A New Book
On Lean Manufacturing
From Manufacturing &
Technology News
A Continuation of Interview With Wiremold CEO Art Byrne:
Q: What is the most common cause of failure among companies trying to implement lean?
Byrne: We've watched a lot of companies fail because lean doesn't seem to apply to accounting. Some of the toughest barriers are the accounting and the computer systems that are set up for batch or standard cost. We get a lot of people who come here and say, "Can you have your finance guy come and talk to our finance guys because we've been doing lean for quite a few months now but our finance guys are killing us. They still want the old measurements. They want to look at things the old way. They're not giving us the data that we need and we're all just confused."
You make it so much harder for yourself if you think of lean as a factory thing. Most company presidents and CEOs are not comfortable in their factories. They come out of finance or marketing and so manufacturing is just something that should happen. They often have a manufacturing guy who says, "Just leave it to me and I'll take care of it." This is the way most manufacturing guys behave, but trying to get the entire organization to change is difficult.
Q: How important is it to have the buy-in from the CEO?
Byrne: The advice we give to anyone who talks to us is if you can't get the CEO to lead this, then don't start because you're just wasting your time. You're going to get more confused. You're going to give the whole idea a bad name because you're not going to be successful and you're going to make it impossible for someone to come along later and do it because everyone in the organization will say, "Oh, we tried that and it failed." It failed because you set it up to fail.
This is a major, strategic, cultural change. If you go to Toyota you hardly ever find senior executives who haven't at some point during their career spent a couple of years on the shop floor doing kaizen. The culture in their company demands that. If you don't know how to do it and if you don't know what it's all about, you're not going to be successful in that company.
Q: More companies are outsourcing their production or moving it to Mexico or China. Is that a good way to reduce costs and stay competitive?
Byrne: You really confuse people when you have a major thrust in outsourcing and you've got another major thrust of doing lean. You can almost guarantee that when a company has that dual thrust, the real thrust is to move everything to Mexico because lean is a much harder thing to do than move everything to Mexico. The organization will take the easier route all the time.
On a piece of paper you can say, "Wow, if I move to Mexico, I'll have the same number of people and they cost 75 percent less. Man, look at how much money I can save. Let's go."
No one thinks about how long you're making the supply chain or how much inventory you're going to put in the system, or how difficult it is to get back into stock when you're out or any of the other potential problems and the costs associated with those problems. It's hard to quantify those costs. It's easy to say, "I have 100 people in Indiana who cost $20 an hour and if I have the same 100 people in Juarez and they cost me $3 an hour, shizam, let's go."
Q: Is there a temptation for Wiremold to move production, in that you can set up a lean operation in a place where you're paying people $1.25 an hour, and potentially really whip your competition?
Byrne: We don't have that temptation at all, although we have a factory in China that is a very good lean factory and a lean factory in China is almost an oxymoron. People go there and they have three times the number of people they have somewhere else and think nothing of it because the labor costs are so cheap. We went there to sell product into China.
Q: Is there any way to make a lean implementation easier than it is?
Byrne: You have to think of companies as nothing but a collection of people. My collection of people competes against your collection of people to service the same customer. If you want to go lean, how are you going to do that? What you need is knowledge.
We can tell you all the principles in about 20 minutes. They're all simple. They make perfect sense. If that's the case, why don't I just tell my guys, "Look here are the two pages of principles, go do this." Why can't they do that? What's so hard?
It's a people issue. That's why it's hard. Getting people to change to do things differently than they have done them is really, really hard.
You can give them the principles and say we're going to change, but what happens is you get down the path a little way and you have a bunch of guys in a meeting and they're all excited and then one guy says what happens when this occurs? Oops, we don't know how to solve that, so let's just go back to what we know and what we know is batch or some form of batch.
The key for a company that has no knowledge but has a CEO who wants to do it is obtaining the knowledge. That is the key. How do I obtain the knowledge of how to start this? Where do we start? How do we organize? You have to have the knowledge that pushes you through the barrier of being in that meeting when nine out of 10 guys say you can't do that, it will never work.
Q: Are the successes achieved by Wiremold or Toyota enough to motivate more companies to adopt a lean system?
Byrne: As a general rule, no, not at all.
Q: Why?
Byrne: In lots of discussions with CEOs over the years you say, "Here is a list of what is possible." It's a list that should knock their socks off, and you say: "By the way, it's not capital intensive at all. There is no capital involved and you can get these gains."
People don't believe it. They say it's not possible -- that those gains are too big. If they do believe that you did it, then they say, "I can understand how you did it, but you're different from us. We're bigger or we're smaller or we're in a different industry, or we have plants in other countries, or you can't transport this overseas, or what if it fails?"
I've heard all the excuses.
Companies don't do it in general because they say they're doing just fine. They don't see any pressure. They have good customer service. They say, "Well we only turn inventory three times, but everyone in my industry does the same thing and I need to do that to supply the customer and even with the three turns I have some customer service issues once in a while but I'm making good margin, I'm growing, I have a little market share, why should I want to go do this other thing?"
These are very traditional batch and queue operations that invest like crazy in automation. That's a very capital intensive go-gain-market-share kind of approach. They are very willing to invest in big automation on a forecast before they even know they're going to have a market or not. It's the opposite approach to the one we take.
Q: How important is it for you to have an outside consultant involved in the implementation?
Byrne: Let's go back to the example of the CEO who wants to do it but he has nobody in his company who knows how. How do you break that barrier? Well, you need outside consultants to show you how to organize the approach; how to go about it; how to set up a program and then come work with you on a regular basis. What they're doing is training your people how to think differently. Without the outside consultant it's just about impossible to do this.
You might be able to hire someone from outside your company who has done it someplace else. The problem is you have to be careful with that because there isn't a manufacturing guy out there who doesn't have a resume that says he is a lean expert -- a Mr. Just-In-Time who has done it all. We see those resumes all the time and most of them are nonsense because there aren't many companies doing this. What you have are guys who know some buzzwords, but are basically batch guys.
There are very few guys in the United States who can really do this type of consulting work. The network of most of the people doing this has grown out of a very small group from Danaher. If you look at companies that are successfully doing this, you'll find a Danaher connection to it and some Shingijutsu connection to it.
Q: Are you still using Shingijutsu at Wiremold?
Byrne: Absolutely. And they're still teaching us stuff. I have people who say we can cut back now because we know how to do it. And I say no way. The day I let them out of here or let off the consulting pressure I'm putting on people is the day I start going backwards.
Q: There is no easy or fast way to implement a lean business system, is there?
Byrne: This is a physical thing. You can't just reprogram your computer system and, baboom, off you go. That was the promise of MRP. It never worked. It's a lazy man's way of doing it.
This is physical. You're going to have to move every machine in the factory maybe six or eight times. When you say that, you get the: "Oh, gee, we don't want to do that because we haven't moved any of these machines for 20 years. You want to move them six or eight times over the next three years?"
"Yes."
"Well how do you know that?"
"Experience."
"Oh, that sounds like it's going to take a lot of effort and maybe we shouldn't start down that path. Couldn't we do something else?"
Let's talk about setup for a second because it helps to answer your question.
Say you ran a company and it takes three hours to changeover and you came and spent a day with us and you went home, got all of your setup guys in a room and told them: "I've seen it. This is it. It has taken us three hours to change over for the last 25 years and as of now, I need you all to change over in less than five minutes."
These guys have been running their machines for you for 20 years and you come in and tell them this revelation. What do you think they're going to say to you?
First of all they'll think you're nuts. They'll say: "Haven't you learned anything in all these years you've been here? You know it takes this long."
When they find out that you're really kind of serious, now you're going to get The List. This is the list of why it can't be done. And you know what? It will be a pretty good list. It will make a lot of sense. Unless you're good at this, unless you know how specifically to do this and to show them how to do this, it's impossible for you to overcome the list because the list comes out of the guys who do this every day. They're going to tell you why you can't do it. So are you stumped?
This is why people fail. They're stumped.
What are you going to do when they give you The List? How are you going to show them? You can't just tell them, you just tried that and it didn't work. So now you're forced to show them that this can happen. You're forced to make them understand what is possible.
When I arrived at Wiremold, we had 1,600 different dies and we had to get them all to the same shut height. What do you think people said when I said let's do that? They said, "But there are 1,600 dies. Do you realize what a project that is going to be?" I said, "Yeah. If we don't get started now we probably won't ever get there. So let's start with the ones we use the most and go from there." We had people working full time doing nothing but converting dies to the same height for three or four years.
Q: Wiremold is now 10 years into the process. Have the barriers changed over time?
Byrne: The fundamental barriers are always the same but sometimes the next barrier is harder than the first barrier. Putting in a really well functioning kanban system was a harder barrier than getting from three-hour setups down to two-minute setups. Getting the kanban system to work smoothly was a harder barrier than moving into one-piece flow cells. That stuff is pretty easy.
As you get to new levels, some of those barriers don't seem like they should be harder, but they are because you have to have a discipline across every aspect of the company. You have to switch from making things on an MRP system to making all of your products using kanban cards. To replenish something can create three or four or five -- maybe even six -- additional layers of kanban cards. To get people to understand that and try to implement that takes a lot of time.
The main barrier is always the same. It's always people. It's not a technology thing at all. This is technology simple. We don't make a lot of capital investments.
Q: How do you get people to take the next step? How do you get them to understand that there are another 20 steps after that?
Byrne: The difficulty might be Western economies in general and the difference between Christian and Eastern religions. We believe in an absolute -- a beginning and end. You die, that's it. In Asia, you can come back as a cat, a dog or a prince. You can come back a lot of times. So there is never an absolute ending.
We translate that into, "I did a kaizen, this is the most perfect way to do it, period. Never go back and look at it again." That's a problem. The Japanese will go back and look at something 40 or 50 times. We've kaizened every part of our business -- every cell, every process -- multiple times. You just have to keep going back. We are never going to stop. The crazy thing is that maybe the first time through you get a 50 percent productivity gain, the next time through you're going to get 100 percent. That is a mindboggling thing for people to think about.
Q: Do you see the same results the eighth time through?
Byrne: Yes. With one of our initial cells, we went from eight people down to four, a 50 percent productivity gain. Then we went from four to two, same thing. Then we went from two to one. The percentage gain was much bigger.
Q: Can you go from one to none?
Byrne: You effectively do that by incorporating other things into their jobs. One person is now doing two or three other rows of tasks.
Q: Do they rebel against having to do so much more?
Byrne: The amazing thing here is that the main people barrier isn't the people on the shop floor doing the work, it's the middle management. The managers fight this more than your shop floor people because it's a bigger threat to them. If you spent the last 25 years putting in a manufacturing system for your company and I show up, take a plant tour and we come back into the office and I say, "Look, I've seen it and it's all no good." What's your reaction to that? "Hey, I've been doing this for 25 years, who are you to come in here and tell me that? You don't know my business; you don't know my industry; you don't know anything and I've been told for 25 years that I've been doing a great job. I've been promoted. I've gotten raises."
Your tendency is to fight me. The number of people who would take the approach of saying, "Oh, really, you think so, can you show me how to make it better?" -- as opposed to, "Screw you." -- is very, very small. Less than 5 percent of the people say, okay, show me. Most people are defensive, so you have to get over that.
I have seen so many organizations where the CEO gets enlightened. He wants to do it and someone tells him he has to have outside consultants. He brings them in and gets them started. The manufacturing guys work on it and after five or six months they've made progress. Then the manufacturing guys come back and say, "You know boss, we know how to do this now. It's great. These guys really taught us a lot but we don't need the expense of these consultants any more. So if you want we can dump them in next year's budget."
As soon as they dump them, they start running backwards because it takes three to five years to get a guy who never had exposure to this to a level of competency that would allow him to push the ball forward if you pull away the consultants.
Q: Do you think it is inevitable that lean will become the operational mode of production in the United States?
Byrne: Over time that is true. If you want to compete with me and you are doing batch and I'm doing lean, then over time, I'm going to kill you. I'm going to take your market share. You just don't have a chance.
But for some period of time you can have two-and-a-half or three inventory turns. If there is enough margin in the industry and there is growth for both of us, you can be a pain-in-the-neck competitor to me for quite some time. But as I go through cycles, you won't be able to compete with me because what will happen is that in order to have a short lead time, you'll have to keep adding inventory, which is more investment. You're going to need more space and more people. I don't need any of that stuff. My costs are much lower than yours. I'll be able to tell the customer that I can give them a two-day turnaround and the other guy is promising six weeks.
We're now trying to teach our distributor partners how to turn their inventory of our product over 10 times because most of them are running an MRP system. Most distributors are very traditional and tend to turn it only three times. A good guy might turn it five or six times. We're saying, "Hey, wait a minute. We can show you how to turn this stuff 10 to 15 times, Wouldn't you like to do that?"
An electrical distributor doesn't make a lot of margin. The whole industry makes 2 percent pretax. That is nothing. So how they manage their asset base, which is almost all inventory in a few warehouses, is really critical to them.
Yet most of the manufacturers in our industry are trying to load them up with product. They're saying, "If you buy a trailer load, I'll give you another five off." They're trying to sell them trailer loads because their manufacturing process makes 50 trailer loads at a crack.
But they don't need a trailer load. They don't even need a tenth of a trailer load. What they need is a small amount of stuff and spin it a lot. Why would you carry four months' worth if I can show you how to carry two weeks' worth?
Q: Is that a hard sell?
Byrne: Yes, it's always been a hard sell. If I go back to my Jake Brake days when George Koenigsaecker was working for me running Jake Brake, we were an awful supplier to engine companies like Cummins and Caterpillar. As we got better, the next logical step was to talk to the customer because we could make every product every day but he was ordering in big batches once a month. Why did he do that? Because we taught him to do it that way because our performance was so lousy. Now that our performance was better, we had to teach him to order in a different way.
We started with Caterpillar, and they were ordering big batches once a month. And we said, "How about if you order once a week?"
We would go and tell them why it was logical and they would understand it and say we'll try it. In about a month or two they would be back saying, "This doesn't work for our MRP and all of our computer systems. We're going to have to go back to once per month." They went back for a period but we kept selling them and they tried it again. You had to work with them in order to show them how to order once a week.
When we got them down to once a week, we said, "Let's do this a couple of times per week and then three times a week." Then we tried to get them to order every day. They understood fundamentally that it was good for them, but their systems and processes weren't set up for this.
It's the same for an electrical distributor. When we tell them that we want them to turn our inventory 10 or 15 times, they understand instantly that that is a good thing, particularly the owners. They ask, "How am I going to do it?" You have to teach them down to the right levels in their organization. You might get the owner to say fine, but if you don't train the guy who is ordering stuff every day off MRP to treat us differently, the computer spits it out and he orders it once per month.
The remainder of this interview and 15 others on lean manufacturing appear in the recently published book by Manufacturing News Editor Richard McCormack entitled "Lean Machines: Learning from the Leaders of the Next Industrial Revolution."