Canceling out distance

PART 1

Words: José Ignacio Garcia Cornejo, head of production at Deutz Spain – Zafra, Extremadura

Open Google Maps and you will immediately be struck by our location: we are tucked away in the southwestern corner of Europe, with our customer located 2,500 kilometers away. Here in Zafra, we produce engine parts for the Deutz Group, which we then ship to Germany. No wonder our transportation costs reach around 5 million euros a year!

From a logistics point of view, this makes no sense. So why do our customers stay with us? One reason is that the plant has been here for 150 years, which means that, when it comes to engines, we have very high levels of technical knowledge. But there is another, more important reason: our lean transformation, which has allowed us to keep our quality high, our costs low and our customer service satisfactory enough to convince the group to keep us as its largest supplier.

Our lean journey began, as it usually does, with small kaizen events. We used them to experiment with some tools. At the same time, every two weeks we organized workshops teaching people about 5S, just-in-time, jidoka and so on. We decided to run a pilot project in the assembly area. It was a very intense year, during which we introduced kanban and the milk-run, moving the machines and completely transforming the assembly work. It was at that moment that we truly turned our plant into a lean plant. When the whole site began to understand what lean is, we introduced the Deutz Production System – inspired by TPS, of course, but customized to our needs.

In 2014 and 2015, we began working with the Renault-Nissan consultancy. That was when we were really introduced to the idea of a lean transformation and to the need to involve management and take change beyond the production area. We drew value stream maps, creating a link between our gemba and the rest of the company. We began to analyze processes critically, rather than by department – we even appointed value stream managers. “Flow” became a common word as we sought a global view of the process.

After that, we began working with Instituto Lean Management – which finally allowed us to reach everyone across the company. By inviting people to take part in the Lean Practitioner program and encouraging them to run improvement projects, we realized that a transformation could only succeed if everyone was involved. I would also say that it was in this last phase that we really reached the shop floor.

We have been on the journey for years, but it still feels like we have only just begun. Perhaps that is because we put a lot of emphasis on reinforcing the fundamentals. Always (even Toyota is going back to basics!). The reason is that you can deploy your strategy well but still be walking on eggshells – so to speak. We know that truly understanding lean principles and techniques means constantly practicing PDCA in our learning.

The Deutz Production System itself is a way of assessing the level of implementation of standards and techniques to ensure that our results are sustainable. It is a manual we rely on to check our level of “lean health”: we know that, whenever we do not reach our targets, the answer lies in the gemba. That is where lean can be seen in action. Our own mantra of “back to basics” means strengthening our standards and our use of lean principles, something the value stream manager is in charge of.

What is very interesting about lean is that you can be fully involved in it and still lose sight of the big picture. Take our example. I feel we are quite advanced in our application of lean principles and tools, but at the moment we still cannot see the elephant in the room: we have too much material in the plant, and that, in my view, is not lean. A healthy plant needs to have as little material as possible; we have 13 days of work-in-process inventory for one of our products and 10 days of finished goods. We ended up getting lost in the details and forgetting the fundamentals! So now we have to put our house in order again.

Don’t get me wrong: everyone at Deutz Spain can recognize waste and knows how to deal with it, but it is very easy to get caught up in daily work and lose the big picture needed to see your work and check whether it is ceasing to be lean. Focusing too much on the technical aspect has its downsides.

That is one of the many reasons why the constant development of people is so important to us. People are the main pillar of our transformation, because they are the ones who allow continuous improvement and change to take root. We offer regular training (we are currently also exploring kata coaching), as well as opportunities to improve their work.

It is a side effect of lean to look at your plant and see only the negative. Within the Deutz Group, in fact, we are a model: our German headquarters sends entire teams to see us here in Zafra, to understand lean thinking and see how we work. The rest of the group has never experienced the same sense of urgency as we have, for the reasons I explained at the beginning of the article (we are far from our customer, and the economy in Extremadura cannot really be compared to Germany’s). That is why it is often said that lean works best in settings where there are not many resources.

To make sure we are as aligned as possible with the group strategy (which is fundamental to survive), we have relied on hoshin kanri. This is a great way to visualize the impact our work has on the company’s objectives and to improve our processes based on what the KPIs are telling us.

For hoshin to work, however, we need a strong daily management system. We have perfected this over the years, which means that, as head of production, I currently only deal with risks. The rest is the prerogative of the teams on the shop floor. The KPIs immediately tell me how we are doing, but it is not my role to step in and tell people what to do when we have a problem (and, yes, sometimes it is hard to resist that temptation). Instead, I focus on the risks we face as a department. That is the beauty of lean: by empowering people to tackle problems in the process, it allows leadership to focus on the big problems that affect our strategic objectives.

Speaking of strategic decisions, one of the things I am focusing on now is the creation of the Deutz Maintenance System (DMS) – a manual that defines responsibilities and describes maintenance techniques. It will teach people to do maintenance in the leanest way possible. This was long overdue, because maintenance is a very large cost for us and we simply need to find a way to predict the situations that may arise with our machines. If we do that, we will save a lot!

Any problem, whether inventory or an interruption in flow, represents money we need elsewhere. I am convinced that, for Deutz Spain, lean thinking is not just nice to have; it is a matter of survival. It may be uncomfortable and difficult to do, but it is necessary. To remain competitive, we need to keep offering the customer the lowest possible price – which means we need to reduce fixed costs (there is simply no way around it). When even your raw materials come from Germany, it is not easy to convince your German customer that it makes sense to buy components from a small company located on the other side of the continent.

The only way I can prove to our customers that we are the best option is through lean thinking. Lean gives us the flexibility we need to offer the best possible service, always give them what they need and keep them satisfied. We are working on this and fighting every day to virtually cancel out the 2,500 kilometers that separate us from our customers.

PART 2 – OUR COMPETITIVENESS CENTER

Words: Francisco Soler Benito, controlling manager at Deutz Spain – Zafra, Extremadura

Deutz Spain is like an oasis in the desert. As the most important manufacturer in Extremadura, we represent a major resource for the local economy. More than six hundred families depend directly on us. This makes our competitiveness more than just a business goal; it is a moral imperative.

In the past, our controlling function (the one that sets standards, monitors the performance of our business and takes corrective action when necessary) worked mainly with reports, but we have now developed a way to truly manage the flow of information in the business.

Things changed in 2014 and 2015, when we had a major crisis in Germany. In response, we held a brainstorming session to try to figure out how to reduce our fixed costs. In the short and medium term, we managed to save € 1.8 million. That was the beginning of our Competitiveness Center.

This is the place where we deal with waste at Deutz Spain. Every Thursday at 1 p.m., we hold a meeting here. At first, everyone responsible for costs was supposed to attend (there were always between 30 and 40 of us), but since October 2017 we only call in those who are facing deviations to report on the problem. We also have a meeting at the end of the month to report on the monthly deviation.

The idea behind the Competitiveness Center is to solve problems as soon as they appear (it is pointless to solve a deviation months after it occurs). With this in mind, we created an automated alert system: whenever the system detects a deviation – for example, productivity drops by more than 5% –, it immediately sends an alert to the manager responsible, who knows right away that they will need to show up at the Thursday meeting with an A3. The meeting is also when we review the countermeasures we have implemented and determine whether or not they are working.

The biggest benefit of the Competitiveness Center has been the creation of a culture of waste elimination and the spread of the idea that, to deal with waste quickly and effectively, we need to work together. It has also given us a way to focus our conversations on the most relevant problems and provided us with a common language to discuss them.

Learn more about Deutz Spain’s lean HR strategy here (in English).