Questions to ask to determine Health of Business and Efficiency of Operations
Joe Rizzo, President
Lean is Green, LLC
June 5, 2019
There are two sets of questions to ask when visiting a company for the first time. The first are the questions to ask when meeting with the Management team in a conference room or the Senior Mangers’s office. The second set of questions is those which are asked during a plant tour of the facility.
My favorite definition of Lean is, “Making what the Customer wants, when they want it, in the quantities they want.” The questions below are aimed at how well the company matches this definition of Lean.
Meeting with the Management Team
Request a presentation on the nature of the business, the health of the business, the performance YTD, and the performance versus the budget.
What are the growth projections for the company?
What is the % Net Profit to Sales? (should be double digit)
What are the Sales per employee? (All employees should be included in the calculation. A satisfactory number used to be, greater than $150,000. Today it should be greater than $200,000. This will give you an idea of whether they have the right number of people for their business or not. A number below the target could indicate too many people.)
During or after the presentation, “What are the three biggest issues or problems that you are dealing with?” - How are they affecting the business? - What are you doing to address those problems? - (listen for reasons cited that are beyond their control)
Upon entering the production floor, stop for a few minutes and scan what is before you.
What do you see? What is your first impression?
Is it bright? Is there good lighting?
Are the aisles well defined and painted?
Do the operations seem orderly or chaotic?
Is all the equipment running?
Is the equipment clean and painted?
Do you see piles of scrap?
Do you see excess inventory?
Do you see FIFO lanes?
Do you see Kanban squares on the floor or other Kanban signals?
Do you see a product flow from the Receiving Dock to the Shipping Dock?
Are the final steps in the manufacturing process close to Shipping Dock?
Do you see any pictures of the employees at their work area or on a bulletin board?
Is there an Employee Recognition Board?
Do you see a lot of fork truck traffic?
Do you see a lot of pictures for employees throughout the building?
Use the rest rooms in the production areas. Are they clean? Do they look sanitary?
The two biggest wastes in manufacturing are Excess Inventory and Overproduction. The second leads to the first.
In terms of days, how much inventory is in Raw Materials?
In terms of days, how much inventory is in WIP?
In terms of days, how much inventory is in Finished Goods?
What is the dollar amount of all inventories?
What is this amount as a percentage of Sales?
What is the number of turns for the total inventory? - (15 turns are deemed to be an acceptable number today. However, I have reached 52 turns when I managed the Audio Products Division for Shape)
Do you have a goal to increase the number of turns?
What are your plans to increase the number of turns?
How important is inventory to the health of the business?
What do you do to control inventory levels?
What would happen if you took inventory down by 20%?
How do you schedule your business?
Is each machine and/or area scheduled individually?
How many categories of “expedite” do you have? - Hot, red hot, white hot, needs to go out today, etc.)
Do you build to order or build to stock?
Is product manufactured in batches or are there U-shaped assembly cells (the assembly line is the most efficient way to produce a product or provide a service)
Are there large pieces of equipment in the manufacturing process? - Does Accounting force you to run the equipment every day? - Do you feel obligated to run the equipment all day, every day?
What is the size of your maintenance staff?
What is this as a percentage of the total workforce?
What is the per cent uptime of most of the equipment?
What are the total hours lost per year due to equipment downtime?
Do you have a goal to reduce this time?
Do you have a Preventive Maintenance program?
Do the machine operators have daily or weekly PM tasks to complete on their machine?
What is your inventory of spare parts in terms of dollars?
Where are the spare parts stored, in a central stock room or at the machine?
How many times do spare parts have to be expedited and shipped “next day”?
What is your philosophy towards people?
Do you feel it is important to keep them busy the full eight hours per day? - Does this lead to overproduction and excess inventory?
Do you ever shut down equipment when an order is completed?
Do you reach out to future orders to produce product today? - Is this done because the changeover to another product is lengthy? - Is this done to keep people busy?
Is your manufacturing operation on a Pull System or a Push System?
Are there any “supermarkets” in the manufacturing process?
How many hours per year do you provide for the training of each employee?
What do you train them in?
Do you cross train your employees to work in different areas or on different machines?
Do you use the four point method to keep track of the employee’s capability levels?
Does the employee’s pay increase with increased worker flexibility?
What is the turnover ratio for employees?
What is your onboarding process for new employees?
When was the last time you fired an employee? For what reason?
If I were to stand in the parking lot at the end of the day, would I hear a lot of tires squealing from employees that can’t wait to leave work?
If I were to come in one hour before the start of the first shift, how many first shift employees would I find in the cafeteria?
Stop and talk with several employees on the tour and ask them some or all of the following questions. - How is it going today? - Any problems or issues today? - Can you tell me what the Quality Policy is? - Can you tell me what the overall goals and objectives of the company are? - How does your work contribute to achieving the overall goals and objectives of the company? - Does your area have goals and objectives? - How is your area doing in achieving those goals and objectives? - Have you made any improvements to your area or work, recently? - What are you good at? - Do you participate in the company suggestion (improving idea) program?
What do you have for an Employee Recognition System?
Is there an Employee Recognition Board?
What other ways do you recognize employees?
How do you engage the workforce?
Do you have a program for engaging the workforce? What is it?
What percentage of the employees are engaged?
Product Cost and Variances
How are the products costed?
Is there a Standard Direct Cost System?
Who adjusts the standards? Operations or Finance.
What is the breakdown by percentage for Material, Labor and Overhead?
Typically, materials are 60%. Overhead is 30%. Labor is 10%.
If the labor content is over 10%, there is opportunity for automation and/or outsourcing.
Are Operations measured by Variances in the three cost factors?
Does Operation often make product to meet their variance goal for the month? - This practice could lead to Overproduction and Excess Inventory
Is there a Bread man system for supplies, hardware and small value items?
Are there any high value items on consignment, stored within the plant?
Is the company on a Pull System or Replenishment system with their major suppliers?
Does Purchasing purchase in high volumes to get the lower price? - This leads to excess Inventory levels. -Or, does Purchase require their suppliers to deliver more frequently, in smaller quantities (the preferred practice)?
Are purchasing decisions based solely on the shipping costs of the item? - This should never be done. - If this is the case, Purchasing needs to find more local suppliers.
Is there a Supplier Qualification process? What is it?
Do Purchasing people visit their suppliers at least once per year?
Is there a Supplier evaluation system?
How often do suppliers ship in damaged or out of spec material?
What are you doing to address this problem?
Is the company ISO registered? To what standard?
Does the company have a Quality Policy? What is it?
Does the company have an MRB (Material Review Board)? How is it working?
What is the average length of time material stays in the quarantined area?
What dollar amount is budgeted for scrap?
What is the YTD amount? How does this amount compare to the budget?
What programs are addressed to reducing scrap?
What is the First Pass Yield at each of the Value Streams?
Ask the company to enumerate the places where they have “quality at the source?
Is there final inspection for the products? Why?
Is there a figure for returned material in the budget? Why?
Is there an account for Warranty Costs? Why?
Can the company articulate “the Cost of Quality”?
How many people in the Quality function? Does this number seem reasonable for the size of the company?
How is the company dealing with suppliers that send in out of spec or off-grade material?
How many times does the company have to expedite shipments from their suppliers?
What is the total cost for expediting shipments from suppliers or for spare parts?