Page 131 - How To Implement Lean Manufacturing

110 Cha pte r S i x

not an undesirable effect. Rather, it was just a change that was both unexpected and
serendipitous. So our plan was to standardize on supplier C.

How Is Standardization Similar to Problem Solving?
In both problem solving and standardization, it is required to find and eliminate the
root causes of variation. Consequently, the skills required for good problem solving
overlap almost 100 percent with the skills of standardization.

A Little More for Your Amusement and Amazement
I told you earlier that there would be a little more … and so now I’ll tell you “the rest of
the story,” as it’s said, which goes like this.
Francisco, having been buoyed by the knowledge that we could reduce defects a full
1 percent simply by single-sourcing our circuit boards to supplier C, was energized. You
see, the company was attempting to implement a Deming type management system, and
Point No. 4, of Dr. Deming’s 14 Obligations of Management has to do with supplier devel-
opment and going to single sources of supply. Francisco was energized beyond belief, and
the first thing he did was calculate the possible gains. They exceeded $1,000,000/year for
the quality losses alone. Next, he investigated this supplier a little. He found that supplier
C was relatively new to Jayaroot Co. but was also the low-cost supplier for this board.
Wow! Even more potential gains. Higher than a kite and filled with new-found energy,
Francisco contacted the purchasing department and found out the following:
• Their objective was to go to a single source of supply.
• Although supplier C was the low-cost supplier, they had already been eliminated.
In the future, boards would be supplied by A and B only. We were told that the
decision had been made at central purchasing.
Well, not too discouraged, Francisco contacted the manager of the central purchas-
ing department. He confirmed what Francisco had already been told. Upon question-
ing this manager, Francisco found the decision had been made, and no amount of data
or logic would deter purchasing. Supplier C was out; A and B were in. Francisco argued
so long and hard he almost lost his job over it. But the low-cost superior-quality sup-
plier was eliminated and we needed to find another way to eliminate these defects.
I never actually found out why this decision was made this way, but the general
manager for the plant just shook his head and said it did not surprise him. He went
on to explain that they had similar problems in the past, nothing quite so clear as this,
but in the past there was little they were able to do—just as in this particular case.
Subsequently, I learned that this facility was strictly a cost center and all raw materials
sourcing, costs, and metrics were managed at the home office in Chicago.
This example, more than most examples, points out the futility and destructive nature of
centralized control taken to an extreme. We had transformed the manufacturing facility to
operate with pull systems using cells operating at takt, and it was very Lean by any measure.
From a manufacturing standpoint, it was a large success. However, it was not surprising that
two years later, I was on the front steps saying goodbye to many fine workers as this facility
was closed. You see, although it was a manufacturing success, it was a business failure.
The notice in the paper said they were moving the facilities to China to take advan-
tage of the low-cost labor market there. This product sold for about $17, and had less
then $0.12 direct labor in the cost to produce. The home office burden was 11 percent.