Recently on a trip to Spain I was reminded how easy it is to be misled into thinking that a company using high tech equipment understands lean manufacturing methods. The fact is the two are not related. Sometimes it is actually easier to see if a company understands lean manufacturing when the equipment is low tech because you can easily identify the proper understanding of Kanbans (properly proportioned part queues), poke yokes (error proofing), good work instructions and communications. The understanding of these principals can be obscured in companies that use high tech manufacturing.

The facility I recently visited had a very nice assembly line that manufactured circuit boards.  The first step was to screen print the solder on the board and send it to a very advanced high speed robotics station which handled the assembly of surface mounted components onto the PCB (printed circuit board).  After the components were assembled, the PCB was fed into a computer controlled oven that completed the soldering process.  The whole assembly process was almost entirely hands off at this point, with the operator only needing to replace the components that the robot placed on the PCB.  They even had a very nice high speed vision inspection system that checked every component on every PCB to insure it was correct. Yet this company would thoroughly demonstrate in the next process step that they really didn’t understand what lean meant.

The final process step was to solder a wire to the PCB. For this, there wasn’t any automation or high tech equipment, but rather a simple clamp fixture to hold the wire, a soldering iron, soldering wire and an operator.  With these things in place, it would still be possible to show lean manufacturing implementation, and have good results from the process.  In this instance there were a few simple things missing. First the operator work instructions didn’t reflect the process that the operator I observed was actually using. When I asked the operator why she was using a different procedure, she said that she found that she could stabilize the PCB better during the soldering process using her procedure, which was actually more precise than the published procedure.

In a truly lean manufacturing environment, that operator would have felt empowered and responsible to inform not only her co-workers performing the same operation, but also the management team that she was using an improved process so it could be documented to insure everyone used the better process (frequently called best practices). Furthermore, if she was really empowered to talk with the management team, she would have felt free to tell them that the process didn’t produce consistent results in the quality of soldering. This would have started a proactive process of trying to improve the fixture that held the wire AND the PCB board, thus insuring that the wires were consistently soldered onto the PCB board. So in the end, the operator lacking this empowerment resulted in a poor fixture, which provided inconsistent soldering, which resulted in a high failure rate at the launch of the product, which created an extended delay in selling the product until improvements were put in place.

Effective communication with your supplier is the most important factor in selecting a supplier after landed costs. Unfortunately, North Americans assume that working with LCC companies is the same as dealing with North American suppliers – and it’s definitely not!

Time Zones –

LCC’s typically will be in time zones 9-14 hours different from North American time. Because of this difference, virtually all communications will be via email. The LCC company will likely have a dedicated person to handle all English communication and it is also likely this person will have little to no technical knowledge or skill. This will require the dedicated English speaker will need to convene with the LCC company personnel which has the requisite technical knowledge to provide answers to your questions or concerns. Scheduling a conference or Skype call during your business hours may therefore be pointless if the technical people are not present in the call. If you are able to schedule a call which includes the technical people, the time required to complete the call can take 2 to 4 times longer than you would normally expect due to translation time and English speaker education time. The common communication cycle is that you ask questions during your business day via email and receive answers the next business day. This cycle can cause the time to resolve issues to be unusually long when compared to typical North American expectations.

Translating technical language –

Frequently, the designated English speaker doesn’t know or understand technical English, or the technical subject in anyway and therefore cannot translate your questions. While your contact can speak and write conversational English, it is of little use in technical discussions. With my extensive travels in LCC countries, I have developed a communications skill where I ask questions via drawing on a white board to get answers directly from the engineers involved. This way, I can typically get an answer from the engineer faster than the translator can even understand my question.

Employee Turnover –

Recent statistics in China show general turnover rates ranging from 15-25% annually. I suspect English speaking turnover is even higher due to high demand. As a customer you may not even know a personnel change has occurred. I have seen instances where the new English speaker takes on the old English speakers email address or English name. You may only notice the change after being confused when they don’t remember a prior conversation or email. The best way to avoid this issue is to look for companies that have employed their English speaker for more than 5 years or one that has been in the industry for more than 10 years.

Turn over rate sources:

http://usa.chinadaily.com.cn/epaper/2015-12/21/content_22763852.htm

http://www.eusmecentre.org.cn/  You will have to download PDF called “HR Challenges in China”

http://www.recruitmentadvertising.cn/news/150.html 

I have visited many companies in southeast Asia, and I can tell you, of those that do not have financial ties to western or Japanese companies, only about 1 in 10 really do understand lean manufacturing. The trick is – how do you know?

Conduct an Audit –

The first and best way is to send a person knowledgeable in lean manufacturing to their production facility to perform an audit.  For many, this may be a cost and inconvenience they cannot afford.

Evaluate Markting Materials – 

The second, and much more difficult is to evaluate their marketing materials (website, brochures, etc) for signs that they understand lean manufacturing. This may include looking for or asking for certificates such as ISO9000, QS9000, or TS16949. But certificates are not truly accurate indicators of a company understanding lean principles. From a distance, you end up making assumptions that this information is truthful. In one extreme case, I found a company’s brochure that showed their lone manufacturing facility on the cover. Upon arriving at the facility for a site review, I realized that the building on their brochure was not theirs!

Supplier Questionnaire –

A third method that is frequently used in many industries is the supplier questionnaire. While I firmly believe in these, their effectiveness is questionable if you are not going to make an on-site audit to confirm their replies to the questionnaire. Additionally, finding the sweet spot in level of detailed questions that results in an accurate picture of the LCC supplier can be very difficult (too many questions may result in no reply). The first obstacle will be the language barrier. The LCC company may not understand many of the questions being asked. The second is the cultural differences. By this, I don’t some much mean the differences between western and LCC cultures, but even business cultures. Frequently, these supplier questionnaires will make assumptions about business systems, acronyms and buzz words that the LCC company will not understand. I have seen many of these where the questionnaire asks question after question such as: Does company use FTA? Where the response is simply yes. The LCC company has no idea if FTA stands for Fault Tree Analysis or Foreign Trade Agreements. Even if the questionnaire asks for supporting documentation of the use of FTA, your reply will still be a simple yes in the reply, and you will wonder if the missing documentation is an over-site or an indication that they don’t really use it.

It frequently astonishes me that companies here in the US will overlook the importance of their LCC supplier utilizing lean manufacturing. Many will only look at their landed cost, and if that is an improvement in their current cost, then they move forward with buying from the LCC company. However, this really ignores an issue that will in the end most certainly impact their landed costs – the cost of non-quality.

The practical ramifications of using a LCC company that are not using lean manufacturing principles are many. I have listed a few here:

Mixed parts:

Usually occurs when you are buying two parts that look fairly similar but have subtle differences. In non-lean companies, due a number of factors but most frequently poor identification of parts during the manufacturing process, parts will become mixed and you will have to sort out the different parts when they arrive at your facility)

Unapproved material substitutions:

There are numerous ways this happens, but most frequently the LLC supplier will decide on their own that a material specified on your drawing is close to something that is more readily available to them and use it without telling you because they think it is close enough. This is a very common problem and I have found it many times.

Unapproved process changes:

Most lean companies require their suppliers to inform them of process changes to make sure there are no problems with incoming products. However, many LCC companies simply do not think this is required. If you are not visiting the LCC supplier, you will never know about process changes in your products until unacceptable product arrives at your facility.

Ignored quality issues:

There really are two ways to ignore quality issues. The first is just because the supplier never checked for possible flaws and just shipped them to you. The second is that they checked and noticed the flaws, but the supplier decided for you that they are not a problem and shipped them to you anyway. Either way, you are going receive flawed product.

Poorly sorted or quarantined suspect parts:

This issue is related to #4. In this case they noticed the flaw, and tried to correct it via sorting. However, either their sorting methods were not robust enough to make sure the flawed product wasn’t shipped.

Haphazard rework processes:

This is also related to #4, but in this case the decided the parts needed repair or rework. Frequently, these methods will not be similar to the original manufacturing process and thus almost as likely create other flawed product issues as it will be to correct the flaws.

No advanced warning of quality or supply issues:

I believe in the Toyota maxim “bad news travels fast”. This simply means that lean companies inform the upstream users of their products when issues are occurring so the entire team can help resolve the problem and corrections to process and schedules can be made. If your LCC supplier is not lean – they most likely will not tell you of their issues in making flawless products for you.

Delayed product shipments:

Finally, all the above can lead to not only delays in your receiving products, but delays in your ability sell your products using them. At this point, all your savings by using a non-lean LCC supplier will be lost.

Even if you are able to back charge your LCC supplier for these issues, your company will most likely never fully recover the costs associated with these errors, either in real costs that were unaccounted for when the credit memo was issued, or opportunity and reputation costs.