August, 2009

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Article Index

MN Economic Report
Article by: Dr. Ernest Goss

For the month of July 2009, reported August 3, 2009. For the 12th consecutive month, Minnesota’s Business Conditions Index fell below growth neutral.


Featured Company: “Don’t give ‘em a reason to leave”
Article by: Justin Dorsey

That is the simple but effective marketing strategy of La Machine Shop, Inc.; a precision machining company in Ham Lake, Minnesota.  That almost 100% of its new business comes from referrals is testimony to its effectiveness. 


Crowd Sourcing - Being creative about being creative
Article by: Rod Greder

Geat ideas come from unexpected people and unexpected places. My most unique thoughts come when listening to someone talk about an unrelated topic. The neurons start firing and connections are laid down to other packets of information stored in remote parts of my cortex and a new hybrid thought is born.


Can Office Improvements Really Make a Difference?
Article by: Jim McCarthy

Question: I am used to seeing Lean improvements in manufacturing, but lately I see opportunities in the office that could make a difference to both our customers and our internal operation.  We seem to be running from “pillar to post” when it comes to chasing orders, scheduling, and floor communications.


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MN Economic Report

For the month of July 2009, reported August 3, 2009. For the 12th consecutive month, Minnesota’s Business Conditions Index fell below growth neutral.

The leading economic indicator based on a survey of supply managers, climbed to 45.2 from June’s 43.9. Components of the overall index for July were new orders at 45.4, production at 49.1, delivery lead time at 51.6, inventories at 43.6, and employment at 36.3. “I expect Minnesota’s seasonally adjusted unemployment rate to peak at 8.9 percent, its highest level since 1982, in the fourth quarter of this year. Minnesota will continue to lose jobs, both manufacturing and non-manufacturing, in the months ahead.  However, the pace of these job losses will diminish significantly from that experienced earlier this year,” 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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Featured Company: “Don’t give ‘em a reason to leave”

That is the simple but effective marketing strategy of La Machine Shop, Inc.; a precision machining company in Ham Lake, Minnesota.  That almost 100% of its new business comes from referrals is testimony to its effectiveness. 

A less folksy attestation, but no less persuasive demonstration, of its client-centric commitment is its quality and delivery ratings that measure above 99% according to its own client’s performance records.  La Machine Shop plays close attention to these measurements and tracks them as part of its ISO procedures.

In technical terms, La Machine Shop is predominately a Swiss-turning machine shop.  (In Swiss-turning the tool does not move which allows extremely close tolerance machining).  Because of that focus, it is able to turn a wide diversity of metals and diameters (ranging from ½” to 1 ¼”).   Its customers come from a variety business sectors but medical devices, defense, aerospace and industrial (food service) are its mainstays.  Its set-up procedures are so rigorous that it can actually run some machines “lights-out” (e.g. overnight with no operators being present).     

La Machine Shop was started in 1976 and is now entirely run by the second generation consisting of three brothers and one sister.  Today, Joe LaBonne is the president and remarks that while inter-familial succession is difficult for many – he and his siblings actually enjoy working together.   Turning to the current business environment Joe says that, “We saw a sharp down turn in orders in January, but have seen a noticeable upswing lately.  I will say, however, that what’s different about these new orders is that they’re not based on forecasts but strictly immediate fulfillment.  So, we will be hesitant to call it a recovery until we start to see orders for future delivery.” 

In all, La Machine Shop employs 28 employees and runs one shift 10 hours a day for four days and reserves the fifth day for overtime.  La Machine Shop takes a very proactive approach towards engaging its employees in its business plan.  To that end, it shares with them  the sales goals and achievements each quarter and complements that with a cash bonus program for exceeding targets.  La Machine Shop also sponsors a 401k plan with a robust match as part of a generous benefits package.  The result is an extremely stable work force with many employees having been there for more than 15 years. 

When asked about the “China” factor Joe says, “It’s more than just China.  There is plenty of cheap labor in a variety of third world countries.  And, we did see some clients move their orders there several years ago.  But, we’ve also seen some of that come back.  In our business, as with most manufacturing, it’s not just about lowest-cost.  Our clients don’t want to have to worry about material substitutes and having to check quality obsessively.  They don’t have time for that.  So in the end, it hasn’t affected us very much.  In fact, we see China in the future as a net gain for us to sell our US made parts into.”  When asked about the Manufacturers Alliance (MA), Joe is enthusiastic.  As he says, “It’s been a very beneficial resource for training and opportunities to visit other shops.  And, we’ve hosted several tours at our own shop.  The feedback from both has helped us be a better company.”  Using lessons learned from the MA, La Machine Shop addressed its #1 bottleneck – shipping – and transformed a department that used 2 ½ employees to one that is run by one employee and reduced  the department’s floor space by 30%. 

Finally, Joe was asked whether the current recession was life threatening to La Machine Shop.  His immediate response was, “No,absolutely not.  Would we like to be growing faster?  Sure.  But the fact is that this slow-down has enabled us to streamline our processes and still be profitable.  So, we’re very bullish and feel like this downturn will ultimately make us stronger and more profitable. ” In this era of doom and gloom it’s refreshing to hear such optimism.  Manufacturing is alive and well in Ham Lake, Minnesota.

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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Crowd Sourcing - Being creative about being creative

Geat ideas come from unexpected people and unexpected places. My most unique thoughts come when listening to someone talk about an unrelated topic. The neurons start firing and connections are laid down to other packets of information stored in remote parts of my cortex and a new hybrid thought is born.

Ideas also come when I am away from my office, maybe at the local hardware store, driving my truck or walking my farm. I’ve asked many people where they have their most creative ideas. No one has boldly raised their hand and confirmed it was in their cramped cubicle or their spacious corner office.

Intentionally exposing yourself to diverse stimuli (people, places, ideas) can lead to increased creativity. I call this approach “premeditated serendipity”. Ingenious thoughts will likely come out of the exposure but it’s a numbers game and you can’t win if you don’t play.

Crowd-sourcing is a more defined way to tap into this much needed diversity. Crowd sourcing is when problems are broadcast to an unknown group of solvers in the form of an open call for solutions. It is a structured method to open up the problem-solving funnel for ideas to pour into it. Bill Joy, co-founder of Sun Microsystems said “No matter who you are, most of the smartest people work for someone else.”  We must look outside our four walls.

A.G. Lafley, former CEO of Procter & Gamble, concluded that even P&G couldn’t expect to have all the best ideas internally to develop new products at the pace needed to compete. He said “External collaboration has played a key role in nearly 50 percent of P&G's current products. We've collaborated with outside partners for generations but the importance of these alliances has never been greater. Our vision is simple. We want P&G to be known as the company that collaborates — inside and out — better than any other company in the world.”

Open Innovation on a local level is also underway, Ken Powell, CEO of General Mills, states “We believe that there is a great opportunity for us to enhance and accelerate our innovation efforts by teaming up with world-class innovators from outside of our company. To facilitate that effort, we created the General Mills Worldwide Innovation Network (G-WIN) to actively seek partners who can help us deliver new levels of taste, health, and convenience in our products.”

The central idea behind crowd-sourcing or open innovation is that in a world of widely distributed knowledge, companies cannot afford to rely entirely on their own R&D and internal assigned experts, but should instead look anywhere and everywhere for creative ideas.  

Open Innovation, to be done effectively should be designed to heed the conditions laid out in the book ‘Wisdom of Crowds’ by James Surowiecki, which states that a group of average individuals (with some cognitive ability and relevant experience) can be more successful solving problems than an isolated expert or two. The following conditions must be present:

  • Diversity of opinion - Each person should have private information even if it's just an eccentric interpretation of the known facts.
  • Independence - People's opinions aren't determined by the opinions of those around them.
  • Decentralization - People are able to specialize and draw on local knowledge.
  • Aggregation - Some mechanism exists for turning private judgments into a collective decision.

 

Prize-based innovation (you offer a defined dollar prize to the provider of the successful solution) involves engaging an unrelated and diverse mass of people to help a company solve a development challenge. The InnoCentive Open Innovation Community is designed to help you tap a virtual team of problem solvers. http://www.innocentive.com/ Innocentive has done a good job of dealing with intellectual property ownership, confidentiality and other issues that can derail this type of approach.

Crowd-sourcing can free up your internal product development staff to focus on evaluating and combining the distinctive submissions that come in and ensuring successful implementation of the best solutions. Costs and cycle times can be reduced and success rates increased for projects that may have otherwise died or been delayed.    

Differing worldviews, diverse know-how, divergent thinking styles and a defined business process are the key ingredients to make open innovation and crowd-sourcing work. Besides General Mills there are numerous other Minnesota companies using open innovation in their own unique ways. They are truly being creative about being creative.

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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Can Office Improvements Really Make a Difference?

Question: I am used to seeing Lean improvements in manufacturing, but lately I see opportunities in the office that could make a difference to both our customers and our internal operation.  We seem to be running from “pillar to post” when it comes to chasing orders, scheduling, and floor communications.

The office doesn't seem to be plugged in to continuous improvements, and no visual indication of status or progress can be seen in the office.  Am I wrong in assuming the office should be part of the value stream?  How can we set up visuals to see how we are doing in the office? Here are a few examples of our frustration:

  • Customers constantly complain (or become former customers) due to very slow “order to acknowledge” or quoting processes.
  • Manufacturing grumbles regularly about being held up due to parts shortages
  • “In-fighting” between manufacturing and scheduling is common due to last minute production changes and 100% (or more) factory loading without capacity adjustments.
  • When I walk through the office, I can never see how they are doing – shouldn’t there be some metrics in place to tell us what is going on?

Lean Champion’s Answer: Ah yes!  I can relate to your frustration! The office is a gold mine of opportunity for continuous improvement.  This relatively new frontier needs to be exploited with a vengeance.

Technically speaking, all office processes are non-value added as they do not change the product; so you should approach the office a little differently than manufacturing.  Start by assuming the thing you are working on (a purchase order, a customer order, a quote etc.) is the “thing of value”.  Anytime you are not changing the “thing of value”, you are in a “waste” or non-value added mode.  In addition, consider available time on a 24/7 basis, because customers don’t care about work days or shifts, they just want their product in a short (elapsed) time.  This especially holds true for international customers – your week-end may be their work day due to time and customary work day differences. 

A smart move is to assemble your office team and create a value stream map using the above guidelines.  I recall an office project where the value added to total cycle time ratio was 0.3% - in other words, we were only working on the “thing of value” 0.3% of the time.  WHAT AN OPPORTUNITY!  We changed the process and it is now six times faster than the baseline.  Don’t forget to establish a baseline before you start any improvements so you know what the score was at the start of the game.

Next, visual metrics are needed to see how well you are doing.  In the above process, we plotted work in process (WIP) or in this case, PIP (paper in process).  At the end of each day, we documented the orders in process (PIP) and graphically plotted the quantity on a chart displayed in the middle of the office value stream.  Once we knew the PIP and the number of orders completed that day, we could compute the cycle time by dividing the throughput into the PIP.  i.e. PIP = 200 orders ÷ 60 orders/day (completed) = 3.33 days (Cycle Time).

Office 5S is also important.  Employees need to standardize workstations and work on only the “live item” to minimize clutter.  When workstations are the same, if employees take vacation, get sick, or leave the company, it is easier to find and complete tasks, with designated places for items.  In the above example we used vertical bins (within reach of an operator) for each day of the week, and also for “destination bins” so a runner who arrived every hour (per documented standard work) could distribute work without question.  When the supervisor passed by a station, she could easily see who was behind, who was caught up, etc.

Other quick tips for the office:

  • Don’t schedule equipment or processes at 100% utilization – this guarantees late deliveries.  Think of driving in bumper to bumper traffic without allowing any travel time delays.
  • Leave some capacity “open” for emergency orders; if unused, work on continuous improvement that day.
  • Visually measure and post any stock-outs in terms of impact hours, or days, on total manufacturing cycle time.  Better yet, don’t release an order with short parts – if you can’t finish the job, don’t start it.  Releasing orders you can’t finish “clogs up” the plant floor & causes waste.
  • Make the office an integral part of the manufacturing value stream; measure and display key metrics and improvement activities. 
  • Document and monitor office standard work compliance using a three tiered approach: several times per week (supervisor), every 2-3 weeks (supervisor’s manager), and every 4-6 weeks (General Manager). 

 

If you want to know more on how to improve office processes and make your operation more visual, consider attending the Manufacturer’s Alliance Office 5S & Visual Management seminar on September 2, 2009.  Delight your customers and improve internal operations and morale through proven Lean office techniques. 

The bell for the next round is about to ring, so that is all we have time for now. See you after the next round!

Jim McCarthy is President and Owner of Product Ventures, Inc., a consulting company for World Class office & manufacturing improvement. He is a certified Lean master, 6 Sigma Black Belt, Lean/Six Sigma Practitioner, Lean Office practitioner, and Quick response Manufacturing (QRM) Implementer. mccarjfm@aol.com - See also www.linkedin.com for James F. McCarthy

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