Leaning towards world-class standards
by derek parker
TO its supporters, it is the way of the future, the necessary if difficult road to efficiency and international competitiveness for the manufacturing sector. To sceptics, it is at best a fad and at worst a means by which sound companies are made dangerously vulnerable to business risks. But one way or another, the concept of lean manufacturing appears to be here to stay, and now the issue is how best to understand and utilise it.
“I see it as having entered the mainstream of Australian business thinking,” said Harry Onsman, a partner in Condico Consulting, a firm which specialises in providing advice on continuous improvement, including lean manufacturing.
“Several state governments have been promoting the idea, and have even sponsored some important conferences, in partnership with key industry associations. And on the educational side there is the new Certificate in Competitive Manufacturing, which has an emphasis on lean manufacturing concepts.”
Lean manufacturing is not a new idea. Its origins can be traced back to the production methods Toyota in the 1950s and 1960s, which introduced a system based on low inventory, just-in-time delivery, waste elimination, stringent quality control, quick response to customer demands, and employees that were both skilled and highly motivated. Lean methods eventually infiltrated Western economies although were mainly associated with manufacturing methods based on repetition and high volumes for several decades.
But in the past decade there has been increasing interest from a much broader range of manufacturers, especially in connection with supply chain changes brought about by the spread of the Internet. In fact, many smaller companies have begun to adopt lean manufacturing methods due to pressure from larger corporate customers – this is especially the case in the automotive sector.
There are aspects of lean manufacturing that seem, at first glance, contrary to good business practice. Lean manufacturing can mean, for example, running production machinery at less than full capacity, which might seem wasteful at first glance. But the real waste, say proponents of lean methods, is to produce goods for which there is no immediate demand, and which will simply go into inventory stock. Excess production, because of the storage costs and the possibility of degradation and obsolesce, is not an asset but a liability to the company.
“A crucial point in adopting lean manufacturing is looking at the whole value stream,” Onsman told Manufacturers ’ Monthly. “In many cases, the individual parts of a company may operate efficiently, but the total process will be less than the sum of its parts. To see the whole, you need a fresh pair of eyes. That is the value, I think, of engaging an outside contractor – although another alternative, especially for larger firms, is to appoint a ‘champion’ from within.
“In either case, the aim is to step back and look at things in a new way, to get away from ‘business as usual’ and promote structural change. A company has to be ready to make the necessary reforms. Some are not, especially in the area of employee relations. For these companies, we provide advice on how to reach the first rungs of the stepladder.”
Analysing performance
Onsman notes that eliminating waste in the use of funds, raw materials, and – perhaps most importantly – employee time is a multi-faceted task. As a consultant, he analyses figures relating to delivery of materials, holdings of supplies, production times, supply chain relationships, and product inventory.
He also underlines the importance of interviewing the people involved, from the workers on the factory floor to the company management. “Yes, every case is a bit different, but a recurring feature relates to factory layout,” he said.
“For example, most production floors are laid out in straight lines, a design which goes back to the days when factories were powered by steam turbines. For purposes of productivity, it’s the worst layout you can think of, requiring the most walking for workers and providing the least amount of sight for quality control. Practically anything is better, although a U-shaped production site is often the best. The point is that doing things without thinking about them, or because they have always been done that way, is a recipe for a waste of energy and time.”
Another common area of waste is the oversupply of raw materials, which must then be stored and maintained. Just as lean manufacturing envisions production of finished goods to meet specific customer demands, so too there is an emphasis on purchasing inputs to meet immediate requirements. Often, this means more frequent deliveries of smaller batches.
The consultant’s audit of company operations eventually leads to a report and a series of recommendations for the senior management team. Despite the importance of inventory control and factory layout, the key changes are often cultural, and the recommendations usually have to be implemented over time.
“You can’t blitz your way to a lean manufacturing system,” Onsman said. “To be fully effective, the process has to be implemented in a series of steps, like climbing a ladder. It can be a long climb, but once you get started it generally gets easier.”
One company that has been advised by Condico Consulting is Mack Valves, a manufacturer of industrial valves and related equipment.
“We chose to use consultants to help initiate and support the lean process, and provide the understanding, skills and resources needed to help us ‘hit the ground running’,” said Keith Goddard, MD of Mack Valves.
“Initially, it was important to identify and develop internal staff to lead the initiatives. We adopted a balanced scorecard approach to identify our goals and to help prioritise and focus our early initiatives. It was tempting to try but we could not do everything we wanted to do in one go.
“We worked hard to make some visible improvements quickly and help get employees involved and behind the initiatives. During the early phases of the lean initiative we found the need to strengthen many internal disciplines and processes. We wanted to ensure that the improvements stuck.”
In the two years since the company began its lean project, there have been significant gains: a 30% improvement in In-Full-On-Time deliveries to customers, a 25% reduction in inventory, and a 10% reduction in overhead costs.
Some of the aspects of becoming lean were fairly easy to implement: keeping tools in an easily accessible location, for example. Others, such as reviewing inputs, have been more complicated.
“We feel we are only just beginning to develop the momentum we would like, and we still have a long way to go,” Goddard told Manufacturers ’ Monthly. But it has been exciting to see tangible benefits flowing from the improvements. We are still facing pressure from imports, but with the increased capacity and reduced costs we can start looking at new products and new markets.”
Focus on processes
Another firm that has reaped the benefits of a lean manufacturing program is boat-builder Riviera Marine, a Gold Coast-based company that specialises in luxury motor vessels. The focus of the program was on adding rigour and controls to existing manufacturing procedures and implementing new procedures. The company aims to eventually increase its production from about 400 to 500 boats.
“We have seen significant improvements in throughput and inventory reduction,” said Bruce Sohier, Riviera’s planning manager. “But anyone looking at lean manufacturing as an overnight solution, some sort of magic bullet, is in for a shock.
“It’s a matter of a 1% increase in a certain area, another 1% in another area. But it adds up across the enterprise, and over time it brings you up to global standards.”
Sohier notes that the changes have also allowed the company to focus more on quality. “We used to be a builder of world-class boats,” he said. “Now we’re a world-class builder of boats.”
Riviera was advised by QMI Solutions, a not-for-profit organisation backed by the Queensland government. Aside from providing advice directly, QMI offers a five-day workshop called the ProEdge Manufacturing Excellence program, which covers issues ranging from factory layout, product documentation, an inventory management system, development of standard operating procedures, visual planning and performance systems, and quality control improvements.
“At QMI Solutions we recognise the great importance of getting an organisation’s practices right before focusing on adopting improved machinery, equipment and other ‘hard’ technologies,” said Ken Porter, CEO of QMI Solutions.
“It is for this reason we have coined the phrase ‘soft’ technologies to refer to organisational practices. “The challenge for small and medium-sized enterprises is to find those new technologies that not only improve efficiency, and therefore productivity, but also help plan the journey to become world class. To really excel, they need to extend themselves beyond short-term visions and focus on filling the ‘soft’ and ‘hard’ technology gaps.
“We have also been working on establishing benchmarks, rating Australian companies against world best practice, as a means of gauging and monitoring improvements. The figures underline the point that sustaining improvements in performance requires new thinking across the organisation, not just commands from the top,” Porter said.
Wary of pitfalls
Clearly, then, the decision to move to lean should not be taken lightly: it effectively involves a remaking of the enterprise and its culture in a long-term program. Moreover, any company looking at lean manufacturing has to be aware that care must be taken in communicating the purpose and details of the project.
“There has been some resistance from employees about the adoption of lean manufacturing methods,” said Onsman. “This has mainly come from misconceptions that it means ‘lean and mean’ – as in downsizing the company and shedding jobs.
“In fact, it’s just the opposite: improving the company to both ensure its survival in a competitive global environment, and underpin the company’s future growth. When that is explained and demonstrated, the resistance usually evaporates.
“In theory, there might be some concern from managers that lean manufacturing, especially because of the low inventory involved, makes a company vulnerable to industrial action. In practice, I’ve never encountered it.
“The unions in the manufacturing sector are generally supportive of lean manufacturing, because they see it as a way of ensuring the survival of manufacturing companies. Being able to respond to customers quickly and efficiently is seen as a way to fight the rising tide of imports. Better a lean company than no company at all.”
For those manufacturing companies that have not yet looked at moving to a lean system, the options are either adopting it by choice or adopting it under pressure – but ignoring it is not on the list.
