Editor's Note: This is the second part of a two-part story. The first part is Transforming Your Business To Lean: Lessons Learned.
On the path toward global competitiveness and industry dominance, today's manufacturers continue to refine and improve the efficiencies of their operations. For many, a hybrid mix of "Lean" initiatives and practices helps reduce inventory, tighten supply cycles, and ultimately, reduce the cost of making goods. The benefits and basic principals of Lean are widely known. However, many organizations struggle to gain a foothold when embarking on the Lean journey. Or, perhaps more commonly, Lean initiatives stall and are sometimes eliminated due to a lack of understanding of what it takes to both make and sustain the Lean transformation.
For purposes of this article, two companies that succeeded in making the Lean transformation, Husqvarna, a manufacturer of commercial turf care equipment, and American Standard, a multi-billion dollar, global, diversified manufacturer, are quite illustrative of "lessons learned" over the years. Here we review lessons gained from these companies.
Deploy Technology To Foster Change
Husqvarna deployed Lean-driven software applications as the enabling technology for its transformation efforts to:
- Visualize and improved alignment of processes;
- Design flexible, pull-oriented flow production;
- Run each and every day to customer demand;
- Extend pull production out to suppliers with electronic kanban;
- While continuously improving with performance management capabilities.
Husqvarna also invested in newer technology conveyance and flexible paint systems to support high quality, high flexibility and low-cost manufacturing in its "green field" plant design.
American Standard, invested heavily in developing Lean manufacturing software, deploying Six Sigma analysis tools, enabling round-the-clock design teams with engineering modeling systems, standardizing product process equipment and in general, giving its people the skills and tools to get the job done. As a result, Wall Street analysts attributed the company's Lean and Flow programs with delivering an incremental $120 million per year in bottom-line operating earnings.
Pull Is Better Than Push
Demand-pull, kanban systems, exploiting simple, visual management systems were deployed extensively across American Standard and Husqvarna. Pushing a forecasted demand through a series of processes leads to considerable waste in time, transactions, expediting and management. Constructing, by process design, an extensive use of kanban throughout the network, leads to highly automated management and faster real-time response, with increased flexibility to handle change -- either dictated by customer demand or in response to process variation. There is not a forward-predictive model that can analyze the ongoing permutations and combinations of events that occur to effectively schedule a complex manufacturing business with the quality of a well-designed pull production system that responds to the actual events as they occur.
We're not talking about a few kanban containers here or there. We are talking about a synchronized flow of processes, materials and information in response to real-time events across the entire manufacturing process. We're also talking about deploying the right kanban technology for the right pull solution -- whether pulling component parts through the manufacturing process, managing a supermarket level of product between an OEM and the supplying factory, pulling semi-finished products through a factory, fabricating parts in group technology machine cells, or managing electronic kanban re-supply from suppliers, sub-contractors, sister plants, or contract manufacturers. If you deploy best practice kanban technology, you'll outpace your push-oriented competition in cost performance, customer satisfaction, and working capital management -- as both American Standard and Husqvarna have proven.
Reducing Risk And Disruption
American Standard developed a clearly defined process -- one step at a time -- that eliminates wasted time from confusion and team frustration with wandering and lack of program focus. They follow a systematic management model to ensure that the right work was completed before moving on to the next step in the process. The Six Sigma DMAIC (Define - Measure - Analyze - Improve - Control) is an exceptional method for accomplishing this.
Using modeling software applications, changes could first be modeled and optimized prior to physical implementation and shop floor disruption. Software applications that create a trusted factory knowledge base ensure that analyses are done with validated process-centric data, not transactional or financial oriented data that can be misleading. Formalized kanban management systems deployed the right best practice algorithm and integrated kanban as a closed-loop and engineering change controlled process, to reduce the risk of stock-outs from bad data or poorly managed change.
You Get What You Pay For
As mentioned earlier, American Standard delivered an incremental $120 million annually to the bottom-line through its Lean and Flow optimization efforts. The Board of Directors of American Standard recognized the value in keeping the momentum fresh and in motivating the people that did the heavy lifting with financial incentives. In short, the Board realized that if you desired breakthrough results, providing visible and meaningful incentives for the people who needed to make it happen would both increase the speed of accomplishment and improve the probability of attainment.
Initially, the Lean programs were driven by a need to manage limited working capital more effectively, and so several layers of management were driven to incentive programs based upon inventory turnover metrics -- both for their operating unit and the company as a whole.
Over time, plant certification programs were deployed to ensure that Lean programs were driving not just interesting process metrics but improved plant and division operating performance -- in customer satisfaction, market share, margin expansion, and working capital utilization. Sites were reviewed with process audits to ensure that repeatable and sustainable Lean methods were deployed properly and that they correlated with measurable business performance.
Certified sites were awarded the much admired silver cup, a $100,000 team bonus, and were brought to the Board of Directors meeting to review their accomplishments and share their entitlement vision for even better performance in the future.
Leaders Are Winners
A 2006 Aberdeen Group study found that "Leaders in Lean" focused on competitive advantage as priority one -- not necessarily as an individual metric but as an overall level of performance to lead their industry. There is a strong correlation with best-in-class companies that have leadership cycle times, on-time delivery performance, return on assets and working capital. Suppliers who took the lead in embracing Lean methods with American Standard were ultimately rewarded with new and larger shares of business. And as AMR Research has shown in recent studies, leaders in perfect order rates are invariably winners in profitability.
Leading and winning are concepts very familiar to American Standard and Husqvarna. As both companies have demonstrated through the success of their Lean transformations, advancing an initiative toward bottom-line results and sustaining those benefits over time requires a strong mix of people, process, and technology. For those struggling to make progress on their Lean journey, there are important lessons to be learned in each area.
Dave Gleditsch is the Chief Technology Officer at Pelion Systems, Inc. He has over 25 years of manufacturing and systems development experience. His area of expertise is in business transformation based on Lean and Flow Manufacturing principles. In his current position, he oversees the development and deployment of all Pelion technology, including establishing and implementing best practices for customers. He previously served as corporate vice president of manufacturing technology for American Standard. To learn more, please visit www.pelionsystems.com or call toll-free at 1-888-LEAN-FWD.