For years, lean practitioners have been preaching about the importance of getting management’s commitment to change. This necessity is as old as the lean philosophy itself. It’s well known that a lack of commitment from management is the one definable reason that lean implementations fail. Yet many company leaders embark on a lean journey with initial zeal, only to allow it to fall apart like every other new idea or program.
Why does this kind of failure occur? It is because change can be difficult. Even though positive transformation can result, changing a paradigm, breaking old habits, and discarding established routines can be tough transitions for anyone, management included. In contrast, maintaining the status quo requires very little effort. Business is good and the customers seem to be happy. Profits and cash flow are good, employee turnover is under control, manufacturing processes are running well, and operational conditions appear stable. It is when things are going well that companies often hesitate to implement something new; they don’t want to risk what they feel is already a good thing.
If you think you may be perceiving your organization in this way, you must know that you have a large group of supporters out there, supporters who want you to maintain your established methods of operating and eliminate any thought of continuous improvement initiatives: your competitors. They want you to conduct business in the same way you are now. It offers them a great opportunity to gather more of your market share, so they are behind you 100 percent.
Global competition is a fierce reality of the business world. When asked why they chose to embark on a lean journey, my clients commonly respond, “To stay competitive.” The principles of lean manufacturing can truly help your business continue to play competitively by operating within a framework of continuous improvement. Do you know why this is important? Your competitors do.
The focus of any competitive business must be its customers and their needs. Potential and existing customers have certain expectations, and manufacturers must try to establish processes that satisfy and exceed those expectations if they wish to remain competitive. In the global economy, people can go almost anywhere to buy products and services, and that is why customer service has become an important factor.
The concept of lean manufacturing has made its way through a variety of competitive industries and has been proven successful. Even so, many companies have not fully embraced the lean philosophy or applied what they have learned about it to their daily operations. And yet these same businesses may wonder why their performance is in jeopardy as compared to their competitors’. Athletic teams and athletes operate under the principle of continuous improvement, constantly seeking to find an advantage, or competitive edge, that will make them more successful as a team; operating a business is no different.
Three main business decision drivers can make or break a deal. When customers come to you, seeking your product or service, they base their decision on cost, quality, and delivery. It is important to find an efficient balance between these drivers, focusing on all three equally, so as not to give one all the attention and allow the others to falter. However, finding an optimal balance of focus can be difficult, and each company defines it differently. The only way to ensure balance is to employ the methodology of continuous improvement, which is the fundamental principle of lean manufacturing.
Lean manufacturing principles, when correctly applied to your environment, can be a powerful tool to determine optimal cost, quality, and delivery for your products. Although there may be a few businesses that always look for the cheapest method, the ideal approach is to find balance. In the following sections, I break down each of the drivers and note how they affect one another within a manufacturing environment.
Typically, companies handle cost in one of two ways: cost cutting or cost managing. Those that favor cost cutting employ downsizing, firing, improvising, abuse of suppliers, and cutting corners, all of which are clear cost cutting actions. Some companies even believe that lean manufacturing is cost cutting, but that is simply not true. Rather, lean manufacturing is about managing costs, which makes much more business sense in the long run.
If you focus only on cost, the quality and potential delivery of your product or service will suffer. In an attempt to lower the cost of labor, many manufacturers try to limit the number of hourly workers and run “thin” assembly lines. Both of these measures constitute cutting costs, but they are usually futile efforts. Typically, the remaining workers are required to pick up the slack and work faster to meet critical deadlines. Essentially, the process is working beyond capacity. This practice is dangerous, because critical assembly and quality steps may be skipped. What typically occurs is that the delivery date cannot be met, and the product is either shipped late or with substandard quality, displeasing the customer and tarnishing the company’s image.
As a kaizen practitioner and trainer, I advocate making process improvements without a lot of cost; however, you must have certain necessary items on hand to ensure an effective process. Assembly lines and other manufacturing processes require tools, workbenches, conveyors, lighting, parts presentation, documentation, shelving, bins, tool holders, equipment, fixtures, and jigs, and these items need to be working properly. At some point when preventive maintenance efforts are exhausted, companies must replace items. Line workers cannot perform efficiently using unreliable or broken tools or equipment.
The costs associated with improvements in training and mentoring are sometimes considered too high. That is not smart thinking. In contrast, I recall a situation in which I negotiated a consulting contract with a company located in Nebraska. We were discussing our potential agreement when the owner made it clear that the initial training was something he could not afford not to do. As far as he was concerned, training was an absolute must in his ever-changing market. Needless to say, this company is prospering in an industry where companies that are not embracing change are struggling. The owner is beating the competition and meeting the ever-changing needs of his customers. Don’t cut your costs. Manage them.
Forced to choose only one driver to keep at an optimal state, I would choose quality, hands down. By no means should cost or delivery be allowed to falter because of a focus on quality, but customers are more loyal to quality than to any other driver.
We are all consumers seeking products and services. If the quality of the product meets or exceeds our expectations, we will sacrifice a bit on the cost or delivery. After all, it may be worth a little delay or additional cost to know that we can rely on a particular business to provide high-quality products and services. I know that many consumers simply look for the rock-bottom price, but I still find that most people value quality most.
Let me give you a personal example. Like most Americans, I own a car. Owning a car carries a variety of associated costs, such as gasoline and insurance. And if I want my vehicle to last, I must spend money for preventive maintenance. As a consumer and automobile owner, I can take my car anywhere for repairs, and each shop offers some level of cost, quality, and delivery.
There is a quick lube shop down the street from my house, probably five minutes away. This shop offers a multitude of services and products at a low price (cost). The workers are very fast and can have my automobile done in a timely manner (delivery). The problem with this particular shop, which is not representative of other quick lube shops, is that its quality is not to my satisfaction. The workers tend to skip steps, forget services, and make errors in the invoice. This shop also makes a practice of hiring high school kids with limited knowledge of automotive repair. My point is that the quality is not good. Although this shop appears to be balancing the other two drivers quite well, quality suffers, and I am loyal to quality.
So what is my alternative? I choose to take my car to a repair shop farther away from home. This shop tends to take a longer time to get the work done; often, I have to wait in the customer lounge, reading magazines. Its prices are higher than most shops in town, too—but its quality is outstanding. This shop has outstanding customer service, and I never have an issue with regard to its quality of work or documentation. If cost and delivery were more out of balance, I might be tempted to seek out another vendor. That is a real possibility. But for now I am satisfied to pay more and wait longer in exchange for the high quality of the work.
That being said, it is possible to place too much focus on quality, causing cost and delivery to suffer. Manufacturers that focus most of their attention on quality may not trust their ability to manufacture a high-quality product. Perhaps there has been a history of poor quality and they are afraid of losing customers.
Companies that spend a lot of time on quality have a greater chance of increasing operating costs. Assigning more people to focus on quality is expensive, and at some point it becomes redundant. Inspections and testing are not considered value-added activities unless the customer is willing to absorb the cost. Some manufacturers have government contracts that demand strict adherence to specific criteria, something the buyer is willing to pay extra for. In this case, it may be cost-effective to perform repetitive inspections and testing. But most manufacturers do not fall into this category. Delivery is also negatively affected by an overemphasis on quality checks, with extensive lead times because of the extra time needed for checking and rechecking product.
“Build, build, build” seems to be the mantra of every manufacturing company. In my ten years as a lean practitioner, I have not yet come across a manufacturer that was not output driven. Of course, deadlines and on-time delivery are not bad things. But speed for its own sake seems to be the cause of much unnecessary chaos. Companies that focus on delivery exclusively will quickly see an increase in cost and a decrease in quality, especially in uncontrolled working environments. Companies that have this volume-driven mind-set cannot see any further than the next hour; there is no long-term vision for the day, week, or month. Crisis management is the name of this game.
The first indicator of an inefficient line layout is a production supervisor or manager who throws people at the process to meet daily production requirements. This practice costs money and does not add inherent value to the flow of the product. The cost of labor simply increases, as does the risk of potential quality problems such as scrap, rework, and future customer complaints. It is hard for many managers and line operators to break this habit, even after lean principles have been applied, but it is a mentality that must be reversed.
The added cost is not usually passed on to the first customer, but eventually it may be added to overall business costs and that will affect future customers. It is a cost that must be absorbed initially by the manufacturer, and therefore it may be pulled from other areas of the company, causing a shortage of funds there. Business 101 is to manage your organization to accommodate the original price agreed on with the client while being able to fund operating costs. Therefore, you are shooting yourself in the foot by creating added costs outside your business structure, and if you compound these costs for each line in the plant for one year, it begins to add up. Additionally, you incur costs that arise from customer complaints, warranty work, and service calls.
Simply put, your organization realizes no gain if you simply create problems and add cost by driving processes and people to meet unrealistic delivery dates. Manufacturing processes should be designed to meet delivery dates efficiently and should be monitored continuously to meet that objective.
In short, the key to managing cost, delivery, and quality is to achieve optimal balance. It’s an ongoing challenge. Your first step in getting there is to recognize that customers can go anywhere to do business, and their choice is based on cost, quality, and delivery. Lean manufacturing provides a variety of tools and principles that can help put you in a direction to better find this balance.
Each business is composed of a web of critical components, all contributing to making the business successful. This web, called a company’s value stream, includes all the activities that a company, its suppliers, its employees, and its owners are involved in to design, order, produce, and deliver products and services.
Everyone in a value stream has a stake in whether a customer chooses to do business with the company or with a competitor. In a global economy that is continuously expanding, the purchasing options are endless. This is the big picture, as shown in Figure 2.1. Suppliers, employees, and owners all contribute to the success or failure of the organization. Therefore, all should strive to operate in ways that improve cost, quality, and delivery.
Let’s look at each of the players in detail.
The biggest stakeholder is the business owner. Often, the owner (with or without partners) started the business and has a vision of its operation and its future growth. Money and time have been invested. The owners need to think of their families’ welfare as well as the welfare of their employees, so job security is a concern. Business owners want strong financial gain, as well as optimum growth that will sustain business profitability. With regard to cost, quality, and delivery, owners are at the forefront in attempting to find this balance.
Job security is very important to most employees. With length of employment at any one company much shorter than it used to be, employees count on steady paychecks, medical insurance, and investment opportunities, and they also desire an enjoyable and stimulating work environment. Employees have a strong interest in the company achieving an ideal balance between cost, quality, and delivery, because it secures their employment. Employees want customers to choose the products and services provided by their organization. Employees want to contribute to the company’s financial strength and continued growth, just as business owners do, but employees’ primary motivation is reliable job security.
Although business owners may have issues with suppliers from time to time, suppliers play a critical part in obtaining optimum cost, quality, and delivery. Remember that lean manufacturing is not about strong-arming your suppliers but about developing long-term relationships, which involves open communication, mutually agreeable contracts, and the desire for both to achieve success. Suppliers want potential customers to buy your products because it brings them business. By using lean manufacturing tools, many world-class organizations have involved their suppliers in the lean implementation process. As part of the value stream, suppliers need to be a part of streamlined processes and efficient transactions, helping them do business effectively with your company. Even if processes are refined and waste has been significantly reduced, it is all a moot point if suppliers cannot meet the current quality and delivery expectations. When the value stream is improved, everyone is a winner.
Acknowledging and understanding the bigger picture are essential to the success of your lean journey. Everyone in your value stream can contribute to the cause.
When it comes down to it, commitment to change is essentially a philosophy. Change is not easy for some individuals. In truth, for some people, change is extremely difficult, because it rocks the boat and makes things that were familiar suddenly become unfamiliar.
It is also difficult to get people to embrace change as a positive measure. And there is no perfect template to follow when adapting to change or teaching others to adapt. The challenge lies in getting everyone to see change as valuable and necessary and ultimately the best way to ensure success. Effectively, change is not in our words; it is our actions.
To avoid lean implementation failures on the shop floor, management must first establish the foundation for success by developing goals and metrics to improve cost, quality, and delivery. Improvements in these areas will have a profound impact on the company’s financial strength as well as overall growth. Actions should always follow words. Don’t simply state, “We are doing lean”; demonstrate it by taking action. This important concept is what I call the strategic purpose.
The strategic purpose is an effective way for management to demonstrate its commitment to the lean program—and to the lean philosophy of continuous change and continuous improvement—beyond inspirational speeches and company declarations. A company’s strategic purpose serves as a guideline for implementing lean processes and sustaining positive change. (Some individuals refer to the strategic purpose as a lean strategy.)
A key part of creating your strategic purpose is to establish a list of critical shop floor metrics that can be measured and quantified. On the production floor, these metrics are often called KPIs, or key performance indicators.
Here are the most commonly used shop floor metrics:
Productivity can be measured in a variety of ways. A productivity measurement requires some kind of input: labor dollars per unit, the distance product travels per person, pound per machine, bag per person, and so on. Or you can compare something like labor hours to standard cost hours. All these are examples of productivity measurements.
Productivity is improved when products are manufactured with, for example, less effort, fewer workers, less equipment, and less use of utilities (overhead). Because lean is about managing costs, and not cutting costs, manufacturers need to adopt a smart approach in attempting to achieve minimum effort. Supervisors and managers always seem to be concerned about speed, but productivity is not about speed; rather, it is about pace. Over the years, manufacturing professionals have had a misconception about productivity. Working hard and fast to excess is not conducive to good quality and safety. Human beings can sustain 100 percent speed only to a point without negatively affecting quality or seriously negating safety factors. So 100 percent pace makes no sense.
Lean manufacturing is about working smart, at a pace that is sustainable, while safely producing the required number of good-quality products in a given time period. There is a methodical approach to designing a process that creates a smart pace, allowing managers and engineers to calculate accurate worker requirements (I discuss this in Chapter 4, Early Stumbling Blocks).
Productivity is directly related to cost. Therefore, it is the most important shop floor metric in your strategic purpose. Focusing on the efficiency of the production operators is critical, because they are considered value-added; they build product, and that, in turn, pays the company’s bills. If you adopt a more efficient process and require fewer personnel, you will dramatically improve cost. Using fewer personnel equates to, for example, less labor, fewer tools, fewer workstations, less documentation, and less material. Fewer people handling product also equates to improved quality. Unnecessary people working on the product, in an uncontrolled and poorly designed process, can increase the chance of quality errors, not to mention safety issues. It also improves delivery because it means having fewer processes, fewer people, fewer transactions and systems, and fewer places the product must travel before landing in the customer’s hands. These are key points that contradict the old philosophy of simply throwing more bodies at a line in order to meet deadlines.
The important thing to remember is that it’s best to manage costs and redeploy personnel as areas become more proficient due to improved processes. Don’t just cut people! That is not the lean philosophy. Proper worker allocation is the best approach.
Quality is one of the key shop floor metrics in the strategic purpose. However, before adding it to the list of metrics, you must make a decision: how you will measure quality. Surprisingly, I have witnessed many companies, large and small, that do not measure quality—a big mistake. Quality should be measured both internally and externally. Some companies use customer complaints as the external measure, simply keeping track of the number of complaints per month and the cost of problem resolution—warranty costs, cost of service calls, and so on. Although those costs are important, you should also track internal costs: rework costs, scrap costs, parts per million (PPM), the number of rejections, and so on.
Quality can be measured in a variety of ways, and it depends on your products and processes. No matter which method you choose, a measurement of some kind must be in place.
It is difficult to improve quality if the production process has significant design variability, a lack of cross-training among line operators, unreliable equipment, outdated documentation, or poor flow. Although it takes many steps to refine these elements, it is difficult to gauge quality improvements until refinement occurs (as discussed in Chapter 4). Quality is improved when you reduce the number of defects, rework, scrap, and external complaints. With this error reduction, you will spend less time and money reacting to problems after they occur. Delivery will be improved when you reduce downtime created by line stoppages. A controlled manufacturing environment promotes good quality, with predictable lead times, and these factors will definitely please customers.
A lot of money is tied up in parts and material, and that is why they should be part of your metrics, providing a method for monitoring and improvement. However, reduction of inventory to a satisfactory level cannot be done overnight. This metric also includes work in process (WIP): parts, subassemblies, partially completed units, and finished goods. The ideal state occurs when completed units have been loaded onto a delivery truck and are not just sitting around in a physical or logical location known as finished goods inventory. Unless your plant is used as a distribution center, fully built products should leave your facility quickly.
Many manufacturing facilities literally use their production lines as stockrooms, with large quantities of parts and material lying around in the assembly area. Some managers view this as a positive method of reducing indirect labor costs because fewer workers are needed to bring material to the work area. Although this practice might make sense in the short term, you incur a much higher cost by ordering large quantities of parts and then storing them. By allocating a smaller, controlled number of parts and material to the process, a company can afford to have personnel to manage it. This cost is less than the cost of excessive inventory.
Excessive inventory and WIP also create other problems. First, there are storage and handling costs. Large lots of parts or WIP can create quality problems due to overstacking, forklift damage, and hidden product defects that are undetectable in large lots. A huge infrastructure is required to control and monitor excessive parts and WIP. Inventory takes up valuable space that could be used for more profitability, such as building a new product. I may be painting an ideal picture, but it is important that each organization find a healthy balance between parts quantity and the cost of indirect labor (addressed in more detail in Chapter 4).
Using inventory as a metric in the strategic purpose is a critical part of achieving good cost, quality, and delivery. Cost is significantly reduced if you do not have money tied up in excessive inventory or WIP, which is a burden on business operations. Quality is significantly improved, damage is less likely to occur, and initial defects can be better visualized in smaller lots. Delivery is also improved because time is not spent moving large lots from one location to another or managing finished goods that could already have been shipped.
Floor space comes at a premium. Renting, leasing, or buying a manufacturing building is one of the highest costs of overhead. Using floor space efficiently is critical to the success of any lean journey, especially with regard to cost, quality, and delivery.
The production floor serves one major purpose: to support the building of products. Although the factory may be used for other purposes (such as holding inventory, shipping, receiving, and maintenance), the production floor should be effectively used for value-added work: building products. Non-value-added work on the floor means less profit, especially considering the high cost of owning, renting, or leasing the building. Over time, items such as workbenches, garbage cans, chairs, machines, tools, tables, carts, parts, and pallets tend to accumulate and valuable production space disappears. Thus, it’s critical to include in the strategic purpose metrics for managing floor space. As metrics are monitored and improvements occur, valuable space will become free, allowing you to add more production lines, build more products, and become more profitable.
If vacant space exists without clear visual objectives for use, the space will get filled. That is only human nature. Unnecessary items will begin to pile up and consume production space, either on the floor or in the work areas. In Chapter 4, I discuss the adoption of 5S and the visual workplace and describe common mistakes people make when attempting to reduce floor space.
Cost is significantly improved when floor space is better used. Adding production lines for new products brings in additional revenue. Or if you determine that you need less floor space, you can move to a smaller location, saving money on rent or lease. Quality is significantly improved when less space is used to store unnecessary items that can become damaged or broken. Also, less clutter in the area promotes better visibility throughout the factory. Delivery is significantly improved through the reduction of unnecessarily long assembly lines and other manufacturing processes that could make more efficient use of space. Products and parts spend less time traveling around the factory, and that means shorter assembly lines, shorter processes, and ultimately, shorter lead times for customers. Does it make sense to spend thousands of dollars on monthly lease payments for a factory floor that is only 50 percent used? Floor space is expensive; use it wisely.
Throughput time is the time it takes a product to flow down the assembly and manufacturing process. Obviously, throughput time has a direct impact on delivery. The more time a product takes to go through the main process, the longer a customer must wait. Of course, there are a multitude of variables that can extend product lead time, so it is wise to simplify the metric by monitoring the throughput time. As an alternative, you can measure travel distance instead of throughput time. It’s up to you.
Longer production lines require more workstations, workers, tools, workbenches, conveyors, supplies, parts, and material, and that results in additional costs and WIP as well as extended lead times. I have witnessed some impressive improvements in throughput time; I have seen travel distance reduced from 300 feet to 35 feet, and from 550 feet to 100 feet. A physical reduction in distance equates to less throughput time, allowing an organization to promise competitive, reasonable delivery dates. Also, from a visibility standpoint, it allows a production supervisor to see everything taking place in his or her area from a single vantage point. The less time the product spends in the building, the better. By improving throughput time, you benefit in cost, quality, and delivery.
Improving key shop floor metrics will have a profound impact on the overall financial success and long-term growth of the organization. The metrics discussed here are particularly important because they are directly related to the work being performed on the production floor, and that affects profit and, ultimately, employee paychecks. Production workers need to work in an efficient environment in order to be successful contributors to optimal cost, quality, and delivery.
I realize that creating a lean strategy cannot be learned simply by reading a book. There are many variables involved, and you must obtain time commitments from all the departments. However, I can provide you with guidelines for creating this valuable tool, which you can use to navigate throughout your lean journey.
The most important element of the strategic purpose is the key shop floor metrics. Although I have listed the most common metrics, you can develop others for office and administrative functions as well. As you prepare this important document, keep in mind that you can’t improve these metrics simply by making improvements to the production floor. Techniques such as new line design, 5S, setup reduction, mistake-proofing, workstation design, single piece flow, and visual management result in an efficient manufacturing process, but other visual parts of the business also contribute to the success of the shop floor.
With that in mind, let’s look at writing your strategic purpose document. You’ll divide it into two major categories:
You should set annual improvement goals for each of the metrics, indicating the estimated improvement for productivity, quality, inventory and WIP, floor space use, and throughput time. By what percentage does the company want to increase productivity and reduce floor space? What goals would be considered reasonable and obtainable? Managers should all agree that goals should be attainable but challenging, thereby ensuring that substantial improvement is made and justifying the effort.
Productivity improves when products are built with minimal effort—for example, less labor, fewer tools, fewer workstations, less documentation, and less material. First, sample data should be collected from the targeted assembly line or process to reveal the current state of operation. Lean manufacturing is all about data—collecting, analyzing, and improving upon it. Improvement decisions are based on the current state, and therefore it’s crucial to gather information on the current state of business processes.
There are several ways to collect this data, including time and motion studies, waste analysis, process mapping, and value stream mapping. This data will reveal waste removal opportunities in overproduction, overprocessing, wait time, inventory, defects, transportation, and motion—the so-called seven deadly wastes. Once you’ve identified a type of waste, you can determine the reason for it as well as the amount of time spent creating it.
After you make these critical measurements, you make logical decisions on methods for removal. Accurate metrics allow you to determine better staffing and workstation requirements for a specific process.
Of course, you may make mistakes when performing waste-reduction metrics, but it is reasonable to assume that overall plant productivity can be improved by 20 to 30 percent over the course of a year. If you practice the suggestions outlined in this book, this rate of improvement is doable.
After lean processes are implemented, it is easy to see remarkable improvements in quality. Simply implementing 5S and adopting good organizational practices can result in a major decrease in problems related to quality, and that equates to lowered costs. Quality is not inspected into a product; relying on an end-of-line or end-of-process inspection or test does not ensure that quality is built into the product. The responsibility for quality lies with those who fabricate and assemble the parts. Line operators are the manufacturing floor’s first line of defense in the fight for outstanding quality. Quality should be designed into the manufacturing process, requiring line operators to check for critical quality attributes throughout the build process. This concept is called quality at the source.
A small series of incoming and outgoing checks should become standard for each worker. It is important not to overload line workers with excessive quality checks, but having them check certain aspects of the product throughout the process is critical. Of course, other variables, such as material from suppliers, office errors, training, and machine capabilities, affect the quality of a product. However, the concept of quality at the source can be applied companywide and not only on the production floor.
As the line operators (or any other employees) prepare to perform work, they should always begin by checking the work of the preceding operation. When that is complete, they should perform their own work and then check their work. As these checks are conducted throughout the process, the likelihood of a defect occurring is significantly reduced. Implementation of quality at the source can result in an 80 percent improvement in quality, depending on the metric.
Be aggressive in your goals for quality. A 70 to 90 percent improvement in quality on the shop floor within one year is a good benchmark, depending, of course, on the number of lines and other manufacturing processes in operation.
A machine shop in North Carolina realized a dramatic improvement in overall plant quality. In this case, quality was measured by scrap cost. The organization analyzed its top ten scrap items and then implemented a process in which machine operators and assemblers performed a check on those items, depending on their work content. That one simple improvement decreased scrap costs by 90 percent. That’s impressive!
Reducing inventory takes time and involves numerous people and departments. It also depends on established relationships with suppliers and other outside vendors, including sister plants. However, you can take several actions that will make a positive impact on inventory kept on the floor.
Reducing workstations and overall line length will help reduce the amount of inventory stored within your manufacturing processes. Fewer workstations equates to fewer parts and WIP. The closer you can get to single piece flow, the better. However, many types of manufacturing industries cannot use single piece flow. The alternative for these businesses is controlled batches, in which a certain amount of WIP is allocated in the space between each process or workstation.
Using single piece flow or controlled batches allows you to better estimate the number of parts required for a work area. Avoid storing huge pallets or totes for parts in the work area, because that uses valuable space. For example, if a line must produce 40 units per day and it requires one wire harness, don’t store 500 wire harnesses in the work space. Leave that quantity in the stockroom or common storage areas.
You can create annual goals for WIP reduction based on how many lines will be physically shortened. I have witnessed WIP reduced by 70 percent following the successful implementation of single piece flow. Any improvement goal should be based on how many processes will be transformed into leaner, smoother operations. With a full lean implementation, it is possible to realize a 30 to 40 percent reduction in WIP and inventory in a single year.
Manufacturing companies often use more floor space than they really need. Setting a goal for reduction can be a little more aggressive because improvements in floor space are generally greater than improvements in productivity. Keep in mind that all of the metrics discussed in this chapter are intertwined; each affects others. After you perform a comprehensive waste analysis and take steps to reduce waste, floor space will be considerably reduced due to removal of unnecessary workbenches, tools, chairs, conveyors, and so on, and therefore productivity will be significantly improved.
Floor space can also be reduced through the implementation of 5S (sort, straighten, scrub, standardize, and sustain). Sort is defined as removing all unnecessary items from the work area, and it is the first step in implementing 5S. Unnecessary items take up valuable floor space that can be used for value-added production space. The goal you create for floor space reduction is contingent on how successful you are in removing all the unneeded items in the production area and also on how well the space is organized and maintained. Data collection and 5S will become two vital components in the early stages of your lean journey. A 30 to 40 percent reduction in floor space use is attainable.
Long assembly lines breed waste and provide space for items to accumulate. Throughput time is significantly reduced when lines are shorter. Granted, all the necessary people, parts, and tools need to be in place, but the longer the line, the greater the throughput time. Reduction of floor space and reduction of throughput time go hand in hand. There is a systematic approach to waste analysis: get the status of the current state of the work content, and perform time studies. This data is a necessary starting point for making improvements that can eventually shrink the physical length of all manufacturing processes.
It is also important to identify how parts and material are presented to the workstations and the overall line. Storing too many unnecessary parts in an area increases the length of the line. Adding a materials handler to the process increases labor cost, but it reduces line costs overall and positively affects both quality and delivery. The cost of this indirect labor is far less than storing more inventory on the floor, something that results in extended delivery dates. As with floor space, you can set a goal of reducing throughput time 30 to 40 percent for the first year.
The shop floor is only one part of the overall lean strategy. Departments such as finance, accounting, customer service, purchasing, engineering, shipping, receiving, and others also contribute to achieving a good balance between cost, quality, and delivery. This approach to the lean enterprise, although a bit unconventional, makes good sense. With a strategic purpose in place and metrics established for the production floor, an organization gains a good sense of why it is in business. Although the shop floor is the key, each department should eventually develop its own internal metrics for improvement.
No single department makes, or breaks, a business. Each department is in place because it contributes to the overall success of the company. Each should be striving for continuous improvement and making its individual processes efficient and free of waste. Improvement initiatives in other departments—such as purchasing, engineering, sales and marketing, production control, and maintenance—should be centered on how they will affect the production floor. Manufacturing companies have a variety of functions that support the manufacturing floor. (Even though some smaller companies may not have all of these specific departments, each service or function is being performed.) Improving the key shop floor metrics should be the ultimate goal of each function, service, or department.
Remember that the goal is to create a balance of cost, quality, and delivery by the improvement of key shop floor metrics. The general function of a purchasing department is to buy parts and material for the production floor and to develop professional relationships with suppliers. Purchasing plays a critical role in a lean organization. No matter how refined, waste free, and streamlined the manufacturing processes are, if quality parts are not available when needed, the line stops. That is not good for delivery or quality.
Establishing annual goals for productivity is difficult when the parts you use are of substandard quality, resulting in production downtime due to confusion, excessive inspection, delay, and rework. These problems hurt productivity. Can your suppliers keep up with the higher volumes you now need because of your ability to reduce waste and inefficiency? Are they able to supply you with parts and material in the quantities and container sizes that will contribute to inventory reduction? It takes time to develop the type of relationships with suppliers that will allow you to work toward mutual goals. But the results will be worth the effort.
Engineering plays a major role in shop floor metrics. It is the responsibility of manufacturing and industrial engineers to collect the necessary data for the metrics. Capturing time and motion studies and analyzing waste are their responsibilities. Engineers are responsible for the technical and analytical projects of lean manufacturing and can assist in planning new line layouts, analyzing equipment capabilities, providing input on process quality, and monitoring conformance with new line balancing. Chapter 3 outlines the importance of having a kaizen champion, someone who is 100 percent dedicated to lean and kaizen principles. This individual should come from the engineering department.
Design and product engineers who are submitting engineering change requests (ECRs) should be trained in lean manufacturing and must be part of the lean effort. When parts changes and product updates occur, it affects workstation layout, 5S, line layout, parts presentation, and tools requirements. There must be a methodical approach to ECRs, as well as knowledge of how changes to documentation and other areas can affect the lean process. You need to address work content and cycle times before adding or removing parts from a product line being assembled in a lean environment. Design and manufacturing engineers should be in constant communication. A smart and thorough approach to engineering changes will prevent inventory, floor space, quality, and productivity from being negatively affected.
Does your sales team know your current capacity? Have salespeople been trained in lean manufacturing so that they can make feasible promises to customers? I am often asked why the sales department should be involved in this journey. Lean processes are controlled through procedures, protocols, and rules. Although managers and supervisors sometimes need to make decisions that require deviation from procedures, that is an exception to the rule. Assembly lines and other manufacturing processes are designed based upon data and specified volume requirements. This volume requirement is used to establish the correct number of workstations, people, tools, parts, support mechanisms, and machines. If promises made by a sales team are forcing the production floor to work beyond its controlled limits, it is difficult to balance cost, quality, and delivery.
However, lean manufacturing is about flexibility and your ability to react positively and effectively to changes in customers’ needs. What you need to avoid is having an untrained, uninformed sales force that is not aware of the operational constraints of the manufacturing department. Bring your salespeople into the lean process early on; share the lean philosophies and the realities of the operation. Their awareness will help them avoid creating unpleasant scenarios for all company employees as well as for the customer.
The production control department represents a major bridge between office functions and the production floor. Often, production cannot move until the official order is received from production control. The customer doesn’t care how long it takes for the order to get processed through your organization; the customer cares only about receiving your product by the promised delivery date. The longer an order sits in administrative processes, the longer the customer has to wait for the product.
For small manufacturers, such as a traditional job shop environment where the day-to-day operations are dictated by the number of jobs in the building, the production control department must be efficient. Does the work order sit in a slow-moving stack? How many departments does it have to go through? Who checks it? What are the wait times between checks? In many cases, the production control department is the company’s lifeblood. This department can have a significant impact—positive or negative—on productivity and delivery.
No matter how lean a process is, as long as any equipment or machines are unreliable, break down often, or do not operate correctly, delivery and productivity will be compromised. Preventive maintenance is critical to ensure that all mechanical tools on the floor are performing optimally. It is equally important to purchase good-value (not necessarily highest-cost) equipment. Good value means good service as well. Costs must be managed at every level of the organization, including the acquisition of equipment.
Focusing on cost, quality, and delivery is not a new concept. Even in a traditional manufacturing environment, these three main drivers are the cornerstones of doing business. Lean consultants and trainers talk the same language in regard to these drivers, and lean manufacturing provides a lot of the tools to help you need to achieve an optimal balance. It is only smart business.
I recommend that you develop your strategic purpose and key shop floor metrics as a guide to improving cost, quality, and delivery, an effective way to begin any lean journey. Creating the strategic purpose is critical, and much attention should be given to it. It will be a living document that evolves over time as improvements are made and new ideas for improvement are created. Striving for optimal cost, quality, and delivery will be a continuous process.
Although I’ve discussed only a few departments in this chapter, everyone has a role to play in the lean journey. Each department should create a long list of waste-reduction action items. Support departments such as administration and human resources also need to become more efficient, because how they operate ultimately affects shop floor metrics. That’s why the strategic purpose identifies the total vision for the organization, allowing everyone to work toward continuous improvement daily. When the floor is successful, the organization is successful.