Lean has its limits. For companies that make custom-engineered products in low or varying volume Quick Response Manufacturing is a more effective strategy says Rajan Suri, founder of the Center for Quick Response Manufacturing.
Suri was recently named to the IW Hall of Fame, for his work in this field.
In his book, It's About Time: The Competitive Advantage of Quick Response Manufacturing he explains that this method addresses "the non-obvious reasons lead time is important (much more important than most managers realize), how it influences total operating costs and quality, and how to take advantage of this realization."
QRM analyzes interactions between machines, people and products and how they impact lead times. It is not "just a shop floor approach; it is applied throughout the organization. It encompasses material planning and control, purchasing and supply chain management, office operations such as estimating and order processing, and new-product development."
Lean's core techniques such as takt times and kanbans are designed to eliminate variability in operations so as to create flow and work well for higher volumes or replacement products, but it might not be the right strategy for low-volume, high-variety or customized products, says Suri. He explains that while lean might be adept at eliminating the dysfunctional variability, it doesn't address the strategic variability. Examples of strategic variability include the ability to cope with unexpected changes in demand, offering a large number of options to customers and offering custom-engineered products for individual applications.
By designing the QRM organization and support systems to effectively cope with this variability, "QRM takes the lean strategy to the next level, appropriate for the twenty-first century," says Suri.
In his book, Suri points to RenewAire, a Madison, Wisc.-based manufacturer of customized energy recovery ventilation system , which was able to multiple its revenue by 2.4 times from 2003-2008. And the company increased its market share by 42%. It was able to do this through an 80% reduction in lead times aided by the QRM.
Another company, National Oilwell Varco, which manufactures equipment used in both offshore and land-based oil drilling, was able to reduce lead time of one of their customized products from 75 days to 4 days. And an unexpected bonus was a 30% cost reduction as well.
Rajan points out that the 30% cost reduction is an effective counter for a growing concern for U.S. companies. "Today most manufacturing companies and their employees in developed countries live in fear that their operation and jobs will be outsourced to countries with lower labor costs. But the fact is, for a typical product made in the U.S. direct labor accounts for only 10% of the cost and this number is similar for developed countries. Thus if you can use QRM methods to reduce costs by 30% then you have effectively wiped out the labor-cost advantage of all of those other countries," says Rajan.
One of the main metrics in QRM is the manufacturing critical-path time. This lead time metric is defined as they typical amount of calendar time from when a customer creates an order, through the critical path, until the first piece of order is delivered. The book provides detail of how companies can create and use this metric. Suri has found that by reducing this metric overhead costs can be reduced by as much as 30%. To achieve these results Suri discusses the organizational structure which includes QRM cells, teamwork and ownership. He explores the dynamics of this system compared to more traditional approaches and lays out a unified strategy for the whole enterprise as well as a road map for implementation.
"The QRM message is simple to understand, singular in its focus and applies to every aspect of the enterprise so that everyone in the organization can be aligned behind one single goal -- reduce MCT," summaries Suri.
One of his clients, Rockwell Automation said it best when asked why they were convinced of the power of this method. "Focus on responsiveness is a positive, unifying perspective for the entire business."