How does Lean lead to everlasting foundations?

[Case] An exporter of furniture hardware accessories in Guangdong, 80% of which are sold to Europe, providing OEM products for mid-to-high-end brands. Mr. is the chairman of the board and is in charge of the factory's manufacturing management; the wife is the general manager and is in charge of sales management. It has been in business for 21 years, and the scale has not grown much, with sales always hovering around 30 million yuan. The company's peak annual profit reached more than 6 million yuan, but in the past five years, business has become more and more difficult to do, customers demand price reductions every year, and the requirements for delivery and quality are getting higher and higher; employee wages and various costs Continued growth squeezes gross profit margins, making it more and more difficult to make profits; by 2012, it had lost more than one million yuan, making it unsustainable. What problems exist in the operation of this business? How should it be solved?

Twin Cities Consultation

With these questions, nearly 100 loyal readers of "CEConline", business owners and executives met on August 6 and August 22. Two Zhihui salon competitions were held in Qingdao and Beijing respectively, discussing how to use lean management to help enterprises improve sustainable profitability and achieve the goal of everlasting business.

Interactive topic: How to apply 5 lean principles to deal with 8 types of corporate waste?

Zhihui Salon provides business managers with opportunities for face-to-face communication and interaction. The "CEConline" team, which is good at doing various types of research, learned through research that in the process of China's manufacturing upgrade and transformation, the biggest confusion for small and medium-sized enterprises is that there are many constraints, slow growth in scale, high operating pressure, and difficulty in guaranteeing profits. The survey found that the challenges faced by export-oriented manufacturing enterprises and trading enterprises in cost control, market development, and grasping market demand; the difficulty lies in insufficient brand power, poor sales ability and insufficient product competitiveness; Most small and medium-sized enterprises are unable to provide systematic training for employees; in terms of production, there are generally low production efficiency, unstable quality, and large changes in orders; in terms of supply chain management, there are problems such as long delays in incoming goods and high purchase prices. Therefore, there is an urgent need for enterprises to improve the level of lean management.

Under the leadership of Dr. Liu Chengyuan, a senior management expert, a star blogger of the CEConlines website, and Chairman of United Resources 3A Consulting Company, all salon participants have the vision of "innovative management to enhance the sustainable profitability of enterprises" expectations, and deeply participate in the case study to discuss how to achieve a variety of solutions to win the future through lean management.

Adjust strategy and learn to settle accounts

The production capacity of the company in the case is not enough to support the development of the company for a long time: the gross profit rate of hardware is not low, and the manufacturing scale of 30 million sales Too small, because the quotation is high, they can only receive small and difficult orders. After the loss, the chairman hoped that the sales department would raise the quotation, thinking that lowering the price would result in a lot of losses; major customers complained that the price was too high, and the general manager hoped to lower the price a little so that he could take more larger orders.

Qian Lin, the owner of Qingdao Yinlongfei Household Products Co., Ltd., believes that the production cost control of the case company has not been done well, and there are problems with the integration of production plans, customers and market positioning. The representatives of the second group of Beijing Salon proposed that this company has not adjusted its development strategy in time according to changes in the market environment for many years. For different customer needs, it should adjust its product pricing strategy, segment customers, and segment products. Dr. Liu affirmed this analysis. He said that since there has been no progress for more than 20 years, this enterprise lacks a strategy first. Without a long-term vision, I do not know why the operation is carried out. The chairman and the general manager think about problems independently. Without strategic thinking, an enterprise will not go far!

Dr. Liu pointedly pointed out: "Business owners must learn to calculate accounts and find the break-even point. The chairman calculates the accounts based on sales of 30 million yuan, and thinks that the more you do, the more losses you make. This algorithm is wrong. .If it reaches 100 million, after the fixed cost is amortized, the material cost and labor cost will account for a certain proportion, and the unit cost will be reduced."

In order to survive, reducing costs is a difficult task. Challenges, many participants pointed out the way to reduce costs, but the wages of individual employees cannot be reduced, what can be done is to reduce fixed capital and hidden costs, improve the utilization rate of various resources, use the least plant equipment, etc. (fixed assets input) to produce the greatest value. For material costs, instead of lowering the purchase price, it is better to make improvements in material utilization and material substitution through the R&D and production departments.

In the past, production and sales departments were profit centers, and other departments were cost centers. But today, efforts are made to make all departments both cost centers and profit centers. The financial department can create a lot of value, avoid tax reasonably, learn how to manage financial management and optimize the use of funds, and even apply for government subsidies; the human resources department can also use their brains to make money. For example, Huawei's human resources department can make money by providing external services. In this way, through accounting and self-improvement, everyone in the team uses their brains to think of ways to improve themselves, so that all departments can contribute profits to the company to varying degrees.

Qi Wei, deputy general manager of TBEA New Energy Co., Ltd., believes that changing the status quo should start from the client, maintain existing clients as much as possible, expand the sales scale on the existing basis, and then focus on Several large customers, the company's situation may have changed.

The representative of the sixth group in Beijing believes that the case company lacks a method of communicating with customers. We may have hundreds of customers, but now the number of orders is low, and the most important reason is to communicate with large customers If this is not done in place, it is worthwhile for good customers to go abroad for one-on-one communication by plane, so that those customers can be brought back.

In fact, the case company did just that. The company conducted a profit analysis with the help of a consulting firm and found that 30 million was the break-even point. The most effective solution was to Existing customers keep the price unchanged. With 30 million sales, the fixed cost of the factory can basically be amortized, and the additional business only needs to bear the variable cost, that is, the cost of materials and labor. By reducing the price by 10%, many large customers who ran away in the past have been brought back.

Introducing Lean Mechanism

Why are many SMEs inefficient in solving problems?

Because there is not a complete set of scientific problem-solving mechanism to support, and without mobilizing employees to solve problems systematically, it is far from enough to rely on impromptu problem-solving by business owners.

Ma Fangda, General Manager of Qingdao Sunshine Optoelectronics International Trade Co., Ltd. has not been in business for a long time, but he has deep insights into management. His speech is powerful, "The most important thing for case companies to change the status To improve management capabilities and efficiency, we must introduce lean management under the guidance of corporate strategic goals to improve per capita output.” Sun Ao of Qingdao Hyde Packaging Co., Ltd. also suggested that the case enterprises should strengthen production management and control capabilities.

Dr. Liu said: "In excellent manufacturing companies such as Toyota and Ricoh, there is a complete set of lean problem-solving mechanisms." When personal accidents, various disasters and other problems occur, the "instant and same-day quality meeting" mechanism is adopted to solve the problem, that is, a meeting is held at the moment when the problem occurs and at a fixed time every day.

For important but not urgent problems, such as tactical problems such as excessive inventory, inefficiency, chronic defects, and delivery delays, the project improvement activity mechanism is used to solve. Aiming at the management problems such as the on-site environment, 5S problems, equipment and tools problems and on-site execution of the production line, it is necessary to promote the self-management activity mechanism to solve them systematically. For other problems, "employee proposals" can be used to solve the problem.

Resolving problems requires full participation. These lean problem-solving mechanisms are not only conducive to the systematic solution of problems, but more importantly, are to enhance the awareness and ability of managers and employees. The goal of enterprise performance improvement and lean management should be clear, that is, the growth of employees, to influence them, inspire them, promote their participation, and enhance their awareness and ability.

The core of lean management is to change the way people behave.

Building a new structure

The representatives of the second group of Beijing Salon believed that the organizational structure of the case enterprise was not perfect, and there was a lack of communication among various departments. A bit of siloedness and lack of a holistic view of the business. The structure should be adjusted to separate sales and production of the two carriages, clarify responsibilities, and strengthen collaboration.

Dr. Liu appreciates this insight very much. He said that in order to achieve sustainable profitability, an enterprise must use lean management to build a sustainable, comprehensive and innovative business structure.

For the case companies, Dr. Liu's prescription is: in the first stage, the loopholes in the organization and management will be filled, and they will find a suitable production manager for the company, which will effectively improve the production efficiency; in the second stage, use lean production to strengthen Manufacturing, do on-site 5S improvement; expand market share in the third stage, retrieve old customers through price reduction sales, and keep existing orders without price reduction.

With the help of lean experts, the production efficiency of the case enterprise has been greatly improved, and the product quality has stabilized. over 3 million.

Based on many years of practical experience, Dr. Liu has refined a set of comprehensive innovative management theory with strong practicality. In addition to the three basic mechanisms, it also includes three improvement mechanisms and a management mechanism. . This set of theory divides enterprise operation and management into two major divisions: "creation" and "education", and implements the improvement of the ability of "creation system" into the effective operation of "education mechanism". Creation is the goal, and education is the means. It fully conforms to Toyota's lean thinking of "creating people first".

The foundation of innovative management is to innovate employees' awareness, build a learning environment and provide a stage for display. By building an efficient education mechanism, employees can gradually become first-class in learning and improvement. As we all know, in order to show their style at the party at the end of the year, the employees started preparing for the show early, and they have no regrets for their efforts after work. It can be seen that as long as we change our minds, we can make employees the protagonists in various mobilization meetings, skill competitions, monthly report meetings and year-end summary meetings, and let them take the stage to share their experience and achievements, which will make the team radiate unprecedented wisdom and enthusiasm. strength.

After the salon, Qian Lin, the owner of Yinlongfei Home Furnishing Company, said that in 2010, the company made great efforts to change its business strategy, gave up large orders with low profits, and specialized in high value-added products to increase profit margins. She has a long-standing awareness of lean management, but she always fails to implement it in operation. She has benefited a lot from the salon. She hopes to have more opportunities to communicate with founders of other companies, grasp the general direction of the market, and find innovative management methods. Improve sustainable profitability.

Special thanks to the venue provider: Kerry Construction Group Co., Ltd. for the Haibitai project. For more information, please visit the official website of the Haibitai project.