This one simple hack created C$400 million value, and here is the secret that small and medium businesses can use instantly
Let me start with a story here.
A few years ago when I was the Quality Director of a manufacturing company in Winnipeg, the customer's Supplier Quality Engineer made a visit one day. He was watching a process that created some troubles for this customer. I remember it was a lamination process of application of glue to bond fabric to ABS.
"Do you have your work instructions?
The production manager replied:
"I guess we are free to choose how to do our work. We can give you the best products and that would meet all your quality requirements."
Wrong answer. What the customer wanted was written work instructions that would be the basis for the production and training and we didn't have any. In fact, such requirements were considered just a costly exercise and a waste of time and effort! The documents and doing the work are two different things, or so he thought.
Soon afterward our company implemented many systems and procedures. We had to.
When Motor Coach Industries started implementing what they called the Quality at Source program back in 2013 where I was one of the delegates, it looked like a system that wasn't really cut out for a medium company like ours. Our defect percentage was already pretty low and the cost was reasonable, or so we thought. Therefore, we did not even start implementing the new system for quite a few months.
But then the pressure was really upon us to get going with the program. With a round of training conducted at the site, we kick-started the program. That program is an adaptation of the processes at the Toyota and the GM automotive plants.
Quality at Source was the process that made Motor Court Industries gain $400 million in value over five years. KPS Capital Partners acquired a controlling stake in Motor Coach Industries in 2010 and sold it to New Flyer industries for over C$600 million in 2015. The purchase price was never disclosed, so the gain in value is only a guess, but it's in that range.
The one simple hack is laying out the workflow or standard work. It is a five-step 'Green Road:' Process Flow - Process Failure Mode Effects Analysis - Control Plan - Work Instructions - Training Within the Industry.
This is the story of a big company gaining a substantial value, C$400 million, in about five years. The secret of that process is no secret at all. It is more famously known as the Toyota Production System. Numerous books have been written on the Toyota Manufacturing System. These systems that produced a huge value addition for a big company will produce similar substantial value gains for any company, no matter the size.
Why is it that small and medium companies are unwilling to use the formula, even though the formula itself is in the public domain? I can understand that because I was in that situation a number of years ago myself. It's a biased view that documentation is ugly and waste because a lot of it really is. ISO 9001 earlier versions were a lot like that. Not anymore, though. Famous cartoon courtesy: dilbert.com
Therefore, it takes substantial education and real business transformation results to comprehend the value of workflow and how to do it properly. It was hard for me to accept the fact in the first place, as it was also hard for my colleagues, so it had to be forced upon us at first. But then I became a convert and an advocate for the program in a short time when the results were apparent. Picture courtesy: dilbert.com
Understandably, even today lots of managers and business owners hate the idea of putting down the procedures on paper. They think it is a challenge to their authority or questioning their prerogative to operate their businesses as they want. And where written procedures exist, they are probably not written in the five-step formula, so they are just useless documents! Dilbert doesn't want useless documents, nobody does!
If you are a small and medium business owner, non-profit or government department head, who cares for the immediate value addition, to the tune of hundreds of thousands of dollars, business continuity, and a 100% workforce engagement, I have a freebie to start with. It is a free email course called "What the hack?" Please sign up here.
PRESIDENT ... TANGENT STRATEGIES INC. Teaching North America to Sell IN WAYS BUYERS WELCOME
4 年Great article. Lesson learned.
Maintenance management , software , data analyst
5 年All business have one Goal , to make money. to the small business documenting and recording processor is an expense they cannot justify. To get them to document everything is going against everything they know and this in its self leads to negativity. The Cost of implementing ISO9000 /9001 or lean (any of the scaling up, six sigma processors ) would essentially bankrupt a small business. Most won't see the cost benefit of hiring someone with said skills. Documenting and recording is a necessary evil that most small or medium companies will never implement regards of the many benefits this will bring to them.
Co-Founder ? ERP Solutions for SMB's ?
5 年Great story Alex, its true that SMB's don't often see the value of process documentation. I see similar issues when companies are going out to source a new ERP system, no documentation!
This is a really good article Alex! Very through and good use of statistical facts to improve a companies bottom line when it comes to efficiency, work flow and cost savings! Very impactful!
Volunteer
5 年Excellent article. Lean transformation is key for retaining and growing manufacturing in Canada. Glad to see another local success story. Sadly, the ISO Dilbert cartoon is eerily familiar to me. While ISO9000 can often be a positive improvement for a company it often ends up like in the Dilbert world. Keep going on the Lean Journey Alex!