Tuesday, February 5, 2013

Small-Business Lean Manufacturing

In 2009, Harley Davidson experienced a severe decrease in sales due to the economic recession. Chief executive Keith Wandell realized the need to cut costs and created a lean manufacturing strategy to the small business. Lean manufacturing is the action of removing anything unnecessary to the company's service or product in the production system. This "waste removal" has the potential to increase efficiency and reduce costs. Yet, lean thinking can have adverse effects such as decreased employee morale and faulty production or service if applied improperly.

Wandell successfully reduced costs by decreasing the number of hourly workers by 50%, increasing each employee's skill set, consolidating 41 buildings into one large factory and refiguring "sloppy" production practices. Wandell also negotiated about 100 workers' schedules as flexible so that they only work when needed. These changes were monumental for a small business such as Harley Davidson, and could have been a detriment to employee morale. The business thrives though, as the hourly workers maintained mutual respect with their managers. Although the production pace increased, hourly workers are able to swap designations with coworkers to avoid fatigue and are encouraged to place finishing touches on their products before sending them to another department. Overall, Wandell increased Harley Davidson's profit margin by 3.5% that year by applying lean thinking to his production system.

This applies to "How to Compare Six Sigma, Lean and the Theory of Constraints," by Dave Nave, who defines lean thinking and its assumptions. Nave states that one of the methodology assumptions is "people in operations appreciate this approach." Harley Davidson is a small business with a unique culture where employees highly value their production line, efficiency and products. Davidson employees are not just making motorcycles, they are creating them. (Refer to Harvard Business School article, "Harley-Davidson Motor Co.: Enterprise Software Selection Solution," by R. Austin.) Lean manufacturing offers a way to reevaluate production systems to increase their efficiency, but what if the employees do not respond well to the rearrangement of their work processes and forced faster pace? Does corporate culture weigh heavier than company size when deciding whether to apply lean strategies?

Source: "Harley Goes Lean to Build Hogs" by James Hagerty. Wall Street Journal. http://online.wsj.com/article/SB10000872396390443720204578004164199848452.html

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