Leaning on OEE

Source : The Manufacturer US
Zone : Manufacturing operations
Published : 26 Sep 2005 16:39

Reliable metrics are needed to measure the effectiveness of any process. Rich Weissman looks at how overall equipment effectiveness can quantify lean improvements

The concept of overall equipment effectiveness (OEE) is all around us. We measure the performance of our automobiles in miles per gallon. We measure the effectiveness of our computers in file download speed. And we measure the success of our fitness regimen in our completion times in the 5K race. In our factories we measure the effectiveness of our equipment, in an effort to increase optimum machine uptime and operation, in a data driven process called OEE.

The theory of OEE is straightforward. The performance of a single piece of equipment, or even an entire factory, is governed by the cumulative impact of the factors of availability, performance rate, and quality rate. Analyzing these factors can help clarify a manufacturer’s equipment strategy. Yet OEE is often an underused or misapplied tool, even though it can help companies maintain existing equipment and even preclude the purchase of new equipment. It can be used effectively in both discrete and process based manufacturing environments.

Lean manufacturing continues to evolve and become increasingly ingrained in manufacturing processes. Often, lean success is measured in increased customer satisfaction levels, reduced inventory, increased product velocity throughout the factory, and even in lower head count. Many of the early gains in lean were highly anecdotal and often not rooted in meaningful data. Certainly the floor layout and product visibility was improved, shipments were going out on time, and customers seemed happier. Improved financial gains may have been the measure of success, but additional meaningful data was needed to measure the effectiveness of the lean implementation.

Once the easy gains are realized, often called low hanging fruit, lean needs to take on more of a systematic and data driven approach. Integrating concepts such as six sigma and statistical process control begin to drive the organization towards a more organized, structured, process driven, and metric-based approach to manufacturing efficiencies. The total quality management based concept of problem prevention finds itself in lean manufacturing as the foundation of total productive maintenance (TPM).
TPM focuses on a formal process of maintaining plants and equipment that is used throughout the manufacturing process. TPM traces its roots to the TQM movement and has enjoyed a renaissance in today’s lean manufacturing programs. While many lean success stories focus on Fortune 500 companies, there are smaller companies that successfully incorporate elements of lean, such as TPM, into their manufacturing strategies. The principles of TPM can be established in any sized company. It may be one of the most inexpensive and easiest ways to quickly improve operational efficiencies.

TPM is more than just a preventive maintenance program. It is a formal process that incorporates a thorough understanding of the importance of the tools and equipment used in the manufacturing process. It includes an intimate knowledge of production processes and the tools and equipment that support them, a tracking program for scheduled maintenance, an inventory of spare parts and consumable items required for the equipment, ongoing training of operators and repair personnel, and an organizational and management commitment for the TPM process. Strong relationships with equipment suppliers are also important, as their knowledge and support can help to increase equipment operation, throughput, uptime and yield.

OEE is the principal performance measure of TPM. It is a best-practice metric for monitoring and improving the efficiency of an organization’s manufacturing processes, including equipment and machinery, work cells, and assembly lines. OEE looks at such elements of manufacturing efficiencies as availability, performance, and quality by creating an overall OEE score, a metric that can be used as a benchmark for internal improvements or external comparison.

Availability quantifies a machine’s down time and operating time. Downtime can be caused by equipment failures, material shortages, and changeover time. The remaining time is considered operating time. The performance metric takes into account all of the factors that cause the process to operate at sub-optimal speed. These elements include machine wear, poor materials, misfeeds, and operator error. Quality is a measure of process yield, determining which product is acceptable and which needs to be reworked or scrapped. Simply, OEE is calculated by multiplying availability by performance and quality to determine an overall OEE metric. Some companies, however, modify the OEE calculation to better suit their objectives, but it still remains as an indicator of process efficiency.

World class OEE for discrete manufacturing plants is generally considered to be 85 percent or better, according to Itasca, IL-based Vorne Industries, a manufacturer of data collection and visual display products focusing on manufacturing productivity. Additional world class OEE related benchmarks are 90 percent for availability, 95 percent for performance, and 99 percent for quality. Vorne’s studies show that the average OEE score for discrete manufacturing plants is approximately 60 percent, a significant opportunity for improvement.

“OEE should be used as early as possible in the manufacturing process in order to determine root cause issues,” says James Feltman, Vorne’s sales manager. “It is the way to benchmark lean activities and provide a quantitative feedback link for measuring efficiency and improving operations.” Feltman sees OEE as a company wide metric that should not be limited to the shop floor, but used to focus the company on increasing the depth of lean. “OEE is a sensible metric that can be used as a true standard across the company. It allows for an objective point of view that can drive improvements.”

Feltman sees OEE as the platform for enhanced manufacturing efficiencies, often driven by lean. “One of the elements of lean is reduced set-up time, and set-up time reduction programs such as SMED help drive the OEE number higher,” says Feltman. A focus on OEE can be a rallying point to reduce breakdowns, avoid small stops, and cut down on start-up rejects. “OEE provides real time plant floor monitoring which allows for constant and consistent focus on the manufacturing process.”

While Feltman is an advocate for the use of OEE in discrete manufacturing, Rockwell Automation’s Lance Rodenfels sees the best use for OEE in process industries. Rodenfels, the Solution Manager for Performance Solutions for the Milwaukee, WI-based company, sees OEE as an indicator of a healthy manufacturing process. “I like to equate OEE in an industrial environment to an EKG in a healthcare setting,” says Rodenfels. “While companies may each calculate OEE a bit differently based on their own criteria, it is a good process measurement.”

Rodenfels feels that OEE provides a good start to determine root cause issues. “OEE is a consistent measurement that can be collected automatically, but OEE in itself is just a number. It is important to use it effectively to help manage and improve the process that it is monitoring.” He wants to make certain that companies are focusing on quality and not just yield. “OEE is really a three-legged stool,” says Rodenfels. “Is the equipment available, is it making what it is supposed to be making, and is it making quality product? I like to use quality as the measure of the level of efficiency.”

Rodenfels cites two cases that support the use of OEE as a diagnostic tool. One client had an issue on a packaging line that showed up in a reduction of the OEE number. An analysis of the data and manufacturing process showed that there were periods of time when cans were coming off of the line without lids. It seems there was a button on the equipment that was used to clean the machine while it was under operation. This button was located right above the button to stop the lid assembly operation, and the operator would inadvertently hit the wrong button, stopping the lidding process. An equipment modification solved the problem.

In another example, Rockwell Automation’s client Kraft Foods deployed OEE across multiple facilities. They used OEE to measure equipment performance and make the necessary changes, realizing a three-percent OEE improvement. This incremental improvement in equipment efficiency resulted in a savings of almost $12 million. “I cannot stress enough the need to use the OEE number to drill down into the manufacturing process it measures to solve problems and improve the methods,” says Rodenfels.

While data is becoming increasingly important in lean initiatives, some worry that focusing too much on the OEE number can force a company to lose sight of other lean-related improvements. “So much of lean success is tied up in behavioral change,” says Larry Cote, president of Ontario, Canada-based lean consultancy Lean Advisors Inc. “While working with an OEE model can be valuable, just paying attention to the number will not solve the manufacturing problems.” Cote feels that companies need to dig deeper to solve their quality and manufacturing problems.

“Often OEE is a tool used to increase speed, but sometimes increased speed leads to quality problems,” says Cote. “Speed may cloud the real organizational issues such as customer responsiveness, quality, or other important business objectives.” Cote understands that equipment availability is critical, and OEE can help to improve equipment uptime as part of the TPM process. Adds Cote: “Companies need to understand that OEE is a tool for process improvement. It is not a magic bullet.”

The fundamental concept of overall equipment effectiveness is certainly not new. As lean manufacturing continues to prove excellent results, old concepts may be reborn into new contexts. OEE, as part of a TPM program, will provide a series of data points and trends that will help companies focus on improving their manufacturing efficiencies within the lean framework. Companies utilizing this valuable tool are best cautioned to keep OEE in perspective. While data is certainly better than anecdotal information, striving to meet an unreasonable OEE number may cause them to hit a roadblock on their lean journey.

Finding the right mix

Source : The Manufacturer
Published : 26 Sep 2005 16:44

Leading automotive supplier Ogihara America Corporation uses lean manufacturing and total productive maintenance to find success with its customers. Linda Seid Frembes finds out more

As a Tier One supplier to the world’s best known automotive manufacturers, Ogihara America Corporation’s business strategy must be flexible enough to cater to a demanding and ever-changing marketplace. The company’s Howell, MI, plant is strategically placed to serve the Big Three automakers of Detroit, while its sister plant in Birmingham, AL, serves a burgeoning automotive market in the southern United States.

Ogihara America began the stamping and sub-assembly of body panels in the United States in 1987 but the company’s roots go back to Ogihara Corporation, a world-renowned Japanese tool and die company for the automotive industry since 1951. Capacity and customer base have steadily grown over the years and today the parent company operates fourteen plants and business offices around the world.

Ogihara’s Howell plant specializes in long-term production jobs requiring stamping and sub-assembly of Class A quality panels via robotic material handling; robotic weld, sealer, and adhesive application; automated assembly lines; and automated material transfer. These panels are the visible surfaces of finished vehicles, fenders, hoods, trunk-lids, doors, body sides, roof panels, and other areas of high visibility for the customer. Ogihara-Howell also offers its customers factory assist off-loads when their plants are over-capacity. “More and more we are seeing a big variation in demand and forecasted demand for certain automotive manufacturers,” says Michael Zimmerman, director of manufacturing for Ogihara-Howell, who is responsible for all manufacturing operations, engineering. and quality at the plant. “This presents a challenge as to how we order raw materials.”

Most raw materials received in Howell are blanks from supplier MMB. Various other parts including smaller stamping components, nuts, bolts, and brackets, are all brought into the facility based on the BOM for project. The operations include a receiving inspection area for blank steel, aluminum, and other purchased parts; once cleared, it is fed into the manufacturing process. “All of our stamping operations start with these blanks for the transfer and tandem lines. Some products are direct ship to the customer and some are fed into our sub-assembly areas. From sub-assembly, it goes into inspection and then to the customer,” says Zimmerman.

The sister plant in Birmingham, AL, shares the same manufacturing structure as Howell. At both plants there are always investments in each facility. Continuous upgrades happen in Howell like the updating and modifying of manufacturing equipment in order to stay competitive with new technology. “Under our preventative maintenance program, some equipment has been maintained so well and for so long that you can’t get parts for it anymore,” says Zimmerman. “Our equipment has to be reliable and up-to-date to keep up with demand.”

That stringent preventative maintenance plan is operated under the umbrella of Total Productive Maintenance (TPM), Ogihara’s quality control and maintenance program. The TPM system combines employee empowerment with data collection and management to lower costs and eliminate waste, such as poor quality and downtime.

TPM is a maintenance program which involves a newly defined concept for maintaining plants and equipment. The goal of the TPM program is to increase production while increasing employee morale and job satisfaction. TPM brings maintenance into focus as a necessary and vitally important part of the business.

The origin of TPM can be traced back to 1951 when preventive maintenance was introduced in Japan. “Our TPM activities include daily cleaning, inspection for wear and other potential issues and lubrication of equipment. Operators conduct their TPM activities based on specific needs of the equipment,” explains Brian Kaitner, TPM coordinator for the Howell facility, who is responsible for all autonomous maintenance, 5S activities, and focus improvement activities.

Ogihara-Howell associates use a check-off sheet to complete daily checks and document any issues. The facility’s TPM activity is audited quarterly and every area of manufacturing has a TPM scorecard posted on a community bulletin board. Each area is measured against a target on safety, quality, productivity, and employee involvement. The overall manufacturing scorecard of business results is broken down into department and then to individual lines. “Our TPM program has been in existence for nearly 10 years,” says Kaitner. “It began with pilot lines and pilot areas in the press and line assembly areas, with the management team leading the involvement. This set the precedent for other areas to follow suit.”
Kaizen improvement activities are based on scorecard results for below target areas. “We integrate all the tools into how we do an Ogihara operating system. TPM is a tool to maintain the equipment. We also have a defined 5S program for standardization and visual control on the plant floor,” says Zimmerman. “We use a mix of lean and TPM to eliminate any wasted handling, wasted motion, or rework activities.”
While it may seem that Ogihara has invested in TPM, the company has always had a lean philosophy. Zimmerman adds: “TPM was one of the tools we chose to help with the lean implementation and make improvements on the processes. TPM was a way to involve the associates in making improvements in the business.”

One of the strengths of Ogihara is the constant drive to try an improvement process. The management team has no issues with trying different methods until something works. “We customize what we learn. We take the basic philosophy and fit it to the way we do business,” says Kaitner.

The company strategy is first to stabilize its processes and then work on continuous improvement. However, supplying to the automotive industry is a difficult task to stabilize since off-loads interrupt the production schedule. Off-loads are always introducing change into the production schedule and the types of jobs that the facility can run. “Our answer is to standardize all of our processes down to the letter. Our process-based tactic to take an off-load eliminates issues before they hit the manufacturing floor,” says Zimmerman. “Every time we do an off-load, we also do a ‘lessons learned’ review to refine the process for next time.”

Off-loads and shutdowns are becoming a more common occurrence in the automotive industry. Several factors influence this fluctuation in demand including more frequent model-year changes and the move away from producing high volume vehicles. Instead, there are several hundred types of vehicles that a consumer can purchase, as opposed to the several dozen models of decades past. Ogihara-Howell must remain flexible in their scheduling since the facility typically only gets one or two weeks notice of a manufacturer’s shutdown. Ogihara-Howell received an average of one off-load every two weeks last year; and notification of the off-load comes only two or three days in advance.

TPM and lean are also used as initial control. All the lessons learned in manufacturing are used as feedback into the engineering group to update product specifications. This eliminates any repeated issues.

In order to stay competitive and flexible, Ogihara-Howell’s 445 employees work on a flexible schedule and each are cross-trained in other departments. The goal of a well-rounded employee starts in the hiring process, which is geared toward finding those who would work best in their environment. New hires go through a two-week training plan with an emphasis on safety; detailed HR orientation; how the Ogihara operating system works; an overview of the entire company, TPM, and lean and how it relates to business (and how they relate to the business goals); and specific machine training. This training is all completed before the employee steps in front of an assembly line.

Ogihara-Howell also uses an employee-based feedback system. This incentive-based system uses suggestions from production associates on engineering standards. The suggestions are quantified based on impact to safety, productivity, and cost. Associates receive a monetary reward representing a portion for the savings.

Other employee incentive programs are tied into the quarterly TPM audit. The TPM Champion award is based on quarterly audits; the winning line receives a denim jacket. For every month without a quality issue on a line, that line receives a company-paid lunch of their choice. The safety incentive includes a drawing for associates with no injuries in a year.

Besides rewards to spur feedback, the company has also built an effective meeting structure. The company holds “home team” meetings where associates meet regularly with their direct supervisor as well as monthly meetings with their department manager. “This is a good structure for pass up and pass down communications,” says Zimmerman.

There is also an annual plant-wide meeting. As a supplement, every quarter they conduct “skip meetings” where the associate can sit down directly with Zimmerman and Pat Cassady, head of human resources, with no involvement from direct managers. This allows the associate to freely communicate directly with upper management.

Ogihara-Howell recently branched out from the automotive industry in its research and development department. The company worked with CogniTens Inc. to play an instrumental role in helping NASA subcontractor United Space Alliance streamline the measurement and manufacturing of space shuttle tiles. The combined team provided technological expertise to help speed the measurement, manufacturing, and replacement of thermal protection tiles on United States orbiters, including the recently landed space shuttle Discovery.

Based on their observations, engineers from CogniTens and Ogihara developed a digital process that replaced the conventional methods utilized by United Space Alliance, providing substantial time reduction, increased accuracy of tile fit, and overall process efficiency.

Ogihara America has garnered several recognitions in recent years. In 2004, it was awarded the DaimlerChrysler Gold Award and an award for its Total Productive Maintenance program. in 2001, the company achieved ISO/TS 16949 and ISO 14001 certifications which are globally recognized by its customers.

“Our mix of TPM and lean is working now but that can always change,” says Zimmerman. “And when it does, we’ll be ready to change with it.”

The heart of the matter

Source : The Manufacturer
Published : 26 Sep 2005 17:32

Medical device manufacturer Boston Scientific uses a unique approach to deploy lean manufacturing throughout the product lifecycle. Linda Seid Frembes reports

Many manufacturing operations are labeled “mission critical” by company managers, but rarely does that term take on life or death meaning. That is, unless you’re Boston Scientific, a worldwide developer, manufacturer, and marketer of medical devices with approximately 16,000 employees and revenue of $5.6 billion in 2004. At the company’s Maple Grove, MN, plant, the focus is on cardiovascular devices known as stents, devices used to treat and relieve blocked arteries.

“Most of Boston Scientific’s 13 plants have a certain specialty; ours is cardiovascular. Our plant specializes in less invasive treatments using stents, balloon catheters, and guide catheters,” explains Terrance Brick, vice president of operations for the Maple Grove campus, who has been with the company for eleven years. “Our drug-coated stent is the most popular and widely used in the medical community. Only two companies have FDA approval for drug-coated stents-us and Johnson & Johnson.”

The Maple Grove operations include two buildings, one in Maple Grove and another building six miles away in Plymouth. The Maple Grove campus is the second largest manufacturing site for Boston Scientific. The largest plant is in Galway, Ireland, which is also a frequent partner in manufacturing and product development since both plants manufacture the same products. The Maple Grove campus is 850,000 square feet which includes a new 150,000-square-foot facility dedicated solely to research and development. Production takes up 110,000 square feet with 2,000 of the total 3,500 employees in manufacturing. The campus is a three-shift operation with most people serving as product builders.

The Plymouth operation uses high tolerance stainless steel tubing in its manufacturing process. The company partners with steel suppliers on dimensions, purity, and specific tolerances. The tubing is cleaned and electropolished before shipping to either the Maple Grove building or to the sister plant in Galway for its drug coating. Functional and analytical testing as well as documentation for FDA regulation is all done in Maple Grove.

At Maple Grove, the laser processing of plastic into balloon catheter and guide catheters are some of the lowest profiles in the industry. The finished product catheters are then crimped onto the end of a stent and prepared for packaging. Included in the end product are directions for use and a sterilized sealed pouch with a stent crimped on the end. “It is packaged so it can be rapidly deployed in a sterile environment,” explains Brick. “The catheter and stent can be taken directly from the package and quickly inserted into the patient’s femoral artery (a common pathway to the heart).”

Maple Grove has been lean since the 1990s but only over the last five to seven years have they honed their lean techniques. Brick adds: “Lean means something different to every company. The most important step is to determine what lean is and isn’t to your company. Lean to Boston Scientific is a production operating system.”

The company’s strategy to excel at lean was to create “islands” of lean in the production area. That meant taking one small piece of the production process and concentrating on simple systems done with discipline. There was regular use of 5S and kaizen events, all with a very simple focus. The next level in the lean strategy was to connect those islands and branch lean outside of production and into business systems. “We used a formula of 40/20/25 and a sense of entitlement. Each island was expected to achieve 40 percent space utilization, 20 percent production improvement, and 25 percent lead time improvement. This metric came from reviewing our own data and seeing that those averages existed. Once you present that expectation and the data to support it, it becomes almost an entitlement to achieve the goal,” says Brick.

In another unique approach, the company pushed lean upstream in development process with the idea to get lean into the new product before it comes into production. This concept, titled “Born Lean,” meant a new product could easily fit into a lean environment without any re-engineering once production began. At Boston Scientific, the industrial engineers are the lean gurus. The “Born Lean” initiative placed one engineer on every product development team to bring in a lean culture to the process.

The lean expectation has moved upstream to the supply chain. Boston Scientific uses kanban for day-to-day replenishment or supplier-managed consignment of materials. Suppliers to Boston Scientific are constantly audited and certified.

“The results speak for themselves: 50 percent reduction in lead times, 15 percent production increase, and 15 percent scrap reduction each year,” says Brick. Maple Grove has had the same square footage since 2000, yet have doubled its production output, thanks to focusing on lean manufacturing.

Company managers aren’t the only ones recognizing the effort. In 2005, the Maple Grove facility received the Shingo Prize for Excellence in Manufacturing and was voted one of the Top 10 Plants in North America in 2003. In 2002, it also won the Minnesota Manufacturer of the Year award.

In addition, Boston Scientific was named the top company in Massachusetts for 2004 in the Boston Globe’s annual “Globe 100” report. Boston Scientific was ranked on a variety of criteria, including return on equity, change in revenue and change in profit margin. Boston Scientific Corporation also received the 2005 Best Practices in Logistics Management Gold Award from Logistics Management magazine.

The sky's the limit

Source : The Manufacturer
Published : 26 Sep 2005 17:35

Executives at Rogerson Kratos share plans for expanding the aircraft instrumentation manufacturer’s use of lean with Cynthia Garber

Formed in 1958 in Pasadena, CA, Kratos was acquired by Rogerson Aircraft companies
in 1984. Already a leader in aircraft instrumentation, Rogerson Kratos pioneered itself into highly integrated AMLCD Display Systems. Today, Rogerson Kratos leads the way in providing an outstanding product line of instruments, active matrix liquid crystal display systems, and other aerospace products which can be found on the most current world airliners, helicopters, and military aircraft.

The company’s modern facilities integrate all phases of design, engineering, production, and quality assurance and provide customers with responsive service and innovative solutions. These proven benchmarks have helped keep Rogerson Kratos at the top of the cockpit instrumentation systems industry. The company’s Electronic Flight Instrumentation Systems (EFIS) and Integrated Instrument Display Systems (IIDS) have won world acclaim as reported by many of the world’s aviation publications and news press.

Fred Lucas, director of customer support, adds that the company is now very heavily involved in the manufacture of Intheairnet—the next-generation in-flight aircraft entertainment and information system. This system not only offers in-air television, stereo, compact disc, and VCR entertainment but Internet capabilities as well.

“Our market is worldwide. Some of our major customers include Bell Helicopter, Boeing, and the Italian manufacturer Agusta. We have customers in Spain, Indonesia, and Czechoslovakia. Our workforce is currently between 70 and 75 people, many of whom have been with us for 10 years or more,” Lucas says.

Because many of the products the company manufactures are often sold in small quantities, Kratos has had to respond to a number of challenges.

“We manufacture at least 250 different products and, in some cases, we sometimes sell in quantities of only a couple at a time. Because of that we had to develop an organization that is really nimble and able to move quickly and we have a very good MRP (Material Resource Planning) system that is the backbone of what we do,” says Ron Tosta, vice president of manufacturing.

This system, Tosta continues, keeps track of planning, inventory, and material transmission. “This way we know what comes in and what goes out and we are able to put our customer purchase orders on the system so we know what to manufacture and ship,” he says.

The computer has made all the difference at Kratos. “We would not be able to do what we do with the handful of people we have without a good reliable computerized system like we have,” Tosta says.
With a total of about 43,700 line items with different part numbers within its structured system, careful planning is of utmost importance and the company is now planning to make even further use of lean.
“Obviously with the number of items we manufacture, we need to be really good at planning and purchasing. That’s because when you are supporting all of these different products at the same time, you may not be ordering a lot of parts of one type but you are trying to order and schedule many different parts in small quantities,” says Lucas. “The backbone of what we do is really being able to manage parts, assemblies, documentation, etc. So in a sense we have to move resources based on where the demands are in relationship to what products need to be built and shipped.”

And that’s where lean can make the difference according to Syed Rizvi, manufacturing engineer, who has been trained in six sigma techniques and is currently putting together an ambitious project in this regard. “We currently use some lean manufacturing techniques but we need to move into an all encompassing lean technique in building our products. We are in the early stages now and I am working on a proposal to bring before higher management with recommendations for all my ISO 9000 projects,” he says.

The company is tightly teamed with its suppliers. And, to further streamline the operation, additional changes are in the works including moving quality assurance to supplier’s sites. “That way we will make our suppliers responsible for the inspection of the material that they deliver to us,” Jim Oliver explains.
It is anticipated that these changes will have positive results. “Presently we are very good at small quantity batch manufacturing,” says Jim Oliver, quality director, who agrees that the company’s future will depend on its transitioning over to higher volume lean manufacturing.

Larry Smith, president, is also anticipating more good things to come from the further implementation of lean. “This is a case where strategically we have decided that our value added is going to be in assembly, test, and design. We design all our own products now so we consciously decided to outsource a lot of the things that would have been done in-house. For example, circuit boards. All of our current boards are outsourced to sub contractors,” he says, adding that some of the sub assemblies will be brought in completely, built, machined, and finished. “Basically, what we will do is bring in the major pieces, assemble, test, and ship them,” he says.

The success of Rogerson Kratos can be largely attributed to the fact that it has adapted to the times and the demands of its customers. “Twenty years ago we were doing probably double the amount of sales volume. But we were doing it with a different type of product, a lot more labor, and a lot more work in-house,” Smith says. “We’re able to cope by becoming a very lean organization and outsourcing a lot of sub contracts and assemblies to local suppliers. Now we’re looking forward to rebuilding at higher production rates with one of our sister companies.”

Knowing what it now knows about lean, Rogerson Kratos plans to do some additional re-organizing to make the company even leaner than ever. “We’ll organize differently and still do a lot of outsourcing. Once we have the volumes, we will set up work cells, go to more of a JIT pull type scheduling system, and do more dock-to-line inventory techniques where we will bring in material from our suppliers to deliver straight to the cells,” says Smith.

Technology's Mr Predictable

The Economist



Michael Dell's money-making machine has further scope for growth

AS TECHNOLOGY executives go, Michael Dell is not, you might say, as colourful as some of his peers. Larry Ellison of Oracle has his huge new yacht and his fighter jet; Jeff Bezos of Amazon is funding a space-rocket start-up; Bill Gates of Microsoft has his enormous, high-tech house and a penchant for Leonardo manuscripts; Steve Jobs of Apple somehow combines counter-cultural cool with business smarts and a second job as a movie mogul. What about Mr Dell? He has four kids, a wife and three dogs, he shrugs. And no, he does not invest in rockets. His company, the world's largest maker of personal computers, is fashioned in Mr Dell's own forthright, no-nonsense image. It does not make sexy products—but, thanks to its straightforward direct-sales model, its brutally efficient lean-manufacturing approach and its unrivalled expertise in logistics and supply-chain management, it does make an enormous amount of money.

The way Dell makes and sells PCs is, in fact, the antithesis of the way Apple makes and sells its iPod music-players, which are arguably the sexiest technological devices around at the moment. Dell's PCs are based on industry-standard technologies. They are sold direct, through Dell's website. And the company's efficiency allows it to offer low prices, squeezing out less competitive rivals while still making a profit. The iPod, by contrast, is based on proprietary standards, is sold through Apple's glitzy chain of retail stores, and is priced at a premium to rival players. This week Dell launched a new music-player, the DJ Ditty (yes, really), as a challenge to Apple. As you would expect, it is cheap, powerful, but not terribly exciting. “Tape-backup drives are a far bigger business for us, or LCD projectors,” says Mr Dell. Such products, along with storage-area networks, servers and other bits of corporate-computing gear—only 15% of Dell's sales are to consumers—may not be as glamorous, but are far more lucrative.

Dell's ability to churn out profits in a predictable and reliable manner has made it a favourite among investors. Look at the last ten years of sales data in the firm's 15 biggest markets—a total of 150 data points—and you will find that it increased its market share in 144 cases, says Mr Dell. That is strong evidence, he says, that his firm's business model “works everywhere, in a multitude of market conditions”.

But might the Dell machine be in danger of running out of steam? Last month, Dell announced that, despite record earnings, its second-quarter sales had grown by a mere 14.7%, rather than the 16-18% it had forecast, and that sales in the current quarter would also be slightly lower than expected. Its share price immediately fell by nearly 10%, and has since declined further.

The case against Dell was made most strongly by Laura Conigliaro, an analyst at Goldman Sachs, who downgraded Dell from “outperform” to “neutral” in a report entitled “A Miss With Much Wider Implications”. Dell is unlikely to return to reliable double-digit revenue growth in future, she argues. It faces increasing competition from Asian vendors such as Acer and Lenovo, and a widening gap between unit growth and revenue growth. And it is a far less nimble company than it used to be. “The company has now come up short of revenue expectations four quarters in a row, with each quarter's miss caused by a different combination of market conditions and execution miscues,” she wrote. In short, Dell is a victim of its own success: its scale means it is running out of room for growth, cannot respond quickly to changing market conditions, and no longer deserves to be valued at a premium to its rivals. Really?


Room for growth, outside America
Mr Dell says he has heard all this before, “maybe ten thousand or twenty thousand times”. Back in the 1990s, he recalls, critics claimed there were limits to the firm's direct-sales model, and suggested that Dell would never be able to make laptops or servers. “People say the sky has fallen, that it's the beginning of the end,” he says. “I don't agree. There are lots of markets with room to grow.” This week Kevin Rollins, who took over from Mr Dell as chief executive officer in 2004, said the company hopes to double or even triple its market share in Europe, which is around 13%, compared with 32% in America. Sales in the Netherlands, for example, are growing by 40% a year.

Dell's worldwide market share of around 19% means there is also room for growth in other regions, notably Asia. But won't low-cost Asian vendors be difficult for Dell to elbow aside? No, says Mr Dell. The firm is, in effect, an Asian vendor itself, with factories in China and Malaysia. Dell is more efficient than Lenovo, he says, and more profitable, thanks to its direct-sales model. Other growth areas are printers, storage systems and services. In printing, profit margins are unusually high, notes Mr Dell. “We'll fix that,” he says, just as the company did when it undercut the high-margin incumbents in the server business. Dell's services arm, meanwhile, which installs and manages computers for large companies, now represents 10% of its business, and is growing twice as fast as its PC division.

What of the charge that Dell's size means it is less responsive to shifts in demand? Mr Dell makes a point of making regular visits to the company's call-centres—and even takes a few calls himself—to make sure that he still understands consumer demand. On one of these visits, the deluge of calls received convinced him that the company had gone too far in slashing the prices of its consumer PCs—a move that had compensated for slowing demand from the American government, but hurt the firm's margins. Mr Dell enjoys his spells in the call-centre—they are, he says with relish, “lots of fun”.

Evidently Mr Dell's idea of fun is different from that of his peers, with their yachts, planes and spaceships. Like his firm, he is predictable rather than glamorous. But that is the way investors like it, and he intends to keep things that way.

Getting the skinny on lean management

Materials Management

By Leigh Page

Toyota-inspired analysis helps reap millions in efficiency gains.

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The management directive is simple: Cut waste, make work easier and simplify systems. Pioneered by Japanese automaker Toyota 50 years ago, the approach is known as "lean management." It involves large doses of observing, measuring and creative problem solving. Large businesses such as Boeing have painstakingly followed the tenets of lean management and reaped major savings. Now, some hospitals and other health facilities are going lean as well. They've experienced successful results and here's how they did it.

Because keeping track of equipment is a constant headache, some hospitals have invested $1 million or more in complex software to find errant pieces of equipment so that someone can fetch them.

But what if a hospital found a simpler way of handling equipment that made these expensive and time-consuming steps unnecessary?

Four years ago, this type of creative thinking occurred to Allen Caudle, vice president for supply chain management at Swedish Medical Center, Seattle, a 1,296-bed system with three acute care facilities.

With Microsoft Corp. based nearby, Seattle is to some degree a bastion of high-tech. Caudle was prepared to join the high-tech trend by tracking hospital equipment. He was planning to purchase a system that required installing signaling devices all over the hospital.

Then he discovered "lean thinking," a decidedly low-tech approach developed by Toyota Motor Corp. in Japan a half century ago. It had already been adopted by Boeing Corp. for its nearby airplane plants and was just starting to make the leap into health care.

Caudle dropped plans for the tracking system, adopted the lean system and told staffers to fan out with stopwatches and paper and pencils to closely observe employees as they did their jobs.

Somewhat like ornithologists painstakingly tracking a flock of rare birds, staffers marked each employee's movements by looping lines on a paper diagram of the workplace, called a spaghetti chart.

Then, in five-day workshops, also known as kaizen events, management and front-line workers debated ways to reduce the size and number of those loops and create a more efficient process.

The workshops came up with some disarmingly simple changes that have profoundly improved efficiency, quality and employee morale at the hospital.

A key principle of lean management is to reduce waste and make work simpler. That's a big change for hospitals, where systems seem to be getting more complex.

At Swedish, for example, intravenous pumps were constantly being misplaced on their journey from a patient's bedside to sterile processing and back again.

The Swedish workshop studying I.V. pump processes decided it would take considerably less work to leave the pumps in patient rooms. But who would clean them? Environmental services workers are there every day to make the bed-- could they do it? No one had ever proposed such an idea, and it seemed absurd at first, but no one could come up with a good reason not to do it.

Environmental services workers were trained to clean the pumps and they began performing new duties.

As a result, cleaning costs fell from $12.65 per pump to 65 cents and the turnaround time for cleaning the pumps went from 21 hours to 34 minutes.

Caudle calls such solutions "brains before bucks." He and his staff insist they are not antitechnology, pointing out that Swedish actually uses some high-tech tracking devices, such as point-of-use cabinets and bar code scanners. But before implementing automation, they used lean thinking to fix basic processes.

"If you automate a broken process," Caudle says, "you make mistakes at the speed of light."

Caudle and his employees also set
to work on another frustrating issue--slow delivery and low accuracy of surgical case carts, a problem that directly affects the quality and efficiency of the surgery department.

It was a high priority for Swedish because of patient safety and because surgery is a chief money-maker.

Again, staff closely tracked workers building the carts and brought their charts to the kaizen event, where intense discussion yielded some dramatic solutions.

In the cart-assembly area, storage areas for frequently used pieces were brought closer together.

The average time it took to build a case cart fell from 86 minutes to less than 15 minutes, and the accuracy of the contents of the case carts improved.

The shortened time allowed materials management to move from batching orders the night before, as most materials management departments do, to assembling each case cart "just in time" for use, which is a key lean concept.

Materials management can then build carts for last-minute cases and not build them for canceled cases, making the operation even more efficient.
The principle of the matter

Using lean principles, Toyota manufactured cars with half the human effort, half the manufacturing space and half the capital investment that other car manufacturers used.

Lean has since become a mantra of American industry, including such giants as General Motors and Dell Computer Corp.

In the past few years, partly due to the urging of manufacturing executives on their boards, a handful of hospitals across the country have adopted lean thinking.

Caudle says some people don't see a connection between manufacturing and health care, but he says, "The fact is we're a manufacturing facility. The same processes are involved. We process raw materials, and the assembly line is the surgery suite."

Cindy Jimmerson, R.N., a lean health care consultant based in Bonner, Mont., argues that lean is exactly what hospitals need right now. Some facilities in her state are at the brink of closing because they are inefficient, but she says, "If you could reduce the waste, these hospitals would be fine."

Jimmerson says the process also reduces errors by simplifying and standardizing complex hospital management systems. And, she says, it improves employee satisfaction by giving them new processes that are less frustrating.

Saint Mary's Hospital, a 324-bed hospital in Grand Rapids, Mich., just finished using lean to improve the processing of sterile surgical instruments.

John Collins, M.D., vice president for quality at the hospital, says front-line employees play a direct role in creating improved work patterns. The employees get very engaged, he says. "They go back to their work and become advocates of the new process."

"Lean thinking incorporates a principle of visualizing your work," says Sandra Rose, R.N., the lean facilitator at Saint Mary's. Rose and others closely observed the surgical supply process, from central sterile and materials management to the OR.

Then, as the lean process requires, the information was brought to an intensive three-day workshop composed of directors and front-line employees from affected areas. The group asked tough questions in an attempt to break through conventional ways of thinking and create a dramatically simpler way of doing things.

They noted that when OR staff needed an extra item, such as a scalpel, someone had to go to a supply room on a different floor or call central sterilization. Sometimes several CS workers were called before the item arrived in the OR.

To remove these bottlenecks, the workshop decided to set up shelves outside the OR stocked with typically needed items, which has reduced calls to central services. It also allowed just one or two phone numbers for surgery to call when someone has a request, so that several workers don't waste time doing the same task.

Within two weeks of making the changes, surgery reported that it had all the items it needed. Surgical volume increased--then accuracy plummeted.

The cause was that central sterile employees "fell back to their old ways under the increased pressure," Rose says. The team regrouped to again improve accuracy. Lean experts often point out that the process is an ongoing, unending effort.
Success comes in all sizes

Medium-sized hospitals also are applying lean thinking. Jimmerson says she helped Community Medical Center, a 135-bed hospital in Missoula, Mont., convert to lean throughout the organization.

One project involved rethinking supply rooms in the hospital's 48-bed med-surg unit. Community made the location and stock of materials match the work. As a result, it reduced the value of the stock by $7,900 and the unit's calls to materials management for more supplies from 32 a day to two a week.

Because lean is so simple and low-tech, having a three- to five-day kaizen event isn't essential, says Jimmerson. This is especially helpful for small hospitals that have limited personnel, especially in nursing where staff can't afford to be away from work for long.

Scott Decker, vice president of quality at Appleton, Wis.-based ThedaCare Hospitals, a three-hospital system, reports that the organization used lean throughout the organization, including to reduce supplies in its ORs and cath labs.

Using one common lean approach, easy-to-identify colors were pasted on shelves, appearing as more articles were removed. Green appeared first, denoting a sufficient supply; then yellow, meaning it was time reorder; and finally red, implying there was a shortage of that item.

Decker says ThedaCare saved $7 million dollars on all lean projects last year, with one-half million of that total in supplies. Lean also helped the organization to reduce the work force by 80 FTEs through work redesigns without layoffs.

Larger hospitals are also moving ahead with the new approach. In Seattle, Virginia Mason Medical Center, a 336-bed hospital, was an early adopter of lean thinking in health care.

Several years ago, CEO Gary S. Kaplan sent top executives to Japan to study the Toyota system first-hand. Among other things, John Donnelly, administrative director of supply chain at Virginia Mason, says he used the lean process to move from batching case carts to just-in-time delivery to change the location of supplies and to avoid duplication. As a result of all its lean activities, Virginia Mason reports that it saved $6 million in planned capital investment, freed 13,000 square feet of space, cut inventory costs by $360,000, reduced staff walking by 34 miles a day and improved patient satisfaction.
What a concept

John E. Siedlinski, a materials management consultant based in Naperville, Ill., says hospitals have been using similar strategies for years.

"Lean management is a good concept, whatever name is applied to it, but it is not new," he says. "In the 1980s we called it productivity improvement. The idea was that you either moved the work or moved the workers. With lean management, you quantify the movement in more detail, but you don't necessarily need the detail to understand what needs to be changed. Lean management serves to quantify what your gut already tells you makes perfect sense."

Lean specialists, however, disagree. Matt Morissette, a lean health care consultant based in Mont Vernon, N.H., says lean is both simpler and more comprehensive than other methods used today.

He says the balanced scorecard comes with no tools to correct the problems it identifies.

While Six Sigma is a highly statistical approach, it isn't easily adaptable to health care front-line employees--but it can be used in combination with lean.

Jerry Balzer, operations manager for logistics at Swedish Medical Center, says several aspects of lean thinking are unique, such as going on-site, looking closely at the workflow and documenting it.

He adds that lean management follows up on changes to make sure they are still working.

Tom Moench, a former lean advisor at Boeing who helped establish the system at Swedish, says lean also pushes hard for change. In a kaizen event, "someone says, 'We can't do that,' and then they work through it," he says. "The process gives them tools to go beyond what they think is possible."

Ken Fortune, director of logistics at Swedish, says discussions in the kaizen events, though sometimes heated, help build lasting ties between such departments as central sterilization and surgery, where lack of communication can be a key factor in wasteful processes.

"There is a true sense of 'team' and an understanding of people's roles," Fortune says, adding that the process is blame-free. "It's very easy to step back and blame someone because the case cart wasn't ready on time," he says. Instead, he adds, people have learned that "everybody is working very hard at what they do. It just may not be efficient."

Moench adds that changes made at the workshops can be applied immediately and have immediate results. "Every project I did," he says, "was dramatic and magical."

Leigh Paige is a freelance writer based in Oak Park, Illinois.

This article 1st appeared in the September 2005 issue of Materials Management Magazine.

The Lion of Lean: An Interview with James Womack

Francis J. Quinn, Editor
Supply Chain Management Review July 1, 2005

For more than two decades, James P. Womack has been an articulate and relentless champion of lean, a management approach that seeks to create value and eliminate waste in all business processes. Womack’s interest in lean began in the late 1970s and early 1980s when he was a researcher at the Massachusetts Institute of Technology (MIT). One study in particular that he worked on—a landmark analysis of the competitiveness of the U.S. auto industry vis-à-vis Japan—opened his eyes to the competitive possibilities of lean production.

That experience ultimately led to the publication of The Machine that Changed the World, which he co-wrote with Daniel T. Jones and Daniel Roos. This business classic laid out the principles of lean production as they played out at Toyota. Womack’s next book was Lean Thinking, originally released in 1996 and recently published in its second edition. In this book, Womack and co-author Jones explain how lean can be applied in a broader business context.

For the past eight years, Womack has been a visible and prolific advocate of lean thinking as the president of the Lean Enterprise Institute (www.lean.org), which he founded in 1997. The institute offers a wide range of workshops, publications, and other resources designed to help organizations understand the principles of lean and put them to work. True to the philosophy that lean is not a destination but a life-long journey, Womack and Jones are working on a new book scheduled for release this fall called Lean Solutions. Clearly, the “lion of lean” has not lost his roar.

Supply Chain Management Review Editor Francis Quinn spoke with Womack at the Lean Enterprise Institute headquarters in Brookline, Mass.

Q:What got you interested in
lean in the first place?
A: Back in the late 1970s, I was a researcher at MIT working on a variety of transportation projects. And at that time, the U.S. automakers were starting to have all kinds of competitive problems with the Japanese. So given the long relationship between MIT and General Motors (GM’s long-time chairman, Alfred Sloan, was an MIT graduate who endowed the Sloan School of Management at MIT), we decided to conduct a study to figure out what was wrong and what could be done about it.

We concluded very quickly that the Japanese automakers’ advantage wasn’t trick currency or some kind of secret weapon. There was something fundamentally different about the way the best of the Japanese companies, led by Toyota, ran the business. And when I say the business, I mean the product development system, I mean the production system, I mean the supplier management system. I mean the system in Japan for dealing with customers. By 1982, my long-time collaborator Dan Jones and I concluded that the best Japanese auto companies were different from us. And with Toyota in particular, we quickly discovered that it was process, process, process, all the time. The ability to define processes, the ability to analyze them, the ability to improve them—they were just brilliant process managers.

So all of that led to our book in 1990 called The Machine that Changed the World, which told the story of how Toyota in particular was using lean production. In 1992, I left MIT and began on a new book with Dan called Lean Thinking, which told how companies could apply the principles of lean to create value while eliminating waste in their organizations. Then in 1997, I started the Lean Enterprise Institute. We write books, we teach workshops, we run conferences. And from time to time, companies call and say “How could I be the Toyota of the oil extraction industry?” Or “How would Toyota run a retail operation or a hospital or a post office?” So we go out and do these conceptual exercises and charge people an absurd amount of money to answer these questions and have some fun. It’s great—you could call it consulting, but it’s really conceptual about what should be done rather than implementation. I wish I could do that every day.

So that’s the long-winded answer of how we got into this.

Q:What are you working on
now at the Institute?
A: We’re now trying to write down all of the techniques you need to actually become lean. The Toyota teaching method is what we would call sensei-deshi, with the sensei being the great teacher and the deshi, the student. Basically, here’s how it works at Toyota: The kids get out of the university and join the company. Then they’re told, “Okay, you know how to do math, and you know how to read. Forget all the rest of the crap. We hope you had a lot of party time because now you’re going to be working long hours for the next 40 years, and we will teach you what you need to know. We’ll start by having you stay right here and look around for waste—muda in Japanese— and we’ll be back in a few hours.”

When the teacher comes back, he’ll ask the employee to tell him all about the waste he sees. It’s an empirical teaching method in which the sensei simply asks questions: “What do you think about this operation?” “Why aren’t you looking over here?” “Over there?” “Why is something happening this way?” They start with applications, and let you figure out the principles. Generally, the way we teach in the West is to start with principles, and then let the pupil to work out applications.

In addition to chronicling the lean techniques in the factory walls, we’re also working on workbooks on lean logistics, warehouse operations (yes, Toyota does have warehouses—for service parts), policy deployment, and many other topics.

Q:What’s the biggest challenge U.S. and Western companies have in applying a lean approach to their supply chain or other operations?
A: One big thing is that lean is a slow process, and Western managers like fast action. But beyond that, a bigger problem is there aren’t enough sensei around to teach the concepts hands on. So what do we do about that? And our answer at the Lean Enterprise Institute was, “Well, why don’t we take this knowledge, which is not secret, and write it down.” So that’s the contribution of the Institute.

Q:Why, suddenly, does everyone seem to be interested in lean and in the Toyota system? What took everybody so long?
A: For better or worse, people go with winners. And when a company is doing well, people say, “Gee, that’s who we ought to imitate.” Toyota is now on a tremendous roll. There are two parts to this. One is that they’ve now got product in every segment, and they’re just getting ready to open this big pick-up truck plant down in Texas next spring. That might be “all she wrote” for Ford and GM because it could really knock the bottom out of the pricing in their last highly profitable segment of the car market.
But the other thing Toyota has going for them is that they changed the technology perception of their products. Prius is the key example. It’s not that they’re going to sell that many Prius cars, but now they’ve suddenly positioned themselves as the guys that have both the market and the latest technology, which they are now applying in a wide range of their products. There’s no style in any of their cars, at least in my view. And yet the company is marching from victory to victory all over the world. So suddenly people are saying, “Oh, wait a minute, these guys are the winners in the post-bubble economy. We thought it was Jack Welch, but Jack’s gone and now GE is into ‘Lean Six Sigma.’” So the heightened interest in lean is partly just a fad—and I wish that weren’t true.

Q: What are the key components of lean, those core elements without which you really can’t have a lean operation?
A: Well, we begin with the premise that all value in life is the result of a process. Okay? A process is simply a sequence of steps that need to be done the right way in the right order at the right time to create value for a customer. That’s what a process is: a series of actions, right order, right way, right time. That’s what creates value.

But the most important question is what value the customer wants. So managers need to start with the customer and begin walking backwards from there. They need to look at all the things that they do and write them down on a simple process map. We call it a value stream map. How many of the steps are being performed because of the way the particular system works as opposed to what the customer wants? Did any customer ever come in and say, for example, “This car has really been reworked a lot, so I’ll pay more”? No, the customer came in and says, “I’m going to pay what I’m going to pay because here’s my estimation of how the car is going to work for me.” So there’s no value in all of those rework steps you have identified. It’s just waste.

So therefore when I see a situation in which a company has a clear definition of the value stream for each of its products, where they’ve looked at all the activities and are making a really good effort to eliminate the junk that doesn’t need to be done, where you see very high velocity so that things are flowing but only as the demand of the customer dictates, and where they have an improvement system that actually makes things better…then I know I’m looking at a lean operation. Now, most organizations have an improvement team, but they don’t actually have management linkage to make sure that the improvements actually happen. So when you see all those things, which is to say a lot of wasted activity being removed, clear definition of value, a clear value stream, high velocity, only making things for the customer as wanted (with no pushing items ahead before they are needed), and a mechanism in place that continually improves the process, now you have lean.

Q: What are the kinds of things companies typically find when they begin looking at their supply chain in an effort to become lean?
A: They typically discover that they seem to be picking stuff up and putting it down a lot. There are storage points everywhere, plus a tremendous volume of finished product. What’s the rationale? Well, the reason we have that buffer of finished product is that it takes us forever to get anything done, so we just have to guess what people want. And by the way, there are so many screw ups that even if we could do something quick, we may not do it right. So, again, we have to have this safety stock. Then there’s this thing with asset utilization. Our accountant says we have a factory, and we have to run it. In some extreme cases, such as the auto industry, we have a union contract where we have to pay our labor 95 percent of their regular salary just to stay home. Anyway, what you end up with is inventory lying around at every point.

What people need to do is envision a future state where you take all the waste out and then really get serious about reaching that goal. But over and over again I see companies that have a current-state map and a lovely future-state map. But when you take a walk, as I like to do, there’s absolutely no evidence that they’re working toward the future state. They’ll tell you that they’re serious about it, but it’s a year-long program and they can’t rush into things, and on and on. It’s all just staff bologna. That’s probably the single most frustrating thing: People know they have a mess with the waste and inventory all over the place. But they’re not really serious about doing something now to fix it.

Let’s just take one example in the purchasing area. People say, “Yes, we’re going to have a lean purchasing organization. And we’ll start by having target pricing.” You say, “Great, but how are you going to do target pricing?” “Well, we’ll set the prices 5 percent below what they are now and that will be our target pricing.” “Fine, guys, but you haven’t done any analysis. With true target pricing, you actually have to look at every step and figure out what it costs— including what’s happening out in the world right now with regard to materials. The costs are really going up, and this reality has to be factored into your pricing approach; otherwise, all you’re doing is squeezing your suppliers.”

Q: What’s the downside of
squeezing suppliers?
A: There are so many problems with this. Worst case, you can put them out of business and this affects your continuity of supply. More likely, you’ll create supplier churn. And it doesn’t matter whether you’ve already consolidated your supplier base from 5,000 to 50, you’re still going to have churn if the suppliers can’t benefit from their relationship with you. As for the prevalent attitude that if the suppliers screw up, we’ll just fire them, that doesn’t work well either. Competent suppliers will not be lining up for your business.

So when I hear people who claim that they are going lean by doing target pricing, and reducing suppliers, and tinkering with reverse auctions, I have to laugh. They’ve still got the inventories, the supplier churn, the waste that they had before. These situations actually become very embarrassing for me if it is a company I know well and have given some conceptual advice to. But I finally said, “Hey, look, embarrassment is muda, so I’m going to stop feeling embarrassed.”

Q: How should you work with your suppliers in a truly lean environment?
A: First and foremost, you have to be open and up front with them. You need to have an understanding that everybody needs to make a living—and that can be a tough one for some companies.

I was telling a Delphi Supplier Day crowd out in Detroit earlier this year about an interesting experience I had in 1982 in Japan. I wound up having dinner with the managing director for purchasing of Toyota. The company had only a very small number of suppliers, only two, or at most three, per category of need. And the most amazing thing was that they didn’t do bids. They would tell the supplier what something was going to cost. They would say, “Look, here’s the deal. This is our target cost based on what the end customer thinks this product is worth. We have to figure how to get to that target while you make money and we make money. So you have to figure how to take enough cost out so that there’s margin left for you.” In other words, they were working backwards from the customer all the way up the supply stream.

So I said to the Toyota executive, “You’ve only got two or three suppliers per category, and you never take bids. How do you know you aren’t being ripped off?” So this guy, who was around 60, gives me an incredibly frosty look and says, “Because I know everything.” Everything? “That’s my job,” he says. Basically, he was telling me that we do our homework, we know what things cost, and we also know where the waste is.

The second part to this is that if the supplier is not smart enough to figure out how to take the waste out, Toyota will go over and show them. And it’s basically not a voluntary exercise. There’s this relentless target costing. There is the expectation that real cost and prices always go down.

Q: Let’s say you’re a logistics or a purchasing manager who really believes in the things you’re talking about. What can you do to promote lean thinking in the organization?
A: Well, if I’m in one of those job positions, the first thing that needs to be done is what we call lean math, which is just figuring out what your total costs are. All too often, in purchasing groups in particular, we see a piece-part approach to costing. Basically, it’s the piece-part price at the factory gate plus slow freight equals total cost. You look at that and say, “Gee guys, is that really total cost? I can think of about ten other things that you might have to add in here, like how much expediting you’re going to have to do.” And the answer you typically get is, “Well expediting costs are not part of the plan. Of course, we are doing some expediting but…” Well expediting is never part of any plan. Where did you ever see a plan that said we’re going to make heavy use of expedited air freight? But in reality it’s a part of that total cost of using far away suppliers that you don’t know well and who have weak processes. That needs to be considered, so write it down on your total-cost tally.

After addressing costing, we need to look at the quality situation. Again, the line typically is, “Well, we’re dealing with this new supplier and right now we’re having a lot of warranty claims, but we have a plan, we’re going to fix that.” “Oh, really? When are you going to fix that?” “Well, we don’t actually have a date, we’re just going to fix it as soon as we can.” “Okay, that’s good. Why don’t we write down your real prospect for the cost of warranty claims this year.”

Knowing the total costs will enable you to do things in a very different way. So instead of the usual response of ordering in larger quantities to cut freight costs or beating down suppliers to get an extra 5 percent of the piece-part costs, you open up to different approaches. You begin to understand that maybe it’s okay to have slightly higher freight costs if you have less inventory in the system and if you’re responding more closely to
actual customer demand.

But before this happens, you’ve got to change the way in which people are compensated. You can’t be paying someone based on how well they’re cutting freight costs while the inventory costs are going through the roof.

Q: What’s the key to sustaining a lean program once you get it off the ground?
A: First off, when people come in and tell me, “We’re going to be at Toyota’s level in a year,” I tell them that while that may correspond nicely with their next promotion, it’s got absolutely nothing to do with reality. Lean is not a destination but a journey, as they say…a really long journey, at that. So it’s almost pointless to try to do this as a program. This isn’t a one-year program, it isn’t a five-year program or a ten-year program. In fact, don’t even call it a program. Don’t give it a label. Don’t call it anything. Just do it, and make it part of your everyday life.

Toyota has never had programs. They never declared back in 1950, “We’re going to do lean.” They said, “Gee, we’ve been thinking there’s got to be a better way to do this. We will now start down the path to determine how to do this.” And they’ve been at it ever since. The notion of a quick program is really the enemy of the long-term sustainable success. Putting a label on it is, in general, a bad idea. In some ways, I just wish people would quit using the term lean altogether.

Q: Instead of thinking of lean as a program, how should people think of it?
A: Think of it as process-focused management. As I said earlier, start with the customer.

What are the processes that will best serve the customer? Then how do you get your people to want to follow those processes and do things the right way? There are still an enormous number of managers out there who are dedicated to the proposition that people can be forced to do things the right way. In the long run, that doesn’t work. Everyone who touches the process needs to believe in it, to understand it, to recognize how it’s helping the customer. And that means everyone—from production associates to line managers to the staff support people. People either believe in this thing or they don’t—you can’t make them believe. The Toyota guys believe in what they’re doing. They understand the underlying logic and why it’s so important. In this kind of environment, nobody has to make you do anything. Nobody has to say to the employees, “Don’t stick your head in a bucket of water and keep it there until you turn blue.” You don’t have to tell people not to do things that everyone agrees are stupid.

Lean is not a game for quick studies, and it’s not a game for Speedy Gonzales. It’s not “I read the first page of your book, and I got it all.” And it’s not a game for the guy who’s doing it for one year in order to get his or her promotion so he can go to the next job. I talked about this recently at GE, which historically had a very rapid progression of management. The feeling there is that if you’re stuck in a job for more than a year, you must be doing something wrong. So I told them that maybe you should start thinking about keeping people at jobs for four or five years. All this jumping around just jumbles up all the information, and you lose all the continuity. Look at how much churn there is in purchasing, for example, and how much valuable information is lost about parts and products, about customers, and so on. You know, last year it was Bob, and then earlier this year it was Sally, and now it’s Ruth. They say, “Well we move people around because we’ve got a flexible, dynamic, and responsive organization.” Problem is: Nobody knows anything. There’s a lot of waste in inherent in this.

Q: Where does technology fit in a successful lean approach?
A: Lean people are always technology skeptics. They’re not Luddites, mind you, they’re just technology skeptics. They spend their time on creating a process that requires as little information as possible, while the rest of us try to figure out how can we get more and more and more information. Lean guys look at something and often notice that there’s a tremendous amount of completely irrelevant information collected and no information that’s actually useful to the management task at hand. They seek to make the process transparent, make it simple as opposed to complicated. And as they do that, they discover that actually they don’t need to know as much as they thought.

Put another way, lean folks want to simplify the process and take the wasted steps out before they want to talk about automating the information needed to manage it.

Q: Other than Toyota, how have companies done generally in implementing lean in their supply chain?
A: In every industry, there are companies that give it a go; some of them get somewhere, and some of them don’t. Tesco, the UK-based grocer, is an example of a success story. They have learned how to go beyond Wal-Mart. They came to Dan Jones ten years ago and asked, “How would Toyota run a grocery business?” And they’ve been working hard to become the Toyota of the grocery business ever since. You know, everyone thinks of Wal-Mart as the model of efficiency. But when I go into Wal-Mart stores and look at the excess inventory and wasted motions in materials handling, I just chuckle to myself. Now, Wal-Mart is vastly better than Kroger or Albertsons or typical grocers in North America and Europe. But they have a lot to learn from Tesco. What Tesco is doing is really just a Toyota knock-off: Small amounts frequently replenished, and let the customer be the trigger point at the scanner.

Perhaps the most interesting example is 7-Eleven in Japan. It’s probably the leanest grocery company on the planet, doing demand-driven replenishment multiple times during the day. Solectron is doing a good job of going lean in contract manufacturing. You find some examples in unexpected places, too. One of my favorites is the post office in Canada. Postage rates in the United States keep going up, and the USPS [United States Postal Service] is losing a fortune. On the other hand, Canada Post is keeping rates steady and pays hundreds of millions of dollars in profits to the Canadian government. What’s the difference? Canada Post went lean.

Q: Any final words on why top management in U.S. companies needs to start getting serious about lean?
A: We have just come through a long time period, ending in 2001, when companies could grow rapidly with new product technologies and acquisitions funded with rising stock prices. But now, as managers look across the industrial world, it’s hard to see much growth through these means. So, if companies want to grow, and most businesses do want to grow, they really need to do it organically by doing a better job for customers in the areas where they already compete. Remember that Toyota has grown steadily for 50 years offering one type of product—motor vehicles—in an industry that was already pretty mature in the developed countries at the time Toyota entered the game.

When it comes to organic growth, lean is a great answer. On the cost side, it’s obvious. But the real opportunity is on the value side where lean companies can offer customers better products developed faster at a lower cost while also taking all the hassle out of what we call the “provision stream,” which runs from the manufacturer through distribution and service to the customer’s actual point of use. Indeed, we think that “lean consumption” is the next big thing, going beyond lean production. Dan Jones and I have a book out in the fall (October 2005) called Lean Solutions that focuses on this next leap.

© 2005, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

Womack Advocates Lean Consumption

Industry Week, Sept. 21, 2005

"A combination of lean consumption, lean provision and lean production can solve problems for consumers, providers and manufacturers. It can help us stop wasting time, provide exactly what consumers want where and when they want it, advocates James Womack, president of Lean Enterprise Institute. He expressed his view on the next phase of lean during a keynote presentation at IndustryWeek's Smart Manufacturing 2005 conference that is being held in Bloomingdale, IL through Oct. 21.

Womack has praise for manufacturers explaining that products have gotten better with fewer defects, more features and lower cost/price due to the adoption of lean production. Companies have created better processes for design, production, logistics and supplier management.

"Even with those advances most manufacturers are not making a great deal of money and customers aren't happy," explains Womack citing the need for lean consumption. "Lean consumption involves solving customers' problems completely, not wasting their time, providing exactly what the customer wants, in a location they prefer and a timeframe they need. And finally it is helping customers reduce efforts to solve their own set of problems."

One example he gives is of Fujitsu Services ability to: reduce total costs to the manufacturers; reduce help-line turnover; reduce customer time and frustration by assigning more knowledgeable people to help lines and direct customers to engineers or other key personnel who are closer to the source of the customer's problem.

Workers behind Shingo Gold

Blackanthem.com, ROBINS AIR FORCE BASE, Ga., September 20, 2005

When the Lean journey began for the Warner Robins Air Logistics Center, few put much stock in where it would lead. Nearly four years later it has become a layman's term synonymous with success and, most recently, excellence in manufacturing.

Last week Maj. Gen. Mike Collings, center commander, announced to the C-5 Programmed Depot Maintenance work force their hard work had paid off in their bid for the much coveted Shingo Prize. The center became one of the first-ever public industries to receive the prestigious Shingo Prize for Excellence in Manufacturing and the first government industry to receive the gold level honor.

The Shingo Prize was established in 1988, and promotes Lean manufacturing concept awareness and recognizes companies that achieve world-class manufacturing status. It was opened to the public sector for the first time this year with four levels of recognition including platinum, gold, silver and bronze.

Greg Beecher, 402nd Aircraft Maintenance Group Lean change manager, attributes the win to the hard work of the mechanics.

"The mechanics' acceptance of Lean and their help implementing it has been the backbone of our success; this is an entire team award," he said. "The mechanics and supervisors, the 402nd Commodities Maintenance Group, Maintenance Support Group and other areas on base from Engineering to Personnel to Environmental all helped in winning this award."

Mr. Beecher said the C-5 area was chosen by the center commander's executive council because of the maturity of its Lean program and because it shows the breadth of Lean at Robins.

Some of the key accomplishments listed in the 100-page achievement report submitted to the Shingo Prize committee earlier this year included 100 percent on-time delivery in fiscal 2004, up from only 25 percent in fiscal 2001, and an average flow day reduction from 339 in fiscal 2001 to 234 in 2004.

While the entire team is proud of the accomplishment, Mr. Beecher said they won't rest on their laurels.

"Lean isn't a destination, it's a journey," he said. "We won gold, but there's still platinum out there. While it's humbling for our peers to recognize us, we know there's still work to do."

DeDe Stone, 402nd MXW Process Improvement Section chief, said the only way to follow this performance is by continuing to implement and sustain the process improvements. "They've worked extremely hard to improve their processes and to make the C-5 a world-class organization," she said. "There were many months and many long hours involved with the preparation of the package and in preparation for the site visit. I was pleasantly surprised because it was the first year for this award, and we didn't know what to expect."

The Shingo Prize is named in honor of the late Dr. Shigeo Shingo who helped create, train and write about many aspects of the renowned Toyota Production System and related production systems.

By Lanorris Askew
78th ABW Public Affairs

USAF Meeting With MIT To Develop 'Lean' Acquisition Process

Source: Aviation Week

09/16/2005 09:38:32 AM
By Jefferson Morris

Late this month the Air Force will meet with researchers from the Massachusetts Institute of Technology in Cambridge, Mass., to discuss how "lean" industry principles can be applied to the service's acquisition process.

The goal is to create a "value stream map" of the Air Force's entire acquisition enterprise. Value Stream Mapping involves drawing a visual representation of every process in a manufacturing line to identify and eliminate sources of waste.

"What the MIT people do is provide the tools and the knowledge to help guide the process of creating a value stream map, and they will act as facilitators and work with the Air Force people to create that map," said Bill McDaniel, director of communications for the Lean Aerospace Initiative. The first meeting will take place Sept. 27. Particular scrutiny will be placed on the "seams" between organizations within Air Force acquisition, where waste and delay often occur, said McDaniel, who met with The DAILY and affiliate Aviation Week & Space Technology magazine.

LAI is a partnership between the Air Force, MIT and industry to develop and apply lean manufacturing principles. LAI began in 1993 when the Air Force asked MIT researchers if it was possible to apply the efficient manufacturing practices of the automobile industry to military aircraft production.

LAI is focused on reducing cost, human effort, engineering hours, time and materials to make manufacturing as waste-free as possible, McDaniel said. The 22 industry consortium members, which include most of the major aerospace contractors, draw on lean manufacturing research performed at MIT and adapt it to their own production lines.

Success stories

The Air Force contributes about $2.5 million dollars annually to LAI, with industry kicking in nearly the same amount. The application of LAI-developed tools to five projects - engine testing at Arnold Engineering and Development Center, F-16 contract closeout, F/A-22 flight-testing, Global Hawk contracting, and the transformation of two of the Air Force's Air Logistics Centers - resulted in savings to the service of $100 million over roughly a three-year period, McDaniel said.

From the Air Force's perspective, "that's a pretty good return on a $20 million investment," he said. "And in the process, [it] got more products, more weapons, more aircraft, more stuff out to the field where it's needed, saving lives."

Aviation Week, a division of The McGraw-Hill Companies.

Everybody wants it, Toyota's got it

Rivals have tried for years to copy the Japanese auto maker's formula for success on the shop floor. Its well-oiled Cambridge plant shows why, GRANT ROBERTSON reports

By GRANT ROBERTSON

Thursday, September 15, 2005 Page B19

CAMBRIDGE, ONT. -- Getting inside Toyota Inc.'s assembly plant in Cambridge, Ont., isn't easy.

Demand for corporate tours, which give outside companies a first-hand glimpse at how the Japanese auto maker works, is so high that executives have been known to sign up for public tours just to get in the door.

But Toyota is by no means secretive about what it does at the sprawling Cambridge facility, nor anywhere else for that matter. Despite riding atop the North American auto sector for the past decade, the company's manufacturing methods are an open book.

Its practices have been pulled apart and dissected by authors and academics alike in an effort to crack the code that has made Toyota the most profitable car maker in Canada and the United States.

But for all the openness, which has laid bare much of the mystique that once surrounded Japanese auto making, the secret to Toyota's prowess remains intact.

North America's Big Three auto makers have studied Toyota's ways, and in some cases incorporating carbon-copy business models into their own plants, but they haven't been able to challenge its dominance in the profit column.

Case in point: Toyota made $11-billion (U.S.) last year -- more than Ford Motor Co., General Motors Ltd. and DaimlerChrysler AG combined.

The Cambridge facility, which makes the Corolla, Matrix and Lexus RX330, is "on balance, the best plant in Canada," says Ron Harbour, president of Harbour Consulting, which measures productivity at auto makers.

Inside Cambridge, the set-up looks like any other modern North American facility might.

Crews work quickly along the production line; the pace is a steady drumming of bolting and fastening. Each task is broken down into roughly minute-long intervals and tools are kept within arm's length at all times. A fresh supply of parts arrives at the line roughly every 40 minutes.

And a long network of lights and wires runs the length of the assembly operation as it snakes its way through the plant. The Andon system, named after a Japanese word for lamp, lets workers halt the assembly process if a problem arises with one of the parts.

At the push of a button, lights flash, an alarm is sounded and, under the principles of the Toyota strategy, crews must fix the situation immediately, rather than allow the problem be shipped down the line to the next assembly point.

While Toyota invented the Andon, it has become somewhat of an industry standard. Several North American car makers, including General Motors of Canada Ltd., have employed the strategy in some form.

The secret, however, lies in the way the system is used, says Jeffrey Liker, director of the Japan Technology Management Program at the University of Michigan and author of The Toyota Way. "Not everyone uses it effectively."

For years, North American car makers were reluctant to stop their production lines for anything, arguing that productivity dropped to rock bottom if the line was halted.

"They have spent a lot of money and they've hired a lot of consultants -- and they've hired a lot of Toyota people," Mr. Liker says. "But the results have varied tremendously from company to company, plant to plant."

It's not that Toyota hasn't tried to help the process. Second only to its export of cars is the export of its philosophies.

In the mid-1980s, former chairman Eiji Toyoda issued a company-wide hoshen kanri -- an edict within the corporation -- that the car maker would share its methods with the industry. At the time, Toyota was looking to set up in the U.S. market and knew it needed the political goodwill of competitors to make the expansion work.

Toyota also knew that if its suppliers were going to operate efficiently, they needed to know the company's system of lean management, where parts are kept flowing into the plant throughout the day and minimal stock is kept on hand.

Though the Cambridge plant has played host to a number of auto makers -- from BMW to Volvo -- who want to benchmark their operations with the facility, its biggest impact has arguably been seen at GM.

With its own use of the Andon and a minimalist approach to managing inventory, GM has made significant productivity gains since it partnered with Toyota on a joint plant in the early '80s. The California partnership helped Toyota get off the ground in the U.S. and opened GM to lean manufacturing, Mr. Liken says.

"They knew that they were teaching GM a lot. But they know it ultimately rests on people and culture, and they realized that GM just seeing what they do isn't a major risk."

More than 20 years later, car companies are still playing catch up.

"The other companies are very intelligent. Don't get us wrong, they're smart companies," says Phil Rodi, head of manufacturing at the Cambridge plant. "I don't think they go down to the level of detail that we do."

Mr. Rodi, who has worked at Ford and Chrysler plants, says the differences in the Cambridge operation rest in the subtleties of how it runs, rather than the infrastructure or the line itself.

"Everything we do has to be done the same way every time," he explains. "You pick a bolt with your right hand, you shoot it with your left hand, then you do it again the same way. So if there is a problem with what we're doing, and we've trained everybody to do everything exactly the same, we can easily find where the variable is."

Line workers spend two hours at one job, then transfer to another within their group of half a dozen people, a strategy Toyota believes helps break monotony, foster teamwork and keep the plant flexible when employees are away.

North American auto makers have experimented with that strategy, but with limited success. Critics argue workers who do the same task repeatedly are more specialized.

However, the industry has flocked to lean management of inventory to save costs. Though it requires careful co-ordination with suppliers, parts aren't needlessly gathering dust in an overstocked warehouse, Mr. Rodi says.

When Toyota opens its new plant in Woodstock, Ont., in 2008, the facility will be a near duplicate of the Cambridge operation, using many of the same people from the Corolla factory.

The goal for Toyota Canada will be to seamlessly duplicate the Cambridge model, matching productivity car for car. It's a challenge that has eluded many of the company's rivals, Mr. Harbour says.

"Toyota has probably laughed behind everybody's backs for years," he says. "Everybody goes in there and looks at [the Cambridge plant] and walks out, but doesn't really understand how to do it. So because of that, I guess they still continue to let them look at it."

News source: The Globa and Mail

Moving Beyond Lean Manufacturing to a Lean Supply Chain

Featured Author - Michael Bittner - September 13, 2005

Background

Most of the buzz and activity around the adoption of lean manufacturing concepts within an enterprise has been linked to the shop floor. Production operations have been the target of most lean manufacturing deployments, but lean manufacturing principles and techniques can be extended beyond the shop floor to processes that are unique to and transcend efficient production operations and supply chain operations. Stretching lean manufacturing principles toward a lean supply chain is a tall order, and only a few early adaptor enterprises such as Toyota, Lockheed-Martin, Nokia, Delphi, and Honeywell can speak to the challenges and successes of lean initiatives. To date, over 50 percent of all U.S. manufactures report some type of lean manufacturing initiative in process, while less than 10 percent report transition of lean principles beyond plant production.

However, these progressive companies show that the extension of lean manufacturing concepts across the interdependent supply chain network of suppliers, customers, and partners can result in real value creation for the savvy enterprise. Lean supply chain operations require continual planning, monitoring, and refinement. They can also undergo transformational changes in response to technological developments. Creating a lean supply chain by streamlining business and production processes to significantly reduce cycle time, increase production yields and quality levels, decrease inventories, minimize waste, lower costs, and increase customer satisfaction are the potential rewards.


Lean Beyond Manufacturing

Lean concepts transcend manufacturing operations to the extended supply chain network.

Organizationally, manufacturers have not traditionally been structured to have all the components of the supply chain responding in harmony to customer demand. Manufacturers, who have traditionally focused on making products to forecast, pushed them into the supply chain with high levels of inventory to counter unplanned variability. These same manufacturers relied on brand equity and catchy marketing campaigns to create demand, and move excess products. Real consumer demand information was hidden in components of the supply chain and not visible in any actionable format. Manufacturing based on consumer demand has not been the priority but instead the focus has been on asset utilization, production efficiencies, and cost cutting. Fragmented IT applications did not help integrate and synchronize business processes from customer demand back to manufacturing schedule execution for profitably meeting demand.

But this is changing as leading manufacturers turn to interdependent supply networks which embody back-end business planning and operations in conjunction with lean methodology and practices across the supply chain. Modern supply chain strategies driven by lean manufacturing tools and concepts will distinguish the performance-driven enterprise. Traditional manual pull systems fall short when applied to a networked supply chain model for the following reasons:

Lack of visibility across the networked supply chain

No standard traceable collaboration medium

Manual systems are slower by nature, and more error prone

Manual approaches struggle with demand variability or spikes in demand
As companies deploy lean strategies in the production environment, the following points should be considered as an expansion of the scope of the project.

In transitioning of the production environment to support a customer driven demand model, firms must also extend this strategy through the supply chain

Lean practices can in some cases be implemented throughout the supply chain simultaneously, albeit cautiously

Improvements in supply chain communication and collaboration are a prerequisite to complete production efficiencies

Understanding the impact and integration requirements of lean with networked partners is a key variable to achieving real results

Focusing on improving lean methodologies and practices through technology can result in enhanced supply chain network communication and collaboration among its participants. Lean enablers in the form of software applications, in conjunction with best practices, are evolving but adoption has been slow. Managing the business process change cycle has been a primary challenge.


Lean and Supply Chain Efficiencies

Extended supply chain efficiencies will emerge as lean mechanisms from manufacturing are deployed.

Progressive manufacturing enterprises will be able to build responsive and agile manufacturing operations synchronized with the associated supply chain network structure that profitably meets real customer demand, rather than merely making efficient use of manufacturing resources, with the lowest costs being the measure of success. Traditionally, the enemy to profitability and responsiveness is the inventory buffers that must be in place to counter unpredictable manufacturing performance. Processes that result in a quick response to change while maintaining control of operations will become an indispensable manufacturing advantage. The advantages of lean manufacturing concepts with demand driven techniques, extended through the supply chain, deliver:

Real time supply chain communication and coordination

Real time supply chain scheduling

Inventory reduction through demand-based replenishment

Reduction of non-value added work internally and externally

Improved demand signal management across the supply chain network

Focus on material flow across the entire supply chain

Profitably building a lean supply chain network requires that manufacturing operations synchronize with customer demand and produce acceptable quality products as needed. A manufacturing strategy that is based on reduced variability, production to demand, waste elimination, and optimal cycle time will drive over all supply chain success. Manufacturers that cannot control variability will not be able to move toward lean demand driven replenishment strategies cost effectively.


Where the Real Value Is Found

Real value creation is found via the extension of lean manufacturing concepts across the supply chain network.

The real return on investment (ROI) “bang”, when extending lean concepts through the supply chain, comes from the improved execution activities of the entire business, not just the manufacturing operations functions. Research studies have estimated that the benefits of extending the lean methodologies and techniques throughout an interdependent supply chain network could be multiplicative, relative to the benefits derived from a single enterprise deploying the same tools solely at the shop floor level. While current empirical evidence is lacking, the research community expects objective and quantifiable data to support this hypothesis in the next few years as more deployments across supply chain networks become a reality.

Meeting the requirements of customer driven demand with its implied uncertainty and variability through interdependent supply networks is not a small undertaking and will take time, especially for the cultural aspects of the required change in mindset. Manufacturers must start now by building a cross-functional team to define their manufacturing and supply chain network strategy, and designing a roadmap for deployment of applications that incrementally build manufacturing and supply chain agi