Rick Bohan’s March 30 article, Is Agility More Important than Lean? is—from my perspective—a must read, not only for lean practitioners but for all manufacturers. The article suggests several important points for manufacturers seeking to increase their competitiveness, as well as backing them up with basic business sense. Let me give some commentary on the article’s principal point.
First, though, I’ll make the point that just about any client involved in lean implementation has probably, at one time or another, asked themselves the following two questions:
- When will my factory be considered lean?
- Where is my organization at on our lean journey?
From my experience, most lean practitioners struggle to answer these two questions to the satisfaction of their clients. For instance, I’ve actually heard one tell a potential client that “lean is the complete absence of waste” and that because of this “A lean journey never ends”—the latter being an answer I can assure you doesn’t go over well with the executives I’ve dealt with. That lean practitioner didn’t end up with the account.
Based on what Mr. Bohan lays out in his article, the answers to these questions are relative rather than absolute, based on what improvements are needed to position a manufacturer to outpace the competition. For instance, he states that the underlying purpose of lean activity should be to create a significantly positive and quantifiable marketplace impact. He then uses the example of a manufacturer being able to satisfy short-fuse orders more quickly than the competition and that this might appeal to customers, both end-users and OEMs.
The lean tie-in of the above is that a manufacturer be able to develop this advantage having a minimal reliance on waste. In other words, lean activities are the vehicle by which this competitive advantage is created. Which implies that order-fulfillment agility is created without excessive pre-built inventories. The issue, then, is that those lean activities that can have the greatest impact on such agility should be given priority in the grand scheme of things.
Once a competitive advantage is created, the lean journey can then be put “on hold” until competitors start closing the gaps, at which time the journey reactivates. This type of approach is justifiable from a “cause-and-effect” point of view, which is what executives look for when they set budgets.
What does a company’s infrastructure and resources do during the pause? How about reaching out to suppliers in the form of supplier development support so that rather than ending up with a smattering of agile suppliers, they reach a critical-mass of them and can say they have created a Lean Performing Supply Base; i.e. what should be the goal of every Supply Management function.
Ventilator Questions
The ventilators needed to keep people alive as they fight off the coronavirus are in very short supply. It is projected that soon, some patients in need of respirators will have to do without. Companies like Toyota, GM, Ford, etc. have all offered to manufacture respirators to fill the need. Some politicians have indicated that this will fix the shortage problem in short order. I wonder what these people—or those they consult with—know about manufacturing and supply chains. From their public comments, I suspect very little.
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Ventilators require 156 purchased parts, many of them sourced across 14 different foreign countries. The suppliers involved in their production—and most medical equipment—are experts in their areas of processing and, for the most part, have specialized equipment to produce the parts they manufacture. The capacity of these suppliers is likely targeted to support normal demand, plus-or-minus, not the amount needed to combat a pandemic. And developing additional capacity always takes time.
Call me a Doubting Thomas, but I don’t see these new respirator manufacturers being able to meet the short-term demand for them, primarily because of the number of required purchased parts and the complexity of the product’s supply chain. In fact, I would like to see their PERT charts showing their time-to-market schedules. I suspect they would confirm my concerns. Remember, it only takes one supplier who can’t support an expanded production schedule to delay production. And many of the parts needed to manufacture medical equipment have very limited sourcing options. I suspect we’re probably talking about 3 months at best—and likely much longer, to produce respirators in the quantities needed. I hope I’m wrong.
Note: A PERT chart is a project management tool used to schedule, organize, and coordinate tasks within a project. It is basically a method to analyze the tasks involved in completing a given project, especially the time needed to complete each task, and to identify the minimum time needed to complete the total project.
Re-Engineering
The March 26 IndustryWeek article This Crisis is an Opportunity to Reset discussed how—in a time of business upheaval—manufacturers should take the opportunity to re-evaluate their current operational practices. It pleased me greatly that the supply management function was included as one ripe for a strategy change. Booyah! The author suggests that there are limits to supply chain globalization and that OEMs should probably focus more on supplier robustness and resilience.
Let’s face it. The drive behind worldwide sourcing was to get lower piece-prices. This has led to increased costs, primarily in customer overhead. Supplier robustness indicates that suppliers can offer their customers more value-add than just the parts they supply. Resilience includes a supplier being able to support short-fuse customer order fulfillment increases when forecasts have underestimated market demand; i.e., through short “true” lead-times and manufacturing flexibility.
A necessary component of revising a supply management strategy is to recognize the ways that the purchasing function can positively contribute to company financials above-and-beyond piece-price, and then measure performance in these areas as the basis for rating both functional and individual performance. Today’s overriding factor in most OEM performance evaluations of and in supply management is year-to-year material variance. The resetting of supply management operational practices will fail without aligning performance with these other areas of purchasing-related financial impact, some of which can dwarf whatever is gained through a solitary focus on piece-price.
Paul Ericksen is IndustryWeek’s supply chain advisor. He has 40 years of experience in industry, primarily in supply management at two large original equipment manufacturers.
