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Jeff Liker

Dan Jones: Lean across a decentralized network

By Jeff Liker, - Last updated: Thursday, July 4, 2013 - Save & Share - Leave a comment

Lean is not just about developing problem solving capabilities but about using them to improve the value creating processes that in turn deliver steadily improving results for the business. So as always the place to start is defining the exact nature of the business problems you are trying to solve. This will in turn show you where your processes are broken and where to focus your lean efforts to greatest effect. Doing lean without a clear purpose is unlikely to be sustained for long.

There is no doubt that improving performance across a geographically disbursed network is difficult. Let me share some examples that shed light on some of the problems. First a really good lean organisation with an excellent lean warehousing and distribution system really struggled to get its small local distribution centres employing a hand-full of staff to use common processes to ensure high levels of customer service. Impressive lean training and central mentoring support was constantly undermined by high staff turnover and very tight margins.

Second Toyota themselves whose Parts Distribution System is still the global benchmark supply chain have struggled for years to get their dealers across the world to implement lean sales, service and repair processes. These are now well documented in Creating Lean Dealers and my colleague Dave Brunt has been working with pioneering Toyota dealers in Portugal, Norway and South Africa that are now demonstrating significantly better customer service and profitability than their counterparts. The key turns out to be convincing leaders of independent and profitable businesses used to making money on the next deal to personally lead their Hoshin process and mentor thee capabilities to streamline the way work is organised.

Third Tesco, the leading UK retailer with a rapid replenishment supply chain learnt from Toyota has been very successful in standardising the processes across their retail stores and warehouses. New processes, like picking home shopping orders, are worked out in operational detail before being rolled out across their network and everyone can see how their work contributes to key business objectives through a steering wheel of a dozen key metrics at every location. Standardising routine activities surfaces problems and frees up time to gather feedback from customers. This works because top management have run stores themselves and spend a week a year actually working on the shop floor, as well as several days visiting stores and warehouses each week. It also works because top management actively values and supports feedback from the front line, which has a direct input into the strategy of the business, described in detail in Management in Ten Words.

Fourth many banks tried and failed to standardise operations in their retail outlets. In hindsight this was never going to succeed until they sorted the back office processes supporting their retail outlets. This was done by creating problem solving teams to eliminate the unnecessary demand created by their broken processes, to respond to new demands as well as standardising processes. This in turn creates new opportunities to serve customers off-line as well as in in retail branches. Which prompts the question how easy is it for your branches to deal with the centre and how often do you’re ordering, distribution and invoicing processes create unnecessary work for your branches?

Fifth a big global organisation sought to impose greater central control of its global operations by deploying a huge SAP system. The net result was not only a huge on-going cost to support it but enormous frustration as it took up to two years to make changes to the system. Instead of aligning operating practices across its subsidiaries it provoked even more push-back against initiatives from the centre, including their global lean programme.

Finally in the light of this experience I jokingly asked another multi-national with an expensive headquarters palace what would happen if it HQ no longer existed. They said we already know the answer – “last summer when almost everyone from HQ was on vacation we had a major operational problem across the business that was fixed well before they got back to work”! This struck me as a huge cost saving opportunity!

These examples point to four key lessons – hands-on leadership at the top and in the branches, support to standardise central and local processes and the links between them, clear goals and targets incorporating strong feedback from the branches and establishing a win-win relationship between the branches and the centre. Easier said than done – but worth striving for.

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