CHAPTER 6: RESPOND TO CUSTOMER PULL

Introduction

Imagine you are running a sandwich shop. At the start of each day you could use all your ingredients and create lots of sandwiches – you would then be ready for any customers and be able to serve them immediately. The downside is that you don’t know exactly what the customers want to order – so you may have used the wrong ingredients to meet demand – for example you may have made lots of ham and cheese sandwiches and then a bus load of vegetarians arrive wanting only cheese! You would be left with a lot of stock at the end of the day that you needed to dispose of – leading to unnecessary waste.

Alternatively, you could prepare a small stock of your bestselling sandwiches, and then make the sandwiches to order depending on customer preference as customers request them. This is referred to in lean as ‘production-pull’. This means no one upstream in the process should produce goods or services, including components, until someone downstream (either a customer or the next processing step) requests them.

Now consider the purchase of a book – I could visit every bookshop to see if they have the title I need. This is time consuming for me and would require each bookshop to have the widest range of books available. Or they could have regional stocks and when I want a particular title they could aim to get it to me within a few days. This is referred to as ‘distribution pull’.

Like most publishers, ITGP now have a process for printing books on demand – this one included. In the past, publishers have had to predict the level of demand for a particular title – especially in paperback with the increased use of e-books. Where they have overestimated demand, the books have ended up being remaindered in low price bookstores or pulped. This concept of just in time printing, based on customer demand, was predicted in ‘lean thinking’.

Key concepts, techniques and tools

The two different models, traditional push and lean pull, are illustrated in Figures 4 and 5.

Figure 4: Traditional push model

Figure 5: Lean pull model

The diagrams show:

Production push

• Each step makes it into stock/WIP

• Changes in demand are hidden behind rising stock levels spread through the process

• Production may not be based on the type or volume required at that time.

Customer pull

• Every step only makes what is needed next

• Pull is into an empty production slot at each step

• Quicker impact of changes in demand (or production)

• May not be for a specific customer but only hold realistic stock levels

• The pull impacts the whole chain, right back to raw materials

• Production planned based on demand.

For the pull to be effective at each stage, significant levels of data and information need to be gathered, including:

• where the batch is in the process, and whether any blocks are being encountered

• the needs, desires and expectations of customers and what they consider to be of value. This applies not only for the end customer but also for the ‘intermediary’ customers – i.e. those waiting further along the production chain.

One way to achieve this is the use of a ‘kanban’ approach, which we will discuss next.

The management of customer information is important in understanding the pull through the process. Many organisations have invested large sums in their customer relationship management (CRM) and related systems to achieve this.

Using kanban to trace batches through the process

A common way of tracing batches through the process whilst ensuring customer pull is the use of kanban (Kan = Card, Ban = Signal). Kanban is not a planning or scheduling tool but can be used for production control.

Using kanban, we would consider the process flow in the customer pull diagram (see Figure 6) as a board with a column for each step of the process, and we would add slots beneath to hold the ‘cards’ (these can be virtual in a system rather than physical cards). Figure 6 shows a simplified representation of how this could appear.

Figure 6: Example kanban board phase 1

This is a simplification but it demonstrates the process. Each of the cards in the slots contains additional information about the requirement (e.g. product type, customer if known, date and time at each stage, etc.). In the diagram we can see that there are two empty work in progress slots (process 1 and despatch). The key one from a lean perspective is the despatch slot. We can see that Ord 2 has completed process 4 and is ready for the next stage. By moving this card (and the item) into despatch, we create a new free slot, at ‘ready’ process 4 – let’s assume that Ord 3 is now completed. The updated board would now look like that shown in Figure 7:

Figure 7: Example kanban board phase 2

The empty work in progress slot is now at Proc 4 and Ord 3a can now be put into that slot and moved to that process step. The chain reaction can then be repeated.

The board provides an effective visualisation of what is happening in the process in real time. The empty slots are as important as the cards themselves, as they indicate potential for work to enter that phase of the process.

As well as facilitating flow, the use of kanban helps to identify where there are problems or bottlenecks in the process so that these can be investigated and resolved.

Kanban has six associated practices:

1. Visualise (with a kanban board as described above)

2. Limit work in progress (with kanban cards)

3. Manage flow

4. Make policies explicit (e.g. what does complete or ‘done’ mean?)

5. Implement feedback loops – based on effective monitoring

6. Improve collaboratively and evolve experimentally.

Building a kanban system is complex, as it involves an understanding of the process flows. The risk in some organisations is that they copy a kanban system they have seen elsewhere – this rarely works. I refer to this as the ‘John Frum Cult’. This is a cult in the Pacific Ocean that believe by building mock runways and control towers the US GIs will return and bring back the prosperity they brought with them during the Second World War. Copying the kanban system which has been developed for a specific process will not work in a different environment. Many other factors need to be considered, including demand patterns, the maturity of the process and business risks.

Kanban includes a methodology for implementation of kanban – the ‘systems thinking approach to introducing kanban’ (STATIK). Before commencing, it is important to understand the purpose and objectives of the system or process under review. There are then six steps to STATIK:

1. Understand the motivation for change and sources of dissatisfaction with the current process. This includes personal views of participants and customers, and an analysis of disruptions, interruptions, quality, etc.

2. Analyse the demand (including by type, volume and seasonality) and capability (current capacity and production levels).

3. Model the knowledge discovery/workflow – looking at what knowledge is required for each stage and where this can be obtained from.

4. Discover classes of service – look at different customer expectations, the risk and benefits of each, and then ensure that these are understood by all contributors throughout the process.

5. Design a kanban system, including visualisation.

6. Roll out.

For collaborative improvement, kanban also has four values:

1. Start with what you do now

2. Agree to pursue evolutionary change

3. Initially respect existing roles

4. Encourage acts of leadership at all levels.

Customer information

To ensure effective pull from customers, information is needed about their likely demands. This could be based, for example, on weather forecasts, to know what stock types retailers will need – strawberries and cream for a nice summer’s day and soups and warm drinks if there is a cold snap.

Most organisations have also implemented customer relationship management systems to enable them to:

• provide information about the demographic and buying patterns of their customers.

• communicate with customers about new products and offers

• segment the customer base to focus more on higher value customers.

• be able to deal more effectively with complaints and issues in order to maintain a good relationship.

• request feedback and comments on the quality of goods and services provided, including seeking views about planned changes.

There are limitations with this approach, including:

• Information is based only on existing customer base, and what they have historically bought. It provides very little information about what they may have bought (for example if the store had stocked other items).

• Data is often out of date or incomplete.

• Invalid assumptions may be made (‘customer who bought new skateboard also bought bandages … ’).

• Risk of SPAM overloading of customers.

• Data privacy concerns.

One solution has been for retailers, and others, to introduce loyalty schemes under which customers are trading information about themselves and their shopping habits in return for regular rewards. One illustration of this is that national chains of retailers now often stock different lines on different days or in different locations, or allow customers to order and receive the goods the following day, if they are not immediately available in the store of their choice.

Audit approach

An audit of customer pull could be based on the STATIK principles as illustrated in Table 6.

Table 6: An audit of customer pull based on the STATIK principles

Summary

Customer pull should pervade throughout the production and distribution process. Kanban provides mechanisms to manage the associated flow of processing and information.