BEYOND TOYOTA: HOW TO ROOT OUT

WASTE AND PURSUE

PERFECTION

Anjali RajNidhi Upadhyay

Vasundhra AgarwalNimisha Karnani

Priyanka DasAnirudh Chaudhari

THE REALITY Managers across the world professing that their

company is adopting lean techniques.

Claims are all just wishful thinking.

The main problem is that though many managers have got the individual lean techniques right , they are not able to put it together into a coherent business system.

More than 50 companies across the world have been studied and 5 steps have been discovered which will be useful to managers everywhere.

THE 5 STEPS

Define value precisely from the perspective of an end customer in terms of a specific product with specific capabilities offered at a specific price and time.

Identify the entire value stream for each product or product family and eliminate waste.

Make the remaining value creating steps flow.

Design and provide what the customer wants only when the customer wants it.

Pursue perfection

LEAN REVOLUTION AT LANTECHHISTORY:

Pat Lancaster grew up in the family workshop, convinced from his early age that he could be an inventor.

In 1972, he had his big idea: a new way for manufacturers to wrap their products for shipment.

With a small investment of $300, went to work under the corporate name of Lantech.

Lancaster’s idea was a device that would stretch-wrap pellets of goods with plastic film in place of the traditional shrink wrapping so that they could be shipped easily from one place to another

START OF THE PROBLEM Like all startups, Lantech was born lean, but as the

company scaled up maintaining lean production did not seem practical.

Lancaster appointed an operations manager, an engineering director and a sales director. Lantech was organized into a series of departments.

In pursuit of efficiency, Lantech built its four basic types of machines in batches.10 to 15 machines of one type were assembled at a time.

As customers bought only one machine at a time, the company had to store most of the machines in the warehouse.

INCREASE IN COMPLEXITY

Complexity increased exponentially as Lantech tried to move the orders gathered by the independent sales force through the office and the plant.

Proposals were sent for cost analysis to the engineering department which then sent the acceptable price back to the sales force.

Once the order is accepted, the order traveled from the sales staff through engineering aplications, design and credit checking before returning to design, which generated a bill of materials.

The order with the bill of materials then went to the production operation’s scheduling department.

There were usually delays as there was a queue of orders.

As a result, orders generally took 12 to 14 workdays to travel from the sales staff to the scheduling department, even though the actual processing time was less than 2.

FIRST STEP TO SOLVE THE PROBLEM Since the movement of products through the

plant was so erratic, the company created a separate order management department within the sales force to communicate with the plant about where the machine was in the production process and to expedite the order if the customer was getting restless.

This system was fine in theory but always a mess in practice because of the conflict between customers’ changing desires and the logic driving the production system.

THE REASON FOR THE ISSUES AT LANTECH Severe communication issues within the

company which increased with increase in staff numbers.

Each engineer had a stack of projects on his desk.

Most steps added no value and managers focused on minimizing variations in operations rather than on pursuing perfection.

CHANGE AT LANTECH On June 26 1989, Lantech lost a patent-

infringement suit against a competitor that was offering lower-priced clones of Lantech machines.

By the end of 1989 clones with roughly comparable performance started to appear everywhere.

It was like “ Lantech was walking dead”. Change was necessary.

FIRST APPROACH First approach was to reorganize the

company into separate profit centers for ‘ standard products’ and ‘ special products’.

TQM was introduced.

The talk about ‘ good enough’ changed to talk about ‘ perfection’.

SECOND APPROACH To create an empowered organization and to

build trust between management and the workforce and among different departments.

Autocratic managers were replaced with managers focused on team work.

Company conducted extensive training in team processes, team leadership and individual interaction.

Even after all this the factory was still a mess.

THIRD APPROACH New production method called Max-Flex

was introduced.

The idea was to slash lead time by building inventories of major components in advance, then assembling machines to customer’s specifications very quickly when an order was confirmed.

Lead time fell from 16weeks to 4, but costs were very high.

FOURTH APPROACH Introduction of better information technology.

The new system was wildly inaccurate because many times items did not get entered into the system.

Also, the magnitude of inputs and changes made the computer run very slowly.

By end of 1991, Lantech’s orders were falling despite price reductions and the factory was unable to accommodate the continual shifts in demand.

RON HICKS Ron Hicks joined Lantech in March 1992 as Vice

President- Operations.

To transform into a lean organization, a company needs three types of leaders:

Someone who is committed to the business and can be the anchor that provides the stability and continuity

Someone with deep knowledge of lean techniques Someone who can smash the organizational barriers

that inevitably arise when dramatic change is proposed.

Lancaster filled the first role, Hicks the second and Zabaneh the third

PROPOSAL OF RON HICKS Lantech would immediately form teams to

rethink the value stream and the flow of value for every product and every process.

Lantech would identify necessary activities and eliminate the rest.

Perform activities in rapid sequence.

Batches, queues , backflows would be banished.

ELIMINATING WASTEFUL ACTIVITIES AND CREATING FLOW Dedicated production processes was established for each

product family.

Throughput time was reduced.

Lantech needed standardizing their work.

Establishing takt time was critical.

Lantech also needed to figure out how to perform equipment changeovers quickly.

By 1992 lantech had converted its entire production system from departmentalized batch methods to continuous flow in cells.

LETTING THE CUSTOMER PULL THE PRODUCT Visual control was established. It is one of the

principles of lean thinking. Its says that if every employee can see the status of an activity, he or she will be able to take appropriate action.

Lantech started a new system of dedicated teams led by a ‘directly responsible individual’ who would be charged for the success of the product during its lifetime.

Once the employees were totally involved in the design and production process , the outcome was that good products were produced. The demand went high and production was based on customer demand unlike before.

Lantech’s share of stretch wrapping market zoomed from 38% in 1991 to 50% in 1995.

PURSUING PERFECTION Lantech as an organization is steadily

striving for perfection- a state in which every action in the organization creates value for the customer.

Despite the performance leap that Lantech has made, it can identify as many opportunities for improvement today as it could then.

LESSONS LEARNT By making continuous incremental

improvements in pursuit of perfection, companies can double productivity within two to three years and halve inventories , errors and lead time.

The problem today is that technology is present but it is misapplied and hence perfection not attained.

There is shortage of managers with the knowledge and capability to apply comprehensive lean techniques.

THANK YOU