Lean Six Sigma at a Custom Manufacturer – Performance Measurement
This custom cabinet and millwork manufacturer was the in-house manufacturing division of a larger residential construction company. They grew very rapidly with a large multi-year order and were spun off as a separate company. The large multi-year order ended and sales dropped precipitously. The overhead costs from equipment and manufacturing space quickly created a loss situation. While they were a separate company, they were still managed like a small internal production facility for the construction company.
They needed a turnaround, but the owner wanted long-lasting solutions. She was in it for the long run and was committed to this company and its people.
Lean Six Sigma Tools
Performance Measurement System
1) The first step was to get the four major departments in the company aligned. This included sales/estimating, production, project management and engineering.
2) Each group created its performance scorecard with input from associates, the General Manager and other departments.
They began to track prior week and year-to-date performance and have meetings every Monday morning at 8:15 AM for 15 minutes, with the entire management team.
3) Most companies measure and look at data and reports, but often they fail to focus on the right data and then take the appropriate actions in follow up. By rigorously applying Performance Measurement processes, we create focus on a few, highly important, “key” measures. We bring great attention and visibility to these key measures via regular (weekly) meetings to review progress and demand follow up and accountability. By focusing attention and demanding action and accountability, qualified teams will drive results. For some companies this could be a big culture change, so it takes time but once momentum builds, progress will endure.
4) Based on how they were trending they created company-focused action plans (shown on the performance scorecard link). This became the foundation for all future performance improvement efforts. Below is a brief list. Many of these will be detailed in future newsletters.
5) Performance results focused this company on Sales, and specifically improving the Bid Close Rate. The minimum target was 17% and current performance was less than 10%. We used Six Sigma tools, with a focus on finding the most profitable and productive customers and market segments. We will detail this Lean Six Sigma project in next month’s email-newsletter.
6) Next we addressed rework. This production metric was trending in the wrong direction so the Plant Manager first, put in place a quick-fix by inspecting every order personally, then moved quality awareness back into the production lines. Included in this effort was a major 5S Visual Management initiative. We had to put pride in the workplace, and have a standard of housekeeping beyond the industry. We had to make sure we minimized craftsmen’s frustrations of looking for tools and information. Quality and Workplace Organization were directly linked and became a passion of the Plant Manager.
7) On-time delivery was in the 30% range, which apparently was “accepted” in construction, because everyone is late. This wasn’t acceptable to our client, so they created Flow Manufacturing Lines, Flow Scheduling Principles and put a daily focus on moving orders through the entire engineering/purchasing/production/billing process. This will be detailed in a future email-newsletter.
Impact on People
1) The transition from a small, loosely managed organization to a tightly run and measured company was very difficult on employees and managers. This included the General Manager, who was driving the entire process improvement effort.
2) For the first 6 months the scorecards were all in the RED or in the “unacceptable” zone. This is normal. If you want to improve, that means your current performance is, by definition, unacceptable. Just because you begin measuring doesn’t automatically make the numbers better. This is the hardest part of implementing a performance measurement system. The weekly exposure to bad performance measures created a bad mood every Monday morning. While everyone wants to know how we are doing, exposing employees can be uncomfortable. Especially when you are climbing out of a negative situation.
3) The General Manager moved the meetings to Tuesday, just to give everyone a break on Monday. After about 6 months, and numerous Lean Six Sigma projects, the numbers started to move up. It would have been very easy for the General Manager to give up, but he stuck to it, until we began to see improvements.
4) Lean Six Sigma can be part of a quick-fix. It can be used as part of a turnaround situation. However, it takes faith and discipline to continue to “stick-to-it” while the culture of Lean Six Sigma takes hold.
As we mentioned, this was the foundation of numerous Lean Six Sigma projects. These will be detailed along with specific results in future Email-Newsletters.