As it happened, the lean transformation at Lantech was easy in one important respect because customers were quite satisfied with current-generation stretch-wrapping equipment in terms of its performance, price, and service support. That is, its value to them was not in question, and Lantech could safely skip the first step of lean thinking described in Chapter 1 .
However, in a supremely ironic twist, Lantech has revitalized itself by banishing batches and their associated muda from the design and production of a product whose sole use is to wrap. … batches! Stretch-wrapping machinery exists for the purpose of quickly and efficiently packaging large pallet loads of goods which are shipped from firm to firm within complex production and distribution chains.
Pat Lancaster has therefore embarked on a new strategic exercise to think through the nature of packaging his customers will need in the emerging world of small-lot production, single-piece flow, and right-located facilities. Lantech needs to be ready with the right-sized, right-tasked process machinery likely to be needed in the future in order to provide the desired value for the customer.
Beyond the Simple Case
Lantech is a striking example of what happens when a small American firm makes the value stream flow smoothly as pulled by the customer in pursuit of perfection. What’s more, there is absolutely no magic involved. Any small firm can follow the conversion steps just described .
However, Lantech is a simple case. Pat Lancaster is a patient investor, not beholden to the impatient stock market. He had the authority as a change agent to “make it happen.” Lantech has only one plant, and it is still possible for senior management to know everyone’s name. The product range is relatively simple, really just four variants of one basic concept. The work-force is relatively young and has never shown an interest in joining a union to square off against management.
While the world is full of small firms like Lantech (which can make excellent investments for an individual or small group with the skills and energy to make the lean conversion), the majority of industrial activity in almost all countries is accounted for by much larger firms with much more complexity. What does it take to carry through a lean revolution in a larger and more traditional company?
CHAPTER 7
A Harder Case
Art Byrne of West Hartford, Connecticut, presides daily over his own United Nations. Within the main plant of the Wiremold Company, of which he is president and CEO, are representatives of twenty-four nationalities. A substantial fraction of the workforce is foreign born and 30 percent list a language other than English as their original tongue.
Wiremold’s polyglot workforce produces a set of objects which Art Byrne describes as “splendidly mundane”: wire management systems that route complex combinations of power, voice, and data wiring through buildings, and power protection devices such as surge protectors and line conditioners, which protect sensitive electronic equipment from voltage fluctuations.
Wiremold employees use simple production machinery—plastic injection molding machines, stamping presses, and rolling mills—to make products for mature and highly competitive markets. The workforce is organized by the International Brotherhood of Electrical Workers, one of the most traditional unions in the United States. The main plant was built in the 1920s and has been expanded over the years by hodgepodge additions of one small annex after another, making continuous flow and transparency difficult to achieve.
In short, Wiremold is the typical instance of “smokestack” America: a “low-tech” product made with “low-tech” tools by a unionized, immigrant, aging workforce with limited skills, working in an ancient facility; the type of firm which has had great difficulty in world competition in the past twenty years.
When Art Byrne arrived in September 1991, Wiremold was in a profound crisis, with declining sales, deteriorating production assets, and practically no profits. Four years later, the company has more than doubled its sales with the same workforce, increased wages, upgraded its physical plant, entered into a permanent growth trajectory, and become outstandingly profitable. How this happened is an object lesson in leaning American industry .
“We Nearly JITd Ourselves to Death”
In the late 1970s, family-owned Wiremold, which had been a successful manufacturer of wire raceways since 1900, switched from family to professional management and, in the words of Orrie Fiume, its longtime vice president for finance, “asked what we wanted to be when we grew up.” The wire raceway business seemed to have practically no growth potential, so Wiremold decided to enter the surge protector business. These are the ubiquitous devices, generally found on the floor under your desk, which protect your personal computer from the electric company.
The easiest route seemed to be through an acquisition, and after some searching, Brooks Electronics of North Philadelphia, Pennsylvania, was acquired in 1988. Brooks brought with it not only an established market position but also a close acquaintance with W. Edwards Deming. President Gary Brooks had embraced Deming’s Total Quality Management (TQM) in the early 1980s, struck up an acquaintance with Deming, and taken not only his entire management but half of his total workforce to Deming’s weeklong seminars.
When Brooks was acquired, TQM was embraced by Wiremold as well, and the management of Wiremold was soon enrolled in the Deming seminars. As Orrie Fiume notes, “Deming’s Fourteen Points were a perfect fit with our values and we all loved the principles. There was only one problem: Deming teaches what he called the ‘Theory of Management,’ or what I call a philosophy of change. But like a lot of good management theories, it was critically short on implementation details.”
By 1989, Wiremold was ready to try harder at implementation, and sent its vice president for operations to visit Japanese factories. He came back praising the concept of Just-in-Time (JIT) and immediately set about pulling down inventories and reducing lot sizes. What he could not do, because no one knew how, was introduce flow and pull by reducing changeover times for Wiremold’s tools and building to a level schedule.
As Orrie Fiume remembers, “Our customer service went completely to hell! We soon discovered that our MRP had years earlier had a 50 percent extra margin added to the safety stock calculation. We also discovered that our reliance on enormous batches and mountainous inventories meant not only that we could tolerate slow tool changes but that we could skimp on tool maintenance. If a tool was installed in a machine and found to be defective, there was plenty of time to send it out for maintenance and get it back before we actually ran out of parts. Our tools had deteriorated to a shocking extent without the management ever realizing what was happening. ”
Between 1989 and 1991, Wiremold slid steadily from record profits toward breakeven. Some of the problem was lost sales when Wiremold couldn’t deliver, but total sales went down only a few percent. The real problem was costs, as Wiremold paid express freight, added a whole customer service staff to explain why deliveries would be late, and paid to fix its tools. As Fiume notes wryly, “We nearly JITd ourselves to death by doing it the wrong way.”
By 1991, Wiremold’s longtime president was ready to retire, creating the opportunity to find a chief executive who could actually implement a lean system. As Fiume recalls, “You might think we would have simply gone backward to large batches and massive inventories, but something had permanently switched over in our minds as a result of exposure to Deming and the rudiments of lean thinking. We gave no thought to going back to the old way, but instead set out to find someone who could implement the new way.”
The Change Agent
For Art Byrne, the “light went on” in 1982 when he was general manager of a small business unit, the High Intensity and Quartz Lamp Division, within the vast General Electric Corporation. One of his manufacturing managers had gone on a study trip to Toyota and had come back with amazing stories about inventory reductions due to JIT. Byrne began to read the available literature, then took his own trip, and was soon ready to give JIT a try. In one of the first JIT applic
ations in GE, Byrne and his colleagues were able to reduce in-process inventories in his business unit from forty days down to three. He remembers, “It seemed like a miracle.”
Art Byrne’s problem was not with JIT but with GE. “I hated the ‘make-the-month’ mentality where everything was evaluated on the basis of short-term financial performance, and I became convinced that I would never be allowed to take the more difficult next steps in creating a lean organization. I already knew that when you try to create continuous flow there is going to be a step backward for every two steps forward, and I doubted that GE’s instant-results management culture could deal with it.”
So Byrne left to become a group executive of the Chicago Pneumatic Tool Company, a manufacturer of small air-driven tools for industrial users. However, he had hardly arrived at Chicago Pneumatic in 1986 when it was taken over by the Danaher Corporation (which we heard about in Chapter 6 ), and Art Byrne was soon put in charge of eight Danaher companies .
The Knowledge
One of the Danaher firms in Byrne’s portfolio was the Jacobs Equipment Company (commonly known as Jake Brake) of Bloomfield, Connecticut. The sales and marketing vice president of this firm was George Koenigsaecker, 1 a particularly eager advocate of lean ideas who had made numerous study trips to Japan, including to Toyota, and read every book and article he could find on lean production.
When he was promoted to president of Jake Brake at the end of 1987, Koenigsaecker and his new operations vice president, Bob Pentland, 2 began moving machinery from process villages, tearing out conveyors (which are really moving warehouses), and setting up their first cells to make truck engine components in single-piece flow. They began to get dramatic results, but neither Koenigsaecker nor Pentland felt they knew as much as they needed to know, and they were constantly looking for ways to learn more.
Early in 1988, Koenigsaecker noticed that a weeklong seminar and kaizen event on the Toyota Production System was being held at the Hartford Graduate Center and in the plant of a nearby firm. He, Pentland, and Byrne decided to attend. The organizer of the course was Masaaki Imai, then becoming well known for his book, Kaizen. The other instructors were Yoshiki Iwata, Akira Takenaka, and Chihiro Nakao of the Shingijutsu consulting group in Japan, whom none of the Danaher group had ever heard of.
After the Danaher delegation had listened to the first day of the Shingijutsu presentation on TPS and discovered that they had worked for years as pupils of Taiichi Ohno in his efforts to spread lean thinking through Toyota’s supplier group and beyond, they thought they were on to something. Koenigsaecker approached the instructors about visiting Jake Brake.
As Bob Pentland remembers, “We had never met a Japanese-style teacher, or sensei, and we weren’t prepared for being turned down cold. Iwata simply said ‘no’ and stalked away. However, George is a uniquely persistent person and kept approaching Iwata, first at lunch, then at the afternoon coffee break, then at the end of the day. Every time he posed the question through Iwata’s translator, the answer was a brusque ‘no.’ The next day George was at it again, before class, at lunch, and during coffee breaks. Finally, at the end of the second day, Iwata and his colleagues agreed to go to dinner, probably so George would stop asking.
“The minute we sat down to dinner, I pulled out a layout of our plant with the new single-piece-flow cell [identical to the Lantech cells described in Chapter 6 ] which we had just created. I laid it on the table in front of Iwata, and asked him whether we were doing the right thing. There was a long, frosty silence. Finally, Iwata said, ‘If I come to your plant, will you do whatever I tell you to do?’ George and I said, ‘Of course.’ Iwata responded, ‘If this is true, roll up the drawing, let me eat my dinner in peace, and I will come to your plant this evening.’”
When they arrived at the plant around 10:00 P.M. , the Japanese team took one look at the new cell and pronounced it all “no good.” They explained that among other problems it was laid out backwards (the work should have been flowing counterclockwise) and it would be necessary to move all the machines immediately. Koenigsaecker and Pentland had done no preparation for the visit and they knew their union leaders would be upset about the abrupt changes (which they were), but it was also clear that this was the test: “Would we do immediately exactly what they told us?” So everyone pitched in to reconfigure the cell and by 2:00 A.M. it was running again, with results far better than before.
With this introduction to the “just-do-it” mind-set of the lean sensei, Koenigsaecker knew he had entered a new world. “My whole notion of how much improvement was possible in a given period of time was fundamentally and permanently altered. I also realized that these guys could be a gold mine for the Danaher group.”
Koenigsaecker and Pentland assumed that they had passed the critical test and that arranging a consulting relationship would be easy. So they were dismayed when Iwata abruptly headed out of the plant once the cell was running, explaining that he had done what he could but that Jake Brake managers were hopeless “concrete heads” beyond his ability to help further.
Fortuitously, the kaizen event held during the rest of the week at another Hartford area firm ran into the entrenched resistance of the firm’s management, which refused to do any of the things the sensei requested. By Friday, the Danaher delegation was ready to ask for help again. This time Iwata responded that Danaher managers seemed to have no idea how to operate their business but that compared with the other American managers he had just met, there was at least some hope. However, he and his colleagues also said they were too old to learn English and that America was too far away.
Art Byrne was determined not to give up and arranged to meet them in Japan a short time later. There, after asking for help a third time, he finally got an agreement for a one-week trial to see if Danaher was truly serious.
The first day of the trial was conducted at the Jacobs Chuck Company, another Danaher subsidiary, in Charleston, South Carolina, which manufactures drill chucks for small electric drills of the type most of us have in our home tool kit and for industrial models as well. Byrne and Jacobs president Dennis Claramunt thought they would start with a one-hour plant tour and go from there. However, after five minutes, Iwata, Takenaka, and Nakao announced they had seen enough. “Everything is no good,” they announced through their translator. “Will you fix it now?”
Two teams were formed immediately, one with Iwata to work on final assembly and the other with Takenaka and Nakao to work on machining the steel bodies for Jacobs’s industrial drill chucks. Byrne and Claramunt followed Iwata but were soon interrupted by Jacobs’s manufacturing engineers, who were upset that Takenaka and Nakao were demanding to move all of the heavy machinery used for machining the chucks during the lunch hour.
Claramunt told the engineers to let Takenaka and Nakao do whatever they wanted and then went to the machining area with Byrne after lunch to see what was happening. With their sleeves rolled up and pry bars in hand, Takenaka and Nakao were working furiously to move the massive machines out of their departments and into the proper sequence for single-piece flow while Jacobs engineers and the rest of the workforce stood with their mouths hanging open.
On one level it was pure theater; the Japanese visitors surely understood what an extraordinary scene they were causing. But on another level, they were prying Jacobs loose from their bureaucratic, departmentalized, batch-and-queue past. As Byrne remembers, “By moving those machines themselves in only a few minutes—when many hadn’t been moved in years and Jacobs executives would never have dreamed of touching any machinery themselves—they demonstrated how to create flow and what a few determined individuals can do. Neither Dennis nor the rest of the Jacobs work-force was ever the same again. They all threw away their reservations and got to work.”
So Danaher passed the test and Japanese advisers agreed to work intensively for Danaher as their exclusive North American client. “With our sensei on board and with the full backing of the Rales brothers as they began to grasp
these ideas in mid-1989, we had the knowledge and the authority to push lean thinking faster and faster.”
By 1991, Art Byrne had introduced lean thinking all the way across the eight companies in his group, with spectacular results. He was also instrumental in spreading lean thinking in the five other Danaher companies, led by John Cosentino, who became a true believer. The transmission device was Byrne’s innovation of the “presidents’ kaizen” in which the presidents of all of the Danaher companies and their operations vice presidents were required to participate hands-on every six weeks in a three-day kaizen event in a Danaher plant. They moved machines themselves and in many cases learned the realities of the shop floor and the ordering and scheduling system for the first time. (One of these companies was Hennessy Industries, where Ron Hicks, whom we met in the last chapter, made the transition from “concrete head” to lean thinker through his experiences in presidents’ kaizen. )
However, Byrne was growing restless. Like most change agents, he wanted to run his own show, but the top jobs at family-controlled Danaher were unavailable. Wiremold, on the other side of Hartford, had heard about Byrne’s work at Danaher, and a match was made.
The Leaning of Wiremold
When Art Byrne arrived at Wiremold in September 1991, he found about what he expected, a classic batch-and-queue system in production operations, order-taking, and product development. Products took four to six weeks to go from raw materials to finished goods. Orders took up to a week to process. New products, even when they were nothing more than a reshuffling of existing parts, required two and a half to three years to progress from concept to launch. As a result, only two or three new products were being launched each year. Thick departmental and functional walls were everywhere, damming up the flow of value and making it impossible to see.
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