Learn now...lean forever

 

Recently, Howard Coleman, principal of MCA Associates and a regular contributor to The Wholesaler, shared some candid thoughts on “Lean management” with editorial director Mary Jo Martin. MCA Associates, a management consulting firm since 1986, works primarily with wholesale distribution companies that are seeking operational excellence. Coleman and his staff of senior consultants provide operational excellence —idea-leadership — and implement continuous improvement solutions focused on business process re-engineering, inventory and supply chain management, sales development and revenue generation, information systems and technology, organizational assessment and development, and succession planning.

 

MJM: Howard, thanks for submitting yourself to some questioning on Lean Thinking and how it fits with the needs of our readership. I hear more and more about it, but honestly, I’m not quite sure that I’ve fully grasped its significance. So maybe that is where we start and where you can begin to fill us in.

 

Coleman: Sure Mary Jo. You know, during this current economic turbulence, companies are looking for ways to reduce operational costs and, at a minimum, maintain competitive advantage, or maybe even provide competitive advantage opportunities for the future. The concept of Lean Thinking and its associated methodologies, sometimes just simply called “Continuous Improvement,” is now making its way through non-manufacturing organizations, and as it transitions, it offers an opportunity for a significant break-through in how management looks at and handles the reduction of “waste” — meaning excess steps, processing, costs, etc., in all aspects of its operations. But, in discussing it, it is important to keep in mind that the concept of “Lean” is not meant to be a “one-time” event or just applied during the “bad times.” That’s the significance of the term: “continuous improvement.”

 

So, having worked with wholesale-distributors over the years, facilitating their “Lean Initiatives,” I found that each company, as they began, was surprised by several different factors that in total comprised a “common thread” that ran through their experiences. I think there is great value in reviewing these before we go on any further.

 

• Upwards of 60% of the activities they performed could be defined as adding no value to the customer. So there was plenty of opportunity to identify “cost-drivers”.
• Early on, “culture change” and a difference in “mind set” became a major point of discussion, as old ways of looking at “roadblocks and bottlenecks” to improvement were addressed.
• What ultimately began to take shape was that  those “old ways” of looking at problems seemed to be just treating symptoms, for the most part, rather than “getting to the root-cause.”
• There were often pre-conceived notions and assumptions, as to “causes,” that sometimes were difficult to dispel.
• The “old way” of treating a problem — “fix-it” and then walk-away — thinking that it was fixed for good, and that the “fix” would not impact another area, often was a result of their current problem resolution thinking.
• “Improvement activities” or whatever they had previously called it, sometimes gave way to the temptation for inertia.
• Management sometimes exhibited a lack of a participatory style, a general reluctance to have all its employees involved in improvement activities — on an on-going basis. Giving up the “power” may be too strong a description, but it often had suffocating consequences on the attitudes of employees.

 

MJM: I know you may have covered this in previous articles that we’ve published, but just review, again, what the concept and content of Lean Thinking is — and a little of its history.

 

Coleman: This will get to the core of how valuable “lean thinking” can be in a wholesale distribution environment.  I define the concept as those “things” that we can do, those steps that we can take, to increase productivity —in other words —  increasing through-put and the time it takes to do things, reducing errors, reducing inventories, reducing space needs — in other words, reducing “transaction costs” — and doing all that with very little capital cost, with the same or less head count, and increased flexibility to meet customer needs.

 

Admittedly, that was a mouth-full. To state it another way, we need to look at the value we add to the customer and the “wastes” we incur in providing that value. “Value” provided to a customer in a wholesale distribution environment is somewhat different than in manufacturing. Typically, a wholesale distributor adds no specific value to a product, unless there is some activity, modification, or special transaction that the customer requests in addition to receiving a quality product — on time. In manufacturing environments, we’ll typically run up against value-added requirements, such as a special modification to a standard product, reducing product cycle time to remain competitive, synchronizing raw material requirements with product final assembly needs, etc., all of which add that value to the way the customer sees us in the competitive marketplace.

 

If we look at it from an “end result” — in wholesale distribution we want to expand our capacity, with less effort required, to deliver the services and the value we do provide — at a reduced cost, which hopefully translates into greater profitability and satisfied customers.

 

Here in the U.S., Henry Ford, back in the early 1900s, introduced his assembly line concept of “moving conveyance” and “standard work.” But by 1926, Henry lost his way and was running into problems - his inability to provide variety in the Model T.  It was limited to one color — Black — no body style options or any other modifications. Now what Toyota Motors did, starting in the 50s, as they began automobile production, was to focus on the problems Henry Ford encountered. To cut the story short, the rest is history. Toyota focused on whatever they could do to add value to their customer — providing them the choices that they wanted — by reducing model change-over costs, increasing production flexibility by reducing production lot sizes and subsequent manufacturing time, reducing unneeded inventories, how they stored and staged materials for production, collaborated with their suppliers for just-in-time inventory deliveries, and very importantly how they brought their factory-floor workers into a continuous improvement process through constant education and fostering their on-going involvement. In short, they looked at every conceivable opportunity for improvement, and empowered their employees to participate. Toyota is still doing that today. They still represent the classic case study of what lean thinking is.

 

MJM: How quickly have the lean concepts been adopted in the wholesale-distributor environment?

 

Coleman:  I think slowly. You know, in manufacturing, it is proven, there are many, many successful initiatives to cite, but in the distribution environment it has been much slower. I truly don’t believe it is because it’s not relevant, but rather it just hasn’t been the nature of distribution management, yet, to make the connection and understand the benefits. It is relatively new to this environment. So, what I call “The 3 Pillars of Lean Thinking,” that is, that the barriers to improvement in an organization exist in the processes we use, people’s attitudes towards change, and how we use technology — has not been sufficiently transitioned. Many of the successes to-date, in distribution, and particularly within large companies, have been in reducing supply chain transactional costs and increasing supply chain reliability — and that’s great. But the benefits of Lean Thinking can extend to any function within a company - and of any size. I believe it will gain more of a foothold in management’s mind as they become more motivated to take pro-active steps to improve performance. I suggest what better time than now?

 

A good example is a mid-size wholesale distributor client of ours who has extended their lean initiative beyond their original central distribution center and warehouse focus to almost every other area of their company: from order and product quotation, order entry and customer service, product procurement - right through account payables and receivables. They have consistently made great strides in leaning their processes and have developed their own culture of continuous improvement. Their fostering of “lean thinking teams”, whole-heartedly supported by their senior management, has really been the key to their success, so far. Once more, they believe they still have further to go.     

 

Editor’s Note: Tune in for the July issue of The Wholesaler for the second half of this exclusive interview with Howard Coleman. We’ll start by asking him how a wholesaler can get started on this “lean journey.”