SEMCO Managing Times Q1 2011

MANAGINGQ1.11

S h a r i n g S o l u t i o n s f o r Y o u r L e a n J o u r n e y

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It Takes a Villageto Catch the Rain

Vermeer’s LeanProcess MethodsSupport GreenMovement

2Leader at ArmstrongWorld Industries Prepares for MarketRebound

5 8

Sigma Electric Beats Low-Cost Competitors with Focus on Service

The most important and recognizableplayer in American football is the quarter-back. The offense must execute the coach’splay calls, yet the quarterback must be ableto improvise based upon the defensivestrengths and weaknesses to move the balldown the field.

Like any leader, innate talent, training,and experience contribute to a quarterback’ssuccess. But he wouldn’t be able to do any-thing without the rest of the team’s adher-ence to discipline and process excellence.Such attributes enable the best teams to exe-cute with consistency, to be responsive, andwin championships.

In this issue of Managing Times, Inoticed a similar theme among our featurestories: Lean is playing a pivotal role by providing a platform for improvement,achievement and sustainability that supportthe vision and passion of talented leadersthat we’re proud to work with.

The Watershed Organisation Trust(WOTR) in India is using lean to introduceproductivity-enhancing and waste-reducingprocesses that increase water levels, improvecrop yields, extend the availability of drinking water, and convert wasteland toviable farmland.

Vermeer Corporation, a long time leanchampion, is using lean process improvementmethods to reduce landfill waste and encour-age recycling. The company has leveragedlean to embrace environmental stewardship.Read the article to learn about the sevengreen wastes.

In Leadership Insights, Don Maier,Senior Vice President of Global Operationsand Supply Chain at Armstrong WorldIndustries talks about their lean transforma-tion and preparation for a housing marketrebound.

PUBLISHER’SNOTE

Sigma Electric has leveraged lean totransform itself into a highly competitiveorganization. They operate in a low-cost,highly commoditized market and now com-pete with a differentiated model that offershigh quality, flexibility and responsiveness.As a result, the company is growing at a 20percent compound annual rate. They haveremained price competitive by containingcosts and keeping high-value knowledge andproduction assets in India. They’ve becomea problem solver for customers while main-taining a low-cost structure.

Be sure to congratulate the team atMilbank Corporation in Kansas City. Theelectrical meter socket manufacturer wasrecently awarded the TBM Perfect EngineSite Award for its commitment to lean excellence in manufacturing. Since 2007,Milbank has liberated cash and space allowingit to invest in a new alternative energy solutions business that will ensure growthand differentiation well into the future.

Operational excellence plays a pivotalrole in helping each of these organizations to differentiate, grow and serve their customers and constituencies. I was certainlyinspired. Ready. Set. Hike! Let’s make 2011a winning year.

Anand Sharma Co-founder & CEOTBM Consulting Group, [email protected]

You Are the Quarterback. Lean is the Game Plan.

A publication of TBM Consulting Group

4400 Ben Franklin BoulevardDurham, North Carolina 27704 800.438.5535 www.tbmcg.com

PublisherAnand Sharma: [email protected]

Executive EditorWilliam A. Schwartz: [email protected]

Managing Editor Angela Scenna: [email protected]

Featured Columnists Carl Deeley Gary RascoeDavid Drickhamer Anand SharmaJoe Panebianco Tonya Vinas

Contributors Terry Butler Don MaierFred Earley Melissa SlaterPaul Hirt David Drickhamer

Art Direction and DesignIONA designwww.ionainteractive.com

Printing Carter Printing & Graphics, Inc.www.carterprintingnc.com

Published in Durham, NC 4400 Ben Franklin BoulevardDurham, NC 27704

TBM, the TBM logo, and LeanSigma® are registeredtrademarks of TBM Consulting Group, Inc.

If you would like to receive this journal via email,send your vital information including emailaddress to [email protected]

On the cover: Precision casting and finishing is acore capability for Sigma Electric ManufacturingCorporation.

Mary Andringa, President and CEO ofVermeer Corporation was inducted into theIowa Business Hall of Fame at the GreaterDes Moines Committee’s annual Black Tiedinner on December 9, 2010. Ms. Andringawas honored for outstanding leadership andcontributions to business and communitydevelopment in Iowa…Dave Johnson, formerly of ConMed Corporation, is now theVP of Global Operations and ContinuousImprovement at Steris Manufacturing…Alsoat Steris, Rob Ledbetter has been namedthe Director of Lean ManufacturingOperations…Joe Gausditis, Site EngineeringManager, will assume all responsibilities forthe development and rollout of all continuousimprovement activities at Zimmer inParsippany, NJ…Travis Jansen is now theLean Champion at Armstrong Industries inThompsontown, PA…Doug Shuff wasrecently promoted to Vice President BusinessTransformation at Harsco Minerals. Dougalso co-presented a webinar with TBMConsultant Gary Rascoe in August 19,2010. The webinar title is “EffectiveExecution of a Business Process Kaizen” andcan be found as an archived event on theTBM web site in the “webinars” section…Carlisle Corporation recognizes the followingnew Carlisle Operating System (COS) associates: David Nieto, Carlisle FoodServices, COS Site Manager in Chihuahua,Mexico…Eric Hines, Carlisle PowerTransmission, COS Site Manager inSpringfiled, MO…Deb Walock, CarlisleIndustrial Brake & Friction, Global COSDirector…

Congratulations to the following LeanCertification Graduates from GEX in India:Bhavya Subbarkrishan, SanjayRamachandra, Ganesh Rao.M, VineetJain, Mallikarjun Vasanad, KartickChanden, Bibhuti Bhusan Pradan, ManiSudhakaran, Ramachandran Gopal,Kanchana, Kokesh Kumar, Karunanithi,Nipun, Srivathsa, Karumbaiah…

Congratulations to the following gradu-ates of the TBM Lean Certification Program

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Leader course in the US: Mike Lyall, ScottWilliamson, Joe Cece, Tim Schmidt, andDon Croteau of Accellent…Robert Carmackand Mike Parkes from Owens Corning…

Congratulations to the following gradu-ates of the TBM Lean Certification KaizenFacilitator course in the US: NathalieRajway-Tukwila, WA, Ryan Boyce-Tukwila,WA, and Shawn Jutte-St. Augustine, FLfrom Carlisle Interconnect Technologies…Kenneth Carmeron-Fort Scott, KS fromCarlisle Power Transmission Products…Robert Dodson-McDonough, GA fromCarlisle Tire and Wheel…Alan Pennells-Pontypol, Wales and Tom Hall-Bloomington,IN from Carlisle Industrial Brake &Friction…Melinda Barbour and Ian Eckmanfrom Carlisle Construction Materials inCarlisle, PA…

Congratulations to the following TBMLean Sigma® Green Belt Graduates:Nicholas McCoy and Ray White fromOwens Corning…Scott Lancaster andTodd Bullington from Hayward PoolProducts… and Renee Smith from Sealy, Inc.

Congratulations to Albert Schott fromWIKA Germany for earning his LeanSigmaBlack Belt Certification from TBM…

TBM consultants Doug Bonner, HerbBrown, Mike Serena, Nero Haralalka, andJonathan Wheatley have earned an AAMICertification in the FDA’s Quality SystemRequirements and Industry Practice…TBMadded two new members to its Board of Directors: Ron Wince, President and CEO of Guidon Performance Solutions and Mark Gottfredson, senior partner and board member of Bain & Company…Nicky Fletcherrecently joined TBM as Marketing and Business Development Manager for the United Kingdom. Suman Jasrai recently joined TBM as Marketing and Business DevelopmentManager for India.

GIVINGBACK

2

The Watershed Organisation Trust(WOTR, www.wotr.org) works with villagesin drought-prone regions of India to restorethe water supply and reduce the need forpeople to migrate to the cities during the dryseason. The non-profit organization providestechnical guidance and some funding. Thevillagers provide the collective will and laborto terrace and trench the land to catch therain when it falls during the monsoon.

The idea is simple: Increasing plantcover, cutting fewer trees, diverting runoffand slowing the flow of rainwater, allows thesoil to absorb more moisture. As a result ero-sion is reduced, soil nutrients are retained,the water table rises, and wells are less likelyto run dry. The benefits flow down fromthere.

“The first thing people do when theirwatershed regenerates and their income goesup is to take their kids out of the fields andput them in school,” one of WOTR’s

founders reported in a November 2009National Geographic magazine article.

Through 2009 WOTR had implementedover 200 watershed projects in the states ofMaharashtra, Andhra Pradesh, MadhyaPradesh and Rajasthan, covering an area ofmore than 350,000 acres. In comparison toother non-profits WOTR has always beenvery efficient in terms of how much of thefunding it raises goes directly to support village projects.––––––––––––––––––––––––––––––––––

Last year TBM Consulting Group

provided LeanSigma certification

training to some of the organiza-

tion’s managers so they could

make it even more efficient.

Their objective was to increase

the assistance that they can provide

to villages without incurring any

additional expenses. ––––––––––––––––––––––––––––––––––


It Takes a Village to Catch the Rain By Gary Rascoe, Senior Management Consultant and Trainer, TBM

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You think you have trouble getting some people in

your organization to get on board with your change

initiatives. What if you had to convince a whole village?

By Gary RascoeSenior Management Consultant and Trainer, TBM

3Managing Times | Q1.11www.managingtimes.com

Among other tools we taught them how tocreate value chain maps and business processflow maps for administrative processes inorder to identify wasteful steps and processesthat could be eliminated.

Over the years WOTR has learned thatthe technical knowledge required to reshapethe land and improve the watershed is onlythe beginning. For any changes to remain inplace from season to season requires cooper-ation and careful attention to the socialdynamics of the farming villages. This iswhere lean program managers and kaizenpromotion officers might learn a lesson ortwo about building consensus to drive sustainable change.

In this region of India water is usuallyin very short supply during the monthsbefore the monsoon arrives in June, whichcauses families to migrate or to wait for thegovernment to send in tanker trucks ofdrinking water. Besides the obvious impacton family cohesion, the forced migration hasa negative impact on access to healthcareand childhood education. WOTR helpssolve this problem at the beginning of aproject by paying villagers a modest wage tostay home and move dirt around for three tofive years. As attractive as such an offermight be, it comes with a number of condi-tions.

First, WOTR will not begin a projectwithout the agreement of everyone in thevillage, including women and members oflower castes who are ordinarily excludedfrom such decisions. Another requirement isthat villagers must have a personal stake inthe success of the project in the form ofsweat equity. WOTR pays people for 80percent of their hours worked and everyfamily is required to contribute free labor tothe project. In addition, to give plants theopportunity to recover and grow, the villagers

must agree to stop free-grazing cattle andnot cut down any trees.

In addition to the farming benefits,WOTR simultaneously works to improvethe cleanliness of the drinking water, whichcan dramatically reduce childhood mortalityin villages where many children die from illnesses caused by waterborne pathogens. Inaddition to a year-long supply of safe drinkingwater, other improvements include increasedmilk production and higher income levelsfrom growing cash crops. Despite such harshrealities and obvious benefits, the socialrealignment and other conditions can bevery difficult for some people to accept.

In the beginning of a project WOTRrepresentatives will explain the requirementsfor collective participation and labor in aseries of communication meetings. Many of

these representatives speak from personalexperience having once lived in other villagesthat have been transformed by the rain harvesting practices. But just as many manufacturing executives don’t understandwhat lean is about until they visit a factorythat is doing it, the real buy-in comes whenvillagers visit other successful projects andsee the results of the work for themselves.

After everyone agrees to move forward,WOTR teaches villagers how to plan andtrack their work, including a large scoreboardsimilar to an hour-by-hour chart that displaysoverall progress. All of the work is performedby the villagers without the help of any outside contractors. Tracking and calculatinghow much each person earns is controlled bythe villagers as well. As a project nears conclusion, while some are always reluctant

GIVINGBACK (continued)

to finish up and give up the steady source ofincome, people typically move on to higher-value work such as crop production thatoffers higher income levels.

WOTR’s holistic approach yields holistic results:

• Ground water levels typically increase 25 to 60%

• Cultivated areas increase by at least 80%, and irrigated agriculture areas increase five- to ten-fold.

• Crop production climbs 90% to 145 % • Village school enrolment increases by 25%

to 40% (to between 75-100% of all children).

• Clean drinking water becomes available year round or for a greater part of the year

• Milk production increases by at least 200%• Former wastelands are replaced by tree

and grass cover that’s plainly visible in overhead before and after photographs.

• And finally, social harmony improves as women and the downtrodden gain a meaningful voice in local decision-makingprocesses.

At TBM we are proud to contribute tothe future success of an organization that hasalready made such an impact on people’slives. During our visits the villagers havealways been open, friendly and immenselyappreciative of the guidance and supportthat WOTR has provided. In its most recentannual report, WOTR states that the LeanSigma trainers taught and certified by TBMare introducing the productivity-enhancingand waste-reduction processes across theWOTR group and its projects.

“The benefits have been observed inthat the various wastes have been identifiedand are in the process of being reduced,

4 Managing Times | Q1.11www.managingtimes.com

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without reducing the quality of social mobi-lization. The projects can now be completedin a much shorter period than before,” thereport states.

Many watershed development projectsin drought-stricken areas around the worldhave failed not because of a lack of fundingor technical expertise. They have failedbecause organizers failed to manage thesocial aspects of such initiatives. The samecould be said for the lean initiatives at manycompanies. By communicating the potentialbenefits and getting everyone on board byshowing examples of the future potential,lean program leaders and kaizen organiza-tions can avoid future hiccups that mightdelay or otherwise derail progress.

TBM commends the staff of WOTRfor the work they have done, for the sus-tained impact of their programs, for therecognition that they have received, and alsofor their spirit of continuous improvement.Beyond watershed and land improvements,WOTR works with the villagers to thinkabout a future that includes better health-care, new schools, more efficient farmingpractices, replacing kerosene with pellet-burning stoves, and solar lighting. As they’velearned, with collective participation andhard work, anything is possible. ------------------------------------------------------Special Note: TBM Consulting Group Co-Founder, President and CEO Anand Sharmaserves on the WOTR board of directors.


5

By combining its operational excel-lence initiatives with a proactive environ-mental program, Vermeer Corporation hasmade dramatic waste and operating costreductions. Headquartered in Pella, Iowa,Vermeer manufactures heavy equipmentserving agricultural, forest, environmental,underground and specialty excavation cus-tomers. Employees cut, bend, weld, cleanand paint hundreds of tons of steel everyyear.

Vermeer conducted its first kaizen eventin 1998 and hasn’t looked back. Over theintervening years it has leveraged lean manu-facturing methods and Six Sigma tools totransform the company and dramaticallyimprove production efficiency and quality,reduce lead times, improve safety, minimizeinventory and boost profit margins. Thecompany has found that efforts to eliminatewasted energy, water, trash and emissions area natural addition to its continuousimprovement processes and culture.

“If you’re going through a kaizen eventand you’re thinking about eliminating waste,it doesn’t take any longer to think abouteliminating green waste as well as process-related waste,” reports Terry Butler, VermeerDirector of Environmental Health andSafety.

––––––––––––––––––––––––––––––––––Like a lot of manufacturers, Vermeerplaced recycling bins in productionareas many years ago. But whenVermeer Environmental EngineeringManager Fred Earley and a “dump-ster diving” kaizen team analyzedthe program, they found that recy-cling procedures were not very clear,and that there were many moretrash cans than recycling containers.When the team sorted out one day’strash on a tarp on the lawn, theyfound that 70% of what was thenbeing sent to the landfill could infact be recycled. ––––––––––––––––––––––––––––––––––

The kaizen team subsequently definednew recycling procedures and trained every-one on the site. They introduced segregatedrecycling bins on carts that operators mustempty after every shift in a central collectionarea. And they reduced the number of trashcans to make it easy to recycle and less con-venient to just throw stuff away. Supervisorshave reinforced the recycling habit by mak-ing it a part of each work area’s weekly 5Saudit.

“It’s been embraced very positively byour employees,” says Earley. “Who doesn’twant to create a better environment inwhich to live and work?”

TECHTALKSaving GreenAt Vermeer lean process improvement methods naturally support green

objectives while simultaneously lowering operating costs.

By David Drickhamer, independent business journalist and former editor of Industry Week magazine

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A kaizen team at Vermeer pick through one-day's trash revealing that 70 percent could be recycled.


Prominently placed recycle carts make it easy to recycle.

––––––––––––––––––––––––––––––––––As a result of these renewed recy-cling efforts Vermeer has reducedoff-site trash disposal by over 760tons per year. By finding beneficialuses for materials that were oncethrown away, the company’s landfillwaste has fallen from more than60% of total waste to less than 30%,and it’s still falling. The lean andgreen program has produced harddollar savings of $230,000 per yearin the form of disposal fee savingsand recycling credits. ––––––––––––––––––––––––––––––––––

Reducing wastewater is another environmental priority at Vermeer. Just as they do when spot-lighting non-value-added time in order-fulfillment processes, continuous improvement teamsmake the opportunities for environmental improvement more visible by mapping the amountof energy and water consumed, the amount of scrap generated, and how much pollution isemitted at each stage of a value stream.

A value stream map that accounts for forms of environmental waste.

After applying such techniques to analyze a parts-washing line, a team rerouted overflowpipes, eliminated heated water, and converted paint-prep coating systems from a phosphate toa zirconium-based process. Changing the overflow configuration reduced the amount ofwater going to the Vermeer wastewater plant—where it’s treated before being released back tothe city—and reduced water usage from 11 to 4 gallons per minute. Total reductions in waterusage and emissions now save Vermeer $114,000 annually.

TECHTALK (continued)

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7

Wastewater reductions at Vermeer dramatically exceeded annual targets.

Other environmental initiatives have reduced particulate emissions by 62% from 6.2 tons to3.6 tons per year through technology upgrades and the addition of new controls and collec-tion equipment. Implementation of a laundering and reuse process for personal protectiveequipment has saved $43,400 per year in replacement and disposal costs.

Much of the environmental progress made by Vermeer can be attributed to changing howpeople think and making environmental waste more visible. In addition to the seven wastesfamiliar to anyone applying lean manufacturing principles, trainers now talk about applyingthe three Rs (reduce, reuse and recycle) to the seven green wastes.

Seven Lean Wastes Seven Green Wastes

1. Overproduction 1. Energy2. Waiting 2. Water3. Excess Inventory 3. Materials4. Defects 4. Garbage5. Transport (Conveyance) 5. Transportation6. Over Processing 6. Emissions7. Excess Motion 7. Biodiversity

Source: Vermeer Corporation

Many manufacturers, motivated by both growing customer demands and a genuine concernfor the condition of the world we inhabit, are making environmental stewardship a core partof their company values. Earth-friendly manufacturing starts where value is created: on theplant floor. As Vermeer has demonstrated, incorporating lean and green priorities into processimprovement programs can translate those lofty values into quantifiable improvement to theenvironment, and your bottom line.

––––––––––––––––––––––––––––––––––

“Over the years Vermeer has

applied lean to all areas of our

business,” notes Earley. “Using it

to improve our environmental

stewardship is a natural progres-

sion. The challenge is learning

how to see green in everything

you do and then applying lean

principals to those opportunities.”––––––––––––––––––––––––––––––––––

––––––––––––––––––––––––––––––––––

“Waste is waste. Find it and

eliminate it,” advises Earley.

“Applying lean principles is a real

win-win and the results speak for

themselves.”––––––––––––––––––––––––––––––––––


Q. You have been involved in lean sincethe late 1980s, working at some of thefirst non-automotive companies to successfully build lean cultures(Batesville Casket Company,

Hillenbrand Industries, and Hill-RomInc.). What’s different about being a

lean leader today?Fundamentally, the tools and

philosophy are the same. It’s stillabout creating a culture focused oncontinuous improvement and

getting up every day to improvesafety, quality, cost and delivery. I

do see two big differences in thebusiness environment. First, we

have significant down cycles acrossjust about every business sector. A key

piece of lean is freeing up and redeployingunidentified capacities. That’s really

difficult to monetize if you’re in a downcycle like we’re in now because you don’thave the opportunity to grow at the ratesyou did 20 — or even four — years ago.

Secondly, business in general is moving ata much faster pace, and the transformations

I’ve been involved with have been movingat an accelerated rate, creating change fasterthan we would have been able to manage 20

years ago. The global success of lean philoso-phies has created an environment that ismore open to change these days.

Q. Prior to joining Armstrong, you werewith TPG Capital, a private-equity group.In this role, you led the lean pilots andmanufacturing due diligence atArmstrong. What is it like to be a leanchampion in this arrangement?The difference is not so much about privateequity as it is about management alignmentand speed of making decisions. Armstrong’slean journey was sponsored and initiateddirectly by our board of directors. With thatbuy-in and support of the board of directors— matched up with management commit-ment — you can really implement radicalchange rather quickly.

Q. Sounds as if it makes your job a lotmore fun. Does it?Absolutely. I talk to so many people at theTBM conferences, and their biggest prob-lems relate to how do you get the leadershipbuy-in and fortitude to let the lean transfor-mation take place and not cut and run thefirst time you have a setback. It’s somethingthat people really struggle with, and the pri-

LEADERSHIPINSIGHTS Loving the Lean Lifeby Tonya Vinas, freelance business journalist and former editor of Industry Week magazine.

Don Maier, Senior Vice President of Global Operations

and Supply Chain at Armstrong World Industries is leading a

lean transformation at the global floor- and ceiling manufac-

turer as it prepares for a market rebound in the struggling

building-products industry.

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vate equity environment gives you a greatbackdrop to get that done.

Q. Do you think that’s because the pri-vate-equity community has recognizedlean as a powerful way to create value?You bet. There are all kinds of deals that aredone in the private-equity space. During thediligence process, significant opportunities inlean for both manufacturing and businessprocesses are usually identified. In those, creation of a lean culture is built into theinvestment thesis, so you really have buy-ineven before Day One of the transformationprocess.

Q. Your first task for TPG was creatingan assessment model to evaluate improve-ment potential, and then use it to evaluateArmstrong. Where did you begin?We spent quite a bit of time at Armstrongcorporate headquarters getting metrics anddata, both quantitative and qualitative. Wethen took that data and, as best we could,put that into our assessment model. We thenconducted six physical site assessments. Theywere done on the gemba, walking the plantfloors with the managers.

Q. What were you looking for that youdidn’t get from the numbers?With these gemba walks it is pretty easy forsomeone with a trained eye to start to seethe signs of opportunity. Is there flow, or arethere islands of batch? What’s the state ofwork-in-process? What’s the frequency ofraw-materials replenishment? What’s the fin-ished-goods inventory position? Are theybuilding to a schedule or customer demand?

You as well get a sense for the talent of theteam. What’s the morale of the workforce?What’s their pace? What are they doing? Arethere tow motors driving everywhere? Or arepeople working in a synchronous way?

A key thing I look at is lead time from thetime raw materials hit the dock to when fin-ished goods are going out the other end.Generally, that gives you an idea of total leadtime versus value-added processing time.

––––––––––––––––––––––––––––––––––

At Armstrong they had a strong

track record of year-over-year

improvements. I was very

impressed with the caliber of the

manufacturing leadership and

Armstrong’s world-class perform-

ance in safety. The discipline and

behavioral change in culture

needed to drive their global safe-

ty performance convinced me

that they could embrace a lean

transformation and accelerate

their rates of improvement.––––––––––––––––––––––––––––––––––


Q. And then . . .The assessment model has several sets ofquestions that take the subjective observa-tions from the gemba walks and quantifythem into specific scores. These scores arethen extrapolated across the financial datathat was entered to create pro-forma P&Ls,balance sheets, and capacity charts. While itis an assumption-based model, it has beenproven to be fairly accurate. The two bigmetrics are gross productivity and working-capital improvement.

Q. Does the model account for chal-lenges outside of management’s controlsuch as raw material prices or a shortageof skilled employees?Yes. It also estimates the cost to drive thetransformation and the degree of difficultyto implement — is it going to be toughdrilling or easy drilling, and are there otherinitiatives that could accelerate or compli-cate the progress. That’s a part that a lot ofpeople miss . . . how difficult is it going tobe all things considered?

Q. If the model shows a favorableinvestment opportunity, and TPG takesthe next step — as it did for Armstrong— do you share the results with the management team?Yes, and management is usually in completedenial and can’t believe there’s that kind ofopportunity. Inevitably, that prompts us toask, why don’t we pick a couple of sites, andwe’ll go run a couple of week-long events,and see what we can find out? I call thesethe pilots. These pilots, often involving anumber of Kaizen events, open up the doorand always show the real potential. The nextstep is to do a robust value-stream model.

Q. I’m betting at this stage, you havecuriosity from some managers and front-line employees, and doubts from others.How do you take the next step to moti-vate people and get them on board?The next 100 days are very important. I callit the proof-of-concept stage. You need topick projects that will drive results that arevisible, sustainable, and that will hit theP&L. Then you have economic evidence ofwhat the lean transformation can deliver,and you begin to get buy-in. After that, youbegin introducing lean at a couple of othersites. I call this the ripple effect. It’s kind oflike the camel getting his nose under thetent. Once his nose is in the tent, it’s notlong before the whole camel is in the tent.

Q. In a multi-plant company such asArmstrong, how do you know where tobegin?You want to stack the deck in your favor, soI look for a couple of characteristics at eachsite: Is the management team open and capa-ble? Will the proof-of-concept be indicativeof what is possible at other sites? And is thisa middle-of-the-pack site? You pick a mid-dle-of-the-pack site because if you pick theworst site and show improvements, peoplewill just discount it, and you won’t get anycredit. Conversely, if you go to the best site,people will say it might work there, but wedon’t have the skills or ability to get thosetypes of improvement at the other sites.

At the end of the proof-of-concept, youwant to have the management team sayingthis is valid, this really works, and we canmake this work across the network of sites.

LEADERSHIPINSIGHTS (continued)

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Q. It sounds easy when you describe it,but no lean transformation is easy. Tellme about a memorable challenge atArmstrong.At our very first site, we had a bunch ofmanagers in the room for our kick-off pres-entation. My second slide came up. The firstpart of it was the definition of lean, and thesecond part was the definition of kaizen.One well-respected and very intelligentmanager, “Bob,” raises his hand and says“Don, is this one of these meetings wherewe can only listen, or is this one of thosemeetings where we can ask questions?” So Itold him we wanted dialogue, and to goahead. He said “Don, there are two wordsthat make me want to just puke, and one ofthem is lean, and one of them is kaizen, andthey’re both up there on your slide.”

So we stopped the presentation and had a45-minute discussion about their prior expe-rience with lean. It was a huge gift fromBob, frankly, because I had no idea aboutthat. So I threw my presentation out, andwe chatted about their past experiences andhow my approach to lean was different. Atthe end of the meeting, I told them that ifthis team didn’t want proceed, that was anacceptable answer, but I would be very dis-appointed. Or, we can complete the value-stream process this week and re-assess onFriday.

Q. Where were you that Friday?It was one of the best value-stream-mappingprocesses I’ve been a part of. The highlightfor me was on Friday when Bob came up tome and said “Don, I appreciate this somuch. This is so different from what wehave done in the past, and I can see all ofthe opportunities that are out there for us.”

Q. Have you or the Armstrong manage-ment team been discouraged by the slowand intermittent pace of recovery in thehousing market?Lean applies whether you are in boomingtimes or bust times. It doesn’t matter. AtArmstrong, we are seeing phenomenalresults with relatively flat markets today, andthat’s making us a better supplier by improv-ing quality and delivery with a much lowercost. When the market does pick back up,we are going to take full advantage. I am afirm believer that lean is a growth enabler ifyou truly focus on your customer.

Q. What do you like most about lead-ing lean transformations?It’s a blast. I told my wife I feel like I haven’tworked a day in eight years. I love seeingpeople develop and grow. I love to see theimprovements through, and then be able towalk away and know the lean journey willcontinue.

------------------------------------------------------Armstrong World Industries, Inc. is a globalleader in the design and manufacture of floors,ceilings and cabinets with a focus on innova-tion, design and environmental sustainability.In 2009, Armstrong’s consolidated net salestotaled approximately $2.8 billion. Based inLancaster, PA, Armstrong operates 35 plants ineight countries and has approximately 10,000employees worldwide.


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Client >SEMCO is a contract manufacturer ofassemblies containing metal castings (con-duit and cable fittings) and injection-moldedcomponents (covers for protection andweatherproofing). SEMCO consists of fourplants in Pune, India, (copper alloy gravity-die casting plant, zinc pressure-die castingplant, aluminum pressure-die casting plant,and steel fittings plant); and one in Jaipur,India, (iron, copper and aluminum alloysand-casting plant). SEMCO distributes itsproducts through a centralized distributioncenter in Raleigh, N.C.

Challenge >In the 2000-2001 fiscal year, SEMCO wasmanufacturing in the hundreds of tons ofdie castings a year and was struggling to doso. This worried the company’s senior lead-ership, which saw potential growth opportu-nities for up to 1,000 tons a year. The rapidrise of China as the lowest-per-unit-cost pro-ducer of the same products added height-ened urgency. Not only did China’s emer-gence as a major competitor threaten long-term growth potential, but also current cus-tomer relationships.

CASESTUDYSEMCO Beats Low-Cost Competitors With a Focus on ServiceFlexibility and responsiveness are attracting an increasing number of customers.

Tonya Vinas, freelance business journalist and former editor of Industry Week magazine

Solution >SEMCO focused on three areas to create amodel to compete with cost-driven com-moditization of its products: controllingcosts through efficiency and qualityimprovements; creating a flexible-productionmodel that lowest-cost producers can’t repli-cate; and building a U.S.-based lean-distri-bution model that enables customers tomaintain adequate-yet-efficient inventories.In 2002, SEMCO started using a variety ofLeanSigma training, tools and techniques torevamp its business model based on thesedifferentiators and has since become a pre-ferred offshore producer (based on growthperformance).

Results >By transforming into a unique provider witha low-cost/high-responsiveness/high-qualitymodel, SEMCO has been able to achieve a20 percent compound annual growth rate.The company’s lean foundation also streamlines growth through acquisition andfurthers substantial efficiency gains achievedduring the past four years at its Indianplants, such as doubling productivity withthe same assets.


• SEMCO is growing at about 20% CAGR because of its ability to compete as a low-cost producer with flexible fulfillmentcapabilities and multiple growth opportu-nities. The company can make any of its 15,000 products during any given week invariable order quantities.

• While growing, SEMCO has remained competitive on price through containingcosts and keeping high-value knowledge and production assets in India. Conversion costs as a percentage of sales have remained the same as the company has grown.

• SEMCO is able to be a “problem solver” for customers while maintaining its low-cost structure. This is in stark contrast to high-volume batch producers that can grow only by selling more units per employee. As a solutions provider, SEMCO is open to growth opportunities such as developing new products, enteringnew markets, and gaining new capabilities through acquisition.

A New Way of Manufacturing When China made its entrance into

modern, global manufacturing earlier thiscentury, she stole the show. All eyes were onthis newly liberated producer as Chinesemanufacturing plants flooded overseas mar-kets with low-cost industrial goods. Thisbaffled many manufacturing leaders, andsome companies never recovered.

But Indian producer SEMCO, whichmakes fittings and weatherproof productsfor rough electrical applications, recreateditself in an Iron Man-like fashion to fightthe low-cost devaluation of its products.According to CEO Paul Hirt, the company’sformula for success — SEMCO is growingat about 20% CAGR — has three key ele-ments: ongoing efficiency improvements; a

flexible production model; and the ability tohelp North American customers manageinventory for optimal profitability.

Another important aspect of SEMCO’sstrategy is the location of its most expensiveassets: All of its plants and production-focused intellectual property are based inIndia, while customer-facing capabilities(i.e., service and distribution) are based inthe United States. This keeps productioncosts low while providing a much higherlevel of service than competitors.

“We make commodity products, butbecause of our service and engineering capa-bilities, we are not a commodity producer,”said Hirt, who joined the company in 2007.

Five years prior to Hirt joining,SEMCO launched its LeanSigma-basedrevamp within its plants. The two biggestphysical changes were transitioning frombatch production to cells and reducing set-up time through standard work (going fromeight set-ups per day to about 40). Thiscombination alone yielded significantimprovements in quality and flexibility.

“The focus on single-piece flow forcedus to get it right the first time,” explainedHirt. “In addition, when a quality issueoccurs, we use the lean tools to take a sys-tematic approach of asking why four timesto get to the root cause and then imple-menting the corrective action to ensure thatissue won’t repeat. By contrast, most of ourcustomers who buy competitor’s productsfrom China have had to implement rigorousincoming inspection processes.”

Flexibility is also unique to SEMCO asa low-cost producer in its market.

“We reduced our set-up time for eachSKU so that we can make precisely thequantity the customer wants,” Hirt said. “It

doesn’t matter if it is 1,000 pieces or a half-million pieces, we will ship it out within aweek. That allows us to maintain a four-to-six-week lead time with a low-cost structure.This type of response is not currently avail-able from our Chinese low-cost competitors.”

Plant-Level Results

Performance improvements at the plant levelincluded:

• Eliminating waste in manufacturing, assembly and packing processes by reducing work-in-process (WIP) from 22 days to less than four days.

• Improving quality in excess of 50%.• Doubling productivity in four years. • Doubling plant volume while reducing

floor pace by 30,000 square feet.

Focus on Customers: Flexibility andResponsiveness

By reinventing itself as a demand-drivensupplier, SEMCO gained another keyadvantage over its batch-focused competi-tors: Being able to help customers manageinventory for efficiency and performancegoals.

SEMCO used lean methods and toolsto re-align its supply chain. This was a cru-cial step to increasing overall customer valuebecause SEMCO couldn’t be demand-drivenwithout its suppliers being similarly aligned.Changes included:

• Moving from a monthly planning cycle to weekly with scheduling from forecasting based on actual point-of-sale data.

• Pushing quality improvements that ultimately yielded a 79 percent increase in supplier quality as measured in parts per million.

• Creating a pull system from suppliers toproduction and final shipment.

With these changes, SEMCO was able to:• Improve fill rates from 65-70 percent to

93-95 percent• Reduce total tooling lead time from

120 days to 72 days.

These improvements have caught cus-tomers’ attention. SEMCO’s share of itsmajor markets has grown by 10 to 20 per-centage points over the past three years.Today, it’s not uncommon for customers tosend direct, demand-driven replenishmentcues to SEMCO as product is consumed;and other customers outright rely onSEMCO to manage a portion of theirinventory. Such arrangements take ongoingcustomer engagement, another thingSEMCO does well that its competitors don’teven attempt.

In 2009, Cooper Industries namedSEMCO Asian Supplier with The MostPotential after one year of doing businesswith the company. It was the first time theaward was given to a supplier after only oneyear.

Major Hurdles and Lessons Learned SEMCO’s lean efforts met the most

resistance in its North Carolina-based distri-bution center. Hirt said attempts to imple-ment lean systems there outright failedtwice. Aligning finished-goods inventorymanagement with customer pull was a mustfor the model to work. Leaders had to makeit work.

Ultimately, they made leadershipchanges, assigned a full-time continuous-improvement specialist to the distributioncenter, and invested in a new software sys-tem that improved visibility and tracking ofinventory (and therefore accountability).

CASESTUDY (continued)


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Paul HirtCEO, Sigma Electric Manufacturing Company

Today SEMCO has one-half to one-third ofthe employees it used to have at the ware-house but is achieving the same productivityAND is able to offer services such as late-point packaging to customers, Hirt said.

Hirt notes two other significant “lessons-learned” about doing business in India:

Over-promising: One aspect of Indian busi-ness culture is to over-promise what can bedelivered. “There’s a tendency to tell themwhat they want to hear.” This makes leader-ship gemba all that more important. “Youreally have to probe as to how you are goingto fulfill the request and then you have toreally monitor to make sure that is happen-ing.”

Great debates: Lean can be successful inIndian plants, but achieving success can takelonger because of the cultural propensity todebate and discuss topics much longer thanis common in U.S. business. Hirt gives poli-cy deployment as an example. Hirt, hisdirect reports and continuous-improvementleaders have been using policy deploymentfor three years, but unlike at a U.S. firm,where strategy deployment often quicklyelicits “ah-ha” moments from long-time cor-porate leaders, complete buy-in is takingmuch longer.

“The first year was very disappointing,” Hirtsaid. “The second year was better, and inthis third year, it’s getting better.”

Today and Tomorrow SEMCO continues to be growth-mind-

ed. LeanSigma is enabling this growth intwo ways, Hirt said. First, one of the goalsof the company’s strategy-deployment initia-tive has been to support new-product devel-opment, which is also employing Six Sigmatools.

“We have implemented a toll-gateprocess that utilizes a lean voice-of-the-cus-tomer approach to identify new productneeds,” Hirt said. “Our first set of newproducts has been launched, and initialresults look encouraging.”

SEMCO also is growing through acqui-sition. Having standard work and definedprocesses has made integration of new busi-nesses much quicker and efficient, Hirt said.

“Lean has brought project-planningrigor that anticipates potential issues andleads to contingency and countermeasureplanning,” he said.

As SEMCO grows, so will continuousimprovement in all areas of the company.Each plant is operating day-to-day withoutmuch upper-management direction, as areparts of engineering, tooling and site main-tenance. Recently, lean teaching has begunin support functions. And, said Hirt, he isstill pushing for ongoing breakthroughachievements.

“After doing lean for several years, it’snot always obvious what’s next to improve,”Hirt said. “We’re still getting improvementsat the cell level, which is O.K., but gettingbreakthrough improvements is gettingtougher. So I’m telling my team — go talkto people. Go talk to them about their bestpractices and bring them back to SEMCO.”

SEMCO’s goal was to become an offshore producer that North American customers would think was “an Americancompany,” Hirt said. SEMCO’s applicationof lean to change its company culture andmodel was the most important factor inachieving this vision. While many industrialmanufacturers continue to struggle againstthe siren’s song of lowest-per-unit costs,SEMCO has found a path not only to maintain market share, but also to grow atan exceptional rate.



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STRATEGICVISION Making Friends with Riskby Carl Deeley, Director, TBM Consulting Group, Inc.

Staring down the barrel of the longestrecession in 100 years, two big themes popinto view, each with a huge potential impacton many fortunes: Innovation in a time ofdisruption, and the fear this strikes into theheart of so many business people.

We know some of humanity’s greatestadvances are born of upheaval and disrup-tion, such as the 1934 invention of the laun-drette during the U.S. depression, whichgave people the opportunity to make use ofnew technology (washing machines) withoutspending scarce capital. History teaches thatwhen world economies are in flux, as theyare now, it’s a great time to hit the marketwith fresh ideas. But global economic tur-moil tends to make executive boardroomsmore cautious than bold. Many of thosewho would innovate are hearing a lot of“no” and “not now”.––––––––––––––––––––––––––––––––––

Executives worry about taking a

chance on something new, even

though they know the inherent

risk of letting their new-product

pipeline dry up and being left in

the dust. Therefore, now is a

good time to review the disparate

meanings of “chance” and “risk”.

––––––––––––––––––––––––––––––––––Let’s start with a tempting bit of

Japanese cuisine: fugu. Also known as pufferfish, fugu has been served as a delicacy inJapan for centuries. In the 17th century, afew morsels of this tasty white fish couldleave you with a faint tingling numbness onyour lips and tongue as it slipped down yourthroat. Or it could kill you. It was a chanceyou took.

“Chance” essentially means unpre-dictability. Anything could happen, as far asyou’re concerned, because you lack someessential information that would make theoutcome knowable.

Over the years, people found the sourceof the puffer’s toxicity -- tetrodotoxin – arather nasty poison that paralyzes humanmuscle, leaving a victim fully conscious asthey asphyxiate. There is no known antidote,but people still wanted to eat fugu because itwas delicious. So, Japanese chefs developedspecial techniques for cleaning fugu, isolat-ing the poison, and serving it up to peopleinterested in taking the risk.

“Risk” is the possibility of loss or dan-ger, with possibility on a sliding scale. Themore skilled your chef, the better chanceyou and your dinner companions will besmiling at each other with only partially par-alyzed grins. These days, fugu is farmed andmost of the fish now lacks the deadly toxin,so few are taking any chance at all. But therisky reputation allows those specially trainedchefs to charge $50 per serving for the 10,000tons of fugu eaten in Japan every year.

Risk usually means you have informationabout both the danger and reward, and youmake an educated leap. This is exactly thekind of approach we need to new productdevelopment in uncertain times, but it mustbe based on solid, actionable information --and most companies have shockingly little.

Surveys? Focus groups? This kind ofintelligence still leaves so many gaps in acompany’s knowledge that most are takingchances instead of calculated risks when itcomes to new products.

The problem is a lack of integration. Let’s see if this sounds familiar. A cam-

paign of intelligence gathering – surveys,focus groups – conducted by outside expertsconvinces your marketing leadership thatcustomers want functions x and y added to

Carl DeeleyDirector, TBM Consulting Group, Inc.

––––––––––––––––––––––––––––––––––

“Risk” is the possibility ofloss or danger, with possi-bility on a sliding scale.––––––––––––––––––––––––––––––––––


your current product, and they want it inblue. This information is dropped onto thedesk of someone in engineering, perhaps,who designs a new product based on hisinterpretation of the data – surely marketingwanted functions x and z – and passes it offto production, who sends it back to engi-neering for clarification. After a few roundsof general grumbling, they come to someagreement on what can be produced andeventually, the object is forwarded to sales. Itmight bear some passing resemblance to theoriginal idea, but it’s been passed around andreinterpreted so many times, it is unrecog-nizable to the original focus group. Withevery iteration of the pass off, valuable infor-mation has been lost.

In a lean business – which is to say, abusiness that focuses on value to the cus-tomer above all else, without undue waste,delivered in a timely fashion – each step inthe process is integrated and all work isaccomplished by a cross-functional team.

The team begins not with a readymadedesign, but with the voice of the customer.This might include some kind of directinteraction between team and customers, aswell as market research, field observation,crowd sourcing, and the like. In general, thedesign work occurs in phases. While cus-tomer participation typically drops off as thedesign takes shape, a lean approach keepsthem around during development in orderto qualify the actual design with real cus-tomers.

What’s remarkable is how much an inte-grated team reduces the dreaded reworkloops that plague most new product designs.Consequently, lean design teams typically doa better job of satisfying the needs of the tar-geted market, which leads to achieving theforecasted sales.

When design groups include the voiceof the customer into the product designprocess, they move the bar from chance torisk. And every additional piece of data

Despite the risks, the fugu fish is considered a special delicacy in Japan.

chance & risk

STRATEGICVISION (continued)

moves that bar further. A smart companythat decides it wants to make a three-wheeled vehicle, for instance, does not startby asking whether the vehicle should begreen or blue, have retro or futuristic styling.The smart group begins by asking what aconsumer wants in a vehicle, where they live,and how they like to travel. Does their vehi-cle represent a conveyance or is it a reflectionof the consumer’s own personality?

When we reach this far into the questionof what a customer wants – and then reallylisten to the answer – we’re including thecustomer’s view in every aspect of the product.We are, in fact, allowing the customer tochallenge our ideas of a good product. Andif it turns out they did not want a three-wheeled vehicle after all, it may be a blow tothe ego of our visionary engineers, but, moreimportantly, it’s a big reduction in the riskwe’re taking.

People are herding, collective creatures.Our opinions and ideas change in waves. So,when a market downturn drastically reducesthe income of a significant percentage of ourfellow citizens, suddenly it just seems betterto buy fruit from giant boxes, rather thanhaving each piece preciously wrapped, evenif the buyer’s own income was not affected.

The discount grocery chain Aldi is cer-tainly an example of a company that knowsits customer. It’s using the current belt-tight-ening atmosphere to introduce itself to moremarkets. In 2009, the company announcedits intention to build 30 new outlets a year,plus two large new warehouses, and doubleits market share while keeping an overallstrategy of stocking less variety at cheaperprices.

A smart company is one in which every-

one’s job is to serve the customer. That alsomeans knowing the customer, both individu-ally and collectively, as a market. Ultimately,the people who buy our products help usreduce risk, if we let them. But let’s be clear:There is no such thing as eliminating risk.We can avoid the stomach-churning carnivalride of chance by inviting customers into thenew-product design process and integratingour functional areas into one team, but forevery company that wants to stay relevant,risk is a constant companion.

In my opinion, this time of turmoilpresents us with great opportunities.Consumers are familiar with the changethat’s all around them and are open to freshideas for dealing with today’s challenges.Now is an excellent time to make friendswith risk. ------------------------------------------------------Carl Deeley recently returned from a two yearengagement as Managing Director of TBMAustralia and Asia Pacific. He is a specialistin lean value chain design and implementation.He has over 20 years experience with leanimplementations and business process improve-ment across multiple functional areas. He wasa featured speaker most recently at the "Innovate2010" conference in Sydney, Australia.

You can contact Carl at [email protected].


TBM presented Milbank ManufacturingCompany, the industry leader in the manu-facture of electrical meter sockets, with theseventh annual “Perfect Engine Site” award,recognizing the Milbank Kansas City plantfor its commitment to “lean” excellence inmanufacturing.

“The Perfect Engine” refers to the precision interworking of human resourcesand physical assets to achieve outstandingproductivity results that create business agility, growth and profitability.

“The Perfect Engine Site” award recog-nizes individual plants or offices that havesuccessfully implemented a LeanSigma®

transformation and demonstrated innovationand outstanding teamwork.

Anand Sharma Chairman and CEO forTBM, presented the award to Eric Krichbaum,Senior Vice President of Operations andChief Operating Officer at the LeanSigmaGlobal Summit in Las Vegas, Nevada. Mr.Krichbaum accepted the award on behalf ofTrace Tandy, the plant manager at theMilbank Kansas City facility. The KansasCity plant began its LeanSigma journey in2007 after creating an overall vision anddirection that required the facility to focuson operational excellence in order to becomemore agile and efficient. Over the past twoyears, the Kansas City facility conductedover 30 kaizen events focused on criticalshop floor and business process areas.

"We committed to a cross-functionalapproach for achieving our strategic objectives.By focusing on lead times, set-ups and stockavailability, we are now able to accommodatecustomer needs for variety. At the sametime, we reduced inventory and significantlyimproved our cash position in spite of therecent recession. I am inspired by ouraccomplishments and humbled by theimprovement opportunities that lie ahead.Most importantly, we’ve invested in the

LEANCHAMPIONSTBM Names Milbank Manufacturing Company Seventh Annual “Perfect Engine” SiteElectrical Meter Socket Manufacturer Recognized for Operational Excellence


development and retention of people to continuously improve our value delivery system," said Krichbaum.

“We are very proud of Milbank becausethey defined a management vision and drovethat vision throughout the organization byembracing LeanSigma tools and rapidly driving sustainable improvements in quality,cost, and delivery,” said Anand Sharma.

Results Summary

Milbank is now using liberated cash andspace to invest in a new alternative energysolutions business.

• Lead times reduced by 53 percent• Over $3.5 million in free cash generated

from reductions in work-in-process andfinished goods inventory.

• Able to support market expansion withcurrent facilities by liberating 100,000square feet of floor space in manufacturingand storage facilities

(Left to right) Eric Krichbaum, Senior Vice President of Operations and Chief Operating Officer, MilbankManufacturing receives the seventh annual TBM Perfect Engine Site Award from Anand Sharma, Chairmanand CEO, TBM Consulting Group, Inc., at the TBM LeanSigma Global Summit in Las Vegas, Nevada onSeptember 16, 2010.

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ACCELERATEDLEARNING Why Lean Programs FailBy Joe Panebianco, Director, LeanSigma Institute

The lure of a continuous improvement(CI) program is irresistible… When doneright, such programs can deliver revenuegrowth and income three to five times thecompetition. Eliminating waste and excessinventory can add millions of dollars in prof-it to an organization’s bottom line. There isan added benefit of enhancing a company’spublic image: “Continuous improvement”and “lean initiatives” have become suchbuzzwords over the past 15 years, that com-panies noted for using these techniques arefrequently perceived as being cutting edgeand resource savvy. And with a weakenedeconomy and uncertain projections forrecovery, many manufacturing companies arelooking to CI techniques as a way to remainprofitable and weather a rough period. As aresult, many companies—almost 67%according to an Industry Week survey—operate some type of continuous improve-ment program.

Do continuous improvement programsreally play such a critical role in the successof an enterprise? Some companies thatimplement CI programs fail to gain tractionand quickly abandon their improvementefforts. More commonly, a company’s con-tinuous improvement program will deliversome type of benefit—usually short-term—to the organization. Unfortunately, very fewCI programs succeed in transforming thecompany. Keith Yeater, a veteran TBM con-sultant, explains, “Lean manufacturing andcontinuous improvement are as much a cul-tural transformation as an operational adjust-ment. In order for the transformation tooccur, the entire organization must under-stand the reasoning behind the change…Without this understanding, people struggleto drive, let alone support and sustain, thetransformation.”

Implementing a truly successful contin-uous improvement program requires trans-forming an organization’s mindset to onethat embraces a culture of continual self-examination, review, and modification. Thistype of change is difficult to implementbecause it is transformational: it requireseliminating old ways of thinking, developingand reinforcing new behaviors, and, simplyput, is scary. It is human nature to fearchange because change requires us to moveout of our comfort zones, try new things,and enter unknown territories. For seniormanagement teams, this type of transforma-tion can be particularly frightening becausethey are stewards of the organization,responsible for a company’s future, its repu-tation in the marketplace, and the welfare ofits employees. Embarking on this type oftransformation journey without a guaranteeof complete success is daunting for mostcompanies.

So what is holding back potential CIprograms? How can an organization takelean to the next level? What are the hurdlesthat have to be cleared in order to maximizethe impact of a CI program?

There are as many different answers tothese questions as there are continuousimprovement approaches. Like CI programsthemselves, the problems that plague theseinitiatives and the reasons why they are sus-ceptible to failure are many and varied.However, when you talk to experts who havespent their careers advising companies oncultural transformations, several commonthemes emerge. Though the reasons why agiven program fails to yield significantresults or gain traction are unique to thatprogram, the primary obstacles to successcan be classified under the following prob-lem areas:


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Joe PanebiancoDirector, LeanSigma Institute

––––––––––––––––––––––––––––––––––Unfortunately, very few continuousimprovement programs succeedin transforming the company.

––––––––––––––––––––––––––––––––––

1. Lack of Leadership. Assimilating acontinuous improvement program into anorganization’s culture requires large-scale,transformational change. Many companiesthink that by rolling out a CI program to itsemployees and throwing in a few incentives,such programs will automatically take rootand employee behaviors will change overnight. This is not the case. CI programsrequire a culture shift, and changes of thatmagnitude need to be strongly led, with sen-ior management fully committed to thechange and modeling the required behaviors.Without executive leadership continuallyreinforcing the new CI culture, employeeswill revert to old habits. “Without cleardirection and leadership, the change will fal-ter,” explains senior trainer and design spe-cialist Gary Rascoe.

2. Lack of Focus. Another common rea-son why CI transformations fail to take holdis a lack of focus. Senior management, aswell as the entire organization, may thinkthey are committed to making lean work,but if management cannot articulate a clearvision of why CI is important, or the organi-zation has other major initiatives going on atthe same time, the undertaking will fail.Likewise, starting a continuous improvementjourney, then temporarily putting things onhold until other conditions change, sends themessage that management is not clearlyfocused on the end goal.

3. Insufficient Resources. Allocating theappropriate resources to a project may seemlike Management 101, but it is another areawhere organizations frequently stumble andfall short on their path to continuousimprovement. Ken Koenemann, managingdirector of consumer products at TBM,advises clients, “If you can’t resource an

activity sufficiently, then change the scope.Take two bites rather than one, or if that’snot possible, fall back and regroup until youhave the firepower to succeed. If you don’tdo this…the organization concludes that theimprovement methodology doesn’t work.”Questioning the effectiveness of lean toolsand continuous improvement programs hasbeen a hot topic in the manufacturing worldlately. However, any program will bedoomed to failure if it is not given theresources to succeed.

4. KPIs don’t link to CI and CorporateInitiatives. Again, you may be wonderinghow an organization could make this mis-take. But in a data-driven world, companiesoverwhelmingly find themselves tracking amultitude of metrics across multiple productlines and in various stages of the manufac-turing process. “Clear measures and clearresults, ultimately tied properly to cash flowand profitability, are necessary to sustain leantransformation,” confirms TBM ExecutiveVice President Bill Schwartz. How to deter-mine the relevant key product indicators,and then connect those indicators in ameaningful way to the organization’s CI initiative, is the challenge. It is not unusualto walk into a client and find the organizationtracking irrelevant metrics. However, once a

metric is established, companies forget toquestion whether the metric is necessary orif it ties to the corporate initiatives in anymeaningful way.

5. Underestimating the size of the task.Lastly, continuous improvement initiativesoften fail because the size of the task is gross-ly underestimated when it is first undertak-en. This is particularly true if a companyhas launched its CI program in response togrowing market or industry pressures. Insuch cases, these organizations are imple-menting CI as a “Hail Mary Pass”—a quickfix to a problem that is plaguing theirprocesses. Such companies will have a ten-dency to declare victory too soon—celebrat-ing success at the first signs of improve-ments—and thinking they have mastered thefine points of a CI program, they may cut-back on education and advice too soon andfall back into their old ways without evenrealizing it.

------------------------------------------------------Joe Panebianco is a senior management con-sultant and director and team leader of theTBM LeanSigma Institute. He is a formeroperations manager with broad manufacturingand business experience and is sought after forhis team-building and leadership skills and hisability to help clients visualize and developtransformational plans. Contact Joe [email protected] or follow his blog atwww.tbmcg.com/blog.


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Corporate HeadquartersDurham, North Carolina

800.438.5535

BrazilSão Paulo

55.11.5051.7490

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86.21.6888.6671

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TBM LeanSigma® Institute 2011 Schedule Highlights

MANAGINGQ1.11

TIMES

KAIZEN TRAINING Kaizen Breakthrough ExperienceParticipate in a live Kaizen event at a lean manufacturing site. Experiencethe dramatic bottom-line improvement and efficiency you can quicklyachieve and sustain as your kaizen team implements lean tools in an actualbusiness operation

•February 21-25, 2011 at SSP FITTINGS in Twinsburg, OH•Go to www.tbmcg.com/kbe for more information, to select your

kaizen team and register for the workshop.

LEAN CONFERENCE Lean Sigma® Global Summit Save the Date! Don’t miss this extraordinary opportunity to immerse your-self in innovative, strategic thinking that will transform your continuousimprovement initiatives. Breakout sessions with rich content in four tracks.Ample time for networking and learning.

• September 21-22, 2011 – Las Vegas, NV at the Green Valley Ranch Resort.

• Go to www.tbmcg.com/GlobalSummit for more information about ourearly bird specials.

TRAIN THE TRAINER Kaizen Instructor Training – Manufacturing OperationsFour days of critical shop floor kaizen instructor training that will set thefoundation for dramatic improvement and successful culture change at thestart of each kaizen event. Learn advanced instructor presentation, trainingand teaching skills.

• March 15-18, 2011 in Durham, NC• Go to www.tbmcg.com/kitmo for workshop details and register for

the workshop.

CONTINUOUS IMPROVEMENT OFFICE ESSENTIALS Creating an Effective Continuous Improvement Office This four day workshop will give you the strategies, tools and skills requiredto quickly establish a highly-effective kaizen promotion office, confidentlychart your path of lean improvement, maintain and build momentum andachieve dramatic, sustainable results.

• April 12-15, 2011 in Durham, NC• Go to www.tbmcg.com/ccio for more information and online

registration.

TBM EVENTS Throughout the course of the year, TBM is involved in several events thatmay be of interest to your continuous improvement journey. Please makenote of the URL below and check back regularly to see the conferences,webinars and speaking engagements we have scheduled.

Go to www.tbmcg.com/events for more information.

Documents

SEMCO Managing Times Q1 2011