Is Inventory a waste or a cover-up of deeper waste?

By Al Norval (bio)

It’s an interesting question since we all know that Inventory is one of the seven classic process wastes called “Muda”. We often see this as we walk the factory floor. Piles of raw materials, stacks of WIP (work in process) and as we leave the manufacturing organization and enter the arena of distribution, we see inventory stored as Finished Goods.

This inventory represents cash tied up waiting to be processed into something which has value to customers. Accountants would see this as an asset which is positive but that’s a blog for another day. We in the Lean world see this inventory as waste to be reduced or eliminated.

But how do we reduce or eliminate this waste of inventory?

I see many Lean practitioners and organizations make a fundamental mistake when it comes to this. The Lean purists in the organization say “Reduce the waste, reduce the inventory” and the obliging organization goes ahead and does so often with disastrous consequences. They reduce their inventory too far and find that all material flow grinds to a halt. They have uncovered some rocks but don’t have the time or horsepower to fix them through countermeasures aimed at root cause. In the meantime customer service suffers and the organization engages in a serious session of firefighting while everyone scrambles to keep customers happy. Many times this happens at the end of a financial quarter or year end.

We all want to reduce the waste of inventory but what’s a better way reduce inventory?

As we develop our eyes for waste, and begin to see the waste that surrounds us in an organization, we need to be able to get to the root cause that’s driving the waste and eliminate the root cause.

Inventory always hides a deeper source of waste. We need to be able to learn to see that and understand the root cause that’s driving the waste of inventory. Only then, after the countermeasures are in place, can we take a step change in inventory.

In fact, sometimes we need to add some inventory back in to stabilize the material flow and give us time to work on countermeasures to the root cause of the waste. Doing this eliminates much of the firefighting which in turn creates time for proper problem solving.

I’m not saying – don’t reduce inventory to expose the rocks. Rather, I’d suggest, reducing the inventory, seeing what rocks (problems) surface and if you can’t problem solve rapidly, add the inventory back in while you address the root causes. Stabilize the material flow, keep your customers happy, drive to root cause, problem solve.

Reduce the waste by eliminating the causes of it.

Cheers,

Al


In case you missed our last few blogs... please feel free to have another look…

7 Basic Quality Tools – Are they underrated?
What Does Leader as a Teacher Really Mean?
PDCA - the Pounding Heart Muscle of Life
Want to Make Better Decisions? Simplify…

Lean & Six Sigma

By Al Norval

I deal with several organizations where the competition between Lean and Six Sigma is nothing short of destructive for the organization. These typically large organizations have two camps both of whom are dug in and set in their ways. They seem to spend more time fighting with each other than actually helping people in the organization make improvements. The skirmishes typically involve sending articles around the organization by email where the pundit has an opinion that supports one side or the other.

I’m always puzzled by this as both improvement methodologies are necessary. Some organizations understand this but end up splitting the two improvement methodologies anyway with statements like “Lean is about removing waste and Six Sigma is about reducing variation”

Hogwash. While reducing Muda (waste) is a key pillar of Lean, so is reducing Muri (Strain) and Mura (variation). These three concepts are related as Strain and Variation are causes of Waste. Strain or Overburden applies both to machines and manpower. We can see it when equipment is made to run faster than it’s capable of or IT systems become overloaded with new software. When it’s applied to people it lines up with another pillar of Lean – Respect for People. Strain here often leads to ergonomic issues. Asking people to do work that causes injuries certainly isn’t showing them due respect.

Likewise Six Sigma is about reducing variation but more importantly it’s about making data driven process improvements using DMAIC which is a variant of Deming’s PDCA cycle.

In both cases, organizations have good people working in broken processes.

The trick is to apply the right technique to the right problem. Here’s my recommendation:

When problems require simple problem solving, use Lean. When faced with complex problems use Six Sigma.

Abraham Maslow once said “If the only tool you have is a hammer, it’s tempting to treat everything as a nail”

In my opinion, both improvement methodologies are necessary. Learn to coexist and get on with the real work of helping people make improvements enabling the organization to achieve its goals.

Cheers

Japanese Words – To Use Them or Not?

By Al Norval

One of the questions I am often asked at clients is whether they have to use the Japanese terms associated with Lean. Most times the organization is leaning towards not using the Japanese terms and is looking to me for some kind of validation. I always answer that it’s their personal choice as an organization but there are several things to consider.

The first is that Japanese terms don’t always translate well into English words. Japanese is a very visual language that relies on a character set called Kanji to make complete sentences in their writing system. Each Kanji or character represents a thought or image which is a very different structure from a Latin based language where each letter represents a sound. So translating these thoughts or images from Japanese into English can be difficult and produce some very wordy translations.

Take Jidoka for example. It has various translations including; autonomation, machines with a human touch, built in quality at the source, separation of man and machine work. All of these translations are correct, yet none of them truly grasps the full meaning of the term Jidoka.

A simpler example comes from Jim Hereford as quoted by Mark Graban in his blog of Nov 22, 2011 at www.leanblog.org. Jim gives the example of sushi in defending the use of Japanese terms and says:

“When you go to a Japanese restaurant, do you order sushi or do you say something like, ‘Please get me raw fish rolled in a leaf and rice?’”

Good point Jim.

Another reason I recommend using Japanese terms is in a Lean Transformation we are trying to change the culture of the organization. To change the culture we’ve got to get people behaving differently. Using Japanese terms signals a change and is a great antecedent to the change process. It tells people the status quo isn’t good enough and needs to be altered. It signals a different kind of change process from one where the change is sanitized to make it palatable to the entire organization and thus is watered down and limiting.

I remember working with an organization who had decided not to use Japanese terms.

I asked about “Kaizen” and they said they would use that one.

I asked about “Kanban” and they said they would use that one as well.

I asked about “Gemba” and of course, they said they would use that one as well, but they didn’t like “Muda” and were going to use “waste” instead. Fair enough.

As I said, each organization has to develop their own glossary of improvement terms and needs to think deeply about what kind of culture change they are introducing by using those terms.

For a sample glossary to get you started, please see www.leansystems.org. for a free download.

Cheers