Last month, I proposed that there is much we in the custom electronics industry can learn from our friends in manufacturing. To continue that discussion, we should focus on what turned the manufacturing world on its ear, and allowed unprecedented leaps in productivity and quality.
The concept of flow allowed manufacturers to revolutionize how they created value for their customers. The basic idea is that everything within a company, or within any collaborative effort for that matter, needs to flow smoothly from beginning to end with no pooling of value. Once you begin adding value to raw materials, ideas, or anything else, finish the job without delay. You only add value to get a return, so once you start, dont stop until you are finished. Every time the value creation or addition is halted, delayed, or backs up, your bottom line suffers.
The concept was pioneered in the automobile manufacturing industry, but has pervaded every manufacturing industry on the planet now. The concept developed between the U.S. and Japan from the 1970s through the 1990s. It was slow going for a long time, because the concept seemed to fly against the craftsman mentality. Car manufacturers used to employ very highly paid experts called fitters, whose job it was to craft parts and make them fit perfectly. To most managers, this really seemed to be value-added work until some companies figured out that if the part was designed for manufacture in the first place, and repeatedly fit perfectly as it was initially made, then there was no longer a need for those expensive fitters. And, because these offline fitting operations were no longer needed, supplied parts could flow right into finished production. Eventually, zealous managers learned to identify everything about their operation that did not flow, and eliminate it.
Maximizing the flow of value is at the heart of just-in-time production principles. If we define lead time as, the interval between the declaration of desire for value and the delivery of that value, then shorter lead times always mean better flow.
One of the best examples of lousy flow, albeit somewhat frivolous, is the typical in-box. An important document goes on top of the pile, and is quickly covered by other documents. Once covered, there is nothing that exhibits the urgency of dealing with the important document, so it lingers, and the value that it could create waits unnecessarily. Eventually, the in-box owner might reluctantly paw through the pile because it has accumulated so many obligations. His heart isnt in the process, though, and he may or may not even notice the documents importance at all. Eventually, when its contents become truly critical, the document gets dragged from the in-box in a rush, and it gets dealt with in crisis mode, rather than important mode. And we all know that crisis mode always costs more money.
Our business if full of examples of value that does not flow. Inventory is an easy one to understand. It impedes the flow of money, as it is really just cash sitting on a shelf. Its not actively doing anything, except making frazzled project managers feel good because at least their stuff is here. Inventory will be addressed specifically in the next article, but there are other examples of poor flow in our businesses.
Custom installation projects inherently flow poorly. They have terribly long lead times to begin with. Years can elapse from the declaration of the clients desire to the fulfillment of that desire. At best, it is months. And during that time, value is being added to the project only sporadically and inconsistently. This creates all kinds of terrible, profit-eating opportunities:
There is a year of opportunity for the client to change his mind, and each time he does, you have work to do altering your design. Adding and deleting rooms of distributed audio, allocation of space for racks and cabinetry, or even changing room dcor can all dramatically affect your choices for the system solution.
Equipment and technology changes have rendered your design out of date. You sell SOA (State of the Art), and, of course, you have to deliver it. But the original design is also out of date, and must be substantially re-worked. You probably did not include in your bid the cost of designing the system twice, so now you have to fight to get paid for doing the design again.
If prices have come down, then your original bid now feels too expensive to the client, and you have to negotiate some sort of give-back. This pricing may wind up at what it would have had to be anyway, but you created expensive ill-will along the way. Now, its harder to bid up some other added-value areas that you would have been able to sell if you could have waited until now to do the initial design.
Maybe you had to buy the TVs early because the cabinet makers began building early with impossibly close spacing around them. Then, months later, the TVs are obsolete, and the client no longer wants them. You know the story.
The applicable principle here is just in time. Dont begin any value-creation process before you must. It is wasteful and costly. You might consider an alternative: Dont do final design, for example, until shortly before system build must start. Contract with the client on a budgetary level early on, and nail down the details at the last possible moment. There are many benefits of this, but the biggest is that the design gets done once. If the design gets done, approved, and the project moves immediately into build, there isnt time for much of the bad stuff to happen. The client approves and you run. You finish, you get paid, and you and your client both win.
There are other benefits, too. The design is fresh in your peoples minds, so they can proceed in the most sure-footed manner. You have the opportunity for more one-on-one with your client, because you have a detailed design review in the middle of the project, not just at the beginning. By the time you do the design, you will know far more about the client, the builder, the architect and all the details of the job than you could have possibly known at the beginning of the job, so your design product will be much better. You also didnt invest, at your sole risk, as much designer time before you actually got the job.
This is an example of how just-in-time principles can be applied to the overall flow of a project. It requires that you run your company differently to make it all work, and thats not easy. But its not easy doing it as is, either. You will need to alter your agreements with your clients, but you are doing so to run a much tighter ship. You will need to tie the client in more closely with their project, because you need them to contribute at very specific times during the job.
Here are some other just-in-time ideas:
Mark all of the rough-in locations in the house the day before you send the crew to pull the wire. Certainly, there will be less time for the tags to get pulled down, and the job will be fresh in the mind of the lead technician who walked the job with you and the client. Plus, your knowledge of the clients desires will be absolutely up-to-the-minute, so youll be less likely to have to change locations.
Pull the wire just ahead of the insulators. Im not advocating crossing up with the insulators, but be just ahead of them. No time for changes. Fewer walls get moved once they are insulated.
Send your technician to training just before he needs to use the new knowledge. This is probably obvious to everyone, but its a great example of keeping lead times low for better results. The closer the training and the use of it are, the better the retained knowledge, and therefore, the better the investment.
Of course, you will help your cash flow and your bottom line tremendously when you buy inventory items on a just-in-time basis. Order project inventory at the latest possible date at which you can be sure to receive it in time.
The wisdom of waiting to add value until just the right time has completely altered industries. Think about the car you drive today as compared with the best cars of 20 years ago. It isnt just technological improvements that make todays cars so good. The timeliness with which value flows into todays cars is highly responsible for their quality and reliability. In a just-in-time operation, little problems become very ugly problems, and must get permanently resolved. So, all of the causes of quality defects, for example, must get resolved to survive. Every time an installer leaves for a job without the proper tool, for example, and someone from the office runs it out to him, a major problem just got covered up. As a result, the underlying cause remains in place to bite the bottom line again and again.
Make it ugly! is a mantra of many just-in-time zealots, and for good reason. Manufacturers got serious about it, and so can we. They went after everything that impeded flow, and eliminated problems at the root level to do so. The same concepts are crucial to improving the customers impression of our products and services, too.
The next article in this series, The Evils of Inventory, will address a huge problem with maximizing flow; inventory. The way manufacturers came to look at inventory, and then how they managed it, taught some very difficult lessons that we can use to our benefit, too.
Kendall Robins ([email protected]) has run a range of companies, including an overseas joint venture start-up, an established high-explosives manufacturer and two CEDIA-type firms.