20 Keys open door to lean success

David Miller (L) with Yoshiyuki Kobayashi - the son of the inventor of the 20 Keys approach. Picture / Glenn Jeffrey.

Industrial components manufacturer Stainless Design was doing well, business was booming, revenue was up by more than 20 per cent and products were being exported through third parties.

But, under pressure from such rapid growth, Stainless Design was fighting problems, wasting resources, feeling like it was out of control and failing to maximise its potential.

In an economy dominated by small to medium-sized companies, the experience of Stainless Design will not be uncommon but it doesn't make for pretty reading.

New Zealand ranks a lowly 20 out of 24 countries in the OECD's most recent gross domestic product an hour rankings at US$59 ($93) - Norway came top with US$129.

Cut the numbers another way by looking at gross domestic product per capita - head of population - and the picture isn't much better, with New Zealand finishing 19 out of 24 countries.

Competition from cheap labour economies, a relatively high exchange rate and low unemployment make increasing industrial productivity vital to stopping manufacturing shifting overseas.

A call from New Zealand Trade and Enterprise about 18 months ago about joining a project aimed at improving productivity gave Stainless Design a lifeline.

Managing director John Cook said signing up was the most important decision in the company's history.

The Aichi Lean Manufacturing Pilot Project helped Cook, who founded Stainless Design in 1988, boost production 62 per cent in one month and remain in full control of his business.

"To be honest, I wish somebody had knocked on my door 17 years ago and explained to me what the system was about," Cook says.

The programme is based on the Japanese concept of continuous improvement called kaizen and gives firms a framework for attacking waste.

Waste is anything not adding value to the product or customer. It includes holding stock and partly made goods, unnecessary handling of materials, overly long production time and late delivery.

Stainless Design employs just under 60 people at its 4000sq m Hamilton factory and began implementing the programme six months ago.

Cook says in that time gross profit has jumped 7 per cent.

The 62 per cent rise in production at the firm's laser-based, steel-cutting facility was the result of group staff activity to identify bottlenecks and the introduction of daily key-performance indicators.

"Had we attempted to put that much volume through the laser centre even last year we would have crashed and burned," Cook says.

The empowerment of staff was critical to success. In the past only three or four people had undertaken planning activities. Now the entire workforce was involved in the process.

"You must get a better result," Cook says. "It's just a sheer numbers game."

The NZTE project helps companies with training, consultant support and visits to Japan to see lean manufacturing in action.

20 Keys

Among the tools used by the project is a framework called the 20 Keys, created by Japanese consultant Iwao Kobayashi who worked for Mitsubishi Heavy Industries until 1981 before setting up the PPORF Development Institute.

The 20 Keys programme is used to walk firms through the lean manufacturing process, which includes some seemingly obvious targets such as maintaining a clear and ordered workplace.

"Get some order into your place. Find a home for everything and have everything in its home," Cook says. "We have created an enormous amount of space by that approach."

This obvious need can make a significant difference to the daily running of factory but can be easily forgotten in the heat of a growing business.

"A lot of it is simply just common sense but what it [lean manufacturing] does is it brings a focus on making improvements in your business on a continuous basis and it forces you to focus on that," Cook says.

Lean manufacturing is spreading overseas and Cook describes the failure to spread the message much earlier at home as almost criminal.

"I think New Zealand would be a hell of a lot further ahead today with a focus on this type of process of doing business."

A conference held last week in Auckland, which was attended by 20 Keys expert and son of the inventor, Yoshiyuki Kobayashi, brought together the four pilot companies and eight firms lined up to join this year.

Auckland-based manufacturer Clearlite Bathrooms was another of the original four firms to sign up for the project.

Clearlite manufacturing manager David Miller said the company wanted to get fitter to better withstand any economic downturn and be ready for the next upturn.

Clearlite used the Aichi project to review and update the company's just in time (JIT) and kanban production systems.

"Just to make things tick over easier," he says. "Use systems wherever possible to automate re-orders, automate scheduling and take away the need to have to think about what's next, so what's required is more obvious [and it] provides less room for error," Miller says.

"Looking at how a person does their task where they are going to to pick up and put down things and eliminating the number of times they have to handle a material."

NZTE project manager Clinton Yeats says the continuous improvement concept of kaizen represents the single biggest change in mindset that local industry could undertake.

"Certainly, my experience with New Zealand companies it's the direct opposite of kaizen," Yeats says. "It's we've always done it like this, we've been relatively successful [and] we'll keep doing it that way."

The risk of not taking up this challenge is that New Zealand will be left behind.

"We have to move on," Yeats says. "We've got to see our daily work lives as not routine but as improvement."

In many countries, including Australia, lean manufacturing principles are being forced through the supply chain by car manufacturers who are seen by many as the origins of the lean approach.

"If you go across to Melbourne, you'll see fourth-tier suppliers implementing lean because it's come down through Toyota in Australia," Yeats says.

New Zealand lacks an automotive industry that can act as a catalyst and, with an economic landscape dominated by small to medium-sized firms, the resources and the impetus are scarce.

Yeats says this is a gap that the NZTE project hopes to fill.

"It seems that word has got out there," he says. "People are understanding this concept of lean and people are understanding there is a way to improve internally without going to the banks for money."

One of the first four firms to take the lean challenge is already talking about the possibility of a lean cluster.

"Great idea, a cluster of lean New Zealand manufacturing companies to learn together, to do business together [and] to grow together."

Smarter not harder

Just in time: The manufacture of products only as they are needed for the next stage of production or for sale.

Kaizen: The continuous improvement of an activity to eliminate waste using problem-solving and analysis techniques.

Kanban: A technique for ordering a manufacturing supply batch only as the previous batch is withdrawn for use.

Lean manufacturing: The amalgamation of ideas including JIT, kaizen and kanban with the aim of minimising the amount of all resources used.