5 reason why Lean manufacturing strategy still relevant to win business competition

What is lean Manufacturing?

What is lean manufacturing? it is a philosophy that implement in manufacturing industry to gain more by less. Lean method seeks more benefit by eliminate wastes rather than charge more money to customer. The term “lean” is taken from the Japanese words for “lean” and “to flow” and is used to describe the process of removing waste from production, which ensures that products are delivered on time with the highest quality possible.

As strategy & system to enhance profitability, lean methodologies not formulated instantly. rather than invention and reapplication of best practice across industry in the last century. Since the nature of lean methodologies trial & practice, lean methodologies evolve from time-to-time befitting industry trends across the history timeline. and until now it still evolving and integrating match in digital industry services such as e-commerce, Banking & logistics.

Reasons No.1. Lean history evolving matching industry needs.

Early stages: standardizations parts

The history record that lean methodologies are started at 1450 in Vencie, Italy for shipyard assembly using canal, however the first publication and thought about time study began in 1700’s for cannon interchangeable spare parts by French general Jean-Baptise Vaquette de Gribeauval led for standardization of cannons known as Gribeauval system.  The system accomplishments were that solid cast cannons were bored to precise tolerances, the standardization of bore also enabling accuracy without sacrificing the range. Imagine during this period of time standardization of detailed spare part are hard to find. Even the earlier firearms are custom made we need to replace or came back to the firearm artisan if there are spare part need to be replaced. later on, Honore le Blanc made standard for flint of firearm and this is the start of emerging lean production.

Time & Motion studies : Early 1900’s

Later in 1898 by F.W Taylor. His study started because he is astounding how his operator works in different way for the same task. He also thinks that the output is one third of the optimum condition. His publication widely spread across academics about scientific management. His time study later on followed by Frank and Lilian Gilbreth which is study motion of worker, later the time and motion study became integral part one of field in industrial engineering. Those concept interchangeable part and also time-motion study developed and implemented in ford factory in which henry ford installed assembly lines as finishing line of car factory. Those is early era for scientific management which gave birth to another lean tools which is quality management.

 SPC & PDCA  : 1931 The dawn of quality control

To increase their quality-of-service Bell telephones engineer Walter A. Shewhart implementing statistical control to increase voice transmission. Later on, he also implemented SPC diagram in the Bell telephone equipment manufacturer western electric company.

On the factory he put memorandum which change the world, he pointed a graph that indicates variation and revolutionize quality management from sorting defected product into variation reductions.

Later on, W. Edwards Deming served as the editor of Shewhart’s book Statistical Method from the Viewpoint of Quality Control (1939), invited Shewhart to speak at the Graduate School of the U.S. Department of Agriculture and after that American society for quality developed in1945.

in 1950’s Deming invited to Japan as introduction for quality management systems and after that he met The Japanese Union of Scientists and Engineers (JUSE) also Japanese industrialists of the likes of Akio Morita, the cofounder of Sony Corporations in July and August 1950, in Tokyo and at the Hakone Convention Center.

1950’s Toyota production system

On his lecture at Hakone Convention center Deming sharing insight that by reducing variation will reduce cost of defect and increase market share. A number of Japanese manufacturers applied his techniques widely and experienced heretofore unheard-of levels of quality and productivity.

The improved quality combined with the lowered cost created new international demand for Japanese products. Not stop in there Japanese’s needs for economic recovery leads the Toyota leader have ideas how to implement supermarket system in united states at auto factory why? since at that time to produce one piece of spare parts need resource that really scarce and the ideas one piece flow as well as Just in time created.

1961 Quality control circle

Admired implementation of Toyota Quality circle application Deming praised Toyota as an example of the practice QCC at early 1950’s later on leader of JUSE formalized the QCC at across Japan in 1961 and expanded by others, such as Kaoru Ishikawa founder of Ishikawa diagram. The program begun to spread across Japanese industry.

1985 Single minutes exchange dies

On a trip to the US in 1955, Taiichi Ohno observed Danly stamping presses with rapid die change capability. Subsequently, Toyota bought multiple Danly presses for the Motomachi plant. And Toyota started to work on improving the changeover time of their presses. They developed a structured approach based on a framework from the US World War II Training within Industry (TWI) program, called ECRS – Eliminate, Combine, Rearrange, and Simplify. Over time they reduced these changeover times from hours to fifteen minutes by the 1960s, three minutes by the 1970s and then just 180 seconds by 1990s. THE SMED method widely spread aroung 1985 by Shigeo Shingo.

1988 Total productive maintenance

Total Productive Maintenance (TPM) was developed by Seiichi Nakajima in Japan between 1950 and 1970. This experience led to the recognition that a leadership mindset engaging front line teams in small group improvement activity is an essential element of effective operation. The outcome of his work was the application of the TPM process in 1971. One of the first companies to gain from this was Nippondenso, a company that created parts for Toyota.^[1] They became the first winner of the PM prize. An internationally accepted TPM benchmark developed by the JIPM Seiichi Nakajima is therefore regarded as the father of TPM.^[2] The classic TPM process he developed consisting of 5 principles was later enhanced by the JIPM to incorporate many of the lessons of Lean Manufacturing and is referred to as Company-Wide TPM which consists of 8 principles/pillars.

Today era

In today era lean become implemented in information technology, such as Andon in amazon when there is product not good the system while take down those products from the web until it resolved. Lean also emerges in other form such as Lean startup by eric reis where he found correlation between being lean and also how to create product that really needs by the customer, or he coined it is as MPV minimum viable product. In the last 300 years lean methodology and lean production are moving along with industry needs.

Reasons No. 2. Lean manufacturing giving profit and sustaining the business in the long run

Lean manufacturing is a process of reducing waste and improving efficiency. It is a way to eliminate waste and make sure that the products are of the highest quality. From illustration graph above we can clearly see how lean beat competition by lowering production cost and increase margin rather than old business approach. Which are increase end product total cost to gain more profit.

Company that implementing lean with end product lower $5 people will attracted to buy cheaper product. As law of economic says lower the cost higher the demand. then what if we talk about sales strategy and marketing funnel or affiliate marketing? sure it will beat lean product in some sales period, but in the long run did discount strategy works? is it sustainable? as we may know sale activity also incur some cost. here some illustration graph that give better insight how lean manufacturing benefit in the long run.

The lean process is a continuous improvement effort. It involves continuous effort to reduce the wastes and continuous improvement of product quality. From graph above we can see over the time cost of goods are ever increasing. This impacting the total sales over the time, which is constantly decrease.

While the company that implementing lean manufacturing the cost of goods ever reducing. Wait is it can be Happening? it sounds bit theoretical right? but it does can be happen. Aside from external inflation and political disruptions, it does can happen by implementing value stream mapping to decrease total production lead time and level scheduling to maintain production flexibility. also using lean six sigma to reduce over consumption of goods and scraps thus creating value by less resources.

Reasons No.3. lean manufacturing applicable for several type of business

How GE (Aerospace, healthcare & Energy business) use lean methodology to Reduced debt load by nearly $90B 

As one of behemoth in American corporation almost hundreds of years, at 2018 General Electric are losing its 100year on the run top 30 stocks blue chip in the New York stock exchange. here factor why GE losing it’s business:

However, Larry Culp CEO of GE still believe in lean approach to improve company profitability in long term gain.  From his posting in Linkedin he wrote “GE have countless examples now of effective utilization of these principles and tools across GE”. Several lean tools had been applied across the sit factory from windmill assembly to aerospace engine installation.

Some of lean tools shown being applied in GE recently:

Kaizen week in Aerospace facility Lynn plant

One of example lean activities were Kaizen Week team at GE Aerospace facility in Lynn, Massachusetts. The Kaizen team apply lean tools to midframe operations, which are now delivering 100% first time yield compared to 59% prior. Larry hope that lean concept at work implement everywhere, not just the manufacturing floor, and also, he encouraged by how they are using lean to improve our business performance.

Source : GE Aviation in Lynn (Jesse Costa/WBUR)

Value stream Mapping in Wind turbines assembly Pensacola plant

The Pensacola site which produces wind turbines applied Pull System combined by Heijunka or level scheduling. the result was astounding, the site knows what steps needed to produce three wind turbine a week in winter and spring season and five wind turbines in summer. By adopting strictly one-piece flow and pull system for wind turbine spare parts the site able improve 6% or build hours needed to produce turbine.

The Result of GE lean implementations

interactive chart klick the bar to see the number 

Main idea of lean is to produce more with less, to implement those ideology Larry Culp divest unwanted stakes and subsidiaries, such as GE’s stake in oil field services company Baker Hughes and the transportation unit, which merged with Wabtec. with selling those business company able to raise capital 53% in 2019. GE able to stabilize Even when covid insurge during 2019 until 2020 since its most profitable business are in aviation.

The company stabilization supported by massive and systemically lean approach across GE aviation factory. The SMED tools implemented to enhance factory flexibility from order. then followed by Level scheduling to compensate the total lead time of the factory ability to produce goods. this is real example implementation of lean in systematical way thus creating more value to the business.

Reasons no. 4 Lean manufacturing Project easy to scale with low cost across industry

Lean methodologies focusing on elimination of wastes inside process. whatever your industry is there always been the cost that incur due to inefficiency. Whether it is marketing agency, logistic supply chain or even in hospital. Lean proven to be less cost to implement rather than automation or new system development.

It doesn’t mean that I don’t like software or tools for doing some office tasks but in a sense of three spectrum, time, cost and impact. lean methodologies are befitting to use in prompt manner. especially for small and medium sized company that are struggling in monthly basis to keep the profitability. Based on study from the Cranfield University by Konstantinos Salonitis shown that there are some barriers to implement lean manufacturing the 2 barriers are higher in small medium sized enterprise were top management barrier and the financial barrier. Where large size corporation more likely in the employee barriers and other barrier.

The financial barrier side means that in the small medium sized company they still think that to implement lean it will cost a fortune. well from my experiences they may be lacking also with personnel with good understanding lean Program befitting their technologies. From my point of view financial barrier can be translated further cost that bear if the project fails and those are pessimistic approach from the management side.

Let's take some examples VSM project and automation project approach to increase productivity in Small medium sized company the value of VSM project and it is impact with the automation project value cost comparisons.

Those comparisons only implemented in manufacturing how about logistic and share services industry ? well lets take example of most commonly used program taken by those particular industry.

5. Lean Manufacturing engage workforce to embrace operating performance

Recent study by researcher indicates that 65% corporation already implementing lean manufacturing in USA. Let alone those Lean program also enabling workforce to accept operating performance. What is operating performance? those are cultural value where the workforce embraces performance KPI and supporting the team to excel in term of performance such as Overall Equipment Effectiveness, Mean Time Between Failure, Mean Time to Repair and others.

Lean enables creative thinking

The Research shown that based on interview with the employee, the lean manufacturing methodology create new mindset that enabling the team to streamline with the KPI or metric of the industry. Since one of key value needed to transform are providing reasoning before giving actions or directive. this item enabling the workforce creative thinking and more ways to solve the issues which is wastes as common enemy.

Lean Reward and recognition enhance in group collectivism

one item which are identify are the reward and recognition program in lean creates more in group collectivism. In group collectivism are good for company since it will enhance collaboration between employee and nurture performance. However often silo mindset came along the way. Silo mindsets occur when each group defined their key performance indicator and the resource needed to achieve that. What I believe this is what happening in many organizations, which derail company KPI with actual overall performance.

Let say the examples, the company KPI for manufacturing such as OEE, MTTR, MTBF are achieved however the financial show the otherwise. This may happen when the metric between the functional and financial not aligned. we also can solve this using Hoshin Kanri or policy deployment some might say Balanced scorecard, but I prefer Hosin Kanri since it does work.

In summary Lean engage workforce culture inside factory to be more creative and enhance in group collectivism, however downturn identified if we are not properly managed KPI metrics by aligning financial and functional KPI using Hoshin Kanri.

Conclusion:

Based on these 5 reasons above the lean manufacturing still relevant as method for company strategy to win business competitions. Here to summarize the article facts:

First Lean methodologies evolving matching industry needs. Based on 300 years of industry trends, is proven that lean method not faded. but even lean manufacturing strategy evolve to match industry needs more efficiently.

Second Lean manufacturing giving profit and sustaining the business in the long run, Base on discussion increasing price with generate profit might be good strategy in short term but in long term lean method are showing more sustainable gain with GE as study case

Third Lean manufacturing applicable for several type of business, here we are showing how amazon as top of ecommerce information technology, GE with aerospace business, renewable technology able to adapt using lean manufacturing and succeed.

Fourth Lean manufacturing Project easy to scale with low cost across industry, compared to six sigma lean manufacturing implementation less cost needed and also more practicable in several industry since the core of lean manufacturing are human not tools or software.

Fifth Lean Manufacturing engage workforce to embrace operating performance, lean manufacturing engage workforce to solve wastes in more creative environment and giving more reasoning rather than directional approach. Reward and recognition also give the workforce in Gorup collectivism which engage the team member collaboration. However, they're observed silo mindset may appears and disengage the functional KPI's and financial KPI's to solve this issue we can use hosin kanri to align and streamline the KPI metric.

Thanks for reading this article hope it is insightful and giving more ideas how lean manufacturing still relevant in current practice. please subscribe your mail to get more valuable insight from industry best practice. and do you agree with all those 5 reasons? give me you thought in the comment below