The following article addresses the unique issues inherent in the Metal Producing Industries, and the Lean transition process adaptations required to overcome such. Note: while this article specifically addresses “STEEL” the philosophy, concepts, and techniques are equally applicable in almost every
Achieving “World Class” Operating Performance in The Metals Industry… Fast!
“Even If You’re On The Right Track, You’ll Get Run Over If You Just Sit There!”
While there are a whole set of techniques and related disciplines, the general concept of “Lean” is that of continuous product flow, without interruption, through the entire value stream. Inventory is seen as an equivalent to cycle time (the more inventory, the longer any one item must wait for “its turn”). An underlying philosophy is that the reduction of cycle times and inventories will force waste to be exposed, and create the urgency for its elimination (see the classical “water & rocks” analogy on last page of this booklet).
Waste is re-defined as “anything that does not add value from the customer’s perspective”.
The results of a successful transformation to this powerful operating philosophy can be staggering: Huge reductions in inventory, freeing up millions in tax free cash; Shorter cycle times (i.e. improved responsiveness); Order of magnitude gains in quality; Quantum improvements in delivery reliability; And dramatic reductions in total operating costs.
To date, we have worked in eight different metal producing companies on two continents. Our ROI’s in this industry have averaged > 90 to 1. The concepts discussed in this article are not theoretical. They have been tested and proven. They work!
Begin your journey to World Class operations, today!
Transitioning to Lean: Our Core Beliefs
Metal producers have a set of uniqueness’ that make the traditional approach to implementing “Lean” very difficult. Some of the more obvious ones include:
What To Do first?
While it is the objective of Lean Manufacturing to dramatically improve all of the basic customer requirements; i.e. cost, quality, lead-time, and on-time; it is important that they be pursued in the correct sequence.
Contrary to intuition, we will encourage you to go after the last two, first! By reducing lead/cycle times, and forcing on-time completions, substantial cost and quality improvements will automatically be generated. As one of our clients succinctly put it, “It’s difficult to spend as much money making something in three days, as you can in three weeks!” Another obvious cost reduction comes from reduced material handling, and the associated damage.
Quality is greatly enhanced by reducing the amount of potential defects (smaller WIP inventory means fewer defects to be repaired or scrapped when a defect is discovered.) And less Work In Process inventory means that defects are discovered quicker, thereby improving the likelihood of uncovering the root cause of such defect.
Let’s establish some basic definitions and relationships before getting into the actual transition techniques. First, we will often refer to “inventory” and “cycle time” as essentially one and the same thing. The reason for this is best explained by referring to the “boxes on the conveyor” illustration below.
There are 10 boxes on the conveyor. If we remove and process one box off the bottom, and put another box on the top each day, how long will it take for the new box to get through this operation? Needless to say, without expediting, it will take ten days. Note: if our production rate were two boxes per day, the cycle time through this operation becomes simply the inventory, 10 boxes, divided by the daily output, 2 boxes/day, equals a 5 day cycle time.
What’s the point? Cycle Times Correlate Directly With Work In Process (WIP) Inventory Levels. Notice that even with expediting, the average cycle time does not change. Every box that is moved ahead simply delays the other boxes a proportional amount.
Another, not so obvious relationship, deals with the impact that high WIP levels have on on-time delivery. Since high inventories equate to long cycle times, large amounts of WIP force our customer to predict further into the future. His crystal ball gets foggy, so he frequently calls in change-orders (which screws up our delivery performance and costs us money for expediting and rescheduling).
You’ll also note that if we were to expedite box 10, i.e. move it around the other boxes down to position one, we would potentially make every other box late!
Expediting is a Major Cause of Missed Deliveries.
Now here’s the big question: Will you do more expediting with ten boxes on the conveyor (10 day lead-time), or with two boxes on the conveyor (2 day lead-time)?
Because our lead times are long, and our reliability suspect, our good customer has even been known to over-order or order early, and then delay delivery (which adds to finished goods inventory, moving and storage costs, and handling damage).
In addition, traditional practices generate all manner of complexity, and complexity costs a fortune!
You are no doubt beginning to see the large, but difficult to measure, cost and quality improvements that can be attained simply by becoming more responsive and reliable.
Our Rapid Impact Process:
We have found that a two-pronged approach produces the greatest gains in the shortest amount of time. Macro gains are achieved via global lead-time and on-time initiatives. While specific productivity and quality initiatives are pursued at the operational level in the form of concentrated blitzes. Blitz team participants also form the foundation for on-going continuous improvement teams.
Well, we’ve discussed why some traditional transition methods won’t work. Now let’s look at a method that does work. The process described below was not inspired by any “divine inspiration”. It was a culmination of many trials, failures, course corrections, and adjustments. Is it perfect? Hardly! Does it work? Exceptionally well!
Attain Top Level Understanding and Commitment:
Our normal process begins with a two day “Visioning” session, preferably offsite, with the entire top management staff. This is where the management team gets a chance to discuss and truly understand the philosophy and techniques of Lean Manufacturing. It is an interactive meeting, and includes a short simulation exercise that, to quote a CEO of a large integrated aluminum company, is “very compelling”. On day two, the discussion focuses on the “implications”. These are the subtle, “gotcha’s” that can blind-side top management if they’re not forewarned. They are discussed in more depth in our booklet “Transitioning to Lean, Top Management Implications”.
We’ll also attempt to get agreement on a set of company ground rules such as: “We will never, knowingly, overbook the mill. When an unforeseen overbooking does occur, the Commercial Department will decide which orders get rescheduled out, and will inform the affected customers”.
Considerable time is spent discussing the impact of “lean” on traditional internal and external measurements (short term profits, tons/hr, etc.). The CFO may be tasked to do a proforma to estimate the impact on quarterly reported profits (typically reduced) and cash flow (typically significantly improved) when inventories are substantially reduced. If the profit impact is large, a separate presentation may be scheduled for the board of directors, and even key analysts.
Next, macro corporate level goal curves are set and committed to by the entire staff (generally for inventory / lead-time reduction, and on-time shipments improvement: example below). Note: A goal curve is a goal (e.g. 95% on-time delivery) with a date for achievement (e.g. 6 months from today), and a line (the actual goal curve) drawn from our current performance level to that target/date. Similar goal curves may also be set at this time for the major 1st level business segments (plants, divisions). The commercial department may also be pushed to establish a finished goods inventory reduction goal curve.
We will request that one or more full-time internal facilitators be assigned. They should be from high in the organization, know the people and processes, and be well respected (the successful mills have re-assigned plant managers or vice president level persons for this critical task). While top management cannot delegate the responsibility, the facilitators become the day-to-day champions for the cause. The facilitator position reports directly to the C.E.O.
Two Basic Methods Of Implementation:
Different methodologies are utilized in mills that have a regular, linear flow from those with convoluted, multi-path routings. We’ll explain the process for both. Note: It is not uncommon to use both methods in the same company. Consider each method as a tool in your “toolbox”. Our job is to help you choose the appropriate tool for each application.
Method 1: Install Kanban Controls and Get On-Time
Kanban is a Japanese word meaning “signal”. It is commonly used in production environments as a signal that authorizes the production or movement of a product.
In metal producing companies, this “signal” is typically represented by an amount of space allocated for product storage between operating units.
As was pointed out earlier, there is a direct correlation between inventory and cycle time. Reducing the amount of inventory between operating units therefore reduces the time it takes to get any product through the process.
Kanbans provide an upper limit to the amount of inventory that is allowed between units. Let’s use a steel company that processes coils as a simple example. The Kanbans might take the form of a restricted number of coil cradles, or allowable locations, between any two operating units.
The operating rules are extremely simple and powerful. The feeding operation, e.g. the pickle line, is authorized to process the next coil on the schedule, as long as there is an empty cradle to accept the coil. By definition, if all of the allowable cradle spaces are already occupied by coils, the downstream operation, e.g. the cold mill, doesn’t need another coil. It hasn’t used the ones it’s already got!
Kanbans are extremely controversial due to the actions that this signal demands. In our example, the pickle line would be required to either slow their production rate to match that of the cold mill, switch to a product that does not go to the cold mill, or stop its’ production until one or more coil cradles are emptied. In most mills, this action is totally contrary to past practice, and adverse to our traditional measurement and reward systems.
As one plant manager put it “In the past, stopping a unit was a career decision!”
What Are The Benefits Of Kanban Controls?
Kanban controls provide some very large benefits. They put upper limits on the inventory, and thereby lead-time. Putting limits on inventory allows you to increase the physical spacing between products, and thereby dramatically reduce handling damage. And reduced lead-times provide a competitive edge in customer service; i.e. quicker delivery.
Kanbans can also have a huge impact on quality. They put an upper limit on the number of potential defects. At a recent client mill, the day after discussing this concept, a defect was discovered that involved 1600 tons of coils. The defect was not detectable until processed on the next downstream operation. Prime product had to be downgraded to non-prime, at a $300/ton price penalty. Total cost: half a million dollars! Note: in less than three months, kanban limits had been put in place, and the maximum quality exposure was cut by 60%!
Another often overlooked impact of kanbans on quality is in its’ impact on speed of discover of a defect. As any quality guru will tell you, the faster you discover a defect, the more likely you are to be able to ascertain a root cause. By reducing the inventory between operations, kanbans speed the discovery of any defects.
Kanbans force us to attempt to pace every operation to the speed of the bottleneck. In so doing, the mill begins to take on the characteristics of an assembly line. Product begins to FLOW, rather than stop and start. Management focus moves from optimizing the individual units, to optimizing the TOTAL MILL. Units are forced to communicate, and coordinate like never before.
And, perhaps the most powerful aspect of kanban controls is that it provides an extremely simple, visual means to force continuous improvement. Reducing the size of the kanban forces the next level of “rocks” to the surface. Resolving each rock improves cost and/or quality.
In our Rapid Impact® process, teams are formed between each pair of operating units. The teams are asked to set a goal curve for the reduction of the kanban size (in this example, coil spaces). These teams meet regularly, and must provide “cause and corrective action” reports to plant management anytime the kanbans are exceeded.
These inter-unit teams are initiated via a “kanban blitz”.
The teams typically include representatives from operations, planning / scheduling, technical/metallurgical, and maintenance. We also advocate the involvement of the material handling people, i.e. the ram truck and/or crane drivers.
The blitz begins with a short education session / review of the basic concepts and techniques. A goal curve is then agreed upon, i.e. “reduce the allowable number of coils in front of the cold mill from 100 to 40 over the next four months”. Unless there are extenuating circumstances, the “curve” is simply a straight line from 100 (today) to 40 (four months from today). This curve is plotted along with the actual kanban size. Teams are required to report “cause and corrective action” when the goal curve is exceeded for any reason.
The “blitz” portion involves the entire team physically walking the floor, agreeing on the initial locations for the starting kanban quantity, and physically marking off these spaces. We always attempt to remove any other possible places to put inventory. Again, using our coil producer example, we’d set a rule that no coil can be place on the floor. It must be in a coil cradle. Then we’d limit the number of cradles to the kanban quantity. We also advocate painting the kanban area a specific color, and doing a thorough housekeeping as part of this process. You want it glaringly obvious that “things have changed. Business as usual is no longer acceptable”
The team then creates the “kanban rules”, documenting the new process. These are then “bulletized” and posted throughout the work place. All operators are then put through an education/discussion session where the new operating philosophy and rules are explained. The inter-unit team typically schedules and conducts such classes for all crews.
Note: We also recommend that any “held” material also be required to be kept inside the kanbans. Doing so will force quick dispositioning and reworking of discrepant material.
Historically, in most mills, an upstream operation would continue to produce as long as there was a place to put the product. You can think of the kanban controls as a way to “shrink the building size”. If the building were smaller, we’d have had to stop sooner!
A simple first step toward kanban controls, in a coil producing mill, is to put out the edict, no stacking of coils, and no placing coils beyond the isle markers. The next step is to then “squeeze” the WIP inventory further by implementing formal kanban controls.
On-Time Delivery Goal Curve
We mentioned earlier that we ask clients to accomplish two simultaneous goal curves: Inventory reduction (cycle time) and On-Time Delivery.
Truthfully, it really isn’t very difficult to accomplish the inventory reduction objective… if you don’t have to be on time! We consider on-time delivery as the “stake in the ground” that makes all other measures relative. In our introductory classes we speak of our original delivery date commitment as a PROMISE. “How do you feel when someone breaks a promise they made to you?”
One critical culture change that must take place is the sanctity of the delivery commitment. “We ship on time. All the time.”
Once again, the goal curve drives the improvement process. Detailed cause and corrective action is demanded any time the actual delivery performance fall below the goal curve.
Let’s take a look at the kinds of problems that may surface at your mill:
One “rock” that you will likely encounter is the disruption caused by extensive down periods due to scheduled maintenance. Needless to say, if the kanban between two units is sized at 12 hours, a scheduled maintenance period of 24 hours is going to cause a problem! The solution:
To “modularize” planned maintenance means to split the maintenance process into smaller chunks, done more frequently. For example, instead of scheduling one 24-hour maintenance down period, every three weeks, we’d like to get the same amount of work done in 8-hour modules, done every week. One way to accomplish this is to hold targeted “maintenance blitzes”.
* * * There Is More To This Article * * *
For a printable PDF version of the entire booklet, or any of our other publications, please visit our Contact Page and complete our short request form.