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Newsletter no.5
may 2013

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business-improvement.eu
inspiring businesses with in-depth real-life cases

The Lean organization as a social network

Small companies often produce ‘Lean’ automatically, because everyone can see the value stream towards the customer. It goes without saying that it is far better to help your neighbor, the next step in the production chain, then to produce a lot of intermediate stock. And when you have an idea for a smarter production process, you will not hesitate to share it with the rest of the team. In addition, job satisfaction is high, because everybody sees their contribution to the end product.   

That last point is of crucial importance. When a company wants employees doing their best, this is only possible when everyone has the feeling that he or she is contributing to the society in a meaningful way. To put it even more strongly: this is such a big incentive, that people sometimes are willing to work unpaid. This fact is proven by the success of open source software.

A few months ago I saw a documentary about Ricardo Semler, CEO of the successful machine factory Semco in Brazil. A few years after Semler took over this company from his father, he fainted from exhaustion.
After this event, he decided to organize things differently. He wanted a company without the usual boarding school mentality and military discipline.  A company in which the employees are in charge themselves, while having an optimal work-life balance.  A company with the enthusiasm of Google starting from a garage, be it much bigger. This means as little rules as possible, and full participation of everyone.
Within Semco, employees share profit, they determine their own working hours, and they even choose their own leaders. It is an industrial democracy, resembling that of the American enterprise Morning Star Company. When you give people maximal freedom and decision power, they automatically seem to do their best to achieve the best end result together. Semler, who used to play in a rock band, compares this with the behavior of a guitar player. He or she will tune each solo with the activities of the rest of the band, and will learn by doing.
In my opinion, the secret of Semco’s success – do what you want in your own pace, provided that you will finish your work – is often exaggerated. Sometimes it looks like Semco is a kind of commune.  There are a lot of books written about the problems that will arise sooner or later in such a community, built on the assumption that everyone always has the best intentions. How Semco copes with problems such as people cutting corners, remains unclear.

That said, lessons can surely be learned. A Lean organization is no more or less than a social network, in which everyone should be able to see how their work contributes to the end result. Therefore, the key question that CEO’s of Lean companies should ask themselves is: How can I give my employees maximal freedom, and maximal opportunities the develop their talents, but within certain boundaries. After all, the guitar player mentioned above should stay within the production rhythm or ‘takt’ of the band.  

Best regards, 
Dr Jaap van Ede, 
owner and editor-in-chief business-improvement.eu

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A. New articles:

1. Lean:  Adding maximum value during R&D
    Book: The Lean Startup

2. QRM:  Fast and cost-efficient production
    Cases: Harley-Davidson, RenewAire, JoyGlobal...

Summaries of these articles you will find below. For more case descriptions, see our case-menu.

B. Summaries of the articles:

1. Lean:  Adding maximum value during R&D
    Book: The Lean Startup


Eric Ries compares lean R&D with driving, 
tuning and steering a car simultaneously
^ Eric Ries compares lean R&D with driving,
   tuning and steering a car simultaneously!


Lean companies improve themselves by fast and successive logistic experiments. Eric Ries, author of The Lean Startup, states that startup companies should apply a similar approach. They should continuously improve their business plan by repeatedly releasing minimal viable products, to learn about their intended customers. This means continuous innovation instead of building a perfect rocket at once, which will often fail when it is launched.

To move in the right direction, you need a True North as a beacon, like in Lean manufacturing. For a startup this compass is a business which adds value for the consumers, and which has enough ability to grow.

According to Ries developing a new product should resemble simultaneously driving a car (testing your product), tuning the engine (continuously improving the product) and steering (adapting your business model when needed)!

What is called go and see in lean manufacturing – always visit the place where the real work is done – is replaced by launch and see: Try to determine as fast as possible which product features your intended customers like.

> more
2. QRM:  Fast and cost-efficient production
    Cases: Harley-Davidson, RenewAire, JoyGlobal...


Assembly cells at Harley-Davidson
^ Assembly cells at Harley-Davidson

Quick Response Manufacturing
(QRM): The faster your production chain, the better! To that end, you should transform your shop floor and even your entire supply chain. Create loosely connected Quick Response Cells, each handling groups of similar tasks. This will make it much easier to produce-to-order, with short delivery times.

As a result you will not only become more attractive for customers, it will also save you money because of the reduced overhead in the form of unnecessary handling and stock keeping. These are only examples; many other sources of system-wide waste may disappear.

What kind of companies are successfully applying QRM? We figured it out when we visited the 11th international QRM-conference.

> more
C. Brief news

The chain-wide buffer replenishment of Liberty Shoes
The Indian company Liberty Shoes, a large leather footwear manufacturer, has implemented Goldratt’s TOC for retail solution. This is described by Mahesh Gupta and James Cox in their article ‘built to buffer’, published at apics.org.

Liberty Shoes exploits the fact that an aggregated forecast at a central warehouse is much more accurate than the forecasts of individual shops.
> more

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