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Amway employed kaizen and a new governance scheme to streamline its SKU revision process, which had previously created waste and inefficiency.
When supply chain managers at Amway needed additional staff to handle a growing workload, corporate management told them to first review current processes to see where improvements could be made.
It quickly became clear to senior supply chain analyst Jerry Bronkema that the huge number of revisions the company was making to its 22,000-plus SKUs ate up a lot of staff time. Whenever anything changed about one of Amway's beauty and health or home products, however small, a revision process was initiated, says Bronkema. The company was averaging 23 revisions a day, each of which took around five hours of an employee's dedicated time and up to two weeks of wait time to get necessary approvals.
"The big 'aha' came when we realized that of all of the revisions we were doing, one in four was never even transacted against," says Bronkema. "We were revising products so rapidly that we actually skipped over a quarter of the revisions before they ever went into effect. That was pure waste."
Further investigation revealed that only about 20 percent of these revisions were required for regulatory or legal compliance. Most were related to how the company did business internally. "These were simply engrained in our processes," says Bronkema. "It was a case of 'this is how we've always done it.'"
To address this issue, the company employed a kaizen event, bringing together stakeholders from across the enterprise to scrutinize the existing processes and to find which steps were truly adding value. "We pulled people together from seven areas and put them in a room for a week and asked them to completely dissect the process and build us something better," says Bronkema. "Kaizen is a wonderful tool for doing this." The kaizen event was facilitated by TBM Consulting, an expert in Lean and Six Sigma quality training.
This intensive analysis resulted in three key action steps, says project manager Ruth Kaminski. One, the company needed to establish a governing body for the SKU revision process, which would be known as the revision review board. Two, each of the different functional areas needed to review their processes and identify areas where SKU revisions could be eliminated. Three, the company needed to develop specific criteria that would guide business decision on when SKU revisions were necessary and provide tools to support the process.
The first step, implementing the SKU review board, actually was one of the most innovative aspects of this project, says Kaminski, "even though people typically think of governance as being the opposite of innovation. We found that putting this governance or structure in place allows us the freedom to then go out and really break apart our processes and ask why we were doing things that way and look for better ways of doing it. It is a little contrary to what one would normally think of as innovation, but we feel the team was able to be very innovative because of the structure we put in place."
While there were significant change management issues involved in putting this new structure in place, Kaminski says the end result was an important culture shift for the company. "We shifted a 50-year-old culture that was focused on 'the way we always did it' to one that looks and the business reasons and questions the need for revisions," she says.
There also have been bottom-line results. Bronkema estimates that the new SKU revision process has saved Amway $1.7m. Not only has the need for additional workers been eliminated, one contract worker has been freed up to work on other issues. And the 25 percent of SKUs changes that were never transacted against have been reduced to 8 percent - a number that continues to drop. "We think the results have been phenomenal - better than anticipated," Bronkema concludes.
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