Transforming the Product Distribution Process Via Lean Management

The client is a large multi-national manufacturer of components for electronic and electrical products, with more than 50 plants world-wide and another 20 sales and distributions locations.

It is organized into four divisions, each focused on specific market segments. Price competition is strong, but key customers also expect reliable on-time delivery and quick response for new product development.

A series of personal connections resulted in the company inviting a widely-known consulting firm to assist them in their implementation. The focus of the implementation was heavy on theory and statistics and not well-integrated into the business plans. The roll-out was inconsistent and the results disappointing. Fortunately, the leadership recognized that Lean and Six Sigma should be delivering better results and that the problem was with the implementation, not the principles.

The Enterprise Quality Department led a rapid and intense effort to review available alternative sources for the support that they knew they needed. Juran was invited to provide that support beginning with the second year of implementation.

The Prepare Phase was, of course, nominally completed by the time Juran arrived, but the assessment revealed that the ties of middle and upper managers to the launch were entirely too weak. These managers needed practical training in their personal specific tasks for ensuring the effective selection, launch, support, and follow-through for the many projects that were needed to create the desired transformation. It was also determined that project selection had previously been too informal and that most projects were not strategically important. As part of the Champion training, managers learned and applied skills for identifying and prioritizing projects based on the strategic “Focal Points” that were the key elements of the enterprise’s strategic plan.

To support the management Champions in their new roles, the enterprise sponsored a comprehensive opportunity assessment at each site that identified the most critical and useful problems to be addressed by projects. These opportunity assessments included identification of major costs of poor quality, critical customer quality and delivery issue notices, customer defections, long lead times, excessive inventories, and quality-as-produced issues. Juran conducted these assessments for each site and trained company staff to continue them on an ongoing basis.

Because of the size, diversity, and geographic dispersion, it was determined that each major plant and sales/distribution office should have a Site Deployment Leader. This individual would provide full time support to local top management in developing and executing their plans for improvement. He or she would also have direct access to the central office and Juran resources so that they could draw on them in real time to implement their improvement plans.

The Expand Phase has continued into the fourth wave of implementation and by now the entire effort has been integrated into the business planning and operations such that the Sustain Phase is well underway with deeper integration of the goals, skills, process improvements, and measurements needed to assure continued and growing success. They have built strong skill sets in their executives, managers, and team leaders. Master Black Belts, Black Belts, and Green Belts have received the rigorous training and have been certified to exacting standards that require demonstrated results as well as mastery of the subject matter.

As an illustration of the depth of their sustaining activity, when the 2008-2009 global recession hit, this company was affected like all firms in its industry with sharply falling demand. Naturally, they had to reduce their staffing and expenditures to keep them consistent with demand. But, unlike so many companies, they realized that their Lean and Six Sigma efforts were not “extras” to be dropped in hard economic times. They continued vigorous deployment and project execution throughout the time period and reaped many times the investment in improved financial performance. They returned to profitability before many others in their industry. No initiatives can insulate a company from large economic changes, but organizations like this one can minimize the adverse impacts on both the volume and profitability of their business by assuring that their processes have minimum waste and delay, their goods and service are of the highest quality, and customers are loyal.

“Thought you would like to know that despite the challenging year, we have managed to achieve our original [annual] $50M savings goal. Many thanks to your people and the high caliber of technical support, leadership and teamwork they have delivered.”

“This goal was set before anyone suspected the economy would fall off the cliff and production volumes with it. The process has been flexible enough to allow our organization to reprioritize and change focus just when we needed to make it happen.” Vice President, Quality