand how each of the Lean tools affects a specific KPI, both directly and indirectly. Since the aim of CI is to build or improve a system, these relationships are rarely simple, direct or one-to-one. A tree diagram is useful for mapping which CI efforts affect which KPIs and how these build up to a measurable financial impact. For example, 5S itself rarely delivers a direct financial impact. It may have indirect benefits on quality, safety, productivity, etc. However, 5S will enable SMED, which will enable reducing lot sizes, which will enable kanban, which will enable shorter lead-times, which enables better inventory turns and on-time delivery, which enable cash flow and reduced expedite costs.
Mistake #3: Declaring victory too soon
An improvement may fail to show financial impact because the new process is not yet stable. Equipment may not perform in continued operation as it did during the improvement and experimentation phase. Incoming materials quantity and quality may fluctuate. Methods may need updating as rarely seen configurations or special orders are run in the new process. Productivity and quality may lag as people working in the process experience learning curves. There are many potential change points to be aware of, track and monitor their effect on seeing financial results.
Mistake #4: Not making changes to supporting systems
Lean activity on the shop floor may change the physical reality of that process. However, there are SOPs, data, protocols, documentation and various other supporting elements. These affect how the work is done in a system. Even if the factory is capable of small lot production, if the lead-time offsets and lot sizes are not changed in the ERP system, or if kanban cards are not updated, orders will be executed according to the old reality of the process. Excess stock may need to be moved away from the process so that there is no temptation to run larger lots. Engineering drawings may need changing. The Bill of Materials may need updating. The cost basis may need to be updated. These should not be surprises, but identified, addressed and agreed upfront.
Mistake #5: Assuming that physical results will be visible as financial results
Sometimes the project leader is happy, the people in the area are happy, the plant manager is happy, but the finance person is not happy. She still can’t see the results. This should not happen if that person has been involved throughout the process in defining success, understanding cause-and-effect of various CI tools on KPIs, identifying potential system change requirements, monitoring new process startup fluctuation and so forth. Things will change, and finance people may need clues on where and what to look for to seeing the impact. There are other factors to be aware of such as reporting error, reporting delays, variability or fluctuation, averaging or normalization of data. For companies just getting started in Lean it is not uncommon that there will be some communication gaps, or unexpected adjustments made from reality on the shop floor to the manufacturing execution system to the financial reporting. Some plant leaders may hedge in reporting the new cost basis because they don’t fully trust the new process. They want additional buffer or slack, so that they are not on the hook to run at a lower cost when the process begins to backslide.
No doubt there are more reasons why we sometimes can’t see the financial impact of continuous improvement. Being aware of these failure modes and discuss them upfront gives us a better chance at showing that kaizen pays off.
This article was first viewed on Target Online. The article was written by Jon Miller of the Gemba Academy. To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
]]>For a goal to be really relevant, it must tie to the broader purpose and goals of the entire organization. Your strategy is going to help drive that. Strategy consists of a desired future state and a definition of how you’re going to get there.
You should break that strategy down into smaller interim goals on that path. Every goal that gets set in the organization should be linked to that broader element of your strategy. How do you do that?
Take your vision and your mission. Look at where you’re going as an organization. Break that down into major themes over the course of the strategic planning period. Break each theme down into actions you’ll have to take to achieve it. Break each action down into subactions until you can set an individual goal for each.
I worked for a lawn and garden company at one point, and I was in the strategic planning group. We said, “We’re no longer going to be ‘just a lawn and garden company.’ We’re going to move into outdoor living.” It was a much broader expansion strategy.
For each part of the organization, we set goals that were tied to that outdoor living strategy. Our consumer packaged-goods business had goals for new product line expansion and getting into new categories. Our services business had goals for offering new services. Even in the strategy group, we had goals for achieving that outdoor living strategy. We had goals for how many acquisitions we would do and what categories we were going to enter. For each acquisition we had goals related to targets to which we were going to make offers. We set a time for when we were going to make the offer. We had deadlines for making a deal. We had deadlines and goals around integration, executing the plan, and expanding those businesses once they were acquired. Every single one of those goals tied to a broader strategic theme, and those themes tied to the broader strategy of getting into outdoor living.
We all knew how we were contributing to the broader strategy. Therefore, our goals made sense, and they were meaningful and relevant to the organization’s mission.
When you set your goals, make sure that you can go from strategy to themes to actions to goals, and then explain to the members of your team how those goals roll up to the broader strategy. It will give their work meaning and help them understand how they fit in.
Goals shouldn’t just connect from your strategy down to the individual goals. When you add your goals up, they also must align from corporate goals down to the individual. Ensure everyone’s work is headed in the same direction, and people know how they fit in, how their work contributes to the broader goals you’re trying to achieve.
The way you do this is to work from the vision down to subcomponents, then down to the subcomponents below that, all the way down to individual goals. Goals should cascade from the highest levels down, and when you add them all up, hopefully it’s more than you’re trying to achieve at the top level. Why? Well, you want to make sure that you hit that goal. By over-allocating that goal across the organization, you’re going to increase the chances that you hit the big goal.
I worked for an operating division at one point, and we had a goal of $200 million of revenue. There were five regions in the organization. Each region was given a goal of $42 million. Now, that’s $210 million. Within those regions, each branch was given a goal, and when you totaled up all the branches, it came to $215 million worth of goals. We then looked at the individual sales reps, and every sales rep was given a goal. When we totaled up all the sales rep goals, it was $220 million. Adding up those individual goals exceeded the division goal by 10 percent, by $20 million.
The reason we did this was to ensure that we hit that top-level $200 million goal. During the course of the year, some sales reps exceeded their goals, some met their goals, and some fell short. Working from the top down ensured that we all focused on the primary goal. Everyone was focused on driving sales, and by over-allocating that goal from the top down to each individual helped us achieve that goal.
If you plan to go with an over-allocating approach, setting these goals from the big goal down to individuals, be careful about overplaying that hand. You don’t want to make the goals unachievable.
I saw this dynamic when I was in the army, and we had to be at formation at a certain time. Our company commander would say, “I want everybody at formation at 6 a.m.” The lieutenants would then go to the organization and say, “I want everybody at formation at 5:30 a.m.” The platoon sergeants then went to the teams and said, “I want everybody in formation at 5 a.m.” The squad leaders then said, “I want everybody in formation at 4:30 a.m.” The next thing you know, you’ve got this poor private standing out there in a parking lot at 4 a.m. waiting for a formation that wouldn’t happen for two hours.
Bad things can happen when you over-allocate a goal down to the individual level, so balance it out. Look at the high-level goal. Break it down into subcomponents. Look at the individual goals that are going to add up to that broader goal. Make sure the goals you set at the individual level are still achievable, and they’re directly tied to the broader goal you’re trying to achieve. By doing so, people know how they contribute, how they fit in. If everybody hits their individual goals, you’ll ensure that you hit those top-level goals.
This article was written by Mike Figliuolo. Mr. Figiuolo is the author of The Elegant Pitch and One Piece of Paper. He's the co-author of Lead Inside the Box. He's also the managing director of thoughtLEADERS, LLC—a leadership development training firm. He regularly writes about leadership on the thoughtLEADERS Blog. To learn more about this topic please contact Mr. Figiuolo. To learn more about this concept and its impact on LEAN please contact the LEAN Accountants of McKonly & Asbury.
]]>Picture this. A CEO says to his or her CFO: “Last month, our kaizen teams reported average productivity gains of 50 percent. Why can’t I see them in this month’s financial statements?”
The CFO responds: “I don’t know. I’m beginning to suspect that this lean stuff isn’t real.”
If I had a dollar for every time I have been told about conversations like this, I’d be rich. The exchange demonstrates that a lot of executives don’t fully understand what productivity gains are and are not. Oftentimes, accounting teams and systems focus on labor efficiency or the relationship of actual labor hours to standard labor hours. Penny pinchers want to think that the standards are correct, but this isn’t always the case.
Lean as a Strategy
The concept of lean is widely known, yet often misunderstood. It is not simply a way to cut costs; it should be seen as a comprehensive strategy. Strategy is what you do to create sustainable competitive advantage, and lean is a fundamentally different way of thinking about how to do that. As such, lean requires us to reframe productivity.
Everything we do is in the context of processes, which are comprised of activities. These activities fall into one of three categories:
One of the underlying principles of the lean strategy is to eliminate all activities that don’t add value for our customers. In the lean lexicon, these activities are called “muda,” or waste. People don’t intentionally create a process that contains waste, but it does happen. It can occur when we define waste with an internal focus rather than a customer focus. We consider scrapto be waste. We consider people who are standing around the copy machine talking a waste of time. But as long as they are working, we don’t deem it as waste.
When Art Byrne came on as CEO at The Wiremold Company in 1991, I, as CFO, gave him a plant tour. At the end of it, he said, “This company has twice as many people as it needs.” This statement surprised me because as we walked around, what I saw was that everyone was working. But what Byrne saw was a lot of activity that didn’t add value for the customer. He had developed “lean eyes.” He had the ability to see between waste and value being added.
One of the stretch goals that Byrne set at the beginning of our lean transformation was to achieve a 20 percent annual labor productivity gain. None of us thought that was even remotely possible, but then, at that point, we didn’t understand the real nature of waste and productivity. From 1991 to 2000, we maintained an average of 14 percent annual labor productivity gain.
The Nature of Productivity
Productivity is the relationship between the output of any process and the resources consumed in creating that output. This applies to all resources, including materials, people, time, energy and supplies. It is possible to improve the productivity of all resources. When we do an improvement event (kaizen), some of the advancements yield immediate cash savings and show up in the financial statements quickly. In other words, they are true cost reductions.
For example, at Wiremold, we were able to decrease the amount of office supplies we use, which nearly cut our cost in half (48 percent.) This produced a quick cash saving and an improvement to our bottom line. Another example is a kaizen in which quality improvements result in reduced (or eliminated) scrap and therefore immediate reduced usage and cost of materials.
It is imperative that executives focus on supporting their employees, which includes providing assurance that no one will lose their job as a result of productivity gains. Their jobs may shift along with the work, but they have to know that their employment is secure. This guarantee is what some CFOs grapple with, because increased labor productivity frees up capacity, not money.
Actualize Improvements into Profits: A Case Study
So, in the context of lean strategy, how do you convert productivity gains into profitability improvement? At Wiremold, we actualized our gains into 13 percentage points of additional gross profit by accomplishing the following:
1) Sell more, do more.
This is the best way to actualize productivity gains into profit improvement. Since we already had the people and production facilities, the only significant production cost of the additional units we sold was their material content. Everything else (sales minus materials, which in accounting parlance is known as value added) improves gross profit. In order to sell more, we used time to create a competitive advantage. For example, we reduced the lead time for most of our products from weeks to days. This enhancement transferred to our customers in the form of a rapid replenishment system, which allowed them to stock less of our product at once, thereby freeing up their cash.
We also aggressively improved our new product development process, which resulted in reducing our lead time (concept to launch) from years to months. This yielded an increase in customer satisfaction, as we were able to provide a stream of more innovative products that our competitors could not match.
All of this growth was self-financed by our productivity gains. Several of our plants were able to more than double their volume with the same number of employees.
2) Reduce overtime.
Many companies, including ours, find themselves incurring significant amounts of overtime. Full Time Equivalent (FTE) employees are eligible for overtime, which makes FTEs expensive to employ, especially since overtime is paid at premium rates. By reducing our number of FTEs, we eliminated those expensive extra hours and turned this productivity gain into profitability improvement.
3) Embrace attrition.
Although we assured employees that no one would lose their job as a result of productivity gains, we did not guarantee a fixed level of employment. When someone quits or retires, see if you can maintain volume without replacing him or her. This will help you further actualize productivity gains.
4) Insource work.
If your company is paying a vendor to do work that you are capable of doing, bring the work in-house. By insourcing, you capture the vendor’s profit for yourself. You have the capacity, which was freed up by productivity improvements, to support insourcing, even if it means spending a little upfront money to buy minor equipment to complete the job.
Lean by Example
When I teach workshops, I ask participants if their companies require complete cost-benefit analyses for each kaizen event. Almost everyone’s hand goes up. Then, I explain the error in doing this, because most improvements will be in the form of labor productivity gains, which do not necessarily result in immediate profits. This can be a hard fact to face, especially for executives, but education can help significantly. Accept a leadership role by teaching your company (a) the strategic value of lean and its ability to disrupt and create sustainable competitive advantage, (b) the nature of real labor productivity improvements and (c) the four things it must do to actualize the improvements into additional profits.
This article originally appeared in the Fall 2017 issue of Target magazine. Orest (Orry) Fiume is retired CFO and director of The Wiremold Company and co-author of the Shingo Prize-winning book, “Real numbers: Management Accounting in a Lean Organization.” Learn more about lean accounting and other financial management practices at AME Chicago 2019 this fall.
To learn more about LEAN and its concepts, please contact the LEAN Accountants of McKonly & Asbury.
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Let’s look beyond 2019 predictions. Are manufacturers’ looking a decade down the road? Here are five trends that need to be on their radar, not just over the next 12 months, but in the coming years.
Global Virtual Workforce: Merging Extended Reality with the Internet
Two million manufacturing jobs could go unfilled by 2025 due to the skills gap. On the horizon lies a solution to manufacturers’ skilled worker shortage: the merging of global interconnectivity with Extended Reality (XR), which will help companies locate STEM-educated employees. Within a decade companies will be able to tap skilled workers across the globe to design products, work with engineers, and operate and maintain U.S.-based machines and equipment – in effect, a worldwide workforce will staff globally connected virtual-actual shop floors.
Internet of Goods: Local Production and Local Distribution
A study published by the MAPI Foundation provides a new vision for how the Internet of Things will affect manufacturing. The rise of e-commerce fulfillment centers and the digitization of distribution, pioneered by Amazon, opens up new ways for manufacturers to shift from a warehouse model to a more flexible distribution process. Customization and cloud computing will lead to an “Internet of Goods,” allowing the creation of new business models capable of expanding the market and changing the geography of production.
The Exponential Generation of Leadership
While Millennials prepare to take over leadership roles in the business world, it’s the next generation (born after 1999) that manufacturers need to put on their radar. Gen Z, which is just starting to populate college campuses and technical schools, has never known a world without smartphones, the internet, virtual reality, and artificial intelligence. Their knowledge of and capabilities with technology and their skillsets and 21st-century leadership style will be needed to help U.S. manufacturers compete globally in the coming decades.
This post was first viewed at www.mapi.net. The post was written by Stephen Gold, president and CEO of Mapi. To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
]]>Manufacturing once again remained a hot topic in 2018 with a lot of reasons for optimism going into 2019. Specific areas have emerged to reveal the top 5 trends impacting manufacturing for 2019.
Projections Predict Growth
Manufacturing in the U.S. is successfully adapting to changes in customer needs and related shifts in the consumer marketplace, while still focusing on profit margins and revenue growth. Production in the U.S. is estimated to grow 2.8 percent from 2018-2021 (a faster increase than other segments of the general economy), and manufacturing continues to have an outsized influence on regional economies. Longstanding economic analysis has posited for every dollar invested in manufacturing, the result is $1.40 in additional economic activity.
This growth trajectory outlook is not without a few lingering questions. For instance, as a result of the projected growth of manufacturing, the need for skilled workers in areas like metal forming, fabricating, welding and finishing has also risen. Welding alone will need an estimated 90,000 welders around the country by 2024. A National Association of Manufacturers report highlights how many organizations are successfully partnering with community colleges and high school career programs to build a pipeline of future skilled workers. Other companies like GM are embracing new technologies and working to attract young engineers focusing on digital services.
Automation Also Advancing
It’s long been held that industrial automation is a job killer, but in reality it’s quite the opposite, according to Jeff Burnstein, president of the Association for Advancing Automation (A3). “Hysterical stories keep being printed in the media, but the robot we see doesn’t match the idea of robots being a job killer,” said Burnstein. “If it were true, then if robot sales were to rise, you'd expect unemployment to rise. We looked at a 20-year period of manufacturing jobs and overall employment in the U.S., and every time robot sales rose, unemployment fell. Every time robot sales fell, unemployment rose.”
In the past seven years 137,000 robots were delivered in the U.S., he continued. “Publicly available studies tell us that as robot use accelerates manufacturing jobs will decline, but guess what? Nearly 900,000 new manufacturing jobs were created during that period. That doesn't sound like a job killer.”
A3 approached customers like General Motors (GM), who despite investing heavily into industrial robots, added 25,000 more staff, he added. Amazon was also approached, having added 40,000 industrial robot units to their fleet, along with 100,000 new humans.
“The significant issue we should be worried about may be labor shortages, as manufacturers struggle to find skilled replacements for retiring baby boomers who are technologically savvy enough for modern machinery and automation. We have examples of companies who have invested in automation to solve the problem of dull, dirty and dangerous jobs, lowered their costs, won new business they wouldn't have otherwise and since they've automated, they've hired more people,” Burnstein said.
New Methods of Production
Revolutionary new methods of making things will continue to advance in 2019. Call it 3D printing, additive manufacturing or rapid prototyping, there is no denying such “additive” technologies (compared to conventional milling, turning or other “subtractive” chipmaking) are coming on strong.
“The automotive industry has been using 3D printing since its infancy,” confirms Brandy Badami, business development manager at Roush, a leading automotive supplier. “Automotive OEM’s are truly embracing additive manufacturing more than we think. Although 3D printing is not yet suitable for their high-volume demands, they are constantly pushing the limits of the technology, allowing them to propel on innovation. Using 3D printing, engineers can design, print and test components designed with one of their biggest challenges in mind: weight reduction. This allows for quick-turn creativity that can provide a competitive edge with first-to-market product.”
More Computing Power and AI Connectivity
In addition to new methods of production, machine tools are exhibiting ever-growing levels of computerized operation and control. Not only does this result in increased precision and faster production, the volumes of data they create can be saved, uploaded to cloud computing centers and used to model even more efficient production processes.
Industry standards, such as MTConnect, are making such advances possible. Basically, MTConnect is an open, extensible, royalty-free standard – a communications protocol designed specifically for the shopfloor environment. By interfacing with different machine tools, cutting tools or any piece of equipment or data source, software applications can be built on MTConnect standard for the efficient gathering, reporting and use of a shop’s data.
With powerful computerized machine tools, the more industry keeps driving the standardization of shopfloor data, the simpler and more efficient a shop’s business becomes. Hours of setup and test cuttings could become a thing of the less efficient past.
Changing Attitudes
By 2025, up to 2 million manufacturing jobs are projected to be unfilled. Rather than continue to bemoan the problem, manufacturers are taking a multi-faceted approach to bridge the gap—not only for next year but also for 15 years down the road.
For example, Rockwell Automation is reaching out beyond millennials in a partnership with First Robotics supporting First Lego League programs for kids in grades four through eight. Some of those kids end up working at the company down the road. Over the past five years, Rockwell Automation’s interns have included young people with First Lego League experience.
“That’s very exciting to see, and it’s helping build our future pipeline of talent that’s coming in,” said a company spokesperson. “We view it as a recruiting tool. We view the students as they’ve got both the technical and the soft skills that we’re looking for that they gain from this experience. It’s more than just the robot.”
Disruption is a hallmark of all these manufacturing changes on tap for 2019: disruption in production methods, disruption in automation and collecting data and disruption in attitudes about manufacturing. Expect sharper clarity and further efficiency improvements as a result.
The above post was first viewed at www.gray.com. The article was written by Ray Chalmers. Mr. Chalmers is the founder and principal writer at Chalmers Industrial Communications Inc. To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
]]>As the economy evolves, technology advances and the workforce changes, individuals need to have the relevant skills, intellectual curiosity, the willingness to learn and adaptability for new-collar careers.
IBM CEO Ginni Rometty has been calling for government and business leaders not to think in terms of white-collar or blue-collar jobs, but new-collar jobs instead. IBM plans to hire 25,000 new-collar employees by 2020. Rometty said she believed that these were jobs that may not require a traditional college degree. New-collar workers may have degrees, or they may have gained the necessary skills through vocational training.
While some of these new jobs require a college education, most are "middle skill" jobs requiring a high school diploma, a foundation of math and science along with some additional training offered by an apprenticeship and or credentialing program. The Federal Reserve Bank of New York research indicates from September 2017 to September 2018 that 41.5 percent of recent college graduates were underemployed in the United States.
Students can attend public community and technical colleges for a fraction of the cost of tuition at four-year universities. Twenty-seven percent of people with less than an associate degree, including apprenticeships, licenses and certificates earn more than the average bachelor’s degree recipient.
Apprenticeship
Apprenticeship is a proven approach for preparing workers for jobs while meeting the needs of business for a highly-skilled workforce. It is an employer-driven, “learn-while-you-earn” model that combines on-the-job training, provided by the employer that hires the apprentice, with job-related instruction in curricula tied to the attainment of national skills standards.
From their first day of work, apprentices receive a paycheck that is guaranteed to increase as their training progresses. The apprentices are paid while they are in classes, unlike university students who pay to attend classes and graduate with student debt.
The apprenticeship model is leading the way in preparing American workers to compete in today’s economy. Apprenticeship programs keep pace with advancing technologies and innovations in training and human resource development through the complete involvement of employers in the educational process.
One of the nation’s premier apprenticeship programs was founded 1919 at Newport News Shipbuilding, a division of Huntington Ingalls Industries in Newport News, VA. The Apprentice School program is an industry-driven, hands-on apprenticeship college for individuals interested in pursuing a career in shipbuilding.
The Apprentice School provides a pipeline of talented, skilled leaders to support the business and drive the future of the company. The school offers four- to eight-year programs in more than 19 shipbuilding skill areas, as well as advanced programs to develop the next generation of world-class journeymen and company leaders.
Described as the “gold standard” by Newport News Shipbuilding president and CEO Mike Petters, the program has been successful in providing workers with the skills to succeed in advanced shipbuilding. In fact, 80 percent of Apprentice School graduates are still with the company ten years after graduation. It’s a real magnet for talented students, since engineers at the company can make nearly double the nation’s median hourly wage.
New Collar Graduates
A growing number of employers, community colleges, workforce agencies, youth programs, labor organizations, policy experts and others across the country are advancing apprenticeship and work-based learning strategies as workforce development and talent solutions for American businesses.
Jobs for the Future (JFF) launched the Center for Apprenticeship & Work-Based Learning to spur mainstream adoption of innovative and high-quality apprenticeship and work-based learning programs that connect more people in the US to good jobs with good wages while providing employers with the skilled workers they need to grow.
Apprenticeships are the new gold standard, states Harry Moser, Founder/President, The Reshoring Initiative. “All countries, even Germany, are having problems attracting and training skilled workforces. The U.S. will bring back from offshore millions of manufacturing jobs when its apprenticeship system goes from being a laggard to a world leader.”
To address these opportunities and challenges the Association for Manufacturing Excellence (AME) is holding a summit May 9-10, 2019, in San Antonio for business, educators and community leaders to learn how to graduate career-ready citizens while retooling the current work force for success in the 4th Industrial Revolution. For more information go to http://www.ame.org/event/san-antonio-2019-summit.
The above post was written by Glenn Marshall, Association for Manufacturing Excellence (AME) Management Team and retired Newport News Shipbuilding executive. To learn more about this post please contact Mr. Marshall at the Association for Manufacturing Excellence (AME). To learn more about this post please visit the above website or contact the LEAN Accountants of McKonly & Asbury.
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