continuous improvement

No time for improvement!

The following story was told to me when I first started in management consulting, over 25 years ago:

Once upon a time, a very strong woodcutter asked for a job in a timber merchant and he got it. The pay was really good and so were the work conditions. For those reasons, the woodcutter was determined to do his best.

His boss gave him an axe and showed him the area where he supposed to work.

The first day, the woodcutter brought 18 trees.

“Congratulations,” the boss said. “Go on that way!”

Very motivated by the boss words, the woodcutter tried harder the next day, but he could only bring 15 trees. The third day he tried even harder, but he could only bring 10 trees. Day after day he was bringing less and less trees.

“I must be losing my strength”, the woodcutter thought. He went to the boss and apologized, saying that he could not understand what was going on.

“When was the last time you sharpened your axe?” the boss asked.

“Sharpen? I had no time to sharpen my axe. I have been too busy trying to cut trees…”

One of the most common refrains I hear from clients is that they are “too busy” to engage in improvement initiatives.   Employees are already working overtime, how can we possibly ask them to engage in an improvement initiative?

WHY are they too busy?”   Many times it’s most likely because their “axes” (i.e., processes) never get sharpened.    I like to tell this story to clients and also add, “what happens if you don’t do anything at all?  Will things ever get better?  Or will they get worse?”

Another familiar refrain is, “I understand, but now isn’t a good time to do something.”   The thing is, it’s NEVER a good time!

Once you’ve agreed that you need to improve, the key questions become WHAT to improve and HOW to improve.  This is where many companies go wrong.   They take on too many improvement initiatives and as a result never get anything done.   I talk about this in the article I wrote some years ago, ““How Constraints Management Enhances Lean and Six Sigma.”   Every organization has limited capacity – FOCUS your improvement efforts on what’s important.

More on this topic in subsequent posts.

 

Posted by r.spector@comcast.net in Lean and Six Sigma

Inventory Turns Continued – Has Lean Progress Stagnated?

In the previous blog post, I stated, “What may surprise you even more is that it has become exceedingly difficult to find examples of companies that have demonstrated sustainable progress with lean.”

Hopefully that piqued your interest.   Again, before proceeding, please review the article I listed in the previous post, The Impact of Inventory Turns on Speed, Quality, and Costs to understand why the trend of inventory turns can be used a proxy to measure a company’s level of “leanness.”

Now that that’s been established, let’s look at how some of the companies are doing that are best known for their lean efforts.   If you do a Google search on “Top Lean companies” or similar words, you typically will get names that include the following:

Hewlett Packard
Wal-Mart
Caterpillar Inc.
Intel
Illinois Tool Works
Textron
Parker Hannafin
John Deere
Ford
Toyota

These companies are usually the ones you find listed as examples of what a successful Lean program would look like.   In the article that I wrote on the state of Lean in the pharma industry, I listed HP and Wal-Mart as examples of companies that Pharma could learn from.  Let’s revisit how things were at that time in these two specific cases:

  • HP has successfully applied Lean concepts with a number of case studies you can find online.  In the time period from 2000-2009, HP displayed significant improvement in inventory trends – inventory turns improved at an average rate of 6.9%.  HP’s upward trend translated directly into growth of free cash flow at a rate of 6.9% percent, with interest on the cash compounded over the 10 year period of lessening funds tied up in inventory.
  • At Wal-Mart, from 2000 to 2009, inventory turns improved at an average rate of 2.6% which translates directly into free cash flow improvement of the same rate.    Wal-Mart was able to transform an entire industry via their Lean improvement approach and dictate the requirements to successfully compete.

Now let’s take a look at the trend of inventory turns for HP and Wal-Mart, along with the other companies in the list above, in the period from 2009-2016.   All data was taken from Morningstar.com so blame them not me for any accuracies.

Inventory Turns Inventory Turns Inventory Turns Inventory Turns Inventory Turns Inventory Turns Inventory Turns Inventory Turns
Company Name 2009 2010 2011 2012 2013 2014 2015 2016
Hewlett Packard 12.50 15.26 13.98 13.38 13.97 13.62 12.19 7.15
Wal-Mart 8.79 9.00 9.08 8.70 8.34 8.08 8.11 8.06
Caterpillar Inc. 3.16 3.81 3.61 3.13 2.89 3.20 3.08 3.09
Intel 4.66 4.52 5.16 4.57 4.76 4.80 4.38 4.33
Illinois Tool Works 6.04 7.05 7.06 6.94 6.04 7.15 6.96 7.30
Textron 3.12 3.78 3.98 3.92 3.57 3.31 2.72 2.63
Parker Hannafin 5.95 6.47 7.27 7.08 7.26 7.41 7.23 7.13
John Deere 6.11 6.50 5.93 5.26 5.11 5.45 5.06 5.14
Ford 14.22 18.38 19.18 17.45 17.00 16.21 15.63 14.70
Toyota 11.27 11.58 12.19 11.20 11.17 11.52 10.83 10.77
Average 7.58 8.64 8.74 8.16 8.01 8.08 7.62 7.03

What do you notice in the data above?   Does ANY company show an upward trend in this time period?   Not one of them does.   It’s clear that lean progress has stagnated, and sometimes even regressed at these “lean leaders.”

Why has this happened?  More on that in the next post.   In the interim, please leave comments if you think you have any insights.

 

 

Posted by r.spector@comcast.net in Lean and Six Sigma