Archive for September, 2010

The design community has the biggest lever

In sourcing, out sourcing, off shoring, on shoring – the manufacturing debate rages. So what’s the big deal? Jobs – the foundation of an economy. Jobs pay for things, important things like food, schools, and healthcare. No jobs, no economy. The end.

What does lean, the most successful manufacturing business methodology, have to say about all this? Lean’s fundamental:


Make it where you sell it


because the shortest supply chains are least wasteful. Dig the ore in-country, make the steel in-country, forge it, machine it, and sell it in-country. With, of course, some qualifiers, some important ifs:

  • If in-country demand is high enough to warrant the investment
  • If your company is big enough to pull it off
  • If quality can be assured.

All good, but I’m discouraged by what lean does not say:

  • Regardless of the country, engage the design community to reduce material cost and waste
  • Regardless of the factory, engage design community to make your factory output like two
  • Regardless of the industry, engage design community to reduce part count.

We all agree the design community has the biggest influence on cost and waste, yet they’re not part of the lean equation. That’s wasteful. That violates a fundamental. That makes me sad.

Let’s put aside our where-to-make-it arguments for a bit, and, wherever you make product,


Engage the design community in lean.

Do you know?

There are three categories of knowing: we know we know, we don’t know, and we think we know.

When we know we know – we understand fundamentals, we have a model, we have evidence, we can predict. We can build on this knowledge. We’re not often in this state, but it sure feels good when we are. The trick here is to understand the applicability of the knowledge. Change the inputs, change the system, or change the environment and we must question our knowledge. Do the fundamentals still apply?

When we don’t know – no fundamentals, no model, and no predictions. No danger on building on bad knowledge. Life is uncomplicated. Next task: develop the fundamentals; build a model. We’re in this state more often than we admit, and there’s the danger. It’s politically difficult to say “I don’t know.” But it must be said. Otherwise we’re expected to predict the future and to build on the knowledge (that we don’t have).

When we think we know – no fundamentals, no model, and predictions we bet our businesses on. Danger. It feels just as good as when we know we know, but it shouldn’t. Momentum in the wrong direction and we don’t know it. And we’re likely in this state more often than not. But this is a meta-state, an unstable state. The trick is to push on our knowledge so we tip into one of the other two states. Push on our knowledge so we know if we know.

Do you know the fundamentals? Do you have a model? Can you predict?

Fight Dilution

What’s worse than getting only one thing done today? Getting none done.

The problem? Our New Normal. Too many things. Dilution.

The answer? Stop starting and start finishing.

Green Jeans Drive Innovation

Environmental stability, aka, Green, is just starting. Most are still in reluctant compliance mode, hoping beyond hope that this newest of corporate initiatives dies on the vine, that it’s just another corporate initiative. Wrong. Very wrong. It’s the way we’re going to grow our business; it’s the way we’re going to make money. It’s time to open our minds, grab Green by the throat, and shake it. Green is here to stay, and Green will demand we change our thinking, will make us see our problems differently, will require we dismantle our intellectual inertia, will require innovation.

Pretend you’re a manufacturer of jeans, the blue ones, the ones that feel so good when you put them on, the ones you’d like to wear to work if you could. (Maybe that’s just me.) Year-on-year your innovation efforts focus on adding pockets then removing them, adding holes then removing them, zippers here then there, dark wash then light, baggy then tight, and yellow stitching than red. What else can a jean innovator do?

Corporate sends the memo: “We’re going Green.” Green jeans. They hire the best sustainability consultants and you, the jean innovator, sit through the sustainability audit results. Their recommendation – reduce carbon footprint: use materials that consume less energy, reduce electricity in your factories, minimize distribution’s fuel costs, and reduce travel miles of your sales folks. Brilliant. Whatever we paid these guys, it was too much. But then they twist your brain. The carbon footprint from the use of your product dwarfs everything else. Your customers generate a massive carbon footprint when they wash and dry your jeans, and you have no control over it. Your jeans are made once and washed and dried countless times. Whoa. Your eyes roll back in your head. What’s a jean innovator to do? First thing – forget about the stupid pockets. Next, figure out how to reduce the carbon footprint generated by your customers. Define the problem and innovate. But what’s the problem?

Why do folks wash their jeans? The obvious answer – they’re dirty. Let’s figure a way to prevent jeans from getting dirty, right? No. The real answer – they stretch, they get baggy and don’t fit right; so we wash them to tighten things up. We wash CLEAN jeans because they get baggy, not because they’re dirty. Let’s fix that.

Believe it or not, there are many likely innovative solutions to make jeans de-baggy themselves, but that’s not the point. The point is we must innovate on jeans that reconfigure, and must not innovate on keeping jeans clean (though we may innovate on that down the road) and must not innovate on pockets, zippers, and stitching.

Green shaped our innovation work. We now have Green jeans that feel good and spring back after wearing and fit great on day two – no washing required. We now have Green jeans that save customers time and money while flattering their backside. But here’s the point – we would have never invented de-baggying jeans without opening our minds to Green as a way to grow our business, to Green as a way to make money. Reluctant compliance won’t get us there. Grab Green by the throat and shake it…before your competitors do.

Bring It Back

Companies (and countries) are slowly learning that moving manufacturing to low cost countries is a big mistake, a mistake of economy-busting proportion. (More costly than any war.) With labor costs at 10% of product cost, saving 20% on labor yields a staggering 2% cost savings. 2%. Say that out loud. 2%. Are you kidding me? 2%? Really? Moving machines all over the planet for 2%? What about cost increases from longer supply chains, poor quality, and loss of control? Move manufacturing to a country with low cost labor? Are you kidding me? Who came up with that idea? Certainly not a knowledgeable manufacturing person. Don’t chase low cost labor, design it out.

(I feel silly writing this. This is so basic.  Blocking-and-tackling. Design 101. But we’ve lost our way, so I will write.)

Use Design for Assembly (DFA) and Design for Manufacturing (DFM) to design out 25-50% of the labor time and make product where you have control. The end. Do it. Do it now. But do it for the right reasons – throughput, and quality.  (And there’s that little thing about radical material cost reduction which yield cost savings of 20+%, but that’s for another time).

The real benefit of labor reduction is not dollars, it’s time. Less time, more throughput. Half the labor time, double the throughput. One factory performs like two. Bring it back. Fill your factories. Repeat the mantra and you’ll bring it back:

Half the labor and one factory performs like two.

QC stands for Quality Control. No control, no quality. Ever try to control things from 10 time zones in the past? It does not work. It has not worked. Bring it back. Bring back your manufacturing to improve quality. Your brand will thank you. Put the C back in QC – bring it back.

Forward this to your highest level Design Leaders. Tell them they can turn things around; tell them they’re the only ones who can pull it off; tell them we need; tell them we’re counting on them; tell them we’ll help; tell them to bring it back.

75% Warranty Cost Reduction – Preview of Upcoming Event

Warranty cost: not a glamorous subject, but an important one.  It’s a great surrogate for what your customers experience.  Some companies try to reduce warranty costs by trimming their warranty policies — reducing costs but offering customers less.  Bad idea, kind of like increasing insurance deductibles and co-pays.  Warranty cost is best reduced by increasing product robustness — how well it functions over a wide range of inputs (or uses).

Here’s a link to Assembly Magazines’ Assembly Summit which will be held in Clearwater  Beach Florida on October 18-20, where I’ll present on warranty cost reduction of 75%.

Assembly Magazine’s Assembly Summit — How we radically reduce warranty cost (Oct. 19 at 2:00).

For a preview, take a look at this short video on warranty reduction.  The mindset — reduce warranty cost and design out product cost AT THE SAME TIME.  AT THE SAME TIME.

Most Popular Posts of 2010

This week is an anniversary of sorts.  So, I thought I’d share the most popular posts over the last twelve months.  Here are the top 5:

  1. Who Owns Cost
  2. The Dumb-Ass Filter
  3. DFA Saves More Than Six Sigma and Lean
  4. Fasteners Can Consume 20-50% of Assembly Time
  5. DFMA Won’t Work

If over the last twelve months a post helped you with your thinking, please take a minute to submit a comment and share your learning.  Or, pay it forward and share your learning with a friend.

Thanks for reading.

Top 10 signs your labor costs are too low

Your purchasing manager was just fired due to skyrocketing shipping costs now that you build product in a country with low cost labor.

You must hold a national press conference to explain how lead paint was put on your product by your supplier in a country with low cost labor.

You get up at 3:00 a.m. (for the fourth night in a row) to talk about a quality problem with a factory in a country with low cost labor.

You must cancel your lean projects because all your black belts are still solving quality problems in a country with low cost labor.

Though you have many half empty factories in your home country, you have a plan to build a new one in country with low cost labor.

Your best manufacturing leader just quit (via text message) because she wants to live with her family and not in a country with low cost labor.

Your purchasing manager’s brand new replacement was just fired because inventory carrying costs are through the roof now that you build product in a country with low cost labor.

You must find a landfill to bury three months of bad product now on a slow boat from a country with low cost labor.

Your new product launch is delayed because you have to tear down the machines and move them to a country with low cost labor.

The financial types that run your company are too far removed from the work so their only trick is to move it to a country with low cost labor.

Be Purple

Focus, focus, focus. Measure, measure, measure. We draw organizational boxes, control volumes, and measure ins and outs. Cost, quality, delivery.

Control volumes? Open a Ziploc bag and pour water in it. The bag is the control volume and the water is the organizational ooze. Feel free to swim around in the bag, but don’t slip through it because you’ll cross an interface. You’ll get counted.

Organizational control volumes are important. They define our teams and how we optimize (within the control volumes).  We optimize locally. But there’s more than one bag in our organizations.

The red team designs new products. They wear red shirts, red pants, and red hats. They do red things. We measure them on product function. The blue team makes products. They wear blue and do blue things. We measure them on product cost. Both are highly optimized within their bags, yet the system is suboptimal. Nothing crosses the interface – no information, no knowledge, no nothing. All we have is red and blue. What we need is purple.

We need people with enough courage to look up one level, put on a blue shirt and red pants, and optimize at the system level. We need people with enough credibility to swap their red hat for blue and pass information across the interface. We need trusted people to put on a purple jumpsuit and take responsibility for the interface.

Purple behavior cuts across the fabric of our metrics and control volumes, which makes it difficult and lonely. But, thankfully some are willing to be purple. And why do they do it?  Because they know customers see only one color – purple.

Mike Shipulski Mike Shipulski
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