A Look At Lean

Dec. 21, 2004
Efforts to reduce inventory and eliminate waste propel good performances.

In theory, lean manufacturing is a winning strategy. Calling for manufacturers to implement practices that reduce inventory levels and remove waste from the production process, lean-manufacturing techniques are an obvious component of many organizations' continuous-improvement programs. In practice, IW Census data show that the effort to implement such practices is not a wasted one. Manufacturers that have implemented such practices in their organizations are realizing improved performances relative to speed, productivity, and quality. Observes Ernie Renner, director of the Best Manufacturing Practices Center of Excellence (BMPCOE): "The IndustryWeek Census of Manufacturers data reflect and corroborate a view of industry that we see clearly emerging throughout the U.S. That view is what I call the 'leaning out' of American companies. . . . Companies are reorganizing workflow, eliminating waste, and using pull systems and continuous-flow processes." Renner should know. The mission of BMPCOE, sponsored by the Office of Naval Research, is to identify and share best practices to strengthen the competitiveness of the industrial base. Top companies, he says, are using lean techniques "with great success." But are all manufacturers? The Third Annual IW Census corporate-survey respondents clearly are enamored of the idea of operating lean. Nearly 55% of corporate executives identified lean manufacturing as "extremely critical" to their ability to achieve world-class status, and another 40% identified it as "somewhat critical." At the plant level, the adoption levels of specific manufacturing processes do not quite support the enthusiasm displayed by occupants of the corporate suite, despite metrics that suggest such enthusiasm is warranted. Plants appear to be embracing lean practices cautiously. Or, if not cautiously, then at least with a prudent recognition that undertaking any of the lean initiatives -- particularly those related to just-in-time (JIT) delivery -- is a long, painstaking process. Among the practices cited on the plant-level survey that could be identified as falling under the umbrella of lean are:

  • Quick-changeover techniques that reduce equipment setup time and permit more frequent setups.
  • Cellular manufacturing, in which equipment and workstations are arranged to facilitate small-lot, continuous-flow production. A cell is composed of all operations needed to produce a component or subassembly in close proximity, allowing quick feedback between operators. Workers in manufacturing cells typically are crosstrained to perform multiple tasks.
  • JIT/continuous-flow production techniques to reduce lot sizes, reduce setup time, drastically cut work-in-process inventory, improve throughput, and reduce manufacturing cycle time. JIT typically includes the use of "pull signals" to initiate production activity, in contrast to work order or "push systems" in which production scheduling typically is based on forecasted demand rather than actual orders.
  • Supplier JIT delivery in which parts and materials are delivered in small lots and on a frequent basis, timed to the needs of the production schedule. JIT delivery by suppliers typically reduces the amount of inventory a manufacturer has on hand, thereby reducing both the need to warehouse materials and the costs associated with owning inventory.
Half or nearly half of the total survey sample has adopted each manufacturing practice associated with lean production. In several instances percentages approach 60%. Almost 70% say they have adopted quick-change-over techniques and cellular manufacturing, and the percentage is nearly 80% for predictive- or preventive-maintenance techniques. When it comes to reporting "wide adoption" of the practice, the percentages drop dramatically. While 20.3% of the survey respondents say they have widely adopted predictive and preventive maintenance, no other lean technique has reached the 20% mark in terms of wide adoption percentages.
Manufacturing Practices and Performance Medians
Performance medians for plants reporting "wide adoption" of selected manufacturing practices.
Performance metric Total plant survey Quick - changeover JIT/
flow production
Cellular manufacturing
Finished-product first-pass yield 95.0% 97.0% 96.0% 95.0%
Scrap/rework as a % of sales 2.0% 2.0% 2.0% 2.0%
Warranty costs as a % of sales 1.0% 1.0% 1.0% 1.0%
Typical manufacturing cycle time 29.0 hrs 10.0 hrs 16.0 hrs 24.0 hrs
Standard customer-order leadtime 14.0 days 8.0 days 10.0 days 11.5 days
On-time delivery rate 95.0% 96.0% 96.5% 95.0%
Annual raw-material turns 10.1 turns 12.0 turns 12.0 turns 11.0 turns
Annual WIP-inventory turns 13.0 turns 16.0 turns 20.0 turns 14.0 turns
Annual finished-goods turns 12.0 turns 14.0 turns 14.2 turns 12.0 turns
Annual total inventory turns 8.0 turns 10.0 turns 9.1 turns 8.0 turns
Productivity* $150,000 $170,750 $170,000 $175,000
Performance metric Focused-factory production Lot-size reduction Predictive/ preventive maintenance Bottleneck /
constraint removal
Finished-product first-pass yield 96.0% 96.0% 96.0% 96.8%
Scrap/rework as a % of sales 2.0% 2.0% 2.0% 1.7%
Warranty costs as a % of sales 1.0% 1.0% 1.0% 1.0%
Typical manufacturing cycle time 24.0 hrs 24.0 hrs 20.0 hrs 24.0 hrs
Standard customer-order leadtime 10.0 days 10.0 days 10.0 days 10.0 days
On-time delivery rate 96.0% 95.0% 96.0% 96.0%
Annual raw-material turns 12.0 turns 10.0 turns 12.0 turns 14.0 turns
Annual WIP-inventory turns 18.0 turns 15.0 turns 18.0 turns 24.5 turns
Annual finished-goods turns 12.0 turns 12.0 turns 12.0 turns 15.0 turns
Annual total inventory turns 8.0 turns 7.0 turns 10.0 turns 9.2 turns
Productivity* $166,000 $170,000 $173,500 $171,000
* Productivity defined as annual dollar value of shipments per employee.
The tune is a different among world-class plants, however. Census data indicate that self-assessed world-class plants are widely adopting many lean manufacturing practices at nearly twice the rate of the total plant survey sample. And among IW's 1999 America's Best Plants finalists, well over 80% say cellular manufacturing and quick-changeover techniques are used extensively.
World-Class and Manufacturing Practices
Percentage of plants in each category reporting "wide adoption" of manufacturing practice.
Manufacturing practice Total plant survey Fully achieved world-class
Predictive or preventive maintenance 20.3% 46.3%
Cellular manufacturing 19.1% 41.2%
Focused-factory production systems 14.5% 31.3%
JIT/continuous-flow production 18.4% 30.8%
Quick-changeover techniques 13.4% 27.8%
Lot-size reductions 16.6% 26.0%
Pull system/kanban 14.5% 22.0%
Bottleneck/constraint removal 16.8% 19.6%
In most instances plants that say they have widely adopted any of the manufacturing practices demonstrate performance metrics superior to those achieved by the entire plant survey. Even more telling is a comparison of plants that have widely adopted a practice and plants that have not adopted a practice at all. For example, IW Census plant -survey respondents who say they have widely adopted quick-changeover techniques achieve a median manufacturing cycle time of 10 hours. By comparison, the median manufacturing cycle time for the entire plant-survey sample is 29 hours, and the median for plants that have not adopted such techniques at all is 40 hours. The only lean practice for which such comparisons do not hold true is that of cellular manufacturing. In numerous instances the medians achieved by plants that report wide adoption of cellular manufacturing are better than medians of both the total survey sample and plants that report some adoption of the practice. However, they are comparable to those achieved by plant-survey respondents who say they have not adopted cellular manufacturing at all. One possible explanation for this is the abundance of process manufacturing plants (65%) among the sample that reported no adoption of cellular manufacturing. Process manufacturers typically report higher productivity and shorter customer leadtimes than discrete manufacturers. Still, a sizable percentage of survey respondents -- even of world-class respondents -- are less than totally enamored with the effectiveness of their practice implementations. Both the total plant-survey sample and the smaller subset of world-class plants were most likely to cite cellular manufacturing as an "extremely effective" practice. Forty percent of the total survey sample that had implemented the practice and two out of three world-class facilities identified the practice as extremely effective. In several instances, world-class manufacturing facilities were twice as likely as the entire plant sample to identify the lean practices as extremely effective. Several possible explanations deserve mention, including the fact that survey respondents may be early in the implementation stage and have not yet had the opportunity to realize a practice's full benefits. Also, the implementation process itself could be faulty, leading to less satisfactory results. Pricewaterhouse-Coopers principal consultant Tom Nicholas points out that a company "must possess many capabilities before embarking on a JIT initiative." Not only must a manufacturer's supplier have his processes under control to deliver in a JIT fashion, but the manufacturer must have his own operations in control to handle such deliveries. Nicholas also suggests that, frankly, some manufacturers aren't handling the basics well enough to embark on JIT initiatives. "They know the buzzwords better than they know the basics," he says. "They're not doing the non-cutting-edge techniques well." On the other hand, "A lot of companies are chasing various elements of lean manufacturing," Nicholas says. "And a lot are getting better."
About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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