Masters of Lean Thinking

April 1, 2003
Here's an inside look at the award-winning operations for some of Industry Week's Best Plants of 2002. Featured Plants: Medical Device Manufacturing and Distribution: Medtronic Xomed in Jacksonville, Florida

Masters Of Lean Thinking

By implementing lean manufacturing techniques, Medtronic Xomed makes and distributes medical devices faster, better and smarter.

Changing the way workers think about manufacturing and distribution was the biggest challenge for Medtronic Xomed of Jacksonville, Florida. Three years ago, the warehouse would deliver a big box full of material to the manufacturing line with parts needed to make medical devices.

"Workers created batches, working on a big bunch of stuff and then passed it on to the next worker so he could build up a big batch of inventory, and so forth," says David Duncan, director of logistics for Medtronic Xomed. Changing that thinking meant moving all the manufacturing workers closer together and having workers implement one-piece workflow where they worked on one piece for a task and then passed the item on to the next worker.

"Converting to one-piece flow after having been a batch operation was a hard change. But we made certain as managers that this changeover had no effect on our workforce numbers. Our sales doubled over the next two years, and we didn’t add any labor due to the increased efficiencies. In the warehouse we went from 48 workers in 1998 to just 32 today while sales have quadrupled," says Duncan.

That sales success has much to do with how Medtronic partners with its doctors who are both customers and product innovators. "Our customers are 15,000 ear, nose and throat surgeons and hospitals in the U.S. and also distributors in 100 other countries. We ship to U.S. destinations in two-day air, which we see as a competitive advantage," says Duncan. Overseas, Medtronic ships by four-day airfreight and uses a freight forwarder to handle customs paperwork on the receiving end and conform to customs documents when shipping.

"Doctors are involved in the design of all our products, and we name products after doctors who design or who are involved in a product’s design. We have an operating room-like lab where doctors with an idea can help us develop or design a product; we also train doctors to use the products at our facility. Cadavers are used in a respectful way to help doctors understand and use this medical equipment," says Duncan.

Customer demand is also reflected in packaging and kitting operations. Many doctors and hospitals don't like Styrofoam peanuts, so Medtronic uses newsprint as a packaging material. They don't want to sweep material off the floor or encounter static cling.

"We do some kitting, and kits don’t leave the dock unless all the parts are together. Doctors want all the parts to arrive at once to avoid having to keep track of multiple shipments of kit components," adds Duncan.

Customer demand determines how much inventory of each product is kept on hand. The average is a month’s supply, but in some cases it may be several months or just a few day's supply. For difficult-to-manufacture items, Medtronic may keep more months' supply on hand. This all depends on the difficulty of manufacturing an item and order demand. There are other items manufactured every day which gives the company a faster response time to its market.

Required reading for innovation

Medtronic's vice president of operations, Jerry Bussell, started on the road to improvement with his interest in value stream mapping — in which every step and process is questioned for how it adds value to the product and to the customer. Managers were required to read the book Lean Thinking by Womack and Jones as well as the book Lean Transformation. Medtronic asked for help from the Lean Enterprise Institute that sent a consultant who met with managers and workers three times a year for a couple of days. "The consultant would ask us why we do something, and we’d give him some lame answer like we've always done it that way," recalls Duncan. Eventually, after asking why again and again and driving down to whether a process added any value, Medtronic began to whittle its operation to eliminate inventory via single-piece workflow.

Worker training was key to success. Medtronic management communicated that they were changing the way they did business but that they wouldn't do anything to hurt the workers. This helped cement workers' involvement in analyzing processes to eliminate steps, inventory and waste. A team was formed that was headed by "The Director of Lean," a manager responsible for project management and worker training. In his team were also the directors of manufacturing, logistics, supply chain and purchasing. Moving with agility

The net result was Medtronic's being able to move product through the plant five times faster than just three years ago. "This has improved our competitive stance by making us more flexible — much more agile. We can react to changes in the market very quickly," says Duncan. While Medtronic is not making every one of its 4,000 different goods, they are making about 180 kinds of parts a day. Managers and workers aren’t laboring under a giant master scheduling plan that calculates what they will need a month from now. Rather they're building to replace what was sold yesterday to maintain the expected month’s worth of supply, on average, of any one product.

Here's an example of how lean business principles apply to distribution at Medtronic in the way that orders are pulled and picked. There was once a conveyor system onto which orderpickers put totes containing ordered items for takeaway. The orders were transported to order checkers who would scan the items and then put the inventory into another tote. These new totes were sent downstream to packers who sent items to freight manifest for labeling and shipment via UPS.

"We've completely redesigned this distribution method," says Duncan. "Now orderpickers are order processors who pick finished goods using orderpicker trucks [Crown W.A.V.E. orderpickers]. We eliminated the conveyor system. Now workers pick an order, pack it, manifest it and put it on the UPS truck in just one pass. This eliminates batches of inventory waiting around between steps."

Material handling at Medtronic

Goods are received manually at the receiving dock of the Xomed warehouse. Bar codes are attached to items (Intermec) and items are scanned in with radio frequency data communications (RFDC) terminals (Intermec) which report directly to the ERP software (Glovia). Much inventory, about 1,800 SKUs, is stored in the manufacturing line at point-of-use while some 200 or so SKUs are stored in the warehouse for the main manufacturing line.

A second manufacturing line is located within the warehouse itself, and 2,000 stored SKUs support this line. A rudimentary warehouse management system within the Glovia software helps in putaway through the assignment of primary bin locations as well as reserve storage. The software also keeps track of replenishment of primary, or forward, pick locations. Only the highest volume goods get primary bin locations. Medtronic is always working with suppliers of larger-size components to shrink them so they can be stored at lineside.

Several hospital and surgical pieces of equipment are built in the warehouse, including a machine for sinus surgery and a nerve integrity monitor used in face, head and nose surgery.

To prevent stockouts of goods stored at lineside, Medtronic calculates the average daily use and keeps a month's supply on hand, sizing the bins accordingly.

Clean room applications

About 50 feet from the warehouse is a 60,000-square-foot clean room manufacturing operation. There, Medtronic manufactures small medical devices for ear, nose and throat surgery. "We make the tubes put into children’s ears to promote drainage as well as replacements for tiny bones of the inner ear," says Duncan.

Workers also manufacture surgical sponges and more than 4,000 different goods. Some products are made just once a year and others every day with 225 manufacturing workers using single-piece workflow. There are 47 workcells, and each cell can have a number of tables in it with workers sitting close together.

Medtronic is different from the typical manufacturing plant. It uses no MRP or planning software. Rather, it makes a determination on target inventory. Then each morning, workers run a daily work order requirement that tells them how much to make today, based on what was sold yesterday. Medtronic wrote this control software itself. Minimum work order sizes are established for efficiency sake, so that even if 5 items were sold yesterday, if the minimum order is 10, then they’ll wait until more are sold.

Finished goods are packaged into medical device pouches. Packages are put into cartons with the cartons being labeled and then put into a sterilizing machine.

Medtronic plans to add RFDC and bar coding into its manufacturing line to keep track of work-in-process, lot numbers and various components for FDA record keeping regulations. Those records are currently kept manually. "Our computer is tracking the part number and lot number using a paper work order, but we’re looking at electronic signatures within a year," adds Duncan.

With about 15,000 customers in doctor's offices and hospitals, Medtronic uses UPS to deliver within two days of receiving an order. Every item is bar coded and scanned before shipment to complete the lean distribution cycle.

With workers being the hinge-pin of success for Medtronic Xomed, the combination of lean engineering principles and value stream mapping have improved operations immensely. There’s no stopping Medtronic now that it is exercising its lean manufacturing and distribution muscles. MHM

Equipment Suppliers

The following provided equipment to the Medtronic Xomed plant:

Bar code labels and RFDC scanners, Intermec Technologies Corporation,

Consultants, The Lean Enterprise Institute,

ERP software with inventory control functions, Glovia,

Lift trucks, Bendi from Landoll Corporation,

Order selector truck, Clark Material Handling Company,

Radio frequency scanner, Teklogix Inc., 800 633-3040.

Span-Track gravity flow rack, Unex Manufacturing, Inc.,

W.A.V.E. Work Assist Vehicle and riding pallet jack, Crown Equipment Corporation,

Reach Medtronic at

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