Thursday, May 14, 2015

Why General Motors No Longer Has Parts Warehouses; They Have “Distribution Plants”
by David P. Carlisle

(“I … agree … about the need to do away with the term “warehouse”. To me, the word brings up the image of the last scene in “Raiders of the Lost Ark”…. massive storage of items that rarely move. The whole point of a Parts Distribution Center is to distribute, not store.” Cheryl LeMieux, General Motors)

If you put together a few facts about parts distribution you have to ask an obvious question. Fact #1: General Motors has had the highest parts distribution center network productivity in the industry since 2010. Five straight years of leadership is not a blip. Fact #2: at the same time, they have been in the top 2-4 OEMs in terms of quality – they actually take more pride in quality leadership than productivity leadership. The question: How do they do it?

If you walk through a GM parts “warehouse” and pretend that you know absolutely nothing about parts “warehouses,” you’d swear that you are in a state-of-the-art assembly plant. A really good one at that. Material flows into the “plant” at a near just-in-time rate. The material is processed and staged – we call this “binning”. Ultimately, the material is assembled into custom orders and shipped out to dealers. Just like assembly plants that make vehicles.

This is not a radical process; for the past 20-or-so years Toyota has leveraged the Toyota Production System in its parts facilities. Many other OEMs have codified their manufacturing process strategies and lent this lean toolkit to service parts distribution.

Toyota is justifiably credited with putting “lean” inside the warehouse. They adapted their manufacturing practices to the parts warehouse – key among these was the elimination of “muda” – waste. These adaptations are what I term “Vertical”; that is, lean manufacturing techniques that apply outside a manufacturing plant. This represents a different way of thinking that can have profound results.

Take, for instance, “kaizen” – practice of continuous improvement – another “Vertical” that profoundly changed our industry. Toyota is the undisputed master of lean Verticals.
Time-out: Six Sigma is a good example of an “extreme” lean Vertical. The term "six sigma process" comes from the notion that if one has six standard deviations between the process mean and the nearest specification limit, practically no items will fail to meet specifications. This very simple concept has a cult following. Typically, outside of Toyota, activists/gurus of various individual lean Verticals are messianic in their advocacy, where all else is diminished inside the micro-nuances of process and technique.

Moving through and mastering a complex set of rules, new gurus are coronated with black belts once they make it to the promised land. Novices look upon these extreme Verticals and become dazed and confused. But, they can’t show their confusion, because they’re expected to understand; they are drilled on the utter simplicity of what is, sometimes, a process of Rube Goldberg complexity. When talking with some Six Sigma shops, I’ve identified what seem to be three groups of followers: those who have others do, those who do, and those who just don’t get it. The focus is typically on the individual Six Sigma efforts and not the consolidated total result. Sometimes, it appears that the whole is less than the sum of the parts. Maybe it’s just me.
It is easy to find lean warehousing practices outside Toyota, where you will encounter a broad cross-section of Vertical approaches. Many of these facilities are managed by warehouse managers who have been heavily influenced by Toyota, or that are run at a network level by supply chain executives … who, also, have been heavily influenced by Toyota.

Typically, we see lean Vertical principals applied, independently, at each facility. The logic behind this makes sense, because at the heart of most lean strategies is Kaizen. Continuous improvement begins at the home, and each home is different.

These warehouses generally look clean, uncluttered, simple, no-tech, bright, and efficient. These are very common impressions. However, most of us non-insiders cannot fully grasp the material flow inside an hour’s tour. That’s because the common Vertical lean practices and touch points look different from one facility to another.

But, GM is very different. Instead of borrowing and adapting lean practices from the manufacturing group, GM runs their service parts supply chain like a string of production plants. Charlie Hyndman is the vice president, who grew up in manufacturing (, and has been at the helm of GM’s aftersales supply chain for more than a decade. His entire team performs like a world-class manufacturing team.
This is an important point: because GM runs its parts supply chain like a manufacturing operation, and not as a “borrower” of lean manufacturing Verticals, it is, by definition, more effective. Why? For the same reason that an endless stream of copies of copies inevitably degrades the information. Only the original provides the clarity of the “original” ideas.
GM strips away the mystique, making their lean approaches easier to grasp … and grow. It makes more sense to explain by example.

All of GM’s “template” parts facilities are cookie cutter designs. They have long, wide aisles devoted to the fastest moving parts (approximately 40% of the volume and associated labor). For years the picking path within a bay resembled a typewriter – moved along the top shelf and picked, came back and picked the next shelf down, and finally came back and picked parts from the bottom shelf.

Like all facilities, workers at the GM Chicago facility are trained in continuous improvement. Inevitably, they figured out that this method of picking parts was inefficient. If you picked parts up and down, you would save steps and time.

They were correct – moving to the new picking path saved 1,000 steps each shift per worker, and 14 miles of steps per shift across all pickers. This continuous improvement philosophy (call it Kaizen) is deeply embedded in GM’s workforce culture; they do not need ornamentations, or coronations, to internally merchandise this sort of concept.

In isolation this plant would not be remarkable – it’s the result of a typical lean Vertical – Kaizen. What is remarkable is that each of GM’s template parts facilities is “massively parallel.” Each has the same fast-pick aisle configuration, and each employs up-and-down picking. This has enabled GM to replicate the results in the Chicago facility across the entire network. Inside of five weeks.

Perhaps what’s even more remarkable is that GM’s Chicago facility is the 15th most productive parts “warehouse” out of 192 motor vehicle parts warehouses in the Carlisle benchmark database (productivity for just hourly labor; looking at “all in” labor, it is 5th ). GM’s Chicago facility is firmly entrenched in the first quintile – top 20% of all warehouses – where you might not expect there was much more room for improvement.

It took me more than a decade to understand what GM was doing. At the center of my confusion was the term “template warehouses” that they used to label their new parts facilities. I heard this and thought of nouns (things), not verbs (processes). What GM has done is standardize their process “templates” across all of their facilities. They wrap all this inside their “Global Manufacturing System” (GMS).

Time-out: GM’s Global Manufacturing System (GMS) has driven dramatic improvements in safety, quality, productivity, and cost. At its heart is a dynamic, best-practice based approach to manufacturing that engages every level of the organization. As such, the GMS umbrella is used to design comprehensive training programs to teach “lean” to the shop floor: Standardized Operating Sheets (SOS), Job Element Sheets (JES),
and Job Instruction Training (JIT) are the backbone of continuous improvement and sustainability. In the example here of a Job Element Sheet it is easy to see a comprehensive approach to measuring out job steps.
This is critical, because GM designs training programs around shop-floor processes. Process compliance – “management” – is covered by audits. The audits can be either comprehensive or short: ten-minutes.

If everybody is a “black belt” on the shop floor, and nobody can break a stiff 2x4 in half with a leg thrust, then you probably don’t need any nifty labels. That’s what I see in GMS … and what makes it very difficult for others to emulate. GMS has coupled two key lean Verticals (continuous improvement and short lead time) with one organizational principal (people involvement), a centuries- old manufacturing principal (standardization), and a singular driving customer objective (built-in quality). GMS is incredibly logical and simple; possibly too much so to be taken seriously by others struggling to improve, and sustain any gains.
Bottom Line: GMS has no fancy pyramid scheme to coddle the gurus.
It is simple and incredibly easy to understand. Maybe that’s why it works so well in a parts distribution environment. Most firms use a handful of Vertical lean processes to get lagging quintile warehouses to toe the line. That only gets you so far. GMS is focused on standardization, documentation, training and auditing … across all global facilities … with the objective to minimize network variability.

It works. That’s why GM is at the top of the heap in parts distribution … and likely to stay there.

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