Kaizen for Dealers - Best Practices
Construction Equipment Distribution magazine is published by the Associated Equipment Distributors, a nonprofit trade association founded in 1919, whose membership is primarily comprised of the leading equipment dealerships and rental companies in the U.S. and Canada. AED membership also includes equipment manufacturers and industry-service firms. CED magazine has been published continuously since 1920. Associated Equipment Distributors
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SECTION: Best Practices

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Kaizen for Dealers

CED Maganize 2010

Article Date: 11-01-2010
Copyright(C) 2010 Associated Equipment Distributors. All Rights Reserved.

Philosophy of continuous improvement yields real results for once-skeptical dealers.

Change is difficult, and to survive the latest downturn most dealers have had to make significant changes. But what if we didn't wait for a catastrophic event such as a recession to usher in change? What if change was a way of life?

Kaizen is a Japanese term that, translated, means "little improvements over time" or "continuous improvement." When applied to a business or workplace, Kaizen refers to activities that continually improve all functions. "It's finding a better or a simpler way to do a job," explains Tony Manos, author and instructor for American Society of Quality. By improving standardized activities and processes, Kaizen aims to eliminate waste. For this reason Kaizen is closely associated with lean manufacturing and lean distribution.

After World War II, to help restore Japan, American occupation forces brought in American experts to help with the rebuilding of Japanese industry. One of those experts was Dr. W. Edwards Deming who was honored by the Emperor of Japan in 1960 for pioneering and implementing Kaizen in Japan. Another example: The Toyota Production System achieved great success utilizing Kaizen. In their system, all line personnel were expected to stop their production line if there was any abnormality and, along with their supervisor, suggest an improvement to resolve the problem.

Vermeer Corp. embraced the Kaizen philosophy in the late 1990s and spurred on by their success, they began suggesting that dealers get on board, as well.

Skeptic Turned Believer in Arizona
Bo Adams, president of Vermeer Sales Southwest, admits he was skeptical at first. After all, how could a philosophy that came out of the automobile manufacturing business possibly work for a construction equipment manufacturer or – even more far-fetched – a dealer?

"To me, Vermeer and Toyota had nothing in common." Today, Adams' skepticism has been replaced by enthusiasm, for Kaizen has produced some very real results for the dealership.

"The more and more I saw the results of it, the more interested I became," said Adams. And as Vermeer continued to develop the idea, Adams took notice of improvements in lead times and reduced costs. In 2006, Vermeer Southwest Sales held its first Kaizen event, a four-day engagement focused on a single area or problem, in this case, the service department.

Part of a Kaizen event is often a workplace '5S' – an organization methodology that uses five Japanese words that start with the letter "s." Translated, they are sort, set in order, shine, standardize and sustain.

During that event, the shop was cleaned and organized for greater efficiency and ergonomic comfort. Systems were developed so that parts weren't lying around and bad parts were disposed of immediately. "I don't know that there is an area inside an equipment dealer that should not be looked at for waste," said Adams.

In February of 2010, with a move to a new facility eminent, Vermeer Sales Southwest took on parts obsolescence in a Kaizen event. The purpose was to establish standard work for the parts department inventory control and reduce the number of obsolete parts.

Before the event, the value of the company's stock of obsolete parts was just over $154,000 or 24.8 percent of the current inventory. After the event, obsolescent parts represented just 9.7 percent of the inventory and were valued at $55,000. Adams credits the success to facing the problem headon. The company threw away parts that had been in inventory more than 15 years and had no value; they moved some parts to other locations; sold parts on Craigslist, and offered deals to customers who owned machines for which they had spare parts.

"What we got was a process that we have in place today that will keep us from creating a part on our shelves that will become obsolete," said Adams.

Catching On in Mississippi
Kaizen took some time to take hold at Vermeer MidSouth, headquartered in Jackson, Miss., but now that it has, employees come away excited after the events. "It took a while for the concept to gain any traction," said President Dennis Vander Molen, "because we didn't have 100 percent buy-in for some time."

The company now holds about three Kaizen events per year at various locations, and Vander Molen not only sees the direct benefits by reducing waste and increasing productivity, but also some more intangible benefits. "The cleaner, more organized the place is, that impacts morale," said Vander Molen, "and it impacts safety."

Some of the areas of operation Vermeer MidSouth has focused on include parts rooms, show rooms, shop floors and business process.

"It has really changed the way that we manage our parts inventories and our whole goods inventories," said Vander Molen. A manual of standard work processes eliminates errors and promotes completeness in the work. For example, the company reduced errors on whole goods orders by 50 percent. "By standardizing the expectation, we can promote a lot better paper work," added Vander Molen. At Vermeer MidSouth, standard work has also become a way by which to evaluate employees.

From Frustrated to Lean in Ohio
Bobcat's mission statement includes a commitment to continuous improvement. Similar to Vermeer, success at the factory in implementing this philosophy trickled down to dealers. Having purchased Bobcat of Lima in Ohio back in December 2007, Dave Shephard and co-owner, Bob Fritz, welcomed an opportunity to participate in a "lean" event in the Spring of 2008. After all, in just a few months, they had already made dramatic changes. Or so they thought.

While not a typical Kaizen event, because the dealership was not involved in making the initial suggestions, the Bobcat lean event focused on small changes to make the operation better. For two days, a team from Bobcat corporate observed the operation. At the end of that time period they all sat down in a room and started to evaluate the different departments: parts, service, sales and rental. However, the results were not at all what Shephard was expecting.

"I was about as frustrated as I could be," said Shephard. Comments about the number of steps a mechanic took to do something, the location of the dumpsters, the entrance and exits to the facility, the location of the rental counter, the exterior paint and signage, did not sit well. "By the end of the day, they had a list of a number of things I thought were really crazy. It was kind of like somebody telling you your wife is fat," said Shephard.

Regrouping after the Bobcat team left, Shephard was ready to move on, but his partner and some of the managers thought they should give it a try, and so they did. In three or four days, they had tackled about 30 items. "After we started doing some of the things on the list, we started thinking, this makes sense," said Shephard. "We were doing things sometimes to make it better for us, but in reality, the customers are the most important people that we have."

According to Shephard, the lean event was a major factor in the company's success and helped the company through the difficult economic times that followed. "It allowed us to be more openminded to change," said Shephard. "I would like someone to come in and do it again."

What Happens at a Kaizen Event?
A Kaizen event is not your typical business meeting where people just discuss and decide what to do. It's a roll-up-your sleeves event in which you get to work right then and there, over what is typically a three- to five-day period. After identifying improvements, the group identifies the ones that make the most sense, and then they get to work cleaning, painting and reorganizing work spaces. Costs are typically minimal (less than $2,000), risk is minimal, but the results are impressive.

Adams has seen shop technicians who were initially upset at getting their world turned around change their thinking. "At the end of the day, at the end of the week, he is going to look at it and say this is nice, how do we keep it this way?" said Adams.

In a typical Kaizen event, a group of about 10 people representing a cross section of departments are invited to participate. They are led by a Kaizen facilitator who may be an employee or a hired consultant. At Vermeer Corp., Craig Nolan, CI manager distribution, has led 28 Kaizen events this year, but Kaizen champions within both of these Vermeer dealerships do the groundwork for the event, selecting individuals and preparing objectives. Staff personnel have usually attended several Kaizen events and received some training.

"We like about seven to 10 people," said Kaizen expert Manos. "The No. 1 rule is you have to have people from the work area on the team."

Cultural Change
Manos agrees that employees can be resistant to change and associate "lean" with job loss. As a Kaizen event facilitator he addresses this right away, but often finds that resistors can often turn into disciples by the end of the event. "Employees know in their jobs where there is waste," said Manos. "As managers, we ought to be able to help them draw that out."

Another positive for Adams is that the event allows you to get to know employees better by putting them in an environment where their ideas are encouraged. "There are always one or two people who you don't know how involved they are and how much they know," said Adams.

For small dealerships, the difficult part of Kaizen is finding the time to take people away from their jobs. Vermeer MidSouth plans three events a year, as does Vermeer Southwest Sales. But the cost of the improvement is typically low – so is the risk. For longer range improvements, Manos will put items on a 30-day action list to be addressed.

There is also no question that Kaizen involves a cultural change in an organization, which won't happen overnight. "North American managers think ‘I worked hard to get in this position, I have to know everything,'" added Manos. "In the lean world, the manager is supposed to be helping and coaching and leading the people." In their quest to the hit the homerun, Manos believes managers may have lost sight of making the little improvements that together can make a significant positive impact.

However, these three dealership example s demonstrate that once that cultural change takes place, Kaizen can become a way of life.

"You start looking into business, and it becomes part of your thought process," said Adams. "You think, where is the waste? – because we have to get rid of the waste in this business."

Three Ways to Take a Lean Journey
  1. On your own – Get educated in the Kaizen philosophy by reading books and articles, watching DVDs and attending Kaizen events. This method is probably sustainable, but keep in mind it will take some time to accomplish.
  2. Hire a consultant – A consultant can provide quick entry into the world of Kaizen, but without buy-in from employees, the results may not be sustainable.
  3. Combination – Hire a consultant to get you off to a great start, but also have employees become experts, to help teach and encourage others in the Kaizen way.

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