Mr. Lean Buys and Transforms a Manufacturing Company The True Story of Proftably Growing an Organization with Lean Principles Mr. Lean Buys and Transforms a Manufacturing Company The True Story of Proftably Growing an Organization with Lean Principles GreG lane Foreword by John Shook Productivity Press Taylor & Francis Group 270 Madison Avenue New York, NY 10016 © 2010 by Taylor and Francis Group, LLC Productivity Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10 9 8 7 6 5 4 3 2 1 International Standard Book Number: 978-1-4398-1516-8 (Hardback) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the validity of all materials or the consequences of their use. 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HD9696.S42L36 2010 658.5’6--dc22 2009045800 Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the Productivity Press Web site at http://www.productivitypress.com Contents Foreword ............................................................................................. xiii Preface ................................................................................................... xv Prologue: The Purchase.......................................................................xix Chapter 1 The Beginning Observation and Documentation ...................................... 1 1.1 Introduction ......................................................................1 1.2 Observing ..........................................................................2 1.3 Getting a Detailed Understanding of the Processes I Would Be Responsible For ..........................5 1.4 A Lack of Training Can Be Costly .................................6 1.5 Training as a Machine Operator ....................................8 1.6 Discovering a Lack of Documentation ..........................8 1.7 I dentifying Skill Sets Tat Needed to Be Replaced ......9 1.8 Workplace Organization (5S) Opportunities .............10 1.9 Discovering Diferent Methods Being Utilized for the Same Task (No Standardization) .....................12 1.10 Discovering Difcult Processes to Standardize .........13 1.11 Tis Much Observation Required Me to “Divide and Conquer” ..................................................................14 1.12 Summary..........................................................................16 Chapter 2 Standardizing the Estimating Process ............................ 17 2.1 Hiring a New Programmer/Estimator ........................17 2.2 Writing the First Draf of Standardized Steps for Programming and Estimating ................................18 2.3 Considering the Complications with Quoting ...........19 2.4 Minimize Training and Start-Up Time by Utilizing Similar Equipment .................................. 20 2.5 Continuing to Determine Where Skill Sets Would Be Lost .................................................................21 2.6 Meeting the Customers ..................................................22 v vi  •  Contents 2.7 Starting Some Measurements ....................................... 24 2.8 Visualizing the Measurement ....................................... 25 2.9 Plan, Do, Check, Act (PDCA) ....................................... 26 2.10 Summary......................................................................... 28 Chapter 3 Learning the Office Processes ......................................... 29 3.1 Introduction ....................................................................29 3.2 Inputting Orders ............................................................ 30 3.3 Problems Working without a PDCA Cycle in the Estimating Process ..............................................32 3.4 Repricing Discussions Are Easier if Based on Accurate Data ............................................................33 3.5 Learning to Purchase .................................................... 34 3.6 Scheduling the Shop Based on Tribal Knowledge .....36 3.7 Job-Shop Planning ..........................................................37 3.8 Simplifed Short-Term Planning ...................................38 3.9 A More Comprehensive Work Order Package ...........39 3.10 Poor Work Order Packages Can Increase Setup Time ..................................................................................41 3.11 Closing the Books ...........................................................41 3.12 Collecting the Money .................................................... 43 3.13 Summary......................................................................... 44 Chapter 4 The First Days Alone ....................................................... 47 4.1 Introduction ....................................................................47 4.2 My First Pricing Decision Alone ................................. 48 4.3 Creating Extra Capacity with 5S ..................................49 4.4 Establishing Normal versus Abnormal .......................52 4.5 Problem Solving versus Firefghting ............................55 4.6 I dentifying the Need for Shop-Floor Visuals .............55 4.7 Converting Small Productivity Improvements into Proft .........................................................................58 4.8 Challenging the Reported Proft Margins.................. 60 4.9 Summary..........................................................................62 Contents  •  vii Chapter 5 Creating and Selling Capacity ......................................... 63 5.1 Only Tinking in Terms of Full Absorption Costing .............................................................................63 5.2 Overtime as a Positive ................................................... 64 5.3 Setup-Time Reductions ..................................................65 5.4 Continuously Measuring Setup Times ........................67 5.5 Creating a Team Leader .................................................70 5.6 Increased Productivity through Visual Management ....................................................................71 5.7 PDCA of the Estimating Process ..................................73 5.8 Becoming the Estimator ................................................74 5.9 Summary..........................................................................77 Chapter 6 Getting Everyone Motivated for Improving the Machine’s Output ............................................................. 79 6.1 Introduction ....................................................................79 6.2 Managing Each Job Visually ........................................ 80 6.3 Te Desire for Independence from Day-to-Day Operations .......................................................................81 6.4 Preparing for Further Setup Reductions .....................82 6.5 Continuing the Kaizen of Equipment by Improving the Adjustment Phase of Changeovers ....83 6.6 Running a Machine while Confrming the Quality of the First Piece .............................................. 84 6.7 Difculties in Creating a Proft-Sharing Plan ............ 86 6.8 Staying Hands-On since “the Devil Is in the Details” ............................................................................ 88 6.9 Cost Justifying a Team Leader ..................................... 90 6.10 Closing the Books Becomes Anticlimactical ..............93 6.11 Summary..........................................................................94 Chapter 7 Seeing the Administrative Processes from a New Angle ................................................................................. 95 7.1 Introduction ....................................................................95 7.2 Visualization Confronts Obtaining Information Either from Computers or in Meetings ...................... 96 viii  •  Contents 7.3 Not Allowing Excuses for a Late Start .........................97 7.4 Small Businesses Look at the Recruiting Process Diferently ........................................................................98 7.5 Focusing to Improve the Ofce Processes ............... 100 7.6 Purchasing Is a Critical Administrative Function to Look toward Improving .........................102 7.7 Unsuccessful at Signifcantly Reducing the Time Necessary for Quotations ............................................107 7.8 5S for Shared Computer Drives and Files .................109 7.9 Outside Quality Accreditation ....................................110 7.10 Summary........................................................................111 Chapter 8 Moving the Business ...................................................... 113 8.1 Industrywide Downturn .............................................113 8.2 Background for Moving the Business at Tis Point in Time .................................................................114 8.3 Creating a New Layout from a Blank Canvas ...........116 8.4 A Nondisruptive Move .................................................118 8.5 Simulating the New Layout ........................................ 120 8.6 Introducing Procedural Changes during the Move ...............................................................................121 8.7 Using a Major Event to Introduce Change in the Ofce.............................................................................. 123 8.8 Summary........................................................................125 Chapter 9 Accurate Pricing through Better Cost Allocations ...... 127 9.1 Introduction ..................................................................127 9.2 Determining More Accurate Allocations during Tough Times ..................................................................129 9.3 Using My “Modifed Activity-Based Costing” .........130 9.4 Starting Simplifed Activity-Based Costing in the Shop Using a Matrix .........................................132 9.5 How to Relate the Matrix to Cost .............................. 134 9.6 A Simple Activity-Based Costing Matrix for the Ofce ..................................................................135 9.7 Relating the Matrices to Hourly Costs ......................136 Contents  •  ix 9.8 How Others Ofen Allocate Costs ..............................138 9.9 Keeping the Team Leader Focused during the Slow Times .....................................................................140 9.10 Increasing Process Capabilities to Reduce Outsourcing ...................................................................141 9.11 Standardizing the Business Processes Allows Time for Pursuing Other Opportunities ...................142 9.12 Summary........................................................................144 Chapter 10 Up-Front Delays ............................................................. 145 10.1 Te Measurements Confrm Success .........................145 10.2 Continuously Developing Protocols Allows More Autonomy from Day-to-Day Operations ........146 10.3 Planning Only Based on Available Materials Is Costly ..............................................................................147 10.4 Capacity Planning Based on Lead Times ..................148 10.5 Identifying Areas Where We Were Only Being Reactive ..........................................................................150 10.6 Available Time Utilized to Document Processes .....150 10.7 Lead Time Reduced through “Strategic” Inventory ........................................................................152 10.8 Prioritizing Problems during Busy Periods ............. 154 10.9 Te Lack of Hands-On Experience Is Very Costly .... 154 10.10 My Personal Experience of Generating Costly Designs ...........................................................................157 10.11 Summary........................................................................158 Chapter 11 Making Money during the Good Times ....................... 161 11.1 Introduction ..................................................................161 11.2 Improving Processes during Slow Periods Pays Of ...................................................................................161 11.3 Problem-Solving Skills Developed during the Slow Periods Begin to Pay Of .....................................163 11.4 Te Leader Keeps in Practice ......................................164 11.5 Diversifcation Would Have Been Helpful ................166 11.6 Te Need for a Second Shif ........................................166