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The Lean TurnaroundThe Lean Turnaround

October 17, 2013October 17, 2013

Art ByrneArt Byrne

MY LEAN JOURNEYMY LEAN JOURNEY

Started January 1982Started January 1982

Always From A CEO PositionAlways From A CEO Position

Looked At From A Business PerspectiveLooked At From A Business Perspective

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WHAT IS A BUSINESS?WHAT IS A BUSINESS?

PeoplePeople

ProcessesProcesses

Delivering Value To CustomersDelivering Value To Customers

BEST TEAM WINSBEST TEAM WINS

TRADITIONAL APPROACHTRADITIONAL APPROACHTake Value Adding For GrantedTake Value Adding For Granted

Make Customers Conform To YouMake Customers Conform To You

MakeMake--TheThe--MonthMonth

ALWAYS LOOKING BACKWARDSALWAYS LOOKING BACKWARDS

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VALUE IS CREATED BYVALUE IS CREATED BY

Improving Your Value Adding ActivitiesImproving Your Value Adding Activities

Delivering Value To Your CustomersDelivering Value To Your Customers

Conforming To Your Customers NeedsConforming To Your Customers Needs

THE OPPOSITE OF THE TRADITIONAL THE OPPOSITE OF THE TRADITIONAL APPROACHAPPROACH

LEAN IS THE BEST VALUE CREATORLEAN IS THE BEST VALUE CREATOR

Enables Vast Changes To Your Value Enables Vast Changes To Your Value Adding ActivitiesAdding Activities

Gain Share And GrowGain Share And Grow

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BUT, WE MESSED IT UPBUT, WE MESSED IT UP

Just In Time AndJust In Time And

Lean Thinking, BecameLean Thinking, Became

Lean ManufacturingLean Manufacturing

A TERRIBLE TRAGEDYA TERRIBLE TRAGEDY

GETTING BACK ON TRACKGETTING BACK ON TRACK

WHYWHY

WHATWHAT

HOWHOW

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WHY LEAN?WHY LEAN?WHY LEAN?WHY LEAN?

WIREMOLD RESULTSWIREMOLD RESULTS

Lead Times From 4Lead Times From 4--6 Weeks to 16 Weeks to 1--2 Days2 Days

Productivity Up 162%Productivity Up 162%Productivity Up 162%Productivity Up 162%

Gross Profit Up From 38% To 51%Gross Profit Up From 38% To 51%

Machine Changeovers From 3 Per WeekMachine Changeovers From 3 Per Week-- 2020--30 A Day30 A Day

Inventory Turns from 3X To 18XInventory Turns from 3X To 18X

Customer Service From 50% To 98%Customer Service From 50% To 98%

Sales More Than QuadrupledSales More Than Quadrupledpp

EBITDA Grew From 6.2% To 20.8%EBITDA Grew From 6.2% To 20.8%

Operating Income Up 13.4 XOperating Income Up 13.4 X

Enterprise Value Increased By 2,467%Enterprise Value Increased By 2,467%

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WHY ISN’T EVERYONE DOING THIS?WHY ISN’T EVERYONE DOING THIS?

“Tell You”“Tell You”

“Show You”“Show You”

“Bet You Can’t”“Bet You Can’t”Yoshiki IwataYoshiki IwataYoshiki IwataYoshiki Iwata

EASY TO SAY……..HARD TO DOEASY TO SAY……..HARD TO DO

WHAT IS REQUIRED?WHAT IS REQUIRED?WHAT IS REQUIRED?WHAT IS REQUIRED?

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YOU NEED A PROVEN APPROACHYOU NEED A PROVEN APPROACH

Three Management PrinciplesThree Management Principles

Four Lean FundamentalsFour Lean Fundamentals

LEADERSHIP = THE KEY INGREDIANTLEADERSHIP = THE KEY INGREDIANT

MANAGEMENT PRINCIPLESMANAGEMENT PRINCIPLES

Lean Is The StrategyLean Is The Strategy

Lead From The TopLead From The Top

Transform The PeopleTransform The People

WITHOUT THESE WITHOUT THESE –– YOU WILL FAILYOU WILL FAIL

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LEAN IS THE STRATEGYLEAN IS THE STRATEGY

Focus On Processes Focus On Processes –– Not ResultsNot Results

Improve Your Strategic OptionsImprove Your Strategic Options

Time Based Growth StrategyTime Based Growth Strategy

OPERATIONAL EXCELLENCE OPERATIONAL EXCELLENCE ––THE CORE STRATEGYTHE CORE STRATEGY

LEAD FROM THE TOPLEAD FROM THE TOP

People Resist ChangePeople Resist Change

Lead By ExampleLead By Example

Learn By DoingLearn By Doing

Commit To Becoming A Lean ExpertCommit To Becoming A Lean Expert

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TRANSFORM THE PEOPLETRANSFORM THE PEOPLE

Only Asset That AppreciatesOnly Asset That Appreciates

Respect Your PeopleRespect Your People

Create A Learning EnvironmentCreate A Learning Environment

LEAN STRATEGY TO LEAN CULTURELEAN STRATEGY TO LEAN CULTURE

THE LEAN FUNDAMENTALSTHE LEAN FUNDAMENTALS

Work To Takt TimeWork To Takt Time

One Piece FlowOne Piece Flow

Standard WorkStandard Work

Pull SystemPull System

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HOW TO IMPLEMENTHOW TO IMPLEMENTHOW TO IMPLEMENT HOW TO IMPLEMENT A LEAN TURNAROUNDA LEAN TURNAROUND

UP FRONT WORKUP FRONT WORK

Articulate Your VisionArticulate Your Vision

Establish Core ValuesEstablish Core Values

Code Of Conduct Code Of Conduct -- -- ExpectationsExpectations

Obtain The Lean KnowledgeObtain The Lean Knowledge

Kaizen Promotion OfficeKaizen Promotion Office

Lean ConsultantLean Consultant

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WIREMOLD STRATEGYWIREMOLD STRATEGY

Be the Leading Supplier In The Industries We Serve And Be the Leading Supplier In The Industries We Serve And One Of The Top 10 Time Based Competitors One Of The Top 10 Time Based Competitors –– GloballyGloballyp pp p yy1. Constantly Strengthen Our Base Operations1. Constantly Strengthen Our Base Operations

100% on Time Customer Service100% on Time Customer Service50% Reduction In Defects 50% Reduction In Defects –– Each YearEach Year20% Productivity Gain 20% Productivity Gain –– Each YearEach Year20X Inventory Turns20X Inventory TurnsVisual Control and The 5s’sVisual Control and The 5s’sVisual Control and The 5s sVisual Control and The 5s s

2. Double In Size Every 3 To 5 Years2. Double In Size Every 3 To 5 YearsPursue Selective AcquisitionsPursue Selective AcquisitionsUse QFD to Speed New Product IntroductionsUse QFD to Speed New Product Introductions

CORE VALUESCORE VALUES

PEOPLE PEOPLE

CUSTOMERSCUSTOMERS

KAIZENKAIZEN

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CODE OF CONDUCTCODE OF CONDUCT

Respect OthersRespect Others

Tell The TruthTell The Truth

Be FairBe Fair

Try New IdeasTry New Ideas

Ask WhyAsk Why

Keep Your PromisesKeep Your Promises

Do Your ShareDo Your Share

REORGANIZE FOR LEANREORGANIZE FOR LEAN

Create A Value Stream StructureCreate A Value Stream StructureT L dT L dTeam LeadersTeam LeadersKPOKPO

Everything Has To ChangeEverything Has To ChangeSalesSalesFinanceFinanceFinanceFinance

Reduction In Force Up Front?Reduction In Force Up Front?

EVERYONE MUST BE ON BOARDEVERYONE MUST BE ON BOARD

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FULL SPEED AHEADFULL SPEED AHEAD

CEO Must LeadCEO Must Lead

Make AnnouncementMake Announcement

Do Initial TrainingDo Initial Training

CEO Must AlsoCEO Must Also

Pick The KaizensPick The Kaizens

Set Stretch GoalsSet Stretch Goals

Kaizen Is A Full Time JobKaizen Is A Full Time Job

MAIN KAIZEN THRUSTMAIN KAIZEN THRUST

BATCHBATCH TOTO FLOWFLOWBATCH BATCH ------ TO TO ------ FLOWFLOW

PUSH PUSH ------ TO TO ------ PULLPULL

INVENTORY IS THE ROOT OF ALL EVILINVENTORY IS THE ROOT OF ALL EVIL

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TYPICAL RESULTS TYPICAL RESULTS –– ONE WEEKONE WEEK

Cut Lead Times 90%Cut Lead Times 90%

R d St ffi F 10 T 5R d St ffi F 10 T 5Reduce Staffing From 10 To 5Reduce Staffing From 10 To 5

Reduce Inventory By 70%Reduce Inventory By 70%

Reduce Floor Space By 50%Reduce Floor Space By 50%

Reduce Defects By 60%Reduce Defects By 60%

Reduce Travel Distance By 90%Reduce Travel Distance By 90%yy

Cut Set Up Time By 90%Cut Set Up Time By 90%

Connect Customer To The Shop Floor Connect Customer To The Shop Floor -- PullPull

LEAN LEADERS ROLELEAN LEADERS ROLE

Make The Case For ChangeMake The Case For Change

Get Everyone On BoardGet Everyone On Board

Implement Policy DeploymentImplement Policy Deployment

Leaps Of FaithLeaps Of Faith

Push Through Problems Push Through Problems –– Overcome LoreOvercome Lore

IDEAS OF 1,000 IDEAS OF 1,000 –– NOT JUST 25NOT JUST 25

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LEAN LEADER ALSO MUST;LEAN LEADER ALSO MUST;

Establish Daily Management At The Point Of Establish Daily Management At The Point Of Value AddingValue AddingValue AddingValue AddingIdentify Breakthroughs Identify Breakthroughs –– Set Stretch GoalsSet Stretch GoalsRespect And Support AssociatesRespect And Support AssociatesCreate The Future LeadersCreate The Future Leaders

CEO MUST BE THE LEAN ZEALOTCEO MUST BE THE LEAN ZEALOT

DUMP YOUR BAD HABITSDUMP YOUR BAD HABITS

Standard Cost AccountingStandard Cost Accounting

Traditional MeasurementsTraditional Measurements

Big End Of Month ReviewsBig End Of Month Reviews

Lengthy CAPEX ProcessesLengthy CAPEX Processes

LOOK FORWARD LOOK FORWARD –– NOT BACKWARDNOT BACKWARD

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CAPITALIZE ON YOUR GAINSCAPITALIZE ON YOUR GAINS

Profit SharingProfit Sharing

Lean Bonus SystemLean Bonus System

AcquisitionsAcquisitions

Provides The CashProvides The Cash

Lowers The RiskLowers The Risk

Creates A Clear Game PlanCreates A Clear Game Plan

LEAN EVERYWHERELEAN EVERYWHERE

Non Manufacturing Gains Are BiggerNon Manufacturing Gains Are Bigger

HospitalsHospitals

Life InsuranceLife Insurance

DistributorsDistributors

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VIRGINIA MASON RESULTSVIRGINIA MASON RESULTS

Nurses Spend 90% with Patients Vs. 35%Nurses Spend 90% with Patients Vs. 35%Ti T R t L b R lt D 85%Ti T R t L b R lt D 85%Time To Report Lab Results Down 85%Time To Report Lab Results Down 85%Cost Of Supplies Down $1 million A YearCost Of Supplies Down $1 million A YearHospital Liability Costs Down 49%Hospital Liability Costs Down 49%A/R Days >90 Days Down 74%A/R Days >90 Days Down 74%Surgery Center; Cases Per Day Up 60%Surgery Center; Cases Per Day Up 60%Surgery Center; Cases Per Day Up 60%Surgery Center; Cases Per Day Up 60%Pharmacy; Order To Available Time Pharmacy; Order To Available Time --93%93%Margin $’s; $0.7M in 2,000 To $41M 2010Margin $’s; $0.7M in 2,000 To $41M 2010

DISTRIBUTION WAREHOUSEDISTRIBUTION WAREHOUSE

Headcount From 16.5 To 9.5 Down 42%Headcount From 16.5 To 9.5 Down 42%

Freed Up 35,000 Sq. Ft. Saving $180,000Freed Up 35,000 Sq. Ft. Saving $180,000

Picks Per 10 Feet Of Rack from 9 To 42 Picks Per 10 Feet Of Rack from 9 To 42 Up 367%Up 367%

Reduced Shipping Errors From 1.1% to Reduced Shipping Errors From 1.1% to 0 11% Down 90%0 11% Down 90%0.11% Down 90%0.11% Down 90%

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SUMMARYSUMMARY

“ Byrne“ Byrne--San, If You Don’t Try Something, San, If You Don’t Try Something, No Knowledge Will Visit You”No Knowledge Will Visit You”

Chihiro NakaoChihiro Nakao

LEAN PROVIDES UNFAIR LEAN PROVIDES UNFAIR COMPETITIVE ADVANTAGECOMPETITIVE ADVANTAGE