by Allen N. Chournos, Premier Computing, Inc.

There are two general approaches to Lean Manufacturing:

1-    Removal of “wastages”.

In simple terms, “wastages” can be explained as the expenditure of resources (employee time, production machine time, inventory) on other than the end customer product value, i.e. wasting resources that will be of no value for the customers.  “Lean,” is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination. Working from the perspective of the customer who consumes a product or service, “value” is defined as any action or process that a customer would be willing to pay for.

2-    Process flow.

The second approach to Lean Manufacturing is a focus is upon improving the “flow” or smoothness of work, thereby steadily eliminating “unevenness” through the system.  The implementation of smooth flow exposes quality problems that already existed, and thus waste reduction naturally happens as a consequence. The advantage claimed for this approach is that it naturally takes a system-wide perspective (removing waste and improving smoothness of processes), whereas a waste focus sometimes wrongly assumes this perspective.

Lean manufacturing is a variation on the theme of efficiency based on optimizing flow; it is a present-day instance of the recurring theme in human history toward increasing efficiency, decreasing waste, and using observed methods to decide what matters, rather than uncritically accepting pre-existing ideas.

Essentially, Lean is centered on preserving value with less work and less cost, and applies to all aspects of a manufacturing organization, i.e. use of employees time, raw inventory on hand, finished goods in stock, purchasing methods, job processes, production machine reliability, etc.  The responsibility of assuring a Lean operation rests not only with employees at all levels of an organization (from Executive Management to Entry Level), but also with the tools, processes, methodologies and automation applications in place.  For many, Lean is the set of “tools” that assist in the identification and steady elimination of waste.

“Keep in mind that Lean applies to the entire organization. Although individual components or building blocks of Lean may be tactical and narrowly focused, we can only achieve maximum effectiveness by using them together and applying them cross-functionally through the system.”
Jerry Kilpatrick, MEP Utah, Lean Principles

As waste is eliminated quality improves while production time and cost are reduced.  To quote Benjamin Franklin in Poor Richard’s Almanac: “He that idly loses 5 schillings worth of time, loses 5 schillings, and might as prudently throw 5 schillings into the river.”  He added that avoiding unnecessary costs could be more profitable than increasing sales: “A penny saved is two pence clear.  Save and have.”

Lean implementation is therefore focused on getting the right things to the right place at the right time in the right quantity to achieve perfect work flow, while minimizing waste and being flexible and able to change.

Enter “best practices”.  Frederick Winslow Taylor, the father of scientific management, introduced what are now called standardization and best practice deployment.  In his Principles of Scientific Management, (1911), Taylor said: “And whenever a workman proposes an improvement, it should be the policy of the management to make a careful analysis of the new method, and if necessary conduct a series of experiments to determine accurately the relative merit of the new suggestion and of the old standard. And whenever the new method is found to be markedly superior to the old, it should be adopted as the standard for the whole establishment.”

Benefits of Implementing Lean

In his article titled “Lean Principles, Jerry Kilpatrick, MEP Utah, suggests the benefits of “implementing Lean can be broken down into three broad categories; Operational, Administrative, and Strategic improvements.  Some of Lean’s benefits are summarized below.

Operational Improvements

The NIST Manufacturing Extension Partnership recently surveyed forty of their clients who had implemented Lean Manufacturing. Typical improvements were reported as follows:

• Lead Time (Cycle Time) reduced by 90%
• Productivity increased by 50%
• Work-In-Process Inventory reduced by 80%
• Quality improved by 80%
• Space Utilization reduced by 75%

Administrative Improvements

A small sample of specific improvements in administrative functions is (based upon personal experiences):

• Reduction in order processing errors
• Streamlining of customer service functions so that customers are no longer placed on hold
• Reduction of paperwork in office areas
• Reduced staffing demands, allowing the same number of office staff to handle larger numbers of orders
• Lean Principles
• Documentation and streamlining of processing steps enables the out-sourcing of non-critical functions, allowing the company to focus their efforts on customers’ needs
• Reduction of turnover and the resulting attrition costs
• The implementation of job standards and pre-employment profiling ensures the hiring of only “above average” performers – envision the benefit to the organization if everyone performs as well as the top 20%!
  © 2003 Utah Manufacturing Extension Partnership

Strategic Improvements

Many companies who implement Lean do not adequately take advantage of the improvements. Highly successful companies will learn how to market these new benefits and turn them into increased market share. One specific example involves a midwestern manufacturer of a common health care product. Of approximately forty U.S. competitors, the third largest company in the industry decided to implement Lean manufacturing principles. The industry average lead-time was fifteen days, and this company was no different. At the end of the project, Company #3’s average lead-time was four days, with no products shipped in less than seven days. In order to capitalize upon these improvements, the company began a marketing campaign, advertising that customers would receive the product in ten days, or the order would be FREE. Sales volume increased by 20% almost immediately. After making the appropriate improvements to handle the new demand, the company initiated another marketing campaign; for only a 10% premium, they would ship within seven days. Again, sales volume increased (by only 5%) because new customers wanted the product within seven days, but more than 30% of existing customers also paid the premium, even they were already receiving the product in less than seven days. The end result was that the company increased revenues by almost 40% with no increase in labor or overhead costs. Another key benefit was that the company was able to invoice customers eleven days sooner than before, greatly improving cash flow.”
Jerry Kilpatrick, MEP Utah, Lean Principles

Is Lean right for your company?

Forward thinking ERP solution developers and competent industry solution consultants are jointly helping manufacturers to remain competitive by applying Lean Manufacturing Techniques.  A recent case study reports a company that designs, manufactures and distributes measurement and control instrumentation for the global oil & gas and process control industries has realized significant and measurable benefits from going Lean.

Working with a small team at the manufacturer’s plant, a Lean Consulting expert lead the group through a five-day event focused on eliminating waste and restructuring key production processes. Current-state metrics were captured for throughput, take-time, line capacity, labor productivity, work-in process levels, and shop-floor space utilization. The team spent one day brainstorming the processes, debating alternatives, and agreeing upon a list of changes they could quickly deploy. Over the next few days, including some late evenings, the group implemented their new vision on the shop floor.

Spending just a few hundred dollars on supplies and using their own efforts to restructure the production processes, they were able to put the new methods in place by day three. Over the next few days they monitored the new processes, measured output and performance of the key metrics, and fine-tuned wherever necessary.

The Results:

Initial results of the event returned improvements of greater than 60% in all key metrics. One key measurement, the level of work-in-process, was improved by 91% using the newly established processes and layout. It is not uncommon to achieve this level of improvement in any manufacturing plant not yet using Lean methodologies. A key component of the Lean initiative was to put in place continuous improvement efforts to ensure additional “wastes” are eliminated and further productivity gains are realized.

The initial team has continued to build upon the success of the first effort and use it as the model for other products and processes in this plant and at their other manufacturing sites. Upon conclusion of this first event the team identified several other critical processes they would redesign in the same manner over the following months.  The consulting staff has been engaged to continue to facilitate several of those sessions.  In support of manufacturers’ needs to ensure continuous improvement in operations the consulting organization provides Lean Manufacturing education, process design, and implementation consulting in addition to Lean ERP solutions and ERP System consulting services.

Lean organizations are able to be more responsive to market trends, deliver products and services faster, and provide products and services less expensively than their non-lean counterparts. Lean crosses all industry boundaries, addresses all organizational functions, and impacts the entire system – supply chain to customer base.

With Infor10 SyteLine, a proven and stable ERP solution for manufacturers, many organizations are taking advantage of Lean technology techniques and are realizing a measurable ROI of 40% and above.  For more information on how Infor10 SyteLine is helping companies to reduce costs and increase profit margins, visit our web site by clicking here or contact the author by email achournos@premiercomputing.com.

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