Early Lean Adopters Embrace Technology (Aberdeen Group Sector Insight)

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Results from Aberdeen Group report, The Lean Supply Chain, indicates that Aerospace and Defense (A&D) manufacturers are 40% more likely to be Best in Class performers – companies that are …

Results from Aberdeen Group report, The Lean Supply Chain, indicates that Aerospace and Defense (A&D) manufacturers are 40% more likely to be Best in Class performers – companies that are characterized by having an integrated Lean approach and solution with technology enablers - than their peers from other industries.

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  • 1. Manufacturing February 01, 2007 Early Lean Adopters Embrace Technology Market Segment Results from Aberdeen Group report, The Lean Supply Chain, indicates that Aerospace and Defense (A&D) manufacturers are 40% more likely to be Best in Class performers – companies that are characterized by having an integrated Lean approach and solution with technology enablers - than their peers from other industries. One of the reasons for this performance difference is their early adoption rate for Lean. The maturity of this industry is directly reflected in its increased rate of technology and lean tools utilization on the shop floor. Lean Adoption Lean is a philosophy that espouses continuous improvement, the simplification and standardization of business process, and the elimination of all forms of waste. A&D Manufacturers have taken the lead compared to their peers when it comes to adopting Lean philosophies and processes in their organizations. These manufactures are 81% more likely to have adopted Lean processes for more than 5 years, as compared to the general population. (Figure 1). Figure1: A&D Manufacturers: Taking the Lead in Lean Adoption 50% 29% 25% 21% 17% 18% 17% 16% 14% 15% 8% 8% Less than 1 year 1 to 3 years 4 to 5 years More than 5 years General Population A&D BIC A&D Source: AberdeenGroup, February 2007 Another interesting finding was the considerable difference in the adoption rates among the A&D manufacturers. Even in the same vertical, the Best in Class (BIC) companies are 72% more likely to have adopted Lean manufacturing processes for more than 5 years. This difference among the A&D manufacturers points towards the fact that there is still ample room for improvement among the A&D sector. Announcement For more Manufacturing research, join Manufacturing Advisor
  • 2. Early Lean Adopters Embrace Technology Sector Insight Page 2 Different Responses for the Same Challenges: Deploying Lean techniques and technologies in the manufacturing process can help companies to significantly improve their operational performance, customer responsiveness and hence the bottom line financials. But as the famous adage goes “it is easier said than done”; companies are facing challenges in implementing Lean concepts. Even with the early adoption rates, the A&D manufacturers are facing challenges similar to those faced by the general population. The challenge of ‘Cultural Change’ is a top issue that manufacturers in every industry vertical are currently facing. But interestingly, A&D manufacturers are responding to the challenge with a slightly different perspective. Figure2: Responding to the Lean Implementation Challenges 67% 58% 58% 48% 42% 42% Use external Lean domain expertise Engaged top management Took small, pragmatic steps to become Leaner A&D General Population Source: AberdeenGroup, February 2007 Companies that are relatively new in their Recommendations for Action Lean journey, start with taking small, pragmatic steps to become lean. This is √ Engage top management to facilitate the the approach followed by the majority of adoption of lean philosophies and technology. the manufacturers. Once they realize the √ For A&D manufactures trying to reach Best in early benefits of using Lean techniques Class performance levels- employ external they get aggressive with their strategy. consultants with greater domain expertise in A&D manufacturers have already passed Lean adoption. that stage and hence are following √ Utilize ERP as a foundation for Lean initiatives different tactics to respond to the and ensure ERP has specific functionality in challenges. Lean tools such as Kanban, Level Loading, and A&D manufacturers are more likely to Supermarket Sizing. leverage external domain expertise with the use of consultants and trainers to speed up their Lean initiatives. This is an important step by A&D manufacturers, taking in consideration the performance gap that exists in the vertical. A&D manufacturers that are early in their Lean journey can use some outside help to get in pace with the top performers in their field. Getting top management engaged with the Lean process is another important strategy followed by A&D manufacturers. In order to get and sustain buy in from top management, it is important to make them realize the short term as well as long term strategic benefits of adopting Lean tools. It becomes a lot easier for any company to address important issues © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  • 3. Early Lean Adopters Embrace Technology Sector Insight Page 3 when a decision comes from the top rather than from the grass root level. Commitment from top officials also helps to increase the technology adoption rate for the manufacturing processes. Technology Adoption Technology plays a crucial role when it comes to applying Lean concepts in manufacturing. Technology is used to increase collaboration across different levels of the organization. With companies expanding their supply chain globally, manufacturers are in need of Lean tools and a robust technology platform. This will help companies to address the challenge of growing complexity in the supply chain and also to adopt Lean on the shop floor and across the organization. Figure 3: Using ERP to Support Lean Strategy 100% 78% 56% General Population A&D A&D BIC ERP (as a general foundation for Lean) Source: AberdeenGroup, February 2007 A&D manufacturers have embraced the use of technology in their approach towards going Lean. They are 40% more likely to use ERP solutions as a general foundation for Lean as compared to other manufacturers. This difference is amplified among BIC A&D manufacturers. In fact, every single BIC A&D manufacturer benchmarked by Aberdeen utilizes ERP technology to support Lean initiatives. ERP solutions have come a long way from being used to manage the back office business processes to being used as a solution to encompass customer and supplier functions. As companies start realizing the real benefit of Lockheed Martin Electronic Systems using Lean tools across departments, they gradually move from the manual approach “In the late 1990’s we improved our competitive (pencil/paper and spread sheets) to the use of standing by coordinating both our business more automated applications – SCM (Supply processes along with our ERP implementation. Change Management). A&D manufacturers This put us in the position to aggressively being historically early adopters of Lean have promote Lean and Six Sigma across our business led this approach. This can clearly be seen in unit. Utilizing ERP in conjunction with our Lean Figure 4, where A&D manufacturers have and Six Sigma programs we have seen overtaken the general population in adopting significant improvements to both our product Lean tools, such as Kanban, Level Loading, cost and cycle time performance” Supermarket Sizing and Value Stream Frederick Musco, Director of Information mapping across the enterprise. The Aberdeen Technology Group attributes this increased adoption of Lean tools to the industry’s early adoption of Lean philosophies and the utilization of ERP as a foundation of Lean, all of which precede Best in Class performance. © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  • 4. Early Lean Adopters Embrace Technology Sector Insight Page 4 Figure 4: Utilization of ERP and SCM for Lean Tools Supply Integration 60% (Kanban) 54% 47% Plant/Line Execution 44% 43% (leveling & Takt time) 35% 38% Supermarket Sizing 20% 24% Value Stream Mapping 30% 28% (Cross-enterprise) 19% Value Stream Mapping 22% 27% (Plant level) 20% General Population A&D A&D BIC Source: AberdeenGroup, February 2007 Aberdeen Conclusion Many Aerospace and Defense manufacturers are enjoying a competitive advantage because of an early adoption of Lean tools. However, there are still considerable differences in the performance among A&D manufacturers. The best way for A&D manufacturers to achieve best in class performance is by using external domain expertise, and utilizing ERP with Lean specific functionalities as a foundation for implementing the above Lean tools. For those Aerospace and Defense manufacturers that are performing at the Best in Class level; continue utilizing technology to institutionalize Lean philosophies and continue to extend Lean initiatives across the supply chain. By implementing these strategies the Aerospace and Defense industry will continue to lead the Lean adoption curve and continue to enjoy performance benefits that are superior to almost all other industries. © 2007 AberdeenGroup, Inc. Telephone: 617 723 7890 260 Franklin Street Fax: 617 723 7897 Boston, Massachusetts 02110-3112 www.aberdeen.com
  • 5. Early Lean Adopters Embrace Technology Sector Insight Page 5 Related Research Upcoming Research The Lean Supply Chain Benchmark Manufacturing Flexibility, February 2007 Report, September 2006 The Lean Benchmark Report: Closing the Shop Floor Data Integration, March 2007 Reality Gap, March 2006 Author: Mehul Shah, Research Analyst, Manufacturing (mehul.shah@aberdeen.com) Matthew Littlefield, Research Analyst, Manufacturing (matthew.littlefield@aberdeen.com) Founded in 1988, AberdeenGroup is the technology- driven research destination of choice for the global business executive. AberdeenGroup has over 100,000 research members in over 36 countries around the world that both participate in and direct the most comprehensive technology-driven value chain research in the market. Through its continued fact-based research, benchmarking, and actionable analysis, AberdeenGroup offers global business and technology executives a unique mix of actionable research, KPIs, tools, and services. This document is the result of research performed by AberdeenGroup. AberdeenGroup believes its findings are objective and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by AberdeenGroup, Inc. and may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means without prior written consent by AberdeenGroup, Inc.