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Applying lean principles in the manufacturing environment
Home \ Manufacturing Operations \ Operations Support \ Bottom
The Supply Chain \ THE LEAN ENTERPRISE \ 'Leaning' Customers

Lean Manufacturing is the application of lean principles in manufacturing environments. However, lean principles shouldn't be limited to manufacturing operations. All areas of the company can benefit from the application of lean principles, ensuring lower costs, higher quality, and better service & delivery.

Specific considerations for implementing lean in manufacturing environments are listed below. If you'd like to comment on or add to these considerations, or if you have specific questions, a form is provided at the bottom of this page.

As with all lean implementations, 3 things can be done to improve performance on the shop floor. Those things are: ELIMINATE WASTE (80%), work toward CONTINUOUS, ONE-PIECE PRODUCT FLOW (10%), and establish CUSTOMER PULL (10%). The percentages indicated relative importance (for example, 80% of the benefits of implementing lean will come from 'waste elimination' efforts - your benefits may vary).

WASTE ELIMINATION efforts begin on the shop floor. This is not a management responsibility, it is an 'everyone' responsibility. It is incumbent upon management to provide the tools and training so that ALL personnel can become engaged in this activity. Some of the lean tools used in WASTE ELIMINATION efforts are:

  • Teian systems
  • Quick Changeover (using Single Minute Exchange of Die techniques)
  • 5S programs
  • Establishment of Standard Work
  • Just-in-Time supply and manufacture
  • Total Productive Maintenance
  • Visual Management tools and techniques
  • Inventory reduction techniques
  • Workspace layout techniques
  • Mistake-Proofing techniques

Depending on the specific challenges and opportunities that exist within your facility, some of these tools will have more 'bottom-line' impact than others. Careful planning and consideration are required in order to ensure that 'real' benefits are being achieved, and that further waste isn't being introduced into our systems.

CONTINUOUS, ONE-PIECE FLOW - Redesign of the work process IS the responsibility of management. And redesigning the work process to allow significant reduction in batch sizes is a considerable undertaking. But why would you want to convert your operations to one-piece flow?

Consider how much (in terms of space, dollars, labor to move, labor to account for, spoilage/obsolescence) exists in your factory. It exists in the forms of RAW MATERIALS (RM), WORK-IN-PROCESS (WIP), and FINISHED GOODS (FG). In many factories, this amounts to millions of dollars in labor a& materials. Also, we've developed (at further, considerable cost) extensive systems to manage this inventory. All of this represents considerable recurring costs, and as we will see, has a negative impact on both quality and delivery as well.

The reasons we have so much inventory (RM, WIP, FG) are two-fold. First, our systems are designed to process BATCHES. Second, inventory provides buffers throughout our processes, mitigating the risks associated with unreliable supply lines, poor quality, poor equipment maintenance, and poor production scheduling. By solving these problems, the inventory becomes a hindrance to further improvements. Reducing batch sizes incrementally will expose problems in our production systems. Elimination of the problems will allow further reduction in batch sizes. Some of the tools used to achieve CONTINUOUS, ONE-PIECE FLOW include:

  • Incremental inventory reduction
  • Root-Cause Analysis/5 Why's
  • Standard Work
  • Mistake-Proofing
  • Kaizen Blitz/Improvement Workshops
  • Just-in-Time supply of materials
  • Supply Chain Management techniques
  • Jidoka/Autonomation

While true 'one-piece flow' may not be achievable in all circumstances, significant reductions are possible, with significant improvements in costs, quality, & delivery.

CUSTOMER PULL - The concept of 'pulling' value through the production system is contrasted by most systems, which either MAKE-TO-STOCK (MTS) or 'PUSH' batches through via a MASTER PRODUCTION SCHEDULE or MATERIAL REQUIREMENTS PLANNING (MRP/MRPII) software. 'Push' systems produce without regard to demand or the requirements of downstream processes. The difference may seem insignificant, but in reality, pull systems can further (and significantly) reduce costs and improve throughput/delivery.

Implementing 'pull' means redesigning the entire system of production from the point of view of your customers. The system doesn't begin production until an order is received from the customer. This order triggers the entire production system, from the supply chain through each production process. Some of the tools used to implement CUSTOMER PULL include:

  • Kanban production scheduling
  • System-wide inventory reduction planning
  • Heijunka scheduling
  • Just-in-Time manufacture
  • Supply Chain Management
  • Kaizen Blitz/Improvement Workshops
  • Decoupling of MRP/MRPII systems from production scheduling

True 'customer pull' may not be realistic in all manufacturing environments. Portions of the system (based on operational requirements or significant cost factors) may require the development of a HYBRID system (a pull system which contains certain push elements). Such hybrid systems are still very effective at reducing costs and improving responsiveness to customers.

As opposed to MANUFACTURING OPERATIONS, the rest of the organization exists to support those profit-generating operations. Operations Support is separated in many companies from typical management functions (such as Human Resources/Payroll, Accounting/Finance, Sales/Marketing, and Executive Staff), but they share a common characteristic that distinguishes them from revenue generating departments: they are all considered NON-VALUE-ADDED BUT ESSENTIAL (NVAE), and therefore require special, focused consideration in applying lean principles.

The focus of leaning support operations is necessarily to:

  1. Increase service levels to manufacturing operations with increased quality and similar cost,
  2. Provide a similar level of support with significantly less resources,
  3. Provide reduced levels of support, transferring certain functions to entities (either internal or external to the organization) which can provide those functions at significantly reduced costs.

Some of the tools used to implement lean in OPERATIONS SUPPORT environments are:

  • Strategic (Hoshin) Planning techniques
  • Supply Chain Management techniques
  • System-wide inventory reduction planning
  • Kanban production scheduling
  • Kaizen Blitz/Improvement Workshops
  • Decoupling of MRP/MRPII systems from production scheduling
  • 5S programs

Lean efforts in OPERATIONS SUPPORT require a long-term view of where the organization is with respect to Mission, Goals, and Milestones, as it will entail system-wide modifications that could profoundly impact manufacturing operations. Great care must be taken to ensure that service levels are maintained during this (typically 2-5 year) transition, so that cost, quality, and service/delivery levels aren't reduced to our customers.

As an organization proceeds with 'leaning' its' internal systems (both on the operations side and the support side), it will soon run into constraints which will slow the lean effort. And while some of these constraints are internal (and can be overcome), some will be external, in the Supply Chain.

These constraints normally take the following forms:

  • Poor quality products (products which have significant variation)
  • Products don't meet specifications (substitute products don't conform to requirements)
  • Poor service/delivery levels (resulting in critical product shortages)
  • Delivery of product in unnecessarily large batch quantities
  • Poor marking of products/packaging (resulting in poor internal delivery of product to production lines)
  • Internal company processes contain significant overhead in the ordering/purchasing cycle

Supply Chain Management techniques offer the opportunity to not only considerably reduce the costs associated with RAW MATERIAL :purchases, but can significantly increase both delivered product quality and delivery/services levels. Some of the tools used to apply lean to the SUPPLY CHAIN include:

  • Strategic (Hoshin) Planning techniques
  • Outsourcing of functions in which the company doesn't have a competitive advantage
  • Supplier consolidation, partnering, and replenishment
  • System-wide inventory reduction planning
  • Kanban production scheduling
  • Kaizen Blitz/Improvement Workshops

From the perspective of the Customer, the Supply Chain is broken down into the following components:

  • First tier supplier - a supplier that invoices the customer for goods and services rendered directly by that supplier.
  • Second tier supplier - a supplier that invoices the first-tier supplier for goods and services rendered.
  • Third tier supplier - a supplier more than one step removed from the first tier supplier, providing goods and services to second tier suppliers.

Thus, if we consider 'ourselves' (or our company) the 'customer' (not exactly true in the lean sense, but common usage), our vendors are the 'first tier' suppliers, their vendors are 'second tier', and all other vendors are 'third tier'. Typical SUPPLY CHAIN lean efforts focus on the FIRST TIER suppliers.

The LEAN ENTERPRISE considers that every portion of the system of producing goods and services must continue to eliminate waste, provide a flow of value to the customer, based on the customer pulling this value through the system. This 'Enterprise' exists from the point where our raw materials come from, through the Supply Chain, through our Production System, to our Customers, and even including the disposal cycle of our products.

One of the ramifications of this concept is that we can't reduce waste in any portion of the system simply by pushing this waste to another portion of the system. We can't make our suppliers bear the cost of holding inventory we don't want, we should work with them to improve their portion of the system so that their reliability is improved to the point where the inventory (which mitigates the risk of poor reliability) is no longer necessary to maintain expected service/delivery levels. We can't expect the customer to bear extra costs, poorer quality, or decreased service/delivery levels due to our system improvements. True waste elimination removes waste from the system, rather than transferring it within the system.

Believe it or not, as we lean our operational systems, our support system, and our supply chain, we will find that additional lean constraints exist in an unexpected place - with our customers. But how can this be? In lean companies, customers drive everything we do. Big orders or small, the customer is the reason we exist. But customers can exhibit non-lean behaviors, which will drive portions of our system to contain waste, which will add to costs, diminish quality, and reduce our service/delivery levels.

Consider the following scenarios, and how they affect our production systems:

  • If we are a second tier supplier (or provide goods to a government agency), our customers may be required to obtain competitive bids in order to contain costs. This process forces each competing organization to respond to bids that may not convert to orders. Accordingly, each competing organization much consider the cost of this bid process, as overhead, in the product pricing process. Since this process doesn't add value to our products, it is considered waste.

  • Because Economic Order Quantity (EOQ) purchasing is still prevalent in many organizations, our customers may tend to order our products in large batches, periodically throughout the year. These orders hinder our efforts to create a smooth production flow, and may require us to actually process large batches within our facility. At a minimum, we will have to maintain large batches until we ship them, which carries both cost and risk, as well as disruption within our systems.

  • Customers often ask for a great many features in our products, without regard to the necessity of these features. In order to meet these inflated specifications, we must design our systems to produce these features (often in conjunction with features requested by other customers as well). The resulting 'feature bloat' has an enormous impact on cost, quality/reliability, and service/delivery.

By working more closely with our customers, we can gather a better idea of what products they need, what features are required, and how often they should be ordering. If we are able to prove to our customers that we are the BEST supplier of these goods and services, we should be able to be their 'sole source' for these items, giving us a huge advantage among our competition. Thus, the establishment of the LEAN ENTERPRISE should be our ultimate goal: a system which is able to provide the EXACT goods and services required by our customers, exactly where and in the required quantities, at competitive cost, and with superior quality.

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