Lean Management: The keys behind Amazon success

Written by Frank Calviño

Amazon success is due, mostly, to a focus on deliver its customer with the prime shopping experience. Jeff Bezos, the man behind this global multi-billion dollars organization, always knew that customers would not pay for waste, and that focus on waste prevention is a fundamental concept of lean management, and a key to success in a world that everyday is becoming faster and more efficient.

Following this philosophy, Amazon learned to focus only on those things that are directly related to the needs of its customers. Hence the selection of the transportation method for a given package is driven, first, by the promised delivery date to the customer. Lower-cost options enter the equation only if they provide an equal probability of on-time delivery. That’s basically a Lean Principle.

This managerial approach to lean management is confirmed by the fact that Amazon has more people working in the fulfillment centers and customer-service centers than it does computer-science engineers. They needed the engagement of all workers on continuous improvement from the Gemba (the physical, frontline place of “value work”) to succeed, since they are the ones who are actually receiving, stowing, picking, packing, and sending packages or responding to customers by phone, chat, or e-mail.

Given the business evolution of Amazon from a bookstore to the “global mall”, they had to reinvent automation, following the lean principle of “autonomation”: keep the humans for high-value, complex work and use machines to support those tasks. Leave the simple repetitive work to machines, and use the human brain in the areas that really matter. Thus creating job positions that offer real challenge and real satisfaction to the people that forms part of Amazon organization.

At the same time, autonomation helps human beings perform tasks in a defect-free and safe way by only automating the basic, repetitive, low-value steps in a process. The result is the best of both worlds: a very flexible human being assisted by a machine that brings the process up from Three Sigma to Six Sigma: the ideal 99.996% of effectivity.

Another major dimension of the deployment of lean at Amazon was the enforcement of “standard work”: combines the elements of a job into the most effective sequence, without waste, to achieve the most efficient level of production. This was enforced by Amazon through a clear Continuous Improvement ideology, focused on the elimination of waste or non-value-added activities throughout the organization.

Following the path of No-Waste

One of the key elements behind the so called “Japanese miracle” – not a miracle per se, but rather the result of decades of hard and relentless work – was the Kaizen philosophy of No-Waste or Waste-Not. This philosophy aimed at reducing waste in all possible ways, thus enforcing the maximum efficiency in every process or service.

The idea was immediately adopted by Jeff Bezos, who relentlessly insisted in maximizing every process efficiency, using the criteria of “What would be faster for our customers?”. A criteria that sometimes required from Amazon to change inside process and retrain personnel.

Each kaizen – the overhauling of each process – is a relatively simple thing by itself, but the accumulation of kaizens makes an enormous difference. Amazon also used kaizen at the workstation level to reach new productivity objectives for stowing products. The goal has always been to stow products within a certain time period and with a certain number of frontline staff, because stowing accounts for about 20 percent of the costs in the fulfillment centers.

A challenge for Amazon was that the productivity of the carts was very unpredictable: stowing a small book does not take the same time as stowing a computer screen. They used kaizen to improve the standard work by reducing stowing times, so they solved things bottom-up on the front line to achieve the top-down goals for productivity.
The ideal kaizen teams are a combination of frontline workers, engineers, and a few executives who are going to ask questions and have no preconceived ideas. They put these people together and said, “Here’s a problem; we’re going to improve it.” The kaizen team should be judged on results that will be meaningful for the company in the long term.

Pulling the andon cord

The andon cord is a Toyota innovation now common in many assembly environments. Front-line workers are empowered to address quality or other problems by stopping production.

At Amazon, they discussed implementing the andon-cord principle in customer service. Bezos was enthusiastic about it right away and they implemented it in about six months. The process begins when a service agent gets a phone call from a customer explaining that there is a problem with the product he or she has just received. If it’s a repetitive defect, they empower the customer-service agent to “stop the line,” which means taking the product off the website until they fix the defect. The objective is to start the line again with the defect resolved. They created an entire background process to identify, track, and resolve these defects.

The andon cord has had an amazing impact; it eliminates tens of thousands of defects per year. The other wonderful thing is that the andon cord has empowered frontline workers. The authority to stop the line is an enormous proof of trust for customer-service agents, who usually have no real authority to help to customers over the telephone. With the cord, the agents have been able to tell customers that the product has been placed in the lab for quality problems until the defect can be resolved. At the same time, they offer customers a new product or reimburse them. Customers can see products pulled for quality issues on the website in real time. This has created incredible energy and motivated our frontline people to do great work for their customers.

 

This content, as well as other managerial and educational content inside X-Cellence, was created by BID and BID Group One, as part of a global effort to promote Excellence, Quality, Innovation and Leadership in all kinds of organizations. ¿You want to learn more about the world of Quality Culture? Visit BID web site at http://www.bid-org.com/

About the author

Frank Calviño

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