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.

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.

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.