The Lean Front-End: Implementing a Lean Front-End - How Do You Measure Success

By BigMachines, Inc.

Published on: April 2005
Type of content: VENDOR WHITE PAPER
Format: Adobe Acrobat (.pdf) (509 kb)
Length: 10 pages
Price: FREE

Overview:
Lean manufacturing arrived on the scene several years ago as a result of the success Toyota and other Japanese manufacturers were having with this system as Womack and Jones described in their revolutionary book "The Machine That Changed the World." A growing number of companies are now adopting Kaizen initiatives for continuous improvement, kanban replenishment, and demand-driven flow manufacturing processes based on a "pull" rather than "push" philosophy. The purpose of lean manufacturing is to eliminate waste, reduce inefficiencies and inventories, and improve on-time delivery rates.

The success of implementing lean techniques and technology solutions for back-end production and fulfillment processes has spurred an extension of the lean philosophy, as many manufacturers have begun to apply lean strategies beyond the shop floor. Manufacturers are now applying lean thinking to streamline their front-end selling processes, from opportunity to order. This includes automating product selection and configuration, pricing and quoting, and order processing. By applying lean thinking and web technology, manufacturers can eliminate the delays and errors inherent in the cumbersome front-end processes typically used to sell complex
products across multiple channels. Just as they have done on the back-end, manufacturers must eliminate front-end "waste" to remain agile and competitive in today's global economy.

A recent study conducted by AMR Research, a leading manufacturing industry analyst, indicates that maintaining quote and order accuracy using a manual, spreadsheet-based quoting process for configurable products across multiple sales channels is a huge challenge. Such manual methods typically lead to high quote error rates, invalid configurations and extensive intervention by engineering and customer service resources. Frequently the net result is lengthy quote response times and low quote-to-order conversion rates.

To alleviate these "pain points," manufacturers of configure-to-order (CTO) and engineer-to-order (ETO) products are increasingly turning to web-based sales solutions in the hopes of achieving the business benefits made possible by a lean front-end. This article examines how front-end process optimization contributes to establishing a customer-centric value stream and describes several Key Performance Indicators (KPIs) by which a company can measure the success of a lean front-end initiative and its impact on overall business performance.

'Slow and steady' drives Toyota's growth

By Chris Woodyard, USA TODAY
TORRANCE, Calif. — Toyota Motor (TM) made a routine announcement in Tokyo on Tuesday that has monumental significance.



Toyota's Jim Press with a new FJ Cruiser, left, and vintage Land Cruiser.
By Robert Hanashiro, USA TODAY

Toyota said it will boost worldwide production of cars and trucks 10% next year, to a company record 9.06 million. That means it could slip past ailing General Motors (GM) to become the world's biggest car company. (Photo gallery: Big moments in Toyota history)

GM, the undisputed production leader since 1931, is expected to manufacture 9.08 million vehicles this year. GM doesn't forecast annual production, but analysts foresee 8.85 million to 9.15 million next year.

CSM Worldwide predicts that GM will crank out 208,459 fewer vehicles than Toyota next year.

What should be good news for Toyota puts the automaker in a tough spot. Its corporate culture embraces humility. And its political sense shuns anything that could create a backlash that, Toyota fears, might spark a boycott of its products.

"We try to prepare our production and sales to respond to customer needs in every region," Toyota President Katsuaki Watanabe told reporters in Tokyo. "I am not thinking much about whether we will become No. 1."

Yet, if Toyota overtakes GM, it will be just another in a growing line of superlatives that enhance the car company's image and, presumably, draw more customers into its showrooms.

While being biggest can help strong-arm lower costs in dealing with suppliers, it's mainly a matter of boasting rights.

"It's largely just symbolic," says Jeffrey Liker, a University of Michigan professor and author of The Toyota Way.

GM lost $3.8 billion the first three quarters of this year and recently announced that it will close nine assembly plants and cut 30,000 jobs to restructure its U.S. operations, where the biggest losses are.

Toyota has prospered by growing slowly and steadily. Today, Toyotas can be found in 170 countries, from the grand boulevards of Europe to the rutted roads of rural China. The company sometimes is late to join segments — its first full-size pickup, Tundra, didn't show up in the USA until 1999 — but wins notice when it eventually arrives. Honda beat Toyota into the U.S. market with a gas-electric hybrid, but Toyota now sells more, and its Prius has become almost a synonym for hybrid.

New opportunities, including cutbacks among the Detroit automakers, are forcing Toyota to quicken its pace. It has set a target of 15% worldwide market share in the next decade, up from 10% today. When growth of the worldwide auto market is taken into account, the increase would amount to 5 million-plus vehicles a year, more than half again as many as it sells today.

New plants on the way

To get there, Toyota faces the ambitious prospect of opening at least five new plants, from Thailand to Texas, by the end of the decade. And there are risks to increasingly fast growth. Already, twice as many Toyotas have been voluntarily recalled in the USA this year as were recalled last year to fix possible defects. Competitors are making inroads in quality surveys.

"Their next evolution is to become a global company. In order to do that, they are going to have to fall and hurt themselves and pick themselves up," Liker says.

Toyota generally doesn't stumble. The company's careful approach — jiwa-jiwa, Japanese for slow and steady — has served it well.

Toyota didn't start selling cars in the USA until 1958. It began with a small sedan and the rugged off-road Land Cruiser. Toyota's breakthrough in the U.S. came after the 1965 introduction of the Corona, a feisty little sedan that sold for $1,760. The smaller Corolla followed three years later and would become the company's all-time best selling car.

The big selling point then, as now: quality.

To Detroit in the 1980s, gripped by fears of Japan Inc. and enthralled with the notion of automated assembly lines, the answer to quality appeared to be factory robots. Toyota, however, has looked to the human factor.

It is a "people business, from top to bottom," in which senior managers are encouraged to visit production lines or otherwise learn firsthand how to fix a problem, says James Womack of the non-profit Lean Enterprise Institute, a management think tank, and co-author of the book Lean Solutions.

	Toyota profit promotes interest in stock
	Investors value Toyota Motor's stock because of the company's strong profit, pushing up the automaker's value to several times that of other car companies. Revenue, net income are for the four most recent quarters. In billions: Automaker Market capitalization Total revenue Profit/loss Toyota $166.4 $179.4 $10.7 Honda $55.4 $83.7 $4.5 DaimlerChrysler $52.3 $194.1 $3.1 Nissan $46.7 $83.4 $4.7 BMW $28.1 $60.1 $2.9 Volkswagen $21.5 $122.8 $1.2 Hyundai $20.4 $51.3 $1.6 Audi $15.2 $34.3 $1.1 Ford Motor $15.2 $175.5 $2.0 General Motors $12.7 $193.0 -$3.9 Suzuki $10.5 $22.8 $0.6 Mitsubishi $9.9 $18.9 -$3.4 Kia $8.3 $17.1 $0.6 Porsche $6.6 $8.0 $1.0 Mazda $6.2 $25.1 $0.5 Isuzu $4.8 $13.8 $0.5 Source: Capital IQ

It's a philosophy that has extended to its U.S. operations. Toyota's U.S. headquarters in this Los Angeles suburb was built with an open design and a pair of circular staircases that force employees in the airy atrium to look around at all the cubicles. Jim Press, Toyota's U.S. president, says it encourages people to talk to each other and solve problems directly.

Underscoring the zenlike quality of the place, Press says the 15% worldwide market share isn't a goal, but a "spiritual target."

If that sounds strange, consider some of the other traits that distinguish Toyota:

•Paranoia. "Toyota is the biggest worrier on the planet," Womack says.

When a group of Japan-based Toyota board members visited U.S. headquarters earlier this month, employees didn't assemble their latest models for them to see. Rather, they created a car show of what they viewed as the toughest competition, including the Hyundai Azera, Honda Civic and Dodge Charger.

"There's this global paranoia," says Michael Robinet, a CSM vice president. Toyota executives are especially worried about the South Koreans — which have the Hyundai and Kia brands in the USA — because of their fast growth.

•No layoffs. Toyota doesn't promise lifetime employment, but it has managed to avoid layoffs because of its growth.

Also, work is shifted among plants in the growing company. When truck bed assembly was sent to Mexico, a Toyota facility in Long Beach, Calif., that had done the work for years, was given other, higher-value components to put together, Press says.

•Hybrids. Toyota is years ahead of U.S. competitors in developing and deploying the gasoline-electric hybrid, one of the most promising new technologies in the automotive world in a generation.

It will have shipped 140,000 hybrids from Japan to the USA this year. Production of hybrids in the USA is expected to start in 2006 with the Camry, built in a factory in Georgetown, Ky. Even a hybrid pickup is being considered.

•Finances. Toyota's bankroll — $18 billion — is the highest in the industry, save for GM's similar cash stash. "Toyota is sitting on a pile of money," Robinet says. Well, not really sitting — investing. Research spending amounts to $6.6 billion this fiscal year.

That's possible when you're making money. The $10.7 billion the company earned in the last four quarters was an industry high, a fact not missed by investors. The total value of all Toyota shares exceeds that of DaimlerChrysler, Ford Motor, GM, Honda and Volkswagen combined.

It sold 1.9 million vehicles worldwide in the quarter ended Sept. 30, up 6.2% from the same period last year. In North America, sales were up 9% — and Toyota offered far-fewer profit-diminishing incentives than domestic automakers.

•Long-term focus. Instead of a fixation on quarterly profit, Toyota is known for looking out years, even decades, in product development and master planning.

And the company occasionally shows it's still willing to take a risk. The FJ Cruiser, a nostalgia-driven off-road truck, will go on sale next year. It's the outgrowth of a concept vehicle at the 2003 auto show in Detroit.

Production on the rise

With sales increasing, filling part of the gap left by diminished GM and Ford sales, Toyota is ramping up production in the USA and Canada. A pickup plant in San Antonio opens next year. A second factory in Canada is scheduled to make its debut in 2008. Around the world, planning or construction is underway for plants in Russia, China and Thailand.

Watanabe also has announced the goal of speeding up the time it takes to develop new vehicles.

Can the company keep pace? Some see a strain already. "Their system is stretched," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.

It's showing up in recalls. The 2.2 million Toyotas recalled through Nov. 17 — twice as many as last year — puts Toyota ahead of DaimlerChrysler's 749,460, the National Highway Traffic Safety Administration reports. Toyota recalls lag behind GM's 4.1 million and Ford's 6 million.

Toyota still has enviable quality rankings, but competitors are catching up. The Toyota brand ranked seventh behind such nameplates as Buick and Cadillac in J.D. Power and Associates surveys measuring initial quality and quality after three years of ownership.

Toyota has taken notice. European chief Shinichi Sasaki was quoted in the Financial Times last month as warning that new factories outside Japan with quickly hired new workers smack at the culture of "built-in quality." Sasaki, the group's former head of quality, noted that rivals are challenging Toyota's high J.D. Power ratings.

Still, Toyota looks like an irresistible force — as its imminent ascension to No. 1 automaker underscores.

"Toyota is kind of a scary mix of a hugely strong financial company and a great product development company supported by an excellent sales arm," says George Peterson, president of consultants AutoPacific. "They are really tough to stop."

Contributing: Matt Krantz, The Associated Press.

Taking lean to the people

Magazine Article, Source : The Manufacturer
Zone : World class manufacturing
Published : December 2005

As the lean drive continues, Malcolm Wheatley discovers how companies are conquering the most difficult issue – getting wholehearted buy-in from their workforce

In the coming year – perhaps more than ever before – manufacturers will be redoubling their efforts to be lean. A sluggish global economy, low levels of consumer confidence, higher interest rates: already buffeted by competition from low-cost economies overseas, British manufacturers know that it’s time to get lean. And, what’s more, stay that way: unlike dieting, in today’s tough economy backsliding can carry perilous consequences.

But if a decade’s experience of adopting lean manufacturing within British industry tells us anything, it’s that lean isn’t a ‘turnkey’ solution. Lean must be worked at, not just wished for. There’s no easy software to plug in, although software can, under certain circumstances, help. Nor can lean be bought, although again, the services of consultants may make the transformation easier. This leads to the most fundamental of questions: how?

The transformation needs to start at the top, insists Mark Fillingham, managing director of Chesterfield-based Robinson Paperboard Packing. Three and a half years into a lean revolution that began shortly after Fillingham’s arrival in 2002, lean manufacturing at Robinson has been underpinned by a firm belief that people are vital to the strategy – and that a demonstrable commitment to getting the best from those people makes a difference. “We simply don’t believe that you can fully harness people’s skills and abilities without this commitment,” stresses Fillingham.

If that sounds a little ‘touchy-feely’, it isn’t. Several members of the existing team of managers and supervisors that was in place when Fillingham arrived are no longer with the company. “Having management with the right values is vital: it’s not that the people who left us weren’t effective, it was that they didn’t have the right ‘people values’ for the changes that I wanted to bring about,” he says. Routinely, for example, senior management would park their cars in the disabled bays close to the entrance: no more, says Fillingham.

Today, the three production cells that comprise the factory are probably no more than 25 per cent of the way along what Fillingham regards as the full journey to lean. 5S is in place, as is operative-led maintenance, underpinned by standard operating procedures and checklists. Nevertheless, backed by demonstrable commitment from the top, a sea change has taken place: there will be no going back, insists Fillingham. An early benefit of the new standard operating procedures, he adds, was a number of operative-inspired manufacturing innovations – several of which subsequently earned the plant an award.

Successful lean programmes have another workforce-related dimension, adds Stephen Parry, an organisational change consultant: they’ve often been ‘sold’ to employees carefully, and sensitively. “The word ‘lean’ can be something of an issue,” he notes. “Employees can think that eliminating waste means eliminating people, which can create resistance. The message needs to revolve much more around preventing waste arising – and redeploying them to create business value elsewhere in the organisation.”

It’s a pitch that certainly resonates with John Caruso, senior vice-president of operational excellence and corporate quality at Sanmina-SCI, a $13 billion dollar American-owned global contract manufacturer for companies such as Sony, IBM, and Sun Microsystems. “To me, our plants that have been most successful in adopting lean manufacturing have been those where they have seen it as a way of improving how they run their business, as opposed to it being just another programme mandated by the folks at corporate,” he confirms.

“Winning the hearts and minds of the workforce is vital if lean is to stick,” agrees Chris Dewhurst, a senior lean manufacturing and six sigma trainer with Smallpeice Enterprises, the training arm of the Smallpeice Trust, a charity set up by retired industrialist Dr Cosby Smallpeice in the 1960s to help manufacturers ‘make things better, quicker and more cheaply’.

Dr Smallpeice didn’t add ‘more enjoyably’ to his objectives, but that can indeed often turn out to be an important aspect of working within a lean environment, argues Dewhurst. “Lean isn’t just about cost reduction, it’s about waste elimination and continuous improvement,” he points out. “If the thrust is all about cost reduction, employees will soon come to think that there’s nothing in it for them, whereas a genuinely lean environment provides hassle-free working, and a sense of fulfilment through working together towards a common aim.”

In summary, he stresses: “It’s all about involvement, visible commitment, getting people involved in making improvements – and feeling proud of early successes.” Success breeds success: a few ‘early wins’ further inspires those who helped bring them about, and also encourages others to join in.

Those early wins, and those that follow them, come from the application of techniques and new ways of working, of course. But even if management is keen to make improvements, some experienced insights into where to start can make the difference between success and failure.

At Crewe engineering company CHK, for example, it was a diagnostic study from MAS (the Manufacturing Advisory Service) in the form of Manufacturing Institute facilitator Tim Fox that helped kick start the business’s lean transformation. “CHK was facing a lot of challenges, but has come through strongly,” says Fox. It is now also a very different business: formerly solely a subcontractor – with all that implies in terms of low margins and fluctuating workload – the company has recently introduced the first of several fabricated products of its own.

Lean didn’t just free-up the physical space in which to manufacturer these, notes CHK’s operations manager Steve Toplis, it also dramatically increased productivity. Formerly, 140 people were employed: it’s now 80 people, says Toplis, collectively generating the same sales value – and with manufacturing capacity to spare.

The trick, he adds, has been to move away from an environment of perpetual firefighting, and towards manufacturing in a more structured manner. And although the move to lean has generally been popular with the workforce, among those who have left the business have been people who haven’t appreciated the change. “Some people like to fight fires: they enjoy the adrenaline rush,” says Toplis. “With lean there are far fewer fires to fight.”

Training is another aspect of the lean transformation that can make the difference between success and failure. The issue: techniques half-grasped, or picked up from books, tend not to work as well as those that have been imparted in a classroom situation by experienced trainers – people well-versed not just in delivering lean training, but also in implementing lean in the real world. What’s more, training helps cement the required culture change, especially when carried out in-depth.

At dairy products manufacturer Dairy Crest’s Davidstow cheese-making creamery, for example, training from Smallpeice has underpinned a lean manufacturing initiative that is now well underway. Four in-house lean ‘experts’ were trained initially on a 10-day lean course, with three more colleagues following them, while a number of engineers and operators attended a three-day ‘overview’ course. “We’re aiming to significantly increase the number of people put through the courses, so that we can have someone with detailed knowledge of the principles and tools in each production team,” explains Richard Boundy, continuous improvement manager at the plant.

Just as importantly, recurrent lean training can help refresh people’s skills and understanding, and also fill the gaps in lean knowledge as people leave or get promoted. Ole Dam, operations manager at Creative Memories, an American manufacturer of personalised scrapbooks and photograph albums, has been a lean practitioner for almost 25 years. But when appointed to his present role seven years ago and asked to implement lean manufacturing, Dam began by sending his company chairman on a four-day course at American lean manufacturing institute JCIT International. “I wanted him to know what was going to happen to his company,” explains Dam.

The result: a free hand to do as he wished, to which Dam responded by sending every manufacturing manager and supervisor on the same four-day course at JCIT that the chairman had attended. Seven years on, lean has revolutionised the business: plant throughput time has fallen from three weeks to 10 minutes, work-in-progress levels have fallen by 80 per cent, even though volumes have increased, and the space needed for this has reduced by 70 per cent. A significant transformation has taken place. But even to this day, every newly-hired or promoted supervisor attends the course – and some senior engineers and other specialists have attended more advanced courses.

But once the lean initiative is underway, how can its impetus be maintained? While ‘refresher training’ helps maintain knowledge levels, sometimes something more forceful is required. At Telford-based Alcoa Fastening Systems, for example, a lean manufacturing initiative begun in 1997 had delivered impressive results: a 60 per cent reduction in lead times, a 60 per cent reduction in setup times, and the freeing-up of 40 per cent of the plant’s floor space.

But in April this year, recognising that the pace of improvement had slowed, the factory recruited Jonathan Griffiths as continuous improvement manager. His role: spearheading further improvements, and monitoring the involvement of personnel in improvement activities: a monthly report to the managing director details the percentage of the factory’s workforce actively involved in lean activities in the previous month. “We’re trying to involve 100 per cent of the workforce,” says Griffiths.

Another impetus-sustaining innovation: a maintenance fitter, employed by a local engineering firm, is kept permanently on site to manufacture anything by way of guides, jigs, fixings or anything else that will make operations more efficient. No requisitions are needed: shift leaders have the authority to have any such equipment manufactured. And a director of the engineering firm in question visits the factory every Thursday, to sit in on an improvement meeting, and make sure everything is working well.

When it comes to the interface between the factory and the outside world, external supply chain partners can help sustain the pace. When Land Rover outsourced its inbound logistics operations to NYK Logistics, explains Richard Osborne, logistics operations manager at Land Rover, part of the rationale was tapping into the capabilities of another organisation with skills in material handling, rather than vehicle manufacture.

Using techniques such as value stream mapping, 5S and the ‘seven wastes’ in a materials context unlocked significant new savings, adds NYK’s director of logistics Gwyn Thomas: a distribution depot formerly used for offsite component storage has been closed completely, he says, being replaced by a ‘cross-docking’ facility at an NYK facility five miles away, at which inbound parts sit for just four hours.

Finally, don’t forget the impact of lean on the rest of the business, advises Martin Armistead, director of consulting at Deloitte. Here, lean can be a double-edged sword, he adds: an opportunity to extend the benefits, but also undermine the progress being made in the factory, if the rest of the business isn’t in tune.

“Tools such as 5S and kanbans can in some ways work against the adoption of the broader lean principles,” he warns. “The reaction to early successes is to want more of the same, from the same tools. But the lean toolset includes a number of other less visible techniques, which are much more likely to influence the business in the long term – addressing issues such as the way an organisation measures itself, or encourages and rewards individual behaviours.”

At Northampton-based motor sport manufacturer Cosworth, for example, four people have been recruited as ‘business analysts’ specifically to address such issues, says planning and scheduling manager Darren Dowding.

“The danger is that lean can end up being a manufacturing initiative that doesn’t extend any further across the business: I’ve seen supposedly lean factories with warehouses that were bulging with inventory,” he notes. “The role of our business analysts is to look at how all our business processes fit together in the context of today’s marketplace and today’s order book – looking at how the finance function calculates things, for example, or how the stores operate.”

The intention: a company that's not only a lean manufacturer, but an agile business – ‘closing the loop’, and ensuring that something that began in the factory spreads out to enable the business as a whole to become fit, lean, and ready for anything. And, as the nation prepares for its Christmas gorging, it’s certainly an objective that's as fitting as any.

TOC support for lean manufacturing

Ferret.com.au

By alan johnson

LEAN manufacturing, a passing fad or not, involves several vital elements that can improve the productivity, and profitability, of Australian manufacturing companies.

As Geoff Squires, supply chain and logistics specialist with Intentia Australia suggests, Australian manufacturers would do well to read more about lean manufacturing and understand its philosophy.

“Subsequently manufacturers should look at their business processes, and understand what the value is they are trying to give to their customers. Then they should work out what techniques they need to apply to make a lean manufacturing environment that is demand driven, a pull process, that provides value to customers and reduces risk, downtime and waste, and ultimately has a continuous improvement process associated with it,” Squires told Manufacturers ’ Monthly.

While admitting TOC (Theory of Constraints) is only a small part of the lean philosophy, Squires says it’s a vital element for manufacturers to increase their value as a supplier to their customer base.

“Many people try hard to optimise all different parts of their business, when in manufacturing the most important part is to understand where the constraints are. Because the constraint actually creates the rhythm for the throughput.

“You might end up having a lot of inventory sitting in front of the constraint, and vacant time on machines downstream from the constraint. If you don’t understand that, you end up wasting a lot of money in parts of manufacture or the supply chain, that’s irrelevant to the outcome for the customer.

Squires believes TOC offers two fundamental savings. “First is a reduction in inventory because you don’t have WIP (Work In Progress) in front of operations that have not been fed because of constraints.

“Second one is total throughput. If you optimise the constraint, you are getting the highest throughput through a plant that you can based on that order front.

“With the trend towards customisation of end product and shorter lead times to market TOC is becoming more important. Today manufacturers are making to order rather than making to stock, at the same time trying to reduce costs,” Squires said.

He explained that Intentia now offers a TOC production planning package to support lean manufacturing. According to Squires, the package can shorten the time necessary to realise the benefits of lean manufacturing. “It can quickly deliver increases in throughput, minimise inventory and reduce operating expenses.

“In its simplest format, the software allows manufacturers to understand the throughput at a constraint and then manage demand and supply to the throughput of that constraint. To buffer the constraint properly.

“In a more complex environment, typically today’s manufacturing environment where manufacturers have floating constraints (depending on demand/product mix), it allows them to look at the demand and understand what that means on the load on particular machines, and then optimise the throughput at the various stages of production to meet that demand, and to buffer the constraints that come from that demand.

“It allows manufacturers to understand where that constraint is, based on the demand.

“The software relies on information put in the system around throughput and product mixes specifically related to those items that can become constraints.

In the past people used to try and model everything, but that creates a whole lot of data you need to do that. But if you understand that of the twenty different operations, for example, that occur in a manufacturing plant, there are three that can become constraints. Then really the only ones you need to model properly on data are those three. The constraint can move between those three depending on what orders are being placed, and the product mix and the set-up times associated with those items.

According to Squires Australia is just starting to understand the concepts of Lean. “And the concepts of all these burning bridges they have to get across to maintain their viability.

“This is also a huge opportunity to move up a level, from pure manufacturing and start looking at supply chains,” Squires said.

Certified by Eliyahu Goldratt (author of The Goal) as being a certified software package for TOC, Squires acknowledges what Goldratt’s book did to promote TOC.

“That was fine for simple production, but the problem is today you have moving constraints, with varying order mixes on a daily/weekly basis. It’s (TOC’s) now a moving target.

“You can’t just walk around the floor and make a decision to where the constraint is because it’s based on the product mix, and the mix is varying now more than ever before,” Squires said.

“This lean approach is something Australian industry really needs to start to think seriously about. TOC, MRP, Kanban, JIT, performance measurement, as isolated components actually doesn’t get the full picture,” Squires said.

Vilsack: 'Lean' factories are the future for Iowa

Zwire.com

MASON CITY - Gov. Tom Vilsack met Thursday with workers at a local door frame plant, telling them legislative initiatives to make manufacturing more efficient are essential to keeping Iowa competitive.

"Economic growth in Iowa depends on strategic support of lean manufacturing," Vilsack told workers at Curries.

He said the state has seen a 22 percent increase in the export of manufactured goods.
"We need to take the next step," he said.

Vilsack said part of that step will be to fund programs that focus on creating and funding programs for the Iowa's work force.

"We must stay connected to our universities and community colleges, be sure there are programs offering the necessary training," Vilsack said, surrounded by the clamor of factory production. He watched as a robotic laser sliced a strip of steel.
Jerry Currie, company CEO, said computer programming stations on machinery and clustered work areas are two ways the company has streamlined operations.

Using the Japanese concept for continuous improvement, known as kaizen, the company became more efficient, Currie said.

"It's the only way to be competitive today," Currie said.

The streamlining began at the top and filtered down, company officials said.

Jay Hain, profit center manager, said a five-step program was in important step.

Production lines were revised. Robotics installed for some steps, helping to speed cutting, breaking or bending steel, Hein said.

The state also embraces kaizen concepts, Vilsack said.

"Kaizen is being used to improve our air quality permitting," Vilsack said. "Each step toward efficiency, in manufacturing or government, creates a more competitive stable economy for Iowa."

'Lean' methods mean a healthier bottom line

DemocratandChronicle.com

Toolmaker Advent puts RIT expertise to work
Ben Rand
Staff writer

(December 9, 2005) — On a busy factory floor populated by more than 100 people rushing to make millions of plastic parts each year, sometimes the simplest solutions are the hardest to spot. Charles Alexander and his co-workers at Advent Co. of Rochester got a good lesson in this recently.

Alexander and other material handlers at Advent were having a hard time communicating which materials were in use — or needed to be used — over the course of a shift change. The problem went away when the team opted to put up a big message board.

"We could look at the board and know immediately what material (was needed), what job it's for and what machine it's for," said Alexander, 35, who has worked at Advent for about a year.

Ortho-Clinical's chief applies lean strategies

DemocratandChronicle.com

Nishad Majmudar
Staff writer

(December 13, 2005) — With 17 years of experience in large-scale manufacturing at Johnson & Johnson companies, Elaine Thibodeau is no stranger to the competitive pressures of a global economy.

As the new general manager of Rochester operations at Ortho-Clinical Diagnostics, a J&J medical device company that employs 1,500 people in the area, Thibodeau is using her expertise to implement lean manufacturing programs — cost-cutting measures prevalent in today's competitive marketplace.

"It's a business reality," said Thibodeau, 43. "For us to remain competitive, we have to be financially responsible and we have to deliver financial results. I'm responsible for manufacturing costs so I have to deliver against that."

As general manager, Thibodeau oversees manufacturing and on-time shipment from the company's Greece facility of Ortho-Clinical's products that include diagnostic machines used by clinicians for such tasks such as blood analysis.

She also considers how to reduce inefficiency and expand the company's product lines within the plant's finite space.

"Every time you bring a new analyzer into the market, there's a significant amount of floor space that's required to make that happen," said Thibodeau, a native of Sault Ste. Marie, Ontario. "What's the best way to manage space so we're not necessarily having to add to size to the building?"

Lean programs are defined as techniques that can create time and cost savings by eliminating or minimizing business processes that don't add value to the end product or service.

"If you look at the steps that get done to make something or service something, half of the steps don't add value that the consumer would want to pay for," said Gregory Dobson, associate professor of operations management at University of Rochester's William E. Simon Graduate School of Business Administration.

"A lot of the times those processes are there because of historical reasons: this was how things were done," Dobson said. "Lean is all about understanding processes and removing non-value-adding steps."

The lean concept was first adopted by the automobile industry three decades ago, Dobson said, but is gaining steam in other industries such as medical device manufacturing, which encompasses a wide variety of products. Bausch & Lomb Inc., for example, is also developing lean manufacturing methods. And Rochester Institute of Technology's Center for Lean Enterprise helps other companies put the method to work.

"The need for being lean, when you have a very high mix of products, is all about being very flexible so you can manage changeovers very quickly," Thibodeau said. "In equipment manufacturing, there are much larger pieces of equipment that have a lot more components going into them."

Thibodeau has used lean techniques successfully at previous J&J appointments.

For 15 years, Thibodeau worked at McNeil Consumer Products in Guelph, Ontario, a J&J unit that makes Tylenol and Motrin, ultimately managing manufacturing there.

Prior to taking the Ortho-Clinical job, Thibodeau worked for more than two years for J&J's DePuy division, a maker of orthopedic implants, in France's Champagne region.

"In France, we implemented lean manufacturing, which was about cell manufacturing, where for one particular product you put all the machines for that product in one area," she said. "We went from 35 days manufacturing down to 15 days over a two-year period."

Thibodeau said one approach to lean manufacturing that can apply to Ortho-Clinical is using hard data to identify and fix a problem.

"If our field engineers or technicians would be confronted by our customers on a recurring issue, they would get together with the equipment manufacturing personnel and look at the problem systematically," she said. "We'd look at the data we have and look at what the causes may be. You need data to ensure you're comparing apples to apples and looking at facts and not someone's gut feelings or instincts."

Ortho-Clinical is also adopting lean methods in manufacturing reagents, which are substances used in medical diagnostics.

"We took repair of motors that, in significant part, drive our equipment," said Rick Mihaljevic, Ortho-Clinical's plant manager of reagent manufacturing. "We used to outsource that repair, but by leveraging the experience and technical expertise of our maintenance group, we not only had costs savings but we have the skills within the maintenance group to get the repairs done internally."

Thibodeau said there is no concrete timeline for the lean programs, which she called an ongoing project.

"Anybody that's manufacturing any kind of equipment has to be as lean and efficient as possible," she said. "The lower the 'throughput' time, the happier our sales forces are because they're making deliveries more quickly."

Saving Time and Money

Syracuse.com
Sunday, December 11, 2005
By Charley Hannagan
Staff writer

A handful of Central New York offices are slimming down, and we're not talking about employee waistlines.

Offices are cutting unnecessary steps and paperwork as they begin following the lean principles of work that have been a part of local factory operations for years.

Defense contractor Lockheed Martin, for example, used lean techniques to cut the time it takes to get security clearances at its Salina facility. The streamlining cut the process in half.

Black Clawson Converting Machinery cut several weeks out of its order-taking processes with a streamlined form.

And when Carrier Corp. took wasted steps out of its interviewing process, the human resources department found it hired better workers.

"The advantage in getting a company to think of it (lean) in a holistic approach is if you've got the office people involved and thinking that way, too, then it becomes a culture," said Cindy Oehmigen, a lean manufacturing specialist with the Central New York Technology Development Organization. "So, you don't have those little islands of excellence. It truly is more pervasive."

Only a handful of companies in Central New York have begun implementing lean techniques in their offices.

Onondaga Community College's Lean Institute, which already offers training in lean techniques for the factory floor, is considering offering lean training for office environments, such as banks and health care, said David Wall, the college's director of corporate and public partnerships.

Companies implementing lean techniques in their factories map out the entire production process, looking for bottlenecks that slow production and consequently waste money.

Mapping out the process, or value stream mapping, can take place in an office, too.

"Everything still applies," said Ed Reynolds. His job title at Lockheed Martin is black belt, which means he works to improve all of the company's processes in on the manufacturing floor and office.

The factory and the office both produce products, he said. In an office that product can be a report, a budget or a design, he said.

In the case of a report, for example, offices need to determine its value, he said. Do you really need that report, or is it something the office has always done?

Then it must look at the processes the creator goes through to complete the report. First you map out the process, then you take out the wasted time, Reynolds said.

"We identify opportunities to do things better," he said.

When it began lean techniques 18 months ago, Black Clawson deliberately started in its offices, said Steve Cole, director of manufacturing. If the company had stopped its lean thinking at the manufacturing floor, it would have become only half as efficient, he said.

Black Clawson designs, makes, installs and services equipment for the flexible web converting and plastics processing industries. The company's machines go into flexible packaging for food and health-care products, adhesive coated tapes and labels.

A significant portion of the company's work takes place up front in getting the information needed to build equipment to the customer's order, he said. The back-and-forth discussions often took four to six weeks, Cole said.

After mapping out the process, the company created a form asking for all the information it needs to begin making the machine.

"If we get that up front in the beginning, we should be able to eliminate that four to six weeks (of discussion time) down to a week or two," Cole said.

As a result, the company cut the delivery time on a typical piece of $2 million to $3 million equipment to 30 weeks from 38, he said.

Black Clawson's corporate parent has a goal to cut product cycle times by 25 percent, he said.

Implementing lean techniques allowed the company to do more work with the same or slightly more people, Cole said.

"Our sales per employee have gone up rather nicely from the year before to the most recent year," he said.

Crystal Jacobson, owner of Strategic Solutions, learned lean techniques at her old employer, Carrier Corp.

She retired from the company as manager of organizational development for its distribution and after-market business.

Jacobson said she became involved in lean processes at Carrier in the1990s. During her time in human resources, the group looked at how long it took from posting a position to hiring someone to fill it, and found bottlenecks in the approval process, she said.

The human resource manager screened candidates before handing them off to the hiring manager, Jacobson said. The time between handoffs and feedback about the candidate could take three weeks, she said.

Human resources found that both interviewers were asking similar questions and had to go back to the candidate a second or third time with more questions, Jacobson said.

After implementing lean techniques, the department created interview templates to improve the process, she said.

While it didn't significantly speed the hiring process, the improved interview process produced better qualified workers, Jacobson said.

"Why is a lean office a good idea?," asked Mark Panozzo, executive vice president at Black Clawson.

"If we don't start right, we don't finish right," he said.

Author Liker Examines 'The Toyota Way'

ChallengerNKY.com

At an industry meeting last week, Toyota Motor Corp. chairman Hiroshi Okuda said the company was able to become the world's most profitable car manufacturer because of its ability to make cars at a low cost.

But with Toyota widely recognized as the most profitable car manufacturer in the world, it's only natural for other companies - even those outside the auto industry - to try and emulate their business model.

Author Jeffrey Liker delivers an inside account of Toyota and its global operations in his book, "The Toyota Way."

According to Liker, the "lean manufacturing" method invented and perfected by Toyota - which aims at the elimination of waste in every area of production - certainly has its role in the company's multi-billon dollar revenues each year.

"But tools and techniques are no secret weapon for transforming a business," Liker writes in the book's opening chapter. "Toyota's continued success at implementing these tools stems from a deeper business philosophy based on its understanding of people and human motivation. Its success is ultimately based on its ability to cultivate leadership, teams, and culture, to devise strategy, to build supplier relationships, and to maintain a learning organization."

After 20 years of studying Toyota Corp., Liker outlines the 14 principles that constitute the "Toyota Way." These principles are the foundation of the Toyota Production System practiced at Toyota manufacturing plants around the world, and vary from decision-making components to respecting, developing and challenging employees.

Not satisfied with current success, Toyota continues its expansion into hybrid vehicles with gas-electric engines.

"Our hybrid vehicles have been a huge success in the marketplace," said Dan Sieger, spokesperson for Toyota Motor Manufacturing of North America. "It's one of the reasons why we're going to be starting to build the hybrid Camry in Georgetown next year - to help us be more responsive to consumer demands."

Mr. Ford's Wrong Turn

Why U.S. Automakers Can't Blame Japan

By James P. Womack
Sunday, December 4, 2005; B01

On Nov. 22 after a speech at the National Press Club, Ford Motor Co. Chairman Bill Ford told the media, with apparent earnestness, that his company "can compete with Toyota, but we can't compete with Japan."

This is an old myth. Ford's competitive problem, according to its chief executive, is driven by the unfair advantages that the Japanese government allegedly bestows on its auto companies -- government-funded health care for workers, government support for the pension system and subsidies to develop the batteries needed for hybrid vehicles.

What makes this claim so extraordinary is that Japanese companies, led by Toyota Motor Corp., are thrashing Ford by building vehicles in North American factories with North American-made parts and North American workers, who receive American-style wages and health benefits. And increasingly, these Japanese brand vehicles are engineered in America by Americans.

Consider a few facts about Toyota. About 65 percent of the vehicles the firm sells in North America it assembles in North America, and it would assemble a much higher proportion here if it could only keep up with its rapid sales growth. Toyota will open its seventh North American assembly line in Texas next summer and an eighth line in Ontario in 2008. It may start assembling vehicles at a Subaru plant in Indiana in 2009, and it is said to be looking for yet another assembly location. In addition, it has three engine manufacturing plants and is looking for a site for a fourth. By the end of the decade, Toyota will be able to assemble about as many cars as Chrysler does in North America, and it is closing in on the capacity Ford will have after plant closings that are widely expected to be announced in January.

In fact, thanks to hiring by Japanese, Korean and German auto makers, total employment in the U.S. motor vehicle industry over the past decade has held steady at about 1.1 million.

So the problem is not Japan Inc. In fact, that country has been a striking industrial failure over the last 15 years. The latest firms to slide down the competitive slope are the big Japanese consumer electronics makers such as Sony Corp. and Panasonic, which are losing out to fast-rising Korean, Taiwanese and Chinese rivals. (In the video game wars, Sony is even getting beaten by an American company -- Microsoft Corp.) The electronics giants are following the downward path of most Japanese auto firms, which have either fallen into foreign hands (Nissan Motor Co. Ltd. and Mazda Motor Corp., the latter now controlled by Ford) or dramatically lost market share (Mitsubishi Motors and Isuzu Motors Ltd.).

The real problem for Ford, and the one that presents a dilemma for American society, is that an industrial-social system pioneered in Detroit in the 1930s has given way to another industrial-social system pioneered by Toyota in the post-World War II era. The irony is that Toyota based the production side of its system on ideas adapted from Bill Ford's great-grandfather Henry. While Detroit's executives have studied the Toyota model, they still have not mastered it or figured out how to pay for the generous (and largely unfunded) pension and health care promises inherited from their predecessors.

There were two elements to the Detroit system. The mass production part, pioneered by Henry Ford in 1914, replaced craft workers with assembly lines. It was so successful that Ford was able to pay decent hourly wages and still dominate the U.S. auto industry, along with General Motors and Chrysler.

The Big Three's hold on the U.S. market seemed so secure by 1948, that they struck a deal with the United Auto Workers that added a new element to the Detroit system: high wages and generous benefits. The car-making business had become a tight oligopoly, with investment barriers for entry so high that no domestic firm could afford to join the club. On the labor side, the UAW held a monopoly. Thanks to rising demand for cars, there were plenty of profits to go around. Periodically the three vertically integrated companies and the union engaged in a bargaining ritual to determine how to split the loot. As long as improvements in mass-production offset the ever-higher wage rates by reducing the number of labor hours per vehicle, the cost of cars for consumers held stable.

The threat to this cozy arrangement came when foreign firms started investing in U.S. production facilities, beginning with Honda in Ohio in 1982, followed by Toyota in a joint venture with GM in California in 1984, and then Toyota again in its massive Georgetown, Ky., complex in 1986.

If any government helped the Japanese at that time, it was the American government. When the Reagan administration came up with the Voluntary Restraint Agreement in 1981, it limited the number of imported Japanese cars sold in the United States for a period of years. Because consumer demand for Japanese cars then was greater than the supply, profit margins on the cars Japanese firms were allowed to sell soared. The Japanese companies then used those enormous profits to invest in North American factories and develop pricier up-market brands such as Lexus.

The Japanese auto makers had an outlook different from that of the Big Three. The purveyors of the old Ford-GM-Chrysler-UAW system assumed that all production laborers in the industry, including workers making parts, should be paid the same rate. The corporate and union leaders further assumed that their position was impregnable and that they could promise to pay defined-benefit pensions and other benefits decades into the future.

The architects of the new Toyota-Honda system assumed that production labor would be paid different rates, as it was everywhere else in the world. Final-assembly workers would receive a premium and less skilled employees of parts makers -- not owned by the car companies -- would work for prevailing market wages. These Japanese firms also assumed that in hyper-competitive markets, no company could commit to benefits decades ahead. Better to base pensions on defined contributions made during work years rather than by guaranteeing payments in the far future.

These were ominous trends for Detroit, and its response -- further investments in automation -- didn't make economic sense. (Remember when GM Chairman Roger Smith thought that all factories were to be run by robots?) The Toyota secret was designing and making cars and purchasing parts in more efficient and creative ways.

This new Toyota system -- which John Krafcik, my former colleague at the Massachusetts Institute of Technology and now the director of product strategy for Hyundai, labeled "lean production" -- uses less human effort and less capital to design products faster and with fewer defects.

What's more -- and this best describes Bill Ford's problems -- the leading Japanese car companies are making more money than their U.S. competitors not only because of lower costs, but because their lean design, production and purchasing system is turning out vehicles so desirable that Toyota and Honda can charge much higher prices for products in the same segment of the market. Indeed, these Japanese companies are giving wages and health packages to current workers in North America similar to those provided by their U.S. rivals, but they're selling vehicles today for $2,500 more than comparably equipped cars made by Ford and GM. This revenue difference, more than the production cost issue, lies at the real heart of Motown's problem.

Ford and GM have tried to embrace lean production methods, but as their market share shrinks, the legacy of the past looms larger. The U.S. firms need to shed large numbers of employees, but the main way to do that under "life-time employment" union contracts has been to encourage early retirement. This has solved one problem -- too many active workers. But it created a second -- too many retired workers for the active workers to support.

It's little wonder that money-losing Ford doesn't have the funds to invest in new technologies and is asking Washington for help. Meanwhile, Toyota is generating such enormous profits (more than $9 billion worldwide this year) that it can invest in new products and new technologies at a level far exceeding anything Japan Inc. could throw into the equation.

This is not to say that Washington shouldn't throw Ford a bone, such as tax credits for additional research on energy efficiency. Everyone needs to do his part to address the greenhouse gas issue. But that sort of government goodie won't save the American-owned auto industry.

The bigger question is how to cope with the pension and health care commitments of U.S. companies on the road to financial ruin. This is not only a government policy issue, but a societal one. U.S. auto companies, and many other firms, are suffering from the same syndrome that is afflicting Social Security: There are too few workers in the post-Baby Boom generation to support the benefits promised long ago to the Boomers.

One approach would be to stand back and let the auto companies fail. A bankruptcy judge could then explain that the promises made to retirees are much more extravagant than what most other Americans are getting. The judge could then call the deal off and pay out pension benefits at maybe 50 cents on the dollar.

Another alternative would be to transfer the obligations to the government. This would ease the pain of a generation caught in a historic industrial transition. But how can the government take on such a burden when it is already saddled with war costs and budget deficits?

But no amount of government assistance can rescue U.S. auto companies unless they become better competitors. In fact, Ford had it exactly backwards when he spoke to reporters last month. Japan isn't his problem; Toyota is. And the answer for his company, like the challenge to it, lies here at home.

Author's e-mail: jwomack@lean.org

James Womack is co-author of "The Machine That Changed the World" (Scribner) and the recently released "Lean Solutions" (Free Press). He is president and founder of the Lean Enterprise Institute, a nonprofit research and education organization in Brookline, Mass.

Process Improvement? First, Walk the Line

Frontline

To streamline business processes, an auto parts manufacturer started by timing actual process walkthroughs.

Dec 1, 2004
By: Joseph Burke

Diemolding Corp. in Syracuse, N.Y., was growing, and at the same time, it was taking on a lean manufacturing initiative. The company develops and manufactures thermoset phenolic components, which include brake pistons and pulleys, for the automotive industry. Diemolding is a leading supplier for some of the largest names in its market, including Ford, General Motors, and Chrysler.

In an industry where customers set strict guidelines for the production and delivery of goods, Diemolding's ability to efficiently and seamlessly manage its manufacturing and business processes is critical to both productivity and profitability. Its lean manufacturing initiative also demands a high degree of efficiency.

Deciding Where to Start
Diemolding's path to IT revitalization began with the reassessment of antiquated, homegrown applications and systems. In 1998, after a period of organizational growth, Diemolding executives determined that these homegrown systems were hampering the company's efforts to comply with evolving industry guidelines requiring accountability and specific metrics of efficiencies.

But where to begin? In attempting to streamline existing processes, many organizations struggle through talk sessions in which they try to describe how they do what they do. Diemolding, however, realized that talking about the steps that make up a process would be insufficient. Instead, director of IT Paul Orr and his staff actually walked through each process, step by step, and they used a stopwatch to determine the time required. It was a system Orr referred to as value-stream mapping.

"For employees to understand how a process can be improved, you have to be able to demonstrate where the inefficiencies and bottlenecks are," said Orr. "Once we understood how much time and effort was involved with each process, we were in a better position to evaluate different ERP [enterprise resource planning] solutions."

Choosing an ERP Solution
Diemolding ultimately selected Macola Progression from Exact Software. In making that decision, Diemolding looked for functionality, ease of use, and cost effectiveness. Working with Exact business partner Xonitek, a value-added reseller, Diemolding began to implement its lean philosophy. With the company producing approximately 40 million brake pistons per year, it was important to improve efficiencies and enhance production by streamlining such manufacturing processes as pick ticketing, traceables, and bills of materials.

Reaping the Rewards
Cutting down on machining time while meeting customer goals for delivery has helped Diemolding realize its just-in-time initiative. For example, the company logs into Ford's inventory control system four times per day to check the levels of its parts in Ford plants. The company has reduced its number of days of inventory and order-cycle time. It is better able to manage and reduce work-in-progress (WIP) inventory.

Diemolding is hitting the same order fulfillment numbers, but with smaller levels of WIP inventory. Inventory turns have dropped to 18 from 22, with an 18% reduction in inventory. In addition, the company has reduced order cycle time by as much as 25% as a result of keeping WIP smaller.

"In our business, every second counts. We are in constant contact with our customers to make sure that inventory levels are stable and deliveries are on time. As an organization, we needed to increase the accountability and visibility in our business processes," added Orr.

Reaching for Even More Efficiency
Empowered by Progression ERP software and a streamlined back-office operation, Diemolding recognized an opportunity to further expand its process efficiencies. The company implemented Exact's e-Synergy to integrate with Progression, centralize document management capabilities, and improve communication with core internal and external processes. Diemolding has created search filters, customized views, and workflows to transfer all documents (for example, legal documentation, quotations, and prototyping) into the system.

Diemolding has also been able to improve the way in which it manages business relationships. For example, Diemolding uses the e-Synergy supplier portal to give suppliers access to account information and reference resources.

"We have been able to create a real-time environment in which our core constituencies, such as employees and suppliers, have access to information across the enterprise that they need to complete a task or work with us in a more efficient manner," said Orr.

It's not just yesterday's news. Here's what lean manufacturing can do for you now.

NAM

From the Fall 2005 issue of Leadership for Manufacturers Magazine

by Robert Sberna

Faced with increasing global competition, a growing number of U.S. manufacturers have implemented “lean” initiatives in an effort to cut costs and improve product quality.

Introduced in the 1990s, the techniques of lean manufacturing have traditionally been used to eliminate waste and maximize efficiencies throughout a production environment. Lean can help manufacturers — and their customers — to realize a wide range of benefits, including shorter cycle times, reduced inventory and enhanced productivity.

In the factory, lean’s impact is readily apparent and quantifiable. The journey must continue throughout the entire organization, however, if bottom-line improvements are to be sustained, says Tony Laraia, an executive with NAM member Wiremold and the president of the Association for Manufacturing Excellence.

Laraia, the co-author of the 1999 book, The Kaizen Blitz: Accelerating Breakthroughs in Productivity and Performance (Wiley), says it’s essential for U.S. manufacturers to adopt lean principles to remain competitive. “The world’s borders have opened; there are few economic barriers to manufacturing or acquisitions of materials around the globe,” he notes. “For us, there must be employee processes that attack waste at all levels. I think the philosophies of lean are some of the most powerful that can be applied.”

At W.L. Gore & Associates, the lean initiatives that were initiated in the manufacturing area are now being replicated in other aspects of the firm. “We have made a lot of nice improvements within our manufacturing organization,” explains Stephen Liberatore, who is the enterprise operational excellence champion. “The real challenge now is to take these improvement efforts beyond manufacturing to other parts of the organization. Our main focus is to make sure associates understand that lean concepts can be applied to all of our business processes, including our administrative ones.”

James Buckley, Gore’s director of manufacturing operations and a member of the NAM’s board of directors, notes the firm’s enterprise-level lean initiative includes standardizing best practices across its 45 plants and sales locations around the globe. “There’s lots of benefits for us, and our customers love it because they know they are going to be treated the same way no matter what country they’re in,” Buckley says. “I don’t think there’s anything here that’s rocket science. We’re taking these tools and making sure to deploy them worldwide. We’re using the experience of the manufacturing team and leveraging it.”

Liberatore adds that one particular Gore sales team utilized lean principles to reorganize the way it covers territories. “This resulted in a revenue increase of approximately $1 million a month,” he notes. “We are also taking a look at our customer order fulfillment process. Now, it involves a lot of phone calls for customers to learn the status of their order. With lean processes, we envision a future when customers can check their order online, right up to shipment tracking.”

The Way of Lean

As a buzzword, “lean” has been around for about 15 years, but the concept was developed and fine-tuned in Japan by the Toyota Motor Company and its management consultant Shigeo Shingo during the years 1949-1975. In sum, the Toyota Production System can be defined as: “A philosophical approach to business that is based on satisfying the customer (whether internal or external) by producing quality products that are just what they need, when they need them, in the quantity required, using the minimum of materials, equipment, space, labor and time.”

When Nypro, a Massachusettsbased plastics firm, decided to transform itself around the principle of error-free production, it sent a management team to visit Toyota and other lean-driven firms.

“In 1988, we started looking at our company’s processes, from interaction with customers through the supply chain,” says Brian Jones, Nypro’s president and CEO. “We spent a lot of time going through the really great manufacturing companies and seeing how they do it.”

An NAM board member, Jones was voted into the Shingo Prize Hall of Fame last year for his sponsorship of lean-thinking principles.

Five years ago, Jones initiated 50 Nypro managers into the way of lean by organizing a week-long tour of Toyota’s Georgetown, Ky., auto plant, which includes an in-house plastics operation. Noting that it’s sometimes difficult to envision how a lean system works, Jones says on-site experience in a lean environment can help people to see the advantages of the process.

Jones credits lean principles for Nypro’s recent dramatic increase in North America sales and profits. “We’ve got managers who roll up their sleeves and go into plants to study work processes to determine what’s value-added and what’s not,” he explains. “For example, if a person has to carry a box 200 times a day, that can take a toll. We re-engineer the workflow for the people on the floor so that we can take out the waste.”

Author James Womack says consumer satisfaction is the next frontier of lean. “We need to apply the same thought processes to consumption that we’ve applied to manufacturing,” says Womack, founder and president of the Lean Enterprise Institute, a Massachusetts nonprofit education and research organization that promotes lean principles.

“We’ve been in a period for some time in which manufacturers have found a way to take the problems out of products and knock down their prices,” Womack explains. “My hat’s off to NAM members — they’ve gotten really good at making things. But at a time of greater product quality, consumers — and providers — are frustrated that obtaining these better goods is filled with waste.”

Womack is credited with coining the phrase “lean manufacturing,” which he first used in his 1990 book The Machine That Changed the World (Scribner), an account of the history of automobile manufacturing and a study of Japanese, American and European automotive assembly plants.

In a new book, Lean Solutions (The Free Press), Womack and co-author Daniel T. Jones address what they term the “massive disconnect” between consumers and providers. The authors note that consumers have a greater selection of high-quality goods and services to choose from, yet their experience obtaining and using these items is time-consuming. Meanwhile, companies find themselves with declining customer loyalty, greater challenges in fulfilling orders and bigger problems in “closing the loop” with their core customers.

In Lean Solutions, Womack and Jones ask: Why do we so routinely encounter the custom-built computer that refuses to work with the printer, other computers and the network software? Why does the simple process of getting the car fixed require countless loops of miscommunication, travel, waiting and defective repairs? And why is the process of consumption backed up by help desks and customer support centers that neither help nor support?

“Companies often believe that they are saving time and money by off-loading work to customers, making it the customer’s problem to get the computer up and running, and wasting the customer’s time,” the authors explain. “In fact, however, the opposite is true. By streamlining the systems for providing goods and services, and making it easier for customers to buy and use them, a growing number of companies are actually lowering costs while saving everyone’s time. In the process, these businesses are learning more about their customers, strengthening consumer loyalty and attracting new customers who defect from less user-friendly competitors.”

On the global stage, the successful players will be those who “do everything to make sure their operating systems and technology are world-class,” says Keith Harrison, global product supply officer for Procter & Gamble.

Harrison, a member of the NAM’s board of directors, explains, “I think it’s very important for the NAM membership to do all that we can to create true excellence in U.S. manufacturing. There are many tough challenges facing manufacturers. Lean is one of the areas that can help us.”

Robert Sberna is a freelance writer based in Strongsville, Ohio.

Reduce machine idle time with changeover solution package

Ferret

THE SMED Quick Changeover Solution Package, available from Improvement Tools, provides all the materials and instruction necessary for companies to conduct their own five-day training program that will lead to the successful implementation of SMED.



SMED stands for 'Single-Minute Exchange of Die' and originally related to fast tooling changeovers on machine tools such as milling machines. The term is now applied to any manufacturing process where downtime occurs as machines are reconfigured to run a different job batch or process.

In a Lean Manufacturing implementation, SMED comes after 5S, which is a discipline for organising the workplace in terms of sort, straighten, sweep, standardise and sustain.

SMED is oriented towards operations and shows the user how to find ways to make changeovers more efficient, no matter the industry or product being manufactured. SMED originated with the time-saving initiatives developed by Shigeo Shingo at Toyota in Japan.

A good deal of time can be lost between batch runs or process runs on manufacturing equipment. This may occur for several reasons. As an example, many pre-production activities that can be done simultaneously are being done sequentially. Other examples include poor material handling efficiency, paperwork that is unclear or complicated and a lack of standardisation of tools.

Rather than having to deal with such problems on a continuous basis, instruction in the techniques of SMED provides a formal way to analyse the time spent between runs. Then, users may transform their findings into practical solutions that are based on highly productive systems and methods.

The SMED solution package both instructs users how to streamline changeovers and provides all the tools for implementation. The result is a package that offers clear, step-by-step instructions yet delivers full flexibility to tailor a program that satisfies unique needs.

More than just an instruction package, SMED provides the necessary materials for full implementation.

The SMED solution package contains:

* Facilitator guide, including a Digital Media CD that uses latest Flash technology in presentation format.

* Preparation guide, to help the facilitator prepare for the event and serve as a reference manual for timing, scheduling and overall flow of the workshop.

* Participant workbooks, motion diagram forms, setup combination worksheets and more.

* Forms for observation and standardisation of changeover activities.

* Red Tag Register along with tags and several posters to serve as constant workplace reminders.

The SMED package encourages workers to fully implement what they have learned when they return to the shop floor. It ensures that companies can be masters of their own productivity-improvement program without having to rely on outside consultants or trainers.

Users will find that the application of a formalised program such as SMED often reveals further opportunities to enhance profits by focusing the attention of all workers on production efficiencies.

SMED involves workers in the lean manufacturing process and encourages their thoughts and commitment toward ongoing improvements in the workplace.

6 December 2005

Local manufacturer touts lean procedures

Charlotte Business Journal

Fred Tannenbaum
Staff Writer

Lean manufacturing is not just a way to boost productivity on factory floors, it can do a world of good for hospitals and offices, a Gaston County manufacturing expert told the Charlotte Chamber's Manufacturing Business Alliance lunch Thursday.

Eliminating wasteful practices can be as simple as reducing the amount of walking an employee must do to complete a task or neatly arranging supplies, Michael Iezzi, manager of the Eaton Heavy Duty Truck plant in Kings Mountain, told attendees.

Iezzi's plant, which has nearly 700 employees, manufactures automatic and manual transmissions and other components for commercial truck and tractor manufacturers. In 2004, it received the first N.C. Shingo Prize for excellence in manufacturing, which recognizes lean manufacturing.

"If you're not using lean in your business, you're missing the boat," Iezzi said.

Gastonia-based CaroMont Health began implementing lean techniques in 2004 and has saved thousands of dollars and improved patient care, said Julie Botchuck, the health-care company's process-improvement executive.

"This is phenomenal, easy stuff," she said.

New procedures have helped CaroMont move patient records faster, ensured surgical procedures start on time and speeded up laboratory tests, Botchuck said. That has improved patient and staff satisfaction, the hospital says.

"What you have to do is roll up your sleeves and just do it," Botchuck said.

Iezzi, the Eaton plant manager, said lean procedures involve everyone but needs to start at the top. "The CEO drives lean," he said. "If you don't get hearts and minds around lean or whatever you want to do, it's not going to work."

don't forget manufacturing

DC Velocity

ONCE UPON A TIME, MANUFACTURING AND logistics were independent entities, or so the story goes. The manufacturing people produced the goods, and then the transportation and distribution people took over and dealt with whatever came their way.

We use the classic fairy tale opener "once upon a time," because that was never entirely true. What was the case—and far too often, remains the case—was that business functions were walled off from one another, which impeded communication and created the kind of inefficiencies we no longer tolerate. Manufacturing is no longer an independent variable in your world, at least if that world is one in which supply chains are integrated.

The argument for integrating manufacturing with supply chain functions is compelling, whether the manufacturing source is across the street, across the country, or across the ocean. But whatever the situation, we cannot afford to simply let manufacturing "happen," figuring we'll deal with the consequences later.

So, in the spirit of this series, let's look at some fundamental issues in manufacturing.

Recent history
For the past three decades, the business world has been deluged with programs designed to transform manufacturing—and with all the attendant acronyms. All of these programs were promoted as transformative ideas that would elevate manufacturing performance to stratospheric levels. We've had just-in-time (JIT), total quality management (TQM), and kaizen; statistical process control (SPC) and single minute exchange of die (SMED); efficient consumer response (ECR) and quick response (QR); time-based manufacturing (TBM); six sigma, and more.

The concept du jour is "lean"—lean manufacturing, lean transportation, lean warehousing, lean logistics. You can't go anywhere without reading or hearing about "lean." But to be honest, we've peeked inside some lean programs and have found a remarkable resemblance to what we were doing 15 years ago, which itself wasn't all that different from programs dating back to the '70s.

Does that mean that these efforts have all been frauds? Not at all. The point is that the concepts behind organized manufacturing improvement have been around for a long time. What makes things different today—and improves the likelihood of a program's success—is the richness and robustness of modern information systems. We knew what to do, back in the day, but we were frustrated by shortfalls in data analysis capacity, by communication gaps, and by supply chains that were still inwardly focused. At the heart of things, it's all pretty simple. Today's manufacturing needs to be agile—nimble, flexible, waste-free, and in sync with ultimate demand. What it takes to make this happen is similarly straightforward. Manufacturers must drive up process reliability, build demand-based run strategies, synchronize with demand and respond to demand variation, and manage and communicate demand.

What does that mean? Let's talk about the component pieces, keeping in mind that in this limited space, this is merely an introduction to some key concepts.

Some fundamentals
From JIT to lean, nearly all of the process-improvement concepts aim at asset utilization—human assets, facility assets, material assets—and the elimination of waste, whether it's wasted time, effort, or products and materials.

In manufacturing, process reliability, for instance, has three components—uptime, dependability and first-run yield. Mastering performance in all three is crucial to achieving reliability. Reliability is expressed as a composite percentage; e.g., 90 percent uptime x 90 percent dependability x 90 percent first-run yield = 72.9 percent reliability. Looking deeper, uptime is the ratio of scheduled operation to what's available—16 hours out of 24, five days out of 7, or 50 weeks out of 52. Adding shifts or days raises human resource and facility wear-and-tear issues, or course. But it's important to note how it fits into understanding productivity; an operation with 95-percent dependability and 99-percent first-run yield that only runs two shifts, five days a week has an overall reliability of 44.8 percent (47.6 x .95 x .99)—not a figure to impress the CEO with.

First-run yield is the ratio of good output to input, subtracting waste, spoilage, trimmings and rework. Sometimes the opportunity to improve yield is trivial; sometimes it is enormous. Most often, the process improvement initiatives are aimed at boosting capacity or improving quality. Quality improvement, generally seen as actions taken to prevent waste, almost by definition improves first-run yield, reducing such things as spoilage and rework, for instance.

Dependability is a measure of actual versus scheduled operations, the ratio of the actual hourly run rate to the capable hourly run rate. The factors influencing the ratio include breakdowns, changeovers, time spent waiting for material, and off-speed operations.

Finally, there's run speed. It may be manufacturing's dirty little secret, but run speed can deliver big-time payoffs. In an operation that was designed, engineered and installed with a nominal rate of, say, 2,400 units/hour, performance can easily deteriorate over time to three-fourths of that rate or less. Reducing setup time, by whatever name, is key to short runs and flexibility.

Manufacturing managers address those issues and others with an eye to chipping away at waste, reducing setup times, establishing consistent run rates, optimizing facility utilization, and eliminating extraneous activity.

The complete solution requires many tools and techniques. And you may find there's some value to borrowing from a number ofprograms—lean, JIT, whatever—tailoring the overall approach to the organization's specific needs and priorities (and culture).

Synchronization
But wait: that's just the foundation. As we suggested at the outset, manufacturing efficiency is just part of the business equation, not a free-standing one. Once the manufacturing house is in order, or at least well on its way, the enterprise is positioned to better synchronize production—and inventory—with customer demand. That's easier said than done, because: 1) it's not always easy to know demand; 2) demand can be skewed by unnatural factors that are nonetheless common business practices (e.g., promotions, diversions, minimums); 3) multiple supply chain touch points can filter or distort ultimate demand; and 4) events can overlay baseline demand.

Manufacturing must have decent knowledge of real demand and good visibility of events that can affect it for good or ill. With that groundwork in place, you can develop run strategies to better align manufacturing output with demand patterns. To give an admittedly oversimplified example, that might mean items in high demand are run every demand cycle and those in lesser demand every few cycles. (A cycle is the smallest capable time frame—daily is often ideal.) Adjusting the quantities of each item class based on actual consumption tightens the synchronization, and largely confines low-volume goods to small inventories. These principles apply, again, whether manufacturing is in Pekin, Ill., or in Taipei.

Demand communication is key to making all this happen. It's essential to adjust production based on timely notice of variations in baseline demand, advance notification of events and promotions, seasonality, and event and season tracking. This requires collaborative planning, forecasting and replenishment (CPFR) tools, or something akin to them, plus point-of-sale current demand data.

Even with the best systems, demand management is an imperfect science. Our marketers and salespeople are attuned to selling, not to the supply chain. Can we ever force them to behave? Maybe someday, but not anytime soon. So, it behooves us to get the manufacturing act as together as it possibly can be. That will allow us to handle the normal crises with some grace and style, conserving our energies for the extraordinary ones.

Lean Manufacturing Approach Offers Potential, Challenges

Pallet Enterprise

By Thomas G. Dolan
Date Posted: 12/1/2005

(Editor’s Note: This is part two of a two-part series of articles on lean manufacturing; part one was published in the November issue.)

In the previous article we explored the topic of lean manufacturing or ‘doing more with less.’

Brian Brashaw, program director of the Natural Resources Research Institute at the University of Minnesota, explained eight key factors of waste that lean manufacturing can eliminate: defects, overproduction, waiting, not utilizing employee talent, transportation, motion, and extra processes.

What the previous article also showed is that, although lean manufacturing appears to be a great concept, it has been slow to be accepted in the forest products industry. There is considerable resistance and also lack of understanding.

To counter this, Brian is trying to spread the word in cooperation with various organizations, including state and federal agencies. His efforts include providing one-day training sessions, special three-hour modules that employers can implement on-site, tours at facilities that have adopted lean manufacturing, and one-on-one consultations with individual companies.

"We’ve provided training broadly to about 100 wood product companies over the past three years," he said. "We have a small staff, but instead of trying to develop just a few companies and try to turn them into showcases, we work with a wide number, get them started on a specific project, and hope they can take it from there."

In working one-on-one with 15 companies to date, Brian reported they experienced production gains ranging from 20% to 60%. That’s the good news.

The bad news, he said, is that only three or four of the 15 have embraced the concept fully and are moving from the first specific project forward to encompass the company as a whole. The rest have either maintained improvements they achieved in one particular problem area but are not moving forward to make company-wide changes while others have experienced temporary benefits because they did not institutionalize organizational changes for continuous improvement. Part of this is due to the fact that these experiments have been going on for only the past year or so. But there have been other reasons, too.

"The employee buy-in to the program is not as great as we would have liked," Brian said. "What it’s really going to take is a cultural change on all levels of a company."

The State of Minnesota has supported the program, Brian said, "because we have 60,000 employees working in wood products. We see what’s happening in terms of the whole global competition issue and have seen what has happened in North Carolina with the loss of the furniture business. We’ve worked very hard to develop our skills to help our companies be as competitive as possible. I’ve gone on trade missions to China to see what we’re up against, and I think we’ve developed some good programs. We have a strong kitchen cabinet focus here, and we have a lot of customization. There are 1.5 million options in terms of sizes, shapes, and finishes. And customization is not where China is now. So, if we can do the custom work and get it done in two to three weeks rather than a couple of months, that can keep us ahead of the game."

The principles of lean manufacturing evolved from the continuous improvement system started at Toyota, Brian noted, and the transition of the principles from one industry to another is not automatic. It is not "paint-by-the-numbers." The principles that worked in the automotive and other industries have to be thought through and applied fresh to forest products. Moreover, the progress to date has been with the secondary wood products sector as opposed to the sawmill sector, Brian observed.

One academic who is taking a close look at the application of lean manufacturing concepts to the rough mill or sawmill sector is Chuck Ray, assistant professor of wood products operations at Penn State University. His position is that applying lean principles that work in the secondary arena to the primary one can put the latter out of business.

Chuck explains. "The objective of lean manufacturing is to eliminate waste in all its forms, of which the primary is inventory," he said. "Through pull-type lean production techniques, called kanban systems, firms learn to produce only those components needed for the current production file. In manufacturing products that utilize homogeneous raw material (such as steel for automobiles) kanban works well; parts are machined from the raw steel stock as required and the remaining stock awaits the next call from the system."

Chuck acknowledges that this system can work well in the secondary wood products arena because these products are made up of individual components, analogous to automotive parts, but
it breaks down when applied to the
raw material.

"In the rough mill of all secondary wood products producers, the more advanced companies attempt to optimize recovery through computer-aided edging, trimming and defecting," Chuck observed. "Since the major raw material cost of these companies is the wood itself, any successful optimization of processing that increases yield lowers raw material cost, and therefore increases the profitability of the mill."

"The yield optimization procedures naturally produce by-product components that must be stored in an in-process inventory for use when called for in future production schedules," he continued. "In implementing lean and attempting to reduce or eliminate their in-process inventory, these companies find themselves faced with the potential of discarding good wood."

The secondary market tolerates a certain amount of waste because its purpose is to machine wood to a current production schedule rather than maximize yield, Chuck noted.

"However, yield is a primary component of a sawmill," Chuck said. "A mill which ignores yield quickly goes out of business. Wood costs are typically 50%-80% of the operation, so if you let your yield drop from 80% to 70%, you are driving up costs. Yield and costs are intimately related."

Because sawmill production planners apply lean principles by trying to machine wood to their current production schedule rather than a yield-optimizing cutting approach, after a time they may conclude that the reductions in yield cannot be justified by any increase in efficiency due to the elimination of in-process inventory, according to Chuck.

"As a result, many companies modify their lean concept to allow for in-process inventory under certain or all conditions, or they abandon the effort completely through frustration. In at least one case, we have seen the company conclude that just-in-time for them meant to produce as large as inventory as possible so as to be better able to deliver on demand to their customer base."

In fact, Chuck noted, if lean means getting the most out of what you have, mills are already practicing lean. So if principles used in the secondary market are applied to the rough mill, the results are negative. The operative principle appears to be, ‘If it ain’t broke, don’t fix it.’

On the other hand, traditional sawmills can still improve their efficiency, said Chuck. But he has come up with a different definition of lean. "Here we look at all of the resources consumed, everything — including raw material, labor, machinery, and the rest, compared to the amount of product produced. The lower the amount of resources you need to produce, the better."

Chuck said his theories are still in the research stage and "are still theories that have not yet been proven."

Returning to the secondary market, where lean manufacturing principles are making inroads, Earl Kline, professor of manufacturing systems at Virginia Tech, said, "Where lean seems to work best is where a company is struggling to meet demand. Typically this is the best place to implement lean."

In assessing an organization’s need for application of lean manufacturing principles, Earl suggests asking the following questions:

1. Are you receiving increasing pressure from customers to shorten lead times or increase ordering flexibility?

2. Are you overrun with work-in-progress (WIP) and-or finished goods inventory? Do you notice several
weeks or months worth of WIP inventory at every machine in your operation, or is WIP inventory at every machine in your operation, or has WIP outgrown its
intended storage area? Likewise, are
finished goods inventories swelling with products that do not sell well, or are there products in finished goods inventory that have been there for months or even years?

3. At any given time during the production day, do you notice volumes of material being moved from place to place; e.g., from machine to machine, in and out of inventory, or back and forth between departments?