A collection of resources and commentary providing an introduction to supply chain management and related systems for students, practitioners, and anyone else interested in learning more about how to design, manufacture, transport, store, deliver, and manage products.
Wednesday, September 10, 2014
Lean Manufacturing in the IT industry: The Amazon Story
The Spirit of Lean has been with
Amazon since 2007. Jeff Bezos, CEO of Amazon has always adopted a customer centric model. He believed that customer should not be charged for the waste and focus on waste prevention, which is the fundamental concept of the Lean Principle.
“ Lean manufacturing, Lean
enterprise or lean production, often simply, "lean",
is a production philosophy that considers the expenditure of resources in any
aspect other than the direct create of
value for the end customer to be wasteful, and thus a target for
Bezos pointed out that Lean principles make a lot of sense in IT
industry. Many companies are implementing CRM (Customer Relationship
Management) tools to understand the needs of the customer and to optimize
their business mode. IT professionals are
being trained to understand the business model they are in and how it is
impacting the end customer.
It is amazing how
Amazon, an E-commerce company has studied this model and blended it well with
their operations. Given the evolution of Amazon from a bookstore to a store of
everything, they had to re-invent and implement various levels of automation. The operations team used humans for creative
and flexible work while machines were deployed for process oriented work. The
result was a very efficient human being assisted by a machine, which met the
standards of a Six sigma process.
Some of the principles
of Lean or TPS (Toyota Production Systems) techniques that were applied were:
Pulling andon cord
The biggest challenge for IT industry lies in eliminating defects from software creation. It will an interesting next few years to see how the application of Lean principles to the software creation evolve.
The problem with most
companies including Amazon was that most workers are assigned vague tasks and
it is difficult to measure their productivity.
To counter this, there was a very well defined standard process that was
defined to describe the task of each worker. An example of this can be seen in
their fulfillment centers. The workers who stowed the items on the shelves also
had to scan each item so that the computer can maintain the inventory. By
defining a standard approach for this, a target productivity of 20 minutes was
set for each worker to unload the trolley.
is the philosophy of continually improving the products, processes, and
activities of a business to meet or exceed changing customer requirements and
the organization’s standards in an effective and efficient way.”
Jeff Bezos introduced a
program where all the senior executives had to work in the customer service
department at least one day in a year. During his time at the center he was in
the “Receiving” department where all the defective shipment items would arrive.
To counter this problem, the team implemented a ‘three strike’ packing process.
The merchants were coached on the guidelines of shipping and in the later
stages a warning was issued to eliminate defects. Failure to comply with these guidelines
resulted in the termination of contract with Amazon.
the andon cord:
The andon cord is another well-known
innovation at Toyota, which allows the frontline workers to make suggestions
for quality improvement. In the event that a customer service agent calls and
complains about a defect, the workers keep a track if there is any pattern in
the defect being reported. The frontline workers stopped the production line if
there were instanced of defects reported and the production again started after
the defect was fixed. This process saved tens of thousands of defective items
from being shipped. As per reports, 98% of the time andon cord is pulled only
when a real defect was found.
Jeff Bezos is adopting the Lean principles
in every line of business to improve efficiency and deliver customer
satisfaction. AWS (Amazon web services)
is a revolutionary cloud solution, which is changing the face of IT industry
forever. This platform was delivered on a pay
as you use where the customers get an insight into the usage and costs
associated with utilization.