Meanderthal Inc. – a case study on a factory turnaround that could be applied anywhere.
Contrary to what some experts will have you believe, there is no standard, one-size-fits-all solution to turning around a problem factory.
In this article, I will provide ideas on how to reduce cycle time, reduce costs and improve competitiveness in an environment of cheaper high quality imports.
Let me introduce a fictional – but alas, representative – manufacturing company. It’s a compilation of several manufacturing companies I have worked with. I’ve given this company the fictional name Meanderthal Inc.
Meanderthal Inc. meanders from change program to change program, but nothing changes.
The burning problem:
Meanderthal was rapidly losing market share to overseas competitors
Meanderthal is an Australian manufacturing company, fast losing market share to cheaper imports. For several years, the company had played the quality card to counter this. However, with the overseas product improving its quality, this care was no longer valid.
A side issue:
Lean manufacturing project without results after 2 years
Two years before engaging me, Meanderthal had introduced Lean Manufacturing in the hope of fixing their many problems. The Lean concept was pioneered by Toyota in the 1990s to reduce waste and lower costs.
The Lean project was the owners most recent attempt at getting the business back on track.
Problems in the factory
Meanderthal’s product (campervans) was plagued by defects. More recently, the rate of defects had escalated. The sales team spent more time resolving product issues than actually selling. Worse, they had lost confidence in the product. Sales were plummeting, as were profit margins. Negative feedback on social media also posed a daily threat to the brand.
Lean manufacturing project fails to deliver results
Back to the Lean project. I was asked by the owners to make a call whether continuing the Lean project would be a go or a no-go. I chose the no-go option. The Lean project had produced no results after running for 2 years, it wasn’t working.
I discovered that 70% to 90% of Lean projects fail to deliver.
In his book Optimizing Factory Performance, Dr. James P. Ignizio put it perfectly: “While cleverly packaged factory improvement methodologies look good in theory, they don’t work for all problems.”
Beware of trendy change programs
Australian manufacturers are under enormous pressure from low-cost overseas competition. So, it is understandable that factory owners and CEOs succumb to the ‘best thing since sliced bread‘ offers from external consultants. But these programs don’t work for everyone.
Concepts like Lean Manufacturing are fine when applied by the right people to the right problem in the right manner. However, trying to replicate what Toyota did with Lean Manufacturing, and apply it to all factory problems is simply nonsense. Worse still, this one-size-fits-all phenomenon puts otherwise good businesses at real risk of going under.
A customised change program that does deliver results
My approach has no sexy branding. It is simple, quick and costs a truckload less than the fashionable alternatives.
Problem solving remains a simple process:
- Define desired performance
- Describe actual performance
- State the performance gap
- Find root causes
- Select interventions
- Implement interventions
As simple as that!
Here is the process I have developed to identify and resolve factory problems:
Initial wins in the Meanderthal factory
A summary of the urgent actions that scored quick wins:
- Immediately addressed lacklustre leadership – the factory manager had to go
- Reduced complexity in the main assembly line – too numerous to mention here
- Reduced process variability – ditto
- Opened the books to everyone
- Installed 6 workstation “gates” along the main assembly line, each with TV data dashboards (see last page)
In the first 90 days:
- Reduced factory cycle time
- Consequently, reduced costs – including warranty costs and significant overtime costs
- Increased output – by a whopping 30%
- Eliminated major defects – this started to take effect in weeks of implementing the 6 gates
- Customer complaints started to lessen
And most importantly:
- Got managers and employees to start thinking and acting like owners, rather than cogs in a machine.
5 steps for your factory turnaround
Step 1: Evaluate & consider substituting factory management
What we did: We quickly installed new leadership in the factory. The factory manager was clearly struggling. With a new manager on board, we started listening to the guys on the production line. They had many of the answers and were keen to fix things.
Step 2: Remove non-value adding process steps
What we did: We overhauled an inefficient assembly line and eliminated superfluous process steps. We installed process step specifications. We engaged a professional cleaner to help de-clutter all workstations. The guys started to take pride in their workplace and morale got a much-needed shot in the arm.
Step 3: Reduce variability in your processes
What we did: We eliminated the bottleneck of missing parts. Missing outside parts and missing internally built parts were killing throughput. We also limited the amount of unauthorised product customisations by the sales team. Random requests had been hampering the smooth flow in the factory. We stopped micro-management from those outside the factory, which was adding to the confusion on the factory floor. These were the 3 main productivity killers: missing parts, unauthorised design changes and external meddling.
Step 4: Open your books
What we did: We made everyone in the factory aware of how their actions impacted the financials. We listened and coached. Team leaders started to act like owners and not just workers. These were the beginnings of an entrepreneurial mindset. In the past it wasn’t safe to speak up.
Step 5: Make the key data visible
What we did: Because production targets were rarely met, we installed 6 new gates along the production line, each with targets for cost, quality and output. At each of these gates, we installed large TV monitors that displayed live dashboards. These TV dashboards played a major role in the turnaround. For instance, if daily output fell below 3 for each station, the number on the screen turned red. Seeing their production, quality and cost numbers loom large every day, meant productivity, efficiency and quality in the factory soared. In fact, they reached levels never before achieved in Meanderthal’s 50+ years of trading.
A bright future for Meanderthal
From a design and strategy perspective, there is now more to do at Meanderthal to truly compete on the world stage. However, the bleeding has been staunched, and this company is out of survival mode. It now has the space to think clearly about how to again become the best.
Note: I am indebted to James P. Ignizio for his work on the science of manufacturing as published in Optimizing Factory Performance. James flags lacklustre leadership, complexity, and variability as the three main enemies of factory performance – all of which have featured in this story about Meanderthal.