Chang Shin Inc. is a major footwear manufacturer for Nike, producing approximately 20 million pairs each year. It has been a leader in the industry, improving factory working conditions by embracing lean manufacturing concepts.
We sat down with Whanil Jeong, chairman of Chang Shin Inc., to learn from his experience in implementing lean manufacturing, enhancing worker-management relationships through training and education, supporting workers with special needs, protecting the environment, giving back to the community and still thriving in the highly competitive world of footwear manufacturing.
It was about 11 years ago. We had factories in Vietnam and China and we were in bad shape; poor product quality, late deliveries - it wasn't comfortable. At a manufacturing seminar, an electronics company introduced me to a concept they'd learned from the Toyota automobile company, and I thought it might be applicable to the footwear industry. This of course, turned out to be lean manufacturing.
I learned more about it by reading a lot of books, and we went to Toyota to see first hand how it works. It was amazing. On our first visit we mainly paid attention to the tools of lean, such as 5S, Kanban, standardization, production line layout and changeover. We thought lean was about the use of these tools. We totally did not understand the culture changes required, but it was a first step.
We were thinking primarily about cost reduction as our initial benefit. We thought we could also increase quality and decrease waste. We didn't know how much lean could impact these, but we knew we had to reduce costs and improve quality to make a profit and be competitive.
We tried to implement lean techniques into our factory and failed because many of our staff did not agree with the changes. They said, "This is a footwear factory; not cars, not electronics." It took eight or nine months to start. We hired a consultant who was very good. He recommended we start very basic at first. The initial goal was to make the cleanest footwear factory in the world using 5S. It was tough, but we started. It took two or three months, but we became a very organized and very clean factory. Many Korean companies visited us and our employees liked it very much. This helped to change our attitude, that maybe we could change other things too. We started to change old bad habits one by one. We had a strong leader who was very good at lean thinking, and some leaders who couldn't accept it left the company. Without all employees deeply understanding and committed, it is hard to implement.
Along the way, we have been very lucky in getting good advice in terms of deciding how to invest in facilities and employee training based on lean concepts. We changed a lot of our layout and machinery based on the lean concept. We had to shed the old attitude that bigger and stronger was better. Now we have as little inventory as possible and the smallest machines possible. Instead of purchasing big machines, we collaborated with machine vendors to design and purchase machines that were properly sized, which saves energy and reduces waste. It also makes our production lines more flexible.
We are certainly not the same company we were 10 years ago. We have had a 154-percent increase in orders. We're up 23 percent in productivity, which is pretty good considering the higher-tech models we're making and the variety of models we're making now.
Defective returns from our customers are down 67 percent, and B and C grade (lower quality) are down 82 percent.
In terms of worker empowerment, we get 500,000 suggestions a year from our employees to make us more efficient. That averages to 17 suggestions per employee per year. These suggestions have helped us save over 2 million dollars in one factory last year. Employees get a share of the money saved as a bonus. Also, various other small incentives and recognition are very important to express our appreciation for the employees' engagement.
In Human Resources, we have half the turnover rate of other footwear manufacturers and it's even better than the auto and electronics industry rates in the region. I believe our employees have pride in this company and the job they do based on mutual trust and respect. We have many programs for our employees that they really like. For example, last year inflation was very high in Vietnam, and at a lot of other companies there was a lot of labor unrest. We talked about this with our trade unions; that we can't always raise wages to adjust to this inflation, but we wanted to help ease the burden on our workers. One way we found to do this was to help with food costs. The main food in Vietnam is rice. We're supporting a fund to purchase rice directly from farmers and then sell it to employees without any markup. We were selling good rice to employees 15 to 20 percent below the market price. We also supported our labor union with funding to open a low-margin supermarket operated by the labor union at no profit. Both the company and the employees feel the company is taking care of them, and these efforts help us build trust and understanding.
While not every one of these benefits is completely from lean, the biggest enabler of all of this has been the lean philosophy, which emphasizes the importance of mutual trust and respect between workers and management.
First you have to set a clear vision that lean is the way to run the business, and everyone must support this vision. Second is to invest in people and ensure all employees have the knowledge and skills to implement lean from the bottom up. Third is to seek help from experts - consultants, partners, other companies. Finally, have patience to let the process work. This includes listening to all the ideas of your employees as well as hearing and sharing the pains of your employees.
Nike played a very powerful role. We were a small company and lean was a new tool in the footwear business. We were an early example of lean benefits. Nike was trying to find an efficiency program and they partnered with us to open the NITC (NOS Innovation and Training Center). The NITC is a training center open to all Nike contract factories and gives them in-depth training on how lean principles can enhance their business. (Link to more on NOS, see below.) We had a lot of our workers attend this training and it has been a very strong engine for building our lean efforts. We also share ideas with other Nike factories to learn what is working well. We are open with our information and are helping each other to improve.
Located just outside Ho Chi Minh City in Vietnam, the NOS Innovation Training Center (NITC) produces more than shoes. It grooms transition leaders who learn the ins and outs of lean manufacturing and return to factories to share the knowledge as they lead coordinated teams along their lean journey.
Serving students from at least seven different cultures, the 14-week Nike-led program makes use of the factory environment to allow the students to interact directly with the shop floor work teams where they learn by doing. The training breaks down to roughly one-third classroom instruction and two-thirds production-floor training.
Lean manufacturing's emphasis on people is causing suppliers to examine existing conditions in their factories. Lean demands people to know multiple parts of the job, rather than one repetitive task along the line.
Creating a work environment that is conducive to better morale has become a priority for the factories. They have addressed this in several different ways: better ergonomics, improved air circulation, frequent on-the-job training, predictable work schedules and worker incentive and recognition programs.
Some companies have taken to calling their program a 6S program - with the inclusion of Safety issues.