September, 2007

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Article Index

Do You Have the 'Will' to Innovate?
Article by: Rod Greder
A sign on a local college football team's weight-room wall says: "Anyone can have the will to win but not many have the will to 'prepare' to win."
This Company Prospers at Play
Article by: Justin Dorsey
Landscape Structures, Inc., (www.playlsi.com), of Delano, makes playground equipment. Sounds simple.
Supply Chain Management - When Internal Operations are the Weakest Link
Article by: Dick Lee
Several years ago, a venerable but fraying custom forms printer asked me for help to improve business process and adopt automation technologies - as part of implementing more customer-centric business strategies.
MN Economic Condition
Article by: Dr. Ernest Goss
For the month of September 2007, reported October 1, 2007. The Business Conditions Index for Minnesota rose for the second straight month.
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Do You Have the 'Will' to Innovate?
A sign on a local college football team's weight-room wall says: "Anyone can have the will to win but not many have the will to 'prepare' to win."

The same logic applies to succeeding at innovation. Creativity and innovation get oodles of lip service, but companies don't want to make the painful changes needed to 'prepare' themselves to truly innovate.

I'm not talking about adding taupe to your color options or fixing the handle that keeps falling off or shaving five percent of your cost. I'm talking about radical disruptive innovation that causes competitors heartburn, leaves customers awestruck, and has investors digging deep. Think iPhone, Facebook, Gardasil (revolutionary vaccine against cervical cancer), and the ultra-low-price Starbury athletic shoes backed by NBA player Stephon Marbury. Each of the developers of these products took risks to change the paradigm. Maybe being on the leading edge (bleeding edge) isn't your style--then own up to it. Match your strategy to your risk profile.

One innovation strategy model put forth by Raymond Miles and Charles Snow lists four general strategies that companies can follow:
  • Prospectors
    • continually search for opportunities

    • regularly experiment with responses to emerging environmental trends

    • are the creators of change

    • usually are not completely efficient

  • Analyzers
    • operate in two types of product-market domains, one relatively stable, the other changing

    • in their stable areas, they operate routinely and efficiently through use of formalized structures and processes, and they emphasize time to market and efficiency

    • in their more turbulent areas, they watch their competitors closely for new ideas, and then rapidly adopt the most promising ones

  • Defenders
    • have narrow product-market domains

    • are highly expert in their limited field and do not tend to search outside for opportunities

    • seldom make major adjustments in their technology, structure, or methods of operation

    • devote primary attention to improving efficiency of their operations

  • Reactors
    • frequently perceive change and uncertainty but are unable to respond effectively

    • do not have good alignment between their strategy and structure

    • seldom make adjustments until forced to do so
No single strategy is the outright best, although prospectors and analyzers tend to outperform long-term. What determines success is that the strategy you choose, and communicate to your organization, is a strategic fit with your company's capabilities, culture, structure, technology, and risk tolerance.

I worked with a Minneapolis manufacturing company this summer whose management team thought the company was innovative. Their middle managers disagreed. In fact the company's behavior, confirmed by interviews with customers, was more aligned with being a defender than a prospector or analyzer. When confronted with this reality management came to grips with the fact that they didn't have the financial wherewithal or intestinal fortitude to really be a trailblazer and risk-taker. That didn't mean that the innovation door was closed to them. We put together a plan that required them to partner with suppliers, customers, and others to spread the risk and tap other's capabilities to co-develop innovative new products. They'll lose some independence, have to modify a number of internal processes and alter some behaviors, but the business results will be worth it. They have developed the will to 'prepare' to innovate.
Rod Greder, Ph.D. founded Breakthrough Forum, an innovation dialogue and accountability group, for product developers and marketers to tap the collective intelligence of their peers who have been there and done that. rgreder@improveproducts.com, (763)443-1531.

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This Company Prospers at Play
Landscape Structures, Inc., (www.playlsi.com), of Delano, makes playground equipment. Sounds simple.

The truth, however, is that LSI has transformed and continues to transform the very nature of what constitutes playground equipment. The company even defines who can and will use that equipment. If that speaks to the "visionary" power of LSI, then the fact that it is now the market-leader in its industry speaks to its command of the more earthbound aspects of such things as on-time delivery, quality, client-satisfaction, and so on. LSI has now begun to address the ultimate challenge for any privately-held corporation - its legacy.

Thirty-six years ago, Steve King - then a landscape architect - and his wife, Barbara, looked at playgrounds dominated by slides and teeter-totters and envisioned a series of posts and platforms that would engage children both mentally and physically. From the beginning they collaborated, and they continue as the senior executive management team at LSI.

Barbara and Steve credit their employees for much of LSI's success. They recently took the ultimate step of acknowledging that employee contribution by transforming LSI into an ESOP. That this is a good company for which to work is inferred by the fact that a number of LSI employees have more than 30 years of service, and there are many more with 20 years.

What will LSI look like tomorrow? While some of the more obvious opportunities revolve around extreme sports like skateboard parks, LSI has begun to ask itself the rhetorical question: why should play be considered only a children's outlet? The company is exploring these questions and more -- do we focus on muscle-stretching needs of baby-boomers or thrilling workouts of generation X-ers?

Yet, LSI remembers its roots. The company is an active corporate sponsor of obesity-prevention programs for children, and continues to be committed to its vision to make a difference in the lives of others with its products.

LSI has also started down the path of being a "green" manufacturer as part of its commitment to being a good corporate citizen. Responsibility for that strategy sits with its Continuous Improvement Manger, Andrew (Andy) Rodgers.

Andy says, "Our 'green' mission and our new ESOP coalesce. A little example is that before our ESOP, throwing an aluminum can into a different container from the glass container might or might not happen. Now, you can be pretty sure that it will. A bigger example is water recycling. Because we paint all of our products in-house we use a lot of water. Recycling that water may seem like a no-brainer. But, it simply takes on a different priority when there's a direct financial impact on the people who are using it. While we still have a long ways to go, we at least know where we're going."

As is true for all interviews for the Manufacturers Alliance, Andy was asked about bottlenecks and the China factor. With respect to the former, he said that bottlenecks had moved out of the warehouse and now reside in the sales department. For example, efficiencies instituted over the years now give LSI excess capacity. That doesn't mean there's been a downturn or lay-offs. It just means that the company is well poised for their next growth spurt. With respect to China, the short answer is that because each playground is custom-designed, LSI has not seen any market penetration from overseas. In fact, the reverse is true and they are beginning to see a continuing rise in inquiries from abroad for their products.

It is difficult to appreciate that each playground is truly customized. There are no stock parts. Yet, the standard turnaround is two days - but 24 hours is not unusual. Including paint! This year, on-time delivery has been 99.9 percent. It's been that way for the last five years. More importantly, 95 percent of their product are "clean," meaning no missing (even washers) or damaged parts (even paint chips). Factor into this equation the fact that shipping damage - through no fault of LSI - is part of the "clean" measurement, and you can begin to appreciate the scope of manufacturing excellence that the company has achieved.

Finally when asked what Manufacturers' Alliance means to the company, Andy says, "We've been a member for a long time because their focus on peer-to-peer teaching is 100 percent consistent with ours. We have the luxury of a dedicated and inspired workforce. But that wasn't by luck. Our company happens to have two owners who really walk the walk and talk the talk. Their concern with green and child obesity is not lip service. It's real and, inspiring. And, we know that with our ESOP we can be a 'real' part of that - today and tomorrow."

Learn more about how to Sustain your Improvement Momentum by attending this month's Monthly Educational Program. Click Here
Justin Dorsey, Director of Sales & Marketing, Advanced Capital Group located at 50 South Sixth Street, #975 Minneapolis, MN 55402. call (612) 230-3009, email jdorsey@acgbiz.com, or visit www.acgbiz.com.

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Supply Chain Management - When Internal Operations are the Weakest Link
Several years ago, a venerable but fraying custom forms printer asked me for help to improve business process and adopt automation technologies - as part of implementing more customer-centric business strategies.

I didn't call the company "old" frivolously. This outfit hadn't changed its go-to-market methods in decades.

We started with a top to bottom workflow/information flow decomposition encompassing all work activities except manufacturing and finance. And while we discovered customer off-putting defects almost everywhere we went, the company's internal supply chain bore primary responsibility for what was becoming a dangerously high customer attrition rate.

Here's how orders flowed. One of the 1,200 direct sales reps - most of whom were qualified forms designers - would accept a customer order. The rep would lay out the job, then fax or e-mail the order back to one of 13 factories, with each factory supporting designated geographical areas for different types of production media. The factory, which was often half the country away, would produce and ship the order either directly to the customer or back to the rep. Alternatively, for a previously designed rerun, the customer could call one of 800 customer service reps spread across several call centers, and the call center rep would forward the order to the right factory.

So far so good? Actually, so far so bad. When we assessed this internal supply chain for quality, cycle time and cost-contributing defects, we found a genuine rat's nest:
  • Factories frequently misinterpreted order specifications, resulting in an unacceptably high level of reruns.

  • As a consequence, adversarial relationships had developed between reps and factory contacts, leading to even worse communication accompanied by constant finger-pointing.

  • Because factories weren't measured for cycle times and meeting customer delivery expectations, they frequently missed delivery commitments (and then blamed the reps for setting unrealistic dates).

  • Because factories were measured for order profitability - and billed the jobs - they had taken to "adjusting" order pricing to protect their margins.

  • Quality had sunk to such a low level that sales reps were personally inspecting every order possible - even if that meant waiting on the customer's shipping dock to inspect product before customers accepted it.
But there was one more issue we found, which instead of being a defect was a huge potential value-adder. Our primary client contact, who'd been promoted to corporate from a field sales management position, confided in us that the most successful reps were circumventing the whole mess by jobbing out all production possible to local printers, a serious violation of company policy and a "firing offense." And their field sales managers, understanding the situation, were actually winking at this practice. This "violation" not only cut costs and cycle time, but it dramatically improved quality both by permitting face-to-face communication of job specs and by creating accountability on the production side.

Want to guess what happened? A real awakening took place. The company discovered that the primary value it delivers to customers is forms design and production facilitation. Customers don't care who produces the stuff. They just want it right the first time, on time and on budget - without ever having to think about an order after placing it. Accordingly, we recommended not only lifting the prohibition on jobbing out production locally, but institutionalizing the practice for routine jobs not requiring specialized equipment unavailable locally. And when management compared the flows for jobbed-out production versus in-house production, the benefits were immediately obvious.

This supply line change contributed to a dramatic domino effect. Sales and service people had far more time to spend with customers, instead of sorting out messes, despite the additional time required to coordinate production. Customer relations improved, as did margins on "commodity" work. But the most blatant positive impact came on the cost side. The company was able to shrink the 2,000 sales and service force down to 1,200 - and gradually shrink the factory count from 13 to 7. Yes, other factors, including major workflow and information flow improvements elsewhere plus some serious automation, did contribute to the positive outcomes. But the shift from an almost purely internal supply chain to a best option system was an "icebreaker" that opened the way for much of the ensuing change.

Learn More about the new Supply Chain Management series of workshops including the new Supply Chain Mini-Series Click Here
<img src="http://www.mfrall.com/newsletter/authorpics/dicklee.gif"align="left">Dick Lee is Principal of High-Yield Methods and architect of Visual Workflow, a process methodology designed for non-manufacturing environments. For more information visit www.h-ym.com.

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MN Economic Condition
For the month of September 2007, reported October 1, 2007. The Business Conditions Index for Minnesota rose for the second straight month.



The index from a monthly survey of supply managers advanced to 57.1 from August's 56.4 and July's 55.5. Components of the overall index for September were new orders at 64.4, production at 60.0, delivery lead time at 52.2, inventories at 60.0, and employment at 44.4. "When the Bureau of Labor Statistics releases its state job data for September, I expect to find that Minnesota job growth was slightly below zero for the third quarter. Based on our survey, I expect an improvement in job prospects for the final quarter of the year, but annualized employment growth will be only slightly above zero. Fallout from the downturn in construction is impacting other industries in Minnesota with durable goods producers reporting weakness. Transportation equipment manufacturers detailed ongoing economic weakness," said Goss.
Dr. Ernest Goss of Creighton University, used the same methodology as The National Association of Purchasing Management to compile this information. An index number greater than 50 percent indicates an expansionary economy, and an index under 50 percent forecast a sluggish economy, for the next three to six months.

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