Embarking on the Lean journey in the cable industry with Four Principles
In February 2017, Aiman Al-Masri, CEO & President of MESC (Middle East Specialised Cables) told Technical Review Middle East Magazine that he believed that human assets are the most crucial part of any business: “At MESC, we believe in our assets. We are faster in executing projects, produce better quality cables and, to top it all, provide good customer service. We have witnessed lay-offs across the region and, though this may be necessary, it is not always the best way to optimise costs – companies can alternatively look at other cost-cutting methods like smarter processes, faster deliveries, maintaining high quality and sourcing materials in the most economical way. This is what I mean by focusing on better business strategy. In 2014, we were not moving fast enough to keep up with the changes in the market. We were “heavy” everywhere… in inventories, processes and so on.”
Even though the company’s product had a very good reputation in terms of quality and was perceived as the top choice in the market, its market share was reducing on a yearly basis due to macro-economic changes that were causing a generalised market contraction, changing the customer focus from quality to price. From the customers’ perspective, the product’s high prices and long delivery lead times were the main problems. For this reason, the management team decided to embark on a Lean transformation with Four Principles that focused on tackling these issues.
Initial analysis established that the main sources of customer complaints were long delivery lead times or missed deliveries. It was found that the equipment in the plant was running for only 44% of the month. At least 24% of the available time was lost due to operational losses – these were caused mainly by long change-over times, machines running at low speed ratios to avoid recurrent equipment breakdowns, high levels of re-work and poor utilisation of personnel.
The company’s management decided that their Lean journey should begin by implementing methods and tools to increase the output of the factory. As Aiman observed, “We did not wait (for the market to turn) – we acted while others focused on quick wins. We had to increase the level of urgency, to stretch ourselves.”
For the first phase of the transformation, the management team decided to create a Lean “lighthouse” – in other words, a project that proved that the overall plant capacity could be increased by reducing the bottleneck equipment downtime whilst increasing its throughput. Through the implementation of Total Productive Maintenance (TPM) principles, the conditions of the selected pilot machines were brought back to fabrication standards which, based on the production mix, increased machine output by 20%. Further capacity was created by implementing quick change-over methods which reduced change-over downtimes by 65% and increased the availability of equipment by 32%.
However, the biggest impact of the changes was an increase in the motivation of the team operating the equipment, giving the operators and technical team a well-deserved sense of achievement that the rest of the company recognised and now craved for. This allowed the successful roll-out of the TPM methodology over several lines and types of machines, enabling machine output increases that ranged from 17% to 88%. It also brought about autonomous maintenance standards compliance of over 80%, as well as full quality control transference to the operators that has since been sustained and increased over the years.
During the project, Four Principles implemented the Daily Direction Setting (DDS) meeting – a cross-functional stand-up meeting conducted at several levels where the operators were given voice and responsibility as agents of change and sustainability. During these daily meetings, all production, planning, quality and maintenance issues were analysed to the root cause. Accordingly, action plans were put in place to avoid the recurrence of the problems. Within the first month of implementation, this practice saved the equivalent of around SAR 3 million worth of quality re-work per annum, as well as avoiding a loss of over 300 productive manpower hours per month. Today, this practice continues to bring value to the company and pride to its workforce.
Elsewhere in the company, the sales department had an issue with product price and order profitability. Four Principles helped the company to reduce the overall product cost, targeting a reduction of the consumption of raw materials by reviewing material specifications and adherence to standards on the shop floor. Furthermore, raw material consumption and waste generation controls were set up, a full Bill of Material (BOM) revision was carried out and the quoting algorithm reviewed. These changes allowed cost reductions in certain areas by up to 7%. These changes gave the sales department the competitive edge they were looking for, opening the door to sustained increases in profitability. Meanwhile, the management team urged the sales department to increase their collections rate. This was achieved through the introduction of a Daily Direction Setting meeting between sales, finance and management to follow-up and reduce overdue accounts receivables.
According to Aiman, during the project “there were supporters, neutrals and opponents – as the others accelerated, the opponents did not run with and were left behind.” However, this situation did not last long, with opponents soon embracing Lean concepts as they came to fully appreciate their benefits. Today, the way the company conduct their Daily Direction Setting meetings is a good example of proactivity and effort. This collaboration results in better inter-departmental communication, improved order status visibility and, ultimately, a systematic way of sustaining achieved success in terms of productivity ratios and cost control. “The culture has changed by trying.” said Aiman.
These new practices have ultimately changed customer perceptions of MESC’s product and service quality. This was achieved by increasing the on-time and in-full delivery to the customer, reducing the overall promised delivery lead time and cutting the amount of quality related customer complaints. Further advantages included a reduction in the amount of man-hours spent in quality-related product rework, reduced overall inventory levels and an increase in plant output and overall equipment availability rates.
Combined, all of these benefits gave MESC a competitive advantage in their specialised cables market niche. The company’s challenge now lies in aligning its organisational strategy to develop more products for new sectors, thereby increasing its customer base.
Today, Aiman can also tell MESC stakeholders that the company is in a position to further their R&D capabilities, enabling them to launch newer products in the Middle East market without investing in further production space or resources. “Looking back, if I could start the journey over again, we would have started sooner and focused more on activities related to the cash cycle earlier in the program.” says Aiman, adding “This is our Lean journey so far – we are not yet done and, when we get to our destination, we will look for a new one. We are moving in the right direction.”
Aiman is proud to claim that MESC’s “Focus is now not just to be the best cable manufacturer in the region, but to be the best by a big margin in terms of quality and delivery service to our customers.” He is now sure that whatever challenges he gets from his customers in terms of delivery and cost, his organisation is much better placed to deal with them.
Aiman’s quotes from:
Interview from 14-16 February 2017 at Middle East Electricity (MEE) – February 2017 magazine issue
We were able to achieve a 47% space reduction in our production areas and warehouses
Take-out customer wait times dropped from over 20 min to below 2 min
Reduced lead times
We were able to reduce our lead times by 43%, which means we were able to produce almost the same amount of products in half the time
Improved on-time delivery
We improved on-time delivery to the guests by 113%
Final result was that our sales net promoter score increased by 25% and the service net promoter score increased by 5%
Better Space Utilization
We managed to reduce our inventory which resulted in a 28% space reduction in the distribution center and the branches
A Clear Structured Approach
With Lean we are now structured and work systemically and that ensures quality, besides efficiency and productivity
Reduced customer waiting times
We reduced the time the customer spent waiting in our reception area by 55%
Significant Lead Time Improvements
Transfer of vehicles from and to branches dropped from 15 days to 1 day and the insurance approval lead time from 7 days to half a day
We have completed implementation of the Lean principles on more than 50% of our machines. Our indicators are very positive with machine output varying between 17% and almost 90% improvement
Retail Sector Sustainable Improvements
The in-store inventory was reduced by over 30% while maintaining an availability of core items of over 99%
The real success
We can now produce for customers based on demand, and this ability and flexibility allows us to save time and money. That’s the real success here
We have increased our output from that machine by 20% and the availability of the machine by 32%
Improved manpower utilization
We have managed to avoid losses of over 300 productive manpower hours per month
We were able to achieve something that we thought is beyond our abilities
Short delivery times
We improved the preparation time for home delivery orders and dropped it from 31 minutes to 16 minutes
The Perfect Store
Today, the entire Zohoor Alreef team has understood through Lean that the “Perfect Store” is a shared aspiration that can only be achieved through Kaizen or continuous improvement.
Sustainable cost reduction
We achieved product cost reductions of up to 7% and have also reduced our inventory over 60%