UNIVERSITÀ DEGLI STUDI DI PISA
DIPARTIMENTO DI ECONOMIA E MANAGEMENT
Corso di Laurea Magistrale in
STRATEGIA
MANAGEMENT E CONTROLLO
Tesi di Laurea
CHANGE MANAGEMENT AND LEADERSHIP
The Empirical Case of Solvay Specialty Polymers
Relatore: Prof.ssa Rigolini Alessandra Candidato: Simone Sergio
Preface
Part I. Manufacturing Excellence and Transformation 1
1. Origin and Strategic Management of the Solvay Group 1
1.1 The Reorganization of the Group 5
1.2 The Culture of Solvay and People Management 7
1.3 Solvay Nowadays 8
1.4 GBU Specialty Polymers 9
1.5 The competitive positioning of the GBU 10
2. Manufactunring Excellence: From the Concept to the Application 15
2.1 What Manufacaturing Excellence is 18
2.2 How implement it: Tools and Methodologies: 22
2.2.1 Total Quality Management 23
2.2.2 Kaizen 24
2.2.3 Lean Manufacturing 26
2.2.4 Six Sigma 29
2.2.5 Total Productive Maintenance 32
2.2.6 Just in Time 34
2.3 When implement Manufacturing Excellence 36
3. Transformation: Achieving Manufacturing Excellence in Solvay 39
3.1 Current Change Agent definition 41
3.2 Transformation team members and roles 42
3.3 Prepare 44
3.4 Diagnose 45
3.4.1 Overall Equipment Effectiveness 46
3.4.1.1 Six Big Losses 52
3.4.1.2 Perfect Production 55
3.5 Design 56
3.5.1 Value Stream Mapping 62
3.6 Implementation 65
3.6.1 Tactical Implementation Plan (TIP) 65
3.7 Sustain 68
3.7.1 10k miles check up 73
Part II. Change Management and Leadership in a Change Process 74
4. Change Management 74
4.1 Understanding Change Management 75
4.2 Change Management Activities 78
4.3 Change Management Toolkit 78
4.3.1 Understanding Change 79
4.3.2.3 Developing a Vision and Strategy 96
4.3.2.4 Communicating the Change Vision 100
4.3.2.5 Empowering Employees for Broad-Based Action 103
4.3.2.6 Generating Short-Term Wins 107
4.3.2.7 Consolidating and Producing More Change 112
4.3.2.8 Anchoring New Approaches in the Culture 117
4.4 Communication Change 121
5. Leadership 124
5.1 Change Management or Change Leadership? 125
5.1.1 Why management is necessary but not sufficient 125
5.1.2 The Leadership of Change 126
5.1.3 Dimensions and requirements of leadership 127
5.2 A New Model of Leadership for Change 129
5.3 Leader’s role in the change process 133
5.3.1 Visionary leadership 134
5.3.2 Roles that leaders play 139
5.3.3 Leadership styles and skills 141
5.3.4 Different leadership for different phases 142
5.3.5 The importance of self-knowledge and inner resources 144
6. Conclusion 146
strumenti per poter diventare non solo un Uomo ma soprattutto una Grande Persona.
A tutto il personale del reparto Oncoematologico - Santa Chiara di Pisa, questo traguardo è anche Vostro.
People, this is what i will focus on into my elaborate. Especially the role of people in a process of corporate change.
Too often in economics we tend to focus on everything except the role of people. My belief is that the people are who create the companies and always the people are who feed them, making them grow until they reach extraordinary realities. People of some generation ago did not grow up in an era when fast-transformation was common. With less global competition and a slower-moving business environment, the norm back then was stability. If you had told a typical group of managers in 1960 that business people today, over the course of eighteen to thirty-six months, would be trying to increase productivity by 20 to 50 percent, improve quality by 30 to 100 and so on, they would have laughed at you. The companies dictated the “rules of the game”, with an active position towards the market that, in an opposite way, took what they offered. Companies were focused on efficiency. Nowadays, we live in a world that is running faster and faster, changes are the order of the day and companies have the duty to keep up. A globalized economy is creating both more hazards and more opportunities for everyone, forcing firms to make dramatic improvements no only to compete and prosper but also to merely survive. Globalization, in turn, is being driven by a broad and powerful set of forces associated with technological change, international economic integration, domestic market maturation within the more developed countries, and the collapse of worldwide communism. No one is immune to these forces. With the advent of globalization, again, positions have been reversed; we are talking about customer orientation or customer satisfaction.
Corporate objectives can no longer be simple economic-financial indicators, but must involve and formalize in some way what is not measurable, such as customer satisfaction, which becomes the first aim of a company.
Change, Change and more, Change. Search for new, innovative solutions. The competitors have increased and are many. An Italian company in the province, for example, no longer has to deal with just the neighboring companies, not even with
Nevertheless, people who have been through difficult, painful, and not very successful change efforts, thus, often end up drawing both pessimistic and angry conclusions. Available evidence shows that most public and private organizations can be significantly improved, at an acceptable cost, but that they often make terrible mistakes when they try it because history has simply not prepared them for transformational challenges.
Consequently, they are showing up new disciplines such as Change management and Leadership that go to the rescue of companies to better manage change, especially working on managing people because despite new technologies, robots, etc., they are still people who make the difference and for doing so they need the right conditions to express themselves in the best possible way.
To keep up with this kind of market, and therefore with the competition, we need to constantly change, but above all, being ready to do so. It is the main challenge of today. The propensity for change, in particular, of people.
The competitiveness is only one of the consequences of a globalized environment and it is going to be the main background-topic which this thesis will treat, especially regarding the manufacturing sector.
Technology and People are the two pillars for achieving a real and sustainable competitive advantage in a hyper-dynamic environment and beyond each activity must be present Change Management and Leadership.
In conclusion, through explaining what change management and leadership are and for what and when they should be used, want to describe how a firm can create and sustain a competitive advantage, specifically speaking about Solvay Specialty Polymers.
Part I. Manufacturing Excellence and Transformation
1. Origin and Strategic Management of the Solvay Group
Solvay is a multi-specialty chemical company, committed to developing chemistry that addresses key societal challenges. Solvay innovates and partners with customers in diverse global end markets. Its products and solutions are used in planes, cars, smart and medical devices, batteries, in mineral and oil extraction, among many other applications promoting sustainability. Its lightweighting materials enhance cleaner mobility, its formulations optimize the use of resources and its performance chemicals improve air and water quality.
Solvay is headquartered in Brussels with around 27,000 employees in 58 countries. Net sales were € 10.9 billion in 2016, with 90% from activities where Solvay ranks among the world’s top three leaders.
Employees by zone Net Sales by zone
The group was founded in 1863 by two brothers. The strategy followed in the years immediately following the constitution, according to Ing.Martinelli, now Industrial Director of the Global Business Unit (GBU), Specialty Polymers, was to "create at least one factory in each developing country, as soda was a raw material used in many productions (for domestic, medical and industrial uses) necessary to support the development of society and the states considered the Solvay plants to be real strategic assets.”
The parent company, called Solvay SA, is a public limited company incorporated under Belgian law and listed on the Euronext markets in Brussels and Paris. The main shareholder of Solvay SA is Solvac SA, which holds the 30.15 percent of the capital and voting rights. About 80% of the capital Solvac SA, also listed on Euronext Brussels, is held by around 4000 descendants of the Solvay founders. The descendants of Ernst Solvay progressively abandoned executive roles while maintaining supervisory and control roles on the work of external management. Until a decade ago, the CEO was a member of the family; subsequently this role was assumed by external managers, but "born" in the Group and very close to the family. Finally, in May 2012, CEO Jean-Pierre Camadieu, formerly CEO of Rhodia, was appointed as Solvay had just acquired.
The company policy provides, with a written rule and that has always been respected, that the company distributes an annual dividend for shares not lower than the previous year. "This policy obliges management to be extremely prudent and cautious in its management," notes Martinelli. The expectation of ever-increasing dividends depends on the fact that many shareholders belonging to the Solvay family derive a large part of their income.
"The objective of dividend growth from one year to the next does not lead to short-sighted and short-term management logic", points out Augusto di Donfrancesco, head of the GBU Specialty Polymers.
Since 1969, the year of the listing, the Solvay Group has never asked its shareholders to subscribe capital increases, using only self-financing as a way to increase the capital endowment. Another company policy provides that annual debt can never exceed a pre-set limit. "This additional constraint, which is always referred to in the documents distributed to financial analysts, requires management to be extremely selective in investment decisions", Martinelli observes.
The governance model is of a dual nature: shareholders are represented on a board composed of 15 members, in which three members of the Solvay family sit. There are 13 non-executive directors, nine of which qualify as independent under Belgian law. The two executives are the CEO and an administrator who, at the time of the appointment, was also part of the Executive Committee and worked full-time in the Group. President, since May 2012, is Nicolas Boël, 52-year-old descendant of Ernst Solvay, who joined the board for the first time in 1998.
In 2005 Solvay acquired Fournier Pharma, a French family-owned pharmaceutical group (similar to Solvay Pharmaceuticals), with an operation aimed at "increasing the turnover of Solvay Pharmaceuitcals by more than a third and the profitability of the Solvay Group, with an important and significant increase in performance through the development of the pipelines and the synergies generated".
At the time, management stated that "Solvay's strategy is focused on profitable growth in the pharmaceutical, chemical and plastic sectors. The acquisition of Fournier Pharma will be an excellent opportunity to accelerate the growth and profitability of the pharmaceutical business from which we await important results when the combined potential of the research and development pipelines will begin to deliver its results ".
In 2008, however, management realized that the size achieved, even after the acquisition of Fournier, was not sufficient to support an adequate research and development activity. Despite the high profitability, management had gained the conviction that Solvay had not reached the critical mass and that within a few years
the risk of not having promising products and appealing products for the market would be very high, so decided to surrender.
The sale, which took place in 2009, led to the exit from the Group of 10,000 employees and a third of consolidated turnover, which fell to around seven billion. the sale of the pharmaceutical, however, has brought about 5.4 billion into the coffers of Solvay, which were immediately reinvested in "sustainable chemistry".
After this first "steering" with the sale of the pharmaceutical business, between 2009 and 2011 the impact of the well-known global crisis has made Solvay aware that the general structure, without the support of a profitable pharmaceutical business, would not have been sustainable. The pharmaceutical company, in fact, with its profits also helped to support a part of the services for the chemistry and plastics business.
The sale of the pharmaceutical and the advent of the crisis were considered by the management as an opportunity to restructure the Group on the principle that every business had to support itself. In Martinelli's opinion "there was a long time the awareness that we had to stop for 'extraordinary maintenance' of the strategy, as Solvay is used to doing every ten years, based on a need that gradually matures during the previous decade".
In 2009, therefore, with the support of McKinsey, it was decided to start the Horizon project with the aim of designing how the company wants to be in the next 25-30 years. The management, on the threshold of the 150th anniversary (in 2013) from its foundation, began to wonder how it would have liked the Group to be on its 175th anniversary.
Martinelli says "the Horizon project was a fundamental input of the reorganization, as it allowed us to extract the strengths and weaknesses of the Group in a benchmarking compared to competitors, not only in economic-financial terms, but also on how to manage, on values, on the ability to innovate, on management ".
Meanwhile, negotiations had begun for some time, in parallel and in secret, for the acquisition of the French chemical group "Rhodia", which would have allowed Solvay to reinvest a large part of the liquidity deriving from the sale of the pharmaceutical business.
1.1 The Reorganization of the Group
The first, fundamental decision that emerged from the Horizon project was that of reorganizing the Group, identifying, at a first level, the businesses (Chemistry and Plastic), then distinguishing, for each business, between essentials and specialties and, finally, the Global Business Unit (GBU) and Regional Business Unit (RBU). Therefore, in the context of both plastics and chemistry, global specialties and regional essentials have been identified.
Consequently, the headquarter in Brussels was reorganized and resized, where approximately 1,700 people worked, locating the headquarter of each business close to their respective customers and their respective markets. For over ten years the organizational structure of the Group, characterized by continental or world business units that all referred to Brussels, has allowed us to achieve advantages in terms of alignment of processes and standardization of the reporting and management systems of the client and market.
With the new structure the standardization of processes is saved, but the distance from the customer and from the market is corrected, which, among other things, demotivated and worsened the quality of management in the suburbs.
This reorganization of the Group is also functional to the goal of developing managerial careers and research and development in high-potential markets, even in emerging countries: "If Solvay wants to be sustainable it must compete on high-tech products and develop reliable processes: this presupposes the ability to "win the war of talents", underlines Martinelli, identifying and recruiting talents from different cultures all over the world. We are convinced that diversity brings value to the Group ".
Therefore, the localization of know-how was a fundamental criterion adopted to decide where to locate the headquarter of the different business units: the GBU Special Chemical headquarters was located in Seoul in South Korea while the GBU Specialty Polymers in Bollate, near Milan. The production of PVC (an essential) takes place in some Regional Business Units (one in Brussels, one in Bangkok, one in Buenos Aires). The RBU Essential Chemicals headquarters were located in Paris, Houston in the United States, Sao Paulo in Brazil and Shanghai in China.
The second milestone in the realization of the strategic design of the Group was the acquisition, through a public tender offer that was successfully completed in September 2011, of the French group Rhodia, an operation aimed at creating a major player in world chemistry, a global group engaged in "sustainable chemistry".
The Rhodia group at the time of the acquisition gave work to 13,600 employees and was a world leader in the development and production of chemical specialties, offering high-tech products and high performance solutions to different markets: automotive, electronics, cosmetics, health, personal care and of the house, consumer goods and industrial goods. Rhodia worked in both the chemistry and the plastics business.
As a result of this acquisition, the Solvay Group is among the top 10 major global chemical players with 110 industrial sites and, as mentioned at the outset, a presence in 58 countries, 27,000 employees and a consolidated turnover of 12.4 billion euro, made up of 40 percent in emerging markets, with highly complementary businesses.
90% of consolidated turnover comes from businesses in which the Group is one of the top three global players in terms of market share. Solvay, in fact, is a world leader in the production of high performance specialty polymers, soda and
hydrogen peroxide, while Rhodia was a leader in the production of specialty materials, products for the consumer market and engineering plastics based on polymide. "Solvay has decided to stay in a business only if it is among the top three players in the world. Leadership is a key element of our competitiveness "concludes Martinelli.
1.2 The Culture of Solvay and People Management
All these strategic and organizational changes implemented by the Solvay Group over the last 10-15 years have been accompanied by a partial revision of the value system.
Gabriella Zafferi, Innovation and Sustainability Officer of Solvay Italia, illustrates this process: "Starting from 2001 Solvay has also refocused values. Once upon a time there was what used to call the esprit Solvay: a very strong business culture with strong affiliation mechanisms; Solvay took his collaborators from school desks and took them to retirement. Solvay has always been socially responsible even when it was not yet called that. Until the second post-war period, the houses were built for employees all the same in all the countries where the company was present. Tradition has then given way to innovation and customer orientation, which according to Zafferi, was not in the original spirit of soda, but that had now become part of the company's DNA. From the past, however, there has been a tendency to care for and to affiliate people, but in a less paternalistic way".
"Even today there are many value elements that put people and staff at the center and this explains the very low turnover: people feel part of an important community. There are still real benefits for Solvay employees, such as prevention programs and an internal mortgage with major reimbursements for medical expenses and surgery. And above all what is not denied to anyone: respect for the person and for the ideas of the person. This also plays in the day by day: in the discussions of work the technical arguments are respected, which are made to prevail over the "political" ones, even if they are carried by younger collaborators.
In Solvay particular attention is paid to meritocracy and this applies to everyone” Martinelli says.
1.3 Solvay Nowadays
In 2016, Solvay passed a new milestone in its transformation into a more resilient, more sustainable, and more innovative multi-specialty Group with high added value.
“We finalized the divestment of our chlorovinyls activities, initiated in 2013, with withdrawals from Indupa in Latin America and from Vinythai in South- East Asia. We also entered into an agreement to sell the acetate tow production activities of Acetow. On each occasion, we were committed to divesting under the best possible conditions, and in particular to safeguarding the future of the operations we were selling.
Furthermore, in 2016 we completed the integration of the Cytec activities in record time, generating a far higher level of synergies than we anticipated. Consequently, the Group is now among the world’s leading suppliers of advanced materials to the aerospace industry” Nicolas Boël says.
“The metamorphosis - carry on Boël - of our client portfolio illustrates the magnitude of our transformation. Ten years ago, our major clients were big glass manufacturers. Today, we continue to lead in our traditional fields of activity, something of which we are extremely proud. But our current top clients are the giants of the aerospace industry or of the world of smart devices, for whom we are a strategic partner in the development of the innovative solutions that are essential for the success of their flagship projects”
Thanks to the transformation of the portfolio and to the investments in personnel that the Group has made in recent years, 2018 should be a year of growth, especially in terms of volume growth in their Advanced Materials and Advanced Formulations segments.
We are operating in an uncertain geopolitical climate. But the diversity of their fields of activity, their positions of leadership in innovative activities, their well-balanced global presence, and their uninterrupted efforts in the pursuit of excellence are the guarantees of the continuity of the Group and of its growth model. “It is with confidence that we are advancing towards our target of building a solid and innovative Group that is capable of creating value for its shareholders and for every one of its stakeholders” Jean Pierre Clamadieu asserts.
Underlying EBITDA Underlying Profit Attributable Free Cash Flow
(in € million)
1.4 GBU Specialty Polymers
GBU Solvay Specialty Polymers was created following the reorganization of the Group. For this GBU was chosen as headquarter Bollate, in the province of Milan, and as responsible for an Italian Manager, L'ing. Augusto di Donfrancesco.
The reasons for these choices lie, first of all, in the extreme importance that research and innovation have for the GBU. In fact, in the laboratories of Bollate, 250 highly specialized researchers work, out of the approximately 550 total that the GBU employs in 11 research centers, located, as well as in Bollate, in other European countries, in the United States and in Asia.
This was primarily a political choice, aimed at highlighting how innovation drives the business of the Specialty Polymers. Secondly, Bollate is in a geographically central position with respect to all 15 production sites and 11 GBU research and development centers, particularly in relation to the United States and Asia:
essentially, in fact, Bollate is equidistant with respect to the United States and to China (+6 hours compared to Atlanta and -6 hours compared to Shanghai). In addition, Bollate is easily connected to the international airport of Malpensa. Finally, the origin of Bollate's choice is that Solvay still believes in the excellence of the Italian university, even if it is often necessary to follow the brightest professors abroad. In fact, the company continuously develops research projects together with Italian university laboratories and research centers. For example, Solvay has been financing a professorship at the Polytechnic of Milan in Chemistry of Fluorine for years. Thanks to this collaboration it has a privileged observatory for the recruitment of young chemical talents. The collaborations, aimed at creating new products and applications, are launched after the conclusion of paid research contracts that disregard the results obtained. For example, an agreement was reached with South Korean researchers that they can exploit the research results on a non-exclusive basis in Korea, while Solvay has the right to use them as well as in Korea, exclusively throughout the rest of the world.
The GBU of Bollate thus, employs a total of about 3000 people worldwide (50% of which in Europe and a third in America) and is divided into 24 locations including factories, research centers and administrative and sales units spread across four continents.
Also from there, with around € 1.34 billion in 2012 accounting for around 11% of the Group's global turnover, the activities of all the global offices are coordinated. The GBU produces over 1500 products, developed thanks to over 40 proprietary technologies, to serve more than 4000 customers worldwide.
1.5 The Competitive Positioning of the GBU
The GBU Specialty Polymers was born from a strategic vision elaborated about ten years ago that was realized with the creation, through acquisitions and internal developments, of a unique product portfolio in the sector.
Ten years ago Solvay could count on two molecules developed around the 70s. Then it made a series of acquisitions, after which four pre-existing companies, Solvay Solexis, Solvay Padanaplast, Solvay Advanced Polymers and Solvin PVDC, have been integrated with the aim of creating a single world-leading company in the field of Special Polymers.
Indeed, the GBU holds the leadership in the top of the "plastic pyramid". At the base there are commodities, measured and sold in millions of tons, with pieces and low margins and with "essential" performances. As you climb towards the top of the pyramid you will find first the high performance polymers and finally the huge performance polymers. While commodity volumes are measured in millions of tons, in the case of high-performance polymers, quantities are often niche, so we are talking about kilograms. Prices vary accordingly: from one euro to the kilo at the base of the pyramid, to 30 thousand euro per kilo at the top. Even the performance of the materials at the top of the pyramid are much higher: some polymers, for example, have the merit of combining high performance with a very low weight, properties, the latter, particularly appreciated in some productions.
The acquisitions of the companies have allowed Solvay to have all four basic technologies of the plastic pyramid and in this they are the only ones in the world, being able to offer customers as many as 35 polymers. These four technologies make the company a leader. In fact, while the most significant competitors are focused only on some types of aromatic or fluoropolymer products and on one or two technologies, Solvay is able to customize the product for its customers. They are not interested in being the first in the world for sales of a certain polymer or a certain product but they are interested in having it in their portfolio.
In a business like that, managing complexity is the real competitive advantage. When they feel that competitors have increased their production capacity, it does not tange them because they still remain the best solution providers in the sense
that they know how to perceive customers' needs and develop them better and better than others.
Among the many solutions that Solvay has developed in the face of specific problems and challenges for its customers, there are those able to increase the duration and to miniaturize the batteries; to improve the bio-compatibility of implanted devices in the human body; to increase safety and at the same time the amount of stored energy produced from renewable sources.
The world leadership in special polymers is not a point of arrival for the GBU: the objectives, the strategy to achieve them, the assumptions and the assumptions underlying them are subject to redefinitions and periodic reviews.
As is the case at the group level, the roadmaps are defined for the GBU specialty polymers; this is the strategic target position desired at five years and, logically, for each roadmap is defined its own implementation strategy.
It is precisely in support of this implementation strategy that one of the main topics we will discuss in this paper, specifically in the next two chapters, as well as the Manufacturing Excellence program. This program precisely supports the GBU's to succeed with their respective roadmap in compliance with the Solvay Group Strategy policy by:
• Supporting Continuous Operational improvement and especially Manufacturing (production, maintenance, quality, site logistics, ...) with focus on
o Fixed costs Improvement o Variable costs Improvement o OEE Improvement
o Quality Improvement
• Developing methods, knowledge base and innovative toolkits (incl. Lean 6 Sigma and performance tools) supporting the processes leading to Manufacturing Excellence, and gives supports for deployment in GBU’s • Networking and Communication in order to maximize Practice Sharing in all
domains related to Manufacturing
• Implementing a continuous improvement and relentless excellence culture in the Manufacturing sites in line with Group People and Management models.
As it has been said into the last chapter, Major global economic and social trends such as demographic shifts, evolving consumer behavior, faster innovation and resource scarcity are redefining the way people interact, communicate, move around, and shop Chemistry plays a key role in meeting these challenges that our world faces.
Standing side-by-side with its customers to better understand their needs, Solvay helps them innovate and turn their challenges into market opportunities through sustainable and value-added solutions.
In this challenging environment, consolidation is accelerating within each segment of the chemical industry. The main players are reshaping their portfolios, reallocating resources towards a more coherent portfolio of assets. Solvay is committed to adapt to this new equation to capture future growth through anticipation, innovation and agility.
In 2016, Solvay’s results once again showed solid growth. To a considerable extent, our strong performance was due to our operational excellence programs, to the rapid realization of synergies from our acquisitions, and to a sustained price dynamic. This has allowed us to strengthen our financial solidity and to involve our shareholders in our strong performance through a continuing increase in our dividend, in response to the confidence they showed us by subscribing to a historic rights issue.
2. Manufacturing Excellence: From the Concept to the Application
The dictionary defines Competitiveness as “striving for superiority”. For being superior you need, at least, one reference. It’s a comparing issue towards someone. According to Porter, competitive advantage is at heart of a firm’s performance in competitive markets. After several decades of vigorous expansion and prosperity, however, many firms lost sight of competitive advantage in their scramble for growth and pursuit of diversification1.
Today the importance of competitive advantage could hardly be greater. Firms throughout the world face slower growth as well as domestic and global competitors that are no longer acting as if the expanding pie were big enough for all. Again, Porter says “competitive advantage si about how a firm actually puts the generic strategies into practice. How a firm gain a sustainable cost advantage, how it differentiate itself from competitors how a firm choose a segment so that competitive advantage grows out of a focus strategy and so on”.
Specifically talking about manufacturing companies, for understanding how to win the competitiveness, they need to be aware about which are the traditional factors that mark it out:
• Quality
• Delivery Performance • Cost
• Service
• Waste Elimination
Then, the companies should be focus on improving these points above. The solution is named: Manufacturing Excellence (ME).
For better understanding what Manufacturing Excellence is, it is important to list what are the main mistakes committed by Manufacturing companies, even without being aware about them:
1 Michael E.Porter, Competitive advantage: creating and sustaining superior performance, The free press
1. End of the companies: Often, Companies based their strategy on their own situation at that moment. It means that if the company is going well, they think their future is secure without any change. The suggest is ”never lay down” because it would mean doesn’t be focus on what’s going on around and, probably, losing opportunities, market share and so on.
2. Capital Productivity: it means understanding how much money, actually, they can get back from the amount of capital they invested in the company. The right question would be if investing in the company is affordable or not. It could look like an expect question but most of the time companies don’t really put attention on that. They only concentrate themselves on labor productivity and, in my opinion, it’s an unsophisticated view of the problem because there are other many side you should care about and which are at the same grade of importance.
3. Hidden plant: The majority of companies nowadays are suffering by this without even knowing about it or just ignoring it is an accumulative long term burden on the business. The hidden plant is simply the “noise in the background”, the effort and time wasting which, over the long run, will cost the company money doing things in the wrong way or not knowing how to do things correctly. For employees could be the heart of the problem in modern day business (it is not necessarily about producing an actual physical product).
4. Change: As Charles Darwin said “It's not the strongest that survive nor the most intelligent, but the ones most responsive to change”. This is a universal truth. It’s not necessary justifying bad results putting the finger on “external factors” like economic crisis, for instance. Every problem has its solution.
For example, If the demand of a company is falling down, they have to recognize the problem first and then ask to themselves “what can i change?”. Change means innovate. And if the companies are not open to innovation they are going to fail miserably.
5. Sense of ownership: Nowadays, unfortunately, the main trend is considering employees like merely numbers. It leads your employees to work in a not exciting environment. The consequence is that they will start to be careless in what they’re doing and it means, for the company, lose efficiency, waste time, raising cost and thus, probably reaching an hypothetical situation like the one said above, about hidden plant.
Manufacturing excellence can handles this phenomenon. If employees treat assets with the same care as they do their cars or homes better results will come. In only one word: empowerment.
6. Way of working: Most of the time, as we already said, the problems come from not outside, but inside our company. It could happen when the system of the company is not perfectly designed. For example, the assets allocation could be better to permit the process proceeding without interruption, essentially, without wasting time.
7. Silo Mentality: It is a mindset present when certain departments or sectors do not wish to share information with others in the same company. This type of mentality will reduce efficiency in the overall operation, reduce morale, and may contribute to the demise of a productive company culture. Silo is a business term that has been passed around and discussed at many board room tables over the last 30 years. Unlike many other trendy management terms this is one issue that has not disappeared over the years. Departmental silos are seen as a growing pain for most organizations of all sizes. It is the duty of the executive leaders and management to prepare and
equip their teams with the proper mindset to break down this destructive organizational barrier.
8. Knowledge based industry: The common belief in manufacturing sector is “cheaper labor, more profit”. This was the main reason why companies, years ago, moved all the factories to developing country where the labor cost was really low. It means less cost for the same quantity so, more profit. But it’s not always true due to the world changing. The problems for the companies are changing as well.
In a dynamic market, the companies need more than just “two arms” therefore, how we will see in the next chapters, the new prospective requests that even the workman has to be aware on what he’s doing; even him, have an important responsibility into the process.
2.1 What Manufacturing Excellence is
Manufacturing Excellence is the vision of “perfection” that guides an organization’s leadership in relentless drive to improve the core value creation process flow, from raw materials to finished product2.
Any measure of Manufacturing Excellence should consider these parameters in reaction to the factors displayed above:
• Quality or yield • Uptime of process • Speed of process • Delivery to customers • Complaints from customers
The journey to Manufacturing Excellence is not easy. It takes commitment to a vision of excellence and a persistent effort over time. But the results are well worth the investment.
Overall, the effort must embrace three main “pillars”, according to Solvay Specialty Polymers:
• Technical System
• Performance Management • Mindset e Behavior
Technical System: The formal structures, processes and systems through which the operating system is managed to deliver the business objectives. It concerns production operations like overall equipment effectiveness (OEE), activity value added analysis, standard operating procedures review. Maintenance operations, it means planning and scheduling process review, equipment criticality and strategy review, wrench-time analysis, gate-keeping evaluation.
Performance Management: The way physical assets and resources are configured and optimized to create a value and minimize losses. It concerns of evaluation of performance management process/system and review of continuous improvement infrastructure performance.
Mindset e Behavior: The way people think, feel and conduct themselves in the workplace. It consists in assessment of driving towards continuous improvement, role modelling, aspirations setting and skill-building processes.
Therefore, Manufacturing Excellence seeks to build a foundation of organization capability and manufacturing discipline that can respond to the challenge of excellence. Deployment of technical knowledge, problem solving and decision making competence, and performance system design are three human levers that augment organization capability.
When the Technical System and Human Capability levels are pulled in tandem, the result is a culture of high performance involvement, with “all minds on board” and engaged in making ongoing improvement a way of life.
High performance involvement rests on the premise that every employee’s contribution is vitally important. The organization simply cannot achieve excellence without everyone contributing their knowledge and experience to resolving current problems, reducing variation wherever it exists, and anticipating and eliminating future problems. This is not empowerment for its own sake, but involvement directed at improving quality, cost, and customer satisfaction. If an organization has to achieve Manufacturing Excellence, the people involved almost inevitably need enhanced technical, job related knowledge and skills. They also need critical thinking skills to form a common language for initiating and implementing change. And, they need to work in an empowering environment with unambiguous performance expectations and goals, clear feedback, recognition and rewards for taking steps to make excellence a reality.
Summarizing, the most important drivers over which an organization should focus their own efforts are:
• Technical Knowledge • Critical Thinking Skills • Empowering Environment
Technical Knowledge: The first driver of organization capability is the deployment of technical job knowledge at all levels of the organization. To quickly evaluate the organization’s capability, the companies should ask themselves: “Do our
effects on product quality? Do design engineers know enough about tolerance design to design robust products? And so on.
I can assert that “knowledge” is a prerequisite to empowerment but, too often, responsibility is assigned without seeing to it that its new owners have the knowledge and experience to be successful.
Critical Thinking Skills: The second factor in building organization capability is the development of critical thinking skills. It becomes the “vocabulary” of empowerment, as all levels and functions begin to speak a common language. These thinking skills also equip people with a “What could go wrong?” proactive mindset that is essential to improving manufacturing effectiveness. Manufacturing excellence cannot be achieved from a reactive stance by only responding to problems after they have occurred.
Empowering Environment: The final human ingredient for effective change is leadership’s conscious intervention in the organization’s human performance system. Basically a set of signals, feedback, rewards, and sanctions that drive organizational behavior at any given moment. It is not enough to merely announce a goal of organizational excellence, empowerment, or six sigma. Leaders must be clear about how the goal translates into specific behavior. We will see better this argument in the fourth chapter.
In conclusion, the sum of all these factors is called “Human Performance System (HPS)”.
Designing HPS is not a widespread management skill, unfortunately. Some leaders intuitively do the right things to evoke change, but still lack a means of consistently creating desired levels of performance long-term in their organizations.
Only when an organization puts human capability first do its people respond by putting the organization first and dedicating themselves to achieving excellence.
2.2 How to implement Manufacturing Excellence: Tools and Methodologies
Trying to reach the “Excellence”, five general improvement approaches are in widespread used today by manufacturing companies:
• Total quality management (TQM) • Lean manufacturing
• Six sigma • Just in Time • Kaizen
• Total productivity maintenance
The primary objective of any improvement program is to raise the level of capability of the manufacturing levers so that higher levels of the manufacturing outputs can be provided.
In most companies, improvement programs started as quality improvement programs for three reasons:
1. In the 1970s, the quality of Japanese products exceeded that of North American products in many industries, so it was natural to focus manufacturing improvement efforts on raising the level of quality;
2. Not only were there many well-known techniques for identifying and solving the problems that caused poor quality, the techniques were organized into many effective quality programs;
3. Perhaps most important, experiences with the quality programs showed that improvement efforts focused on raising the level of quality also produced improvements in cost and delivery.
More recent improvement approaches have moved beyond quality to consider other manufacturing outputs, such as delivery time and flexibility, combination of outputs etc. let’s consider first the quality factor.
2.2.1 Total Quality Management (TQM)
Quality has been considered as one of the critical factors of competitiveness for manufacturers.
In the world of manufacturing, quality has been defined in characteristics of form, fit and function, product reliability and consistency. This is probably the traditional narrow view of quality that people refer to in the context of factory production. In the concept of Total Quality Management3, the definition of quality is beginning to take on a wider and more comprehensive meaning: “Quality is customer satisfaction”. A product is the output of a process and includes goods and services. Customer satisfaction is achieved thorough providing market qualifying and order winning levels of the manufacturing and non-manufacturing outputs.
TQM must be addressed to the entire company, not only the folks in the factory but sales, accounting, marketing, computer systems, human resources, purchasing, production control, engineering, top management, our suppliers and, yes, even customers. No one can be left out. This the meaning of the word TOTAL in TQM. The process must begin with understanding the customer requirements, not just the characteristics of the product they wish to buy, but how they would like to do business with the company. For example, how they would like the product packaged and delivered.
Nevertheless, it’s not only a customer business. There are also suppliers to consider. Without TQM, suppliers were chosen primarily on the basis of lowest cost, not quality or delivery, and the more suppliers the better, so the companies could play one off against the other. In contrast, a key principle of TQM is that suppliers must be embraced as long-term partners who provide excellent standards in cost, quality and delivery and who are prepared to link their destiny with that of their customer. they are usually selected on their ability to provide a full range of products and services that must meet the customer requirements in a certified
mode. This means that supplier can deliver components directly to the customer’s assembly line without the need for checking the count or inspecting the quality4. When, all of this, is implemented in large companies, it involves numerous people and processes and huge quantities of information. Well-planned quality systems are needed. Three such systems are Florida Power and Light’s TQM system, ISO 9000 and the quality system of the Malcom Baldrige National Quality Award. The last two are examples of well-known, effective, and non-proprietary quality systems.
In most industries, ISO 9000 is the minimum or market qualifying level of quality. Twenty areas make up the ISO 9001 quality system, which is the most complete system in the standard. Companies with industry average and higher levels of capability will already have up-to-date documentation and efficient record keeping systems. The major benefit of seeking ISO 9000 certification is not the certification itself, but the improvements made in the 20 areas. They increase the level of manufacturing capability, which results in higher levels of all manufacturing outputs.
In the end, continuously improving your systems to approach zero defects should be considered a never-ending journey, not a destination. This is the essence of Total Quality Management: understanding customer requirements, supplier partnerships, quality at the source and complete participation by the entire organization in an unending quest for perfection.
2.2.2 Kaizen
The concept of kaizen, or continuous improvement, has long been touted as the ultimate wayforward in quality. Whether running a factory pumping out bicycle parts or a top-level consultancy firm advising clients on mergers, kaizen will help to ensure top product quality, and an ever-improving organization. Despite its qualities, leaders are often perplexed by what it really is. In essence, it encourages sincere pro-activism in order to stop small problems from building up
and eventually crushing teams like a land slide. To follow kaizen is like walking up a heaven-like Stairway to Perfection: each step taken is one step closer to higher quality goods and services, reduced costs and satisfied customers.
Kaizen means continuous, incremental improvements. It is a hands-on approach that incorporates a few dramatic improvements every few months. A simple implementation consists of following four steps.
1. Organize: Every three or four months, management organizes three to six kaizen teams of eight to ten members each. New teams are formed for each session, with team members coming from all parts of the organization. Areas where improvements can be made (called “kaizen points”) are identified. Specific goals are set for each kaizen point. There are few restrictions on the changes the team is permitted to make. It can eliminate operators, reduce inventories, move equipment, compress layouts, modify tooling and so on. Kaizen sessions last 2 or 3 days max.
2. Learn: each session starts with a half day for learning and developing action plans.
3. Hit the floor running: after the half day of learning, the team is dispatched to plant floor. Accurate observations and records are mandatory. Layout are changed, procedures are revised, tooling is changed, operators are moved, and documentation is prepared. Every two or three hours, the team reassembles to review progress and the returns to the floor.
4. Boast: Each kaizen session ends with team presentations.
Like many quality management tools, kaizen is not a quick fix for the woes of a company. Because it focuses on gradual improvement, fully quantifiable improvements may not be significant in the short term, but the positive effects will slowly, but steadily snowball into long term profits, quality and other non-monetary benefits, such as associate retention.
In the end, kaizen is part action plan and part philosophy. As an action plan, Kaizen is about organizing events focused on improving specific areas within the company. As a philosophy, it is about building a culture where all employees are
actively engaged in suggesting and implementing improvements to the company. In truly lean companies it becomes a natural way of thinking for both managers and plant floor employees.
2.2.3 Lean Manufacturing
Lean is a systematic method for waste minimization within a manufacturing system without sacrificing productivity. It also takes into account waste created through overburden and waste created through unevenness in work load. Working from the perspective of the client who consumes a product or service, ”value” is any action or process that a customer would be willing to pay for5. This management philosophy is derived mostly from the Toyota production system6. Although the elimination of waste may seem like a simple and clear subject, it’s noticeable that waste is often very conservatively identified. The elimination of waste is the goal of lean, and Toyota defined three broad types of waste: muda, muri and mura.
The flow based approach aims to achieve JIT (just in time), by removing the variation caused by work scheduling and thereby provide a driver, rationale or target and priorities for implementation, using a variety of techniques. The effort to achieve JIT exposes many quality problems that are hidden by buffer stocks; by forcing smooth flow of only value-adding steps, these problems become visible and must be dealt explicitly.
Muri is all the unreasonable work that management imposes on workers and machines because of poor organization, such as carrying heavy weights, moving things around, dangerous tasks, even working significantly faster than usual. It’s pushing a person or a machine beyond its natural limits. It focuses on the preparation and planning of the process, or what work can be avoided proactively by design.
Mura focuses on how the work design is implemented and the elimination of fluctuation at the scheduling or operations level, such as quality and volume. Muda is then discovered after the process is in place and is dealt with reactively. It is seen through variation in output. It is the role of management to examine the muda, in the processes and eliminate the deeper causes by considering the connections to the muri and mura of the system. the muda and mura inconsistencies must be fed back to the muri, or planning, stage for the next project.
The original seven mudas are:
1. Transport (moving products that are not actually required to perform the processing)
2. Inventory (all components, work in process, and finished product not being processed)
3. Motion (people or equipment moving or walking or walking more than is required to perform the processing)
4. Waiting (waiting for the next production step, interruptions of production during shift change)
5. Overproduction (production ahead of demand)
6. Over Processing (resulting from poor tool or product design creating activity)
7. Defects (the effort involved in inspecting for and fixing defects)
At a later time, many others have added the waste of “unused human talent” or “space” and so on.
The identification of non-value-adding work, as distinct from wasted work, is critical to identifying the assumptions behind the current work process and to challenging them in due course.
Nevertheless, the discipline required to implement lean are so often counter-cultural that they have made successful implementation of lean a major challenge. This has been a key problem within the manufacturing sector where “lean” is more than just reducing operational and industrial costs.
The role of the leaders within the organization is the fundamental element of sustaining the process of lean thinking.
Continuous improvement breaks down into three basic principles:
1. Challenge: having a long term vision of the challenges one needs to face to realize one’s ambition (what we need to learn rather than what we want to do and then having the spirit to face challenge). To do so, we have to challenge ourselves every day to see if we are achieving our goals.
2. Kaizen: good enough never is, no process can ever be thought perfect, so operations must be improved continuously.
3. Genchi Genbutsu: going to the source to see the facts for one self and make the right decision, create consensus, and make sure goals are attained at the best possible speed.
Respect for the people is less known outside of Toyota, and essentially involves two defining principles:
1. Respect: taking every stakeholders’ problems seriously and making every effort to build mutual trust.
2. Teamwork: this is about developing individuals through team problem-solving. The idea is to develop and engage people through their contribution to team performance.
Lean principles have been successfully applied to various sectors and services. For example, call center services use these principles to improve live agent call handling. By combining agent-assisted automation and lean’s waste reduction practices, a company reduced handle time, reduced between agent variability, reduced accent barriers, and attained near perfect process adherence.
Lean principles also have applications to software development and maintenance as well as other sectors of information technology. More generally, the use of lean in information technology has become known as Lean IT.
In conclusion, summarizing, the commonly goals of Lean are: • Improve quality
• Eliminate waste
• Reduce time • Reduce total costs
And the main steps to follow for implementing the ideal lean manufacturing system are:
1. Design a simple manufacturing system
2. Recognize that there is always room for improvement 3. Continuously improve the lean manufacturing system
2.2.4 Six Sigma
Six sigma is a set of techniques and tools for process improvement. It was introduced by engineers Bill Smith & Mikel J Harry while working at Motorola in 1986.
It seeks to improve the quality of the output of a process by identifying and removing the causes of defects and minimizing variability in manufacturing and business processes. It uses a set of quality management methods and statistical methods and creates a special infrastructure of people within the organization who are experts in these methods.
Each Six Sigma project carried out within an organization follows a defined sequence of steps and has specific value targets, for instance: reduce process cycle time, reduce pollution, reduce costs, increase customer satisfaction, and increase profits.
The term “Six Sigma” originated from terminology associated with statistical modeling of manufacturing processes. The maturity of manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products its creates.
The doctrine asserts:
• Continuous efforts to achieve stable and predictable process results (by reducing process variation) are of vital importance to business success.
• Manufacturing and business processes have characteristics that can be defined, measured, analyzed, improved, and controlled.
• Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management.
Features that set Six Sigma apart from previous quality-improvement initiatives include:
o A clear focus on achieving measurable and quantifiable financial returns from any Six Sigma project.
o An increased emphasis on strong and passionate management leadership and support.
o A clear commitment to making decisions on the basis of verifiable data and statistical methods, rather than assumptions and guesswork.
The term “Six Sigma” comes from statistics and is used in statistical quality control, which evaluates process capability. Originally, it referred to the ability of manufacturing processes to produce a very high proportion of output within specification. Processes that operate with “six sigma quality” over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities. Six sigma’s implicit goal is to improve all processes, but not to the 3.4 level necessarily. Organizations need to determine an appropriate sigma level for each of their most important processes and strive to achieve these. As a result of this goal, it is incumbent on management of the organization to prioritize areas of improvement.
In recent years, some practitioners have combined six sigma ideas with Lean Manufacturing to create a methodology named Lean Six Sigma. The latter methodology views lean manufacturing, which addresses process flow and waste issues, and Six Sigma, with its focus on variation and design, as complementary disciplines aimed at promoting “business and operational excellence”. A lot of company use Lean Six Sigma to focus transformation efforts not just on efficiency but also on growth.
We need to highlight though, that Lean Management and Six Sigma are two concepts which share similar methodologies and tools but they are two different programs. Lean manufacturing is focused on eliminating waste and ensuring efficiency while Six Sigma’s focus is on eliminating defects and reducing variability.
Six Sigma projects follow two methodologies inspired by Deming’s Plan-do-check-act Cycle. The one we are going to treat is called DMAIC:
1. Define: the system, the voice of the customer, and their requirements, and the project goals, specifically.
2. Measure: key aspect of the current process and collect relevant data. 3. Analyze: the data to investigate and verify cause and effect relationships.
Seek out root cause of the defect under investigation.
4. Improve: or optimize the current process based upon data analysis using techniques such as design of experiments and standard work to create a new, future state process. Set up pilot runs to establish process capability. 5. Control: the future state process to ensure that any deviations from the
target are corrected before they result in defects. Implement control system such as statistical process control, production boards, visual workplaces, and continuously monitor the process. This process is repeated until the desired quality level is obtained.
Moreover, one key innovation of Six Sigma involves the absolute “professionalizing” of quality management functions. Prior to Six Sigma, quality management in practice was largely relegated to the productions floor and to statisticians in a separate quality department. Formal Six Sigma programs adopt a kind of elite ranking terminology to define a hierarchy that includes all business functions and levels.
Six Sigma identifies several key roles:
§ Executive Leadership: includes the CEO and other members of top management. They are responsible for setting up a vision for Six Sigma implementation. They also empower the other role holders with the freedom
and resources to explore new ideas for breakthrough improvements by transcending departmental barriers and overcoming inherent resistance to change.
§ Champions: take responsibility for Six Sigma implementation across the organization in an integrated manner.
§ Master: identified by champions, act as in-house coaches on Six Sigma. They devote 100% on their time to Six Sigma.
§ Black Belts: Apply Six Sigma methodology to specific projects. § Green Belts: employees who take up Six Sigma implementation.
2.2.5 Total Productive Maintenance (TPM)
TPM is a system of maintaining and improving the integrity of production and quality systems through the machines, equipment, processes, and employees that add business value to an organization7.
TPM focuses on keeping all equipment in top working condition to avoid breakdowns and delays in manufacturing processes.
One of the main objectives of TPM is to increase the productivity of plant and equipment with a modest investment in maintenance. Total quality management (TQM) and total productive maintenance (TPM) are considered as the key operational activities of the quality management system. in order for TPM to be effective, the full support of the total workforce is required. This should result in accomplishing the goal of TPM: “Enhance the volume of the production, employee morale and job satisfaction”.
The main objective of TPM is to increase the OEE (overall equipment effectiveness) of plant equipment. TPM addresses the causes for accelerated deterioration while creating the correct environment between operators and equipment to create ownership.
OEE has three factors which are multiplied to give one measure called OEE: Performance x Availability x Quality.
§ Performance associated losses: - running at reduced speed – minor stops § Availability associated losses: -breakdowns – product changeover § Quality associated losses: - startup rejects – running rejects
Therefore, the objective finally is to identify then prioritize and eliminate the causes of the losses.
The eight pillars of TPM are mostly focused on proactive and preventive techniques for improving equipment reliability:
1. Focused improvement 2. Autonomous maintenance 3. Planned maintenance 4. Quality maintenance 5. Cost deployment
6. Early equipment management 7. Training and education
8. Safety health environment
With the help of these pillars we can increase productivity. Manufacturing support. But, what is the difference from TQM? Both are often used interchangeably. However, TQM and TPM are considered as two different approaches in the official literature.
TQM attempts to increase the quality of goods, services and concomitant customer satisfaction by raising awareness of quality concerns across the organization. It is based on five cornerstones: the product, the process that allows the product to be produced, the organization that provides the proper environment needed for the process to work, leadership that guides the organization, and commitment to excellence throughout the organization. Whereas, TPM focuses on the equipment used to produce the products. By preventing equipment break-down, improving the quality of the equipment and by standardizing the equipment, the quality of the product increase.
Basically, TPM can be seen as a way to help achieving the goal of TQM.
2.2.6 Just in Time (JIT)
JIT is a philosophy of continuous improvement and a process of exposing and reducing waste of all kinds.
We know how excessive inventory on the factory floor hides waste and inefficiency. Once this waste has been uncovered, the techniques of TQM can be directed toward permanently and continuously improving the entire manufacturing system. To help us reduce inventory, we can begin to implement this philosophy8. The fundamental approach to understanding JIT is to compare the traditional “push” system of production with the “pull” system associated with JIT.
The material pull system at the heart of JIT has also been called the “Kanban system”, a technique developed by Toyota9. The key to its success is to build only when a Kanban signal is received from the customer workstation. The quantities produced when the signal is received will only be enough to fill the pre-determined Kanban container. If the customer workstation doesn’t need any part it will not pull any from the supplier workstation. An easy way to understand this is to consider one of the earliest Kanban signals, the empty milk bottle. In the good old days when fresh milk was delivered daily to your home, the signal that milk was required was the placement of one or more empty milk bottles outside your door. No bottles meant no milk required today. Simple but effective.
On the factory floor, Kanban signals can be specially designated containers, pallets, cards or even spaces on the floor marked by paint or tape. The number of different ways a Kanban signal can be displayed is only limited by creativity of thinking factory worker.
While there are no hard and fast rules on Kanban signals, there are three principles which should apply in any situation:
1. Never produce without an open Kanban
2. Never pass along a known defect
3. Eliminate a Kanban from the system periodically.
Never produce without an open Kanban: So, what do we do while waiting for a Kanban to open? If the workstation A has no open Kanban to work on, the operator could move to workstation B, which has an open Kanban. This is also an opportunity to engage in continuous improvement activities such as implementing improvement ideas, attending quality meetings or receiving additional training in new skills. The importance, by the way, is that we should never build more than we need at the customer workstation.
Never pass along a known defect: this principle clearly shows how JIT and Total Quality management are closely linked together.
Eliminate a Kanban from the System Periodically: Every piece or unit of inventory sitting in a Kanban could be considered as waste if it sits idle too long. If manufacturing process appears to be running well and under control, that’s a good time to take even more inventory out of the system.
All of this, it’s not enough for implementing a right Kanban system. we must first be certain that our supplier supports the JIT philosophy of producing only to a Kanban signal and provides reliable delivery of quality parts.
Material Flow
To improve material flow, use:
Ø Point of use storage (POUS): Eliminate the stockroom and deliver parts and sub- assemblies directly to the factory floor. The advantage of POUS is that all inventory is visible to the people who need it.
Ø Housekeeping: POUS must also be supported by good housekeeping habits. Work–cell Design
The JIT concept will also force us to re-examine how we move materials in and around the factory. If we truly wish to run our business in a visible manner, we must move supplier workstations closer to customer workstations. Eliminating the stockroom and allowing material to be received closer to POS (point-of-use-storage) will also significantly reduce travel time.
