Lean, Mean Business Machine

Lean manufacturing focuses primarily on eliminating the seven major wastes, which are waiting time, motion, scrap, inventory, over-production, transportation and over-processing. Lean manufacturing’s main keys are the following:

Perfect first-time quality – quest for zero defects, revealing & solving problems at the source, waste minimization – eliminating all non value adding activities & safety nets, maximize use of scarce resources (capital, people and space), continuous improvement – reducing costs, improving quality, increasing productivity and information sharing, pull processing: products are pulled from the consumer end, not pushed from the production end, flexibility – producing different mixes or greater diversity of products quickly, without sacrificing efficiency at lower volumes of production, building and maintaining a long term relationship with suppliers through collaborative risk sharing, cost sharing and information sharing arrangements.

The economy in the world today is always changing and more competitive than ever. There are new companies created everyday and old ones tightening their grip on their thrifty empires. For any of these companies to remain successful or become successful, they must find a way to stay on top of their game and please the customer better than ever before. Increasingly, successful companies are turning to lean manufacturing as the answer to staying on top of their industry. Lean manufacturing is not necessarily a particular way of producing a product. It is instead a philosophical way of thinking.

McDonald’s can be said to have recently implemented a lean technique. McDonald’s no longer makes an abundance of food to wait in holding bins in anticipation of a meal time rush. If a rush does not happen, then there is an obvious waste of food as well as labor. Instead, McDonald’s has focused on making the food when the customer orders to provide a fresher and hotter meal. A focus on consistent labor training and improvement is the key to keeping this service speedy and reliable. By implementing this new “leaner” way of thinking, waste of food and labor has been minimized, which is the main goal of the lean process.

Lean manufacturing was actually born in 1914 with Henry Ford and the mass production moving assembly line. Lean relies on keeping a steady flow of product out the door to the customer. Ford’s system did exactly that, though it was missing some of the most important and common factors in today’s lean philosophy. The original Ford assembly line was putting out thousands of Model-T cars at a vast rate. The problem was that it did not matter what the customer demand or requests were; there was a base black Model-T available. They didn’t worry about customer satisfaction or demand whatsoever. The Ford motor company stuck with mass production and had a large stock of inventory (waste) just sitting around. Although Toyota is credited with beginning Lean Production with their Toyota Production System, the roots of “lean” date back as far as the 16th century. In 1570, King Henry III of France watched in amazement as the Venice Arsenal built galley ships in less than an hour using continuous flow process.

Later in the 1940’s The Toyota Loom Company had problems of its own. After World War II when Japanese industry was decimated, the Toyota family decided to extend Toyota Automatic Loom Company to start an automotive company. They had some cash but did not have the infrastructure. They certainly could not compete directly with the established companies like Ford. Therefore, their sole demand was in Japan, which meant supplying small quantities, with high variety while Ford was selling any color Model-T you wanted as long as it was black. Toyota also had to rely on outside supplier partners to make the capital investment needed to get in business. Taiichi Ohno, leader of the Toyota manufacturing enterprise, came up with a system now called the ‘Toyota Production System’ or TPS. He did not do this alone though. Ohno diligently studied Henry Ford and his companies’ philosophies on manufacturing. Toyota and Japan had the problems of not enough space, resources, or demand to compete with the larger automobile manufacturers of America. By assessing and solving these problems, Ohno began the Toyota Production System, and the manufacturing revolution known today as Lean Manufacturing.

After WWII, Ford was ten times more productive than Toyota, but between 1945 and 1970, Ohno’s Toyota Production System was revolutionizing the Japanese automobile industry. It was during this time the rest of the world and particularly the United States started realizing the overwhelming benefits of lean manufacturing. The U.S. auto industry paid particular notice when The Machine that Changed the World was published highlighting the great accomplishments of Toyota and the huge gap between Japanese quality and productivity and auto companies in the West. Many differences were factors of ten – like the original gap between Ford and Toyota, but reversed. That book coined the term “lean manufacturing” because Toyota was doing more with less of everything – less space, less people, less capital and less inventory.

As said before, lean manufacturing’s main goal is to eliminate or at least minimize waste. Lean manufacturing also seeks to streamline the flow of production material throughout the process. By eliminating waste, a lean system eliminates variability in the process itself and in the cycle time of materials. The cycle time is the length of time production materials spend in the factory, while processing time is the length of time required to process any particular item at any given workstation. By eliminating variability within these two lean concepts, companies become more efficient, and are able to reduce the final costs of producing a customer-demanded quality product.
Reducing variability is a core objective of lean manufacturing. In fact, variability reduction could be defined as lean manufacturing in action. Some of the benefits of reducing variability or practicing lean principles are shorter cycle times, shorter lead times, faster response times to customer demands, lower costs, greater flexibility, higher quality, better customer service, and higher revenue. Certainly, these are all elements of creating a successful company, capable of meeting the changing demands of a highly-competitive marketplace.

The International Society of SixSigma provides the acronym DOTWIMP for recalling the seven wastes associated with lean manufacturing.

Defects: A defect is defined as anything produced through the process that the customer is not satisfied with or is unwilling to pay for. Usually referred to as errors, defects disrupt the production process, and require a greater final investment to produce a product for profit. Initially, most defects require less production time to produce than the intended high-quality product. This is because most defects occur because at least some facet of the production process was skipped or missed. In the end, however, defects are cost nightmares for companies. The additional steps they add to the production process are exponential, since most steps in the process are repeated. In addition, the intrinsic costs are immeasurable. Lack of customer confidence, added customer operating costs, and dissatisfaction with the purchased products are all end costs of defects that destroy company profits and longevity in the marketplace.

Overproduction: Think back to the Ford model of production in the early 1900’s.

What value did the hundreds of excess Model-Ts create? In essence, they only created greater expenses for the company. Valuable resources were tied up in goods that could not be readily sold. This creates wasted time, labor and resources that could be allocated to other areas, such as customer needs, process improvement, or business growth.

Transportation: This deals with the movement of raw materials from vendors, to parts through the production process, to the finished goods reaching the end user. Lean manufacturing seeks to streamline this movement so that unnecessary handling of raw materials, excess movement of parts, and increased steps in the distribution process are eliminated.

Waiting: One of the major problems with the Ford assembly line approach is that not all steps are in synchronization with each other. One step might require five minutes of labor to complete, while the following step might require only two minutes to complete. Obviously, when this is the case a disruption of movement will occur, and the process will be in a “waiting” mode. Lean manufacturing works to eliminate or minimize this waiting period by combining some steps and separating others, so that each step is more closely matched to the ones before and after. This reduces the amount of time an employee has to sit idle while being paid.

Inventory: When Toyota began developing into an automobile manufacturing facility, they were forced to eliminate as many additional costs as possible. One way they did this was to eliminate capital resources sitting unused in their parts warehouse. They realized that if their revenue was tied up into parts that could not be turned around into saleable goods in an efficient manner, then they would most likely not survive as a young company. Instead, they worked closely with there supply partners to receive inventory that was needed to manufacture goods in accordance with customer demand. The goods were then sold more quickly, and greater cash flow was created to purchase the next order of parts from suppliers.

Motion: Hours and hours of production are wasted seconds at a time. Lean addresses this problem by streamlining the production process at the workstation itself. If a worker takes minutes to find the parts needed to complete their step in the process, Lean finds a way to make the parts more accessible, thereby reducing the minutes to seconds. This might not seem like much of a waste reduction, but consider this model. One worker uses one screw per product in their step in the process. The same worker produces one hundred of these products each workday. The worker must stoop down below the work table each time the screw is needed. This step takes thirty seconds, or 3000 seconds per 100 products. By placing the screw bin in front of the worker at shoulder height, the worker can retrieve the screw with less effort and in only ten seconds. This motion reduction has saved 2000 seconds per 100 products. When calculating the end cost of this reduction annually, it becomes obvious how reduced motion saves money as well as time. This simple example can save a company as much as 137 production hours over the course of a year. These costs really start to add up when one considers that there are several production steps involved in creating a product for sale.

Process Flaws: This concept can take on several dynamics. It can be simplified to say that any flaw in the process, which creates a slow down in production, a disruption of the process flow, or an increase in needed labor greatly increases a company’s initial investment to create a desired result. This, of course, creates a greater cost, which hinders a company’s ability to remain competitive in the marketplace.

Go Lean or Go Home

Lean is currently a hot topic in most major industries and is coming to an industry near you. Practically every type of industry is currently using lean manufacturing: Distribution centers, electrical, government agencies, manufacturing, mechanical, and software and system companies. I’m personally in the process of implementing lean principles at a staffing and recruitment firm. The current big players in lean manufacturing are Cascade Engineering, DsMax, General Electric, Hewlett Packard, Intel, Microsoft, Oracle and Toyota. The use of lean thinking has for decades been applied to improve competitiveness and accelerate a company’s growth by managers and CEOs alike. Perhaps, the most interesting aspect of lean manufacturing is that it does not stop with upper management. Instead, lean is a philosophy that embraces the worker who actually produces the product or service being bought and sold. Today the leader in manufacturing is the United States, due at least in part to the implementation of lean principles in so many of our industries.

Other businesses have taken notice and are now applying lean principles to compete. Channel 9 Billionaire James Packer had this to say about lean, “New management at Channel 9 has launched a concerted attack on its cost base in order to restore margins through eliminating waste, improving efficiency and lowering programming costs.”

Companies, no matter how big or small, are switching practices over to lean methods. Many companies that implemented lean practices such as General Electric and Hewlett Packard cut their overhead operations by 30% or more, sales doubled, more profits and they’ve continued to grow at an accelerated rate. Companies have experienced this growth and success without cutting jobs, which seems to have been the primary solution used to cut cost in the past.

In the article “Achieving the Lean Dream”, By Nelson Teed he discussed a book by Dr. Edward W. Deming written in the early 1980s trying to explain the downfall of America’s business. According to Deming United States businesses have been too focused on numbers without implementing proper methodology. The differences in cultural management styles from the United States to Japan were significant and have a huge difference in performance. MIT did a study for five years on the automotive industry, which found out that plants implementing lean or at the time noted as Toyota Method, were overall more productive. Deming reported, “The key concepts to work on are teamwork, employee involvement, continuous improvement, communication, and self-direction: all the key elements of cultural change. However, unlike the failed activity-based programs of 10 years ago, this is “on demand” cultural change. The need for it is obvious, even pressing. It is immediately applicable to supporting change on the shop floor. Staff positions and management levels are reduced, authority and responsibility are driven down to the plant floor, barriers fall, communication improves.”

With such overwhelming evidence, and such compelling arguments, it would seem reasonable that all companies would embrace lean manufacturing concepts. This is not always the case. There are two primary reasons some companies are not implementing lean. Some companies are simply ignorant to lean methodology and clearly do not understand what is involved in process improvement. Since they are ignorant of these practices, they tend to use older methods with which they are more comfortable. Lean manufacturing cannot and will not happen overnight. Converting to a lean system takes time and effort, and results driven people want immediate results. The other primary reason companies fail to implement lean practices is that they see process changes as new investments, which of course equals new cost. They have invested such great sums of time and money in their current process, regardless of inefficiencies, they fail to understand that initial costs of lean processes is simply an investment for future growth and profit.

Lean manufacturing is not a set of isolated techniques. It is a complete business system. By eliminating inherent wastes, lean creates a new way of designing, a new way of selling, a new way of manufacturing, and most importantly, a new way of involving all employees in improving processes, product quality, and customer satisfaction.

Taiichi Ohno was given very demanding marching orders in the 1950’s: catch up with Detroit in three years. Faced with a seemingly fruitless situation complicated by little or no money, a small diverse market, and low productivity, Ohno was able to meet and exceed his orders by creating a manufacturing system to reduce costs through eliminating wastes.

It should be recognized and remembered that lean is not a final goal that a company works towards. It is an ever-changing way of thinking to make the company the best it can be at all times. Simply put, lean manufacturing is making the customer happy by getting them their product in the fastest way possible with the highest quality possible while making the largest profit possible. There is no better way to succeed in today’s changing business world. Darwin’s idea that it wasn’t the strongest species, but the most adaptable species that were able to survive and thrive in the changing world, is equally applied to business. Companies who are consistently able to adapt to the changing needs of their customers, and companies who are able to meet these changes with the fewest costs while producing the greatest profits are the companies who will continue to succeed. These companies understand that lean manufacturing is a process, a journey, not an end state.