1. A Lean Story TRI-STATE MANUFACTURERS’ ALLIANCE Jean Cunningham with
A program of The Chamber of Commerce of Southwest Indiana
with
Jean Cunningham

2. Building LEAN Beyond Manufacturing
JCC founder and president
Lean Accounting, Lean Business Management, Lean Office pioneer
Original Thought Leader for Lean Accounting, Lean IT, Lean HR Summits
Lean accounting lecturer for The Ohio State University, Masters of Business Operations Excellence program
Lean Education Advancement Foundation board member
Former CFO
Lantech, Inc.
Marshfield Door Systems
Association of Manufacturing Excellence
Stiles Associates
© 2016 by Jean Cunningham Consulting All rights reserved

3. Building LEAN Beyond Manufacturing
Managing Times Press, 2003
Shingo Prize, 2004
Lean Accounting
Productivity Press, 2007
Shingo Prize, 2008
Lean IT
Lean Accounting
Wiley Publishing, 2008
My colleagues and I have been fortunate to be on the fore front of lean innovation in the U.S. since the early 90’s. Jean inadvertently helped to invent what has become known as lean accounting. In our decision making roles for large and medium size companies we lived it and evolved it and believe we can help you do the same.
Logo (waste going in the can, basketball hoop, cheering leanster, red olive martini)
© 2016 by Jean Cunningham Consulting All rights reserved

4. Industry Leaders
Still with Lean ; reference Article in USA Today in Fall 2007
Both companies had leading market share in their segment.
Marshfield made wood doors for commercial and high density applications
Lantech invented stretch wrap equipment in 1972 and is industry leader. After lean successes, able to have resources and methods to significantly expand products to include shrink wrap, case erectioning and pallet building equipment. International Company.
Marshfield Doors – All custom configurations. 130K doors a week.
© 2016 by Jean Cunningham Consulting All rights reserved

5. Lantech Lean Buzz
Lantech was historically very successful before lean, the inventor and leader in their segment. They lost an important patent. Worked with Coopers and Lybrand to define issues. Tried partial builds with more inventory and other “fixes”. Once they started adopting lean, the gains were surprising and dramatic.
Tell story of Lantech being early adopter, put in Lean thinking and then HBR selection the Lantech Chapter
© 2016 by Jean Cunningham Consulting All rights reserved

6. Lantech Metrics Batch and Queue Flow Development of new product family
3-4 yrs
1 year
Working prototype
3 months
1 week
Batch size
10-25 1
Production throughput time
16 weeks
14 hrs to 5 days
Employee hrs per machine
160 80
Delivered defects per machine 8
0.6
Product delivery lead time
4-20 wks
1-4 wks
Order entry to schedule
12-14 days
2 days
When this is redone, this slide will have the top level results. Can’t get top level results by focusing at the top level, so what changed underneath?
Product delivery lead time is time customers wait before the product can be delivered. In 1991, most of the time was in process time. In 1995, most of the time was wait time for a production slot as sales zoomed.
Note beginning was 1991, end 1995
Lead Time for “Rockets?”
Lantech ‘s product at that type was primarily stretchwrappers. However, within that category there were units that had all standard options , with hundreds of unique configurations, but also wrappers that had specfic customer engineering. And some wer e way out there with most elements custom engineered. If the option set was really far out, we called them Rockets and mad them their own product line. The lead times in this category could grow up to 26 weeks with about four to six weeks of that time on the shop floor, with the remainder in custom engineering and purchasing of specialty components.
New products – 1st manufacturer into a market usually realizes highest margins.
From “Lean Thinking”, Jones and Womack
© 2016 by Jean Cunningham Consulting All rights reserved

7. Lantech Metrics Before After WIP and FG inventory $2.6 M $1.9 M
Excess space 0%
30%
Employees
300
Volume
100%
200%
Market share
38%
50%
Profits
Loss
Industry Leading
These will be the details of some of the key impacts.
WIP and FG Inventory down significantly on 2X the volume.
Had planned to build another building – in the end it was not needed.
Quality went way up – extended warranties went from 1 – 3 years.
From “Lean Thinking”, Jones and Womack
© 2016 by Jean Cunningham Consulting All rights reserved

8. My First Lean Aha Moment
Assembly
Welding
Cutting
PAINT
Inventory
Fixtures
PAINT
Cut
Weld
Assy
Inv
© 2016 by Jean Cunningham Consulting All rights reserved

9. “Fix the Office” All about the processes throughout Lantech
No system changes…..yet.
Creating flow
Once and be done
Factory
Materials
Order Prep
Product Development
Engineering
Accounting HR IT
© 2016 by Jean Cunningham Consulting All rights reserved

10. Price Realization Gain
Financial Value
Expenses at ½ of Growth Rate
Shipments per Person
Working Capital as % of Sales
Profit Model $
➠ Increased Demand ➠
Break-even
Loss
Profit
Savings
Price Realization Gain
Accelerated
Volume
© 2016 by Jean Cunningham Consulting All rights reserved

11. Lantech doubled the size of the company
“The problem is the perception that when you get your monthly report, you now know the vital issues in the business. … I would say even more strongly from my experience that you don’t know the details of the business based upon accounting … it’s based on two big sins—standard costing and material resource planning (MRP). … I don’t want to say it too strongly, but I really think that if you drive your ship … based on the two instruments of standard cost and MRP, you will pretty much drive yourself into a waste condition that is almost unimaginable.”
 — Pat Lancaster, CEO, Lantech
Lantech doubled the size of the company
with the same number of employees
Quote excerpt taken from The Lean CEO by Jacob Stoller
© 2016 by Jean Cunningham Consulting All rights reserved

12. People Value Everyone involved Move people around
No one will lose there employment due to productivity gains
Everyone’s job has to change
Move people around
Not everyone makes it
Some at all levels leave by their own choice
Hierarchical leaders must change or leave
© 2016 by Jean Cunningham Consulting All rights reserved

13. “A leader is like a shepherd
“A leader is like a shepherd. He stays behind the flock, letting the most nimble go out ahead, whereupon the others follow, not realizing that all along they are being directed from behind.”
Nelson Mandela
As quoted by Linda A. Hill
Harvard Business Review
January 2008
© 2016 by Jean Cunningham Consulting All rights reserved

14. Order Flow Simulation

15. Order Flow Materials Inside Sales Design Schedule Quality
© 2016 by Jean Cunningham Consulting All rights reserved

16. One Piece Pull Work Cell
Sit close together
Sit in order
Only 1 at each operation
Pass only when the next person is ready
© 2016 by Jean Cunningham Consulting All rights reserved

17. Lead Time, Cycle Time, Takt Time, Perfect Manning
Lean Metrics
Lead Time, Cycle Time, Takt Time, Perfect Manning
© 2016 by Jean Cunningham Consulting All rights reserved

18. Product Cycle Time Cycle Time in Minutes Order Type % of Total Sales
Design
Schedule
Materials
Quality
Total
Hot
13%
0.25 1
Regular 1
33%
0.5
Regular 2
20%
Normal
Maximum
4.5
Weighted Avg.
0.73
0.40
0.90
0.42
3.18
© 2016 by Jean Cunningham Consulting All rights reserved

19. Cycle Time in Minutes
© 2016 by Jean Cunningham Consulting All rights reserved

20. Takt Time How often do we need to complete an order?
Meet the rate of customer demand = “Takt Time”
Current: Need 400 orders in one day
Future: Need 400 x 110% = 440 orders in one day
available time
demand units
Takt =
450
400
Available # minutes in day =
Demand =
Takt = min
450
440
Available # minutes in day =
Demand =
Takt = 1.02 min
© 2016 by Jean Cunningham Consulting All rights reserved

21. Takt Time / Cycle Time Current Takt FutureTakt
© 2016 by Jean Cunningham Consulting All rights reserved

22. Perfect Manning Current People = 9 (4 operators, 4 movers, 1 checking)
Maximum
∑ CT =
4.5
4.00 people TT
1.125
Average
3.18
2.83 people
Future
3.11 people
1.02
∑ CT = ?
2.99 people TT
1.02
2.99 x 1.02 = 3.05 CT
3.18 − 3.05 = 0.14 minutes
How much work needs to be eliminated to stay under 3 people?
© 2016 by Jean Cunningham Consulting All rights reserved

23. Lead Time W Sales M Design Schedule Materials Quality .25-1 0-1 .5-1 1.1
.5-?
Value Add = 1 to 4 minutes
Non-Value Add = 6.8 minutes minimum
Total = 7.8 to 10.8 minutes or more
© 2016 by Jean Cunningham Consulting All rights reserved

24. Metrics Current Future No. of People 9 3 Lead Time 11 min 4 min
No. of Units
400/day
440/day
Units in Inventory
10-15
Flexibility
Low
High
Ability to Predict Completion Time
© 2016 by Jean Cunningham Consulting All rights reserved

25. Box Score Tracking CURRENT GOAL J F M A S O N D No. of People 9 3
Lead Time
11 min
4 min
No. of Units
400/day
440/day
Units in Inventory
10-15
© 2016 by Jean Cunningham Consulting All rights reserved 25

26. Material is Copyrighted
A Lean Story
TRI-STATE MANUFACTURERS’ ALLIANCE
A program of The Chamber of Commerce of Southwest Indiana
Material is Copyrighted