q2 2011 managing times

2 Managing Times | Q2.11www.managingtimes.com

What strikes me as I review the articles inthis issue is that we are literally transforminglean itself. As lean thinking matures, many ofour clients no longer need to understand thedefinition of lean or how to implement someof the tools within their organizations.

The articles in this issue highlight thenext frontier of operational excellence. Howare you pushing beyond the boundaries andcreating the future of lean in your enterprise?

In our Leadership Insights Q&A,Vermeer CEO Mary Andringa, a long timelean champion, has created a larger-than-lifelean culture to unearth a steady stream ofcash flow, growth and profit sharing.Vermeer leaders have infused their culturewith LeanSigma principles and best practicesand are replicating this model as a platformfor sustainable, repeatable growth. Thismeans that they aren’t expanding globally by simply opening sales offices in othercountries. They’re embedding themselves in each local market and developing newproducts and services that meet localbusiness requirements.

In our featured case study, a medicaldevice manufacturer is simplifying businessprocesses to get closer to customers andremove hard-to-see waste in a call center. Assales grew over the years, operations in thecustomer call center became increasinglycomplicated and less effective. They decidedto apply LeanSigma tools and practices toreduce the number of dropped calls, improveaverage speed to answer and reduce thenumber of calls going into voice mail. As aresult, the company was able to increasecustomer value and drive new revenueopportunities.

Ken Koenemann, our resident experton lean value chain transformation,challenges us once again to think differently

PUBLISHER’SNOTE

about supply chain management. Headvocates the concept of value streamsegmentation as a way to connect customerdemand, marketing strategy and executionby organizing supply chain strategies aroundcustomer needs.

Finally, be sure to read about the CarlisleCorporation. The diversified industrialmanufacturer was recently awarded the TBMPerfect Engine Corporate Award just threeyears into its lean journey. Carlisle is using theLeanSigma approach as part of a strategicroadmap for value creation and growth. Since2008, the company has rapidly deployed leanmethodologies through a globalimplementation of the Carlisle OperatingSystem — a global lean business managementand performance system. Over 75 Carlislesites have leveraged lean to drive a 25 percentimprovement in productivity, liberate 2.6million square feet of manufacturing andwarehouse space, and deliver nearly $70million in division cost savings throughoutfive strategic business platforms.

Don’t get me wrong. The basic toolsand methodologies will always be important,and these lean leaders aren’t taking the toolsfor granted. They’ve recognized that thebasics are just the beginning. A LeanSigmaoperational excellence model provides afoundation for leveraging your assets andpeople to constantly increase the value thatyou deliver to your customers. Is leanstanding still in your organization or is ittransforming to create your new future?

Anand Sharma Co-founder & CEOTBM Consulting Group, [email protected]

The Future of Lean Is Visible Today

3Managing Times | Q2.11www.managingtimes.com

A publication of

TBM Consulting Group

4400 Ben Franklin Boulevard

Durham, North Carolina 27704

800.438.5535 www.tbmcg.com

Publisher

Anand Sharma: [email protected]

Executive Editor

William A. Schwartz: [email protected]

Managing Editor

Angela Scenna: [email protected]

Featured Columnists

Anand SharmaTonya VinasKen KoenemannGreg Babe

Contributors

Mary AndringaTonya VinasNero HaralalkaDavid DrickhamerMelissa Slater

Art Direction and Design

Crossbow Groupwww.crossbowgroup.com

Printing

Carter Printing & Graphics, Inc.www.carterprintingnc.com

Published in Durham, NC

4400 Ben Franklin Boulevard

Durham, NC 27704

TBM, the TBM logo, and LeanSigma® are registeredtrademarks of TBM Consulting Group, Inc.

If you would like to receive this journal via email,send your vital information including emailaddress to [email protected]

On the cover: Business process improvement in a call center helps our client get closer tocustomers and roll out upgrades and other clientbenefits faster.

Dave Winter, Stolle MachineryCompany, LLC, was named as VicePresident, Manufacturing, ColoradoOperations. David will be responsible fordirection, leadership and oversight of theirproduction sub-system integrators andcontract logistics centers within the state ofColorado…Congratulations to the winners ofScholle’s 2010 Lean Award winners from theScholle Packaging Northlake facility: JohnPiccininni, Rick Gawenda, Lewis Bowman,Dan Robbins, Ken Eme and AndreOliveria. They received the award forexcellence in all aspects of a lean enterprisewhile proficiently deploying best practicesand achieving expected results….CatalentPharma Solutions recently launched a leantransformation at their Wilmington, KYlocation…Herb Brown, formerly of TBMConsulting Group has joined SterisManufacturing as Director, Lean Enterprise.

MANAGINGQ2.11

TIMES

PUB

LISH

ER’S

NO

TE. L

EAN

CO

MM

UN

ITY

NEW

S

Mark Bennett is now the C.I. Leader atMettler Toledo, Hi-Speed, Ithaca, NY.TBM has added several new employees tosupport our clients: Parker Ress, GraphicDesigner and Brent Hetland, DploySolutions Programmer in Durham,NC…Edward Qiang LIU and KevinHandayang are Senior ManagementConsultants in TBM China and Indonesiarespectively...Patricia Fonseca, MarketingManager and Jose Sanchez, SeniorManagement Consultant in TBMMexico…Aditi Badve, SeniorManagement Consultant in TBM-US. Sheis a Six Sigma Black Belt with extensiveFDA regulatory experience… Thefollowing consultants are supporting TBMclients in a contract role: Ken Black, BillSample, Bonnie Smith, Don Beaver,Kevin Hogan, Mike Noonan and SheriNemeth.

LEANCOMMUNITYNEWS

2011 Perfect Engine Award

TBM presents Carlisle Corporation with the 2011Perfect Engine award recognizing commitment to a

continuous improvement philosophy and its success as a leanenterprise. From left to right: Bill Schwartz, TBM Executive VicePresident, President and CEO, Mike Voigt, Vice President, CarlisleOperating System, Dave Roberts, Carlisle Chairman, Anand Sharma,TBM Founder and CEO.

Q. You have so many excitingimprovement programs going on atVermeer —whether focused on productand process, or dedicated to employeeor community benefit. How do youdecide what to focus on?

We use the process of policy deployment.This past year, for instance, we did another

five-year strategy look. Weidentified some major

breakthrough initiatives thatwe want to focus on for thenext five years, and then wedrilled down into what ourtop priorities would be for2011 and identified ourannual improvement

projects. From that, wedecide the areas wherewe will put ourresources.

Q. Tell me about one of your top priorities for 2011.

Our potential — and how we build ourresources for — growth in the LatinAmerican market. But as in everything wedo, we use lean as we go through theprocess. So we’ll be looking first at growingwith the resources that we have — creativitybefore capital.

Q. You have seven sites around theglobe, approximately 2,400 employees,nearly 600 industrial and forageequipment dealers and an expandingproduct line. How has having a leanculture helped your company managecomplexity?

There are always complexities and challengesno matter where you are as a company. Lean has made some things less complex.For example, 10 years ago, we did not havestandard work and commonality, whichmade us more complicated. We used lean tocreate more commonality in engineering,more commonality in processes. But we’recomplicated in different ways.

In the past 10 years we’ve enlarged our global footprint and our product/solutionoffering; we’ve bought a lot of technology;and we’ve bought a few companies. And wewere able to do all of that because we freedup inventory for cash.

LEADERSHIPINSIGHTS

Mary Andringa, President and CEO of Vermeer,

a heavy-equipment manufacturer based in Pella, Iowa.

Vermeer leaders have infused their culture with LeanSigma

principles and best practices and are replicating this model

as they expand globally.

Lean Leads The WayHow one mid-sized manufacturer created a larger-than-life lean culture to unearth a steady stream of profit sharing, cash flow and growth.

Tonya Vinas, freelance business journalist and former editor of Industry Week magazine


We also have quite a robust internship

program, so we are touching college students. Right now we have 200 internapplications, and we’ll be able to take 25 to30, so it’s really competitive. We look forsomeone with multi-cultural experience orwho can fit where we have a need. We havehired quite a few people who broaden our perspective this way.

We also do a lot of training. We trainwelders and machinists, and we workintensely with our local community colleges.We are very proactive about making sure wehave the right talent.

Q. You have a very innovative new-product-development process. Give me anexample of a recently developed productthat is creating value in a new way forcustomers.

Our on-grade trenchless technology forsewer or water installation. Usually theseprojects use large excavators, and a lot ofopen trenches. This technology is trenchless,and it is precision boring. It uses a laser, andit takes all of the fluid out of the ground.What you get is perfectly on-grade precisioninstallation of pipe. We are growing themarket. It’s pretty dependent ongovernment funding, but this is a big issuearound the world. So it is a big market.

Q. How about a service example?

We’ve done some training courses for thetree-care industry. It’s not a big, profitableprogram, and it’s not ongoing because it is somewhat dependent on governmentfunding. We have participated in weeklongtraining for potential employees of tree-carecompanies. Then, at the end of the week weset up interviews for the participants and tryto secure them jobs. Checking back with theemployers, they were very pleased with theknowledge that these participants had, andoften they were promoted into managerialpositions faster than they would have been otherwise.

Q. As far as global lean companies, I consider Vermeer to be world-class. Yet, true to lean principles, your companystill works to eliminate waste in very basicways. Your dealer inventory-replenishmentprogram is a good example.

That’s right. We worked on one line toreduce lead time. What required 52 days todeliver in a batch mode is now at a little overtwo days. When a brush chipper is sold to aretail customer, we automatically startbuilding another brush chipper for the dealerand get it to them as soon as possible.Previously, we had been incentivizing themto order once a month. So they wereordering in batches, but not selling inbatches, and the flow didn’t fit.

LEADERSHIPINSIGHTS (continued)

LEA

DER

SHIP

INSI

GH

TS


Q. Can you summarize the project?

We had a kaizen event with dealers to figureout how the trigger points would work, andwe launched it with a couple of pilot dealers.Then we would launch it at one dealer amonth and work out the bugs before wemoved on. Within a year we had all of ourdomestic dealers on the program, and theylove it. Before, they would place an orderwithout really knowing what customerswanted, and then we would fill that orderover the next couple of months.

Now, we know at 4 o’clock in the morningwhat they sold, and we automatically put areplacement in the line up for them. Andoften, we have that chipper on a truck onthe way to them the next day. [We havesome buffer in our yard, and they have somebuffer in their yard.]

So inventory turns for dealers have improvedtremendously, and they get fresh inventory.This used to be a problem because we wouldhave aged inventory, and they would haveaged inventory, because forecasts changed.

Q. What have been the biggest businessbenefits for dealers and Vermeer?

They tell me that they are spending 10 to 20fewer hours a month in planning. A lot ofdealers have multiple locations, so they spent a lot of time locating equipment andmoving it from one location to another.Now, we deliver directly to the site fromwhere they are going to sell it.

For Vermeer, when we got the dealers set up,we turned around and did the same thingwith the key suppliers for the model line.We really kept working at the whole linefrom the suppliers to the production process,to the dealers. Because of this project, we’ve made great strides with ourdomestic industrial dealers for at least 50 percent of our volume.

Q. What lean practices do you use mostin your work life?

I’m really into standard work. I’m constantlylooking at how to pack, how to go into airports and how to go through customs in ways that take time out of a process. And I’m always sequencing what has to bedone when.

“Because of this project,

we’ve made great strides

with our domestic industrial

dealers for at least 50

percent of our volume.”

CA

SE S

TUD

Y


CASESTUDY

Identifying waste — you could call itthe first step toward process improvement.Look around for piles of parts or barricadesof boxes. Time how long an operatorsearches for a missing tool. Count thenumber of steps someone takes to deliverinformation that could have been conveyedvisually.

These typical wastes are easy to spot on an open plant floor where inventory is everywhere. But what if operators are onphones instead of a production line? Suchwas the setting for a customer call centerwhen the company asked for TBM’s help.

Stellar customer care is a key growth driverat this company. But as sales grew over theyears, operations in the call center becameincreasingly complicated and less effective.

Leaders suspected the potential to increasethroughput and quality (more calls, moresales and a better customer experience).What was needed, they decided, was a wayto apply LeanSigma tools and practices tothis non-manufacturing operation.

“As we’ve expanded, we didn’t look internally at our processes and ask, ‘Does this still make sense? And do our internalprocesses ultimately bring value to our external customers?’ ” explained a companyspokesman. “With TBM’s help, we were able to step back, evaluate our processes and answer those questions.”

CLIENT

A privately held company thatdevelops, manufactures and sellsdisposable medical devices, withclients in 90 countries.

CHALLENGE

The company identified threegoals for its in-house call centerfor new and existing customers:improve customer satisfaction,reduce costs and increase revenue.

SOLUTION

The call center team used traditional LeanSigma practicesand tools to identify “just-do-it”waste removal opportunities inthe call center; streamline callrouting; standardize work; andimplement plans for ongoingtraining, measurement, controland sustainment.

RESULTS

The company achieved short-term efficiency gains without amajor reorganization. Companyleaders say they are now closerto customers and able to rollout product upgrades andother client benefits faster.

Simplification Brings Medical Device Supplier Closer to CustomersIdentifying and removing hard-to-see waste in the call center increases customer value and revenue opportunities.

Tonya Vinas, freelance business journalist and former editor of Industry Week magazine

Stellar customer care is a key

growth driver at this company.


credibility and consistent brand recognitionamong our customers.”

But despite the model’s strengths, problemswere uncovered when the call center teamand TBM mapped the process of answeringincoming calls and serving customers:

• Information flow was complicated:Caller information was being passed fromone department that answered the phonesto the CSRs. Also, a batch-and-queueprocess pushed callers to one group for processing their enrollments and insurance, and then back to the originalphone-answering team to order product samples. The result was a longlead time between an incoming call and a satisfied caller.

• Inconsistencies and variations amongcoordinators and associate coordinators:No standard work. No best practices. Noteven regular lunch-hour coverage. Andthere was variation in yield, which was notbased on experience.

• Weak spots in customer service: Six percent of calls were dropped duringtransfers; the average time to answer a call was 17 seconds; and an average of 21 calls went to voice mail each day.

The findings revealed obvious improvementopportunities when mapped next to afuture-state value stream, but company leaders were reluctant to move there directly.They feared that too much change too soonwould erode brand recognition that hadbeen carefully nurtured.

The solution was to design an “interimstate” and create a six-month timeline to getthere. Ultimately, a unit known as “Triage,”

which provided mainly back-office-typefunctions, would be eliminated and itsduties absorbed by CSRs.

Without Triage, incoming calls to CSRswould increase, so early kaizens focused onthis challenge.

The work started with client-focused coordinators. Tasks and training were divided into a list of “just-do-it” items andcreation of standard work for operators.Results after one week showed markedimprovement in key customer-facing metricsand the potential to save 450 hours in worktime annually.

Best-Practices ApproachAccelerates Improvements

At first, the CSRs were resistant to createstandard work. Each had their own practicesthat they felt cemented relationships withcallers.

Just Do Its: (450 Hours Saved Annually)

> Phone Enrollment to Electronic Form –Projected savings of 275 hours

> Lead to Electronic Form –Projected savings of 160 hours

> Fax Remaining –Projected savings of 15 hours

Companies in high-growth sectors such as medical device and equipment manufacturing often unintentionally complicate processes as they expand.Fortunately, as this example demonstrates,traditional process-improvement tools andpractices can be an effective solution.

Current State: A Complicated Path

The company’s client-focused and nurse-focused associates are not typical customer service representatives (CSRs).Because of the highly personal nature of thediagnosis for which these devices are used,CSRs working directly with patients need to be able to provide encouragement andemotional support while answering questions, giving instruction, and matching

customer needs to the right products. Thisbalance requires skills developed throughexperience. CSRs working directly withhealthcare professionals who are caring forpatients also need a high level of skill andexperience, as well as clinical knowledge.These valuable employees give the companya competitive advantage.

“Through our customer service initiatives,we’ve enhanced our position as a customer-facing organization,” said the companyspokesman. “By focusing on the needs of theend-user, we’ve been able to build greater

“Through our customer service

initiatives, we’ve enhanced

our position as a customer-

facing organization...”


“They thought of themselves as developing apersonal relationship with customers andsaid, ‘We don’t want to sound like robots,’”said Nero Haralalka, a TBM practice leaderwho worked with Hollister. “So we said,O.K., we won’t make you sound like robots,but we can develop some best practices foreveryone to use.”

Standard-work documentation and trainingfollowed for voicemail greetings, introductionsand messaging, customer titles, identifying the “why” for each call, addressing insurance questions, etc. In all, the group identified 22 must-have best practices used to createtraining documents, and 17 nice-to-have best practices that would become part of anonline best-practices forum.

The kaizen team also identified key metricsto measure their progress and a control planthat included weekly peer-to-peer meetings,a quarterly best-practices review meeting,and creation of a quick-reference guide for operators.

Additionally, they identified the time thatcallers are on hold as an opportunity forupselling (14,400 patients per year) and set agoal of increasing yield (patient enrollment)by three percentage points a year, whichcould mean more than $650,000 in cost ofgoods sold.

This strategy worked well based on resultsfive weeks after the first kaizens.

The second focus area was the group handling incoming calls from nurses. Thestreamlining and efficiency work mirroredthe first effort. Potential benefits identifiedincluded increased enrollment of 67 patientsper year and new incremental revenue ofmore than $400,000 a year.

A Plan for The Future

More powerful than short-term gain is that theimprovements make the company faster andmore nimble in the market. New strategies andtactics can be implemented faster, and addedbenefits will reach customers sooner.

“By eliminating some of the inefficiencies on the floor, taking advantage of multiple just-do-it initiatives, and embracing an overallsense of change, we have been able to expeditenew strategies that will make us much morecompetitive in our marketplace,” said thespokesman. “Also, with this new practice, weare able to uncover revenue opportunities thatwere previously overlooked.”

Going forward, the company is confident teammembers can sustain the improvements they’vemade and identify and implement more asthey move toward the future-state vision.

According to the company spokesman, “This process change has allowed us to handle more customer inquiries and makesfor a better consumer experience when theycall us. To that end, we will continue to evaluate the changes that we’ve implemented,while exploring new opportunities and better methods of executing the sustainment process.”

CASESTUDY (continued)

CA

SE S

TUD

Y

“Also, with this new practice,

we are able to uncover

revenue opportunities that

were previously overlooked.”

Pre-kaizen 1 Week Post-kaizen

5 Weeks Post-kaizen

Dropped Calls 6% 3.8% 2.3%

ASA (Average Speed to Answer) 17 seconds 9 seconds 13 seconds

Calls Going to Voice Mail 21 9 7


Velocity and flexibility have been supplychain management buzzwords for decades.These objectives have prompted companies toinvest billions of dollars into new informationtechnology, supplier development programsand redesigned distribution networks. Muchof that effort has been a waste of time andmoney. Let me explain.

In a traditional manufacturing business the sales department always wants moreinventory. Suppliers want larger orders. Andoperations wants longer production runs.Driven by economies of scale thinking, eachof these functional biases ultimately reducesvelocity and flexibility, and increases costs.

Customers still want their orders deliveredtomorrow, or sooner, but too often the specific items or configurations that theywant are out-of-stock and put on backorder,or the sale is simply lost.

At some point the call goes out from thecorporate office: Our supply chain must berevamped and optimized to increase velocityand flexibility. New IT systems are thenrolled out to increase material and order visibility. Manufacturing processes are leanedout; tripling inventory turns and reducingorder lead times from a month to a week orless. The supplier base is rationalized andpartnerships are formed with key vendors.

Distribution networks are restructured. And,lo and behold, material and goods flowfaster and orders are delivered in half thetime. And then competitors follow suit.

So the supply chain must become even faster and even more flexible. More investments are made, suppliers’ arms aretwisted, production operations are expeditedeven further, and… I think you get thepicture. Unfortunately, a very importantplayer is overlooked in this one-size-fits-allsupply chain optimization strategy: yourcustomers.

Value stream segmentation connects customer demand, market strategy and execution

True customer focus starts from a valuestream segmentation perspective. The ideathat you should organize your businessesaround value streams has been promoted foryears, but the vast majority of companiesstill approach production planning,manufacturing and order fulfillment—again, driven by economy of scale and cost-basedthinking—in ways that treat all customersthe same.

There are a variety of reasons why a businessshould not serve all of its customers with the same order fulfillment strategy.

By Ken Koenemann

Managing Director, TBM Consulting Group, Inc.

––––––––––––––––––––––––––––– –––––

By analyzing and segmenting marketrequirements, a businessthat is truly demand-drivenwill optimize individualvalue streams to matchcustomers’ unique needs.

––––––––––––––––––––––––––––––––––

• No competitive differentiation

• Not customer-focused

Factory Distribution

Center Customer

Customer

Customer

Customer

Customer

Customer

• Silo mentality

• Internally focused optimization

A traditional supply chain model is based in a silo mentality, internally focused, and offers littlecompetitive differentiation with customers. ST

RA

TEG

IC V

ISIO

N

Value Stream SegmentationWhen It Comes to Serving Your Customers, One Size Does Not Fit All

By Ken Koenemann, Managing Director, TBM Consulting Group, Inc. © 2011

Traditional Supply Chain Model

STRATEGICVISION

Learn more about value stream segmentation on our webinar. Join Ken Koenemann, TBM ManagingDirector and value chain expert, to learn how organizations are embracing value stream management tooutperform competitors and optimize internal performance.

One Size Doesn't Fit All Customers — Using Value Stream Management to Deliver Market-Based Strategy


STRATEGICVISION (continued)

From the customer’s perspective:

• Customer service – Strategic customersdeserve and expect concierge-level service.

• Service requirements – Different customer segments have different productoption needs and value-added servicerequirements.

• Innovation and new products – Newproducts and features developed for onemarket segment may have little interest orappeal for another.

From a business perspective:

• Profitability – Knowledge of long-termsales and earnings potential should influence order fulfillment commitments.

• Cost control – Order-fulfillment modelsshould match customer expectations. Fasterservice, for example, could be offered at apremium for customers willing to pay for it.

• Sales growth – Tighter alignment between customer expectations and orderfulfillment performance will improve the customer experience for both premium-and value-oriented customers, improvingprofitability and revenue growth.

Design Product

Price Order

ManageOrder

Fulfill Order

Capture Order

Value Stream Management

Functional Management

Order Entry

Must have value stream metrics to manage performance and drive improvement

Value Stream Scorecard

Value Stream Management offers a more customer centric approach. The real challenge lies in physically seeing the value stream from the customer perspective. Organizations must develop value stream metrics tomanage performance and drive improvement.

One Size Does Not Fit All

Value stream segmentation starts withunderstanding actual customer requirementsthrough demand segmentation. By analyzingand segmenting customer requirements, yourbusinesses can optimize individual valuestreams to match the unique needs of thosecustomers.

A demand segmentation initiative will look at order volumes, order variability, historicinventory levels, shipment records and point-of-sale data. In the factory, this analysis can beused to determine if a product should be madeusing a “pull” system, or if it should only beproduced on a made-to-order basis. It shouldalso influence supply chain strategies.

For example, PC manufacturers in variousmarkets around the world have attempted to perfect a mass customization businessmodel in order to offer an almost infinitevariety of product configurations based oneach customer’s unique needs. What they’rediscovering is that a significant percentage of customers don’t require such extreme customization.

Retail outlet buyers, for example, are perfectlyhappy with a fairly standard configuration,with the possibility perhaps of a few minormodifications. The mass customization fulfillment model does not match the valuestream requirements of those customers.

In this case, a build-to-stock fulfillmentmodel improves product availability forthose less finicky customers who receive their

“Whenever there is a product or service for a customer,there is a value stream. The challenge lies in seeing it.”


orders faster. It also reduces costs for PCmakers, which can manufacture and shipmore standardized products via containership instead of air freight. Reducing suchtransportation costs alone could save billionsof dollars for some of these companies.Apple Inc. (www.apple.com) has led the wayin this area with products that are virtuallyidentical with minimal customization. Thisallows its contract manufacturers to quicklyramp up assembly of new products and shipthem out by the millions of units.

Another example on the customer side could be any of the major suppliers to themammoth retailers, such as Wal-Mart andTarget, or the home improvement centerslike Home Depot and Lowe’s. The sales volume is so significant that these supplierstypically have dedicated account managersand teams that include cross-functional

representatives from product development,purchasing, production and distribution.Each works closely and exclusively withcounterparts within the customers’organizations. They may even have dedicated production lines, distribution center spaceand transportation lanes for these customers.

Supply Chain Segmentation

Build to Plan

Build/ Configure to Order

Build to Stock

Val

ue

Ch

ain

Man

agem

ent

Val

ue

Ch

ain

Seg

men

tati

on

Customer Understanding

Demand Segmentation

In effect, by embedding a team with the customer, they have begun to segment theirfulfillment models all the way back to newproduct development to satisfy each customer’s unique market needs.

Inventory reductions and service levelimprovements will typically deliver sufficientcost savings to justify a value streamapproach. In addition to cost savings, applying the appropriate order fulfillmentstrategies by value stream promotes long-term sales growth by improving overall customer satisfaction. Supply chain velocityand flexibility should only be pursued whenthose performance characteristics enhancethe alignment of your order fulfillment and supply chain structure with the needs of current and potential customers.

Ask your operations management team howwell they understand the requirements ofyour primary customer segments. Does youroperations, order fulfillment and customerservice structure support the needs of thosevalue streams?

------------------------------------------------------

Ken helps clients leverage lean into theextended enterprise—applying lean principlesto their sourcing, manufacturing,warehousing, distribution, planning andscheduling processes. He was trained by twooriginal members of Taiichi Ohno'sAutonomous Study Group and spent sixmonths in Japan learning and implementingthe Toyota Production System.

Definitions

> Value Stream Management –A strategic approach for organizationalalignment and structure that ensures allfunctions are aligned to support specificvalue streams or strategic lines of business. A value stream manager hasprofit & loss (P&L) responsibility for asegment and generally manages directreports or a matrix organization alignedto effectively run the business.

> Value Stream Segmentation –A strategic process for analyzing andunderstanding different customerrequirements within a value streamthat helps organizations to define andimplement product features, serviceofferings and customer interfacesaligned to customer expectations.

> Demand Segmentation –An analytical approach tounderstanding customer buyingpatterns through the analysis ofvolume, variability and frequency todetermine product portfolio needs,optimize sourcing, manufacturing and distribution decisions and selectappropriate fulfillment andmanagement systems.

> Supply Chain Segmentation –An approach for grouping customerswith similar fulfillment needs andthen developing distinct supply chainoperations to meet those particularrequirements. The objective of segmentation is to develop distinct supply chains that are able to moreefficiently and profitably meet a widerange of customer needs.

Value Chain Segmentation

• Understands different customer requirements

• Develops efficient supporting value chain capability


CONSIDERTHIS

America was built by generations of menand women who got out of bed every morningand made something. Their hard work andingenuity were the backbone of this country.

But somewhere along the line, our countryfell out of love with manufacturing. AfterWorld War II, U.S. manufacturingcontributed as much as 30 percent of GNP.However, since 2007, due to a number of factors such as the recession, that share ofGNP has fallen to just 11 percent. Westopped making products, not just from“mature industries,” but from the high-techspace, too. Innovations that define this generation – cell phones, microprocessors andplasma TVs – and those that will shape thefuture aren’t being made in Americaanymore.

These technologies are now primarily coming out of China, where companies arequickly “scaling” up from start-up to massproduction. One Taiwanese company alone,Hon Hai Precision Industry Company, plansto employ more than 1.3 million by the endof the year. That’s more than the worldwideheadcount of Apple, Dell, Microsoft,Hewlett-Packard, Sony and Intel combined.

So how do we correct the course of theAmerican manufacturing industry? Theframework for an answer may be found inthe work of two unheralded geniuses: AngusMaddison, a Scottish economist, andWilliam Bernstein, an American neurologistturned investment advisor turned historian.

For nearly six decades, Maddison looked at asingle economic statistic: GDP per capita inevery country, across all of human history.Per-capita economic growth was essentiallynonexistent for much of recorded history,until about 1820 and the onset of TheIndustrial Revolution in the United

Kingdom. Here began a remarkable growthtrajectory, which works out to be about twopercent of inflation-adjusted income growthper year. It continues to this day.

Dr. Bernstein entered the picture with hisbook, The Birth of Plenty, deciphering thehistorical forces behind such a dramaticchange. Bernstein’s “hypothesis of wealth” isbased on four conditions: property rights,scientific rationalism, capital markets, andefficient transportation and communication.Each one has to be present to create real andsustainable economic growth. Combine these

four forces and you begin to manufactureproducts that improve people’s lives.

Take a deeper look at Bernstein’s four conditions of industrialization, and you can see a stark correlation to the decline of manufacturing here in America, and how wecan start moving in the right direction again.

Property rights: The U.S. tax system has achilling effect on property rights. America’scorporate tax rate, at 35 percent, is the second highest among the 30 OECD countries. Only Japan has a higher tax rate.While most countries are lowering corporatetaxes, America is doing the opposite.

CO

NSI

DER

TH

IS

What’s happened to American manufacturing?

By Greg Babe

President and CEO of Bayer Corporation and Bayer Material Science LLC

“Building upon the current

manufacturing momentum

for continued long-term

success depends on whether

or not we encourage the

factors that give rise to

economic growth.”

It’s Time to Rebuild American Manufacturing By Greg Babe, President and CEO of Bayer Corporation and Bayer Material Science LLC


Scientific rationalism: Our nation’s needfor scientists and engineers will only grow asbaby boomers retire. Reaching students earlyis key to sparking interest in science.

Bayer Corporation’s Making Science MakeSense® program promoting hands-on learning is one example.

Access to capital markets: The governmentmust ensure a stable financial system, efficientcapital markets and ethical business practices.Carefully implementing new financial reformswill give banks the certainty they need tobegin taking prudent risks and lending in away that grows our economy and creates jobs.

Transportation: We need to invest ininfrastructure to more efficiently moveproducts and people. A recent analysis by thenonpartisan Milken Institute estimates that aninfrastructure investment of $225 billion overthree years would create 6.2 million jobs, $238billion in earnings and $775 billion in output.

There are some positive signs. February wasa good month; the U.S. manufacturing sector saw an additional 33,000 jobs and thehighest output indexes in seven years. Theselarge gains were spurred by declining inventories and robust export demands.

Building upon the current manufacturingmomentum for continued long-term successdepends on whether or not we encourage thefactors that give rise to economic growth. It’s acollaborative process and requires ongoing discussion between industry leaders, electedofficials, regulators, our own employees, andthe public to keep it going.

We need to start the conversation. The decision is ours alone and will ultimatelydecide the economic future of this country.

TBM

Co

nsu

ltin

g G

rou

p, I

nc.

44

00 B

en F

ran

klin

Blv

d.

Du

rham

, NC

277

04w

ww

.tb

mcg

.co

m

PRES

ORT

EDFI

RST

CLA

SSM

AIL

US

POST

AG

EPA

IDR

ALE

IGH

, NC

PER

MIT

#24

83

Corporate Headquarters

Durham, North Carolina

800.438.5535

Brazil

São Paulo

55.11.5051.7490

China

Pudong, Shanghai

86.21.6888.6671

Germany

Frankfurt

+49(0)69.710.455.172

India

Gurgaon

91.124.437.5995

Mexico

Monterrey

52.81.50.00.91.36

United Kingdom

Nottingham

+44 (0) 1623.758298

Join us on

TBM LeanSigma® Institute

2011 Schedule Highlights

MANAGINGQ2.11

TIMES

USA

LEANSIGMA GREEN BELT AND BLACK BELT CERTIFICATION www.tbmcg.com/lsgb

• WEEK 1: Define/Measure/Analyze: July 18 – 22, 2011 Durham, NC• WEEK 2: Event Week: August 15 – 19, 2011 at Host TBD, USA• WEEK 3: Analyze/Improve/Control: September 12 –16, 2011 Durham, NC• WEEK 4: Advanced LeanSigma Skills (Black Belts Only):

October 10 –14, 2011 Durham, NC

Hands-on, experiential belt training for operations professionals whoneed to combine lean and Six Sigma tools to rapidly implement high-impact business improvements. Green Belt certification providescandidates with LeanSigma principles, kaizen methodology and SixSigma statistical problem-solving tools to create a faster approach toidentifying and correcting problems. Black Belt certification teachescandidates how to lead Sigma Kaizen events and how to use kaizen tocomplete black belt projects in six weeks versus a typical six months. Thecurriculum includes value-stream analysis and Six Sigma statisticalproblem-solving tools. LeanSigma Green Belt is not a prerequisite toLeanSigma Black Belt.

EXECUTIVE ROUNDTABLE www.tbmcg.com/roundtable

• August 10 – 11, 2011 in Atlanta, GA with a tour of WIKA Instrument Corp.

A 1.5-day workshop designed for executives who wish to experiencefirst-hand how manufacturers are leveraging lean as a strategicplatform for growth. If you consider your company to be poorlypositioned for growth or unable to translate continuousimprovement results into meaningful, measurable value then youshould consider attending this intimate roundtable discussion forsenior business leaders.

LEANSIGMA GLOBAL SUMMIT www.tbmcg.com/globalsummit

• September 21 – 22, 2011 in Las Vegas, NV

2 days, 20+ breakout sessions, featured speakers and panelists to helpyou achieve operational excellence in the workplace. We expect nearly150 operations and continuous improvement leaders from a widevariety of industries in the manufacturing and service sector. Early birddiscount and group discounts available.

EVENTS

Visit www.tbmcg.com/events for information about webinars andother opportunities to hear TBM and client presentations on a widevariety of topics related to operational excellence

q2 2011 managing times

Documents

future of lean

lean journey

lean thinking

thedefinition of lean

lean leaders arent

value thatyou

value creation

vermeer leaders