The recent nuclear reactor problems in Japan reminded me of an important message from Weick and Sutcliffe’s Managing the Unexpected. Their book is about how some organizations have built systems that are able to quickly and effectively adapt to unexpected events. Continue reading
My wife recently found me a great deal on Bloomberg BusinessWeek to get a 3-year subscription for $18. While reading the first issue to arrive, I found a great story about a company in Silicon Valley that has created a flexible, U.S.-based manufacturing system for their product. The company is called SeaMicro. They make low-power servers for Internet companies like Mozilla and eHarmony. I liked what the CEO, Andrew Feldman, had to say about why they have taken the unconventional approach of building their servers onshore.
Feldman says that manufacturing locally will help SeaMicro compete with bigger, deeper-pocketed rivals. The company’s engineers constantly experiment with the latest and greatest components in a bid to lower the power consumption and quicken the performance of their systems. They can then take their changes down the road to NBS—less than a mile away—and start testing them in new systems immediately. “You don’t have to deal with working across the globe and shipping stuff back and forth,” says John Turk, the vice-president of operations at SeaMicro. “You can lose days with systems sitting in Taiwan or China.”
Even more satisfying is reading how two company executives were dismayed by BusinessWeek’s line of questioning.
When asked if the happy marriage between SeaMicro and NBS will dissolve should SeaMicro hit it big and shift toward mass production, consternation fills the faces of Turk and Maslana. “It’s not about us getting big,” Turk says quickly. “It’s about how do we stay flexible. That is what the big guys don’t have.”
It was an okay article, but I have a few questions of my own for the executives. How did you get the courage to buck the trend? What are the basic principles of your operating system? Why have you chosen those principles. As an operations manager, these are three questions that I am interested in having answered.
For all those people in California and the rest of the United States who are worried about radiation from Japan, I made this simple chart. It shows how radiation from Fukushima scales to other sources of radiation. The important thing to note is that everyone gets 3650 microSievert per year from natural sources. You can’t escape that. This amount is 36,500 time greater than what a Californian might see from Japan. Put away your potassium iodide pills.
I have been enjoying Ron Pereira’s great blog at lssacademy.com. He recently posted the following question to readers: Is Little Caesar’s Lean?
Is Little Caesars Lean? I’d like to offer my view. A basic feature of the ideal Lean system is pull initiated one piece flow. Pull initiated means that the factory does not make the product until the customer places an order. One piece flow means that the factory is able to accommodate order sizes as low as one piece as well as high piece-to-piece feature variation with no finished goods inventory.
Pull initiated one piece flow is not how Little Caesars does things. Their key competitive advantage is cheap, instantaneous pizza service. I love those Hot-N-Ready pizzas. Any time of day, I can drive up to a Little Caesars, hop out, and pick up a couple of Cheese or Pepperoni pizzas without a second of waiting. The paradox is that Little Caesars has to make pizzas ahead of time and keep a small inventory in order to provide the instantaneous service. The other non-lean feature is that they only offer Pepperoni or Cheese. No infinite topping variation on a Hot-N-Ready pizza. You would think that Papa Johns has a better business model. At Papa Johns, the customer must place an order before the pizza is built and cooked using pre-staged dough and toppings. Their business model is pull initiated one pizza flow. In fact, that is the business model of most pizza restaurants, except Little Caesars. The typical pizza house carries no finished goods inventory, but the pull initiated one pizza flow introduces a 10-15 minute wait that prevents regular pizza houses from capitalizing on the unanticipated and emergent pizza needs of potential customers.
Although pull initiated one piece flow is supposed to be the gold standard of Lean manufacturing, it really is not. The gold standard is whatever system delivers the most value to the customer. Since a made to order pizza cannot be made in microseconds, I would rather forsake extra toppings in order to get my pizza cheap and fast. The value from my perspective is speed over variety, so Little Caesars ends up being more lean than Papa Johns because they deliver value to me like no other pizza place. Toyota recognizes this, too. As we all know, Americans like their cars delivered at the time of purchase. In order to service the great majority of American consumers, Toyota has to build and maintain thousands of cars in finished goods inventories on dealer lots. This is waste in the process that must be tolerated, because the customer requires instantaneous delivery.