Sunday, August 16, 2015

Lean FROYO Part 4-Application of Kanban to Frozen Yogurt

As a faithful reader of my drivel, you are probably aware that my wife of 30 years, Gloria, has opened and is managing her very own frozen yogurt franchise, called Menchies. The store opened in March of 2014, and she reluctantly hired P4 Lean Strategy (me, and she had no choice) to come on board as her lean consultant, because her life partner is a freakin lean zealot. I understand the Golden Rule of Lean is to never bring it home, but her Froyo shop isn't technically home, right?!?!

Nestled here in seasonal New England, you can probably imagine the seasonality of a frozen dessert business. In the summer, people are waiting at the door at 11 am when she opens, and in mid-January when there is a foot of snow on the ground......not so much. Some days you can leave it outside on the frozen stoop and nobody will take it.

Keep in mind that poor cash flow kills more businesses than anything else. From the classic book, "The Goal", Eliyahu Goldratt stresses that the only 3 things you need to measure are Thoroughput, inventory and operational expense. Inventory is the money you have invested in raw material you intend to convert to something your customer will buy. Operational expense is the money you've invested in people (salaries, insurance, 401k), overhead, heat, electricity, etc. to convert your inventory into something your customer will gladly pay for. Thoroughput is the RATE (how fast) at which you convert the I and O to CASH. The faster you can do this the, the healthier and wealthier your business is.

Back to Gloria and the froyo. When the store was brand new, it took some time to predict when the yogurt store will be busy and when it would be slow. I suppose you can guesstimate and buy (invest) in inventory based on this guesstimate. (In bigger businesses, this isn't called guesstimating, it goes by the term "forecasting". 

Forecasting, as you know, is the one of the arch enemies of LEAN. Lean thinkers understand that the goal is flow and just-in-time and "replenishment triggered by consumption". Sell one, buy one. Sell five, buy five. How much we keep on hand is based on how long it takes us to get it from our supplier. 

The primary raw material for the frozen yogurt comes in 1 gallon jugs. They arrive frozen, and are transferred from the freezer to the cooler when they are ready to be used. The Kanban system works like this. There is a magnetic "form" (with a marker attached) on the outside of the cooler door. When a team member removes a gallon of a certain flavor,they just put a check mark next to the flavor they took.

I consider Kanban one of the most difficult of all lean tools to implement and sustain, because it is about gaining agreement and the discipline of leader standard work. Expect to train over and over and over. People ARE smart and people DO care, it is important they understand the value of this routine, the why. In this case, Gloria and I would just need to double check for a few weeks that consumption did indeed result in a check mark (replenishment). 

Once established as standard work, my wife can now simply replenish exactly what was eaten over the course of a week, no more, no less, no forecasting.

I've never been prouder of my lovely wife than when the supplier's truck pulled up and the freezer was empty. Tears streamed down my cheeks as she achieved what every good marriage should....just-in-time.

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