The Center for Operational Excellence has expanded the scope of the April 9 plant tours offered as part of our three-day Leading Through Excellence summit to include a trip to LeanCor in Florence, Ky., in the Cincinnati metro area. Unlike the five other plant tours we’re offering Wednesday afternoon, this is an all-day experience that heads to two different operations LeanCor runs, both of which are models of enterprise-wide lean application.
The lean-focused third-party logistics provider supports 44 plants, five cross-docks, 1,700-plus suppliers, and 1,200-plus outbound shipping locations. In any given week, they coordinate the movement of 17,000 tons of cargo.
The exclusive summit tour is taking attendees to LeanCor’s control center for tactical transportation management, where visual management is used not just to track the movement of cargo but highlight problems. Brad Bossence, a LeanCor vice president, tells me the tour also highlights how leaders are engaged in problem-solving.
After lunch, the LeanCor tour heads to a 110,000-square-foot in-bound replenishment facility (pictured, above) the organization runs nearby, which supports a number of major automakers. Here, you’ll see how LeanCor has implemented visible metrics for tracking the engagement of the 100-worker team hour-by-hour, painting an agile, accurate picture of how workflow is moving.
We all stare down complexity day-in, day-out. LeanCor offers a compelling, multifaceted playbook for tackling it.
The two speakers for the Center for Operational Excellence’s Feb. 14 seminars couldn’t have been from two more different companies, but both emphasized a crucial truth about the journey of process improvement: You’re never too good to learn – or borrow – from others.
Take Pittsburgh-based grocery chain and COE member Giant Eagle Inc., whose President and COO, John Lucot, spoke to our crowd of more than 100 members and guests. The company has been in existence for more than three-quarters of a century, but Lucot said recent years have marked “the most exciting time in the history of our company.”
Emerging from an economic downturn in which consumers tightened the purse strings, Giant Eagle has developed new formats and transformed the customer experience. For proof, look no further than its Market District location a few miles from Ohio State University, which has become the unofficial epicenter of its neighborhood in a few short years. This has happened all while the company has aggressively maintained focus on health and safety and implemented lean principles throughout the supply chain. Lucot told the crowd that Giant Eagle has drawn inspiration from organizations ranging from the Cleveland Clinic – a gold standard in patient experience – to Alcoa, a fellow Pittsburgh company whose safety centric turnaround under former CEO Paul O’Neill is the stuff of legend.
And while Giant Eagle started down its road to operational excellence with an eye on removing cost and boosting efficiency, the balance sheet doesn’t rule the day, Lucot said.
“We never, ever talk about the financial impact of the things we do,” he said. “We are unwavering in our commitment to health and safety, and no one in our organization has the right to put money or anything else above those efforts.”
It’s that same focus on Giant Eagle’s employees and its customers that underlies a comment Lucot made that’s destined for the whiteboard: “We have no right to ask people to do things that don’t add value.”
Speaking later in the day, George McAfee, marine logistics manager at Findlay, Ohio-based Marathon Petroleum, shared the challenges posed to knowledge management and transfer in a work force with a widening generation gap and a growing share of over-55 workers.
With those dynamics, McAfee said, it’s even more crucial to develop standard procedures to capture and communicate processes so a company’s mission, vision and values don’t get muddled over time.
And echoing Lucot, McAfee said benchmarking – even outside one’s industry – is key to finding the right path.
“You must be willing to admit someone else might be better at what you’re doing,” he said.
This article appears in the March 2014 edition of COE’s Current State e-newsletter. Have a colleague who should be receiving this e-newsletter? Contact Matt at firstname.lastname@example.org.
The numbers don’t lie, as the saying goes, but Ilaria Raniero knows some tell the truth better than others – and many more aren’t worth listening to.
Raniero (pictured, right), a visiting scholar to the Ohio State University Fisher College of Business from the Polytechnic Institute of Milan (Politecnico di Milano) in Italy, recently conducted a wide-ranging research project with several Center for Operational Excellence member companies as part of her graduate thesis. This sweeping look at a wide variety of industries uncovered some promising trends in how lean evolves in organizations over time and sheds light on how the successful ones select the right metrics.
More importantly, Raniero – with the help of COE Associate Director Tom Goldsby – developed a new performance measurement framework for the lean supply chain. The final product is a road map of sorts that could help organizations move from implementing lean in a single silo to a more holistic approach, all while measuring what matters – and ignoring what doesn’t.
Raniero’s research, “Applying Lean Principles in the Supply Chain: An Examination of Measurement System Adaptation,” is the product of more than 80 hours of face-to-face interviews conducted between October 2012 and February 2013 with 10 companies, though much of the research looked in-depth at Dublin-based COE member Cardinal Health.
The inspiration for the research, Raniero said, was rooted in a key observation she made about organizational behavior.
“The measurement system is something that drives the company’s behavior and drives employees’ behavior, too,” she said. “As companies adapt their strategy, they need to adapt their measurement systems accordingly.”
Selecting the wrong metrics plays out in familiar fashion for many: A measurement that seemingly aligns with company goals – cost per unit, for example – ultimately can encourage very “un-lean” behavior. Aggressive bulk purchasing might lower a company’s cost per unit, but it could wreak havoc on inventory levels and other key measures. A company taking a broader look at the supply chain might instead choose to track total cost of ownership, a metric that would raise a red flag much sooner.
Raniero’s research, in fact, found that companies with a track record of success in lean implementation have taken such a journey: First, applying lean in operations, then spreading it across the entire enterprise. The final, and largest, leap came when companies began to bring this waste-zapping, value-focused strategy to their interactions with suppliers, customers, their own employee relations, and their sustainability initiatives.
In short, it ultimately becomes a question not of performing better in tried-and-true metrics, but broadening the very definition of performance, said Goldsby, a professor of logistics at Fisher.
“Companies are becoming aware of how operational excellence can impact customer retention, employee satisfaction, supplier relations, and sustainability concerns,” he said. “As a result, companies are introducing new measures that capture these dimensions of performance, which yields a more holistic perspective on the health and future prospects for an enterprise.”
This holistic perspective is captured in Raniero’s formal framework of five voices: Voice of Customers, Voice of Business, Voice of Employees, Voice of Suppliers, and Voice of Sustainability.
That final “voice” has taken on a much more important role in today’s business environment, but Raniero said companies wrestle with it nonetheless.
“Many companies struggle to find the right measures and don’t know how to tie sustainability into the profit-loss statement,” she said.
By making sustainability one part of a larger lean strategy, the report states, it’s possible to use tools such as value-stream mapping to identify environmental wastes and ultimately reduce cost.
With five distinct “voices” and metrics for each one, how do successful lean organizations not wind up with too many dials on the dashboard? The answer, Raniero’s research found: They adapt metrics along with shifts in strategy, keeping an eye out for newly important ones and those that no longer guide lean behaviors.
John Matera, COO of COE member Willow Wood and one of Raniero’s interviewees, said his part in the research project has helped the company take a closer look at its “voice of business,” which includes key financial and operational measures. Where once Willow Wood was tracking as many as 15 business-related metrics, it’s now working down to half as many.
“(Fifteen) is a lot to keep track of on a regular basis,” Matera said. “Working with Ilaria has helped us focus on what’s important.”
This so-called “structured adaptation” in measurement systems is a defining mark of a company making progress in its lean journey. It also highlights another key feature of Raniero’s framework: Strategy influences each one of the five “voices” by guiding what’s measured, but the results themselves can play a role in strategy over time.
It’s this complex interplay that Alan Deutschendorf, vice president of operational excellence at Cardinal, says the company can evaluate with a renewed perspective after taking part in Raniero’s COE-sponsored research.
“This has really given us food for thought as we update our strategy and tactics and continue to develop a culture of operational excellence,” he said.
As pharmaceutical recalls continue to hit headlines, an ongoing focus of research for one Fisher College of Business professor is taking on a new urgency.
Fisher Prof. John Gray and two co-authors of an unpublished paper recently wrote an article featured in the online edition of U.S. News & World Report that highlights the ongoing challenges pharmaceutical manufacturers face in maintaining quality, particularly when production has been outsourced or offshored. U.S. News published the article just days after GlaxoSmithKline announced a recall of asthma drug Ventolin and several months after dozens of people died because of quality issues at the New England Compounding Pharmacy in Massachusetts.
Gray, along with Prof. Aleda Roth of Clemson University and Associate Prof. Brian Tomlin of Dartmouth College, took a close look at the performance of pharmaceutical plants run by firms that own the brands, versus those run by contract manufacturers. There was not an overall difference, but their research did indicate less-experienced and less-regulated contract manufacturers had a higher risk of quality issues.
“Our research provides empirical evidence that drug manufacturers are hard-pressed to consistently maintain high quality operations even in their own domestic facilities,” Gray and his co-authors wrote, referring to multiple research papers. “This challenge is magnified when production is performed in offshore and outsourced plants.”
The challenging business of making and supplying safe pharmaceuticals has been a topic of interest in Gray’s research for years. In 2011, he co-authored a study published in the Journal of Operations Management that found drugs produced in offshore manufacturing plants – even when run by an American company – pose a greater quality risk than those produced stateside. They attributed this result to differences in language and culture between the plant’s personnel and those at headquarters.
Gray told us then that “just one quality error that hurts customers or leads to a recall can be extremely costly to a company responsible.”
What makes Gray’s research with his co-authors so resonant these days is the underlying truth that goes beyond organizational borders and language barriers: Successful quality reforms come from far-reaching culture change across the entire supply chain, a feat that isn’t easy, cheap, or quick. For any industry, defeating a culture of silos, miscommunication, and blame is a hard-won battle.
It’s an urge in the pharmaceutical industry, and countless others, to turn to technology – buy Gray and his colleagues write in the U.S. News article that the solution, instead is in people and day-to-day processes.
“Absent such an organizational mindset,” they write, “quality failures will occur even with the best technology.”
Google “value stream map” and you’ll get about 5 million hits. You can read as much as you want on it, but the only way to truly learn is by doing one – and in my experience, you learn more with each new map. Learning to See, co-authored by lean guru John Shook, gave our MBOE students this past week a prime on the value stream map, and in class, they learned much more about the five components to one: Customer, Supplier, Process Steps, Process Metrics and Information Flow.
So why should one care about mapping a value stream? For starters, it helps you answer a ton of questions about what you do day in and day out. Just a sample:
Are you producing to takt (customer demand), creating more than is needed or you are so slow?
How are you balancing supply with demand?
Do you have too many, too few or just the right amount of people doing the work?
Are there wastes in the process?
Are people undergoing unnecessary movements to get materials or information to do the work?
How do all the steps communicate with each other?
A value stream map gives you a snapshot of your process in a given time period. It tells you how much of the process you are studying is actually value adding. It might be shocking for someone mapping the first time to find out that more than 90% of the work they do is non-value added.
Here’s an example of that: Executive in Residence Gary Butler this past week told of his first encounter with MBOE Sensei Paul Kerry, a coach in our program. Kerry asked Butler and his executive team to tell him about their expenses, and Butler explained it by making the drawing above.
Kerry turned around and drew what he said was the reality of the business, which you’ll see below. A value stream map gives you a new lens through which you can look at your business. And what you see isn’t always pretty.
Last February, the Center for Operational Excellence teamed up with Fisher’s Operations and Logistics Management Association for its first-ever attempt at a “world café”-style event. For a few hours, we brought together COE members, Fisher students and faculty to tackle the topic of logistics in an actionable way – with a catch. The clock ticks during discussion sessions at each table, and when it runs out the groups scramble.
Last year’s World Cafe attracted dozens of industry leaders,
The first time out of the gate, the event was a huge success – and that’s why we’re hosting it again this year. Next Friday, Jan. 25, we’re hosting what we’re calling a Link Symposium, and while the name and the chief topic have changed, the format’s all the same. The spotlight this year will be turned on sales and operations planning.
Move around the tables, meet students and faculty and watch as our best and brightest at Fisher give report-outs on key takeaways from each subtopic. We’re also capping off the event with a networking period to give our attendees a chance to chat without the pressure of time.
It’s a common occurrence but a sad fact of life in the business world: Lured by cheaper wages and less red tape, a company uproots U.S. manufacturing operations and sends them to China or another country in an effort to cut costs.
Harry Moser has made a crusade out of asking those companies a simple question: “You sure about that?”
In a recent visit to Fisher, the founder of the Reshoring Initiative outlined how he’s working to broaden companies’ understanding of all the costs of offshoring – and the benefits, in turn, of keeping or moving it stateside. Sure, the price tag initially might look cheaper on paper, but factor in a host of other risks and costs that escape that first glance and the U.S. is much more competitive, if not less costly altogether over the long term (run the numbers with Moser’s handy Total Cost of Ownership Estimator).
“We’re much more competitive competing here than we are competing there,” Moser said.
At the forum, sponsored by the Center for Operational Excellence, CIBER and the Ohio Manufacturing Institute, I was thrilled to see Moser talk about the costs of offshoring from an operational excellence perspective. Based on evidence Moser presented, a compelling case can be made that running an operation offshore can create waste that would make any lean thinker shudder.
Just think about the impact the big blue ocean between your offshore plant and your customer can create. Bringing product back makes the most financial sense with large batch shipments, but what happens when demand shifts your product mix? And what about defects discovered after a product has been shipped from half a world away? Research in the pharmaceutical manufacturing realm by our own John Gray indicates offshore production – even by U.S. drug-makers – carries a greater quality risk than its American-made counterpart.
Advocates for bringing it back home, take heed: It’s easy to make the case for reshoring not just with dollars and sense, but common sense.
Sometimes the scope of the machine can obscure the beauty in the little cogs that make it all work. Take Center for Operational Excellence member Cardinal Health Inc. for example: It’s a $100 billion-plus company, highly profitable, one of the largest employers in the Columbus area and manager of a network of distribution centers so vast its products can reach a staggering share of hospitals nationwide in no time flat.
It’s also an extraordinarily efficient and nimble enterprise, having navigated through the recession with few bruises, shed a piece of itself to create a new West Coast entity and plotted an ambitious expansion into Asia that could pay untold dividends in the future. It’s the efficiency and its translation into high-quality service to customers that has captured the attention of the number-crunchers at research firm Gartner, which recently named the Dublin-based company the No. 1 health-care supply chain in the nation.
To reach No. 1, Cardinal moved past last year’s holder of the top spot, Owens & Minor, which slipped to No. 5 this year. Nos. 2-4, in order, were Mercy, BD and the Mayo Clinic.
It’s reasons quantitative and qualitative that got Cardinal the honors. Gartner perused data on financials and inventory levels, combining that with other survey data and peer opinions (Cardinal’s top-notch there, in specific). The company in bestowing the honor called Cardinal “a complex combination of well-connected businesses … (that) combines the varied strengths of a medical-surgical distributor, a pharmaceutical wholesaler and a large manufacturer.”
So why all the hoopla over a health-care supply chain? Gartner gets at a key distinction that strikes at the heart of why operational excellence in the health-care realm is so important: “Losing sight of the customer, in most industries, results in frustrated tweets and blog posts about a product or service that may lead to lost sales opportunities. Losing sight of the patient, however, can reduce the quality of life for particular patients and, in the worst case, can lead to the loss of life.”
So congratulations to Cardinal, an all-star on COE’s roster that recently came to Fisher to share its lean story at our Dec. 2 quarterly seminar.
A congratulations by proxy goes to fellow COE member Abbott Nutrition, whose sister pharmaceutical operation made Gartner’s top 10.