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Archive for the ‘Lean Ops’ Category

MK-CE404_HONEYJ_DV_20130630185251One of the challenges of growing a business through acquisitions is how the buying firm can create added value that the acquired firm couldn’t create on its own. One possible solution is that the acquirer can bring some operational expertise that the acquired  firm lacks. That, according to the Wall Street Journal, seems to be the case with Honeywell (Honeywell’s System Sensor Plant Declares War on ‘Seven Deadly Wastes’, Jul 1).

The article describes the efforts Honeywell has put in to improve operations at a plant in its System Sensors unit that it inherited when it bought Pittway Corp in 2000. So what did things look like when they bought the place?

The 1,000 workers inherited at the St. Charles plant struggled to align output with demand. The facility often produced too much, anticipating demand that didn’t materialize. Overproduction and excess inventory are two of the seven “deadly wastes.”

“You couldn’t see the plant floor because there was so much inventory stacked up,” says Karl Odegaard, System Sensor’s director of manufacturing.

Sounds like classic case of push production scheduling, right? Here are some of the steps that they took to improve the process. (more…)

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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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For once we are not reporting on external content but on our own: I am excited to announce a totally new approach to executive learning and education on operations. Co-author and co-blogger Gad Allon and I have been working with our friends at McKinsey & Company to design the Executive Operations Experience: From Strategy to Execution.

A new collaboration between the Kellogg School of Management and McKinsey & Company.

Operations executives who are eager to stay current, hone their skills and broaden their networks, take note! In an exciting cooperative venture,  the Kellogg School of Management at Northwestern University in Illinois, USA, and McKinsey & Company will be offering a first-of-its-kind, experiential learning program starting in the fall of this year. Four, three-day sessions taking place at McKinsey’s model factories throughout Europe will provide a curriculum that covers all operational functions, jointly taught by both academics and consultants. Learn if the new 2013 program might be right for you here.

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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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