The Value of Desperation

[David Dodd]

Six weeks ago, I started a thread here titled, "Lean Management for Lean Times?" That thread began after the credit markets had seized up and after the federal bailout of the financial markets had become law, but before the unemployment rate reached 6.5 percent, before the "Detroit 3" came hat in hand to Congress to ask for a bailout to avoid bankruptcy, and before the federal government was forced to step in and rescue Citigroup over this past weekend.

I do not pretend to know how our economy will perform over the next several months, but I expect things to get worse before they get better. It appears that we are headed for a global recession that could turn out to be more severe than any we have faced since the end of World War II.

So, is there any way to extract something good from this very bad situation? I think so. The reality is that an economic crisis can be a powerful catalyst for implementing lean business practices. In fact, many of the most successful practitioners of lean (including Toyota) began their lean efforts in the midst of a crisis.

There are several reasons why a crisis can be an effective catalyst for a lean transformation, and why lean is often the right response to difficult business conditions. First, an economic crisis can make it easier for company leaders to accept the necessity for change. All of us have and use paradigms or mental models to make sense of the world around us. These mental models lead us to believe that if we do X and Y, the result will be Z because "that's the way the world works." And we tend to "bend" external facts and phenomena to fit our established paradigms. We will change our paradigms only when the facts and phenomena can't be sufficiently bent or stretched to fit our existing models. Success with lean usually requires a major "paradigm shift," and when business conditions turn really bad, it becomes difficult to ignore the fact that the old paradigm isn't working. Therefore, the organization is more receptive to change. As the old saying goes, "Desperate times call for desperate measures."

In addition to making company leaders more open to change, an ecomonic crisis can provide a "rallying point" for employees throughout the organization. It's amazing how focused and energized we can become when our livelihood is at stake.

And finally, lean is often the best response to an economic crisis because it requires relatively little cash to implement, especially when compared to other possible responses like acquiring new technology or equipment. When viewed over a reasonable period of time, a well-designed lean program should be self-financing. Some expenditures are needed to get the implementation started, but these are relatively small and the payback is fast.

I wish that no one had to face the economic crisis that now confronts us. But if we must endure this difficult period, let's use it to build leaner companies that will be prepared to benefit from the economic recovery that's sure to follow.

 

[Michael Josefowicz]

David, All good points. Just want to suggest that we don't lose sight of the possibility of repurposing workers who might not be as necessary in a lean implementation. Every business needs more work. To get more work Printers need innovative products. The best way to innovate is to combine granular understanding of production reality with granular understanding of customers.

Sales people and production people could get together and have honest conversations to answer the question: "what can we produce easily, that our present customers will value".
Working to make present products cheaper and faster works on the supply side. My take, it's nice, but only races to the botto,

If on the other hand, everyone focuses on new products for old customers , it's lean on the demand side. If the demand side increases, everyone wins.

 

[mattf]

David:

Thanks for the post, I gather everyone in this forum is experiencing the economic slowdown, in one fashion or another.

Mike, your observation is a fairly basic and fairly successful thought process on what to produce. If the company makes the most profit from letterheads, why can't we push our excellence within letterheads? Same goes for business cards, saddle stitched books and so on. I don't, however, believe its the best to have production people within the loop. Sales is a good shift, but maybe only having the shop foreman in on the discussion is the best bet. The foreman controls what happens in production, and his input is probably the most in depth you need to go because the foreman is the guy who controls that aspect.

It is true that type of mindset is pushing the cheap product into the supply chain. This only works in certain areas. Letterheads, business cards and a few other small press work can do this, digital printing is all about short and quick runs, but large press work won't benefit from this.

Large press work, however, will benefit from the "new product" to old customers. Push new and innovative printing to the customer will create a hopeful demand for it. Granted it can also work with small press items, but I think the most potential can come from large press work.

 

[Michael Josefowicz]

Matt,
I have to respectfully disagree with :"I don't, however, believe its the best to have production people within the loop. Sales is a good shift, but maybe only having the shop foreman in on the discussion is the best bet. The foreman controls what happens in production, and his input is probably the most in depth you need to go because the foreman is the guy who controls that aspect."

Here's the thing:
First, good ideas can come from everywhere in the shop. Besides the foreman is probably too busy following the work to have the time to think of new apps. Plus you get into the "to hammer everything is a nail" problem, The other thing is that you have to be really careful about figuring out the most profitable job. What is the transaction cost? All that invisible time spent in entering the job, sending the proof, doing the press check, sending it out, getting paid.

With small jobs, if your cost of transaction isn't pretty close to zero it will be greater than the cost of printing and paper. That's the secret of Vista Print. It's not an innovative print process. It's an innovative transaction process.

Meanwhile for big offset jobs the competition is fierce. So the profit margin is low. How about if instead of "sales" the customer facing service is project management. Project management saves time. Nobody wants to buy stuff. Everybody wants to save time.

The cool thing is that if you save a customer time, you can charge them sometimes lots of money for that. The printed piece is only an excuse to sell the project management.

 

[PDeuth]

Printing is too diverse an industry to make generalizations. Where I work now, we are a general commercial printer, using the offset-litho process. In terms of lean we are all pull - nothing we print is for inventory, it's all a job-shop production system. In a sense we offer more of a service than a manufactury. Shops that print, say, folding cartons make a product that can be inventoried, however, and the pull parts of the lean production system apply more directly for them.
In commercial a lean gain can be realized by paying attention to the flow of jobs, rather than product. In a shop that prints newspaper inserts you might benefit from paying attention to the flow of paper. Each market will have its own most-effective strategy, there is no one size fits all. Or is there?
Printing is a process and we apply that same process to every order that we print (only rarely do we sell our prepress services without putting ink on paper; never have we sold our bindery as a trade shop.) We can apply lean principles to the flow that concerns our process and optimize the act of putting ink on paper. We can apply lean principles to our process, itself, so that jobs, and work, flows seamlessly. It's a matter of focus, in the end. Let's not forget that Toyota applies their system strategically and that we benefit most from starting with a strategy, rather than a tactic, and especially rather than a method. Figure out what business you're in first, then pick and choose the best tools to make your system work well.

 

[Michael Josefowicz]

@PDeuth,
Good points. In terms of commercial shops especially the idea that it's a pull situation where the process in a sense is the product helps to clarify what's going on. On other way to look at the same thing is that commercial print shops are experts at just-in-time manufacturing. While batch process manufacturers are still learning the new rules, commercial printers have been doing since day one.

I wonder if anyone has applied lean principles to sales. From my experience it's ironic that the production process is moving to the 21st century while the sales process is still in the 19th.

 

[David Dodd]

Printing is too diverse an industry to make generalizations. Where I work now, we are a general commercial printer, using the offset-litho process. In terms of lean we are all pull - nothing we print is for inventory, it's all a job-shop production system. In a sense we offer more of a service than a manufactury. Shops that print, say, folding cartons make a product that can be inventoried, however, and the pull parts of the lean production system apply more directly for them.
In commercial a lean gain can be realized by paying attention to the flow of jobs, rather than product.

I agree that most commercial printing companies are "make-to-order" as opposed to "make-to-stock" operations. Therefore, at the highest level, commercial printing companies produce in response to customer "pull." However, we also need to remember that most lean companies use "pull" techniques to manage and control the movement of products from one production step to the next. This is normally done using some form of a kanban system. In my experience, printing companies mostly use "push" to move jobs through the production process. Pull systems can be used in a printing company, but they aren't common.

I also agree that the real focus should be on improving the flow of jobs. Flow can be difficult for printing companies to achieve because the work content and process cycle times of jobs can vary substantially. However, flow usually gets better when some "pull" principles are used.

 

[rich apollo]

In my experience, printing companies mostly use "push" to move jobs through the production process. Pull systems can be used in a printing company, but they aren't common.

…flow usually gets better when some "pull" principles are used.

What are pull and push production principles - within the scope of printing?

 

[mattf]

What are pull and push production principles - within the scope of printing?

This is how I understand it in terms of printing:

Most printing companies have a push production system. There is a sales force that pushes for demand. This activity creates consumer demand. For the most part this type of system tries to sell directly to the customer. That being said, the amount of work that can go through production can be extremely variable. Companies have a mindset of how many jobs they can push through production at the same time, or a maximum controllable situation. This is the case for most printing companies, and that's what has been done in the past. Pull principles within production is a completely different ball game for printers. One reason because we have always done push production.

Pull systems work differently as they are used as a demand signal which immediately transmits through the supply chain. The cycle time for a pull system is the realistic amount of time to manufacture a specified amount of goods. So instead of creating a mindset of how much a production facility can handle and push for that maximum, we determine the max at the start and create a process that pulls jobs easily along the production line. Again, its a very different way of thinking within print but it has worked as a model in multiple companies.

 

[rich apollo]

Sorry, I'm still not getting it.

As I understand it "push" principles apply when a company is trying to build inventory. Think of your plate manufacturer - they have so many plates in circulation at any time. While they're trying to limit the number of uncommitted plates manufactured they have to be prepared for spikes in consumption.

"Pull" principles are in play when you wait for the order. Think of a restaurant - they don't make it until you order it. The trick is to produce rapidly enough (or of such quality or unique character) that the patron is willing to spend the time. Print as an industry operates on "pull" principles, doesn't it?

So, Toyota supposedly operates on a "pull" system. They don't manufacture a vehicle until a dealer has ordered it. But in this model doesn't the dealer warehouse the inventory?

Wouldn't "pull" principles only work for items you can wait for?

 

[PDeuth]

Think of the printing company, or printing production, as some kind of a machine. Somebody throws the switch to start the machine and begin production. If that switch is thrown by a customer or end user, or even somebody further down the production line/stream, it's a pull system. If that switch is thrown by somebody further up the production line or stream, it's a push system.
In commercial printing the switch is thrown by the end user/customer. We do not use an internal kanban system and produce plates only when the press has used up all available plates or jobs; that would put the press down while prepress got their act together. Keeping the press working is the priority for internal success, it's a key internal metric. To be "ideologically pure" in this regard would be foolish.