Eliminate waste. Increase workflow efficiency. Strive for
continuous improvement. These are just a few of the phrases
manufacturers have come across regarding Lean Manufacturing and its
benefits. Lean has become a proven method for improving operational
performance, product quality, customer relationships and the
financial bottom line.
In this paper, we will take a closer look at Lean Manufacturing
— how it began and why, its underlying principles and practices,
where it has been and, most importantly, how today's manufacturers
can undertake lean initiatives to drive significant improvements in
virtually every aspect of their operational and business
performance.
A Brief History of Lean
The basic principles of Lean Manufacturing dates back 50 years
to a complete re-thinking of processes at Toyota. This led to that
company's development of the Just-In-Time (JIT) philosophy and the
Toyota Production Systems (TPS) — all steps taken to enable Toyota
to compete in both domestic and foreign markets with limited
resources and capacity. The company's overwhelming success in the
ensuing decades became a case study and model for manufacturers all
over the world, and still sets the standard today.
In past years, repetitive manufacturers have experienced the
most success with Lean practices because remapping the value stream
was straightforward, the implementation process was often limited
to the factory and customer demand was somewhat more predictable.
As time went on, however, competitive pressures on all
manufacturers continued to grow and magnify weaknesses in the
organization. Today, shorter product life cycles, increases in
customer expectations and foreign competition are forcing companies
to further reduce costs and improve supply chain flexibility and
agility.
Since the introduction of Lean Manufacturing half a century ago,
numerous companies have been exposed to the Lean philosophy and
impressed by its success stories. Unfortunately, many businesses
sought quick answers by implementing piecemeal approaches, not
fully realizing or understanding the methodology and commitment of
resources required for success.
Other companies have been able to leverage Lean principles to
realize substantial positive results. As a result, the concept of
Lean has enjoyed steady growth and is again being discussed in
executive meetings and IT departments. Much of this renewed
interest is due to the changes that have occurred in both the
application of Lean and competition in the marketplace.
Defining Lean Principles
To better understand the changes in the application of Lean and
competition in the marketplace, we need to revisit the basic
fundamentals of Lean and its critical success factors.
For a business to be called "Lean," management needs to adopt a
philosophical strategy that is relentless in its efforts to create
value for the customer through the elimination and prevention of
waste, such as excess inventory, needless motion and other time and
resource-consuming activities. Essentially, Lean aims to create a
value stream comprised only of processes that add perceived
customer value.
As more value is created with fewer resources, lean operations
can increasingly focus on allowing customer demand to "pull"
products and services through production and the supply chain,
rather than "push" products out to customers based on plant
capacity, forecast assumptions or other factors. However, unless
there is stability and optimal flow, the Lean value stream cannot
meet the demand that is pulled through the system without using a
considerable buffer inventory.
Flow, which is created through communication and
synchronization, will minimize delays within the system and allow
for collaboration. This customer-focused value stream ultimately
improves productivity, decreases waste, creates flexibility and
responsiveness and increases customer satisfaction, while reducing
inventory and adding to the bottom line.
5 Steps Toward Implementing Lean
From a 'big picture' point of view, there are five key steps an
organization needs to take to begin implement Lean thinking,
principles and practices. These include:
-
Specify – Since the most dominant underlying principle
of Lean is the creation of value for the customer, the first step
calls for breaking down and analyzing the entire value chain to
calculate the perceived customer value delivered by each process
area.
-
Map – Once the value chain is broken down, the various
steps are valued and mapped in their respective places according to
value delivered. Those areas that do not contribute to customer
value are considered as wasteful and either minimized or
eliminated. The remaining elements form the foundation for
developing a true customer-focused value chain.
-
Flow – The purpose of this step is to create a smooth
and efficient process flow between the value-added steps identified
in order to transform the chain into a value stream for the
company. The increase in flow will ultimately improve lead times
and eliminate "bull whip" effects, creating maximum efficiency and
productivity.
-
Pull – Pull and flow are two of the most important
elements of Lean Manufacturing and its implementation. Once the
true value stream is established, products can be manufactured in
alignment with actual customer demand and not by assumptions or
arbitrary forecasts.
-
Perfect – The final and very important step is bringing
the principle of continuous improvement to the Lean Manufacturing
initiative. We have all seen how complacency and stagnation can
plague an organization – whether it is a championship sports team,
a small to midsize business, or a Fortune 500 company. It is
essential that an organization not allow the initial taste of Lean
success to get in the way of their continual pursuit of perfection.
Ongoing process improvement is absolutely key to sustaining a
competitive edge.
Eliminating the 7 Areas of Waste
Preventing or at least minimizing waste is another key principle
of Lean Manufacturing. Seven areas of waste that can plague a
manufacturing enterprise include:
-
Overproduction – Inaccurate demand forecasting and
faulty communication are a few reasons why manufacturers tend to
produce more than their customers need or want. Simply put, a
business that persists in producing more products than the market
demands is simply wasting time, money, energy and labor
resources.
-
Excess Inventory – A direct result of overproduction and
long cycle times is excess inventory, whether in raw materials,
work-in-process or finished goods. This type of waste can be
especially burdensome when it begins to take up space, requires
maintenance/ record keeping, and freezes up a good portion of
liquid assets.
-
Transportation and Logistics – When creating shorter
cycle times, a good place to start is the transportation segments
of the value stream. Any time you have materials, parts or finished
goods in transit, there is potential for enormous waste because the
parts and goods are sitting in a container creating no value.
-
Excess Motion – Similar to transportation, motion
creates waste when materials, products, equipment and people are
used inefficiently. Excessive movement should be automated where
applicable or eliminated altogether so that product cycle times may
be reduced.
-
Design/Engineering – Products should only carry the
value that is perceived, needed or appreciated by the customer. If
customers cannot see the value in a particular product feature or
understand its purpose, then there is no reason to include it in
the first place. This kind of waste is often present in product
development areas, such as design and engineering.
-
Excessive Waiting – A byproduct of poor process design,
waiting time creates lags in the system and interrupts efficient
flow, which not only affects that particular phase of the
operation, but also the ones that come before and after as well.
This "bullwhip" effect is a common occurrence that creates many
capital and risk issues.
-
Errors – As is commonly known, the expense and effort
involved in repairing damage or defects, and handling scrap, is
typically more than the cost and labor required to prevent them.
Taking preventive measures and focusing on creating an error-free
production process will lead to higher productivity and a smoother
experience for everyone involved, including the customer.
10 Technical Elements of Lean Manufacturing
In its Lean initiative, Toyota instituted five s-words — Seiri,
seiton, seiso, seiketsu and shisuke — which can be roughly
translated as: Sort, Simplify, Shine, Standardize and
Sustain. The purpose of these directives is to create a clean
and organized work environment that is consistently productive.
Here are nine additional ways in which Lean principles are put into
action:
-
Visual Control – An important aspect of Lean, visual
controls promote the importance of communication and visibility.
This is a key element in any process because the signals invoke
almost immediate responses from the target.
- Standardized Work – It was only a matter of time before factory
automation and the Industrial Revolution decimated the cottage
industry. Standardization is the clear path to efficiency when
producing quality products on a consistent basis.
- Total Predictive Maintenance (TPM) – An adaptation of Toyota's
maintenance philosophy, TPM stresses the importance of utilizing,
updating and maintaining equipment to create a production line that
is flexible and flows at an optimal level.
- Cellular Production – A type of "division of labor," cellular
production organizes the manufacturing process into sub-processes
and enables the company to produce smaller lot sizes, increase flow
and improve product quality.
- Error Proofing – Referred to as "poka-yoka" in Japanese, the
idea is to identify the sources of mistakes and create measures
that will cause them to either be eliminated or spotted easily for
correction.
- Takt Time – The basic rate of production, Takt time uses
customer demand and production time to create a steady flow in
operations, eliminating many areas of waste such as inventory,
overproduction and waiting.
- Continuous Flow – Using a timed execution schedule and some of
the aforementioned techniques, optimal flow is created and
maintained to allow operations to keep inventories to a minimum and
shortened cycle times.
- Leveled Production – Utilizing tools such as Takt time, leveled
production aims to remove bottlenecks and allows work to flow
through the production process by coordinating with customer
demand.
- Pull System – In order to decrease cycle times and keep
inventories low, pull systems will only consume materials required
because they are based on demand, instead of forecasting tools.
This principle led to the practice of Just-in-Time delivery in
which materials and supplies needed for production are scheduled
for delivery on a just-in-time basis, eliminating the need for
additional labor expense and storage.
Critical Factors to Lean Success
Today, tremendous opportunity exists not only for companies that
have had initial success with Lean, but also for those who are
starting or have not yet begun the journey. Despite some initial
misconceptions, Lean can support a wide range of manufacturing
styles from Repetitive and Make-to-Stock to Build-to-Order and
Engineer-to-Order – in addition to entire enterprises and supply
chains. Success in these environments is highly contingent on the
design and application of the appropriate Lean solution. When it
comes to Lean, one size does not fit all.
Critical success factors for any Lean Manufacturing initiative
include:
- Top management desire, commitment and leadership, and active
daily support from all levels of management
- Consistent goals, objectives and performance measures
throughout the company
- A thorough understanding of "as-is" customer needs, business
requirements and processes
- A clear and consolidated company purpose, lean vision and
strategy
- Formulation of new operating philosophies, "to-be" methods and
processes
- Fully engaged and knowledgeable people at all levels of the
business
- Ownership by team members directly involved in the value
stream
- A company-wide focus on daily problem solving for continuous
improvement
- The intelligent application of proven technologies to enable
the transformation by supporting people and processes, accompanied
by experienced Lean consultation to help ensure success
Commonly Held Misconceptions About Lean
Clearly, Lean Manufacturing provides real opportunities to
leapfrog the competition and drive significant performance
improvements by incorporating the benefits and implications of
demand-driven supply networks and build-to-order supply chains.
However, prior to creating a Lean strategy, vision and "to-be"
value stream process models, it is important to clear up some
misconceptions about MRP, ERP, appropriate Lean applications and
the Internet.
-
Lean Cannot Coexist with MRP and MPS
One of the dominant principles of Lean is that production should
be based on demand pulled through the system, and that anything in
excess of that demand is considered waste and hence should be
avoided. In the past, however, manufacturers used material
requirements planning (MRP) and master production scheduling (MPS)
to help them push their work through production. At first glance,
it would seem that Lean's "pull" and MPS's "push" could never
coexist because the purpose for one is a polar opposite of the
other.
Despite the perceived line between the two, a company that
adopts lean practices does not have to part with the components of
their "push" system. In fact, MRP and MPS can be used with Lean to
create a balanced attack towards keeping inventories low and cycle
times short. MRP and MPS can actually help automate wasted areas of
motion, increase visibility and create avenues of heightened
communication. If forecasts can be frequently updated and demand
history is broken down into small homogeneous streams, MRP and MPS
will be able to assist in the receiving and relaying of signals for
procurement and production.
-
Lean Cannot Coexist with ERP
As a product of MRP and MPS, enterprise resource planning (ERP)
is also a target of many lean enthusiasts because of the
centralized techno-bureaucracy that exists. They feel the concept
of sending information back and forth, as well as the mass amount
of reporting, would end up clogging a system that is intended to
eliminate waste.
In the end, as technology becomes better and faster with each
passing day, the reasoning behind their logic becomes poorly
grounded. Accurate data can be transferred in real time, giving
everyone in the organization an up-to-date status report,
regardless of time or place. Despite the fact that ERP, in its
relation to Lean, was met with great skepticism ten years ago,
advances in technology have now made it an essential tool for
successful implementation.
-
Lean is Only for Large Corporations
Smaller and midsized businesses (SMBs) feel pressure to
implement cost cutting strategies as well, but think the strategies
applied by large corporations are inapplicable to them. They
believe the price tag for implementing Lean and the accompanying
technology would be far too much for an organization that is more
reactive and concerned with the total cost of ownership. This
expectation and their need for short-term results often keeps them
from evaluating the ROI or long-term benefits of Lean.
As long as a company focuses on mission-critical areas and
improves its core competencies, there should be no reason why Lean
Manufacturing and technology cannot benefit SMBs. Lean is a
scalable solution that requires a great deal of personnel
commitment; however, the technology can be worked in so it is cost
effective and manageable.
-
Lean and the Internet Do Not Mix
Another dichotomy that exists within common understanding of
Lean is its apparent conflict with the natural capabilities of the
Internet. While Lean tries to create efficient manufacturing by
keeping the variety and flexibility of a product limited, the
Internet and technology enable companies to provide the variety and
flexibility customers desire.
Because of this, the Internet and IT are sometimes labeled as
inhibitors of Lean – but nothing could be farther from the truth.
The two are actually great facilitators in helping to reduce and
eliminate a large amount of waste, whether on the shop floor or in
customer/supplier management processes. The Internet and IT allow
Lean principles to be implemented, both directly and indirectly,
throughout the supply chain, as communication and visibility are
created on a real-time basis. With suppliers on board, the role
that the Internet plays for Lean and its "pull" principle is clear.
Demand driven manufacturing is triggered through customers on the
Internet on a real-time basis, allowing everyone one involved in
the supply chain, even the outsourced suppliers, to receive updated
information on the materials and parts required.
Lean Manufacturing Today
Many of the misconceptions around Lean Manufacturing were formed
and promulgated by traditionalists who made observations during a
time when the Internet was in its infancy and IT was still trying
to justify its existence to a corporate board.
Today, however, both technology and the Internet continue to
amaze us as they shrink the world and improve efficiency,
communication and connectivity in virtually every facet of our
life. In fact, their influence on globalization is so deep and
widespread that it is hard to defend a lot of traditional business
processes and practices.
The rise of demand driven supply networks (DDSN), development of
the Internet and growth of globalization have created a level of
competition that forces companies to seek out Lean strategies to
help them compete and grow.
Demand Driven Supply Networks, the Internet and globalization
are interconnected and all play integral roles in shaping the
market environment that exists today. Through globalization and
Lean objectives, companies are able to offer more to their
customers for less, and in effect, lay the groundwork for DDSNs as
well as foster the development of the Internet. DDSNs need a system
that can respond to demand in real time, across a network of
suppliers and employees. This network of suppliers, a product of
globalization, can only develop the superior responsiveness
required through the use of the Internet.
Because real-time information is so critical, the Internet is
regarded as an essential tool to actualize the full potential of
globalization and DDSNs. By recognizing and utilizing these three
forces correctly, a company can achieve the ultimate goal of every
manufacturer: To deliver the right products to the right customers,
at the right place and at the right time.
Conclusion
Faced with the competitive challenges of globalization,
manufacturers must now look past their own organization and adopt a
wider perspective, analyzing competitive advantages and identifying
opportunities on a supply chain level. Progressive manufacturers
today need to create new models capable of performing optimally in
today's demand driven supply chains. Lean has gone way beyond the
factory walls and now encompasses all aspects of business, in
effect extending itself across the entire enterprise. The market
now requires leaner processes that focus on full collaboration
externally, among suppliers and customers, as well as internally,
among the various functions of operations. This outward focus is
propelled by the objectives of customer management instead of waste
prevention/reduction. Improvements are employee driven, not by
project teams, which creates a much more dynamic environment that
is flexible and responsive.
To be sure, implementing Lean calls for a degree of discipline,
adherence to Lean principles and practices in a way that is
properly tailored to the manufacturer's business model, business
processes and corporate goals and objectives. However, when planned
and implemented properly, using a value-based approach, Lean can
have a real, lasting and positive impact on the entire enterprise –
its people, its processes, its competitive position and its overall
business performance.
About Glovia Services, Inc.
Glovia Services, Inc. is a wholly owned subsidiary of Glovia
International, Inc., a subsidiary of Fujitsu Limited (Tokyo Stock
Exchange: 6702), one of the world's most experienced and solidly
backed providers of extended ERP solutions for businesses of any
size-from small and midsized companies to global enterprises.
Glovia Services offers GSInnovate web-based manufacturing software
from pluggable point solutions to a comprehensive on-demand ERP
suite that provides for the unique needs of engineer-to-order,
make-to-order, high volume and mixed-mode manufacturing
environments through comprehensive, end-to-end functionality for
the entire product life-cycle. Headquartered in El Segundo,
California, Glovia Services has helped manufacturers to cut costs,
improve productivity, and meet customer demands for over 30 years.
For more information please visit www.gsinnovate.com, or call
310-563-8700 or 877-474-8896 (toll free).
About Fujitsu
Fujitsu is a leading provider of IT-based business solutions for
the global marketplace. With approximately 160,000 employees
supporting customers in 70 countries, Fujitsu combines a worldwide
corps of systems and services experts with highly reliable
computing and communications products and advanced microelectronics
to deliver added value to customers. Headquartered in Tokyo,
Fujitsu Limited (TSE:6702) reported consolidated revenues of 5.3
trillion yen (US$53 billion) for the fiscal year ended March 31,
2008. For more information, please see: www.fujitsu.com.
About the GSInnovate Industry Insight Series
Glovia Services strives to equip manufacturers with the expert
knowledge and best practices gained from our own manufacturing and
technology experience. The GSInnovate Industry Insight Series
provides manufacturers with the latest resources to effectively
manage their business on demand.
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