Constraints Are Opportunities

I started my lean journey many years ago while working in the motorcycle industry.  I was a parts and accessories manager for a BMW Motorcycles dealership in the Monterey Bay area of California.  This dealership had been in business for many years and had recently moved into a new, purpose built building.

Abundant Resources

The new store was so much larger than the previous one.  When they moved in, the owners didn’t know how they were going to fill it.  They actually thought they had overbuilt for the company’s needs.

Complexity

The parts and accessories department had multiple value streams.  We were a BMW Motorcycles Apparel dealer (most dealers weren’t); we imported an aftermarket accessory line from Europe and distributed to other dealers throughout the Americas; marketed and sold common motorcycle accessories that were available at pretty much every motorcycle dealership in the country; and, of course, sold BMW parts and accessories.

Our customers came to us through the dealership showroom, the service department, telephone, and the internet.  This was in the days when internet retail was still new.  Our dealership was the first under the BMW Motorcycle brand to retail via the internet and maintained a dominant web presence for many years.

While we had a new, purpose built store, it was already obsolete.  Internet sales hadn’t really been considered much of a growth opportunity when the building was designed.  Our shipping/receiving department was comprised of two desks  in a 12′ x 12′ area of the parts room.  There was a 36″ swing out door that opened to the parking lot at the side of the building.  There wasn’t even a loading dock.  Everything that went in and out of the parts and accessories department went through this door.

Wasteful Processes

We were in the habit of ordering parts from BMW and several other suppliers once a week.  Orders for the specialized accessories line were place about once every six weeks.  At the time I didn’t think much of it.  This was the way I was taught to order, so I did.

It didn’t take long for our parts room to fill up to the point it was overflowing.  It was crowded and the three of us who worked in there were constantly bumping into each other.  Large weekly orders were delivered in crates just small enough to fit through the door.  Our practice was to take everything out of the crate and put it on the desk and on the floor, so we could get rid of the crate to make more room.  Receiving these orders (checking parts off of the packing slip and placing them in the proper bin location) took hours, largely because we did it while also serving customers in the showroom, through the service department and over the phone.  Internet orders could be batched and could wait a while.

Constraints Intensified Problems

It was common for orders to be half received when we went home at night.  It was pretty much guaranteed that we’d have to rework the receiving process in the morning.  There were brand new items spread out all over the place.  Finding the remaining items on the packing slip was often a mess and took a long time to sort out.

The day-to-day operation had become hectic most of the time.  There were errors in receiving with nearly every large order.  With our internet/catalog mail order business growing rapidly, we discovered new opportunities for error.

The point of sale system generated invoices printed with a dot matrix printer (like I said, it was a long time ago).  There was only one font and one size: 10pt.  Bold typeface wasn’t an option.

90% or more of our shipped orders were shipped FedEx Ground.  The remaining orders were split between FedEx Overnight and FedEx Two Day Air.  The shipping method was listed on the invoice mixed in with some boilerplate text above the order line items.  It was difficult to see at a glance.  It seemed that about half of the overnight and two day orders were shipped ground by mistake.  With 75-100 shipments per day, we had quite a few disappointed customers.

No Option but to Improve

Our team was frustrated and overburdened.  We new we had to make changes, not only to provide better service to the customer, but also to have a better experience at work.  I remember talking to the team about the idea of flow.  Product need to flow into the room, onto the shelves, and back out to the customer like water flows through a stream.  Anything that disrupts the flow, or causes ripples in the water, needs to be removed.

We replaced the desks with workbenches, but not just any workbenches.  They were the kind that were bolted to the wall and didn’t have legs.  We needed floor space and legs would disrupt flow.  With the new workbenches we implemented new practices.  Nothing–absolutely nothing–was to be left on the workbenches when we closed the store at night.  Anything on the workbench was a signal for work to be done.  Sometimes we needed to stay late to clear off the workbenches and make sure there wouldn’t be any confusion in the morning.

We agreed that we would no longer empty crates before receiving items into inventory.  Our receiving process was changed to simply removing an item from the crate, checking it off of the packing slip, and placing it in the bin location.  Checking the item off of the packing slip was a critical step in the process.  If an item was removed from the crate without being checked off the slip and the phone rang or a customer approached the counter, the item would be put back into the crate so the customer could be served and so we would prevent errors in the receiving process.  If the item was checked off the packing slip, we’d place it in the proper bin on the way to serving the customer or simply hold onto it (some items were small) until it was put away.  They key point was putting the item down somewhere else was to be avoided because this was the cause for confusion and rework.

We also wanted to reduce the amount of work required to receive an order, which meant we needed smaller orders.  I started ordering product 3-4 times per week in the busy season and 2 times per week in the slow season.  Our orders were much smaller and the receiving process much faster.  I also learned that by ordering more frequently, I could reduce the inventory on hand while maintaining or even improving my customer satisfaction rate.

Our inventory was reduced from just over $300,000 (I think it was about $302,000) to $199,000.  I also learned that anything in stock for more than 12 months was a financial liability.  I listed these items on Ebay for $0.01 and let the bidding go.  We often sold these items for the retail price.  The benefit was that we cleared out a lot of storage bin space.  This simplified the operation by making the remaining parts easier to identify.  This helped us speed up our service to the customer.

We split the 12′ x 12′ shipping/receiving area in two sections.  Inbound product would flow in through the door, which was on the west wall, and onto the workbench on the north wall.  Outbound product would flow to the packing area, which was the workbench on the south wall.  Packed boxes were staged in the southwest corner and flowed out the door at the end of the day.  We agreed that items in the receiving process would never be placed on the shipping workbench and shipping items would never be placed on the receiving workbench on the opposite side of the room.  We all knew what kind of confusion this would create for us and we didn’t have any trouble sticking to our agreement.

Shipping method continued to be a problem.  We tried different ways to solve this.  The method that ended up working was the easiest to do.  We ordered three large self-inking stamps to highlight the shipping method.  The first stamp read “OVERNIGHT” in red ink.  The second stamp read “2-Day Air” in purple ink.  The third read “Ground” in green.  These were the colors of FedEx’s shipping labels and also the matched the logos on their express and ground shipping trucks.  We simply stamped the invoice with the appropriate shipping method.  This not only reduced the shipping errors, it shaved a few seconds off of shipping processing time because the shipping method was so much easier to read.

We made many small changes to improve the operation.  This was done out of a need to survive.  What was once thought to be a more than sufficient resource turned out to be a constraint as the business grew.  If we had the space to spread out, we certainly would have used it.  This would have meant more waste.  We would have had more inventory and would likely would have kept with the large batch orders.  Receiving would have continued to be burdensome and problematic.  There would have been an increased waste of motion by walking back and forth across a larger space.

The space limitation turned out to be a gift.  We had no room to move.  We had no alternatives.  Improving processes was the only option.  Our constraint revealed opportunities to improve process, free up cash, and become more profitable.

I learned a lot about Lean working there.  One thing I didn’t learn until later in my career was that Lean was a thing.

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