Just In Time -- Lean You Can Believe In

What a way to start the new year. According to the Institute for Supply Management's index of manufacturing activity, new orders have fallen for 13 straight months (through December 2008), and are at the lowest level on record, which dates back more than 60 years to January 1948. The ISM tracks 18 different manufacturing sectors, and not a single one of them reported growth in December. Norbert Ore, chair of the ISM Manufacturing Business Survey Committee, says manufacturers are reacting to the downturn by "reducing inventories and shutting down capacity to offset the slower rate of activity." Meanwhile, the U.S. manufacturing industry shed 85,000 jobs in November, and unless the rounds of layoffs end soon, the industry could dip beneath 13 million jobs by spring, a low-water mark not seen since 1949. And if it's any consolation, manufacturing is down worldwide as well, putting a lie to the notion that emerging economies like China and India are immune to any effects of a U.S. recession.

The obvious question, then, for every manufacturer whose doors are still open, is: What can be done to stop the bleeding? IndustryWeek recently teamed up with TBM Consulting Group on conducting the Multinational Manufacturing Pulse, a study of global manufacturing trends in the U.S.,U.K., Germany, France, Mexico and Brazil. The majority of respondents ranked "cost pressures" as the biggest hurdle they have to face in 2009. So I put it to Ken Koenemann, managing director in TBM's Lean Value Chain Practice: What should manufacturers be doing now that they're not already doing?

"If you're not already applying continuous improvement practices or LeanSigma in your operations, then you should in order to create competitive advantages and cost efficiencies," Koenemann suggests. "If you are already implementing the principals and tools of the LeanSigma culture, then you should look at ways to accelerate its implementation throughout the organization." As he points out, lean manufacturers are much stronger and better able to weather a downturn than their nonlean counterparts.

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Don't stop your lean journey once it's spread throughout your plant. Instead, Koenemann says, "Look at extending lean across the value chain to capture the opportunities to interact more closely with customers and align operations and distribution networks with customer demand. Lean companies are more closely connected to demand and will likely reduce production levels quickly when sales fall. This means lean companies do not overbuild and create stockpiles of unnecessary inventory during periods of slow demand. In addition the workforce is typically more flexible, which means that lean companies are able to rebalance labor and reduce costs."

Manufacturers of high-volume/low-variability products should focus on speed -- namely, how quickly they can produce their items -- and on reducing cycle times, he notes. And conversely, companies that produce low-volume/high-variability products should focus on the flexibility of their operations as the key to their success is being able to change over very quickly in response to very small order quantities, as this will lead to cost efficiencies.

Lean, with its emphasis on daily continuous improvement, is gaining a global following, Koenemann reports, particularly in markets where manufacturing has been growing, such as China and India. At the same time, he notes, "manufacturers are also looking at technology for different ways of manufacturing products to improve both cost and quality. In some cases, companies are making some capital investments, but most of the lean initiatives are focused on product design and rapid innovation in addition to finding new ways of manufacturing existing products."

The bottom line, Koenemann says, is there are numerous opportunities for improvement. "If you've been on your lean journey for a long time, you should seek ways to renew the excitement in your workforce that you had when you first started and drive lean deeper into the roots of your organizational culture." If you're not using lean to work more closely with your customers and suppliers, he adds, then start in on it as soon as possible. The new year may have just begun, but time is already running out.

David Blanchard is IW's editor-in-chief. He is based in Cleveland. Also see Chain Reactions: David Blanchard's blog about supply chain management.