Saturday, September 19, 2009
The posts have been a bit light for me the last week or so because I was in Mesa Arizona doing an internship at Boeing. Not only has it been difficult to carve out time to write, but the Internet connection at the hotel was $9.99 for a 24 hour period! Ouch. As part of my lean journey within the Air Force, I have been lucky enough to attend the University of Tennessee and now to do an education with industry program with Boeing. Besides the amazing weather in Arizona it was an incredible opportunity to embed myself within a major defense contractor and see how they are implementing and benefiting from lean within their organization. It proved even more valuable than I originally thought because learned a lot about how they run their business and what the other side of the fence in the acquisition world is like so to speak. Since I am behind the desk in the Air Force purchasing large weapon systems and systems support it was great to see how the company brings the government requirements to fruition. But beyond the lessons that just apply to lean or government acquisition are the lessons apply to more broad topics. Great experience that will be one I remember and use forever. Here are a few things I took away from my time spent in Mesa as well as some cool pictures.
1. Internships/Education Within Industry Is Extremely Valuable - I have written about benchmarking before here on BadskiBlog. Every time I partake in these pseudo field trips I am amazed at the nuggets of knowledge I pull from the experience. They teach us in kindergarten that getting outside your element is valuable, but as we grow older we seem to forget that lesson. The military as a whole is especially resistant to learning from outside organizations. Its a culture that believes that what we do is unique and so different that lessons cannot be gleaned from other industries. This outlook builds complacency and stymies creativity. At Boeing I have learned that we share very similar challenges and often come to similar solutions. With regard to implementing lean within the culture of the organization Boeing struggles from the same resistance from naysayers. Boeing struggles with bureaucracy. They struggle with bridging the communication gap between leadership and lower level workers. Some times it takes looking in someone elses kitchen to be able to see how your organization really is. When you see their issues and challenges you can look back to your organization and begin to see how they may affect you as well. Luckily you can do the same with successes. Nothing is ever directly transferable to your organization from another, but you can take winning ideas from one organization and morph them into a success within your organization.
a selfish standpoint the trip was a great experience as well. The trip shrunk the sea for me. When you are in your own little routine and day to day life you think that there is so much out there and that other organizations are so different. The trip helped me to realize that people are people everywhere. Whether in Boeing, the Air Force, or on a pro sports team the dynamics of social interactions are the same everywhere. The trip helped to take Corporate America off a pedestal for me. Its similar to the grass is always greener on the other side mentality. You see how messed up your own organization is some times and you get to thinking that other organizations are heads and tails above you. The truth is they probably aren't. My old coach used to always say "when you win you are never as good as you thought you were, and when you lose you are probably better than you thought you were." Its easy to get frustrated with your own struggles and begin to think that the other team, in this case Corporate America, is utopia. It's not. I think it was healthy for me to see that and it helps to ingrain within me that I can and will be successful in any organization if I put in the effort and passion. Bottom line: get out of your comfort zone and experience new things. There are always lessons to be learned.
2. You Can't Optimize A Part At The Expense Of The Whole - Basically this means that you can't try and improve one area of the business and expect it to boost results for the business as a whole. Our organizations are often broken up functionally, regionally, or a million other ways. Although it may help with chains of communication or with allocating resources it often creates a stovepipe mentality where people are only concerned with their narrow view of the overall business. We all fall into this trap. However, optimizing one area will not necessarily benefit the business as a whole, in fact it often harms other functions and the company's bottom line. If your doctor tells you that you need to start working out to lose weight and all you do is bicep curls would you necessarily say you are healthier? A systemic approach must be used to truly improve an organization.
3. What Gets Measured Gets Done - Leaders can use this to their advantage, but often the metrics within a company are not aligned with the strategy. People will work hard and in a way that exploits the metrics that are being used to measure them. There is nothing wrong with this, in fact when you look at providing for your livelihood and your family you would expect nothing less. With a lean strategy the customer should always be the focus. What are your customers expectations and how are you meeting them? Is there a gap in your satisfaction of customer requirements? If so, that is where your efforts should be focused. However, what often happens is the company or organization measures things that do not matter to the customer at all. In turn, employees work to those metrics instead of satisfying the customer.
An example at Boeing, and at manufacturing plants across the world I am sure, is the productivity measures of individual employees. There are time standards for parts and how fast they complete the parts as compared to those standards is how the craftsmen are measured. Does the customer care how fast Joe Metalworker finishes part X? You might find yourself saying well yeah kind of. From a lean perspective that is a tell tale sign the answer is no. The customer, who in this case is the Army, wants an affordable, capable, and available helicopter. They don't care how fast Joe makes part X of the helicopter. They want the entire copter when they need it, they want it to work, and they want it for a fair and reasonable price. You might be thinking that if the chopper doesn't have part X then it can't fly. That is true. But what if there are twenty part X's in the warehouse? What if the only reason you can't get a helicopter out faster and cheaper is due to the availability of part Y? Then you are pumping out extra part X's because Joe Metalworker is measured on his productivity rate, even if making more of those parts is costing the company thousands of dollars in inventory. Multiply examples like that across the company and you can see very quickly how much what you are measuring can negatively affect your overall business strategy.
4. Real Leaders Think Big - Real leaders don't think big in the sense that they can cure world hunger. They think big in that they see all the pieces of the puzzle and how they are interconnected and interrelated. Great leaders drive that large vision scope down to the lowest level and inculcate it into the culture and lifeblood of the organization. They constantly asking "does this benefit the company as a whole or more importantly the customer." As I have preached before the two are inextricably linked. Much of the value of my Boeing experience was shadowing the lowest shop floor workers and feeling their struggles and delving into their daily realities and how they affect the company culture, and then shadowing upper management and seeing their struggles to take a strategy and actually have it come to fruition throughout the lowest levels of the company. Great leaders bridge the gap between creating a vision in the boardroom and having the average worker actually live it.
5. Labor Is Cheap - Everyone focuses on labor. Every day in any newspaper across the country you can read about company X and how they are laying off X number of workers. Labor should be the last to go. Plain and simple. Those who get lean realize it is a growth strategy (see my post here). What happens when you grow and you are thin on bodies? You cannot meet or more importantly exceed customer demand; it is only a matter of time until you are dead. Boeing nailed this point home for me and I will never forget it. We were doing some time and motion studies at Boeing, which are pretty brutal. They basically time a worker on how long it takes to do a given process and how much motion in the form of walking, set up, etc. they are doing per job. Then you take the data you collected and you see how you can lean out some of the process, or reorganize the workplace to speed up the time it takes to do X process. Most of the sexy tools in lean are used to focus on processes that involve people (labor), because they are the most visible and you can interact with the people and get feedback. But that is not where your money is. At Boeing we found a way to speed up some part making processes through workplace reorganization. But does that savings necessarily translate into a monetary savings or better yet increased throughput of the product as a whole? No. Not necessarily. In this case a production manager who was performing roughly three job descriptions was forced to batch parts to be delivered over to the paint shop. He did so, because he didn't have time to deliver the parts as they were produced. He would always deliver them at the end of the day. So even if we cut time off the part making process the parts would sit until the end of the day to be delivered anyways. See number 2 above! Well what should Boeing do instead? Studies have shown that industry averages of costs are typically broken down as follows:
Overhead Costs - 34%-36%
Material Costs - 60%
Labor - 4%-6%
Material makes up the majority of the costs. This is especially true in a giant defense contractor like Boeing. So why would you waste your time trying to get Joe Metalworker to go faster when you can focus on inventory which is your largest cost. What is more enlightening is tying the concepts to actual numbers. Here are some of the rough numbers we ran at Boeing. We said that the burn rate for an employee on the shop floor is roughly $200/hr. That includes their salary, benefits, cost to operate the plant/employee, etc. There were 10 employees working 8 hrs/day. This means the company spends roughly $16K on this backshop's labor for a given day. Lets say we lean their process and get a 10% reduction in cost. We would be roughly saving $1,600 per day. We focused on one of the 271 parts that are made in the backshop and found numerous bottlenecks, broken processes, and lack of visibility as to how many parts were in the system. The cost to the company was roughly $4000 per piece. We found 20 pieces within their process (WIP), which equates to about $80K in inventory costs. If we leaned that process and made a 10% reduction in inventory on that one part along we would save $8,000. That is half a day's labor for every employee in the shop! Not to mention that Boeing sells the part to the government for $9,500 which brings the inventory cost up closer to $200K. You can see that this strategy applied to all the parts made in that back shop would dwarf any improvement effort geared towards labor, or more importantly and layoff strategy you could implement. Labor is cheap!
6. Just Because Something Is Simple Doesn't Mean Its Easy - Concepts are easy. Implementation is difficult. Creating/changing a culture is extremely difficult.