Lean Concepts Make Mean Manufacturers

The concepts behind Lean manufacturing were built on common sense. In his book "Poor Richard's Almanack", Benjamin Franklin wrote "He that idly loses 5s. [shillings] worth of time, loses 5s., and might as prudently throw 5s. into the river." If I read this right what he meant was "if you don't need it, don't waste your money on it."

While it was Henry Ford who took the concept of waste reduction into the manufacturing floor, it was Toyota that concretized the practice into what we now call lean concepts.

Lean manufacturing processes have revolutionized the way many leading enterprises deliver products to their customers and manage their supplier relationships. Over the past few years, the use of Lean techniques has expanded well beyond the automotive industry to delivering dramatic results in other sectors, including aerospace, consumer goods, and industrial equipment, among others.

According to AberdeenGroup, Lean concepts have helped manufacturers streamline processes and reduce cycle times in complex manufacturing and supply chain environments. For example, when applied to product development these same concepts result in increased productivity and potentially the ability to develop more profitable products.

In "The Lean Benchmark Report, Closing the Reality Gap," Jane Biddle, Vice President of Manufacturing Research, AberdeenGroup, notes that although C-level executives are enthusiastic about the benefits that can be derived from "Leaning out" operations. A large performance gap exists between those companies that are simply using Lean techniques on the shop floor versus those that have built a culture based on Lean thinking.

Lean manufacturing is nothing new. Some of the best run manufacturing businesses in Asia have deployed Lean manufacturing to streamline operations, reduce cost and increase operational efficiency.

Asia awareness levels
Just how familiar are manufacturers with regards to Lean concepts? Large manufacturers with multiple operations spread across different countries understand the concepts well and are in various stages of implementation (bear in mind that in the case of Toyota, adoption of lean concepts is an in-going process).

Ronald Li, Director of Industry and Product Marketing at Infor, says that the level of understanding of what constitutes "Lean" in a manufacturing sense varies by country as well as by type of industry. "Across Asia, companies that have taken the road to 'lean' are more likely to pursue this strategy to achieve departmental improvements. In mature countries such as Japan, manufacturers have been practicing lean for many years, especially on the manufacturing floor.

Paul Liddiatt, APAC Program Director for Oracle Commercial Applications concurs and adds his thoughts: "The application of Lean manufacturing principles to the entire supply chain is now being seen as the imperative in order to deliver the responsiveness customers require while still keeping a tight reign on costs. Once Lean manufacturing techniques are understood they are seen as the key to eliminating waste in all its forms from the supply chain. Without the burden of waste, the supply chain delivers significant competitive advantage."

Methodologies vary
As something based on common sense, Lean implementations can come in the form of pencil and paper or entries in a spreadsheet. While workable, these are neither scalable nor sustainable. Companies that have progressed far advanced in implementing lean are likely to depend on systems that take a more holistic approach to support lean deployments.

As companies begin to extend Lean concepts across departments, integrated business applications suites are being seen as helping them to manage information more efficiently.

"These applications rely on a single, integrated source of data to connect disparate business processes, not just within the company and its factory but also throughout its entire supply chain. This may comprise multiple contract manufacturers. When users make a change to one application, every other application is notified, initiating related workflow processes automatically," said Liddiatt.

ERP vendors have also introduced "enablers" that adapt their applications to a Lean environment, with inherent support for Kanban control, product configurators, and just-in-time materials procurement. This level of integration allows companies to compress the manufacturing process and streamline production, reducing the time for the whole order-to-delivery cycle.

Liddiatt cautions that ERP applications are just management tools that support the operations of a manufacturing plant. An ERP package helps users use information more wisely, eliminate non-value-adding activities and streamline core business processes. "To successfully implement Lean manufacturing concepts, appropriate training and resources need to be invested so users embrace the principles of Lean," adds Liddiatt.

Lean initiatives, fat benefits
At the end of the day, companies deploy Lean initiatives because they want to save money. Call it 'cost cutting' or 'waste elimination' or 'saving pennies' the end goal is the same: eliminate what is not necessary to get the job done and deliver the promised goods.

Biddle surmises that for companies willing to make the commitment, Lean pays dividends in both the short and long term. Successful Lean implementations have met and exceeded the performance expectations of 80 percent of best-in-class companies in areas such as customer service and supply chain flexibility.

"In many cases, technology solutions are enabling best-in-class companies to outperform their competitors by continuously measuring, monitoring, and responding to key production metrics in real-time. Additionally, ERP, Lean Specialty/MES, and homegrown solutions provide the foundation from which companies are enshrining value streams, improving productivity, preparing for new product launches, and driving culture change throughout the company and supplier base," adds Biddle.

Role of technology
Many Lean initiatives start on paper. Over time these "technology-less" implementations become impractical for a number of reasons. According to Biddle, customer expectations continue to escalate, driving the need for additional variations to existing products, faster launches for new products, and decreased order cycle times; this requires increased flexibility in existing plants, with suppliers, and across the supply chain.

Pricing pressures have driven many manufacturers to outsource production, which has resulted in a lack of visibility into foreign operations; this is driving the need for web-based solutions that enable decision makers to see and control key operations remotely.

Finally, leading companies are scaling and extending their Lean processes beyond a single plant to encompass supply chain partner processes; this is driving the need for a technology infrastructure that facilitates the design and implementation of customer-focused business processes.

Lean technology solutions can provide a solid foundation from which manufacturers can manage Lean transactions across core value streams that extend from the customer, through production, and back to the supplier.

Lean solutions should support Toyota Production Systems (not because you work for Toyota) by dynamically managing key control points, scheduling and tracking critical resources, and promoting continuous improvement programs. In addition to managing transactions, solution technologies should facilitate the capture of standardized processes and value stream operating models.

Finally, Lean solutions should support the principles espoused in the 'Toyota Way' by embracing common language, promoting a shared understanding, providing tools that enable collaboration, and institutionalizing a culture of Lean for the long term.

Lean challenges persists
AberdeenGroup warns that for any manufacturer, transitioning from a traditional to a Lean manufacturing environment is a major change for many reasons. A significant cultural change needs to happen. It may be business as usual but certainly the way to go about business as usual will not be the same. People need to be willing to change the way they do things and that process of change is where much of the challenge lies.

Another challenge will be a persistent and firm commitment from senior management. Lean will mean a company's long-term vision and senior management must not be distracted by short-term concerns when Lean initiatives are concerned.

Lean manufacturing goes against the grain of many manufacturing traditions. The old measures of success of efficiency and utilization need to be replaced with agility, lead-time, inventory turns and quality across the board.

Liddiatt warns that an upheaval inherent in Lean programs means that the engagement of senior management is required for successful implementation. "A top-down approach is necessary for adequate resources to be allocated to train employees and change the thinking within the company, and resolve is also necessary to push through reorganization in production processes and inventory management," adds Liddiatt.

Beyond integrating legacy systems with the new Lean initiative is the necessity of integrating external partners and suppliers into the Lean program.

"Meeting customer requirements for just-in-time deliveries requires the support and cooperation of not only finance and logistics, but also the suppliers who provide the raw materials, components, and assemblies that are used early in the manufacturing process," Biddle says.

Liddiatt agrees and adds that as Lean principles take hold, innovative companies will realize that they need to involve their suppliers and even their customers to achieve continuous improvement. "Suppliers should be considered an extension of the company, and the most successful lean companies involve their suppliers in product design in order to improve quality and simplify manufacturing. They work together to improve communication methods and shorten lead times throughout the supply chain," says Liddiatt.

Manufacturers are constantly on the prowl to weed out waste and inactivity. As Toyota has shown, this is a continuous process with benefits trickling right across the operation. Because Lean concepts cut across functional barriers, it is entirely, some experts actually support the idea, to shift the focus from Lean manufacturing to Lean enterprise.