Archive for January, 2010

Implementing Lean Manufacturing

January 21, 2010 by Clark

How far can you take lean manufacturing practices before you cross the line of what makes sense economically versus doing what a pure lean implementation tells you that you should be doing?

We have all heard the statement, “You were too close to the forest to see the trees.”  I think at times, in our eagerness to adopt lean manufacturing principles and practices we find ourselves “Too close to lean that we sometimes can’t see what makes sense.”

To illustrate this situation let me tell you about a company that was faced with a similar situation.

The company was a major player in the medical products/device manufacturing industry.  They had adopted a lean philosophy plant wide and had been following lean practices for about 5 years.  They had seen fantastic results as they broke down traditional methods and practices and followed the lean manufacturing principles to a “tee”.

They had done a superb job of connecting their processes in their various value streams and had managers of each area that believed in lean but were having a difficult time understanding how to decide what was right for their next efforts along the path of continuous improvement and lean implementation.

They were trying to achieve a single part flow into a low volume, high variety type of job shop assembly area.  They had established supermarkets for each the components that were required by each value stream.  In their hopes to fully connect the component manufacturing with the component demand in the value stream cells they were contemplating bringing some fabrication equipment into several of the value stream cells to reduce supermarket inventories of certain critical parts and to perhaps better connect the process.

The fabricated parts required multiple machine center resources to complete.  Many issues related to safety, cleanliness and process flow also needed to be considered.  The existing fabrication center was set up in a “U” shaped cell and actually ran very well.   Additionally, the existing fabrication cell supplied component and services to several other value streams within the plant.  After much contemplation and study, the group agreed that bringing the fabrication cell into the assembly areas would be a big mistake.

What came out of this study is that you can actually find better ways of fully connecting the processes in the overall manufacturing operations without actually having to physically locate all associated production tasks in the same cell.  With a little work and thought, the supermarket inventory levels were dropped, the communication of TAKT time demands were better established across the lines of fabrication and assembly, and the customer began to realize immediate benefits of better connecting their processes.

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Why does the huddle work at Setpoint Systems?

January 14, 2010 by Joe Knight

Setpoint Systems is an open book company. This means that our books are open to our employees. Even though we are a privately held company we choose to share our financial information.

When the company started in 1992, the engineer founders Joe Cornwell and Joe VanDenBerghe (aka the Joe’s) decided they wanted to share financials with their employees. As a project based company they found that the way their part-time CPA did the books with them did not give them a good measure of how the projects were performing financially on a week-to-week basis.

So the two Joes with the help of others developed a way of tracking their projects on a weekly basis that included hour tracking by labor section, material costs tracking, and earned value project management concepts. This allowed a fairly accurate measure of the financial performance for projects on a weekly basis. This type of the project financial analysis did not comply with GAAP (The Generally Accepted Accounting Principles). Their CPA did not like it but it made sense to them and their employees.

The weekly tracking process happens on a big white board where projects are measured for material costs and percentage progress every week. The key project number, that every employee follows, is GP or gross profit by project (at Setpoint GP is simply earned revenue by percent complete less actual material costs). After the gross profit by project is measured then we compare that to our week OE or operating expenses. You take GP – OE to measure our profit for the week.

We track closely three measures on our huddle board. First, is GP/OE. For us, 1.2 is good and anything less is not good enough to sustain the business. Second, we track what percentage of our labor is direct to our automation projects. Third, is GP per direct hour charged to projects. Everyone knows that if our GP per hour is over a key threshold and our percent direct is over a key threshold Setpoint will make a nice profit and GP/OE will be well over 1.2.

It’s actually a really simple system. We have a monthly and annual bonus that pays out based on beating minimum GP-OE targets for the month and year. We also train all of our employees on how the huddle board works and what the key metrics mean.

So why does our huddle work? Well I think that there are few things that have made this simple 15-minute weekly meeting work for Setpoint. First, it’s a simple way to track projects and everyone understands it. Second, we tie objective financial rewards to how the board looks. Third, we involve every employee in the process. In the weekly huddle every employee has a seat at the table.

The power of Setpoint’s weekly huddle is evident in the survival and success of this business. When a project is bad on the board, the assembly people blame the design and engineering people, the design and engineering people say the project was under funded when it was sold and blame sales. We are all together in the meeting and it needs to be worked out between these groups or we do not have a business. The huddle creates at Setpoint what I like to call ‘psychic ownership’. Ever though all the employs do not own stock in Setpoint they act like owners because they see the performance on a weekly basis and want the company to perform well.

We have seen this ‘psychic ownership’ express itself in many ways over the years. Recently, when a project was nearing completion some shop people approached our CEO and challenged the percent complete shown on a specific project. They were in final assembly and thought the machine was well beyond 90% complete but our project engineer had the number much lower on the huddle board thus lowering our GP-OE and bonus for the month. In short, our assembly people accused the project engineer of sandbagging on the project. After a brief review an adjustment was made. We’ve also had situations where percent complete has been challenged as being farther along than we really are.

With everyone involved the huddle really keeps us safe and accurate on our business. We believe the huddle process and the systems behind it is the single greatest asset that Setpoint Systems has.

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Being the “mother” at Setpoint

January 5, 2010 by Setpoint

I’m not sure I like the title of Mother at Setpoint. I guess because then I am the oldest female working here. Aside from that it has its advantages. Sitting at the front desk and being in charge of the candy dish people come to my desk often. So while they are there they will tell me about their family and what they did over the weekend or what their plans are for a vacation. I know most of their family and now I can ask how they are doing. Most people like to talk about their family and so it’s been fun to get to know them in a more personal way. Being the mother of 4 children it’s a natural thing for me to get involved in all the employees personal lives.

I think being older and having raised a family sometimes people will come to you with questions and ask for advice or some input on a situation. Just watching them with their kids makes me smile to see what good parents we have at Setpoint. They are all striving to become great parents.

Being the mother also means that you see the kitchen and think that someone will clean that mess up but after a couple of days and it is still there you just clean it up because it’s easier than finding out who made the mess and will I ever find out who did it? Probably not. Whenever we have a Setpoint party it seems that the girls always seem to get the clean up job so I do have some help there.

My job at Setpoint is to hand out the checks so it’s kind of like allowance that a mother will give her kids. So everyone likes to see me coming when I have checks that’s always a plus.

I like my job at Setpoint and it is my family away from home since we spend a lot of time at work. There is a special bond and we are all concerned about everyone else. Last year my husband lost his job and everyone was so concerned about me I knew that if I needed anything they would be there for me.

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