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Educational Sessions:• MANAGING FOR.......p. 2

DAILY IMPROVEMENT

• HIDDEN COSTS ......p. 5OF GLOBAL SOURCING

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Everybody Everyday:

Managing for

Daily ImprovementBy Jamie Flinchbaugh, Partner,Lean Learning Center

I have traveled to manycompanies over the past coupleof years. For the past ten yearsI have continued to see thesame strategies for leantransformation tried and failedover and over. Does this soundfamiliar? Train people in lean,begin some 5S application, andholding kaizen events. When Isurvey companies, I would

estimate that at least half ofcompanies pursuing lean havethis as their strategy. Thatnumber could be as high as 90percent. But it is a failedstrategy every time. Events donot make you lean. To begenuinely lean, it must happenthrough the efforts of everyperson everyday.

Early on in a company’s leanefforts, event lean can besuccessful. In particular, itcreates a significant amount ofvisibility into the actions takingplace because it is distinctly different from the status quo.The structure of things such as

kaizen eventsensures at leastshort-term gains, whichare attractive. But genuinelean is not built throughevents. Genuine lean is builtinto an organization’s people,processes, and ways ofperforming work—everything its people do, touch, or say. Ittakes time for a company tobuild this, and using events forlean is likely a stop along thepath to genuine lean. But toomuch dependence on eventswill prevent you from continuousprogress.

Why is event lean faulty when itactually produces results? Theunintended result is you maycreate a pattern of turning onand off the lean light switch. Theevent is over, so turn the leanswitch off. You will nevergenerate genuine lean this way.When times get tough, you mayleave the switch off for a while.The longer the switch is left off,the harder it is to turn it back on.Another reason event lean isbad is that it only engagessome of the employees some ofthe time.

Click to continue to page 3.

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Everybody Everyday:Managing for

Daily Improvement

Wednesday, April 25, 200710:20 a.m.

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Article continued from page 2.

As an example, while I was doing a leanassessment of one company’s lean efforts, Idiscovered that the assembly area had not had akaizen event in nine months.

Kaizen was the dominant form of lean in the company andhonestly they had done a great job at it. However, since nokaizen had occurred in such a long time, employees in theassembly area were under the impression that the lean effortshad ended.

Lean is like a muscle; the more it is used, the stronger itgrows. Conversely, if an employee only experiences a leanevent every few months, he or she has no chance tostrengthen the muscle and it begins to atrophy. Lean is reallyabout investing in the skills for improvement. There are threebuilding blocks for a foundation of genuine lean: an explicitlean culture based on lean principles, a solid and dynamicideas system, and standard work for management.

What is really behind companies that succeed at lean issustained lean implementation—and those that don't—is thelevel of thinking driven by lean principles and rules. Thinking,or beliefs, is a powerful lever in changing an organization.Thinking drives behaviors. Behaviors drive action. Actiondrives results. And no tool can fix that. Principles should helppeople make decisions that they might not otherwise make. Italigns people to a common set of ideas. For those companiesthat do bother to write down a set of principles or values endup posting it in the front lobby. Who’s that for? Not theemployee. It’s for the customers. True principles help peoplemake decisions that they would not otherwise make. You donot change people’s behaviors through policies or tools.

It requires two things: the clear articulation of those principlesand behaviors that associate with them and the continuousproviding of experiences that reinforce those principles.


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You want the person working on thedock at 2 AM to be able to make adecision in the same way you would.

Another key building block is an effective ideaprogram. This replaces the commonly referredto suggestion program. The change ismuch more than just a name; it is theessence of how such a system shouldoperate. Suggestions are for someoneelse; they are ideas for someone otherthan the originator to try. Ideas shouldoriginate from the person performing thework, whether that work is running amachine, designing a system or closing asale. That individual is the expert in theirspecific role, and the expectation is thatpart of their job is process improvement.

The final area is the application ofstandardized work for management. Mostmanagers don’t believe their work can bestandardized. It can’t be down to the minute,but it can be in terms of what should bepaid attention to, how and when. Andmost importantly, how to respond whensomething abnormal is found. Through theapplication of standard work to managementactivities, you gain predictable andrepeatable results, the ability to shareknowledge and the ability to improve.

True lean, genuine lean, is about goingwell beyond the tools, the events, thetraining and the lingo. It is aboutfundamentally changing how you runyour business—day in and day out.

For more insight on this topicplease attend the session:Everybody Everyday: Managing for DailyImprovement at the IW Best PlantsConference. This session will be held onWednesday, April 25 at 10:20 a.m.


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SESSION SPOTLIGHT:

Meet the speaker of the session: EverybodyEveryday: Managing for Daily Improvement

Jamie Flinchbaugh, Founder andPartner, Lean Learning Center

[email protected]

www.leanlearningcenter.com

Jamie shares his successful and variedexperiences of lean transformation as apractitioner and leader through companies suchas Chrysler and DTE Energy. He also has awide range of practical experience in industrialoperations, including production, maintenance,material control, product development, andmanufacturing engineering. Jamie is agraduate fellow of the highly regarded Leadersfor Manufacturing Program at theMassachusetts Institute of Technology, wherehis research thesis was on implementing leanmanufacturing through factory design. He alsoholds a B.S. in Engineering from LehighUniversity in Bethlehem, PA and an M.S. inEngineering from the University of Michigan. In2006, he was named to Crain Detroit's 40Under 40 list for his accomplishments. He isalso the co-author of the book: The Hitchhiker’sGuide to Lean: Lessons from the Road.


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Global Sourcing:

Illusive Profits,

Expensive Mistakes

By Andy Stinnes

Global sourcing has become thestrategy du jour as enterprisesseek to reduce cost ofacquiring, building and sellingproducts in a continual effort tocompete more successfully forcustomers. Yet extendingsupply lines overseas bringswith it new commercial andoperational challenges that arefar more complex than before,and expose the enterprise to anentirely new universe ofinvestments, costs, partners,liabilities, resource acquisitionand management needs.

The result—sourcing initiativesthat do not deliver the projectedcost savings and/or profitsbecause the risks and costs oflonger, more complex cross-border supply chains were notproperly understood, trackedand managed.

The Rush To Outsource, Hidden PitfallsAs companies come underincreasing pressure to competeon price, the rush to“outsource” and embracecheap overseas labor and low-cost manufacturing indeveloping countries hasresembled a modern-dayversion of the historic Californiagold rush. The only difference isthat the modes of transportationare ships and planes instead ofhorses and covered wagons.

Five years into the newmillennium, tens of thousandsof companies have movedsourcing and manufacturingoverseas. Where in 2000 it was

not uncommonfor a U.S.-basedcompany to have10% or less of itsproducts provided bysuppliers in another country,today those same companiesare going overseas for 50%,70%, even more than 90% oftheir products.

And while the purchasingdepartments in all thoseorganizations will point withpride to all the money they havesaved their companies, a walkdown the hall to the logisticsand supply chain group revealsa far different story.



The Hidden Costs of Global Sourcing

Wednesday, April 25, 20079:10 a.m.

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Conference ConnectionArticle continued from page 5.

Running a logistics operation from Austin, Texas to Buffalo,New York has far fewer moving parts, fewer and lesscomplex cost components, and lower impact on financialcash flow than a cross-border supply chain from Osaka,

Japan to Columbus, Ohio. The risks and challenges are an order ofgreater magnitude.

Independent Functions, Disconnected SystemsLogistics and procurement departments tend to be “siloed” functionsthat because of their focus, how they are measured, and how they arecompensated, often end up actually working at cross-purposes, withone gaining or losing at the expense of the other. The purchasing folksare measured by unit price. The logistics team is measured bytransportation spend or total logistics cost as a percent of revenue.

Add to this mix yet another separate management system and employeegroup—accounts payable—where the company’s bills are received,checked, assigned to cost centers and paid. The resulting picture is onewhere many operational processes are running concurrently but have littleor no visibility into each other. Yet each has an impact and a role in how anorganization understands, manages and controls its global costs, cashflows and profitability.

Lacking a common, integrated cost tracking, measurement and analysissystem that “overlays” and connects these silos, they are like shipspassing in the night, mostly unaware of either’s presence. Without anoverarching system that provides real-time intelligence into the global“financial supply chain”—and allows accurate and timely visibility to bothglobal sourcing and logistics costs as they are incurred—disaster is boundto result. And it’s a disaster that typically does not show up on thecompany’s bottom line until weeks or months later. Several industry reportsprovide examples of the impact:

• A European retailer looking at the landed cost of health and beauty care products on its shelves uncovered an astounding 3,500 of 5,200 products that had no contribution or a negative impact on net profitability. They were in fact dead weight or subsidized by the remaining profitable offerings. Click to continue to page 7.

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• A diversified Fortune 250 retailer embarks on an initiativeto increase from 5% to 30% a number of material, component and service activities sourced in four low-cost countries, with a projected savings in cost of goods sold (COGS) of $200 million. With longer supply lines the initiative also had to account for logistics costs that could potentially rise to as much as 40% of COGS, as well as the challenge of how to assign these costs back to individual items for profitability analysis. The projected COGS savings is significantly adjusted downward.

• A manufacturing enterprise successfully expands its global supplier base, saving $20 million, only to find that logistics costs had increased by $38 million due to increased trucking expenses.

Advantages Of Dynamic Global Cost Control SystemsIntegrated global cost control systems present significant advantagesand can be the source of qualitative as well as quantitativedifferentiation for a global enterprise. Major opportunity areas include:

Improve target costing—Accurately understanding target costs—the expected full cost to purchase goodsfrom an overseas supplier and get them to market—is the key to profits. Dynamically tracking actualcost against previously set targets quickly uncovers targets that are unrealistic or inaccurate. Earlyvisibility into the delta between these two allows shippers to quickly adjust targets and modify plans fordownstream product pricing and marketing campaigns. By reducing from months to weeks or evendays the discovery of unrealistic targets, companies can save millions in lost margins.

Dynamically report and manage costs—By implementing a global platform that automates and centrallymanages global logistics data collection and consolidation, substantial reductions in cost reportingdelays are made possible. Traditional reporting solutions suffer from latency problems and are goodonly for post-audit or “after the fact” analysis. Issues that may be uncovered relate to logistics activitythat’s long since been completed; retroactive resolution is not possible. With dynamic cost reporting,lead-time for actuals can be cut from days or weeks to hours. Supply chain issues are exposed early.Enterprises can take steps to respond quickly and correct them before excessive costs are incurred.



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Article continuedfrom page 7.

Track the liabilitypipeline—As

globally sourced goods aremanufactured and then starttheir journey to market, theenterprise incurs liabilities forpayment of goods and services.With actual global cost tracking,financial managers can literally“watch the meter build” assourcing and supply chainmilestone activities areexecuted, and the costs areincurred. This intelligence canbe used to better assessobligations as well as currentand future cash flow needs. Theintegrated global cost controlsystem also supports keyfinancial managementprocesses that underpinaccurate total costmanagement. These include:

• Cost allocation—Costs can be automatically allocated by the system in the proper proportion to the right shipment, order, product line item or SKU. No “orphan” costs are left out and the resulting global landed cost calculation is accurate.

• Cost audit—Costs can be automatically audited in the system. For example freight costs can be matched against transportation contracts, duties against item classifications, first cost against commercial invoice or original purchase order.

• Cost timing—The time in which a certain liability (cost) was incurred can be audited or matched by the system against a corresponding event in the physical supply chain. For example, transfer

of title to goods (and resulting payment) can be associated with or triggered by related events in the “physical” supply chain, such as Forwarder Cargo Receipt, Vessel On-Board or Vessel Arrival.

ConclusionExperience has taught us thatoutsourcing and strategicrelocation of manufacturing andsupply bases to lower costcountries can help enterprisesreduce cost of goods sold.


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However, history also proves that thesavings from those sourcing initiativescan quickly evaporate without effectivetechnology platforms and systems

capable of managing longer and more complexsupply lines, and the larger, more extendedfinancial commitment required to operate them.It’s the holy grail of global supply chainmanagement.

Tangible benefits in global sourcing and cross-border supply chain performance, as well asmeasurable improvements in bottom-lineprofitability can be obtained by investing in anddeploying today’s advanced, Internet-basedglobal cost control systems. These herald thenext generation of landed cost management,introducing new measures of value and benefitthrough connected networks that synch up thephysical and financial supply chain, and delivernew-found visibility and control over a broadswath of global sourcing, trade and logistics

operations.

To downloada full whitepaper onGlobalSourcing:IllusiveProfits,ExpensiveMistakesplease clickhere.

For more insight on this topicplease attend the session: TheHidden Costs of Global Sourcing at the IW Best Plants Conference. Thissession will be held on Wednesday, April 25 at 9:10 a.m.


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Meet the speaker of the session:The Hidden Costs of Global Sourcing

Andy Stinnes, Vice President,Products & Strategy, GT Nexus

[email protected]

www.gtnexus.com

Stinnes is responsible for GT Nexus' globalproduct management activities andcorporate strategy. Mr. Stinnes has over tenyears of experience in listening tocustomers, designing solutions, launchingand growing successful products in thesupply chain applications market. Beforejoining GT Nexus, Mr. Stinnes lead productmanagement for Apexon Inc., a supplierrelationship management applicationsprovider. Prior, he spent over seven years ati2 Technologies Inc., holding posts inEurope and the U.S., heading i2's worldwideindustry solutions organization for theautomotive and industrial equipmentmanufacturing markets. Mr. Stinnes holdsMaster of Science degrees in MechanicalEngineering and Manufacturing SystemsEngineering from Stuttgart University,Germany and the University of Wisconsin.


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http://www.gtnexus.com/

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I nternational Truck and Engine Corp.’sIndianapolis Engine Plant producesthe new 6.4-liter diesel engine for

Ford Motor Co.'s F-Series Super-Dutypickup trucks. The plant is currentlyproducing approximately 500 engines aday for Ford's Kentucky Truck Plant inLouisville. The Indianapolis Engine Planthas 1.1 million square feet ofmanufacturing space. The plant wasnamed as an IW Best Plants winner in1998. To give you more insight into thisplant, IW asked Anthony Page,Communications Manager fromInternational’s Indianapolis Engine Plant ,three quick questions.

Plant Tours Sponsored By: ®

3 QUICK QUESTIONS ABOUT. . .INTERNATIONAL TRUCK AND ENGINECORP.—INDIANAPOLIS ENGINE PLANT

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IW: What one piece ofadvice would you give tomanufacturers just startingout on their continuousimprovement efforts?

Page: To have a goal andan action plan for how thegoal will be achieved, withpeople who are accountablefor making sure the plan iscarried out. Recognize,though, that there will bebumps in the road and thatthe action plan may have tobe altered from time to timeto reach the goal.

IW: What do youconsider your most valuablecontinuous improvementinitiative in the past threeyears? Please describe thisfor an IW Best Plantsattendee.

Page: International'sIndianapolis Engine Planttakes great pride in the factthat it has improved thequality of its product for thecustomer by approximately50 percent each of the pastthree years. We measure

this by tracking our defects(Repairs per 1,000) at thecustomer. This past year,1.7 engines of every 1,000shipped to the customerhad some defect that wasrepaired by our employeesat the customer's locationbefore the engines wereinstalled in Ford F-SeriesSuper Duty pickup trucks.This significantimprovement in quality hascome about due to anumber of reasons,including getting ourmachine operators on theplant floor more involvedwith addressing the issues,having our operators visitthe customer in order tounderstand how the issueimpacts the customer, andmaking our suppliers moreaccountable for issues withtheir parts by beefing up ourSupplier Quality Engineerorganization.


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IW: Yourplant is a tour stopduring the IW BestPlants Conference.What is the one bestpractice “take away” you'd likemanufacturers to leave with?Please explain.

Page: Our Cold Test Station inAssembly is a good example of abest practice for our plant. TheStation monitors our engines atvarious RPMs and monitorswaveforms to detect defects. This

allows our operators to check pressure, torque, sensors and mechanical attributes of the enginewithout starting it. Because of the accuracy and reliability of our Cold Test Station—along with theaccuracy and reliability of our 14 other Integrated Quality Assurance Stations—it has freed us up fromhaving to Hot Test 100 percent of our engines, which has resulted in a significant cost savings. Weuse our Audit Hot Test Cell to hot test only 1 percent of our engines to ensure we didn’t miss anythingat any of our 15 Integrated Quality Assurance (IQA) Stations. (In the Audit Hot Test Cell the engine iswarmed up for three minutes and then undergoes 30 minutes of testing.) Each computer-controlledIQA Station applies a system of inspection during the assembly process, ensuring the engine meetsthe highest quality standards at each stage of inspection, rather than waiting until the engine iscompletely built. No engine can advance beyond an IQA station without passing an inspection.

Other plant tours at the IW Best Plants Conference include: Allison Transmission, General Motors Corp. National Starch Food InnovationBatesville Casket, Batesville Operations TOUR FULL Nucor Steel, Crawfordsville Caterpillar Inc. Large Engine Center Subaru of Indiana Automotive Inc. TOUR FULLCummins Inc. Columbus Midrange Engine Plant Toyota Industrial Equipment TOUR FULLGeneral Cable, Indianapolis Compounds

Plant tours are filling up quickly! Register TODAY to reserve your spot! Click to continue to page 12.

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2007 IW Best PlantsConference Registrantsby Company as of 01/18/07

3MABB PERFORMANCE SERVICESABBOTT LABS, ABBOTT DIABETES CAREABITIBI-CONSOLIDATED INC.ACCESS BUSINESS GROUPACTIVPLANT CORP.ADVENT DESIGN CORP.AK STEEL - ROCKPORT WORKSALLEGHENY TECHNOLOGIES INC.ALLISON TRANSMISSIONALTICORALTO PRODUCTS CORP.ARC ADVISORY GROUPATIBATESVILLE CASKETBAXTER PRODUCTOS MEDICOSBIOVAIL LABORATORIES INTERNATIONALBIRCH CONSULTINGBMA INC.BOSTON SCIENTIFICBOWATER INC.BPC INC.BREAKTHROUGH MANAGEMENT GROUPBURNETTE FOODSBURTEK INC.CAMERON COMPRESSION SYSTEMSCARPENTER TECHNOLOGY CORP.CH2M HILLCUSTOM DIRECT LLCDAIMLERCHRYSLERDATACRAFT SOLUTIONSDAVIS WIRE CORP.DELOITTE CONSULTING LLPDELPHI CORP.DEVELOPMENT DIMENSIONS INT’L INC. DONALDSON COMPANY INC.DORMONT MANUFACTURINGDST OUTPUTDUGGAN & ASSOCIATESEMERSON NETWORK POWER

ENERGIZER BATTERY COMPANY INC.FEDERAL PRISON INDUSTRIESFEDEX SERVICESFEY INDUSTRIESFORMICA CORP.FOSECO METALLURGICAL INC.GALAMBA METALS GROUP LLCGALLATIN STEEL CO.GARDNER DENVER INC.GE GENERAL CABLEGREENE TWEED & CO.GT NEXUSHALDEXHANNAY REELS INC.HARDINGE INC.HATCO CORP.HEADWATERS INC.HOIST LIFTRUCK MANUFACTURING INC.HYPERTHERM INC.ILC DOVERINDALEX INC.INDUSTRIAL SCIENTIFIC CORP.INFORINLAND LABEL & MARKETING SERVICESINTERNATIONAL TRUCK AND ENGINE CORP.INVENSYS PROCESS SYSTEMSJERGENS INC.JOHN DEERE WATERLOO WORKSKENNAMETALLADISHLEAN ENTERPRISE INSTITUTELEAN LEARNING CENTERLOCKHEED MARTINMAGEE RIETER AUTOMOTIVE SYSTEMSMAINSTREAM CONSULTINGMANUFACTURING INSIGHTSMEC MIDWESTMEDRAD INC.MKM MACHINE TOOL CO.MORRISON PRODUCTS INC.MOYNO INC. MYERS INC.MQ WHITEMANNATIONAL STARCH FOOD INNOVATION

NATIONWIDE LEARNING INC.NEW PIG CORP.NOBLE METAL PROCESSING G.P.NORTHROP GRUMMANNUCOR CRAWFORDSVILLEPEERLESS PUMP CO.PENN EMBLEM CO.PLAYWORLD SYSTEMS INC.PRAXAIRPURDUE UNIVERSITY TECHNICALASSISTANCE PROGRAMQSC AUDIORESPIRONICS INC.RICH PRODUCTSROME METALS LLCROSE PLASTIC USA LPSAFETY PERFORMANCE SOLUTIONS INC.SAP INC.SCHNEIDER ELECTRICSKIER'S CHOICE INC.SNAP-ON TOOLSSOLECTRON CORP.SPRINGFIELD WIRE INC.STRICK CORP.SUBARU OF INDIANA AUTOMOTIVE INC.SUMITOMO ELECTRICTANDEHILL HUMAN CAPITALTBM CONSULTING GROUP INC.THE BOEING CO.THE MPI GROUPTHOMAS & BETTS CORP.TIMKEN COMPANYTOYOTA MATERIAL HANDLINGTRIAD PACKAGING INC.TRW SAFETY SYSTEMSTUBELITE INC.VALVOLINEW.P. HICKMAN CO.WATSON PHARMACEUTICAL INC.WISECO PISTON COMPANYWOODWARD GOVERNOR CO.ZF LEMFORDER CORP.


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The host hotel for the IW Best PlantsConference:

Hyatt Regency Indianapolis

Don’t Forget! Reserve your hotel room by April 2, 2007 and askfor the IW Best Plants Conference rate of$159/night. To reserve your room call the hotel at317-632-1234 or click here to make yourreservations online.

IW Best Plants Conference Homepage

IW Best Plants Registration

Hotel Accommodations

IW Best Plants Advisory Board

Contact Us

Complete Conference Agenda

Keynote Speakers

IW Best Plants Panel Discussions:

Developing Your Continuous Improvement Strategy

Motivating Your Employees

Sustaining Your Continuous Improvement Efforts

Benchmarking: Why, Who and How Often

Managing in a Union Environment

Plant Tours:

Allison Transmission, General Motors Corp.

Batesville Casket, Batesville Operations TOUR FULL

Caterpillar Inc. Large Engine Center

Cummins Inc. Columbus Midrange Engine Plant

General Cable, Indianapolis Compounds

International Engine Group

National Starch Food Innovation

Nucor Steel, Crawfordsville

Subaru of Indiana Automotive Inc. TOUR FULL

Toyota Industrial Equipment TOUR FULL

Sponsors:

TBM Consulting Group Inc.

Activplant Corp.

UGS

SAP America Inc.

ABB Inc.

The Indy Partnership

More links on next page



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http://www.iwbestplants.com/contactus.asp

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http://www.iwbestplants.com/program_generalsessions.asp#tue8am

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http://www.iwbestplants.com/program_ci101.asp#tue10am

http://www.iwbestplants.com/program_leadership.asp#tue2pm

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http://www.iwbestplants.com/tours_Caterpillar_2007.asp

http://www.iwbestplants.com/tours_Cummins_2007.asp

http://www.iwbestplants.com/tours_GenCable_2007.asp

http://www.iwbestplants.com/tours_IndianapolisEngine_2007.asp

http://www.iwbestplants.com/tours_NationalStarch_2007.asp

http://www.iwbestplants.com/tours_Nucor_2007.asp

http://www.iwbestplants.com/sponsors.asp

http://www.tbmcg.com/

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Links continued from page 13.

Conference SessionsUsing Kaizen to Reduce Energy Waste

Developing and RetainingManufacturing Leaders of Today & Tomorrow

How and Why to be a Best Plants Winner

Lean Accounting: Solving the Standard Costing Problem

Winning Compensation Models: Partnering withEmployees to Create Performance Gains

Product Development Processes for LeanManufacturing

Discover How Quality Improvement Tools CanImpact Your Bottom Line

Hoshin Planning: Vision-driven Leadership forBreakthrough Improvement

Managing Cultural Diversity

Supplier Evaluation

Creating Operational Excellence

Integrating Lean with ERP

The Next Phase: Supply Chain Convergence-Benchmarking, Lean, and Six Sigma = IntegratedFulfillment Execution

ERP for Small/Mid-size Manufacturers

Taking Continuous Improvement Beyond the Plant Floor

Creating a Culture for Competitive Advantage

Beyond Best Plants: Best-in-Class Supply Chains

Developing a Corporate Approach to Reliabilityand Maintenance Excellence

Office Lean

Planning for Disaster

The Hidden Costs of Global Sourcing

Manufacturing Performance Metrics: Which OnesDeserve Attention and Why

Performance Metrics that Matter: ChoosingInformation Over Data

Everybody Everyday: Managing for DailyImprovement

Managing Distribution: RFID & Manufacturing

Prioritizing Six Sigma and Kaizen Initiatives toAchieve the Greatest Gains

Integrating Lean Manufacturing and Six Sigma:The Challenges and Benefits

Making Safety a "Culture," Not Just an "Initiative"

Employing Kanban to Win in the CompetitiveGlobal Market Place


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