Category Archives: Lean Audit

Making Lean work in FMCG

This blog is the fifth in a series written by Jeremy Praud, Head of UK & Europe. (To start at the beginning, click here.)

Lean-and-Green-webinar-Video15 years ago, Lauras developed an approach to making Lean work in FMCG.  It was entirely results focussed – the founders had and unstinting belief that if you followed the process, you would achieve rapid and sustained improvement. 

Those of you who have come across driver tree based problem solving will know what a wonderfully logical and concise approach it is.  That’s why 15 years ago, we applied our own problem solving method to the factors that drive sustainable improvement in a factory.   The result was the SIM – the Sustainable Improvement Model.

We’ve been putting this to use in the intervening period, and as with all good driver trees, as we get new knowledge and understanding, we can refine it time and again, to evolving it to ensure nothing is missed, and the relative importance of each of the elements is understood.  After a few years, and having tested it across many different sectors, we realised that as much as the structure was common across all sectors, each sector needed its own refinement.

In particular, we noticed that the asset value against operating cost has a significant impact on the rapidity and value that certain improvement techniques bring – thus to truly ensure we could get as close to the maximum rate of improvement possible, we needed a bespoke approach for FMCG v high asset intensity sectors.

A decade down the line, with instances where clients have used the SIM to drive their improvement and in so doing have won multiple awards, the precise understanding of ‘what to do, when’ to ensure rapid and sustained manufacturing profit improvement is better understood than ever.

Since every factory is starting from a different place, the one size fits all approach just isn’t going to deliver the maximum rate of improvement for a given site.   The SIM rates each element across a 5 point scale:

  1. Not Engaged
  2. Experimenting
  3. Effective
  4. Good Practice
  5. Best Practice.

An early learning was that it is vastly more important to identify the elements that have no or little focus, and are rated as Not Engaged or Experimenting, and turn them Effective.  Where there is a lot to do, there is clear path that can be mapped out as what to prioritise in year 1, and what can wait until year 2 or 3.  The rate of improvement of a site that has merely achieved “Effective” at every level of the SIM is impressive – and this doesn’t take anything more than doing the basics well.

The M&S Plan A audit framework has become the first retailer supplier audit to review against a Lean Framework.  The first version of this framework, developed in association with the people who coined the term Lean from an academic analysis (the reasons behind Toyota’s success) is true to Classic Lean, and has yet to be tailored for FMCG.

The purpose of a Lean Audit is simple – to drive improved value, and ultimately reduced manufacturing cost.  The Manufacturers who remember this when following a retailer Lean Framework will do best and maximise the value from lean auditing.

For more discussion on making Lean work in FMCG – register for  Food Manufacture’s Lean Audit webinar (11am, Tuesday 26th April).

 

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M&S Lean Audit: What’s missing for FMCGs?

Lean-for-FMCGs-AuditThis blog is part of an editorial series written by Jeremy Praud, Head of UK & Europe.

This is now my fourth blog in the ‘Lean Audits for FMCGs’ series.  If you’d like to start at the beginning, click here.

Otherwise, lets look at two key tools that are missing from the ‘Classic Lean’ Toolkit that would deliver significant value to FMCGs, an area of focus that doesn’t belong, and one of the greatest benefits of the M&S Lean Audit Framework.

Debottlenecking is missing – yet has fastest impact on your bottom line
The major tool missing from Classic Lean that is of tremendous value within FMCG is debottlenecking theory – sometimes called the Theory of Constraints (TOC).  Pioneered by Eli Goldratt in the book “The Goal”, debottlenecking methodologies can be used to optimise line performance, and give a clear set of tactics to deliver improvement.

The average FMCG manufacturing line has approximately 9 processes.  This is many fewer than a car line – and this difference is the key reason why constraint theory doesn’t appear in the classic Lean Toolkit.  However, as a tool used to optimise speed, line control, and accumulation, it has one of the fastest impacts to the bottom line you can hope to achieve.

Improvement Systems is missing –  yet critical to sustain improvement
Good leadership and management processes are of course common across industries.  The M&S audit does a good job on most of these.  If there’s one thing the audit is light on though, it’s ensuring the right reporting is delivered easily from the right kind of measurement systems.  KPI’s are taken for granted within the audit – but all too often FMCG factories struggle with the accuracy of information.  Ensuring your measurement system is telling you to work on the right things, not the wrong things, is of critical importance and should be high on your priority list.

Supplier Relationships – not relevant for most FMCGs
Lean Audits often prioritise focus on Supplier Relationships.  For FMCG manufacturers, this requires leverage of the buyer on the supplier – and whilst this holds true in some supplier relationships, there are many where it does not.

The large enterprises have identified this, and in many instances are already trying to mimic the tactics used on them for so many years by the retailers. Whether the relationships being mimicked could be called compatible with “Lean” however is a different question.

The purpose of the Lean Audit framework should be to help you achieve a better cost to manufacture. If you are not a large enterprise, move Supplier Relations lower on list of priorities than other activity.

Improvement Champions – the real win for FMCGs
Finally, one of the greatest benefits the M&S Lean Framework will bring is the focus on having an improvement champion/manager.  The legacy of a half a century of quality audits is that the requirement for a quality department is no longer questioned. The real win will be if Lean Audits help businesses to understand that whilst continuous improvement, like quality, is everyone’s responsibility –  Improvement Champions are the key to  ensuring the processes are working, running CI workshops, and offering training and support With Improvement Champions in place, we can look forward to a continual improvement in manufacturing efficiencies, reduction in waste, and ever improving manufacturing cost per unit.

Next time I’ll be looking at how to make Lean work in FMCG. And to hear more on this subject from us, retailer M&S, and supplier Greencore – register for this Food Manufacture webinar.

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FMCG Lean Audits: choose from the Toolkit with caution

This blog is the third in a series written by Jeremy Praud, Head of UK & Europe.

In my first two blogs in this series, we looked at the benefits of CI audits, and why Lean Audits could drive improvement in FMCG. 

But not all of  the ‘Lean Toolkit’ is appropriate for FMCGs, and can in fact drive the wrong actions…
The purpose of any continuous improvement function is ultimately to provide a lower manufactured cost per unit.  Whilst all of ‘Lean’ can be said to achieve this, we can see that when applying the principles to FMCG, some assumptions from the car industry don’t translate across so well into fast moving consumer goods (see last blog), and other things taken for granted are of critical importance.

So lets look at what to focus on to drive rapid, sustainable improvement.

The standard tools in the M&S Lean audit are:

  • Workplace Organisation (5S)
  • Problem Solving (5 Whys and FMEA/Fish Bone Diagrams)
  • Value Stream Mapping and
  • Standard Work.

It also briefly touches on Kanban, quick changeovers, and TPM (total productive maintenance).

5S – Low Priority for FMCGs
Classic Lean tends to prioritise workplace organisation (5S).  However, unlike other industries, FMCG already has quality and hygiene standards embedded, which means that the early wins available from workplace organisation elsewhere simply aren’t available within most FMCG factories.  There are of course benefits to be had, but it is a much harder task to translate these to the bottom line,.

As such it is much more prudent to move 5S down the priority of implementation.  It looks good, and does have a moral boosting effect, but better to do this once you have cash in the bank from other tools to have offset the rather significant time investment required.

5 Whys and FMEA/Fish Bone Diagrams – FMCGs can do better
In Classic Lean, the problem solving methodologies promoted are generally 5 Why’s and FMEA / fish bone diagrams.  However, Six Sigma promotes  technically advanced statistical analysis methods that are more useful.

The advantage that FMCG has over other industries is that the processes and machinery simply aren’t that difficult. But this also means that most of the easy wins have already been achieved through experiential problem solving.  As such, FMCG is particularly well suited to the use of problem solving methodologies using Control Factors, or Driver Trees – that drive the simple application of logic and basic science.

Targeted VSM – high priority
Value Stream Mapping as a tool from first principles is best used in extremely targeted ways.  There are specific outcomes that can lead to quick bottom line benefit – changes to the planning process, distribution, warehousing, and stock holding for example – so having a firm view from the outset on the expected outcome and potential realisable benefit is a key step to ensuring maximum rate of return.

For instance, admin processing costs are not generally that high, and significant activity is normally required for even a small benefit.  It is of course a very good thing to do, but understand that other activity is going to deliver much greater benefit earlier for you.

Within FMCG, we can see that the value stream is essentially the order fulfilment process – and as such has traditionally been called the S&OP process.  The first draft of the M&S Lean Audit is quite light on detail in this area, so it ensuring you are using a bespoke S&OP audit process as well, most likely based on the work of Oliver Wight, would be a good way to accelerate the value return.

Quick Changeovers – Highest Priority for FMCGs
Depending on the SKU profile, and work already done, quick changeovers can be of very significant value, and can be moved much further up your priority list, ahead of 5S.

In my next blog, I’ll be looking at what’s missing from this Lean Audit that would add tremendous value to FMCGs – and the tools that really won’t add benefit!

Stay tuned.

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Lean Audits drive action – but is it the right action?

This blog is the second in a series written by Jeremy Praud, Head of UK & Europe at Lauras International.

TPM-SixSigma-LeanIn my last blog I mentioned that Marks & Spencer’s, who pioneered the Quality Audits, have introduced a Lean Audit into their Plan A.

So lets look at whether ‘Lean’ will deliver in the food industry what is clearly hoped of it by the retailers. The objective of course is to lower manufacturing costs – so of the three main approaches to continuous improvement, is Lean the right one, and is it what is needed in FMCG?

Lets consider the other two approaches – TPM and Six Sigma
If we look at the relatively low asset cost required in FMCG manufacture, the spend required to achieve exceptionally reliable equipment – the fundamental reason for a TPM approach – rarely gives a value return. This means that reliability of 96% is generally quite acceptable, except for a few notable exceptions, and the requirement to spend big on predictive maintenance just isn’t there as it is in other industries.

Meanwhile, Six Sigma is fundamentally about eliminating variation – 6 standard deviations from the mean and all that (actually 4.5, but that’s another story). For FMCG, with low unit cost (and permissible variation of around 1 sigma due to the average weight legislation) again the high-end techniques of Six Sigma have limited value return.

This means that a Lean Approach is in the driving seat
However, Lean did not originate in FMCG – it comes from automotive, with an entirely different asset base and set of base assumptions. This means that whilst many areas of Lean can deliver real value for FMCG, we must be careful in its application. What is taken for granted in automotive is not always true in FMCG – thus the success of the Lean Audits in reducing cost within FMCG will ultimately come down to how well adapted they are for the FMCG sector.

Taking one example (and there are many more); Constraint Theory as outlined in Eli Goldratt’s “The Goal” is of huge applicable benefit within FMCG, but classic Lean either ignores it completely, or allows the contraction of ‘Unnecessary WIP’ to merely ‘WIP’ to drive exactly the wrong actions.

Having experienced the misfortune of this type of misapplication, one FMCG factory owner was heard to remark “I’d rather have taken a million pounds in cash out the bank and used it to fuel a bonfire in the car park – it would have been less painful than what happened”!

So – the future is sure to be Lean Audits – but the companies that succeed from using them will be the ones that are wise to prioritizing what delivers rapid bottom line benefit – and uses an approach to continuous improvement tailored specifically for FMCG.

Tune in next week for the next blog in this series, or hear more on this topic by registering for Food Manufacture’s Lean Audit webinar (11am, 26th April).

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The Benefit of Continuous Improvement Audits

Hear Jeremy discuss this subject with Mike Stones, Group Editor at Food Manufacture

Hear Jeremy discuss this subject with Mike Stones, Group Editor at Food Manufacture

This blog is the first in a series written by Jeremy Praud, Head of UK & Europe

With GCSE and A level exams looming, it is easy to think back to that time (perhaps more years ago than we’d like to admit), that we took exams ourselves.  I remember that as the deadline approached, the mind was able to focus on the task ahead, and get down to revision, and making sure I had done the necessary work.  There’s something about a test that drives action.

Those days may be behind us, but auditing (the analogue of exams in the workplace) are a hugely useful way of ensuring activity takes place rather than constantly being put off in favour of other priorities.

This is why historically Quality Audits have been so effective across the UK food industry.  Standards have been driven ever upwards, so much so its hard to believe what it was like 50 years ago…  In hoping to supply a retailer with their standard Bordeaux, one young entrepreneur took the de facto product for analysis to find out where it came from, and discovered it was simply not from Bordeaux. In fact, it wasn’t even wine – rather a mix of industrial alcohol, food colourings and glycerol!

Whilst last year’s horsemeat scandal reminds us of the need for constant vigilance, the wholescale abuses of the past simply aren’t viable any longer – and make no doubt about it, it’s external audit that has achieved that goal.

But what next as the margins to be gained from Quality Audits are ever diminishing?  

Manufacturers aren’t merely interested in good quality. Cost and on time delivery are just as important.  So an audit that is going to help manufacturers drive efficiency and reduce waste has the potential to give a competitive audit to both those companies, and ultimately any retailer sourcing from those companies.

No doubt that is why Marks & Spencer’s, who pioneered the Quality Audits, have introduced a Lean Audit into their Plan A.  With 300 companies being asked to achieve silver status by 2017, any company wanting to supply M&S in the future needs to be on their game. For everyone else, they can be sure that where M&S lead, the other retailers will follow, which means that Lean Audits in the food industry are going to be the shape of things to come.

In my next blog I’ll be looking at whether ‘Lean Audits’ are actually what is needed in FMCG.