Lead and sustain lean manufacturing transformations enterprise-wide
Expand or consolidate? In-source or out-source? Push or pull? Make versus buy? Batch or single piece flow? These are but a few of the business critical questions manufacturing executives are faced with each and every day. So how do you decide what is best for your customers, your shareholders and your employees? What methodologies and tools do you use to help you make informed decisions on priorities and investments?
The ability of manufacturing executives to correctly answer these questions and to develop effective transformation strategies is directly tied to their understanding of how value flows to their customers.
Traditional lean manufacturing practices, tools, and methodologies are designed to help transform manufacturers to a customer driven, pull-based, on-demand operation versus an internally focused, push-based, forecast-driven operation. In essence, transform production operations to synchronize with actual customer demand. If successful, lean principals and practices can dramatically:
| • | Lower manufacturing costs. |
| • | Increase operational efficiency. |
| • | Increase on-time delivery performance. |
| • | Improve quality and customer service. |
| • | Improve employee morale. |
| • | Increase competitiveness. |
| • | Generate new sources of value. |
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Market leaders lead by lean example
Companies such as GE, Autoliv, and Celestica are enjoying market leader status because of their dedication to lean principles and practices. They are fast to market, more responsive to customer demand, earn more on invested capital, and reward shareholders more generously than their competitors.
At GE’s aircraft engine plant in Lynn, Mass., lean manufacturing practices resulted in a 33-percent improvement in inventory turnover, a 35-percent increase in throughput time, a 28-percent improvement in quality, and 17-percent less human effort per engine.
AutoLiv, a leading airbag and seatbelt provider, improved on-time delivery by 12 percent during a 10-percent growth period, reduced customer returns by 362 percent, and reduced inventory by 330 percent, all accomplished in a three-year period.
Celestica is the first electronics manufacturer services provider to receive the Shingo Prize. The award-winning implementation of lean at Celestica’s Monterrey, Mexico, facility resulted in space utilization improvements of 34 percent, reduction in setup times of 85 percent, reduction of scrap by 66 percent, and reduced customer lead times by 71 percent.
These companies are also recognized for their innovation leadership. In fact, many companies that embark on a lean journey discover that lean principles and practices create a culture that drives dramatic innovation in product development, customer service, supplier relationships, and product quality.
Lean generates new sources of value in all aspects of manufacturing operations, not just in product delivery value streams. For example, Grupo Fernando Simao, a Portuguese automotive dealer group, cut its service shop costs by 30 percent, reduced average customer waiting time by nearly half, and reduced its loaner-car fleet by 75 percent. Also, Delphi Packard Electric Systems, in Vienna, Ohio, reduced customer complaints by 97 percent after it switched to its first all-electric injection molding operation.
Implementing lean principles enterprise-wide
Many manufacturers have applied lean practices and principles successfully to existing product delivery value streams. They’ve eliminated waste along the continuum of raw materials to finished goods so that products and services are delivered to meet customer expectations at the lowest possible cost. This approach has primarily focused on cost-cutting improvements with a factory floor focus. However, as James Womack, author of The Machine that Changed the World and Learning to See, has discovered, most lean implementations do not have an enterprise-wide focus. This focus requires manufacturers to apply lean principles with multiple stakeholders across product and service lines, including suppliers, distributors, customers, and departments.
It also requires a combination of leadership, commitment, effective change-management practices, and information technology systems and tools that assist in scaling and sustaining lean transformations across the enterprise.
Dr. Earll Murman, co-author of Lean Enterprise Value – Insights from MIT’s Lean Aerospace Initiative, provides unique insights on successfully applying Lean principles enterprise-wide. Dr. Murman examines the concepts and principles of a lean enterprise value focus, how to implement lean enterprise value concepts, and why and how manufacturers benefit from a lean enterprise value focus.
The ERP/MRP challenge to lean practices
Unfortunately, manufacturers’ enterprise resource planning (ERP) and manufacturing requirements planning (MRP) systems are inherently cumbersome for plant operators to use. As a result, they are not well-suited to making improvements at the point of execution by plant floor operators. Also, ERP/MRP systems are not architected to reflect the interconnected chain of activities of a value stream from customer order to customer delivery.
For example, ERP/MRP systems make it difficult to provide insight about:
| • | When stock outs occurred |
| • | Why stock outs occur even when the system shows that inventory is available |
| • | Order status at any point in time, not until after the goods arrive |
| • | What steps of a value stream are value-added vs. non-value-added |
| • | Total cycle time from order to delivery |
Fortunately, new IT solutions have emerged that can be seamlessly integrated into existing ERP/MRP systems enabling a smooth and orderly transition from “push-based” to “pull-based” manufacturing based on actual customer demand. For instance, electronic Kanban solutions streamline production, which can drive down inventory costs up to 75 percent.
At Ingersoll-Rand’s Hussmann facility, a leading producer of commercial refrigerators, inventory was reduced by $13 million (U.S. dollars) and stock outs were reduced from two per week to zero through the implementation of an eKanban solution from Ultriva.
Dynamic business intelligence supports lean principles
Butcher paper and sticky notes are the tools of choice of lean and six sigma practitioners engaged in value stream mapping and analysis. Though effective for building team synergy and gaining agreement on process steps, the continued use of these tools routinely results in a common set of pains that will marginalize a corporate lean transformation initiative.
Lean event deliverables routinely contain business critical data yet this data is usually in hard copy form, it is often difficult to access and it is rarely reusable. This makes knowledge-sharing difficult. Some lean event teams use digital cameras to capture electronic images of butcher paper and sticky note maps, but digital photos of static value stream maps are mostly unusable.
Another common set of practices employed by lean event teams involves the manual collection and annotation of key process data on data sheets which are then affixed to the corresponding sticky note on the butcher paper. A cursory analysis of this data is then performed using custom built, stand-alone spreadsheets. Understanding the implications of this data on value stream performance is essential to effective lean transformation.
For a lean initiative to be successful, value stream maps, analysis data, and value stream improvement opportunities need to be converted into dynamic business intelligence that can be easily shared across the organization and reused during future lean events.
At Lockheed Martin's Missiles & Fire Control Center in Orlando, FL, the Longbow FCR Program Team was able to create value stream maps, capture the data and get results for analysis in a single day using LeanView from the Orlando Software Group.
The Microsoft mission for lean manufacturing
Microsoft’s mission is to help energize, transform and sustain manufacturers’ lean initiatives. To do so, Microsoft recommends that manufacturers follow the Massachusetts Institute of Technology Lean Aerospace Initiative’s “Production Operations Transition-To-Lean Roadmap” that follows. This roadmap is a proven framework in use by many manufacturing and government organizations today.
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To advance your lean transformation success rate, even with a guide such as the Production Operations Transition-to-Lean Roadmap, staff at every level need tools that:
| • | Work together to integrate and enhance value stream mapping, analysis, implementation, execution, and reporting. |
| • | Make lean practices predictable and repeatable across the enterprise. |
| • | Create a system of record so managers and individual contributors can collaborate easily, make improvements continuously, and enhance the culture changing impact of lean. |
| • | Grow with your enterprise in your lean transformation journey. |
Microsoft partners in lean manufacturing solutions
Whether you are just embarking on a lean transformation or are many years into your lean journey, Microsoft partners have created a new generation of solutions designed to meet the needs of the most demanding manufacturers. Solution categories include value stream mapping and analysis, value stream modeling and simulation, lean execution, manufacturing intelligence, and lean product development.
Next steps
Learn about Microsoft partners who have built lean manufacturing solutions on the Microsoft platform.
Sources
| • | Lean Enterprise Value – Insights from MIT’s Lean Aerospace Initiative
Murman, Allen, Bozdogan, Cutcher-Gershenfeld, McManus, Nightingale, Rebentisch, Shields, Stahl, Walton, Warmkessel, Weiss, Widnall, 2002 |
| • | Lean Manufacturers Recognized for Excellence
Society of Manufacturing Engineers, March 2005 |
| • | In Search of the Lean Retailer
Chappell, Automotive News, February 6, 2006 |
| • | Lean Solutions – How Companies and Customers Can Create Value and Wealth Together
Womack, Jones, 2005 |
| • | East Meets West – Lean Manufacturing and ERP Are a Better Fit Than You Think
Sweeney, McGovern, AMR Research, 2005 |
