Speed to market lean manufacturing for job shops

SPEED TO MARKET Second Edition SPEED TO MARKET Second Edition L E A N M A N U F A C T U R I N G F O R J O B S H O P S VINCENT BOZZONE American Management Association New York • Atlanta • Chicago • Kansas City • San Francisco • Washington, D.C Brussels • Mexico City • Tokyo • Toronto Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations For details, contact Special Sales Department, AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019 Tel.: 212-903-8316 Fax: 212-903-8083 Web site: www amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service If legal advice or other expert assistance is required, the services of a competent professional person should be sought Library of Congress Cataloging-in-Publication Data Bozzone,Vincent Speed to market : lean manufacturing for job shops / Vincent Bozzone.—2nd ed p cm Includes bibliographical references and index ISBN 0-8144-0694-7 Production management Production schedule I.Title TS155 B615 2001 658.5—dc21 2001037308 © 1998, 2002 Vincent Bozzone All rights reserved First AMACOM edition published 2002 Printed in the United States of America This publication may not be reproduced, stored in a retrieval system, or transmitted in whole or in part, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019 Printing number 10 In memory of Harvey W Wallender III, friend and collaborator CONTENTS FOREWORD xiii AUTHOR’S INTRODUCTION xvii PART I SPEED TO MARKET CHAPTER LEAPFROGGING LEAN What is Lean Manufacturing? The Concept of Pull Leapfrogging Lean The Concept of Flow The Concept of Continuous Improvement Lean Manufacturing in Job Shops The Essential Difference vii Contents viii Speed to Market How Cutting Lead Time Improves Performance and Profitability The Mother Lode Key Points 17 CHAPTER PROCESS THINKING Process Defined Job Shop Business Process Task Time vs Chronological Time Process Analysis Key Points CHAPTER CUTTING LEAD TIME SALES AND ESTIMATING IN 27 Turning RFQs around Quickly Process Analysis Applied Marketing and Sales Advertising and Promotion Key Points CHAPTER CUTTING TIME PREPRODUCTION AREAS IN Order Entry Delays in Order Entry Production Planning, Engineering, Materials Management, and Purchasing A Note on Master Scheduling Purchasing and Materials Management Engineering Key Points 43 Contents CHAPTER THE SHOP FLOOR ix 59 Recognizing Two Businesses under the Same Roof Organizing by Type of Demand Reducing Setup Time Process-Step Value Analysis Revising Overdetermined Quality Programs Targeting Rework Closing the Loop Explanatory Notes The Computer is Not the Solution Accelerating Cash Flow Listen to Your Customers Key Points CHAPTER CONTINUOUS IMPROVEMENT 83 What Does Continuous Improvement Look Like? Using Performance Improvement Teams to Drive Continuous Improvement Establishing a Performance Improvement Team A Continuous Improvement Caveat Installing a Weekly Management Report How to Construct a Weekly Management Report Example of a Weekly Management Report Selecting the Metrics Installing the Management Report How to Use the Management Report Key Points CHAPTER IMPLEMENTATION Implementation Defined Requirements for Effective Implementation Avoiding Typical Implementation Pitfalls Key Points 107 Contents x PART II SOLUTION STRATEGIES FOR COMMON JOB SHOP PROBLEMS 119 CHAPTER WHEN SCHEDULING IS OUT OF CONTROL 121 Schedule Defined Static Scheduling The Fallacy of Static Scheduling The Concept of Dynamic Scheduling Scheduling Is Not a Clerical Activity Develop a Scheduling Strategy Managing Extensive and Complex Manufacturing Processes Key Points CHAPTER HOCKEY STICK BLUES 135 Problem Solving vs Problem Amelioration Hockey Stick Dynamics Setting the Stage for the Next Month A Combination of Factors What You Can Do Incremental Work-Out Strategy Measure and Monitor Trends Key Points CHAPTER 10 THE THORNY ISSUE JOB SHOP OVERHEAD OF Labor Hours Machine Hours Materials The Market Doesn’t Care Defining Overhead Fair-Share Concept Allocating Usage Calculating Overhead for an Average Order 147 Contents xi Monitoring Performance Key Points CHAPTER 11 THE BIG PICTURE PERSPECTIVE Scenario Scenario Scenario Scenario 157 CHAPTER 12 WHAT BUSINESS ARE YOU REALLY IN? 163 The Need for Conceptual Space Guidelines Organic Organizational Model Product-Service Packages A Caveat PART III APPENDIXES: TOOLS TRADE OF THE 169 171 APPENDIX A IS THIS YOUR SHOP? APPENDIX B DETAILED VIEW BUSINESS PROCESS OF A JOB APPENDIX C HOW TO CONDUCT SYSTEMS REVIEW Step Step Step Step Step SHOP 179 A BUSINESS 187 D w i n g t h e N e w O r g a n i z a t i o n L i n e s 215 Institute of Technology and reported by Robert Benjamin and Eliot Levinson in the Sloan Management Review1 supports this conclusion: The benefits of IT are not being realized because investment is heavily biased towards technology and not towards managing changes in process and organization structure and culture Elsewhere they state: As most managers realize, new technology is not enough to increase productivity Organizational and process changes must also be made Managers must know how to integrate the technology, business processes, and organization in order to achieve the goals they expect with the technology Linking IT and Organization Design Research and practical experience support the judgment that information technology alone is not sufficient for achieving maximum results Information technology solutions must be designed in the context of a broader plan for improvement that is based on a thorough understanding of the business, competitive environment, organization, and future outlook.The design perspective proceeds from the broader value chain, or higher level system, in which every organization operates Critical performance elements must be recognized and integrated into an overall plan for improvement.This will enable IT installations to be more productive and to have a greater impact on bottom-line business results What Is Organization Design? Traditionally, organization design is defined as “organization structure.” Historically, the emphasis has been on questions of centralization versus decentralization, or whether geography, products, functions, customers, mar- 216 Appendix F ket segments, or even time frames should be used to configure an enterprise More recently, however, leading practitioners in the field recognize that an organization’s structure is not a stand-alone design element Structure cannot be separated from business strategy, management planning, mission-critical processes, information systems, culture, or people An organization must be designed from “whole cloth,” so to speak What Is Information Technology? Information technology can be either broadly or narrowly defined Definitions can range from automating a portion of a process to increase efficiency and reduce costs to the broader view of information technology as organization structure There is probably no single definition of IT that would satisfy everyone Regardless of how it may be defined, however, IT is a burgeoning technology that can have a tremendous impact on any company’s performance, profitability, and future prosperity Structure Is Not a Stand Alone Design Element—And Neither Is IT From an organization-design point of view, information technology must be considered in the context of an enterprisewide perspective It is a critical element that must be integrated into an overall approach for building any company’s competitiveness and profitability Maximum results come when information technology is designed into the larger business and organizational context, rather than being superimposed upon it In the right hands, the perspective, concepts, and methodology D w i n g t h e N e w O r g a n i z a t i o n L i n e s 217 of organization design and information technology represent a powerful enterprisewide approach for improving an organization’s performance and enhancing its future viability The Goals of Organization Design and IT Are Essentially the Same A successful result is an enterprise that clearly understands its mission and strategic direction, is better positioned competitively in its environment now and for the future, adapts to change more easily, and operates more efficiently and effectively How to Integrate Organization Design and Information Technology The integration of IT and organization design begins during the proposal stage of any prospective project.This is when the scope is defined and the preliminary project approach formulated A proposal that proceeds from an organization-design framework is guaranteed to be stronger and more comprehensive—and likely more salable to management—than an IT proposal prepared without it In the Harvard Business Review, Peter Drucker laid out the following challenge: Now we are entering a third period of change: the shift from the command-and-control organization, the organization of departments and divisions, to the information-based organization, the organization of knowledge specialists.We can perceive, though perhaps only dimly, what this organization will look like We can identify some of its main characteristics and requirements.We can point to central problems of values, struc- 218 Appendix F ture, and behavior But the job of actually building the information-based organization is still ahead of us—it is the managerial challenge of the future.2 The Bottom Line Companies are better served when the benefits and positive impact of new information technology are maximized Linking organization design and IT is an effective strategy for achieving this objective References Robert I Benjamin and Eliot Levinson, “A Framework for Managing IT-Enabled Change,” Sloan Management Review, Summer 1993, pp 23–33 Peter F Drucker, “The Coming of the New Organization,” Harvard Business Review, JanuaryFebruary 1988, pp 45–53 D w i n g t h e N e w O r g a n i z a t i o n L i n e s N O T E S 219 220 N O T E S Appendix F INDEX advertising and promotion, 41 “A Mouse Click, a Car Built: Web May Help Automakers Custom-build Cars in Days,” 5–6 analysis, see process analysis automation and estimate process, 36 preparation and communication to the customer, 37–38 pricing, 36–37 special treatment, separate standard bids from bids requiring, 35 big picture perspective, 157–161 business process, 19, 21, 179–182 backlog, order, 12 benchmarking, 113 Benjamin, Robert, on information technology, 215 bids faster service producing winning, 11 performance monitoring and winning too high a percentage of, 153–154 cash flow, 12, 77–79, 176 certifications, 114–115 change, perception of and managing, 84 changeovers, 66–68 chronological time vs task time, 22–24 closing the loop, 72–76, 176 Cloutier, Rick, of Hyde Tools, xxiii 221 222 command-and-control pyramid model, 18 commissions, 80 commitment among key people, implementation and, 111 communication cash flow, 78–79 disconnects, organization, 126–127 Humpty-Dumpty theory of organization, 18 implementation, 114 information from the customer, receiving, 32–35 information management, integrated approach to, 73 listening to customers, 79–80 psychological wall/barrier between office and shop, 175 weekly management report, 102 computers, 73, 77, 130–131, 191 concepts and job shop problems, wrong, xx conceptual space, 164–165 continuous improvement change, perception of and managing, 84 climate for, proper, 90 key points, 104–105 metrics, selecting the, 99 nonbureaucratic, 84 overview, 83 perfection as an ideal, xix, process improvement team, 85–90 weekly management report, 90–91, 93–104 conversion processes, 22–23 costs against the estimate for each order, compare actual, 87 credit policies, 46, 79 critique guide, process, 201–202 customers bid preparation and communication with, 37–38 cash flow, 78–79 credit checks for new, 46 Index first contact with, xiv–xv information from, receiving, 32–35 listening to, 79–80 questionnaire for showing how Speed to Market can have a positive impact on your business, 173 custom manufacturing environments, see make-toorder businesses and mass-production manufacturing, differences between data collection form, 33, 35 data overload, 70–71 decision making, 18, 176 delays engineering, 53–55 order entry, 45–46 process step, 38–39 released late vs shipped late reasons for, 47, 48 summary of actions to take for reducing delays in preproduction areas, 55–56 delivery dates as part of quotes, 45 demand, organizing by type of, 63, 64–66 disconnects, fix organization, 126–127 do-it-yourself programs, 112–113 Drucker, Peter, on organization design/information technology, 217–218 Dun & Bradstreet, 46 dynamic problem solving, 207–210 dynamic scheduling, 125–127 Emmons, Chris, of Human Resource Professionals, xxiii engineering, 46–48, 53–55, 66, 78 enterprisewide view, xvii, 18, 19, 87–88, 111, 188 estimates, 35–36, 87, 109, 174, 175 see also sales and estimating, cutting lead time in Index fair-share concept, 150–151 fast-track process for urgent orders, 35 feedback, measure results and provide, 113 financial statements, 93 first contact with customers, xiv–xv flavor-of-the-month programs, 115 flexible manufacturing, 8–9 floor, see shop floor flow, 8–9 functional utility, 165–166 graphs, 87, 98, 100 Gresham’s law, 112 growth, profitable, xviii, xix, 13, 14 Harvard Business Review, 217 help, implementation and getting, 112–113 hockey stick pattern, xx–xxi breaking the, 139–143 dynamics involved, 136–138 incremental work-out strategy, 142–143 information appropriately, using, 142 input control, 141 key points, 143, 145 measure and monitor trends, 143, 144 next month, setting the stage for the, 137–138 overview, 135–136 problem solving vs problem amelioration, 136 psychological payoff from, 138 weekly focus, adopt a, 140–141 weekly management report, 139 horizontal management, 17 Humpty-Dumpty theory of organization, 18, 47 Hyde Tools, xxiii–xxiv implementation defining, 108 feedback, measure results and provide, 113 223 help, getting, 112–113 key points, 117 leadership, 110–111 momentum, maintaining, 112 organization, 110 overview, 107–108 performance improvement teams, 85–90 pitfalls, avoiding typical, 113–116 plan/schedule, develop a, 111–112 process analysis, 196–197 review, business systems, 191 small, start, 109–110 understanding and commitment among key people, 111 see also weekly management report improvement, effective planning/preparation as key to, 68 see also continuous improvement incremental work-out strategy and ameliorating hockey stick pattern, 142–143 information for analysis/decision making, getting accurate, 176 information from the customer, receiving, 32–35 information management, integrated approach to, 73 information technology (IT), 214–218 input control and ameliorating hockey stick pattern, 141 inventory, 52, 64 invoicing, 78, 79 job shops, xx, xxii–xxiii, 4, 6–10, 19, 21 see also mass-production manufacturing and maketo-order businesses, differences between; individual subject headings just-in-time (JIT) business, 64 224 labor hours used as a basis for allocating overhead, 148 leadership, 110–111 lead time, cutting, xvii, xviii, 11–12 see also individual subject headings lean manufacturing continuous improvement, defining, flow, 8–9 job shops, 9–10 key points, 13–14 make-to-order businesses and mass-production manufacturing, differences between, 3, 6–8, 10 performance/profitability improved by cutting lead time, 11–12 profitable growth, 13, 14 pull systems, 5–6 speed to market, 10–11 Levinson, Eliot, on information technology, 215 machine hours used as a basis for allocating overhead, 148–149 magic bullet solutions, 114 make-to-order businesses and mass-production manufacturing, differences between, xx, 3, 6–8, 10, 60–63 management, engineering delays and project, 55 manufacturing environment, major changes in the, 115–116 manufacturing processes, scheduling and managing extensive/complex, 128–131 margin analysis, 89–90 marketing and lead generation, 39–41 Massachusetts Institute of Technology (MIT), 215 mass-production manufacturing and make-to-order businesses, differences Index between, xx, 3, 6–8, 10, 60–63 master scheduling, 48, 50–51 materials management, 46–48, 51–52 materials used as a basis for allocating overhead, 149 measure results and provide feedback, 113 measuring/monitoring trends, hockey stick pattern and, 143, 144 Metal Fabricating News, xxiii metrics, 94, 99 missed deliveries, xiv momentum, implementation and maintaining, 112 monitoring/measuring trends, hockey stick pattern and, 143, 144 monitoring performance, winning too high a percentage of bids and, 153–154 muda (waste), nonbureaucratic continuous improvement, 84 Ohno,Taichi, on lean manufacturing, order backlog, 12 order entry, 43, 44–46 organic organizational model, 166 organization disconnects, 126–127 Humpty-Dumpty theory of, 18, 47 implementation, 110 information technology, 214–218 job structure, a typical, 20 organic organizational model, 166 preproduction functions, 48, 49 shop floor, 63, 64–66 original equipment manufacturers (OEMs), 64 overdue amounts, interest on, 79 Index overhead, xxi, 12 calculating, average order and, 152–153 defining, 150 fair-share concept, 150–151 key points, 154–155 labor hours, 148 machine hours, 148–149 materials, 149 monitoring performance, 153–154 overview, 147–148 pricing, 149–150 usage, allocating, 151–152 overkill and implementation, 114–115 paradigm change, manufacturing environment going through, xix Park, Richard, on functional utility, 165 perfection, delays in engineering and the tendency toward, 54 perfection as an ideal, continuous improvement based on the idea of, xix, performance, winning too high a percentage of bids and monitoring, 153–154 performance expectations and business systems review, 190 performance improvement teams, 85–90 performance/profitability improved by cutting lead time, 11–12 planning and implementation, 111–112 planning/preparation as key to improvement, 68 positioning for growth/prosperity, 163–167 preparation/planning as key to improvement, 68 preproduction areas, cutting lead time in defining preproduction, 43 engineering, 53–55 225 master scheduling, 48, 50–51 order entry, 44–46 organization of preproduction functions, 48, 49 preproduction areas, cutting lead time in, 57 production planning/ engineering/materials management and purchasing, 46–48 purchasing and materials management, 51–52 summary of actions to take for reducing delays, 55–56 pricing, 149–150 priorities, customers changing, 173 problem solving, dynamic, 207–210 problem solving vs problem amelioration, 136 process analysis bid preparation and communication to the customer, 37–38 bid pricing, 36–37 critique guide, process, 201–202 defining, 23 delays, process step, 38–39 delays in the RFQ-to-order process, 31–32 enterprisewide view business systems review differing from, 188 estimate, preparing the, 35–36 implementation, 196–197 information from the customer, receiving, 32–35 objectives, 195–196 results summary, 203 sales and estimating, cutting lead time in, 31–39 shop floor, 68–70 task/activity data collection procedure, 197–199 task/activity data collection worksheet, 200 tools for performing, 197–203 walk-through, 196 226 process improvement team (PIT), 85–90 process thinking defining process, 18 horizontal management, 17 job shop, 19, 21 key points, 25 organization structure, a typical job, 20 overview, 17 process analysis, 23 task time vs chronological time, 22–24 process time, 190 production planning, 46–48 product-service packages, 166–167 profitability/performance improved by cutting lead time, 11–12 profitable growth, xviii, xix, 13, 14 profit-revenue relationship, 157–161 promotion and advertising, 41 psychological payoff from the hockey stick pattern, 138 psychological wall/barrier between office and shop, 175 pull systems, 5–6 purchasing, 46–48, 51–52 push systems, 5–6 quality, x, 12, 70–72, 114–115 questionnaire for showing how Speed to Market can have a positive impact on your business, 171–176 redefining a company’s business along new lines, 167 released late vs shipped late reasons for delay, 47, 48 repair business, 66 reports, see weekly management report request for quotations (RFQs), 22, 27–32, 109 see also sales and estimating, cutting lead time in Index rescheduling orders in production, 173 revenue-profit relationship, 157–161 review, conducting a business systems, 187–191 rework, 72, 175 RFQs, see request for quotation Rizner, Ken, of Hyde Tools, xxiv router, shop, 73–76, 85 rush orders, see hockey stick pattern sales and estimating, cutting lead time in advertising and promotion, 41 key points, 41 marketing and lead generation, 39–41 process analysis applied, 31–39 RFQs around quickly, turning, 27–31 sales and questionnaire for showing how Speed to Market can have a positive impact on your business, 173–174 sales dollars as a measure of usage, 132 sales-profit relationship, 157–161 scheduling clerical activity, perceived as a, 127–128 defining, 122–123 disconnects, fix organization, 126–127 dynamic, 125–127 engineering delays, 55 implementation, 111–112, 115 key points, 131–132 manufacturing processes, managing extensive/ complex, 128–131 master, 48, 50–51 out of control, 121–122 questionnaire for showing how Speed to Market can have a positive impact on your business, 173 Index static, 123–126 strategy, develop a scheduling, 128 service companies, 4–5 setup time, reducing shop floor, 66–68 ship date, 44, 47, 48 shipping, invoicing coordinated with, 78 shop floor cash flow, 77–79 closing the loop, 72–76 computers, 77 demand, organizing by type of, 63, 64–66 key points, 81 listen to your customers, 79–80 overview, 59–60 process-step value analysis, 68–70 quality programs, overdetermined, 70–72 rework, 72 router, shop, 73–76 setup time, reducing, 66–68 two businesses under the same roof, 60–63 skepticism, 115 skill and implementation, lack of, 114 Sloan Management Review, 215 static scheduling, 123–125 statistical process control (SPC), 70 status quo, 112 steering team, 111 task/activity data collection procedure, 197–199 task/activity data collection worksheet, 200 227 task time, 22–24, 190 teams, process improvement, 85–90 time, process/task/chronological, 22–24, 190 time frames and implementation, 115 Toyota, two businesses under the same roof, 60–63 unbalancing the workflow, 137–138 uncertainty in contingent systems, reducing, 131 understanding among key people, implementation and, 111 unpredictable and short term demand, 64, 66 usage, allocating, 151–152 value adding, 68–69 value flow, making, 19 value stream, 63 videotape review, 68 wait time, cutting customer, xvii, xviii see also individual subject headings waste, weekly management report constructing a, 93–95 example of, 94, 96–100 hockey stick pattern, 139 installing a, 90–91, 93, 99, 101–102, 108 meaning of the numbers, understanding the, 108–109 using the, 102–104 work in progress (WIP), 174 workload variations, 54 ABOUT THE AUTHOR incent Bozzone has generated millions of dollars in new revenues and earnings for companies as a result of his ability to conceive, plan, and implement solutions for a broad range of strategic and operating problems He is the president of Delta Dynamics Incorporated, a firm he founded in 1991 to provide job shops and custom manufacturers with expertise and hands-on implementation support to improve performance and profitability in a lean manufacturing world He has written many articles for professional journals and business publications, a chapter in the Handbook of Organizational Consultation, and two books on international business He is an MBA graduate of Columbia University, the Past V 229 230 About the Author President of the Association for the Management of Organization Design, and lives in Bloomfield Hills, Michigan For more information, visit www.deltadynamicsinc.com ... MICHIGAN SPEED TO MARKET Second Edition PART I SPEED TO MARKET C H A P T E R O N E LEAPFROGGING LEAN any companies are pursuing lean manufacturing programs to drive out waste, increase value to customers,... company M Speed to Market What Is Lean Manufacturing? Lean manufacturing is a strategy for performance improvement based on concepts and methods derived from Taiichi Ohno’s revamping of Toyota’s... Leapfrogging Lean Table 1-1 Differences between job shops and mass production manufacturJob Shops Mass Production • Make to order/custom • Build to stock • No finished goods inventories • Finished