In this episode, we have our guest Sanjeev Baitmangalkar, who discusses LEAN thinking and why most companies fail with LEAN as they focus on tools. He also shares several stories of how he implemented Lean thinking at several facilities in various industries. Finally, He shares numerous KPIs and execution strategies to help business executives implement Lean.
Chapter Markers
- [0:17] Intro
- [2:49] Personal journey and current focus
- [9:57] Perspective on growth
- [11:16] Differences in Lean thinking across countries
- [17:56] The importance of consumption rate with Lean Thinking
- [22:59] The nine governning policies to enable Lean Thinking
- [25:59] Closing thoughts
- [27:26] Outro
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Key Takeaways
- Lean is not about tools. It’s all about strategy. Lean is complete strategy work. Lean thinking is a midnset. It’s about those principles. It’s about those philosophies, and it’s about how you use them that can be applied to any business process.
- Lean thinkng is understood differently in different places, and while lean really is all about strategy, you actually begin with the customer in mind. Before we actually embark on the Lean journey, we need to understand customer demands. We need to understand the problems that need to be solved. We need to understand whether we have the products that can solve the problems. And we need to evolve a product strategy which can do that. Finally, we need to streamline the variables there.
- It’s not the demand variability that needs to be streamlined because the demand variability is always going to be there. And that is exactly what we address in lean, but we need to minimize variability that takes place otherwise.
- If my month has got 25 days, and if I am supplying, let us say 100 units of whatever, during the month, if I supply 100 units in the last week, that is bad, that’s very bad; ideally, I would like to supply for every day so that on the 25th day I have completed my 100. That is efficient stuff.
- What we try to achieve the behavior in our manufacturing to comply with that demand so that we can match that demand curve in terms of what we deliver, how we deliver when we deliver, and ensure that it is within the expectation of the customer and not beyond.
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About Sanjeev
Sanjeev Baitmangalkar is a pioneer of Lean in India and is an active Lean practitioner for the past 30 years. He is credited with the total Lean Enterprise transformation of Mysore Kirloskar in India and Bridgeport Perkasa in Indonesia. Both initiatives were first of their kind in their respective countries. He is also a founder of India’s leading Lean thinking consulting company Stratmann Consulting and has worked in 30 different industry segments so far. He is a writer, publisher, blogger, and keynote speaker.
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Full Transcript
Sanjeev Baitmangalkar 0:00
When you do that, you kind of mechanize it. Like, it just follows automatically, and nobody has to seek information. Nobody has to seek clarification. And nobody has to seek answers.
Intro 0:17
Growing a business requires a holistic approach that extends beyond sales and marketing. This approach needs alignment among people, processes, and technologies. So if you’re a business owner, operations, or finance leader looking to learn growth strategies from your peers and competitors, you’re tuned into the right podcast. Welcome to the WBS podcast, where scalable growth using business systems is our number one priority. Now, here is your host, Sam Gupta.
Sam Gupta 0:53
Hey everyone, welcome back to another episode of the WBS podcast. I’m Sam Gupta, your host, and principal consultant at the digital transformation consulting firm, ElevatIQ.
There are a lot of definitions around lean, but implementing it right is easier said than done. Most companies fail to implement lean thinking because they focus more on tools then focusing on strategy. It’s a change in thinking about the way you do your business. It’s the kind of process you want to follow in your business and how flexible you want to be around those. The less variability and leaner operations you have, the more competitive you will be. If implemented, right, lean thinking could be your competitive advantage.
In today’s episode, we have a guest, Sanjeev Baitmanglakar, who discusses lean thinking and why most companies fail with lean as they focus on tools. He also shares several stories of how he implemented lean at several facilities in various industries. Finally, he shares numerous KPIs and execution strategies. To help business executives implement lean.
Let me introduce Sanjeev to you.
Sam Gupta 2:05
Sanjeev Baitmangalkar is a pioneer of lean in India and has been an active lean practitioner for the past 30 years. He is credited with the total lean enterprise transformation of Mysore Kirloskar in India and Bridgeport Perkasa in Indonesia. Both initiatives were the first of their client in their respective countries. He is also a founder of India’s leading lean consulting company Stratmann Consulting and has worked in 30 different industry segments so far. He’s a writer, publisher, blogger, and keynote speaker.
With that, let’s get to the conversation.
Hey, Sanjeev, welcome to the show. Hi, Sam, good to be with you.
Sam Gupta 2:49
Okay, amazing. And I’m super excited to discuss lean thinking with you. Obviously, you spend a lot of time doing a lot of different projects. So I’m super excited to hear those stories. But before we do that, to kick things off, do you want to start with your personal story and current focus?
Sanjeev Baitmangalkar 3:04
Oh, sure. I got into lane more by accident. Actually, this was about 30 years ago. Dr. Sean Berger, who wrote this book, world-class manufacturing, happened to be on a visit to India and was a keynote speaker at a function where he introduced the subject of he was talking about what he saw in Japan about Japanese manufacturing.
And he talked about his book and just in time, yeah, so after his keynote, my company decided that we should get into doing this just in time stuff. And we had many factories under the umbrella of my company.
Sanjeev Baitmangalkar 3:47
And so they decided to pick up on one strategic business unit and said, Okay, let’s start doing it here. And a little after that, I was transferred to head that factory and take this forward at a point where I knew nothing about what just in time was, let alone anything else.
The word lean was not even coined when we started our journey. So all I had to start as there’s a famous story about water flowing and boulders in the river. It was just that one story that actually stuck with me that stayed with me. And it was whatever little motivation I got from that story is that helped me go along this journey. So that’s how we made our beginning.
Sanjeev Baitmangalkar 4:33
And we had no consultant teaching us there was no sensai. And in those days, there were no books. There were no seminars, and there was absolutely nothing, so based on what we had understood from what was translated out of the official instructors, we had to take everything forward or in so many ways.
I think we were lucky because we had no distractions. Nobody told us a variety of stuff, and we stuck to the principles of lean. We did not know it so much in terms of terminologies or the phrase theologies that came later on when Jim Womack book on lean thinking came out, and Dr. Liker Euro did such wonderful work with all his books.
So we didn’t know all the terminologies. But we actually did a lot of things are almost everything that has been talked about there. We use the principles, the concepts of pull the flow, which we used to increase the velocity of movement of parts and assemblies, reduce the inventory, improve productivity and quality.
Sanjeev Baitmangalkar 5:42
And it was amazing what we did, we knew we did not know the names of any tools, but we almost used a lot of tools. Remember, there are nearly 100 tools and techniques in Toyota’s basket of Toyota Production System. Not all of them are known outside the lean world.
So the effect of this, we went along on this journey. Every day, we were so passionate. We were so much in a hurry. We sacrificed so much to achieve what we did in about two years, or under three years, we had reduced our cost by about 60%.
And in about three years, we had increased our sales volume by 500%. Our manpower went down by 25%. We freed up about 35 to 40% of the space. We brought in new products, new technology without adding to capital costs. And when I talk of velocities, our throughput times went down from what was 45 to 60 days. It went down to two and three days a day employees were so motivated, sold 10s of 1000s of problems when our costs reduced by 60%. We shared this benefit with our customers, I gave my customers 30% of it, and we retained half of it.
Sanjeev Baitmangalkar 7:06
So if you brought my machines before that day for X dollars from the next day, you paid me X dollars less 30%. And so, my competitors did not know what hit them. They almost became redundant. My customers were delighted. The early 90s was a period of high recession, and there were no orders. But we had faced that situation of no orders. We had even gone through a closure. We had to close the factory for no orders.
But now, during the recession, with what we had done, we had a different kind of problem. And that problem was we had so many orders, and we had to figure out how to execute them. So even my competitors came to me and said Sanjeev, you can’t give desperate discounts like this. They thought I was giving discounts. They had no clue what had happened behind, and what went on behind was what was the result of using lean strategies, putting lean thinking in place, and working on just-in-time concepts.
So when I moved on to Indonesia, I had a different kind of problem. And I was actually running six different manufacturing businesses there.
Sanjeev Baitmangalkar 8:17
And one of them which was also a machine tool company. It was a joint venture with Bridgeport, and the thing was, this company existed for five years. And the Bridgeport guys actually sat there and ran the factory. People were taken to the USA trained any USA how to build machines, the plant and equipment were there, the manpower was there in five years, salaries were paid, but they had never produced machine serial number one.
And so when the chairman told me, I don’t know what to do with this, I said will you relax, we will turn this around, all we had to do was put lean thinking in place. And inside of six months, there was so much activity in that factory. We had customers from all over the world ordering machines sending us a letter of credits, and the factory was thumping out production.
I was told this was a very prestigious collaboration. And on a given day, the president of Indonesia those days, you know was the lady Sukarnoputri she along with her ministers and the American ambassador landed in front of my factory on the football field in a helicopter.
Sanjeev Baitmangalkar 9:24
They came to see what is this magic that turned this around. It was just putting in place the right lean strategies and proper lean thinking. This is what lean can do. This is what lean is about. Whenever I talked about tools, we did use the tools there to solve problems. But it’s not about tools. It’s all about strategy. Lean is complete strategy work. Lean is about thinking. It’s about those principles. It’s about those philosophies, and it’s about how you use that can be applied to any business process doesn’t matter what.
Sam Gupta 9:57
Okay, amazing. Thanks for a great story. So now, One of the questions that we always ask before we dig deeper into your background and some of the amazing work that you have done in terms of getting those KPIs obviously is very impressive work.
But before we do that, one of the standard questions we have for all of our guests and is going to be changing your perspective on growth. When you think of business growth, what does it mean to you?
Sanjeev Baitmangalkar 10:20
Well, when you talk about growth, to me, I look at it in a few different ways. Now, any business, first of all, should be a contributor to the GDP of that particular nation. And it’s just not a contribution to GDP. Any business needs to contribute to the aspirations of that nation, which can include people, which means along with that growth should also come by providing growth in economic growth in jobs.
And if all these components are there, then that’s good growth. It’s just not measuring the top line and the bottom-line growth. If you just look at the financial sheet, you can say this grows, but the real value addition might have been done elsewhere.
So if I talk of growth, and I look at a business in a particular country, then that business needs to contribute to that particular country’s economic growth and growth also in terms of the number of jobs. So that is growth.
Differences in Lean thinking across countries
Sam Gupta 11:16
Okay, amazing. So let’s talk about some of the manufacturing situations that you have had, and you bring a unique experience to the table, especially the lean consultants that we have interviewed in the past. They don’t have as much international experience as you have.
So I’m super curious about understanding the manufacturing differences and the lean differences. When you look at let’s say, you work in India, you work in Japan, you will see in the US, right, and also in Malaysia.
So when you look at the manufacturing landscape in all of these countries, what are some of the differences and similarities that you have seen in all of these countries from your perspective?
Sanjeev Baitmangalkar 11:55
If I should stay with the subject of lean and what I see, in different countries, lean is understood differently in different places, and while lean really is all about strategy, you we actually begin with the customer in mind, we need to understand the customer. Before we actually embark on the Lean journey, we need to understand customer demands. We need to understand the problems that need to be solved. We need to understand whether we have the products that can solve the problems. And we need to evolve a product strategy which can do that. And we need to streamline the variables there.
But I say we need to streamline the variables. It’s not the demand variability because the demand variability is always going to be there. And that is exactly what we address in lean, but we need to minimize variability that takes place otherwise. For example, organizations are very used to using ERP tools for forecasting. And so when you use forecasting techniques with whatever algorithms this that everything, you still find that when you begin a particular year or period that you want to measure very soon, variability creeps in.
Sanjeev Baitmangalkar 13:09
What we actually did in my circle is we found a way to beat this because we started to measure the weight of demand. And then we were able to measure how the rate of demand actually varied. That helped us to define how our flow should be of material insight so that we can match the demand rate with our delivery rate or the sale rate.
We came up with the idea of forecasting, which we had been using for decades, and we moved on to something else, which is measuring the consumption rate because we felt consumption is the only truth out there in the marketplace, and nothing else really matters. So we developed a tool, how we can actually measure the rate of consumption, that is, the actual market behavior, and then design our processes behind it to actually match that so that we could just deliver to that rate and deliver to a customer. So that is where the work in lean actually begins. And then you get into the other part of the value stream.
Sanjeev Baitmangalkar 14:19
Now, this first part is very important to do because this is like the marketing side of the customer interface is like the engine of a trial. If this engine starts a jerky movement, then the whole train is going to jerk, so we want the engine to be smooth.
All variabilities have got to be arrested here. One of the ways we did that was we actually wrote down nine governing policies, these were written down signed, and nobody had the authority to go beyond that.
If I should say it another way, this was like mechanizing or automating the marketing function itself, and so this allows them to bring in an order. As soon as an order came in, we had a method of writing a signal card. So this is the Kanban, visual Kanban system. We wrote a signal card. The card went into a pigeonhole at a particular place inside the factory.
And from that moment onwards, the workmen took charge, and they were in charge until the machine was packed and delivered. There was no intervention of supervisors or managers in between. And the whole system was honed such that the workers would be able to run, including pulling material from vendors.
Sanjeev Baitmangalkar 15:39
Because we wanted the workers more to be on the job, we also designed a visual factory where a worker does not have to go behind excel sheets or computer screens but could be on his work spot doing his work. What he saw would give him a visual signal.
He could take action based on that. So that’s how a Lean journey actually progresses. That’s how you actually set up everything. When you get into talking about a module, then it is not, in my opinion, that is not lean. You can call that productivity improvement. You might show improvement a little bit here, a little bit there. Will it really show up on your balance sheet on your profit and loss account? I don’t know.
But it did on our in our case. And in terms of valuation, the valuation of the company went up 10 or 12 times more. So it’s like, what is your bigger picture? What do you want to achieve? What is your difficulty? And what do you want to overcome that? What do you want to achieve?
Sanjeev Baitmangalkar 16:40
What is the vision you’re seeing? Do you have patchy problems that you want to solve, in which case productivity improvement might do the job? But do you want to do something else like lean really is the best known competitive strategy today? There is nothing better, and it can give you the best competitive advantage over your competitors like nothing else.
It’s an end-to-end solution. And so that’s how our Lean journey actually progresses. And a lot of people try a lot of different things. I see them because I see them every day people talk to me. There are so many different things. There are so many different approaches, which unfortunately have been used. And I would like to say that we, the lean community, might have actually been partly responsible for having messed this up.
Because lean really is strategy, it’s a way of how to think we are at calling it lean tools. We started calling it lean manufacturing. It actually is not restricted to the manufacturing itself. It’s end to end in an application. It starts with your customer. It ends with your last vendor. And everything in between, including the way you do your costing, the way you deal with the finances, everything.
The importance of consumption rate with Lean Thinking
Sam Gupta 17:56
Okay, so let’s talk about the consumption rate that you mentioned. Some of the audience may not be familiar with what the consumption rate is versus the delivery rate and demand rate that you mentioned.
So do you want to touch a little bit on that? Yeah, if let’s say I have these small to medium-sized manufacturers, and I’m the CFO of the small to medium-sized business, and I have no idea how to basically measure the consumption rate. And I may be measuring some of the KPIs right now. But I don’t know how to number one, set up these KPIs, how to continuously measure, and make sure that I’m getting the value out of my lean strategy. So let’s say if you were the manufacturing CFO, Sanjeev. So how would you approach this? How would you define your KPIs? And what would be your advice in terms of setting up these KPIs?
Sanjeev Baitmangalkar 18:44
Okay, see, why do we need to measure consumption basically? Because it’s behind this that everything else actually takes place. Now, if we don’t measure consumption, and let us say, we work to a forecast, these are the two situations when we work to a forecast, maybe if we start our financial year on the first of January, and we say our forecast for this year is like this January, we are going to produce X number of products and February is going to be x plus something much is going to be x minus something, and so on and so forth.
And what happens is we can produce those numbers that we have forecasted, but behind that, we need to invest in producing those products. That means we need to buy that raw material. We need to engage the resources. We need to do everything to be able to produce those numbers. And in the end, if those numbers don’t flow out, then we are stuck with a problem.
Sanjeev Baitmangalkar 19:41
This is number one. Number two, there’s another kind of problem that exists in conventional manufacturing. While we are in business, what is it that we really want to do? I would like to find a customer, go to a customer, get his order, produce his product as fast as I can give it to him. Collect my money, that’s all I’m interested in, that’s the cycle complete how fast I complete it is my efficiency.
The one who does it the fastest actually is the winner. Now, this means that if my month has got 25 days, and if I am supplying, let us say 100 units of whatever, during the month, if I supply 100 units in the last week, that is bad, that’s very bad; ideally, I would like to supply for every day so, that on the 25th day I have completed my 100. That is efficient stuff.
Sanjeev Baitmangalkar 20:34
So, if I have to do that, then four units need to get consumed every day, which means I need to set up my marketing activities such that that flow is continuous, and so I need to measure that I need to measure what’s my consumption going to be and how do I do that with you can fall back on data that you already have for the last one year two years, three years and try to understand how was the inflow every day you can do a running average.
Or you can find some other algorithm for it to find out what would have been the closest if you had forecasted a number, not through the conventional forecasting, but by looking into the crystal ball now after you have defined a way how to calculate the consumption rate and this rate can be calculated on a monthly basis on a weekly basis or a daily basis depending on your volumes.
Sanjeev Baitmangalkar 21:28
Now automotive sector higher volumes etc. can be done almost on a daily basis. Something else slightly slow-moving can be weekly basis lesser numbers can be on a monthly basis. It also depends on what goes into building up that product and how fast you really can build it, so that’s a reason why you need to do that.
So what we try to do in Lean is we know for sure that the demand every day is not going to be the same. It is going to be up and down. And what we try to achieve the behavior in our manufacturing to comply with that demand so that we can match that demand curve in terms of what we deliver, how we deliver, when we deliver and ensure that it is within the expectation of the customer and not beyond.
So it’s to do that. We need to measure how the demand comes in. We measure how we execute, which is what we call the sale rate. The rate at which the products were getting dispatched out of the factory now if you have a demand coming in at the rate of X number of units every day if you’re able to sell the same X number of units every day, you’re absolutely matching the demand you will run a very thin and lean factory with the least number of inventory hassles, etc., most efficient form.
So how do we achieve that? These are some of the techniques that we use to be able to achieve that to match the way that curve behaves. Okay,
The nine governning policies to enable Lean Thinking
Sam Gupta 22:59
so you mentioned a couple of things about your nine governing policies. But I don’t know if I missed those policies. But do you want to dig into those what were those nine governing policies or try to describe each of those because our audience may not be familiar with some of the lean concepts, right? So can you go over all of those nine, and that’s how companies can benefit from these nine governing policies?
Sanjeev Baitmangalkar 23:21
I will talk about it in principle because those policies that were specific to my company might not be applicable as it is to everybody else, but the principles can be used, and the principles were based on an understanding of the processes pertaining to the customer.
I’ll give you examples like we had to get an order, so we suspect that an order must have a certain amount of advance paid up with the order. So we analyze the percentage that should it be ten, should it be 15? Should it be 20? We had put a number to it, and this was so that an order is not just a piece of paper. It has a certain commitment that yes, when you produce this product, I’m going to take this product away because now for me to produce a product, how much time did I need, either two days or three days depending on the size of the machine. Was it small? Was it big?
So, that was one second we were able to put our finger and tell the customer exactly when the machine would be delivered, on which day. And so, the full payment for the machine had to be made before that before we dispatch the machine. It had to come in through the system so that that had a policy there was no waiver any changes to this like okay, here is my check or I’m sending this to you, etc.
Sanjeev Baitmangalkar 24:47
There was absolutely nothing. The cash register had to ring in the money, and the machine would then go, so it was like that. It was like all the service parts. What were our commitments? What would we exactly do in terms of parts? How do we make the parts available? And how much time would be attended to a complaint? How close would we carry parts to our customers?
Because India is big geography and our dealers in other countries, 43 other countries, this is big geography. So where would we carry the parts and how much and what parts etc.? So, it was like this. These policies will pertain specifically to a business process of a particular organization. And one needs to break down that process, what happens in that business process into as many details as possible, and these policies are used to plug every loophole so that you are asked all variabilities, and when you do that, you kind of mechanize it, like it just follows automatically, and nobody has to seek information.
Sanjeev Baitmangalkar 25:52
Nobody has to seek clarification. Nobody has to seek answers, and nobody has to go to everybody for anything at all. And so that’s how it works.
Sam Gupta 25:59
Okay, amazing. So that’s it for today. Sanjeev, do you have any last-minute closing thoughts, by any chance?
Sanjeev Baitmangalkar 26:04
Well, you see, like I said, in any business process, lean strategy is the best competitive strategy today. It’s irrespective of what business you’re in, whether it is manufacturing, information, technology, financial institutions, hospitality, education, whatever it is, I have done work in 30 different industry segments so far, and lean can be applied everywhere.
I did write a piece on LinkedIn the other day when I saw what was happening in the vaccination process, and the delays were taking place, and people picked it up because that little publication went a little viral. People circulated that, people latched on to it. And I was able to see in many places that people have done what I had said.
How do you overcome delays and the slowness in your vaccination process, so it can be applied anywhere, everywhere? Lean is the best comprehensive strategy. If you want to gain a competitive advantage over your competitors, distance them go lean, and remember, lean is a strategy. Lean is all about thinking. It’s not about tools.
Sam Gupta 27:13
Okay, amazing, and my personal takeaway from this conversation is going to be Lean could be your significant competitive advantage of going lean. Thank you so much, once again, for your time and your insights.
Sanjeev Baitmangalkar 27:25
It’s been a pleasure, Sam.
Sam Gupta 27:26
I cannot thank our guests enough for coming on the show for sharing their knowledge and journey. I always pick up learnings from our guests, and hopefully, you learned something new today. If you want to learn more about Sanjeev, head over to leanmanufacturing.consulting. Links and more information will also be available in the show notes.
If anything in this podcast resonated with you and your business, you might want to check other related episodes, including the interview with Paul Critchley from New England Lean consulting, who discusses practical examples of how to apply 5S of lean to your organization. Also, the interview with Ian Pratt, who discusses how to distinguish between the need for additional resources and operational bottlenecks that need to be optimized before investing for that.
Also, don’t forget to subscribe and spread the word among folks with similar backgrounds. If you have any questions or comments about the show, please review and rate us on your favorite podcasting platform or DM me on any social channels. I’ll try my best to respond personally and make sure we get help. Thank you, and I hope to get you on the next episode of the WBS podcast.
Outro 28:35
Thank you for listening to another episode of the WBS podcast. Be sure to subscribe on your favorite podcasting platform so you never miss an episode. For more information on growth strategies for SMBs using ERP and digital transformation, check out our community at wbs.rocks. We’ll see you next time.
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