1. LEAN ENTERPRISE
Angelo Angeleri
Rick Grimes
IBM Corporation
Introduction
After a decade of down sizing, reengineering and Enterprise Resource
Planning (ERP) implementation, many manufacturing executives are still looking
for that successful “formula” that will give them a competitive advantage,
sustainable growth, and profit. They are also discovering that the rigors of the fast-
paced, customer-driven Internet age have raised the bar for speed and quality in
customer service.
Instead of focusing on their existing organizations and outdated definitions of
value, successful companies are adopting principles based upon lean thinking and
the lean enterprise. The corner stone of lean ideas is to provide only what the
customer wants, when he wants it, and faster than ever through a value stream that
flows smoothly at the “pull” of the customer and does not create any waste.
Satisfying the customer means winning, pursuing perfection in what you do.
At its most basic level, a lean approach produces a product only after the
company receives the order. Market “pull” initiates activity, rather than “pushing”
products from the factory into glutted distribution channels. The concept has far
reaching impact in today’s digital economy.
IBM has found that, from an electronic industry perspective, there are
challenges in changing the enterprise, especially if lean production is adopted as a
key business strategy for entire end-to-end (E2E) business process.
Moving from the factory floor into the enterprise with lean concepts presents
challenges because value streams become more complex and contain additional
characteristics that need to be defined and analyzed. These value streams usually
require an E2E business process understanding and not just a departmental view of
the process. This is evident when optimizing shared services such as HR and
Finance, when incorporating lean concepts into engineering, development, or in
implementing cross-functional applications such as ERP, PDM, CAD, etc.
With cross-functional applications, value streams have more cross-stream
reliance and inter-linkages. Executing and sustaining change in this environment is
often underestimated with a lean approach. IBM has found that the approach
required is one that integrates three areas of business transformation and addresses
them concurrently. By integrating the organization’s people, business processes,
and information technology tools simultaneously, IBM has overcome the
challenges of implementation.
This paper addresses lean ideas and how to apply the principles in creating real-
world, lean enterprises. It discusses electronic industry trends, the impact of the
Internet, increasing product design complexity (mass customization), and the need
2. for value stream alignment, to enable Design (anywhere) for Manufacturing
(anywhere), or DFM. It provides lean insight into creating customer and
stockholder value in e-business design, and recounts recent lessons learned both
from IBM clients and the transformation of the IBM Corporation.
Lean Manufacturing
The definition and benefits of lean manufacturing are embodied in Toyota’s
Automotive Lean Production System. Toyota recently provided the results of their
lean approach to the world’s leading automobile manufacturers and data indicates
that Toyota’s lean manufacturing approach requires half the human labor, half the
manufacturing space, half the investment tools, and half the engineering hours to
produce a vehicle. The results are an order of magnitude better than anything
produced using traditional mass production techniques, proving lean
manufacturing is one of the most important organizational paradigms for the next
decade.
But lean manufacturing principles can be applied to any organization in any
industry; although its origins are firmly in automotive production environment, the
principals are transferable and often referred to as lean thinking. Lean thinking
applies to all activities including product development and the DFM process. The
starting point is to recognize that only a small fraction of the total time and effort
in any organization actually adds value for the end customer. By clearly defining
value for a specific product from an end customer’s perspective, all non-value
activities, or waste, can be targeted for removal.
IBM’s discrete-event simulator now enables trading partners to analyze supply
chain management (SCM) cause and effect activities and find the most profitable
alternatives. The simulator uses pull-based replenishment versus push-based
replenishment through non-linear, discrete-event simulation to understand the
impacts upon collaborative SCM activities. A company can test new strategies
without committing scarce resources, while gaining 1) quantitative evidence
regarding the change and the benefits derived; 2) education for management
throughout the supply chain on the value of adopting new strategies.
Applied across product development, supply chain management, customer
relationship management, and human resources, lean enterprise techniques
revolutionize the way products are ordered, manufactured and delivered.
Electronic Industry Observations and Manufacturing Trends
Today electronic companies are trying to reduce costs, risks, and increase
market responsiveness and profits. In the product development process today, the
new frontier for cost reduction and revenue improvement initiatives is the complex
and collaborative Design for Manufacturing process.
IBM has found that the design and manufacturing of complex electronic
systems, in some companies, is still based upon individual departments of various
engineering (Electrical Design, RE, SW, Mechanical, Industrial Design, etc.) and
3. manufacturing disciplines. Understanding and improving these diverse processes
and their inter linkages is critical. Few products are created by one department or
organization alone, so to enable the value creating steps to flow continuously, the
entire set of value stream activities across DFM processes must be identified along
with the information flow that occurs between the activities.
But today, this integration alone will not enable the lean enterprise to meet
customer demands and effectively compete in terms of time to market, cost,
quality, global market participation, and customer service. To accurately specify value,
the entire value stream must be identified, including customers’ activities.
The Internet has enabled customers to pull the design from upstream steps. This
ability has created a new class of savvy customers, intolerant of imperfect goods and late
deliveries, that are now able to dissect pricing variations across global divisions and in
seconds compare dozens of companies’ product offerings. The explosion of the Internet
has taken the concept of mass customization beyond anyone’s expectations, and
businesses and consumers now demand customized products meeting exactly their
specifications and delivery. Following these trends, consumer electronic companies must
be able to produce products tailored to customer needs, quickly, and at a reasonable cost.
This requires looking at the entire business model of a company and in many cases
redefinition of the business.
IBM’s Microelectronics Division re-engineered its custom chip order design services
via the Internet. To reduce the turnaround time to design custom ASIC chips, and avoid
the expense of multiple proprietary and 3rd-party design tools, IBM built an online
service that reduced turnaround time from 3-4 weeks to overnight.
To achieve mass customization, electronic companies must manage cost and time by
integrating information and processes throughout the extended enterprise. This
integration is not just between design and manufacturing, but includes sales, customer
fulfillment, and administration. The enterprise must adapt to market changes which
includes the way it acquires necessary intellectual property, skills, resources, knowledge,
technology, and other key pieces of the puzzle that affect the speed with which products
are brought to market.
The U.S. consumer electronics industry is quickly evolving into a provider of work
style and lifestyle solutions and the next wave of consumer electronic products that
customers will want and/or need is driving more complexity into the DFM process.
Looking ahead to the build-out of the Internet, we find the demand for the convergence of
communications, computers and consumer electronics, the growth of handheld
computers, organizers, two way pagers and Internet-ready cell phones show a trend
towards more embedded electronics and software content. This will exhibit itself in the
growth of new electronic products and technologies in the years to come.
The demand for more complex and custom products will require better linkages in the
DFM process and better information management capabilities than exist today. The DFM
process will increase in importance as more sophisticated packaging evolves, as will
interactions between other domains such as electrical and software design.
4. Based upon technology trends:
The need for automation to aid in design management will steadily increase;
Design complexity will increase;
The number of design process and checking steps that must be successfully
enacted to complete a design must be optimized;
Design team size involved with a single design entity will increase;
Design interactions across multiple design domains will increase.
These trends lead to the following lean enterprise requirements for DFM:
Align the value streams;
Align organization to value stream;
Breakdown existing barriers.
Running Lean Across Design and Manufacturing
The goal in engineering is to design or change a product in such a way that it is
ready for production when it hits the manufacturing floor. Designs that do not
achieve this goal often result in higher manufacturing costs, and delay the
introduction of the new product. While design for manufacturing may require
more time during the initial design phase, the lost time will typically be made up
when the product enters the manufacturing stage.
A product that has been designed for manufacturing can begin realizing
benefits of the design even before it leaves the development area. Most companies
today still think of DFM as the standardization of data, tools, or translators that
enable engineering to transfer relevant data to manufacturing. By extending our
definition of DFM to include the design anywhere/manufacture anywhere concept,
the value streams become enriched with greater alignment than ever before.
Companies striving to improve time to market and shorten product life cycles
often broaden the DFM initiative to include the design (anywhere) for
manufacturing (anywhere) value stream. This extension not only addresses
standardization and transfer of product objects such as product data, but now
includes design rules, capacity models, conversion cost analyses, options
management, design data translations, manufacturing tooling data, process
instructions and test information. Aligning the organizations to these value stream
elements requires that loyalty to product flow and lean thinking to be expanded
across all functions.
The first task towards incorporation of the above elements is to align and
standardize the design and development processes to a common product life cycle.
The common processes at this point will allow for effective and consistent
program management and facilitate the design anywhere objective. Consistency in
the development processes will enable design sites to repeatedly develop quality
products, efficiently and quickly. This will support a rapid prototype process
within the engineering development cycle as well as streamline overall cycle time
to production. This requires flexible systems and processes and a development
discipline and controls of the product data at defined stages of the life cycle.
5. The second task towards alignment is to standardize the transfer and conversion
of a product data package in such a way that it will truly feasible to realize the
build anywhere concept. The process to transfer and convert this data quickly and
correctly will determine the cost of the transfer, the time to accomplish a factory
transfer, the time to ramp up production, and the ability to produce a consistently
high quality product. This sets the standard for metrics that will measure cost, time
and quality of a DFM process.
As lean thinking contends that because value streams flow across design and
manufacturing, it needs to be organized around its key value streams. For design
(anywhere) the value streams focus on product data, design rules, capacity models,
conversion cost analyses, options management, and design data translations. For
manufacture (anywhere) the value streams focus on the product data package,
manufacturing tooling data, process instructions, test information, factory,
equipment, production, and quality. Such an end-to-end value analysis allows an
enterprise to manage the entire value stream for products, setting common
improvement targets and rules for sharing gains and work effort. It provides the
view to align the value streams and the design and manufacturing organizations to
the value stream.
Removing wasted time and effort represents the biggest opportunity for
performance improvement. Creating flow and pull starts with radically
reorganizing individual process steps, but the gains become truly significant as the
entire steps link together. As this happens, layers of waste become visible and the
process continues towards the theoretical end point of perfection, where every
asset and every action adds value for the end customer. In this way, lean thinking
represents a path of sustained performance improvement, and not a one- off
program.
A major challenge facing DaimlerChrysler was process standardization across
five product platforms and standardization resulting from the merger with
Daimler-Benz. Working with IBM, DaimlerChrysler improved the Wiring Harness
Design process by defining a common best-in-class process. This resulted in
significant cycle time reductions through improvements in the product
development process.
Creation of the Lean Enterprise
The creation of a complete value stream design for the lean enterprise can be a
large and difficult task. Diverse groups within a single design enterprise need to
use the same design process approach, but may need to use (or change to) different
design management systems. It is imperative that a standard for representing this
important design data be developed and adopted to enable design process
methodology to be portable across compliant design managers. Further, the overall
business value stream may demand the use of multiple design management
6. systems for different areas of the value stream, and potentially even multiple
design management tools working on the same area of the value stream.
e-business is the cornerstone to enabling the lean enterprise by reaching new
markets, building customer loyalty, reducing transaction costs, building global
collaboration, and tightening supply chain linkages. The realization of the Lean
Enterprise is enhanced by ebusiness designs that can be competitively advantaged
and calibrated to changing customer priorities. This capability provides for greater
customer pull, which affects all elements of the end to end value stream.
As lean thinking contends the organization must view itself as just one part of
an extended supply chain, it needs to think strategically beyond its own
boundaries. IBM has found that the development of an e-business strategy forces
companies to evaluate value streams that drive profit and shareholder value.
Strategic e-business elements include a determination of the targeted customers
and the value that will be delivered to both the customer and the shareholder based
upon the competitive position in the market and scope of the business design.
In summary there are many challenges to implementing a lean enterprise and
the benefits of providing value to the customer and eliminating waste can be
significant. Breaking down the barriers to change, and aligning the
Design/Manufacturing value stream and organization are steps in eliminating
waste. To enable Design (anywhere) for Manufacturing (anywhere), an end-to-end
value stream analysis is required to understand and optimize the cross stream
reliance and inter linkages. A key enhancement for the lean enterprise is e-
business: web technology is fundamental to new business strategies and value
stream mapping.
Key Lean Thinking Principles
The starting point is to recognize that only a small fraction of time and effort in
any organization actually adds value for the customer. By clearly defining value
for a specific product from an end customer’s perspective, all non-value activities,
or waste, can be targeted for removal.
Few products are created by one department or organization alone, so to enable
the value creating steps to flow continuously; it requires the entire set of value
stream activities across the DFM value stream to be identified along with the
information flow that occurs between the activities.
To accurately specify the value steam for DFM activities, the customer’s
activities must be included to enable the feedback provided by customer facing
systems such as the Internet. DFM needs to be organized and aligned around its
key value streams.
Removing wasted time and effort represents the biggest opportunity for
performance improvement. Creating flow and pull starts with radically
reorganizing individual process steps, but the gains become truly significant as the
entire steps link together. As this happens more and more layers of waste become
where every asset and every action adds value for the end customer.
7. As lean thinking contends the organization must view itself as just one part of
an extended supply chain, it follows that it needs to think strategically beyond its
own boundaries. Strategic e-business elements include a determination of the
targeted customers and the value that will be delivered to both the customer and
the shareholder based upon the competitive position in the market and scope of the
business design.
