How Lean Are You?
Hint: This is not about the latest fad diet. It is about how U.S. manufacturers will beat foreign competitors over the long term. Beat foreign competitors you read? Yes, even with 8,000 more manufacturing jobs lost this past month, according to the Bureau of Labor Statistics, U.S. manufacturers have a fighting chance. Lean isn’t a piece of science fiction—rather we hope to explain the benefits of lean that have helped to transform very large and small manufacturing companies.
If your company faces any of the following―low profits, no cash, no growth, declining market share or poor customer service―lean is for you!
First, what is lean? Quite simply, it is an initiative focused on removing all waste. One common misperception is that it relates only to manufacturing processes. It does not and in fact, its principles and philosophies apply to all company functions. The seven elements of waste (cleverly referred to as DOTWIMP) stand for defects, overproduction, transportation, waiting, inventory, motion and process. Lean tells us what the customer values and what they do not. The goal is to break down processes and eliminate as many non-value added ones as possible. Non-value-add means a customer will not pay for a particular step in the process. Moreover, the simplicity of lean allows everyone in the organization to participate.
But why should all U.S. manufacturers care about lean? Lean can transform a company from being the high cost producer to being the low cost producer. It can increase customer satisfaction and cut product development time. Moreover, it increases productivity and increases inventory turns. One $100m manufacturer freed up 40% of its floor space and closed a 70,000 foot distribution, center. In a little over one year, this company, improved its cash position by $8m by implementing a JIT (just in time) system. Lead times went from 45 days to 45 minutes. Talk about a satisfied customer!
The list of benefits continues―sales per employee up by 150% over 9 years, improved inventory turns by a factor of 5, double digit gross margin improvements, 40-60% reduction in defects, a three-fold improvement in EBITDA, and the list goes on and on. What is most exciting is how quickly the benefits can begin to accrue. Though lean is a journey, companies can see some amazing results, within weeks.
To some supporters, lean is the grand-daddy of all improvement initiatives. Its philosophy of Kaizen (Japanese term that means continuous improvement) allows firms to bite off small projects and obtain meaningful results. A Kaizen event might.be a set-up for a particular machine. It could be a project to reduce billing errors. Companies take on the mind-set of continuously improving the operation to eliminate waste and improve efficiency.
Companies such as Allied Signal and G.E. have implemented lean while smaller companies such as W.B. Hickman Company and Karpen Steel have also achieved significant benefits. Those benefits have not come without a few challenges, specifically the need for executive level buy-in and leadership. Technology systems that don’t support lean can also hinder change.
But these challenges can be overcome. There are plenty of consultants and advisory firms who can take your company to the next level. Contact your local MEP (Manufacturing Extension Partnership) for information on lean providers. You can also learn more by going to Google and typing in “lean manufacturing,” which provides a number of useful sites and lips for implementing lean practices.
Thanks to lean, there’s no need to passively wait while more jobs go overseas. By implementing lean, we’re quite confident that many domestic manufacturers will be beating the foreign competition for a long time to come.