Posted in Innovation, Inventory, Lean Ops, Operations Strategy, outsourcing, Supply Chain, tagged 3D Robotics, Chris Anderson, Inventory, Lean Ops, Operations Strategy, outsourcing, Supply Chain on January 28, 2013 |
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Chris Anderson, the former editor of Wired and current 3D printing cheerleader, has an intriguing piece in the New York Times (Mexico: The New China, Jan 27). it deals with his experience running 3D Robotics, a maker of civilian drone aircraft. 3D Robotics competes with firms that sourcing their production in China and hence they have had to find a way to take on competitors with low labor costs. Their answer? Tiajuna, Mexico. 3D is based in San Diego so engineering is done on the north side of the border but assembly is done on the south. Labor costs may higher than in China (but, as the article notes, the gap is closing as Chinese wages rise) but Anderson sees many advantages in his firm’s “quicksourcing” model that depends as much on speed as cheap hands.
First, a shorter supply chain means that a company can make things when it wants to, instead of solely when it has to. Strange as it may seem, many small manufacturers don’t have that option. When we started 3D, we produced everything in China and needed to order in units of thousands to get good pricing. That meant that we had to write big checks to make big batches of goods — money we wouldn’t see again until all those products sold, sometimes a year or more later. Now that we carry out our production locally, we’re able to make only what we need that week.
This point obviously depends on owning one’s own facility in Mexico or having a very tight relationship with the Mexican supplier. If a small buyer doesn’t have much negotiating power with a supplier it will still likely face large minimum purchase quantities when buying from Mexico. Still it is an interesting observation and suggests that some start ups may be making ill-advised trade offs between cost savings and flexibility. (more…)
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Over the years, we have had several posts applying lean operations to health care (see, for example, this or that). However, we have yet (I think) to post anything on Virginia Mason. Despite what its name might suggest, Virginia Mason is located in Seattle and has long been known as a leader in taking lessons from Toyota and applying them to health care. Now, in the form of a report from PBS’s NewsHour, we have an excuse to remedy that oversight (Rooting Out Waste in Health Care by Taking Cue From Toyota Assembly Lines, Oct 24). Check it out!
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California is famous for its car culture but that lifestyle has been expensive in recent months as the price of gas in the Golden State has climbed and climbed. California gas prices are almost always above the national average but in recent weeks the gap has grown more significant than usual.
So what gives? According to the Wall Street Journal, it’s all about supply chain issues (California’s Gas Price: Is There a Villain?, Oct 18).
What’s the lesson learned from California’s recent spike in gasoline prices, which is costing consumers millions of dollars and prompting calls for an investigation?
Probably nothing more villainous than this: In the world of tight supply-chain management, if you live by “just in time,” you on occasion will get hosed by “just in time.” And that’s the price Californians opted to pay, in part because they have goals beyond just access to cheap gas.
As the article goes onto explain, there are two issue here. The first has to do with the features of the market that have operational implications.
The state is an isolated market. Ships deliver oil to California’s refineries, which then make gasoline and pipe it throughout the state and to neighboring Nevada, Arizona and Oregon. There is no major pipeline or rail infrastructure that can quickly deliver large amounts of gasoline or oil from other locales in the U.S. to California—supplies that could mitigate shortages.
How isolated is California? While the rest of the U.S. is consuming less imported oil and more domestic shale oil from fields like the burgeoning Bakken in North Dakota and Eagle Ford in Texas, California is importing more oil from countries such as Ecuador and Iraq—now up to roughly half of what it consumes.
The state also mandates a special blend of cleaner gasoline—with the strictest specifications in the nation—especially in the extended summer months. The cleaner and pricier gasoline, in a driving market that’s larger than many countries, has been a plus for the state’s air quality, a goal Californians sought. But the trade-off is that during emergencies, California stands alone.
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The new issue of Businessweek has an interesting article on how Iowa has a program to improve state services through lean services (Iowa’s Lone Efficiency Ranger, Aug 23).
Lean, a management theory popularized by Toyota Motor, focuses on kaizen, or, loosely translated, “change for the human good.” The idea is to first map all of the steps, stops, time, and personnel involved in making a product or executing a process, then rethink how it could be done more efficiently. In white-collar offices that’s hard because many of the steps are invisible. Still, a 2010 kaizen at the Iowa Department of Transportation resulted in a 46 percent reduction in the number of steps it took to issue a temporary restricted license, dropping the backlog of people awaiting them from 600 to about 100, and response time from 30 days to just five. “It’s a continuous improvement mind-set, and one of the things that you have to be doing is constantly reassessing,” says Mike Rohlf, the administrator of the Iowa office.
Issuing temporary restricted licenses hasn’t been the program’s only win. The Iowa Department of Management’s website list the various projects they have undertaken as well as the benefits they have seen.
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Posted in Apparel, global operations, Human resources, Lean Ops, Operations Strategy, tagged American Apparel, Apparel, global operations, Lean Ops, Operations Strategy on June 5, 2012 |
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When you think of the retailer American Apparel, you may first think of racy advertising or a CEO prone to being served with sexual harassment suits. (My mind, of course, goes immediately to a classic Onion piece that combines both of these.) What you may not know is that American Apparel’s apparel is actually made in America. Just how they go about doing that is the subject of a recent LA Times piece (American Apparel fights the ‘made in America’ fight. For how long?, Jun 3).
The company’s seven-story factory, a former Southern Pacific Railway freight depot, is the biggest garment-making facility in the U.S., according to an industry trade group. Here, 4,500 workers staggered over two shifts cut, sew, fold, box and ship clothes to the company’s 253 stores and other clothiers worldwide. …
In addition to the two large buildings downtown, the company owns four smaller manufacturing operations in Southern California. Fabric for the company’s trademark cotton T-shirts, which come in 52 colors, is knit and dyed in those facilities before getting trucked downtown for sewing.
So what steps do they take to make manufacturing T-shirts in the US viable? (more…)
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The current issue of Businessweek has an interesting profile of a Monomoy Capital Partners, a private equity firm with about $700 million in investments (My Week at Private Equity Boot Camp, Apr 26). Private equity deals are not the normal focus of this blog, but the article highlights an intriguing aspect of how Monomoy goes about deals. To take over a company and then be able to spin it off for a profit requires some combination of cleaning up balance sheets, rethinking the acquisition’s strategy, or straightening out the firm’s operations. As the article tells it, Monomoy’s approach to the latter is (from an operational perspective) is encouraging.
To buy a company and sell it at a profit requires a complex skill set: financing, restructuring, negotiating new leases and labor contracts, and, of course, “operations,” the term private equity uses for “making things.” Improving operations can mean parachuting in a consultant or a former chief executive officer as an adviser. Monomoy goes further. It occupies a plant floor like heavy infantry, with yellow tape, label makers, and overwhelming force.
In part, Monomoy does this through a series of two-week “boot camps.” Four times a year, the firm pulls about 20 managers from the manufacturers in its portfolio and sends them to one of its plants to suggest—and carry out—efficiencies. …
Monomoy has adopted Toyota’s system. Five of the seven people in Stewart’s operations group spent time on the line at the Toyota plant in Georgetown, among them Mike Bray, also in the training room. Bray, tall and goateed, runs the boot camps for Monomoy. He uses the word “kaizen” as a transitive verb and as a noun with an indefinite article, as in “We’re going to kaizen this” and “We ran a kaizen on it.”
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The Wall Street Journal had an interesting story on process changes at Boeing that aim to produce more 737s without having to expand the size of their Renton, Washington, factory (Boeing Teams Speed Up 737 Output, Feb 7). The scale of what they are trying to do is pretty impressive.
Workers here recently boosted 737 output to 35 jets a month from 31.5, and Chicago-based Boeing aims to produce 42 planes a month in 2014. Executives said they are studying ways to eventually reach 60 a month as they plan a retooled version of the plane called the 737 Max, a jet that Boeing expects to begin delivering in 2017. The company is trying to pare an order backlog of some 3,700 jetliners, including about 2,300 of its best-selling 737s. …
“How do you produce more aircraft without expanding the building?” is the question Boeing managers in Renton continually focus on, said Eric Lindblad, vice president for 737 manufacturing operations. “Space is the forcing function that means you’ve gotta be creative.”
So how are they are going about this? Largely by applying lean operations with cross-functional teams focusing on different parts of the plane. (more…)
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Posted in Auto Industry, global operations, Lean Ops, Manufacturing, process improvement, tagged Auto Industry, global operations, Lean Ops, Manufacturing, Toyota on December 2, 2011 |
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It is hard to feel sorry for Toyota. It is a mammoth corporation and a force in its industry. Still the Japanese automaker has been going through a rough stretch. Some of its problems are surely of its own making (e.g., quality issues and recalls), but others are largely beyond its control (e.g., turmoil in the world economy). One item in the latter category is the appreciation in the yen (see the graph at right).
As the Wall Street Journal reports (For Toyota, Patriotism and Profits May Not Mix, Nov 29), Toyota despite years of building factories in the US and elsewhere still has a larger share of its production capacity in Japan than its main domestic rivals. Given a weak Japanese market for new cars, Toyota would have to export heavily from Japan in order to make good use of that capacity.
How has Toyota responded to this challenge? In part they have been using innovative ways to decrease the size and cost of assembly plants. Check out this spiffy graphic:
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Much has been written about applying operations management techniques — many developed in manufacturing environments — to health care settings. Indeed, this has been a regular topic in this blog. One thing that has been missing from this discussion has been a view of preventing errors through better design. When making things, the argument goes that it is easier (or at least more cost-effective) to prevent quality issues at the design phase than once production has begun. That gets us to CareMore, a company profiled in a recent article in The Atlantic (The Quiet Health-Care Revolution, Nov 2011, with a hat tip to Suraj Mathew of EMP 87 for pointing me to this one).
CareMore specializes in taking of Medicare Advantage patients. Medicare Advantage is a capitation program. The health care provider is paid a fixed amount per patient and gets nothing extra when something catastrophic happens. That is, it shifts risk from the insurer to the provider. How has CareMore done in this market?
CareMore, through its unique approach to caring for the elderly, is routinely achieving patient outcomes that other providers can only dream about: a hospitalization rate 24 percent below average; hospital stays 38 percent shorter; an amputation rate among diabetics 60 percent lower than average. Perhaps most remarkable of all, these improved outcomes have come without increased total cost. Though they may seem expensive, CareMore’s “upstream” interventions—the wireless scales, the free rides to medical appointments, etc.—save money in the long run by preventing vastly more costly “downstream” outcomes such as hospitalizations and surgeries. As a result, CareMore’s overall member costs are actually 18 percent below the industry average.
What has driven these savings is upstream intervention to identify problems while they are still minor and easy to deal with and proactively making sure that patients adhere to their treatment plans.
One of CareMore’s critical insights was the application of an old systems-management principle first developed at Bell Labs in the 1930s and refined by the management guru W. Edwards Deming in the 1950s: you can fix a problem at step one for $1, or fix it at step 10 for $30. The American health-care system is repair-centric, not prevention-centric. We wait for train wrecks and then clean up the damage. What would happen if we prevented the train wrecks in the first place? The doctors at CareMore decided to find out.
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The Wall Street Journal had an interesting article on how Louis Vuitton is relying on operations to support its growth (At Vuitton, Growth in Small Batches, Jun 27). The brand has grown significantly and is now significantly bigger than rivals such as Gucci. That raises some interesting challenges as it tries to keep up its growth while maintaining its exclusivity. Part of the way it is meeting that challenging is opening a new factory in Marsaz, France, and trying to optimize all of its operations.
The site is part of a strategy to eke out small quantities of growth throughout its operations, starting with the factory floor. Vuitton’s size means it has fewer unexplored avenues to tap for growth than competitors. …
Vuitton’s growth over the years means it is constantly bumping up against its full production capacity. The company owns 17 factories that manufacture bags and accessories. Marsaz is the twelfth in France; in addition, there are three factories in Spain and two in California. Last year, Vuitton was running so low on inventory that it closed its French stores early in the day. The company only manufactures components such as zippers in Asia.
How is Vuitton getting more out of its existing factories? Lean operations. (more…)
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