Continuous Improvement -- Lean Laggards

It's not too late to get with the program.

Lean manufacturing is yesterday's news. Manufacturer faces crisis. Reinvents itself by switching from batch to small lot sizes and pull-based production. Trains and empowers workers to tackle problems and root out waste. Subsequently improves product quality, cuts inventory levels, shortens lead times and beats the pants off competitors. Business is saved! It's a story that's become so familiar, it no longer gets the attention of business reporters or financial analysts. "Lean manufacturing, that was a 1990s thing, like TQM in the '80s," they say. Looking for the next silver bullet, they overlook the enduring competitive advantage afforded by a full-bore lean operation. Add to that the fact that most manufacturers who've actually tried to restructure their operations along lean lines, which is comparatively few, are really only scratching the surface. According to preliminary results of the 2003 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers, a little over one-third of U.S. manufacturers (36%) identify lean manufacturing as their primary improvement methodology. Only 2% of plants believe their lean implementations are complete. That leaves a lot of opportunity for those just beginning the journey. A couple of lean's leading proponents, who you might expect to be a bit biased, agree that American industry has a long way to go. "About 80% of what you hear about lean is basically nonsense," says George Koenigsacker, president of Lean Investments LLC and former president of the Hon Co. "There's a strong tendency to put out your press release before you've actually done all of the work." He believes less than 5% of U.S. manufacturers are in fact substantially lean, and most of these are greenfield startups from Japan. Today Koenigsacker says most of the excuses have been taken away. Naysayers have said lean wouldn't work in the United States. That it wouldn't work in union shops, outside of the automotive industry or in low-volume operations. They've all been proven wrong, he says, as IndustryWeek has repeatedly confirmed in our editorial coverage. Most industrial sectors have had a few innovators that have embraced lean principles to a certain degree and achieved results significant enough to force competitors to take notice. Jim Womack, co-author of several books on the subject and leader of the Lean Enterprise Institute, is heartened by the U.S. economy's inventory turn numbers. For 40 years, beginning in the fifties, they were basically flat, rising and falling slightly with the economic cycles. For the past 10 years they've been improving, especially in the automotive industry, where annual turns have grown from 16 to around 22. The increase from 7.8 to 9.0 turns for the total economy from 1992 to 2002 might not seem like much, says Womack, but it's significant with the number of stock-keeping units or the variety of products retailers carry these days. Considering today's big challenge, what Womack refers to as the "low piece-part price, go-to-China option," he says that U.S. manufacturers must get lean and continue to increase material velocity simply to stay in the game. The only advantage they have is being close to customers and delivering what is wanted when it's actually needed. "We've seen a lot of sad sack outfits that were close to the customer but might as well have been on Mars with regard to their ability to respond to the customer," says Womack. "That category of company is an endangered species." So this lean thing does still have some legs. The challenge for late adopters and seasoned practitioners alike is maintaining focus, not being thrown off course by the next big idea or a change in leadership. "Very few people have an understanding of how big the improvement can be if you stay on the path," Koenigsacker adds. We're talking about operational performance measures that exceed industry standards by four to five times, and profitability that follows suit. Lean manufacturing may be old news, but it's good news. Keep spreading the word. David Drickhamer is IndustryWeek's Editorial Research Director. He also coordinates the IW Best Plants award program.

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