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Leaning-out “dead wood” in a subcontractor-based business [Guest Post]

Guest Post: Kurt Woolley is Lean Champion within Intel’s Fab/Sort Manufacturing (FSM) organization, and founder of Atmos Industries. See more on his LinkedIn profile at http://www.linkedin.com/pub/kurt-woolley/3/941/575.

Do lean methods apply within a subcontractor-based business? Oh yes! In my recent journeys, I’ve had the opportunity to work with a sub-contractor business – a millwork operation, making cabinets (casework as it’s known), specialty products such as wood posts, vigas, ceiling tiles, and some pretty elaborate wooden furnishings, such as desks, bars, and custom paneling…pretty cool stuff and interesting to observe how these craftsman transform a piece of plywood or particle board into a work of art! After 3 not-so-successful, previous attempts at getting started on lean, I was asked by the owner to jump start it yet again, but this time “let’s get it right,” he pleaded.

Having never been in such a shop, it took me a couple of weeks to learn the ins-and-outs of the process, from estimating and engineering to sawing and routing (all CNC), assembly and installation. After much deliberation with the management team and a few fairly heated discussions, we agreed that the main focus should be in the office – where the information and design work all takes place; we chose the office because it was completely overlooked in the past. Of course, this spilled into almost every corner of the business since we all know how root causes to problems can surface from almost everywhere. As I quietly made my rounds, simply observing and asking a few “why do you do it that way?” questions, workers started to express that “here comes the lean guy” look in their eyes, and tell me why “this lean stuff won’t work in our business – everything we do is custom, there’s no single piece flow here!” “Really?,” I’d ask, and inquire why they thought lean was only about single piece flow? Apparently, that’s what all the previous consultants had taught them.

In any case, we embarked on a process to instill the rules and principles of lean thinking into their culture, with particular focus on structuring their activities: “Yes, every cabinet is custom, but you design and make 50 of them a day,” I said, “so let’s standardize the sequence of designing and building a cabinet!” Priority two was problem solving via A3 thinking, a methodology that was completely foreign to them. Over time, they watched the number of man hours required to design and build a cabinet drop by over 50% and the number of defective products drop by 30% simply by getting to the root causes of reoccurring problems. All that great stuff aside, the one aspect of the business that I found intriguing – and very frustrating at the same time – was the job scheduling process. The production manager would run a meeting once a week in which all the key players were involved – project managers, plant manager, team leads, etc., and this poor guy would go through line item by line item of easily 100-plus jobs and ask whether the previous week’s date was still good for job completion? The project managers would reply, “pull in by…” or “push out by…” And this went on for over an hour, just once a week, for many jobs that weren’t even scheduled to start for up to 3 months!

I took on the challenge of working with the production manager to help him build a simple, visual Gantt chart that we put on the wall showing ONLY the upcoming 6-weeks’ worth of projects. We then moved a green “tag” left or right, depending upon whether the project was slipping or pulling in. Easy enough, but the biggest learning came from the financial impacts of slipping the schedule: courtesy of a terrific CPA / financial analyst I often work with, we educated the staff on how a 1-week slip in the schedule negatively impacted the financial IRR of the business by 1%! That’s right – the effect of one job slipping one week ripples through the system, affecting every other job after it and making it almost impossible to recover and get projects back on-track. Material, labor, equipment and all other valuable resources “pile up” and consume cash, hence driving IRR down. Simply understanding this basic relationship had a huge, positive impact on everyone’s behavior – suddenly, “schedule is king” became the mantra, and the “non-believers” were converted. So, who says lean doesn’t apply to the contractor trades?