How Lean manufacturing can help in a time of economic crisis

1. Advanced Manufacturing Consultancy Sdn. Bhd.
HOW LEAN CAN HELP IN “TROUBLED TIMES”
JR VICTOR
Sr.Consultant and Director, Advanced Manufacturing Consultancy Sdn. Bhd.
Lean Manufacturing has the solutions to make an operations/business more productive and profitable. However during
these times of bad economy and slow‐down of volumes the focus very often shifts in most organizations. Most
companies are caught in a panic where the power of Lean is often ignored or put in the lower lines of their priority list.
With the current economic conditions, a slowdown in volume is seen by everyone (except a few types of
businesses/industries). Manufacturing companies will find that it is difficult to turn things around because the effect is
experienced at the Industry level (competitors also will be facing the same problem)
A few realities need to be assessed before we can say whether Lean can play an IMPORTANT Role in turning around the
current scenario:
1. Has the Total Volume shared by all competitors gone down to such an extent that it is below your plant’s
capacity? If NO than you still have an opportunity to increase MARKET SHARE?
2. Are the Operational Drivers mentioned below a critical “selling factor” for possible increase in market share?
a. 20% ‐ 30% Reduction in overall Lead Time
b. Improving Top three defects, common in the Industry by 50%
c. Managing Inventories as a leverage to reduce Cost Per Unit by 20% ‐ 30%
d. Improving On Time Delivery to achieve 90% and above
3. If any of the above Drivers is a POSITIVE selling point then LEAN becomes a CRITICAL INITIATIVE to focus on
during this turbulent time.
Strategies to apply to make Lean work for increasing market share during such time:
A. MEASURE FOR SUCCESS:
• Use the correct plant wide measurements to make sure all improvement initiatives are working
towards this end WITHIN THE NEXT SIX MONTHS
i. Overall Lead Time (Time from receiving order to delivery) to reduce by 50% of the current
ii. Use OEE of bottleneck equipment (capital resources) as a measurement for Sales Personnel.
iii. Measuring Velocity Ratio, MCT and OTD with following targets: Velocity Ratio: 3; OTD: 95%,
MCT: 50% lower than current
iv. Zero Defect and scrap cost per unit becomes a key measurement
B. MANAGE INVENTORIES:
• Manage line inventories with a target of 50% reduction through Kanban and batch size reduction
• Manage Raw material inventory: Apply lean Kanban concepts in managing Raw Material
• Force manageable suppliers into VENDOR MANAGED INVENTORIES stored at your site
C. MANAGE CAPITAL SPENDING & Utilization
• Ensure no capital investment will be made unless current machines are running more than 85% OEE
• Hike up current machines to 85% OEE so that more machines can be shut down to reduce operational
cost OR to Reduce utilization percentage in order to have Cycle Time advantage
Manufacturing and business solutions towards increased profitability

2. Advanced Manufacturing Consultancy Sdn. Bhd.
D. MANAGE LEAN ACROSS THE BUSINESS
• Critical areas where LEAN must spread ASAP (apart from production) to reduce their time by 50% in
order to have an impact in overall Lead Time
i. Order Processing
ii. Shipment
iii. Procurement
iv. PC Planning
• Administrative areas
i. Reduce Administrative Waste by 50% so that the work‐force can be transferred to
“Throughput generating” areas
E. MANAGE THE QUALITY
• Focused Lean & Six Sigma initiatives to bring improve Top Three Industry‐common Quality issues to a
level which is attractive to customers
F. MANAGE THE SALES FORCE
• Use low OEE of capital resources (Caused by poor Availability because of low volume) as a key
measure and driving force for sales teams to negotiate increased volumes from customers (To
increase market share)
All the above strategies can be achieved by aggressively using the Lean methodologies and Tools. Most of the time the
work‐force who have gone through the relevant training in Lean manufacturing will have the knowledge of the tools
but may lack experience, strategic ideas, initiative, and creativity to apply the tools in various business scenarios.
However with empowerment, close monitoring of progress and sufficient management support the work‐force can be
led to work on these areas.
The key thing in using Lean to achieve the above will be:
• SPEED
• EMPOWERMENT
• MEASUREMENTS
• SPONSORSHIP
• USE THE IMPROVEMENT AS A SELLING POINT TO BARGAIN MORE MARKET SHARE
• EFFECTIVE EXECUTION AT ALL LEVELS
I extend my Best Wishes to all Lean Practitioners and Lean believers in your Lean journey.
“There is nothing more insane than doing the same thing again and again and expecting different results”
(Albert Einstein)
JR VICTOR
Advanced manufacturing Consultancy Sdn. Bhd. is a consultancy firm specialising in:
• Helping clients in cost saving & productivity improvement programs
• Consulting and Training in Theory of Constraints
• Consulting and Training in Lean Manufacturing
• Lean Sigma development
• Certification programmes in Lean & LEANSIGMA
• Factory audits and assessments
http://www.amc-sb.com
mailto:enquiries@amc-sb.com
Fax: +605-526 1090
Manufacturing and business solutions towards increased profitability