Editor's Note: This is Part One of a three-part story. Click here for Part Two and Part Three.

This is the story of how a team of highly engaged employees executed a large business transformation from the bottoms-up.  By reaching across functional, geographic and organizational boundaries, focusing on a common vision, and locking arms together, they overcame years of stagnation and cynicism and demonstrated a real cultural change in less than one year.

After 4 years of false starts and over $XXM spent on consultants, software, and FTE's, every "transformational" initiative we tried failed.  Cynicism grew rampant about the "flavor of the month" initiative.  Employees felt that management was totally disconnected from reality.  However, the consultants weren't wrong.  The underlying operating system was falling apart.  Without massive change the system would crash, meaning, we would be unable to profitably serve our customers and compete in the 21st Century.  Something had to change.

Like many of these stories, timing and serendipity often come into play.  One of our sales VP's was furious.  We'll call him John.  Last October John got up at the global sales meeting and railed against the operations group.  "We would have sold 'X-millions' if only operations could deliver."  Heads nodded in agreement.  Whenever sales had a bad year operations was the first whipping-boy.  But simply presenting a diatribe wasn't enough.  John was on a righteous mission to turn over the tables and whip operations into shape. 

A week later he showed up at Bill's (VP of operations) office, closed the door behind him and proceeded to give him the corporate equivalent of a shakedown.  Now John is a 6' 4" burly Irishman, whom I saw drink 12 pints of Guiness in one sitting.  He towered over Bill and proceeded to give him every instance of ops' failures.  Bill sat patiently like a zen-master, sitting on his pilates ball (he used this instead of a chair), chewing on an apple.  When John paused he calmly asked, "are you finished?"  Well, that triggered another 10 minute rant.  When John finally finished, Bill said, "you're right.  Delivery is poor, and I'm willing to help."

Bill's non-defensiveness was like a master judo move.  It totally disarmed John.  "However," Bill said, "I can't solve delivery on 80,000 SKU's." 

We were a $1B company, yet we sold more SKU's than Target, a $60B giant.  The SKU proliferation created a literal gridlock in our supply-chain.  Since we were operating under a build-to-forecast model, no matter how brilliant our SAP-guru master schedulers were, we invariably guessed product mix wrong.  When the real orders came in, we were fighting fires just to ship even products that were high-runners.  Our operations literally looked like the I-405 in Los Angeles, twelve lanes of gridlock.  I used to commute from Redondo Beach to Irvine and I had this rule: if I could get to Beach Blvd by 6AM I was free and clear.  Well, over time, 100,000 other commuters had the same rule and eventually I would have to leave by 4:30AM to get to work on time.  That was exactly what was happening with us.  There was so much gridlock that we started inventing "sales alerts", phantom orders that "might" turn into real orders.  If we could just start earlier, we might ship on time.  It didn't work.

With this in mind, Bill repeated himself: "I'll help you solve delivery, but not on 80,000 SKUs.  I can't defy the laws of physics.  How about we start with a much smaller set and see if we can get to 80% of revenue?"  John agreed.  Bill's brilliance in this case was twofold:  one, he scoped the project to a manageable size.  All of the previous initiatives failed because we tried to boil the ocean.  Second, his target was meaty enough that it would significantly move the needle on the overall problem.  Luckily, to get to 80% of revenue required solving lead-times on about 2,000 SKUs.  Not your typical 80/20!

A week later, David Choe (me), the director of strategy was wandering through the hallway.  Bill called me into his office.  "Young man, how would you like a real job in operations?"  I quickly replied, "I would love it."  Managing corporate strategic planning was fun, but as a former West Point infantry officer, I always longed to be where the action was thickest.  Bill sat me down and explained the situation.  I gulped and honestly, I saw the word "failure" flashing in front of me.  To accomplish this project would literally require a business model transformation and we had just spent millions on failed initiatives.  Now, my butt was in the hotseat.

I quickly assembled a cross-functional team and met with them on a cold wintry day in Minnesota last December.  We decided to map out what it took to book and ship an order.  In the history of our company, this had never been done.  After four days and hundreds of post-it notes, we showed all the hands offs and steps on a 12ft x 8ft mural.  It was so large, we couldn't tape it on the wall.  The centerpiece of our process was what we dubbed "the circle of death." 

The circle of death was the product of our build-to-forecast mess.  Since customers couldn't get products on time, they started giving us request dates of "today" and even "Jan 1, 1900" in the hopes that their order would get bumped forward in the queue.  With over 30,000 orders per month, this phenomenon turned into white noise.  We only worked on orders where the salesperson and customers were yelling the loudest.  Back and forth the emails and phone calls would go.  The process was essentially a negotiation.  The customer would ask for delivery today on products where we had no forecast visibility.  Operations would immediately reply with a "90-day" lead time.  Customer service would hit the "expedite" button.  Operations would then reply with a "50-day" lead time.  The sales person would yell and scream.  Operations would then start looking at capacity, scheduling, and materials and then commit to a "45-day" lead time.  This process would go back and forth for a week until ops gave their best and final: "40-days."  This exhausting circle-of-death aggravated customers, infuriated sales people, and wore down everyone from customer service through supply-chain.  But, we created a ship-to-promise metric that stated we were 97% on time to that final commit date!

As we stared at this mural we created, it was like we were staring into the abyss.  Yes, we knew theoretically we would have to implement a pull-replenishment system instead of a build-to-forecast model, but to execute this seemed impossible.

West Point taught me that when the bullets are flying, the platoon leader needs to quickly take charge and clearly articulate next steps.  Research has shown that soldiers will, in the thick of battle, follow the most clear and confident voice, even if that "follow me" is coming from a private.  I decided that where all the other initiatives failed, boiling the ocean, we would succeed by scoping our first project for success.  We decided we would pilot our future state process on just one product line and 36-part numbers.  As small as this was, even this at the time seemed like a massive undertaking. 

In order to ship these 36-part numbers on time (at a 95% service level, from a 65% current state), we would have to eliminate expediting, maintain a kanban of raw materials, and implement a lean manufacturing cell.  While sales was quoting "7-21 days" on these 36 parts, our suppliers were quoting us "60-90 days".  We would have to align the entire value-chain on a single lead-time.  I asked the sales team, "if we get you to 14-days, will that be good enough?  Instead of the circle of death, we will confirm 14-days to the customer in 24-hours.  But once we do, you have to promise us not to expedite."  Our sales team replied "if you can get to 14-days and commit in 24-hours, we will have a competitive advantage!  By the way, we don't want to expedite.  That takes up 40% of our time.  We only do it because you guys give us ridiculous 90-day lead times."

With sales on board with the end-state, we created 3 teams to work on the underlying processes.  One team would work on the order management process.  A second team would work on supplier-alignment.  And a third team would work on lean cell design.  In order for us to implement pull replenishment, we needed dozens of people on the frontlines to work with us.   But, we had to overcome years of cynicism and mistrust. 
                         "Will this flavor of the month go away too?"
                          "I have tons of other things to do."
                          "What are we going to call this one?"

As part of the management "buzzwords," management talked about empowerment all the time.  But over the years, employees learned that this meant nothing.  Whenever they tried to act empowered they got their hands slapped.  "How come I wasn't invited to this meeting?" Or, "you never cleared this with the steering committee." Or, "we need to get approvals before we do anything."  Over time, people learned to just do what they were told and since there were enough crises-of-the-day, most people were content to keep their heads down.

I decided to try something different.  We were going to execute and not continuously ask for permission.  We would execute so fast and show results so quickly, that VP-types wouldn't have time to react.  I got the idea from studying how fighter pilots dogfight.  Although employees were tentative at first, we held several kaizen events where we empowered employees and made changes on the spot.  We saw immediate results.  In one lean-cell kaizen, we improved cycle time 60% in one week!  People started to get more confident.

I put a line in the sand and said, "team, we need all of these workstreams to converge by March 1.  We basically have 100-days to show management results."  With the confidence they were gaining from the kaizens, the team went into overdrive.  I briefed upper management and the sales organization on the "March Experiment."  We would shut off expedites and only build to a real order.  People were nervous on Feb 27th and then we went live.

Almost like magic our ship-to-target jumped from 65% to 97%.  Our lead-times dropped from 50-days to 14-days.  Although the pilot was small, we shipped about $1M of product, not too small that the results were insignificant. 

The team was elated.  Management was ecstatic.  Sales was enthusiastic.  But how do we keep the momentum going?

Editor's Note: This is Part One of a three-part story. Click here for Part Two and Part Three.