The lean business model is designed to reduce waste in business processes. If an organization thoroughly integrates lean concepts into its operations, a likely outcome is a reduced need for cash, fewer errors, higher quality products and faster deliveries to customers. Extending the reach of lean efforts into a lean business model can help streamline the business allowing it to address market changes quickly. That's when real, transformational changes take place which can generate hundreds of millions of dollars of opportunities and drive growth. A good example of a lean business model is Solatube International, Inc. Solatube is also one of the featured tour sites for the AME 2018 Conference in San Diego.
Solatube manufactures and markets tubular daylighting devices for residential and commercial applications in the United States and internationally. Founded in 1991, Solatube established the tubular daylight device industry and is the industry leader serving over 150 countries worldwide. Today, more than two million people have improved their homes with Solatube products and millions more have enjoyed the benefits at department stores, schools, hotels, hospitals, grocery stores, offices and athletic facilities. The North American headquarters located in Vista, California has 240 people including field sales, marketing and manufacturing operations.
Since 2002, Solatube has been on its continuous improvement journey, deploying lean practices throughout manufacturing, warehousing and distribution. Touring the company, visitors can see Solatube’s vertically integrated manufacturing which includes plastic molding, metal stamping and pressing, laminating and assembly of the entire line of products. Visitors can also see how they utilize lean to drive work cells, manage inventory, replenish materials, stock the distribution center and facilitate improvements. Additional highlights include an exploration of how they use Kanbans, 5S, one-piece flow, pull through systems and other visual management tools.
Continuous improvement has become the culture at Solatube and is not limited to the production floor. With many competitors, Solatube’s dealer network is a core competency and differentiator in the market place. Marketing efficiency is tracked by the cost to reach 1000 people as a key metric. Advertising, pricing, dealer sales process and site installation is designed to minimize waste. Products are designed for manufacturing and quick installation. Improvements are constantly being made, tried and perfected first at their home location. Dealers are then taught the standard work for whom to sell to, and how to go to market, along with any improvements.
“Our business model is how we win,” says Bob Westfall, President of Solatube. “Every single touchpoint is addressed.” This has resulted in solid business results. During the ‘Great Recession’ Solatube’s business was flat when the construction industry was down 40 percent to 70 percent. Today the company is back into a strong growth mode extending its market reach and adding new product categories which include solutions in ventilation and daylight control.
Contributing to the growth is strong cash flow supported by how the company manages inventories. Suppliers release materials to manufacturing needs. Outside processing is being addressed as an opportunity to reduce inventories (WIP) and reduce cycle time. Currently, they are bringing powder coating process in-house continuing to support the vertical integration of the manufacturing. This approach is also applied in the field. Recently, Solatube set up a warehouse in Europe allowing dealers there to close their warehouses and focus on sales and installations.
Internally, communication is considered critical. Monthly standup meetings provide associates the opportunity learn how the business is doing and what initiatives they are taking in the market. The goal is to develop a line-of-site for people to see how important the work they do is to the business and their customers. Included in the meetings are peer-to-peer recognition awards to encourage team atmosphere.
Lean business models often reward experimentation and can be more cost-effective because they avoid lengthy implementations of unproven strategies and investments. Solatube illustrates what it means for lean to be a part of your company's DNA. They prioritize ideas based on ROI as well as continuously test assumptions and make adjustments based on the results. Are your lean efforts still stuck in operations or has it become part of your DNA? The viability of your company depends on the answer.
Ken Rolfes, a long time AME volunteer, is a management advisor, past corporate officer, senior operations executive and Shingo award-winning author. He is President of KDR Associates, a Director of the Association for Manufacturing Excellence (AME) and leads the AME San Diego Business Improvement Consortium. For more information about AME San Diego 2018, visit http://www.ame.org/sandiego.
