Nike Lean Manufacturing

It’s quite interesting to see that ‘lean manufacturing’ has not just found prominence in the world of manufacturing but has now reached many other industries including health care, service providers and even military. They may all have unique implementations but the lean thinking is universal. We even saw a few examples like Dell, Seattle Children’s hospital, Starbucks and Toyota in this week’s readings. The reason why lean implementation can be applied to almost any industry is because its goal is to increase value-added work by eliminating waste. It is designed to improve customer satisfaction, throughput time, employee morale, inventory management and overall productivity of the company. In this blog, I will mainly describe how Nike has reaped benefits from this approach. But before I do that, let’s first try to understand what lean manufacturing is through this video.

“Apparel and footwear industries have remained fairly low tech, employing low skilled labor in emerging markets” [i]. This view seems to be changing as Nike is taking a lead by adopting lean methodology to deliver the highest quality product while eliminating all kinds of waste, including lost time and material. It is empowering its employees with the skills and knowledge required to manage production and issues related to process or quality improvements quickly. This would put decisions closer to the workers and would provide them the opportunity to enhance their skills and contribute in continuous improvement. Nike and its contract manufacturers are working together to shift from monitoring to building manufacturing capacity for self-management. Nike believes that this approach will turn out to be more successful and sustainable in stimulating systematic changes and improving the lives of workers.

The ‘FY10/11 Sustainable Business Performance Summary’ document highlights the tremendous results Nike has seen by adopting lean manufacturing throughout its factories [ii]. According to this document, Nike has significantly improved its manufacturing by reducing both waste and wasted time as its sustainability agenda, therefore achieving more efficiency in their supply chain. Amongst these improvements are: -

1. 50% reduction in defect rates

2. 40% faster lead times

3. 20% improvement in productivity

4. 30% reduction in time taken to introduce a new model.

Lean manufacturing has definitely changed Nike’s business for good. It has provided many benefits like improved quality, reduced costs and shorter lead times while reducing human effort, manufacturing space and investment in new tools.

Because of all the above benefits, it makes complete sense for organizations to adopt ‘lean manufacturing’ methods. But the question is how easy is this transition - from traditional manufacturing to lean manufacturing processes? Does it always produce good results? Are there any risks involved?

I think the answer to the first question depends on the mindset of the individuals in the company. Lean manufacturing opposes traditional methods that support large inventory, economic order quantities and high capacity utilization. Therefore, it may result in cultural issues. It’s difficult for people to believe in a new system as they have worked in the company for a long time and are resistant to change. In such a situation, it’s extremely important for the managers to help workers understand lean and why it’s a success to reduce their resistance. In a lean approach, it’s mainly the people who make the difference, so complete support of the whole organization is required. It’s also possible that a company may fail in his attempt to implement lean due to lack of understanding of core lean principles. Successful implementation of lean requires additional training. Another critical element in implementing lean successfully is finding reliable suppliers and building good relationships with them. A problem with a supplier can be disastrous while keeping minimal inventory and supplies. Therefore, before jumping into “Lean Manufacturing Bandwagon”, companies should understand the risks, tradeoffs and commitments involved in adopting this approach. However, if implemented successfully, it can provide great competitive advantages to a company through increased revenue, market shares and profit growths.

References

[i] http://www.nikebiz.com/crreport/content/workers-and-factories/3-9-1-our-approach.php?cat=hr

[ii] http://technorati.com/business/article/nike-reaps-the-benefits-of-using/

[iii] http://www.ehow.co.uk/list_6025715_disadvantages-lean-manufacturing.html

[iv] http://www.reliableplant.com/Read/138/lean-manufacturing

[v] http://rockfordconsulting.com/lean-manufacturing.htm

[vi] http://cdi-usa.biz/news-events/what-is-lean-manufacturing/

[vii]http://businessknowledgesource.com/manufacturing/why_is_lean_manufacturing_such_a_challenge_032160.html#more