What the Duck?! Episode 43 Transcript
KOCH’S LEAN COOKING: Enhancing Operational Performance Through Lean Continuous Improvement with Ed Koch
Welcome to What the Duck?!?! A podcast with real experts talking about direct spend challenges and experiences. And now, here’s your host, SourceDay’s very own manufacturing Maven, Sarah Scudder.
Thanks for joining me for What the Duck?! Another Supply Chain Podcast, brought to you by SourceDay. I’m your host, Sarah Scudder, and this is the podcast for people working in the direct materials part of the supply chain. I’m at Sarah Scudder on LinkedIn and at @sScudder on Twitter. If you are new to the show, make sure to follow this podcast so you don’t miss any of our direct materials supply chain content.
Today, I’m going to be joined by Ed Koch, and we’re going to discuss improving operational performance by applying lean continuous improvement programs across multiple sites. If you are a manufacturer struggling to improve operations, then this episode is for you. Ed leads the Solutions Division at CCI. We can see he’s rocking his brand on his shirt, so the marketer in me appreciates people who are on brand. And his company combines digital solutions and advisory services to transform business performance. With a career spanning almost 30 years in operations in consumer goods and beverage industries, Ed has either run operations or led manufacturing transformations in Africa, Europe, Latin America, the U.S., Australia, and China. So, very, very global experience, which is something kind of unique and one of the reasons I asked him to come on the show.
So, Ed, welcome to the show. I think it is almost dinner time your time in London. I’m still in the morning here in Austin.
Well, thank you very much. It’s a great pleasure to be here. Thank you for the invitation. Yes, I’m probably closer to beer time than you are.
I know, I should record these later in the day so we can share some wine or a cocktail or a beer during the show. Absolutely.
So, Ed, we’re gonna go back in time. I like to tell people’s kind of career journey and stories as a part of our interview because I think that’s really important. So, you started your career at Unilever, and you were there for a few years in what I would describe as various operational roles. So, let’s start with why Unilever.
Okay, so when I was growing up in South Africa and when I was looking at colleges, Unilever, I was fortunate enough to get a bursary with Unilever, so they sponsored part of my college fees. That was probably the primary reason for the choice at the time. But I think, in retrospect, it was really an excellent company at the start of my career. They had a very structured graduate program, exposure to various parts of the supply chain through the program, good technical and leadership development. And in Africa, the business was growing at the time, so we were expanding, the markets were growing, so it was an exciting time to be there.
What would you say was the most important lesson learned if you had to sum it up? Is there one thing that you felt was more valuable than anything else from your time there?
Alright, I think probably learning to lead people is key. In South Africa in the mid-1990s, it was quite a tough labor relations environment. Nelson Mandela had just come into leadership in the country. Learning to lead with empathy, building engagement with people, and credibility was vital to achieving goals in that environment. I think that was probably the biggest lesson from that period.
What was the best mistake you made while working at Unilever? So, we need to choose from.
I think early on, realizing how little practical skills I had as a graduate. I remember getting a stern talking to by a maintenance engineer for not being able to do flow calculations in materials handling, specifically raw materials handling. I quickly learned to be more humble and to utilize the expertise around me to make changes. When I went to school at Sonoma State University, a small state school in California’s wine country, my favorite professor was a guy named Wally Quirk. He was very quirky and had a big mustache. The reason I thought he was such a good professor is that he gave us real-life things to implement and work on while we were in college. Instead of studying for multiple-choice tests or memorizing spellings, it was more about tackling real-life business scenarios and solving them or building a company. I wish more school was like that. It’s so valuable and powerful.
So, why did you leave Unilever, a great company to work for with lots of systems and processes in place? But you decided to make a change. Yes, I went to SabMiller, which was a global brewing and beverage company at the time. I moved from detergents to beer, making detergents to making beer. SabMiller was also recognized as a strong company in South Africa at the time. It had great leadership and was just beginning its global expansion through acquisitions in Eastern Europe and later with the Miller Brewing Company, hence the name. I had an opportunity to run a complete factory, the largest soft drink bottling plant in Africa at the time. It was a great opportunity to oversee the entire production process, from raw material intake to warehousing and distribution. That was a really good opportunity I had there.
So, you mentioned that you had the opportunity to run the plant end to end. This was at a company called SabMiller, where you again stayed for several years and moved up pretty quickly in various roles. You ended up as the Global Director of Supply Development. What would you say are your most important accomplishments as you were progressing your career there?
Well, I think that several things, I SabMiller, was growing at the time, and one of the things that I took over as I moved into the global business and we moved across to London was the lean operational excellence program for SabMiller. And at that time, they had about 120 operations worldwide, made up of about 80 breweries, soft drink plants, and then maltings. And we were really rolling out this program across those businesses. So when I joined, there was about half of them had this operational excellence program in place and really had the opportunity to expand that and roll that out to the rest of the business. And it was, it really made a significant impact on the business and on optimizing the supply chain performance. And to the point that I think the supply chain became a real competitive advantage for SabMiller in terms of the performance, the efficiencies, and the sustainability that was gained along the way. Another, another, I think, important aspect was that we standardized a set of performance KPIs across the global business. And that was a huge lever because we were able to show the correlation between performance and the maturity of the operational excellence practices. So that as you improved, your practices became more mature and got them better entrenched in your operation, your performance really did drive up. So that was, that was an important lever for us.
And in a couple of minutes, because that’s really the focus and core of our conversation today, I think our listenership, which primarily works in supply chain for small and mid-sized manufacturers, can learn a lot from that. A couple of other things that stood out to me that you worked on when you were at SabMiller was you incorporated something called an Industry 4.0 concept. What does this mean, and why is this significant? The Industry 4.0 is really a term, I guess, for the digitization of the supply chain, and it was really early days for us. We were experimenting and doing research in this area, but essentially what we tried to do is to try and, with digital technology, connect machines across production processes so that we could surface information and data that enabled operators to make real-time decisions on things like quality, the performance of the line so that we were able to give that information into the hands of the operators. And through that, we then were able to develop digital tools for workflows for specific activities, in shortening full control of the equipment in health and safety for problem-solving. And of course, this is much more advanced now, 10 years on, but it was quite an exciting time. We ran a pilot first in a single brewery, and then we built designs for, we were still building breweries at that time, so we built designs for our future factory builds to incorporate this Industry 4.0 concept and thinking into the future way of running factories. So it seems like it’s kind of about combining technology to help increase efficiency and increase operations. That’s yeah, that’s absolutely correct, yes. So to use technology, I think, to try and surface information across the supply chain and use that then to make the right decisions in real time and quickly. The other thing that stood out to me is one of your accomplishments was you had what you call a focus on sustainable operations. What is this, and why was this also significant? The sustainable operations for us really meant looking at our impact on the environment, and I think for there are a number of big elements that are consumed through making beer and beverages, a lot of energy, water, and we operated in many water-stressed areas in Africa or in Latin America, in India. So water was always very prominent, water usage was always very prominent on our gender, and what we started realizing is that actually about 70 percent of the improvements in these areas came from strong management practices inside the factory, so good control of your operations, incremental problem-solving, good measurement of the usage of energy and water, and over a five-year period, we were able to halve our greenhouse gas emissions on on-site operations and reduce water consumption by 25 in four years. So that was an ongoing effort. There were also several other areas in sustainability that we looked at. One was engaging communities in sustainable crop production for the crops that went into our products, really helping to develop them and supporting local farmers, and in fact, taverners in running their business and running their licensed businesses.
Sustainability means very different things to different companies, so I think it’s important to clarify, and it seems like yours was very measurable, which I think is a struggle for a lot of manufacturers, especially if they’re smaller mid-size. Yeah, that’s a great point, and we found that actually our first step was putting in the measurement, getting the right measurement in place to understand where we were. Yeah, it’s more of just, well, this feels good or this feels right, but here’s actually what we’re accomplishing and here’s the impact on the company. Absolutely, absolutely. And if you can report that as well, that also just creates great momentum in the business. So I want to go back to something you talked about, which you worked on when you took this role at SabMiller, and that’s around lean operational excellence.
So I’d like to have you start by describing for our listeners what this means.
Cool, okay. So lean operational excellence is really a focus on, if we think of the major levers in the supply chain, the focus on customer cash and inventories, cost, and sustainability, the environmental impact. Often, we think that we need to trade off these areas and improve one at the expense of the other. But I think what lean operational excellence really tries to do is to take a holistic approach and say, through systemic methodology, you can actually improve all of those areas simultaneously. So improve customer service, improve speed to the customer, reduce your supply chain inventories, reduce costs, and build more sustainable supply chains. So lean operational excellence is a series of practices and methodologies to help improve performance. Really, what are some of the cons? If I’m listening to this and thinking this is something that I may want to tackle, what should I be aware of? Yeah, I think that’s a great question. Probably one of the biggest ones is to recognize that it isn’t a project, that it needs to be treated as a transformation program, and it’s not a quick fix. So it’s not something that can be done in six or 12 months. It should be something that’s embarked upon with the mindset that we’re in for the long term to improve performance systemically across the business. So I think that is perhaps one of the cons, that it can be treated as just a program without the right level of engagement.
How do you stand up a lean excellence program if this is something that a manufacturer has no framework or no foundation for? Where should someone start? So, one should always start with the leadership, and it should be treated as any transformation program. So, for the leadership team to develop a clear vision of the future, well articulated in terms of the performance they’d like to achieve, what the future would look like, what the behaviors they would like to see in the business from people, and what are their big ambition and goals, because that really helps to provide the energy and vision for the program. And then, lean operational excellence is really about learning by doing. So, there is some training involved in some of the basic methodologies, but quite quickly, we’d like to get people involved in actually solving problems, identifying the problems in the area, working on solving them, and incrementally making improvements. So, a lot of the improvement is driven from the front line, but it does need to be guided by leadership with that strong vision.
Of good coaches, kind of the same with any digital transformation project, you have to have buy-in at the top or it’s very, very hard for it to be successful. Yes, yeah, yeah, absolutely measure success. So, let’s say we are all in, I go ahead and build a foundation, and I launch a lean operational excellence program. What should I be measuring, and how do I know if it’s successful?
Well, I believe we should really be measuring the business performance measures that you would usually measure in the supply chain because, at the end of the day, that’s really what you want to improve. So, if it’s your customer service, if it’s quality, if it’s the reliability of your factories, if it’s your inventory levels. So, those hard numbers are the things that you want to measure. And I think what’s also important, though, is to measure some of the softer aspects, like the level of engagement from people, the degree to which people are learning new skills, the positive behaviors that you’re seeing in your teams, in your workforce, in your frontline staff.
Is there a time when I should avoid rolling out a lean operational excellence program altogether? Like, is there a manufacturing facility or company where it may not be a good fit?
I think it’s probably fairly broadly applicable. The times where it may be good to avoid or wait is if you’ve got instability in the workforce or a lot of change in the leadership team. I think you’d want that to settle down first before you go for it. Or sometimes, you’ve got major changes in the factory or in the supply chain, whether you’re expanding or building a new factory, and those sort of changes can be quite disruptive.
Would you say that lean operational excellence programs make sense for small and mid-sized manufacturers, or have you primarily seen it with larger organizations?
No, it would make sense for small and medium manufacturers. We’ve worked in all size organizations, and there is a degree, I think, of tailoring that probably is necessary, but really, the techniques and the methodology are applicable to all sides of manufacturers and can have a real impact. We’ve got some really great stories of small and medium manufacturers who’ve transformed their operations.
Let’s transition into the next part of our conversation. You made what I would call a pretty major career pivot, and you started your own independent consulting firm called Value Point. Why did you decide to make the transition from being a practitioner to being a consultant?
Well, I think I’d been thinking about it for some time, and I had this opportunity to step out of the corporate world. I wanted to give it a go and try stepping out on my own. One of the major reasons, I think, was that I am really passionate about this area. I think watching people transform the way that they work can be very rewarding. So, I decided to step out on my own, formed a company, and worked with various clients. In some cases, I was doing operational due diligence, assisting private equity firms when they were investing or expanding smaller businesses. I was really trying to bring the experience of what we’ve done in big organizations and the learning through deployments across multiple geographies and different cultures to organizations across Europe, primarily.
When you had your consulting firm, what value did you provide to your clients? And the reason I’m asking that is, I feel like consulting is very saturated, a crowded market. There are lots and lots of supply chain consultants.
Yeah, I think you’re right. And I hope that I would have brought a perspective of that global insight of having implemented across multiple cultures. There was quite a lot of learning around doing this across different cultures and different parts of the world. So, in different places, different levers were applied, and different responses from different organizations. I think I was able to bring some of that richer experience into the consulting environment, and I guess just some practical experience from actually having done it myself.
So, you made another pivot after you had your own consulting firm. Well, I’ll have you describe it a little bit more, but I think your company is still in the consulting space. You are the Chief Solutions Officer for a company called Competitive Capabilities International. So, what does your company do?
A little bit of the history is that I had a long relationship with Competitive Capabilities International (CCI) as a client. In both Unilever and SabMiller, we had used them. They started out as a small consulting firm in the operational excellence area. Particularly in SabMiller, we had worked very collaboratively together with CCI and helped develop their solution. Subsequently, the business has really developed into a tech-enabled consulting firm. We have a digital product that provides all the step-by-step how-to guides on implementing a lean operational excellence program. The idea is that we want to, in a sense, work ourselves out of a job. We provide some supportive consulting support to get our clients going, started on the journey, started on the program. But the idea is that over time, we step away, and they can run their own program using the digital solution. That’s really the background, and having been a client for so long, I think CCI is fairly unique in this space. They have a long history in terms of the actual content that is developed on their digital solution.
Is it fair to say that you and your team are lean operational excellence program experts?
Yes, I think so. I think one of the other things that CCI brings is that all of our consultants are 100 percent who come out of industry. So, they’ve all been working in factories, working in parts of the supply chain, running warehouse operations, distribution operations. So, they’ve been there, done that, and I guess have the battle scars to show for it. They’re able to bring a lot of practical expertise into our clients’ businesses.
Program background and it’s kind of the expertise of your company, now helping organizations set up and run successful programs. What sort of trends are you noticing this year that you think are important to call out today?
Yeah, it’s interesting because it definitely is changing, and I think digital is having a big impact in this area. One of the areas that we really see growing is connected worker solutions. These digital solutions are similar to what we were trying to do with Industry 4.0 but provide data and information in the hands of frontline staff to make real-time decisions. These solutions are very sophisticated but often very simple and easy for people to develop the solution themselves. So, there has been a big growth in connected worker offerings. I think that’s a trend. And I think there’s a continued focus on extending into the supply chain. Operational excellence probably started very much in the factory, but I think more and more there’s a focus on how these methodologies can be applied from procurement through planning and through the extended supply chain in distribution and warehousing, and so on.
Thank you for discussing improving operational performance by applying lean continuous improvement programs across multiple sites with me, Ed. Where would you like to send people to find you?
You can find me at Ed Koch on LinkedIn or cci.com.
If you missed anything, you can check out our show notes. You can find us by typing in “What the Duck?! Another Supply Chain Podcast” in Google. To have optimal results, make sure to add “Another Supply Chain Podcast” at the end of your search to ensure you don’t miss a single episode. Make sure to follow this podcast and subscribe to us on YouTube. I’m at Sarah Scudder on LinkedIn and at s Scudder on Twitter. This brings us to the end of another episode of “What the Duck?! Another Supply Chain Podcast.” I’m your host, Sarah Scudder, and we’ll be back next week. Thank you.