|
Congratulations are in order to manufacturing companies around the world that have successfully implemented lean manufacturing practices in their factories. Your achievements are impressive and include, among other benefits, increased growth with no increase in workforce or floor space, as well as reduced work in process to speed time to market.
There are many examples of how the power of lean manufacturing can transform a business. For instance, Emmanuel Kampouris, the “prophet of zero working capital” and former CEO of American Standard Companies Inc., credits his company’s use of demand flow® technology for helping to save over US$600 million in working capital with a concurrent rise in output. Originated by JCIT International in the 1980s, demand flow technology actually predates the advent of the term “lean manufacturing.” After speaking with Kampouris about lean manufacturing processes, Jack Welch, former CEO of General Electric Company, says in Winning, a book he co-authored with Suzy Welch, that Kampouris “…regaled us with stories of how they had drastically improved inventory turns at American Standard…. Our team was awestruck…. Over the next several years, (we) adapted many of American Standard’s processes to GE.... It worked. By 2000, GE’s inventory turns had more than doubled, freeing up billions of dollars of cash.”
Avoiding “Random Acts of Lean”
Because of achievements like this, thousands of manufacturing companies are energetically implementing lean tools and principles within their factories and are taking the time to optimize their manufacturing processes. However, when looking at the overall fulfillment process versus only the manufacturing portion of that process, many of these manufacturers are facing a common problem: On one side of the value chain, finished goods are rising, while on the other side, supplier materials often remain erratic or volatile.
In SAP’s 30+ years of experience in the manufacturing industry, it has seen that organizational structure is usually the core cause of this problem. In numerous instances, a vice president or director of operations drives lean improvements within a company. When defining the road map of the lean journey the organization is about to undertake, this person tends to keep the resulting changes within their area of direct control – the thought being, “By changing what is under my control, I can effect immediate change.” In taking this shortsighted view and committing what JCIT calls “random acts of lean,” companies often end up focusing on the wrong piece of the value stream, as the following examples, each drawn from actual experience, testify: _ A hospital took 4.2 days to process a new patient through its procedures and wanted to get that number down to less than 4. To the operations director of the hospital, that sounded like a good idea. To the CEO who owned the P&L to the business, the 4.2 days spent on patient processing was not the problem. In his view, the real issue was the 62 days it took to process the paperwork to receive payment for a patient’s procedures. Therefore, although random acts of lean, such as reducing 4.2 days to less than 4, are good initiatives that can lead to new efficiencies, what is their value to the overall business if they don’t tie back to the bottom line?
_ A pharmaceutical company took less than 10 days to manufacture and fill millions of bottles of pills for a drug campaign. They used fill and pack machines that ran so fast you could barely see the bottles coming out. However, to reduce the number of production days still further, the company wanted to create a stretch goal to reduce 10 days to less than 10. Again, to the operations director, this made sense. The CFO had a different view. Although he saw the advantages to reducing the 10 days, what he recognized as a more urgent need was the 240 calendar days it took to process the paperwork for that one drug. By applying lean tools and principles against a very large quality documentation problem, the company would slash 200+ days of paperwork processing.
_ A construction equipment manufacturer took 3 days to build a massive piece of construction equipment that required a bill of materials containing more than 10,000 items. A lean improvement team wanted to get 3 days to less than 3. Upper management had different eyes.
|
