City Furniture: A 'lean’ machine

By Clint Engel -- Furniture Today, March 23, 2009

FORT LAUDERDALE, Fla. — Several years ago, when City Furniture President Keith Koenig’s son Andrew was in college, Andrew became enamored of Toyota and its automobile production system.

At some point, Andrew — now operations manager for City — talked his father into taking a trip to Japan during a school break and started giving him books to read, like “The Toyota Way” by Jeffrey Liker and “The Machine that Changed the World” by James Womack, Daniel Jones and Daniel Roos. Womack coined the word “lean” to characterize processes that Toyota has been perfecting now for decades — the practice of continuous improvement through the elimination of waste.

Keith Koenig’s reaction to the trip and all this new information was, “Wow — I’ve been looking for this my whole life.”

Today, the 25-store City Furniture is two years into its lean initiatives, and Koenig said the experience has been “absolutely transformational.”

“If we had not made the progress through lean that we’ve made in the last two years, our future wouldn’t be nearly as bright,” he said. “We’ve been able to manage the downturn pretty darn well.”

Lean principles have been used by many manufacturers in the United States and other countries, but it remains rare to find a retailer so engaged. Indeed, City is most likely the first furniture store chain to make such a deep commitment to the shift, said Dave Francis, director of implementation for Charlotte, N.C.-based GDC Total Business Solutions, the consulting firm and lean expert City called in for help.

Francis called City a “lean success story” and its 909,000-square-foot distribution center in the Fort Lauderdale area a “Generation 1 lean warehouse,” in which all the areas have gone through some sort of lean conversion.

“It’s the first time we’ve ever seen lean in every department,” Francis said. “It’s a testament to the focus coming from the top.”

For a retailer, lean can extend beyond the distribution center. City is in the process of bringing the lean approach to its sales floor this year.

Full lean implementation can lead to 30% improvement in productivity and sometimes more — dramatic results that the Top 100 company already is enjoying.

“And it’s not improvement I came up with,” Koenig said. “Lean is all about associate involvement, particularly involvement in 'kaizen’ events, a big tool of lean.”

In Japanese, Koenig added, kaizen means “good change.”

“The way it works is, if you’ve learned lean — and we have with the right consulting agency helping us — and learn how to use the lean tools, particularly kaizen, you can squeeze a lot of waste out of the whole process.

In the 1996 book “Lean Thinking,” and on the Lean Enterprise Institute’s Web sites, lean is boiled down to these five principles:

• Specify value, which is determined by the end customer.

• Identify the steps in the value stream, which is every step it takes to create that value, and eliminate those that don’t.

• Flow, or getting those value stream steps to flow smoothly.

• Pull, which is making just what the customer tells you to make instead of forecasting. Or, in the retail world: delivering or pulling to fulfill customer orders or near-term expectations of those orders.

• Pursue perfection, which suggests that that the process of eliminating waste and cutting time, effort, cost and mistakes is a continuous one.

Here’s how the first lean conversion worked for City in its chair assembly area. Before the conversion, the retailer’s assemblers did it all. They retrieved their carton of parts. They opened and laid out the chair pieces on a table lined with other assemblers, and they went to work — constructing, then inspecting, leveling and placing the finished chairs back on a cart to be loaded in the warehouse. Each assembler was producing three to four chairs an hour.

After a kaizen event, which takes ideas from the people who are doing the work in the department, and after subsequent changes in flow, the assembly area took on a U shape. The “assemblers” now are positioned on the outside of the U, while “runners” — a new position — bring the unassembled chair pieces to the team as needed. The runners uncart the components. After the chair is assembled and leveled, it moves to a staging lane, where “handlers” then either prepare it for inventory, customer pickup or delivery.

As Curtis Walker, president and CEO of GDC, described it, the assemblers became the “rock stars.” The goods are brought to them and prepared “so they can spend all their time on what they do best.” Through the use of lean thinking and practices, City and GDC created consistency and a more efficient standard.

The result: assemblers now build nine to 10 chairs an hour. The new positions of runner and handler were created using City’s assembler employees — with some cycling through the various positions as needed.

City has held more than a dozen kaizen events throughout its distribution center for tasks such as receiving and staging, repairing, customer pickup, recycling, and delivery truck preparation and loading. A session even was held on battery maintenance — which involved improving how batteries are changed on equipment such as stockpickers, tuggers and golf carts.

Before these events, a lot happened to bring City to the place it needed to be to make the needed changes both in its operations and business culture.

It started with GDC’s initiation of the overall lean project and training of City’s senior and upper-level management team. This training is a three- to four-month process, GDC’s Walker said.

After that, additional “master training” began for about 20 key City staffers. These are engineers, controllers and supervisors — employees that City considers to be future leaders, who think analytically and are positioned for growth.

They’re also the people that will enable City to continue on its lean journey after GDC leaves. The master training takes about 42 weeks, and lean projects are implemented along the way, so the team gets a feel for how easy or difficult a conversion may be.

All along the way, City is aiming to foster a culture of employee participation so that the changes are sustainable and the entire team recognizes themselves as part of the solution.

Walker said most businesses that truly implement lean will see a 30% to 40% decrease in overall operations costs. But he also tells clients that for the first two years, 15% to 20% of that improvement goes back as an investment in the process, paying for employees’ time and the consultant’s fee.

“We pay for ourselves,” Walker said. Francis added that as City’s sales increase over time, its operating costs should remain relatively flat because it won’t have to add so many people or expand its back-end operations.

“So it scales very rapidly,” he said. “That cost savings goes directly to the bottom line.”

GDC also tells clients that once lean has been implemented for about six months, it will soon be time to address the sales side of the business, because the newfound efficiency will be so evident that sales will need to increase in order to keep everyone busy. One goal of lean, he said, is to make people and processes more productive — not to eliminate people.

In general, it will take about 18 months for a committed company to achieve lean status, but Walker added that the true lean thinkers realize it’s never really completed, and you can count Koenig in that camp.

“It’s about cultural conversion to a participative, involved workforce,” Koenig said. “The results (in terms of both productivity and morale) are extraordinary, and we’re very early in the process. We’re only two years into it. Toyota has been doing it for 50 years and they think they’re halfway there.”

Even in one of the toughest economic climates, Koenig said, “I’m more excited about this year than ever because of lean. This year, we’re going to get into our sales organization.”

City already has held one kaizen event for sales this year and a half dozen more sessions are planned.

“If you think about the value stream map of a sales associate, it’s really interaction with customers, making presentations and writing up orders,” Koenig said.

“Sometimes on slow days there’s a lot of empty time in there. That’s called waste. It’s not making them money. It’s not making us money, and we’re going to look at how to eliminate that waste.

“I’m quite confident we will do it.”