Improving with Customers

Published May 2017

Iíve facilitated over 250 formal improvement events over the past 13 years. One of the most challenging improvement activities was also one of the most rewarding Ö funny how that works out.

While working for Sauer-Danfoss (now Danfoss Power Solutions) we supplied a custom-designed transmission to a well-known tractor manufacturer. Orders from the customer were very sporadic Ė periods of lax orders, followed by requested emergency partial truck shipments were the norm. The crazy orders resulted in our on-time delivery being below both our and the customerís goal.

How could this be? Due to its popularity with consumers, our transmission was practically a standard component on the tractor, included on over 90 percent of the models. The output of the assembly line simply couldnít vary that much day-to-day. Our frustration reached a breaking point when we were informed that no units were required from us for the next several weeks. Now what to do with two shifts with a half dozen workers apiece and no demand for six weeks?

We agreed that we had to work an improvement project with the customer Ö a bit of an awkward situation since they were the customer. We first had to overcome the paradigm that the customer is always right.

Fortunately, aside from their erratic ordering patterns, we had an excellent relationship with the customer. We collaborated closely during the design of the innovative transmission and its unique features set their tractor apart its competitors.

We always accepted the fact that they hired us for our transmission design expertise. So in this case we reasoned that they now needed us for our supply chain expertise. We had a good 10-year head start in practicing Lean principles.

Value Stream Mapping is a Lean tool which looks at the chain of processes linked within a facility Ė from the receiving dock to the shipping dock in the case of a factory Ė to produce a product or service. It addresses the waste which often occurs between departments, perhaps after years of focused sub-optimization within the individual processes.

Extended Value Stream Mapping takes an even bigger picture view to remove the waste between facilities. If the opportunity for sub-optimization is significant between departments within the same facility, the prospect across facilities is enormous!

Our visit to the customerís tractor assembly line confirmed our suspicions. Output was 100 tractors per day, plus or minus five Ö every day. The root cause for their crazy order patterns was a computer-based ordering system which no one really understood.

The customer defined the minimum and maximum number of units they wanted to have on hand. We designed and painted a floor template so pallets of transmissions were always stored in the same place and counting the number of loads on-hand was a cinch. At the end of each workday one of the customerís material handlers communicated to us the actual number of units on hand. For the first time ever, we received a clean signal of what the customer actually had instead of a computer-calculated value based on an algorithm created by Rube Goldberg.

Based on the customerís actual inventory, our shipping team removed the appropriate number of pallets of finished units from a small ďsupermarketĒ and loaded them onto a trailer that the trucking company kept at our plant. When the trailer was a day from being filled we notified the trucking company that a driver would be needed the following day for shipment. The assembly cell then built new units to replace the empty spots in the supermarket.

Simple! In essence, each day we built the number of transmissions to replace those assembled into tractors at the customerís factory 1000 miles away. The solution was a smashing success:

  • The customerís average inventory was significantly reduced, freeing up cash and saving space
  • Partial truck shipments were eliminated, saving the customer thousands of dollars in annual shipping costs
  • We realized level demand, avoiding unnecessary overtime and occasional worker surpluses
  • Our on-time delivery went to 100 percent

Perhaps the biggest benefit, however, was that the cause of animosity towards the customer was eliminated. Everyone involved with the tractor transmission was now connected to our customer. Walking through the factory one day, I noticed the transmission assembly cell wasnít working. When I asked one of the workers who typically worked the cell, he explained that a squirrel had gotten into a transformer and shut down their plant. Now thatís really knowing your customer!

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