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The Neglected Law of 6-Sigma

September 18, 2010 Leave a comment

I have just come back from a consulting engagement at a manufacturing plant. This plant is the most successful plant of a global enterprise. In the past 6 years they have been exceeding improvement targets in productivity and order fulfillment. Even in this economy, they have been turning out record profit. Marketing department loves to promote their product because of their high profit margin. Success has brought them more pressure because any improvement would impact the company performance. I can’t held to ask “Why would such a successful operation need any sort of consulting and not just continue to do what have made them successful?”

This turns out to have something to do with the natural law of business process.

Take the example of order fulfillment which is their most important metric. They were at 70% 6 years ago. A yearly target of 5% improvement has taken them to around 96%. But then, they are hitting a wall. Well why should the last 5 % be more difficult than the others? The basics of 6-sigma would cast light on this problem.

Going from 70% to 96% is the journey of going from 1 sigma to 2 sigma. The natural law of business processes says that it will require the same level or more effort to increase every sigma level. Frequently it is a totally different ball game that requires significant resource investment, skill acquisition, technology advancement and cultural transformation to ramp up each sigma level.

They have been relying on automation and Lean methodology in the past 6 years and have succeeded in the journey from  1 to 2 sigma. In order to get to 3 sigma, I have suggested them to start applying scientific and statistical tools to business processes. Without taking more detail measurements and applying appropriate quantitative methods along with Lean, there is a limitation on how far that they can further improve. It is indeed a different ball game that they are more than ever in need of enabling information technology to get them the data and visibility required for scientific management. Years of neglect in IT investment at manufacturing may come to a point to limit further growth of the operation.

Does your operation set key improvement targets, the associated resource and infrastructure investment based on target 6-sigma level? How far can you go down the 6-sigma journey without implementation of enabling information technologies?

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How a traditional Japanese meal can accelerate new product introduction?

September 9, 2009 3 comments

What should be the “correct” eating sequence?

For those of you who frequent Sushi restaurants, have you wondered what should be the correct sequence of eating the many choices on the plate? The problem becomes worse when you graduated from Sushi and started trying traditional Japanese meals such as Kaiseki. There are easily over 30 dishes arrive at your dinner table at almost the same time. What should be the correct eating sequence?Japanese cusine

Many westerners who used to take dinner according to predetermined sequence from appetizer, entrée to desert have not used to make such decisions. Indeed the dining culture in the west has assumed the position of a behind-the-scene expert designer, who in this case could be the chef, and the rest of us at the frontline should just follow the standardized design from the expert who is supposed to know what the best is for us.

Here is what a master chef in Japan told me about eating sequence. “The rhythm of dining depends not only on individual preferences but also on your accompanies, the dynamics of the conversation during dining, the flow of your mood and the pace of drinking. During the few hours of dinner time, there are many complex cycles of dining dynamics that are best matched with cycles of light to heavy, salty to sweet and cold to warm tasting sequence.” Therefore the eating sequence is best determined either by the meal-takers or through continuous interaction with the Chef. The later is only possible if you choose “Omakase” style (let the chef decide everything) and sit in front of the kitchen counter. In this case, the Chef will chat with you on how you feel about the progress, observe how much you have eaten and drunk, and discuss what are the best choices of the day. Based on these explicit and implicit information, he hand-makes every dish, typically in small portions to match your changing dining dynamics. This is the kind of detail sensitivity required to compose perfect dining experiences that have padded the country with Michelin stars.

Dining culture and management style

To my knowledge, the idea of the chef continuously interacting with the meal-takers to determine the course of the dinner and deliver varities of dishes in incremental small portions does not exist in western culture.tacit manufacturing

In this sense, manufacturing management style in western companies bears strong similarity to its dining culture. Architects or designers of a product typically work at a building isolated from frontline workers. The outputs of each phase from design to prototype to production are meticulously documented to minimize communication between different roles during the sequential process of product development. With this waterfall approach, a lot of the design problems are hidden until the last phase of realization at which they emerge as change orders.

Concurrent engineering has been at the heart of Japanese product development culture. Researcher and designers work side-by-side with production engineers and frontline workers just like the Japanese chef continously commnicates with the meal-takers during execution of the meal. More often than not, they work at the same location with a lot of personal interaction and collaboration during the product development process. In this way, the design, engineering and manufacturing team develops common language and sense of tacit knowledge without an excess documentation of explicit specifications just like the chef’s observation of your body language and pace of dining. Many short cycles of development phases are carried out almost in parallel just like there are many tiny cycles of apertizer to desert dynamics in a Japanese meal. This methodology has been proven to eliminate waste as a result of excess documentation, redesign and wait time between phases. The end result is shorter product development lead time than its western style counterpart.

The idea of eliminating waste in the product development process is very similar to the lean principles applied to production. Accordingly, it is more effective for different functional roles to work concurrently as if in a work cell instead of the sequential division of labor as if in a straight production line. Design and development tasks are pulled by actual events instead of pushed by a rigid phase-by-phase plan. The idea of pull process applies in development as well as in production.front loading

I remember well that when I was working as R&D engineer at a Japanese firm, I was frequently sent to the shop floor to conduct labor work and line commissioning. I did not like it at that time but then I could get a good grasp of the manufacturing problems facing frontline workers and quickly modify my design upfront without many change orders of the product at a later stage.

In contrast, when I was working as a manufacturing engineer for a US Hi-tech firm, I often had no chance to understand the physical and scientific principles behind the design. All engineers surrounding me were looking closely at the statistics of the process to find out what have been changed when a problem occurred. In many cases the identified changes are not necessary related to the cause of the problem. The results were a lot of politics between divisions and supplier relationship. Many actions were taken based on inconclusive data without understanding of the root cause. The designers worked at the overseas headquarter had very little communication with the shop floor level manufacturing engineering. I often thought that a lot of the problems can be resolved much quicker especially during the launch of new product if only design and manufacturing could have worked concurrently side by side.

Leveraging technologies to shorten new product introduction lead time

Companies like Toyota have spent huge investment in IT to institutionalize front-loading and concurrent engineering methodology. Inforamtion technology is especially important when design and manufacturing operations are a complex global network, planning a simultaneous global launch. V-Comm (Virtual Communication) and CASE (Computer Aided Simultaneous Engineering) together with teleconferencing tools are key technologies deployed by Toyota to shorten development lead time. In this way, engineers across multiple regions can work on the same virtual model of the product to develop a common language and share tacit knowledge. Design, engineering and manufacturing problems are discovered and tackled early through team work and model simulation. This front-loading approach minimizes waste of rework and redesign which are considered as waste. As a result, Japanese auto manufacturers typically have product development lead time that are 50% shorter than their western competitors (see table below).

Company Design to production lead time (month) Production takt time (hour)
Toyota 10 27.9
Nissan 10 29.4
Honda 12 32
GM 22 34.3
Chrysler 24 35.9
Ford 26 37.0

2004 Harbor Consulting – Nikkei News 2005/6/3

An often neglected area in shortening product development cycle is the feedback from the manufacturing operation to engineering. In order to enable fast development cycle required for concurrent engineering, such manufacturing execution system must entail the following characteristics:

  1. Process modeling capability to rapidly execute design and process change during prototyping without hard coding
  2. Process roll-out capability to enable processes captured during prototyping to smoothly and quickly roll out to multiple international facilities
  3. Kaizen sustainability to allow for continuous improvement and rapid execution of change orders at local facilities
  4. Seamless integration with SCM / ERP and PLM system to feedback as-built, as-tested and as-maintained records to improve the virtual product model over time.
  5. Wide and integrated functional footprint to cover detail production, quality, material, resources, tools information from both in-house and sub-contract processes to allow benchmarking and trouble-shooting for processes of multiple facilities

Today’s manufacturing execution BPM tool that is designed with the above principles can feedback the real time dynamics of the execution process, hence allowing the Master Japanese Chef to design his grand cuisine as you execute your perfect meal. If you are interested in learning more, please invite me to my recommended Japanese restaurant and we shall sit together beside the kitchen counter to discuss how to slash your product development lead time. I ensure you that you shall find your time well spent:)

Other useful sources:

http://www.shmula.com/344/the-toyota-product-development-system

http://www.allbusiness.com/management/691893-1.html

Toyota’s IT Investment in Global Kaizen

September 8, 2009 Leave a comment

Little has been published about Toyota’s IT investment. This may be one of the reasons why many consultants who practise Lean or TPS have mistaken that Toyota does not need IT. In fact Toyota has spent close to 10 billion USD in IT since the dawn of this century. Although Toyota tends to be secretive about its investment plan, more information can be found in Japanese.

According to magazine “Nikkei Information Strategy”[1], Toyota has spent 2 billion USD on IT by 2003 on what was called “Global Kaizen”. This investment was only the first step in the “10 billion dollar Kaikaku” effort that spanned across the global operation of 27 countries and more than 60 facilities. The following areas were identified by industrial expects as Toyota’s targets to leverage IT.

  1. Rolling out supplier Kanban for global purcruement
    At 2003, Toyota’s regional profit margins are Japan 9.2%, NA 4.6% and Europe 0.2%. Obviously, best-practices in Japan had not been able to rollout to other parts of the world. A key bottleneck was regional supplier relationship, which was especially important for high margin luxury vehicles that are made in small lots. Even with the same product, part numbers are created uniquely at each facility as a result of local Kaizen activities. Factory IT systems and CAD were largely in-house developed for each facility.  Therefore from a global enterprise perspective, there was no easy way to identify what parts are used at each facility or hence to substitute supply of parts from one facility to another. As a result, the rollout of Kanban system across regions was extremely difficult.
  2. Improving new product introduction
    During the product planning phase, it is important to be able to simulate weight, space occupied, cost and even level of safety based on combination of parts from the suppliers. For that purpose, Toyota has developed “V-Comm” (Virtual Communication) to simulate design and facilitate concurrent engineering for many years. Although the new product launch and prototyping lead time has been shortened, cost estimation has remained largely manual. During the course of 2004, Toyota has informed suppliers to submit CAD data of either CATIA or Pro/Engineer during parts delivery. Standardization on packaged instead of in-house built software was a drastic step for Toyota.
  3. Incorporating BTO (Dell model)
    Toyota has been trying to shorten order-to-deliver lead time to 1-2 weeks. This requires the capability to search in real time what are the work-in-progress vehicles in the assembly line and hence to assign customer specific options to be added in the down stream process. Toyota was trying to lay down the foundation for BTO capability especially at developing countries such as China where the sales network still have been under construction.
  4. Enhancing after-sales service
    After-sales service was identified to become a major growing revenue stream. A bottleneck to enhance after-sales service was the lack of traceability. For example, the capability to identify which lot of parts has gone to which vehicle and hence using that information for problem containment or recall had not been fully developed. Hence a huge amount of manual work was required to identify the affected vehicles in the event of recall. The plan was to extend traceability to after-sales running and maintenance record. As increasing weight being given to sustainability, there was also increasing need to extend traceability to the end of the vehicle’s service life.

Toyota’s 10 billion IT investment in operation

R&D Purchasing Production Logistics / Sales After-Sales
  • Packaged CAD
  • BOM standardization and PDM
  • Product planning DB
  • Production simulation /3D data

 

 

  • Electronic Kanban
  •  

  • Traceability
  • BTO production
  •  

  • Traceability
  • Order-taking system for BTO
  • Global purchasing for BTO
  •  

  • Embedded system
  • traceability
  • System built for 2 billion USD

    Other events that gave a glimpse of  Toyota’s IT activities include:

    1. Toyota was elected as the no. 2 in “IT power” by Nikkei BP Magazine in 2007. Toyota is the no.1 in “IT power” among all Japanese automaker. (way above second Honda and then Nissan).
    2. Toyota global CIO Amano-san was elected as CIO of the year by “Nikkei information strategy” at 2004. He mentioned that there was a time that Toyota believed IT is not of much value but that position has significantly changed due to globalization
    3. During an appearance at the CIO forum 2009, Toyota President Watanabe-san said that he firmly believes IT will save his company, the enterprise and the nation from the recent recession, which represents one in a hundred years opportunity to change and thrive.

    Some other useful source of information:

    http://www.shmula.com/205/information-technology-at-toyota

    http://www.gembapantarei.com/2006/10/lessons_from_toyotas_it_strategy.html

    http://www.gembapantarei.com/2006/06/how_toyota_uses_information_technology_it_for_kaizen.html

    http://www.gembapantarei.com/2006/07/how_toyota_used_it_to_cut_new_product_development_time_in_half.html
     


    [1] Nikkei Information Strategy, Oct issue 2003

    How Japan’s enterprise IT has failed to learn from its most competitive industry–manufacturing

    August 28, 2009 Leave a comment