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Supply Chain Horror Story

November 2nd, 2010 admin No comments

In his excellent reference ‘The Lean Toolbox’ ( a must read for any aspiring Lean student or practioner wanting a comprehensive review of Lean basics), John Bicheno outlines a number of supplier management approaches, including obviously preferring quality over quantity, developing long-term collaborative relationships, encouraging joint improvement activities, vendor-managed inventory and collaborative planning forecasting and replenishment. All good basic supply chain best practice.

One he obviously missed out on however is highlighted in a French newspaper this morning. It seems that a number of suppliers of the electronics industry were recently told by a major manufacturer that, given that electronic invoicing was being imposed on them, they would be expected in exchange to pay 1200 euros given that their photocopying and printing costs were going to be reduced.

These companies form part of the 7400 French companies who are using an arbitration process put in place by the governement supposedly to help the smaller firms during the current economic period. I doubt if it was meant to face up to blatant stupidity however. What is interesting is that the 7400 companies currently concerned by this process is made up of 47 individual cases… and 14 collective cases. That’s an average of over 500 per group.

What is happening is that, requiring the cover of anonymity, the small boys are taking shelter behind the industry federations to ‘gang up’ on the bigger players. And the 14 collective cases could only be the tip of the iceberg – many conflictual situations are resolved only after the threat has been made, but before any action is taken.

Whether these figures say more about the state of customer-supplier relations or the more general specificities of the French culture is not easy to determine. And it is clear that, under the cover of anonymity, it is much easier to fight back, especially with an elected federation wishing to show its clout.

However, I shall not be proposing to John B that the 1200 euros is used as an example of the best practice of ’sharing cost savings’. This one belongs a lot more firmly in the Horror section.

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From the Albi Ekiden to Chicago

October 3rd, 2010 admin No comments

As a Lean Practitioner, it is important to have other centres of interest, or life can become really frustrating (at other times, it can be exhilirating, of course). One of mine is running, which I took up around eight years ago, mainly to keep myself of mischief.

Last night I participated in my very first ‘Ekiden’, in the beautiful cathedral city of Albi, in the south-west France. The format is a marathon (42,195km) relay, with a team of six, running respectively 5, 10, 5, 10, 5 and 7,195 km). And all this starting at eight in the evening, by which time it was obviously dark, and some of the less-serious teams had already been downing the ‘aperitifs’ for a couple of hours.

The interesting fact is that I’ve only just learned this evening that ‘Ekiden’ is in fact a Japanese term. According to Wikipedia,

“The first ekiden race was sponsored by the Yomiuri Shimbun in 1917, and was run over three days between the old Japanese capital of Kyoto and the modern capital of Tokyo, a distance of 508 km, to celebrate the anniversary of the moving of the capital to Tokyo….As written in Japanese, Ekiden combines the characters for “station” (駅) and “transmit” (伝).”

That I consider this ‘interesting’ is due to the fact that, whilst observing people’s behaviours around me last night (there were over 260 teams of six runners), my perception was that the whole thing had a decidedly ‘Lean’ flavour to it. It some ways it reminded me of the school outing in Goldratt’s ‘The Goal’, where the group only progressed as fast as its slowest walker. Last night there were some really fit looking athletes desperately looking for their team members who were obviously a lot slower, restrained by their inferior speed (in this part of France, running is generally an excuse for having a good time, and for some runners it’s the only time they put on their training shoes all year).

But there was no frustration, no hard feelings. A lot of work had gone into defining the exact order of runners so as not to leave anyone too far behind. Mutual encouragement was rife, to the extent that individuals in difficulty were often accompanied by team members over the more testing parts of the course. Advance warning was given of the imminent arrival of your team member through a large screen hooked up to a camera 100 meters down the road. And everything was measured and instantaneously posted on electronic scoreboards each time a runner crossed the finishing line. Everybody knew where the team stood, and what needed to be done.

And it was the Japanese that invented this.

It probably suffices to say that my team didn’t win, but we weren’t last, and in any case was one of those that had already started on the red wine before the race.

However, this time next week, it’s going to be a totally different story. I’m coming over to Chicago for the 10-10-10 Marathon, just as I did last year, and enjoyed it so much I just had to get back as soon as possible. No red wine allowed next Sunday, and there’ll be five less members in the team.

Wish me luck.

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Why, why, why, why, why?

September 5th, 2010 admin No comments

In 2009 in France, 43% of new car sales were of  models manufactured in France, that is a 14% drop on ten years earlier. And of the cars manufactured in France, 64% of components were sourced in France (compared with 67% in 1999).

Just one extract from an interesting study that came out this week from the Ministry of Industry. Globally, the percentage of French components in French products has dropped by 75% to 69%. Only a 6%  drop, you may be saying, but when multiplied by trillions of components sourced over the period, it’s pretty easy to understand why French industry is seen to be in decline.

Some industries come out better than others. 86% of components in high tech products are French, as are 80% of luxury goods. However, trains (including the TGV include only 62%, and the airlines just over half).

All of a sudden it is easy to understand why Airbus, for example, has faced consecutive delays to some of its major programmes. There most be a million or so components (if not more) on an A380. It would be a major job getting them delivered, tested and passed even with suppliers housed next door. If almost half of the parts have to be passed through customs and any questions raised during testing fed through a translator, it could become a little more difficult. Unless there are masses of stock both at final assembly and on the high seas or in distribution centres around the world.

It does make you want to ask ‘why’ at least five times!

In any case, the French government has decided to react and is thinking about introducing a ‘made in France’ label. How they are going to define ‘made in France’ based on some of the figures above is another story entirely.

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Money to invest, anyone?

September 4th, 2010 admin No comments

4 septembre 2000 : the CAC40, the French equivalent of the Dow Jones or FTSE index, reached 6922 points.

4 septembre 2010: it closes at around 3672, barely over half of the level of 10 years earlier.

Source : Les Echos, 3/9/10

Source : Les Echos, 3/9/10

Now, Lean Thinkers generally agree that the Lean journey is far more difficult in those companies permanently fighting off shareholders pressures. Don’t you think that, with hindsight, shareholders 10 years ago may have been pushing longer-term Lean improvements rather than demanding short-term financial gain?

For the decline in value of French shares is far more acute than that of either the U.S. or Germany, as indicated by the diagram on the right. The U.S. and Germany are two countries where Lean Thinking has caught on far more than in France (I also read this week that unemployment has dropped in Germany for the 13th successive month).

OK, there have been three waves of crisis in the last years – the Internet bubble bursting, the subprime phase, and more recently international debt. However, contrary to the Dow Jones and Dax 30, the peak in 2000 has never again been reached since.And what is also worrying is that, back in 2000 (as is the case today), technology and innovation were seen as the way forward. 10 years later, technology stock accounts for only 6% of the CAC 40, against 40% at the time.

There have been successes, notably in industry : Air Liquide has increased by 87% and Michelin by 78%. However in the 10 leading stocks in terms of value at this moment, (Total, BNP Paribas, Sanofi-Aventis, EDF, GDF Suez, L’Oréal, LVMH, France Telecom, AccelorMittal, Société Générale), there is only one we could consider as belonging to industry.

Anyone with money to invest? I can only suggest putting it where Lean Thinking is rife, and sitting back with confidence that this is the best investment you can make for the next ten years.

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The road back from China

August 8th, 2010 admin No comments

Back in the first quarter, I reported on the government plans to reboost industry, one measurable objective being to increase industrial output by 25% by 2015.

One of the measures announced was to provide ’support’ to entice French companies having offshored production to bring it back into the country. 20% of the billion or so euros available have been set aside between now and 2013 to provide financial incitations to bring back the work.

Last week, the first company to benefit from these measures was announced. A foundary, Loiselet, in the north of France had transferred production to China some years ago as environmental restrictions had limited its potential for expansion. The return on investment however was offset by the transports costs (one would have thought that this may have been calculatable beforehand?) and the government offer of a reimbursable loan was sufficient for them to decide to transfer back, and invest 12m euros in the French site.

The qualifying criteria? You need to be a company of less than 5000 employees, have a project of more than 5 million euros, and commit to creating and keeping at least 25 jobs for the next three years. The aim is to create 2000 jobs over the next few years – which needs to be put in the context of the 2m industrial jobs which have disappeared over the past 30 years, but it is hoped that the success of the measures will provide a springboard for others to follow suit under their own steam.

There are, as is the norm in France, those who dispute the real value of the measure, and claim that companies are starting to come back anyway. A furniture manufacturer, Majencia, transferred production to China in 2000. Theoretically,  there was a 20% cost advantage in doing so, but this was soon reduced to 10% due to the extra logistics costs (another lack of foresight?). In 2006, the work was transferred back after an agreement with the works councils that the remaining 10% difference could be cancelled out by productivity improvements. Atol, a network of optical centres, had to transfer production to China in 2003 as there were no French companies prepared to take on the small batch sizes of spectacles to be manufactured. It’s now all coming back (what a difference a financial crisis makes) and the opportunity taken to work with local manufacturers on providing innovative products, which was not possible when the suppliers were oceans away.

A form of protectionism it may be, but the French government is showing the way, and hopefully more companies will be jumping on the return-trip bandwagon over the next few months.

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Why does Productivity make us uneasy?

August 5th, 2010 admin No comments

Maybe I’ve already mentioned it, but when giving an ‘introduction to Lean’ presentation a few weeks ago, my mention of a ‘time-based approach’ led to one of the participants commenting that “you should be careful about mentioning that, it could scare people”.

Scared by taking less time to get something done. Well, it got me thinking, and concluding that there is a probably a link between this type of point of view and the difficulties we have in France is driving ‘Lean’ thinking. It’s all to do with the culture!!

A post a few months ago made a reference to the government’s plan for industry, in which ’subsidies’ was the buzzword, ‘productivity’ hardly mentioned (apart from wondering why the Germans are so much better at it) and ‘Lean’ not at all.

In the past 30 years, the price of petrol has been divided by 2, steak by 3, oranges by 4 and electric light bulbs by 5. All thanks to skilled industrial engineers making the changes required to drive ‘productivity’. Consumers have therefore benefitted greatly from the progress made, but have as a result interpreted productivity in only one of two possible ways – producing as much using less resources… and in most people’s minds, the resources in question are the people themselves.

Very few people see productivity as an opportunity to make more with the same resources. Therefore, productivity has become linked to social recession. In the same way, using time as the unit of measure induces concern and maybe even stress, rather than joy and excitement as the potential of being able to make and sell so much more.

France is and always has been a very creative and innovative country. Information systems is the current thing to be in. I saw an article this morning in which it is reported that over the first half of this year, national results for the big IT companies are far better than the international averages. The French love creating things.

However, growth cannot feed on creativity and innovation alone. Production and productivity make our daily bread. Innovation and productivity feed off each other. And it is time for us all to stop worrying whenever we hear the P word.

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A ninth waste identified by Air France

June 22nd, 2010 admin No comments

Depending on what you are reading or who you are talking to, part of Lean is about eliminating either the seven or the eight standard wastes, the eighth in question being insufficient use of human potential and competences. Well, I can announce a ninth one, according to a recent governement report looking into criminality in Paris airports.

The ninth waste in question is theft, and Air France, being the major carrier into and out of Paris, is suffering the most from the lack of process control of goods destined to make trips with Air France more comfortable.

For example, blankets, pillow cases and tablecloths used in the long haul flights mysteriously disappear…. most probably in the hands of the passengers themselves, at a cost of 1,9m euros per year. The loss of cutlery and porcelain plates and cups amounts almost to as much.

However, it is not just the passengers who have light fingers. It is estimated that one in ten bottles of champagne never actually makes it onto the plane in the first place. The toiletries are another favourite for those dealing with the transport, as well as the meals themselves. And almost half a million of euros worth of newspapers disappear without trace. What can they possibly do with a few hundred copies of today’s papers?

Duty-free items, despite stringent security, and first-aid kits come in for the same treatment. But probably the most strange items to disappear are the metal trolleys used to serve meals and drinks. 630 000 euros worth, taken probably for the value of the metal!

The fact that the word ‘theft’ is the same in French (’vol’) as the word flight, this report potentially adds a new slant to Air France’s marketing campaigns!

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How does 144 days work a year sound to you?

May 14th, 2010 admin No comments

We all know that leadership and training are at the heart of all successful continuous improvement initiatives. But wouldn’t it be easier if we managed to get it right during our schooling?

A 2006 report indicated that the efficiency of the education system in France was below the average of developed nations (OCDE). If you want good schooling, live in Finland or… Korea. Now, a national investigation has revealed that :

- one in five children suffers serious reading diffculties during his school curriculum (and it’s a lot worse in maths),

- one in six leaves the schooling system without any qualifications.

This is despite the fact that 3,9% of GNP (average for the OCDE countries) is dedicated to education, but the number of pupils is far less than in Finland or Japan, who also come out really well.

Conclusions of the government task force : “it is a problem with organisation and management“. Well, I wonder how much they got paid to come up with that one!! Some of the observations made are that :

- very little review of the education policies against actual pupil requirements (who said ‘customer value’?),

- redundancy of the different systems of extra hours in place to help students with difficulties (’overproduction’),

- a too high centralisation of recruitment decisions with the local heads having very little say (’misuse of workforce potential’).

The measurement system comes in for criticism. For example, France is ‘world champion’ in having students redo a year’s curriculum due to insufficient results (it happens to 40% of them before they reach 15), with no evidence that doing improves results in the long term. However, schools obtain resources based on the number of pupils per level – where is the incentive to whisk them through the system?

The school year is made up of 144 days work, one of the shortest in the world (and I know for the fact that my son spends many of those idling his time away in self-study periods). Nearly half of lessons attract small groups given the diversity of subjects that are on offer. And who comes out of this the worst off? Those from the lower social levels, of which only 18% obtain the ‘baccalaureat’ against 78% for the better off.

What is the most frustrating in all of this is that there doesn’t seem to be a plan in place to make things any different!!

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Lean, Green and Risk-Free

April 27th, 2010 admin No comments

There’s an interesting article in this morning’s French economic newspaper “Les Echos”. Basically, the author is asking the question on whether last week’s air traffic standstill due to the Icelandic volcano eruption is a sign that the transport boom is over, in the same way as the property, internet and financial good time have all come to an end at some time in the recent past.

He points out that the increased accessibility and reduced cost of transport over the years, from both a business and leisure viewpoint, has increased our dependance so much that we now cannot live without it. Companies have gone overseas to find cheap alternative sources of supply, the benefits outweighing the increased cost of the supply chain. And the increased demand has generated economies of scale, which have made the services that more accessible, etc… One big vicious circle.

‘Lean Management’ gets a mention, rare for this paper, in the context that an obsession with reducing the non value-adding costs of these extended supply chain has resulted in decreased stock levels. In some cases, the only stocks can be those currently being shipped in the transport system. And when the transport system in question breaks down, there is potentially chaos.

So have we gone too far? I can’t say that I heard too many complaints from businesses faced with production lines shutting down due to the non-availability of parts. Most of the anguish came from individuals and holidaymakers. Maybe the downtime of five or six days was not sufficient to make an impact. However, would it be the same outcome if, as has happened in the past, the French lorry drivers block all roads for a couple of weeks, or a worldwide fuel crisis nails the planes to the ground?

Food for thought indeed, especially for those pushing for more insourcing and home-grown products. Being Lean is a great objective – being Lean, Green and Risk-Free, even we pay a little more, is maybe a better compromise.

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It had to be expected.

April 15th, 2010 admin No comments

I’d say that this is the first of many. It seems that the suppliers of the telecoms operators are having difficulty keeping up with the demand of their customers at the moment. 2009 was spent reducing headcount and taking defensive actions against falling sales. But since the beginning of the year, with the explosion of the Iphone and other mobile devices requiring investments in new networks, France Telecom, SFR and Bouygues etc are placing increased demands on the Ciscos and Alcatel-Lucents of  this world.

A ’spokesman’ for the supplier claims that this situation is quite normal. It appears that lead-times are around six months, given the number of component suppliers in the supply chain, each with their own second-tier suppliers.

It looks pretty obvious that communication is not of the highest quality in this type of supply chain. If the operators and their suppliers had spent a little more time around a table agreeing on what would be and what would not be possible, and where strategic stocks should be held, and that this had been communicated through and agreed by the sales divisions, the current situation may be a little different. Instead it seems that the operators are ‘exercing pressure’ (we can probably guess in what sort of climate) on the suppliers to limit the damage.

In the case of Alcatel-Lucent, the consequences have been and could be even more dramatic. Worldwide sales figures have been reviewed downwards with a similar impact on the forecasted share price, and the Operations Director left the company on Friday possibly because he’d reduced stocks so much in the context of a cost-cutting initiative that it is going to take months to recover. You can be sure that he probably got a big bonus a few months ago for doing so, so we shouldn’t worry for him too much.

Interestingly enough, it seems that the Chinese operators are not facing the same issues. Either they have vertically integrated, have very flexible local suppliers… or didn’t notice the dip in the economic cycle.

I just wonder who is going to be next.

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