The Road to Lean Manufacturing

July 9, 2003 Staff

Lean Manufacturing, an approach to manufacturing made famous by Toyota, has been hailed as the next great thing by consultants and practitioners. Fads, like reengineering and ERP solutions, have come and gone, but lean manufacturing appears to be gaining ground in the United States over the past two decades and should be around for some time. The goal of lean is to maximize the most out of your resources and eliminate waste wherever possible. Lean was mastered by Toyota in Japan in the 1970s. It has primarily been employed by manufacturers, but has begun to emerge in service industries such as food preparation(1).

However, breaking down the barriers that stand in the way of ingraining a lean philosophy into a company’s culture can be difficult. Many workers have seen too many business fads to warrant paying this latest program any thought. It is top management’s responsibility to emphasize that this a high priority commitment that will be continually supported.

Transforming a company out of old habits and into new ones is difficult. Employees are fearful that change could result in more work or in the worst case, job losses. Therefore, it is important to address the barriers to implementing lean practices and eliminate them by doing the following:

Provide executive training
Create a road map
Review metrics and measurements
Work with supply chain network

Employ a value stream manager

Executive Training
Educating top-level executives about lean manufacturing should be the first step. If senior management does not support and understand the philosophy embedded in lean, then any attempt at implementation within the organization is destined to fail. Because initiatives are sometimes launched in haste, perhaps to respond to a move by a competitor or due to a corporate crisis, management may not fully grasp the significance behind the changes, and the rest of the employees will be unable to comprehend the goals of the initiative(2).

Senior executives need to learn the fundamentals behind lean in order to implement it successfully. Executives will need to re-evaluate the strategy of the organization in order for lean to fit into the goals. Once executives understand the commitment and resources necessary for lean to be successful in the organization, implementation will progress more smoothly(2). However, mistakes will be made in the process and senior management should not discourage employees from taking calculated risks(3).

Road Map
After management has been trained extensively in the lean philosophy, the next move should be to design a road map. In this step senior executives review the actions required and the timelines expected. Creating this action plan should be complementary to the corporate strategy at the least and embedded in the strategy at best(4).

A kaizen event is a continuous improvement process in which employees focus on eliminating waste. A road map is necessary to ensure that kaizen events are planned out properly and yield the best results for the company. Bringing together cross-functional teams to effect change on the plant floor during kaizen projects is imperative for lean implementation. According to Nelson J. Teed, CPIM, founder and president of a company that specializes in lean manufacturing implementations, “the combination of narrow focus, management mandate, tight deadline, bias for action, cross-functional team effort, and simple yet powerful analysis tools enable kaizens to quickly reshape the plant floor (4).”

Successful lean implementation may mean that fewer people will be needed to operate at current output levels. Management needs to clarify that there will be no layoffs due to productivity gains from this program. If management does not make this clear from the onset of the program, employees will speculate that these improvements may result in the loss of their jobs. Employees will not put as much effort into the program, and in some extremes, may even try to sabotage the program(4). Therefore, it is management’s responsibility to plan to grow the business or reassign workers to different areas within the organization.

Metrics and Measurements
Along with retooling the strategic goals of the organization, management needs to see to it that the previous measures and metrics are re-examined. The measures and metrics currently in place are going to be supportive of the old system. Measurements and metrics should reflect the redesigned strategy of the company.

For example, if workers were being judged and compensated on output per hour, then that measure would have to be revised. Output per hour does not take into account what the customer wants. In essence, there is no value created for customers, only wasted resources, if the output per hour exceeds demand. Management should redesign the measures of performance to ensure that the workers’ and the organization’s goals are aligned. Instead of output per hour as the basis for measure, defects per order or percent of customer orders filled on time would be a better measure.

Supply Chain
Getting suppliers to cooperate with a lean initiative may be the biggest challenge for an organization implementing a lean program. Back in the 1980s when Toyota was considering setting up manufacturing facilities in the United States, it was skeptical about whether or not the lean philosophy would be embraced by American suppliers. Instead of going it alone, Toyota entered into a joint venture with General Motors to operate the New United Motor Manufacturing Inc (NUMMI) plant in Fremont, Calif. Gary L. Convis, president of Toyota’s second largest plant in the United States and part of the management team that started out at NUMMI, believes that “the success of that plant [NUMMI] convinced Toyota that Toyota Production System [Toyota’s namesake for lean] could be transplanted to the United States(5).”

While lean manuifacturing is gaining momentum in the United States, it has proven more difficult to implement in Europe. Manufacturing experts cite two reasons for why lean has not been embraced in Europe: It requires a lot of resources, and executives believe they cannot get suppliers to cooperate. Because supplier involvement is so vital to implementing lean, European executives have had difficulty in generating interest with suppliers. It has been challenging to get suppliers on board with lean. According to Dan Jones, author of Manufacturing Blueprint: Competitiveness, educating suppliers about lean manufacturing took Toyota 20 years(6). This helps explains the hesitancy of organizations to pursue lean.

Value Stream Manager
Utilizing a value stream manager within an organization is another way to ensure success in implementing lean. The role of a value stream manager is to understand the entire flow of a product or product group through the company. This person is empowered to make changes that may sub-optimize certain departments, but optimize the supply chain. However, the value stream manager should not focus on sub-optimizing parts of the supply chain, but focus on maximizing the value of the entire system(3).

Selecting a value stream manager is not an easy task. The person needs the right attitude, even if the person is not technically strong in lean practices, which can be learned later. Additionally, this person must understand that the real value created on the plant floor is the people and not the technology. When looking for the right candidate, management should look for the following attributes:

Strong leadership abilities
Motivation skills

Decision making based on data, not opinion (3)

In addition, the value stream manager should possess the following abilities:

Create and manage a value stream plan
Communicate with senior executives
Demonstrate why urgent change is necessary

Interact with customers and suppliers (3)

Without support from top management, value stream managers will have little chance of succeeding. For instance, senior executives need to clarify that they will support the value stream manager when he suggests that a department perform at less than optimal levels. This may infuriate the local manager, who may outrank the value manager in authority, and ignore the recommendations to maximize the value of the system. As long as the local manager, and others know that the value stream manager has the support of senior management to enact change, then they will be more inclined to cooperate. In addition, senior level executives must understand that the value chain manager is going to make mistakes. This value stream manager should be encouraged to take calculated risks without fear of reprimand(3)

Implementing a lean program is not an easy task. It requires extensive work both within and outside the organization. But the long-term benefits, as Toyota has demonstrated with its increasing market share in the United States, can help differentiate your organization from the rest of the pack.

References:

(1) LSG Sky Chefs’ Recipe for Success Is Rapid Launch of Lean Transformation. (April 2003). Lean Enterprise Institute.

(2) Annis, Allan. Power Lean: A Powerful Approach to Organizational Excellence. Lean Enterprise Institute.

(3) The Value Stream Manager. (September, 1999). Lean Enterprise Institute.

(4) Teed, Nelson J. (January, 2001). Origins and Reality of Lean Manufacturing. APICS- The Performance Advantage.

(5) (August, 2001). Strozniak, Peter. Toyota Alters Face of Production. Industry Week.

(6) (October, 2002). Why is Lean so Far Off? Works Management.