Lean manufacturing beckons low-volume operations

While not a new concept, lean manufacturing has never been more relevant. Indeed, many of the basic lean principles — continuous improvement, just-in-time delivery, etc. — have been employed at manufacturing facilities in various industries for over 30 years. New, unprecedented competitive pressures arising in part from outsourcing to offshore suppliers, however, are causing many companies to coordinate and kick-start lean practices in their operations in order to create a true lean culture and identity.

The stakes are high. With driving down costs essential to survival, lean manufacturing is being embraced by managers at small, as well large, companies. The change is a significant: it was once felt that the small volume, high product mix typical of the smaller shop was incompatible with implementation of lean principles. Almost daily a new case study is proving this to be a myth.

“If we hadn’t changed, we wouldn’t be in business,” said Bill Brockhurst, manager of continuous improvement for Active Burgess Mould, in a presentation at Lean Conference Canada 2004, held in Ottawa last year. Active Burgess is a toolmaker with three divisions in Windsor, ON, and one in Wallaceburg, ON. “We had to communicate this sense of urgency to our employees.”

Active did just this three years ago when it decided to implement lean manufacturing. The company trained its employees, conducted value stream mapping of its operations and rolled out “kaizen” or continuous improvement practices onto the shop floor. The results have been dramatic. The moldmaker has realized productivity improvements over the last three years of 10%, 20% and 12%. Active once needed 22 operators to run 11 CNC machines; now it uses eight operators to run eight machines. There have been similar productivity improvements in the gundrill and EDM operations.

One of the company’s first lean achievements was the elimination of a plant’s tool crib, which freed up 1500 sq. ft. of floor space. In doing so, the company lived up to several of the most cherished principles of lean manufacturing, which stresses identifying waste from the customer’s perspective and then determining how to eliminate it. Waste is defined as any activity a customer would not want to pay for, and large amounts of space-eating inventory certainly falls into this category. The accomplishment was also in keeping with the lean objective of creating continuous process flow, rather than logistically complex batch systems.

“We’ve gone from a $50,000 inventory of screws to a system in which a supplier comes in once a week and re-stocks screws,” said Brockhurst. “We’ve put the tools into the work stream.”

Brockhurst calls running lean in a high mix/low volume operation the “holy grail” because, “everyone understands how lean works when you’re making a half-million of the same part.”

In order to get lean manufacturing started at the company, Active hired a consultant. The decision was significant, as it allowed Active to move faster than it could have if it had chosen to self-direct lean implementation. The company was able to draw on the consultant’s expertise to do value stream mapping (see next section for details) and quickly have a plan in place to attack waste and inefficiency. The plan called for transforming the structure of the shop floor from one based on departments (CNC department, finishing department, etc.) to one based on small-, medium- and large-mold work cells. Each work cell is responsible for the build and delivery of a complete core and cavity. Work implementation schedules are the responsibility of die stream managers assigned to each cell. Brockhurst said one of the keys to making the system work is a communication strategy based on visual controls such as job scheduling boards which allow the die stream managers to smoothly track and organize work-in-progress.

“Two years ago, an operator had no idea how long it was supposed to take to build a specific mold,” he said.

Problems, of course, still crop up. When they do, for example missing parts from a supplier, they are taken to the company’s “Blue Room”, where someone is assigned to deal with and solve the problem.

Value stream mapping: Digging for gold

In one sense, the term lean manufacturing is a misnomer — success in becoming a lean-running company depends as much on what happens in the office as it does on what happens on the manufacturing floor. The key to seeing the really big picture, and ferreting out waste and inefficiency from all the hidden nooks and crannies, is an exercise called Enterprise Value Stream Mapping (EVSM). In essence, EVSM is a graphical chart mapping all the internal activities and processes that take place from the time a customer makes contact with a company until the time the customer receives a product (see diagram p. 16).

“What we’ve often found with job shops and other smaller facilities is that they can spend up to half or more of their time producing paperwork to make the product,” says Chuck Doyle, a consultant with Lean Advisors Inc. in Ottawa.

As EVSM begins with customer contact, the first step is defining what is meant by first customer contact. Doyle advises against including the quoting process in EVSM, as this will over-value the lead time. The bidding process can be pulled out as a stand-alone step; a better measure of true production lead time is achieved by beginning EVSM when an order is received.

“In doing EVSM, we usually find that, whatever the design of the physical product, the largest amount of time is spent waiting,” says Doyle. “This time is consumed by various procedures, such as waiting for a sign-off on design, or a purchasing manager’s approval. We focus on what we can do to reduce waiting times.”

The recouped time opens breathing room in a company’s production schedule and often spins off into benefits for its customers. Doyle recounts the example of a casting manufacturer that cut the lead time for its castings by half, from six to three weeks. As a result, the company can now allow its customers to make design changes three weeks later in the production cycle.

EVSM reveals sources of both internal and external waste and inefficiency. Sources of external waste can be suppliers who fail to deliver a product or service on time. While external waste can be a significant drag on productivity, Doyle advises companies to initially focus on sources of internal waste.

“Factors outside of your control should at first be a lower priority,” Doyle notes. “With most companies there’s a lot of internal things that can be done to improve productivity.”

Using EVSM, companies often uncover insidiously small and overlooked details that add waste and delay to their operations. One company had operated for years with a complicated, unclear order form. Invariably, the form compelled phone calls from suppliers seeking clarification. EVSM revealed the obvious, in this case, the need to redesign the form.

Beware of the hurdles

While lean principles and philosophy, properly acted on, can bring quantum improvements to a company’s productivity and bottom line, they also bring challenges that require astute leadership and deep understanding of the program’s limitations and objectives.

Decoma International Inc., a supplier of automotive exterior systems with over 16,000 employees in 11 countries, began implementing the 14 management principles of the Toyota production system across all of its divisions last year. The 14 principles (see box) are defined in Jeffery Liker’s book “The Toyota Way”. Liker derived the principles from studying the production practices at Toyota for over 20 years.

Robert Brownlee, Decoma president of North American Fascia Operations, says the Toyota system is intended to complement many of the quality and productivity initiatives already in place at the company — for example, six sigma, Best Practices and Winning Teams. Brownlee notes that Decoma’s Winning Team program has been used in its plants sinc
e 1996 and has helped to create a culture of continuous improvement at the company. Implementation of the Toyota system will help coordinate the strategic thinking and activity of all Decoma’s employees, according to Brownlee.

“One of the things you notice at any Toyota plant you visit, whether it’s in Germany or Asia or the U.S., is that the people all think the same and operate the same,” says Brownlee. “We want to have that same feeling when you walk into a Decoma plant. We aren’t there yet, but we recognize that’s where we have to be.”

Brownlee says one of Decoma’s biggest challenges will be to provide good, consistent training for all its employees in several different countries in different languages.

Zomax Canada, among other things a manufacturer of optical storage discs located in Arnprior, ON, confirms the importance of proper training in the implementation of lean manufacturing.

“We gave everyone in the plant a basic introduction to lean,” reports Craig Cunningham, director of operations. “This helped explain where we were going and prepared everyone for greater involvement at a later date.”

Cunningham says that excellent communication is a key in getting lean up and running and keeping it on track. Zomax uses newsletters, company quarterly meetings and communication boards on the shop floor to identify objectives and highlight positive results. He also recommends setting up pilot projects early into a company’s lean journey. The projects help demonstrate lean principles and get people familiar with generating ideas.

Zomax faced two specific challenges while implementing lean, according to Cunningham. The first challenge was dedicating enough people power to get the project of the ground. The challenge was overcome by top management’s commitment to lean, and the realization that the company would have to free up production staff to work on teams in order to make it work.

A second hurdle was getting non-day shift employees involved as team members. Cunningham says that in some cases supervisors simply put certain employees on straight days for an extended period of time.

Active Burgess Mould and Design’s Brockhurst cautions against lean implementation overkill. Such overkill can be well-meaning, but ultimately a source of waste itself. He questions, for example, the need to train all employees, when only a few will actually be implementing lean. He also advises against rushing into a flurry of activity with no plan or objective. Without proper direction, Brockhurst observes, a simple continuous improvement exercise can turn into a “red tag event”, quickly grid locking lean intiatives.

Leadership and buy-in from the top are imperative to overcoming these and other hurdles that will be encountered.

“The top person at the facility must be a true believer and fully committed to starting the lean journey,” says Cunningham. “As with any key change in a business, this support is crucial.”

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TOYOTA’S

14 MANAGEMENT PRINCIPLES OF LEAN MANUFACTURING*

1. Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.

2. Create continuous process flow.

3. Use “pull” systems to avoid overproduction.

4. Level out work load.

5. Get quality right the first time.

6. Standardization tasks are the foundation for continuous improvement and employee empowerment.

7. Use visual controls, so no problems are hidden.

8. Use only reliable, thoroughly tested technology that serves your people and process.

9. Grow leaders who thoroughly understand the work done by your company.

10. Develop exceptional people and teams who follow your company’s philosophy.

11. Respect your extended network of suppliers and partners by challenging them and helping them improve.

12. Go see for yourself in order to understand the situation.

13. Make decisions slowly by considering all options; implement them rapidly.

14. Become a lean organization through relentless reflection and continuous improvement.

*Taken from Jeffery Liker’s book, “The Toyota Way”

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CANADIAN COMPANIES RATE AVERAGE ON THE LEAN SCALE

More Canadian companies appear to be getting fatter rather than leaner, according to at least one leanness study, which tracked the inventory performance for 1,000 companies in 27 countries. The study, completed in 2003, and reported on by Richard Schonberger in an issue of Advanced Manufacturing, gave each company a report-card system grade, A through F, based on the standard metric of inventory turnover. To qualify, a company must have had at least 15 years of data from public financial records. An A is for an improving trend for at least 10 years. A B-grade is for 10 or more years of imporovment, but with plateauing or backsliding in the most recent five years. Companies with no clear trend get a C; and companies that have shown an improvement trend followed by a backslide of 10 or more years get a D. An F goes to companies with a long downward trend.

Among the 73 Canadian companies in the study, only 22 got A’s, 11 got B’s, with the remainder getting C’s, D’s and F’s. The conclusion, according to Schonberger, is that the majority of companies, 70%, are getting fat, not lean.

Some of the companies getting A’s include Alcan, Canadian Tire and Moore Group. Magna was included in the C group of companies. Bombardier, Canada Bread Company and Methanex are a few of the companies that got an F grade. The best performer in this leanness study turned out to be a plastic processor — GSW Inc., a manufacturer of plastic decking and building products located in Barrie, ON. GSW’s inventory turns hit bottom in 1980 at 5.1 and have been improving since, reaching 10.2 in 2002, an improvement of 2.9% per year.

Overall, Canadian companies rated below the United Kingdom, Scandinavia and the U.S., but about equal to the rest of Europe. Ironically, Japan, the home of lean, rated dead last. Schonberger attributes this anomaly to the country’s economic woes, which have plagued its domestic economy for over a decade.

Not everyone agrees that measuring lean performance using inventory-based assessments is highly accurate or meaningful in any sense.

“Inventory turns are a small part of the overall program encompassed by lean operat-ing principles,” says Bob Brownlee, president, North American Fascia Operations with Decoma International.

Nonetheless, as Schonberger points out, companies with a long history of swelling inventories, such as Bombardier, must pay for it by using up earnings, borrowing money or diluting ownership by selling stock.