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Midsize
Manufacturers: There's Never Been A Better Time
To "Go Lean"
By Bob Anderson
Current
trends suggest that flexibility and responsiveness
will be the most critical attributes of success
for midsize manufacturers by 2006. Manufacturers
have already begun to experience the heightened
competitive climate driven by the Internet and
enhanced means of communication and collaboration.
As the economy improves and becomes more demand-driven,
these forces will accelerate and require even
more agility.
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Customers
will continue to bring more pressure upon midsize manufacturers
to maximize quality, service, and price. Those hoping
to respond successfully will have to address the "better-faster-cheaper"
competitive triangle or risk failure. A "we can
have it all" when, where and how we want it attitude
among both retail and business-to-business customers
will force midsize businesses (MSBs) to become much
more flexible and adaptable.
Midsize
manufacturers will face the following technology challenges
during the next few years:
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The
ability to achieve concurrency in all operations.
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The ability to instantaneously transform information
gathered from a vast array of sources into useful
knowledge for making effective decisions.
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The
need to reduce production waste to "near zero".
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The
need to reconfigure manufacturing enterprises
rapidly in response to changing needs and opportunities. |
In
response to these heightened standards and a more
dynamic marketplace, all activities that are not essential
in support of customer value will need to be eliminated.
In
the late 1940's, the Toyota Production System evolved
from the Ford manufacturing system. In this system,
managers and workers learned to question the need
for every work sequence, every item of in-process
inventory, and every second that people, material
and machines were idle. As a result, managers and
employees learned to identify and eliminate waste,
increasing both production and quality. The term "lean
manufacturing" appeared in the late 1980's as
the American label for this system.
Lean manufacturing is based on three primary concepts:
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Value
Stream: Focusing only on activities that
add value to the customer and eliminating those
that do not, while outsourcing those that can
be delivered faster/better/cheaper by others.
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Inventory Reduction: Acquiring raw
material only as needed, moving material through
production work-in-process (WIP) with little or
no restocking, and shipping finished goods quickly
after completion.
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Demand-Driven,
Pull Systems: Where possible, building
to actual customer demand, converting to cellular
manufacturing, moving away from "push"
systems and toward Kanban or "pull"
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Given
that lean manufacturing has been known and in practice
for more than 20 years in North America, why do we
believe it is critical to bring it up again to midsize
manufacturers seeking to successfully navigate the
challenges of the new century?
Based on recent Gartner surveys, up to 45 percent
of MSB respondents had no knowledge of formal lean
manufacturing tools or methodologies. Yet midsize
manufacturers are finding themselves in the midst
of the first economic recession in ten years and are
experiencing incredible new forces that are driving
them to become even more competitive. When times are
tough, revenues are contracting, and customers are
demanding more---what better time to seek out ways
to get lean?
Lean
manufacturing provides an organizing system for eliminating
all non-value-added activities and waste throughout
an organization. The results of successfully implemented
lean programs include greater productivity, shorter
delivery times, lower cost, improved quality, and
increased customer satisfaction. Products are produced
as needed, in the amount needed, at the time needed,
with minimum materials, equipment, labor and space.
Resulting
benefits for some midsize manufacturers have included
up to 60 percent reduction in finished goods inventory,
80 percent reduction in WIP inventory, 50 percent
shorter lead times and 30 percent increases in plant
productivity. Midsize manufacturers must begin to
put all operations and processes, including those
shared with suppliers and distributors, under the
microscope and begin eliminating non-value-added steps.
To remain competitive they must transform themselves
from being factory-focused, top-down and change-averse
to enterprise-focused, supply-chain oriented, bottom-up,
continuous-improvement companies.
Lean manufacturing is very broad in its methodologies
and will more than likely require MSBs to seek outside
assistance. However, the place to begin "thinking
lean" is by focusing on the two principles of
"5 and 7":
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Ask
Why Five Times - Asking "why"
five times enables manufacturers to ultimately
get to the root causes of the problems rather
than merely responding to their symptoms.
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Uncover the Seven Wastes - Waste
in this context means anything that the customer
will not pay for and/or does not need. The seven
wastes include– |
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–Waste
associated with producing more than what is needed.
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–Waste
of associated with waiting, e.g. operator or machine
idle time. |
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–Waste
associated with movement of material that does
not directly
support added value. |
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–Waste
of processing operations that do not add value
to the product. |
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–Waste
of holding inventory in excess of that required
to produce a product. |
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–Waste
associated with the movement of people or machines
that does not add value to the product. |
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–Waste
of defects. |
By
2006, the need to reduce total operating costs and
pass gains along to end-users will be incessant across
MSBs. For many midsize manufacturers, especially older
firms organized under traditional push systems, lean
manufacturing can provide a management philosophy
that helps dramatically improve their competitiveness.
Since few MSBs have the resources to implement the
lean approach on their own, however, outside consultants
should play a key role in knowledge transfer.
Going
lean holds great promise for restoring the competitiveness
of midsize manufacturers, however implementing lean
must be a never-ending journey that focuses on continuous
improvement.
Bob
Anderson is Research Director, BMIT and SMB, Gartner.
He will present the Opening Session, "Midsize
Business Manufacturing Scenario: Glass Half-full or
Half-empty?" this fall at Midsize
Enterprise Summit. Click
here for details.
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