Japanese Manufacturing Techniques – the early days of Lean in the UK

In the late ’80’s I was fortunate to join a very fast-growing electronics company that was one of the first UK manufacturers to adopt what was then known as “Just-in-Time Production”. I was employed as Materials Manager to implement a new MRPII system and to introduce Just-in-Time supply to a reduced supplier base. The concept of “Lean” was not then known, and the main focus of business improvement activities was around Total Quality Control, Zero Defects and Quality Circles.

One of the very few English language books available at the time was Richard J. Sconberger’s Japanese Manufacturing Techniques, first published in 1982, and still on my bookshelf. Even the title of the book shows that the main focus then was simply to copy what were thought to be the main techniques of successful Japanese manufacturers. In fact, each of the book’s nine chapters deals with one of these “techniques”.  Chapter 4 in particular indicates this thinking: “The Debut of Just-in-Time Production in the United States. Lesson 4: Culture is no obstacle; techniques can change behaviour”

Sadly, this view still persists to this day with some manufacturers. They still see “Lean” – as we now call it – simply as a set of tools and techniques to be learned and applied. Not surprisingly this narrow approach rapidly leads to disappointment and then a search for the next “initiative”.

Over the last 30 years we’ve come to realise that Lean is a company-wide philosophy that requires strong Leadership at all levels, a respect for people and a willingness always to look for a better way. Yes, the right tools and techniques are important, but there’s much, much more to Continuous Improvement than tools and techniques.

If you’d like to share your own experiences of “Just-in-Time” and Lean, please register and comment. And if you’d like some help with your own Lean journey, please email me at Andrew.Nicholson@ImproveMyFactory.com

QCD is out of date – you need CxVAR

For decades now manufacturers have measured their performance in terms of Quality, Cost and Delivery. These days that’s no longer good enough. If you really want to raise your game here are some measures you need to be thinking about:

Cx – Customer Experience. The customer’s total life-time experience of your products, services and brand. Think customer journeys, Net Promoter Score, Fault-Free Years in Service and the like. Talk with them, partner with them, have the difficult conversations, grow old together.

Value-Add. This goes to the heart of what manufacturing is all about – taking a whole load of inputs and resources and turning them into something more valuable. Value-add per employee is a critical measure of productivity. At the plant level, it’s one of the “critical few” measures, and at a national level increasing productivity is the only real way to improve living standards.

Responsiveness. Simply delivering a product “on time” (which date exactly?) doesn’t really cut it. How agile and responsive are you to customer needs? Do you know exactly what’s important to your customer? Can you flex volumes, delivery times and specifications? Do you need to offer guaranteed lead-times, short lead-times or both?

If you’d like an up-to-date, independent review of your KPI’s and objectives, contact Andrew.Nicholson@ImproveMyFactory.com

Brexit – immediate actions for UK Manufacturing Leadership

Manufacturing clients that we’ve been working with at a strategic level already have well-rehearsed plans in place for Brexit. For those who are still reeling with shock here are some of the short-term actions that Manufacturing Leaders might consider – the “Six R’s”:

Reassure: the first essential role of Leadership in turbulent times. Ramp up the communication, make yourself available, get out and about in the workplace. Let people know that despite recent rhetoric no-one’s job will be lost this month or next. In particular, reassure migrant workers that they are valued and wanted and will continue to be so.

Resilience – time to update your business risk assessments and make sure that you have robust plans in place and contingencies for the things that won’t go to plan! In particular, consider broader supply chain risks (see below).

Rates 1 – Exchange Rates: the pound will be weaker for a while so ramp up the exports and continue to use Lean to in-source materials and components. De-risk the Supply Chain and take manufacture and control in-house.

Rates 2 – Interest Rates: we simply don’t know if interest rates will go higher or lower so shorten your payback periods slightly but keep on investing. Short-term turbulence often leads to cheaper asset prices so look out for bargains – don’t put off that acquistion but instead go flat out and bargain for a lower price.

Routine: now is the time to reinforce Standard Work, One Best Way and all of the “boring but important” daily disciplines that make for successful long-term business.

Remember: turbulence doesn’t change the world but it makes for bigger opportunities and bigger threats – update your SWOT review, spot the opportunities and act decisively.

Courage mon brave!

From BRICs to MINTs – the Second Round of Emerging Market Growth Begins

The BRIC (Brazil, Russia, India and China) countries have seen significant growth over the last decade since the group of countries were defined as emerging markets in 2001.

Brazil is currently experiencing significant growth in its manufacturing industry thanks in part to high import taxation laws imposed by the government.  These laws were introduced to try and encourage companies to manufacture goods in Brazil rather than import them into the country.  The government policy of high import taxes has worked, especially as far as the automotive industry is concerned and the high tech industry is growing quickly as well.  In fact I would argue that next to China, Brazil is seeing more inward investment, from a manufacturing investment point of view, than many other countries at the moment.  Whether it is to take advantage of a growing economy or leverage the country as a stepping stone into the North American market, you cannot deny that Brazil is on a roll at the moment.

Russia has also seen significant growth over the past decade, thanks in part to a reduction in government imposed restrictions and red tape. Traditionally many companies have chosen markets other than Russia to invest in but those that have taken the plunge and invested in Russia have seen huge growth in their own market share.  The automotive industry is a prime example, many Russian car plants look as though they have just come out of the stone age due to tight government control and lack of investment, but St Petersburg Port has become an unlikely investment hub for the global automotive industry.  Renault-Nissan made a significant investment in the government controlled automotive manufacturer Avtovaz, which has resulted in the alliance controlling a significant market share. Like a Phoenix, the whole automotive industry in Russia is now rising from the ashes and it is just a matter of time before millions of consumers start to spend their money on new cars.

Moving across to India, the country is still seeing significant growth in its economy, thanks in part to a decade of setting up one of the world’s largest markets for outsourcing companies to invest in and it has become the offshoring destination of choice for many companies around the world. Consumer wealth in India is growing significantly and many consumers are making the switch from two and three wheeled vehicles to cars. India’s manufacturing industry has grown around its ability to produce high quality goods from a relatively low cost but highly skilled workforce. Most goods manufactured in India are for export but increased consumer wealth is likely to slow down the rate of export as manufactured goods are sold into the domestic market instead.  So some interesting dynamics at play here which has helped companies such as Tata invest in overseas luxury brands such as Jaguar Land Rover (JLR).  In fact in 2013 JLR sold more cars than any previous year thanks in part to the significant investment from Tata who has a strong belief in the future of the luxury brand.

Ten years on and China is still referred as an emerging market by some analysts but out of the four countries China has seen the largest growth in its economy when compared to the other three countries. As consumer wealth has grown in the country, so has the consumer desire for luxury goods such as cars.  In fact China is the largest car market in the world and it continues to grow. Strict government laws, namely establishing  joint manufacturing ventures, around how western companies can establish a presence in the country, has helped its own domestic manufacturing industry to flourish. However times are changing in China as the government tries desperately to spread the wealth across the country rather than have it all focused along the East Coast.  Large tax based incentives are now seeing more western investment in central and western China and this trend is likely to grow over the next ten years.  Today, companies are finding they have a choice, either to put up with the increasing wage rises in Eastern China or move their operations to lower cost regions of the country.  In some cases companies, even Chinese ones, are looking at other emerging markets around the world to invest in.

Increased wage costs, labour strikes and a desire to exploit other growing markets has led to the emergence of a new wave of emerging economies, thirteen years after the BRICs were defined. Hold on tight, the second wave of emerging markets is vying for inward investment, say hello to the MINT countries!  This new acronym refers to Mexico, Indonesia, Nigeria and Turkey and was coined by Jim O’Neill, the former chief economist and head of asset management at Goldman Sachs.  Interestingly Jim was also credited with introducing the BRIC term back in 2001, so you could say he has expertise in identifying key growth economies around the world.  So let me now explore why these countries are likely to take over from the BRICs as the economic growth engine of the world.

One of the common things that three of the MINT countries share is that they all have geographical positions that should be an advantage as patterns of world trade change.  For example, Mexico is next door to the US and also Latin America. Indonesia is in the heart of South East Asia but also has strong connections with China.  The BRIC countries have certainly helped boost the profits of many logistics providers around the World as they ship manufactured goods from China and India to all corners of the world.  Given that the MINT countries are geographically better positioned next to key economies then I would expect the dynamics of the logistics industry to change given the shorter distances that goods will have to be shipped to reach their point of distribution or sale. As for Turkey it can be regarded as being in both the West and East however Nigeria is the odd one out here as it is located in a part fo the World that has traditionally seen little development, at least by Western standards but it could be a key country once other countries stop fighting with each other and trade finally opens up across the Continent.  Given that Nigeria has been included in the MINT definition it could lead to the country being accepted as a member of the G20 as the other three countries are already members.

Economically three MINT countries, Mexico, Indonesia and Nigeria are commodity producers and only Turkey isn’t.  This contrasts with the BRICs where two, Brazil and Russia are commodity producers and the other two countries aren’t.  In terms of wealth, Mexico and Turkey are at about the same level $10,000 per head, this compares with $3,500 per head in Indonesia and $1,500 per head in Nigeria which is roughly the same as India.  They are slightly behind Russia at $14,000 per head and Brazil on $11,300 but still a bit ahead of China on $6,000.  As part of the research for this blog I found a great set of infographics which dives deeper into each of the MINT countries, click here for the article.

From an infrastructure point of view, these countries have some significant catching up to do, especially in Indonesia and Nigeria. Jim O’Neill recently completed a trip to each of the MINT countries on behalf of the BBC and he found out some amazing facts.  One of the most interesting was that about 170million people in Nigeria share the same amount of power that is used by about 1.5million people in the UK.  Almost every business has to generate its own power.  So this begs the question, how has Nigeria grown at a rate of 7% with literally zero power!  If Nigeria is able to sort out its utilities infrastructure then it is estimated that Nigeria could grow at 10-12% per year and become a key economic hub for the African continent.

Indonesia faces both political and infrastructure challenges and Turkey has its politics and a desire to do things the Western way which when combined with the Muslim faith in the country is certainly a challenge but they are determined to see their economies grow over the next decade. It is no surprise that Turkish Airlines is currently the fastest growing airline in the world.

From a manufacturing point of view, Mexico is grabbing most of the MINT related headlines in terms of levels of manufacturing inward investment.  Over the past two years it has established itself as a key automotive manufacturing hub, thanks in part to its relative proximity to the huge North American market and significantly reduced labour rates. Nissan, Daimler and VW have all announced multi-billion dollar investments in new production plants in the country.  Indonesia is seeing significant investment from both Western and Chinese companies looking to get out of the increasingly more expensive Chinese labour market.  Just as Mexico stands to become a leading automotive hub, then it is possible that Indonesia could become a leading high-tech investment hub over the next decade. High Tech goods have been manufactured in Indonesia for many years but I would expect exponential growth to now continue given that the country has now been identified as a significant growth economy.

From a B2B perspective it has been interesting to watch how technology has been adopted across the BRIC countries in recent years as it provides clues on B2B adoption levels across the MINT countries.  Out of all the BRIC countries and from a communications point of view, China has placed a lot of emphasis on improving its legacy telecommunications and network infrastructure.  It has also been keen to develop its own XML based message standards due to the increasing importance placed on internet based trade around the world.  However what has actually happened over time is that Western companies entering the Chinese market have brought in their Western ways of working and this includes their best practices for deploying B2B, ERP and other IT infrastructures that are key to operating a business today.  Also, China has huge global expansion plans and if they are to establish further operations in North America and Europe they will have to adopt Western B2B message and communications standards such as EDIFACT and AS2.  For this reason I believe that EDI messaging is here to stay and in fact the growing success of the emerging markets and their global expansion plans could lead to a growth in EDI traffic around the world.  Who thought that would happen back in 2000 when XML was touted as the replacement for EDI messaging!

Since the BRICs were identified as growth economies in 2001, technology has moved on very quickly and I think we will see the MINT countries move straight to new telecommunications infrastructures such as mobile networks.  After all reliable, fixed line internet connectivity is not widely available in many of the MINT countries.  Given that it is far quicker to install a mobile network when compared to a fixed line telecommunications infrastructure then I would expect mobile commerce or M-Commerce to grow faster in the MINT countries than the BRIC countries over the next few years. Here is a great SlideShare presentation that I found highlighting how a local telco provider, Vodacom, plans to support the mobile communications market in Nigeria, click here for more information. China will probably be implementing more mobile networks across the Western parts of its country but collectively I think mobile network adoption will be faster across the MINTs.

If companies are able to get access to reliable mobile and utilities infrastructures then we will see levels of B2B adoption increase quickly as the MINTs look to utilise more cloud based B2B integration services.  Given the relatively low IT skills that exist in some MINT countries, a cloud based approach to rolling out B2B infrastructures will help these countries grow their economies far more quickly than the BRICs were able to achieve in their early days on the world stage.

International expansion is an area that I have covered in numerous blog posts over the past few years, but this particular one encapsulates most of the areas that companies have to be aware of when entering a new market for the first time.  I have discussed Mexico extensively in an earlier blog post and future blog posts I will cover the other three MINT countries in more detail. So in summary, an interesting time for Western companies, should they invest in BRICs or MINTs ? As I have a sweet tooth I think I know where my money would go!

Fighting conflict minerals mining with the supply chain

The manufacturing industry has to contend with an enormous amount of different corporate social responsibility (CSR) requirements, but those responsible for the supply chain are increasingly facing the problem of how to ensure that all of their suppliers adhere to numerous, wide ranging compliance regulations. One of the most significant compliance issues about to take effect across the manufacturing industry is conflict minerals reporting.

Raw materials used in the manufacture of electronic components are typically sourced from many different locations around the world. One country that is considered mineral rich is the Democratic Republic of the Congo (DRC). Mining is crucial to the DRC economy, but some mines are controlled by militant groups that cause serious social and environmental issues in the region. These issues include serious human rights abuse, theft, extortion, forced child labour, deforestation and high taxation of mineral resources. Subsequently mining in the region contributes to a conflict that has claimed more than 5.4 million lives since it began in the late 1990’s. Increasingly, the manufacturing industry is seeking to only source “DRC Conflict Free” minerals, defined as products that do not contain minerals or their derivatives determined to be directly or indirectly financing or benefiting armed groups.

The DRC Conflict Free ban mainly affects four minerals: Cassiterite (tin ore), Wolframite (tungsten ore), Coltan (tantalum ore) and Gold. Collectively these are known as 3TG (Tin, Tantalum, Tungsten and Gold), and are used in the following supply chains:

  • Tantalum is often regarded as the first conflict mineral and became popular following the growth of the mobile phone industry. Today it is used in electronic components inside mobile phones, computers, video game consoles, digital cameras and as alloy for making carbide tools and jet engine components.
  • Tin is widely regarded as the primary funding source of rebel groups and used in alloys, tin plating, and solders for joining pipes and electronic circuits.
  • Tungsten is used in metal wires, electrodes and contacts which are used in a multitude of electrical and electronic devices, and the DRC is the world’s 5th largest producer of the mineral.
  • Gold is most often used in the manufacturing sector in electronic, communications and aerospace equipment due to its superior electric conductivity and corrosion resistance.

Over the past couple of years a number of organisations have been formed to help define processes on the clamping down of conflict minerals sourcing. The International ‘Organisation for Economic Co-Operation and Development’ (OECD) has designed a 5 step framework for identifying and removing conflict minerals from the supply chain. Additionally two bodies have been established to help high tech companies implement the OECD framework, the Electronic Industry Citizenship Coalition (EICC) and the Global eSustainability Initiative (GeSi).

To try and remove conflict minerals from global supply chains, the U.S congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. . Section 1502 of the act is a provision related to the sourcing of conflict minerals. This means that all companies submitting filings to the SEC must now complete forms to confirm that they are not using conflict minerals across their supply chain. The first submission is due for 31st May 2014 and then annually by 31st May each year. Any company, there are estimated to be around 6000 of them, that file Forms 10-K, 20-F or 40-F with the SEC each year will be affected by this new law. In particular those that operate in the aerospace, automotive, high tech, defence and medical devices sectors will be impacted. According to Deloitte, “the complexity of today’s supply chains combined with lack of visibility into sourcing practices will be one of the key challenges of ensuring that Dodd-Frank can be adhered to.”

One tool that has been developed by EICC to help companies adhere to the Dodd-Frank law is the conflict minerals reporting template, which complies with the SEC’s due diligence requirements. This Microsoft Excel based reporting template embraces the OECD’s 5 step framework and asks specific questions to ensure that conflict minerals are not used across a supply chain. Given that conflict minerals reporting is now law for North American based SEC filings, it is in a company’s interests to find an efficient way to conduct the reporting process with minimal effort and without disrupting the day to day operation of the companies being asked to complete the survey.

There are two key challenges to ensure successful reporting of conflict minerals. Firstly the company must ensure that it has up-to-date contact information for every company across the supply chain. Secondly all companies must complete the survey questions in a timely manner so as not to delay an SEC filing. Efficient contact management is therefore critical to the success of this reporting process, and to help ensure that a company remains within the law on conflict mineral reporting.

Establishing a community management strategy is never easy, especially given the global nature and diversity of today’s suppliers. One of the simplest ways to engage with a global community of trading partners is through a common platform that is accessible through nothing more than a web browser. One such platform is  GXS Active Community, a cloud based community management tool that has been designed to support people to people interactions across a supply chain. The platform uses a combination of centralised contact management and mass communication tools to allow a company to reach out to their trading partners anywhere across a supply chain. When using this platform, the EICC reporting tool could either be distributed as an email attachment or it could be replicated within the platform’s built in survey module. Therefore any company that has to comply with the new conflict minerals reporting process will be able to ensure that all its supply chain contacts are up to date but more importantly that it also has full traceability over which suppliers have actually completed their submission. Any trading partner that fails to complete the report for any reason will automatically be sent a reminder email, significantly improving response rates and helping to ensure that a SEC filing is completed on time.

Supply chain directors need to recognise the role that they can play in the fight against mining of conflict minerals by ridding them from their supply chains. Using an effective community management tool they’ll not only gain greater visibility of their supply chains and ensure they adhere to government legislation like the Dodd-Frank law, but they’ll also be helping to rally the fight against the mining of conflict minerals in suffering regions.

Mark Morley

Director of Industry Marketing for Manufacturing

GXS

Sheffield Forgemasters SC21 Manufacturing Excellence Assessment

“Audit” and “Enjoyment” are two words you don’t often see together but that’s how it’s been this week as Sheffield Forgemasters http://www.sheffieldforgemasters.com/ undertook a rigorous three-day SC21 Manufacturing Excellence Assessment with six auditors, overseen by four observers / mentors from BAE and Rolls-Royce. Great example of Supply Chain collaboration and delighted to see recognition for all of the hard work by everyone at Forgemasters. Thanks also for some great input, advice and coaching by the folk from BAE and Rolls-Royce. Everyone now looking forward to the next one! https://www.adsgroup.org.uk/pages/91430300.asp

Sheffield Forgemasters video (HR Media)