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FEATURE - Taiwan-based Machan International Co. makes sheet metal products, tool storage, medical trolleys and smart energy storage cabinets. Last year, they engaged lean to improve their product development process.
Words by: Max Chen, Darren Chen, David Hu, Dennis Lu with Yu-Hsiu Hung
In 2021, we faced a harsh reality: despite high sales, our margins were very low. We had too many OEM orders and too few ODM orders, leaving us with low revenues and a murky future. The pandemic hampered our ability to reach customers and our innovation seemed to stagnate. Our over-reliance on one major customer in the US, which represented 30% of our sales, posed a significant risk. If we lost them, our business would suffer tremendously. It was clear that we needed a new approach. So we made a strategic decision: we had to switch from OEM to ODM and diversify our customer base.
We began with a simple but profound realization: we needed to understand our customers better. But how do we do that? In our search for a solution, we met Professor Yu-Hsiu Hung, an expert in Lean Product and Process Development (LPPD) from National Cheng Kung University here in Taiwan. His teachings were a revelation. We learned to start by understanding customer needs before we developed products. This change in approach was transformative. Previously, only three out of 10 product ideas we offered our customers became successful. With LPPD, we learned to focus on what the market really needs.
In 2022 and 2023, we were able to expand and diversify our customer portfolio, making us less dependent on the American customer. During that time, we developed about 100 new products, slowly increasing our revenues. Gradually, LPPD began to play a crucial role in transforming our business, as it allowed us to fully understand users' pain points and design the products that would address those pain points. Whether it was tool carts for workshops and factories or carts for nurses administering medication, we were able to design products that truly met people's needs.
With LPPD, we have developed four successful products (including a tool cart and a medical cart), increasing our market success from 30% to 60%. Extensive research and early customer feedback ensure that we get it right the first time, reducing the need for costly rework. Whether we present prototypes to customers or develop products with them, we ensure that constant feedback influences our decisions - before and after production.
Communication with customers goes beyond product development. Exporting 90% of our production poses major challenges for Machan, especially after Covid, which severely disrupted supply chains. To mitigate these problems, we opened a warehouse in the Netherlands to support our European customers and worked on longer-term orders from our top 25 customers. These strategies helped us reduce delivery times and strengthen relationships with our customers.
Before embracing LPPD, we had already conducted a number of lean experiments aimed at reducing costs, improving quality and shortening lead times in production. In retrospect, it would have made sense to start LPPD right away, but like many other organizations, we started a little later. We are grateful that we took the time and effort to integrate it into our practices.
The introduction of LPPD has indeed changed our approach. We now have open communication with customers, who share their ideas and feedback with us, leading to increased sales and therefore a more solid business relationship with our distributors. We have moved from delivering the products we could develop to delivering the products our customers want!
Our next focus is on improving our sales process by further reducing lead times and fully implementing lean principles in all areas of our business. In particular, we want to extend our LPPD efforts to the production department. At the beginning of the LPPD project, Prof. Hung asked us to put together teams with representatives from all departments, but not all teams ended up including someone from the production department. The reason is that in the first LPPD learning round, there was no focus on cost reduction (we didn't want to do too much too soon). But we are going to change that, and in the next cohort - which consists of four more teams, each with one person from the previous group, to make sure there is some LPPD experience - we will clearly focus on the target cost of designing and manufacturing our products. This means involving the manufacturing team in every conversation about our designs.
Prof. Hung is an LPPD expert, but his greatest contribution to Machan is that he taught us to develop people - not products. As Toyota says, "We make people before we make products," and we now understand that LPPD is our way to achieve this. In fact, our goal is to develop a team of Chief Engineers for the company, people who understand the whole process of designing and manufacturing products, who can break the silo thinking by using the new understanding of the end-to-end process that people throughout the organization are developing.
We are still at the beginning of our journey, working to instill this way of thinking in every team member. It has been as rewarding as it has been challenging: it has reshaped our business, strengthened our customer relationships and set us on a path to sustainable success. We are excited about the future and strive for continuous improvement in every aspect of our business.
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