__-

VJoril i.r,i-rir ii
ro
oihei studellis io rievelop a iwo-page prcspecills desciibing ihe
particulai't'eaiuies
of an Oir,i co,sulting praciice you ,rou1d ,ro,t oit", graduaiion. (Hini: Identif,v' a iargei mai'ket and
unique skiiis
)/our
team
possesses tnat fit thai lr-rarket')
Sketch a t,vpical materials piocui'emeni plocess that exists in functional oiganizalions Usir-rg
,""ngio"..irg
principies, cirailenge the status quo and redesign this
process'
Anequiprnenimanufacturerhasthefolloivingsrepsinitsordeien-u_ypIocess:
c. Take the order and fax ii to order entry'
b. Enter the order into the syslem
(10 percent unclear or incorrect)
c. Check siock availabiiity
(stock not availabie for i5 percent of orders)'
d. Check customer credit (10 perceni of orders have credit questions)" '
e. Sead bill of materials
'ro warehouse'
The order leceipi to ra'arehouse ci'cle time is typically 48 houls; 80 percent ofthe orders are han-
dleci without enor; a:rd order handling .ort, ur" 6 percent of order revenue shOuld you reengi-
neer this process, or is continuous i.Lprovement
the appropriaie approach? If you choose to
reengineer. how wouid you go about it?
Rapil plant urr.ur*.nt l"a-nness exercise: Form a team of fbur to flrie people and take a
3o-minute lour of a piant or service business. At the conciusion of the tour, Iate the leanness of
rhe operation using ihe RPA questiounaire given in the appendix to this chapter'
(According t'o
the questionnaire's developer, the average number of yeses for over 400 plant lours \
/as
seven'
and the standard deviation was 2.) in ciais, discuss those areas where leanness is generally lack-
ing across al1 comPanies visited.
Advanced analysis:
a. use the resulis from fi1iing out the leanness questionrraile and your team's obsel'vations to
deveiop a consensus ,.orJfo, each item in the 11pA rating sheet' (There are many quantifi-
abie factors by wh.ich to assess performance in the rating sheet's l'1 categorises They are pre-
sented on Goodson's Web site: w tn'*'L-' 1ls' tl il-lici-' e'l'-rirpa')
D. Prioritize targets of opportunity for management'
c. Deveiop a two-page action pian that you would present to management to help them make
i.mprovements.
6
Casp: RTTxGINEERING
nr SIMWoN PF.EClsloN Meciitxrs
CotupnNv
Ixrnoouc'uox
Mr. Yang Yong Sik, age 48, an executive director of Samwon
Precision Company who has piayed an important roie in the com-
pany's innovative
growth, described how he saw the company situ-
ation in the business environment in which there ate increasing cost
and quality demands from buyers, both domestic and overseas' He
argued that:
I can see that Korean products are losiltg their competitive edge from
everywhere, but why is
-,tris
happening?
' ' '
I have traveled to many
cou,tri",insoutheastAsiaandlseethatourproductsareingoorishape,
in the matter of design and quaiity, but the problems 1ie in their cost'
' '
'Why
is our cost higher compared tcr other countries?
He then explained:
kr the last few yeais, our labour and manufacturing
over-head cost have
been.rising
"onirantly,
but we are not adding enough vaiue to cope with
this risinglosl . . . That is io' say, in the pasl' we worked for
''099
-*:::
of wages and produced 1,100 rvons of vaiue' but we now get paid 3'000
wons but produce oniy 2,000 wons of value'
He further asked:
Whatshallwedonow?..'Wemustrecluceoutcostsby2-3percenta
year, anC produce more value than our costs' ' ' '
In every part of our
compally, 1 can see so many areas ol wasie where we couid be adding
vaiue. Our opport-unity cost is mr:ch higher than before and we cannot
afford to *urt" ti-. and resources when v;e are working'
He coniinued:
Now that I have explained this to my company, we have really seen what
we can do, if u'e just realize what we are doing'
' ' '
It is us who must
realize what is in front of us.
According to Mr' Yang, it is going to be lr'vo or three years
before the Koreane.ono*y is going to either prosper again oi fali
behiud other rapidly rising countries'
(Appendixes 1 and 2 illustrate
some financial data that show the cost increases')
Becrcnorn:o ol rHE C0NIP.qr\-Y
The Samwon Precision llachines Company was flrst established
in
1974 producing springs for ballpoint pens, and expanded
quietly
uniil i980.In 1975, the company started to develop auto parls and
becameamembeloftheKoreaAutoAssociation.Itjoinedthe
Korea Metal Indusuy Association in September L9'16' ln 1978' the
company estabiished a technical coalition with Murada
Hatchizo
Co. ofJapan.
lnlgS0,samwonrvasdesignatedaSanautopaltsfactorybytt}e
Korean Ministry of Commerce and Industry and, in i983' was des-
ignated as a supplying company for the. Ministry
of National
Defence. In 1986, Samwon was designated by the gor'ernment
as a
promising smail to medium company and, in-i^9^81'
became
a ffrern-
ber of the Korea Eiectronics Association'
In i 990'
j ust after S arnwon
was designated as an *nttJi"g
small to mecium
company'
they
established a new factory in Kyung Ki Do'
GC-J
secii.1ti 2
PRocpss Serecrtcx,srr*l
DEsrcN
The compa,y now produces abour 1,g00 different kinds of
springs and manufactures
100 million springs per. month. From
about 2,000 spring makers in Korea, Sam*on became one of the
lagest suppliers after Daewon, which is now the largest company
in the industq, by size. The organizational
structure is shown in
. ,-
Figure 1. However, for. cold coil springs, Samwon was the iargest in ''-/
size and supplies
'arious
cornpanies ra.gi,g from auto to ba,point
pet manufacturers.
Though tl.rere had been evidence of growth, it was in the 19g0s
,,i
tliar the company needed some changei to cope with the hostile
business environment.
The economii
envirori,,nent
of that time
was not very pleasant for managers of any industry in Korea. The
execudve direcror, [4r.
yang yong
Sik, worked with the owner,
Mr. Mun Halc Moo, CEO, who is now 75 years old. Mr. Mun
worked in rhe company from its beginuings ai a line foreman. He
learned his own managerial
skiils while rnanaging the growing
company with expanding
managerial boundariei. It is interestin!
that Mr. Yang, while he was only a line foreinan and never had
regular school education beyond rhe six years of public school
and a short term in a vocaiional
institution, could manage to pro_
pel the reformation
of the company. This is very unusual for
Korean companies that traditionaliy
have a iop_down manage_
menf structure.
Facrons
SerrrNc Ti{E CoNTExr oF Cr{.al\GE
Due
_to
the Korean goverument,s
growth_orieilted
policy of that
et'a, Samwon had expanded
rapidly to evolve as a weli_balanced
::Tpany,
but problems
arose as the company expanded. In ihe
i980s, just
like other Korean companies,
Surnrcn faced manv
pr-obleras
such as rising wages and rvorker resistance ,"frif.
-r-f*.i,
/
customers'
requests
for lower cosls was the sfrol.lgest pressure
on
Jamwon.
X,::::).1:,"^
or rsu Nrpr ro Cu.{rlGE ..{ru Coxrrxr oF C}TANGE
r,,u uusLrre
coltdrtrot.ts
of ihe I9g0s were the driving force to adopt
the.5S program.
Samwon
adopted
55 jusr
before rhe crisis was felt
ai'rhe company.
While \4r..
yang
was aline joreman
ar Samwon. he visited
japan.
During iris visit, he flgured thar
"
a;;";i;'roo,,
.o,r, ro ih"
Koiean inciustry ancl he wanted
Saro,von,o
U. pi"pur"O.
He met
with the licensor cf Sam-w,orr
in Os;Lka
,* ,""*r."0
from the
Japanese that pr:oducti.,,ii1,
ir,creases
.orlC
o.ii,
5" achiei,ed by
workers and at the place ofproduction.
He felt that his compan),
had
:1 "h11g"
quickly ro compere with the comperirors
in Japai. Hlnce,
Mr. Yang's mission u/as ro implemeni the 55
frogram in
Samwon. He took a risk in that he received a six_month window
of opporrunity
from NIr. h{un the CEO, and if ihe program
did not
succeed. he was to ieave the company.
,,5S,,
is iapanese which
stands for seri (determine
which equipment is necessary and which
is not), seiton (have the necessary equipment
in reach and in the
right place), seiso (clean),
seikersu (maintain
the above 3S), and
sitsuke (mental
discipiine and readiness).
Pnocrss
op Tnal.sruox
After his rctum to Korea, Mr.
yang,
with the owner Mr. Mun,s per_
missiot, launched this 55 projecr in Samwon without knou,ing
precisely what the eonsequences would be.
Irnplementation
of the 55
program
The adaptation
of 55 was
the hardest part for the company, just
like any other innovation
process,
reflected in the old Korean aphorism
,the
start is when half
.
of the wort is done." The 55 program was fl1.sr adopred in 19g0 ald v,
failed in the f,rst and second attempts because of the resistance of
the workei's and other managers; however, it finaily came to fruition
in 1988. When it was fully embraced by the workers, ,fr.f ,oot,i^
,
months of pre-educational
programs to establish the cultur.al back_
ground
before actuall)r adopting the fundamental principles
of 55.
This was when Samwon's culture was formed, based on ifr. foff*,_
ing forces that drjve tire culture:
:''i:;i:
.
"I am the owner of the cornpany,';
.
"I get what I earn.,,
.
"I am evaluated by my work for
school diploma."
"Do it myseif first."
the company, not by my
Senior nanagement were encouraged to take the initiative of
setting an exampie to subordinates and were encouraged
to arri,e at
work earlier than their s,bordinates. General nronug"i,
*oria ur:riu"
at 6:30 A.M. 30 miirutes earlier than regular rvorkei.s,
and chief exec_
utives would arrive at 6:00 e.l,r. No office meeting would occur
,j
during office hou's; they would meer before the oifice hours that
norrnaiiy stafied at 8:00 ,q.riz.
After Mr. Yang,s venture turiled out io be successfui, Samwon
became a lean compan), with emplo5,gs
sltppcrt of the nern, com_
parry direction. It toolc eight years of downsizing
to mal(e the
compairy. slim and 6r e,ough io cope with the environment. In fact.
-
Samu,on was ahead ci rhe riownsizing trend ihei was carried out in
iioi'ea.
ji4i.
Yarrg is pioud of the fact ihai ihe 5S prograrr, r,r,as origi-
nally adopted fi'om Japan and has been atterapteo by alinost every
Korean company. but iio other company succeedeC in setting up ihe
system
The core part of the change was Lhe n_ew culiure of the workers
where everyone believed that he/she was the olvner of the company.
Thrs rs shown in the company's payments, where every increased
profit was reinvesterj qr paid to the workers and even more impor-
tantly ihe company irept its word when implementing the projecr. In
order for Samwon to prosper, the 55 program had to be successful.
The success was due to many factors peculiar to sma11 companies
like Samwon (such as no shifl in politics and no changes of CEO).
The successful adaptation of 55 from their Japanese licensor
company gave Samwon the structure for other .o*puign, to be suc-
cessfully implemeniec.
The Initiation ol tFre Program Cho Kwarr Ri Once management
of the 55 was found to be mature and the lesults had become well
-
established, Mr. Yang wanted to introduce the nexi action pl.ogram
to increase the productivity and sophistication of the company by
uiiiizing the 55 foundation. Mr. Yang thought the market pressures
on pdce and quality wouid increase at a greater rate than ihey could
manage.
The next progiam was named "cho kwan ri" (CKR: cho stands
for a second of time; kyvan ri refers to management), a time-based
management system. Llnlike the Japanese 55 campai_en, CKR was
exclusiveiy invented by Samwon. In the process of vraste analy-
sis, Mr. Yang wanted to ilyg;gg4te rhe.-amount of time w.qqtg{-
during wort both on the Tlcrory ffoor and ar office aesfci, anO
measure these in some monetary terms. In other words, estab-
iish how much monelth.e
_company
actually lost due to wasted
|
-F
Llme.
Whiie Samwon successfully adopted the 55 program after eight
years of difflcult wort, the environment around Samwon had also
grown more adversarial than before. Their main problem was with
'tl- manufacturing cost. Since the material cost was over 80 percent of
the manufacturing cost, it was not easy for Samwon io reduce tire
manufacturing cost while the wages and other overheads increased
due to social pressure. They needed something more than just
55.
As was the case with other Korean manufacturers, the material cost
as a proportion of the total manufacturing cost actually surpassed
the labour cost (which accounted for aronnd 15 percent of totai
manufacturing cost) in competition with other foreign compering
cJzcrgier 9
Lrafineis. This was in conirasi to F*orean manageis, perceDtioits ihat
ihe labour cosi vras actuaily the v,,orsi factor..
In establishing cho kwan ii, Iv{r. Yang thor-ighi that the 60-min-Lrte
houl was noi accuraie enough to measure tite wasted time. He took
the "second" as rhe measuring scale to count the time as accuraiely
,.' as possible. Mr. Yang calculated the value of
.,each
second,' iepie-
sented by workers and managers by dividing their.average annuai
saiaries by the total number of seconds for the actual annual work-
ing days. Hence, one second of floor workers' time and managers'
time have a different worth.
/
Cho kwan li calculated all work activity, inciuding furiie team
meetings, chatting iime, smoking, coffee breaks, etc., into monerary
value in an attempi to publicly identify the wasted time in tire com-
pany. Figure 2 shows the wage table. For example, if it took 10 sec-
onds to make one spring, then, since it cost 2 wons per second
for wages, it hAs cost 20 wons in wages. It would get more expen-
sive when it is caicuiated for top managers. If it took 600 seconds
to write a repot't by a manager and it cosl 3-wons per second, then
it would cost 1,800 wons in v;ages.i
Cho kwan ri initialiy iooked like a way of sqr.reezing time from
the workers. On the other hand, it reflected what &e workers wanted.
The workers would get more davs off than at other companies if the
factory was run 359 days a year. The main purpose was to concen-
trate on working hours and use the saved time to good purpose
regardless if it is for personal use or for the company. Samwon start-
ed cho kwan ri in 1990 and this time was easier than before, because
the new company culture had already been established from the 55
program.
Once the cost measuring system was developed, everyone was
equipped in calculating cost information on wasied time and its
effect on productivity as well as the value creation by inciividual
wolkels, depariments, and the whole company. This enabled
workers to manage their own vrays of wor.king in order to be as
efficient as possible themselves, without any supervision or
direction from the top. Many programs to get rid of wasted time
have been automatically created by the employees for themselves.
The empioyees suggested themselves that any business meeting
should be ca11ed before the workday starts at 8:00 .c.Na. The com-
.
pany saw that meetings during the lvorking day caused the most
waste of wor:king hours and ilrey did nor want the company oper-
ations being interrupted by workers being caIled away for the
meetings.
As a result of CKR, employees have shifted ream meerings to
-
?:00 a.u. to discuss and find problems that lie ahead. This vras
quickly supported by everyone. As a result, it encouraged an
Cho Kwan Ri
YoU cANNoT SA\E TIME; LET,S Do oUR BEST wHiLE wE HAVE iTI
-
GC-4 seciiatl 2 Pnocrss SEi.ec:tiot'; ti.io Desrcx
ef8cient flow of communication and feedback improvements and
ihe team ieaders could then be well arvare of what was going on in
the company. The information flow bet\
/een
departments was
suff,eient to ensure thai any team leader could answer simple phone
calls or questions frorn external pafiies.
Soine of the effects thai c1.ro kwan ri has achieved lor the com-
pary aie listed below:
1 WasteC time reduction, A new system for morning meer-
ings usually commenced at 7:00 A.M. in order.to reduce
wasted time during the day. The best part of this was tirat a1i
the participants were eager to have the meeting and it was
very productive. A suggesiion system in fact changed the
way R & D efforts were conducted in such a way that work_
ers on the floor suDported rhe work of R & D members,
resulting in teamwork between workers and R & D person_
ne1. In an attempt to get rid of rhe wasre, all workers were
asked to develop or improve their work, which was very
'
effective in process development. The machines were cus_
tomized to the workers so thai they could run the machines
with the knowledge of the processes going on inside the
maehine. The workers saved a lot of time due to time_based
management. They spent this time with.the machines and
suggested implovements every week. Every worker kept a
self-management checksheet by seconds for a month and
salaries were set based upon their pei-formance, not by
seniority.
According to Mr. Yang, most of the machines produced
t/'
four times more springs than when they were imported from
Japan and the U.S. Some rnachines thar made long coil
springs were redesigned to make short coil springs and
.
replaced the impcrted machines so that they did not have to
import those machines again. They also had a custom_made
quality checking machine
.made
by the manufacturing
department, which would be very expensive if imported.
2 \\/eifare was enhanced
a. Pay r.vas 30 perceat more than any other company in
Korea..
b. Bonuses were up 6 times previous 1evels.
c. The company paid ali the employees' childr.en,s educa-
tional 1'ees up to college level.
d. The company suppofted overseas training.
e. A11 the company-owned cars were air-conditioned for
efficier:cy of ihe work force.
f. The suggestion system worked u,ithout any intervention
. from upper management.
The CKR system was nationally ackaowiedged as
,,best
prac_
tice" and was also recognized as a benchmark model for other
companies.
Samsung Group, the national representative business
conglomerate,
benchmarked Samwon to add the basics of &e CKR
ryo_{u*
to its own operation. Samsung's early office hour sysrem
(7:00
a.rv. ro -1:00 r.ria.) staned in
j.994
after Samwon,s CKR
sysiem.
Boosting. the Fhase:
Saryuk 0.01 Carnpaign As part of the
uullrparly s conitnuous
rmpr-ovement,' pl.ogram, Samwon then
adoptecl the Saryuk 0.01 &mpaign afrer the C-KR and 55 programs
\\7et'e suucessruti), urp.iemented.
The r.eason for the Saiyuk 0.01
can:paign
(sa;'-i,rrl.;
means to nrake a iiesperate or frantic effort for
ihe ultimaie goal) u,as a
_qoal-orienied campaign
io improve by
even 1 percent. Externai\r, it was the buyer companies, pressure
on price reduction and adversarial economic conditions for
small-sized supplving companies. in an effort to reduce cost, they
"' focused on reducing the waste. The principle of cho kwan ri was to
reduce waste that is invisibie, rvhereas the principle of Saryuh 0.01
was ro reduce *u.t"f6Iilr .,isible. Mr.
yang
wished ro continue io
seek out any waste in the conffiy in or.dei io meei the competitive
situation, The Saryuk 0.01 program was introduced into the com_
pany in order ro get rid of the visible waste in.every aspecl of the
companyls operation,s.
Samu,on's moito was:
.
Saryuk for 0.01 of productivitl,
improvement.
"
Saryuk for 0.01 of wasre.
Saryuk for 0.0i of profit..
Its specific objective was ro reach a toral of rwo million wons of
waste for the whole corporation. It was calculated that if each
member of the company saves 10 tl.rousand wons of wasie this
would result in 2 million wons of waste for the company. It is nat_,
ural that this process wouid be icrpossible to implement if the3, did
not have 55 and cho kwan ri in place beforehand. Mr.
yang
insisted
that "a company always has to prepare itself to be a wave rider
instead of a victim of environmental change.,, Buyers aiways
impose their own cost and quaIit1, pressures on their suppliers. For
the last contract the major automakers wanted a 5 percent price cut
while Samwon's proflt rate was only about 4 percent. This meant
that if Samwon \rras not prepared for the cost reduction pressures
from buyers, there would not be any chance of surviving fiom such
pressure.
Samwon talgeted nine waste categories as follows:
1 Waste frorn defects. It is important to keep in mind that
quality contr-ol is in:portant for all, even in managerial work.
In fact, defects in managerial work bring more damage to the
company. To prevent these wastes, we must be accurate and
sensitjve in every operation.
2 lVaste frorn clumsy work. We should know that no matter
how precise the plan is, there is a chance that it cannoi be
.
completed at the right time. It is bener to take time in this
case, rather than poorly finishing the work.
3 Waste frorn inventories. Inventory is money, whether it is
product or material. Any inventories over the rninimum
required level not only cause stagnation in cash flow, but
also a waste in managing the inventories. This can be man_
aged as part of a JIT
ftust-in-time]
program.
4 Waste of motions. Evely morion of the wort can be a
process of creating value. We have to keep in mind that we
should watch every motion of our work and machines so that
it can be improved and add more value.
5 Waste of waiting. For example, waiting for service in a
bank is a waste of a lot of time.
.Every
member of the com-
pany must be organized aad information flow should be
'
comprehensive so ih.at we can reduce the r.i/aste
of time in
places such as the bank or taxation office.
6 \4raste of transporting. Usage of mass tr-ansportation in
the company and-<gside the company can reduce a iarge
waste.
7 Waste of process. We s\oufd use suggestion sysrems so
that any wasie in the p\-ocess can be found and the
'
improvecl wor-k siluation should be comrnunicated to al1
u orkers. 1
alr::
;:r. l
j;;-ii
!:a:l
."i.
itr.
...i:
;11
E
-v-'-este
cf ii-r,ir:sliiai aecideet" This brin-es mosi oi ilre
g,asie
ibr tire conrpiini'and foi ihe person, not to irlention all of tl-re
pain rirat he or- she witL suffer. These kinos oi accidents are
aimost alwa1,s from carelessness of ihe workers (90 perceni
of the time). It is only ourselr,es who can preveni these hinds
.
of wasies.
9 lYaste oi manageriai work. This is invisible waste. The
mosr important thing io reduce this ki.nd of wasie is to have
good information flow in the company, both verticaliy ancl
1'rorizontally.
i-.. The company saved W 49,000,000 and W 59,896,719 foi rhe
24 months fi'on June 1993 when it started the Saryuk 0.01 carn-
palgn. There are weekly and monthiy schedules in Samwon to
reduce rvaste and keeo up the above three campaigns. Mr. Ya-ng
asserted that the management systems operate not by order and
supervision. issued every time something has to be done as is usu-
ally seen in other companies, but by the predesigned ''time-work
schedule." He says.
We even care about the waste caused b)/ makino schedules about what we
do today and this week and who should do this and tliat every time. . . .
lnstead, we tried to make ourselves used ro thejobs Cone regulariy b-v
whom and by when.
The time-work schedule in Table 1 shows how each department
is scheduled to do what at which day of the rveek and in which week.
For instance, on Tuesday, everybody is supposed ro carry out the 55
campaign tasks from 7:55 to 8:15 e.u. Specifically, in Week i of ihe
month, offlce cleaning is the work to do. Everyone has to clean up
the personal drawers, fi1es, computers, etc., by 55 system rules,
Each one has a designated area to clean if it is for a companywide
cleaning.
Some of the Achievements of Saryuk 0.01 Campaign One of
the striking exampies of reducing waste was the way in which
workers innovated the way of serving meals in the cafeteria. The
workers used to be served thelr meais from a fixed menu and
^;.,-^ ^--
')
-f,
|
u(,"j
amorirlt by cat'eteria worireis a.i tite meal siands, which resuiied in
iire raroLkers ihrora,ing a\
/ay
an), Iefiovei- fooci. Tirat \l,asted food
needed containers anC the related activities io abancion the waste
and caused woikers to be involved in cleaning the containers. The
workers' commiitee recommended a self-senice system by which
workers select the amount of food to as much as 80 percent that they
need at the first trip to the serving stand. This system eventualiy
eliminated 20 percent of cafeteria overhead costs by getting rid of
wasted food, wasle containers, and the cleaning work. The workers
took seats from the flrsl low of rables in arrival sequence so that
unoccupied seats were not mixed up with ihe used difiy seats. They
saved cleaning work of the dining room by 20 percent. Trash cans
were sorted b.v items like bottles, meial cans, paper cups, and others.
The workers reduced the number of durnping trash cans by crush-
ing the metal cans and piling the paper cups in columns in order to
,
save space in the trash cans. They decided not to put bottled drinks
in the vending machines because the empty botrles need more
storage room.
Another example was a reduction in the_eiectriglty bdls_by_swiE!:_
ing the lights in tire restroom on and off as needed and indicating the
occLlpancy by Lrsing O and
X signs on the outside of the door. As
such, the ideas were actually suggested by workers themselves. Each
worker was committed to repcrt 1_5 or more cases of removing waste
per month. The company called the suggestions a "guaranteed
cheqr,re," meaning that the ideas make money by reducing waste. The
sugsestion syslem was successfully operated along with an incentive
system. The suggesters were paid by a certain ratio of total income
gained from the specific ideas plus a compensation reward in terms
of promotion and wage increases based on the company evaluation
scheme.
lv1r. Yang wondered how the office staff determines their work-
load and identifies the waste in offlce work. He considered the
production workers to be rirore effectively measurable than the
office workers. He fi.nal1y decided to utilize the CKR technique to
analyze their work i:i seconds for each job
for a period of one
month. The, monthly job
analysis sheets gave them important
information on which jobs were more important than others in
terms of time requirement and tlten ihey could easiiy determine
The Pre-designed "Time-Work" Schedule
Woms Tnar Drv Weex 1 WEEK 2 lVrex 3 Weex 4
Presentation:
technology
trq
Education,
suggestions
Organization
development
Team meeting
Meetlng-Each
department
7:55-8:1b
Monday
7:55-8:t5
Tuesday
7:55-B:r5
Wednesciay
7:55-BrS
-i-hursday
7:55-8:i5
Friday
7:55-8:r5 Saiurday
Production I
Cteaning:
UIIICE
Education:
About ihe
company
department
Inspection
Meeting-each
depariment
Cleaning:
Factory
Educaiion:
Technology
Related
depariment
Educatron
Marketing
Cleanlng:
E--+^-.
Education:
Prcduction,
quality
Relared
department
lnspection
Meeting-each
department
Accounting
Cieaning:
Total
Education:
Menial
preparation
Relateci
department
Edr.rcation
Fnocnss Srr-ocrrorq lllo Desrctx
Sand Cone of the Campaigns
irow to improve tl:re way of doing jobs and the kind of
jobs that
could be eliminated. This process provided the company with very
reasonable u,ays of optimizing the manpower level in the office.
As shown in Figure 3, the series of campaigns are depicted as a
sand cone.
PoLITICS oT CHANGE
When the 5S program was first adopted, it seemed that it would be
successful. Hora,ever,
just when the work was showing a positive
outcomg, resistance came noi from the workers but from the
]righer
managers. They couid not bear to see that this new approach, imllel
mented by only a line foreman, was r.vorking out wei1. They refused
to emblace 55 and natulally the workers refused a1so. Samwon
showed its difference from other coinpanies with the owner backing
L4r. Yang and supporting him with the power to sack employees,
even managers, if they were not emblacing this new program. Ten
percent of the employees were flr'ed and many of them were man-
agers rather than workers. Consequently, this had a dowusizing
effect and flattened the organizational structure making it simple,
single-pathed, and cross-functional with a lot of power held by
Mr. Yang. This was a totally new concept at that time in Korea, as
traditionally, ihere were managers for each deparL'nent and it
became a multipie-path structure.
After eight years of the cultural change within the company,
there was little, if any, functional poiitics during the deveioprrrent
and implementation of cho kwan ri plograms and the Saryuk 0.01
campaign.
OprutioNs or NE\t/ Pn-q.cuces
The series of campaigns eventualiy brought in a broad range of
changes in the managerial systera assisting to resolve the funda-
mental operational problems. The typical problems included 1a)roff
of people, which was inevitable after.downsizing, capital invesl-
ment tiral rvas required ioi replacing the oid equipmenr and updat-
ing the technologies, and wage increases that surpassed productivity
incleases and tiie iike.
Layoffs were not generaliy accepied by the public in Korea and
were usually subject_ io very emotional iesistance by the labour
unions. Ur,iess a natuiai decrease of ilanpower exists, the company
sllou1d depend on some other u,ay of utilizing thb excess rran-
power realized bi, a i-eduction of unploductiye u,orli iime. Sarnw'on
Precisioii Cornpanl, expanded tite plant capacity without extra cap-
ital investine-rrt iry adrlin*s a thir-d
-v,,crl<
shift to the exisring two-shift
system. The piants were then operated on a 24-hour per day basis,
absorbing the excess manpower available fiom the iruovation cam-
paigns. The company also extended the annual working days to as
many as 359 days with only six days unutilized per year, which
u,as signiflcantly ciifferent from the average working da1,s o1 3OO ot
less for other Korean companies. This system utilized tlre factory
at the maximum capacity in such a way as to save extra capital
investment otheru,ise required for increasing production capacity.
This maximum machine utilization system, combined with autorna-
tion of the production process, aliowed the company to let their
workers fiee from work for 94 days per capita per year. This holi-
day beneflt was much longer than that of other average Korean
companies wirile keeping the factories wor-king for more days at
three fuil shifts.
The compirny crealed its own wolking calendar with the work-
ers scheduled into two groups, A and B. According to the calendar,
empioyees in group A did not need to work on Sundays while the
employees of gioup B did not work on Tuesdays. The company
kept the production lines in fuiI operation throughout the year with-
out shutdowns. It reduced factory overhead by one-fourth and
increased overali productivity io four times higher than other simi-
1ar companies in Korea. This unique operational system coupled
rvith the automation of the process resulted ia a reductioa of
production cost by 30 percent and . at the same time, wages
increased by 20 percent over the 18 months since the Saryuk 0.0i
program was launcired. On top of that, the workers benefited by
900 percent of the annual flat bonus instead of 400 percent titat used
to be the a11lount a year ago.
The company acceierated tire automation of production lines
ihrough the innovative activities of the machine workers and R & D
staff. Many production processes were automated with the help of
the innovative efforts through the Saryuk 0.01 waste banishment
program. Nowadays a line consisting of 50 maclrines is operated by
just one woi-ker.
As an exampie of a typical success stoly, an automatic sofiing
machine was designeci by Mr. Kim T. S', the operator who vranted
to drive out the waste of man-hours required in sorting the over-
sized springs from the good ones. He spent about one and a half
months in developing an eiecirical sensol to sort the over-sized
springs. Mi. Kim v,on a grade A reward of W 500,000 as one of the
"innovative perfcrrrrances
of the month," which was an inceniive
system io encourage the line
"torkeis
to improve ihe automatioil
1eve1.
Alothe-r'v/a"s i!4i. Lee S.
,1..
'r,.'frc -u,oi:deied
iihe could reduce the
marrhours ic pacli lhe picducis. He tlied io autcmaie ti'r; prccess,
b,v reducing the neec for rnanuai pacicing. He e\/erliualiy autornated
the whole process b-r'. ii,hich ihe company saved
,4
peiceni of the
rvork iime and cui inveniory by 20 perceni. in the piocess,
50 rnachines in rharrarticuia;1ine were managed only by one woiker.
Another example was ihe simple adjustment of the machine rack
tllai resriltei in impori substitution of Japanese machines. N&. Cho
C. R. deveioped ii in thiee weeks and he was subsequently awarded
a !\' i.500.000 i'eu'arci.
The main characieristic of these successes was that the R & D
activities rvere closs-functional among the development engineers
and iine workers who work 24 hours a day on a three-shift sysiem,
ploviriing prompi reacrion io the floor problerns and new produci
deveiopment.
The company motivateci its employees to participate in the pro-
-erams
by leinforcing their tmst in the company policy. The policy
was to reinvest the profits back into tde company operations, and
for employees' welfare so lhat the employees were confident ihat
they rvorked on behalf of themselves, and believed that they could
manage their wage increases, not by the CEO. It was nor surpris-
in-g that there was no labour union. The line managers rotated as
Appiixorx 1
9,000,000
8.000,000
7.000,000
e
6,000.000
C
.:
5,000,000
f
.+,ooo,ooo
I
F
g,ooo,ooo
2,000,000
1,000,000
0
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600.000
400,000
200,000
0
GC-/
sueeiiliendei:t e\rei')I lronth, so lhat eve{/ line nalager ano wori:eL
irao io lmou, abo-uri ihe ploblems and issues faceri in the factories.
The company kepr its olganization exceptionalLy flar, flexibie, and
cross-funciional so that communication bar:riers were Lemoved.
Training was also considered an important communication device
io shale the vision, value of the operaiion, teclinique, ano skiil.
Managerient submiited the modei to the subordinates and encour-
aged them to accepr. the idea "to wori( for themseives."
Coxcr,usrox
This case sheds light on a genera.l proposition ftat the sustained
innovaiion of a company can only be realized if iop manauement is
committed to the vision that everyone in the company shares and
is involved in the process of improvement. Mr. Mun, the owner,
became a winner of the game by implementing this proposition. He
believed in the process by empowering his employees. especially
Mr. Yang, initially only a line foieman.
The point of the proposition is io run a company to achieve
aggregaie effectiveness of the total organization. It encourages
the company to inte-srate a1i ievels of the organization and all
functional areas of lhe company. Motivation, communication, and
empowerment are critical foundatioas for total innovation of the
-+
Costs on welfare
--s-- Material cost
-3*.Wages
;:-i
Administrative cost
-.:;,:;,.. Total manufacturing cost
-6-
Revenue
-*-
Operating profit
-
0
I
L
GC-3,/394
seciicti 2
.,l-pperlIl
2
Pnocess
Sprscrrox
ANI Drstem
o
o
=
E
= p
,-
I 4r000,000
1 2,000,0c0
I 0,000,000
8,000,000
6,000.000
4.000,000
2,000,000
1992 1 00"
1994
1 00,
1,993
t 994
-&-
Gross sales
-E-
Cost of goods
-*- Gross margin
'::{- Net eanrings
+-
Cost%o
--.B-
Gross margin Vo
--*- Increasing
rate of net
earnings
o
t
=
=l
o
r'.
0.s
;lTi::,;Jlfi#:'H
j:il
i;::r;: ;1i,'1"_'#lllJ?111lil
3i:::::::::itlt l:l*:,
precision
company
discovered
dreir
rhe overall
measure
or innovatron
is d:e agsrffi?ffectiveness
or ;"*.J:;::";iinTi.:X,t,
,'Jj,Til;:,1"':::"r:;l*:f::
X;
the whole companlr
operation'
not the sin-ip?!r.
"r,r,r"
erncien-
;;;;r"
infomed
"f
;i;;;;ision
and Ergers were! and also ro
cjes of each operation
of the indi'idua
r"tti""t
,,ch as produc-
p.;;i;
them with upaut"J rr.iii, ,ra ideas. The samwon precision
tion lines' marteting'
finance' the information
network,,etc:
a"**ny
showed
how an organization
should be oriented for the
Another point
is that the managerial
system
needs to have a spe- ruturi,
ara why the organizaion
shourd be ffexibre and motivated
cific p.escription
rarher than a panacea
for all companies.
This case to .onii,ruuly
improve.
*Tgrs
cnse wes DEVELopED FoR usE rN
vo*ro
u*,rii,rv, ,;;;:;;l);;.*ssRooM
DrscussroN AND rs Nor TNTENDED ro NEcEssARrLy rLLUsTMlr AppR
r""'"o^oio^i";:;##:.1;::,T:'HIx"flJLliiln',:I'J:"xruxxriX#y::H:{##.[ITl#.-l;,";*1',l,xl1?TjTJ::J:,[:]
lTge
evruc; tvonr<truG
YEAR was trsu
PArD
20 MiLLroN woN i;:;;if'J:rt."'rf*';li?o'ooo
sECoNDs' lF woRKERs WERE pArD
14 MrLLroN woN pEF.
'EAR, 'HEN
rr woulD cosr 2 woNs pER
sEcor{D AND rF MANAGER' WERE
-r.=o=="=**=.g,,r=.==r=E==:==*=_,=.*===