LEAN DOES NOT MEAN LITTLE. It just means low-fat. And lean manufacturing is not an instinctive process for a manufacturer, distributor, or service provider. It takes goal-setting and a desire to reach those goals.
That's the message Jim Snyder tried to emphasize in a recent Specialty Equipment Market Association (SEMA) webinar, “Lean Manufacturing: How To Eliminate Waste in Manufacturing and Distribution.”
“You cannot become a lean and healthy organization by starving yourself of inventory, headcount, training, and capital investments while simultaneously running yourself crazy,” said Snyder, professor and department chair of automotive supply at Northwood University in Midland, Michigan.
“Diets rarely work. Changing your diet to lose weight is instinctive, but selecting the proper combination of diet and activities in order to become lean is not instinctive. It has to be learned through education and reinforcement. Lean organizations must change their ‘eating habits’ by feeding and strengthening themselves with flowcharts of business processes, financial facts from an Activity-Based Cost (ABC) system, and finite goals. Goals should be providing customers the right products and services, in the right quantity, at the right time, and the lowest cost, by doing the right activities.”
Snyder said that in the 1996 book, Lean Thinking, authors Jim Womak and Daniel Jones focused on muda, the Japanese word for waste. He said the antidote to muda is lean thinking. In short, lean thinking believes that it is possible to do more with less and less, while providing the customer exactly what he wants.
“To be lean, you have to think lean,” he said.
He said lean managers need lean measures, and accounting in the ABC system converts muda into money.
“Many lean organizations are using ABC systems to dollarize waste by measuring non-value added activities, excess capacity, excess inventory, wait time, and duplicated activities,” he said. “The most successful lean organizations reduce the size of monthly accounting reports. Accounting managers should cut out the financial fat.
“Process variation is lean's No 1 enemy. Error-prone processes, downtime, and binge inventory purchases bleed organizations of their resolve to become lean. For example, the single most important principle in the design of a lean distribution system understands that a warehouse is not a place to store products. A distribution center is a ‘factory’ that never varies from its primary purpose … quickly converting products into customer orders.”
Be lean — and mean it
He said lean manufacturing, distribution, or lean services will not work unless you mean it. Lean behavior is controlled by the consequences or responses it receives. If no consequences exist, it signals that management didn't really mean it when they said, “We're gonna get lean and mean.”
“Leaders are the lid of lean,” he said. “If senior management can't explain lean, don't expect the employees to perform lean.
“Getting lean is not easy. Tests, trials, and temporary setbacks are a normal and important part of getting lean. Resistance makes you stronger. Tests make you wiser. It is very difficult to be a lean organization with a fat mission statement, (including the idea of being) everything to everyone. Lean organizations, such as Southwest Airlines, Dell Computers, and Tech Data use focus to remain lean, strong, and profitable. For example, Dell's mission statement says they will strive to be best for ‘those markets that we choose to serve.’”
What does a lean organization look like?
“It's like a sleek racing scull,” Snyder said. “Everyone in the organization is in the same boat, sitting closely together, working at a synchronized rhythm that is spoken by a single, strong voice. Each person with an oar has prepared their body to share the workload as the scull cuts through the water towards the goal line. Is that a picture of your organization?”
He said manufacturing strategy is a pervasive theme or mission that guides decision-making, establishes direction, and determines what competencies the factory will develop. He said there is a complex and dynamic interrelationship among corporate goals, corporate strategy, manufacturing strategy, and manufacturing capabilities.
Six facets of manufacturing strategy
He said a useful way to observe and understand manufacturing strategy has been proposed by Leong and Ward (1995), who identify six facets of manufacturing, three of which pertain to the content of the manufacturing strategy and the other three to the process through which the strategy is put into effect:
- Planning.
“Most commonly, manufacturing strategy is seen as a factory's long-term plan, and, in fact, that is the aspect we have presented so far. This planning aspect of manufacturing strategy does not necessarily need to be driven from the top down; however, in many companies that have not yet reached world-class status, the ‘plan’ is primarily the concern of senior management.”
- Proactiveness.
“Developing capabilities before they are needed is the proactive facet of manufacturing strategy. Manufacturing strategy directs what capabilities the factory will develop; anticipating the potential of new technologies and new capabilities allows manufacturing to be an important part of product development and marketing.”
- Patterns of Action.
“Another facet of manufacturing strategy is the patterns of action that can be observed over time. Patterns of decisions indicate the intentions of management or the intended strategy, not necessarily the strategy that really exists. Patterns of action are observable, even when they are unintentional or when they run counter to the ‘official’ strategy.”
- Portfolio of manufacturing capabilities.
“This portfolio includes five generic manufacturing capabilities: cost, quality, delivery performance, flexibility, and innovation.”
- Programs of improvement.
“By examining what the factory seeks to improve, we gain considerable insight into the nature of the manufacturing strategy.”
- Performance measures.
“The measurement criteria should reflect the strategic goals of the factory, and the reward system should be aligned with the manufacturing strategy.”
Developing a manufacturing strategy
He said that single-piece flow is the optimal manufacturing method for meeting future customer demand, that customers should pull product through the value stream, and that lean manufacturing is the best hope for a common global language of manufacturing, noting that the largest and most influential manufacturing companies in the world are incorporating lean thinking into their operations management.
Snyder said changing a factory just because we can does not justify the difficult transformation journey. We must have some compelling business reason for the factory to run differently.
“What is most important to the customer?” he asked. “Satisfying the customer is the only way the factory can succeed. There's a New York Times quote (from 1998): ‘After all, satisfying the customer is what business is all about.’
“Why does the factory keep excess inventory? Is equipment too unreliable? Are setup times too long? Is production scheduled in large batches? Is there any reason at all for having the excess inventory? Once we understand the reasons why, we can begin to develop appropriate strategies. Two observational tools that are often useful are the production flow diagram and value stream mapping.”
He said that contrary to popular literature, inventory in itself is not the “root of all evil.” He believes inventory — and in particular, work-in-process inventory (WIP) — is merely an outward manifestation of other problems in the factory. A high WIP level indicates improper conditions, even when those improper conditions are not visibly disrupting the factory.
Snyder said process reference models integrate the well-known concepts of business, process, re-engineering, benchmarking, and process measurement into a cross-functional framework.
Planning and management
Some aspects of demand/supply planning and management:
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Balance resources with requirements and establish/communicate plans for the whole supply chain, including return, and the delivery execution process.
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Management of business rules, supply chain performance, data collection, inventory, capital assets transportation, planning configuration, and regulatory requirements and compliance.
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Align the supply chain unit plan with financial plan.
Some aspects of sourcing stocked, make-to-order, and engineer-to-order product:
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Schedule deliveries; receive, verify, and transfer product; and authorize payments.
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Identify and select supply sources when not predetermined as for engineer-to-order product.
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Manage business rules, assess supplier performance, and maintain data.
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Manage inventory, capital assets, incoming product, supplier network, import/export requirements, and supplier agreements.
Some aspects of make-to-stock, make-to-order, and engineer-to-order production execution:
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Schedule production activities, issue product, produce and test, package, stage product, and release product to deliver.
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Finalize engineering for engineer-to-order.
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Manage rules, performance, data, in-process products (WIP), equipment and facilities, transportation, production network, and regulatory compliance for production.
Some aspects of order, warehouse, transportation, and installation management for stocked, make-to-order, and engineer-to-order product:
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All order management steps, from processing customer inquiries and quotes to routing shipments and selecting carriers.
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Warehouse management, from receiving and picking product to loading and shipping product.
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Receive and verify product at customer site and install, if necessary.
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Invoicing customer.
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Manage business rules, performance, information, finished product inventories, capital assets, transportation, product life cycle, and import/export requirements.
Definitions of the process
He provided the following definitions:
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Plan: Processes that balance aggregate demand and supply to develop a course of action that best meets sourcing, production, and delivery requirements.
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Source: Processes that procure goods and services to meet planned or actual demand.
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Make: Processes that transform product to a finished state to meet planned or actual demand.
- Deliver: Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management.
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Return: Processes associated with returning or receiving returned products for any reason. These processes extend into post-delivery customer support.
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Planning: A process that aligns expected resources to meet expected demand requirements.
Planning process: balance aggregated demand and supply; consider consistent planning horizon; generally occur at regular, periodic intervals; can contribute to supply-chain response time.
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Execution: A process triggered by planned or actual demand that changes the state of material goods.
Execution processes generally involve: scheduling/sequencing; transforming product, and/or moving product to the next process.
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Enable: A process that prepares, maintains, or manages information or relationships on which planning and execution processes rely.
In explaining the concept of “Configurability,” he said a supply-chain configuration is driven by: plan (levels of aggregation and information sources), source (locations and products), make (production sites and methods), delivery (channels, inventory deployment, and products) and return (locations and methods).
He said each basic supply chain is a “chain” of source, make, and delivery execution processes. Each intersection of two execution processes (source-make-deliver) is a “link” in the supply chain: execution processes transform or transport materials and/or products; and each process is a customer of the previous process and a supplier to the next. He also said planning processes manage these customer-supplier links: planning processes thus “balance” the supply chain; and every link requires an occurrence of a plan process category.
Looking at these principles, Snyder said everyone should realize that lean is a tool.
“If we look at the Toyota production system, they don't even refer to lean anymore,” he said. “It's an entirely different philosophy. We in the US have coined lean as a way to be competitive. We have done a very good job on the manufacturing floor. We still have a lot to do in the front office.
“Lean principles have proven not only to be universal, but tend to be universally successful in improving results. The key is that management has to be involved with it and understand it from the top.”