just in time and lean manufacturingDocument Transcript
JITJust in time (JIT) is a production strategy that strives to improve a business return oninvestment by reducing in-process inventory and associated carrying costs. Just-in-timeproduction method is also called the Toyota Production System. To meet JIT objectives, theprocess relies on signals or Kanban (看板 Kanban?) between different points in the process,which tell production when to make the next part. Kanban are usually tickets but can besimple visual signals, such as the presence or absence of a part on a shelf. Implementedcorrectly, JIT focuses on continuous improvement and can improve a manufacturingorganizations return on investment, quality, and efficiency. To achieve continuousimprovement key areas of focus could be flow, employee involvement and quality.Quick notice that stock depletion requires personnel to order new stock is critical to theinventory reduction at the center of JIT. This saves warehouse space and costs. However,the complete mechanism for making this work is often misunderstood.For instance, its effective application cannot be independent of other key components ofa lean manufacturing system or it can "...end up with the opposite of the desired result." Inrecent years manufacturers have continued to try to hone forecasting methods such asapplying a trailing 13 week average as a better predictor for JIT planning; however, someresearch demonstrates that basing JIT on the presumption of stability is inherently flawed.PhilosophyThe philosophy of JIT is simple: inventory is waste. JIT inventory systems expose hiddencost of keeping inventory, and are therefore not a simple solution for a company to adopt.The company must follow an array of new methods to manage the consequences of thechange. The ideas in this way of working come from many different disciplines includingstatistics, industrial engineering, production management, and behavioral science. The JITinventory philosophy defines how inventory is viewed and how it relates to management.Inventory is seen as incurring costs, or waste, instead of adding and storing value, contraryto traditional accounting. This does not mean to say JIT is implemented without anawareness that removing inventory exposes pre-existing manufacturing issues. This way ofworking encourages businesses to eliminate inventory that does not compensate formanufacturing process issues, and to constantly improve those processes to require lessinventory. Secondly, allowing any stock habituates management to stock keeping.Management may be tempted to keep stock to hide production problems. These problemsinclude backups at work centers, machine reliability, process variability, lack of flexibility ofemployees and equipment, and inadequate capacity.In short, the Just-in-Time inventory system focus is having ―the right material, at the righttime, at the right place, and in the exact amount‖-Ryan Grabosky, without the safety net ofinventory. The JIT system has broad implications for implementers.Transaction cost approach
JIT reduces inventory in a firm. However, a firm may simply be outsourcing their inputinventory to suppliers, even if those suppliers dont use Just-in-Time (Naj 1993). Newman(1994) investigated this effect and found that suppliers in Japan charged JIT customers, onaverage, a 5% price premium.Environmental concernsDuring the birth of JIT, multiple daily deliveries were often made by bicycle. Increased scalehas required a move to vans and lorries (trucks). Cusumano (1994) highlighted the potentialand actual problems this causes with regard to gridlock and burning of fossil fuels. Thisviolates three JIT waste guidelines: 1. Time—wasted in traffic jams 2. Inventory—specifically pipeline (in transport) inventory 3. Scrap—fuel burned while not physically movingPrice volatilityJIT implicitly assumes a level of input price stability that obviates the need to buy parts inadvance of price rises. Where input prices are expected to rise, storing inventory may bedesirable.Quality volatilityJIT implicitly assumes that input parts quality remains constant over time. If not, firms mayhoard high-quality inputs. As with price volatility, a solution is to work with selected suppliersto help them improve their processes to reduce variation and costs. Longer term priceagreements can then be negotiated and agreed-on quality standards made the responsibilityof the supplier. Fixing up of standards for volatility of quality according to the quality circleDemand stabilityKarmarker (1989) highlights the importance of relatively stable demand, which helps ensureefficient capital utilization rates. Karmarker argues that without significantly stable demand,JIT becomes untenable in high capital cost production.Supply stabilityIn the U.S., the 1992 railway strikes caused General Motors to idle a 75,000-worker plantbecause they had no supply.JIT implementation designBased on a diagram modeled after the one used by Hewlett-Packard’s Boise plant toaccomplish its JIT program. 1) F Design Flow Process – F Redesign/relayout for flow – L Reduce lot sizes – O Link operations – W Balance workstation capacity
– M Preventive maintenance – S Reduce setup Times2) Q Total Quality Control – C worker compliance – I Automatic inspection – M quality measures – M fail-safe methods – W Worker participation3) S Stabilize Schedule – S Level schedule – W Establish freeze windows – UC Underutilize Capacity4) K Kanban Pull System – D Demand pull – B Backflush – L Reduce lot sizes5) V Work with Vendors – L Reduce lead time – D Frequent deliveries – U Project usage requirements – Q Quality expectations6) I Further Reduce Inventory in Other Areas – S Stores – T Transit – C Implement carrousel to reduce motion waste – C Implement conveyor belts to reduce motion waste7) P Improve Product Design – P Standard production configuration
– P Standardize and reduce the number ofparts – P Process design with product design – Q Quality expectationsEffectsA surprising effect was that factory response time fell to about aday. This improved customer satisfaction by providing vehicleswithin a day or two of the minimum economic shipping delay.Also, the factory began building many vehicles to order,eliminating the risk they would not be sold. This improved thecompanys return on equity.Since assemblers no longer had a choice of which part to use,every part had to fit perfectly. This caused a quality assurancecrisis, which led to a dramatic improvement in product quality.Eventually, Toyota redesigned every part of its vehicles to widentolerances, while simultaneously implementing careful statisticalcontrols for quality control. Toyota had to test and train partssuppliers to assure quality and delivery. In some cases, thecompany eliminated multiple suppliers.When a process or parts quality problem surfaced on theproduction line, the entire production line had to be slowed oreven stopped. No inventory meant a line could not operate fromin-process inventory while a production problem was fixed. Manypeople in Toyota predicted that the initiative would beabandoned for this reason. In the first week, line stops occurredalmost hourly. But by the end of the first month, the rate hadfallen to a few line stops per day. After six months, line stops hadso little economic effect that Toyota installed an overhead pull-line, similar to a bus bell-pull, that let any worker on the line ordera line stop for a process or quality problem. Even with this, linestops fell to a few per week.The result was a factory that has been studied worldwide. It hasbeen widely emulated, but not always with the expected results,as many firms fail to adopt the full system.The just-in-time philosophy was also applied to other segmentsof the supply chain in several types of industries. In thecommercial sector, it meant eliminating one or all of thewarehouses in the link between a factory and a retailestablishment. Examples in sales, marketing, and customerservice involve applying information systems and mobile
hardware to deliver customer information as needed, andreducing waste by video conferencing to cut travel time.BenefitsMain benefits of JIT include: Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. The tool used here is SMED (single-minute exchange of dies). The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management. Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed. Production scheduling and work hour consistency synchronized with demand. If there is no demand for a product at the time, it is not made. This saves the company money, either by not having to pay workers overtime or by having them focus on other work or participate in training. Increased emphasis on supplier relationships. A company without inventory does not want a supply system problem that creates a part shortage. This makes supplier relationships extremely important. Supplies come in at regular intervals throughout the production day. Supply is synchronized with production demand and the optimal amount of inventory is on hand at any time. When parts move directly from the truck to the point of assembly, the need for storage facilities is reduced. Minimizes storage space needed. Smaller chance of inventory breaking/expiring.ProblemsWithin a JIT systemJust-in-time operation leaves suppliers and downstreamconsumers open to supply shocks and large supply or demandchanges. For internal reasons, Ohno saw this as a feature ratherthan a bug. He used an analogy of lowering the water level in ariver to expose the rocks to explain how removing inventoryshowed where production flow was interrupted. Once barrierswere exposed, they could be removed. Since one of the mainbarriers was rework, lowering inventory forced each shop to
improve its own quality or cause a holdup downstream. A key tool to manage this weakness is production levelling to remove these variations. Just-in-time is a means to improving performance of the system, not an end. Very low stock levels means shipments of the same part can come in several times per day. This means Toyota is especially susceptible to flow interruption. For that reason, Toyota uses two suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. Thus, a strong, long-term relationship with a few suppliers is better than short-term, price-based relationships with many competing suppliers. Toyota uses this long-term relationship to send Toyota staff to help suppliers improve their processes. These interventions have been going on for twenty years and have created a more reliable supply chain, improved margins for Toyota and suppliers, and lowered prices for customers. Toyota encourages their suppliers to use JIT with their own suppliers.EXAMPLES:It once took Lifeline Systems at least 30 days to produce and ship its product--personal-response devices that enable wearers to summon help immediately byvoice in an emergency. "Now, production lead time has been cut to four days,"says John Giannette, corporate manager of materials and purchasing. "We havethe ability to ship in 24 hours."Without increasing its 68-member manufacturing work force, the company hastripled production since 1987. Thats when it adopted a manufacturinginfrastructure that integrates .the philosophies and cultures of just-in-timeinventory (JIT), total quality management (TQM), and manufacturing-resourceplanning."What comes in the back door [in parts and materials] is gone four days after itgets here," says Giannetto. Lifeline Systems has progressed from a money-losingfirm with gross sales of $19.6 million in 1987 to a profit maker with $38.5 millionof sales in 1991. Profits were about $4 million in 1992.The increasingly popular just-in-time system keeps inventories to a minimum,usually no larger than what is needed to support one day of production. The
systems effects are rippling out to businesses everywhere as companies realizethat just-in-time cuts costs and improves quality.In turn, suppliers doing business with a manufacturer or retailer operating on JITmust deliver as the customer specifies-- or not at all. Because the systemincreases the number of deliveries and decreases the quantifies delivered,transportation must be faster and more reliable.JIT manufacturing is a powerful and proven system of producing products efficientlywhile keeping costs low. Some of the most successfully companies in the world haveused this philosophy to improve their manufacturing processes and better meetcustomer demand.Just in Time ManufacturingJust in Time Manufacturing (JIT) refers to a system of manufacturing in whichproducts are not built until the product is ordered and paid for. Some companies thathave successfully implemented JIT include Toyota, Dell and Harley Davidson.ToyotaToyota is considered by many to be the poster child for JIT success. The Toyotaproduction strategy is highlighted by the fact that raw materials are not brought to theproduction floor until an order is received and this product is ready to be built. Noparts are allowed at a node unless they are required for the next node, or they arepart of an assembly for the next node. This philosophy has allowed Toyota to keep aminimum amount of inventory which means lower costs. This also means thatToyota can adapt quickly to changes in demand without having to worry aboutdisposing of expensive inventory.Important factors to Toyota success: Small amounts of raw material inventory must be kept at each node in production, so that production can take place for any product. These parts are then replenished when they are used. Accuracy of forecasting is important so the correct amount of raw materials can be stocked.DellFree Inventory Management
www.sohoos.comGet your free and friendly business management solution for free. Ads by GoogleDell has also leveraged JIT principles to make its manufacturing process a success.Dell’s approach to JIT is different in that they leverage their suppliers to achieve theJIT goal. They are also unique in that Dell is able to provide exceptionally short leadtimes to their customers, by forcing their suppliers to carry inventory instead ofcarrying it themselves and then demanding (and receiving) short lead times oncomponents so that products can be simply assembled by Dell quickly and thenshipped to the customer.Important factors to Dell’s success: Dependable suppliers with the ability to meet Dell’s demanding lead time requirements. A seamless system that allows Dell to transmit its component requirements so that they will arrive at Dell in time to fulfill its lead times. A willingness of suppliers to keep inventory on hand allowing Dell to be free of this responsibility.Harley DavidsonHarley Davidson’s use of JIT is mostly characterized by its transformation in the lateWorld War 2 era from an inefficient manufacturer that solved all of its problems withextra inventory to a nimble manufacturer able to meet demand and provide shortlead times.Results of Harley Davidson’s JIT implementation: Inventory levels decreased 75%. Increased productivity.Harley Davidson’s success with the implementation of JIT had a lot to do with thefact that when JIT was put into practice, process problems could no longer be hiddenby costly inventory that helped to meet ship dates. The inefficiencies in theprocesses were quickly identified and solved.
Lean manufacturingLean manufacturing, lean enterprise, or lean production, often simply, "Lean," is a production practicethat considers the expenditure of resources for any goal other than the creation of value for the endcustomer to be wasteful, and thus a target for elimination. Working from the perspective of the customerwho consumes a product or service, "value" is defined as any action or process that a customer would bewilling to pay for.Essentially, lean is centered on preserving value with less work. Lean manufacturing is a managementphilosophy derived mostly from the Toyota Production System (TPS) (hence the term Toyotism is alsoprevalent) and identified as "Lean" only in the 1990s. TPS is renowned for its focus on reduction of theoriginal Toyota seven wastes to improve overall customer value, but there are varying perspectives on howthis is best achieved. The steady growth of Toyota, from a small company to the worlds largestautomaker, has focused attention on how it has achieved this.Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is a present-dayinstance of the recurring theme in human history toward increasing efficiency, decreasing waste, and usingempirical methods to decide what matters, rather than uncritically accepting pre-existing ideas. As such, itis a chapter in the larger narrative that also includes such ideas as the folk wisdom of thrift, time and motionstudy, Taylorism, the Efficiency Movement, and Fordism. Lean manufacturing is often seen as a morerefined version of earlier efficiency efforts, building upon the work of earlier leaders such as Taylor or Ford,and learning from their mistakes.OverviewLean principles come from the Japanese manufacturing industry. The term was first coinedby John Krafcik in a Fall 1988 article, "Triumph of the Lean Production System," published inthe Sloan Management Review and based on his masters thesis at the MIT Sloan School ofManagement. Krafcik had been a quality engineer in the Toyota-GM NUMMI joint venturein California before coming to MIT for MBA studies. Krafciks research was continued bythe International Motor Vehicle Program (IMVP) at MIT, which produced the internationalbest-seller book co-authored by Jim Womack, Daniel Jones, and Daniel Roos called TheMachine That Changed the World. A complete historical account of the IMVP and how theterm "lean" was coined is given by Holweg (2007).For many, Lean is the set of "tools" that assist in the identification and steady elimination ofwaste (muda). As waste is eliminated quality improves while production time and cost arereduced. Examples of such "tools" are Value Stream Mapping, Five S, Kanban (pullsystems), and poka-yoke (error-proofing).There is a second approach to Lean Manufacturing, which is promoted by Toyota, in whichthe focus is upon improving the "flow" or smoothness of work, thereby steadilyeliminating mura("unevenness") through the system and not upon waste reduction per se.
Techniques to improve flow include production leveling, "pull" production (by meansof kanban) and the Heijunka box. This is a fundamentally different approach from mostimprovement methodologies, which may partially account for its lack of popularity.The difference between these two approaches is not the goal itself, but rather the primeapproach to achieving it. The implementation of smooth flow exposes quality problems thatalready existed, and thus waste reduction naturally happens as a consequence. Theadvantage claimed for this approach is that it naturally takes a system-wide perspective,whereas a waste focus sometimes wrongly assumes this perspective.Both Lean and TPS can be seen as a loosely connected set of potentially competingprinciples whose goal is cost reduction by the elimination of waste. These principlesinclude: Pull processing, Perfect first-time quality, Waste minimization, Continuousimprovement, Flexibility, Building and maintaining a long term relationship withsuppliers, Autonomation, Load leveling and Production flow and Visual control. Thedisconnected nature of some of these principles perhaps springs from the fact that the TPShas grown pragmatically since 1948 as it responded to the problems it saw within its ownproduction facilities. Thus what one sees today is the result of a need driven learning toimprove where each step has built on previous ideas and not something based upon atheoretical framework.Toyotas view is that the main method of Lean is not the tools, but the reduction of threetypes of waste: muda ("non-value-adding work"), muri ("overburden"),and mura ("unevenness"), to expose problems systematically and to use the tools where theideal cannot be achieved. From this perspective, the tools are workarounds adapted todifferent situations, which explains any apparent incoherence of the principles above.OriginsAlso known as the flexible mass production, the TPS has two pillar concepts: Just-in-time (JIT) or "flow", and "autonomation" (smart automation). Adherents of the Toyotaapproach would say that the smooth flowing delivery of value achieves all the otherimprovements as side-effects. If production flows perfectly then there is no inventory; ifcustomer valued features are the only ones produced, then product design is simplified andeffort is only expended on features the customer values. The other of the two TPS pillars isthe very human aspect of autonomation, whereby automation is achieved with a humantouch. The "human touch" here meaning to automate so that the machines/systems aredesigned to aid humans in focusing on what the humans do best. This aims, for example, togive the machines enough intelligence to recognize when they are working abnormally andflag this for human attention. Thus, in this case, humans would not have to monitor normalproduction and only have to focus on abnormal, or fault, conditions.Lean implementation is therefore focused on getting the right things to the right place at theright time in the right quantity to achieve perfect work flow, while minimizing waste and beingflexible and able to change. These concepts of flexibility and change are principally requiredto allow production leveling, using tools like SMED, but have their analogues in otherprocesses such as research and development (R&D). The flexibility and ability to change are
within bounds and not open-ended, and therefore often not expensive capabilityrequirements. More importantly, all of these concepts have to be understood, appreciated,and embraced by the actual employees who build the products and therefore own theprocesses that deliver the value. The cultural and managerial aspects of Lean are possiblymore important than the actual tools or methodologies of production itself. There are manyexamples of Lean tool implementation without sustained benefit, and these are often blamedon weak understanding of Lean throughout the whole organization.Lean aims to make the work simple enough to understand, do and manage. To achievethese three goals at once there is a belief held by some that Toyotas mentoringprocess,(loosely called Senpaiand Kohai, which is Japanese for senior and junior), is one ofthe best ways to foster Lean Thinking up and down the organizational structure. This is theprocess undertaken by Toyota as it helps its suppliers improve their own production. Theclosest equivalent to Toyotas mentoring process is the concept of "Lean Sensei," whichencourages companies, organizations, and teams to seek outside, third-party experts, whocan provide unbiased advice and coaching, (see Womack et al., Lean Thinking, 1998).There have been recent attempts to link Lean to Service Management, perhaps one of themost recent and spectacular of which was London Heathrow Airports Terminal 5. Thisparticular case provides a graphic example of how care should be taken in translatingsuccessful practices from one context (production) to another (services), expecting the sameresults. In this case the public perception is more of a spectacular failure, than a spectacularsuccess, resulting in potentially an unfair tainting of the lean manufacturing philosophies.A brief history of waste reduction thinkingThe avoidance of waste has a long history. In fact many of the concepts now seen as key tolean have been discovered and rediscovered over the years by others in their search toreduce waste. Lean builds on their experiences, including learning from their mistakes.Pre-20th centuryThe printer Benjamin Franklin contributed greatly to waste reduction thinking
Most of the basic goals of lean manufacturing are common sense, and documentedexamples can be seen as early as Benjamin Franklin. Poor Richards Almanac says ofwasted time, "He that idly loses 5s. worth of time, loses 5s., and might as prudently throw 5s.into the river." He added that avoiding unnecessary costs could be more profitable thanincreasing sales: "A penny saved is two pence clear. A pin a-day is a groat a-year. Save andhave."Again Franklins The Way to Wealth says the following about carrying unnecessaryinventory. "You call them goods; but, if you do not take care, they will prove evils to some ofyou. You expect they will be sold cheap, and, perhaps, they may [be bought] for less thanthey cost; but, if you have no occasion for them, they must be dear to you. Remember whatPoor Richard says, Buy what thou hast no need of, and ere long thou shalt sell thynecessaries. In another place he says, Many have been ruined by buying good pennyworths." Henry Ford cited Franklin as a major influence on his own business practices,which included Just-in-time manufacturing.The concept of waste being built into jobs and then taken for granted was noticed by motionefficiency expert Frank Gilbreth, who saw that masons bent over to pick up bricks from theground. The bricklayer was therefore lowering and raising his entire upper body to pick up a2.3 kg (5 lb.) brick, and this inefficiency had been built into the job through long practice.Introduction of a non-stooping scaffold, which delivered the bricks at waist level, allowedmasons to work about three times as quickly, and with less effort.20th centuryFrederick Winslow Taylor, the father of scientific management, introduced what are nowcalled standardization and best practice deployment. In his Principles of ScientificManagement, (1911), Taylor said: "And whenever a workman proposes an improvement, itshould be the policy of the management to make a careful analysis of the new method, andif necessary conduct a series of experiments to determine accurately the relative merit of thenew suggestion and of the old standard. And whenever the new method is found to bemarkedly superior to the old, it should be adopted as the standard for the wholeestablishment."Taylor also warned explicitly against cutting piece rates (or, by implication, cutting wages ordischarging workers) when efficiency improvements reduce the need for raw labor: "…after aworkman has had the price per piece of the work he is doing lowered two or three times as aresult of his having worked harder and increased his output, he is likely entirely to lose sightof his employers side of the case and become imbued with a grim determination to have nomore cuts if soldiering [marking time, just doing what he is told] can prevent it."Shigeo Shingo, the best-known exponent of single minute exchange of die (SMED) anderror-proofing or poka-yoke, cites Principles of Scientific Management as his inspiration.American industrialists recognized the threat of cheap offshore labor to American workersduring the 1910s, and explicitly stated the goal of what is now called lean manufacturing as acountermeasure. Henry Towne, past President of the American Society of MechanicalEngineers, wrote in the Foreword to Frederick Winslow Taylors Shop Management (1911),
"We are justly proud of the high wage rates which prevail throughout our country, andjealous of any interference with them by the products of the cheaper labor of other countries.To maintain this condition, to strengthen our control of home markets, and, above all, tobroaden our opportunities in foreign markets where we must compete with the products ofother industrial nations, we should welcome and encourage every influence tending toincrease the efficiency of our productive processes."Ford starts the ball rollingHenry Ford continued this focus on waste while developing his mass assemblymanufacturing system. Charles Buxton Going wrote in 1915: Fords success has startled the country, almost the world, financially, industrially, mechanically. It exhibits in higher degree than most persons would have thought possible the seemingly contradictory requirements of true efficiency, which are: constant increase of quality, great increase of pay to the workers, repeated reduction in cost to the consumer. And with these appears, as at once cause and effect, an absolutely incredible enlargement of output reaching something like one hundredfold in less than ten years, and an enormous profit to the manufacturer. Ford, in My Life and Work (1922), provided a single-paragraph description that encompasses the entire concept of waste: I believe that the average farmer puts to a really useful purpose only about 5%. of the energy he expends.... Not only is everything done by hand, but seldom is a thought given to a logical arrangement. A farmer doing his chores will walk up and down a rickety ladder a dozen times. He will carry water for years instead of putting in a few lengths of pipe. His whole idea, when there is extra work to do, is to hire extra men. He thinks of putting money into improvements as an expense.... It is waste motion— waste effort— that makes farm prices high and profits low. Poor arrangement of the workplace—a major focus of the modern kaizen—and doing a job inefficiently out of habit—are major forms of waste even in modern workplaces. Ford also pointed out how easy it was to overlook material waste. A former employee, Harry Bennett, wrote: One day when Mr. Ford and I were together he spotted some rust in the slag that ballasted the right of way of the D. T. & I [railroad]. This slag had been dumped there from our own furnaces. You know, Mr. Ford said to me, theres iron in that slag. You make the crane crews who put it out there sort it over, and take it back to the plant. In other words, Ford saw the rust and realized that the steel plant was not recovering all of the iron.
Fords early success, however, was not sustainable. As James P. Womack and Daniel Jones pointed out in "Lean Thinking", what Ford accomplished represented the "special case" rather than a robust lean solution. The major challenge that Ford faced was that his methods were built for a steady-state environment, rather than for the dynamic conditions firms increasingly face today.Although his rigid, top-down controls made it possible to hold variation in work activities down to very low levels, his approach did not respond well to uncertain, dynamic business conditions; they responded particularly badly to the need for new product innovation. This was made clear by Fords precipitous decline when the company was forced to finally introduce a follow-on to the Model T (seeLean Dynamics). Design for Manufacture (DFM) also is a Ford concept. Ford said in My Life and Work (the same reference describes just in time manufacturing very explicitly):...entirely useless parts [may be]—a shoe, a dress, a house, a piece of machinery, arailroad, a steamship, an airplane. As we cut out useless parts and simplifynecessary ones, we also cut down the cost of making. ... But also it is to beremembered that all the parts are designed so that they can be most easily made. This standardization of parts was central to Fords concept of mass production, and the manufacturing "tolerances", or upper and lower dimensional limits that ensured interchangeability of partsbecame widely applied across manufacturing. Decades later, the renowned Japanese quality guru, Genichi Taguchi, demonstrated that this "goal post" method of measuring was inadequate. He showed that "loss" in capabilities did not begin only after exceeding these tolerances, but increased as described by the Taguchi Loss Function at any condition exceeding the nominal condition. This became an important part of W. Edwards Demings quality movement of the 1980s, later helping to develop improved understanding of key areas of focus such as cycle time variation in improving manufacturing quality and efficiencies in aerospace and other industries. While Ford is renowned for his production line it is often not recognized how much effort he put into removing the fitters work to make the production line possible. Until Ford, a cars components always had to be fitted or reshaped by a skilled engineer at the point of use, so that they would connect properly. By enforcing very strict specification and quality criteria on component manufacture, he eliminated this work almost entirely, reducing manufacturing effort by between 60-90%. However, Fords mass production system failed to incorporate the notion of "pull production" and thus often suffered from over-production. Toyota develops TPS Toyotas development of ideas that later became Lean may have started at the turn of the 20th century with Sakichi Toyoda, in a textile factory with
looms that stopped themselves when a thread broke, this became the seed of autonomation and Jidoka. Toyotas journey with JIT may have started back in 1934 when it moved from textiles to produce its first car. Kiichiro Toyoda, founder of Toyota, directed the engine casting work and discovered many problems in their manufacture. He decided he must stop the repairing of poor quality by intense study of each stage of the process. In 1936, when Toyota won its first truck contract with the Japanese government, his processes hit new problems and he developed the "Kaizen" improvement teams. Levels of demand in the Post War economy of Japan were low and the focus of mass production on lowest cost per item via economies of scale therefore had little application. Having visited and seen supermarkets in the USA, Taiichi Ohno recognised the scheduling of work should not be driven by sales or production targets but by actual sales. Given the financial situation during this period, over-production had to be avoided and thus the notion of Pull (build to order rather than target driven Push) came to underpin production scheduling. It was with Taiichi Ohno at Toyota that these themes came together. He built on the already existing internal schools of thought and spread their breadth and use into what has now become the Toyota Production System (TPS). It is principally from the TPS, but now including many other sources, that Lean production is developing. Norman Bodek wrote the following in his foreword to a reprint of Fords Today and Tomorrow:I was first introduced to the concepts of just-in-time (JIT) and the Toyota productionsystem in 1980. Subsequently I had the opportunity to witness its actual applicationat Toyota on one of our numerous Japanese study missions. There I met Mr. TaiichiOhno, the systems creator. When bombarded with questions from our group on whatinspired his thinking, he just laughed and said he learned it all from Henry Fordsbook." The scale, rigor and continuous learning aspects of TPS have made it a coreconcept of Lean. Types of waste While the elimination of waste may seem like a simple and clear subject it is noticeable that waste is often very conservatively identified. This then hugely reduces the potential of such an aim. The elimination of waste is the goal of Lean, and Toyota defined three broad types of waste: muda, muri and mura; it should be noted that for many Lean implementations this list shrinks to the first waste type only with corresponding benefits decrease. To illustrate the state of this thinking Shigeo Shingo observed that only the last turn of a bolt tightens it—the rest is just movement. This ever finer clarification of waste is key
to establishing distinctions between value-adding activity, waste andnon-value-adding work. Non-value adding work is waste that must bedone under the present work conditions. One key is to measure, orestimate, the size of these wastes, to demonstrate the effect of thechanges achieved and therefore the movement toward the goal.The "flow" (or smoothness) based approach aims to achieve JIT, byremoving the variation caused by work scheduling and thereby provide adriver, rationale or target and priorities for implementation, using avariety of techniques. The effort to achieve JIT exposes many qualityproblems that are hidden by buffer stocks; by forcing smooth flow of onlyvalue-adding steps, these problems become visible and must be dealtwith explicitly.Muri is all the unreasonable work that management imposes on workersand machines because of poor organization, such as carrying heavyweights, moving things around, dangerous tasks, even workingsignificantly faster than usual. It is pushing a person or a machinebeyond its natural limits. This may simply be asking a greater level ofperformance from a process than it can handle without taking shortcutsand informally modifying decision criteria. Unreasonable work is almostalways a cause of multiple variations.To link these three concepts is simple in TPS and thus Lean.Firstly, muri focuses on the preparation and planning of the process, orwhat work can be avoided proactively by design. Next, mura thenfocuses on how the work design is implemented and the elimination offluctuation at the scheduling or operations level, such as quality andvolume. Muda is then discovered after the process is in place and isdealt with reactively. It is seen through variation in output. It is the role ofmanagement to examine the muda, in the processes and eliminate thedeeper causes by considering the connections to the muri and mura ofthe system. The muda and mura inconsistencies must be fed back tothe muri, or planning, stage for the next project.A typical example of the interplay of these wastes is the corporatebehaviour of "making the numbers" as the end of a reporting periodapproaches. Demand is raised to make plan, increasing (mura), whenthe "numbers" are low, which causes production to try to squeeze extracapacity from the process, which causes routines and standards to bemodified or stretched. This stretch and improvisation leads to muri-stylewaste, which leads to downtime, mistakes and back flows, and waiting,thus the muda of waiting, correction and movement.The original seven muda are:
Transport (moving products that are not actually required to perform the processing) Inventory (all components, work in process and finished product not being processed) Motion (people or equipment moving or walking more than is required to perform the processing) Waiting (waiting for the next production step) Overproduction (production ahead of demand) Over Processing (resulting from poor tool or product design creating activity) Defects (the effort involved in inspecting for and fixing defects)Later an eighth waste was defined by Womack et al. (2003); it wasdescribed as manufacturing goods or services that do not meet customerdemand or specifications. Many others have added the "waste of unusedhuman talent" to the original seven wastes. These wastes were notoriginally a part of the seven deadly wastes defined by Taiichi Ohno inTPS, but were found to be useful additions in practice. For a completelisting of the "old" and "new" wastes see Bicheno and Holweg (2009)Some of these definitions may seem rather idealistic, but this toughdefinition is seen as important and they drove the success of TPS. Theclear identification of non-value-adding work, as distinct from wastedwork, is critical to identifying the assumptions behind the current workprocess and to challenging them in due course. Breakthroughsin SMED and other process changing techniques rely upon clearidentification of where untapped opportunities may lie if the processingassumptions are challenged.Lean implementation develops from TPSThe discipline required to implement Lean and the disciplines it seems torequire are so often counter-cultural that they have made successfulimplementation of Lean a major challenge. Some would say that itwas a major challenge in its manufacturing heartland as well.Implementations under the Lean label are numerous and whether theyare Lean and whether any success or failure can be laid at Leans dooris often debatable. Individual examples of success and failure exist inalmost all spheres of business and activity and therefore cannot be takenas indications of whether Lean is particularly applicable to a specificsector of activity. It seems clear from the "successes" that no sector isimmune from beneficial possibility.Lean is about more than just cutting costs in the factory. One crucialinsight is that most costs are assigned when a product is designed,(see Genichi Taguchi). Often an engineer will specify familiar, safe
materials and processes rather than inexpensive, efficient ones. Thisreduces project risk, that is, the cost to the engineer, while increasingfinancial risks, and decreasing profits. Good organizations develop andreview checklists to review product designs.Companies must often look beyond the shop-floor to find opportunitiesfor improving overall company cost and performance. At the systemengineering level, requirements are reviewed with marketingand customer representatives to eliminate those requirements that arecostly. Shared modules may be developed, such as multipurpose powersupplies or shared mechanical components or fasteners. Requirementsare assigned to the cheapest discipline. For example, adjustments maybe moved into software, and measurements away from a mechanicalsolution to an electronic solution. Another approach is to chooseconnection or power-transport methods that are cheap or that usedstandardized components that become available in a competitive market.An example programIn summary, an example of a lean implementation program could be: With a muri or flow basedWith a tools-based approach approach (as used in the TPS with suppliers). Senior management to Sort out as many of the agree and discuss visible quality problems as their lean vision you can, as well as Management downtime and other brainstorm to identify instability problems, and project leader and set get the internal scrap objectives acknowledged and its Communicate plan management started. and vision to the Make the flow of parts workforce through the system or Ask for volunteers to process as continuous as form the Lean possible Implementation team using workcellsand market (5-7 works best, all locations where necessary from different and avoiding variations in departments) the operators work cycle Appoint members of Introduce standard work the Lean and stabilize the work pace
Manufacturing through the system Implementation Start pulling work through Team the system, look at the Train the production scheduling and Implementation move toward daily orders Team in the various with kanban cards lean tools - make a Even out the production point of trying to visit flow by reducing batch other non competing sizes, increase delivery businesses that have frequency internally and if implemented lean possible externally, level Select a Pilot Project internal demand to implement – 5S is Improve exposed quality a good place to start issues using the tools Run the pilot for 2–3 Remove some people (or months - evaluate, increase quotas) and go review and learn from through this work again your mistakes (the Oh No !! moment) Roll out pilot to other factory areas Evaluate results, encourage feedback Stabilize the positive results by teaching supervisors how to train the new standards youve developed with TWI methodology (Training Within Industry) Once you are satisfied that you have a habitual program, consider introducing the next lean tool. Select the
one that gives you the biggest return for your business.Lean leadershipThe role of the leaders within the organization is the fundamentalelement of sustaining the progress of lean thinking. Experienced kaizenmembers at Toyota, for example, often bring up the conceptsofSenpai, Kohai, and Sensei, because they strongly feel that transferringof Toyota culture down and across Toyota can only happen when moreexperienced Toyota Sensei continuously coach and guide the lessexperienced lean champions.One of the dislocative effects of Lean is in the area of key performanceindicators (KPI). The KPIs by which a plant/facility are judged will oftenbe driving behaviour, because the KPIs themselves assume a particularapproach to the work being done. This can be an issue where, forexample a truly Lean, Fixed Repeating Schedule (FRS) and JITapproach is adopted, because these KPIs will no longer reflectperformance, as the assumptions on which they are based becomeinvalid. It is a key leadership challenge to manage the impact of this KPIchaos within the organization.Similarly, commonly used accounting systems developed tosupport mass production are no longer appropriate for companiespursuing Lean. Lean Accounting provides truly Lean approaches tobusiness management and financial reporting.After formulating the guiding principles of its lean manufacturingapproach in the Toyota Production System (TPS), Toyota formalized in2001 the basis of its lean management: the key managerial values andattitudes needed to sustain continuous improvement in the long run.These core management principles are articulated around the twin pillarsof Continuous Improvement (relentless elimination of waste) andRespect for People (engagement in long term relationships based oncontinuous improvement and mutual trust).This formalization stems from problem solving. As Toyota expandedbeyond its home base for the past 20 years, it hit the same problems ingetting TPS properly applied that other western companies have had incopying TPS. Like any other problem, it has been working on trying aseries of countermeasures to solve this particular concern. Thesecountermeasures have focused on culture: how people behave, which isthe most difficult challenge of all. Without the proper behavioralprinciples and values, TPS can be totally misapplied and fail to deliverresults. As with TPS, the values had originally been passed down in a
master-disciple manner, from boss to subordinate, without any writtenstatement on the way. Just as with TPS, it was internally argued thatformalizing the values would stifle them and lead to furthermisunderstanding. However, as Toyota veterans eventually wrote downthe basic principles of TPS, Toyota set to put the Toyota Way into writingto educate new joiners.Continuous Improvement breaks down into three basic principles: 1. Challenge: Having a long term vision of the challenges one needs to face to realize ones ambition (what we need to learn rather than what we want to do and then having the spirit to face that challenge). To do so, we have to challenge ourselves every day to see if we are achieving our goals. 2. Kaizen: Good enough never is, no process can ever be thought perfect, so operations must be improved continuously, striving for innovation and evolution. 3. Genchi Genbutsu: Going to the source to see the facts for oneself and make the right decisions, create consensus, and make sure goals are attained at the best possible speed.Respect For People is less known outside of Toyota, and essentiallyinvolves two defining principles: 1. Respect: Taking every stakeholders problems seriously, and making every effort to build mutual trust. Taking responsibility for other people reaching their objectives. 2. Teamwork: This is about developing individuals through team problem-solving. The idea is to develop and engage people through their contribution to team performance. Shop floor teams, the whole site as team, and team Toyota at the outset.Differences from TPSWhilst Lean is seen by many as a generalization of the ToyotaProduction System into other industries and contexts there are someacknowledged differences that seem to have developed inimplementation. 1. Seeking profit is a relentless focus for Toyota exemplified by the profit maximization principle (Price – Cost = Profit) and the need, therefore, to practice systematic cost reduction (through TPS or otherwise) to realize benefit. Lean implementations can tend to de-emphasise this key measure and thus become fixated with the implementation of improvement concepts of "flow" or "pull". However, the emergence of the "value curve analysis"
promises to directly tie lean improvements to bottom-line performance measuments.20 2. Tool orientation is a tendency in many programs to elevate mere tools (standardized work, value stream mapping, visual control, etc.) to an unhealthy status beyond their pragmatic intent. The tools are just different ways to work around certain types of problems but they do not solve them for you or always highlight the underlying cause of many types of problems. The tools employed at Toyota are often used to expose particular problems that are then dealt with, as each tools limitations or blindspots are perhaps better understood. So, for example, Value Stream Mappingfocuses upon material and information flow problems (a title built into the Toyota title for this activity) but is not strong on Metrics, Man or Method. Internally they well know the limits of the tool and understood that it was never intended as the best way to see and analyze every waste or every problem related to quality, downtime, personnel development, cross training related issues, capacity bottlenecks, or anything to do with profits, safety, metrics or morale, etc. No one tool can do all of that. For surfacing these issues other tools are much more widely and effectively used. 3. Management technique rather than change agents has been a principle in Toyota from the early 1950s when they started emphasizing the development of the production managers and supervisors skills set in guiding natural work teams and did not rely upon staff-level change agents to drive improvements. This can manifest itself as a "Push" implementation of Lean rather than "Pull" by the team itself. This area of skills development is not that of the change agent specialist, but that of the natural operations work team leader. Although less prestigious than the TPS specialists, development of work team supervisors in Toyota is considered an equally, if not more important, topic merely because there are tens of thousands of these individuals. Specifically, it is these manufacturing leaders that are the main focus of training efforts in Toyota since they lead the daily work areas, and they directly and dramatically affect quality, cost, productivity, safety, and morale of the team environment. In many companies implementing Lean the reverse set of priorities is true. Emphasis is put on developing the specialist, while the supervisor skill level is expected to somehow develop over time on its own.Lean services
Main article: Lean servicesLean, as a concept or brand, has captured the imagination of many indifferent spheres of activity. Examples of these from many sectors arelisted below.Lean principles have been successfully applied to call center services toimprove live agent call handling. By combining Agent-assistedAutomation and Leans waste reduction practices, a company reducedhandle time, reduced between agent variability, reduced accent barriers,and attained near perfect process adherence.Lean principles have also found application in software applicationdevelopment and maintenance and other areas of informationtechnology (IT). More generally, the use of Lean in IT has becomeknown as Lean IT.A study conducted on behalf of the Scottish Executive, by WarwickUniversity, in 2005/06 found that Lean methods were applicable to thepublic sector, but that most results had been achieved using a muchmore restricted range of techniques than Lean provides.A study completed in 2010 identified that Lean was beginning to embedin Higher Education in the UK (see Lean Higher Education). The challenge in moving Lean to services is the lack of widely availablereference implementations to allow people to see how directly applyinglean manufacturing tools and practices can work and the impact it doeshave. This makes it more difficult to build the level of belief seen asnecessary for strong implementation. However, some research doesrelate widely recognized examples of success in retail and even airlinesto the underlying principles of lean. Despite this, it remains the casethat the direct manufacturing examples of techniques or tools need tobe better translated into a service context to support the moreprominent approaches of implementation, which has not yet received thelevel of work or publicity that would give starting points for implementors.The upshot of this is that each implementation often feels its way alongas must the early industrial engineers of Toyota. This places hugeimportance upon sponsorship to encourage and protect theseexperimental developments.Lean goals and strategyThe espoused goals of Lean manufacturing systems differ betweenvarious authors. While some maintain an internal focus, e.g. to increaseprofit for the organization, others claim that improvements should bedone for the sake of the customerSome commonly mentioned goals are:
Improve quality: To stay competitive in todays marketplace, a company must understand its customers wants and needs and design processes to meet their expectations and requirements. Eliminate waste: Waste is any activity that consumes time, resources, or space but does not add any value to the product or service. See Types of waste, above.Taking the first letter of each waste, the acronym "TIM WOOD" isformed. This is a common way to remember the wastes. The otheralternative name that can used to remember is "DOT WIMP". Reduce time: Reducing the time it takes to finish an activity from start to finish is one of the most effective ways to eliminate waste and lower costs. Reduce total costs: To minimize cost, a company must produce only to customer demand. Overproduction increases a company’s inventory costs because of storage needs.The strategic elements of Lean can be quite complex, and comprisemultiple elements. Four different notions of Lean have been identified: 1. Lean as a fixed state or goal (Being Lean) 2. Lean as a continuous change process (Becoming Lean) 3. Lean as a set of tools or methods (Doing Lean/Toolbox Lean) 4. Lean as a philosophy (Lean thinking)Steps to achieve lean systemsThe following steps should be implemented to create the ideal leanmanufacturing system:: 1. Design a simple manufacturing system 2. Recognize that there is always room for improvement 3. Continuously improve the lean manufacturing system designDesign a simple manufacturing systemA fundamental principle of lean manufacturing is demand-based flowmanufacturing. In this type of production setting, inventory is only pulledthrough each production center when it is needed to meet a customersorder. The benefits of this goal include: decreased cycle time less inventory increased productivity increased capital equipment utilization
There is always room for improvement The core of lean is founded on the concept of continuous product and process improvement and the elimination of non-value added activities. "The Value adding activities are simply only those things the customer is willing to pay for, everything else is waste, and should be eliminated, simplified, reduced, or integrated" (Rizzardo, 2003). Improving the flow of material through new ideal system layouts at the customers required rate would reduce waste in material movement and inventory. Continuously improve A continuous improvement mindset is essential to reach a companys goals. The term "continuous improvement" means incremental improvement of products, processes, or services over time, with the goal of reducing waste to improve workplace functionality, customer service, or product performance (Suzaki, 1987). Stephen Shortell (Professor of Health Services Management and Organisational Behaviour – Berkeley University, California) states:- "For improvement to flourish it must be carefully cultivated in a rich soil bed (a receptive organisation), given constant attention (sustained leadership), assured the right amounts of light (training and support) and water (measurement and data) and protected from damaging." Measure Overall equipment effectiveness (OEE) is a set of performance metrics that fit well in a Lean environment. Implementation pitfalls One criticism of lean perennially heard among rank-and-file workers is that lean practitioners may easily focus too much on the tools and methodologies of lean, and fail to focus on the philosophy and culture of lean. The implication of this for lean implementers is that adequate command of the subject is needed in order to avoid failed implementations.How a Small Business Can Use LeanManufacturingBy Mike Hart―Lean manufacturing‖ is a style of manufacturing, originally invented by Toyota, where theobjective is to eliminate all wasteful processes that impede your efficiency. Progress isgauged by a reduction in inventory and WIP relative to sales.
Lean manufacturing is primarily a management philosophy rather than a specific set ofsoftware features. Lean principles can be applied to any manufacturing software package.Many of the lean manufacturing resources on the web are from consulting firms that helpcompanies implement lean manufacturing programs. Among these firms you will findseveral blogs and books on the subject.My company is the developer of DBA Manufacturing, a software package for smallbusinesses. We find that lean manufacturing principles make eminent good sense for smallcompanies and strive to present those principles in our documentation and video trainingcourses.To me, lean manufacturing makes common sense and is intuitively practiced by smallcompanies. Many job shops, for example, keep inventory to an absolute minimum by onlypurchasing material when jobs materialize. This is a simple form of lean manufacturing.Essentially, lean manufacturing is about reducing inventory. ―Inventory‖ encompasses stockon hand as well as work in process. In general, the more inventory that is required per unitof sales, the less efficient a company is. Conversely, the more sales that are supported perunit of inventory, the more efficient a company is.Excessive inventory is used to mask inefficient practices. Ordering material earlier thannecessary and in larger quantities than needed ties up scarce working capital and storagespace. Companies that use manual purchasing instead of MRP typically over stock, yet arestill plagued by chronic shortages and high expediting costs.Excessive work in process causes many problems. Releasing too many jobs at once withlarger run sizes than necessary clogs up work centers, aisles, and storage areas, requiringextra material handling. Extra handling and large run sizes amplify the effects of qualityproblems and complicate work center scheduling. Favored jobs get expedited at theexpense of other jobs and late deliveries are the norm.So ―getting lean‖ is all about reducing inventory. The steps you must take to reduceinventory will make your company more efficient. And it’s easy to judge your progress overtime because you simply compare your inventory and WIP levels against your sales.There are five basic steps you can take to get lean.1. Use Manufacturing SoftwareIt is not practical to implement lean manufacturing practices without manufacturingsoftware. You will need a manufacturing software package that includes the core functionsof inventory, bills of material, routings, sales orders, MRP, jobs, and purchasing.2. Reduce Run SizesReduce your job quantities to the smallest run sizes possible, even if doing so requires manymore setups. Small run sizes are easier to schedule, require less material handling, improveproduct quality, and shorten production times. The efficiency gains far outweigh the extrasetup time.3. Pull jobs through the shopRelease jobs to the shop only when the shop has open capacity for the next job. By doingso, you ―pull‖ jobs through the shop instead of ―pushing‖ jobs onto the shop. Let each job
wait its turn. Releasing jobs properly keeps WIP to a minimum and will dramatically shortenthe time it takes to get jobs through the shop.4. Use MRPMRP is essentially a time-phased shortage list. Use MRP to generate POs instead ofmanual purchasing. Gradually tighten your reorder levels and lead times over time so thatyou get as close to ―just in time‖ receiving as you can.5. Practice Continuous ImprovementEstablish a ―continuous improvement‖ program where you formally meet with supervisorsand workers on a regular basis to review progress and discuss new ideas for processimprovement.Lean manufacturing is counter-intuitive to most people. Having extra stock on hand,minimizing the number of setups, and starting jobs as early as possible seem like goodpractices and are done with the best of intentions, but they are deadly harmful to your overallefficiency.So if you want to complete jobs quickly and on time with high quality, keep your inventoryand WIP to a minimum, which forces you to adopt efficient practices. Get lean. What changes can employees expect as a result of a Lean transformation?One of the goals of Lean is to move decision making closest to the customer, or in otherwords, as close as possible to the physical product or service, since this is what thecustomer receives. Since the individual operator is the closest human to the product, thegoal becomes to move decision making to this level. Consequently, the first andimmediate change that employees notice is that they have more significant input in theproduction methods of their work area. This empowerment often motivates teammembers to accomplish unexpected level of performance both for their owndevelopment as well as the companys productivity gains.Naturally, employee empowerment is much more comprehensive than managementsimply stating that moving forward employees will be empowered. It involves settingguidelines and boundaries, rolling out the process in a deliberate and wellcommunicated manner, and making adjustments when appropriate. Gembutsu workswith upper management to ensure that this cultural shift towards lean does notjeopardize company morale or productivity.EXAMPLE OF LEAN MANUFACTURING SYSTEM:GOING LEANpercentage of companies responding "yes" to the survey question: Is your company implementing lean operatingprinciples?Industry segment 08 09Industrial equipment 61% 65%Food and beverage 45% 52%Metal fabrication 68% 68%Transportation equipment 42% 70%
Building materials 51% 55%Plastics 65% 64%Electronics 61% 67%Chemicals 55% 59%Printing, publishing 55% 51%Medical devices 61% 87%Total 56% 61%A couple of years ago, Sealy, the worlds top mattress maker, pieced together beds in a sort of stutterstep. Today, its a ballet.At a plant here recently, two workers place rectangles of foam, fiber and cloth on a springboard withthe dexterity of sandwich makers, briskly firing spray guns to glue the layers to each other and stapleguns to bolt the cloth to the metal.As they slide their handiwork onto a table, a "taper" just a few feet away grabs it and places it underthe rat-tat-tat of a sewing machine that stitches the top panel to the rest of the unit. Within fiveminutes, a queen-size mattress is formed.Previously, workers churned out dozens of unfinished mattresses at a time, loading them onto aconveyor. The taper, about 40 feet away, had to pick through 4-foot-high piles of them. Mattresses,which took up precious floor space, were sometimes damaged from rubbing against one another.Sealy is among thousands of manufacturers that have remained profitable during the recession byusing a practice called lean manufacturing to become more cost-efficient. It entails making eachwidget in an uninterrupted flow, rather than as part of unfinished batches; producing only whatcustomers order; and ruthlessly chopping billions of dollars in inventory."The big advantage is less material handling, less movement and less dirt on the product," says MikeHofmann, Sealys executive vice president of operations. "Theyre only working on one bed at a time."In the short term, as manufacturers slash inventories and reduce their workforces, the recovery couldbe slowed or delayed, experts say. Many, such as Sealy, are scaling back through attrition and cuttingtemporary staff rather than resorting to layoffs.Yet industrywide, some jobs will be lost permanently as manufacturers use their new cost efficienciesto wring more output from fewer employees, says Cliff Waldman, an economist at the ManufacturersAlliance, which does research for the industry. But by allowing U.S. manufacturers to better competeagainst low-cost rivals abroad, the maneuvers are helping them maintain profits and ultimately hireemployees, economists say."Our response to the cost pressures brought about by globalization is … to produce cheaper andmore efficiently," Waldman says. "Its survival."Manufacturing productivity, or output per labor hour, rose 4.9% in the second quarter, the highestsince early 2005. A big portion of the gains can be traced to lean-manufacturing techniques, sayseconomist Brian Bethune of IHS Global Insight.They were pioneered by Toyota in the late 1980s as a way to reduce waste and eliminate steps thatdont provide value to customers. While a growing number of companies have adopted the practicesthrough the years, the number of converts has grown substantially during the economic downturn,
Waldman says. Sixty-one percent of manufacturers said they have adopted lean practices or plan todo so this year, according to a spring survey by RSM McGladrey.Faced with mandates to cut costs, most are scrambling to make the changes in a few months insteadof over a year or two as they were before the recession, says Anand Sharma, CEO of TBMConsulting. He estimates only 15% of manufacturers are applying lean policies extensively.Theyre responding to a brutal climate. Manufacturers have cut production more than 14% since therecession began, even after a sharp rebound since June. Theyve eliminated 2 million jobs during theslump, more than any other sector.Driving the lean movement is an urgent need to pare inventory, executives say. With revenue downand tight-fisted banks reluctant to lend, the makers no longer can afford to tie up hundreds of millionsof dollars in raw materials that languish in factories for weeks or months."Inventory is evil," says Drew Greenblatt, CEO of Marlin Steel Wire in Baltimore. By trimming, "Youfind a big pile of cash."The trend toward leaner stockpiles could dampen the early stages of a recovery, Bethune says. Thatsbecause economists expect the upturns initial phase to be driven by a need to replenish depletedinventories, or at least draw them down slower.Sealy launched its lean strategy about five years ago but has intensified it during the recession,Hofmannsays. Its paying off. Net sales fell 14% in the third quarter to $349 million from a year earlier.Yet earnings rose to $12.1 million from $10.9 million, and gross profit margin edged up to 41.8% from40.5%.EXAMPLE 2: More aerospace and defense suppliers are using lean manufacturingprocesses to reduce costs and increase business, said Bill Lewandowski, vicepresident of supplier management for the Aerospace Industries Association(AIA)."More than 90 percent of the top 50 percent of suppliers have lean programs,and 50 percent of all aerospace and defense subcontractors use lean,"Lewandowski told The DAILY Sept. 27.This is an increase over a figure stated by a Government Electronics andInformation Technology Association (GEIA) report released earlier this year,which said that "while 50-60 percent of defense and aerospace prime contractorsuse lean principles and practices, only 10-15 percent of subcontractors do"(DAILY, April 15).Lean techniques include minimizing inventory or parts and using more modelingand simulation.
A major advantage for suppliers using lean manufacturing is that it takes thewaste out of their manufacturing process, decreasing the floor space they use tomake products and leaving space for expansion."They go after different products and they increase sales," Lewandowski said.For example, DynaBil Industries of Coxsackie, N.Y., which builds titanium partsfor military and commercial aircraft, was able to increase its business by 40percent due to lean manufacturing, he said."After 9/11, our revenues dropped to $13 to $14 million from $17.5 million. For2004, we are projecting revenues to reach $16 million. We were able to do thisby using lean," DynaBil President Hugh Quigley told The DAILY.The company also supplied all the titanium on the U.S. Armys RAH-66Comanche helicopter, which the Army killed earlier this year (DAILY, Feb. 24)."We lost about $3 million worth of work this year because of its cancellation, buthave gained that back and a little more in other military programs, like from theincreased activity on the Black Hawk program and new work from BoeingIntegrated Defense Systems and Lockheed Martin Aeronautics," he said."When 9/11 hit, we didnt layoff anyone. Instead, we used that period to trainour employees in lean, so when the upturn hits, which is now, we are ready togo. As we get new work, we are wowing our customers by turning it aroundquickly," he said. "We also decreased our footprint by about 20 percent."Before 9/11, DynaBil was 70 percent commercial and 30 percent defensebusiness. Today, 55 percent of the companys revenues come from the defenseindustry while 45 percent comes from commercial, Quigley said.Efforts from the new Lean Aerospace Initiative (LAI), a consortium focused onincreasing the value of aerospace business practices - led by the MassachusettsInstitute of Technology, U.S. government organizations, defense and aerospacecompanies and organized labor - is filtering down to suppliers, Lewandowskisaid."The LAI itself doesnt include smaller suppliers; they do studies of larger primesand put out tools companies can use to implement. But this information getsfiltered down through Department of Commerce Manufacturing ExtensionPrograms [MEPs] and large AIA member companies that have supplier qualitymanagers," he said.