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Lean goes radical
Unlike most companies, Sunnen Products Company took a radical approach to managing value streams during its lean transformation. To ensure successful implementation of lean principles, Sunnen created a new organizational structure focused around the value streams.
Most companies going through a lean transformation must face the question of how they should manage the value streams they have created. For many, the answer is to either hire a value stream manager who serves in a sort of a staff role or create a matrix organization that shares responsibility between functional alignment and value stream alignment. Sunnen chose a different route.
Keeping the paceSt. Louis-based Sunnen is a global leader (Sunnen has operations in the United Kingdom, Switzerland, Italy, France and China) in the manufacture and distribution of bore sizing and finishing equipment, engine rebuilding equipment, and tooling and abrasives. Its mission is to keep pace with the needs of customers in the processing of new materials and new requirements for high-volume production while maintaining the highest standards of precision.
Privately owned and operated, with annual revenue of approximately $100 million and about 550 employees, Sunnen began its lean transformation in May of 2006 with company-wide assessments and education followed by value-stream-mapping activity. The product family analysis determined 13 value streams.
Sunnen selected Future State Solutions, Moorestown, NJ, as its lean transformation partner for education, consulting and software. By February 2007, the first value stream—conventional abrasives—was operating in the future state mode and several other value streams had future state maps, which were being implemented. Lean accounting principles were also introduced and implemented, including profit-and-loss statements by value stream and value-stream box scores.
Transition painsAs is often experienced during the lean transformation, the conflicts between the value stream management approach and measurements, and those of the (traditional) functional organization, were felt.
Sunnen has always had a very cohesive management organization that works well together as a team; the issues that became apparent did not stem from egos or turf. Rather, the alignment of the organization was not really conducive to the kind of horizontal decision-making that a well-run value stream needed to be most effective. Simply put, too many people from too many groups had measurements and goals, which didn’t jive with the goals of the value stream. It was agreed that doing more communication, more meetings, more planning, more metrics at cross purposes – in other words, more of the same, only better – wasn’t going to be sufficient to bring about the needed changes in the company to gain the full benefits of lean.
An executive team began meeting on a regular basis to explore the possibility of creating a new organizational structure focused around the value streams and today, Mike Haughey, COO, continues to provide support and guidance. “We are committed to making lean work here. We need to do whatever is necessary to make this happen and continuously improve to the next level.”
With this as a mandate, a model was built that would take this approach as far as it would seem possible – all organizations would be placed into value streams, even if there weren’t any apparent advantages over the current functional management structure. This meant that all functional organizations in the company were considered as candidates to be broken apart and to join the value stream organizations. And while not all of the organizations considered ended up in the value streams, the approach placed more people in the value stream organization than otherwise expected.
The following table shows the placement of the functional organizations into the new value stream organizations.
Value Stream Resources | Shared Functional Resources | | Manufacturing | Shipping | | Quality | Accounting | | Manufacturing Engineering | Human Resources | | Purchasing | Customer Service | | Planning | Facilities Maintenance | | Warehouse | All non-product support of R&D | | IT functional requests | Model makers | | Machine maintenance | Field sales | | Production part of R&D | C.P.G. | | Engineer to order R&D | Tool maintenance (sharpening, etc.) | | Tool & die (decided by value stream) | IT corporate support | | Product managers | Honing lab | | Tool crib unique to value stream | Marketing |
There are 13 value streams at Sunnen. Many of the functions placed into the value stream organizations didn’t have 13 people working in them, including most of the support functions listed in this table. The decision was made to have the value stream leaders be responsible for managing a group of value streams. This allowed many functions to be aligned with a value stream group, even though there were not enough people in many of them to have a full-time person dedicated for each value stream. For instance, Mark Wildt is the value stream leader for abrasives. The Abrasives Group contains four value streams—Conventional Abrasives, Superabrasives, Plated Abrasives, and Press-to-size Abrasives. Each of these value streams has a manager. However, because there are not enough manufacturing engineers to have one for each value stream, the manufacturing engineers are shared across the value streams within the group.
The resulting organization mirrors a large organization with business units. The value streams each have a profit-and-loss statement and a set of dedicated resources. The value stream group has a manager and a set of resources that are shared among the value streams within the group, as well as a rolled-up profit-and-loss statement. Finally, some resources were left at the corporate level, mainly to allow for consistent policy decisions across value streams, such as usage of systems and other procedural issues.
The results are encouraging. After a period of settling down (any major change is typically met with a certain amount of unrest in most companies), the groups are finding that the new organization provides certain advantages. Because the value streams within Sunnen are so different from one another, ranging from primarily make-to-stock products in a few value streams, to engineer-to-order products in others, the organization has allowed the various functions to focus on providing solutions tailored to the needs of the value stream they are working for, rather than more generic solutions that need to serve many different conditions.
About the authorBill Kerber is a principal and vice president of consulting for Moorestown, NJ-based Future State Solutions, a provider of lean transformation software and guidance to companies wishing to embrace lean principles as a way of life.
Copyright © 2010 Society of Manufacturing Engineers
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| December 10, 2007 Issue: |
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