Written by Daryl Powell
As of 2013, there were more than 200 Norwegian companies operating in China. One company in particular is Kongsberg Maritime, which officially opened its advanced production facility – Kongsberg Maritime China Jiangsu (KMCJ) – on 30th November 2009. Today, KMCJ is one of Kongsberg Maritime’s largest production centres outside of Norway, providing all-round services of design, development, manufacturing, assembly, and test of maritime products. In this article, Daryl Powell, Lean Manager – Kongsberg Maritime Subsea, presents an overview of the initial phases of the company’s lean implementation at KMCJ.
China’s manufacturing industry grew significantly following the Chinese Economic Reform that began in 1978. As a result, many foreign companies began to take interest in the benefits of such a sizeable market with such low labour costs. This sparked particular interest for Norwegian producers, which rank as number one in terms of the most costly labour rates in the world. According to the International Labour Comparisons Program (2014), the average manufacturing hourly compensation cost in Norway in 2010 was approx. 60USD. In comparison, the cost of Chinese labour was a fraction of this, estimated at just 2USD.
However, in recent years, the cost of Chinese labour has been surging. For example, research from the Boston Consulting Group (BCG) shows that more recently; the cost of labour in China has grown on average more than 10% annually. This has resulted in an increased interest amongst Sino-European manufacturers as to how the lean practices that have begun to underpin their European operations can be effectively deployed in China in order to counteract this rise in costs.
At its site in Zhenjiang (approx. 250km North West of Shanghai), Kongsberg Maritime China Jiangsu (KMCJ) is an example in the making. Starting up as a small, advanced production facility in November 2009, KMCJ today has over 50,000m2 of modern production facilities, making it one of Kongsberg Maritime’s largest production centres outside of Norway. Faced with rising production costs, the senior management team at KMCJ took the Kongsberg Maritime Subsea Executive Lean Awareness Course in September 2015, when the team decided that lean was a realistic way in which to attempt to offset the increasing labour costs in China. At the same time, a group of KMCJ employees (mostly middle managers, supervisors and foremen) also received basic training in Kongsberg Maritime Subsea’s Lean Programme. Both Rune Hagen, General Manager (GM) at KMCJ and Jed Ding, Deputy GM confirm that lean has since become a central part of the company’s long-term business strategy. “Lean is a strategically important direction for KMCJ”, says Rune. “Our aim is to strengthen our competitive edge by reducing our cost level. We plan to achieve this through implementing efficient processes, emphasising continuous improvement, and eliminating waste such as unnecessary transportation, overproduction, waiting, and excessive inventory in the form of non-moving capital”.
INSERT PICTURE OF Group of KMCJ employees (“KM Subsea’s Lean Manager, Daryl Powell, pictured here with participants of Lean Introduction course at KMCJ in September 2015).
Team-based Continuous Improvement
KMCJ began to apply lean thinking systematically across its manufacturing operations in autumn 2015. The starting point for this was the creation of continuous improvement teams on the shop floor. Here, the operators, foremen and supervisors in each production area have weekly stand-up meetings where they gather around lean boards to discuss problems and identify improvement opportunities through employee suggestions. Each production area also has its own change-agents who have the responsibility of fostering lean change at KMCJ.
At Kongsberg Maritime Subsea in Norway, the decisions to implement improvements based on employee suggestions remain entirely at the discretion of autonomous production teams themselves during weekly stand-up meetings. In contrast, at KMCJ, a systematic assessment of all improvement suggestions is carried out, firstly by the foreman, assessing each suggestion in terms of impact, benefit, and cost to implement. The improvements are then prioritised for implementation before the team assigns individual responsibility for following up each improvement activity. The company is also currently developing a program for rewarding the best improvements at an annual awards ceremony. This will most likely be similar to the system adopted in Norway, where certificates of achievement and non-financial awards are presented to teams and individuals during the company conference to recognise significant efforts in lean and continuous improvement.
KMCJ’s lean champion, Evans Wang, explains that many of the improvements that have been identified and carried out so far at KMCJ have been directed towards establishing standards for the lean basics such as visual management and 5S workplace organization. In some cases, this has been in direct response to an increased focus on changeover time and setup reduction. “In 2015 our average time per changeover in the mechanical workshop was approx. 6 hours” reports Evans. “Already in January 2016, this average has been reduced to approx. 4 hours. A 35% reduction”.
Leo Fu, mechanical workshop manager and change-agent, and Bryan Wu, production manager describe the activities that have been carried out in order to reduce the changeover times in the mechanical workshop. “First we analysed the work that is carried out in the tool room”, says Leo. “We noticed a large amount of time was being spent searching for tool holders and inserts, so we designed a standard for organising these parts. The result is that now the tools can be prepared just in time for the start of each production order”. Bryan adds that efforts are currently being made to apply the same standards to the tooling fixtures and jigs on the shop floor, such that the setup times can be further reduced. “One reason for the success in setup reduction so far has been understanding, identifying and separating the internal and external parts of the setup,” says Bryan. “Now tools are prepared and organized on trolleys and brought out to the machine before the operator stops the machine. This has led to a significant reduction in setup time”. But he concludes that “we still have a long way to go to reach single-digit minute changeovers”.
Flow efficiency is a central part of Kongsberg Maritime’s corporate lean program – The KONGSBERG Way – that was developed at Kongsberg Maritime Subsea in Horten, Norway in autumn 2014. In China, Evans has clear ambitions for improving flow efficiency at KMCJ. “We have already made some analyses of the layout in the different production areas, with a special focus on transportation and motion waste”, he says. “We also plan to relocate punching, cutting and bending machines nearer to the welding department so that we can improve material flow and reduce throughput time”.
8D A3 Problem Solving
KMCJ have also adopted the standard approach to problem solving that is used throughout Kongsberg Maritime’s global locations – The Eight Disciplines (8D) A3 methodology. 8D was originally developed by Ford Motor Company as an alternative approach to Toyota’s A3 problem solving process, both of which are based on Deming’s Plan-Do-Check-Act cycle. The Kongsberg Maritime approach to the 8D A3 process is as follows:
D1 – Team: Define a good cross-functional team and identify a responsible team leader and continuous improvement coach.
D2 – Problem Statement: Provides the starting point for solving the problem. It is vital to have a “correct” problem description for an effective 8D A3 process. What is the problem we are trying to solve? What is the current condition? What is the goal / next target condition?
D3 – Temporary Containment Actions: Choose and verify temporary actions (quick-fix solutions) to contain and isolate the problem from any customers until permanent correction is in place, where applicable.
D4 – Root Cause Analysis: Analyze and identify the root cause of the problem. Why has the problem occurred? In case of possibility for Design of Experiment (DoE), classify causes as either Constant (C), Noise (N), or Experimental variables which can be investigated further (X).
D5 – Action Plan (Experiments and / or Permanent Corrective / Preventive Actions): Define an action plan to address the identified root causes. Plan for experiments where possible. Choose solutions that address the root causes and not the symptoms. Document and verify the permanent corrective / preventive actions in the action plan.
D6 – Effect Confirmation: Validate the effects of any experiments and verify any corrective / preventive actions in terms of our original goal (D2) / hypothesis (D5). Detect any undesirable side effects. Document this in the action plan. Return to root cause analysis, if necessary.
D7 – Follow-up Actions: Ensure that corrective action remains in place and successful. Determine what improvements are applicable in the “wider” system. Modify the management systems, operation systems, practices, and procedures to prevent recurrence of this and all similar problems.
D8 – Conclusion: Evaluate the A3 process and standardise successful corrective / preventive actions. Repeat 8D A3 where necessary.
Such a structured approach to problem solving makes it very simple to follow a logical set of actions to bring an effective team from a well-defined problem statement to a set of solutions designed to tackle the root causes of the problem.
A Lean Future
The fact that Chinese manufacturing is also becoming very complex and high tech. requires that KMCJ continuously revisit the basic lean principles in order to realise the benefits of lean. Understanding that simply adopting an assortment of traditional lean tools and techniques will not lead to sustainable results at KMCJ is of strategic importance, particularly in light of increasing complexity and advances in technology. Principles-before-practices is the essential message behind The KONGSBERG Way, which as a corporate lean program must be seen as a holistic system in its entirety.
The development of novel approaches to lean production is particularly relevant when the level of product variety and respective low volumes at KMCJ are considered. “Such a situation means that we cannot establish fixed production lines for our products” says Evans. He is currently studying an MBA at Nanjing University of Aeronautics and Astronautics, where he plans to specialise in lean production. “I hope I can learn about some different ways in which we can achieve better control of production in our high variety environments” says Evans, “maybe we can use CONWIP* or POLCA**?” This is a crucial example of how a traditional lean best practice – Kanban – would offer very little for the project-oriented material flows at KMCJ. By adopting a principle-based view of lean that emphasizes learning, leadership and employee involvement rather than a more typical tool-headed cookie-cutter approach, KMCJ strives to advance its lean journey with a focus on the long-term development of a customized lean approach.
Involvement of Everyone
The lean efforts at KMCJ are not only limited to the production areas. Other business functions such as logistics, planning, procurement, and product development are also involved in the continuous improvement activities. And this forms the basis for cross-functional collaborative improvements. For example, Peter Zhuang, planning department assistant manager presents his plans for significant inventory- and lead-time reduction. “Working together with logistics and procurement, we aim to increase the effectiveness of our rate of raw material consumption such that 80% of the goods are consumed in 30 days or less. We currently stand with 50% of stock not moving for 90 days or more. These are tough goals that lean can help us to achieve,” says Peter. Nevin Ni, product department manager also states that plans are in place to reduce the design and engineering time by applying The KONGSBERG Way’s lean principles in research and development.
Given the subtle differences between Chinese and Norwegian national cultures, should we believe that one nation is more apt to successful lean implementations than the other? For example, the Hofstede report considers differences in national cultures across several dimensions and suggests that Norwegians are much more individualistic than their collectivist Chinese counterpoints. Bearing in mind that the Hofstede report also suggests that Norway and China have significant differences in terms of the Power Distance dimension (with Norwegians adopting a more decentralised style of management in contrast to a strong hierarchical management structure in China), one may be led to believe that certain cultural traits could influence the success of a lean program. However, experience in general suggests otherwise. Given an understanding of the fundamental lean principles and an emphasis on team-based problem solving and improvement, it appears that there is very little cultural influence on the success of lean adoption from one country to the next.
KMCJ’s GM, Rune Hagen concludes, “The Chinese way of adopting lean may well be different to that of western countries – Norway in particular – but somehow we have so far used this to our advantage. It’s about creating a common understanding – “seeing the light” – and then adhering to the well-established lean principles. So far, we have benefitted from the effort of keen and eager “lean- advocates” in KMCJ. Their ability to apply their knowledge into our operation is nothing less than impressive. Management support and drive is also of crucial importance to succeed – and our lean journey in KMCJ started with a lean introduction to the whole management team including our Board of Directors. That gave us the motivation to pursue our lean strategy, and from that moment, everyone in KMCJ recognized the importance and magnitude that lean would have from thereon. KMCJ is still in the early phases of becoming lean and accomplishing the desired results, but we already see huge enhancements throughout the different production areas.
*Constant Work-in-Process (CONWIP) can be used to reduce throughput time and increase flow efficiency by setting an explicit limit for WIP levels on the shop floor and limiting the number of jobs that are released into a system (see Spearman et al., 1990).
**Paired-cell Overlapping Loops of Cards with Authorization (POLCA) is the predominant production control system in quick response manufacturing (QRM). It is a material control system that regulates the authorization of order progress on the shop floor in a cellular manufacturing environment (see Suri, 2010).
This work has been carried out in collaboration with the research project Lean Management in Manufacturing Industry, funded in part by the Research Council of Norway.
Spearman, M.L., Woodruff, D.L. and Hopp, W.J. (1990). CONWIP: a pull alternative to Kanban. International Journal of Production Research, 28(5), p. 879-894.
Suri, R. (2010). It’s About Time: The Competitive Advantage of Quick Response Manufacturing. CRC Press, Boca Raton.