7 Myths of Configurators

I have just published a white paper, "7 Myths of Configurators," that is available at www.valent-group.com/Resources.html . This paper focuses on the misconceptions associated with customer-facing configurators that lead to less-than successful deployments. It also discusses some of the methods to avoid these mistakes.

The 7 Myths are:
1. A Configurator Is a Strategy
2. The Primary Justification of a Configurator is Increased Sales
3. Who the Sales Force Is Doesn't Matter
4. Customers Want to Choose From Every Possible Option the Company Offers
5. Engineering or Configuring - Who Cares?
6. If It's Technically Possible, Build It Into the Configurator
7. A Configurator Is an End-to-End Business System

I invite you to review this paper and offer your comments, criticisms, and own experiences.

Surviving

Much is being and will continue to be written as to how companies should survive the recession. I need to add my own brief comments to this topic.

1. Focus on margins, not market share or gross revenue. Too many companies will take any job no matter the profitability (if any). If you do this, and unless you are sitting on a huge cash reserve, you will end up spending your way out of business just to perform those jobs. A focus on financial health, now more than ever, is critical, and underperforming lines of business are not worth maintaining. Rationalize products and parts and drop what is not worth carrying. What good is market share if the business goes under?
2. Get as close to your customers are possible. This has been trumpeted many times as a response to globalization, but it's just as important in this recession. Analyze the principles of mass customization and see if there are any you can adopt - even if the whole paradigm is not a match for your business.
3. Grasp competitive advantage. The recession will end at some point. Be prepared to leverage every bit of competitive advantage you have now and for the future. Use this time to exploit your value chain (Porter's tool for analysis of competitive advantage) for every bit of competitive advantage you can find. Build a strategic plan (see Align/Excel, www.AlignExcel.com) based on competitive advantage and focus on internal capabilities.

Nudge

I'd like to recommend the book Nudge by Richard H. Thaler and Cass R. Sunstein. The foundation of the book is how and why people make the decisions they do - and why people are rarely the completely "rational" beings that underlie so much economic theory (a very timely topic given the current financial travails).

Besides being a very interesting and engaging read, this book does have a lot of applicability to the challenges of high-variety manufacturing. So much of customer interaction for HVM companies is about managing choices, and Nudge offers an excellent guide to "choice architecture." It underscores the importance of understanding the motivation of your customer. It also provides insight into product management and sales strategies - and why making all options available during the configuration process is not a good idea.

What is your Economic Profile?

There is a very interesting self-test at Learn Your Economic Type on the Information Technology & Innovation Foundation website. ITIF is an economics think tank with a focus on Innovation Economics.

The Economic Profile lets you know whether you are a strong, moderate, or weak adherent of:
Innovation Economics
Supply Side Economics
LIberal Neo-Classical Economics
or
Neo-Keynesian Economics

I think this is a very interesting and informative profile test - especially given the current economic and political climate. I encourage everyone to take the test. It provides excellent insights into one's perspective of business and policy.

By the way, I'm a strong Innovation Economics type.

(BusinessWeek has an excellent article on Innovation Economics: BusinessWeek: Can America Invent Its Way Back? (9/11/2008).

What is High Variety Manufacturing (HVM)

What is High Variety Manufacturing (HVM)? Why is it important to define it? High-variety manufacturing is more than just a description of manufacturing processes; HVM is a business model that offers significant opportunities, but it also presents significant challenges. In order to take advantage of the opportunities and solve the challenges, it is necessary to recognize what HVM is and how it is reflected in your company.

A potentially bewildering range of acronyms and descriptors are variously used to describe marketing and manufacturing models that have a high degree of variability, variation, and variety:

• Mass customization
• BTO, build-to-order
• CTO, configure-to-order
• ETO, engineer-to-order
• ATO, assemble-to-order,
• HMLV, high-mix low-volume,
• Job shop
• Etc.

There is a problem, however, with lack of precision and definition with these terms and a limitation to the extent of a company's value chains that are described by them. I use the term high-variety manufacturing as an umbrella concept to cover all of these marketing and manufacturing models, framed by the critical idea that HVM is a business model that encompasses all of a company's value chains.

HVM is best-defined as a set of characteristics of which a manufacturer may exhibit any one or all.

• The sales process is complex and includes customer-driven design and configuration decisions.
• The products are highly configurable and the number of options and the configuration combinations are such that the demands for specific manufacturing routings, tasks, and materials can not be forecasted. The specific product and its manufacturing demands are not known until the order is received.
• The production value chain includes non-manufacturing activities such as project engineering; unique manufacturing documentation, such as drawings, generation; unique BOM determination; etc.
• The company's "product" is competencies rather than specific products. Examples are job shops and short-run or low-volume suppliers to OEMs.
• The company is a pure custom or project-based manufacturer.

So we return to the question of why it is important to define HVM. One of the most critical keys to success for implementation of any type business and process improvement initiative is alignment. That is, at a strategic and tactic level all business activities, from sales and marketing to product development and management to finance to production, are aligned with the business's objectives (and that those business objectives exist, of course). If, for instance, an initiative such as lean manufacturing does not recognize that project engineering and BOM and manufacturing documentation generation are part of the production value chain in HVM, the degree of success for that initiative is diminished.

Self-knowledge of one's business model and process are necessary to "maximize variety (sales) and minimize variation (production)."

When Manufacturing Errors are not Manufacturing Problems

I had a recent conversation with an Industrial Engineer from a US-based HVAC company. He said that they had just completed an analysis of manufacturing errors. The result: 40% of errors came from design or manufacturing documentation problems. Let me repeat that:

The root cause of 40% of manufacturing errors was design or manufacturing/design documentation.

Many manufacturers are making significant investments in lean, continuous improvement, and quality programs to remain competitive. But what if those investments are returning only a portion of their potential because critical production activities and inputs, such as manufacturing documentation, are ignored? This situation is especially critical in high-variety manufacturing (HVM), such as build-to-order, engineer-to-order, configure-to-order, mass customization, job shop, and HMLV (high-mix low-volume).

I discussed this situation before in my post, Inputs, Process Control and High-Variety Manufacturing, from 3/31/08. This conversation brought it all to mind again, and, in truth, it is a recurring soapbox issue for me.

To maximize investment in lean, continuous improvement, and quality programs, an HVM company must recognize and include its full operations value chain in those efforts.

Business Success, Strategy, Lean, and Zealotry

I attended an interesting presentation last week sponsored by the Minnesota chapter of the Association for Strategic Planning (ASP), www.strategyplus.org. Two Professors of Management from the University of St. Thomas, Dr. Michael A. Sheppeck and Dr. Jack Militello, spoke on the "Mediating Factors in Strategy for Successful Organizations." The professors are doing empirical research on which strategic processes lead to positive financial outcomes.

While their findings are preliminary, they have strong data that show that no one single factor can be claimed as the "secret of success." What the data does appear to show is that a combination of factors, really a mixture of strategy and tactics, is the determinant of financial success. The specific set of mediating factors are correlated to market strategy, workforce competency, organization culture, and HR management practices, with company to company variation.

I think their findings underscore the contention of Phil Rosenzweig in The Halo Effect that:

"What leads to high performance? If we set aside the usual suspects of leadership and culture and focus and so on - which are perhaps better understood as attributions based on performance rather than causes of performance - we're left with two broad categories: strategic choice and execution. The former is inherently risky since it's based on our best guesses about customers, about competitors, and technology, as well as about our internal capabilities. The latter is uncertain because practices that work well in one company may not have the same effect in another. In spite of our desire for simple steps, the reality of management is much more uncertain than we would often like to admit - and much more so than our comforting stories would have us believe." (emphasis added)

So what does that have to do with Lean and zealotry? Anyone who participates in lean discussion forums sees that the level of emotion and certainty about lean does rise to the level of zealotry at times. It clouds that fact that lean, while without a doubt one of the most powerful methodologies a company should use and a powerful cultural construct, is, by itself, not the primary driver for a company's success. Marketing decisions, HR management practices, and the other mediating factors that Professors Sheppeck and Militello are studying, have just as much impact, or more or lack thereof, on a company's financial success.

Zealotry about lean can also cloud one's judgment in terms (1) how lean should be implemented in specific situations, such as high-variety manufacturing, and (2) is lean the answer to the real root causes of a company's lack of financial or competitive success. In either case, it is likely that the reality of the benefits derived from the lean implementation will not be aligned with the expectations - a potentially devastating outcome. I wonder if this misalignment of expectations with reality is one of the reasons that the track record of lean implementation is spotty within American industry.

Inputs, Process Control and High-Variety Manufacturing

I was reading a chapter in Lean Manufacturing for Job Shops (Tristani and Irani) that introduces the concept of process control. The following statement resonated with me:

" . . . consistent inputs help give better internal work-center-to-work center quality, which tends to lower the amount of re-work a job requires. That means the work content is less, product cost is less, and product lead time through the shop is improved."

I believe that many manufacturers overlook what should be one of the easiest and potentially most critical input to control: their manufacturing documentation.

In high-variety manufacturing (HVM)*, by definition, there is variety and variation of products manufactured, and, in many cases, uniqueness of product. That means that the manufacturing documentation which details the specific requirements of the specific product or product variation to be manufactured is absolutely critical to the effectiveness (productivity and quality) of the manufacturing process.

There is no universal standard for manufacturing documentation; in HVM, especially, it needs to mirror the variation and variety of product. It must, however, include all relevant content and present it in a way that reduces and/or clarifies complexity. (One common error is to include too much irrelevant information that ends up obscuring the most critical information.) The physical organization must match the workflow of the shop floor, as must the specific presentation match the needs of each process step. That is, a drawing may be needed for some steps, but other steps may just need a dimensional cut list. In some cases generic assembly instructions or drawings may not be needed in the packet itself, but accessible on an as needed basis. The documentation also needs to reflect the needs of the workforce in terms of language and technical literacy.

Too many times, however, the manufacturing department just accepts what it receives as either it doesn't realize that the documentation can be improved or it's been told that that is another department's responsibility and not its concern. Both of these conditions, and the lack of control and quality in the manufacturing documentation, are symptomatic of a larger issue: the lack of understanding that in HVM "production" or "operations" encompasses more than just the manufacturing floor and that, as such, process and quality improvements, whether lean or other methodologies, need to extend beyond the factory threshold.

More on this subject forthcoming.

* High-variety manufacturing includes types such as job shop, build-to-order (BTO), configure-to-order (CTO), engineer-to-0rder (ETO), mixed model, high-mix low volume (HMLV), mass customization, modular, and so forth.

"Lean Manufacturing for Job Shops" - a great new book

A great new book and resource has just been published: Lean Manufacturing for Job Shops by Robert J. Tristani and Dr. Shahrukh A. Irani. The information site is www.geocities.com/Robert_Tristani .



The book has a unique format which adds to its usefulness. The story of Southern Foundry and Pattern Works, a fictional job shop implementing the job shop lean principles, is intertwined with the textbook portion of the book. This format really helps the reader grasp the concepts and how to apply them. It also helps the reader visualize how these critical principles can be applied to other job shop and high-variety manufacturing scenarios.



The book is packaged with two additional resources: a CD about Value Network Mapping (VNM) and a CD entitled "How a Jobshop Developed their In-House Training Video on Waste Elimination." Anyone who has tried to do a Value Stream Map of a non-repetitive process knows the limitations thereof. Value Network Mapping solves those problems.

I strongly encourage everyone in high-variety manufacturing to get this book and its companion resources. I foresee using it as not just a resource for the shop floor but for management, as well.

Implementing a Lean Manufacturing Program in a Jobshop - webminar

Here is a webinar worth attending:

Lean Manufacturing is a proven manufacturing strategy that is based
completely on the Toyota Production System. It helps to increase capacity
and to reduce lead times, setup times and inventories. But, even if the
principles of the Toyota Production System are universal, there are
significant differences in the design and operation of production systems
designed for low-mix high-volume manufacturing versus high-mix low-volume
manufacturing, especially small-to-medium sized contract manufacturers. At
this unique and interesting online event, the speakers will discuss
implementing Lean Manufacturing programs specifically for the jobshop
environment.

Speakers:
Shahrukh A. Irani (The Ohio State University),
Louis Marecek (Parker-Hannifin)
David Lechleitner (Exact JobBOSS)

Date: March 11, 2008
Time: 1:00 - 2:30 p.m. Central

Website for Registration: http://www.exactamerica.com/jobboss/webinarform.php?date=March-11&source=website

Production information quality call to action

With all the focus and investment in lean and Six Sigma and all the other methodologies, why do so many companies settle for ineffective, inefficient, and some times just plain incorrect order and manufacturing documentation?

This is a special vice of high-variety manufacturing as, almost by definition, each order and manufacturing packet can be different.

The content and format of manufacturing packets are the inputs to manufacturing value streams. Efficiency and effectiveness of that information is as important to a streamlined and productive production process as any kaizen event. Yet time and time again, I see horrifically inefficient project engineering processes; reliance on manual data management; manual drafting instead of automated, smart drawings and models; poorly constructed and confusing shop floor information packets; manual programming of CNC machines; and so forth.

There are so many opportunities to improve the quality of this information. In many cases, its just making better use of the tools at hand whether it’s 2D CAD, solid modeling, ERP or MRP. The problem is that inertia sets in with how these tools are used, the users are not trained in the application capabilities beyond minimum functionality, and management does not demand an appropriate level of performance accountability.

My call to action for anyone involved in high-variety manufacturing is to really start questioning whether your information foundation and content is really supporting your lean, quality and process improvement programs.

Fun demo of TWI combined with video

I think the demo available at the following link, http://highvarietymfg.ning.com/forum/topic/show?id=1799974%3ATopic%3A2688 ,
shows the continuing relevance of TWI (Training Within Industry).

Using the "2-second T-shirt fold," Vic Uzumeri, a professor at Auburn University, shows how simple video can enhance the structured training benefits that TWI offers.

Be sure to follow the discussion thread for his remarks on why it is important to include both a full-speed demo and a step-by-step clip.

(And you may gain some laundry tips, as well!)

The Lessons of the Commoditization of Starbucks

"Overhaul, Make It A Venti," an article in the Wednesdays, January 30, 2008, New York Times discusses the current restructuring of Starbucks. The article references a memo written by Howard Schultz, its long-time and newly rehired CEO, entitled "The Commoditization of the Starbucks Experience." As I read the article I started wondering whether some very cogent lessons for high-variety manufacturers, can be derived from the Starbucks experience.

The Times article quotes several analysts:
"…replacing mystique with relentless commerce."
"…the mystique that so thoroughly defined the initial experience is conspicuously absent - trampled in the stampede of proliferation."

Starbucks tried to become everything to everybody. They loaded up their stores with absolutely everything they could sell: music, food, cutesy beverages, appliances, gifts, etc. They tried to be everywhere. And their biggest mistake: they replaced the experience of the barista-made cappuccino with automatic machines.

So how does this relate to job shops, mass customizers, build-to-order, and the like? It is very easy, especially in a time of economic uncertainty and pressure, to accept every possible order if one has the slightest capability to deliver it. It is very easy to try to create a "product" from every possible idea a customer or an employee may have.

What this sort of reaction can do, however, is destroy the very competencies and customer values that have contributed to the growth and success of the business to date.

Being a job shop, a mass customizer, or other sort of high-variety manufacturer requires an exceptionally-disciplined focus on what it is that you do well and what value you deliver to your customer. If you are accepting every order that comes in the door, what impact does that have on your quality? On meeting your delivery deadlines? On managing your production schedules? On the perception of your most profitable customers as to who you are?

Starbucks lost sight of those items, is experiencing declining customer traffic, and is closing stores. The NY Times article frames its discussion by profiling a neighborhood coffee shop that has four Starbucks stores within one mile of its location. At least one of those Starbucks is closing. The neighborhood coffee shop? It's continuing to thrive, with coffee roasted by hand, free refills, and a funky atmosphere.

The importance of a New Product Development process

A couple of recent conversations have re-enforced in my mind the need for a good, disciplined New Product Development (NPD) process for any company and for high-variety and mass customization manufacturers in particular. The danger of being used to variety and variability and having flexibility is that it is easy to say yes to just about anything. High-variety and mass customization do not absolve you from the need to understand what your competencies are, who your market is, and where your profitability arises.

The statistics regarding the benefits of a structured NPD program are quite dramatic. For instance, companies that use a disciplined NPD approach:

• are two and one-half times more likely to launch a successful product,
• will capture two times the market share, and
• will generate two times the profit.

(from the Product Development and Management Association, http://www.pdma.org/, Best Practices Study)

A job shop may say that they don't have a "product," just capabilities or services that they sell to their customers. In reality both those services and the types of parts they produce on a regular basis are products within a NPD definition. The decision to add a new service or take an order for a new type of part should be just as carefully considered as the development and marketing of a product product by a mass-production manufacturer.

This is a link to a white paper on my website that may be useful to any manufacturer looking at implementing or improving an NPD program.

New Product Development - A Cornerstone of Competitive Strategy

Additional materials are available upon request.

High-Variety Manufacturing Professional Community

I'm pleased to announce the launch of a professional community for High-Variety Manufacturing, http://highvarietymfg.ning.com/. I'm also pleased to say that I'm acting as site administrator.


This site is directed at all people involved in high-variety manufacturing, whether in operations, sales & marketing, product development and management, or any other job role. It is also directed at all flavors of high-variety manufacturing: job shop, HMLV, mass customization, contract, mixed model, etc.


I would like to invite all interested parties to join this community. It will become what its members want it to be. I hope that it becomes a true resource center for sharing and support for this challenging environment.



So please join, take part in discussions, join SIGs and other groups, post content, and interact with other members. If you have any questions or problems joining, feel free to contact me through this blog.