Wednesday, September 10, 2014

Can all industries “lean” the same way?



We all know about adaptation of lean practices in the manufacturing industry or factory settings. Since its inception at Toyota about 5 decades ago, it has been greatly prevalent in majority of the manufacturing industries.

Lean, as the name suggests is all about “trimming” off the waste that does not create value for its customers. It is a continuous process of improvement in various business processes by identifying the roadblocks and dealing with it promptly.

Source: http://farm4.static.flickr.com/3532/4083220012_0bbdfbd151.jpg
Manufacturing:

While Toyota has pioneered lean manufacturing, this lean technique has all the potential to backfire and cause a lot of damage. Let’s take an example of quality control issues. According to David Meier, co-author of “The Toyota Way Fieldbook”, “there is trade-off with standardising parts across the company”.

This may reduce cost in the short term by using the same parts across various models or products. This is because you save setup time for using different types of material in your assembly line, you save on procurement etc. But it does add a significant amount of risk after all. For example in the car industry, due to the increased complexity, it might be harder for manufacturers to detect few problems at an early stage. This was the reason for Toyota’s recall of quite a lot of its models in the U.S., Europe and China due to a defect in gas pedals. In another incident, Ford had to recall about 4.5 million of its cars in response to a fire hazard in few of its models’  cruise control feature.


Hospitals:

We read in the article, “Factory efficiency comes to hospital” about how the Seattle Children’s Hospital implemented “Continuous performance improvement” or C.P.I and saved a lot of money and also increased its profits by serving more patients. However, I completely agree with some of the views in the article about standardisation of procedures. While in an assembly line, you work on the same type of product again and again and a predefined time for a process would be feasible, it's not really the case in hospitals. The time taken to perform a procedure depends from one patient to another. You cannot just trim the empathy part from a doctor-patient or a nurse-patient interaction by considering it a “waste”. However, I agree with some of the parts about inventory management and scheduling of operations over the weekend.

Hence, even though hospitals have to earn profits at the end of the day, you cannot just cut out most of the interactions that make up the soul of treating patients.


E-commerce(warehouses/operations):

Amazon’s lean strategy: Amazon tried to automate packaging everything but as it turns out, automation didn’t quite work well as more and more products apart from books started getting added in amazon’s store. They decided to modify that process by keeping humans for tasks of high-value and using machines as an aid for those tasks. This cuts out performing non-value adding tasks by human beings.

Another great thing they adopted from the TPS was proper description of employee tasks because the task description was very vague and subjective. For example: the standard time to stow all the products in the trolley was 20 minutes. But during process investigation, they found out that the productivity decreased significantly as the scanner’s battery starts to die. So they measured how many scans it can complete before the scanner starts to get unresponsive due to low battery. Then they put a system in place to load and monitor the scanner. This helped Amazon cut out a significant stowing time increasing their workers’ productivity.

They also implemented kaizen philosophy at their fulfilment centre. For example merchants would now get 3 chances to improve their packaging before sending it to the Amazon fulfilment centre, after which they end their relationships with the merchant.

So, we can see a somewhat similarity between the manufacturing setup and warehouse setup of large commerce websites.


Food and beverage chains:

Chipotle: Chipotle is giving other fast-food chains like McDonalds, Burger King and KFC a run for their money. Increasing customer preferences are leaning towards healthier food. Moreover, customers like designing their own meals. Even though Chipotle has hardly changed its menu since its inception about 2 decades ago, it has significantly improved its customer service; faster serving time to be precise.

In 2012, Chipotle averaged about 1 transaction every 11 seconds! On customer suggestions of having a second register to speed up the line, they did try it out. It turns out, the payment part wasn’t really a bottleneck unless it required handing out pennies to customers. To get rid of that extra time, Chipotle tried rounding up the bill to the nearest nickel in a few locations. This did not go well with some customers and Chipotle decided to round it down instead.

The process improvement of faster service helped Chipotle to serve more customers and hence increase its bottom-line. In this paper, the authors conclude that a seven second reduction in the average customer waiting time can increase a chain’s market share by one percent. Now this is a significant proportion of market share in such large chains.


Software development:

Lean and Agile go hand in hand when it comes to software development. The waterfall model of software development is almost always not much of use since in a software development project, the requirements of clients keep on changing, which makes it very difficult to make changes to the development in the middle of a project. Lean principles come in the picture in the following ways: eliminating waste like unnecessary code or functionality, delaying the development until all the requirements are clear instead of speculating, using API’s etc.

The development work is done in iterations which decreases the product to market time and leaves scope for changing requirements at the end of each iterations. But there is a "defect detection" problem here. The “real testing” happens through customers acting as beta testers of the software once the software is deployed and not during production itself.


Hence, even though there are quite some benefits of using Lean principles across a spectrum of industries, it works more so in some industries than the others. I think it really depends on whether, in trying to provide “more value” to customers, are you taking away from the customers, the experience that they value more than what you’re providing them with or not!





References/Sources:
· http://www.kellogg.northwestern.edu/faculty/allon/htm/Research/Fast_Food_Waiting_Time_MSOM_052611.pdf
·      http://www.nytimes.com/2010/07/11/business/11seattle.html?pagewanted=all&_r=0
·      http://online.wsj.com/news/articles/SB124933474023402611
·      http://en.wikipedia.org/wiki/Agile_software_development#cite_note-Agile_Manifesto-1
·      http://www.forbes.com/2010/01/11/software-lean-manufacturing-technology-cio-network-agile.html
·      http://www.agilistapm.com/differences-between-waterfall-iterative-waterfall-scrum-and-lean-software-development-in-pictures/
·      http://en.wikipedia.org/wiki/Lean_software_development  http://people10.com/blog/how-agile-solves-traditional-pitfalls-of-it-outsourcing/

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