"Guarding the Line"

Rob Wilson

Industrial Engineer

April 2005, pp. 46-49

The author of this article states that Lean manufacturers must be careful to avoid increased worker compensation costs, which can skyrocket if the company does not take ergonomics into consideration: "...lean processes can make jobs highly repetitive while eliminating critical rest time for employees. When ergonomics is not integrated into the process, the repetitive jobs take their toll on employees as stressful postures and high forces are repeated continuously throughout the day." Ergonomics and safety must be included as core values along with waste reduction and value creation.

The following factors are proposed to integrate ergonomics effectively into lean processes:

• Lean prioritization—Ergonomic risk assessments and quality metrics should be incorporated into the value stream mapping process
• Ergonomics training—Basic ergonomic concepts and ergonomic design factors should be included when training team leaders and kaizen team members
• Ergonomic design—Integrating ergonomic design concepts into processes will reduce errors and increase productivity
• CTD (Cumulative Trauma Disorder) risk assessment—This will help design work stations that minimize such injuries
• Stakeholder involvement—Involving employees in the redesign of a process is critical to the success of lean, and this applies to involvement in ergonomic aspects as well
• Quantifying the impact—Tracking and sharing the significant cost savings in productivity, quality, and workers compensation claims will ensure that ergonomics continue to be seen as a priority for management
• Creating a culture for success—Sharing the mission and goals of the Lean process will help create a positive work environment where workplace improvements are expected and accepted

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"The Quest for Customer Focus"

Ranjay Gulati and James Oldroyd

Harvard Business Review

April 2005, pp. 92-101

The authors of this article studied seventeen companies that they identified as having made significant progress toward becoming exceptionally customer focused. The authors found that these companies take three concepts very seriously:

• They strive to learn everything they can about their customers on an individual level.
• They emphasize the importance of employees sharing what they learn about customers, even if it is inconvenient or does not seem to serve the best interests of the employee to do so.
• The insights gained from customer information are used to guide the organization's significant decisions, including the organizational strategy and the organizational structure.

The primary focus of the article is on a four-stage path that these organizations follow to create a lasting customer-focused mindset:

1. Communal Coordination—In this stage, the organization gathers and standardizes all information available about the customer into a single information pool. The information is then organized by customer (instead of by product, location, etc.). The IT organization usually controls and oversees this pooling of information.
2. Serial Coordination—In this stage, companies do more than just assemble customer information. They analyze it and draw inferences from it. There is usually a set of business analysis experts who pass their results on to the business units. The traditional roles and structures of the organization may present obstacles to spreading the information. Often, changes in the organizational and social structure may be necessary at this stage.
   In this stage, it is also usually found that there are critical gaps in employee skills to deal with so much information. This must be addressed through training or through centralizing the analysis function.
3. Symbiotic Coordination—In this stage, the company moves from analysis of past customer data to anticipating and dealing with likely future scenarios for customers. There are four different types of activities to do this: Creating models to predict customer behavior; Experimenting with various interventions to alter customer behavior; Measuring the results of these interventions; and Using feedback from the front line to improve the models and subsequent campaigns.
   The authors of this article say that many companies get stuck at this stage because they have difficulty creating and maintaining the constant informal give-and-take necessary among various units. The two most common solutions to this dilemma are to reorganize by customer segment or to add a new organizational unit to ensure coordination.
4. Integral Coordination—In this stage, the company moves past formal initiatives, and incorporate their deep understanding of customers into all of their day-to-day operations. Employees are given the freedom and latitude to use the value of customer-focus in nearly all their actions.

The key points of this article are illustrated through examples from Continental Airlines, Royal Bank of Canada, SBC, and Harrah's.

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"The 10 Procurement Pitfalls"

Dave Nelson, Patricia Moody, and Jonathan Stegner

Supply Chain Management Review

April 2005, pp. 38-45

This article explores ten common supply management mistakes companies make that hinder growth and diminish profitability:

1. Low expectations—Not expecting excellence from suppliers or from the procurement group itself is the first pitfall. Lack of management attention to or recognition of supply chain processes is the main sign of low expectations.
2. Decentralized purchasing—If purchasing is too decentralized, purchasing offices and decision making will not be coordinated; supplier strategies will not be linked; volume will not be leveraged; relationships will primarily exist at low organizational levels; and there are local incentive schemes.
3. Production reporting into operations or marketing—When procurement reports into marketing, complexity can be built by creating overlap and redundancy. When purchasing reports to operations, there is a tendency to neglect spending management and strategic procurement planning. The authors of this article recommend reversing this flow, so marketing and operations send their data to purchasing. Cost and supplier performance can be compared and consolidated.
4. Lack of good analytical tools—"What is essential for profitable spending management is the ability to gather, consolidate, manipulate, and analyze procurement information from many sources. The frequency of analysis at minimum should be once per quarter."
5. Supplier proliferation—Too many suppliers affects the quality of parts and the company's ability to manage the suppliers effectively. It also limits high-level partnerships that are necessary for supplier development.
6. Short-term, low-level tactical focus—Short-term focus leads to too much fire-fighting, and the resulting over-consumption of resources to solve problems. It also puts serious stress on both the suppliers and the organization.
7. Bad press—Procurement teams will be seen as only dealing with "costs" if they do not make a direct and clear statement of their connection to profitability and revenue growth.
8. Product variety and complexity—"If producers want to find immediate cost relief and change the way buyers and engineers work together, reduction of variety and complexity is a great place to start."
9. Purchasing separate from new-product development—There needs to be reciprocal interaction between these two groups during product development. Both Honda and Delphi report that this is crucial to optimizing the upfront area of the supply chain. A bill of materials database should also be available to both groups.
10. No supplier development—The authors of this article state that the proven payback for providing supplier development personnel to supplier is three to four times their cost.

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"Beyond Best Practice"

Lynda Gratton and Sumantra Ghoshal

MIT Sloan Management Review

Spring 2005, pp. 49-57

The authors of this article argue that the search for, and utilization of, best-practice processes is important-but not sufficient for superior performance. In addition, a company needs to have its own signature processes-processes that "embody a company's character and signify their idiosyncratic nature...processes that have evolved internally from executives' values and aspirations."

The article explores signature processes at three companies:

• Nokia has a signature modular organizational structure that is re-aligned frequently. The restructurings usually happen over the weekend.
• Royal Bank of Scotland Group holds a signature one hour senior executive team meeting every morning, without a prior agreed-upon agenda.
• BP, as its signature process, requires that business unit heads spend large amounts of time supporting the performance of their peers in other business units. Bonuses are strongly affected by the amount of improvement in the other business unit.

The article notes that these three signature processes are in many ways contrary to the usual notions of "best practice". However, they work because of the unique history and values of each company, and they provide a competitive edge that is very difficult to duplicate.

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Benchmarking, Best Practices, and Root Causes

John McNeil, GP Deltapoint
 

GP Deltapoint has a long history of benchmarking. We have conducted over 75 trips in Japan, Europe and the US, helping clients understand world class companies' key success factors and the ways in which those factors can be adapted and applied in their own businesses. The benchmarking process, when expertly conducted, avoids descending into "industrial tourism", but provides a structured set of applicable lessons. When benchmarking, we follow these guiding principles:

• Benchmarking is a process to carefully assess current performance and capabilities, and compare them to world-class standards.
• Benchmarking starts with self-study to better understand the current situation - know yourself.
• The purpose of benchmarking is not just to learn how to copy and catch up, but how to become the best.
• Benchmarking, by itself, does not improve performance. To realize gains, the information must be used in strategic decisions, or in process improvement.

We follow a structured six-step benchmarking process to ensure that this occurs: decide what to benchmark, plan the benchmarking events, understand own current performance, study best in class, learn from the data; and use the findings.

Take note of the last two points. They emphasize what Gratton and Ghosal point out in their Sloan Review article: that your signature needs are unique and that your use of findings must be specific not only to your current situation but also to your history and values. You should take specific care in applying lessons from other organizations to your own. Some organizations that pursue radical approaches will succeed. Toyota, for example, is an exemplar of team-based decision-making. But before embarking on a radical approach, you should ask whether all organizations that have adopted that approach have been successful. Specifically: are the findings from your benchmarking in fact the root causes of your benchmark organizations' success?

Unless you can determine that it is teamwork itself (as an example or Six Sigma or ERP) that contributes to a company's success, you may launch a program only to find that you are missing another accompanying critical success factor. In our experience, this leads thoughtful companies to benchmark more deeply and more often and to benchmark organizations that are at similar stages of strategic evolution as themselves. This will help you evolve your processes based on your unique values and aspirations as Gratton and Ghosal advise.

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