Small Manufacturers Need to be Agile, Not Lean

Workplace organization, quick setup, work standardization, pull systems, error proofing are very much a part of agile manufacturing.

Much of what is written about lean manufacturing simply isn't applicable to small manufacturers, most of whom make their money by meeting specific service specifications for specific customers.

When lean literature says, "Only make what the customer wants when the customer wants it," small manufacturers say, "That's the central facet of our business. You mean there are companies who make things nobody wants?"

When lean literature talks about training everyone in lean methods and concepts, small manufacturers say, "Everybody around here is already wearing three hats. Who has the time to conduct or attend all this training?"

And when the lean literature talks about . . . well, being lean, small manufacturers say, "We're already lean. Remember that part about everyone already wearing three hats? Maybe big companies have extra people around but we don't."

Traditional Lean Message Lacks Applicability

Don't get me wrong, it's not the small manufacturers have all their problems solved. They suffer from the same operational difficulties that large manufacturers do, maybe more, given that they have fewer resources to devote to sophisticated equipment, IT, and engineering. It's just that the "lean message," at least as it's been translated and communicated over the past several years, has little applicability to the circumstances of small manufacturers.

Small manufacturers (and just about everybody else) have been sold on the idea that lean tools are primarily for cost cutting. So small manufacturers employ lean tools expecting big savings that may not be forthcoming, given that many of them are already practiced at keeping costs as close to the bone as possible.

The value of lean tools for small manufacturers lie, not so much in their cost cutting potential, as in their potential for creating agility. A company I know has promised several of its largest customers that it will keep a month's worth of the products it needs in the warehouse at all times. In other words, the vendor has promised the customer that it can order a month's worth of any of the products it uses with no lead-time.

If this weren't challenging enough, the customer will sometimes order a full month's worth of several products, then order another month's worth of those same products within a week or two. And if all that weren't challenging enough, the sales office often promises similar service to lesser customers.

If this company implements lean, hoping for "promised" cuts in payroll, improvements in efficiency and reduced costs elsewhere, it's missing the largest strategic use of lean: the ability to meet customer service demands while keeping inventories as low as possible. In fact, it might actually go the wrong direction if the initiatives the company takes to make it "leaner" actually diminish service. This company needs agility, the ability to meet the sometimes capricious and unreasonable demands of customers each time, all the time.

Focus on Cycle Times and the Customer

What's the small manufacturer to do? Focus on manufacturing cycle times, inventory levels and customer service rather than cost cutting. Focus on improving efficiencies as a path toward operational excellence, not as a move toward labor cost reductions. Understand that smooth, consistent flow of information and material is more important than occasional bursts of speed.

For products that have long lead-times, ask, "If we could reduce the lead-time to the customer for this product, would we realize an advantage over our competitors, even if the cost of making that product stayed the same?" Where lead-times are short because you are keeping product in the warehouse (as in the case above), ask, "Can we maintain or even improve customer service even as we reduce inventories?"

All that said, make sure you know what your inventory buffers are costing you. What could the company above save in inventory if it were to ask the customer for one-day lead-time? Two days? The company may or may not decide to make changes to its promises, but it needs to know what the costs of those promises are. (This may seem to contradict my earlier statements, but giving the customer a shorter lead-time than it needs is as wasteful as keeping inventory on hand to meet a short lead-time. The company mentioned earlier sometimes risked providing poor service levels to large customers that very much needed a very short lead time in order to offer equal terms to much smaller, less frequent customers that may have been willing to have a one or two day lead-time.)

Does a focus on agility rather than cost cutting require different "lean tools"? No.

Workplace organization, quick setup, work standardization, pull systems, error proofing are very much a part of agile manufacturing. If anything, their connection to agility is more intuitive and straightforward than is their connection to cost cutting. (I've often had looks of disbelief, not to say arguments, from supervisors and operators who I told we were reducing setup times so that we could do more setups. They couldn't see the connection between more setups and good efficiency. When I explained the advantages of improved agility on customer satisfaction, they got it.)

On the other hand, a focus on agility does require a different strategic view on the part of leadership and a great deal of discipline on the part of supervisors and operators. It requires everyone to see lean initiative as a "top line" (better sales) strategy as contrasted to a "bottom line" (lower costs) tactic.

Rick Bohan, principal, Chagrin River Consulting LLC, has more than 25 years of experience in designing and implementing performance improvement initiatives in a variety of industrial and service sectors. Bohan has a bachelor's in psychology from the University of North Carolina at Chapel Hill and a master's of science in organizational development from Case Western Reserve University in Cleveland. He has published articles in National Productivity Review, Quality Progress and ASTD's Training and Development Journal. He is also co-author of People Make the Difference, Prescriptions and Profiles for High Performance. Bohan can be reached at [email protected].

See Also:

Want to Succeed at Lean? Forget Cost Cutting

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