Author: David Dehne

The Industrial Internet of Things (IIoT) and the Modern Marketer

For your customers, it’s more than just connectivity

I was recently reading about the Industrial Internet of Things as it relates to my business—manufacturing software. It’s exciting that technologies are now available that will liberate manufacturers from the rigid systems and processes of the past. For today’s manufacturer, the IIoT boils down to the ability to capture and connect data from multiple sources to attain truly meaningful information.

An interesting outcome of all of this is that it’s driving manufacturers to a more service-driven model to effectively compete. Manufacturing.net noted that 77% of manufacturers polled view improvements in services as a key competitive factor. (FYI – Interesting article.) They also described this movement in a blog entry:

“In this new era, manufacturers need to look beyond the single product sale transaction into a new relationship between themselves and the consumer—characterized by an ongoing delivery of value—exchanged over a platform in the form of a smart, connected product.”

Similarly, I have found that marketing manufacturing software requires me to position our services as a differentiator. Yes, most of our products can be purchased on a Cloud-based software-as-a-service model. Today’s manufacturers, however, need more than agile software, they need long-term business partners to help them navigate the changes brought on by digitization and connectivity (e.g, the Industrial Internet of Things, the Factory of the Future and Industry 4.0).

On Board Early

It’s interesting to see manufacturers really collaborate with us during the early part of the sales cycle. Long before we get to software implementation, we work with clients to address their goals and plot a course to achieve their vision. (The Orbital ATK case study is a good example.) We draw from various tools – Lean Manufacturing, Theory of Constraints and Six Sigma – to drive a demand-driven change. (Where demand equals actual customer need.)

Our prospective clients are not looking for us to just install software and leave. They need assurance that we will be true partners; always available to not only help them get the most out of their system, but to help use their new found digitization and connectivity to best manage constraints, drive ongoing continuous improvements and make informed decisions. Francis daCosta describes this perfectly in his book, Rethinking the Internet of Things:

“With the increasing automation of the factory floor, the autonomous or semi-autonomous lower–level control and feedback loops made possible through distributed intelligence within the Internet of Things may allow for higher production and better use of human resources. If integrator functions can handle lower-level adjustments and controls of operating machinery, human eyes and minds may be freed for longer-term analysis and optimization, based on exception and historical data collected at a higher level. (p. 135).”

So, with the factory floor more digitized and your machines and systems connected, you suddenly have access to an incredible amount of data. The question then becomes how do you turn that data into meaningful information? Information that will improve workflow, pre-empt issues, lend focus to continuous improvement efforts and more? This is the service component – and where experience really counts. In many cases, we become trusted advisors to our client’s in-house teams, not just because we know the software inside-out, but because we’ve been successful with a variety of similar manufacturing environments.

Selling Consultative Value

With the rate of change brought on by the Industrial Internet of Things, connected factories will look completely different in a decade. Because our clients know that Synchrono has always been ahead of the curve, they know we are not just selling them software—we’re selling them tools to better service their customers and better compete. And we’ll be there to help them realize it.

If you are a marketer engaged in classic features-benefits selling, I would urge you to move beyond that discussion. Practically speaking, of course, these matters are extremely valuable to clients because they can check off all of the boxes on their functional requirements list – but you don’t distinguish yourself. Communicate how you will help them win in a competitive market through stellar service enabled by a more informed workforce.

Case studies provide a great vehicle for communicating service value. For example, we have service plans that build continuous improvement processes into the implementation plan. We have ROI numbers from other clients that show how much they realized in waste reduction—and also, about the time they saved through our standard integrations into their ERP.

We can plot a compelling graph that shows cost-avoidance numbers because we have helped put an end to expensive expediting in their production environment. We have testimonials from our clients’ suppliers about how their new, end-to-end eKanban inventory replenishment software repaired adversarial relationships and helped them become more responsive to customer needs.

These are just a few of the stories we tell that were a result of the added services we provide. Clearly integrating services (and their results) into your value proposition helps differentiate your company in a cluttered market.

Customers need to know they can trust us—their supply chain depends on it. Building this trust requires sharing our strong record of success with other clients. Are there unique ways that you have done that? Let me know, I’d love to hear from you.

July 8, 2015
Common Lean Manufacturing Software Project Constraints
Leveraging Project “Constraints” and Maximizing Results

As a project manager for demand-driven, lean manufacturing software, I have more than a nodding acquaintance with the theory of constraints (TOC). What I find quite remarkable is the ability to apply the theory of constraints to other mediums beyond the manufacturing of goods – even something like project work. When a client understands the theory’s principles, it can be powerful in driving a truly transformational project that outperforms their other software installations. It becomes a new way to frame how you and an organization collaborate to create something new – a better business with better and faster results.

If you want to learn more about how constraints management works in manufacturing, definitely check out my fellow blogger, Rick Denison. He’s the go-to guy for this practice on our site. What I’d like to talk about today is constraints management during projects—specifically—what are some of the more common project “constraints” and how do I deal with them?

Every project contains a standard set of parameters that become initially defined, but are continually balanced throughout the project lifecycle. These are competing project constraints, which include, but are not limited to:
- Scope
- Quality
- Schedule
- Budget
- Resources, and
- Risks[1]
These elements will pull against each other throughout the project, but it’s wise to identify them not as “bottlenecks” or issues, but as constraints that can be leveraged to drive outputs and faster progress. To give you some ideas about how to leverage these constraints, I will focus on three from the list: schedule, resources, and risks.

Schedule Time to Schedule

Sometimes people consider project planning a phase that can be glossed over so that the “real work” can begin sooner. Talking about the work does not accomplish the work, but it will make you consider ways to work smarter. Working smarter means different things to different teams, but can include creative scheduling solutions like:
- Several “sprint-like” mini projects instead of one big define-and-deploy project. This mini-project approach can mean functionality is delivered to business users faster and in more palatable scope amounts.
- Parallel paths of work to get more out of the project timeline.
- Understand the benefits of building in purposeful “buffer” time, which can at first seem like it’s unnecessary or that there’s no time allowable. I encourage teams to do this so that they protect the most constrained project resources and create a project system that is able to handle the inevitable, yet “standard” project disruptions, such as new business climate factors, changing team members, etc. Buffers are central within the TOC framework. Since the constraint resource becomes the pacemaker for the rate at which project deliverables are output, building in this time becomes critical to remaining on-time and not slipping in either schedule or scope.
It’s easy for a project team to complain about not having enough time in the schedule – even if they are just starting out. Instead, think about the full project timeline as a blank canvas and an opportunity to get creative on how to best leverage the time.

Your Most Valuable Resources are People

Your project team is about finding the perfect combination of two elements: quality and quantity. The “quality” of your team members cannot be overvalued. Capable team members that know their role, the business needs, and can deliver on the project objectives are the most valuable assets that any project could ask for.

But even top-performers only have so many hours in the day. Whether team members are allocated 25% or 100%, the important thing is to maximize the time, or capacity, that these resources have available. It’s not about labeling your most “valuable” resources, but inevitably, one team member will be a constraint. So, acknowledge the constraint and have everyone rally around the team member(s) to support their activities. In my experience, that means doing everything I can as a project manager to align tasks, schedules, and being extra-prepared for these specific (and valuable) resources.

The second leverage point to boost your project resources would be to add capacity by increasing the “quantity” of resources. When you have fully maximized the results from all of the current resources and are still not meeting the project scope, many teams consider relieving the constraint by increasing headcount. While this can be a helpful solution over time, be aware of the upfront time associated with bringing more people up to speed and that their output quality may not initially match others. Just like a manufacturing environment, additional resources (machines/assets) add to capacity, but require management and attention too.

Risky Business

Consider project risks to be like identifying project “flow disruptions” — ahead of time and concurrently adjusting course to mitigate those disruptions. Risks can range from small to significant, but discussing them openly and planning accordingly can sometimes be enough to avoid them all together. This means you increase the overall velocity of your project when you deal with less surprises downstream and you are able to deliver results to the business faster and with more clarity.

A team that does not spend time identifying risks throughout the project lifespan will likely regret it at some point. Discussing project risks can seem like more time taken away from “doing work” or a “gloomy” way to kick off a project, but it’s actually incredibly productive. The project paranoia that people raise can seem like an energy drain, but pay attention because often these concerns are based off of real experiences and legends of projects past from which the current team can learn.

The act of going through risk identification can surface two categories of topics. The first category is the potential risk scenarios for which a mitigation plan should be developed and executed. These would be the most common notion of project risks that people consider – the “what-ifs” and their consequences. The second category are issues that may seem like risks, but are really actual and necessary project tasks that were overlooked in the project plan. Be grateful that these were identified and plan them into your project activities like everything else, with a pat-on-the-back for your thoroughness in planning and the confidence in knowing you delivered a higher-quality output.

Next time, we’ll take a deeper dive into the project risks category and talk about ways to overcome them. Until then, feel free to send me your questions or experiences on anything implementation related.

[1] PMBOK Guide, 5^th edition

Sarah takes a customer-focused and results-driven approach to project management and demand-driven manufacturing systems implementation. With hundreds of projects under her belt, Sarah is fearless when it comes to challenging the status quo and delving into the details to ensure an optimal user experience. As such, her posts reflect tips and best practice advice for managing people and processes through projects – and getting the most out of your systems.
June 4, 2015
Using TOC, Lean and Six Sigma to Become More Demand-Driven
What Tools to Use to Get the Most of Your Demand-Driven Changes
Last time, we looked at specific companies that I have worked with and how they became more demand-driven using the Theory of Constraints (TOC) as a first step. As you saw from these real-life examples, TOC works well as a pointer to see where you need to change – and what should be the first items on the list.

I have watched TOC solutions work exceedingly well in manufacturing, scheduling, replenishment, and project management for continuous improvements that truly revolutionize environments. Just as coarse-grade sandpaper can quickly address a rough surface, TOC quickly identifies global changes that can smooth flow and impact the bottom line. However, to get to that next level of improvement, we need to start using our Lean Tools.

Kaizen

Continuous improvement of an entire value stream or an individual process to create more value with less waste.

There are two levels of kaizen (Rother and Shook 1999, p. 8):
1. System or flow kaizen focusing on the overall value stream. This is kaizen for management.
2. Process kaizen focusing on individual processes. This is kaizen for work teams and team leaders.
Value-stream mapping is an excellent tool for identifying an entire value stream and determining where flow and process kaizen are appropriate.

– Lean Institute

Tools such as kaizen (after you understand the global system) delivers profound improvements to your production process—and, ultimately, high-quality business results.

A way of thinking

The TOC thinking processes allow you to build current and future reality trees that give you an excellent understanding of the environment, its core conflicts, and the root causes that are holding the company back. Its buffer management methodology lets you identify disruptions to flow and pare out disruptions to find the points in the organization that, if resolved, would have the largest impact on increasing global flow. Now you have a “board” that is smooth enough to let you switch over to medium sandpaper and start employing the tools of Lean to resolve the disruptions that TOC has pointed out.

Just as I have never seen a more effective tool than TOC when you’re first starting a company on the continuous improvement path, I have yet to see a methodology as effective at rapidly improving processes (once the focal point is known) as the process of Kaizen. Use Kaizen—along with the tool set that comes with the Lean methodology –and watch your improvements exponentially increase.

Costly mistakes

In order to get the largest global benefits, you need the pointer – TOC. This is another place where sandpaper comes into play. If you take a really rough board and use medium sandpaper (Lean tools) on it, you can still get it as smooth as you would if you started with coarse paper (TOC) and then moved to medium paper. The difference will be in the time, effort, and expense that it takes to reach the same point when compared to using the coarse first and then the medium. I have seen companies use only Lean tools to achieve phenomenal success. However, the kaizens were directed only from intuition; I have found over and over again that real leaps in global performance were not made until an enormous number of kaizens had been completed. If your management has enough patience, tenacity, time, and cash to wait until tens or hundreds of kaizens are completed, you can be successful. If not, the Lean transformation is doomed to fail – not because it doesn’t work, but because we started with the wrong methodology and focus.

I want to be clear here: When I say global improvement, I am talking about improvements that show up on the bottom line.

Numbers Game?

There is often a problem with how improvement results are measured. Too often, they are measuring local optima, with cost accounting principles that ignore whether or not actual bottom line or global flow gains are made. For example, if you cut the setup time in half on a specific machine – from one hour down to 30 minutes, and then you setup the machine 1,000 times each year with an overhead burden of $500 an hour, you do not get to say that you achieved $250,000 in cost savings. The cost/ depreciation does not change for that machine and the cost of your overhead does not go down due to this improvement, either. There are only two possible ways that actual impact to the bottom line occurs:

1) If you are able to ship more product because of the change. (It must leave your shipping dock and the customer needs to be invoiced for it to count.) Extra throughput through the resource does not count if the other resources in the chain cannot get it through at the same rate.

2) If you can send the operator home early or give them days off – but this certainly doesn’t get you $250k.

You need the pointer to make sure that the changes you make have the largest impact on the bottom line and for me, TOC is the best methodology for determining this. TOC will show you the areas that, if improved, have direct impact on global throughput.

Yes, I recognize that Lean has value stream maps. However, those are snapshots of the system at one point in time, and they are product-specific flows. They do NOT look at the aggregate and interconnected environment that most manufacturers live with every day.

A Smoother Board

It has been my experience that Lean produces the most refined, disciplined, and productive manufacturing process. If I walk into two environments, one that only used TOC and one that used only Lean, and they both made it five years into the journey with management staying committed, I would fully expect the Lean company to have had the most success in transforming their operation. If we looked at the same two companies one year in, the reverse would be true.

This is not about which methodology is better. The fortunate thing for companies is that TOC and Lean are pieces to the same puzzle and if used together, the results are formidable.

Next time we’ll talk about an even more fine-tuned refinement tool- Six Sigma. Until then, please let me know how you have used the tools of TOC, Lean and Six Sigma to refine your continuous improvement projects.

-John Maher

This is part three of a four-part series. Here are the links to the earlier posts in this series:
- Part 1, What Sandpaper Will You Use?
- Part 2, Fast Results Using TOC for Demand-Driven Manufacturing
John’s passion for demand-driven manufacturing is equal to his interest in how this method improves the lives of employees within these environments. “I’m here to help, not to judge” comments John whose posts reflect why demand-driven matters and are based on his experience working in manufacturing environments and expertise in ERP, MRP, APS, supply chain, manufacturing planning and scheduling systems and constraints management.
May 19, 2015
Three Ways to Use Big Data to Understand Your Customers
How effective marketers use customer intelligence data to build relationships

Marketers have more connected data to work with these days– but many of us struggle to find a place to put it to use. The Internet of Things has delivered unprecedented visibility and connectivity between:
- Sales data (what leads yield results and why?)
- Customer data (who is your customer and where do they go to learn about your products?)
- Product data (what customers need from your product and where are your next innovations?).
As your company’s social media marketer, sales lead choreographer or product marketer (yes, many of us wear several hats) what should you do to gain the most customer intelligence from this data?

I have gone in fits and starts using data to drive my customer intelligence quotient. I want you to know this list is a product of some good choices but also a few false steps! But after doing some serious research; contracting with the best in the business to install programs to manage the data; and learning what not to do from peers and colleagues—I think these three areas are a good place to start:

Lead with Your Heart

Use improved sales data to figure out how to manage your leads better. Then you can comb the data to see how you’re doing in retention and with suspects and prospects – and craft your marketing messages accordingly.

In my case, I was able to drill down to who was downloading our product resources—and also what search terms they used to get to those pages. After following that path, I was able to see who was looking for terms that described our product mission—rather than our product features or benefits.

Synchrono champions demand-driven, Pull-based manufacturing philosophies because we believe using these will help manufacturers succeed. We had been crafting many of our messages around that “brand purpose” – which defines for your customer why you are doing what you’re doing before they know what you are selling. The “heart” of your mission, if you will.

According to Jim Stengel, former CMO of P&G, companies that transmit their brand purpose effectively are three times more profitable than those that don’t. I found that our potential and current customers were on board with our brand purpose—they needed to know how to start to apply these principles to their own environments. Once I knew we were hitting the mark with our brand purpose, all of our marketing resources and tactics became aligned behind it.

Reach Out

Customer reach is farther and more diverse than ever, thanks to the proliferation of social media B2B programs that can hit your decision makers where they live. The good news is that by targeting your customers’ preferences and activities via online data (in many cases, from your social media channels) and response rates (from targeted customer emails) you can expand your reach to the highest potential groups.

You need to figure out a way to do this using social media. In fact, research by Forrester suggests that businesses that spend only 6 hours a week using social media experience a 74% increase in website traffic. Getting your customers to experience your purpose through your website—and keeping them there with great content, allows you to create an engaging conversation. This conversation often turns into a great sustainable relationship.

Get Social

This infographic shows that 85% of the decision-makers polled said that at least one social media channel was very important to them in making technology purchase decisions. That’s why I urge you to include your most valuable social media channel in your outreach. The good news is that by managing your customer intelligence appropriately with back-office, big data-capturing processes, you can identify what channel will bring you closer to the people who will sign the checks. Nurturing this intelligence, trying new things, such as repurposing white papers, blogs and infographics across different channels, will give you all of the feedback you need to refine your strategy.

These are just three places to start to mine your data and come up with solid, actionable customer intelligence. Let me know if you’d like to add to this conversation…I’d be pleased to hear your great marketing ideas and how you communicate your purpose to spark new opportunities.

– Marketing

Big data, the Internet of Things, Industry 4.0, Factory of the Future, the Visual factory – what do you really need to pay attention to and what do these concepts mean to most manufacturers? A sceptic and trend-spotter, Pam’s posts leverage a background in technology marketing to apply these big concepts to the real world – and real work – of demand-driven manufacturers.
May 2, 2015
Life Hack 101: Doing Implementation Documentation Right
The Who, When, What and Where for a Solid Project Doc Strategy

Imagine if your most important photos—your child’s first birthday party, the day you brought home your new dog, that awesome vacation in Europe—were all lost forever. Your computer fell into the bathtub or the hard drive was wiped by an electrical storm, and you didn’t back up your drive. Don’t let this happen to your project documentation. Keep it accessible and functional for the life of your project as well as secure for future use, whether it’s for new end users, future implementations, or even project auditors. Consider the following and you will be on your way to doing documentation right:

You’ll want to figure out the Four W’s- Who, When, What, Where

Who? Who needs access and what level of access do they need? Do they have authority to sign off on documents, or are they just a viewer? Someone who can edit documents and share them? Define a few user groups according to their necessary level of editing rights. Use categories such as content Viewers, Team Members (creating and posting documentation) and Administrators. Also, be sure to get all individuals setup with a secure login so that they can access the information. Line up someone to be in charge of setting up and allowing new access requests for others. Be sure to designate someone that will be in charge of overall organization and version clean-up within the space. Sometimes multiple drafts of one document can get overwhelming, so you’ll want to be sure someone is tidying up along the way so that old versions aren’t confused with the latest drafts.

What? Now we’ll really need a good project tool with all of the built-in capabilities you need to ensure security, version control and ease of use. If the client company uses a Windows-based authentication system, this will work well with a number of collaboration tools, such as Microsoft® SharePoint or JIRA Confluence. These tools also make it possible for contractors, like partner company team members, to have project-specific login credentials.

Selecting a collaboration tool within the overall corporate IT strategy also means that the platform is supported and that retention policies are already in place for later access. Commonly, these collaboration tools are accessible via a secure Cloud for safe remote access and allow you much more functionality than just an electronic “file cabinet.”

As for the “what” to store, I recommend a certain baseline to get started, then some guidelines to execute and finalize the document repository:
- Blank, clean versions of all required deliverables
- Meeting minutes from any meeting where decisions are made and action items assigned
- Project management documentation (such as RACI, team contact list, charter, statement of work)
- One final version of all required deliverables in a folder marked “Final Deliverables”
- PDFs of final deliverables with written sign-offs from required approvers (each page initialed and signed on the approval page)
- Archive folders of older versions of deliverables or other documents
When? When should you set up the collaboration software or a documentation repository? It’s prudent to do this as far in advance of the project as possible so that pre-project kick-off communications or documentation can be posted to have an effective Day 1. Many companies have tools that they use to ensure a current version of the very first documentation. Dangerous gaps can form that leave crucial decisions out of the paper trail.

Don’t worry; you don’t have to have the entire organizational structure of the project down before you build your platform. This is just an address for everyone to visit and build from as you go along.

Where? You’ll need a location that is accessible to both the client and the partner team. If you host on your internal network, you might get into proprietary issues for client-side devices—and your partner team might not have the access they need. Work out any remote login logistics prior to the project start date.

The Email Error

I have seen personal emails between project team members disappear or cause serious problems in a project. Your “where” must definitely not rely solely on one-to-one emails that contain any project information that’s crucial to decisions or outcomes—basically, ask your team to add all necessary communications and information to the project collaboration space. Make it all public knowledge so the private email accounts of your project won’t leave gaps in your project depository.

Having a great place—a “where” that allows you to take action based on the most recent decisions—allows you to trust that your project documents represent all of the deliverables you need to track during the project and ensure that they’re not lost at the end of the line.

One version of the truth

You can tell that the overarching rules for project documentation are visibility and veracity. You need one version of the truth, for the right people, at the very beginning of a project and beyond.

Share your insights and any tricks you might have on project documentation done right. Also, send me any implementation questions or topics you would like to see discussed in an upcoming post. More tips of the trade coming up in future blogs – stay tuned!

Sarah takes a customer-focused and results-driven approach to project management and demand-driven manufacturing systems implementation. With hundreds of projects under her belt, Sarah is fearless when it comes to challenging the status quo and delving into the details to ensure an optimal user experience. As such, her posts reflect tips and best practice advice for managing people and processes through projects – and getting the most out of your systems.
April 14, 2015
When Manufacturing Improvements Have Too High a Price

Engineering design fiascos – spending thousands to save pennies

This is a true story. The names have been changed to protect the innocent. It’s meant to illustrate how using constraints-based thinking can uncover the hidden price of cost-cutting projects.

Several years ago, a friend of mine was working in the quality group at a large automotive company. We will call my friend Harry for the story. Harry’s position was to use statistical analysis to determine design flaws from a large data warehouse containing warranty data, recall data and state-by-state accident information collected about the products the company manufactured. This data was used to identify areas where leading indicators could prevent major recalls and point out where engineering might improve products. Although this effort was important to the organization, Harry thought that there were better ways to move the company ahead faster than looking at data from the past, which in many cases, was a byproduct of compromises in the design process.

After many years of working in the quality group, Harry decided to contact the CEO of the company. Harry felt that if they were to look at the issues and conflicts in new product development and in product design engineering, the company would be able to eliminate the design compromises, which led to the negative effects of recalls and warranty costs.

To Harry’s surprise, he received a response from corporate leadership and from an engineer named Edwin. Edwin was the Director of Engineering and Competitive Practices for the organization and was responsible for identifying methods or systems that competitors were using, and determine which should be adapted to benefit the company. Edwin wanted to know if Harry’s recommendation was possible, and arranged a meeting.

A fateful meeting

Another colleague with the company and I were lucky enough to be invited to the meeting with Edwin and Harry. The conversation started with questions and answers about the current process for new vehicle design. We were all interested in learning how new improvements to current models came about in the company.

Edwin told us that during a new design, his group had little influence on the timeline, which would be handled by some other part of the organization.    So, we asked for an example of how engineers were introduced to this process. Since Harry and I are Theory of Constraints Jonahs (A Jonah is someone who uses the socratic approach to problem resolution), we wanted to understand the baseline for the process and find out what they considered to be a successful project. We also wanted to learn how they chose products and measured performance. Edwin told us that the number one measurement was cost savings on an assigned project.

We were told that the group manager’s annual goal was to reduce component costs on each vehicle, for example, by $0.04/vehicle on a vehicle platform. In one case, the engineer looked at reducing the cost of the door locking system by $0.01 to $0.02. If the car is a 4-door, they would hit their cost-savings target over the total of vehicles they made that year. These goals are typically in the $400,000 to $5,000,000 range across the entire vehicle line.

An engineer redesigned the door-locking mechanism to reduce the cost of the components in the car — and sold the group’s idea to management. After some back and forth between various levels of the organization, the project was approved, and design money and resources were budgeted.

We asked several questions to determine if this was, indeed, a cost savings. Here’s what we learned from Edwin:

Q: How many door locking mechanisms does the company currently use?

A: Seven.

Q: If there is a new design, is one taken out of service?

A: Not usually; not until it is determined to be obsolete. Warranty and Service have a large influence on the determination of obsolescence.

Q: Since this is a door-locking mechanism, will the vehicles that use this new design have to be sent through crash testing to determine if the new device meets safety standards?

A: Yes.

Q: More than just the normal yearly testing?

A: Yes, since it was a change to a safety device, extra testing will be required to ensure the design meets or exceeds standards.

Q: Do the suppliers of the mechanisms need to fill the supply chain with parts so the new design can be used in production?

A: Yes, the suppliers would have been working with the design team during the process, so they would know what the supply chain needs to be prepared for production. They are very good about keeping up with the design process.

Q: With a new design, how often is it ready on time for assembly to begin the new model year?

A: There are frequent delays for the new model year, and there will have to be some work to change over the new mechanism.

“I’m sorry, but I do not see how there is any cost savings in the method you described,” I said.

They answered, “Of course there is, the company saved $0.02 per vehicle!”

I explained that because the process described added a new assembly, each step represented new inventory to support the new assembly. Since the old design wasn’t discontinued, the inventory for the old design would not be removed from the system, so no savings there. If the new design is not ready for the model year changeover, the delay to production can be quite costly, the old parts would have to be used until the new parts are available, and then the old inventory would need to be removed, new inventory added and the assembly line would need training. In addition, the dealership network would have to be notified about when the old style was changed and in which vehicles. The dealership technicians would also need training on the new mechanism.

Every step costs

Every step they took added cost. Their $0.02 savings was eaten up before they began. In reviewing the entire process, we quickly realized that no one at the company had a holistic view of the process. Further, they didn’t have any comprehensive information to fully judge the impact of a change upon the system due to the silos and structure of the organization.

Edwin maintained that because they were measured for the $0.02 cost savings, they only needed to concentrate on that– they did not have any knowledge or responsibility for what the rest of the company was doing.

I simply said, “I think you are using the wrong measurements.”

On my way back from the meeting, Harry said, “What do you think is the number one warranty cost for the company?”

“I don’t know, please tell me,” I said.

“Door locking mechanisms,” he answered. “How about in the 1990s?”

“The same?” I asked.

“Yes,” he added. “In fact, the number one warranty item since the 1960s has been door locking mechanisms.”

He went on to tell me that in the late 1980s, the company did a study between its door lock mechanisms and another car manufacturer’s design. At that time, Harry’s company’s door lock had 13 parts in the design compared to 7 parts in the competitor’s lock mechanism. Fewer parts are often more cost-effective—as there is less time to assembly them, fewer parts in the supply chain, and simplicity is its own form of effectiveness.

The company they used for the study was well known for their impressive reputation for quality. Keep in mind, he said– each new engineer goes through a required training course that uses this comparative study to show the differences between Harry’s company design and the premier competitor’s design. The objective is to reduce complexity and still provide world class quality. And, these engineers need to demonstrate that they understand the study and its implications for the company before they are allowed to do any design work.

“We have been teaching this class for 15 years. Do you know how many parts our current design has?” Harry asked me.

“I would guess eight or nine?” I looked at him hopefully.

“No,” Harry sighed. “We have 12 parts in our design and the competitor’s mechanism is now using 6 parts.”

I didn’t know what to say to that, other than shake my head in dismay.

Epilogue

That was 10 years ago. Since then, there have been several senior leadership changes at the company. And even though that company, like many others, further fractured into a flatter organization, it maintains many of the traditional silos.

This company eliminated or sold many vehicle lines to preserve cash to strengthen the parent company. And, after a long and hard struggle, they are again profitable. The company is making a better quality vehicle today, but the number of recalls is still higher than the global average for the same type of organization.

Many organizations still focus on cost savings to the detriment of a holistic view of constraints. They base design and engineering decisions on what looks like it will save money rather than the costs of instituting these changes. Next time, we will talk a bit about why erroneous metrics make projects like the $0.02 -savings door lock look good.   Let me know about your experiences with constraints management—or share a story like this one. I’d love to hear from you.

– Rick Denison



Rick is the “Dr. Who” of manufacturing operations and logistics. And while Rick doesn’t travel through time, he is adept at leading change – and saving time – in a diverse range of manufacturing environments through Lean manufacturing, Six Sigma, and TOC techniques. Rick’s posts address how demand-driven matters and draws from his background in process improvement, change management, project management, information systems implementation, and profitability analysis.

March 26, 2015

“test”